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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Collection: Paul A. Volcker Papers Call Number: MC279 Box 12 Preferred Citation: Congressional Correspondence,July-September 1983 [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/c462 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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Policy on Digitized Collections Digitized collections are made accessible for research purposes. Princeton University has indicated what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids. However, due to the nature of archival collections, it is not always possible to identify this information. Princeton University is eager to hear from any rights owners, so that it may provide accurate information. When a rights issue needs to be addressed, upon request Princeton University will remove the material from public view while it reviews the claim. Inquiries about this material can be directed to: Seeley G. Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) email@example.com https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congressional July-September 1983 BOARD OF GOVERNORS OF THE FELIERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 PAUL A. VOLCKER September 28, 1983 CHAIRMAN The Honorable Stan Parris House of Representatives Washington, D. C. 20515 Dear Mr. Parris: 15 concerning Thank you for your letter of September al loan" in the proposed the definition of the term "commerci n Y, which implements the Bank revision of the Board's Regulatio is part of a major revision Holding Company Act. The proposal ms, to speed and simplify of the regulation to clarify its ter orporate outstanding Board the applications process, and to inc s. rulings applying the Act's provision m "commercial loan" Last year, the Board defined the ter enting a credit extension to a to include any transaction repres l ers the purchase of commercia commercial organization. This cov certificates of deposit, and the paper, bankers' acceptances and d definition was adopted in sale of federal funds. The revise g accelerating trend by nonbankin order to halt a pronounced and companies, securities firms, organizations, including insurance ns, to acquire banks. This retailers, and industrial concer k through a loophole in the Ban development has been accomplished the bank to be acquired ceases Holding Company Act, under which nk" ential ingredient of the "ba to make commercial loans, an ess ice bank acquired through this dev definition under the Act. The osits from the public, both deretains the ability to take dep es of loans, to retain federal mand and time, to make other typ , access to the payments systeM deposit insurance, and to have poses a bank. remaining for all intents and pur https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the broader ramificaI have stressed my concern about ent testimony before the rec my in h bot nt pme elo dev s tions of thi ance before that Comear app my in and tee mit Com g Senate Bankin tory of the Bank Holding his ve ati isl leg The il. Apr t mittee las icies which the Act was pol l tia den pru ic bas the Company Act and Congress desired the Act t tha te ica h ind bot ect eff intended to ly think of as banks-mon com we t tha ons uti tit ins to cover all and make loans. The Board institutions that take deposits Act are seriously underthe of es ici pol ic bas the t believes tha enon. mined by the nonbank bank phenom commercial loan has been of on ati ret erp int s rd' Boa The and former Federal C FDI the ing lud inc e, som by criticized ters you enclosed, as let the in ll dwe Col or ern Gov Reserve Board gress in view of the Con the for y tel ria rop app e a matter mor ecting the entire finanaff ed olv inv ons ati lic imp broad policy very reason, however, s thi for is It ry. ust ind es cial servic 4 The Honorable Stan Parris Page Two preemption of Congressional that the Board acted to prevent critical area and to prevent a s thi in on isi dec and ion rat ibe del the actions we have taken are it, see we As li. omp acc t fai onal intent and Congressional ssi gre Con the ve ser pre to ed ign des ing, in the strongest terms prerogatives, and we have been urg with the issue. Specifically, possible, that the Congress deal a temporary moratorium on we have urged that Congress impose banks and then promptly consider further acquisitions of nonhank Financial Institutions Deregulathe Administration's proposed tion Act. ome an issue is because, The reason Regulation Y has bec regulation, the Board believed in proposing the revision to the important interpretations of it appropriate to incorporate all the Board's definition of comthe Act's provisions, including comment on these positions. mercial loan, and to ask for public public comments submitted on The Board has not yet reviewed the e any decision on whether to includ the proposal and has not made al regulation. The Board the definition of bank in the fin n of the final regulation later expects to take LID consideratio that the Board will consider this fall, and I can assure you your views at that time. ts on this matter. I appreciate receiving your commen Sincerely, Sgaul A. Volcker JVM:MF:PAV:pjt (#V-188, 8330) bcc: All Board Members Mr. Mattingly Ms. Fein G.C. Log #251 Legal Files (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE ON THE DISTRICT OF COLUMBIA Action assigned Mr. Bradfield v.mm 8TH Disi,i,cy STAN PARRIS WASHINGTON OFFICE 230 CANNON HOUSE BuiLoiNG WASHINGTON. DC 20516 (202) 225-4376 T011trCi5Z of the United g;tates SELECT COMM;TTEE ON NA1COTICS ABUSE AND CONTROL I CHAIRMAN HOUSE TASK FORCE ON ECONOMIC POLICY Tune of Represcntatius illashinEton, D.C. 20515 CENTRAL DISTRICT OFFICE 6901 OLD KEENE MILL RD , 101 SPRINGFIELD, VIRGINIA 22150 (703) 644-0004 r ALEXANDRIA OFFICE. nmoo.Gsmsi ALEXANDRIA. VIRGINIA 22314 (703) E46-5288 September 15, 1983 The Honorable Paul A. Volcker Board of Governors Chairman Federal Reserve System 20th Street and Constitution Avenue, N.W. 20551 Washington, D.C. •- •• C'D nes Dear Mr. Chairman: occurred. During the summer, two important events have comprehensive legislation to First, the Administration has offered Second, the Federal Reserve update our Nation's banking laws. on Y which seeks to Board has proposed a revision to Regulati the definition of a ✓ edefine banks and non-banks by expanding commercial loan. of the House and As I am sure you are aware, some members Federal Reserve's Board Senate, as well as a former member of the Federal Deposit Insurance o f Governors and the Chairman of the on Y would impinge upon Corporation, have charged that Regulati a "bank" is and who should Congress' prerogative to decide what ✓ egulate it. fit of your reaction to I would be interested to have the bene More specifically, I would be e ach of these developments. promulgation of Regulation Y appreciative if you would explain why n of the Administration's should precede congressional consideratio onse to the Furthermore, I would like to have your resp bill. nton letter of July 18, a Coldwell letter of June 3 and the Eggi copy of each of which is attached. Thank you for your prompt attention to this matter. With kindest regards, Sincere .1 a"..^,c4 11 Parris 4/4/ Stan Member of Congress Enclosures s cc: Members of the Board of Governor SEP/rl https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N.W. 3 63:: N b SU:. • 800 %% A SH IN GTQN. D.C. Ps. 00043 •• ; . V -0177 June 3, 1983 Mr. William Wiles Secretary Board of Governors Federal Reserve System Washington, D. C. 20552 Gentlemen: 41. ts on the proposedl, . en mm co r fo on ti ta vi in s In response to the Board' / following observations. e th ve ha I Y, on ti la gu Re of on si revi fication Or elimination di mo e th as ch su s, ge an , are Many of the proposed ch tivity for each office ac g in nk ba n no a r fo y e the of the need to appl sume that in cases wher as I r, ve we Ho s. ce an st would desireable in cost in and such a new office on ti oa ni ga or ed iz al it ap ent applicant is an underc uld still be a requirem wo e er th l ta pi ca ce ar sc dissEpate some of the opinion inap_proprizte. my in is al os op pr e th to apply. If not, then schedule for Board ne ti te di pe ex e th as Other proposals, such staff that either there e th on e -s es pr ch handling would place so of reasons to extend e us e iv ns te ex an 07 view will be a shortshrifted re reduce the burden to es iv ct je ob s d' ar Bo ile the the processing time. Wh e ad able, they rust ar ng si es oc pr r fo me n the ti before on the banks and shorte difficult cases are now e th ly on at th s ct fa e em to be te_rpered with th mment. It does not se co to t gh ri ic bl Tu a even the Board and there is casts is unreasonable Or t ul ic ff di ch su of ew r.e that a careful revi is unrealistic. that a 90 day schedule en severely criticized be s ha e rv se Re l ra de Fe I recognioe that the rsaries use this as a ve ad me so at th d an me ng ti for its lengthy processi gulatory review.re ch su om fr d ar Bo e val of th will be reason to advocate remo frame is a trap which me ti d ne te or sh e th , gh all. In my opinion thou r times or no review at te or sh en ev r fo sh pu adequate used by critics to inciple of caoeful and pr e th on d an st ld ou s should I think the Board sh cases. All other case g in tt se t en ed ec pr d 25 Short review of difficult an ine policies.and in el id gu r de un s nk Ba e rv with be handled by the Rese y to insure compliance ar ss ce ne s ew vi re e th do a time as the banks can the guidelines. misses some important d an s es oc pr ew vi re es its If the Board compress ce and will be under vi er ss di a lf se it will have done it point in a case, it review. In my opinion, ry to la gu re om fr aw dr th wi b or greater pressure to to force a slipshod jo an th aw dr th wi y il ar nt would be better to volu s high standards. compromise the Board' ep. The capital requir ou gr d xe mi a as re strike The other proposals r any application as a ve co to d ne de oa br on should be is. ment on stock redempti demption could stay as re of ce ti no e th en d th general requirement an https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis OD .1 A cerning the Board's iterpretations con of n tio ora orp inc ed pos prc The alation. ns seem to me as legisla:ion by reg lca ial erc co= and ts osi dep demand ch h definitions it is ang-ress whi suc nge cha to ing ill tmw is ss gre If Con uences. I would rater see the seq con the for ty ili sib pon res bears the gressional review rather t1.2n byCon a ms ter est ong str the in Bcard urge s by attemptedd regulatory proceedures. pass the Cpniressional proces https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely P. E. Coldwell • ..,%,-,or -uo or go 1HEvi 4111P f(D[;!! .e3 JUL 18 PM 3: 53 11.4111 FEDERAL OFFICE OF 1,-4E cHlipmLN DEPDS11 INSURANCE C°17777::ri7.. July 18, 1983 Wiles Honorable William W. d of Governors Secretary of the Boar rve System of the Federal Rese Avenue, N.W. 20th and Constitution 1 Washington, D.C. 2055 Dear Mx. Wiles: tion Y ed Revision to Reeula 0s 00 Pr , 70 04 R. No Docl.et Subject: ned d are deeply concer an Y on ti la gu Re to proposed revision licy issues We have reviewed the tion outstanding po la gu re by e lv so re tempt to e by attempting to resolv over the Board's at is d ar Bo e Th . ss to Congre stry. The tire financial indu that are better left en e th ct fe af ll wd serious sues that op-gap measure to a regulation serious is st a as e rv se ly on proposal. wever, can defer action on the Boardsolution, ho to d ar Bo e th ge ur equence, we encourage Congress to problem. As a cons to is e iv at rn te al outdated g, a Wiser problems arising fro= Instead of rule:nal- 1of ew vi re e iv ns he firms, e a compre , thrifts, securities immg.diately undertak ns io ut it st in g in nk and ns among ba al firms in general, ci statutory distinctio er mm co d an es ic rv . financial se broad-based problems e other providers of es th to s on ti lu so legislative to enact perm_anent Sincerely, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Y_argaret L. Egginton an Deputy to the Chairm 31t4: 2D ES :E d 81 1111' MISS 3i1Cd3SJI3 1V303.4 31:41 30 SW43AD3 JD 0P7H ..aid... •. fo GOVri• BOARD OF GOVERNORS OF THE *0 FEDERAL RESERVE SYSTEM • —1 WASHINGTON, 0. C. 20551 .cfsx,V[[1[Fi _ • (-) • • 1?AL '....** September 28, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Walter E. Fauntroy Chairman Subcommittee on Domestic Monetary Policy Committee on Banking, Finance, and Urban Affairs House of Representatives 20515 Washington, D. C. Dear Walter: es Recently, I wrote to you regarding interim procedur use of assets which the Federal Reserve had adopted to limit the for Federal denominated in foreign currencies as collateral that more perReserve notes. In that letter, I also reported be presented to manent procedures being considered would shortly Board has the Board. I am pleased to inform you that the Reserve notes adopted a revised procedure for securing Federal rency assets in which will eliminate the need to use foreign-cur normal circumstances. rienced As you know, the Federal Reserve has never expe circulating Federal any Systemwide shortage of collateral for in foreign currencies Reserve notes, even if assets denominated ign-currency aswere excluded from consideration. Use of fore Banks because their sets as collateral arose at a few Reserve securities had not share in System holdings of U.S. government ilities. Under the grown proportionately with their note liab y October, eacti new procedure, which will take effect in earl Reserve agents all Reserve Bank will pledge to all the Federal Federal Reserve its assets eligible for use as collateral for assistant to all the notes. An employee of the Board, acting as assets pledged an Federal Reserve agents, will draw from all amount of Federal amount for each Reserve Bank equal to the vaults. Gold certifiReserve notes outside the Reserve Bank's nt and federal agency cates, SDR certificates, and U.S. governme procedure specifies obligations will be used first. The new encies may be used to that assets denominated in foreign curr Board's specific secure Federal Reserve notes only with the icitly, as part of the authorization. The Board has stated expl will be given only in new procedure, that such authorization expect that the tradiunusual and exigent circumstances. I more than enough tional assets listed above will provide the foreseeable future. collateral for Federal Reserve notes for https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Federal I appreciate your attention to the issue of 2850, which would Reserve note collateralization. H.R. notes, certainly eliminate collateral for Federal Reserve r hand, if the deserves serious consideration. On the othe F a The Honorable Walter E. Fauntroy Page Two Congress does not wish to eliminate the requirement for collateral completely, it could add to the list of eligible collateral notes evidencing advances to depository institutions made under section 10(b) of the Federal Reserve Act. As you are aware, notes evidencing Reserve Bank advances to depository institutions currently may be used as collateral only if the advance is made under section 13 of the Act. However, for technical reasons virtually all of our lending is accomplished under section 10(b). These changes would provide the Federal Pascrve with the flexibility to assure that the nation has an adequate supply of currency in even the most extreme circurnstances. Sincerely, GTS:JRA:AFC:vcd (V-90) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Schwartz Mr. Don Adams Legal Files (2) Mrs. Mallardi (2) Mr. Alexander https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 27, 1983 The Honorable Walter Fauntroy Chairman Subcommittee on Domestic Monetary Policy Comatittee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman Fauntroy: Thank you for your letter_ of September 21 regarding hearings on the causes and impact of the strong dollar. Governor Henry C. Wallich. is looking forbehalf ward to appearing before your Subcommittee, on of the Board, on October 5 at 10:00 a.m. Sincerely, CO:vcd (V-189, 3878) bcc: Governor Wallich Mr. Gemmill (drafting statement) Mrs. Mallardi (2) -' 4 Gov. Wallich will testify; Mr. Geminl drafting statement . ALTER E. EUNTSOY, D.C.. CHAIRMAN , STEPHEN L NEAL N.C. DOUG BARNARD. JR.. GA. CA.AROLL HUBBARD, JR., KY. BILL PAT1AAN. TEX. BUDDY ROEMER. LA BRUCE A MORRISON. CONN JIM COOPER. TENN THOMAS It CARPER, DEL GEORGE HANSEN. 113A)40 RON PAUL. TEX BILL McCOLLUM. FLA. BILL LOWERY. CALIF. JOHN MILER, IND U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE N2-109. ANNEX NO 2 WASHINGTON. D.0 20515 (202) 226-7316 COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 September 21, 1983 The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Paul: On Wednesday, October 5, 1983, the Subcommittee on Domestic Monetary Policy will meet to begin an examination of the causes and impact of the unprecedented cumulative appreciation of the dollar against the currencies of the major industrial countries of the past two years on the domestic economy. The Subcommittee would be particularly pleased if you or your designee would provide to the Subcommittee your best assessment of the reasons for this rise of the dollar, its likely duration, and how it might be stabilized if, indeed, it should be restrained from further rises. The Subcommittee is also interested in the effects of this phenomenon on the capacity of the Federal Reserve to continue to conduct monetary policy in an orderly manner. It is also concerned with the impact of the dollar's appreciation on exports and imports, domestic employment and unemployment, domestic interest rates generally and federal debt financing costs in particular and domestic inflation rates. In conjunction with that component of your testimony, the Subcommittee would like to know how often, under what conditions, the reasons, and at what costs the Federal Reserve, acting for itself or the Treasury, has intervened in the foreign exchange markets. The Subcommittee would like a blunt assessment of that strategy and whether it should be changed towards greater or lesser degrees of intervention. The Subcommittee is particularly interested in the impact such interventions could have on the domestic economy, how these effects are currently minimized, and whether such minimizations can be maintained over the longer run if greater intervention is soPght. The Subcommittee recognizes that the strong dollar has made imports to the United States less expensive for Americans and exports more difficult for American businesses. The Subcommittee would like https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4. Chairman Volcker 2 September 21, 1983 e events your view of the overall impact on the domestic economy of thes for including any suggestions you might have on improving the market ican Amer American exports. I hope you will consider the impact on the have. export industry of financing that a strong dollar might also You or your designee should feel free to bring with them such t be able individuals from the Board or any of the Reserve Banks who migh the issues to assist in providing answers or further comments on any of been my raised here or which might be raised at the hearing. It has encouraged experience that such persons have been invaluable and you are to have them participate in these proceedings. the The Subcommittee will meet at 10:00 a.m., in Room 2222 of witnesses Rayburn House Office Building. Committee Rules provide that hours before should provide 100 copies of their testimony at least 24 ional copies if the hearing. Witnesses should also bring with them addit public who may be they want to be sure that members of the press and the imony. If you in attendance are to be provided with copies of their test . have any questions, please contact Howard Lee at 226-7315 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Thank you very much for your cooperation. Sincerely yours, Walter E. Fauntroy Subcommittee Chairman The Honorable frichael V. Barnes House of Representatives 4U1 Cannon House Office Builainy WasPin,ton, U.C. 20515 Pear lwr. Parries: I ail pleased to inform you that the Board of GovPrnors of the Federal Reserve System is norinatint, Stephen C. Schererim„, Supervisory Financial Analyst, for the Com,ressional Excalihur Award. Schercrins has evidenced exceptional leadership, investisiation, and neyotiation skills in analyzin cifficult anc plex financial institution supervisory prehlers vital tc trp safety and souncness of the bankiny inaustrj. Pr. Vr. Schemeriny's outstandiny service is outlinec in the enclosed nowination. We Pope you will Ove his porinaticn full consiaeration. Thank you for tle opportunity to participate in this very worthwhile provar. Sincerely, uz,e Enclosure TD:sk:lc (V-154) bcc: Covenor Crarley Jock Ryan David Shannon John Weis Tony DiGioia Carol O'Brien Phyllis Mulcahy Suu Ylineeinst https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (Dy tITUJ - The Federal Reserve Board of Governors is pleased to nominate Stephen C. Schemering, Supervisory Financial Analyst, for the Excalibur Award in recognition of his outstanding efforts in handling special attention banking situations. Since Mr. Schemering joined the Board's Division of Banking Supervision and Regulation in 1974, he has evidenced unusual skill in analyzing difficult and complex financial institution supervisory problems. His responsibilities require him to deal with extremely delicate banking matters that call for not only outstanding knowledge and financial ability, but also strong communication skills and an ability to negotiate complex issues under adverse conditions. Some of his major responsibilities are briefing Board members and senior Board staff on significant banking developments, acting as the Board's representative in meeting with senior officials of banking organizations to review special attention situations, and maintaining a national perspective on the financial community at large. In addition to accomplishing his regular assignments, Mr. Schemering has been responsible for critical activities normally handled at a higher level. For example, he closely worked with a multibank holding company and its two state member banks in Florida on a yearlong problem situation, and played an important advisory role for Board testimony on the issue before Congress. The Florida banking problem required extensive review, negotiation, and supervision and a significant additional commitment not ordinarily encountered in such instances. Due to the sensitive nature of Mr. Schemering's work, we cannot detail his full job responsibilities in this document. However, involvement with and expertise in handling complex actions has grown to the point that his leadership, investigation, and negotiation skills are considered the Board's primary resource for handling critical and delicate bank supervisory problems. In addition, he has successfully carried out projects of vital concern to the financial community. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MICHAEL D. BARNES 8TH DISTRICT, MARYLAND COMMITTEE ON FOREIGN AFFAIRS ASSISTANT MAJORITY WHIP CHAIRMAN. INTER-AMERICAN AFFAIRS MEMBER. HUMAN RIGHTS AND INTERNATIONAL ORGANIZATIONS WASHINGTON OFFICE 401 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 COMMITTEE ON THE DISTRICT OF COLUMBIA (202) 225-5341 Congre5 of tbe Zanitcb MONTGOMERY COUNTY OFFICE SUITE 11141 302 )out of itpresSentatibeg GEORGIA AVENUE 20902 (301) 946-6801 TTY-(301) 946-0108 WHEATON, MARYLAND Vatusbington, ri.C. 20515 tatez MEMBER GOVERNMENT OPERATIONS AND METROPOLITAN AFFAIRS CHAIRMAN, FEDERAL GOVERNMENT SERVICE TASK FORCE August 2, 1983 Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 Dear Mr. Volcker: I am pleased to inform you that we are now accepting nominations for the eighth presentation of the Congressional Excalibur Award. September 30, 1983, is the deadline for your agency to should submit one or more nominations to this office which and a include a letter of nomination, limited to one page, ved summary of each nominees achievements: Nominations recei . As after this date will be considered for a future award s will in the past, nominations for earlier Excalibur Award be reviewed once again. All federal employees, civilian and military, are ated by e ligible for the Excalibur Award, and can be nomin officials of either federal agencies or private offer o rganizations. Members of the general public may also but a nominations. Most awards are given to individuals, d team of persons will also be considered if they worke together on a specific project. Last February, I was privileged to honor several on of exemplary federal employees at the seventh presentati s John the Excalibur Award: Customs Service Special Agent Gottenborg, William Laverty and Thomas Mitchell were recognized for their outstanding courage and dedication in bringing to justice a narcotics smuggling organization; Ms. ce, Yvonne Cartier, an employee of the Internal Revenue Servi received an Excalibur Award for her untiring efforts to 's assist taxpayers with special needs; and Mr. Joel Halop https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Honorable Paul A. Volcker Page 2 August 2, 1983 leadership role in developing a new and simple method for removing asbestos insulation for the Navy Department was also recognized. I encourage you to publicize the Excalibur Award and the upcoming nomination period for the eighth presentation. Enclosed for your reference is a fact sheet, further describing the Award, and a flyer for posting on a bulletin board. I look forward to receiving one or more nominations from your agency. Sincerely, Michael D. Barnes MDB/mf https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MICHAEL D. BARNES 8TH DISTRICT, MARYLAND COMMITTEE ON FOREIGN AFFAIRS ASSISTANT MAJORITY WHIP CHAIRMAN. INTER -AMERICAN AFFAIRS MEMBER, HUMAN RIGHTS AND INTERNATIONAL ORGANIZATIONS WASHINGTON OFFICE. 401 GANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-5341 MONTGOMERY COUNTY OFFICE, SUITE 302 11141 GEORGIA AVENUE COMMITTEE ON THE DISTRICT OF COLUMBIA Congrez5 of tbe Ziniteb WHEATON, MARYLAND 20902 (301) 946-6801 TTY-(301) 946-0108 zz) tate5 Pouge of 1kepreiSentatibe5 Kicusbington, ri.C. 20515 MEMBER. GOVERNMENT OPERATIONS AND METROPOLITAN AFFAIRS MEMBER, JUDICIARY AND EDUCATION CHAIRMAN. FEDERAL GOVERNMENT SERVICE TASK FORCE EXCALIBUR AWARD FACT SHEET CongAeisisman Michaa V. BaAne'S (12-8-Md.), ChaiAman cq the FedeAat GoveAnment SeAvice Ta/sk FoAce, initiated the Excatibm AwaAd in 7979. The pmpoise oA the awaAd ,Us to Aecognize and honoA outstanding contAibutiows made by AedeAaf civitian and mititaAy peA,sonnet. WHAT ARE ITS OBJECTIVES? o o o To encourage initiative and excellence in performance by government employees of To publicize such achievements and enhance public appreciation to the merit and performance of governmeht employees, helping counter the negative image sometimes associated with government service To help attract talented persons to the federal service WHAT ARE THE CRITERIA FOR THE SELECTION OF NOMINEES? are sought who On a regular basis, candidates for the Excalibur Award exemplify: o local, Outstanding efforts or leadership in solving problems at national, or international levels o achievements Exceptional scientific, technical, or administrative o ent of Superior service to the public, such as the improvem ations efficiency including simplification of government regul o ctives, such Ability to overcome obstacles to organizational obje as making substantial savings in expenditures o in dealing High personal integrity, moral character and courage with difficult or sensitive problems https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis EXCALIBUR AWARD o FACT SHEET PAGE 2 tive involved in a specific Unusual degree of imagination and initia the public achievement impacting on the agency and NS MADE? WHO IS ELIGIBLE AND HOW ARE NOMINATIO employees are eligible. All federal career civilian and military dual, but a small team of persons Normally, each award goes to one indivi also be considered. who have worked jointly on a project may uing basis from heads and other Nominations are invited on a contin s ncies, from other organization officials of federal departments and age and from the general public. l's achievement should not exceed Nominations summarizing the individua s should advise Rep. Michael D. one page in length. Interested person lding, Washington, D.C. 20515 Barnes, Room 401 Cannon House Office Bui (301-946-6801) of their nominees. WHO WIII. SELECT THE AWARD RECIPIENT? committee, appointed by Rep. ial art imp an by e mad are s ion ect sel Final d citizens drawn from a wide she gui tin dis ht eig of ed pos com , Barnes The Chairman of the Excalibur es. enc eri exp and ns sio fes pro of y iet var mer ry McPherson, attorney and for Har Mr. is tee mit Com ion ect Sel rd Awa don Johnson. Other Selection Lyn ent sid Pre to l nse Cou se Hou te Whi mer D. Tydings, attorney and for eph Jos . Hon e: lud inc s ber mem tee Commit of Nolan, Secretary-Treasurer as hol Nic Mr. nd; yla Mar m fro r ato Sen U.S. t Employees; Dr. Estelle Ramey, men ern Gov of n tio era Fed an ric Ame the at Georgetown University try mis che Bio and y log sio Phy of sor fes pro s ector of the National Institute Dir the to r iso Adv and ool Sch l ica Med the to the Comptroller General of ant ist Ass , ler Hel n Joh Mr. ; lth of Hea y Hymel, economic consultant; Mr. Gar , han Nat R. ert Rob Mr. ; tes Sta United eill; ant to House Speaker Tip O'N ist Ass ws, the Mat is Chr Mr. ; Co. Gray & gtonand associate with the Washin t lys ana cho psy , ier Lab s gla Dou and Dr. Character. based Project on Technology, Work and HOW IS THE AWARD GIVEN? on. a plaque and an honorary citati of m for the in d nte gra is rd awa The Capitol, a ceremony held at the U.S. at nes Bar . Rep by ted sen pre is It cutive Congress, officials of the exe of s ber mem er oth of ce sen pre in the Award Selection Committee, and bur ali Exc the of s ber mem , branch representatives of the news media. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I ME r u b l a c x ar w c n ce i li pub e c i v ser el nn o s r for ary pe d r awa d milit ex l a ion an an s s ili gre con ral civ e Fed n le l e c bur cali e to x E n nth vic eve nt ser avis, a is S e , e D h e m t c . n i r ts ff er is. M an O n v e o g s n g n av unti re eral ci g D p a . l s T p d o e ne k Acc as ully in f ran Bar an lence and F eneral ccessf mero w oym s u l G l ) s s o t p e e f he xc em le or gr .R Con d for e mero ( er at t ounsel ear. Mr sector Opporc r o c Awa os J. R nt Offi areer each y federal Equal c n l e s r m e d a e C ring is a ce ye pla regard emplo furthe es. He tment. t u O n epar ghly riti 200 le i a hi age of his ro d mino Labor D n r r ave red fo men a th the i o o w n w o t h for ialis t n me y Spec t tuni al n o i t or na , l a loc t a ns vels o i t ibu onal le r t ng t / n i w d o co rnati n kn tsta men n e o n t i n u r i nat any o gove e h n let t t the m men i u o abo and w ted mony n e n me res l cere p n tio apito a t i c S. C . U at https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •- September 23, 1983 The Honorable Fernand J. St Germain Chairman Subcommittee on Financial Institutions Supervision, Regulation and Insurance Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman St Germain: Thank you for your Letter of September 16 concerning your hearings on H.R. 3535, the Demand Deposit Equity Act of 1983. Governor J. Charles Partee is looking forward to appearing before the Subcommittee, on behalf of the Board, on October 25 at 10:00 a.m. Sincerely, CO:pjt (#355-8334) bcc: Gov. Partee Don Kohn --4(NNA.z. AN\(sap-4,L, / )1-- V-/ or https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ..... .• oT cove •• .% BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 September 20, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Doug Barnard, Jr. Chairman umer Subcommittee on Commerce, Cons and Monetary Affairs ions Committee on Government Operat House of Representatives 20515 Washington, D.C. Dear Chairman Barnard: your letter of This is in further response to ested information on a July 25, 1983 in which you requ iminal violations by subcr le ib ss po of s al rr fe re of le samp rectors of certain state di or , rs ce fi of , rs de si in al ti stan was selected by your staff, h ic wh , le mp sa e Th s. nk ba er memb ring the period January 1, du de ma s al rr fe re of d se ri mp is co d involves banks having a 1980 to December 31, 1981, an ting of 3, 4, or 5 at any ra e it os mp co ) EL AM (C y or is rv supe es, od. Federal Reserve procedur ri pe g in rt po re e th ng ri du time affs of the enforcement st th wi n io ct un nj co in t ou ed work referrals directly to the ke ma to s nk ba e ag ur co en , es agenci e conduct of bank examinath ng ri Du s. ie it or th au e at ri approp l check to determine that ne on rs pe y or is rv pe su em st Sy tions, by the bank, and make de ma ly er op pr re we s al rr fe such re levant information that re on up d se ba s al rr fe re al on additi ion. It is our underat in am ex e th ng ri du t gh li to comes the present study, your of e os rp pu e th r fo , at th ng di stan in referrals made by the y il ar im pr ed st re te in is f staf Department, and not those e ic st Ju e th to e rv se Re l ra Fede banks. referrals made solely by the als that the Federal A review of our records reve d ing the criteria establishe et me s al rr fe re ur fo de ma e Reserv e situations involved were th of o tw gh ou th al f; af st by your nt to an informal staff ua rs Pu . nk ba e th by ed rr fe also re bral regulators, your Su de Fe e th n ee tw be t en em re ag level ing ment, it is our understand rt pa De e ic st Ju e th d an e te commit description of each referral a th wi u yo e id ov pr ld ou sh that we and names of the individuals e th to es nc re fe re l al se omitting ed description of each ca il ta de re mo A . ed lv vo in s to the bank al document has been sent rr fe re al tu ac e th of rm fo in the onal ey may provide the additi th at th so nt me rt pa De e ic the Just out spositions of the cases with di e th on ed ne u yo n io at inform r duals or banks. It is ou vi di in of s me na e th g in fy identi ide stice Department will prov Ju e th at th g in nd ta rs de un further ctly. you with its findings dire https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis d, Jr. The Honorable Doug Barnar Page Two ption of each referral ri sc f de ie br a is g in ow ll Fo ets the criteria and me at th e rv se Re l ra de Fe e made by th your staff: conditions established by Case #1: 17, 1980 involving the ly Ju on de ma s wa al rr fe A re a community bank in the of s or ct re di of d ar bo re enti rral e United States. The refe th of n io ct se rn te as he sout olations of 18 USC 656 vi al in im cr le ib ss po d ge alle funds) and 18 USC 1005 of on ti ca li pp sa mi ul lf (wil $3,780.86. (false entries) totaling Case #2: de from September 7, 1978 ma re we s al rr fe re us ro Nume cers volving two lending offi in 80 19 , 15 r be to Oc h ug thro n of e middle Atlantic sectio th in nk ba al on gi re a of ibility ferrals alleged the poss re e Th . es at St ed it Un the rding the lending officers rega by t uc nd co nt le du au fr of e time rious borrowers. At th va to it ed cr of ns io ns exte of the alleged criminal nt te ex e th s, al rr fe re e of th e bank, of loss, if any, to th nt ou am e th d an es ti vi acti . could not be determined Case #3: a senior ril 10, 1981 involving Ap on de ma s wa al rr fe A re rn al bank in the midweste on gi re a of t en id es pr vice . The referral alleged es at St ed it Un e th of n sectio nk led $18,000 from the ba zz be em al du vi di in e th that unt at his demand deposit acco to s nd fu e th d ie pl ap and ed from s subsequently discharg wa r ce fi of e Th . nk ba the the bank. Case #4: 1981 involving the , 21 r be em pt Se on de A referral was ma of a senior lending officer d an t en id es pr ce vi United first estern section of the dw mi e th in nk ba y it an commun d that the officer, in ge le al al rr fe re e Th . h he States that two loans for whic ct fa e th l ea nc co to effort rged to be charged-off, fo t ou ab re we e bl si on sp was re tively, to replace ec sp re , 00 ,0 $8 d an two notes for $5,000 full restitution de ma r ce fi of e Th s. his the charged-off loan was allowed to resign d an ed lv vo in nt ou am for the position at the bank. The Honorable Doug Barnard, Jr. Page Three #3, and #4 required The banks involved in cases #1, by virtue of CAMEL composite more than normal supervision ult of examinations conducted ratings of 3 assigned as a res The 1980 to December 31, 1981. during the period January 1, l supervisory attention by bank in case #2 required specia assigned as a result of virtue of a composite 4 rating the same period; this bank examinations conducted during e posite 3 in late 1981 becaus was marginally upgraded to com #2 In addition, the bank in case of its improved condition. and desist order issued by the was operating under a cease of poor asset quality, low Federal Reserve Board because trust activities area. This capital, and problems in its the since been lifted because of cease and desist order has agement. It is generally man new and ion dit con ed rov bank's imp ry erve to take formal superviso the policy of the Federal Res In rated composite 4 or worse. action against institutions the Federal Reserve, cases #3 addition to action taken by ement authorities by the orc enf to ed err ref o als e and #4 wer bank itself. helpful to your SubcomI hope this information is e. can be of further assistanc I if w kno me let ase Ple mittee. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, S/Paul A. IlOcker THP:RS:CO:pjt (#V-148) bcc: Tom Pritchard Rich Spillenkothen Jack Ryan Mrs. Mallardi (2) Mr. Cary Copeland Department of Justice Office of Legislative Affairs Room 1142 Main Justice 20530 Washington, D.C. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 August 22, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Doug Barnard, Jr. Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman Barnard: I am writing in response to your letters of July 11 and 25, requesting certain information pertaining to a list of banks that have either been closed or required FDIC merger assistance since January 1, 1980. Your letter of July 11 seeks information on criminal referrals involving substantial insiders, officers or directors. Pursuant to instructions from your staff, it is our understanding that the Subcommittee is interested in referrals made since January 1, 1978, exclusively by the Federal Reserve and not those referrals initiated by the commercial banks themselves. Your letter also addresses supervisory enforcement actions as they pertain to the list of closed banks. A review of our records reveals that a criminal referral was made on March 15, 1982, involving a senior bank official of Aquia Bank and Trust Company, Stafford, Virginia, which was closed and whose assets were sold on April 3, 1982. The referral alleged that the individual diverted $15,000 of the proceeds of a loan for his own use. To the best of our knowledge no indictment has been brought against the individual by the Justice Department at this time, and an investigation is still ongoing. On January 18, 1982, the Aquia Bank and Trust Company consented to the Federal Reserve's issuance of a cease and desist order against the bank and one individual as an officer and director. Staff at the Justice Department has indicated to us that the foregoing information is sufficient to track the relationship between the referral made by the Federal Reserve and any subsequent Justice Department action. With respect to Metropolitan Bank and Trust Company, Federal Reserve examiners participated in investigations conducted by a special strike force under the auspices of the Department of Justice and the Federal Bureau of Investigation. Federal Reserve personnel assisted in the gathering of information on the activities and transactions involving insiders and certain other individuals associated with the bank, and worked closely with appropriate law enforcement officials. We have https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • The Honorable Doug Barnard, Jr. Page Two recently learned that indictments for fraud have been brought a7ainst the former president of the bank and another individual with business connections to the bank. From June of 1q81 until its subsequent receivership, %letropolitan Bank and Trust was operating under a cease and desist order addressing the bank's liberal lending policies, poor loan administration, substantial amount of classified and nonaccrual loans, operating and loan losses, eroding capital position, and declining liquidity. In addition to these actions and supervisory efforts, each of the other state member banks on the list enclosed with your letter was the subject of a formal supervisory enforcement order. Specifically, South Side Bank, Northwest Commerce Pank, Columbia Pacific Bank and Trust Co., and United Southern Rank were onerating under cease and desist orders addressing certain unsafe and unsound banking practices, including high levels of classified loans and liberal lending Policies. The rrrlainler of the information requested in your letter of July 25 will be supplied to you by September 20. I hone this information is helpful to your Subcommittee. Sincerely, RS:CO:pjt (#V-126 & #V-148) bcc: Rich Spillenkothen Mr. Ryan Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ar-tx.4Lr.J Y1/14/ vet. NINETY-EIGHTH CONGRESS DOUG BARNARD. JR., GA., CHAIRMAN RONALD D. COLEMAN, TEX. JOHN 54 SPRATT, JR., S.C. JOHN CONYEFIS, JR., MICH. ELLIOTT H LEVITAS, GA. HENRY A. WAXMAN. CALIF. Comm of tbe Zlniteb 6tatecs tetr-k- JUDD GREGG, NM WILLIAM F. CLINGER, JR., PA TOM LEWIS. FLA. MAJORITY—(202) 225-4407 jfpufse of Aepressentatibef COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, ROOM B-377 WASHINGTON, D.C. 20515 cc, July 25, 1983 Hon. Paul Volcker Chairman Federal Reserve Board Washington, D.C. 20551 RE: - (A) Hearings on Criminal Referrals Dear Mr. Volcker: of June 3 and July 11, 1983, I am writing in further reference to my letters s of bank officers, direcconcerning our continuing study of criminal referral to the Justice Department. On tors, and insiders by the federal banking agencies representatives from all the July 20, 1983, the subcommittee's staff met with cal sample of referrals by banking agencies to discuss the design of a statisti all the agencies. from your office indicated At that meeting, Bill Maloni and Tom Pritchard with the request I made at our that the Federal Resereve is proceeding to comply provide the subcommittee with June 28 hearing for all the banking agencies to s that have failed or have information on their criminal referrals in bank . The Fed's contribution to required FDIC merger assistance since January 1, 1980 ommittee by August 15, 1983. this request, they said, will be provided to the subc to design a statistical The primary purpose of the meeting, however, was three basic criteria: first, it sample of recent criminal referrals that meets sufficiently specific, compremust provide the subcommittee with information ings and recommendations on the hensive and authoritative to justify report find as it relates to serious banking effectiveness of the criminal justice system the banking agencies; and, third, en burd ly undu not ld shou it nd, seco ct; ondu misc es of unindicted persons and titi iden the view ic publ from ect prot ld shou it s. The sample outlined below rral refe such of ects subj the are who ions itut inst basis for the subcommittee's meets these three criteria and will provide the report. referred to above, the With the exception of the closed bank information information. Please keep in for ests requ ier earl our e rsed supe also sample will le: to find out what action is mind that the purpose of this sample is quite simp agencies to the Justice Departtaken against individuals referred by the various ment for possible criminal prosecution. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 n In order to protect the identity of persons referred for possible prosecutio ces to but never actually indicted, it will be necessary for your regional offi banks are contact the U.S. Attorneys' offices in the jurisdictions where the We have located in order to determine the disposition of each referral. Department and requested, and should receive, the full cooperation of the Justice local U.S. Attorneys in compiling this information. The Sample 1. Size of Sample inal referPlease provide the information specified in "2" below on all crim rals made by the Federal Reserve: a. between January 1, 1980, and December 31, 1981; and b. ers that pertain only to individual bank officers, directors, and insid (e.g. major shareholders); and c. time that involve member banks which, at any time during the sample "4", or period, were operating under a composite CAMEL rating of "3", u -n 2. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Information Requested the following: Please provide a history of each referral, consisting of a. Criminal Referral by the Federal Reserve 1. 2. b. Indictment Secured - If an indictment has been secured the individual(s), then provide an unexpurgated copy actual referral document sent by the Federal Reserve Justice Department or to the local U.S. Attorney. If a the document is not available, then provide a summary information contained in the referral. against of the to the copy of of the secured Indictment Not Secured - If no indictment has been of the against the individual(s), then provide either a copy name(s) actual referral document, omitting all references to the Or,if the of the individual(s) and the institution(s) involved. official actual referral document is not available, indicate the of the position of the person, the size and regional location alleged. bank, and a brief description of the criminal violation Prosecutorial Action Taken rney in each Please request the Justice Department or the U.S. Atto case to furnish the following: 1. ed against Indictment Secured - If an indictment has been secur charges the individual(s), provide a brief description of the nt itself), con tamed in the indictment (or a copy of the indictme the case, the date of indictment, and the ultimate disposition of equied, including sentence imposed. If the case was nolle pros dropped, or dismissed after indictment, explain why. 3 2. c. Indictment Not Secured - If no indictment has been secured against the individual(s), then indicate whether: A. the case has been declined, B. the referral is still the subject of an ongoing investigation, or C. an indictment will be sought. Other Civil Action has As to each criminal referral, indicate whether the Federal Reserve for taken any civil action against the subject person or his/her bank ral. the specific conduct forming the basis of the criminal refer taken. Describe the nature of the civil action and the date that it was If no action was taken, why not? SeptemPlease provide this information to the subcommittee no later than ee staff, at ber 20, 1983. Please contact Mr. James M. Pates on the subcommitt 226-2498, if there are any questions. Thank you for your continued cooperation in this matter. Sincerely, Doug B4'nard, Jr. Chairman DB:jmp:v https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned to Jack Ryan. DOUG BARNARD, JR, GA, CHAIRMAN RONALD D COLEMAN, TEC JOHN M SPRATT. JR, S.C. JOH0-"CONYERS. JR MICH. ELLIOTT H. LEVITAS, GA HENRY A. WAXMAN, CALIF. JUDD GREGG, N.M. WILLIAM F CLINGER. JR.. PA. TOM LEWIS. FLA. NINETY-EIGHTH CONGRESS Congre5S5 of the inniteb Ztate5S 31)0115e of teprefSentatibeg MAJORITY---(202) 226-4407 COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, ROOM B-377 WASHINGTON, D.C. 20515 rrs rrl C:2 July 11, 1983 - C-", rr-t CA) r-r-1 Hon. Paul Volcker Chairman Federal Reserve Board Washington, D.C. 20551 —‹ rn Dear Mr. Volcker: dated June 3, 1983, This is in further reference to my letter to you n and prosecution of regarding the Subcommittee's hearing on the investigatio directors and insiders. As criminal violations of banking laws by bank officers, imony of your agency was you know, a hearing was held on June 28, 1983, and test presented. ested was not supplied Regrettably, all of the information originally requ ignored our requests for by your agency. In some instances, the Board either This inadequate data. information completely or supplied incomplete and law enforcement efforts prevents the subcommittee from properly assessing your in this area. stigation and to issue a Since the subcommittee intends to continue this inve again that the originally report on the subject, I am writing now to ask information, be supplied to requested information, as well as certain additional consideration to your views the subcommittee. We will, of course, give serious any data. The subcommittee on the necessity of protecting the confidentiality of individual person referred will insist on an accurate method of identifying each number, or docket number, to the Justice Department, whether by name, referral one agency to another. since this is the only way to track each referral from determine the scope of The specific purposes of our investigation are (1) to regulatory agencies to the recent criminal referrals of bank insiders by the bank and success of the referrals Justice Department, (2) to determine the timeliness there is any civil enforceand their disposition, and (3) to determine whether In order for the case. ment action taken by the banking agencies in each owing additional data must be subcommittee to make these assessments, the foll supplied. I. Information Requested at June 28 Hearing banking agencies provide At the June 28 hearing, I requested that the s involving banks that have been certain information on their criminal referral since January 1, 1980. Please closed or have required FDIC merger assistance https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 event later than July provide to the subcommittee as soon as possible, but in no ral Reserve Board 28, 1983, a list of all criminal referrals made by the Fede ging possible illegal acts since January 1, 1978, to the Justice Department alle ed on the attached by bank officers, directors, and insiders in the banks list so that the subcommittee schedule. Provide appropriate identifying information rtment dispositions and can properly track the relationship between Justice Depa where indictments have banking agency civil actions. Include named defendants , a description of the been secured. Also include the date of the referral le), and the disposition, alleged violation, the date of indictment (if applicab unable to provide the including sentence imposed. If, for any reason, you are requested material, please explain. II. A Sample of Criminal Referrals ling of bank insider This subcommittee will be issuing a report on the hand referrals. The June 28 referrals and we need specific information on actual tains records tracking hearing revealed that none of the agencies currently main efore, in order for the the disposition of a referral after it is made. Ther of the agencies, we will subcommittee to compile satisfactory statistics from all s requested in Questions need, at minimum, to select a sample from the referral 1(d) and 1(e) of my June 3 letter to you. not unduly burdenThe subcommittee would like to obtain a sample that is person on your staff to some. Therefore, I would like for the appropriate f, at 226-2498, as soon as contact Mr. James M. Pates on the subcoirmittee staf agencies and the Justice possible to arrange a conference of all the banking sample that is both Department in order to meet and to design a statistical cies. useful to the subcommittee and manageable to the agen information will be Regardless of the size of the sample, the following needed on each referral within the statistical sample: d above) of the person The name (or other identifying information as explaine 1. the offense and the referred, the institution involved, a description of indictment (if applistatute violated, the date of referral, the date of rmation requested in cable), and the ultimate disposition (i.e. all info Questions 1(d) and 1(e) of the June 3 letter). rve Board, either Any civil enforcement action taken by the Federal Rese each individual. 