The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 10
Preferred Citation: Congressional Correspondence, November 1980-January 1981; 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/c435 and
https://fraser.stlouisfed.org/archival/5297
The digitization ofthis collection was made possible by the Federal Reserve Bank of
St. Louis.
From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ
These documents can only be used for educational and research purposes ("fair use") as per United
States copyright law. By accessing this file, all users agree that their use falls within fair use as
defined by the copyright law of the United States. They further agree to request permission of the
Princeton University Library (and pay any fees, if applicable) if they plan to publish, broadcast, or
otherwise disseminate this material. This includes all forms of electronic distribution.
Copyright
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Under certain conditions specified in
the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of
these specified conditions is that the photocopy or other reproduction is not to be "used for any
purpose other than private study, scholarship or research." If a user makes a request for, or later
uses, a photocopy or other reproduction for purposes not permitted as fair use under the copyright
law of the United States, that user may be liable for copyright infringement.
Policy on Digitized Collections
Digitized collections are made accessible for research purposes. Princeton University has indicated
what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids.
However, due to the nature of archival collections, it is not always possible to identify this
information. Princeton University is eager to hear from any rights owners, so that it may provide
accurate information. When a rights issue needs to be addressed, upon request Princeton University
will remove the material from public view while it reviews the claim.
Inquiries about this material can be directed to:
Seeley G. Mudd Manuscript Library
65 Olden Street
Princeton, NJ 08540
609-258-6345
609-258-3385 (fax)
mudd@princeton.edu
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 205E51
November 6, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Walter D. Huddlesto
n
United States Senate
Washington, D.C.
20510
Dear Senator Huddleston:
Thank you for your letter of Octobe
r 23, requesting comment
on correspondence you received fro
m Mr. Earl Templeman, President
of the Cecilian Bank of Cecilia,
Kentucky.
Mr. Templeman expresses concern
about the degree of
accuracy required in the calcul
ation and disclosure of the annual
percentage rate (the "APR") under
Regulation Z. He appears to
believe that, in order to disclo
se an APR that is within 1/8 of
one percentage point of the ann
ual percentage rate--as required
by Regulation Z--his bank wil
l have to purchase calculators.
He
questions the need for such an
expenditure.
The staff believes that Mr. Tem
pleman's concern may arise
from a misunderstanding of the
regulation as it applies to the
facts
described in his letter. He
states that his bank always uses
a
simple interest method to comput
e interest charges on loans. Tha
t
being the case, and assuming
that the bank imposes no other fin
ance
charges besides interest, the sim
ple interest rate and the APR would
in fact be identical. Thus, Mr.
Templeman's bank would not need
calculators to make the computati
ons, and could continue to follow
its simple interest rate formul
a. For other types of transactions
,
creditors can generally use the
Board's Annual Percentage Rate
Tables (Volume I for regular tra
nsactions, Volume II for transactions with multiple advances
and/or irregular payment streams).
In addition, the 1/8 of one per
cent tolerance to which
Mr. Templeman refers was designed
to facilitate compliance for
creditors, not to impose a strict
er rule. The annual percentage
rate expresses the cost of a cre
dit transaction and is intended
to give consumers a standard measur
e for comparing credit source
s.
Because of its value in facilitat
ing credit-shopping, which is a
primary goal of the Truth in Len
ding Act, it is generally considered to be the most important
of all the disclosures mandated
by the Act. The Board amended
the rules for determining and dis
closing the APR in January 1980
to give creditors a wider margin
of error than was previously ava
ilable, without significantly
diminishing consumer protec
tions.
Prior to January 1980, the annual
percentage rate had to
be disclosed either as an exa
ct figure or rounded to the neares
t
•
-44
The Honorable Walter D. Huddlesto
n
Page Two
1/4 of one percent. For example,
if the actual annual percen
tage
rate was 10.04 percent, the credit
or had to disclose either
that
rate or 10 percent, the nearest 1/4
of one percent. Disclosure
of any other rate did not comply wit
h the Act and regulation,
however small the discrepancy. Now
, under the regulation as
amended, the APR disclosed to the
consumer is considered accurate
if it varies, either up or down
from a precisely computed rate,
by not more than 1/8 of one per
cent. For example, where the
exact APR is determined to be 10
1/4 percent, a disclosed APR
anywhere from 10 1/8 percent to
10 3/8 percent will comply with
the regulation.
Please be assured that the Board
and its staff are aware
of and share the general concern
regarding the complexity of Truth
in Lending requirements. We are
now in the process of restudying
Regulation Z, following the adopti
on last March of the Truth in
Lending Simplification and Reform
Act. We believe the revised
regulation that is ultimately adopte
d by the Board will alleviate
some of the burdens creditors
now face in their efforts to com
ply.
I hope this response will be hel
pful to you.
be of further assistance, ple
ase let me know.
Sincerely,
StPaul A.V4,1Q.keit
cs.cotiAt (IV 40E)
boas G. Silvcr
Mrs. Mallaxdi (2)
If we can
-*
A10ALTER D. HUDDLESTON
Actieassigned Janet Hart
KENTUCKY
•
COMMITTEES:
AGRICULTURE. NUTRITION.
AND FORESTRY
APPROPRIATIONS
'ZCnifeb Zfafi.'- 55
crtate
SELECT COMMITTEE ON
INTELLIGENCE
SELECT COMMITTEE ON
SMALL BUSINESS
WASHINGTON. D.C. 20510
October 23, 1980
The Honorable Paul A. Volcker
Chairman
Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
Dear Mr. Chairman:
Enclosed please find correspondence I have
received from Mr. Earl Templeman, President of thr
Cecilian Bank in Cecilia, Kentucky.
Mr. Templeman points up what he feels to be
unnecessary regulations with regard to interest rates
on installment loans.
I would appreciate your
addressing the specific problems Mr. Templeman
brings to light and getting back to me with your
comments and response.
Thank you in advance for your attention to this
matter.
Sincerely,
all111111111111P
r
Walter D. Hidd1eston
Enclosure
.•.,-''''.
k.,..,
rr
Li....
••••••=.•••.••,....
•••
"Who •-•
6
:3 A i\j ir c
o
•
;
I _
:1 1 I ,
'1•4 ,,
I '...44
•.7'4,
lit' ,
'OA VII I F. KY.
Y.
/31 "3 750
Cli !"1. KY.
1.1 2 "4 ''?4
)10
P.
or
y-u
,‘C
of the (Jr;i/y
1 .."!111:001'y
rAljn!I
c\ur
:
)1
1
1/2 01 1%
' 0',. I),Ir
'V
:iich :11111
If up - -re II:in 1/8 of 174, 1.e arc
1):I1 tly
, •1 1/8 0)1 1 cpw(., ace
1( , -In to
the fitlro on a $10,;WO
•
ttat ovor lho fon yoar 1-• y:od, 1/8 of 1%
2.( ,0 in int ,re:,1. to !y)
1 '1 , q'!3.
I I:1v,-,
to
a
-4 a!!‘i rind Hint if
r,
,r
iiovcr a ri'e
u:;
1, ueo, Iu!:derbc6ii:ning
1:Achine.
1,
muA also co:1p1y with this regulatiDn. 13e this true,
ilKni five machines to take care of our lending
..1:11: will
ofricers, t. c.lultj!-:/; in a cost of $8,163 over the five year pc'rjod.
l 11
t
Wi Ii!' ,v,)
Our 17ank has al▪ lys used the flimple interest formula on _Ar co:iim(3rcia1 notes.
:2 months poriod, on
grant you a loan of $10,000 for a Lhr,
•?x.plple, should
the Tirst ,ity of Cc. L_Dbr, 1980, :-;ay at a rate of 12%, we w:3,11! matiply tl-,0 $10,000
by the 12% :Ind divide by 4, giving us an interest charge of $300. That would be
-what y1,1 would owe • on January 1, 1981. We neither discount nor add on interst.
the full $10,000 at the time the note is made and pay the simple interest
fail to nee how we could be taking advantace of anyone
of the note.
t11:7; . 1.hoi or how a rruplicatA formula could improve upon it.
l)y
I
!!0
r-ally aware of so:Ile of the:, idiotic reLillations
. ,!,roi if you
1 Ilion Lank:3 and if you would have any i:.torest in working
"'.crY truly •ors,
,
• z
tiove.7;ber 12
271.4
ror3.
tiliac. ProxrAre
Chairmaa
Committee on
rLiv,
oisizci
aud Uxban Ai!fairs
Unitad State* Senate
kastlington. D.C.
2051+;
Dear C4airman Proxmire.
Thank you for your recent letter invitigic, the I--otirtl to
testify on the subject of current law and policy goverLinc
acquisition of ttrift ibst1tution8 toy banks and bank hol,linc
coaTanies.
Governor Lyle L. clra.liley will be pleased to appear on
bchalf of the &oard an gcvemLer 21 at 9:3 a.m.
Sincerely,
SLEW A.Vo!cket
Le AL (øV -4C3)
:)ce
Oov. Gramlay
cossrs. Eiaenbeis ano Lleier
rs.11allardi
1
Kr.11A 4.4
•
PrPrrfroinr wI., cmiirlm•4
HARE,SON A. WIT LIAMS. JR., N.J.
(:ANS700.4 r:Al IF.
ADLAI
r ••.TIVI,
OVIP4
ILL.
ROPENT MORFOIN4. N.C.
• .+At_r. vv. 4411$11 E. J$4.,
MICH.
✓ 4. S. YANIIANES. MD.
i•LCI W. STEW•RT, ALA.
nc,
Don Winn will do memo to Chairman Volcker
JAKE 41•444. tryAll
JOHN TOWER, Tr Y.,
PA.
JOHN NT Ni.I
,
.. C04.0.
WILLIAM L. ARI$.44r44044
NANCY LANDON K•S51- 11 ,4UM, KANS.
RICHARD G. LUGAR, IND.
'ZIG/ ifeb
fatez Zenale
CEORGE .1. MITCHELL, MAINE
KENNETH A. MC LEAN. STAr4 DIRECTOR
M. DANNY WALL, M1NOEHEY STAFF otnrc ron
MARY FRANCES OE LA PAVA, CHIEF CLERK
COMMITTEE ON BANKING. HOUSING. AND
URBAN AFFAIRS
WASHINGTON. D.C.
20510
October 22, 1980
The Honorable Paul Volcker
Chairman
Federal Reserve System
Washington, D. C.
rs,)
Dear Dear Mr. Chairman:
This letter is to confirm our request for your
testimony before this Committee on the matter of cross
industry takeovers between commercial banks and thrift
institutions.
The Committee would particularly appreciate a
discussion of current law (both statutory, regulatory
of
and decisional) and policy governing the acquisition
thrifts by banks and bank holding companies.
The hearing will be held in Room 5302 on November
21, 1980 at 9:30 a.m. I am enclosing a copy of the
Committee's Guidelines for Witnesses for your information. If you should have any questions, please feel
l,
free to contact Mr. Lindy Marinaccio, Gcneral Counse
at 224-7391.
Sincerely,- —
2410Z-P
1
a 111
Chairman
WP:lmg
Enclosure
1
mire
6
•
WILLIAM Prioxmint, WIS., CHAIRMA
•
•
Ay,/ A. WILLIAMS, JR., H.J.
v CRANSTON. GAUP%
E. STEVENSON, ILL.
,,osERT 1.0AGAN, NC.
JOHN Towrm,
JOHN HEINZ, PA.
coNALD •
1. Ricr.Lr. JR., MICH.
PAUL S. SARRANES. MD.
DONALD W. STEWART. ALA.
PAUL E. TSOHGAS, MASS.
IA
JAKE GARP... U
WILLIAM L. ARMSTRONG. COLO.
NANCY LANDON KASSIFKAUM. KANS.
PICJHARD G. LUGAR, IND.
'Zinifeb Ziatez -Senate
COMM ITTEE ON BANKING. HOUSING. AND
URBAN AFFAIRS
WINNE-OH A. MC LEAN, STAKW DIRECTOR
DANNY WALL, MINORITY STARK DIRECTOR
MARY rRANcts DE LA PAVA, CHIEF CLARK
WASHINGTON, D.C. 20510
GUIDELINES FOR WITNESSES
1.
These guidelines apply to all hearings of the Senate
Committee on Banking, Housing and Urban Affairs, unless
otherwise indicated.
2.
All hearings will begin at 10 a.m. in Room 5302, Dirksen
Senate Office Building, unless otherwise indicated.
3.
Committee rules require that all witnesses submit at
least 100 copies of their written statements 48 hours
prior to their appearance. Sundays and holidays are
not to he included in determining this 48-hour period.
Statements should he delivered to Room 5300, Dirkson
Senate Office Building, Washington, D.C. 20510. Strict
adherence to this rule is essential in order that Committee members may review the statements before the
hearing, thus enabling the participants to more thoroughly discuss the issues involved. Statements will
not he released to the news media prior to the day
of your testimony.
Oral presentations must be limited to a brief summary
not to exceed 10 minutes. Your complete statement will
he printed in the hearing record.
S.
Please complete the attached card and bring it to
Room 5300 prior to the hearing. You will be given
copies of statements of those testifying with you at
thlt
time.
Please supply the address to which you prefer the reporter's transcript
delivered for your correction.
Kindly turn this card in at loom 5300 Dirl“en Mice Building prior to
giSing your te,4imony.
(Name)
(Organisation)
(Business address)
(City and State)
\ ATE
BAN I:I NG, 110t.'SINf; AND IIII SN
(Phone)
(ZIP Code)
AFFAIRS COM NIITTEF.
36-45-h
GPO
ion is appreciated.
,
U
.wovemiour 12, lik
1or‘ra.a1a lienry s. Aeuss
Chairman
Cc.)..i.Liittee on Bsekinci, Finance
4ina Urban Affairs
6444tAkse of Representative*
, c3sikitv;to1s, Z.C.
204415
LitrarY.
Monk you or your letter of .71cteDer 2
orwardiu%,
lctt4r re(:eivvd cy Congressman Cradison conceminc the Luren
liovt2.rrarlental regulation, ul his letter to colwressvan Oradi,
.varvin I. EMOAA, PresiZent of t!e Fr:laudation :avings and 4404
cot14-any, cincicnati, Ohio. exprossas %is conctArn over the increai,
ra,041atory i/ur,14;..1.6 ilsposed on zlis Institution by tzc,:.ulatier
LoNard policy ano practice to review regulations
oftrefully to onsLtre that .t.4y are written as gifTly as passible
in orcor to alloviate mlulatory burdan. In adortinq Pe(.7u1at1on D,
tLe J,clard took several actions it furtherance of these oLjectivas.
Irstitutions with deposits of less than 42
of c'cer0er 51.
1974, will not *..K! rekqiree to report or maintain rinerves until
May19s1. Al that tie the Uoard will consider wl-itsther to postpone
furtt4c.r tlAt ivzpoeitiotA oi rusorw retr.airents on ttiese smaller
institutions. Thisa action relieves the reculatory burden for
MQX4 than 17,t`..0%; dopository institution*, 41X .vf the nation's
total. The Uovord also decioeci to allow institutiqns witi. deposit*
offl5 i1Lioii or Jess t4,; fila reports quarterly rather than weekly
and maittuin reserves dinq each quarter kAssee on thous reports.
It 16
With reviaard to Foundation Savings and Loan Company, it
appear* that this institution may be e1iit4e for t14: sizplified
quarterly krocodures since its aspoalt Ltase as of Lecember 31.
was spprostiestely $14.2 tAllion. rir. Nodes should contact
the icAtwal IteeerVe Sank of Clc.vvland for a deternisatioc of his
institution's status.
can assure you ttat trio toarj continuos to 'via concerned
a4out the iact of Federal reserve roquirewsnts, particularly on
Apall tmetitutions, and will continuo to monitor thus regulation
carefully to oetiaroino if f4rthur stepa can t)e taken to si71-lify
,:toci:dures and miniulise feaerworY.
rclePO.
DLRAMT3-DX4,pit (Olf-4tkiO)
bcc. Dan Fivoiles
Gil ficl.warti
Mallari (2)/
Leval Records (2)
eincerely,
sipai
AlI
.1. Erl.r,s. WIS., CHAIRMAN
%S L. ASHLEY. OHIO
AM S. MOORHEAD, PA.
FTE*NAPt:-. J. ST GERMAIN, R.I.
HE NRY 0. GONETALEZ, TEX.
JeqEPIE G. MINISH, NJ.
FRANK ANNUNZIO, ILL.
JAMES M. HANLEY, N.Y.
PARREN J. MITCHELL, MD.
WALTER E. FAUNTROY. D.C.
STEPHEN L. NEAL, N.C.
JERRY M. PATTERSON, CALIF.
JAMES 1 nt ApormArn, MICH.
cARRot I ti, I Ilk ; ,
.. KY.
JOHN J. LAUAt CF, N.Y.
GLADYS NOON SI'Ll. LMAN. MD.
LFS AuCOIN. OREG.
DAVID W. EVANS, IND.
NORMAN E. D'AMOURS. N.H.
STANLEY N. LUNDINE. N.Y.
JOHN .1. CAVANAUGH, NEBR.
MARY ROSE °AKAR, OHIO
JIM MATTOX, TEX.
BRUCE F. VENTO, MINN.
DOUG BARNARD, JR., GA.
YVES WATKINS, OKLA.
ROBERT GARCIA, N.Y.
MIKE LOWRY. WASH.
tion assigned Mr. Petersen
•
J. WILLIAM STANTON, OHIO
CHALMERS P. WYLIE, OHIO
STEWART B. McKINNEY, CONN.
GEORGE HANSEN. IDAHO
HENRY J. HYDE, ILL.
RICHARD KELLY. FLA.
JIM LEACH, IOWA
THOMAS B. EVANS. JR., DEL.
S. WILLIAM GREEN, N.Y.
RON PAUL_ TEX.
ED BETHUNE_ ARK.
NORMAN D. SHUMWAY, CALIF.
CARROLL A. CAMPBELL, JR., S.C.
DON RITTEii. FA.
JON HINC+ON, MISS.
JOHN EOWARO PORTER, ILL
U.S. HOUSE OF IT EPRESENTATIVES
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
NINETY-SIXTH CONGRESS
2129 RAYBURN HOUSE
OFFICE BUILDING
WASHINGTON, D.C. 20515
US-42.0
October 22, 1930
The Honorable Paul A. Volcker
Chairman
Board of Governors
Federal Reserve System
Washington, D. C.
Dear Mr. Chairman:
Congressman Gradison has forwarded to me a copy of a letter from President
Emden of the Foundation Savings and Loan Company of Cincinnati, Ohio, pointing
out quite specific ways in which he feels Federal regulations stemming from the
Depository Institutions Deregulation and Monetary Control Act are excessive.
As you know, the Depository Institutions Deregulation and Monetary Control
Act of 1980, Title VIII requires that regulations be written as simply as possible and paperwork minimal. The point Mr. Emden raises suggests that it would be
useful to review these regulations with these requirements in mind.
Sincerely,
Henry S.
Chairman
Enclosure
euss
V
THE
LdLo:PFITEnithi-TIE
SAVINGS AND LOAN COMPANY
•
OctobeA 3, 1980
ML.
L Gtadison
U.S. Rep,tesentative
Hcuse 066ice Buitding
Washingtpn, V. C. 20515
Deaii
We Aeceived youA tetteA dated Septembek 4, 1980, conceAning
batancing the budget and 6edeAat goveAnment spending, and we
agkee with you/E. position.
We au a smatt savings and toan doing what we think is a gAeat
pubtic seAvice in pumoting thAi6t and 6inancing homes. We have CIA
unbetievabte buAden o6 goveAnmentat AeguLation and we aAR. devoting at
Least 2590 o6 woAhing tire /Leading and comptying with them. On the 6iAst
o6 this month, we au subject to to additionat Aegutatoky bukdens; one,
an expanded moAtgage Loan Aegistut AequiAing us to spend a guat amount
o6 additionat time in pAocessing a Loan, and two, Regutation "1)", undek
the Depositoky Institutions Deugutation and MonetaAy ContAat Act o6
1980 (H. R. 4986). We anz now AequiAed to ptace AeseAves with the Fedekat.
ReseAve Bank System (non-inteAest beaAing) to add to the cost o6 doing
business to bAing about a natutat Acsutt o6 higheA inteAest chaAges to
the home buyeAs o6 this countAy. In addition, we now must spend, Lite/tatty
how's each week /Leading and undeAstanding FedeAat ReseAve Bank AeguLations,
and most o6 which do not peAtain to smatt thAi6t insti.tiLtions. This a in
addition to the hand/tads o6 pages o6 Fedetat Home Loan Bank BoaAd Aegutations that we Aeceive each month, which we atso must head and undeAstand,
and moat 06 which do not peAtain to smatt savings and loans. Evemone in
Washington tatks about the oveA-Aegutation, but veity 6ow peopte ake doing
anything about it as evidenced by the 6act that each yeak bAings suf?sequent
additionat AegutatoAy buAdens upon us. We appkeciate youA e66oAts kn Azducing this buAden.
SinceActy yoms,
)
"4 \CLI-Urt.ke\ •
NaAvin I. Emden
P/losident
P (.\
T
NIE:sh
Q .r
1 ..
u
f2/4k=
719 VINE STREET
CINCINNATI, OHIO 45202
TELEPHONE (513) 721-0120
INSURED
•
BOARD Cc' GOVERNORS
ciF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 205S1
PAUL A. VOLCKER
CHAIRMAN
November 7, 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 October 15 let
ter which asks three
questions regarding the Board's
response to Section 603 of the
Housing and Community Development
Act of 1980. That section expresses the sense of Congress tha
t lending by Federally insured
lenders for conversions of rental
housing to condominiums and
cooperative housing should be dis
couraged in situations in which
doing so will adversely affect the
housing opportunities of lowand moderate-income, elderly, and
handicapped tenants.
The Board fully understands the
general concern Congress
has expressed with the plight of
individuals who find themselves
displaced as a result of the con
version of rental housing, and hav
e
difficulty in relocating to equiva
lent or adequate quarters. We
plan to inform each of the State mem
ber banks under our direct
supervisory authority of this genera
l expression of public policy
as well as the sense of the releva
nt legislative history. We also
will coordinate with other agencies
through the Federal Examination
Council to insure full and consis
tent coverage of Federally insure
d
lenders
The staffs of the Board and of the
Federal Reserve Banks
also participate in many meetings
and seminars with community groups
and others interested in local
investment, and our participants
in
these sessions will specifically
note the sense of Congress embodied
in Section 603 in connection wit
h these meetings. Our examiners
also frequently contact civic,
religious, and neighborhood organizations in seeking to ascertain
the credit needs of the community
in the course of the examination
process. Our examiners will pas
s
along this information to commun
ity groups in appropriate cases.
In relevant instances, State mem
ber banks participating in bank
financing of condominium conversio
ns will be counseled with respec
t
The Honorable Henry S. Reuss
Page Two
to the expression of public policy contained in Section 603, Similarly, we plan to indicate the public policy considerations expressed
by Congress in our contacts with groups in communities affected by
conversions of this kind.
Your final question regards what action we intend to
take to assure that Section 603 is in fact being implemented by
State member banks. The sense of Congress set forth in Section 603
as an expression of public policy contains no mention of enforcement
nor any specific delegation of enforcement authority. It is our
understanding that the absence of enforcement provisions was a conscious decision by Congress that it did not intend that specific
enforcement actions with the force of regulation or formal administrative procedures be undertaken. Indeed, as we understand the
legislative history as reflected in the discussion on the House
floor, the Congress did not contemplate compulsory enforcement
and, in particular, did not intend that the Community Reinvestment
Act should be a vehicle for assuring the implementation of
Section 603.
I would also note that, while the general nature of the
Congressional concern is evident, its relevance in particular instances will likely depend on very specific facts; e.g., the
number of disadvantaged affected, the nature of procedures and
other safeguards of their interests, and the like. It would be
extremely difficult, even impossible, without much more precise
guidance from Congress to draw up specific guidelines for judging
what is acceptable and what is not in an area that importantly
affects the rights of landlords and the rights of tenants.
We believe that the steps outlined above that the
Board proposes to undertake are responsive to the legislative
intent and to your concerns.
I trust you find this information useful.
have any further questions, please contact me.
Sincerely,
k:g(/67,ZZ6‘
?
1:131*!CAL LCTIttiii. SIAIT T
CIAICANN
.11..L'AV.ved (IV-393)
4,
%lama Lart
3011) Fishes
ru. Nallsrdi (2) &/#
sT
n
If you
„dr
NI:Y S. REUSS, WIS.. CHAIRMAN
400..4AS L. ASHLEY. OHIO
WILLIAM S. MOORHEAD. PA.
ETRNAND J. ST GERMAIN. R.I.
HENRY 9. GONZALFZ. TEX.
J0'..*.t PH G. MINISI-4, N.J.
FRANK A.:NUNZIO. ILL.
JA•.“ •-• k. HANLEY, N.Y.
rARPE•: J. MITCHELL. MD.
WAITER E. FAUNTROY. D.C.
ST frvir .1 l_. NE At . N.C.
Actie as signed
Jack Ryan and info co
o
r
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
Jf 1:•17Y ..
PATTEr.nON. CALIF.
JAM( If 1. III AN/ .' A r,rt MICH.
CARROLL HUBOArli. At , KY.
JOHN J. LArAt.cr, N.Y.
GLADYS NOON SPELLMAN. h4O.
LES AvCOIN, OREG.
DAVID W. EVANS. IND.
NORMAN E. D•AMOURS. N.H.
STANLEY N. LUNDINE. N.Y.
JOHN J. CAVANAUGH, NEBR.
MARY ROSE OAKAR, OHIO
JIM MATTOX. TEX.
BRUCE r. VENT°. MINN.
DOUG BARNARD. GA.
WES WATKINS, OKLA.
NINETY-SIXTH CONGRESS
2129 RAYBURN Housc OFFICE BUILDING
WASHINGTON, D.C. 20515
October 15, 1980
sent Janet
Hart
J. WILLIAM
STANTON. OHIO
CHALMERS P. WYLIE, OHIO
STEWART B. McKINNEY, CONN.
GEORGE HANSEN, IDAHO
HENRY J. HYDE, ILL.
RICHARD KELLY. FLA.
JIM LEACH. IOWA
THOMAS B. EVANS. JR.. DEL.
S. WILLIAM GREEN, N.Y.
RON PAUL, TEX.
ED BETHiJNE, ARK.
NORMAN D. SHUMWAY, CALIF.
cARnou. A. cAmrnELL. JR.. S.C.
DON RITTER. PA.
JON HINSON. MISS.
ns-4247
ROBERT GARCIA. N.Y.
MIKE LOWRY. WASH.
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Chairman Volcker:
Last week the President signed into law the Housing and Community Development
Act of 1980. Among the many significant and far-reaching provisions affecting the
growth and economic welfare of homeowners is a provision which demonstrates the
real concern Members of Congress have regarding those who are unable to afford the
increased housing costs due to condominium conversion. The provision reads as
follows:
"Sec. 603. It is the sense of the Congress that lending by
federally insured lending institutions for the conversion of rental
housing to condominiums and cooperative housing should be discouraged where there are adverse impacts on housing opportunities of
the low- and moderate-income and elderly and handicapped tenants
Involved.”
Important questions now arise:
*Or
1. How do you intend to discourage financial institutions from lending
for a conversion which will have adverse impacts on the low- and moderate-income,
elderly, and handicapped?
2. How do you intend to inform civic, religious and neighborhood organizations of the Congressional action so that they may rely upon it to dissuade a
socially undesirable conversion?
3. Finally, what necessary action do you intend to take to assure that
section 603 is being implemented by the financial institutions under your
jurisdiction?
Sincerely,
Fernand J. St Germain
Chairman, Subcommittee on
Financial Institutions,
Regulation and Insurance
Henry S. Reuss
Chairman
NovemLer 14, 19U
The :4onorable tienry Lellon
t;nitetl States ,:;fts..ate
wasnincton, D.C.
20510
f.Jear Senator Lellmon.
Thank you for your recent letter re:Jarding the proposed
merger of Fort at hounton t41.nkShares, Inc., with VJopuzlic of
Texas Corporation. and torwarding corrchipondence from your constituent, Mr. Saruel J. Veazey, on Cilia matter. This proposal
is still pending before Use eloarfa and your letter will be made
a part of th
oard's record on tle application. I ould Me
you to know that your conpents znd those of your constituent
will receive full consideration at the time the board takes
filial action.
I appreciate your interest anc: concerit and your takinq
the time to Ova Li% t:..e '..Atnefit of yota views.
'Sincerely.
SiPau] A. lioLckeL
KOD - pjt (41V-395)
boo; Ms. O'Day
Mrs. Mallard'
)11b
•
•
.
W ARRrN 0. MAGNUSOF:I. WASH.. CHAIRMAN
JICRIN C. STENNIS, MISS.
ROBFRT C. BYRD. W. VA.
WILLIAM ITOXMIRE. WIS.
OAHU 4 K INOUYE. HAWAII
.IERNIST r. HOLLINGS. Sc.
• H. IND.
BIRCH
THm•s F. EAGLrTON. MO.
LAWTON CHILES. FLA.
.1. Br NNI Tr JOHNSTON. LA.
WALTrR D. HUDDLESTON, KY.
MILTON R. YOUNG, N. DAK.•
CLIFFORD P. CASE. N.J.
EDWARD W. BROOKE. MASS.
MARK 0. HATFIELD. OREG.
TrO ST/WENS, ALASKA
CHARL I. 9 MCC. MATHIAS, :R , MD
RICHARD S. SCHWriK I R. PA.
HINRY BELL MON. OKLA.
LOWI LL P. *SACKER. JR
7.0NN,
Citifeb Zfalcz Zonate
COMMITTEE ON APPROPRIATIONS
011IFNTIN P4. BURDICK. N. OAK.
PATRICK J. LrAMI, VT.
JIM SASSER, TENN.
WASHINGTON. D.C. 20510
OMNI{ 01 CONCINI. ARIZ•
mut sumnosc ANC
JAWS R. CALLOWAY
CHIEF COUNSEL AND STAFFCM PICCTON
October 15, 1980
-,
Mr. Paul Volcker
Chairman
Federal Reserve Board
Federal Reserve Building
Washington, D. C. 20551
c
Dear Mr. Chairman:
Enclosed is a file of correspondence relating to a
proposed merger of Fort Sam Houston BankShares, Incorporated, with the Republic of Texas Corporation.
It is my understanding that the Board of Governors
of the Federal Reserve System has decided to disapprove
the merger, but the matter is under reconsideration.
My constituent who has contacted me on this matter
seems to have a good case. I strongly urge that you
examine the facts in this case, and that unless you
have conclusive evidence to the contrary, that you
allow the present decision by the Governors to stand.
Sincerely,
Pra-ayr/t
t
k
/
_
7
Al 414J2.0.
.
-
Henry Belimon
HB:ca
•
•
(
•
IcErS
DOLMAN,
jAm1.5 L. DOLMAN
JAMES B. DOLMAN
SAMIJUL ) VIA7EY
Doi
MAN & VEAZEY
TELEPHONF
405 223-3610
503 Lit Ir Building
P. 0. Box 13S8
ARDMORE, OKLANoMA
73401
October 9, 1980
The Honorable Henry Bellmon
United States Senator
820 Old Post Office Building
Oklahoma City, OK 73102
Dear Senator Bellmon:
This letter will confirm our telephone conversation of
October 9, 1980. The purpose of this letter is to attempt
to set out those facts which you should be aware of in
visiting with Chairman Volcker regarding this matter.
