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Federal Reserve Bank of St. Louis
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 10
Preferred Citation: Congressional Correspondence, October 1980; Paul A. Volcker Papers, Box 10;
Public Policy Papers, Department of Rare Books and Special Collections, Princeton University
Library
Find it online: http://findingaids.princeton.edu/collections/MC279/c434 and
https://fraser.sdouisfed.org/archival/5297
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
.•
.• ofGovt/i•
• •• •
BOARD OF GOVERNORS
•co
.•
)t•
Ln•
•.(c,
rIF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. E. 20551
RALizts•'
• • .. • •
PAUL A. VOLCKER
CHAIRMAN
October 1, 1980
The Honorable Edwin B. Fo
rsythe
Member of Congress
P. 0. Box 128
Moorestown, New Jersey
08057
Dear Mr. Forsythe:
Thank you for your lett
er of September 17 regard
correspondence you receiv
ing
ed from Mrs. Celia Horw
itz requesting
assistance in obtaining
a replacement check fo
r
a $394.10 discount check that she did
not receive. The discou
nt check was
issued in connection with
Mrs. Horwitz's purchase
of a $10,000
six-month Treasury bill.
Board staff has contacte
d the Division of Chec
at the Treasury Departme
k Claims
nt and has learned that
Mrs. Horwitz's
stop payment order was
entered on July 14,
19
80. The Treasury's
records also show that
Mrs. Horwitz's discount
check has been
cashed. They are now in
the process of looking
into nrs. Horwitz's
request. In order to ex
pedite a resolution of
this case, we are
forwarding your inquiry
to the Treasury Departme
nt. I am sure
you will be hearing fr
om them in the near futu
re.
Sincerely,
,kaaill A. Yolckec
vcd (0T-371)
ix. Wallace
11. QU
::alaardi (2)
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Federal Reserve Bank of St. Louis
•
q9
GOIAt •
BOARD OF GOVERNOR5
OF TI-Ir
••
FEDERAL RESERVE SYSTEM
WASH1NGTON.O.C. 20551
October 1, 1980
Department of the Treasury
Bureau of Government Financial Operations
Congressional Claims Branch
Division of Check Claims
401 14th Street, S.W.
Washington, D.C. 20227
Dear Sir:
Enclosed is a copy of an inquiry that we received
from Congressman Edwin B. Forsythe. Congressman Forsythe's
constituent, Mrs. Celia Horwitz, submitted an Advice of
Request for Stop Payment on July 1, 1980, for a discount
check in the amount of
. Since Mrs. Horwitz submitted
her request, she has received no response to her claim.
We would appreciate your investigating Mrs. Horwitz's
request and responding to Congressman Forsythe directly. .
Thank you for your assistance.
Sincerely,
(Signed) Donald J. Winn
Donald J. Winn
Special Assistant to the Board
Enclosure
141Y3mrk (0V-371)
bac;
Zr. Wallace
Ms, Young
Mallardi (2)
Aden assigned Mr. Wallace
I
C.DWIN El. FORSYTHE
•
303
CANN•IN l'iCRPCI"
OF ICE Buitmtmo
WAsortwaro... D C.
•
20515
WHOSE R
Commirrt
M ERCHANT MARINE AND FISHERIES
2C2-225-4765
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Federal Reserve Bank of St. Louis
Commtr-Try
Congros5 of die Unitcb cptate5
31)oufse of 3AtprefSentatiins5
Ulasnton,
20515
Scitnice ANO Trcm4ouoor
trim0F,
i
September 17, 1980
/1
1,)
14/
Hr. Paul A. Volcker, Chairman
Bd. of Governors of the
Federal Reserve System
20th & Constitution Ave NW
Washington, D. C. 20551
Dear Nr. Volcker:
The attached correspondence from Nrs. Celia horwitz
is sent for your consideration and review. I would
appreciate it if you could investigate this matter as
soon as possible.
Your
necessary
tuent and
with your
assistance in providing me with the
information for replying to my consti—
returning the enclosed correspondence
answer would be most helpful.
Thank you very much for your time and efforts
in responding to this request.
romilimmo.
Sincerely,
'qv
Edwin B. Forsythe
Nember of Congress
LBF/pd
Enclosure
P.S.
Please reply to: P.O. Box 128, Hoorestown,
New Jersey 08057.
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Federal Reserve Bank of St. Louis
JACK
FiNNITZ, 0 P. M.
•
SURGE' 'I PODIATRIST
SEP. 1
463 InalA STREFT
OURLING1ON
TilLaPHONIE
N
.J.
oso
6
366-0124
September 11, 1980
Congressmen Edwin B. Forsythe
F. 0 Box 128
Yoorestown, N. J. G6C57
Dear Congressman Forsythe:
I Purchased a 6 month Treasury Bill for
on
May 29, 1980. The account # is
with a
discount amount of
. A copy of the "statement of
account" with all the pertinent information identifying the
account is attached.
I never received my discount check for
=
;Es:
I
c
.
I waitdd a reasonable time and then notified the Federal Re—
serve Bank of Philadelphia where the Bill was bought that I
had not yet received my interest for the "bill".
The Federal Reserve Bank of Philadelphia sent me an "Advice
for Request for Stop rayment" together with a covering letter,
a copy of each is also attached, herewith. Both of these are
dated July 1, 1960.
Until today I have received no reply from my Government. Be—
tween duly 1C, 1980 and September 10, 1980 I have telephoned
and written to both the Federal Reserve Rank Of Philadelphia
and to the Bureau of the Public Debt in Washington, D. C. sev—
eral times but to no avail.
No one knows anything about anything. Whet makes it most frus—
trating is that to whomsoever I speak refuses to give me a
name for future reference.
Congressman Forsythe, I would be most appreciative if you
would use your good offices to cajole your government and
mine to please send me
which they now owe me for
over 3 months. I'll be satisfied to forgo the interest.
Very sincerely yours,
1-16-11-4.(•
Celia Horwitz
kr4
STATEIJENT OF ACCOUNT
Ei.,:-.E4u Or THE RUkLIC DL
x
DC 20226
BOOK-ENTOsECURITIES
TELEPHONE 'o:(202) 287.4113
TELEPHONE No FOR DEAF: (202) 2A7- 4097
CELIA
THIS STATEmENT
IS NOT NEGoTIAsLE
W]RbsITZ
YOUR ACCOUNT NUmBER:=
=
=
STATEMENT DATE:
06/1 9/80
=.
ESS ABOVE, PLEASE
= :HEN rORRESPONOING ARITE TO THE TREASURY ADDR
AS SHOwN ON THIS STATEMENT, ALL CHANGES=
=INCLUDE YOUR ACCOUNT NUMBER
c
AT THE BUREAU BY: 10/29/80
=FOP THIS BILL ACCOUNT MUST BE RECEIVED
DESCRIPTION OF SECURITIES:
TREASURY BILLS
TYPE OF SECURITY
031-18557
FRB REQUEST NO:
912793505
CUSIP NUMBER:
05/29/60
ISSUE DATE:
1 1 /28/80
riATURITY DATE:
39a.10
DISCOUNT AMOUNT:
110.01.4879
SOCIAL SECURITY OR EMPLOYEE ID NO:
AMOUNT
CURREJ.T STATUS OF ACCOUNT!
BALANCE
10,000
As OF STATEMENT DATE
0
TO BE REINVESTED:
10,000
TO BE REDEEMED:
03603977
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Federal Reserve Bank of St. Louis
4L-t
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"P‘
FEDERAL ULSI=HVE BANK OF PHILADELPHIA
SECURITIES DIVISION
POST OFFICL BOA 90
PtilLADELPHIA PINNSV1VAN:A IQIC
July 1, 1980
.
Dear: Mr. Horwitz
We are sorry that you have not received your check
of discount from your Treasury Bill.
You will hear from
the Treasury in Washington in the next several weeks
.
They will send you a discount check to cover the one
you
did not receive.
Please keep this yellow copy that is
enclosed with this letter.
Thank you,
Federal Reserve Bank of Pa.
Securities Division
•00,44,
kofk"ii
I‘O
• "op
5/
FISCAL AGENT OF THE UNITED STATES
https://fraser.stlouisfed.org
•
Federal Reserve Bank of St. Louis
•
-
•16/9.- ••••
.
• •
11917-C
•••i Memo No.6 (REvl
••
ADVICE OF REQUEST FOR STOP PAYMENT
--r
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(forward to Pc..• or Cio;mant)
_ t of F.eqJest. 2.
7/1/80
P1131011 .
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, ... 4. D.of Oydc 1.5. Symbol,_ . 6. 04.1.k P's'-ber
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102.65741
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. CI PI ant.; nom* in Box 9 f ',1" • rir%
79
E iernarki (inducing identification or (*Ferenc') 9. Claimant of Cheek and Current Addrei4
:
see sittached-71
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.9Your ciaim is being,handled • the Office or the-freas-urer °Tule United States
Check Claims Division, N% aslungton,
'D.C.20226.
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Pleace react -and-carefully observe me instructions on t e other racie or(his orm.
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
-4"•
-:ai J'"
A
•
" -
C/1/1
(ctu..-1 2,
TYe Honorable Lilliam Prox.14.ire
Chairman
ittee o:. 5an)vinl, cusirt
and Urban Affairs
;;tates Senate
20510
intor,r;.C.
Dear Chairman Proxmire
I am 1,1eaved to forward “*eliminery reforts on
actitins taken so far by the Fe4eral reserve to implement the
:„.onestary Control Act of 1980 (Title I of P.L. 9C-221), and
on the actions taRen thus far by the repasitory institutions
Deregulation Committee. These relorts were undertaken at the
raquest of CI:airman Leuas of the. House Committee on Banl-ing,
Finance') sr-1;i Ce.An Affair.
A1cn4; with the rei,orta, I am enclosing cories of
various relevant regulationv, rrens relelses, and staff
mamotanda.
Sincerely,
SLPalll A.
Identical ltrs. to Sen. Carn & Cong. Etantor.
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
Enclosures:
P. R. dtd. 3/31/80
P.R. dtd. 4/17/80
Ltr. to Executive Officer of Commer
cial Banks from Chrmn. dtd.
4/17/80.
'
P.R. dtd. 4/23/80
P.R. dtd. 6/4/80
P.R. dtd. 6/10/80
P.R. dtd. 6/26/80
Memo to Board from Mr. Axilrod re Reg
. D dtd. 7/31/80
Memo to Board from Discount Policy Gro
up re Reg. A dtd. 7/31/80
Memo to Board from R&S & Legal Divs.
re Public Comments on
Proposed Pass-Through Guidelines dtd
. 8/8/80
P.R. dtd. 4/11/80
Memo to Board from Bk.Ops,R&S,Legal
Divs. re Federal Reserve
Float dtd. 8/15/80
P.R. dtd. 8/15/80
P.R. dtd. 8/27/80
P.R. dtd. 8/28/80
Memo to DIDC from DIDC staff re Sel
ection of Chrmn. and Initial
Organizational Decisions dtd. 5/2/80
,
Memo to DIDC from DIDC staff re
Interest as a Deposit for Purposes
of the Early Withdrawal Penalty Rul
e; Payment of Interest After
Maturity dtd. 5/2/80
Memo to DIDC from DIDC staff re Pre
miums and Finders Fees dtd.
5/2/80
r'
P.R. from DIDC dtd. 5/7/80
P.R. from DIDC dtd. 5/13/80
RXRXXXMMXHINEXIAXXXXHX2URR
Memo to DIDC from DIDC staff re Adj
usting Rate Ceilings on
Variable Ceiling Deposits dtd. 5/27/
80
P.R. from DIDC dtd. 5/29/80
P.R. from DIDC dtd. 6/4/80
P.R. from DIDC dtd. 6/6/80
P.R. from DIDC dtd. 6/10/80
Memo to DIDC from DIDC staff re Ear
ly Withdrawal from IRA and
Keogh Accounts dtd. 6/20/80
Memo to DIDC from DIDC staff re Con
gressional request for comment
on money market mutual fund-type acc
ounts for depository
institutions dtd. 6/20/80
Memo to DIDC from DIDC staff re Dep
osit Rate Ceilings on Interestbearing Household Transaction Accoun
ts dtd. 6/20/80
Memo to DIDC from DIDC staff re
Rhode Island Petition dtd.
6/23/80
P.R. from DIDC dtd. 6/30/80
Memo to DIDC from DIDC staff re
Deposit Rate Ceilings on Interestbearing Household Transaction Acc
ounts dtd. 9/3/80
Memo to DIDC from DIDC staff re
Actions Relating to the Authorization of 14-29 Day Time Deposits
dtd. 9/4/80
Memo to DIDC from DIDC staff re Pro
posed Rules on Premiums and
Finders Fees dtd. 9/5/80
Charts Accompanying Briefing on
Savings Deposit Flows--dtd.
9/9/80 by Dale P. Riordan of FHLBB.
The Wonora;.4a Donale,
:
,
:tewart
Unitad rotates Sotate
;ias2A.n.;;t4n, D.C.
2:;510
rsear
n414.
T:lank you forLatter of Scir.,tember 10, concerning
ext -ankerts LArnk exeog,tion fr4m. ro4t.erve r4.tuirt-T,Aentr
t)q,
141motapxy Control Act. Lest Wednesaa l the Board ditcuscat,O.
critaria to be wi/Ilied in order to cnalify for the oxenptiou.
ittailes CA, Aet ?
.oeitQr7 iLstitution im a .skni.ars• bant if
it doez not d4
aesis with t.k41 general putlia. Consiatert
-41tA CAt iLttaat of Coalreas, the. Board determined that zu inmtitattoo that dtiagiseis deti,ogits txrs .rat *neonate *f no more than
1C ,er Gent of itP total lielil!tic,n front or imakes loans of
.ncre than
4-er cent ot total as,:ot:: to r ccrtain United
custo3ers sue ma 4f:tit:era or directorr cf ethr credit unions,
zeml.ortg of faiLA credit Uhi0114, or trade associations 4anarally
vould vivalif.; for the 1... 11clai bank exmption. based upon Vla
ialorz4atie4 vrcseutad, Alaaaa Central would al,pear tr have
4144usts and IluLilitias attrJtAital:le to individuals in excess of
tLe 10 ter oent litAts and tl.orafore would not ap;-ear to
at t!lt1 tiz.c for t:Alt czomi=tion from revery* requirelorto.
•
tc.2 diteuso the noard's IrteiretAtion wit
fAaff
AlaY4r.A Cautral to deterine
eutent
!,4z. tlees
wit*r. CAI gencral
nverc;
of( elc ii17441141
ct
tAssine3v to t
crydit
TAs al4To4c1; voul4 AltAin"
onak4a Ala;,;ima
CcIttral tx=•
t.kr thc
":..;a4rA io , Lot rotx
6Va iwjt (01-370)
Cil Schwartz
Lcual Lecords (2)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
t.
'7.73tter.
Action assigned Mr. Petersen
DONALD W. STEWART
STATE OFFICES!
ALABAMA
MONTGOMERY
COMMITTEES:
AGRICULTURE. NUTRITION. AND
FORESTRY
cwEA ,RMAN SUF3CoMmETTE-E ON
AGRicuLTuRAL RESEARCH AND
GENF PAL LFGISLATION
— -RURAL CE VELOPMENT
—
ENVIRONMENT. SOIL CONSERVATION.
AND FORESTRY
?Anitcb 'Zfalcz
mate
FEDERAL BUILDING
474 SOUTH COURT STREET
MONTGOMERY. ALABAMA 36104
(205) 832-7600
BIRMINGHAM
WASHINGTON. D.C. 20510
September 10, 1980
FrorRAL BUILDING
18o0 5TH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(205) 254-1288
M013ILE
3280 DAUPHIN STREET
13UILDING
MosiLr. ALABAMA 38604
(205) 690-3125
BANKING, HOUSING. AND URBAN
AFFAIRS
CHAIRMAN
ANN ISTON
INSURANCE SUBCOMMITTEE
FINANCIAL INSTITUTIONS
FEDERAL BUILDING
1129 NoeLt Srvetrr
ANNISTON, ALABAMA 36201
(205) 237-5993
SMALL BUSINESS
HUNTSVILLE
GOVERNMENT REGULATION
500 LOWELL DRIVE BUILDING 2.0
HUNTSVILLE ALABAMA 35801
(200
, 538-4493
RURAL HOUSING
GOVERNMENT PROCUREMENT
The Honorable Paul Volcker
Chairman, Federal Reserve Board
20th and Constitution Ave. NW
Washington, DC 20551
Dear Mr. Chairman:
14'
I have attached a letter from the Alabama Central Credit
Union which discusses a concern they and other central credit
unions have with the "banker's bank" provision of Regulation D,
which is presently being considered by the Board.
It is my understanding that any institution under the definition of a "banker's bank" would be exempt from placing reserves
against their transactions accounts. The Alabama Central Credit
Union serves both institutions and individuals and is concerned
that it may be required to hold reserves not only against its
individual accounts but against its institutional accounts as
well.
tA'arlif.•
,
The President of the Alabama Central Credit Union, his legal
counsel and a member of my staff have met with Federal Reserve
staffers and fully discussed the nature and extent of this problem.
We felt that the response from the Fed staffers was very good and
that an equitable solution was certainly within reach.
I feel strongly that this is the type of case which merits
the kind of flexible regulatory consideration that you and I have
discussed in the past.
Sincerely,
e.
'bog-
Donald W. Stewart
United States Senator
DWS/jr
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Federal Reserve Bank of St. Louis
THIS PAPER IS 100% RECYCLED FIBER.
011'711
ALABAMA CENTRAL CREDIT UNION
61
t3.1, AVFNUE
SOUTH
P. 0 BOX 10324
BIRMINGHAM, ALA. 35202
TELEPHONE 252-8031
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Federal Reserve Bank of St. Louis
September 3, 1980
Mr. Theodore E. Allison
Board of Governors of the Federal Reserve System
20th Street at Constitution Avenue, Northwest
Washington, D. C. 20551
Re:
Monetary Control Act
"Bankers' Bank" Exclusion
Dear Mr. Allison:
Alabama Central Credit Union wishes to make certain
comments regarding the "Bankers' Bank" exclusion from reserves
required by the Monetary Control Act (P.L. 96-221) and
regulations promulgated pursuant thereto. Alabama Central
Credit Union is a credit union which was organized under
state law in 1938 to serve its members, consisting of other
credit unions and the officials of other credit unions.
Throughout its history, the credit union has served not
only credit union members, but also individual members.
As of August 31, 1980, Alabama Central had approximately
$77,000,000 of corporate assets and $20,000,000 of individual
assets.
Alabama Central Credit Union is concerned that
it will be required to maintain reserves on all of the
deposits which represent its corporate deposits, when such
reserves are not required if it reorganized into a "pure
corporate" credit union. This result might be required
by the provisions of the "Bankers' Bank" exclusion contained
in .201.1(c)(4) as follows:
"This Part does not apply to any
financial institution that (i)is organized
solely to do business with other financial
institutions; (ii)is owned primarily
by the financial institutions with
Mr. Theodore E. Allison
Page 2
September 3, 1980
which it does business; and (iii)does
not do business with the general public."
The above exemption is, of course, simply a restatement
of the statutory exemption which appears in §103(9) of
the Act.
Obviously, Alabama Central Credit Union could
avoid any reserve requirements for its corporate business
if it would "spin-off" its corporate functions from its
individual functions. We know of no congressional policy
which this would advance and feel that some consideration
should be given to requiring such reserves for Alabama
Central as would be necessary if the credit union had reorganized
into two separate credit unions. Essentially, this would
permit Alabama Central to continue to do business in its
present form, but require reserves for transaction accounts
like any other credit union. This result would be achieved
by recognizing the "Bankers' Bank" exclusion as applying
to Alabama Central Credit Union's corporate deposits.
Certainly, the "Bankers' Bank" exception should
not be applied to all credit unions, but only to credit
unions whose major function is being a "credit union's
credit union". In this connection, the Central Liquidity
Fund provides for a 51% requirement for existing central
credit unions and the NCUA provides for a 75% requirement
in chartering a new corporate "central credit union".
The NCUA regulations define a credit union as
a corporate central credit union as follows:
"Corporate central Federal credit
union' means a Federal credit union
operated for the primary purpose of
serving corporate accounts. A Federal
credit union will be deemed to be a
corporate central Federal credit union
when its total dollar amount of outstanding
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Federal Reserve Bank of St. Louis
L
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. Theodore E. Allison
Page 3
September 3, 1980
corporate loans plus corporate shareholdings
is equal to or in excess of 75 per
centus of its total outstanding loans
plus shareholdings."
One of the difficulties with the above definition
is that it does not recognize corporate funds which are
invested in anything other than loans to credit unions
as "corporate". Therefore, if a credit union had 75% of
its deposits from credit unions (but had no outstanding
loans to credit unions) and had the remaining 25% loaned
to individuals, the credit union would have 75/125ths "corporate
business" as defined by the above formula. Obviously,
credit union members tend to all need either loans or investments
at about the same time. It is, therefore, obvious that
at certain times the deposits of credit unions will not
be reflected by loans back to the credit unions, but by
investments. Whether the credit union members need loans
or investments at a particular time does not really detract
from whether a credit union is more or less corporate.
However, a definition such as is described above might
have the unfortunate effect of having a credit union meet
the test at one point in time and not meet the test the
next day.
The NCUA regulations which permit participation
in the National Credit Union Central Liquidity Fund (pursuant
to the National Credit Union Central Facility Act, Subchapter III of the Federal Credit Union Act) deals with
this problem by defining a central credit union as follows:
'Central credit union' means
a Federal or state-chartered credit
union primarily serving other credit
unions. A credit union is primarily
serving other credit unions when the
total dollar amount of the shares and
deposits received from other credit
unions plus loans to other credit unions
exceeds 50 percent of the total dollar
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
Mr. Theodore E. Allison
Page 4
September 3, 1980
amount of all shares and deposits plus
loans during the qualifying period,
as defined in subsection (o) of this
section."
Certainly the percentage figures for qualification in the
Central Liquidity Fund are less likely to result in any
institution waivering as to its qualifications.
In summary, Alabama Central Credit Union believes
that it should not be required to undergo an artificially
contrived reorganization in order to avoid reserving on
its corporate business. The most practical solution is
permitting credit unions like it which are basically "credit
unions' credit unions" to come within the "Bankers' Bank"
exemption with reference to their credit union deposits.
To permit this to be done would not detract from any of
the policy which prompted the Monetary Control Act, but
would permit the market place to determine whether "mixed"
corIS rate centrals can adequately serve their corporate
memS.rs.
Very truly yours,
ALABAMA CENTRAL
.EDIT UNION
(/
William Ec%aOrdan, President
WEJ/lw
CC:
Alabama Credit Union League
617 - 37th Street South
35222
Birmingham, Alabama
U.S. Central Credit Union
P. 0. Box 431
Madison, Wisconcin
53701
Ak-4r,
r\- .
•
rLe
v-
BOARD
OF GOVERNORS
F.; THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20 551
PAUL A. VOLCKER
CHAIRMAN
October 2, 1980
The Honorable Ed Jones
House of Representatives
Washington, D.C.
20515
Dear Mr. Jones:
Thank you for giving me the opport
unity to comment on
the recent letter from your consti
tuent, Mr. John Clinton.
Mr. Clinton is concerned with the
effect of high interest rates
on small businesses and farmers and
the role of the Federal
Reserve in causing those rates.
High interest rates are primarily
the result of the
rapid rate of inflation we are exp
eriencing and the deeply
embedded expectations that prices wil
l continue to climb. In
this environment, interest rates are
high because demands for
credit to finance purchases are strong
, while lenders are reluctant to extend credit without being
compensated for the declining
value of the dollars they will rec
eive in repayment. The Federal
Reserve might be able to offset the
se effects temporarily by
encouraging more rapid expansion
of money and credit, but this
would only increase inflationary
pressure in our economy over the
long run. The most prudent course
for the Federal Reserve to
follow in the present situation is
to lower the growth of the
money stock gradually. Such a pol
icy, over time, will reduce
our inflationary spiral and allow
interest rates to fall to lower
levels.
We are pursuing a policy of slower
monetary growth not
by manipulating interest rates the
mselves, but rather by controlling the growth of bank reserves.
This approach, which we
have been following since October
6, 1979, is expected to give
us closer control over the money sto
ck and, thereby, promote a
higher degree of stability in the
economy. An unavoidable byproduct of the reserve approach, how
ever, is that interest rates
are determined solely by market for
ces. With the new control
procedures, therefore, we can expect
larger and more frequent
interest rate fluctuations.
Mr. Clinton is correct in pointing out
that responsible
fiscal policy is an essential element
in improving conditions in
our credit markets. A reduction in gov
ernment spending will help
reduce inflation and limit the need for
government borrowing, both
of which will allow interest rates to
fall.
https://fraser.stlouisfed.org
MFederal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Honorable Ed
Jones
Paye Two
I understand the pr
oblems that high
cause some borrower
interest rates can
s. Over the long
run, however, your
will best be served
constituent
by monetary and
fiscal policies de
remove inflationary
signed to
biases and to crea
te a stable econom
ment in which busi
ic environnesses can thrive
and expand. I be
Federal Reserve is
lieve the
pursuing a course
that will contribu
more prosperous ec
te to a
onomic situation.
Sincerely,
MM:DK:JLK:pjt (#V-37
2)
bcc: Mr. Kichline
Mr. Kohn
Mr. Moran
Mrs. Mallardi (2)
0
• ED JONES
Actiontsigned Jim Kichline
•
7TP-fp DISTRICT. TENNESSEE
• 108 C.ANNotl H°usr OFFICE BUIUDING
oisTarcr orricrq.
Room 13-7. POST Orricr BUILDING
JACKSON, TENNESSEE 38301
(202) 225-4714
•
COMMITTEE ON
AGRICULTURE
(901) 423-4848
Congress of tije Ziniteb
tate5
cwikimmAki.
SUBCOMMITTEE ON
CONSERVATION AND CREDIT
COMMITTUr ON
HOUSk; ADMINI:aiRATION
CHAIRMAN.
SUBCOM M ITTEE ON
HOUSE SERVICES
3Ti)oucse of iltpressentatibeg
tarusbington, WC. 20315
3179 NORTH WArxims
MEMPHIS, TENNESSEE 38 1 27
(90 1)358-4094
P.O. Box 128
YORKVILLE, TENN(ssr r
(901) 643-412.3
38389
September 23, 1980
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
Enclosed is a copy of the letter I received from a
constituent in my district regarding his concerns on the
policy of high interest rates. I believe you will find
the enclosed self explanatory.
I am confident that the arguments of this citizen will
be given every consideration that they merit. May I please
be provided with information to use in response to Mr. Clinton.
Thanking you for your kind and prompt attention and with
kindest regards, I am
cerely,
EJ/cac
Enclosure
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Federal Reserve Bank of St. Louis
•
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
13rownsvi1le Bank
September
16, 1980
The Honorable Ed Jones
The United States House of Representatives
108 Cannon House Office Building
Washington, D. C. 20515
Dear Ed:
I am writing you concerning the way the Federal Reserve is
handling our interest rates.
I do not believe that the
sitting
up there realize what they are doing to the
people
small business man and the farmer of our community.
It does
not make much sense to me to talk about inflation when we
are bankrupting the above-mentioned people while inflation
is actually being caused by the way the government is spending
the money.
I think the people of our community are completely fed up
with the way this is being handled.
I personally feel that
it is a grave injustice to be treating the people who are
supporting the government this way while the government is
taking no action at all to slow down spending to help solve
the problem.
We have had a Chrysler dealer close, a Chevrolet-Buick dealer
close, a Massey-Ferguson dealer close, an Allis-Chalmers
dealer close, several small retail businesses close, and
quite a few building contractors are in serious trouble with
houses they have built for sale.
Yet, every time we try to
hold our interest rates down to help these people the Federal
Reserve runs the rates back up.
The working people are
scared to death of the government and arc afraid to invest
in anything in our community.
I am sick and tired of the way this is being handled and
would appreciate hearing from you concerning your views.
Sincerely
JOHN CLINTON
President
JC:jm
The HonoraLle Nancy Landau Kasaebauz
United States Senate
20510
77aah1ngton, D.C.
Li.,ar Nancy.
am writin,3 iu further reponse to your concern ciout
u1atioi ot fnmnilvq4tct of the lacctronic Fund Tranufer
cial institutions using a 2ranel of automated tcller machinc (2V1
czzs to ,J.ultile accountx of the same type '.ut
thet cwit
'the,. account aeccIzed ort the terminal
that cannot uniclusay
t1cRoulation.
recei;it, as reirtad
Sezte4Aber 24, the Iloard adoFted an amenamvnt to t'
'lationj -;:ffective itzmediatoly, to exen;-t t,-ene terTnina13 fro
this identification rw:uirellent. 7.71e oxceTtion us availeAp for
AT;:. that were ordured or 5.4uret;aued efore the tegulatir,n
isaued in final form. A co;,:i of the pres.! relaazel on t
ulent iu enclosed.
I *r,clie.ve that thi
reaon7ive tck
llf:-2
*.t.-
SiPa!4A.Voy;b4,
Enclosurc
LUB,DJ;pjt (i(v-198)
bac; Lynne Sarr
blallardi (2) %.1/
Ventical 'tr. 'lso sol:t to Cong. Jeffries (1244).
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.
