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•I*   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ri  Collection: Paul A. Volcker Papers Call Number: MC279  Box 12  Preferred Citation: Congressional Correspondence, September 1982 [Folder 1]; 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/c454 and https://fraser.sdouisfed.org/archival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. 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Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) muddgprinceton.edu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressional September 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Joint Statement  before the  Subcommittee on Domestic Monetary Policy  of the  Committee on Banking, Finance and Urban Affairs  United States House of Representatives  Washington, D. C.  September 23, 1982  by  Robert H. Boykin, President Federal Reserve Bank of Dallas  E. Gerald Corrigan, President Federal Reserve Bank of Minneapolis  Frank E. Morris, President Federal Reserve Bank of Boston  Lawrence K. Roos, President Federal Reserve Bank of St. Louis  Anthony M. Solomon, President Federal Reserve Bank of New York  _ _All   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Introduction We are pleased to have this opportunity to contribute to your examination of the activities and policies of the Federal Reserve district banks and their implications for monetary policy.  After consulting  with the Subcommittee, we are presenting the views of all five of us in a joint statement on the following issues: (1) pricing of Federal Reserve services and related matters; (2) difficulties related to the expansion of reserve requirements; (3) cooperation between the Reserve Banks on the one hand and the commercial banks and thrifts on the other hand; and, (4) matters related to the Reserve Bank boards of directors, including the representation of women, minorities, and representatives of thrift institutions on the boards, and their role in the formulation of policy. The other areas of questioning relate more to individual Reserve Bank activities and our own opinions on various issues related to monetary policy.  Accordingly,  in addition to this joint statement we are each prepared to testify separately regarding these latter issues. Pricing of Federal Reserve Services  As the Subcommittee knows, the Monetary Control Act of 1980 (MCA) mandated among other things that all depository institutions have access to Federal Reserve Bank payment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  services, and that the Federal Reserve Banks charge explicit fees for such services.  The MCA further requires  that, over the long run, such fees be set in such a way as to recover the full costs incurred by the Reserve Banks in providing these services--including the so-called "private sector adjustment factor" (PSAF).  The MCA  specifies that the Federal Reserve should set its fees giving due regard to "competitive factors and the provision of an adequate level of such services nationwide."  Finally, the MCA requires that the Fed price (or  eliminate) Federal Reserve float. The legislative history of the MCA suggests that our services should be priced in such a way as to encourage competition and to enhance the overall efficiency of the payments mechanism.  In this context, we believe that  it is important that these specific mandates of the MCA also be viewed in the larger context of the Federal Reserve's traditional and historical public responsibilities relating to the safety and integrity of the payments mechanism. Explicit pricing of Federal Reserve payments services was phased in on a service-by-service basis over the 12-month period ending January 1982.  Thus, all payments  services were explicitly priced within five months of the date specified for beginning the implementation of pricing. Similarly, since the MCA was signed into law, Federal Reserve   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  float has been reduced from about $4.9 billion to $1.8 billion.  This reduction has increased our payments  to the U.S. Treasury by about $350 million. The initial pricing of Federal Reserve services posed a host of difficult questions and issues for the Federal Reserve Banks.  Not the least of these was the  impossibility of our prejudging, with any degree of precision, the timing and magnitude of volume adjustments that would accompany the introduction of explicit prices for Fed services.  Obviously, shifting patterns of volume  would have important implications for the nature and speed of resource adjustments made by the Reserve Banks, in the wake of pricing, as well as for our ability to meet certain of the specific mandates of the MCA. In fact, the aggregate volume loss incurred by the Reserve Banks since the advent of pricing has been relatively modest, although there have been fairly pronounced differences from one Fed office to the next.  For all  services at all Federal Reserve offices, the overall drop in volume has been close to 20 percent.  However, when  allowance is made for volume shifts among the different Reserve Bank "products," as well as differing patterns of resource utilization at the Reserve Banks, the volume decline is more modest, on the order of 15 percent.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4  In the check processin  area, which accounts  for about three-fourths of the total cost of all priced services, we have seen check processing volume decline by a similar amount, although about half of the decline in processed check volume was offset by a rise in "fine sort" or packages of sorted checks handled by the Reserve Banks.  In addition, the rapidity with which  check volume has fallen off, and the unevenness in this trend among the Federal Reserve offices, suggests to us that much of the decline has resulted from the establishment by the commercial banks of local clearing arrangements. This development, which contributes to the overall efficiency of the payments mechanism, has long been favored by the Reserve Banks. Looking at the overall cost-revenue picture, the results to date are mildly encouraging.  In the early  months of pricing, the Reserve Banks as a group encountered a fairly sizable gap (reaching almost 30 percent) between total costs (including PSAF) and revenues.  That gap  reflected a combination of factors including volume losses, shifts in the composition of processed volume, the problems inherent in making resource adjustments in the short run and some of the inherent difficulties in the initial setting of prices. appreciably.  More recently, the revenue gap has narrowed For example, we tentatively estimate the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  5  revenue gap for the three months ending in August to average about 15 percent.  Thus, based on these preliminary  data, the Banks as a group are covering all of their actual costs, but are not yet recouping the 16 percent private sector adjustment factor.  We anticipate a further narrowing  of the remag gap over the closing months of this year and the elimination of the gap during 1983. The progress that has been made to date in narrowing the cost/revenue gap reflects a three-pronged program aimed at cost containment, the repricing of our services, and efforts to better adapt our services to the needs of depository institutions.  In all of this, the  Federal Reserve remains sensitive to its underlying obligation to work toward fostering greater efficiency in the payments mechanism and to its ongoing public responsibes regarding the payments system. In this connection, we would now like to address one specc matter related to pricing in which this Subcommittee has expressed a particular interest, namely the effects of pricing on Reserve Bank employment.  Effect of Pricing on Reserve Bank Employment At the outset, we should note that long before passage of the MCA and the implementation of pricing for Reserve Bank services, the Federal Reserve Banks had undertaken major cost containment efforts.  To a considerable  extent, these efforts were spurred by technological advances •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  6  that laid the groundwork for significant improvements in "back office" operations.  At the Reserve Banks, the  emphasis has been on high-speed equipment for processing checks and currency and the adaptation of state-of-the-art telecommunications technology to our funds and securities transfer services.  Through these efforts, the Reserve  Banks have been able to achieve major reductions in the real unit costs of providing services between 1974 and 1980. These developments have served to enhance the efficiency of the payments mechanism.  The associated  containment of operating costs has also worked to increase the payments made annually to the United States Treasury. The emphasis the Reserve Banks have placed on improving the efficiency of our back office operations has, of course, resulted in substantial reductions in employment. For example, between 1974 and 1980, total Federal Reserve employment in these areas fell by more than 17 percent. Since the onset of pricing in 1981, employment in check processing alone has been reduced by nearly 13 percent, or 720 people on a Systemwide basis, and we would expect further, although more modest, reductions in the months ahead.  These employment reductions have been achieved in  a manner that sought--and we believe successfully--to minimize the impact of these dislocations on our employees. objective has been accomplished through a combination of  This   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  attrition, retraining and reassignment of employees in the affected departments to other areas of our operations and voluntary separations supported by early retirement provisions, severance pay, and assistance in finding other employment.  While it is difficult to be precise, we  believe it is fair to state that normal employee turnover and attrition have accommodated the vast majority of the workforce reductions that have occurred in the Reserve Banks, not just in the post-pricing periods, but for the post-1974 period as a whole. In the foregoing remarks, we have outlined with a necessarily broad brush the initial experience of the Federal Reserve Banks in operating in a priced service environment.  What is not and cannot be captured in such  a summary is the scope of the challenges this transition has represented to the Reserve Banks.  Indeed, while the  initial transition to a priced service environment has been completed in a timely manner, much remains to be done. For example, important (and controversial) changes in check collection procedures that will significantly accelerate the collection of checks have recently been proposed by the Federal Reserve Banks.  Similarly, in the near term,  we will be announcing the details of the next (and, we hope, the last) phase of our float reduction and pricing efforts. In these and other efforts, we will remain sensitive to the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  8  requirements of the MCA, the views and needs of a wide and diverse group of depository institutions and to our continuing responsibilities regarding the efficiency and integrity of the payments mechanism.  In all of this, we  believe good progress has been made in a relatively short amount of time and that we are well on the road to fulfilling the expectations embodied in the MCA. We might add that to a significant degree our progress to date has been facilitated by coordination and cooperation among the 12 Federal Reserve Districts.  Each  Reserve Bank administers prices locally for certain services furnished in its territory based on relevant volume, cost, and other factors for those services.  Broader questions of  pricing policy and strategy are coordinated through the System 'Pricing Policy Committee chaired by President Corrigan, which includes both Federal Reserve Board and Reserve Bank personnel, and the Conferences of Presidents and First Vice Presidents of all 12 Reserve Banks. Reserve Requirements A major objective of the MCA was to extend reserve maintenance and reporting reauirements to all depository institutions in order to attain a higher degree of control over the money supply.  This approach has  obviously entailed significant costs as well as benefits. From the standpoint of the Reserve Banks, both the large  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  9  increase in the volume of data to be handled and the need to service and collect data from a wide range of new institutions--most of them very small and with differing financial structures--led to a substantial increase in resources dedicated to this activity--both human and computer.  These additional costs to the System were a  natural consequence of the imposition of universal reserves. As for those depository institutions that were subjected to reserve requirements for the first time, the additional burdens imposed upon them fall into two broad categories:  the cost of holding reserves in the  form of non-interest bearing assets, and the operating costs associated with reporting requirements.  We recognized  early on that relatively little additional improvement in monetary control would result from imposing these burdens on the thousands of very small institutions; thus, there has been a broad consensus within the Federal Reserve-as, we believe, in the Congress as well--that the smaller institutions be exempted from the more burdensome aspects of reserve requirements where possible.  The only question  is how best to do this. To date, the potential problem posed by the imposition of reserves on these smaller institutions has been held to a minimum.  The Congress made an important  contribution in this regard by allowing for the orderly phase-in of reserves for nonmembers.  We have seen a high   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  10  degree of cooperation among the nonmember banks, the thrifts, the credit unions and their respective primary supervisors in smoothing the phase-in of reporting and reserve requirements For our part, the Reserve Banks have made intensive efforts to minimize the burdens as well.  We have permitted  the small institutions--under $15 million in deposits--that are not exempt from reporting requirements to file reports with us quarterly--rather than weekly--at their option. We have also held field meetings which have enabled us to make contact with literally thousands of institutions to explain reserve requirements and our reporting and reserve maintenance procedures. As you know, the Federal Reserve Board has been providing an administrative deferral from reserve and reporting requirements for institutions with less than $2 million in deposits measured as of year-end 1979.  This  administrative deferral is scheduled to expire at the end of this year and we believe it should be replaced by legislative action of a more permanent nature.  In this  regard, we are pleased that the House has acted favorably upon the proposed Reserve Requirements Reform Act of 1982 (H.R. 6222) which represents a sensible approach to this matter, in our view.  It provides that the first $2 million  in reserveahle deposits for all institutions (with an annual adjustment) would he exempt from reserve requirements.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  11  In testifying on the Senate proposal toward the same ends last fall, Chairman Volcker indicated that either the $5 million deposit size cutoff in that bill, or exempting the first $2 million in reserveable liabilities-the approach taken in your bill, Mr. Chairman--was acceptable.  More recently, in testimony before this Subcommittee  regarding your proposal, Vice Chairman Martin expressed the Board's support for a legislative solution to replace its administrative exemption. To put the matter into perspective, of some 40,000 depository institutions in the United States only a bit more than half are presently filing regular deposit reports.  (Substantially all of the non-reporting institutions  are credit unions.)  Furthermore, approximately 80 percent  of the institutions that do report need not actually hold reserves with the Reserve Banks.  This is because their  reserve requirements can be and are being met by their holdings of vault cash.  In a sense, no additional monetary  cost is being imposed on them--other than the cost of reporting itself. In the absence of legislation along the lines of the bill passed by the House last week, the result would be that an additional 18,000 depository institutions-44 percent of the total of such institutions--would have reserve requirements extended to them when the Board's administrative exemption expires.  Under your proposal,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  12  all of these institutions, plus an estimated 6,000 that are presently subject to reserves, would be exempt.  In  our view, this should be quite adequate to alleviate the burdens on the smaller institutions, while not compromising in an important way the Federal Reserve's degree of control over the money supply.  On balance,  although other approaches are obviously possible, we think this approach is a good one and we would endorse its adoption by the Senate.  Degree of Cooperation Between the Reserve Banks and the Commercial Banks and Thrift Institutions The MCA brought about very significant changes in the relationship between the Federal Reserve System and the thrift institutions, as well as large numbers of commercial banks that had not previously been members of the Federal Reserve.  We recognized from the outset the  need to open lines of communication to these institutions and develop working relationships as quickly as possible. We also recognized the desirability of incorporating their views and concerns more explicitly into the deon-making processes of the Federal Reserve System. One area in which this can and should be achieved  sS  providing for representation of these   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  13  institutions on Reserve Bank and branch Boards of Directors.  We would like to briefly review some of  the mechanisms that are in place already.  Thrift Institutions Advisory Committees To date, eight of the Reserve Banks have formed some type of advisory committee to explicitly solicit the views and concerns of thrifts and other nonmember depository institutions.  While the exact format and composition of  these committees vary among the different Reserve Banks, in general they all provide a forum for the discussion of the broadest possible range of issues of mutual .interest to the Federal Reserve and the affected institutions.  By  and large, membership of these committees consists of senior officials of savings and loan associations, mutual savings banks, and credit unions.  Ih some cases, officers  of the respective trade associations participate as well. Senior officials of the Reserve Banks meet with these advisory groups on a periodic basis, and a full interchange of information and advice is encouraged.  These  sessions typically deal with matters such as Reserve Bank services, discount window administration, and issues arising in connection with the work of the Depository Institutions Deregulation Committee.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  14  Financial Institutions' Visiting Program All 12 of the Federal Reserve Banks have established formal programs under which their officers or designated representatives make periodic visits to the commercial banks and thrift institutions in their Districts. Many purposes are served by these visits, including: informing the institutions and their managements, many of whom have little or no prior direct experience with the Federal Reserve, of our policies and operations; discussing and explaining the services offered by the Reserve Bank and the related prices; assisting .in the resolution of operating problems that may arise in the use of Reserve Bank services (this is obviously especially important for our many firsttime users); developing a feel for the effect of Federal Reserve policies at the "micro" level, in terms of the day-to-day experiences of small depository institutions; and ascertaining the views of their officers regarding current trends and developments. Meetings for Chief Executive Officers Shortly after the passage of the MCA, the Reserve Banks began a variety of educational meetings for nonmember commercial banks and thrift institutions to explain the implications of that major legislation and to open discussions with senior officials of the thrift industry.  On an ongoing  basis, about half the Reserve Banks regularly sponsor   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  15  meetings for chief executive officers of various types of financial institutions, including the thrifts. To sum up, we have made much progress in establishing lines of communication with thrift institutions and nonmember banks.  Just as important, we have established  close and cooperative relationships with the Federal Home Loan Banks and other primary regulatory authorities for these institutions.  Obviously, much remains to be done,  and the mutual learning process goes on--but we are confident that we are moving in the right direction. Reserve Bank Boards of Directors The final topic for which we felt a joint response was appropriate is the composition of the Reserve Banks' Boards of Directors, proposals for increasing the representation of thrift institutions on the Boards, and the role of the Boards in formulating policy. With respect to the present composition of the Reserve Bank Boards, in terms of representation of women, minorities, and the thrift industry, we are submitting the relevant data from all 12 Reserve Banks and their branches as an exhibit with this statement.  The exhibit sets forth  the names and primary business affiliations of all of the directors of the Reserve Banks and their branches, and also gives breakdowns according to the occupations currently represented, the number of women and minorities on the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  16  Boards, the representation of women and minorities in each year since 1975, and the representation of thrift institutiS ns.  While these data should furnish the "long"  answer to your question, we would like now to present the "short" answer highlighting the more significant points. First, a very broad spectrum of interests and S.ckgrounds is represented on the boards of the Reserve Banks and their branches.  The occupations occurring most  frequently are, in descending order, banking, manufacturing, education, agriculture, real estate and construction, wholesale and retail trade, non-bank financial institutions, and services.  Over the 1975 to 1982 period, progress • has been made in adding women and minorities to our boards: The number of women on Bank and branch boards has grown from four in 1975, about one percent of all Reserve Bank directors to 30 in 1982, for about 11 percent of the total. This includes 11 women on the Reserve Bank head office boards, of which two presently serve as Chairpersons. There were 13 minority group members, or 5 percent of the total in 1975 and 16 minority group members, or 6 percent of the total this year, with somewhat higher representation in the 1979-1981 period. One minority group member presently serves as a Deputy Chairman of a Reserve Bank board. We believe there is room for improvement in representation of minority group members and women on the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  17  Reserve Bank and branch Boards of Directors, and we consider increased participation by both groups to be an objective we are committed to achieving.  In this regard,  you have asked us to discuss our plans for achieving increases in 1983 and beyond. First, by way of background it should be noted that there are some practical limitations on the rate at which progress can be achieved in increasing the representation of women and minorities.  Since the three  directors within each Class serve staggered terms, normally only one appointment will be made each year in each Class.  Also, six of the nine directors on the  Reserve Bank boards--those in Classes A and B--are elected by the member institutions, and the degree to which they solicit recommendations from the Reserve Bank management varies from District to District.  However, the Board of  Governors does request our recommendations in fulfilling its reponsibility to appoint the Class C directors, and this has been a primary vehicle for accommodating additional representation for women and minorities. On the other hand, a majority of the directors of the Reserve Bank branches are appointed directly by the Reserve Bank boards, with the remainder appointed by the Board of Governors, and the Federal Reserve Act does not specify any particular qualifications or other criteria for their appointment.  In addition, there are   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  18  25 Federal Reserve Bank branches altogether, as compared with 12 parent Federal Reserve Banks.  Finally, the  branches by and large serve smaller geographic regions than do their parent banks.  With all of these considera-  tions in mind, we regard the branch boards as a logical means for increasing the representation of women and minorities, as well as of thrift institutions. At the present time, some of the Reserve Banks have completed their plans regarding appointment of branch directors for 1983, as well as for recommendations to the Board of Governors regarding both branch and Class C appointments to the Reserve Bank boards.  However, we  understand that some other Reserve Banks have not completed their plans, and we can thus reply only in general terms.  But our understanding is that among those that  have established plans, the proposed representation of women and minorities--as well as of thrift institutions-will generally be maintained or increased.  Thrift Institutions The representation of thrift institutions poses a somewhat different question from that of women and minorities.  At present, there are no representatives of  thrift institutions on Reserve Bank boards, and only 5 on branch boards.  There are, however, one Reserve   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  19  Bank director  and six branch directors who are affiliated  with thrift institutions in a significant capacity-director, advisory director, trustee, or officer--but not as their primary occupation. We in the Federal Reserve are in general agreement that thrift representation should be increased, especially now that the thrift institutions hold reserves and have access to Federal Reserve services under the MCA.  Over the  past several years, the Reserve Banks and the Board of Governors have examined a variety of proposals to achieve this objective.  On balance, we would favor the approach  outlined below. First, there is obviously room to increase the representation of thrift institutions on the branch boards. We believe this approach is especially advantageous for the smaller thrift institutions that furnish credit, and may seek to use Reserve Bank services, in the regional territories served by the Reserve Bank branches.  Since  there are no statutory restrictions on the qualifications of branch directors, the branch boards provide a logical way to increase their representation in a straightforward manner. Second, we favor increased thrift representation on the Reserve Bank head office boards as well.  In our  judgment, this can be achieved through the present  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  20  structure, by means of the Reserve Banks making recommendations to the Board of Governors for appo ment of thrift industry representatives in Class C. Under the Federal Reserve Act, including the 1977 amendments, the Class C directors are appointed to represent the public generally, giving due--but not exclusive--consideration to the interests of agriculture, commerce, industry, services, labor, and consumers. In our judgment, these criteria are broad enough to encompass thrift institutions, and do not impose any legal impediment to their appointment through Class C. Historically, the Board of Governors had taken the stance that as a matter of policy representatives of institutions engaged in any form of lending should not be included in Class C, since the interests of lending institutions were already represented by the Class A directors.  However, with the enactment of  the 1977 amendments to the Federal Reserve Act we have noted, and especially the MCA, this consideration no longer carries the weight that it did in the early days of the Federal Reserve System.  Accordingly, we under-  stand that the Board as a general matter is willing to appoint thrift industry representatives as Class C directors.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  21  Role of Directors in Policy Formulation Finally, we would like to briefly discuss the role of our directors in the formulation of policy.  As  you know, the Reserve Bank directors have the initial responsibility for setting the discount rate, subject to review and determination by the Board of Governors.  In  discharging this responsibility, the directors regularly report on, and take into account, general economic and business conditions as well as economic conditions in their local areas.  