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r   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  Collection: Paul A. Volcker Papers Call Number: MC279  Box 11  Preferred Citation: Congressional Correspondence, May-June 1981; Paul A. Volcker Papers, Box 11; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c437 and https://fraser.sdouisfed.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 withini fair use as defined by the copyright law of the United States. 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Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) mudd@princeton.edu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressional May-June 1981  -44  ...„.., .r. . . ....,,.. .,  . ., •.,01-( " 17• • .•;"1" - 1.-4.63: ICA - r •. f' .  'I'Vd4.  •-ri  1.V,  Irt."' "1:-• ,..;, 1 '",.2 •  HOARD OF GOVERNOWL) nr- THE  FEDERAL RESERVE SYSTEM  f r i ......,,,,, qvi-;:• •-:--............ :•„ii,r{[.,......, 0 _... \,. . „• .• , .„,..AL .poi . . ., • •  .• -..°:s°..:  .,,  •. .• •  WASHINGTON, C3. C. 20551  June 29, 1981  PAUL A. VOLCKER 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: Thank you for your letter of June 16, rega rding the Board's proposed interpretation conc erning NOW accounts. The Board's proposal was intended to clar ify the types of depositors that are eligible to maintain NOW acco unts and to make the eligibility criteria more consistent and equitable. During the last year, the Board had rece ived numerous inquiries from the public requesting ruli ngs on NOW account eligibility. Many of these requests expr essed a desire for a comprehensive review by the Board of the eligibility criteria. In the course of considering these requests, the Board concluded that sole proprietorships may have been provided with what could be regarded as an unfair competitive advantage over similar businesses that are incorporated . Since the NOW account statute does not permit business orga nizations to maintain NOW accounts, it seemed appropriate to propose permitting individuals to maintain NOW accounts only for fund s used primarily for personal rather than business purp oses. We have received several hundred conu nents on this proposal to date. Many of the comm ents from banks and thrifts echo your concerns with the possible restriction of NOW accounts to individuaIs in their personal capa city. The comment period has just ended and a sununary of the views expressed by the public is being prepared. It is anticipated that the Board will review the public comments and will be cons idering this matter in the near future. I can assure you that your views on this matter will prove useful to the Board and will be given careful consideration when it Lakes up the issue of NOW account eligibility. Thanks again for ptoviding me with your insight and vicws on this proposal. GTS:AFC:pjt (#V-165) bcc: Gil Schwartz Legal Records (2) Mrs. Mallardi (2)/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Ealj  AND J7ST GERMAIN, R.I.. CHAIRMAN F tANK A•INUNZIO. ILL. CARROLL HURPARD. Jog.. KY. NORMAN E —'AMOURS. N.H. JIPAIMATTOX, TFX. JOSEPH G. mIN,TH, N J. DOUG PARNARO JR.. GA. JOHN J.L.AFALCE. N.Y. DAVID W. EVANS. 1140. MARY ROSE OAKAR, OHIO BRUCE F. VENTO. MINN. norwRr GARCIA. N Y.  U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE  NORMAN D. SHUMWAY. CAUF. ED WEBER. OHIO BILL MCCOU-UM. FL.A. BIU.- LOWERY. CAUF  OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS  CHAR!. C F. iCHUMLR, N.Y. BILL PATMAN, TEX.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHALMERS P. WYLIE. OHIO HENRY J. HYDE. ILL. GEORGE HANSEN, IDAHO JIM LEACH, IOWA ED BETHUNE. ARK. STEWART B. MCKINNEY. CONN.  N I N ETY-SEV ENT H CONGRESS  WASHINGTON, D.C. 20515  June 16, 1981  1(0'  C;C)  c—  I f•  41.0  r• -  „.  • ••••• .410-  . 1 7: 1" ; r  -4  I  „  ; C ) .  • :  1:31  rl  Honorable Paul Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551  rys  frt  2! 4:3  -< ••  IN)  Dear Mr. Chairman: Unfortunately, proposed restrictive regulations of the Federal Reserve Board dealing with eligible NOW account depositors have only recently been brought to my attention. The Board's proposed regulations (Docket No. R-0356) would eliminate individuals acting as sole proprietors as eligible NOW account depositors. It is my understanding that the Board believes that Congress intended the adoption of a more restrictive policy relying upon remarks made by myself and other Members of Congress during floor debates leading up to enactment of Public Law 96-221, the Depository Institutions Deregulation and Monetary Control Act of 1980. I wish to state clearly and unequivocally that at no time during consideration of this landmark legislation by the House of Representatives nor at any time during House-Senate conference activities, did the principal sponsors of the bill intend to delimit the scope of the so-called NOW account experiment. The subject, indeed, was never discussed. Our intent in extending the benefit of NOW accounts to consumers nationwide was precisely the opposite, i.e., to make this innovative consumer service available on equal terms to all individuals and otherwise eliglble nonprofit, eleemosynary and government entities. At a time when depository institutions of all types are hard pressed to meet the competition posed by money market funds, I am absolutely astonished that the Board would suggest a course of action that would restrict a ready and willing source of account holders. The experiment in Rhode Island where sole proprietors may now qualify as NOW account depositors has been completely devoid of operational or other problems from the standpoint of both banks and thrift institutions. Since NOWs are of obvious benefit to consumers and other depositors there would appear to be no valid reason for the Board to go forward with the proposed interpretations to the extent that it would disqualify certain account holders.  •••••••  r,1  I•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Hon. Paul Volcker  - 2 -  June 16, 1981  Beginning as early as 1973 with the NOW account experiment in Massachusetts and New Hampshire our intent has been to authorize the widest possible use of NOW accounts by individuals while prohibiting corporate usage. My recent floor remarks must be reviewed in that context. It should also be pointed out that on each occasion extending NOW accounts, as floor manager, I made it clear that Congress was extending such accounts governed by the regulations in existence beginning with the Massachusetts/New Hampshire experiment. Sole proprietors throughout this entire period have, in fact, been considered eligible NOW account depositors. I strongly urge the Board to withdraw its pending proposal since I strongly believe that its adoption would be clearly contrary to the public interest and completely inconsistent with the basic purposes of P. L. 96-221.  FJStG:gSj  • ' •  GON: • v•  OF THE  •40  ••  •0 • -n • -A • 1. • <0   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS  FEDERAL RESERVE SYSTEM  kn.  WASHINGTON, D. C. 20E51  •  • '`,AL. • •.. • •  June 26, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Ed Jones House of Representatives Washington, D. C. 20515 Dear Mr. Jones: Thank you for giving me the opportunity to respond to the recent letter from your constituent, Mr. Charles Woods, President of WTVY-TV in Dothan, Alabama. Mr. Woods specifically asked why interest rates are so high and further questioned the autonomy of the Federal Reserve Board. The Federal Reserve System was created by the Congress as an independent agency in order to insulate monetary policy decisions from political pressures. Members of the Board of Governors of the Federa l Reserve System are appointed by the President, with the advice and consent of the Senate. Moreover, the general goals of the Federal Reserv e have been set forth in the Full Employment and Balanced Growth Act of 1978, in which Congress laid out for the Federal Reserve, as well as for the President, the objectives of promoting full employment, balanced growth of real income, adequate productivity growth, and reasonable price stability. In attempting to achieve these goals, which tend to be longer term in nature, the Federal Reserve establishes annual ranges for growth of monetary and bank credit aggregates. These ranges are presen ted in Monetary Reports to Congress each February and July, in which the Federal Reserve discusses how money and credit growth within these ranges will contribute to the achievement of longer-term goals. In addition, member s of the Board make frequent appearances before Congress on related issues . With regard to interest rates, high interest rates are commonly associated with high inflation, but it is high inflation that inevit ably causes high interest rates rather than the reverse. In an inflationary period, lenders insist upon interest rates high enough to compensate them for the anticipated decline in the purchasing power of the dollars they are lending. Borrowers are willing to pay these high rates becaus e they too anticipate repayment in cheaper dollars. High interest rates tend to encourage the postponement of less promising investment projections and the deferral of consumption, thus reducing the deminds in markets and easing upward pressure on prices. We realize that these favorable implications for prices are offset to   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Ed Jones Page Two  the extent that interest rates themselves are a cost ever, the relative contribution of interest rates to of most products is small, and the overall effect of cost of credit--thnt is, interest rates adjusted for generally upward pressure on prices.  of production. Howthe ever-rising costs an increase in the real inflation--is to reduce  The only effective way to reduce interest rates over the long run, and thereby provide a reasonably stnble financinl environment, is to curb the underlying inflationary pressures. There is, unfortunately, no simple way to do this. Only persistent application of non-inflationary policies over n long period of time will succeed in breaking the spiral of rapid price increases and intense inflationary expectations. It is widely agreed thnt the slaw growth of money and credit over time is an essential element in succeeding without causing serious economic dislocations. However, in order to hasten progress against inflation, monetary restraint must be accompanied by prudent fiscal policies, which will reduce the federal government's demands for the economy's scarce savings, and by appropriate private sector restraint on wage and price decisions. I hope these comments prove useful to you. I can be of further nssistance. Sincerely,  S/Paul  JLK:vcd bcc:  OV-169)  Mr. Kichline Mrs. Mallardi (2)  Vo'chat  Please let me know if  '  ED JONES  Rook, ' B-7. POST OITICE Buiumwo  7TH DISTRICT. TENNESSEE 10a CANNON Housr Orytcr BUIL DING  J4cxsoo4. TENP•irscrr  (202) 725-4714 COMMITTEE ON AGRIcULTURE  38301  (901)423-4848  Congrms of tlic Ziniteb *tato  3179 Noarm WATKINS MEMPHIS. TrNmEssrr 38127 (901) 358-4094  CHAIRMAN  :S .HF1COMMIT TEE ON CONSERVATION AND CREDIT COMMITTEE ON TRATION HOUSE  3rptige of iktpregentatibef  P.O. Box 128 YORKVILLE, TENNESSEE  38389  (901) 643-6123  Ellagbington, Ile. 20315  t HAiRMAN  SUBCOMMI  EE ON  HOUSE SERVICES  June  17, 1981  01'  Chairman Paul A. Volcker Federal Reserve System Federal Reserve Building Washington, D.C. 20551  CD  t-C3 0  ?" C") Erl  C--  -c  1:11 (1)C")  -t rn  CO  71:7&) -  7M1 Lit ••••••••••  Dear Mr. Chairman:  CO  Enclosed is a copy of a letter I recently received from Mr. Charles Woods, President of WTVY, Inc. in Dothan, Alabama. I would appreciate your consideration of his comments, and I will be looking forward to your reply. With kindest regards and best wishes,  am  Sinc rely yours  ED   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •,e—orn  , .•••10  ••  Enc:  271  "gm  10.  EJ/pl  r-  ONES,  /  IMM  NPINWIShroftftlp,  •  :Oa 11 t ET ASL $  •  NIZPITTSY April 30, 1981  W t  Dear Congressman: Why are interest rates so high? Our central banking system is not owned by the government but by the private banking sector. Our central banking system is separate fram the Federal Government like General Motors. In 1913 Congress, without benefit of Constitutional amendment, turned over the respo nsibility to "create and regulate currency" to the Federal Reserve Board . °Ince bankers got the Federal Reserve system, they began to regul ate currency and interest rates, then greed entered in. They will say, we are going to raise interest rates to cure inflation, but that is one of the most inflationary things you can do. Interest exceeds even the cost of food—it is the biggest single expense in the country! The consumer loses two ways: (1) he has to pay the increased cost of the items he buys, and (2) he has to pay the increased interest costs when he borrows money. The Federal Reserve thus increases the cost of living. They keep raising interest rates until they are so high that people stop buying, unemployment soars, and everything suffers. Cost of living comes down because there are a lot of people out of work and they can no longer buy. When a person loses his job, he stops becoming a tax payer and becomes a tax recipient. Our city, county, state and federal revenues suffe r. When a man has a job he can cope with rising prices but if you take his job away, he can cope with virtually nothing. A terrible tragedy. I don't think we will ever achieve our maximum potential until we get interest rates and the control of currency back in the hand.s of Congress where it belongs. They are more responsive to the will of the people. I believe that ample funds at reasonable rates would cure most of our economic problems.  Charles Woods President WTVY, INC. CW/spe  MO  11111181   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  len  POST OFFICE ROX 1089 • TELEPHONE 205/797-3195 • TWX  810744-4n7n •  TIOTHAN  lAwr)  .•  16.  • • ' of GOvt• •. 4'4%  •0 ' •;,-••o‘•• 4,Q • co .— a  Q.,• '1„, ,s\ ,„,,r •P• •• -2;  •:, , ., ..•7.i•.,2,1, c,. .„41., .,.7_,,[r#"!. ,• -,,.—:• c . , ••,,,,..  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  RV: ) ': • •••..• •  June 24, 1981  RAUL A. VOLCKER CHAIRMAN  The Honorable Steve Symms United States Senate Washington, D.C. 20510 Dear Senator Symms: Thank you for your letter of May 28 concerning corr espondence I received from Mr. Tom Richards. I read Mr. Richards' letter urging an easing in monetary policy targets with great interest and appreciate the importance of the messa ge Mr. Richards ..so aptly conveyed. While I do not adree with Mr. Richards' policy recommendation, I was impressed by his carefully thou ght out and well-reasoned line of argument. Mr. Richards is correct that monetary restrain t seems to be affecting a few credit sensitive indus tries most heavily while some sectors of the economy have continued to grow strongly. High interest rates have always had a disproportio nate impact on construction, given the postponable nature of most expenditures in this sector and the heavy reliance on credit. Small businesses also have fewer resources to fall back on to weath er cyclical pressures, and are limited in their ability to adap t creditraising activities to an increased cost of fund s. The current level of interest rates primarily reflects both the level of inflation in our economy that, as Mr. Richards points out, has been building up over a number of years, and expectations by the public that inflation will cont inue to be quite rapid. It also reflects an excessive depe ndence over the years on monetary policy to curb inflation, with insufficient support from the government's budget policies. As Mr. Richards notes, the primary issue for debate now is how vigorously monetary policy should proceed in attempting to bring inflation to heel. In my view we cannot afford to be any less vigorous. More rapid money growth migh t not reduce interest rates at all, and if it did, any such effe ct would likely be quite short-lived. This is because any indic ations that the Federal Reserve was backing away from its efforts to reduce the rate of price increase would worsen the public's inflationary expectations, which would encourage borrowing, discourage lending, and produce even higher interest rates. In any case, the monetary and fiscal authorities eventually will need to take the steps necessary to control inflation, and delaying those steps certainly will not make the task any easier or less painful.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The Honorable Steve Symms Page Two  To some extent, the difficulties associated with high interest rates can be lessened if budgetary policy is also keyed to fighting inflation. In particular, smaller deficits will speed the response of the economy to our policy, take some pressures off credit markets and help bring about lower interest rates. In this regard, I am encouraged by the progress being made in reducing federal spending and the heightened level of concern in the Administration and Congress about the size of the deficit. I know all of this may not offer much immediate consolation to someone in Mr. Richards' position. However, I do think we are beginning to see some evidence of progress in the fight against inflation and my hope is that before too long we can all look forward to lower inflation and interest rates. Thanks again for taking the time to write. Sincerely,  /1 LAC6)..",a,' to 6'/  Lv- 1 )° )   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1/4  • STEVIE SY M MS  Chrmn. Volcker  IDAHO  Action assigned to Jim Kichline  ?.1Crtifeb Zfafez Zenate WASH I NGTON, D.C. 20510  EOARD OF GrP.'E.RNCRS OF lilt_ FEDERAL. IZESEIA'C r  1981 JUN -4 PM 9: 18  May 28, 1981 rECEIVED OFFICE OF THE CHAIRMAN  40' The Honorable Paul Volcker, Chairman Federal Reserve Board Pennsylvania Ave. and 6th St. N.W. Washington, D.C. 20551 Dear Paul, I have just read a letter addressed to you from Tom Richards, who is President of the Idaho Forest Industries, dated May 26. I would urge you to give this letter your upmost attention. It is my intention to stress upon you the grave importance of the message that Mr. Richards is trying to convey. In light of our present economic situation it is vitally important that we not allow any one segment of our economy to bear an unjustly harsh burden as we try to get our economic house in order. I have taken the liberty of enclosing a copy of Mr. Ricnards' letter for your review and would again urge you to give it your careful consideration. With warm regards, I am Yours  fee society„....-777  Steve Symms United States Senator  7-fr"-A44  SS:jj Enclosure  PLEASE REPLY TO:  0 IDAHO FALLS Orricc 211 FEDF RAL BUILDING IDAHO FALLS  83401  (208) 522-9779   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  POCATELLO OFFICE 207 FEDERAL BUILDING POCATELLO 83201 (208) 236-6775  1061 BLUE LAKES BLVD. (2) NORTH. # 3A TWIN FALLS 83301 (200 734-2515  Boisr OFFICE Box 1190 BOISE 83701 (208) 334-1776  LEWISTON Orricc LEWIS-CLARK PLAZA LEWISTON 83501 (208) 743-1492  MOSCOW OFFICE 105 FEDERAL BUILDING MOSCOW 83843 (208) 882-5560  COEUR D'AtiNt OFFICE 305 FEDERAL BUILDING COEUR D'ALENE 83814 (208) 664-5490  ,4 4  ;  r-71 ••  f  ;  May 26, 1981 The Honorable Paul A. Volcke r, Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551  Dear Mr. Volcker: I hope that you will take the time to read what I ca n only classify as a plea for assistance. My pl ea is on behalf of those parts of our economy that are bearing the brun t of the Federal Reserve Bo ard's present monetary policies. Our Company operates in Id aho and Oregon where we empl oy approximately 400 people in the manufact ure and distribution of lumb er and other forest products. I believ e that we are very tepresen ta tive of the thousands of small and medi um sized companies in the co nstruction, homebuilding, forest produc ts industries and related su pport groups that are the most affected by the extremely high interest rates and the investment uncertainties th at have been created. We ca n obviously also add to this list small bu siness in general and the se verely damaged savings and loan industry . I don't believe anyone in the above group quarrels with the objectives of either the Federal Re serve Board or the Reagan Ad ministration. Clearly we must bring in flation under control and at the same time, return fiscal responsibi lity to the public sector . On the other hand, we must get this job do ne without inflicting seve re and possibly incurable damage on a sign ificant portion of those in dustries I have mentioned. We have now had severa l months of attempts to co ntrol the growth of the money supply and the corr esponding influence on in terest rates. The results at the very best are mixed. It is now clea r that high interest rates have minimal or no effect whatsoever on seve ral key parts of our economy. Consumer spendi ng is clearly the best exam ple one can look at. Consumers continue to incr ease their spending regard less of what interest rates are doing. This at titude on the part of the consumers could change if we get beyond the "beat inflation by spen ding now" psychology, although I also doubt this is the case. Other sect ors also continue unaffected by high intere st rates. Oil, oil se rvice, defense, and health, are typical exampl es. Strength in these sectors of the economy more than offsets the di sastrous things happening in the construction,  P. O. BOX 1030   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COEUR D'ALENE. IDAH O 83814  A. C. 208-667-94 4 1  Mr. Paul A. Volcker Page Two May 26, 1981 homebuilding, forest products and savings and loan industries and to small business in general. It is als o clear that high interest rates themselves are very inflationary. No where is this clearer than the effects of present high mortgage rat es on the Consumer Price Index. Most companies in the forest produc ts industry have curtailed or shut down for varying periods during the las t 18 months. Our Company is no different, although we have made every effort to keep our plants operating, and, therefore, maintaining nor mal levels of employment. We are close to the point, however, where thi s will prove impossible. One of our three plants is operating with virtually no order file. At this time, we can accumulate inventory for another 4-6 weeks, but would then have to begin curtailment if there was no relief in sight. The first sign of relief would nat urally be a change in the posture of the Federal Reserve Board and lower int erest rates. I know that this is not what the Board presently has in min d. I would ask, however, that your policies be reconsidered. I sin cerely believe that your current course is going to inflict irrepaira ble damage on a substantial portion of our economy before the overall pro blem is solved. We have unfortunately learned the har d. way that it takes more than the efforts of the Federal Reserve Board on the monetary side to stop the deep-seated inflation our nation fac es. It also takes the kinds of changes in fiscal policy now being pro posed and made by the Reagan Administration. Unfortunately, these changes must take place in the political arena and, therefore, take tim e to accomplish. We are all aware that the predicament our econom y finds itself in has taken years to create. It, therefore, seems non sensical to believe that we can cur e double-digit inflation and massive gov ernment deficits overnight. The price that parts of our economy and individual citizens are having to pay is proving too high. Most of those affected by your pre sent policies are not asking for government subsidies or assistance. The thousands of small companies that are in trouble do not ask for the kind of help that was given the Chrysler Corporation and New York Cit y. Although our industry faces severe competition from imported lum ber from Canada, we also do not ask for artifical restrictions such as the automobile industry has received. Nor do we want the reinstatement of federally subsidized housing programs that have been the instant pan acea for the past several decades. We simply want an opportunity to produce and compete within our own industry and with our neighbors in Canada. - This opportunity can only be present with the availability of mor tgage money at reasonable rates. We acknowledge that in order to do this your present targets for the growth of the money supply will hav e to be adjusted. This will most likely Lean a delay in the victory ove r double-digit inflation. Such a delay clearly would seem to be prefer able to the disastrous effects of your present policies. As I stated ear lier, we are simply trying to cure years of built up inflation and government deficits far too quickly. As you stated before the House Commit tee on the budget in March, "Th e only issue for debate is how vigorousl y to proceed". I would submit that the Federal Reserve Board is bei ng far too vigorous.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Paul A. Volcker Page Three May 26, 1981 I hope that you will accept my letter in the constructive vein that it is written. I am not, nor do I pretend to be, an economist. I also do not pretend to know all the intricate deta ils that you and the Board must take into account in setting your poli cies. I am simply a concerned member of the business communit y who feels very strongly that your present policies may eventually prove successful, but in the meantime they are going to prove fatal to certain parts of our economy. It is unknown to me how much input your Board or the Reagan Administration seeks from America's small business community. I can say without equivocation, however, that we would be happy to assist and give input if we were given the opportunity. We do not want subsidies or handouts. We simply want a chance to compete in a free enterprise economy. Most of us do not or will not have this oppo rtunity if your present policies persist. Sinderely yours, IDAHO FOREST INDUSTRIES, INC. \ W.IT. Richards Preident WTR/pab cc:  President Ronald W. Reagan Senator James A. McClure Senator Steven D. Symms Representative Larry Craig  Action assigned to Ms. Hart. „KEN KFgAMER VTH n't RIC T , COLORADO  !1 RS BOAROOFGVER, r,7 FEDFRAI  commliTrrs ARMED SERVICES EDUCATION AND LABOR  taisf41111:27  a at. ip ak "  Congrt5,5) of tbe  VVASHINGTON orrtcr, 114 C AP.4.10N FADOST l',,r1rE BUILDING 20515 VVA1040.C. (202)245-4422  DISTRICT Orf ICES '01.4 SOULS V A RO 1520 Nowr.4 )9.-s% CoLoaAno S4441..cs. CoLnstAao (1C3)113:-VS5S 273 LINtopi Excx.m.ecit 8933 EA ST UNION ^vs- Nut Eivourw000. Cot_oRADo 80110 (303) 779-69a0  ii)oti5e of irpre5entatibeg PECi 'HE r,- FICE OF  Washington, 33.C. 20315  June 23, 1981  1  The Honorable Paul Volcker Chairman Board of Governors Federal Reserve System Twentieth Street and Constitution Ave., S.W. Washington, D.C. 20551 Dear Chairman Volcker: Enclosed (:•re copies of letters which I have received from several of my constituents regarding Regulation Z. As you will read, my constituents state that the newly published "simplified" version of Regulation Z implemented pursuant to the Truth -in -Lending Simplification and Reform Act is actually quite complex and difficult to understand. While intended to be a simplification, several of my constituents feel that this version of Regulation Z is difficult to interpret, and therefore, difficult to comply with. My constituents also express their concern that federal banking regulations in general have become increasingly complex and burdensome. Since one of the goals of the current Administration is to reduce the burden of excessive federal regulation, I would appreciate your addressing the concerns raised by my constituents. In addition, I would appreciate your sending me an even more simplified explanation of Regulation Z if one is available. Many thanks for your cooperation.  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Unit periods per year (v.1 = 12 Ad‘ance. 1-10-71s First rayment, 2-1078. From 1-10-78 through 2- $0.7‘ period. it f 0) Annual rercen!.tge rate ssi (1) ;To ;;:• 5.0f.-"e  1 uni:  1-...‘Jrnpie Pa.s mem•-cr tv:o months (short first period. irrt•i.-ular first pa)ment. and irregu:ar payment)  Example 1:1•• Payments e•-cry tsso %seeks (short first per:A irregular final ray rr.ent Amount adsan‘ed (A $ raymer.t (P! Sc. 50  S2(  ['nit period v=ec),.. Unit periods per scar (v..) = 52/2 Advance, 4-3-7s Firs: pas:tient 4- 11-7S From 4-3-7s thr.-)ugh 4-11 7s - s days it = 0: f S ;41 Annual per:enta..:c rate (I) = 1222 --,- 12 :2'1  (4) Singie-ad:aucc aq odd ,irj! payment. odd !Ina:. pay":ent. :th withcut -egular. Thc cqu...!loi. paral-r.ipli ( h)( 8) of this section Lan iv put in the following special form 11.r this type of transas-tion [I'  1' •  1 I  1 )n  P I = 100%. (- - — 1 A  Form 2—Term inure than one year bur than twO years:  _( P 4: — I) A  f'orm 3--Term equal to ct-act multiple of a year:  I  — (I  CX0Clly 0 'Ta -  100[  — I A  Regular  Final payment (Po = S30 Number of payments (n  - — -— (1+1:10 _ 1,1 P. - , 11 ..1)" •  ,:regular final paym-:Ai  0  Amount adsanced (A First payment t P I ) S44,):q ReguLr payment (P) S.:I.:5 Final panietit (PO S200 Number rayments (r; Unit period 2 months periods per year ; Unit 12/2 = 6. Advance. 1•10-7S First pAyinent. 31-78 throuith 3•1-78 From month From I -10-78 throu.:11 2-1-7S 22 da (t 0; 6(7.Annual percentage rate (I), = 0730 7  Form 4—Spc,-;a1 form for iteratIon pr dure (no restrh-tton on term):  7-7  4,:ee-payirent :rani(5') ae:.,n. 1 he g-:lierai eAtiati :II in paragraph 1,- pat in th • %pc( Si ot tins section for tst-lo%. ciai single single payment transactions Forms I tnrough 3 trc 'Tor thc deterrilv:aPon of the anriu.i. per. -:titage rato under spe,-tal conditions Form 4 requtres dr: use ot the lteralion procedure of paragraph ; h)( (if ihIS section and can ',(•• used tor all singie-adsance, single-payment transa,:tions regard'less of tL•rrn.  A  (1 -- fi)(I  -i)t  1::xampk (1) Single-advance, stngle-; ment (term of less than one ear, r sured in days) Amount adsanced (A) SI000. I SI080 mew (I') Unit period •-- 255 das Unit periods year (w ) 365/255. Advance, 1-3-78. Payment, 9-15-78. 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A •  •••  • • • ••• • 1 %. 0 . ...V 17.* •• • •  .  " ••• ••••...  •• • O•  •.'.•• ••  •• •  •• .•• .• ••• •  4••• •••  •••••• :. • .* • •. •.•• ••" .'.'....r..'  ••  •  •.• •••••.• •••••••••• • f•••• • •••••••.0. ••••••41..  •••••• ........ • •• .• •  •••••••. .  • . .  * • •  4.• . •  •••  ••••••• • •••• • 4••••• ••••• •• V. •• •••• .....• • ••••• ••• ••• •1'.. • • ••••••••• •••• • • • •••  ••••  ,•• ••• • ••  •  • ., •••••• ,..•••• .•••- • . ▪ •, •••• •.. ••• •••.: ••••'•• si• ••••••; *ice •••••••  •• .  •••••• •••  •%. •  • •• • • • • •• •  •Ao  . •••• •••• ..•. ••• •,  1.  .  ••  •• • •• •Pg••••••• ••••• ••••••  •  ••• •• ••  X- • •  • •  p!  .'  • • .   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  or  cel/6/2/  ‘6TJN•'•\ ,11  ( _J. Oc.itAd, U  4,1x1.71  1.14c71-J-L4144-----  7A1 (7L)'*-/L,i,e,LL-o-z_4(4) icceizA, rL(-;-/L..) IS)  e ...„(:).„,  3  katut.)  5  16./24021,kirkit.x)._ 4:La? Lt/V  ,i`CeLktC,74  ,-)1-4-z- /7  6  "1L-  CC"'  - ticcLoL ccic ,0_/,wcf2  C'3  (*.,C&L-i-f___C-s,  -  1-r LA.04? 71  C  ?,  4, 1)7  •  _2a..(LLEr  . ULY  a_fi'Ldti,Qi-C--6-(k  f)  Ck..„  Y:1)  ; •  ce-k.  ,-1111,tu  (H._ ?ALL.6&._  Alb  eGcULek.  /MC •  4./Q:kJL  . 0001•00,  44 z 11114.,  • No04:1 fro*, •  -.0 fr. ••: I ' • • •  •.  .  •,•• • :;) •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  :••  Vallnialog.14,Susedai....".AAN~POIL Jilmariagassitslavallemll .•:  7:*.  •• •  • •  !.; ••  • .:• • • I:. .  .:• .  •.. .  - •  6-";  Fi  June 10, 1981  tt U. S. Congressman Honorable Ken Kramer 1724 Longworth Building Washington, D. C. 20515 Dear Representative Kramer: This morning I received an 88-page "simple explanation" of the revised "simplification of the Truth in Lending Law". I am enclosing a copy of one page.  1  Frankly, many of the explanations in this book would seem better suited to Einstein's theory of relativity. I am at a loss to understand how we can have such federal laws and regulations. Sincerely yours,  Norman M. Postles President NMP:cjh Enc.  31011 Nortli Nrut0a 41IN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  'Cox "12611  Colorabo  Colorabo 011933  ilrlrOntir ( 31131 .173-2000  ‘Z.:k‹..:  4q;  k_(,( ,  6--3  tO . C . 'it()  !.; ti t  1`.:ISI  )(bk  , c,  <1) C4 ' 3 4 LA)4  t-L  -)1-e()  1 (L? r*G-4  Gt'6  4-e-it,k,a 4-0 -yLijak._ 3,--7._EA"Ft:cd-c4.7--) c„ 6- b-l.