2. nst before or after the date of its criminal referral, agai the action and the date For each civil action taken, describe the nature of it was taken. If no action was taken, why not? stigation and that we can I am certain that we can work together on this inve ent of our country's banking assist each other in improving the criminal enforcem laws. Sinc rely, nard, uoug Chairm n 1 Li DB:jmp:v Attachment https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Jr. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FDIC INSURED BANKS CLOSED/REQUIRING ASSISTANCE BY THE JANUARY 1, 1980 THROUGH JUNE 17, 1983 Allowance for losses Name and Location Date of closing or Deposit assumption Bank of Lake Helen Lake Helen, Florida January 11, 1980 First National Bank of Carrington Carrington, North Dakota February 12, 1980 1,786,000.00 Mdhawk Bank & Trust Company Greenfield, Massachusetts February 16, 1980 0.00 The Citizens State Bank Viola, Kansas June 4, 1980 City and County Bank of Campbell County, Jellico, Tennessee June 28, 1980 7,456,000.00 The Mission State Bank & Trust Company, Mission, Kansas August 8, 1980 9,183,000.00 The Metro Bank of Huntington, Inc. Huntington, West Virginia September 12, 1980 1,407,000.00 The Rochelle Bank and Trust Company, Rochelle, Illinois October 11, 1980 571,000.00 Citizens State Bank of Galena Galena, Kansas November 21, 1980 533,000.00 December 31, 1980 0.00 East Gadsden Bank Gadsden, Alabama * ** Merger Assistance Transaction Special Assistance Transaction 0.00 24,000.00 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis INSURED BANKS CLOSED/REQUIRING ASSISTANCE BY THE FDIC JANUARY 1, 1980 THROUGH JUNE 17, 1983 Allowance for losses Name and Location Date of closing or Deposit assumption The Des Plaines Bank Des Plaines, Illinois March 14, 1981 1,217,000.00 South Side Bank Chicago, Illinois March 14, 1981 3,095,000.00 Peoples Banking Company Boston, Georgia March 17, 1981 355,000.00 Northwest Commerce Bank North Bend, Oregon June 19, 1981 605,000.00 Scuthwestern Bank Tucson, Arizona September 25, 1981 Hi&i-1 Lakes Community Bank La Pine, Oregon October 23, 1981 680,000.00 Midtown National Bank Pueblo, Colorado October 30, 1981 3,051,000.00 Greenwich Savings Bank* New York, New York November 4, 1981 334,962,144.50 Central Savings Bank* New York, New York December 4, 1981 131,675,259.00 Union Dime Savings Bank* New York, New York December 18,1981 61,099,323.03 * Merger Assistance Transaction ** Special Assistance Transaction 0.00 INSURED BANKS CLOSED/REQ UIRING ASSISTANCE BY TH E FDIC JANUARY 1, 1980 THROUGH JUNE 17, 1983 Nare and Location Date of closing or Deposit assumption Allowance for losses Western Savings Bank* Buffalo, New York January 15, 1982 30,500,000.00 The First National Bank and Trust Company of Tu scola Tuscola, Illinois February 6, 1982 1,760,000.00 Metropolitian Bank and Trus t Company Tampa, Florida February 12, 1982 10,140,000.00 Farrers and Mechanics Saving s* Bank of Minneapolis Minneapolis, Minnesota February 20, 1982 62,961,700.00 Dank of Yorkville Yorkville, Tennessee February 20, 1982 1,256,000.00 The Bank of Woodson Woodson, Texas March 1, 1982 Fidelity Mutual Savings Bank * Spokane, Washington March 11, 1982 35,261,484.00 United States Savings Bank of* Newark, New Jersey Newark, New Jersey March 11, 1982 65,001,905.25 The New York Bank of Savings* New York, New York March 26, 1982 421,429,668.43 * ** Merger Assistance Transactio n Special Assistance Transa ction https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 187,000.00 (Continued) -2- Western Saving Fund Society of* Philadelphia Haverford, Pennsylvania April 2, 1982 175,437,378.00 The First National Bank in Humboldt, Iowa Humboldt, Iowa April 2, 1982 10,941,000.00 Aquia Bank and Trust Company Stafford, Virginia April 3, 1982 2,014,000.00 National Security Bank Tyler, Texas April 16, 1982 367,000.00 Pacific Coast Bank San Diego, California April 29, 1982 2,306,000.00 Carroll County Bank Huntingdon, Tennessee April 30, 1982 0.00 Coles County National Bank of Charleston Charleston, Illinois May 1, 1982 1,390,000.00 Community Bank of Washtenaw Ypsilanti, Michigan May 15, 1982 1,356,000.00 Banco Regional Bayamon, Puerto Rico June 12, 1982 0.00 Citizens Bank Tillar, Arkansas June 23, 1982 232,000.00 Farmers State Bank of Lewistown Lewistown, Illinois June 25, 1982 4,050,000.00 The Belle Bland Bank Bland, Missouri July 2, 1982 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis * ** Merger Assistance Transaction Special Assistance Transaction 118,000.00 „ 3- (Continued) 46,000,000.00 Penn Square Bank, National Association Oklahoma City, Oklahoma July 5, 1982 The Bowie County State Bank Hooks, Texas July 27, 1982 3,072,000.00 Guaranty Bond State Bank Redwater, Texas July 27, 1982 4,368,000.00 Unity Bank and Trust Company Boston, Massachusetts July 30, 1982 2,406,000.00 Mt. Pleasant Bank and Trust Company Mt. Pleasant, Iowa August 6, 1982 0.00 August 6, 1982 0.00 Abilene National Bank Abilene, Texas First Security Bank of North Arkansas Horseshoe Bend, Arkansas August 27, 1982 4,694,000.00 y Security Bank and Trust Compan Cairo, Illinois August 27, 1982 1,492,000.00 Western National Bank Santa Ana California August 27, 1982 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis * ** Merger Assistance Transaction Special Assistance Transaction 1,746,000.00 (Continued) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0.00 Hbhenwald Bank and Trust Company Hbhenwald, Tennessee September 3, 1982 United Mutual Savings Bank* New York, New York September 24, 1982 Oklahoma National Bank** and Trust Company Oklahoma City, Oklahoma October 3, 1982 3,227,000.00 Tri-State Bank Markham, Illinois October 8, 1982 229,000.00 Mechanics Savings Bank Elmira, New York October 15, 1982 0.00 Cedar Bluff Bank Cedar Bluff, Alabama November 2, 1982 606,000.00 The First National bank of South Charleston South Charleston, West Virginia November 5, 1982 4,054,000.00 Texas Bank of Auarillo Amarillo, Texas November 5, 1982 882,000.00 Bank of Quitman Quitman, Arkansas November 12, 1982 2,089,000.00 Ranchlander National Bank Melvin, Texas November 19, 1982 1,361,000.00 The Ballinger County bank Lutesville, Missouri December 10, 1982 316,000.00 The Security State Bank Mooreland, Oklahoma December 16, 1982 535,000.00 * ** Merger Assistance Transaction Special Assistance Transaction 30,000,000.00 ANCE BY THE FDIC INSURED BANKS CLOSED/REQUIRING ASSIST JANUARY 1, 1980 THROUGH JUNE 17, 1983 Name and Location Date of closing or Deposit assumption Allowance for losses 310,000.00 The Madison County Bank Fredericktcwn, Missouri January 21, 1983 Dry Dock Savings Bank New York, New York February 9, 1983 32,456,110.00 State Bank of Barnum Barnum, Minnesota February 9, 1983 1,403,000.00 American State Bank Bradley, Illinois February 12, 1983 1,478,000.00 lle United American Bank in Knoxvi Knoxville, Tennessee February 14, 1983 60,000,000.00 k Merchants and Farmers State Ban Blythe, California February 18, 1983 828,000.00 February 25, 1983 39,531,000.00 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis American City Bank Los Angeles, California k Newport Harbour National Ban Newport Beach, California ction * Merger Assistance Transa ** Special Assistance Transaction March 11, 1983 7,177,000.00 • .0 (Continued) -2- Pan American National Bank Union City, New Jersey March 18, 1983 2,690,000.00 Columbia Pacific Bank & Trust Company Portland, Oregon March 18, 1983 4,439,000.00 March 24, 1983 566,000.00 Bear Creek Valley Bank Phoenix, Oregon March 25, 1983 2,198,000.00 The Ina State Bank Ina, Illinois April 8, 1983 NOT AVAILABLE Bank of San Marino San Marino, California April 8, 1983 NOT AVAILABLE Sparta-Sanders State Bank Sparta, Kentucky April 15, 1983 NOT AVAILABLE April 29, 1983 NOT AVAILABLE Prairie Ccunty Bank Hazen, Arkansas Heritage Bank Ashland, Oregon * ** Xi- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis n Merger Assistance Transactio Special Assistance Transaction , (Continued) -3- NOT AVAILABLE First National Bank of of Oak Lawn Oak Lawn, Illinois April 29, 1983 Smith County Bank Carthage, Tennessee May 6, 1983 NOT AVAILABLE City and County Bank of Knox Canty Knoxville, Tennessee May 27, 1983 NOT AVAILABLE United Southern Bank of Nashville Nashville, Tennessee May 27, 1983 NOT AVAILABLE United American Bank in Hamilton County Chattanooga, Tennessee May 27, 1983 NOT AVAILABLE City and County Bank of Roane County Kingston, Tennessee May 27, 1983 NOT AVAILABLE City and County Bank of Anderson Ccunty Lake City, Tennessee May 27, 1983 NOT AVAILABLE The Commercial Bank of California Los Angeles, California (West Hollywood) May 27, 1983 NOT AVAILABLE June 17, 1983 NOT AVAILABLE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Community Bank Hartford, South Dakota * n Merger Assistance Transactio ion ** Special Assistance Transact •4 • .J. #• Govz.4.• .* BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 szt.s September 19, 1983 PAUL A. VOLCKER CHAIRMAN •• • ••• The Honorable Paul Trible United States Senate Washington, D. C. 20510 Dear Senator Trible: nt to thank you for your On behalf of the Board, I wa rm that the definition of the te ng ti es gg su 31 st gu Au of s er lett om the proposed revision of fr d te le de be " an lo l ia rc me "com the Bank Holding Company Act. ts en em pl im h ic wh Y, on ti la gu Re r revision of the regulation to The proposal is part of a majo simplify the applications proand d ee sp to s, rm te s it y if clar e ing Board rulings applying th nd ta ts ou e at or rp co in to and cess Act's provisions. ned the term "commercial Early this year, the Board defi nsion ion representing a credit exte ct sa an tr y an e ud cl in to " an lo of comon. This covers the purchase ti za ni ga or al ci er mm co a to deposit ances, and certificates of pt ce ac s' er nk ba r, pe pa l ia rc me was s. This revised definition nd fu l ra de fe of le sa e th d an trend by onounced and accelerating pr a lt ha to r de or in d te op ad nce companies, securira su in g in ud cl in s, on ti za ni nonbanking orga ns, to acquire banks. er nc co al ri st du in and s er il ties firms, reta rough a loophole in the Bank th ed sh li mp co ac en be s ha is Th to be acquired ceases nk ba e th h ic wh r de un t, Ac Holding Company gredient of the "bank" in l ia nt se es an s, an lo al ci to make commer through this device ed ir qu ac nk ba e Th t. Ac e th definition under the public, both deom fr ts si po de ke ta to y it il retains the ab federal deposit insurin ta re to s, an lo e mak to mand and time, stem, remaining for sy ts en ym pa e th to ss ce ac ance and to have bank. all intents and purposes a the broader ramificat ou ab n er nc co my ed ss re st I have nt testimony before the ce re my in th bo t en pm lo ve de tions of this pearance last April. The ap my in d an e te it mm Co g in Senate Bank the Bank Holding Company Act and to legislative history of the ed the Act was intend h ic wh r de un es ci li po al ti en all basic prud desired the Act to cover ss re ng Co at th te ca di in effect both as banks--institutions of k in th ly on mm co we at th institutions e Board believes that the Th s. an lo e mak and ts si po that take de sly undermined by the nonou ri se e ar t Ac e th of es ci basic poli e Congress will deal th at th pe ho r ou is It . on bank phenomen discussed with the Banking ve ha I es su is cy li po ad with the bro proposal submitted by um ri to ra mo e th er th ei h ug Committee thro Administration's proposed e th on on ti ac pt om pr by the Board or gulation Act. Financial Institutions Dere https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ••••• The honorable Paul Trible Page Two is because, The reason Regulation Y has become an issue appropriate to in revising the regulation, the Board believed it the Act's proincorporate all important interpretations of , and to ask visions, including the Board's definition of bank d has not yet for public comment on these positions. The Boar proposal and has reviewed the public comments submitted on the the definition in not male any decision on whether to include up considthe final regulation. The Board expects to take and I can assure eration of the final regulation later this fall s at that time. You that the noard will consider your view matter. I appreciate receiving your comments on this Sincerely, jvm:co:AFC:vcd (V-182) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis All Board Members Mr. Mattingly Legal Files (2) Mrs. Mallardi (2) COMMITTEES LLOYD BEF TEXAS — https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Zfatez „Senate FINANCE WORKS T AND PUBLIC EN NM RO ENVI IC OM JOINT ECON ON TAXATION JOINT COMMITTEE NCE TEE ON INTELLIGE SELECT COMMIT . 20510 WASHINGTON. D.C August 31, 1983 -ri ....n CO Z---; rl, ,--. Gr, 1-:1 nn - :---3 --i -, -10 I'll --4C"-D I i an: Dear Mr. Chairm r1-1 C-1.< :::: t=2 53 2,...— ---.-- 120.• ri)73: = t"---) c= -rI .......4 7 22.. .< 1-1-1 Bentsen Encl sure : PLEASE REPLY TO ilding 912 Federal Bu 701 Austin, Texas 78 lbe ATTN: Jill Ko rn c..., PP r...... -.CO C., , ,-..... half of Keith be on y ir qu in evious recent concerning my pr g in it wr py of his most am co A I . es ti ri eston Secu nce. McGarrahan of Pr ed for your refere ch ta at is ce en correspond comments information or al on ti di ad er iate whatev . I would apprec tter at this time ma is th on ve you may ha Sincerely, .., 11.-- rrl --4 C--) -:ri • ..- lcker, Chairman Mr. Paul S. Vo System Federal Reserve enue between Constitution Av reets, N.W. 20th and 21st St 20551 Washington, D.C. rr11 .. , , c"..: PRESTON SECURITIES MLNIBER NEW YORK STOCK EXCHANGE ARLINGTON,TEXAS 76011 MEIRo461 • 1591 424 LAMAR BIN1) EAST SUITE 210 ISes August 19, 1983 Mr. Lloyd Bentsen United States Senate ilding 703 Hart Senate Office Bu Washington, D. C. 20510 Dear Senator Bentsen: pondence e that you've taken my corres ev li be to t ul ic ff di ry ve It is have ker, not you, nor your aides lc Vo . Mr y, sl ou vi Ob y. sl seriou read my letters. ussed. address the problems disc to n gi be en ev 't dn di r ke Mr. Volc ial accused us of asking spec en ev d an em th d re no ig he In fact favors. ms ers for years. The proble tt ma e es th t ou ab ed in la mp We've co mpanies to get approval), co r fo rd ha it g in ak (m de tu d are atti d for small companies an ar eg sr di l ra ne ge d an , on ti misinforma smaller brokerage firms. lcker sends you a copy of Vo . er ov d an er ov is th d ne We've explai question as to why he en ev t n' do u yo d an y pl re " his "strange outlined. doesn't address the problems an shuffling papers and me t n' es do te na Se e th in e Being effectiv e would read them with the on me so sh wi We . es pi co g simply sendin idea of solving a problem. Sincerely, PRESTON SECURITIES, INC. , Keith McGarrahan Vice President KMcG/bt cc: Paul A. Volcker cc: Magazine Registered Representative cc: The Wall Street Journal Attn: Amanda Bennett https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis a. • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 September 14, 1983 The Honorable Joseph M. Gaydos House of Representatives 20515 Washington, D.C. Dear Mr. Gaydos: I am writing in response to your letter to the Chairman of the House Banking Committee, the Honorable Fernand St Germain, requesting comment on an inquiry received from your ania, constituent, Mrs. Priscilla Falk of Pittsburgh, Pennsylv concerning the purchase of banks and farmlands by Arab nationals. Chairman St Germain asked that we respond directly to you on this matter. Concerning the foreign ownership of U.S. banks, under ity federal law there is generally no restriction on the national ed of persons owning the shares of banks chartered in the Unit been States. The issue of foreign ownership of U.S. banks has itstudied on many occasions by various groups, including comm ign tees of the Congress. There is no indication that fore ownership of U.S. banks is detrimental to the U.S. economy. The acquisition of U.S. banks by foreign parties gener3 of ally is governed by the Bank Holding Company Act. Section rve that Act, which sets forth the criteria the Federal Rese does not Board is to consider when acting on an application, comdistinguish between acquisitions by foreign and domestic osals to panies. The Act instructs the Board when reviewing prop enience consider the probable effects on competition, the conv l and and needs of the community to be served, and the financia these managerial resources of the organizations involved. If for considerations are favorable, there is no basis in the law parties. The denying applications by either foreign or domestic the factors Board invites comment from the public in regard to mentioned above. In acting on applications by foreign organizations to a showing of acquire U.S. banks, the Board has generally found the form of net benefits to the public. These usually take g their capital injections to the U.S. banks, thereby improvin the condition, the addition of managerial resources, and isitions, offering of new product services. Many of these acqu to by strengthening the U.S. bank being acquired, also lead by a increased competition. Moreover, U.S. banks acquired all U.S. foreign party must, of course, continue to comply with federal and banking laws and are supervised by the appropriate state regulators. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I * The Honorable Joseph M. Caydos Page Two Concerning foreign ownership of U.S. farmlands, a report by Economic Research Service of the United States Department of Agriculture entitled "Foreign Ownership of U.S. Agricultural Land Through December 31, 1982" indicates that foreign persons owned 13.5 million acres, or slightly more than 1 percent, of U.S. agricultural land (farmland and forestry) as of December 31, 1982. Forest land accounts for 55 percent of all foreign-owned acreage, cropland for 13 percent, pasture and other agricultural land for 27 percent, and nonagricultural and unreported uses for 5 percent. Foreign persons from Canada, the United Kingdom, Hong Kong, West Germany, and the Netherlands Antilles account for 75 percent of the foreign-held acreage. The largest number of acres owned by foreign persons was reported in Maine. Foreign holdings in Maine account for 14 percent of the total privately owned agricultural land in Maine. Except for Maine, foreign holdings are concentrated in the South and West-34 percent of the holdings are in the South and 31 percent in the West. According to the report, foreigners do not appear to be taking purchased agricultural land out of production. I hope this information is useful. if I can be of further assistance. Please let me_ know Sincerely, Donald J. Winn Assistant to the Board cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Chairman St Germain JSK:pjt (#V-168) bcc: Jim Keller Jack Ryan Mrs. Mallardiw/ OHIO CHALMERS P WYLIE. CONN STE WART B MckINNEY. GEORGE HANSEN. IDAHO JIM LEACH. IOWA RON PAUL. TEX ED DETHIJNE. ARK F NORMAN 0 SmuMWAY. CALI STAN PARRIS VA BILL McCOLLUM. FLA NY GEORGE C WORTLEY. MARGE ROUKE FAA. NJ. F BILL LOwERY CALI R. DOUG ISERE UTER. NEB DAVID DREIER CALM. JOHN HILER. IND THOMAS J RIDGE. PA STEVE BARTLETT. TEX. Action assigned Jack Ryan AN N, RI. CHAIRM FERNAND J ST GERMAI ' TEA. HENRY S. G•7ALEZ. 04 G. MI SW N.J. ,t, 'C't FRANK ANNuNZIO. ILL PARA. I J MITCHELL MD WALTER E. FAUNTROY. D.C. STEPHEN L NEAL" C, F JERRY Al PATTERSON, CALI CARPoLL HUBBARD. JR.. JOHN J LAFALCE. N NORMAN E D AMOURS. N.H. STAN LuNDINE. NY MARY ROSE OAKAR. OHIO N. BRUCE F VENTO, MIN , GA. DOUG BARNARD. JR ROBERT GARCik NY. MIKE LOwRy. WASH N Y. CHARLES E SCHUMER. B ARNEY FRANK, MASS. BILL PATMAN. TEX. WILLIAM J COYNE, PA BUDDY ROEMER. LA CALIF. RICHARD 1.4 LEHMAN, N. BRUCE A. MORRISON, CON JIM COOPER. TENN. MARCY KAPTUR, OHIO BEN ERDREICH, ALA H. SANDER EA LEVIN. MIC THOMAS R CARPER, DEL F. ESTEBAN E TORRES, CAU S U.S. HOUSE OF REPRESENTATIVE NANCE AND URBAN AFFAIRS COMMITTEE ON BANKING, FI NINETY-EIGHTH CONGRESS CE ILDING 2129 RAYBURN HOUSE OFFI BU WASHINGTON, D.C. 20515 226-4247 -n August 12, 1983 r-› f7, •-vi rY1 7-4 C-> MEMO •,‹ tr-9, ••x-. lcker Honorable Paul Vo Chairman s Board of Governor stem Federal Reserve Sy 20551 Washington, D.C. : Dear Mr. Chairman ydos rable Joseph M. Ga no Ho e th om fr er tt nd a le of farmlands and se Enclosed please fi ha rc pu e th on n ts informatio in which he reques ons. banks by Arab nati Congressman Gaydos e id ov pr d ul co u yo iated if ect. It would be apprec ailable on this subj av n io at rm fo in y directly an Sincerely, ain Fernand J. St Germ Chairman Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis June 22, 1983 Honorable Fernand J. St Germain g, Chairman, Committee on Bankin Finance and Urban Affairs ilding 2129 Rayburn House Office Bu Washington, D.C. 20515 Dear Mr. Chairman: letter from my constituent, a of py co a nd fi se ea pl ed os Encl sburgh, Pennsylvania. Mrs. Priscilla Falk, of Pitt the issue of the purchase s se es dr ad lk Fa s. Mr , er tt In her le at ab nations. Any information th of farmlands and banks by Ar ese ur committee relating to th you could send to me from yo ted. issues would be greatly apprecia s, I am, With warm personal regard Sincerely yours, JOSEPH M. GAYDOS MEMBER OF CONGRESS JMG:mkf Encleeure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • • • • • • • • • ??, Cf '41/9-171'1YY 7/ fir7-7A17 r t-7 ••• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 8, 1983 The Honorable Lloyd Bentsen United States Senate Washington, D. C. 20510 Dear Lloyd: Thank you for your letter of August 31 recommending Harry Jorgenson to fill the vacancy in the Board's Congressional Liaison Office. I can assure you that Harry's qualifications will receive careful consideration when the Board makes a decision regarding this vacancy. The Board appreciates receiving your recommendation. Sincerely, 44 CO:vcd (V-181) (83-461) bcc: Mrs. Mallardi (2)/ Action assigned Don Winn COMMITTEES LLOYD BENTSEN TEXAS United i*tatts FINANCE ENVIRONMENT AND PUBLIC WORKS JOINT ECONOMIC SELECT COMMITTEE ON INTELLIGENCE JOINT COMMTEE N Op -TAXA CO WASHINGTON, D.C. 20510 August 31, 19834/ tE/ r--I, -.:7-1 c:' cD rn"" rn r11 c-7$ —7., -,0 1 ).--- r'% Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 ;',- :-:-I zr_ r▪ gi ..7: 7 -.a. 55 .7.: -, (7.--?. ---. :'•) Dear Paul: Jorgenson is interIt has come to my attention that Harry onal liaison office. ested in a position in your Congressi to recommend Harry for I would like to take this opportunity this position. he worked for the Joint I have known Harry since 1973, when years, he has provided Economic Committee. For the past six Senior Attorney with the assistance to me and my staff, as a the Federal Reserve Legal Division, Board of Governors of he has shown himself to System. Throughout our association, dgeable -- traits which be courteous, responsive, and knowle Congressional liaison I believe would be invaluable to any with his knowledge of office. His Hill experience, combined h the needs of your the FED, enables him to understand bot gressional inquiries. agency, and their relationship to Con ation the utmost considerI trust you will give Harry's applic ance, please do not hesitation. If I can be of further assist ate to contact me. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Vti -"c, V S3 II https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 8, 1983 The Honorable Parren J. Mitchell House of Representatives 20515 Washington, D.C. Dear Parren: Thank you for your recent letter pn behalf of Mr. Jack R. Marchbanks, who expressed an interest in employment with the Federal Reserve Board. Our Division of Personnel., has been in touch with Mr. Marchbanks. Ms. Juanita Johnson has interer viewed Mr. Marchbanks and explored potential care ropportunities with him. Mr. Marchbanks will be inte viewed in the Division of Banking Supervision and ncial Regulation on September 21 for the position of fina analyst. I can assure you that he will receive full consideration. We appreciate having your. recommendation on behalf.of Mr. Marchbanks. Sincerely, .4tA4 CO:DJW:pjt (#V-173) bcc: Mr. Shannon Ms. Johnson Mrs. Mallardi (2)/ • CONGRESSIONAL BLACK CAUCUS DEPUTY WHIP COMMITTEES: CHAIRMAN SMALL BUSINESS COMMITTEE SUBCOMMITTEES: CHAIRMAN OF THE SUBCOMMITTEE ON SBA AND SBIC AUTHORITY, MINORITY ENTERPRISE AND GENERAL SMALL BUSINESS PROBLEMS BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE CHAIRMAN OF THE SUBCOMMITTEE ON MINORITY ENTERPRISE, ECONOMIC DEVELOPMENT AND HOUSING PARREN J. MITCHELL 7TH DISTRICT, MARYLAND OFFICE ADDRESSES: Congrefki of tbe Elniteb :•;) tatez 3i)ou5e of iltprefientatibefi Macsbington, /IC. 20515 HOUSING JOINT ECONOMIC COMMITTEE ...- 73 SUBCOMMITTEES: INVESTMENT, JOBS AND PRICES TRADE, PRODUCTIVITY AND ECONOMIC GROWTH https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2367 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D C 20515 (202) 225-4741 BALTIMORE DISTRICT OFFICES: /-/ SUBCOMMITTEES: DISTRICT OF COLUMBIA OFFICE: GEORGE FALLON FEDERAL BUILDING Room 1018 31 HOPKINS PLAZA BALTIMORE, MARYLAND 21201 (301) 962-3223 1903 BLOOMINGDALE ROAD BALTIMORE, MARYLAND 21216 (301) 962-4531 August 18, 1983 rn cf=0 co ca Ir-61 731.. Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Constitution Avenue and 21st Street 29_5.51 Washington, D.C. , ' 3;7 G5 G" ' cr, rrl r-1 (.0 % :3 ; ' as— 1-* 01 , V C:3 70 c/D D" Dear Mr. V I strongly recommend that your personnel division carefully consider Mr. Jack R. Marchbanks for a staff position with the Offices of the Board of Governors. Mr. Marchbanks has impressed the United States House of Representatives Small Business Committee with his knowledge of minority business financing and minority contractor surety bonding. He also has a solid background in commerical banking, community affairs and economics. Mr. Marchbanks appears well-qualified for the Public Affairs section that reports directly to the Board of Governors and equally qualified for your Banking Supervision and Regulation Division. ely, Parren J. Mitchell, Member of Congress PJM:cbt rn September 7, 1983 The Honorable Roger W. Jepsen Chairman Joint Economic Committee 20510 Washington, D.C. Dear Chairman Jepsen: Enclosed is a copy of a report on foreign exchange ing the operations by the Treasury and the Federal Reserve cover The report will be period from February 1983 through July 1983. ve Bulletin. printed in the September issue of the Federal Reser tomorrow morning's It is being released to the press for use in newspapers. ChairCopies of the report are also being sent to the copies are men of other interested Committees. Additional Committee. enclosed for the use of members and staff of your Sincerely, Enclosures (30 copies) Identical ltrs. to Chrmn. Jake Garn, Senate Bkg., 20 copies Chrmn. St Germain, House Bkg., 50 copies JRC:pjt bcc: Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • September 7, 1983 The Honorable John Heinz Chairman Subcommittee on International Finance and Monetary Policy Committee on Banking, Housing and Urban Affairs United States Senate 20510 Washington, D.C. Dear Chairman Heinz: Enclosed is a copy of a report on foreign exchange operations by the Treasury and Federal Reserve covering the be period from February 1993 through July 1983. The report will tin. printed in the September issue of the Federal eserve Bulle ng's It is being released to the press for use in tomorrow morni newspapers. Sincerely, Enclosure Identical letters also sent to those on attached list. JRC:pjt bcc: Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senate Chrmn. John Heinz etary Policy Subcmte. on International Finance and Mon Affairs Committee on Banking, Housing and Urban William Proxmire Ranking Minority Member etary Policy Subcmte. on International Finance and Mon Affairs Committee on Banking, Housing and Urban House Chrmn. Jerry M. Patterson nt, Institutions and Finance Subcmte. on International Developme an Affairs Committee on Banking, Finance and Urb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Douglas K. Bereuter Ranking Minority Member nt, Institutions and Finance Subcmte. on International Developme an Affairs Committee on Banking, Finance and Urb JEC Vice Chrmn. Lee Hamilton c: JEC, House side--sent to main off of ty ori Min g nki (Ra ie Wyl P. rs Chalme c.) , Senate side--sent to main off JEC of ty ori Min ng nki (Ra n tse Ben Lloyd https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 7, 1983 The Honorable Denny Smith House of Representatives Washington, D. C. 20515 Dear Mr. Smith: I am writing in connection with our earlier correspondence about the membership application of Great Western Bank, Dallas, Oregon. The Federal Reserve has approved the application and the applicant has been notified today. I am enclosing a copy of the Board's letter which sets forth the basis of the Board's decision. Please let me know if I can provide any further information. Sincerely, Donald J. Winn Assistant to the Board Enclosure CO:vcd (V-110) bcc: Mr. Egertson Mr. Ryan Mrs. Mallardi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 7, 1983 The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D.C. 20510 • Dear Chairman Garn: Thank you for your letter,, of August 30 inviting me to testify on S. 1609, the Financial Institutions Deregulation Act, and on other legislative proposals concerning the future structure of the financial services industry. I am looking forward to appearing before your Committee on Tuesday, September 13, at 9:30 a.m. Sincerly, Wall A.VolskeE CO:DJW:pjt ((#V-180--83441) bcc: Messrs. Sass, Bradfield, Axilrod, Ryan, Kichline, and Corrigan Mrs. Mallardi (2) JAKE GARN, UTAH, CHAIRMAN JOHN TOWER, TEXAS JOHN HEINZ, PENNSYLVANIA WILLIAM L ARMSTRONG, COLORADO ALFONSE M D'AMATO, NEW YORK SLADE GORTON, WASHINGTON PAULA HAWKINS, FLORIDA MACK MATTINGLY. GEORGIA CHIC HECHT, NEVADA PAUL TRIBLE, VIRGINIA WILLIAM PROXMIRE. WISCONSIN ALAN CRANSTON. CALIFORNIA DONALD W RIEGLE, JR . MICHIGAN PAUL S SARBANES, MARYLAND CHRISTOPHER J DODD.CONNECTICUT ALAN J DIXON, ILLINOIS JIM SASSER. TENNESSEE FRANK R LAUTENBERG, NEW JERSEY United eStates e tnate M DANNY WALL. STAFF DIRECTOR DIRECTOR KENNETH A McLEAN, MINORITY STAFF https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 August 30, 1983 Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Ave. N.W. Washington, D.C. 20551 Dear Chairman Volcker: This letter confirms the invitation of the Senate you to Committee on Banking, Housing and Urban Affairs for be held on appear as a witness at the legislative hearing to Room Tuesday, September 13, 1983 starting at 9:30 a.m. in adSD-538 of the Dirksen Senate Office Building. We will esses here to the following schedule, with each of the witn appearing individually: Tuesday, Sept. 13 Wednesday, Sept. 14 Chairman Volcker Chairman Isaac Chairman Gray C. Todd Conover The principal purpose of the hearing is to receive on testimony on S.1609, the proposal of the Administrati of 1983", titled the "Financial Institutions Deregulation Act a on S.1532, the Federal Reserve Board's proposal to impose within moratorium on certain acquisitions and new activities Federal the financial services industry, and on S.1682, the isitions Deposit Insurance Corporation's bill to limit acqu imony on by nondepository institutions. In addition to test those bills, we welcome your comments on any other pend ng to ing legislative proposals which raise issues pertaini stry, such the future structure of the financial services indu payment as proposals on regional interstate banking and the unts. of interest on reserve balances and on checking acco es for Enclosed is a copy of the Committee's Guidelin tions, please Witnesses. If you or your staff have any ques https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Honorable Paul A. Volcker August 30, 1983 Page 2 contact John Collins or Dexter Bell of the Committee staff at 224-7391. Sincerely, cQ ) rn Jake Chairman Enclosure JG:dbk JAKE GARP& UTAK. CHAIRIAAJt • JOHN TOWER...TEXAS JOHN HkINZ. PENNSYLVANILA WILLIAM L An/JSTRONG. CO-CRADO ALFONS! IH C AFAATO NEw YORK 'SLADE GORTON vvASNINCION PAULA HAWKINS. F LORIDA LUCK MATTINGLY. GEORGIA CHIC HECHT, NEVADA PAUL TOUSLE. VIRGINIA WILLIAM pRox•AiRE WtSCOPCSIN ALAN CRANSTON. CALIEDNii1A DONALD W IMEGLE. JR._ IlitOUG.AX PAUL S SAIMANIES. LLANYLAND CUT CI,PuSTOPNERJ DODO CONNECTI ALAN .1 DIXON ILLINOIS Jim SASSER TENNESSEE FAANK FL LA TWIG. NEw JCPCSVY M DANNY WALL STAFF DIRECTOR DIRECTOR KENNEThA *AcLEANL miNORITy STAFF eUnitc c tatts eSmate COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS ' WASHINGTON, D.C. 20510 GUIDELINES FOR WITNESSES 1. ittee These guidelines apply to all hearing of the Senate Comm rwise indicated. on Banking, Housing and Urban Affairs, unless othe 2. sen Senate All hearings will begin at 9:30 a.m. in Room SD-538 Dirk Office Building, unless otherwise indicated. 3. at least 75 Committee rules require that all witnesses, submit res copies copies of their written statements (if witness desi needed) be distributed to press and public, more copies are days are 24 hours prior to their appearance. Sundays and holi od. not to be included in determining this 24-hour peri Senate Statements should be delivered to Room SD-534 Dirksen rence to Office Building, Washington, D.C. 20510. Strict adhe ers may this rule is essential in order that Committee memb ling the review the statements before the hearing, thus enab involved. participants to more thoroughly discuss the issues a prior to Statements will not be released to the news medi the day of your testimony. 4. 5. ary not to Oral presentations must be limited to a brief summ printed exceed 10 minutes. Your complete statement will be in the hearing record. SD-534 Please complete the attached card and bring it to Room You will Dirksen Senate Office Building prior to the hearing. you at be given copies of statements of those testifying with that time. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Your cooperation is appreciated. Jake Garn Chairman September 6,.1983 The Honorable Walter E. Fauntroy Chairman Subco=itti?.e on Domestic 'Ionetary Policy Cor7-,ittee on Banking, Finance ar0 Liran Affairs Tashington, D.C. 20515 Dar Walter I would like to thank you for sharimi with us the Primer," pre7ared by rtort "oney and Near onies: n. Fenderson. As you know the reaeral Reserve has for some me been concerned al-pout the influence on the monetary aggre(gatr, of financial innovation, and we aporeciate receiving the views of an outside researcher on this imnortant matter. As the stuy emphasizes—and the Peleral eserve also has noted in ttimony and other occasions--the process of financial 1erry7ulation and innovation has greatly complicated the interpretation and control of the montary aggregates, which in turn has made nccc2ssary additional flexibility and -ludgment in the exercise of monetary policy. p I have asked our staff to review more thoroughly the analysis and conclusions of this study and will forward any co-nments to your Committee. Than: you again for the study. Sincerely, SZ Pa41 FJ:TDS:JLK:pjt (#V-175) bcc: All Board Members Mr. Jensen Mr. Simpson Mrs. Mallardi (2) Ms. Walls https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Kichline; all Governors received identical letters one response will be sent by the Chairman on behalf of the Board WALTER E FAUNTROY,0 C., CHAIRMAN STEPHEN L NEAL. N C. DOUG BARNARD, JR., GA. CARROLL HUBBARD, JR., KY. BILL PATMAN, TEX. BUDDY ROEMER, LA BRUCE A MORRISON. CONN. JIM COOPER, TENN THOMAS R. CARPER, DEL https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /42-109, ANNEX NO 2 WASHINGTON, DC. 20 515 (202) 228-7315 GEORGE HANSEN, IDAHO RON PAUL. TEX. BILL McCOLLUM. FLk BILL LOWERY. CALIF. JOHN HILER, IND. U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 August 18, 1983 r=) -n -n C) co co ca.) T-r1 G) rrl The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 —.4 N.3 N.) C-rr c=) ;73 :T=-• cP aD Dear Paul: I am pleased to share with you a copy of Committee Print 98-6 entitled "Money and Near Monies: A Primer," which has been prepared for the use of the Subcommittee on Domestic Monetary Policy by Dr. John B. Henderson, Senior Specialist in Price Economics of the Economics Division, Library of Congress. The report describes the evolution of money, examines the impact of financial innovations on the definition and measurement of money, and discusses the implications for monetary policy of these changes. I believe the report will be of great help to those who are concerned with monetary policy and how it should be conducted in today's financial and economic environment. I have already shared copies of this report with my colleagues. I wanted to be sure that you were familiar with this undertaking and kept abreast of the work and thinking of the Subcommittee. I would be pleased to receive any comments you or your staff might have. Please send any comments or suggestions to the following address: Subcommittee on Domestic Monetary Policy House Office Building Annex #2 - Room H2-109 Second and D Streets, Southwest Washington, D.C. 20515 Sincerely yours, t70,17;:tYpk% Walter E. Fauntroy Chairman September 2, 1983 The Honorable Trent Lott House of Representatives Washington, D.C. 20515 Dear Mr. Lott Thank you for your letter of August 12 regarding a concern that Mr. H. P. Heidelberg, President of the Pascagoula-Moss Point Bank, had on transportation expenses incurred for food coupons that are sent to the Federal Reserve Bank of New Orleans fot processing. Mr. Robert P. Forrestal, the First Vice President at the Federal Reserve Rank of Atlanta has already been in contact with Mr. Heidelberg. I believe Mr. Forrestal's letter, which is enclosed, clearly explains to Mr. Heidelberg both the relationship between the Federal Reserve System and the Department of Agriculture (DOA), and the position of the DOA in treating food coupon transportation costs as a non-reimbursable expense. Subsequently, Mr. Forrestal contacted the Federal Reserve Board in Washington, to request that we contact the DOA directly to raise the issue once again. We did so, and our reply to 11r. Forrestal is also enclosed for your review. I hope this information is useful. if I can be of further assistance. Sincerely, Wool A, Volcker Enclosures RBS:CO:pjt (#V-169) bcc: R. Sese Mr. Farnsworth Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Please let me know Action assigned Clyde Farnsworth 2400 RAYBURN BUILDING WASHINGTON, D.C. 20515 TRENT LOTT 202-225-5772 5TH DISTRICT. MISSISSIPPI REPUBLICAN WHIP DISTRICT OFFICES: Congre55 of tbe aniteb 6tate5 RULES COM t:ITTEE GULFPORT, MISSISSIPPI 31501 101-1141-71170 HATTIESBURG, MISSISSIPPI 21140I 3i)ou5r of 1tprei‘entatibts5 flias'bington, D.C. 20515 ADMINISTRATIVE ASSISTANT TOM H. ANDERSON, JR. 101-5112-124111 LAUREL, MISSISSIPPI 1014411-1211 August 12, 1983 Mr. Paul A. Volcker Chairman Federal Reserve System Avenue, N.W. 20th Street and Constitution Washington, DC 20551 Re: Mr. H. P. Heidelberg, Jr. P. 0. Drawer 1029 Pascagoula, Mississippi 39567 Dear Mr. Volcker: g, pondence from Mr. H. P. Heidelber res cor ed eiv rec ly ent rec e hav I of his problems with the Department ing ard reg me ted tac con who Jr., t of Reserve System concerning the cos Agriculture and the Federal transporting food stamps. ce, is a copy of this corresponden Enclosed for your information y much your problem. I would appreciate ver the of ure nat the s ail det which to this be of assistance in responding ld wou ch whi on ati orm inf providing inquiry. in this matter. Thank you for your assistance With best regards, I am Si ely y Trent Lott TL/mm Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis INIAVH3:::11:111312A3 03A1333121 90:8 WV L I 9nv £861 ISLS 3A113S3•2 171i303.4 JJ FANi3t,0n C'dVcsa 311440 Ri(rfroldai H P HEIDELOERG, JR PM St OE N7 i:d444t 7Aid, TO ADDRESS REPLY P 0 DRAvvER 1 0 2 9 67 PASCAGOULA, MS 395 July 25, 1(;.83 Congressman Trent Lott ce Building 2400 Rayburn House Offi 5 Washington, D.C. 2051 Dear Congressman Lott: into a apparently entered e ur lt cu ri Ag of nt me ng food 19S2, the Depart st of transporti co e th h ic Effective October 1, wh in stem at the Federal Reserve Sy e Branch would be rv se Re l ra de contract with the Fe t es near ndence ercial banks to the pieces of correspo ve fi ed os stamp from comm cl en ere is mmercial banks. Th expense of the co shion. l bureaucratic fa ca pi ty in s ad re which scussed th which we have di wi s nk ba r he ot us mero by the of our bank and nu nt of Agriculture me rt pa De e It is the feelins„ th r fo which vor is being done from retail grocers d te si - tter that the fa po de en this m.. wh sh ca amps. these food stamps as lue of the food st va e th of e banks. We accept us ys da one them losing a minimum of st of delivering co e th rb so ab to means that we are d obligate ber 1, we are now Effective last Octo ch. deral Reserve Bran Fe t es ar ne e th to oices: is one of three ch se ur co re ly on r Apparently, ou posit. pt food stamps on de 1. Refuse to acce tail grocer. the 2. Charge the re get his food stamps to he at th er oc gr il reta can. 3. Suggest to the Branch as best he e rv se Re l ra de Fe nearest is To be quite frank, it e. bl ta la pa ry ve e ree choices ar ment tter is for the Depart None of the above th ma e th to on ti lu e only logical so our cpinion that th sportation cost. an e tr th rb so ab to e of Agricultur https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MEMEER OF FEDERAL RESERVE SYSTEM • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • 7, '7). ."(t.waqe, a - dj - Rwl/a July 25, 1983 Page Two It would be most appreciated if you would give us the courtesy, of your reply as to your feeling as to how the situation should be corrected. Very truly yours, ) I President HFUJR :lk cc: John iiubbard, President Mississippi Bankers Association P. 0. Box 37 Jackson, MS 39205 MEMBER FEDERAL RESERVE SYSTEM S BRANCH NEW ORLEAN NK OF ATLANTA A B E V R E S E R FEDERAL ANA 70)61 NS, LOUISI NEW ORLEA 0•••CI O. eliD[1417 V.Cf Par A.f.bilF1ANCT https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis TO: 82 September 20, 19 N DEPOSITARIES ALL FOOD COUPO e Federal Reserve th of ch an Br s the New Orlean Express Courier ny Po Earlier this year th wi ct ra cont cash entered into a new ecks and other ch Bank of Atlanta al ci er mm co of ndle transportation will no longer ha s es pr Service for the Ex ny Po contract terms, items. Under the s to this Branch. on up co od fo of on the transportati ts, od stamp deposi fo ur yo of nt me ive litate the ship Therefore, to faci arrange alternat to n io ut il st in l each financia or a privately il ma we are requesting ed er st gi re in tion, such as your cooperation te ia means of transporta ec pr ap d ul service. We wo contracted courier . by October 1, 1982 on ti si an tr e th g in malc g transportation in ng ra ar in u yo , y assistance to of Cash Services r ge na If we can be of an Ma e, ch Me contact Mrs. I:aren . alternatives, please ant Manager, or me st si As s, re Ba ey Mrs. Audr Sincerely, lds 4rederick P. Shie ....PZ -EMI 112f/7 rit. COM4 ,r7,47:Za735 • . • • •• oo,c.1,--5v2aAarlicat.MYCLNAL Ks.c.itZty24-24,=,•_-r1Ppi WM, July 20, 19E3 • .' „:;* •..t Mr. Jack Cuynn.' Senior VICA - President of Atl:.nta rederal Mcservc Bank P. 0. Box 1731 30301 Atlanta, CA • IN Dear Jack: osed copy of letter cl en is e er th , ay id Fr n telepho-ae convt,rsatio observe With reference to our er 20, 1982. 1,6 you can :J er pt Sc d te da ch an Br s Ncw OrIcen errangeerta to transport we received fro= your r he ot r.e r-Je nks be: at th s !.uggested ing msde of the refund of be fro:4 this letter, it wa n tio :zn r., no th wi h nc w Otl.zens 'Dre fccd LcaLps to your Ke shipping cbarzes. e credit for these food at di im s er cm tt cu e or st ., retell grocery hewing lp.ItinCss dey by /c e ,ve,of course, give our th l ti , un :7 the r fo possibly be paid ness day :temps, end we cannot on to the loss of one busi ti di ad in is lt su e re Th . ch transyour New Orleans Bran furt!'er required to 1.4 the c ar we d, le nd ha s mp s. st food on the velue of the them to your branch. portation cost to get at of transportation co e th d an d, te ec rr co be this siLustion should serve Bank. It-is our feeling that culture or the Federal Re ri Ag of nt me rt pe Le e th be paid either by Sincerely; President • HPH.TR:lk Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . '1. • • Ir - ,, !• • • .A • .