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BOARD OF 50VERN0RS
OF 'ME
FEDERAL RESERVE SYSTEM
WASHINGTON, U. C. 20551
PAUL A. VOLCKER
CHAIRMAN
October 6, 1980
The Honorable John Glenn
United States Senate
201 Superior Avenue
Room 104
Cleveland, Ohio
44114
Dear Senator Glenn:
Thank you for your letter
of September 16, concerning
the Federal Reserve System's
procedures for processing pro
tests
filed pursuant to the Com
munity Reinvestment Act. In
par
ticular,
you mentioned the processing
of the CRA challenge by Ohio
Public
Interest Campaign ("OPIC") and
Citizens to Bring Broadway Bac
k
("CBBB"), to the application
of National City Corporati
on,
Cleveland, Ohio, to acquire
The Henry County Bank.
I assure you that in acting
on this application, the
Board will base its decisi
on on all facts of record,
including
the comments submitted by
OPIC and CBBB. In addition,
while I
believe the System's present
procedures for processing CPA
protests are fair, I agree tha
t a review of these proced
ures could
be useful. The System has
a continuing interest in imp
roving
its CPA procedures and, in
any such review, will take
into consideration its experiences in
administering the present pro
cedures.
In closing, I appreciate you
r interest in this matter
and your comments relating
to Community Reinvestment Act
generally.
Please let me know if I can
provide any further informati
on.
Sincerely,
SiPaul A. bidet
SMW:CO:pjt (#V-367)
bcc: Federal Reserve Bank/Cleveland
Attn: John Davis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. Claude Blair
President
National City Corporation
P.O. Box 5756
Cleveland, Ohio
Ms. Sandy Buchanan
Ohio Public Interest Campaign
340 Chester-12th Building
Cleveland, Ohio
44114
Ms. Weinberg
Mrs. Mallardi (2)V
S&R Clearing Unit
Mr. Dan Liuzzo
Citizens to Bring Broadway
Back
4947 Broadway Avenue
,t
::.
Cleveland, Ohio
44127.'/
. 140W
:A.
ABRAHAM RISICOPF, CONN., CHAIRMAN
M. JACKSON. WASH.
THOMAS V. EAGLETON, MO.
CHARLES H. PERCY. ILL.
JACOB K. JAVITS. N.Y.
SAM
LAWTON CHILES, ELA.
NUNN, GA.
TED STEVENS, ALASKA
JOHN GLENN, OHIO
JIM RASF.FIT, TENN.
CHARLES MC C. MATHIAS. JR.. MD.
JOHN C. DANFORTH. MO.
HENR• Y
•
WILLIAM
DAVID N. Priron. ARK.
WILLIAM
CARL
DAVID
LEVIN, MICH.
V. ROTH. JR., DEL.
S. COIIEH, MAINE
DURENBERGER, MINN.
RICHARD A. WEGMAN
CHIEF COUNSEL AND STAFF DIRECTOR
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Action assigned Mr. Peters
PZCI-tifcb Zfafez Zertate
COMMITTEE ON
GOVERNMENTAL AFFAIRS
WASHINGTON. D.C. 20510
September 16, 1980
Board of Governors
Federal Reserve System
Washington, D.C. 20551
Attention:
Mr. Paul Volcker, Chairman
Dear Mr. Volcker:
During the past month my office has received correspondence
from the Ohio Public Interest Campaign and the Citizens to Bring
Broadway Back expressing concern about the procedures used in their
CPA protest of National City Corporation's application to acquire the
Henry County Bank. Also, my Executive Assistant in Cleveland, Mr. Pat
Bluso, attended a meeting in the North Broadway neighborhood on
September 10, where the case was discussed by OPIC and CRTIR.
After talking with Mr. Bluso, I feel that the Federal Reserve
Bank of Cleveland has attempted to be fair, but I am concerned that
the Federal Reserve System's procedures for CPA are not the most
effective possible for adjudicating and mediating such sensitive
matters. Since the Community Reinvestment Act is still relatively
new, I would like to suggest that a review of procedures might be useful to all parties involved.
In reviewing your published procedures, it's clear that the
decision on whether to have a formal hearing is made by the Board of
Governors rather than Reserve Bank Staff. In making your decision on
a hearing in the National City case, I know you will take into
consideration the needs and concerns of all parties.
Sincerely,
John Glenn
United States Senator
JG:bjp
Please reply to
Senator John Glenn
201 Superior Avenue
Room 104
Cleveland, Ohio 44114
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
........
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WASHINGTON. 0 C
20551
October 7, 1980
PAUL A
VOLCKER
CHAtR MAN
The Honorable Abraham A. Ribicoff
Chairman
Committee on Governmental Affairs
United States Senate
Washington, D.C. 20510
Dear Chairman Ribicoff:
This letter concerns the General Accounting Office (GAO) Report
GGD-80-59 entitled "Internal Auditing Can be Strengthened in the Federal
Reserve System." This report contains recommendations concerning the Federal
Reserve and therefore requires comment in accordance with Section 236 of the
Legislative Reorganization Act of 1970.
The GAO report makes three recommendations regarding the Federal
Reserve's use of internal auditing: one concerns internal auditing at the Board of
Governors; the other two concern internal auditing of the Federal Reserve Banks
by the General Auditors. These recommendations do not concern, directly or
indirectly, the Federal Reserve System's use of internal auditing with respect to
more than 80 percent of its operations. The GAO recommendations are limited
because the Federal Reserve System maintains one of the largest internal
auditing capabilities in the U.S. Government on both an absolute scale and
relative to the size of our budget and staff. This is not mentioned in the GAO
report. The observations that are the basis for the three GAO recommendations
are directed not at whether the remaining operations are audited, which they
are, or at the results of such audits, but only at the specific methods employed.
Moreover, there is not unanimous agreement in the auditing profession regarding
such methods. Indeed, the Board's external auditors, who have the responsibility
to review our overall audit program, have not questioned these methods.
The Board addressed the basis for its current internal auditing
methods in its May 7, 1980, response to the draft of the GAO report. The
Board's response is included in the Appendix to the final report. This letter is
meant to supplement that response and identify the actions that the Board has
taken and plans to take with regard to the three recommendations.
GAO's first recommendation is that the Board "establish a
permanent, independent internal audit group at the Board of Governors,
consistent with professional internal auditing standards." The GAO basis for this
recommendation is their general observation that no single group involved in the
Board's auditing function provides fully independent, full scope evaluations.
Specifically, GAO observed that the Operational Review Program (ORP),
although it reports to the Vice Chairman, is staffed entirely by part-time
personnel and, therefore, presents the possibility of compromise of
independence; the ORP performs no follow-up on its reviews; the Controller
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
To: The Honorable Abraham A. Ribicoff
-2lacks independence since he reports directly to the Staff Director for
Management; the possibility for redundancy exists between ORP's and the
Controller's efforts; arid the external auditor's activities are limited to financial
reviews. If adopted in toto, the GAO recommendations would combine the
internal auditing activities of the Controller with the ORP into a single group
with direct access to the Board.
It is the Board's belief that the present combination of the ORP and
the Office of the Controller has served and can continue to serve the needs of
the Board well in the areas of operational review and financial controls. A group
such as GAO recommends is not absolutely necessary nor even better than the
current combination because of the unique nature of the Board's operations for
the following reasons.
First, the Board's financial operations are expense oriented, and
predominantly (80 per cent) made up of personal services expenses; therefore,
financial risks are identified almost entirely with the personal services area. All
no
purchases and services are directed and controlled on-site. The Board issues
grants, large scale, off-site contracts, or computer based financial transactions
nment
(other than payroll), characteristics of the operations of many large gover
ized
agencies. Therefore, the potential for fraud and abuse is identified, minim
e of
and controlled adequately by the internal techniques overseen by the Offic
the Controller.
m
Second, in view of the special status of the Federal Reserve Syste
l financial
in the U.S. Government, the Board has chosen to undergo an annua
ments and the
examination by an outside auditor who reviews our financial state
Board. This
status of our internal controls and reports the results directly to the
government
function is typically assigned to internal auditing groups in other
The Board does
agencies and often performed on less than an annual frequency.
examination or
not wish to change the method or frequency of such an
supplement it with a redundant internal capability.
that of
Third, management of the Board's operations is separate from
ds only to the
the Federal Reserve Banks; its internal auditing function exten
ng functions serve
Board, unlike other government agencies whose internal auditi
general auditors
headquarters and regional operations. Separate Board staff and
functions of those
in each of the Reserve Banks perform the internal auditing
Banks and their branches.
large and
Finally, there exists in the Federal Reserve Banks a
with the Federal
experienced staff both trained in internal auditing and familiar
that, with the proper
Reserve's highly technical operations. The Board believes
operations can best be
precautions, efficiency and effectiveness reviews of its
cadre of generalists
achieved through the use of such staff rather than a small
creation of a separate,
permanently assigned to the Board's staff. Although the
Board's belief that it
permanent staff has a certain superficial appeal, it is the
would turn out to be divisive and counterproductive.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
To: The Honorable Abraham A. Ribicoff
-3Although the Board is generally satisfied with the organization of its
current internal auditing functions, the Board has taken the following actions in
the areas of the GAO observations:
o Created a full-time position of Manager, Operational Review
Activities in the Office of Board Members which will substantially reduce the
possibility of independence compromises (recruiting for this position is currently
underway);
o Directed its Operational Review Committee to reconcile with the
Vice Chairman all team-member independence conflicts, should they arise;
o Directed the Operational Review Committee to follow up on its
reviews, including all those undertaken since the inception of the program;
o Reaffirmed the Controller's direct access to the Board in areas
involving internal auditing;
o Assigned two additional full-time staff members to the Controller's
internal auditing function; and
o Directed the Chairman of the Operational Review Committee and
the Controller to coordinate their activities in the interest of sharing mutually
relevant information and avoiding redundant activities.
In addition, the Board plans to go beyond the areas covered by the
GAO report and in the future will:
o Direct the external auditor to review the policies and procedures
of the Operational Review Program on a periodic basis and report its results to
the Board; and
o Assign the responsibility to follow up specifically on actions
resulting from GAO recommendations to our internal auditing elements.
With regard to the GAO report in the area of internal audit activities
at the Reserve Banks, the Board was generally gratified that the report gave
recognition to a number of positive features of those activities: its foundation
on progressive and dynamic System -wide audit standards, its organizational
independence, its provision for a quality control mechanism managed through the
Board of Governors, its commitment to building highly qualified professional
staffs and, in general, the encouragement and support afforded the audit
function by System management. The Board believes Reserve Bank audit
departments make valuable observations and recommendations and that they do
a thorough job of utilizing modern tools and techniques.
•
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Federal Reserve Bank of St. Louis
•
S
To: The Honorable Abraham A. Ribicoff
-4-
Among the tools used by audit departments to review operations and
to signal potential trouble spots is the System's own expense accounting and
management information system. PACS, as our planning and control system is
known, was recently cited by the Joint Financial Management Improvement
Program, to which the GAO itself has been a collaborating agency, as one of the
five most sophisticated of its kind in government. We believe that the nature of
the current report recommendations, like the aforementioned evaluation of the
System's underlying management information system, suggests that Federal
Reserve controls, including audit policies and practices, have measured up well
against the stiff criteria that traditionally marks GAO scrutiny.
GAO's second recommendation is that the Board "require Reserve
Bank General Auditors to review the efficiency and effectiveness of bank
supervision and regulation and economic research activities."
The Board wishes to reaffirm its general agreement with this
recommendation. As noted in the response to the preliminary report, the Board
of Governors has issued a policy letter that endorses the appropriateness of
Reserve Bank audits of supervision and regulation and economic research. It is
believed that this endorsement furnishes Reserve Bank General Auditors with
explicit authorization to perform reviews in those staff areas. Furthermore, the
Conference of General Auditors, consisting of the General Auditor of each
Federal Reserve Bank, has charged a task force with responsibility for
developing a "core program" for use by Reserve Bank audit departments in
tailoring procedures for their own reviews of supervision and regulation. The
"core program" has been completed and forwarded to the Conference of General
Auditors for its approval. Also, a task force will be named in the near future to
develop similar guidelines for use in performing reviews in the economic
research area.
While it is believed, then, that significant progress has already been
made in developing a collective approach to the audit of staff areas by the
General Auditors, the Board continues to believe that the unrestricted scope of
The Board believes that the GAO's
such audits cannot be justified.
recommendation has insufficiently distinguished between the objectives of (1)
auditing for efficiency and effectiveness of internal controls and existing
operating procedures, and (2) auditing performance against "desired results."
The Federal Reserve's missions in the bank supervision and regulation and
economic research areas are aimed at broad national goals and objectives toward
which other governmental entities are working as well. Success or failure in
achieving such "desired results" should only be measured at a level where those
performing the evaluation are able to compare the products of all of the
contributing units and also consider the impact of external factors. In the
Federal Reserve System, the relatively local Reserve Bank internal audit
4
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Federal Reserve Bank of St. Louis
To: The Honorable Abraham A. Ribicoff
->departnents do not have the proper vantage point from which to make such an
evaluation. Therefore, while the Board fully encourages General Auditors'
evaluation of, the efficiency and effectiveness of internal controls and operating
procedures, the synergism of the System's component members and the presence
of external variables do not permit a meaningful evaluation at the local level of
the respective components' professional products and judgments that support the
System's overall effectiveness in contributing to broad national goals.
The Board believes that an evaluation of the professional products
and judgments of the bank supervision and regulation area is currently being
performed at the appropriate level. Such an evaluation is afforded on a
continuous basis through the Board's Division of Banking Supervision and
Regulation, and on a periodic basis via Board-conducted operations review
programs.
Moreover, the Board of Governors itself maintains a further
independent check on the System's supervision and regulation activities through
its Committee on Banking Supervision and Regulation, consisting of three Is.
memS ers. Finally, the System's overall performance in this area is re •
gularly
scrutinized by the Congress and its effectiveness weighed against the perceived
effectiveness of other financial institution supervisory agencies.
Similarly, the Board believes that the "desired results" of the
economic research function at the Reserve Banks are already evaluated at
appropriately high levels. Since Reserve Bank research activities are primarily
aimed at furnishing data and information for judgmental use and consideration by
the Board of Governors and the Federal Open Market Committee in formulating
national monetary and credit policies, professional evaluations of those activities
must be performed by members of those bodies. Such appraisals are currently
performed on a continuous basis by the respective Reserve Bank Presidents who,
as participants in the deliberations of the FOMC, not only direct the economic
research activities of their own Banks but use and must rely on the products of
the other Banks. In addition, the Committee on Research and Statistics of the
Board of Governors, composed of individuals who can appreciate the full range of
national policy considerations as well as the System's regional economic
intelligence needs, evaluate the effectiveness of the System's collective and
component research capabilities. In the economic research area, as well,
Congressional oversight serves to appraise independently the Federal Reserve's
effectiveness in the monetary policy area, which is highly related to and
I ependent on the research function.
In summary then, the Board believes that reviews by Reserve Bank
audit departments, keying on compliance, administrative efficiency and
effectiveness, and the appropriateness of internal controls and operating
procedures, will contribute significantly to the quality and comprehensiveness of
broader evaluations that must be made at levels commensurate with those at
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
To: The Honorable Abraham A. Ribicoff
-6which policies are actually made and at which ultimate responsibility lies. Thus,
while. the GAO regards limitations placed on the scope of such reviews by
Reserve Bank audit departments as inconsistent with professional internal
auditing standards, the Board believes they are necessary given the decisionmaking structure of the System and the cornplexity and sensitivity of its "desired
results."
Furthermore, the Board is satisfied that the broader types of
evaluations that the GAO envisions be made by internal audit departments are
already regularly made at more appropriateI
GAO's final recommendation is that the Board "instruct the
Conference of General Auditors to amend their 'Audit Standards and Levels of
Audit Attention for Federal Reserve Banks' to include a System -wide approach
toward reviewing bank supervision and regulation and economic research
activities and a specific operational policy statement requiring the follow-up of
the Board of Governors' reviews by General Auditors."
The Board believes the issuance of its May 12, 1980, policy letter in
this regard has the intended effect of requiring such reviews. Furthermore,
efforts made by the Conference of General Auditors to design core audit
programs for use in the bank supervision and economic research areas evidences
the development of a System -wide approach toward reviewing these areas. The
core program for supervision and regulation will be presented to the Conference
in October 1980 and the core program for research is expected to be completed
in 1981. The Conference is also preparing a statement for inclusion in its Audit
Standards concerning follow-up of all audits and external reviews for adoption in
October.
Also, the General Auditors have been officially charged with
following up on findings and recommendations resulting from Board of Governors
operations reviews since 1975, and the Board clarified and strengthened that
requirement last year. In addition, the Board expects the Conference of General
Auditors to consider changes to its "Audit Standards" document that would
establish a separate standard prescribing responsibilities for following up on the
results of all internal and external reviews.
Sincerely,
VAI:evjj
lx:c: Mr. Malrenin
:s.allardi (2)
Identical letter also sent to Mairman Jack Ilrooks.
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Federal Reserve Bank of St. Louis
October 7, 1980
Dea/ Henry;
I understanS that you are doing very
well
.
It's a uniaue way
to spend an election campaign -- maybe better
suiteI to a Fed Chairman.
But we look forward
to seeing you back, hale and hearty as ever.
All the best,
The Honorable Henry S. Reuss
St. Mary's Hospital
2323 North Lake Drive
Milwaukee, Wisconsin 53211
CCM;PAV
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Federal Reserve Bank of St. Louis
October 7, 1980
Dar Pat:
I appreciate your sending me the copy
of "Counting Our Blessings."
Sometimes I
need to be reminded, and I look forward to
reading it.
Sincerely,
The Honorable Daniel P. Moynihan
United States Senate
Washington, D. C. 20510
CCM
•
DANIEL
PATRICK Moy-NrEIAN
UNITED STATES SENATOR
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Federal Reserve Bank of St. Louis
NEW Youx
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
..
•
S
BOARD OF GOVEFRNOR5
OFTIIE
FEDERAL RESERVE SYSTEM
WASHINGTON. D.C. 20551
October 9, 1980
The Honorable Paul E. Tsongas
United States Senate
Washington, D.C.
20510
Dear Senator Tsongas:
Chairman Volcker has asked that I acknowledge
receipt
of your letter of October 2 requesting views
on a letter you
received from a constituent expressing concern
regarding the
activities of Citibank, N.A., New York, New York
, in promoting
a service called Citi-Shopper. Citi-Shopper
is a merchandising
service offered to holders of Citibank credit
cards by Comp-UCard, Inc., an organization unrelated to Citi
bank.
Citibank is a national bank and as such is unde
r the
jurisdiction of the Comptroller of the Curr
ency. Citibank's
parent corporation, Citicorp, New York, New York
, is a bank
holding company and its primary supervisory auth
ority is the
Federal Reserve Board. Members of the Board's
staff contacted
representatives of Citicorp regarding the Citi-Sho
pper program
and were advised that the promotional activiti
es questioned by
your constituent are performed by Citibank rath
er than Citicorp.
We have, therefore, referred your request to the
Comptroller of
the Currency for response.
Sincerely,
(Stnc:!) Donald J. Wina
Donald J. Winn
Special Assistant to the Board
boo;
Congressional Liaison Office
Office of the Comptroller of the Currency
CO:pjt (tV-384)
boos Mrs. Mallardi
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Federal Reserve Bank of St. Louis
PAUL TSONGAS
MASSACHUSETTS
"Zfrrifeb
fafez Zeltale
WASHINGTON. D.C. 20510
October 2, 1980
The Honorable Paul Volcker
Chairman
Board of Governors of the
Federal Reserve System
Room B-2125
20th and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Chairman Volcker:
I have enclosed a letter from my constituent, Wayne Walega, regarding
a Citibank banking service called "Citishopper". Mr. Walega questions
whether or not this is a non-related banking service which violates
the charter of Citibank.
I would appreciate a full report on this matter so I can respond to
my constituent. Please answer in duplicate and return the attached
materials to the attention of Ms. Toni Travis.
Thank you.
PAUL E. TSONGAS
United States Senator
PET/ttt
Enclosure
410
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Federal Reserve Bank of St. Louis
fl
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rilf,N I.VJAWO
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
%#.1,11,mbr
9,
),.notor P,)ul Tsongm!,
2003 .J.F. Kf:nnedy Fedora! building
flostr,n, MA
02203
Dar Senator Tsongas,
It has recently been announced by Citibank, one of
the
n ation's laraest banks, that they are -starri
ng a new
banking
service called "Citishopper".
It is a telephone
buying service, offered in conjunction with Comp
-U-Card,
Inc. of Stamford, Connecticut;
which offers Citibank
holders of their VISA and MasterCard, this buyin
g service.
The cost is based on 118.00 per year membersh
ip and it
e ntitles the member the right to purchase most
small and
major appliances among those items listed, at 40% off
of
the manufacture - s' suggested retail price.
This banking service offered to the customers
of Citibank
for marketing the Visa and MasterCard serv
ice is certainly
a non -related banking service and must violate
the charter
o f Citibank.
At best, this service does set up an unfair
competitive practice for the distributors and
retail dealers
o f these products.
Customers of these buying services are at a disa
dvantage
insofar as delivered, damaged merchandise is
concerned
and service to these products when it is
required.
I would hope that this type of unquestionab
le banking service
would cause you some concern and that
we can look forward
to your support in ending these prac
tices.
Sincerely, c'
(:
CL .-(
V;ayne haleca, CKD
President
h r./Cr.r
C
(ti;
7; 7tj:,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCKER
CHAIRMAN
October 9, 1980
The Honorable William Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman Proxmire:
In response to your letter of Septembe
r 17, the Board's
staff has compiled the enclosed material
you requested on the issues
of remote disbursement and delayed fund
s availability.
On the subject of remote disbursement
, three documents are
enclosed: a November 14, 1978, staff memo
randum to the Board, the
January 11, 1979, press release and poli
cy statement issued by the
Board, and a May 3, 1978, letter of
instructions to Federal Reserve
examiners. Regarding delayed funds avai
lability, we have enclosed
the report of the Delayed Funds Availabi
lity Task Force dated
February 16, 1979, testimony of Governor
Rice before the Commerce,
Consumer, and Monetary Affairs Subcommi
ttee of the House Committee
on Government Operations given on Sept
ember 12, 1979, and relevant
portions of our response to an inquiry
from Chairman Rosenthal of
the House Commerce, Consumer, and Monetary
Affairs Subcommittee.
Not included with this transmittal are copi
es of the
following material which we have previous
ly supplied to you: staff
memoranda attached to correspondence on
these subjects addressed to
you from Chairman Burns dated March 4,
1977, and February 8, 1978,
and the 1978 Survey of Selected Bank Prac
tices (includes delayed
funds availability) conducted by examiner
s of the Office of the
Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Federal Reserve System whic
h was released by the Board
in 1979. Copies of all consumer comp
laints and inquiries are being
collected from the Reserve Banks as well
as being extracted from
the Board's files. We expect this mate
rial to be available in
about two weeks and details of their tran
smittal will be arranged
with your staff.
Board staff work is continuing on efforts
to develop
recommendations to the Board that could alle
viate the undesirable
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Federal Reserve Bank of St. Louis
•
The Honorable William Proxmire
Page Two
aspects of delayed funds availability and remo
te disbursement without
imposing burdensome and costly regulation.
We will, of course, keep
you informed of any action the Board takes
regarding either of these
issues.
Sincerely,
Enclosures
(OV-368)
Lcc.r. heedor
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Federal Reserve Bank of St. Louis
•
11.rs. Mallardi (2)
ff•
WILLIAM rproxmiott.
%I A. WILLIAMS, JR., NJ.
ALAN ERANCTON. CALIF.
ADL•I F. STEVENSON. ILL.
ROPERT MnRGAN. N.C.
DONAL
,W
RIEGLE. JR.. MICH.
PAUL S. SAIMANES, MD.
DON %1.D W STF WART. ALA.
WIS., CHAIRMAN
JAKE GARN, UTAH
JOHN TOWER, TEX.
JOHN HEINZ. PA.
ion assigned Janet Hart and Bill Wallace for coordination
of responfl)
o
WILLIAM L. ARMSTRONG COLO.
NANCY LANDON KASSERAUM, KANS
RICHARD G. LUGAR, INO.
GEORGE J. MITCHELL. MAINE
KENNETH A. MC LEAN. STAFF DIRECTOR
N. DANNY WALL, MINORITY STAFr DIRECTOR
MARY FRANCES DE LA PAVA, CHIEF CLERK
'ZCItifeb Zfafer. ,Slienate
COMMITTEE ON BANKING, HOUSING. AND
URBAN AFFAIRS
WASHINGTON. D.C. 20510
September 17, 1980
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Constitution Avenue between
20th and 21st Streets
Washington, D.C. 20551
•-;
Dear Chairman Volcker:
The Senate Banking Carmittee may schedule oversight hearings at
the beginning of the 97th Congress to review the actions taken by the
various federal financial regulatory agencies to resolve the issue of
delayed funds availability and remote disbursement.
To prepare for these hearings, I wish to request copies of all
correspondence arising fram and relating to any consumer complaints or
inquiries lodged with your agency relating to these issues since January 1,
1977.
I understand that it has been the practice of your agency in
recent years to forward copies of such camplaints only after the names
and addresses of the consumer and the institution have been blacked out,
presumably, to preserve the privacy of the consumer. I would request
that, henceforth, unexpurgated copies be forwarded in response to this
and future requests in view of the fact that consumers will not be identified either in the hearings, the public record or elsewhere without the
Committee's staff first acquiring the permission of the consumer involved.
I also wish to request copies of any staff survey or study or
Board policy statement relating to these areas and developed since
January 1, 1977.
Sincerel
i 1 am Pr
Chairman
V4P:jqj
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Federal Reserve Bank of St. Louis
•
.• • • . .
.• of GOI/t;•
BOARD OF GOVERNORS
OF THE
•
•
". •
.
....
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.11t
Ft
•
FEDERAL RESERVE SYSTEM
\
'It.•
WASHINGTON
—
ii'ALRes
••....••
FREDERICK H. SCHULTZ
VICE CHAIRMAN
October 10, 1980
The Honorable Frank Annunzio
Chairman
Subcommittee on Consumer Affairs
Committee on Banking, Finance and
Urban Affairs
House of Representatives
Washington, D.C.
20515
Dear Chairman Annunzio:
In Chairman Volcker's absence, I want to thank you
for
your letter regarding the Board's proposal to exem
pt overdraft
checking plans from the Electronic Fund Transfer
(EFT) Act's prohibition on compulsory use of EFT as a condition of
an extension
of credit to a consumer.
You believe that adoption of this proposed amen
dment to
Regulation E would exceed the Board's authority
and contravene what
you believe to be unambiguous statutory language,
and ask that the
Board withdraw the proposal. You point out that
, under the EFT
Act, the Board may grant exceptions for a class
of electronic fund
transfers only if it concludes that an exception
is necessary or
proper to effectuate the purposes of the Act, prev
ent circumvention
or evasion, or facilitate compliance with the stat
ute. The primary
purpose of the EFT Act (as stated in the statute)
is to provide
consumers with individual rights with respect to
EFT services, and
you feel that the Board's proposed exception woul
d take from consumers their right not to be coerced into acceptin
g EFT services.
The Board proposed this amendment in response to
petitions
from financial institutions. According to the
petitioners, the
extensive programming changes that would be requ
ired in order to
eliminate the automatic debiting of minimum paym
ents would increase
collection and programming costs significantly, and
may increase
costs for the payments system by leading to grea
ter numbers of
returned items and Ewer-based payments.
The Board is concerned about the adverse impact
of
regulatory requirements on the provision and cost
of EFT services.
The EFT Act requires the Board to demonstrate
that the consumer
protections of Regulation E outweigh the complian
ce costs imposed
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Federal Reserve Bank of St. Louis
I
neWAAJA:
(V.37)
The Honorable Frank Annunzio
Page Two
upon consumers and financial instit
utions. In this instance, as
you point out in your letter, the
required use of preauthorized
debits to repay overdraft checking
extensions of credit is not
unduly onerous for consumers.
Moreover, these plans have been
increasingly popular, with little
evidence of consumer problems.
The costs of nonautomatic pay
ment options, on the other hand,
could be substantial and could
have an adverse impact on the
payments system. They could
also lead to higher prices or reduce
d
service levels for consumers. Thu
s, a balancing of the competing
concerns of consumers and financ
ial institutions may well support
the proposed exemption.
Thank you again for your views
on this matter. The
Board will consider them along
with those of other interested
commenters when the amendment
is again brought before it.
Sincerely,
Frederick H. Schultz
LBB:DJW.pjt (#V-376)
bcc: Gov. Schultz
Lynne Barr
Mrs. Mallardi
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Federal Reserve Bank of St. Louis
MEM,
I
ANN] N710, ILL., CHAIRMAN
CLADYA NON SrELLMAN, MD.
EIRtlry I .17-ENT°. MINN.
IWAL, F P E. FAUNTROY. D.C.
J. MITCHELL, MD.
CUPTIF.
'INS,
TOR
STAFF DIU
•
•
THOMAS D. EVANS, JR.. DEL.
CHALMERS P. WYLIE. OHIO
DON RITTER, PA.
U.S. HOUSE OF REPRESENTATIVES
NINETY-SIX I H CONGRESS
SUBCOMMITTEE ON CONSUMER AFFAIRS
TELEPH(NF_: 225-9181
OF THE
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
ROOM 212 HOUSE OFFICE BUILDING ANNEX
WASHINGTON, D.C. 20515
September 29, 1980
Honorable Paul A. Volcker
Chairman
Federal Reserve Board
20th Street & Constitution Avenue, N.W.
Washington, D.C.
20551
Re:
Docket No. R-326
Dear Mr. Chairman:
I have reviewed the Board's proposed amendment to Regulation E to exempt
overdraft checking plans from the Electronic Fund Transfer Act's prohibition
against any person conditioning the extension of credit to a consumer on such
consumer's repayment by means of preauthorized electronic fund transfers.