-)(_& trin 01AA-,-LA  1-c-otA  W-1-ck).  6-777t-  3  )1.t4 1 kt Ai   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  , 4,0 4_,y,y ) 911 ? w-12 dut_J(3-7AA) -ht61-7f1 /Lizrt-X #401-0---LA .}2 , L4J4X-(-  / p' -k°  I  "i1A-  6LA-A--r,-t-st, lb •  .  Vt--16-0-1}LJ  _  •  JUN 11  '. "" \ •  ••  •  •  \`' •  •  •  •  . ••.  .  •-  •  c  \  •  -•  ‘, •  ••••\  •. t .  •  \-:) •  42.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "a  OD  \.  •\  k  k  WALTER L. FAUNTROY, D.C.. CHAIRMAN MITCHEL L. MO. NEAL. N.0 DOUG FIARNARD. JR GA. 1-41- NRY S REUSS. W'S. JAMI S J. BLANCHARD MICH CARI00' I. HUBBARD, JR., K Y. BILL PA rMAN, TEX  GEORGE HANIIEN. IDA/10 RON PAUL. TEX. BILL McCOLLUM. FLA. RILL LOWERY. CALIF. ED WEBER. OHIO JAMES K. COYNE. PA.  J  U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY  A47-179 AN•4f X NO. Z ev•SHINGTON. D C. ZOSIS (:02) 223-1315   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-SEV ENTH CONGRESS WASHINGTON. D.C. 20515  June 19, 1981  The Honorable Paul A. Volcker chairman i3oard of Governors Feder:A. Reserve System Room B-2046 20th and Constitution Avenues, N.W. Washington, D. C. 20551 Dear Paul: I just wanted to drop you this brief note to again express my appreciation for your willingness to join me and a number of Washington business leaders for an informal, off-the-record breakfast discussion of some of the pressing economic issues of our time. For your information, I have enclosed a copy of the letter which I have sent to those whom I have invited. If there are persons whom you would like to invite to join us, including some who may be on your staff, please let me know so that I can make adequate breakfast arrangements. Additionally, I want to also thank you for working with my Subcommittee on establishing a time whereat you could testify on the impact that money market funds and related type instruments have on the conduct of monetary policy. I have enclosed the Committee Notice which is similar to that which was sent for the first hearing. An additional notice will be sent to remind Members just prior to the hearing. I have, for your information, extended a personal invitation to Freddie St Germain to join me and I hope that he will in light of the importance of your statement to both his as well as to my own subcommittee. With every good wish, I am Sincerely yours, Walter E. Fauntroy Chairman Enclosures  WALTER E. FAUNTROY.  C.. CHAIRMAN  PARREN J. MITCHELL. MO. STEPHEN L. NEAL. N.C. DC •IOG BARNARD, JR . GA. HENRY S. REUSS. WIS. JAMES 1 BLANCHARD. MICH CARROLL HUBBARD. JR . KY BILL PATMAN. TE X  H2-174). ANNE X NO. 2 WASHINGTON 0 C. 20SIS (202) 2:S-73IS  U.S. HOUSE OF REPRESENTATIVES  GEORGE HANSEN. IDAHO RoN PAUL. TEX. BILL MCCOLLUM. FLA. SIU- LOWERY. CALIF. ED WESER. OHIO JAMES K. COYNE. PA.  SUBCOMMITTEE ON DONIESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS WASHINGTON. D.C. 20515  As you probably know, my seniority in the Congress has now given me the opportunity to chair the Subcommittee on Domestic Monetary Policy of the House Committee on Banking, Finance and Urban Affairs. Even though the District of Columbia is without a vote on the Floor, our citizens do, through me, have a vote in committee and a voice on the Floor on some of the most important work in Congress. Over the past six months, more and more attention has been focused on the Administration's efforts to stabilize the economy and the problems of inflation, unemployment, high interest rates, the money supply and the rapidly changing financial industry. These areas are the primary concerns of my subcommittee and it has given me the opportunity to know on a very personal basis many of the key architects of our nation's economic policies. One of these persons is the Honorable Paul Volcker, Chairman of tne tioard of Governors of the Federal Reserve System, who has deeply impressed me with his understanding and sensitivity of the concerns that I and so many friends like you have of our present economic course. He has graciously agreed to join us at an informal, off-the-record breakfast meeting on Friday, June 26, 1981 at 7:45 A.M. in Room 8-339 of the Rayburn House Office Building to give his views on the short and long term scenarios. I hope to conclude by 9:00 A.M. although I am sure that Paul would be willing to extend that time should the questions warrant it. I know this invitation is extended on a somewhat short notice but I do hope that you will give this invitation your highest priority because of the importance of the work that Paul is trying to do at this most crucial time. If you would call Miss Jean Thomas or Mrs. Maryse Horblitt at 225-7315 to let them know whether or not you will be able to join Paul and myself, I would be most appreciative.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely yours,  Walter E. Fauntroy Chairman •••  WALTER E  FAUNTROY, D C , CHAIRMAN  PARRE N I MITCHELL MO. ▪ 'E PH( N L NEAL. N C `clailL.i BARNARD JR . GA. RIEUSS E"NRT JA ft 1 Pll ANC- HARI) MICH AR1,401 L imunnano. JR KY BILL PAT NEAN. TEX.  GEORGE HANSEN. IDAHO NON PAUL. TEX. SILL McCOLLUNI. FLA. BILL LOWERY. cAur. ED WrSER, OHIO JAMES K. COYNE. PA.  U.S. HOUSE OF sEPRESENTATIVES SUBCOMMITTEE ON DO ,CESTIC MONETARY POLICY  142-1711. ANNE X NO. 2 10//..SHINGYON 0 C. 20SIS (MO 22S• 73IS  OF THE  COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS  WASHINGTON. D.C. 20515  June 11, 1981  SUBCOMMITTEE NOTICE OF HEARING  To  •-  Members, Subcommittee on Domestic Monetary Policy  From :  Walter E. Fauntroy, Subcomittee Chairman  Re  Second Day of Hearings - Impact on the Conduct of Monetary Policy by New Forms of Investment and Transaction Mechanisms  •  Thursday June 25th 10:30 a.m.  The Subcommittee on Domestic Monetary Policy will meet on Thursday, June 25, 1981, at 10:30 a.m. in Room 2128 of the Rayburn House Office Building to take further testimony on the impact of the conduct of monetary policy by new forms of investments and transaction mechanisms, including money market mutual funds.  2128 Rayburn HOB   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The hearing will additionally cover the impact these new forms of investments and transaction mechanisms have on: 1.  The safety and security of existing financial intermediaries;  2.  The safety of the investments and deposits held by investors and depositors;  3.  Their impact on community investment and credit needs and domestic credit needs generally; and  4.  The differentiations which should be made between various forms of payments, types of accounts, and kinds of investments and deposits.  The witness will be The Honorable Paul A. Volcker, Chairman of the Board of Governors, Federal Reserve System. An invitation is extended to all Members of the Full Committee to attend in light of the importance that this testimony is expected to have on this important subject.  Nv.) l\W-fax-tk' •• of GOt,' • • ••0 ; c•i: •  r2.  BOARD OF UOVERNORS (Di THE  eJ •  FEDERAL RESERVE SYSTEM  fruL 0 F.  wASHINGIC"4, D. C. 20551  • 71 .•  •.- .-4,:k.,[r ...I.r1 I.,r f •-• ,.•'"r .. •..-/..,.)-'''....A, ,.--- __ _ .• • r' i .••:1 t•:'• ' t. • ' • .. . •  June 18, 1981  PAU L A. VOLCKE P PMAN  Thu Honorable Dennis DeConcini United States Senate Washington, D.C. 20510 Dear Senator DeConcini: Thank you for your letter of June 3 in which you ask a series of questions relating to the prime rate. I shall try to answer them one at a time. Many banks, particularly large ones, post a prime or-as it is sometimes called--a base rate of interest . The Federal Reserve monitors these tates and publishes a figur e for the prevailing prime rate at 30 large banks located acros s the country. The media may report this rate or the prime rate of particular banks or groups of banks. While each bank establis hes its own prime rate, normally the prime rates of the large banks tend to move together because of competitive pressures. From time to time, however, an individual bank may post a prime rate differing from those at other banks, owing to its desire to seek or deflect loan business or to its differing expectation about near-term money market developments. The prime rate is generally used to refer to the rate of interest a bank has established as the rate it may charge its most creditworthy customers on short-term business credit under established credit lines. These loans typically carry maturities of around two or three months. Other terms and the rate itself on the loan way vary depending on the customer, but the loan agreements and the credit lines use the prime rate as a kind of index. In the last several years, some banks also have begun to provide business credit based on rates other than the prime rate. Some banks make available to eligible customers loans based on the cost of short-term funds; such loans tend to be very large and have very short maturities, generally a few days to a few weeks. These loans are not directly comparable to traditional bank lending but are more similar to short-term money market transact ions. The federal funds rate may, for example, provide the basis for pricing such a loan. The rates on this type of credit have in many instances been below the prime rate, especially durin g periods when money market rates are declining rapidly. The Board's staff has completed a study of this practice, which I have enclosed for your convenience.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Dennis DeConcini Page Two  to be Longer-term fixed-rate business credit will tend s, particularly if priced to reflect longcr-term interest rate sure to interest rate banks are seeking to minimize their expo loans are frequently risk. However, longer-term floating rate tied to the prime rate. a direct Consumer loan rates do not in general bear they are--like the linkage to the prime rate. Nevertheless, g the general cost prime--influenced by developments affectin y have tended to of credit. Rates on consumer loans typicall slowly than rates adjust to changes in market conditions more prime rate, although attached to business credit, including the ibility of consumer recently there are signs of some greater flex rates. usury laws, a As far as we are aware, and apart from for any type of credit bank may set any rate of interest it wishes re a degree of uniextended. However, competition acts to ensu lar characteristics in formity among rates for credit having simi all relationships terms of risk, collateral, maturity and over made through comwith a bank, including, for example, payments of no inverse relation pensating balances or fees. We arc aware length of time the between the cost of credit to a firm and the the additional risk implicit firm has dealt with a bank, although ected in rates. in dealing with a new customer may be refl personal relaAs for a preferential rate based on a federal statute tionship, this would not be prohibited by any ver, since such a unless the lean were to a bank insider. Howe bank's shareholders practice would come at the expense of the be resisted by its and other customers, it could be expected to board of directors. I hope these comments prove. useful to you. Sincerely, SgaLit A. Aide(  -Term Business Lending at (Study dated July 1980, "Short Rates Below the Prime Rate") Mr. Kichline Mr. Simpson Mr. Brady Mrs. Mallardi (2)  Enclosure bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  vi T413 li"--As/dt*  rk.44)  •  STROM THURMOND. S.C., CHAIRMAN CHARLES Mr.C. MATHIAS, JR.. MD. JOSEPH R. BIDEN. JR., DEL. PAUL LAXALT. NEV. EDWARD M. KENNEDY. MASS ORRiN G. HATCH. UTAH ROBERT C. BYRD. W VA. ROBERT DOLE. KANS. HOWARD M. METZENBAUM. 0) 0 ALAN K. SIMPSON. WYO. DENNIS DeCONCINI. ARIZ. JOHN EAST. N.C. PATRICK J. LEAHY. VT. CHARLES E. GRASSLEY. IOWA MAX SAUGUS. MONT. JEREMIAH DENTON. ALA. HOWELL HEFLIN. ALA. ARLEN SPECTER. PA. EMORY INTEDE.M. CHIEF COUNSEL QUENTIN CROMMELIN. JR.. STAIrr DIRECTOR  Action assignei to Mr. Kichline.  '11Cnifeb Zfafez „Senate COMMITTEE ON THE JUDICIARY WASHINGTON. D.C. 20510  June 3, 1981  C,  Paul Volcker Chairman Federal Reserve Board 20th and Constitution Avenue, N.W. Washington, D.C. 20551 Mr.  "TI  un ao  C-1  rl • •  Com  •b"  CD Aa m  Zie  r".""(.1 C)  Xrrl rT1,;  cn .7)=-  C".., Y  Dear Mr. Volcker:  tvl  00 N,)  cn Would you or your staff be so kind as to answer a few very basic questions about the prime interest rate?  First, is there such a figure in a formal sense or is it merely what the media determines it is after consulting some of the major New York banks? Second, what does the prime rate really mean with regard to any particular institution? For example, does each bank have its own prime rate which may or may not be in line with the so-cal led national prime rate? If a bank does have a prime rate, does this mean that it is the rate charged to its very best customers---presumabl y large, credit-worthy corporations? Does the prime rate apply only to certai n types of loans and not to others? Thus, does the prime rate vary within the same institution vis-a-vis the same customer on the basis of the nature of the loan? How are consumer purchase loans tied to the prime rate? How are individual personal loans tied to it? What latitude under the law do banks have to set different rates for different customers? For exampl e, if a particular bank has a so-called prime rate of X for a partic ular category of loan, can it charge some special customer less than that rate, the specialness being based upon a long association or a personal relati onship? I would certainly appreciate any light you could shed on these questions. A number of acquaintances of mine in the banking industry have privately stated to me that the so-called prime rate is a sham. Inasmuch as interest rates figure so prominently in our nation al economy these days, I thought it would be useful to broaden my understandin g of these matters.  Sincerely,  DENNIS DeCONCINI United States Senator  DDC/rro   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ED e•-•, i; -  " •  HARRY F. BYRD. JR. VMWNM   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  11Cnifeb Zfatez Zenafe WASHINGTON. D.C. 20510  BOARS OF G@VERNCRS ;IF ilk. FEDE-R Al RESERVE SYsTi::•'  1981 JUN -3 flPi 11: 34 RECEIVES OFFICE OF THE CHAIRMAN  June 1, 1981 j  My dear Paul:-  I have been away during the Congressional Recess, so just today did I see your cordial letter of May 26.  My thanks for writing.  With every good wish, I am,  Sincerely,  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 23, 1981  The Honorable Ed Bethune House of Representatives Washington, D. C. 20515 Dear Mr. Bethune: In Chairman Volcker's absence, I want to thahk you for your recent letter recommending Mr. William Marion Hartz for appointment as a director of the Federal Reserve Bank of St. Louis. His willingness to offer his services to the public sector is commendable, and we appreciate knowing of his interest to serve with the Federal Reserve System. The System maintains a constant search for talented individuals for possible service as directors of Reserve Banks and branches. In this regard, I have taken the liberty of sending a copy of Mr. Hartz' biographical information to Mr. Roos, the President of the Federal Reserve Bank of St. Louis, so that he will also be familiar with Mt. Hart7' background. You may be assured that his qualifications will be considered as future director vacancies occur within the St. Louis District. Sincerely,  Frederick H. Schultz  JnB:vcd (#V-164) cc: Mr. ROOS (w/copy of bio) bcc: Mr. Russell-St.Louis Fed Ow/copy of bio) Gov. Gramley Mr. Wiles Mr. Allison Mr. Bischoff Ms. Winkler Mrs. Mallardi (2)%0°'  ED BETHUNE  Action assigned to Mr. Allison.  irsTRic-r-T, ARK ANsAs i.N.D c  COMMITTEES BUDGET BANK ING. FINANCE AND URBAN AFFAIRS  • •  • ,WAgHINGTON OPf 1535: LOtnWORI14' Ho up 0FRICE Bt.TTL.01 NG  Congre55 of tije liniteb *tato  WASH rNG Tr44.1. D.C. 20515 tr02)145-21156_,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DISTRIC T OFFICE:  3/)otige of iktprt5entatitieg bilasbington, 33.e. 20515  1527 FEDERAL BuiLDING 700 WEST CAPITOL TTLE ROCK, ARKANSAS 72201 (501) 378-5941  —)  June 11, 1981  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Constitution Avenue between 20th and 21st Sts. Washington, D.C. 20551 Dear Mr. Volcker: My good friend, Mr. Marion Hartz, of Stuttgart, Arkansas, has indicated to me his interest in being appointed to the Board of Directors for the Federal Reserve Bank in St. Louis, Missouri. I have known Marion for many years and have been associated with him in different ways over a period of time. He is a good businessman, a sincere and capable individual. His high moral and business standards are well recognized and my feeling is that you could not find a more qualified person to fill the position. Your time and consideration of this matter would be greatly appreciated.  fp -71 -31  u:3 cr3  Member of Congress C: 3C  EB/pc r 11  rn c--)rn  CD  rel rt, MI 7.• ;"'"  =c1C) rn  7.1  ri • -< :4:  X  LID  c.-) •  Ca) •  7=1 "."3Z  C37 C.'  r  t z c:1  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information.  Citation Information Document Type: Resume Citations:  Number of Pages Removed: 7  Resume, William Marion Hartz, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  June 22, 1981  The Honorable Lien jamin Rosenthal Chairman ::AL.,cop.unittee on Comraerce, Consumer and Monetary Affairs Committee on Goverruitent Operations House of Representatives Washington, D.C. 20515 Dear ChairiAan Rosenthal: In Chairman Volcker's absence, I would like to acknowled%je yuur letter of June 16 requesting that certain data on OPEC holdincs, reserves, and deposits, furnished by the Federal Reserve to your .,abcoLutiittee in July anu August of 1979, be updated. v;e are in the process of compiling thin inforLiation and shall submit it to you by July 2. Sincerely,  15Frederick H. Schultz VCD:pjt (YV-168) bcc: Mr. Terrell Mr. Truman Gov. Schultz Mrs. Mallardikr*   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  SEN/AM7N S  ROSENTHAL. N.Y.. CHAIRMAN  MILH. KINN CONYERS. JR EUGENIE ANINSON. PA. si r rvorn L. NEAL. N.C. 1 BARNARD. JR.. GA. 0011, Pr.'01 A. PtySFJII. Y.  LYLE WILLIAMS, ow° HAL °ALIO. NEBR. WILLIAM F. CLINGER. VI  NINETY-SEVENTH CONGRESS  Congrt5 of tbe Zfluiteb  tato  o.4A/ootrry—(202) 225-4407  31)oufse of teproSentatibei‘ ga.  COMMERCE. CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515  June 16, 1981  Hon. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Chairman: In July 1979, the Subcommittee on Commerce, Consumer, and Monetary Affairs held five days of hearings on the adequ acy of Federal agency efforts to monitor, analyze, and report on foreign, includi ng OPEC country, investments in the United States. Our investigation is continuing, with hearings scheduled for late July. We require that certain data on OPEC holdings, reserves, and deposits, furnished by the Federal Reserve to the subcommittee on July 19, 1979, be updated. (I am attaching copies of the data tables involved, taken from the hearing transcript.) I request that the data be updated as follows, utilizing the same formats: (1) Table 1 should be updated for 1979, 1980 and 1981 to the present; (2) Table 2 should be updated by including data as of January (a) 1980 and (b) 1981; (3) Table 3 should be updated including the most recently available data and revising the listing of banks, as necessary; (4) Table 4 should be updated by dropping March 1979 and substituting, instead, data for December (a) 1979 and (b) 1980, and (5) the August 21, 1979, follow-up letter from Governor Coldwell to the subcommittee should be updated, including the most recently available data. We would like this information by July 2, 1981. If your staff have any questions, they should contact subcommittee counsel, Stephen R. McSpadden. Sincerely,  Ben am Chai man Enclosure BSR:mb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PA.  JOHN MILER. IND.  Rosenthal  -•••,  -•  a .  , •  • A  4  •  THE OPERATIONS OF FEDERAL AGENCIES IN MONITORING, REPORTING ON, AND ANALYZING FOREIGN INVESTMENTS IN THE UNITED STATES (Part 2 OPEC Investment in the United States)  .„ ,,,„ LI•  4 r 1 /  HEARINGS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES  .. •. • 1 1frOt (1 '•' •  •  1  . 10 .1  ••& •  •r• 11,  NINETY-sIXTII CONGRESs FIRST SE.SS•ION  JULY 16, 17, 18, AND  r  rt•  •  • V.•  atiotu; amittee on Government Oper  •  •  Printed for the use of the Cor •• r  At'  •  t 4  L )114 fk  !;•••  44 r.  •••  ,  a  •  *IS.  , , ....„.4.;„,.....• -,..-. i • 4',41...." - 4 .'..":". -: 4 ,i -. • r . • t .;,it- ,., , 41A ., 0 •• '  ' '' I ' ".. AC , . f o ...•..,  .. I  -  .;   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  e,  o,Sn TAAL! I  TABLE 2  r011,160 OPF1t1•1 11,4,11VIS OF romcm Ibitilo.. of dollars)  1970 Total Moldinla OW countries Middle i'st.in 1 2. AfricaI. Other-  A  It '1  All other cougar"-,  ti ,idinto in the United %tate. Treasury bill, end 412ificates I. OPIC countries 2. Other countries  A  Noticeable Ttir•outi bonds and notes countriesUappr.sisiate) I. 2. Other countries t.  D. t  honmarketabte Treasury bonds Of and notes-  2/ 1, 4, 1/ 7! ti  FOREICM OFFICIAL MOLDINGS OF MARKETABLE U.S. TREASURY SECURITIES, SELECTED DATES  December 1977 1973  1978  March 1979  281.3  248 0  45.4  122.4  241.0  3.6 2.5 0.1 6.2  12.6 8.5 1.3 2.6  07.9 52.4 S./ 9.6  0 41 ____  109.8  175 1  2)0 1  244.8  21.11  bb .....V  ill.I  1112.4  15/.1  li 4 ___ st • n •.  11.5 n.a. n.a  47.6  07 7  4 2 4i.6  3.3 04.4  540 7 /.: 50.5  5.7 n.s. n.a.  12 2 11.0 21.2  35.9 9.0 26.9  16.0 8.0 28.0  20.6  21.0  20.5  14.7  14.9 21.2 -4.71 13.4  0 1 n.a.  15.5  securities  al  /  7/ Itanktrl and iss,ney market assets,countries T."--OFLC :. Other countries  5 4 ___ n.a n.a  17 4 n.a. n.a.  18.0 4.0 8.4  23.1 10.2 1:.8  4.  10  28 1  11 9  19.1 9.0  20.1 11.8  Other  5/8/ OP1C countries- Other coubtrios  n. a. n.•.  n.a. rt.*.  23.1 11.0  bcginnihg April 1928 data raLludr Sautit Ardiblav toieign eaihange covet against (amounttng to about 55.3 billion sn marth 14/8) the note r• !tan, I aq , ow• , Libya, Oat •r S•tads At et, • tiros tr., Are, LSI Algeria. Gabon. Nigeria tivadot, Venesufla. Indonesia. Also includes Ilahtain and Oman. None held by OM. Printipally bank deposits. cu.. telor.isse syrersiri.es, baniers acceptan.es, "mimeo...tat papet. , private holdings. aim.  Sok.t.es   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I.  International Monetary 0 S. TrIllury. System. Federal It  Amount ($ billions) bonds Bills L Notes Total  Inietnatr,nol Finan.ial Slatisti.s.  Percentage of total Outotandinl tondo Bills & Notes Total  6.5 3.8  .5 .5  7.0 4.3  8.9 5.6  0.3 0.3  3.0 1.9  1973 - March 1 9 /4 - January  37.6  6.9  4.2  5.2  44.5 34.4  35.8  29.2  27.1  3.2  16.5 12.7  1979 - January  68.4  36.0  104.4  42.1  10.8  21.0  51.3  36.3  87.6  31.3  10.7  17.4  1968 - November 1969 - Junt  3.6  NoldioLs at P.,reikn tranthes ot 0.S. Parks A. 8.  txrmAmcr  - April  34U  341  TABLE 3 TABLE  DEPOSITS OF MIDDLE FAST Olt PRODUCING coupalles im romcm BRANCHES OF LARGE U.S. KANIS (billions of dollarsl-  December 1975 Second Sia Largest Largest Sis Banks tanks _  Neat Nine hanks  Silt Largest Banks  NUMBER OF U.S.CHARTERED  BANYS REPORTING LIABILITIES TO OPEC COUNTRIES AT FOREIGN BRANCHES  March 1979 &stood Meat Nine Largest Sia Banks Ranks  Dec. 1975  Total deposits tconsoirdated)  197.5  (rep-obits of Middle teat 21 Prod...snit Countries - 9.8 trne 12r se percent of Line fl/  76.3  49.9  1.2  0.7  I/ 273.S-  I/ 99.9--  IS.)  1.7  68.41  0.5  1 6  1 4  6.0  1.7  Indonesia  te  i/ 1'  Kuwait  Lep.osils as of bac. 19711 ln.ludes Iran. Iraq, luvtaat. °man. Qatar, Saudi Arabia and the United Arab Imitates.  Saudi Arabia United Arab Emirates Algeria  Sia_larilot banks  Rank ot America Chri•e s•.1. at t t,r...i.  Morgan  Hanover  Guafiblay   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  46  45  39  82  89  81  si  52  So  43  45  50  53  50  49  23  24  13  13  JO  33  29  32  15  17  16  31  33  34  34  38  37  44  45  51  19  26  19  19  14  12  11  13  19  19  36  11 28 17 18 19 36  8 30 24  Libya tankers Trust Continental Illinois Crocker Nattonal Bank 'trot Mattonal bans of  )111114filtufeff  48  16  Nest nine  Secohd largest  80  40  Qatar N  1979  Iran  0.7  Deposits an foreign kron.hes represent more than 70 percent of total deposits of Paddle Last oil producers is ail U.S. banks.  D•c. 1978  31  Iraq 5.0  Dec. 1977  Ecuador Venezuela  (11  Dec. 1976  Security Pacific Wells Fargo  Chicago  European American Bank & Trust First National Bank uf Boston First National tank of Dallas First National Bank of Detroit Irving Trust Marine Midland Mellon Republic National Bank. Dallas United California Bank  9 Algeria  11  15 14  •  ' •  .ht.*  igtA,  •  • '  331 FiCARD  deposits from Middle In foreign brandies?  '.  •  •  FEDERAL RESERVE SYSTEM  !,  the total for foreizn  •••• ,•••  r•  ony has that in their  •••1 ••.••r  August 21, 1974  Chairman. N1y as_ A   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Benjamin S. Rosenthal Chairman Sul•committee on Co7rIerce, Consumer and Monetary Affairs Committee on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman Rosenthal: During my testimony on July 18, you asked me to provide information on the total deposits of Middle East oil producing countries in the U.S. offices and foreign branches of 21 large U.S. tanks. The figures as of March 1979 are as fellows: Six largest U.S. banks Second largest six Next nine bankb  $1q.4 billion 2.1 0.8  nest fise:res include the depc!its ic fcr41::n branches a, i4perted in Ta'- le 3 of mv testimony. The estimate supplied during tne hearing of the share of total deposits represented by depcsits in foreign branches was based on data that inadvertently included some U.S. government securities that hanks were holding ir uustod: for customers. These custody holdings flit net liabilities of the banks themselves, and counting only deposits, foreirn branch figures represent more than 80 percent of the total. Since:rel .• voi.•  ,  4..7 .?  F. E. Coldwell  ..  •••ovcovt •• •q•o  BOARD OF GOVERNORS OF THE  .....  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  i!tv,  •••<,  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 2055I  •'-,  z /ULO.S. ••• •••  June 19, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Bill Emerson House of Representatives Washington, D. C. 20515 Dear Mr. Emerson: Thank you for giving me the opportunity to comment on your views regarding high interest rates, particularly as they affect the housing industry. I understand your concern about the current level of interest rates. However, these rates are largely a reflection of the rapid rate of inflation we are experiencing and the deeply embedded expectation that prices will continue to climb. As a result, lenders are reluctant to com.mit their funds without being compensated for the declining value of the dollars they will receive in payment. The oaly way we are likely to achieve a lasting decline in interest rates, therefore, is through a lowering of inflation and inflationary expectations. Since maintenance of control over money and credit is an essential ingredient in the fight against inflation, the Federal Reserve has little choice but to continue to pursue a policy of restraint. There is no doubt that the effects of monetary restraint are uneven and that the housing industry suffers disproportionately from high interest rates. Nevertheless, we cannot escape that problem by simply creating more money. In the end, such a course could only aggravate inflation. Indeed,'if the Federal Reserve were perceived to be validating the inflationary process, inflationary expectations would surge and lead to still higher interest rates. Rather than helping industries such as housing that are particularly vulnerable to high interest rates, more rapid money creation would worsen their position over time. I have long stressed the importance of a broadly based approach to solving our inflatio-1 problem. I am encouraged by Congress' actions to bring federal spending under control and by the recognition of the need for monetary and fiscal policies to work together in an effective overall economic program. A policy of curtailed public spending in  •  i k   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Page 'Dm  Emerson  conjunction with disciplined monetary policy will entail some risks and strains in the short run. But both aspects of this policy stance are essential in order to achieve the basis for lower interest rates and sustained. economic growth ovor the longer term. We welcome the counsel of the members of Congress and efforts to work together to halt inflation. In that spirit let me eNpress again my thanks to you for writing. Sincerely,  AK:LS:JLT::DJW:vcd (V-161) bee:  Mr. Kiehline Mr. Slifman Ms. Kusko Mrs. Mallardi (2)  •  Action assigned to Mr. Kichline.  BILL EMERSON MEMBER or CONGRLSS 10TH DISTRICT. MISSOURI  AGRICULTURE COMMITTEE SUBCOMMI'TIEES:  Congitg of die aniteb gptate5  COTTON, RICE AND SUGAR WHEAT, SOYBEANS AND FEED GRAINS ARTMENT OFERATv-..c NESEARLH ANC) FORLtGN AGI,  tURE  3Dott5e of ikepre5entatiing Waisbington, D.C. 20515  OITICCS. SUIT( 418 CANNON BUILDING WASHINGTON. D C. 20515 202 225-4404 THE FEDFRAL BuiLniNa 339 BROADWAY CAPS GIRARDEAU. Missouni 63701 314,335-0101 P O. Box 128 H ILLI•orto, M ssoup.  63050  314,789-3561  June 10, 1981 in -re -ri  t  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Peserve System Washington, D. C. 20551  Co rr• CD:my -"I rrt ...--) -4 --.- En  F-71‹ c-)rn .-.r CD To A; M  Dear Chairman Volcker:  co co -C—  C ____  r•.) 3^. 71K — — ”  XI.  CD  X.  CM  Allow me to briefly outline how this problem has affected the State of Missouri. For the three years of 1978 , 1979, and 19C0 housing starts in Missouri were 38,500, 31,000, and 37,000 respectively. Taken together, these yearly starts indic ate that an average year would be about 34,000 starts. However, in 1981 housing starts will be down to about 13,000 or off 24% 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 excel lent 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. Being fully aware that the Federal Reserve 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 work in concert to smother the fires of inflation and curb wayward deficit spending. Therefore, I respectfully request the Federal Reserve Board to review its present policy of recession to end inflation.  incere  BILL EMERSON, M.C. BE/jbb  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r"  M G 1... 73 CI  2  This communication is to express my deep concern regarding the meteoric rise of the prime rate. The jump to twent y percent in the last few weeks ties the record set last December . I fear that strong business loan Hemand will push it up even higher, thus further damaging the already reeling housi ng industry.  With best wishes, I remain  -T1 rq CI " r n, >  :-"••()CI Mc ...n -11 te ,  r-1 -fa, ,-,--fl 4.4.-r 1-z T'i fq  rq M -...  --< cA -1  C. ti 71.3 c.,-.  June 19, 1981  The Honorable Glenn English Chairman Subcommittee on Government Information and Individual Rights CoLdaittec on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman English: Thank you for your letter of June 3 requesting a list of audio-visual materials that have been budgeted or that the Federal Reserve System plans to produce and distribute in fiscal year 1982. t;e are in the process of compiling this informat ion and shall submit it to you before July 15. Ziincerely,  DJ1,1:pjt (PV-157) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Coyne Mrs. Mallardi (2)  June 19, 1981  The Honorable David W. Evans House of Representatives Washington, D.C. 20515 Dear Mr. Evans: Earlier this year you introduced H. Con. Res. 82, which called for the Feeral bank supervisory agencies to decrease the existing ,Asparity in capital requirements among commercial banks of different size. Shortly thereafter, togcther with Representatives Nattox, ShuMway and Wat::ins, you wrote to me asking the Federal Reserve to analyze a study entitled pank .C,apit41_Adequacy, Size_and_Risk. Your letter also asked us to update tne data contained in that study and to discuss curre nt Federal Reserve policy with respect to bank capital. I am plcased to enclose for your review a paper entitled Curr_ent AlEervisory Ppliqy Regar6i4u ';lank Capital, which discussc: recent trends in the capital ratios of both large and small banks, the primary reasons for those trends, and current Federal Reser ve supervisory policy regarding bank capital. As you requested, I am also forwarding a Joara staff analysis of the study par* Camitl Adeuyaqi, Laze and Risk, and I am enclosing extensive data that updates that study.  