• • •10 . • . •• „. • . . . • t • . • • - • ' ••• S •J • ' • 1.L • • r • •'14 4 July 20, 19E3 Mr. Clyde H. Farnsworth, Jr. Director Division of Federal Reserve Bank Operations Board of Governors of the Fer2ral Reserve System Washiggton, D. C. 20551 Dear Clyde: the food staiap program Crie of the old complaints in connection with y enclosed letter to hts raised its h2td again. As you can see from Point Bank, Pascagoula, Pat Hzidalbcrg, Jr., Presidcnt of Ptscagoula-Moss DLTartment of Agriculthe Mississippi, he has asked our help in c,ctting to acknowledge the cost ture (DOA) to reconsider its position of refusing redexption as an expense of trensorting food st!mps to a Fed office for the DOA will reimburse. with the governmantal I know your staff mair,tains on -going contact the first opportunity, agt:ncies that contract with us for services. At e Mr. Heidelberg hts raised. I hcpe you will ask once again about the issu Sincerely. Robert P. Forrestal Enclosure bcc:‘' Mr. Pat Heidelberg, Jr. Mr. Janes Hawkins https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis lUrt 11 NK FEDERAL RESERVE BA OF ATLANTA 303 ATLANTA. GEORGIA 30 OPriCe OP IDENT FIRST VICE PRES July 20, 1983 . Mr. H. P. Heidelberg, Jr President nk Pascagoula -Moss Point Ba Drawer 1029 39567 Pascagoula, Mississippi Dear Pat: ynn recently posed to Jack Gu u yo on ti es qu e th to se food This is in respon a courier for delivering om fr ed iv ce re nk ba ur yo concerning a bill New Orleans Branch. r ou to nk ba ur yo om fr coupons th culture has contracted wi ri Ag of nt me rt pa De e th , As I think you know od stamp redemption and de fo n ai rt ce e id ov pr to s we our Federal Reserve Bank A dictates just what work DO e th , or ct ra nt co r ou struction services. As to reimburse. While the g in ll wi is cy en ag at th are to do and what costs and destroying the food g in fy ri ve r fo s nk Ba e rv se on expenses incurred by Re lture (DOA), transportati cu ri Ag of nt me rt pa De e th by e stamps are reimbJrsed y, we are unable to reimburs gl in rd co Ac . ed ud cl ex ly nor expenses are specifical vering food coupons to us, li de of e ns pe ex e th r fo t financial institutions e these expenses would no nc si on ti ta or sp an tr e id ov pr are we in a position to Agriculture. As you can of nt me rt pa De e th by t en em be eligible for reimburs imburse transportation re to s nk ba r he ot om fr ts es qu imagine, we have had re the cost of getting the at th on ti si po e th to st fa held responsibility of the costs, but the DOA has e th is on ti mp de re r fo nk rve Ba stamps to a Federal Rese nt's deposit. bank that takes the mercha this point, we had on t ar he of ge an ch no en be has pervisor Food CouJust to be sure there Su , er ng ri Sp J. s me Ja . Mr contact ates our New Orleans office nt Section of the United St me ge na Ma ce an li mp Co e pon Specialist in th rvice (USDA-FNS) Regional Se n io it tr Nu od Fo e ur lt ocessing and transpr l al Department of Agricu at th d se vi ad er ng Mr. Spri onsibility of that sp re e Office in Dallas, Texas. th is nk ba al ci er rred by a comm is allowed by USDAn io ut portation expense incu it st in ch ea at th e hc did stat institution. However, r food coupon deposits. ei th ng li nd ha r fo e fe a FNS to charge retailers https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ATLANTA VE EANK OF R E S E R L A R FEDE Page 2 s continue to have in d er nk ba ms le ob pr g I have aske ose naggin th y, of ir e qu on in is ur yo is of th t ligh Pat, ington Department programs. In sh rn Wa r ve ei go th th th wi wi n on ai ti ag connec raise this matter uch if we get to to in f af ck st ba on be gt to in sh re su cur Wa acts and I will be nt co e ul lt cu ri Ag ment of shington contact. Wa e th om fr t en em any new encourag Sincerely, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Robert P. Forrestal cc: anch Manager Dr s, in wk Ha s me Ja Mr. Nev, Orleans Branch th, Director Mr. Clyde Farnswor erations Departnent of FRB Op https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis September 2, 1983 The Honorable Bruce F. Vento House of Representatives 20515 Washington, D.C. Dear Mr. Vento: Thank you for your letter, of August 15, enclosing questions you had following my recent testimony before the House Banking Committee. my responses to your questions. Enclosed are I appreciate the opportunity to amplify my views, and hope you find these responses useful. Sincerely, UN' Enclosure DLK:SHA:pjt (#V-171) bcc: Mr. Kohn Mr- Axilrod Mrs. Mallardi (2) y/l Federal Question #1. It is generally agreed that in August, 1982, the which Reserve shifted to a more accommodating monetary policy. (A move ies I, incidentally, applaud.) As a result of our tight money polic and of recent years, have we learned something new about the value t and accuracy of using monetary aggregates as the primary measuremen us to a criteria for the performance of the economy? If this has led taneous tool re-evaluation of the value of monetary aggregates as a simul the shift and measure of monetary policy, was this the primary cause of for the in policy in August, 1982? If not, what was the primary cause August, 1982, change in policy? The behavior of the various monetary aggregates and interest y adaptations rates since the late summer of 1982 reflected both polic behavior of the to shifts in the public's preferences for money and the economy. of The substantial drop of interest rates in the second half itory institu1982 reflected Federal Reserve easing of pressure on depos er weakening of the tions reserves to help sustain money growth, the furth ry expectations economy and private credit demands, and reduced inflationa https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rmance. resulting from the sustained improvement in price perfo In the longer-run target process M2 and M3 grew around the upper limits of their ranges. above its M1 growth, however, accelerated sharply and was well of 1983. longer-run range in late 1982 and into the early part The Federal h than it had Reserve was more accommodative to overshoots in M1 growt been earlier. assets It had become evident that the public's demand for ng interest rate, had in Ml, particularly for NOW accounts which paid a ceili of M1 declined in the increased sharply--with the result that the velocity had in a cyclical consecond half of 1982 by much more than it usually traction. first quarter In part this decline, which continued into the large movement of funds of 1983, reflected the special circumstance of a and transactions function into NOW accounts--which perform both a savings s the cost of holding and have come to be an increasing share of M1--a Question #1--continued -2- in market these highly liquid balances dropped sharply with the decline interest rates. More recently the velocity of M1 appears to he rising, though by less than in earlier cyclical expansions. The atypical behavior of M1 velocity caused in part by the affects increased importance of NOW accounts, together with uncertain in the on M1 associated with the maturity of All Savers Certificates less fall of 1982 and early 1983, led the Federal Reserve to place emphasis on M1 as a policy guide than it had previously. The broader that aggregates were given more emphasis, though it was recognized year, by these too would be distorted, at least for a time early this the availability of new deposit instruments. It seems to me that these experiences simply underscore a approach, which basic premise that has always been a key element in our monetary taris that a certain flexibility in achieving and evaluating and institutional gets is needed in light of changing financial practices arrangements. Incoming data on money growth will always have to be of economic and interpreted in relation to information about a variety financial indicators. Even so, experience over long periods in a variety , monetary aggreof circumstances has shown that, interpreted with care ary policy formulation gates can be and normally are valuable guides to monet and implementation. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Question 42. In light of some current economic conditions, supporters of a tight money policy can make a very strong case. For example, the current federal fiscal policy is extremely expansive and the federal deficit in nominal dollar terms, in terms of percentage of G.N.P. and in terms of percentage of total savings, is extremely large. In addition, there seems to he little likelihood that reductions in federal spending circumor increases in federal revenue will reduce the deficit. These stances appear to me to be precisely the type of conditions which prompt many people (and indeed the Federal Reserve in years past) to call for a tightened money supply. On the other hand, for the past several months, forces have acted, during a time of an accommodating Federal Reserve Board policy, to restrict rates the availability of credit. In spite of low inflation, real interest remain high enough to restrict the availability of credit to such a degree that it is not realistic to fear a new round of inflation by a rapidly expanding economy fueled with easily affordable credit. It seems to me that the effect of the market forces (higher priced credit) has been essentially the same as the effect of a tightened monetary policy (scarce supply of money, leading to higher priced credit). While the effect has been the same, the method of obtaining this result is very different. If these market forces continue to result in high real interest rates, do you foresee a need to move away from the Federal Reserve's more accommodating monetary policy in the near future? The overriding objective of our monetary policy is to promote a period of sustained noninflationary growth in the economy. In choosing the important monetary and credit growth ranges to promote this end, one of fiscal policy factors we have taken into account is the expansive stance of ely large. and the likelihood that the federal deficit would remain extrem served to keep As you note, these deficits--actual and prospective--have https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis apparently real interest rates at unusually high levels, but these rates have not interfered with a substantial rebound in economic activity this year. We believe our ranges for money growth are appropriate for attain ing the objectives we all share for the economy. In recent months--with the way to a slightly economy rebounding strongly--we have moved in a measured -2- -. Question #2--continued ol of money less accommodative reserve supplying posture to assure contr growth over the longer run. This move had the effect of producing a firm- dence ing in money markets in the short run, but by promoting greater confi ns we would adhere to a noninflationary course, we believe these actio t market have helped to reduce the risk of a greater tightening in credi conditions down the road. The moderate rise in interest rates over recent months has concerns reflected as well the massive borrowing needs of government, and t demands that these are beginning to compete with expanding private credi in a growing economy. A more accommodative monetary policy would not pre- only vent such a conflict for a limited volume of savings, but would sion. promote an imhalanced recovery and future inflation and reces A real rates reduction in budget deficits is the key to reducing these high ity. and ensuring a balanced, sustainable expansion in economic activ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Question #3. I have been concerned about the fact that interest rates seem to be staying at historically high levels relative to the inflation rate. (I think most economists will agree that interest rates have traditionally been approximately 3-1/2 percent above the inflation rate.) This has been true for many months now, and it seems that this irregularity is even more important now that we have begun to come out of the recession. In the exercise of your monetary policy tools to control the money supply, to what extent are you limited by the fact that some profitable corporations, and individuals, are, in effect, only paying half of the market rate of interest on their borrowings after deducting interest expenses from their taxes? Wbuld you comment on whether interest rates have in part remained so high above the inflation rate because of this tax treatment? If a substantial segment of business is sufficiently profitable to be paying a net interest rate below the rate at which their investments are inflating, does this create a distortion in the economy? I do not view the tax treatment of interest payments as an important limitation on monetary policy, but it to some extent does influence the allocation of financial and real resources--depending on which firms or individuals are receiving favorable tax treatment on their borrowing relative to the tax treatment on their earnings, which is in turn affected by such issues as whether their earnings are in the form of current income or capital gains or the impact of using available depreciation and inventory accounting methods. While, in practice, the influence is difficult to mqure, the level of real interest rates (before taxes) in the market appears to be higher than they otherwise would be, in a period of general inflation, because of various properties of the tax laws. While the basic characteristics of the tax treatment of interest havebeen in place for many years, the impact is different, and potentially greater, during a period of high actual or expected inflation. However, at the present time, high "real" rates in large part reflect pressures generated by current and expected unusually large federal deficits. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis reyQuestion #4. Chairman Volcker, the fundamental purpose of the Humph y, equal Hawkins Act is to require that in setting national economic polic unemconsideration should be given to several economic factors, such as it ployment, inflation and interest rates. However, I don't think that ing can be disputed that your recent policy has concentrated on reduc loyinflation at the expense of the highest real interest rates and unemp ment rates in memory. For instance, in your report, you project unemployment rates in we changed 1983 at 9-1/2 percent and about 8-1/2 percent in 1984. What if sis the Humphrey-Hawkins Act to require you to place the greatest empha on unemployment? What changes in policy would you pursue if you were required, as percent unyour primary responsibility, to achieve a 6-1/2 percent to 7 employment rate to the end of 1984? If we were to give primary emphasis to reducing the unemployment have to rate to the 6-1/2 to 7 percent area by the end of 1984, we would increase money growth even more rapidly. But such a policy emphasis would be not only short-range but also short-sighted. The kind of aggregate by the end of demand stimulus needed to achieve such an unemployment rate impetus 1984 if indeed that were at all possible, would give tremendous . to inflation and sow the seeds of future economic disruption A longer- the context of range focus on achieving sustainable economic expansion in durable progress moderating inflation provides the best hope for achieving on the employment front. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BRUCE F. VENTO Action assigned Steve Axilrod; info copy to 4TH DISTRICT, MINNESOTA 2433 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-6631 Mike Pre11 HOUSE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS Congress of thct1nitd c5tates DISTRICT OFFICE: HOUSE SELECT COMMITTEE ON AGING tousc of Rtintuntattes Vashington, D.C. 20515 ROOM 150 MEARS PARK PLACE 405 SIBLEY STREET SAINT PAUL, MINNESOTA 55101 (812) 725-7724 August 15, 1983 HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS /2/ Honorable Paul A. Volcker, Chairman Federal Reserve Board 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: During your last appearance before the Banking, Finance and Urban Affairs Committee, there were several questions which I was not able to ask because of time constraints. I would appreciate your response to the four enclosed questions. Sin e . Vento ember of Congress BFV/gg Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C=Is co C=0 7.13 c=3 C=7, r-r1 --n Le3 CD rri ir-T1 Cr? OD D FIBERS THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLE C"'"3 11. Question #1 .., r It is generally agreed that in August, 1982, the Federal Reserve shifted to a more accommodating monetary policy. applaud.) (A move which I, incidentally, As a result of our tight money policies of recent years, have we learned something new about the value and accuracy of using monetary aggregates as the primary measurement and criteria for the performance of the economy? If this has led us to a re-evaluation of the value of monetary aggregates as a simultaneous tool and measure of monetary policy, was this the primary cause of the shift in policy in August, 1982? If not, what was the primary cause for the August, 1982, change in policy? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 . % Question #2 In light of some current economic conditions, supporters of a tight money policy can make a very strong case. For example, the current federal fiscal policy is extremely expansive and the federal deficit in nominal dollar terms, in terms of percentage of G.N.P. and in terms of percentage of total savings, is extremely large. In addition, there seems to be little likelihood that reductions in federal spending or increases in federal revenue will reduce the deficit. These circumstances appear to me to be precisely the type of conditions which prompt many people (and indeed the Federal Reserve in years past) to call for a tightened money supply. On the other hand, for the past several months, forces have acted, during a time of an accommodationg Federal Reserve Board policy, to restrict the availability of credit. In spite of low inflation, real interest rates remain high enough to restrict the availability of credit to such a degree that it is not realistic to fear a new round of inflation by a rapidly expanding economy fueled with easily affordable credit. It seems to me that the effect of the market forces (higher priced credit) has been essentially the same as the effect of a tightened monetary policy (scarce supply of money, leading to higher priced credit). 1 While the effect has been the same, the method of obtaining this result is very different. If these market forces continue to result in high real interest rates, do you foresee a need to move away from the Federal Reserve's more accommodating monetary policy in the near future? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis % % . Question 1/3 . I have been concerned about the fact that interest rates seem to be staying at historically high levels relative to the inflation rate. (I think most economists will agree that interest rates have traditionally 2% above the inflation rate.) 1 been approximately 3/ many This has been true for months now, and it seems that this irregularity is even more impor- tant now that we have begun to come out of the recession. In the exercise of your monetary policy tools to control the money supply, to what extent are you limited by the fact that some profitable corporations, and individuals, are, in effect, only paying half of the market rate of interest on their borrowings after deducting interest expenses from their taxes? Would you comment on whether interest rates have in part remained so high above the inflation rate because of this tax treatment? If a substantial segment of business is sufficiently profitable to be paying a net interest rate below the rate at which their investments are inflating, does this create a distortion in the economy? https://fraser.stlouisfed.org Federal 0 Reserve Bank of St. Louis % , Question #4 SP` Chairman Volcker, the fundamental purpose of the Humphrey-Hawkins Act is to require that in setting national economic policy, equal consideration should be given to several economic factors, such as unemployment, inflation and interest rates. However, I S. think that it can be disputed that your recent policy has concentrated on reducing inflation at the expense of the highest real interest rates and unemployment rates in memory. For instance, in your report, you / 2%in 1984. 1983 at 91 / 2% and about 81 project unemployment rates in What if we changed the Humphrey- Hawkins Act to require you to place the greatest emphasis on unemployment? What changes in policy would you pursue if you were required, as ySur primary responsibility, to achieve a 6 the end of 1984? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to 7% unemployment rate be September 1, 1983 The Honorable Tom Bevil' House of Representatives 20515 Washington, D.C. Dear Tom: Thank you for your note of August 17 enclosing a letter from Mr. Ben E. Lusk regarding the difficulties faced by the American coal industry in exporting. The Federal Reserve recognizes that the current strength of the dollar exchange rate is having an adverse impact on a range of U.S. industries, both exporters and those competing with imports from abroad. Reflecting the combined effects of the strong dollar and relatively weak demand abroad, our nonagricultural exports have declined by around 10 percent in volume over the past year. As your note observes, the strength of the dollar exchange rate derives importantly from purchases by foreign investors of dollar assets, reflecting both the historically high rates of return on these assets and the significant recluction in inflation that has been achieved. You ask about recommendations for reducing the attractiveness of dollar assets to foreign investors. Other things equal, lower levels of interest rates on dollar assets would work in that direction, and I continue to feel that the most important step we could take in this area is to reduce the federal budget deficit. Sincerely, RFG:CO:pjt (4V-174) bcc: Mr. Gemmill Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 111.) 11 assigned Mr, Truman HOUSE OF REPRESENTATIVES, U.S WASHINGTON, D.C. August a,7 17q 19 8 Hon. Paul A. Volcke r Chairman, Board of Governors of the Fe derE Reserve System Constitution Avenue ft ng dAiE las Rm St enrit,st eL Thet iit ted for your consideration, and to ask that the request made therein be complied with, if possible. If you will advise me of your action in this matter and have the letter returned to me with your reply, I will appreciate it. Paul, I would ap preciate your commenting on the attached, as well as any recommendations you migh' have on how to reduce the attractiveness of thE U. S. dollar to overseas investors. Tom Very Truly yours, M.C. Ala, 4th https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis TB:cl 1377 K Street, N W,Suite 900 Washington, D C 20005 Telephone (202) 789-0641 Ben Lusk AUG 5 1983 Washington Representative onummono COM comPnrw July 25, 1983 The Honorable Tam Bevill 2407 Rayburn House Office Building Washington, D.C. 20515 Dear Congressman Bevill: Coal Company and I am writing to you on behalf of Drummond ge coal companies in the U.S. Alabama By-Products, two relatively lar al situation of which I am sure you that are faced with a very paradoxic would want to be advised. economic recovery, those While our country is experiencing an experiencing difficulties in of us in the export coal business are ies whose currencies are not as strong selling our coal to those countr as the dollar. m Italsider indicates, As the attached copy of a telex fro sing American Coal because the Italy is having difficulties purcha t the Italian lire. dollar has become so strong agains ong economy, we're also Although we are all in favor of a str kets overseas. We obviously have concerned about losing our export mar l you can provide us with some advice no solution, however we are hopefu xing problem. as to how to handle this very perple https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis exported from the In addition, I'm sure other commodities should also be considered. U.S. are facing similar problems and have would be greatly Any help, advice or suggestions you may d consideration to this very appreciated. Thank you for your kin pressing problem. Sincerely, Ben E. Lusk Washington Representative BOARD OF GOVERNORS OF THE: FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 PAUL A. VOL:KER CHAIRMAN August 30, 1983 n The Honorable Fernand J. St Germai Chairman Committee on Banking, Finance & Urban Affairs House of Representatives Washington, D.C. 20515 Dear Mr. Chairman: need to undertake I share your concern about the leak of information from the promptly the inquiry into the to the Congress. Midyear Monetary Policy Report y disappointed about the At the same time, I am frankl the t recent letter calling upon mos r you in ed lin out ure ced pro one s we discussed on the teleph son rea the for ly, ive lus exc GAO were persuasive to you as t ugh tho I ch whi and ago e tim some of ity and general competence egr int the t pec res I le Whi well. know, participation of you as , fer pre y atl gre ld wou the GAO, I relevant investigatory h wit ty par e sid out nt nde an indepe experience. time, in the interest of However, given the passage of prepared to concur in the am I , job the h wit on g gettin investigation under agreed GAO a for e pos pro you nts eme arrang nection, I believe we are con s thi In . nce ere ref terms of focus on determining to is n tio iga est inv the agreed that it will not, of course, t tha and k, lea the for ty responsibili ry ntive questions of moneta encompass procedural or substa policy. ged the persons who had My staff has already catalo were time that the decisions the m fro nts ume doc the to access official release on ir the of e tim the to 13, y made on Jul should assist in expediting k wor ry ina lim pre s thi and July 20, the task of the investigators. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, Fil„ T t2=1 cr. ..... GOvz- •• A BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM • i?AlL RES • • •..• • * WASHINGTON, D. C. 20 551 PAUL A. VOLCKER August 30, 1983 CHAIRMAN The Honorable Quentin N. Burdick United States Senate Washington, D. C. 20510 Dear Senator Burdick: Thank you for your letter of August 23 regarding concerns your constituents expressed relating to the Board's proposal to amend Regulation Y, its regulation governing bank holding companies. Specifically, they express concerns about the proposed changes to the provisions of the regulation governing the redemption by a bank holding company of its own securities. Currently, the Board's Regulation Y (12 CFR 225.6) requires a notice to the Board for any proposed redemption by a bank holding company of its own equity securities if the consideration paid for the shares exceeds 10 percent of the net worth of the bank holding company. The Board reviews the notice to determine whether the redemption would adversely affect the safety or soundness of the organization. Under the proposed amendments to Regulation Y, no notice would be required for any redemption if, after the redemption, the bank holding company meets the standards for adequate capitalization established by the Board of Governors and the Comptroller of the Currency. The Board generally regards these standards as the minimum for safe and sound operation of banking organizations. The proposal also allows a bank holding company to make redemption of its stock without regard to these capital standards under two additional circumstances. First, a company may make de minimis redemptions equal to one percent of its net worth in any 12 month period. Second, a company may apply to the Board for its approval to make redemptions in unusual circumstances. In considering those requests, it is contemplated that the Board would consider the overall effects of the proposed redemption on the capitalization of the bank holding company. The proposed revision of the redemption provisions emphasizes that the Board's primary concern with such redemptions is the effect they have on bank holding company capitalization. In a redemption situation, the holding company's capital is reduced through the retirement of its capital stock and, in many cases, this reduction in capital is accompanied by a corresponding increase in the indebtedness of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis *Ms* • -. . —...•nneitetor • •• The Honorable 7pientin N. Burdick Page Two the holding company to finance the redemption. In other words, in many cases, a redemption involves the substitution of debt for capital in the bank holding company. Under the proposal, the ability to make redemptions that reduce the holding company's capital and increase its indebtedness is male contingent upon the bank holding company satisfying the interagency capital standards. The proposal is premised upon the belief that a reduction in a bank holding company's capital may not be consistent with safe and sound banking practice where the holding company's capital will be below the minimum capital standards established by the Board and the Comptroller of the Currency. The Board has received numerous comments on the proposed amendment, primarily from small banking organizations. The main thrust of the comments is directed to the fairness of the proposed provision that no redemption be permitted without prior approval where the bank holding company has a debt-toequity ratio in excess of 30 percent following the redemption. The comments have raised concern that application of the Board's capital standards in a redemption situation will seriously limit the transferability of small banking organizations. While the Board is concerned with adequate capitalization of bank holding companies, the Board has also recognized the unique function of small one-bank holding companies in facilitating the transfer of ownership of small banking organizations. (Policy Statement on Assessment of Financial Factors of One-Bank Holding Comoanies, March 28, 1980.) Because of this concern, the Board has, in proposals involving the ownership of small banking organizations, permitted liberal debt-to-equity ratios substantially in excess of the 30 percent level on the basis that the bank holding company would direct its efforts to reducing its debt-to-equity ratio over a relatively short time span in order that its improved debt capacity will allow it to serve as a source of strength should the subsidiary bank require assistance. The Board's staff is reviewing modifications to the proposed stock redemption proposal in light of the Board's previously stated policy regarding the transfer of ownership of small banking organizations and the Board's concerns with the capital adequacy of the nation's hanks. I appreciate having your constituents' views, and their concerns will be presented to the Board when it takes action on the Proposal. I will be happy to let you know when the Board reaches a final decision on the matter. Sincerely, (VM:)CO:pjt (#V-179) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis bcc: Mrs. Mallardi (2) 7)/Paul A. Volckec MARK O. HATFIELD, OREG., CHAIRMAN TED STEVENS. ALASKA Lrw-LL I-. WETCKER, JR., CONN. J‘MES A. MC CLURE, IDAHO PAUL LAXALT. NEV. JAKE DARN. UTAH THAD COCHRAN, MISS. MARK ANDREWS. N. OAK. JAMES ABONOR, S. OAK. ROBERT W. KASTEN. JR., WIC ALFONSE M. D AMATO, N.Y. MACK MATTINGLy, GA. WARREN RUDMAN. N.H. ARLEN SPECTER. PA. PETE V. DOMENICI, N. MEX. JOHN C. STENNIS, MISS. ROBERT C. BYRD, W. VA,.. WILLIAM PROXMIRE, WIS. DANIEL K. INOUYE, HAWAII ERNEST F. HOLLINGS, S.C. THOMAS F. EAGLETON, MO. LAWTON CHILES, FLA. J. BENNETT JOHNSTON, L.A. WALTER D. HUDDLESTON. ICY. QUENTIN N. BURDICK, N. OAK. PATRICK .1. LEAHY, VT. 9..trtifeb ,Sfalez Zenate COMMITTEE ON APPROPRIATIONS WASHINGTON, D.C. 20510 .IIM SASSER. TENN. DENNIS DE CONCINI, ARIZ. DALE BUMPERS, ARK. .1. KEITH KENNEDY. STAFF DIRECTOR FRANCIS .1. SULLIVAN MINORITY STAFF DIRECTOR August 23, 1983 7 Mr. Paul A. Volcker Chairman Board of Governors Federal Reserve System Constitution Avenue and 21st Street Washington, D.C. 20551 Dear Mr. Volcker: Enclosed are copies of letters I have received from constituents of mine in North Dakota. ts. I thought you would be interested in their commen With kind regards, I am Sincerely, 73-‘f Quentin N. Burdick QNB:spc Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis GA-) co 17Tr4AL t&rsoINFERIE-lair/WTI L NAM •an g •• Pape 1141. II0, i Eizos•D•EAT sOes DE POSI T IINSUPIAMoci .—M111:1V WATIPCLM2enrcraiI6 58854 August 12, 1983 Secretary e Board of Governors of th Federal Reserve System 1 Washington, D. C. 2055 Dear Sir: RE: Regulation Y Proposed Revision to g Companies Regarding Bank Holdin to express my objection to er tt le is th g in I am writ sion relating to your vi re ed os op pr e th bank the portion of stock redemptions by it ib oh pr y el iv ct rds attempt to effe nimum capital standa mi n ai rt ce ss le un s ct holding companie should go into effe on ti la gu re ed os op pr are met. If your will cease to exist ns io ut it st in l ia nc of locally owned fina ired as a result qu re ad lo bt de al on rs because of the pe service that debt. to y it il ab in e th d a bank purchase an tal •ownership by to er sf an tr to le ib bank It will not be feas any redemption of mp co g in ld ho e th of using the concept stock. very large holding ly on n io at sl gi le ed Under the propos stock, deem holding company re to le ab be d ul wo will companies ndent community banks pe de in r le al sm e th pendent which,peans Locally owned inde . ge ta an dv sa di ct part of be at a distin gral and important te in an en be er ys wa banks have al untry would suff co r ou em th t ou th d wi proposal and our banking system, an ur yo er id ns co y ll fu care this provision. a great loss. Please aw dr th wi d an et rg please fo after consideration Yours truly, • jem S ephen L. Steneh Vice President SLS/ljj cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ews, Senator Honorable Mark Andr Burdick, Senator/ Honorable Quentin an, Congressman Honorable Byron Dorg Emerzsor4 umunNAllcan, uk.Pac. FIE-L:11MR L.VBECK AG( NTS HOW*, 3030 13th Ave So. lybeCk • Tele -1-701-293-0011 P.O. Box 3045 Fargo, North Dakota 58108 Erickson freeklner to tybeck . e'.'""•\17r' ri rr V.1 prt von En9ceennoven rwin Konrad r r t‘' ... 1 August 9, 1983 Senator Burdick United States Senate Washington DC 20000 Dear Quentin: g activities. I understand there din k hol ban the g nin cer con you to g I am writin , some of which I understand are not to is legislation pending to make revisions an article from the Independent ing los am enc I er. sum con the of st ere the best int views and concerns. Please note the Agent which outlines the insurance agents portion I have underlined. n and if this legislation comes I do thank you for keeping this in mind whe before you. Yours very truly, 1 HEKTNER-LYBECK-ERICKSON f„ / tr, .i.?D , •7 7 ,‘c MITPA titEq6\Vt-rie r AGH:do Enc. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — — A LOCAL INDEPENDENT AGENCY M, HOME, AUTO. -PROTECTING YOUR BUSINESS, FAR CROP AND LIFE- 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: Newsletter Citations: Number of Pages Removed: 2 Independent Insurance Agents Association. "IIAA Spells Out Reasons for Bank Restrictions." Window On Washington, July 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org BOARD OF GOVERNORS OF THE •c0 FEDERAL RESERVE SYSTEM *0 ' ;•-• • 62 4 'S ilif r WASHINGTON, 0. C. 20551 &AL OS • •. „ • • • ' Mr. Louis Ross P.O. Box 653 Beverly Hills, California August 29, 1983 90213 Dear Mr. Ross: At the request of Chairman Annunzio, I am pleased to respond to your letter of July 20, asking whether a lender must furnish a consumer with Truth in Lending disclosures and a right of rescission notice in a consumer home loan transaction, in which the lender acquires a security interest in the consumer's home in the form of a deed of trust with the right of foreclosure. Under the current Regulation Z (effective October 1, 1982) which implements the Truth in Lending Act, the answer to the question depends upon whether the lender granting the credit is subject to Regulation Z, and if so, whether the credit is subject to the right of rescission. I will first address the question of whether Truth in Lending disclosures should have been given in this case. Section 226.2(a)(17) of Regulation Z defines a creditor as a person who offers or extends consumer credit that is subject to a finance charge more than 25 times (or more than 5 times for transactions secured by a dwelling) in a calendar of year. If the lender in your transaction meets the definition a creditor as stated above, the individual must provide the consumer with the Truth in Lending disclosures required by Section 226.18 of the Regulation. As to the question of whether the transaction would be rescindable, it first would have to be granted by a creditor as defined in the paragraph above. Unless the credit is granted by someone subject to the regulation, neither the disclosure nor the right of rescission requirements would apply. Assuming the credit has been granted by a creditor as defined in Regulation Z, section 226.23(a) of the Regulation gives consumers the right to rescind credit transactions secured by their principal dwelling if the credit extended is for a purpose other than for the acquisition or initial construction of the consumer's principal dwelling. Consequently, if an individual meeting the definition of creditor is extending credit to a consumer for a purpose other than for the acquisition or initial construction of a dwelling, such as for home improvements, the right of rescission would apply, and the creditor must provide the consumer with the notice of the right to rescind. If the consumer, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ,1r. Louis Ross Page Two however, is going to use the credit extended to finance the acquisition or construction of a principal dwelling, the right of rescission would not apply, regardless of whether or not the individual granting the credit meets the definition of a creditor as defined by the Regulation. The questions and answers (Appendix A of Regulation Z) submitted by you applied to Regulation Z before it was revised in April of 1981 to implement major changes to Truth in Lending enacted in 1980. I hope this information is helpful. if I can be of further assistance. Please let me know Sincerely, Donald J. Winn Assistant to the Board cc: Chairman Annunzio MW:CO:pjt (#V-157) bcc: Ms. Whitehead v/ Mrs. Mallardi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FRANK ANNUNZIO, ILL., CHAIRMAN FERNAND J. ST GERMAIN. R.I. HENRY B. GONZALEZ, TEX. JOSEPH G. MINISH, BILL PATMAN, TEX, BRUCE F. VENTO, MINN. MIKE LOWRY, WASH. CURTIS A PRINS, STAFF DIRECTOR TELEPHONE: 226-3280 RON PAUL TEX. CHALMERS P WYLIE, OHIO JOHN HILER, IND THOMAS J RIDGE, Pk U.S. HOUSE OF REPRESENTATIVES NINETY-EIGHTH CONGRESS SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS ROOM 212 HOUSE OFFICE BUILDING ANNEX NO WASHINGTON, D.C. 20515 rl August 3, 1983 1-"re —11 CZD - rt•-4 rrl • Honorable Paul A. Volcker Chairman Federal Reserve Board nue, N.W. 20th Street and Constitution Ave Washington, D.C. 20551 I- C▪./) •-••••1 c=p C-) CD .L"-• Dear Mr. Chairman: have received from Enclosed is a copy of a letter I official interpretation of an ts ues req who s, Ros is Lou Mr. in Lending Regulation Z th Tru s rd' Boa e erv Res l era Fed the ht of rescission in rig s er' sum con the to ns tai per as it er's home. transactions secured by the consum indicated that the I have written to Mr. Ross and . Board will respond directly to him this matter. Thank you for your cooperation in With every best wish, Sincerely, 401,44/ /42444 -rank Annunzio Chairman Enclosure July 20, 1983 Committee on Banking, Finance & Urban Affairs Rayburn House Office Building, Room 2129 Washington, D.C. 20515 Attention: Congressman Frank Annunzio Chairman, Subcommittee on Consumer Affairs Dear Congressan Annunzio: I am requesting an official internretation of the meaning of the questions and answers as shown on the enclosed copy of Appendix A of Regulation 1 (1977), applicable to the following question: In a consumer home loan transaction in which the lender acquires a security interest in the consumer's home in the form of a deed of trust with the right of foreclosure, is it mandatory by Federal law that the lender furnish the consumer the required material disclosures stating the costs of the loan and the Notice of Right of Rescission to cancel the loan transaction, if the consumer desires to do so? I would appreciate your earliest attention and reply. Very t ly you z' G/ArL2 Louis Ross P.O. Box 653 Beverly Hills, Ca 90213 Encl. Appendix A, Reg. I Page 100 (1977) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org ff Federal Reserve Bank of St. Louis APPENDIX A Q: NItist I use the Board's Annual Percentage Rate tables? No. You may wish to purchase specialls prepared tables toi sour ts pc oh business from one of several table or chart publishers. Trade associations and financial institutions can be helpful also. (Reg Z/ 226.5(0(2)) Q: Must the creditor alwapr show the annual percentage rate? A: Generally yes, except that on credit other than open end credit. it the tinancr.• charge is $5 01 less. and applies to credit oh $75 or less, it need not be shown. I he same exception applies to a finance charge of $7.50 or less on credit of more than $75 (Reg / 226 St b)(2)(1) and (ii)) SOME QUESTIONS AND ANSWERS ..111OUl RI Al. ESIAIF Q: Is real estate credit covered under Regulation Z? A: Yes. All real estate credit in any amount is covered Linder this Regulation when it is to an individual and not for business purposes, except that real estate credit for agricultural purposes in excess of S25,000 is exempt.(Reg. Z/226.3) Q: Does such real estate credit cover more than mortgages? A: Yes, very definitely. Any credit transaction (other than a business credit transaction) that involves any type of securit interest in real estate of a consumer is cos ered. (Reg. 1.'226.2(dd). (ea (11.) and (gg)) Q: Are there any special provisions that appl3 to real estate credit? A: Two basic points: I. In many cases, you do not have to show the total &Hai amount of the finance charge on a credit sale or first mortgage loan to finance the purchase oh the customer's dwelling (Reg. 1../ 226.8(0(8) and (d)(3); 226.8(18) 2. In many instances, out eustomei has the right to cancel eiedit arrangement within three business days it his residence is used as collateral for credit 'Reg / 226.9) Q: Nlus( a creditor inform his customer of the right to cancel? A: Ye. He must furnish the Notice prescribed hs the Regulation (Rec. 1. 226.9(h)) Q: What must the customer do to cancel a real estate transaction under the Regulation? A: A customer may cancel a transaction or or or I. by signing and dating the Notice to customer required by Federal law, which he receives from the creditor, and either (a) mailing the Notice to the creditor at the address shown on the Notice. (b) delivering the Notice to the creditor at the address shown on the Notice either personally or by messenger (or by other agents). 2. by sending a telegram to the creditor at the address shown on the Notice. A brief description of the transaction which the customer wishes to cancel should he included in the telegram. 3. by preparing a letter (or other writing) which includes a buret description of the transaction which he wishes to cancel. wid either (a) mailing the letter (or other writing) to the creditoi al the addiess shown on the Notice. (b) delivering the letter tor other writing) to the creditor at the address shown on the Notice either personally or by messenger tor hs other agents). 100 1! 4-401, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 PAUL A. VOLCKER August 26, 1983 CHAIRMAN The Honorable David L. Boren United States Senate Washington, D. C. 20510 Dear Senator Boren: Thank you for your letter of August 17 regarding concerns your constituents expressed relating to the Board's proposal to amend Regulation Y, its regulation governing bank holding companies. Specifically, they express concerns about the proposed changes to the provisions of the regulation governing the redemption by a bank holding company of its own securities. Currently, the Board's Regulation Y (12 CFR 225.6) requires a notice to the Board for any proposed redemption by a bank holding company of its own equity securities if the consideration paid for the shares exceeds 10 percent of the net worth of the bank holding company. The Board reviews the notice to determine whether the redemption would adversely affect the safety or soundness of the organization. Under the proposed amendments to Regulation Y, no notice would be required for any redemption if, after the redemption, the bank holding company meets the standards for adequate capitalization established by the Board of Governors and the Comptroller of the Currency. The Board generally regards these standards as the minimum for safe and sound operation of banking organizations. The proposal also allows a bank holding company to make redemption of its stock without regard to these capital standards under two additional circumstances. First, a company may make de minimis redemptions equal to one percent of its net worth in any 12 month period. Second, a company may apply to the Board for its approval to make redemptions in unusual circumstances. In considering those requests, it is contemplated that the Board would consider the overall effects of the proposed redemption on the capitalization of the bank holding company. The proposed revision of the redemption provisions emphasizes that the Board's primary concern with such redemp tions is the effect they have on bank holding company capitalization. In a redemption situation, the holding company's capital is reduced through the retirement of its capital stock and, in many cases, this reduction in capital is accompanied by a corresponding increase in the indebtedness of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable David L. Boren Pale Two the holding company to finance the redemption. In other words, in many cases, a redemption involves the substitution of debt for capital in the bank holding company. Under the proposal, the ability to make redemptions that reduce the holding company's capital and increase its indebtedness is made contingent upon the hank holding company satisfying the interagency capital standards. The proposal is premised upon the belief that a reduction in a bank holding company's capital may not be consistent with safe and sound banking practice where the holding company's capital will be below the minimum capital standards established by the Board and the Comptroller of the Currency. The, Board has received numerous comments on the Proposed amendment, primarily from small banking organizations. The main thrust of the comments is directed to the fairness of the proposed provision that no redemption be permitted without prior approval where the bank holding company has a debt-toequity ratio in excess of 30 percent following the redemption. The comments have raised concern that application of the Board's capital standards in a redemption situation will seriously limit the transferability of small banking organizations. While the Board is concerned with adequate capitalization of bank holding companies, the Board has also recognized the unique function of small one-hank holding companies in facilitating the transfer of ownership of small banking oraanizations. (Policy Statement on Assessment of Financial Factors of One-Bank Holding ComPanies, 'larch 2R, 1)80.) Pecause of this concern, the Board has, in proposals involving the ownership of small banking organizations, permitted liberal debt-to-equity ratios substantially in excess of the 30 percent level on the basis that the bank holding company would direct its efforts to reducing its debt-to-equity ratio over a relatively short time span in order that its improved debt capacity will allow it to serve as a source of strength should the subsidiary bank require assistance. The Board's staff is reviewing modifications to the proposed stock redemption proposal in light of the Board's previously stated policy regarding the transfer of ownership of small banking organizations and the Board's concerns with the capital adequacy of the nation's banks. I appreciate having your constituents' views, and their concerns will be presented to the Board when it takes action on the proposal. I will be happy to let you know when the Board reaches a final decision on the matter. Sincerely, (VM:)CO:pjt (#V-172) bcc: Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CLO typing standard response for Chairman's signature MIDASEIr COMMITTEE ON FINANCE DAVID BOREN COMMITTEE ON AGRICULTURE. NUTRITION AND FORESTRY OKLAHOMA COMMITTEE ON SMALL BUSINESS WASHINGTON OFFICE: RUSSELLBUILDIMG WASHINGTON, D.C. 20510 STATE GOMM: 621 NORTH ROIHNSON OKLAP0OFKA CITY, OKLAHOMA 73102 440 SOUTH HOUSTON TULSA, OKLAHOMA 74127 MUNICIPAL BUILDING SEMINOLE. OKLAHOMA 74868 UnittTgRates g5enate WASHINGTON, D.C. 20510 August 17, 1983 cp Mr. Paul A. Volcker ors of the Chairman, Board of Govern FEderal Reserve System Constitution & 21st St. Washington, D.C. 20551 Dear Paul: ma me smaller banks in Oklaho so om fr ts en mm co ed iv ce rve I have re tion Y by the Federal Rese la gu Re of ng ti da up e th regarding Board. that proposed Treasury is n er nc co r ei th , ly al ic k More specif iminate the use of stoc el ll wi s ge an ch on ti ca fi ly, stock noti rship changes. Apparent ne ow r fo e cl hi ve a as l redemption rtionate impact on smal po ro sp di a ve ha ll wi s these change bank holding companies. Thank mments on this issue. co ur yo g in iv ce re to d I look forwar . you for your assistance Sincerely, avid L. Boren U.S. Senator DLB:dba https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 August 26, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Bill Frenzel House of Representatives Washington, D. C. 20515 Dear Mr. Frenzel: Thank you for your letter of August 17 regarding the Board's proposal to amend Regulation Y, its regulation governing bank holding companies. Specifically, you express concern about the proposed changes to the provisions of the regulation governing the redemption by a bank holding company of its own securities. Currently, the Board's Regulation Y (12 CFR 225.6) requires a notice to the Board for any proposed redemption by a bank holding company of its own equity securities if the consideration paid for the shares exceeds 10 percent of the net worth of the bank holding company. The Board reviews the notice to determine whether the redemption would adversely affect the safety or soundness of the organization. Under the proposed amendments to Regulation Y, no notice would be required for any redemption if, after the redemption, the bank holding company meets the standards for adequate capitalization established by the Board of Governors and the Comptroller of the Currency. The Board generally regards these standards as the minimum for safe and sound operation of banking organizations. The proposal also allows a bank holding company to make redemption of its stock without regard to these capital standards under two additional circumstances. First, a company may make de minimis redemptions equal to one percent of its net worth in any 12 month period. Second, a company may apply to the Board for its approval to make redemptions in unusual In considering those requests, it is contemcircumstances. plated that the Board would consider the overall effects of the proposed redemption on the capitalization of the bank holding company. The proposed revision of the redemption provisions emphasizes that the Board's primary concern with such redemptions is the effect they have on bank holding company In a redemption situation, the holding capitalization. company's capital is reduced through the retirement of its capital stock and, in many cases, this reduction in capital is accompanied by a corresponding increase in the indebtedness of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Bill Frenzel Page Two the holding company to finance the redemption. In other words, in many cases, a redemption involves the substitution of debt for capital in the bank holding company. Under the Proposal, the ability to make redemptions that reduce the holding company's capital and increase its indebtedness is made contingent unon the bank holding company satisfying the interagency capital standards. The proposal is premised upon the belief that a reduction in a bank holding company's capital may not be consistent with safe and sound banking practice where the holding company's capital will be below the minimum capital standards established by the Board and the Comptroller of the Currency. The Board has received numerous comments on the proposed amendment, primarily from small banking organizations. The main thrust of the comments is directed to the fairness of the proposed provision that no redemption be permitted without prior approval where the bank holding company has a debt-toequity ratio in excess of 30 percent following the redemption. The comments have raised concern that application of the Board's capital standards in a redemption situation will seriously limit the transferability of small banking organizations. While the Board is concerned with adequate capitalization of bank holding companies, the Board has also recognized the unique function of small one-bank holding companies in facilitating the transfer of ownership of small banking organizations. (Policy Statement on Assessment of Financial Factors of One-Bank Holding Companies, March 28, 1980.) Because of this concern, the Board has, in proposals involving the ownership of small banking organizations, permitted liberal debt-to-equity ratios substantially in excess of the 30 percent level on the basis that the bank holding company would direct its efforts to reducing its debt-to-equity ratio over a relatively short time span in order that its improved debt capacity will allow it to serve as a source of strength should the subsidiary bank require assistance. The Board's staff is reviewing modifications to the proposed stock redemption proposal in light of the Board's previously stated policy regarding the transfer of ownership of small banking organizations and the Board's concerns with the capital adequacy of the nation's banks. I appreciate having your views, and your concerns will be presented to the Board when it takes action on the proposal. I will be happy to let you know when the Board reaches a final decision on the matter. Sincerely, (VM):CO:pjt (V-177) boo: Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BILL FRENZEL Tisio DISTRICT. MellItIOTA 111111111140TA MICR' MAYBETH CHRISTENSDI m.mmmuciimm 1026 LOOGIrOtTN Omura 202-12S-W1 Now 115 1120 him Avow SowT0 Ikarmiscrost. Monosson 01431 CongresS1 of tbe tiniteb atatesS 612-W1-1100 *DUO of iltpressentatibtsi IlListington. 