The Boards of Directors may, if they  wish--and often do--communicate these observations directly to the Board of Governors in connection with their actions on the discount rate. Furthermore, in our experience, the directors often use the opportunity of a discount rate discussion to comment on underlying economic conditions, monetary policy, fiscal policy, and related matters.  Indeed, it  is necessary for them to consider and discuss these matters in order to make well-informed decisions regarding the discount rate, since that policy tool does not operate in a vacuum. The directors' reports on business conditions are used by most of the Reserve Banks in compiling the "Current Economic Comment by District"--which we refer to colloquially as the "Red Book"--a briefing document   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  22  given to FOMC members, in advance of each FOMC meeting. The "Red Book" is prepared for the purpose of aiding the FOMC in identifying economic and financial developments in addition to economic expectations in various industries and regions of the country. One other way in which the directors serve as a conduit for regional input to national policy formulation is through the Conference of Chairmen and Deputy Chairmen of the Federal Reserve Banks.  This group meets semi-  annually with the Federal Reserve Board in Washington, affording an opportunity for the interchange of views. It might be added that these interchanges operate in both directions.  Their ongoing contact with  Federal Reserve policy formulation through discussion of the discount rate, as well as through the other avenues we have noted, enables our directors to communicate the overall thrust of Federal Reserve policy in general terms to their respective business and regional communities. Finally, it should be mentioned that the directors play a significant role in the oversight of the management and operation of the Reserve Banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  23  They bring the knowledge and expertise garnered in their own business and community activities to such matters as reviews of budgets, expenses and major capital acquisitions, development of personnel and compensation policy, appointment of Reserve Bank officers, and operating and financial audits of Reserve Bank operations.  Exhibit I -1FEDERAL RESERVE BANK OF BOSTON Term expires Dec. 31  Service Beoan  President Bank of Maine, N.A. 244 Water Street Augusta, Maine 04330  1982  1-1-80  Mr. Henry S. Woodbridge, Jr. 1 12-11-28/$1.7b 401-278-8410  Chairman of the Board and Chief Executive Officer Rhode Island Hospital Trust National Bank One Hospital Trust Plaza Providence, Rhode Island 02903  1983  1-1-81  Mr. James Stokes Hatch 8-22-43/$15mm 203-824-5423  3  President Chief Executive Officer c/o The Canaan National Bank Main Street Canaan, Connecticut 06018  1984  1-1-82  Mrs. Carol R. Goldberg 3-25-31/$345m 617-463-4323  2  Senior Vice President The Stop & Shop Companies, Inc. P.O. Box 369 Boston, Massachusetts 02101  1982  8-3-78  Mr. Joseph A. Baute 1-30-28/$72m 603-352-4448  1  Chairman and Chief Executive Officer Markem Corporation 150 Congress Street Keene, New Hampshire 03431  1983  1-1-81  Dr. George N. Hatsopoulos 1-7-27/$250m sales 617-890-8700  3  Chairman of the Board and President Thermo Electron Corporation 101 First Avenue P.O. Box 459 Waltham, Massachusetts 02254  1984  3-8-82  Class A:  Group  Mr. H. Alan Timm * 1-15-26/$70m ** 207-622-7161  2  Class' B:  1 - Member, Executive Committee, Conference of Chairmen 2 - Chairman, Executive Committee, Conference of Chairmen 3 - Vice Chairman, Executive Committee, Conference of Chairmen **   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Date of birth. Dollar amounts represent ass ets of banking instituti ons, and assets or annual sales of non banking institutions.  - Federal Reserve Bank of Boston (Continued)  Class C:  Term expires Dec. 31  Group  Service Becan  Mr. Thomas I. Atkins 3-2-39/Not available 212-245-2100 DEPUTY CHAIRMAN  General Counsel National Associ!tion for the Advancement of Colored People 1790 Broadway New York, New York 10019  1982  1-1-80  Mr. Michael J. Harrington 9-2-36/Not available 617-246-3420  Harrington, Keefe, and Schork, Inc. 40 Salem Street Lynnfield, Massachusetts  1983  1-1-81  1984  1-1-79  Mr. Robert P. Henderson 4-9-31/$173m 617-276-3003 CHAIRMAN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  01940  Chairman and Chief Executive Officer Itek Corporation 10 Maguire Road Lexington, Massachusetts 02173  .1 I  3FEDERAL RESEJNE BANK OF NEW YORK Term expires Dec. 31  Class A:  Service Began  Mr. Gordon T. Wallis 2- 15-19/$16.7 b 212-487-6330  1  Chairman of the Board Irving Trust Company One Wall Street New York, New York 10015  1C:=9  1-15-80  Mr. Peter D. Kiernan 8-1 5-23/$2.35 518-447-44P3  2  Chairman and President Norstar Bancorp Inc. 1450 Western Avenue Albany, New York 12203  1983  1-01-81  Mr. Robert A. Rough 5-9-39/$78m 201-948-3300  3  President The National Bank of Sussex County Branchville, New Jersey 07826  1924  1-1-82  1  President Union Pacific Corporation 345 Park Avenue New York, New York 10154  1982  8-6-80  2  President and Chief Executive Officer International Business Machines Corporation Old Orchard Road Armonk, New York 10504  1923  1-14-81  3  Chairman of the Board Allied Corporation P.O. Box 3000 R Morristown, New Jersey  1934  1-01-92  Paul Garrett Professor of Public Policy and Business Responsibility Columbia University 703 Uris Hall New York, New York 10027  1932  6-17-77  Senior Partner Shearman and Sterling, Attorneys 53 Wall Street New York, New York 10005  1933  2-6-76  Class B: Mr. :1 1il1iam S. Cook 09-06-22/S6.2b 212-826-8203  John R. Opel 1-5-25/S27b 914-765-4750  Mr. Edv;ard L. Hennessy, Jr. 3-22-28/S5.5b 201-455-4811  07960  Class C: Dr. Boris Yavitz 6-4-23/1,250 Students 212-280-3401 DEPUTY CHAIRMAN  Robert H. Knight, Es:. 2-27-19/2nd largest in U.S. 212-483-1000 CHAIRMAN Mrs. Gertrude G. Michelson 6-3-25/$2. 7b 212-560-4312   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senior Vice President R. H. Macy & Company, Inc. 151 W. 34th Street Naw York, New York 10001  2-10-78  BUFFALO BRANCH  Appointed by Federal Reserve Bank: Miss M. Jane Dickman 8-14-23/Among top ten 716-856-6565  Partner Touche Ross & Co. Main Seneca Building 237 Main Street - Suite 1602 Buffalo, New York 14203  Mr. Arthur W. Richardson 12-29-26/$1.3b 716-262-2982  Chairman of the Board Chief Executive Officer Security Trust Company 1 East Avenue Rochester, New York 14638  Mr. Carl F. Ulmer 11-17-26/$32m 716-549-1000  President The Evans National Bank of Angola Box 191 Angola, New York 14006  Mr. Edward W. Duffy 4-30-26/$18.4b 716-843-5881  Chairman of the Board Marine Midland Bank, N.A. One Marine Midland Center Buffalo, New York 14240  Term expires Dec. 31  Service Becan  1982  1-01-77  1932  1-01-80  1983  1 984  1-01-82  Appointed by Board of Governors: Mr. Frederick D. Berkeley, III 8-7-28/$28.7m 716-343-2216 CHAIRMAN Mr. John R. Burwel/ 10-25-39/$2.1m 716-232-2450 Mr. George L. Wessel 10-2-23/122,000 members 716-852-0375   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman of the Board and 1982 President Graham Manufacturing Company, Inc . 26 Rarvesl.er Avenue Batavia, New York 14020 President Rollins Container Corporation 100 Kassau Street Rochester, %tie York 14605 President Buffalo AFL/C10 Council 686 Ellicott Square Building Buffalo, Kew York 14203  2-02-77  1983  1-01-79  1984  1-01-79  -5FEDERAL RESERVE BANK OF PHILADELPHIA  Class A:  Group  Mr. Donald J. Seehold 9-6-22/$51.6m 717-275-3740  3  Mr. Roger S. Hillas 4-11-27/$2.7b 215-585-5228 Mr. Douglas Eugene Johnson 6-15-39/$185.5m 201-892-1900 x358  Term expires Dec. 31  1  2  President The First National Bank of Danville Corner Mill and Bloom Streets Danville, Pennsylvania 17821 Chairman and President Provident National Bank P.O. Box 7648 Philadelphia, Pennsylvania  1982  (P.O.  Service Regan 6-25-78  Rox 279)  1983  1-01-81  1984  1-01-82  19101  Chairman and President Ocean County National Bank 501 Arnold Avenue Point Pleasant Beach, New Jersey  08742  Class B: Mr. Eberhard Faber, IV 10-22-36/$16m 717-474-6711  1  Chairman of the Board and Chief Executive Officer Eberhard Faber, Inc. Crestwood Wilkes-Barre, Pennsylvania  1982  1-01-80  18773  Mr. Harry A. Jensen 7-17-18/$891m 717-397-0611, X2212  2  President and 1983 1-01-80 Chief Executive Officer Armstrong World Industries, Inc. Liberty and Chariot Streets (P.O. Box 3001) Lancaster, Pennsylvania 17604  Mr. Richard P. Hauser 12-20-34/$2.4b 215-422-1885  3  Chairman and Chief Executive Officer John Wanamaker 1300 Market Street Philadelphia, Pennsylvania  1984  1-01-79  1982  1-01-77  1983  1-01-81  1984  1-01-82  19101  Class C: Dr. Jean A. Crockett 4-20-1 9/15,854 Students 215-243-7637 CHAIRMAN  Robert M. Landis, Esquire 12-21-20/188 Lawyers 215-972-3765 DEPUTY CHAIRMAN Mr. George E. Bartol, III 4-20-21/$49.4m 215-732-7700  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman Professor of Finance Department of Finance Wharton School University of Pennsylvania Philadelphia, Pennsylvania Partner Dechert Price & Rhoads 3400 Centre Square West 1500 Market Street Philadelphia, Pennsylvania  19104  19102  Chairman of the Board Hunt Manufacturing Cor*any Suite 1300, 1405 Locust Street  MI\  -6FEDERAL RESERVE BANK OF CLEVELAND  Class A:  Term expires Dec. 31  Group  Service Beclan  Mr. John W. Alford 10-21-12/$248.5m 614-349-8451  2  Chairman of the Board and Chief Executive Officer The Park National Bank 50 North Third Street Newark, Ohio 43055  1982  1-01-77  Mr. J. David Barnes 8-23-29/$14.9b 412-232-4961  1  Chairman of the Board Mellon Bank, N.A. Mellon Square Pittsburgh, Pennsylvania  1983  1-01-81  Mr. Raymond D. Campbell  15230  3  Director The Oberlin Savings Bank Co. Oberlin, Ohio 44074  1984  1-01-82  Mr. John W. Kessler 3-7-36/Not available 614-224-9561  2  President John W. Kessler Company 100 East Broad Street Suite 1501 Columbus, Ohio 43215  1982  1-01-80  Mr. E. Mandell de Windt 3-31-21/$3.4b 216-523-4617  1  Chairman of the Board Eaton Corporation 100 Erieview Plaza Cleveland, Ohio 44114  1983  1-01-81  Mr. Richard D. Hannan 9-16-30/ 513-272-1111  3  Chairman of the Board and President Mercury Instruments, Inc. 3940 Virginia Avenue Cincinnati, Ohio 45227  1984  1-01-82  Mr. W. H. Knoell 8-1-24/$779.3m 412-343-4626 DEPUTY CHAIRMAN  President and Chief Executive Officer Cyclops Corporation 650 Washington Road Pittsurigh, Pennsylvania 15228  1983  1-15-81  Mr. John D. Anderson 5-17-22/$800m 419-893-5050  Senior Partner The Andersons P.O. Box 119 Maumee, Ohio 43537  1982  1-01-81  Mr. J. L. Jackson 1-31-32/$55m 606-231-5310 CHAIRMAN  Executive Vice President and President - Coal Unit Diamond Shamrock Corporation 1200 First Security Plaza Lexington, Kentucky 40507  1984  1-01-79  Class B:  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CINCINNATI BRANCH  Appointed by Federal Reserve Eank:  Term expires Dec. 31  Service Sedan  Mr. Oliver W. Birckhead 6-20-22/$1.2b 513-651-8900  Chairman of the Board and Chief Executive Officer The Central Trust Company, N.A. Fifth and Main Streets Cincinnati, Ohio 45202  1982  1-01-80  Mr. O. T. Dorton 6-15-20/$69m 606-789-4001  President Citizens National Bank P.O. Box 670 Paintsville, Kentucky 41240  1983  1-01-81  Mr. Richard Fitton 4-18-27/$386m 513-867-4711  President and Chief Executive Officer First National Bank of -Southwestern Ohio P.O. Box 476 Hamilton, Ohio 45012  1984  1-01-81  Mr. Sherrill Cleland 9-21-24/1,250 Students 614-373-4643  President Marietta College Marietta, Ohio 45750  1984  1-01-81  Sister Grace Marie Hiltz 4-20-20/3,500 Beds 51 3- 922-9775  President Sisters of Charity Health Care Systems, Inc. 345 Neeb Road Cincinnati, Ohio 45238  1982  1-01-80  Mr. Clifford R. Meyer 9-25-23/Not available 513-841-8225 CHAIRMAN  President and Chief Operating Officer Cincinnati Milacron Inc. 4701 Marburg Avenue Cincinnati, Ohio 45209  1983  5-01-81  Mr. Don Ross 3-29-27/Not Available 606-299-5334  Owner Dunreath Farm 6335 Winchester Pike Lexington, Kentucky 40509  1984  1-01-82  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -8-  PITTSBURGH BRANCH Term expires Dec. 31  Appointed by Federal Reserve Bank: Mr. William D. McKain 3-29-27/$83.3m 304-232-0110  President Wheeling National Bank 1145 Market Street Wheeling, West Virginia  Service Becan  1982  1-01-80  26003  Mr. Ernest L. Lake 12-27-22/$42m 814-725-4541  President The National Bank of North East P.O. Box 270 North East, Pennsylvania 16428  1983  1-01-81  Mr. Robert C. Mils= 12-15-24/$6.5b 412-355-2251  President Pittsburgh National Bank Fifth Avenue and Wood Street Pittsburgh, Pennsylvania 15222  1984  1-01-82  Mr. James S. Pasman, Jr. 12-20-30/$5.2b 412-553-4715  Executive Vice President of Finance Aluminum Company of America 1501 Alcoa Building Pittsburgh, Pennsylvania 15219  1984  1-01-82  ,1982  2-08-80  1983  1-08-80  1984  1-01-82  Appointed by Board of Governors: Dr. Robert S. Kaplan 5-2-40/5,500 Students 412-578-2265  Dean Graduate School of Industrial Administration Carnegie-Mellon University Pittsburgh, Pennsylvania 15213  Mr. Milton G. Hulme, Jr. 10-12-26/$243m 412-273-5268 CHAIRMAN  President and Chief Executive Officer Mine Safety Appliances Company 600 Penn Center Boulevard Pittsburgh, Pennsylvania 15235  Mr. Quentin C. McKenna 9-2-26/$312m 412-539-5221  President and Chief Executive Officer Kennametal Inc. P.O. Box 231 Latrobe, Pennsylvania 15650   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FEDERAL RESERVE BANK OF RICHMOND Term expires Dec. 31  Class A:  Service Began  Mr. William M. Dickson 11-21-29/541 .9m 304-647-4500  2  President & Senior Trust Officer 1982 The First National Bank in Ronceverte P.O. Drawer 457 Ronceverte, West Virginia 24970  1-01-80  Mr. J. Banks Scarborough 8-20-28/527m 803-346-3181  3  Chairman and President Pee Dee State Bank P.O. Box 458 Timmonsville, South Carolina  1-01-81  Mr. Joseph A. Jennings 8-12-20/$3.8h 804-782-5202  1983 29161  1  Chairman and Chief Executive Officer United Virginia Bankshares Inc. and United Virginia Bank P. O. Box 26665 Richmond, Ya 23261  1984  1-01-82  Mr. James A. Chapman, Jr. 9-30-21/S30.2m 803-472-2121  3  Chairmen of the Board and Chief Executive Officer Inman Mills P.O. Box 207 Inman, South Carolina 29349  1982  1-01-80  Mr. Leon A. Dunn, Jr. 10-6-38/S1 5.4m 919-443-4101  2  Chairman, President, and Chief Executive Officer Guardian Corporation and Subsidiaries P.O. Box 4305 Rocky Mount, North Carolina  1983  1-01-81  Chairman of the Board and Chief Executive Officer Commercial Credit Company 300 St. Paul Place Baltimore, Maryland 21202  1984  1-01-82  Mr. Paul E. Reichardt 4-26-18/$479m 202-624-6191 DEPUTY CHAIRMAN  Chairman of the Board Washington Gas Light Company 1100 H Street, N.W. Washington, D.C. 20080  1982  7-20-79  Dr. Steven Muller 11-22-27/9,555 Students, 5555.2m 301-366-3590 CHAIRMAN  President The Johns Hopkins University Charles and 34th Streets Baltimore, Maryland 21218  1983  1-1-78  Mr. William S. Lee, III 6-23-29/$6.1b 704-373-4283  Chairman of the Board and Chief Executive Officer Duke Power Company P. O. Box 33189 Charlotte, North Carolina 28242  Class B:  Mr. Paul G. Miller 12-13-22/$5.3b 301-332-3760  1  27801  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1984  1-01-82  -10-  BALTIMORE BRANCH Term expires Dec. 31  Appointed by Federal Reserve Bank:  Service Bevan  Mr. Hugh D. Shires 4-14-18/$116.2m 301-777-4600  Senior Vice President First Mational Bank of Maryland P.O. Box 1685 Cumberland, Maryland 21502  1982  1-01-80  Mr. A. R. Reppert 3-4-19/$216.9m 304-624-3400  President The Union National Bank of Clarksburg P.O. Box 2330 Clarksburg, West Virginia 26301  1982  1-01-77  Mr. Joseph M. Gough, Jr. 8-8-27/$65m 301-475-8081  President The First National Bank of St. Mary's 5 East Park Avenue Leonardtolen, Maryland 20650  1983  1-01-73  Cr. Pearl C. Brackett 1-6-19/$6.3m 3017467-9905  Deputy Manager Baltimore Regional Chapter of American Red Cross (MAILING ADDRESS: 4100 North Charles Street Baltimore, Maryland 21218)  1984  1-01-78  Mr. Edward H. Covell 4-15-21/$18m 301-822-3000 CHAIRMAN  Vice President for Governmental and Industry Affairs Country Pride Foods Limited P.O. Box 799 Easton, Maryland 21601  1982  1-01-80  Mr. Robert L. Tate 6-13-24/$25m 301-539-0787  Chairman Tate Industries 601 W. West Street Baltimore, Maryland  1983  1-01-81  1984  1-01-82  Appointed by Board of Governors:  Mr. Thomas H. Maddux 10-2-27 301-837-9550   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  21230  Executive Vice President and Chief Operating Officer Easco Corporation 201 North Charles Street Baltimor,, Maryland 21201  -n-  CHARLOTTE BRANCH Term expires Dec. 31  Auointed by Federal Reserve Bank: Mr. W. B. Apple, Jr. 11-4-30/S54.2m 919-342-3346  President First National Bank of Reidsville P.O. Box 2037 Reidsville, North Carolina 27320  Mr. Marvin D. Trapp 12-24-29/Si 97m 803-775-1211  President and Chief Executive 1982 Officer The National Bank of South Carolina P. O. Drawer 1798 Sumter, South Carolina 29150  Mr. Nicholas W. Mitchell 5-31-13/S277m 919-725-5371  Chairman of the Board Piedmont Federal Savings and Loan Association P.O. Box 215 Winston-Salem, North Carolina  Mr. Hugh M. Chapman 9-I1-32/S970m 803-765-8203  1982  1983  Service Began 12-27-74  2-11-82  1-01-81  27102  Chairman of the Board The Citizens & Southern rational Bank of South Carolina P.O. Box 727 Columbia, South Carolina 29222  1984  1-01-79  Dr. Naomi G. Albanese 10-17-16/950 Students 919-379-5980 CHAIRMAN  Dean School of Home Economics University of North Carolina at Greensboro Greensboro, Worth Carolina 27412  1982  1-01-77  Mr. Wallace J. Jorgenson 10-23-23/S7m+ 704-374-3761  President Jefferson-Pilot Broadcasting Co. One Julian Price Place Charlotte, North Carolina 28208  1983  1-01-82  Dr. Henry Ponder 3-28-28/2,000 Students 803-254-7253  President Benedict College Harden and Blanding Streets Columbia, South Carolina 29204  1984  1-01-79  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  -12FEDERAL RESERVE BANK OF ATLANTA  Class A:  Term expires Dec. 31  Service Beaan  Mr. Dan B. Andrews 7-13-27/$46m 615-446-5151  2  President First National Bank P.O. Box 666 Dickson, Tennessee 37055  1982  1-1-80  Mr. Hugh M. Willson 9-20-25/$22m 615-745-0261  3  President Citizens National Bank P.O. Box 220 Athens, Tennessee 37303  1983  1-1-78  Mr. Guy W. Botts 7-12-14/$3.7b 904-791-7714  1  Chairman of the Board Barnett Banks of Florida, Inc. P.O. Box 40789 Jacksonville, Florida 32231  1984  1_1_79  Mrs. Jean McArthur Davis 7-9-24/$12m 305-754-4521  3  President McArthur Dairy, Inc. 6851 N.E. Second Avenue Miami, Florida 33138  1982  12-1-77  Mr. Harold B. Blach, Jr. 10-29-31/$6m 205-322-3551  1  President Blach's Inc. 1928 Third Avenue, North Birmingham, Alabama 35203  1983  1-1-81  Mr. Horatio C. Thompson 8-5-14/$608m 504-775-6181  2  President Horatio Thompson Investment, Inc. P.O. Box 1027 Baton Rouge, Louisiana 70821  1984  2-16-79  Class B:  Class C:  a  Mr. John H. Weitnaver, Jr. 5-21-26/$205m in sales 404-586-2810 DEPUTY CHAIRKAN  Chairman and Chief Executive Officer Richway P.O. Box 50359 Atlanta, Georgia 30302  1982  1-1-80  Mr. William A. Fickling, Jr. 7-23-32/$95m 912-742-1161 CHAIRMAN  Chairman and Chief Executive Charter Medical Corporation P.O. Box 209 Macon, Georgia 31202  1983  3-6-78  Mrs. Jane C. Cousins 6-29-24/300 licensed salespersons 305-667-4815  President and Chief Executive Officer Merrill Lynch Realty/Cousins 5830 S.W. 73rd Street Miami, Florida 33143  1964  1-8-82   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BIRMINGHAM BRANCH  Appointed by Federal Reserve Bank: Mr. C. Gordon Jones 9-27-27/$85m 205-353-0941  President and Chief Executive Officer First National Bank of Decatur P.O. Box 1488 Decatur, Alabama 35602  Miss Martha A. McInnis 7-28-37/Not available 205-277-7050  Executive Vice President Alabama Environmental Quality Association 3815 Interstate Court Suite 202 Montgomery, Alabama 36109  Mr. Henry A. Leslie 10-15-21/$253m 205-265-8201  President and Chief Executive Officer Union Bank and Trust Company P.O. Box 2191 Montgomery, Alabama 36197  Mr. William M. Schroeder 8-1-42/$26.6m 205-668-0711  Chairman and President Central State Bank P.O. Box 180 Calera, Alabama 35040  Term expires Dec. 31  Service Beaan  1982  1-1-80  1982  1-1-80  1983  1-1-81  1984  1-1-82  Appointed by Board of Governors: Mr. William H. Martin, III 2-17-31/$26m 205-767-0330 CHAIRMAN Mr. Samuel R. Hill, Jr. 5-19-23/14,000 Students 205-934-3493  Mr. Louis J. Willie 8-22-23/$20m 205-328-5454   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  President and Chief Executive Officer Martin Industries, Inc. P.O. Box 128 Florence, Alabama 35630 President University of Alabama in Birmingham Office of the President University Station Birmingham, Alabama 35294  1982  12-4-75  1983  1-1-81  Executive Vice President 1984 Booker T. Washington Insurance Co. P.O. Box 697 Birmingham, Alabama 35201  1-1-79  -14-  JACKSONVILLE BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Whitfield M. Palmer, Jr. 3-28-29/$25m in sales 904-732-2715  Chairman Mid-Florida Mining Company P.O. Box 367 Ocala, Florida 32670  1982  1-1-80  Mr. Billy J. Walker 3-4-31/$1.8b 904-358-6930  President Atlantic Bancorporation General Mail Center Jacksonville, Florida 32231  1982  1-1-80  Mr. Gordon W. Campbell 8-17-32/$1.2b 813-224-5616  President &nd Chief Executive Officer Exchange Bancorporation, Inc. P.O. Box 25900 Tampa, Florida 33630  1963  1-1-81  Mr. Lewis A. Dorian 3-21-30/$90m 904-433-2299  President The Citizens and Peoples National Bank P.O. Box 1072 Pensacola, Florida 32595  1984  1-1-82  Mr. Copeland D. Kewbern 8-22-11/$10m 813-971-0440 CHAIRMAN  Chairman of the Board Newbern Groves, Inc. P.O. Box 17237 Tampa, Florida 33682  1982  1-1-77  Mrs. Joan W. Stein 2-2-29/$28m 904-725-9272  Partner 1983 Regency Square Properties, Inc. 1200 Barnett Regency Tower Jacksonville, Florida 32211 (MAILING ADDRESS: P.O. Box 2718 Jacksonville, Florida 32232-0033)  Dr. Jerome P. Keuper 1-12-21/5,000 Students 305-723-3701  President . Florida Institute of Technology P.O. Box 1150 Melbourne, Florida 32901  kToointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1984  1-1-78  1-1-79  -15-  MIAMI BRANCH  ADoointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. M. G. Sanchez 12434,$40 305-941-2810  President and Chief Executive Officer First Bankers Corporation of Florida P.O. Box T Pompano Beach, Florida 33061  1932  1-1-80  Mr. Daniel S. Goodrum 7-11-26/$1b 305-457-5300  President and Chief Executive Officer Century Banks, Inc. P.O. Box 757 Ft. Lauderdale, Florida 33302  1983  1-1-81  1984  7-1-82  President Barnett Bank of Fort Myers, N.A. P.O. Box 338 Fort Myers, Florida 33902  1984  1-1-32  Ms. Sue McCourt Cobb 8-18-37/80 Attorneys 305-579-0543  Attorney Greenberg, Traurig, Askew, Hoffman, Lipoff, Quentel and Wolff, P. A. 1401 Brickell Avenue - PH -1 Miami, Florida 33131  1982  1-1-82  Mr. Eugene E. Cohen 11-1-17/Not available 305-448-5E22 CHAIRMAN  Chief Financial Officer and Treasurer Howard Hughes Medical Institute P.O. Box 330837 Coconut Grove,' Florida 33133  1983  1-1-81  Yr. Roy Vandegrift, Jr. 12-5-20/53.6m 305-924-5551  President Roy -Van, Inc. P.O. Box 619 Pahokee, Florida  1984  2-19-79  Yr. E. ilwyd Ecclestone, jr.  Mr. Stephen G. Zahorian 8-24-38/S1 69m 813-936-6656  Managing Partner PGA National P.O. Box 3267 West Palm Beach, Florida  33402  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  33475  -16-  NASHVILLE BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Beoan  Mr. Charles J. Kane 1-2-20/$1b 615-748-4177  Chairman and Chief Executive Officer Third National Bank in Nashville Nashville, Tennessee 37244  1982  1-1-80  Mr. John R. King 10-16-24/$60m 615-246-4121  President The Mason and Dixon Lines, Inc. P.O. Box 969 Kingsport, Tennessee 37662  1982  1-1-30  Mr. James F. SmIth, Jr. 12-11-29/$500m 615-521-5134  Chairman and Chief Executive Officer Park National Bank P.O. Box 511 Knoxville, Tennessee 37902  1983  1-1-81  Mr. Michael T. Christian 1-24-43/$75m 615-639-2181  President and 1984 Chief Executive Officer First National Bank of Greeneville P.O. Box 777 Greeneville, Tennessee 37743  1-1-82  Appointed by Board of Governors: •  Mrs. Cecelia Adkins 9-3-23/represents 6.3m people 615-256-5284 CHAIRMAN  Executive Director Sunday School Publishing Board 330 Charlotte Avenue Room 319 Nashville, Tennessee 37201  Mr. Robert C. H. Mathews, Jr. 6-16-27/Not available 615-244-2130  Managing General Partner R. C. Mathews, Contractor P.O. Box 22149 Nashville, Tennessee 37202  Mr. C. Warren Neel 12-6-38/5500 Undergrad 615-974-5061  Dean 1964 College of Business Administrati on 716 Stokely Management Center The University of Tennessee Knoxville, Tennessee 37916   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1982  1-1-77  1983  12-21-76  1-1-82  -17-  NEW ORLEANS BRANCH Term expires Dec. 31  Appointed by Federal Reserve Bank: Mr. Patrick A. Delaney 6-19-32/$1.7b 504-586-7209  Chairman and President Whitney National Bank of New Orleans P.O. Box 61260 New Orleans, Louisiana 70161  Mr. Ben M. Radcliff 9-25-24/$702,000 205-666-7252  President Ben M. Radcliff Contractor, Inc. P.O. Box 8277 Mobile, Alabama 36608  Mr. Paul W. McMullan 2-6-29/$373m 601-544-4211  Chairman and Chief Executive Officer First Mississippi National Bank P.O. Box 1231 Hattiesburg, Mississippi 39401  Mr. Jerry W. Brents 11-10-41/$402m 318-232-1211  President and Chief Executive Officer First National Bank P.O. Box 90-F Lafayette, Louisiana 70509  Service Beaan  1982  1-1-80  1982  1-1-80  1983  1-1-81  1984  1-1-82  AQ,r)ointed by Board of Governors: Ms. Sharon A. Perlis 11-2-44/Not Available 504-834-3700 Mr. Leslie B. Lampton 7-30-25/$95m 601-948-3472 CHAIRMAN Mr. Roosevelt Steptoe 11-28-34/ 504-771-5020   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Attorney Suite 215 433 Metairie Road Metairie, Louisiana President Ergon, Inc. P.O. BOX 1308 Jackson, Mississippi  1982  1-1-82  1983  1-1-81  1984  1-1-82  70005  39205  Chancellor Southern University Baton Rouge Campus Southern Baton Rouge Post Off ice Baton Rouge, Louisianna 70813  -18FEDERAL RESERVE BANK OF CHICAGO  Class A:  Term expires Dec. 31  Group  Mr. Patrick E. McNarny 4-16-35/$140m 219-722-4111  2  Mr. 011ie Jay Tomson 5-3-35/$35m 515-228-5315  3  Mr. Roger E. Anderson 7-29-21/$41h 312-828-7703  1  President First National Bank of Loganspo rt One First National Plaza Logansport, Indiana 46947 President The Citizens National Bank of Charles City P.O. Box 517 Charles City, Iowa 50616 Chairman of the Board Continental Illinois National Bank and Trust Company of Chicago 231 South La Salle Street Chicago, Illinois 60593  Service Began  1982  1-1-80  1983  1-1-81  1984  8-25-80  Class 8: Mrs. Mary Garst 3-25-28/Not available 712-684-2266  1  Mr. Leon T. Kendall 5-20-28/$756m 414-347-6486  2  Mr. Dennis W. Hunt 3-21-32/$1.3m 712-297-7571  3  Manager of Cattle Division Garst Company 218 South Fifth Coon Rapids, Iowa 50058. Chairman of the Board and Chief Executive Officer Mortgage Guaranty Insurance Corp. 250 E. Kilbourn Avenue Milwaukee, Wisconsin 53202 President Hunt Truck Lines, Inc. West High Street Rockwell City, Iowa 50579  1982  1-1-79  1983  1-1-81  1984  1-1-79  1982  1-7-80  1983  1-30-78  1984  2-3-78  Class C: Mr. Stanton R. Cook 7-2-25/$947m 312-222-3300 DEPUTY CHAIRMAN Mr. John Sagan 3-9-21/$23.5b 313-323-2450 CHAIRMAN Mr. Edward F. Brabec 12-17-30/6,500 members 312-421-1010   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  President Tribune Company 435 North Michigan Avenue Chicago, Illinois 60611 Vice President - Treasurer Ford Motor Company The American Road Dearborn, Michigan 48121 Business Manager Chicago Journeymen Plumbers Local Union 130, U.A. 1340 West Washington Blvd . Chicago, Illinois 60607  DETROIT BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Becan  Mr. Dean E. Richardson 12-27-27/$4.5b 313-222-4970  Chairman Manufacturers National Bank of Detroit 100 Renaissance Center Detroit, Michigan 4243  1982  1-1-80  Mr. Lawrence A. Johns 10-10-28/$59m 517-772-9471  President Isabella Bank and Trust P.O. Drawer 100 Mount Pleasant, Michigan  1983  1-1-78  48358  Mr. James H. Duncan 6-13-25/$1.7b 625-383-9297  Chairman and Chief Executive Officer First American Bank Corporation 108 E. Michigan Avenue Kalamazoo, Michigan 49007  1984  1-1-79  Mr. Thomas R. Ricketts 3-4-31/$3.5b 313-643-9500  Chairman and President Standard Federal Savings and Loan Association 2401 W. Big Beaver Troy, Michigan 48084  1984  3-1-81  Mr. Russell G. Mawby 2-23-28/$792m 616-965-1221 CHAIRMAN  President and Trustee W. K. Kellogg Foundation 400 North A/enue Battle Creek, Michigan 49016  1982  1-1-80  Dr. Karl D. Gregory 3-26-31/12,000 Students 313-377-3295  Professor; Management and 1983 Economic Consultant School of Economics and Management Oakland University Rochester, Michigan 48063  Mr. Robert E. Brewer 1-9-32/$15.5b sales 313-643-1640  Executive Vice President Finance K mart Corporation 3100 West Big Beaver Road Troy, Michigan 48084  !noointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1984  3-24-81  1-1-82  -20FEDERAL RESERVE BANK OF ST. LOUIS Class A:  Group  Term expires Dec. 31  Service Began  1982  1-1-80  Mr. Donald L. Hunt 9-1-37/$23m 618-295-2364  3  President First National Bank of Marissa 111 North Main Street Marissa, Illinois 62257  Mr. Clarence C. Barksdale 6-4-32/$3.2b 314-554-6201  1  Chairman and 1983 Chief Executive Officer Centerre Bank National Association P.O. Box 267 St. Louis, Missouri 63166  1-1-81  Mr. George M. Ryrie 11-3-21/$97m 61 8-463-221 1  2  President First National Bank & Trust Co. P.O. Box 517 Alton, Illinois 62002  1984  1-1-79  Mrs. Mary P. Holt 2-26-21/$379,000 501-664-3177  2  President Clothes Horse 5 Fields Building University Avenue at "R" Street Little Rock, Arkansas 72207  1982  1-1-80  Mr. Frank A. Jones, Jr. 4-8-27/S6m sales (home phone) • 901-685-6916  3  President Dietz Forge Company (Mailing Address: 137 Perkins Extended Memphis, Tennessee 38117)  1983  1-1-81  Mr. Jesse M. Shaver 11-16-19/$1.5b 502-589-2108  I  Consultant Allis-Chalmers Corporation 455 South Fourth Street Louisville, Kentucky 40202  1984  1-1-82  Mr. Armand C. Stalnaker 4-24-16/$1.5b 314-444-0652 CHAIRMAN  Chairman of the Board 1982 General American Life Insurance Co. P.O. Box 396 St. Louis, Missouri 63166  1-1-77  Dr. William H. Stroube 6-24-24/13,490 Students 502-745-3151  Department of Agriculture Western Kentucky University Bowling Green, Kentucky 42101  1983  2-7-78  Mr. W. L. Hadley Griffin 5-17-18/$400m 314-854-4100 DEPUTY CHAIRMAN  Chairman of the Board Chief Executive Officer Brown Group, Inc. P.O. Box 29 St. Louis, Missouri 63166  1984  1-1-82  Class B:  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -21-  LITTLE ROCK BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Beaan  Mr. William H. Bowen 5-6-23/5403.6m 501 378-3221  Chairman and Chief Executive Officer The Commercial National Bank of Little Rock P.O. Box 1331 Little Rock, Arkansas 72203  1982  1-1-80  Mr. William H. Kennedy, Jr. 9-8-17/$157.2m 501-534-1131  Chairman of the Board National Bank of Commerce of Pine Bluff P.O. Box 6208 Pine Bluff, Arkansas 71611  1983  1-1-81  Mr. Gordon E. Parker 1-6-24/S146.3m 501-863-3181  Chairman of the Board and President The First National Bank of El Dorado P.O. Box 751 El Dorado, Arkansas 71730  1384  1-1-79  Mrs. Shirley J. Pine 9-18-30/9,238 enrollment 501-569-3155  Department of Cominicative Disorders University of Arkansas at Little Rock 33rd & University Little Rock, Arkansas 72204  1984  1-1-79  Mr. E. Ray Kemp, Jr. 9-15-24/S250.5m in sales 501-376-5200  Vice Chairman of the Board and Chief Administrative Officer Dillard Department Stores, Inc. P.O. Box 486 Little Rock, Arkansas 72203  1982  3-4-77  Mr. Richard Y. Warner 5-23-29/$980m 501-226-2511 CHAIRMAN  Group Vice President Wood Products Group Potlatch Corporation P.O. Box 390 Warren, Arkansas 71671  1983  Mr. Sheffield Nelson 2-23-41/Sib 501-372-6241  Chairman of the Board, President and Chief Executive Officer Arkla, Inc. P.O. Box 751 Little Rock, Arkansas 72203  1984  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1-1-82  -22-  LOUISVILLE BRANCH Term expires Dec. 31  Appointed by Federal Reserve Bank: Mr. Howard Brenner 9-16-19/$61.3m 812-547-2323  Vice Tell P.O. Tell  Mr. Frank B. Hower, Jr. 11-26-28/$1b 502-566-2708  Chairman of the Board City National Bank Box 128 City, Indiana 47586  Service Began  1982  1-1-77  Chairman and Chief Executive Officer Liberty National Bank and Trust Company P.O. Box 32500 Louisville, Kentucky 40232  1983  1-1-81  Mr. R. I. Kerr, Jr. 4-10-23/$551m 502-587-8891  President and Managing Officer Greater Louisville First Federal Savings and Loan Association One Financial Square Louisville, Kentucky 40270  1984  1-1-82  Mr. John E. Darnell, Jr. 10-20-21/$200m 502-926-3232  Chairman of the Board, President and Chief Executive The Owensboro National Bank P.O. Box 787 Owensboro, Kentucky 42301  1984  3-23-82  Dr. James F. Thompson 6-1-26/8,000 Enrollment 502-762-4188 CHAIRMAN  Professor of Economics Murray State University Murray, Kentucky 42071  1982  1-1-77 •  Mr. William C. Ballard, Jr. 9-10-40/$1.3b 502-561-2087  Executive Vice President Finance and Administration Humana, Inc. P.O. Box 1438 Louisville, Kentucky 40201  1983  12-11-80  Sister Eileen M. Egan 1-11-25/1 ,000 Students 502-585-9911  President Spalding College 851 S. Fourth Street Louisville, Kentucky 40203  1984  1-1-79  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -23-  MEMPHIS BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Earl L. McCarroll 5-2-15/$62.3m 501-763-8101  President The Farmers Bank & Trust Co. P.O. Box 688 Blytheville, Arkansas 72315  1982  4-13-78  Mr. Wayne W. Pyeatt 9-22-24/Not available 901-725-1311  President Memphis Fire Insurance Company P.O. Box 40968 Memphis, Tennessee 38104  1983  1-1-81  Mr. Edgar H. Bailey 5-8-26/$1.1b 901-523-2961  Chairman and President Leader Federal Savings and Loan Association P.O. Box 3410 Memphis, Tennessee 38103  1934  1-1-82  Mr. William M. Matthews, Jr. 8-25-32/$1.2b 901-523-6101  Chairman of the Board and Chief Executive Officer Union Planters National Bank of Memphis P.O. Box 387 Memphis, Tennessee 38147  1984  1-1-82  Mrs. Patricia W. Shaw 7-26-39/$56m 901-525-3641  Executive Vice President Universal Life Insurance Company 480 Linden Avenue Memphis, Tennessee 38125  1982  9-22-80  Mr. Donald B. Weis 3-21-35/$1.3m 501-735-4501 CHAIRMAN  President Tamak Transportation Coro. P.O. Box 1985 West Memphis, Arkansas 72301  1983  1-1-81  Mr. G. Rives Neblett 5-25-43/Not Availalbe 601-398-5121  Attorney Neblett, Bobo & Chapman P.O. Box 63 Shelby, Mississippi 38774  1984  1-1-82  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -24FEDERAL RESERVE BANK OF MINNEAPOLIS  Class A:  Term expires Dec. 31  Group  Service Bevan  Mr. Henry N. Ness 2-21-18/S 110m 701-293-2261  1  Senior Vice President The Fargo National Bank Main at Broadway Fargo, North Dakota 58124  1982  1-1-80  Mr. Vern A. Marquardt 7-5-22/$24m 906-524-6172  2  President Commercial National Bank of L'Anse 1 E. Broad Street L'Anse, Michigan 49946  1983  1-1-81  Mr. Dale W. Fern 2-25-27/$34m 715-684-3366  3  President and Chairmen of the Board The First National Bank of Baldwin, Wisconsin P.O. Box 145 Baldwin, Wisconsin 54002  1984  1-1-82  1  Chairman Western Surety Company 908 West Avenue North Sioux Falls, South Dakota  1982  1-1-80  Class B: Mr. Joe F. Kirby 12-14-22/$38m 605-336-0850  57101  Mr. Harold F. Zigmund 4-11-19/$180,000 218-327-6201  3  President and Chief Executive Officer Blandin Paper Company 115 South West First Street Grand Rapids, Minnesota 55744  1983  1-1-81  Mr. William L. Mathers 9-29-23/$3.5m 406-232-4425  2  President Mathers Land Company, Inc. 314 So. Merriam Miles City, Montana 59301  1984  1-1-82  Sister Generose Gervais 9-18-19/1,050 Beds 507-285-5158  Administrator St. Mary's Hospital 2414 South Seventh Street Rochester, Minnesota 55901  1982  10-10-78  Mr. William G. Phillips 3-3-20/387.4m 612-340-3301 CHAIRMAN  Chairmen and Chief Executive Officer International Multifoods 1200 Multifoods Building Minneapolis, Minnesota 55402  1984  1-1-79  Dr. John B. Davis, Jr. 9-14-21 /1 730 Students 612-696-6207 DEPUTY CHAIRMAN  President Macalester College St. Paul, Minnesota  1954  1-1-82  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  55105  -25-  HELENA BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Becan  Mr. Jase O. Norsworthy 2-21-26/$4.3m 406-252-8432  President The N.R.G. Company Box 1315 Billings, Montana 59103  1982  1-1-79  Mr. Roger H. Ulrich 5-15-25/Not Available 406-654-2340  President The First State Bank of Malta Malta, Montana 59538  1983  1-1-82  Mr. Harry W. NeKlon 6-14-31/$97m 406-587-9222  President First National Bank P.O. Box 730 Bozeman, Montana 59715  1982  1-1-50  1982  1-1-81  1983  1-1-82  Appointed by Board of Governors: Mr. Ernest B. Corrick 11-25-20/$4b 406-258-5511 CHAIRYAN  Mr. Gene J. Etchart 12-26-16/Not available 406-228-2835   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Vice President and General Manager Champion International Corporation Jimberlands - Rocky Mountain Operation (MAILING ADDRESS: 115 Takima Drive Missoula, Montana 59801) Past President Hinsdale Livestock Company P.O. Box 429 Glasgow, Montana 59230  •  -26FEDERAL RESERVE BANK OF KANSAS CITY  Class A:  Term expires Dec. 31  Group  Service Began  Mr. Howard K. LODflis 4-9-27/S63m 316-672-5611  2  President The Peoples Bank (MAILING ADDRESS: Krey Co. Ltd., P.O. Box 926, Pratt, Kansas 67124)  19B2  5-10-79  Dr. Wayne D. Angell 6-28-30/$3m 913-242-6100  3  President Council Grove National Bank (MAILING ADDRESS: 1341 South Mulberry, Ottawa, Kansas 66067)  1983  6-13-79  Mr. John D. Woods 12-6-29/$807m 402-348-7990  1  Chairman and Chief Executive Officer The Omaha National Bank 17th and Farnam Omaha, Nebraska 68102  1984  1-1-79  Mr. Charles C. Gates 5-27-21/Not available 303-744-4288  1  President and Chairman of the Board Gates Rubber Company 999 South Broadway P.O. Box 5887 Denver, Colorado 80217  1982  1-1-80  Mr. James G. Harlow, Jr. 5-29-34/$1.7b 405-272-3195  3  President and Chief Executive Officer Oklahoma Gas and Electric Co. P.O. Box 321 Oklahoma City, Oklahoma 73101  1983  1-1-78  Duane Acker 3-13-31/19,982 Students 913-532-6221  2  President Kansas State University Anderson Hall Manhattan, Kansas 66506  1984  1-1-82  Mr. Paul H. Henson 7-22-25/54.4b 913-676-3301 CHAIRMAN  Chairman 1962 United Telecommunications, Inc. (MAILING ADDRESS: United Telecom, Box 11315, Kansas City, Missouri 64112)  1-1-77  Mr. John F. Anderson 4-12-24/52.1b 816-459-6216  President and Chief Executive Officer Farmland Industries, Inc. 3315 North Oak Traffic Way Kansas City, Missouri 64116  1983  1-1-81  Dr. Doris M. Drury 11-18-28/7,858 Students 303-753-2427 DEPUTY CrIAIRRAN  Professor of Economics: Director of Public Affairs Program - University of Denver 10879 E. Powers Drive Englewood, Colorado 80111  1984  1-1-80  Class B:  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -27-  DENVER BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Becan  Mr. Delano E. Scott 1-3-19/$77m 303-879-0550  President and Chairman 1982 The Routt County National Bank of Steamboat Springs P.O. Box 1237 Steamboat Springs, Colorado 80477  1-1-77  Mr. George S. Jenks 3-11-27/$900m 505-765-2525  Chairman and Chief Executive Officer Albuquerque National Bank P.O. Box 1344 Albuquerque, New Mexico 87103  1982  1-1-81  Mr. Kenneth C. Naramore 11-27-20/$127m ' 307-682-5144  President Stockmen's Bank & Trust Company Box 3004 Gillette, Wyoming 82716  1983  1-1-80  Mr. Donald D. Hoffman 11-2-23/$900m 303-893-3456  Chairman Central Bank of Denver P.O. Box 5548 T.A. Denver, Colorado 80292  1984  1-1-82  2771 South Eaton Way Denver, Colorado 80227  1982  1-1-80  President and Chief Executive Officer J.N., Inc. P.O. Box 2850 Cody, Wyoming 82414  1984  2-1-62  Appointed by Board of Governors: Mr. Alvin F. Grospiron . 4-17-16/Retired 303-988-6930 Vacancy Mr. James E. Nielson 5-24-40/Not Available 307-578-1322   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -28-  OKLAHOMA CITY BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Marcus R. Tower 4-12-20/$1.1b 918-588-6541  Vice Chairman of the Board Chairman of the Credit Policy Committee Bank of Oklahoma P.O. Box 2300 Tulsa, Oklahoma 74192  1982  1-1-81  Mr. Walter L. Stephenson, Jr. 1-22-30/$170m 405-233-3535  Chairman and Chief Executive Officer Central National Bank and Trust Company P.O. Box 3448 Enid, Oklahoma 73701  1982  1-1-77  Mr. William H. Crawford 5-4-38/$40m 405-335-2126  President and Chief Executive Officer First National Bank and Trust Company P.O. Box A Frederick, Oklahoma 73542  1983  1-1-82  Mr. Samuel R. Noble 8-12-25/Not available 405-226-1900  Chairman of the Board Noble Affiliates, Inc. P.O. Box 1486 Ardmore, Oklahoma 73401  1982  1-1-79  Mrs. Christine H. Anthony 12-18-16/Retired 405-843-4785 CHAIRMAN  6707 N.W. Grand Boulevard Oklahoma City, Oklahoma 73116  1983  1-14-78  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -29-  OMAHA BRANCH  Appointed by Federal Reserve Bank:  Term expires Service Dec. 31 .2.s2r_i_  Mr. Donald J. Murphy 3-15-18/$475m 402-536-2102  Chairman and Chief Executive Officer United States National Bank of Omaha P.O. Box 3408 Omaha, Nebraska 68103  1982  1-1-81  Mr. Joseph J. Muckfeldt 3-23-34/$59m 308-436-5061  President Gering National Bank and Trust Company P.O. Box 100 Gering, Nebraska 69341  1983  1-1-78  Mr. William W. Cook, Jr. 2-19-37/$50m 402-228-3333  President Beatrice National Bank and Trust Company P.O. Box 100 Beatrice, Nebraska . 68310  1983  1-17-80  Appointed by Board of Governors: Mr. Robert G. Lueder 11-14-22/$30m 402-339-1000 CHAIRMAN  President Lueder Construction Company Suite 500 11128 John Galt Boulevard Omaha, Nebraska 68137  1982  1-1-79  Mrs. Gretchen S. Velde 8-16-23/Not available 402-391-8400  Chairman of the Board Swanson Enterprises The Swanson Building, Suite 304 8701 West Dodge Road Omaha, Nebraska 68114  1983  1-1-80   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -30FEDERAL RESERVE BANK OF DALLAS  Class A:  Group  Mr. John P. Gilliam 12-24-37/$9m 817-932-5204  3  Mr. Miles D. Wilson 1-7-33/$39m 713-865-3181 Mr. Lewis H. Bond 7-31-21/$2b 817-338-8110  Dr. Kent Gilbreath 12-28-45/9,702 Students 817-755-1211 Dr. J. Wayland Bennett 10-13-23/23,129 Students 806-742-2876  Chairman of the Board & Presid ent 1983 The First National Bank of Be llville P.O. Box 128 Bellville, Texas 77418  1  Chairman of the Board and Chief Executive Officer Texas American Bancshares Inc. P.O. Box 2050 Ft. Worth, Texas 76101  Class C: Mrs. Margaret S. Wilson 8-7-30/$9m 512-451-8448  Mr. John V. James 7-24-18/$2.9b 214-746-6704 DEPUTY CHAIRMAN Mr. Gerald D. Nines 8-15-25/$480m 713-621-8000 CHAIRMAN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  3  2  President and 1982 Chief Executive Officer First National Bank in Valley Mills Box 278 Yalley Mills, Texas 76689  2  Class B: Mr. Robert D. Rogers 6-10-36/$313m 214-637-3100  Term expires Service Dec. 31 _13.e...22._  President Texas Industries, Inc. 8100 Carpenter Freeway Dallas, Texas 75247 Associate Dean Hankamer School of Business Baylor University Waco, Texas 76798 Charles C. Thompson, Profes sor of Agricultural Finance and Associate Dean College of Agricultural Sc iences Texas Tech University P.O. Box 4190 Lubbock, Texas 79409 Chairman of the Board and Chief Executive Officer Scarbroughs Stores P.O. Box 5879 Austin, Texas 78763  1984  1-1-80  1983  3-22-79  1984  1-1-79  1983  Owner 1984 Gerald D. Mines Interests 2100 Post Oak Tower Houston, Texas 77056 (MAILING ADDRESS: Federal Reserve Rank of Dallas. CtAtiAn r  m.11_  1-1-79  1982  1982  Chairman of the Board Dresser Industries, Inc. P.O. Box 718 Dallas, Texas 75221  1-1-80  1-1-77  1-1-81  1-1-79  -31-  EL PASO BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Stanley J. Jarmiolowski 5-18-39/$34m 915-593-1333  Chairman of the Board and Chief Executive Officer Interfirst Bank El Paso, National Association Box 9715 El Paso, Texas 79987  1982  7-9-81  Mr. Claude E. Leyendecker 10-15-22/$29.8m 505-546-8871  President Mimbres Valley Bank P.O. Box 1050 Deming, hew Mexico 88030  1983  1-1-78  Mr. Ernest M. Schur 8-25-18/$175m 915-332-7311  Chairman of the Executive Committee Interfirst Bank Odessa, National Association P.O. Box 4798 Odessa, Texas 79760  1984  3-13-80  Mr. Gerald W. Thomas 8-3-19/17,066 Students 505-646-2035  President New Mexico State University Drawer 38C Las Cruces, New Mexico 88003  1984  1-1-82  Appointed by Board of Governors: Mr. A. J. Losee 1-18-25/5500,000 505-746-3508 CHAIRMAN  Shareholder Losee, Carson, & Dickerson Professional Association P.O. Drawer 239 Artesia, New Mexico 88210  1982  1-1-77  Mr. Chester J. Kesey 4-17-25/$3m 915-447-2324 CHAIRMAN PRO TEM  C. J. Kesey Enterprises (MAILING ADDRESS: 2 Briar-wood Circle Pecos, Texas 79772)  1983  1-1-78  Ms. Mary Carmen Sauced° 2-5-25/60,173 Students 915-779-5481  Associate Superintendent 1984 Central Area El Paso Independent School District 6101 Hughey Drive El Paso, Texas 79925   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1-1-82  HOUSTON BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Will E. Wilson 2-28-16/$325m 713-838-9288  Chairman of the Board and Chief Executive Officer First Security Bank of Beaumont, N.A. P.O. Box 3391 Beaumont, Texas 77704  1982  1-1-80  Professor Raymond L. Britton 8-20-24/28,900 Students 713-749-1277  Labor Arbitrator and Professor of Law University of Houston (MAILING ADDRESS: 6146 Olympia Drive, Houston, Texas 77057)  1983  10-12-78  Mr. Ralph E. David 10-31-27/$80m 713-233-4401  President First Freeport National Bank P.O. Drawer H Freeport, Texas 77541  1984  1-1-79  Mr. Thomas B. McDade 6-21-23/$12b 713-236-5413  Vice Chairman Texas Commerce Bancshares, Inc. P.O. Box 2558 Houston, Texas 77001  1 984  1-1-82  Mr. Jerome L. Howard 8-4-16/$174m 713-525-8000 CHAIRMAN  Chairman of the Board and Chief Executive Officer Mortgage & Trust, Inc. P.O. Box 2885 Houston, Texas 77001  1982  1-1-77  Mr. Paul N. Howell 9-13-18/$139m 713-658-4000 CHAIRMAN PRO TEM  Chairman of the Board and President Howell Corporation 1010 Lamar Building Suite 1800 Houston, Texas .77002  1983  1-1-81  Mr. George V. Smith, Sr. 3-19-26/$5m 713-453-8546  President Smith Pipe & Supply, Inc. P.O. Box 24099 Houston, Texas 77015  1984  2-29-80  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -33-  SAN ANTONIO BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. George Erannies 12-25-43/S30m 915-347-6375  Chairman of the Board and President The Mason National Bank P.O. Box N Mason, Texas 76856  1982  1-1-80  Mr. John H. Garner 4-1-21/$343m 512-881-6878  President and Chief Executive Officer Corpus Christi National Bank P.O. Box 301 Corpus Christi, Texas 78403  1963  1-1-78  Mr. Charles E. Cheever, Jr. 5-17-28/$191m 512-824-0444  President Broadway National Bank P.O. Box 17001 San Antonio, Texas 78286  1984  1-1-79  Mr. Joe D. Barbee 12-25-23/S11.4m 512-968-7502  President and. Chief Executive Officer Barbee-Neuhaus Implement Company P.O. Box 386 Weslaco, Texas 78596  1984  1-1-82  Mr. Pat Legan 1-7-21/$14m 512-341-7206 CHAIRMAN PRO TEM  Owner Legan Properties 4402 Vance Jackson, Suite 200 San Antonio, Texas 78230  1982  1-1-77  Dr. Lawrence L. Crum 7-25-33/43,000 Students 512-471-4358 CHAIRMAN  Professor of Banking and Finance The University of Texas at Austin (MAILING ADDRESS: 3920 Sierra Drive, Austin, Texas 78731)  1983  1-1-80  Mr. Carlos A. Zuniga 11-1-27/$1m 512- 723-6311  Zuniga Freight Services, Inc. P.O. Box 89 Laredo, Texas 78040  1984  1-1-79  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -34FEDERAL RESERVE BANK OF SAN FRANCISCO  Class A:  Term expires Dec. 31  IrL221 .a  Service Beaan  Mr. Frederick G. Larkin, Jr. 1 12-28-13/$26.1b 213-613-6037  Chairman of the Executive Committee Security Pacific National Bank P.O. Box 2097, Terminal Annex Los Angeles, California 90051  1982  1-1-77  Mr. Ole R. Mettler 9-7-17/$197m 209-334-1101  2  President and Chairman Farmers & Merchants Bank of Central California P.O. Box 380 Lodi, California 95240  1983  1-1-78  Mr. Robert A. Young 10-28-20/$51m 206-695-1311  3  Chairman and President Northwest National Bank P.O. Box 1867 Vancouver, Washington 98668  1984  1-1-79  3  Chairman of the Board C. L. Peck Contractor 3303 Wilshire Boulevard Los Angeles, California  1982  1-1-74  Senior Member Richards, Watson, Dreyfuss & Gershon 333 South Hope Street Los Angeles, California 90071  1983  1-1-78  President and CEO Yeyerhauser Company Tacoma, Washington 98477  1984  1-1-82  Mrs. Caroline Leonetti Ahmanson 4-12-18/275 Students 213-275-4282 CHAIRMAN  Chairman of the Board Caroline Leonetti, Ltd. c/o Mrs. Howard Ahmanson 9500 Wilshire Boulevard Hollywood, California 90212  1982  1-1-80  Mr. Alan C. Furth 9-16-22/$4.3b 415-541-2136 DEPUTY CHAIRMAN  President Southern Pacific Company 1 Market Plaza San Francisco, California  1984  1-1-80  Mr. Fred W. Andrew 1-26-27/$68.3m 805-832-1111  President and Chief Executive Officer Superior Farming Company 3501 Stockdale Highway Bakersfield, California 93309  1983  1-1-80  Class B: Mr. Clair L. Peck, Jnr. 11-18-20/Not available 213-381-6711 Mr. J. R. Vaughan 1-28-16/Not available 213-626-8484  1  Mr. George H. Weyerhauser 8-8-26/$4.9b 206-924-3000  90010  Class C:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  94105  • 4.  -35-  LOS ANGELES BRANCH Term expires Dec. 31  Appointed by Federal Reserve Bank: Mr. Bram Goldsmith 2-22-23/$1.4b 213-550-5711  Chairman of the Board City National Bank 400 North Roxbury Drive Beverly Hills, California  Service Began  1982  1-1-80  1982  1-1-82  1983  1-1-78  Chairman and 1984 Chief Executive Officer California Federal Savings 5670 Wilshire Boulevard - 15th floor Los Angeles, California 90069  1-1-82  Mr. Togo W. Tanaka 1-7-16/$5m 213-620-5760  President Gramercy Enterprises 445 South Figueroa, Suite 3750 Los Angeles, California 90071  1982  1-1-79  Mrs. Lola M. McAlpin-Grant 9-23-41/1,223 Students 213-642-2914  Assistant Dean Loyola Law School 1440 West Ninth Street Los Angeles, California  1983  1-1-80  1984  1-1-82  Mr. William L. Tooley 4-23-34/2.5m sq. ft. of office space 213-382-8211 Mr. James D. McMahon  1-20-26/$10Dm 805-255-9611 Mr. Robert R. Dockson 11-6-17/$6b 213-932-4001  Managing Partner Tooley and Company, Investment Builders 3303 Wilshire Boulevard Los Angeles, California  90210  90010  President Santa Clarita National Bank 23929 W. Valencia Boulevard Valencia, California 91355  Appointed by Board of Governors:  Mr. Bruce M. Schwaegler 4-23-37/$500m 213-486-5363 CHAIRMAN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  90015  President Bullock's - Bullocks Wilshire 7th and Hill Street Los Angeles, California 90014  •  -36-  PORTLAND BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Servi...2 Berlan  Mr. Herman C. Bradley, Jr. 4-23-31/$11m 5036.998-8734  President and Chief Executive Officer Tr -County Banking Company P.O. Box 377 Junction City, Oregon 97448  1962  5-29-R1  Mr. William S. Naito 9-16-25/$11m • 503-228-7404  Vice President Korcrest China Company P.O. Box 3458 Portland, Oregon 97208  1983  1-1-81  Mr. Jack W. Gustavel 12-31-39/$84m 208-654-1446  President and Chief Executive Officer The First National Bank of Korth Idaho P.O. Box 1409 Coeur d'Alene, Idaho 83814  1984  1-1-79  Chairman of the Board and Chief Executive Officer United States National Bank of Oregon P.O. Box 4412 Portland, Oregon 97208  1984  1-1-82  Mr. Phillip W. Schneider 9-22-1 3/4,000,000 members 503-292-2759  Former Northwest Regional Executive National Wildlife Federation 8755 S.W. Woodside Drive Portland, Oregon 97225  1982  1-1-78  Mr. John C. Hampton 2-10-26/Not available 503-297-7691 CHAIRMAN  Chairman and President Willamina Lumber Company 9400 Southwest Barns Road Suite 400 Portland, Oregon 97225  1983  1-1-81  Ms. Carolyn S. Chambers 9-15-31/$79m 503-485-5611  Executive Vice President and Treasurer Liberty Communications, Inc. P.O. Box 7009 Eugene, Oregon 97401  1984  1-1-82  Mr. John A.,. E1orriaga10-20-23/$5.1m 503-225-5778  p.  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • 4-  -37-  SALT LAKE CITY BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Fred H. Stringham 12-19-26/$349m 801-973-5020  President Valley Bank and Trust Company 2510 South State Street South Salt Lake, Utah 84115  1982  1-1-78  Mr. Albert C. Gianoli 12-18-18/$8m 702-289-4441  President and Chairman of the Board First National Bank of Ely P.O. Box 479 Ely, Nevada 89301  1983  1-1-81  Mr. Spencer F. Eccles 8-24-34/$3.6b 801-350-5329  President and Chief Executive Officer First Security Corporation P.O. Box 30006 Salt Lake City, Utah 84125  1984  4-30-80  Mrs. Lela M. Ence 9-19-27/22,000 Students 801-581-6995  Executive Director 1984 University of Utah Alumni Association 155 South Central Campus Drive Salt Lake City, Utah 84112  1-1-82  Mr. Robert A. Erkins 1-20-24/Not available 208-352-4460  Geothermal Agri/Aquaculturist White Arrow Ranch Box 108 Bliss, Idaho 83314  1982  1-1-78  Mr. J. L. Terteling 1-25-37/$25m 208-376-6700  President The Terteling Company, Inc. P.O. Box 4127 Boise, Idaho 83704  1983  1-1-78  Mr. gendell J. Ashton 10-31-12/71,000 Circulation 801-237-2188 CHAIRMAN  Publisher Deseret Mews P.O. Box 1257 Salt Lake City, Utah  1984  1-1-79  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  84110  -38-  SEATTLE BRANCH  Appointed by Federal Reserve Bank:  Term expires Dec. 31  Service Began  Mr. Donald L. Mellish 11-1-27/$600m 907-265-2929  Chairman of the Board National Rank of Alaska P.O. Box 600 Anchorage, Alaska 99510  1982  1-1-78  Mr. Lonnie G. Bailey 12-5-39/$50m 509-928-9600  Chief Operating Officer and Executive Vice President Farmers & Merchants Bank of Rockford N. 10 Argonne Road Spokane, Washington 99206  1983  1-1-81  Mr. John N. Nordstrom 3-14-37/Not Available 206-628-2357  Co-Chairman of the Board Nordstrom, Inc. 1501 Fifth Avenue Seattle, Washington 98101  1984  1-1-82  -Ir. G. Robert Truex, Jr. 5-29-24/$5m  Chairman Rainier Bancorporation and Ranier National Bank P.O. Box 3966 T24-1 Seattle, Washington 98124  1984  1-1-82  Mr. Merle D. Adlum 2-21-19/Not available 206-623-0733  President 1982 Puget Sound District Council Maritime Trades Department, AFL/CIO 1501 Norton Building Seattle, Washington 98104  1-1-78  Dr. Virginia L. Parks 5-1-39/4,150 Students 206-626-6505  Vice President for Finance and Treasurer Seattle University 12th and Columbia Seattle, Washington 98122  1983  1-1-78  Mr. John W. Ellis 9-14-28/$450m 305-453-6731 CHAIRMAN  President and Chief Executive Officer Puget Sound Power & Light Company Puget Power Building Bellevue, Washington 98009  1984  1-1-82  Appointed by Board of Governors:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Exhibit II OCCUPATION CJ1ARACTERISTICS OF FEDERAL RESERVE BANK AND BRANCH DIRECTORS (as of August 1982)  Occupational Category  Branche  Federal Reserve Ranks No.  No.  % of 108  Totals p. of 2li  % of 169  1.  Banking  36  33  73  43  109  39  2.  Manufacturing  19  18  11  7  30  11  3.  Education  9  8  19  11  28  10  4.  Agriculture  8  7  10  6  18  6  5.  Wholesale & Retail Trade  7  6  6  4  13  5  6. Services  3  3  7  4  10  4  7.  Professional  4  4  5  3  9  3  8.  Real Estate & Construction  7  6  7  4  14  5  Communications  2  2  4  2  6  Non-Bank Financial  4  4  a5  Labor and Arbitration  1  9. 10.  11. 12.  Consumer & Civic Representatives 1  ,  13  3  2  5  3  6  13.  Utilities  3  2  14.  Mining 4 Extraction  1  5  3  6  2  15.  Transportation  3  3  2  6  2  16.  Unclassified  77.  Vacancies  Total* *  NOTE:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  •••••  108  100  Totals may vary due to rounding.  169  100  277  1001  REPRESENTATION BY WOMEN AND MINORI TIES ON BOARD OF DIRECTORS OF THE FEDERAL RESERVE BANKS AND BRANCHES (As of August, 1982) .'1  Federal Reserve Banks A  B  C  Branches  Total  Bank Appointed  Total'  Board Appointed  Total . •  ,  .  ltwortv409  4  7  11  6  4.-•;  _19  30  10  -'1).  r.".•  Minorities a.  Blacks  •;  9 b.  Hispanics  •••  /NA  3' c.  Orientals  •••  3 -  I  •••  'a  d,  Native Anericans  2 ,  REM  4111.0•••••■•••••••••  Total Minorities  1  1  3  12  15  "  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '  ; 'MS  REPRESENTATION BY WOMEN AND MINORITIES ON BOARDS OF DIRECTORS OF THE FEDERAL RESERVE BANKS AND BRANCHES  1975  Women  1977  1976  1978  #  %  0  %  0  %  if  4  1%  6  2%  17  6%  ?3 8%  %  1979  1980  1981  1982  #  %  #  %  # !I  #  7-  30  11%  30  11%  28  30  11,  10%  Minorities a. Blacks  5  2%  6  2%  7  3%  13  5%  14  5%  13  5%  11  4%  b. Hispanics *  5  2%  7  3%  7  3%  5  2%  5  2%  5  2%  3  1%  1  -  1  -  1  -  1  _  I  _  2  1%'  2  1%  2  1%  2  1%  *  c. Orientals d.  Native American  Total Minorities *  13  5%  16  6%  1  15  5%  20  7%  21  IMO •••  8%  20  7%  16  6% 411.11P  BASE  269  269  269  269  Information not available. Percentages are rounded to the nearest number   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  275  275  275  277  REPRESENTATION OF THRIFT INSTITUTIONS ON BOARDS OF DIRECTORS OF THE FEDERAL RESERVE BANKS AND BRANCHES (As of August 1982)  Directors Whose Primary Occupations Are With Thrif t Institutions Federal Reserve Bank Boards Branch Boards Total  0 5 5  Directors Otherwise Affiliated With Thrift Inst itutions  Federal Reserve Bank Boards Branch Boards   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Total  1 6 7   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Statement by  Frank E. Morris  President, Federal Reserve Bank of Boston before the  Subcommittee on Domestic Monetary Policy  of the  Committee on Banking, Finance and Urban Affairs  United States House of Representatives  Washington, D.C.  September 23, 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I am pleased to be able to participate in this Hearing. The following are my responses to the questions posed by Chairman Fauntroy which are not dealt with in our joint statement. What has been your bank's involvement with community and scholarly activities? In this connection, I would be pleased to know what work -training programs, upward mobility programs, affirmative action policies, forms for small and minority businesses, and research activities your bank has been and is presently engaged in doing. Perhaps the most fundamental contribution of the Bank to the region we serve is our research program on the New England economy.  This program which absorbs a sizable  part of our research budget, has over the years led to the Bank becoming known as a center for objective expertise on New England economic problems.  Our regional research  staff routinely services requests for data and analysis from New England Governors and Mayors.  They were actively  involved in the resolution of the financial crises of the State of Massachusetts and the City of Boston. We have cultivated close contacts with the New England academic community.  Two prominent economists, James  Duesenberry of Harvard and Robert Solow of MIT, have served as Chairmen of the Board of Directors of our Bank. We solicit the views of a panel of prominent New England economists prior to each FOMC meeting and transmit them -1-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  to the FOMC members as part of our contribution to the Red Book.  We sponsor one or two conferences a year on  some topic of pressing interest.  These conferences have  served to strengthen the ties between the Bank and the academic community.  