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r https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Collection: Paul A. Volcker Papers Call Number: MC279 Box 12 Preferred Citation: Congressional Correspondence, May-June 1982 [Folder 21; Paul A. Volcker Papers, Box 12; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c453 and https://fraser.stlouisfed.org/archival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. They further agree to request permission of the Princeton University Library (and pay any fees, if applicable) if they plan to publish, broadcast, or otherwise disseminate this material. This includes all forms of electronic distribution. Copyright The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions of copyrighted material. Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or other reproduction is not to be "used for any purpose other than private study, scholarship or research." If a user makes a request for, or later uses, a photocopy or other reproduction for purposes not permitted as fair use under the copyright law of the United States, that user may be liable for copyright infringement. Policy on Digitized Collections Digitized collections are made accessible for research purposes. Princeton University has indicated what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids. However, due to the nature of archival collections, it is not always possible to identify this information. Princeton University is eager to hear from any rights owners, so that it may provide accurate information. When a rights issue needs to be addressed, upon request Princeton University will remove the material from public view while it reviews the claim. Inquiries about this material can be directed to: Seeley G. Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) muddaprinceton.edu https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 1, 1982 The Honorable Jim Weaver Chairman Subcommittee on Forests Committee on Agriculture House of Representatives 20515 Washington, D.C. Dear Chairman Weaver: Thank you for your letter of August 24 inviting the Board to appear before your Subcommittee at hearings on the economic outlook of the housing and forest products industries. I am pleased to let you know that Governor Lyle E. Gramley is looking forward to being with you on Thursday, September 16, at 10:00 a.m. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, CO:pjt (#V-201) bcc: Gov. Gramley Mr. Kichline Mrs. Mallardi (2)/ 0•1‘k, oxy 24, 1202 The iliboorable ihrmos CheIrian Joiat 1110041111,ke CMISItteit VaaniagOos. D. c. 20314 Deer Mr. Chairman: 1 so responding to your Lotus Od Say 12 regerdAng the ettletode of the PoSeral Open Market Committee toast el Longroeeional revalution reietlag to meoetegy psUcy. I ma, ot coast*, were at the lampuage adopood by the Loss es4 isaito t Cuasitteeo is that rot. t 'debt addf too, that I as Unit* 01 as iota' opiates regwested og given to °)astity • refusal to ousply with a Coagresetanal dlroottwe.' Comtittee• at ray !swats did iliaasse the irossurbi gseettes xn the teem of its asettag ee May 111 I was ealtrod to orsatirn to yt3u the toil usdetstasdieg of all imbue that tb. todowei Iseittv* ie a *sootiest of Cowesa and teapeasAttla to It, that tftit comets** Saintly Ms the Conatittailoahl authority end the tight te dete.wate. the oontrol of alorvYs that the System Ls sobleet teCompressiesal owercloght end, of COOLS., 11,111 follow the law. I sada" predeoessors L41,0# as you note, oenitistently expeessed oar views Le that vein. As yow WNW, 0.111titea tee delegated the presses of ssestAiry poliySerssLatios est isplawastatles to the Federal Ilieerire algae the Paisaral lisaterre Act was otigisally passed '=',84 1,I3. Us present isetitearecieraisants refloat in ay siOn• the tylief of the Caswell* that the pebils iateceet le *wired by es istatztstIonal witting that can aumblas appecksised laisammt sad tosioaal reprootatatios in its auteraiap botlies. sad aositiseity is +Impost esaipsis, with a tier talc* ilifiaatisas free tratsaiest pantos& isflesiwass. A fester ill that ea is teasgsities that staietary pol y asslipsilsted tad abort- tiktlii at putiess peripose could have petsatiany allserse topercosattill• tee UN OfestaWil. *tie I ;weaselly Welleve those eessidetatiese rosaio wend Way, Confrossi, of 'micas, eon at any tine datonatae to ehaege theft arteognocnta. I hew* also otesomed ropeetedly Wit the 1414e1e1 altelccle ast000t sad does set ma. se tsplasioat ametaty volley with asohamioal riC4ity, as without esselderatios eit a wide vaataty of relevaat fastois. In selootiag our targets fax mow emorth anti La toseyia, out our eperot.i4as from leek to week oz month to 'loath, we ate *ileitist el the tteancial https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MiaA.4a3ie garP*90 Twc Irte S. ae an0 isoonom.x eavitortmest, cett.nly laclui.5!.ng, **cog OCA4v lactcrs., the posture of fiaoal pt,licy. Thus, you may tie vimptod that the Paele-A; ae**F166 ciiiketul attention to the .iripIicatiQos 40 tfty coiling* lo the budgetary outlook as it evolvaa. That, as t nederstentl It, is the seat* a the Language is tie40 plopoW ,esclot4v,ni en4 1 oaa &sours you the Pe.dasol Opes Illarket Comaittse. a* abeam will gave fall ettert, ,, te any Congressioael resolution cortosiniag our sespnaisibilAidte. Zr the Itgat of thet general understanding, it skimmed to me afteemaasty and inappropriate to call a tiOnial VOL, k-in a hypotetcal tesolutlari of the floot yoe In eff:rting cut tageogrition of the altsete amtb4rtty of the Congraris ov*r the !Newel Resel:ve, 1 wow:A *leo add that itottat4 by the Congress to. indicate iv' viirevt 4 speelfc ooerse foe nowitery policy, such 46 a precise moaetary teivet, w014 be a 64/vision of greet softest, fot t Congress, an for the Pelletal Seeityve. It would. SA effect, move toweiet altift.log d/rectly te the Congiess the responsibility fier desieivne over1aL4 with technical a* *ell 44% substaettre onsplesitee. in the process cleitIy Umpiring a *Mingo tte mst;tuttorkl arreagemeato embodied in the Plitts2a1 aseevse Amt. I* that connitctc, the emphasis i3k1 your Uttar oa e stegle measure of Mengft6tY PeltaY MI, *filch is belay affecte& mons ether Lefluesioael ty the iirpoot a tiftaacial ., equtre contskoiong analysis molt innswatIons La tho martet plea. jeegment -- seem* to as aluplatee4. In any *rest, T would hope the Congress would refrain fres adoptall a spectfAc taliet-eettiag bill Or resolution listhcet the most **Idol considetation, through hearings ;o t,.pap iate an4 othetwise, taking icont not only of the technical amplboations of the proposal bat the ocemequesioes of such a *di‘ectkve for isstitutivoal arrangements in place kor almost 70 yem!a. Is clms440 let as r• *tat ay corelotlon that fotoeful. def1nitive action by the Corlogreee to rol$6,40,40 * downward trend in the /*dotal deficit es the *convoy 1400Vaz6 ib * key to greirtec contidenee fjeasiotal markets and eehveving and weent*.eing the lower intim/at tteso meceasety to sport sustained economic expastsion, Stncetely1 PAVritlan 5/24/82 #113 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SENATE HOUSE OF REPRESENTATIVES NEW IL REUSS, Wig., CHAIRMAN Inr:a4AreD 11104..IJNO, M. ZE H. Fu....411..TON. IND. ,a11..LMw.LONG.L.A. PARREN J. MITCHELL. MD. FREDERICK W. RICHMOND, N.Y. CLARENCE J. BROWN, OHIO MARGARET M. HECKLER, MASS. JOHN H. RouSSELErr, CALIF. 04ALME RS P. WYLIE, OHIO A Action assigned Mr. Axilrod 'tate. b ite Congre55 of theICZin COMMITTEE JOINT ECONOM PUBLIC LAW 304. 77TH COMORE (cREATED PURSUANT To SEC. Vs) OF WASHINGTON, D.C. 20510 ! ROGER W. JE1.111EN, IOWA, VIDE CHAIRMAN WILLIAM V. ROTH. JR., DEL. JAMES AlIDNOR, S. OAK. STEVEN D. SYMMS, IDAHO PAULA HAWKINS, FLA.. MACK MATTINGLY, GA. LLOYD BENTSEN, TEA. WILLIAM PROXMIRE, WIS. EDWARD M. KEPOBEDY, MASS. PAUL S. 11ARRArall. MD. JAMES K. OALSRA ITN, EXECUTIVE DIRECTOR May 12, 1982 LO CO F•44 rn cD rn 31C 3=1 ' X1 r— cp r> 71:1 -n -n The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. CO (1) = CD rr• ••••., •••• .7Z < r„ Dear Mr. Chairman: tion of the budget impasse and Congress is moving rapidly toward a resolu budget deficits for the years ahead. a significant closing of the prospective Houses of Congress have come to As this happens, Budget Committees in both policy must play in a strategy to realize the crucial role which monetary economic recovery. In reporting bring about lower interest rates and full Budget Committee recognized the its Budget Resolution last week, the Senate presently in effect and included inadequacy of the monetary growth ceiling n Market Committee to reevalute an explicit instruction to the Federal Ope Senate language follows: The . icy pol get bud new the of ht lig in that ceiling Congress acts to " It is the sense of the Congress that if s projected budget restore fiscal responsibility and reduce way, then the Feddeficits in a substantial and permanent ll re-evaluate its eral Reserve Open Market Committee sha t they are fully monetary targets in order to assure tha ined fiscal policy." complementary to a new and more restra later this week. My judgment g tin mee be l wil tee mit Com get Bud se The Hou almost certainly be included in is that language on monetary policy will se Banking Committee, by a Hou The l. wel as n tio olu Res get Bud the House House Budget Committee include a the t tha ed end omm rec has 14, to 26 of vote its monetary targets and lower e eas to e erv Res l era Fed the to ive ect dir Congressman George Miller, Congressinterest rates. In a letter authored by 5, 1982 to Chairman Jones and Chairman Morris Udall and myself, sent on May nt in favor of explicit Congressional man Rostenkowski, we presented the argume get Resolution. The key paradirection'to the Federal Reserve in the Bud graphs of that letter follow: have a special problem. " With monetary policy during 1982 we ced that it would try to For 1981, the Federal Reserve announ 6 percent. Instead, it achieve money growth of between 3 and wth for the year. Then, in achieved only 2.2 percent money gro ounced that the money February 1982, the Federal Reserve ann to 5.5 percent from a growth range for 1982 had been set 2.5 failure to attain the base that was severely depressed by range. even the bottom of the 1981 target https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 p , The Honorable Paul A. Volcker May 12, 1982 Page Two d " So far this year, the Federal Reserve has actually permitte money growth of 8.9 percent at an annual rate, which is much more in line with the requirements for economic recovery than its the announced targets. But this rate of growth presents own problems. th " If the Federal Reserve decides to stick with its M1 grow has targets of 2.5 to 5.5 percent, the fact that money growth s exceeded the upper limit during the first four months mean May that growth will have to be severely restricted between and December. For example, to hit a 4 percent money growth rate for 1982 -- the midpoint of the range -- would require , less than 1 percent money growth for the rest of this year d coul much less than the actual growth rate of last year. How higher such monetary stringency give us anything but even interest rates and continued recession? to let the " On the other hand, the Federal Reserve may decide of the current rate of money growth continue through the rest upyear. But if the Fed does this without publicly revising ery of ward its monetary target ceiling, it will make a mock it will the requirements of the Humphrey-Hawkins Act. Worse, finanadd to the uncertainty that currently prevails in the rd pressure cial community. The result will be unnecessary upwa nty premon interest rates as lenders demand higher uncertai iums. instruc" We propose that the 1983 Budget Resolution include growth tions to the Federal Reserve to announce new monetary targets for the year. One way to do this would be for the beFederal Reserve to announce a feasible six-month target y supginning July 1, 1982, rebased to the level of the mone ply in the second quarter of 1982. Such an action would clearly convey that the Federal Reserve intends only a once for-all correction, and not a sustained, potentially inflationary increase of the money growth rate." I believe that this position has powerful bipartisan support in is finally enacted. Congress and will prevail when the Budget Resolution rapidly becoming imperaWith the position of Congress established, it is will respond to the impendtive that the Federal Reserve make clear how it are ambiguous. On the ing Congressional directive. Recent press reports rks to the Women's Economic day of the House Banking Committee vote, your rema s as a refusal to alter Roundtable in New York were interpreted in the pres or of what is done to monetary policy irrespective of Congress mandates column in the Washington Post of close the deficit. A few days later in his med Federal Reserve Board member May 4, 1982, Joe Kraft reported that an unna justify a refusal to comply had requested and received a legal opinion to Bondweek newsletter has with a Congressional directive. Subsequently, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker May 12, 1982 Page Three not reported that your comments before the Women's Economic Roundtable had ve Board. been cleared with or approved by your colleagues on the Federal Reser I cannot really believe that the Federal Open Market Committee would battempt to rewrite the Constitution, the Federal Reserve Act, and well -esta The lished precedent by an act of defiance of a Congressional resolution. ly esprecedent of House Concurrent Resolution 133, enacted in 1975, clear Congress on tablishes the binding character of a Congressional resolution of The the Federal Reserve System and on the Federal Open Market Committee. preamble of H. Con. Res. 133 states: " Whereas article I, section 8, of the Constitution provides that Congress shall have the money power, namely to coin money and regulate the value thereof': " Whereas Congress established the Federal Reserve Board as its agent, and delegated to its agent the day-to-day responsibility for managing the money supply; ...." ess can Moreover, H. Con. Res. 133 establishes a precedent under which Congr conduct of provide explicit instruction to the Federal Reserve regarding the monetary policy. The language is as follows: " That it is the sense of Congress that the Board of Governors Comof the Federal Reserve System and the Federal Open Market mittee-"(1) pursue policies in the first half of 1975 so as to encourage lower long term interest rates and expansion in the monetary and credit aggregates appropriate to facilitating prompt economic recovery; and ...." acknowledged Every Federal Reserve Chairman of modern times has also of the Federal Rethe preeminent role of Congress and the subordinate role serve: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Thus, Federal Reserve Board Chairman Thomas McCabe in 1950: Senator Douglas. Here you are, twins, Siamese twins, but with no central coordinating nervous structure to dictate a uniform policy. Do you see some possible dangers in that situation? Mr. McCabe. Well, I could see very grave dangers if you had in the personnel of the Treasury and the Federal Rethese serve the type of people that just refuse to discuss interest. broad questions from the standpoint of the public first If we reached an impasse, Senator, I would think the him arbirecourse would be to go to the President and have trate these differences in point of view. of the Certainly, the Federal Reserve being a creature then make Congress and reporting to the Congress, should points of view. its appeal to the Congress to arbitrate the The Honorable Paul A. Volcker May 12, 1982 Page https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Four As I see it, there are three steps: One is persuasion, the second is appeal to the President, the third is appeal to the Congress; that is, to meet this hypothetical situation that you advance. Senator Douglas. Would it be helpful if Congress were to give a definite directive of policy which both the Treasury and the Federal Reserve would follow, not merely on money and credit policy, on the one hand, and debt policy, upon the other hand, but for the two as an integrated whole? Mr. McCabe. I have thought a great deal about that, as to the type of directive, if you want to call it that, which the Congress might issue. It might be in the form of a resolution or the Congress might more definitely define the areas of responsibility, or the Congress might even go so far as to say which body would be the body of final decision. (F arings, Joint Economic Committee, November, 1950, p. 489) Thus, Chairman William McChesney Martin, Jr. in 1956: Senator Douglas. Let me turn to a general question. Do you regard the Federal Reserve Board as the agency of the Executive or the agent of Congress? Mr. Martin. I regard it as an independent agency of the Government. Senator Douglas. To whom is it responsible? to the Executive or the Congress? Mr. Martin. It is responsible to Congress... The indenture of this trusteeship was written by the Congress in the Federal Reserve Act, and can be altered at any time by the Congress.... (Hearings, Senate Committee on Banking and Currency, January 20, 1956) Thus, Chairman Arthur Burns in 1968 and 1971: Senator Proxmire. You do acknowledge, do you not, only Congress has the constitutional authority to regulate the money supply, and the Federal Reserve is an agent of the Congress independent of the executive branch? Dr. Burns. I have no quarrel with that. I know the Constitution and I am a law-abiding citizen. (Hearings, Senate Committee on Banking and Currency, December, 1968, p. 54) Mr. Patman. Tell me the law that created that separate entity. The Honorable Paul A. Volcker May 12, 1982 Page Five Dr. Burns. The law which created that separate entity is the Federal Reserve Act. Mr. Patman. The Constitution says that the Congress shall make the laws and the executive shall enforce the law. Now, I am fairly well acquainted with the Federal Reserve Act. I wasn't here when it was passed, but I was here not so long after that, and I have kept up with it pretty well. And I have never been able to find a sentence in the Federal Reserve Act that indicated that the Federal Reserve should be independent of the Government. Would you tell me where it is? Dr. Burns. I have not claimed that the Federal Reserve is independent of the Government. Mr. Patman. You said separate entity, you know. Dr. Burns. I have recognized not only in the past, but again this very morning that the Federal Reserve is a creature of the Congress, and that it is a servant of the Congress. (Hearings, House Committee on Banking and Currency, September 27, 1971, p. 24) Thus, Chairman William G. Miller in 1978: Mr. Grassley. I would detect that your relationship with the administration doesn't depart too much from what we have been told have been the patterns of previous administrations and previous chairmen. Mr. Miller. I know of no difference. I have really picked up the agenda that was established by Dr. Burns.... Mr. Grassley. This final question would probably give you an opportunity to sum up what you have previously said. But is the independence of the Fed in any danger from either political pressure from this administration or from the Congress? •••• Mr. Miller. I don't detect it at this time. The President has stated over and over again that he believes in the independence of the Fed....I know that it is only the Congress that has created the Fed, not the Constitution. (Hearings, House Committee on Banking, Finance, and Urban Affairs, April 10, 1978, pp 142-143) In view of the overwhelming weight of law, precedent and past testimony concerning the relationship of Congress to the Federal Reserve, it is vital for Congress to know whether the Federal Reserve will now accede to the directive of Congress, or instead assert that it is a fully independent fourth branch of government accountable to no one. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker May 12, 1982 Page Six The next meeting of the Federal Open Market Committee is on May 18. It would be in the public interest to give the Federal Open Market Committee an opportunity to vote on this question. I, therefore, request that you submit to the Open Market Committee a resolution in substantially the following form for their consideration and vote, and that you provide to me the results of the vote, together with the names of Open Market Committee members voting in the affirmative and in the negative: "RESOLVED, that the Federal Open Market Committee, will comply with a directive in a Concurrent Resolution requesting the Federal Open Market Committee, if the Congress substantially reduces budget deficits, to adjust its present monetary target range in order to permit lower interest rates." I appreciate your consideration in this matter and look forward to hearing the results of this vote. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, Henry S. Reuss Chairman May 21, 1982 The honorable Jake Garn Chairman Committee on Banking, housing and Urban Affairs United States Senate 20510 Washington, D.C. Dear Chairman Garn: Thank you for your letter of May 20 inviting the board to testify before your Committee at a hearing on S. 2531, a bill to provide financial assistance to depository institutions, and S. 2532, a revised Regulators' bill. Vice Chairman Preston Martin is looking forward to appearinS on behalf of the Board on May 26. Sincerely, 4. iff41.44 CO:pjt (#V-116) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Vice Chrmn. Martin Mr. Ettin Mrs. Mallardi (2) I JAKK SARK UTAH, CHAIRMAN TOWICR, TVC. JOL94 bW3NX. PA.. WiLIJAM L ARMSTRONG. 001.0. ItICHARD G. LUGAR. ND. ALFONSI U.['AMATO, N.Y. JOHN N. CHLAFKE, R.I. HARR ISON JACX'• sca414 Trr, N. MID(• NICHOLAS F. BRADY. N.J. DONALD W. IDECILE, JR, MICH. WILLIAM PROXMIRS, WIS. ALAN CRANSTON, CALIF. PAUL S. SARIMNIES, MD. CHIL LITOPRIOL .1. DOOD. CONN. ALAN J. DIXON, ILL.. JIM SASSCR, TINN. M. DANNY WALL.!TAFT DIRIXTOR &Ulan C. IDSLNIIICRO, ACTING MINORITY STAFF DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11Cnifeb Ziatez „Senate COM MITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON, D.C. 20510 May 20, 1982 Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th & Constitution Ave., N.W. Washington, D.C. 20551 Dear Chairman Volcker: a member of the Federal This letter is to request that s before the Committee on Reserve Board appear as a witnes May 26, 1982. S.2531, a bill to proThe subjects of the hearing are ository institutions, and vide financial assistance to dep bill. Your comments on these S.2532, a revised Regulators' on troubled institutions bills, particularly their effect growth of the financial and on the long-term stability and system, will be appreciated. m 5302, Dirksen Senate The hearing will be held in Roo at 9:00 a.m. I am enclosing Office Building, and will begin ines for Witnesses for your a copy of the Committee's Guidel a complete hearing record information. In order to ensure g process, I would emphasize and a smooth functioning hearin ing thorough written and brief the Committee's interest in hav . oral presentations by witnesses ons, please feel free to If you should have any questi Boland of the Committee staff contact John Collins or James at 202-224-7391. Jake Garn Chairman JG:jbk N JAKE SARK UTAN, COM IRM A JOHN TIPArlia SOWN *MINX PA. M 1111110010. COLO 41/1LL flalCOM RD G LUGAR , DID. aurroese N.0 AmATO, N.Y. CNA PT IC NI. JOINN . , N. M "MitaISON 1114M IMalRISON A. WILLIAMS. /11.. WILLIAM /VOX tat WIS. ALAN MAN/TON. GAUP. DONA.LD N. NICOLL at MICH. PAL*_ S. SARSANSJI. MD. CNN STOP141EPi .1. 