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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
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Federal Reserve Bank of St. Louis
Congressional
May-June 1981
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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)/
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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.
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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
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Honorable Paul Volcker
Chairman
Board of Governors
Federal Reserve System
Washington, D. C. 20551
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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.
•••••••
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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.
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BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
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WASHINGTON, D. C. 20E51
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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
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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
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Mr. Kichline
Mrs. Mallardi (2)
Vo'chat
Please let me know if
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ED JONES
Rook,
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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
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HOUSE SERVICES
June
17, 1981
01'
Chairman Paul A. Volcker
Federal Reserve System
Federal Reserve Building
Washington, D.C. 20551
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Dear Mr. Chairman:
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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
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April 30, 1981
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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
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Federal Reserve Bank of St. Louis
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WASHINGTON, O. C. 20551
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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.
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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
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Federal Reserve Bank of St. Louis
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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
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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
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Enclosure
PLEASE REPLY TO:
0
IDAHO FALLS Orricc
211 FEDF RAL BUILDING
IDAHO FALLS
83401
(208) 522-9779
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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
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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
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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.
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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.
KK:mj
Encl.
sa.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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payment (1'1) = .50
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rayments (r;
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ciai
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single
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trc 'Tor thc
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June 10, 1981
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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
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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
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AR1,401 L imunnano. JR
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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.
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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
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•
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.
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Dear Mr. Volcker:
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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
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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
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COMMITTEES
BUDGET
BANK ING. FINANCE AND
URBAN AFFAIRS
•
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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.
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The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to personally identifiable information.
Citation Information
Document Type: 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
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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)
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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.
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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
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Indonesia
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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
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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
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•
•
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331
FiCARD
deposits from Middle
In foreign brandies?
'.
•
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FEDERAL RESERVE SYSTEM
!,
the total for foreizn
•••• ,•••
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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.•
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F. E. Coldwell
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BOARD OF GOVERNORS
OF THE
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 2055I
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••• •••
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
•
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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
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t
The Honorable Paul A. Volcker
Chairman
Board of Governors of the
Federal Peserve System
Washington, D. C. 20551
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Dear Chairman Volcker:
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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
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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
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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
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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
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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
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FEDERAL RESERVE SYSTEM
KJ,:4p
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WASHINGTON, D. C. 20551
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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.
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ERNEST r. NOLL INGS. S.C.
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JOSIFH R. RIDfN. IR.. DIM.
1 SENNETT JOHNSTON. LA.
JIM SASSFR. T1NN
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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
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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,
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Ernest y Hollings
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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
• ••
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BOARD OF GOVERNORS
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WASHINGTON, O. C. 20551
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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./
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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)
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Federal Reserve Bank of St. Louis
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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,
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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
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May 7, 1981
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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.
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Federal Reserve Bank of St. Louis
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Please give this issue your personal attention.
Thank you.
Si
ly,
A.„/,
Lee H. Hamilton
Chairman
Subcommittee on Economic Goals
and Intergovernmental Affairs
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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
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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."
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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.
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Federal Reserve Bank of St. Louis
2
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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.
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Federal Reserve Bank of St. Louis
It
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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:
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Ms. Warellime
Mallardi (2'
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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
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Enclosed are a resume and letters of recommendation 5;
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for Hal K. Bird, who wishes to be considered for an
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internship at the Federal Reserve Board for the summer of 7:
1982.
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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
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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
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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. Bird
HKB:bo
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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
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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
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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
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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
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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
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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°
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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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
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Chrmn. Volcker
ED JON,Allt TENN..
CHAIRMAN
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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
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The Honorable Paul A. Volcker
Chairman, Board of Governors
of the Federal Reserve System
Federal Reserve Building
Washington, D. C.
20551
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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
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WASHINGTON, D. C. 20551
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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
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Federal Reserve Bank of St. Louis
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Fundinc Debts of l'oland, t.:t
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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,::;'
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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
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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
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JERRY B. Mc KENNEY. M D.
HUMPHRE •
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KEN T UC KY
42459
TiLEPHoNE 333-5521
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MaY 7, 1981
Carroll Hubbard
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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
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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
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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
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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
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Action assigned to Ms. Hart.
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VICE CHAIRMAN
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WILLIAM V. ROTH. JR
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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
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Dear Mr. Volcker:
an
.
C.A.)
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Col
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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?
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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
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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:
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"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—
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.....•••••••••."
"
7
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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 *
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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.'
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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
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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
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May 18, 1981
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Honorable Paul A. Volcker
Chairman
Federal Reserve Board
20th and Constitution Avenue
Washington, D. C. 20551
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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
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)N.TENN
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TINES
VIC.1 P14,
ExiI(
April 30, 1981
fi)41 A
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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
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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.