My family collectively owns the largest block of stock
in Fort Sam Houston BankShares, Incorporated, which is a
bank holding company with its principal offices in San Antonio
Texas. The bank holding company consists of three banks,
being the National Bank of Fort Sam Houston, which is one of
the nation's leading military banks, and two other small
banks in the San Antonio banking market. In late 1979, an
announcement was made by Fort Sam Houston BankShares,
Incorporated, and Republic of Texas Corporation of Dallas,
Texas, of a proposed plan of merger wherein Republic of
Texas Corporation would acquire Fort Sam Houston BankShares,
Incorporated. On February 20, 1980, at a special meeting of
the stockholders of Fort Sam Houston BankShares, Incorporated, the proposed plan of merger was approved by a large
margin. It is my opinion the margin of approval was large
because most of the stockholders did not fully understand
the merger terms and, as is usually the case, went along
with management's recommendation. My family, as well as
other stockholders, voted against this plan of merger. On
June 12, 1980, the Board of Governors of the Federal Reserve
System denied, by a vote of six -to-one, the application of
Republic of Texas Corporation to acquire Fort Sam Houston
BankShares, Incorporated. The Board in its ruling found
that Fort Sam Houston BankShares, Incorporated, was well
able to compete effectively in the market place independent
of the proposed affiliation with Republic of Texas Corporation, and that the proposed merger would have anti -competitive
effects on the San Antonio banking market in that Republic
already has several affiliated banks in the San Antonio
market. A copy of the press release of the Federal Reserve
dated June 11, 1980, is enclosed for your information.
The Honorable Henry Bellmon
October 9, 1980
Page 2
After the denial by the Federal Reserve Board, Republic
requested the Board to reconsider and the Board granted
Republic's request. I am told that the granting by the
Federal Reserve Board of Republic's request for reconsideration, where there had been a previous denial by a six-to one vote, is most unusual. It is also my understanding that
as of this date reconsideration by the Federal Reserve Board
is pending. It is my further understanding that if the
Board takes no action on this request for reconsideration
within a 90-day period, which will expire on October 18,
1930, that the merger is automatically approved without
further action by the Federal Reserve Board.
As I indicated to you, several letters have been written
by various stockholders to the Federal Reserve Board of
Governors, not only by my family, but by other stockholders
of Fort Sam Houston BankShares, Incorporated. I am enclosing
copies of letters which have been written by me and by
members of my family to the Board of Governors regarding
this matter. My father has also written letters to the
Board, but those copies are not enclosed because I wanted to
get this material in the mail to you today. It is my concern
that the members of the Board of Governors have not been
made aware of these letters written by my family as well as
other stockholders, but that these letters have been routinely handled within the bureaucracy and have gotten no
further than the office of Mr. Don E. Kline, Assistant
Director, Division of Banking Supervision and Regulation, of
the Federal Reserve Board. I am also concerned that there
is a real possibility that the Federal Reserve Board may
choose not to deal further with this proposed merger and
that the same shall become effective after October 18, 1980.
Your willingness to contact Chairman Volcker in this
matter is greatly appreciated by myself and my family. As
I indicated to you, it is not our desire that you attempt to
discuss the merits or demerits of this merger with Chairman
Volcker, but as a result of your contacting him, that
Chaiman Volcker might become better aware of the concerns
of many of the stockholders of Fort Sam Houston BankShares,
Incorporated, regarding this merger.
The Honorable Henry Bellmon
October 9, 1980
Page 3
Please give my regards to Mrs. Bellmon.
Yours very truly,
SAMUE1 J. VEAZEY
SJV:jnm
Enclosures
•
•
•
-
•
•
)
:4
•
•
;.•11.4:4.
'" • "4-'
EDERAL..RESERVE press rele-aso
4
•a
..
•
•
1""C"--•17777:.!"-ir
-P•N
• 6
••
t•
•
UUi
11, Iva.)
The Federal. Itoatrva li.orlrd today announce:1 its denial of the
application of Republic of T(.;:.tt cio
with Fort gau Boustkwi
i1&
TeRsc,
to
mcr;c
Incorpoi:ste 0 ..›2r$
Attached Lis thri 710.:Ird'L CI:dcr role.tit.g to this action.
attached are tbe Concacrizn= a2tat of Gcr.7.Trnc.kr
Statemont of Covstroz galatz.
U icfti &n
•
ALikaa„„La
I
...wig
.
7
.
•
For immediate celeas.c
• •••
\ \ jjjj
• ";:o.'.
.•••7,-
,A-06qm..
14
Attach=ants
'I
•
•
%-!•••-•:.-r•r•.7.7.••••••••- •••;-•,-.:177C
"
•.
•••
Aluo
Lbe LaSosztinq
7ZEALAAL RZI3E10.714. NZST=S
ICLKIDLIC Or TZXAS CORATIC
016er DerlyIK 1.6:gc:: of 11.7...nk aoldini! Caaisti
•
Republic: of TaxAL Corpo:ttion, rAalac, Taxar: & bank holding
company within the maaninil.of tho Bank Coiding COz.pany Act,
has applizd
for the Board's ap2royt.1 une..er accticc, 3(a1(5) of the Act
C12
5 1842(a)(5)) to neirvc witb AAA: az.c Ucucto:i Ban'hnzref.:, Incorpor
ate,
San Antonio, Taxac (b7L;LLI"), undar Chz /v.= and charter of P4pf
ublic
of Texas Corporation ('App1Icent4).
Applicant has alp.) tpplit-d for the Dozrd's avproval under
acction 4(c)(8) of tbQ Act (12 U.S.C. S 1643
(c)(8)) and section 225.4(b)(2)
of the Ward's Regu1atio:1 Y (12 C.P.A. S 225.
4(b)(2)), to actraira all
of the outstanding &titres of 7ort Sar.
Life In3uranca Catvi:.eny, San Antonio,
Texas (nrurt Sam Life), a subgidiary of Mat
, and to enca9e in the
sale of insurance directly related to
extensioos of credit by naB's
banking subsidiaries.
Port Sam Life engagas in underwritinl credit
life, an4 credit accideat and 4.wath inzuranc
* in connection with - ex—
tensions of credit by nilB's
rirg uubsi6iaric!:.
activitice,
have been determined by th.e Doard to LT cloa
ely r1ite3 to banking
(12 C.F.R. SS 225.4(a)()(ii) and (10)).
Notice of the applicatiorts, affordiN opportunity
for interetteZ
persons to
ubait com:knts and views hag b.acn given in raccordrincT
witb
sections 3 and 4 of the Act (45 Fc.:1,-,ral 1-cg
irtcr 3GGE:).
Mt/ tic to: filing
comments and views has expircifi, and the applicat
ion:, nn6 a11 co:limentL
••••
-2-
re sat fortn in
received have been.considcred in light of th.t facto
section 3(o) of tha Act ;12 U.a.C. S 1042(c)) anjU
conaiderations
specified in section 4(c)(&) of tia4 4ct.
Texas,
Applicant,.the fourth largett bz.nkin9 organization in
1/
billton.
controls 22 banks with eg(„reijm.s de'posits of appi:cih:aately
banks In LLAD
reprQsentirtg 7.4 pr cant of totzl deposits In oc.=zrcicl
in Texas,State.1( PSDB, the twcntlsth larv;zt bznkinq orcaniiation
has two sub-sidiary banks and has rec.:dyad approvx1 to ow.n a
ac
novo
million, reprebank, and controls total depozita o: approAlzately $163.0
senting 0.3 per cent of total Staicvids coercia1 r.,ank deposits.
conauramation, the resultin
Upon
bankiris; orgznizatioa wo. ild rank as the
of total
fourth largest in the StaLs, controlling about 7.7 pc r cent
deposits in commercial banks in TeXAS.
While oc..ncentration of bankiri
, the BoLr6
resources in Texas has bcen a source, of conceril to the Loare)
serious
concludes that consimmation of thie transaction wou.).d not have
.
adverse effects on tha coziccntratio4 of 6.1.nkin ra5ourcer. in the State
ons
Applicant ranks aa the fifth largest of 42 b:inci organizati
3/
thro:Igh
t)—
r..arke
ant
relev
t
(the
marke
n
bankii
io
Anton
San
ths
in
located
,cc7.1bor 31, 19/8, and Lefiect bank
1/ All bank.ing data arc aa of D4.
holding company formation* and acquisitions hpprovco au of January 31,
1900.
2/ Dy Order dated ilarch 10, 1980, the Board iTproved the acquisition
by Applicant of Bank of Austin, Austin, Tex. Cons=z.ltion of that
acquisition would result in Applicant's controllins; 23 banks and 7.5
per cent of total deposits in the State.
3/ The San Antonio banking Aarket 15 approxilL:AccA by ill': San Antonio
SHSA.
ke with colabinl
its control of two subsidiary ban
million, representin
in the market.
4.e
dep.z.eits of $175.6
bank deposits
per cent. ot . totti coszcial
:,r;;anization in the
FAIM, th..12 fourth Iaa:gost bankir,c
market, through it
ascragatw dvposits
tw.c; su1J2idicry bankr controls
..xkct ckpoeits.
t of z.r.,
can
par
5.0
in
ant
.ea
l
rep
n,
lio
of $183.0 mil
Con-
plicant'u
increasa aricinificantly A,?
su=mation of the transaction would
beco..as
t, CAU!siY,:; hp21icant to
cen
ptr
to
t2,
osi
dep
ket
mar
of
share
rerwit in the
, &nd
k6L
mar
tht
In
i
ios
zzt
ani
urg
t
the third larges
Oatween Applicant and
on
iti
pot
com
ng
sti
exi
al
nti
elimination of substa
on
usly, & proposed combinati
As the Doard has indiczttd previo
market
within the samc banking
1s
ior
sat
ani
or9
s
kin
d
ban
ize
rly-s
of simila
(4:41tncibtcract capable
of
b
.ie
00s
eu0
e
iev
ach
to
e
that are of a siz
tts ag3i*oritivs Cortitly
den
;:n
ep.
ind
e
rat
ope
to
e
management and are abl
PSUB.
ahould
anticompetitive effe-cts and
tore, would ordinarily have serious
circumutaancea.
not be approved except in compelling
horizontal 6c:oisitioo in
This propos-31 represents e large
icant i'rasance through
lif
baw
a
has
y
ead
alr
ant
a market where Applic
al Lank
. s, Dcxtr County Nation
Ex.nk
.z:
tIrc
of
ger
lar
Mc
ks.
ban
ita tvo
right. and ib fully
in it
ion
zst
zni
org
le
sab
Kis
a
is
of San Antonio,
irc geugraphic maroni
the
h04t
u:.;
thro
s
vic
capable of marketing itt per
pete
alz.o i* able to ccm
it
t
tha
s
ict
ind
ld
wou
B
VSE
ket. Th4 siz of
with Applicant. Moreon
eti
ili
aff
ent
abL
n
eve
effectively in tht market
inr-novti esER al A viable
ld
wou
al
poa
pro
tho
of
ion
mat
sum
over, con
diD,
ry vehicle ior other hol
ent
le
sib
pos
a
as
and
ion
zat
dependent organi
•
'codpanies not currently repres‘)nted in the mazket, and would significantly
increase the concentration of bankinr; reaourccs in the 5zn Antonio
banking market.
Based upon the
and other factl of r&crZ, tltb;a:r4
is of the opinion that consw-nation of this propossl
have sutr-
C/
stantially adverse effectm an c:.oc*.l.titioil in the relevant bah.Unv market.ConsummItion of the pro2olal would alt,o foreclose the pozcibility
of increased compwtition in th,2 future.
Applicant't absolute/ cise
total resources could support,itz expansion in this marka/L
by
foothold ac(itiinition.
;1.. novo or
Expansio,n by such :La:An: would ;oat4t rathoz
than eliminate competition.
The .S.an Antonio 1.>,:nb.inej LI.Irkct. it growinci,
and can support continued expansion, by existirn tirr.zs while rcre..a.inin-;
attractive for outside entry by
novo or foothold 24-.:ann.
In this
regard, FEUB is also a large, well-n6snaged organizstion fully capable
of continued growth and expansion within ths sLarket, which in demonstrated by its recent dr. novo expansiofi in the riarket.
In rocchinc its conclusion on the com-.pctftiva' effo.cts; of this
proposal, the Board noted that FSHE's load subsidiary bank, National
sank of Fort Sam Houston ("Fort Ss= E.ank"), in what ic coar.Jonly terzcid
a "military bank" in that it is locatc-C at a izilitary inatallation tInd
oerivenn tignificant amount or its deposit and loan business from
military personnel located outside the local banking m.arket.
Applicant
4/ 1Thile Chairman Volckcr agrec3 with the Board's dcnial of this application, he uoes not agree with-Lb,Board's chbracterization of the anticorapttitive effects as being substantially adverse.
111
#
•
that Fort Sam 1.1z,nk's wrket sharc uhould bti l'educed by half
asserts
•
to r.ore fairly assess the coçtitivta offacLc in the locL u.nrkot.
This reuucLion would t‘bult ii
1;4.11cant ck.)zat.rollin, uvori concurzAttion
of this propo5.51, about 7.3 pct cont. oE LoL41 ycarket. depoLitc; howoverp
even shading Fort Sam ilanOs :;.!iz_ze. of rkcit 6tixmits, ti Doard
of the opinion that coi-hlAlmmatiocl of tit* LrumEtIction wcJule. bava cilrious
adverse effects on cmq:.nttitioTt.
hank may derive a
Although Port
large portion of its business fi:c4:1 Qilitaxy i.c,:z.cnncl, to a cortzin
dagree &11 banks in tho Lin
ioL• Luuinflno frca-.
mar):01,..
military personnel and, th2rerorc, thu shadinr.;c.
F1YImzkot share
to the extent sugsested by kppIicant any ovc..;:ttate the zi9n12icanc.c
of Fort Sas Bank's orientaticin.
The Board has also considered the. imp...cL of thrift institutions
on competition within Co.:, San Antcxlic rkct
lthaush thci.o are t
nuaber of large thrift inGtitutionz locatvd in the San Xntonio banking
7trz.:
market, ths Board in thie instancy is unAble to conclu6s froa tho evidence in the record that them° in&titutions coc:octs activ44 with
COQ..
mercial banks over a sufficient rango of financial servicen to mitigate
significantly the anticopctitivc/ effect& of the propotial.
Thus, having
Board
considered all of the Lacts of re<.:ord in this application, thz..
•-• ,11
sub—
concludes that concuumation of the p‘oposed tranGaction roiC htwo
ztrkot.
stantially adverse effects on co7zi?etition in the Sr Antonio
•
1hr
The finiAncial t.n6 1.:/Ana.-Jer.12.1 resource:. and iuture
of Applicant, FSHD, 4114 thcii: cubsid;arice are conciLA,erc:; catisfactory.
Accordingly, banking factors; Lac von&ibLent
cation.
z,i)roval of the: /Appli-
Applicant propos“ Lo dIsvfalop tbz local cuatomer.and commercial
business of FSRD's banks with particulex ezphasiz oci 63vc1opcdont of
Fort &am Bank's local busine.w..
ri:./wovfir, 7:3:13 spNars to bavo the
resources to develop theac oGi.viccs injcNndently of affiliation with
Applicant.
services.
Applicant also intends to initiate truct. and international
Mile these consideratiowlA may lend
weight towarei z+p-
proval of the application, they are inaufficient to outweigh the anticoqpetitive effects of the porgar eccially in licjLt of the' loss to
the co=munity of a viable ane, aggcestivo cogz;atitor that could colltinue
to serve as an alternativs source of hr_nkincj services. 'Znerefore,
considerations relating to iho convenicaca and nceeic of the co.Lunitv
to be served Oo not clearly outweigh the substantial anticompetitive
effecta that would result fro= corisuzmation of the prcpoacict:tra
szizavtion.
With respect to tht.i application to acquiLc Port gax Lifs,
the Board has determined that the 1.›Iance of public intercat factors
prescribed by section 4(c)(0) of Lhe l'bct warrant alipl.oval.
There is
no evidence that Applicant's ..cquinition of Port Saz., Lift? Alone would
result in undue concontrc.tion of re&ourcen, occree6 o
ii..tair cocpeti-
tion, conflicts of interest, unsound banking practice.-;, or other adverc
c
•
-7•
'efftitIta on the public intere5L.
In thci cor:te.l.t of t213 proposal, ho'
ever, kTlicant could not connu=ate this z.cquisition without acquirin9
control of MID.
Accordingly, the Board concludcm that thi6 applicaLion
must alfo bo denled.
It ia the Boarci's juclgzkint that cunsumastion or the proposal
would not bo in the public intereat and OW; tbe apViicntiorsi; uhould
be denie6.
loing talc; other facts or record, Lhe appliBased on the fore,
cations are hereby denied.
i930.
By order of the DAArel oZ Govccnorts,:2 effcctiva June 13.,
1.4.1. E:i_C4!Y1-2
at-hy
Cathy L. Petryr.hyn
huzistant Secretary of the Board
[sr-AL]
5/ Voting for this action: Chairr. Volckur bn6 Governora
Partce, Teeters, Rice and Gramley. Voting againgt thic action:
Schultz;
Governor
LL CU
1/
As I have inuicatco on previous occelsions,— because of the diverse
group of financial product6 Lnd seryicos.tht:t thi&L institutionti r,ow
orfor in Oirect competition witn com=rcial banka, thrift inutitutions
should be includcd in the anlyuig or coaNtition “.) 4.4 mch greater
extent than has been the Boztrei's practice.
that view.
I continue to adhere to
'
Bouever, in light of all the facts of i:::cord in this instance
including the abscrico of vutticicnt eviutncc
tctivc ecAmpatition
between thrift institutions an6 col=zircica brink::: in Uliti market, I agrea
with the majority's actioa in denyin9 this propobal.
June 11, 1980
31 United Rank Corporation_of is:euYork (Schenecta&y Trust Comilany),
64 Federal Reserve Dullotin 894, 396 (1973); Indepondcnt 5ank Corporstioci
(The Old State Bank of Freziont), 65 eederal. Rot:cry° Dulletin 887, 870
(1979); United ilmnk Corc.oration of New York (Schonectdy Trust Cozpany),
66 FecIleral Reservu Dulletin 61, 64 (1980).
DISSNT114G STATEr 0? GOVZIWOR SCUL;LTI:
0
I would approve the upplication of Republic of TOXCAS Corporation
to merge with 1.'oxt Sa
UQu4ton Bank6hareu, Inc. bCCDLA:: ; 64) not bulieve
that this merger would have Lerioua edvc.:rsc effects on co:;.pctiLio41.
On the contrary, it iu my opinion thr.t thu
Ciiia1tAon of thene two
organizations would enable FSiiLI to coetc more aggressively in the
local banking market, thugs enanciin, competition in the :aarket an0 better
serving the needs of the local cOmunity.
June 11, 1980
•
Tune 25, 1980
Federal Reserve Poard of Covernors
20th & Constitution Avenue,
Washington, D.C. 20551
Gentlemen:
In view of your recent ruling concerning the merger of the National
Bank of Fort Sam Houston Bankshares of San Antonio, and Republic of Texas
Corporation, Dallas, Texas, I wish to congratulate the Board on its rejection
of this merger.
The merger, in my opinion, was absolutely not necessary, and I have
oblected, most strenously, from the very beginning.
My interest in the National Bank of Fort Sara Houston goes back to its
Inception. My father and rnOther were original stockholders. My father was
issued Stock Certificate No. 1. T have watched the growth of this small bank
Into a larger bank of considerable resnurses that has enjoyed a splendid
reputation In banking circles, not only in our City and State but among the
military through out the world. After careful study and analysis of the
Republic Eank proposal, I found no cv..cler.ce that we need any help from
Republic or any other bank, at this t....e.
The Fort Sam I3ank has demonstrated its cupabil:ties for many years.
I am confident and enthusiastic abouc hc :utura and trust your very substantial
rejection will put an end to the acquisition of Fort Sam Houston F4‘. -ikshares by
Republic. As you have found, it is sLrong enough to compete on its own.
If the merger were to take place, Republic would own at least five banks
In the San Antonin area. As you havt. found this lAroula indeed, create an undue
concentration of banks under one ownership and would not be in the best interest
of the Community. I applaud your wisdom.
This is another example of a power play which is in reality not in the
best interests of the Fort Sam Houston Bankshares, nor our banking community
locally.
I am, indeed, grateful to you gentlemen for your denial of this applicaticn,
you have reaffirmed my faith in the democratic form of government, and I offer
my sincerest congratulations.
• dr
a r
)St
Respectfully,
,\Iiss Lee
Chandler
•
•
•410
BOARD OF LOVERNORS
. 4t-
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
November 14, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Benjamin S. Rosenthal
Chairman
Subcommittee on Commerce, Consumer
and Monetary Affairs
Committee on Government Operations
House of Representatives
Washington, D.C.
20515
Dear Chairman Rosenthal:
Thank you for your letter of October 24, relating to
certain issues associated with the conversion of multifamily
rental properties to condominium or cooperative status.
I am enclosing, as requested, a copy of my recent letter
to Chairmen Reuss and St Germain replying to their questions about
the various actions that the Board plans to take in response to
the provisions of Section 603 of the Housing and Community Development Act of 1980.
You suggest that the Board, in connection with its actions
under Section 603 and in contemplation of your subcommittee's
hearings on the subject, should undertake studies or analyses of
several aspects of conversions; namely, speculative activity in
condominium and cooperative units financed by member financial
institutions, increased housing costs resulting from such conversions financed by member financial institutions, and inflationary impacts generally, resulting from increased housing costs.
Particularly since other federal agencies that supervise
financial institutions have received similar suggestions, the
matter has been referred to the Federal Financial Institutions
Examination Council for interagency review. Once this review has
been completed by the FFIEC and considered by the Board, I will
notify you promptly of the Federal Reserve's decision.
Sincerely,
RIOWLK spjt (I1V-405)
bcc: Mr. Kichline
Mr. Fisher
Ms. Hart
Mrs. Mallardi (2)i..-Enclosure
crrkm1.4 S.
or 'Cr
.t
T
ROSENTHAL. N.Y.. CHAIRMAN
marr.to,
Actiak assigned Jim Kickable --Janelpart already
Wrking on Reuss/St Germain 141Pr
.1( /GT NT V. ATKIP.ON. PA.
1 1 4‘..1, J. PT G.TRmAIN. RI.
joo..• CnHYTrti. .:R.. MICH.
T II. IF- VITAS, GA.
NINETY-FIXTli CONGRESS
Congre55 of I lie Zthiteb *tato
LYLE WILLIAM/. OHIO
JIM JErrRIE,. KANE
JOEL IDECK•RO. IND.
MA.PORITY— (ZOO
3i)otize of 1lepre5entatibef
COMMERCE. CONSUMER. AND MONETARY AFFAIRS
SUBCOMMITTEE
OF THE
COMMITTEE ON GOVERNMENT OPERATIONS
RAYBURN HOUSE OFF ICE BUILDING. ROOM B-377
WASHINGTON. D.C. 20313
October 24, 1980
Hon. Paul Volcker
Chairman
Federal Reserve Board
Washington, D. C. 20551
Dear Mr. Chairman:
The Commerce, Consumer and Monetary Affairs Subcommittee is presently examining the Federal response to the growing national trend toward the conversion of
multifamily rental housing into condominium or cooperative status. The Housing
and Community Development Act of 1980 (Public Law 96-399, signed by the President
on October 8, 1980) contains Title VI dealing with Condominium and Cooperative
Conversion Protection and Abuse Relief. Section 603 provides as follows:
"It is the sense of the Congress that lending by federally
insured lending institutions for the conversion of rental
housing to condominiums and cooperative housing should be
discouraged where there are adverse impacts on housing opportunities of the low- and moderate -income and elderly and
handicapped tenants involved."
In discussing this provision on the floor of the House, Chairman Reuss stated:
"Civic-minded banks and savings and loans will welcome an
opportunity to tell a condo converter who wishes to displace
low and moderate income, elderly, and handicapped tenants that
he should look elsewhere for his money, in that Congress has
given its view.
Local religious, civic and neighborhood
organizations in dealing with lending institutions, can also
point to the sense of Congress. Thus the condo resolution here
enacted would be analogous to the procedures under the Community Reinvestment Act and- the Home Mortgage Disclosure
Act.
"Finally, the Federal regulatory agencies, including the
Federal Reserve System, the Comptroller of the Currency, the
Federal Home Loan Bank Board, the Federal Deposit Insurance
Corporation, and the National Credit Union Administration1
aware of the congressional expression, should present that
225-4407
point of view on the same basis that they all discourage and
encourage various undesirable and desirable loans in many
other areas today. Thus the Fed has recently 'discouraged'
lons for corporate takeovers and commodity speculation, and
has 'encouraged' loans for home building and similar
productive purposes.
"Properly applied by the private and public sector, the
sense
of Congress condo resolution can help stem the tide
of
socially undesirable conversions."
(Congressional Record,
September 30, 1980, pp. H10095-6, emphasis added)
An extensive study on the subject ("The Conversion of
Rental Housing to
Condominiums and Cooperatives," June, 1980) prepared
by the Department of
Housing and Urban Affairs found the following:
"Between 58 and 66 percent of residents in converting
buildings move rather than stay as renters or owners."
(p. IX-32)
"Some conversions require people with low or moderate
incomes to move because they cannot afford to buy their
apartments. About 42 percent of those who moved out of
converted buildings had incomes which, according to generally accepted criteria, were too low to have permitted
them to buy their converted units; 47 percent of all
former residents say they did not purchase because they
believe they could not afford to do so." (p. vi, Summary)
-
"18 percent of all households (27% of households with
persons age 60 and over) who moved from converting buildings have experienced the adverse effects of displacement." ( p. vi)
-
"One-half of all former residents of converted buildings
had some difficulty in finding new housing; elderly, nonwhite, and lower income former tenants are more likely to
report such difficulties." (p. v, Summary)
-
"Lower income and nonwhite former residents' households
are significantly more likely to rate their neighborhood,
or some aspect thereof, as inferior to their preconversion neighborhood." (p. 1X-32)
As Mr. Reuss stated in his remarks on the floor of the
House, loans for
condo and coop conversions which have the adverse
impacts stated should be
discouraged in the same fashion as loans for commodity specu
lation and other
socially undesirable activities. He also indicates that
the condo resolution
"would be analogous to the procedures under the Community Reinv
estment Act and
the Home Mortgage Disclosure Act."
I agree that the Federal Reserve already has the power, under the
Community
Reinvestment Act, to require regulated financial institutions to serve
the needs
of the communities in which they do business. Congress has
expressed one of
these needs to be the discouraging of lending where the adver
se impacts set forth
in Section 603 occur.
S
I understand that Chairmen Reuss and St Germain have written to you (sample
copy of their letter enclosed) asking how you plan to implement Section 603 and
what steps you plan to take to ascertain situations "where there are adverse
impacts on housing opportunities of the low- and moderate-income and elderly and
handicapped tenants involved."
I am writing to ask that you also supply this subcommittee with answers to
the questions posed by Chairmen Reuss and St Germain.
I am also concerned about the impact on increasing housing costs generated
by speculative activity in the sale and purchase of condominium and cooperative
units. As the HUD study indicates, housing costs are invariably increased by
conversions: "Total monthly outlays made by tenant buyers are typically 36
percent higher than what they paid in rent, while the median increase in monthly
housing costs for buyers coming from other housing is 62 percent...." (p. v,
Summary) More recent studies and estimates find even more startling increases in
housing costs, even when tax benefits are considered.
The HUD study and others have also found a high level of investor or
speculative purchases of units, not for use as a primary residence, but for
profit on resale. It has been shown that inflated prices for condo and coop
units are often made possible and even encouraged by the ready market provided by
speculation. In short, speculation bids up prices without relation to intrinsic
values.
I request that in connection with your response to Congress' view set forth
in Section 603, and in contemplation of subcommittee hearings on the subject,
that you also consider the role of financial institutions under your supervision
on inflation and rising housing costs created by conversions. Specifically, I
suggest that the Federal Reserve conduct studies or analyses of: (a) speculative activity in condo and coop units financed by member financial institutions; (b) increased housing costs resulting from such conversions financed by
member financial institutions; and (c) inflationary impact generally, resulting
from increased housing costs.
The subcommittee staff is ready to work with your staff to implement Section
603 and the suggestions for studies set forth above. If you have any questions,
please contact Theodore Jacobs, General Counsel of the subcommittee.
Sincerely,
I
l
Benjamiin S. Rosenthal
Chairman
BSR:jb
1
CHAIRMAN
pr.- 5
4
V
•
AS
L. At!.. 1 -tY. ('HID
'Ht .&D. PA.
4NAND J. Sr Gf rm•IN.
Hi-NtRYI
A: CZ.. TEX.
JG5LpH G. r.i'..rsH. NJ.
:K A•:•wo.r.'0 LL
FRA,
JAr5, M. HAN FY. N.Y.
• r'
'4)
0.AD.
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON BANKING. !INANCE AND URCAN AFFAIRS
E. rAuP41RoY. D.C.
STE.pHEN L. NEAL. N.C.
JERRY M. pATTErtscN. CALIF.
WAt..7 1: Ft
JAMES J. 0...ANc1APD. MICH.
CARROLL HuBBARD. JR., KY.
NINZTY-SIXTH CONGRESS
2129 RAYI3URN HOUSE OFFICC ()WILDING
JOHN J. LAFALCE. N.Y.
GLADYS NOON SPELLMAN. MD.
LES AtiCOIN. OREG.
DAVID W. EvANS, IND.
NORMAN E. D•AtviOuRS. N.H.
WASHINGTON, D.C. 20515
October 15, 1980
J. WILLIAM rtANTON. OHIO
CHALmt- IPS, P. wr"...IE. OHIO
STirwAKT e mcKINNEY.
CONN.
C.CoRGE HAN:EN. IDAHO
HENRY J. HyDE.., ILL
RicHARD KELLY, FLA.
JIM LrAcH. IOWA
THomAg B. II.vANS JP. or.
S wit_LIAm GpF.LN. NY.
RoN PAUL, TEX.
ED BETHuNE. ARK.
NORMAN 0. SHumwAY. CALIF.
CARRoLL A. CA•47
,19E.U.., JR.. S.C.
DON RITTER. PA.
JON HINSON. MISS.
us-420
STANLEY N. LUNDINE, N.Y.
JOHN J. CAVANAUGH, NEBR.
MARY ROSE ()AKAR. OHIO
Jim MATTOX, TEX.
BRUCE F. VENTO, M:NN.
DOUG BARNARD. GA.
WES WATKINS, OKLA.
ROBERT GARCIA. N.Y.
MIKE LOWRY, WASH.
Honorable Jay Janis
Chairman
Federal Home Loan Bank Board
Washington, D. C. 20552
Dear Chairman Janis:
Last week the President signed into law the Housing and Community Development
Act of 1980. Among the many significant and far-reaching provisions affecting the
growth and economic welfare of homeowners is a provision which demonstrates the
real concern Members of Congress have regarding those who are unable to afford the
increased housing costs due to condominium conversion. The provision reads as
follows:
"Sec. 603. It is the sense of the Congress that lending by
federally insured lending institutions for the conversion of rental
housing to condominiums and cooperative housing should be discouraged where there are adverse impacts on housing opportunities of
the low- and moderate-income and elderly and handicapped tenants
involved."
Important questions now arise:
1. How do you intend to discourage financial institutions from lending
for a conversion which will have adverse impacts on the low- and moderate-income,
elderly, and handicapped?
2. How do you intend to inform civic, religious and neighborhood organizations of the Congressional action so that they may rely upon it to dissuade a
socially undesirable conversion?
3. Finally, what necessary action do you intend to take to assure that
section 603 is being implemented by the financial institutions under your
jurisdiction?
j
I
tnand J. St Germain
hairman, Subcommittee on
Financial Institutions,
Regulation, and Insurance
Sincerely,
1
Henry S. Reuss
Chairman
•
11V
70.• •
Of
.•
0
• q-.
•• ,r•
• o i./-4%,,,.
,--..„
:2
GO Vi •
4
(7.•r,
• I:r
• -.I
• —4
....e
•
HOARD OF YiVERNOR
r1;
.
i:r(i ,,.•_,.