10.C. 20515 August -n -n c.., 17, 1983 rn e=) Honorable 41.11 Chairman Federal 20th Reserve and NW, Ave. r- ..... — •• ca Mr, I writing am express to proposed Regulation Y, which owned banks, making one-bank will the not with a it almost company be a to to Section the are Bank the Federal 225.41 of Holding burdens redeem In already its GO ...., rn = "/ own small, stock. to redeem up the own banking needed, very its truly, Bill Frenzel Member of Congress BF:pd WKS STATKIIKEY MINT= 011 Peal 11101 WITH RICTO.E0 WIKK1 • hope current sufficient, independents, Yours a family my judgment, the shaking not and revisions, and notice, are small that are private impossible for company prior the hurt of these holding 45-fay changes to approved. system, especially not add clearly necessity rules, allowing Enough opposition implements would holding question stock Ci, ....4 Act. proposals they my amendments These I rn -in Chairman; Reserve ' s Company VO na Washington, D.C. 20551 Dear 4=0 dc= rn vo = ,.. ..... Board Constitution 2 C= =r" r".2 c-D rn = c:, Volcker Paul rrs rrs N3 .....1 C.', The W t.a.7 ' Let s C3 rn Vo 0 foo SOCIAL ENGAGEMENTS -- IMF MEETINGS Friday, September 23 6:30 - G-Five Meeting & Dinner (stag) Satu_rday, September 24 G-Ten Meeting 5-8 Cocktail Buffet - Goldman Sachs, F Street Club 8:30 G'-Five Dinner (stag) Sund_.vf, September, 25 liaterim Committee eham, Palladian Room 12:00-2:U0 Luncheon - Continental Illinois National Bank, Shor Per Jacobbson Lecture 3;00 Larosiere @ F St. Club Mrs. Volcker -- Luncheon - Mrs. Clausen & Mrs. de 12:30 Bank), Atrim Reception - Cleary, Gottlieb, Steen & Hamilton (for Pres. Asian Development 5-7 Hotel ons Seas Public Limited Co., Four 5;30-7:30 Reception - Euro-clear Clearance System Istituto Mobiliare Italiano, Metropolitan Club 6-8;30 Reception 8;00 Dinner - Peg & Don Platten, Department of State 8;00 on ran Gallery of Art Reception & Buffet Supper, Morgan Stanley, Corco https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2 Monday1 _September, 26j_1983_ 12;00,-3;00 -7;30 5;30, Reception & Buffet Luncheon Reception Manufacturers Hanover Trust - Washington Hilton -Rotterdam Bank, Woodrow Wilson House, 2340 S St. Amsterdam, Brown Brothers Harriman & Co. - Shoreham Hotel, Diplomat Room -8;00 6;00, Reception 8;00 NW (Prussia) Black tie Dinner 7- Bank of America, City Tavern Club, 3206 M St. 7;30 (Wriston) Reception & Dinner - Citibank, Meridian House, 1630 Crescent Place, NW 8;30 Black tie dinner - Lewis Preston, Morgan Bank, 2900 N St. N.W. Tuesday. , September 27 12;15 12;00 1:00 5;30,-8;00 5-7;30 5;307-7;30 ador Room Luncheon (PAV) - Merrill Lynch Capital Markets - Shoreham, Ambass Luncheon - Brasilinvest, Shoreham Hotel, Regency Ballroom (PAV) am, Blue Rm (PAV) - Luncheon - Delegations from Western Hemisphere Countires, Shoreh Reception - Northern Trust Corp., F Street Club Reception - Credit Suisse First Boston Ltdl, 3327 P St. NW Reception 7- ABECOR - Madison Hotel, Dolley Madison Ballroom First National Bank of Chicago, Corcoran Gallery 6;007-8;00 Reception 6;00,-8;00 Reception - Federal National Mortgage Association, 3900 Wisconsin Avenue 6;30-9;30 Reception - American Express, Meridian House 7;00'-8;00 Cocktails & Dinner - Merrill Lynch, Capitol Building 8;00-8;30 Reception & Dinner - Mr. & Mrs. Clausen & Mr. & Mrs. de Larosiere, Shoreham https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3 Wednesday, September 28,1983 Luncheon (PAV) - First Chicago, Ritz-Carlton Hotel, Chesapeake Room 12:00 N 6-8 Joint Fed-Treasury Reception, National Gallery 6-8 Reception National Bank of Abu Dhabi & Abu Dhabi Int. Bank, Sheraton Carlton Reception - Gulf International Bank, Shoreham, Diplomat Room Reception - Industrial Bank of Japan, Madison, Dolley Madison Salon 9 , 7 5;30-8 Dinner - Salomon Brothers (Herny Kaufman) Cocktail-Buffet - Merrill Lynch - The Foundry 10:00 , 6 Thursday https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis City Tavern Club September 29 5;30-7;30 Reception Mr. Watanabe, Bank of Tokyo, Madison, Dolley Madison Ballroom August 26, 1983 The Honorable Rill Patman House of Representatives 20515 Washington, D.C. Dear Mr. Patman: while I am With regard to your letter of August 15, ions I had with members of glad to characterize the few conversat legislation, I do not believe the public in reference to the IMF particular people it would be a?propriate to identify the I specifically recall disinvolved. All four people with whom IMF legislation were cussing the approaching vote on the e were themselves interindividuals that I had reason to believ that institution and ested in the strength and stability of of the policy issues or appreciated the importance of certain gressional debate. One of questions that had been raised in Con eral Reserve official; one those persons is a former senior Fed uainted; the others had was a small banker with whom I am acq financial experience. ention of the In each case, I simply called to the att the legislation was person involved the fact that action on Congressional concerns or approaching and reviewed some of the me. In that context, I questions that had been expressed to might be interested in indicated that members of the Congress ons that had been raised knowing of their response to the questi no systematic effort with me. Ns I hope this makes apparent, "follow UP" with those was made and I initiated no effort to contacts. ue is not the As to your substantive question, the iss --they plainly are not-attractiveness of apartheid or communism for dealing with these very but rather the most suitable forums some earlier corresponlegitimate concerns. As elaborated in ieve that the IMF would dence which I've enclosed, I do not bel e forum for pursuing be an appropriate or especially productiv essentially political issues. Sincerely, Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PAV:NMS:pjt (#V-170) bcc: Mrs. Mallardi (2) (Enclosures: Ltr. dtd. 5/6/83 to Chrmn. St Germain from Chrmn. Volcker on SDR and ltr. dtd. 5/25/83 to Chrmn. Hatfield from Chrmn. R Volcker.) .• V . :e:W 014"10 " ilial. •••• Z. y.• • • • viikag•• et • ..-77 Action assigned Neal Soss BILL OATMAN 14T; 1408 LONGWORTH BUILDING WASHINGTON, D.C. 20515 (202) 225-2831 DISTRICT, TEXAS Comm of tbe Unita iptate5 P.O. DR2_,N,IER A GANWpia, "1".•,s 77962 ag12) Cf, 3OU5C of tkeprefSentatibe0 ••• 7 7.:r7 Uicosbington, 3D.Qt. 20515 r-D rri Eli:2 August 16, 1983 Honorable Paul Volcker Chairman, Board of Governors Federal Reserve System 20551 Washington, D. C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis G, 411•111.• --n rrl ""r1 cr) C/3 rfl r-r) rrl q' Gerl CD 7.X-1 Dear Chairman Volcker: Thank you for your August 11 letter correcting the record concerning your testimony before the Subcommittee on Domestic Monetary Policy on August 3. Your correction, stating that you later recalled three conversations resulting from getting in touch with members of the public in Representatives' districts to influence the Representative to vote for the IMF bill, confirms that you had four such conversations. You had testified that you had talked to only one private person about that matter. I appreciate your providing this additional information, and I will provide a copy of your letter to the Subcommittee Chairman, the Honorable Walter E. Fauntroy, so the record can be corrected. Meanwhile, my office has received several telephone calls asking which Representatives' districts were involved in your calls and what persons you asked to contact those Representatives. I also would like to have that information and, therefore, request your kind cooperation in providing it to me at your earliest convenience. As you know, I remain deeply disturbed about the potential impact of the $8.4 billion proposed additional U. S. commitment to the IMF. My concerns are about the effect that this diversion of funds from the U. S. money supply may have on interest rates in this country, the $8.4 billion increase in our national deficit (even though this is an off-budget commitment), and the potential for increasing inflation because of the restricted availability of funds for domestic lending. A final question, to which I would appreciate your response: do you support the amendments to deny IMF loans to countries practicing apartheid and to countries under Communist government control? I look forward to hearing from you in the near future. Sincerely, WNP:bb • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 205S1 PAUL A. VOLCKER August 24, 1983 CHAIRMAN The Honorable Tony Coelho House of Representatives Washington, D.C. 20515 Dear Mr. Coelho: Thank you for your letter dated August 5 regarding a proposed agricultural credit corporation to be affiliated with Pacific Valley National Bank of Modesto, Modesto, California ("Pacific Valley"), and PV Financial, Modesto, California. It is my understanding that in April 1983, Pacific Valley contacted the Comptroller of the Currency concerning the permissibility of its investment in an agricultural credit corporation under section 24(7) of the National Bank Act, 12 U.S.C. .5 24(7). The permissibility of this investment is subject to the Comptroller's determination and is pending before the Comptroller. As a separate matter, by letter dated June 16, 1983, PV Financial requested that the Board exempt transactions between Pacific Valley and the agricultural credit corporation from the collateral and lending requirements of section 23A of the Federal Reserve Act, 12 U.S.C. § 371c. Section 23A is designed to protect banks from abuse in financial transactions with entities with which they are affiliated. Section 23A imposes collateral requirements and lending restrictions on such transactions in order to protect the bank and its depositors from losses that might result from "non-arm's length" transactions between the bank and its affiliate. Prior to the passage of the Banking Affiliates Act of 1982, ("Act"), section 23A did not apply to affiliates engaged solely in the business of an agricultural credit corporation. In 1982, Congress eliminated this exemption when it passed the Act as part of the Garn-St Germain Depository Institutions Act. Although Congress eliminated the specific exemption for agricultural credit corporations, Congress generally authorized the Board to exempt specific transactions or relationships from the Act if the exemption would be in the public interest and consistent with the purposes of section 23A. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Tony Coelho Page Two PV Financial has requested an exemption, and I am informed that the Board staff is currently preparing to submit PV Financial's request to the Board for its consideration. In preparing PV Financial's request for an exemption, Board staff is examining the history and supervisory aspects of transactions between banks and agricultural credit corporations to determine whether an exemption would create any concern. I appreciate receiving your views on this matter, and your concerns will be presented to the Board when it takes action on this proposal in the near future. I will be happy to let you know when the Board reaches a final decision on the matter. Sincer,Xy, . S/Paul A. 11.PGN:CO:NS:pjt (#V-164) bcc: Ms. Mardolilli Mrs. Mallardi (2) Legal Records (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • ICULTURE COMMITTEE ON AGR SUBCOMMITTEES: TONY COELHO IA 15TH DISTRICT, CALIFORN 216 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-6131 AR COTTON, RICE AND SUG POULTRY LIVESTOCK, DAIRY AND . CONSUMER DOMESTIC MARKETING N RELATIONS AND NUTRITIO DISTRICT OFFICES: FEDERAL BUILDING 1130 0 STREET, ROOM 2001 FRESNO, CALIFORNIA 93721 (209) 487-5004 INTERIOR AND COMMITTEE ON INSULAR AFFAIRS FEDERAL BUILDING 415 WEST 18TH STREET MERCED, CALIFORNIA 95340 (209) 383-4455 SUBCOMMITTEES: OURCES WATER AND POWER RES OVERSIGHT AND INVESTIGATIONS Congrc55 of tbe ZLInittb Rptate5 LARGE MAJORITY WHIP-ATNG AND DEMOCRATIC STEERI POLICY COMMITTEE FEDERAL BUILDING nnIsTREET 4 5:10DE STO, PII F OR1.111P. 9535 PotifSe of 1ltprriqntatibe5 -n r.-1 cn 'rn Ula5bington, D.C. 20515 (20a3327-gil rri c-) r--- •••••• August 5, 1983 rv ••••••• C=1 3z Mr. Paul A. Volcker Chairman Federal Reserve System N.W. 20th and Constitution, Washington D.C. 20551 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 9P C11 0) r-r Dear Mr. Volcker: pending attention to a case now ur yo g in br to g in it wr I am Curd the Comptroller of the an d ar Bo e rv se Re l ra de with the Fe rency. ia has nk of Modesto, Californ Ba al on ti Na ey ll Va c fi Paci ion. ltural Credit Corporat cu ri Ag a r fo al os op pr a submitted n was dated April 1983. The original applicatio has been made, because se ca is th on on si ci de It seems that no difficulty in developing ng vi ha e ar es ci en ag th . the legal staffs of bo decision can be made cy li po a h ic wh om fr y, or le the legislative hist things which your peop r he ot ny ma e ar e er th eWhile I realize that four months should be ad at th k in th d ul wo I t are concerned about, gh this is a preceden ou th en ev , se ca is th quate time to research setting matter. li at serve is Pam Nardolil Re l ra de Fe e th in on The contact pers , the case is being ce fi of s r' le ol tr mp Co e 202/452-3289, and in th . As requested by 42 19 744 2/ 20 at lt au rn He handled by Suzanne L' of Senator Pete Wilson ce fi of e th d an , ce fi my of Ms. L'Hernault, both legislation, and will d te la re e th of es pi co have made requests for to her. be forwarding that on tter, and I consideration of this ma ur yo te ia ec pr ap I would ible. Agribusiness is ss po as on so as n ke be ta fic urge that some action and the approval of Paci , ns ia rn fo li Ca ny ma the lifeblood of t benefit to many of ea gr of be ll wi al os prop Valley National Bank's our citizens. rward to your reply. fo ok lo I . ce an st si Thank you for your as Sincerely, k,SLIVO TONY COELHO MEMBER OF CONGRESS • LAW OFFICES LUPI ROSENBLUM, PARISH & BACIGA PROFESSIONAL CORPORATION Or COUNSEL SEVENTH FLOOR 1E ROSENBLUM ALUIN VICTOR J. BAC:G P•0544 JILF•RE• .1. INENIXT P. vote4tT5KY ..#0041.1 C. NEJNERNIET 111 440 ma Ail 0. 64 A30N 00etfryL TENTH FLOOR SAN SS ALMADEN BOULEVARD ET 114 SANSONE STRE 94104 FRANCISCO. CALIF. SAN JOS(. CALIF. 95113 1400) 977-0120 14151 421-0232 IRONALOLLUCF410 SCH NE CX ¶U0%4 .1014N E. CURTIS Jig- TELECOP• 14001 977-0129 TELECOPY 1.4451 397-5303 TELEX 270319RRF9 PLEASE REPLY TO: DORN AN N •1111ADF0 0110 N. °EWA San Francisco .11/J+IL 1E IFOSS 5090X0 11111CNALIFO ry T/40,4 A3 IC our OURO ISTILIFNEN M. WURZI 7E EFTLJAJIT 0. SCNE1NHOL BILENN C. WE STRE 1C.04 June 16, 1983 TI404AAS N. NAKRIS %WAYNE L BENDER JUT/0V( M. SULENSKI https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D.C. 20551 Mr. William W. Wiles Secretary Attention: Re: PV Financial (Modesto, California) on Proposed Agricultural Credit Corporati Dear Mr. Wiles: a corporWe represent PV Financial, a Californi d with the Board of ation and bank holding company registere y Act of 1956, as Governors under the Bank Holding Compan issued and outstandamended. PV Financial owns all of the ional Bank, Modesto, ing capital stock of Pacific Valley Nat in regard to SecCalifornia (the "Bank"). This letter is tion 23A of the Federal Reserve Act. Background ry 2, 1982, PV Financial was incorporated on Februa ties necessary to orto coordinate and direct the activi lic offering of 800,000 ganize the Bank. Following a pub ancial, the Bank comshares of the Common Stock of PV Fin 1982. Enclosed herewith is menced operations on November 1, ed July 29, 1982 and its 1982 the PV Financial Prospectus dat a full range of commercial Annual Report. The Bank offers on business customers inbanking services, with emphasis iculture. volved in food production and agr ts of the The Bank's primary service area consis a, and the balance of Stanislaus City of Modesto, Californi as of San Joaquin County and the County, the southern are County. The leading commodities northern areas of Merced nty are milk, chickens and eggs, produced in Stanislaus Cou calves, peaches, grapes, silalmonds, walnuts, cattle and the leading producers of wines in age, and tomatoes. One of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Two d in Stanislaus County and the world, Gallo Winery, is locate 416 acres producing in 1982 the County had a total of 20, nislau County Departgrapes. Figures published by the Sta nislaus County had ment of Agriculture indicate that Sta $746,105,400 in total agricultural production valued at production in Cali1982. The value of all agricultural which the Counties of fornia in 1981 was $15,858,209,000, of ounted for $2,286,850,000. Merced, San Joaquin and Stanislaus acc is a major economic As these figures indicate, agriculture activity in the Bank's service area. ancial and The Chief Executive Officer of PV Fin Cardoza was formerly the Bank is Robert J. Cardoza. Mr. of the Modesto ProPresident and Chief Executive Officer on he held since 1972, duction Credit Association, a positi as Assistant General Manager and from 1968 to 1972 he served Association. The Modesto of the Merced Production Credit of the largest of such Production Credit Association is one Mr. Cardoza has had associations in the United States. erience. extensive agricultural lending exp ectors of PV Other members of the Board of Dir e in agriculture related Financial have substantial experienc 18-20 of the Prospectus enterprises. We refer you to pages on of this experience. dated July 29, 1982 for a descripti Vice Chairman of the Board One Director, E. Brice Draper, is s, the largest canning and of Directors of Tr -Valley Grower of California. Another marketing cooperative in the State Berryhill, is the current L. re Cla Mr. , ors ect Dir the of the California State Director of Food and Agriculture for Department of Agriculture. from the sale of The net proceeds to PV Financial y $7,950,000, of which its Common Stock were approximatel ,000 shares of the $5.00 $5,000,000 was used to purchase 500 balance was reserved for par value stock of the Bank. The possibility of an investment other activities, including the poration. in an agricultural credit cor Agricultural Credit Corporation organize a California PV Financial proposes to Credit Corporation" (the corporation named "Valley Ag to farmers and ranchers for "Corporation") to make loans ing the breeding, raising, agricultural purposes, includ estock. Such loans would be fattening and marketing of liv https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Three Corporation or orioriginated by the Bank and sold to the Corporation would ginated by the Corporation itself. The ices of the Corporation engage in no other business. The off esto, California, would be located at 1302 "J" Street, Mod the Bank, and officers the same location as PV Financial and officers of the Corof PV Financial would also serve as poration. ish a disThe Corporation is expected to establ Intermediate Credit Bank count relationship with the Federal funding would be provided of Sacramento (the "FICB") whereby nt or sale of indito the Corporation through the discou the Corporation pursuant vidual loans or by direct loans to B. In order to qualify to procedures prescribed by the FIC will be required to mainfor FICB funding, the Corporation lio to meet FICB stantain the quality of its loan portfo originated by the Bank and dards. It is expected that loans transferred without resold to the Corporation would be FICB officials regarding course. Mr. Cardoza has met with nt relationship and those the establishment of a discou ancial intends to proceed discussions are continuing. PV Fin near future, and the FICB with a formal application in the on eligible to utilize its is expected to find the Corporati on the FICB funding proservices. To obtain information gest that you contact Mr. gram, as necessary, we would sug the FICB, at (916) 485George M. Anderson, President of 6140. mer Co., We refer to Application of Otto Bre 1 (CCH Banking Law ReDocket No. BHC-58, January 12, 196 y of which is enclosed, porter, 1960-1966, 1193,220), a cop ral credit corporation orfor an example of an agricultu g company. There are ganized by a registered bank holdin s not propose to discount business reasons why the Bank doe ch are also covered in directly with the FICB, some of whi the Otto Bremer matter. and exceeding The Bank has agricultural loan dem the Corporation is expected to its capacity, and creation of ding to such demand than would a pon res in ive ect eff e mor be to the Bank. The lending limit one-time addition of capital the FICB in relation to any one h wit d nte cou dis ns loa for ation's capital and customer would be 50% of the Corpor bilities of the Corsurplus, and the ratio of total lia of credit established with the e lin the g din clu (in on ati por https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Four the Corporation would be FICB initially) to net worth of . Neither PV Financial nor allowed to at least seven-to-one rantee the Corporation's the Bank will be required to gua obligations to the FICB. Bank Holding Company Act shares in an The purchase by PV Financial of is permissible under Section agricultural credit corporation mpany Act, as such an invest4(c)(5) of the Bank Holding Co al banking associations under ment is authorized for nation of the Revised Statutes (12 the provisions of Section 5136 4(c)(1) of the Bank Holding USC 24). In addition, Section shares of any company of on iti uis acq the s mit per t Ac Company nishing services to or fur in ely sol d ge ga en be to or engaged k holding company or its performing services for the ban poration would act as an banking subsidiaries. The Cor pose of facilitating the adjunct to the Bank for the pur to the Board of Governors Bank's operations. We refer ral Reserve Regulatory de Fe the of 96 4-1 at on ti ta re interp Res. Bull. 1911; 12 CFR Service, Volume I (1967 Fed. ns 4(c)(1) and 4(c)(5), PV tio Sec on ed bas , us Th 2). 225.12 make application to the to ed uir req be t no ld wou l ia Financ n to acquire shares of the sio mis r per fo s or rn ve Go of Board Corporation. ief Executive Officer As already indicated, the Ch with the most FICB agriculson per e th and l, ia nc na Fi of PV J. Cardoza. Although rt be Ro is , ce en ri pe ex g in nd tural le e Officer of the Bank, the iv ut ec Ex f ie Ch o als is a oz Mr. Card r of the Bank is Raymon ce fi Of ing rat Ope ef Chi and t Presiden or of the Bank but is ct re di a o als is de Rho Mr. R. Rhode. erall coordination of the Ov l. ia nc na Fi PV of or ct re not a di FICB, and administration the h wit ip sh on ti la re s n' io Corporat the portfolio, will be under of the Corporation's loan control of PV Financial. treatment of the CorIn terms of the accounting advantages to consoliare re the o, li fo rt po an lo poration's idiary of PV Financial bs su a as on ati por Cor e dating th k the Bank. Whereas the Ban of ry ia id bs su a as n g rather tha deposits and then employin ing her gat of ss ne si bu e no is in the the Corporation will hav s, an lo e mak to s nd fu those ng discounted with the FICB. bei s an lo the ch mat to deposits of the Corporation with the n io at id ol ns co a , ly Consequent nanthe call reports and other fi t or st di to d ten d ul Bank wo PV Financial would not have . nk Ba the of ts en cial statem this problem. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Five sed with This proposed investment has been discus , Bank Holding Company and Mr. Harry W. Green, Vice President e Bank of San FranInternational Regulation, Federal Reserv the legal aspects cisco (telephone 415-974-2235). Also, Cooper, Associate have been discussed with Mr. William L. of San Francisco General Counsel, Federal Reserve Bank ng provided copies of (telephone 415-974-2254). They are bei this letter. 12 USC 24 ld also purIt is contemplated that the Bank wou Corporation, pursuant to chase shares of stock issued by the Seventh. Further, the the authority contained in 12 USC 24 st 80% of the total Bank expects that it would own at lea the Corporation. dollar amount of the capital stock of Bank would be of such a Nevertheless, stock purchased by the than the Bank would type or class that PV Financial rather business reasons for hold control of the Corporation. The sidiary of PV Financial structuring the Corporation as a sub have been mentioned above. horizes a Paragraph Seventh of 12 USC 24 aut chase for its own account pur to on ati oci ass g kin ban al ion nat icultural credit corpora"shares of stock" issued by an agr unless the association owns t tha es vid pro r the fur It n. tio unt invested by the assoat least 80% of the stock, the amo mpaired capital and ciation is limited to 20% of the uni tinction between voting surplus of the association. No dis . In the absence of such a sed res exp is ck sto g tin -vo non and t "stock" in the context distinction, we are of the view tha ation means any type of of an agricultural credit corpor ferred, voting or noncapital stock, whether common, pre mation of this view from voting. We have requested confir and our request is now the Comptroller of the Currency, are also being sent to Mr. pending. Copies of this letter Washington, D.C. office Frank Rath in the Comptroller's Joe Pogar in the Comp(telephone 202-447-1880) and Mr. (telephone 415-974-8593). troller's San Francisco Office erve Act Section 23A of the Federal Res we are conRegarding the Federal Reserve Act, posed purchase of stock not be cerned that the Bank's pro ction" within the meaning of construed as a "covered transa 23A, i.e. "a purchase of or an Paragraph (b)(7) of Section ued by the affiliate". Prior to investment in securities iss main Depository Institutions enactment of the Garn-St. Ger https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Six dit corporation was exAct of 1982, an agricultural cre n of "affiliate". pressly excluded from the definitio ns such a reference. Paragraph (b)(2) no longer contai agricultural credit corHowever, we believe the proposed ge of Section 23A, for poration is still outside the covera the following reasons: (1) (2) mpts certain Paragraph (d) of Section 23A exe in Paragraph transactions from the restrictions purchase of securi(a). One such category is the kinds described ties issued by any company of the Holding Company Act in Section 4(c)(1) of the Bank described in Section of 1956. Among the companies h services to or 4(c)(1) are companies that furnis holding company or perform services for the bank Corporation will be its banking subsidiaries. The cribed above. such a company, as already des ons in Paragraph The 10 and 20 percent restricti conjunction with (a) of Section 23A, when read in place a limit on Paragraph (b)(7)(B), appear to dit corporation the amount of agricultural cre a member bank. stock that may be purchased by USC 24 already However, Paragraph Seventh of 12 of investment. deals with this specific type percent limit would There it is provided that a 20 owns 80 percent or apply unless the national bank in which case more of the corporation's stock, 24 deals with the there is no limit. Since 12 USC s should control specific subject, its provision of Section 23A. We over the more general coverage has generally believe the Board of Governors reference to statufollowed such an approach in e, in regard to tory subsidiaries; for exampl the overlap of 12 premises holding companies and 12 CFR 250.200 and USC 371d and Section 23A, see ard to small business 12 CFR 225.101, and in reg 225.111 (although investment companies see 12 CFR may also qualify agricultural credit corporations t companies, national as small business investmen estment limitations of banks may disregard the inv e of agricultural credit 15 USC 682(b) in the cas of the Currency, corporations; see Comptroller ruary 10, 1981, Staff Interpretive Letter, Feb Volume 2, Banking Law, of 05 33. n tio Sec at ed cit and Cooper, published Whitley, Schlichting, Rice by Matthew Bender). https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Seven ion that the We respectfully request your confirmat erage of Section 23A. proposed investment is outside the cov to agree, we respectIf the Board of Governors is unable rd of Governors exempting fully request an order of the Boa nts. We believe an this transaction from such requireme erest and consistent exemption would be in the public int , as provided in paragraph with the purposes of Section 23A (e)(2) of Section 23A. is to safeThe principal purpose of Section 23A inst misuse for the benefit guard the resources of a bank aga control with the bank. It was of organizations under common king too large an amount designed to prevent a bank from ris to assure that extensions of in affiliated enterprises, and aid. In the case at hand, credit to affiliates will be rep The FICB will provide such concerns are not warranted. nting or purchasing indifunds to the Corporation by discou the Corporation pursuant vidual loans or by direct loan to the FICB. All loans must be to procedures prescribed by must meet FICB requirements, made for agricultural purposes, to assure liquidation of and must be of such character as e time consistent with the obligations within a reasonabl practices. Loan documensound lending and agricultural ation required for each tation and credit analysis inform The activities of the loan is prescribed by the FICB. ing agricultural loans Corporation will be confined to mak B. More than 75% of the and discounting them with the FIC be secured by collateral. discounted loans are expected to Corporation would represent an The Bank's investment in the quality standards which, in interest in loans meeting FICB y standards for loans made by turn, meet or exceed the qualit its own account. Such an invest for ed ain ret and k Ban the of funds of the type which ment would not be a misuse vent. Section 23A is designed to pre l promote the agriculThe proposed investment wil te of California and the farmers, tural industry of the Sta Bank's serving area by making ranchers and growers in the the industry than otherwise would be to ble ila ava ns loa e mor and the Bank can better serve the ial anc Fin PV e. cas the making possible increased produc, ity mun com the of ds nee g the risk to the Bank. According sin rea inc t hou wit , ity tiv Section 23A would be in the public m fro ion mpt exe an ly, interest. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Board of Governors of the Federal Reserve System June 16, 1983 Page Eight If any further information would be helpful, please do not hesitate to contact us. Very tr ly ours, h G. Mason JGM:dg Enclosure CC: Mr. Mr. Mr. Mr. Mr. Mr. Harry W. Green William L. Cooper Frank Rath Joe Pogar Robert J. Cardoza Gary G. Butler August 23, 1983 The Honorable Tom Lewis House of Representatives Washington, D.C. 20515 Dear Tom: 9 outlining the Thank you for your letter of August ut interest rates. The thrust concerns of your constituents abo that interest rates at their of their complaints seems to be sistent with sustained present levels are too high to be con foreign debt problems, and a economic recovery, containment of healthy balance of trade. oblective of Federal Let me assure you that it is the recovery consistent with Reserve policy to promote a sustained run. Such a recovery containing inflation over the longer rate the foreign debt would, over time, lo much to amelio balance of trade. Some problems and stimulate a healthier m interest rates can be moderate fluctuations in short-ter h an expansion. Indeed, suc of rse cou the in ur occ to ed expect the necessary price of steps be may now es rat in ses rea inc small small increases may help to to avoid renewed inflation. Such her than being a precursor rat on, er lat ses rea inc r rpe sha id avo tends to be associated with ch whi es rat in -up run id rap the of t is already rampant. steps to contain an inflation tha contributing to the In my view, the important elements st rates are fears that ere int rm -te ger lon of el lev h hig t curren cern about the implications con and ate ler cce rea l wil ion lat inf deficits. Thus, successful get bud l era fed e hug g uin tin con of lationary pressures even as inf n tai con t tha es ici pol ic nom eco bute importantly to a downtrend tri con l wil rs ove rec y nom eco the ilarly, further congressional Sim es. rat st ere int erm g-t lon in imbalance between revenues l ura uct str the uce red t tha s action toward lowering interest rates k wor l wil o als res itu end exp and nt conducive to balanced and creating an economic environme growth over the longer run. to you and your I hope these comments are useful constituents. Sincerely, DJ:SL:MLK:mrk (#V-163) cc: D. Johnson, S. Lepper, J. Kichline Mrs. Mallardi - 2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ..... •of 41- 0.• -P • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20 5S1 August 22, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Bruce F. Vento House of Representatives 20515 Washington, D. C. Dear Mr. Vento: Thank you for your recent letter concerning the proposed revision of Regulation Y. Your letter urges the Board to delay, for a period of 90 days, action on those portions of Regulation Y that would broaden the definition of a commercial loan for purposes of determining whether an institution is a bank under the Bank Holding Company Act. You state that Board action on the Regulation Y proposal would be inconsistent with ongoing Congressional consideration of draft legislation that deals with the definition of the term bank. The Board has indicated its support for the enactment of legislation that will address the issues raised by the acquisitions of "nonbank banks" by securities, insurance and other firms. To avoid preemption of Congressional discretion by a continuation of such acquisitions, the Board has forwarded for Congressional consideration draft legislation to halt temporarily new acquisitions of banks and thrifts by nondepository institutions. In addition, Congress now has before it, in the form of the Treasury's proposed Financial Institutions Deregulation Act of 1983, a comprehensive draft bill that addresses these and other fundamental issues. In view of the present confusion regarding the appropriate definition of the term bank and related issues, the Board hopes that Congress will act quickly on either the draft moratorium bill proposed by the Board or the draft Treasury bill which the Board has endorsed. The Board's proposal to amend the bank definition in Regulation Y is merely one part of a complete revision of that regulation that has been in progress for some time. This revision was undertaken as part of the Board's general Regulatory Improvement Project, and has resulted in the receipt of several hundred comments from the public concerning all aspects of Regulation Y. As proposed by the Board, the revised Regulation Y would, among other things, significantly reduce the regulatory burden now placed on bank holding companies by streamlining the procedures that holding companies must follow before engaging in new activities. The normal course of the Board's administration of the Bank Holding Company Act required the Board to address both the commercial loan and demand deposit portions of the bank definition in some detail during 1982. The Board's actions in this https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I The Honorable Bruce F. Vento Page Two respect were taken in the context of specific applications without any opportunity for public comment on the broader issues raised by those applications. The draft revision of the bank definition contained in Regulation Y represents a proposal to codify the positions previously taken by the Board. In the absence of such a rulemaking proceeding, there would have been no opportunity for public comment on these prior decisions. Thus, we believe that the proposed revision of Regulation Y provides a desirable opportunity for public participation where such particination might otherwise have been unavailable. In addition to the fact that the proposed bank definition is consistent with actions previously taken by the Board in individual cases, it is also consistent with the various legislative proposals now pending before Congress. As a general rule, any entity that would be a bank under the definition proposed by the Board also would be a bank under the proposed legislation mentioned above as well as under the FDIC's bill and the bill introduced by Chairman St Germain. The Board's proposal to revise Regulation Y has been outstanding since late May and the period for public comment was only closed as of August I. The Board, of course, will consider all comments received in deciding how to finalize the draft regulation, including those that you have submitted. Review of the comments received will take some time, and your letter will be considered by the Board when it acts on the final regulation. As is apparent, de facto the proposed change will not become effective--assuming the Board agrees to the proposal--until weeks after the Congress has returned from recess. I appreciate receiving your views on this matter. Sincerely, VM:AFC:PAV:pjt (#V-138) bcc: Mr. Mattingly G.C. Log 188 Legal Files (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BRUCE F. VENTO HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS 4TH DISTRICT, MINNESOTA 2433 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-6631 DISTRICT OFFICE: ROOM 150 MEARS PARK PLACE 405 SIBLEY STREET SAINT PAUL, MINNESOTA 55101 (612) 725-7724 Congrtss of thc ilinitcd e tats um of fRtprestntatium HOUSE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS HOUSE SELECT COMMITTEE ON AGING Vashington, D.C. 2015 C- July 18, 1983 The Honorable Paul A. Vol cker Chairman Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 co Dear Mr. Chairman: On May 20th, the Federal Res erve Board issued proposed regulations to substantially revise Regulation Y. I am concerned about the se proposed changes for two reasons: first, the scope of the substantive change in the powers and policies of the Federal Res erve Board, and second, the effect of such changes on Congressional consideratio n of pending legislation. The proposed revision of Reg ulation Y would substanti ally broaden the definition of a commercial loan. As you know, the definitio n of a commercial loan is of crucial importanc e in determining what a bank is and for engaging the Bank Holding Company Act of 1970. In addition, the proposed revision substantially modifies the powers of the Federal Res erve Board, the Comptroller of the Currency and the Fed eral Deposit Insurance Corpor ation. While these changes may have significa nt merit, they are of suc h a sweeping nature as to require closer Congressiona l examination. There have been several pie ces of legislation introduce d recently which would provide for a moratorium or provide a substantial revision in the laws governing financial institutions . This legislation is receiv ing active consideration by Congress. Where this legislation and your proposed reg ulations concern the same subject, Congress, not the Federal Reserve Board, mus t establish the federal policy. For these reasons I urge you to delay the implementation of the proposed changes in Regulation Y for 90 day s to allow Congress to fully con sider the issues involved and act on the pendin g legislation. I appreciate you r consideration of my request. Sincerely,_ 7-• // uce F. Vento Member of Congress BFV:ccj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . yr CC: Preston Martin, Vice Chairman Henry C. Wallich, Member Lyle E. Gramley, Member J. Charles Partee, Member Nancy H. Teeters, Member Emmett J. Rice, Member https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IOW August 22, 1983 The Honorable Paula Hawkins United States Senate Washington, D.C. 20510 Dear Senator Hawkins: Thank you for your letter restating your views about the disposition of the stock warrants obtained by the U.S. government in the course of guaranteeing loans to the Chrysler Cornoration. As you may already be aware, the Loan Guarantee Board has agreed to sell the warrants, without modification of their terms, to the public through a process of competitive bidding. We expect several syndicates of investment hankers to submit bids for the warrants; Chrysler also is welcome to participate in this process, with the price it submits to be -judged along with the others. The Board believes that this approach will maximize the returns to the taxpaper and thus will accomplish the objective stated in your letter. I appreciate your interest in this matter. Sincerely, S/Paul A, Volcket DK:EM:JLK:AFC:pjt (4V-166) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Kohn Ms. Mallinson Ms. Ray Mrs. Mallardi (2) Action assigned Mr. Kichline JAKE GARN. UTAH. CHAIRMAN JOHN TOWER, TEXAS JOHN HEINZ. PENNSYLVANIA WILLIAM L ARMSTRONG, COLORADO ALFONSE M DAMATO, NEW YORK SLADE GORTON. WASHINGTON PAULA HAWKINS. FLORIDA MACK MATTINGLY. GEORGIA CHIC HECHT, NEVADA PAUI 1;, D.E. VIRGINIA WILLIAM PROXMIRE. WISCONSIN ALAN CRANSTON, CALIFORNIA DONALD W RIEGLE. JR.. MICHIGAN PAUL S SARBANES, MARYLAND CHRISTOPHER J DODD,CONNECTICUT ALAN J DIXON. ILLINOIS JIM SASSER. TENNESSEE FRANK R LAUTENBERG, NEW JERSEY M DANNY WALL, STAFF DIRECTOR KENNE rH A McLEAN. MINORITY STAFF DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis United c$tates e$Enate COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 -11.1 August 11, 1983 re, cz) r-ri —n —Tr" (r) rrl The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Twentieth Street and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Chairman Volcker: In view of recent announcements concerning the disposition of Chrysler warrants held by the federal government, I wanted to renew my request to you to use your voice and vote as a member of the Oversight Board to ensure that the taxpayers receive full market value for their investment. From this perspective, it would be wrong to acceed to suggestions to shorten the maturity date from 1990 or to sell the warrants back to Chrysler at a discount. Nor would similar ideas be agreed to if this transaction is conducted, as it should be, at an "arms length" basis. Instead, I believe the federal government should sell the warrants on the open market. Or, if there is reason to believe a higher price will be achieved, these warrants should be sold to a major investment banking house. My impression from the meeting we had in my ofice in early July, prior to your confirmation hearings, was that you shared this view and I trust our joint position will be agreed to by the other two Board members, too. Sincerely, Paula Hawkins United States Senator PH:ssh rn C/3 CAJ, --I r-r, 3E CM, 7.Zip cep v., BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 August 22, 1983 • 'NAL RE.S •••• • PAUL A. VOLCKER CHAIRMAN The Honorable Quentin N. Burdick United States Senate Washington, D. C. 20510 Dear Senator Burdick: Thank you for your letter of August 8 enclosing letters your constituents regarding the Board's proposal to amend Regulation Y, its regulation governing bank holding companies. Specifically, your constituents express concern about the proposed changes to the provisions of the regulation governing the redemption by a bank holding company of its own securities. I.. Currently, the Board's Regulation Y (12 CFR 225.6) requires a notice to the Board for any proposed redemption by a bank holding company of its own equity securities if the consideration paid for the shares exceeds 10 percent of the net worth of the bank holding company. The Board reviews the notice to determine whether the redemption would adversely affect the safety or soundness of the organization. Under the proposed amendments to Regulation Y, no notice would be required for any redemption if, after the redemption, the bank holding company meets the standards for adequate capitalization established by the Board of Governors and the Comptroller of the Currency. The Board generally regards these standards as the minimum for safe and sound operation of banking organizations. The proposal also allows a bank holding company to make redemption of its stock without regard to these capital standards under two additional circumstances. First, a company may make de minimis redemptions equal to one percent of its net worth in any 12 month period. Second, a company may apply to the Board for its approval to make redemptions in unusual circumstances. In considering those requests, it is contemplated that the Board would consider the overall effects of the proposed redemption on the capitalization of the bank holding company. The proposed revision of the redemption provisions emphasizes that the Board's primary concern with such redemptions is the effect they have on bank holding company capitalization. In a redemption situation, the holding company's capital is reduced through the retirement of its capital stock and, in many cases, this reduction in capital is accompanied by a corresponding increase in the indebtedness of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Quentin N. Burdick Page Two the holding company to finance the redemption. In other words, in many cases, a redemption involves the substitution of debt for capital in the bank holding company. Under the proposal, the ability to make redemptions that reduce the holding company's capital and increase its indebtedness is made contingent upon the bank holding company satisfying the interagency capital standards. The proposal is premised upon the belief that a reduction in a hank holding company's capital may not be consistent with safe and sound banking practice where the holding company's capital will be below the minimum capital standards established by the Board and the Comptroller of the Currency. The Board has received numerous comments on the proposed amendment, primarily from small banking organizations. The main thrust of the comments is directed to the fairness of the proposed provision that no redemption be permitted without prior approval where the bank holding company has a debt-to-equity ratio in excess of 30 percent following the redemption. The comments have raised concern that application of the Board's capital standards in a redemption situation will seriously limit the transferability of small banking organizations. While the Board is concerned with adequate capitalization of bank holding companies, the Board has also recognized the unique function of small one-bank holding companies in facilitating the transfer of ownership of small banking organizations. (Policy Statement on Assessment of Financial Factors of One-Bank Holding Companies, March 28, 1980.) Because of this concern, the Board has, in proposals involving the ownership of small banking organizations, permitted liberal debt-to-equity ratios substantially in excess of the 30 percent level on the basis that the bank holding company would direct its efforts to reducing its debt-to-equity ratio over a relatively short time span in order that its improved debt capacity will allow it to serve as a source of strength should the subsidiary bank require assistance. The Board's staff is reviewing modifications to the proposed stock redemption proposal in light of the Board's previously stated policy regarding the transfer of ownership of small banking organizations and the Board's concerns with the capital adequacy of the nation's banks. I appreciate having your constituents' views, and their concerns will be Presented to the Board when it takes action on the proposal. I will be happy to let you know when the Board reaches a final decision on the matter. VM:vcd (#V-160) Sincerely, bcc: Messrs. Mattingly & Bradfield SeaM1Volcket Legal Files (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 bict.t Lo elte_A4...2.4;v7 MARK O. HATFIELD, OREG., CHAIRMAN TED STEVENS, ALASKA P. WEICKER, JR., CONN. JAMES A. MC CLURE, IDAHO JOHN C. STENNIS, MISS. ROBERT C. BYRD. W. VA. WILLIAM PROXMIRE. WIS. PAUL LAXALT, NEV. JAKE GARN, UTAH THAD COCHRAN. MISS. MARK ANDREWS. N. OAK. DANIEL K. INOUYE, HAWAII ERNEST F. HOLLINGS. S.C. THOMAS F. EAGLETON. MO. LAWTON CHILES, FLA. .1. BENNETT JOHNSTON, LA. WALTER D. HUDDLESTON. KY. Lown.L. JAMES ABONOR. S. OAK. ROBERT W. KASTEN. JR., WIS. ALFONSE M. D AMATO. N.Y. MACK MATTINGLY. GA. WARREN RUDMAN. N.H. ARLEN SPECTER, PA. PETE V. DOMENIC!. N. MEX. 