In a conference to be given next  month on government policies to influence the savings rate, we will have papers presented by faculty members from Harvard, MIT and Yale, as well as by economists from outside the region. The Bank is actively involved in efforts to resolve the social, as well as the economic problems, of our region.  I serve as chairman of the Tr -Lateral Council  for Quality Education, a business group which seeks to improve the quality of the Boston School System.  I am  also Vice Chairman of the Boston Private Industry Council, a member of the Advisory Council to the Coalition of Northeast Governors and a member of the Coordinating Committee (sometimes known as "The Vault"), which is a business group concerned with the problems of the City of Boston.  We encourage Bank officers to get involved in  community affairs.  Among other affiliations, our officers  are directors of the Neighborhood Housing Services, the Massachusetts Higher Education Assistance Corporation and the New England Education Loan Marketing Corporation. As a member of the Tr -Lateral Council for Quality Education, the Bank has entered into a partnership arrangement with South Boston High School under which we contribute to enriching the educational experience of the  - 2_  N.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  students.  We also seek to prepare students for entry into  the world of work by counseling, teaching them how to participate in a job interview, and providing the experience of a part-time or summer job.  Twenty-five students from the  South Boston High School worked in the Bank this summer. The Bank operates a Skills Development Center in which disadvantaged young people who do not meet our minimum employment standards are taught clerical skills and good work habits.  Seventy-eight trainees have  graduated from the program and have been placed in permanent jobs, including sixty-six placements within the Bank.  One graduate of the Skills Development Center  is now a computer programmer. The Bank is a member of the New England Minority Purchasing Council and, as part of our affirmative action program, has an annual target for purchases from minority vendors. The status of business and financial liquidity, in the economy as a whole and in your District, and the implications for monetary policy. The lack of economic growth during the past three years, together with declining profitability and high interest rates, has depressed business liquidity to a record post-war low.  For nonfinancial corporations, the  debt-to-asset ratio now has reached 60%, well above the customary 50% established in the late 1960s and 70s. During the 1980s to date, about two-thirds of business borrowing has been short term.  -3  _  High leverage and high   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  interest rates have pushed the ratio of debt service charges to cash flow above 50%, well above the 30% ratio that prevailed during most of the 1970s.  A drop in the rate  of return on assets has been responsible for much of the erosion in business liquidity.  The rate of return on  total nonfinancial corporate assets is only about twothirds of its level in the late 1960s and early 1970s. While we have no direct estimates of regional business liquidity, there is no reason to believe that conditions in New England differ sharply from those nationally. Nonetheless, we know of no major New England corporation which is currently suffering a severe liquidity squeeze. The major decline in interest rates of recent weeks has undoubtedly helped to ease the situation of many firms and the sharp rise in common stock prices should make it feasible for some of them to strengthen their equity positions. The commercial banks of New England are in good condition, undoubtedly reflecting the relatively strong performance of the New England economy.  While it is too  early in the game to form a final conclusion, my impression is that loan losses at New England commercial banks, while showing a rising trend, may not be as serious as the loan losses suffered in the 1974-75 recession. The thrift institutions of New England are highly liquid, reflecting very conservative asset management since 1975.  We have seen very few forced mergers of -4 _   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  thrift institutions in New England, in large part because their capital positions tend to be substantially stronger than the thrift industry nationally. The implication for monetary policy is that the Federal Reserve must remain alert to evidence of any generalized liquidity problem and to any development which might threaten the viability of the financial markets.  Employment and business conditions in the economy, as a whole and in your District, and the implications for monetary policy.  The New England States have weathered the recession relatively well.  Unemployment rates throughout most of  the region have been consistently below the national average.  During the first six months of 1982, the  average unemployment rate in New England was 7.8 percent, which compares with the U.S. figure of 9.1 percent.  Total  employment has tracked closely the national trend, despite the loss of approximately 50,000 state and local government / 2. jobs in Massachusetts attributable to Proposition 21 This relatively strong performance reflects the transformation of the New England economy, with competitive high technology companies gradually replacing the old-line industries.  Some of our high technology companies  have been adding to their employment rolls right through the recession.  New England is also benefiting from the  upturn in defense procurement, which is cushioning, for many companies, the decline in consumer demand for their products. -5-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  On the other hand, New England is heavily dependent on capital goods production.  Many high technology  products are investment goods, and the region is still active in machine tools and other more traditional capital goods industries.  These companies have been living off  their order backlogs.  New orders are weak because of  high interest rates and the strength of the dollar on the foreign exchange markets, which has made our exports less competitive in world markets.  More than anything  else, these companies need public policies which will reduce the cost of capital and render financially feasible investments which have been shelved because of high cost of money.  Policies which expand total demand without  bringing interest rates down are not going to meet the needs of New England's capital goods producers.  The relative importance of further reductions in inflation at this time compared with the state of employment and business conditions and liquidity.  We are at a delicate juncture for monetary policy. We must have a policy which provides a financial base  for a sustained upturn in economic activity while, at the same time, providing assurance to the financial markets that the Federal Reserve continues determined to reduce the rate of inflation in the years ahead.  To  restore the economy to a healthy state, produce a substantial decline in the unemployment rate, and generate the increases in productivity necessary to produce rising  -6   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  real incomes for the people of the United States, we must reduce the costs of capital for new investment. A precondition for a healthy economy is a healthy bond and stock market.  To generate a healthy bond and stock  market, we must convince the investor that the inflation rate is going to continue to decline in the years ahead. This is why inflation control must not take a back seat to any other policy objective. Disinflation is a painful business. We have paid a heavy price for the gains we have made thus far, but the gains are real and critically important.  The inflation  rate is down substantially, we have seen a surprisingly large decline in the rate of advance in wages and salaries and there is evidence of fundamental changes which will show up in sizable productivity gains as the economy turns up.  We have begun to lay the found-  ation for a strong economy for the balance of the 1980s. Yet these developments are viewed with a heavy layer of skepticism by many players in the investment markets.  They saw the inflation rate decline and wage  rate increases decelerate in the wake of the 1974-75 recession, but it proved to be purely a cyclical phenomenon.  Because we were unwilling then to continue to  give high priority to inflation control coming out of the 1974-75 recession, the gains won at such heavy cost soon evaporated and we moved quickly back to staglation-with high unemployment and double digit inflation. -7-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  After the 1974-75 recession business liquidity improved only superficially.  During the late 1970s, rising inflation  eroded business profitability while inevitably increasing the cost of long-term financing.  As a result of this  experience, I believe that a steady reduction of inflation is a precondition for sustaining growth and attaining acceptable levels of employment and business liquidity in the 1980s. We should learn from the experience following the 1974-75 recession, but many in the financial markets are not sure that we will.  When they are convinced that we  will stay the anti-inflation course, long-term interest rates will come down sharply.  The appropriateness and viability of the monetary targets currently used by the Federal Reserve, specifically the M-1 aggregate, and your views on alternative targets, including the monetary base, a credit target, GNP, or targetting of real or nominal interest rates.  I have come to the conclusion that we can no longer measure the money supply of the United States with any kind of precision.  By that I mean that we can no longer  draw a clear line between money and other liquid assets. Innovation and the computerization of the financial system are revolutionizing the manner in which the American people handle their cash balances.  This has  brought us to the point where any definition of the money supply must be arbitrary and unsatisfactory; i.e., -8-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  it must include assets that some people view as short-term investments (not transactions balances) and exclude other assets that some people consider part of their transactions balances.  Cash Management, Sweep, and Money Market Accounts  are making "idle" transactions balances disappear.  In  the future, people may have much less need for transactions balances --funds may pass from a buyer's cash management account to a seller's cash management account, existing as transactions balances only long enough to complete the trip. All of the monetary aggregates can be distorted by shifts from one type of liquid asset to another, shifts which have no significance for monetary policy.  To an  increasing degree, longer -term securities and real assets have also become an abode of purchasing power because these assets may be tapped for transactions purchases on demand through modern credit arrangements.  More and  more purchasers look to their "lines of credit" rather than their check book balances in completing their transactions. Thus, we have a serious measurement problem with the concept of money.  We have been attempting to deal  with this problem by periodically revising the definition of the money supply.  This raises another issue.  What  we call M-1 in 1982 is not the same thing that we called M-1 in 1975.  There is no necessary reason to believe,  therefore, that the new M-1 (and its successors of future -9 _  I   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  years) will behave in the same manner relative to nominal GNP as the old M-1.  Furthermore, M-1 velocities have  risen more rapidly in recent years in response to rising interest rates.  Presumably, as interest rates move down,  we should expect a slowing in velocity --but when and by how much?  With all the uncertainties surrounding both  the measurement of M-1 and its relationship to the nominal GNP, I have concluded that the monetary aggregates, particularly M-1, are no longer suitable guidelines for monetary policy. My suggested alternative is total liquid assets, which is both stably related to the nominal GNP and unaffected by shifts from one type of liquid asset to another. I should add that the problems with M-1 as a target for policy are problems for the future, not the present. If we had been implementing a total liquid assets target in 1982, we should probably have chosen a range of 8 to 11 percent.  The growth rate for total liquid assets thus  far in 1982 has been somewhat above the upper limit of this range.  Thus, a switch to total liquid assets would  not have produced an appreciable difference in monetary policy in 1982.  -10-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Statement by  Anthony M. Solomon  President, Federal Reserve Bank of New York  before the  Subcommittee on Domestic Monetary Policy  of the  Committee on Banking, Finance and Urban Affairs  United States House of Representatives  Washington, D. C.  September 23, 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Good morning, Mr. Chairman.  I am  Anthony Solomon, President of the Federal Reserve Bank of New York, and I thank you for this opportunity to contribute to your examination of the activities and policies of the Federal Reserve district banks and their implications for monetary policy.  After consulting with  the Subcommittee, Presidents Boykin, Corrigan, Morris, Roos and I have submitted a joint statement addressing some of your auestions and areas of concern with respect to the Reserve Banks collectively.  Therefore, in my  separate remarks today, I will present my own views and those of the New York Reserve Bank regarding the following matters: (1)  our Bank's involvement with community and scholarly activities, including forums for small and minority business and other members of the community and our economic research efforts;  (2)  our policies and practices in the area of equal employment opportunity and affirmative action, and related matters;  (3)  economic conditions in the economy as a whole and in our District, including employment and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  business liquidity and how they factor into our thinking regarding inflation and monetary policy; and (4)  the appropriateness and viability of the monetary targets being used, specifically Ml, and the possible use of alternative measures. For convenience, I will discuss these topics  in the order they are presented in your inquiry.  Community and Scholarly Activities The Federal Reserve Bank of New York maintains extensive links with consumer and community groups in the District.  We are also committed to providing a full  range of informational and educational publications concerning the work and objectives of the Federal Reserve to general audiences as well as more detailed and analytical publications aimed at professional and scholarly audiences. In order to inform the public about their rights and responsibilities under consumer credit legislation, we produce a large number of pamphlets, including some in the Spanish language in recognition of New York's sizeable Hispanic community.  We meet with  consumer groups to discuss common concerns and, when we receive complaints from bank customers that might imply a violation of the regulations, we investigate and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  assure that an appropriate response is made to the customer. We also conduct educational seminars, some of them in conjunction with the New York City Department of Consumer Affairs and the Board of Education, for such varied audiences as instructors of the Youth Opportunity Program, counselors at the Budget and Consumer Credit Counseling Services, school teachers of social studies and members of the Harlem Consumer Education Council. Thus far in 1982, we have held nine of these seminars. We reach other audiences, too.  About once a  month I host a meeting for business and community leaders in our District, where we exchange viewpoints on the current state of the economy.  Other senior officials of the  Bank hold similar meetings around the District, three times a year. We are aware of the importance of the Community Reinvestment Act and have an active and ongoing contact with groups, both private and governmental, whose major focus is housing and urban lending.  This is in addition  to our statutory duty to monitor compliance by statechartered member banks, which we fulfill through the bank examination process. We also are responsive to inquiries we receive from the general public.  In the first half of 1982, the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4  Public Information division in New York responded to almost 100,000 inquiries.  Many of these involved our  role as fiscal agent for the Treasury, as people wanted to know about government securities and how to buy and sell them.  Other questions were about regulation or  the central bank services we perform, and we have prepared a number of educational booklets about the work of the Federal Reserve that we send out on request.  Research and Scholarly Activities Our research and scholarly activities are quite extensive.  The primary publication outlet for  these efforts is our Quarterly Review, a widely read journal of economics containing articles that range from discussions of the regional economy to examinations of money market instruments and monetary policy options. To give you a complete picture of all the types of matters covered in our Quarterly Review, I have submitted as an exhibit a listing of all of our articles over the past few years.  We also make available a  variety of economic papers written by our research staff.  We keep in close touch with the academic com-  munity and other economists.  We invite professors and  others to conduct seminars at the Bank and our economists are frequently invited to lecture or conduct seminars   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  5  at universities and elsewhere.  In adon, we conduct  special seminars at the Bank for college teachers of money and banking, and for members of international organizations and foreign central banks. The research activities at the Federal Reserve Bank of New York are basically policy oriented--they are geared to assist in the formulation of domestic and international policies in the broadest sense.  A good  part of our research work is devoted to current analyses of economic and financial developments in the United States, in foreign economies and international markets, and in our region. At the national level, we follow very closely innovative practices in the financial markets that might affect the interpretation of the monetary aggregates, the implementation of monetary policy, or the stability of aur economic and financial system.  We are concerned  with the implementation of monetary targets and with the outlook for the Federal deficit.  Some of the issues we  have examined recently are the effects of tight shortrun control of money, the role of money market funds as a substitute for money, and the relationship between the Eurodollar market and domestic financial markets. We are also very concerned about the prospects for economic growth and inflation.  In that connection we  have recently studied the effect of the international   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6  value of the dollar on exports and imports and on domestic prices. Internationally, we have examined other nations' fiscal and monetary policies sand have looked into their experiences with financial innovation.  We  have investigated their methods of implementing monetary policy and the effects of developments abroad on U.S. economic growth and inflation.  We also analyze  the situation of the less-developed countries, with particular focus on their balance of payments and their international debt, and the economic and financial position of the OPEC nations. At the regional level, we have done a number of studies of New York City's tax structure and have examined regional economic growth and inflation compared with that of the nation as a whole.  In  evaluating New York City's attractiveness as a place to work and for employers to locate, we have looked into such matters as the cost to businesses and individuals of subway delays, and have started a study of the costs of crime.  Equal Opportunity Policy As an employer and member of the community, the Federal Reserve Bank of New York is committed to   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  maintaining a work environment in which all individuals receive equal treatment and equal opportunity without regard to their race, color, religion, national origin, sex, age, or handicap.  This commitment is an integral  aspect of our personnel management and employee relations activities including recruitment, selection, promotion, compensation, benefits, training and education, and counseling.  Affirmative Action Since the early 1970's the New York Reserve Bank has conducted an Affirmative Action Program, which is aimed at increasing the representation of minorities and women in upper level salary grades and in our official staff, primarily by promotion from within the Bank.  In the aggregate, minorities and women are  well represented at our Bank, comprising 40 percent and 55 percent of our total staff, respectively.  Each  year we review our targets and our progress in meeting them, and set new goals for the current year. In broad terms, our Affirmative Action Program consists of four major efforts: First--Establishing specific Affirmative Action goals which are approved by our Board of Directors;  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I  8 Second--Developing detailed action plans for recruitment and advancement of minorities and women; Third--Implementing or carrying out of these action plans; Fourth--Monitoring our results against goals and reporting them to our Directors. We have a record of continuing progress toward increasing our representation of minorities and women in senior level jobs and in official positions. Over the past five years minority representation in our senior salary grades has improved from 12 percent in 1977 to 15.5 percent in 1982.  Women have increased  their representation in those grades from almost 19 percent in 1977 to 24 percent in 1982.  There were five  minority group members in our official ranks in 1977; today we have eight, and our goal for 1982 is 10 (or 7.5 percent of our official staff).  There were 12 women  officers at the Bank in 1977; today there are 24, and we intend to have 27 women officers (or 26 percent of our official staff) by year-end.  Affirmative Action for the Handicapped Since 1976, the Bank's Board of Directors has approved an Affirmative Action Program for the Handicapped.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  9  The Bank recruits handicapped individuals and insures The  equal opportunity for all handicapped employees. Bank has instituted programs designed to increase  supervisors' awareness and understanding of the concerns of handicapped employees and has made alterations to its physical plant to accommodate the disabled.  Bank-Sponsored Upward Mobility Programs Over 40 in-Bank training programs are offered each year to assist our employees in developing jobrelated skills and to prepare them for increased responsibility.  Among the courses offered are English  as a second language, supervisory training, writing and office skills, and management skills training.  In  addition, an equal employment opportunity awareness program "Fair Play," is presented to supervisory personnel.  Interview skills workshops are held to  improve employees' interviewing skills and prepare them for opportunities available through our job posting system. Most job openings at the Bank are filled through the job posting system, which emphasizes equal opportunity for all qualified applicants.  Counseling  is available to all employees to assist them in reviewing career opportunities at the Bank and in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  10 determining their qualifications for specific job openings. This summer, the Bank sponsored a Minority Summer Internship Program.  This program provided  summer employment in professional positions to minority college students interested in a career in the banking industry.  The objective of the program  is to assist in the identification and recruitment of qualified minority students about to enter the marketplace.  The program was limited to college  juniors and seniors.  We feel it was highly success-  ful and plan to repeat it in 1983. During the past years, we have increased participation by minorities and women in our Executive Training and Development Program, and the Management Training Program.  These programs are  designed specifically to identify and develop promising candidates for supervisory and managerial positions. Special emphasis is placed on the following areas: •  Seminars to help upwardly mobile employees to objectively identify their career aspirations and strengths; Instruction in communication skills (both written and oral) and confidence building;  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I,'  Increasing exposure to Federal Reserve poes, procedures, projects, etc. and Development of interpersonal and leadership skills to prepare the employee to supervise others.  Community Involvement The Bank supplements its internal affirmative action efforts by participating in a variety of special community action programs, and actively pursues new opportunities to enhance its community involvement. Some of these are as follows: 1.  National Urban League's Black Executive Exchange Program  A program in  which black businessmen and women from a variety of fields lecture at predominantly black colleges and universities to supplement classroom instruction, acquaint students with a wide variety of career opportunities, and provide positive role identification. 2.  American Economic Association (AEA) Summer Program for Minorities -- This program is administered by AEA, hosted by Yale University, and funded by the Sloan   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  12  Foundation, the AEA, the Board of Governors of the Federal Reserve System and a number of Federal Reserve Banks, including the Federal Reserve Bank of New York.  The objective of the program  is to identify promising prospective minority Ph.D. candidates with the necessary undergraduate training in economic theory and analysis. 3.  Open Housing Center -- An employer-sponsored service which provides assistance in locating housing in New York City for employees and assists employees who feel they have been discriminated against in locating suitable housing.  4.  Various New York City and New York State Sponsored Programs a. Youth Opportunity Campaign - A program administed by the New York State Employment Service which provides summer jobs for economically disadvantaged high school and college students.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  13  b. School Work Exploratory Educational Program (SWEEP) -- A workshop sponsored by the New York City Board of Education and the National Alliance of businessmen to provide high school students with exposure to a variety of career opportunities through onthe-job observations. On many occasions, our officers and employees are asked to participate in business and career forums sponsored by corporate and academic institutions.  To  give just two examples: New York University and Citibank Business Career Forum for Minority Students -- A program designed to acquaint minority students with graduatelevel study in business and businessmen and women who are also members of minority groups. Minority Job Fair -- Sponsored by the National Organization of Black University and College Students held at Howard University in Washington, D.C. Finally, I should add that in the coming month, we will become a member of the New York/New Jersey Minority Purchasing Council, Inc. to enhance participation   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  14  by minority vendors in supplying goods and services to the Bank.  Economic Conditions and Monetary Policy The long-run goal of monetary policy is to reduce inflationary pressures by gradually slowing the growth of money to a rate consistent with noninflationary expansion in business activity.  And the Federal Reserve  has been moving toward that goal.  M1 growth in 1979 was  less than in 1978, in 1980 less than in 1979, and in 1981 below 1980.  This slowing in money growth is now being  reflected in lower inflation rates and in expectations of reduced inflationary pressures for some time to come. The financial markets are becoming convinced of the Federal Reserve's resolve on the inflation front. Because inflationary psychology had become deeply entrenched in economic decisions and expectations the reduction in inflation has been a painful process. Profit margins have been squeezed, especially in those firms that had bet on a continuation of inflation, and unemployment is up sharply.  Nor have the effects been  even across all regions or sectors of the economy. Homebuilding and the auto industry have been among the hardest hit because of their sensitivity to the cost of credit.  But hopefully the worst of the bad economic   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  15  news appears to be behind us, and we believe that the Federal Reserve's monetary targets are sufficient to permit economic growth in a noninflationary environment.  