0000, CONN. Al-Ali .1. DIXON, ILL. /1CrtiteD Ziatez senate SING, AND N. DAMNY WALL, STAFF DM=TOP T001 AMP CIOUNSILL WOW Alta A. MISPICLL. MINCOUTT STAPP DIOISC COMMITTEE ON RANKING. HOU USAN A FirA I PtS WASHINGTON. D.C. 20510 GUIDELINES FOR WITNESSES 1. 2. 3. 4. 5. the Senate These guidelines apply to all hearings of ban Affairs, unless Committee on Banking, Housing and Ur otherwise indicated. om 5302 Dirksen All hearings will begin at 9:30 a.m. in Ro e indicated. Senate Office Building, unless otherwis ses submit at Committee rules require that all witnes ents (if witness least 75 copies of their written statem s and public, more desires copies be distributed to pres eir appearance. copies are needed) 24 hours prior to th ed in determining Sundays and holidays are not to be includ delivered to be this 24-hour period. Statements should , Washington, Room 5300 Dirksen Senate Office Building le is essential D.C. 20510. Strict adherence to this ru ew the statements in order that Committee members may revi rticipants to more before the hearing, thus enabling the pa . Statements will thoroughly discuss the issues involved r to the day of not be released to the news media prio your testimony. brief summary Oral presentations must be limited to a statement will not to exceed 10 minutes. Your complete be printed in the hearing record. bring it to Room Please complete the attached card and be given copies of 5300 prior to the hearing. You will you at that time. statements of those testifying with Your cooperation is appreciated. 's transcript you prefer the reporter ch whi to ess addr Please supply the prior to on. delivered for your correctiin at Room 5300 Dirksen Office Building Kindly turn this card giving your testimony. (Name) • (Organisation) (Phone) (Business address) (city ISBN ATE and State) (ZIP Oode) °DIMMER AND URBAN AFFAIRS RANKING. ROUSING, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (Date) 117-013-12 RPO r May 18, 1982 The Honorable Doug Barnard, Jr. 'House of Representatives Washington, D. C. 20515 Dear Doug: Thank you for your letter of May 13 requesting support for your proposal to liberalize the requirements for the issuance of bankers' acceptances. As you know, the Board has expressed its support in the past for the concept of expanding the present statutory limit on the aggregate nmount of eligible bankers' acceptances that may be issued by member banks and for applying those limitations to nonmember banks and to United States branches and agencies of foreign banks. To make acceptance credit more broadly available to all borrowers and to promote competitive equity between large member banks presently at their limitation and those banks not subject to the statutory restrictions, the Board has favored a relaxation of the limitation along the lines suggested in the draft language that we submitted last year. The Board's continuing concern is that, since eligible bankers' acceptances represent a source of funds that is exempt from reserve requirements under the present rules, this source should not be liberalized to such an extent that monetary policy would be adversely affected. We believe that the provisions in H.R. 6016, as presently drafted, present potential problems with regard to participation. Under the existing language, a bank could expand the amount of its bankers' acceptances outstanding virtually without limit by issuing participations to other banks. This practice would undermine the effectiveness of the limits established by the bill and could adversely affect monetary policy to the extent that bankers' acceptances are substituted for liabilities that would otherwise be subject to reserve requirements. This problem could be corrected by adding a specific provision which clarifies the Board's authority to establish the terms and conditions under which participations in bankers' acceptances may be issued ar by using the draft language that the Board submitted last year. I appreciate the opportunity to comment on this matter. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, PSP:NS:DJW:vcd (#V-112) bcc: Paul Pilecki, Ed Ettin Legal Records (2), Mrs. Mallarci DOUG BARNARD, JR. Action assignei Mr. Ettin 10Tm DISTRICT, GEORGIA COMMITTEES: BANKING. FINANCE AND URBAN AFFAIRS Congrecz of tit tiniteb GOVERNMENT OPERATIONS tattc; jtioute of RepresSentatibet watbington, ti.C. 20515 4 //1 May 13, 1982 DISTRICT OFFICES: STEPHENS FEDERAL BUILDING Room 128, Box 3 ATHENS, GEORGIA 30601 (404) 546-2194 407 TELFAIR STREET P.O. Box 10123 AUGUSTA, GEORGIA 30903 (404) 724-0739 N EWT0N COUNTY EXECUTIVE OFFICE BUILDING COVINGTON, GEORGIA 30209 (404) 787-2110 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Twentieth Street & Constitution Avenue, NW Washington, D.C. 20551 Dear Mr. Chairman: I would like to request the support of the Board of Governors for my legislation to liberalize the requirements for the issuance of banker's acceptances. My bill is now contained i Chairman St Germain's H.R. 6016 as section three. The pr visions of this section come very close to those of the draft bill you sent me last year. I have made a considerable effort to come as close to your provisions as possible, while still enabling acceptance financing to be extended by more banks to medium sized exporters through the use of participations. This is an area I believe in very strongly. I appreciate your consideration of this request, and I look forward to your response. Sincerely, DBJr./dj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .1) 1 r.11 --4 rr, 1 S. ••• 0G0iik,•. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20 551 •., RA L R • •...• May 17, 1982 PAUL A. VOLCKER CHAIRMAN The Honorable Alan Cranston United States Senate Washington, D. C. 20510 Dear Senator Cranston: I am pleased to respond to your request for my comments on Howard Craven's proposal for alleviating the problems of the nation's thrift institutions. Mr. Craven presents a succinct analysis of the source and nature of the problems facing the thrift institutions. As he points out, the current distress of the thrifts can be traced to their substantial holdings of low yielding mortgages that were acquired in earlier periods when interest rates were generally much lower than they are currently. As interest rates have subsequently risen to their present high levels, the market value of these assets has dropped sharply, and the interest revenue earned on them has proven insufficient to meet the interest costs the thrifts must pay on their deposits and other liabilities. As a result, most of the institutions have had negative earnings and a consequent serious erosion of their capital base. But, while Mr. Craven has correctly diagnosed the illness of thrifts, his proposal does not offer an effective remedy. More specifically, the proposal would provide thrift institutions another source of liquidity rather than a means to bolster deficient earnings and capital. Mr. Craven recommends that the Federal Reserve (or perhaps some other government agency) establish a program in which financial institutions would be offered the opportunity to sell low interest mortgages--or other securities with low coupons--to the federal agency under an agreement to buy back these same assets 5 to 7 years later. In effect, these repurchase agreements would be long-term loans collateralized by the assets exchanged. Mr. Craven specifies that the institutio-ft's taking part in this program would enter competitive bids in terms of the interest rate they would be willing to pay on such loans, and institutions offering the highest interest rates would obtain the loans. Since Mr. Craven envisions placing no restriction on the participants in these auctions--other than that they hold in portfolio low yielding assets that were acquired at an earlier time--it is to be expected that the interest rite set on these loans through the auction process would be near to those prevailing in the open https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • LuL • •• The Honorable Alan Cranston Page Two market on loans of similar maturity. Therefore, the loans would provide the institutions little, if any, subsidy. And, while there would be only a minimal cost to taxpayers, there would, at the same time, be no significant reduction of pressures on earnings and capital positions of thrifts. Moreover, it is important to stress that the institutions, even those generally facing the most severe earnings and capital problems, are generally not experiencing serious liquidity pressures. The current liquid asset holdings of most institutions would appear adequate to judge by historical standards. Moreover, many of the institutions can arrange loans in the private market similar to those envisioned in the Craven plan. Large institutions, for example, can issue mortgage-backed bonds and/or borrow from private institutional lenders using such mortgages as collateral. Smaller institutions, too, can, to a greater or lesser extent, raise funds by borrowing using their mortgages for collateral. Finally, most thrift institutions needing liquidity can turn to the Home Loan Bank System or the Federal Reserve for liquidity assistance. In addition to not offering relief from the fundamental problems facing thrifts, I have reservations about Mr. Craven's proposal on other important grounds. He envisions that the program could be administered by the Federal Reserve without compromising its monetary policy objectives. Such a result, however, would require the Federal Reserve to offset the impacts on reserve levels resulting from the repurchase agreement. While this could be done, the effects would not be neutral, since upward pressures on interest rates on U. S. Treasury securities would result. Moreover, while Mr. Craven has structured his proposal to exclude the possibility of a subsidy or bailout through the Federal Reserve, I am not certain it would be perceived that way by the public. Thus, there would be the danger of setting the precedent of using open market operations of the Federal Reserve to meet perceived special needs of particular institutions or sectors, an issue that is best left to the judgment of the Congress. Conceivably, it would be possilyie to use a vehicle similar to that proposed by Mr. Craven to provide an income subsidy to the institutions and thus address their earnings and capital erosion problems. For example, repurchase agreements or loans secured by low-rate mortgages could be arranged at below market rates which would augment_ the income flow of the institutions and slow--or, perhaps, stop altogether if a sufficient volume of such assistance were provided--the erosion of their capital base. Of course, such a program would have to be carefully structured to avoid providing an unnecessary subsidy to https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Alan Cranston Page Three some while under -compensating others and, thus, the disbursement of the subsidy would require some arrangement other than the competitive bidding approach suggested by Mr. Craven. Moreover, a subsidy would involve a cost to the Treasury either in the form of a direct budget outlay or a reduction in Federal Reserve revenues if the program were administered by the Federal Reserve. Finally, having such a program administered by the Federal Reserve would create the same precedential problems as discussed above and could lead to adjustment problems in the financial markets since the dollar volume of the purchases necessary to effect a meaningful subsidy would likely greatly exceed the normal volume of open market purchases. The problems of the thrifts fundamentally are caused by inflation-induced high interest rates. Over time, I feel certain that these problems will abate in line with inflation, the fundamental development needed to produce a significant and sustained decline in interest rates to more normal historical levels. This result is the goal of our current monetary policy; it could be achieved with significantly less strain in financial markets if fiscal policy were more harmonious with the antiinflationary monetary policy. Beyond this, however, it may well be necessary to aid the thrift industry more or less directly. I believe their problems can be addressed more expeditiously, however, through the type of capital infusion programs contemplated in the so-called Regulators' bill and in other legislation currently being considered by the Congress. Sincerely, S/Patil A. MAR:FMS:ECE:NS:vcd (V-103) bcc: Mr. Regalia Mr. Struble Mr. Ettin Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 JAKE GARN, UTAH, CHAIRMAN JOHN TOWER, TEX . HARR!SoN A. WIL JOHN HEINZ, PA. LIAMS. JR., N.J . WILLIAM PROXMI WILLIAM L. ARMSTR RE, WIS. ONG. COLO. ALA N cRANSTON, CAL RICHARD G. LUGAR, IF. IND. DONALD W. RIE GLE, JR., MICH. ALFONSE M. D'AmAT O, N.Y. PAUL S. SARBAN JOHN H. CHAFEE ES, MD. RI. CHRISTOPHER J. HARRISON SCHmIT DODD. CONN. T, N. MEX. ALAN J. DIXON, ILL. M. DANNY WALL, STA FF DIRECTOR HOWARD A. mENELL , MINORITY STAFF DIRECTOR AND COU NSEL /a1Cnifeb Zfafez Zerrat e COMMITTEE ON BA NKING. HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 April 21, 1982 I) ) I b .411.4:10 Honorable Paul Volcker Chairman Federal Reserve 20th Street and Board Constitution Av Washington, D.C. enue, NW 20037 Dear Paul, C.0 Mr. J. Howard Cr mist in Califo aven, a well known and respec rnia, has sent me a very thou ted banking econoaddressing the ghtful proposal ea for thrift institut rnings problems facing many of ions. Mr. Crav ou r na ti on's en government -perhaps the Fede 's plan involves the federal ral Reserve -tal infusion to providing a capi de po si to ry in st itutions throug of long-term re h the offering purchase agreemen ts on low-yeil ding assets. I would be most appreciative of on the feasibil your prompt re view and commen ity and cost of t Mr. Craven's pr furnish me with oposal. Please a report of your convenience. findings at your earliest Thanks again for your time and attention. With warm regard s, Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Research paper/proposal Citations: Number of Pages Removed: 6 Craven, J. Howard. "Facing The Problem of 'Underwater' Assets of Depository Institutions." May 11, 1981. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .*, • • BOARJ •• s'," .• ... • -0 .r • -, •••• ! • • ••,--`, n EVE THE NE FEDERAL RESERVE SYSTEM', N N May 12, 1982 v_ The Honorable Daniel A. Mica House of Representatives Washington, D. C. 20515 Dear Mr. Mica: In Chairman Volcker's absence, I want to thank you for your letter of April 26 emphasizing the need for a credible federal budget and lower interest rates. The present stance of fiscal Policy, which implies large prospective budget deficits, is exposing the economy to very serious risks. Deficits that persist in periods of economic recovery would draw on the limited supply of private saving that could otherwise finance productive private sector investment. Moreover, in the context of an anti-inflationary monetary policy, the prospect of future competition for funds between the federal and private sectors results in upward pressure on today's interest rates. This pressure places a disproportionate burden on the interest-sensitive sectors of the economy. I, therefore, agree that it is essential that Congress and the Administration promptly adopt a credible budget policy that reduces projected budget deficits. Such a policy would send the positive signal to financial markets that future government borrowing requirements were being brought under control. In my view, allaying uncertainty about future credit market 12ressures would lead to a sizable reduction in today's interest rates. The Federal Reserve policy of gradual reduction in the growth of money and credit to non-inflationary rates is consistent with such a decline. The precise details of that policy, of course, are adjusted when annual targets for money growth are set, to take into account current developments. Predictable, moderate restraint, however, will help to reduce the inflation and uncertainty premiums that are currently built into our interest structure. ThanL you again for lAharing your concerns about the economic problems facing our nation. DC:SL:JLK:vcd (V-104) bcc: Mr. Cohen Ms. Lepper Ms. Wing Ms. Winkler Mrs. Mallardi\/ Sincerely, Is/ Preston Martin Action assignel Mr. Kichline CANNON HOUSE OFFICE BUILDING ROOM 131 WASHINGTON, D.C. 20515 ADMINISTRATIVE ASSISTANT RICHARD McBRIDE DANIEL A. MICA FOREIGN AFFAIRS 11TH DISTRICT, FLORIDA VETERANS' AFFAIRS Congre55 of the Elniteb LEGISLATIVE ASSISTANT JAMES E. LAMBLE tate5 SELECT COMMITTEE ON AGING Pou5e of epresSentatiba assbington, ID.C. 20515 11 DISTRICT OFFICES: 701 CLEMATIS STREET SUITE 321 WEST PALM BEACH, FLORIDA 33401 April 26, 1982 550 NORTH STATE ROAD 7 MARGATE, FLORIDA 93063 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 22. The Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Twentieth Street and Constitution Ave., N.W. Washington, D.C. 20551 Dear Chairman Volcker: The urgent need for a credible federal budget and lower interest rates was impressed upon me time and time again during my recent visit home to south Florida during the Easter congressional district work period. The President, the Speaker, and the Senate Majority Leader are to be commended for entering into discussions regarding the economic problems we face. In Florida I found that some of our most long-standing and successful enterprises are having great difficulties, that new operations are unable to get off the ground, and that employees with years of experience are being laid off. Uncertainty must not be allowed to continue. A credible budget, one in which the people know the level of federal spending, revenues, the deficit, and federal policy, will allow businesses and individuals to plan and adjust accordingly. Inaction will only serve to heighten fear, and further prolong our Nation's recession. I hope that the Congress will take action in the near future, and that you will signal your intent to work with the Congress and the Administration to bring down interest rates and help get our economy moving again. Kind regards. DM:jl CD tyl c>c) -r7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nay 19 1932 The Honorable Fernand J. St Germain Chairman Supcomittee on Financial Institutions Supervision, Regulation and Insurance Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman St Germain: In Chairman Volcker's absence, I am writing to thank you for your lettcr of May 7 inviting the Board to appear beforc your Subcommittee at the hearing on pending export trading company legislation. Governor Wallich is looking forward to being with you on May 19 at 9:30 a.m. Sincerely, Preston nartin CO:vcd (V-110) bcc: Gov. Wallich Bob Gemmill Mrs. Mallardi CHALMERS P. WYLIE, OHIO GEORGE HANSEN. IDAHO JIM LEACH, IOWA ED BETHUNE, ARK. STEvVART B. McKINNEY, CONN. NORMAN D. SHuMWAY, CALIF. ED WEBER OHIO BILL McCOLLUM. FLA. BILL LO1AERY. CALIF. GEORGE C. WORTLEY, N.Y. FERNAND J. ST GERMAI!.. RI., CHAIRMAN FRANK ANNUNZIO, ILL. CARROLL,HUBBARD, JR., KY. NORMAN E. D AMOURS, N.H. 1.ItM MATTOX, TEX. JOSEPH G. MINISH. NJ. DOUG EIARNARD, JR., GA. JOHN J. LAFALCE. N.Y. DAVID W. EVANS, IND. MARY ROSE °AKAR. OHIO BRUCE F. VENTO. MINN. ROBERT GARCIA. N.Y. CHAR -ES E. SCHUMER, N.Y. U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS BILL PATHAN, TEX. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LCD NINETY-SEVENTH CONGRESS ts.J WASHINGTON, D.C. 20515 May 7, 1982 Honorable Paul Volcker Chairman Board of Governors Federal Reserve System Washington, n. C. 20552 near Mr. Chairman: Confirmi• - a number of discussions between our respective staffs, the Subcommittee ill resume hearings on pending export trading company legislation on 'k'av 19, 1982, in ROOM 2128 of the Rayburn House Office Building at 9:30 a.m. We would be pleased to receive testimony from the Federal Reserve Board immediately following a brief presentation of a panel of Congressional witnesses. It is our understanding that the Board will continue to designate Governor Wallich, who as we know, has testified on several previous occasions on pending export trading company legislation. I have enclosed for your information a copy of H.R. 6016, the Bank Export Services Act, a brief section-by-section analysis of the bill, a copy of my introductory statement and press release of March 31, 1982, on behalf on the bill's cosponsors, a copy of the opening statement in connection with previous by Subcommittee hearings held on September 30,1980, after passage of S. 2718 the Senate in the 96th Congress and a copy of the April 22 opening statement. The Subcommittee will continue to concentrate on the bank participation issues by our emphasis on the provisions of H.R. 6016. You might find of interest the Subcommittee's follow-up letter to Secretary of Commerce Baldrige, which summarizes a number of problem areas remaining to be resolved. We would appreciate receiving 100 copies of your statement by 12:00 noon Rayburn). on Tuesday, May 18, to be delivered to the Subcommitee office (8303 r To permit adequate time for questioning and to accommodate the large numbe limited of witnesses scheduled to testify, it is requested that oral testimony be record to ten minutes. The entire statement will, of course, be printed in the and made available to all members prior to the hearing. Sincerely, Fernand J. St Chairman Enclosures ermain 97TH CONGRESS 2D SESSION H • rt• G016 To permit bank holding companies and Edge Act corporations to invest in export trading companies and to reduce restrictions on trade financing provided by financial institutions. IN THE HOUSE..OF REPRESENTATIVES MARCH 31, 1982 MT. ST GERMAIN (for himself, Mr. REUSS, Mr. MINISH, Mr. ANNUNZIO, Mr. FAUNTROY, Mr. NEAL, Mr. PATTERSON, Mr. BLANCHARD, Mr. LAFALCE, Mr. EVANS of Indiana, Mr. D'AmotTRs, Ms. OAKAR, Mr. BARNARD, Mr. LOWRY Of Washington, Mr. SCHUMER, Mr. FRANK, Mr. WILLIAM J. COYNE, Mr. STANTON Of Ohio, Mr. McKINNEY, Mr. LEACH Of Iowa, Mr. PARRIS, M. WORTLEY, Mr. LOWERY Of California, Mr. JAMES K. COYNE, and Mr. BEREUTER) introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs , A BILL .4 40,ie To permit bank holding companies and Edge Act corporations to invest in export trading companies and to reduce restrictions on trade financing provided by financial institutions. 1 Be it enacted by the Senate and House of 1?epresenta- 2 tives of the United States of America in Congress assembled, 3 a 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 SHORT TITLE SECTION 1. This Act may be cited as the "Bank Export 5 Services Act". 2 1 INVESTMENTS IN EXPORT TRADING COMP ANIES 2 SEC. 2. (a) Section 4(c) of the Bank Holdin g Company 3 Act of 1956(12 U.S.C. 1843(c)) is amende d4 5 6 7 8 4 9 10 11 12 13 14 15 . 