FEDERAL RESERVE SYSTEM
1,,, I, xk5,:-. .
'1.,4[FRF
It0, ,••• •
•
WASHINGTON, 0. C. 20551
.• ..4:̀ (
)
N.:,.L.f
.
.
04 -
1,\
'
• • .... •
.• 1 A V:
,
..
November 17, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Max Baucus
Chairman
Subcommittee on Limitations on
Contracted and Delegated Authority
Committee on the Judiciary
United States Senate
Washington, D. C. 20510
Dear Chairman Baucus:
Thank you for your letter of October 29 requesting
information in connection with your Subcommittee's review of
public information, advertising, promotional and related
activities of the Federal Government.
The Board issues three publications which fall
within the categories listed in your letter; namely, a newspaper, a magazine and an employee publication. The statistics
for these publications are shown on the enclosed table and
copies issued during the time period you requested are also
enclosed. The Board does not print any posters or engage in
any billboard advertising.
For your information, I have also enclosed a pamphlet
entitled "Public Information Materials of the Federal Reserve
System" and separate lists of the Board and Federal Reserve
Bank publications. We would be pleased to furnish copies of
any of these publications which may be useful to your Subcommittee.
Please let me know if I can be of further assistance.
Sincerely,
S/Pa_41 A. Vgicjig
Enclosures
COomd (IV-408)
bcc:
Helen Uulen
Larbara Pills
Ann Marie Bray
Mrs. Mallardi (2)
•
1980 Statistics for Releases Published by the Board
publication
Number of
Recipients
Annual
Production
Cost
Postage
Cost
Contracted Out
Newsletter
AmF1C Newsletter
100
l65'
28
No
Magazine
BULLETIN
24,300
359,635
2,300
2,989
98,423
William Byrd Press Inc.,
Richmond, Virginia
Employee Publication
intcrest Bearing Notes
1/
215
No
•
1/ Includes estimated costs of duplicating labor and materials.
2/ The William Byrd Press, Inc., was awarded the contract for the composition, printing, and
binding
of the monthly Federal Reserve Bulletin for 1980 and 1981. The estimated production
cost for 1981
is $385,106 and postage is $130,900 (based on expected increase of 33%). For the years
1978 and
1979 the Bulletin was produced by Judd and Detweiler, Inc., Washington, D.C. Producti
on cost for
1978 was $375,846 and postage was $53,934; for 1979 the production cost was $413,089
and postage
was $61,102.
Action assignei Cong. Liaison Office; input from Publications,
Consumer *airs ani Personnel
•
//c_.
'ZJCniteb Ztafez „Senate
WASHINGTON. DC. 20510
October 29, 1980
Honorable Paul A. Volcker
Chairman
Federal Reserve System
20th Street & Constitution Avenue, NW
Washington, D.C. 20551
Dear Mr. Volcker:
tising,
I am conducting a review of public information, adver
. As
promotional and related activities in the Federal government
part of this review, I request the following:
1. One copy of each newsletter mailed to individuals or
to the
organizations outside your agency, from January, 1978,
present, inclusive.
r
2. One copy of each magazine published in-house and/o
externally, from January, 1978, to the present, inclusive.
and/or
3. One copy of each newspaper published in-house
externally, from January, 1978, to the present, inclusive.
4. One copy of each poster published in-house and/or
externally, from January, 1978, to the present, inclusive.
5. Description and cost outline for each billboard
advertisement, from January, 1978, to the present, inclusive.
For each of the above, please include the number of
ge and
recipients and annual costs of publication, including posta
ding
handling. Also, state whether any part of the work, inclu
printing, is contracted out, and if so, to whom, and at what
cost.
Thank you for your prompt attention to this matter.
n
there are any questions, contacts on my staff are Carme
Schmelebeck or Sharon Specter at 224-7542.
If
Sincere].
Acc,/
Max Baucus
Chairman, Subcommittee
Limitations on Contracted
and Delegated Authority
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20951
November 18, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Robert N. Giaimo
Chairman
Committee on the Budget
House of Representatives
Washington, D. C. 20515
Dear Chairman Giaimo:
As you complete your days as Chairman of the House
Budget Committee, I want to express my appreciation for
your
dedication and leadership these past four years.
I do not know of any job in Government that is as
difficult--or as thankless--as the task of setting limit
ations
on Federal spending. The key role you have played in that
process is reflected in the distinction you have had of
being
the first Chairman elected to serve for a second term.
It is
no coincidence that this was at a time when Congress recog
nized
that it was critical to gain control over the Federal budge
t.
I particularly appreciate your strong efforts in this past
year both to control spending and to improve the budgetary
process. Those of us whom you leave behind will do our
best
to continue your efforts and to do so in a manner that
reflects
your own sense of fair play and concern for the well-being
of
all our citizens, including those who need the understand
ing
and help of Government.
May the years ahead bring you many enjoyments and
personal rewards.
Sincerely,
Si Paul
DJW:PAV:vcd
bcc: Mrs. Mallardi (2)
RUDY BOSCHWITZ
M NNESOTA
2Cnifeb Ztafez Zenate
( LO
•
•
11A4. 111144v44:,
•
.•
•
GO
•
.
V L10I
BOARD OF 30VERNOR5
.•
••-„
, I1,li,i!
•
• AL
RES
••• • • •
4 it.u. •
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
November 19, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Fernand J. St Germain
Chairman
Subcommittee on Financial Institutions
Supervision, Regulation and Insurance
Committee on Banking, Finance and
Urban Affairs
House of Representatives
Washington, D.C.
20515
Dear Chairman St Germain:
Thank you for your letter of October 16 conc
erning the
difficulties encountered by Hortence Cotto in
attempting to cash
her father's social security check at bank
s where neither she
nor her father maintained an account. You
requested that I provide you with steps that I believe could be
taken to facilitate
the cashing by the elderly of social secu
rity checks at institutions supervised by the Federal Reserve.
The Board's legal staff has informed me
that there are
no Federal laws or regulations that requ
ire banks to cash U.S.
Government checks. Thus, a bank's check
cashing policy has
generally been regarded as a matter of inte
rnal operating procedure, and a bank is free to establish
its own policies regarding
the circumstances under which it will
cash checks. The Board's
staff is aware that many banks have adop
ted a policy of cashing
checks only for customers who maintain an
account with the bank.
This policy is based on economic grounds
since substantial costs
are incurred in providing check cashing
services and there is
little incentive for a bank to provide
this service to nondepositors. Furthermore, in recent years bank
s have been experiencing
a growing problem in cashing checks, espe
cially checks that are
presented for payment by nondepositors.
Banks have frequently
encountered instances where checks that were
cashed for nondepositors of the bank are returned to the
bank unpaid. When
the bank attempts to recoup the funds
from the person for whom
the check was cashed, it discovers that
the person is unable to
be found or is otherwise unable to reim
burse the bank. In order
to avoid losses resulting from such tran
sactions, many banks have
decided to establish a policy of cashing
checks only for depositors.
This practice insures that the bank will
be able to locate the
depositor in the event that a check he or
she has cashed is returned
to the bank unpaid and reduces the institut
ion's risk of financial
loss.
The Honorable Fernand J. St Ger
niain
Page Two
I would agree with you that
a major problem with resp
to the cashing of social
ect
security checks is that of
providing
recipients with acceptab
le identification. Banks
currently have
great difficulty in guardi
ng against fraudulent iden
tification,
which is important becaus
e in cashing a government
check the bank,
and not the government,
bears the risk of loss.
As
you may know,
current Treasury regulati
ons require banks cashing
government
checks to guarantee that
all endorsements on the ch
eck are genuine.
These regulations further
permit the Treasury to dema
nd refund from
the bank if the check is
later found to bear a forg
ed or unauthorized endorsement. In fi
scal year 1977, for exampl
e, the Treasury
received over 223,000 cl
aims for lost or stolen ch
ecks, representing
more than $192 million.
Of these claims, the Trea
sury actually
initiated reclamation proc
eedings concerning more th
an 171,000
of these checks against th
e banks which cashed them
.
In light of these consider
ations, a requirement that
or other depository inst
banks
itutions cash social secu
ri
ty or other
government checks would
impose additional risks of
loss on these
institutions. The impact
of this increased risk na
turally would
vary among individual in
stitutions. Any action to
impose such a
requirement should, theref
ore, provide both reasonab
le identification procedures that woul
d be acceptable to the Trea
sury and
arrangements for protecti
on against liability wher
e these identification procedures are fo
llowed.
It is unlikely that mand
atory check cashing requ
would fully solve the prob
irements
lems posed by your letter
. I also believe
that further efforts shou
ld be made to encourage
Social Security
recipients to utilize th
e option of having their
benefits deposited
directly into an account
at a depository institut
ion. While this
does entail the establis
hment of an account at an
institution, I
do not think this is a
major or costly burden, an
d it has been
shown that direct deposi
t is a more efficient and
safe way of
disbursing government be
nefits than checks.
The Federal Reserve stan
ds ready to assist you, th
Treasury, and the Social
e
Security Administration in
developing
ways of facilitating the
cashing of social security
checks. We
believe this is not an ea
sy problem to resolve, an
d hope that
we can aid in finding a
workable solution.
Sincerely,
LSAspjt (01V-401)
bcc. Lee Adams
Mrs. Mallardi (2)
Legal Records (2)
SZPay_l A. toldw_wi
Action assigned Mr. Petersen
'4 AND J. ST GERMAIN, RI., CHAIRMAN
ANK ANNUNZIo, ILL.
JAM t S !.4. HANLEY, N.Y.
CARRo! L
in.. KY.
JERRY M. PATTERSON. CALIF.
THOMAS L. ASHLEY. OHIO
NORMAN E. 0 AMOURS. N.H.
JOHN J. CAVANAuGH, NEBR.
JIM mATTOX, TUX.
JOSEPH G. mINISH. N.J.
WALTER E. rAUNTROY, D.C.
DOUG BARNARD. GA.
CHALMERS P. WYLIE. OHIO
HENRY J. HYDE. ILL.
U.S. HOUSE OF REPRESENTATIVES
GEORGE HANSEN, IDAHO
JIM LEACH, IOWA
CARROLL A. CAMPBELL, JR., S.C.
ED BETIAUNE. ARK.
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
SUPERVISION, REGULATION AND INSURANCE
OF THE
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
NINETY-SIXTH CONGRESS
WASHINGTON, D.C. 20515
October 16, 1980
Honorable Paul A. Volcker
Chairman
Board of Governors
Federal Reserve System
20th & Constitution Ave., N.W.
Washington, D. C. 20551
Dear Mr. Chairman:
On a number of occasions, social security recipients have
complained that they have had difficulty cashing their monthly social
security checks at commercial banks. The latest of these complaints
is contained in the enclosed correspondence from one of my constituents
Hortence Cotto of Riverside, Rhode Island on behalf of her father Joseph
Saial.
As this letter indicates many social security recipients do not
have drivers' licenses and other identification and banks use the absence
of such identification as a justification to refuse to cash the checks.
The only alternative, in many cases, is a commercial check cashing service,
a liquor store or other business establishment which often impose substantial fees.
I am deeply concerned about the inconvenience and costs that are
unnecessarily imposed on senior citizens in this regard and I am asking
that your office take steps to develop a plan which would facilitate the
cashing of these checks.
I have asked the Commissioner of Social Security to develop a plan
which would provide proper identification for senior citizens and I have
further asked that he consult with you and other financial supervisory
agencies in this effort and that you will let me know what steps you
believe can be taken to facilitate the cashing of these checks at institutions under your supervision.
Sincerel
Fernan
hair
FJStG:gLj
Enclosure
J. St Germain
•
S
-$21)-L.ist,ek,w1 .
4:1t-t-e--ri
J.lt‘z-r.27 .2/410-0
0-gol
eawAL43
4/1
1:‹).
4
)
-1
ri
• iea
V
4 4,
C/
/
44
1°C
Clefg4
0---7
.x1-7
--te4-41 of,/
AZr
aky
1,14146‘
"14Cf
e-,o
Ax/,
c4fee
cz2,1.)
_-)
J6.1
•
2•4Z---
_<,41
6,1,1
zv-21
Or—veld, e__
•
S
*
;
446
C
411,619
j
.
/
°<J
*
6
g0<itdi/
2lf0•4-4r2/ /
- i/
7A-4t
(
r
74e
6:1
/
# A‘r°(
•4A14 4
1
; /1!../..0
4/rri
R.
. A)..e
•
LI
ct/
t
.0/4
./-zit%Ci?.4A-, •
#ealfvt-
/31,4-47- c7L-1
LZV
Z•Le
4-4
,
e(r-e4--y 69.4
liev.
frp ,
.
/(.‹%
r
V
1
g
a-"Pt
A IV
I
V
LW1-,
."&„44
,..c.„4, 6,1
,
t5L,•
J_aA,•
d
0444--;--41•
.
•
-
el-cet--!
•
•
July 7, 1930
Federal Reserve Board of Governors
20th and Constitution Avenue, N.W.
Washington, D.C. 20551
Gentlemen:
My congratulations to you en your rejection of the
proposed merger of Fort San Houston BankShares, Incorporated, of San Antonio, Toxas, into Republic of Texas
Corporation, of Dallas, Texas.
An a stocnolder of Fort Scm Houston PankShares,
Incorporated, I did not support the proposed merger.
My family has been intorestad in and associated fcr
rany 1 eal-3 v1:11 an National B3r. o Fort Sun Houston, which
is the largest mamber bank of Fort Sam Houston nankSharas,
Incorporated. My mother and father, the late Mr. and
Mrs. Samuel J. Chandler, of San Antonio were early stockholders. I have dcno most of my banking with the National
Bank of Fort Sem Houston for 45 years. Thl National Bank of
Fort Sam Houston and Fort San Vouston BankShares, Incorporated,
both have demonstrated their capabilities through the years
and their ability to compete effectively in a very competitive,
business environment.
Most respectfully,
Elizabeth C. Veazey
•
•
1v
,
"
•1 '11
..11 I
•-•
;1, n
v
n
1)
1
•
r
4, •
)1.141.
4prrni1ri
?(. r !", 1
1t1
1 1—vr( b•-,1 0-r
1-:""(t
-,
"M"'" "^•Ir'•
r,
1'117
rii I rz
1 r_
T
o
'.7
(311 a r
1/1
it. 1, ,..N r
4 .rt FT
I11.
1
. ,
, Inc(11r n -,t 1 r.11^ ?
• • •
1
gr
tr,, pa
,..,r
"
!1
"
-'
'7 • ••••,
)1^. 1-
n
1
•*$! 03
•-7 4 :
n
n "'`'Ibl
IC
!
°•
•••
•
;
; rr"
!
i"
il ntn r• ; ,% 1,, 1
'
t ..
1 I.... •.
e...7*-%j • .ni,
1 l'.
4
,
^ I
!,
c,
r,••-••••,•1-1, j.• ti' r7.-;-•
T.,
•
.06 "/ r. a•
!
4 ••$ 4-4
IP•
-
***. r)
r
")1
r
.
." •••,'•—• •••".1"46
-1
e •
of
" ,
•-•i /1‘•
4 `.•e
'*,••, C+ •:•1
-
.3'1';
1 t 4 ,1 f'• I• ; i•fs I ••
n. re s,
-• !,,z,„
1r
/
,ei .-.,1 t_•
,vn 'b.
.•t n 1 1 ,- .• 1
l'..1 .•••1••
!".),,,•.1, ', i c rs ... ..•
,•.,
?* 7 e f1 ,
n
"1
"
- /-
c
ri
•"
r'
1 Y. rl
s.dl
$
1.1'70r"!YrriT'llI
h
e. •
re"
,
,,re,
4r•
rs f3
.
r• r%
f
'
'-; - ?`1 1"
•
rf
n r
/-
..--,i = .- • ei ;
1
t
c
.1 -,-, •-,.-.,--, -1
r%
, -, - ,:,. • - i. t.1,
,
•,
,
•,
•
,r)....• t
h
P
r;
v••
C.7 i
nr"1 •ir
C VUITV1
ç,1,: j rir;
••
.,.;:
n. I 4yi;,„ ,,
„...„„• 4 .. ;,• ,-. 1.- ..,,
1. i '',
r
•
,
4-
'
'h 01
V N 1.
,/•••
i
• ^
"s. ••••• ,•i 44
"
..
s
•
•
July 1E, 19C1
Federal Reserve P.oard of Governors
2Ot!) and Constitution Avenue, N.W.
Vashington, D.C. 20551
(entlemon:
IncorAs a sl:areholder co' 70rt 7,n7i T70112T1
lisarpointed to re:1 in 7:e
poratel,
rrrin:j7-te reGvest
r'rn1 Pesorre roar,i
ws
of-7epublic I To)M corT)oratior 1 recoils Per the rolrl's
o - "ort
"onston
earlr derill r‘f t1):' proposel
17an'hares,
of 7, xrls Cor7,^r1tien, n11115,
rort (-rim ro l!.:4nn
Tncorncrated,
Tn n:ripfli
a'ln to clncr-ptino
is fully c'11mrlret -21, ,
p(te errect've]v if!
'?epuhlic 0F TrNqs rerperition. I
propesei!
fully concur wit:1 1e m1r3'!, fin'in- in in; rilr:r nonving
--rr;cr
7,10 have
n1 !'el.!inos Co7nrInicr. !'nt
tierp ,:•r of
serious ndverse r.rfccts on cor-)e*:ition in t!,o 'ran 1%rterie
t,anising marl et. T Itroe thr: TW-r.1] nnsr.,rv- ^Inn"!
Jeny the application of Porulqic or Texas rernorstion to
mere with Fort !7nm Houston Pinres, Tpcornornted, an
Antonio, Texas.
Your consideration of this 1-tter is airreciitcd.
11-Nrsth
C. r:17.(1v
•
•
July 1 0,
7W ,ral r.-:121vr- "n'r(1 nf rvrr
20th and C.otitntion .Avenue, `!.W.
Waqin7ton, 7).C.
flontlerv,n:
r4ks
,Inr(!-; of Fort
''ank"71,77-^s, vcordisnr
ninto
d
to loarn t- hit tit^ !'"ierr.l. T.- Serve
T
Board had rra:Itr
ronuo!;t nf rr.. i bi i
r TPY.1‘ Cornr,ration
to rocon
t!:0 rorIrd's (!nr2if-r (!,
71111 or t-')f. 2ronoce,ri
rerr of Fert In ron7;ton
<2,1
Antonio, Tcxas, with nopllic of Tnri!: corPorltion, r)nllas,
TCX15.
•
• r-rt
Tr -v
ITn1:;.on
r ro:
is Full.p.
netP eritiv^1r 1 " T'1(:"
nronssed
-ith
fult! co”.71:r wi 4 h
rnarl'
in(7ornorated,
nIA.f, to conn
tOVI
'n
-^„,",- n.; 1,
trancti:)1
in -r a!le
‘1,nlirnnt'c flr'mnublic's)
shore or 7:Irl‘ot
"'hlt
01
-, ronosal
!;,Thst.iptiollv nr1vf,r-.0 ^frr,r- f- on cori-,r,ti/.- ion in
te
rrirt:e*" nr ,1
forPrloqo f.h!
'7-7ron53e'! con,
.'tHtion
T urge
the Po(1eral Torve T1o7r,l, to n7iin
1- ho ro)nlirntio,- of
Repulllic of Texas Corporation to mrp-e with Fort cron iinuStOn
BankSharcs, Tncorrorr;ted, Sin .Antorio,
nnd in Fn
doing, to reaffirm thc 1),(117. 's nresert
nf maintnining
a competitive bankinc7 environne.,It.
11, )1.1H,
"• 11-1+-
Thank you for your conifl-rati ,-.-
1) 4-
!;r0AUFf j.
SJV:jnm
•
rhi"
•
109 IT, French Place, ft3n3C
San Antonio, Texas 78212
September 25, 1980
Covernor Nancy H. Teeters
Federal Reserve Board of Governors
Federal Reserve System
Washington, D.C. 20551
Dear Covernor Teeters:
The recent actions of tho Fc0:2ral reserve Board in the
matter of the merger of Fort San l!ouston BankShares, Incorporated, and the Republic of Texas Corporation perplex mc.
For rPny years I hive followed closely the activities
of th- 7;ationp1 Bank of Fort Sam rouston and have been
friends of rost of its principal officers snd its founding
stee.-holders. I have been proud of the bank's tradition of
worldwide service to the military.
A year ago the directors of Fort San ”ouFton T%%anl:Shares
Incorporated, agreed in principle to merge with Pepublic of
Texas Corporation. This action I attribute largely to the
interests of two groups of stockholders—one, a group of
business men who paid too much for a large block or stock a
few years ago, and the other, a group who received Fort San
Houston stock in exchange for the stocl- of their small bank.
They, I believe, are more interested in the liquidity of
their holdings than in the tradition of service to the
military. Management, as in most such cases, persuaded
rank-and-file stockholders to go along. I objected strenuously to the merger both in principle en(' as to price,
but to no avail. The stockholders voted approval.
I fully expected the Federal Reserve Board to approve
the merger as a routine matter. To my great surprise the
Board disapproved by a vote of six-to-one, and issued a
seven-page news release on June 11, 1980, detailing Its
reasons for disapproval. Its basic reasons were so right-Fort an is big enough to compete, and a merger, giving
Republic five banks in San Antonio, would make Republic too
big. T was so delighted with the lloard's action that I
wrote the Board expressing my admiration.
•
•
•
Covernor Nancy P. Teeters
t;.cyptember 25, 1980
Page 2
The Fedral Reserve Board again surprised re. It
agreed to reconsider. Why, I do not know. Certainly nothing
has changed. The Loard's seven-page rationale remains as
valid as when it was written.
It has been almost a year now since the merver actions
wore initiated. Stockholders were led to believe that
consurl7lation would be complete by June 30, 1980. Fort Sam
Nouston BankShares, Incorporated, has continued to grow. If
merger is now approved, Republic would get the benefit of
the appreciation at the expense of Fort Sam stockholders.
This adds to the aggravation as, in my opinion, the price
was far too low in the first place. Our ntc6;ho1dors and
bank employees certainly deserve an early decision. It is a
very unsatisfactory situation.
I an forwardinr: a copy of this letter to Chafrman
Volcker for his information. Your consideration of this
letter is appreciated.
Sincerely yours,
Lee Ray Chandler
cc:
Mr. Paul Volcker, Chairman
Federal Reserve System
Washington, D.C. 20551
thAttovat;
CY- 39°0
BC:JAPE) flr "FIVERNORS
1:
• .„,
•
FEDERAL RESERVE SYSTEM
WASHINGTO"., 0. C. 20551
••/AAL
• • • .• • • •
November 24, 1980
PAUL A. VOLCKE P
C H AIR M A N
The Honorable Toby Moffett
House of Representatives
Washington, D.C.
20515
Dear Mr. Moffett:
Thank you for your letter of October 21 enclosing a
copy of a letter you received from Mr. Sherwood W. Travers of
The Savings Bank of Ansonia regarding the Depository Institutions Deregulation and Monetary Control of 1980 (P.L. 96-221)
(the "Act").
As you are aware, the purpose of the Act is to enhance
the ability of the Board to conduct monetary policy. Under the
Act, reserve requirements are imposed on transaction accounts
(checking-type accounts) and nonpersonal time deposits held by
all depository institutions. Depository institutions are defined
to include commercial banks, mutual savings banks, savings banks,
savings and loan associations, and credit unions, if they are
federally insured or eligible for federal insurance.
The Board has been sensitive to the burdens imposed on
small institutions by the reserve reporting and the reserve maintenance requirements. However, we have also kept in mind the
primary objective of the Act, i.e., to increase the effectiveness
of monetary policy through the application of uniform reserve
requirements. To achieve this greater effectiveness of monetary
policy, it is necessary that the Board have the ability to monitor
monetary and credit aggregates by obtaining deposit data from
virtually all institutions. In this connection, The Savings Bank
of Ansonia pointed out in its letter that it must prepare and submit weekly reserve reports even though the amount of cash it
maintains in its vault will fully satisfy the reserve requirements
it must meet in the near future. While it is true that its
required reserves will be satisfied by vault cash, the weekly
report of deposits which will be submitted is essential to the
monetary statistics that the Federal Reserve compiles. Furthermore, although we recognize that institutions have incurred
additional costs in making operational changes to conform to
the new requirements, once these changes have been completed the
preparation of the report will be less burdensome on a continuing
basis.
The Honorable Toby Moffet
t
Page Two
The Savings Bank of Anso
nia also feels that it
"small" institution in te
is a
rms of the overall nati
on
al
money supply.
With total deposits of $1
69 million, The Savings
Ba
nk
is actually
a relatively large inst
itution. Only 8 per cent
of
depository
institutions have $100 mi
llion or more in total de
po
si
ts. If
all institutions the size
of The Savings Bank were ex
em
pt from the
reporting requirements,
the Federal Reserve's ca
pa
ci
ty
to conduct
monetary policy would be
substantially weakened.
The Board has afforded
special consideration to in
tutions with total deposi
stits of less than $15 millio
n.
For institutions with less than $2 mi
llion in deposits, the effe
ct
iv
e date
of the regulation has been
deferred until May 1981, an
d
for
institutions with more than
$2 million but less than $1
5 million
in total deposits, a simp
lified quarterly reporting
procedure has
been established which wi
ll begin in January.
I hope that this informat
ion is useful.
know if I can be of furt
her assistance.
Sincerely,
SBW:PSP:DJW:pjt (4V-399)
bcc: Mr. Schwartz
Mr. Pilecki
Ms. Winebarger
Mrs. Mallardi (2)
Legal Records (2)
Please let me
TOBY MOFFETT
Action assign
o
411%
•
•
4
Oil tcr Buttroe:
C
) 225•
vvitlir 04 IN'EPSTATE
A•-• I r-;
COMMERCE
Coltgres.5 of the Zlititco
31)oust of 3.kcptcstittatibeg
tAastiturvon,
,OmMIT TEE ON
GOVERNMENT OPERATIONS
Oct,oer
Mr. Petersen
20313
19S0
orsma0FMm
160 Fairmircrori Arr
131HLTJL COMNICTIC7T
TELIPKNE (211) 581-5753
I'S rt it STRUT
[mato C ,01%1C1•CUT N052
Irtrrw ...r 00);45-5577
144 Wr s7 MAIN Sritri
NEN BITT4101. CONN(CTICUT 06052
TELEPHONE. (203) 224-7156
(Tou.-Fttit.1400-3824521)
/36
Dear Mr. Volcker:
I would greatly appreciate it if you would have tho
proper person on your staff analyze the enclosed
letter which I received from a constituent, and prepare a response to be sent to both the constituent and
me. I would also appreciate any information which you
think might help me to hotter understand my constituent's
problem, and how the Depository Institutions Deregulation
and Monetary Control Act is being carried out. _
Thank you very much for your help.
Sincerely,
•
Toby Noffett
Member of Congress
Mr. Paul A. Volcker
Cli a i rman
Federal Reserve Board
20th fl Constitution Avenue, N.W.
Washington, D.C. 20551
FM:el
‘.;
.4
L
f f6,4sor
October 1, 1980
The Honorable Anthony Toby Moffett
127 Cannon House Office Building
Washington, D. C. 20515
Dear Representative Moffett:
The Savings Bank of Ansonia is a S193 million institution which has
total deposits of $169 million. In our fiscal year ending May 31, 1980,
our net operating earnings were $1,944,000. Based upon our earnings for
the first three months of this Year, because of the drastic increases in
the cost of our deposits, our earnings may approximate $600,000 to
$650,000 next Mav. 71.17:: of our assets are invested in mortgages,
restly in 1 - 2 family homes.
In March of 1980 the Congress passed the Depositary Institutions
Deregulation and Monetary Control Act of 1980. Under this Act, as a
mutual savings bank, we are required to maintain daily deposit statistics
and, if necessary, maintain reserves of cash in vault and/or with the
Federal Reserve Bank of Boston.
Since the regulation has been available to us in August we have
spent approximately $900 sending our officers to New York and Boston to
attend seminars in learning to comply with this regulation. We have
spent countless hours analyzing our accounts to determine how much of
our deposit account base might be applied to natural persons and how
much of it night be non-personal accounts.
We have determined that we have 54,666,000 in transaction accounts.
From that must be deducted $864,000 for demand balances and cash items
in process of collection, leaving a net transaction account of $3,802,000.
We have determined that we have $4,113,000 in non-personal deposits.
The sum of these two, $8,215,000, is the amount against which we must
hold a reserve.
The reserve, 32: of this S8,215,000, amounts to $246,456. In the
first year we will be required to hold in our vault cash of $32,150, and
at the end of the eighth Year, that amount increases to the full $246,456.
'
7
I
`7;1
irlr7C
nk
of Ar,sonia •211 /44,-iin Sfr o.et • Anconia, Corirwcticuf 06-101 • 134 7561
The lit!norabl
iv 1H': Th,ffe'
October 1, 1980
Page Two
For Septel.,ber, our average cash in vault, which is
conservatively
is $;39,190. In other words, we must do the calculations
shown
LIR enclesed sheet every day of every week of every month
from now on
to determine that we must hold cash of $32,000 in our vault
to meet this
new federal requirement.
I would point out to vou that the total deposits of this bank
subject to reserve represents .00000002 of MB 1 at its presen
t balance.
it seems that the enactment of this legislation and the
implementation
as set forth in the Federal Reserve System's regulations is
unneeded and
unnecessary harrassment of the small banks which have no troubl
e meeting
the reserve, but must incur vast additional expenses to establ
ish the
fact that we do not need to maintain additional reserve.
We will incur a daily service charge from our data processing
service to determine the total of our telephone and pre-authoriz
ed
transfer savings accounts, the total of our non-personal saving
s accounts
and certificates of deposit, the total of the certificates of
deposit
which had an original maturity of less than 4 years and the total
of all
deposit accounts which have a balance in excess of $100,000.
I ask that
review this matter, the laborious and expensive
calculations which we will be forced to do daily for no benefit in
reserve holding to the federal government or the Federal Reserve
System.
Phase consider this matter and see if you do not agree with me
that relief is required for banks of considerably more than our size
who
are going to be seriously hurt in attempting to comply with the
reporting
required under this regulation which will have no effect on the reserv
e
amounts held against our deposits and a remarkably small effect on
the
monetary statistics.
Yours very truly,
THE SAViNCS F:CCK OF ANSONIA
•••
, •
••1
•••....
President
SWI:mbp
cc:
National Association of !,;utual Savings Banks
200 Park :,venue
New York, New York 10017
•
BOARD Or GOVERNORS
7
6 1F-
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C.20551
November 24, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Robin Beard
House of Representatives
Washington, D. C. 20515
Dear Mr. Beard:
Chairman Reuss has asked me to respond to your letter
of October 17 to him regarding the Depository Institutions Deregulation and Monetary Control Act (Pub. L. 96-221). One of your
constituents has expressed concern about the reserve requirements
imposed on "transaction accounts".
As you are aware, Title I of the Act imposed Federal
reserve requirements on depository institutions other than Federal
Reserve member banks for the first time. "Depository institutions"
are defined to include commercial banks, mutual savings banks,
savings banks, savings and loan associations, and credit unions,
if they are federally insured or eligible for federal insurance.
Reserve requirements are imposed against transaction accounts and
nonpersonal time deposits held by such institutions. The Act
itself defines "transaction account" as
a deposit or account on which the depositor or account
holder is permitted to make withdrawals by negotiable
or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items
for the purpose of making payments or transfers to
third persons or others. Such term includes demand
deposits, negotiable order of withdrawal accounts,
savings deposits subject to automatic transfers, and
share draft accounts.