me know.  If we can be of further assistance to you, please let  Sfraql 1+.  Enclosures SHT:DJW:pjt (4V-68) bcc: Mr. Talley Gloria Blessing Mrs. Mallardi (2) Identical letters also sent to:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressmen D'Amours, Mattox, Shumway and Watkins.  atr.,44u ci-4-49"' 14-eite; 1414.4- 187BANKING. FINANc.'12 AN7) URBAN AFFAIRS COM  Conqrts'E- of tlic -Qiniteb *tatt5  mil Tir  DISTRICT OFFICE: 4TH  FLOOR ADMINISTRATION  BUILDING  INDIANAPOLIS INTERNATIONAL  3..1)otic_i't of iArpre5entatibe5  C.OVERNMINT OrERATICNS COMMI T TEE  INtDIANAPoi_is. INDIANA  A'prowl-  46241  Tri_Frr4o44( (317) 269-7364  Ulasoincston,  SELECT COMMITTEE  20513  TOLL FREE  NUMBER:  OPERATOR-ENTERPRISE  7364  ON AGING WASHINGTON OFFICE: SIT  DAVE EVANS  RING C OMMIT 1 : I .  miowr ST-NOR I 1  AST CC GNOMIC  6TH DISTRICT, INDIANA  ADVANCEMEN T COALIT ION  438 CANNON Orrtcr BUILDING WASHINGTON. 0  C.  20815  I rirrwor.a. (202) 2.28-2276  !larch 5, 1981  ".r. Paul Volcker Federal Ruscrve System 20th Constitution Ave., Washington, D.C. 20551 >car :1r 1  Cha i  :  On March 2nd, we introduced H. Con. Res. 82 calling for the Federal bank reulators to diminish the inequitable capital requirements among commercial banks. Our interest in this issue was sparked by data contained in a study prtpared for the Independent Bankers Association of Texas, a copy of which attached for your review. Upon reviewing this report, we would appreciate your written analysis of this report, an update on the data which the report contains, and a statement of vour current policy with respect to hank capital of small- and medium- sized hanks. In addition, we would appreciate advice on the current .,catus of anv studies being conducted on the issue and the possible recommendations that are under consideration. Ihe evidence is clear to us that there is an inequity in the capital requirements on certain banks imposed by the Federal regulators. Unless there are clear and compelling reasons for such discrepancies, it would seem to us that all commercial banks should be able to function effectively with lower requirement of capital or its equivalent. We are interested in resolving this issue as expeditiously as possible and your addressing of our questions will greatly assist in that task. thank you for your help and we look forward to your early reply. Sincerely,  ().9)''14\.)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ne114 P  t  ik  A I  lA( . 1  11118•0 "-  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Research paper Citations:  Number of Pages Removed: 42  Fraser, Donald R. "Bank Capital Adequacy, Size, and Risk." August 1, 1980.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  MIL  • GOvtii  BOARD OF GOVERNORS OF THE  • co  FEDERAL RESERVE SYSTEM  KJ,:4p ,......  WASHINGTON, D. C. 20551  ..--trifg •• A, .e.0  June 19, 1981  • 4.1/11.12i.5 • '• •..• • •  RAUL A. VOLCKER CHAIRMAN  The Honorable Ernest F. Hollings United States Senate Washington, D.C. 20510 Dear Senator Hollings: The material you recently sent me, including your comments on the Senate floor regarding a recent resolution concerning Federal Reserve policy and your testimony before the Finan ce Committee, provided interesting reading, indeed. I very much appre ciated your remarks on the Senate floor in opposition to the resolution. Of course, we all hope that tax reduction will stim ulate the productive capabilities of the economy while the prospects for tighter budgetary control and the other elements of the President's economic program will reduce inflation and inflatio nary expectations. This would permit both faster growth of real outp ut and lower interest rates. The experience of the last decade suggests that turning inflation and inflationary expectations around may be a difficult process. Until that is accomplished, interest rates are likely to remain much higher than any of us desire and be pushed higher yet in the event that heavy Treasury borrowing needs compete for funds with the private sector. And for that reas on, we seem to be on entirely common ground in our concerns about the budget. From the perspective of credit markets, I am very symp athetic with your concern that tax cuts not vastl y expand and perpetuate federal deficits, You have made a very impo rtant point in noting that tax reductions aimed at spurring inve stment will be at least partially self-defeating if the combinatio n of tax and spending decisions results in large deficits. I also recognize the force of the Administration's argument that, politically, higher taxes may encourage some to accept higher spending, and we end up with the deficit and high taxes, which are themselves damaging. That is why your leadership in ensuring the implementation of spending cuts is particularly importan t. I could not agree more strongly that accelerating growth in the money supply in an effort to lower interest rates would ultimately prove counterproductive; it would sign al a capitulation in the fight against inflation. The Fede ral Reserve is   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  4•0111P •°  The Honorable Ernest F. Hollings Page Two  uctetLanu to hold the growth of the money supply on a reason able ;ie wt:lcome all the assistance that can be provlueu in damping federal credit demands and removing cost-raising regula tions in order that monetary restraint can unwind inflation as rapidly and with as little pain as possible. Thank you for your suppor t. Sincerely,  ‘,.**1  /PA W.  SL:MFMS:JSZ:pjt (4V-139) bcc: Mr. Kichline Mr. Struble Ms. Lepper Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PETE V. JOIAENICI, N. MEX., CHAIRMAN WO.21414M I_ ARMSTRONG, COLO. ir  NANCY LAN-ON KASSESAUM. KANS. punv DOSCHWITZ. MiNAs. oaniN G. HATCH. UTAH JOHN TCWER. TfX. MARK ANoRIWS. N. OAK.  a  SYMMS. IDAHO CHARI ft GRASSLET. lOwA STFYIN  RORFRT W  KASTEN. WIS  DAN CAJAYt r  ERNEST r. NOLL INGS. S.C. rt.& LArtrom JOSIFH R. RIDfN. IR.. DIM. 1 SENNETT JOHNSTON. LA. JIM SASSFR. T1NN  ,Stafez ,...%cnate  GARy HART. COLO. NowAPO M. METTrNSAU/A, OHIO (XNAL  W. RlfGLIC. JR.. MICH.  OANIFL PATRICK MOYNiNAN. /  IND.  Action assigned to Mr. Kichline.  COMMITTEE  ON THE BUDGET  JAMES EXON. NEBR.  WASHINGTON. D.C. 20510  SLADE (...:ARTON, WASH. s-TEPNcm SELL. %TAFF DiRrcron UZARETH TANKERSLEY. MINORITY STAFF DIRECTOR   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 20, 1981 cp  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551  gap co  -7, r, 41.1  cv r  :Tr  •_231  :17 711  1=11  rri r\.)  • • r'N r ...„1 Cr)  rr. —ICI • 4 -.3 C,./ I• 7-r •  Dear Mr. Chairman:  I have attached a copy of some of my recent remarks in debate on the Senate floor as well as a copy of my testimony to the Committee on Finance on the tax cut. These remarks indicate my concern over the current directions of fiscal policy, insufficient spending cuts combined with excessive personal tax cuts, as well as support for the Federal Reserve's policies to restrain the growth in the monetary aggregates. I hope that both fiscal and monetary policy will work more closely together in an effort to reduce the rate of inflation. /Sip ely, ./7/  ,  I 4  V44-  Ernest y Hollings 4  :  m cn  CD C71  4  7.7) c) ;u C.P1  United States of America  Vol. 127  TongressionateRecord PROCEEDINGS AND DEBATES OF THE  97th  CONGRESS, FIRST SESSION  WASII1NGTON, WEDNESDAY, MAY 13, 1981  No. 73  Senate (LegislatzLe day of Monday, Apr1127,1981) Mr. HOLLINGS. 1 thank the distinguished chairman cf our Banking Committee. Mr. F'resident, let me bring this debate into sharp focus. The distinguished Senater from Virginia and I agree most of the time. He asks uhether or not President Reagan's progra:n can work. We hape that the Reagan-Kemp-Ruth across-the-board tax cut with a substantial loss of re‘enues doraa not work, because taat is really what is bring:rig about the inflation and the high interest rates. It has not been the Congress for the part 15 years. Ever body likes to talk aaout the last 15 years. Let us talk about now. President Reagan caree, President Reagan FaW, and he conqiiered. He got his spending cuts IIe has becn cu`ting reguiations Increases in de:ensa are provided for. Those interest rates acre coming down. But what caused rates to rise in the last 2 aeeks is the success of the Presidant. On this score, Mr. President. this, amendment shoa. ft complete misunderstar.ding of the workings of the Federal Reserve, financial markets. and the reasons why we have hiali interest rates. It is the Federal Reaerve's announced policy sal trying to keep the growth of the money supply to less than 7.5 percent. When you have deficit spending, and admittedly you are going to have a high deficit, the Governnient, as the Senators have pointed out. must go into the capital markt to borrow the 111011CV. The Gmernment now spends nearly $100 tallion of a $700 billion budget on interest. and could easily spend a lot more Lf deficit spending is not removed. Suah borrowing will crowd other borrowers out of the market. The Federal Reserve ctin monetize part of the debt. It can buy some of that debt, but this increases the money supply, and you have added to inflation and reduced the value of the dollar. that is the very same dollar you or I have in the savings account, and on the other hand the Fedaral Reserve could hold tight to that goal of 7.5-percent growth in the money sapply. I can tell you right here and now that interest rates must go up significantly to make it attractive enough for the public to come in and buy that extra Government debt after the administration of Congress grants that large Roth-Kemp tax cut.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Either the Fed will monetiae the debt and inflate the currency. or the F'ederal Reserve will try not to inflate the currency. That latter course will require a high enough interest rate to attract people to come in and buy that debt. That is the way it works. But the beginning of that inflation and that high interest rate Ls in the resolution aciopted yesterday evening. That is why I resisted this amendment being put on the very end of the re-solution. The real kicker is after you have already created the extra debt by tile choice of fiscal policy. after you have unbalanced the budget, after you have at least a $50 billion deficit in 1984, we engaee in this political rhetoric saying. "The Congress should implement a fiscal policy which will permit a balanced budget as soon as posaible but in no case later than 1984." That is what they were doing in passing that resolution by an overwhelming majority on last evening. We now have a high rate of inflation and could acid to that by throwing fire on it with a higher deficit for next ycar. We do not head it in the right direction to brirg down the deficit. The Congressicnal Budget Office has projected not the $50 billion deficit that the resolution states, but a $70 billion deficit for next year. That Ls a higher deficit in fiscal year 1982. under Preaident Reagan's policy as adopted yesterday evening in Senate Concurrent Resolution No. 19 than for fiscal 1981. It a-ill be higher than President Carter's. This amendment is just like taking a raging fire and throwing gasoline on the fire and then saying, ''By the way, let US investigate the fire department." The Federal Reserve has been, as the Senator from Virginia said, the only act in town trying to keep the fires out, trying to moderate the growth in the nioney supply. It certainly was not fiscal policy. Fiscal policy set us in the other direction. I agree that that was the message on November of Last year, to balance the budget and not to cause more inflation and higher interest rates. That is why I did riot vote for the resolution. I certainly do not want this copout to blame higher interest rates on the atderal Reserve. This is what you might call the Volcker ouster resolution. We are going to get rid of the head of the Federal Reaerve. Everybody says the administration's program will not reduce infla-  tion and give balanced budgets. It will not work But when the Congress vote! for it and it does not v.ork, then it . the Federal Reserve that is not coo:a • Brine with the President, not workiza with the Government. This is somethiag rro-e than laying the groundwork t. blame Volcker and the Federal Restne That is exactly what it is. This amendment shows no understanding whatever for the working of the Federal Reserve, nor an apprecaatiaa for their attempts to restrict the growtn of money and arrest inflation in this coantry. I cosponsored with Senator Dorararci $3 billion more in spending cuts than recommended by President Reagan. But spending cuts alone of only $36 9 billion will not aleld a balanced budget 11 you are going to increase defense spending by nearly an equal arnount for next year and reduce revenues with an across tie_ board tax cut of some $54 billion. This is a demand side tax cut. I hope private cittaen.s will buy some of the additional Federal debt, rather than buying a new car, a refrigerator. or other consumer goods. However, the only thing that would attract the public into buying some of the debt we are creating is a higher interest rate. The Federal Reserve either has to monetLze the debt and then inflate the currency, or they have to slow the growth in the money supply and let the interest rates go up so the public will come in and buy the debt that you and I created last evening with that fiscal policy. This amendment wants to engage the Congress even more into private credit markets by advocating a two-tiered or dual prime rate. Rather than the free market determining the flow of capital. we are going to politically determine in Washington v.-hat you can get credit for and a-hat you cannot get credit for. That Ls pure political financial monkeyshines. There Ls no better description for it. Mr. President. I hope we defeat this resolution and get back to the fundamentals, that Ls, the fiscal policy as enunciated in the resolution of last evening. That resolution made gooci provision for defense. It also included other spending cuts. 13ut it also included a revenue cut of some $54 billion. And ask. where did the deficit come from? Those deficits cause increa.sed Federal borrowing and higher interest rates. Do not vote for that resolution of la-a evening and then blame the Federal Reserve in the resolution here today. I thank the distinguished Senator from Uta.h  • ••  •*Q0f GOv, ••. .1(1 r-4Q .-A ••C 42 • •• 'C • -n •  •••:  BOARD OF GOVERNORS oF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  fr •<4.• •  At . • •..• •  June 16, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Lee H. Hamilton Chairman Subcommittee on Economic Goals and Intergovernmental Affairs Joint Economic Committee Washington, D.C. 20510 Dear Chairman Hamilton: Thank you for the suggestion in your May 7 letter regarding the Board's proposed revisions to Regulation C, implementing the Home Mortgage Disclosure Act. Please be assured that I share your conc9rn about the crucial need to trim regulatory costs. When we consloder final adoption of the revised regulation, we will give careful attention to your suggestion that we reduce, from five to four, the number of reporting categories. Our preliminary thinking, however, is that the category breakdown in the proposal would ease, not worsen, the reporting burden. The extra category to which you refer results from the separate treatment of data on multi-family dwellings. That is, the regulation requires lenders to categorize data on one-to-four family dwellings by the four categories which, as noted in your March 24 letter, are specified by the statute. With regard to multi-family dwellings, on the other hand, the proposed regulation mandates that the data all be reported in one category--whether the loans represent home purch,pse or home improvement, owner or non-owner occupied property, 6nd conventional or government financing. If institutions were not reporting loans on multifamily dwellings as one category, they would have to subdivide them into the categories that are now required for one-to-four family dwellings. It is arguable, of course, that the Board might (as an alternative to categorization of multi-family loan data) exclude such data from HMDA disclosure. This result, however, would not appear to be in keeping with the statute, which requires depository institutions to disclose "all" mortgage and home improvement loans, not just loans on single-family or one-to-four family dwellings./   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,di  The honorable Lee H. Hamilton Page Two  I approciate receiving your coruTtent unu exprussion of concern, and want to reiterate again my own personal comritment to the reduction of regulatory burden. Sincerely, S/Paul A. kcker  DS:pjt (0V-142) bcc: Dolores Smith Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • mtr-epty s. PEutS. wis..  CHAIRMAN  RICHARD DOLLING, MO. LEE H. HAMILTON, IND. GILLIS W. LONG. LA. PARREN J. MITCHELL. MD. fREDERICK W. RICHMOND. N.Y. CLARENCE J. BROWN OHIO MARGARET M. HECKLE R. MASS. JOHN H. RDIUSSELOT. CALIF.  Action assigned to Ms. Hart.  PKX1ER W. JEPSIEN. IOWA, VICE CHAIRMAN WILLIAM V.  sicrirm,  JR  JAMES AMONDR,  STEVEN SYMMS, IDAHO PAULA KA YIK IN'S, VILA. MACK MATTINGLY, GA.  CongresE-') of the latiteb *tates  CHALMERS P. WYLIE, OHIO JAMES K. GALIBRAITH,  DEL.  DAK.  LLOYD IIENTSEN. TEX. WILLIAM PROXMIRE. WIS  JOINT ECONOM IC COMMITTEE PURSUANT TO SEC.• • Of IstrilLIC LAW 1041, TITH corvoriii ss)  COWARD M. KINPEEDY, MASS. PAUL S. SAPIDAPIES, MEL  EXMLETIVEDIRECTOR  WASHINGTON.  D.C. 20510 CD  May 7, 1981  C") CD rly  -"Irn (—) :r *1 < c—)  Mr. Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551  -•  LAD c=p ne --c r•..)  :y.  rr.c3r) -T1 . ••••• 4 CI A):X.  711  —I. CD  BC  r  rel td)  X). -10  -4 ••••••  CJ1  Dear Mr. Chairman: Thank you for responding to my comment letter of March 24 regarding the Federal Reserve Board's proposed regulations implementing the Home Mortgage Disclosure Act (HMDA) Amendments of 1980. I want to reiterate one of the points raised in that letter. In crafting HMDA, the Congress explicitly required that four categories of loan data be provided by mortgage lenders. In the past, your regulations required lenders to report loan data in six categories. And your proposed regulations would still require lenders to provide loan data in five categories. I am frankly puzzled that the Board insists on going beyond the law and imposing excessive reporting requirements under HMDA. You are not carrying out Congressional intent in doing so, and I encourage the Board to comply with the provisions of HMDA. You and the Board should be seeking ways to trim regulatory costs imposed by law rather than gratuitously creating such costs by going beyond the mandates of the law.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rr.  I .1  Please give this issue your personal attention. Thank you. Si  ly,  A.„/, Lee H. Hamilton Chairman Subcommittee on Economic Goals and Intergovernmental Affairs  c-) cf.  June 19, 1981  Tne nonozable Alfonse M. D'Amato United States Senate Washington, D.C. 2°510 Dear Senator D'Aluatc.): 1 am pleased to respond to your request for comment on an amendment you intend to offer to the bill drafted by the Federal regulatory agencies. Under the draft bill, prior to the conversion of a mutual savings bank to stock form, the FDIC and FSLIC are to agree to reasonable indemnification for a period of up to five years for losses that may be incurred by the FSLIC as a result of the transfer of insurance liability from the FDIC. Your amendment would permit the FDIC to agree to indemnify the FSLIC for a somewhat longer period than that provided for in the uraft and would permit the GAO to arbitrate a resolution if the agencies are unable to reach an indemnification agreement. oased upon the discussions between the agencies during the course of preparation of the bill, I am confident that the agencies would be able to achieve an equitable indemnification agreement between themselves in a timely fashion if the need arises. Consequently, I believe that there is little need to require the GAO to resolve any differences that may arise between the agencies. While the bill is not scheduled for Congressional action, I continue to believe it is a very important and well balanced piece of legislation. I hope the Congress will consider it later tnis year and, at that time, it may be desirable to indicate in the legislative history that issues relating to inuemnification sLould not hamper a conversion to stock form that may be necessary to resolve a supervisory problem. Thank you for the opportunity to comment. Ldncerely,  GTS:AFC:DJW:DS:pjt (4V-147) bcc. Gil schwartz Legul Records (2) G.C. Log (#186) Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  MAIRK 0 HATFIELEI. twrn. co•moirmAr• TED syrvr•wq. ALASKA LOWELL • v. EICKEEt, JR,. COHN. i•r•r•  10,c a...tr. im•fo  PAUL LAXALT. %Irv. i•Pr GARN. UTAH  MAPX AH0E/FINS  N  OAK  ASONOPI. S. 0A14 4.0PrKT W. KASTEN  Jap  •1, 0Nsr AM•TO macs( 0.4 • • V I NC V GA A Pi PI I 14 tt ( ANL  V4IS. N v.  iv  c'.6:: THCMAS r. EAGLIT004. MO. LAWTON CHILES. FLA.  •d  tIl•• 53')JCiitteb Ztafez Zellate  . J Of NNETT JOHNSTON. Lk5,,,B1 Ilk /11 29 VI AL T E R D. monrx_rs*opo . ournair• N. supotcm. N OAK. CenVEI •• 4 61 1 pAyPICK J. LEAHY. VT. ik L.,... I H NI k%t I• 41' ' . 4 .A‘Srit. Tri4P4. TV. • .. , ;•qt cop4C1141 APIPI7 OFF ...,...k,m•kitS. ARK.  _.  srir,..Trro. PA  t  n ia. v.c cc I N t L  roaNt .cl• r. Hot.A.mon  HAK•!LON T.EHMITT. N. MEX. THAD COCHRAN. MISS.  onvuksziv  vott•••• rrroxmilar. WIS BOMkg Ci j:• 104.N c. STENNIS. MISS. '..41 !). t' C4 ) %( ..:' 44044EPT C. DERE), W. vA. I... s• " r.•Kili L K . 14.431JT IF , HA ilp ay,.  COM M I TTEE ON  APPROPRIATIONS  WASHINGTON,  D.C. 20510  et' T Ili. k- '  Pirlf110.114141:., ST•• THOMAS L. VAN OS  VOURT  mo.a...e. I T STAFF/ oiwicToo•  May 28, 1981  The Honorable Paul A. Volcker Chairman Federal Reserve System 20th Street and Constitution Ave, NW Washington, DC 20551 Dear Mr. Chairman: As you and your organization are taking an active lead in the development of important legislation on Federal assistance to troubled thrifts I thought you might appreciate a copy of the enclosed amendment to the "Bank Regulator's" bill which I am considering introducing. I have circulated copies to Messrs. Sprague, Pratt and Isaac for their comments. I would be grateful if you would share with me any thoughts you have on this matter. Sincerely,  Alfonse M. D'Amato United States Senator AMD/phm Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  AMENDMENT  May 11, 1981  •  Special Provision on Transition from FDIC Sec.  FSLIC  is amended as cnciion 26 of the Federal Deposit Insurance Act  follos: nos Banks Savi__, Conversion ________ mutual savings bank "Sec. 26. With resi)ect to any State -chartered insured .46  which converts into a Federal mutual savings bank bank, or r-rges or  or a Federal stock savings  onsolidates into a Federal.mutual savings bank  or a  mnify the Federal Savings Federal stock savings bank, the Corporation shall inde by it which arise and Lcan Insurance Corporation against any losses incurred one hundred per out of losses incurred by the converting bank as follows: ncs and Loan Insurance centum for such losses incurred by the Federal Savi ersion, 75 per centum during Corporation during the first three yrars after conv , and 25 per centum during the fourth year, ED per centum during the fifth year the sixth year.  a greater The Corporation, at its discretion, may provide  degree of indcmnification where circumstances wa.rrant.  The Corporation and  shall within two months the Federal Savings and loan Insurance Corporation e cn what shall be from the date of enactment of this Act mutually agre of losses incurred by the treated as 'losses incurred by it which arise out agreement, the General converting bank' for purposes hereof and, failing such s. Accountino Office shall prescribe the meaning of those term  The General  arbitrate and its decision Accountino Office shall also have the authority to the Corporations relative shall be final and bindino as to any dispute between to this section.  Any conversion, merger, or consolidation covered by this  red status under section 8(a) section shall not be deemed a termination of insu of this Act."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Explanation  This amendment would amend the Federal Deposit Insurance Act to provide insured that state -chartered, Federal Deposit Insurance Corporation (FDIC), mutual savings lanks that become Federal mutual savings banks (iMSB's), ed by the chartered by the Federal Home Loan Bank Board (FHLBB) and insur the FDIC Federal Savings and Loan Insurance Corporation (FSLIC), will have status requires indemnify the FSLIC if a FMS.B becomes insolvent or its financial losses to be paid out of the FSLIC's insurance funds.  This concept was  tutions Regulatory originally provided for in section 1201 of the Financial Insti and Interest Rate Control Act of 1978 (PA. 95-640).  That amendment provides  rsion, for indemnification only for potential losses identified prior to conve ation for a five year period, and for a decreasing proportion of indemnific over that five year period.  This amendment broadens that provision.  This  loss expenditures amendment is necessary to protect the FSLIC from unnecessary at a time when the fund is under stress.  In addition, it will facilitate  are suffering the conversion to Federal charters for mutual savings banks which best prosper from the present problems in the nation's economy and which can govern federal and grow under the more flexible and far-reaching statute that associations.  That statute (The Home Owner's Loan Act), when combined with  de these grand-fathered state law powers under the 1978 Act, would provi . institutions with the best chance of survivial and prosperity  The amendment  of the FDIC for is fair and just because: it recognizes the responsibility it eases potential the previous management of these converting savings banks; the best chance for stress on the FSLIC; it gives converting institutions ums paid by srowth and survival, and it recognizes that until insurance premi to the FSLIC, the these institutions are actually proportionate to the risk FDIC should indemnify the FSLIC.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  trI  •  of the failure of the The present law makes the institution the victim FDIC and the FSLIC to  reach an agretment on indemnification. If conversions  s to Federally-chartered mutual savings of state-'irsured mutual savings bank ulator's Bill" should include an banks are to be made on a fair basis the "Reg outlined. This was the FHLBB's amendment to Section 26 enacted along the lines its' testimony before the Senate position. However, the FDIC as M'anifested by change. Banking Committee sees no need for any legislative  A converting  delayed indefinitely. mutual savings -bank under the present law could be  This  to best plan for its would make it impossible for an institution to be able future to survive the deregulation transition. as any insurance company, This amendment recognizes that the FDIC, much savings banks. has received premiums over a long period of years from mnification. recognizes their responsibility for financial inde  It  No assurance  take all necessary steps is necessary from the FHLBB or FSLIC that they will to prevent the need for indemnification.  The proposal does not go so far as  indemnification if their to suggest a transfer of pre-paid premiums, but only is the unlikely prospect of losses.  In addition, the size and strength of  the FSLIC. the FDIC fund make it much more able to cope th-an  This amendment  served at the expense makes sure that the public and the institutions are of bureaucratic jealousies. protects the FSLIC.  It assures the FSLIC of indemnification.  s Otherwise, the FSLIC would have to take additional risk  with no concrete assurances from the FDIC.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  It   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 19, 1981  The Honorable Don Nickles United States Senate 7rshin3ton, D. C. 20510 Dear Senator Nickles: 'limn% you for your recent letter recommending Mr. Hal K. Bird for a summer internship with the Board of Governor s of the Federal Reserve System. Our Division of Personnel will contact 1:r. Bird directly about our summer application process.  You may be assured that he  receive full consideration. Your interest in the Board's employment program is nppreciated. Sincerely, ..! • !,.• ,  KW:vcd bee:  OV-159)  Ms. Warellime  Mallardi (2'  -1111E  Chrmn. Volcker Action assigned to Mr. Shannon  DON NICKLES  "Zlitifeb Zfafez Zolalc  OKLAHOMA  WASHINGTON. D.C. 20510  COM M rTTCLII? ENERGY AND NATURAL RESOURCES LABOR AND HUMAN RESOURCES  June 9, 1981  SMALL BUSINESS  Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D.C. 20551  •  U70 cc)  r-: ri 7,  c1711 -nrn  c: 2c  en  21'  ap enr-2 (11-.1 • g c •-•.-  Dear Paul:  nr" Lrt;:) . 2P  Enclosed are a resume and letters of recommendation 5; -:.r for Hal K. Bird, who wishes to be considered for an -., internship at the Federal Reserve Board for the summer of 7: 1982.  3::. 71/E. —...  f" ,.. 4. .-<  -t1 27 C-1  _... 73 •• ,-, -4 CP .-- ...., (Jo  Hal has been highly recommended to me by a number of Oklahomans. He plans to pursue a career in international finance, and 1 believe he would find an internship with the Federal Reserve Board to be extremely rewarding. )our consideration of Hal Bird is s Best  cercly appreciated. ards,  Don Nickles U.S. Senator  DN/lw enclosures  820 OLD POST OFrICC BLDG. 214 N.W. 3no OKLAHor.4*CiTy, OK 73102 0405, 231-4941   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3003Fmrpcm..13t.m. 333 W. 47.64 TULSA. OK 74103 19111. 3111-76S1  1916 LAKC ROAD Pow.* Cm.. OK 74601 0403. 767-1270   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 18, 1981  The Honorable Don Nickles Senate Office Building 205010 Washington, D.C.  RE:  Federal Reserve Board Internship  Dear Senator Nickles: I have just finished my junior year in the college of finance at Oklahoma State University and am now spending my second summer as an intern for Rotan Mosle in Houston. Rotan Mosle is a regional investment banking firm that is based here in Houston. This letter concerns my efforts towards securing an internship at the Federal Reserve Board for the summer of 1982. There is a lady in Houston who is helping me to secure the position and she has advised me that a letter of Tecommendation from you would be of great help. My grandparents, Lloyd and Louise Bird, have also suggested that I seek your recommendation. It is something that I would truly value. This position at the Federal Reserve Board is very important to me as I intend to obtain my masters degree in International Finance and it would give me great insight into my field. Thank you very much for your consideration and any help that you can give me. Sincerely, /4,7/1—/ Hal K. 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WAA-1" riedf "do-eiva (Ind . lt tfireu 411-0,A,e -5,(.v. tivi/a. ri C 6/ (-'; 604.1M  ;), (,) tin-1/i 4 vria. tno-ut odroisirrtic/exid lilirr,A1 ) -0-  (14,  .  4/1. t!Tritrii  t4) tO 6.11-01, hee. dri2kA/1/6   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  fi/V  1147.04. -1,ilfle;kAl(iJrn diftl(t/0 )  flee, (  ..,C CM/ -eilij/VI , t0 C./0 A/0 60P)/?/.  ;i071, 4,11'11J,  C IA,  hn(t,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  t  !D-3  oft/tAAAkod,e -OVA, hnfotml (1, t, axle, 04 .9.1 -en/lc/V.4 Iliveibe, hovi fire, wirnet/a. -to cy).4 -thrtsvue, too4?eifin mrnxi, ci,f,orna wsini  VIAILerre,f514  0.2,‘ tit-arnetta. -tkt (10 -;:yo,tiod.; - n4 to -tilfs keq;  f,filtJ,ed,  WilietApPA,ed,  goilk c_nrn, (-1/;Ju-e, heiri  ci,eftet,bit  11:)‘,), ivytye, fi,f/y) -L%-etein, -t,1-1-e, ftiou cold eirkt, S'„e/iorvn, rvue, ryt.-1.,.enitletrion -to do Rix/lc/Jilt OW, li,ou 6)n,e/Y.A., too) iv-or:414 do /and 411-e_it,e -eLscA.,40,d . tIVIta (ic zt/iit.t.e, 1~, orini, . c.,(1r-rivae;..,Qin„ 413-e cz-va  <Ifnu  c.,a,f,P.  via..  . Y,ov/i/3-e, kit,d.  '  6). 