16 17 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 18 19 20 21 22 23 24 25 (1) in paragraph (12)(B), by striking out "or" at the end thereof; (2) in paragraph (13), by striking out the period at the end thereof and inserting in lieu thereof "; or"; and (3) by inserting after paragraph (13) the following: "(14) shares of any company which is an export trading company whose acquisition (including each acquisition of shares) or formation by a bank holding company has been approved by the Board, except that such investments, whether direct or indirect, in such shares shall not exceed 5 per centum of the bank holding company's consolidated capital and surplus. No approval may be granted by the Board under this paragraph unless the Board has taken into considera tion the financial and managerial resources, competiti ve situation, and future prospects of the bank holding cornpany and the export trading company involved and has imposed such restrictions, by regulation or oth erwise, as the Board deems necessary to prevent confli cts of interest, unsafe or unsound banking practices, undue concentration of resources, and decreased or unf air competition. Notwithstanding any other provision of HR 6016 Iii • 3 'eek https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 law, in any case in which a bank holding company in- 2 vests in an export trading company, such bank holding 3 company shall be deemed to be a member bank, with 4 respect to such export trading company, for purposes 5 of section 23A of the Federal Reserve Act, and such 6 export trading company shall be deemed to be an affili- 7 ate for purposes of such section, except that amounts 8 invested pursuant to the first sentence of this para- 9 graph shall not apply with respect to the limitations 10 imposed under section 23A of the Federal Reserve 11 Act. For purposes of this paragraph, the term 'export 12 trading company' means a company which does busi- 13 ness under the laws of the United States or any State 14 and which is organized and operated exclusively for 15 purposes of exporting goods or services produced in the 16 United States or which facilitates the exportation of 17 goods or services produced in the United States by un- 18 affiliated persons by providing one or more export 19 trade services. For purposes of this paragraph, the 20 term 'export trade services' includes consulting, inter- 21 national market research, advertising, marketing, prod- 22 uct research and design, legal assistance, transporta- 23 tion, including trade documentation and freight for- 24 warding, communication and processing of foreign 25 orders to and for exporters and foreign purchasers, HR 6016 IH "*"."..V4,11Mimminpway.sousupwomegpmuipippub 4 T. 1 warehousing, foreign exchange, and financing, when 2 provided in order to facilitate the export of goods or 3 services produced in the United States. For purposes of 4 this paragraph, an export trading company (A) may 5 - engage in or hold shares of a company engaged in the 6 business of underwriting, selling, or distributing securi- 7 ties in the United States only to the extent that its 8 bank holding company investor may do so under appli- 9 cable Federal and State banking law and regulations, 10 and (B) may not engage in manufacturing or agricul- 11 tural production activities. The name of the export 12 trading company involved shall not be similar in any 13 respect to the name of the bank holding company 14 which owns any of its voting stock or other evidences 15 of ownership.". 16 (b) Section 25(a) of the Federal Reserve Act(12 U.S.C. 17 611 et seq.) is amended— 18 19 (1) in the first paragraph of subsection (c), by inserting "(1)" after "(c)"; and re,r, kt40.,:z https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 20 (2) by inserting alter the first paragraph of subsec- 21 tion (c) the following: 22 "(2)(A) Notwithstanding any other provision of law, 23 with the approval of the Board of Governors of the Federal 24 Reserve System, a corporation organized under this section 25 may purchase and hold stock or other certificates of owner- HR 6016 IH 1 5 ort trading corn1 ship in any other corporation which is an exp Board under this 2 pany. No approval may be granted by the • o consideration the 3 paragraph unless the Board has taken int itive situation, and 4 financial and managerial resources, compet ed and has imposed 5 future prospects of the corporations involv ise, as the Board 6 such restrictions, by regulation or otherw interest, unsafe or 7 deems necessary to prevent conflicts of tion of resources, 8 unsound banking practices, undue concentra 4 corporation orgaNo on. iti pet com air unf or sed rea dec and 9 such export trading 10 nized under this section shall invest in per centum of its 11 companies in an amount in excess of 25 viso of paragraph (1) 12 own capital and surplus. The second pro in this paragraph. 13 shall apply to any corporation referred to vision of law, in any pro er oth y an ing and hst wit Not B) "( 14 • 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis this section pur15 case in which a corporation organized under ownership in any of tes ica tif cer er oth or ck sto ds hol or ses 16 cha ding company, such 17 other corporation which is an export tra banking institution 18 acquiring corporation, or any bank or certificates of ownerer oth or ck sto ds hol or ses cha pur ch whi J.9 be deemed to be a 20 ship in such acquiring corporation, shall trading company, ort exp h suc to t pec res h wit k, ban er mb me 21 and such export trad22 for purposes of section 23A of this Act, e for purposes of liat affi an be to ed em de be ll sha y an mp co 23 ing ested pursuant to sub24 such section, except that amounts inv HR 6016 III VOL ••••-••••...." 6 1 paragraph (A) shall not apply with respect to the limitations 2 imposed under section 23A of this Act.. 3 "(C) For purposes of this section- 4 "(i) the term 'export trading company' means a 5 company which does business under the laws of the 6 United States or any State and which is organized and 7 operated exclusively for purposes of exporting goods or 8 services produced in the United States or which facili- 9 tates the exportation of goods or services produced in 10 the United States by unaffiliated persons by providing 11 one or more export trade services; and 12 "(ii) the term 'export trade services' includes con- 13 suiting, international market research, advertising, 14 marketing, product research and design, legal assist- 15 ance, transportation, including trade documentation and 16 freight forwarding, communication and processing of 17 foreign orders to and for exporters and foreign purchas- 18 ers, warehousing, foreign exchange, and financing, 19 when provided in order to facilitate the export of goods 20 or services produced in the United States. 21 "(D) For purposes of this subsection, an export trading a • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 22 company23 "(i) may engage in or hold shares of a company 24 engaged in the business of underwriting, selling, or dis- 25 tributing securities in the United States only to the HR 6016 IH 7 1 extent that the corporation which is organized under 2 this section and which invests in the company defined 3 in this clause may do so under applicable Federal and 4 State banking law and regulations; and "(ii) may not engage in manufacturing or agricul- 5 r• - https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 • 6 tural production activities. 7 "(E) The name of the export trading company involved 8 shall not be similar in an,- respect to the name of the corpora9 tion organized under this section which owns any of its 10 voting stock or other evidences of ownership.". BANKERS' ACCEPTANCES 11 12 • SEC. 3. The seventh paragraph of section 13 of the Fed- 13 eral Reserve Act (12 U.S.C. 372) is amended to read as 14 follows: 15 "(7)(A) Any depository institution, as defined in section 16 19(b)(1)(A), and any Federal or State branch or agency of a 17 foreign bank subject to reserve requirements under section 7 18 of the International Banking Act of 1978 (hereinafter in this "!1 19 paragraph referred to as 'institutions'), may accept drafts or 20 bills of exchange drawn upon it having not more than six 21 months' sight to run, exclusive of days of grace22 23 24 25 "(i) which grow out of transactions involving the importation or exportation of goods; "(ii) which grow out of transactions involving the domestic shipment of goods; or HR 6016 III 8 1 "(iii) which are secured at the time of acceptance 2 by a warehouse receipt or other such document con- 3 veying or securing title covering readily marketable 4 staples. 5 "(B) No institution shall accept such bills, or be obligat- 6 ed for a participation share in such bills, in an amount equal 7 at any time in the aggregate to more than 150 per centum of V, 8 its paid up and unimpaired capital stock and surplus or its 9 equivalent, as defined by the Board, in the case of a United 10 States branch or agency of a foreign bank.. 11 "(C) The Board, under such conditions as it may pre- 12 scribe, may authorize, by regulation or order, any institution 13 to accept such bills, or be obligated for a participation share • 14 in such bills, in an amount not exceeding at any time in the 15 aggregate 200 per centum of its paid up and unimpaired capi16 tal stock and surplus or its equivalent, as defined by the 17 Board, in the case of a United States branch or agency of a 18 foreign bank. 19 "(D) Notwithstanding subparagraphs (B) and (C), with 20 respect to any institution, the aggregate acceptances, includ21 ing obligations for a participation share in such acceptances, 22 growing out of domestic transactions shall not exceed 50 per 23 centum of the aggregate of all acceptances, including obliga24 tions for a participation share in such acceptances, authorized 25 for such institution under this paragraph. I. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HR 6016 III 4111...01.001WOMMINPIPP.,. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9 "(E) No institution shall accept bills, or be obligated for 2 a participation share in such bills, whether in a foreign or 3 domestic transaction, for any one person, partnership, corpo1 4 ration, association or other entity in an amount equal at any 5 time in the aggregate to more than 10 per centum of its paid 6 up and unimpaired capital stock and surplus, unless the insti7 tution is secured either by attached documents or by some 8 other actual security growing out of the same transaction as 9 the acceptance. 10 "(F) The limitations contained in this paragraph shall 11 not apply to that portion of an acceptance which is issued by 12 an institution and which is covered by a participation agree13 ment sold to another bank or a corporation regulated under 14 section 25 or section 25(a) of this Act. 15 "(G) In order to carry out the purposes of this para- 16 graph, the Board may define any of the terms used in this 17 paragraph, and, with respect to institutions which do not 18 have capital or capital stock, the Board shall define an equiv19 alent measure to which the limitations contained in this para20 graph shall apply.". 0 4 4 4 March 18, 198-2 SECTION BY SECTION ANALYSIS • OF THE "BANK EXPORT SERVICES ACT" Section 1 prescribes the short title of the bill, the Bank Export Services Act. Section 2 contains two subsections authorizing bank holding companies and Edge Act Corporations to invest in export trading companies. Export trading companies are defined as organizations that operate under U.S. or State law exclusively to export or facilitate the export of goods or services produced in the U.S. by providing one or more export trade services. These services would include consulting, international market research, advertising, marketing, product research and design, legal assistance, transportation, including trade documentation and freight forwarding, communications and processing of foreign orders to and for exporters and foreign purchasers, warefibusing, foreign exchange, and financing, when provided to facilitate the export of U.S. goods and services. Bank holding companies would be permitted to invest up to 5 percent of their consolidated capital and surplus, and Edge Act Corporations up to 25 percent of their capital and surplus, in export trading companies. All investments in export trading companies would be subject co prior approval by the Board of Governors of the Federal Reserve System. Export trading companies could be owned wholly or in part by one or more bank holding companies or by one .or more Edge Act Corporations. Export trading companies could become involved in underwriting, selling or distributing securities in the U.S. only to the extent their parent bank holding companies or Edge Act Corporations could legally do so. :Export trading companies also could not engage in manufacturing or agricultural production activities, or have a name similar to their parent organizations. Limits on the amount of permissible lending between parent companies and affiliates, contained in Section 23A of the Federal Reserve Act, would apply to export trading company affiliates of bank holding companies and Edge Act Corporations. Section 3 amends the Federal Reserve Act provision relating to bankers' acceptances. The coverage of the provision would be broadened to include nonmember banks and branches and agencies of foreign banks subject to reserve requirements. The overall limit on a bank's acceptances would be raised from the current level of 50 percent of the bank's paid up capital stock and surplus (100 percent with Federal Reserve Board approval) to 150 percent (200 percent with Board approval). The new provision would specify that no more than 50 percent of a bank's outstanding acceptances could be connected with domestic transactions, and would delete current language limiting domestic acceptances to 50 percent of a bank's capital stock and surplus. The current limitation on the issuance of unsecured acceptances for any one customer to 10 percent of the bank's capital and surplus would be retained. The new provision also would specify that, when banks enter participation agreements to share the obligations of an acceptance, the portion of the obligation retained or purchased by a bank would count toward that bank's acceptance limits. The existing requirement that acceptances involving domestic shipments must include shipping documents that convey or secure title would be deleted. The Federal Reserve Board would be authorized to define any terms in carrying out the 7)P•ovision. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis H 1328 CONGRESSIONAL RECORD — HOUSE vide increased financing capabilities for these firms. With these advantages, and the concerns about- banks' involvement in commerce in mind, I explored the possibility of allowing depository institutions to engage in export trading company activities in a manner which assures as much separation as possible between that activity and the deposit taking function of the depository institutions. This can be accomplished by allowing only direct investments (purchases of the securities of export trading companies) by bank holding companies or Edge Act Corporations. Thus, operating export trading company activities within a bank itself would be precluded. The operations would be in separate subsidiaries. Clearly any legislation in this area must address these concerns. The Bank Export Services Act contains two major provisions. The first autorizes bank holding companies and Edge Act Corporations to invest in export trading companies. Export trading companies are defined as organizations that operate under U.S. or State law exclusively to export or facilitate the export of goods or services produced in the United States by providing one or more export trade services. These services would include consulting, international market research, advertising, marketing, product research and design, legal assistance, transportation, including trade documentation and freight forwarding, communications and processing of foreign orders to and for exporters and foreign purchasers, warehousing, foreign exchange, and financing, when provided to facilitate the export of U.S. goods and services. Bank holding companies would be permitted to invest up to 5 percent of their consolidated capital and surplus, and Edge Act Corporations up to 25 percent of their capital and surplus, in export trading companies. All investments in export trading companies would be subject to prior approval by the Board of Governors of the Federal Reserve System. This will insure the proper review and supervision needed to reduce the possible risk to depository institution subsidiaries. Export trading companies could be owned wholly or in part by one or more bank holding companies or by one or more Edge Act Corporations. Export trading companies could become involved in underwriting, selling, or distributing securities in the United States only to the extent their parent tank holding companies or Edge Act Corporations could legally do so. Export trading companies also could not engage in manufacturing or agricultural production activities, or have a name similar to their parent organizations. Limits on the amount of permissible lending between parent companies and affiliates, contained in section 23A of the Federal Reserve Act, would apply to export trading company affiliates of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis bank holding companies and Edge Act Corporations. The second section of the Bank Export Services Act amends the Federal Reserve Act provision relating to bankers' acceptances. The coverage of the provision would be broadened to and banks nonmember include branches and agencies of foreign banks subject to reserve requirements. The overall limit on a bank's acceptances, including its participation share in acceptances originated by others. would be raised from the current level of 50 percent of the bank's paid up and unimpaired capital stock and surplus(100 percent with Federal Reserve Board approval) to 150 percent (200 percent with Board approval). The new provision would specify that no more than 50 percent of a bank's authorized acceptances could be connected with domestic transactions, and would delete current language limiting domestic acceptances to 50 percent of a bank's capital stock and surplus. The current limitation on the issuance of unsecured acceptances for any one customer to 10 percent of the bank's capital and surplus would be retained. The new provision also would specify that., when banks enter participation agreements to share the obligations of an acceptance, the portion of the obligation retained or purchased by a bank would count toward that bank's acceptance limits. The existing requirement that acceptances Involving domestic shipments must include shipping documents that convey or secure title would be deleted. The Federal Reserve Board would be authorized to define any terms in carrying out the provision. This legislation is, I believe, a reasonable approach to resolving the twin concerns of insuring bank safety and soundness by limiting the breach in the separation of banking and commerce, and encouraging the flow of exports from this Nation. It is anticipated that the committee can move expeditiously on this issue. To that end. the Subcommittee on Financial Institutions Supervision. Regulation and Insurance will conduct hearings. on this bill on April 21 and 22 and will meet in executive session to mark up the legislation on April 27.• The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Connecticut (Mrs. KENNELLY)is recognized for 5 minutes. (Mrs. KENNELLY addressed the House. Her remarks will appear hereafter in the Extensions of Remarks.) The SPEAKER pro tempore. Under a previous order of the House, the gentleman from California (Mr. Mramea) is recognized for 10 minutes. (Mr. MILLER. of California addressed the House. His remarks will appear hereafter in the Extensions of Remarks.) March 31, 1982 THE FROM COMMUNICATION SPEAKER OF THE HOUSE OF THE REPRESENTATIVES TO CLERK OF THE HOUSE OF REPRESENTATIVES The SPEAKER pro tempore laid before the House the following communication from the Speaker of -the House of Representatives: U.S. HOUSE OF REPRESTATIVES, Washingtor., D.C., March 30, 1982. Hon. EDMUND L. lizN SHAW, Ja... Clerk, House of Representatives, H-105 The Capitol, Washington, D.0 DEAR MR. CLERK: I have reviewed your notification letter of March 29, 1982 informing me, pursuant to the provisions of House Rule L(50) of receipt of a subpoena directed to you as custodian for House documents in a pending case. Eenford v. American Broadcasting Companiez, Inc., Civ. Action No. N79-2386 (District of Maryland) and commanding you to appear for deposition at a yet undisclosed room at the Holiday Inn in Chevy Chase, Maryland and to bring with you what I understand to comprise approximately 100 linear shelf feet of records relating to the condUct of a legislative investigation. After consulting with the Majority and Minority Leaders and Whips of the House, as I have from time to time in matters of this sort, I must advise and instruct you not to carry these documents outside the Capitol to a place where their preservation cannot be adequately assured. I need only remind you of your duties in this regard and the precedents and prerogatives of the House which bird you to properly discharge the responsibilities devolved upon you by rules of the House. Since at least 1879. the House has insisted that no officer or employee of the House has a right either voluntarily or in obedience to a subpoena to produce any original document belonging to its files. The House cannot properly be assured that its papers will remain safe and secure if they are physically carried from their place in the Capitol and delivered to a yet undisclosed room at a Holiday Inn in Maryland. The gravity of this attempt to improperly wrest control of documents belonging to the House is emphasized by the breadth and intrusiveness of a subpoena which seeks documents generated during a duly authorized Investigation by a committee of the.11ouse. As you are aware the investigative records of a committee of the House are not subject to judicial process. Accordingly, I must instruct you not to produce the records in your control and possession at this time. Of course, (if after further proceedings, you should be served with a narrow and specific subpoena for records which are actually relevant and not privileged under circumstances which enable you to assure their preservation, and do not require you to carry the records to a distant jurisdiction, the matter can be reconsidered at that time.) Sincerely. THOMAS P. O'NEILL, JR.. Speaker. JIM WRICITT. P"ajority Leader. THOMAS S. FoLEY, Majority Whip. ROBERT H. MICHEL Minority Leader. TRENT Lorr. Minority Whip. t ••••.'