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ERNON 1).0 K
Alin
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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.
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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.
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ALAN CRANSTON, cAur.
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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
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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
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MadingtOnt 0.e.
DISTRICT OFFICE:
o
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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
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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
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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
_
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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
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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
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HOMECRAFT,
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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
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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
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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
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OBY e0TH
Member of Congress
126 N. Oneida St.
Appleton, Wis. 54911
FTS 362-6220
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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
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Donald H. Hietpas
Exc. Vice-President
P.S. Put yourself in our place!
AUTHORIZED DEALER
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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:
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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
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BEARFOOT CORPORATION
VVAD!iVVOR T1-0. 00-110 442F11
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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
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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
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DISTRICT. CALIFORYIA
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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
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Chairman
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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
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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.
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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
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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
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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)
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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
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WASHINGTON OTTICF•
1223 LCINGWORTH HOUSE OEFICE BUILDING
No response necessary
TittcrtioNa (202) 225-5231
COMMITTEES,
JUDICIARY
Congre55 of Or
INTERIOR AND
INSULAR AFFAIRS
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
DISTRICT orrice,
FEDERAL BUILDING
AKRON, OHIO 44)03
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May 26, 1981
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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
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THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS
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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
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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
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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)
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Mr. Ryan
Mr. Talley
Mrs. Mallarai (2)Y/
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RON PAUL. 7EX.
JON HINSON, MISS.
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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
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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
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DOB LOFTUS, STAFF L.RC.CTOR
Or THE
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
IrLrrisc.Nr,
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Federal Reserve Bank of St. Louis
2328
NINETY-SEVENTH CONGRESS
1NASHINGTON, D.C. 20515
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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.
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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)
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May 5, 1981 4
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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
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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,
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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.
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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
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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
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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)
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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:
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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
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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
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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•
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• • • ..•
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
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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
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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
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JOESKEEN
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April 30, 1981
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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
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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
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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
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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.)
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PB:pjt
bcc: Paul ,,oltz
Mrs. Mallardi (2)
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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.
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_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
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Utlasbington, ae. 20315
tatt5
P 0 Box 1101
79634
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(915, 673-7221
SMALL DuSINESS
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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53
Mr. Paul A. Volcker
Chairman
Board of Governors of
the Federal Reserve System
Federal Reserve Building
Constitution Avenue
Washin,,,
,ton, DC 20551
(
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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
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Federal Reserve Bank of St. Louis
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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)
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bcc: Gil Schwartz
G.C. 4150
Mrs. Mallardi (2)
Legal Rucords (2)
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Federal Reserve Bank of St. Louis
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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
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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
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Dear Chairman Volcker:
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I am writing to recommend favorable consideration by
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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.
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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,
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of Congress
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(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
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
Hon. John D. DinvIell
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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
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Committee on Cnergr anb ectnmetityei npii
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Z2laisbington, D.C. 20_515
OFFICE (7!Crrill:
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-.1FCAIRMAN
CLIVE BENEDICT, W. VA.
DANIEL R. C.OATS.
THOMAS J. BLILEY, JR., VA.
March 31, 1981
POTTER, J R.
CHIEF COUN3(1. AND
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Federal Reserve Bank of St. Louis
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C.ARDISS COLLINS. ILL.
MIKE SYNAPI. OKLA.
W. J. "SULLY — TA.UZIN. LA.
PON WYDEN. oRcre.
RALPH NI. NALL TEX.
PRANK M
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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
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sEssio, H.R.2879
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To amend the Securities Exchange Act of 19:34 to provide uniform ninrgin
requirements in transactions involving the acquisition of securities of certain
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States rorporations bv foreign persons where such acquisition is
financed hv a foreign lender.
IN THE HOUSE OF REPRESENTATIVES
11Aucii 26, 1981
Mr. COLLINS
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Committee on Energy and Commerce
A BILL
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To amend the Securities Exchange Act of 1934 to provide
uniform margin requirements in transactions involving the
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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.
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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
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(1) by redesignating paragraphs (2) and (:3) as
paragraphs (3) and (4), respectively; and
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Federal Reserve Bank of St. Louis
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(2) bv inserting- after paragraph (1) the following
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new paragraph:
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"(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
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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
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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".
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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
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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
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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
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Federal Reserve Bank of St. Louis
PRIVr•
Fl"r0OAL
ROos4 6104. 3:1^ A.-4,
'NW
1100401 11111
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(808) 546-7550
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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.
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Federal Reserve Bank of St. Louis
MI. . Paul A. Volcker
'Thrch 11, 11
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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.
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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
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