6 i;vtid,  I •  ROGER L. N1cMILLIAN ROGER L. McMILLIAN  Attornt 703 SOUTH HU:;BAND STREET 405/624-0783  Post Office Box 1243 Stillwater. Oklahoma 74074  March 17, 1981  The Honorablp. Don Nickles Senate Office Building Washington, D.C. 20510 In Re:  HAL KENTON BIRD  Dear Senator Nickels: Hal Bird has asked that I write you concerning his efforts to secure employment with the Federal Reserve Board for 1982. Mr. Bird is currently classified as a junior at Oklahoma State University. I have become acquainted with him at the Beta House where he is truly one of our finer undergraduates. Any help you could give us from your end, would certainly be appreciated. With every good wish, I am, erely your:  ROGER L. McMILLIAN Attorney At Law RLM/ksr   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information.  Citation Information Document Type: Resume Citations:  Number of Pages Removed: 3  Resume, Hal Kenton Bird, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ILRKILL  'April 10, 1981  To Whom It May Concern: It is a pleasure to provide a recommendation for Mr. Hal Bird. I am acquainted with this young man through his work for Portfolio Management of Texas, Inc., Houston, Texas. Mr. Bird is an outstanding individual with an excellent aptitude for economic, financial and business research. He exhibits in all areas of his work performance a dependable and highly cooperative attitude. I highly recommend Hal both professionally and personally. He will contribute significantly to any organization that can utilize his talents. Sipcerely,  William W. Sherrill Chairman Dasa Corporation  WWS:ho  0.4  •  •  Rotan Mosle Inc. 1500 South Tov.er Pennzo11 Place Houston, TeNas 77002 713/236-3000  ROTARMOSLE  Investment Services   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  June 2, 1980  TO WHOM IT MAY CONCERN: Hal Bird worked for the Compliance Department for the past two weeks under the Rotan Mosle Internship Program. He handled a variety of projects, from doing research which enabled us to respond to SEC inquiries to helping us analyze the department budget. We have found him an intelligent and capable young man who grasps concepts and anstructions quickly and then works steadily until his job is completed. He speaks well and conducts himself in a professional manner. We would recommend him highly for further work at Rotan Mosle Inc. or at any other company of his choice. Sincerely, le Michael J. av lewitz Vice Presid n Director of Compliance MJK:sl   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PORTFOLIO  MANAGEMENT  offeias,inc. PAUL M. OAKES Vice Prr3LIM t Markzong cute! Development  •• NI!.•.•  •\,-7. . .;•ikissiiiitv„ allnlIti••••..1•••••••=••=11/  September 15, 1979  To Whom It May Concern: Hal Bird worked for me'in a summer training program Portfolio Management spo nsors each year. Mr. Bird proved to be an intell igent, dependable and cooperative individual with an ambition for business. I would not hesitate to recommend him to any company that might require his ser vices. erely1(; , 27. ae.A.g Paul M. Oakes  1929 Buffalo Speedway Houston, Te_xcu 77098 (713)622-2900   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 16, 1931  The Honorable Norman E. D'Amours House of Representatives Washington, D.C. 20515 Dear Mr. D'Amours: Thank you for your letter of June 8 concerning the Board's proposal to modify the categories of depositors eligible to maintain NOW accounts. We have received numerous comments to date on the Board's proposal, many of which express views similar to yours and President Cole's concerning the eligibility of sole proprietorships to maintain NOW accounts. I can assure you that the Board will carefully consider your comments when final action on the proposal is taken. Sincerely,  S4Paul A. Voti.,Ar.it  (GTO:AFC:cic (W-160) bcc: Mr. Schwartz (w/copy of incoming) Legal Records (2),/copy of incoming) Mrs. nallardi (2)  a  NORM D'AMOURS  DISTRICT OFTICES, MANCHESTER. NEW HAAAPSHIRE 03105 720 Nowpils COTTON FED( RAI_ BUILDING  1ST DISTRIcT. New HAMPSHIRE  COMMITTEE ON cIANKING. FINANCE AND URBAN AFFAIRS  Congre55 of the Uniteb  tate5  Tou.. FREE: 1-800-562-3802  iDoufSe of 1-ktpreckntatibes MERCHANT MARINE AND FISHFRIES COMMITTEE CHAIRMAN: 8UBCOMMiTTEX oN vt.4.104041tAPli  275 CHESTNUT STREET (603) 668-6800 (603) 666-7526  PORTS MOUT14. NEIN HAMPSIVIRIC 425 ANo 126  Matbingtoll, D.C. 20515  FEDERAL  03801  Oulu:soda  80 DANIEL STREET (603)131-8719 (603)136-7720, Ex-r. 707  June 8, 1981 WASHINGTON orrice.  to'  22-42 RAYBURN HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 (2.02) 225-5458  LACONIA. NEW HAMPSHIRE 01246 128 FEDERAL BUILDING 719 MAIN STREET (603) 524-7185  Honorable Paul Volcker Chairman Federal Reserve Board 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: In light of the Fed's continuing deliberations on the eligibility for NOW accounts, I want to share with you correspondence I have just received from the Mascoma Savings Bank. Although the Mascoma Savings Bank's letter is directed to the FDIC, it covers material which the Fed is also considering. President Cole makes a very persuasive case against further restrictions on NOW accounts. Further restrictions in this area will only accelerate the development of alternative investment opportunities such as Money Market Mutual Funds. I hope the Fed will take this into consideration during its deliberations on this issue, and will act to expand, rather than restrict, NOW account eligibility. Si  erely,  Norman E. D'Amours Member of Congress NED/mr Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  co  --t ri r r •  C_CD:r -71rri  -» , (-)  I  .-r1 ,C)  rrl 17-1  .7-01  -r rvi r* I 7) n . Ul  *r. 7-'  UlD  •  X C.P  :_),e MASCUMA SAVINGS BANK (4 A N '71 N  OR i•(.  PE lit3rN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  :)t  •  A  A A. 1•.,k.,‘,  ()  f  1 .4(,'.t  603 44E4 1650  r l) 1 ti J  ,  ,. t  May 2(,), 1981  Mr. Hoyle L. Robinson, Executive Fecretary Federal Deposit Insurance Corporation 550 17th Street NW Washington, D.C. 20429 Dear Sir: This letter is written to register my strongest opposition to the Proposed Interpretation of NOW Account Eligibility Requirements to the extent that sole proprietorship depositors would be denied the benefits of having a NOW account in our bank. We are the only bank for many of our customers of modest rt,lans. They have their savings account, home mortgage loan (possibly a mortgage on their commercial or rental propert y), aut loan, safe deposit box, personal NoW account, and in many instances, a NOW account maintained to conduct a small business such as a "Mom Pop" store; a tupperware sales agency; a /eal estate investment, etc. One of our branches is located in a community (Canaan, Nli) where there is no other bank. The community supports a couple of small markets, a couple of fil/ing station/garages, two or three hone industries and perhaps several other sole proprietorships. One of our motives in establishing branches in outlying communities was the realization that pe,,ple can ric longer afford to drive 30 miles round trip to conduct a banking transaction. Both the Mascoma Savings Bank and these customers would suffer substantial inconvenience if they were denied the benefits of their NOW accounts. Our main office caters to many small business people (sole proprietors) although a commercial banking facility exists nearby. These customers prefer our service. I realize, however, that our national bank competition has a following that wouldn't be caught dead in our lobby, The fact is that both groups have a choice, which will not 1.0 the case ir they are denied a NOW account in our bank.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mascoma Savings Bank doe!.n't have (IPman6 dr:posit authority. ..:ve attt.Tpted to fill th.- gar !.(-),,.ewhat with a N111*/ account 1.)1z this hasn't been entirely satisfactory. I think it is fair observation to say that thc. 1:ignificant (ommercial community has heen exclu(1, fT(m th, N^W a-c-ount fr-71 day one. The vcAume (2t ..7rWIMI('?'.21A A .unts ar, is r(allv through I. in 't.rr, 'f dollar ammint and national 14,11 icy, !lit th. important to a multitude of i.,Aividuan:. I would plead that the rules of eligibility not he changed. I cannot understand the need to our national welfare to do so. The thrift industry in itr present depressol state doesn't need further deterioration of imag( via tlic withdrawal of service from its customers. I am relucnt to silept-st that pres,?nt accounts he "Grandfathered", but of coursc s',Ich concession would be preferable to the di!;10,:ation which will result from the absolute denial of sole proprietc ,rships to have a NOW account. Please recall that most of the nation h;c:: harl +hp Now account for a relatively short time. New Hampshire savings banks havc• been offering NOW accounts for neatly ten years. We have long-standing,m1tually beneficial relationships which will suffer severe disruption if the proposed interpt(tation is aAopted. I plead for the Statur Quo.  '\, ry tiol•y".")urs, •  ...."••••••••  Peuben D. Cole 1 .tesid(nt RPC:t.ep cc to:  Congressman Judd Cieug Congrk2ssman Norman D'Amouts Senator Gordon J. Humphrey Senator WarrPn Rudman National Association of Mutual Favings Banks New Hampshire Association of  ,ivings Pankr;  • •  June 16, 1981  Tne Iiohorabl Carl Levin United L;tates Senate '';ushington, D.C. 20510 Dear Lienotor Levin: Thanks for your letter about a possilae return to the gold standard. ..th respect to the precise question you asked, thc Fccral Reserve Board has never taken a positicn in favor of to the (laid standard or in supnort of S. 6, the Gold Ruscrve Act of 1981. In testimony Lefore the Senate last July, I L:xpressed wy own opinion tl-Iat I don't see any circumstances arising in which it would be either feasible or ueiraolc to go back to anything that could be called a full gold stanuard. As you know, the Congress has really established the Gold CoL,mission to exaEdne many of the issues you raised. Three wembers of the Federal Reserve Board of Governors will 1.)e on tnat body, and we hope thc;--e will be a full examinatiun qaustions involved in having gold play a more prominent rolc: in cur montary system. Please let we know if I can be of further assistance. Sincerely, S/Pa4i A, Voickei  DS:pjt (4V-136) Dec: Mr. Karcz Mr. Adams Mr. ilenry Mrs. Mallardi (2)w° ' °.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .00   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  June 16, 1981  The Honorable Ed Jones Chairman Subcommittee on Conservation, Credit, and Develoi.,ment Co:,,,mittee "i'..firiculture House of Rei:resentatives Washin...i ton, 2 1 . C. 20515 The honorable James Jeffords I:anking iiinority Subcolia:Littee on Conservation, Credit, and Rural Develoi'ment Cohauittee on Aejriculture, Nouse c.)f nei:resentatives Icashinyton, D. C. 20515 boar Chairman Jones and V.r. Jeffords: Thank you for your letter of June 4 inviting the Board to appear before your Subcommittee to cliscuss the ii.11,act of credit i)olicies on American agriculture. Vice Chairman Frederick II. Schultz is looking forward to appearim; on Tuesday, June 23. Sincerely, :  vcd bcc:  (V-156) Vice Chairman Schultz Mr. Kichline Mrs. Mallardi (2)6 /  ,.11  i01,44  Chrmn. Volcker ED JON,Allt TENN.. CHAIRMAN  .t  Action assigned to Jim Kichline (Gov. Schultz will testify)  RKLEY BEDELL, IOWA AN GLICKMAN. KANS. TOM DASCHLE 6. DAK. BYRON L. DORGAN N. OAK. DAVID R. 13OWEN MISS.  3Pou5e of Ilepre5entatibr5 Committee on cigriatiture  TOM NARKiN, IOWA GLENN ENGLISH OKLA. FLOYD J. FITHIAN. IND. LION C. PANETTA. CALIF. BERYL ANTHONY. JR.. ARK. FREDERICK W. RICHMOND, N.Y.  foubconunittee  (KIKA) DE LA GARZA. TEX.. EX OFFICIO MEMDLR  (caniserbation, ercbit, anb nebelopment  JAMES M. JEFFORDS. VT.. RANKING M;NORITY MEMBER E. THOMAS COLEMAN. MO. PAT ROBERTS. KANS. JOHN L. NAPIER. 6.C. JOE SKEEN, N. MEX. SID MORRISON. WASH. CLINT ROBERTS. S. OAK. STEVE GUNDERSON. WIS. COOPER EVANS, IOWA WILLIAM C. WAMPLER, VA.. EX OFFICIO MEMBER  ROGER ALLBEE, MINORITY CONSULTANT  lloom 1301,'Rongtuortb 740U5C Office Kluilbing ROBERT A. CASHDOLLAR. STAFF DIRECTOR  Viagbington, D.C. 20515 June 4, 1981  „V/VI  f "I (LI  CC'  r-1 7-1  1-1. "7-.) 160  ""r1 m  :•••-•  The Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D. C. 20551  rr5  C! CO  r`i 717: .r"" CIT3  f" c:-) r < r 7-1 rVI —<  ) C .  -  cr .  Dear Mr. Chairman: The House Subcommittee on Conservation, Credit, and Rural Development will hold public hearings on June 23, 1981, at 9:30 A.M. in Room 1301, Longworth House Office Building, on the topic of the impact of credit policies on American agriculture. We very much would appreciate your appearance as our leadoff witness for those hearings. Generally, we would like you to explain current Federal Reserve credit and monetary policies, advise us of Federal Reserve projections on interest rates and credit availability for the agriculture sector and respond to questions of the Subcommittee Members. Robert Cashdollar, Subcommittee Staff Director, will work with your staff on further arrangements.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  With kindest regards and best wishes, I am Sincerely,  James M. Ranking M  Member  Ed Jones Chairman  )t •-.•••.. . . of G0I't R.•.  Mow.  • 0 •%,-,i--i-c-"',11'r.)% ..-;`,-'"/Z,'. .,//440 ,  .. • - • W  '''ig  .•  —,k '.'. ;tis :r r r r r i 04...0 !---,:  • 1.-••  Y A,L; 1,11!  ROAPD OF '.)OVERNORS OF "HE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  40,' 4- •  •• ...I', .... ..)•..t.,...,..--. r,_: .1.4'..rc, -.1.44.,.•.  •• •••.•••• 4tRAL tz?"F\--••  June 16, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable John J. Rhodes House of Representatives Washington, D.C. 20515 Dear Mr. Rhodes: Thank you for your letter of June 9 requesting comment on correspondence you received from Mr. and Mrs. Roy Bodine concerning the authority of the Federal Reserve to purchase securities. While we have not seen the Patterson news letter nor the reference to Polish debt and various New York banks, this issue is the same one raised by passage of a provision in the Monetary Control Act of 1980 (P.L. 96-221). The original Federal Reserve Act, enacted in 1913, permitted the Federal Reserve to purchase various types of securities in the open market. At that time we were permitted to purchase U.S. Government and agency securities, bankers' acceptances, bills of exchange, and certain short-term State and local government securities. The purpose of this authority originally was to provide Reserve Banks with the opportunity to earn a return on their funds. There was never any indication that the authority was to be used to "monetize" the debts of plivate organizations and State and local governments, and we can assure you that we have no intention of doing so. Indeed, virtually all of our securities holdings consist of U.S. Government and agency obligations ($124 billion) purchased in conjunction with open market operations and in the course of issuing Federal Reserve notes. The Monetary Control Act of 1980 did amend the open market authority of the Federal Reserve to permit us also to purchase obligations of foreign governments and their agencies. The legislative history of the Act indicates that Congress intended this authority to be used only in conjunction with the Federal Reserve's normal activities in the foreign exchange market. In the course of foreign exchange operations, the Federal Reserve from time to time acquires balances in foreign currencies. Prior to the passage of the Monetary Control Act, there was no convenient way in which foreign currencies held   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • The honorable John J. Rhodes Page Two  by the Federal Reserve could be invested to earn interest. As indicated by Senator Proxmire on the floor of the Senate'on March 27, 1960, during tne Lienate's consideration of the Monetary Control Act, the purpose of this provision is "to provide a vehicle whereby such foreign currency holdings could be invested in obligations of foreign governments and thereby earn interest. This authority would be used only to purchase such obligations with foreign currencies balances acquired by the Federal Reserve in the normal course of business" (126 Cong. Rec. S 3168). In niy testimony before the Senate Banking Conodttee on September 26, 1979, I indicated that the purpose of the provision was to add to tne present list of assets, currently eligible for purchase uy tne Federal Reserve, short-term government securities so as to enable the Federal Reserve to invest its non-interest bearing foreign currencies in interest bearing obligations. (These earnings are ultimately paid over by the Federal Reserve to the U.S. Treasury.) It was never the intent of the Federal Reserve to use tnis provision to "bail out" foreign governments that may be in danger of defaulting on their debts. We believe it j_s clear that the authority is to be used only in conjunction with tne Federal Reserve's normal foreign exchange operations. ..ith respect to purchasing obligations of Eastern bloc countries such as Poland, the Federal Reserve has not purchased ana has no plans to purchase obligations of sue. countries. As noteu above, tne Federal Reserve would only buy short-term liquid obligations of foreign governments with currency balances of those fureign countries acquired in connection with foreign exchange operations in order to earn a return on what would otherwise be non-interest bearing currency holdings. As indicated in the board's Annual Report, reciprocal currency arrangements exist with the followin.4 countries only: Austria, Belgium, Canada, Demtark, Lngland, France, Germany, Italy, Japan, Mexico, the Netnerlands, Norway, Sweden, and Swit-zerland. I Elope that this is helpful to you. know if I can be of further assistance. Sincerely, S/Paul A. Vo (GTS:)AFC:pjt (4V-158) bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please let me  J.kODES ttToimimAmohA  Chrmn. Volcker Action assigned to Tony Cole  Congraqi of tfie Ziniteb *taw; ibotuse of 3.;rprefsentatibro Washington, n.c. 20515  June 9, 1981 Mr. Paul Volcker Chairman, Federal Reserve System 20th St. and Constitution Ave°, N.W. Washington, DC 20551 Dear Mr. Volcker: Enclosed is a letter I received from my constituents, Mr. and Mrs. Roy Bodine. Their question concerns the Reserve's purchasing of some debts of Poland, and I would appreciate any information you could share with me to answer them. Thank you for your cooperation. Yours sincerely,  CWS  Attn:Don Winn   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  C.0  UM CU  -71  c rl  C__ C):71  ri  21C  •"•Cl rn - - 3  mm=11.  rn <  = ' 1:311  ami•••••  .73  r') . c  .•••••••1 ••  ••=11•••  -•  pa tr•  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Fundinc Debts of l'oland, t.:t -  P.R.. ROY L. 11.2I)IllE  May 25, 19:L:1  Congreiman Jchn Rhoades, Arizona 1- iyburn House Off10E Bldg Washington, DC ::0515 Dear Corlyressman Rhoades: Mr L T fatter son has informed us through Iris news lettert that PouTas Lamont, in a E.-,igneci art if:le in the. Chicagn Sun Times on 7.1arch reported the det..ils of how GUI Vectural Reserve liank :,-,tends to purchEise the debts of Feland and other 1.1lock ce.untries from the major New York Banks. This will reloave the F,,nks of their responsibility for the Lnsound loa.ns they made which il,ve gone sour and now can neN.,er be repaid. I understand th,-it CongresJ,:itiraci Ron Paul had this article Inserted in the Congressional 1::.eeord. Pleabe familiarize yourself 4ith the facts in this important matter t.and stop this actic.)n from tak.ina plar.e. There is no reason for DUI government (thus the Fig:.- .ople of the United States) to assUme this tremendous unsound liability to bail out IDave Rockfeller arid the 'Trilateral bands from `.., created for themselve,::;' Your ,:icti , .Jt r- • ld!  t?que,tv)  :  h  , co, .)  r Monica  •C.  irt  c.—e-f  (.1,TUI) this unEound action  June li, 191  •  The honorable Carroll Hubbard House of Representatives 20515 Washington, D.C. Dear kir. 1-ubLarci: nt Thank you for your letter of June 4 requesting comme exon corrospondenc(-:. you received from Dr. Jerry 13. McKenney pressing concern about high interest rates and addressino other matters relating to monetary policy. High interest rates are coiamonly associated with high cause inflation, but it is high inflation rates that inevitably a period high interest rates rather than the other way around. In enough of rapid inflation, lenders insist upon interest rates high purchasing to compensate them for the anticipated decline in the willing to power of the dollars they are lending. Borrowers are that both interest pay thesc high rates because they too anticipate and principal will be repaid in cheaper dollars. nt High interest rates tend to encourage the postponeme ral of consumpof less promising investment projects and thc defer pressures tion, thus reducing demands in markets and casino upward able implicaon prices. As Dr. AcKenney points out, these favor est rates tions for prices are offset to the extent that inter . themselves, ilk:: the price of oil, are a cost of production final LvDwever, the relative contribution of interest rates to t of an costs of most products is small, and the overall effec rates increase in the real cost of credit--that is, interest prices adjusted for inflation--is to reduce upward pressure on generally. I hope that this information will be useful to you. Please let me know if I can be of further assistance. ; Liincerelv,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (Signed) Donald J. Winr  Donald J. Winn Assistant to the Board (DG:JZ:JLK:)AFC:pjt ,dyy-155) bcc: Mrs. Mallardi  ________r.stRROLL HUBBARD CONGPESSMAN 1  rib;!STRICT. K IERTUCKY  Chrmn. Volcker Action assigned to Cong. L. Office (reply AT LARGE MAJORITY WHIP previously prepared by Kichline et al) comurrTIMS. BANKING. FINANCE AND URBAN AFFAIRS  2244 RAYBURN HOUSIC  OrrICC  WACHIP+GTON, D C  BUILD,140  20515  (202)225-3115   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Coligrt5 of tlic Unita' tatt 31)ouiSt of iltpre5entatitni‘ Illagbington, 0.e. 20515  MERCHANT MARINE AND FISHERIES C$4RMAN 11171313COPAMiTTEE ON ""1-P ANAm ,a#A N A WOU 11:111  p  CONTINENTAL-1440-C,. C__ 1%. mtp  •  47-  0 . 1  r-.1. n r••  In  f-ri  June 4, 1981  rn  CO  a: X UV  '  77.7  M7  :3Z  .a"" CO  Honorable Paul A. Volcker, Chairman Board of Governors Federal Reserve System 20th Street and Constitution Avenue, NW Washington, DC 20551 Dear Mr. Chairman: I am writing on behalf of one of my constituents, Dr. Jerry B. McKinney of Sturgis, Kentucky. Dr. McKinney has requested my assistance with obtaining an answer to questions regarding interest rates and inflation. Enclosed is a copy of his letter to me, for your information and review. I would be most appreciative if you would provide me with information, so that I may properly respond to Dr. McKinney's quite timely and complex questions. Thank you for your assistance with this matter. forward to hearing from you soon. With best wishes for you, I am Sincerely yours,  Carroll Hubbard Member of Congress CH/mms Enclosure  2: C.,  (-0  I look  rt%  JERRY B. Mc KENNEY. M D. HUMPHRE • STURGIS  •  BUILDING  KEN T UC KY  42459  TiLEPHoNE 333-5521  C01)  MaY 7, 1981  Carroll Hubbard  r\V  -1 5  Yember of Congress 1123 Cannon Building Washineton, r.c. 2o515  Dear Sir: I need your help in securing an answer tothe followin; fai-ly sirple question. If increases in the price of commodities, for instance oil, which h:s a broad irpact on various sectors of our economy, seriously worsen inflation; how can increasing interest, which is increasing the cost of the ccmmodity, money, which touches every fdret and sector of our ecor^ny do anything other than also severely T-Icrease inflation? We hear frem all levels of rlovernrent, that the Federal Rcserve increases in interest cost is a pkinfIll step necessary to reduce inflation. I feel that sirple common sense indicates that these steps to increase interest have the opposite effect. It seems obvious that these steps increase, not decrease, inflation and at the _rime time punish the economy further by producing recession. appreciate it, if you ask your staff to sipply me with the r=er: and es of responsible individuals in the Federal Reserve, in the Concress, or in any sector cf cur eovernment or people responsible for economic pn2icy. It is my intention to write these individuals asking for an answer to the question I outlined above. I would also appreciate it if you perscmally would ask these individuals the same question, and exercise the influence of your office in urging these people to give you, themselves, and the country an honest answer to the question. Your coor.eration and assistance in this matter will be greatly appreciated.  o. 2. McKenney, Y.!) Ja.'CK/mcw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  'GRADISON BILL 1ST DISTRICT, OHIO  WASHINGTON OFFICE: 11 17 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C.  RON ROBERTS ASSISTANT ADMINISTRATIVE _  Congre55 of the Elniteb  , :  t  20515  TELEplioNE:(21)2)225-3164  tato  . 4 (  DISTRICT OFFICE: FEDERAL OFFICE BUILDING  • .)•••  6.1  ) IL/  •••••••••  I.:  Mc  3DotuSe of Repre5entatibe5  550 MAIN STREET CINCINNATI, OHIO  Riatibington,13.C. 20515 CZ;e--••• L..  tr)  CD  "kr CL: itt./ IM 14J  Crs   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 10, 1981  Hon. Paul A. Volcker Chairman Board of Governors The Federal Reserve System Washington, D.C. 20551 Dear  45202  TELEPHONE:(513) 684-2456  Mr. Chairman:  I am delighted that you will be our guest speaker M breakfast meeting on Wednesday, at the SOS and C September 16. We meet at 8:00 a.m. in the Members Private Dining Room, H130 of the Capitol, and end promptly at 9:00. Our session is informal and strictly off-the-record. You can say whatever is on your mind for five or ten minutes, or longer if you wish. We then go around fhe room with questions. M members who I have enclosed a list of SOS and C are invited to the breakfast each week. We usually average about 30 in attendance. I'm looking forward to seeing you and will meet you a few minutes before g:n0 by the elevators on the first floor of the House side of the Capitol. Please let me know if I can be of any assistance in the meantime. Sincerely,  BilTradison Repr sentative in Congress BG/b Enclosure  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  SOS/C .• 'DATE SOS MEMBERS Armstrong, Bill Beard, Robin Bereuter, Doug Broyhill, Jim Cheney, Dick Cochran, Thad Conable, Barber Corcoran, Tom Coughlin, Larry  M BREAKFAST ATTENDANCE LIST  ROOM .SCHEDULER Patti P.K. Nancy Lyn Kathy Doris Linda Mary Debbie  SPEAKER PHONE 45941 52811 54806 52576 52311 45054 53615 52976 56111  DeNardis, Larry Edwards, Jack Erlenborn, John Fields, Jack Frenzel, Bill Gingrich, Newt Gradison, Bill Gregg, Judd Hiler, Jack  Betty Nygen Charlotte Glenda Barbara Pat Laurie Becky Mary Colby Susan  53661 54931 53515 54901 52871 54501 53164 55206 53915  Leach, Jim Lee, Gary Lewis, Jerry  Lee Margaret Judy Miller  56576 53333 55861  Madigan, Ed McCollum, Bill Moore, Henson Morrison, Sid Regula, Ralph Rhodes, John Schulze, Richard Smith, Denny Stafford, Robert Stanton, Bill Thomas, Bill Trible, Paul Vander Jagt, Guy Weicker, Lowell  Diane Fran Cheryl Marlene Sylvia Marie Sharon Borg John Heubush Jean Shirley Lee Ann Beverly Margaret Cindy  52371 52176 53901 55816 53876 52635 55761 55711 45141 55306 52915 54261 53511 44041  YES  NO  X  X  X X  Do Not Call Do Ndf—Cal 1 Do Not Call  X 775-2000 Jane Fowler Anderson, John Bush, George (WH-Jennifer Fitzgerald-456-7123, Dirksen-Bob, 42424) 683-4744 Cederberg, Elford X Novotny 293-6177 John Dellenback, John 626-7200 Mary Frey, Lou X 467-6460 Hosmer, Craig Laird, Melvin Laurie Holly/Kathy Weaver 223-1642 Ruth Weldon 785-7400 MacGregor, Clark Do Not Call McCollister., John T. (H-402-391-0132,0-712-322-4038) Bobbi 452-0888 Minshall, William 659-1867 Pollock, Howard Cathy 544-4503 Sarasin, Ron 395_6816 Diana Rice Stockman, Dave 484-2970 Wilson, Bob Cathy Do Not Call Callaway, Howard "Bo" Linda Hall (303-349-6611 or 5411) Do Not Call (513-721-2700) Keating, William   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  SOS/C & M BREAKFAST ATTENDANCE LIST ir  SPEAKER  DATE  ROOM  C & M MEMBERS • Archer, Bill Badham, Robert Bethune, Ed Brown, Clarence Brown, Hank Burgener, Clair Campbell, Carroll Coleman, Thomas Courter, James Dickinson, William Evans, Thomas Hagedorn, Tom Kemp, Jack Kindness, Tom Loeffler, Tom Lott, Trent Martin, Dave Martin, James G. McClure James cEwen, Bo Michel, Robert Quayle, Dan Railsback, Tom Rogers, Hal Shuster, Bud  SCHEDULER Donna Louise Marlene Kathy Rita Jayne Sally Suzy Edwards Susie Rosalee Jean Sharon Jane Nancy Susan Wells Donna Karen Roberts Nell Marti Sharon Cynthia Margaret Judy Virginia  PHONE 52571 55611 52506 54324 54676 53906 56030 57041 55801 52901 54165 52472 55265 56205 54236 55772 54611 51976 42752 55705 50600 45623 55905 54601 52431  Ayres, Bill Brock, Bill  Carol Browning  395-3204  Byrnes, John W. Davis, Glenn Devine, Sam Hillings, Pat   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sally DO NOT CALL  862-5334 293-1833 393-0044  NO YES Do Not Call  Doesn't Eat " - Do Not Cali  Do Not Call  Doesn't Eat  'VP  r"•  GOVtii;•  BOARD Lif  •  - ,>, .•47 :-9 f.,,, ,-/.,""4--".+:::.,-,,,-,;,'. • 4' •'''i ',. ‘';3/ 1-- • .% .... ....„. , • e•f -....._,-i,[fl .../-....,,,,, ,4121i'-': .% .• ..--;: ••6wAL RE-4-ft- •• • • ....• •  GOVERNORS  1)1 TH E  FEDERAL RESERVE SYSTEM WASHINGTON  June 5, 1981  FREDERICK H SCHULTZ VICE CHAIRMAN  The Honorable Lee H. Hamilton Chairman Subcommittee on Economic Goals and Intergovernmental Affairs Joint Economic Committee Washington, D. C. 20510 Dear Chairman Hamilton: In Chairman Volcker's absence, I want to than k you for your letter of May 6. Although the Board has approved a voluntary survey for obtaining information from financial institut ions on the costs and benefits of compliance with Regulations B, E, and Z, it does not appear advisable at this time to ask bank s and other financial institutions for information on incremental costs of complying with HMDA and RESPA. We are breaking new ground with the survey of Regulations B, E, and Z. Consequently, it will be important to gain experience with this survey before we embark on additional surveys of other regulations. We hope to learn bett er ways of framing questions, as well as to uncover technical prob lems with surveys of this type. Experience with editing and revi ewing reported data of this kind is also necessary to ensure that the data are meaningful and capable of being interpre ted. Since all regulations cannot be reviewed imme diately, the Board selected Regulations B, E, and Z, the consumer regulations for which the Board has primary rule-wri ting authority, for review at this time for several importan t reasons. The ongoing costs of Regulation Z are likely to be the most significant among the consumer regulations. Sinc e some of the provisions of Regulation B are related to Regulation Z, the Board's staff and the institutions participating in the survey believe that it is cost effective to handle both at the same time. With reference to Regulation E, the start-up cost s will still be available and recollections fresh. As burdensome as some believe HMDA to be, a join t FHLBB-FDIC study indicates that HMDA complian ce costs are not on the same order of magnitude as the costs of complying with   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  lb 9.0  The Honoraole Le.e II. ilai-ailton Page Two  Regulations B, E, and Z. Noreover, as noted in Chairman Volcker's letter of April 29, the uoard in adopting the new flegulation Z addressed the issue of duplicative or similar disclosures under RESPA and Truth in Lending. Needless to say, we are pleased that you share our concerns about the cost effectiveness of certain regulations. I trust that our efforts will address some of the problems you perceive. Sincerely,  Frederick H. Schultz  BRL:AFC:vcd (V-141) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ms. Lowrey Ms. Winkler Mrs. Mallardi (2)LV  HI ,..RY 9 !MUSS. WIS CHAIRMAN RK.HAIK ROLL INC'. MO.  Action assigned to Ms. Hart.  ROGEKI W. irrsrm.  tow*,  VICE CHAIRMAN  Lit  HAMILTON. IND. 0.1-LIS W IONG. LA.  WILLIAM V. ROTH. JR  P•MItt1,4 MITCHELL. MD. r CK W. RICHMOND. N Y. J BROwN OHIO MA ',GA PI M HECKLE R. MASS. ./C*41.1  . IROLISSELOT, CALIF. CHALMERS P. WYLIE. OHIO JAMES K. GAUSRAITH.  DEL.  JAMES  S. DAX. STEVEN SYMMS. IDAHO PAULA HAWK INS. FLA.  Congress of the  Optate5  MACK MATTINGLY, GA. LLOYD BENTSEN, TICK. 'WILLIAM piroxHiptc. WIS.  JOINT ECONOMIC COMMITTEE (CREATED PURSUANT TO SSC.  EDWARD M. KENNEDY. MASS. PAUL S. SA/MAKS. MO.  •‘ OF PUSLIC LAW 104, MTH CONGRESS)  ILXWIJTIVIEDIRECTOR  WASHINGTON. D.C. 20510  May 6, 1981  rtt  Mr. Paul Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551  CC, CO fr7  NI Ce  nr  7z, h.  20.  3=4 r ry) pin c) .1zto  r\) r\)  S, C .7,  r^.  • c)  3:=N tob : . c F°  Dear Mr. Volcker:  an .  C.A.) CT)  Col  7:7 mo  ,  Thank you for replying so promptly to my letter of March 25, 1981. You recall that I requested data on the cost which institutions subject to your regulations incur in complying with RESPA and HMDA. You indicated that requiring lending institutions subject to your regulations to submit such cost information would be expensive and burdensome. I agree. In addition, I requested information on the extent to which such institutions were required to provide duplicative or similar information under provisions of RESPA and the revised Truth-inLending Act Regulation Z. You suggested that data would be difficult to obtain. Let me propose that you request data on compliance cost and duplicative reporting requirements on a voluntary basis. I expect that some institutions subject to your authority may be well able to voluntarily provide such information in an accurate and speedy fashion. You should give them that opportunity. Alternatively, you could enlarge the scheduled survey concerning Regulations E and Z to solicit compliance cost data for HMDA and RESPA. It would be a good vehicle, as well, to solicit lenders' comments on the extent to which RESPA and Truth-in-Lending reporting requirements are duplicative or similar. How quickly could either of these steps be taken?   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Best wishes. Sinc  ely,  /AUL Lee H. Hamilton Chairman Subcommittee on Economic Goals and Intergovernmental Affairs  June 10, 1981  The honorable Richard G. Lugar United States Senate 6ashington, D.C. 20510 DeaI  Lienator Lugar:  I welcome the opportunity to respond to your request for comments regarding state interest rate ceilings on consumer credit transactions, and specifically on H.R. 2501, a bill recently introduced to remove rate ceilings on business , agricultural, and consumer loans. Bills have been offered on several occi:sio ns in recent years that nave sought to eliminate ceilings on interest rates charged consumers or to replace state limi tations with a federal standard. The Loaru, too, has long been concerned about the adverse impact tnat usury ceilings can have on the availability of funds in local markets and has encouraged the stat es to remove these barriers to tnu flow of credit. The Depository Institutions Dregulati on and Monetary Control Act of 1980, of course, provided for some loosening of rate constraints un tne assets of financia l institutions, as well as on their liabilities. On the acset side, the Act eliminated all state rate ceilings on most conventional fir st mortgage loans and provided that iAlsiness and agricultural loans could be made at 5 percentage points above the discount rate. Cons umer lending was affected by a general provision authorizinu depo sitory institutions to make any loan at one percentage point above the discount rate. H.R. 2501 would broaden the preemption for business , auricultural, and consumer loans by suspunaing ceilings enti rely and would extend coverage for consumer loans to non-dep ository creditors, such as finance companies and retail stores. Although the i;oard favors termination of artificial constraints on interest rates, we continue to have reservations about federal preemption of lonn-standing stat e regulatory responsibilities. The Board prefers that the counter-pro ductive effects of usury ceilings be addressed by corrective action at the state level. If the Congress chooses to take further pree mptive measures on state   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The ilonorable Richaru G. Lugar Page Two  interest rate ceilings, therefore, the Board would strongly endorse the provisions in b.R. 2501 authorizing the states to reest ablish their own rate regulations by acting within a certain period of time.  erations.  I hope that these comments will be helpful in your delib el•  Sincerely, S/Paul A. Mau  CAL:RMF:JLK:pjt (#V-127) bcc: Mr. Luckett Mr. Fisher Mr. Kichline Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ;;-RD  G. LUGAR  INDIANA  V. C. Schultz testifying today, 4/28, and then it will be decided whether written report necessary  commirmis  ..RIcucruRE. NUTRITION. AND FORESTRY  5107 Otplw SEN OFTICIE BUILDING WASN,NGTON.  D C.  20510  INDIANA orricr  BANKING. HOUSING. AND URBAN AFFAIRS  'ZICnifeb Zictfez ,Senale  46 EA ST ONIO Srvarr-r. Room 447 INDIANApoLis. INDIANA 46204  WASHINGTON. D.C.  FOREIGN RELATIONS SELECT COMMITTEE ON INTELLIGENCE  20510  April 27, 1981  d/2- 7  Paul Volker, Chairman Federal Reserve Board Dear Chairman Volker: During the upcoming Senate Banking, Housing and Urban Affairs Committee oversight hearings on majof banking issu es, I request that you, as well as all other witnesses, addr ess the issue of state interest rate ceilings on consumer credit tran sactions. Last year, Congress overrode state interest rate ceil ings on mortgages and on certain business and agricultural loan s, subject to the right of states to reimpose them within specified time periods. Consumer credit ceilings were not addressed in last year's legislation. Industries critical to the economic well-being of Indi ana have advised me of the significant problems posed for them recently by consumer credit interest rate ceilings in certain areas of the nation. Specifically, consumers desiring to purchase automobiles, mobile homes, recreational vehicles and other expensive consumer goods have been unable in some states to obtain adequate financing because of interest rate ceiling restrictions even though they were willing to pay higher rates. I would like to be advised of your thoughts concerning interest rate ceilings on consumer credit and whether Congress should take any action relative to this issu e. In addition, I enclose a copy of H.R. 2501, a bill introduc ed by Congressman John LaFalce to deregulate interest rate ceilings on business, agricultural and consumer credit transactions. H.R. 2501 represents a particular approach to addressing this issue. I also request your specific comments regarding the approach used in H.R. 2501. Separately, I would appreciate any comments you might have concerning technical aspects of this bill. I thank you in advance for your regret the short notice of this statement may already have been I would appreciate your written the hearing.  attention to this request. I request, and that your prepared completed. If that is the case, response subsequent to  Sincerely,  Richard RGL:bkf  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  . Lu a  a  •  r   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  97Tii CONGRESS 1sT SEssioN  H.R.2501  To derugulate interest rate ceilings on business, agricultural, and consumer credit transactions, and for whet purposes.  IN THE HOUSE OF REPRESENTATIVES 11ARcit 12, 1981 Mr. 1,AFALcE introduced the following hill; which was referred to the Committee on Banking, Finance and Urban Affairs  A BILL To deregulate interest rate ceilings on business, agricultural, and consumer credit transactions, and for other purposes. 1  Be it enacted by the Senate and House of Representa-  2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Interest Rate Deregula4 tion Act of 1981". 5 6  TITLE I—BUSINESS AND AGItICULTURAL LOAN SEC. 101. Section 511 of the Depository Institutions  7 Deregulations and Monetary Control Act of 1980 (94 Stat. 8 161; Public Law 96-221) is amended to read as follows:  It. r_  ,•  4-•malbo.••••••••••r  _  _  I!  ^—__.e,.:191Pierspfme.turte x .  2 "SEc. 511. The provisions of the constitutions or the 6 )  laws of any State expressly limiting the rate or amount of  3 interest, discount, points, finance charges or other charges 4 which may be charged, taken, received, or reserved shall not 5 apply in the ease of a business or agricultural loan.". 6  SEC. 102. Section 512 of the Depository Institutions  7 Deregulation and Monetary Control Act of 1980 is amended 8 to read as follows: 9  "SEc. 512. (a) Except as provided in subsection (b) of  10 this section, the provisions of this part shall apply' with re1111111111111111111.11•11,111.11111111111  11 spect to business and agricultural loans made on or after 12 April 1, 1980. 13  "(b) The provision of this part shall not apply to any  14 business or agricultural loan made in any State after the date 15 (on or after April 1, 1980, and prior to April 1, 1983), on 1(3 which such State adopts a law or certifies that the voters of 17 such State have voted in favor of any provision, constitution18 al or otherwise, which states explicitly and by its terms that 19 such State does not want the provisions of this part to apply 20 with respect to loans made in such State, except that such 21 provision shall apply to any loan made on or after such date 22 pursuant to a commitment to make such loan which was en1111111111MmIMPIP•m"mmoal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  23 tered into on or after April 1, 1980, and prior to such date. 24  "(c) A loan shall be deemed to be made on or after April  25 1, 1980, if such loan—  -f  .....•••••••••."  "  7  '  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3 "(1)(A) is funded or made in whole or in part during such period, regardless of whether pursuant to a 3  commitment or other agreement therefor made prior to  4  April 1, 1980; "(B) was made prior to  Or  on April 1, 1980, and  bears or provides for interest during a period after April 1, 1980, on the outstanding amount thereof of a variable or fluctuating rate; or "W) is a renewal, extension, or other modification  9  of a loan made prior to April 1, 1980, and such renew11  al or extension or other modification is made with the  19  written consent of any person obligated to repay such  13  loan; and  14  "(2)(A) is an original principal amount of $25,000  15  or more ($1,000 or more on or after the date of enact-  16  ment of the Housing and Community Development Act  17  of 1980 or any amount on or after the date of enact-  18  ment of the Interest Rate Deregulation Act of 1981);  19  or  20  "(B) is part of a series of advances if the aggre-  21  gate of all sums advanced or agreed or contemplated to  22  be advanced pursuant to a commitment or other agree-  23  ment therefor is $25,000 or more ($1,000 or more on  24  or after the date of enactment of the liousing and  25  Community Development Act of 1980 or any amount  ,Nr7 *   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4 1  on or after the dates of enactment of the Interest Rate Deregulation Act of 1981).".  3 4  TITLE II—CONSUMER LOANS SEC. 201. Title V of the Depository Institution Deregu-  5 lation and Monetary Control Act of 1980 is amended by 6 adding at the end thereof-the following new subpart: 7 8  "PART D—CoNsumER 1,0ANs "SEc. 531. (a) The provisions of the constitution or the  9 laws of any State expressly limiting the nature, rate, amount 10 of, or manner in which interest, finance charges or other 11 charges or fee, including the imposition by a creditor of trans12 action fees and access fees pursuant to an open-end credit 13 plan, which may be charged, taken, received, or reserved 14 shall not apply to an extension of consumer credit. 15  "(b) Notwithstanding subsection (a), the consumer pro-  16 tection and regulatory provisions of the constitution or the 17 laws of any State shall remain in full force and affect. 18  "SEc. 532. The term 'extension of consumer credit'  19 means credit made available by a creditor to a natural 20 person, primarily for personal, family, household, investment, 21 home-acquisition, or home improvement purposes, whether 22 secured or unsecured and without regard to the nature of the 23 property securing the indebtedness including the refinancing 24 of credit made available for such purposes, but excluding 25 credit subject to the provisions of section 501 of this title.'  1111.1•4  trimmobAllellftkusablistuatttieso•  ' •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  5• 1  "SEe. 533. (a) Except as provided in subsection (b) of this section, the provision of section 5:31 shall apply with  3 respect to any extension of consumer credit made on or after 4 the effective date of the Interest Rate Deregulation Act of 5 1981. 6  "(I)) The provisions of section 531 shall not apply to any  7 extension of consumer credit in any State made on or after a 8 date (on or after the effective date of the Interest Hate De9 regulation Act of 1981 and prior to a date three years after 10 such effective date) on which such State adopts a law or 11 certifies that the voters of such State have voted in favor of 12 anv provision, constitutional or otherwise, which states ex13 plicitly and by its terms that such State does not want the 14 provisions of this part to apply with respect to loans made in 15 such State, except that such provisions shall apply to any 16 loan made on or after such date pursuant to a commitment to 17 make such loan which was entered into on or after the effec18 tive date of the Interest Rate Deregulation Act of 1981. 19  "(c) Any law or certification adopted by a State or its  20 voters pursuant to subsection (b) of this section may specify 21 that portion of the extensions of consumer credit made in 22 such State to which the provisions of section 531 will not 23 apply. 24  "SEc,. 5:34. The Board of Governors of the Federal Re-  25 serve System is authorized to issue rules and regulations and  *1111   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6 1 to publish interpretations governing the implementation of 2 this part.". 3  SEC. 202. Section 528 of the Depository Institutions  4 Deregulation and Monetary Control Act of 1980 is amended 5 by inserting "Section 107(5)(A)(vi) of the Federal Credit 6 Union Act" after the words "-National 'lousing Act,". 7 8  TITLE III—EFFECTIVE DATE SEC. 301. The effective date of this Act shall be the  9 date of enactment of this Act. 0  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 205S1  June 8, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Ed Jones House of Representatives Washington, D. C. 20515 Dear Mr. Jones: Thank you for your letter of May 18 requesting comment on correspondence you received from Mr. Billy B. Tines, in which he expresses concern about the high level of interest rates and also raises questions about loan demand , lending activity of New York City banks, and the composition of assets of money market mutual funds. High interest rates are commonly associated with high inflation, but it is high inflation rates that inevitably cause high interest rates rather than the other way around. In a period of rapid inflation, lenders insist upon interest rates high enough to compensate them for the ant icipated decline in the purchasin g power of the dollars they are lending. Borrowers are willing to pay these high rates because the y too anticipate that both int erest and principal will be repaid in che aper dollars. Moreover, when interest rates advance relative to expectations of inflation, businesses are encouraged to pos tpone less promising investment projects and households are enc ouraged to defer consumption, thus reducing demands in markets and easing upward pressures on prices . Total loans at all commercial ban ks are estimated to have grown at a seasonally adjusted ann ual rate of 7 percent in the first four months of this year. Virtua lly all of this expansion occurred at small- and medium-sized banks. Nevertheless, there may be considerable geographic variation in loan demand and this growth may not correctly describe loan dev elopments in your constituent's area. Loan data by state of boo king are not available on a timely basis. The issue of domestically issued funds being loaned abroad is a rather complex one. U. S. banks make loans to foreign reside nts from offices in the United Sta tes. For example, in a recent wee k, large domestically chartered ban ks in New York City--mentioned by Mr. Tines--had about $2-1/2 billion in business loans to non -U. S.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A  The iionorable Ed Jones Page Two  addresses and $4 billion in loans to banks in foreign countries, out of $102 billion in total loans outstanding. In addition, U. S. banks advance funds to their foreign branches—which are available for lending to both U. S. and foreign residents--and they attract funds from their foreign branches for lending in the United States. Recently, large domestically chartered banks in New York have tended to advance a moderately larger amount of funds to their foreign branches than they have received. This margin, however, is more thari offset by foreign banks with offices in New York, as they attract a considerably larger amount from their offices outside the United States tnan they advance to those offices. With respect to I:1r. Tines' question about money market mutual funds, The Investment Company Institute reports fund assets as of April to have been as follows: U. S. Treasury securities, $11.2 billion; other obligations of the federal government, $6.1 billion; certificates of deposit and repurchase agreements issued by comercial banks and other domestic financial institutions, $36.6 billion; Eurodollar deposits, $12.6 billion; commercial paper, $39.9 billion; and bankers' acceptances, $11.0 billion. I hope this information is useful to you. me know if I can be of further assistance. Sincerely, S/Pa41 A. Volckec  TB:TDS:JLK:vcd (V-138) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Kichline Mr. Simpson Mr. Brady Mrs. Mallardi (2)  Please let  DISTIINCT Offs('  ...sED JONES  Room 13-7• POST OPTIC! E14,1 Lop.,  7TH MS I RICT. TENNESSEE 1)8 CANNP,4 HCAISF Orme Buil. vim°  J ACX SON. T rpoo  38301  (901) 423-4848  (2021 225-4714 COMMITTEE ON AGRICUL TURE emAitsomx..1 SUBCOM MI T TEE ON  CONSERVATION ANL) CREDIT  Congroz of tfic 'Unita tate5 jipufse of ilepregentatibeiS  3179 NORTH VV•Txopis Mturwic Tar41.4tscrr  P 0 Box 128 YootxvoLLE. TtPaqr  Eliagbington, 33.e. 20515  COMN1ITTEE ON MOUSIZ ADMINISTRATION  38127  (901) 358-4094  38389  (901) 643-6123  CNAIRIAAN SUBCOMMITTEE ON HOUSE SERVICES   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ra.b .  May 18, 1981  r.1  co  f 7.) v.%  1.,..,„ 11 a....  -n Tv, W 71.1 (.4 ( .a  07D -rirn  Honorable Paul A. Volcker Chairman Federal Reserve Board 20th and Constitution Avenue Washington, D. C. 20551  CD C"  C50 " IS- 4;1/  1:111 Olt 00 •  r"  r.g1 (f/ . 4  -  Dear Mr. Chairman: Enclosed is a copy of the letter that I received from Mr. Billy Tines regarding several issues of interest to him. I believe you will find the enclosure self explanatory. I am confident that the arguments of this citizen will be given every consideration that they merit. May I please be provided information to use in response to this constituent. Thanking you for your kind and prompt attention, I am Sin erely,  ED JONES, EJ/cac Enclosure  fi) C2  4. 1  II  1 tit; I  )N.TENN :t  LY 19  t 1 I  TINES  VIC.1 P14,  ExiI(  April 30, 1981  fi)41 A  -;* A loW  Congressman Ed Jones United States Congress Washington, D. C. 20013 Dear Congressman Jones: I know that we are all concerned with the high interest rates now facing us. In small communities like ours, the problem has reached a very devastating point. I understand that inflation is a problem and monetary restraint needs daily attention. As I have talked to bankers throughout our entire state including the large metropolitian areas, they all tell me t.ley 1 have little loan dk.mand. The thing I do not understand is "who are the borrowers"? I believe it might be quite interesting if we knew where the funds held by large money market mutual funds were being loaned. I also -t-hink it might by interesting to know where the large New York banks are _making loans. If these funds are being gathered up throughout our C(7)-tintrY and b_ciag_1044a04_44,>_LAjrcign countricis at astronomical rates, I think-Chis--iZke -Thi- a bad situation and one that Congress nue .1.1.Q....bluktia..4021.djaiLLI,Y. I would apprcciate hearing from you and if you have any information concerning this matter, I would be most pleased to receive it. Sincerely yours,  /s,44,y/  .k11:4  Billy B. Ti_nes Executive Vice President BBT:je  141.1.1111.1111.11.11 .111111RPIMISIMINIMIMPRImmi...---   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •••  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 5, 1981  The honorable Ted Stevens Assistant Majority Leader United States Senate Washington, D. C. 20510 Dear Senator Stevens: In Chairman Volcker's absence, I want to thank you for your letter of Nay 27 concerning the Board's proposal to modify the categories of depositors eligible to maintain NOW accounts. We have received numerous col,altents to date on the :3oard's proposal, manv of which express views similar to yours concerning the eligibility of sole proprietorships to maintain NOW accounts. I can assure you that the Board will carefully consider your counents when final action on the proposal is taken. Sincerely,  Frederick H. Schultz  GTS:AFC:vcd (4V-148) bcc: Mr. Schwartz Ms. Mekosh (G.C. Log #187) Legal Records (2) Mrs. Monarch_ (2) Ms. Winkler  TEr.I.,,STEVENS  Action assigned to Mr. Mannion.  ALASKA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  VVERNCRS Cr 1HE FElEFAL RE.SETIVE SYSTRI1 80ARI  •  'ZICrtifeb Zfafez Zertafe OFFICF OF  THE ASSISTANT M AJOR ITY LEADER WASHINGTON. D.C.  20510  1981 JUN -2 Pill: 58 PECEIVFii OFFICE OF THE CHAiRmAx  May 27, 1981  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Constitution Avenue, N.W. Federal Reserve Building Washington, D. C. 20551 Dear Chairman Volcker: My staff has informed me that it is possibly the intent of the Board of Governors to change the roles of eligibility on NOW accounts concerning proprietorships. As you know, it was the intent of Congress to offer this new banking service to the widest spectrum of the non-commercial public. Proprietorships fall into the murky area between commercial and personal activities. Many proprietorships in my home state of Alaska consist of farmers and fishermen. Often it is impossible, both legally and practically, for a bank to determine the uses of a checking account by such proprietorships. While the proposed change in the rules of qualification might better assist those concerned in meeting the Congressional intent of excluding commercial uses, I believe such a change would not be in the public interest. The new regulation would work a substantial burden to banks and consumers alike, and seems to be clearly contrary to the Congressional spirit of not requiring the free enterprise system to jump through unnecessary bureaucratic hoops. Please inform me of any further action by the Board on this matter. With best wishes,  ; 7  /1) Tyb STE  ENS ---"Assistant Majority Leader  11  June 5, 1901  The lionoraole Charles E. Grassley Uniteu Status Senate Washington, D.C. 20510 Dear Senator Grassluy: In Chairman Volcker's absence, I want to thank you for your letter of Nay 18 requusting comment on correspondence from idr. J. A. Fordyce concerning Federal Reserve System procedures for collectiny municipal and corporate bonds and coupons. As you arc awaru, Mr. Fordyce had written directly to Chairman Volcker, and I am pleased to enclose a copy of his reply. I hope this information will be useful to you. iet me know if I can be of further assistance. Sincrely,  (Signed) Donald L Wino Donal(; J. ';linn Assistant to the ioard Enclosure  (Ltr. to Mr. Fordyce from Chairman Volcker dtd. 3/31/81.)  / VCD:pjt (#V-149) bcc: Mrs. Mallardiv/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Please   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  ROAM, OF  'alCuifeb „Vales ,.'irt)* cuate WASHINGTON. D.C. 20510  May 18, 1981  or ITIc. ETTPAL KESERVE  1981 JUN -3 PM II: 3/4 NECEIVCD OFFICE OF THE CHAIP,MAN  /(1( Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Ave. between 20th 21st Streets Washington, D.C. 205S1 Dear Mr. Volcker: Enclosed please find a letter from Mr. J. A. Fordyce regarding regulatory reform and the seemingly unnecessary paper work resulting in time delays and excess charges which does not seem justified. I would appreciate any information you could send me regarding this matter. Please mark the envelope to the attention of Susan Hollywood when responding to this office. Thank you for your attention to my request. Sincerely,  CHARLES E. GRASSLEY United States Senator CEG/shc Enclosure  •  ••••••  .  311)LNI  1. . / 1 . .  I1 1  ) ERNON 1).0 K  Alin  . _ ._  .  3nd Trust Corpan..t..i 20X 153 MOUNT VERNON IC,  '4  :  February 20, 1981  . Paul A. Volcker, Chairman . Res2rve Board of Governors r.11 Rese:ve 3uilding ,hin;con, D. C. 20305 sAr  Volcker,  is my desir_ to call attention to ciarrent procedure utilized for cl.e ilction of munici?3,1 and corporate bonds and coupons. By virtue of some ill advised recommendation, these items have been routed throu4'. tkle Federal Reserve Bank system for the past year or two, in contrast to direct routing, ..411ch .nas been the practice for at least the previous 30 or 40 years. I cannot visualize the prudence of this indirect routing. However, by current praeice, many of the banks handling these items, from midwest location such as Chicat;o, are now sending them to some other correspondent bank in the eastern area, such as Ne.,. iork. They, in turn, have to process them and route them to the New York Fed, there to !,e processed and 1—_,'Ited back to the Chicaso Fed, subsequently to be processed and foruirdei to final destinationfor payment. Example: If the destination is Mount Vernon, Iowa , direct routing is approximately 230 miles. The indirect a few thousand miles, mult iple processing and unreasonable expense of multiple registered insured mailings and a radical waste of time and labor. The time element? They are arriving two to three months late—after due date. ihe solution? There is now a request for authorizatio n of automatic charge, at present tor the coupons. AUTOMATIC CHARGE for something unseen and that won't appear for some months later? Not very desirable. In fact, it is unacceptable.  -„  'This is one of the silliest, if not the silliest , rulings and utilization of the Reserve system since it cam, ! into ex1-3tence. The only accomplishme nt has been ite a bottleneck.  Simplification? All such items could, as prev iously handled be sent direct to .eltinition by the holder and arrive and be Lettl ed within one weeks time. inere is room for a little sensible and prud ent thou:;ht and policy revision to t:Iis awkward and inefficient collection program.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Very truly yours, / . J, A. For:lyco_ rr,side  June 5, 1981  The Honorable Harrison A. Williams, Jr. United States L)enate Washington, D.C. 20510  e-  Dear Senator Williams: In Chairman Volcker's absence, I want to thank you for your letter of Nay 6 enclosing corresponden ce from Mr. Monte Seewald who expresses concern about disparat e regulation requirements when a customer's securities are sold. Nr. Seewald's letter states that an investor must epes it full payment for his stock purchase within seven business days under the Board's Regulation T, but a broher is under no corr esponding time requirement to pay the customer for 6 stoc k sale. As you know, the requirements as to payment for securities purchased through broker-dealer firms are set by the Board's Reclulation T, pursuant to the Congressional dire ctive contained in section 7 of the Securities Exchange Act of 1934. In that statute, Congress directed the Board to issu e regulations for the purpose of preventing the excessive use of credit to purchase or carry securities. However, section 7 does not provide the authority for the Board to require a broker to promptly forward payment to a customer after a stock sale has settled. Board staff has reviewed Mr. Seewald's lett er and finds it to be similar to past complaints regardin g delay of payment by brokers and dealers to customers. We have been informed that the Securities and Exchange Commission is considering revising its Rule 15c3-2 which duals with customer free credit balances. It is our understanding that these revisions will encom-fass the concerns of Mr. Secwald, and that the revi sions should be out for public comment in the near future. If adopted, these amendments would accomplish tne desir_.4 result of prompt paym....nt to customers. in the event you feel that additional legislation is needed, however, staff of the Board would be available to provide technical assistance. Sincerely,  1.313:DJW:pjt (#V-135)  bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Bruce Brett Gov. Schultz z Mrs. Mallardi%/  Frederick h. Schultz  • JAKE CIARN. IJTAN  i1AF.P SON A. WILLIAMS. 1111.. N.J. Wit LIAM PROXMIRII NIS  .010 TOWt Ilv TEX .CIST4 HIINI PA WILLIAM L  •N••STRON6. COLO AMA TO  W. RIEGt r, IR., MICH.  SARIBANICS, MD. CHRISTOPHER I. DODO, CONN.  N Y.  N C •VICII pp s. IP .4A*1111160edat .• MIT N  ALAN CRANSTON, cAur.  oc)Ai A La rAus_ S  RICHAPT, 0 I lIGAIR. IND l'ONCIP'  Action assigned to Mr. Ryan.  .4x1PINIAN  MIX  ALAN J. DIXON, ILL.  eZCnifeli Zfatez Zenctfe  M. DANNY VVALL, STAFF DIRECTOR HOWARD A  INFAIELL  MINORITY STAFF DIRECTOR AND COUNSEL  COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C.  1  20510  Nlay 6, 1981  Ilonorable Paul A. Volcker Chairman Federal Reserve System 20th and Constitution Ave., N.W. Washington, D.C. 20051 Dear Mr. Chairman: I am attaching recent correspondence from N1r. NIonte Scewald concer ning an apparent loophole in Reg. T which works to the disadvantage of the small investor. As a result of previous communications with the Federal Reserve Board, as well as the SEC, Mr. Seewald has demonstrated that Reg. T is a one way street for the small investor. While it requires that he promptly pay his broker in connection with the purchase of a stock, there is no corresponding requirement on the other side of the transaction. In other words, when stock is sold, the broker is under no requirement to promptly forward payment to the customer. Whether any abuses have occurred as a result of this program is a difficult judgment to make in the absence of any empiric al data. In any event, it does seem to present an opportunity for broker age firms to take advantage of small investors by delaying payment to suit the convenience of the brokerage firm. I would like you to reevaluate Mr. Seewald's findings, and upon completion of the reviel,v, to prepare the necessary legislation to provide more complete protection for investors in connection with the purchase and sale of securities under Reg. T and its statutory base. With every good wish, I am  IIW/hmp Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .001011111611111111mo.•.•••.•  ,  11**6.14...60.41,b6, Ne-• ...,146.0  , 4,41111k04610.14  UN MP,*  .100,..  1`184 ch 309 //oiv ad r  -C Tl• ,X  t-U(//)-0101,S i  30 0.1(2._  -4-) c),I(  "4-5 0(1i 27ci)  ( 0(,, - c_oiic. Cnif7 cf 7c_I  L a r,t)  C /11.ail  14-  Lc-t-Lcr  tl  A A  /1-3  ciRes ,.  o-r 1-4 f c _..C,- r,c  p  r re_   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Pt  Se.  iir-1  _As __ Mr.__ Cee 44 d /C e_Ofo//a) P.  L-c ,-)  A  -4c(  rccz,4 i  red 4,_,  -wile, n- __ 4S 7IoCk  I 7n i  ...y o i ir-lz -  7. 71(Z....  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Co ci stz_.5.,.4(._)1_41 _ Pr-4.-31k ' - -Ler -L-0 'Fo.erz4 2- c .,)-)d i-d a (e-t /-1-1._co-Pi il 0-1-e s 1( T--- (/00CA 1C-. ill C1)C___ 61ci-1- 17? 1 1 (; ,;t(-- 01' 7/ fly' 6k` Q '_C-_-_`;  /1:•.--C h -C61-- ‘  ---1 1  LA) I L L  i'4- - .1  002)11 ‘)  . V0ciA4C-if  14S 4 2 4 0  r  co/Lc  1  0.f,',i iL -')  A)/  i•8/  ;lc1G7c.1  I  fr-z .1- 4-- ,.--  C_0r re C--.  ---1- e--  , 7, c S f 1 1 g17'91  141 I.Ii 7c)(/61/00.--)  if  .-1d  1A  /(  4-.,_ r--e d  IF,  ‘A)ii Oil   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  o tA r'  au,),JJ "  cC  24-  S(";‘):2 CAD yr) 0/1, ). L412C1  71 42. -- 1I  .(4,0 4 _....  