? • "arch 01, 1982 One device which is suggested is the export trading company. The experience of our European and Japanese neighbors indicates that firms in those countries effectively utilize companies which specialize in importing and exporting goods and services. These trading companies provide manufacturers a means of reducing the risks associated with foreign business endeavors and offer a wide variety of services to their customers—including freight handling, financing, and market analysis. Proponents argue that this country needs to provide opportunities for the establishment and more successful operation of such firms in this Nation. Thus, a number of bills provide incenBANK EXPORT SERVICES ACT tives for the establishment of export The SPEAKER pro tempore. Under trading companies with the Departprevious order of the House, the gen- ment of Commerce providing the focus eman from Rhode Island (Mr. ST for these efforts. ERMATN) is recognized for 5 minutes. Export trading companies can proMr. ST GlsiiMAIN. Mr. Speaker. vide assistance to small and medium )day I am introducing legislation de- size businesses in the United States gned to increase bank involvement in who produce goods and services which xport financing and the export of can be marketed abroad. To my knowlpods and services. Everyone supports edge, no one has suggested that we he proposition that the United States should not encourage the development lust increase its exports of manufac- of such firms. Thus, there is support ared goods. Our performance over for provisions defining the nature of he years in this economic activity is an export trading company and prooor. Foreign countries for years have viding information on the use and oplaced a major emphasis on exports eration of such firms through existing nd the effects become more visible trade promotion programs in the Deach year. Imports into this country partment of Commerce. ontinue to increase. U.S. manufacturThere is a long tradition in this rs face serious competition from forand ig,n manufacturers here at home. country of separating banking evipractices of 3overnment and the private sector re- commerce. As a result the to up leading Llize that growth in our economy now dent in the period in closings bank the and 1929 of lepencis on a major shift from reliance crash enacted was legislation thirties, the m domestic sales to a mix of domestic which created a wall between the opind foreign sales efforts. of our depository institutions erations Given this realisation, comprehenand fields of enterprise. This other Ave studies, both in the public and prinecessary to assure wall was believed vate sectors, were undertaken to deterwhich held public institutions the that or economic nine what Government credit for all vital policy was needed to encourage our do- funds and provided and comindustry U.S. of mestic manufacturers to move into the segments safe and a in operated were merce export market. Early on it became s concentration that and manner sound clear that many of the problems and combinations from resulting power of their solutions were difficult, expensive, and long-range in nature. For ex- of banking and commercial firms were ample, studies suggest that changes minimized. Over the years since pasare needed in our tax laws to assist sage of that legislation, Congress has companies in their exporting. Howev- allowed some exceptions to this sepaer, we are confronted with a short- ration. In particular, bank holding term problem if tax incentives are pro- companies have been allowed to vided—such tax incentives cost the engage in activities which are "closely Government revenues thus making it related to banking" and savings and difficult to bring expenditures in line loan holding companies have similar with revenues. Also, many studies sug- latitude. These exceptions reflect the gest that Government lissistance— changing nature of the financial servloans and guarantees through the Ex- ices industry and the development of Im Bank. SBA. EDA, and other agen-s new product lines and needs in the cies—would provide substantial assist- marketplace. In some cases, bank involvement in ance. Again, these solutions would cost areas led to increased risk to such y the money—mone Government institutions and in some cases those quantities the in which is not available led to bank failures. The Nation must, suggested. Since major expenditures either as as a result, continue to be cautious tax benefits or major spending pro- about making changes which bridge grams are not realistic solutions in that traditional separation. Depository today's environment, efforts must be Institutions continue to play a vital directed toward changes which will en- role in our economy and steps which courage the private sector to become place those institutions at risk must receive careful consideration, and if almore involved. mbers of cargo shipments and entries it have been selected out as high risk for lations, including, potential revenue ses. These selectivity programs include ,oratory analyses, selective audits of irnrters and commodities, fraud investigans and cargo inspections. Uthough in fiscal year 1981 Customs col:ted almost $18.50 per dollar expended lm the total budget, the marginal returns )rn additional staffing will be much lower, cause of the high level of compliance that -eady exists overall among U.S. importers d travelers. Thank you for your interest in Customs. Sincerely. JACK T. LACY, Comptroller.. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis II 1327 CONGRESSIONAL RECORD — HOUSE lowed must provide sufficient protec• tions to avoid undue risk. concern was then that natural was It raised about allowing depository institutions to have equity interests in firms which provide many services not now offered by banks and which engage in high risk endeavors. The Federal Reserve System and the Federal Deposit Insurance Corporation on several occasions expressed their strong reservations. Clearly any legislation in this area must address these concerns. On the other hand, these concerns must be balanced by the national need to expand it,s trade possibilities. This is particularly important to my area of New England. Traditionally, this region has been heavily involved in International trade. For example. the New England Congressional Institute provided information on this point: In 1980, the six New England States generated over $10 billion in export sales. An estimated 135,000 jobs in New England are a direct result of export sales. When asked to predict the effect of passage of ETC legislation on their companies' receipts in the New England Congressional Institute survey conducted in April, 57 percent of the export trading company respondents estimated an Increase of over 25 percent. All of the respondents indicated increases of at least 5 percent. Applying the lowest of those estimates to current export data suggests that the potential effect of ETC legislation in New Eng:end means 500 minion dollars earned in export sales, and over 10,000 jobs. (Emphasis in originaL) The Institute goes on to say: New England, which has over 25,000 manufacturing firms, has a growing interest in export trade among its small and mediumsized firms. In the opinion survey conducted by the New England Congressional Institute In April. 52 percent of the manufacturing sector respondents indicated they would be interested in utilizing the services of an ETC. Of these, 24 percent do not currently export. The survey appears to indicate that. several thousand New England firms are interested in using the services of an export trading company.(Emphasis in originaL) Studies such as these point up the need for improving the chances of those small manufacturers to engage In international trade. To do so, these firms need an intermediary to absorb some of the risks that are involved in International activities. Increased activity by export trading companies appears to be one way to generate some benefits in this area. Bank Holding Companies and Edge Act Corporations can provide services which will make an ETC function more effectively. They can supply the capital necessary to allow ETC's to experience large economies of scale. The existing international communications and data processing systems and financial expertise of large BHC and Edge Act Corporations will provide additional benefits to ETC's. Also, liberalized roles for the issuance of bankers' acceptances—a form of financing provided by depository institutions to facilitate trade transactions—should pro- 1116.- kNZ' . ST GERP.PAIN.R.I,CHAIRNIAP4 niuss. Y ID. GON7AU:2. Trx.. H C.. P.4tN1. 1 NJ. < ANNUNZIO. ILL.. :P4 .1. MITCP;EU., MD. D.G. ER E. TAO iet-I L. N[AL N.C. CALIF. f M. PATTERSON. S J. II LANCrIARD. MICH. OLI.. NUaBARD. JR.., KY. J. LAFALCC., N.Y. )W. EVANS. IND. U.S. HOUSE OF FREPRESENTAT1VES COMMITTEE ON BANKING. FINANCc AND URBAN AFTAIP.S NINETY-SEVENTH CONGRESS 2129 RAYDURNI HOUSE OFFICE BUILDING IAN E. trAMOURS. .-EY N. Lt./MOINE. N.Y. 110SC OAKAR. OHIO ' WASHINGTON. D.C. 20515 IA'TTOX.. TEX. E F. VENT°. MINP4. loARNARD. JR., GA. RT CAR CIA. N.Y. 1-0HRY. WASH., +LES C.SCHUH VII. N.Y. .t.W71.1.3A1-1 STANTON. OH:0 CHP.I..-MERS R. WYt IE. OH • D STEwAKT 19. Mc PCINNE.Y. CONN. GEORGE HANEEN.IDAHO JIM LEACH. 1E/WA Al; D. EVANS. JR.,, DEL. PO' PAUL,'TEX. ED EE-THUNr ARK. NORHAN D. SHu HAY. CALIF. STAN PARRIS. VA. ED WEBER, OHIO FL.A. 13.1-L 0.1c.CCLLU GREGORY W. CARMAN. N.Y. GEORGE C. WORTLEY. N.Y. MARat ROUrCEMA. NJ. SILL LOWER?. CALIF. JAMES K. COYNE. PA. DOUGLAS K.. DEREUTER. N1MR. DAVID DREIER. CALIF. 2.23-42.47 •EY rrwlMASS. PATIMAN.'TEX. IAM J. COYNE PA. Y H. HOYER. MO. FOR IMMEDIATE RELEASE 411P WASHINGTON, D.C., March .31 'In a move to spur U. S. exports, Chairman Fernand J. St Germain of the Banking, Finance and Urban Affairs Committee today introduced legislation which would. allow bank holding companies and Edge Act . corporations to acquire companies specializing in export services. The legislation would also liberalize the use of bankers acceptances, bills of exchange often utilized to facilitate export—import transactions. M±..St Germain said he believed the legislation is "a reasonable approach to resolving the twin concerns of ensuring bank safety and soundness by limiting the breach in the separation of banking and commerce, and encouraging the flow of exports from this nation." Pointing to the need to improve this nation's export markets, Mr. St Germain predicted that the export trading companies will provide important assistance to small and medium sized businesies which produce goods for foreign consumption. He said the increased international trade, generated by exporting companies, will produce signifi— cant new economic activity and jobs domestically. Mr. St Germain said the legislation provided especially difficult problems for - maintaining the traditional separation of banking and commerce. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •• Oma 2 '"We wrestled with this problem for many months and decided a high degree of separation could be maintained by limiting the investments in export companies to bank holding companies and Edge Act corporations formed to facilitate overseas operations of U.S. banks," the Banking Committee chairman said. The bill will not authorize direct. investments in export trading companies by. commercial banks. The legislation would allow banks to issue.bankers acceptances up to 150 percent * of the individual bank's capital and surplus. The figure could be raised to 200 percent with Federal Reserve approval.' Currently, banks may issue acceptances only up to 50 percent of capital and surplus with the Federal Reserve authorized to approve up to 100 percent. The bill was also co-sponsored by Henry S. Reuss, (D., WIS.); Joseph G. Minish, N J.); Frank Annunzio, .(D., ILL.); Walter E. Fauntroy, (D., D.C.); Stephen L. Neal, (D., N.C.); Jerry M. Patterson, (D., CALIF.); James J. Blanchard, (D., Mich.); John J. LaFalce, (D., N.Y.); DavidW. Evans, (D., Ind.); Norman E. D'Amours, (D.,N.H.); Mary Rose Oakar, (D., OHIO); Doug Barnard, Jr:, (D., GA.); Mike Lowry, (D. WASH.); Charles E. Schumer, (D., N.Y.); Barney Frank, (D., MASS.); William J. Coyne, (D., PA); J. William Stanton, (R., OHIO); Stewart B. McKinney, (R., CONN.); Jim Leach, (R., IOWA); Stan Parris, (R., VA.); George C. Wortley, (R., N.Y.); Bill Lowery, (R.,CALIF.); James K. Coyne, (R., PA.); and Douglas K. Bereuter, (R., NEBR.). Hearings are scheduled before tlie Financial Institutions Subcommittee on April 21 and 22; https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tee t EXPORT TRADING COMPANY LEGISLATION 2 TUESDAY, SEPTEMBER 30, 1980 FIHOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING, NFINA ON NANCE AND URBAN AFFAIRS, SUBCOMMITTEE CIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE, Washington, D.C. Rayburn The subcommittee met at 10:05 a.m., in room 2128, n of irma (cha House Office Building, Hon. Fernand J. St Germain the subcommittee) presiding. y, BarPresent: Representatives St Germain, Annunzio, Ashle nard, Wylie, Hansen, Leach, and Bethune. to order. Chairman ST GERMAIN. The subcommittee will come ng company legisThis morning we open hearings on export tradiand most of these , lation. A number of bills have been introducedHous e. This subcomcross jurisdictions of several committees of the of the legislation mittee's principal concerns are the key sections Nation, grant which would, for the first,time in the history of this tments in inves commercial banks the authority to make equitythe expansion of export trading companies. This is a giant step ined it will mean a banking powers, and if this legislation is enact st the mixing of substantive breach in ouriongstanding policy again commerce and banking powers. nson bill, The Senate has passed S. 2718, the so-called Steve nt in stme inve for which gives banks extremely broad powers export companies. s will It is reasonable to assume that large commercial sbank into local follow their investments in export trading companie undou btedwill ent communities around the Nation. This developm among ly have a bearing on future competitive relationships . money center banks, regional banks, and local independent banks e It is essential that we fully explore all of these questions befor we making our recommendations to the full House. At a minimum, tradi should discover what the legislation will mean for: First, the y and tional separation of banking and commerce; second, the safet ce in soundness of banking institutions; third, the competitive balan the financial industry; and fourth, the promotion of exports. ut the All of us on this subcommittee, and I suspect througho U.S. Congress, are solidly behind the desire to increase exports of rt of suppo the in ne products. I would not take a back sent to anyo we export promotion, but I also believe we must make certain that more e creat may are providing real remedies, not quick fixes that dislocations in the economy. are the The thrust of many of these bills suggests that banksthey will problem—that they haven't been participants, and that https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (1) play the export game only if they have a piece of the action in the is form of equity investments. Frankly, I don't know whether this us the case or not, and I am hopeful that full hearings will give some answers. , This morning we will hear from the Honorable Abraham Katz Assistant Secretary for International Economic Policy, who is substituting for Secretary Klutznick, whom I understand is at the White House at this moment; as well ELS a panel consisting of Peter How -11, vice president, International Relations Unit, Citibank; and H. Robert Heller, vice president for international economics, Bank of America. We will first hear from the panel. Mr. Howell and Mr. Heller, if you would approach the witness table. And at this point I would recognize my colleague, Mr. Wylie. Mr. WYLIE. Thank you, Mr. Chairman. I have an opening statement which I would ask unanimous consent to insert in the record at this point. Chairman ST GERMAIN. Without objection. Mr. WYLIE. I would just like to summarize, if I may. As the subcommittee begins these hearings on this export trading company, it probably should be the first of a series of hearings to indicate what measures we should pass to stimulate exports. The statements of proponents, which I had an opportunity to glean through, were optimistic, even though somewhat vague, and maybe they have to be at this point, I am not sure. There is reason to believe that the authorization of bank investment in export trading companies may be somewhat helpful in assisting American industry to increase its export activities. There are difficult questions regarding the conditions under which the various banking agencies would be called upon to regulate bank participation. It is important that the subcommittee as well as the export community recognize that the bill that is before us today should not be regarded as a substitute for an effective export policy. I might say that although I am inclined to pass an export trading bill if we could get the bugs out of it, I hope that if it is passed it will not be an indication that we have resolved the serious task of addressing the need for fundamental changes in export and economic policy vis-a-vis our performance in the world market. I thank you very much for allowing me to give this opening .statement. OPENING STATEMENT FERNAND J. ST GERMAIN, CHAIRMAN SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE ON H.R. 6016, the Bank Export Services Act April 22, 1982 Today, the Subcommittee on Financial Institutions begins three days of hearings on the subject of export trading companies with special emphasis on the provisions of H.R. 6016, the Bank Export Services Act introduced on March 31, 1982, cosponsored by 25 members of the Full 4P. Committee, including 13 members of this Subcommittee. The recent history of Export Trading Company legislation, a brief background treatment of the separation of banking from commerce doctrine of this nation, a summary of projected increased trade prospects with accompanying estimated job creation potential if American ETC's are able to expand, both in number and in aggregated activity, a summary of essential differences in the bank participation provisions of previous legislation and the provisions of H.R. 6016 have been set forth fully in the floor statement accompanying the introduction of H.R. 6016. That statement is attached and has been supplied to all Committee members. Rather than reiterate that material, the Chair this morning would like to comment on the expertise of this morning's panel of witnesses and touch briefly on the events and survey procedures followed by the New England Institute. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • 2 The New England Congressional Caucus has traditionally through the years, come together in caucus on issues of regional significance . Far more often than not, such political differences that may have existed from time to time have been subordinated to the best interests of the New England region. The caucus, in an effort to involve even more directly the citizens of our region in our consideration of regional wide problems, created the New England Institute. Our first two witnesses, Senator John H. Chafee and Congressman Stewart B. McKinney, representing the caucus, will introd uce to the Subcommittee Institute witnesses who have given of their extensive talents and valuable time in an effort to create opportunities for expanded export trade activity for not only the New England region, but for the entire nation. Our witnesses are experts in their own areas of endeavor. Their herculean service as members of the Institute's Export Trading Company Task force is appreciated. Their considered opinion as to the promise of export trading company legislation, possibly justifying this major proposed breach in the nation's separation of banking and commerce doctrine, will be invaluable to the subcommittee. We are also pleased to have two additional New England witnesses, both potential users of the expanded permissive authority of pending ETC legislation, Mr. George! Taylor, Chairman of the Board and Chief Executive Officer, Citytrust, Bridgeport, Conn. and Alden Anderson, President, Hospital Trust, Inc., Providence, R.I. On September 30, 1980 this Subcommittee held hearings on export trading company legislation after passage of S2718. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis On that occasion, 3 witnesses, we heard from represenerce Comm of nt rtme to Depa tion addi in There was concern before, tatives of the Bank of America and Citibank. luded on the part of the during and frankly after those hearings conc to whether the passage of Chair and many of the members who attended as large number of medium and small the legislation would, indeed, cause a participate in expanded export banks as well as small manufacturers to trading company activities. Since H.R. 6016 deals entirely with bank appropriate to have representatives involvement in ETC activity, I think it tte of their projected use of of regional banks to advise us the Subcommi the authority provided by H.R. 6016. to begin these hearings with In conclusion, I find it refreshing have thoroughly considered the witnesses such as this panel-witnesses who it of compromise and who issues and have reached a consensus in a spir 7 individual areas of expertise. are thoroughly knowledgeable in their own https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CHAIRMAN RMAIN. R.I.. -17NANn .1 ST GE IO. ILL. /ANK ANNUNZ RD, JR., KY. BA r_ HU ARRJLL RS, OU AM ORMAN E. CI X. TE , OX •M MATT MINisH, NJ. OSEPH G. ARD. JR., GA. RN BA YOU° LCE. N.Y. rA LA O!