To  foster such growth, the FOMC has tentatively decided to retain the 1982 targets for M1 growth for 1983. While the Federal Reserve generally expresses its long-term goals in terms of monetary targets, particularly M1 growth, many other economic factors are taken into consideration.  Broader measures of money  and liquidity as well as credit aggregates are monitored by the Federal Reserve System.  In addon, the Federal  Reserve Bank of New York, like the other Reserve Banks, keeS s in touch with business conditions in its District as well as national economic trends.  The New York Bank,  however, is unique in that it operates in the Government securities market on behalf of the FOMC, as well as in the foreign exchange markets. Moreoever, the Second District contains the world's foremost financial center.  Most dealers in  U.S. securities are located in New York City, many of the nation's largest banks are headquartered there, and more than half of the Treasury's securities are sold through New York financial institutions.  As a result,  the New York Federal Reserve carefully follows developments in the national and international financial markets and brings that perspective to FOMC meetings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  16  In recent months, the strength and resiliency of our financial markets have been tested by events like the failures of Drysdale Government Securities and Penn Square National Bank.  There is also market concern  about a number of domestic and international credits. Appropriately, reviews of market practices and credit procedures are being undertaken which will ultimately strengthen our financial system. At the New York Reserve Bank, we have taken a particularly active role in working to improve practices in the Government securities market.  We  have also been closely involved with efforts to relieve concerns in the international financial markets--notably involving Mexico in recent weeks. Along with a perspective on financial markets, the New York Reserve Bank brings an overview of the regional economy -- one of the nation's largest FOMC meetings.  to  Business conditions in the Second  District have deteriorated during the current recession, but the decline has not been as severe as in other parts of the nation.  Total employment in New York  State has not fallen nearly as much on a percentage basis as it has for the nation as a whole.  S.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  17  In part, this is due to the concentration in New York of financial and service industries which tend to be less sensitive to business downturns. Manufacturing employment, although declining sharply in New York since last summer, has not fallen as much as it has nationwide.  So while the recession has  affected New York, there are also reasons to be optimistic about the ability of New York's economy to withstand recessionary forces better than in the past when New York's losses were considerably greater than for the nation. And at this juncture, there are also reasons to be less pessimistic about the national outlook as well.  Inflation rates are down, interest rates have  declined, and most of the inventory adjustment has been completed.  Thus, while some questions remain about  the exact timing, the economy appears to be poised for a period of modest business recovery  a recovery that  will not be accompanied by a resurgence of inflationary pressures as long as the Federal Reserve maintains its monetary discipline and the Congress continues to work toward a closer balancing of Federal receipts and expenditures.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  18  The Federal Reserve's commitment to monetary discipline, however, should not be interpreted as rigid adherence to monetary targets, particularly in the short run.  The Federal Reserve is prepared to  allow money growth to be above or below target for brief periods of time when the circumstances suggest that special factors are coming into play.  In 1981,  the rapid growth of money market funds appeared to be reducing M1 growth as consumers transferred part of their transactions balances to money funds, and others learned what a convenient mechanism money funds could be for managing cash balances more efficiently.  Under  such circumstances, the Federal Reserve was willing to tolerate below-target growth for a period of time. In contrast, during 1982, special factors seemed to be adding to M1 growth.  The sharp decline  in business activity late last year and early this year prompted consumers to build up their precautionary balances -- primarily in the form of NOW accounts and savings deposits.  With M1 being raised by growth in  nontransaction deposits during late 1981 and early 1982, the Federal Reserve felt that M1 growth around the top of the annual range was acceptable.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  19  The buildup in precautionary balances eased in the second quarter of this year, but if economic turS ulence and uncertainty led again to stronger than anticipated demands for money and liquty, the FOMC would tolerate growth somewhat in excess of the annual range for a period of time.  The Federal Reserve would  look to a variety of factors in making such a decision, including the behavior of different components of the money supply, movements in velocity, and the condition of banking and financial markets.  But we do not plan  to respond strongly to various "bulges" or "valleys" in monetary growth at times when the demands for money and liquidity may be exceptionally volatile. The Federal Reserve will need to continue its flexible approach to policy in the long run also as the financial markets continue to change and new ways are found to manage cash balances more efficiently. Sweep accounts, NOW accounts, money funds, retail and corporate RPs, and Eurodollars -- all have raised enough questions in recent years about the usefulness Sf M1 by itself as a guide to policy. In summary, we have traveled a long way on the road toward greater price stability and a healthy foundation for sound economic expansion.  It would be   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  20  a tragic mistake not to finish the journey.  The  Federal Reserve remains firm in its anti-inflationary stance, but flexible in its approach to policy, and fully intends to aim for money growth consistent with economic recovery in the years to come.  In that  sense, the Federal Reserve's Ml target, after allowance for normal velocity, can be viewed as effectively setting a cap on nominal GNP growth.  As inflation  recedes, the monetary targets will automatically permit more room for real economic growth.  And that  appears to be the stage of the process we are now entering -- less inflation and more economic growth.  Contents  Issue  Summer 1980  Author  United States and the World Economy (speech)  N4ii.i;TI . Solomon  Current developments The business situation The financial markets  John Wenninger Leonard G. Sahling  Reforming New York City's Property Tax: Issues and Options  Mark A. Willis  Perspective on the United States External Position Since World War II  III.arke  The Pricing of Syndicated Eurocurrency Credits  an  Monetary Policy and Open Market Operations in 1979  ight  Treasury and Federal Reserve Foreign Exchange Operations (interim report) •  Autumn 1980   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ii.rIii.iii Innovation  in Canada  Laurie Landy  Current developments The business situation The financial markets  Marcos Jones Leonard G. Sahling  Recent Trends in the Federal Taxation of Individual Income  Carl J. Palssh  Increasing Personal Saving:  Robert DeFina  Can Consumption Taxes Help?  Treasury and Federal Reserve Foreign Exchange Operations (semiannual report)  -8_  Scott E. Pardee  Issue Winter 1980-81  Contents In Memoriam:  John Henry Williams 1887-1980  Inflation and Stock Values:  Is Our Tax Structure the Villain?  Cutting the Federal Budget: Growth Can Be Reduced  Analyzing How Fast Expenditure  Current developments The business situation The financial markets Global Payments Problems:  Spring 1981   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Author Stephen V.O. Clarke Marcelle Arak  James R. Capra  Marcos Jones John Partlan The Outlook for 1981  William J. Gasser  Oil Price Decontrol and Beyond  Paul Bennett, Harold Cole, Steven Dy  Social Security and Savings Behavior  Paul Wachtel  Treasury and Federal Reserve Foreign Exchange Operations (interim report)  Scott E. Pardee  New York City's Economy in 1980  Rona B. Stein  The Economic Costs of Subway Deterioration  Daniel E. Chall  Current developments The business situation Highlights of the recent national income and product account revisions The financial markets  Steven Dym Deborah Jamroz David Beek  The Decline in Personal Saving  Donald Cox  The LDC Debt Burden  David Roberts  Financial Innovation and Monetary Indicators in Japan  Dorothy B. Christelow  Treasury and Federal reserve Foreign Exchange Operations (semiannual report)  Scott E. Pardee  -9-  Contents  Issue Summer 1981  a  I)  Autumn 1981   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Recent Instability in the Demand for Money  John Wenninger, Lawrence Radecki. and Elizabeth Hamnond  Bank Lending to Non-OPEC LDCs: Are Risks Diversifiable?  Laurie S. Goodman  The National Defense Budget and Its Economic Effects  James R. Capra  Current developments ... The business situation A itThe finaticial markets  1.  Author  Paul Bennett Marcos Jones  I  Bankers' Acceptances  William C. Melton, Jean M. Mahr  International Diversification by United States Pension Funds  Edna E. Ehrlich  Excess Reserves and Reserve Targeting  David C. Beek  Current developments The business situation New York experiences renewed strength in personal income The financial markets  Sharon P. Smith Rona B. Stein and Mark A. Willis Marcos Jones  Evolution and Growth of the United States Foreign Exchange Market  Patricia A. Revey  Treasury and Federal Reserve Foreign Exchange Operations (semiannual report)  Sam Y. Cross  -10-  I eaue Winter 1981-82  Spring 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Author  Contentq Innovations in the Financial Markets  Marcelle Arak  Monetary Policy Without Regulation Q  Betsy Buttrill White  Money Market Mutual Funds and Monetary Control  John C. Partlan, Michael Doteey. and Steven Englander  Original Issue Deep Discount Bonds  Andrew Silver  The SDR in Private International Finance  Dorothy Meadow Sobol  Lensing -- A Financial Option for States and Localities?  Mark A. Willis  Current economic developments  Leonard Snhling  National Gas Controls and Decontrol  Paul Bennett, Deborah Kuenstner  Combining Decontrol of Natural Gas with a New Tax on Producer Revenues  James R. Capra David C. Beek  Short-run Monetary Control: Some Possible Dangers  An Analysis of Lawrence Radecki  The Eurodollar Conundrum  Edward J. Frydl  Mortgage Designs, Inflation. and Real Interest Rates  Marcos T. Jones  -11-  Issue Summer 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Contents  Author  Dollar Appreciation. Foreign Trade, and the U.S. Economy  Robert A. Feldman  turodollar Arbitrage  Lawrence L. Kreicher  The Cost of Capital:  Now High Is It?  Patrick J. Corcoran Leonard C. Sahling  The First Concurrent Resolution and the Budget Outlook  James R. Capra  Impact of "Buy Downs" on Affordability and Home Prices  Robin DeMagistris  New York's Economic Performance  William W. Greer Ronn B. Stein Edward M. Tepper Mark A. Willis  Foreign Banking in the United States: and Supervisory Perspective  -12-  A Regulatory Betsy Buttrill White  a  %   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TESTIMONY OF  LAWRENCE K. ROOS PRESIDENT FEDERAL RESERVE BANK OF ST. LOUIS  BEFORE THE  SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS U.S. HOUSE OF REPRESENTATIVES WASHINGTON, DC  SEPTEMBER 23, 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,  Question 3: What has been your bank's involvement with community and scholarly activities?  In this connection, I would be pleased to know what  work-training programs, upward mobility programs, affirmative action policies, forums for small and minority businesses, and research activities your bank has been and is presently engaged in doing?  The Federal Reserve Bank of St. Louis has maintained a formal Affirmative Action Plan for the past 10 years.  The plan  is designed to encourage women and minorities to apply for positions particularly in the management, professional, and technical fields such as administration, operations, data processing, and bank examination.  The results reflect that the  Bank has been able to maintain or increase the number of women and minorities in upper grade levels during the past several years while the total number of staff members has declined. Achievement of the Bank's Affirmative Action Plan has been supported by its accelerated commitment to the following community work-training and scholar cooperative programs consisting of 60 percent females and minorities: American Institute of Banking Work Study Program St. Louis University Cooperative Program •  Southern Illinois University Cooperative Program International Visiting Scholar Program  The Bank through its upward mobility programs has promoted 179 staff members of which 62 percent were females and 26  ,  I ..  .  -  percent were minorities.  2  -  Programs that we have found to be the  most successful include the: .  District Management Development Program  .  System Management Development Program  .  Bank Job Posting Program  .  Bank Career Planning Program  .  Special entry level training programs  In addition, our Bank has participated in local community activities involving forums, workshops, and special projects for small and minority businesses.  Our role in these activities is  to provide technical assistance in community reinvestment to both the public and the banks.  Those organizations with which  we have close contact are the: •  Small Business Association Neighborhood Housing Services of St. Louis Community Development Commissioners of St. Louis and St. Louis County  •  St. Louis Association of Community Organizations  The research activities of our Bank are primarily concentrated in the area of monetary theory and policy. the topics investigated are:  Among  relationships between money growth  and income, output and employment; relationships between fiscal policy and economic activity; relationships between reserve variables and money; impact of bank regulation on financial markets; and studies in individual bank behavior. The results of these studies are published in the Federal Reserve Bank of St. Louis Review.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I  In addition, the Bank  ‘  % 46,  -  3  -  publishes data on monetary, economic, agricultural, regional, and international trends.  The research staff participates  widely in teaching and disseminating information on monetary policy in seminars at colleges and universities, as well as at meetings of a great variety for local, national, and international organizations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  or  g   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Questio wThhoe sta l  y  ,  a  liquidity,  d  mplications  oo  Financial liquidity reflects simply the ability of financial institutions to lend to prospective borrowers. Financial institutions in our district do not appear to lack loanable funds. Despite the increase in business bankruptcies and some resultant losses to financial institutions in this seeking new ggr district, financial institutions are aessively borrowers and continuing their lines of credit with existing borrowers. This is particularly true of smaller institutions which sell their surplus funds in the federal funds market because their loan demand is low compared to their available loanable funds. Business liquidity also reflects the ability of businesses to borrow. There is evidence that financial institutions are g activity displaying increAsed selectivity in their lendin• greater gly conscious •of • as they have became increasin• gh most large and visible non-repayment risk. Even thou•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _ 5 -  business failures have been associated more with mismanagement than with a general credit squeeze, financial institutions are currently wary of making marginal loans, even at what might have previously been considered reasonable interest rates. Consequently, businesses that are perceived as being higher-risk borrowers, either because of their product line or for other factors, are finding funds to be less available at current rItes.  In this sense, their liquidity has been impaired.  In summary, I see little evidence that credit flows are overly restricted because of any significant lack of bank reserves.  Therefore, I IS not believe that a more expansive  monetary policy would improve the liquidity of businesses that now find themselves unable  551orrow at current market rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  6 -  Question 2: Employment and business conditions in the economy, as a whole and in your District, and the implications for monetary policy.  In the 8th Federal Reserve District, business conditions are "flat."  Manufacturing activity has been declining, retail  sIles in real terms are about on par with last year's. industries, however, are expanding.  Service  Residential construction is  slightly above its postwar low, and commercial construction is slowing from its all-time high.  Although average agricultural  incI me in this district will be somewhat lower than last year, the drop has not reached crisis proportions.  Livestock growers  are enjoying excellent margins and grain growers expect a bumper crop.  Prices, however, will be lower.  Hardest hit are the  approximately 2.5 percent of all farmers who bought land at extremely high prices and have had to finance it at high interest rates. Unemployment in the district, on average, is similar to the national level.  Illinois, Indiana, Kentucky, Missppi and  Tennessee have higher-than-national unemployment (in the 10 - 12 percent range); Missouri and Arkansas are lower (8•.5 - 9.5 S.rcent range). For the economy as a whole, I expect output growth to be slI w for the remainder of the year.  If money continues to grow  at a rate of 5 - 5-1/2 percent, economic activity should pick up in the second or third quarter of 1983.  This implies that there  will not be much improvement in unemployment until the middle of 1983.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ment I would like to point out, however, that while unemploy of figures are very high, total civilian employment as a percent ent population is also very high--almost as high as the perc achieved at previous cyclical peaks.  About 58 percent of the  57 percent population was employed in July 1982 as compared with in 1951, 58 percent in 1956, 1969 and 1973, and 60 percent in 1979.  Each of these years was viewed as a full employment  period.  Thus, current unemployment figures do not imply the  cs would serious contraction in spending that similar statisti have implied in the past. Regarding monetary policy, I have no doubt that a sharp y increase acceleration in money growth would produce a temporar in output growth and a temporary decrease in unemployment. I would like to underscore the word "temporary."  But  Because  ed economic decisionmakers have learned that inflation is relat ed, to money growth, and that inflation is not easily eliminat markets now respond to monetary acceleration much more quickly than they did in the past.  This means that inflationary  money expectations are formed very rapidly and that any boost in growth is quickly translated into higher prices and higher interest rates.  Thus, output and employment gains resulting  lead from monetary expansion would be short-lived and would ultimately only to permanently higher inflation and higher interest rates.  I, therefore, believe that the best policy to  ment restore normal output growth and thereby reduce unemploy percent rate would be to maintain M1 growth currently at 5.5 et (the top of the Federal Reserve's announced M1 growth targ  W  _  8  -  range), deviate as little as possible from that figure, and reduce Ml growth in the future by no more than one percent per year.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  e   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  9 _  Question 3: The relative importance of further reductions in inflation at this time compared with the state of employment and business conditions and liquidity.  All the evidence that we have accumulated indicates that the basic rate of inflation begins to decline about one or two years after monetary growth is reduced.  For example, current  reductions in inflation are the result of the reduced monetary growth since 1979.  This implies that inflation will continue to  decline, or at least remain at current levels, for a year or so irrespective of what we do at this time.  But if we are  concerned with current interest rate levels, which are based on inflationary expectations, a further gradual reduction in money growth becomes important.  This is particularly true since our  evidence indicates that gradual and steady reduction in money growth has very little negative effect on output and employment.  Thus, if we want to lower interest rate levels  without adverse effects on output and employment, a gradual and steady reduction in money growth, which implies a continuing slow reduction in inflation, is both feasible and desirable.  w   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 10 -  Question 4: The appropriateness and viability of the monetary targets currently used by the Federal Reserve, specifically the M-1 aggregate, and your views on alternative targets, including the monetary base, a credit target, GNP, or targeting of real or nominal interest rates.  The goal of monetary policy is to affect economic activity (GNP).  Because the Federal Reserve can directly control only  the monetary base, any policy target--M1, interest rates, or any other, is simply a short-term indicator of what changes we can expect to occur in GNP. Targeting on either the monetary base or GNP alone would mean that there would be no short-term indicator of policy actions.  As a result, we would incur both a loss of information  and a greater probability of errors that might easily compound over time.  Thus, it is generally preferable to target on some  variable that is predictably related both to the monetary base and to GNP, and one that can be observed in the short run. Using interest rates as targets brought us to the economic disarray that prompted a change of emphasis towards monetary aggregates in 1979.  Interest rates as targets suffer from three  serious deficiencies: (1) The relationship between interest rates and GNP is tenuous; (2) it is doubtful that monetary authorities can control interest rates, even in the short run; and (3) because interest rates are highly visible, there will always be pressures on the monetary authority to try to stabilize them at the cost of destabilizing economic activity as  %  T  a whole.  For example, when GNP is increasing at a fast pace,  both credit demands and interest rates rise.  Under such  circumstances, attempts to prevent an increase in interest rates usually result in supplying additional credit and money, which further stimulates GNP.  Therefore, policy actions produce  exactly the opposite of what economic stabilization would require.  Similar procyclical actions typically occur when GNP  growth is falling and reserves are withdrawn to counter any decline in interest rates. Although a credit variable may be well correlated with GNP, it is difficult, if not impossible, to control.  In the absence  of direct credit controls and credit allocation by some governmental agency, monetary authorities can influence only a small part of total credit--only that part which arises out of newly created reserves of financial institutions.  I have  serious reservations about direct credit controls and doubt that credit allocation would be acceptable to our society. This leaves Ml which, despite financial innovations and despite changes in economic behavior, has been reliably related to the central bank's control variable--the monetary base--and This  has reliably predicted movements in prices and output. does not mean that some other variable might not perform better.  I simply don't know of any that would do so.  In the  absence of a better alternative, I would be extremely reluctant to abandon M1 targeting and subject the economy to the greater volatility and greater inflation dangers that would result.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  or  %   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Statement by E. Gerald Corrigan President Federal Reserve Bank of Minneapolis Before the U.S. House of Representatives Subcommittee on Domestic Monetary Policy September 23, 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. chairman, members of the Subcommittee, I appreciate this opportunity to testify before the House Subcommittee on Domestic Monetary Policy. In addition to the joint statement submitted by the five presidents, I would like to comment on the several questions you have raised that relate more directly to the Federal Reserve Bank of Minneapolis. The first of these questions concerns the Minneapolis Fed's involvement with community and scholarly activities and its efforts and programs in the area of affirmative action. Our community involvement activities can be grouped in three broad categories: education, communications, and corporate responsibility. I have attached, for the record, a summary of such efforts, and will briefly describe highlights of our programs. Our economic education programs reflect the philosophy that by providing materials and assistance that fill curriculum gaps and by focusing on teacher training programs, we can serve the greatest number of people at the lowest cost. Examples of these efforts include providing staff to elementary schools to assist teachers in developing materials on economic issues generally and on the role of the Federal Reserve particularly and providing teacher training in economics for educators involved in a program for high-potential elementary students. One of our most significant curriculum projects was the development of an instructional unit on consumer credit. The curriculum materials in this unit are being used in community/adult education programs and in high schools throughout the country, with more than 3,500 units distributed to date. I should add that all of our economic education efforts are closely coordinated with the State Councils on Economic Education. In addition, I am a trustee of the Joint Council on Economic Education. Another important curriculum material developed by the Bank has been "You're the Banker." a simulation game designed to acquaint students and adults with the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2  basic economic principles related to money and banking. We are currently extending use of "You're the Banker" from a board game to use as a computer simulation game. In the area of communications, we have made special efforts to reach three groups: depository institutions, agricultural and small business groups, and the business community generally.  Communication efforts directed at these groups take several  forms. In 1981, Minneapolis Fed personnel gave over 180 speeches to banking, business, construction, labor, agricultural, educational and service groups throughout the six states in our district. We have also held a series of seminars around the state of Minnesota on issues related primarily to agricultural finance, and we have provided program and administrative support to a district organization concerned with agricultural credit. One of our most significant recent initiatives was the development and presentation of a seminar on economic issues for small business representatives from the district. more generally. we have defined as an important objective the development of working ties between the Small Business Administration, the Minnesota Commission on Small Business and the Task Force on Small Business and Economic Stability. From my experience with these programs I would suggest that their value lies not simply in the information we impart but, as important, the information, attitudes and concerns that we receive from these diverse sources. We meet our corporate responsibilities through two broad functions. First, we try to participate fully--while acknowledging the special constraints imposed on a Federal Reserve Bank--in community-based programs. This participation includes a role within the Minority Business Opportunity Committee; providing staff to the local chapter of the National Alliance of Businessmen for a program that identifies summer jobs for minority youth; board membership on the Minnesota Project, a center for public policy study and community development: active involvement--in terms of staff assistance and solicitations--with the United Way of Minneapolis: and support services to the '‘,4innesota Special Olympics.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  Second, we try to initiate and support programs that are consistent with our overall responsibilities and that address specific community needs.  Examples of  these programs include a joint education program we have undertaken in cooperation with the Minneapolis Urban League to provide community residents with practical and useful skills to cope with individual and family finances.  