i1 I C._v?167(LCc-2 /7  IA1 )C. --k3ilCI- (f -f-)1 .. C -I o c4  i99/1C-If)I/)(f I'  -no  70 '-‘'ef 61v)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 3, 1981  McCloskey, Jr. The Honorable Paul N. ves House of Representati 5 Washington, D. C. 2051 Dear Mr. McCloskey: I want to thank you e, nc se ab s r' ke lc Vo In Chairman Walt for ending Mr. Harold P. mm co re er tt le nt ce re Bank of fcr your the Federal reserve of or ct re di a as t en appointm his services again r fe of to s es gn in ll wi iate San Francisco. His endable, and we apprec mm co is or ct se ic bl Reserve to thc pu rve with the Federal se to st rc te in s hi knowing of System. search for talented nt ta ns co a s in ta in ma The System s of reserve Ranks or ct re di as e ic rv se le indiviJuals for possib Walt's biographical . Mr at th d re su as be and branches. You may conside-e0, as future be ll wi ns io at ic if al qu rict. information and his the San Francisco Dist in th wi r cu oc s ie nc ca director va Sincerely,  Frederick H. Schultz  MB:vcd (#V-143) bcc:  Mr. Allison Mr. Bischoff , z Ms. Winkler Mrs. Mallardi./  Chairman Volcker FAUL N. McCLOSKEY, JR.  Action assigned to Ted Allison  205 C.ANNON BUILDING  12TH DISTRICT, CALIFORNIA  WASHINGTON. D C.  8000 ur "  tiE/  COMMITTEE ON GOVERNMENT OPERATIONS IA. AND  C   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  al*RIfit  31?oue of irpre5entatill  AND FISHERIES  VI:Rivet?s  •  Congre55 of the  COMMITTEE ON MERCHANT MARINE  20511 (202) 225-5411  205OFICE  Y3 kt.t; A TO7ANT AVENUE94306 CALIFORNIA 3CL5 (415) 328-7383  nig 10: /6  19egi  MadingtOnt 0.e.  DISTRICT OFFICE:  o rli F E CEIVEC r2:  CHAITHel  May 15, 1981 t  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: Enclosed is a letter I wrote to E. Pendleton James regarding the desire of Harold Richard Walt of Woodside, California to be nominated for a public interest seat (Class C) on the Board of Directors of the San Francisco Federal Reserve Bank (Region 12). Mr. Walts's business, government and collegiateexperience is extensive and, I think, well demonstrates his ability to make a substantial contribution to this Administration. I must say that in my review of Mr. Walt's credentials, it was my impression that you will not be able to find a more experienced or qualified person. Enclosed is a copy of Mr. Walt's resume. I would appreciate hearing from youzafter you have had the opportunity of reviewing it. With best regards, Sincerely,  PAUL N. MC CLOSKEY, JR.  PNMcC:ASm Enclosure  THIS FITATIONFRY PRINTFO  PAPFR NA  WITH nre- yr1 rn rinr-nr  205 CANNON DUILDINO  PAUL N. McCLOSKEY, JR.  WASHINGTON.  12TH DISTRICT, CAL/FORNIA  COMMITTEE ON  20515  DISTRICT OFFICE  Congre55 of Hie lanittb  GOVERNMENT OPERATIONS AND  tatts)  CONIMITTEC MERCHANT  C.  (202) 225-5411  PALO ALTO. CALIFORNIA  91306  (415) 326-7383  )clalfSe of lAepre5entatibefS  MARINE  305 GRANT AVENUE  AND FISHERIES   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Massbinton, D.C. 20515  May 15, 1981  The Honorable E. Pendleton James Assistant to the President for Personnel The White House D.C. Washin Dear Several weeks ago, I wrote on behalf of Harold Richard Walt who was being considered for an appointment to the Federal Savings and Loan Advisory Council. Since that time, I understand the Chairman of the Federal Home Loan Bank Board, Dr. Richard Pratt, has decided to appoint another to the position Mr. Walt was seeking. Mr. Walt has indicated his willingness to offer his service to the Federal Reserve System and would like to be considered for a public interest seat (Class C) on the Board of Directors of the San Francisco Federal Reserve Bank (Region 12). Mr. Walt recently completed a four-year term as a public interest director on the board of the Federal Home Loan Bank of San Francisco. His career in the business field was culminated by his presidency of his corporation, a leading firm in architecture, planning and engineering. Since his retirement, he has served as a Professor of management, Dean of the College of Business Administration and Acting Provost at the University of San Francisco. Obviously, Mr. Walt's credentials are extensive and substantial and I don't believe you will_ find many candidates as well qualified as Mr. Walt to serve on the Board of Directors. With best regards, Sincerely,  PAUL  MC CLOSKEY, JR.  PNMcC:ASm ..+A"Tio".•tr- r7v•  riN PAPC- 11 %A  WITL4 nrrsert rn rtrirr,c  •  HAROLD RICHARD WALT  Present Occupation:  Professor of Management, University of San Francisco. Have served USF additionally as Dean of the College of Business Administration (1974-77), Acting Provost of the University, and member of the Trustees' Finance Committee.  Personal Background:  Reside at 18033 Skyline Boulevard, Woodside, CA 94062. Age 57. Born (1923) in Berkeley. Married; six children. Hobbies are gardening, swimming, reading and horsemanship. Phone: 666-6771 (Business); 851-2073 (Home). Details provided by Who's Who in America.  Education:  U.C. Berkeley, B.S.F. 1948. Forestry/Ag Economics. U.C. Berkeley, B.S. 1950. Business Administration. U.C. Berkeley, M.B.A. 1953. Corporate Finance.  Business Experience:  President of William L. Pereira Associates, an international firm of planners, architects, and engineers. Bay Area projects include the Transamerica Pyramid, St. Francis Hotel Tower, Fort Miley V.A. Hospital, Social Security Administration Processing Center, and the Stanford Research Institute. Previously Assistant Budget Director of Kaiser Industries; Director of Civil Systems for Aerojet-General Corporation; and founder-director of several small firms.  Government Experience:  Deputy Director of Finance for the State of California.  Collegiate Experience:  University of California, Berkeley, in various positions from Assistant Dean of Nlen to Vice Chancellor—Finance, including an academic appointment as Lecturer in the School of Business Administration.  Military Experience:  Amphibian Tractor Officer, U.S. Marine Corps during World War II with 18 months active duty in the Pacific Area.  National Academic Honoraries: Other Affiliations: Career Chronology:  Beta Gamma Sigma (Business Administration), Pi Sigma Alpha (Political Science), Alpha Zeta (Agriculture), Xi Sigma Pi (Forestry), and Beta Alpha Psi Accounting). /11 eo) Board of Directors, Federal Home Loan Bank of San Francisco; Boar of Directors, ISU Companies, Inc.; Bohemian Club; Chairman of the Board, Children's Hospital at Stanford; Financial Executives Institute; Security Analysts of San Francisco. 1942-47 1948-60 1961-64 1965-66 1967-68 1969-71 1972-74 197419781978-  11RW 5/1/80   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  U.S. Marine Corps University of California Kaiser Industries Corporation State of California Aerojet-General Corporation SysteMed Corporation William L. rereira Associates University of San Francisco Visiting Professor of Business, San Francisco State University, Summer Session Expert witness for economic/business testimony  11/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  . ... • • •..  ....;oof G°Vt • .. •CO  . •  •0 .71  %.•;.• 1 .,„4 • 13 1,7• vs.  • -.4 ..1.-.  DOARO nr GOVERNORS nr THE  FEDERAL RESERVE SYSTEM WASHINGTON  .s. c.) •  .  . ..4,' . /),  kl ..  &AL Re  •. : r  • •..• •  June 1, 1981  rnEOER1CK H SCHULTZ VICE CHAiRMAN  The Honorable Dan Daniel House of Representatives Washington, D. C. 20515 Dear Mr. Daniel: In Chairman Volcker's absence, I want to thank you for your letter of May 19 requesting comment on correspondence you received from Mr. H. R. Legg concerning the possible purchase of foreign debt obligations by the Federal Reserve and the Board's request for public comment on the desirability of continuing to report money supply data on a weekly basis. With reference to the possible purchase by the Federal Reserve of Polish debt held by New York banks, the Monetary Control Act of 1980 (P.L. 96-221) did amend the open market authority of the Federal Reserve to permit us to purchase obligations of foreign governments and their agencies. The legislative history of the Act, however, indicates that Congress intended this authority to be used only in conjunction with the Federal Reserve's normal activities in the foreign exchange market. In the course of foreign exchange operations, the Federal Reserve from time to time acquires balances in foreign currencies. Prior to the passage of the Monetary Control Act, there was no convenient way in which foreign currencies held by the Federal Reserve could be invested to earn interest. As indicated by Senator Proxmire on the floor of the Senate on March 27, 1980, during the Senate's consideration of the Monetary Control Act, the purpose of this provision is "to provide a vehicle whereby such foreign currency holdings could be invested in obligations of foreign governments and thereby earn interest. This authority would be used only to purchase such obligations with foreign currencies balances acquired by the Federal Reserve in the normal course of business" (126 Cong. Rec. S 3168). In Chairman Volcker's testimony before the Senate Banking Committee on September 26, 1979, he indicated that the purpose of the provision was to add to the present list of assets, currently eligible for purchase by the Federal Reserve, short-term government securities so as to enable the Federal Reserve to invest its non-interest bearing foreign currencies in interest bearing obligations. (These earnings are ultimately paid over by the Federal Reserve to the  c N... •  The Honorable Dan Daniel Page Two  Treasury.) It was never the intent of the Federal Reserve to u,c this r.rovision to "hail out" foreign governments that may be in danger of defaulting on their debts. We believe it is clear that the authority is to be used only in conjunction with the Federal Reserve's normal foreign exchange operations. With respect to purchasing foreign obligations of developing countries, the Federal Reserve has not purchased and has no plans to purchase obligations of developing countries. As noted abcve, the rederal Reserve would only buy short-term liqui,1 obligations of foreign governments with currency balances of those foreign countries acquired in connection with foreign exchange operations in order to earn a return on what would other wise be non-interest bearing currency holdings. As indicated in the Board's Annual Report, reciprocal currency arrangements exist with thc following countries only: Austria, Belgium, Canada, Denu.ark, England, France, (;ermany, Italy, Japan, !!exico, the Netherlancls, Norway, Sweden, and Switzerland.  c  With reference to the publication of weekly money supply data, no decision has as yet been made regardin9 changing the publication schedule for these data. As stated in the enclosed press release and attached letter fror Chairman Volcker, there is concern about occasional financial market over-reaction to weekly money supply data that contain a large amount of "noise". As a result, the Board has invited public comment on the desirability of alter native schedules for publication. The options to the current schedule include publishim.; weekly data with an additional week' s delay, publishing only not seasonally adjusted data, or publishing only monthly data (or a moving average of weekly data). The Board in making its decision on the publication of money supply data will give very careful consideration to public comment. lct _   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I hope that these comments are helpful to you. know if I can be of further assistance. Sincerely,  I  I5  Frederick I. Schultz Enclosure (4/2/81 P.R.) (GTS):AFC:TDS:LW:JLK:vcd (#V-140) bcc: Mr. Kichline Mr. Simpson Ms. Wing Ms. Winkler Mrs. Mallardi (2)  Please  •  Action assigned to Mr. Kichline.  OAN DANIEL I  2363 R4yrnipm MOLDING  5T14 :,..‘,TRICT, VIRGINIA  WAEHINc.TON, D C.  20515  (202) 225-4711 COM MITT/Tilt ARMED SERVICES  Congre55 of tbe Uniteb iptatos  EL/SCOMmITTEES MILITARY READINESS. CHAIRMAN INVESTIGATIONS NONAPPROPRIATED FUND CHAIRMAN  PoncSe of Reprequtatibeg Nicatittgtott, 3:).C. 20515  ADMINISTRATIVE AsSISTANT W. FRED FLETCHER  315 POiT Orrict DGILDIMG DANVILLE, VIRGINIA 24541 TturrHoNtI 792-1280 AMITE FEDERAL 04../11.01KG 103 S. M4n4 STREET FARMVILI.X. VIRGINIA  May 19, 1981  23901  TI:LETisor4r., 392-64344  tan co  rn r-, r-  C..  51  IN71,  I7 7.31  Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue between 20th and 21st Streets Washington, D. C. 20551 Dear Mr. Chairman: Enclosed is copy of a letter dated May 1st from Mr. H. R. Legg, P. 0. Box 359, South Hill, Virginia 23970, which appears to be self-explanatory. Your comments will be very much appreciated. With kind regards and best wishes, Very sincerely,  Dan Daniel DD:jw Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rn ,e)  N.)  •• L Cr -/ -T1 ."1 •-)  Tv't  - 7-)  rn or:  '• 7; 1  r"  c  .2)  C Up  a  Ln  -4"  ,.-  CP  e  •  HOMECRAFT, aoh, _CORP ORATON  P. Coe KIR 3 9  INTERSTATII ANC.A% 111. BS /GUTH HILL VIRGINIA 23970  *  P. O. Box 359 South Hill, Virginia May 1, 1981  •  • .•  23970  Honorable W. C. "Dan" Daniel Congress of the United States House of Representatives Washington, D. C. 20515 •••  Dear Dan:  •  The Patterson Strategy Letter informs that The Federal Reserve System may purchase Poland's debt from the New York banks. This is reportedly authorized by Public Law 96.221, the Monetary Control Act of 1980, Title 1, Section 105(b)(1)(2). This is only further evidence of the tremendous power being wielded by the International banks most of whom have aided and abetted communism since its' inception. It was also reported that Paul Volcker has suggested termination of the publication of the mcney supply statistics. Needless to say, this would permit the Fed to inflate the Money supply without limit and only bankers would have knowledge of what the money supply actually was. ••  Also, this authority is supposed to be effective as of June 1, 1981. I know you will use your influence to prevent this disaster and hope you will contact The House and Senate Committees who supposedly oversees the Fed. Very truly yours,  a .  HRL/bpc Senator Harry F. Byrd cc: Senator John Warner Patterson Strategy Letter   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  H. R. Leyg   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  June 1, 1981  The Honorable Toby Roth Member of Congress 126 North Oneida Street Appleton, Wisconsin 54911 Dear Mr. Roth: In Chairman Volcker's absence, I want to thank you for your letter of May 20 requesting comment on correspondence you received from Mr. Donald H. Hietpas concerning the burden that high interest rates have placed on his automobile dealership. You also expressed your own concern about the effect of high interest rates on small businesses and the economy generally. We at the Federal Reserve also share in your constituent's concern about the burden that high interest rates impose on small businesses. We redognize that the heavy dependence of small enterprises on short-term bank credit makes them vulnerable to increases in interest rates, especially since their access to alternative sources of funds generally is limited. High interest 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. Consequently, the only effective way to reduce interest rates over the long run--and thereby provide a reasonably stable financial environment for small and large firms--is to curb underlying inflationary pressures. Malntenance of reasonable control over growth of money and credit is an essential ingredient in the fight against inflation. However, progress against inflation will be hastened by actions complementing monetary restraint, such as prompt steps toward prudent fiscal policies that reduce the Federal Government's demands for the economy's scarce savings and by appropriate private sector restraint on wage and price decisions. I hope this information is helpful to you. Sincerely, TB:TDS:JLK:vcd (#V-144) bcc: Messrs. Kichline, Simpson, Brady Ms. Winkler v/Frederick H. Schultz Mrs. Mallardi (2)  Chairman Volcker  Action assigned to Jim Kichline;  4- TOBY ROTH EIGHTH DISTRICT  •  -•  FOREeN AFFAIRS COMMITTEE SUBCOMAAITTEES: EUROPE AND THE MIDDLE EAST INTERNATIONAL OPERATIONS RURAL CAUCUS TRAVEL AND TOURISM CAUCUS  RI111110 1-,.;,0441  .  80A Rri OF (1:11V:7RNpRS I hc  WASHINGTON OFFICE 215 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515  ysTf— ** DISTRICT OFFICES. 126 NORTH ONEIDA STREET ** APPLETON, WISCONSIN 54911 26 11M10: 16 207 FEDERAL BUILDING tv'  linitebtatrevarcirchii-04..0: 'Hauge uf iRepreBentatiuts  325 EAST WALNUT STREET GREEN BAY, WISCONSIN 54301 101 NORTHERN BUILDING 844 PIERCE AVENUE MARINETTE, WISCONSIN 54143  May 20, 1981  Mr. Paul A. Volcker Chairman Federal Reserve System 20th Constitution Ave., N.W. Washington, D.C. 20551 Dear Mr. Volcker: Please find enclosed a self-explanatory letter from Donald H. Hietpas who runs a car dealership in my Eighth Congressional District. I share Mr. Hietpas' concern over the high prime rate and what it is doing to the small businessman as well as the Country as a whole. How much longer must the public put up with these excessive prime rates? I would appreciate your comments on Mr. Hietpas' letter, specifically addressing the problem of when we can expect the prime rate to come down to a more realistic figure. Thank you for your attention to this matter.  Bost regards,  TR/jpf Enc.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /1( kOt OBY e0TH Member of Congress 126 N. Oneida St. Appleton, Wis. 54911 FTS 362-6220  • •  P77,1% ,;„,, •  4 t  .14-4 xi.1.•  , 17,77-777-rT.7-1777 "47.1"Arr'71 . • :, •r040-1,4rT-f1.:, .77,17 • A  17. " . " ....-771717.71  ;.;  • •,41t ,A_444,111C.atieli/Lt  14 ( .t4 514 DRAPER ST.  KAUKAUNA, WIS. 54130  TELEPHONE 766-4z.11  May 19, 1981 . Dear Mr. Roth, How long do you think we can survive in business  Cilln SLIM   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  while paying out 250 of every dollar for interest alone? Cur interest expense increased $7100 in 1980 from the previous year on the same number of vehicles. Already this year we have surpassed interest paid compared to all of last year. We need a definite cut in the prime rate. We have been in the car business since 1966 sellinc; on the average 200 new and used cars per year. Our gross sales increased last year $300,000 to an all time high of $1,420,000 . Yet, we lost $6534.00 compared to a profit of $6100.00 in  1979. A lot of the blame has to do  with the excessive high prime rate. Then this year another increase in FICA taxes has increased our payroll taxes by 3100 per month. We can be a healthy business with a prime rate at 13%, could live with 15%, but the current rates are disastrous.  erely,  •••.,  /Et  (;7`-el-a Donald H. Hietpas Exc. Vice-President P.S. Put yourself in our place!  AUTHORIZED DEALER  R 4%. CHRYSLE me,onsco.,WiAIILN 'Ay V.,  •  May 29, 1981  The Honorable John Seiberling house of Representatives Wasnington, D.C. 2U515 Dear Mr. Seiberling: Thank you for your letter of May 12 enclosing correspondence from your constituent, T.D. Calvin, regarding the effects of current monetary policy on exchange rates. That letter contains a miskerception of the objectives of Federal Reserve policy, and I, therefore, thought it would be desirable to set the record straight. Mr. Calvin asserts incorrectly that there is "manipulation of (the foreign) currency value in this country through the increase in interest rates." The Federal Reserve does not have as an objective of monetary policy the level of tne international value of the dollar. Although the recent appreciation of the dollar has in part reflected an increase in U.S. interest rates relative to those in other financial centers, it is simply not the case that the Federal Reserve tries to achieve a particular level of the exchange value of the dollar tnrough the conduct of monetary policy. The Feaeral Reserve is committed to reducing inflation in this country. To acnieve this objective we are pursuing a policy of monetary ana credit restraint. To the extent that the demand fur money and credit in the economy increases, dollar interest rates rise in reflection of that restraint. Depending on financial conditions abroad, pursuit of our basic objective may at times cause the dollar to appreciate, as we have seen recently. Such an appreciation will assist us in the effort to reduce inflation, but it is not the intention of our policy to bring about a higher excnanye value for the dollar. While I recognize that the effort to reduce inflation imposes burdens on many sectors of the economy, including those competing with imports, I believe, it is essential to tne longer run health of our economy that we eliminate inflation and, tnus, strengthen our competitive position in the world economy. I have enclosed a copy of)a recent speech in which I elatJorate on tne need to bring down' inflation and restore price stability. Sincerely, PC:LMT:pjt (#V-137) bcc: Peter Clark SiFaulA.Voi-c401 Ted Truman Mrs. Mallardi Enclosure (6peech dtd. 4/15/81 entitled "Dealing with Inflation: Obstacles and Opportunities."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  JOb•N F. SEIOERLING 1ETII DISTRICT. OHIO  Action assigned to mr.  WAnHINGToN OFFicr 1225 LONGWORTH HOUSE OFFICIF BUILDING Trt_ErHot+r (202) 225-5231  COMMITTEES JUDICIARY  Congre.55 of the liniteb *tato  INTERIOR AND INSULAR AFFAIRS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  AjotW of ikepre5entatitn5  o s-rm ICT OFFICE FEDERAL BUILDING AKRON. OHIO  44308  TELEPHONE (216) 375-5710  Lliazijington, 33.C. 20515 May 12, 1981  ILL:3 CO  Paul A. Volcker Chairman Board of Governors of the Federal Reserve Twentieth Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker:  71C 7C.71 CD= ry,  r  a I though you might be interested in the enclosed letter from my  constituent, T.D. Calvin, concerning the Fed's current high interest rate policy. Thank you for your courtesy.  No response is required. Si cerely,  // John F. Seiberling Member of Congress JFS:nm Enclosure  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  a/  r 7:1.  111. 71 ct  ck r -n-Ti (r) r cl =.7  rn :•••C7 7> :10  CI  :A  ao cn LI1  "' C3 :V  BEARFOOT CORPORATION VVAD!iVVOR T1-0. 00-110 442F11  T1 1.1 1'0-00, VE  1215) :1 15-2581  May 4, 19(61  Honorable John Seiberling House of Representatives Washington, D. C. 20515 Dear John: I urge you again to use your good offices to influence by your contacts and pressure, if you will, the Federal Reserve Board and its Chairman, Mr. Volcker, to renounce its position in pressing and supporting high interest rates. The raising of the rediscount rate last Fall by Mr. Volcker was a very damaging act from the standpoint of correcting our balance of payments and the potential improvement of our automotive industry and its employment. Mr. Volcker reacted in this way immediately following the commencement of the decline of the dollar against the Japanese yen. This decline was exactly the automotive price increase for Japanese cars that our American industry needs. The Japanese government had anticipated that the dollar would decline to below 190 yen, but through the stimulation of the Fed interest policy, the dollar has now risen again to 218 yen and, of course, the higher interest rates in the United States are increasing the flow of dollars into American banks from abroad. Ostensively, this policy was intended to try to "choke" inflation, which is more like trying to cure a headache with a tourniquet around the neck. This external action against inflation, we think, has turned out to be futile and we continue with the extreme damage to American manufacturers and their employees. There can be no argument really with the fact that an increasingly free trading world will be better for all of us; however, we must have free trade not only in the merchandise through the reduction of tariff and non-tariff barriers, but we must also have the necessary balancing and correcting activities that come about with fluctuating currency values. The manipulation of currency value in this country through the increase in interest rates is virtually the same as a non-tariff barrier as far as trade is concerned. Free traders in this country have been looking at trade only from the standpoint of the "free flow of goods". They seem to forget thattrade is the exchange of goods for consideration and sometime the balance of payments must balance by changing the value of the currency, if in fact there is not a balance of the exchange of goods at the existing currency levels.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page 2  416  It is extremely hard to understand how they properly can preach on behalf of the desirability of export, which requires our importing of goods, and then stand silent when the balance of trade goes into a deficit position and there is less money here to use for imported goods. I don't understand why we pursue a high price "sound" dollar. A cheap dollar would be much more "sound" from the standpoint of selling more goods abroad and employing more people here. I think that if the American worker were as well informed about the consequences of this currency manipulation as he is about other matters of free trade and fully understood how his interests were severely undercut by Chairman Volcker, we would have a march on Washington which would make the farmers' or the veterans' marches look insignificant. As you know, the company has been deeply hurt for many years by impor ts of footwear and more recently the imports of automobiles. Our customers have been hurt and our employees have been hurt. We look forward to the necessary corrections in the monetary sense that are going to make it possible for us to participate in foreign trade. I ask you sincerely to look into this matter for us. Very truly yours, BEARFOOT CORPORATION  T. D. Calvin President TDC/k   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  oPr BOARD OF GOVERNORS  .••  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. E. 20551  • •.. • •  May 28, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Norman D. Shumway House of Representatives Washington, D. C. 20515 Dear Mr. Shumway: This is in further response to your letter of April 28 enclosing suggested language to be incorporated into regulations issued by the Department of the Treasury and the Federal Reserve governing recordkeeping by commercial banks for customer safekeeping of book-entry Treasury securities. In your letter you indicated that a number of purchasers of book-entry Treasury securities were concerned about the security of such instruments in the event of the failure of the commercial bank holding bookentry Treasury bills on behalf of the customer. As you know, the book-entry procedure for U. S. Government securities was first introduced in 1968 in order to help the Treasury Department and the Federal Reserve Banks, acting as fiscal agents for the Treasury, to handle a large volume of such securities through the use of computerized information. One of the major advantages of the book-entry procedures has been to reduce the opportunity for theft of government securities, since the engraved physical evidences of the obligation have been eliminated. It should be noted that no losses have been incurred by securities holders since the book-entry system was initiated by the Treasury. The regulatory amendment that you suggest specifies the recordkeeping requirements that an institution should follow when holding securities of customers in safekeeping, including such information as customer name, address, and taxpayer identifying number, amount, maturity date, and CUSH) number, The current Treasury regulations on this point (31 C.F.R. 350.6) already contain a recommendation that such information be maintained by commercial banks holding book-entry securities for their customers. As such, we believe that adoption of the language you have suggested would be unnecessary at this time since the requirements it calls for are already provided for on a voluntary basis in the current Treasury regulations,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IP   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The honorable Norman D. Shunway Page Two  It should be noted that internal and external banlauditors review bank records and proceOures regularly to insure that banks are not misusing customer securities. 'As a result, if a bank fails while holding securities for a customer, its records should clearly reflect the extent of the customer's holdings, and the customer should have little probler obtaining his holdings from the bank's receivers. For your inforrLation, I am enclosing a copy of a "Memorandum Reviewing Principles of Booh-rntry Procedure for Government Securities" that was prepared by the Subcommittee of Counsel of Fiscal Agency Operations, a subcommittee of the Conference of First Vice Presidents of the Federal Reserve Banks. This meit.oranciturt analyzes some of the risks and responsibilities arisin9 out of the book-entry procedure. Thank you for advising me of your views on this matter. If I can be of further assistance, please do not hesitate to let me know. Sincerely, S/Paill A. Yoldiet  Enclosure  NPW:vcd (#V-128) bcc:  Ms. Toomer Mr. Schwartz Ms. Winebarger Mr. Petersen Ms. Hubbs Legal Files (2) -  2761-14ti-eILL  NORMAN D. SHUMWAY 4 DISTRICT. CALIFORYIA  Action assigned Mr. Allison  Y  tommitTirq comMITTFE ON RANKING. FINANCF 1ND URBAN AFFAIRS SELECT C.04.1 MI TTEF ON AGING  2211 LONG WOR T 1,4 NOVIIt 0r  Congre55 of die *tatt5 jpougc of tepre5entatibt5  WAsminiGT004,  C  c  nult.otroo  20515  (202) 225-2111 CHRISTOFF4ER C. SEEGER AOMINISTRATIVT ASSISTAFFT  1045 NORTH EL DoR•Do Room 5 STOCKTON. CALIFORNIA  95202  (209) 4154-7612  Ulamiington, D.C.  20315  April 28, 1981  MARK A. DENERO DISTRICT RILPRIESENTATIVE  ry-f ""1 am.  tl 1  -10  ET1  Paul A. Volcker Chairman Federal Reserve Board 20th and Constitution Ave., NW Washington, DC 20551  ("D  -T1 M ta-)  CD < c-.  '  1  •  4, II - -4 t 1  c_)  I have recently become aware of a concern which many purchasers of book-entry Treasury bills have concerning the security of those instruments in the event of the bankruptcy of the federal or state bank holding the book-entry bill for an individual's account. Let me explain the problem as I understand it. Until recently, the purchaser of a Treasury bill received an actual engraved certificate. Of course, such a bill in bearer form was readily negotiable at face value. As of December 31, 1978, engraved Treasury bills were no longer issued and the book-entry system of bill purchase became standard. Under the book-entry system of purchase, the buyer has no physical instrument to look to should the federal or state bank holding the book entry go bankrupt. By contrast, the purchaser of a Treasury note can still look to the actual negotiable instrument. Present purchasers of bills are thus concerned that their book-entry investments are not as secure or as immediately negotiable, due to a change in the purchase method. Importantly, it is clear that the secured status nf Treasury bills was never intended to be altered as a result of the Treasury's move from engraved certificates to the book-entry purchase method. That this change should not alter the holder's protection is codified at 31 C.F.R. Section 350.3(6):  1I .111111111.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r 7") 279 •r  •  Dear Mr. Chairman:  The maintenance by a Reserve Bank of book-entry Treasury bills under this paragraph shall not derogate from or adversely affect the relationships that would otherwise exist between a Reserve Bank in its individual capacity and the entities for which accounts are maintained. The Reserve Bank is authorized to take all action necessary in respect of book-entry Treasury bills to enable such Reserve Bank in its individual capacity to perform its obligations as a depositary with respect to such bills.  