The final Federal Reserve Regulation D--Reserve Requirements of Depository Institutions--was announced on August 15 implementing the Act. In adopting the final regulation, the Board took
into account the more than 750 public comments received on the
proposed regulation. .The regulation as finally adopted permits
a maximum of three telephone or preauthorizcd withdrawals per
month from a share to a share draft account to cover overdrafts,
or for any other reason, without such account being regarded as
a transaction account. Thus, credit unions, and other depository
institutions, can continue to offer services to their customers
'4
11,
The Honorable RobIllBeard
Page Two
for occasional overdrafts without subjecting such accounts to
a reserve requirement ratio of up to 12 per cent. Therefore,
as long as the number of transfers from a share account to a
share draft account to cover inadvertent overdrafts that occur
in the share draft account do not exceed three per calendar
month, the share account does not fall within the definition
of "transaction account". This exception was intended to allow
occasional overdraft protection plans to continue, but to make
reservable, in accordance with the mandate from the Act, those
accounts such as automatic transfer accounts that facilitate
third-party payments. This effectuates the objective of the
Act which is to enhance the ability of the Federal Reserve to
conduct monetary policy more effectively through the imposition
of uniform Federal reserve requirements on similar accounts held
by all depository institutions.
Please let me know if I can be of further assistance.
Sincerely,
11Voldec
cc.
Citairman Reuss
P;,.i.,Ji..vcd (*V-409)
1_ cc
%r. Schwartz
Winebargor
Legal Records (2)
Mrs. Mallardi (2)100"'
ENRY
S. nrusl.
WIS., CHAIRMAN
THOIHI.`S L. ASHLEY. OHIO
WILLIAM S. MOORHEAD. PA.
FERNAND 1. ST GERMAIN. R I.
HEN'7Y EL GONZALEZ. TEX.
JOSUPIE G. MINISH, N.J.
FPAI:K ANNUN710, ILL.
.P0.'ES M. HANLEY. N.Y.
PARPEN .1. MITCHELL. MD.
•
•
J. WILLIAM STANTON. OHIO
CHALMERS P. WYLIE. OHIO
STEWART B. MCKINNEY. CONN.
U.S. HOUSE OF REPRESENTATIVES
COMNIITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
WALTER E. FAUNTROY, D.C.
STEP111-14 L. NEAL. N.C.
NINETY-SIXTH CONGRESS
GLADYS NOON SPE, LMAN. MD.
LES AL.COIN. ORE.
DAVID W. EVANS, IND.
THOMAS B. EVANS. in
EEL.
S. WILLIAM GREEN. N.Y,
RON PAUL, TEX.
NORMAN D. SHUMWAY, CALIF.
2129 RAYBURN HOUSE
OFFICE
BUILDING
cAnnoLL
A. CAMPBELL. JR.. S.C.
DON RITTER, PA.
CAPH )k
HI_ LILA :D. JR.. KY.
JOHN J. I ArAl, CE, N Y.
RICHARD KELLY. FLA.
JIM LEACH. IOWA
ED BETHUNE, ARK.
JERRY M. PATTERSON. CALIF.
JAMEsI Pt ANCHAPD, MICH.
GEORGE HANSEN, IDAHO
HENRY J. HYDE. ILL.
WASHINGTON. D.C. 20515
JON HINSON. MISS.
22.S-420
October 31, 1980
NORMAN E. D'AMOURS, N.H.
STANLEY N. LUNDINE. N.Y.
JOHN J. CAVANAUGH, NEBR.
MARY ROSE OAKAR. OHIO
JIM MATTOX, TEX.
BRUCE r. VENT°. MINN.
DOUG BARNARD. GA.
WES WATKINS, OKLA.
ROBERT GARCIA, N.Y.
MIKE LOWRY, WASH.
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Chairman Volcker:
Please find enclosed a letter I recently received from Congressman Beard
regarding the reserve requirements imposed on credit union transaction accounts.
I have replied by indicating that the Federal Reserve's regulations provide
that if there are a limited number of overdrafts in a given month, a reserve
requirement will not he imposed. I would appreciate it if you would respond
to Congressman Beard in more detail, explaining the limitations in the regulations and indicating how a credit union can proceed so that its share accounts .
stay within those limits.
Sincerely,
c/
Henry S. Reuss
Chairman
Enclosure
_
ROBIN E3EARD
srarcr orncesi
6T.4 Disrp'icy. TENNESSEE
WASHINGTON OFFICE:
229 C A N1401,4 Hot/SE OFFICE MAL/JIM°
WASHINGTON. CD C.
Congre55 of the Uniteb
205IS
(202) 228-2811
tate5
iotisSe of Ilepreantatiing
5575ftmAsit
Surm815
MIEMPHIS. TCNNESSE1E 38119
(901) 7674652
22 Pusuc ScuAwc
COLUMIIHA. TICHINESscc 33401
(615) 388-2133
Pliactington,7D.C. 20515
October 17, 1980
Hon. Henry S. Reuss
Chairman
Committee on Banking, Finance
and Urban Affairs
2129 Rayburn Building
Washington, D.C.
20515
Dear MT. Chairman:
I have been contacted by one of my constituents regarding
P.L. 96-221, the Depository Institutions De-Regulation and Monetary Control Act.
My
constituent is very upset at the provisions that require
a penalty reserve to be paid on each "transaction account". If
overdrafts are paid from the regular share account, it becomes
a transaction account and the penalty reserve must be paid. The
payment of the reserve is a heavy expense to the Credit Union, and
therefore overdrafts will no longer be paid from the regular share
account in his Credit Union.
ac .(
I would appreciate it if you would look into this matter and
let me know if there is any possibility that the Committee may
consider altering the bill to change this matter. Thank you for
your attention in this request.
With warm regards.
Sincer
a
o in Beard, N.C.
RB/wl
•
001/4
BOARD OF
.••
'
•
.
P•
•
,..
;- \!1.11{1{
"
(DVERNOR'I)
•
:
•
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
November 24, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable John Breaux
House of Representatives
Washington, D. C. 20515
Dear Mr. Breaux:
Thank you for your letter of November 18 recommending
that Mr. Thomas C. Jeffery be considered for appointment as a
Director of the New Orleans Branch of the Federal Reserve Bank
of Atlanta. The Federal Reserve is very much interested in
talented individuals from a wide variety of backgrounds for
possible service as Reserve Bank Directors.
We shall keep Mr. Jeffery's name in mind as a possible candidate for the New Orleans Branch Board, and your
recommendation has also been sent to Mr. William F. Ford,
President of thc Federal Reserve Bank of Atlanta, for consideration of Mr. Jeffery as a candidate for a Reserve Bank
appointed Director of the New Orleans Branch.
I appreciate your interest in identifying qualified
individuals for Reserve Bank Directors.
Sincerely,
Voidie(
vG,t (Te 41 )
sr.
'41Po •
4
• • '•
14.411atw
)
fa
Congressional Liaison Office will have draft to Chairman 11/24
Air
JOHN BREAUX
7m DISTISICT. LOUISIANA
COMM ITT!Es
PUBLIC WORKS AND
TRANSPORTATION
WA•:INGTON ADOWE Si
Room 2159
RA* .-4,4 Housr Orricr Bult_niNo
ruci.a. (202) 225-2031
2530 POST
ric.r AND
Or,
Firm NAL BUILDING
LAX, CHARt ri. LOtlISIANA
70601
Congrt55 of tbe Zinitcb fgate5
PotisSe of itprtfSentatibeti
(3161 113-1122
it,1 I I in•k,
LAr•vel le, Lut,istANA
CHAIRMAN.
FISH AND WILDLIFE
SUBCOMMITTEE
AD HOC SELECT
COMMITTEE ON THE
OUTER CONTINENTAL
SHELF
Ria.sbingtott, D.C. 20515
70531
MERCHANT MARINE
AND FISHERIES
•
DEMOCRATIC STEERING
AND POLICY COMMITTEE
(316) 232-2061
SELECT COMMITTEE
ON COMMITTEES
November 18, 1980
p
•
The Honorable Paul A. Volcker
Chairman
Board of Governors
Federal Reserve System
Washington, D.C. 20551
Dear Mr. Chairman:
I write on behalf of Thomas C. Jeffery, who has
applied For a director position to the New Orleans
Branch of the Federal Reserve System.
Mr. Jeffery is a professional engineer and has worked
for the Pittsburgh Plate Glass Corporation for twenty
four years. He is currently manager of the Development
and Licensing Office of the company's chemical division.
Ho is also the holder of eight U.S. patents and numerous
worldwide patents. Finally, several distinguished
articles he has written have appeared in national and
international publications. He is well known and widely
respected in the field of chemical engineering.
In addition to his outstanding professional career,
Mr. Jeffery has been a prominent member of the various
committees of the Louisiana Credit Union League. For
the past fifteen years he has served as Chairman of
the Student Loan Committee, helping those pursuing
higher education with their critical, financial arrangements. He has also been an active participant in the
League's Legislative and Governmental Affairs Committee
and in this capacity has studied extensively the new
rules and regulations pertaining to the use of share
draft systems in state and federal credit unions.
Mr. Jeffery has been an outstanding community leader
over the past two decades and has devoted much of his
personal time to improving credit union services and
their reputation. I feel he would make an excellent
Page 2
November 18, 1980
director and therefore urge your fullest consideratio
n
of his application.
With warmest personal regards.
Sincere*
daft
,/.
?OhN BREAUX, M.C.
JB:dhh
cc:
T. E. Allison
Novetlii;er 24, 1980
The Lonorable Joseph G. Minish
Cnairr4an
subcozzattee on Cenral Oversight
an0 Renegotiation
CoimUttee on Winking, Finance and
LrLan Affairs
iiouse of Representatives
2051S
washington, D.C.
iAlor Chairman tqini4h,
Thank you for your letter of Noverber 19 invitirr, the
board to testify t)eiore yoLa. SutcwaAttee on the Currency and
Eoreicn Transactions eporting Act.
I ai4 ploased to desicinate Mr. John £. Ryan, Director
of the Division of iankin4d Supervision and Regulation, to appear
on behalf of the Doard on Deceraier 3 at 9;30 a.m.
Sincerely.
S/Paul L Volckei
CO.pjt (0/-419)
bee: Jack Ryan
Mrs. liallardi (2)u.0'
BOARD OF GOVERNORS
or THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
November 24, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable William Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Re:
Money Supply Error Investigation
Dear Chairman Proxmire:
As you will recall on October 25,
1979, the Board of
Governors announced certain downwa
rd revisions to the money supply
estimates it had previously releas
ed on a preliminary basis for
the weeks ended October 3 and Oct
ober 10, 1979. These revisions
amounted to approximately $700 mil
lion and $3 billion, respectively
.
The Board attributed these revisi
ons to errors in deposit data
submitted initially to the Federal
Reserve Bank in New York by a
major money center bank and which
were thereafter submitted to
the Board. On October 26, 1979,
Manufacturers Hanover Trust Company
("Manufacturers") in response to
various inquiries announced that
it had made the errors in comput
ing the data it previously reported
to the New York Federal Reserve Ban
k.
Shortly after that incident, in the
light of the conceivable
possibility that the underlying err
ors in the deposit data had been
the result of some prearranged pla
n or scheme, or that institutions
involved, or persons connected wit
h those institutions, had used
their knowledge of the errors for
financial gain, the Board and
the Federal Reserve Bank of New Yor
k engaged independent Special
Counsel, Fulbright & Jaworski of
Washington, D. C., to conduct an
investigation into the matter.
Special Counsel was directed to
determine whether any institution
or individual, including
Manufacturers and persons connected
with Manufacturers, the Board
or the Federal Reserve Bank of New
York, improperly and knowingly
profited from preparation and rel
ease of the erroneous money
supply data during October 1979.
Special Counsel conducted an
extensive investigation over the
past several months and enjoyed
the full cooperation of the Boa
rd, the Reserve Bank and Manufacturer
s
in this endeavor.
The Honorable William Proxmi
re
Page Two
The investigation has now
been completed, and a copy
of Special Counsel's report is
enclosed for your review.
We are
pleased to note that Specia
l Counsel has concluded, as
summarized
on page 6 of the report,
that:
1. Manufacturers and pers
ons connected with Manufa
the Board or the Federal Re
cturers(
serve Bank of New York did
not improperly
and knowingly profit from
the preparation, release or
revision of
the erroneous money supply
estimates during October
1979.
2. There is no indication
that any other institutio
or individual improperly and
n
knowingly profited from th
e preparation, release or revision
of these erroneous money
supply estimates
during October 1979.
The Board and the Federal
Reserve Bank of New York ar
of course, gratified that
e,
Special Counsel found ther
e were no
improper or illegal acts or
omissions associated with
these events,
and that the integrity of
the Federal Reserve System
as well as
of Manufacturers in this
matter has been confirmed.
Sincerely,
S/Paul A. Volcket
Enclosure
IDENTICAL LETTERS TO SENATOR GARN, CONGRE
SSMEN STANTON AND GREEN
NLP:PAV:vcd/pjt
bcc: Mr. Petersen
Mrs. Mallardi (2)u/
Legal Records
.1111106
TRIC.;A SCHROEDER
ETRICT. DENVER. Coo
00
DISTRICT OCIICIe
1767 1-110t4 Sr./rut
Orsrvr. COt oPt A no 80218
•
(303) 837-2354
wkININGTON
i0o1k_ 6)144AL
09/1C11,
2437 Rk•suor4
Houir OrrIce 13uut...otwo
WASHINGTON. D C. 20515
(202) 225-4431
R
OSERVICESCOMMITTEE
a'POST OFFICE AND CIVIL
SERVICE COMMITTEE
Congre55of the Zinitcbckatt5
Pout‘t of ittproSentatiincS
Wassbington, rLC. 2051$
Refer reply to:
Walz/440.A/jg
November 24, 1980
J. Roger Guffey, President
Federal Reserve Bank of Kansas
City
Federal Reserve Station
Kansas City, MO 64198
RE:
Olive Walz
Dear Mr. Guffey:
Your reply of October 7, 198
0 arrived on my desk November
13, 1980.
I am not satisfied with the
answers provided. Althou
gh,
I am pleased that "this ban
k will probably not sustai
n
any bosses", the problems are
very serious.
I am disturbed by the fac
t that the Denver Branch Non
cash
Collection Unit has been out
of balance since October,
1979 has been audited six tim
es since June of 1979, and
nothing has been resolved.
I would like an explanation
of how and why the out of
balance
situation happened and how and
when it will be corrected
.
It seems to me Ms. Walz was
caught in the middle and has
been made the scapegoat.
I would like to know why,
after many years of servic
e,
there was not more of an eff
ort to find a suitable positi
on
for Ms. Walz, since she cou
ld not accept the job offere
d
for medical reasons.
Please respond to my DeVer
District Office.
‹:
With kind regards
/I(
\
\(
Schroede
of Congress
PS:jgb
THIS STATIONFRY PRINTFD ON PAP
ER MADE WITH RECYCLED
FIBERS
2
November 24, 1980
Mr. J. Roler Guffey, President
CC:
Paul A. Volker, President
Board of Governor's of the Federal Reserve System
20th Street & Constitution Ave, N.W.
Washington, D.C. 20551
p
•
BOARD OF GOVERNORS
nF- THE
: 4:,P;
• --1 ..,`47
FEDERAL RESERVE SYSTEM
4A 1
:•
,,o,
.,;:i
1
ItJ
•
L.,
...../:, •
WASHINGTON, O. C. 20551
•• 5e ,.1.::_ i i .1. ' •- .1-. ,
•,4,'
• 404Id -:,
'_>i,24 •
'
•.-AL Rf.Sic..••
November 24, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Henry S. Re
uss
Chairman
Committee on Banking, Fina
nce
and Urban Affairs
House of Representatives
Washington, D. C. 20515
Re:
Money Supply Error Inve
stigation
Dear Chairman Reuss:
As you will recall on Octobe
r 25, 1979, the Board of
Governors announced certai
n downward revisions to
the money supply
estimates it had previously
released on a preliminary ba
sis for
the weeks ended October 3
and October 10, 1979.
Th
es
e revisions
amounted to approximately
$700 million and $3 billio
n, respectively.
The Board attributed thes
e revisions to errors in de
po
sit data
submitted initially to th
e Federal Reserve Bank in
New York by a
major money center bank
and which were thereafter
su
bmitted to
the Board. On October 26
, 1979, Manufacturers Ha
nover Trust
Company ("Manufacturers")
in response to various in
quiries announced that it had made
the errors in computing
the data it
previously reported .to th
e New York Federal Reserv
e Bank.
Shortly after that incide
nt, after consultation with
you and in the light of
the conceivable possibil
ity that the
underlying errors in the
deposit data had been the
result of some
prearranged plan or scheme
, or that institutions invo
lved, or
persons connected with th
ose institutions, had us
ed their knowledge
of the errors for financia
l gain, the Board and th Fe
e
deral Reserve
Bank of New York engaged
independent Special Counsel,
Fulbright &
Jaworski of Washington, D.
C., to conduct an investigatio
n into
the matter. Special Counse
l was directed to determin
e whether
any institution or indivi
dual, including Manufacturer
s and persons connected with Manufa
cturers, the Board or the Fede
ral
Reserve Bank of New York,
improperly and knowingly profit
ed
from preparation and re
lease of the erroneous money
supply data
during October 1979. Sp
ecial Counsel conducted an ex
tensive
investigation over the past
several months and enjoyed
the full
cooperation of the Board,
the Reserve Banks and Manufa
cturers
in this endeavor.
0nil
The Honorable Henry S.
Reuss
Page Two
The investigation has
now been completed,
of Special Counsel's re
and a copy
port is enclosed for
your review. We are
pleased to note that
Special Counsel has co
ncluded, as summarized
on page 6 of the report
, that:
1. Manufacturers and
persons connected with
the Board or the Fede
Manufacturers,
ral Reserve Bank of Ne
w York did not improper
and knowingly profit
ly
from the preparation,
release or revision of
the erroneous money su
pply estimates during
October 1979.
2. There is no indi
cation that any other
or individual improper
institution
ly and knowingly prof
ited from the prepar
tion, release or revi
asion of these erroneou
s money supply estimate
during October 1979.
s
The Board and the Fede
ral Reserve Bank of Ne
of course, gratified
w York are,
that Special Counsel
found there were no
improper or illegal ac
ts or omissions associ
ated with these events
and that the integrit
,
y of the Federal Rese
rve System as well as
of Manufacturers in th
is matter has been
confirmed.
Sincerely,
Wag,A. Vog.citot
Enclosure
NLP:PAV:vcd (V.W4i)
bcc: Mr. Petersen
Mrs. Mallardi (2)/f
Legal Records (2)
7
HENRY S. REUSS, WIS., CHAIRMAN
7.10MAS L. ASHLEY, OHIO
WILLIAM S. MOORHEAD, PA.
FERNAND J. ST GERMAIN,
HENRY 0. GONZALEZ, TEX.
JOSEPH G. MINISH, N J.
FRANK ANNUNII0, ILL.
JAmES U. HANLEY, N.Y.
PARREN J. MITCHELL. MO.
WALTER E. FAUNTROY. D.C.
STEPHEN L. NEAL. N.C.
JERRY U. PATTERSON. CALIF.
JAMES I. 'IL ANCHARD, MICH.
•
•
J. WILLIAM STANTON. OHIO
CHALMERS P. WYLIE, OHIO
STEWART B. McKINNEY, CONN.
GEORGE HANSEN, IDAHO
HENRY J. HYDE, ILL.
RICHARD KELLY. FLA.
U.S. HOUSE OF REPRESENTATIVES
JIM LEACH, IOWA
THOMAS B. EVANS, JR., DEL.
S. WILLIAM GREEN, N.Y.
PON PAUL, TEX.
ED BETHUNE, ARK.
NORMAN D. SHUMWAY. CALIF.
CARROLL A. CAMPBELL JR., S.C.
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
CARROLL HUBB/Ozt, ' . KY.
JOHN J. LAFALCE. N.1.
GLADYS NOON 5PELLMAN, MD.
LES AuCOIN, OREG.
DAVID W. EVANS, IND,
NORMAN E. °AMOURS, N.H.
STANLEY N. LUNDINE, N.Y.
JOHN J. CAVANAUGH, NEEJR.
MARY ROSE OAKAR, OHIO
Jim MATTOX. TEX.
BRUCE F. VENTO, MINN.
DOUG BARNARD. JR.. GA.
WES WATKINS, OKLA.
ROBERT GARcIA, N.Y.
MIKE LOwRY, WASH.
NINETY-SIXTH
2129 RAYBURN
HOUSE
CONGRESS
OFFICE BUILDING
DON RITTER, PA.
JON HINSON, MISS.
WASHINGTON, D.C. 20515
JOHN EDWARD PORTER, ILL.
225-4241
November 18, 1980
The Honorable Paul Volcker
Chairman
Board of Governors
Federal Reserve System
Washington, D. C.
Dear Chairman Volcker:
I have been informed that the report of the independent legal firm concerning the mistake in monetary data collection last October as requested by the
Committee is now completed. Please forward this report to us.
Sincerely,
,
Henry S. Res
Chairman
•
•
BOARD OF r3OVERNORE
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
November 26, 1980
PAUL A. VOLCKER
CHAIRMAN
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:
Thank you for your letter of November 10 regarding
the Board staff's proposed commentary on Regulation E.
Your comments about the passbook-update question
have been sent to the Division of Consumer and Community
Affairs. I have asked the staff to give careful consideration to the point you raise before they issue the commentary
in final form.
We appreciate having your comments and your
assessment that, overall, the commentary will be helpful
in clarifying the provisions of the Regulation.
Sincerely,
S/.Paill
DSS:DJW:vcd (#V-411)
bcc:
Ms. D. Smith
Mrs. Mallardi (2)‘../-
•vich4:
I.
FRANK ANNUNZIO, ILL., CHAIRMAN
THOMAS D. EVANS, JR., DEL.
CHALMERS P. WYLIE. oHio
DON RITTER, PA.
GLADYS NOON SPELLMAN, MD.
PRUE': F. VENTO, MINN.
WALTFR E. FAUNTROY. D.C.
PARREN J. MITCHELL. MD.
U.S. HOUSE OF REPRESENTATIVES
CURTIS A. PRINS,
STAFF DIRECTOR
NINETY-SIXTH CONGRESS
SUBCOMMITTEE ON CONSUMER AFFAIRS
TELEPHONE: 225-9181
OF THE
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
ROOM 212 HOUSE OFFICE BUILDING ANNEX
WASHINGTON, D.C. 20515
November 10, IMO
Honorable Paul A. Volcker
Cl ariman
Federal Reserve Board
20th Street & Constitution Avenue, N.W.
Washington, D.C. 20551
c,‘
RE:
EFT-2
Dear Mr. Chairman:
I have reviewed the proposed official staff commentary on Regulation E.
Overall, it appears the cormentary is helpful in clarifying various provisions
of Regulation E.
However, I strongly disagree with the question and answer designated as 9-50
which reads as follows:
0-50
Q:
Is a financial institution required to update a passbook every time
the consumer presents it (for example, when the consumer uses the
passbook to make a deposit or withdrawal)?
A:
No. The institution need only update the passbook (by entering the
amount and date of preauthorized credits) when the consumer presenting
it requests updating. [5 205.0(c)]
This answer is contrary to both the regulation 205.9(c) and the Electronic
Fund Transfer Act [section COG(d)]. Both the regulation and the statute expressly
require disclosure of the amount and date of each transfer "upon presentation,"
rather than only "upon request," as the proposed commentary provides. This require
disclosure is in place of supplying the consumer with a periodic statement. Consequently, this is important documentation which it is essential the consumer receive
For these reasons, I believe this corrirntary answer should be reconsidered
and changed so that it is consistent with the law and the regulation.
With every best wish,
Sincerely,
Frank Annunzio
Chairman
\
.•
• of GOVe
.
'
•
R4,•.
0•
DOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
November 26, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Bill Nichols
House of Representatives
Washington, D. C. 20515
Dear Mr. Nichols:
Thank you for your letter of November 17,
concerning
the classes of depositors eligible to
maintain NOW accounts.
As you are aware, the purpose of the Cons
umer Checking Account
Equity Act of 1980 is to permit deposito
ry institutions throughout the nation to offer NOW accounts
by extending NOW account
authority beyond New England, New York
and New Jersey. The
statutory language adopted by Congress
parallels the regulations
previously adopted by the Board and the
FDIC concerning NOW
account eligibility.
The summary prepared by the Board's staf
f presents a
compilation of the numerous interpretati
ons and rulings adopted
by the Board over the years concerni
ng what activities are operated
primarily for religious, philanthropic,
charitable, educational
or other similar purposes. The summary
format was used in order
to alleviate the need for member bank
s to sift through numerous
pages of textual materials in order
to determine whether a
particular type of 'entity is qualified
to maintain a NOW account.
We believe that this should simplify the
ability of institutions
to comply with the NOW account prov
isions of the Act.
You indicate concern with certain of
the Board's rulings
on who is eligible to maintain NOW
accounts. The ease with which
the institution could attribute the
funds to the business organization is a key element in determining
whether a NOW account could
be maintained. For example, a husb
and and wife operating an
unincorporated business are permitted
to maintain a NOW account
because in many instances the checking
account of the family is
used for business purposes. It woul
d prove burdensome and difficult
to require the separation of the fami
ly's funds into those used
for personal expenses and those used
for business purposes. A
partnership, however, is a separate lega
l entity that typically
possesses a separate deposit account used
solely for business
purposes. The same rationale applies
to the treatment of a sole
proprietorship and an incorporated
entity such as a professional
corporation owned by one person. A
further discussion of other
The Honorable Bill Nichols
Page Two
NOW account categories you raised
in your letter can be found in
paragraphs 3080 through 3106 of the
Board's Published Interpretations, a copy of which is enclos
ed for your information. To
change these interpretations at
this time would have the effect
of disadvantaging institutions tha
t have established longstanding
NOW account relationships with
these entities. We believe that
the categories previously adopte
d by the Board are consistent
with Congressional intent, partic
ularly since the statutory
language is derived from the Boa
rd's NOW account regulation.
You also requested that the Dep
ository Institutions
Deregulation Committee adopt uni
form regulations concerning NOW
account eligibility. While the
jurisdiction of the DIDC is quite
broad in the area of the paymen
t of interest on deposits, it
does
not extend to definitional mat
ters such as these. The author
ity
to define eligible NOW account
depositors remains with the agenci
es
themselves. In this regard, in
the interests of uniformity,
the
FDIC and Federal Home Loan Bank
Board have adopted positions
similar to those of the Board's
with respect to NOW account
eligibility. I believe that thi
s approach in arriving at a
coordinated position is more con
sistent with the objective of
deregulation and is preferable to
that of adopting additional
regulations that have the potent
ial for disrupting existing
relationships between depository
institutions and NOW account
customers.
We appreci,ate your interest in
this matter.
let me know if I can be of fur
ther assistance.
Sincerely,
Enclosures
(ws/tn (07413)
C; 0r. Schwartz
mitaXardt
Lova Rocords (2)
Please
December 1. 1980
The Honorable Thomas b. Lvans, Jr.
ilouse of Representatives
Washin4ton, L.C.
20515
Dear Ir. Ivens.
The board has been working hard to simplify tht Truth
in Lending requirements, and I wanted to bring to your attention
the Loerd's recent proposals in this area. In May, we issued
a first redraft of Regulation
to carry out the Truth in
LerwIng Silx,plification and Reform Act. t:asect upon the conmerts
received, and a cood deal of additional work here at Vie joard,
we have just propose a second draft for further comment vitich
should move us further toward simplification. Not only should
col...kliance
.
Lie much simpler, but we truly believe that the
chaes4es sugciested will benefit consumers by focusing on dis
closures ir the everyday types of consumer transactions, ana
by directing enforcer.ent more toward substance rather than
technicalities.
The Regulation is, however, still very formidable
looking. Unfortunately, Regulation 2. cannot ever be a short,
sizple doctri,ent. Nevertheless, we believe that the proposal
represents some substantial improvewents. The "enclosed summary will ciive you a feeling for how we went aLout the task
of simplifying the Regulation, and why we think it will
venefit everyone concerned.
We would, of course, be delighted to have your
comxents.
Sincerely,
saul A, Volcket
1.nclosure
GLG:DJW pjt
bcc; Mr. Garwood
Mrs. mallardi (2)
• 1- 11"4
•
• • •,
..
•%.0
BOARD OF GOVERNORS
GOt/4,.•
OF THE
:6
FEDERAL RESERVE SYSTEM
•
WASHINGTON, D. C. 20551
December I, 1980
PAUL A. VOLCKER
CHAIRMAN
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:
As you know, the Board has been working hard to
improve
Regulation Z pursuant to the Truth in Lending Simp
lification and Reform
Act. The Board issued a proposal for comment
last May, and we appreciated
receiving your views. We have done a good deal
of additional work toward
further simplification, and have reissued the prop
osal for further public
comment. I wanted to make sure that you personal
ly received a copy. In
line with your earlier comments, we have elim
inated the concept of "alternate
shopping disclosures."
The Board has made a number of new proposals. As I'm
sure you
well know, no real improvements can be made with
out sacrificing at least
some of the technical information now provided
. Thus, it will be easy to
point to individual circumstances in which cons
umers will receive somewhat
less disclosure than before. However, we believe
that the proposal carries
out the purpose of the Act to effectively info
rm consumers about the cost
of credit at the same time that it reduces the burd
ens of compliance-particularly on small business. We have trie
d to retain the important
protections under the Act, while directing it more towa
rd clear, easy-tounderstand disclosures for the everyday common type
s of credit transactions.
In addition, enforcement under the proposal can be dire
cted more to matters
of substance rather than technicalities. This shou
ld also benefit consumers.
The enclosed summary will give you a feeling for how
we went
about the task of simplifying the Regulation, and why
we think it will
benefit everyone concerned.
As always, we will welcome your thoughts.
Sincerely,
ad elpitisii
Enclosure
tfth taWci4,
co-itettaxemxil
/-eZA A-uu.g.ti4
U-
•
.•
• of GOVt• •
R •
•
-filey,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
•0
• -n
WASHINGTON, DC. 20551
•
'.A L RF-$'•••
December 1, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Jake Garn
United States Senate
Washington, D. C. 20510
Dear Senator Garn:
In view of your interest in simplifying the
Truth in Lending
requirements, I wanted to personally brin
g to your attention the Board's
recent proposals in this area. In May, we
issued a first redraft of
Regulation Z to carry out the Truth in Lending
Simplification and Reform
Act. Based upon the comments received, and
a good deal of additional
work here at the Board, we have just proposed
a second draft for further
comment which should move us further towa
rd simplification. Not only
should compliance be much simpler, but we
truly believe that the changes
suggested will benefit consumers by focusing
on disclosures in the
everyday types of consumer transactions, and
by directing enforcement
more toward substance rather than technicaliti
es.
The Regulation is, however, still very form
idable looking.
Unfortunately, Regulation Z cannot ever be
a short, simple document.
Nevertheless, we believe that the proposal
represents some substantial
improvements. The enclosed summary will give
you a feeling for how we
went about the task of simplifying the Regu
lation, and why we think it
will benefit everyone concerned.
We would, of course, be delighted to have
your comments.
Sincerely,
Enclosure
/awe .
tiv
ceaat.;
cs-ao tve-v‘i-!
//
ftvu3,
•
Olet.e.4,t4
•• •
.• ofGotiti;•.
BOARD OF GOVERNORS
*co
OFTHE
FEDERAL RESERVE SYSTEM
*0
WASHINGTON, D. C. 20561
I
'1A L Ft?..5" •
•.. •.• •
December I, 1980
RAUL A. VOLCKER
CHAIRMAN
The Honorable William Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman Proxmire:
In view of your interest in simplifying the Truth in Lend
ing
requirements, I wanted to personally bring to your
attention the Board's
recent proposals in this area. In May, we issued a
first redraft of
Regulation Z to carry out the Truth in Lending Simp
lification and Reform
Act. Based upon the comments received, and a good
deal of additional
work here at the Board, we have just proposed a seco
nd draft for further
comment which should move us further toward simplifi
cation. Not only
should compliance be much simpler, but we truly believe
that the chanIII- sted will benefit consumers by focusing on
disclosures in the
everyday types of consumer transactions, and by dire
cting enforcement
more toward substance rather than technicaes.