The impact of permitting preauthorized debits by a financial institution
to repay extensions of credit pursuant to an overdraft checking plan is not
unduly onerous on consumers.
However, the Electronic Fund Transfer Act expressly, without ambiguity,
forbids a financial institution from forcing a consumer to agree to repay credit
through preauthorized debits from his account. Permitting a financial institution
to require a consumer to agree to preauthorized debits from his account as part
of an overdraft checking agreement is precisely what the Electronic Fund Transfer
law forbids. This provision of the law provides consumers with the right to be
protected from being coerced into accepting electronic fund transfer services.
I believe the Board is exceeding its regulatory authority by proposing this
exemption. Section 904(c) of the Act grants the Board regulatory authority, but
limits that authority so that the Board may only grant exceptions for a class of
electronic fund transfers if the Board concludes that the exception is necessary
or proper to effectuate the purposes of the Electronic Fund Transfer Act, the
exception will prevent the circumvention or evasion of the purposes of the
Electronic Fund Transfer Act or the exception will facilitate compliance with the
purposes of the Electronic Fund Transfer Act. Section 902 of the Electronic Fund
Transfer Act sets forth the purpose of the law. It states in relevant part:
The primary objective of this title,
however, is a provision of individual
consumer rights.
Since the Board's action will take from consumers the individual consumer right
provided in Section 913 that they not be coerced into accepting electronic fund
transfer services, the Board's action is in violation of its regulatory authority.
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Federal Reserve Bank of St. Louis
%
..
s
e
Honorable Paul A. Volcker
September 29, 1930
Page Two
If the Board feels there is a compelling need to take from consumers a
consumer protection clearly provided to them under the Electronic Fund Transfer
Act, the appropriate action for the Board to take is to recommend that Congress
amend the law so that overdraft checking plans are exempt. The Board, in
proposing this exemption as a regulatory amendment is usurping Congressional
authority.
Accordingly, I believe the Board should withdraw this proposed amendment.
I would appreciate an explanation of why the Board chose in this instance
to exceed its authority under Section 904(c) of the Electronic Fund Transfer Act.
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Federal Reserve Bank of St. Louis
I
With every best wish,
Sincerely,
.
,.../.......-7c74
Frank Annunzio
Chairman
BOARD OF GOVERNORS
Of
THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCKER
CHAIRMAN
October 15, 1980
The Honorable Norman D. Dicks
House of Representatives
Washington, D. C. 20515
Dear Mr. Dicks:
Thank you for your letter of October 3 regarding the
Federal Reserve's conduct of monetary policy. The Board share
s
your concern about the problems facing the economy and about
the
relatively harsh impacts of high interest rates on some
sectors,
such as housing. However, we believe that the way out of
the
present difficulties is not to be found in a rollback of
recent
increases in the discount rate or in an attempt to push inter
est
rates down to lower levels.
This is not to say that it is the aim of the Federal
Reserve to maintain a high level of interest rates. Rathe
r we
are endeavoring to pursue a long-range policy that will help
restore price stability and foster an environment condu
cive to
sustained, vigorous economic growth. It is well-establish
ed that
price stability cannot be attained if money is permitted
to expand too rapidly. Consequently, we have set out to achie
ve a
gradual moderation of monetary expansion. Unfortunately,
in
the recent period demands for money and credit have been enlar
ged
as the continuing brisk rise in the general level of price
s,
occurring against a backdrop of firming business activity,
has
resulted in pressures on financial markets and increasing
rates.
Those tendencies for rates to rise perhaps could have been
offset for a time, but only by permitting a still more rapid
growth
of money and credit, with clearly adverse results with respe
ct
to inflation in the months ahead. The fact of the matter
is
that we cannot hope to have a substantial and durable drop
in
interest rates until there is a decisive slowing in the pace
of
inflation and a lowering of the inflationary expectations
that
are currently embedded in rates.
You suggest that the Federal Reserve might be able
to
achieve its basic objectives at lower interest rates
through
the use of selective credit controls. The System
has only a
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Federal Reserve Bank of St. Louis
The Honorable Norman D. Dicks
Page Two
very limited set of selective con
trol measures at its disposal,
primarily the power to set margin
requirements on certain security
transactions. The extraordinary pow
ers granted to the Federal
Reserve by the President under the
Credit Control Act earlier this
yoar have been revoked--as the
y should have been once it became
clear: that the inflationary pressu
res in the economy were not being
supported by excessive use of cre
dit by businesses or consumers
.
T think it fair to say that
our experience with the special cre
dit
restraints served to reinforce the
view that credit controls are
extremely difficult to operate
in a way that is equitable and tha
t
avoids undesirable distortions
of funds flows. In most circumstances, our highly competitive
financial system can be expected
to bring about a more efficient
allocation of credit among the
many potential borrowers in our
economy than can any governmental
agency.
I share your belief that our abi
lity to achieve strong,
non-inflationary economic growth
would be enhanced by a restructuring of our tax system that pro
vided greater incentives for
business investment. With the
potential after-tax returns on
capital outlays improved by a mor
e hospitable tax structure,
firms would be in a position to
bid more aggressively for funds
in the nation's capital markets.
The most urgent priority for fed
eral tax policy, as for
monetary policy, is to exercise
the sustained restraint necessary
to wind down the inflation that
is plaguing the economy. Restoration of reasonable price stability
would in itself produce conditions more conducive to saving
and long-term investment. My
colleagues and I on the Board
believe that the decision by the
Congress to defer action on tax
cut proposals was a most constructive step in the fight agains
t inflation, and continued
fiscal discipline will do much
to ease the burden of needed
monetary restraint.
In these difficult times no one
can be certain of the
precise answer to the problems
confronting us. I hope that the
ongoing dialogue between member
s of the Congress and this Board
will aid in the identification and
implementation of effective
public policy action.
Sincerely,
S/Paul A, VolQ_ket
MJP:JZ:vcd (V-381)
bcc: Mr. Kichline
Mr. Zeisel
Mr. Prell
Mrs. Mallardi (2)10"°.
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Federal Reserve Bank of St. Louis
NORMAN D. DICKS
•
6TH '.DISTRICT, WASHINGTON
•
•
DISTRICT OFFICES:
PIERCE COUNTY
SUITE 602
SECURITY BUILDING
COMMITTEE.
2 PACIFIC AVENUE
1
915/
APPROPRIATIONS
TACOMA, WASHINGTON
98402
PHONE:(206) 593-6536
SUBCOMMITTEES.
DEFENSE
KITSAP COUNTY
INTERIOR
SUITE 3
Congre55 of the Eittiteb
tatc
1508 LONGWORTH HOUSE OFFICE BUILDING
WASHINGTON, D.C.
20515
PHONE:(202) 225-5916
900 PACIFIC AVENUE
BREmERTON, WASHINGTON
98310
PHONE:(206) 479-4011
3i)ouie of leprefkntatibesS
SOUTH KING COUNTY
SUITE 101
EVagbington,
39.e. 20515
/
1025 Sotrn4 320TH
FEDERAL WAY, WASHINGTON 98003
PHONE:(206) 941-2382
October 3, 1980
Chairman Paul A. Volcker
Board of Governors
Federal Reserve Board
20th and Constitution Avenue, NW
Washington, D.C. 20551
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Dear Mr. Chairman:
to immediately
At this time, I urge you and the Federal Reserve Board
ne other alternatives
roll back the July increases in the discount rate and exami
unnecessary
to eliminate the rate of inflation without causing additional
hardship to the American people.
to
In my view, the current high discount rates will ultimately prove
nation's
be extremely counter-productive to our efforts to restore this
economic health.
t
The Federal Reserve's high interest policy has had a devastating effec
interest rates,
on America's housing industry. Because of the recent high
This has caused
housing starts are down an astounding 34 percent from last year.
prevented thousands
large numbersof homebuilders to absorb severe business losses,
cannot continue.
of hcmebuyers from buying homes and harmed our realtors. This
, I
As I told you and the President this spring at the White House
est rate
am very concerned that the continuation of the Board's high inter
essarily
policy will lengthen the current recession and continue the unnec
ands
thous
high levels of unemployment which exist. This policy has caused
on the
of Americans to suffer needlessly and has created severe pressures
rises by
budget. As I am sure you know, when unemployment in this country
al government
one percentage point annually, it autamatically costs the Feder
billions in lost tax revenues.
There are alternatives to high interest rates which can be used to
tive
slow inflation. For instance, the Federal Reserve can use its selec
investments
credit control authority to direct available capital into long-term
manufactured
which will increase current supplies of housing, energy, and other
goods. All of these alternatives should be explored immediately.
•
•
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Federal Reserve Bank of St. Louis
Chairman Paul A. Volcker
Page Two
October 3, 1980
I am convinced that these alternatives, when coMbined with Congression
ase
efforts to develop "supply-side" economic and tax proposals to incre
economic health
our nation's productivity, can effectively restore America's
and substantially reduce the current rate of inflation.
Thank you for your kind consideration of this matter.
Sincerely,
NORMAN D. DICKS
Member of Congress
NDD:wp
UNITED STATES SENATE
WASHINGTON, D. C.
HOWARD H. BAKER,JR.
TENNESSEE
October 1, 1980
The Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Washington, D.C. 20551
Dear Paul:
Thank you for sending to me a copy of your letter
to Senator Byrd on the advisability of a pre-election
tax cut.
Since
6iw J
ward H. L'
HHBJr:rdt
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20 551
PAUL A. VOLCKER
CHAIRMAN
October 15, 1980
The Honorable Dante B. Fascell
House of Representatives
Washington, D.C.
20515
Dear Mr. Fascell:
Thank you for your note of October 2 requ
esting comment on
correspondence you received from Mr. Robert
L. Epling, President of
the Community Bank of Homestead.
Mr. Epling expresses concern about what he beli
eves to be
an unfair application by the courts of
the Truth in Lending law's
civil liability provisions. He is particul
arly concerned about
court interpretations of the regulation
holding that the right of
a creditor, in an automobile installment
sale contract, to receive
insurance proceeds and retain unearned insu
rance premiums constitutes a security interest that must be disclose
d. Based on these
court decisions, financial institutions
have been held liable for
a statutory penalty of $1,000 per obligor
in cases where the disclosure appeared on the reverse rather
than the face of the contract.
The Board is aware of the difficulties that
creditors face
in achieving compliance with Truth in Lend
ing disclosure requirements.
The requirements relating to the disclosu
re of security interests
have been particularly troublesome. The
staff is now restudying
the relevant provisions of Regulation Z,
following the adoption
of the Truth in Lending Simplification and
Reform Act, in the light
of public comments on this issue. We
believe the revised regulation that is ultimately adopted by the
Board will provide clearer
guidance to creditors--and to the courts-regarding disclosures,
and will thereby alleviate some of the
burden that creditors now
face in their efforts to comply. The prom
ulgation by the Board
of model disclosure forms (pursuant to a stat
utory mandate) should
also enhance understanding and compliance,
and provide a safe harbor
from civil liability.
Application of the Act's civil liability prov
isions, however,
is totally within the province of the cour
ts. The recent statutory
amendments, as you may know, do attempt to narr
ow the scope of
creditors' liability by reducing the number of
disclosures that
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
The Honorable Dante B. Fascell
Page Two
are subject to the statutory penalty.
It is hoped that this change
will eliminate litigation such as that
described by Mr. Epling,
which is based on violations of a pur
ely technical nature.
I hope this response will be helpful.
if we can be of further assistance.
Please let me know
Sincerely,
RS:COlvjt (#1
.:.vo
1
;
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
V-380)
Ex. Silver
:Arse vallardi (20
a
ction assignei Janet H.....,-.ES
axt R. o REG A PI
DANTE R. FASCEll
41110
I5!,1DO,TRUCT.RtHrolI
ADMiNISTIAtin ASSIST
commqvrts•
FOREIG4 AFFAIRS
cHAtpt.fati mir•siatitriAl
OPERATIONI
SoperilleTTIE
MUM* 1.1Tti IMCIIICAM Ar7AIR1
SUICOMMITTft
GOVERNMENT OrERATIONS
conart51 of tfie ?Unita;
tatt
pottle of ileprosentatiticti
MASbingtott.
D.C. 20515
INIMOIR: MISLATPOPI 4WD ORTIONAL
Ifetilat S.'SCOMMITTUE
COMMISSICN ON SICUNITY AND
COOPERATION IN Lul:-PE
October 2, 1980
cHA,RMAN
CANADIAN—UNITED STATES
INT ERPARLIAMENTARY GROUP
CHAIRMAN, U.S. DELEGATION
The Honorable Paul A. Volcker
Chairman, Federal Reserve Board
20th Street & Constitution, N.W.
20551
Washington, D.C.
Dear Mr. Chairman:
Enclosed is a copy of correspondence from
my constituent, Mr. Robert Epling.
Your consideration and comments regarding
the matter discussed in his correspondence would
be greatly appreciated.
Sincerely,
a,
DANTE B. FASCELL
Member of Congress
DBF/AAC
Enclosure
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
COIY1MONIT BANK
•
OF HOMESTEAD MI
.
September 10, 1980
,
7
Paul A. Volcker, -Chairman
Federal Reserve Board
Federal Reserve Building
St.
Constitution Ave. & 20
Washington, D. C. 20551
RE:
-Lending Act
Alleged Violations of Truth-In
Dear Mr. Volcker:
r attention which appears to
you
to
nt
ide
inc
an
ng
bri
to
We should like
A.
tion 128(a)(10), 15 U.S.C.
Sec
of
on
ati
lic
app
or
on
ati
be an unfair interpret
n Z,. Section
ding Regulations; Regulatio
Len
InthTru
0);
)(1
8(a
163
Section
A. following Section 1700.
226.8(b), (b)(5), 15 U.S.C.
Retail
k of Homestead purchased a
Ban
ity
mun
Com
9,
197
21,
On September
of Homestead. The borrower's
.
Inc
es,
Sal
Car
s
Cy'
m
Instalment Contract fro
is enclosed. The
os. A copy of the contract
Ram
ia
Mar
and
on
Ram
e
wer
names
n, and the
ner with adequate documentatio
man
mal
nor
a
in
d
dle
han
loan was
tract.
ts in accordance with the con
men
pay
all
e
mad
e
dat
to
IK)rrower has
dence from
received a copy of correspon
we
0,
198
17,
May
ut
abo
On or
Inc.
Florida Rural Legal Services,
the
h
wit
ey
orn
att
an
d,
Robert M. Hustea
and is self-explanatory.
A copy of same is enclosed
the reverse
correspondence is untrue, as
the
in
n
tio
usa
acc
st
fir
The
or to
include the right of the credit
s
doe
)
ted
igh
ghl
(hi
ct
tra
of the con
m cancelled insurance policies.
retain returned premiums fro
ce been
of the correspondence have sin
ns
tio
usa
acc
rd
thi
and
The seccnd
by
orrect and properly disclosed
inc
n
bee
e
hav
to
d
tea
Hus
acknowledged by Mr.
the bank.
ies, 551 F.2d
ions in Davis v. United Compan
Rased upon similar situat
it was
v. Allen-Russel Ford, 78-1072,
son
ond
Edm
and
7)
197
.,
Cir
971 (5th
ons were liable for a statutory
uti
tit
ins
ing
anc
fin
the
t
tha
adjudicated
e of
the disclosure was on the revers
e
aus
bec
er
mak
per
000
$1,
penalty of
tract. (See enclosures from
con
the
of
e
fac
the
n
tha
her
the contract rat
FEDERAL REPORTER).
ionale is
case have been harmed and our rat
None of the parties in our
y for the
k must pay this statutory penalt
ban
our
t
tha
t
fac
the
to
absent
tract.
closure on the "face" of the con
dis
the
ing
hav
not
of
e
lur
simple fai
ing
iously add to the cost of borrow
obv
l
wil
ies
alt
pen
h
suc
of
Our payment
for all consumers.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
RIDA 33030
POST OFFICE ROX 379, HOMESTEAD, FLO
(305)245-2211
4
September 10, 1980
aul A. Volcker, Chairman
'Pare Two
and we do not feel
Many fellow bankers have similar liabilities
to suffer from the statute.
it was the "legislative intent" for business
fair and equitable
We at Community Bank pride ourselves in being
th; doing our best to obey
bankers as evidenced by our earnings and grow
y violate the law.
the law. We certainly would not intentionall
erely request your
In view of the situation presented, we sinc
to remedy the situation.
consideration of leaislation or regulations
Very truly yours,
L. En?,'
President
RLE:jn
cc:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Senator Lawton Chiles
Senator Richard Stone
Congressman Dante Fascell
Senator Dick Anderson
Mr. G. Eicher
Mr. J. McDonald
Mr. J. Marcus
Mr. D. Stone
ion
Mr. J. Milstead-Florida Bankers Associat
American Bankers Association
- Atlanta
Federal Deposit Insurance Corporation
State Comptroller of Banking
:
Florida Rural Legal Services, Inc.
and
•
Legal Services of Greater Miami, Inc.
381 NORTH KROME AVENUE, SUITE 204
POST OFFICE BOX P
HOMESTEAD, FLORIDA 33030
TELEPHONE:(305) 248-5500
nay 15, 1980
Cy's Car Sales
29120 South Fecleral Highway
Homestead, Florida
33030
Dear nr. Pastor:
On September 21, 1979 you sold to Ramon and Maria Ramos
a 1976 Ford Torino. The contract form used violates the Truth
in Lendina Act in the following ways.
First, the description of the security interest does
not include the richt of the creditor to retain returned
premiums from cancelled insurance policies. Edmondson v AllenRussell Ford, 577 F.2d 291 (5th Cir., 1978). Nor does it
-disclose the reauirement of physical damage insurance being
maintained nor that such insurance is payable to the creditor.
011,
Second, the default charges are not properly disclosed
in that your perlineation of a portion of that disclosure
renders it inconsistent with permissible charges under law.
I hereby make demand on you for the sum of $1,000.00
for each buyer for the faulty disclosures, as provided by the
Truth In Lending Act. see Davis v United Companies, 551 F.2d
971(5th Cir., 1977). This demand is also directed to Community
Bank of Homestead, to whom I am providing a copy of this letter.
The case citations are supplied as a courtesy so that
legal correctness of our position can be checked by your or
the b'ank's attorney with the utmost economy and I suggest that
you have an attorney read the cases cited; if 'we get into
litigation and our position prove correct, you will be liable
for attorneys fees to Plaintiffs' counsel. I hope that we
can all save expense and aggravation by settling immediately.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Very truly yours,
Robert M. Hustead
Attorney At Law
r_:
On-
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to personally identifiable information.
Citation Information
Document Type: Sale contract
Citations:
Number of Pages Removed: 2
Sale contract, Cy's Car Sales, Inc., September 21, 1979.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
•
JOINT LAW OFFICES OF
Florida Itural Legal Services, Inc.
1.1-1(1
Legal Services of Greater Miami, Inc.
381 NORTH KROME AVENUE, SUITE 204
POST OFFICE BOX P
HOMESTEAD, FLORIDA 33030
TELEPHONE:(305) 248-5500
July 14, 1980
Dennis E. Stone, Esq.
Malikas & Stone
Krome Plaza, Suite 868
9th and North Krome Avenue
Homestead, Florida 33030
Dear Mr. Stone:
Please find enclosed the copies of the The
United
_ States Law Week entries on Edmondson v. Allen Russel
,
}ord. The first page is the subject matter summary of cases
recently filed and the second reflects the denial of certiorari
by the Supreme Court. While I knew that I had read that cert
had been denied, I was way off on the date; the denial appears
in the May 15, 1979, issue of U.S. Law Week.
I hope that this information results in some
expeditious resolution of our case.
With best regards, I remain
Vei.V truly youys,
/
) I-
Rob rt M. Hustead
RNH/rs/enc.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Newspaper articles
Citations:
Number of Pages Removed: 14
"78-1072 Ford Motor Credit Co. v. Edmondson." United States Law Week, 1979.
"Money and Finance." United States Law Week, 1979.
"Edmondson v. Allen-Russell Ford, Inc." Federal Reporter 2d Series, 1979.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCKER
CHAIRMAN
October 15, 1980
The Honorable Abraham A. Ribicoff
Chairman
Committee on Governmental Affairs
United States Senate
Washington, D.C.
20510
Re:
Report by the General Accounting Office
entitled
"Despite Positive Effects, Further For
eign Acquisitions of U.S. Banks Should Be Limited
Until Policy
Conflicts Are Fully Addressed" (GG
D-80-66)
Dear Chairman Ribicoff:
On pages 5-14 of this report, certai
n recommendations
are directed to the Board and to the
other Federal banking agencies.
These recommendations concern the
procedures followed and the information received when applications
are received for foreign acquisitions of U.S. banks.
The first of the three recommend
ations is that, in such
circumstances, contact be made with
the regulatory authority of
the acquiring bank to determine the
bank's financial strength and
reputation. As noted in the Board's
earlier comment on the draft
of this report, the Board announced
in its policy statement dated
February 23, 1979, that it would obt
ain the views of the home
regulatory authority before acting on
an application by a foreign
bank to acquire a U.S. bank.
The second recommendation is tha
t the Board deny applications where the home regulatory aut
hority furnishes an unfavorable
reference. Under the Bank Holding
Company Act, the Board is obliged
to take into consideration, among
other things, the financial and
managerial resources of the banks con
cerned. An adverse comment
by the home regulatory authority wou
ld reflect unfavorably on
the bank's financial and manageria
l resources and would be weighed
accordingly by the Board in acting
on the application.
Under the third recommendation, for
eign banks and other
businesses seeking to acquire U.S. ban
ks would have to submit
certified consolidated financial
statements prepared in accordance
with U.S. generally accepted acc
ounting pripciples. In the major
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Honorable Abraham A. Ribico
ff
Page Two
acquisitions that the Board has
already acted upon, the Boa
rd considered very carefully its nee
ds for adequate information
on the
condition of the acquiring bank.
In all of these cases, the Boa
rd
was able to assure itself abo
ut the financial condition
of the
acquiring bank on the basis of
the financial statements presen
ted
and other information furnis
hed, including explanations
of any
material differences from U.S
. accounting standards. It
was the
Board's judgment that it wou
ld be unduly burdensome to req
uire the
foreign bank to recast all of
its accounts, and all of the
accounts
of its subsidiaries, according
to U.S. accounting principle
s. The
Board continues to believe
that the reporting and other inf
ormational
requirements which it is puttin
g in place will be sufficien
t for
the exercise of its superviso
ry responsibilities toward for
eign
banks.
Sincerely,
0d.
Waal A.191,
irlesidt
boob reed
&XS, Piallawit(21
Identiatil Utter OA, seat to Chows Jai* UMke•
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Federal Reserve Bank of St. Louis
vir
LQnoraUe Sas S. aall. Jr.
cAous4,
lw,romertativas
WAahiagton. V.C.
20515
Lter :41r. Sall
Than), 4 Ju for your lettur of October 6, 1,00t 00A *WalinV the relortinl protlem under tNe Monetary Control Act 414
196C raised ty jr. T.E. Crawford of the Renderson Claq Prodt
Credit Cnion. 11:e aoard has made an effnrt to Amin's. ri .ortirfy
burdens on small inetitutions Ly deferrir•:,; reorting and re't,t
requirements for those delvsitory inatitutlpn9 vitIn Use than
$1 million in total delGaitz (including overN11,000 credit unions)
until .ray 1581, and ky reluirinq reports from ecnxisitory Motttuticat. Llztwaen $1 million and $5 stallion Jr. t,r,tAl deposits only
(24exter1i LoOntirci in January 1,81.
r. Crawcrd has keen cwItacted by staff at the rederal
reserve Dank of Ls.114a in an effort to verify the eliqibility-of--'
the Lc,”dersen Clay Products Credit Union for deforred reportinl
and ItAiilturiaftC4 tof required reservts.
Please, lut iae know if I can
c of further assistance.
ItiAcor.47,
wRJ.JSZtCO:pjt (IV-383)
Mr. Kichline
Lr. Jones
Mrs. nallardi (2)%/-
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Federal Reserve Bank of St. Louis
S/Paul A. Vo!chett
Action assigned Mr. Kichline
SAM B. HALL. JR.
1
4"
•
FIRST DISTRICT
STATE OF TEXAS
COMMITTEES:
;$
JUDICIARY
Congrels5 of tfie ifiniteb iptate5
sumommITTrES
CRIMINAL JUSTICE
IMMIGRATION. CITIZENSHIP, AND
INTERNATIONAL LAW
SUFICOMMITYL I
COMPENSATION, PENSION AND
INSURANCE
MEDICAL FACILITIES AND BENEFITS
U.S. FEDERAL BUILDING. Room G 15
MARSHALL. TEXAS 75670
Pouge of Aepregentatibeti
tZlaMjington,;le. 20515
VETERANS AFFAIRS
318 CANNON HousE OrricE BUILDING
WASHINGTON. D.C. 20515
TELEPHONE:(202)
U.S. POST OFFICE AND FEDERAL BUILDING
Room Vil>"-PARIS. TEXAS 754160
October 6, 1980
U.S. POST OFFICE AND FEDERAL BUILDING
Room 401--TOCARK ANA. TEXAS 75501
poisoopumw
The Honorable Paul A. Volcker, Chairman
Board of Governors of the Federal Reserve System
Twentieth St. and Constitution Ave. NW
Washington, D.C. 20551
Dear Mr. Chairman:
Enclosed for your kind attention is a letter from one of
my constituents, Mr. T. F. Crawford of Henderson, Texas. As
you will note, Mr. Crawford is President of a small credit union
which is experiencing difficulties in complying with the reporting
requirements created by the Board under the Monetary Control Act
of 1980, PL 96-221.
While I recognize that this law gives the Board very broad
powers in this area, I would encourage reconsideration of the
problems many smaller institutions may face in trying to comply
with the Boards rules. Any information or advice which you can
properly provide concerning this matter will be greatly appreciated, but I would urge an amendment to these reporting requirements to exempt smaller institutions such as Mr. Crawford's
be
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Federal Reserve Bank of St. Louis
Thank you for your assistance and with kindest regards and
wishes, I am
Sincerely yours,
1.4AAJ
,J47
/gam R. Hall,
•
•
• •"
ato.
HUST or VICE 11.1x 1129
•
HENDERSON, FIX AS
7S652
Septembcr
HnnnrNhie SIM B. Hall Jr.
House of Representatives
31g Cannon House Office Building
Washington, D. C. 20515
Dear Representative Hall:
Reference is made to "Ihe Monetary Control Act of
1980" (11 .1.. 96-221),
enacted on March 31, 1980.
The employees of Henderson Clay Products have a small
State Chartered
Credit Union with less than .?- 00,000 in shares. This
small Credit
Union has one part time paid bookkeeper while the remai
nder of the
Credit Union officers donate their time. NI- purpo
se is to encourage
thrift among emnloyees and also provide a place where
employees can
borrow money. Many of our rinority employees find this
is the only
source of money at reasonable interest rates.
The attached publication slal,'s reporting for institutions
with deposits less than Si million do not have to report until May
1981;
however, the Federal Pseserve Pank of Dallas Circular No. 80-1
71,
September 8, 1980 requ i rc a "questionnaire" be completed by
September
17, 1980. Ihis questionnaire wonld require several days resea
rch
Ti order to complete. Additionally, this Credit Union has
started
to receive volumes of regulations from the Federal Reser
ve Bank that
are difficult for non-financial personnel to understand
.
Please help this, as well as other, small Credit Unions escap
e the
reporting requirements imposed under "The Monetary Contr
ol Act of
1980." Most small Credit Unions will not be able to survive
government reporting, where as, larger Credit Unions with their full
time
stalls and larger deposits will find the reporting expensive
and
tiMe COT1SUMi ng hut achievable.
Your assistance is appreciated.
Sincer,ely,
T.
Crawford
President
TFC/gg
enclosure
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Federal Reserve Bank of St. Louis
October 1E, 1'380
Thw 4‹,norati1e Portland J. St Cermain
Cnairman
Cubcomittee on Financial InstitutIns
'Lui-crvisioni Regulation and Inpurarce
CoAmitteo on banking, Finance in41,
Uran Main;
P31106 of Rei.rasentativcs
20515
WaOinton, D.C.
1:?ear Chairman St Cemain,
Thank iou for -our letter of Cotocr
JoGept. Cwiini as a ii4,1111ter of the Uoard's Cc,nitur 7‘,=INIIry
Council.
Cugini'a resume i:: on file with t,F, Board, ;trii. I
can asure you that his qualifications will roceive full consileration when the Board makes the 1961 aprointments to the Council.
we will be in touch wit)' you whon the selections are made.
:e :Tird in4rociates reccivir,i ,our recommendation and
Jour interest in the Contumer Advisory Counc51.
rincerely,
sira,.
trAcittl:
CO.pjt (4V-391)
bcc
Ann Marie gray (w/foj;le. of inconin)
Mallardi (2)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
FAANK ANNUNZIO. ILL.
JAMES M HANLEY, N.Y.
CARROLL HUBBARD, JR., KY.
JERRY M. PATTERSON. CALIF.
THOMAS L. ASHLEY, OHIO
NORMAN E. D AMOURS. N.H.
JOHN J. CAVANAUGH. NEBR.
JIM MATTOX, TEX.
JOSEPH G. MINISH, N.J.
WALTER E. FAUNTROY. D.C.
DOUG BARNARD GA.
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Federal Reserve Bank of St. Louis
,ii
Res
FER'1AND J. ST ornmioN. R.I., CHAIRMAN
o
nse will be prepare-1 by Cong. _,iaison Office
CHALMERS P. WYLIE. OHIO
HENRY J. HYDE. ILL.