r--   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Paul Volcker April 28, 1981 Page 2 In addition, applicable Reserve Board and Treasury regulations on this matter make it clear that a book-entry bill used for purposes of a pledge to a Reserve Bank or to an account of a customer of the Bank is perfected and is "deemed to be maintained in a bearer definitive form" (31 C.F.R. Section 350.4(b)). Thus, as to a pledge to a bank or to an individual customer's account at the bank, the book -entry Treasury bill is secure. Finally, Securities and Exchange Commission regulations require a broker or dealer to maintain a separate', segregated account for all fully paid securities and excess margin securities carried by that broker or dealer for the account of the customer (17 C.F.R. Sections 240.15c2-1, 240.15c3-3(b), 240.8(c)-1). Many banks already employ a similar safekeeping requirement for Treasury debt instruments which were purchased by individual account holders with the bank. ,Vhile federal regulations on the scope and effect of Treasury bill accounts do not mandate specific recordkeeping procedures from member banks, book-entry Treasury bills should be treated identically to the previously issued engraved Treasury certificates. I would very much appreciate your help in doing whatever is necessary to assure that purchasers of book -entry Treasury bills have the same protection as if the actual engraved certificate were held by the bearer in a safekeeping, segregated account by the bank. To that end, I am enclosing a suggested clarification to existing Federal Reserve Board regulations. I look forward to and appreciate your advice on this matter. Sincerely, 6Ntitt'VVV\t' it tiMitiik-NI NORMAN D. SHUMWAY Member of Congress  NDS:aec Enclosure  -<  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PROPOSED LEGISLATIVE OR REGULATORY CLARIFICATION  All United States Treasury bills held in bookentry form by a federal bank, or a state bank which is a member of the Federal Reserve system, for the account of a pustomer shall be deemed to be maintained in a bearer definitive form for the individual as if the individual held the actual Treasury certificate.  Such  United States Treasury securities purchased by an individual through the book-entry method via a federal or state bank shall be kept separate from the general assets of the hank, shall be adequately identified as the property of the individual or entity they were purchased for or by, and shall be held in segregated safekeeping form, which shall include data to permit both customer identification by name, address and taxpayer identifying number, as well as a determination of the Treasury securities being held in such account by amount, maturity date and CUSIP number, and of the transactions relating thereto.  May 26, 1981  The Honorable Jake Garn Chairman Comr,littee on Banking, Housing and Urban Affairs Unitud States Senate Washington, D.C. 20510 Dear Chairman Garn: I very much appreciate your leadership on the Senate floor in oppositicn to the Sasser Resolution. As you well know, we at the Federal Reserve take no pleasure in high interest rates and I am grateful for your remarxs that put the problem of high rates in the broad er context of government spenaing and budget deficits. I also appreciated your statements against politicizing the Federal Reserve. Sincerely,  SL Paul  DJW:pjt  bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mrs. Mallardi (2)  May 26, 1981  The LionoraDle John C. Stennis United States Senate Wdshington, D.C. 20510 Dear Senator Stennis: . I want to thank ycu for your comnents on the Senate floor in opposition to the Sasser Resolution. vie at tne Federal Reserve take no pleasure in high interest rates and fully understand the severe problems caused by high rates. Only when inflation is significantly reduced, however, will interest rates fall to permanently lower levels. Along with the efforts of monctary policy, prudent fiscal policies will hasten progress against inflation and consequent downward adjustments to interest rates. I very much appreciatei4 your remarks supporting the independence of the Federal Reserve during this period when we are trying to do our part in the fight against inflation. Sincerely, Waol  DLTW:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  VoIckez  May 26, 1981  The Honorable Harry F. Byrd, Jr. United States Senate Washington, D.C. 20510 Dear Senator Jyrd: I want to thank you for your leadership on the Senate floor in opposition to the Sasser Resolution. As you well know, we at the Federal Reserve take no pluasure in high interest rates and I am grateful for your remarks tnat put the problem of high rates in the broader context of government spending and budget deficits. I also very mucii appreciated your statements supporting the independence of tne Feueral Reserve. Sincerely, SL Ea4  DJW:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 26, 1981  The HonoraOle Lrnest F. Nollings United States Senate Washington, D.C. 20510 Dear Senator Hollings: I want to thank you for your comments on the Senate fluor in opposition to the Sasser Resolution. As you well know, we at the Federal Reserve take no pleasure in high interest rates and I very much apprec iated your placing the problem of high rates in the broader contex t of government spending and budget considerations. I am grateful for your statements pointing out the difficulties the Federal Reserve faces in trying to slow monetary growth and deal with inflation when government deficit spending remains high. Sincerely,  DJW:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman Volcker JOHN F. SEIE3ERLING icr“ DISTRICT.0 " 10  WASHINGTON OTTICF• 1223 LCINGWORTH HOUSE OEFICE BUILDING  No response necessary  TittcrtioNa (202) 225-5231  COMMITTEES,  JUDICIARY  Congre55 of Or  INTERIOR AND INSULAR AFFAIRS •-•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DISTRICT orrice, FEDERAL BUILDING AKRON, OHIO 44)03  *tatet‘  jipti5e of ikepreantatibe5  TrurrreciNt: (216) 37S-5710  Ulafsbinqton, 15.QC. 20315 May 26, 1981 ""E1 7 445  -41 -11  CO  3=,  C_,  721  IP'  r-  NIP  c-, r, 1  C:)70 rn  G, r"  < c-1  Paul A. Volcker Chairman Board of Governors of the Federal Reserve Twentieth Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: I recently sent you a letter from T. D. Calvin concerning the Fed's high interest rate policy.  I am enclosing a letter from  Peter Bommarito, President of the URW, who wishes to add his voice to Mr. Calvin's. Thank you for your courtesy.  No response is required. Sincerely,  John F. Seiberling 6// Member of Congress JFS:nm Enclosure  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  3:3  U:610 "P• 7.3 ) 9,  tro •.  rn td.) -4 --1  r ea 7:3 Li/  PF TEF4 ROM0.1AC4ITO. President MII AN STONE  Vi• •  yr-ident  DONALD C TUCKER Secretary Ivens  '1.•  UNITED RUBBER, CORK, LINOLEUM AND PLASTIC WORKERS OF AMERICA AFL-C10. CLC  87 SOUTH HIGH STREET  AKRON. OHIO 44108 Area Ccxie 216 376.6 181 376-6182  May 14, 1981  376-6183 376-6184  The Honorable John Seiberling House of Representatives Washington, D. C. 20515 Dear Mr. Seiberling: Recently you received a letter from the President of Bearfoot Corporation, T. D. Calvin, making a case for a retreat from our federal government's ill-advised economic policies of high interest rates and tight money. The URW represents the hourly employees at Bearfoot's Wadsworth, Ohio plant and Mr. Calvin asked if we would add our voice to the fight against the adverse effects of our high interest rate policy. We do this not just on behalf of our members at Bearfoot, but onlehalf of all of the members in the United States. This kind of economic policy is causing many more problems than it is solving. A lack of world confidence in the United States' ability to deal with inflation and the subsequent desire to strengthen the dollar in relation to other currencies is at the heart of the restrictive monetary policy of the Federal Reserve Board. High interest rates and resultant tight money are supposed to reduce demand and thus inflation. The rate of inflation is slowing somewhat, but it still remains at double-digit levels and may jump again largely because the government's tight money policy doesn't properly address the major factors in the current inflation - inflation in the necessities, some of which is primarily due to external influences such as OPEC. In fact, to a degree, the Fed's monetary policies fuel inflation by adding to the cost of doing business and thus to the price level. Not only is the Fed ineffective in its efforts to slow inflation, but its policies may permanently damage the American industrial base. This nation is in need of reindustrialization if we are to compete effectively in the new and more competitive world economy that we helped to build but now find threatening the existence of some of our basic industries. By strengthening the dollar, the Fed has made our exports more  expensive and imports less costly, and our nation is artificially made less competitive. This policy must be turned around. Inflation is certainly not a desirable economic factor; it is a burdensome cost. However, the price  ,":;T; ft.,  trt 711i ••  : z  \4:(;;EFICLI$"  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  we are paying to fight it through some of the most restrictive monetary policies in our history could become more expensive in the long run if the Fed's policies continue to hinder the recovery of the domestic automotive inaistry. The revival of our automotive industry is necessary to rebuild America's prosperity. Tight money will only hinder that recovery to the detriment of the automobile assembly industry and its suppliers, dealers, etc. The rubber industry is part of this process. It is unnecessary for me to go into detail on what has happened in the rubber industry in the recent past. The problems of this industry are many and they have been exacerbated by the Fed's policies both directly and indirectly. A move to a more reasonable monetary policy is imperative to help U. S. industries recover, return to prosperity and provide jobs for the seven million people who are currently looking for work and unable to find it. I appreciate your consideration of this very important matter. Sincerely,  ammar to ' W International President  PB:pkb opeiu 339   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 26, 1981  The Honorable Joseph G. Minish Chairman Subcommittee on General Oversight and Renegotiation Committee on Banking, Finance and Urban Affairs house of Representatives Washington, D.C. 20515 1.)ear Cnairman Thank you for your letter of May 7 inviting the Board to appear before your Subcommittee to discuss the regulatory and examination process of the various Federal financial institutions' regulators. Governor J. Charles Partee is looking forward to appearing on Thursday, June 4. Sincerely,  siyaml A. Viziskez pjt (#V-132) bcc: Gov. Partee Mr. Ryan Mr. Talley Mrs. Mallarai (2)Y/  JO  4:NISH, N.J.. CHAIRMAN  RON PAUL. 7EX. JON HINSON, MISS. EIILL hicEOLLLIN4 FLA.  HENRY r t..:ONZAL EZ. TEX. FRANK ANNUNZIO. I -L. PARFrN MITCHEL:, MD. DOUG EiA • iARD. JR . GA. WA,TER E. FAONTROY, D.C. MARY POSE OAKAR, OHIO JIM  TLX.  ED WEBER, OHIO  U.S. HOUSE OF REPRESENTATIVES  MARGE ROUKEMA. N.J. GREGORY W. CARMAN, N.Y. GEORGE C. WORTLEY. N.Y.  SUBCOMMITTEE ON GENERAL OVERSIGHT AND RENEGOTIATION  ' 4 ANK. MASS. DOB LOFTUS, STAFF L.RC.CTOR  Or THE  COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS IrLrrisc.Nr,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2328  NINETY-SEVENTH CONGRESS  1NASHINGTON, D.C. 20515  ) /r  ciay /, 1 KA  The Hon. Paul A. Volcker, Chairman, Board of Governors of the Federal Reserve System, Federal Reserve Building, Constitution Avenue bet.20th and 21st Streets, Washington, D.C. 20551.  CV  Dear Chairman Volcker:  Vft.  The Subcommittee on General Oversight and Renegotiation will be conducting oversight hearings next month on the regulatory and examination process of the various Federal financial institutions' regulators. The hearings will focus specifically on uniformity in the examination process and overlap and duplication of the activities of the various agencies. We would appreciate your testimony on this subject before the Subcommittee on Wednesday, June 3rd, at 10 a.m. in Room 2128 of the Rayburn House Office Building. Sincerely yours,  (A Jo eph G. Minish, Chairman.  N  May 19, 1981  The Honorable Dale Bumpers United States Senate Uashington, D. C. 20510 Dear Dale: I read your letter about the savings and loan induntry with interest; I share the concern you express. As you note, the current high interest rate environment places any institution with a large portfolio of fixed rate lonu-term assets in a very difficult position. The only really satisfactory solution is to have our efforts--in the red and elsewhere--to reduce inflation become effective, for that will produce the environment for a sustained reduction in interest rates. However, there is no c;voidinu the fact that until that happens many thrift institutions will be under nevere pressure. We have been worl-ing with the other re5ulatory agencies on legislation to enhance the ability of the iDIC and FSLIC to provide transitional assistance to thrift institutions in order to helr them to better weather the perioe until interest rates come down. I hope this legislation will be introduced within the next few weeks and can be acted upon quickly.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  RFS:vcd (4V-134) bcc:  Mr. Syron Mrs. Mallardi (2), "  MARK O. NATTIrLD. 1. ALA'KA TE3 S• . N. 6  LolACLL P  CONN.  ER.  cLunr. It-A040  JAMrS A.  FAuL LAN It T. NEV. JAKr IIT• HA IT '  C  N/111T. N  MrY.  JAmES If • Nr , R. A. RenrPT  •  OA  K  AUrONSF M.  RoornT C. BYRD. W. VA.  THOIA•S  r.  441. I- TON. A40.  LAWTON CHlt N.  .  N f.  NAL Tf R D. NuDoLFCT0N. KY. Otif NTIN N. et1ROICK. N. DAK. PATRICK J. rAmy. VT.  MACK MATTINGLY. CA.  JIM SASAER. TENN.  WARRCN PlUt`MAN. N H.  Of NNIS DC CONCINI. ARIZ.  ARLI N •PEI • f If J  r• KI  ?.:Cnifeb  Zenate  .:. et NNE TT JOHNSTON. LA.  JR •IMATO  Action assigned to Mr. Ettin.  WILLIAM PROXMIRE, WIS. J.DiaN C. STrINNIS. MISS. DAWN'L K. INOUYE, HAWAII rf..Nr ST f. HOLLINGS. C.  THAU COCHRAN. MARK AAK,Rf W1  CHAIRmAN  COMMITTEE ON APPROPRIATIONS WASHINGTON.  D.C. 20510  (\AL T ch. urrreS. ARK. Tit  T140 MA S L. VAN Le 1.  FNNIrOY. STAFF DIREC•01111 VOONT. M 11+40101TE STAFF DINSCTOOt  May 5, 1981 4 ,1 5  i:  The Honorable Paul Volcker Chairman Board of Governors The Federal Reserve System 20th and Constitution Avenue, N. W. Washington, D. C. 20551 Dear Paul: It was reported last week that customers of savings and loan associations withdrew a record high $2.3 billion more than they deposited during March. The report from the Federal Home Loan Bank Board said that this withdrawal of $2.3 billion broke the previous record of $1.5 billion reported for July 1966 and April 1979. These latest withdrawal figures combined with the operating losses experienced by many savings and loan associations in 1980 and the first quarter of this year raise serious questions about the solvency of the savings and loan industry. Last year was the least profitable for savings institutions since World War II. Net returns on assets declined to 0.1% in the 1980's last half, by far the worst showing in the four decades the Federal Home Loan Bank Board has collected the data. The Board reports that 35% of federally-insured associations had operating losses during the last half of 1980, compared with 31% in the first half. Board officials estimate that more than 60% of thc associations now are operating in the red. The depressed earnings are attributed to a sharp downturn in the volume of new home loans, which dropped from $108 billion in 1978 to $70 billion in 1980, and the severe rise over the last 18 months in the interest rates savings associations must pay for money market certificates and other forms of deposits. The industry is in serious trouble principally because it is being squeezed by interest rates. Institutions must pay high rates to attract cash. Yet much of their income comes from decade-old low-interest mortgages. At the out of ments, by the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  same time, many would-be savers have taken their money savings and loans and put it into more lucrative investparticularly money market mutual funds, as reflected March withdrawal figures.  Olt  The Honorable Paul Volcker May 5, 1981 Pacje 2  no_ savins and loan business had its worst earnings ever in 1980. The cumulative net income of the savings and loan industry was $800 million. The figure reflects a stunning drop in earnings from the industry's $3.7 billion in 1979 and $3.9 billion in 1978. The last time the business made less than $1 billion was in 1970 when its total assets were less than one-third of today's total of more than $600 billion. The earnings situation has worsened in 1981. Over the first two months of the year, the business lost approximately $400 million. The United States League of Savings Associations reported that there were 5,669 savings associations in 1970, 4,821 in 1975, 4,61 last year, and each intervening year showed a steady reduction. Although you are familiar with these statistics, I am writing to stress the need for immediate administrative and legislative action to provide relief for the savings and loan industry. Restoring the financial strength of the savings and loan industry should be one of the cornerstones of the economic recovery program. Salomon hrothers economist, Henry Kaufman, recently stated:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "Among financial institutions, including commercial banks and thrift institutions, a number of distinctive and disturbing developments stand out at the present time. Our savings banks and savings and loan associations, the traditional source of most housing credit, are significantly immobilized -- an unprecedented development for the early stages of business recovery. In the past, this would have been the time when these institutions were experiencing large savings inflows, repaying loans which they had received from the Federal Home Loan Banks, and making huge lending commitments. Currently, however, these deposit type institutions are receiving marginal savings inflows (when not actually negative), making modest financing commitments, and have, on balance, added to borrowings in the current expansion. Moreover, their capital positions, in some instances, have been impaired significantly by operating losses and by the large market discounts on their assets. These institutions can be quickly resuscitated only by a sharp decline in interest rates -which I feel is highly unlikely."  4  416   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul Volcker May 5, 1981 Page 3  I am concerned that deregulation combined with the depressed conditions faced by savings associations will result in a sharp decline in their numbers and a loss of public confidence in these financial institutions. would appreciate having your recommendations about possible solutions to this financial crisis. I look forward to hearing from you at your earliest convenience. Sincerely,  e Bumpers DB:amk   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE  •64171"421. J.,  -•  FEDERAL RESERVE SYSTEM  lir , Alt).  LI • (,) . „  WASHINGTON, D. C. 20551  ..:‘e20,`--kGk44 9 "RALitt.s.•• ••(  PAUL A. VOLCKER  May 19, 1981  CHAIRMAN  *.• • • •  The Honorable Henry S. Reuss Chairman Joint Economic Committee Washington, D.C. 20510 Dear Chairman Reuss: Thank you for the recent letter sent from yourself and Vice Chairman Jepson commenting on the schedule for publication of money supply statistics. You cite several reasons in favor of publishing new money supply information promptly and suggest the possi4lity of releasing money supply figures on a daily basis if that could be done without added cost. If such a modification is not feasible, you recommend that the Federal Reserve should not change the present reporting procedures. I appreciate having your comments on releasing the money supply information and I can assure you they will be given careful consiaeration by the Board. Sincerely,  ,a1/66  /775,  -afii-t-  -a/tt.  6611P11  / 0 1 / /1  v74 ct ceti,“et,&t.% TS:DJW:pjt (4V-126) bcc: Tom Simpson Mrs. Mallardi (2)  Identical letter also sent to Vice Chairman Jepsen (without the postscript).  Action assignei Mr. Kichline HENRI, ft.  finis,. WM. CHAIRMAN  RICHARD BOLLING. mO. LEE H. HAMILTON. 11413. ONO. LA. „ TA 01XEN J marcHrt L. MD. FREDERICK W. RICHM0No. my. CLARENCE J EIROwN Ow° MARGARET M. oircKLER. mASS. JOHN H. romssrLoT. CALI/. CHALMERS P WYLIE. OHIO JAMES K. GAt ISRArTH.  ROGER W. JEPSEN. /OWE.. VICE CHAIRMAN WILLIAM V. ROTH. JR.. DEL. JAMES ADONOR. S. OAK. STEVEN SymMS. IDAHO PAULA HAwKINS. FLA.  Cougur55 of tijc aniteb iptatt5  MACK MATTINGLY. GA. LLOYD OENTSEN. Tax. WILLIAm PROXMIRE. Wit.  JOINT ECONOMIC COMMITTEE  COWARD M. KIENNKOY. MASS. PAUL S. IBA RSA MS. MD.  (C KKKKK0 PURSUANT TO SEC. l'al OF PLISILPC LAW 1101. MN CONGRESS)  EXWLETIVEMRECTOR  WAsHINGToN. D.C. 20510  April 15, 1981 "Va • Ti  co  rel  Xm  2J49 cp  The Honorable Paul Volcker Chairman Board of Governors Federal Reserve System Washington, D.C.  .s.v. C ) .  =0 NJ  . F.  CP  rvi  e)  „I rv%) <  (--)rra 2).X1 =  3:11  u) •• (.4.)  (77  Dear Mr. Chairman: We are pleased to respond to the Federal Reserve Board's request of April 2 for public comment on possible changes in the procedures for weekly reporting of money supply figures. The weekly money supply numbers by themselves probably contain no significant amount of useful information, except insofar as they augment the data available from previous weeks. But since such numbers will in any event be available to the Federal Reserve, we believe that the only defensible policy is to make them available to the public as soon as they are available. If credit and capital markets are, as some believe, rational and efficient users of information, market participants can and must be trusted to read the careful fine print which the Federal Reserve includes on its weekly releases. They also must understand the implications of the estimated weekly standard deviation in the noise factors for MIA and M1B (which is $3.3 billion), and discount accordingly. No social harm can be done by providing efficient markets with more information. If, on the other hand, markets are not efficient users of the weekly money supply information, but instead react irrationally to random blips in the money supply numbers, the case for prompt publication is even stronger. For a demand for weekly estimates will be met, if not by the Federal Reserve then by "Fed watchers" and private crystal ball gazers. An industry will spring up, dedicated to guessing what the weekly numbers would have been if only the Federal Reserve had released them. As you point out in your letter of March 24 to Senator Garn, all of the intermediate proposals for modifying the published   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul Volcker April 15, 1981  Page Two  data are subject to the same objection: they would induce efrorts by market participants to "glean the weekly number" from whatever data were published, or leaked. And such guesses would be subject inevitably to more error than the numbers available to the Federal Reserve. The ideal, and foolproof, solution would be to publish money supply figures on a daily basis. (If daily changes are truly random, as would appear likely, no market participant could conceivably hope to profit from betting on day-to-day movements.) If this solution is costless, we recommend it. However, if as we suspect, such action would not be costless, we recommend that the Federal Reserve not change its present money supply reporting procedures.  Sincerely,  i) CL-L Roger Jepsen Vice Chairman   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Henry S. Reuss Chairman  May 18, 1981  The Honorable benjamin S. Rosenthal Chairman Subcommittee c.)n Conutterce, Consumer and Nonetary Affairs Coi.uaittee on Government Operations House of Representatives Wasnington, D.C. 20515 Lear Chairman Rosenthal: I am following up on my letter of November 14, 1980, tnat rosponded to your suggestion that the Federal Reserve Board undertake studies or analyses of several aspects relating to conversions of multifamily properties to condomirium or cooperative status, in connection with the provisions of Section 603 of the Houbing and Coi;ununity Development Act of 1980. In my letter of last November, I indicated that the matter had been referred to the Federal Financial Institutions Examination Council (FFILC) for interagency review, particularly because other federal supervisory agencies had received similar suggestions. I also promised to notify you about the Federal Re:ierve's action once the FFIEC review had been completed and considered Ly the board. After having discussed the matter, the FFIEC referred ttie bug,;estion to the Federal Home Loan Bank board which had alre:-Idy assigne,A a Liank Board working group to consult with your Subcommittee about it. Since then, I understand that FHLBB staff members have met with staff of your Subcommittee on several occasions to clarify the issues, and that John Dalton has written you to indicate that FHLBB will review the results of the studier, being undertaken by HUD before determining whether additional FhL6b action may be necessary. In this regard, I understand thdt the HUD study is nearing completion and may be released shortly. Sincerely,  S/Paul A. Volcket RMF:AFC:pjt (4V-405 from 1980) bcc: Mr. Fisher Mrs. Mallardi (2) Mr. Kichline Ns. Hart   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  11. BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  May 18, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable David Durenberger United States Senate 20510 Washington, D.C. Dear Senator Durenberger: This is in response to your inquiry concerning the authority of the Federal Reserve to purchase securities. The original Federal Reserve Act, enacted in 1913, permitted the Federal Reserve to purchase various types of securities in the open market. At that time we were permitted to purchase U.S. Government and agency securities, bankers' acceptances, bills of exchange, and certain short-term State and local government securities. The purpose of this authority originally was to provide Reserve Banks with the opportunity to earn a return on their funds. There was never any indication that the authority was to be used to "monetize" the debts of private organizations and State and local governments, and we can assure you that we have no intention of doing so. Indeed, virtually all of our securities holdings consist of U.S. Government and agency obligations ($124 billion) purchased in conjunction with open market operations and in the course of issuing Federal Reserve notes. The Monetary Control Act of 1980 (P.L. 96-221) did amend the open market authority of the Federal Reserve to permit us also to purchase obligations of foreign governments and their agencies. The legislative history of the Act indicates that Congress intended this authority to be used only in conjunction with the Federal Reserve's normal activities in the foreign exchange market. In the course of foreign exchange operations, the Federal Reserve from time to time acquires balances in foreign currencies. Prior to the passage of the Monetary Control Act, there was no convenient way in which foreign currencies held by the Federal Reserve could be invested to earn interest. As indicated by Senator Proxmire on the floor of the Senate on March 27, 1980, during the Senate's consideration of the Monetary Control Act, the purpose of this provision is "to provide a vehicle whereby such foreign currency holdings could be invested in obligations of foreign governments and thereby earn interest. This authority would be used only to purchase such obligations with foreign currencies balances acquired. by the Federal Reserve in the normal course of business" (126 Cong. Rec. S 3168). In my testimony   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The ilonorable David Durenberger Page Two  before the Senate Banking Committee on 6eptember 26, 1979, I indicated that the purpose of the provision was to add to the present list of assets, currently eligible for purchase by the Federal Reserve, short-term government securities so as to enable the Federal Reserve to invest its non-interest bearing foreign currencies in interest bearing obligations. (These earnings are ultimately paid over by the Federal Reserve to the U.S. Treasury.) It was never the intent of the Federal Reserve to use this provision to "bail out" foreign governments that may be in danger of defaulting on their deLts. We believe it is clear that the authority is to be used only in conjunction with the Federal Reserve's normal foreign exchange operations. With respect to purchasing foreign obligations of developing countries, the Federal Reserve has not purchased and has no plans to purchase obligations of developing countries. A3 noted above, the Fecieral Reserve would only buy short-term liquid obligations of foreign governments with currency balances of those foreign countries acquired in connection with foreign exbhange operations in order to earn a return on what would otherwise be non-interest bearing currency holdings. As indicated in the Board's Annual Report, reciprocal currency arrangements exist with the following countries only: Austria, Belgium, Canada, Denmark, England, France, Germany, Italy, Japan, Mexico, the Netherlands, Norway, Sweden, and Switzerland. I hope that this is helpful to you. if I can be of further assistance. Sincerely,  444 GTS:pjt (per telephone request) ucc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please let me know   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  nay 15, 1981  The Honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Govornuent Operations House of Representatives Uashincton, D. C. 20515 Dear Chairman Rosenthal: Thank you for your April 13 letter asking whether consumers must be notified of rate increases that occur in variable rate open-en(7 credit plans before they occiir. Cur staff has discussed this matter at some length ‘j_th Tucker of your staff. In this regard, under the recently revised ne(julation Z, a creditor must disclose in writing before the consumer uses the variable rate account that the rate on the open-end credit plan is subject to change, and the circumstances under which the rate may increase. With this disclosure, the consumer can decide whether or not to rartieipate in the plan (or to continue 'cc participate in the ;.lan, if the variable rate feature is added later on) given the possibility that the rate may vary from time_ to time. Plee,se lot me know if I can be of further assistance Sincerely, t aul A. Voicket  mPE:CO:vcd (#V-119) bcc:  Ms. English Mrs. Mallardi (2)  Ar..A,p4 s. POSF14704AL. P4 V., CHAIPIHIAP4  Action assigned Janet Hart  for  -04 yrnn. JR., MICH . ( .../..-'01AvpiP4Sov. pA. EUGENF STEPtan, L. NEAL. C.  NINETY-`,EVENTH CONGRESS  DOUG PAPP4ARD. JR., GA. PETER A PlEvSIER. N.Y.  Congre55 of tfic Ziniteb 5;)tate5  I. TLC volLUA440. °Hop HAL DALAI. AMMO yrILLIAM P. CL.1140114, 01/ "MPH HOLM/. 11.40  ms000try - (ioz) 223-44o7  3botiEse of Ikepreantatibef COMMERCE, CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D C. 20515  April 13, 1981  Hon. Paul A. Volcker, Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Chairman: I am writing to request a clarification concerning the application of the Truth -in-Lending notice requirements to interest rate changes on credit card and other open-end credit accounts. My concern arises in particular because of the potentially significant development of variable-rate credit card operations in Delaware under that state's newly-enacted Financial Center Development Act. Section 944 of this Delaware law allows credit card plans with floating interest rates that are adjusted automatically according to some schedule or formula. The language of that section is as follows: 944. Variable Rates If the agreement governing the revolving credit plan so provides, the periodic percentage rate or rates of interest under such plan may vary in accordance with a schedule or formula. Such periodic percentage rate or rates may vary from time to time as the rate determined in accordance with such schedule or formula varies and such periodic percentage rate or rates, as so varied, may be made applicable to all outstanding unpaid indebtedness under the plan on or after the effective date of such variation . including any such indebtedness arising out of purchases made or loans obtained prior to such variation in the periodic percentage rate or rates. The Federal Reserve's newly revised Regulation Z provides, in section 226.9, for advance written notice to credit card holders of changes in the terms of their credit, "unless the change has been agreed to by the consumer...." Under credit card contracts that explicitly contemplate a varying interest rate, such as are authorized under the above section of the new Delaware law, how does this exception in the language of section 226.9 apply? More specifically, my questions are:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PA  2 1  When a change in the interest rate is to be made, pursuant to the existi ng variable-rate provision of the contract, is any written notice required by Regulation Z?  2  Must this notice, if required, be given in advance of implementation of the rate change?  