The Regulation is, however, still very formidable
looking.
Unfortunately, Regulation Z cannot ever be a short, simp
le document.
Nevertheless, we believe that the proposal represen
ts some substantial
improvements. The enclosed summary will give you a
feeling for how we
went about the task of simplifying the Regulation,
and why we think it
will benefit everyone concerned.
We would, of course, be delighted to have your comm
ents.
Sincerely,
/f,firtIuitla
Enclosure
;.,
/ sf-OD
/4v
•
.*
•• f• GOvt ••
R4,•.
o•
.•
.
•:
17
'0
•-n
BOARD
OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
.1RAL
• • ..• •
December 1, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Russell B. Long
United States Senate
Washington, D. C. 20510
Dear Senator Long:
Thank you for your letter of November 21 reco
mmending
that Mr. Thomas C. Jeffery be considered for appo
intment as a
Director of the New Orleans Branch of the Fede
ral Reserve Bank
of Atlanta. The Federal Reserve is very much
interested in
talented individuals from a wide variety
of backgrounds for
possible service as Reserve Bank Directors.
We shall keep Mr. Jeffery's name in mind as a possible candidate for the New Orleans Branch Boar
d, and your
recommendation has also been sent to Mr.
William F. Ford,
President of the Federal Reserve Bank of
Atlanta, for consideration of Mr. Jeffery as a candidate for
a Reserve Bank
appointed Director of the New Orleans Branch,
I appreciate your interest in identifying
qualified
individuals for Reserve Bank Directors.
Sincerely,
(WHW:DJW):vcd (#V-420)
bcc. Mr. Ford--FRBk. of Atlanta (w/copy of incoming)
Mr. Wallace
Mrs. 1,a1lardi (2)
F(USSELL D. LONG
• LOUISIANA
•
•
'ZCnifeb Ziafez senate
WASHINGTON. D.C. 20510
November 21, 1980
The Honorable Paul Volcker
Chairman, Board of Governors
Federal Reserve System
Constitution Avenue
20551
Washington, D. C.
Dear Chairman Volcker:
I understand Mr. Thomas C. Jeffery is being considered
for appointment to the Class C Director position in the New
Orleans Branch Federal Reserve Bank of Atlanta.
While I do not know Mr. Jeffery personally, he comes
highly recommended by Mr. Edgar L. Fontaine of the Louisiana
Credit Union League, copy of his letter enclosed. Therefore,
I would appreciate your giving his qualifications for this
position full consideration.
With every good wish, I am
Sincerely yours,
cc:
•
Mr. Eric Hingst
Federal Reserve Bank
P. 0. Box 1731
30301
Atlanta, Georgia
r"PIPPFP"'""wommigromoirwwasprw.--wwwirwwwwfwe
•
a /I
•
toffilea
./ea emaliZ 14elo" it Zetzgwe
Ti
SUITE 804 • 144D CANAL ST • NEW ORLEANS. LA /0112• PHONE (504)581-4251 •
1.K10 662-7881
EDGAR L. FONTAINE
1.6.A• • ,g (").•pc tOf
October 2,1980
Russell B. Long
and
J. Bennett Johnston
Louisiana United States Senators
Senate Office Building
Washington, D. C. 20510
Dear Senators Long and Johnston:
Recently the credit unions of our Nation have been brought,
to an extent,
under the Jurisdiction of the Federal Reserve S>stem as a resul
t of
statutory changes that now permit the use of share drafts by
both federal
and state chartered credit unions. While we were eager to inclu
de the
use of share drafts in our credit unions, many of us have been
concerned
for the need of the Federal Reserve System applying additional
rules and
regulations to govern credit union conduct in this respect.
To offset this growing concern, there have been suggestions
on the part
of the Federal Reserve Board to include credit union perso
nalities in
the overall administration of the Federal Reserve System, and
principally
in the area of Class C Director positions of the Reserve
Bank branches.
The League Organization has proposed, among several
other nominees, the
services of Thomas C. Jeffery as a nominee for a Class C Direc
tor position
in the New Orleans branch. The purpose of this lette
r, therefore, is to
introduce to both of you to this proposition, cite the credential
s and
qualifications of Mr. Jeffery, and to respectfully reque
st your assistance
.in bringing about the acceptance of this nomination.
Mr. Jeffery is the Manager of Development and Licensing Divis
ion of the
Pittsburgh Plate Glass Industries, Inc., 'Chemical Division,
U.S., located
in Lake Charles, Louisiana. Mr. Jeffery has achieved renow
n and distinction
In his chosen profession as a chemical engineer, and is
iurmer oarionai
Chairman of the Industrial Electrolytic Division of the
Electra Chemical
Society, holder of six (6) U.S. Patents and numerous forei
gn patents in the
industrial countries of the World, and this resulted in addit
ional dimensior:
regarding international financial pressures.
Apart from the qualifications and outstanding working exper
ience, Mr. Jeffer
represents in his chosen profession and occupation he
has played an
outstanding role within the Louisiana credit union devel
opment by virtue
of his leadership position in our Legislative and Government
al Affairs, and
as the Chairman of the League's Student Loan Program Commi
ttee for the past
fifteen (15) years.
t• I 2 •
Fae
Snators Long and Johnston
October 2,1980
The quality of conduct of the credit union development is largely
dependent upon the talent, dedication abd volunteer services offered
by many capable credit union leaders. These leaders are chosen from
the credit union of origin and as a member of the PPG Employees Credit
Union of Lake Charles, Mr. Jeffery has been chosen from this group for
the statewide leadership roles that he presently represents. The PPG
Employees Credit Union was organized in 1952 and serves the economic
needs of more than 1800 employee members of the Pittsburgh Plate Glass
Industries of Lake Charles.
Within the credit union development of the Lake Charles community, Mr.
Jeffery serves actively in the local Chapter Organization and lends
his specialized academic and engineering knowledge and position to the
conduct of their community programs. He is especially included among the
officials whose leadership merits the high esteem that is held for the
credit unions of the Lake Charles area.
The activities of the League's Student Loan Program are a paramount
concern of this Headquarters Organization, and the statewide Committee
headed by Mr. Jeffery responds to the many and varied developments that
occur in our efforts to provide economic assistance to young men and
women who aspire to college and university education, but who lack
financial means. Mr. Jeffery also served as Vice Chairman of the
Louisiana Higher Education Assistance Commission whose composition
included Bank Presidents.
The advice in this letter, we believe, lends evidence of the esteem we
hold for the outstanding contributions made to the Louisiana credit union
development on the part of Mr. Jeffery, who, without monetary gain,lends
continuous service on behalf of our efforts for achieving economic
betterment for the thousands of our citizens.who participate in Louisiana
credit unions.
We are most hopeful that the
mentioned will be considered
participation in the affairs
Charles Credit Union Chapter
nomination of Mr. Jeffery for the position
in light of his continuous leadership and
of the PPG Employees Credit Union, the Lake
and the Louisiana Credit Union League.
Sin •rely,
Edgar L. Fontaine
naging Director
CC: Board of Directors - rpc Employees CU
Officials - Lake Charles Credit Union Chapter
League Student Loan Program Committee
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
AUHO
•.A'esc
;
••.RA
1. L IIESt
:•
WASHINGTON, D. C. 20551
December 3, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Berkley
Bedell
House of Representati
ves
Washington, D. C. 20
515
Dear Mr. Bedell:
I am pleased to enclos
e a copy of the most
Country Exposure Lend
recent
ing Survey, which show
s foreign lending
by large United States
banks during the firs
t half of 1980.
The survey, conducted
semi-annually, covers
credits to (claims
on) foreign residents
held at all domestic
and foreign offices
of 143 United States
banking organizations.
In addition to
information on types
of borrowers, loan ma
turities, and loan
guarantees, the survey
provides information
on commitments
to provide funds to fo
reigners. The survey
data are given
on a country-by-country
basis.
I have forwarded copi
es of this survey to
Chairmen of the House
the
and Senate Banking Co
mm
it
te
es, the
Senate Foreign Relati
ons Committee, and th
e
Ho
us
e
Affairs Committee,
Foreign
Sincerely,
S/Paul A. 'OLCke(
Enclosure
CO:DJW:vcd
bcc:
Mike Martinson
Mrs. Mallardi (2)‘•/
..•••...
.
:
t4
•• Of GOV,
BOARD
.••
OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
•.RAL RES .•
•....•
December 3, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable William Proxmi
re
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C.
20510
Dear Chairman Proxmire:
In view of past Congressiona
l interest in this
area, I am pleased to enclos
e a copy of the most recent
Country Exposure Lending Sur
vey, which shows foreign
lending by large United Sta
tes banks during the first
half of 1980. The survey
, conducted semi-annually,
covers credits to (claims
on) foreign residents held
at all domestic and foreig
n offices of 143 United States
banking organizations. In
addition to information on
types of borrowers, loan
maturities, and loan guarantees,
the survey provide inform
ation on commitments to provid
e
funds to foreigners. The
survey data are given on a
country-by-country basis.
Sincerely,
S/Paul A. Vpida
Enclosure
IDENTICAL LETTERS TO CHAIRMAN REUSS
(HOUSE BANKING),
CHAIRMAN CHURCH (SENATE FOREIGN REL
ATIONS)
CHAIRMAN ZABLOCKI (HOUSE FOREIGN AFF
AIRS)
CO:DJW:vcd
bcc:
Mike Martinson
Mrs, Mallardi
•
4.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
December 4, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Nancy Landon Kassebaum
United States Senate
Washington, D.C.
20510
Dear Nancy:
Thank you for your letter of November 19, regarding
Federal Reserve services to Wichita, Kansas, with which you
enclosed a copy of a letter from Mr. C. Q. Chandler, President
of the First National Bank of Wichita. Mr. Chandler's letter
had previously been received during the comment period following
publication in the Federal Register of proposed prices for
Federal Reserve Bank services. It is our intent to consider
all comments before final regulations and prices are issued
.
Mr. Chandler's letter raises issues in which bankers
throughout the nation are interested. Since the importance of
these issues will increase after Federal Reserve Bank services
are priced, I welcome this opportunity to explain the perspe
ctive
of the Federal Reserve.
It is common banking practice to set deadlines which
define the latest time at which checks may be deposited to receiv
e
credit according to published availability schedules. Normally,
in Federal Reserve oiDerations, the deposit deadline is set to
provide just enough time to process the expected number of checks
and to transport and deliver them timely to the banks on which
they are drawn ("payor banks").
In their attempt to reconcile the needs of both collecting
and payor banks, the Federal Reserve Banks have established
deposit
deadlines which are based not on the location of the collecting
bank, but rather, on factors which include the location of the
banks on which the checks are drawn, available transportation,
and
required processing time. Each Federal Reserve office has deposi
t
deadlines which are applicable uniformly to all banks in the
nation interested in obtaining check collection services throug
h
that office. Unfortunately there are no inexpensive solutions
to the problems of transporting checks long distances.
We expect
that the impact of location will be lessened through greate
r use
of automated clearinghouses (ACH's) and when some form of nation
wide electronic check collection (which eliminates the
physical
movement of paper) becomes feasible. In the interim, howeve
r,
manipulation of deposit deadlines would not be consistent with
the Federal Reserve's objective of improving the efficiency
of
the payments system.
The Honorable Nancy La
ndon Kassebaum
Page Two
In the past, the Boar
d has approved a numb
from the Reserve Bank
er of proposals
s to accelerate the
ch
ec
k collection proc
by establishing regi
ess
onal check processi
ng
ce
nters ("RCPC's").
have been informed
I
by my staff that prev
ious studies conducte
by the Federal Rese
d
rve Bank of Kansas Ci
ty concluded that a
check processing cent
regional
er ("RCPC") to serv
e the banks in Wichit
could not be cost ju
a
stified. Thus, no
proposal has been su
for approval to the
bmitted
Board. However, I un
derstand that recent
as a result of meetin
ly,
gs between Wichita
bankers and senior
ment at the Federa
managel Reserve Bank of Ka
nsas City, a joint st
will be conducted
udy
to determine if curr
ent banking conditio
warrant a Federal Re
ns
serve presence in
Wichita at this time.
Board involvement in
this decision will
await the outcome of
new feasibility st
the
udy.
Congress specifically
sought to stimulate
competition for bank
private sector
ing services when it
established pricing
requirements for the
Federal Reserve in
the Monetary Control
of 1980. We have be
Act
en told by a number
of banks across the
that the additional
nation
cost of Federal Re
serve pricing will
in the expansion of
result
local clearing arra
ngements. Because th
arrangements are priv
ese
ate sector agreemen
ts, it would be in
priate for the Fede
ap
proral Reserve to prov
ide compensation or
considerations as su
ot
her
ggested in Mr. Chandl
er's letter.
The matter of main
taining competitive
financial institutio
equity among
ns is a subject abou
t which the Board is
deeply concerned, ari
'd the availability
and cost of Reserve
operating services
Bank
is important in th
is context. Within
constraints of differ
the
ent geography and di
fferent banking laws
and customs, the Syst
em is attempting to
provide equitable ce
banking services wher
ntral
e they are needed
. The practicality
has always been an
of cost
important factor in
bank operations, and
the implementation
with
of pricing of Fede
ral Reserve services
will assume greater
, it
significance.
I appreciate this op
portunity to comment
issues facing the Fe
on some of the
deral Reserve in im
pl
em
enting the Monetary
Control Act of 1980
. I hope that this
in
fo
to you.
rmation will be helpfu
l
Sincerely,
MJH:DJW:pjt (#V-414)
bcc: Mr. Hallmon
Mr. Wallace
Lee Adams
Mrs. Mallardi (2)
Henry Czerwinski, 1st V.P. Kansas City FRBa
nk
sgai
HOWARD W. CANNON, WV, CHAIRMAN
•
WAR-k
'
N O. MAGNUSON, WASH.
PtJSEit fl. LONG, LA.
[FINEST f'. HOLLINGS, S.C.
DANIEL K. I•ntPrE, HAWAII
ADLAI E. STIN,ENSON.
Wf psDrLL H. rem', KY.
DONALD W. Ri
.LF, JR., MICH.
PcI) rAcyvvoon. OREG.
B ARIly GOLDWATER. Ant?
v.Ar1171004 H. SCHMITT, N. MEX.
JOHN C. DANFORTH, MO.
NANCY LANDON KASSEBAum, KANs.
LArmy r
SCLER. S. OAK
JOHN W. WARNER, VA. '
J. JAMES EXoN. NI IIR.
HOWELL HEFLIN, ALA.
'iCnikb ,3fafez
AUBRrY L. SARVIS, ST •re- DIRECTOR AND CHIEF COUNSEL
E!IWIN K. HALL, GrNf RAL COUW,CL
Wilt I kg .4 PIEFFN':I. PH ER, MIPaortiTy STAFF DIRECTOR
ena e
COMMITTEE ON COMMERCE. SCIENCE.
AND TRANSPORTATION
WASHINGTON, D.C. 20510
November 19, 1980
Mr. Paul A. Volcker, Chairman
Federal Reserve System
20th Street N.W. and Constitution
Washington, D.C. 20551
Dear Paul:
Enclosed you will find a copy of a letter from Mr. C. Q. Chandler,
President of the First National Bank of Wichita, Kansas, addressed to
Mr. Theodore E. Allison of the Federal Reserve Board of Governors.
Mr. Chandler sent me a copy of this letter and it outlines what I
believe to be some legitimate concerns on his part regarding the pricing
of Federal Reserve services to a Wichita bank. You will note, that he
alleges that because of rules established by the Kansas City Federal
Reserve, Wichita banks pay a considerable premium, as compared to the cost
of the same services for banks located in or near cities with a Federal
Reserve Bank or branch. He also notes some significant price differentials
between Kansas City and Wichita banks with regard to charges made for Federal
Reserve services. It appears to me that Mr. Chandler's concerns are legitimate and he has suggested as a possible solution the location of a branch
or remote check processing center in the area. I would very much appreciate
being advised of the Fed's position with regard to both the problems Mr.
Chandler outlines, and suggestions he has made.
Warmest regards,
Nancy Landon Kassebaum
United States Senator
'
October 28, 1()M)
Mr. Theodore E. Allison
Secretary
Board of Governors of the
Federal Reserve Svsleiii
Washington, D. C.
elr Mr.
!(
I.,xplicit pricing of services offered
IA the Federal Reserve System.
Wichita is the largest city in Kaw;as aryl provides the State with the largest
percentage of ts banking services. Many banks in Kansas, Oklahoma,
New Mexico, Texas and Eastern Color:ido use Wichita banks as principal
correspondents, and many corporations headquarter their operations in
the vicinity. The volume of checks processed through Wichita is very
and for this reason, check processing (barges are of major importance to us,
The Yansas City Fed is 200 miles from Wichita awl, yet, we are required
to meet the same (or earlier) deadlines for check processing as the banks
in Kansas City. We have for years attempted to find a solution to this
problem, such as having a branch or RCPC located in our area but, up to
now, the only one acceptable has been for us to stop our computer runs
early in the day and employ air couriers to meet the deadlines imposed.
\Ye are, therefore, even thoueh a Fed member, already paying a considerable premium for Fed services because of our remote location, as (0TH to the cost of the same services for banks located in or near cities
with a Federal Reserve Bank or branch.
Our particular bank will process approxiMately nine million items this
yeaI- valued at over Five Billion Dollars, which
never go through tic
Fed, and for which we receive no consideration fur having kept out of the
Fed work flow.
•
`.11i:;on
I
Altho,Agh living costs do not L;upport !hi• premise that Ean:-3as and Missouri
are among the UL()St ex-pensi% c place.:; to live in the United States, we note
that the prices at the Kansas City l'ed arc among the highest. Of the 23
prices quoted for 'Fed city items, our I nsa s City Fed price Of 1.7 cents
is exceeded only by New York, Philadelphia and Chik:ag...,. Of the 2.7 price:,
(picoed for y'e d e()unt rv ar,.d 1:(71q:
tt;:r Kansa:.-; City Fed price of
2.4 cents is excet (led only Ir) Ne\k- York .:1(1 Chicago. We estimate that
our 7.dditional ce:=t JOF check processing due to this pricing schedule will
ext ccd $ IOW OGO. 00.
The (.- tir rent: v and coin prit - in t,,, is similarly difficult to explain. The
Kansas City Yeti has pr,)posed these comparativc•(•harges for our bank
:111(1 Ea.nsas City
C11 r rent
F.ans
ichis..t
Coin
Per Stop
II
1.7.1
t e t ha! I he ch,tr...:0 !nade per stop in V.•ii hita
1
St;tte, and
prt..tter L1:1 .1 1;1 r(40:-;
r %)
t i'r
Ow
'HI the (.:11ite.ni
illatie by brant
hes
. :;it-is;i:• City Ve(i„
,
4* the 1.,
Although I recognize that most hanks will, in fact, pass these additional
costs on to the consumer, and that the small taxpayer will ultimately
carry the hurden, it seems most discriminatory to me tor the little taxpayer in Nans:ts t D:tv 111., 1•e th,‘
r! in Missouri, 011ahoma,
'),•(
• olormlo
r
t•.tr (1(.( i Hon in which his
k ., )11)1
.\\
* C ,ra
1
!tit
S \V(' r
'
)t" 01
11.1 ."
n.
t't)nSir : t
voa make your
I strongly ur..;(.• iiat
regulations, that you
make every effort to retoo\t. the ili:-:crintinA tory pricintz, ‘vhorever possible.
Sincerely you rs,
C. Q. Clmncller
President and (. 11.1i1- 111.(11 ot tin
loa rci
••••
...,;ovGo_v_t/e4,
ROARO OF GOVERNORL
OF 'HE
-.••
FEDERAL RESERVE SYSTEM
WASHINGTON, D. G. 20551
PAUL A. VOLCKER
December 9, 1980
CHAIRMAN
The Honorable Harrison A. Williams, Jr.
Chairman
Subcommittee on Housing and Urban Affairs
Committee on Banking, Housing and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman Williams:
Thank you for your letter of November 10 regarding the
actions the Board intends to take in response to the enactment
of Section 603 of the Housing and Community Development Act of
1980.
The Board understands the general concern Congress
has expressed over the plight of individuals who find themselves
displaced as a result of the codiversion of rental housing to
condominiums and cooperative housing, and who have difficulty
in locating equivalent, adequate shelter at reasonable cost.
We plan to inform each of the banks under our direct supervisory authority of this general expression of public policy
as well as the sense of the relevant legislative history.
In addition, the staffs of the Board and of the
Federal Reserve Banks participate in many meetings and seminars
with community groups and others interested in local investment,
and our participants in these sessions will specifically mention
the sense of Congress embodied in Section 603. Our examiners
also contact civic, religious and neighborhood based community
organizations in seeking to ascertain the credit needs of the
community in the course of the examination process, and they
will be directed to inform these organizations of this information. In particular instances, state member banks found to be
participating in the financing of conversions will be counseled
with respect to the expression of public policy contained in
Section 603.
While the spirit and intent of the Congressional
statement are clear, its applicability in particular instances
will depend on, a variety of procedural safeguards and individual
circumstances. It would be extremely difficult, without much
1110
The Honorable Harrison A. Willi. ms, Jr.
Paye TWo
•
more precise guidance from Congress, to draw up specific guidelines for judging what is acceptable in an area that significantly
affects the rights of both landlords and tenants. Indeed, the
sense of Congress set forth in Section 603 contains no mention
of enforcement nor any specific delegation of enforcement authority. It is our understanding that the absence of enforcement provisions'reflected a decision by Congress that it did
not intend that specific actions with the force of regulation
or formal administrative procedures be undertaken.
It appears that there is some ambiguity in the legislative history regarding the role of the Community Reinvestment
Act in the enforcement of Section 603. The legislative history
reflected in the Senate debates indicated that if a lender acted
in a Way deemed to be contrary to the sense of the Congress,
it would be taken into account in assessing the lender's record
unS er the Community Reinvestment Act. The legislative history
in the House, as reflected in the discussion between Messrs. Wylie
and Reuss on the House floor, indicates that the Congress did not
intend that Section 603 be taken into account under the Community
Reinvestment Act.
Our examiners will continue to assess the record of a
state member bank in meeting the credit needs of its local community by using the inter-agency assessment factors and examination procedures. I would expect that the examiners will continue
to be sensitive to the problems of displacement and that they
will recognize and give credit to lenders who participate in
innovative methods of revitalizing neighborhoods in ways which
can help minimize displacement of residents. We have informed
our examiners about the programs of the Neighborhood Reinvestment
Corporation, particularly Neighborhood Housing Services, as well
as about (jovernment programs such as HUD's Section 8 program, so
that they will be knowledgeable about ways to help minimize
displacement. In training our examiners, we certainly intend
to continue to familiarize them with these and other programs
sS that they can assist state member banks to more effectively
helS meet the credit needs of their communities.
You asked on page 3 of your letter for my personal
view about whether an increasing share of national resources
should be devoted toward conversions of rental units to condominium or cooperative ownership. While I claim no special
expertise on real estate conversions, it seems to me that the
issue requires a full assessment of benefits as well as costs,
particularly from the vantage point of the economy as a whole.
Consideration also could be given to the consequences tl,at
Th(, Honotoklc HarLison A. Willims, Jr.
Pag(, Three
structure
would stem from ottrnotives to conversion within the
of our general economic system.
incorm,)tinn refTnn7,ive
hopn thot. you will find thi
If I can be of furthnr assistance, please
Lo your questions.
contact me.
Sincerely,
Waal MckeE
KB:RP:yea (#V-410)
bcc:
Mt. Filler
Nr. Baebel
Ms. Hart
Mrs. Mallardi (2)
-
--
-
trrirr
z
HARRISON A. WIU4AMIlk JR.. NJ., CHAIRMAN
WILLIAM PROXt.iIRE. WIS.
ALAN CRANSTON. CALIF.
ROBERT MORGAN. N.C.
DONALD W. RIEGLE. JR.. MICH.
PAUL S. SARBANES. MD.
•
JAKE DARN. IJT'AH
JOHN TOWER. TEX.
JOHN HEINE. PA.
RICHARD G. LUGAR, IND.
ALBERT C. riscparra, STAFF DIRIETOR
JESSELIS E. BARLOW, MINORITY STAFF DIRECTOR
•
"Zertifeb Zfalcz Zenate
SUBCOMMITTEE ON HOUSING r e
AND URBAN AFFAIRS
WASHINGTON. D.C. 20510
I
r't
November 10, 1980
Mr. Paul A. Volcker
Chairman
Federal Reserve System
20th Street & Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Mr. Volcker:
As you know, the President signed the Housing and
Community Development Act of 1980 into law on October 8th.
I am writing to direct your attention to Section 603 of the
Act, which stresses the important role to be played by
Federally insured lenders in mitigating displacement caused
by conversions of rental housing. Section 603 states:
"It is the sense of the Congress that
lending by Federally insured institutions for
the conversions of rental housing should be
discouraged where there are adverse impacts on
housing opportunities of the low- and moderate income and elderly and handicapped tenants involved."
It is my hope and belief that this important and
explicit statement of the sense of the Congress will aid
your efforts to promote further the anti-displacement policy
which is implicitly contained within the Community Rein- .
vestment Act (CRA) and its implementing regulations.
The incorporation of Section 603 within the existing
CRA examination procedures should not be difficult. I have
noted that assessment factor (L) of CRA's implementing
regulations directs a focus to: "Other factors that in the
agency's judgment reasonably bear upon the extent to which
the institution is helping to meet the credit needs of its
entire community." The uniform examination procedures for
CRA, developed and issued by the four Federal financial
supervisory hgencies, amplify the meaning of factor (L) by
stating that pertinent factors may include "whether the
institution's policies promote efforts to assist existing
residents in neighborhoods undergoing a process of rein- •
vestment and change."
Mr. Paul A. Volcker
November 10, 1980
Page Two
Clearly, loans which assist current residents to avoid
displacement would result in a positive rating under this
factor, while failure to extend such loans could indicate
that an institution is failing to meet adequately the credit
needs of its community. Section 603 of the 1980 Act is
simply the corollary to this existing criteria, stating that
lending for the purchase of a rental property for conversion,
or commitments of mortgage availability for the individual
.
units being marketed within such a property, are activities
which should be discouraged where they promote and facilitate
the displacement of low- and moderate-income tenants. I am
in full accord with Senator Proxmire's declaration, made
during the debate preceding Senate passage of the Conference
Report on S. 2719, that "if a lender acted contrary to this
sense of the Congress, clearly this would have to be taken
into account in assessing such lender's record for Community
Reinvestment Act purposes."
A determination as to whether adverse impacts result
from a specific conversion will, of course, be dependent on
particular marketing practices and terms surrounding the
conversion, local housing conditions, and other factors.
However, it is my view that the definition of "adverse
effects of displacement" utilized by the Department of
Housing and Urban Development in its June 1980 study of
conversions -- "movement to rental housing that is of
similar or lower quality at higher cost, or of lower quality
at equivalent cost" -- is certainly an excellent point of
departure for such an evaluation. I am particularly concerned
about HUD's finding that households containing persons of
age sixty or older were 50 percent more likely than younger
households to suffer such adverse effects. This is particularly
disturbing in light of the strongly held opinion among aging
experts that forced uprooting of the elderly from their
neighborhoods, sever them from vital social support systems,
and can precipitate physical and psychological hardships.
Mr. Paul A. Volcker
November 10, 1980
Page Three
Although not directly related to Section 603 and CRA,
I also wish to raise a question in regard to HUD's finding
that the vast majority of conversions involve, at most, only
cosmetic alterations of existing multifamily housing stock.
In a time of rental housing crisis, should an increasingly
larger portion of the Nation's finite capital resources be
utilized to facilitate alterations of the legal status of
existing shelter; where such change diminishes affordability,
results in negligible qualitative improvement, and triggers
increased Federal tax expenditures to subsidize mortgage
interest and property taxes? Your view on this question of
deep concern will be greatly appreciated.
In closing, let me say that I look forward to hearing
from you regarding the actions you are planning to take in
response to Section 603 of the 1980 Housing Act, as well as
your general comments regarding implementation of CRA's
anti -displacement policy to date. Information received from
some citizens and public interest organizations suggests
that the Federal financial supervisory agencies should
consider more vigorous actions to discourage displacement.
I certainly hope to explore these important issues with you
further in the days ahead.
With best personal regards,
Sincerely,
rison A Williams,
HAW:pcsc
If-LW:AND J 1ST GUM MAIN. R.1.. CHAIRMAN
f RANK ANNLINzIO.
•AMES 0.4 NHANI 1Y. N.Y.
, KY.
CA RROt L 14014RARD.
Jf RRY M rAilf FICON, cAur.,
ASHt. f Y. OHIO
1HomAs
NORMAN F.
AMOURS. N.N.
JOHN J. CAVANALH:14. NEEIK.
JIM MAI TO.K. TLX.
JO•Wri-1 (3„
Y.'ALTER C. f ALINT ROY. D.C.
DOUG RA RNAR D. OA-
U.S. HOUSE OF FREPRESENTATIVES
CHAIM( Rs P. WYLIE. OHIO
HENRY J. HYDE. ILL.
GEORG(' HANSI N, IDAHO
JIM LEACH, IOWA
CA R ROLL A. EA NIPBELL. JR.. S.C.
CD BETHUNE. ARK.
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
SUPERVISION. REGULATION AND INSURANCE
OF THE
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
NINCTY-SIXTH CONGRESS
WASHINGTON, D.C. 20515
December 9, I,JI
Mr. Anthony M. Solomon
President
Federal Reserve Bank of New York
New York, New York 10045
Dear Mr. Solomon:
Thank you very much for your letter of December 3 discussing the
oPIeration of the discount window and your philosophy of how this window
should relate to thrift institutions.
However, I believe that Public Law 96-221, rather than past practices,
will be the governing factor in how the Federal Reserve System must
administer the discount window. That Act, as you recall, specifically states
that any depository institutions in which transaction or non-personal time
deposits are held "shall be entitled to the same discount and borrowing
privileges as member banks." P.L. 96-221 further instructs the Federal Reserve,
in administering the discount window, to take into consideration the special
needs of thrift institutions 11 consistent with their long-term asset portfolios
and sensitivity of such institutions to trends in national money markets."
In summary, the law clearly says (1) open the discount window to thrifts,
and (2) tailor the administration of the window to take into account the long-term
nature of the thrifts' portfolios.
I realize that the Federal Reserve has utilized the discount window
for a variety of purposes for the commercial banking industry and it is only
natural that an agency, now 67 years old, has surrounded the discount window
and other functions with what many may regard as inviolate tradition.
P.however, is now the law and the Federal Reserve, like the
entire financial community, must adjust to the requirements and changes mandated
by the Congress. I must say that the Federal Reserve was given the fullest
opportunity to participate in the hearings and other deliberations before
P. L. 96-221 was enacted with the new mandate for operation of the discount
winISw.
de
Mr. Anthony M. Solomon
December 9, 1980
Page Two
For a number of years I have been very interested in the manner in
which the discount window is utilized in the different Federal Reserve
districts and this current discussion over the extension of the window
to thrifts only serves to further whet my desire to learn how this window
,
can and should be administered. Dependent on other legislative schedules
think it may well be useful for this Committee or one of its Subcommittees
to study the discount window in detail in the next Congress, to determine
how and when it has been used in the past, and how it might be used in the
future taking into consideration the mandates of P. L. 96-221.
Since the law has been in effect since last March 31 and since it
Is reasonable to assume there are ongoing needs of the thrift industry
in your district, I would hope and trust that there woull be quick resolution
of any remaining questions regarding the operation of the discount window
under the new mandate.
Again, thank you very much for keeping me informed on the New York
Federal Reserve Bank and I am looking forward to learning how you implement
Public Law 96-221.