'ZICrtifeb Zfatez Zerrate QUENTIN N. BURDICK, N. OAK. PATRICK J. LEAHY, VT. JIM SASSER. TENN. DENNIS DE CONCINI, ARIZ. DALE BUMPERS. ARK. J. KEITH KENNEDY, STAFF DIRECTOR R FRANCIS J. SULLJ VAN MINORITY STAFF DIRECTO https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis COMMITTEE ON APPROPRIATIONS WASHINGTON. D.C. 20510 /&° August 8, 1983 Mr. Paul A. Volcker Chairman Board of Governors Federal Reserve System Constitution Avenue and 21st Street Washington, D.C. 20551 Dear Mr. Volcker: from Enclosed are copies of letters I have received constituents of mine in North Dakota. ents. I thought you would be interested in their comm With kind regards, I am Sincerely, Quentin N. Burdick QNB:spc Enclosures •••••• •• •••••• •••••• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SECURITY STATE BANK OF ROBINSON Met r COPIPOWAIIONI PIA( 1)1POni1 INSIollANCE P 0 BOX 37 ROBINSON, N. DAK. 58478 392-8411 'July 15, 1983 d) Secretary Board of Governors Federal Reserve System Washington, D. C. 20551 Re: Proposed Revision to Regulation Y : Dear Members of the Board of Governors posed Revision to Please consider our objection to the Pro it a holding company from Regulation Y which would seem to prohib own stock. redeeming any significant amount of its our Bank and Rank Holding The effect this change would have on Ownership of thestock in the Company would be very undesirable. one family, a family which Robinson Bank Holding Company is 88% in needs of this community and has is dedicated to serving the financial a third generation now working in so functioned since 1922. There is . the bank and hoping to acquire ownership impractical for these The proposed limitations would make it investors, to acquire the stock. family members, or even for outside responsible transfers of ownership for e vid pro ns tio ula reg t sen pre The le. To take away or change the that makes repayment of debt feasib stock of little value. existing advantage would render our sion to eatablish a One Bank We applied for and were granted permis a considerable amount of expense 2 was re The 0. 198 in y pan Com g din Hol setting up the holding company. and on ati lic app the ing fil in ed involv on the assumption that we could depend the on out d rie car was ion act This existing regulations. a farming community, agriculture in k ban a for es tim ing try are These is important to maintain local it nk thi We e. her ry ust ind e is the sol regulate us our of existence. financial services. Please do not Yours very t ily, Robert V. Wells President cc: Senator Mark Andrews Senator Quentin Burdickv/ Representative Byron Dorgan Seirol-49 e)-Z‘ See 47 ele&i,243 ST/ATE BA r\fit tit * ••1•P... , It _.......„. ...„___.,_10, Member FDIC https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Phone 701 - 627-4717 ••••• I a raf I'mulmir, -----.......--...---k—or."!'"' " -- - - - - P.O. Box 727 NEW TOWN, NORTH DAKOTA 58763 July 23, 1983 Secretary Board of Governors Federal Reserve System Washington, D. C. 20551 Re: Regulation Y - Elimination Stock Redemptions Gentlemen: the above subject, Please take into consideration at your hearing on ly and/or the serious effect you would have on the small fami community investor banks. would eventually Under your proposed changes, these type of banks would be very , dissappear from the scene. This type of revision fighting for serious, especially now, with the Community Bank existence in the BANK - NON BANK revolution. ica could The long range effect on small town USA and rural Amer be serious. Respe ully submitted, Daro • Petersen Pr ident President-North Dakota Bankers Association DP/mp cc: Mark Andrews - United States Senator Quentin N. Burdick - United States Senator Byron L. Dorgan - United States Representative tob• o‘z L NC3 16\<P : , C) ) ,14.";(0‘ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 15, 15E3 Secretary Board of Governors FLderal Reserve System \%:ashington, D. C. 20551 Re: Reaulation Y Gentlemen: proposed chance to I seriously doubt the practicality of the panies. Bank Holdinc Com reaulation Y, as it affects One sale of small banks I believe it will adversely affect the m Generation to Generation. and their ability to pass on 'stock fro needs the small banks. In my opinion, rural America wants and dit over the two centuries This has been America's source of cre ong with its natural source of its life. Let's keep America str of credit. Respectfully suipmi-t-re-d , 1Y: —Albert E. Bowman Fresident https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ..• Juiy 1, 19E3 Secretar Board of Sovernors Fede:-21 F.eserve System Washintor., D. C. 20551 Re: Reoulation Y Dear Secretary: char 9e to Reaulation Y. I wish to vioorously object to the proposed the marketability The proposed reoulation would seriously restrict of the holdino company stock. sufficient to restrict I feel the Fed currently has powers that are safety of the subsidiary stock redemptions that would jeopardize the bank. Sincerely, ,7)„_eY )J-VL40( Lorraine Bowman Board Director Das:ota Western Bank • Bowman, ND 58623 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE BANK OF TIOGA TIOGA, NORTH DAKOTA 513852 July 21, 1983 /21 . •• Mr. William W. Wiles, Secretary Board of Governors Federal Reserve System Washington, D.C. 20551 RE: Nt0470 Docke• 1Bank Holding-tcmipanies and Change in Bank Control Dear Mr. Wiles: The proposed revision by the Federal Reserve Board concerning the Bank Holding Companies and Change in Bank Control would have a very negative impact on the future for private ownership of small banks. This change would about eliminate holding company stock redemptions and all its benefits. Our Bank Holding Company is owned by a small group of shareholders. If bility redemptions by a holding company were to be prohibited, then the marketa of our shareholders stock would he seriously impaired. One of the reasons for establishing a one bank holding company was to provide a source for this stock redemption or market for our stockholders stock. The result of proposal is to eliminate completely this reason to have a holding company for a small bank. I urge you not to implement this regulation. Should this regulation be implemented, I am sure you will Pliminate the private ownership of nearly every small bank in North Dakota. I know that in our situation we would not have any choice but to sell out to a large bank, probably out of our stock,' area, should we have to find a market for any of our shareholders without our holding company source as a purchase of this stock. In closing, if the proposed regulation becomes final, the impact on small bank holding companies and independently owned community banks such as our would be devastating. Please reconsider your proposed revision of Regulation Y, "Bank Holding Companies and Change in Bank Control" and not adopt this revised regulation. ),..,L14.‘ • cereirp, / Ne son 19(07. President CC: The Honorable Mark Andrews U.S. Senate The Honorable Quentin N. Burdick U.S. Senate The Honorable Byron L. Dorgan U.S. ReRpresentative LBS/vs ruts/ ,----_,, .• j •_ 47' ,7-__- -,----- I_AfEsit Rk 1 - ' ' ...e r7---; "f....5 1 11-.:41-• -4,1: h : *-, t : - 7:1A i . 1-;:f".',r-- !'' I LI1 ; g'11-1:1-.t li,l! -. rs:Er' i _ ,.t 7% N •,. el,,e : . • ',:. i.. j:.1. , . L...;_•;,u...a...,..21 ,_ ____ fkif ES ERNI I in'i A[[ : 1 71..._4, , • l® la 141)1+1 ' -,-_,,- 1 I lc, P.O.. BO,X-1090-..- MINOT, NORTH 11 -4-4 / .,—,- Y ,..,.• V ) 1 )( DAKOTA • 58702 TELEPHONE 852-3711 . . 7 I —•• .. ___.. .,...a ,i-- r, July 14, 1983 Secretary Board of Governors Federal Reserve System Washington, DC 20551 • %t L• .." Gentlemen: nge in regulations in regard to holding I am writing in regard to your proposed cha posing such a change? There certainly company stock redemptions. Why are you pro nge and under the current regulations has been no demonstrated need for such a cha company if it is considered to be in you can prohibit any redemption by a holding ed regulations offer no attempt to relate pos pro new The d. oun uns or fe unsa way any ndness of a holding company. It appears sou and ety saf the to ios rat in t tes new the set of new ratios having no relationary itr arb an ply sim is n tio ula reg ed pos the pro the holding company. ship to the underlying financial position of re to sell to outside parties. ssu pre se rea inc ld wou n tio ula reg a such , Obviously ties" that would be able to buy par de tsi "ou the are who on, sti que the to ds That lea tibank holding companies mul ge lar y onl be to ms see wer ans The k? a community ban redemption to provide marketon y rel not do who and ded tra ly lic pub whose stock is rs a decline in the value buye le sib pos of n tio ita lim the h wit re, rmo the ability. Fur would certainly occur, and this result of independantly owned community bank stock minated the internal marketability would come only because a regulatory agency eli itrary restriction of a bank holding of the community bank stock through its arb company's corporate power of redemption. eady facing many new challenges alr are g kin ban ity mun com in ed olv inv are We who pressures and difficulties we se rea inc y onl ld n wou tio ula a reg h Suc s. nge and cha now face and is entirely unnecessary. tions as to the redemption of ula reg the ve lea and r ide ons rec to you I strongly urge you very much. holding company stock as the now are. Thank Very truly yours, J.H. Hoeven, Jr. President JHH:cm https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •t- U.11nia::o;_,nNciS1ihDRakaIlaD50)I54n5 k -1-1J47,011 749-2233 STATIONS STANTON - ZAP iq July 15, 1983 Secretary Board of Governors Federal Reserve System Washington, D.C. 20051 Re: 6 6-" --...•••6•6. Regulation "Y" Dear Sir: insure g Company primarily to in ld Ho nk Ba a g in rm fo We have been planning on d bank serving the local ne ow yit un mm co a as nk ba lation the continuation of our e Board to revise regu rv se Re l ra de Fe the of stors area. Under the proposal l community-minded inve ca lo r fo le ib ss po im y ll rtua ll "Y", it would become vi ssary for estates to se ce ne it ke ma ld wou and nk e to own an independent ba causing the demise of th s ie an mp Co g in ld Ho nk Ba their stock to the large stem. ally the dual banking sy tu en ev and s nk ba t en nd small indepe the nation must indicate ut ho ug ro th s nk ba d ne ow lly a. The large number of loca maintaining rural Americ and ng pi lo ve de in ns utio ages the value of these instit numbers, need the advant in ty ri jo ma e th g in ions, be tain These smaller institut in competitive and main ma re to ns io ut it st in l nancia enjoyed by the large fi independent status. lation "Y", relating to gu re to on si vi re ed os the prop wTherefore, we urge that be reconsidered allo s, ie an mp Co g in ld Ho nk by the Ba the redemption of stock tions to remain. ing the present regula https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, , / Board Stroup, Chairman of the Union State Bank d.M. GMC/jh cc: ews The Honorable Mark Andr N. Burdick The Honorable Quentin Dorgan The Honorable Byron L. sociation North Dakota Bankers As URANCE CORPORATION T MEMBER FEDERAL DEPOSI INS CeT171 NS - ST al - _ BANK - vrif- tti zert5 PETERSBURG, N. DAK. 58272 1701) 345-8282 '1, A • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis STATE BANK ;4; 5 f July 1)4, 1983 Secretary Board of Governors Federal Reserve System Washington, DC 20551 ,-----'/// Dear Sir: osition to the proposal This letter is to convey my strong opp pany stock redemptions. of the Fed, to limit holding com th of the community This proposal would undermine the streng in effect, make it practically banks of this country. It would, nsfer ownership, thereby forcimpossible for smaller banks to tra out to the large multi-bank ing them out of business or selling s about service to rural America. holding companys who could care les ment elsewhere. other than to draw funds for invest to defeat this proposal and to I respectfully request your support use in the orderly transfer of preserve this much needed tool for small banks. Yours v y truly, / 47 me J; H. En-( sather, President cc: Senator Mark Andrews Senator Quentin N. Burdick Representative Byron L. Dorgan https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 4 / ‘1,.*3 Secretary Board of Governors Federal Reserve System Washington, D.C. 20551 Secretary : sion to Regulation Y. I wish to strongly object to the proposed revi of holding company stock Such action would hinder the marketability ged profitable banks. and discriminate 'unfairly against well mana rve Board currently It is my understanding that the Federal Rese may jeopardize possesses the power to deny any redemption that company. the financial safety and soundness of a holding have resulted from It is my contention that most bank failures mptions. mismanagement and not from leveraged stock rede Roger N. Bc- lund Executive Vice President RNB/bfm feet, (ereleerSTATE BANK OF LAKOTA I Post Office Box 468 Lakota, ND 5344 701 247-2413 / July 14, 1983 Secretary Board of Governors Federal Reserve System WashingLon, D. C. 20551 Dear Sir: ed changes the Federal Reserve Board propos to s ect obj ota Lak of k Ban te Sta The stock ally eliminate holding company nti sta sub l wil ch whi Y, n tio ula reg in its redemptions. n pany rely heavily on our redemptio Com g din Hol k Ban our of ers old reh The sha y s ownership. As the holding compan y!. pan com g din hol the ng uri uct str in powers n power is needed to provide tio emp red t ren cur the , ily fam a is owned by bling family members to maintain ena e tim e sam the at le whi ity uid estate liq a large personal debt. control of the bank without incurring to be ge stock redeuptions still have Under the current regulations lar or soundness of the Holding ety saf and rd Boa e erv l Res era Fed approved by the Company is not threatened. emptions as changes on holding company red ed pos pro the pt ado to not you ask We of srpll future for private ownership the on act imp ve ati neg a e hav l s wil thi banks. Sincerely, Aron D. Anderson Executive Vice President ADA/ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Security State Bank a 1E-521 ""—_' 1OMInIN . .121 5 13 ' rzr; . :;•a 17 : / '4 • •;":: ou.'ANmin. -nor . 4 7 • ,4 HANNAFORD • NO. DAK. 58448 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PHONE 769-2121 Secretary, Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Sir: DOCKET NO. R-0470 mption by a PROPOSED SECTION 225.4 (b) Purchase or rede es bank holding company of its own securiti RE: a definate hardThe proposed change in the regulation would create ship in our family situation. l multiple bank holding Our family at the present time owns a smal one additional bank, company which has debt from the purchase of ced the holding company the plans were that when this debt was redu stock owned by myself. In would start a program to purchase the age the program would be complete eight years when I reached retirement holding company, the children would and my stock would be owned by the two banks in the holding company. then own and continue to operate the ship in case of my death, at the This change would also create a hard d purchase my stock, the estate present time the holding company coul estate taxes and the operation would have liquidity needed to pay ld the change be approved the would continue on in the family, shou forced to sell the stock outside family would have a large debt or be of the family. proposed change We urge your rejection of the above Thank you. ; Sin e -ely„yourt S. cc: Brown, resident Senator Mark Andrews Senator Quinton Burcidk Representative Byron Dorgan IDPOIDIjEJ 3 BrrArnE VELVA, NORTH DAKOTA 58790 (701) 338-3111 July 12, 1983 Secretary Board of Governors Federal Reserve System Washington, DC 20551 RE: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Regulation Y revisions Dear Sir: your regulation which We wish to comment on the proposed changes in redemptions and all would substantially eliminate holding company of its benefits. upon small one bank These changes would create an undue hardship is owned by one holding companies in which the holding company It would destroy family and/or a small group of stockholders. of a bank in the family sucession plans for keeping ownership stockholders, the family and, in the case of a small group of marketability of each proposed change would seriously impair the shareholders shares. y set of new ratios It appears the proposed regulation is an arbitrar ng financial which have no relationship whatever to the underlyi urge that this proposed condition of the holding company. We strongly regulation be dropped. Sincerely, Richard A. Beall Vice President & Cashier Linda D. Beall Vice President ,: --i'• / 4/ ii---; RANK FARMERS,pnd MERCHANTS / https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WIMBLEDON, NORTH DAKOTA 58492 • PHONE:(701) 435-2411 . , ;',,_‘...t. i . ...,, 7 _.:-/' --I :,.: 1 _\--, 1 . — l• • _-- -- "::)-` \ .; ,7C: :' C _.....j.._ -..j Secretary, Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Sir: RE. DGeket No. fl-0470 mption by a Proposed Section 225.4 (b) Purchase or rede bank holding company of its own securities. to tell you that After reviewing the above proposal I have the small bank it definately is a bad proposal as far as holding companies in our area are concerned. l banks and was set up Our own holding company owns two smal able to eventually for the purpose of my brothers and I to be with family ownerpurchase my fathers stock and continue on would negate any ship of the banks. That you have proposed on. use of our holding company for such redempti proposal as it I would encourage the Board to reject this holding companies would end the advantage of the small bank continuity. Sincerely A. Brown Pvnn. Ti ce Prc,si(i. cc: nt Senator Mark Andrews Senator Quentin Burdick Representative Byron Dorgan ,- \-- & Johnson Wheeler, UAW, Peterson, Schmitz, McDonald A Professional Corporation Attorneys and Counselors at Law R W WHEELER ALBERT A WOLF DAVID L PETERSON ORELL D SCHMITZ JACK McDONALD JR. CHARLES E. JOHNSON FRANK J. WIKENHEISER WILLIAM D SCHMIDT GREGORY C. LARSON JO WHEELER JOHNSON STEVEN L. LATHAM LISA J. WHEELER 220 North Fourth Street Post Office Box 2056 Bismarck, North Dakota 58502 2056 -,(701) 223-5300 Linton Office FRANK J WIKENHFISER POST OFFICE BOX 427 LINTON, NORTH DAKOTA 5E1552 (701) 254-4836 July 18, 1983 Secretary Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Gentlemen: the Independent Community of ns er nc co e th e ic vo to ng I wish proposed regulations concerni e th to as ta ko Da h rt No Banks of tions. Ownership of mp de re k oc st y an mp co g in ld one bank ho community banks in t en nd pe de in 0 13 e th of over one-half holding companies presently. nk ba e on by d ne ow e ar North Dakota pendent community de in in ta in ma to y it il ab The continuing s in North Dakota ie it un mm co l al sm s ou ri va e banks to serve th y to ity of the holding compan il ab e th on up t en nd pe de the is family members. Obviously ed as ce de of k oc st e th redeem on would hit hardest the ti la gu re ed os op pr is th of effects e now already finding ar at th s nk ba y it un mm co d very small s under ever-changing an er om st cu r ei th g in rv se difficulty unpredictable deregulation. proposed regulation e th , se ur co of , ct fe ef As a secondary ve built equity ha o wh s on rs pe on up ip sh ment works a severe hard e years and whose retire th er ov p hi rs ne ow k oc st nk nk in ba e readily marketable ba th on up t en nd pe de e ar ms ra the prog rnative would be to have te al e Th . em th by d ne ow stock rsonal debts to make such pe r cu in rs de ol eh ar sh g in surviv ed shareholders. purchases of stock of deceas nancial institutions who f' l al sm r fo n er nc co e th I hope that ican agriculture will be er Am to g in nd le y ar im pr provide the rol of stock redemption nt co r fo on ti la gu re is th recognized and will be rejected. Since -11)-ert AAW:jb Dorgan CC: Honorab e Byron L. Honorable Mark Andrews ick Honorable Quentin N. Burd ICBND https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CITIZENS STATE BANK OF PEMBINA COUNTY 484 CAVALIER, NORTH DAKOTA 58220 • 265-8 STATIONS AT: NECHE, N.D. 58265 • 886-7521 / PEMBINA, N.D. 58271 • 825-6289 . i 4e July 27, 1983 --I ,-./... . 1,7-1 ‘-)•; s— , s•w, i ..,,, , •, -,, s'l. - . • S.__ . . II r3 _ i,....._ - At. William W. Wiles, Secretary Board of Governors of the Federal Reserve System 20th and Constitution Ave. N.W. Room 6-2223 Washington, D.C. 20551 Re: Docket No. R-0470 Dear Mr. Wiles: holding The Citizens State Bank is owned by a one bank arily company which was formed a few years ago prim holding to take advantage of the fact that a bank which would company provided our owners with benefits enable them to maintain independent ownership. We, as owners, felt we could plan our estates to spouses allow passage of the stock ownership to our and children. ctively The proposed revision of Regulation Y would effe by the eleminate benefits such as stock redemption fit one bank holding co. Elimination of this bene ownership. could provide problems with passage of stock ility of It could also possibly limit future marketab our Bank. on Y. We question the necessity of a change in Regulati certainly The safety and soundness of our Banks has most not been jeopardized by the present regulation. revision We wish to object strenuously to the proposed elves on of Regulation Y and also wish to place ours -record in opposition. YoCrs very C•—; ()} V/ -f —7-21---e /—N'- James H. Duncan President ...GATEWAY TO CANADA... ORATION MEMBER FEDERAL DEPOSIT INSURANCE CORP t.• August 5, 1983 Dear : proposed changes Thank you for contacting my office regarding to banking regulations. letter to Accordingly, I am forwarding a copy of your reviewed at that Dr. Paul Volcker so we can be sure it gets level. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis With kind regards, I am .Sincerely, Quentin N. Burdick QNB:sPc -<" f olr 1\13t5CA -Ia.! Bank & Trust Compsny.• Boxn 160,. -Devils Lake, North Dakota 5S301 • 662-4024 ) J July 22, 1983 Secretary to Board of Governors Federal Reserve System Washington, D. C. 20551 Re: Proposed Changes Bank Holding Co. Gentlemen: I am strongly opposed to the May 25, 1983 recommended changes. A 1% limitation on the purchase or redemption of its securities is very unsatisfactory. These changes appear to me to be the work of Chase Manhattan or Citi-Corp banks. Only the ]arge banks would be able to live with the proposed changes. Check the Capital Ratios, Earnings and Service to their own people and you will see the banks on "Main Street" are doing a far better job than the large city banks. This proposal seems to have in mind the liquidation or consolidation of the small bank. WHY? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Page 2 Secretary to Board of Governors Federal Reserve System July 22, 1983 • eated or drastically I hope these changes will be def changed for the better. Respectfully .submitted, z)z",_,/ / Fred Hoghaug he Board Chairman of ) d;/ FH:fl cc: The White House Washington, D. C. Senator Mark Andrews Washington, D. C. Senator Quentin Burdick Washington, D. C. Representative Byron Dorgan Washington, D. C. Independent Bankers Assn. P. S. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis article is enclosed. Photo copy of Commercial West Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Magazine article Citations: Number of Pages Removed: 2 Costley, J. Kevin. "Fed Wants To Limit Holding Company Stock Redemptions." Commercial West, July 2, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Adjiti.t STATE BANK PHOAL 701 - 662-4936 P 0 f30X 610 DEVILS LAKE, NORTH DAKOTA 58301 July 7, 1983 The Honorable Byron L. Dorgan United States House of Representatives 427 Cannon House Office Building Washington, D. C. 20515 The Honorable Mark Andrews United States Senator 417 Russell Senate Office Building Washington, D. C. 20510 he Honorable Quentin N. Burdick United States Senator 451 Russell Senate Office Building Washington, D. C. 20510 Gentlemen: changes by This correspondence is submitted in reference to the proposed ng Company the Federal Reserve Board to substantially eliminate Bank Holdi stock redemptions and all of its benefits. in the There are more than 500 independently held Bank Holding Companies Companies Ninth Federal Reserve Region alone - many of the Bank Holding ming its own were formed to allow for the advantage of repurchasing or redee stock. the One Bank Numerous banks throughout the upper midwest are formed under to provide Holding provision by local community minded investors who chose n that financial service to specifically benefit the population withi locally community. If the proposed regulation should go into effect, considering the supported financial institutions will cease to exist when and the inability personal debt load required as the result of the purchase ments". Under the to establish a market within commonly used '!buy-sell agree ownership to proposed regulation, it will not be feasible to transfer total ption of bank stock. children by using the concept of the holding company redem companies could Under the proposed legislation, only very large holding or redemption redeem holding company stock as the criteria for a purchase to exercise any of its equity security makes it practically impossible redemption power. MEMBER FEDERAL DEPOSIT INSURANCE CORPORATION The Honorable Byron L. Dorgan The Honorable Mark Andrews The Honorable Quentin N. Burdick July 7, 1983 Page 2 d this proposed regulation. I ask that you take immediate action to avoi pendent community bank position . If it should be approved, I feel that the inde within our communities cannot survive. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Yours very truly, ' \ James V. Kuchar President JVK:ms f t/ze /3-tA u 1.c OF Crt.1 (5211 LF 1ELD •-• • . . C ' , •. ; :• r "- (. Li? • •a • SELF IELD, NORTH DAKOTA 58622 TELEPHONE: (701) 575 8282-, -- • STATION AT SOUTH HEART • July 15 19E33 SecreLary Doard of Governors Federal Reserve System 20551 Washington, DC RE: Regulation "Y" Revision Gentlemen: to your proposed reviThe purpose of this letter is to respond y This revision could have a substantiall sion of Regulation "Y"! ing Companies and private adverse effect on small One Dank Hold ownership of small banks in peneral. nks in the upper midwest. it would be Without E,mall country Numto their customers. difficult to provide financial service ed under the One Dank erous banks in the upper midwest are form rtunity to redeem stock Holding provision which provides an oppo . of persons choosing to sell their interest into effect, it will mean If the proposed regulation should go because of the personal that small banks would cease to exist purchase the stock and at ,the debt load that would be required to blish a market for the same time it would be difficult to esta stock. to transfer ownership of a We do not want to make it difficult a family bank. bank to the children if it i is my belief tnat demise of If this proposal Does into effect, it Over the years, the banking ccimmunity banks is inevi table. and trIls type of proposal industry had to struggle for survival could end it all for community banks. for the uenefit of bankI would urge you to scrub this proposal try banks in business. ing industry and keep these small coun iFULL SERVICE BANK https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I OLD-FASHIONED FRIENDLINESS WITH MODERN SERVICE • .••••••• -•• co• 4.• 6• •• FD:C Board of Governors Page 2 July 15, 1983 large holding companies to Let's not present an opportunity for become larger. Thanking you kindly, THE FIRST NATIONAL BANK OF BELFIELD / . 6t42 oseph Z Presider, JZ:amd cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Byron L. Dorgan The Honorable Mark Andrews The Honorable Quentin N. Burdick North Dakota Bankers Association ski 1 -z4 FRANKLIN G. LARSON Valley City, North Dakota July 13, 1983 Honorable Senator Quentin Burdick Senate Office Building, Suite SH 511 Washington, DC 20510 Dear Senator Burdick: y of my comments to the Enclosed for your consideration is a cop ed changes, regarding Federal Reserve Board relative to propos governs bank holding stock redemptions, in Regulation Y which companies. s unneeded and restrictive I urge your support in opposition to thi regulation. Sincerely yours, -4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FRANKLIN G. LARSON Valley City, North Dakota 58072 July 13, 1983 Secretary, Board of Governors Federal Reserve System Washington, DC 20551 Dear Sir: RE: DOCKET NO. R-0470 PROPOSED SECTION 225.4(b) Purchase or redemption by a bank holding company of its own securities As a banker in rural North Dakota I am seriously opposed to the pFederal Reserve Board's proposal to all but eliminate the redem tion of bank holding company stock in the future. I believe it is an attempt by governmental agencies to overhim regulate the small businessmen and make it more difficult for to survive. s. I see no need for the Board to be so restrictive on redemption The Board already has the power to disapprove redemptions that do not strengthen the subsidiary bank. Why then do you need to establish more regulations. The proposed regulation will limit of the options available for sales and purchases of the stock able bank holding companies. Officers of banks will no longer be to obtain substantial ownership of a bank unless they are ty independently wealthy. It is difficult enough to keep quali employees in rural communities. You are just adding more obstacles in their path to their long-range goals of bank ownership. This is just one more step in the direction of big holding companies owning all the banks in the nation. nies By eliminating the redemption feature for small holding compa ficant the big billion dollar corporation banks will have signi acquisiless competition in their efforts to expand their bank tions in the rural areas. As an independent banker I just cannot see how this will strengthen the local communities in North Dakota. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Secretary, Board of Governors Page 2 This proposal will also cause serious tax consequences to the independent banker. In order for any redemption of stock to receive capital gains treatment it must be significant in order to meet criteria established by the Internal Revenue Service. Your proposal forbids the redemption of any significant amount on and, therefore, if any of my stock is redeemed I must pay tax the gain at ordinary tax rates. Why penalize me on an investment that I've held for many years. I have a right to capital gains governtreatment. This proposal will take away that right. Our tly mental agencies must stop making regulations which are direc n opposed to another agency's regulation with the small businessma caught in the middle. If you want to promote big banks in taking over the banking industry and forcing out the independent bankers, then the proposed regulation will do exactly that. If you want to keep strong local management in the banking of industry and not put obstacles in the way for their ownership banks, then you will reject the present redemption proposal. Sincerely yours, Franklin G. Larson https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ,-1 •\ V .c•-. ",- .. . IlLi 1---- ) ) N" ,, - --,-5 - Juty 13, 19E3 Secn&tany, Boand o6 Govennou Fedutat RueAve System WasUngton, D. C. 20551 Dean Silt: We have Aead wLth a gAeat deal o6 inte,tet and concekn, the pkopozed change4 by the Fed cleating with additionat timitationz 6ok kedemption gAeateA o ti Bank Hotding Company ztock. In °Aden that you might have a backgtound inzight into owA conceAn in thiz mattet, I witt pAovide a be . o ti the hiztoAy o6 ouA pent bank owneAzhip, and the community we zeAve hozpitat, OuA town, HaAvey, NoAth Dakota, haz a poputation o6 2500 peopte, a nuAzing home 6acititie,s, 2 bark, 2 savingz and toan bkanchez, 6 doctoA , 4 imptement deateu, 3 taAge gAoceAy ztokez and many otheA buzinezzez chuAchez, cubs, and oAganizationz. Even though ouA town i,t) <matt in and poputation, ouA community, which inctudez 6matteA zuitAoundng towns AuAat Aezidencez, pAovide4 the goodz and sekvicez necezzaAy il oA the needz o6 the anea. The contkotting intnezt o6 the Bank (80%) tvaz acquiAed in OctobeA 1983 by 6ive tocat individuatz, two .06 which, the pAuident and myzet6, ake gted to active in day to day management. ThAough the yeccus we have stnag maintain and buitd a ztkong capital bae 6ot ouA Aapidty kowing bank baziz. white at the isame time ttying to zeAvice the debt on an individuat d' the We at/so had home veAy zekiouz conceknz as to how the continuity o6 one o ti the gAoup ,shoutd die. It woutd be Bank would be maintained az we weke veAy diUicutt doA the majoAity (36 uz to puAchaze the ztock atAeady heavity indebted on a peksonat baziz. a zotution to the debt zeAvicing and continuity ptobtem6, ouA gAoup il otmed a Bank Hotding Company in June o 1982. Thiz waz an expenzive g that and time conzuming ztep, howevek, thiz move ha's ptomoted a lieetin The debt Aeduction and continuity o management would be maintained. ny 6ive membek4 have a buy zett agAeement in which the hotding compa e would puAchaze the zhaAez o6 one o the gAoup zhoutd eventz neceszitat thiz action. A6 iicant Since the FedeAat RezeAve Boatd atkeady makez a Aeview when a zigni ttans6ek oA Azdemption, bock o6 hotding company sha-kes ake pAopozed ate needed 1 do not 6eet that the new aAbittany Aatioz and pelicentage4 noA ate.. they 6ait ok equitabte when apptied to bank-6 o ti di“eting size and compo6ition. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The ocat Bank with peopte making the poZiciez who tive in the a/Lea a/Le the ti6ebtood o6 a smatt community. I can point out many examptes o6 a weak bank in a <small town and I can show you that the town iA suAely dying. We do not need, no can we aoAd to have AegutatoAy change that wilt timit the atAeady timited puitchazetz and inveztou in zmall town bank, 6oA a smaJl town is only as .t/Long az the suppott it gets 6tom its tocat ,gnanciat inztitutionz. The below named membeAs o6 ouA newty 6oAmed Holding Company aAe veky much opposed to the pAoposed Aegutatoky changez concetning ztock Aedemption. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Jamez Lewi.z Ga./1.y BeAgzt/tom Robett BeAg LawAence Metz NoAman Wecketty Sincekety, GaAy B gztAo , SecAetaAy Fiut Bank Holding Co. HaAvey, NoAth Dakota •. Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Magazine article Citations: Number of Pages Removed: 1 Costley, J. Kevin. "Fed Wants To Limit Holding Company Stock Redemptions." Commercial West, July 2, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Vice-President JAMLS E. MATH IASON, Executive & Ag Rep. Pres. ViceAt , FOSS F. THEODORE MELBA E. GILSETH. Cashier JOHN D. BANKER, President E. C. BANKER, Vice-President https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Citizens State Bank Corporation Member of Federal Deposit Insurance Telephone 756-8364 MOHALL, NORTH DAKOTA 58761 July 14, 1983 \ Secretary Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Secretary, to the multitude of comments you I would like to add my "two-cents worth" vision" to Regulation Y. are receiving concerning the proposed "Re nge, you give proper perspective to I hope in your consideration of this cha e ll banks of our nation. Also at the sam the effect of such a change on the sma of ll community bank to the communities time consider the importance of the sma this nation. minated nomic history that would have eli We have just been thru a period of our eco ity it were not for the concerned commun if ms far and s sse ine bus ll sma our of y man working in our communities with banks. We as community banks are aware and strive to keep all viable businesses We e". lin m tto "bo the n tha e mor for n concer essity of, and have the ability for, and farms in operation and realize the nec hip el. This would be lost if the owners analysis of the situation on a local lev ds of "outsiders" and big city banks. of our community banks were in the han e of Reg Y allows for ownership of our The current redemption of stock featur uals by providing a means by which irldivid small community banks to stay that way It e to finance the purchase of same. abl are ces our res ial anc fin d ite lim h wit ers of ownership necessary in many nsf tra ly" ami "in-f of ns mea a es vid also pro cases. ices 1980, the proportion of banking off During the ten year period from 1970 to need went from 12% to 56% indicating the affilitated with Bank Holding Companies panies of applications by Bank Holding Com for such a viable tool. Also the number ce. 00 in 1980, a mere three years hen approved increased from 900 in 1977 to 1,5 This too speaks for itself. ed revision on a local level, both the To indicate the reaction to the propos and the North Dakota Bankers Assoc. ota Dak th Nor of ks Ban ity mun Com nt nde Indepe ned y of the action. They are concer vit gra the of ks ban ota Dak th Nor d ise have adv ase ve effect on all rural banks. Ple because such an action would have a gra iewed. consider this when the revision is rev Let Our Bank Be Your Bank I nt JAMLE MATHIASON, Executh.e Vice-Preside Rep. Ag. & res. Vice-P Ass't THEODORE F. FOSS, MELBA E. GILSETH. Cashier HN D. BANKER, PI,sioent C. BANKER, Vice-President Citizens State Bank Corporation Member of Federal Deposit Insurance Telephone 756-6384 MOHALL, NORTH DAKOTA 58781 Reg Y Revision. p2 that relates to the I urge you to delete that portion of the revision anies. As stated prohibition of stock redemption by bank holding comp for the survival of above, this stock redemption ability is necessary our community banks and the communities they serve. Thank you in advance for your consideration. erely, Mathiason, Exec. Vice Pres. Jam The Citizens State Bank Moh 11, North Dakota 58761 cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Mark Andrews The Honorable Quentin N. Burdick The Honorable Byron L. Dorgan Let Our Bank Be Your Bank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S candia AMERICAN BANK P. 0. BOX 9 STANLEY, NORTH DAKOTA 58784 . PHONE (701) 628-3131 . July 13th, 1983 - Secretary Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Sir: Re: Revision of Regulation Y. the above I am very concerned about a proposed change in have a regulation by the Federal Reserve Board which could te ownership substantially negative impact on the future for priva of small banks. rship of banks It seems this is a assualt on the private owne to multiand may in the future force the sale of small banks holding company regional bank systems. the Fed's The objectional part of the revision relates to s by bank holding attempt to effectively prohibit stock redemption ards are met. companies unless a certain minimum capital stand y-pnwed banks This surely will prove expecially costly to famil helped bring During the late 1920's and 1930's the big banks way of repeating down the smalls; evidently history always has a nature would only itself; only this time around, an effort of this banking system as in time do away with the small's; and, our duall we know it today will be gone. y eminate from Prudence in money and credit does not necessaril olled banking system, Governmental agencies or a money centered contr ually. These proposals which these proposed changes would bring event our ways of free enterwould only servie to stymie individualism and prise. problems and it is Our country may be facing critical financial ns to shape up and high time for management of financial institutio this the old get their house in order; and, I feel we can do es which will only fashioned way. Let us not proceed with new chang e more restraint make our problems worse in the long term. A littl do much more than reand backbone by our regulators will certainly writing the rules. Thank you for your thoughtfull considerations. Very truly yours, M. T. Nelson, 3nliftric_d_ Out Sruivtiitt.— &IA Outt Sthaire_ res. BRADY, MARTZ 8c ASSOCIATES, P. C. OTHER OF FICES CERTIFIED PUBLIC ACCOUNTANTS MEm3ERS OF 24 WEST CENTRAL 1913 SOUTH v, A sHINGTON P 0 BOX 1076 GRAND FORKS NO 58201 P. 0 BOX 848 AICPA TELEPHONE MINOT, NORTH DAKOTA 58701 American Institute 01 Certified Public Accountants (701)775-4685 OR 17011775-5516 TELEPHONE:(701) 852-0196 305 OE mERS P 0 130X 165 EAST GRAND FORKS. MN 56721 TELEPHONE (216)773 3414 July 6, 1983 Secretary, Board of Governors Federal Reserve System Washington, DC 20551 Re: Regulation Y. Gentlemon: A recent article in Commercial West indicates that the Board of Governors is contemplating changes in its regulations relating to bank holding company stock redemptions. qj irViour area, we As accountants and advisors to a number of small comm feel somewhat alarmed by this, as it appears that such an .eComentlas outlined In the Commercial West article would negate a great deal of planning for most or all of these one-family banks that we serve. While we are not familiar with all of the complexities involved with the larger holding companies, we would want to prevail upon you to consider the granting of an exemption to holding companies having total resources or total assets of less than $200,000,000. Such an exemption would enable many, if not most, of these family owned community banks to retain and operate them, as desired when the parent-owners retire and pass on. It would also appear that the proposed regulation is designed to give the larger bank holding companies a big boost in that it will almost require that the small community locally-owned banks will eventually become "subs" of the larger regional bank holding companies. Of course, this would serve to stymie individualism, and the American concept of entrepreneurship. To have these banks cwned by the' larger holding companies will almost assure the disappearance of the small town along with its banks, since continued operation will be determined only by profitability. While we do realize that the safety and soundness of the banks must be protected, we are doubtful that the proposed regulation would not make for problems greater than those supposedly solved. Your full consideration of this matter will be appreciated. Yours very truly, BRADY, MARTZ & ASSOCIATES, P. C. ItA0 By Baldwin E. Martz BEM/IIh Zie 7 -cJq-c_> 7)1,c 0Q-4-.Le,<, J-41/ , https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r /t " w 7'K.?" f.1 -T MT -T-l °CANDO, Nowrii-D., KOTA * CA N DC) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 62324 ,- \ \ .1... t : ., /. 17,1 -1 1 e• • ' . . 1 \ t__\.- • .. .... ‘‘ , ... %...- ,.% July 13, 1983 ,-)•.). .- Secretary, Board of Governors Federal Reserve System Washington, DC 20551 RE: Docket No. R-0470 Proposed Section 225.4(b) Purchase or redemption by a bank holding company of its own securities. Dear Sir: revision in This letter is to express my deep concern over the proposed We are an regulation Y relative to bank holding company redemptions. Dakota with independent community bank located in north central North with 180 assets of $20 million. Our bank was founded 15 years ago r bank stockholders investing in "their" bank. Cando has had anothe polis since 1888, however when this bank became a member of a Minnea the combased multi-holding company many of the financial needs of County munity were no longer met. There was a great urgency for Towner share. Our State Bank which has since captured almost 40% of the market customers independent bank not only benefited our customers, but also the of the other bank because of the new competition they faced. holding company, Although we are not currently affiliated with a one bank tions, we are in the process of forming one. Under the current regula transfer . the holding company will enable the majority stockholder to This stock to minority shareholders, such as myself, upon his death. estate taxes redemption will provide the liquidity to his estate to pay ity to while at the same time enabling the stockholders in our commun maintain control without incurring substantial personal debt. then the The intended purpose of this regulation appears to be to streng equity by bank by not allowing the bank holding company to reduce their ite. The redemption. However, the side effects may do just the oppos will not have young managers of family-owned independent community banks owners pass on. the means to retain majority ownership when the current Bank, whose Ironically, the community banks such as Towner County State offer better services, Purpose of formation was to increase competition and choice than to will become prey to the same big banks and have no other sell out. That sounds to me like we are going backwards. YOUR Home Owned Independent Bank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Secretary, Board of Governors Federal Reserve System Page 2 has a procedure in place where a The Federal Reserve Board already if the Board determines that such stock redemption can be prohibited safety and soundness of a holding a transaction would jeopardize the nt months has been deregulation company. The Board's emphasis in rece it is fair that the commuand increased competition. We agree that still remain profitable. However, nity banks must learn to compete and ral Reserve Board eliminated the it would be quite unfair if the Fede bank stock through a restriction internal marketability of independent on. By so doing, you would of a holding company's power of redempti in business and compete. I urge be taking away our chance to remain osed. your rejection of section 225.4(h) as prop Sincerely, I Terry U. Jorde Vice President TJJ/sg cc: Senator Mark Andrews Senator Quentin Burdick Representative Byron Dorgan a----A I :LI P-ccciaG:co C-ificcEzczaTtibli 2,2aE-t https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Beach, North Dakota 58621 Station al Medora 701 872- July 13, 1983 The Honorable Quentin Burdick U.S. Senate 451 Russell Office Building Washington, D.C. 20510 Dear Senator Burdick: the Stock Redemption I wish to comment on the proposed revisions of Section of Regulation Y. s, the proposed revisions As a stockholder and officer in two small bank long-range planning and appear to have a very adverse effect on the of Directors and stockgoals that have been established by the Boards r small banks throughout holders of our banks, and I'm sure of many othe the country. rly limit the use of the Paragraphs (b), (2), (iii), (A), and (B) seve vehicle. Granted, a new one bank holding company as an estate planning essed each time a redempbank holding company application could be proc an unnecessary amount of work tion occurs, but this would certainly put the cost and time of owneron your staff and would certainly increase (25% interest) in a one bank ship transfers. As a minority stockholder proposed change is enacted, holding company, I am concerned that if this stock interest in the bank it will be very hard for me to dispose of my is almost impossible for ' holding company. As you are well aware, it the IRS limitations on the individuals to purchase bank stock, due to this proposed change deductibility of investment interest expense; company from redeeming almost certainly precludes the bank holding easy to see that the 100 percent of my stock interest. It is very interest will be greatly marketability of any significant minority intent of the Bank Holding reduced. I do not think this was the original Company Act. strong financial position for As a banker, I believe in maintaining a bank. I can see no problems the bank holding company and subsidiary tal & Debt to Equity ratios related to the Board's requiring these Capi nt to redemption, such as in within a reasonable period of time subseque ents. the bank holding company formation requirem step toward eliminating the I sincerely hope this is not just another https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Quentin Burdick July 13, 1983 Page 2 ted in a small, privately owned bank. Our bank is loca service to 1,400 people and has provided uninterrupted ut our 76 years. This bank and others like it througho cture. a very important cog in the local economic stru revisions seriously threaten this situation. community of the community for country are still The proposed Sincerely, i/ . ..-- 1-.......e..