GEORGE HANSEN, IDAHO
U.S. HOUSE OF REPRESENTATIVES
JIM LEACH. IOWA
CARROLL A. CAMPBELL, JP... S.C.
ED BETHUNE. ARK.
SUBCOMNITTEEONFINANCIALINSTITUTIONS
SUPERVISION, REGULATION AND INSURANCE
OF THE
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
4
NINETY-SIXTH CONGRESS
WASHINGTON, D.C. 20515
October 10, 1980
Honorable Paul Volcker
Chairman
Board of Governors of the
Federal Reserve System
washingLon, D.C.
Dear Mr. Chairman:
As Chairman of the House Subcommittee on Financial
Institutions, I am enthusiastically recommending the appointment
of Mr. Joseph Cugini of Rhode Island to be a member of the Consumer Advisory Council of the Federal Reserve System.
Mr. Cugini's many years of experience in the credit union
movement assures thoughtful and valuable input from the perspective of both financial institutions and the consumers they
serve. I am personally acquainted with Mr. Cugini and consider
him exceptionally well qualified to serve the Board as a member
of the Council. I am certain that his contributions to the work
of the Council will reflect his interest in and knowledge of
consumer affairs legislation and regulation, as well as his
expertise as a credit union manager.
I enthusiastically support Mr. Cugini's nomination and
urge the Board to appoint him a member of the Consumer Advisory
Council of the Federal Reserve System.
FJStG:hh
04:144/1.4
BOARD OF GOVERNOR5
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON. O. C. 20551
RAL RE-S.•
• •.. • •
October 17, 1980
The Honorable Berkley Bedell
House of Representatives
Washington, D.C.
20515
Dear Mr. Bedell:
Chairman Volcker has asked me to acknowledge your
letter
of October 14 requesting our views on a letter you
received from
Mr. Dick Krommenhoek. Mr. Krommenhoek
expresses concern regarding
the activities of Citibank, N.A., New York,
New York, in promoting
a service called Citi-Shopper. Citi-Shopper is
a merchandising
service offered to holders of Citibank credit
cards by Comp-U-Card,
Inc., an organization unrelated to Citibank.
Citibank is a national bank and as such is under the
jurisdiction of the Comptroller of the Currency. Citibank's
parent corporation, Citicorp, New York, New York, is
a bank holding
company and its primary supervisory authority is the Fede
ral Reserve
Board. Members of the Board's staff contacted representa
tives of
Citicorp regarding the Citi-Shopper program and were
advised that
the promotional activities questioned by Mr. Krommenhoe
k are performed by Citibank rather than Citicorp. We have, ther
efore,
referred your request to the Comptroller of the Currency for respo
nse.
Sincerely,
(Signed) Donald I. Winn
Donald J. Winn
Special Assistant to the Board
bcc;
Congressional Liaison
Office of tho Comptrollar
of the Currency
COsplt ($V-394)
boa; tire. Mallordi‘,/
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S
BERKLEY DEDELL
6Tti DiTicT. IOWA
esponse will be handled by Coressional Liaison
wAcKINGTou (wrier
Office
405 CANNON 1-10t/SE OrrICE BUILDING
20515
WASHINGTON. D C
(202) 225-5476
CONINIITTErn•
AGRICULTURE
wiinrOmmiTTtrn
Congtt5c.") of tijc Uniteb *tates'
LIVESTOCK AND GRAINS
FAMILY FARMS. RURAL
DEvELopmENT AND SPECIAL STUDIES
31)oirst of iitpre5entatibe.5
CONFRvATION AND CREDIT
I1MAL 1.11JSINCS5
Z.Zlasbington, n.c. 20315
.1.111CommiT1C1 S
October 14, 1980
ANTIT RUST AND RESTRAINT OF TRADE
ACTivi riLS AFFECTING SMALL oUSINEsS
DISTRICT Orr ICES:
479 FrOCRAL BUILDING
FORT DODGE. low*
50501
(515) 573-7169
311 FEDrpe AI_ BuiLoING
Stoux C,rv, tow..
(712) 152-4164
51101
EXT. 281
Mr. Paul A. Volcker, Chairman
Federal Reserve Board
Washington, D.C. 20551
Dear Mr. Volcker:
Congressman Bedell has asked that I write to you in regard to a letter he
received concerning a new banking service called "Citishopper". A copy of
that letter is enclosed.
Congressman Bedell 's constituent is concerned that the new service will set
up an unfair competitive practice for the distributors and retail dealers of
products offered in conjunction with this service. Furthermore, he believes
this to be a non-related banking service in violation of the charter of the
bank involved.
Congressman Bedell believes that these concerns merit review. He would appreciate
your consideration of these views, and looks forward to your thoughts on this matter.
Thank you for your assistance.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Sincerely,
Ga y Hubbard
L gislative Assistant to
Congressman Bedell
rup,
114111."
,
0
N.+
411
4
I, _
411
KITCHENS by KROMMENHOEK
1916 PIERCE - SIOUX CITY.
P.
IOWA 51104 • (712) 252.4402
'RECOVED SEP 17 NBC!
Dear Representative Bedell,
UP 2 2 1380
It has recently been announced by Citibank, one of the nation's
largest banks, that they are starting a new banking serv
ice
called "Citishopper". It is a telephone buying serv
ice, offered
in conjunction with Comp-U-Card, Inc., of Stamford,
Connecticut;
which offers Citibank holders of their VISA and Mast
erCard,
this buying service.
The cost is based on $18.00 por year membership and it
entitles
the member the right to purchase most small and major
aopliances among those items listed, at 40% off of the manu
facturers' suggested retail price.
This banking service offered to the customers of Citibank
for
marketing the VISA and MasterCard service is certainly a
non -related banking service and must violate the charter
of the
Citibank. At best, this service does set up an unfair
competitive practice for the distributors and retail dealers
of these products.
Customers of these buying services are at a disadvantage
insofar
as delivered, damaged merchandise is concerned and serv
ice to
these products when it is required.
I would hope that this type of unquestionable banking
service
would cause you some concern and that we can look
forward
to your support in ending these practices.
Sincerely,
//
Dick Krommenhoek
Kitchens by Krommenhoek
164
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Federal Reserve Bank of St. Louis
Octolier 1C, 198C
The Nonoralle Gary Hart
United Stater Senate
:.:4Ilhinuton, D.C.
20510
rear Senator Tart.
Chaiman Volaer !tar; anYed mc to acl.nowledge your letter
of Cctober 10 re9uest1nj our views on a letter you received from
r. rarula E. VrA,ir, Jr. rr. Vabie extresnes concern regarainq
the cctivitica of Citilank, N.A., nPW York, Vew York, in promoting
a acrvice called Citi-Shopper. Citi-Shoppor in a merchandising
service offered to holders of Citibank cretlit cards by Comp-U-Card,
Inc., an orejanizatien unrelated to Citi)-ank.
Citibank in a net:lona'
ard Ag such is under the
jurisdiction of tno Ccmi'troller of the Currency. Citibank's
1.arent corratio:', Citicorp, New York, New York, is a 1-.ank holding
comyany and its I- ririary cu}ervisory authority is the Federal reserve
Loard, nembers of the Poard's staff contacted rerrosentatives of
Citicorv reyardirvl tLe Citi Shorver pro7ram and were advised that
the rromotioral activities itientioned by Vr. 'inbie are performed
Uy Citil:ank rather tan Citicorp. Wn hnve, therefore, referred
your reuent to the Comptroller of the Currency for resronse.
Sincerely,
{Sirnstf) Donald I
wtiñi
nornlei J. Winn
Ficcial Annistant to the Iloard
bcc;
Conuressional Liaison Office
Office of the Comvtroller of the Currency
CO:ljt (#V-389)
Lcc: Mrs. Mallardi 1/
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Federal Reserve Bank of St. Louis
WEIMMMIIMMIMML.
GARY HART
coLon,A2o
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Repowill be handled by Cong. ',jai* Office
COMMITTEES:
ARMED SERVICES
ENVIRONMENT AND PUBLIC WORKS
?JCnifeb Ztale,c; Zenate
BUDGET
WASHINGTON, D.C. 20510
October 10, 1980
•
The Honorable Paul A. Volcker
Chairman of the Board of Governors
of the Federal Reserve System
20th and Constitution Avenue, NW
Washington, DC 20551
Dear Mr. Chairman:
CA)
Attached is a copy of a letter from Mr.
Harold E. Mabie, Jr. concerning the "citisho
pper"
service offered by Citibank. The service apparent
ly
offers appliances at reduced rates to Comp
-U-Card,
Visa, and Master Charge holders.
I would appreciate your attention and review
of this matter.
Sincerely,
70.
Gay Ha
Enclosure
THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS
7
i
r
I
F.!
20,
S,nator Gary Hart
254 Russell Building
Washington, D. C. 20510
Dear Senator Eart:
It hqs recently been announced by Citibank, one of the nation's
larFost banks, that they are starting a new banking service called
"Citishopper". It is a telephone buying service, offered in conjunction with Crnm-U-Card, Inc., of Stamford, Connecticut; which
offers Citibnk holders of their Visa and MasterCard, this buying
S ervice.
The cost is based on $18.00 per year membership and it entitles the
r=ber the rirht -to purchas most =all and major appliances amen:
those items listed at 405 off the mriurcturers' suggested retail
;-1
•
_
,i(,..:._
tiL iiiie charLt.,
...r. ol -Lne
.. . .. '011d mu,_-, ,- , vii_a.
,
- 1.
. .
, _ ___ .
t.,...... I. ..._,.....
e dirihutc,rc pnd retail dealers of these products..
.
t
cf
•
r--
Customers of thse buying services are at a disadvantage insofar
as delivered, damaged merchandise is concerned and service to these
products when it is required.
o,
Lanking servic
- -,
, .1..
KINGS KITCHEN GENiLR
•_ 't
. • -•.•• P
••'
-
,.•
•
,
Harold E. Mabie, Jr.
Owner
FEM/ect
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-
r
1
1-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
October 17, 1980
Dear Mac:
I read your "foreign policy report" with great
interest. The range of issues is so enormous -and so difficult -- one is tempted to react with
despair about our ability as a people to get a rational
handle on them. But the message that comes through in
the end is that we really can -- once we look beyond
the practical concerns of elections and re-elections
and realize that people like yourself can provide the
core of thoughtful consensus and leadership necessary.
With best wishes,
Sincerely,
The Honorable Charles McC. Mathias, Jr.
United States Senate
Washington, D. C. 20510
PAV:ccm
#388
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Fic C.I
TIIIIA,
WAVIr10 18 51111DTAIMEC
October 8, 1980
Dear Paul:
I am enclosing a statement which I released last
week entitled "Toward a New American Foreign Policy."
In it, I have tried to take a comprehensive look
at what constitutes "national security" in this day
and age. I have sought to avoid dwelling on our past
successes and failures and instead have concentrated
on what I believe should be our national security
priorities for the future.
I thought that you might find it of interest.
With best wishes,
/;
•
t,
,
Sincerely,
I t
r
'
!k
Charles McC. Mathias, Jr.
United States Senator
-
The Honorable Paul A. Volcker
Chairman, Board of Governors
of the Federal Reserve System
20th and Constitution, N.W.
Washington, D. C. 20551
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Federal Reserve Bank of St. Louis
,4*
/16
•
•
Congressional Record
S
•
United States
of America
Vol. 126
PROCEEDINGS AND DEBATES OF THE 96th CONGRESS SECOND SESSION
WASHINGTON, TUESDAY, SEPTEMBER 30, 1980
No. 153—Part II
Senate
TOWARD A NEW AMERICAN
FOREIGN POLICY
Mr. MATHIAS. Mr. President, we have
all been following closely the war taking
place between Iraq and Iran. All of us
recognize that although only two nations
are directly involved, at present, in the
fighting, the global implications of their
conflict could be very grave indeed. The
potential for serious energy shortages in
the West, escalating regional violence,
and superpower friction arising out of
the current Iraq/Iran confrontation cannot be ignored.
We need desperately to set a prudent
course through these troubled waters.
Our foreign policy must be one which is
responsive to the full range of threats
affecting our national security and yet
guides us in pursuit of clearly defined
priorities. I should like to explore this
subject in detail with other Senators and
with the American people.
PART I--'HZ CHAILLXNGZ8 OP THZ 198013
Americans, with good reason, look back
on much of the post-World War II era
with some degree of nostalgia. The many
International crises we faced during the
period prior to our Vietnam engagement
were very real. Some, such as the Cuban
missile crisis, were potentially catastrophic. But, in retrospect, we never
had it so good. We were, in fact and in
the perceptions of our friends and foes,
the strongest nation on earth.
Our major
adversary, the Soviet
Union, could operate with impunity only
within its relatively narrow sphere of
influence. Its ability to project its power
beyond the territory it overran during
World War II, was restricted. Its global
role was largely that of a spoiler, not of
a shaper, of events.
Economically, we had no rival. We
were active participants in a global economy, the framework of which was largely
shaped to our specifications. But we
were not directly dependent on that
world economy for our ultimate security.
Foreign trade was in no sense critical to
our survival as a free and functioning
society.
Finally, and critically, there was a high
level of popular support in the United
States for an activist American foreign
policy along the lines of that pursued by
the administrations in office in the 1950's
and much of the 1960's. The "containment" of Soviet power was a goal acceptable to the American people. The strong
American domestic economy made the
pursuit of that goal all the easier.
The Vietnam war helped to erode both
the economic and popular underpinnings
of American foreign policy. Americans
came out of that experience with an altered view of the world and, most particularly, with an altered view of our role
in it. The domestic base for an activist
U.S. foreign policy seemed to have dissipated by the early 1970's. (The Nixon
doctrine, with its stress on giving others
the tools to pursue our interests, was the
policy consequence of this shift in popular sentiment.)
But what only became clear in the latter half of the 1970's was that the world,
and our relative position in it, had shifted
fundamentally. What is less clear is
whether or not Americans appreciate the
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Federal Reserve Bank of St. Louis
felt everywhere. In 1978, the U.S. oil imextent of the changes and are prepared
port bill was $42 billion. This year, it may
U.S.
to deal with their implications for
well top $90 billion. In the nonoil prointerests.
developing countries, the situaducing
vital
it
is
1980's,
the
As we embark on
particularly
grim. The Economist
tion
is
we
world
a
of
sort
what
understand
to
estimates that "Every time the price of
are operating in and what sort of forces
oil rises by $1 a barrel, the nonoil LDC's
will impact on our interests in the years
Developed Countries) have to
worth
(Lesser
are
ahead. The following points
$2 billion more a year to pay
nearly
find
emphasizing:
It is estimated that
imports."
Soviet
their
the
1960's.
for
early
the
First. In
the LDC's must come up with $65 billion
Union embarked on a major effort to
to pay for their imported oil this year
build up its capabilities in the strategic
convenand
nuclear
alone.
tactical
nuclear,
been
has
effort
This
fields.
In the past, adding to debt as well as
military
tional
increasing exports have helped to fund
sustained up to the present with annual
LDC oil purchases. These funding avemilitary expenditures amounting to from
nues are in question.
11 to 14 percent of Soviet GNP (as
of
percent
5
approximately
The Third World is already heavily
against our
with debt. It is estimated that
burdened
GNP)
.
larger
a
the debt of nonOPEC developing counThe result of this effort is a Soviet
tries was approximately $250 billion at
military establishment very substantially
larger and far more capable than it was
the end of 1979, up from $73 billion in
1973. It is not clear how much more fi15 or 20 years ago.
nancing is available. On the export side,
It is, of course, difficult to compare
U.S./Soviet military capabilities with any
with the deepening economic troubles of
Europe and the United States, it is quesprecision. The two countries have emphasized different aspects of their force
tionable that these markets for LDC exstructures. (We do not match the Soviet
ports will remain stable (much less
Union in numbers of tanks, but they have
grow). At present, the United States and
Europe take over 60 percent of LDC
no equivalent to our carrier task forces.)
Nonetheless, across a wide range of inexports.
dicators of military strength, the Soviet
Nor is the West immune from this
Union is now challenging the United
cycle. More than 30 percent of the total
States.
annual exports of the United States,
It goes without saying that other facEurope, and Japan go to the developing
tors must be considered in making the
countries. Whole industries in the West
comparison. For example, a substantial
could be adversely affected by the LDCs'
portion (roughly a quarter) of the Soviet
Inability to import.
Union's military assets are directed
As if this were not enough, the world
against the People's Republic of China,
goes on adding people at a fantastic rate.
whereas the PRC is not, at present, conThe population of this globe is now over
sidered by us to be a significant threat to
4.5 billion and is expected to reach 6 bilthe United States.
lion within 20 years. "Unless current
But even granting the more varied
trends are reversed," according to a
nature of Soviet security concerns, one
State Department report, "the growth of
Is still left with a fundamental concluthe world's population in the last quarter
sion. One major reason the world will he
of this century will equal the growth in
different for the United States in the
world population from the birth of
1980's than it was in preceding decades
Christ to 1950: 90 percent of that growth
is that the other superpower is now our
will occur in developing countries."
military equal.
From Cairo to Calcutta, Mexico City to
Second. There is an =fortunate tendBangkok, young people are making deency on the part of some Americans to
mands impossible for any government to
believe that expanding Soviet power is
meet and impossible for any government
the only major threat to U.S. security in
to ignore without incurring grave risks
the 1980's. This perception, unfortuto its own future. They are asking for
nately, is far from accurate. Economic.
food, shelter, and work. They are straindemographic, political, and other forces
ing the earth's resources to the breaking
at work in the world today are reshaping
point.
the very environment in which we will
These many and varied pressures
have to operate in the 1980's. These
undermine the political stability of naforces could ultimately have far greater
tions all over the globe. Governments are
impact on our Nation's security than will
are being replaced with regularity. Authe Soviet Union.
thoritarian solutions to governance probWe are, for example, witnessing a trelems are becoming more common. Leadmendous transfer of wealth to the oil
ers are driven to desperate measures to
producing nations of the world. The imdivert public attention from the ecoplications of this transfer are still only
nomic ills which plague them. The 1980's
clear in outline, but the emerging picture
promise to be a decade of great political
Is not a reassuring one.
instability.
It is estimated that OPEC's net finanThird. Some Americans still believe
cial assets will reach $380 billion by the
that we can isolate ourselves from the
end of 1981, up from $8 billion in 1973. In
misery of the rest of the world. The thirst
1980 alone, thanks to the Precipitous
major reason that the 1980's will be difprice rise in 1979. OPEC's current acferent than preceding decades is that it
count surplus will top $100 billion, up
is now very clear that such isolation is
from about $7 billion in 1978.
no longer an option for us. After World
Indeed, the World Bank estimates that
War II, we took on global responsibilities
"the real price of oil is likely to be at
voluntarily: today we have no choice.
least 80 percent higher in 1980 than in
The United States provides the ulti1978."
mate counter weight to expanding Soviet
The impact of higher energy prices is
power. No other country, or group of
•
The challenge to American foreign policy
countries, can realistically expect to
Is
to understand that we are broadly inwithstand Soviet military pressure withvolved
and our responses must be broad.
out the credible backing of the United
We
must
not be lulled into believing that
States.
we can escape our problems or goaded
This basic fact imposes great risks and
into thinking'they can be resolved by
responsibilities on us. The dangers of a
military solutions alone. We face two
regional conflict escalating and drawing
vital
imperatives, in Harvard Prof. Stanin the superpowers is all too real. The
ley
words,"the imperative to
Hoffmann's
balance of nuclear terror is so delicate
evaluate correctly our own predicament
that the risks of miscalculation must
and the imperative to think in the long
never be minimized. At the time of the
term."
Cuban missile crisis, one side backed
PART II—THE DO UCESTIC BASE Or AMERICAN FORdown. The next time, the world may not
ZION POLICY
be so lucky.
the
The problem that we will face in
These are the challenges Americans
1980's—as the example of Iran graphicalwill face in the 1980's. We must ask ourly illustrates--is that the internal reselves whether we are philosophically and
sources and cohesion of many countries
Institutionally ready and able to meet
are being sapped by the forces discussed
them. The answer is no.
above. In Korea., Thailand, Pakistan,
PHILOSOPHICAL CONSTRAINTS
Turkey, Saudi Arabia, and other counAmericans' view of the world has been
tries important to the United States, inconditioned by our country's geographic
ternal processes at work are weakening
Isolation and its historic material selfthe ability of these countries to control
sufficiency. We have never had to get
their own destinies.
along with other peoples. We have never
We are also experiencing divergences
had to understand perspectives other
in interests with our most valued allies
than our own. And we find it difficult to
in Europe and the Far East. These could
do so.
become fundamental and unbridgeable.
The world, for us, is divided into good
For example, the United States only imand evil. We are, by definition, on the
ports from 40 to 50 percent of its oil
side of the angels. We do battle with the
and relies on its sizable domestic proforces of evil and are surprised when even
duction for the balance. Europe and
our friends do not see the global chalJapan have no such cushion.(Japan imlenges the same way we do. Because we
ports over 90 percent of its oil consumpfail to understand what concerns or motion.) As one observer puts it, these
tivates others, our global policies too
countries live "closer to the edge of
often appear irrelevant or dangerous to
catastrophe." This basic fact has condiothers.
tioned very different European/Japanese
Because we are used to having our
responses to Middle Eastern problems in
own
way within our own geographic
general and the Palestinian issue in parsphere,
we find it difficult to apply our
ticular than those of the United States.
power
subtly
and effectively in other
In addition, our attitudes on East/West
spheres.
We
favor
quick, technological
relations have been diverging more and
solutions to problems. We are prone to
more recently.
believe that the global influence of a
But more than strategic necessity and
nation
is only or largely a function of
political reality bind us to the rest of the
Its military strength, and that global
world. Like it or not, the United States
problems are amenable to military soluIs no longer economically independent, a
tions.
We are uncomfortable with nuance
bald fact which by itself dictates our
or
compromise.
active role on the world scene.
INS'Iii u IC NAL CONSTRA1NTS
The United States relies increasingly
on the rest of the world for its raw maMany of our foreign policy problems
terials. In 1950 we imported only about
have institutional roots, both in the executive branch and in the Congress.
15 percent of our raw mineral needs. We
One overriding problem is that Amernow import close to 35 percent. For exforeign policy originating from the
ican
ample, we import over 90 percent of the
executive branch has, in recent years,
maganese,cobalt, bauxite, and chromium
we use. But imported energy is our most
lacked continuity of purpose and direccritical dependency. In September 1973,
tion. The extensive personnel changes
we imported 3.4 million barrels of oil per
with every new administration have
undermined the purposeful conduct of
day. I n August 1979, we imported 6.7
million barrels of oil per day, almost
foreign affairs. President Carter, for
double the 1973 figure. This amounts to
example, put his own people into 16 of
over 40 percent of our daily consumpthe top 22 positions in the State Departtion. Approximately 25 percent of our
ment. We are reinventing the wheel
oil imports come from the Persian Gulf.
every 4 years or less.
During the same period, our domestic
Moreover, every department of govproduction, even with Alaska coming on
ernment seems to be actively engaged
line, stayed essentially flat.
in foreign policy related activities. For
There is every prospect that in the
example, our relations with Mexico are
conducted through State (diplomacy).
1980's U.S. dependence on imported raw
materials will increase. In fact, the U.S.
Energy (oil), Commerce (trade), Justice
Bureau of Mines estimates that by the
(illegal immigrants), and so on. Try as
year 2000 only 20 percent of our primary
it does, the bureaucracy cannot seem to
materials will come solely from domestic
weave these different strands into a
serviceable fabric. The National Secusources.
This dependence on imported raw marity Council should do so, but since McGeorge Bundy it—or at least the senior
terials is only one aspect of an increasadviser—has too often operated as an
ing U.S. involvement in a global econadvocate of its own point of view rather
omy. In 1960 exports provide 5 percent
of our GNP; by 1979 this figure had risen
than a distiller of other bureaucratic
viewpoints.
to 10 percent. Today, every third acre
The complexity and unwieldly nature
of farmland in the United States and
of the U.S. foreign policy process has
every eighth manufacturing job probeen further complicated by the entry
duces for export.
onto the scene of a new participant-Those who say that we can ignore the
In the early 1970's, Congress
Congress.
Third World should ponder the fact that
itself in the foreign policy
reasserted
the bulk of our imports of raw materials
a period of some passivity.
after
arena
comes from developing countries. Today,
the process has been influon
effect
Its
Western
to
LDCs
than
we export more to
changes in the nature
recent
enced by
Europe and Japan combined. The twelve
itself.
Congress
of the
fastest growing markets for American
The dispersal of power among Memexports today are in developing counbers
of Congress reached a new peak in
tries.
Today, party leaders cannot
1970's.
the
this
on
the
U.S.
The impact of all
members' votes. Chairmen
their
deliver
domestic economy is profound. The U.S.
their committees. The
deliver
cannot
dollar is the currency of the world. Its
Congress in the 1970's
joining
Members
declining value relative to other currenlot than their
disciplined
less
a
are
cies pushes up the price of U.S. imports,
as an
Congress
predecessors.
Moreover,
fueling American inflation. The U.S.
Institution has dispersed foreign policy
Government Ls unable to exert adequate
issues across a range of committees. It
control over the dollar assets held by forhas no coordinating mechanism analeigners, thus restricting our ability to
to the NSC in the executive
ogous
resolve our inflation difficulties.
branch.
We cannot retreat from the problems
Despite these shortcomings, Congress
which face us, but neither can we give
injected itself into the foreign policy
has
confront
us.
In to the pressures which
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Federal Reserve Bank of St. Louis
411k
cess with a vengence. Its primary impact in recent years has been to restrict
executive branch initiatives, not to
formulate policy. The congressional review process has often been constructive.
It has also been pernicious at times.
Members of Congress often find it difficult to fit individual foreign policy issues into a larger framework. Aid issues.
military sales issues, and even major
treaties are too often examined in narrow and parochial terms. There is too
little real understanding of the need to
sustain foreign policy initiatives with
the effective use of foreign policy tools
(military, assistance, trade).
RECO M MENDATIONS
A successful foreign policy is dependent
on successful domestic policies. To a
large extent our foreign policy problems
have domestic roots. There are a number
of actions we could take at home to make
our efforts abroad more fruitful. For
example:
First. We put great stock in the image
of military might which we project
abroad, but nothing has so undermined
our credibility in recent years as our inability to get our own economic house
in order. Americans traditionally have
paid little attention to the position of the
U.S. dollar abroad. For foreigners however, this is a prime indicator of the
strength of the American economy. The
dollar's precipitous drop in value deeply
troubles our friends as has our continuing failure to gain control over our excessive use of energy, our inflation rate,
our declining productivity, and our low
national rate of savings.
These all suggest to foreigners that we
cannot manage our affairs, that we are
weak and unreliable. For many foreigners, these economic weaknesses are
more important than whether or not we
can deploy the 82d Airborne rapidly to
the Persian Gulf. We must get our economic house in order if for no other reason than that it is a vital underpinning
to an effective foreign policy.
Second. The NSC and the job of the
National Security Adviser should be returned to what it was most recently under Brent Scowcroft and before that under McGeorge Bundy. The NSC should
bring the bureaucratic strands together.
It should not be one more competing
agency in the Government.
Ideally, power in the foreign affairs
field should be restored to the one department of the U.S. Government designed
to manage it—the State Department. At
the same time, there has to be greater
expertise and more continuity of leadership in that organization. The periodic
house cleaning that takes place, in the
Department itself and in our ambassadorial ranks, does much to reduce the
effectiveness of our diplomacy. Our professionals have a great deal to contribute; they should be better utilized.
Third. U Congress is to be constructive
in its foreign policy interventions in the
future, not only attitudes but institutions
will have to change. Perhaps the single
most effective action that could be taken
would be to establish some sort of coordinating mechanism to bring together the
work of the several committees with
jurisdiction into a unified foreign policy
framework.
More generally, members of Congress
will have to develop greater sensitivity
to the serious and far-reaching implications their actions have for both foreign
and domestic policy. A cut in U.S. contributions to the World Bank, for example, can show up as an increase in
American energy bills or in decreased
exports of American companies.
The Congress is inherently subject to
the force of public opinion in both domestic and foreign policy. It is therefore
important that foreign policy issues be
framed so that public perceptions are not
polarized along narrow and emotional
lines. Otherwise the Congress will only
intensify its own problems and its own
pain while helping to mislead the
country.
To make a start at solving our problems, all Americans must learn to appreciate the complex interdependencies of
the world we live in. U we do not help
Mexico with its employment and population problems, there will be serious
consequences for us further down the
road. If a Khonaeint comes to power
Saudi Arabia, we vrill feel the effects ot
ttiat change at the gas pumps. If the
Soviet TJnion does not find our military
c,apabilities credible, we will have to confront increased Soviet global probing.
The purpose of a strong milita.ry establishment is not to invite war but to deter
Those who seek only military answers
to our foreign policy problems, however,
fail to understand that many of these
problems IS not lend themselves to m
tary solutions.
We must. M short, begin to pull together, if we are not to pull apart. To do
that, we need a strategic policy abroad
which can promote American interests
and command the support of the American people.
PART I.
STRATEGIC TORSION POLICY !OR TYKE
19030'S
America sits astride a crossroads without a map_ A troubling agenda of international problems faces us, but we lack
tI. conceptual framework to address
We could, of course, conduct our international relations on a piecemeal, reactive basis, jumping from issue to issue.
But every administration since World
War II has recognized that this approach
is not in our best interests. Without
some sense of direction and purpose, our
foreign policy is ultimately doomed to
flounder.
We live is: in a world of radical
change. Whether we become victims or
beneficiaries of this change depends on
the measures we take in cooperation with
our friends to meet the challenges of a
complex and changing world. U we are to
I.ster the future, we must be strong—
militarily, economically, and politically.