Sincerely,
. St Germain
nd U.
,h irman
FJStG:mLr
Lecv:-.L4Jr
101 190
The Honoranle eenry S. RC4Slit
Chairman
Committee on banking, Finance
and jrben Affairs
house of 14opresentatives
Weshineton, L.C.
20515
Dear Chairman Reuse:Thank you for your letter of Noveeber 20, regarding
the L.onitoring of compliance with Section 603 of tie HousInc
and Ce=unity Development Act of 1980.
It appears that there is some ambiguity in the legislative history regarding the role of the Community Reinvestment
Act in the enforcement of Section 6A. The lesislative history
reflected in the discussion between yourself an‘l Congressman
Wylie on trio souse floor indicates that tLe Congress did not
intend that Section 401 be taken into account under the Ce3runity Reinvestment Act. The legislative history ref1ecte..1
in tae Senate ee'estee indicated that if a lender acted in a
way deemed to i.;e contrary to the sense of the Congress, it would
oe taken into account in aasessincl the lender's record under
the Col:munity Reinvestment Act.
As I stated in my letter to you of Novelaber 3. 1980,
we intene to inform state member Lank* as well as community
organizations about the expression of public policy contained
in Zection 603. Wrier our examiners are examining banks under
our supervision, they will be inquiring whether the bank has
LAMA financinc conversions of rental property. We will counsel
state weber banks, which have had a part in financing those
,projects, about the sense of Congress an0 the legislative history
in Section 603. We anticipate that various sources, including
consumers and coimunity based organisations. will bring specific
exaliiples to our attention where conversions have had adverse
1. p
- act on low- and moderate-inemte tenante.
The examination troce6ures used in CPA examinations
call for the extv4iners to assess a bank's record of performance
The
kage Iwo
ilenry S.
&c•
by using twelve factor. (Alti factor calls for examiners to
assess, "other factors that, in the Voardis judgment reasonably
i:uar ion the extent to wnich a State v.eiziaer tanke is helping
to 7.eet the credit ncet4s of its entire community." The proceL,ures list several axei41es of the factors the Board had in
1-And, including ewhether the institution's policies prospote
e.Cforts to assist existing residents in neighborhoods undercing a process of reinvestcent and aanve." We have used
tais exarle as a way of teechinc our ehaminere to be *ensitive
to the proidlevis of displacement I;(> that they will recognise
anu(Ave credit to lenders who participate in innovative methods
of revitalixinsi neiborhoods in ways we.ich can help minimize
dis;Jacement of existing residents. We have informed our
exe:Linors about the proqrams of the Neichborhood Reinvestment
corporation, 1,articularly Neir;hborh000 housinc services, as
well ills governt proc;ra:as sucl, as 1..1D 1 s Section 8 program,
so tiiat they will I-4e knowledgeable about ways to minimise dis;v1acent. We intend to keep training our examiners shout
thus* an other prograns so they can assist state nemider banks
to or effectively help meet the credit needs of their coz-v.u-
If I can
I aope this has been responsive to your questions.
of further assistance, please contact re.
Sincerely,
SiPaul A. Iluicitec
JKB:pjt (V•417)
bcc:
r4 Llaeldel
k:rs. mallardi (2)%0/
,4Y n. REUSS, VVIS., CHAIRMAN
lk
L CHOMAS L. ASHLEY, OHIO
WILLIAM S. MOORI-IEAD, PA.
FERNA`10 J. ST Gr:RMAIN, R.I.
HENRY B. GONZALEZ. TEX.
Jost.rt4 G. MINIs14, N J.
FPANK A•'NUNTIO. ILL.
JAVIrS M. HANLEY, N.Y.
PARREN J. MITCHF_LL, MD.
•
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
%VALTER E. FAUNTROY. D.C.
STEFFIF.N L. NEAL, N C.
JERRY M. PATTEPCON. CALIF.
JAMES J. BLANCHARD, MICH.
CARROLL HUDrAf“;), .31.4.. Ny,
NINETY-SIXTH CONGRESS
2129 RAYBURN HOUSE
JOHN J. LAFALCE. N.Y.
GLADYS NOON SPELLMAN. MD.
LES AuCOIN. onro.
DAVID W. EVANS, IND.
NORMAN E. D'AMOURS, N H.
STANLEY N. LUNDINE, N.Y.
JOHN J. CAVANAUGH, NEBR.
MARY POSE OAKAR. OHIO
OrFICE
RUILC,ING
J. WILLIAM STANTON, OHIO
CHALMERS P. WYLIE. OHIO
STEWART B. McKINNEY, CONN.
GEORGE HANSEN. IDAHO
HENRY J. HYDE, ILL.
RICHARD KELLY. FLA.
JIM LEACH. IOWA
THOMAS B. EVANS. JR.. DEL.
S. WILLIAM GREEN, N.Y.
RON PAUL. TEX.
ED BETHUNE. ARK.
NORMAN D. SHUMWAY, CALIF.
CARROLL A. CAMPBELL, JR., S.C.
DON RITTER, PA.
WASHINGTON, D.C. 20515
JON HINSON, MISS.
223-412417
November 20, 1980
JIM MATTOX. TEX.
BRUCE F. VENT°. MINN.
DOUG BARNARD. GA.
WES WATKINS, OKLA.
ROBERT GARCIA, N.Y.
MIKE LOWRY. WASH.
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
20551
Washington, D. C.
Dear Chairman Volcker:
On October 15, 1980, Congressman St Germain and I wrote you
regarding section 603 of the Housing and Community Development Act
of 1980. In that letter, we posed three questions concerning your
plans for implementing section 603. I now have an additional question I would like you to answer: How do you intend to keep informed
of whether or not a financial institution makes loans in compliance
with section 603?
I would like you to describe your system for
monitoring the loans of your members to ensure that the spirit of
section 603 is being observed.
I note with interest Senator Harrison Williams' letter of
November 10, 1980 in which he urges you to incorporate section 603
He refers
into the Community Reinvestment Act examination process.
to a statement made by Senator William Proxmire that loans made in
violation of section 603 should be taken into consideration when
assessing a lender's record for Community Reinvestment Act purposes.,
Upon reflection, I find their concept intriguing and would appreciat4
your views on it.
Sincerely,
)
Reuss
Henry
Chairman
•••p
J. ST GrrtmAIN. R.I.. CHAIRMAN
.-.4•411‘ ANNUNZIO. ILL.
JAmps M HANLEY. N.Y.
CARROLL HUPRARD, JR., KY.
JERRN M. PATTERSON. CALIF.
THOMAS 1. A41
Y. 01410
NORMAN E. 0 AMOUR. N H.
JOHN J CAVANAUGH. NEBR.
JIM MA,
10X, TEX.
joscpm Q MINISH. NJ.
•
U.S. HOUSE OF REPRESENTATIVES
P. WYLIE. OHIO
HENRY). HYDE. ILL_
GEORGE HANSEN. IDAHO
JIM LEACH. IOWA
CARROLL A. CAMPBELL Ali, B.C.ED BETmuNE., ARK.
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
SUPERVISION, REGULATION AND INSURANCE
OF THE
WALTER (. FAUNTROY, 0 C.
DOUG BARNARD, GA.
•
cviALmt ns
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
NINETY-SIXTH
CONGRESS
WASHINGTON, D.C. 20515
#S7t)
December 11, 1980
•
Honorable Frederick H. Schultz
Vice Chairman, Board of Governors
Federal Reserve System
20th and Constitution Avenue, N.W.
20557
Washington, D.C.
Dear Governor Schultz:
As a follow-up to my meeting with you of this morning, I
am submitting this letter through you to the Board of Governors
requesting the Board to respond to me in the same tone as that
of our meeting.
Assuming the severity of the liquidity and/or earnings
problem of the thrift industry, both within the immediate and
foreseeable future, what contingency plans does the Board have to
address the long-range structural problems of the thrift industry
or the short-term problem of returning thrift portfolios to a
point where their asset structure more closely matches their
liability structure. 'What benefits, costs, or other results
would such a contingency plan achieve?
Would you please request that your staff and the Board
address any recommendations the Board might have to remedy the
current difficulties of the thrift industry. I would hope that
such discussions would include a reconsideration of the Board's
policy concerning thrift institution access to the Federal Reserve
discount window. For your convenience, let me quote the pertinent
section of Public Law 96-221 which refers to discount and the
borrowing authority:
"(7) Discount and Borrowing -- Any depository
institution in which transaction accounts or
nonpersonal time deposits are held shall be entitled
to the same discount and borrowing privileges as
member banks. In the administration of discount and
borrowing privileges, the Board and the Federal Reserve
banks shall take into consideration the special needs
of savings and other depository institutions for
access to discount and borrowing facilities consistent
with their long-term asset portfolios and the sensitivity
of such institutions to trends in the national money
markets."
14.1111111111111111111111111111Milallt
Hon. Frederick H. Schultz
December 11, 1980
Page Two
Reserve Pegulation
This statutory provision, combined with Federal
ng to "Extended Credit
A, in particular that section of regulation pertaini
statutory and
and Exceptional Circumstances" appears to be adequate
res, thrift access
regulatory mandate to provide, if the Board so desi
I would hope that you would also consider a
to the discount window.
ow and some form
combination of easier atcess to the discount wind
ent in its apparent
of government assistance; or if the Board is adam
ount window access is
position that under current circumstances disc
rnment assistance
unavailable to the thrift industry, what form of gove
would the Board recommend?
the Federal
If the Board believes that existing authorities of
Federal Deposit Insurance
Reserve, the Federal Home Loan Bank, and the
itude of the current
Corporation are insufficient to address the magn
ions, what legislation,
and long-range problems facing thrift institut
statutory limitations.
if any, would it recommend to address these
ve(s) of the Board
It would be appreciated if a representati
) of the Federal Deposit
would consult with appropriate Board member(s
Board so their input can
Insurance Corporation and the Home Loan Bank
be incorporated into your considerations.
of the situation,
In recognition of the magnitude and severity
views on an expeditious
request that you and/or the Board submit your
basis. Thank you for your cooperation.
Sincerely
4
St Germain
n, Subcommittee on
air
inancial Institutions
Supervision, Regulation
and Insurance
.•
• F GOVt'
•
:
• co
BOARD
_•)
.. 0-
OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
December 11, 1980
RAL RES
• •..• •
PAUL A. VOLCKER
CHAIRMAN
•
The Honorable Fernand J. St Germain
Chairman
Subcommittee on Financial Institutions
Supervision, Regulation and Insurance
Committee on Banking, Finance and
Urban Affairs
House of Representatives
Washington, D. C. 20515
Dear Chairman St Germain:
The Board has appointed eight new members to its
Consumer Advisory Council, to succeed those persons
whose
terms expired this year. Mr. Joseph N. Cugini, whom you
recommended for appointment, was among those selected to
the Council.
The selections were made from more than 900
nominees this year and the Board was pleased at the large
number of highly qualified individuals whose names were
submitted for consideration. For your information, I am
enclosing a press release announcing the Board's selections
.
We very much appreciate your interest in the
Council and thank you for recommending Mr. Cugini.
Sincerely,
0.0.14Wlyjt
Enclosure
bmis
Jhima Marls ixay
Ws. Nollarti (2)
adoWANIL ltrs. also sont to.
.:.,4,c.at.ors tort, Gam,
Cranston' (sigasd Paul), sad
Cong. 00141w/tor
BOARD OF GOVERNORS
ofto.
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 205S1
40.
December 15, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Ronald M. Mottl
House of Representatives
Washington, D. C. 20515
Dear Mr. Mottl:
I appreciate the opportunity to res
pond to your
letter of December 1 on the conduct
of monetary policy.
You express concern, which I share,
about our high and
sharply fluctuating interest rates
and you urge the Federal
Reserve to abandon its new technique
s for controlling the
money supply.
I commented about the broad thrust of
monetary
policy and about our new operating
procedures in recent
Congressional testimony. As I indica
ted in my statement,
it may be possible to improve those
procedures and some
months ago I requested our staff to
review them thoroughly.
However, while improved technique
s may be helpful, the
general thrust of monetary policy alo
ng with appropriate
fiscal and other economic policies are
much more important
in solving our nation's fundamental
economic problems.
Progress toward reducing the rate of
inflation and restoring
the growth and pr,oductivity of our
economy will lead to the
lower and more stable interest rates
that we all want.
For your convenience, I have enclos
ed a copy of
my recent Congressional statement on
these issues. I
would be pleased to discuss these vit
al questions further
at a mutually convenient time.
Sincerely,
S/Paul A. Volcker,
Enclosure (11/19/80 statement)
NB:vcd (4V-422)
bcc:
Mr. Bernard
Mrs. Mallardi (2)
ROBINDEARD
6Tt4 DISTRICT. TENNrssrr
DisTRK- T orricrs•
5575 Pori-4w
Surrt 815
MEMPHIS. TENNtrvsEr
WAIIINGTON ornct .
229 CANVIONI 14r.k/CT: OT ICU OolLCIING
WA sp4INGrou. 0 C. 20515
(202) 225-2811
Congrc5s' of tOc Zinitcb
tatc5
ji)otifSe of 3Arpregnitatibt5
22 PURLIC SQ.lA Pr
CoLtpusii.. TENNtssrr 38401
(615) 388-2133
611agbington, ae. 20315
November 24, 1980
Paul A. Volcker
Chaiman
Federal Reserve System
20th and Constitution, N.W.
Washington, D.C.
20551
Dear Mr. Cha i nm
I am enclosing for your review a copy of a letter I received
from Mr. John David Douglas of Somerville, Tennessee regarding
the Report of Transaction Accounts, Other Deposits and Vault Cash,
form FR2900. I believe it is self-explanatory.
I would appreciate it if you would review the merits of this
letter, and let me know if there is any possible way in which you
might be able to lessen the frequency of reporting for this bank.
Thank you for your attention in this request.
,1 Vith warm regards.
Since ely,
ft '
I: bin Beard, M.C.
RB/wl
Enclosure
38119
(901) 767-4552
•
ir
H
,.'
V. e•Pres-Jcnts
P. BULL E
JOHN DAVID DCUGLAS
OH
L
.'
- W
(ü1 0‘.1 /
Vtce
vm,T.
Twit;K As; Tit
P:74114.AZ VILLE BB
f1- • J
‘4.11,11,411
I 11 I .,.
.•••••
41
1111i ,
_
vv.4. 14 :41 ji"
Assistant Cashiers
:z-it
cs,
MARJORIE L
CET TY 1-10Vi ELL
14().11Kitvii.a.c.
!.•
ViLe -Pre- i
W. H. REID
R
PRISCILLA LANGDON
'ATf-ERYI‘J S. McCASKILL
'
,
'TEN( P. SANDERS
HARrr
DALTON BYRD
LILLIAN R PLII.L I AM
STEPHEN H SHE L TON
1 - r•• .• r••••
1,0
h'r,
1-.1
t '
$
•
Trnn site ti rn
L"..
- t.'10 ron'1i t..)(i '
i'eclern 1
rrc ve'i
"quit •"-,:-;ks" ,
F
.
PR2,TC
7.( PC , 27 (9 l'ir•ortt3. 1 cnI•c•
•'• IL-1!
reservt;
y ••T• hr.se -i n
t. .')
r•rnre "t(! ...7 .4
tin!! .
r
cet3 r)t.
C.
4- f•
1 •
(
•
a •
.r. ;.r
!4 ,!41•)1. r,!-; i
tnr
'
•
r.c;.t I
:
-1) 11
t
pr,C
t
r
7(1 1. rs
1 )
( 1:
•
" r:c ••••:
( It .) :ni
r,
n•-,
r t,"tt rercr
to r..
j'r
II. yci3 RVC lc ss
•:cr, 1''C !'L 2u,rter17,
• :lust; roi:crt; wee', 1.y.
cr.,
3!!) -15 1.11 rn in -es. c7i ts, mr rest;r7e ',rill he
q r 2/8 cis
rs t;
t'
t'(•
nf
t 1
r,rc z
fl ccntinuir.- 1/P me r9 Ter
n(3 :Ttlqr
e
27C ,(CC .11 f'r-y; •
r•ITise-in 53 ccmrlete. I•t will be six
.";t-•
t' I th.o,
yoqr
(,1:,' ro5..(7).vo renlii rem 'nt.wi 11
‘!:T.•
I el
1' rwes
t',11'11
4
•
q .7
t,
•
ur
•
'/
•j
t
Y.!
,
r•
•
•, ,
'•'
n
4 ,.
r's
(L
(
•••'•er;
r
4 - c
.4 1.1
•rt,Ier- 1 Peserve.
nct, '•••. 1 1s; eiutornnte ird
i s rermi red
7' r‘apFrnr("1
1-)nr 1. cur c.5 ze ,
n
1 1 10 t.:1''1-f, 7(.1 'is ';'fi 1.nre.Or; ;rI 7 t t 1. —
*.- C‘ th t'-‘e s'frq11 bnr1'. s
•'r r
r ''..!T 1'1
' n• "
.^ t'c! c nIrs•rts.,:sr 1 ,!
,• •
1 ' t:•'. ••••,-• .1- •.:r '
• . 1, s.,tc, t•rcr•r- 17 feel thqt
i- 1. il r en11 rercrt
l ". f., 1 0 '
1. i
-- •, r - , •!• 1 fl(' , r r
• c --1' '• 1,
. -' - I"'-:`:4; Et t•c- • pc - .! 'le t..- -, 7e .1(•• r,1_ ‘eserw;
- • ! t.
ge serve
771• — 1 'r „, .) I.
7( 1 ( n
( Veit I?:'• tl-i
'r r) ,
',-- ,- 1•1
(
n
fl.
qup,:Jaa,i-oi,
(
s
-\-140 0-14
n
Ji
'op:oLz
04uiJ:JUJ-IU
:3L14
i:IOLZ3jUS
d
09)1 g lA
pabok,
•r
40'
•
•
.•
• c;
•-ri
-...4
.•
•
•
f GOW •.
BOARD OF GOVERNORS
OF THE
1.-•., :
,
••
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
A
.
(').
December 15, 1980
RAUL A. VOLCKER
CHAIRMAN
The Honorable Adlai E. Stevenson
United States Senate
Washington, D. C. 20510
Dear Senator Stevenson:
On behalf of all the members of the Boar
d, I am pleased
to respond to your letters about
Edge Corporations and the
"quaed business entity" (QBE)
proposal. As you recognize,
the Board in proposing the QBE conc
ept sought to carry out the
mandate contained in the Internat
ional Banking Act of enhancing
the ability of Edge Corporations
to further the trade of the
United States. At the same time, the
Board sought to achieve
this objective without changing the inte
rnational character of
Edge Corporations and allowing them
to intrude unduly into
domestic banking.
The QBE proposal provoked substantial
disagreement
in the banking industry. The large bank
s generally supported
the proposal while most regional and
smaller banks argued that
it would permit Edge Corporations to
engage in domestic business, thereby violating the spirit if
not the letter of the
McFadden Act and section 3(d) of the
Bank Holding Company Act.
Some suggested that the matter should
be resolved by Congress
and not by the Board.
The Board postponed action on the proposal
and instructed the staff to review the issu
e further and to explore
alternative approaches. Since then,
staff has proceeded with
that review and held further discussi
ons with interested
parties including Edge Corporations them
selves and regional
banks. This past summer, the Board rece
ived a new proposal
on the subject from the Bankers Associat
ion for Foreign Trade
which is currently under staff review.
It is currently contemplated that the issue will be brought
back to the Board early
in 1981.
During this same period, the staff has been moni
toring
the- experience of Edge Corporations under
the revised Regulation
you will recall, the revision did
in
't'4II
several respects the rules applicable to
the operation of Edge
S
MIL
•
The Honorable Adlai E. Stevenson
Page Two
Corporations. One of the liberalizing
actions was to authorize
domestic branches for Edge Corporations
. Another was to enlarge
their ability to finance production for
export. The Board's
report to Congress on the Internationa
l Banking Act pointed out
the marked expansion in Edge Corporat
ions and Edge Corporation
offices since the revision of the regu
lation. This expansion
has occurred both in cities where Edge
Corporations have traditionally been located and also in citi
es where there had
been no previous representation. This
rapid growth furnishes
clear evidence that U. S. banks perc
eive an increasing number
of locales as viable markets for inte
rnational financial
services, including trade financing,
of the kinds provided
by Edge Corporations.
In closing, I would like to assure you
that when the
QBE question comes before the Board
for consideration, your
views will be again brought to the
attention of every Board
member.
Sincerely,
FRD:DJW:vcd (#V-421)
bcc:
Fred Dahl
Mrs. Mallardi
A
Action assigned Fred Dahl
ALAI E. STEVENSON
ILLINOIS
•
'ZICTlifeb Zfafes Zenate
WASHINGTON. D.C. 20510
November 25, 1980
Paul A. Volcker, Chairman
Board of Governors
Federal Reserve System
20th Street and Constitution Avenue
Washington, D.C. 20551
g;1
Dear Mr. Volcker:
I have reviewed the Federal Reserve Board's Report of September
17, 1980, on the International Banking Act of 1978 (IBA). While the
Board has adopted several regulations which should make U.S. banks
more competitive with foreign banks and expand the role of U.S.
banks in promoting U.S. exports, I am deeply concerned that the
Board has delayed action on the important regulatory revision
dealing with "qualifying business entities" (QBEs).
W•j1
r7rImmool
64;444
The IBA required that regulations which would disadvantage
or unnecessarily restrict Edge Corporations be modified. The
present prohibition against permitting these corporations to
provide full service banking to entities whose business is
primarily in international commerce discriminates against U.S.
banks which must compete with foreign banks providing these
services, and inhibits the production of goods for export.
The Board, in its proposed regulation on this matter, recognized
the limitations of current regulation limiting export financing
to the shipment and storage of goods for export. The Board was on
point when it declared:
Under current rules and policies of the Board each deposit
and credit transaction by a United States resident must be
directly related to an international transaction. The Board's
strict interpretation of the statutory requirement has
resulted in Edge Corporations being unable to fully service,
and compete effectively for the business of, firms specializing
in international trade. Moreover, these rules have placed an
administrative and supervisory burden on both Edge Corporations
and the Federal Reserve System. The proposed approach would
reduce these burdens and enlarge the ability of Edge Corporations
to provide international financial services and, in this way,
would be consistent with the new expression of legislative
intent contained in the IBA. Those United States residents
•
S
•
'Paul A. Volcker
November 25, 1980
Page two
that do not qualify as international customers would continue
to be able to obtain limited banking services directly
connected to international transactions.
While the more liberal test that 1/2 or more of a QBE's
purchases or sales be in international commerce would have been
preferable, the 2/3 test proposed by the Board is an acceptable
compromise.
41e:'
c-'
The international trade dilemma of the U.S. is well-known to
the Board. The latest statistics highlight the problem: in
September 1980, exports fell 2.1% to $18.7 billion, imports rose
1.2% to $19.5 billion, and the U.S. trade deficit grew to $764
million. This is but a continuation of the trend since 1977.
The unsettling fact is that foreign banks are supplying much,
if not most, of the financing for U.S. exports. According to a
study by the Export -Import Bank, foreign banks finance one-third
of all U.S. exports, while U.S. banks finance only 7% of U.S.
exports. As the author of the Edge Act provisions of the IBA,
I intended to enable Edge Corporations to compete with foreign
banks and facilitate and stimulate the export of U.S. goods and
services with full banking service for U.S. firms which are
predominately engaged in importing and exporting.
To comply with the legislative mandate of the IBA and prevent
further erosion in the U.S. international trade position, I urge
the Board to adopt the QBE regulation it proposed on February 14,
1979 and for the reasons it then stated.
With thanks for your attention to this matter,
Sincerely,
a(Asi ///,64_40v),
g.-••
.
'
rollmop.
-
•
A
(11-(475)
0V• GOvt • •
HOARD OF 50VERNORS
0.
OF THE
• c)
• -n
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20 551
December 18, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Henry J. Nowak
Chairman
Subcommittee on Access to Equity
Capital and Business Opportunities
Committee on Small Business
House of Representatives
Washington, D.C.
20515
Dear Chairman Nowak:
Thank you for your letter expressing conc
ern about
the impact of current high interest rate
s on small businesses
and summarizing your Committee's recommen
dations for monetary
policy as contained in the report on "Fed
eral Monetary Policy
and Its Effect on Small Business."
We at the Federal Reserve share your conc
ern about the
burden that high interest rates impose
on small businesses. We
recognize that the heavy dependence of
small companies on shortterm bank credit makes them vulnerable to
increases in interest
rates, especially since their access to
alternative sources of
funds generally is limited. High inte
rest rates are primarily
a result of the rapid rate of inflation
we have experienced and
of expectations by the public that price
increases will continue.
The only effective way to reduce inte
rest rates over the long
run--and thereby provide a reasonably
stable financial environment
for large and small firms--is to curb
underlying inflationary
pressures. The Federal Reserve is committe
d to a policy designed
to reduce inflationary pressures over
time by gradually moderating
the growth of money and credit.
In pursuit of this goal, the Federal Rese
rve since
October 1979 has sought to restrain
monetary expansion by controlling the growth in bank reserves.
This reflects a change
in operating procedure from one that prev
iously had focused on
influencing short-term interest rates; the
change was undertaken
in order to improve the System's control
over growth in the
monetary aggregates. But the new proc
edures also have meant
that interest rates have moved more rapi
dly in response to
changing market forces and therefore have
been subject to more
volatility than in the past. Indeed,
the rise in interest rates
since August in large part reflects an
upturn in money demands
associated with the rebound in economic
activity and renewed
inflationary expectations. While the Fede
ral Reserve could hold
down short-term interest rates temporar
ily by accommodating these
accelerating money and credit demands, such
a policy would greatly
aggrevate the inflationary spiral and like
ly lead to still higher
interest rates over time.
The Honorable Henry J. Nowak
Page Two
We realize that in the near
term our efforts to slow
monetary growth may cause pro
blems for small business bor
rowers
and others. In this regard,
we continue to encourage com
mercial
banks to make special effort
s to meet the needs of their
small
customers as credit condition
s tighten. Under the specia
l credit
restraint program earlier in
the year, many large banks rep
orted
they had instituted special
programs to accommodate small
customers,
including in some cases a dua
l prime lending program. We pre
sume
that many of these programs
are still in place.
The Federal Reserve has avo
ided, however, setting specif
guidelines on the terms of ban
ic
k lending to businesses. The
determination of interest rates
and other loan terms must tak
e into
account borrower needs and
characteristics as well as genera
l
market conditions, and such
factors can be appropriately det
ermined
only by direct interaction bet
ween individual lenders and bor
rowers.
If rates are set independentl
y of risk and other individua
l loan
considerations, substantial
distortions in credit flows may
occur,
including a possible reduction
in the availability of credit
to small
businesses. The Federal Res
erve strongly opposes the use
of reserve
requirements as a means of cha
nneling credit to particular
sectors
or groups within the economy.
Such credit allocation progra
ms-for small businesses or other
deserving groups--would make
it
much more difficult to carry
out aggregate monetary and cre
dit
policy, as well as distort the
flows of funds in private cre
dit
markets. We believe a direct
subsidy program would be a mor
e
efficient and explicit means
of meeting the credit needs
of small
businesses if the Congress det
ermines such subsidies are des
irable.
In the meantime, the Federa
l Reserve will continue its
efforts to slow inflation and
hope that relief from interest
rate
pressures will come soon.
Thank you again for your let
ter.
Sincerely,
VIS:NO:ES.JLK:pjt (#V-425)
bcc: Mr. Kichline
Mr. Mains
s. Stockwell
Ms. Scanlon
mallardi (2)./
•
4
.•
.•
f GOV4-•.c.)..
BOARD OF 30VERNORE
C.
OF THE
•m
oLQ
I- •
•
.‘•41 RES
• • •.• •
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20E51
December 22, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Mary Rose Oakar
House of Representatives
Washington, D. C. 20515
Dear Ms. Oakar:
I certainly appreciate the concerns expressed in
your letter of December 10 about the difficulties being generated by recent high levels of interest rates. And I share
your hope that these rate levels will not be long lasting.
But the surest way for the rates to be of short duration is
for the Federal Reserve to attain its monetary targets. If
we attempted to drive rates down "artificially" by pumping
in bank reserves, that would only cause the money supply to
increase further, thereby fueling inflationary pressures,
and ultimately leading to even higher interest rates.
At the same time, I, like you, would prefer less
volatility of interest rates than we experienced last year.
That will probably be a natural by-product of bringing inflation under control and if significant exogenous shocks to the
economy--such as large oil price increases or an unexpected
widening of the budgetary deficit--can be avoided.
Finally, you mention the need to re-evaluate our
present operating procedures. We have had such a project
underway for a few months now, and I may be able to indicate,
at least preliminarily, findings at the time of our February
report on monetary targets under the Humphrey-Hawkins Act,
Sincerely,
itiV-4d47)
ucc
A. Aauilrot.
ors. 144114r4
I ,
IN,^411 I ROSE OAKAR
015 TRICT OFFICE:
523 F ;,C PAL COUNT Elum.r,mo
21 5 SI/Pr/410R Ay,.411E
CLr‘r(A:./n, 0,410
44114
(216) 522-4927
•
41
2.0rfs Disrn Cr. OHIO
COMMITTEES:
BANKING. FINANCE
AND URBAN AFFAIRS
POST OFFICE AND CIVIL SERVICE
Congre55 of ayZUiiitcb*tatt5
3t)ottge of 3ArprOttitatibeg
WASHINGTON OFFICE:
107 CANNON Hot.r:r OFFICE QUILDING
SELECT COMMITTEE ON AGING
Chair, Task Force on Social
Security and Women
Wrigbington, Ile. 20515
WASNINGTCN. D C. 20515
(202) 225-5871
December 10, 1980
Honorable Paul Volker
Chairman
Federal Reserve System
20th and Constitution Avenue N.W.
Washington D.C. 20551
Dear Mr. Chairman:
It is with utter dismay that I continue to read economic predictions that interest rates will continue to rise and may even
hit new highs in 1981.
As you know, following the raising of the discount rate by the
Fed last Thursday from 12% to 13% (plus a surcharge of three
percentage points to big banks), most major banks on Friday
boosted their prime rate to 19%. Many analysts have warned that
the prime will exceed 20% shortly. Where will it all end?
It is my fear that the continued scarcity of credit and continuing
spiraling of interest rates will so severely handicap consumer
spending and business investment that unemployment will continue
to grow at an intolerable rate creating a severe crisis in our
national economic growth.
Frankly, I think it is time for the Fed to review its policy of
monetary restraint (now over a year old) and more specifically, to
re-evaluate that part of the Fed policy which places an emphasis
on the control of bank reserves as a means of achieving better
control of money stock as opposed to the traditional policy of
paying closer attention to interest rates.
I need not remind you what the volatile interest rates have done to
the auto and housing industries. Without belaboring the point,
this week I received calls from three small businessmen, all
constituents of mine. All three are filing for bankruptcy because
they can no longer borrow needed capital to continue their businesses
I am concerned that these examples will prove to be just the tip of
•
2
the iceberg if the Fed's current tight monetary policy remains
totally inflexible. My concern is exacerbated when Today's Wall
Street Journal quotes Frederick Schultz, Vice Chairman of the Fed
as saying "the risks of overkill are less than the risks of underkill."
Very frankly, Mr. Chairman, I do not agree with Mr. Schultz and if
his statement is typical of current economic thought at the Fed,
then I see no alternative but to have the House Banking Committee,
on which I serve, address itself to possible remedial legislation
regarding current powers entrusted to the Federal Reserve System.
I will end on a somewhat optimistic note. Indeed, it is encouraging
that there are some at the Fed who are concerned that the Federal
Reserve may do severe economic damage by driving up the interest
rates. Board Member, Nancy Teeters voted against the latest two
increases in the discount rates, and she apparently feels that these
increases are driving the market interest rates too high. I concur
and would strongly encourage other Members to follow suit.