-IN J. ANS. :ND. EV W. D v; 3A ()AKAR. OHIO ..ARY ROSE NTO. MINN. BRUCE F. VE IA, N.Y. RC GA RT ROPF HUMER. N.Y. SC CHARLES E. TEX. BILL PATMAN. S RESENTATIVE P E R F O E S U O H S. U. NS NANCIAL INSTITUTIO SUBCOMMITTEE ON FI E TION AND INSURANC SUPERVISION, REGULA CHALMERS P. GroRGE HANSEN, IDAHO ..t!PA LEACH,IOWA ED BETHUNE,, ARK. Y. CONN. STEWART B. McKthiNE CALIF. Y. wA uY D. SH AN Rm KD L F_R OHIO ED ViE, A. BILL McCOLLU M, FL IF. CAL . RY wE .LL LO B. Y. N.Y. GEORGE C. WORT—E OF THE FAIRS NCE AND URBAN AF NA FI G, IN NK RA ON E COMMITTE RESS NINETY-SEVENTH CONG C. 20515 WASHINGTON, D. May 4, 1982 m Baldrige The Honorable Malcol Secretary of Commerce 230 Washington, D. C. 20 Dear Mr. Secretary: • s itutions, I wish to expres st In l ia nc na Fi on ee mitt R. 6016, the Bank On behalf of the Subcom H. of ns io is ov pr e th ur testimony on arings on May 19he of on ti mp our appreciation for yo su re e th r preparation fo ucted so that all nd co en be s ha Export Services Act. In pt ri sc an the April 22 tr in need of possible es su is e os th 20, a thorough review of on t en opportunity to comm al comments you on ti di ad y An n. witnesses may have an io at ic or regulatory clarif ony will be appreciated. im st statutory amendment te ed ar ep pr ur yo g lementin may wish to make supp Issues Summary of H.R. 6016 ETC financing, in s nk ba by n io at ip ic age maximum part lding company banks, ho 1. In order to encour nk ba nno by n io at particip proposals to permit ly be developed. ib ss po ld ou sh , ds ar gu with appropriate safe mes to the investing na r la mi si d we lo al e mpanies ar re that the investing su in to d 2. If export trading co pe lo ve de be opriate means institutions, can appr is not mislead? er us C T E e th d an ic publ e ETC legislation if th of e os rp pu y ar im pr er in the r Is this an area bett ec 3. How do you mainta fi di mo y ll ia nt ta bs ent is su statutory definition. by th "exclusively" requirem wi t al de an th er elines rath left to regulatory guid ude product modifica cl ex to s ar pe ap g in of manufactur 4. Present definition ry discretion? to la gu re to ft le st area be tion. Is this also an BliC's capital of % 5 of s nt me st ve tations for BHC in r size banks? le 5. Are H.R. 6016 limi al sm d an um di me ctive for and surplus too restri goods, and if so, to e tl ti ke ta to d we e ly be allo tion with appropriat la gu re 6. Should ETCs explicit by d le nd ha riately be should this more approp safeguards? g bank holding on am ns io ct sa an tr l ia g s and other financ of some bank holdin ce 7. In the past, loan ur so e th be to en on have prov healthy dependence un company affiliates ge ra ou sc di To . problems company soundness https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of Section 23(A) governing affiliate banks for operating credit, the terms The motivating belief is inter-affiliate lending are intentionally onerous. ness basis, it d that if a subsidiary company is operating on a soun busi need to depend on its should be able to obtain credit on its own and not this perspective inappropriate unique relationship with an affiliate bank. Is holding companies, and if to export trading company subsidiaries of hank so, why? mary, which you may In addition to any comments on the foregoing sum • response to the following care to make, the Subcommitee will appreciate your questions based upon your testimony: esses stated that 1. Expanding on the modification issue, several witn facturing should be made H.R. 6016's prohibition on ETCs engaging in manu which engage in "minor more flexible. The activities of smaller companies appliances to conform product modification" such as converting electrical with foreign language with overseas voltage requirements and repackaging stments by BHCs and instructions, could render them ineligible for inve e smaller companies Edge Act Corporations under H.R. 6016. Should thes suggest statutory or be made eligible for investment and if so, can you m? Related to this are the regulatory language which could include the following questions: ld be allowed? -What types of "minor product modification" shou "exporting" companies -Do you have any statistics as to how many modification" before presently engage in some form of "minor product exporting? companies? -What is the average size of such exporting companies concentrated? _what area(s) of the country, if any, are such page 112, commenting on 2. You will recall that Congressman Patman on responsible for 80% of this country's your reference to !96 of U.S. firms being to the exports of Japan exports on page 77, asked for the ratio relevant information being sought by Mr. and Germany. we would appreciate the Patman requested for the record. onse prior to May 18 so that The Subcommittee will appreciate your resp printed hearing record. all responses may be made a part of the Sincerely, Fernand 3. Chair man Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • ermain 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis May 11, 1982 The Honorable Steny H. Hoyer House of Representatives 20515 Washington, D.C. Dear Mr. Hoyer: In Chairman Volcker's absence, I want to thank you for your recent letter urging that the Federal Reserve extend the deferral of reporting and reserve maintenance requirements for smaller depository institutions. On April 28, the Board extended the deferral until December 31, 1982, in view of legislative proposals that are now being considered by Congress. However, it is the sense of the Board that it will be increasingly difficult to grant extensions beyond the end of this year unless some legislative action is taken with regard to the exemption. The Loard believes that it is preferable to remove very small institutions from the burden of reserve requirements completely. In its legislative recommendations to Congress, the Board has suggested either exempting depository institutions with less than $5 million in deposits from reserve requirements or exempting the first $2 million of reservable liabilities of all depository institutions. Once again, thank you for expressing your views on this matter. Sincerely, Preston Martin xx (GTS:PSP:DJW:)CO:pjt (PV-111) bcc: Gov. Martin, Mrs. Mallardi Congre55 of tbe Unita &tates 3iiott5e of 1kepretentatibt5 STENY H. HOYER COMMITTEES. POST OFFICE AND CIVIL SERVICE IZIa5bington, D.C. 20515 5TH DISTRICT, MARYLAND BANKING, FINANCE AND URBAN AFFAIRS April 21, 1982 Mr. Paul Volcker Chairman Board of Governors, Federal Reserve System Constitution Ave. and 20th St. Washington, DC 20551 Dear Chairman Volcker: It has recently come to my attention that the small institution reporting and reserve exemptions granted by the Federal Reserve System to smaller financial institutions will soon expire. As you well know, the exemption was granted to relieve very small institutions from the reporting and reserve requirements required by the Monetary Control Act of 1980. Given the fact that legislation is presently pending before Congress which would permanently exempt smaller depository institutions from the reserve requirement of the Monetary Control Act, I respectfully ask that you grant a further extension of this exemption. Such an extension would not only aid our very small institutions, but would allow Congress to act, legislatively, on this matter. Thanking you in advance for your cooperation and with kind regards, I am Sincerely yours 4 ST Me cc: National Assn. of Fed. Credit Unions https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ••• H. H0Y4R of Congress tack rt-1 HOUSE OF REPRESENTATIVES WASHINGTON. D. C. 20515 7I1itlit 1J449.41tudA tile 00 spituaG4 4tA cptUtt9 U4 eu triu; ,1o. & rtu datum/ 040 Cotelh troup bow( Ituk tteitotA V4 10( https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (Lit; 1(04 yoy Rem( . Au" NORS BOARD OF GOVER OF THE SYsTE: E FEDERAL RESERV 1981 MAY -6 am 9: 58 RECEIVED IRMAN CHA OFFICE Or THE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, C. C. 20551 PAUL A. VOLCKER May 5, 1982 CHAIRMAN The Honorable Dave McCurdy House of Representatives Washington, D. C. 20515 Dear Mr. McCurdy: Thank you for your recent letter with which you enclosed correspondence from several bankers in Oklahoma regarding actions by the Depository Institutions Deregulation Committee. I want to assure you that I understand the concerns that prompted your constituents to write. A number of the bankers comthented that the Committee's deregulatory schedule--beginning on May 1, 1982--with maturities of 3-1/2 years and over was a step in the right direction, but they urged the adoption of a new, short-term deposit instrument that would enable their banks to compete more effectively with money market mutual funds. In the latter connection, several of the bankers questioned the effectiveness of the new 91-day ($7,500) minimum account in stemming outflows of funds to money market mutual funds. The bankers also expressed considerable disappointment over the new account's 1/4 percentage point differential in favor of thrift depository institutions, even though the applicability of that differential is limited to one year and is suspended whenever the Treasury bill rate falls below 9 percent for four weeks. While I voted in favor of the new 91-day account at the March 22 meeting of the Committee, I am not satisfied that it does enough to enhance the competitive position of banks and other depository institutions, and I said so at the meeting. At my urging the Committee directed the staff to develop a new short-term instrument that will enhance the competitive posture of depository institutions vis-a-vis money market mutual funds. Staff has in fact been working on a number of alternative proposals, and Secretary Regan, ChaiLman of the Committee, has scheduled a meeting for May 24 to consider a new account. I must add that in developing a new account the Committee must also be concerned about its cost impact on depository institutions. Authorization of an instrument fully competitive with all the features of money market mutual funds would result in enormous added earnings pressures as funds were shifted from savings accounts and other https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Dave McCurdy Page Two low-yielding deposits to the higher-yielding instrument. Any new instrument must therefore involve a compromise and such a compromise may not be wholly satisfactory to all. I appreciate the opportunity to comment on this important issue, and I will keep you informed of any new Committee decision. Sincerely, Siraul A. Voluka: NB:vcd (V-107) bcc: Mr. Bernard Mrs. Mallardi (2) DAVE McCURDY wAskrwcToN orrict. 313 CANNON HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 (202)225-6165 4m DIST1RICT. OKLAHOMA COMMITTEES' ARMED SERVICES PROCUREMENT Canzrts'5 of tric tinfteb f7tatr5 READINESS SCIENCE AND TECHNOLOGY ENERGY DEVELOPMENT AND APPLICATIONS )out of r\rprtantatibt5 itZiastington, P.C. 20515 SCIENCE RESEARCH AND TECHNOLOGY https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis DIsTwIrr orricrt: 207 iNts7 MAIN NORMAN, OK. 73069 (405) 3294500 April 29, 1982 103 FEDERAL BUILDING LAA-roni. O. 73501 (405) 357-2131 /6 -rt Honorable Paul A. Volcker Chairman Depository Institutions Deregulation Committee 20th and Constitution Ave. Washington, D.C. 20551 0 -Ti 4-n r, I-71 OM ▪r-, I-1 tr• C., ..... 7) CD ..z cpfD i:-.... =rd" r.,.....4c, ni •••"*" „ 7 , =C) „.. C.. .....1 =CD > Dear Chairman Volcker: c• c) 11+.0 =I 'IQ =.3 =3 = X 1. D tet •• ....• Enclosed please find several letters written by bankers from te State of Oklahoma. I thought you might like to know the feelings of these people concerning recent actions taken by your Committee. GO /wit &OL45 e iiL. urdy, N.C. .C: n .... rt,i cf) :::- -‹ C.I. ---. n1 1 :: X https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis P. O. BOX 68 PIEDMONT, OKLAHOMA 73078 (405) 373-1600 Ot_t_VI% STATE Ilitr Todd P. Ward BANK Ma Chairman of the Board 47 9 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, Oklahoma 73105 26, 1982 Ce /k 9 44q4b 19c9 4).4.%6, LAUR4 CLAR4t, JOAN PHYLLIS-LARFY MAX. SUNNY Dear Bob: The Depository Instituti.cns Deregulation Committee has apparently forgotten the reason it was organized. Since its establishment it has issued volumes of regulations and has done little to deregulate until its last meeting when it finally adopted an interest rate phase out schedule. If history repeats itself they will probably change this schedule many times before it becomes official. At their last meeting they authorized a 91 day Certificate of Deposit with a minimum deposit of $7,500.00 (another regulation). They also allowed thrift institutions to pay 1% more than commercial banks. It is beyond my comprehension how we can bail out the thrift industry by authorizing a certificate that will have little or no widespread appeal among the savers of this country. It is also beyond my comprehension how the Deregulation Committee can justify restricting competition between financial institutions when one of its goals was supposed to be the opposite. I will support the Oklahoma Bankers Association in any of its efforts to bring about deregulation of financial institutions and increased competition. Very truly yours, Todd P. Ward https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr71CA NrITE BAN!:—Sc TRUST COMPANY JERRY L HUDSON Prostoont March 29, 198 LAURA CLARA REX PHYLLIS JOAN LARRY SUNNY Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 OTHER Dear Bob: We are certainly disappointed in the recent action of the Depository Institutions Deregulation Committee. The $7,500.00, 91-day C.D. does very little for us as we continue to attemnt to compete with money market rate, transaction account products offered by our brokerage firm competitors. The continuation of the rate differential in this product adds further to our opinion that DIDC does not have either a clear understanding of the situation or the necessary intention of allowing a free market process to occur in the competition for deposits. For our bank, this product will only serve to divide our current users of 6 month money market certificates. It will also cause those customers to have one more opportunity to realize the thrift institutions rate differential. We do not expect to gain new depositors or to prevent current depositors from investing in money market funds with the 91-day C.D. Our customers are becoming more and more convinced that we do not intend to offer them a competitive return on their transaction balances. They are not sympathetic with our explanation that regulators do not allow us to provide that product. The longer this situation exists, the more harm we face from this inequitable structure. 41st and South Darlington. P. 0. Box 1200 II Tulsa. Oklahoma 74102 • Area Code 918-628-1200 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Your assistance in relaying this viewpoint to our representatives and regulators will be greatly appreciated. Sincerely, A Hudson J President JLH:em • 1 Uri L-Cita p- ••• 7123 SOUTH LEWiS AvENUE POST OFFICE BOx 7700 Match 29, 1982 f TULSA OKLAHOMA 74105 (918)4921811 LAURA CLARA REX PHYLLIS JOAN LARRY MAX SUNNY ‘-‘ OTHER Mt. Robett E. Hatnis Executive Vice Ptesident Oktahoma Bankets Association P. O. Box 1E246 Oktahoma City, atahoma 73105 Dean Bob: It i4 incAedibte that the Depositoty Institutions Dctegutation Committee made up 06 some oi the nation's most knowtedgeabte and intettigent men coutd teach the concutsions and come to the decisions tepotted tast week. One moAe 4matten, shottet-tetm C.D. is not a competitive instAument to the nation's money matket 6unds. Thitty day6 o6 additionat study onty indicates ignotance which obvicuzty is not ptesent among the membeu. To what ptessutes ate these membets tesponding? When witt they make decisions that indicate to the nation that they have used some common sense? Out sophisticated customlets ate moving thousands o6 dottaitz each day out o6 and out o6 state to the untegutated money matket 6unds. Who can ou IS btame them? When witt the DIDC give these cast:omens a teazon to Leave theit 61/nets n'Shoma without being penatized? Can the °BA hetp? Sincaety, Wittiam R. Nash Pnesident https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • Firct kctional erms rruct Co. REX E EDGAR Presloent Arra Chief Executrve Offi,pr LAURA CLARA REX PHYLLIS JOAN LARRY- MAX SUNNY OTHER March 30, 1982 VED Bob Harris Executive Vice President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, OK 73154 MAR ' Dear Bob: This letter will voice my displeasure. The incredible illogic of the Depository Institution Deregulation Committee meeting whereby they so approved in their wisdom the new certificate of deposit in the form of a 91 day c.d. with a minimum deposit of $7,500 with the rate to banks 25 basis points below the rate on 91 treasury bills. It is beyond my comprehension how the new deposit instruments with it's high cost of funds is going to help banks compete with the money market mutual funds. And particularly how it will help address the problem the thrifts are presently facing by giving them the quarter percent differential to their already high cost of funds. In my judgement our bank and our community will be hurt a great deal, particularly through the growth of increased deposits, since the rate we are able to pay on the treasury bill is certainly not going to be able to compete with the money market funds. All that I can see happening in our community is just an on going cost increase in our cost of funds. We compete with two of the largest s & our community and seems to me that all to their dilemma as well as to our own of our less than $10,000 accounts will cost of funds, that being the new c.d. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Second and Grand • P.O. Box 1151 • l's in the state in this will do is add in that we feel many convert to the higher depository instrument. Ponca City, Ok,.:47orna 74602 • 405-762-1644 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Page -2Bob Harris Executive Vice President Oklahoma Bankers Association I am sure there is not a great deal that we can do since, in all of the wisdom of the DIDC, they don't concern themselves with input from bankers through the ABA and state organizations. This will voice my anger and concern that the outflow of deposits which might have been used to fund the agriculture and energy and other capital needs of our borrowers in our community, is certainly going to continue to leave our community and we are still faced with the problem of how to secure reasonable funds at a base that we can afford to loan and the borrowers can afford to borrow. I trust that you will carry out the proposal of sending the displeasure of Oklahoma bankers to Washington. With kindest regards I remain, Sincer Y2 7(' Rex E. Edgar President and Chief Executive Officer REE:nb A IV:E.17,1,T:A N AT"iaIV L Bank and Trust Company r-77: 60 P0 BOX 1408 SAPULPA OKLAHOMA 74066 • 918 224-3210 -_ WILLIAM L. BERRY CNAIRAAAN OF TNE BOARD AND CHIEF EXECUTIVE OFFICER March 26, 1982 .11 Mr. Bob Harris ‘1\ Executive Vice-President Oklahoma Banker's Association P.O. Box 18246 Oklahoma City, Oklahoma 73154 1982 R•Efri: Dear Bob: I am writing concerning the DIDC's recent decision to create a new ninetyone day savings certificate. Our bank likes the idea of having a more competitive shorter term C.D., but we cannot believe that Thrift's were given favoratism on the rate. A day does not go by that I don't read an article on how their high cost of funds is destroying their spread position. I am not as sophisticated as many, but it seems to me the way to increase the spread is to increase yields on investments and reduce cost of funds. Locally, our housing market is at a standstill. This presents a problem for Thrifts to increase the yields on their loan portfolio, leaving no alternative but to lower their costs. We are certainly not afraid of competition. However, it seems when comparing banks to Thrifts and Money Market funds, we are always having to play the game with a man short. As of February 28, 1982, 31.1% of our bank's deposits were . in 182 day, S10,000.00 Money Market Certificates. I am not sure of the ultimate impact on our bank, but I think any banker will testify that customers are rate conscious and that for a quarter percent we can expect to lose many, many deposits. I would hope that you will pass this letter on to the DIDC Committee. It is time for that committee to get out of the office and come to the country to see how absurb some of their rulings are. Sincerely, William L. Berry WLB:bb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MEMBER FEDERAL RESERVE SYSTEM • FEDERAL DEPOSIT INSURANCE C0RPOr-t-A7I9N https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 077, ) e7-71- NATIONAL Ikh!K •••••• tr"7"•• t Lr A rr _ : „.„ • ••..••••a•••••• ,,,,,,,,, •••••••••-• LAURA CLARA REX PHYLLIS JOAN LARRY— MAX SUNNY- OTHER March 30, 1982 RECE1VW MAR 31 id.e Mr. Robert E. Harris Executive Vice President Oklahoma Banker Assn. P. 0. Box 18246 Oklahoma City, Ok. 73154 R.E.H. Dear Bob: I urge you to strongly protest the recent DIDC authorization of a new deposit instrument with a rate differential favoring S & Ls. It seems unreasonable to me for us to not be able to pay our customers the same rates as our regulator favored competitors when the goal is supposed to be competitive equality. I would also urge that in the event that any action is taken to bail out S & Ls with our FDIC funds that the OBA take any action possible to prevent it. This would be a direct subsidy to a competitor that enjoys favored treatment from regulations on branching and rates and does not allow them to go broke trying to provide our customers No service charge services which have been the downfall of many banks. Yours vpry truly, Mahan Hatton President On. /a. • ••• ••• • •••• March 26, 1982 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. O. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob: gib We at First Bank In Claremore wish to again ask you for assistance in Washington. In our opinion the recent decision of the DIDC authorizing a new 91-Day, "non-transactional", CD will have more negative than positive impact on the problems that currently exist both nationally and right here at home. The S & L Industry needs a 1/4% differential like it needs a 25% New York Prime. If the differential should attract bank deposits into this new high rate CD with mortgage loan demand what it is this may very well be the icing-on-the-cake for them. There are two Savings & Loan institutions in Claremore, one being a prime example of the S & L with old low rate loans and high cost of funds. They absolutely don't need more high-rate deposits. We see very little more than a paper shuffle for the banks. The new CD will be popular only as opposed to the 182 day Money Market CD. It is merely a baby step toward what is really needed, that is a bonifide Money Market Mutual Fund competitive instrument our banking customers should rightfully be provided. Our customers who have been forced to seek nonfinancial service firms in which to invest their liquid assets would much prefer to see those assets reinvested back into their own community rather than profits from Money Market mutual funds used to buy condominium complexes in Florida, or Office buildings in Atlanta. There is a community pride in Claremore and I'm sure in many other towns and cities throughout our nation. Also, Bob, the personal "convenient" service which we can provide is very important to our customers. Many times they must deal with a firm many 100's of miles away on an impersonal and unsatisfactory basis. Many of our customers have voiced their negative opinion of this condition which exists due to a lack of our competitive service. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 Pr Liicf. FIRST BANK IN CLAREMORE / P.O. BOX 309 / CLAREMORE, OKLAHOMA 74017 / 341-6540 • March 26, 1982 Page 2 We think it is very important that the 30 day study which the DIDC Staff has been asked to persue produces meaningful results. That a transaction account be authorized which will give us at least an 'equal" chance to keep our home money "at home" and to invest that money back into our community where it belongs and not to some brokerage house in Metropolitan America. Please send our message to Washington in hopes that some good will come from the DIDC 30-Day study. Thank you. Very truly you p, 4:1•7/ James S. H agland Vice President & Cashier JSH:bls https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ( e;ti -4 g7 /e g (Fe77 azile/ PI;cal egjanye ezrty March 2I!_, 1982 Larry E. Briggs, CCL President RECEIVED &c32 Mr. Robert Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 73154 Oklahoma City, Oklahoma RE: LAURA CLARA REX PHYLLIS JOAN LARRY_ MAX SUNNY_ R.E.H. DIDC March 22, 1982 Meeting Dear Bob: I have been reading several news articles concerning the aboveThe rationale behind the decision of that referenced meeting. meeting completely escapes me. I do not feel that the new 91-day CD with the minimum deposit of $7,500.00 will provide the banks with the tool to be competitive with money market mutual funds. It would appear that this will not increase the influx of new funds into the This will only increase the cost of existing banks and S&Ls. funds. I certainly do not understand the ;4 of 1% rate advantage that It seems to me that the the S&Ls will have over the banks. S&Ls have been complaining to Congress that their high cost of funds has caused a negative spread, therefore substantial How does the new CD solve the problems that the losses. thrifts are facing today, ie negative spreads, high cost of funds, low-yielding mortgages? The rate advantage for the S&Ls seems to negate the previous attempts to provide rate parity on the six-month money market It seems that we're taking one step forward and two CD. steps backward. I feel that this rate differential will hurt the First National Our customer base is Bank and Trust Company of Holdenville. of extremely rate sensitive and will move their deposits for This should cause a substantially less a percent difference. This growth rate than what we have experienced in the past. will also slow down our lending ability to the farmers, ranchers, small businessmen, home buyers and consumers. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis P.O. BOX 790 / HOLDE":VILLE, OKLA. 74848 405 / 379 / 3307 Robert Harris March 29, 1962 -2- Not only do I feel that it will hurt how the high cost of funds will help little loan demand for homes because CD will not allow anybody to compete mutual funds. the banks, I do not see the S&Ls. There is very of interest rates and the with the money market I would hope that the DIDC would reconsider their decision and develop a more competitive situation than what they implemented at this latest meeting. Thanking you, Sincerely LARRY BRIGGS LB : BK https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the firot srate bcr1\ G trus corr-per) of snawnee https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis March 29, 1982 40. Robert E. Harris Executive Vice President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob: I concur with your _comments concerning the action the DIDC took on Monday. In following Secretary Regan recently, it is our opinion that he is working for the betterment of the Merrill Lynches at the expense of the banking industry. The outflow of funds from our area continues to grow, making it more and more difficult to have the funds available for the needs of our communities. It also appears that the liberal press has started work on commercial banks, using partial facts to make a story. I am week". enclosing an article that just arrived in the March 29 "news If you haven't read it, I thought you would be interested. MD/sr Encl. 912 EAST INDEPENDENCE • P.O. BOX 1249 • SHAWNEE, OKLAHOMA 74801 • AC 405 273-6100 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: Magazine article Citations: Number of Pages Removed: 1 "The Long, Long Wait For Checks To Clear." Newsweek, March 29, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org N11717TM 77D OF BROKEN A.R R OW JACK D. LEWIS Presicenz arid Omer Executsm Officer March 26, 1982 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob, Having only recently became a bank President, I was not completely attuned to the survival implications involved in the battle for interest sensitive deposits. However, the March 22nd action of the Depository Institutions Deregulation Committee brought home clearly the message that the committee members have little regard for the immediate needs of banks to be able to compete effectively for these dollars. If I could view the situation completely objectively, I would still have a difficult time understanding why one segment of our deposit intermediation system operates under one set of rules and banks operate under a more strict structure. In the first place, how many hundreds of billions of dollars must be drained from the principal providers of credit for American business (i.e. the banks) before the regulators grant banks equality? Secondly, why did the regulators see fit to grant the 4 of 1% differential on the new 91 day Certificate of Deposit to an industry (the Savings and Loans) on the brink of insolvency at a time when they probably could acquire almost an equal amount of deposits if rate parity existed with banks, a la the six month money market certificate. Bob, in my opinion, we must voice our deep concern both to our regulators and congressmen about their seemingly indifferent attitudes toward commercinl banks' abilities to attract deposits in the future. The idea of gradually getting to a competitive rate of interest environment might be okay if all participants in the mnrket were currently on equal footing. However, obviously, the money market funds have long been in such an environment. Please express my concern to any group or individual you think might be an appropriate audience. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, Jack D. Lewis President and CEO 91st and Elm Place, P.O.Box 1E0, Broken Arrow, OK 74012 91E/258-8E55 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CENTRAL NATI01ALepArac,__ AND TRUST CarkPArnf 0I-LEN13-JOAN MAX OTHER CLARA PHYLLIS LARRY SUNNY W. L. STEPHENSON. JR. Chairman of the Board March 25, 1982 RECtIViO viAR 2 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 t82. Dear Bob: I am appalled at the decision of DIDC on Monday of this week. I think our industry has made a compelling argument for the need to have an instrument that is competitive with the Money Market Mutual Funds. Instead of meeting this need, they are handing us another certificate of deposit with a differential in favor of the Thrifts - who, by their own admission, can't afford to pay current rates to acquire deposits. The whole thing is idiotic. used to believe that DIDC's actions were predicated soley on an effort to try and salvage the Thrifts. I have about convinced myself that Secretary Regan is consciously, or unconsciously, protecting the industry from whence he came at our expense. We are losing money daily to Money Market Mutual Funds. If this hemorrhage is not stopped - we will have a sick banking industry to go along with a dying Thrift industry, and Mr. Regan's former employer will be the only game in town. Sincerely, W. L. Stephenson, Jr. Chairman of the Board WLSJr:lb BOX 3448 EN:O. Cv....0MA 73731 4CE:233-3.53E r'L... IL r",deNciumogL LL ; .1•:••-••: ".,1r • : TAP "- in I POST OFFICE BOX 577 302 SOUTH FIRST Wayne Cahanisa President & Chief Executive Officer 'cid..MiI 43-Z2V2ItigKLAHOMA 73446 405.795-3332 1982 March 25, 1982 Robert E. Harris Executive Vice President OklAhnnq Bankers Association P.O. Box 18246 Oklahoma City, OK 73154 5%301 01-ioVr\ Dear Bob: Your comments regarding the most recent action taken by the Depository Institutions Deregulation Committee were very cypLopriate. I agree 100 percent with you tT-It the new 91 day certificate of deposit will r.R.lise funds to flow fram our bank into our local savings & loan branch in Madill. Investors Savings & Loan of El Reno, Oklahoma, has a relatively new branch,office inMarinl. They are paying the =it= rates allowed 2 yeP7- CD's and are paying above ninrket rates for jumbo CD's and 1 on 2/ public funds in our area. There is no question but what they are operating at a negative spread in acquiring the funds they are from the other financial institutions in our area. While the S & L branch will continue to draw funds fram the other banks in our county, they will continue to have a negative spLead an the funds they are acquiring, which will hasten their demise. It is past tinici. our regulators came to their senses and realize the you problems they are creating. If there is anything I can do to assist to and my fellow bankers across the state and nation in communicating be the regulators the need for more sensible decisionmaking, I will happy to do so. Wayne Cabaniss, President Chief Executive Officer WC:rt https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PigN 1) RECEIVED MAR 2 ,; 1982 BAK AND TRUST(,1C). RSA-6221 P.O. BOX 9426,2420 SOUTHWEST BLVD.,'TULSA, OKLAHOMA 74107 • TEL.(918) B. J. LEE Presadent https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LAURA___-_ CLARA REX_______ PHYLLIS JOAN March 25, 1982 LARRY SUNNY OTHER_____ Mr. Robert E. Harris, Executive Vice President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob: I agree that the DIDC once again made a decision that will result in a disadvantage to bankers. However, I must confess I do not share your concern for the Savings and Loan's problems -- they actively lobby for the 1/4 % differential and for other privileges that have allowed them a competitive edge in the past. I perceive our problem to be one of lack of regulation in one area -- (financial services from non-financial institutions ) and over-regulation in another - ( limitations of Banks and Thrift institutions.) To allow disintermediation on one hand, and to foster inequitable competitive situations on the other, seems to me to be purely a problem of regulation. The problem may be the DIDC itself ! Its obvious that the road to final deregulation is going to be very bumpy for bankers ! Very truly yours, ./' ( afi B.J. Lee President BJL/kh ""mIMII=IPr SOUTHWEST TULSA BANI( RECivt13 ii;AR 2 March 25, 1982 18.2 LAURA CLARA RE'X PHYLLIS JOAN LARRY MAX SUNNY OTHER R.E.H. Depository Institutions Deregulation Committee Dear Gentlemen I wish to express my disappointment at the way your committee is handling the deregulation of interest rates. I find your actions last Monday to be hypocritical, and they are actually adding to this country's problems. I wish all of you, with the exception of Mr. Issacs, would resign immediately. Sincerely M. P. Youn President MPY/rjr P. O. BOX 9220 • 4544 S. 33rd W. AVE. • TULSA, OK 74107 • (918) 445-1111 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis a . 10 REC-EiVED I .1•1111. " • • 11• • • . . • • eir3tdic:2„1"-er-Trrr-zer=4, k c.fe4rigrAir .:C 64 k: PFZES'DE.`4T H. li,AR 2 1982 CI: A.."‹ Co-, A,*••3 March 26, 1982 Mr. Robert E. Harris Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 LAURA CLARA REX PHYLLIS JOAN LARRY MAX OTHER SUNNY Dear Bob: I am writing to express my extreme disappointment at the DIDC for their action of March 22nd. I am unable to understand how men of such knowledge and understanding of the financial market place could make such a decision relative to the new short term certificate of deposit which they authorized. In' a time when the S & L industry is so worried about high interest rates they are given this instrument with a rate in excess of their banking counterparts. I see of no way that this new instrument can help in the compeon for the money market funds because of the rate being nowhere near competitive with them. I do; however, see how we, in the banking industry, will once again see our funds being withdrawn from our banks, which in turn drain funds from the agricultural, commercial and energy related areas of Oklahoma, to help another industry whicI in no way, at the present time, helps to stimulate economic growth of not only Oklahoma but the entire Nation. The entire financial industry, it seems, want to be allowed to compete on an equal footing; however, the DIDC seems to be determined to direct a course against this being something of a reality at the present and for the future. It almost seems as if their direction is the complete ruin of the entire financial industry, with the exception of the mutual funds, money market funds, Sears and the like. Perhaps their thinking that the only way to deregulation is to allow those industry representatives, which are not now regulated, to assume the entire financial posture for America. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MEMBER FEDERAL DEPOSITORS INSLJRANCE CORPORATION Mr. Robert E. Harris Oklahoma Bankers Association Page 2 All in all, the meeting of March 22nd of the DIDC seems only to confirm that this group intends to direct a collision course between the fantasy world of Washington and the reality of the Financial Markets of America. I would only hope that there is some way, prior to May 1st, to enable the DIDC to see the error of their way before the banks of America, once again, a're treated as the trash of the financial world. 10. ear I do commend the DIDC for at least establishing a timetable for the complete deregulation of interest rates over the next few years. However, I do have a fear that if their actions in the future follow the pattern of their past actions they will likely find some reason to upset this timetable and we will once again be caught somewhere between full regulation and no regulation. Yours truly, 4 JOHN H. FRANK, President JHF/ja https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The First National Bank and Trust Company of Muskogee, Oklahoma H. E. LEONARD PRESIDENT March 25, 1982 LAURA. CLARA RD( PHYLLIS JOAN LARRY— MAX SUNNY- OTHER RECEIVED Mr. Robert E. Harris Oklahoma Bankers Association P. O. Box 18246 73105 Oklahoma City, Oklahoma (AR 2 1982 R.E.H. Dear Bob: I have just read the inconceivable action of the DIDC in Washington. If I remember correctly, last year the "ailing thrifts" wanted demand checking accounts and consumer lending powers to "bail" them out. They wanted it bad enough to supposedly agree to give up the differential. They then said - since we're making all of these consumer loans, we don't have sufficient funds for housing and need the differential back. Now they're saying - since we're paying so much for funds we're going broke, so give us the differential back so we can pay more, and it follows they can go broke sooner. The DIDC apparently believed all this and at the expense of the commercial banking business gave them the differential. It may be different in Washington, but in Muskogee there are just so many savings dollars. They will follow the highest rate drawing funds from banks. The thrifts will not use these funds for housing since no homeowner can afford their interest rates. Thus, DIDC has made it very apparent that banks must be made weaker institutions in the name of helping "ailing thrifts". Let's have all our financial institutions weaker, then no one will notice the "ailing thrifts". At least one thing is still in our favor - we will be here to pay the interest when due and since DIDC compounded the thrifts problem, some of them may not. Sincerely, , /1/1/CH. E. Leonard President HEL/clg https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T1 r't c0 1/L At,• re " 1. CC. ": .rt es ILA(11 fr"! -7r4 1 6C"3 .....•••11•••••.10 :::) IE-L I. f STATE , , BARK ________ "0444Pme411.61411141110111M V.AR 2 1982 March 26, 1982 Mr. Robert E. Harris Executive Vice-President Oklahoma Bankers Association Post Office Box 18246 Oklahoma City, Oklahoma 73154 LAURA.-- CLARA PHYLLIS REX--JOAN-- LARRY MAX---- SUNNY R.E.H. OTHER-- Dear Bob: We would like to voice objections to the methods and procedures of the DIDC and the Congress supposedly supporting them. The total lack of response shown by these people for bank customers is almost as asinine as giving preference to a bankrupt industry that we, as member banks of FDIC, are being assessed extra dollars, to support. These totals, that we must make up in high-priced volatile CD's to fund the needs of our customers, not only add to the cost of our loans and decrease the profit range of banks, possibly to the levels of the savings and loan industries if this line of thought continues. Then, I would Congressional cannot borrow and operating like to hear the response of the Oklahoma Delegation when my customers find that they second mortgage money, small business money, capital from Merrill Lynch. Sincerely, Gene Campbell President dds https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis or • 4501 South 1-35 • P.O. Box 95329 • Oklahoma City, Okla. 73143 (405) 672-7831 att3enh TruT ca P. 0. BOX 1117 OKMULGEE. • 918/756-7910 OKLAHOMA 7444i W. CARLISLE MAIIIREY III PRVIIIDIENT • Match 25, 1982 LAURA CLARA REX PHYLLIS JOAN LARY MAX SUNNY OTHER • Mt. Robett E. HatAis Executive Vice Ptesident OLLahoma Banketz Association P.O. Box 18246 Oktahoma City, OK 73105 RECEIVED Mt? 2 1982 Dean_ Bob: RJER Once again the D.1.D.C. has taken a giant step backwatd. It is inconceivabte to me that in th,i6 day and time o ti supposed deteguiation, the D.1.D.C. wouid authotize a new deposit instAument on which it attow4 the thti6t industty to have a one quattet o6 one petcent ekL. Community banks tike outsetves ate having a dcutt time maintang oult &cat deposi,ts az it is. Now once again, we ate being asked to compete with one hand tied behind out back. I am in tiavot o6 the new 91 day C.D. I zimpty think it is unconscionabte that we ate not allowed to pay the same 'Late on it az ate the S S L4. Ptease do whatevet you can to have the di66etentiat temoved. Vetu ttut youts, .f W. CaALLste Mabtey Ptesident WCM/t.o https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 111.1 Floyd W. Kennedy, Jr. President it—t, Tmes LAURA CLARA.-- REX PHYLLIS JOAN LARRY MAX_ SUNNY OTHER_ March 26, 1982 RECEIVED Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 MAR 2 :7 1982 R.E.H. gib Dear Bob: Please convey my concern to both the Depository Institutions Deregulation Committee and our Oklahoma Congressional delegation about the recent decisions made by DIDC. The last thing the banking industry needed was another Certificate of Deposit. If most of us in the banking industry cannot understand the different types of certificates that we are able to issue to our customers, how then can we expect our customers to understand. The DIDC seems to have blinders an when they consider the problems that have been causing the savings and loans and mutual savings banks to operate at a loss, and the new 91-day Certificate will not solve their problem. In my opinion, it will cause many of our banks' customers who have surplus cash that can be invested for as short as a three month period to move their deposits from banks to savings and loans. This will hurt both the banks and the savings and loans in that the higher interest cost to the savings and loans causes them to have even greater losses, and the banks will have lost a customer. This to me is totally unfair competition for the banks. It is difficult for me to understand why the DIDC cannot recognize the fact that the Money Market Mutual Funds have created more problems for both banks and savings and loans than any other thing at this time. Money is being withdrawn fram our local community that could be used for mortgage loans, agricultural loans, and other consumer loans. C Aver.1:e.ct Yf https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sfreet. • P.O. &x 489 • Lorvrton, Oklahoma 73521 • 40E/353-770: • Member F.D.I.C. Mr. Robert E. Harris March 26, 1982 Page Two It appears to me that the finance industry would be better off if the DIDC was completely done away with, and possibly then the regulators could regulate each of the industries on a fair basis. Thank you very much. sincerely, Kennedy, F oy President FINIC:kc https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LAURA CLARA__ RD( PHYLLIS JOAN LARRY RECEIVED 3.ct 1982 SUNNY MAX vOTHERNA11ONAL BANK & TRUST CO. March 26, 1982 7 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 73105 Oklahoma City, OK Dear Bob: I am writing in regard to the action taken by the DIDC on March 22, 1982. I strongly urge the OBA to employ all available resources to obtain a reversal of the DIDC's action with regard to the new 91 day T-Bill CD with the lls% differential. This action does nothing to assist banks or thrifts in competing with money market funds. We estimate that approximately 35% of our total deposits will be subject to this disintermediation because of the rate differential. A transfer of funds of this magnitude from commercial banks to thrifts will help neither institution. Commercial bank's liquidity and their ability to serve their community's credit needs may be sorely tested, while the last thing that thrifts need is higher cost of n ds The D1DC should concentrate their efforts on deregulation. If the savings and loan industry must be "saved" it should not be at the expense of the commercial banking industry. y Anything the OBA can do to reverse or delay this action will be greatl appreciated. Sin rely your 71 7/4 1/ ' /Gene Whee e President ch BOX 1468 • DUN,OKLAHOMA 735:13 • (405) 255-4100 r7r-r"r7:-; ••••••• r" FirtrWrfiurr bor4brhaeL ffrT0Trff , itArrfir , r 864 ibá Allawairh ftaisv LAURA ""Wl CLARA A NO TRUST COMPANY PC BOX ROBERT ',Doe•CHICKASHA OKLAHOMA 73018• AC 405/224-6°00 B. BATES PRESIDENT AND TRUST OFFICER March 26, 1982 PHYLLIS LARRY JOAN SUNNY OTHER NECEIVED ki:AR 2 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 Re: RIB. Depository Institutions Deregulation Committee Dear Mr. Harris: This letter is written for the purpose of making known to you our dissatisfaction concerning the action taken by the Depository Institutions Deregulation Committee in their meeting on March 22, 1982. One of the major objectives to be accomplished during that meeting was the consideration of a new product for banks and thrifts to offer, which would enable them to compete effectively with money market mutual funds. As you know, anything short of a money rate transaction account will not accomplish this objective. As in the past, it seems that the DIDC took official action to create a new 91 day certificate of deposit, which in no way will allow banks and thrifts to better compete with money market mutual funds. It seems that this committee is in a pattern of creating additional regulations instead of relaxing those regulations that prohibit effective competition. It seems that congressional action may be necessary to get the job done. I am in hopes that you will be able to forward our letter to those regulators who helped make the above described decision, and also to our Oklahoma Congressional delegation. Sincerely, Robert B. Bates President and Trust Officer RBB/fgb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ffi:D I 1-,4b12 March 26, 1962 Rr ." 4,- •• LAURA REX Howard N. Smith President CLADA L:s JOAN LAP.RY MAX SUNNY OTHER Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob: I am responding to you regarding the D.I.D.C. actions taken on March 22, 1982. ;AN D PRINGS ;TATE 3AN K I am so frustrated that I cannot think of an intelligent to comment on the D.I.D.C. action - or inaction as you may choose to perceive it. It would appear as though we have not offered a solution at all, but another piece of spaggetti in I! the bowl to further confuse the customer about the intent of banking and its service to the community. r d atl ut, u mo t ov op- Again, I am apalled at the lack of a decisive action by the D.I.D.C. to approach the real problem. I do not look forward to being in a horse race and continuing to wear governmental hobbles. It is my desire that this thinking be expressed to the members of the D.I.D.C. and anyone else that has an interest in the survival of banking. Sincerely, HNS:jjb 401 E. BROADWAY https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Howard N. Smith President SAND SPRINGS. OKLAHOMA 74063 1 AREA CODE 918 245-8741 Larry G. Koch Prasicant Inc Chief Ocersting Officer lVED 41: 114avi 6. 1982 LAURA CLARA REX PHYLLIS JOAN LARRY MAX SUNNY OTHER March 25, 1982 R.E.H. Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, OK 73154 Dear Bob: Once again, the DIDC has ignored the pleas from the banking industry to authorize some type of an instrument or transaction account which would enable banks to compete with the money market mutual funds. Without some type of an account to compete with the money market funds, we here in Claremore have a very serious problem. In Claremore, we have three commercial banks and two savings and loan associations. With our close proximity to Tulsa, we compete very heavily with the Merrill Lynch fund, Bache-Halsey, and numerous other money market funds. Our customer base in this community is very sophisticated and are all interested in earning the maximum return on their investments. Consequently, millions of dollars have flowed out of this community into the money market funds. The loan demand in Rogers County and Claremore area is very strong. In order for these financial institutions to continue to be able to invest money in industrial growth as well as small business and personal growth, we are going to have to have some type of relief. We have got to be able to entice those funds that have flowed to the money market funds back into our institutions. It is hard for me to comprehend how the DIDC can continue to ignore this problem. If it is this serious in Rogers County, Oklahoma, think how serious it must be in other parts of the country. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Fi or FIRST BANK IN CLAREMORE / P.O. BOX 309 / CLAREMORE, OKLAHOMA 74017 / 341-6540 Mr. Robert E. Harris March 25, 1982 Page Two Commercial banks have been the guiding force in Oklahoma as far as community and industrial growth is concerned. In order for this to continue, we have got to be able to compete with Merrill Lynch, Sears, Wards, and all of the other conglomerates that are now in the financial picture. We have aot to have help from the DIDC, our regulators, our congressmen and our senators to resolve this unfair competitive situation. • I love competition, and I think I can compete heads up with any bank or savings and loan in my area, but I can't compete with the New York conglomerates when I am not playing on the same level playing field. Bob, whatever the OBA can do or whatever we can do here in Claremore to inform our senators and representatives as to the severity of our problem is most important. Sincerely yours, .# Koch Lar President LGK:plp https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RECEIVED APR 0 8 1982 P1-1 7:1717,1-Z A\ \717 _ April 1, 1982 ONALD P. EDWARDS PRESIDENT & CEO. Mr. Bob Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73154 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LAURA CLARA REX PHYLLIS LARRY MAX SUNNY P.O. Box 507 Elk City, Oklahoma 7364E Phone (405) 225-3434 OTHER__ Dear Bob, Please pardon my delay in response to your request concerning the DIDC's recent proposals in the C.D. area. In a word, "unbelievable". Bob, we are all aware that the S & L's need help but the recent proposals in my estinntion do nothing to help the S&L's in the long run and additionally stimulate the flow of funds from banks to S&L's by keeping the rate differential in effect. I am continually amazed at the DIDC and its decisions. We are constantly faced with competitive pressure from non—finacial sources and the DIDC does nothing whatsoever to help us. Instead their vacil— lation has kept financial institutions at a distinct disadvantage in a very competitive market place. Please express our displeasure at the committies latest action. truly yours, nald Edwards RE/db FIRST S.:)TATE Et.NK ,caZeru-aii,0Zia/writ-a 74164 RECEIVED President April 2, 1982 1982 LAURA----- CLARA JOAN Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, OK 73105 OTHEp Dear Mr. Harris: Yes, I was disappointed on March 24th when I learned that the DIDC again ducked the true issue of giving regulated financial institutions a comparable vehicle to compete with money market mutual funds. And to top it off, they added insult to injury by implementing a k% differential on the new 91 day certificate. This is completely contrary to their goals of deregulation. This action probably will not impact this bank as much as those located in metropolitan areas. However, we do have several present customers and former customers who could utilize a money market fund type account. I am not fearful of competition if the competition is using the same game rules that apply to me. Big or little, branch or multi— bank, I can compete if all the players are on the same level playing field. Sincerely, Geor President ean GRB:mrn https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 APR 0 GEORGE R. BEAN P. 0. Box 827 (918) 456-6108 PHYLLIS LARRY SUNNY Bank of Commerce E. M. BEHNKEN RECkivED President April 1, 1982 APR 0 2 1982 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, Oklahoma 73105 LAURA.—_—_ CLARA RD FL4YLUS JOAN LARRY MAX_----- SUNNY OTHER____ Dear Mr. Harris: In regards to your letter dated March 24, 1982, I share with you the same concern and disappointment over the recent developments from the DIDC. Their inability to effectively identify and address the problems of financial institutions is disturbing. Their actions only tend to further complicate and leave in doubt what lies ahead for all financial institutions. We've observed a similar pattern by this Committee in the past. The point at issue is the Committee's unwillingness to allow financial institutions to offer transaction accounts capable of competing with money market funds. It's totally unexplainable why the Committee elected to avoid or further delay this issue by delegating its staff members to study within the next 30 days options for a new savings account. The DIDC was inclined, however, to create a new deposit instrument which will only shorten our liability structure and not increase deposits. Although consumer reaction can never fully be anticipated, it is probable that shifts will occur from the six month certificate creating greater rate volatility and a decline in reliable funds for most financial institutions. Ultimately, a decision must be made by this Committee. They've allowed unregulated money market funds to attract local deposits and centralize these funds in major money center banks. This is to the detriment of both the regional banking community and the customers they serve. Hopefully, when the regulators do and make their decision it will be out of insight to the future not because our industry is in need of crisis relief. Sincerely, t. E. M. Behnken President EMB:db https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Balk of C0.71:Xrce ant Trust Company BOX 2269 TULSA OKLAriOrAA 74101 TELIPtiONE 918 584-1321 rr April 2, 1982 r-- LLLLLL ,LLL RECENE D NpR 0 1982 LAURA CLAR REX________ JOAN LARRY Mr. Bob Harris, Executive Vice-President Oklahoma Bankers Association Post Office Box 18246 Oklahoma City, Oklahoma 73154 SUNNY OTHER Dear Bob: I am with bank went enclosing a copy of a letter sent to the members of DIDC, together copies addressed to our congressional representatives, the state commissioner and the President of the United States. This letter out before DIDC met an March 22nd. Obviously, it did no good. The recent action taken by financial institutions its nothing for the banking or to S&L's, harmful to banks securities industry. DIDC is a disgrace and an insult to the members represent. The new 91-day CD does thrift industries. It will be disasterous and represents a real victory for the Furthermore, the announced phased deregulation of Regulation Q interest rates is "too little and too late." It should be obvious to any informed banker that, unless modified, the industry will be seriously, if not fatally damaged by the inordinately long phase-out period adopted by the committee. There simply is no interest from the public in long term instruments and the deregulation of 3-1/2 year maturities is nothing more than an empty gesture toward deregulation. Adoption of a three month certificate has effectively halved the average maturity of a significant portion of the liabilities of bank's and thrifts. This further aggravates an already precarious asset-liability relationship in most financial institutions without meeting the main competition which is centered in upscale depositors who furnish most of the deposit funds. We must be allowed to compete. Equity and the public interest demand it. Our depositors and our communities are entitled to the benefits of free and fair competition. Anything less is unacceptable. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Lincoln Center Ardmore, Oklahoma 73401 / 405'223-2265 Mr. Bob Harris -2- April 2, 1982 DIDC's latest action represents a vital challenge to the American Bankers Association and to the 50 state banking organizations which represent the industry. The committee members, except for Chairman Isaac of FDIC, have breached their fiduciary responsibility. Serious damage has been done. This urgent issue cannot be resolved without the immediate concerted, coordinated effort applied through our trade associations. I urge 0.B.A. to insist that the full resources of the American Bankers Association be brought to bear to resolve this issue quickly. If our efforts are not successful, the banking industry will become a relic of the past. Sincerely yours, • John W. Grissom, President and Chairman of the Board LBTC/gjd CC: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis American Bankers Association 1120 Connecticut Avenue NW Washington, D.C. 20036 The Honorable Wes Watkins U.S. House of Representatives Washington, D. C. 20515 The Honorable Don Nickles United States Senate Washington, D.C. 20510 The Honorable David Boren United States Senate Washington, D.C. 20510 EILL March 16, 1982 Senator David Boren United States Senate Washington, D.C. 20510 Dear Senator Boren: ns is Prompt deregulation of the nation's financial institutio ngful deregulation. essential. DIDC has not yet accomplished any meani n at its meeting We urge you to encourage DIDC to take'meaningful actio message to scheduled for March 22nd. We have sent the following Comptroller Secretary Regan, Chairman Volcker, Chairman Isaac and Conover: n's banks have It should, by now, be abundantly clear that the natio ulation. $190 suffered irreparable damage from delayed deposit dereg There is billion in money market funds should be ample evidence. te freely in the urgent need to allow both banks and thrifts to compe ill—conceived and financial marketplace. Remove Regulation Q. It was deserves a quick death. longer because of the The banking industry must not be held hostage any the nation's banks plight of the thrifts. It makes no sense to weaken e a larger to accommodate a failing thrift industry. Don't creat compete with the problem by denying the banking industry the right to managed financial non—regulated financial services industry. Well of poorly managed institutions should not be penalized by the ineptness ones. The public interest demands it. ss to attempt to Let us design our own service products. It is usele market in the entire design a financial service that is right for every cial services U.S.A. Our markets are different and deserve finan designed to meet their unique needs. the financial industry. DIDC's congressional mandate was to deregulate the problems of the Meaningful deregulation is long overdue. Leave a great extent for the thrifts to Congress. They are responsible to be separated. The plight of the thrift industry. The issues must rved in the public vitality of the banking industry must be prese interest. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis / Respectfully yours, 1 / NJ A VA; \ _ John VO7 Grissom, President and Chairman of the Board / d Lincoln Center I Ardmore, Oklahoma 73401 / 405'223-2265 Also sent to: The President The White House Washington, D.C. The Honorable Wesley Watkins U.S. House of Representatives Washington, D.C. 20515 Senator Don Nickles United States Senate Washington, D.C. 20510 Mr. R. Y. Empie, Bank Commissioner Oklahoma State Banking Department 4500 Lincoln Boulevard Oklahoma City, Oklahoma 73105 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis f eVanommll Bank &Trust https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Robert L. Brookshire of the Board & Chief Executive Officer Chairman April 5, 1982 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association 643 N. E. 41st Oklahoma City, Oklahoma 73105 Dear Bob: The recent action of the DIDC creating a short term deposit instrument is a "farce". The proposed instrument of a $7,500 minimum deposit tied to the 91 day T-bill rate which Thrifts may offer (banks will be 1/4% less) continues to be discriminatory. More importantly, it does not curtail the runoff of funds to the unregulated securities industry. Community banks must have a deposit instrument that is marketable and competitive and still be able to serve our customers and maintain deposits locally for borrowers at reasonable interest rates. The present loan demand in our area is strong and we need the resources to continue funding our customers requests. Retail purchase agreements and "sweep" accounts may retain some customers but neither method will secure deposits. An unregulated interest rate instrument of $25,000 minimum with only one-day's notice of withdrawal is absolutely necessary to allow banks to compete with the money market mutual funds in some manner. An instrument of this type would at least allow community banks to maintain deposit accounts for our remaining loyal customers and regain those that moved to money market funds. Banks must be allowed to compete in the market place. Yours very truly, / Robert L. Brookshire Chairman of the Board RLB/lh 15 E.15th ST.. EDmONO, OKLAHOmA% 73034/405) 341-82.22 (:) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RECEIVED The First National Bank & Trust Company of Tu's Post Office Box One Tulsa. Oklahoma 74193 A PR 0 1 1982 !ER. March 30, 1982 LAURA__ CLARA REX PHYLLIS JOAN LARRY MAX SUNNY OTHER__ Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. O. Box 18246 Oklahoma City, OK 73154 Dear Bob: I would like you to add my letter to what I hope is a stack of protest mail concerning the results of the March 22 DIDC meeting. Many things could be said about several of the decisions . . • • both positive and negative, but I want to concentrate on a single factor which dwarfs any other development from the meeting • • • • 1 47 the serious, misguided, potentially devastating enactment of a / unfavorable rate differential on the new 91 day deposit instrument. For all but the wealthiest class of bank customer, a money market certificate represents the most treasured, satisfying, and rewarding form of personal property that an individual can entrust to his or her bank. It is an exceptional individual who can meet the $100,000 minimum requirement of the "jumbo CD". The checking account . . . . the NOW account . . . . the savings account . . . . all are utilitarian, low yield banking needs from which an individual gains little personal satisfaction and to which he or she characteristically commits as few dollar funds for as short a time as possible, for selfevident reasons . . . . the relatively dismal yield compared to money market certificates and unregulated money market funds. Here in Oklahoma, for rural banks and for "community" banks in the suburbs, money market certificates comprise a very large and growing segment of their funds. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Robert E. Harris March 30, 1982 Page 2 Now, with many crippled thrift institutions flying straight into the ground, DIDC has fired a fusillade, presumably unintentionally, right at the rural and suburban community banks who depend, and whose customers depend, upon the competitive attractiveness and parity of the 6 months money market certificate. I expect commercial banks • • • • rural, suburban, and downtown like us . . . . to lose money market certificate funds to the thrifts because of our adverse competitive position on the new 91 day certificate. Moreover, I expect savings passbook funds to move from banks to the 91 day certificates offered by thrifts because depositors feel much more comfortable with a 3 month time horizon than the half-year that heretofore has distinguished the money market certificate. For large, downtown banks like us, the money market certificates are the core of our consumer deposits and are the heart of our stable deposits on which we earn a decent spread, in contrast to the "jumbo" CD of $100,000 or more. In sJYTTimsry, Bob, I feel the DIDC committee, by instituting a V. differential on the new 91 day certificate, singlehandedly created an adverse condition for commercial banks which holds no promise for restoring the health of thrifts and quite likely will spread the illness of thrifts through the ranks of commercial banks. DIDC should be told with a storm of protest so they reconsider or do not repeat their mistake. Sincerely, Robert A. Barley Chairman of the Board P.S. I've also enclosed a copy of a local bank survey which we conducted just after the news of the DIDC decision was released. Enclosure DATE March 25, 1982 TO Jerry Rothlein FROM Dan McAdams SUBJECT Bank Survey COPIES TO: David Moffett Yesterday, we did a survey of 17 local banks as to their feelings on the new 91 day Certificate. Included is the contact at the bank and their position. If you need any further information, please let me know. _ SIGNATURE Flp :Ma %tour First kirscasrat 10 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis INTEROFFICE CORRESPONDENCE New $7,500 Minimum Deposit RE: CD for 91 Days 1. Admiral Bank - Ken Olinger - Executive Vice President - Because of consumer orientation, they will issue - Wave of the future - Not pleased with la rate differential 2. Bank of Commerce - E.M. Behnken - President - Will not accomplish anything - Transaction account needed to compete effectively - DIDMC was supposed to deregulate la, but this builds in more regulation 3. Bank of Tulsa - Houston Adams - President - Not small enough minimum - should be $2,500 - Does not compete with money market funds - No reason to keep favoring S & L's with la rate differential, have compromised on this issue before 4. Boulder Bank - William R. Shaw - President - "Damn poor compromise" - Does not fill the need for a product competitive with money market funds - la differential contrary to purpose of committee - deregulation 5. Brookside - Howard Barnett - Chairman of the Board - Banks & S & L's should be able to pay same rate 6. City Bank - Glenda Sisson - Vice President - will offer the certificate, but are not pleased - Management feels it is inflationary and will increase the bank's costs which will have to be passed on to the consumer 7. Commercial - Michael J. Thompson's Asst. - President - New certificates seen as a boost - customers showing much interest - Bank has many 90 day notes and these new certificates would be a great form of collateral - la difference in unfair 8. F & M - Robert - Certificates - Another form in the world 9. Harvard - Sylvia Batten - Assistant Vice President - not aware of the new certificate - no opinion 10. 11. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Davis - President are not worthwhile of gov't intervention - "The gov't is the largest corporation and they are broke." Northside - Marvin Colley - Senior Vice President/Cashier - unsure as to whether to offer the certificate there is no sense - all-savers were a bomb, this could be too, so setting up the books for a failure. President/Cashier Republic Bank - Patty J. Smith - Senior Vice 4% more, we cannot compete 1 - in favor, but with S & L's paying / • -2 12. Security Bank - James D. Elliott - Senior Vice President - in favor if competitive with S & L's, but with / 1 4% differential, we can't do anything. - Need to phase out Reg Q 13. Southwest Tulsa Bank - M.P. Young - Chairman of the Board/President - good idea - do not like rate differential - doing more regulating - large S & L's will attract the money away from the commercial banks 14. United Bank - William Nash - President - disappointed, but will offer it - confuses customers and does not compete with money market funds 15. Valley National Bank - Steve Schooly - good for consumers and banks to offer - confusing to public - not enough forethought in public education ot products 16. Western National Bank - Taft Welch, Chairman - Will not help - just a political jesture to a compromise - Will not draw in money except at S & L's which helps them, but hurts commercial banks 1 4% rate differential wrong -/ - confusing to consumers - need to add service charges as rates on savings accounts increase in order to offset increased interest expense 17. Woodland Bank - Mary Atkinson - Operating Officer - need to be competitive so we will offer it - is a put down to banks since S & L's can pay / 1 4% more - management will be cautious until it is known that the measure will not be repealed. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis K or TEE L1-1'\91ES 29 March, 1982 LAURA CLARA REX JOAN PHYLLIS MAX OTHER Mr. Robert E. Harris Executive Vice-President Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, OK 73105 op Dear Bob: LARRY SUNNY aCEIVED APR 0 1 198 I.E.H. recent I strongly agree with your letter of 24 March, 1982, concerning DIDC actions, which will create a 91-day certificate of deposit for banks and savings and loan institutions. It has become readily apparent that customers of financial institutions are extremely rate conscious, and this fact can be revealed by the severe outflow of local deposits into money market mutual funds. It seems the financial problems surrounding savings and loans in today's marketplace stem from the inability to obtain funds at current short-term rates to support loans which have been on their books for some time Marry of which are yielding rates much lower than current levels). The DIDC action to allow savings and loans to offer a 91-day certificate of deposit at 25 basis points higher than commercial banks will allow these institutions to increase their negative spreads while obtaining funds for a housing industry that cannot use them. The federal oovernment seers adept in creating problems and devising solutions that compound the original problems. It is strongly felt within our bank that this most recent decision will draw a good deal of our present certificate of depOsit customers away from our bank and into local savings and loan institutions. However, we do NOT feel that this money will be put to good use. The obvious difficulty with savings and loan institutions is not a lack of demand for funds, but a lack of positive interest spreads on the funds that they now employ. It is ludicrous to assume that this new certificate is going to solve anyone's problem: rather, it will most likely create additional ones. DRAWER A https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LANGLEY, OKLAHOMA 74350 PHONE: 918-782-3216 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Robert E. Harris 29 March, 1962 Page Two Therefore, with this in mind, we urge the CHA to acoressivelv pursue a change in this most recent legislation, not only for the benefit of commercial banks, but for savings and loans as well. Thank you. Sincerely, R. Dougl Presiden RtivI/dh CC: The Honorable Michael Syner Congress of the United States House of Representatives Washington, DC 20515 The Honorable David Boren United States Senator United States Senate Washington, DC 20510 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FIRST FIRST NATIONAL BANK AND TRUST COMPANY OF STILLWATER 8th and MAIN POST OFFICE BOX ONE STILLWATER, OKLAHOMA 74076 (405) 372-3133 March 23, RELEWED 1 1982 Mr. Robert E. Harris Executive Vice President Oklahoma Bankers Association P. 0. Box 18246 Oklahoma City, OK 73105 RA Jo R.E.H. LARRY CLAMxjT S UNNY Dear Bob: I have today received notification of the DIDC ruling on the new 91 day CD. I am completely astounded by this action and sincerely hope OUT organization will express displeasure with the action. At a time when lendable funds are at an all time high rate, the committee chose to authorize one segment of the financial community a rate advantage over banks, thereby diverting additional funds away from a sinking agriculture economy. This action can only lead to additional pressure on the Nation's S&L's since they will be paying a high rate on deposit dollars and consequently require an even higher rate on home loans which is already stifled. Bob, you are well aware of our situation in Oklahoma and probably this letter will be of little avail, but I sincerely hope you can convey my thoughts to those of suppos—ly higher intelligence. ell°P C. President and Chief