But above all, we must be wise.
Our priority must be to manage the
changes we face skillfully enough to
prevent the tide of world affairs from
going against us. Specifically, our interests lie in insuring that:
The Soviet Union does not so shift the
S.lance of power against the West that
it can dictate to us from a position of
military supremacy or geographic control
of vital resources.
A regional conflict does not so escalate that the superpowers are drawn into
a direct confrontation neither wants nor
can survive.
The proliferation of conventional arms
and nuclear weaponry does not get out of
hand th the point that conflicts of everincreasing intensity become a permanent
feature of the world scene.
The alliance system on which Western
security rests does not succumb to narrOW economic protectionism and diverging political imperatives.
The socio/political ideals of the Western democracies continue to find free
expression around the globe.
The fragile balance between man and
his environment not be overturned by a
world population that outstrips the resources that sustain it.
The United States and her allies retain
access to vital raw materials.
To come to grips with these imperatives, we are left vrith a fundamental and
continuing task—to persuade others to
join us in building a raore stable world.
The tangible IS of persuasion available to us are diplomatic, economic, and
military. But they are also perceptual—
the confidence others have in our
strength, resolve, reliability and the
soundness of our approach to world
affairs.
What is called for now is not a Pax
i.e f cooperative
Americana but a
relationships which binds responsible
members of the world corruaiunity in a
common approach to the challenges facing all of us. Our problems are all
shared problems, the solutions must be
shared as well.
For such a system to work, Americans
must begin by setting a course designed
to bring others aboard. What then
should our direction be? Where do our
priorities lie?
PAST
IV--OLOBAL PRIORIT/ILS
ALLIES
At no time since the 1940's has the
need to coordinate our responses to
global problems with our allies been so
great.
All the evidence suggests that the
1980's will expose the United States to
an unprecedented range of threats to its
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security. Soviet power will be relatively
greater than. ever before. Global economic interdependence will be dranaatically accentuated. Indeed, if left to
fester, the problems facing the Third
political legitiWorld—determining
macy, curbing population growth, or
finding the economic resources to maintain life itself--could doom us all.
V7e simply can no longer avoid the imperative of seeking coordinated Western
responses to the common global challenges facing us. The United States cannot, and indeed should not,"go it alone."
Our most fundamental priority is the
preservation of Western unity in word
and deed.
Every U.S. administration since Truman's has supported allied coordination
anI cooperation but, too often, the practical application of this support has been
lacking. When Henry Kissinger went to
China and when we ultimately normalized our relations with the People's Republic of China, Japan was among the
last to know. Fortunately, Japan favored
the policy—but its execution left much
to be desired.
Only when our allies participate itt
the shaping of policy can we be co
dent they will participate in its execution.
Structuring a foreign policy grounded
on cooperation is not easy. Consensus
cS n be difficult to obtain. Many bases
have to be touched. Moreover, our immediate interests may not be compatible
with those of our allies. All parties have
to keep firmly in mind the greater risks
of a complete breakdown in alliance cooperation and coordination.
The rewards of a cooperative allied approach to problems can be great. The
military, political, and economic strength
of the West simply cannot be matched by
the Soviet Union and its unreliable client
states. This strength, when applied in a
cIS rdinated way, can have enormous
impact.
Another advantage to this approach is
that there are problems for which there
may be no American solution, but there
could well be a French or Bsh one.
The recent settlement in Rhodesia is a
case in point.
In sum, our fundamental priority is to
II: .1 the strength and cohesion of
the Western alliance. It is the sine qua
non in our pursuit of every other interest
of concern to US.
ECONOMICS
To a remarkable degree, our foreign
policy must be developed with global economic reaes in rnind.
U Western democracies are going to
continue to function as free societies.
effective control over global inflation
must be achieved and assured access to
raw materials guaranteed. U political
chaos is not to engulf the Third World,
economic progress must be continuous
and significant. In an interdependent
world economy, all countries have a stake
in the smooth flow of goods and services
between nations. All nations—to varying
degrees--are vulnerable to any interruption of this flow.
Economic imperatives increasingly dictate our geographic interests and is
of
our allies. Oil is a crucial factor in our
approach to Middle East issues. It is a
growing factor in our relations vrith
Mexico.
Inflation has become a global phenomenon and requires a global response. The
burgeoning debt of the Third V7orld is a
Western dilemma as well. The continued
role of the dollar as the premier world
currency remains a common problem in
search of a common solution.
Perhaps because we have such d
culty in dealing with our domestic economy, we shy away from these vastly more
complex international economic issues.
But, this is a lthcury we cannot afford.
The health of our domestic economy is
tied to that of the world economy. A major priority of the United States must
I. to pursue a strengthened global
economy.
SOVIET UNION
have delayed examining the U.S./
Soviet relationship not because it is not
critical, but to underline two points.
First, for relations with the U.S.S.R. to
be constructive, from our point of view,
we must first reestablish good relations
I
lk
ween the United States and its allies.
Secon,. although the Soviet Union and
the United States can destroy each other
militarily, our vulnerability to economic
catastrophe is a clear and present danger
and would persist even were the Soviet
threat to disappear miraculously overnight.
Nonetheless. our competition with the
other superpower will continue to be of
vital U.S. national concern.
This being the case, it is all the more
remarkable that we lack any sort of national consensus on answers to basic
questions concerning the Soviet Union
and our relations with it. Consider the
rouowing list:
What are the fundamental interests
of the Soviet Union and what are merely
peripheral?
`77hat is the nature of the Soviet threat
to us? Is it prima,rily military or primarily political or potentially economic?
Are there incentives or disincentives
thS t influence soviet behavior? What are
they?
Is it in our interest to deny to the Soviet Union grain or oil field technology
in order to undennine the Soviet economy? Or, by doing so, do we merely support those in Moscow calling for more
vigorous confrontation with the West?
In our dealings with countries on the
Soviet border,should we be promoting an
anti-Soviet alliance or should our approach be more balanced (i.e. What is
na card"?)
the role of the
Finally, in our competition with the
Soviet Union, should we be primarily
cIS cerned with the "lessons" of 1939
when compromise was seen to whet the
appetite of an implacable aggressor? Or
should we be recalling the events of 1914
when the superpowers of the day were
sucked into a catastrophic V7aX by the
requirements of mobilization schedules
and by the needs of lesser states embroiled in secondary concerns?
Without having resolved fundamental
I uestions such as these, we blithely continue to make tactical decisions of potentially enormous impact on the direction
of Soviet strategic thinking. Playing the
China Card and approving the introduction of nuclear armed cruise missiles
onto German soil are two examples
which come to mind.
This is not to argue the merits of these
decisions, but only to point out that decisions of such import as these should
only be taken wn a much larger strategic cbntext. Tactical decisions on issues
affecting the U.S.S.R. should only flow
from a strategic view of Soviet intentions.
What, then, is the threat that the Soviet poses for U.S. interests? It is obviously military. Soviet strategic nuclear,
theater nuclear and conventional
tary capabilities are sizable and expanding rapidly. Soviet defense expenditures
are estimated to be running as much as
30 percent ahead of ours.
Moreover, the Soviet Union has been
demonstrating an increasing propensity
to project its military presence internationally. Military equipment in vast
quantities has been transferred to the
Third World. Soviet, Cuban, and East
German advisors have been active
S round the globe. Cuban combat troops
have been a significant force in such
countries as Ethiopia. The Soviet invasion of Afghanistan represents only the
latest escalation in Soviet activity.
The Soviet threat to U.S. interests is
also political. Soviet leaders pursue
IIlicies•: .1 to separate us from our
allies. Soviet agents seek to undermine
regiI.-s friendly to the West.
It is quite possibly economic. The Soviet Union may soon be a bidder in world
oil markets and a competitor for other
natural resources.
Here again, Stanley Hoffmann articulates our dilemma. "Geopolitically," says
Hoffmann. "as the main status quo
II''er in a world a change, the United
States is on a kind of universal defensive,
wh.Ue its rival can pick and choose the
points for attack from among the manY
ferments of trouble." Wetoday, waiting for blowups in Yugoslavia, Pakistan,
and elsewhere.
In structuring a response to the Soviet
challenge, we must, howrver, guard
against being one dimensional. Our policies must be for the long term.
Clearly, the U.S./Soviet military bal-
•
•
ance must be maintained. We cannoill
,
liferation. Finally, we must deal with the lkst:
permit either the fact or the perception
continuing deterioration of the global
First: Begin to negotiate with her al9f U.S. military weakness vis-a-vis our
lies. The era of simple notification after
environment
major competitor to arise. But neither
decisions is over. Our European friends,
It is vital to stress that these global
should our force buildup be mindless.
Issues require our consideration quite
if they are to be expected to lend their
Instead of debating percentage increases
apart from our pursuit of our other
power to policies, must have a hand in
in the defense budget, we should be
interests.
the formulations of those policies in
talking about military missions and the
No sensible animal fouls its own nest.
genuine consultation.
force structures necessary to carry them
Yet man is progressively destroying his
Second: This means that the European
out. What should a Rapid Deployment
environment Unless we actively move to
component of our foreign policies must
Force be able to do? The answer to that
repair the damage, we will have to share
increase. This is difficult for us to accept
question should determine how we begin
in the consequences.
and understand, but it is this very deto structure the force.
Dramatic population growth and hopeparture that could determine the success
If only because perceptions matter, we
less poverty in the Third World will inor failure of these policies.
should soft-pedal what has become our
crease the incidence of waves of refugees
Europe must:
excessive public denigration of our own
cast upon our shores and pressures for
First. Understand that with power
strengths, military and otherwise. The
more immigration.
comes
responsibility. Germany. France,
world is far more unfriendly to Soviet
Six nations have exploded nuclear
must reorient their thinking
Britain
and
interests than many would have us. bedevices. But a number of others are bechallenges which can unglobal
the
to
Soviet
Union
lieve. The
faces a Western
lieved to be capable of doing so. The day
regional security. The battheir
dermine
alliance with formidable military capamay not be far off when Libyans, Iraqis,
tle for Bonn may be lost in Kabul or
bilities. It is ringed by unfriendly neighand Pakistanis have nuclear bombs.
Riyadh.
bors. It cannot rely on its closest allies.
That should be of concern to us.
Second. The European component in
It has little to offer beyond military
Finally, and specifically, we should not
global "burden sharing" must bethe
hardware to Third World countries conlet our competition with the Soviet Union
more significant. Americans must
come
cerned with economic progress and poso dominate our thinking that we are
not
be
left with the feeling that they
litical stability.
unable to respond to Third World needs
are alone on the front line while EuroBeyond,, maintaining our military
except in terms of that competition.
peans reap the benefits of detente.
strength, we must be clear about our obOne of our greatest challenges—and
THE MIDDLE EAST
jectives. The Soviet Union must underworst failings—has been our inability
stand clearly what we consider our vital
The United States has longstanding
to frame a constructive framework for
interests to be and what penalties attach
ties to certain nations in this region.
responding to Third World challenges.
to threatening them.
We are, for example, committed for a
Our security is at stake in the future
Much of our response to the Soviet
variety of good reasons to the security
stability of Saudi Arabia and Nigeria.
challenge must be political as well as
and well-being of the State of Israel.
Yet we understand little about the forces
military in nature. The real threat to the
A primary interest in the Middle East
at work in these and other Third World
Western alliance is not a Warsaw Pact
of
the United States and her allies is concountries.
attack (though we must be prepared for
access to adequate supplies of entinued
PART V-REGIONAL POLICIES
this) but the corrosive effects of diergy at "acceptable" prices. We get oneOur conceptual priorities—centrality
verging interests among the allies being
quarter, Western Europe two-thirds, and
of alliances, economic imperatives, et
exploited by Moscow. The primary
Japan three-quarters of its imported oil
cetera—have regional implications which
threat in the Third World is not Cuban
from the Persian Gulf.
are important to consider. A sound U.S.
troops and Soviet advisors but political
Access to this oil is threatened by poforeign policy must be grounded in active
Instability arising from economic and
litical instability in the region, Soviet acand sensible policies in Western Europe,
social roots. The Shah, even with his vast
tivity, and by the continuation of the
the Middle East, Japan. and the Westmilitary arsenal, could not withstand the
Arab-Israeli conflict.
ern Hemisphere. These regions must
revolutionary forces at work In Iranian
Ever since World War II, the Middle
receive the focus of U.S. policy initiatives.
society.
East has been a region of political inWESTERN EUROPE
In our anxiety to respond to the chalstability. The continuing search for nalenges posed by the Soviet Union, we
tional identity and political legitimacy in
Our relations with the major nations
must not overlook what we have in comthat part of the world has not been an
of Western Europe are fundamental to
mon. Each superpower fears and expects
easy one. The experience of Iran provides
the United States. These relations are,
the worst from the other. We each reonly the latest example of just how diffihowever, currently under strain for the
tain the capability of annihilating the
cult this process can be. It is quite posfollowing reasons:
other. With the steady increase in and
sible that abrupt shifts in the ruling
The credibility of American strength,
diversification of our respective nuclear
elites, such as took place in Tehran, will
reliability, and commitment is widely
arsenals, the underpinnings of deteroccur in other countries in the region.
questioned in Europe. The European rerence may be eroding. Nuclear war may
Soviet activity in the Middle East must
sponsiveness to global challenges is
become a greater possibility in the years
also
be viewed as threatening to us. In
Washington.
doubted in
ahead.
recent years, as has been noted earlier,
Europe and the United States appear
We tend to forget that accommodation
there has been a particularly deterto have divergent interests on Middle
with the Soviet Union, if managed prumined effort by Moscow to expand its
East and East-West issues in particular.
dently, can be in our mutual interests.
influence in that part of the world. This
Economic problems on both sides of
The air we breathe is less deadly because
effort has not always met with success,
the Atlantic inevitably promote talk of
both nations are abiding by the 1963
but it continues. The Soviet use of surregional or national rather than Western
Test Ban Treaty, We share a need to
rogates such as the Cubans and East
responses to these problems.
control nuclear arms and reduce the
Germans is a particularly worrisome
Nonetheless, there remains widespread
possibility of conflict.
phenomenon.
understanding of the overriding comIn short, we need a decathlon policy
The Arab-Israeli conflict represents a
monality of certain Western interests.
for dealing with the Soviet Union. No
dangerous situation for the United
Only the Soviets can gain from a split
single strength or skill will suffice. We
States. There is always the possibility
in the Western alliance, a split they are
must have the capacity to take the initithat this conflict could expand into a
actively attempting to promote. Moreative in the economic sphere, in political
direct superpower confrontation. Moreover, the augmentation of Soviet milicooperation, in military power, in techover, the continued absence of an accepttary power has direct implications for
nological transfer, in cultural exchange,
able solution to the Palestinian issue afthe European balance. This is particuet cetera.
fects our other relations in the Middle
larly the case given the weakening of the
We must evolve a policy toward the
East. Quite obviously, our problems in
Southern flank of NATO in recent years.
Soviet Union which employs both the
the region would not disappear if this
Turbulence in the Third World poses a
stick and the carrot. We must, on the
and other issues were resolved. However.
general threat to the West and a particone hand, be clear about our vital interour ability to concentrate on our pursuit
ular threat to European nations dependests and our ability and willingness to
of our other interests in the region would
ent on raw materials for their economic
defend them. But, on the other hand, we
be enhanced by an enduring resolution—
survival. Yet institutionally, in the milimust also understand that the Soviet
that is, acceptable to Israel and the
tary sphere in particular, we are not
Union has vital interests of its own. —The
Arabs—of these issues.
prepared to deal with conflicts outside
worst possible situation," writes Seweryn
of Europe. NATO was set up to respond
We have not been very adept at conBialer of Columbia University, "is when
to European not Middle Eastern crises.
structing policies responsive to these
the U.S.S.R. feels that it has nothing to
The United States, and her key Eurochallenges. We have yet to determine the
fear from the U.S. and nothing to gain."
pean allies, must begin by stepping back
proper balance between maintaining the
In the final'analysis, we should seek
from the tactical discussions—Afghanstatus quo and recognition that inevitstability and predictability in our relaistan, trade, Iran, and so forth—which
able change in the region will leave us
tions with our major competitor.
occupy so much of our time, and try to
behind unless we are nimble. Moreover,
GLOBAL ISSUES
reach a consensus on the strategic chalour tendency has been to "go it alone"
lenges which face our alliance. Only then
in the Middle East in the last decade. We
Our relations with our allies, our intercan cooperative programs be devised to
national economic concerns, and our
abandoned the Five Power talks for onemeet these challenges.
man shuttle diplomacy. We are now decompetition with the Soviet Union are,
The strategic framework for our Eastveloping a Rapid Deployment Force for
of necessity, priority concerns for U.S.
West and North-South relations must be
the region that could send us hurtling
policymakers. But these issues cannot be
constructed so that crises, such as are
into the Middle East alone and unaided.
permitted to dominate our thinking to
occurring now in Afghanistan and Iran,
We must begin by recognizing that
the extent that we ignore the host of
can be dealt within the context of larger
"global" Issues that ultimately could
there are severe limitations on our ability
realities.
have a far greater impact on our Nation's
to maneuver in that part of the world.
security and well-being.
There is a tendency in some quarters in
Only in this way can we mitigate the
It is increasingly clear that we must
the United States to want to believe that
inevitable tactical disagreements which
devote more attention to the Third World
our only problem in the Middle East is
are today splitting the alliance.
and Third World issues—political legitithat we are no longer respected. Our
But if these programs are going to obmacy, population, hunger, debt, trade,
"power" is no longer feared and our
tain the necessary consensus support.
"will" is in question.
and security. We have to concern ourthere will have to be accommodation by
There is an element of truth in these
selves with the question of nuclear proall parties. Specifically, the United States
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assertions, but to the extent that the",
adherents believe we can restore American influence through the use of military
iforce alone, it is a dangerous misconception.
We have to recognize that the nations
of the Middle East suspect us of having
ulterior designs in the region. For us to
use our own military forces to resolve
what is seen as an internal Middle East
issue would be to confirm their worst
fears. It would not lead to greater respect. It would lead to a far greater regional coalescence against an external
American threat.
We must, in short, walk a fine line in
which we make clear our ability to defend our interests without exercising
that ability indiscriminately in a misguided effort to demonstrate our will.
This suggests, of course, that we must
begin to involve our aMes--regional and
external—far more than we have in the
past in cooperative approaches to regional challenges.
We must have priorities. Recent administrations have been right to focus on
resolution of the Arab-Israeli conflict.
Our ability to work constructively with
both Israel and Egypt will be enhanced
when these countries are no longer isolated in the region. Quite clearly, we
must provide more effective responses to
Soviet challenges. Augmenting our naval
capabilities in the Indian Ocean is certainly necessary.
We must not, however, permit Soviet
activity in the Middle East to blind us to
the underlying political/economic problems in the region. These countries will
develop their own antibodies to Soviet
expansion if we assist, not threaten.
them.
FAR EAST
The United States has vital strategic
interests in the Far East. They affect
both our security and our economic wellbeing.
These interests include: insuring the
safety of U.S. allies in the region: maintaining regional stability particularly
with respect to possible conflict situations in Korea, Taiwan or Southeast
Asia: and promoting stable economic
relationships between the United States
and the countries of the region.
The cornerstone of our Asian relations
is, and must continue to be, Japan, our
strongest and most reliable ally in the
area. Japan has the second or third
largest economy in the world. It is strategically located and is tied to the United
States by mutually binding treaty commitments.
U.S. relations with the Japanese have
not always been easy. Our refusal for
many years to normalize relations with
the PRC and our involvement in Vietnam
strained our ties with Tokyo. Economic
differences remain an ever present source
of potential friction.
Nonetheless, there is a general understanding on both sides of the Pacific that
what binds us is far greater than what
separates us. It is important, therefore,
that our commitment to the relationship
be strengthened. The Japanese are understandably concerned by our talk of
troop withdrawals from Korea and a
"swing" defense strategy that would send
U.S. Pacific-based military assets to Europe in the event of a crisis there. Sending our 7th Fleet carrier task farce to the
Indian Ocean did nothing to dampen
these concerns.
Our relations with Korea are of a different sort. We have a historical commitment to that country's security, which
is vital to maintain if for no other reason
than that Korean security has great significance for Japanese security.
Our most difficult regional policy dilemmas are with the Peoples' Republic
of China. Few disagree that cooperative
relations between the PRC and the
United StatPs are in the mutual interest
of both countries. It is much less clear
how close these relations should be.
We have tended to display great enthusiasm for the PRC connection without, perhaps, sufficiently considering the
pitfalls of overplaying the China card.
Chinese leaders have attempted to
draw the United States into a more confrontational stance vis-a-vis the Soviet
Union. These efforts have, of course, provoked considerable concern in Moscow.
A little bit of Soviet uncertainty regarding the extent and purpose of United
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Sts.tes-PRC ties is not unhealthy. Henry
Kissinger understood this well. But too
much uncertainty could be catastrophic.
The point is a relatively simple one.
The Soviet Union has the military capability—and may also have the necessary
paranoia about Chinese intentions—to
wipe out the People's Republic as a functioning society. It is in our interest to
Improve our relations with Beijing but
not at the expense of creating major
tensions in Moscow. Our relations with
the Soviet Union and our interest in
avoiding a major Sino/Soviet military
confrontation must temper our hot pursuit of improved ties with China.
We should certainly proceed with the
improvement in our economic and cultural interaction but stay away from
military ties with Beijing.
Whatever improvement in United
States-People's Republic of China relations occurs will have to take place despite the internal political instabilities
in China and the nonresolution of the
Taiwan issue. We cannot hope to have
much effect on the first and must remain
resolute in our ingistence that the second
be resolved by peaceful means.
In the rest of the region, we must continue in the closest relationship with
Australia and New Zealand. We should
seek to understand and respond sympathetically to the economic aspirations
of the people of Asia. But, we cannot expect to exert great influence on their security arrangements. The response, for
example, to Vietnamese expansion must
come largely from local forces not
American.
WILSTERN
HZ WISP 11:13112
We have historically neglected our relations with our neighbors. Key bilateral
relations have not been properly nurtured and regional priorities have traditionally been overshadowed by other foreign policy concerns.
Three countries, in particular, are of
critical importance to the United States
in this hemisphere Canada, Brazil, and
Mexico.
The United States has traditionally
devoted insufficient attention to its relations with its northern neighbor. We
have assumed too much. It is not too late
to rectify this mistake, but considerable
effort will be required on our part.
Canada's interests do not necessarily
converge with ours and managing our
differences in the decade ahead will be
of vital importance to both of us.
Brazil has traditionally had close relations with the United States. In the
economic field, 19 percent of Brazil's exports go to the United States, we supply
16 percent of Brazil's imports, and our
banks supply close to a third Jf Brazil's
foreign debt. In each of these categories.
we are Brazil's largest partner.
However, Brazil is determined to chart
a course independent of the United
States. It is determined to play a role
on the world scene commensurate with
its size—fifth largest country in the
world—population sixth most populous
with 125 million inhabitants—and economic clout—eighth largest Western
economy with a 1979 GNP of $200 billion.
For the United States to deal with
Brazil constructively, we must be willing
to address ourselves to the issues—
largely economic—which concern her.
Bra7i11ans recognize that their fate is, in
part, tied to ours. An economic recession
in our country inevitably has negative
repercussions in Brazil. What Brazilians
want and need is U.S. movement on commodity, trade, and technology transfer
issues. If Brazil's economy is to maintain
its impressive growth rate, her commodities must be traded in a more predictable
pricing environment. She must have access to our markets and to our technology.
By the mid-1980's, Mexico could be our
largest single trading partner. At present, Mexico sends over 70 percent of its
oil exports to the United States. It could
becume a growing source of energy for us
In the future.
There are, however, severe strains in
our bilateral relations. These are, in part,
inevitable. Mexico is seeking a separate
role in the region and the world. Inevitably, this involves distancing itself from
the United States on certain issues. We,
on the other hand, have not been sufficiently sensitive to Mexico's special con-
e
rns. We have not accorded that country the respect it deserves.
We can no longer avoid the problems
and the opportunities that exist with
regard to United States-Mexican relations.
Mexico has a population of 65 million
which could double by the year 2000. Today 30 million Mexicans are under the
age of 14. Mexico is our largest single
source of undocumented aliens Unless
this problem is dealt with, it will plague
our relations for years to come. Part of
the solution may be in the fact that 8
of Mexico's 32 states account for 80 percent of all Mexican migration to the
United States. If we could help solve the
economic problems in those states, the
Issue of illegal immigration could become
more manageable.
But the United States needs not only
good bilateral relations in the Western
Hemisphere, it needs good regional policies as well. This is particularly the case
with respect to the Caribbean area.
We have unwisely neglected the Caribbean region. It should be a vital regional
priority of the United States to remedy
this neglect quickly.
The Caribbean, and the countries in
and around it, form the strategic underbelly of the United States. Through the
Caribbean flows more than 50 percent of
our annual oil imports. It commands the
entrance to the Panama Canal. It—in
particular Jamaica—is the source of
much of our bauxite. Last, but not least,
the Soviet Union has established a presence there which is potentially threatening to us.
These are all sound security reasons
for paying more attention to the countries of the Caribbean, but there are domestic American reasons as well.
The United States is now the fifth
largest Spanish-speaking country in the
world. The 17 to 22 million Hispanic
Americans may shortly be our largest
minority. Moreover, the Caribbean is now
our second largest source of undocumented aliens—after Mexico.
The barriers to effective U.S. policies
in the Caribbean are enormous. Political instability is endemic to the region.
It arises out of the failure of nations in
the region to reach internal agreements
on issues of political legitimacy. Who
should hold power and how should
power be transferred? These political
problems are exacerbated by severe economic and demographic strains.
The combination of economic mismanagement, high oil prices, and low commodity prices has created a regional economic depression. High unemployment
is rampant. High emigration saps the regional talent pool. All these problems are
made worse by a dangerous demographic
situation. The median age in the Caribbean is 16, as compared to 29 in the
United States. The young people in the
Caribbean, collectively, constitute a time
bomb set to explode.
We will have to live with the inevitability of change—sometimes violent—in
the region.
We must awaken to these challenges.
Certainly we must not neglect the possible military implications of joint SovietCuban activity in the region. But real
problems also lie elsewhere. We cannot deal with them by blaming Cuba for
all the unrest in the area. The Soviet
Union would like nothing better than to
have the Caribbean polarized between
those who are "with us" and those who
are "against us."
I can, therefore, think of no region of
the world for which it is more important
to have sound aid and trade policies. We
will want to achieve the proper balance
between bilateral and multilateral assistance. But there must be no question
that the United States is not ready to
assist in the economic rehabilitation of
the region. We must also be more receptive to exports from the Caribbean. Exports mean jobs for these countries and
until unemployment is reduced political
Instability will be a fact of life.
In the final analysis, however, we can
only assist the countries of the region to
assist themselves.
cctohor 176 1980
-ihet Uonorable william Proxmire
CeJ.Talittee on ranking, Housing
4nd rIrlar. Affairs
L'nitecl ti!tates Senate
20510
' ton, r.C.
Dims CI-airman Proxmire.
on the
Thank ycu for or Cctol-ier 1 letter oor7,menting
c articularly concernee
proeoscd revision of Reculation Z. You are
titernate shorpirg
about that portion of the Jraft allovi:lg for
- early dirclosures
disclosures. While you endorse the conceit cq
:.elieve tN4t tl'te
to encourage the informed use of credit, you
.e creditors mi7,?-t
k roposed draft could create a loophole ty 14;:l
avoid making comilete disclosuras.
shorTing
The Board's proposed provision for alternate
s and creditors.
diaclosures was Intended to benefit both consuner early di,sclosure
ide
It wiz d(esi(Ined to encouraffe cryelitors to prov
bettor opportunity
of credit costs, there:b.:id ellowine; consumers a
it. T"te proposal
to sisop and en9age in the informed us* of cred
lation. as you know
represented a dei,arture frofil the current requ
cific coent a% to t$het1;er
and the Board thercfore scaicited
cretlit e•orTtnq function
the “vposed diccloures would promote tEc4
of the Truth in Len4:in9 Act.
ely
The oowronts received on the iroTosal were larg
rs expressed con•
nejative; botE industry and consumer commente
alternate disclesurits.
corn about ti.e rotential problems posed by
to determine }ow
As a result, staff is restudying the prol.yosal
nce the crOit
best to carry out the Board's cmamitment to enha
long-standing
shopping functios; of the Act. IL view of your
ttke Board appreinterest and involveaent in Truth in Lending,
keyt in rind in
ciates having your coaments and they will Le
credit shopcinej
any revision that we aaght oak* to improve the
function of the disclosures.
Sincerely,
S/Pau1A.VoIçUL
CtLD.M.00apjt (11V-37)
r. Hurst
Lcc
.
(2)w--"
Paula rice (for diztribution)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
WILLIAM PROXMIRE. WIS.. CHAIRMAN
HARRISON A. WILLIAMS. JR., N.J.
ALAN CRANSTON. CALIF.
ADLAI E. STEVENSON, ILL.
ROBERT MORGAN, N.C.
DONALD W:
JR., MICH.
PAUL S. SARBANES. MD.
DWALD W STEWART, ALA.
G. /RGE .1. MITCHELL, MAINE
JAKE GARN, UTAH
JOHN TOWER, TEX.
JOHN HEINZ, PA.
Action assigned Janet HartAh
11,
WILLIAM L. ARMSTRONG. COLO.
NANCY LANDON KASSF.BAUM, KANS.
RICHARD G. LUGAR, IND.