Sincerely, /
2
/
Mary Rose Oakar
Member o Congress
MRO:efr
•
•••
C
',c)0? GOV4 •
BOARD OF r3OVERNORS
OF THE
FEDERAL RESERVE SYSTEM
•
•
WASHINGTON, O. C. 20651
•. RAL RES"
•
•• • • • •
PAUL A. VOLCK ER
CHAI RMAN
December 22, 1980
The Honorable Fernand J. St Germain
Chairman
Subcommittee on Financial Institutions
Supervision, Regulation and Insurance
Committee on Banking, Finance & Urban Affairs
House of Representatives
Washington, D. C. 20515
Dear Chairman St Germain:
Your December 11 letter to Vice Chairman Schultz asks the
Board to
consider polidy options that might be adopted to help "reme
dy the current
difficulties of the thrift industry". While I discussed
answers to your
questions with Governor Schultz before he was called out
of town, he asked me
to convey the substance of our conversation to you. As
he indicated in his
discussion with you earlier this month, the Board --in
conjunction with other
supervisory agencies--has had the difficulties of the thrif
t industry under
intensive and continuing review, and will be consulting
further with these
other agencies in the new year.
In characterizing the current difficulties of the thrif
t industry
your letter refers to the severity of the industry's "liqu
idity and/or
earnings problem". It is important to note that altho
ugh an "earnings"
problem can lead to a "liqudity" problem, these two types
of difficulties are
quite different and consequently call for rather diffe
rent remedies. The
discount window is designed to help institutions deal
with liquidity but not
with earnings problems.
Presently, the primary problem facing thrift institutio
ns is a
deficiency of earnings. The interest costs of maintainin
g thrift fund
flows have escalated rapidly because thrift liabilities
are essentially shortterm and have had to be rolled over at steeply rising inter
est rates, whereas their assets include a sizable proportion of longer-term
mortgages that
carry returns well below present deposit costs.
Thus far, the thrifts have generally Continued to pay the
high
interest rates needed to attract deposits. In fact, some
have used a sizable
share of resulting deposit inflows to acquire relatively short
-term high
yielding assets in lieu of mortgages thereby improving
their earnings at the
•
•
2
the margin. While this approach has not provided enough interest income to
offset the drag on earnings of the low-yielding mortgages already in their
portfolios as the mass of maturing money market certificates has been rolled
over, it has helped to maintain a fairly comfortable cushion of liquidity.
The discount window of the Federal Reserve System is available to
help meet the needs of any eligible depository institution faced with temporary liquidity strains, so long as the institution is in a solvent operating
position. We believe this is in accordance with the letter and spirit of
the Monetary Control Act. Before seeking such assistance, institutions-whether banks or thrifts--are expected to turn first to their reasonably
available alternative sources of funds, either in the market or from other
lending institutions. Thrifts, of course, can obtain funds from the Federal
Home Loan Bank System or from other special industry lenders, as well as in the
market. From recent contacts of our Federal Reserve Banks with thrifts, we
expect that a few such institutions may, in fact, soon find it appropriate to
have recourse to the "window" for limited periods.
Thus, our general approach to use of the discount window in meeting
such short-term liquidity needs is, as directed by the Act, no different for
thrifts than for commercial banks. In addition, as the Act also directs, our
recently revised regulation for administering the discount window includes a
program that specifically "takes into consideration the special need of
savings and other depository institutions for access to discount and borrowing
facilities consistent with their long-term portfolios and their sensitivity to
trends in the national money markets".
This provision of the Act was inserted against the background of
repeated episodes of so-called disintermediation, when thrifts were either
experiencing or being threatened with a prolonged inability to compete
effectively in markets to maintain their liquidity and asset positions.
Accordingly, our clear understanding is that this statutory directive means
the discount window should be available to assist depository institutions
with longer-term assets when they are confronted with serious prolonged
strains on their liquidity arising from an inability to sustain deposit
Inflows--a circumstance that might become rather general at times of high
interest rates. Contrary to our usual practice of encouraging rapid repayment of discount window borrowing, assistance for thrift institutions in
these circumstances should he available for rather extended periods. Such
arrangements contrast sharply with the short-term adjustment dredit lending-running from one day to a very few weeks--that has been provided for
dommercial banks in the past and is also now available to thrift institutions
meeting the same criteria as banks.
Because of the generally ample, and even
of the thrift industry today, it is not surprising
not been used. Nevertheless, it is important that
in place-which it is--against the possibility that
will arise.
improving, liquidity position
that our new facility has
the policy be understood and
generalized liquidity strains
a.
•••
3
Important as this new faCility may.at times become, we have never
concv1ve0 of the discount window as a means of deliberately subsidizing
the operAtions of hanks or other depository institutions and find no legislative basis for such a determination. Consequently, the discount window
is not designed to deal with the earnings problem of thrifts, as differentiated from their liquidity needs. Any plan for Federal Reserve loans at
low interest rates to institutions with ample liquidity, simply because they
are confronted with a protracted earnings problem, would change the fundamental nature of the window. Among other things, if such a plan were to
he effective, it would require Federal Reserve lending on a scale far beyond
any amounts heretofore contemplated. It would release a very large volume
of reserves to the banking system and risk imperiling our ability to meet
our reserve and monetary targets. In addition, it would require setting
the discount rate, not to facilitate the needs of general monetary policy but
rather on the basis of earnings criteria. To the extent earnings of thrifts
were so benefited, Federal Reserve earnings and ultimately Treasury receipts
would be reduced without clear legislative authority.
While we do not believe that the Federal Reserve discount window
is an appropriate vehicle for the deliberate subsidization of thrift industry
earnings, that does not mean that the window would be ineffective in dealing
with a prolonged liquidity squeeze, since it does provide a potentially
critical "backstop" for protecting the general stability of the industry. We
are fully aware of the harsh realities of the earnings problem now facing
thrift institutions; they are the subject of the inter-agency concern to
which I alluded earlier. In line with your suggestion, we will keep you
Informed as this interchange of ideas with other agencies continues, looking
toward practical approaches for dealing with whatever problems arise--including possibly proposals for new legislation.
th.
(Vet-duttei 'pat.
.
jqttii
;7Ezt)ea7(Peed,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 13. C. 20551
December 24, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Al Ullman
Chairman
Committee on Ways and Means
House of Representatives
Washington, D.C.
20515
Dear Al:
Thank you for your letter of
December 15, concerning
the reservability of deferr
ed compensation accounts und
er Regulation D.
As indicated in your letter,
the
se
accounts, are
maintained and controlled by
employers in accordance with
IRS
requirements. Because of thi
s, Regulation D currently req
uires
that these funds be regard
ed as nonpersonal time deposi
ts,
subject to a 3 per cent res
erve requirement. I have ask
ed
the Board's staff to review
this matter and present to the
Board its recommendations
for a possible amendment to
Regulation D.
I anticipate that this matter
will be considered by the
Board in the near future.
Sincerely,
S/Pauli64011440t
GTS:pjt (#V-431)
bcc: Gil Schwartz
Mrs. Mallardi (2)-°'
Legal Records (2)
AA"SSLgiiu M. 1PLersen
AL lriLMAN
2001sTnicT. OREGON
CHAIRMAN. COMMITTEE ON
WAYS AND MEANS
JOINT COMMITTEE ON TAXATION
Congte55 of tbc Unita' tatt5
3i)ott5t of ileprrgrntalitie5
IZIaribinton, 13.C. 20515
December 15, 1980
Mr. Paul Volcker, Chairman
Federal Reserve System
Twentieth Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Paul:
On August 1, 1980, I wrote to you regarding the treatment of
deferred compensation accounts under Regulation D. My concern was that
the Board would define "nonpersonal time deposits" in such a way that
these accounts would be reservable.
On October 22, 1980, Gerald A. Kerans of Equitable Savings and Loan
wrote you to ask for a ruling on the deferred compensation accounts they
hold for the State of Oregon and other public and private tax exempt
employers. Gilbert T. Schwartz of your staff replied on November 14,
stating that under the regulations, it was the opinion of the Federal
Reserve that deferred compensation accounts would be subject to reserve
requirements.
I am writing to ask that you consider regulatory action to correct
this problem.
Deferred compensation plans were established pursuant to section 457 of
the Internal Revenue Code. In order to meet IRS requirements, these plans
were set up to maintain employer control over the funds in a technical sense,
while allowing them to function in the same manner as IRA and Keogh accounts.
The effect of imposing reserve requirements on deferred compensation
accounts will be to put them in an untenable position. To meet IRS requirements the institutions must maintain the current employer-employee financial
relationship. However, to do so will now make the accounts subject to
Regulation D reserve requirements.
In view of the fact that these accounts are similar to IRA and Keogh
accounts, I belive it is reasonable to exempt them from reserve requirements
as well.
Thank you for your attention to this
1410*.
AU:jsb
,AL ULLN1AN
n
CHAIRMAN. COMMITTEE ON
WAYS AND MEANS
licc-r. ornrc.c•i
JOINT COMMITTEE ON TAXATION
Congtr55 of tin Ztiniteb
tatr5
3i)ouiSt of ikepresentatang
Watbington, ;:3.e. 20315
August 1, 1980
Mr. Paul Volcker, Chairman
Federal Reserve System
Twentieth Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Dear Paul:
On June 4, 1980, the Federal Reserve Board issued for public comment a
proposed Regulation D which would implement the reserve requirement provisions
of Public Law 96-221, the Monetary Control Act of 1980.
The Board proposed to define deferred compensation accounts as "nonpersonal
time deposits" under the meaning of Section 103 of the Monetary Control Act.
Reserve requirements would be extended to IRA and Keogh accounts as well.
While the Board may technically have the authority to make deferred
compensation accounts reservable, I believe it would not be consistent with sound
monetary policy to do so. Deferred compensation accounts do not function as
demand deposits and thus have little or no effect on monetary policy. They are
designed, along with IRA and Keough accounts, to provide for retirement income.
As such, they serve the same function as any other pension trust.
Reserve requirements could significantly strain the resources of many
savings institutions. The cost of providing deferred compensation plans will
increase, and it will remove part of the money supply which could be used for
home loans. Additionally, it will affect the competitive position of savings
institutions vis-a-vis other institutions which have retirement accounts not
subject to reserve requirements.
The Board may have a legitimate fear that deferred compensation accounts
could be abused if not subject to reserve requirements; I believe the regulations could be altered to prevent this, while still exempting deferred compensation plans from Regulation D as it would apply to nonpersonal time deposits.
At the least, I hope the Board can exercise its statutory discretion, as
provided for in Section 19(b)(2) of the Federal Reserve Act, and prescribe a
reserve ratio for deferred compensation deposits of zero.
Thank you for your attention to this matter.
AU:jsb
•
S
HOARD Or 730VERNORS
Tii
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 2055!
PAUL A. VOLCKE R
CHA'RMAN
August 11, 1980
IL_ ,.ullorable Al Ullman
Chairman
Committee on Ways and Means
House of Representatives
Washington, D.C.
20515
Dear Al:
Thank you for your letter of August 1 concerning the
definition of the term nonpersonal time deposits for reserve
requirement purposes under the Monetary Control Act of 1980.
Last Tuesday, the Board adopted in final form the
reserve requirement regulations. After consideration of the
issues raised by applying reserve requirements to deferred compensation accounts in the form of IRA or Keogh accounts or pension
fund time deposits, the Board determined that such funds should
be treated as personal time deposits, exempt from the reserve
requirements of the Act. Similarly, any funds held by fiduciaries in which the entire beneficial interest is held by
individuals would be personal time deposits.
On behalf of the Board, thank you for your comments
on this matter.
Sincerely,
•
•
rb4e
October 22, I90
Chairman of the Federal Reserve Board of Governors
Federal Reserve System
Washington, D.C. 20551
Re:
HOME OFFICE
S
1300 W SIXTH AVE.
P0 BOX 72, 97207
PORTLAND, OR 97201
(503) 243-1611
Publication issued by the Federal Reserve Board on the
final rule for Regulation D--Docket No. R-0306.
Dear Mr. Chairman:
A ruling is respectfully requested on behalf of Equitable Savings and Loan of
Portland, Oregon and its sister institutions with respect to exemption from
reserve requirements under Regulation D for funds held on deposit under deferred
compensation agreements.
FACTS
The State of Oregon and many other public
certain of their employees participate in
employers have selected Equitable Savings
act as the institution for receipt of the
and private tax exempt employers and
deferred compensation programs. The
and Loan Association ("Equitable") to
deferred funds.
PROGRAM OF UNFUNDED DEFERRED COMPENSATION
Under the plan of deferred compensation, employees who choose to participate
enter into a contract (copy attached and by this reference made a part hereof)
with the ei,ployer whereby upon employee's election, prior to the beginning of the
month of service for which the compensation is payaLle, a specificd amount of
employee's compensation is set aside through a bookkeeping entry by the employer
in a deferred compensation account for the benefit of the employee.
The contract provides, in part, as follows:
1.
Investment. All or any portion of the Account may but shall not be required
to be invested by Employer in a savings account or accounts of Equitable
Savings and Loan Association.
, such amount may, but shall
When the Account at any time totals $
account
not be required to be transferred to a
of Equitable Savings and Loan Association. Employer shall have absolute
and uncontrolled discretion with respect to whether the Account (including
dividends and other income) is invested and, if invested, with respect to
the institution or institutions in which it shall be invested.
2.
Obligation Equal to Value of Account. The Employer's obligation to the
Employee at any time shall be equal to the value of the Account at such
time. With respect to such obligation, Employee shall be a general (not
secured) creditor, and the parties confirm that no trust nor trust fund is
October 22, 1980
Chairman of the Federal Reserve Board of Governors
Page two
intended. If all or any portion of the Account is not invested, the value
of such uninvested portion of the Account at any time shall be equal to the
value of all deferred compensation credited to such portion of the Account.
If amounts credited to all or any portion of the Account are invested,
the value of such invested portion of the Account at any time shall be equal
to the fair market value of the investment. The Employer's obligation to
the Employee shall be reduced by any charges or fees incurred in liquidating any investment, including any interest penalty for early withdrawal,
er
of amounts deposited in any financial institution. In addition, the Employ
2 of 1 percent of
1
.thly fee not to exceed /
may charge each Employee a mc-,
amounts deferred each month for administrative costs. This fee shall be
withheld from the nondeferred compensation of the Employee.
3.
At the time the Employee signs this Plan and AgreeSettlement AgreerTient.
ment he or she shall complete the Settlement Agreement by which the Employee
shall elect the manner in which deferred amounts are to be paid.
4.
Distribution. In the event of Employee's separation from service with
Employer due to retirement, death, disability, or other voluntary or inee's
voluntary termination, the Employer shall distribute the value of Employ
ent.
Account to the Employee in the manner specified in the Settlement Agreem
unicability" shall mean a continuous physical or mental incapacity which
es
causes the Employee to be unable to perform his or her employment servic
ation
as determined by the Employer and such incapacity results in the termin
In the
of Et,ployee's employment or contractual services with the Employer.
event of the Employee's death distribution shall be made to Employee's
designated beneficiary. At the time the Employee signs the Plan and Agreerent, he or she shall designate one or more beneficiaries on a Designation
of Eeneficiary form supplied by the Employer.
5.
Manner of Distribution in Absence of Settlement Agreement. In the event
that the Employee has not signed an effective Settlement Agreement prior
to the earliest distribution date provided under this Plan and Agreement,
the Employer shall, upon such distribution date, liquidate and pay to the
Employee or the Employee's beneficiary an amount equal to one fifteenth
(1/15th) of the value of the Account (as of such distribution date) each
year for fifteen (15) years, adjusted annually for any increase or decrease
in the value of the Account. The annual requirement may be met by monthly,
quarterly, or sffliannual payments at the discretion of the Employer so long
as the annual minimum is met.
6.
Absence_orj)ea_th of Designated Beneficiary. Notwithstanding the provisions
of paragraphs 7 and 8, in fK6- event Employee dies and (a) the Employee had
ciary
not filed a Designaticrn of Beneficiary, or (b) no designated benefi
an
shall survive the Employee, then the Employer shall liquidate and pay
Employee's
amount equal to the value of Employee's Account in a lump sum to the
October 22, 1980
Chairman of the Federal Reserve Board of Governors
Page three
or is enestate. In the event of death of a beneficiary who is receiving
no contintitled to receive distributions under this Plan and Agreement and
the Employer
gent beneficiary is named or survives such beneficiary, then
shall liquidate and pay an amount equal to the balance of the Employee's
Account in a lump sum to the beneficiary's estate.
0
•
7.
8.
9.
In the event an Employee is faced with an unforeUnforeseeable Emeraer)cx.
seeable emergencildetermined in the manner prescribed by regulation under
fying
Section 457 of the InternAl Revenue Code) Employer may, after satis
itself that the requirements of the aforementioned regulations have been met
and upon application by Employee, permit the distribution from the Employee's
Account of only that amount reasonable needed to satisfy the emergency need.
Such amount shall be determined by the Employer in the Employer's sole discretion.
All amounts of compensation deferred under this
Property of Employer.
Plan and Agreement, all property and rights purchased with such amounts,
and all income attributable to such amounts, property, or rights shall reicted
main solely the property and rights of Employer (without being restr
only
ct
to the provision of benefits under this Plan and Agreement) subje
shall have no right,
to the claims of Employer's general creditors. Employee
general creditor of
title, property nor claim to such amounts except as a
Employer.
a state chartered
General Factual Information. Equitable Savings and Loan is
. It is a publicly
savings and loan association with accounts insured by FSLIC
in Equitable
held corporation in existence since 1890. Deposit of funds
by the employer is authorized by ORS 294.035(7).
THE REGULATION "D"
l Reserve Board on
The following taken from the publication issued by the Federa
that savings accounts
the final rule for Regulation D --Docket No. R-0306 indicates
within the definition
held on deposit under deferred compensation arrangements are
ts:
of personal time deposits and exempt from reserve requiremen
The
IRA and Keqgh Plan Time Deposits and Escrow Funds.
(from page 13)
name of—a depositor
Monetary Control Act provides that any tim67TeposiChe1d in the
nonpersonal
that is not a natural person is subject to reserve requirements on
its, which can
time deposits. Under this provision IRA and Keogh Plan time depos
time deposits since
only be issued to individuals, would be treated as nonpersonal
due to the
the" are held by the df_positou institution as trustee or custodian
deposits are
technical requirements of theInternal Revenue Code. Since these
Td TS tTnIgiii_J
1- 6-ETe from ofker Tp_ersonal. Time effFd e7efly the
will regard
-depositor as his own funds subjed -TO---his -direct control, the Board
such fundsas personal time deposits. 'emphasis
October 22, 1980
Governors
Chairman of the Federal Reserve Board of
Page four
ber of. commentators
Time Deposits Held by Trustees. A num
stees
treatment of time deposits held by tru
te
ria
rop
the
app
to
as
ue
iss
the
raised
l
beneficial interest is held by natura
ire
ent
the
re
whe
es
ari
uci
fid
er
oth
and
such
imposition of reserve requirements on
the
t
tha
es
iev
bel
rd
Boa
The
s.
person
transmonetary policy. Therefore, any non
of
t
duc
con
the
for
ary
ess
nec
not
or
funds is
a trustee or other fiduciary whether
of
e
nam
the
in
d
hel
t
osi
dep
e
tim
ferable
a personal time deposit if the entire
as
ed
ard
reg
be
l
wil
,
son
per
l
ura
nat
not a
sons. A nontransferable time deposit
per
l
ura
nat
by
d
hel
is
st
ere
int
l
cia
benefi
normally be regarded as a personal
ld
wou
d
fun
n
sio
Ten
a
of
et
ass
an
is
thd.t.
interest of such funds normally is
al
ciefi
hen
ire
ent
the
ce
sin
t
osi
time dep
added)"
held by natural persons. "(emphasis
(2) "Deposit does not include:
(from page 31)
perly
delpsitory institution that it keeps pro
the
by
d
hel
or
ed
eiv
rec
ds
fun
st
tru
(i)
ts in
m itsaeneral assets or which it deposi
fro
rt
apa
and
ds
fun
st
tru
as
ed
aat
s_tgre
If
elf as trustee or other fiduciary.
its
of
dit
cre
the
to
on
uti
tit
ins
r
anothe
l department of the depository institucia
mer
com
the
h
wit
ted
osi
dep
are
ds
trust fun
assets, a deposit liability of the inl
era
gen
its
h
wit
d
gle
min
ise
erw
oth
tion or
"
stitution is created; "(emphasis added)
ns:
(f) (1) "Nonyersonal time deposit" mea
t, that is not a transaction
psi
dep
s
ing
sav
a
ing
lud
inc
t
osi
dep
(i) a Owe
eficial interest is held by a depositor
ben
au
ch
whi
in
ds
fun
ing
ent
res
rep
account,
asis addedY
which is not a natural _person; "(emph
(from nAno 34)
osit" does not include nontransdep
e
tim
nal
rso
npe
"No
(2)
(from page 35)
ch the entire beneficial interest
whi
in
or
of
dit
cre
the
to
ts
osi
e
dep
ferable tim
l Retirement Account or Keogh
dua
ivi
Ind
an
to
nt
sua
pur
l
dua
ivi
ind
an
is held by
n 408, 401. "(enphasis added)"
tio
Sec
)
-1954
.
R.C
(I.
.C.
U.S
26
er
und
n
ft0 Pla
RULING REQUESTS
ble Savings and Loan and its
ita
Equ
of
alf
beh
on
and
ing
ego
for
the
In view of
t the following ruling be issued:
sister institutions, it is requested tha
held under deferred compensation
1. Savings accounts and time deposits
eral Reserve as "personal time
arrangements will be treated by the Fed
es under Regulation D.
deposits" for reserve requirement purpos
2.
for the same basic purposes
on
cti
fun
ts
oun
acc
ion
sat
pen
com
ed
err
Because def
l treat them as if they were
as pension trusts, the Federal Reserve wil
IRA or Keogh accounts.
•
October 22, 1980
Chairman of the Federal Reserve Board of Governors
Page five
3.
That the sweeping definition in Regulation D of personal time deposits
as any case where the beneficial interest is held by natural persons
(whether or not the immediate funds are held by a public entity or
corporation) is meant to include deferred compensation accounts, without
specifically naming them.
•(]••
PROCEDURAL STATEMENTS
Please address your reply and ruling letter to the undersigned.
If information is desired, please telephone the undersigned at (503) 243-1800.
To our knowledge, the issues herein are not pending before any District office
of the Federal Reserve.
A conference is hereby requested, if any decision should be under consideration
inconsistent with any of the foregoing ruling requests before any such decision
is actually made.
Respectfully submitted,
4
s -Jt'-e(
•Gerald A. Kerns
Vice President
Deferred Compensation
GK: bg
Enclosures:
bcc:
Copy of Employer/Employee Agreement
Settlement Agreement and Designation of Beneficiary Form
John Mason
Jim Scott
Jim Truax
Darlene Smith
Neal Fisher, State of Oregon
John Shank, C/O Al Ullman's Office
•
•
•
•
BOARD Or GOVERNORS
• . • • • ...
DI THE
F
'
'
• c••:.
'
r• •• ''
FEDERAL RESERVE SYSTEM
•
•
•
• ••
•,..
•
•
WASHINGTON, D. C. 20551
AODOISi
4
;11111:
OrrICIAL
COUR( SPONIOrP.Cr
•
•
e.
NO
"am, 4
• • eA 4,1.t
'
'
NP.(
.
1110• 640
•
November 14, 1980
Mr. Gerald A. Kerns
Vice President
Equitable Savings and Loan Association
1300 S. W. Sixth Avenue
Portland, Oregon 97201
Dear Mr. Kerns:
Chairman Volcker has asked me to respond to your letter of
October 22, 1980, concerning the treatment for reserve requirement purposes under the Board's Regulation D--Reserve Requirements of Depository
Institutions (12 CFR Part 204) of funds held on deposit under deferred
compensation agreements. You state that these plans are offered to
employees of the State of Oregon and many other public and private tax
exempt employers.
Under the plan of (,
- eferred compensation, employees who choose
to participate enter into a contract with the employer whereby the employee may elect prior to the beginning of the month of service for
which the compensation is payable to have a specified amount of the
employee's compensation set aside through a bookkeeping entry in a deferred compensation account for the benefit of the employee. The deferred compensation agreement provides that the funds will be placed
in a deposit account at rquitable Savings. Such plans are established
pursuant to section 457 of the Internal Revenue Code (26 U.S.C. (I.R.C.
1954) § 457). You ask whether savings accounts and time deposits held
under deferred compensation arranaements will be regarded as personal
time deposits under Regulation D exempt from reserve requirements on
nonpersonal time deposits. In this regard, you assert that deferred
compensation funds serve the same basic purposes as pension funds and,
thus, should be treated as if they were IRA or Keogh Accounts and that
such accounts are personal time deposits since the beneficial interest
in the funds is held by natural persons.
In general, under Regulation D, a time deposit, including
a savings deposit, is subject to reserve requirements on nonpersonal
time deposits if it is transferable or if any beneficial interest in
the funds is held by a depositor which is not a natural person. Such
deposits with maturities of less than four years are subject to a three
per cent reserve ratio while those with longer maturities are subject
to a zero per cent reserve requirement.
•
Mr. Gerald A. Kerns
-2-
With specific reference to the deferred compensation agreement
that you enclosed, paragraph 4 provides in part
"The Employer's obligation to the Employee at any time shall
be equal to the value of the Account at such time. With
respect to such obligation, Employee shall be a general (not
secured) creditor, and the parties confirm that no trust nor
trust fund is intended."
In addition, paragraph 12 states
"All amounts of compensation deferred under this Plan and
Agreement, all property and rights purchased with such amounts,
and all income attributable to such amounts, property, or
rights shall remain solely the property and rights of Employer
(without being restricted to the provision of benefits under
this Plan and Agreement) subject only to the claims of Employer's
general creditors. Employee shall have no right, title, property
nor claim to such amounts except as a general creditor of
Employer (emphasis added)."
These provisions in the agreement are intended to preserve the tax deferred status of such funds under section 457(b)(6) of the Internal
Revenue Code which requires an eligible state deferred compensation
AnfOrrc%ei linHenr the
plan to provirie rhtAll AmnlIr0-c of nnmnnncnrinn
plan, all property and rights to property purchased with amounts of
compensation deferred under the plan, and all income attributable to
the property must remain solely the property of the state subject only
to the claims of the state's general creditors until made available
to the participant or other beneficiary. Thus, while the plan participants may select among any optional methods provided under the plan
for investing amounts of deferred compensation, they cannot have any
secured interest in the assets purchased with their deferred compensation. Moreover, the assets may not be segregated for the participants'
benefit that would put the asse0 beyond the reach of the general creditors of the sponsoring entity.-/
The Monetary Control Act of 1980 (Title I of P. L. 96-221)
provides that any time deposit held in the name of a depositor that
is not a natural person is subject to reserve requirements on nonpersonal
time deposits. Under this provision, IRA and Keogh Plan time deposits,
reprinted
1/ H. R. Rep. No. 1445, 95th Cong., 2nd Sess. 55 (1978),
in 1978 U. S. Code Cong. and Ad. News 7093.
•
Mr. Gerald A. Kerns
-3-
be treated as nonpersonal
which can only be issued to individuals, would
institution as trustee
time deposits since they are held by the depository
Internal Revenue
or custodian due to the technical requirements of the
from other personal
Code. Since these deposits are indistinguishable
his own funds subject
time deposits and are regarded by the depositor as
d such funds as
to his direct control, the Board determined to regar
time deposit
personal time deposits. In addition, any nontransferable
ded as a personal
held in the name of a trustee or other fiduciary is regar
by natural persons.
time deposit if the entire beneficial interest is held
held
The Legal Division is of the opinion that time deposits
your letter must
under the deferred compensation agreement described in
, the rebe regarded as nonpersonal time deposits. In this connection
provisions
quirements of the Internal Revenue Code and the explicit
sponsoring
of the agreement provide that the funds are assets of the
tors. Conseparty and are subject to the claims of its general credi
remain entirely
quently, the beneficial interest of the funds does not
hable
with natural persons. We believe that such accounts are distinguis
have confrom IRA and Keogh Plan funds in that the individual does not
ship of
trol over the funds and the tax law provision regarding owner
addition, the
the funds is more than a mere technical requirement. In
as a trustee or fidudeferred compensation agreement cannot be regarded
tion since
ciary relationship as might exist in a pension fund situa
specifically provide
the terms of the deferred compensation agreement
the agreement.
that a trust relationship is not contemplated under
If you have questions on this matter, you may contact me
Legal Division.
(202/452-3625) or Paul S. Pilecki (202/452-3281) of the
Sincerely yours,
Gilbert T. Schwartz
Assistant General Counsel
•
•
• • •oc cot,/ ••
4' •
.cs
•.',„
;
,_ 1).;*•• 1,
0
1,..
.r
::-7 ,'
.
•4
‘.• " • •
• -•:-. •".; ..... :?,•,.-2- .
RDARD OF. GOVERNORS
i-TF-
FEDERAL RESERVE SYSTEM
:-.1.C.!,Jrrfrnv.
..•..••
WASHINGTON, O. C. 20551
PAUL A. VOLCKER
December 24, 1980
CHAIRMAN
The Honorable Henry S. Reuss
Chairman
Committee on Banking, Finance
and Urban Affairs
House of Representatives
Washington, D. C. 20515
Dear Chairman Reuss:
I am writing in response to your letter of December 2,
requesting that the Federal Reserve and other banking supervisory
authorities make information available to the public on loans by
individual U. S. banks to individual foreign borrowers.
As you are aware, U. S. bank supervisory agencies already
collect and provide to the public much information on individual
banks, as well as a great volume of aggregate data on the banking
system. In particular, all banks file Quarterly Reports of Condition, and all banks with significant international activities
also file with their bank supervisory agency detailed supplements
to the Reports of Condition. These reports and supplements are
available to the public, as are Reports of Condition filed by Edge
Corporations that engage in international banking. The banking
supervisory agencies recently revised extensively the Report of
Condition to expand significantly the information available on the
international activities of banks, and these improvemerkts have
made those reports more useful to depositors and investors seekin
g
to evaluate the activities of the banks.
In addition to these reports, bank holding companies
file reports with the Securities and Exchange Commission providing
information designed to meet the needs of investors. Where the
foreign activity of a bank is a significant part of the total
(generally 10 percent or more), information on assets and revenues
is to be reported for separate geographical areas (as distinct
from countries) that account for a significant share of a bank's
business. And, of course, the banks themselves publish information on the nature of their international operations in reports
that they prepare for their stockholders.
I believe the information now collected from banks and
provided to the public represents an appropriate balancing of
the needs of the public and of the bank supervisors for information against the costs that the statistical reporting system
imposes on banks.
-•
Tmr-
The Honorable Henry S. Reuss
Page Two
Your letter raises issues of confidential
ity of banking
data. Publication of information on the
accounts of individual
customers would, of course, be directly
contrary to our tradition
regarding the privacy of individual bank
customers. It should
also be emphasized that release of info
rmation on country totals,
bank by bank, could reveal transactions
of individual customers,
since in some cases all transactions
(loans as well as deposits)
of an individual bank with a particular
country are for the
account of a single institution in that
country.
Moreover, release of individual bank data
on particular
countries could in some instances adve
rsely affect the competitive
position of the bank involved vis-a-vis
other U. S. banks and
vis-a-vis foreign banks. The general
competitive position of
U. S. banks in international banking rela
tive to foreign banks
would be adversely affected. I should
point out that domestic
U. S. banking data are not published bank
by bank in the degree
of detail that you are suggesting be
done for international
lending. (Individual banks may, of cour
se, provide some information of this type in their annual
reports.)
The United States already publishes more
information on
domestic and international lending by
our banks than is available
on banks of other countries. For the
reasons outlined above, I do
not believe it appropriate for the Fede
ral Reserve to publish the
information described in your letter.