______ D. F. Baertsch President DFB:eah • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 12, 1983 PS A Secretary Board of (lovernors Federal reserve System Washington, D.C. 20551 Dear Sir: State Banking Board This Department and the North Dakota tion Y which would oppose the proposed revision to Pegula by bank holding effectively prohibit stock redemptions companies. adeauate with 1.7e believe that present regulations are holding companies and regard to stock redemptions by bank redemption should rethat the option to complete a stock ding companies. We main open to the shareholders of hol ld eliminate the fear that the proposed regulations wou ctical purposes, which stock redemption option, for all pra shareholders, inhibit would cause substantial hardship on affect business plans business planning, and significantly contributing to proper previously put into effect, without this rule would make regulatory activity. We fear that maintain local ownership it significantly more difficult to that it would lead and control of North Dakota banks and ancial resources to the to increased concentration of fin Dakota and of this detriment of the citizens of I.orth republic. have made important conLocally owned banks in North Dakota Dakota. We deem it tributions to the citizens of North continue to meet the important that they be permitted to tion changes regarding changing times. The proposed regula companies would adversely stock redemptions by bank holding ble under local ownership affect their ability to remain via and control. ns be withdrawn or rejected. We ask that the proposed regulatio Sincerely, L. M. Stenehjem, Jr. Commissioner Chairman, State Banking Board LMS:sr cc: , NDLA Sen. Andrews, Sen. Burdick, Rep. Doraan https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LINTON, NORTH DAKOTA 58552 July 12, 1983 To The Secretary Board of Governors of the Federal Reserve System Washington, D. C. 20551 • Re: Proposed Change to Regulation Y Gentlemen: ng The proposed prohibition of stock redemption by bank holdi ly held companys will NOT be in the best interest of small close North Dakota banks. and Our small North Dakota banks depend too much on the work the stock investing of very few individuals in so many cases that for a bank redemption might be the only way to make a viable deal purchaser. owner— If we make it so that our small banks have to dilute the it becpmes ship much in the same way that the mutual S & Is do, then becomes a question of "who is in charge here'? Hired management ion secure, more a possibility, and with the idea of making his posit in one way or another. Please, this is NOT good for North Dakota small banks. Thank you. Very truly yours, 2.1u K. A. Meier cc: B. Dorgan M. Andrews Q. Burdick NORTHERN PLAINS BANCSHARES, INC. FARGO NATIONAL BANK BUILDING MAIN at BDWY. FARGO, N. D. 58124 July 12, 1983 Secretary, Board of Governors Federal Reserve System Washington, DC 20551 Dear Sir: RE: DOCKET NO. R-0470 a bank PROPOSED SECTION 225.4(b) Purchase or redemption by holding company of its own securities by our I am enclosing herein a copy of a letter sent to you any. This Certified Public Accountant, Charles Bailly & Comp subject. letter also accurately reflects our view on this the contiThe proposed revision of Regulation Y could hamper Northern nuity of management and the community ownership of The Fargo Plains Bancshares, Inc. and its principal asset, National Bank & Trust Company. s. We would urge you not to adopt the proposed revision Respectfully yours, David D. Gordon President DDG:bb Enclosure CC: S ator Mark Andrews enator Quentin Burdick Representative Byron Dorgan https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Charles Bailly tS Con-wally Certified Public Accountants Suite 1100 Fargo National Bank Building Fargo, North Dakota 5124 Telephone (701) 237-5275 A.sociate. in print 'pal elties l.'nited State.. Canada. ; Nle‘ieo and Enrorw. July 8, 1983 Secretary, Board of Governors Federal Reserve System Washington, DC 20551 Dear Sir: RE: DOCKET NO. R-0470 a bank PROPOSED SECTION 225.4(b) Purchase or redemption by holding company of its own securities bank holding The proposed revision in regulation Y relative to y burden and company redemptions if enacted will place a very heav s. We urge undo restrictions on the independent community bank t concern to you to seriously address this issue which is of grea many bankers in the Upper Midwest. section 225.4 In this day of deregulation, we believe the proposed pressure on bank Corporate Practices places increased regulatory ts of less holding companies, especially those with total asse regulation, if than $150 million. We see that this proposed pendent passed, could be the beginning of the end for inde ownership of many community banks. lation is to It appears the overall purpose of the proposed regu bank holding strengthen the subsidiary bank by not allowing the actuality if In company to reduce their equity by a redemption. ion the proyou look beyond the monetary aspects of the transact community posed regulation will weaken a significant number of banks in our area. been used to In our experience, the redemption process has not w present bring in new management but has been used to allo a means of management, who have been minority stockholders, ed in for many obtaining control of banks which they have work on bankers could years, a means where second and third generati with the needs of remain in banking. These people are familiar people and are able their communities, they are familiar with the . They are the to make better banking decisions because of this new challenges in managers that are best able to deal with the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Secretary, Board of Governors Federal Reserve System Page 2 les in their way to the banking industry. By putting obstac how this can obtaining majority ownership, we cannot see goal of many in the strengthen the community bank. It is the younger generation in business environment to strive to keep the g one more obstacle the rural areas. We envision this as puttin e and possibly someday in their path in their goal to stay at hom owning the community bank they work in. e planning in the The regulators have been stressing long-rang -sell agreements -lave banking industry. Therefore, various buy uity of management. What been entered into to preserve the contin lified by regulations good is this planning when it is all nul e entered into. many years after the buy-sell agreements wer ue. The proposed We see this issue as a big bank-small bank iss ge billion dollar ✓ evision will have little effect on the lar rural community banks. metro banks but will impact directly the based on bank size, Even though there are different guidelines under $150 million do the proposed special guidelines for banks Why add this unfair little if anything to help the small bank. faced with a signifiregulation to an industry that already is cant challenging and changing environment. ed regulation and The big banks won't be hampered by the propos will eliminate a lot will, in fact, be benefited by it since it sing the smaller banks. of their competion when looking at purcha it relates to the The Board is keenly aware of competition as ers. Why then should banking industry's service to its custom the competition when it regulations be made which will decrease company stock. comes to the acquisition of bank holding al Revenue Service As we're sure you are aware, present Intern to be redeemed either laws require a significant amount of stock n or a complete terby a substantial disproportionate redemptio ckholder to receive mination of interest in order for the sto With a debt to capital .gains treatment on the transaction. ng allowed by the proequity ratio of no more than 30 percent bei stockholder will inevitably posed regulation changes, the redeemed gain on his investbe taxed at ordinary income tax rates on the ment which he has held for many years. ers from meeting other Why make regulations which prohibit taxpay ing reasonable tax governmental agencies criteria for obtain redemptions in order to treatment. The IRS requires significant prohibits significant qualify for capital gains. This regulation squeezed by two ✓ edemptions. Once again the taxpayer is conflicting regulatory requirements. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r Secretary, Board of Governors Federal Reserve Systems Page 3 If the Board believes additional guidelines are necessary, why not have them similar to the current regulations as it relates to bank holding company application criteria with total assets less than $150 million. Under these guidelines redemptions would be subject to the same criteria as used by the Board when the holding company was originally formed. If the holding company was deemed to be a source of strength when it was formed under those criteria, it will continue to be a source of strength if it maintains the same criteria for redemptions. In summary, we believe the proposed regulation relative to nce redemptions is unfair and will further jeopardize the existe of of the independent community banks. We urge your rejection section 225.4(b) as proposed. Sincerely yours, CHARLES BAILLY & COMPANY 1 i https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senator Mark Andrews Senator Quintin Burdick Representative Byron Dorgan I Charles Bailly & Compaily Certified Public Accountants Suite 1100 Fargo National Bank Building Fargo, North Dakota 58124 Telephone. (70)/ 237-5275 Associates in principal cities of United States, Canada, Mexico and Europe. Nr July 8, 1983 Honorable Senator Quentin Burdick Senate Office Building, Suite SH 511 Washington, DC 20510 Dear Senator Burdick: Regulation Y The Federal Reserve Board is proposing changes in ieve a section of which governs bank holding companies. We bel emptions will have a the proposed changes dealing with stock red business communities detrimental impact on North Dakota and our throughout the state. Board and solicit We are enclosing a copy of our comments to the proposed your support in opposition to this section of the hip structure of regulations which unduly restricts the owners bank holding companies. summarizes the In addition we are enclosing an article which issues involved. Thank you in advance for your consideration. Sincerely yours, CHARLES BAILLY & COMPANY https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A.1 Charles Bailly &Company Certified Public' Accountants Suite 1100 Fargo National Batik Building Fargo, North Dakota 58124 Telephone (701) 237-5275 iat es in principal cities of United States, Canada. Mexico and Europe.. A sm July 8, 1983 Secretary, Board of Governors Federal Reserve System Washington, DC 20551 Dear Sir: DOCKET NO. R-0470 or redemption by a bank se cha Pur b) .4( 225 N TIO SEC ED POS PRO s holding company of its own securitie Y relative to bank holding The proposed revision in regulation l place a very heavy burden and company redemptions, if enacted wil nt community banks. We urge undo restrictions on the independe ue which is of great concern to you to seriously address this iss many bankers in the Upper Midwest. ieve the proposed section 225.4 bel we , ion lat egu der of day s thi In regulatory pressure on bank sed rea inc ces pla ces cti Pra ate Corpor h total assets of less wit se tho y all eci esp , ies pan g com holdin posed regulation, if pro s thi t tha e iev bel We n. lio mil than $150 the end for independent passed, could be the beginning of ownership of some community banks. proposed regulation is to It appears the overall purpose of the allowing the bank holding strengthen the subsidiary bank by not emption. In reality if company-to reduce its equity by a red s of the transaction the proect asp ry eta mon the ond bey k loo you nificant number of community sig a ken wea l wil n tio ula reg ed pos banks in our area. has not been used to s ces pro n tio emp red the e, enc eri In our exp n used to allow present bring in new management but has bee stockholders, a means of management, who have been minority they have worked in for many obtaining control of banks which rd generation bankers could years, a means where second and thi familiar with the needs of are ple peo se The g. kin ban in ain rem with the people and, therear ili fam are y the es, iti mun com their decisions. They are the g kin ban e mak to e abl ter bet fore, are h the new challenges in wit l dea to e abl t bes are t tha managers RE: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Secretary, Board of Governors Federal Reserve System Page 2 tacles in their way to the banking industry. By placing obs not see how this can obtaining majority ownership, we can the goal of many in the strengthen the community bank. It is p the younger generation in business environment to strive to kee one more hindrance in their the rural areas. We invision this as someday assuming ownership of goal to remain at home and possibly the community bank they work in. g-range planning in the The regulators have been stressing lon s buy-sell agreements have iou var ly, ing ord Acc ry. ust ind g kin ban tinuity of management. The con the ve ser pre to o int d ere ent n bee when it is all nullified ble ona sti que is ng nni pla s thi of value buy-sell agreements were by regulations many years after the entered into. mall bank issue. The proWe perceive this issue as a big bank-s on the large billion posed revision will have little effect directly the rural community dollar metro banks but will impact ent guidelines based on bank banks. Even though there are differ s for banks under $150 size, the proposed special guideline p the small bank. The addihel to ng thi any if tle lit do n lio mil that is already faced with ry ust ind an to n tio ula reg s thi of n tio environment is injurious. x ple com and ng ngi lle cha gly sin rea inc proposed regulation and the by ed per ham be 't won ks ban big The since it will eliminate a lot will, in fact, be benefited by it at purchasing the smaller of their competition when looking competition as it relates to banks. The Board is keenly aware of its customers. Why then should the banking industry's service to se the competition when it ✓ egulations be made which will decrea holding company stock. comes to the acquisition of bank Internal Revenue Code t sen pre re, awa ly tab oub und are As you be redeemed either by a to ck sto of unt amo nt ica nif sig a ✓ eCiuires a complete termination or n tio emp red e nat tio por pro dis al substanti to receive capital gains er old ckh sto the for er ord in st of intere a debt to equity ratio of no treatment on the transaction. With by the proposed regulation more than 30 percent being allowed l inevitably be taxed at changes, the redeemed stockholder wil n on his investment which he o rdinary income tax rates on the gai has held for many years. taxpayers from meeting other it hib pro ch whi ns tio ula reg e mak Why obtaining reasonable tax governmental agencies criteria for redemptions in order to nt ica nif sig es uir req IRS The . treatment n prohibits significant tio ula reg s Thi ns. gai l ita cap qualify for er is squeezed by two ✓ edemptions. Once again the taxpay . conflicting regulatory requirements https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Secretary, Board of Governors Federal Reserve Systems Page 3 s are necessary, why If the Board believes additional guideline rent regulations, parnot design them in conjunction with cur g company application criticularly those relating to bank holdin million. Under these teria with total assets less than $150 to the same criteria as guidelines redemptions would be subject y was originally formed. used by the Board when the holding compan a source of strength when If the holding company was deemed to be will continue to be a it was formed under those criteria, it same criteria for redempsource of strength if it maintains the tions. tion relative to In summary, we believe the proposed regula jeopardize the existence redemptions is unfair and will further We urge your rejection of of the independent community banks. section 225.4(b) as proposed. Sincerely yours, CHARLES BAILLY & COMPANY LP ip CC: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senator Mark Andrews Senator Quentin Burdickv/7 Representative Byron Dorgan a: sc7s6 SALFIM Member S ZCIPITy 9,Ari BANK Phone 843-7521 FDIC rE :la 1 ,.......,47.74:r. - 71)7444"461 7 :7177 I L4 •i .:)'1,4 .2•-i.t.UR 2. A. C. GOETZ, President , &.1''''''''';'-''' New Salem,North Dakota 58563 July 12, 1983 Secretary Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Secretary: Regulation Y A proposed revision by the Federal Reserve Board to re for private could have a substantial negative impact on the futu The part that is objectionable relates ownership of small banks. ely prohibit to the Federal Reserve Board's attempt to effectiv certain minimum stock redemption by Bank Holding Companies unless This would prove costly to family capital standards are met. Under this proposal only very large holding comowned banks. eria for a panies could redeem holding company stock as the crit it practpurchase or redemption of its equity security makes ically impossible to exercise any redemption power. this You are encouraged to take immediate action to reject If it is approved, the Independent proposed regulation. not survive. Community Bank's position in small communities will Sincerely yours, ///. A.C.Goetz President ACG/dm cc: The Honorable Mark Andrews The Honorable Quentin The Honorable Byron https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N. Burdick L. Dorgan te A lperrYil,..%\ff BETTER LIVING BEGINS AT 411. 1\,-4 YOUR FULL SERVICE BANK GARRISON STATE BANK /' 1 2 i2 V;, 4r Air c f •-• t 4t1: 5 )1. • GARRISON, NORTH DAKOTA 58540 Telephone (701)463 2262 ,1* • July 14-.1983 T%. -L % • ‘ . V ) . (r. •-1 6r. Secretary, Board of Governors -//114.—...--tc\:/ Federal Reserve System I 2055 Washington, D. C. -0—• Gentlemen: in the July second ed ar pe ap at th e cl ti ar an to In response placing limits on e th ng ni er nc co , st We al ci er mm issue of Co Holding Company stock redemptions. obstacle in Holding s ou ri se ry ve a e ac pl d ul wo I feel this nks. This could make the Companies owning small family ba years past there In t. ul ic ff di s wn to l al sm in sale of stock ry difficult to sell stock in have been times when it was ve to tion could cause a return la gu re is Th . nk ba wn to l al sm a this situation. give the large bank Holding d ul wo it at th s ar pe ap it me To the small family owned bank. er ov e ag nt va ad r he ot an s ie an Comp to curtail individualism and e rv se d ul co is th n ru ng lo In the ship. Our nation needs ur ne re ep tr en of t ep nc co an the Americ taken to insure that be ld ou sh re ca d an s, nk ba all sizes of nk will remain in ba ed at er op d an d ne ow ly mi fa the small existence. nks muet be protected, ba e th of ty fe sa e th at th e I fully realiz n to insure that it ve gi be ld ou sh n io at er id ns co but care and e smallerhnnks. is not done at the expense of th ncerely appreciated. si be ll wi er tt ma is th of n io Your considerat Sincerely, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Wayne A. Stroup President WAS:pb Your Partner in Progress • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis August 22, 1983 The Honorable Walter E. Fauntroy Chairman Subcommittee on Domestic Monetary Policy Committee on Banking, Finance and Urban Affairs House of Representatives 20515 Washington, D.C. Dear Walter: I just wanted to take a mpment to thank you for your letter of June 30 enclosing a copy of your letter to Chairman Rodino regarding H.R. 3418, to amend the Bankruptcy Code with regard to certain repurchase agreements. I certainly appreciate alj you have done with regard to this legislation and should you need anything further, please do not hesitate to let me know. Sincerely, CO:pjt (#V-119) bcc: Mr. Bradfield (w/copy of incoming) Ms. Nesse (w/copy of incoming) Mrs. Mallardi (2) Acknowledgement being drafted by CLO WA'TER elAUNTKROY. D C CHAIRMAN STEPHEN L NEAL N C 00OUG BARNARD JR , GA CARROLL HUBBARD, JR., KY BILL PATMAN TEx BUDDY ROEMER LA BRUCE A MSRR1SON CONN Jttv COOPER TENN THOMAS R CARPER. DEL H2-109 ANNEX NO 2 WASHINGTON D C 20 515 f202) 225-7315 GEORGE HANSEN IDAHO RoN PAUL if x BILL mccoLium FLA BILL LOWER CALIF JOHN HILER IND U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 June 30, 1983 The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Paul: I am forwarding to you a copy of the correspondence I have sent to the Honorable Peter W. Rodino, Jr. Chairman of the Committee on the Judiciary regarding H.R. 3418, a bill to amend Title 11 of the United States Code with regard to certain repurchase agreements. A copy of my full statemnt, along with the text of the bill and a section-by-section may be found in the Congressional Record of June 27, 1983 on pages E3183 - E3187. This legislation rose out of hearings held by the Subconvittee on April 25, 1983 on the Safety, Soundness, Structure and Function of Domestic Institutions Engaged in the Purchase and sale of United States Government Debt Instruments. It was developed with the full cooperation of the staff of the Federal Reserve and particularly, Janet Nesse an attorney in the legal division. I would be most appreciative if you would convey to her my appreciation. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely yours, Walter E. Fauntroy Chairman GEORGE HANSEN, IDAHO BON PAUL, TEX BILL McCOLLUM FLA BILL LOWERY CALIF JOHN MILER. IND .TER 4r FAUW-ROY, DC..CHAIRMAN STEPHEN L NEAL, N DOUG BARNARD JR , GA. CARROLL HUBBARD, JR. KY. BILL PATMAN TEX BUDDY ROEMER LA BRUCE A MORRISON. CONN ..OM COOPER TENN THOMAS R CARPER. DEL H2-109 ANNEX NO 2 WASHINGTON DC 20515 (202I 226-7315 U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 June 30, 1983 The Honorable Paul A. Volcker Chairman board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Paul: I am forwarding to you a copy of the correspondence I have sent to the Honorable Peter W. Rodin°, Jr. Chairman of the Cornittee on the Judiciary regarding H.R. 3418, a bill to amend Title 11 of the United States Code with regard to certain repurchase agreements. A copy of my full statemnt, along with the text of the bill and a section-by-section may be found in the Congressional Record of June 27, 1983 on pages E3183 - E3187. This legislation rose out of hearings held by the Subcommittee on April 25, 1983 on the Safety, Soundness, Structure and Function of Domestic Institutions Engaged in the Purchase and sale of United States Government Debt Instruments. It was developed with the full cooperation of the staff of the Federal Reserve and particularly, Janet Nesse an attorney in the legal division. I would be most appreciative if you would convey to her my appreciation. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely yours, Walter E. Fauntroy Chairman I. (t1 g 11,4 P•./ W•! /I A I f /1:N1 p^tv tot 1,,01014 tt 14.1P PAUL PP. 1:,•. 111 ftit I Mt Ill I IV t i A 1 *ea.; P. $".,,104. tr sty. I+ Aler.•..; JP (1.1. tI I I'll I 11)Vel is,( A GA J.: MkAI-II' JOHN Nil I II INU Y PA TWAIN euctitv P A41 P t A bNUlt A AoCo•h. SUN CONN JIV CUOPIP It PP 1,40MAS R CARPIR DEL U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE H?-O9 APOItXPdO 2 VV4SNNLION D C 20 S15 (202)226-73lb COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 June 29, 1983 The Honorable Peter W. Rodino, Jr. Chairman Co-,-ittee on the Judiciary U.S. House of Representatives Washington, D. C. 20510 Dear Peter: Last April 25, 1983, the Subcommittee on Domestic Monetary Policy of which I am Chairman for the Committee on Banking, Finance and Urban Affairs held, as a part of its continued oversight on circumstances and events which affect the conduct of money and credit policies; hearings on the safety, soundness, structure and function of domestic institutions engaged in the purchase and sale of United States government debt instruments. One of the issues raised at that hearing concerned the need for clarification of the treatment of repurchase agreements under the Bankruptcy Code. That uncertainty has been highlighted by the filing in the Bankruptcy Court in the Southern District of New York, a chapter 11 bankruptcy petition by Lombard-Wall, Inc. in August 1982. A bench decision in the Lombard -Wall case held that the holder of securities subject to a repurchase agreement was subject to the automatic stay of the Code and that this holder was precluded from closing out its position with the debt without approval of the Court. Lombard-Wall Incorporated v. Columbus Bank & Trust Co., et al. (In re Lombard-Wall, Inc.) No. 82 B 11556, Bankr. Ct., S.D.N.Y. bench decision, September 16, 1982. This holding has made clear the risks to the market created by the Code's stay and avoidance provision and demonstrated that PL 97-222 is not sufficient in scope to protect the market from major dislocations caused by the bankruptcy of market participants. The effect on the capacity of the ability of the Federal Reserve to conduct monetary policy and to function as the fiscal agent of the United States is also jeopardized. The Federal Open Market Committee, through the trading desk at the New York Federal Reserve Bank, makes extensive use of repos in regulating the supply of funds in the execution of monetary policy. Repos have become a highly flexible and effective short-term tool for the Federal Reserve to adjust reserves for short periods of time without disruption of the Government securities market and it depends on broadbased public participation. These repurchase agreements are also crucial to https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis If The Ponorable Peter W. Rodino, Jr. 2 June 29, 1983 the financing of the public debt and any question abo ut their liquidity can have an adverse impact causing disruptions in the placement of the debt and increases in the interest rates paid by the United States and, as Federal Securities are the most credit favored of all debt instruments, ultimately on interest rates paid by all other borrow ers. As a result of these hearings I have introduced H.R. 3418 which are amendments intended to clearify the treatment of these repurchase agreements under the bankruptcy code. These amendments are designed to protect the financial markets from the disruption that would result from the bankruptcy of a major participant in the market and should aid in the further smooth functioning of the market by eliminating questions about the possible treatment of a repurchase agreement in the event of a bankru ptcy. These amendments are supported by the Federal Reserve as well as by participants in the repurchase agreement market . Broad support for the legislation has been obtained from security dealers, money market mutual funds, financial institutions, states, municipalities, and pension funds. While I understand and agree with your vie w that the issues raised by the Supreme Court in its decision styled Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 102 S.Ct 2858 (1982), ought to be resolved prior to other changes in the Bankruptcy Code, it is my considered opinion that these particular amendments should be enacted as promptly as possible to guard against any disruption of the nation's financial markets and the Federal Reserv e System's capacity to conduct monetary policy or act as fiscal agent of the United States. The sheer magnitude of the market --over $100 Bil lion is outstanding each day-warrants this unusual consideration which I hope your Committee will be able to give it. For your use, I have included copies of the bill, the statement I -,inserted into the Record on June 27, 198 3, this Subcommittee by the Honorable Anthon and the materials provided to Federal Reserve Bank of New York at the y M. Solomon, President of the hearing held by my Subcommittee. I would be pleased to further discus s this matter with you and, when appropriate, to testify and share with you the findings of my own Subcommit tee. Additional assistance on this matter may be obtained from the Staff Director of my Subcommittee, Howard Lee, by calling 226-7315. With kindest regards to you and every good wish, I am https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely yours, Walter E. Fauntroy Chairman BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20SSI August 22, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable Timothy J. Penny House of Representatives Washington, D. C. 20515 Dear Mr. Penny: Thank you for your letter of August 9 regarding the Board's proposal to amend Regulation Y, its regulation governing bank holding companies. Specifically, you express concern about the proposed changes to the provisions of the regulation governing the redemption by a bank holding company of its own securities. Currently, the Board's Regulation Y (12 CFR 225.6) requires a notice to the Board for any proposed redemption by a bank holding company of its own equity securities if the consideration paid for the shares exceeds 10 percent of the net worth of the bank holding company. The Board reviews the notice to determine whether the redemption would adversely affect the safety or soundness of the organization. Under the proposed amendments to Regulation Y, no notice would be required for any redemption if, after the redemption, the bank holding company meets the standards for adequate capitalization established by the Board of Governors and the Comptroller of the Currency. The Board generally regards these standards as the minimum for safe and sound operation of banking organizations. The proposal also allows a bank holding company to make redemption of its stock without regard to these capital standards under two additional circumstances. First, a company may make de minimis redemptions equal to one percent of its net worth in any 12 month period. Second, a company may apply to the Board for its approval to make redemptions in unusual circumstances. In considering those requests, it is contemplated that the Board would consider the overall effects of the proposed redemption on the capitalization of the bank holding company. The proposed revision of the redemption provisions emphasizes that the Board's primary concern with such redemptions is the effect they have on bank holding company In a redemption situation, the holding capitalization. company's capital is reduced through the retirement of its is capital stock and, in many cases, this reduction in capital of accompanied by a corresponding increase in the indebtedness https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MI6 The Honorable Timothy J. Penny Page Two the holding company to finance the redemption. In other words, in many cases, a redemption involves the substitution of debt for capital in the bank holding company. Under the proposal, the ability to make redemptions that reduce the holding company's capital and increase its indebtedness is made contingent upon the bank holding company satisfying the interagency capital l is premised upon the belief that a _ standards. The proposa reduction in a bank holding company's capital may not be consistent with safe and sound banking practice where the holding company's capital will be below the minimum capital standards established by the Board and the Comptroller of the Currency. The Board has received numerous comments on the proposed amendment, primarily from small banking organizations. The main thrust of the comments is directed to the fairness of the proposed provision that no redemption be permitted without prior approval where the bank holding company has a debt-to-equity ratio in excess of 30 percent following the redemption. The comments have raised concern that application of the Board's capital standards in a redemption situation will seriously limit the transferability of small banking organizations. While the Board is concerned with adequate capitalization of bank holding companies, the Board has also recognized the unique function of small one-bank holding companies in facilitating the transfer of ownership of small bankinn organizations. (Policy Statement on Assessment of Financial Factors of One-Bank Holding Companies, March 28, 1980.) Because of this concern, the Board has, in proposals involving the ownership of small banking organizations, permitted liberal debt-to-equity ratios substantially in excess of the 30 percent level on the basis that the bank holding company would direct its efforts to reducing its debt-to-equity ratio over a relatively short time span in order that its improved debt capacity will allow it to serve as a source of strength should the subsidiary bank require assistance. The Board's staff is reviewing modifications to the proposed stock redemption proposal in light of the Board's previously stated policy regarding the transfer of ownership of small banking organizations and the Board's concerns with the capital adequacy of the nation's banks. I appreciate having your views, and your concerns will be presented to the Board when it takes action on the proposal. I will be happy to let you know when the Board reaches a final decision on the matter. Sincerely, VM:vcd (V-165) bcc: Messrs. Mattingly & Bradfield Legal Files (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WASHINGTON orrici BUILDING ON Nous( OFFICE NN CA 1 50 515 20 DC , WASHINGTON TIMOTHY J. PENNY (202) 225-2472 NESOTA 1ST DISTRICT, MIN COMMITTEES AGRICULTURE IRS VETERANS AFFA DISTRICT OPPICIS PARK TOWEPIS AY NoRTH BROADW s t a t e d t t i n i t e h t f o s s e r g n Co /louse of Rtpuscntatibts 22 55901 53 (507) 281-60 OTA ROCHESTER. MINNES TER TY GOVERNMENT CEN BLUE EARTH COUN P0 Box 3148 Vashington, D.C. 20515 August 9, 1983 56001 OTA MANKATO. MiNNIS (507)625-6921 ••••vi C=3 —11 ".1.1 (0c;:' Crx %) . C 7▪;0 c=, rrl c—> — f ;, A I C==) alimma CP, womml C.") rr. rri ker, Chairman Mr. Paul A. Volc s ard of Governor Office of the Bo System W. Federal Reserve tution Avenue, N. ti ns Co d an et 20th Stre 20551 Washington, D.C. : 9P CJ1 CO Volcker: Dear Chairman L▪ om Minnesota have fr s al du vi di in d d other concerne on Y now Many bankers an ges in Regulati an ch le ib ly ss po e jecting to th ey are legitimate Th d. ar Bo e rv contacted me ob ral Rese small banks and ation by the Fede on ge an ch ed os under consider is prop the impact of th objections and r ei th er id ns co concerned about on Please particular revisi ing companies. is th on de ma is small bank hold decision before a final respond to me ons. of the regulati ely, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 Y TIMOTHY J. PENN ss Member of Congre TJP/FS/lth Enclosures CD c") BANK HARMONY STATE 1 MAIN AVE N 4 ISAM HARMONY MN 5543 Z CSP' NG MB IP S IC 83 5/ T 1 4..0225645196 07/ BN HARMONY MN 76 07015 1148A ES TD 5078866422 MGM f-6) — /(7a /c /72 MOTHY J PENNY TI N MA SS RE NG CO CE BLDG 501 CANON OFFI 515 WASHINGTON DC 20 FECT PRIVATE AF LY SE ER DV .A iiIILL IT Y SECTION 225.4 ON TI OF OWNERSHIP. LA GU TY RE UI IN NT ED CO OS IT THE PROP BANKS AND WILL LIt4 INTEREST OF L TY AL RI SM NO MI OF ILITY.OF ELY OWNERSHIP DUCE THE MARKETAB Y STOCK, AND IT WILL ADVERS RE LY ED RK MA NST AN WILL E FIRMLY AGAI R NK HOLDING COMP O BA W S D AN NE PL OW Y ON EL K OPT; PRIVAT E EMPLOYEE STOC AT IN IM EL OR AFFECT SE HELP US. EA PL ON TI LA GU RE THE PROPOSED BANK HARMONY MN E AT ST Y ON RM HA LEN PRESIDENT LEONARD D SKAA 11i50 EST MGMCOMP https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis GRAM REPLY BY MAIL PHONE NUMBERS ION'S TOLL - FREE UN N ER ST WE R RSE SIDE FO MESSAGE, SEE REVE FIRST NATIONAL BANK OF STEWARTVILLE P.O. Box 385 Stewartville, MN 55976 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 18, 1983 s, Secretary Mr. Uilliam W. Wile of the Board of Governors em Federal Reserve Syst e. NW Av 20th & Constitution Room 6-2223 20551 1,:ashington, DC 70" RE: "Docket No. R-04 Dear Mr. Wiles: restrictions al on ti di ad y an , 70 ket No. R-04 ir In reference to "Doc Bank Holding Company's stock would impa of One cause the in the redemption dependent banks through OBHC's and be in we feel the safety t, en em ir the ownership of qu re ce ti no day prior osed additional op pr e Fed now has the 45 Th d. re ve co is already mber of and soundness issue timately reduce substantially the nu ul detrimental to be d ul wo rn restrictions could tu in h ic wn banks wh independent small to that these banks serve. ties the rural comuni Sincerely, esident Don K. Podein, Pr of Stewartville, MN 1st National Dank Durenberger cc: Senator David schwitz Senator Rudy Bo J. Penny Congressman Timothy DKP/mlk B t n a i l t r r i t i c S s r r 3ganu ?5tatr Vank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank" "Your Home Owned 612-243-3702 July 15, 1983 J. Penny Congressman Timothy Building 501 Cannon Office 515 Washington, D.C. 20 nny: Dear Congressman Pe the to Regulation Y by s on si vi re ed os op e pr r rural Minnesota. fo k ac I strongly feel th tb se al re a d would be the financial ng li il Federal Reserve Boar lf fu e ar s nk tly owned ba The small independen a reasonable cost. at s ie it un mm co e needs of th nk is probably ba a e er wh ns io at bring up situ ese are strictly th r, ve I admit, they will we Ho . ld ou ll as it sh no not performing as we I am sure there is l, al in l Al y. . ns io at for their communit b jo a few isolated situ od go a do s nnesota bank e question that the Mi very involved in th e ar d an y it un mm co e They are part of th area. development of that or would open the do is th , ss pa to re gulations we eat the small tr d ul If the proposed re wo d an ns io ial institut m sure not only I' . nk to the large financ ba er rg la e a branch of th take away the d ul wo banks as strictly it t bu , se banking increa All in all, y. it un mm would the cost of co e th to es of the bank strong personal ti y would suffer. it un mm co e th el I fe ng give us in opposi n ca u yo at th lp he any ation or anyrm fo in al I would appreciate on ti di there is any ad your request. at it ly pp this proposal. If su ly ke, I would glad thing you would li 4 erely, /7// // Li/t /4f4 ( BOX 137 362 MINNESOTA 56 PAYNESVILLE, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis K N A B E T A T S E JANESVILL ESOTA 56048 N N I M , E L L I V S JANE July 15, 1983 thy J. Penny Congressman Timo ce Building 501 Cannon Offi 20515 Washington, D.C. n Penny: Dear Congressma re of days and befo le up co a r fo nk the ba osed Joe is gone from garding the prop re u yo t ac nt co d that I he left he aske of Regulation Y. te da up d an on si revi to erything you can ev do se ea pl u would yo Board. On behalf of Joe, Federal Reserve e th by ge an ch prevent this Thank you. Sin9Erely, Victoria Zie Secretary i r a i j . ) ? A c i r i a .T LAW ATTORNEY AT 2111i0A0VvAT 100 SOU/m 56097 WELLS. MINN 553-3805 PHONE 507/ July 13, 1983 m Penny Representative Ti Office Building e 2344 Rayburn Hous 20515 Washington, D.C. Dear Tim, cretary of the Se e th to er tt le tion py of my Enclosed is a co ard concerning the proposed regula Bo s. Federal Reserve y stock redemption an mp co g in ld ho restricting bank recommend for I , ea ar is th th familiar wi the Minneapolis of y le If you are not st Co n vi 83 ticle by Ke your study an ar ist and Vennum from the July 2, 19 qu law firm of Lund al West. A copy of the article is ci issue of Commer enclosed. regulation is ed os op pr e th at th not feel th even to help wi r no n ma Obviously, I do ss ne si bu companies the small designed to help ty and soundness of bank holding fe enforcing the sa bsidiaries. su nk ba r ei th and t e present time bu th at y an mp co g re bank holdin in the near futu e on f o n I do not have a io at rm y for the fo ult for my I intend to appl on will make it even more diffic re. and this regulati to engage in banking in the futu ue family to contin concern to the ur yo of l ta it nessmen te the transm I would apprecia Board on behalf of all small busi Federal Reserve who own banks. consideration. ur yo r fo u yo Thank https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Respectfully, Patrick V. Hart w Attorney at La PVH:kgn Enc. i r a W , . r 0 A c ' i r 9-jczf LAW ATTORNEY AT wvAr loo soul« arioao 56097 WELLS MINN -3005 PHONE 507/5$3 July 13, 1983 l Reserve System Secretary a r e d e F e th f o ors Board of Govern C. 20551 Washington, D. g ulation Regardin g e R in e g n a h C lding Company o H nk Re: Proposed Ba a by k oc Redemption of St ons regarding i t a l u g e r e th in are unnecessary roposed changes p y n a s p ' m d o r c a o B g n i d e l o Th stock by a bank h f o n o i t p m e d e r trictive. and unduly res ng a conscious ki ma is d ar Bo e erv all one bank the Federal Res sm t a f h o t k s m oc e e st s e th It said stock to the market for f t o i m e i l l a s to e t th r o e f rc ef s in order to fo s. This appears to be e i n a p m o c g n i d hol nie k holding compa g government to cater to n a b i t l u m r e g lar an effort by bi n a h t re mo g n i noth big business. f o s e r i s e d the as a redemps n o i t a l u g e r the would be unsafe for a change in d e it e n f i o n d e t i is b i h There The challenges nt rules is pro e r r . u k c n a e b h t e r th e d d n an tion u holding company y and changing financial e th r o f d un so and un y's econom a d o t in nk ba this era of facing a small y system are tough enough in e regulations th g n r i e g v n i a l h e c d s r s ato service ut having regul o h t i w " n o i t a l u "dereg businessman. l l a m s e th t c i r to unduly rest iew of each v e r e s a c by ase reliance on a c d e u n i t to the safety n o c as y s n ' a d p r m a o o c B g n e Th y by a bank holdi to an arbitrar n o i d t e p r m r e e d f e e r r p k is c sto such redemption istical criteria. f o s s e n d n u o s and on of stat i t a c i l p p a s u o i and capric https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Respectfully, t Patrick V. Har aw Attorney at L PVH:kgn Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Magazine article Citations: Number of Pages Removed: 2 Costley, J. Kevin. "Fed Wants To Limit Holding Company Stock Redemptions." Commercial West, July 2, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CAIWER COUNT STATE BANI Chaska,Minnesota 5531E Phone 612-449-210C July 11, 1983 eA SECRETARY Board of Governors of the Federal Reserve System Washington, D. C. 20551 €.• %4•.? • J.' ( % 6 •ft. .07 ° 10 DOCKET NO. R-0470 Dear Sir: stock redemption I object strongly to the proposed revision of the banks would be section of Regulation Y. The future of most small town severely curtailed with the passage of such legislation. holding company Our small 25 million bank has just completed the ng purchased transformation, buy-sells are in place, insurance findi I had as majority and so forth. This procedure is the only vehicle fer of ownership stockholder to affect an orderly and economical trans available to me over a 10 to 15 year period. The only other solution extremely relucwould have been an outright sale of the bank. I was ng company as our tant to sell to a large outside conglomerate or holdi also had to conbank had been in our family control for 120 years. I other bank officers sider my own estate planning and the careers of two Without that participated with me on the holding company formation. ations I could the present Minnesota holding company rules and regul object very not have accomplished what had.to be done. Hence, I section of strongly to the proposed revision of the stock redemption Regulation Y. Very truly yours, ‘p • e to Dc . W. DuToit Jr. Chairman cc: Bankers Resource Center, Inc. Bank Holding Company Association of Minnesota enc. Member FDIC IR • . Z 4r1"014 .86. 04.m 7 eau/.diate OF MANKATO 51L4 & LONG STREET MADISON AVENUE X 3109 POST OFFICE BO ESOTA 56001 NN MI O, AT MANK 625-1121 TELEPHONE (507) July 15, 1983 thy J. Penny mo Ti e bl ra no Ho e Th fice Building Of e us Ho on nn Ca 501 20515 Washington, D.C. ction 225.4(b) Se in s ge an Ch ed RE: Propos Docket No. R-0470 ve Penny: Dear Representati of the Board of y ar et cr Se e th t ac quest that you cont em opposing the above-mentioned re ly ul tf ec sp re st I Federal Reserve Sy asons: Governors of the e following re th r fo s ge an ch proposed more than 30% no d an ts se as l to ia (6% bank capita which would have to be met for er it cr ed os op pr n 1. The e holding company) th in e for the formatio ty ac ui pl eq to in w no debt e os tougher than th approval are much lding company. se of a new bank ho sell stock to infu to y it il ab s y' an ce the holding comp du re d ul wo It 2. iary bank, id bs su s it in l ing company to ld capita ho nk ba l al sm the ability for a e at in im el d ul 3. This wo nority stock. ugher if not to make a market in mi ch mu be d ul wo dividual's estate in an om fr s on ti 4. Redemp to the holding ok lo impossible. h ic wh s) hip Plans (E.S.O.P.' rs ne Ow k oc St ee 5. Employ would be crippled. on ti mp de s. re r fo y compan the proposed change r de un l ca ti ac pr ements would be im re ag ll se y/ Bu nk 6. s every small ba en at re th it e, ac very existence of ed changes take pl e os th op pr s en e at th re ld th ou Sh nership and tter is needed ow ma s it is d th an y in an lp mp holding co country. Your he ceived by the Federal Reserve is th in g in nk ba must be re independent ts ac nt co d an s er tt immediately as le 1983. , System on July 18 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, OF MANKATO NK BA E AT ST TY RI SECU AU A. C. Norland Board Chairman of the BANK T FULL SERVICE AN INDEPENDEN CORPORATION T INSURANCE SI PO DE L RA DE MEMBER FE dmw THE FIRST NATIONA TA 56057 BANK LE CENTER LE CENTER,MINNESO fa% P44:7,11,14.1'43 Phone: 612.357-2273 July 15, 1983 thy J. Penny Congressman Timo ce Building 501 Cannon Offi 20515 Washington, D.C. Re: Docket fiR-0470 Stock Redemption fi225.4 visions, Section Re Y on ti la gu and Re n Penny: Dear Congressma the new Section of on ti ta en em pl edent the im in objection to a dangerous prec er ts tt en le es pr is re , th ed g authoriz I am writin on from e. This law, if ov ab ed nc nking organizati re ba fe a re it ib is oh h pr ic y wh nization meets ga latory agency ma or gu re at th l ra ss de le fe actice un whereby a gal corporate pr le , rd da an . st conducting a regulatory agency e th by d he is bl s esta certain standard the d by the Board, se po im be that to s all banks, in nimum standard sm mi e of th p hi of rs e ne us ow ivate Secondly, beca hicles and will versely affect pr ve ad ng ll ni wi an pl on ti te la esta proposed regu iminate employee lding Companys as el Ho nk or Ba t ct mi fe li af y ly rsel it will severe It will also adve omic hardship p. on hi ec rs l ne ia ow nt ta of bs e a su n limit continuity w BHC formatio , of course, plac ne ll wi le is fi Th to s. ed an be forc . stock option pl s, and they will stock redemption nk a ba l to al e sm iv at of rn rs an alte on private owne Reserve System as l ra de Fe e th applications with oposal. sition to this pr po op my te no Please Sincerely, ler Charles L. Trax President https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CLT/bjn FIRST NATIONAL BANK -4r° ..9-"• Pd.e: J IN 11Aivir • A LtirquIL ST. CHARLES MN 55972 UTICA 55979 07) 523-2700 (507) 932-4486 •(5 ST. CHARLES AVE •(507) 932-4610 1130 WHITEWATER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 15, 1983 y J. Penny Congressman Timoth Building 501 Cannon Office 20515 Washington, D.C. b) Section 225.4 Subd.( Y, g. Re d se po Re:Pro Penny: Dear Congressman d ota, are oppose es nn Mi s, le ar Ch St. , National Bank in n 225.4 Subd.