KENNETH A. MC LEAN. STArr DIRECT
OR
M. DANNY WALL, MINORITY STAFF DIRECT
OR
MARY FRANCES DE LA PAVA, CHIEF CLERK
'ZICrtiteb ,23.fafes, Zerrate
COMMITTEE ON BANKING. HOUS
ING, AND
URBAN AFFAIRS
WASHINGTON. D.C. 20510
October 1, 1980
The Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Constitution Avenue
between 20th and 21st Streets
Washington, D.C. 20551
Dear Chairman Volcker:
The Board will soon be consideri
ng the proposed revision
of Regulation Z. I wish to
indicate serious reservations con
cerning that section of the
revision relating to advanced dis
closures. While I concur with
the Board that the concept of
advance disclosure has the
potential to greatly encourage the
informed use of credit, promul
gation of this proposal in its
present form would most certai
nly undermine not only the potential utility of this concept
but the basic premises of TIL its
elf.
On October 29, 1979 I stated my
support for advance
disclosure on the Senate floor.
I specifically noted that the
benefit from such advance disclo
sures would derive from the
fact that "the borrower could
review credit cost information
when applying for credit, at
a time when credit shopping is
possible, rather than obtaining
the disclosure at the loan
closing". Unfortunately, your
proposal does not in any way
differentiate between transacti
onal circumstances where the
borrower is making tentative inq
uiries concerning the cost of
borrowed funds and those situation
s where the borrower is sitting down with the creditor to
consummate the agreement to extend credit. The failure to make
this distinction will undoubtedly permit any number of unscru
pulous creditors to avoid making
complete disclosure merely by
supplying the borrower with "advance" disclosures at the consum
mation of the transaction as
permitted (if not encouraged) by
this loophole.
Another obvious weakness of this
proposal would permit
the disclosure of an amount financ
ed which may be as much as
10% at variance with the actual
amount financed. This permissible variance, without any dollar
limitation, would be particularly
troublesome in the case of larger
consumer credit transactions,
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Federal Reserve Bank of St. Louis
it
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Honorable Paul A. Volcker
-2-
October 1, 1980
such as home improvement and mobile home loan
s. For example,
your proposal would permit an aluminum siding
firm to solicit
a family, in their home, to purchase siding
and to consummate
a 15 year credit transaction for $16,200 with
this family, all
on the same day, while providing only "adv
ance" disclosures
with a grossly understated amounted financed
of only $15,000.
Obviously, any advance disclosure of the tota
l finance charge
would be similarly understated. The potentia
l for mischief is
unmistakable.
I would therefore urge the Board to reject this
advance
disclosure proposal until such time as these
deficiencies have
been obviated. I trust that we are in agre
ement that advance
disclosure deserves a much stronger foundati
on than would be
provided by this particular proposal.
Sincerely
)
William Proxmire
Chairman
WP:lgj
BOARD OF GOVERNORS
Oc THE
•••••
• RAL
FEDERAL RESERVE SYSTEM
t-1 •
(-)
,
144'•
REc.
-0%-• •
WASHINGTON, D. C. 20551
PAUL A. VCJLCKER
CHAIRMAN
October 20, 1980
The Honorable Don Ritter
House of Representatives
Washington, D. C. 20515
Dear Mr. Ritter:
I want to thank you for your rec
ent letter describing
H. R. 7655, which would reduce per
sonal and corporate tax burdens
and limit the growth of federal
spending.
Last month I had the occasion to
discuss the tax cut
issue with the House Budget Com
mittee, -so my comments regarding
H. R. 7655 probably will come as no
surprise to you. I continue
to be concerned that the fiscal pol
icy proposals before the
Congress--including H. R. 7655 and
the Senate Finance Committee's
bill--would prove detrimental to
our nation's long-run economic
health. While there is an unders
tandable desire to foster a
vigorous recovery from the curren
t economic downturn--and to
ease personal and corporate tax bur
dens--we must not lose sight
of the implications that an expans
ive budgetary policy would have
on inflationary expectations. In
our current environment, any
deviation from a commitment to a
sustained fiscal discipline is
likely to have a destabilizing eff
ect on the public's view of the
prospects for a return to price
stability. As a result, any benefits accruing from a tax reduct
ion may be dissipated in further
financial and price pressures.
I agree with you that a well-str
uctured tax reduction
can make an important contribution
to solving our nation's economic difficulties. The tax system
can be adjusted to add incentives that encourage capital
formation, and thereby enhance
productivity growth. As your let
ter suggests, a tax reduction
also can help relieve the pressu
res that have been placed on
many household budgets by a com
bination of rising living costs
and increasing marginal tax rates.
A decision on the size and timing
of a tax reduction,
however, must be reconciled with
the nation's economic outlook
and the government's budgetary
stance. All evidence points to
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Federal Reserve Bank of St. Louis
111
The HDnorable Don Ri
tter
Page Two
a substantial growth
in federal spending
in the year ahead.
groWth coupled with st
This
rong inflationary
trends already in pl
argues ayainst a tax
ace
cut of the magnitud
e embodied in H. R.
Until restraint is de
7655.
monstrated on the
spending side of th
anyHirIcrease in the
e budget,
deficit would be vi
ewed as inflationary
wou).d pose a throat
and
to the recovery of
such interest rate
sectors as housing
sensitive
and autos.
Gi\ien these factors,
I continue to favor
consideration of a ta
delaying any
x cub until early ne
xt
year. At that time
some of the current
,
economic uncertaint
ie
s
will be resolved an
a clearer picture wi
d
ll emerge about the
spending priorities
the Congress and the
of
Administration, Th
e next three to six
months will provide
an opportunity to re
fine our thinking ab
the structure of any
out
future tax reductio
n. We want to be ce
that it provides the mo
rtain
st efficient moans
of achieving the ob
of long-term economic
jectives
growth, price stab
ility, and budget
balance.
Sincerely,
SifautitvoIpifcr
JSF:FMS:JSZ:vcd (#V-377)
bcc:
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Federal Reserve Bank of St. Louis
Messrs. Kichline, Struble, Fralic
k, Zeisel
Mrs. Mallardi (2)./
Action assigned Jim Kichline
DON RITTER
15TH DfcTpirr. PENNSYLVANIA
•
SUBCOMMITTE(S:
124 CANNON OFFICE BUILDING
WASHINGTON. 0 C
20515
(202) 225-6411
k,AgL14,10'
COMMITTEES
BANKING. FINANCE AND URBAN
AFFAIRS
•
"."
Congre55 of die
HOUSING AND COMMUNITY
DEVELOPMCNT
1)0MLST,C MONETARY POLICY
CONSUMER AFFAIRS
•
SCIENCE AND TECHNOLOGY
DISTRICT OFFICES:
1iiitebiptate5
ji)oufSe of ikeprefentatibes
Zinaitington, 33.e. 20315
zi
'
/134r
Sul-re 1005
1 BETHLEHEM PLAZA
HLEHEM. PENNSYLVANIA 19018
(215) 866-0916
ROOM 212
ALLI NTOWN POST OrrICE BUILDING
ALLENIOINN. PENNSYLVANIA 18101
(215) 439-8861
September 26, 1980
R00M 705
AL PHA BUILDING
EASTON. PENNSYLVANIA 18042
(215) 258-8383
SUBCOMMITTEES.
ENERGY DEVELOPMENT AND
APPLICATIONS
SCIENCE. RESF ARCH AND TECHNOLOGY
NATURAL RESOURCES AND
ENVIRONMENT
Mr. Paul A. Volcker
Chairman-Board of Governors of
The Federal Reserve System
20th and C Streets, N.W.
Washington, D.C. 20551
Dear Mr. Volcker:
I thought you would be interested to learn of a major new legislative proposal to help
fight inflation and reduce the burden of taxation on the American people.
I am pleased to be a cosponsor of H.R. 7655 which embodies principles that have received
my support since my election to Congress. H.R. 7655 not only increases after-tax
incentives for all individuals but slows the growth of federal spending. In addition to
providing a 30 percent tax cut in three years, this legislation would begin to adjust - or
"index" - all tax brackets in the fourth year according to the Consumer Price Index. This
will prevent taxpayers from being pushed into higher tax brackets without increases in
income. This bill also provides much needed tax incentives for business by accelerating
depreciation rates for business investments.
As you know, I have continually fought for legislation to limit the amount of taxes we are
forced to pay. For too many years, individuals have been relentlessly pushed into higher
tax brackets regardless of whether their earnings increased in "real" terms or merely
because of inflation. Only through reduced levels of taxation will our society again see
the beginning of real economic growth, productivity at work and increased savings. The
wealth of our nation is created not only from natural resources but also, and more
importantly, by people responding to economic incentives. The poverty of a nation is the
result of a lack of these resources and of people being discouraged by lack of incentives
to realize their full potential. When we are urged to make money, only to discover that
the government will permit us to keep less than half of it, we are disinclined to do so.
It is time to end the circular process of raising tax rates, economic decline, widening
deficits and further tax increases. I firmly believe we must cut tax rates beginning in
1981. My support for this important legislation is not only to return to work those
millions of Americans who have lost their jobs in this unnecessary recession. We must
restore permanent incentives to provide the climate of lasting prosperity we need to get
our fiscal house in order to meet the many challenges facing us at home and abroad.
With kindest regards, I am
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Federal Reserve Bank of St. Louis
Sincerely,
DON RITTER
Member of Congress
•
4 • ••
v Govi-
BOARD Dr
DM./ERNORS
r'"
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCKER
EHAIRMAN
October 20, 1980
The Honorable William Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D.C.
20510
Dear Chairman Proxmire:
Thank you for your recent letter that includes corr
espondence from Mr. Milton Schmidt concerning the
Bank of Sturgeon
Bay in Sturgeon Bay, Wisconsin. The facts outlined
in his letter
indicate that he entered into a mortgage contract
with the bank
in 1972, with a disclosed interest rate of seven
percent. Subsequently, he was informed by the bank that the inte
rest rate
would be raised to eight percent, pursuant to
a provision in the
mortgage note which he signed.
At the time Mr. Schmidt signed his mortgage, the
Board's
Regulation Z (Truth in Lending) gave creditors
an option in dealing
with contractual variable rate provisions for
purposes of required
disclosures. Creditors could either (1) give cert
ain variable rate
disclosures as part of the Truth in Lending disc
losure statement
that is provided prior to consummation of the cont
ract or (2) make
no disclosures on the disclosure statement prov
ided at consummation and treat each rate increase as a refinancing
of the original
contract requiring a full new set of disclosures.
Effective
October 1977, the Board amended Regulation Z to
require certain
disclosures in connection with any contract cont
aining a variable
rate provision.
Mr. Schmidt's contract was signed in 1972 and his
bank
can properly operate under the pre-October 1977 rule
s outlined
above. Evidently the bank chose to treat each
rate increase as
a refinancing subject to new disclosures. The
new disclosure
statement Mr. Schmidt received in the mail appe
ars to be the bank's
effort to make the required new disclosures for the
rate increase.
Mr. Schmidt also indicates that the variable
rate clause
may have been added to his contract after
it was signed. This of
course raises an issue of fact that we are not
able to resolve.
I trust you find this information useful.
WiC01081040t (tv-3711)
9 Mehl* tensor
SUalersii (I)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Sincerely,
S/Paul A. Volcker.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. 0. 20551
PAUL A. VOLCKER
CHAIRMAN
October 20, 1980
The Honorable Henry S. Reuss
Chairman
Committee on Banking, Finance
and Urban Affairs
House of Representatives
Washington, D.C.
20515
Dear Chairman Reuss:
Thank you for your letter of
October 2 regarding implementation of the Monetary Contro
l Act through Federal Reserve
Regulation D (12 C.F.R. 204).
You expressed concern that the
provisions of Regulation D could
unnecessarily subject credit uni
on
share accounts to reserve req
uirements because, under the def
inition
of transaction account, routin
e distributions of Federal gov
ernment
employee salary allotments
directed to savings accounts could
cause
the accounts to fit within the
definition of "transaction accoun
t"
and thus be subject to reserv
e requirements.
This problem has been considere
d recently in light of
the concerns which you and oth
ers have expressed about the impact
of Regulation D on the type
of plans offered to customers of fin
ancial institutions which have
the effect of encouraging thrift amo
ng
depositors. We have concluded
that where a deposit is made direct
ly
to one account, but within
a very short time routine disbur
sem
ents
of a portion of a payroll dep
osit are made to family member acc
ounts
or other accounts of the dep
ositor, such disbursements are an
element of the deposit transa
ction and are not to be regarded
as
"transfers". Thus, the capabi
lity of a depositor to distribute
funds in this manner would not
in and of itself render an accoun
t
to which the payroll funds are
initially deposited to be a transaction account.
We feel that the above positi
on clearly affords institutions the flexibility to contin
ue to offer plans which encourage
savings and also achieves the
objectives of the Monetary Control
Act by applying reserve requir
ements to accounts used truly for
transactions purposes.
silho101hOt (rwArts)
444.4
mi4 Wimimmppoi
act Sibmists
Pa*, sloWasdi (2)./
1064,44 ammode
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Sincerely,
stag
Action assigned Janet Hare
WILLIAM PROXMIRE. WIS., CHAIRMAN
II.PRISCP4 A. WILLIAMS, JR.„NJ.
•
ALIN CRANSTON, CALIF.
,ADL.AI t. SIVVE-N:0?4, ILL.
JAKE GARN, UTAH
JOHN TOWER, TEX.
•
POSERT •H1FIGAN. N.C.
DCIEALD W. RIEGLE. JR., MICH.
HE'Na. PA.
WILLIAM L. ArimSTROP)(1, COLO.
NATOCN LANDON K .185E1:DAUM. K AN s
rAut A.
RICHARD G. LUGAR. *10.
JOHN
SAT:RANT S. MO.
DONALD W
GEORGE 1
STEWTRT, ALA.
'afnifcb
MITCHELL, MAINE
KTNNCTH A
MC LrAN
?RECTOR
M. DANNY WALL, MINORiT' STAFF DIRECTOR
MARY FRANCES OE LA PAVA, CHIEF' CLERK
r5f3cna1e
COMMITTEE ON RANKING. HOUSING. AND
URBAN AFFAIRS
WASHINGTON. D.C. 20510
September 24, 1980
Honorable Paul A. Volcker
Chairman
Federal Reserve Board
Constitution Avenue
between 20th and 21st Streets
Washington, D.C. 20551
Dear Chairman Volcker:
I am enclosing correspondence from a Mr. Milton Schmidt
of Sturgeon Bay, Wisconsin who has brought to my attention a
problem he has encountered with the Bank of Sturgeon Bay.
Would you please review both the documents and the
procedures utilized by the bank in this case and issue a
statement on your inquiry as soon as possible.
Best wishes.
Sincerely
Ns')
Chairman
WP:lgj
Enclosures
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
L;
• •••••••,
1...4•40
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•
FROM THE LIOK OF
111 la •
1.
,
MILTON "BUD" SCHMIDT
,
SA,
••• 4"
••••••••
-1998,Hwy. 42-57 Rt. 2
STURGEON4Ag• pl.SCONSIN 54235
PHONE 743-6966
S,
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Federal Reserve Bank of St. Louis
..,"nator - T-12_1ian
52:41 _24rksen
...-ashin:ton, D. C. 2010.
Lr -,ena„o_
•
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.1.
7-4 led to you on
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additi
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lette
wit;:i the --01 - of
the .roble:: T v.71
L,
to the Truth
Stur-eon T.ay at Stur-con flay, :;-1.sconcir. 7:ith reference
jusu rec.-33.-.-ed the enclosed co-r7 of a
in Lendf_n2 D4 scl °sure rorn.
foni fro:. the bank
ne-w1-.- nre-1,,,•:d Truth in
letter an
or
raG 04.2.000 40 c 0:
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a.3-s•am. L.
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letter to us 172Z dated I.u7ust 27, 1950
not
- forn
the new Truth in Lendin:,
a this,undotec11;-, was the •date
•
•
P,n 1
•••. is ce_‘••3212...ely a violation of the Truth
:cared.••••••-•
La; and wo-ld greatly an7reciate your investigating
25, 120 lett.';r to you. it is
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this n
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"We Live and Work in Beautiful Door County, God's Country"
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
LOCATIONS TO SERVE YOU
MAIN OFF/Cl
215 NORTH THIRD AVENU1
STURGEON BAY, WISCONSIN 5423
PHONE: 414-743-555
SERVING DOOR COUNT'
SINCE 188
August 27, 1980
Mr. Milton W. Schmidt
RE:
Mortgage Escalation
Dear Mr. Schmidt:
Chicago's letter
Pursuant to the Federal Reserve Bank of
the additional disof August 22, 1980, we are forwarding to you
of Regulation Z. The
closure required under section 226.8(b)(8)
s the anticipated prinenclosed Truth-in -Lending statement indicate
and, calculating the incipal balance due for your October payment
your loan, it also
terest rate to be applied on the balance of
monthly payment. This
shows the total finance charge as well as the
State disclosure requirestatement complies with all Federal and
usion or misunderments and should avoid any possibility of conf
have any questions,
standing in the future. However, should you
please feel free to contact me personally.
Verj trul
yours,
Steph n A. Kas
Corporation Co nsel
31K: Lm
Enclosure
CC:
Ron Berg
Tom Herlache
Federal Reserve Bank
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to personally identifiable information.
Citation Information
Document Type: Personal account documents
Citations:
Number of Pages Removed: 2
Mortgage loan disclosure, Bank of Sturgeon Bay, May 31, 1972.
Federal Reserve Bank of St. Louis
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*•
6
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Federal Reserve Bank of St. Louis
FEDERAL RESERVE BANK OF CHICAGO
2 It)'
,
SIKH- I
sAl I
04I I I
('I II(
ILI INt)ii, 600440
(312) 322-5322
August 21, 1980
Mr. Milton W. Schmidt
Dear Mr. Schmidt:
This is to acknowledge your letter of August 16, 1980.
We have enclosed Federal Reserve Board staff Public
Information Letter number 749, written for a situation identical
to yours. Therefore, our opinion is consistent with letter 749,
that is, by a contractual agreement outisde the sphere of
Regulation Z, the bank is free to change the rate so long as
it treats the change in terms as a ;-errifanc rig requiring new
Truth in Lending disclosures.
a.••
•.1.411666666666•66MInalummo
A copy of Regulation Z, is enclosed. Please note that
interpretation 226.810(page 76) has been superceded by Section
226.8(6)(8).
Very truly yours
/
(7
ohn L. Bergstrom
- Supervisory Examiner
NOTE:
This letter was just received today when we were about to
nail this infornation to you. You can see our problem.
Our loan on our home has not been refinanced but is the
original loan as of 1:ay 311 1972 and payments have been
made each and every month without fail.
ilton "3ud" Schmidt
FROM THE C
le VII
••
•.
Lk'. 314
MILTON "BUD" SCHMIDT
3998 Hwy. 42-57 Rt. 2
STURGEON BAY. WISCONSIN 54235
PHONE 74,3-6966
Li 1
4',•1 1;st 25) 1930
ACAW.A.011,
c
1••••:* 1.•
OF
4,
Senator illian Pro:=..re)
52/41 air::sen Duilc:Lnr,
:•:[.-.sh.ington, D. C. 2051(..).
Dear Senator Proxmire:
forn
!. natter has arisen with reference to the Truth in L3nding Disclosure
with
w:lich my .J - n and 1 signed when we no2tgaged our hone on !:ay 31, 1972
the Dan:: o2 Sturr:eon ray at Sturgeon 3ay, 174sconsin.
would be
The ban:: sent us a notice on June 23, 1930 stating our interest rate
increased fron 7 to 6. (,ur r1ruth in Lending form did not specify that there
would be any increase in interest at any tine. It clearly specified that we
wood have 2'L40 consecutive 7aynents at U2h.05 per Eonth, at 75 interest, with
It
no indication of any further paynento or possible increases in the future.
this form.
is our understanding that any escalation clause must be also noted on
. at
rninterest, we would not have signed the
t:e :mown there .--_, be an increase in
well
form or t.,":nn the nort7a:e from then. :L copy of this form is enclosed, as
• letters to us.
as
enclosed is a co-.7 of the mortr:age note which we signed. Kowever, we would
we
like to 7c'nt out that we did not receive a co.:7 of this note at the time
the mort72.7-. This co:7y •Tne. made for us at the bank just a few days
ed
cur request. -0 also wish to point out that the mort:2.70 note indicat
we have no ::nowled,7e tend was ty-ped on
an escalation clause was added of which
would
the r07nrsn side of the note. Ka0 we ::nown this at the tine in 1972, we
date by
not have signed the note. This addition :lay have been added at a later
disclosed
the bank. ':e ha7e no way o2 ::nowin:2, but one thing is sure, it was not
notice, on
to us or reflected in the Truth in Lending Disclosure form. If you
were crossed
the Truth in Lendin2 for.: under "::ortgage Costs", additional char:es
to know what
o:: because we would not agree to any additional charges. 7e wanted
our e;:act costs would be at the closirr- as well as in the fliture.
3D
ca
is legal.
checked with the :ederal Reserve Earl:: in M,ica7o, and they said this
for a
I:owever, we do not feel it is legal—otherwise there would be no reason
a waste of
"ruth in Iondinr: form and the form is definitely then worthless and
taayer's money.
7 2- 1980
do not feel an
e.
andly investi7ate this matter and advise as soon as possibl
in Lending
increase in interest is warranted since it did not a712ear on the Truth
feel this is a violation of the Truth in Lending regulation.
Disclosure form.
dum YG0152.
1-lnase refer to :leguLAion Z 226.8 (B) (8) 12/27/78 and also memoran
Thank you very n7ach for your heln.
1'OT7:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
T
:mow I can count an your assistance.
See notation on bottom of 7ederal
I:eserve Dan: letter dated Aug. 21, 1930.
Yours very,
"We Live and Work in Beautiful Door County, GM
A 4<Q I
CY-ur7Try
F
5
-L^-42
C
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
LOCATIONS TO SERVE YOU
MAIN OF,FICE
2 1 5 NORTH THIRD AVENUE
STURGEON BAY, WISCONSIN
June 23, 1980
54235
PHONE: 414-743-5551
SERVING DOOR COUNTY
SINCE 1889
Mr. and Mrs. Milton Schmidt
Dear Mr. and Mrs. Schmidt:
As we all know, spiraling inflation is making everything more
expensive. The cost of money is no exception. As you may recall,
your mortgage note with the Bank of Sturgeon Bay contains a clause
which permits the Bank of Sturgeon Bay to escalate the interest
rate under certain circumstances and after proper notice to you.
°thy' finarwial tw:litutions hAve long been invoking the escalation
clause but until recently the Bank of Sturgeon Bay has been able to
Recently, inflation has become so severe that the
avoid doing so.
Bank of Sturgeon Bay has been compelled to increase its interest
We regret that this action has become necessary.
rates as well.
Attached to this letter is the official notice required by the
At the
Wisconsin Statutes advising you of your rate increase.
time your new rate becomes effective, you will be sent a new
Please read the notice carefully. If you have any
payment book.
questions, please feel free to contact our Mortgage Loan Department.
Sincerely,
Ronald D. Berg
Vice President
RDB:nad
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The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to personally identifiable information.
Citation Information
Document Type: Personal account documents
Citations:
Number of Pages Removed: 5
Notice of interest adjustment, Bank of Sturgeon Bay, June 23, 1980.
Mortgage agreement, Bank of Sturgeon Bay, May 31, 1972.
Mortgage note, Bank of Sturgeon Bay, June 30, 1972.
Payment record, undated.
Mortgage note, Bank of Sturgeon Bay, June 30, 1972.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
VdidcoL,
11- 3 er
October 22, 1900
iTIlemorahist Daniel K. Inouye
United States Senate
Washington, D.C.
20510
Dear Senator Inouye*
Thamk you for your letter of October 18, 1980, concerning
the requests al mommember depository institutions in Rawaii for temporary
relief from Federal reserve requirements under the Monetary Control
Act of 19$0. Yesterday the Board oomsidered thee* requests and determined
that a six-month waiver of reserve requirements until May 1981 in approporiao
for seamember depository institutions in Bassaii that are not currently
:equired to maintain reserves under the Act. The Board's action was
taken after examination of the legislative history
the exemption
provided by the Act for certain State-chartered inatitutioms located
in Hawaii amd in view of the small amount of reserves that otherwise
would be required to be maintained. It is anticipated that the board's
action will provide Congress with an opportunity *ally next year to
re-examine the extraordinary exemption for institutions located in Hawaii.
In order to assist the Board in obtaining data necessary fim
the conduct of mometary policy, all institutions in Bioeli are requested
to grapes* and file the Federal Seserve's report of deposits form in
aceeedamcor with ftgalation D just as is requireW of ell of the nation's
dOPOsitory imstitettems. The Board appreciates your interest in this
matter and having received the benefit at your vises.
Sincerely,
Wail!A, VOldiel
GTS:bbo
10/22/80
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
CiffAirei.Las MC C.14Airmur_As 9 JR.
inviirEno STATES SATE
October 27, 1980
Dear Paul:
Thank you for your generous letter regarding
my recent foreign policy statement.
I appreciate your taking the time to share
your thoughtful comments with me.
With best wishes,
Sincerely,
Charles McC. Mathias, Jr.
United States Senator
Honorable Paul A. Volcker
Chairman, Board of Governors
of the Federal Reserve System
20th and Constitution Avenue, N.W.
Washington, D.C. 20551
Octo!-er 27, 1'.381
The Uonorable Wi1lie Prox-dro
e%airman
Committee on Tie.r.%in,
and T2r;,:ca1 Aifaira
kinited Statoe Oenete
Waah1nct4>n, r.c.
20510
Deur Chairman ProxrAro.
l'ou *tor your lettcr of f.,ctoi er 22 re:con:lending
Ilarren L. Lri
s, ft z.NoloZ of ttc
Conruner 70visory
Council.
1 c:an assmre you that
:iernite quzilifications will
receive full consideration when tif? roar.f! oakef. tLo lrtEl aproint
ot%nts to tLe
Thg Doara amreciates receivitsg youx recmnemlation and
your intar -t in the C .insumer
.
AdviE.ury Council.
Sincerely,
CO.* t (#V-402)
bcc: Ann Marie Bray (w/co;yy of incolainq)
rIrs. nallardi (2)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
WILLIAM PROXMIRE. WIS., CHAIRMAN
HARRISON A. WILLIAMS, JR., N.J.
ALAN CRANSTON. CALIF.
ADLAI I STEVENSON. ILL.
R0DERT MORGAN. N.C.
DONALD W. RIEGLE, JR., MICH.
PAUL S. SARDANES, MO.
DONALD W. STE WART. ALA.
GEORGE J. MITCHELL, MAINE
JAKE ()ARM. UTAH
JOHN TOWER. TEX.
JOHN HEINZ. PA.
WILLIAM L. ARMSTRONG. COLO.
NANCY LANDON KASSESAUM, KANS.
RICHARD G. LUGAR, IND.
KENNETH A. MC LEAN, STAFF DIRECTOR
M. DANNY WALL, MINORITY STAFF DIRECTOR
MARY FRANCES DI LA PAVA, CHIEF CLERK
?JC-niffb Zfatez „Senate
COMMITTEE ON BANKING. HOUSING. AND
URBAN AFFAIRS
WASHINGTON. D.C. 20510
qv
October 22, 1980
dad)
Honorable Paul A. Volcker
Chairman, Board of Governors
of the Federal Reserve System
Washington, DC 20551
Dear Chairman Volcker:
I write to recommend the appointment of Warren L. Dennis
to be a member of the Board's Consumer Advisory Council. Mr.
Dennis has demonstrated exceptional knowledge and an exceptional record of accomplishment both in his prior work with
the Department of Justice and his more recent work with the
firm of Troy, Malin and Pottinger.
Mr. Dennis has substantial expertise on the subjects of
the Equal Credit Opportunity Act, Fair Housing Act, and Community Reinvestment Act. I am sure that he would be a valuable
addition to the Advisory Council.
crel
tTlim
Chairman
WP:srj
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Federal Reserve Bank of St. Louis
re
Octot'er 27, 1980
The Honorable ii1ia Proxmire
CLairman
Committee on Sanl‘imi l Rousing
and Url,an Affairs
United States Senate
Washinvton, D.C.
20510
Dear Chairczan Proxmire:
Thank 'feu for your letter of Octol-er 10 in
you
encloae cerrc!niondence froL t'r. and Mrs. Uilfred Reiting concerninii tLa eTilication of !Judson Bancsharen Ccrporation for Board
aproval to becorie a Lank holding company.
r. one,
Heitinq have beer contacted Ly the Federal
Raucrve Lank of einneai.olis and advised that tho aprlication has
been acccrted for irocesAing by the Poser,'
Notico of tIm
application has been puLlished ir t.e Federal Pe7ister and the
cloce of the uublic comment period as set fcrth In the Federal
le0.stta. is Lovember 3. Any further cormemts that the Haitin9s
have concernin tle application ihould be submitted by that date.
Sincerely,
Saaglitygidig
ItML.DaW:pjt (#V-392)
bcc: Mr. Mannion
Mrs. Lallardi (2)t./
Legal Eccords (2)
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Federal Reserve Bank of St. Louis
WILLIAM PROXMIRE, WIS.. CHAIRMAN
HARRISON A. WIL IIAMS. JR..
ALAN CRANSTON. csur.
ADLAI E. STFVENSON. ILL..
ROOFRT MORGAN, N.C.
RI! GLE, JR.. MICH.
DONALD
PAUL S. frotnnimirs. MO.
DON•LD W STEWART. ALA.
GEORGE J. MITCHELL. MAINE
JAKE DARN. UTAH
JOHN TOWER, TEX.
JOHN HEINZ. PA.
WILLIAM L. ARMSTRONG. COLO.
NANCY LANDON K A SSERAUM. KANS.