Your letter also expresses concern that
foreign lending
by U. S. banks has reduced the amount
of credit available for
investment and other purposes in the Unit
ed States. Most foreign
lending by U. S. banks is conducted at
their foreign branches with
funds obtained from foreign sources; thes
e credit flows are thus
outside the U. S. banking system. Moreover
, it is important to
recognize that bank credit is only one
element in the total international capital flows of the United Stat
es. In recent years
the United States has had a current acco
unt deficit, and has, on
balance, been a net importer of capital.
Thus, foreigners have
been net suppliers of credit to the Unit
ed States over this
period, although at any one time there may
be an outflow of funds
through the U. S. banking system that was
more than matched by
inflows through other channels (aggregate
data on these flows
are, of course, publicly available). In
conclusion I should
emphasize that the volume of credit avai
lable to U. S. borrowers
is affected only marginally by internat
ional credit flows and for
the most part it reflects developments
in domestic credit markets.
Sincerely,
(11V 424)
Nr. Geoutill
;•4rs. 3a1lardi
V S. RE'JSS, WM. CHAIRMAN
MAS L. ASHLEY, OHIO
,4ILLIAM r, MOORHEAD, PA.
FERNAND J. ST GERMAIN, R.I.
HENRY B. GoNZALEZ. TEX.
JOSEPH G. MINISH. N.J.
FRANK ANNUNZIO. ILL.
Gemmill
tion assigned Mr.
•
lik
GEORGE HANSEN, IDAHO
HENRY J. HYDE. ILL.
U.S. HOUSE OF REPRESENTATIVES
WALTER
r
RICHARD KELLY. FLA.
JIM LEACH, IOWA
JAMES M. HANLEY, N Y.
FV,RPEN J. MITCHELL. MD.
J WILLIAM STANTON, OHIO
CHALMERS P. WYLIE. OHIO
STEWART B. MCKINNEY. CONN.
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
EAUNTROY. D.C.
THOMAS B. EVANS. JR.. CEL.
S. WILLIAM GREEN, N.Y.
RoN PAUL, TEX.
STEPHF N L. NEAL. N.C.
JERRY PA. FATTERSON. CALIF.
JAMES J. ULAN( IlArto
2129 RAYBURN HOUSE OFFICE DUILnINC
CARROLL HusnAno. JR., KY.
JOHN J. LAEALCE. N.Y.
WASHINGTON, D.C. 20515
NINETY-SIXTH CONGRESS
GLADYS NOON SPELLMAN, MD.
LES AuCOIN. OREG.
DAVID W. EVANS, IND.
NORMAN F. D'AMOURS,
STANLEY N. LUNDINE, N.Y.
JOHN J. CAVANAUGH, NEBR.
ED BETHUNE. ARK.
NORMAN D. SHUMWAY, CALIF.
CARROLL A. cA.ArnELL, JR.. S.C.
DON RITTER. PA.
JON HINSON, MISS.
225-4241
December 2, 1980
MARY ROSE (DAKAR. OHIO
JIM MATTOX, TEX.
BRUCE F. VENTO, MINN.
DOUG BARNARD. GA.
wrs WATKINS, OKLA.
ROBERT GARCIA. N.Y.
MIKE LOWRY. WASH.
Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
20551
Washington, D. C.
Dear Chairman Volcker:
The American public needs to know much more than they do today
about the foreign lending practices of U.S. banks. Since the
Federal Reserve, together with the Comptroller of the Currency and
the Federal Deposit Insurance Corporation, already gathers and
publishes some of the most useful, though still inadequate, information on bank commitments abroad, I urge you to take the lead in
improving the public's knowledge about foreign lending.
There is no current source of fully detailed information about
U.S. bank lending abroad. Attempts by private citizens and groups
to compile data on foreign loans take months of research using
sources such as World Bank files, banking trade publications and
newspaper clippings. Besides being laborious and slow, the process
often results in incomplete information.
Some valuable information is now routinely compiled by various
sources. The World Bank prepares a World Debt Table that lists the
external debt of foreign countries but does not disclose who the
creditors are. In addition, the World Bank summarizes information
from public sources on borrowings in the international capital
markets. This gives details of loans, including the names of lead
banks in syndicated lending, but still does not systematically disclose the extent of an individual bank's commitments abroad.
The Federal Reserve, the Comptroller of the Currency and the
FDIC also compile information on foreign lending. Banks with foreign
offices that lend more than $20 million abroad are required to file
a Country Exposure Report listing how much is lent to the entire
banking sector, the public sector, and all other borrowers in each
foreign country, and the maturities of these loans. The three Federal
agencies have treated the material submitted by individual banks as
Hon. Paul A. Volcker
December 2, 1980
Page 2
confidential. Therefore, when this information is aggregated for
release to the public as the semi-annual Country Exposure Lending
Survey, it masks the foreign exposure of any particular bank. In
addition, the original information submitted by banks does not include the names of foreign borrowers, so that the purposes of the
loans are not clear.
Quarterly data on foreign lending are also submitted by U.S.
S.nks to the Treasury and the Federal Reserve for use in Bank for
International Settlements publications and in the Federal Reserve
Bulletin. Once again these provide no breakdown by borrower, and
are only made public in aggregated form to show lending by all U.S.
banks.
There are several groups on whom this lack of available detailed
infS rmation falls particularly hard. First, many religious and
secular organizations are interested in knowing which U.S. banks are
providing credit to countries that consistently deny their citizens
basic human rights. Even while these countries are being denied U.S.
government economic or military assistance or a favorable U.S. vote
for multilateral aid under sections 116(a) and 502B of the Foreign
Assistance Act of 1961, American banks are providing private capital
that supports the status quo in those countries. Without a more detailed breakdown than currently is available, the groups that defend
human rights cannot effectively try to convince banks that loans should
go for more socially responsible purposes.
Another group, bank stockholders, are concerned not only with
these human rights matters but also with the financial soundness of
their bank's exposure abroad. The most recent Country Exposure Lending Survey notes that total foreign lending for the 130 most active
U.S. banks was $250 billion in 1979, up 12 percent from 1978 and
perhaps as much as four to five times the total foreign lending just
a decade ago.
If all this money were going to blue chip investments, stockholders would hardly need to worry. Yet significant amounts are
going to the public sector in countries that are heavily in debt and
to private entities in countries where political turmoil makes these
ventures highly speculative. Stockholders ought to know when their
investments are being put at the risk of the political winds, and
not have to rely on the ability of federal bank examiners to assess
the safety and soundness of these lending practices.
Finally, the American people and Federal policymakers should
know why so much credit is escaping abroad when the lack of capital
is crippling productivity and prosperity here at home. Even while
U.S. business hungers for investment capital to buy new machinery
so it can better compete abroad, and even while the American consumer
vs
Hon. Paul A. Volcker
December 2, 1980
Page 3
searches vainly for funds to buy a car and help our struggling U.S.
automakers, American banks are lending abroad in ever-larger amounts.
We must begin to assess this situation and make sensible policy on
how best to revitalize our economy by providing the capital needed
to overhaul our ramshackle economic structure.
For all these reasons, and to satisfy the needs of all these
groups, the current reporting on foreign lending needs to be made
more open to public scrutiny. Much of the vital detail is already
in your possession. By expanding the data only slightly to include
the names of foreign borrowers and by releasing bank-by-bank data
without aggregation, your statistics could provide all the insights
the public needs to make informed judgments on the economic and
social propriety of bank lending. Bank confidentiality is really
not an issue when the stakes are so high for our nation's productivity, for the solvency of U.S. banks and for America's commitment
to human rights around the world.
Your general power to require banks to prepare any necessary
reports (12 U.S.C. 5248(a) for member banks and 12 U.S.C. 51844(c)
for bank holding companies) and the similar powers of the other bank
examining agencies (12 U.S.C. 5161 for national banks and 12 U.S.C.
51817 and 51820 for FDIC-insured institutions) certainly provides
ample legislative authority for you to work with the Treasury and
the FDIC to bring to light the information I believe is urgently
needed.
I look forward to your early consideration and reply to this
proposal.
Sincerely,
Henry S. Reuss
Chairman
.•
GoviR* •.
•
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
December 29, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Howell Heflin
United States Senate
Washington, D. C. 20510
Dear Senator Heflin:
Thank you for your recent letter
regarding the impacts
of the current high level of int
erest rates.
I share your deep concern regard
ing the impact of high
interest rates on many segments
of the economy. I would very
much like to see a decline in
rates and a return to a more sta
ble,
healthy economic situation. Unf
ortunately, the solution to thi
s
problem does not reside with the
Federal Reserve alone. The sur
ge
in interest rates has occurred
as demands for money and credit
have increased with the rebound
in economic activity since mid
year. As the System has sought
to adhere to its long-range
objective of holding monetary
expansion to the moderate rates
consistent with an unwinding of
inflation, bank reserve positi
ons
have tightened, placing pressure
on the money markets. If we had
accommodated the increased demand
for reserves, the result would
have been monetary growth faster
even than the very rapid rates
we have actually experienced.
Faster monetary growth would onl
y
have added impetus to the inf
lationary forces that underlay the
interest rate pressures; moreov
er, the abandonment of our announ
ced
commitment to monetary restraint
would have had devastating effect
s
on expectations in the financial
markets and elsewhere.
Until there is a general sense
that we have begun to
make some headway in reducing the
momentum of inflation, there
can be little hope of a sustai
ned reduction in interest rates
-especially long-term rates. I
agree with you wholeheartedly tha
t
reliance solely on monetary pol
icy to achieve control over inf
lation is inappropriate. Complemen
tary discipline on the part of
fiscal policy will move us much
more quickly toward the end of
lower inflation and lower intere
st rates, with much less wrench
ing
of financial markets along the
way. I have, of late, received
a
number of letters from members
of Congress expressing concern
about high interest rates, but als
o indicating a commitment to
fiscal restraint. There is in the
se letters a recognition of
The Honorable Howell Heflin
Page Two
the interactions of policy and the need
for a coherent assault
on the serious problems confronting us.
I am much encouraged
by this and feel more confident as a resu
lt that we will find
a solution to these problems.
Sincerely,
NJP.JLK.DJW:vcd ( V-434)
bcc.
Mr. Prell
Mr. Kichline
Mrs. Mallardi (2)
4
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
•o
WASHINGTON, D. C. 20551
fRALRE-s.
December 29, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Floyd J. Fithian
House of Representatives
Washington, D.C.
20515
Dear Mr. Fithian:
Thank you for your recent letter
regarding the problems
caused by high interest rates.
I share your concerns and would ver
y much like to see
interest rates decline from their pre
sent levels. We simply
cannot, however, afford to bring
about that decline by fostering
a more rapid expansion of money,
which would in turn only exacerbate inflationary pressures in the
economy and lead ultimately to
higher interest rates and even gre
ater economic difficulties.
A sustained lowering of interest rat
es will be possible
only when actual and anticipated
inflation has slowed substantially.
Proper fiscal policies, as you ind
icate, have an important role
to play in the fight against
inflation and high interest rates.
Indeed, only if there is a clear,
credible long-range commitment
to both fiscal and monetary restra
int can we hope to see a reversal
of the expectational spiral that
has given such a powerful momentum
to the rise of wages and prices.
These are very troubling times.
We at the Federal Reserve
are doing everything we can to ass
ure that the policies we pursue
are in the best interest of our nat
ion's citizens. We welcome the
counsel and cooperation of the mem
bers of the Congress. In that
spirit let me express again my tha
nks to you for writing.
Sincerely,
,ljtut
:AJP;JI.X..pjt (V-426)
Prell
• Kichline
Lra. mallazdi (2)
WASHINGTON orrice.
129 CANNON HOUSE
•
•
OFFICE BUILDING
WASHINGTON. 0 C
(202) 225-5777
DISTRICT OFFICES,
513 MAIN STREET
LAFAYETTE, INDIANA 47901
(317) 742-0211
20515
commirTcrs
AGRICULTURE
FOREIGN AFFAIRS
GOVERNMENT OPERATIONS
Congrr55 of tly Unita'6tate5
518 Sarni BurraLo STotrit
WARSAW, INDIAt.A 46580
jPottiSe of 1lepregentatibt5
(219)269-1813
203 CITY HALL
PORTAGE, INDIANA 46368
U.Inobinciton, Ile. 20315
(219) 763-3505
TOLL FREE ACTION LINE
(800) 382-7517
FLOYD J. FITH IAN
-OFFICE ON WHEELS"
T•tAvtLeN0 otEGLILAIRLY THROUGH THE OISTVIICT
2ND DISTRICT, INDIANA
Dec. 2, 1980
Mr. Paul A. Volcker, Chairman
Federal Reserve Board
.
Constitution and 20th St., N.W.
Washington, D.C. 20551
Dear Chairman Volcker:
I am writing to you because the recent increases in interest
rates may prevent recovery from the recession and stimulate
another round of unemployment increases and slowdowns in the
auto, steel, housing, and real estate industries. Our economy
should not be put through the wringer twice in the same year.
High interest rates have not substantially reduced the
inflationary spiral that has gripped the nation for the last
year, and in fact may have actually contributed to it. I do
not see how a repeat of a failed policy would bear new fruit.
High interest rates have in fact contributed to the dramatic
reduction in housing starts, driven real estate firms out of
business, curtailed construction jobs, injured auto sales,
driven auto dealers to bankruptcy, created a slump in the steel
industry, and resulted in millions of unemployed workers.
Small businesses are severely impacted by high interest rates
for their inventories and many have closed their doors forever.
The people I have the privilege of representing feel strongly
about the need to bring down interest rates to a reasonable level
and to keep them there, while at the same time controlling
inflation. Lowering interest rates and curbing inflation can
both be accomplished with proper fiscal policies and a balanced
federal budget. The time has come to reduce interest rates and
cut government spending.
You may have my assurance that I, as a Member of Congress,
will spare no effort to cut spending and to continue my work for
a constitutional amendment to balance the federal budget. I
would respectfully urge you and the Federal Reserve Board to
bring interest rates to a reasonable level.
Since
F YD FI
Member
FF/em
THIS STATION/FRY PRINTEri ONi PAPFR MAOF WITH
nrrvi-t rri
Congress
ft
•
UENRYJ.NOWAK,N.Y.
J. WILLIAM STANTON. OHIO
CHAIRMAN
TOBY ROTH. WIS.
LYLE WILLIAMS, OHIO
TOM STUD, OKLA.
PARREN J. MITCHELL, MO.
FREDERICK W. RICHMOND, N.Y.
pnittb „States pollee of ?teirresentatitiez
Committee on
BERKLEY BEDELL, IOWA
CLAUDE LEACH. LA.
ntn11inc,
c*Itliroittinittre Du cArrroo to KJ Ititu Tapital
nub Pusittres Mpporttittitiro
P-363 gagburn Plus*
ffirs
DAVID E. FRANASIAK
SUBCOM M I TTE1C COUNSEL
202-225. 7797
HAROLD L. ARONSON. JR.
MINORITY SUOCOMMITTEIC COUNSEL
202-225-4541
puiibirtg
2U515
December 2, 1980
Honorable Paul A. Volcker
Chairman, Board of Governors
Federal Reserve System
Washington, D. C. 20551
Dear Mr. Chairman:
Once again, our Nation's small business community is
being pushed to the brink of disaster by high rates of interest. The prime rate has climbed four and one-half percent
in the last month, and it appears that even higher rates are
likely.
These high rates,, if allowed to continue, will stifle
that sector of our economy which creates the jobs and innovations we most desperately need for an increase in productivity today.
Mr. Chairman, this simply cannot be allowed to happen.
I strongly urge you to implement my Subcommittee's recommendations of last September which are detailed in our Report
on Federal Monetary Policy and its Effect on Small Business.
These recommendations are the result of six days of exhaustive
Subcommittee hearings. During the course of these proceedings,
we heard from a broad cross section of small businesses, economists, financial experts, banking officials and your vice
Chairman Frederick H. Schultz, wh9 testified twice.
In addition, I directed my staff to conduct a nationwide survey of small businesses. The responses reinforced our
belief that smaller firms bear the brunt of tight money policies.
I strongly urge you to reconsider your recent policy
actions, and to restructure your approach along the lines recommended in the Report. Specifically, I urge you to:
1. Stabilize the interest rates. Rate fluctuations make
IL virtually impossible for the small business person to plan
for the future.
Honorable Paul A. Volcker
December 2, 1980
Page Two
2.
Urge the large banks to institute a dua
l prime rate.
3. Urge the banks to peg their loans
to smaller firms
at rates other than prime. The prime is
an artificial rate and
it is not the best rate offered a bank's
best customers.
4. Lower the banks' cost of money for
loans to small
businesses. The Federal Reserve has the
power to do this by
allowing the banks to immediately write
off their small business loans. Another approach would be to allow
banks to loan
a percentage of their reserves held on deposit
at the local
Federal Reserve bank, to smaller firms.
Other approaches are possible and are wel
l within the
broad latitude conferred on the Board by
Congress.
If we act now, we may be able to save hun
dreds of thousands of smaller firms from certain financ
ial ruin.
With best wishes and kind regards,
Sincerely,
Henr
Cha
, "1":4411it'VY,VA'K
ha -
Nowak
•
BOARD OF GOVERNORS
O
THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
December 29, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Toby Roth
House of Representatives
Washington, D.C.
20515
Dear Mr. Roth:
Thank you for your recent letter conc
erning the current
direction of monetary policy. I full
y understand that the real
estate industry faces grave problems
as a result of rapid inflation
and the current high level of interest
rates prevailing in the
economy.
I share your concerns and would very
much like to see
interest rates decline from their pres
ent levels. We simply,
cannot, however, afford to bring abou
t that decline by fostering
a more rapid expansion of money, which woul
d in turn only exacerbate inflationary pressures in the economy
and lead ultimately to
higher interest rates and even greater
economic difficulties.
A sustained lowering of interest rate
s will be possible
only when actual and anticipated infl
ation has slowed substantially.
Proper fiscal policies, as you indi
cate, have an important role to
play in the fight against inflation
and high interest rates.
Indeed, only if there is a clear, cred
ible long-range commitment
to both fiscal and monetary restrain
t can we hope to see a
reversal of the expectational spiral
that has given such a powerful momentum to the rise of wages and
prices.
These are very troubling times. We at
the Federal Reserve
are doing everything we can to assure that
the policies we pursue
are in the best interest of our nation's
citizens. We welcome
the counsel and cooperation of the memb
ers of the Congress. In
that spirit let me express again my than
ks to you for writing.
Sincerely,
S/Paul k Vo!cket
JI.FiRMF:JLgpjt (*V-433)
bcc:
•r. Freund
re. Nallardi (2)
r. Fisher
.r. Kiehl/no
An assigned Mr. Kichline
TOBY ROTH
EIGHTH DISTRICT
WISCONSIN
SCi
4
TECHNOLOGY COMMITTEE
SURCOMNAITTEES
•
ENERGY RISE ARcH AND PRODUCTION
INvEsTiGATIONS AND OVERSIGHT
ND
SMALL B
cc CoMEAITTIL
SUBCoMmt1TEES
SBA AND SBIC AuTHORify AND Gi FARA'
SMALL BusINEss PROBlEmS
ACCESS TO EQUITY CAPITAL
AND BUSINESS OPPoRTuNutis
tAir I Vie
I
1r
•
116 ;At,
•02
/
,,
;f
, Sift 1rPrtrynt
WASHINGTON OFFICE:
1008 LONGVVORTH HOUSE OFFICE BUILDING
WASHINGTON, D.C. 20515
DISTRICT OFFICES:
126 NORTH ONEIDA STREET
APPLETON. WISCONSIN 54911
Congrefs of tlie tittiteb AbtattE4
Apitsse of ikepregentatibel
filagbingtort, 33.C. 20515
207 FEDERAL BUILDING
325 EAST WALNUT STREET
GREEN BAY. WISCONSIN 54301
101 NORTHERN BUILDING
8,44 PIERCE AVENUE
MARINETTE. WISCONSIN 54143
December 15, 1980
The Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C. 20551
Dear Chairman Volcker:
This communication is to express my concern regarding
the meteoric rise of the prime rate. The jump to twenty
percent ties the record set last April and has risen five
and one-half percentage points since Election Day. I fear
the strong business loan demand will push it up even higher, thus further damaging the already reeling housing industry.
Allow me to briefly outline how this problem has affected
the State of Wisconsin. For the three years of 1977, 1978,
and 1979 housing starts in Wisconsin were 43,000, 43,000, and
35,000 respectively. Together, these yearly starts indicate
that a normal year would be about 40,000 starts. However,
in 1980 housing starts will be down to about 8,000 or off
75% from last year. Further, with an average interest rate
of 15% only 6% of the citizens of this country can qualify
for a mortgage loan.
The homebuilding industry offers an excellent example
of the bankruptcy of the Federal Reserve Board's policy
of recession to stop inflation. By virtually halting
housing construction, current policies simply bottle up
demand for housing and spur greater inflation in the future.
There is no question the demand for housing will increase
dramatically in the 1980's. The number of people between
the ages of 25 and 34 will increase by about five million
in the next ten years. Approximately 2.3 million new housing
units is a conservative estimate of the annual increase in
demand for housing expected in this same period. The pent-up
demand created during the current downswing will cause a substantial upward pressure on prices when the economy recovers.
41
Page 2
Being fully aware that the Federal Reserve Board alone
cannot halt spiraling inflation, I am prepared to exercise
my responsibility as a Member of Congress to more effectively
control Federal expenditures. The Federal Reserve Board and
the Legislative Branch must begin to act in concert to
smother the fires of inflation and curb wayward deficit spending.
Therefore, I respectfully request that the Federal Reserve
Board re-evalute its policy of putting people out of work in
order to stop inflation.
With best wishes, I am
Sinc rely
TOBY'0Th
Mem r of Congress
TR/JBB
.•• GOI/k, •.
R4,•„
..•
-N 0 •
BOARD OF GOVERNORS
OF THE
•
•
FEDERAL RESERVE SYSTEM
• "1
WASHINGTON, D. C. 205S1
••4•IALREs - ••
•••
••
•
December 29, 1980
PAUL A. VOLCKER
CHAIRMAN
The Honorable Ken Kramer
House of Representatives
Washington, D. C. 20515
Dear Mr. Kramer:
Thank you for your recent letter regarding Federal
Reserve policy and the behavior of interest rates. I
shall
attempt to respond to the several questions you raised.
First, you inquired as to the Board's current interest
rate policies. In a sense, the Federal Reserve does
not have
an interest rate policy per se. Under the procedures
adopted
a year ago, the System provides reserves to the banking
system
in a volume believed consistent with the monetary growth
objectives set by the Federal Open Market Committee.
Interest rates then are determined against this backdrop by the interplay of supply and demand forces in the
market.
Interest rate movements are watched carefully for they provi
de
an indication of the credit conditions affecting economic
activity,
but it was precisely the ambiguity of this indication in
an environment of high inflation and volatile price expectatio
ns that
led us to move away from our former procedures in which
interest
rates had greater importance as a guide for day-to-day
operations.
As the economy has snapped back in recent months from
the slump in the spring, and as demands for money and credi
t have
increased correspondingly, there has been a natural tende
ncy for
monetary growth to accelerate. Because the Federal Reser
ve has
sought to hold monetary expansion within bounds, in line with
the needs of our longer-range anti-inflationary strategy,
the
pressures of demands on limited supplies have expressed themselves in rising nominal interest rates. In addition, howev
er,
interest rates have tended to rise because of shifts in expec
tations about inflation, prompted by such factors as the unexp
ected
sharpness of the economic rebound, the lack of progress in slowi
ng
the pace of wage and price advances, and concerns about
large
federal budget deficits.
The large and unexpected surge in interest rates clearly
has caused hardships for many households and businesses.
We
The Honorable Ken Kramer
Page Two
recognize that less wealthy individuals and smaller businesses
may encounter particular difficulty because of their relatively
limited financial options. We very much wish that these problems could be avoided. However, the powers of the Federal
Reserve to deal with the complex of forces creating the upward
pressures on interest rates are limited. Essentially the only
option we have would be to abandon the objective of monetary
moderation and pour reserves into the banking system to accommodate burgeoning demands for money and credit. This would not
be more than a temporary palliative for the difficulties you
have identified, however, for the greater monetary ease would
intensify inflationary forces and eventually produce worse
financial market tensions and economic disorder.
Thus, we have adhered to what we feel is the only
responsible course of action, namely an effort to apply measured
monetary restraint with an eye to the moderation of growth of
aggregate demand and to the provision of a sense of long-range
stability in monetary policy. It is clear that, if inflation
and inflation expectations do not diminish, nominal interest
rates will tend to remain relatively high and the room for
economic expansion will be limited. I cannot say what will
happen to interest rates in 1981; economic forecasting in
general has proved exceedingly difficult, and predicting interest rates is an especially treacherous exercise. I would
only say that it is my hope that the sustained commitment of
the Federal Reserve to anti-inflationary restraint--supported
by a disciplined fiscal policy and constructive action elsewhere in the public and private sectors--will bring about a
diminution of inflationary momentum and lead to some reduction
in interest rates.
Sincerely,
MJP:JLK:DJW:vcd (#V-432)
bcc:
Mr. Prell
Mr. Kichline
Mrs. Mallardi (2)
Action assigne4 Mr. Kichline
1111118'
KEN KRAMER
¶Tr4 ID-LTR,CT. COLORADO
•
411
DISTRICT OFFICES,
1520 NORTH UNION 1301ILEVARD
CoLont400 SemINGs. CounR4Do 80909
(303) 632-8555
COMMITTEES.
275 UNION ExcHIANor
EDUCATION AND LABOR
SCIENCE AND TECHNOLOGY
8933 EAST UNION Avrvut
WASHINGTON crricr:
1724 LoNr.vvvRTH 1-frir.r OrricE SviLorma
WASHINGTON,
EsioLu.v000, CoLomA co
Congre55 of tbe Ziniteb ltatef
n
C. 20515
(202) 225-4422
30ott5e of ikeprefSentatibeti
tliastingtort, 33.C. 20315
-2
(303) 779-6990
dl
December 12, 1980
The Honorable Paul A. Volcker
Chairman
Federal Reserve System
Board of Governors
20th Street and Constitution
Avenue, NW
Washington, D.C. 20551
Dear Chairman Volcker:
High interest rates have alarmed many persons concerned about the
health of the nation's economy. I have been contacted by several
of my constituents disturbed by the possible effect interest rates
above 20" may have on small businesses.
As a result of my constituents' concerns, I would like to be advised
as to the Federal Reserve Board's current interest rate policies.
In your report back to me, I would appreciate having your analysis
of the potentially devastating impact such high interest rates will
have on farming and ranching, as well as on the many other small
businesses which often require short term borrowing or speculative
investment, and your prediction as to interest rate levels in 1981.
Many thanks for your prompt attention to this inqu
Si nc
.en Kramer
KK:mr
1
80110
nnApo Of 7,OVEPNOPS
FEDERAL RESERVE SYSTEM
WASHING1ON, 0. C. 20551
PAUL A. VOLCKER
January 2, 1981
CHAIRMAN
The Honorable William Proxmire
Chairman
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman Proxmire:
The Board of Governors is pleased to forward
to you its twelfth Annual Report on Truth in Lending.
The Report highlights the efforts of Congress and the
Board to simplify the Truth in Lending Act and Regulation Z. In addition, the Report covers creditor
compliance, enforcement and the Board's administrative
functions under the Truth in Lending Act for the year
1980.
Sincerely,
Enclosure
IDENTICAL LETTERS SENT TO THOSE ON ATTACHED LIST:
JCK:DJW:vcd
bcc: Mr. Kluckman
Mrs. Mallardi (2)
Senate
Chairman Proxmire, Senate Banking Cmte,
Chairman George Mitchell, Subcmte. on Consumer Affairs, Senate Bkg.
Donald W. Riegle
Paul S. Sarbanes
William L. Armstrong
Nancy Landon Kasscbaum
House
Chairman Reuss, House Banking Cmte,
J. William Stanton
Frank Annunzio, Chairman, Subcmte. on Consumer Affairs, House Bkg.
Gladys Noon Spellman
Bruce F. Vent°
Walter E. Fauntroy
Parren J. Mitchell
Thomas B. Evans, Jr.
Chalmers P. Wylie
Donald Ritter
Benjamin S. Rosenthal, Chairman, Subcmte. on Commerce, Consumer,
and Monetary Affairs, House Gov. Ops. Cmte.
Lyle Williams
Copies of report (w/o ltr.) sent to:
Ken McLean
Danny Wall
John Quinn
Beth Climo
Paul Nelson
Jim Sivon
Curtis Prins
Jim Kutchcr
Frank Maguire
Don Tucker
•
S.
HOARD Pr bOVERNOPS
Cy THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
PAUL A. VOLCEP
January 2, 1981
CHAIR LA AN
The Honorable Thomas P. O'Neill, Jr.
Speaker of the House of Representatives
Washington, D. C. 20515
Dear Mr. Speaker:
The Board of Governors is pleased to submit
its twelfth Annual Report on Truth in Lending. The
Report highliahts the efforts of Congress and the
Board to simplify the Truth in Lending Act and Regulation Z. In addition, the Report covers creditor
compliance, enforcement and the Board's administrative
functions under the Truth in Lending Act for the year
1980.
Sincerely,
Enclosure
Speaker of the !louse of Representatives received
Speaker of the 70113C of Representatives by
JCK:DJW:vcd
bcc: Mr. Kluckman
,
Mrs. Mallardi (2)u
— re -
• --w -,-7-••••••-agarr-
-Tar-ratTVPRIPPE'rulirgr
•.•
oc t.r)v; •.
•
4' •
-TA.N1',-)•
••%..'•;
• C/
i
,
/r
POAPD Pr GovERNoRS
•
•. 4 It
.;
*
j
•
• ;••
•
• e
• •.44LRC'
1
t
• •.• • •
,1r• T.i !FEDERAL
RESERVE SYSTEM
WASHINGTON, 0. C. 20551
••
PAUL A. vnLCKER
January 2, 1981
CHA1MMAN
The Honorable Walter F. Mondale
President of the United States Senate
Washington, D. C. 20510
Dear Mr. Vice President:
The Board of Governors is pleased to submit
its twelfth Annual Report on Truth in Lending. The
Report highliqhts the efforts of Congress and the
Board to simplify the Truth in Lending Act and Regulation Z. In addition, the Report covers creditor
compliance, enforcement and the Board's administrative
functions under the Truth in Lending Act for the year
1980.
Sincerely,
Enclosure
President of the U. S. Senate received
President cf the U.S. Senate by
JCK:DJW:vcd
bcc:
Mr. Eluckman
Mrs. Mallardi (2) we'.-
noArlo
fl
.OVERNORS
ç't Tk.r
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
•
•••,.•
• I•
•
•
-•.4(1R1
•
PAUL A. VOLCKER
January 5, 1981
CHAIRMAN
The Honorable Fernand J. St Germain
Chairman
Committee on Banking, Finance and
Urban Affairs
House of Representatives
Washington, D. C. 20515
Dear Chairman St Germain:
The Board of Governors is pleased to forward
to you its twelfth Annual Report on Truth in Lending.
The Report highlights the efforts of Congress and the
Board to simplify the Truth in Lending Act and Regulation Z. In addition, the Report covers creditor
compliance, enforcement and the Board's administrative
functions under the Truth in Lending Act for the year
1980.
Sincerely,
Enclosure
IDENTICAL LETTERS TO CHAIRMAN ST GERMAIN (HOUSE BANKING)
CHAIRMAN GARN (SENATE BANKING)
CHAIRMAN CHAFEE (CONSUMER AFFAIRS SUBCMTE.
OF SENATE BANKING)
SENATORS D'AMATA AND SCHMITT
JCK:DJW:vcd
bcc: Mr. Kluckman
Mrs. Mallardi (2)
.71
.
..T-••••••••••
•
@FedFRASER