(b) io ct Se ", We at the First "Y on lati revisions to Regu banks. to the proposed e owners of small th rt hu y sl ou ri se because it will is authorized by d ar Bo e th r he whet a question as to We feel there is this subsection. law to implement This p is passed on. hi rs ne ow d an d ne s are family ow e ownership of at iv pr ct fe ef y Many small bank versel estate lation "Y" will ad g companies as in ld revision of Regu ho nk ba t mi at it will li small banks in th . planning vehicles ivately interest of pr ty ri no mi of y eliminate ce marketabilit so just about al d ul It will also redu wo It k. g company stoc owned bank holdin tion plans. employee stock op private owners on ip sh rd ha economic es a substantial ac pl is th el fe We of small banks. n in this matter. io at er id ns co y an Thank you for Sincerely, Jerry A. Fix President JAFmc ci AL BANK FIIIST NATION IN Si. CHARLEj LiS r MN 55972 UTICA 55979 (507) 523-2700 (507) 932-4486 • ST. CHARLES AVE •(507) 932-4610 1130 WHITEWATER July 14, 1983 Docket R-0470 Secretary s Board of Governor System Federal Reserve 20551 Washington, D.C. Dear Sir: to the proposed on ti si po op te lu er my abso s. I wish to regist stock redemption g in rd ga re Y on ti change in Regula d by the Board se po im be to s rd minimum standa ct private ownerfe af y Because of the el rs ve ad gulation will orations will be rp co this proposed re e rg la ly nks in thd:on ereby limit the th ll wi ship of small ba It s. a hasing said bank ation and hence tr en nc capable of purc co a te ry banks and crea the hands of ve in g in market for such be ns io ncial institut continuity of e th t mi monopoly of fina li e will furthermor of e marketability small groups. It th ce du re ly ed ll mark bank holding d an nk ba ownership and wi d ne ow s of privately minority interest company stock. e the employee at in im el or ct fe and ore adversely af g company stock in ld It will furtherm ho nk ba n ow s that inely taken for ut ro stock option plan e ar h ic wh centives thereby remove in corporations. granted by most s,. Respectfully your https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • ick, M.D. Donald W. Herr Chairman DWH:je k n a b l a n o i t a rfn117 First n 76 ARTVILLE, MN 559 ) 533-4731 • STEW 07 (5 • 5 8 3 X O B P.O. July 14, 1983 Docket R-0470 Secretary nors Board of Gover e System Federal Reserv C. 20551 Washington, D. Dear Sir: o the proposed t n o i t i s o p p o . ster my absolute k redemptions oc st I wish to regi g n i d r a g e r lation Y change in Regu ed by the Board s o p m i be o t s ate minimum standard y affect priv l e s r e v Because of the d a l l i w n regulatio corporations e g r a l y l n o this proposed hat will thereby mall banks in t t s I f o . p s i k h n s a r b e n w id o of purchasing sa d create a concentration e l b a p a c be l l i an w for such banks being in the t s e n k o r i a t m u t e i h t t s n t i i m li ial re limit the opoly of financ o n m o r m e h a t r e u f nc he l l d wi an all groups. It e the marketm c s u d y e r r e v ly f o ed s rk d han l ma d bank and nership and wil e w n o w o f o y y t el i u at n iv i t pr con ty interests of i r o n i m f o y t i abil pany stock.. m o c g n i d l o h bank liminate the e r o t c e f f a y rmore adversely holding compan nk ba n w o It will furthe t a option plans th are routinely h ic wh s e v employee stock i t n eby remove ince stock and ther rporations. o c t s o m y b d e taken for grant ours, Respectfully y https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ick, M. . • r r e H , W d l a n o D Chairman DWH:je qlb FIRST NATIONAL BANK 56051 KIESTER, MINNESOTA ••••••• ent M. A. PASSER, Presid https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 13, 1983 y J. Penny Congressman Timoth dg. 501 Cannon Office Bl Washington, D.C. 20515 , Regulation Y Re: Docket R-0470 k Redemptions Section 225-4, Stoc Penny: Dear Congressman ges sition to the chan po op r ou e ic vo is letter to We are writing th ed in Section 225-4. os op pr g in be e which ar use: these changes beca We are opposing ing r small bank hold fo y it il ab e th eminate 1. This would el in minority stock. et rk ma a ke ma companies to ock ility to sell st ab s ie an mp co g in ce the hold bank. 2. It would redu it's subsiduary in l ta pi ca se fu to in tougher, if not ch mu be d ul wo from estates 3. Redemptions impossible. ok to the holding lo h ic wh s an pl ock ownership ult. 4. Employee st on would be diffic ti mp de re r fo y compan be impractical. d ul wo ts en em re ell ag 5. Many buy-s " ON THE CORNER K N A B LY ND IE "THE FR existin significant change to in er th ra a be to s rge What appear the ease in which the la se ea cr in ly on ll wi s regulation the small privately e ir qu ac ly al tu en ev y s ma banking organization holding companies as nk ba t mi li ly re ve se uld ty of owned banks. It wo uld also limit continui wo d an es cl hi ve ng estate planni onomic hardship on ec e ac pl ly te ni fi de uld ownership. This wo forced to file new be d ul wo h ic wh s, nk l ba private owners of smal an alternative to as ns io at ic pl ap n io at form buy-sell agreebank holding company ny ma e ar e er th , ly al dition stock redemption. Ad ntractually obligco is y an mp co g in ld nk ho n ments wherein the ba eholders under certai ar sh re mo or e on ares of ock a significant ated to purchase sh st em de re to y it il this ab holding ownership conditions. Without nk ba of ty ui in nt co aced on abdity of minoret hardship could be pl rk ma l ia nt te po d group an by a given family or tantially reduced. bs su be ll wi st re te ity in ing y small bank hold er ev s en at re th al os l this prop you tell the Federa In closing we feel at th t es qu re We nership. h. company and it's ow major changes throug ch su g in sh ru op st Reserve System to for your consideration. e nc va ad in u yo Thanking https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Very truly yours, M. A. Passer President MAP:15 July 14, 1983 mothy J. Penny The Honorable Ti ce Building 501 Cannon Offi 20510 Washington, D.C. Y Section 225.4, g. Re in s ge an ch RE: Proposed Subd. (b) Dear Mr. Penny: position to the op in t or pp su ur e urge yo e Federal Reserv th I respectfully by s ge an ch ed propos represent a s above captioned ge an ch ed os op ese pr tory Board. I feel th a federal regula y eb er wh t, en ed om dangerous prec organization fr g in nk ba a ss it ib e practice unle at agency may proh or rp co l ga le by andard, rds established da conducting a st an st n ai rt ce meets of the minimum e the organization us ca be , so Al agency. osed the regulatory Board, the prop e th by d se po im e ownership of at iv standards to be pr ct fe af y adversel limit bank ly regulation will re ve se ll wi that they vehicle and ng ni small banks, in an pl te ta s as an es It will further holding companie p. hi rs ne ow uity of ty will limit contin ity of the minori stock; il ab et rk ma e th any markedly reduce nk holding comp ba d ne ow y el at ee interest of priv eliminate employ or ct fe af y el rs ve lding and it will ad at own bank ho th ) S" OP ES (" s an l stock option pl in a substantia lt su re ll wi d is Th small banks, an of company stock. rs ne ow e ip on privat lding company ho economic hardsh nk ba w ne rced to file Reserve System l ra de they will be fo Fe e th ations with . formation applic stock redemption a to e iv at rn as an alte g ort in defeatin pp su ur yo ge reasons, I ur Holding Company nk Ba For the above e th in new changes ge in the Bank these proposed an ch e th in d de amen Act of 1956 as 1978. Control Act of ur consideration. yo r fo u yo k Than ry truly, i. J. Buscher Chairman e Officer Chief Executiv RJB:dah AMERICAN STATE BANK (507)345-4531 H. -P 1 00 56 A OT ES NN 880, MANKATO, MI X BO O. P. , ET RE ST F ON 302 NORTH FR 024-PH. (507)257-3830 56 A OT ES NN MI , KE LA X 40, EAGLE 401 PAR/AY, P.O. BO https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 983 July 13, 1 J. Penny y h t o m i T n a Congressm . ffice Bldg O n o n n a C 501 , D.C. Washington https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Y Regulation , 0 7 4 0 R edemptions R k Re: Docket c o t S , 4 5Section 22 n Penny: e changes h t o t n o i sit e our oppo c i o v o t r e ett ing this l on 225-4. t i i t r c w e S e r n a i e W osed being prop e r a h c i h w because: s e g n a h c e osing thes nk holding a b l l a We are opp m s for e ability h . t e t a n i m e el rity stock o n d i l m u o w n i s t i ke 1. Th make a mar ock o t s e i n a p o sell st t com y t i l i b a ies ing compan d l o h e nk. h t siduary ba d reduce b l u u s o w s ' t t I i 2. capital in not to infuse ugher, if o t h c u m e d b states woul e m o r f s n tio • 3. Redemp ng . e l b i s s the holdi impo o t k o o l ich p plans wh i h s r e n w o difficult. e e stock b e y d o l l u p o m w E n o 4. r redempti company fo practical. m i e b d l wou greements a l l e s y u 5. Many b essma Dear Congr change to existing t an ic if gn si in er a rath which the large in What appears to be se ca e th se ea ely only incr e the small privat ir regulations will qu ac ly at tu en as tions may ev holding companies nk banking organiza ba t mi li ly re would seve t continuity of mi li owned banks. It so al d ul wo d vehicles an omic hardstip on on ec e estate planning ac pl ly te ni w would defi forced to file ne be d ul ownership. This wo h ic wh s, small bank an alternat:ve to as ns io at private owners of ic pl ap n any formatio ny buy-sell agreema e ar e bank holding comp er th , ly . Additional ractually oblignt co is y stock redemption an mp co g n e bank holdin ders under certai ol eh ar sh ments wherein th re mo or shares of one ock a significant st em de re ated to purchase to y it p out this abil holding ownershi nk ba of ty conditenns. With ui in placed on cont abaity of minoret rk ma l ia hardship could be nt te or group and po ced. by a given family bstantially redu su be ll wi st re ity inte g small bank Holdin y er ev s en at re this proposal th tell the Federal u yo at th t es In closing we feel qu ownership. Wc re changes through. r jo ma company and it's ch su g in stop rush Reserve System to ation. e for your consider nc va ad in u yo Thanking https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis s, Very truly your C7 Ceutz/L-Gi Edward Eilertson ard of Directors Bo e th of an rm ai Ch of Kiester 1st National Bank a 56051 Kiester, Minnesot ANK ARLINGTON STATE -RBeal Estate Banking-Insurance 230 WEST MAIN A 55307 ARLINGTON, MINNESOT Office 612-964-2256 Home 612-964-5408 H. W. LYNCH President July 14, 1983 y J. Penny Congressman Timoth ilding Bu 501 Cannon Office 20515 Washington, D.C. Penny: Dear Congressman ed a notice of su is d ar Bo e rv se Re the Federal on represents the ti la gu On May 19, 1983, re is Th Y. s to Regulation Act of 1956, as y an mp Co g in proposed revision ld Ho tion of the Bank mbered 225.4 Board's implementa ed revision is under a new section nu os chase or amended. The prop ons. In subsection (b) entitled "Pur ti rities", the cu Se n Ow s it and has two subsec of y nk Holding Compan a blanket proby ed ac pl re Redemption by a Ba en be requirements have es with the prior notification demptions by a BHC, unless it compli re capital adequacy. on t en em at st hibition on stock cy in the Board's poli minimum standards ge for Section 22.4(h) is as follows: ua The proposed lang its holding company of nk ba a by on ti mp de hase (b) Purchase or re mpany may not purc co g in ld ho nk ba A own securities. ties, unless: ri cu se ty ui eq s it or redeem , r the securities fo id pa n io at er id (1) the gross cons e net consideration paid for all th when added to th e preceding 12-mon th ng ri du ns io ct sa similar tran llion or 1 percent mi 0 $1 an th re mo r period, is not net worth, whicheve s y' an mp co g in ld of the bank ho is less or, ing company has: (2) the bank hold billion or more, and $1 of ts se as ed at (i) consolid mption, its consolide re or se ha rc after the pu ssets ratio is at -a o -t l ta pi ca y dated primar least 5 percent; https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (2) cont'd to $1 billion, n io ll mi 50 $1 of assets oli(ii) consolidated purchase or redemption, its cons ratio is at and after the ts se as al ot -t to taldated primary capi or least 6 percent; or less, and n io ll mi 50 $1 of ing assets (iii) total bank or redemption, se ha rc pu e th r afte of tal assets ratio at to ot lta pi ca y (A) the primar (consolidated) is y an mp co g in ld ho the bank or least 6 percent, o of tal assets rati to ot lta pi ca y g company is in (B) the primar ld ho e th of nk quity ratio each subsidiary ba -e o -t bt de e th d t an at least 6 percen holding company (nonconsolnk of the parent ba than 30 percent; or dated) is no more approval of the r io pr e th s in lding company obta rchase on the basis of unusual (3) the bank ho demption or pu Board for the re circumstances. bsection (b) as su is to ct je that I seriously ob r the Board is authorized by The subsection as to whethe on ti es d upheld, reprequ an s ou ed ri su se is f a i h, is ic there ry agency may is subsection, wh to th la t gu en re em l pl ra im de a fe law to dard, legal precedent whereby an st s ou a er ng ng ti da uc nd a sents ganization from co on meets certain standards or g in nk ba a it mum prohib at organizati th ss le un use of the mini ca ce be ti , ac ly pr nd co e Se at corpor gulatory agency. gulation will ad ly re re e th ed os by op d pr he e is th establ will severe the Board, by it d at se th po im in s be nk standards to rship of small ba ne ow e at t continuity of iv mi pr li ct ll fe wi af d an y versel ty interests ng vehicles ri ni no an mi pl of te y ta it es il ab limit BHC's as reduce the market rsely affect or eliminate ly ed rk ma ll wi ve ownership; it k; and it will ad S") that own BHC stock. oc st C BH d ne ow P of privately (hereinafter "ESO omic hardship on private s an pl on ti op k econ employee stoc e a substantial ac new BHC formpl , le se fi ur co to of ed , rc ll fo be This wi an alternative s, and they will nk as ba em l st al Sy sm e rv or Rese owners with the Federal ns io at ic pl ap ation mption. to a stock rede t supporters es ng ro st ur yo of situation. Many s ou ri companies. We se g ry in ve ld a ho is nk ba is wn y Th stors in small to n and will greatl ve io in at tu l si ia nt is ta th bs in by are su support and help sist us. Laws should be made e at di me im ur need yo you can do to as le, not by the edict of bureau ng hi yt er ev te apprecia tives of the peop this. ta en es pr re d te duly elec hear from you on to ke li d ul wo crats. I C ) r te, il H. W. Lynch President MATL:dp https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ER JOHN A.FISCH. July 14, 1983 m Penney Representative Ti ng 501 Cannon Buildi 20515 Washington, D.C. ve Penney: ti ta en es pr Re ar De I have recently er tt le a of py co find a the Federal of s or rn ve Go Enclosed please ard of th respect cretary of the Bo wi Se n e io th at or to rp n Co te writ her g behalf of The Fisc on em the Bank Holdin st Sy of e ' rv 'Y Rese on ti la gu nk change to Re y eliminates ba el iv ct fe to their proposed ef ge an ing a e proposed ch stock; this be n ow r Company Act. Th ei th g in facilitate the s from redeem ie to an s mp ie co g an in mp ld co ho ing is currently ntly used by hold d ue an eq fr en e dr qu il ni ch ch te his from a father to k oc st of er sf tran any corporation. to e bl la ai av is a technique that at it could th in ct fe ef g it such a devastatin nking as we know ba This change has y it un mm co t ate independen virtually elimin today. and effort to me ti t ea gr n ke d gislature has ta ainly farms an (m ty er op pr The Minnesota Le held This was sfer of closely . an en tr dr e il th ch r fo s e hi er to provid to keep what es) from a fath ss le ne ab si be bu l ld al ou sm other child sh vel, e belief that a th of e the Federal le reason us On ca be d. il bu done to me worked so hard d for the sa te op ad en be his parents have ve ually tate tax laws ha al would virt os op pr e rv changes to the es se Re s on to their is Federal nk th , ba nd r ha ei r th he ot ss pa On the r many bankers to fo le ib ss po im make it children. so oposal, I am al pr is th of d ains have even hear ey which expl rn to at As you may not l ca lo a ticle written by . enclosing an ar proposed change e th d an on ti la the current regu for community bank l ca lo s hi s en involved in is asset to hi th g in ss My father has be pa le. To deprive him of s. ar ye y ft ir or reasonab fi fa , over st ju be t appear to children does no such terial change ma a at th le action. t seem reasonab ministrative, ad t no It would at leas d an is not put gislative, le ge an e ch ir qu ed re os d op pr as this woul see that the to do n ca u yo Anything that be appreciated. into law would s, Very truly your AL A'Z-47elt-L, _ JAF/jw Enclosures r John A. Fische Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Magazine article Citations: Number of Pages Removed: 3 Costley, J. Kevin. "Fed Wants To Limit Holding Company Stock Redemptions." Commercial West, July 2, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org HER JOHN A. FISC July 14, 1983 d of Governors Secretary, Boar System Federal Reserve 20551 Washington, D.C. Re: Dear Sir: 70 Docket No. R-04 ion scher Corporat Fi e Th of lf ha itten on be d") rve Board's ("Fe This letter is wr se Re l ra de Fe e in Regulation s response to th ge in an ) ch r" ed he os sc op Fi (" to pr letter ent with respect mm co r fo ifically, this t ec es Sp qu re t. cAc y an lding Comp ich would effe Ho wh nk b) Ba 4( e 5. th 22 n of io 'Y' Sect y of its own osed change to an op mp pr co e g th in s ld se ho es bank addr demptions by a re e at in im el ly tive stock. whose subsiy an mp co g in ld all multibank ho wiston") and. Le (" on st Fischer is a sm wi Le of rity State Bank s formed in cu wa r Se he e sc th Fi e ar . s ff") diarie her, of Wykoff ("Wyko nk Ba e Webster A. Fisc at r St fo t e cl hi ve the Firs d Lewiston, tate planning an es r he an sc as Fi ly of in cer 1978 ma f Executive Offi the majority ie Ch is r d he an sc t Fi en id . Mr the Pres ston ctor of Wykoff. re di d an volved in Lewi r in ce fi ly ve ti ac and an of been Fischer and has were to plan an ns io nt te in s stockholder of her' his children years. Mr. Fisc to y ft ts fi se as er s ov hi r o f of onomical transfer d to become a ec ie d pl an ap e t iv i ct me fe ef e ti of the Fed of his death. At th s ve of ti me ta ti en e es th pr t a re odemptions to pr Fischer met with re y, an f o mp e co g us in e ld ho tail th yment of estate discussed in de pa d an e s th li po r ea fo nn Mi tate Mr. Fischer's es to y it id qu li de vi taxes. ovided for, and pr ng ni an pl requate estate mily being inte fa e at di With seemingly ad me im s Wykoff Bank in Webster Fischer' e f o th er ed mb ir me qu ac ch r with ea her discussed industry, Fische g sc in Fi nk , ba nd e mi th in ested in estate planning of redemption e e th us e th th wi s n, li ai po Minnea 1981. Ag committed to f the Fed of en o ev s r ve he ti sc ta Fi en es , ime with repr at y. At that t an mp co g in g company so th ld in ho ld ho e th e in th th wi thin d be a source of tion levels wi an mp d de un re so ed y ct ll ri rest entatives of in financia es ma pr re re ys e wa th al f d o tion of Fischer woul At the sugges . s k n a policies on each b e s nc it ra to su in th ng y stre life the death of an even purchased on r Up he sc . Fi r e h d, c s Fe Fi d/or the en payable to an officer an dr er il th ch ei s r' s a he sc ed ssar Mr. Fi involv ive the nece all actively ce ( re s d on ul rs wo pe e r es he Fisc of th tate on or Wykoff), used as an es st s wi wa Le r f he o sc or Fi ain, direct eir stock. Ag th em de re to funds https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis d of Governors Secretary, Boar Page 2 would remain a t i at th so ed on d was positi planning tool an th to its banks. ng re st l ia nc na fi on b) of Regulati 4( 5. 22 n io ct Se o ges t this estate f o l al ng The proposed chan ki ma f ct o ble e devastating effe th ve ha ys used availa d wa ul al s wo ha r 'Y' he sc s. Accordnd worthless. Fi y de ll vi ua di rt vi y an ng ni plan r paid not have the debt; it has neve d s ul it wo ce du en re dr il to s ch cash Even if of Mr. Fischer, hi h . at te de ta e es th s on hi om ingly, with y to buy stock fr ar ss ce ne s ire repayment nd qu fu re d ul wo t i personal , ed the holding uld be accomplish om fr n aw dr th wi such funding co y sl s, dollars obviou or dividends. es ri la sa h ug after tax dollar ro th r subsidiary banks) strength Fische e th on ct fe company (or the ve ef a serious negati ve ha d ul co is Th ff. Lewiston or Wyko to e id ov pr d ul co y s can currentl ie an mp co g in ld alizes that ho eir financial th rm ha Fischer fully re y ll ia nt es means for s which can substa id on ov ti pr mp de ' Y re ' m on or ti y perf the current Regula tion effectivel r, la ve gu we re Ho . ed on os ti op pr posi g companies such abuses. The in t ld en ho ev pr e os to th d o t en the Fe commitments f redemptions ev o de e ma us e ve th ha es o at wh ose elimin e commitments. strong and to th os y th ll t ia me nc na ve fi ha e D AN that ar t to redemptions an arbitrary ec ly sp mp re si th wi be d Fe to s to the regulation appear ying financial ed rl os de op un pr e e th th t, to ship In shor d ving no relation ha os regulation coul ti ra ed w os ne op pr e set of Th g company. banking as we in ld y ho it e un th mm f co o n t en conditio icly owned ation of independ bl in pu im el e e rg th la e rc or thy easily fo uld afford e extremely weal co th s ly on On ti mp y. de da re e know it to rmally do not us no t a h previously well t s d ie ul an wo mp co ly g on in t ld No ho e ss. rthless, but th e banking busine wo th in me co in be ma re ng ni d to an g company coul ght out estate pl in ou ld th ho d a an r d fo ne k an as pl an estate could at th sale". e ic pr g in sell of a "distress l ve le e th to ibly be reduced poss mment period co e th at th ) ully requests (1 be extended in ' Y ' on ti Fischer respectf la gu Re change can ion 225.4(b) of ct ed Se os op to pr ge an is ch th of ges for any complete review opted, no chan d ad an e ll ar fu s a on at ti gula order th redemptions or en the final re wh ) to 2 ( t d ec an sp re ed Y' with be analyz realistic it rm ent Regulation ' pe rr cu ey e th th , to 4(b) be made to Section 225. de ma e ar s ge an (3) if ch estates. redemptions by https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis urs, Very truly yo rporation The Fischer Co olvtohn A. Fischer, Secretary JAF/jw , Lakeland State Bank 568/4025 ESOTA 56472 • 218/ NN MI S, KE LA OT PEOU OTA 56442 OSSLAKE, MINNES BRANCH OFFICE: CR AND, President July 14, 1983 GLENN S. BIRKEL https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis thy J. Penny o m i T n a m s s e r g n Co ice Building 501 Cannon Off C. 20515 Washington, D. n Penny, Dear Cpngressma hat the Federal t e c i t o n d e v i e I recently rec revision of n o s t n e m m o c g n is receivi Reserve Board ship of small r e n w o e h t o t g tainin Regulation Y per . I sincerely s e i n a p m o c g n i d l nk ho banks by one-ba gulation, as pro e r e h t n i e g n a he ch mall banks s e believe that t h t o t l a t n e m very detri ation that t e posed, would be r p r e t n i y m s tates. It i nted to allow e m e l in the United S p m i s a w y n lding compa ls and allow the a the one-bank ho u d i v i d n i y b be owned small banks to stock. transfer of the t the change in s n i a g a k r o w o ou t I would urge y Federal Reserve e h t y b d e s o p now pro Regulation Y as r cooperation. u o y r o f h c u m y you ver Board. Thank y Your /- ery trul GSB/mf SOCIATION S A S R E K N A B A T O S MINNE 55402 HEROINE A ILIPED. ^um VA 'curt, slam saiA DEN1 ftitS1 VICE PitESi GAON 1 PATE S' , VAT mit ..1 Etr.. MILDEW SECOND NCI ClONION D EUIETZ, S.iff NO•w000 crittiv5 D, TREASLAIN &WS I )0ESTA LD im arizEio slat/ ems S TRUMAN t /MES M SAN fret owe via SEETNiathwE MV TN! IOW, &types .•IVO WIC PON JOHN I /AC(SON Or NA am (WNW MAIPG•117 &OH NNESOTA NNEAPOLIS, MI MI • NG DI IL BU 332 BAKER (612) 336-7851 July 14, 1983 thy J. Penny The Honorable Timo Building 501 Cannon Office 20515 Washington, D.C. Re: and Update of Proposed Revision Regulation Y nny: Dear Congressman Pe s to Regulation Y on si vi re ed os op pr ced Your office has no e Board has announ s. nk ba l al sm of The Federal Reserv rs ne at sly impact private ow s on the issue. It is believed th ou ri se ll wi h ic wh small banks lls and letter of ca p us hi ro rs me ne nu ow e ed at iv priv doubt rece ll adversely affect wi on ti estate planning la gu as s re ie ed an mp co g in ld the propos ho e marketability of riously limit bank th se ng ll ci wi du re it by at p th hi in as ners y stock, as well e continuity of ow an th mp t co mi g li in , ld es ho cl nk hi ba ve k. of privately owned s st re te that own such stoc in s ty an ri pl no on mi ti op k oc g employee st adversely affectin ared are comments prep ed os cl en e, su is polis firm. u with the yo ea g nn in Mi nt a ai , qu c. ac In , of er Cent As a means th Bankers Resource wi nt ta ul ns co by a senior been extended s ha le ru ed os op e pr em appropriate with respect to th de od u ri yo pe t ce en an mm st co si e er as I believe th d appreciate whatev ul wo ce fi of r Ou of its proposal. n io at er id to August 1. ns co re fecting Board with respect to ef Thank you. Very truly yours, ckson ohn S. General Counsel JSJ:jab Enclosure cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Herbert A. Lund Galen T. Pate MOII Y ONS TO REGULATION SI VI RE ED OS OP PR E TH COMMENTS ON Introduction ereindfter the (h em st Sy e rv se dr to ors of the Federal Re that dues nut dppe Y The Board of Govern on ti la gu Re to eing a change t a supervisory prec se y il "Board") Is propos ar tr bi ar d atute and woul over, the new regula re Mo be authorized by st s. on ti or op y far-reaching pr the continuation of to at re th dent of potentiall t en es a clear and pr d appear at first ul wo at Wh tion would represent s. of commercial bank ting regulation, is ex an to private ownership ge an er insignificant ch g organizations in nk ba e rg la glance to be a rath e h th leaviny only a the ease with whic s, se nk ea cr ba in d ne ly ow on y ll wi atel es. ire the small, priv qu ac ly al tu en ev y ek banking servic ma se y ma ic bl pu e th which few megabanks from https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis er posed revisions to Regulation pro of ice a not ued iss rd Boa the Un Moy 19, 1983, ation of the think Holding ent lem s Imp rd' Boa the s ent res rep in Y. This regulation d (12 U.S.C. 1841 et seq.) and the Change de en am as 6, 195 of Act the Company 1817 (J)). The notice states that .C. U.S 2 (1 8 197 of Act l Bank Contro gram to improve and simplily its pro s rd' Boa the of t par is on proposed revisi d. in the notice would lead one use ge gua lan y mar sum the t, fac regulations. In ous enough, so that those ocu inn are ed pos pro as ons isi rev lo t the to believe that the uld be in favor of, or not object sho ed ect aff ly ial ent pot or pused allected id except for the amendment being plu val ms see ing son rea s Thi . revisions is the itled "Corporate Practices", which Y ent n tio ula Reg of .6 225 n tu sectio subject of this paper. [lie Current Regulation a bunk ies the notification requirements fur if ec sp .6 225 n tio sec y, tl Curren own ") planning to purchase or redeem its HC "B er ft na ei er (h y an mp co k ot holding to notify its rederal Reserve Bon ed uir req Is BHC a ly, ial ent Ess if ,,holes. or redemption of its own stuck se cha pur d nne pla a to or pri least 45 days the company's net worth. or e mor or t cen per 10 to al equ is the purchase price suct such a transaction is through the ven pre can rd Boa the y wa y onl The on order, wherein the proposed transacti ist des and se cea a of ce uan iss on cessful ound practice, or the transacti uns or fe sa un an te tu ti ns co is deemed to n or order, or any condition tio ula reg e, rul , law e abl lic app would violate an with, the Board. imposed by, or written agreement essive ed in 1976 primarily to prevent exc ent lem imp was n tio ula reg t such The curren h a change in control. Often wit n io ct un nj co in Cs BH of UHC releveraging Board's power to approve or deny the ted ven cum cir ly ive ect eff releveraging tion was diminished with sec s thi of y it ss ce ne and e os rp formations. The pu 8. This law gave lite Board 197 of Act l tro Con k Ban in passage of the Change uf on exist my UHC, l tro con in ge an ch ed pos pro a direct authority to deny tion is involved. whether or not a stock redemp . The Proposed Regulation subsecsection number 225.4, and has two new a er und is on isi rev ed s", The propos ding company policy and operation hol nk "Ba ed itl ent , (a) n tio of tions. Subsec a DHC should serve as a source t tha rd Boa the of icy pol in codifies the bank and nonbank operations its t duc con and ies iar sid sub strength for its ce. Also, subsection (a) cti pra and icy pol g in nk ba nd accordance with sou y Act that authorizes the pan Com g din Hol k Ban the of describes the provision activity under certain or y iar sid sub k ban non a of re of the Uuurd to order divestitu section, but subsection (b) sub s thi not is It s. nce sta adverse circum new 225.4 that is objectionable. redemption by a bank or e as ch ur "P , re fo be as , ed tl In subsection (b), enti ification requirements not or pri the s", tie uri sec a BHC, holding company of its own n on stock redemptions by io it ib oh pr t ke an bl a by ent have been replaced rds in the Board's policy statem nda sta m imu min the h wit unless it complies itted by the Board only in rm pe be d ul wo ns io pt ce Ex on capital adequacy. s. The official lanimu min de is n tio emp red the unusual circumstances or if follows: guage proposed for section 225.4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ATE PRACTICES SECTION 225.4 -- CORPOR and operation. (1) A bank cy li po y an mp co g in ld ho (a) Bank nancial and managerial fi of ce ur so a as e rv se holding company shall uct all of its operand co l al sh d an es ri ia id subs strength to its bank g policy and practice. in nk ba d un so th wi ce an tions in accord conbelieves an activity or d ar Bo e th er ev en Wh ) (2 , a serious risk to safety s te tu ti ns co ry ia id bs trol of a nonbank su of a bank holding comry ia id bs su nk ba a of y soundness, or stabilit inciples or the purpr g in nk ba d un so th wi tent pany, and is inconsis bank holding company e th e ir qu re y ma d ar Bo t, the poses of the BHC Ac of the subsidiary, l ro nt co e at in rm te to vity or to terminate the acti n 5(e) of the BHC Act. as provided in sectio ly on by a bank holding_compar ti mp de re or se ha rc Pu (b) y may not puichuse or an mp co g in ld ho nk ba A es. of its own securiti rities, unless: redeem its equity secu ties, ion paid for the securi at er id ns co s os gr e th ) (1 r all similar transacfo id pa n' io at er id ns co t when added to the ne , is not more than $10 od ri pe th on 12-m g in ed tions during the prec s net worth, whichy' an mp co g in ld ho nk ba e th million or 1 pecent of ever is less, or mpany has: (2) the bank holding co of $1 billion or more, ts se as ed at id ol ns co (1) idated primdry capol ns co s it , on ti mp de re se or and after the purcha at least 5 percent; ital -to-assets ratio is $1 ts of $150 million to (11) consolidated asse ed tion, its consolidat mp de re or se ha rc pu e billion, and after th t 6 percent; or as le at is o ti ra ts se as al primary capital -to-tot $150 million or of ts se as g in nk ba l ta (i11) to hase or redemption, less, and after the purc tal -to-total assets (A) the primary capi is at leubt 6 perd) te da li so on (c y an mp co lding ratio of the bank ho cent or ation" is the gross er id ns co et "n n, io ct 1 For the purposes of this se s equity securities it of l al r fo y an mp the co e gross considerconsideration paid by th s nu mi od ri pe e th during the. purchased or redeemed curities sold during se ty ui eq s it of l ation received for al part of a new issue. as an th r he ot od ri pe https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 -total assets (B) the primary capital -to y is at least 6 an mp g co in ld ho e th of nk ba ing ratio of each subsidiary tio of the parent bank hold ra y it qu o-e -t bt de e th percent and Is no more than 30 percent; or ) ed at id ol ns co on (n y an mp co y obtains the prior apan mp co g in ld ho nk ba e th (3) hase on the basis of rc or pu on ti mp de re e th r fo proval of the Board unusual circumstances. Objections tion ntial objections to subsec ta bs su e ar e er th , ew vi of From a banker's point on as to whether the Board ti es qu s ou ri se a Is e er th (b) as proposed. First, if Issued and uph, ic wh , on ti ec bs su is th t en em impl is authorized by law to latory agency may gu re l ra de fe a y eb er wh t en ed ous prec rpolute held, represents a danger ting a standard, legal cu uc nd co om fr on ti za ni ga or by the prohibit a banking ain standards established rt ce s et me on ti za ni ga or proctice unless that m standards to be imposed mu ni mi e th of e us ca be , ly nd regulatory agency. Seco fect private ownership af y el rs ve ad ll wi on ti la gu re by the Board, the proposed estate planning vehias Cs BH t mi li ly re ve se ll wi of small banks, in that it rkedly reduce the ma ll wi it p; hi rs ne ow of inuity will cles and will limit cont ely owned BHC stock; and it at iv pr of s st re te in ty ri no nafter marketability of mi ock option plans (herei st ee oy pl em e at in im el adversely affect or , place a substantial econ se ur co of , ll wi is Th k. oc "ESOPs") that own BHC st they will be Forced to d an s, nk ba l al sm of rs ne ow e omic hardship on privat l Reserve System OS an ra de Fe e th th wi ns io at ic pl file new BHC formation ap ving at the afore— ri ar r fu s on as re e Th . on dempti alternative to a stock re aphs. t forth in the ensuing paragr se e ar s on si lu nc co d ne io ment Authority (I) Absence of Statutory ing on 12 U.S.C. 1844(b), ly re Is d ar Bo e th 4, 5. 22 n In proposing the new sectio lding Company Act of Ho nk Ba e th t en em pl im to y orit which refers to Board auth to issue cease and d ar Bo e th es iz or th au h ic 3), wh arily issued in im 1956, and 12 U.S.C. 1818(b)( pr e ar rs de or st si de d Cs. Cease an d desist orders against BH ions of laws, rules, an at ol vi or s, ce ti ac pr d un so response to unsafe or un 12 U.S.C. 1844(b), and to rs fe re ) (a on ti ec bs su that regulations. It appears 12 U.S.C. 1818(b)(3). subsection (b) refers to has the authorit ng di en nt co is , (b) 5.14 22 section t The Board, through the new a UHC if the WIC does no by ce ti ac pr e at or rp co rd ity to prohibit a standa direct Implication, the By d. ar Bo e th by d te ga ul om meet certain standards pr be unsafe or unsound to on ti mp de re k oc st a rs de ,consi ined by the Board. Board is saying that it rm te de as s rd da an st d ie et specif whenever a BHC does not me e Office of the th of y or st hi w la se s used the ca at Apparently, the Board ha n the OCC declared th ei er wh , ") CC "O er ft na ei er cy (h in a bank to be unsafe Comptroller of the Curren me co in e nc ra su in n ai rt ce ing the practice of not retain ty. The OCC requires vi ti ac ch su g in aw tl ou gulations and accident insur, th or unsound and issued re al he , fe li it ed cr the sale of st remain in the mu that income earned from nk ba a in s an lo of with the making ance sold in conjunction bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ty, has never belole ci pa ca ry to la gu re d an y bank supervisor e practice unless at or rp co l ga The Board, in its le a ns ba a regulation that is lelyiny on it d en nt co y proposed or issued ma d ar Bo e surs are met. While th tion prohibiting an in specified standard la gu re s C' OC e th of w ing e case la e Board is not. propos th d, legal support from th un so un or fe sa un e ined to be or unsound. To th fe sa un ance practice determ be to It by tice considered le corporate pracab pt ce ac , rd to prohibit a prac da an st a it wants to prohib the Vold, is not by ed in contrary, the Board rm te de as , rd tion ain capital standa draw between the regula tice whenever a cert to n io ct in st di t an rt po one, an im ard. On this basis al being met. This is Bo e th by ed os op pr g in that be t. issued by the OCC and ing the proposed amendmen su is om fr d de lu ec pr the Board should be (2) Precedent Establishes Dangerous be dangerous precedent will a l. t en dm cn am is th g in the in issu ing organilations by If the Board succeeds nk ba of n io is rv pe su lates to tory agencies. By not la gu t...tobli.;hed as It re re nk ba l ra de fe r em and othe capital standards are m mu ni rcderal Reserve Syst mi ss le un e ac pl mption to take l of a UHC should not ta pi ca allowing a stock rede at th ct fe ef in is contending ment. On the face ge na ma maintained, the Board C BH of on ti lt of a conscious ac e a stock redempnc si , le ab be reduced as a resu on as re un not appear t logically of it, such a restril ctaniodn fidonaesncial strength. However, does it novi by a payment or di dends it tion reduces capita ib oh pr to nt wa y rl may simila After all, the payment ? follow that the Board ed in ta in ma e ar s rd tal standa uity relationship is eq to UHC unless minimum capi bt de e th if d, ces capital. An y increase in debt an it ib of dividends also redu oh pr to ed uld also be expect prohibitions could r la mi Si an issue, the Board co . ed in ta able l standards are main and other controll es unless minimum capita ri la sa e at or rp co e to includ also be established sets and liabilities. as of e ur ct ru st e th expenses, as well as y the Board could eb er wh d he is bl ta es edent would be (i.e. take over ss ne si bu In other words, a prec s it ng ti nization from conduc the Board. [he by d he is bl prevent a banking orga ta es s not met specific standard section 225.10) does g management) unless it in os op pr in d ar Bo e A ed by th ing organizations. nk ba -,tatulory reference us er ov l ro nt co such outright at if the board does th de appear to authorize lu nc co to e on ocess must lead dends, debt levels, vi di on reasonable thought pr ls ro nt co to place outright ogatives, the Board er pr nt not have the authority me ge na ma r ructures, and othe s. ct stock redemption a.,set and liability st ri st re so to y it or th ve the au certainly does not ha Capital Adequacy on cy li Po th wi nt te is are Incons (3) Minimum Standards at the Board dues have th nt me gu ar le ab on w make a reas to Regulation Y, the on si vi Even if one could someho re ed os op y to issue the pr that most typical e iv ct ri st re the statutory authorit so e sed by the Board ar . minimum standards impo could not take 'place ly al rm no C BH l al sm stuck redemptions by a https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ed for public comment that it ploposes the Board states in the document issu the following: y from purchasing ur . . . to prohibit J bank holding compan after giving effect to thy deeming its equity securities, unless, g company complies with redemption or acquisition, the bank holdin icy Statement on Capital the minimum standards in the Board's Pol Adequacy. ss or legal authority or thy BuJid's ene abl son rea the h wit e issu ng taki t hou Wit cert with the UCC I the hoard Is policy on capital adequacy issued in con m ndard for small BlICs (coning to incorporate more into the minimu sta pos pro _ ion) than is included in the capital solidated assets of less than $150 mill each Fedeial The capital adequacy guidelines issued to adequacy guidelines. ing: RVWFVV Bank state, in part, the follow Capital Adequacy Guidelines s program will I. Application or guidelines. The guideline member banks and bank holdiny generally apply to national and State r, for holding companies companies on a consolidated basis. Howeve , the capital .guldelinys under $150 million in consolidated assets will apply to the bank only, provided: ectly or (1) the holding company does not engage dir ing significant levelaye; indirectly in any nonbankiny activity involv is held by the general and (2) no significant debt of the parent holding company, other public. IF these conditions are met, the e additional risks to the things being equal, is less likely to pos erally felt to be separable bank, and the condition of the bank is gen Under these conditions, from the condition of the holding company. es of capital analysis will therefore, the holding company For purpos the imposition of capgenerally not be consolidated and subject to solidated ratios. ital guidelines on what are usually lower con imum acceptable capital to assets The guidelines go on to explain that a min small BHC is G. However, use Board relationship for a subsidiary bank of a ulatory amendment would be essenreg ed pos pro r thei t tha ized real y ntl appdre nt stock redemptions by small ica nif sig y man ng iti hib pro in ive fect inef tially subsidiary bank were apthe for rd nda sta l ita cap m imu min the y BHCs if onl to equity cri ter ion at the pal via pliyd. Therefore, the Board added a debt concerned. fhe ill% debt to equity UHC level, insofar as stock redemptions are 1311C level that the Board requires For a the is ed, pos pro as rd, nda sta m imu min r after formation. This is in yea h lft twe the by t mee can it te to demonstra h the Board to Form a BHC. conjunction with an application filed wit a Factor in analyzing a UHC's Ihe relationship of debt to equity, while itly a part of the capital adequacy lic exp not Is , ion dit con ial anc fin all over to either small or large UHCs. ate rel they as rd Boa the by ed s issu guideline financial condition with debt ory act isf sat in be to d ere sid con Many BlICs are Board certainly has nut The . 30% of ess exc in far es tag cen to equity per level exceeding 3U% is an unsafe previously intimated that a debt to equity https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -6- opplicatiow, Case, many of the UHC the re .we ch su If n. oi unsound conditio als or ums with debt to rov app e tut sti con ld wou rd Boa the recently approved by the or unsound, in the context oh fe sa un be to ed er id ns co ls equity leve of the debt to equity standaid apn io at or rp co in , us Th s. on si proposed revi anted. pears unreasonable and unwarr C ative standard For J 5MJII UII ern alt an ed add has rd Boa the In this same vein, ationship of 6%. Such a rel ets ass to l ita cap ted ida sol to meet, which is a con ines lor small LIIICs. del gui cy qua l ade ita cap the of t par the standard Is also not a heless have an effect similar to ert nev ld wou rd nda sta ve ati ant Yet this altern use a small UHC with signific ca e be tru is is Th . rd da an st debt to equity 6% consolidated percentage of the t mee to e abl be ly mal nor leverage would not bank had a capital ratio ry ia id bs su its ss le un , rd da an capital to assets st bsidiary en 7%. In fact, if a WIC's su ev or , 6% of ss ce ex in y ll being substantia tage and the bank stuck was en rc pe ts se as to l ta pi ca on bunk had a 7% the UHC's debt to equity positi C, UH nt re pa the by e lu va k call jet! at boo ted capital to assets relationship ida sol con the t hou wit 14% to could not exceed n of a 6% consolidated capital tio ora orp inc the s, Thu 6%. falling to below nimum standard appears unreami ve ati ern alt an as s DHC ll assets ratio for sma sonable and unwarranted. ership of Small Banks (4) Adverse Effect on Private Own s being proposed by the Uuard rd da an st m mu ni mi e iv ct ri st With the highly re new regulation poses J signithe d, cte nsa tra be may n tio before a stock redemp s. p of small banking organizuticn hi rs ne ow e vat pri to eat thr ficant ng purposes, wherein connni pla ate est for med for the for example, many DHCs are more readily continued upon be can ly mi fa en giv a by hip trolling owners the capacity to burrow money has ly mal nor DHC The . er mb me /or death of a family son to pay estate taxes and per ed eas dec the by ed own to redeem BHC shares ets. Larger correspondent ass te ta es of on ti bu ri st di y to provide for orderl % of the book value of 10U to up nt ou am an d len to banks are usually willing rmally there is very no , so Al C. DII the by d ne lthe subs.idiary bank stock ow investors, except For the wil ty ori min by d ne ow ck sto BHC little market for h stock. Often, the UHC has suc se ha rc pu to C BH the of ingness and capacity subsidiary bank stuck and, its t ns ai ag g in ow rr bo ready access to funds by ght as a Lux shelter to ri and e eg il iv pr the s ha unlike most individuals, addition, Lheiv are many In s. lar dol x -ta pre h wit purchase service the associated debt contractually obligated to is BHC the n rei whe s, ent buy -sell agreem ers under certain conditions. shares of one or more sharehold hardship could be placed on nt ica nif sig a ck, sto eem red Without the ability to potential marketability of and , ily fam en giv a by p continuity of BHC ownershi to the effect on ESOPs, As d. uce red y all nti sta to put minority interests will be sub s have a contractual right OP ES , ms ra og pr ch su of rt book as an integral pa ined price in relation to erm det pre a at BHC the to their BHC stock back of ESOPs buying DHC stock ss ene tiv rac att the , on ti value. Without this put op the stock dues noL otherfor ket mar dy rea a ce sin is substantially reduced, wise exist. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Conclusion plopu.3vd, the ulation Y of Reg n tio sec n tio emp red ck sto the In revising and regulatuiy aulholity over ry iso erv sup its ing eed exc y arl cle iloard would be ivate be contributing to the demise ur pi bunking organizations and would ownership of commercial banks. tand the hnplicatIons and conseers y und onl not t mus y nit nou cou g kin I he ban take humediate and deckive action t mus it n, tio ula reg ed pos pro the quences of tion. The Board very seldom make,p material to prevent issuance of the regula ulation issued fur public comment. changes to, or recinds, a proposed reg ed regulation must be made on both an pos pro the to s ion ect obj , ore ref Ihe tion with congressional ica mun ing com lud inc le, sca al ion nat and individual king commdttees. Only then will there representatives, especially those on ban ,tion in to revise the regulation in quv , be a chance to convince the Board not the unwarranted manner as proposed. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis v VALLEY NK NATIONAL BA 3371 PHONE 612 665- 058 MINNESOTA 56 LE SUEUR, July 18, 1983 thy J. Penny Congressman Timo ng 501 Cannon Buildi 20515 Washington, D. C. Dear Mr. Penny: of a letter formation a copy in ur yo r fo g s of the I am enclosin Board of Director e th of y ar et cr in the sent to the se enting on changes mm co em st Sy e us in our Federal Reserv it would affect w ho d an Y on er ti Fed.'s Regula ed that the read um es pr ve ha I unity. al bank and our comm ics of the propos if ec sp e th to access mof the letter has e limiting my co er th em th r ve co did not and therefore I al reactions. ments to my person d ould be presente sh es on r la mi si of as these or If issues such ve the benefit ha ld ou sh u yo at e I feel th t time this issu to the Congress en es pr e th at at rstand th my views. I unde the Senate. does not involve st wishes. Thank you and be Sincerely, a n ohn A. Chamberlai President JAC:cjg Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ONAL BANK VALLEY NATI 5-3371 PHONE 812 66 056 MINNESOTA 56 LE SUEUR. July 15, 1983 Wiles Mr. William W. Secretary System e Federal Reserve th of s er rn ve Go Board of 20551 Washington, D. C., Dear Sir: RE: Y R-0470, Regulation # et ck Do on t en Comm e s as proposed becaus ge an ch e es th to posed nks I am completely op hip of community ba rs ne ow e at iv pr ct affe rthey will adversely that private owne of ty ui in nt co ng ti h limi bank such as ours throug stock redemptions by on s le ru t en mng ri ship with too-st y banks are the nu it un mm co n, io in op In my es holding companies. ial small business ur ne re ep tr en r fo vocate s to be our ber one ally and ad d and this continue ne ow y el at iv pr mmunities. which are also ligation to our co ob of e ns se r ou community tanks, strength based on of rs ne ow on ip sh onomic hard to the By placing this ec ip and disadvantage sh rd ha ic om on ec r you invite greate e. communities we serv from riate regulation, op pr ap in h ug ro th , ed ly or to If we are prohibit ration of the fami ne ge xt ne e th to p hi en eventransferring owners y banks will be th it un mm co r ou , or st ve alanother private in e large banks who th ft le s r' ye bu only to tually sold to the d greater exposure an ts en em ir qu re l pita rts in . ready have lower ca ing to recent repo rd co ac ,. do s nk ba unity s loss than the comm long-term interest st be e th at th e ev t beli or the press. I do no a branch manager by ed rv se be n ca ota, ll of Le Sueur, Minnes his own career,. wi in ed ot om pr be to who, field vice-president t time. I, on the or sh ly ve ti la re a e for d to be on the local scen fe and am committe li my of st mo re ved he other hand, have li We are committed y. it un mm co my r fo rvices quality financial se Sueur. to Main Street, Le a large t in the future to in po me so at nk ba re cash than a The sale of this mo us rn tu re ll we nay might bank or banking comp but I am not in, or st ve in e at iv mber or pr I have sale to a.family me lator or magnate: pu ni ma l ia nc na fi regard terested in being a are like me in this s er pe my of ty rticular to believe the majori nst with this pa ai ag d te na mi ri sc another and weare unjustly di e to be abuses in ev li be st mu u yo plan to address what stry. _segment of the indu https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis les Mr. William W. Wi page two July 15, 1983 the at is essentially wh of on ti la gu re that tal adeqFurthermore, I feel attention to capi h ug ro th s nk ba ess of edures safety and soundn ugh present proc ro th d se es dr ad ly ons adequate ed stock redempti uacy is already os op pr of n io at ic upon appl which equacy standards involving review ad l ta pi ca ng yi pl w be e basis ap and which will no on a case-by-cas d te ga ul om pr d an ency. clarified oller of the Curr have just been re tr mp Co e th r, to la n't primary regu on that " If it ai enforced by our ti ni mo ad y tr un co mind the re just This all calls to equacy standards we ad l ta pi Ca ." it still holds ample cy en broke, don't fix ag ur yo e, or ng! Furtherm gulations "fixed" this spri holding company re nk ba t en es pr e th used when leverage through sist which can be de d an e as ce of r including the powe ed. discipline is need in order. The invi is t en mm co r he edure, furt s Federal With regard to proc om the Minneapoli fr e su is is th tely-contation to comment on red this incomple ve co , 83 19 , 25 May ck page Reserve Bank dated ragraph on the ba pa ce en nt se e on a le "residered proposal in good and reasonab be to s ar pe ap e rwis lify the following what othe clarify and simp to d an en rd bu ry lato impact vision to ease regu ek when the real we is th l ti un 't wasn ers regulations..." It e Minnesota Bank th by us to d se lo oses was disc of this proposal comment period cl e th t bu , rs he ot d ess, an Association, the pr July 18, 1983. uding l business incl al sm in nt me st ve in ss and an In sum, small busine rength of Americ st d an ss ne ue iq un itional ened w further threat family farms, a trad no d an d re ue ag le already be business's number free enterprise, is l al sm of re tu fu e r clouding th y bank. Furthe In this fashion by it un mm co d ne ow y el the privat ge one cheerleader -s will discoura nk ba y it un mm co in investment ow it today. I kn discouragement of we as se ri rp te of and free en the same ends et small town business me to nt wa th bo regulators economies, and a al believe we and the on ti na d an l ca ng, stable lo and free entern, io sound banking, stro at in rm te de lf mpetition, se healthy spirit of co prise. factors u to take these yo by n io at er id ns reco same We request further ceived in the re e ar ey th pe ho and we Into consideration are offered. good faith as they Your sinc re , cc: r Sen. David Durenberge Sen. Rudy Boschwitz Rep. Timothy J. Penny Federal Reserve Bank of Minneapolis JAC:cjg https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • n A. Chamberlain resident and r cretary & Treasure Vice President, Se tion,4 In.c. Valley Bancorpora - Maplewoondk S D BEAM AVENUE WHITE BEAR AN State Ba P. 0. BOX 2028 NNESOTA 55109 MAPLEWOOD, MI https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (612) 777-7700 July 18, 1983 y J. Penny Congressman Timoth ilding Bu 501 Cannon Office 20515 Washington, D.C. gulation Y Re of te da Up d an sion RE: Proposed Revi Penny: Dear Congressman ate chartered St d ne ow y ll ca lo is an independent nk Ba e at llion dollars. St mi d ty oo ir ew th y Mapl el at im totalling approx bank with assets y affect private el rs ve ad ll wi on ti bank holding oposed regula pr t e mi th li ly at re th ve se el We fe nks in that it will d will limit continuity of ba l al sm of p hi owners ning vehicle an an pl te ta es an companies as ownership. s of privately st re te in ty ri no mi e marketability of will adversely th it ce at du th re s ar so pe al ap It will any stock. It also ans that own bank holding mp co g in ld ho nk on pl owned ba employee stock opti e at in im el or affect company stock. ic hardship on om on ec l ia nt ta bs su this will place a small banks may be at th d an rs ou We believe that as ications with the small banks such private owners of bank holding company formation appl tion. w ock redemp st to e forced to file ne iv at rn te al stem as an Federal Reserve Sy bdivision B be Su 4, 5. 