This "Personal Economic  management Workshop" includes information on budgeting, borrowing, debt repayment, and tax preparation. Our Consumer Affairs office has, in cooperation with the FDIC. provided staff assistance to help financial institutions and local groups in a district community develop a community reinvestment program.  One such program has been  completed and another is planned for the near future. In a similar vein, and in cooperation with other agencies and educational institutions, we arranged for conferences and special studies related to economic development issues on Indian reservations in the district. A final example of efforts to match our particular expertise with community need would be educational programs and briefings on economic conditions that we have provided to the Metropolitan Economic Development Council, a group formed to provide support to minority businesses. You also raised, Mr. Chairman, specific questions regarding work-training programs, upward mobility programs and affirmative action policies. The Federal Reserve Bank of Minneapolis has, long before my tenure as president, had a strong commitment to an effective affirmative action program. On an annual basis, we prepare, monitor, and update an affirmative action plan that sets our objectives for increasing the representation of women and minorities in the Bank in general and particularly in professional positions. I do not believe, however, that numbers are necessarily a good measure of the actual effectiveness of an affirmative action program. To my mind, the real test of successful affirmative action is to create an environment in which targeted groups are a functioning, contributing force within the organization. This points to the need for a   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -4  range of initiatives in areas including recruitment, placement and training of minorities and other protected classes. We also have an active program for the handicapped. There are four objectives in that program: eliminating physical and attitudinal barriers, expanding employment and advancement opportunities, providing job-related programs and services, and supporting community efforts to expand employment for the handicapped. The research program at the Federal Reserve Bank of Minneapolis is a balanced effort aimed at making meaningful contributions in three broad areas: first. macroeconomic research, with an emphasis on issues related to public policy; second, regional and national issues related to the evolving financial structure; and third, regional economic issues with particular emphasis on agriculture. While our research staff is small, it has made and continues to make important contributions in each of these areas, including frequent contributions to scholarly journals. Also, in the past year, one of our economists was on leave to a major university and two members of the research staff were on leave to the staff of the U.S. Senate Budget Committee.  Similarly, when consistent with our public responsibilities, our  research staff has participated on special commissions and studies related to state and local government policy issues here in the Ninth District. Given the thrust and reputation of the Bank's research program, it is not surprising that we have maintained close relations with the district's academic community and particularly the University of Minnesota.  We have also, through contract ar-  rangements, made use of academic advisors to our research work. I would like now to respond briefly to the questions you raised in four policy-related areas:  the liquidity position of nonfinancial and financial businesses;  employment and business conditions; the trade-offs between further reductions in inflation and improvements in business conditions; and, finally, the appropriateness and viability of the monetary targets currently used by the Federal Reserve.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -5  On a nationwide basis, the liquidity of nonfinancial businesses is at historically low levels by most standards.  While some of the decline in business liquidity in  recent years may reflect growing sophistication in corporate financial and cash management techniques, it is clear that much of the recent slippage in corporate liquidity reflects patterns of economic performance we have witnessed over the last several years. For example, the long period of essentially escalating inflation experienced over the past decade or more made borrowing and leveraging very tempting because it was so easy to paper over mistakes with successively higher product prices. To make matters worse, the high levels of interest rates that inevitably accompany the inflationary process effectively closed down our long-term capital and equity markets for many borrowers. Thus, increasingly, the debt incurred in recent years has been of the shortterm variety. For this reason, reopening and keeping open our long-term capital markets and our equity markets must remain one of the central goals of economic policy generally and monetary policy specifically. In my judgment, this goal can best be realized (or perhaps can only be realized) in the context of policies that get inflation down and keep it down. While it is difficult to find meaningful statistics that focus exclusively on the liquidity situation of business firms located in the Ninth Federal Reserve District, I have no reason to believe the situation in the Upper Midwest is materially different than it is in the nation as a whole. It is possible--given the nature of some of the major business firms in the Twin Cities area--that in the nonfarm sector things may be a shade better than is suggested by the national statistics. However, when allowance is made for conditions in the farm sector--which has a very substantial presence in the Ninth District--the overall nonfinancial business liquidity situation in the district is not likely to differ from the national picture. The situation with respect to the liquidity of financial firms--banks in particular--is a little more difficult to read. For example, in the Ninth Federal Reserve   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6  District, certain conventional measures of bank liquidity--such as loan-to-deposit ratios and liquid asset ratios--suggest that bank liquidity is generally satisfactory. However, on closer inspection, it would appear that at least some of that statistical evidence reflects curtailed levels of borrowing growing out of overall economic conditions--particularly in the farm sector. It is also true in the Ninth District--as for the nation as a whole--that recent months have seen a deterioration in the quality of credit, as heavy debt burdens in combination with general economic conditions have cut into the net cash flow and profit positions of many firms. Any discussion of liquidity trends would not be complete without adding a word or two about consumer liquidity, where there are some signs of improvement. For example, there is now a smattering of evidence to suggest that consumer saving rates have risen somewhat. Similarly, the rate at which the consumer sector has taken on new debt has diminished over the past few years. These developments, in combination, have strengthened the liquidity position of the consumer and, in the aggregate. augur well for some step-up in spending. Turning now to employment and business conditions more generally, I would characterize current conditions for the nation and for the Ninth District as about flat. In recent months there have been some scattered signs--some straws in the wind—to suggest that overall economic activity and employment might be picking up a bit, but hard evidence of a generalized recovery is not yet available. When that evidence is at hand, I expect we will see a recovery which, in its early stages, is modest in strength and driven largely by consumer spending. The durability and sustainability of the recovery, and thus its capacity to encompass other sectors of the economy, will depend importantly on our ability to make and sustain further progress on the inflation front and to avoid another resurgence of strains and pressures in financial markets stemming from the combination of private and public credit demands.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  Having said earlier that I do not perceive any major overall differences in business conditions and employment in the Ninth Federal Reserve District relative to the economy as a whole, let me make two qualifications to that statement. First, on balance I believe it is fair to say that the Ninth Federal Reserve District may have fared somewhat better than the nation as a whole in this recent recessionary period. Certainly, comparative unemployment rates would suggest that conclusion. For example, during the second quarter of 1982, unemployment for the district as a whole averaged 7.3 percent. sharply below the national average. The second qualification I would make is that these overall statistics mask some serious specific problems. Agriculture is one, but in addition there are geographic pockets within the Ninth District where sharp declines in the production of wood products and copper and iron ore, have produced very high levels of unemployment and economic distress. More recently, the coal, oil and natural gas producing belts within the district have also been adversely affected by the worldwide conditions in the energy and related industries. These circumstances lead quite naturally to your next question regarding the trade-offs between economic conditions and controlling inflation. In my judgment, it is important to bear in mind, that in the current circumstances, further reductions in inflation can and should go hand-in-hand with improvement in employment, business activity, and liquidity. But, even over the longer term, the economic choices we face do not involve either/or decisions.  What is before us is a package deal: if we want to  improve the employment picture, increase liquidity, and create the right environment for lasting and healthy business growth, we have to make further and sustained progress against inflation. To be sure, there has been meaningful and encouraging progress on the inflation side, as evidenced by the widespread deceleration in both price and wage increases that has already occurred. But we are by no means "home free" on the inflation front--a proposition that in my view is underscored by the still-high level of long-term interest rates prevailing in our financial markets. Such rates suggest to me. and suggest   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S  rather strongly and directly, that investors are not yet convinced that progress against inflation will be extended or, indeed, even maintained. If my reading of the message in long-term interest rates is correct, then it follows that improvement in employment, and in economic performance more generally, requires further progress on the inflation side. For, as long as long-term interest rates. girded by stubbornly persistent inflationary expectations, remain high, recovery in the interest sensitive sectors of our economy--homebuilding, autos, other consumer durables. business captial spending--may be sluggish and short-lived. In short, I doubt that we can have the kind of recovery we desire over time without the full participation of these sectors—participation that over time will depend upon lower long-term interest rates. More broadly, I would maintain that the economic history of the past 15 years or so has demonstrated rather unmistakably that perceptions about trade-offs between inflation and unemployment--while seductive and perhaps relevant in the short run--were misplaced; inflation and true economic prosperity are fundamentally in conflict. If we want to regain our economic health--and I know that this is not an issue of debate—then it is essential to bring inflation down and keep it down. Only through this channel can we, in my opinion, reestablish the lower interest rates so critical to a broad, durable, and sustainable expansion in our economy. Fortunately, I sense that we are now in a position in which we can have economic recovery and further progress in winding down inflation. Maintaining that condition will, however, require persistent discipline on the part of both monetary and fiscal policy. Finally, let me respond to your question regarding the current monetary targets.  Admittedly, monetary aggregate targets have limitations.  We do not always  fully understand, for example, the factors contributing to short-run, week-to-week or even month-to-month fluctuations in aggregates.  And we are aware that, over longer  periods, the full range of money supply measures are influenced and affected by innovations in financial instruments and practices, as well as by monetary policy and financial   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  9  and economic developments. All of these forces, and others, can at times make it difficult both to predict and to interpret trends in money growth. But recognizing that the aggregates have some problems does not imply. in my judgment, that they ought to be abandoned as policy targets. Indeed, I am satisfied that they are more than adequate guides for policy, given our current institutional and operating arrangements. The problems that I alluded to earlier do suggest, though, the necessity of applying experience, judgment, and old fashioned "common sense" in establishing, and then trying to achieve, specific monetary targets. They point out the continuing virtue of closely following several rather than a single aggregate such as MI-both because a particular measure may, from time to time, be influenced by transitory forces and because there is, in any event, potentially valuable policy information contained in the broader aggregates. Innovations in payment practices may, at some point in the future, raise sufficiently serious questions of definition, measurement, and control of the monetary aggregates that alternative policy targets and techniques will have to be considered. However, that day is not here. Having said that, let me add that the alternative targets that have been proffered have serious shortcomings in their own right. While I do not want to repeat the complete litany here, I would simply suggest that the other potential policy targets frequently mentioned--real or nominal interest rates, the monetary base, and so on--will not yield magical solutions to our economic problems. And, while one particular target may have certain technical advantages over another, even those technical advantages have to be weighed against each other.  And, at least to date, I am  satisfied that the weight of the evidence still points to the wisdom of sticking with the family of monetary aggregates—with particular emphasis on MI-- as the primary guide for monetary policy. That is not to suggest that we can be, should be or, in fact, are indifferent to other considerations in the short run. Nor is it to say that I cannot conceive of conditions and circumstances which might lead me to a different view. How-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 10 -  ever, it is to say that balanced and judicious use of the aggregates is operationally and intellectually the best game in town for contemporary monetary policy. And to repeat myself, the use of an alternative target will not eradicate the hard choices we face nor would it eliminate the need for the persistent discipline in our financial policies that is essential to sustained economic growth and prosperity.  Community Involvement Projects: Summary  1.  Urban League--joint education program The League's overall program provides community residents with practical and useful skills to help increase their interest in, and skills to cope with, the current economic situation. The Personal Economic Management Workshop Series includes: Budgeting Borrowing Debt repayment Tax preparation and other topics.  2.  Neighborhood Housing Services Neighborhood Housing Services (NHS) programs are designed to stimulate reinvestment in neighborhoods. The service is based on a partnership of financial institutions, community residents, and local government. The Bank hosts luncheons to enable the NHS staff to report to their supporters and solicit new support.  3.  Indian Economic Development Programs A series of studies was designed to provide the following planning and management tools in a reservation setting: Resource identity Management techniques Threshhold analysis, economic base study Linear programming Three conferences and four special studies were generated in cooperation with other agencies and educational institutions.  4.  Metropolitan Economic Development Council The Bank has assisted MEDA, a minority business development advocate, by supporting internal growth through educational programs, training, and briefings on current economic conditions. (See also Memberships, Minority Purchasing Council.)  5.  Food and Agricultural Policy Seminars, co-sponsor, University of Minnesota A series of seminars was held around the state of Minnesota on issues important to agricultural interests in the Ninth District. Most were related to agricultural finance. The Bank helped bring in speakers and provided other resources to maximize the value of the seminars for participants.  6.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Opportunity Workshop When projects of an appropriate nature arise, e.g., assembling media catalogs, the Bank uses Opportunity Workshop, a sheltered workshop in Minneapolis.  7.  Community Resource Volunteers Program The Bank provides resource people to elementary classrooms to assist teachers in planning and teaching about forms of money and the Fed's role in an efficient payments mechanism.  8.  Omnibus (A program for high-potential elementary students) The Bank has provided training sessions for volunteers teaching special units in economics to Omnibus students.  9.  Business Community Resource Volunteer Program Bank staff members serve as resource people who participate in career discussions with senior high school students.  10.  Twin Cities Opportunity Industrial Center The center retrains hard-to-employ adults for entry into the labor market. The Bank has provided resource people for classes and seminars in connection with training programs.  11.  Consumer Education Unit An instructional unit on consumer credit development has been developed in conjunction with educators and representatives of the credit industry. The unit is to be used in the teaching of consumer credit concepts and skills in schools, community/adult education programs, and other similar programs.  12.  State Councils for Economic Education In cooperation with State Councils in the Ninth District states, the Bank provides a variety of resources in setting up educational programs and seminars for teachers, e.g., our teacher-banker workshops. Council programs are then developed and aimed at teachers and students. This represents a major involvement by Bank.  13.  Tours Tours are available to the public and to special groups upon request. In 1981 and 1982, groups have included in addition to school groups: o o o o o o o  14.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  business clubs, senior citizens, junior achievement classes, farmers' groups, Native American school groups, AAUW and other women's groups, and conventions, e.g., finance managers and agricultural economics professionals and foreign visitors.  Northside Child Development Center With other businesses, the Bank was involved in founding a child development center in an urban area of Minneapolis.  15.  Upper Midwest Agricultural Credit Council (UMACC) The Council is an organization of bank credit specialists that functions as an educational forum for bankers serving rural communities in the Upper Midwest. A Bank staff person is executive secretary of UMACC, and the Office of Public Information provides substantial administrative support.  16.  Upper Midwest Council The Bank was a major supporter of the Council, a regional research group, until its demise this year.  17.  Small Business Seminars, Initiatives a.  White House Conference on Small Business The Bank provided substantial planning, personnel, and adminstrative assistance to state planning meetings leading up to the 1980 conference.  b.  Small Business Liaison The Office of Public Information has, as a key objective, maintained close ties with District (see Memberships, Participations) states' small business. This has been accomplished, for example, through ties with the Small Business Administration, the Minnesota Commission on Small Business (attendance at annual and regional meetings), and the Task Force on Small Business and Economic Stability (organized by SBA to assist small firms with financial problems caused by high money costs). Examples of interaction with small business groups include:  18.  o  Small and minority business-sponsored meeting on the effects of economic policy in March 1982 (Corrigan and staff),  o  Meetings with small and (Corrigan), and  o  Meeting with the Task Force on Small Business and Economic Stability for discussion of credit and monetary policy in August 1980.  minority business groups in  November 1981  Minnesota Special Olympics The Bank provides support services for the Minnesota Special Olympics, thus allowing Special Olympics to devote more of its resources to programming.  19.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Support for the Arts a.  Purchases The Bank purchases for its collection the works of regional artists and has made an effort to include works by minority and women artists.  b.  Exhibitions A program of temporary exhibitions has focused on Black artists (a Black History Week event) and plans to highlight the Southeast Asian community (Hmong tapestries) and correctional facilities inmates (Arts in Corrections) in upcoming months.  20.  United Way of Minneapolis Area The Bank provides substantial support to the annual United Way campaign. Each year a staff member, who remains on salary at the Bank, spends three to four months as a United Way Loaned Executive. Bank departments provide members for solicitation and administrative work, and the Bank holds rallies for employees on Bank time.  21.  You're the Banker The simulation game, You're the Banker, was developed by the Bank to acquaint players with the basic economic principles related to money and banking. The game, in board and computer versions, is used to bring students, educators, and members of the community in contact with the financial institutions. The game is generally distributed to schools and banks at the cost of production.  22.  Community Catalyst Role Presidents of the Bank have been instrumental in concluding a significant study on future choices facing Minnesota (Commission on Minnesota Futures), initiating an organization to support academicians studying regional issues (Mid-Continent Regional Science Association), and arbitrating a major dispute between the University of Minnesota and black students (following the assassination of Martin Luther King, Jr.).  23.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Community Reinvestment Act/Truth in Lending Activities The Consumer Affairs Department provides educational services that include speaking on regulatory issues, distribution of brochures and other materials produced throughout the Federal Reserve System, and responding to consumers' telephone inquiries. The department has also provided a staff person for up to one week to help an individual SMSA group develop a CRA program (in cooperation with FDIC). One program has been completed and another is planned for the near future.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Memberships, Participations Small Business Administration Advisory Committee Council One staff member serves as a member of the Council Board, which serves as an interface between small business and the SBA. The Council recommends policies that will enable SBA to better serve its constituency. Minority Business Opportunity Committee, Federal Executive Board Even though not a member of the Federal Executive Board, the Bank elected to participate fully in the Committee's work promoting the development of minority-owned business, both because of our financial expertise and our commitment to minority business development. Minority Purchasing Council The Council is a subgroup of the Metropolitan Economic Development Council, a minority business development advocate. The Bank participates in the Minority Business Exchange, the Council's trade fair, and attends the Council's annual meeting. National Alliance of Businessmen Each year since 1972, the Bank has loaned the local NAB chapter a senior staff person to participate in a program that identifies summer jobs for minority youth. The Minnesota Project, Board Membership The Project is a. center for public policy study and community development, with an emphasis on the implications of public policy decisions for all strata of the state's communities. vlinnesota Charities Review Council, Board Membership The Council oversees solicitation and allocation of donations by charitable organizations operating within the state.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Statement of Robert H. Boykin, President Federal Reserve Bank of Dallas before the Subcommittee on Domestic Monetary Policy of the Committee on Banking, Finance and Urban Affairs United States House of Representatives September 23, 1982  Introduction It is a pleasure to appear at this hearing to discuss the Activities and Policies of the Federal Reserve Banks and their Implications for Monetary Policy. As you know, certain areas of your inquiries have been addressed in the joint statement of the five Federal Reserve Bank Presidents who have been called to appear.  My responses to the issues not covered in the joint state-  ment are as follows.  What has been your bank's involvement with community and scholarly activities? In this connection, I would be pleased to know what work-training programs, upward mobility programs, affirmative action policies, forums for small and minority businesses, and research activities your bank has been and is presently engaged in doing. The following is a listing of the major activities of the Bank with respect to community and scholarly activities:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Work-Training Programs Computer-trainee program in conjunction with Skyline High School, Dallas, Texas. Summer intern programs with minority schools such as Bishop College, Texas Southern University, and Prairie View A&M University. In-House training, including typing, shorthand, and word processing classes. Maintenance, electrical and equipment repair training in the Facilities Department of the Bank. Bank supported educational program offering full payment for tuition and books for bank related/job related courses at colleges in the area. Upward Mobility Programs Executive Development Program - emphasis on management development for potential managers and officers. Executive Secretarial Program - emphasis on upward mobility for clerical workers.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  -  Administrative Assistant Program - emphasis on exposing new college graduates to various areas of the Bank.  _  Career Ladder Establishment - a Bankwide program that establishes career paths in many areas of the organization. Posting System - allows employees to bid for jobs in other departments before outside recruiting begins.  Affirmative Action Policies _  Recruits at minority colleges.  -  Advertises in minority newspapers and publications.  _  Establishes targets toward upward mobility for women and minores.  _  Seeks and encourages job applications from members of minority groups.  _  Cooperates in educational programs with Texas Southern University and Bishop College.  _  Staff members participate in community service activities, particularly those designed to serve the needs of disadvantaged members of the community.  -  Conducts In-House EEO awareness seminars. Participates in career day at minority schools.  _  Two of our branches are heavy minority employers with minorities representing half of their staffs. All of our offices have excellent minority representation when compared to community standards.  Community and Scholarly Activities _  Conducts meetings on community reinvestment activities with individuals and organizations throughout the Eleventh Federal Reserve District.  _  Gives speeches on all aspects of Federal Reserve System activities.  _  Partates in activities with the Joint Council on Economic Education, the Texas Council on Economic Education, and the Educational Center for Economic Education at North Texas State University.  _  Cooperates with universities in programs economic education and to bring about an of monetary and economic policy.  g e pro v  rc tuon  ig   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  Participates in community consumer educational fairs, activities, and various other consumer education meetings. Hosts meetings and participates in various activities that are initiated to enhance small business financing and operational needs. Participates in the Volunteer Business Council. Hosts meetings involving community leaders, bankers, businessmen, and various other groups such as students and community organizations. Provides support to community activities such as the annual United Way Campaign, Wadley Blood Bank, and other community sponsored programs designed to improve the conditions and environment of all citizens. The officers and staff of this Bank are members of, or are involved in, the following organizations and activities: American Economics Association Dallas Economists Club Advisory Council, East Texas State University, Bank Operations Institute Dallas Personnel Association American Society of Personnel Administrators Advisory Bov.d, Texas A&M University Executive Development Program American Institute of Banking Advisory Committee, Computer Science Cluster at Dallas Independent School District American Institute of Certified Accountants Texas Society of Certified Public Accountants State Bar of Texas Dallas Bar Association American Bar Association Dallas Management Association Junior Chamber of Commerce Chamber of Commerce American Statistical Association Zonta Club of Dallas I Bank Administration Institute Dallas Agricultural Club Dallas Council U.S. Navy League Rotary International Southwest Roundtable Houston Personnel Association American Agricultural Economics Association Southwestern Social Science Association Counselor, Southwest Graduate School of Banking, Southern Methodist University Lions International  4  Optimist International Advisory Council, School of Management, University of Texas at Dallas Advisory Council, Center of Banking Education, Texas Southern University Advisory Council, Texas Tech School of Banking at Lubbock The status of business and financial liquidity, in the economy as a whole and in your District, and the implications for monetary policy. Cash flow positions at businesses throughout the country and in the Eleventh District are still showing some strain.  Liquidity pressures at  small- to medium-sized firms have increased, as evidenced by the number of bankruptcies reported. also evident.  Cash flow problems among agricultural producers are  High and rising production costs, together with falling crop  and livestock prices, have significantly reduced net farm earnings, and the number of forced farm sales is up. Cash flow problems in the business sector have also generated earnings pressures in the financial sector.  Recent business and financial  failures, together with concerns about Mexican and other international credits, have increased tension in U.S. financial markets.  In recent months loan loss  provisions at commercial banks have been increased and more attention is being given to problem loan areas.  Earnings pressures at savings and loan institut-  ions, resulting from high funding costs, remain a source of concern. Lenders are exhibiting some preferences for quality credits and risk premiums have increased in several sectors.  In the commercial paper market,  the interest rate spread between the medium- and top-quality paper has widened. The spread between CD rates and Treasury yields also widened temporarily following recent bankruptcy announcements. However, the commercial banking sector is relatively liquid at this time.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Business loan growth since July has moderated and discount window  -5 _  borrowings have dropped off sharply in recent months.  Similarly, in contrast  to 1974, access to the commercial paper and corporate bond markets has not been closed to lower-rated borrowers.  Both financial and nonfinancial firms  have been able to raise a substantial amount of funds in the credit markets with most of the borrowing concentrated in the shorter maturity range. In the Eleventh District, weakness is primarily concentrated in the energy sector--manufacturing of energy equipment, drilling and energy servicing industries.  Moreover, similar to the national picture, high borrowing costs  have increased liquidity pressures at small- to medium-sized firms, particularly auto dealerships and residential home builders.  However, despite the  weak energy sector, economic activity in our District is still relatively strong compared to the rest of the country, and our major financial institutions have been among the top performers during the last several years. Implications for monetary policy of liquidity strains in both the financial and business sectors are taken into consideration when setting policy.  Recently, both long- and short-term interest rates have dropped  sharply and if this decline is sustained, it should significantly reduce liquidity strains during the second half of this year. Employment and business conditions in the economy, as a whole and in your District, and the implications for monetary policy. Economic indicators seem to imply some improvement in the economy in the near future.  The index of leading economic indicators has risen for four  consecutive months. since December 1980. capital goods.  In July, new factory orders rose at their highest rate The biggest gain appeared in orders for nondefense  Movements in that statistic often are indicative of future  changes in plant and equipment spending.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6 However, at the present time the economy still is rather weak.  The  manufacturing sector in general, and capital goods manufacturing in particular, have been hit hard by the recession.  The  Auto and home sales are slow.  index of coincident economic indicators fell in June and again in July, and in August the U.S. unemployment rate was at its highest level since 1941. The Eleventh District has been hit by recession also.  Last year,  growing weakness in some manufacturing sectors was more than offset by strength in the energy industry.  But the District economy started to show signs of  recession in the first quarter of 1982, when oil and gas drilling activity began to decline.  Employment in a number of energy-related industries--  including drilling, oil field equipment manufacture and primary metals--peaked in March. Devaluations of the Mexican peso in February and again in August severely affected retail sales on the border and in San Antonio, one hundred fifty miles away.  As a result of the devaluations, and because of the slug-  gish economy, District retailing has been weak. District farmers are suffering from low prices and crop damage. Over the last two years, Texas farm employment has fallen by more than 10,000. Low sales in the national housing markets have hurt the District's forest products industry. Although the inflation rate abated in July, many of our nation's economic problems are still tied to inflation and to inflationary expectations. Certainly, high interest rates reflect investor fears of high inflation.  The  difficulties which have occurred this year in the capital goods markets, the housing market and, to some extent, the automobile market, are legacies of past high inflation rates and the resulting high interest rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  Consequently, the implications of the current state of the economy for monetary policy must be weighed carefully.  While the current economic  situation is serious, any quick fix that could be given by an expansionary monetary policy would refuel inflation and the expectation of more inflation. Such a policy would ultimately drive up interest rates and erode our economic base even further.  This suggests that despite the current weakness of the  economy, it is to the long-run benefit for everyone to encourage an environment of stable prices in which productivity and employment can expand. The relative importance of further reductions in inflation at this time compared with the state of employment and business conditions and liquidity. We have learned a very painful lesson in this country about inflation. If left unchecked, inflation will lead to high and volatile interest rates, increased uncertainty about the future economic environment, and reduced savings and investment.  Through these channels, inflation ultimately contrib-  utes to inadequate growth in productivity, living standards, and employment opportunities. This realization led the Federal Reserve System to adopt a long-term program to slowly reduce the rate of inflation.  Much progress has been made:  by almost any measure the rate of inflation has been cut in half in the last several years.  Nevertheless, public skepticism regarding the permanence of  this progress, together with swelling Federal deficits, kept interest rates high, even while inflation was moderating.  This represented a sharp increase  in the so-called "real", or inflation-adjusted, interest rate, that is the primary cause of current economic weakness. Recently, however, the public has accepted some of the reduction in inflation as more permanent, fostering significant reduction in interst rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -8 _  Were we to relax our vigil against inflation, public expectations would reverse that decline.  Consequently, we feel our current policy provides the only hope  for enduring diminution of interest rates. Although the choice of an appropriate short-run policy always involves tradeoffs between competing objectives, the dilemmas are less troublesome now that substantial progress has been made against inflation.  Present monetary  growth targets can provide sufficient liquidity and credit for a sustainable economic recovery, which is apparently under way.  Yet these targets are, at  the same time, consistent with further reductions in inflation and interest rates. The appropriateness and viability of the monetary targets currently used by the Federal Reserve, specifically the M-1 aggregate, and your views on alternative targets, including the monetary base, a credit target, GNP, or targetting of real or nominal interest rates. The monetary aggregates the FOMC uses as targets have helped and, I believe, will help guide policies which will further reduce inflation and make possible economic recovery and sustainable growth.  Nevertheless, structural  changes in our economy and our financial markets can affect patterns of monetary growth, and we must be willing to adjust our growth targets, revise the definitions of our aggregates, or even change the type of targets we use when evidence suggests this is necessary. For some years, with particular emphasis during the past three, we have used the monetary and credit aggregates as targets.  Statistical studies  over a number of years have shown that changes in these aggregates are related to future changes in economic activity.  Of special importance is the evidence  that reductions in the rates of growth of these aggregates will lead to reductions in the rate of inflation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  Tighter control of these aggregates over the last three years has helped cut the inflation rate in half.  Further gradual reductions in the  rates of monetary growth will ensure further reductions in inflation.  But our  experience in the last three years points out the importance of flexibility and judgment in using these aggregates.  The rapid pace of change in financial  markets and temporary shifts in the liquidity needs of firms and households have required us to deviate from our long-term targets from time to time.  We  must continue to reexamine the aggregates' behavior and their relationships with our economic goals as we set our long-term growth targets.  And, in  setting our short-term targets, we must continue to view recent changes in money growth in the context of a whole host of economic variables and ind tors to determine if short-run deviations from our targets are appropriate. Other strategies, based on alternative targets, appear less attractive.  Among those frequently mentioned is the monetary base.  Although the  concept--merely the sum of bank reserves and currency--appears simple, a problem arises in adjusting the base for changes in reserve requirements.  If  reserve requirements are increased, for example, a higher amount of base is necessary to support the same level of deposits and economic activity. ferent adjustment procedures can yield  substantially different results.  The base has several other deficiencies as well.  Like the money  aggregates, the base is affected by shifts among different types of deposits such as those caused by the nationwide introduction of NOW accounts in 1981, or shifts from bank deposits to money market mutual funds shares over a longer period.  In addition, the economy's need for base money is also affected by  shifts in the public's demand for currency relative to bank deposits and shifts in deposits among institutions with different reserve requirements.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Direct control of interest rates is another frequently discussed alternative.  However, our unhappy experience with putting more emphasis on  interest rates in the '60s and '70s is precisely what led us to greater emphasis on the monetary aggregates three years ago.  When inflation is accel-  erating, small rises in interest rates are unlikely to slow it down.  It has  been possible for interest rates to rise over a long period of time and yet have inflation accelerate as well, which renders nominal interest rates of little value in guiding monetary policy. Real interest rates, which attempt to adjust nominal interest rates for the rate of inflation, appear to be an improvement.  Unfortunately, the  rate of inflation needed to make the adjustment properly is the rate expected by borrowers and lenders over the life of the loans or deposits on which the interest will be paid.  This number is unobservable, so the true real interest  rates are, to some extent, a matter of conjecture.  Furthermore, many factors  can be expected to change the relationships between real interest rates and other economic variables.  Changes in the rate of inflation, tax structure,  productivity of our capital stock, and size of Federal budget deficits all alter the level of the real interest rate which would best help us achieve our goals.  Research done at our Bank indicates that the relationship between real  interest rates and the level of business actives, while significant, is hiS hly variable and undependable. The use of nominal GNP as an explicit target of Federal Reserve policy has some appeal.  A policy of limiting increases in this variable to  those justified by long-term trends in labor force and productivity growth would ensure our success in controlling inflation without preventing the economic growth we strongly desire.  The disadvantage is that the Federal  Reserve has no 5irect control over GNP.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  GNP is affected not only by monetary  policy, but also by our nation's budget and regulatory policies, international events, and unanticipated domestic economic developments.  Because of the long  lags involved in monetary policy, current policy decisions cannot be based on GNP behavior of the recent past but rather would have to be based on expected GNP behavior in the distant future.  Such a policy strategy would require  highly accurate forecasts of the future course of our economy--as yet, economic science has not progressed enough to provide us with such forecasts. Recent attention has also been given to using a broad credit aggregate as a policy target.  While such aggregates are closely related to GNP, it  currently takes several months to compile the data necessary to compute them. Also, as is the case with GNP, broad credit aggregates cannot be easily controlled by the Federal Reserve.  They are relatively insensitive in the  short run to changes in either bank reserves or market interest rates.  We do  currently use a credit aggregate, bank credit, as one of our target variables. Because it is restricted to banks which are required to keep reserves, it falls much more closely under our control. In my judgement, our current set of monetary target variables is the best of a very imperfect set of possible choices.  The search for better  policy guides will and should continue, but, until they are found, careful and flexible use of our current targets offers our greatest hope of reducing inflation and providing the foundation for long-term growth.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  September 23, 1982  The Honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations House of Representatives 20515 Washington, D.C. Dear Chairman Rosenthal: I am pleased to respond further to your letter of August 18 requesting information on supervisory experience with banks controlled by foreign individuals.  The enclosed  data have been prepared in response to your request as a joint effort by the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve. Sincerely, VFW A.ItOcker  Enclosure FD:J11:CO:pjt (#V-188) bcc: Fred Dahl Jim houpt Mrs. Mallardi (2) *\./   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DATA ON U.S. BANKS OWNED BY FOREIGN INDIVIDUALS  The attached tables provide statistics on the supervisory experience of the three federal bank regulatory agencies with U.S. banks that are 25 perce nt or more owned by foreign individuals.  The data include summaries of examiner  ratings, the frequency of bank violations of U.S. laws and regulation s, and the number of consumer complaints about these banks received by the three agencies. The commercial and consumer examination ratings provide indicators of the banks' overall financial strength, their adherence to good banking practices, and their conformance to U.S. laws and regulations.  In general terms, ratings  of 1 and 2 are excellent to satisfactory; a rating of 3 is less than satisfactory; and ratings of 4 and 5 reflect poor to very poor perfo rmance. The data on violations should be used cautiously.  Many violations, for  example, are very technical and are corrected during the exami nations.  At  times, a single transaction or misinterpretation of law or regul ation can result in numerous violations.  Some banks may be cited for relatively large  numbers of violations, yet receive strong management and compliance ratings if the nature of the infractions is not serious or symptomati c of widespread problems.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 1 1/ U.S. Banks Owned by Foreign Individuals--Canada & W. EuropeAmounts in $1000  Bank  City  State  Domestic Deposits June 30, 1982  Coolidge Bank and Trust Co. Security NB & Trust Co. of NJ Creditbank 1st City NB of Jacksonville Biscayne Bank  Watertown Newark Cutler Ridge Jacksonville Miami  MA NJ FL FL FL  124,805 52,970 35,283 9,350 92,470  Totalbank Intercontinental Bank Southern Florida Bank NA American Bank & Trust Co. Alamosa National Bank  Miami Miami Riviera Beach New Orleans Alamosa  FL FL FL LA CO  110,301 404,660 16,024 344,059 26,334  Dominion Bank of Denver Dominion National Bank of Denver American Bank of Commerce Bank of California NA  Denver  CO  19,961  Denver Phoenix San Francisco  CO AZ CA  19,015 32,004 1,742,416  Number of Banks = 14 Median Deposit Size = $44,127 Total Aggregate Deposits = $3,029,652  1/ Excludes banks owned by foreign banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 2 U.S. Banks Owned by Foreign Individuals--Latin American— -' Amounts in $000  Domestic Deposits June 30, 1982  Bank  City  Meadowlands National Bank Central National Bank of NY Repulic National Bank of NY Caribank NA Dania Bank  North Bergen New York New York Coral Gables Dania  NJ NY NY FL FL  33,841 108,102 3,438,257 40,313 159,803  Safrabank Consolidated Bank NA Eagle National Bank of Miami Dadeland Bank Republic National Bank of Miami  Miami Hialeah Miami Miami Miami  FL FL FL FL FL  230,639 362,854 73,195 51,112 466,905  Florida International Bank Sunshine State Bank International Bank of Miami NA  Perrine South Miami South Miami  FL FL FL  37,190 51,443 67,945  Total Number of Banks = 13 Mediam Deposit Size = 73,195 Total Aggregate Deposits = 5,121,599 1/ Excludes banks owned by foreign banks.  State   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 3 U.S. Banks Owned by Foreign Individuals--Middle East !" mounts in $000  Bank  City  State  Domestic Deposits June 30, 1982  National Bank of Georgia  Altanta  GA  430,999  First Bank & Trust Co.  Marietta  GA  145,524  Bank of the Commonwealth  Detroit  MI  796,824  Du Quoin State Bank  Du Quoin  IL  48,072  First Western Bank  Houston  TX  13,065  Texas Investment Bank NA  Houston  TX  28,415  Peoples Bank  Houston  TX  60,186  Houston  TX  223,787  Phoenix  AZ  438,357  Western Bank Great Western Bank & Trust Total Number of Banks = 9 Median Deposit Size = $145,524 Total Aggregate Deposits = $2,185,229  1/ Excludes banks owned by foreign banks. ___   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 4 st' ar Ea  -F n Individualsig re Fo by d ne U.S. Banks Ow Amounts in $000  City  State  Bank Trust Co. Liberty Bank & an Bank Chinese Americ Trust Co of NY Community NB & nk Global Union Ba c State Bank American Pacifi e Bank of Financ erseas Bank California Ov nk Independence Ba National Bank Trans American . Bank & Trust Co Pacific Union rnia Bank America Califo Bank American Asian of California Bank of Canton ient Bank of the Or Redwood Bank ty Bank American Securi  Boston New York New York New York Los Angeles Los Angeles Los Angeles Los Angeles Moneterey Park Menlo Park Palo Alto San Francisco San Francisco San Francisco San Francisco Honolulu  Banks = 16 Total Number of Size = $88,113 Median Deposit 695,945 Deposits = 1, e at eg gr Ag l Tota s. by foreign bank d ne ow s nk ba 1/ Excludes  MA NY NY NY CA CA CA CA CA CA CA CA CA CA CA HI  ts Domestic Deposi June 30, 1982 12,605 197,976 73,585 21,458 111,757 21,334 102,641 140,201 52,176 41,606 14,024 40,234 177,700 127,177 160,364 401,107  Table S.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1/ Latest Examinationsls, dua ivi Ind n eig For by ed a for U.S. Banks Own Commercial Examination Dat  Region of Owner Canada/ Western Europe  Latin America  Middle East  Far East  Total  Number of Banks  14  13  9  16  52  Capital Rating 2 1  4  9  5  5  23  8  1  2  6  17  3 _  1  4_5  1  2  Composite Rating 3 2 1 _  4-5  Total  Number of Enforcement 1/ Actions-  5  4  1  5  4  85  1  31  4  54  7  10  2  0  199  204  3  1  5  0  2  1  1  9  3  1  5  0  24  1  1  3  5  6  1  19  1  1  1  10  1  3  3  4  2  54  6  3  25  2  5  29  1  4  30  7  5  12  10  367  13  5  66  28  301  6  8  by foreign banks. 1/ Excludes U.S. banks owned by types of violations. 2/ See Table 6 for details 3/ See Table 10 for 'details.  Number of Banks With Management Rating 4-5 3 2 _ 1 _ _  Number of Violations for Banks Rated Composite 11 3-5-2 1-2  ••••.  Table 6.  1/ ationsin am Ex st te La s, al du reign Indivi S. Banks Owned by Fo U. r fo ns io at ol Vi n io Commercial Examinat  Region of Owner Canada/ Western Europe  Latin America  Middle East  Far East  Total  Number of Banks  5  2  1  4  12  Violations Exec. Officer Borrowings  Bank Secrecy  Other  Total  2  8  31  2  8  0  2  5  0  1  0  4  5  0  1  16  25  1  1  5  2  3  66  18  12  30  3  Lending Limit  11  2  0  Credit to Affiliates  examination. e 3-5 during the latest it os mp co d te ra re we banks that 1/ Includes only those by foreign banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  d Excludes U.S. banks owne  Table 7.  Consumer Examination Data for U.S. Banks Owned by Foreign Individuals, Latest Examinations' —  Region of Owner  Number of Banks  Number of Banks With Consumer Composite Rating of: 2 3 4-5 1  Total Number of Violations of Consumer Banking ?! Laws & Regulations  Total Number of Consumer Complaints, 1981-823/  Canada/ Western Europe  14  1  9  4  0  373  79  Latin America  13  0  10  3  0  194  247  9  0  8  1  0  247  24  16  2  12  2  0  383  11  52  3  39  10  0  1,197  361  Middle East 1 Far East  Total  1/ Excludes banks owned by foreign banks. 2/ See Table 8 for details by type of violation. 3/ See Table 9 for details.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 8.  1/ Consumer Violations for U.S. Banks Owned by Foreign Individuals, Latest Examinations-  Region of Owner  Number of banks  Equal Cr. Opportunity  Int. on Deposits  Truth in Lending  HMD Act  Flood Insurance  Fair Cr. Reporting Act  R.E. Settlement Act  Other  Total  Canada/ Western Europe  14  28  9  160  2  35  23  31  85  373  Latin America  13  6  23  108  7  8  8  7  27  194  9  94  39  52  2  12  2  5  41  247  16  42  20  187  2  11  21  17  83  383  52  170  91  507  13  66  54  60  236  1,197  Middle East  Far East  Total  •••••,  1/ Excludes U.S. banks owned by foreign banks.   1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 9.  Consumer Complaints Received About U.S. Banks Owned by Foreign Individuals, 1981-1982I(  Resolution Region of Owner Canada/ Western Europe  Latin America  Middle East  Far East  Total  Number of Banks  14  13  9  16  52  Bank in Error  15  33  1  1  50  Bank Correct  24  Questionable  2/  Other  Total Complaints  16  24  79  37  12  165  247  13  9  1  24  5  2  3  11  39  193  361  79  •41.4r.  1/ Excludes U.!. banks owned by foreign banks. 2/ Includes complaints for which the agencies gave the consumer general information and then heard no more about the matter.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table 10. Enforcement Actions in Effect Toward 1( U.S. Banks Owned by Foreign Individuals, August 31, 1982  Type of Action Written Agreement  Formal Agreement  Memorandum of Understanding  Amendment to Existing Cease and Desist Order  Date May 1982  January 1981  September 1981  June 1981  1/ Excludes U.S. banks owned by foreign banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Condition to be Corrected Inadequate capital position, poor management and earnings performance, low asset quality and growth, and limit certain international activity. Poor asset quality; inadequate disclosures regarding the conditon of the loan portfolio; mis-matched and inflexible balance sheet; violations of law, including consumer laws.  Inadequate capital and earnings; violations relating to trust and consumer laws; inadequate disclosure regarding the condition of the loan portfolio.  Inadequate capital, improper transactions with affiliates.  Table 10. (continued)  Type of Action  Date  Formal Agreement  May 1981  Formal Agreement  January 1981  Condition to be corrected Improper loans and other transactions with insiders (self-dealing); poor overall loan quality and administration; internal control and internal audit deficiencies. Non-compliance with Bank Secrecy Act.  Memorandum of Understanding  February 1980  No written loan policy, unsatisfactory loan loss reserves, inadequate loan documentation, suspend cash dividends unless approved by FDIC, poor asset quality, violations of consumer laws.  Memorandum of Understanding  March 1981  Poor asset quality, no written loan policy, inappropriate accounting policies, poor loan administration and collection procedures, low loan loss reserves, violations of consumer laws.  Memorandum of Understanding  October 1981  Memorandum of Understanding  June 1982   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Low asset quality and liquidity, inadequate loan loss provision, violations of law.  Low capital, inadequate management policy, poor inadequate credit files no overdraft policy, no poor internal controls:  liquidity and funds loan policies and and loan documentation, internal auditor and    , https://fraser.stlouisfed.org  Federal Reserve Bank of St. Louis  Table 10. (continued)  Type of Action Memorandum of Understanding  Cease and Desist Order Section 8(b)  Date  August 1982  March 1981  Condition to be Corrected  Poor asset quality, inadequate loan loss reserves, no written liquidity and funds management policy, low capital, violations of laws, poor operational efficiency.  Unacceptable management, inadequate capital and loan loss reserves, violations of laws, low asset quality, excessive overdue loan totals, poor loan documentation.  .  •ISON ,  CM.INUAMIN S. ROSZPITHAL, N.Y.. CHAIRMAN JOHN CONYERS, JR., MICH. EUGENE V. ATK I NSON, PA ZITEPHEN L. NEAL, N.C. DOUG 'BARNARD. JR., GA. PETER A. PEYSER, N.Y. GARAARA L PLENNELLY CONN.  Action assigned Fred Dahl; info copies to Gov. Wallich, Mr, Germ/Lill & Ms. Jacklin  LYLE WILLIAMS, OHIO NAL DAIS. NEBR. WILLIAM P. CLINGER, JR., PA. JOHN HILER. I.  NINETY-SEVENTH coNGRESS  oricionrrv—(202) 225-4407  Congre55 of tic Zhittb 6tataS yooufse of ilepresSentatibes$ COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, ROOM 111-377 WASHINGTON, D.C. 20515  73  F  August 18, 1982  Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: I am writing in connection with the hearings of the Commerce, Consumer, and Monetary Affairs Subcommittee on foreign ownership of U.S. banks that have now been scheduled for September 29 and 30 to request the preparation of background information regarding recent supervisory experience with U.S. banks controlled by foreign individuals. In cooperation with the Comptroller of the Currency and FDIC, please prepare for the Commerce, Consumer, and Monetary Affairs Subcommittee a factual report covering certain items of information on all foreign -owned banks that are 25 percent or more controlled by foreign individuals, either directly or through for holding companies (excluding only those that had been under foreign ownership tion less than 6 months at the time of the most recent examination). The informa requested should be reported separately for four subgroups of these banks, grouped according to whether the principal owners are from (a) Canada or Western Europe, (b) Latin America, (c) the Middle East, or (d) the Far East. The information requested is the following: 1  the The number, median deposit size, and total aggregate deposits of all banks in this class;  2  The names, locations, and deposit sizes of the individual banks in this class;  3   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  in The supervisory experience of the Federal regulators with these banks these terms of financial soundness and performance, including the number of banks found during 1981 or 1982 to be substandard in terms of capital adequacy or financial soundness;  2 4.  