RICHARD G. LUGAR. ONO.
KENNETH A. MC LEAN. STAFF DIRECTOR
M. DANNY WALL, MINORITY STAFF DIRECTOR
MARY FRANCES DE LA PAVA. CHIEF CLERK
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Federal Reserve Bank of St. Louis
?Artifeb Zfatez --Senate
COMMI T TEE ON BANKING. HOUSING. AND
URBAN AFFAIRS
WASHINGTON. D.C. 20510
October 10, 1980
C ,r1
The Honorable Paul Volcker
Chairman
Federal Reserve System
Washington, D. C.
Dear Mr. Chairman:
I have enclosed a copy of a letter with attachments
from Mr.
Mrs. Wilfred Heiting regarding the application of Hudson Bancshares Corporation.
I would appreciate it if your Office or the Federal
Reserve Bank of Minneapolis would contact the Heiting's
about this matter so that they may be fully heard.
Thank you in advance for your cooperation.
Sincerely,
l e
•
'William Proxmire
Chairman
WP:lmg
4
•
Septem er 14, 1980
69.FTPAP :1',1.1 14: 52
i3'
Hon. William Proxmire
United States Senate
5241 Dirksen Senate Office Building
Washington, D.C. '20510
Re:
Application of Hudson BancsNires Corporation
Dear Senator Proxmire:
The Hudson State Bank was organized in 1968-69 with the help of approximately
300 local middle class people who saw a need for a second bank in our community.
It was truly a people's bank until the enclosed letter went out to the share—
holders in late June.
We are still in shock.
Some of us asked for a courtesy
meeting where we could learn about the "changing priorities" mentioned in the
letter.
This has not been granted.
We have also appealed to the Federal Reserve Bank of Minneapolis, and we are
informed that our only opportunity to participate in a hearing would be after
notice is given in the Federal Register
and that is only a faint possibility.
During the years when the bank was growing, we were thanked profusely and
praised for our support.
Suddenly the sweet—talk has stopped, and we are left
trying to figure why we are suddenly dispensible.
Our question at this time is:
Federal Register?
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
How do we become aware of the notice in the
Could your office help us?
We thank you for any assistance you can give us,
and for all past work on our behalf.
Wilfred G. and Catherine B. Heiting
•
4
STP.,T.E..A.N1( of HUDSON
— tc:
.5 3
Dear Stockholder,
Changing priorities, interests and personal needs of same of our major
State Bank of Hudson stockholders have brought on a number of requests for sale
of their stock. In an effort to retain local ownership and current bank management,
staff and philosophy, Glen Gaynor, Richard Kenall, David Cleveland and Darrell
Youngberg have agreed to purchase controlling interest in the bank. No other
agreements with any individuals or holding_ganpanies to sell the banks controlling
interest shares have bccn made or are (nticipated. ,
This letter is an offer to purchase all of your State Bank of Hudson stock
at $130.00 per share. Current book value for your stock is $120.00.
This offer to buy your stock is made to you contingent on; A.) Your tendering
of all of your shares, B.) Buyers ability to buy no less than 80% of all of the
outstanding shares C.) Buyers ability to gain approval from thejederal Reserve
to form a one Bank holding oompany)
The buyers have the right, but are not obligated, to purchase more than 80%
of the outstanding shares. In the event that more than 80% are offered for sale,
80% of each individual's share holdings may be purchased on a prorata basis but
in no case will the 20% remaining unsold be faxer.than two shares. The buyers do
not anticipate any future offers to purchase minority shares.
Your acceptance of this offer, in order to be valid, must be signed and returned to Darrell Youngberg, at his State Bank office, on or before June 20, 1980.
Upon acceptance and if the other conditions of the offer are met, we anticipate
finalization of purchase and payment to you on or before September 15, 1980. An
offer to purchase is being made to all State Bank of Hudson shareholders.
Please direct any questions you might have to any of the undersigned.
GlIç. Gor
Richard Kemal
Darrel
R
Youn
4w,g
David E. Cleveland
e to sell all of my (our) State Bank of Hudson stock pursuant to
I (we)
the above provisions.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
715'386-9366 • 600 SECOND STPEET, HUDSON, WISCONSIN 54016
c\GLA-L.•7_ E.-k
C:7-"I
k
\A aL.N.N...\.k
1110
During July, 1967, a group of nine local businessmen met to discuss the
feasibility of a new financial institution to nerve the Hudson area.
From that meeting came the basic philosophy that has guided the incorporators
during the past eighteen months in the development of the new State Bank of Hudson.
1.
That the bank be locally owned.
2.
That the ownership be spread among as many stockholders as possible.
3.
That the best possible location be used.
4.
That the best possible facility be built.
5.
That services be provided the community which are not presently provided.
These guide lines have constantly effected the decisions of the incorporators.
Three
of the incorporators were present at that original meeting - James V. Hirsch,
G. Fred Kremer, and Richard N. Larsen.
Monthly meetings were held from July through December. Subscription agreement
was circulated through out the area to assess public interest. The community showed
$400,000.00 worth of interest without making the subscriptions a public issue.
In January and February the bank group met weekly at breakfast meetings, some
as early as 6:30, with Attorney John Bosshard of La Crosse, whom the incorporators
hired to provide specific legal counsel.
All of these meetings were pointing toward
State Banking Federal Reserve Board and FDIC approval.
In March, Mr. Hirsch, Mr. Kremer, Mr. Dabruzzi. and Mr. Larsen flew to Madison
to set up a hearing date before the State Banking Com issioner.
• In April, each of the incorporators submitted to a lengthy examination given
by the FDIC and Federal Reserve Board.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6422\ S
•
S
•
The hearing, which was contested by the other local banking facility, took
place in May at Madison.
Preparations for this meeting included the proposed
facilite-., area growth potential and financial needs and expected growth of the
new bank.
The State Bank of Hudson became a reality as the information given by the
incorporators convinced the banking commissioner of Hudson's need.
In June, the incorporators elected officers from the group.
President-
G. Fred Kremer, Vice President - James V. Hirsch, Secretary - Richard N. Larsen,
Treasurer - Glen D. Gaynor.
The incorporators have met each Tuesday evening since June, assessing building
plans, selling stock and the thousand and one things necessary to the formation of
a new business.
In March, an option was taken on the Wichser building and purchase was
completed on October first.
Construction on the new building began November first
and will continue throughout the winter.
The new building will be completed by
June 16, 1969, almost two years after the original meeting.
Stock sale began in September of 1968, and the goal of $400,000.00 was reached
e-t-ct4:
1-- 7-,rie)•
23‘
-Y
..e
by December 16, 1968.
13,4
y
•4 4.4.
9148 man hours have been spent during the past 18 month
Bank of Hudson to its first Stockholders meeting.
P
G- „cc.
A
to bring the S+'"7
'
'
It would take one man working
40 hours per week almost five years to amass 9148 hours of labor.
On a basis of
$4.0n per hour, that man would have earned $36,592.00 during this five year period.
The incorporators have received no payment for the time spent and the various
trips and meetings have been held at their own expense.
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Federal Reserve Bank of St. Louis
4
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Advertisements
Citations:
Number of Pages Removed: 2
The State Bank of Hudson. "Hudson's Community Owned Bank." Undated.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Tvv Aouora43.e IlaAat L. Auli.a
:i.amwa of ,:kseTrosontativez
Ikusnire)ton, f;.C.
24SV4
!7'eftparitaa
/04anik you for 1-givitt
tt-it OirtkArity t refwzr,4 tc
L_A„. liavefA
tter trotk your covo*titmiczti 11P. 3:i
Iar
NiN ;47o“oita1s are 1nteroatir4 aad irmovative,
IL :Act, ,seveielle Coirrou;:ordonco bollworm gr. 0A4
Zi4ax, 4144 C1,
4aixzen gillor bats addrosswe the work -chiming ;IAr,
Oise eaelesaces).
views on this prcirosol aro essentially the
10A60
th**0 Almq.x016411ed in th. ea:tiler corraswondencs. /ft addition e
I would mots that several inatitetionA aro experivettiAii viez loam,
of the equity-sharinv ty:As that r. St4rl. ,Trokoaes,
rtAx; t.44* offered is(.;xe 0..)tIsttrb.ctive idcos; ho,,mvore
I .AaJovr
.
e tLiot iAnat.korsar!i 1.,re,Asoro* aro co 44q4pty ontriereo4,
tJ4it a .404Ador-Laotbd “Aicy rospormo 1* reNu1rc4. 41:.ropriste and
kerAiete:4t o4tiorto
t:Ap VtVeCAmOrte. i co*ratic,a vitt *rforts
441044 labor, should result ovityr tiae in a groduoi ttidtn
douu of ifttlation an4 a ri4o in 10..4) levol tt av,loyment. 2 van
zi4ire 10U tat rslobotary 0Aiicy iA i&inrotlucteel "'its toot
c4./jzzctAvoz ta ;74nd.
- A. IluiL;44
-
(Mr. dtd. 10/23/78 4 9/29/72 fror4 niller to Ca
Enar15; and ltrs. dtd. 10/13/79 4 7/5/78 from the
arott to ClIrtan.
;.1110:J2.DJ4p eljt (M385)
;r. KicEline
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Federal Reserve Bank of St. Louis
liCtriey
1-ta11ardi (2)-0'
Alction assigned Mr. Kichline
A1 .
3 "ALCI SERVICLS COMMITTEE
4
sutscommiTTE(S
PROCUREMENT AND MILITARY
NUCLEAR SYSTEMS
WASHINGTON OFFICr:
1108 LONG WORTH HOC'S E Orrper Buitointo
WAsmimcToN. D.C.
20515
(202) 225-5611
INVESTIGATIONS
Congre55 of die artiteb *tatc5
HOUSE ADMINISTRATION
COMMITTEE
ji)oruSe of ikeprefSentatibei4
SUBCOm hi ITT FES'
OFFICE SYSTEMS
ACCOUNTS
DIST RICT OFFICE,
1649 WESTCLIFF DRIVE
NEWPORT BEACH. CALIFORNIA
ROBERT E. BADHAM
40TH DISTRICT. CALIFORNIA
October 2, 1980
The Honorable Paul A. Volcker
Chairman of the Federal Reserve Board
Washington, D.C. 20551
D2ar Chairman Volcker:
Enclosed is a letter that a constituent of mine, John Sharp,
requested I bring to your attention. Mr. Sharp outlines a
proposal to reduce inflation and employment at the same time.
It would be appreciated if you would carefully consider this
proposal and share with Mr. Sharp any comments you may have
on it.
Cordj,belly, .2
.,
/ i
1
/
i,
E.`Badham
Member of Congress
/Robert
REB:cmw
cc:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. John V. Sharp
(714) 631-0040
92660
3015-N Via Buena Vista
Laguna Hills, CA 92653
September 15, 1980
The Honorable Paul A. Volcker
Chairman of the Federal Reserve Board
Washington, DC 20551
Dear Chairman Volcker:
You have again shown how to cut our inflation rate. Your action, as you know,
would save about $25 billion for each 1%-cut you achieve this year. Yet
Senator Cranston, while visiting Leisure World in July, said "Congress would
lose about $25 billion for each 1% rise in unemployment". Consequently, will
you please consider a set of legal provisions--similar to ones used in California and elsewhere.
A review of the legal status of similar provisions is as follows:
g Credit-sharing loans --started by your policy letter of 8/23/79.
• Work -sharing compensation --started in California in July, 1978 by Senator
Greene of Watts --a former union official. Its success now leads Congresswoman Schroeder to extend th-T —law nationwide.
• Equity-sharing loans --issued in California to defer senior homeowner taxes,
and elsewhere as mortgages for new-home buyers.
9 Rent-sharing agreements--to pass through cuts by Proposition "13".
Extending this set could cut inflation and unemployment together.
How? Each employer who uses bank loans could prepare a plan using these provisions. By his plan he could reduce spending to hold down prices, yet avoid
lay-offs during severe regional downturns only. Tax, union, and rental
officials could approve when needed.
The set of provisions which any regional employer could use, are:
s Credit-sharing loans--with reduced purchases and inventories.
o Work -sharing compensation --with reduced payrolls and no lay-offs.
a Equity-sharing loans--with reduced mortgage repayments and taxes.
o Rent-sharing agreements--with reduced rents paid to owners who choose
to participate as employers or employees.
My
a
e
a
convictions about the use of these cost-effective* provisions are:
Related laws with incentives can be promptly extended nationwide.
Fewer lay-offs and equitable income-sharing could result for all.
You could then cut both inflation and unemployment less painfully.
Accordingly, will you and your regional bankers consider giving the legislative
push, plus the administration, needed to combine the provisions into "A National
Downturn -Sharing System"?(1)
By contrast, is not income -indexing really upturn sharing? Will you then favor me with a critique of this policy to share with
its many contributors?
Productivel
yours,
2,
Ref. (1)--details, if you wish.
)
(John V. Sharp
(*)-All reductions are in 5% steps--set by the percentage a region's downturn
exceeds the nation's during the three preceeding months.
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Federal Reserve Bank of St. Louis
•
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCKER
CHAIRMAN
October 27, 1980
The Honorable William -Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman Proxmire:
Thank you for your letter of October 9 inquiring
about the legality of the Citi-Shopper customer
discount
service that is being promoted by Citibank.
Citi-Shopper is a merchandising service offered
to holders of Citibank credit cards by Comp-U-Card,
Inc.,
an organization unrelated to Citibank. Although
this
service does not appear to violate Regulation Q
or give
rise to consumer problems, I have asked my staff
to review
this matter in more detail. In addition, because
Citibank
is a national bank and as such is under the
jurisdiction
of the Comptroller of the Currency, I have also
referred
your request to the Comptroller for respo
nse.
Sincerely,
cc:
Congressional Liaison Office
Office of the Comptroller of the Currency
LSA:vcd (#V-390)
bcc:
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Federal Reserve Bank of St. Louis
Lee Adams (for follow-up)
Mrs. Mallardi (2) •-e".
••••••••••il...1.
p
1A1PI.
--014 A. WILLIAMS. JR.. N.J.
ALAN Cf.,van-roki. C.ALir,
AM. A I I STEVENSOP . ILL.
ROM RT MoRGAN. N c.
fl(NAI r
FC.( r. JR.. MICH.
rAUL c sA.HA,
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DONNt U A STF WART, ALA.
Action assigned Gil Schwartz *coordination with
Janet Hart's Division
•
NILE IAM PROXMIRE. WIS., CHAIRMAN
JAKE GARN. UTAH
JOHN TOWER. TEX.
JOHN HI INZ. PA.
WILLIAM L. ARMSTRONG. COLO.
NANCY LANDON I ASSERAUM. KANS.
RICHARD G. UJGAR, 1110.
Zfalc,c; Zenate
GEORGE J. MITC14
,
LL. MAINE
KENNr Fit A. MC Li H. STAFF DIRECTOR
H. CANNY WALL, MINORITY STAFF DIRECTOR
MARY FRANCES DE LA PAVA, CHIEF CLERK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
COMMI I TEE ON BANKING. HOUSING. AND
URBAN AFFAIRS
WASHINGTON, D.C.
20510
October 9, 1980
Honorable Paul A. Volcker
Chairman
Federal Reserve Board
Constitution Avenue between
20th and 21st Streets
Washington, D.C. 20551
NJ
Dear Chairman Volcker:
A considerable number of constituents have expressed
concern that a new customer discount program initiated by
Citibank, known as "Citishopper", may include several anticonsumer elements. I would appreciate it if the Board
would initiate an investigation of this program to determine
whether it complies with all applicable federal and state
laws and regulations.
Best wishes.
/William Proxmire
Chairman
WP:lj
J. .44)-•nL,:ttt NItritoti
-Jaited St44tos 4olsati4
usahlregtort,
2051C
Johustov
:jou 1:or four lett4r of c.tor-(!x- 8 rccovend,
Tbo44ob C. &afford; be considered for af..1.ointlAtint et a rireetor
of the 1.410 OrIeens Urine!, of the Fe(loral '-v4orve Szink
'‘tlanta.
T444 ked*ral reserve /* vigry race, ir,tareetifd ift ts104nte4
frOM 4 Wide Yarittt Of hactitounds for l4)vci'1,i4 tirvletl. se r(rgervs
rcctors.
We z1a11
Nt. Jeffrey's naime in 4:1.rci AS 4 rolvible
candidate for IVIt .;:t1v4 OrloAats :Irtmch Ipcitsd 4 taad your ritcei3(!Ation
hos sloe bosh iat,
11141ta Y. nrd, PresVel-J7it of tc r4ro1
ret!srvc,
AtIaot4i4 for coseideratim of
Jeffroy 4t1 &
a -t1r-vt,, Uan)
Droctor of the,. Vow OrIvan
I 4i::pr(A:itte yout intercat in ideztifyinr4 - usliffed
fcir :1-0tAttz-ve 10.ank Directors.
Pi!;cerel s .
WUW:DSWt (4V-387)
bcc;
Ford—Ma, Atlanta
r. Wallace
nrs.fla11ardi (2)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
JA.CPRON, WA
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JOHNFTCN, LA.
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MALCOLM WALLOP. !MVO.
JOHN MEI. r.-14, R. MON'''.
PAUL W. Tsorrskc. MAAr
RR.% IWADCF.Y. N.J.
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tion assigned Bill Wallace
?-1G-tifeb ,,T)fafez Zertafe
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
DAN;EL A. DPFVFIJI. ATAFIF cinrc-rort
D. MICN - In NARVIY.
couronri
iper.rw SAY DIRIELTOR FOR Tlif MINcAtr-y
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
WASHINGTON. D.C. 20510
October 8, 1980
The Honorable Paul A. Volcher
Chairman
Board of Governors
Federal Reserve System
Washington, D.C.
20551
Dear Chairman Volcher:
I am writing to bring to your attention the candidacy of
Thomas C. Jeffery for a Class C Director position in the New
Orleans branch of the Federal Reserve System.
While I am not personally acquainted with Mr. Jeffery, I
have been impressed with all that I have learned of him from the
Managing Director of the Louisiana Credit Union League, whose
organization has nominated him for this post.
Mr. Jeffery has long been active in the League as well as in
his own credit union. He has played a very important part in initiating
programs at both levels and has been recognized, in particular, for the
job he has done in heading up the League's Legislative and Government
Affairs Committee and chairing the Student Loan Program Committee.
Because the Federal Reserve is now beginning to regulate some of
the programs sponsored by credit unions I'm sure that persons representative
of these organizations will soon be made a part of your agency. I know
that Mr. Jeffery will be one to whom you will want to give careful
consideration.
With kindest regards, I am
Bennett John. on
ited States Senator
JBJ:mm
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.
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BOARD OF GOVERNOR
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WASHINGTON, O. C. 20SSI
PAUL A. VOLCKER
CHAIRMAN
October 28, 1980.
The Honorable Russell B. Long
United States Senate
Washington, D.C.
20510
Dear Senator Long:
Thank you for your letter of October 16,
enclosing a
copy of correspondence you received from
First Republic Bank,
Rayville, Louisiana, concerning Federal
reserves required to be
maintained by the Bank pursuant to the Mone
tary Control Act of
1980, Public Law 96-221.
As you know, Public Law 96-221 provides
that a bank that
was a member of the Federal Reserve Syst
em on July 1, 1979, and
withdrew between that time and March 30,
1980, is required to maintain reserves to the same extent as a memb
er bank. Nonmember
depository institutions, including bank
s that withdrew from membership before July 1, 1979, are entitled
to an eight-year phase-in
of reserve requirements under the Act.
First Republic Bank withdrew
from System membership on February 1,
1980, and thus is required
by Public Law 96-221 to maintain rese
rves to the same extent as a
member bank.
In recognition that an individual bank's
withdrawal from
the Federal Reserve System may have been
delayed by individual
circumstances, the Board, consistent with
the legislative history
of the Monetary Control Act, on April 23,
1980, issued an interpretive ruling (12 C.F.R. § 204.120)
providing that a former member
bank that presented evidence that it
made an unambiguous, irrevocable
decision to withdraw from membership befo
re July 1, 1979, would be
entitled to an eight-year phase-in of requ
ired reserves. The interpretation provided that a former national
bank that presented the
Board with documentation that its shar
eholders voted to convert to
a State charter prior to July 1, 1979, and
that was not a member bank
on March 31, 1980, would qualify for the
eight-year phase-in of
reserves. The interpretation stated
that banks desiring consideration under the provisions of the inte
rpretation should submit full
documentation to the Board as soon as
possible, but in any event no
later than June 16, 1980.
On June 17, 1980, First Republic Bank
requested consideration under the Board's interpretation.
The Bank supplied information
https://fraser.stlouisfed.org
•
Federal Reserve Bank of St. Louis
The Honorable Russell B. Long
Page Two
to the Board indicating that its
board of directors did not
vote
to convert to a State charter unt
il November 13, 1979, and
that
its shareholders did not vote to
approve the conversion until
January 15, 1980. Accordingly,
in a letter dated July 17, 198
0,
the Board advised the Bank that
it was not eligible for the eig
htyear phase-in of reserves under
the interpretation and that it
would be required to maintain
reserves to the same extent as
a
member bank, as required by Pub
lic Law 96-221, beginning with
the
seven day reserve maintenance per
iod commencing on August 28, 198
0.
The Board also advised the 'Bank
that the Board would consider gra
nting
limited extensions of the time for
maintaining reserves in extraordinary circumstances in recogn
ition that former member banks
could experience hardship by bei
ng subjected to Federal reserv
e
requirements by the August 28 mai
ntenance period. The Bank was
requested to submit any relevant
information to the Board before
July 31, 1980, if it wished to
be considered for hardship relief
.
The Board has received no fur
ther correspondence from the Bank
indicating that it wished to be
considered for hardship relief.
The Board has afforded to First
Republic Bank the full
extent of the opportunity for rel
ief that the Board believes is
available under Public Law 96221. While we can understand the
Bank's concern, the Board does
not believe that the statute
authorizes the exemption from the
provisions of the law that First
Republic Bank requests.
We appreciate your interest in
this matter.
us know if we can provide any
additional information.
Sincerely,
S/Pakil A. VOcker
:;'IsSeV41014 4C0,1013V1pjt
.cc.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
(11V-3,4)
Cil Schwartz
ns, Foin
mrs. talardi (2)
Legal Recor40 (2)
Please let
ction assigned Mr. Petersen
RIJSSCLL
•
LONO, LA , CHAIRMAN
r. TALMADGE. GA.
HI
Apt,1,141,
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SPAqK
MATSLONAGA, HAWAII
DAN•t t PATRICK MCF(NIHAN,
ROBERT J. DOLC. KANS.
808 PACKWOOD, OfllitS.
WILLIAM v. sto*H. JR
DLL.
JOHN C. DANFORTH, MO.
JOHN H. CHAFIE, R.I.
JOHN HEINZ. PA.
MALCOLM WALLOP. WTO.
DAVID DURENEILROT
?Jettifeb ,Sfatez
MtNN.
MAY 8AUCLIS, MONT.
DAVI() L. DORI N, OKLA.
WILL BRADLEY, N.J.
ROM
e
COMMITTEE ON FINANCE
WASHINGTON. D.C. 20510
MICHAEL STERN. STAFF DIRECTOR
LIGHTHIEER. CHILF MINORITY COUNSEL
October 16, 1980
Honorable Paul A. Volcker
Chairman, Board of Governors of
the Federal Reserve System
Federal Reserve Building
Constitution Avenue between Twentieth
and Twenty-first Streets
Washington, D. C.
20551
Dear Mr. Chairman:
Enclosed is a copy of correspondence from First RepuIE
blic
Bank of Rayville, Louisiana, concerning problems they are
experiencing with reserve requirements as a result of Public
Law 96-221.
I would appreciate your consideration of the correspondence
on the matter. Thank you for your assistance.
and your .i.JIsuIiLj
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
With best wishes, I am
Sincerely yours
/..711.0..'t•Of
,,
W. D. COTTON, Chairman 01 The Board
" P F. STAFFORD, President
,4747
r
Fili
B
0. DOX 077 / RAYVILLE, LOUISIANA 7126D
iu
54
'ALTERS, Vice President
80 BY J. KING, Vice President
MRS. FLORA B. KALIL, Cashier
MRS. HATTIE C. EPPINETTE, Assistant Cashier
ItqCY K. HARRIGILL, Assistant Cashier
Zlil
September 16, 1980
Honorable Russell B. Long
Senate Office Building
Washington, D. C. 20510
r-n
Subject: Monetary Control Act ofr80
Public Law 96-221 - March 31, 1980
Dear Senator Long:
On June 25, 1980, we wrote you regarding the referenced
legislatila=and
its impact on our bank. The specific part of the law
which has such a
vastating effect on our bank is Section 103(8)(D)(i), whic
h provides:
"Any bank which was a member bank on July 1, 1979, and which
withdraws
from membership in the Federal Reserve System during
the period beginning on July 1, 1979, and ending on the day before the
date of enactment of the Depository Institutions Deregulation and Mone
tary Control
Act of 1980, shall maintain reserves beginning on such date
of enactment in an amount equal to the amount of reserves it woul have
d
been
required to maintain if it had been a member bank on such date
of enactment. After such date of enactment, any such bank shall main
tain reserves
in the same amounts as member banks are required to maintain
under this
subsection, pursuant to subparagraphs (B) and (C)(
i)."
We were formerly First National Bank of Rayville. We had been
a national
bank and Fed member since May, 1952. After many mont
hs of thoughtf
liberate analysis and investigation, we applied and were approved ul and defor a charter
conversion from a national banking association to a stat bank
e
, regulated and
supervised by the Office of Financial Institutions, Stat
e of Louisiana. Our
charter conversion and Fed withdrawal was effective
February 1, 1980.
As we informed you in our June 25th letter, we had applied
to the Federal
Reserve Board of Governors for an exemption from this prov
ision. We outlined
in detail our reasons for the request, citing the step by step
process we used
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
'Honorable Russell B.
September 16, 1980
.)[.1- 2? 10 s'4 AN
'60
to convert our charter from a National Banking Association to a state bank
and to withdraw our membership from the Federal Reserve System. Our request
for exemption was subsequently denied, and a copy of the letter informing us
of the denial is enclosed for your information. You will note in paragraph
two of this letter of denial that a former member bank may present evidence
that it mad?an unambiguous, irrevocable decision to withdraw from membership
before July 1, 1979, in order to qualify for an exemption from this provision.
In paragraph three, the letter states that the Board regards votes of both
the directors and shareholders as necessary elements of an irrevocable decision.
As we pointed out to the Board of Governors we commenced our conversion
process on May 11, 1979, prior to July 1, 1979. As a matter of practicality
and priority, it would haNTe—been very ill-advised for us to have made the
"irrevocable and unambiguous" decision to convert our charter and withdraw
our membership before we obtained charter approval from the Office of Financial Institutions, State of Louisiana. In our opinion, that certainly would
have been "putting the cart before the horse".
We have subsequently been ordered to maintain reserves on deposit with
the Federal Reserve Bank of Dallas, beginning August 28, 1980. We have no
alternative but to maintain these reserves, regardless of the effect on our
bank, unless we can obtain an exemption. Therefore, we are writing you again
to make our position very clear and to call on you for assistance.
We sincerely feel that the fears and concerns expressed by several members of the House and Senate, when this legislation was pending have come to
full fruition. We refer you to the Congressional Record, of the House dated
March 27, 1980, when Mr. Hammerschmidt said:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
"H-2289 Mr. Speaker, I am still somewhat troubled over a particular
section of this legislation which would adversely impact on some
banks in the congressional district that I represent. * * * * My
primary objection is that the numerous banks across the Nation who
have withdrawn from the Federal Reserve System will be penalized by
this provision for action they have taken over 6 months ago. It
would certainly seem more logical and equitable to modify the
July 1, 1979, effective date to the date of the enactment of this
legislation and to have the longer, 8-year phase in period for nonmembers applicable to these banks which have withdrawn to date. * *
I would hopthis legislation would provide the Board of Governors
some leeway in accomplishing the desired purpose of H.R. 4986 without forcing a "fire sale' and endangering these institutions. Is
that the understanding of the gentleman of Board's discretionary
* * * *"
* *
•
Honorable Russell B.
4111,
-3
September 16, 1980
After the foregoing concerns were expressed, Mr. Stanton the
floor
manager in the House for the bill states:
"It certainly was the intention of the conferees and the frame
rs
of this legislation to allow just as the gefilleman has described,
the Federal Reserve Board to have the discretionary powers to
reco9nize that there are some hardships. in individual cases so
that it could solve theseon an individual basis. * * * * It
has
been brought to my attention, as the gentleman says by the gentl
eman from Michigan and the gentleman from Washington that there
are
certain individual banks in the country which were caught in a bind
with regard to the grandfather date for withdrawing from the Feder
al
Reserve System. I am very pleased to 22-int up the congressional
intent that indeed such flexibility will be given to the Federal
Reserve Board in these particular cases. * * * *"
As you will recall, on 5-3174, similar assurance was
given by Senator
Proxmire when Senator Bayh questioned him, relative to
the provision of
the act, and pointed out that there would be a "small
number of financial
institutions which would be unduly penalized, if restrictiv
e interpretations
were applied to this language". Senator Proxmire
replied:
"The Congress and the conferees did take into account
the chance
that there might be certain circumstances where an immed
iate
change in the requirement would cause si nificant losse
s. In
such cases, the conferees provided that the Federal Reser
ve Board
should take into account such other matters as it deems necessary
to ameliorate the adverse effect of this change in reser
ve
requirements.'
In view of the repeated assurances, given to the Congr
ess, it certainly would appear to us that it would be fair and equit
able that the Federal
Reserve System take cognizance of our unique position,
and of the unfair
and unprecedented position which the legislation has
forced upon us.