22 n io ct ed Regulation Y Se We ask that propos iminated. el reconsidered and Ver/trul yours m G. Ja k Hillstro Pre dent GJH/pm https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rimers STATE BANK 33 North Main Sherburn, MN 56171 4311 TELEPHONE 15071 764- July 13, 1983 of Governors Secretary, Board serve System of the Federal Re 20551 Washington, D.C. Re: Docket No. R-0470 Dear Sir: g d ruling regardin se op pr ur yo ng ni you concer I am writing to anies. bank holding comp ing severely restrict an me d ul wo it , er the proposel holders to transf e ar sh If I understand s ie an mp co sited bank holding irritial, short ch su the ability of to d se po am totally op their stock. I thinking. e the Farmers Stat by to o ag s ar ye gether three sets) with the as 1 41 (1 a I put a group to ot es nn e , Sherburn, Mi We purchased th s. li po Bank of Sherburn ea nn Mi of someral Reserve ity and to own un mm blessing of Fede Co e th d an dies, en the Bank of my partners e on If Bank to strength e. on me an work for so le to buy these ab be t thing rather th no ll wi his shares we sell to a large st mu e or wants to sell or ef er th company and thru the holding at a reduced price. ly ab ob pr y an mp holding co ing systems??? nk ba e rg la nt wa Why do you ease reconsider Pl ! p! hi rs ne e ow d on small privat il bu s wa a ic er Am your proposal. Sincerely, James D. Lytle President JDL/amr https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PEOPLES STATE BANK /243-3511 TELEPHONE 507 OF MADISON LAKE OTA SON LAKE. MINNES P.0 BOX 216 • MADI 56063 July 21, 1983 thy J. Penny Congressman Timo ce Building 501 Cannon Offi 20515 Washington, D. C. Penny: Dear Congressman on Y sion of Regulati vi re ed os op pr e rs of reference to th the private owne on ct I am writing in fe ef s it than serve Bank and ntacted by more co en by the Federal Re be ve ha u will am sure that yo osal because it op pr small banks. I is th to ve ti nstituents rela ility of retaining ib ss po e one of your co th on would adverse effect stitutions. It in l ia have a distinctly nc na fi of the pendent control the dedication of of st local and inde te us tm li l it should be a intaining a smal ma of seem to me that ea id e n th d yourself to e concentratio an th y rt et Pa ab ic d at an cr d Demo h would ai e king steps whic ta t no d precisely what th an is ss ne at Th busi y. tr un frankly sources in this Co be and it almost d ul wo of financial re on ti ac d e. the proposed Fe rd that objectiv wa to consequences of ng mi ai be calculated to seems to me to be at more t, I am sure th ec bj su e th on write you a book out to you in a g in th I'm not going to is th d le than I have spel e fit to that you will se articulate people r, ve we ho , Fed pe ho tail. I Governors of the of d ar Bo great deal of de e th fluence you can on exert whatever in ror of their ways. er r ei th e se to to cause them Yours truly, W. C. Ries. President WCR/ba k p a l i l a p o i t a Tile First N https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 226 West. WEIBISBU 2 Si. cter, NIrrncoth 5608 . . 507431-4000 • -- . . ..„. . • •• •., • July 20, 1983 • • -X •• am • • • •••• , •• •. se• J. Fenny . Congressman Tiffothy ilding 501 Cannon Office Bu 20515 Washington, DC RE: lation Y Regulation Federal Reserve Regu orate Practices Section 225.4 - Corp •••• . Dear Congressman: for an objection t or pp su ur yo k portunity to as Federal Reserve e th at th I am taking this op Y on ti vision of Regula icninr revision is rt pa to the proposed re is th at th ing at. I feel a as well as the ot es nn Mi Board is now look in s nk ermany of the ba day would be hamp to n ow a serious threat to kn e ur ct the banking stru Midwest and that on was passed. si vi re is th if ly ed considerab ether the Board wh to as on ti es ed e is a serious qu , which, if issu on ti ec bj su First of all, ther is th w to implement y a federal regeb er wh t is authorized by la en ed ec pr ents a dangerous fram conducting on ti za ni ga and upheld, repres or g s y prohibit a bankin organization meet at th ss ulatory agency ma le un l corporate practice cy. Secondly, en ag ry to la a standard, lega gu re the established by the sed by the Board, po certain standards im be to s rd da p in mum stan private ownershi ct fe because of the mini af y el rs ve ad will be holding companies nk ba e th t proposed regulation mi li at it will severely of ownership. ty ui in nt co t small banks, in th mi li ely . vehicles and will terests of privat in ty ri no mi as estate planning of y e ce the marketabilit affect or eliminat y el rs ve ad It will also redu ll d wi g company stock an ently have. This es pr s ie an mp co owned bank holdin g e ans that bank holdin hardship on privat ic om on ec l employee stock pl ia nt se, place a substa le new bank holdfi to ed rc fo then will, of cour be stem. nks, and they will Federal Reserve Sy e th owners of small ba th wi n io at ation applic ing company form ock redemption. st a to e iv at rn as an alte ve to . . ever power you ha at wh e us d ul wo , as I te it if you ove this revision pr ap I would apprecia to d ar Bo e esota deral Reserv especially to Minn s lt encourage the Fe su re e th anies not aware of bank holding comp e at am sure they are iv pr e th where most of and the Midwest . are in operation. •••,, • .4 Sincerely, • • ; . • .•••••••:—. • •• • .• L.•" •• • • .• ••• • •••%• • A - •r • . • 'or" • .•• •• • •P.c. Ir. •.• • • President • FDIC liy '1810 hi your corqrquil •ar.. q trust ca bcglqa wilb a baqk you • •„• .,"••• • r . . (Prior lake State(Bank ( https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 28, 1983 Penny Congressman Timothy J. ng 501 Cannon Office Buildi Washington, D. C. 20515 Dear Mr. Penny: Y, ng the proposed Regulation ni er nc co u yo g in it wr I am rve sions by the Federal Rese vi ) Re (6 b. Su 9, 5. 22 n Sectio ct on will have adverse impa si vi re ed os op pr is Th Board. small banks. on private ownership of uld of that ownership. It wo ty ui in nt co e th s ct ri st It re bank holding company stock. n ow at th 's OP ES e th restrict es. rket value of minority shar It would reduce the ma e The big get bigger, and th The outcome is obvious. nks disappear. small locally owned ba ur feelings and hope for yo I look forward to your . support in this matter Yours very truly, v, R. N. Barsness Exec. Vice President & Cashier RNB:jit P.O. MINNESOTA 55372-TEL AVENUE SE PRIOR LAKE, UTH DUL 77 166 , 369 BOX 612-447-2101 CITIZENS K E BAN _ STAUT 3 OF ST. LO IS PARK ulevard 5050 Excelsior Bo nnesota 65416 St Louis Park. Mi 61 Phone 926 65 July 18, 1983 les, Secretary Mr. William W. Wi s of the Board of Governor System Federal Reserve on Ave. NW 20th & Constituti 551 Washington, DC 20 RE: Docket No. R-0470 les: Dear Secretary Wi rnors is conve Go of d ar Bo e on Y e Federal Reserv th at th n (b) of Regulati io n nt io te is at iv my bd su to 225.4 It has come a Bank Holding h ange in section ic ch wh ed r os de op un pr s a ance templating ange the circumst ch y ll ia nt ta bs or securities. es ar sh n ow that will su s it hase or redeem Company may purc is passed, the t i f i at th nt Holding Company tion it is appare la nk gu Ba re y ed an os op of pr y ilit In reading the primary benefits y eliminate the ab e ll th ua rt of vi e to on be h is effect would securities, whic ncerely feel that si n ow I s it k. em oc de st nk to purchase or re thod of owning ba and therefore me g y in an nk mp ba Co g f o in of the Bank Hold are in the the best interest in de t tu no ti at is ge is an th ch r this regulatory ecific reasons fo sp My . en ak rt de should not be un follow. board's right paragraphs that e th to rd ga th re ucting a standestion of law wi nd qu co s m ou o r ri f se n a io business that ibits a corporat I believe there is oh ar pr ul t a ic h t rt pa on ti a regula being president it is engaged in e to to implement a us ca on be ti t di s u ad j in tice e g this legal in er id ard and legal prac deral regulatory agency. Sinc ns co in fe I am justified of banking that is now el fe I is regulated by a . er wy am also a la e deregulation ng pressure with reth th wi of this bank, I at th el si ition, I fe r ever increa de un ed me increasingly ac question. In add co pl be be to to g g in in go go are e of this it is e public and one of the occurring, banks us ca Be y. it il th ofitab ownership from s owners and t it gard to their pr ac f tr o at t to or pp s bank e su more difficult for can least afford to lose is th eliminate a key estate plan ing regulation will thereby take away a substanthings that bank ed os op pr e h T ners. ownership and of the public as ow ty ui in nt co ll as ning vehicle as we nk ownership. ba act that I am f e tial incentive to th in es li . The Federal oposed change ed pr ir is qu th re to n is l l objectio y change at al any redemption an y op wh st t My last substantia ou to e t r h u g g ri y loss to fi gulation, the Holding Company and thereb re t en absolutely at a es pr e has, under th undness of the l source of so ia nt ta e bs th su d Reserve already an of aten the safety ing Company will remain a of any abuses d that would thre ld ar Ho he e t th no t a bhave re th quire such a su Additionally I re protect and assu . d nk ul ba wo e th at es th th to financial_ streng tion Y or of any general abus ding. gula such long stan of the present Re on ti la gu re in a stantial change https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 18, 1983 Secretary s, le Wi W. m ia ll Wi . Mr Page 2 In view of terms that of section ngest possible ro st e th in ng ti t respectfully reques by re he am e proposed amendmen I th e, of ov rt pa y the ab an t e Board not adop the Federal Reserv Y. on ti la gu Re 225.4 of Very truly y urs, Hauge President RLH:jk CC: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis renberger Senator David Du Office Building 353 Russell Senate 0 Washington, DC 2051 hwitz Senator Rudy Bosc SH-506 Hart 510 Washington, DC 20 y J. Penny Congressman Timoth ilding Bu 501 Cannon Office 515 Washington, DC 20 F. Vento Congressman Bruce ce Building 2433 Rayburn Offi 5 51 Washington, DC 20 Olav Sabo Congressman Martin ilding Bu 436 Cannon Office 5 51 Washington, DC 20 Sikorski Congressman Gerry Building 414 Cannon Office 515 Washington, DC 20 ber Congressman Vin We ilding Bu 318 Cannon Office 5 51 Washington, DC 20 Frenzel Congressman Bill Office Building 1026 Longworth 515 Washington, DC 20 n Stangeland Congressman Arla Office Building h rt wo ng Lo 26 15 515 Washington, DC 20 Oberstar Congressman James ce Building 2351 Rayburn Offi 5 51 Washington, DC 20 4 71 CITIZENS K E BAN STAT S PARK evard 5050 Excelsior Boul nnesota 65416 St Louis Park. Mi Ph one 926 6561 OF ST. LOUI July 18, 1983 les, Secretary Mr. William W. Wi s of the Board of Governor System Federal Reserve on Ave. NW 20th & Constituti 551 Washington, DC 20 RE: Docket No. R-0470 les: Dear Secretary Wi vernors is conGo of d ar Bo e rv the Federal Rese Regulation Y at of th n ) b io ( nt n te io at is bdiv g It has come to my section 225.4 su in ge h a Bank Holdin an ic ch wh r ed de os un op pr a s ce ng stan templati . change the circum y ll ia nt ta bs su es or securities ar sh n that will ow s it em se or rede Company may purcha is passed, the t i if at th nt y pare gulation it is ap ility of any Bank Holding Compan re ed os op pr e th ab ts In reading y eliminate the e primary benefi ll th ua of rt vi e on to is be h effect would ncerely feel that n securities, whic si ow s I it k. em oc de st re bank to purchase or and therefore method of owning y g an in mp nk Co ba g f in o ld st of the Bank Ho are in the in the best intere de t tu no ti is at ge is an th ch for this regulatory specific reasons My . en ak rt de should not be un follow. paragraphs that e board's right th to rd ga re tion of law with ion from conducting a standes qu s ou ri se a at I believe there is ohibits a corpor ar business that t pr ul at ic th rt pa on ti a la gu en d in to implement a re use it is engage e in addition to being presid l ca be t s u j ce ti ga ard and legal prac deral regulatory agency. Sinc idering this le ns co in d ie if fe st w is regulated by a . I feel I am ju lation of banking that is no er wy la a so al of this bank, I am ion, I feel that with the deregu increasing pressure with redit question. In ad placed under ever going to become increasingly be to g in go e ar is occurring, banks cause of this it and one of the Be ic bl y. pu it il e ab th it om gard to their prof act ownership fr e support of its owners and tr at to s nk ba more difficult for rd to lose is th eliminate a key estate planfo af t as le n ca g regulation will things that bankin away a substaned ke os ta op y pr e eb Th er th . rs d of ownership an the public as owne ty ui in nt co as ll ning vehicle as we nk ownership. ba fact that I am tial incentive to e th in es li l proposed change l is required. The Federa is th to n io ct al on l obje any redempti y any change at op wh st My last substantia t ou to t re gh gu ri fi y loss to regulation, the Holding Company and thereb t en es absolutely at a pr e th e has, under soundness of th a substantial source of e th d Reserve already an ty fe en the sa will remain y abuses of an of d that would threat that the Holding Company ar he not re such a sube tionally I have ir di qu Ad re protect and assu . d nk ul ba es that wo th to the financial_ streng tion Y or of any general abus ding. stan gula of such long the present Re on ti la gu re a in stantial change https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 18, 1983 Mr. William W. Wiles, Secretary Page 2 g in the strongest possible tin ues req lly tfu pec res eby her am In view of the above, I ent adopt any part of the proposed amendm not rd Boa e erv Res l era Fed the t terms tha _ Y. n tio ula Reg of .4 225 n of sectio Very truly y urs, Hauge President RLH:jk CC: Senator David Durenberger 353 Russell Senate Office Building Washington, DC 20510 Senator Rudy Boschwitz SH-506 Hart Washington, DC 20510 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congressman Timothy J. Penny 501 Cannon Office Building Washington, DC 20515 Congressman Bruce F. Vento 2433 Rayburn Office Building Washington, DC 20515 Congressman Martin Olav Sabo 436 Cannon Office Building Washington, DC 20515 Congressman Gerry Sikorski 414 Cannon Office Building Washington, DC 20515 Congressman Vin Weber 318 Cannon Office Building Washington, DC 20515 Congressman Bill Frenzel 1026 Longworth Office Building Washington, DC 20515 Congressman Arlan Stangeland 1526 Longworth Office Building Washington, DC 20515 Congressman James Oberstar 2351 Rayburn Office Building Washington, DC 20515 COMMITTEES TOM LEWIS COMMITTEE ON SCIENCE AND TECHNOLOGY 12TH DISTRICT, FLORIDA 013 ROOM 1313 LONG WORTH HOUSE OFFICE BUILDING WASHINGTON. DC 20515 TELEPHONE (202) 225-5792 MAIN DISTRICT OFFICE: 8895 NORTH MILITARY TRAIL SLATE 304-8 PALM BEACH GARDENS. FLORIDA 33410 TELEPHONE (305)627-8192 CONGRESSIONAL RURAL CAUCUS SUBCOMMITTEE ON ENERGY DEVELOPMENT AND APPLICATIONS SUBCOMMITTEE ON NATURAL RESOURCES, AGRICULTURE RESEARCH, AND ENVIRONMENT Congress of the United itatts /louse of 'Representatives Washington, D.e. 20515 COMMITTEE ON GOVERNMENT OPERATIONS SUBCOMMITTEE ON COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE ON GOVERNMENT INFORMATION, JUSTICE, AND AGRICULTURE HOUSE EXPORT TASK FORCE CONGRESSIONAL TRAVEL AND TOURISM CAUCUS SELECT COMMITTEE ON NARCOTICS ABUSE AND CONTROL August 9, 1983 Mt. Paul A. Volcker, Chairman Federal Reserve Board of Governors Twentieth Street & Constitution Ave., N.W. Washington, D.C. 20551 rn C.= 36 Dear Mr. Volcker: c=, Fri 41••••M. 7:: rri rri rr. have been hearing from I am writing to you to outline complaints I ng interest rates. = easi incr of tor spec the g rdin rega ents titu my cons been in several years Real interest rates are higher than they have rest rates appear to be and the latest news indicates that real inte headed toward record levels. c.:.? cn certainly could be The economic recovery is extremely fragile and rates. All agree that thwarted and/or aborted by higher interest can be stabilized at the recovery will only be sustained if rates reasonable (lower than present) levels. danger of igniting Although the monetarists argue that there is a the near term problems run-away inflation two or three years hence -must be given first priority. very reco the ng aini sust and ment ploy unem of pressure on the beleaHigher interest rates will place substantial s to foreign governments gured and indebted LDC's and a default on loan -inflationary. In addition, would be cataclysmic and ultimately hyper interest rates has the strength of the dollar caused by high U.S. at some point must be recreated a balance of payments deficit which conciled (at a cost of inflation). r medicine has caused extreme The monetarists have had their day and thei y! However, the camments I have pain. Perhaps same of this was necessar now time to allow the economy been getting indicate a belief that it is business will not survive and supply side factors to work. American s. another round of sky-rocketing interest rate consideration when making I hope you will take the above remarks into e our economy. the crucial decisions about how to stabiliz Sincerely, 7117 7; Tam Lewis Member of Congress https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis TL/jhm 513 HART SENATE 0. FICE BUILDING WASHINGTON, D.C. 20510 (202) 224-2621 SLADE GORTON WASHINGTON commaTm: COMMERCE, SCIENCE, AND TRANSPORTATION tinitcd eStates e tnate 2988 FEDERAL OFFICE BUILDING 915 SECOND AVENUE SEATTLE WASHINGTON 98174 (206) 442-5545 770 U S COURT HOUSE W 920 RIVERSIDE AVENUE SPOKANE, WASHINGTON 99201 (509) 456-6816 BANKING, HOUSING, AND URBAN AFFAIRS BUDGET SMALL BUSINESS FIRST FEDERAL PLAZA. SUITE 445 1220 MAIN STREET VANCOUVER, WASHINGTON 98660 (206) 696-7838 INDIAN AFFAIRS August 4, 1983 The Honorable Paul Volcker, Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 C_O Dear Paul: rd L. Chapman, I would like to add my endorsement of Howa vacancies on your to be appointed to one of the year-end not personally know Consumer Advisory Council. Although I do many years, and know Mr. Chapman, I have known his family for of him through them. seem to qualify Mr. Chapman's background and experience cil. In his more him very well for a position on your Coun Indiana, he has speciathan 25 years in private law practice in sing clients in the lized in consumer -related lending, advi well as submitting Truth -In -Lending Act, RESPA and ECOA, as He has also worked comments to your Board in these matters. s outside of the with real estate mortgage lending practice state of Indiana. Council, and I hope I believe he could be an asset to your that you give him every consideration. Sincerely, SLADE GORTON United States Senator SG :ct https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 August 11, 1983 R PAUL A. VOLCKE CHAIRMAN in The Honorable Tom Hark ves House of Representati 5 Washington, D.C. 2051 Dear Mr. Harkin: ich you state your wh in er tt le ur yo r Thank you fo tary policy and the ne mo of ng ni te gh ti le . concern over a possib licy on the recovery po a ch su of ct pa im potential onomy evidence that the ec y er ev is e er th t, an At this poin deed, much better th in -ll we ry ve m or rf ty, is continuing to pe ago. Economic activi hs nt mo w fe a ly ke li to most of us thought last year, continues of d en e th ar ne up which began to pick have a good deal of to s ar pe ap d an ce pa been accompanied s ha advance at a rapid n io ns pa ex e th me time, momentum. At the sa ice performance. by remarkably good pr eases pands and price incr ex y om on ec e th as icaYet, even remain over the impl ns er nc co ad re sp de stainability of the remain moderate, wi su e th r fo ts ci fi deral de flation. Indeed, tions of massive fe in t ns ai ag ss re og d our pr r of the economic go economic recovery an vi ry ve e th by heightened ral credit demands de these concerns are fe y av he en wh y s the da . recovery which hasten the private sector of s nd ma de g in en th clash with streng of occasions, the goal ny ma on ed iz as ph em ve As I ha ic growth in the om on ec m er -t ng lo e to promot ver, monetary policy is t inflation. Howe ns ai ag ss re og pr d ue e recontext of contin job. Indeed, as th e th do ot nn ca e on deficits anticil monetary policy al ra de fe al ur ct ru e large st r lob increasingly ou covery proceeds, th ke ma ll wi re tu seeable fu re pated for the fore demands overall we it ed cr e at iv pr gh is year, further th difficult. Althou of lf ha t rs fi e of th ng private bormoderate through most si ri to ad le ly ab it will inev owing. economic expansion heavy federal borr d ue in nt co th wi ct li nflict rowing and conf ameliorate this co to ek se e rv se Re l be an Should the Federa , the result would es ur as me ry na io ns pa ng through more ex near-term and risi e th in th ow gr y ne or even the -acceleration of mo n io at fl in d pi ra With more d, in any event, be ul inflation later. wo e er th -n io d er inflat ch a policy woul expectation of fast su us th d an s te ra interest upward pressure on efeating. tend to be self-d part of the second er tt la e th in , op Against this backdr some tendency to ed ow sh th ow gr it m ry and cred with our long-ter nt quarter, as moneta te is ns co ed em se dly than ok a slightly less to increase more rapi e te it mm Co et rk l Open Ma policy, the Federa https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Tom Harkin Page Two accommodative stance toward the provision of bank reserves and credit. Although this policy led to some back-up in market interest rates, they remain well below levels of a year ago, and it is our view that these developments do not threaten the viability of the recovery. Indeed, we believe that through such limited and timely action the chances for continued recovery have been improved. Nevertheless, a sustained and balanced expansion in economic activity will also require decisive fiscal actions that reduce significantly the federal government's large claim on our financial markets. Thank you again for your letter, and I hope my comments have helped clarify our policy intentions. Sincerely, SZPay! A. ValLaw,. TS:FJ:JZ:vcd (V-124) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Simpson Mr. Jensen Ms. Ray Mrs. Mallardi (2) MIL Q,1 1 1_ 6 - TOMi F:ARKIN /%1I qkAlkAt—cf_ DISTRICT, IOWA 2.411 RAYBURN HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 (202) 225-3806 DISTRICT OFFICES: 1401 N. JEFFERSON SUITE I INDIANOLA, IOWA 50125 (515) 961-8473 Congre55 of tbe tiniteb tate55 PoufSe of ik epreantatibel SPECIAL PHONE FOR THE HEARING IMPAIRED Wassbington, D.C. 20515 TTV-202-225-1904 VOICE-202-225-0656 colommmEs? AGRICULTURE July 8, 1983 SCIENCE AND TECHNOLOGY Box H 229 FEDERAL BUILDING COUNCIL BLUFFS, IOWA 51502 (712) 325-5533 245 FEDERAL. BUILDING AL/ FT. DODGE, IOWA 50501 (515) 573-7169 cr• az> C=P Mr. Paul A. Volcker, Chairman Board of Governors Federal Reserve System Constitution Avenue and 21st Street Washington, D.C. 20551 MENNE. 111111, LA= cn Dear Chairman Volcker: my is The Federal Reserve is facing an important decision. The econo nued large showing clear signs of recovery. However, we also have conti budget deficits and high unemployment. targets, Because of monetary growth rates above the Federal Reserve money supply or many are urging that the Federal Reserve tighten up on the antial inflation even increase the discount rate. They fear a return to subst rates. and that the prospect of such inflation will raise interest supply or raise I urge that the Federal Reserve not tighten up the money the economy the discount rate. Such action would be very detrimental to of unemployment both in the short and long term. With the present levels not see a and the current low level of plant utilization, we will significant increase in inflation for some time. would clearly have On the other hand, a tightening of the money supply a policy further an immediate adverse impact on the economy. I see such agricultural goods strengthening the dollar, making it harder to sell our limiting other overseas. It would also raise interest rates abroad, rates could also countries' ability to buy grain. Higher world interest disastrous consequences. precipitate a default on foreign debts which would have ahead of most proOn the domestic side, while our recovery is moving and especially small jections, it is still very fragile. Many businesses, ion with a relatively businesses, are in an extremely weak financial posit treet, over 15,000 businesses large amount of debt. According to Dun and Brads nearly three times the have failed already this year -- a rate of failure Any increase in interest historical average for the 1960 to 1980 period. n the building of inventories rates would, in my opinion, not only sharply dampe into bankruptcy. and plans for expansion, but also push more businesses , in a great many cases, Certainly, plans for hiring additional workers would turn sour with considerable be placed on hold. In short, our recovery could speed. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBER Volcker July 8, 1983 Page two Again, I urge the members of the Open Market Committee not to tighten up on the money supply or increase the discount rate at this time. I appreciate your attention. Sincerely, Tom Harkin Member of Congress TH/RB/kga https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis August 11, 1983 The Honorable William Patman House of Representati ves Washington, D. C. 20 515 Dear Mr. Patman: As I discussed with you on the telephone Subcommittee on Dome after the stic Monetary Policy hearing last Wednesday, I do want to set the record stra ight with regard to one answer I gave you. In response to your question of whether I had "gotten in touch with members of the public in the representatives' districts to influence the representative to vote for the IM F bill," I said that I had talked to one private person wh o I thought had an in te rest in this. As I mentioned to you over the phone, when I retu rned to my office I recalled thre e such conversations in add.ition to the one that came to mind during the hearing. I appreciate the oppo rtunity to have this co inserted into the hear rrection ing record. Sincerply, S/Paul NMS:PAV:vcd bcc: NMS:cic https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ms. Salus Mrs. Mallardi (2) Insert p. 94 vii,V4_4. • 7u9ust 11, 1983 The Honorable Strom Thurmond The President Pro Tempore United States Senate Washington, D. C. 20510 Dear Senator Thurmond: Thank you for your letter of August 5 recommending Ms. Kathleen Goodpasture Smith for a position on our Consumer Advisory Council. I can assure you that Ms. Smith will receive full consideration when the noard selects eight new Council members later this year. The Council provides valuable assistance in advising the Board on its implementation of consumer regulations and on other consumer-related matters, and the Board is pleased to receive recommendations for qualified individuals who can contribute to the Council's work. dation. Again, the Board appreciates having your recommenSincerely, CO:vcd (V-161) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mrs. Bray (w/copy of. incoming) Mrs. Mallardi (2)L CLO preparing response for Chairman's signature STROM THURMOND SOUTH CAROLINA Presibent Pro Tempare UNITED STATES SENATE August 5, 1983 CL) CC) u.) rn c=1 rn , 2 r— G-1 G) Honorable Paul A. Volcker, Chairman Federal Reserve Board 20th Street and Constitution Avenue, N. W. Washington, D. C. 20551 Dear Chairman Volcker: under I understand that Ms. Kathleen Goodpasture Smith is Board consideration for appointment to the Federal Reserve Consumer Advisory Council. Enclosed is a copy of her resume. ation I ask that you give Ms. Smith the careful consider this position. that her credentials merit for appointment to With kindest regards and best wishes, Sincerely, Strom Thurmond ST:r Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information. Citation Information Document Type: Resume Citations: Number of Pages Removed: 3 Resume, Kathleen Goodpasture Smith, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org August 11, 1983 The Honorable Slade Gorton United States Senate Washington, D. C. 20510 Dear Senator Gorton: Thank you for your letter of August 4 recommen ding Mr. Howard L. Chapman for a position on our Cons umer Advisory Council. I can assure you that Mr. Chapman will receive full consideration when the Board selects eight new Coun cil members later this year. The Council provides valuable assistance in advising the Board on its implementation of consumer regulati ons and on other consumer-related matters, and the Board is plea sed to receive recommendations for qualified individuals who can contribute to the Council's work. dation. Again, the noard appreciates having your recommen Sincerely, CO:vcd (V-162) bee: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mrs. Bray (w/copy of incoming) Mrs. Ma11ardi (2) CLO preparing response for Chairman's signature Ih 513 HART SENATE 0. PICK BUILDING WASHINGTON, DC 20510 (202) 224-2621 ADE GORTON WASHINGTON COMMITTEES: COMMERCE. SCIENCE. AND TRANSPORTATION cUnhtcd e tates li tnate BANKING. HOUSING, AND URBAN AFFAIRS 1 2988FEDERALOFFICEBUILDING 915 SECOND AVENUE SEATTLE. WASHINGTON 98174 (206) 442-5545 770 U.S COURT HOUSE W 920 RIVERSIDE AVENUE SPOKANE. WASHINGTON 99201 (509) 456-6816 BUDGET SMALL BUSINESS FIRST FEDERAL PLAZA, Suitt 445 1220 MAIN STREET VANCOUVER, WASHINGTON 98660 INDIAN AFFAIRS (206) 999-7638 August 4, 1983 —1-1 uo c.-- rn c= The Honorable Paul Volcker, Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 -...-•: C—a -- rri rn •70 7.- G") ....... CD ...., .:777 crr: -1.1 cz) CD rrl ...4 , c--) r-r=.) '"--. ...K.' 3›.• CAN, C•6 '.4:fr? ....... '—. cnm ..:.,... co Dear Paul: Howard L. Chapman, I would like to add my endorsement of vacancies on your to be appointed to one of the year-end do not personally know Consumer Advisory Council. Although I for many years, and know Mr. Chapman, I have known his family of him through them. seem to qualify Mr. Chapman's background and experience Council. In his more him very well for a position on your Indiana, he has speciathan 25 years in private law practice in sing clients in the lized in consumer -related lending, advi well as submitting Truth -In -Lending Act, RESPA and ECOA, as He has also worked comments to your Board in these matters. tices outside of the with real estate mortgage lending prac state of Indiana. Council, and I hope I believe he could be an asset to your that you give him every consideration. Sincerely, SLADE GORTON United States Senator SG :ct https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rrl rut GOve' BOARD OF GOVERNORS OF THE co p . FEDERAL RESERVE SYSTEM z •0 • • • ci_4(••• • • RALizt.s.' • •..• • WASHINGTON, O. C. 20551 August 10, 1983 The Honorable Malcolm Wallop United States Senate Washington, D.C. 20510 Dear Senator Wallop: Thank you for your letter of June 21 requesting our comments on correspondence you received from Ms. Catherine Thomson of Douglas, Wyoming. Ms. Thomson expressed concern rs regarding the Federal Reserve System's role in monetary affai and as a bank regulator, and I hope the following is responsive to each of her concerns. Ms. Thomson mistakenly believes that the Federal ral Reserve is a private corporation and first asks why the Fede m Reserve uses the name "Federal". The Federal Reserve Syste is a creation of Congress under the Federal Reserve Act of 1913. the The Federal Reserve consists of the Board of Governors and sed twelve Federal Reserve Banks. As indicated in the enclo ve decision, Jet Courier Services, Inc. et al. v. Federal Reser Federal Bank of Atlanta, the Federal Reserve is an agency of the by the government. The seven members of the Board are appointed ent of the President of the United States with the advice and cons for deterSenate. The Board is responsible, among other things, e mining monetary policy and generally supervising the twelv , the Federal Reserve Banks. Although a creation of Congress it could System was designed to act independently to ensure that ral bank. carry out its responsibilities as the nation's cent Ms. Thomson also is concerned about the purpose of the s why it was Federal Deposit Insurance Corporation and question some created. She mistakenly believes that it guarantees was created deposits carried by the Federal Reserve. The FDIC national banks in 1933 to protect persons who deposit money in protection. This or in state banks which choose this insurance is paid to a insurance covers deposits up to $100,000 and fails. The Federal depositor who loses his deposit when a bank individuals and are Reserve Banks do not accept deposits from https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis „ / The Honorable Malcolm Wallop Page 2 re not insured by the FDIC. Therefore, the FDIC does not insu deposits of the Federal Reserve. Finally, Ms. Thomson suggests that the Federal As Reserve be restructured to make it a government agency. we indicated above, the Federal Reserve Board already is regarded as a federal agency. One primary function of the System is to effectuate monetary policy in order to maintain a stable and healthy economy. Some of the methods the Federal Reserve uses to carry out monetary control include the impo , sition of reserve requirements on depository institutions ituadjustments in the discount rates at which depository inst tions may borrow from the Federal Reserve, and open market purchases and sales of securities. Ms. Thomson also states that the U.S. Government The borrows billions of dollars from the Federal Reserve. ing U.S. Treasury finances the United States budget by sell sury Treasury bills and Treasury bonds to the public. The Trea the is not permitted to sell these obligations directly to ons to Federal Reserve. Rather the Treasury sells its obligati however, individuals and other investors. The Federal Reserve, these as a means of implementing monetary policy, may purchase pursecurities in the secondary market from those who have is not chased them from the Treasury. The Federal Reserve luding operated for a profit and returns all earnings (inc excess of interest received on government debt obligations) in payments expenses to the U.S. Treasury. In calendar year 1982 more than to the Treasury by the Federal Reserve amounted to $15 billion. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ms. Thomson also suggests that we return to the gold rn to the gold standard. Often the argument is made that a retu ut most of standard will cure all our economic ills. Througho of gold standard. the 1800's the United States was on some sort fluctuating Yet this standard did not prevent prices from in gold widely even though the value of a dollar as measured a raw materistayed relatively stable. Further, since gold is ve uses, the al that has commercial, industrial, and decorati as well as for supply of gold available for use in the economy how much gold these purposes also fluctuated, depending upon ared to the was being discovered and processed from ore comp or to use it. price the public was willing to pay to hold it and early Several financial panics occurred in the 1800's standard. One of 1900's while we were nominally on the gold nciers attempted the panics, in 1869, was caused when two fina , even when dollars to corner the commercial gold market. Thus The Honorable Malcolm Wallop Page Three are backed by gold and silver, private market forces may upset the stability in the government-specified price between dollars and gold. A full gold standard was effect from 1900-1933, providing for free coinage of gold and full convertibility of currency into gold coin. The passage of the Gold Reserve Act of 1934 triggered the end of the gold-based monetary system in domestic exchange. In reference to this, one should note that there is no Constitutional requirement that the monetary system of the U.S. consist of currency backed by gold (or silver). One of the reasons for establishing the Federal Reserve System and for the demonetization of gold in the 1930's was to provide for a mechanism to make the money supply elastic to match fluctations of the economy rather than fluctuations in the supply of a commodity, such as gold (or silver), which may be unrelated to the growth of the economy at large. We have no way of knowing what the inflation rate would be if our currency were backed by gold (and silver). However, Public Law 96-389 directed the Secretary of the Treasury to establish and chair a commission to assess and make recommendations with regard to U.S. policy concerning the role of gold in domestic and international monetary policy systems. Members of the commission included members of the Board of Governors of the Federal Reserve System, the Council of Economic Advisors, the Joint Economic Committee of Congress, the House and Senate Banking committees, and four private citizens. The Commission's report, dated March 31, 1982, concluded that a return to the gold standard at this time would not be appropriate. As further background on ,the Federal Reserve, I am enclosing five pamphlets which may be of interest to Ms. Thomson. I hope this information is helpful to you. let me know if I can be of further assistance. Sincerely, (aigned) A, Colo Anthony F. Cole Special Assistant to the Board Enclosures GTS:JHJ:EMB:mrk (# V-112) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Schwartz Mr. Jorgenson Legal Files (2) Please CLO will handle response ROBERT J. DOLE, KANS., CHAIRMAN BOB PACK WOOD. OREG. RUSSELL B. LONG, LA. WILLIAM V. ROTH, JR., DEL. LLOYD BENTSEN. TEX. JOHN C. DANFORTH, MO. SPARK M. MATSUNAGA, HAWAII JOHN H. CHAFEE, R.I. DANIEL PATRICK MOYNIHAN. N.Y. JOHN HEINZ, PA. MAX BAUCUS, MONT. DAVID DURENBERGER, MINN. DAVID L. BOREN, OKLA. BILL BRADLEY, N.J. WILLIAM L. ARMSTRONG, COLO. GEORGE J. MITCHELL, MAINE STEVEN D. SYMMS, IDAHO DAVID PRYOR, ARK. MALCOLM WALLOP. WYO. ?Jertiteti Ztafez -.Senate COMMITTEE ON FINANCE CHARLES E. GRASSLEY, IOWA WASHINGTON. D.C. 20510 ROBERT E. LIGHTHIZER, CHIEF COUNSEL MICHAEL STERN, MINORITY STAFF DIRECTOR June 21, 1983 The Honorable Paul A. Volcker Chairman Federal Reserve System Washington, D.C. 20551 Dear Chairman Volcker: Enclosed is a copy of the letter which I received from Catherine Thomson of Douglas, Wyoming regarding the Federal Reserve System. I would appreciate it if you would review the letter and answer some of her questions so that I can respond to her concerns. Thank you very much for your time and cooperation. Sincerely, Malcolm Wallop United States Senator MW:tpp Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , • • ••Li „ .; CI*/ :01 i."/ ZZ tilr cci 111%3 1V11303.4 2141 SON't1310.:3 an108 I- I,' CrAherine Thc/7:on LE3 - I • ---) <42 1/ .2 Today,s newspaper tells of fVe more banks closing, making a total of twenty-three for the year so far. There are several ouestions that I ,d like to ash about banking etc. If you cannot answer these questons, can you tell me who will? They are: Lear o ,:>a. Why is the Fedder'al Reserve allowed to use the name Federal" when it is a private corporation? regulate the 7b. Our congiess was given the power to coin money & to the PRIVAT -value thereof. In 1913 they gave this power corporation called "FEDERAL ESERVE CORPORATION". Then Congress went further out on a rotten limb by setting up the FDIC guaranteeing some deposits that this private corp carries. Ridiculous? NO'; IT,S STUPID.. How much longer is Congress going to allow th'is situation to continue? c. Why can,t Congress re-negotiate with Fed. Reserve Corp. making it truly a Federal Corporation? We do need some such agency to we should go back on the administer our money problems. gold standard. Since 1913 the Federal Government has BORROWED overone trillion dollars from the Fed Reserve. We are now.paymg over one billion a year in interest on this loan. Since these fgures were compiled many millions more have been borrowed. !1-ien are you, as representative of the -neople, going to regain control of printing and regu lating our money? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Thank you beforehand for replying. 2,&/;6.ce CATHERIJLE ‘t-&/11-2•6N Aucust 10, 1983 The Honorable Brian Donnelly Chairman Task Force on Entitlements, Uncontrollables and Indexing Committee on the Budget House of Representatives Washington, D. C. 20515 Dear Chairman Donnelly: On behalf of the Board, I want to thank you for your letters of August 4 recommending Professor Joseph McEttrick for a position on our Consumer Advisory Council. I can assure you that Professor McEttrick will receive full consideration when the Board selects eight new Council members later this year. The Council provides valuable assistance in advising the Board on its implementation of consumer regulations and on other consumer-related matters, and the Board is pleased to receive recommendations for qualified individuals who can contribute to the Council's work. Again, the Board appreciates having your recommendation. Sincerely, CO:vcd (V-159) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mrs. Bray (w/copy of incoming) ,,, - g ("a.\ el A . .--• , . / ck.ki -,1 e *1}9st, a BOV,B F COVERHORS Tri VE SISTal RESER FEHRikt_ 59 1E63 AUG -8 ri 8: rr V..N CFFIrT Cr- UE CI1A113, Congrefics of the ZEIniteb ztate5 itpufse of Aepretentatibeg BRIAN DONNELLY ASSACH USETTS August 4, 1983 ELEVENTH DISTRICT COMMES BUDGET Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue, NW Washington, D.C. 20551 MERCHANT MARINE PUBLIC WORKS AND TRANSPORTATION Dear Chairman Volcker: trick of Suffolk University Law I write to recommend Professor Joseph McEt of the Federal School for appointment to the Consumer AdV173737 Council Reserve Board. s and throughout that time I have known Professor McEttrick for over 20 year advisor. His he has been a most knowledgeable and hard-working its place within the understanding of the complexity of consumer law, and ined with his energy and economy, is truly impressive. That knowledge, comb le to me not only in my Budget dedication, have made his assistance invaluab worked together. Committee work, but in every matter on which we have ground and experience Further, I believe that Professor McEttrick's back the Consumer Advisory make him particularly well-suited for appointment to law, and currently Council. He is an authority in the area of consumer of the Federal teaches a consumer law course which emphasizes the role the Consumer Credit Protection Trade Commission in consumer protection, As a recognized Act, and the Massachusetts Consumer Protection Statute. y before the Massachusetts authority in consumer law, he testifies regularl most influential in Legislature on bills affecting consumers, and has been slation. the drafting of consumer protection legi law field is not limited Professor McEttrick's experience in the consumer ion as a member of several to academia. He has served with distinct s Regulatory Board of government advisory bodies, including the Small Loan Banking, the Attorney General's the Massachusetts Department of Banks and and the Massachusetts Advisory Committee on Debt Collection Regulation, Judicial Nominating Commission. k to you without reservation. In sum, I recommend Professor Joseph McEttric sory Council. He would be an outstanding member of the Consumer Advi BRIAN DONNELLY Chairman, Budget Committee Task Force on Entitlements, Uncontrollables and Indexing 436 CANNON HOust Orricr Ekm..roPeo W4041/4crrom. D.C. 20615 225-3215 (202) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2.307 JE:04N F. Krp.iroy FEDERAL DUILI31 BOSTON, MA. 02203 (617) 223-00311 47 WASHINGTON STREET Ouipacy, MA. 02169 (617) 472-1000 61 MAIN STIttIT Boma(TON , MA. 02401 (617) 563-6300 Tout,Freirr LINN To WA SH I NO TON 1-800-424-9112 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20551 August 8, 1983 The Honorable Connie Mack House of Representatives Washington, D. C. 20515 Dear Mr. Mack: 14 requesting Thank you for your letter of July of Fort Myers, Florida, about information for Mr. Boyd Nelson a depository institution must Federal Reserve policy on when tomers for checks deposited into make funds available to its cus their accounts. New York, there are With the exception of the State of es governing the time period in no legislative or regulatory rul must or must not make funds availwhich depository institutions s, each institution sets its own able for checks deposited. Thu experience and with a view policy based generally on its own t loss in the event a check is toward protecting itself agains on is unable to recover the returned unpaid and the instituti State of New York, the banking funds from its customer. In the recently to determine a reasoncommissioner was given authority y institutions to delay access able number of days for depositor o, the law requires depository to funds by their customers. Als funds availability policies. institutions to disclose their considered by the California Comparable legislation is being l Reserve has no rules or Legislature. Although the Federa practices, we do believe that regulations governing availability ly of their institution's customers should be informed ful policies. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis es a check from a When a Federal Reserve Bank receiv lection, it gives provisional col for on uti tit ins y tor osi dep zero to three business days m fro on uti tit ins the to dit cre of the paying institution. The on ati loc the on ing end dep er, lat e the Reserve Bank has the right credit is "provisional" becaus if ount of the sending institution acc the ly ate edi imm rge cha to any reason. When a check is for aid unp ed urn ret is ck che a on for several days to elapse omm unc not is it , aid unp ed urn ret the Federal Reserve Bank of the before the check is received by check with the Federal Reserve. institution which deposited the checks is often due to the fact ed urn ret of t eip rec in ay del The sed manually and are generally ces pro be t mus cks che se the that olved originally in the collecinv on uti tit ins h eac by d dle han angements not involving the arr n tio lec Col ck. che the of tion Federal Reserve are similar. cite the length of Many depository institutions often unpaid as a major faced urn ret be to ck che a for ed uir time req making funds available to their tor contributing to delays in The Honorable Connie Page Two ack aging greater efficiency in customers. In the interest of encour favorably funds availthe payments mechanism and impacting erve has been examining ways ability practices, the Federal Res item processing which to improve the efficiency of return cost of check collection. contributes disproportionately to the ently began a pilot ProThe Federal Reserve sank of Dallas rec accelerating the handling of gram to test the feasibility of gram, a dishonored check returned checks. Under the pilot pro institution of first dewould be returned directly to the er depository institutions posit--bynassing (where Possible) oth on, a wire notice would be in the collection chain. In additi deposit for dishonored provided to the institution of first checks of $2,500 or more. pful to you. I hope that this information is hel ther in this matter. let me know if I can assist you fur https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SincerelN / ‘. -c-..1od) Wil 4 ? William R. Maloni Special Assistant to the Board MJH:CO:vcd (V-142) bcc: M. J. Hallmon Mrs. Mallardi Please i;A ' SHINGTON OFFICE C3NNIE MACK 504 13TH DISTRICT. FLORIDA CANNON BUILDING WASHINGTON, DC 20515 (202) 225-2536 COMMITTEES. BUDGET ,DISTRICT OFFICES: 106 POST OFFICE AND CIVIL SERVICE FEDERAL BUILDING 33901 (813) 334-4424 SORT MYERS, FLORIDA Congress of the United tats 2015SIEsmDRIVE SuiTE 204 SARASOTA, FLORIDA 33579 (813)388-9482 booze of iltprocntatans Vashington, D.C. 20515 July 14, 1983 Mr. Paul Volcker Chairman Federal Reserve System Twentieth Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: Recently I received a telephone call from one of my constituents, Mr. Boyd Nelson of Fort Myers, Florida, regarding the amount of time it takes banks to clear a check. Mr. Nelson is interested in the Federal Reserve's policy on this matter. I would appreciate a response. Thank you for your help. //i ncerely, (7 on Mack CM/nfl . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis co _m fin co c , rn 7:7 L— rria i r L3 FT-1 rn rrl •• cp CT1 lite"--71;k4714.304:71.1/4 Crd rwri cf)