The adequacy of compliance of these banks with all applicable laws and regulations for which they are examined, including the numbers of violations of laws and/or regulations found in examinations during 1981 or 1982, specifying in all cases the particular law or regulation violated and the nature of the violation found;  5.  A listing, without bank identifications, of all formal supervisory or enforcement steps seeking to correct unsafe conditions or violations of law or regulations, such as cease and desist orders, supervisory agreements, or memoranda of understanding with the bank's board of directors, specifying the types of conditions to be corrected; and,  6.  The number and specific character of the consumer complaints filed against these banks during 1981 and 1982.  Please submit this joint report to the Commerce, Consumer, and Monetary Affairs Subcommittee no later than Friday, September 24. In addition to this background material, please include in your testimony for the hearing your general findings with regard to the question of whether these banks as a group, or any significant subset of these banks, have a supervisory record or consumer complaint record that is significantly different from (a) the record of comparable domestically owned banks, or (b) their own record prior to being acquired by foreign owners. S ncerely, , n amin S. Rosenthal hairman BSR:dt:b   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IP  N‘,3 oto fit  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  September 22, 1982  PAUL A. VOLCKER CHAIRMAN  The Honorable Gene Chappie House of Representatives Washington, D.C. 20515 Dear Mr. Chappie: Thank you for your letter of August 23 enclosing an article by Sylvia Porter that recently appeared in newspapers across the nation. The article raises concerns about the growing trend toward "check truncation", that is, the practice of having the depositor's financial institution retain canceled checks rather than returning them to the depositor with his or her periodic statement. Based upon our experience to date, we believe that there are very few, if any, problems that have arisen from check truncation. In recent years, depository institutions have encountered significantly increased operating costs due to increases in salaries, computer equipment, postage, and other expenses. The introduction of interest-bearing NOW accounts has also increased costs. Much of these increased costs are passed on to depositors in the form of service charges. In order to provide customers with lower cost services, depository institutions are able to reduce handling and processing costs as well as postage expenses. As a result, the institution is in a better position to pass on these savings to the depositor. Ms. Porter's article recognizes that this is the principal benefit of the check truncation service. Ms. Porter's article, however, cautions that depositors will have less ability to challenge errors if a paper check is not returned to the depositor. We do not believe that this is the case. First, under standard industry practice where truncation is in use today, the depositor retains a carbon copy of the check for his records. The carbon copy contains virtually all of the information that the original copy contains and can be used to identify payments. Second, depository institutions are able to provide microfilm copies of the original in a timely fashion if additional questions arise. Such copies are generally accepted as proof of payment.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  01.  The Honorable Gene Chappie Page Two  There has been no intention on the part of the Government agencies to keep the issue of check truncation quiet. Indeed, the National Credit Union Administration has adopted rules requiring federal credit unions that offer share draft (checking) accounts to truncate customers' checks. This rule was adopted after an extensive public comment period. Any rules that are adopted by federal agencies in this area are subject to the Administrative Procedure Act (5 U.S.C. §§ 551 et seq.), which requires, in most instances, that public comment be solicited before final rules are adopted. Accordingly, I would expect that any action by the agencies to accommodate check truncation would be considered only after the public has had extensive opportunity to comment on the proposed rules, The federal banking agencies do not have rules authorizing check truncation by commercial banks because the service is permitted under banks' authority to accept deposits, which is granted to them by statute. There are no plans under consideration by the banking agencies to require that commercial banks truncate checks. Ms. Porter states that there will be a single location at which depositor records will be centralized. We are unaware of any proposals or plans to centralize information concerning depositors, and check truncation does not result in having information available in a central location. The process involved in check truncation is as follows. The customer's bank (or a bank earlier in the collection process) transcribes information from the check onto magnetic tape which is used to service the account. The bank uses the tape to place charges and credits against the account and to prepare an itemized account statement. Images of the front and back of the check are transferred to microfilm. The original checks are then placed in storage, under current industry practice typically at the drawer's bank. Should questions arise concerning particular payments, copies of the check could be made from the microfilm. The original checks are usually destroyed by the customer's bank after the passage of a certain time period, typically three to six months after they are paid. Ms. Porter also mentions that check truncation makes it easier for the IRS to audit taxpayers. Check truncation   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The Honorable Gene Chappie Page Three  does not have any effect on the ability of the IRS to audit returns nor upon financial privacy. Depository institutions already keep microfilm copies of checks regardless of whether or not the checks are returned to the depositor. Under the Bank Secrecy Act (12 U.S.C. § 1829b) each insured bank is required to make a microfilm or other reproduction of each check, draft or other similar instrument drawn on it and presented to it for payment under regulations of the Secretary of the Treasury (12 U.S.C. § 1829(d)(1)). The Department of the Treasury has issued the Financial Recordkeeping and Reporting of Currency and Foreign Transactions regulations (31 CFR Part 103) to implement this statute. While only checks of more than $100 are required to be microfilmed under the regulations, in practice depository institutions microfilm virtually all depositors' checks in the event a problem arises. In addition, the Right to Financial Privacy Act of 1978 (P.L. 95-630) provides substantive and procedural safeguards established by Congress to ensure that information concerning depositors' financial records is protected. These protections would apply regardless of where the checks are stored before they are destroyed. The article also questions the move towards electronic banking, arguing that customers would be more vulnerable to loss of their funds. We believe that Congress already has addressed many of the consumer concerns that arise with regard to electronic funds transfers. The Electronic Funds Transfer Act (Title XX of P.L. 95-630; 15 U.S.C. § 1693) establishes consumers' rights, protections, and responsibilities with respect to the electronic transfers of funds. The protections afforded to customers under this Act and the Board's Regulation E (12 CFR Part 205) implementing the Act include specified disclosures of the terms and conditions of EFT transactions, written documentation of transactions, a specified error resolution procedure, and limited customer liability for unauthorized transfers. We believe electronic funds transfer systems potentially have substantial benefits for customers and for the payments mechanism of the country. In this regard, EFT systems are more efficient than a paper-based payments system. This increased efficiency should result in lower costs to financial   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Gene Chappie Page Four  institutions that likely will be passed on to customers, given the highly competitive nature of the financial services industry. I hope that the foregoing is helpful to you. let me know if I can be of further assistance. Sincerely,  S/Paul A, Voicke(  •  (GTS:PSP:DJW:)CO;pjt (IV-200) bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please  Cong. Liaision Office will draft response  " '1ST DISTRICT, CALIFORNIA  (202) 225-3076 COMMITTEE ON AGRICULTURE SUBCOMMITTEES: COTTON, RICE, AND SUGAR  Congre  FORESTS, FAMILY FARMS, AND ENERGY DOMESTIC MARKETING, CONSUMER RELATIONS, AND NUTRITION   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0  WASHINGTON OFFICE: 1730 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515  GENE CHAPPIE  of tbe Unita% tate  DISTRICT OFFICE: 270 EAST 4TH STREET CHICO, CALIFORNIA  jbousse of Reprelentatibet  95926  (916) 893-8363  Ellassbington, Xl.QC. 20515 August 23, 1982 C:) ..411 7,  Chairman Paul Volcker Federal Reserve Board 20th & Constitution Ave NW Washington, D.C. 20551  F < ••••••••  • .1a  Dear Mr. Volcker, I have recently become aware of plans by some our nation's banks to change the method by which records of cancelled checks are kept. I wish to take this opportunity to express my opposition to these proposed changes. It is my understandina that cancelled checks will be kept by a centr 1 depository by agreement with various banks. Only computerized statements and not the checks themselves will be returned to the individual. This seems to leave open the possibility of increased computer error without the benefit of the cancelled checks to prove the computer wrong. Furthermore, the centralization of these records will make it far too easy for government aaencies and other concerns to gain access to this confidential information. In this age of computerized information oatherino, I strongly believe that it is important to protect the individual's right to privacy as much as possible. I hope that before these changes are implemented, there will be opportunities for governmental and private criticism and input. Thank you for your kind attention.  GENE CHAPPIE Member of Conoress GC:WBc Enclosure  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Newspaper article Citations:  Number of Pages Removed: 1  Porter, Sylvia. "Banks Plan to Keep Your Canceled Checks." Sacramento Union, May 27, 1982.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  .OF GOV;•.  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON. D.C. 20551  September 15, 1982  The Honorable Thomas F. Hartnett House of Representatives 20515 Washington, D.C. Dear Mr. Hartnett: Thank you for your letter of August 24 requesting comment on the correspondence you received from Mr. Andy Windham concerning the Federal Reserve System. Mr. Windham asks several questions relating to the nature of the Federal Reserve System and its employees. Mr. Windham wishes to know "who runs the Federal Reserve?" and seems concerned about the Federal Reserve's independence vis-a-vis other branches of government. The Federal Reserve System is a creation of Congress under the Federal Reserve Act of 1913. The Federal Reserve Act states that the Federal Reserve System shall be composed of the Board of Governors and of up to twelve Federal Reserve Banks. The Board is an agency of the Federal government, and its seven members are appointed by the President of the United States with the advice and consent of the Senate. The Board is responsible, among other things, for determining monetary policy and generally supervising the twelve Federal Reserve Banks. Although the Federal Reserve Banks are organized like private corporations, their stock, as provided for by law, is held by commercial banks that are members of the Federal Reserve System. However, ownership of that stock is in the nature of an obligation incident to membership and does not carry with it the attributes of control and financial interest ordinarily attached to stock ownership in corporations that are operated for the purpose of making a profit. The amount of stock that member banks are required to own is specified by law. The stock may not be sold or pledged as security for loans, and dividends are limited by law to 6 percent per year. If a Reserve Bank were liquidated, any surplus would go to the U.S. Government, not the stockholders. Every national bank is a member bank by law, and State-chartered banks may voluntarily choose to be members. Further, Congress recognized that the Federal Reserve System is a unique institution. For example, the Federal Reserve Act provides that each Reserve Bank should have nine members on its board of directors--three persons to represent banks who are chosen by the member banks in each district, and six persons to represent consumers, agriculture, labor, and nonbank business--three of whom are chosen by the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Thomas F. Hartnett Page Two  member banks in each district, and three of whom are selected by the Board of Governors of the Federal Reserve System. The Federal Reserve is not operated for a profit and returns substantial sums to the U.S. Treasury each year. The earnings of t.he Federal Reserve System are derived chiefly from interest on U.S. Government securities held in the System's Open Market Account, which are acquired as a part of the System's monetary policy actions. The System returns all earnings in excess of expenses to the U.S. Treasury; in calendar year 1981, payments to the Treasury by the Federal Reserve amounted to more than $14 billion. As a creation of Congress, the Federal Reserve is required by several Federal statutes to report to Congress periodically on its actives, policies, and plans, and is often requested by Congressional committees to testify on, submit, and to make recommendations on legislation affecting the economy. Each year the Federal Reserve submits an annual report of its actives to the Congress. Additionally, the Board of Governors in exercising supervision of the Reserve Banks requires these Banks to have independent audits and to report their condition to the Board. In section 30 of the Federal Reserve Act, Congress reserved the right to amend, alter, or repeal the Act. Since Congress created the Federal Reserve System, it could, of course, alter its character or authority at any time. As you are aware, Congress has exercised its prerogative a number of times since the inception of the System, the most recent instance being the Monetary Control Act of 1980 (Title I of P. L. 96-221). In virtually all of these instances, however, the Congress amended the Act to enable the Federal Reserve to respond flexibly to changing economic conditions. The President, of course, has veto power over acts of Congress, subject to Congressional override. Thus, both Congress, through the ability to enact laws, and the President, through his ability to appoint Board members and veto legislation, retain a certain degree of control over the Federal Reserve. Mr. Windham also asks why the United States Treasury does not own stock in the Federal Reserve System. Paragraph 10   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F. Hartnett The Honorable Thomas Page Three ides that Federal ov pr t Ac e rv se Re l ra Fede es of section 2 of the ed to the United Stat tt lo al be l al sh k oc st • Reserve bank by banks • • • be • • s on ti ip cr bs su l ta to "(s)hould the nt of capital required ou am e th e id ov pr to d it insufficient Reserve has never foun l ra de Fe e Th • •` • therefore • by allotting stock on ti si po l ta pi ca s it , necessary to increase ntly, the government ue eq ns Co . nt me rn ve Go to the United/States Reserve bank stock. l ra de Fe y an to ed ib cr to date, has not subs e employees of the th y wh ks as m ha nd Wi Finally, Mr. the civil service. by d re ve co t no e ar Federal Reserve System e System, provided it rv se Re l ra de Fe e th Congress, in creating ce in order to insulate en nd pe de in of ee gr res. with a substantial de -day political pressu to yda om fr s on si ci e monetary policy de ically exempted from th if ec sp is d ar Bo e Thus, for example, th Board are appointed to e th of s er mb me s, es appropriations proc ees are specifically oy pl em s d' ar Bo e th nt 14-year terms, and relating to governme s on ti la gu re e ic rv se e to exempted from civil rvice. With referenc se l vi ci ed fi si as cl in employees in the of the United States t ur Co e em pr Su e th the Reserve Banks, e Banks are instrurv se Re e th e il wh , at s of 1928 recognized th ey are not department th , es at St ed it Un e stern mentalities of th eet Corporation v. We Fl cy en rg me (E nt me nk the Federal Govern 6). Thus, Reserve Ba 42 5, 41 S. U. 5 27 Union Telegraph Co., ees of the Federal oy pl em as ed rd ga re ons. employees are not vil service regulati ci to t ec bj su t no e Government and ar let is helpful. Please n io at rm fo in is th at I hope th further assistance. of be n ca I if me know Sincerely,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ww,a4 PONO J. Donald J. Winn ard Assistant to the Bo BAB:GTS:CO:pjt (#V-198) bcc: Ms. Belcamino Mr. Schwartz Ms. Mekosh Mrs. Mallardi  Action assigned Mr. Bradfield THOMAS F. HARTNETT  WASHINGTON OFFICE:  1ST DI - RICT, SOUTH CAROUNA  509 CANNON BUILDING (202) 2.25-3176  1114 COMM ITTEE:  DISTRICT OFFICES:  ARMED SERVICES  334 MEETING STREET, SUITE 640 CHARLESTON, SOUTH CAROLINA  SUBCOMMITTEE ON MILITARY  29403  (803) 724-4175  PERSONNEL AND COMPENSATION SUBCOMMITTEE  SEAPOWER AND  -0AL .1 _STRATEG IC -4ND CRI1 ; • MATERIALS  ,„_; •••••• ?  I  Congrems of tbe ZLiniteb  2,7 CZt  POST OFFICE BOX 1538 BE AUTORT, SOUTH CAROLINA  100tIfq Ot 1teprefientatibel5  leastingtrintO.C. 20515  (1"..  263 HAMPTON STRErr W A LTE R IDORO, SOUTH CAROLINA (803) 549-5395  est  August 24, 1982  Mr. Paul A. Volcker, Chairman Federal Reserve Board of Directors Federal Reserve Building Constitution Avenue, between 20th and 21st Streets Washington, D.C. 20551 Dear Mr. Volcker: Please find enclosed a letter from Mr. Andy Windham, concerning the Federal Reserve, its organization, operation, and procedures. I would appreciate your comments concerning his proposal and answers to his questions. Thank you in advance for your assistance. Sincerely,  Thomas F. Hartnett, M.C. TH/js/bb Enclosure  29902  (803) 524-2166  •• g   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tatez  29488  40G 7 4  ' Please Publish! Congressman  Hartnett  ,Who Runs The Federal Reserve?  Dear Editor, On Jan 31, 1982, former Vice-President Walter Mondale, speaking at the opening of the Chicago Gift Show at McCormick place said: "Nobody understands the Federal Reserve, NOT HIM, not even the Federal Reserve Board members. It's like following a blackbird in the night. If anyone says that they understand the Federal Reserve Board and just how it works in the economy, I'd sure like to meet him because I've been looking for 20 years". A phamplet published by the Federal Reserve Bank called,"The Hats the Federal Reserve Wears" says on the last page: "Congress created the Federal Reserve back in 1913 but Congress doesn't run it. Neither does the President of the United States". Then it adds; "It is a fairly independent organization within the Government". I see a problem, however, with that last statement. There are only 3 branches of Government- Executive (the President), Legislative (the Congress), Judicial (the Courts). Now, if the Federal Reserve is an organization within the Government and the President don't run it and the Congress don't run it, does this mean that the Courts run the Federal Reserve? This same phamplet which is published by the Federal Reserve Bank of Philadelphia says: "When the Federal Reserve was created, its stock was sold to member banks. As stockholders, they elect some of the directors of the 12 Federal Reserve banks. The other directors and the officers they select run the Federal Reserve banks and their 20,000 or more employees, who are not under Civil Service". I have also learned from other sources the following: Each of the 12 Federal Reserve banks has 9 directors. Only 3 of these directors are appointed by the Federal Reserve Board, while the other 6 are elected by the member bank stockholders. I have also learned that when the Federal Reserve Act was passed, it contains a provision that allows the Dept. of the Treasury to purchase shares of stock in the Federal Reserve banks, but that this option has never been exercised. I would like to close this letter by asking our local Congressman three questions. First, who runs the Federal Reserve? Second, if the Federal Reserve is a public organization, why is it that the Dept. of the Treasury owns no shares of stock in the System? Last of all, if the Federal Reserve banks are owned and controlled by the Government, why is it that its 20,000 employees are not required to take Civil Service tests? I look forward to your reply.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  sincerely yours,  Andy Windham   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  September 15, 1982  The Honorable Alfonse D'Amato Chairman Subcommittee on Securities Committee on Banking, Housing and Urban Affairs United States Senate Washington, D. C. 20510 Dear Chairman D'Amato: Enclosed please find a report concerning Drysdale Government Securities and other recent developments in the government securities market as requested in your letter of July 2. As I indicated in my letter of July 8, the report was prepared by the New York Federal Reserve Bank under the direction of President Solomon. I trust this report is responsive to your request; please let me know if you would like any additional information. Sincerely,  Sgaul A.Volcker Enclosure PAV:dmg-b(V-146) bcc:  Mrs. Mallardi (2)  Ilk  FEDERAL RESERVE BANK OF NEW YORK NEW YORK, N.Y. 10045 AREA CODE 212 791-6173  ANTHONY M. SOLOMON PprstIDENT  September 16, 1982  The Honorable Joseph G. Minish Chairman of Subcommittee on General Oversight and Renegotiation of the Committee on Banking, Finance and Urban Affairs U. S. House of Representatives Washington, D. C. 20515 Dear Mr. Chairman: As promised in my letter to you on June 22, 1982, I'm sending you a report prepared by the Federal Reserve Bank of New York on "Drysdale and Other Recent Problems of Firms Involved in the Government Securities Market." The report was prepared at the request of the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Development. The report describes in detail the weaknesses in market practices and bank controls that enabled Drysdale Government Securities, Inc., to amass very large speculative positions. The collapse of the firm, with the attendant large losses incurred by major banks, led to a general tightening of credit standards. This contributed to the subsequent withdrawal from the market of Comark and bankruptcy of LombardWall, Inc., as other market participants, including their clearing banks, became aware of weaknesses that made them unwilling to continue doing business with the firms. Our conclusion at this time is that these incidents, disturbing and costly as they have been to a number of institutions, do not of themselves justify a hasty move to a formal regulatory structure for the Government securities market. We believe there is a good prospect that more intensive Federal Reserve surveillance of the dealers in Government securities, and close supervisory scrutiny of bank practices relative to the Government securities market, should work toward maintaining an efficient market employing high business standards. If experience with this approach does not provide sufficient assurance of sound practices, it may well be necessary to seek authority from the Congress for a more formal regulatory approach.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  FEDERAL RESERVE BANK OF NEW YORK  2  September 16, 1982  I am taking a strong personal interest in these matters and have appointed, as a senior vice president of the Bank, an individual with broad market experience to provide forceful leadership to our surveillance efforts. Already, we have obtained agreement from the primary reporting dealers to make the recognition of accrued interest a standard feature of operations in the market for repurchase agreements by early October. We have strengthened our bank examination practices to pay increased attention to securities clearing and lending operations. We are also working with the dealers to develop means for reducing credit exposure associated with "when-issued" trading of Treasury securities--i.e., trading between the Treasury announcement of their sale and the date the securities are delivered and paid for. More fundamentally, we are working at developing standards of capital adequacy of primary reporting dealers. I trust that the enclosed report will be useful to you. Sincerely,  -dir-e,.---Anthony M. Solomon President Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  k  FEDERAL RESERVE BANK OF NEW YORK NEW YORK, N.Y. 10 045 AREA CODE 212 791-6173  ANTHONY M. SOLOMON   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PpcsilDENT  September 15, 1982  The Honorable Alfonse M. D'Amato Chairman of Securities Subcommittee Banking, Housing and Urban Affairs Committee United States Senate Washington, D. C. 20510 Dear Mr. Chairman: As promised, I am transmitting herewith a report prepared by the Federal Reserve Bank of New York on "Drysdale and Other Recent Problems of Firms Involved in the Government Securities Market." The report describes in detail the weaknesses in market practices and bank controls that enabled Drysdale Government Securities, Inc., to amass very large speculative posi,:ions. The collapse of the firm, with the attendant large losses incurred by major banks, led to a general tightening of credit standards. This contributed to the subsequent withdrawal from the market of Comark and bankruptcy of Lombard -Wall, Inc., as other market participants, including their clearing banks, became aware of weaknesses that made them unwilling to continue doing business with the firms. Our conclusion at this time is that these incidents, disturbing and costly as they have been to a number of institutions, do not of themselves justify a hasty move to a formal regulatory structure for the Government securities market. We believe there is a good prospect that more intensive Federal Reserve surveillance of the dealers in Government securities, and close supervisory scrutiny of bank practices relative to the Government securities market, should work toward maintaining an efficient market employing high business standards. If experience with this approach does not provide sufficient assurance of sound practices, it may well be necessary to seek authority from the Congress for a more formal regulatory approach.  • 2 FEDERAL RESERVE BANK OF NEW YORK   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  September 15, 1982  I am taking a strong personal interest in these matters and have appointed, as a senior vice president of the Bank, an individual with broad market experience to provide forceful leadership to our surveillance efforts. Already, we have obtained agreement from the primary reporting dealers to make the recognition of accrued interest a standard feature of operations in the market for repurchase aareements by •early October. We have strengthened our bank examination practices to increased attention to securities clearing and lending operations. We are also •working with the dealers to develop means for reducing credit exposure associated with "when-issued" trading of Treasury securities--i.e., trading between the Treasury announcement of their sale and the date the securities are delivered and paid for. More fundamentally, we are working at developing standards of capital adequacy of primary reporting dealers. •pay  I trust that the enclosed report will be useful to you. Sincerely,  / 0-1 7 Anthony M. Solomon President Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A REPORT ON DRYSDALE AND OTHER RECENT PROBLEMS OF FIRMS INVOLVED IN THE GOVERNMENT SECURITIES MARKET  FEDERAL RESERVE BANK OF NEW YORK  September 15,1982  Table of Contents Page INTRODUCTION AND SUMMARY  1  THE DRYSDALE CASE Investigation  8  Conditions Which Permitted the Default to Occur  10  Drysdale's Operations  13  Relationship with NYC Banks  19  Intermediary Banks  20  Clearing Banks  25  Chronology of the Drysdale Failure THE COMARK AND LOMBARD-WALL CASES  28 33  CONSEQUENCES FOR THE MARKET Market Behavior  39  Repurchase Agreements  41  REGULATORY AND SUPERVISORY TOOLS  42  STEPS TO IMPROVE THE GOVERNMENT SECURITIES MARKET  46  ATTACHMENTS Loan Balance Federal Reserve System Securities Retail and Wholesale Repurchase Agreement Circular Dealer Transactions Dealer Financing Executive Vice President Sternlight's letter to Dealers President Solomon's letter to Dealers   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I II III IV V VI
Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102