3.  If advance notice is not required, is this section of the regulation satisfied by a notice distributed subsequent to the effective date of the adjustment?  4.  If notice subsequent to the rate change is satisfactory, how much time lag is permissible before notice is given?  5.  If no notice of the rate change is required, or if notice subseq uent to the rate change is sufficient to meet the requirement of 226.9, how is this regulatory provision reconciled with the general disclosure objective of the Truth in Lending Act for "meaningful disclosure of credit terms" to facilitate credit shopping and enable consumers to "avoid the uninformed use of credit"?  senthal BSR:tb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • of GOve•di. ..cilo 4/.• 0 i,.. ••01- A • co i-4, -., .•  •0•_, vi' ,. ;., .;-.?-,.•. ...,. z: • -r,  •.e‘.,giu{',"? o‘•-• . ..'/Ki.- : s?. 4'.• •• eRAL RESt. • • •••—•••  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. E. 20551  PAUL A. VOLCKER  May 12, 1981  CHAIRMAN  The Honorable Fernant a. St Germain Chairman Conunittee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman St Germain: Please find enclosed the draft bill we have been discussing to enhance the ability of the regulatory agencies to deal effectively and flexibly with possible problems among thrift institutions during this high interest rate period. I am also enclosing anFwers to the questions you raised in your letter of April 30, 1981, drafted by the relevant agencies. I would, however, particularly note a new provision which has been added to the end of the bill, which would enable the FDIC to sell a large failing bank to an out-of-state bank or bank holding company. The provision would require that the FDIC make extensive attempts to sell the failed bank to another institution first within State and after that in an adjacent State. You will recognize this reflects a long-standing concern of the bank regulators, all of whom would support this provision. However, I recognize we have not discussed its inclusion in this vehicle at any length, and I would like to know whether you think it appropriate to include, or whether it would jeopardize the remainder of the bill. I and the other regulators stand ready to testify or take whatever other steps you feel should happen next, and I hope we can be in contact shortly.  Enclosures  Identical letter to Cong. J. William Stanton   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS m THE ••  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  PAUL A. VOLCKER  •• eRAL.FiCs`\1• ' • • • ..•  CHAIRMAN  May 12, 1981  The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D. C. 20510 Dear Chairman Garn: Please find enclosed the draft bill we have been discussing to enhance the ability of the regulatory agencies to deal effectively and flexibly with possible problems among thrift institutions during this high interest rate period. I would, however, particularly note a new provision which has been added to the end of the bill, which would enable the FDIC to sell a large failing bank to an outof-state bank or bank holding company. The provision would require that the FDIC make extensive attempts to sell the failed bank to another institution first within State and after that in an adjacent State. You will recognize this reflects a long-standing concern of the bank regulators, all of whom would support this provision. However, I recognize we have not discussed its inclusion in this vehicle at any length, and I would like to know whether you think it appropriate to include, or whether it would jeopardize the remainder of the bill. I and the other regulators stand ready to testify or take whatever other steps you feel should happen next, and I hope we can be in contact shortly. Sincerely,  Enclosure Identical letters to Sen. Harrison A, Williams, Jr. and Sen. Alan Cranston  •  N./ - 130  CL4&0L-riNkev-.•. 0f G0Viii , ••.  •••s,-0 4, • 0. \ -Pr • ; ,-......", '''''.1/4.:.: • :::- .P`' A z. ' : "1:, ..--% . ::%',.. 111.111 ../:-'.'• l' e .13.15: •  thtdaitBOARD OF HOVERNORS OF I H E  FEDERAL RESERVE SYSTEM  .. ••• •••• . .'7 .4 • a" ‘,. . • ./ ,'N \ •' :• . V4 f:7,..:2: • ...)101'.41,i0'..e.  WASHINGTON, O. C. 20SSI  May 11, 1981  • •• • • •  The Honorable Joe Skeen House of Representatives Washington, D.C. 20515 Dear Mr. Skeen: On behalf of the Members of the Board, I want to thank you for your letter of April 30 expressing your support for the application of El Pueblo Bancorporation, Espanola, New Mexico, to become a bank holding company by acquiring El Pueblo State Bank, Espanola, New Mexico. Views similar to those you set forth were considered by the Board in acting upon this application. On April 1 the Board determined that approval of the application was not warranted for financial reasons and denied the application. El Pueblo Bancorporation petitioned the Board for reconsideration of its decision, and on April 30, 1981, the Board's General Counsel, acting pursuant to delegated authority, concluded that the petition presented no facts that for good cause shown were not previously presented to the Board and denied the petition. Copies of the Board's denial Order and the letter denying the petition for reconsideration are enclosed for your convenience. Please let me know if I can be of further assistance. Sincerely, (Signed) Donald J. Winn Donald J. Winn Assistant to the Board Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Orrocr BulLoiNci C 23515 202-225-2365  150e LONGWORTH  •  DISTRICT  WAsFoNGTosi  Congre55 of  COMMITTEES  AGRICULTURE  orr.cts  FiroritAL nipLniNci RoswELL. Num Nerw.co 86:01  Zinittb *tato  LAS  FEDERAL BUILDING Coevcrs. Ncw NItx.co  8ROL'  300 W. ApewiNGToo.  SCIENCE AND TECHNOLOGY  3i)oluSe of 3arpre5cntatibes5  FARMINGTON, NEW MO XICO  874. '  SUZANNE LISOLD ADMINISTRATIVE ASSISTANT   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rD -T,  JOESKEEN  c.c3  rvl  April 30, 1981  f°  cn  (;) r.,__,c)  c)r.71 = 1...,.. ezi  173  ;•-• ' ,11 • ."::  3:IC  ..-73 X 7,./.  CO — NJ  The directors of El Pueblo assure me that a favorable ruling would enable them to expand operations, create competition in the industry, and continue to provide for the needs and convenience of its patrons.  Sincerely,  JOE SKEEN Member of Congress  r--  -___  f- 1 ...--  This is to ask that you consider the El Pueblo State Bank of Espanola, New Mexico, in its effort to apply for a One-Bank-Holding Company.  Kind regards.  nic —ic I  --rt rn --,c") ^.-Ivl  Dear Mr. Volcker:  Thank you for your consideration in this matter.  ca  CDn!,  Paul A. Volcker Chairman, Federal Reserve Board of Governors zOth St. & Constitution, N.W. Washington, D. C. 20551  JS/bl  r"  m  2NO DISTRICT. NLW MEXICO  ---,i c)c) rn -ri  7,-.- L-7-)  (...• -, f.,-,  rn m 74 u 7.73 c.,  NM\   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 60 19L1  The Lionorable Henry 21. $41444 Chairman Joint ii,conemic Cormittos oashington. D#C. 20510 1)ear Cbeirman ROUSS; In accordance kith erreagessata that haw ialeu mai.to with your Committee, enclosed is 4 staff report coverimi finarAciel devalopments in the first quarter of 1951, Sincerely, S/Paul A, ValskaL  LlIclosure  cc4  %TLC (alonq with 30 copies of ltr. & rept.) Vice Chalman Jepaen Dan Wall, Howard Maslen (Senate Bkg.) Paul imelson, Jim Sivon, Graham Northup Glouse fioweret Lee (Do?;,estic Nonetary Policy Subcmte. of liouse Saataxilasitexxi Greg Wilson (iiouse Bkg.)  r, •  )  PB:pjt bcc: Paul ,,oltz Mrs. Mallardi (2)  -4  INNve . 1%.64.4b: V  ..•'  GOvtii  BOARD OF GOVERNORS  ( /3 1)  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  May 7, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Charles W. Stenholm House of Representatives Washington, D.C. 20515 Dear Mr. Stenholm: Thank you for your letter of April 27 requesting comment on correspondence you received from your constituent, Mrs. J. C. Dudley of Abilene, Texas, regarding the Monetary Control Act. It is important to understand that the original Federal Reserve Act, enacted in 1913, permitted the Federal Reserve to purchase various types of securities in the open market. At that time we were permitted to purchase U. S. Government and agency securities, bankers' acceptances, bills of exchange, and certain short-term State and local government securities. The purpose of this authority originally was to provide Reserve Banks with the opportunity to earn a return on their funds. There was never any indication that the authority was to be used to "monetize" the debts of private organizations and State and local governments, and we can assure you that we have no intention of doing so. Indeed, virtually all of our securities holdings consist of U. S. Government and agency obligations ($124 billion) purchased in conjunction with open market operations and in the course of issuing Federal Reserve notes. The Monetary Control Act of 1980 (P.L. 96-221) did amend the open market authority of the Federal Reserve to permit us also to purchase obligations of foreign governments and their agencies. The legislative history of the Act indicates that Congress intended this authority to be used only in conjunction with the Federal Reserve's normal activities in the foreign exchange market. In the course of foreign exchange operations, the Federal Reserve from time to time acquires balances in foreign currencies. Prior to the passage of the Monetary Control Act, there was no convenient way in which foreign currencies held by the Federal Reserve could be invested to earn interest. As indicated by Senator Proxmire on the floor of the Senate on March 27, 1980, during the Senate's consideration of the Monetary Control Act, the purpose of this provision is "to provide a vehicle whereby such foreign currency holdings could be invested in obligations of foreign governments and thereby earn interest. This authority   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Tbe Hancrale Carl. Two  ' II  :Aenho'.1,1  _Lii L() i.urcase :,uch obligationL.. with foreign currLncies ;Jalinces acquired by the Federal Reerve in the normal course of busines" (126 gong. Rec. S 3168). In my testimony before the :enate Banking Cor.mittec on September 26, 1979, I indicated that the purpose of the provision was to add to the present list of assets, currently eligible for purchase by the Federal Reserve, short-term government securities so as to enable the Federal Resc:rve tc invest its non-interest bearina foreign currencies in interest bearing obligations. (These earnings are ultimately paici over by the Fe6eral Reserve to t_le U. S. Treasury.) It was never the intent of the Federal Reserve to use this provision to "bail out" foreign governments that may be in danr7er o defaulting on their debts. e believe it is clear that the authority is to be use& only in conjunction with the Fe0eral Reserve's normal foreign exchanae operations. With respect to purchasing foreion obligations of developing countries, the Federal Reserve hns not purchnseJ and has no plans to purchase obligations of developing countries. A3 noted 31.)cve, the Federal Reserve would only buy short-t erm liquid obligations of foreign governments with currency balances oi these foreign countries acquired in connection with foreign cFcrations in order to earn a return on what would otherWijO be ',on interest bearing currency holdinas. As incacatec: in the Board's Annual Report, reciprocal currency arrangements exist with the following countries: Austria, Belaiur,, Canada, Denmark, England, France, Germany, Italy, Japan, Eexico, the Netherlands, Norway, Sweden, and Switzerland. I hor)e that this is helpful to you. if I can be of further assistance. Sincerely,  Sgaul A, Volcker  Y-  (GTS:)CO:pjt (4131) bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please let r.e know  DISTmICT  ,HARLLS W. STEN140._NI 4 17TH DISTRICT  orriarSi  P.O. !lox 123) STAMr0T19, TexAs 7953  TEXAS  (915) 773-3623 WATHINGTOMorricr  12.32 Loodaworcn4 Nous, Orricr 13. .L0ING WasHip4c7c,D C. 20315  Congre55 of tije Uniteb  (202) :25-6605  3Dou5e of ikepregentatibe5  co,...wrvrrS, AGF;c . LTuRC  Utlasbington, ae. 20315  tatt5  P 0 Box 1101 79634 AsiurP4c. (915, 673-7221  SMALL DuSINESS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tj  c:31 --, -1-1 __ r'')  rr 1  April 27, 1981  (-_-) •••rt rr. .....1 c--) --7 . rrl  "1„---; r-,r-;3 :r..C111  ..--,  -, r •11  cc, CO  ;'..1  .1r,  3( =i ""41C  i CD  ,.... -•-  (0 r.  1.. a C:i  --- r-1 C)  c;) . • -1 ....c.) 7,:111.^,-  2:2  at  ...-..r,i< rrl r rl 2?  53  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue Washin,,, ,ton, DC 20551  (  U'I  Dear Nr. Chairman: Enclosed please find a letter from a constituent of mine, Mrs. J. C. Dudley of Abilene, Texas, addressing some concerns that she has about gonetary Control Act. I would appreciate having your analysis of this portion of the Act and your response to her concerns. Thank you for your attention to this matter and I look forward to hearing from 'you. With warm regards, I remain Sincerely yours,  < Charles W. Stenholm Member of Congress CWS:sbb Enclosure  •  C -3  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •r"  4-  I  • :' v  4-  1  t-  4-  •  -r infl2itior.ary,hs :-oten*.ial for selling us 71:'Id in  1.• 1-  cm:h a nc'entially vc,u ic,t it pass  •  ...V  !.(1  .1  T_,71W  7 t , V1-)  fl •:  •  • .  .  and  •  nay 7, 1981  The i,onoraLle Tom Daschle riouse of Representatives hashington, D.C. 20515 Dear Mr. oaschle: Thank you for your letter of April 14, concerning the continued deferral of rcserve requirements for small depository institutions. On April 24, 1981, the Board agreed to continue this ‘leferral for another six months. A copy of the Board's announcent is enclosed for your information. While we believe that continued deferral is desirable in order to ease the burdens placed on these institutions as well as Federal Reserve Banks, it is our view that legislation is necessary in order to make this deferral permanent. The Loard Idelieves that Congress should give serious c.onsideration to a permanent exeption for small institutions since ionetary control would not be appreciably improved by subjecting them to the reporting and reserve requirement provisions oi the Monetary Control Act. I appreciate your expression of support for the Board's efforts to reduce tne regulatory burden imposed on depository in6titutiuns. Sincerely,  S/Paul  Enclosure (p.r. dtd. 4/24/81) GTS:pjt (4V-125) bcc: Gil Schwartz G.C. 4150 Mrs. Mallardi (2) Legal Rucords (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Vo!au  vailmaivr  •  *  &ALAI'  ••  If',  Action assigna Mr. Petersen  TOM DASCHLE  DISTRICT OFFICES•  1.ST DISTRICT. SOUTH DAKOTA  800 SOUTH CLIFF  CONIMITTFFS:  Box 1274  AGRICULTURE VETERANS' AFFAIRS 439 CANNON OFFIrr [WILDING WASMNGTON, C. 20515 (202) 225-2801 TOLL-FREE 1-800-424-9094   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sioux FALLS. SOUTH DAKOTA  57101  (605) 334-9596  Congres5 of the Elniteb f-7)tatr5 jDoufq of AeprefSentatibe5  310 SOUTH LINCOLN ABERDEEN, SOUTH DAKOTA  57401  (605) 225-8823  filagbingtort, D.C. 20515 April 14, 1981 Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th and Constitution Avenue, NW Washington, D.C. 20551  tts cc)  C::  17:11  :,r34—  soC, rri 4-2 rn < rn CP  Dear Chairman Volcker:  r`a  ).00 -n -41 .C.f) 73= -  .c.r •-  it  I am writing to recommend favorable consideration by L.) the Board of Governors during the upcoming Azgi..1,2-3rPT meeting of the continued deferral of the effective date for compliance with the requirements of Regulation D for federal credit unions with deposits of less than $2,000,000 It is my understanding the effective date for compliance with Regulation D requirements has previously been deferred until May 1, 1981. This was, I believe, a prudent decision and inasmuch as the underlying conditrons which prompted deferral previously are essentially unchanged, I believe continued deferral at this time is both appropriate and desirable.  (01  27 .  (11 4  30 C.'"'  If, however, the Board of Governors believes continued deferral for all such institutions is not possible, I recommend the Board consider further delineation on the basis of total deposits among such institutions with deposits of less than $2,000,000. With further delineation, the Board could continue deferral of the effective date of compliance for those institutions which are least able and which will be most burdened by compliance at this time. Additionally, I urge the Board to continue its efforts to insure the objectives of the Financial Regulation Simplification Act of 1980, particularly the specific objectives of Section 803. With best regards, I am Sinc rely,  mbe  chle of Congress  'antes woifp Thet..4 . Miati4A: (Well 2)  May 7, 1981 Hon. Jo4n Pieiell , Cnairian Committee on Energy and Commerce U. S. House of Representatives Rayburn House Office Building Washington, O. C. 70515 Dear Chalmers Dingell: This is in response to your request for the Board's views on H.R. 2n79, a bill to provide uniform 'virgin requirenents to the acquisition of securities of U. S. corporations by foreign persons using credit obtained from foreien lenders. On February 26, Covernor Partee testified on behalf of the Uoard on H.R. 1294, a bill that would make it unlawful for a foreign lender to extend credit and for a foreign national to obtain credit in excess of the 3oard's nar(!in requirements when that credit would finance certain acquisitions of U. S. securities -- specifically when a section 13(d) or 14(d) statetgent is required to tle filel under the Securities Exchanne Act in connection with the acquisition of 5 percent or more of the equity securities of a publicly-held conpany. At that tioe, the Koard voiced concern AS to the effect of the proposed bill on U. S. relations with foreign govern-eots and foreign financial institutions and suggested deletinn of the erovision that would make it unlawful for a foreign hank or other lender to lend on terms different from United States margin requirements. The 9oard is gratified that this provision has been omitted from H. R. 2679. H.R. 2879 would aclenrt section 7(f) of the Securities Exchange Act by enlarging the categories of persons covered by the prohibitions of section 7 to include all foreign persons who nbtain credit to nurchase or carry any United States securities anywhere in the world. The legislation would also broaden the Board's authority to exempt any class of persons from its margin requirements. The present legislation is directed to remedy a perceived inequity between dwestic and foreign borrowers who are purchasing O. S. securities. Although we wmpathize with this goal, we believe it would be unrealistic to assurse that the Board's margin regulations could *(1 applied to every security transaction occurring abroad that involves a purchase of U. S. securities. For exaople, in the usual situation it is doubtful that We would even know if a foreign national borrowed from a foreign bank to purchase a nominal amount of the securities nf a 0. S. corporation. In the Board's minion. a sienificant U. S. nexus must be present in order to apply its regulations. In this   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Hon. John D. DinvIell  -2-  respect, ti.k. 1294 would specifically provide such a nexus -- that is, the Board's credit limitations would only apply where a section 13(d) or 14(d) statement is required to be filed. If H.R. 2879 is enacted in its present form the Board would consider using its exemptive authority to adopt the sane or a similar test. In addition, as indicated in tlovernor Partee's 1 tter of March 13, 1931 to Congressman Wirth, Chairman of the Subcommittee nn Telecommunications, Consumer Protection and Finance. the Congress may wish to reconsider that section of the bill that provides for a nrivate right of action. As drafted, the bill would appear to provide a private right of action for tarrjet companies or those injured by corporate takeover bids involvinn foreine buyers. Since the basic thrust of H.R. 2879 is to provide equal treatment between foreign borrowers and U. S. borrowers, the Congress minht also want to help assure this result by making the private cause of action provision applicable to the entire section instead of just subsection (f). The Connress would thereby clarify its intent as to access to the courts by any person to seek redress for injuries suffered as a result of violations of the nargin regulations by foreign or domestic persons. We hope the above comrlents will he helpful to the Committee's consideration of this bill. Sincerely. Sgagi A. Voickec  IRSP:gt - #112  Action assigned Mr. Plotkin  NINIETY•SEVC-NTIE CONGRESS  ..04W  ..1044N D. 011.4GELL. MICH., CHAIRMAN  JAMES H scut-tam. N.Y. RICHARD L. OTTINGIII, N.v. HE `41.IY A, WAX*,AN CALIF.  JAMES T. BROYHILL N.C. CLARENCE J. •ROWN, OHIO JAVII S M. C.OLLINS. TEX. NORMAN F. LENT. N Y.  T!%4.5THY E. V1 MTH. COLD. PHILJP P. SHARP. IND. JAPAIS rLoPlutp. N.J. ANTHONY TOBY MOFFETT, CONN. JIM SANTINI. NEV. EDWARD J. MARKEY. MASS. THOM A S A LUX EN, OHIO 004/G WALGREN, PA. ALBERT GORE, JR.. TENN. BARBARA A. MIFOLS041, MD. RONALD M. r.4 crrrt. OHIO PHIL GRAMM, TEX. AL SWIFT. WASH. MICKEY LELAND. TEX. RICHARD C. SHELBY. ALA.  II2WARD P. MADIGAN. ILL. C A RI. OS J. MOORHLAO. caur. MATTHEW J. RiNALDO. MARC L. 4.4ARKS. PA. TOm CORCORAN, ILL. GARY A. LEE. N.Y. WILLIAM E. OANNEMETER, c.ALir.  Doe  WHITTAKER. KANS. THOMAS J. TAL/KE. IOWA DON RITTER. PA. HA MOLD ROG E RS, KY.  BOARD  EL*. 31)ouse  Committee on Cnergr anb ectnmetityei npii  rim 10: 49  Z2laisbington, D.C. 20_515  OFFICE (7!Crrill: . -.1FCAIRMAN  CLIVE BENEDICT, W. VA. DANIEL R. C.OATS. THOMAS J. BLILEY, JR., VA.  March 31, 1981  POTTER, J R.  CHIEF COUN3(1. AND   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _2  oorri 2123. Ilarburn il,,ouse Offitt Nuithing  C.ARDISS COLLINS. ILL. MIKE SYNAPI. OKLA. W. J. "SULLY — TA.UZIN. LA. PON WYDEN. oRcre. RALPH NI. NALL TEX. PRANK M  of  r:OVERNORS C:- ihE ilepregentatibeff.EAL.TiESErlE SYS':"  STA/r  RIECTOR  TO:  Office of Management and Budget Securities and Exchange Commission Federal Reserve Board  FROM:  JOHN D. DINGELL CHAIRMAN  Your views are requested on the enclosed bill, H. R. 2879, to amend the Securities Exchange Act of 1934 to provide uniform margin requirements in transactions involving the acquisition of securities of certain United States corporations by foreign persons where such acquisition is financed by a foreign lender. The Subcommittee on Telecommunications, Consumer Protection, and Finance will hold a second day of hearings (April 2, 1981) on similar legislation. Accordingly, your expeditious attention to this request and your reply in triplicate will be appreciated.  JDD:jmcl Enclosures  10•11100.• ...••••:14#$1\  r •• •• 0•  ▪  •  sEssio, H.R.2879 9711isT"""E" To amend the Securities Exchange Act of 19:34 to provide uniform ninrgin requirements in transactions involving the acquisition of securities of certain r ilit ed States rorporations bv foreign persons where such acquisition is financed hv a foreign lender.  IN THE HOUSE OF REPRESENTATIVES 11Aucii 26, 1981 Mr. COLLINS  Of  ar•'"*.; '• aie s t io ) ;„..  Texas introduced the following bill; which was referred to the Committee on Energy and Commerce  A BILL  •  • 44.  1 , 174.-  To amend the Securities Exchange Act of 1934 to provide uniform margin requirements in transactions involving the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  acquisition of securities of certain United States corporations by foreign persons where such acquisition is financed by a foreign lender. 1  1  .  -• sr - ••••  r .• .  Be it enacted by the Senate and House of Representa-  2 lives of the United States of America in Congress assenibled, 3 That (a) Section 7(f) of the Securities Exchange Act of 1934  t• tA  .e  .• ••  •.  . " 4" " *  4 (15 U.S.C. 78g(0) is amended-  ikro•  Nre..1.444 .t 1444.  5 6  (1) by redesignating paragraphs (2) and (:3) as paragraphs (3) and (4), respectively; and  fi„   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •)  1  (2) bv inserting- after paragraph (1) the following -Tv- -  Pr  new paragraph: :3  "(2)(A) It is unlawful for alIV person not subject to para-  4 graph (1) of this subsection to obtain, receive, or use the  5 proceeds of a loan or other extension of credit from 1111V 6 lender (without regard to whether the lender's office or place 7 of business is in a State or the transaction occurred in whole  "or  8 or in part within a State) for the purpose of (i) purchasing or 9 carrying United States securities, or (ii) purchasing or carry10 ing within the United States of any other securities, if under 11 this section or rules and regulations prescribed thereunder, Immominommomml;moirm....  19 the loan or other credit transaction is prohibited or would be :  13 prohibited if it had been made or the transaction had other14 wise occurred in a lender's office or other place of business in 15 a State. 16  "(B) Any United States person injured or threatened  17 with injury by reason of a violation of this paragraph and any  4.j - o.. •  '11  .  18 person whose securities are being purchased or carried may 19 bring- an action in the appropriate district court of the United 20 States, or in the appropriate United States court of any terri21 tory or other place subject to the jurisdiction of the United  ,  22 States, to recover damages for such injury or to enjoin such a 23 violation.". 24  (b) Paragraph (i) of section 7(f) of the Securities Ex-  25 change Act of 1934, as redesignated by subsection (a) of this  if  2S79— h  ow%  •  :3 1 section, is amended by striking out "Ifnited States persons or  2 foreign persons controlled bv a United States person" and 3 inserting in lieu thereof "persons". 4  0111101••••••••••■••.-  SEC. 2. The amendments made by this Act take effect  5 on March  , 1981, and the provisions of paragraph (2) of  6 section 7(f) of the Securities Exchange Act of 1934, as so  rimifirAidift.alalL•* ir Ni.•" 4;: ' 6 92W14,9f;  .7:4%  1  7 amended, shall apply to any purchase of securities occurring 8 on or after such date and to the carrying of such securities on 9 or after such date, if the loan or extension of credit therefor  • ••••••  10 originated on or after such date or if the loan proceeds used  'oP  •  or: i tb . 40 04, wit *4 .  11 to purchase or carry such securities were disbursed on or  N  12 after such date.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0  Nawa.44F0.4.,  '  • .•  •  ..2rk  •-•  •.  -  r  •  ...teralt.., 1111/11.  li.R. 2$79—ih   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 17, 1981  The Honorable Daniel X. Inouye United States Senate Washington, D. C. 20510 Dear Senator Inouye: lecently a group of Hawaiian thrift institutions requested that the Doard extend a waiver, qranted originally in October 1980, from certan reserve requirements of the :7onetary Control Act of 1920. The Poard has determined to extend the waiver of reserve requirements cjranted in October until Decomer 30, 1981, in order to provIde a full logiclative session for the matter to Le con:Adered by Congref7s. The noard appreciates your interest in this matter and havinc received. the benefit of your views. Sincerely,  PSP:WRM:vcd (#V-73) bcc:  Mr. Schwartz Mr. Pilecki Legal Records (2) Mrs. Mallardi (2)v ,  OAVIELK.INOUYE  Action assigned Mr. Petersen   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PRIVr•  Fl"r0OAL  ROos4 6104. 3:1^ A.-4,  'NW  1100401 11111  ntrt  -)AN• (Urn pr,a50  (808) 546-7550  fez ROOM 101, ROSCFLL r1rNATE SUILDING WASHINGTON. C) C. 2C510 (202) 224-3934  March 11, 1981  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20SS1 Dear Chairman Volcker: I again most respectfully urge that the Federal Reserve give its serious consideration to the recent request by Hawaii's savings and loan associations for an additional exemption from holding reserve requirements under the Monetary Control Act of 1980. As you know, tho Monetary Control Act provides a special five-year delay For Hawaiian state -chartered institutions prior to the start of an eight -year phase -in of reserve requirements For non-member institutions of the Federal Reserve System. This special transition rule was designed to alleviate the capital shortage problem in Hawaii lnd to minimi:e the impact of delays in bank services resulting from Hawaii's vast distance from thc rest of the Federal Reserve System: The initial Monetary Control Act reserve requirement legislation was drafted to apply only to commercial hanks However, during thc final stages of this legislation, the Conference Committee added reserve requirements to tho Monetary Control Act and extended the reserve requirements and transition rules to all financial institutions. Unfortunately, there was very little time to revicw this action before final passage of the loonetary Control Act, and thus six of Hawaii's largest savings and loan associations were required to hold reserves contrary to the legislative history and the initial intent of the Act. As a result of these reserve requirements, Hawaii's six largest savings and loan associations will be holding approximately $44,820,000 in reserves by the end of the five-year transition period. This reserve requirement rule would remove S33,580,000 from Hawaii's economy.  •  •/I ,  411  ..••••   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  MI. . Paul A. Volcker 'Thrch 11, 11 •  Given the relatively small size of Hawaii's economy and the fact that Hawaii remains a capital -short arca, withdrawal of such a large amount of money, especially when the reverse multiplier effect is taken into account, will have a significant negative impact on the economy of Hawaii. The exclusion of Hawaii's largest savings and loans from the five-year delay extended to Hawaii's largest banks creates the same problem that the special transition rule was designed to avoid. Not onlv would the immediate phase-in of reserve requirements for these savings and loan associations freeze needed capital in the State of Hawaii, but it would also place six of Hawaii's savings and loan associations at a competitive disadvantage with state -chartered thrifts and state -chartered banks that qualify for the five-year delay in reserve requirements. Fortunately, the Board of Governors of the Federal Reserve System in late October 1980 granted Hawaii's six largest savings and loan associations a six-month exemption From holding reserve requirements. I, as well as Hawaii's thrift institutions, am extremely grateful for this action on the part of the Federal Reserve Board. As you may know, the members of Hawaii's Congressional delegation and the House and Senate Banking Committees have explored the feasibility of remedial legislation in both the past and present Congress. It is the view of Hawaii's Congressional delegation that the special transition rule, with the five-year delay period, should apply equally to all thrift institutions in Hawaii. However, on each attempt to resolve this matter, we have been advised against socking legislative remedy for fear that remedial legislation For Hawaii's financial institutions would serve as a vehicle for amendments curbing or repealing thc general reserve requirements. Hawaii's Congressional delegation has been reluctant to precipitate legislation that would undermine the reserve requirement provisions of the Monetary Control Act of 1980. Thus, up until the present time, we have refrained from introducing and pressing for legislation to correct the unintended and disadvantageous effect currently faced by most of Hawaii's thrift institutions.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I . Jul A. Volcker !I, 1981 Page 3  We will continue to seek legislative relief to this problem. However, it will take a great deal more time than the initial six-month exemption to successfully resolve this matter. In the meantime, I request your favorable consideration of a request by six of Hawaii's savings and loan associationF for an additional, and if possible longer, extension from holding reserve requirements under the Monetary Control Act of 1980. Favorable action on tho part of tho Federal Reserve Board will provide Hawaii's delegation with the necessary time to successfully implement legislation to alleviate this problem. Thank you for your consideration of this matter.  DANIEL K. INOUYE United States Se DKI:vqbf
Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102