We feel that this one paragraph provision in the law is
very discriminatory
and creates an EX POST FACTOsituation whereby we are sever
ely penalized for
our action taken prior to the passage of the law.
We had completed our charter
conversion and our Fed withdrawal on February 1, 1980,
two (2) months prior to
passage, The effect of this provision on our bank
will be devastating insofar
as our earninTand capital retention are concerned.
We are at present a $36
million dollar bank, and we estimate the loss in earni
ngs to our bank, if we
do not grow at all, to be approximately $80,000.00
per year. This, in our
opinion, is most unfair to our shareholders and to the cumunity
which we serve.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.. •
Honorable Russell B. lIkg
4-
September 16, 1980
One of the most frustrating aspects of our situation is that we have no
practical method to combat this situation efficiently or effectively. If we
attempted legal means in our effort, the process would undoubtedly be very
long and expensive. There is no organized body to assist us. We are the
only bank in Louisiana in this situation, and one of only three or four banks
In the Dallas Federal Reserve District. As far as we have been able to ascertain, there are approximately only forty (40) banks in the entire United
States which are affected by this one paragraph provision of the law.
We are not asking for any special treatment. We are strongly urging
you to consider our situation and make any efforts which you can to amend
this discriminatory law and to allow us and other banks in our situation
equal protection and the ability to phase-in our reserves over the eight
year period as provided in the law. In essence, we are requesting status
of a state, non-member bank, which we were on February 1, 1980.
We trust this information will enable you to assist us in our efforts.
However, should you require any additional, we will furnish any data at our
disposal.
Senator Long, please be assured that any efforts you make in our behalf
will be most appreciated by us and also by the other banks in our same situation.
Yours very truly,
0--//
airman
Philip F. Stafford,
WDC/PFS:mh
Enclosure
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
esident
*ARO OF GLIVERNORS
•e,
or TH f
GOt•I
•
•
•
• t•.• . pr„, . .„ •
FEDERAL REEVE SYSTEM
WASHINGTON,
es.,
-
••
•
•
s*
C. 20551
ADDR(.. arrICIAL
TO
THE
CO‘filial•ONOILINCE
OA.°
&AL PLS% • •
July 17, 1980
W.D. Cotton, Chairman
Philip F. Stafford, President
First Republic Bank
P.O. Box 877
Rayville, Louisiana
71269
Dear Messrs. Cotton & Stafford:
This is in response to your letter of June 17, 1980, request
ing that First Republic Bank (formerly First National Bank of
Rayville),
Rayville, Louisiana ("Bank") be permitted to phase-in the new reserve
requirements under the Monetary Control Act of 1980 (Title I of
the
Depository Institutions Deregulation and Monetary Control Act of 1980,
P.L. 96-221). The Act provides that a bank that was a member of
the
Federal Reserve System on July 1, 1979, and withdrew between that
time
and March 30, 1980, is required to maintain reserves to the same extent
as a member bank. Nonmember depository institutions, including banks
that withdrew from membership before July 1, 1979, are entitled to an
eight-year phase-in of reserve requirements under the Act. According
to the Board's records, Bank converted to a State charter and withdrew
from System membership on February 1, 1980. Therefore, under the Act,
it would be required to maintain reserves to the same extent as a member
bank.
In recognition of the fact than an individual bank's withdrawal from the System may have been delayed by individual circumstances,
the Board, consistent with the legislative history of the Monetary Control
Act, has issued an interpretation (12 C.F.R. 204.120) providing that
a former member bank may present evidence that it made an unambiguous,
irrevocable decision to withdraw from membership before July 1, 1979,
and thus is entitled to an eight-year phase-in of required reserves.
The interpretation provides that a former national bank whose
shareholders
voted to convert to a State charter prior to July 1, 1979, and was
not
a member bank on March 31, 1980, may present the Board with clear,
unambiguous documentation of such action.
You state in your letter that Bank commenced conversion
discussions with the Louisiana Commissioner of Financial Institutions
on May 11, 1979, and applied to convert to a State charter on September 27,
1979. According to information provided by Mr. Stafford
to Ms. Melanie Fein
of the Board's Legal Division, in a telephone conversation on June 26,
1980, the Bank's board of directors did not vote to conver until Novembe
t
r 13,
1979, and the shareholders did not vote to approve the conversion until
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
p.
•
111
.•
•
is
-2-
411
January 15, 1980. The Board regards the votes of both the directors
and shareholders as necessary elements of an irrevocable decision by
a national bank to convert to a State charter. Under the National Bank
Act (12 U.S.C. § 214a), these votes are required before a national bank
can convert to a State charter. Since these votes were not taken before
July 1, 1979, Bank is regarded as having withdrawn from Federal Reserve
membership after that date. Thus, under the provisions of the Monetary
Control Act, Bank will be required to maintain reserves to the same
extent as a member bank beginning with the seven-day reserve maintenance
period that commences August 28, 1980.
In recognition that former member hanks may experience hardship by being subjected to Federal reserve requirements by the August 28
maintenance period, the Board will consider granting limited extensions
beyond that date in extraordinary circumstances. If bank desires consideration
under this provision, please submit any relevant information to the Board
before July 31, 1980.
I have enclosed a copy of the Board's interpretation concerning the new Federal reserve requirements for your information. As Mr. Stafford
requested in a telephone conversation with Ms. Fein on July 11, also
enclosed is a list of former member banks that withdrew from System membership
after July 1, 1979.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Depu y Secre ar
•••
a •o d
of t e Board
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I3DAUD
DI
11,
I tilVF_PHDP r--)
III(
FEDERAL RESERVE SYSTEM
dr)t,,.1
•
.•
. 4,11 RI
•
• • .. • •
October 28, 1980
Thc . Honorable Lloyd Be
ntsen
United States Senator
9.1.2 Federal Building
Austin, Texas 78701
near Senator Bentsen:
Chairman Volcker has 'ask
ed me to acknowledge re
of your letter of Octobe
ceipt
r 24 requesting commen
t
on
you received from Nr. Ga
correspondence
ry Woodburn concerni
ng
th
e First National
Bank, of Bellaire, Texa
s.
By statute, the Board'
s primary supervisory
is limited to State
jurisdiction
banks which are member
s
of
the Federal Reserve
System. Although all
national banks are me
mb
er
s of the Federal
Reserve System, primar
y supervisory author
it
y
rests with the
Comptroller of the Cu
rrency. Therefore,
I
ha
ve referred your
.request to that agency
for reply.
.Sincerely,
(Signed) Donald 5. Winn
Donald J. Winn
Special Assistant to the
Board
CC:
Congressional Liaison Office
Office of the Comptroller of the Currency
CO:vcd (#V-404)
bcc:
Mrs. Mallardi
/A
LLOYD BEN TSEN
11- 'CAS
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Curre
. ncy
Inco 'ng will be referred to the Comptroller of the
CommiTTFEF MANCE
Liaison Office
by the Co
INN/MONMENT AND PUT31 IC WnPV.6;
•
JOINT ECONOMIC
?Jrnifc6 Zto fez. Zenale
WASHINGTON. 0 C
20310
October 24, 1980
4
/1 • r
I,
if
L
Chairman
Federal Reserve System
Constitution Avenue bewteen
20th and 21st Streets, N.W.
Washington, D.C. 20551
Dear Chairman:
and I
I recently received the enclosed constituent inquiry,
any
would very much appreciate your providing me with
matter.
pertinent information you might have regarding the
Your kind assistance is greatly appreciated.
cerely,
ntsen
Enclosure
PLEASE REPLY TO:
912 Federal Buildina
Austin, Texas 78701
ATTN: Mario Ortiz
S
Octobor 13, 1980
Senator Lloyd Bentsen
Russell Senate Office Building
20510
Washington, D.C.
Dear Sir:
Regional
We would appreciate your assistance in getting the
against the
Administrator of National Banks to take action
First National Bank.
property
This bank is trying to "bulldoze" over the rights of
g our deed
owners in Richmond Plaza Subdivision by violatin
rs, the bank
restrictions. Despite protests by property owne
commercial
continues to use two lots in Richmond Plaza for
purposes.
have
We the property owners do not want the deterioration we
restriction
seen in other neighborhoods as a result o1 deed
We do not want a "shade tree" auto repair shop
violations.
used car lot
with cars all over the front lawn, topless bar, or
in Richmond Plaza.
Plaza other
There is currently no commercial activity in Richmond
ing lot. The
than the bank's attempt to build a commercial park
bank's address is:
First National Bank
5315 Bellaire Blvd.
P.O. Pox 40
Bellaire, Texas 77401
Your assistance is appreciated.
Sinefely,
•
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A,?. ---_,
,
Gary Woo8burn
Richmond Plaza Civic Association
cc: file
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
•
1
Octol:er
1980
l Panks
Admillitrator of ;:ationa
tr:'(t, ;1_1ite 3800
1201
75270
Dallas, Texas
al
charter of First Nation
g
in
nk
ba
e
th
g
in
lk
vo
Pe
He: 147860,
Banl:
Dear Sir:
tional
arter for the First Na
ch
nk
ba
e
th
lk
vo
re
se
ea
s is:
Would you pl
t? The bank's addres
us
tr
ic
bl
pu
e
th
of
n
io
Bank for violat
First National Bank
5315 Bellaire Blvd.
P.O. Pox 40
1
Prllaire, T(,x,1!: 7740
follows.
r beina revolked is as
te
ar
ch
's
nk
ba
is
th
ton
The reason for
aza Subdivision in Hous
Pl
nd
mo
ch
Ri
of
rs
ne
. The
We the homeow
sidential neighborhood
re
ul
ef
ac
pe
a
in
s
me
violating
bought our ho
g our neighborhood by
in
en
at
re
th
is
nk
Ba
First National
our deed restrictions.
ty from small "pigpen"
er
op
pr
r
ou
t
ec
ot
pr
ns
tree"
Our deed restrictio
homes such as "shade
e
th
in
d
he
is
bl
ta
es
g
type businesses bein
rked all over the front
pa
es
cl
hi
ve
th
wi
s
r
auto repair (1.3r1c.:e
n we have seen in othe
io
at
or
ri
te
de
e
th
nt
wa
We do not
ated.
lawns.
strictions being viol
re
ed
de
e
th
of
lt
su
neicihborhoods as a re
across the street from
od
ho
or
hb
ig
ne
e
on
in
t
A topless bar was buil
has a used car lot in
n
io
is
iv
bd
su
nt
ce
ja
An ad
a l'aptist church.
her home.
operating out of anot
sh
wa
r
ca
a
d
an
wn
la
one front
• First National Bank
th;
,
rs
ne
ow
ty
er
op
pr
Plaza by
Despite protests by the
strictions of Pichmond
re
ed
de
e
th
e
at
ol
vi
continues to
Instead of
nk parking lot.
ha
al
ci
er
mm
co
a
as
ts
ral
usinr two lo
the 1-:,]nk has hi rd seve
n,
io
at
ol
vi
is
th
g
discontinuin
operty owners by some
pr
e
th
''
ze
do
ll
bu
''
s to
"Philadelphia" lawyer
to feel the hank's
em
se
rs
ce
fi
of
's
nk
The ba
local technicality.
ne from the law.
money makes them immu
f--; charter
or, we want the bank'
vi
ha
be
s
es
kl
ec
wr
's
nk
of any
Pun to this ba
please scud us a copy
u
yo
d
ul
Co
u.
yo
Th,ink
rcr:olked.
to this case?
correspondence relating
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Sifferely,
1_
atX
Gary Woodburn
sociation
Richmond Plaza Civic As
cc:
cc:
cc:
cc:
Congressman Bill Archer
Senator John Tower
Senator Lloyd Bentsen
file
Removal Notice
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sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Newspaper articles
Citations:
Number of Pages Removed: 3
"Letters." Suburbia Reporter.
Pedersen, Nedland. "FNB Patrons' Use of Vacant Lot May Lead to Court Battle." Suburbia
Reporter.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Octoker 2S, 198C
The honorable Howard H. Baker, Jr.
United States Senate
Washin9ton 4 D.C.
20510
Dear fenator Ltker
Chairman Volcker has asked mc to ae.nc.:71edge your letter
of OctoLer 27 requestiny our views on a letter you received from
nr. T.I. Smartt. Va. Smartt expresses concern regardin,3 the
activities of Citibank, N.A., New York, New York, in promoting
a service called Citi-Shopuer. Citi-Shoprer is a merchandising
service offered to holders of Citibankcredit cards by Comr-U-Card,
Inc., an organization unrelated to Citibank.
Citank is a national banl- and as such is under t!'.e
jurisdiction of the Comptroller of the Currency. Citillank'r
1:arcnt coryoration, Citicorw, hew York, New York, is a Lan) holdinc
company and its primary supervisory authority is the Federal Peserve
Board. Eembers of the Board's staff contacted representatives of
Citicorp rerdin,j the Citi-Shouper irogram and were advised that
.,Tomotional activities questioned ty Mr. Snartt are performed
the .
by Citibank rather than Citicorp. We have, therefore, referred
your request to the Cotroller of the Currency for nisporce.
Sincerely,
T1:::nald J. Winn
r-ccial Lzsintant to the Board
Congressional Liaicon
Office of the Comptroller
cf the Currency
CO:rjt (#V-407)
Lcc: Mrs. ',allardi%/e
1.:cc:
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Federal Reserve Bank of St. Louis
HOWARD H. BAKER, JR.
TEN N ES SEE
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Federal Reserve Bank of St. Louis
Zeitate
STC-niteb
WASHINGTON, D.C. 20310
tarrr
•
October 27, 1980
rnmmr
Mr. Paul A. Volcker
Chairman
Federal Reserve System
20th and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Mr. Chairman:
I have enclosed correspondence from Mr. T. R. Smartt, which
I believe is self-explanatory.
I am grateful for your review of this
matter, and for any information you might provide that will assist me
in responding to this inquiry.
Please respond to the attention of
my staff assistant, Ms. Lee Hunt.
Sincer
ward H. Baker,
HHBJr:rdt
Enclosure
r.
14
•
•
Sig.1Road .
Chattanooga, Tenn 37405
•
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Federal Reserve Bank of St. Louis
Tolephone: (615) 266 - 3157
Or,^
2:52
801•
September P, 19R0
4
Senator Howard Baker
Senate Office Building
Washington, DC
Dear Senator Baker:
It has recently been announced by Citibank, one of the nation's largest
banks, that they are starting a new bankin service called "Citishopper".
Tt is a telephone buying service, offered in conjunction with Comp-U-Card,
Inc., of Stamfo/T1, Conneciicut; wIlich offers Citibank holders of their
VISA and MasterCard, this buying service.
The cost is based on $18.00 per year membership and it entitles the
member the rigbt to purchase most small and major appliances among those
items listed, at NO% off the manufacturers' retail price.
This banking service offered to the customers of Citibank for marketing
the Visa and MasterCard service is certainly a non-related banking
service and must violate the charter of the Citibank. At best, this
service does:et up an unfair competitive practice for the distributors
and retail dealers of these products.
Customers of these buying services are at a disadvantage insofar as
delivered, damaged merchandise is concerned and service to these products
when it is required.
I would hope that this type of unquestionable banking service would cause
you some concern and that we can look forward to your support in ending
these practices.
Fl
HOWARD H. BAKER, JR.
TENNESSEE
-31Crti1eb Ziales -.Senate
WASHINGTON. D.C.
20510
October 27, 1980
Mr. T. R. Smartt
Smartt Cabinets
801 Signal Mountain Road
Chattanooga, Tennessee 37405
Dear Mr. Smartt:
MOomai.
4141-1,0c/1.:
Thank you for your letter of September 2, 1980. I certainly
appreciate hearing from you and hope you will forgive my extremely
long delay in replying.
r“
I understand your concerns regarding the growing number of "services"
available through financial institutions which appear to fall outside
the realm of acceptable or traditional "banking services". I am
interested in receiving the reaction of the Federal Reserve Board
to services such as the Citishopper plan you referenced, and I have
requested the position of the Board for this purpose. I believe their
assessment will be most informative for us both, and I will be pleased
to advise you as soon as I receive a response.
I do appreciate your bringing this matter to my attention and, again,
I apologize for the delay in responding. I appreciate your interest
and will be back in touch in the near future.
?
Sincerely,
OriOnal sip,ned by
Howard Baker
Howard H. Baker, Jr.
HHBJr:rdt
bcc:
Chairman Paul A. Volcker
'411111Pum."—
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Federal Reserve Bank of St. Louis
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BOARD OF GOVERNORS
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• •
FEDERAL RESERVE SYSTEM
•o
•
WASHINGTON, 0. C. 20 551
•••••
.RAL RE
•
• •..• •
PAUL A
VOLCKER
r;iniPMAN
October 31, 1980
The Honorable S. William Green
House of Representatives
Washington, D. C. 20515
Dear Mr. Green:
Thank you for your letter of October 20 requesti
ng my
comments on two articles sent to you by one of your
constituents.
One article suggests that inflation is caused by
increases in the
Federal Reserve's discount rate. The other article
evinces concern over the instability in interest rates--and in
the monetary
aggregates--that is perceived to have arisen from
the operating
policies adopted in October 1979.
High interest rates commonly are associated with
high
inflation rates, but it is high inflation rate
s that inevitably
cause high interest rates rather than the other
way around. In
a period of rapid inflation, lenders insist upon
interest rates
high enough to compensate them for the anticipated
decline in
the purchasing power of the dollars they are lending.
Borrowers
are willing to pay these high rates because they
too anticipate
that both interest and principal will be repaid
in cheaper dollars
Higher interest rates tend to foster savings at
the expense of
consumption and to encourage the deferral of less
promising investment projects--developments that reduce overall
demands and
reduce inflationary pressures. Since the discount
rate is kept
in reasonable alignment with the level of market
interest rates,
it also will tend to be high in times of rapid infl
ation.
We believe that it is premature to conclude that
the
operating policies adopted last October have been
a failure, as
suggested by the article from the Guardian. This
year's environment has not been conducive to stable interest rate
s nor to steady
growth in the monetary aggregates. Monthly and
quarterly movements in the growth of the monetary aggregates this
year were
substantially influenced by the sharpest economic
contraction
on record earlier in the year, followed by a very
rapid recovery
to positive economic growth. Moreover, policy was
carried out
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Federal Reserve Bank of St. Louis
•
•
The Honorable S. William Green
Page Two
against a background of a series of changes in
the federal budgetary
picture, the imposition and subsequent removal
of credit controls,
the Soviet invasion of Afghanistan, and the outbreak
of war between
Iran and Iraq, all of which have left thei
r mark on financial markets.
In light of all these difficulties, the rele
vant question
with respect to this past year's policies
is whether or not there
were better ones available. Needless to say,
the benefit of hindsight might suggest some alterations in poli
cy; nevertheless, it
should be noted that despite this year's prob
lems, the monetary
aggregates stand in reasonable alignment with
the ranges set for
this year. In addition, the Federal Reserve'
s visible commitment
to monetary restraint seems to have helped cont
ain inflationary
expectations.
I hope that these comments have been helpful.
let me know if I can be of further assi
stance.
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Federal Reserve Bank of St. Louis
Sincerely,
,(A_ei/ecu/6
40-rapid.
Please
•
jS. WILLI AM GREEN
1 titI4 DISTRt T. NI" W YIORK
A1 .26iction assigned Mr. Kichline
COIMMITTETS
WASHINGTON OPFICE•
1 18 LONGWORTTE HOUSE OFFICE OUILDING
WASHINGTON ID C. 20515
(202) 225-2436
FlANKINri. FINANC.0 AND
URBAN AFFAIRS
Congrts.5 of the linittb *tatc5
suscommirrrrs
tinusiNc. R•40 cckgrotiNITY DE VELOPMENT
GT T.
N ONom IC • YAWL IZATION
AL OVE R!•,-.14 I AND RE aGOT IA rioN
ou5e of leprt5entatib0
ZZIasfiington, D.C. 20313
SELECT COMMIT 1(EON AGING
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Federal Reserve Bank of St. Louis
October 20, 1980
(212) 826-4466
229 FIRST AVENUE (14TH STREET)
NEW Yor4K. NEW YORK 10003
(al 2) 826-4466
The Honorable Paul Volcker, Chairman
Board of Governors of the Federal Reserve
System
Federal Reserve Building
Washington, D.C. 20551
Dear Chairman Volcker:
Enclosed are too articles from a constituent of mine.
I would appreciate your comments on the major points on
monetary policy.
Best wishes.
Si
NEW VOIRK orricrs•
1628 SrcoNo AVENUE'(8 ITTI STREET)
NEW YORK. Nrw YORK 10028
erel ,
•
(
Bill Green
Member of Congress
BG:nwh
Enclosures
THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS
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Document Type: Newspaper articles
Citations:
Number of Pages Removed: 2
Lewis, Ardron D. "Economy: 'Chains of Causation of Our Distress.'" New York Times, June
27, 1978.
"Wall Street Echoes UK Disenchantment With Monetarism." The Guardian, September 28,
1980.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
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ROARD OF
GOVEPW7PS
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WASHINGTON, D. C. 20551
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• • •.. • • •
PAUL A. VOLCKER
CHAIRMAN
October 31, 1980
The Honorable Bruce F. Vento
House of Representatives
Washington, D. C. 20515
Dear Mr. Vento:
Thank you for your recent letter regarding the Federal
Reserve's interest rate policies.
I can assure you that it is not the objective of the
Board
or of the Federal Open Market Committee to bring
about high or
widely fluctuating interest rates. The insta
bility of money
and interest rates this year has certainly been
a matter of concern
to me, as it has been to you. Inflation is too
high, productivity
remains low, and we have too many unemployed.
But the only relevant
question is whether these conditions would have been
better or
worse with a different monetary policy, and I feel
reasonably
satisfied about the technical changes introduced last
October.
I'm sure you can appreciate that the circumstances in
which
the Federal Reserve has operated in the past year have
been extraordinary. We've seen tremendous variations in the rate of
increase
in major price indexes and in the intensity of inflatio
nary expectations. The federal budgetary picture has gone throu
gh a series
of significant changes. We've experienced the shar
pest economic
downturn of the postwar period, but it also appears to
have been
extraordinarily short and unemployment has remained well below
levels projected some months ago. Credit controls were
instituted
and subsequently removed. The Soviet invas
ion of Afghanistan and
the Iran-Iraq war have given rise to serious conc
erns that have
left their mark on financial markets. This has
not been the sort
of environment in which one could reasonably expe
ct stability in
interest rates and steady monetary expansion.
This is not to say that, as always with the benefit of hindsight, I might not have chosen to modify somewhat the course
of
policy this year. But even so, I think that our performa
nce has
had a significant measure of success.
In assessing our record with respect to monetary control,
I would argue that it is not the month-to-month or quar
ter-toquarter movements in the money supply that matter, but
rather the
longer trends. In that regard, it may be noted that,
despite the
difficult circumstances in which we have operated, the
monetary
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
The Honorable Bruce F. Vento
Page Two
aggregates at this point stand in reasonable alignment -although a bit higher than we would like -- with the ranges
we set for the year. Moreover, I firmly believe that our
visible commitment to a policy of monetary restraint has
helped to contain inflationary expectations in the face of
some extremely troubling developments that would have otherwise led to substantially higher inflation.
Our determination to avoid excessive monetary expansion
has, to be sure, played a role in the recent increase in
interest rates. However, it must be said that such factors as
the talk of a deficit-expanding tax cut, the impetus to inflation
from recent agricultural adversities, and the fears of economic
dislocation in connection with the turmoil in the Middle East-as well as the surprising strength of the third quarter economic
rebound and the lack of progress in moderating underlying wage/
price trends--have contributed importantly to the very negative
psychology prevailing in the debt markets. But while the rise
in interest rates cannot be regarded as a favorable development
at this early stage of an economic recovery, I don't think that
a shift in System policy toward greater monetary accommodation
would have proven wise. Quite likely the result would have been
a still more pronounced aggravation of inflationary expectations,
with negative implications for interest rates and future economic
stability. In a meaningful sense, we have been following the
steadier course by permitting interest rates to rise as monetary
expansion accelerated in the past few months.
The rise in rates does tend to focus attention on those
segments of the economy that may be relatively hard hit by a
tightening of credit conditions. However, I must say that our
experience with the credit control program earlier this year
has made me more certain than ever that government-directed
credit allocation schemes should not be a standard feature of
our financial landscape. The Federal Reserve, as you know, has
no significant allocative powers at present, and it probably is
best that it remain so. Credit controls are extremely difficult
to manage in a way that is equitable and that avoids undesirable
distortions of funds flows. Jawboning and other informal techniques
must for the same reasons be used with care--and are unlikely to
be effective for extended periods in the face of contrary market
pressures. By and large, our highly competitive financial system
can be expected to bring about a more efficient allocation of
credit among the many potential borrowers in our economy than
any governmental agency.
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Federal Reserve Bank of St. Louis
0
•
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Federal Reserve Bank of St. Louis
The Honorable Bruce F. Vento
Page Three
1 think that the only real hope for attaining on a
sustained basis lower, more stable nominal interest rates
and an environment conducive to productivity-enhancing
capital formation lies in a return to greater price stability,
which in turn is dependent in part on the persistent application
of reasonable monetary and fiscal restraint. We recognize that
what the Federal Reserve does has significant consequences for
the economic fortunes of our nation, and within that basic
framework, the Federal Reserve will continue to subject its
policies and procedures to the most intense scrutiny to ensure
that its actions are as effective as possible in serving the
public interest.
Sincerely,
/
2
C(1)4'
6A4
Paul A. Volcker
Action assigned Mr. Richline
-
E3RUCE F. VENTO
41DIS1RCT, MINNESOTA
•
•
HOUSE COMMITTEE ON
BANKING. FINANCE AND
URBAN AFFAIRS
230 CANNON V.ICKP3E OFFICE BUILDING
SUBCOMMITTEES-
(202) 225-6631
ECONOMIC STABILIZATION
Congrr5.5 of the V.Iiiitcb
tate5
DiSiRicTOFFICE,
31)oti5e of iktpressentatitn
ROOM 150
Mtmas PARK PLACE
405 SIBLEN, STREET
SAINT PAUL MINNI OTA
Ulasijington, D.C. 20315
55101
OW 225-7724
October 7, 1980
CONSUMER AFFAIRS
HOUSING AND
COMMUNITY DEVELOPMENT
HOUSE COMMITTEE ON
INTERIOR AND INSULAR AFFAIRS
SUBCOMMITTEES
ENERGY AND THE ENVIRONMENT
NATIONAL PARKS AND
INSULAR AFFAIRS
Mr. Paul A. Volcker, Chairman
Federal Reserve Board
Federal Reserve Building
Constitution Avenue
Washington, D. C. 20551
Re:
High Interest Rates
Dear Chairman Volcker:
I am writing to express my strong opposition to the Fed's recent decisior6
to raise the discount rate in order to control recent growth in the money
supply. This action has effectively forced the nation's banks to raise
their prime interest rates to the unreasonably high interest levels of 13.5%
and 14% and, in my opinion, will likely precipitate negative economic
consequences.
One year ago today, the Fed unveiled its new policy of targetting growth in
the monetary aggregates while allowing interest rates to fluctuate with the
market. The Fed adopted this policy in the hopes that it would prove more
effective than past interest rate pegging policies at promoting moderate and
steady monetary growth. Unfortunately, this new Fed policy has not proven
successful. In fact, in the past year, this country has experienced highly
erratic monetary growth together with the widest swings in interest rates
that we have ever known. As a result of these broad interest rate swings,
long term capital markets have been brought to the brink of disaster through
a lack of investor confidence. Unless the Fed begins to re-examine the miserable performance of the economy under its heavy-handed ways and becomes more
sensitive to the effects of fluctuating interest rates, I think the current
economic pattern of long term investment instability, short term capital outflows
and an insecure dollar will continue to persist and eventually pose a serious
threat to our entire savings and investment structure.
In the House Banking Committee's August 19th rebuttal to your bi-annual monetary
policy report, we strongly urged the Federal Reserve to pursue a policy of
measured restraint so as to control inflation and excessive monetary growth
without precipitating a downturn. This country needs a stable and consistent
monetary policy that will allocate scarce credit to productive concerns and
give investors the confidence to make important long term investments. Merely
tightening the reins across the board flies in the face of the depressed industries, small businesses and thousands of unemployed workers who are finally
feeling some economic hope after two of the worst quarters in recent years.
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Federal Reserve Bank of St. Louis
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•
Mr. Paul A. Volcker
October 7, 1980
Page Two
During the past year, the Fed has shown itself quick to clamp down when
the economy becomes heated, but unrelentingly slow at providing relief
when a stimulus is needed. The recovery which the economy now appears
to be in is an encouraging sign that should not be stamped out through
heavy handed restraint. In this case, the Fed should exercise judicious
encouragement of the recovery by implementing an extensive microeconomic
program to curb banks from making speculative loans for purely financial
activities such as stock buy backs, corporate takeovers and foreign exchange
purchases and instead pressure banks to channel credit into areas in need
of production-enhancing capital such as housing, agriculture and small business. The Fed has the tools to implement such a program and it certainly
should use them. If the Fed continues on its current course of extreme
restraint, I fear that it will only destroy the progress our economy has
made in recent months and likely lead to a recessionary relapse accompanied
by higher federal deficits, increased instability in our savings and investment structure, and further unemployment and domestic social upheaval.
Again, Mr. Chairman, I strongly object to the Fed's continued use of high
interest rate policies and strongly urge you to make a careful re-examination
of the effects your actions have had.
Thank you very much.
Warm regards.
Sit 621ely,—
. Vento
Member of Congress
BFV:mc
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