Executive Officer ECH:pjs https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis \LALdusning nalw 2.24 EAsT eri:A:MAr 9.S1 C..;S-fe•13 OKLA4-!0/VA 74023 91 8-225.2010 PJROEHS,NJEA'.BRYANT March 29, 1982 Robert E. Harris Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, Okla. 73105 Dear Bob, you Just wanted to let you know that I am in agreement with nts other on the DIDC issue. I really have no additional comme that than the fact that I am supportive of your position and please if the Bank of Cushing can be of help to you in any way, let us know. LAURA CLARA REX PHYLLIS JOAN LARRY MAX SUNNY OTHER- RECEIVED APR 0 i 1982 -1\ RECEIVED APR 0 1 1982 R.E.H. rt45 riCtsr=-7 rrrr kIâifniFJ TEUFT LARRY ADAMS REjoAN ( LARR' SUNNY MAX OTHER Vial Presideint https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LAURA CLARA 0S March 29, 1982 • Robert Harris Oklahoma Bankers Association P.O. Box 18246 Oklahoma City, Okla. 73105 Mr. Harris, I am in complete agreement with you that the Depository Institutions Deregulation Committee does not seem to have any consistent goal in mind. Certainly complete deregulation of deposit instruments, if that is in fact their goal, is not being brought about quickly enough to aid commercial banks in competing with money market instruments for funds. While I have no objections at efforts to assist the ailing S&L industry, it is counterproductive to expect one area of the financial cammunity, specifically commercial banks, to bear the entire costs of these "subsidies". DIDC should remember that the present situation most S&L's are in is a result of a chronic and historic failure to properly match the maturities of their assets and liabilities. In other words, S&L's are where they are because of poor management. The threat facing commercial banks is a result of campletely opposite circumstances. The options available to us within the narrow confines of existing regulations has prevented many commercial banks from being able to exercise any management ability whatsoever. Specifically, in our area, our inability to compete with mutual funds has prevented us from maintaining, let alone attracting, deposits that could be used to fund local loans. The ‘garri.; Ecarted Cad'. •••••• I e t,tji •1111r1 / fl f erSV 1I / tAnci-yen • I ettnie.". r•rrs., t 1 10./1 A 1../. ieleT,'". , tc% c?.coac ERCZ Mr> larST LARRYkDAMS Vice President We count on your help in expressing our concern that immediate attention should be given by DIDC to the inability of commercial banks to compete with these funds, and the ensusing flow of funds out of local areas. Sincerely, Larry Adams Vice President & Cashier C https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Vi'arta.1 Hearted garik 14TH & HIGHLAND / P. 0. BOX 111 / (4051762-5651 / PONCA CITY, OKLAHOMA 74601 l Pcop STATE TRUST CO. HOLDENVILLE P.O. BOX 898 BAA'K RECEIVED OKLAHOMA HOLDENVILLE, OKLAHOMA 74848 PHONE 379-3353 March 29, 1982 APR 0 1 1982 LAURA CLARA REX PHYLLIS JOAN_ LARRY MAX SUNNY OTHER Robert E. Harris Executive Vice President Oklahoma Bankers Association Box 18246 Oklahoma City, Oklahoma 73105 Dear Bob: Again the DIX made their move to make sure the Savings and Loans and Mutual Savings Banks will have a rough tine staying afloat. The 1/4 of 1% differential will do nothing for their industry. my opinion it will put them furthLI er in the RED. In We need all financial institutions to suloply the credit needs of our country. However, we all need to be able to play the same game. I see no move to help the sagging agriculture industry. The banks over the country has financed the farmer and rancher through very difficult times. With the inequities that DIDC is putting on the banks it is possible that these group of individuals will have a difficult time with financing their operation. Lets' hope that DIDC will rescind their differential and let the free market work. S. adwell omas Chairman of the Board TWT:jcw MEMBER OF FEDERAL DEPOSIT INSURANCE CORPORATION https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis EACH DEPOSITOR INSURED TO $100 000 . I • -12 , 6, IrVI • Aktil ".;.A1-!C.:•:Al. BANK .....,.._-_-.--.--e!,,.-_=_-,.•- ---......2co ... :. . LF. P•7 " I " . I .'........04 I:7.... • .• .t. i A x...4.....Z. :t4i.... .:. . 'PC : • - ..... 10 'Z,„,,,,,,..."%. bey ,•.:1 a .root ' il 4 i ..:7•77-_j-<'-:f .. _ , ,,,,,, -,: i b... 1 7 ........ "..j•, ' 6.4!„,..........•••.:;;:4,. ...•• iii ' .... ! II : i i( l / ' ....41, i.i...... - 11 41 • V .il —„—_— W M . H. (BILL) CRAWFORD https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis March 31, 1982 PRESIDENT Mr. Robert E. Harris Executive Yice President Oklahoma Bankers Association P. O. Box 18246 Oklahoma City, Oklahoma 73154 Dear Bob: Bob, as we have previously discussed, most rural banks in Oklahoma obtained lendable funds through Money Market Certificates. Money Market Certificates fully account for approximately one-third of most rural banks' deposits while we have responded to the farmers' pleas and have continued to finance and support agriculture. It seems the new ruling would be devastating to small rural banks in Oklahoma. As I pointed out above, the deposit base would be eroded, therefore it would be difficult to continue to finance agriculture at the current level. Bob, I would appreciate you relaying my views to our delegation. It is certainly my feeling that we would lose a substantial number of deposits. The rate differential would leave a catastrophic effect on rural Oklahoma. Sincerely, Wm. H. (Bill) Crawford WHC:mgm ?...!:1K St TRUST C 10th and FLORAL PHONE:(405) 335-2126 FREDER1C,K. OKLAHOMA 73542 =11 • G T)7AP<D ET SEVE:=RN2i-. -3 • ' ...... • \ • THE FEUAL ;-:r.ESERVE SYSTEM v..;•,cr :\ E. Z. .E. OSE.1 May 5, 1982 F4 MAN The Honorable George Hansen House of Representatives Washington, D.C. 20515 Dear Mr. Hansen: Thank you for the opportunity to comment on a recent letter from one of your constituents, 21r. Thomas G. Minow. Mr. Minow expresses his deep concern that competition by money market mutual funds is draining deposits from smaller banks and thrift institutions, thereby rechanneling credit flows to large money centers and constraining the availability of credit to local business and agricultural borrowers. As a corrective measure, he urges that the deregulation of depository institutions be accelerated, so that these intermediaries can compet e more effectively with the money market funds. As you know, the Depository Institutions Deregulation and Monetary Control Act of 1980 mandated the removal of all interest rate ceilings on time and savings deposits by March 31, 1936, and charged the newly created Depository Institutions Deregulation Committee (DIDC) to implement a program towards this end. I might note that the Act also required the DIDC to consider the safety and soundness of the depository institutions in framing such a progra. Thus far the Committee has taken several actions to liberalize the ter::Is on whch deposi ts can be offered, including the removal of the interest rate "caps" on 2-1/2 year small saver certificates, the creation of the ceiling-free 1-1/2 year IRA/Keogh account category, adjustments in the ceilings for money market certificates, the creation of a new 91-day account category, and--most importantly-the adoption of a schedule for the phasing out of deposi rate t ceilings by maturity. In addition, at the March 22 meeting, tha DIDC at my strong urging directed the staff to develop proposals for alternative short-term instruments that would allow depository institutions to compete more effectively with money market mutual funds and other market alternatives for short-term funds. Secretary Rogan, Chairman of the DIDC, has scheduj a mooting on May 24 Lo connider the sLaff's proposals in Lill re i. While ;ome may rool LILIL thc ciurequIJILlon pl:ogre:i has boon slow, the CcmiLLee b,Aievos tirmly that the pace of deregulation is as fast s it can be in view of the severe earnings problems that the thrift institutions currently are experiencing. MM:EFMcK:JLK:PAV:pjt (V-102) bcc: Mr. Moran Mr. McKelvey Ms. Wing Ms. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Kichline GEORGE HANSEN IDAHO DISTRICT OFFICES: SrcoNoMsTmcro UPPER SNAKE RIVER VALLEY Box 740, IDAHO PALLS, IDAHO 83401 I I ZS LONGWORTH BUILDING TEL.: 52.3-534i WASHINGTON, D C. 20515 SOUTHEASTERN IDAHO TEL.: (202) 225-5531 250 S. 4TH, SuiTE ZZO POCATELLO, IDANo 83201 TEL.: 236-6980 COMMITTEES-SURCOMMITTEES: AGRICULTURE FonrsIi-TTs. FAMILY FARMS, AND ENERGY LIVESTOCK, DA I RY, AND POULTRY DOMESTIC MARKETING. CONSUMER • Congre55 of tbe Uniteb RELATIONS, AND NUTRITION BANKING, FINANC.0 AND URBAN AFFAIRS DOMESTIC MONETARY POLICY (RANKING NIEMBER) tate5 jr)otte of Iltprtentatibefs EZIa0ington, AC. 20515 MAGIC VALLEY 1061 BLUE LAKES BOULEVARD NORTH TWIN FALLS, lowHo 83301 TEL.: 734-6466 WESTERN IDAHO 442 BORAH FEDERAL BUILDING 304 NORTH EITH STREET BOISE, IDAHO FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE IN7'ERNATIONAL TRADE, INVESTMENT AND MONETARY POLICY April 20, 1982 r\j Mr. Paul A. Volcker, Chairman Federal Reserve Board Federal Reserve Building Constitution Avenue between 20th and 21st Washington, D.C. 20551 Dear Mr. Volcker: Enclosed is a copy of a letter which I have received from one of my constituents expressing his concern for the ability of banks and thrift institutions to compete with money markets under present regulations. Mr. Minow's concerns appear to be justified and your comments on this issue and proposed method of dealing with it would be greatly appreciated. I look foward to your immediate reply. Thank you. Sincerely, GEORGE HANSEN Member of Congress GVH:at Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 83701 TEL.: 334-1876 VALLEY BANK 501 BROADWAY • IDAHO FALLS, IDAHO 83401 • TELEPH ONE (208) 525-6228 THOMAS G. MINOW SENIOR VICE PRESIDENT TRUST OFFICER April 8, 1982 The Honorable George Hansen U. S. House of Representatives Washington, D. C. 20515 Dear Representative Hansen: As a rural community banker, I am deeply concerned with the outflow of deposits we and other independen t banks are presently experiencing. Under the present financial environment, funds are flowing in ever increasing amounts from the banks and thrift institutions to the money marke t funds. We are unable to compete under our present regulatory restrictions with the non-regulated suppliers of money market funds. Of greatest concern to me is our inability to supply the needed funds to our small businesses and to the agriculture segment of our economy. The outflow of funds to money market funds paying unregulated rates takes the funds out of our state and local economy to the big money centers. The centers do not reinvest the funds back to our areas to generate produ ction of any kind or nature. The money market funds for the most part are invested in big bank certificates of deposit, large corpo ration debt instruments, or in government securities, none of which help our local economy. The small investor is entitled to the highest rates of interest attainable, yet without deregulation banks and thrif ts are not able to compete with money markets, enabling them to retain those deposits for regeneration into their local economies. Banks and thrifts must be allowed to compete on a level playing field by being allowed to offer a non-regulated transaction account wherein interest rates would be competitive nationwide with money marke t mutual funds. Adequate funds would be available and would tend to drive interest rates down. Unless relief is forthcoming in the near future, many smaller agricultural and commercial businesses will fail, further deteriorating rural area economies. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •. I April 8, 1982 The Honorable George Hansen Page 2 Accelerated deregulation is required to stimulate our local economy and provide jobs and accelerate production. Without the relief we shall see our economical base continue to falter and deteriorate. Positive steps must be taken before it is too late. Respectfully, 1/Ut•uv,tttu, Thomas G. Minow Senior Vice President and Trust Officer TGM/pw https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Valley Bank Aay 4 :t4loortlible Sonloolo S. Seessobal Chat!mon .4ilborosaszttee Commeretit elinalatft *tot Moastary ASZaitr eerotittoewictovottsseatOptici4ta ova. ithoptleseotativea Maabliostco. D. C. 20S1.S Pow Chairmen Sosttztali SortA.:4 °,4 tgolus I mm writlitt to )'00204ed to pow ftivevr. NV61!:4f U. 'SlIvei Report* .71t t.tt es the revommeadation pttsestot4 C4MAIMMOf AM4 ManataLy AftaiKt 4141;',coMettto* of ti..4 Ccoattot* on akomnoont ratiOtta that the (48%c* iBC. redet41 Rarer,* 1504.i'a ami Deptilantt5 tzt dootdistit stiith oraceit,wte Aploaltase and 'Neeirary e. syetwmat.i.c zzchkrtle of OW of e formai totersiamoy meetimftisie belt, formotioo relatlug to the earveillanoe og tits ast4onve Intersiatfto financial mortatt ise* eufereement of offiat!Pc Laws.* ka pito are amic- e4 the direst xecutation of stool ea4 commodities sertets is the fuectoo et the Seceelties aimA bwehemge C4malsaiAm *Ad flit Commodity Patsies Trottel, COMISigeitSh. The faletai liesticesis refidato the settla, of mamin regoWlemmetsfAhU.:1y tosoottoos ire tfading :rt seam AAA., sad iafectia •rst resentthilities Met emit Limits for U.S. Tteasmil e4 Vedortai. 444ftcy $40cutittioe040 1$4 ace:01 tips *c swam, cone/azalea 'emote:11y about the eftect:ve taftetionim, of the nation's E....asocial markets tree the WM of view of thole rob& in t40. healthy foaetAmie, of the egeonour. adelleste. information en machat tree& 4,14 tepid 4600400 to 1401Weett00 em paheattel problem developments is oirese*tIol to teltIllin" thee* celeletoty and *comely policy Nootleme. believe. that te meohosiema mow in plebe. or in the prime** ot towel*, moot losable as to (*tato the needed lAforMetisa mail promote matereseney esporOmetlemi Vs hove welcomed the ealtsitotion Og our visue sad them ef the Tteomary by the MC on4ec the previsions of tluo Commodity- SMobenoge S. freemaiy *ad hedexti eipmwiss/ Pat before *gm itositAts beset ee secooit.4e ere approve& La oddities, the CirE hem also eceoght Oft views of the tees:al Solowive 40/1 frimogry CO ell pregeeed tutors* contracts hosed sal flourootsl imettiments sack 04 lturoinklat time depeeitas domestx turak CDs, and booed SOMMA stook indents. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Th. Bonorable Benjamin S. Rosenthal .2. Moreover, shortly after the outminatton of the prahlem in silver, the martet in 10$0, staff somber* from the CIPTC. U. S. Treasury, redei:al Ritortre Board amid Federal Paean,* sank of Mew York began meeting 4174arterly to review recent developments in financial futures markets enel to exchange pertinent information. With the recent introOuction of futuves contracts below, am steel' iodates, our staffs hive tgreed that special attention will be foommed es these markets at thew' regulat quarterly meetings and that information shoat geeeral developments in these sorbets tell he exchanged routinely on a mo4e frequent basis. The CF7C has also recently extended an invitation to the Federal Reserve and the Treasury to attend its weekly serveillance meetlege—as representatives of the Agriculture bepartmert have been doing for same ti on those occasions when the CFTC Intend* to diocese eantrect markets that are of epectal interest to the agencies. in addition, the BoorA unc:erstanda that the recent discussion between the CFTC Ond $SC, leach lea to their *greenest on jurimeictional reeponsibillties, Nits else estaOliehed the basis for greater cooperation between these agencies in carrying out their duties of regulating the elsaely related markets for futtues, options and underlying financ!al teetroments. In view of tee general and specific arrangements either in place er in the process ot development, it does not seem that legieLail* antics is regaire0 at this time to establish an interageacy cassardimattem Weebantam. After same e..40....rietwe with tcne evolving pret.7edorem, oolisidersition oluld be given to their effectiveness and vhethe: furtter coor4inaticr ac!tione ere needed. Stammelys SZ fay' MB:ids https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Fred truble with info copy to Neal Soss OENJAMIN S. ROSENTHAL, N.Y.. CHAIRMAN JOHN CONYERS, JR., MICH. ELIGENE V. ATKINSON, PA. STEPHEN L. NEAL, N.C. DOUG BARNARD, JR., GA. PETER A. PEYSER, N.Y. NINETY-SEVENTH CONGRESS LYLE WILLIAMS, OHIO FIAL DAUB, NEBR. WILLIAM F. CLINGER. JR., PA. JOHN HILER, IND. Congrezz of tbt Unita :4)tato 3botuSeofilepresSentatibet COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515 MAJORITY(202) 225-4407 7</ March 19, 1982 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: As you know, the Rules of the House of Representatives assign to the Government Operations Committee broad investigatory authority for the operation and activities of all Federal agencies and for the effectiveness of the laws they administer. The Commerce, Consumer, and Monetary Affairs Subcommittee is assigned specific oversight jurisdiction for the operations, activities and effectiveness of laws administered by the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), the Federal banking agencies, including the Federal Reserve, and the Department of the Treasury. The regulatory responsibilities of each of these agencies were seriously impacted by massive silver speculation and the eventual collapse of the silver markets in 1980, an event characterized by then CFTC Chairman James Stone as "a situation of financial panic which could affect not only the commodities markets but the stock market and possibly financial institutions as well." The Commerce, Consumer, and Monetary Affairs Subcommittee is deeply concerned that such activity seems to have been least understood or monitored where agency jurisdictions most overlapped and markets were most closely interrelated. There were several findings in the subcommittee's Silver Report, approved by the Committee on Government Operations December 8, 1981, which I would like to bring to your attention. Commercial banks (under the supervision of the Comptroller of the Currency and the Federal Reserve), brokerage firms and certain publicly-held companies (under the SEC's jurisdiction), and commodity dealers (under the CFTC) were heavily involved in the financing and purchase of silver, including the extension of massive amounts of credit to finance silver speculation. Yet, until the week silver prices collapsed, the Federal financial market regulatory agencies, which share responsibilities for the Nation's marketplace, had exchanged little information or expertise on speculative activities in silver which impacted institutions and traders under each agency's jurisdiction. In fact, the agency principals met together for the first time March 26, 1980, one day before "Silver Thursday." https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 .t The Report concluded that the present structure for interagency coordination among the financial regulatory agencies is totally inadequate. It does not require agencies with overlapping concerns to systematically share information in order to make informed decisions or provide coordinated market oversight. The Commodity Exchange Act recognizes the need for a close relationship among the financial market regulatory agencies but only requires the CFTC "shall maintain communications" with the Department of the Treasury, the Federal Reserve Board and the Securities and Exchange Commission. James Stone testified that certain important issues were never addressed as a result of this interagency isolation: "There are lessons to be learned about coordination between the agencies. Although there have been many fruitful discussions between the agencies over the last several years, and specifically on this subject recently, I think there is not enough coordination in general between agencies. I have no doubt that some of the issues that turn out to be important in this case fell between the cracks. "For example, I think the issue of institutional lending to meet commodities margin calls, both on the part of banks and on the part of brokerage firms in the stock business, didn't Somehow it is clearly fall within anyone's jurisdiction. incumbent upon government to fill in any cracks that may exist and provide better coordination than has existed in the past." As a result of the subcommittee's findings, the very first recommendation in the Silver Report was that the CFTC, the SEC, the Federal Reserve Board and the Departments of Agriculture and Treasury "should undertake the immediate establishment of a formal interagency mechanism for the systematic exchange of information relating to the surveillance of the Nation's interrelated financial markets and enforcement of existing laws." In order to proceed and so that we may have all the information possible to make the kinds of legislative and policy choices such a reorganization might involve, would you provide this subcommittee with a preliminary proposal for establishing such a mechanism, including recommendations for any necessary legislative or regulatory changes, by April 30, 1982. I have enclosed one copy of our report for your consideration. If you have any questions, please contact the subcommittee office at 225-4407. Sincerely, 1,1 Benj.iml Chairman Enclosure BSR:btb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nthal https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis May 3, 1982 The Honorable Benjamin S. Rosenthal Chairman Subcoalmittee on Commerce, Consumer and Monetary Affairs Committee on Guvernment Operations House of Representatives Washington, D. C. 20515 Dear Chairman Rosenthal: As you requested in your letter of April 27, we are pleased to provide the names of the presidents of the selected state member banks to whom your SubcoLuaittee will be sending a questionnaire on bank practices regarding dormant checking and savings accounts. Our source for this information was McFadden American Bank Directory (Fall 1981). Please let me know if I can be of further assistance. Sincerely, 3L Enclosure DJW:vcd (V-106) bcc: Mrs. Mallardi (2) IESENJAWN S. ROSENTHAL, N.Y., CHAIRMAN JOHN CATERS, JR., MICH. EUGENF V. ATKINSON. PA. STEPI-EN L. NEAL, N.C. DOUC BARNARD, JR., GA. PET':.R A. PEYSER, N.Y. NINETY-SEVENTH CONGRESS Congre55 of the Einiteb 6tatess LYLE WILLIAMS, OHIO HAL DAUB, NEBR. WILLIAM F. CLINGER, JR., PA. JOHN MILER, IND. MAJORITY-(202) 225-4407 ott5e of ikepreantatibesS COMMERCE, CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515 April 27, 1982 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: The Commerce, Consumer, and Monetary Affairs Subcommittee is preparing to nting conduct a questionnaire survey, with the assistance of the General Accou am Office, of bank practices regarding dormant checking and savings accounts. I writing to request the assistance of the Federal Reserve on one minor step in the preparation for mailing the questionnaire. Enclosed is a copy of the randomly selected list of banks to whom the each questionnaire will be sent. Please provide the name of the president of in state member bank on this list, and please indicate the source you have used "SM" in obtaining this name. (The listing identifies the state member banks by column 2.) I would appreciate having this information by Friday, May 7, if that would be possible. Sirkerely, enjamin S. Rosenthal t-lairman Enclosure BSR:dtb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis