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r FEDERAL HOME LOAN BANK BOARD: 1979-82   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Collection: Paul A. Volcker Papers Call Number: MC279  Box 25  Preferred Citation: Federal Home Loan Bank Board, 1979-1982; Paul A. Volcker Papers, Box 25; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c161 and https://fraser.sdouisfed.org/archival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. 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Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) mudd@princeton.edu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Date:  7// 9 .J 2 0  To: From:  Sandy Wol fe  Chairman Volcker would appreciate a reply to the attached for his signature as soon as possible.  Y)1L-4/ 'Y 0.1, 4 44141 tev-4 -a 4A /e41k 0-11A6c, /4° 11 rteL Cei"# 1  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  OAA Thv  lierv )7)1aAt  .147-4-d-ta , 1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank Sys em Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Savings and Loan Insurance Corporation RICHARD T. PRATT CHAIRMAN  July 7, 1982  •.1  CD (7, r-•  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551  .7.772  Dear Paul: This is to request that the members of the Depository Institutions Deregulation Committee (DIDC) only publish for comment the enclosed account which was largely drawn from Chairman Isaac's draft. The account incorporates two key elements, which in my opinion, should be included to satisfy the full intent of Congress in enacting the Depository Institutions Deregulation and Monetary Control Act of 1980 and to avoid greater competitive inequalities from developing. First, I believe the account should be linked to the enactment of comprehensive restructuring legislation, such as is represented by S.1703 and S.1720. This connection is in recognition of the restructuring that is necessary to achieve the competitive equality Congress sought among depository institutions. Second, the account's rate should be based on the 91-day Treasury Bill rate, with a 25 basis point preference for thrifts, which would drop to 1/8 of 1 percent six months after the effective date of thrift restructuring legislation and be eliminated twelve months after that date. This account would recognize the legal and economic environment in which financial institutions are currently competing, and virtually deregulate the liability side of depository balance sheets long before 1986. I would hope that members of the DIDC will agree to publish only this account for comment. Sincerely,  Richard T. Pratt Enclosure  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  72.-J CD  Comment: The current level of earnings and savings flows of the savings and loan industry warrants including a thrift differential on this account. However, enactment of thrift restructuring legislation would justify rapid elimination of the differential. In the absence of such legislation, the differential will continue to be needed; however, the account does recognize the need to remove interest rate ceilings and differential by 1986. Withdrawals:  No limit on telephone transfers, in-person withdrawals, mail transfers, etc. Transaction features should be optional with each institution as follows: (1)  No sweeps or third-party drafts, or  (2)  Three third-party drafts per month (mandatory $25 charge per item for each draft beyond three), or  (3)  Unlimited sweeps and third-party drafts with a $500 minimum per transaction  Withdrawal Penalty:  None  Reserve Requirement:  Transaction account reserve requirements may be imposed by Federal Reserve depending on transaction features offered by institution  Additional Deposits:  No limit  Eligibility:  All depositors  Other:  No loans to meet initial or maintenance balance   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ' 7/7/82 FHLBB MONEY MARKET ACCOUNT  Effective Date:  60 days after the effective date of comprehensive thrift restructuring legislation such as is contained in Senate Bill 1720.  Minimum Balance:  $20,000 -- The minimum balance may be reduced at the option of the institution as follows: $15,000 $10,000 $ 5,000 0  90 days after the account's effective date 90 days later 90 days later 6 months later or  In the absence of enactment of comprehensive thrift institutions restructuring: $20,000 $15,000 $10,000 $ 5,000 $ 0  effective effective effective effective effective  6/1/83 1/1/84 6/1/84 1/1/85 6/1/85  Comment: This alternative schedule represents a logical linkage of asset and liability deregulation that is necessary to satisfy the full intent of Congress in enacting the DIDMCA of 1980. Maturity:  None - (14 day reservation notice as with present passbook accounts).  Interest Rate:  The account's rate should be based on the 91-day Treasury Bill rate, with a 25 basis point preference for thrift institutions. The differential should be reduced to 1/8 of one percent 6 months after the effective date of comprehensive, thrift restructuring legislation. The differential and any ceiling would be eliminated 12 months after such date.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  If comprehensive thrift restructuring is not enacted, the differential should remain at 25 basis points until 12/31/84, except when interest rates are below 9 percent. On 1/1/85 the differential should be reduced to 1/8 of one percent and remain at that until 3/31/86 when it will be eliminated completely.  Ccm  >y44  ‘c. >04-  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance Corporation LCI CO RICHARD T. PRATT C—. CHAIRMAN  June 18, 1982  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Paul: Enclosed for your information is a copy of a letter that Board Members DiPrete, Jackson and I sent to Jake Garn recommending that the Senate Banking Committee link legislation restructuring the thrift industry to S. 2531 and S. 2532. Additionally, identical letters were sent to each member of the Senate Banking Committee. I hope you will find this information helpful.  Richard T. Pratt Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,3  •  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance Corporation  JUN 1 6 1982 Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D. C. 20510 Dear Mr. Chairman: We are writing this letter to strongly recommend that the Senate Banking Committee link legislation restructuring the thrift industry to S. 2531 and S. 2532. Although S. 2531 and S. 2532 are important measures for the regulators and the thrift industry, we firmly believe that fundamental restructuring and additional flexibility for thrifts must be combined with these measures if the thrifts' problems are to be addressed adequately. Specifically, we again recommend the compromise version of S. 1703 and S. 1720 discussed at the May 26 hearings. The desirability of restructuring legislation is immediate and striking in that defective structuring is a primary cause of the present economic vulnerability of the thrift industry. The financial environment has changed, and will continue to change, to such a substantial degree that even a significant decrease in In interest rates may not ensure thrifts' long-term viability. this context, it may not be appropriate to provide public funds to buy time in the short run while failing to provide those same organizations with the tools for long-run survival. We are convinced that a compromise bill, affording deregulatory benefits in a balanced fashion, is vital to the long-term public interest, and desperately needed if the thrift industry is to ultimately survive. We have attached for your information a resolution adopted by Bank Board on June 10, which reaffirms the Board's strong the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 2 commitment to statutory restructuring as the only lasting cure to the thrifts' current problems.  Sincerely,  Richard T. Pratt Chairman  Andrew A. DiPrete Board Member  rs•\,  Jamie Jay Ja Board Member  Attachment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  son  FEDERAL HOME LOAN BANK BOARD No.  82-395  Date:  June 10, 1982  WHEREAS the Study of the President's Committee on Financial Institutions (1963), the Study of the Savings and Loan Industry by Professor Irwin Friend (1969), the Report of the Hunt Commission (1971), the Brookings Institution Study (1982), and the Report of the President's Commission on Housing (1982) have identified the need for structural changes in the thrift industry, and broadened powers; WHEREAS the extreme volatility of interest rates and the current earnings problems of thrifts have again demonstrated the need for restructuring in the thrift industry; WHEREAS the asymmetrical approach to deregulation represented by deregulating thrifts' liability side without providing them with additional asset flexibility is unworkable; The Bank Board reaffirms its belief that restructuring of the thrift industry has been necessary for the long-term viability of thrifts for a number of years, and is still needed today. The Bank Board therefore encourages the Congress to enact without delay the restructuring proposals incorporated in the Thrift Institutions Restructuring Act (S. 1703, H.R. 4724) and the Financial Institutions Restructuring and Services Act of 1981 (S. 1720). In view of these conclusions, the Bank Board hereby affirms its unqualified support for the immediate enactment of the TIRA.  Federal Home Loan Bank Board  1  -1 e( 7;e;  SY. r. Finn secretary  Chairman  t. 1917,1„k Board Mem-oer  ,narr  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  iA '  •  AprIl 10, 1442  Vhe ibmorablo lichard T. Pratt Chat=Oh federal Some boon Seek licex6 Weehingtoni LC. 20$52 nowt Cheitalee Pratt& Oils latter responds to trup MVO's request to. comment on ations to engage a proposal to permit swings and loan stervice corpor Sips include camactri.t ed propos In a twirle caage of hew functions. The ties eacsrl actlVit&eiti other mercial landings aeoerlties brokerage and seal .ztizs, andaric C* aposg,tion at softy mattet mutual tun**, LAAWAA sabiae g cturin manufa estate brokerage, tam sattagements ead mint V% un4erstan4 that although *Le say lowest no wee tbav a p.z can cl.on corpoia s of their assets Is service corpotatiasa, the semis -4 ti trim' ing bectoo iesreasie the effect.ve sive of the intestseat by parties. The expatiates of **Mee corporation posers cantatas:4 in the ure pccpooad tsgelatkon itsea hosed gmestions regarding the tuture struct of tole of the financial aervlces indsstry ma a whole, tatiludiag the specialised leading lostitotiono and appropriate linos to be &rams to sepazating behtipg fres commerce. It *veld net be an exaggeration pdevelo charactetive the proposal es savisig the effeot of isecostaging the Ing apniAt t4onst vent of an additional set of Ceellexclal benttag ima1te under significantly different rules, ;tsaliding a diffetent regulatory meat structure, different btenching posers, different access to govern tleaat a ttatiai (foi end er's. tan ent *treat sponsored credit, !differ period) different interest rate coinage. In addition to the fondemeatal issues serfhood by tuts propoself ourisAttesey it also raises mow:taint legal questions that ranee* es its ciel lesollag eassee of fail s, omelet the ular. with colitis, law. In partic in the Seetendition of Poormes bY Atio servlost corporations omit) teasit * of the Soak wipes. for as beak iaries IlLs operating seen subsid eastsised is tuts eativi the of we nadir* Corosay hat, andel whit* sible. permis be the propeeed segulatott would sot Is thle stest, :evolving basis eaanges sdapasitery Wdsg powers Lased on on *spans.** isterpretatlan of exiattla, Les• pcoomm , the Nether e. optiat by regstatory miatieft *eons particalex34 iseggc proposal very fact that significant policy-legal ism's a. aised by 04 iesolved and eed be a&tres oily serves to striae trm rega.ratisnt that they by the Casagesse.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ' 5,06 okti"  LA0 itio^ofabls Lard?. Pcatt As you know, Congress has betotv Inumerous proweels deeltsq a the with depository instil:Wes pewits, imeledi.o, the 'Gore bill am s tevaLd;A Boitx4 Reserve *Melabetors" oill. The ilosition of the Federal fall. last of y testimon this loeislatioa is eescribed in **toil us my address 1 look fotwax6 to the prompt exastment of legislation toot wall the with tn deal $ctl.cri the 4sams ooveA.e4 in ay tegtimpol. including sorleas problams tame by thrtft 4natitntiors Slt:cerely,  UL  ML:CViltmax 4/30/82   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Eto4R,cm-  4  :.ECEPAL RESEW::  S.71:  1962 MIR I'  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank  Federal Savings and Loan Insurance Corporation  BoacFrdFICEORrECTEHEIVI5FLA,IP:414\1 RICHARD T. PRATT CHAIRMAN  March 12, 1982  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve Board Washington, D. C. 20551 Dear Paul: I thought you might be interested in the enclosed paper which contains some preliminary thinking about the issues currently facing the savings and loan industry. I look forward to working with you on these issues. Sincerely,  Richard T. Pratt Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  SUGGESTED PROGRAM FOR DEALING WITH THE PROBLEMS OF THE SAVINGS AND LOAN INDUSTRY  The present problems besetting the savings and loan industry A  are extensive and now well known.  Over 90 percent of the associa-  tions in the country are losing money.  Numerous proposals have  been proposed to deal with the situation, ranging from continuation of the status quo to assistance programs costing more than $10 billion per year.  Several factors favor some legislative  consideration: (1) the need to preserve orderly financial markets and public confidence in the regulated financial system; (2) the belief that a properly planned and orderly implemented program could address public needs while not causing an inordinate shock to the budget; and (3)  the fact that the savings and loan business is  an important, competitive sector of the American financial system that deserves the right to demonstrate that it can be competitive once again after restructuring and an appropriate transition period. The principal arguments against government-sponsored assistance programs would seem to be as follows: (1) the cost of most of the programs proposed is substantial, ranging approximately from $7-15 billion per year; and (2)  the precedent set by industry assistance may be  v(awed as inappropriate.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  If Congress wishes to address the present difficulties facjnq the thrift industry, and if it chooses to consider the adoption of a program that incl udes financial assistance, I suggest that it also consider solu tions that will reverse the crisis in confidence and minimize the impact on the budget. Such a .prooram should include the following: (1) placing the full faith and credit of the U.S. Government behind the obligations of the Federal Deposit Insurance Corporation ("FDIC") and the Federal Savings and Loan Insurance Corporation ("FS LIC); (2)  immediate development and approval by the Depository  Institutions Deregulation Committe e ("DIDC") of competitive market instruments that will (a) competitive ways of saving, (b)  provide consumers with new, offset the unfair competitive  position of money market funds, and (c) return a fair share of the savings flows to thrift institut ions; (3) -  statutory authorization granting thri ft institutions  flexible investment and lending authority (i.e., passage of the Thrift Institutions Restructurin g Act); and (4)  a short-term assistance program whic h will maintain public  confidence in the system, allow thri fts an appropriate time to restructure and minimize impact on the budget. Full Faith and Credit Without question, the obligations of the FDIC and the FSLIC to - protect insured depositors must be met in any and all circumstances.  Given this fact, a legislative change that  acknowledges these obligations as thos e of the United States   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I  Government will impose no addi tional cost on the Treasury either now or in the future. The documented loss of savi ngs market share which thrift institutions are expe riencing has already benefited other depositories that have been the recipients of many of these idisintermediated fund s.  Such deposit shifts can only  be attributed to a lack of confidence in savings and loan associations and mutual savings banks.  Legislated government  acknowledgment of the Insurance Corporations  obligations as  its own would provide a majo r part of the solution to the problem.  In addition, full faith and cred it backing of the  Insurance Corporations would also facilitate short-term, • note -for-note-type assistance that would have a minimal impact on tl'e bet  Attraction of New Funds into Thri ft Institutions If thrift institutions are to rest ructure themselves and -regain full public confidence, they will need to be able to -- at-tract new deposits,  This -will be more attainable if the  full faith and credit of the U.S. Government is provided for the obligations of the FDIC and FSLI C.  However, the problem  of attracting new funds could also be dealt with effectively by the DIDC.  Therefore, the DIDC should develop an acco unt  or program of accounts which woul d provide commercial banks and savings and loan associations with competitive instruments to attract new funds.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •••  utions Addi.:_ional Powers and Flexibility for Thrift Instit ue to The reuulators and the Administration must contin powers urcle the passacle of lecislation authorizing expanded for thrift institutions.  Given fluctuating interest rates,  thrift institutions are statutor  misstructured and have  without only a questionable chance of long-term survival in the present additional operating flexibility. For example, ity, checking competitive climate, commercial lending author g authority, account authorization and expanded consumer lendin necessary to as provided in S.1720, S.1703 and H.R.4724,are ze the need ensure the survival of the industry and to minimi for ultimate Government assistance and intervention.  Short-Term Assistance ution Given the actual cpErating condition of thrift instit assistance and the psychology of the American saver, shbrt-term should be seriously considered.  However, I would suggest  ed by any that the follow_ing objectives should be achiev -  _ _•  ••••  •"  shorf-term assistance plan: President's (1) the assistance should not jeopardize the budget; age the (2) it should be structured to allow and encour survive; strongest and best managed institutions to strative (3) it should not place an unmanageable admini n on the regulatory agencies; and _ -_burde — '2-  a-7  _   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •1  - :=ture71 to cive manazeent a continuinc (4) it sbc.-.:16 be s :  incentive to minimize costs, operate efficiently and solve existing operating problems. Such a short-term assistance prouram could be structured as follows: (1) Eligible thrift institutions would sell to the FSLIC Income Capital Certificates ("ICC"), instruments that have been designed by the Federal Home Loan Bank Board to facilitate the infusion of capital into' institutions with a minimal, direct cash outlay.  The FSLIC would purchase  these capital instruments with promissory notes bearing interest approximately at the current rate paid by the U.S. Treasury for notes of a similar term.  Upon rehabilitation  of the institution, the ICC's would be redeemed. (2) Assistance would be provided pursuant to a formula based on an acceptable index, such as the level of capital or the level of losses being experienced by a peer group of institutions. ' —(3) Assistance would not be designed to cover 100 percent of the losses of participating institutions.  The program would  mitigate losses and give viable associations time to make appropriate operating adjustments, but it would also allow the disappearance of institutions which are simply not viable. A more specific program of this type could incorporate the following, conditions: All savings and loan associations with networth that _ percent or less of total assets would be eligible to participate in the program.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Institutions  havinc not mo re than 3 pe rcent nor less than 2 perc ent net worth would receive FSLIC notes eq ual to 30 percent of the operat ing losses of the average as sociation in the 2-3 percent net worth peer gr oup. Those having A 1 to 2 percent ne t worth woul d receive FS LIC notes equa l to 40 percent of th e average lo sses for inst itutions of th is category, and those wi th 0 to 1 pe rcent net wo rth would re ceive FSLIC notes equal to 50 percent of the averag e operating lo sses of institutions in their peer groups. While only an example, this type of progra m would prov ide for the foll owing benefits : (1) as a note -for -note  program, the principal am ount of the notes would not impact th e budget when the notes we re issued; (2) because infusion woul d be based on industry aver ages, inordinate am ounts of regu lation to assu re that expens es were not bein g "padded" or losses being falsified, wo uld not be required; and -7  3  because the in fusion would be designed to cover less th the total lo an sses of the institutions in volved, the weakest institutions would not be able to surviv e as independ ent entities indefinitely, and all of th e incentives for efficient management and operatio n would be main tained. Cost estimate s for the prog ram are as foll ows: Institutions having less th an 3 percent net worth lost approximately $2.7 billion in 1981. Applying the fo rmula stated above, the anticipate d financial as sistance requ ired   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  . in 1981 would have been  1 billion.  For institutions currently having 3 per cen7._ net worth, thi s proaram would extend the period of time until their cap ital is exhausted by approximately 50-75 percent, giving them a substantial additiona l period for adjustmen t and tradition to the rigors of a less reg ulated market. The amount of notes out standing at the end of 1981 would have been $1 billion, while the int erest costs associate d with these paid in cash would have been approximately $80 million in 1981.  I believe that the above four-point pro gram offers effective , short-term solutions to the thrift industry and will be less costly and more efficient than other alternatives already proposed. It gives legitimate tim e for adjustment and res tructuring while not impacting the budget or setting precedent s which are highly des tructive to the fundam entals of the free mar ket.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  DRAFT  •  No. Date  FEDERAL HOME LOAN BANK BOARD 12 CFR PART 545 Service Corporation Activities AGENCY:  Federal Home Loan Bank Board  ACTION:  Proposed regulation  SUMMARY: The Board is seeking public comment concerning the range of activities in which service corporations of federal savings and loan associations may engage without prior Board Service corporation activities proposed for comment approval. real estate brokerage for property owned by third include: parties; manufacture of mobile homes; commercial lending without restriction; leasing of consumer and business goods; insurance underwriting; debt collection services; expanded loan servicing; coin and currency services; preparation of tax returns for businesses; engaging in certain securities activities such as acting as a broker and organizing and selling shares in mutual funds, and money market funds; investing in certified development corporations; trading GNMA options; acting as a futures The commission merchant; and issuing letters of credit. Board is also proposing the elimination of current customer limitations on certain preapproved activities, including: credit analysis and appraisal; development and administration of personnel benefit programs; advertising and procurement of savings accounts and loans; serving as escrow agent or trustee; providing liquidity management and financial consulting services; and establishing and operating remote The proposal also includes several technical service units. amendments. COMMENT MUST BE RECEIVED BY:  [60 days from date of publication]  Send comments to Information Services, Office of ADDRESS: General Counsel, Federal Home Loan Bank Board, 1700 G Street, Comments will be available at N.W., Washington, D.C. 20552. this address for public inspection. Wendy B. Samuel, FOR FURTHER INFORMATION, PLEASE CONTACT: Federal Home Loan (202) Counsel, 377-6465, General of Office 20552. D.C. Washington, Street, N.W., Bank Board, 1700 G   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Two  •  On April 30, 1981, by Resolution SUPPLEMENTARY INFORMATION: No. 81-208, the Board adopted amendments that expanded federal associations' service corporation investment authorization and preapproved activities. See, 46 FR 24148 (April 30, 1981). This expansion was a result of a broadening of the statutorily permissible activities for federal associations by the Depository Institutions Deregulation and Monetary Control Act of 1980, Pub. L. 96-221, and the need for increased experimentation and 'innovation in providing financial services through service The months since that amendment have been 'corporations. characterized both by increased need for profitable investments and by an expanded view by the Board of the powers of federal associations generally. The competitive developments that continue to evolve because of the innovative market-oriented approach of many depository and non-depository firms are clear evidence that the traditional business of financial intermediation has In this increasingly competitive financial services changed. market, the Board recognizes the need to consider allowing federal associations to have new and competitive opportunities to engage in activities not directly permissible, and to realize profits in new areas to bolster a reduced return on traditional investments. Moreover, in view of various congressional inquiries and hearings seeking to study and evaluate the changes occurring in the financial services industry, the Board believes that it is similarly appropriate first to seek public comment that will assist its own inquiries and evaluation of appropriate industry powers and the possible expansion of service corporation powers. Service corporation activities authorized by 12 U.S.C. B) have been limited by Board policy to those 1464(c)(4)( § related to the activities of the parent reasonably are that This has generally included making investments institution. and engaging in activities permissible to the parent, additional services related to lending, such as real estate appraisal and title abstracting, and other financial services that either were reasonably related to the activities of federal associations or were limited to customers of the As indicated above, it is the Board's parent association. view that in the current economic and competitive climate, it is appropriate to reconsider what activities are reasonably related to activities of federal associations and perhaps even whether the requirement that an activity be "reasonably related" still provides a relevant and workable standard. As a result, the Board now seeks comment on an additional expansion in authorized activities for the service corporations of Federal associations. Moreover, the Board is particularly interested in comments addressing the specific ways the proposed activities can be used beneficially by association and can be considered reasonably related to the activities of federal associations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Three Proposed New Service Corporation Activities Manufacture of mobile homes Current regulations permit the retail sale and the set-up ies of manufactured homes as reasonably incident to the activit ng financi s include ty authori of federal associations, Whose the purchase of manufactured homes. It is now proposed that such this authority be expanded to include the manufacture of resithe to related homes. This activity may be reasonably s dential lending activities of the parent because of the latter' and homes, authority to finance the purchase of these types of because such activity is the functional equivalent of real service estate development and construction which are within y activit this n, additio In ty. corporations' current authori real of types other than involves no more risk to the parent While estate development activities of service corporations. an whether of risk is not germane to the Board's determination al practic the activity is reasonably related, it is relevant to rather decision whether to permit the activity as preapproved than Lo retain greater control by requiring prior approval. Insurance underwriting Under current regulations, service corporations are permitted to act as agents for the sale of liability, casualty, automobile, life, health, accident and title insurance. The Board seeks comment concerning the extension of the preapproved iting. powers of service corporations to include insurance underwr lace, Given recent developments in the financial services marketp the both to related bly provision of insurance may be reasona deposit and lendinc functions of federal associations, and the underwriting of insurance may be functionally indistinguishable from selling. While the Board believes that the financial risks of acting as an underwriter may be significantly greater than those of acting as a sales agent, prudent management, Bank Board regulations, and state restrictions on insurance underwriters should be sufficient to control this risk. Moreover, the possible detriments that are inherent in the insurance function may not outweigh the benefits to the public, the association and the service corporation from its offering of these services. The Board's experience in previously reviewing and approving some underwriting services on a case-by-case basis indicates that this may be an area appropriate for preapproval authorization. This proposal also includes private mortgage insurance sales and underwriting services as preapproved activities Currently, service corporations for service corporations. of federal associations are not permitted to act as sales agents or underwriters for private mortgage insurance, and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Four all insured institutions the accounts of which are insured by the FSLIC are limited by Section 563.44 of the Insurance Regulations (12 C.F.R. § 563.44) with respect to the sale of this type of insurance to their customers by their service This position has been based on the Board's corporations. view that the purpose of requiring private mortgage insurance is to protect the lender from loss upon default where the value realized from the security property is less than the Where the insurer is an outstanding balance of the loan. al interest, the financi a has lender entity in which the amount of its the to up risk lender continues to be at believes, however, now Board The investment in the insurer. minimized by be can loss that since this possibility of iting underwr careful adherence to prudent lending and standards it is insufficient to justify denying service corporations access to this source of revenue. However, the Board notes that the proposed inclusion of private mortgage insurance services as a preapproved activity would have little effect absent amendment of Section 563.44, which is currently being considered in conjunction with a review of all the Board's conflict-of-interest regulations. Debt collection The Board proposes to permit service corporations to This would include such perform debt collection services. activities as contacting delinquent debtors by letter or telephone, attaching or garnishing wages or other assets, and foreclosing against security property. Obtaining repayment is an integral part of lending activity, and therefore is reasonably related to the activities of both Since as maker and the parent and the service corporation. processer of loans the service corporation and parent association are already involved in debt collection activities in connection with their own loans, permitting service corporations to offer this service to third parties may be reasonably related to association activities. Letters of credit The Board also seeks comment on whether to permit service These are instruments corporations to issue letters of credit. the beneficiary and pays tion through which the issuing institu s for the credit. arrange who is reimbursed by the account party, uishable disting Since a letter of credit is not substantially s propose Board for many purposes from a commercial loan, the as credit to permit service corporations to issue letters of Standby letters of credit part of their commercial lending. applicable to lending. ions limitat any to would be subject   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Five Coin and currency  I.  The Board proposes to permit service corporations to operate coin and currency services. This activity includes contracting with Federal Reserve Banks or commercial banks to make coins and currency available to fund normal operations of the parent association or other customer institutions, and could include delivery and security arrangements. Since the use of coin and currency is directly related to most of the normal activities of the depository institution parent, these services may be offered without restriction as to customer. Enclagina in securities activities A proposal that has been brought to the Board's attention by several recent applications involves the authority of service corporations to act as brokers (e.g. effecting transactions in securities for the accounts of others) and to organize, sponsor, operate, control, render investment advice to an investment company and underwrite, distribute or sell securities of an investment company. For example, a service corporation might act as a broker and purchase and sell securities pursuant to customers' instructions, and establish a money market mutual fund, and sell the shares of such fund to the public. These services may be reasonably related to the parent's authority to purchase specific types of securities and to act as a fiduciary. Both of these proposals raise the issue of the application of the Glass-Steagall Act, 12 U.S.C. §§ 377 and 378, which generally prohibits depository institutions and certain of their affiliates from engaging in the business of issuing, selling or underwriting securities. Without addressing the applicability of this Act to savings and loan associations, the Board has determined that service corporations, because of their separate corporate existence from the depository institution parent, are not subject to the restrictions of the Act. Service corporations are required pursuant to Section 563.37 (12 C.F.R. § 563.37) to maintain a separate corporate existence from the parent associations, and Section 570.10 (12 C.F.R. § 570.10) sets general standards for ensuring such separation. Therefore, even assuming application of the Glass-Steagall Act to the parent association(s), where a separate corporate existence is maintained service corporations clearly may engage in securities activities without violating the prohibitions contained in the Glass-Steagall Act. Furthermore, the securities activities of service corporations would be subject to the rules and regulations of the Securities and Exchange Commission. Subject to these limitations, the Board believes that securities services may be reasonably related to the permissible activities of the parent.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Six Leasing The Board further proposes to permit service corporations to engage in the leasing of consumer and business goods without limit as to the nature of the lessee. Service corporation leasing is currently limited to office furniture, equipment and remote service units primarily for financial institutions. As the Board established by opinion of the Office of General Counsel issued September 29, 1981, and as set forth in recent judicial decisions, e.g., M & M Leasing Corp. v. Seattle First National Bank, 563 F.2d 1377 (9th Cir. 1977) cert. denied, 436 U.S. 956 (1978), leasing under certain circumstances may be considered the functional equivalent of lending. Consequently, service corporations should be permitted to lease goods and equipment the purchase of which they or the parent would be permitted to finance. Options trading The Board has proposed permitting insured institutions to engage in trading contracts on GNMA and certain other contracts when approved for tradina on an organized exchange, .and adding a new Section 56.3.17-5 to this effect. See Board Consequently, the Board , 1982). Res. No. 82believes that service corporations should also be permitted to enter this activity, and therefore proposes to include this authority in the revised regulation. Acting as a f - tures commission merchant Under cur:- nt regulations, service corporations are permitted to engaa:. in interest rate futures transactions subject 563.17-4. The to certain limitations contained at 12 C.F.R. Board believes thEt expansion cf this authority to include acting as a futures commission merchant would also be a reasonably related activity. As an FCM, the service corporation would furnish advice and place orders for financial institution customers for trading interest rate futures contracts. Service corporations engaged in this activity would be subject to rules and regulations of the Commodities Futures Trading Commission. Extension of Currently Preapproved Activities Real estate brokeraoe The Board seeks comment on whether service corporations of federal associations should be permitted to offer real estate brokerage services for property owned by third parties. The Board has previously declined to designate such real estate brokerage as a preapproved activity, but applications have been Real estate made for authorization on a case-bv-case basis.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Pace Seven brokerage is an essential part of the process of marketing and financing homes and, for that reason, may be reasonably related to the activities of federal associations whether or not the property is owned by a third party. For that reason, allowing federal associations to provide real estate brokerage services on a wider scale may foster significant economic and competitive benefits for both the public and the savings and loan industry. The Board recognizes, however, that a potential conflict of interest may exist, in that the decision of the parent to offer financing in a particular transaction could be affected by anticipation of the fee to a service corporation that would be generated by such a sale. However, after reviewing several applications for approval of this activity, the Board considers this potential conflict sufficiently remote so as not to offset the advantages of increased services to the public and profit opportunities of federal associations. Any actual conflicts of interest can be identified and monitored in the supervisory process. Farm manaaement Current regulations permit service corporations to engage in the maintenance and management of real property. The Board believes that this section should be amended to include specific reference to real property used for farming. Since the authority of federal associations includes authority for lending secured by agricultural property, a reasonably related activity for service corporations would be the maintenance and management of such property. Corrnercial lending The Board also seeks comment on whether to permit service corporations to engage in commercial lending without the current restriction to U.S. agency guaranteed business loans secured by real estate and inventory loans to dealers to finance the purchase of goods to be sold for personal, family, or household purposes. The current lending authority of service corporations is slightly different from the lending powers of the parent In seeking comment on the possible extension of association. the ability of service corporations to experiment and to engage in a wider range of profitable activities, the Board is endeavoring to determine whether the activities of a service corporation which can already engage in real-estaterelated commercial lending activities coincidental to the parent's may also engage in the forms of commercial financing activities that expand its current business horizons but that may be considered logical extensions of the authorities already possessed by federal associations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Eight Loan servicing Since servicing of loans, including record keeping, acceptance of payment, and billing, is reasonably related to the authorized activities of associations, the Board seeks comment concerning the authority of service corporations to service loans without restriction to the types of loans in which the service corporation may invest. Tax return preparation The Board also proposes to permit service corporations to prepare tax returns. While a service corporation may not serve as an expert tax consultant, the preparation of tax returns has been an adjunct to service corporations' offering of financial counseling services. At present, tax return preparation services may be offered, but not to businesses operated for profit. The restriction to non-profit entities may no longer be justified, and therefore the Board seeks comment on the appropriateness of its deletion. Investment in Cered Development Corporations Under current regulations, service corporations are authorized to invest in small business investment companies or minority enterprises licensed pursuant to Section 301(d) of the Small Business Investment Act of 1958, 15 U.S.C. 681(d). This Act was amended in 1980 to add Section 503, 15 U.S.C. § 697, which provides that the Small Business Administration (SBA) may guarantee payment of debentures issued by a state or local development company, defined as an entity incorporated under state law "to promote and assist the arowth and •development of small-business concerns". 662(6). It is the Board's view that investment in such companies should be a permissible type of business lending, and that the SBA payment guarantee makes this type of enterprise a prudent investment. Furthermore, this proposed expansion would enhance associations' abty to utilize the full investment authority earmarked for community development actives. •  Elimination of customer restrictions Certain activities currently are preapproved for service corporations because they are performed for customers of the parent. However, under the expanding view of the appropriate role of an association, the Board seeks comment on including among preapproved acties, without limitation to association credit analysis and other services customers, the follow connected with origination of construction loans; developing and administering personnel benefit plans, including IRA and Keogh plans; activities to procure and retain savings   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Nine accounts and loans; serving as trustee; providing liquidity management and various financial consulting services; and establishing, owning and operating remote service units. Technical Amendments Since the April 1981 amendment of Section 545.9-1, the need for several technical changes has come to the Board's First, some confusion resulted from the inclusion attention. in subparagraphs (c)(11) and (c)(12) of references to acquiThe Board theresition and development of real property. fore is proposing to amend the authorities relating to the acquisition and development of real estate to clarify that the limitations on holding periods apply to both types of The other technical amendment concerns subparaactivity. graph (d)(3), Which refers to serN.Tice corporations that qualify under "paragraph (b) of this section." The Board proposes to amend this section to clarify its intent that the reference be limited to service corporations qualifying under subparagraph (b)(1) of this section. Finally, the proposal arranges the authorities under new subheadings for easier reference. Accordingly, the Federal Home Loan Bank Board hereby proposes to amend Part 545, Subchapter C, Chapter V of Title 12, Code of Federal Regulations, as set forth below.  SUBCHAPTER C - FEDERAL SAVINGS AND LOAN SYSTEM PART 545 - OPERATIONS Amend § 545.9-1 by changing the subparagraph (d)(3) reference to "paragraph (b)" to "subparagraph (b)(1)", and revising paragraph (c) to read as follows: 545.9-1 Service corporations.  A service corporation in which a (c) Permitted activities. Federal association may invest is permitted to engage in the following activities: (1)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Loans. Originating, investing in, selling, purchasing, servicing, or otherwise dealing in (including brokerage or warehousing), any of the following: (i) loans, and participations in loans, on a prudent basis and secured by real estate or liens on manufactured homes;  No. Page Ten (ii) loans, with or without security, for altering, repairing, improving, equipping, or furnishing real estate; (iii) commercial loans; (iv) educational loans; (v) consumer loans; (2)  Services primarily for financial institutions. Performing any of the following services, primarily for financial institutions. (i) research, studies, and surveys; (ii) purchasing of office supplies, furniture, and equipment; (iii) developing and operating storage facilities for microfilm or other duplicate records; (iv) providing clerical, accounting, data processing and internal auditing services; (v) acting as a futures commission merchant for interest rate futures;  (3)  Real estate services. (i) maintaining and managing real estate, including real estate used for agricultural purposes; (ii) managing owners' associations for condominium, cooperative, Planned Unit Development or other rental real estate projects; (iii) providing homeownership and financial counseling; (iv) providing relocation services; (v) providing real estate brokerage services; (vi) acquiring unimproved real estate for prompt development or subdivision, for construction of improvements, for resale or leasing to others for such construction, or for use as manufactured home sites; or developing, subdividing, and constructing improvements for sale or rental on real estate: provided, that any development, subdivision, and construction of improvements is to be completed within three years after commencement of development of the real estate and within five years after acquisition of the real estate, unless such period is extended by the Principal Supervisory Agent (as defined in § 545.14(a)(3) of this Part) upon written application by the service corporation, which application shall be supported by information evidencing that the service corporation will proceed or has proceeded in accordance with a prudent development plan and has not caused undue delay in the completion of construction;   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  No. Page Eleven and provided further, that acquisition of an option to purchase is not an acquisition for the purpose of determining the periods provided for in this subparagraph; (vii) acquiring improved real estate or manufactured homes to be held for rental or resale, or for remodeling, renovating, or demolishing and rebuilding for sale or rental; (viii) manufacture and set-up of manufactured homes; (ix) acquiring, maintaining and managing real estate (improved or unimproved) to be used for offices and related facilities of a stockholder of the service corporation, or for such offices and related facilities and for rental or sale, if such acquisition, maintenance and management is performed under a prudent program of property acquisition to meet either the stockholder's present needs or reasonable future needs for office and related facilities: provided, that without prior approval of the Board, no service corporation shall acquire such real estate if, as a result of the acquisition, the outstanding aggregate book value of all such real estate owned by the stockholder and its service corporations would exceed their consolidated net worth; (4)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Other investments. (i) making investments specified in §§ 545.9 and 545.9-3 of this Part; (ii) investing in savings accounts in an insured institution that is a stockholder of the service corporation: provided, that the service corporation receives no consideration, other than interest at the current market rate, for opening or maintaining any such account; (iii) investing in tax-exempt bonds of state governments or political subdivisions thereof used to finance residential real property for family units and issued pursuant to section 103 of the Internal Revenue Code, and tax-exempt obligations of public housing agencies used to finance housing projects with rental assistance subsidies and issued pursuant to section 11(b) of the United States Housing Act of 1937, as amended; (iv) investing in the capital of a small business investment company or minority enterprise small business investment company licensed pursuant 301(d) or the debentures of a certified deto velopment company guaranteed pursuant to § 503  No. Pace 'I\aelve 9.  of the Small Business Investment Act of 1958 by the U.S. Small Business Administration, where such small business or certified development company is engaged exclusively in the activities listed in subparagraphs (c)(1)-(5) of this section; (5)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Other services. (i) preparing state and Federal tax returns; (ii) insurance brokerage, agency or underwriting for liability, casualty, automobile, life, health, accident, title, or private mortgage insurance; (iii) providing fiduciary services upon application 550.2, and subject to to the Board pursuant to the conditions provided in §§ 550.1-550.16, of this Subchapter; (iv) issuing credit cards, extending credit in connection therewith, and otherwise engaging in or participating in credit card operations; (v) credit analysis, appraising, construction loan inspection, and abstracting; (vi) developing and administering personnel benefit programs, including life insurance, health insurance and pension or retirement plans including IRA and Keogh Plans; (vii) establishing, owning, leasing, operating or maintaining remote service units; (viii) advertising, brokerage and other services to procure and retainlooth savings accounts and loans, but not pooling savings accounts or soliciting or promoting pooled savings accounts; (ix) serving as escrow agent or as trustee under deeds of trust, including executing and delivering conveyances, reconveyances, and transfers of title; (x) providing liquidity management, investment, advisory and consulting services; (xi) providing coin and currency services; (xii) providing debt collection service; (xiii) leasing of equipment and business and consumer goods; (xiv) servicing loans; (xv) engaging in interest-rate futures transactions subject to the provisions of § 573.17-4 of this Chapter, but not subject to any notification requirements thereof; (xvi) engaging in options trading subject to the provisions of .5 563.17-5 of this Chapter; (xvii) issuing notes, bonds, debentures, or other obligations or securities; (xviii) acting as a broker, and thereby engaging in effecting transactions in securities for the accounts of others, provided, that (a) the service  No. 41.  Page Thirteen on corporation obtains and has on file an opini the of legal counsel certifying that it meets requirements of § 563.37 of this Chapter rerate garding the maintenance of a separate corpo , rules cable appli all existence, and (b) that ing engag to ining regulations and statutes perta in such activities are complied with; (xix) organizing, sponsoring, operating, controlling, rendering investment advice to an iinvestment company and underwriting, distr tment inves an in ities secur ng buting or selli racompany provided, that (a) the service corpo legal of on opini tion obtains and has on file an rements counsel certifying that it meets the requi mainthe of § 563.37 of this Chapter regarding tenance of a separate corporate existence, and and (b) that all applicable rules, regulations ities activ such in ing engag to statutes pertaining are complied with; (xx) issuing letters of credit; (6)  (7)  d in Activities reasonably incident to those liste and on; subparagraphs (c)(1)-(5) of this secti Such other activities reasonably related to the activities of Federal associations as the Board may approve.  ) of 2. Change the reference in subparagraph (d)(3 )". (b)(1 aph aragr § 545.9-1 from "paragraph (b)" to "subp § 1464); sec. 408, (Sec. 5, 48 Stat. 132, as amended (12 U.S.C. ed (12 U.S.C. 48 Stat. 1261, as added by 73 Stat. 691, as amend 3 CFR 19431730a); Reorg. Plan No. 3 of 1947, 12 F.R. 4891, 48 Comp., p. 1071)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  By the Federal Home Loan Bank Board  J. J. Finn Secretary   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •• fi.(,:ki;REs.t..•  Paul A. Volcker April 16, 1982  Dear Dick: My calculation indicates that American Federal is paying $156.25 for every $7,500 it took in on April 1 in addition to whatever it pays on the certificate for the three months after May 1. This realy does seem like either excessive competitive zeal or an association severely pressed for liquidity.  or  April 16, 1982  Mr. William Logan President State Central Savings Pank 601 Main Street Keokuk, Iowa 52632 Dear Mr. Logan: Thank you for your letter and its enclosure, and I can understand your concern. I do not have any information about the depository institution in question, but I am forwarding this correspondence to Chairman Richard Pratt of the Federal Home Loan Bank Board, which has supervisory responsibility for federally chartered savings and loan associations. Sincerely,  Paul A.  cc:  Mr. Pratt Mr. Bernard  NB/NMS:slw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ."111  F - static central -re-savings bank  William Logan President  April 1, 1982  77, The Honorable Paul Volcker Chairman Board of Governors, Federal Reserve System DIDC Committee i1ember 21st & Constitution Avenue N. W. Wash.inr,ton, D. C. 20551 Dear Sir: If the Savings and Loans are in so much trouble, how can they afford to pay 25%??? We had our best year as a bank in 1981, and we cannot afford it. Don't you think management has something to do with how an institution is operated, and since when does the United States Government bail out bad management? Yours very truly,  illiam Log President wl:fgh enc.  / 1 4 state central savings bank • 801 main street, keokuk Iowa • 319 - 524-1021  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Advertisement Citations:  Number of Pages Removed: 1  American Federal Savings and Loan Association. "New 91-Day Money Market Certificate." 1982.  Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  oLG___otii• ' "6.e:'• ( .•  17 / 3 . ,7 / - 2/45 /41 January 15, 1982  Paul A. Volcker Dick: Enclosed is the outline of a draf t bill that I mentioned to you on the phone earlier today. The section numbers in this outline are for oonvenient reference and do not refer back to the Garn bill or your own proposal, which, of course, we drew upon extensively.  AN OUTLINE OF A PROPOSED BILL CONSISTING OF THE THREE TITLES:  Expanded Powers for Thrift Institutions  I.  Modifications in Banking Laws Federal Preemption of State Due-on-Sale and Usury Laws  TITLE I EXPANDED POWERS FOR FEDERAL THRIFT INSTITUTIONS 1.  Expanded Asset Powers   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A.  Real Property Loans:  Section 1 removes restrictions  in the form of loan-to-value ratios that now apply to loans secured by residential real property that are made by Federal S&Ls and savings banks, although the FHLBB would be authorized to set appropriate ratios in its discretion.  The limitation on nonresidential real estate  lending would be increased to 30 per cent from its present level of 20 per cent of assets. B.  Commercial or Other Loans:  Section 2 permits Federal  S&Ls and savings banks to invest up to 10 per cent of assets in secured and unsecured loans for commercial or agricultural purposes (including small business investment companies) as well as equipment leasing and would apply a limit on such loans to one borrower of $250,000 or 10 per cent of capital, whichever is higher.  In exercising  this lending authority thrifts would be expected to give priority in their lending policies to the credit needs of farmers and local business.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  Currently, Federal S&Ls cannot make commercial loans; Federal savings banks currently can make commercial loans up to 5 per cent of the assets and only within the state in which the institution is located or within 75 miles of its home office. In addition, the proposed bill would remove the present limitation of 20 per cent of assets on investments in commercial paper and corporate debt securities, provided such investments were made in prime, highly liquid instruments, and provided that investments in the paper of any single institution did not exceed 10 per cent of capital, or $250,000, whichever is higher.  The requirement that  Federal S&Ls may invest in mutual funds having portfolios consisting entirely of assets in which S&Ls could invest directly would not be changed. C.  Consumer Loans:  Section 3 permits Federal S&Ls and savings  banks to make consumer loans without limitation.  Currently,  such loans are limited to 20 per cent of assets. D.  State and local Securities:  Section 4 permits Federal  S&Ls and savings banks to invest up to 100 per cent of assets in state and local obligations.  Investments in  the obligations of one issuer would be subject to a percustomer limitation of 10 per cent of capital, or $250,000, whichever is higher.  Currently, such investments are  limited to general obligations and certain housing-related obligations. E.  Time Deposits in S&Ls:  Section 5 permits Federal S&Ls  and savings banks to invest in time and savings deposits  -3of other insured S&Ls and savings banks.  Such deposits  (net of reciprocal balances) would also be treated as liquid assets.  Currently, Federal S&Ls generally can  make deposits only in FDIC-insured commercial banks and only deposits of commercial banks and Federal Home Loan Banks qualify as liquid assets. F.  Additional Investments:  Section 6 permits Federal S&Ls  and savings banks to engage in educational loans without limitation.  Currently, such loans are limited to 5 per  cent of assets. G.  Investments - Overdrafts:  Section 7 authorizes Federal  S&Ls and savings banks to make loans in the form of overdrafts in transaction accounts.  Currently, only overdrafts  in NOW accounts are permitted. 2.  Acceptance of Demand Deposits   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Section 8 permits Federal thrifts to accept demand deposits from individuals without limitation and from businesses in connection with a commercial, corporate or business loan relationship. This authority is identical to the authority that Federal savings banks presently possess.  This section applies the  prohibition against the payment of interest on demand deposits to thrift institutions and authorizes the Federal Home Loan Bank Board to adopt rules concerning when a deposit is to be regarded as related to a business loan.  In addition, Federal  thrifts would be authorized to establish demand deposit accounts with commercial entities for the exclusive purpose of effectuating payments to these entities by their nonbusiness customers.  -4-  3.  S&L Holding Company Activities Section 9 provides that the activities of all S&L holding companies (both unitary and multiple) would be limited to those permitted to multiple S&L holding companies.  Existing  S&L holding companies would be grandfathered and could continue to engage in the activities they engaged in on the date of enactment.  Currently, unitary S&L holding companies are not  subject to limitations on permissible activities. 4.  Application of Bank Holding Company Act Section 10 exempts S&Ls from the Bank Holding Company Act definition of "bank" so long as their commercial lending activities do not exceed 10 per cent of assets, and demand deposit-taking powers are within the scope provided for in section 8.  5.  Branching Section 11 prohibits interstate branching by Federal S&Ls and savings banks exercising new commercial lending powers contained in section 2.  Existing interstate branches would  be permanently grandfathered.  The Federal Home Loan Bank  Board would be permitted to grant exceptions to this prohibition on a case-by-case basis where such action facilitates the merger of a distressed thrift with a thrift in another state. 6.  Miscellaneous Provisions   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A.  Chartering and Purpose:  Section 12 provides that Federal  S&Ls and savings banks may be chartered by the FHLBB for the purpose of deposit or investment of funds and for the purpose of primarily extending credit for individuals, homes, farmers and small business.  Currently, the statute focuses  upon chartering thrifts for the provision of home financing.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -5-  B.  Notice on Savings Deposits and Capital Stock:  Section 13  lowers the minimum notice period for savings accounts to 14 days from the present 30, and would explicitly allow Federal S&Ls and savings banks to issue stock. C.  Conversions to Federal Charters:  Section 14 permits  Federal conversion of thrifts into mutual or stock Federal S&Ls or savings banks and facilitates conversion of such stock institutions into national banks if such conversion is desired by the institution involved. D.  Conversion from State Mutual to State Stock:  Section 15  eliminates the prohibition against creation of Federal stock institutions in states where stock associations do not exist.  The FSLIC would retain jurisdiction over  conversion from mutual to stock form. E.  Incidental Activities:  Section  17 permits Federal  S&Ls and savings banks to engage in activities incidental to their deposit-taking and lending authority. no such explicit authority exists.  Currently,  -6-  TITLE II MODIFICATIONS IN BANKING LAWS A.  Amendment of Section 23A of the Federal Reserve Act Section 1 amends Section 23A of the Federal Reserve Act to  simplify and reduce regulatory burdens.  The revisions will increase  the overall effectiveness of Section 23A by closing some potentially dangerous loopholes, while freeing banks within a bank holding company system from unnecessary restrictions.  The bill would apply the same  restrictions to transactions between thrift institutions and their affiliates. B.  Bankers' Acceptances Section 2 amends the Federal Reserve Act to increase the  aggregate limit on the amount of eligible bankers' acceptances that may be issued by a member bank from 50 per cent to 150 per cent of capital and surplus, and to 200 per cent with the permission of the Board.  To assure that all institutions are subject to the same rules,  the same limitations would apply to nonmember banks and the U.S. branches and agencies of foreign banks. C.  FIRA Amendments Section 3 amends the Financial Institutions Regulatory  and Interest Rate Control Act of 1978 ("FIRA") aimed at lessening unnecessary restrictions and burdensome reporting requirements.  These amendments  clarify existing laws and reduce some of the restrictions and reporting burdens with respect to loans to executive officers, directors and principal shareholders of insured banks.  The amendment represents a combination  of the legislative proposals submitted to the Congress by the Federal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -7-  Financial Institutions Examination Council during 1980 and 1981.  In  the Council's judgment, they represent an important and necessary step in clarifying existing law and lessening the regulatory burden imposed on insured banks. D.  Municipal Revenue Bonds Section 4 permits banks to underwrite and deal in municipal  revenue bonds.  This section contains provisions to protect against  conflicts of interest or unsound banking practices and applies substantially all of these provisions not only to the new authority on municipal revenue bonds but also to existing authority to deal in municipal general obligation bonds.  Bank underwriting of municipal revenue bonds would enhance competition  in the revenue bond market, and should reduce costs to tax-exempt borrowers. E.  Investment Company Activities Section 5 permits banks to sponsor and sell stock, bond and  diversified mutual funds through a commingled agency account.  No sales  commissions may be charged and restrictions could be established by the Federal Reserve Board to avoid conflicts of interest and self-dealing. Federal S&Ls and savings banks are given similar authority.  This section  would not permit banks or thrifts to sponsor, operate or sell money market mutual funds. F.  Redefinition of Bank Under the Bank Holding Company Act Section 6 amends section 2(c) of the Bank Holding Company  Act to redefine the term "bank" for the purposes of that Act to include (1) an insured bank as defined in section 3 of the Federal Deposit Insurance Act, or (2) an institution eligible to make application to become an insured bank under section 5 of the Federal Deposit Insurance Act which   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -8-  makes commercial loans or takes demand deposits, or (3) an institution determined by the Federal Reserve Board to be engaged in commercial banking by making commercial loans and taking demand deposits.  An institution  described in this section would not be regarded as a bank if the Board determines that the institution does not function as a commercial bank. In addition, S&Ls shall not be considered to be banks if they do not have authority to make commercial loans not secured by real estate in excess of 10 per cent of assets and do not have authority to accept demand deposits from business customers except in connection with a commercial loan relationship.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -9-  D.  TITLE III FEDERAL PREEMPTION OF STATE DUE-ON-SALE AND USURY LAWS A.  Preemption of Due-on-Sale Prohibitions Section 1 preempts state law by permitting depository institutions  to enforce due-on-sale provisions contained in mortgage instruments, although the states could override this preemption by enacting new legislation within three years.  The bill exempts from preemption, assumptions of  mortgages after the rendering of Court decisions or the effective date of state laws prohibiting enforcement of due-on-sale clauses, by permitting enforcement of due-on-sale provisions only for sales occurring after the date of enactment. B.  Usury Provisions Section 2 broadens the coverage of preemptive actions taken  with respect to state usury laws in the Depository Institutions Deregulation and Monetary Control Act of 1980.  This section removes state usury  ceilings on business, agricultural, and consumer loans, while permitting states to establish their own ceilings by enacting overriding legislation within three years.  The bill provides that any new ceilings adopted  could not be tied to the Federal Reserve discount rate since this rate is an instrument of monetary policy and not appropriately a benchmark for usury rates in the market.  In addition, the bill recognizes the  binding character of state override actions taken since adoption of the DIDMCA, but before the effective date of this section. The DIDMCA presently sets a ceiling of 5 per cent above the Federal Reserve discount rate on 90-day commercial paper and affects only loans above $1,000.  Business and agricultural loans below that  amount are subject to state usury provisions.  Consumer loans are subject  to a ceiling of 1 per cent over the discount rate.  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .u&_LciLczJLJ  Seresiber 28, 3.981  Mott Mr. Miehaird Chairmen federal inme Loon Monk Board 1700 G Street, MA. 205S2 Washington, D.C. Door Dicks Thanks for your letter of Oleptemhes 16 oesseaday the ability of investment nownies owed exclusively by saving, MS lesia ossociatiems to well funds to depository institutions on a reserve free beeio. 1. Board has reoeived two requests ea behalf Of snob °appeal** to apply the interbank exemption of Megulatiors 0 and Qto sea alempeaSee so that they can sell federal funds an an overnight basis aMeept from reserve requirements. The rtaff is currently analysing these regeesta and it Is anticipated that the 'Board will consider the issue shortly. I appreciate having your aomMO148 and can asaure you that they will he gives every consideration. Sincerely,  PAUL  OTSDPSP:Oho 9/28/81 Chmn. Log Ho. 3361:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Federal Home Loan Bank Board  I  .. .• , 1700 G Street N.W. hprHgton, D.C. 20552 / r) r, i 7. s vFejd e deer:It-I-I , Hoomrtiee iZi.[Z .n geSgyestcern orporation eral Sayings and Loan Insurance Corporation VP'  RICHARD T. PRATT CHAIRMAN  SEP 16  3g1  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Paul: As you know, the Depository Institutions Deregulation and Monetary Control Act of 1980 expanded the investment powers of savings and loan associations to allow them to invest in, redeem, or hold shares or certificates of certain open-end management investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Deregulation Act and the implementing regulation (12 CFR § 523.10 (g)(7) and (h)(6)) allow associations to invest in such companies only if the company's investments are limited to those that qualify as eligible liquid assets for members of the Federal Home Loan Bank System and if the the company's investment policy is changeable only by a vote of the Shareholders. Since the passage of the Act, at least three such open-end management investment companies are in various stages of development. The Federal Home Loan Bank Board has been informed of a potential problem concerning the interpretation of Regulation D and the operation of such investment companies The potential problem brought to my attention has been the possibility that federal funds sold by such investment companies, the entire beneficial interest of whidh is owned by depository institutions, may not qualify for the interbank exemption from reserve requirements. Without an interpretation of Regulation D stating that such transactions are exempt from reserve requirements, banks might be unwilling to purchase federal funds fram such investment companies. There are at least three reasons why such investment companies should be allowed to invest in federal funds. The first, and strongest, reason is that the investment companies are merely conduits. All investors in these investment companies can sell federal funds so the investment company acting as their agent ought to be able to do so. Second, federal funds offer more flexibility to the beneficial owners of the investment companies because federal funds are not subject to the fourteen day minimum maturity on nonpersonal time deposits. Third, although overnight repurchase agreements would offer the beneficial owners of the investment companies the same maturity flexibility as federal funds, over the recent past federal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page Two  funds have been at a considerable yield advantage over overnight repurchase agreements. For example, the yield spread was 280 basis points on July 23 and 184 basis points on July 30. Since the beneficial owners of the investment company can directly sell federal funds in order to take advantage of such yields, the investment campany acting as a conduit should be Able to do likewise. The Federal Home Loan Bank Board's regulations permit member associations to sell federal funds and to invest in investment companies of the type I have described. I do feel that associations should be able to benefit fully from the liquidity, flexibility, and yield advantages such investment companies offer. I further believe that this can happen only if the Board of Governors confinub that federal funds purchased from such investment companies, the entire beneficial interest of Which is owned by depository institutions, are subject to the interbank exemption of Regulation D.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Richard T. Pratt Chairman  BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM  Date: 10/20/81  To:  Chairman Volcker  From: STEPHEN H. AXILROD  You may be interested in the attached communication to Home Loan Bank Presidents with regard to access to the discount window for thrifts with severe supervisory  t problems.  Our effort to convince the staff  here that they should not put the blame on the Federal Reserve seems to have been successful.  Attachment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552  Federal Home Loan Bank Board  Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Savings and Loan Insurance Corporation  October 19, 1981  Mr. Stephen H. Axilrod Staff Director, Monetary & Financial Policy Federal Reserve Board Washington, D. C. 20551 Dear Mr. Axilrod:  Enclosed for your information is a corrected letter that has been sent to the Presidents of the Federal Home Loan Banks regarding Federal Reserve extended credit. I apologize for the sentence in the earlier letter that seemed to imply that the Board of Governors had formally and unilaterally taken a position on the definition of severe supervisory problems. That was not the message I meant to convey to our Bank Presidents. I have also enclosed a copy of a letter to the Federal Home Loan Bank Presidents regarding release of FHLBB examination reports to Federal Reserve Banks. Sincerely,  James R. Silkensen, Acting Director Office of District Banks Enclosures cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Peter M. Keir, Assistant to the Board Federal Reserve Board John Spitzer, Senior Economist Federal Reserve Board D. James Croft  AMR •  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System  Federal Home Loan Bank Board  Federal Home Loan Mortgage Corporation Federal Savings and Loan Insurance Corporation  October 19, 1981  To the Federal Home Loan Bank Presidents  e extended Chairman Pratt and Chairman Volcker have agreed that Federal Reserv isory superv credit will not be made available to associations on the verge of r Volcke an or assisted mergers. As noted in Chairman Pratt's letter to Chairm the of August 19, 1981, the Federal Home Loan Banks are expected to meet agencies needs of the institutions with severe supervisory problems. The two isory superv have had discussions on the definition of "institutions with severe d define problems" and in this context, a severe supervisory problem is being as an institution with twelve months or less remaining net worth. of In conveying information to your members regarding the availability to make Federal Reserve credit, it should be noted that the decision not problems was isory superv severe with utions instit extended credit available to e credit jointly agreed to by the two agencies. In cases where Federal Reserv to lay not best their do should rs office g lendin will not be extended, FHLBank Reserve Board the blame on the Federal Reserve System. Likewise, the Federal best not their do to rs office window nt will ask Federal Reserve Bank discou . to lay the blame on the FHLBank System Sincerely,  James R. Silkensen Acting Director Office of District Banks cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  John S. Buchanan D. James Croft H. Brent Beesley FHLBank Lending Officers  f/4. •;: 0 . I  1700 G Street,,NW. SfiVA:thin,titon, D.C. 20552 II  Federal Home Loan Bank Board  RICHARD T. PRATT  1711  vF-ee.ddeetraaifii -H oom r4:e ' ( B 1114 System Loan MAVgage Corporation (Ti3de,Fal'Sayings and Loan Insurance Corporation  SP 1 6 lbol  CHAIRMAN  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Paul: As you know, the Depository Institutions Deregulation and Monetary Control Act of 1980 expanded the investment powers of savings and loan associations to allow them to invest in, redeem, or hold Shares or certificates of certain open-end management investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Deregulation Act and the implementing regulation (12 CFR § 523.10 (g)(7) and (h)(6)) allow associations to invest in such companies only if the company's investments are limited to those that qualify as eligible liquid assets for members of the Federal Home Loan Bank System and if the the company's investment policy is changeable only by a vote of the shareholders. Since the passage of the Act, at least three such open-end management investment companies are in various stages of development. The Federal Home Loan Bank Board has been informed of a potential problem concerning the interpretation of Regulation D and the operation of such investment companies. The potential problem brought to my attention has been the possibility that federal funds sold by such investment companies, the entire beneficial interest of which is awned by depository institutions, may not qualify for the interbank exemption fram reserve requirements. Without an interpretation of Regulation D stating that such transactions are exempt from reserve requirements, hanks might be unwilling to purchase federal funds from such investment companies. There are at least three reasons why such investment companies Should be allowed to invest in federal funds. The first, and strongest, reason is that the investment companies are merely conduits. All investors in these investment companies can sell federal funds so the investment company acting as their agent ought to be able to do so. Second, federal funds offer more flexibility to the beneficial owners of the investment companies because federal funds are not subject to the fourteen day minimum maturity on nonpersonal time deposits. Third, although overnight repurchase agreements would offer the beneficial owners of the investment companies the same maturity flexibility as federal funds, over the recent past federal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page 'I\° • funds have been at a considerable yield advantage over overnight repurchase agreements. For example, the yield spread was 280 basis points on July 23 and 184 basis points on July 30. Since the beneficial owners of the investment company can directly sell federal funds in order to take advantage of such yields, the investment company acting as a conduit should be able to do likewise. The Federal Home Loan Bank Board's regulations permit member associations to sell federal funds and to invest in investment companies of the type I have described. I do feel that associations should be able to benefit fully from the liquidity, flexibility, and yield advantages such investment companies offer. I further believe that this can happen only if the Board of Governors confilmb that federal funds purchased from such investment companies, the entire beneficial interest of Whidh is owned by depository institutions, are subject to the interbank exemption of Regulation D.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Richard T. Pratt Chairman  •  August 20, 1981  The ronorable Richard T. Pratt Chairman Federal Tone Loan Bank Board 1700 C Street, Northwest Washington, D. C. 20552 Dear Dick: Thanks for your letter of August 19. I understand the position of the Federal Bone Loan Bank Board as expressed there, as do other members of the Poard. We are delighted that arrangements with the Federal Home Loan Bank System to facilitate a camplementary lending program by the Federal Reserve to thrift institutions under sustained liquidity pressure have proceeded smoothly. We are, and have 1%een, prepared to provide extended credit to depository institutions should qualified institutions Le unable to find reasonable alternative sources of credit. As you know, access to liquidity has not generally been a problem in the past. However, looking to the future, we fully realize thrifts nay increasingly seek Federal Peserve credit. In that connection, we greatly appreciate your cooperation, and that of your staff, in developing practical approaches to our provision of extended credit to memlers of the Federal Home Loan Bank System. Sincerely,  SHA:ccm'02431   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street N W  IJJig S61 Federal Home Loan Bank Board  Washington. D C 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corpo,ation  •  August 19, 1981  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Paul: Our recent discussions about the Federal Reserve's program for extended credit to depository institutions facing sustained liquidity pressures have been helpful and productive. Your staff has been very cooperative in working out practical aspects associated with lending to the institutions supervised by the Federal Home Loan Bank Board. As I have previously indicated, the Federal Home Loan Bank Board believes it is now desirable and prudent for the Federal Home Loan Bank System to encourage the Federal Reserve to supplement its own efforts in funding members' liquidity needs. We are prepared to cooperate with you in informing thrifts of the conditions under which they can obtain extended credit from their local Federal Reserve Banks. It is my understanding that the Federal Reserve adjustment credit program is also available to thrifts. The Federal Home Loan Banks intend to meet the needs of institutions with severe supervisory problems, requiring that the lending be very closely coordinated with an orderly workout of the situation. In addition, the Federal Home Loan Banks may continue in selected instances to lend to their members who are engaged in expansion lending. We are also prepared to maintain the present volume of our lending to institutions borrowing from the Federal Reserve. In the case of institutions that are experiencing liquidity pressures and are eligible for Federal Reserve lending, we also anticipate that some part of their increased credit needs will be supplied by the Federal Home Loan Banks. Sincerely,  Richard T. Pratt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Paul 21. Volcker imeunirriamacr=111=111IF77171Efir  August 7, 1981  • IWINIM41111MOP...P4M 'NM  Dick: I am enclosing the drafts I mentioned over the telephone. You will see that in the part of the first letter I had not gotten to over the phone, there is indeed some allusion to "sharing," perhaps so vague that it does not connotate anything in particular. The isolated sentence on the third page is simply the kind of "diplomatic" response that I think would serve our needs, and it seems to me your institution as well, in triggering our entry into the lending business for a FHLB member.  L.  Alk `I  , -  .? tau,.  S . 1.• ofts  .  ==1=11  tfir, 4  .04 .1  •  .  40%•  •  4 11P . •4 t;.7.•  I expect to be in Colorado next week but will be in touch. I would hope that things could be settled in the next few days and a "flexible" sharing understanding seems to me by all means the simplest way of handling procedures. Let me know of any comments you have on the drafts.  — 14:4i,;44-.-91'7: •-14  ;Az*'  rill.1111111  •  •  . PACTit' • . .• •  . i t .e.. 5 ,..5kr  •  !,• r  - - • :1.42%,",  -  ,`-i.74,41;040.47. :-1Y:•;;MX...?.1*,.. ••  gr '%oar.•  Enclosure ...  '  .• .„, . r  •  .•  ' • .  .  ,  • •k „  -ct.•  .  .)•  „.  •  •  . ••  • r.A1*' 'V' '  ,  .  ,  _  " 5._-.` , •  .....  ,,,.....  .0 .,  -  .....  •  -.'  A....4' 1... -",  .  .•  .0  '' ''S ' ' .11. .. . 0/ .....-. .....,....  •• '''' r  . 'sq.... •  's......* • ....................' ....... 0 ‘5 . 55  Y..,  5  . 5.  .111......' ...'' ...S. 1 •. i'S •. .., .• •.' ... . •.. WI ...... 5 ...... ‘... .....,  5......  • .  ..k.......1.1. .' -.1.. ,..........,..•......„ /rt....4_,••..4...,...' ......7/ ...:4-, ...!....,......  4.  • ...... •  •  44._  •-• •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  -  • •••• •  •  •  • , .  4dt''W.': '-•"fn.  .!•,-.•  `'ers÷s.0,0,,t. , • •_.• •.• • ,  •  _  .  21A,„ , „ :F ...4...1 .  . 7:74.:,_.., 4 .1..r. 7"  DRAFT  Dear Paul: I have found our recent discussions about the Federal  Reserve's program for extended credit to depository institutions facing sustained liquidity pressures to be helpful.  Practical  coordination of your and our approaches to lending, and how they may most usefully complement each other under current circumstances, is well advanced, and I believe we are prepared should the need arise. In that connection, as I have indicated earlier, the Federal Home Loan Bank Board believes that it would be desirable and prudent for the Home Loan Bank System to restrain to some degree the total volume of advances to its member institutions, in the light of potential overall needs and our borrowing program.  We reached that judgment in the  knowledge that, if loans are not freely available in all circumstances from the FHLB's, institutions qualifying for credit under Federal Reserve guidelines would be eligible to borrow from the Federal Reserve. The Federal Home Loan Banks intend to continue to meet themselves the needs of institutions with severe supervisory problems, requiring that the lending be very closely coordinated with an orderly work-out of the situation.  In addition, the  Federal Home Loan Banks may continue in selected instances to lend to our members who seek and are eligible for credit to finance expansion in their lending.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  WE also are prepared  to maintain the present volume of our lending to institutions borrowing from the Federal Reserve.  In the case of institutions  experiencing liquidity pressures and eligible for Federal Reserve lending, we also anticipate that some share of their needs would continue to be satisfied by the Home Loan Banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  In current circumstances in which our loans have been rapi.ily increasing, and considering our obligations to our member institutions as a whole, we are conserving availability of credit to institutions in the position of   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DR:\FT  Dear Dick: Thanks for your letter of  I under-  stand the position of the Home Loan Bank Board as expressed there, as do other members of the Board.  We are delighted  that arrangements with the Home Loan Bank System to facilitate a complementary lending program by the Federal Reserve to thrift institutions under sustained liquidity pressure have proceeded smoothly. We are, and have been, prepared to provide extended credit to depository institutions should qualified institutions be unable to find reasonable alternative sources of credit. As you know, access to liquidity has not generally been a problem in the past.  However, looking to the future, we  fully realize we may be called upon for assistance.  In that  connection, we greatly appreciate your cooperation, and that of your staff, in developing practical approaches to our provision of extended credit to members of the Federal Home Loan Bank System, as and should the need arise.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  •  1700 G Street N W Washington, D C 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporavon  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance Corporation T PRATT CHAIRMAN  July 2, ')81  The Honorable Paul A. Volcker Chairman Board of Governors of the Federa2 Reserve System Washington, D. C. 20551 Dear Paul: The Federal Home Loan Bank Board wishes to express our position concerning Federal Reserve lending to savings and loan associations and Federal Home Loan Banks at this time. The Boarri encourages the Federal Reserve Banks to institute leniingIrograms to S&L associations, both for adjustment credit and longer term credit, consistent with the provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980. The Bank Board will be happy to cooperate and provide input concerning appropriate programs. To the extent that the Federal heserve System may have felt that institutions should first exhaust credit availability from the Federal Home Loan Bank System, we believe that such a requirement is not consistent with the law and would be inappropriate at this time. We would like to further recommend that the Federal Reserve Board and the Federal Home Loan Bank Board work together to reestablish provisions of Federal Reserve Bank credit to the Federal Home Loan Bank System, should such credit extension become necessary. We loo forward to cooperating with you in the development of such a program. We have r!:ceived excellent cooperation in working toward the implementation of Federal Reserve credit to thrift institutions, and we an, appreciative of the efforts of you and your staff in this regard. Sincerely, vjJ_IH1  30 331.I.I0 03,11333a  ZZ :S  d  e- 7nr  1861  Richard T. Pratt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7iIt _IC ..?At-') Oil  V0.9  c. t  NATION- AL CASSOIbliPN LT MUTUAL SAVINGS BANKS V'  rt-f-  200 PARK AVENUE  . t N4W'YORK, N.Y. 10166 1A-.7.:_\'.!i:c: TELEPHONE 212-973-5432  SAUL_ B KLAMAN retsiolftr Cat le Add,ess. Sav,nys, New York  June 29, 1981  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Paul: By this time, I am sure you have received the letter of June 16 from Bob Henderson and Elliott Carr of the Savings Banks Association of Massachusetts concerning the continuing discrimination against members of the Federal Home Loan Bank System with respect to access to the Federal Reserve discount window. This letter is to assure you that the problem is not limited to Massachus etts savings banks. Savings banks throughout the industry that are members of the Federal Home Loan Bank System have expressed similar frustrations. I believe the time for resolution is long overdue. Whatever arrangements were made between the Federal Reserve and the Bank Board under its previous chairman need to be reviewed. I am hopeful that Dick Pratt, to whom I am also writing on this matter, will understand that informal arrangements between federal regulators cannot preempt the provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980. Apart from all other considerations, this matter is of considerable importance to our industry, given the growing liquidity needs and the continuing disparity in interest rates available on borrowings from the Fed and from the Home Loan Bank System. On the general matter of savings bank access to the window, I am pleased that a few of our banks have gained access to it. But this has been only on a very short term basis. We still feel that the Fed's regulatio ns do not recognize the "special needs of savings (banks)... consistent with their long term asset portfolios ...." I know that you are aware of the acute problems in our industry, Paul, and are ready to be as helpful as possible. It would be especially helpful if our industry's access to the discount window were clarified once and for all both with respect to those who incidenta lly are members of the Federal Home Loan Bank System and with respect to the availability of longer term credit.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul A. Volcker Page Two June 29,  I hope that you will be in a position to resolve these critical issues at an early date. If it would be useful, we will be available at any time to discuss the matter with you and your colleagues. Sincerely,  Saul B. Klaman President P.S. - Incidentally, I commend you for your statement suggesting the need for reserve requirements against money market funds. I know you have agonized about this for some time, and, given the sentiment in Washing ton against doing anything about money market funds, it took a lot of courage on your part to do this.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (1)  iLlAPO CI  1961 JUN 18 n!,II: 45 Pr  )  Savings Banks Association of Massachusetts  Su L.,-..?ngress Street Boston. Massacriusetts 02109 (617) 742-7970  it 102 ' June 16, 1981  Chairman Paul A. Volcker Board of Governors of the Federal Reserve System Washington, D.C. 20551 Chairman Richard T. Pratt Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D.C. 20552 Frank E. Morris, President Federal Reserve Bank of Boston Boston, Massachusetts 02106  Ii  Raymond H. Elliott, President Federal Home Loan Bank of Boston P.O. Box 2196 Boston, Massachusetts 02106 Gentlemen: This letter is addressed to all four of you because previous contacts by savings bankers, in Massachusetts and elsewhere, have resulted in somewhat conflicting information in regard to whether federal policy concerning savings bank access to the Federal Reserve window is being made by the Federal Reserve system or the Federal Home Loan Bank system and at what level. On behalf of the Massachusetts savings bank industry, we find it astounding that the federal government at this time, through any agency, deems it desirable economic policy to provide loans to commercial banks enjoying record profits at rates lower than those available to thrift institutions experiencing substantial difficulties. Yet this is the impact that results from commercial bank access to the Federal Reserve window while thrift institutions' needs must be met through the Federal Home Loan Bank system.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  This discriminatory treatment by the government is partic ularly astounding in that since 1980, it appears to contradict thu will of Congress. The language contained in the Deregu lation and Monetary Control Act of that year, that "the Board and the Federal Reserve Bank shall take into consideration the specia l needs of savings and other depository institutions for access to discount and borrowing facilities consistent with their longterm asset portfolios and the sensitivity of such institutions to trends in the national money markets," appears to express clear Congressional intent that Federal Reserve borrowing be available to thrifts on terms at least equal to commercial banks. However, the "special needs" of savings banks in an econom ic environment such as that currently prevailing seem to have been totally ignored by the Federal Reserve system. None of the several Massachusetts savings banks which have approached the Federal Reserve Bank of Boston have yet to receive a totall y clear response concerning under what circumstances and what terms Federal Reserve credit will be available. Of particular concern to Massachusetts savings banks is the seeming discriminatory treatment developing concerning savings banks which are members of the Federal Home Loan Bank of Boston compared to those which are not. The best inform ation which has reached this office indicates that the Federal Reserv e system has acceded to requests of the Federal Home Loan Bank system, originated by Federal Home Loan Bank presidents in other parts of the country, that FHLB savings bank members not be granted access to the Federal Reserve window even on the limite d terms available to other savings banks. Instead, their credit needs must be fulfilled through the Federal Home Loan Bank system, at far inferior terms. This appears to be an exerci se in bureaucratic fiefdom that has the net result of making membership in the Federal Home Loan Bank of Boston, which curren tly pays no dividends on stock held by thrift members, into an additional tax -- voluntary for savings banks and involuntary for savings and loans. We would welcome the opportunity to discuss this matter with any of you, and hope we will receive responses from all of you which are internally consistent. We have no desire to seek confrontation. All we seek is a path through a bureau cratic maze while it would still do some good instead of becoming real grist for a post mortem autopsy being conducted by Congre ssional committees and others concerning the failure of thrift institutions. Sincerely, „1  A /IX1  Elliott G. Carr President EGC:als   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /// 1/ Robert M. Henderson Chairman  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  Office Correspondence To  Chairman Volcker  From  David L. Shannon  Dee  July 27, 1981  Subject:  -914  Per our conversation this afternoon, the following data regarding their Office of Finance was supplied to us by the Federal Home Loan Bank Board in June of this year: The Office has 45 employees, 7 of whom are officers.  The range  of pay for the Director is $90-$118,000 per year, the Deputy Director's salary is 75 percent of the Director's, and the salary range for 5 Division Directors is $38-$70,000 per year.  All other employees are under a Hay  Compensation System with no federal pay cap limitation. The Office of Finance's Thrift Plan permits employees to contribute up to a maximum of 12 percent of salary with the first 6 percent being matched by the Office of Finance at the following rates: 1 to 3 years  50%  4 to 5 years  _  Over 5 years  _  100%  75%  The Office of Finance's pay and benefits systems are based on comparable financial organizations such as Citicorp, Student Loan Marketing Association, and Federal National Mortgage Association.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD CF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  Office Correspondence  Date  July 9, 1981  To  Mr• Richard Syron  Subject: Legislative Changes Proposed  From  Frederick Furlong  By The Federal Hone Loan Bark Board.  Attached are some proposed legislative dhanges that are currently being considered by the Federal Hone Loan Bank Board (FHLEB). to ne byMalcolm Draper who is the assistant to Chairman Pratt.  These were sent Althoudh the  Bank Board has not made any final de isions, Mr. Draper indicated that the FHLEB would like to have these proposed changes brought to the attention of ^ Chairman Volcker as soon as possible.  Mr. Draper emphasized that the attached  documents are confidential and asked that they not be discussed or distributed outside the Board. While the changes are quite numerous and cover a wide spectrum of issues, in general they appear to be disigned to help the Bank Board and the Federal Savings. and Loan Insurance Corporation (FSLIC) handle the current problene in the thrift industry. Some of the major dhanges involve provisions to:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (1)  Facilitate conversions of thrifts from mutual to stock associations.  (2)  Expand the investment powers of thrifts.  (3)  Alter the liquidity requirement for thrifts.  (4) Preempt  state laws that inhibit the enforcement of due on  sale clauses. (5)  Allow the FHCBB to arrange interstate mergers of thrifts.  (6)  Allow the Fsac to provide assistance to thrifts when severe financial conditions exist which threaten the stability of a significant nurrber of institutions or institutions with signicant financial resourses, not just to prevent the default of an individual institution or to restore a dafauted institution to normal operation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  t( (7)  Allow the FSLIC Tore flexibility in making dividend payments to meMbers of the FHLB System.  (8)  Allow the FSLIC to borrow from the FHLBs._  (9)  Increase the insurance coverage to $5000,000 on deposits related to ;:msion or profit sharing plans, retirement accounts, trustccd en-ployee benefit plans and state deferred compensation plans.  (10)  Allow for separate insurance on accounts assumed in a merger or consolidation for six months or, in the case of time accounts, the earliest maturity data following the six month period.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THE THRIFT INSTITUTIONS RESTRUCTURING ACT OF 1981  H.R.  97TH CONGRESS 1st Session  Cs. IN THE HOUSE OF REPRESENTATIVES [IN THE UNITED STATES SENATE]  A BILL To enhance the competitiveness of thrift institutions, to protect depositors and creditors of such institutions, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress Assembled, TITLE I:  FORM OF CHARTER; DEMAND ACCOUNTS  SECTION 101. This Act may be cited as "The Thrift Institutions Restructuring Act of 1981." SECTION 102. Section 5(a) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(a)) is amended to read as follows: "(a) In order to provide thrift institutions for the deposit or investment of funds and for the extension of credit for homes and other goods and services, the Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as "Federal Savings and Loan Associations", or "Federal Savings Banks", and to issue charters therefor, giving primary consideration to the best practices of thrift institutions in the United States." SECTION 103. Section 5(b)(1) and (2) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(b)(1), (2)) are amended to read as follows: "(b)(1) An association may raise capital in the form of such savings deposits, shares, or other accounts, for fixed, minimum, or indefinite periods of time (all of which are referred to in this section as savings accounts), or in the form of such demand accounts, as are authorized by its charter or by regulations of the Board, and may issue such passbooks, time certificates of deposit, or other evidence of accounts as are so authorized. All savings accounts and demand accounts shall have the same priority upon liquidation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F - 2 Holders of accounts and obligors of an association shall, to such extent as may be provided by its charter or by regulations of the Board, be members of the association, and shall have such voting rights and such other rights as are thereby provided. Except as may be otherwise authorized by the association's charter or regulation of the Board in the case of savings accounts for fixed or minimum terms of not less than fourteen days, the payment of any savings account shall be subject to the right of the association to require such advance notice, not less than fourteen days, as shall be provided for by the charter of the association or the regulations of the Board. The payment of withdrawals from accounts in the event an association does not pay all withdrawals in full (subject to the right of the association, where applicable, to require notice) shall be subject to such rules and procedures as may be prescribed by the association's charter or by regulation of the Board, but any association which, except as authorized in writing by the Board, fails to make full payment of any withdrawal when due shall be deemed to be in an unsafe or unsound condition to transact business within the meaning of subsection (d) of this section. Accounts may be subject to check or to withdrawal or transfer on negotiable or transferable or other order or authorization to the association, as the Board may by regulation provide. Associations may establish remote service units for the purpose of crediting savings or demand accounts, debiting such accounts, crediting payments on loans, and the disposition of related financial transactions, as provided in regulations prescribed by the Board. (2) To such extent as the Board may authorize by regulation or advice in writing, an association may borrow, may give security, may be surety as defined by the Board and may issue such notes, bonds, debentures, or other obligations, or other securities, including capital stock, as the Board may so authorize." SECTION 104. Section 5(1) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(i)) is amended to read as follows: "(i)(1) Any institution that is, or is eligible to become, a member of a Federal Home Loan Bank may convert itself into a Federal Savings and Loan Association or Federal Savings Bank under this Act (and in so doing may change directly from the mutual form to the stock form, or the reverse), but such conversion shall be subject to such rules and regulations as the Board shall prescribe, and thereafter the converted association shall be entitled to all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations incorporated pursuant to this Act.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 3 (2) Subject to the rules and regulations of the Board, any Federal association may convert itself from the mutual form to the stock form of organization, or from the stock form to the mutual form, and any Federal association may change its designation from a Federal Savings and Loan Association to a Federal Savings Bank, or the reverse. (3) Any Federal association may convert itself into a savings and loan or savings bank type of institution organized pursuant to the laws of the State, District, Commonwealth, or Territory (hereinafter referred to in this section as the State) in which the principal office of such Federal association is located: Provided, (i) That the State permits the conversion of any savings and loan or savings bank type of institution of such State into a Federal association; (ii) that such conversion of a Federal association into such a State institution is determined upon the vote in favor of such conversion cast in person or by proxy at a special meeting of members or stockholders called to consider such action, specified by the law of the State in Which the home office of the Federal association is located, as required by such law for a State-chartered institution to convert itself into a Federal association, but in no event upon a vote of less than 51 per centum of all the votes cast at such meeting, and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association; (iii) that notice of the meeting to vote on conversion shall be given as herein provided and no other notice thereof shall be necessary; the notice shall expressly state that such meeting is called to vote thereon, as well as the time and place thereof, and such notice shall be mailed, postage prepaid, at least thirty and not more than sixty days prior to the date of the meeting, to each member or stockholder of record of the Federal association at his last address as shown on the books of the Federal association and to the General Counsel of the Federal Home Loan Bank Board, Washington, District of Columbia; (iv) that, in the event of dissolution of a mutual association after conversion, the members or shareholders of the association will share on a mutual basis in the asstets of the association in exact proportion to their relative share or account credits; (v) that, in the event of dissolution of a stock association after conversion, the stockholders will share on an equitable basis in the assets of the association; and (vi) that such conversion shall be effective upon the date that all the provisions of this Act shall have been fully complied with and upon the issuance of a new charter by the State wherein the association is located; it being provided that its act of converting into a Statechartered institution shall constitute an agreement to be bound by all the requirements that the Federal Savings and Loan Insurance Corporation may legally impose under   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 4 section 403 of Title IV of the National Housing Act, as now or hereafter amended, and the association shall upon conversion and thereafter be authorized to issue securities in any form currently approved at the time of issue by the Federal Savings and Loan Insurance Corporation for issuance by similar insured institutions in such State: Provided, That if the insurance of accounts is terminated in connection with such conversion, the notice and other action shall be taken as provided by law and regulations for the termination of insurance of accounts. (4) Any aggrieved person may obtain review of a final action of the Board or the Federal Savings and Loan Insurance Corporation which approves, with or without conditions, or disapproves a plan of conversion from the mutual to the stock form, only by complying with the provisions of subsection (k) of section 408 of the National Housing Act within the time limit and in the manner therein prescribed, which provisions shall apply in all respects as if such final action were an order the review of which is therein provided for, except that such time limit shall commence upon publication of notice of such final action in the Federal Register or upon the giving of such general notice of final action as is required by or approved under regulations of the Corporation, whichever is later. (5) To the extent authorized by the Board, any Federal savings bank chartered as such prior to the enactment of this paragraph may continue to make any investment or engage in any activity not otherwise authorized under this subsection, to the degree it was permitted to do so as a Federal savings bank prior to such enactment. The authority conferred by this paragraph may be utilized by any Federal association that acquires, by merger or consolidation, a Federal savings bank enjoying grandfathered rights hereunder." SECTION 105. Section 402(j) of the National Housing Act (12 U.S.C. §1725(j)) is amended as follows: (a)  By amending paragraph (1) to read as follows: "(1) Other than as provided in section 5 of the Home Owners' Loan Act of 1933, as amended, no insured institution may convert from the mutual to the stock form except in accordance with the rules and regulations of the Corporation.";  (b) By striking paragraphs (2), (3), (5) and (6), and renumbering paragraph (4) as paragraph (2).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S.  _ 5 _ SECTION 106. Section 2(d) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1462(d)) is amended by striking the word "mutual" wherever it appears. SECTION 107. Section 403(a) of the National Housing Act (12 U.S.C. §1726(a)) is amended by striking the word "mutual". SECTION 108. Section 408(a)(1)(A) of the National Housing Act (12 U.S.C. §1730a(a)(1)(A) is amended to read as follows: "(A) "insured institution" means a Federal savings and loan association, a Federal savings bank, or a building and loan, savings and loan, or homestead association, or a cooperative bank, the accounts of which are insured by the Federal Savings and Loan Insurance Corporation;" TITLE II:  INVESTMENTS  Section 5(c)(1)(A) of the Home Owners' Loan Act SECTION 201. of 1933 (12 U.S.C. §1464(c)(1)(A)) is amended to read as follows: "(A) Account loans. -- Loans on the security of its savings accounts and loans specifically related to transactions accountsc SECTION 202. Section 5(c)(1)(B) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(B)) is amended to read as follows: "(B) Real prok)erty loans. -- Loans on the security of liens upon residential or nonresidential real property." SECTION 203. Section 5(c)(1)(G) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(G)) is amended to read as follows: "(G) Deposits. -- Investments in the time deposits, certificates, or accounts of any bank the deposits of which are insured by the Federal Deposit Insurance Corporation, or in the savings accounts, certificates or other accounts of any institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation." SECTION 204. Section 5(c)(1)(H) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(H)) is amended to read as follows: "(H) State securities. -- Investments in obligations of, or issued by, any State or political subdivision thereof (including any agency, corporation or instrumentality)." Section 5(c)(1) of the Home Owners' Loan SECTION 205. Act (12 U.S.C. §1464(c)(1)) is amended by striking subparagraph (L) and adding a new subparagraph (L), to read as follows: "(L) Commercial and other loans. -- Secured or unsecured loans for commercial, corporate, business or agricultural purposes."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IS  - 6 SECTION 206. Section 5(c)(1)(0) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(0)) is amended to read as follows: "(0) Housing and Land and Urban Development Insured or Guaranteed Investments. -- (i) Loans secured by mortgages as to which the association has the benefit of insurance under Title X of the National Housing Act or of a commitment or agreement for such insurance, or (ii) loans as to which the association has the benefit of any guarantee under Title IV of the Housing and Urban Development Act of 1968 or under Part B of the National Urban Policy and New Community Development Act of 1970 or under Section 802 of the Housing and Community Development Act of 1974 as now or hereafter in effect, or of a commitment or agreement therefor." Section 5(c)(1) of the Home Owners' Loan Act SECTION 207. of 1933 (12 U.S.C. §1464(c)(1)) is amended by striking subparagraph (P) and adding a new subparagraph (P), to read as follows: "(P) Corporate securities. -- An association may invest in, sell or hold commercial paper and corporate debt securities as defined and approved by the Board." SECTION 208. Section 5(c)(1)(0) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(Q)) is amended to read as follows: "(Q) Investment companies. -- An association may invest in, redeem or hold shares or certificates in any openend management investment company which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of which is restricted by such management company's investment policy, changeable only if authorized by shareholder vote, primarily to such investments (without regard to any percentage-of-assets restriction applicable to such investment under this subsection) as an association by law or regulation may invest in, sell, redeem, hold, or otherwise deal with." SECTION 209. Section 5(c)(1) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)) is amended by adding a new subparagraph (R), to read as follows: "(R) Consumer loans -- An association may make secured or unsecured loans for personal, family or household purposes, and loans reasonably incident to the provision of such credit." SECTION 210. Section 5(c) of the Home Owners' Loan Act of 1933 (12 U.S.C. 1464(c)) is amended by: (a)  Striking paragraph (2);  (b)  Redesignating paragraph (6) as paragraph (5);  (c)  Adding new paragraph (2), to read as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  "(2) Investments limited to 10 per centum of assets. -- The following investments are permitted, but authority conferred in the following subparagraphs is limited to not in excess of 10 per centum of the assets of the association for each subparagraph: (A) Investment in realty. -- An association may invest in real property, and such investment may include, without limitation, subdividing, developing, constructing improvements upon, and renovating such property. An association may own, rent, lease, manage, operate for income or sell such property. (B) Investment in personalty. -- An association may invest in tangible personal property, including, without limitation, vehicles, mobile homes, machinery, equipment, or furniture, and may hold such property for rental or sale. (C) Nonconforming loans and investments. -- An association may make loans and other investments not otherwise permitted under this subsection."; (d)  Amending paragraph (3) as follows: (1)  By striking subparagraph (D);  (2)  By amending subparagraph (A) to read as follows: "(A) Education loans. -- Loans made for the payment ol educational expenses."; and  (3) (e)  By striking subparagraph (C); and  Amending paragraph (4) as follows: (1)  By amending subparagraph (B) to read as follows:  "(B) Service corporations. -- Investments in the capital stock, obligations, or other securities of any corporation organized under the laws of the State in which the home office of the association is located, if the entire capital stock of such corporation is available for purchase only by savings and loan associations of that State and by Federal associations having their home offices therein, but no association may make any investment under this subparagraph if its aggregate outstanding investment under this subparagraph would exceed 5 per centum of the assets of the association. Provided, that an association may make an investment under this subparagraph notwithstanding that the service corporation in which investment is authorized has invested in any other corporation (i) that is not chartered by the State in which the home office of the association is located, or (ii) that has stock available for purchase by entities other than savings and loan associations of that State or by Federal associations having their home offices in such State.";   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 8 (2)  By amending subparagraph (C) to read as follows: "(C) Foreign assistance investments. -- Investments in housing project loans having the benefit of any guaranty under section 221 of the Foreign Assistance Act of 1961 or loans having the benefit of any guarantee under section 224 of such Act, or any commitment or agreement with respect to such loans made pursuant to either of such sections and in the share capital and capital reserve of the Inter-American Savings and Loan Bank. This authority extends to the acquisition, holding and disposition of loans having the benefit of any guaranty under section 221 or 222 of such Act as hereafter amended or extended, or of any commitment Investments or agreement for any such guaranty. in the exceed, not shall ph subparagra this under the of centum per one n, associatio any case of n."; associatio such assets of  (3)  By striking subparagraph (D);  (4)  By adding thereto the following new subparagraph: "(D) Small business investment companies. -- An association may invest in stock, obligations, or other securities of any small business investment company formed pursuant to section 301(d) of the Small Business Investment Act of 1958, for the purpose of aiding members of the Federal Home Loan Bank System, but no association may make any investment under this subparagraph if its aggregate outstanding investment under this subparagraph would exceed 1 per centum of the assets of such association."  SECTION 211. Section 5(c) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)) is amended by adding a new paragraph (8), to read as follows: "(8) An association may engage in any activity or venture the Board determines to be reasonably incident to the exercise of the authority conferred by this subsection, or by subsection (b)." SECTION 212. Section 5A(b)(1)(B) of the Federal Home Loan Bank Act (12 U.S.C. §1425a(b)(1)(B)) is amended by striking the words "and commercial banks", and substituting therefor the following: ", institutions that are, or are eligible to become, members thereof, and commercial banks;" TITLE III:  PREEMPTION OF DUE-ON-SALE PROHIBITIONS  SECTION 301. Section 501 of Public Law 96-221 (12 U.S.C. §1735f-7 note) is amended by redesignating subsections (f) and (g) as subsections (g) and (h) respectively, and adding a new subsection (f), to read to read as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 9 "(f) The provisions of the constitution or the laws of any State limiting the ability of a depository institution to enter into contracts, or to enforce contracts, whenever executed, providing that the institution may, at its option, declare due and payable sums secured by the institution's security instrument if all or any part of the real property securing the loan is sold or transferred by the borrower without the institution's prior written consent shall not apply to contracts involving loans secured by a lien on residential real property, by a lien on stock allocated to a dwelling unit in a residential cooperative housing corporation, or by a lien on a residential manufactured home. Except as limited by the Federal Home Loan Bank Board pursuant to subsection (g) herein, exercise by the institution of such option (hereafter called a due-on-sale clause) shall be exclusively governed by the terms of the loan contract, and all rights and remedies of the institution and borrower shall be fixed and governed by the contract. In the exercise of its authority under subsection (g), the Board may require institutions to observe appropriate consumer safeguards to the extent it is authorized to require such observance by Federal savings and loan associations." SECTION 302. Subsection (g) of Section 501 of Public Law 96-221 (12 U.S.C. §1735f-7 note) is amended to read as follows: "(g)(1)  The Federal Home Loan Bank Board is authorized to  (A) issue rules, regulations, interpretations or approvals governing the implementation of this section; and (B) delegate authority to duly authorized officials, employees or agents of the Board to issue interpretations or approvals governing the implementation of this section. "(2) No provision of the constitution or laws of any State imposing any liability, penalty or forfeiture shall apply to any act done or omitted in good faith in conformity with any rule, regulation, interpretation or approval under this section by the Federal Home Loan Bank Board or in conformity with any interpretation or approval by an official, employee or agent of the Board duly authorized by the Board to issue interpretations or approvals under this section under such procedures as the Board may prescribe therefor, notwithstanding that, after such act or omission has occurred, such rule, regulation, or approval is amended, rescinded, or determinded by judicial or other authority to be invalid for any reason."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 10 Subsection (h) of Section 501 of Public Law SECTION 303. note) is amended by striking the period §1735f-7 U.S.C. (12 96-221 for subsection (f)." except words ", the adding and TITLE IV:  EXTRAORDINARY AUTHORITY  SECTION 401. Section 408 of the National Housing Act (12 U.S.C. §1730a) is amended by adding a new subsection (m), as follows: "(m) Notwithstanding any other provision of State or Federal law, except as provided in subsections (e)(2) and (1) hereof, the Corporation', upon its determination that severe financial conditions exist which threaten the stability of a significant number of insured institutions, or of insured institutions possessing significant financial resources, may authorize, in its discretion and where it determines such authorization would lessen the risk to the Corporation, an insured institution that is eligible for assistance pursuant to section 406(f) of this Act to merge or consolidate with, or to transfer its assets and liabilities to, any other insured institution, may authorize any other insured institution to acquire control of said insured institution, or may authorize any savings and loan holding company to acquire control of said insured institution or to acquire the assets or assume the liabilities thereof. Mergers, consolidations, transfers and acquisitions under this subsection shall be on such terms as the Corporation shall provide. In considering authorizations under this subsection, the need to minimize financial assistance required of the Corporation shall be the paramount consideration, but the Corporation shall make a reasonable effort to authorize transactions under this subsection in the following sequence: First, between institutions of the same type within the same State; second, between institutions of the same type in different States; third, between institutions of different types in the same State; and fourth, between institutions of different types in different States." SECTION 402. Section 408(e)(2) of the National Housing Act (12 U.S.C. §1730a(e)(2)) is amended as follows: (a) By adding in the first sentence immediately after the term "subsection" the following: , or any transaction under subsection (m) hereof,"; and (b) By adding in the third sentence thereof immediately after the word "acquisition," the following: "except a transaction under subsection (m) hereof,". SECTION 403. Section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464) is amended by adding at the end thereof the following:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "(o) Notwithstanding any other provision of this section or State law, and consistent with the purposes of this Act, the Board may authorize (or in the case of a Federal association, require) the conversion of a mutual savings and loan association or mutual savings bank into a Federal stock savings and loan association or Federal stock savings bank, or charter a Federal stock savings and loan association or Federal stock savings bank to acquire the assets of, or merge with such a mutual institution under the rules and regulations of the Board. The Board may condition its approval of the conversion or acquisition of a mutual savings bank under this subsection that was previously insured by the Federal Deposit Insurance Corporation upon the receipt from the Federal Deposit Insurance Corporation of reasonable indemnification of the Federal Savings and Loan Insurance Corporation for lossses that may be incurred by the latter as a consequence of its insuring the accounts of such institution, as agreed to by the Corporations. Authorizations under this subsection may be made only to assist an institution in receivership, or if the primary Federal supervisor has determined that severe financial conditions exist which threaten the stability of an institution and that such authorization is likely to improve the financial condition of the institution, or when either of the Corporations has contracted to provide assistance to such institution under section 406 of the National Housing Act or section 13 of the Federal Deposit Insurance Act.". SECTION 404. Section 406(f) of the National Housing Act (12 U.S.C. §1729(f)) is amended to read as follows: "(f)(1) In order to prevent the default of an insured institution, or in order to restore an insured institution in default to normal operation, or, when severe financial conditions exist whicll threaten the stability of a significant number of insured institutions, or of insured institutions possessing significant financial resources, in order to lessen the risk to the Corporation posed by an insured institution under such threat of instability, the Corporation is authorized, in its sole discretion and upon such terms and conditions as it may determine, to make loans to, to make deposits in, to purchase the assets or securities or to assume the liabilities of, or to make a contribution to, such an insured institution or such an insured institution so threatened. "(2) Whenever an insured institution is in default or, in the judgment of the Corporation, is in danger of default or, Whenever severe financial conditions exist which threaten the stability of a significant number of insured institutions, or of insured institutions possessing significant financial resources, and in order to lessen the risk to the Corporation posed by an insured institution under such threat of instability, the Corporation is authorized, in its sole discretion, in order to facilitate a merger or consolidation of such insured institution with another   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 12 insured institution or the sale of assets of such insured institution and the assumption of its liabilities by another insured institution, and upon such terms and conditions as the Corporation may determine, to purchase any such assets or assume any such liabilities, or make loans or contributions to, or deposits in, or purchase the securities of, such other insured institution, or guarantee such other insured institution against loss by reason of its merging or consolidating with or assuming the liabilities and purchasing the assets of such insured institution in or in danger of default, or under threat of instability. The Corporation may provide any party acquiring control of, merging with, consolidating with or acquiring the assets of an insured institution under section 408(m) of this Act with such financial assistance as it could provide an insured institution under this subsection. "(3) No assistance shall be provided pursuant to this subsection in an amount in excess of that which the Corporation finds to be reasonably necessary to save the cost of liquidating, including paying the insured accounts of, such insured institution in or in danger of default, or under threat of instability, but if the Corporation determines that the continued operation of such institution is essential to provide adequate savings or home financing services in its community, such limitation upon the amount of assistance shall not apply." SECTION 405. (a) Section 406(a) of the National Housing Act (12 U.S.C. §1729(a)) is amended by striking the phrase "savings and loan". (b) Section 406(b) of the National Housing Act (12 U.S.C. §1729(b)) is amended to read as follows: "(b) In the event that a Federal association is in default, the Corporation shall be appointed as conservator or receiver and as such (1) is authorized (i) to take over the assets of and operate such association, (ii) to take such action as may be necessary to put it in a sound and solvent condition, (iii) to merge it with another insured institution, (iv) to organize a new Federal association to take over its assets, (v) to proceed to liquidate its assets in an orderly manner, or (vi) to make such other disposition of the matter as it deems to be in the best interest of the association, its savers, and the Corporation, and (2) shall pay all valid credit obligations of the association. The Corporation shall pay insurance as provided in section 405. The surrender and transfer to the Corporation of an insured account in any such association which is in default shall subrogate the Corporation with respect to such insured account, but shall not affect any right which the insured member may have in the uninsured portion   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 13 of his account or any right which he may have to participate in the distribution of the net proceeds remaining from the disposition of the assets of such association." (c) Section 406(c) of the National Housing Act (12 U.S.C. §1729(c)) is amended by striking the phrase "savings and loan" wherever it appears. (d) Section 406(c)(1) of the National Housing Act (12 U.S.C. §1729(c)(1)) is amended by adding the letter "(A)" immediately after the phrase "(c)(1)", and by adding a new subparagraph (B), to read as follows: "(B) Notwithstanding any provision of state law, or of this section, in the event the Federal Home Loan Bank Board determines that any of the grounds specified in section 5(d)(6)(A)(i), (ii) or (iii) of the Home Owners' Loan Act of 1933 exist with respect to an insured institution, other than a Federal association, the Board shall have exclusive power and jurisdiction to appoint the Corporation as sole conservator or receiver of such institution. In such cases the Corporation shall have the same powers and duties with respect to insured institutions as are conferred upon it under subsection (b) of this section with respect to Federal associations." (e) Section 406(c)(2) of the National Housing Act (12 U.S.C. §1729(c)(2)) is amended by adding the words "conservator or" immediately after the word "sole" in the first sentence. (f) Section 406(c)(3) of the National Housing Act (12 U.S.C. §1729(c)(3)) is amended as follows: (1)  By adding the phrase "conservator or" immediately prior to the word "receiver" wherever it appears therein;  (2)  By striking the phrase "paragraph (2)" and substituting therefor the phrase "paragraphs (1) or (2)"; and  (3)  By striking the second sentence thereof.  (g) Section 406(d) of the National Housing Act (12 U.S.C. §1729(d)) is amended to read as follows: "(d) In connection with the liquidation of insured institutions, the Corporation shall have power to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith, subject only to the regulation of the Federal Home Loan Bank Board, or, in cases where the Corporation has been appointed conservator, receiver, or legal custodian solely by a public authority having jurisdiction over the matter other than said Board, subject only to the regulation of such public authority.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 14 SECTION 406. Section 16 of the Federal Home Loan Bank Act "SEC. 16." (12 U.S.C. §1436) is amended by inserting "(a)" after and adding at the end thereof the following: "(b) Notwithstanding subsection (a) or any other provision of this Act, if the Board determines that severe financial conditions exist threatening the stability of member institutions, it may suspend temporarily the requirements under subsection (a) that a portion of net earnings be set aside 'semiannually by each Federal Home Loan Bank to a reserve account and permit each Federal Home Loan Bank to declare and pay dividends out of undivided profits. Thereafter, dividends shall be paid in accordance with subsection (a)." SECTION 407. (a) Section 402(d) of the National Housing Act (12 U.S.C. §1725(d)) is amended by striking the period at the end of the first sentence and adding the following: , except that interest on loans from the Federal Home Loan Banks shall be not less than their current marginal cost of funds, taking into account the maturities involved, and loans from the Federal Home Loan Banks shall be adequately secured, as determined by the Federal Home Loan Bank Board. (b) Section 402(i) of the National Housing Act (12 U.S.C. §1725(i)) is amended as follows: (1) In the first sentence, immediately after the word "source", by adding the following: ", except the Federal Home Loan Banks"; and (2) In the first sentence, immediately after the first time the word "loan" appears subsequent to the first colon, by adding the words "from the Treasury". (c) Section 11 of the Federal Home Loan Bank Act (12 U.S.C. §1431) is amended by adding a new subsection (k), as follows: "(k) The Federal Home Loan Banks are authorized to make loans to the Federal Savings and Loan Insurance Corporation, as directed by the board, but subject to Section 402(d) of the National Housing Act." SECTION 408. Section 404 of the National Housing Act (12 U.S.Cc §1727) is amended by redesignating subsection (h) as subsection (i) and adding a new subsection (h), as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "(h) Notwithstanding any other provision of this section, the Corporation, upon its determination that extraordinary financial conditions exist increasing the risk to the Corporation, may terminate distribution of shares of the secondary reserve and utilize said reserve on the same basis as the primary reserve. If otherwise authorized, the Corporation may resume such distribution upon its determination that said conditions no longer exist."  - 15 TITLE V:  MISCELLANEOUS  SECTION 501. Section 17(a) of the Federal Home Loan Bank Act immediately (12 U.S.C. §1437(a)) is amended by adding a new sentence follows: as after the first sentence, to read "Notwithstanding any other provision of law, the Board may from time to time make such provision as it deems appropriate authorizing the performance by any officer, employee, agent or administrative unit thereof of any function of the Board (including any function of the Federal Savings and Loan Insurance Corporation), except with regard to promulgation of rules and regulations in accordance with the Administrative Procedures Act, and adjudications subject to such Act." SECTION 502. Section 5(d)(8)(A) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(d)(8)(A)) is amended by adding in the last sentence thereof, immediately after the word "party", the following: ", which prevails,". SECTION 503. Section 405(d)(3) of the National Housing Act (12 U.S.C. §1728(d)(3)) is amended to read as follows: "(3)(A) Notwithstanding any limitation in this title or in any other provision of law relating to the amount of deposit insurance available for any one account -(i) Funds invested in an insured institution pursuant to a pension or profit-sharing plan described in section 401(d) of the Internal Revenue Code of 1954, as amended, and funds invested in an insured institution in the form of individual retirement accounts as described in section 408(a) of the Internal Revenue Code of 1954, as amended, shall be insured in the amount of $500,000 per account; (ii) Funds invested in an insured institution pursuant to a trusteed employee benefit plan shall be insured in the amount of $500,000 per trust estate; and (iii) Funds invested in an insured institution in the form of an account of any State deferred compensation plan as described in section 457 of the Internal Revenue Code of 1954, as amended, shall be insured in the amount of $500,000 per each employee's contributions to such accounts. (B) As to any plan qualifying under section 401(d) or section 408(a) of the Internal Revenue Code of 1954, as amended, the term "per account" means the present vested and ascertainable interest of each beneficiary under the plan, excluding any remainder interest created by, or as a result of, the plan." SECTION 504. Section 10 of the Federal Home Loan Bank Act (12 U.S.C. §1430) is amended as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 16 (a) By deleting the first two sentences of subsection (b); (b) By amending subsection (a) to read as follows: "Each Federal Home Loan Bank is authorized to make secured advances to its members upon such security as the Board may prescribe."; and c)  By deleting the word "twelve" wherever it appears in subsection (c) and substituting therefor the word "twenty".  SECTION 505. Section 405(a) of the National Housing Act (12 U.S.C. §1728(a)) is amended by adding after the first sentence the following: "Whenever the liabilities of an insured institution for accounts shall have been assumed by another insured institution or institutions, Whether by way of merger, consolidation, or other statutory assumption, or pursuant to contract, all accounts so assumed shall have separate insurance which shall terminate at the end of six months from the date such assumption takes effect or, in the case of any certificate account, the earliest maturity date after the six-month period." SECTION 506. Section 6(c)(2) of the Federal Home Loan Bank Act (12 U.S.C. §1426(c)(2)) is amended to read as follows: "(2) Notwithstanding any other provision of this subsection, no action shall be taken by any bank with respect to any member pursuant to any of the foregoing provisions of this subsection if the effect of such action would be to cause the aggregate outstanding advances, within the meaning of the last sentence of subsection (c) of section 1430 of this Act or within the meaning of regulations of said Board defining said term for the purposes of this sentence, made by such bank to such member to exceed twenty times the amounts paid in by such member for outstanding capital stock held by such member." SECTION 507. Section 8a of the Federal Home Loan Bank Act (12 U.S.C. §1428a)) is amended by striking the fifth sentence thereof and adding in lieu thereof the following: "Subject to the provisions of §7 of the Federal Advisory Committee Act, all members and alternates of the Council may be compensated and shall be entitled to reimbursement from the Board for traveling expenses incurred in attendance at meetings of such Council."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  i  - 17 Section 6(1) of the Federal Home Loan Bank Act SECTION 508. at the end (12 U.S.C. §1426(1)) is amended by striking the period ng: followi the of the second sentence and adding   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a voluntary I ; provided, however, that in the case of ' a predeemed be shall withdrawal, such liquidation subject be shall and dness, payment of any such indebte ent.". prepaym such to any penalties applicable to  SECTION-BY-SECTION ANALYSIS OF THE OF 1981" "THRIFT INSTITUTIONS RESTRUCTURING ACT Title I:  FORM OF CHARTER; DEMAND ACCOUNTS  states that the bill may be Section 101. Title: Section 101 Restructuring Act of 1981." cited as the "Thrift Institutions This section would Section 102. Chartering and Purpose: Act of 1933 ("HOLA") to revise §5(a) of the Home Owners' Loan Federal associations known specify that the Bank Board may charter or Federal Savings Banks as Federal savings and loan associations shall be to provide thrift and that the purpose of such activity nt of funds, and for the institutions for the deposit or investme goods and services. extension of credit for homes, and other of Federal mutual savings ering Present language limiting the chart investment and activity banks ("FMSBs") and providing them with S&Ls is eliminated in ral Fede limitations different from those of een all Federal betw ts order to provide a parity of entitlemen of stock contion aliza associations. Consistent with the liber y contained in orit auth version options and association investment as mutual ions ciat asso the bill, references in §5(a) to Federal iations assoc such of ses institutions are deleted, and the purpo exclusive ent curr the d are widened, as indicated previously, beyon focus on housing. Stock: This section Section 103. Demand Accounts and Capital Under revised §5(b)(1), would revise §5(b)(1) and (2) of the HOLA. r any customer a demand Federal associations would be able to offe not authorized to offer account. At present, Federal S&Ls are account, the NOW account, demand accounts; their only transactions requirement. Because is statutorily subject to a 30-day notice ns or governments, NOW accounts are not available to corporatio e of transactions sourc table profi S&Ls are thus cut off from a offer demand deposits to ed allow are account business. Federal MSBs loan relationship, to customers with which they have a business and are thus handicapped to a lower degree. lower the statutory In addition, §5(b)(1) would be amended to (including NOW nts notice-of-withdrawal period for savings accou days. This ty thir accounts) to fourteen days from the current respect to with would put S&Ls on a par with commercial banks this type of account. existing prohibition The amendment to §5(b)(2) would delete an ral S&Ls and subagainst the issuance of capital stock by Fede such stock. The stitute an explicit grant of authority to issue d from authorizing Boar current prohibition acts to prevent the Bank provisions icit expl Federal stock S&Ls on a de novo basis, for a conversion on ions ciat elsewhere now authorize Federal stock asso )(2). §5(b in basis, notwithstanding the prohibition contained   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2 section Section 104. Conversions to Federal Charters: This is a that tion institu any would amend §5(i) of the HOLA to allow member) a become to e eligibl Federal Home Loan Bank member (or is As part of to convert to a Federal S&L or a Federal Savings Bank. converted) (or ing convert the the conversion process (or thereafter), the (or form stock the to institution could change from the mutual as either itself te designa to reverse) and would be free to elect its previous a Federal S&L or a Federal Savings Bank regardless of savings stock Federal denomination. Present law does not allow savings Federal of s banks, and does not authorize de novo charter not does law current r, Moreove banks or of Federal stock S&Ls. s charter stock Federal permit state stock associations to obtain forbids and unless they existed as stock entities before 1976, not chartering of Federal stock associations in states that do back ions allow state stock institutions. Procedures for convers t explici to state institutions would be changed slightly, making e obsolet an provision for conversion to stock institutions, deleting the reference to the General Manager of the FSLIC and substituting Bank Board's General Counsel, and striking obsolete provisions ip pertaining to Treasury or Home Owners' Loan Corporation ownersh action of Federal association shares. Persons aggrieved by final the d provide be would ion convers a ing of the Bank Board respect (4) §402(j) by cases such in granted ly current same right of review Federal allow may law current Because Act. of the National Housing mutual savings banks to engage in certain activities and make ) certain investments not authorized under this bill, revised §5(i)(4 bill the of nt enactme to prior ed would permit FMSBs that convert zed to continue those activities or investments to the extent authori the to pass would rights by the Bank Board. These grandfathered successor institution in the event of a merger or consolidation. Section 105. Conversion from State Mutual to State Stock: This Act. section would amend extensively §402(j) of the National Housing stock mutual-toon That provision governs the nowexpired moratorium conversions, and is substantially obsolete. Currently significant provisions that would be dropped include a burdensome annual report on conversion activity, and a prohibition against creation of Federal stock institutions in states where stock associations do not exist. As revised, §402(j) simply would retain current FSLIC jurisdiction over state mutual to state stock conversions involving l insured institutions, and would preserve the existing judicia appeal procedure available to persons aggrieved by agency conversion decisions. Section 106. Technical: This section would amend §2(d) of the HOLA to ensure that statutory references to Federal S&Ls include all Federal savings banks, not just FMSBs. Section 107. Technical: This section would establish the duty of the FSLIC to insure the accounts of all Federal savings banks, rather than simply FMSBs, as the statute currently provides. Section 108. Technical: This section would include Federal savings banks within the listing of entities defined as insured institutions for Savings and Loan Holding Company Act purposes.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3 TITLE II:  INVESTMENTS  Section 201. Overdrafts: This section would amend §5(c)(1)(A) with of the HOLA to provide that overdraft loans could be issued rather n, associatio Federal a respect to any transactions account of case. the currently than only against NOW accounts, as is Section 202. Real Property Loans: This section would amend §5(c)(1)(B) of the HOLA to allow Federal associations to invest up to 100 percent of their assets in loans secured by loans on residential or nonresidential real property. At present, §5(b)(1)(B) allows 100 percent investment in residential real property loans, but provides an extensive list of loan-to-value ratios that must be observed, depending on the nature of the security property. These statutory restrictions would be eliminated by the amendment. Under current law, nonresidential real estate lending is limited basically to 20 percent of assets, and the loans must be secured by first liens on other improved real estate. The amendment would eliminate the percentage-of-assets and first lien restrictions, as well as dispense with the requirement that the real estate securing the loan be of any particular nature. Section 203. Time Deposits in S&Ls: This section would amend §5(c)(1)(G) of the HOLA to allow associations to invest in each other's time and savings deposits. Currently, associations wishing to invest in time and savings deposits must utilize FDIC-insured commercial banks. Section 204. Governmental Securities: This section would amend §5(c)(1)(H) of the HOLA to allow Federal associations to invest up to 100 percent of their assets in obligations of or issued by State or local governments. At present, investments in such securities are limited to general obligations, and to certain housing-related instruments. Section 205. Commercial and other lbans: This section would amend §5(c)(1)(L) to allow Federal associations to invest up to 100 percent of their assets in secured or unsecured loans for commercial, corporate, business or agricultural purposes. Federal S&Ls currently have no power to make loans of this kind and FMSBs can only make commercial, corporate or business loans to the extent of 5 percent of their assets, and only within 75 miles of the institution's home office. The section would replace existing paragraph (L), dealing with loans to financial institutions. Section 206 Technical: Sections 204 and 206 would amend existing §5(c)(1)(0) and §5(c)(4)(C) of the HOLA to remove from §5(c)(4)(C) existing authority for Federal associations to invest in certain insured land development loans and place such authority in §5(c)(1)(0). This is merely intended to permit an easier reading of §5(c), as the reorganization will place the land development loans in a provision dealing with other insured loans of similar type, and will leave revised §5(c)(5)(C) to deal solely with foreign In addition, in .55(c)(1)(0), the amendment assistance investments. would change the name of the "Urban Growth and New Community Development Act of 1970" to the "National Urban Policy and New Community Development Act of 1970."  https://fraser.stlouisfed.org I. Federal Reserve Bank of St. Louis  amend Section 207. Corporate Securities: This section would per100 §5(c)(1)(P) to allow Federal associations to invest up to ies. securit debt te cent of their assets in commercial paper and corpora on provisi This The limit on such investment now stands at 20 percent. ents investm would replace authority regarding state housing corporation that is to be subsumed under section 204, supra. §5(c)(1)(Q) Section 208. Mutual Funds: This section would amend wider variety of the HOLA to allow Federal associations to invest in a to investing ted restric are tions associa ly, of mutual funds. Current they which assets of y entirel ed compris ios in funds having portfol ents investm permit would nt amendme The y. could invest in directl assets in mutual funds having portfolios consisting primarily of basis. direct a on in which associations could invest a new Section 209. Consumer loans: This section would create in ents investm zing authori §5(c)(1)(R) of the Home Owners' Loan Act Without loans. g plannin floor consumer loans, including inventory and veness the authority to make loans of the latter two types, the effecti hed. diminis tially of the power to extend consumer credit is substan to 20 Present law limits Federal association consumer loan authority percent of assets. Section 210. Additional Investment Options: This section would provide a substantial liberalization of the investment options open to Federal associations. 1. Ownership of Real Estate. Institutions would be allowed under revised §5(c)(2)(A) to invest up to 10 percent of their assets associatio , directly in real estate. Present law provides that Federal may take an equity position in real estate only when the property ment is located in a geographical area receiving concentrated develop ment Develop ty Communi and Housing the assistance under Title I of Act of 1974, and that the amount so invested cannot exceed 2 percent of assets. 2. Equipment Leasing. Revised §5(c)(2)(B) would give Federal l associations authority to invest directly in tangible persona engage to tions associa enable would property. This new empowerment the for ble profita been has that in equipment leasing, an activity commercial banking industry. 3. Leeway Authority. Under revised §5(c)(2)(C), associations would be provided with enhanced "leeway" authority to invest up to 10 percent of their assets in investments not otherwise authorized under §5(c). Existing "nonconforming loan" authority available to Federal associations merely permits them to make loans on the security of or respecting real property or interests therein used primarily for residential or farm purposes that do not comply with §5(c) limitations. 4. Education Loans. Amended §5(c)(3)(A) would expand the scope of the current 5 percent-of-assets education loan authority to include any loan for educational purposes. At present, Federals may make such loans only for the purpose of paying for the expenses of university, college or vocational education.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Under amended §5(c)(4)(8), Federal 5. Service Corporations. associations would be able to invest 5 percent of their assets in percent their service corporation subsidiaries, instead of the 3 be no would currently authorized. Unlike current practice, there t investmen explicit statutory requirement that a portion of the community authority be used primarily for community, inner-city, and In addition, the bill would clarify the development purposes. "secondstatus of subsidiaries of service corporations -- so-called that ng stipulati lly specifica by -tier" service corporations entities primary service corporations would be able to invest in such ons restricti ownership stock and regardless of the state-of-charter ons. corporati service in t investmen that affect Federal association Associations are only permitted to invest in service corporations chartered in their home state, and whose stock is available for purchase only by savings and loan associations headquartered in that state, and a recent U. S. District Court case in New Jersey indicated that these restrictions likewise should apply to investments by primary service corporations in their subsidiaries. 6.  Foreign Assistance Investments.  See Section 206.  7. Small Business Investment Corporations. New §5(c)(4)(D) would restore authority to Federal associations to invest in Small Business Investment Corporations that inadvertently was deleted from §5(c) in the course of the reenactment of that provision by Public Law 96-221. This replaces authority to invest in certain state and local government obligations that is to be subsumed under section 204, supra. Section 211. Reasonably Incident Activities: This section would create a new §5(c)(-8) that would clarify the power of Federal associations to engage in activities and ventures reasonably incident to the exercise of authority conferred under §5(b) or (c). For instance, questions have been raised as to the ability of Federals under current law to form joint ventures with investors to facilitate the sale of low-yield mortgages. Given the present power of associations to sell mortgages, new paragraph (8) would remove any doubt as to the authority of those institutions to enter into business relationships designed to facilitate such sale. Section 212. Liquidity Eligible Investments: This section would amend §5A(b)(1)(B) of the Federal Home Loan Bank Act (12 U.S.C. §1425a(b)(1)(B)) to specify that members of Federal Home Loan Banks could use their investments in time and savings deposits in other members, or in institutions eligible to become members to help satisfy the statutory requirement that they maintain at all times a certain amount of liquid assets. Present law authorizes time and savings deposits to count toward satisfaction of this liquidity requirement only if the deposits are in Federal Home Loan Banks or commercial banks. TITLE III:  PREEMPTION OF DUE-ON-SALE PROHIBITIONS  Title III would provide for Federal preemption of state laws prohibiting exercise by lenders of so-called due-on-sale clauses that stipulate that a borrower's mortgage becomes due when he sells his home. The preemption would apply to all depository institutions,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  b  -  Regulations and interpretations not just savings associations. governing implementation of the preemption would be issued by the Bank Board, which could require observance of appropriate consumer safeguards. Specific provision would be made for delegation by the Bank Board to its staff of authority to issue approvals or interpretations, and any lender relying in good faith on the Bank Board's regulations or on its interpretations or those of its staff would be free from application of state law penalties. This delegation and good-faith reliance provision would apply as well to the Bank Board's existing authority to implement the Federal preemption of state mortgage usury laws. The need for preemption in the due-on-sale area is acute. Thrifts' current earnings problems stem directly from the fact that they have large portfolios of low-yield fixed-rate mortgages. It is essential that these mortgages be "rolled-over" and replaced with instruments bearing interest more in keeping with the rates being demanded by depositors for their funds. Under normal circumstances mortgage loans roll-over roughly every 7-8 years. Where due-on-sale clauses are prohibited, however, effectively allowing automatic assumptions of mortgages, the average life span of the low-yield mortgages that are causing so much difficulty for thrifts increases greatly, since those are precisely the mortgages that sellers of homes wish to pass along to prospective purchasers. Thus, the negative impact on earnings of those mortgages in such localities can be expected to persist far into the future, diminishing the ability of affected thrifts to provide competitive yields on savings and attract an adequate mortgage lending base. TITLE IV:  EXTRAORDINARY AUTHORITY  Sections 401 and 402. Emergency Thrift Acquisitions: These sections would allow the FSLIC, regardless of any other law (except antitrust law) to authorize an insured institution eligible for FSLIC assistance to merge with any other insured institution, or to be acquired by a savings and loan holding company. This would enable the FSLIC to arrange mergers of state-chartered institutions across state lines notwithstanding state law prohibitions, and to let savings and loan holding companies acquire institutions other In making such authorizations, the than in their home state. paramount consideration would be minimize the cost to the FSLIC, but the Corporation would have to make a reasonable effort to arrange transactions involving: first, institutions of the same type in the same state; second, institutions of the same type in different states; third, institutions of different types in the same state; and, fourth, institutions of different types in different states. The condition precedent to the use of the authority conferred by this section would be the existence of severe financial conditions which threaten the stability of a significant number of insured institutions or of institutions possessing significant resources. Section 403. Emergency Stock Charters: This section would allow the Bank Board to authorize (or in the case of a Federally-chartered association, require) a mutual institution to become, or merge into a newly chartered, Federal stock association, regardless of other state or Federal law. These authorizations could be granted only with respect to: (1) an institution in receivership; (2) an   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 7 institution that has contracted to receive FDIC or FSLIC assistance; or (3) an institution the stability of which is threatened by the existence of severe financial conditions, provided the authorization is likely to improve its financial condition. In cases where the converting institution is FDIC-insured, conversion to a Federal charter FDIC would be accompanied by an indemnification agreement between the rather basis, -case case-by a on and FSLIC that would be negotiated than being tied to the statutory indemnification provisions applicable to ordinary conversions involving changing of deposit insurers. Section 404. Assistance to Thrift Institutions: This section would allow the FSLIC to provide assistance to insured institutions at a somewhat earlier point in their financial difficulties than is presently allowed under the threshold criteria that to receive aid, an institution must be in default or in danger of default. The amendment would permit assistance in cases when severe financial conditions exist threatening the stability of a significant number of insured institutions, or of insured institutions possessing significant financial resources, where such assistance would reduce the threat to the FSLIC posed by institutions under such threat of instability. In addition, the amendment clarifies that assistance may take the form of deposits in the institution or of purchase of its securities, as well as the current approach of making contributions or loans or purchasing the assets of the troubled institution. Section 405. Conservatorshi and Receivership Powers: This section would provide the FSLIC with conservatorship/receivership powers over State-chartered insured institutions approximately equal to those which it now has with respect to Federal associations. While the FSLIC still could accept an appointment as receiver or conservator from a State authority, and operate according to its regulation, the Bank Board would be able to appoint the FSLIC as sole conservator or receiver of a State-chartered insured institution, superseding and preempting any state appointment, upon a determination that the institution was in an unsafe or unsound condition to transact business, had substantially dissirated its assets, or had assets less than its obligations. Under current law, such preemptive power exists only Where an institution actually has been closed or a State receiver has been appointed for at least 15 days, where grounds exist identical to those required to appoint a receiver or conservatol for a Federal association, and an account-holder has been unable to obtain a full withdrawal of—Fis account. Section 405 also would clarify the fact that when the FSLIC acts in its capacity as a receiver of a Federal association, it pays the credit obligations of that institution only in its capacity as receiver. The present statutory language raises the possibility that the FSLIC's insurance fund might be held liable for all the debts of a defaulted Federal association. Additionally, the amendment would allow the FSLIC as receiver of a defaulted institution, to make such disposition of the defaulted institution as it determines to be in the best interests of the association, its savers and the Corporation itself. Currently, an anomalous situation exists whereby the ability of the FSLIC to make "such other disposition" of a defaulted S&L as is in the best interests of its insured members applies only to state-chartered insured institutions, and not to Federal associations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 8 Section 406. Assistance to Federal Home Loan Bank Members: Section 404 would allow the Bank Board, upon its determination that severe financial conditions exist threatening the stability of member institutions, to waive the requirement of §16 of the Federal Home Loan Bank Act that a portion of net earnings of the FHLBanks be set aside semi-annually to a reserve account, and allow the Banks to pay dividends from undivided profits. Section 407. Borrowing Authority: This section would allow the FSLIC to borrow from the FHLBanks, as long as the rate on the loan is not less than the FHLBanks' marginal cost of funds, and the loan is adequately secured. Section 408. Secondary Insurance Reserve: Section 407 would permit the FSLIC, when it determines extraordinary financial conditions exist increasing the risk to it, to terminate the payback of the secondary insurance reserve and to use the reserve exactly as it uses the primary reserve. The payback could continue thereafter, if otherwise authorized by law. Under present law, the FSLIC's secondary reserve (now approximately $700 million) is required to be paid back to insured institutions until such time as the aggregate of the primary reserve and the secondary reserve is not at least equal to 1 1/4 percent of the total amount of all accounts of insured members of all insured institutions. The secondary reserve at present may be used only to cover losses of the Corporation, and only to the extent the primary reserve is not available. TITLE V:  MISCELLANEOUS  Section 501. Delegations: Section 501 would allow the Bank Board to delegate any of its functions, except those of promulgating regulations, and performing adjudications. The Federal Reserve already has similar power under 12 U.S.C. §248. Section 502. Payment of Attorneys' Fees: This section would clarify that a court may assess attorneys' fees against the Bank Board only in the event the agency loses a lawsuit. Section 503. Increase in Insurance of Accounts Limit: Section 503 would allow $500,000 insurance coverage for all pensionrelated accounts, including Individual Retirement Accounts, Keogh Plan Accounts, Trusteed Employee Benefit Plan Accounts, and State Deferred Compensation Plan Accounts. The amendment would increase the security of monies intended for retirement purposes, and would help attract a stable long-term source of funds for housing finance. Section 504. Collateralization of FHLBank Advances: Section 504 would strike the extensive and detailed statutory collateralization requirements appearing in §10 of the Federal Home Loan Bank Act, and give the Bank Board authority to prescribe what should constitute acceptable security. In addition, it would correct a technical omission connected with the recent liberalization by Congress of the stock-to-advances ratio that must be observed by FHLBank members.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 9 This section Section 505. Insurance of Accounts in Mergers: a FSLIC-insured would provide that depositors who have accounts in in which they institution that merges into another such institution for the two ce insuran e have accounts will be able to have separat short-term offer to ty accounts for a period of six months. Authori FDIC. the by ed possess is dual coverage of this type already Requirements: Section 506. Deletion of Obsolete Stockholding the Federal of §6(c) in Section 507 would delete obsolete language FHLBank of Home Loan Bank Act that operates to require a handful te aggrega of members to hold stock in excess of the one percent . loan principal level applicable to all other members Section 507. Compensation of Federal Savings and Loan Board Advisory Council Members: Section 508 would allow the Bank y Advisor to compensate the members of the Federal Savings and Loan Comy Council, subject to the limitations of the Federal Advisor public mittee Act. This would be particularly useful in attracting rable conside interest members of the FSLAC, who currently serve at a ng financial sacrifice because of the inadequacy of the traveli expense reimbursement currently available to them. Section 508. Prepayment of FHLBank Advances: Section 509 would require an institution withdrawing voluntarily from FHLBank ting membership to pay prepayment penalties in connection with liquida ng governi t contrac the g assumin Bank, the any indebtedness it owes the indebtedness calls for imposition of such penalties. This g in provision is designed to dissuade institutions from engagin disruptive in-and-out FHLBank membership.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IN/ •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHANGES IN EXISTING LAW MADE BY THRIFT INSITUTIONS RESTRUCTURING ACT OF 1981  1.  Section 102: Section 5(a) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(a))  (a)E1)] In order to provide [local mutual thrift institutions an which people may invest their funds and in order to provide for the financing of homegLthe Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as "Federal Savings and Loan Associations", or "Federal Emutua)savings banks"[(but only in the case of institutions which, prior to conversion, were State mutual savings banks located in States which authorize the chartering of State mutual savings banks, provided such conversion is not in contravention of State law)jand to issue charters therefor, giving primary consideration to the best practices of Eocal mutuaDthriftEnd home-financingjinstitutions in the United States. EAn association which was formerly organized as a savings bank under State law may not convert from the mutual to the stock form of ownership. An association which was formerly organized as a savings bank under State law may not convert from the mutual to the stock form of ownership.' An association which was formally organized as a savings bank under State law may, to the extent authorized by the Board, continue to  for the deposit or investment of funds and _ for •t he extension of credit for homes and other gooris • and services,  carry on any activities it was engaged in on December 31, 1977, and to retain or make any investments of a type it held on that date, except that its equity, corporate bond, and consumer loan investments may not exceed the average ratio of such investments to total assets for the five-year period immediately preceding the filing of an application for conversion and such an association which was formerly organized as a savings bank under State law shall only be permitted to establish branch offices and other facilities in accordance with the limitations imposed by State law controlling applications of a savings bank organized under such State law, provided that such an association; (A) shall be exempt from any numerical lirnitations of State law on the establishment of branch offices and other facilities, and (B) may, in any case, subject to the approval .of the Board, establish branch offices and other facilities id its own Standard Metropolitan Statistical Area, its own county or within thirty-five miles of its home office, but only in its State of domicile. An association which was formerly organized. as a savings bank under State law shall be subject to the requirements of State law (including any regulations promulgated thereunder and any sanction for the violation of any such law or regulation) in effect at the time of conversion, in the State of its original charter— (A) pertaining to discrimination in the extension of home mortgage loans or adjustment in the terms of mortgage instruments based on neighborhood or geographical area, (B) pertaining to requirements imposed under the Consumer Credit Protection Act, if the Board c:etermines that State law and regulations impose more _stringent requirements than Federal law and regulations. (2) A Federal mutual savings bank may make commercial, corporate, and business loans except that— (A) not more than 6 per centum of the assets of such a bank may be so loaned; and (B) such loans may only be made within the State where the bank is located or within 76 miles of the bank's home office. CS) In addition to the authority conferred by paragraph (1). Federal mutual savings bank may accept demand deposits in connection with a commercial, corporate, or business loan relationshipD   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S.  2.  Section 103: Section 5(b)(1) and (2) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(b)(1), (2))  may raise capital in th(2 form of "(b)(1) An association shares, or other account3, for such savings deposits, of indefinite periods of time (all fixed, minimum, or ng savi as this section which are referred to in of such demand accounts, i of form all [am or in the 1 Oiall 1._ account* charter or by regulatidh which as are authorized by its . 11/ tho sc.eof the Board, and may issue such passbooks, time unts acco 1‘ of other evidence priority upon_ certificates of deposit, or nd dema and C All_ saming_a_a_=21-111tS as are so authorized. ion. idat liqu same priority upon accounts shall have the gors of—an associati-Ori— obli -aers OTTacdounts and 11-61 ter [savings] may be provided by its char shall, to such extent as Board, be members of the or by,regulations of the such voting rights and such association, and shall have Except as may thereby provided. other rights as are by the association's charter be otherwise authorized Board in the case of savings or regulation of the mum terms of not less than [thirty] accounts for fixed or mini of any savings account fourteerl days, the payment t of the association to shall be subject to the righ thirty] not less than/fourt require such advance notice, the of ter char for by the days, as shall be provided of the Board. The ons lati regu association or the frompaccounts in the event payment of withdrawals [savings] pay all withdrawals in full an association does not associatiorlv_ where (subject to the right of the be suSject to such / to require notice) shall applicable, be prescribed by the assorules and procedures as may lation of the Board, but ciation's charter or by regu pt as authorized in writing any association which, exce withfull payment of an by the Board, fails to make ed to be in an unsafe or drawal when due shall be deem business within the meaning unsound condition to transact vings accounts section. /Accounts mE:.NI beISa of subsection (d) of this iableshall not) negot drawal or transfer c,r) subject to check or to with the order or authorizatior: to or transferable or other  for withdrawal or transfer of savings accounts upon nontrans[but] erabIe or r o authorization] association, as the Board may by regula This section does Associations may establish remote service units not prohibit the purpose of crediting savings _Qr. d_e_mpA accolin s on loan g ents lishment of) , itin paym estab unts cred such acco ting debi and the disposition of related financial transactions by associations] as provided in regulations prescribed by the Boilrd.  fil  (2) To such extent as the Board may authorize regulation or advice in writing, an association may borrow, may give security, may be surety as def[ned by the Board and may issue such notes, bonds, dEbentyres, , lexceptj or other obligations, or other securities,)/1—=‘ capital stocy as the Board may so authorize."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  3.  Section 104: Section 5(i) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(i)) become, is, or is eligible to irito[pleludim "(i)(I) Any institution that lf itse ert conv /may Bank Lgpin a savings A member0 a FederalCire ciation or Federal SavinSs hank Asso Loan and ngs Iavi a Federal chanirectly Bank under this Act,'(and in so doing may the stock form, or ,theverse)._ from the mutuen form to and loan ,r,and any State stock savings for at form stock in d existe . type institution may (if such institution r to a charte its t conver 1980) ' least the 4 years preceding March 31, ceni per 61 of upon a vote Federal stock charter under this chapter, er consid to called g meetin turn or more of the votes cast at a legal such actiont  -L  but such conversion shall be subject Board /shall prescrtrimay] to such rules and regulations as the shall be entitled ion ciat d asso and thereafter the converte l be subject shal and ion sect to all the benefits of this nt as exte same the to on to examination and regulati Act. this to uant purs ated rpor other associations inco  ons of the Board, any (2) Subject to the rules and regulati lf itse Federal association may convert of organization, from the mutual form to the stock form , and any Federal form al mutu the to or from the stock form a Federal from ion gnat desi its association may change ngs Bank, Savi ral Fede a to ion Savings and Loan Associat or the reverse. [savings and loan] ert itself into a (3) Any Federal/association may conv institution savings and loan or savings bank type of e, District, organized pursuant to the laws of the Stat referred to in Commonwealth or Territory (hereinafter principal office this section as the State) in which the Provided,/(i) [(I)] of such Federal association is located: any savings and of on. That the State permits the conversi such State of ion loan or savings bank type of institut ersion OT g1(2)] conv such into a FederaVassociation;/(iirthat is deterion itut [savings -and Federal/association into such a State inst in cast on ersi loan] mined upon the vote in favor of such conv or ers memb / of and ngs [savi person or by proxy at a special meeting loan] on, specified stockholders called to consider such acti office of the home by the law of the State in Which the by such law ired requ as Federal association is located, itself into ert conv to for a State-chartered institution   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4) a Fe -!eral association, but in no event upon a vote of less than 51 per centum of all the votes cast at such meeting, and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association;i(iii) that notice of the meeting to•i(3)] vote on conversion shall-be given as herein provided and no other notice thereof shall be necessary; the notice shall expressly state that such meeting is called to vote thereon, as well as the time and place thereof, and such notice shall be mailed, postage prepaid, at least/thirty and notrtwenty] [thirty k more tharl(s_ixty days prior to the date of the meeting, to each member or stockholder of record of the Federal association at his last address as shown on the books of the (General ManagSrFederal association and to the /General Counsel of the Federal of the Federal Uome LoanBank BoaBoard!,Washington, District of Columbia ; ( J Savings and Loan( iv) that,1---Insurance Corppon th effecoration)  E  tive date of the conversion, the association has repurchased the total amount invested in its shares by the Secretary of the Trl asury; and (6) that if, upon the effective date of conversion, the Home, Owners' Loan Corporation will hold of record shares of the usso ia-1 eon, its approval of the conversion has been obtained; (6) that  ia-\ in the event of dissofution of a - mutual assoc of rs holde or share tin_ after conversion, the members l basis in the mutua a on share will n iatio the assoc rtion to their assets of the association in exact propo ts; (v) that, in the relative share or account credi association after event of dissolution of a stock share on an E uitable conversion, the stockholders will iation; and/771__Tt a [(i)1 basis in the assets of the assoc tive upon the date that such conversion shall be effec chapter shall have teen all the provisions of this the issuance of a new fully complied with and upon the association is located; charter by the State wherein act of converting into a State it being provided that its be to ment agree an itute const chartered institution shall that the Federal Savings ts remen requi the all bound by n may legally impcse under and Loan Insurance Corporatio National Housinc Act, as section 403 of Title IV of the upon and the association now or hereafter amended, ities secur issue to d orize 'auth conversion and thereafter be the by ved at the time of issue in any form currently appro nce issua ance Corporation for Federal Savings and Loan Insur thstrict)or ns in such State(,'by similar insured institutio Territor)d   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (5)  1  n for conversion upon a votc n addition to the foregoing provisio d as a Federal savings chartere ion associat any o the members only ding shares held outstan having and loan association, including any Loan Corpora Owners' Home or y by the Secretary of the Treasur an equitabl upon ion institut State a into tion, may convert itself by the Fed e, otherwis regulations or basis, subject to approval, by an Savings Federal the by eral Home Loan Bank Board and ce of ac insuran the if That d, Provide Loan Insurance Corporation] with such conversion, the notic counts is terminated in connection provided by law and regulatio, and other action shall be taken as accounts. for the termination of insurance of  9  (4) Any aggrieved person may obtain review of a final action of the Board or the Federal Savings and Loan Insurance Corporation which approves, with or without conditions, or disapproves a plan of conversion from the mutual to the stock form, only by complying with the provisions of subsection (k) of section 408 of the National Housi9 Act within the time limit and in the manner therein prescribed, which provisions shall apply in all respects as if such final action were an order the review of which is therein provided for, except that such time limit shall commence upon publication of notice of such final action in the Federal RegnIer or upon the -giVing of such general notice of final action as is required by or approved _I.Inder regulations of the Corporation, whichever is later. (5) To the extent authorized by the Board, any Federal savings bank chartered as such prior to the enlctment of thri paragraph may conEinue to make any investment or envage in any activity not otherwise authorized under this subsection, to the degree it was ermitted to do prior to such enactment. so as a Fe era savings .an The authorf-Ey conferred by this paragraph may be utilized by any Federal association that acquires, by merger _or consolidation, a Federal savis bank en-56Ying grandfathered rights hereunder."  4.  Section 105: §1725(j))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Section 402(j) of the National Housing Act (12 U.S.C.  Except as otherwise provided in this subsection, until June 30, 1976, the Corporation shall not approve, under regulations adopt, ed pursuant to this subchapter or section 1464 of this title, by order or otherwise, a conversion from the mutual to stock form of organization involving or to involve an insured institution, except that this sentence shall not be deemed to limit now or hereafter the authority of the Corporation to approve conversions in supervisory cases. The Corporation may by rule, regulation, or otherwise and under such civil penalties (which may be cumulative to any other remedies) as it may prescribe take whatever action it deems necessary or appropriatz to implement or enforce this subsection] .  I  (1) Other than as provided in section 5 of the Home Owners' Loan Act of 1933, as amended, no insured instituti n ma convert from the mutual to the stock form except in accordance withthe gPles and regulations of the Corpora-fib-h.  (2) Ehe number of applications for conversion which the Corporation may approve pursuant to such regulations prior to such date shall be determined by the Corporation but shall not in any case be in excess of 1 per centum of the total number of all insured institutions in existence on the date of enactment, exclusive of the number of applications submitted for filing prior to May 22, 1973. Provided, That the Corporation shall process to final determination any application submitted for filing prior to May 22, 1973, pursuant to regulatiI ns in effect and adopted pursuant to this subchapter or sectiS n 1464 of this title, with further proviso that, with respect th a plan of conversion of any such applicant which, before May 22, 1973, has given vvritten public notice to its accountholders of adoption of a plan of conversion or has obtained waiver forms from substantially all its new accountholders subsequent to the giving of auch notice, such plan need not require payment for stock distributed to accountholders as of a record date prior to the date of such notice. (3) Notwithstanding any other provision of law, an insured institution converting in accordance with this subsection may retain its Federal charter. The Corporation shall not, however, permit the conversion of Federally chartered associations in States the laws of which do not authorize the operation of State chartered stock 118SOciations, except that the prohibition contained in this sentence shall   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (7 Commonwealth of Puerto District of Columbia, the (jot apply to the domiciled therein are all insured institutions re whe te Sta a or , tico jederally chartered. al action of obtain reveiw of a fin Any aggrieved person may Corporation which ap7.. n Bank Board or the Et4a Federal Home Loa es a plan of converconditions, or disapprov ftrOves, with or without ing with the proviply section only by com ts pursuant to this sub e within the time section 1730a of this titl ons of subsection (k) of provisions shall rein prescribed, which imit and in the manner the order the rean e wer such final action if as ts pec res all in ?apply that such time limit n provided for, except •%view of which is therei such final action in publication of notice of k.shall commence upon general notice of upon the giving of such pie Federal Register or er regulations of und ed rov uired by or app th final action as is req o, suc is later. ;the Corporation, whichever more often as ll, at least annually and (5) The Corporation sha ss on the exerder reports to the COngre e.ircumstances require, ren this subsection. rase of its authority under n the Corpovisions of this subsectio k:`... In implementing the pro to achieve (A) as approvals granted so as ation shall regulate the an equitable dis) sion as practicable; (B ',uch geographical disper t utions; (C) an tit ins g tin the size of conver tt ibution with respect to and Federally between State chartered !Appropriate distribution ) flexibility to (E ; (D) timeliness of filing Chartered institutions; o account the int ing tak n ns of conversio '1,he extent possible in pla ons; (F) the meetular converting instituti ;characteristics of partic able results as it (G) such other reason ;frig of capital needs; and lic interests pub the appropriate in i may consider necessary or  p alec4g  5.  Loan Act of 1933 ) of the Home Owners' Section 106: Section 2(d (12 U.S.C. §1462(d))  § 1462.  Definitions  As used in this chapter—  Federal Home Loan Bank (a) The term "Board" means the • Board. (b), (c) Omitted. ,• s a Federal savings and loan .:? (d) The term "association" mean s bank chartered by the association or a FederalEmutualsaving any reference in any and , Board under section 1464 of this title association shall be loan and ngs other law to a Federal savi ralEputualavings bank, -•' deemed to be also a reference to a Fede unless the context indicates otherwise.  6.  Section 107: §1726(a))  ional Housing Act (12 U.S.C. Section 403(a) of the Nat  § 1726.  eligibility provisions Insurance of accounts and Insurance of accounts  re the accountl the Corporation to insu mutual ral ria (a) It shall be the duty of Fede .,. associations and savings and loan ,  of all Federal building an loan insure the accounts of savings banks, and it may cooperative banks and ions homestead associat savings and loan, and the State, District, according to the laws of organized. organized and operated they are chartered or or possession in which  Territory,  7.  Section 108: Section 408(a)(1)(A) of the National Housing Act (12 U.S.C. §1730a(a)(1)(A))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  l savings "(A) "insured institution" means a Federa nk,; a s ba ina l sav era and loan association, a Fed estead or hom n, loa and s building and loan, saving ounts of acc the k, ve ban ati associatior:144. or a cooper Loan and s l ing era Sav which are insured by the Fed Insurance Corporation;"  8.  Sections 201, 202: Section 5(c)(1)(A), (B) of the Home Owners' Loan Act of 1933 (12 U.S.C. 51464(c)(1)(A), (B)) Investment authority  (c) An association may to suca extent, and subject to such rules and regulations as the Board may prescribe from time to time, invest in, sell, or otherwise deal with the following loans, or other investments: (1) Loans or investments without percentage of assets limitation: Without limitation as a percentage of assets, the following are permitted:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (A) Account loans.--Loans on the security of its savings accounts and loans specifically related toEiegotiable orderof-withdrawa,accounts. B) Single-family and multi-family mortgage loans.— Loans on the security of liens upon residential real property in an amount which, when added to the amount unpaid upon prior mortgages, liens or encumbrances, if any, upon such real estilte does not exceed the appraised value thereof, except that the amount of any such loan hereafter made shall not exceed 662/ii per centum of the appraised value if such real estate is unimproved, 75 per centum of the appraised value if such real estate is improved by offsite improvements such as street, water, sewers, or other utilities, 75 per centum of the appraised value if such real estate is in the process of being improved by a building or buildings to be constructed or in the process of construction, or 90 per centum of the appraised value if such real estate is improved by a building or buildings. Notwithstanding the  transactions  a  above loan-to-value ratios, the Board may permit a loan-tovalue ratio in excess of 90 per centum if such real estate is improved by a building or buildings and that portion of the unpaid balance of such loan which is in excess of an amount equal to 90 per centum of such value is guaranteed or insured by a public or private mortgage insurer or in the case of any loan for the purpose of providing housing for persons of low income, as described in regulations of the Board.)  "(B) Real_EL-222rV loans. -- Loans on the securqy of liens upon residential or nonresidential real property." _  (10) 9.  Section 203:  Section 5(c)(1)(G) of the Home Owners' iioan Act of 1933 (12 U.S.C. §1464(c)(1)(G)) ii__"(G)/ Deposits. -- Investments in the time deposits, certifr=r777—or accounts of any bank the deposits of which are insuree, by the Federal Deposit Insurance or in the savings accounts, certificates Corporation gr other accounts of any institution the accounts or which are insured by the Federal Savings and Loan -rnsurance Corporation.  10.  Act Section 204: Section 5(c)(1)(H) of the Home Owners' Loan of 1933 (12 U.S.C. §1464(c)(1)(H)) qenera] of (H) State securities. -- Investments inAobligations fi thereofi n i4sued by t any State or political subdivisio ality). instrument (inc1udin3 any agency, corporation or  11.  Section 205: Section 5(c)(1)(L) of the Home Owners' Lioan Act of 1933 (12 U.S.C. §1464(c)(1)(L))  E  L) Loans to financial institutions, brokers and dealers. -- Loans to financial institutions with respect to whi-cn tne United States or an agency or instrumentality thereof has any function of examination or supervision, or to any broker or dealer registered with the Securities and Exchange Cciimissibn, secured by loans, obligations or inve3tments in which the association has the statutory authority to invest directly or unsecured (L) Commercial,and other loans. -- Secured acricultural or business loans for commercial, corporate, purposes. 12.  Section 206:. Section 5(c)(1)(0) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(0))  irld Land and tlilban laielopment Irsured "(1Housin Loans securel nvelt"rirtrirrft" uaranteed or has the lene it on "'Tref a es as eer which the associati HousIE:71 National the of insurance unaer Tit e X o irsurance, such for Act or of a commitment or agreement the benehas on [L] or (ii) loans as gTvihid-h rhe associati and Housing the of IV Title under fit oI ay guarante the cf B Part under 19687or Urban Development TTt of [Growthr National UrbantPolic and New Community Development ection 802 of the Housinc and LIL Act 0r-7970/or under Community Development Act of 1974 as now or hereafter km or after% in effecti, or of a commitment or agreement there-TT= March 31, 1980j   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ( 1) AcL 13. Section 207: Section 5(c)(1)(P) of the Home Owners' Loan of 1933 (12 U.S.C. §1464(c)(1)(P)) P) State housing corporation investments.—Investments in, commitments to invest in, loans to, or commitments to lend to any State housing corporation, provided that such obligations or loans are secured directly, or rectly through an agent or fiduciary, by a first lien on improved real estate which is insured under the provisions of the National Housing Act and that in the event of default, the holder of such obligations or loans would have the right directly, or indirectly through an agent or fiduciary, to cause to be subject to the satisfaction of such obligations or loans the real estate described in the first lien or the insurance proceeds under the National Housing AO  E  (P) Corporate secures. -- An association 'nay invest in, sen or hold commercial paper and corporat! - debt securities, as defined and approved by the Board.  14.Section 208:section 5(c)(1)(Q) of the Home Owner's' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(Q))  [solely  "(Q) Investment companies. -- An association may invest redeem/or hold shares or certificates in any openend management investment company which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of which is restricted by such management company's investment policy, changeable only if authorized by shareholder votelprimarily to/such investmeR77-/any] (without regard to anY percentage-of-assets restriction applicable to such investment under tnis _Irr=7-rtion) as an association py law or reguraEion mayf invEst ini ,wIthout limitssell, redeem, hold, or otherwise deal with ' tion as to percentage of asseti [The Board shall prescribe rules anI regulations to impOement the previsions of this stit-,aragraph.]  15.Section 209: Section 5(c)(1)(R) of the Home Owilers' Loan Act of 1933 (12 U.S.C. 51464(c)(1)(R))  (R) Consumer loans -- An association may make secured or unsecured loans for personal, family or household purposes, and loans reasonably incident to the provision cf such credit.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (12) 16 •  Section 210: Section 5(c) ut the Home Owners of 1933 (12 U.S.C. §1464(c))  Loan Act  eentum of assets. 72) Loans or investments limited to 20 per 1 but authorpermitted, are investments —The following loans or  not in ity conferred in the following subparagraphs is limited to for association the of assets the of centum per 20 of excess each subparagraph: of (A) Commercial real estate loans.—Loans on security first liens upon other improved real estate. (B) Consumer loans and certain securities. An associapersonal, tion may make secured or unsecured loans for or family, or household purposes, and may invest in, sell, deas securities, debt corporate hold commercial paper and fined and approved by the Boare  (2) Investments limited to 10 per centum of assets. -- The following investments are permitted, but authority conferred in the following subparagraphs is limited to not in excess of 10 per centum of the assets of the association for each subparagraph: (A) Investment in realty. -- An association may invest in real property, and such investment may include, without limitation, subdividing, developing constructing improvements uponj and renovating such property. An association may own, _rent, lease, manage, operate for income or sell such property. (B) Investment in personalty. -- An association may invest in tangible personal propert , includin• without limitation, vehicles, mobile homes, machinery, equipment, or furniture, and may hold such property for rental or sale; (C) Nonconforming loans and investments. -- An association may make loans and other investments not othErwise permitted under this subsection. (3) Loans or investments limited to 5 per centum of assets. —The following loans or investments are permitted, but the authority conferred in the following subparagraphs is limited to not in excess of 5 per centum of assets of the association for each subparagraph:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (A) Education loans.—Loans made for the payment of college, university, or vocational edulcatio3 expense (H) Community development investments.—Investments in real property and obligations secured by liens on real property located within a geographic area or neighborhood receiving concentrated development assistance by a local government under Title I of the Housing and Community Development Act of 1974, except that no investment under this subparagraph in such real property may exceed an aggregate investment of 2 per centum of the assets of the association. (C) Nonconforming loans.--Loans upon the security of or respecting real property or interests therein used for primarily residential or farm purposes that do not comply with the limitations of this subsection]  L  E  D) Construction loans without security.--Investments not exceeding the greater of (A) the sum of its surplus, undivided profits, and reserves or (B) 5 per centum of the assets of the association, in loans the principal purpose of which is to provide financing with respect to what is or is expected to become primarily residential real estate where (i) the association relies substantially for repayment on the borrower's general credit standing and forecast of income without other security, or (ii) the association relies on other assurances for repayment, including but not limited to a guaranty or similar obligation of a third party. Investments under this subsection shall not be included in any percentage of assets or other percentage referred to in this . aubsectionj (4) Other loans and investments.—The following additional loans and other investments to the extent authorized below: (A) Business development credit corporations.—An association whose general reserves, surplus, and undivided profits aggregate a sum in excess of 6 per centum of its withdrawable accounts is authorized to invest in, lend to, or to commit itself to lend to, any business development credit corporation incorporated in the State in which the home office of the association is located in the same manner and to the same extent as savings and loan associations chartered by such State are authorized, but the aggregate amount of such investments, loans, and commitments of any such as' sociation shall not exceed one-half of I per centum of the total outstanding loans of the association or $250,000, whichever is less.  (B) Service corporations. -- Investments in the capital stock, oSirciations, or other securities of any corporation organized under the laws of the State in which the home office of the association is located, if the entire capital stock of such corporation is available for purchase only by savings and loan associations of that State and by Federal associations having their home offices therein, but no association may make any investment under this subparagraph if its aggregate outstanding investment under this subparagraph would exceedA5 per centum of the assets of the association. Provided, that an association may make an investment under this subparagraph notwithstanding that the service cPIP_g_r_AIi2B_iDWb-i.Lh_j.aY_Q_.5J.dngILtLj,51L°El has invested in any other cor-Doration (i) that is not ch;trtered by the State in which the home office of the associiltion is located, or (ii) that has stock available for purchase by entities other than savings and loan associations of that State or by Federal associations having, their home offices in such State.  C3  per centum of the assets of the association, except that not less than one-half of the investment permitted under this subparagraph which exceeds one per centum of assets shall be used primarily for community, inner-city, and community development purposes.]  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (1 ;)  (C)  , certain guaranteed loans]  Foreign assitance invesEments. --/ /A  ci) Loans secured by mortgages as to which the association Chas the benefit of insurance under Title X of the National Housing Act or of a commitment or agreement for such insurance)  Tnvestments in housing project loans haq-fng th6 Denefit of any guaranty under section 221 of the Foreign Assistance 1c of 1961 or loans having the benefit of any guaranteVilder section 224 of such Act, or any commitment or agreement with respect to such'loans made pursuant to either of such sections and in the share capital and capital reserve of the Inter-American Savings and Loan Bank. This authority extends to the acquisition, holding loans having the benefit of any and disposition guaranty under ,aection 221 or 222 of such Act as hereafter amended or extendelt or of any commitment or agreement ior any such guaranty. '  RA  r  oil) Investments under clause (i) of this subparagraph shall not be included in any percentage of assets or other percentage referred to in this subsection) Investments under Elause (ii) oOthis subparagraph shall not exeed, in the case of any association,alcr centum of the assets of such  association_ one  E  D) State and local government obligations.—An association whose general reserves, surplus, and undivided profits aggregate a sum in excess of that amount which is determined by the Board for the purpose of the third sentence of section 403(h) of the National Housing Act is authorized to invest in obligations which constitute prudent investments, as defined by the Board, of its home State and political subdivisions thereof (including any agency, corporation, or instrumentality) if (:) the proceeds of such obligations are to he used for rehabilitation, financing, or the construction of residential real estate, and (ii) the aggregate amount of all investments under this subparagraph ihall not exceed the amount of the association 's general reerves, surplus, and undivided prolitsi  (D) Small business investment companies. -An association may invest in stock, obligations, or other securities of any small business investment company  formed pursuant to section 301(d) of the Small Business Investment Act of 1958, for the purpose of aiding members of the Federal Home Loan Bank System, but no association may make any investm ent  under this subparagraph if its aggregate outstan ding investment under this subparagraph would exceed 1 per centum of the assets of such association.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (15)  C511  E6g Definitions.--As used in this subsection— (A) the terms "residential real property" or "residential real estate" mean leaseholds, homes (including condominiums and cooperatives, except that in connection with loans on individual cooperative units, such loans shall be adequately secured as defined by the Board), combinations of homes and business property, other dwelling units, or combinations of dwelling units including homes and business property involving only minor or incidental business use, or property to be improved by construction of such structures; (B) the term "loans" includes obligations and exteniions reference to a loan or inor advances of credit; and vestment includes an interest in such a loan or investifient; and (C) the term "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, the Canal Zone, Guam, American Samoa, and any territory or possession of the United States.  17.  Section 211:  Section 5(c)(8) of the Home Owners' Loan Act of 1933  "(8) An association may engage in any activity or venture the Board determines to 507-17717731771Fly incident to the exercise c;:f the authority conferre8 subsection, or by subsection (b)• 11  18.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Section 212: Section 5A(b)(1)(B) of the Federal Home Loan Bank Act (12 U.S.C. §1425a(b)(1)(B))  ElquIdIty requlreinen11•1 minimum and maximum aninuntas rulea and rraulntIon• •  (b)(1) Any institution which is A member or which is an insured institution as defined in section 1724(a) of this title shall maintain Vie aggregate amount of its assets of the following types at not less than Ruch amount as, in the opinion of the Board, is appropriate: (A) ca.sh;  •  (B) to such extent as the Board may approve for The purpo ter( of this section, time and savings deposits in Federal Ilo.ne Loan :tanks Cand commercial bank3H1 institutions that are or are  ) to such  extent as t e Board may so approve, such obliga:ions. Including much special obligations, of the United States, a Stitt( , any territory or possession the United States, or a political subdiv;sion, agency or instrumentality of any one or more of the foregoing, and bankers' acceptances, s.s the Board may approve; . (D) to such xtent as the Board tsay so-approve,.slares or c( runcater; of any open-end management investment company which registered with the Securities and Exchange Comnsission under th a investment Company Act of 1940 and the portfolio of w.iich rer .ricted by such investment company's Investment policy, changeable only if authorized by shareholder vote, solely to any of the obligati° is or other investments enumerated in subparagraphs (A) through (C): (E) balances maintained in II- Federal Reserve bank or p, seed through a Federal Home Loan Bank or another depository inr.titution to a Federal Reaerve bank pursuant to the Federal Reserve Act; (F) to such extent as the Board may approve RA liquid. h'ghly rated corporate debt obligations with 3 years or less remainink until maturity; and Ited (0) to such extent as the board may 80 approve, highly commercial paper with 270 days or less remaining until maturity. (2) The requirement prescribed by the Board pursuant to this sul,seedon (hereinafter in this section referred to as the uidity req•airement") may not be leas than 4 per centum or more than 10 per cer tum of the obligation of the institution on withdrawable accounts and bor. owings payable on demand or with unexpired maturities of one year or leas, or in the case of institutions which are insurance conopanies, such o'her base or bases as the Board may determine to be comparable. The 13( ard shall prescribe rules and regulations to Implement the provisions of this subsection.  eligible to becorge, members thereof, and commercial banks.  17) 19.  Sections 301, 302, 303: Section 501 of Public Law 96-221 (12 U.S.C. §1735f-7 note)  "(f) The provisions of the constitution or thc laws 87-777-77777===g t77-nility of a depositflry institution to enter into contracts, or to enforce contracts, whenever executed, providing tIlat the institution may, at its option, declare (1177-7714 payable sums securea by the institution's security instrumen=7-777-777 anv_part of the real property securing tie loar is sold or transre-7777-77-71e borrower without th=nstitunot app y to contracts tion s prior writt2n consent s a on lien resid7=.1 real a 1Dy Involving loans secur77 to a awelling anocat777 property, by a _Lien on stock - Corp6ra ion, nousing unit in a re777777771 cooperative -77t77-777ept manutac="5 or by a lien on a resiaentia pursuant Board Sank Loan tome Federal as limited by the insttution the oy exercise herein, to subsection (g)  57-73777-777717-7777777777-Caiied a aue-on-sa e 7777777 =Moe exclusive_a_ overned oy the terms ot =TM contract, and all fidllts an remeaies or tne irstitution pnd borrower shall be fixed and governed by th,1 contract. In the exercise of its authorit under sunsecton (g, re UTEe institutions to observe tppropriate the Board ma consumer safeguards to the extent it is authorLzed to require such observance by Federal savings 777-7oan 'associations."  ) ) (I [  "i(g )(1)  -The Federal Home Loan Bank Board is althorized to ............ [and] [and to publish]  (A) issue ruleZ-regulations,/interpretatLons or aob ovals governing the impleMentation of :his sec ion; and delegate authority to duly authorized officials, employees or agents ot the hoard tO issue _nterpietations or approvals governing the implementation of this section.  (B)  "(2) No provision of the constitution or laws of any State imposin any liabilit , enalty or forfe_ture shall apply to any act done or omitted in good faInh in conformity with any rule, regulation, interpretation 9r approval under this section by the Federal lome Loan Bank Board or in conformit with any inter retition or _te oracto_fhe Board L.o...y, -. ...1i a..L_sr . .1..L.Fi. appro21. 2. 2 to issue interpre ,la ions duly authorizedby the Boar or approvals under this section under such procedures rescribe therefor, notwithstinding as the Board ma sucI act or omission has occurred, sun rule, Tequlation, or approva is amen ea, rescinae , Or aeterminded by judicial or other authority to be in/alid for any reasont"  (f). _ _for subsection effect on April 1, 1980[.], _ excepi HO] (h) This section takes   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I  20.  Section 401: Section 408(n) of the National Housing Act (12 U.S.C. §1730a)  fm) Notwithstanding any other _provision of State. or Federal law, except as provided in subsections (e)121 and (1) hereof, the Corporation, upon its deterninatiOn that severe financial conditions exist which threaten the stability of a significant number of—insured institutions, or of insured iEstitut1-66 p6-:S--SeiSin---4 significant financial resources, may auth5-riz2, in-its -aiscretion and where it C:otermines such authorization would lessen the risk to the Corporation, an fnsured ing-dEittiti-Eih that is JI-q3715-le for assistance pursuant to section 406(f) of this Act to merge or consolidate with, or to transfer its assets and liabilities to, any other insured institution, may authorize any other insured institution to acquire control_of said_ insured institution, or may authorize any savings and loan holding company to acquire control of said insured institution or to acquiire the assets or assume the liabifiiies Mergers, consolidations, transfers and acquisitions thereof. under this subsection shall be on such terms as the Corporation In considering authorizations under this shall provide. subsection, the need to minimize financial assistance required of the Corporation shall be the paramount consideration, but the Corporation sharl make a reasonable effort to authorize transactions under this subsection in the following sequence: First, between institutions of the same type within the same 37671 -7)7-1-fle same type in State; second, between 37-5different States; thiTd, between iiistitutions of different types in erl-e' same State; and rourth, between institutions of different types in different States.  21.  Section 402: Section 408(e)(2) of the National Housing Act (12 U.S.C. §1730a(e)(2))  (2) The Corporation shall not approve any acquisition under subparagraphs (A)(i) or (A)(ii), or of more than one insured institution under subparagraph (B), of paragraph (1) of this subsectioni._...,_ or an transaction except in accordance with this paragraph. In every case, the CorpoInd er subsection m ration shall take into consideration the financial and managerial relereof sources and future prospects of the company and institution involved, and the convenience and needs of the community to be served, and shall render its decision within ninety days after submission to the Board of the complete record on the application. Be• except a fore approving any such acquisition,hthe Corporation shall request transaction under from the Attorney General and consider any report rendered within subsection (r0 hereof thirty days on the competitive factors involved. The Corporation shall not approve any proposed acquisition— (A) which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to att2mpt to monopolize the savings and loan business in any part of the United States, or (B) the effect of which in any section of the country may be substantially to lessen competition, or tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed acquisition are clearly outweighed in the public interest by the proballe effect of the acquisition in meeting the convenience and needs of the community to be served.  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  22.  Section 403: Section 5(o) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(o)) "(o) Notwithstanding any other provision of this section or State law, and consistent with tne pmposes of this Act, the Board may authorize (or in the case of a .11 PederaI association, require) the convers1.9 of a mutual savings and loan assoCiation or mutual savings bzink into a 77-deral stock savings and . -7 savings bank, or charter loan associa= or Federal s77k a Federal stock savings and loan association or Eecteral ;lock savings bank to acquire the assets at, or merge With such a mutual institution under the rules and r ,2aulations The Board may condition its approval of the pf the Board. conversion or acquiFdtion of a mutual savings tpank under this subsection that was previously insured by the Federal Deposit Insurance Corporation upon the receipt rnm trTe'retre7ai uepubrt -4 Insurance Corporation of reasonable indemnificataon of-Ehe Federal Savingsloan Insurance Corporation :or iossseg T7777777-777777777771-by the latter as a consequence at its insuring the accounts 5f such institution, as agreed to by the Corporations. Authorizations under this subsection mai be made only to assist an institution in receivership, or if the primary Federal supervisor has determined tnat sever? ' financial conditions exist which threaten the stability of an institution and tha: such authorization is likely to improve the financial condition of the institution, or when either of the Cor orations as contracted to provide assi:tance to such institution unaer section 40. o t e la ional T-lousing Act or section 13 of the-77777777777777777=77)ce Act.-.  23.  Section 404*. Section 406(f) of the (12 U.S.C. §1729(f)) National Housing Act  [a] [in] "(f)(1) In order to preventlthe default/of an insured institutions or in order to restore an insured irstitution in default to normal operation, or, when severe linancial „conditions exist which threaten the stability of • signifd_c_fin_t_aumtLes of insured institutions or of ins' re institutions yossessina sianificant financial ref.ources, in order to lessen t're risk to the Corporation pc,sed by an insured institution under such threat of instzbilitv, the Corporation is authorized, in its f.ole discretion and upon such terms and conditions as it may determir.e, to make loans to, to make deposits in, to purchase the assets nr securities or tc2 assume the liabilitie; of, or to make a contribution to, zuch an insured institution or sucb an insured institution),sp trptc,_ned. -[in default]   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "(2) Whenever an insured institution is in default or, in the judgment of the Corporation, is in danger of default or, whenever severe financial condi+'ions exist -9 I• insured institutions, or of insured institutions_posses_s_ing sinificant financial resources, and in order to lessen the risk to the Cornoration nosed by an insured institution under .52,2s,J1_Ihreat of instability, the Corporat ion/isautil, [may in its sole disscretion, in order to facilitate a merger or consolidation of such insured institution with another insured institution or the sale of/assets of such insur ed [tne institution and the assumption of its liabilities by anothe r insured institution./. and upon such terms and conditions as the Corporation may determine, to purchase any such assets or assume any such liabilities, or make loans Dx contributions to, or deposits in, or purchase the secur ities of1 such other insured institution, or guarantee such other insured institution against loss by reason of its merging or consolidating with or assuming the liabilities and purchasing the assets of such int:ured institution in or in danger of default, or under threat 9f instabiiitY. The Corporation may provide any party acquiring control of, merginq with, consolidatiaT with or acauiring the assets of an insured institutiola under Lerti_an 40Blm) of this Act_ with such financial assistAnce as it could provide an insured institution under this subsection.  [contribution or guarantee] [made] "(3) No/Assistance shall be/provided pursu ant to[paragraphs (1) oi this subsection in an amount in excess of that which (2) of] the Corporation finds to be reasonably necessary to save the cost of liquidating, including paying the insur_ed accounts cf1 such insured instit ution in or in danger of default, s2_1- under threat of instability, but if the Corporation determines that the continued operation of such institution is essential to provid e adequate savings or home financing services in its community, such limitation upon the amount of/A.s sistance shall not apply." [a contribution or guaran tee]   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (2 1 )  24.  Section 405: Section 406 cf the National Housing Act (12 U.S.C. §1729)  (a) In order to facilitate the liquidation of insured institutions, the Corporation is authorized (1) to contract with any insured institution with respect to the making available of insured accounts to the insured members of any insured institution in default, or (2) to provide for the organization of a new Federaltiavings and loaliassociation for such purpose subject to the approval of the Federal Home Loan Bank Board.  (b) In the event that a FederalEavings and loanlassociation is in default, the Corporation shall be appointed as conservator or receiver and [is authorized] as such (1) is authorized (i) to take over the assets of and operate such association, [(2)] (ii) to take such action as may be necessary to put it in a sound and solvent condit ion, [(3)] (iii) to merge it with another insured institution, [(4)] (iv) to organize a new Federal [savings and loan] association to take over its assets, [or (5)] (v) to proceed to liquidate its assets in an orderly manner, [whichever shall appear] or (vi) to make such other disposition of the matter as it deems to be [to] in the best interest[s] of the [insured members of the] association [in default] its savers, and the Corpor ation, and (2) shall pay all valid credit obligations of the associa tion. hand in any event the] The Corporation shall pay[the] insurance as provided in section 405 [and all valid credit obligations ot such associa tion]. The surrender and transfer to the Corporation of an insured account in any such association which is in default shall subrogate the Corpora tion with respect to such insured account, but shall not affect any right which the insured member may have in the uninsured portion of his account or any right which he may have to participate in the distribution of the net proceeds remaining from the disposition of the assets of such association.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (e)(1) In the event any insured institution other than a Federal and loar3 association is in default, the Corporation shall have authority to act as conservator, receiver, or other legal custodian of such insured institution, and the services of the Corporation are tendered to the court or other public authority having the power of appointment. If the Corporation is so appointed, it shall have the same powers and duties with respect to the insured institution in default as are conferred upon it under subsection (b) of this section with respect to FederalUavings and loarjassociations. If the Corporation is not so appointed it shall pay the insuranc e as provided in section 1728 of this title, and shall have power (1) to bid for the assets of the insured institution in default, (2) to negotiate for the merger of the insured institution or the transfer of its assets, or (3) to make any other disposition of the matter as it may deem in the best interests of all concerned.  L7avings  (22)  (B) Notwithstanding any provision of state law, or of this section, in the event fhe Federal Borne Loan Bank Board determines that any of the grounds specified in section 5(d)(6)(A)(i), (ii l or iiiJ of the Home Owners -Loan Act of 1933 exist with respect to an insured institution, other than a Federal association, the Board shall have exclusive power and jurisdiction 2.0 appoint the Corporation as sole conservator or receiver of In z,uch cases the Corporation shall have uuch in7;titution. ,the sam_pow-e-rs and dules with respect to inured Institutions t under subsection (b) of this section as are conferred upon with respect to Federa1 associations.  (2) In the event the Federal Home Loan Bank Board determines— (A) that (i) a conservator, receiver, or other legal custodian (whether or not the Corporation) has been or is hereafter appointed for an insured institution which is not a FederaVavr or ings and loan association other than by the Board (whethe— not such ins itution is in default) and that the appointment of such conservator, receiver, or custodian, or any combination thereof, has been outstanding for a period of at least fifteen consecutive days, or (ii) an insured institution (other than a FederalEavings and loarlassociation) has been closed by or under the laws of any State; (B) that one or more of the grounds specified in paragraph (6)(A) of section 1464(d) of this title, existed with respect to such institution at the time a conservator, receiver, or other legal custodian was appointed, or at the time such institution was  p  closed, or exists thereafter during the appointment of the con. servator, receiver, or other legal custodian or while the institution is closed; and (C) that one or more of the holders of withdrawable accounts in such institution is unable to obtain a withdrawal of hits account, in whole or in part; the Board shall have exclusive power and jurisdiction to appoint the Corporation as soleAreceiver for such institution. As used paragraph (2), the term "State" includes the Commonwealth of Puerto Rico, the territories and possessions, and any place subject to the jurisdiction of the United States. i-Nlragraph (1) (3) In any case where the Corporation is appointed receiver of an or insured institution pursuant (A) the provisions of section 1464(d) of this title shall be applicable in the same manner and to the same extent as if such institution were a FederalEavings and loarIssociation with respect to which the Corporation had been appointecl oi.receiver under paragraph (G) thereof, and the provisions paragraph (14) of said subsection (d) shall be applicable in the same manner and the same extent that they would be applicable if the insured institution were an institution referred to in the first sentence of said paragraph; and (B) the Corporation shall have authority to liquidate such institution in an orderly manner or to make such other disposition of the matter as it deems to be in the best interests of the institution, its savers, and the Corporation. connection with the liquidation of any such institution, the lanEL guage "the court  or other public authority having jurisdiction over the matter" in subsection (d) of this section shall mean said BoarD   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  conservator or  conservator or  (23) (di In connectio;i with the liquidation of insured institutions in default, the Corporation shall have power to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith, subject only to the regulation of theEourt or other public authority having,jurisdiction over the matterl  —41  _ Federal Home Loan Bank Board, or, in cases where the Corporation has been aepointed conservator, receiver, or legal custodian solely by a public authority having jurisdiction over the matter ot5er than said Board, sub'ect only to the regulation cf such public authority.  25.  Section 406: Section 16 of the Federal Home Loan Bank Act (12 U.S.C. S1436)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  § 14.3t1. Reeerves and dividends klEach Federal Home Loan Bank shall carry to a reserve account semiannually 20 per centum of itii net earnings until said reserve account shall show a credit balance equal to 100 per centum of the paid-in capital of such bank. After said reserve has reached 100 per centum of the paid-in capital of said bank, 5 per centum of its net earnings shall be added thereto semiannually. Whenever said reserve shall have been impaired below 100 per centum of the paid-in capital it shall be restored before any dividends are paid. Each Federal Home Loin Bank shall establish such additional reserves and/or make such charge-offs on account of depreciation or Impairment of its assets as the board shall require from time to time. No dividends shall be paid except out of net earnings remaining after all reserves and charge-offs requited under this chapter have been provided for, and then only with the approval of the board. The reserves of each Federal Home Loan Bank shall be invested, subject to such regulations, restrictions, and limitations as may be prescribed by the board, in direct obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association, in mortgages, obligations, or other securities which are or ever have been sold by the Federal Home Loan Mortgage Corporation pursuant to section 1454 or section 1455 of this title, and In such seeuritiet as fiduciary and trust funds may be Invested in under the laws if the State In which the Federal Home Loan Bank is located.  "(b) Notwithstanding subsection (a) or any other provision of this Act, if the Board determines that  sevre financial conditions exist threatenin(f the stability of member institutions, it may sus_pend temporarily the requirements under subsection (al thil:t_doiLill net_earmings be set aside ;',eminnually by _each Federal Home Loan Bank to a reserve s ccount and pP ,-mit each Federal _Home loan Ban}: to declare. and pay dividend-s out of undivided p: ofits. Thereafter, divi6ends shall be paid in accordance *_wbsfc_tiOn_i)2"  26.  Section 4u/(a): Scctioli 402(d),(i) of the National Housing Act (12 U.S.C. §1725(d),i))  oprrattiona  oses of this subchapter, the Corporation shall (d) For the Lave Power to borruw money, and to issue notes, bonds, debentures, or other such obligations upon such terms and conditions as the Federal Borne Loan Bank Board may deterrninVIIoneys of the Corporation not required for current operations shall be deposited in the Treasury of the United States, or upon the approval of the . any Federal Reserve bank, or shall be S!cretary of the Treasury, in ii,vested in obligations of, or guaranteed as to principal and interest by, the United States. When designated for that purpose by the Secretary of the Treasury, the Corporation shall be a depositary of public money under such regulations as may be prescribed by the Secretary of the Treasury, and may also be employed as fiscal agent of the United States, and it shall perform all such reasonable dutiea as depositary of public money and fiscal agent as may be required of it. Insured institutions shall be depositaries of public money and may be employed wp fiscal agents of the United States. The Secretary of the Treasury is authorized to deposit public money in such insured institutions, and shall prescribe such regulations as may be necessary to enable such institutions to become depositaries of public money and fiscal agents of the United States. Each insured institution shall perform all such reasonable duties as depositary of public money and fiscal agent of the United States as may be required of it including services in connection with the collection of taxes and other obligations owed the United States.  Loans ifs  ....i.  , except that interest on loans from the Federal Home Loan Bank shall be not less than their current marginal _c211 ;s of funds, taking._ Into account the maturies invo1ved 2_ and loans from the Federal Home Loan Banks shall be adequately secure_j_, as determined by the Federal Home Loan Bank Board.  rorporstlaw  (i) The Corporation is authorized to borrow from the Treasury, a.-d the Secretary of the Treasury is authorized and directed to loan to tht Corporation on such terms as may be fixed by the Corporation and the Secretary, such funds as in the judgment of the Federal Home Loan Bank Board are from time to time required for insurance purposes, not exceeding in the aggregate $750,000,000 putstand• inr at any one time, and the Corporation hereafter shall not exercise its borrowing power under the first sentente of subsection (d) of this section for the purpose of borrowing money from any other from the Treasury source). Provided, That each such leanohall bear interest at a rate ,determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the making of such Joan: Provided further, That nothing in this subsection shall prevent the Corporation from issuing debentures in at• cordance with the provisions of subsection (b) of section 1728 of this title., For the .p—u rposes of this subsection the Secretary of the Treasury is authorized to use a s a public-debt transaction the proceeds of the sale of any securities hereafter issued under the Second Liberty Bond Act, as now or hereafter in force, and the purposes for which securities may be issued under the Second Liberty Bond Act, as now Or hereafter in force, are extended to include such loans. Any such loan shall be used by the Corporation solely in carrying out its functions with respect to such insurance. All loani public-deb: and repayments under this subsection shall be treated as trarsactions of the United States.  i  Qxcept the Federal Home   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (25)  27.  Section 407(c): Section 11 of the Federal Home Loan Bank Act (12 U.S.C. §1431)  authorized The Federal Home Loan Banks are Loan and Savings Federal t..o make loans tOe board, but the b directed as Insurance Corporation, Housing Act. National the of 402(d) subject to Section (k)  Section 408: Section 404 of the National Housing Act (12 U.S.C. S1727)  28.  "(h) Notwithstanding any other provision of this section, the CorrDoration, upon its determination that extraordinary financial conditions exist increasing, the risk to the Corporation, may terminate distribution of shares of the secondary reserve and utilize said It reserve on the same basis as the primary reserve. such resume ma otherwise gistribution u on its determination that sal conntions no longer exist. 29.,  Section 501: Section 17(a) of the Federal Home Loan Bank Act (12 U.S.C. §1437(a))  § 1437. Federal Home Loan Bank Board; creation; composition; powers and duties; salaries; independent agency; report to Congress (a) The board shall supervise the Federal Home Loan Banks created by this chapter, shall perform the other duties specifically prescribed b: this chapter, and shall have power to adopt, amend, and require the ob. servance of such rules, regulations, and orders as shall be necessary from time to time for carrying out the purposes of the pro'Wong of thin ch_apterbe The board shall have power to suspend or remove any di[ rector, officer, employee, or agent of any Federal Home Loan Dank, Ow c,ause of such suspension or removal to be communicated in writing forthwith to such director, officer, employee, or agent, and to such Feder& Home Loan Bank.  "Notwithstanding any other provision of law, the Board may from time to time make such provision as it deems appropriate authorizing the perforiaance by any officer, emp oyee, agent or administrative unit thereof function ofof the Board (including any function cf the Federal Savings and Loan Insurance Corporation', except 777Ch regard €ö promulgationof rules and reguli,tions ln aceordance wit7-777====TIVE—PraEed=r77T, and adjudications sZiriect to such Act."  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (26) 30.  Section 502: Section 5(d)(8)f 71) of the Home Owners' Loan Act of 1933 (12 U.S.C. S1464(d)(8)(A))  (8)(A) The Board may in its discretion apply to the United States district court, or the United States court of any territory, within the jurisdiction of which the home office of the association is located, for the enforcement of any effective and outstanding notice or order issued by the Board under this subsection (d), and such courts shall have jurisdiction and power to order and require compliance therewith; but except as otherwise provided in this subsection no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this subsection, or to review, modify, suspen d, terminate, or set aside any such notice or order. Any court having jurisdiction of any proceeding instituted under this subsection by an association or a director or officer thereof, may allow to any such partyisuch reasonable expenses and attorneys' fees as it deems just and proper; and such expenses and fees shall be paid by the association or from  , which prevails,  its assets.  31.  Section 503: Section 405(d)(3) of the National Housing Act (12 U.S.C. §1728(d)(3)) "(3)(a) Notwithstanding any limitati on in this title or rriany other provision of law relating to the amount of deposit insurance available for any one riccount/IL If] Li] Funds invested in an insured inst itution pursuant to a pension or profitEshari ng plan described in section 401(d) of the Internal Revenue Code of 1954, as amended, and funds invested in an insu red institution in the form of individual retirement acco unts as described in section 408(a) of the Internal Revenue Code of 1954 as amended, shall be insured in the amount 4$100,000] of/$500,000 per account; Cii) Funds invested in an insured inst itution pursuant to a trusteed emnloyee benefit plan sT1-777-be Insured in the amount o 00,910 per rusT est.ate; and (iii) Funds invested in an insured institution n the form of an iAccout_of apyState _deferrecLaaraensation plan as described in section 457 of the Internal Revenue Code of 1954, as amended, shal l be insured in the amount of 500, 75—W 00 1 npoyee—r=t7171771ons to such accounts. (b) As to any plan qualifying under section 401(d) as amended, or section 408(a) of the Internal Reve nue Code of l)54,/€ term "per account" means the present vest ed and ascertainable interest of each beneficiary under the plan , excluding any remainder interest created by, or as a result of, the plan."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ;27) )2.  Section 504: Section 10 of the Federal Home Loan Bank Act (12 U.S.C. §1430)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -Z I F-F1'ar-24 (a) Each Federal home Loan \Tank is authorized to or -vances to its members upontthesecurity[of home mortgages, guaranteed fully obligations obligations of the United States, or and by the United States, subject to such regulations, restrictions, shall advance such ['Any prescribe. may Board the as ]imitation be subject to the following limitations as to amount: (1) Irsecured by 1. mortgage insured under the provisions of subchapters I, II, VI, VIII, or X of chapter 13 of this title, the advance may be for an amount not in excess of 90 per centum of the -unpaid principal of the mortgage loan. (2) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of six years or more, or in cases where shares of stock, which are pledged as security for such loan, mature in a period of six years or more, centum the advance may be for an amount not in excess of 65 per case no in but loan; mortgage home the of principal -of the unpaid shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home mortgage loan. (3) If secured by a home mortgage given in respect of any other home mortgage loan, the advance shall not be for an amount ir excess of 60 per centum of the unpaid principal of the home mortgage loan; but in no case shall the amount of such advance ex-ceed 40 per centum of the value of the real estate securing the Iome mortgage loan. (4) If secured by obligations of the United States, or obligations fully guaranteed by the United Stales, the advance shall not bf for an amount in excess of the face value of such obligations]  (b) o home mortgage shall be accepted as collateral security for ,n advance - by a Federal liotrie Loan Dank if, at the time such advance 's made (1) the home mortgage loan secured by it has more than thirty years to run to maturity, unless such home mortgage Is insured under t e National Housing Act, as amended, or insured or guaranteed under the Servicemen's Readlustment Act of 1944, as amended, chapter 37 of Title 38, or (2) the home mortgage exceeds a sum equal to the dollar limit ttion under the first proviso of the first sentence of section 1464(c) of Ws title for each home or other dwelling unit covered by such mortgage, or (3) is past duo more than six months when presented, unless the amouitt of the debt secured by such home mortgage is less than 50 per centum of the value of the real estate with respect to which the home mortga4e was given, as such real estate was appraised when the home mortga'm was made. For the purposes of this subsection and subsection (a) yf this section the value of real estate shall be as of the time the advarze is made and shall be established by such certification by the borrowi.ig For Vie institution, or such other evidence, as the board may require nurooaes of this section, each Federal Home Loan Bank shall save poi er to make, or to cause or require to be made, such appraisals and other •nvestigations as it may deem necessary. No home mortgage otherwise eligible to be accepted as collateral security for an advance by a Fede - al Home Loan Bank shall be accepted if any director, officer, employee, ittorney, or agent of the Federal Home Loan Bank or of the borrowl ig Institution is personally liable thereon, unless the board has specifics ly approved by formal resolution such acceptance.  28)  (c) Such advances shall be made upon the note or obligation of the member or nonmember borrower secured a •n this sec-tian., bearing such rate of interest as t e oard may approve or determine, and the Federal Home Loan Bank shall have a lien upon and shall hold the stock of such member as further collateral security for all indebtedness of the member to the Federal Home Loan Bank. At no time shall the aggregate outstanding advances made by any Federal Home Loan Lank to any member exceed[welv3 imes the amounts paid in by such member for outstanding capital stock held by it, or made to a nonmember borrower exceed EwelvD tinn7;-the value of the security required to be deposited under subsection •(e) of section 1426 of this title.  33.  firiehty  Section 505: Section 405(a) of the National Housing Act (12 U.S.C. §1728(a))  Amount of Insurance  (a) Each institution whose application for insurance under this subchapter is approved by the Corporation shall be entitled to insurance up to the full withdrawal or repurchasable value of the Accounts of each of its members and investors (including individuals. partnerships, associations, and corporations) holding withdrawabla or renurchanable shares, investment certificates, or deposits, in suds_ institution; except that no member or investor (other than a member or investor referred to in subsection (d) of this title) of any such institution shall be insured for an aggregate amount in excess of $100,000./For the purpose of clarifying and defining the insurance coverage under this subsection, subsection (d) of this section, and subsection (b) of section 1724 of this title, the Corporation is authorized to define, with such classifications and exceptions as it may prescribe, terms used in those subsections and in subsection (c) of section 1724 of this title and the extent of the insurance coverage resulting therefrom.  "Whenever the liabilities of an insured instiLution for accounts shall have b?en assumed by another insilrecl institution or institutions, whether by way of mer.T ..r, 00 0 dation or other statutor assum tion or .u -suant to contract, all accounts so assumed shall have seprate, insurance which shall terminate at the end of six months Lt.-0m the date such assumption takes effect or, in t7i_q case of any Certificate account, the earliest maturLy date after the six—month period."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  fLA)ChtIf  ( 29)  34.  Section 506: Section 6(c)(2) of the Federal Home Loan Bank Act (12 U.S.C. §1426(c)(2))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Minimum; subscriptions; rteiremrnt of oversubscriptions; limitations; e•acellation of over•ut.criptions; aggregate unpaid lora principal; reports and Information (C) (1) The original stock subscription of each institution eligible to become a member unde.. section 1424 of this title shall be an amount equal to 1 per centum cf the subscriber's aggregate unpaid loan principal, but not less than $5CCe The bank shall annually, as of the close of the calendar year, adjust, at such time and in such manner and upon Buell terms and conditions as the Federal Home Loan Bank Board may by regulations or otherwise prescribe, the amount of stock held by each member. so that such member shall have invested in the stock of the Federal Home Loan Bank at least an amount calculated in the manner provided in the next preceding sentence (but not less than $600). If the bank finds that the investment of any member in stock is greater than that required under this subsection it may, unless prohibited by said Board or by the . provisions of paragraph (2) of this subsection, in its discretion and upon application of such member retire the stock of such member in excess of the amount so required. Said Board, in its discretion, may, by regulations or otherwise, provide for adjustments in amounts of stock to be issued or retired In order that stock may be issued or retired only 11 entire shares. (2)The provisions of paragraph (1) of this subsection shall be subject to the following limitations: (I) No member which is a member on September 8, 1961 shall b., permitted to reduce its stock to an amount which Is less than the amount held by it as of the close of such date, except that a member may at any time reduce its stock to an amount which Is not lees than 2 per centum of Its aggregate unpaid loan principal as of tha beginning of the calendar year in which the reduction is made (but not less than $500): Provided, That if the amount to which such stock is so reduced is less than 2 per centurn of such member's aggregate unpaid loan principal as of the close of Septenabe: 8, 1961 such reduction may be made only to such extent as said Board in its discretion may by regulations or otherwise provide.. Notwithstanding any other provision of this uubsection, ni action shall be taken by any bank with respect to any member pursuant, to any of the foregoing provisions of this subsection If the .4 1 effect of such action would he to cause the aggregate outstanding : advances, within the meaning octhe last sentence of subsection (c) of kection 1430 of this title or within the meaning of regulations of the Eaidg Board defining said term for the purposes of this sentence, mad by such bank to such member to exceed twenty times the amount; paid in by such member for outstanding capital stock held by sue). member. (3) Except as provided In subsection (1), of this section, upon retire meat of stock of any member the bank shall pay such member for th stock retired an amount equal to the par value of such stock, or, at the election of the bank, the whole or any part of the payment which woule otherwise be so made shall be credited upon the indebtedness of th. member to the bank. In either such event, stock equal in par value to the amount of the payment or credit, or both, as the case may be, shall be canceled. (4) For the purposes of this subsection, the term "aggregate unpale. loan principal" means the aggregate unpaid principal of a subscriber'E or member's home mortgage loans, home-purchase contracts, and simila• obligations.  „la  _  (6) TEe Federal Home Loan Bank Board, by regulations or other wise, may require each member to submit such reports and informatioe as said Board, in its discretion, may determine to be necessary or appro prlate for the purposes of this subsection.  V-  (30)  35.  Section 507: Section 8a of the Federal Home Loan Bank Act (12 U.S.C. §1428a)  There is hereby created a Federal Savings and Loan Advisory Council, which shall continue to exist as long as the Board biannually deternainea, as a matter of formal record, after consultation with the Director of the Office of Management and Budget, with timely notice in the Federal Re„:later, to be in the public interest in connection with the performance of duties imposed on the Council by law. The Council shall, in all other respects, be subject to the provisions of the Federal Advisory Committee Act. The Council shall consist of one member for each Federal Home Loan Bank district to be elected annually by the board of directors of the Federal Home Loan Bank in such district and twelve members to be appointed annually by the Board to represent the public interest. Each such elected member shall be a resident of the district for which he is elected. rAU members of the Council shall serve without compensation, but shall be entitled to reimbursement from the Board for traveling expenses It curred in attendance at meetings of such Council The Council shall meet a as ngton, at ct o o urn .1a, at least w ce a year and oftener if requested by the Board. The Council may select Its chairman, vice chairman, and secretary, and adopt methods of procedure, and shall have power— (1) To confer with the Board on general business cond - tions, and ol: special conditions affecting the Federal Home Loan Banks and their members and the Federal Savings and Loan Insurance Corporation. . (2) To request • information, and to make recommendations, with respect to matters within the jurisdiction of the Board and the Federal Say . Lags and Loan Insurance Corporation.  Ibiect to the provisions of 57 of the Federal Advisory Committee Act[ all members and alternates of ent..tled the Council may be compensated and shall be traveli e;. pensez ng for to reimbursement from the Board Council ," such of meeting s attenda nce at incurred in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ( 31)  36.  Section 508: Section 6(1) of the Federal Home Loan Bank Act (12 U.S.C. §1426(i))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NVithdrawal or remural of members; surrender and cancelbitIon of stock  (i) Any member other than a Federal savings and loan association may withdraw from membership in a Federal Home Loan Bank six . months after filing with the board written notice of intention no to do, and the board may, after hearing, remove any member from membership, or deprive any nonmember borrower of the privilege of obtaining furthpr advances. if, in the opinion of the board. such member or nonmember borrower (1) has failed to comply with any provision of this chapter or regulation of the board made pur,aiant thereto; (ii) is insolvent: Provided, That any member of a bank which is a building and loan association, savings and loan association, cooperative bank, or homestead association shall be de .med insolvent if the assets of such member are less than its obliga',.ions to its creditors and others, including the holders of its withdra‘, able accounts; or (iii) has a management or home-financing policy of a character inconsistent with sound and economical home final cing or with the purposes of this chapter. In any such case, thc indebtedness of such member or nonmember borrower to the Fed,. eral Home Loan Bank shall be liquidated, and the capital Ptock In the Federal Home Loan Bank owned by such member shall be surrendered and cancele Upon the liquidation of such indebtedness suc mem er or nonmember borrower shall be entitled to the return of its collateral, and, upon surrender and cancellatio of such capital stock, the member shall receive a sum equal to its cash paid subscriptions for the capital stock surrendered, eYcept that if at any time the board finds that the paid-in capital of a Federal Home Loan Bank is or is likely to be impaired as a rcsult of losses in or depreciation of the assets held, the Federal 'Tome Loan Bank shall on the order of the board withhold from the am )unt to be paid in retirement of the stock a pro rata share of the am )unt of such impairment as determined by the board.  provided, however, that in the case of a voluntary • • •" • 1 S. II "• A Pr I. Iaayment of any such indebtedness and shall 12 subject tn Any penalt ie.s applicable_to_s_uch i.r_p‘ paymP.L..t...." • "-  JUN 15 1981  The Honcrdbie Richard T. Pratt Chairman F,14,Jral Herne Loan daAk board 1)00 G Street, N.W. Washington, D.C, /0e  Oear-*r-r-tlfTIITTNV: Wa :zppreclatd your sending us the 1931 report to Congress dcribing the !..ank 63ard's cctivities under Section 18(f) of the Federal Trade Commission Act. Since we have si4i1ar raspQnsibillties under tho act, I have forwarded your repurt to Janet Hart and her ut4ff In our Division of Consumer and Community Affairs for closer r,tadirg. Again, thank yuu for tha information. Sincerely,  "S/  bcc:  Chairman's office J. Eart D. Smith,/ Governor Schultz  -1J Oql DSS:aem 6/1 1/81 M-1208   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  APO Cr. ri.10;NORF. .7F 1!-i 131*:.7 t  1700 G Street, NW Washington, D.0 20552  Federal Home Loan Bank Boa l9r9al  Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  RECK1Vt.:9  Federal Sayings and Loan Insurance Corporation  CFFICE. H  HARD T PRATT CHAIRMAN  MAY 14 1981  'rlonorable Paul A. Volker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: I am pleased to forward to you the Federal Home Loan Bank Board's second annual report to the Congress on this agency's activities to eliminate unfair and deceptive trade practices in the savings and loan industry. Our report indicates that we have improved our handling of consumer complaints and significantly reduced the number of unresolved complaints. Exhibit A to the Report lists regulations adopted by the Board which address areas potentially involving unfair or deceptive trade practices. Sincerely,  Richard T. Pratt Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ANNUAL REPORT TO CONGRESS ON SECTION 18(f) OF THE FEDERAL TRADE COMMISSION ACT  FEDERAL HOME LOAN BANK BOARD May 8, 1981  INTRODUCTION  This is the second annual report describing the activities of the Federal Home Loan Bank Board ("Board") in fulfilling its responsibilities under Section 18(f) of the Federal Trade Commission Act. Those responsibilities are: (1) to identify unfair or deceptive trade practices and to adopt regulations prohibiting such practices; (2) to receive and take appropriate action upon complaints directed against insured savings and loan associations; and (3) unless certain exceptions apply, to promulgate regulations applicable to insured associations that are substantially similar to rules prescribed by the Federal Trade Commission, within 60 days after such FTC rules take effect. The Department of Consumer and Civil Rights (DCCR) of the Office of Examinations and Supervision (OES) administers the Board's activities relating to unfair and deceptive trade practices. DCCR, established in late 1979, was staffed and became fully operational in 1980. The activities of DCCR form the core of the Board's Consumer Program, published for comment in the Federal Register in October 1980, and adopted by the Board on February 19, 1981.  1. REGULATORY ACTIVITIES A.  New Regulations  A large number of the Board's regulations cover subjects which could involve These regulations, including those unfair and deceptive trade practices. adopted in 1980, are listed in Exhibit A. As new regulations are considered and as existing regulations are simplified or revised, the Board takes into account its responsibility to eliminate unfair and deceptive trade practices. During 1980, this consideration resulted in the requirement for disclosures on adjustable mortgage loans, elimination of the "Rule of 78's"* for certain mobile home loans, and generally in the new consumer and real-estate lending powers granted to savings and loan associations. During the public comment periods for proposed amendments to the Board's adjustable mortgage regulations, DCCR circulated the proposals to consumer organizations and invited them to comment. DCCR reviewed all consumer comments as well as many industry comments to these proposals and ensured that the Board, in deliberating the proposals, was fully aware of consumer considerations.  * The "Rule of 78's" is a mathematical formula for calculating the refund of unearned interest when an installment loan is paid before maturity. The formula is front-loaded, thus favoring the lender.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page 2  B.  Identification of Practices  Another major DCCR activity was its participation in the activities of the Consumer Compliance Task Force of the Federal Financial Institutions Examination Council, a forum for coordinating the examination activities of the federal financial regulatory agencies. Through participation in the FFIEC, the Board identifies and designs corrections for unfair and deceptive trade practices. The Council adopted the Task Force's recommendations for uniform procedures for examining regulated institutions for compliance with the Community Reinves— tment Act ("CRA") and with the Right to Financial Privacy Act. The Consumer Compliance Task Force also wrote and obtained Council approval for the CRA and Regulation Z (Truth in Lending) Policy Guides for examiners and a Consumer Guide for CRA. The Board joined the other members of the FFIEC in issuing a policy statement on advertising for NOW accounts. The Board issued the policy statement on September 30, 1980, requiring associations advertising NOV account services to clearly state when the NOW account would be opened, and reminding associations that all advertisements for NOV accounts should comply with Regulation Q, and that the accounts should be accurately described. C.  Consumer Education  An important factor in eliminating unfair and deceptive trade practices is the knowledgeable consumer. To this end, during 1980, Board's staff attended meetings on invitation from civil rights groups and consumer groups including meetings scheduled by the White House Consumer Office. Using the consumer complaint process to identify issues of importance to con— sumers, DCCR staff found that consumers need more information about the early withdrawal penalty changes which the Board and the Depository Institutions Deregulation Committee ("DIDC") made in the last two years. DCCR receives numerous complaints and questions about changes in penalty requirements. To help reduce this confusion, DCCR prepared a fact sheet which explains each penalty, the time period during which each was effective, and how these penalties must be applied by the institution. To better distribute consumer information, DCCR prepared a Consumer Resources Guide containing information for consumers on various Board programs. The information included material explaining the Board and the Federal Home Loan Bank System, fact sheets of Board regulations, and the consumer brochure "There Ought to Be a Law... There Is" which includes a form and instructions for filing a complaint. DCCR distributed this Consumer Resource Guide at the consumer information fairs in which DCCR participated.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  2.  COMPLAINT INVESTIGATION AND ENFORCEMENT ACTIVITIES  During 1980, DCCR continued to monitor consumer complaints and unfair or decep— tive trade practice problems identified in examinations. In 1980, the Board received 4,210 complaints. The largest category of these complaints, involving savings accounts, comprised 43.5 percent of the complaints, up from 30 percent in 1979. Complaints about loans fell from 56.2 percent in 1979 to 43.4 percent in 1980. The decrease in complaints about loans is attributable largely to in the decrease in complaints concerning loan charges (720 in 1979 and 542 lending in tion discrimina 198)). We also received fewer complaints alleging in 1980 (123) than in 1979 (215); fewer complaints concerning the adverse action notices required by Regulation B (144 in 1980, 162 in 1979) and fewer complaints under the Consumer Credit Protection Act (85 in 1980, 142 in 1979). in During 1980, DCCR acted on 4,276 complaints, including complaints received the at 1979. DCCR has reduced the number of unresolved complaints from 475 only end of calendar year 1979 to 409 at the end of 1980. As of April 1981, In 13.7 percent of the cases 37 complaints received in 1980 remain open. n violations or errors. associatio found Board the 1980, in closed received and by an association both correction voluntary of This includes 182 instances ately, the highest Proportion ion. investigat Board's the before and after alleging problems complaints in was percent) (39 error rate of association practices. with advertising high In complaints concerning escrow accounts, there was a1s3 a comparatively , complaints account escrow 212 the Of error. rate of association violation or com— tion discrimina lending In result. that there were 43 (20 percent) with or error. plaints, there were only 6 cases (5 percent) of association violation only 14 were there Act Protection In complaints concerning the Consumer Credit error. or instances (16 percent) of association violation Since its organization, DCCR has streamlined the Board's system for investi— gating and resolving consumer complaints. To do this, DCCR revised the complaint to ensure processing instructions and introduced an acknowledgment procedure tion of identifica more efficient complaint handling. To enable more detailed , complaints consumer problems, and to improve the Board's ability to monitor computer new DCCR revised the data system for complaint information and added n. codes for identification of complaint problems and their dispositio 3.  FTC REGULATIONS  1980. The The FTC did not issue any regulations relating to § 18(f) during practices. credit on regulation proposed FTC's Board did not comment on the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  EXIIIBIT A  Federal Home Loan Bank Board Regulations (12 CFR) that Address Areas Potentially Involving Unfair or Deceptive Trade Practices  Regulations applicable to member institutions of the Federal Home Loan Banks (the district banks)  *Part 526:  Savings account structures, including NOW accounts  § 526.2(g): § 526.6:  Calculation of savings earnings  Advertising of interest or dividend on savings accounts  le§ 526.6-1, 526.7:  Premature withdrawal penalties  *Part 528: Nondiscrimination regulations (lending, appraising, advertising, employment) §531.8:  Guidelines on nondiscrimination in lending  Regulations applicable to member federally-chartered savings and loan associations *§ 545.1 - 545.4:  Terms of savings and other accounts  *§ 545.4-2(f) - (1):  545.5:  Safeguards on remote service units ("RSUs")  Give-aways (premiums)  545.6-4a:  Adjustable mortgage loans  545.7-10:  Consumer lending  545.8-2: 545.8-3 provisions)  Initial loan charges Loan contracts (including escrow, late charges, and due-on-sale  § 545.8-5(b), 555.15: § 545.23: *§ 550:  Prepayment penalties  Annual Statement of condition  Trust Powers  § 555.8: Rulings regarding savings accounts, including initiation of earning period, non-discriminatory redemption of savings accounts, and sales of merchandise in connection with promotions  *  Revised or amended in 1980.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  § 556.9: Statement of policy on imposition of late charges and due-on-sale clauses Regulations applicable to institutions whose accounts are insured by FSLIC § 562.10:  Prohibition on advertising of prospective insurance of accounts  *§§ 563.1 - 563.3-3, 563.5, 563.7-1:  Terms of savings and other accounts  § 563.17:  Management and financial policies  § 563.24:  Sales plans and give-aways  *§§ 563.25, 563.26:  5  Sales commissions  563.27: Accuracy in advertising  § 563.34: Restrictions on interlocks between savings and loan and affiliated persons § 563.35:  Restrictions on loan services (tie-in prohibitions)  § 563.40:  Loan processing fees, kickbacks and insurance fees  § 563.41:  Restrictions on real-estate transactions with affiliated persons  *§ 563.43: persons  Restrictions on loans and other investments involving affiliated  § 563.44: Part 590: loans.  Restrictions on loans involving mortgage insurance Preemption of state usury laws for federally-related mortgage  § 590.4: Consumer protection rules for federally-related loans, mortgages, credit sales and advances secured by first liens on residential mobile homes.  * Revised or amended in 1980.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  571t.. Itititir or des ,'it Ivo acts or pruclires rolcood,tm; pro,',show.— AlithorIty of Commission to prescribe roles nod general state ments oi policy $ (1) 'rite Commis3ion may present.: (A) interpretive rules and genera l statements of policy with re spect to unfair or decept ive acts or practices In or affecting 4'41111 !tierce (within the meaning of section 45(a)(11 of this title). and (1I) rules which define with specif icity acts or practices which a le unfair or deceptive acts or practices in or affecting commerce (with in the meaning of section 4 5 (a)( 1 ) or this t it ). Rules under I hi:, subparagraph may includ requi e rements prescribed tor the purpo se or preventing such acts or practices. (21 The Commission shall have no authority under this chapter. other than its authority under this section, to premeribe any rule With respect to untatr or deceptive acts or practices in or affecting comme rce within the meaning of section 45 (a)( 1) of this title I. The preceding sente nce shall not affect any author ity or the COminission to prescribe rules (includ lug interpretive rules) , and general st.ttetnvnti of poHey . with respect to unfair methods of competition In or affect:lig commerce. (  When  Prot....Wry'', 111.1.11(.011r preliCrlidng a rlIlt• Under subsection  (a)(I)()1) of this section, the Commission shall proceed In accordance with section 55:: Title 5 (without regard to any reference In such section to sectio ns 5:,,, and 557 of such title). and shall also (1) publish a notice of propoae,l ruleniaking stating with particularit y the reason for the proposed rote, (2) allow interested persons to siihnitt written data, views, and argil intuits, and make all such sub:Oa:dun s publicly available; (:;) pro idan opportunity for an Infor mal hearing in accordance with sulen•ctior, of this section; and 1 4 I promu lgate, if appropriate, a final ride on the nia•ier in the rulemakIng record t as defined in subsection (e, (I.1) of this section), together with a statement of basis and purpose. Informal lei-tiring !iron-dune  The Commission shall conduct any Informal hearings required hy subsuction (b)(3) of this section in accordance with the fullow ine Procedure: (1) Subject to paragraph (2) of this subsection, an interc:das! person Is entitled-( A 1 to present his position orally or by documentar y so!, to (or both). and (ii) It the commission detrrnitties that there are disputed. is.sues material. tact it is necessary to resolve, to present such rebuttal submissions and to conduct (or have conducted under para&•rapli ( 2 ) I It ) sic) cross-examin ation of persons as the Cootinission determines Ii) to be approp riate. and (II) to be required fur a full and true disclo sure with respect to such i1.4. 12 Th,• Commission oleo' prescr ibe such rules and make such rulings concerning pi-oceedings lii such hearings as may tend to )1‘oid unnecessary costs or delay. Such rules or rulings may include (A) imposition of reasonable time limits on each interested per:a)ti's oral (C)  prusentat!ons. nuoi 1111 reilli iretnents t!la' any crOss-e‘ainihatioo pur aal 'nay hue enlitled under Par.)  :raid' (II he conducted by the Coniiiih.sion on 1).•tialr or thAt 1,(•/-,,0 0 in such manner as the Conintssion determines (I) to be approprialv. and (ii) to lie required tor a full and true dIsclosnee with respect to disputed 1,e,ilec of material. fact. 1 ( A I Except as piovided iii htibilaragra pli (11), IC a group of Pythons jach of whom under palagra)uhs ) and (2) would be entitled to conduct (or have cototucted) cros•--exami nation alit! who ail! determined by the Commis Ion to have na, s:,•,,e or .•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Interests for ilurposes of cross-examin ation, the C(tmmiasion ilia) make roles and rulings (I) !hotti ng the repreticlitattoo of such inter cst, for hitch nurPoses. and (II) go % l.1.1111114 the manner in.wh ich such croa.. examination shalt 1,, limite d (II) When any person who Is a member of a group with respect to which the (loinnilsslon has made a determination under subparagraph (A) Is unable to agree upon group i•epresentation with the other members of the group, then such person shall not be denied under the authority of subparagra ph (A) the opportunity to conduct tor have conducted) cross-e‘amination as to issues affecting his particular interests If (I) he satisfies the Commis:don that la• has made a reaa(dialde and good halt h i•rrort to reach agreement upon gruois nide sentation with the other membe rs of the group and ti) the Cominiss:oe determines that there are substa ntla! and rele‘aist Issiies while!, are not adequately presen ted by the group representative. ( I' A %erbattiii transcript shall be taken or any oral presentation, and cross aw.lies.  u  h f  - e‘amlnation, in an inrori na! hearing TO Which tills Subseetitoi  Such transcript shall lie available to the plibilc.  Wu lit  .it litikIN find ptiribmir hig ruin "( "111 1,11••10.1" rir%tewif niNni..16...-•,1 rEpessl (a. rill.. 1,101811.. Tuft  )II) 'rho (..'ou:itiIssloti' i.11tiiui i ',it basis and purpose to accompany a role i,roinulgated tinder subsec tion (a)( 1)(11) of this section shall inclnde 1.'.1 a sta!einent as to the preval ence oi the act, or practice:, heated 1,). $be ru:e; Ili) a state ment as to the manner and context in which aeis or practices are unfair or (1).-ceptive; and (C) a state-went a:, to •• ti,m.utiiC if ftet or the rule, taking Into account the effect on small be•-.1n. -:1 and consumers. $ ,(A, ''. tt•rin "t20niiiiission" at used in this subsec tion and subs. 1 IA / and IC or ht•ctiont any peraon authorized to act !,ehalt of the Commission lu tt)' part or the ruleinalting proceeding. (11) A. substantive amendment to, or repeal or, a rule promulgated Ittnisq• st:Iii•ell(,tt tat(1) tit) or this sectio n shall be prescribed. and subject to .)odic.al , re\ lew. in the same manner as a rule prescr ibed under BUCI1 snt,n1•C1!011. An exemption under sul,section (g) of' this section shall not. be 'reale)! as an amendment or repeal or a rule. Wh.•11 a 11 Y  rule under subsection 1a)(I )(11)  or thth hect.tott takes CUlihtittItC all unfair or deceptive act or tiracticr ‘101 ation of hvolon 451:0 1) of this title, unite-4 Ow Commis:ion othe•rwhe provi.sivs In :,nch  effect  a  bUtint•iflItlit violation I, helcUr  Jtialh•las  ro•% ir ,,.tuuuuuiui Ii hon.! ant r.-ll. ft re, 14,• I,y  Jul r10.411. .18.1  I..is  1114.1  4 Iuiirlu  tuijil  r."..... 1.. 1 1 ../4 if  11.141  ...hill 14.4stai  Not laler than ne days alter a rule Is lirt)IiI IIIL:ated Under 1 ;0 11 (Itt of this section by the Commission, any interested per••(0 1 • inc., (ling a cons$41ner or conannei r i iattll.tI ion 1 may file a hall *Ion, .1, the , ;$ate,, Court ()I it oeala f the !):.ar!ct it ro:uloi,la c!ictin utu ior the r,rentt in v.11111, pei:.ots ut* loot liii prinrlp.L! p:Aeo of !on,inens, tor judicial re% it of such rule. Cuples of I hue petition ,11a:i tm• t!%i111 tr...tt milted by the cleric or the court to mu oth,t. ofries•r (IA i..nated by if !or ta1 pro%1mote. uti ,-ection 2 I 11! or TWA; apply to I he Mini: or thu roh..m .11,Ing r, cord of oroceeditic!, liii\ride), the based its rale a nd to the I ranater (e. proceeding-) Its the rourts id appeals. (111 Per pill pl.: es or 'hut, si•ctom, the ,i•int rt—outt" Toratim (lit ,'s htio.•ifivot iii u, , :tod om.i.o.r, the traie,cilia required by si.1,th•ction ICI (It or this .secth ui, any written suluill),aluils, and any other inturmation which (lse Commission coieddei s relevant to such riot.. (2) f 1if- 7 - k.'"'•'' • rum' •'le • ••• ti , :t• •r 1, 1 ,- )( I/(A)  a  't:LiZLE  COMMERCE AN!) TRADE  to the satisfaction of the court that such suloolssions and prewntal ions he mater:a! and that there were reasonable grounds lot- the ubtio stun and f.:ilure to make such submissions and presentations ii,!acceding butore the Conitnissiun, the court may order the Cufflink' provide additional opportunity to make such submissions and itire.,enialions. The Commission may modify or set aside Its rule or make a new rule by reason of the additional submissions and presentations and shall file such modified or new rule, and the rule's statement of basis id purpose, with the return of such stibmissloid4 and presentations. The court shall thereafter review such new or modified rule. (3) Upon tit° filing of the petition under paragraph (1) of this sole section, the court shall have jurisdiction to review the rule in accordance with chapter 7 of Title 5 and to grant appropriate relief, Including interim relief, as provided in such chapter. The court shall hold unlawful and set aside the rule on any ground specified In subparagraphs (A), I !1), or (1)) of section 706(2) of Title 5 (taking due account of the rule or prejudicial error), or if--(A) the court finds that the Commission's action Is not supported by substantial evidence in the ruleinatiing record (as defined in paragraph (1)(13) of this subsection) taken as a whole, or (11) the court finds that— ill a Commission determination under subsection (c) of this section that the petitioner is not entitled to conduct cronsexamination or make rebuttal submissions, or (11) a Commission rule or ruling under subsection (c) of this section limiting the petitioner's cross-examination or rebuttal submissions, .recludeti disclosure of disputed material facts which was necessary for fair determination by the Commission of the rule:II:Ode:4 proceeding taken as a whole. Thu term "evidence", as used in this paragraph, means any matter tit the rulemaking record. (4) The judgment of the Court affirming or setting aside, in whole or in part, any such rule shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification, as provided In section 1254 of Title 2S. (5)(A) Remedies under the preceding paragraphs of thin subsection are in addition to and not in lieu 01 any other remedies pruritic(' by law. (ll) Thu United States Courts of Appeal shall have exclusive ttnisttic(ion of any action to obtain juuicial review (other than in an enforcement proceeding) of a ru:e prescribed under subsection (a)(1)(13) or this section, if any district court of the Uulted :-;tates would have had jurisdiclion of such action but for this subpararraph. Any such action sha:! he brought In the Vritted States Court of Appeals for the District of Columbia circuit, or for any circuit which includes a judicial dintrict In which tho action could have been brought but tor LH:. subparagraph. (C) A deturtnination, rule, or ruling of the Commission described in paraeraph (3)111)(1) or (ii) may be reviewed only in it proceeding under this subsection told only in accordance with paragraph (3)( li). Section 061 2no E) of Title 5 shall not apply to any rule promuleated Under sui-ectiou (a)(1)(11) of this section. The contents and toienuacy of any statement required by subsection (ii)(4) of this section shall not he subject to`judidal review In any respect. Utiftdr or drcrpfl•r nelps or ur prwiltiO,Astinu ur ..•,,tito.11,...4 by Itt,ard Itt,e , ra. Sy ale., atitd toy lrorrroui Ilutoor fureement0,11,1 compllioher usrliclro. untiffrclral rrpurlIng rc.itdrrua,u1.4  &Ind ion,u tot rrojerpti .1, ...ivy  (f)(1) jii order to prevent unfair or deceptive acts or practices in or dece:, :fair •, or !. ,c0 ,0 , •"4 , -!,..•, con. yerce Irid 1.,1 •14.; h 1, are   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,•., a  10,1•0 Nth Oka!l establish a separate division of consumer affairs whirl, stet!! receive and tato': aporopriate act ,04) upon complaints with respect to such acts or practice. ) hr) batiks or savings and loan iorstillrtioios Ill• ,crIbed ion paragraPh ( ) stibject to its jurisdiction. The Board of Govetnors or the Pcoleral Reserve System (with respect to banks) anti the Vedet a! Home Loan Bank Board 41Nitli respect to savings and 11/:111 iiih It nit urns described in paragraph (3)) shall prescribe regulations to carry 4110 l ile. 1.111111/hCA ot (Ilk ht!e11011. 11101111111g regulat 1"1"1: '" ('Ii ,),4•4•Iticify surf, unfair or deceptive acis or practices, and CoOlitIllIng noojritii,'iii. its Isrt'SCrihed for till, foltf.lnii• ot ireVt.111111g such acts or prac'14 Wheeever the Commission ore,crIhes a rule under subsection la) ( 1( (Ii) Oct this secHon, then ‘vithin COI days after such rule takes ellect each ..tich lioard shall promulgate sttb:otantlaily :o•n•. or practices of han1;14 or saving, ' and loan 111,111'01 w" i ts,1'11 lit'd iU 1i1ragraph (3) as the case may he, which are substantially .;nt:'ar to I!;ose prohibited toy roles of the ('ommis:Awl and which Impose :.1!.:.tawtary :;ttotilar requirements. otif t -,s A) either hitch Board finds such arts or practiees or hanks or savings and loan institutions de In paranraPh (3), as the case may be, are 110t unfair or tiecept!%e, 4.4r ( it) the hoard of Governors of the Pederal Re:.erve System finds I hal Hopleinentation of shell:1r regulations with respect to hanks would :erioesly conflict with essential monetary and paYments systems 11111 icies 01 such Imard, and publishes any such 1 inditig, and the reasons therefor, in the Federal Register. (2) Conith!iance with regulations prescribed under this subsection shall be eniorced under section ISIS of Title 12, In the case of— (A) national banks and banks operating under the code of law fur tire District of Columbia, by the divimi.on of consumer affairs established by the Comptroller of the Currency; (11) member banks of the l'sederal Reserve System (other than banks referred to in huhparagraph (A)) by the division of consumer affairs established toy the Hoard or Governors of the Puderal Reserve System; and (C) banks Insured by the Pi:der:LI Deposit Insurance Corporation (other than banks referred. to in subparagraph (A) or (II)), try the division of consumer affairs estatollshed toy the Board of Directors of the Pederal Deposit ln,urance Corporation. 1%1 Compliance with reg.ulations prescribed tinder this subsection sh;•!! be enforced under sect ton 5 of the Ilome tiwilers' Loan Act of 114:::: w.iii respect to Pederal savings and !oat' In section 407 of Ow National !lousing Act with respect to Insured instittittons, and sections 'WI and 17 of the Home Loan Dania Act with respect to savings .otti! loan institutions which an' 1111.1111•1•ni of a loederal 1140114 Loan Bank, •,) 0.1%Imion eof I:mew:tier attain, to loo' estalolkhed by the Veolerul Hume no P..tn!, !hoard put:want to (be redera) Home 1.uan hank Act. Pox- the purpo-e or the exerelse by air: agency referred to in para. .u..ph 42) of its powers under any Act referred to In that paragraph, it 1:01;ition of any regulation prescribed under this subsection shall be deem 4.4! to ho a %Rotation of a requirement under that Act. In addition to Its powers tinder any prod:don of law specifically referred to loo , I i.e /*apti each or the a...encles referred to in that paragraph may o.“•rei:,e. too. the WI r illtPie of enforcing compliance with any regulation lireScrilied under this huhtlection, any oilier authority conferred on it by law. (5) The authority of the Board of Governors of the Federal Reserve ;ystem to issite rerulatiens under this subsection does nut impair the authority of any other agency designated In this subsection to make rules respecting its own procedures in enforcing compliance with regulations prescribed under this sUiTheeti011. v  — „%  r-  o r it  AND .1".:ADE  ..  • ILL  port On Its activities under this paragraph during the e,ereding  year.  Jabal by u.uil I Ile oval rrovlition P / r 'dog N.d .%.1...1.11..tro.- bran vitiate lap he rallia,%a it I.y of I oh,: 1,11 1 I, 1,011.11 II ta•rea,..,, it, nil. iii.. Lug H.0161:01" fur iF ti.,..,LI'.,pir l'rn. it.,1*-- .1 y 41,64,1 1..11 1111111111,-1, •11111i...r11., ..r 1...." Viltle. al. ‘•111.••11 41, It tiliNi.ihuii to 111•(.4,4•11 lilt 11 111.0 li) cone Ini ..I:I•I• ! 1I:; nionelded I.y l's.I..1,. DI "It lit a pprdprtole :hot lo :21.1„ Mmy St.,t. Polo. (1,41 Will. foul. nil mil Ittabs I hill holly a ram II 97. Niiy. I. IY.! St ,it. 21:10. brasalim iii %%, litchi art....111de g.i.erol 'hot : 1. viler.. I Trade rommimor utiat.1 tact. Iii h..... Imo tip. rutty.- Niftier...ice 4.1' 1184 I 1.11.11 St /dun 1.11/111 11,14•11 Chili hilt 11 ion l',,r1 ..f dooplitlitt *herrn. WHIM Iff, ',till) mod t•valompon of rtilend, 1, int! hid to. 11,11 II fir,• pr... , i,uI 111111.•r p14•1•11011 lii .P the. I..,1..ffir it iii. iii I'..aattealatNaint Art ii 1.1. anel 1..1. I iii,.,t rym,ide rote 11141.11 wool %Own. dna 11101 Inlin II a its h000red if be 1101V I inclitillng ony • ri•qourd liy 111111111111g It role pr Ie. the eulaa'ra• ,,, , nut ist,r in•imes, E1.s•triolitcp4 I u.r I•'. .'u. to, t97tu_'' T. C., 1..C.111.19-;:., 11..•cimtoll•,, 1 or It•gltdalhe 5. Collthe•ol , lotertrolloo Id•A v poi It Pitt. I,. 113 LI 1, of lllll 11411,11.111 III /1,111.11111.: 11 Pi; 1'1.110 (.'41111 1:. /1111.1 A dm 1....11.1.11.-ny ut 11111111in lo ',VIVI:111111111g Ia. alp... 1'10..1, till 1, 191:1 fake 11•1111/411, 14,111. C1/114. 111111 p. iigutiui,.t corpormliv 1.0iii,..lf oft ‘..•11 om ,11 11i 10111 4•11 11,1,11,, how II rli IN 11. lull),  1:1, plugs! Ion  th•  role.. Pro.•TaIIT1'11 1:arro 1.11un• and a(aya frog. opplleafloo 4,r a) i) (g)(1) Any person to whom a rule under subsection this section applies may petition tie Commission for an exemption from such rule. (2) If, on its own motion or on the basis of a petition under paragraph (1), the Coinrisissiolt I 11(15 hat the application of a rule prescrthed this liVelltht to any person or class or under subsection (a)(1)(11) suits is not necessary to prevent the unfair or deceptive act or practice to • •, which the rule relates, the CUM 111 iS3i011 may t•xempt such flerSI,I1 I/1' troll) all or part of such rule. Section 553 of Title 5 shall apply to .telion Under this paragraph. (3) Neither the pendency of a proceeding under this subsection respecting an exemption from a rule, nor the pendency or judiciat prhet's, lirm In review the Commission's action or failure to act under this subscribe:. lt) ii ta shall stay the app;!cability of such role under tuba.. I his section.  , aibilaciaaft•al  Iuid  Cubs pc nista I Iota Ii,.  fa,r  lit- rousts  I orate y rotala  r  a.r rt  1,raoca• a..: I as,:  e  11 sar az rt. b.: is  r  In. it rrr al it ant,la ia  yiror 1,u)kalple laa ii,)( 1 ) The Commission may, pursuant to tules prescribed by It. proide compensation for reasonable attorneys lei's, cxlit.1! NV It 'd•rother costs of participating In a ruiv i n ai,,Ing proceeding .1 11.1.t•r t(Oh to any person (A) who has, or repre:en,::, an interest (it whirl, would not otherwise be adequately represented in such proceetlini!. and (Ii) representation of which is necessary tor a fair determination of the rulemal(ing proceeding taken as a whole, and (11) who is unable et fectixe:••• to participate in such proreeding becalpe such person cannot L' turd to pay custs of making oral presentations, conductitig and making rebuttal submissions in such proceeding. (2) The aggregate amount ot compensation paid under this subsection in any fiscal year to ail Persons who,it rtiletnaking proceedings In which they receive compensation, are persons who either (A) would be regulated by the proposed rule, or :III represeet perions who would he !io regulated, may nut exceed 25 percent of the aggregate amount paid am compensation under this subsection to all persons in such fiscal year. (3) 'rile aggregate amount of compensation paid to all persons In any fiscal year under this subsection may not exceed ;1,11116,00o. , 1 is,addl. I JII. 1, 1 ..175. Sept. 2ti, 1,14 . i I, II, § 202(a ,, titi Stat. 2193; July 23. 1979. Pub.L. 96-37, § ltel. Stat. 95. 1 No III original. Referent-eft h. Teat. S.,•111.ii 5 of the thin ':W.:(c) ut 1'0..1.. 3 1K1; pr..% It. Howe ii. iiir.. l.s, Act .of ruh•ri...1 that : I,y ii t.. •.1 milk..., • :iii, 1m . Huai, . lion-, (iii mill iii lit 11.1‘ 1111.1 1',..1,1‘.‘1,.. 4 11,114 •k7:, ,,r 'hi" I 'a. 1.1ad :•••••4•.1-11 10; 114 11,4• N1111,,i...1 I It• 41,11" , 1 t , ta -,1 . sa iu, Irt I 'it I, fr. I I. 'ft molotee • a •‘4 1 1 111,• V111..1It y a any role , 11 Iv 12 1 41 I., •.,i Him 17M uf nal , 1,roisanIgat...1 undvr The I '.•,1.•ral I lontr Loon re ..•I rode IN *110v...11, 11 141 ferfed i, ts. If prod* lo !he list II., ;Ig I .I. 11.1 it 44 111.• •••••.. • C11.14 11,11.111 •• 1111. h.. 1.,pi, '.1 hr. 1,1I •.f 11...l Art / ir 4•!,,,n1(11..1. 1. ,• , 1 t 1/ pro 1111,. 11 11 1111,1 1 IJ; 1.• Ile. 11.011 1 to it. I. . •.I %% W. r, g1:111.•ti. 11,11.1 ur % sut,,,,• Ito n. )'ut, Ii.!..,, suit, nit • 1 1, .4,114.11 III so. IN14.1.4 re11W •liii111 1,1,1 I I .• 14, h.1111.,,:ft /11111 11,1114 11,11111114,11h II.% V11111111 r • II, 11 ri,Is• 11, '.'.III. 'lir 111111 1114. 111,i; fi•1111 •11•••1 I W •-• ,I% II. ..11111 11,1%..• 'orris 11r1,11111!41111•1: 1,,,,I 1 1 . 111h1111111161111 111,111/1111: 111.1•11,11 l 1.1•1•1, 1 1. tun P•1', I 114111It• 1,1,1111 11,11i Is 11,,,11,1 .131, 1'1111.1, "121 If II role. 411,1 1* 1111•11 111 .1.1...1 ll'orti.er std. 'v.-. III ot him tit:I....rut...1i Is %Wit! and f t:is (0(1). limo IN it II,.' l..ii ru I'I'ii..!.• ra•,11,11glioul I.. 1111 I it !a• •s•a • I 'ail, :all 1(1(11 tan,. la 1,,, .! • ! Ito halal r, ! huh .1 I..•ei, (t)  t•• • •••,-  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  iliii.114 .111%.• tarot v4,41114(4 11.,r.:. 11 4., 1.r.,..1" Xisterb: Jut!" !ald  I sitrr%  5  Iola  I  111.41,1.011411.011.1i1 of Cu  hts.lonerm  1,.•lon 3  l uwer or to '  1111.11  1'o...trot-lion m li,,• hbec:fle.nlly 1., condos I n.!:tido...11%e pro •111.• Nlitl I or,lllll ilgale• I reh1.• 111,11 I tilt,. Wit! r its I. Cotten fri•hl lithe 11,11. 11f :.fiori p•pfi•li Mr) 1, 1sp11. lip ii olsit•,...,t• (drp. b y, '1'. C.. 1).C.I !.  1  Ilel. Eller I 11.1.J75, 1112 /I  lit ',via  '.ti, lies'  1111 111, II Is!111,1111,1 WI Idris' 14 111 .1111,11,111 lia.:11 .•orporitte plideatiff and f ollicr mono • fitriurerm Ly '.via) uf vill itt1 jit.111, judleial ...terve:0 ion wit, Inn %%drraided, wItnr.! %Ire, if oily. 1% um I hot pro 1111,1•11 ride utah propo-ted order ogissiod iff %%eft, Iii nil ens1•111inl rerilits IN identical %Ain.. In 1111.1, huten( lllll colurvil tlui n Oen rair1" order ngatomt plaintiff at 1•1•111•1111.1.tli oir o il mins./ rot tve iir...•••.•,1 ph.loil iff it.  4  .1:•,,al qt. Ababa  rl,htl. n  rory ...1 pil.i judicial 11,1,4114'h Corp. v. I.% 'I'. 1 , :•411/. II gli 1'lllll iiihodon hod /11:11Innl unlit's. Leitrim! otil  to Nut'''.  t'ir  dlr., I  le niviinird  re% WY,  h., did ?third las lhat er.r. rani... It WI•r11 Nil thitppritprill141 liii lb %•linrem to-I out lit 1,115 mt-el ion are rant ri hearing rialluluraa I ) 1 111101a.! I ail a.r li•n• tooling out:dolly of- 10111s• 1:, ::::• id!Joi: 1. olory pro.,..1...gm Z. 1..•orrmlly .0.01.inf man laiiiiitifni Iiifu is gun! I. uiII,'.uI lull'., (11141114 1.11113 r111/1 1 111.114,11 Ii. .•t ery rn'e sh.,Litd• ,..pits 1lsia %%ere Industrywid e Id. ihfy st o w In! list liii tido iii1 ft,:rt., a. 1/1........01fleadlon of Co 1....109.cra oiler i•arti., hove 1..-t•it nthirded i'lr Telt for ...lineal ,.r fuderal opp..rt mot y tit agetwy fry, ' trade •r 111 pr.. IV.. In , ro• Id r.'.•vt...1 , 111,,1111.•(1•1.1p•il •  (II.1 (Hi I .  p•pi  hp,. I)  V  a.ro,  .•  11,• o re .....!iitid-att  11 0111N -  III  I•n  lea ,  11.1  ale1;balged  4. ,,r  1„•„ ring  . ,1111)  I  be  iiuuatl  hil%% Ili.  Ili III  1111 nvery uhrtio'llt of  It la  bait  h.• ,s.  VW!! lii.  ,vIalala  evrt y  tape,. rta ewe  r.aliaaaab,hbala drublem 111 /1111111,/ 11 . 11114 r.'1-!tlIi.I1011 rule. It mils"!, 111 hill, .•4 114,1, i 'I ill MI( /WI 1.... II!.I,l hull ..1 pro ria '.• Hilt) readodipt t' et. 1..•,:er 111(01111A. -der, 1,' writ 1. ti dot •, :int! 11.1•711N It) 11111-1-1,14•41 atol prof', !.,t of a finis! role 1,:i•1•11 loll (WV 11,111. 1....!etItnr ,,  III  Viltirt.  rta  I,saw  al ma!  burp...,  1,4'1 ,,11.•  v. I' 'I'. 1.* .  a all  Ii,  ,!s  al •  :  .•  I  .tuiyu  lt..  Iluui,d  lertaliiatal - aala  111•1  1111.1  mt  fat  hete .orab•i  %cry  1. A.11,..11.•thI bt. procertilna• A,! pro...nth:it; nef..n. frderal r 11411ht 1,1• iiti, 11.14•41 1,4,1 w'll. elenield of 1,111 .1 - 11 1,114.11f /1111 l• of compleit•fIlm t.- r) h14111 111114111 uf NO I I .% tivert Iii'.19711.  V.  1.1a,  pr.  1  Itor.l.d, of proof 1114111,m aslijfilii furl 1..•.• ...file:pinion In Inn -  (ratty rt•t!tilml  lie•lort  ton  a .,aitrl al wad,  In,,,,.! 4 .1111,11.1,14,111  11ril,11111. 114 it 11141MI 111,1f/111k 1111.111, brood ol.j.•eii,t,  l'ow.'r of e  In  111,1,,,rtaint ('lilnhli tit ..- it:al...tory right. 1,1.  t.,1..  1, i•  "Minim/1 1101.0'f  ,,.t u. ti'., prornt, but Ild im ephoti do• ihi 11 -II rlik.•11 front Isla 1140111 y air W111 littm bia rl I.,  I. t'.1.  V.  I 1.i•  alit•sara  .,uiiigtut  uhf  ...II .k 41 vs lite 1.,.. '',moo tr....  I.  W  .•1. di.dit,•re-d 4,1 vet iii Inil ..111 11,1:1. 111111 4•llllll 111,410114f 1111, 111 h41111.• boa liNtfro•  euutu, Indy  mljaasige.1 fo. %tell ,is .11he .11 /1,1,111, 41 a Iii,, riba.: it . Aba,a,cliat 1 ,, at lit Nationol A.IInt•rM, !Ile. '1' C.. V. I.(' Wm, 1,91l. (:Viler. HY. WIWI) 41 1111 111111inelti i1.11 of 1•1,11111.1shli,111.1- III 1 •lllll 1.1141e• r1.1.:11• Int !...l role waling 1 0 1'1.4,441111g I, a,  inaitia•  brutal! is '  I %.•:+t ,  It •  t  lllll king lifort-ell. hialatal nail tail  I li t  ,  a•  .11  hisaaVallig'  1,1, 11,0,01am  May 14, 1981  The Honorable Richard T. Pratt Chairman Federal Home Loan Bank Board Washington, D. C. Dear Dick: Sorry I will be in the air for your swearing-in.  I would like to welcome you  officially to the "family," but I'm glad you're here in any event! All the best,  PAV:ccm   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, NW Washington, D C 20552 Federal Home Loan Bank System  Federal Home Loan Bank Board  Federal Home Loan Mortgage Corporation Fadetal Savings end Loan Insurance Corporation  JAY JANIS Chairman  DEC  1380  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve Board System Washington, D.C. 20551 Dear Paul: The most current numbers we have on the condition of SUs are not encouraging. I thought it would be helpful for you to have the following update: Profitability: For the first half of 1981, we expect that 75 percent of the S6Ls will have negative earnings. For the second half of the year there will be approximately 73 percent under water. This compares to our estimate for 1980 of 50 percent with losses for the second half of the year and 30 percent for the first half. Note that these estimates are based on a medium interest rate scenario, tinder a high interest rate scenario, the percent with losses in 1981 approaches 82 percent. Return on Assets: ROA for 1981 -- under the medium interest rate scenario -- is estimated at between -.35 to -.40. Under a high interest rate scenario, the range is -.65 to -.90. FSLIC Fund: Based on our current problem hook cases -- under a worse case scenario the losses to the insurance fund could reach as high as $2.5 billion. The book value of the fund is $5.8 billion, but the market value is probably closer to $4.6 billion. Enclosed are a couple of charts and the backup simulations for your staff to review and compare with their own. On the first chart you can see our interest rate assumptions.  a Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1,  •  RDA PRO,ECTIONS FOR LOW, KDIUM, AND HIgli INTEREST RHTE SCENARIOS .4  .2--  LOW  0--   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • N  "N s, N  • •  • • •  NED IUM N SO ow.* ••••••• *ma.  2 1S80  Oaf.  •••••••  eon..  i  2 i98i lik-SDLID LINE MEDIUM-40ED LINE HIGH-DOTTED LINE  Dcember 2, 1980  OPER Interest Rate Scenario Semi-annual Averages and Implications for ROA  80:2  Low 81:1  81:2  '.1MC Rate  13.0  10.5  2-1/2 Certificate Rate  10.8  Jumbo Rate Mortgage Contract Rate  ROA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  80.-)  Medium 81.1  81.2  80.2  High 81.1  81.2  9.9  13.1  13.5  12.9  13.2  15.5  14.9  11.0  10.85  10.8  12.0  12.0  10.8  12.0  12.0  14.6  11.9  11.2  14.7  15.15  14.40  14.8  17.15  16.80  12.25  13.25  13.00  12.30  14.25  14.0  12.35  15.0  14.75  -.04  -.03  .39  -.04  -.40  -.35  -.04  -.65  -.90  -• •  irr .  F1-)P4-7rAST - LIA4 INTERFT PATES C): 1  i  fl.-lkiF.. LIWilli. (IND 1:174,11R01-7 ... f 1i'..-.1) Porc V..PI(J:LE F,TE !'--- rr_HillIolFD ! ..;-11E E_)F---11 fl.r-.1  r HIT-1.•  .:_ ,L .:usirlE.::.  .)..)  1_17,.:41.7  1 t.:..N -.  IHvf_ .i74:-IEN1 ':=1=CURIIIEE. ... T o I F CouNFD (NET) ('I 'T ET(': Tc_IIN._ IYI.ETc;  472.234 - 7.234 47. 15.0)0 .000  ::::.1.-il  ;F:i.):  81:1  495.227 4 i.3.727 16.500 .000  .-.:%/.:,:::  517.547 7 0. - 42 4' 15.47 11.E68 2.-...gAl  52/L..288 427./.-.A9 14.11 .4.07:--: ;41.279  .000  2.449  6.432  10.046  1/-..9A0  17.726  18.488  19.127  55.740  58.186.  60.531  62.457  1.973  2.062  2.172  2.270  .7.7:1-.:2  8.20(1.  8./"L. :-.:4  •:.. f --:,.)  5.431  5.i...::  5.989  582.272  612.168  643.337  669.720  475.1E:7 104.540 37)'4f:. 149.923 7'. 325 185.324 22.074  498.979 109.775  524.978 102.7-t70 422% 603 96.761 :7:6.. 9E:2 1f..3t9 41.997  542.97S 97.735 445.242  3.000  5.000  I ICIPILITIE7_,  011011Ntc; ALI: 11)UNT. TIDT()L T 'r14 -_-1/2 5', A YEl'iR 0. 'J.  :HIPD-P,1RTY AC:COUNTS H.11 ,70WFD MONEY 1411 F-4 rffiV1:- E-7. --. UTILE F:A-A.:P17.1!EO MONEY 11.1"-4N•77. [NJ Hi;01_ F, c-::: 1..:IFIC FOY.T.LVES J1.7. . lic I: 1 r.:;-..Liri cr1111c: 14-:P LIAPTI.ITIP:: TOTAI  LIABII ITIE::  POO  .620  105.956 . 174.644 29.917 .:---:(x) .  107'. 477 211.//2 43.437  54.926 40.845 14.091  b.0.109 4::::.092 17.015  61.92.0 44.499 17.482  A/-..292 47.777 18.516  7.0f"---:9  7.259  7.822  8.169  .217  727  .239  .247  2.625  2.827  4.053  4.217  2.509  8.941  9.450  550.193  580.242  611.F.24  A26.717  21.926  31.812  22.019  LET   :111 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1 7;: 11 '  I.M. - LOW1 1('L 1 r  !Plc  ToTr!..L !JC1;: Oi-EPATING INCOME TCOAL INCOME  . 1 1fikATINC, EXPENE  27. 141 :5.t48 21.111 7%762 .880 ..720 .773  29.521 27.7 22.628 . f-:-.:6.7 3.415 .977 . -_- -:23 .811  31.355 z9./95 24.514 .964 3. 75 1.042 .70 .855  :33,551 31.::!`7..3 26.1'7'2 1. 100 2.156 1.105 .S06 .892  .412  .429  .453  .475  27.553  29.91  31.809  34.026  4.209  4.426  .c:26  7.818  PirIDE. (INFEREST) (-1CrnlINTc, THIF, D-fpJ:TY ACCOUNT.:. 1-HtP (4,YA,P.:FE OTPER 17--, P1-0.1L- EI MONEY  •:ç  LOW INTEREST RATE7-. :1  T:r\L u!- •T:F . AT:rici INCOME INITI ,NE ml...,RIE t..0,-,NS !', C'ONIWVI.TS 1-_r'_Pl;:R ,-.',JD OTHER Le.-;r4s .• • T_ ..T-:r1::_- rn..7: P., DEPOr17.IT-: 77'...1-.1.711 *::-.F.C. (I_Ki • • FPON 1..7.1;)N FLES F., LII:LOUNTS ,)!L P, 1.ATING INCOME ..  .1.1 TAL  -  22.816 19.':'4'. .000 2.096 .772  25.918 22. 9::=::E: .019 2.141 .771  27.472 24. 41::0 .050 2.312 .680  .171  .174  .182  .190  7'0.071D  =:1.8A.2  I:12.157  OTHER TAXES  ..-:67 ..7.09 .059  .001 -.035 .037  .029 -.010 .041  .474 .115  TnTAL FYPENE AFTER TAXES  27.073  30.031  21.891  32.747  .748 .267 .4:::0 .030 .450  -.128 .001 -.12Q .0'3 -.152  N':  TOTAL IJOT;-0FtFATING FXPEN.E IIITAL  ••  P)FEN'7.E PEFORE TAXES  TAXEc'. STATE., LOCAL,  27.541 24. 26.17 ' .105 2.491 .A.77  NET INI0M7  NET INCe.ME PEFIT'kE TAXE:. TAXF': NEI 1NtinMr CAT.H DIVIDFuir:. ON STnir NET INIIINE AFILR TAXES. F., DIV. • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -.0 .029 -.0S7 ' .030 -.112  1..:i:69 1.279 .074 1.205  1-0 1 2/:-.)) 15:41 I.M. - LOW1 flirCP NET WORTH % oF  - LOW INIEPE.1 k‘ITES  AS 7. uF AVERAGE NET AS':.ETS --------AVERAGE NET 11-POS C0.3T OF INTEkEST FUNDS INTEREST INCuME INC,OME EXPEUE  AVERAGE COST OF SIWIN63  AVERAGE YIELD ON r LTGAGE-1  I I.  ): 1  • -3  .17  74 10.15  31:1  T'I'T. 1 -:1 C1:1  5.75 - .47 5.45  DIST. 2 1 :1  :31:1  -.12  -. 20  9.71 9.7`i E:s,  9.10  5.,7 5.20  -.17 .10  174.63 9.76  7, )L",  .12 .07 .02 ...?Ef")  Q.19 9.75  6.47 /_.47  10.01  S.7;/ E:. $,. 0.49  7./.0 .7., 99 8.33 :E:. 1  7.97 :3 47 .23  7.62 S.39 S.14  7.U5 7.80 7.S'=" 7.52  8.74 9.51 9.56 9.15  '71.06  9.16 9.50 9.8 10.09  6.86 7.47 7.57 7.2.2  8.17  7..?.: ,  79  S.91 C.6`;  8.58  9.34 9.53  6.1  7.41 7.61 7.36  8.9 9.03 9.0R 8.81  6.76 7.47 7.56 7.'9  7.  9.43 ,,  8.213  R.28 8.65  8..7)9 2.A.Q  S.96 9.20  S.30 9.01 9.10 S.82  8.04 3.91 9.05 8.73  R.85 9.11e. 9.4S 9.71  r=1:.45 9.47  S.27 9.41  9.11  9.06  9.01 9.3. 9./ , 7 9.93  8.44 9.32 9.40 9.03  8.31 9.27 Q.29 R.9A  9.10 9.42 9.72 9.95  DIST. 9.9, ; 7 -.11 5.4  1'1.T. :7: 11:1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7 , 1(.1  .17 4 -.11  10.0? 10.29  9.48 10.02 10.03 10.25  :3.52  7.79 8.62 8.72  /.00 7.77 7.47  12/02/S.) 15:41 I.M. - LOW' !j ER FORECAST - LOW INTEREST RATES NET WO!-:TH OF 77 r,/AL  DI '1. T. 6 ?:): 1  OF= (WERAE NET WSSETS AVERAGE t.LT c.rw_:: INTEREST SAVINGS 1:1-17:.T OF INGME INCOME EXrENSE INTEREST FUNDS  .5:: 6.-5  (-)(1 -• f)-:  21:  5.29  .11  6. 5.2:3 5.55 C.  . 13  2.37 2.97 10.02 10.2S  2.68 3.77  WERE C1.i (.4 OF Si.,..:1Nf33  AVERAGE YIELD ON  7.31 S.01 2.05 7.66  3.52 9.41 c4.4E: 9.06  9.3 9.50 9.04  9.09 2.48 • 10.09  7.77 7.87 7.54  9.37 9.01  2.21 9.34 2.93  9.61 .9.8A  2.26 ci.2c1 9.63 9.39  HI:T. 7  DIST. 2 :=.(: 1 :1 1: .1  5.33 5.40 5.30  -.14 .26  9.46 9.27 10.0n 1 0.24  2.69 2..36  (71.C17 : :  7.32 3.2? 2.93  I-. 1-.S 7.74 7.25 7.47  2.41 9.53 9.61 9.20  2.16 9.47 2.59 9.10  3.14 9.07 9.13  7.36 2.27 2.32 7.2A  2.24 9.33 9.26 9.34  2.72: 9.R2 9.90  6.7/. 7.71 7.30 7  2.60  3.47  •  10. 27 10.'37 10.61  7.29 2.39 2.99 2.60  9.73 9.29  9.73 9.20  9.97 10.24  10.46 10.76 10.'1 11.2  S.73 9. 1.3 9. 13 3.62  7.29 7.77  9.51 9.93 2.22 2.42  9.'34 9.27 Q.  9.70 10.04 10.40 10.70  .11 -.34 . 10  10.17  -.07 .40  10.41 10.56 10.7/  • :r): :1  5.4, 5. 4:  10.27  DIST. 1() 7.('S 6./:.?  -.02 .36  7*.Z, • A  1 , 1_1. 11 20:2 .31:1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7. 4.1 7. 7.01 7. 15  .24 .13 •  7.41  9.22  •  LOW1 uf--tR FORECAST - LOW INTEEST RATES NET WuRIN c_:r7 flrr,/t  AS  OF AVEPAGE NET ASSETS  NET 1WOME  INTEREST !AVINGS  AVERAGE COST OF  AVERAC,E Cry- T OF  AVERAGE YIELD ON -:-1RrGrAGL':  ST. 12   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7.47.5 7.29  .21 .12 .o'  1n.24 10./.2 10.4  Q.03  9.64  77 10.26 10.51  •  •••••• Ativie,oricauddiftahwast•  ....64.7.6.16Mairroaiatiktiiiiiitabl.4••• • -•••  1  • I  t..1.2141 1_11L.R VOkLLAST - LOw INTERLST PATES  ,^LIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 10:1 LINJPICT  1 40 10 17 1'7! 11  1  cI.  17  4-  .33 117 45 4!„ 117 42 47 109 2') 7 25 t2 43 32 31 45 13 135 0 0  117 .-1:02 1 1 -  7  -  -  4  7  .7/0 45 36 19 32 0  67 46 45 12 5 1:3  70 67 71 37 17 C.  672 492  10  11  12  101 221 101 64 46 93 :33 37 25 51 43 92 29 21 20 66 24 12 16 7 45 1 .1 10 19 12 10 23 5 11 9 13 13 25 14 0000 0 265 6,..)3 220  cUMLATIVE i0FAL %  IOTA!  1490 661 424 306 173 318 0  37.17 16.49 15-3'7/ 10.5:3 7.&D  1490 2151 2733 3212 3512 A :1':6c)1 4009 7. .00 4009  1.)0.00  142  '')k-PF"  37.1 69.5; 30.1. 92.0 100.0( 100.0( 100.0(  1.- PEA1ER THAN 0.40 0.20 TO 0.40 0.00 TO 0.-'0 -0.20 TO 0.00 -9.4t) TO -0.20 -0.60 TO -0.40 LESS THAN -0./-.0 UUILFINFEI rorAL  N:LT H1- RTH (Y.; A PERCENT OF TOTAL DEPOSITS, 1920:1 DISTRICT 4  171 47 101 4 7 14 1 (_)  - 117  t.  7  S  o  10  11  12  3:7:3 157 142,2'71 155 147 109 201 12:: 45 174 23 227 50 40 25 4'-3 7 17 2 42 14 5 ::::'=,, 14 4 4 46 13 39 9 1 0 4 :-.:: 1 0 2 1 0 0 0 0 0 0 0 0 /-.72 4•7)2 21:3 4;3,4. 265 60:3 2.'20 205 142  1-_,!,E6TER THAN I. TO t. n 4.0 TO 3.0 TO TWN lit!f.LFINLT, TIA(AL  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  %  CUmLATIVE TOTAL %  60.24 2415 3621 5.04 4..32 7,:cp7,6 . 32 4009 .00 4009  60.24 90.-42 95.36 99 63 100.00 100.00  4009 100.0(.-) 400'7'  100.00  2415 1206 202 173 13 0  1:41 I.M. - LOW1 OcLR lurirAr:.T - LOW Iwirr  PATUI.  ANNUALIZED NET INCOME 4S A PERCENT OF AvERAOE NET ASSETS, 19:30:2 I 17TFICT 1  1 -  4  :3  6  5  77 111 131 103 40 43 92 77 _ 33 42 109 79 14 4 27 :34 107 67 5 15 17 102 6 11 13 63 45 7 13 _A 27 C.::: 53 :3 -00000 24 1:3.  - 11; 1 -  7  47 110 40 63 -,, 44 ,:i.:2. 24 24 /...::: 16 41 17 49 (- 1  z  0  9  2'2 37 25 /-.0 1- t, 75 43 79 47 '..1:9 .1.9 78 47 135 0  •  0  to.)  10  11  12  TOTAL  %  42 21 46 29  71  33 21 27 18 1S 15  :DA9 550 615 54S 534 366 527  0  0  21.68 13.72 15.34 12.67 13.32 9.13 13.15 .00  14 -,  25 23 17 10 24  0  0  i'l  J  2-n 2,)-. 142  cuMLATIVE TOTAL %  069 1419 2034 25:::" 3116 3432 4009 4009  21.63 35.4 50.74 64.41 77.7,: S6.85 100.00 100.00  4009 100.00 4009  100.00  CiREATER THAN 0.40 0.20 Tn 0.40 0.00 TO 0.20 -0.20 TO 0.00 •-0.40 TO -0.20 -0.60 TO -0.40 LESS THAN -0.60 UNULFINLD TOTAL  N.  WIA;TH  A PEPIJ:NT OF TOTAL DEPOSITS, 1930:2  DISTRICT CUMLATIVE 1  1  _ _ 4 ''. -  4  5  1.  7  3  9  10  11  1"  ..-_-: 151 1:7.4 3-.:.3 303 1E.3 243 12'7, 240 136 13? 101 1: 106 ::5 211 141 42 155: 92 2::::. A!:: 51 27 Q 7 .-'5 16 A6 :A 12 54 : -2 57 4 6 $7, 7 9 1 7, :7; A 7 51 24 19 59 21 , 0 9 n 1 .4_ 6 1 .3 3 2 0 0 0 0 0 0 0 0 0 0 0 0 0 11 1  7:02 2'7'2 /..72 492 ::12 cipEc4IFR THAU 6.0 1.0 TO 6. ( ) TO 4.0 n.0 TO 3.0 1ESS TH:',N 0.0 UNPEFINED  7  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _:05 142  TOTAL  2169 1267 304 2.39 30 0  %  lorAL  54.10 2169 7:1./10 2436 7.53 3740 5.9A 21979 .75 4009 .(4) 4009  54.10 35.71 93.29 99.25 100.00 100.00  4009 100.n0 4009  100.00  , 12/n2/20 15:47 I.M. - LOW1  orLR  FORLCO:J - LnW INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:1 DISTRICT 1  1 4  21 13  _  17  ._, -  11 17. 0  7 _  .- -  - 11'  4 7 -  "I:  4  71 102 39 :`-, 45 .7.-.:1 2.1_. 2'7, 1:::0 11 47 7-:0 ) 0  115 :E:7 112 112 102 77 ,,  ...,_  /=.72  C"  A.  7  76 70 79 P.--: 72 44 66  36 .34 4/.:. 32 2.2: 15 21  74 65 75 22 71... Ei3 61  0  C)  0  (1  17 71 -9 52 39 1:4 42 87 50 29 42 7'=, 44 115 0  0  10  11  4(.:, 24 49  71 20 33  2.3 ::3 7 20 24 0  12  21 12 3. 1:3 13 -::: 12 , 10 J -A 18 0  0  .1/.25 603 22() 263 142  21z.  TOTAL  %  745 518 A63 592 548 399 524 0  12.52 12.92 14.54 14.77 14.17 9.95 13.07 .00  CUMLATIVE TOTAL %  745 1242 192A 251::" 20'7...:A 34S5 4009 4009  1:11.5. 21.50 42.04  62.81 74.95 100.0( 100.0(  4009 100.00 400:'  0!  GM- ATER THAN 0.40 0.20 TO 0.40 0.00 Ti:, 0.'7'0 -0.70 TO 0.00 -(P.40 TO -0.20 TO -0,40 LESS THAN -0.60 1.:NDEFINED 101- 1)L  NET WMTH AS A f'EPCI:NT OF TOTAL DEPOSITS, 1921:1 DISTRICT 1  3  .^.  5  A  7  (.7)  11  12  TOIAL  11,9 -:01 .2/. 14:J. 2--:1 10'7; 21.3 121 123 05 214 153 44 137 27 -04 76 51 12: .7) 17 ":6 --:c-' 77 , 12 75 40 'Pl 10 71 13 10 7r:: 12 37' 25 , .7. 4 4 n 1 _ 1/. 5 4 (, (..) 0 0 0 ,..) 0 0 0  :30 37 7 'Z: 1 0  1954 1241 424 333 50 0  141  :-: _  11 '  72 4'712 213 THxl 6.0 -T!.; 4.0 TO Tn ' 2%0  1 4 )  7  4  f",.0   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _  10  602: 220 205 142  %  4' , 3.79 '7:0.94 10.5Y2 C.47: 1.25 .00  CUMLATIVE TOTAL %  1954 31c/7 2.4.21 3959 4009 4009  42.79 79.75 90.32 9E:.75 100e00 100.00  4009 100.00 4009  100.00  I.M. - LOW1 OPER FORECAST - LOW INTEREST RATES  t'INNUALIZED NET INCOmE AS A PERCENT OF AVERAGE NET ASSETS, 1981:2 DISTRICT 1  1 ,_ .--. 4 5 A  _ _  7 '-'  '''  3  4  6  7  8  c.,  10  11  12  43 123 177 384 250 127 237 113 297 12'7/ 141 - 4 -: - • 43 112 38 38 79 46 ‹7,2 34 23 .. .-_ , 3 25 r 21 64 67 37 81 14 28 :: 32 20 48 37 10 41 33 47 10 4 c, 21 ,':. 22 10 21 33 16 27 7 5 ,--. 1? 9 7 7 3 17:4 8 20 6 0 c-,.,-3 7 .:/-. :-: 12 .--:9 15 13 J 6 13  91 20 c, A 4 4 :=1  -  l. )  - 117 1  -  -  -  0  0  '.).Z  0  0  .1,72  0  0  0  0  0  213 436 265 60.:: 33  0  0  35 142  TOTAL  2116 642 491 296 181 98 1:1:5  %  52.78 16.01 12.25 7.33 4.51 2.44 4.61  0  CUMLATIVE TOTAL %  2116 2758 3249 3545 3726 3824 400?  C1.04 33.4: 92.94 c-'5.3' 100.0(  .00 4000  1(10. C:  52.7C  4009 100.00 4009  C,rEAIER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 -0.20 TO 0.00 -(:.40 TO -0.20 -0.%0 TO -0.40 LE'F.S THAN -0.4(: iP,UEFINED  ,!LT (4Or, :TH AS A TERIENT OF TOTAL DEPOSITS, 1981:2 DISTRICT 4  A  1  A•  7  C  2  10  -,. ,  CUMLATIVE TOTAL '4  11  12  TOTAL  107 204 119 117 82 20:7: 74 53 37 94 12 lc, 27 84 11 12 4 5 14 4 0 0 0 0  35 :::C 10 2 1 0  1c,51 48.67 1-. 7 51 1201 29.96 .3152 440 10.9* 3592 9.02 ::::54 : 467 ' 55 1.'37 4009 0 .00 4009  43.A.7 72.6: 3c..)..4.0 .:-44-.: 100.'0 (' 100.(:),_,  345 603 220 205 142  4009 100.00 4009  100.0e  A '  1. _  5  1_ 11  '1 .1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  17 16 1 0  ....0  1 -.74  :.7 11:3 73 3::::: 75 12 3, 0 (:) VV  e3 4'7'2 T1-WN TO  ro 4.0 TO 3.0 THC,N 0.0  111  2.34  42 132 14 7-::: 1:: 42 C.) 5 fl, C.,  12/02/00 17:32 I.M. MEDI OPER FORECAST - MEDIUM INTEREST RATES ASSETS  P0:2  MORTGAGE LOANS AND CONTRACTS . FIXED RATE VARIABLE RATE RENEGOTIATED PATE  81:1  81:2  472.234 457.234 15.000 .000  495.227 473.727 16.500 .000  514.060 437.778 15.482 10.801  531.711 494.282 14.582 22.747  22.151  22.628  23.381  24.073  .000  2.449  6.390  9.9t..0  OTHEP L0AN':  16.960  17.726  18.364  18.977  t.ASH F, INVESTMENT SECURITIES .  55.740  5:::.136  60.124  61.932  REAL ESTATE OWNED  1.973  2.062  2.159  2.251  rIXCD ASSETS (NEI)  7.782  3.06  8.576  3.923  OTHER ASSETS  5.431  5.685  5.949  , / .19:::  5:32.272  612.168  639.00:::  664.02t.  475.137 104.540 370.646 149.923 2.225 125.324 32.074  493.079 100.775 239.205 105.956 63.683 174.644 39.917  520.973 98.985 421.993 94.741 :32.977 197.973 44.282  533.078 91.625 447.352 87.566 9 .637 215.52 43.5(7  .800  3.000  F..000  54.936 40.345 14.091  6n.109 43.093 17.015  62.941 44.967 17.974  63.225 48.714 19.511  7.0R9  7.359  7.764  3.110  .217  .227  .237  .246  DEFERRED CREDIT  3.6.::5  3.327  4.022  4.136  OTHER LIABILITIEc.  8.509  3.941  9.278  9.741  550.193  520.243  603.321  634.435  32.080  =:1.926  30.679  0 50:7. 23  OD  MORTGAGE-BACKED SECURITIES (US) 1:0NSUMER LOAW.  TOTAL ASSETs  LlAB1LITIE  ACCOUNTs PASSP001 ACCOUNTS 1:ETIFICATES, TOTAL EYISTING CERTIFICATE:. NEW 2-1/2 4 YEAR CERT. Mt-11- •• 1100,000+  •• •  THIRD-PARTY ACCOUNT. ; PURROWED MONEY FHLB ADVANI-Ec. OTHER BORROWED MONEY LOAN  IN PR111Eq•:.  FECIFIC RESERVE;  TOTAL LIABILITIES  NET WORTH  NET WORTH  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  46..11111ftelahiriag,  12/02/80 17:33 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES INCOME  80:1  60:2  61:1  P1:2  rOTAL OPERATING INCOME INTEREST INCOME .... MORTGAGE LOANS CONTRACTS . CONSUMER AND OTHER LOANS ... INVESTMENTS !, DEPOSIT!:; MORTGAGE-PACLED SEC. (US) . FROM LOAN FEES DISCOUNTS .. ALL OTHER OPERATING INCOME ..  27.141 25.648 21.111 .S94 2.762  29.521 27.207 22.628 .2A7 3.415 .977  34.406 22.735 24. 8/. 1.476 2.6A7 1.107 • 786  .720 .773  .811  31.841 30.350 24.544 1.019 3.744 1.043 .642 .849  .412  .429  .450  .471  27.553  29.951  :2.292  34.877  3.818  3.987  4.194  4-393  22.216 1f'.94 .00) 1.096 .772  25.912. 22.88 .019 2.141 .771  29.552. 26.273 .050 2.22.3 .841  31.776 28.153 .10t,  .171  .174  .181  .189  26.:::05  30.079  3:=:. 9:3.3  36.357  TAY,Ls FEDERAL TAXES STATE, LOCAL, AND OTHER TAXES  .267  .001  .059  .037  -.402 -.416 .014  -.256 -.376 .02o  TOTAL EXPENSE AFTER TAXES  27.073  "-. -c0.0:::1  .748 .2A7 .480  -.128 .001 -.129 .0-17( -.152  -L1TAL Nr_IN-OPERATING INCOME T'1 AL INCOME  •  EYFENSE  TOTAL er'ERPTING EXPENSE -1ST OF FUNDS (INTEREST) ACCOUNT': THIRD-PARTY ACCOUNTS FHLD PIVANFE uTHEP PORROWED MONEY TOr(-,L N':'N-C'FERAT INC. EXPENSE TOTAL EXPENSE BEFORE TAXES  .857  2/-..000  NEI INCOME  NLY INCOME BEFORE TAXES TAXEc: NET INCOME CASH DIVIDENDS ON c:Tnrr NET INCOME AFTER TAXES !, DIV.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .450  -1.640 -.402 -1.237 .010 -1.247  -1.479 -.356 -1.122 .018 -1.139  12/02/80 17:23 I.M. - MEDI 'JEER FORECAST - MEDIUM INTEREST RATES  riREA/YEAR  NET AS V. OF AVERAGE NET ASSETS WORTH AVERAGE V. OF NET GROSS INTEREST SAVINGS COST OF DEFOSITS INCOME INCOME EXPENSE INTEREST FUNDS  L1:1  6.74 (-..39 5.85 5.4?  .17 -.04 -.40  9.74 10.15 10./15 10.84  -.12 -.50  9.71  -.5e  10.20  -.20  AVERAGE COST OF SAVINC.6  AVERAGE YIELD ON MORTGAGES  7.05 7.80 S.52 8.78  8.74 9.51 10.21 10.60  8.53 9.43 10.29 10.58  9.16 9.50 9.S8 11).21  7.60 2.-22 8.94  6.8A 7.47 8.11 8.44  S.17 8.81 9.55 9.92  7.99 8.73 9.51 9.89  6.79 9.02. 9.26 9.A0  9.10 9.4/, 9.85 10.16  7.97 8.29 9.11 9.49  6.21 7.41 0.17 8.51  P.59 9.03 9.76 10.13  8.23 8.85 9.66 10.04  opc) 9.2R  6.76 7.47 S.11 8.43  9.01 9.78 10.13  8.04 8.91 9.72 10.09  8.85 9.18 9.51 9.81  8.27 9.41 10.27 10.57  9.01  8.79 9.57 9.87  1 2 81:1 81:2  29 5.75 5.32 4.91  1 ): 5.13 4.71)  -.47  :31 :2  81:1 81:2  7.05 6.7S 6.23 5.94  .12 .07 -.20 -.31  9.1 9 9.75 9.99 10.25  7.62 8.28 9.02 9 38  6.34 C .  .26 -.11 -.50 -.47  9.57 9.99 10.27 10.A?  7.85 9.A0 9.92  8.74 9.02  8.45 9.47 10.28 10.57  .17 -.04 -.47 -.44  9.49 10.02 10.22 10.58  7.79 8.62 9.29 9.71  7.00 7.77 8.42 3.69  0.44 9.32 10.12 10.42  ['1ST. 4  S1:1 81:2  5.36 4.87  DP:T. 5 *f0:1  7.00  S1:1 81:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6.17 .J.74  7.08  e.o2  C. 9.27 10.11 10.41  9.72 10.04  c,.10 ' 11.42 9.7c.  12/02/80 17:33 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  CIF:EA/YEAR  NET AS X OF AVERAGE NET ASSETS WORTH AVERAGE 7. OF GROSS NET INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  ['1ST. 6 20:1 20:' 21:1 S1:  .OR .00  AVERAGE COST OF SAVINGS  AVERAGE YIELD ON MORTGAGES  -.31  9.27 9.97 10.23 10.64  7.92 S.68 9.46 9.75  7.31 8.01 8.67 8.92  9.41 10.22 10.49  9.29 10.24 10.52  0.09 9.48 9.87 10.21  6.24. 5.93 5.39 4.04  .13 -.08 -.50 -.45  0.4A 0.97 10. 1 10.59  7.78  /-.95 7.77 8.47 3.75  E:.43 (7.29 10.09 10.40  8.23  8.06  9.21 10.05 10.37  0.65 9.07  6.34 5.22 5.22 4.A7  .11 -.34 -.71 -.65  9.33 9.8 10.11 10.50  7.82 8.88 9.67 9.98  6.68 7.74 S.46 S.69  10.3? 10.61  6...7:4 5.89  10.06 10.41 10.79 11.16  2.14 9.07 9.89 10.15  7.36 8.27 0.01 9.24  8.24 9.83 10.67 10.90  2.72  9.22  9.83  9.62  4.30  .29 -.13 -.47 -.30  10.72 10.95  10.04 10.41  7.45 7.05 6.45 5.98  .35 -.03 -.46 -.38  9.:::R 10.27 10.55 10.95  7.89 8.39 9.69 9.97  6.76 7.71 2.42 8.63  8.60 9.65 10.48 10.74  8.47 9.63 10.50 10.75  9.A7-{ 10.07 '• 10.2A  7.61 7.29 , I. 0  .24 .12 -.12 .00  10.46 10.76 11.12 11.57  8.7? 9.13 0.39 10.16  7.20 7.77 C.  0.51 9.93 10.74 11.00  9.34 9.27 10.73 10.98  0.70 10.04 10.45 10.83  6.25 5.77 5.41  Su:2 21: 1 1:  DIST. 8 : : 8.1: 1 21:2  7  9.36  C.  8.16 9.47 10.2? 10.60  2.96 9.67 10.00  I 'ST.  5.23  :E1:2  DIST. 10 20:2 :1 21:2  DIST. 11 30:1 ?1:1 81:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6.52  8.76  12/02/S0 17:3:: I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  AREA/YEAR  DST. 12 C(_):1 S1:1 S1:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NET AS Y. OF AVERAGE NET ASSETS WORTH AVERAGE GROSS INTEREST SAVINGS COST OF % OF NET INTEREST FUNDS DEPOSITS INCOME INCOME EXPENSE  7.65 7.29 6.71 6.27  .21 .12  10.24 10.62 10.35 11.27  C.27 2.77 9.54 9.2.6  6.90 7.42 2.11 3.37  9.56 10.36 10.67  AVERAGE COST OF SAVINGS  2.72 9.45 10.30 10.61  AVERAGE YIELD ON MORTGAGES  9.64 9.94 10.31  12/02/80 17:3: : I.M. - MEDI  OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSET S, 1920:1 DISTRICT  I  1  ^  10  11  12  TOTAL  40 10 17  83 117 269 192 67 189 101 221 101 C. 45 4/ , 117 78 46 70 51 9R 42 47 109 90 45 67 48 92 29 62 45 20 71 23 AA 24 32 2:0 4? 3/ , 12 37 19 45 10 C . 26 9 31 19 5 17 10 23 45 18 35 18 35 13 13 0 0 0 0 0 0  64 37 31 18 19 11 25 0  46 25 20 16 12 9 14 0  1490 661 637 424 306 173 318 0  4 11 7  12 0  4  5  Cl  7  117 302 292 672 492 213 484 245 A0:3 220 205 142 1 ,_ 4 5 7 8  CUMLATIVE TOTAL %  %  37.17 16.49 15.89 10.5s 7.63 4.32 7.93 .00  1490 2151 2728 3212 2518 3691 4009 4009  37.17 53.65 69.54 80.12 87.75 97).07 100.00 100.00  4009 100.00 4009  100.00  GREATER THAN 0.40 0.20 TO 0.40 0.0') TO 0.'0 -0.20 TO 0.00 -H.40 TO -0.20 -fl.60 TO -0.4n LPES THAN -0.60 UNUEFINED luTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:1 DISTRICT 1  1 -  4  5  7  :3  9  10  11  12  58 171 199 E: 338 157 265 142 291 155 147 109 47 101 s0 201 123 45 174 93 227 50 40 4 16 9 17 7 30 14 42 5 9 7 14 4 14 4 16 13 9 8 6 1 0 1 0 1 0 3 4 1 2 0 0 0 0 0 0 0 C .  345-  7 - 117 302 292 672 492 213 486 265 603 220 205 142 1 _ 4 -  6 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  2415 1206 202 173 13 0  %  60.24 30.as 5.04 4.32 .32 .00  CUMLATIVE TOTAL %  2415 3621 3823 3996 4009 4009  60.24 90.32 95.36 99.68 100.00 100.00  4009 100.00 4009  100.00  12/02/80 17:33 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:2 DISTRICT 7  2  1 -  24  4  14 15 11 13 0  77 111 131 103 A. 40 4- 77 38 42 109 79 27 34 107 67 17 102 68 31 13 63 45 27 AS-: 53 51 0 0 0 0  7  3  4  1  47 110 40 63 44 72 24 03 24 63 16 41 18 49 0 0  S  9  22 87 25 60 36 75 43 79 47 89 39 78 47 135 0 0  10  11  12  TOTAL  %  42 31 46 29 31 14 27 0  71 ..-. 7.=.., -,= 4-.1  38 21 27 18 18 5 15 0  81 , 9 550 615 548 534 366 527 0  21.68 13.72 15.34 13.67 13.32 9.13 13.15 .00  23 17 10 24 0  9 - 117 802 292 672 492 213 486 265 603 220 205 142 1 -  4 5 7 -  CUMLATIVE TOTAL %  869 1419 20:Wt 3116 3482 4009 4009  21.68 25.40 50.74 64.41 77.73 86.85 100.00 100.00  4009 100.00 4009  100.00  GREATER THAN 0.40 TO 0.40 0.00 Ti) 0.20 TO 0.00 -0.40 Ti) -0.-)0 -0.60 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:2 DISTRICT 4  1  6  7  f't C.  9  10  11  12  53 151 184 •=r::8 303 153 243 129 240 136 133 101 211 141 68 51 27 48 10A 42 158 92 9 6 4 7 12 54 22 57 16 66 '7*6 r. 9 21 6 24 19 59 7 19 7 51 3 1 0 9 6 1 2 3 0 0 0 0 0 0 0 0 0 0 0 0 0  4 5  7 - 117 302 292 672 492 2174 486 265 6J03 220 205 142  1  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 2.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  %  2169 1267 304 2:'49 30  54.10 31.60 7.58 5.96 .75 .00  CUMLATIVE TOTAL %  2169 24'36 3740 3979 4009 4009  54.10 85.71 93.29 99.25 100.00 100.00  4009 100.00 4009  100.00  12/02/80 17:3 I.M. - MEDI  OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:1 DISTRICT 1  1 11 18  4 5 6 7  4 3  4A 27 32  37 18 ;0 37 105 0 0  4  A  62 49 33 32 40 34 ;0 53 38 29 A3 50 46 106 73 28 114 A5 247 173 0 0  7  R  9  14 36 5 44 13 23 R 26 27 ' 47 17 50 33 54 96 42 41 68 29 80 31 81 45 86 59 175 135 275 0 0 0 0  10  17 2 17 24 42 38 74 0  11  12  25 17 16 9 27 12 21 11 34 27 19 16 5340 0 0  - 117 302 292 672 492 213 486 265 603 220 205 142 1 2 4 f. I  TOTAL  366 245 356 398 609 592 1442 0  CUMLATIVE TOTAL V.  %  9.13 6.11 R.SR  366 611 967 1?.6.5 1974 2546 4009 4909  9.1? 15.24 24.1: 34.0,f 49.24 64.01 100.0( 100.0(  4009 100.00 4009  100.00  15.19 14.77 25.99 ()0  GREATER THAN 0.40 TO 0.40 0.00 TO 0.-'0 -0.20 TO 0.00 -0.40 TO -0.60 TO -0.40 LESS THAN -0.A0 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1981: 1 DISTRICT 1  1 4 6-  4  5  7  2  9  10  11  45 125 160 -7.R9 259 137 215 101 202. 112 117 47 95 94 207 152 48 146 89 195 79 54 13 40 78 ;9 13 74 39 100 14 14 10 29 15 PA 40 15 46 21 88 9 15 = C. 1 12 0 A 17 0 0 0 0 0 0 0 0  12  TOTAL  85  1858 1244 456 392 59 0  10 2 1 0  7 - 117 302 292 672 492 213 486 265 603 220 205 142 1 4 5 6 7  GREATER THAN 6.0 4.0 TO 6.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  %  46.35 31.03 11.37 9.78 1.47 .00  CUMLATIVE TOTAL %  1858 3102  46.35 77.38 83.75  '=:.=/=( 4009 4009  100.b0 100.00  4009 100.00 4009  100.00  4  12/02/80 17:33 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:2 DISTRICT  1 2 3 4 5 6 7-  A  4  1  6  39  9  -,  12 :"(:) 8 33 1c) 32 -.A. .::-:: 37 112 0 0  AO 44 39 37 75 45 34 52 108 30 32 102 77 A5 204 157 0 0  58 32 32 37  7  C.  9  8 61 16 41 18 747-i 10 74R 29 44 21 ' AP. 30 73 31 , 33 67 40 2/ 49 33 81 48 152 107 0 0 0  10  11  12  TOTAL  %  23 12 25 29 36 23 62 0  45 26 21 RO 19 20 44 0  20 11 15  421  10.50 7.03 9.65 12.42 14.57 14.57 31.-)5 .00  23 18 22 0  - 117 302 292 672 472 213 436 265 603 220 205 142 1 4 -  7 C -  CUMLATIVE % TOTAL  10.5() 17.54 27.1c' 39.61  421 703 1090 1538 2172 2756 4009 4009  63.7 100.00 100.001  4009 100.00 4009  100.00  .4-04  387 498 534 534 1253 0  GREATER THAN 0.40 0.-,0 TO 0.40 0.00 TO 0.20 -0.20 TO 0.00 -0.40 TO -0. -)0 -0.A0 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1981:2 DISTRICT 4  1  1 4 A -  43 17 14 2 0  5  A  7  121 200 127 154 260 79 :31 186 142 53 123 14 70 42 :37 96 F.3 37 , 19 18 115 5/ 49 A 1 c", 5 15 0 0 0 0 0  R  73 33 45 45 9 0  9  170 161 113 127 27 0  11  12  TOTAL  %  96 105 75 54 26 21 16 20 5 7 0 0  71 44 11 13 3 0  1649 1139 55 579 87 0  41.13 28.41 13.84 14.44 2.17 .00  10  7 - 117 302 292 672 492 213 486 2A5 603 220 205 142 A 7 1 2 2 4  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CUMLATIVE % TOTAL  1649 2788 3343  41.1 69.54  4009 4009  100.0C 100.0C  4009 100.00 4009  100.0C  12/02/80 16:20 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES 80:1  Ac.sETc:.  RO:2  .• 1  472.234 457.224 15.000 .000  495.227 478.727 16.900 .000  51'.564 486.739 15.504 10.321  527.904 491.707 14.622 21.495  22.191  22.628  23.311  2:::.R99  .000  2.449  6.371  9.809  16.9A0  17.726  18.212  18.R4--)  55.740  50.1R6  59.947  61.408  REAL ESTATE OWNED  1.973  2.0A2  2.153  2.25  FIXED ASSETS (NET)  7.782  i::.206  8.551  :::..0, .-.0  OTHER ASSETS  5.431  5.605  5.922  A.159  612.168 '' 5R' 7  637.141  659.271  475.107 104.540 270.646 149.923  490.979 109.775 229.205 105.956 6.0.602 174.6,44  518.979 96.010 96.761 79.693 199.CO:E.: 46.. 707  534.70 25.59,:. 449.202 07.966 .977 219.:342 53.497  .620  .R00  2.000  5.000  54.9746 40.849 14.091  A0.109 43.093 17.015  63.911 45.435 18.476  70.141 49.651 '-'0.490  7.0C9  7."::5c.C1  7.72:4  S.050  .217  .227  .237  .244 4.155  MORTGAGE LOANS AND CONTRACTS FIXED RATE VARIABLE RATE RENEGOTIATED RATE MORTGAGE-BACJED SECURITIES (US) CONSUMER LOANS OTHER LOAN'; (ASH P., INVESTMENT SECURITIES .  .6  TOTAL AsSFTS  LIABILITIPE  'T.AVING ACCOUNTS PASSB001. ACCOUNTs CERTIFIrATES, TOTAL EXISTING CERTIFICATEs 4 YEAR CERT. NEW 2-1/2 MMC S $100,000+ THIRD-PARTY ACCOUNTs BORROWED MONEY FHLB ADVANCES OTHER BORROWED MONEY LOANS IN PROCEss SPECIFIC RESERVES  •••  1:::5.324 :32.074  DEFERRED CREDITS  3./,'",  3.827  4.007  OTHER LIABILITIEc;  R.509  8.941  9.342  550.193  500.243  607.210  632.237  22.0R0  31.926  29.927  27.029  TOTAL LIABILITIES  NET WORTH  NET WORTH   https://fraser.stlouisfed.org L Federal Reserve Bank of St. Louis  12/0 /80 16:2'. I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES INCOME  P0:1  TOTAL OPERATING INCOME INTEREST INCOME MORTGAGE LOANS f!2 CONTRACTS . CONSUMER AND OTHER LOANS INVESTMENTS °, DEPOSITS MORTGAGE-BACrED SEC. (US) . FROM LOAN FEES !, DISCOUNTS .. ALL OTHER OPERATING INCOME  27.141 25.648 21.111 .896 2.76-) .880 .720 .773  E: 1: 1  81:2  29.521 27.887 28 .8A7 3.415 .977 .823 .811  32.141 30.680 24.600 1.061 3.974 1.044 .614 .847  34,875 33. 2'.1 2A.:-430  .412  .429  .449  .468  27.553  29.951  :2.59(  35,343  3.313  3.987  4.1E13  4.271  22.816 19.949  25.912 "'''..c/c:c.  -:0.902 27.518  .000  .01,-,  ,05o  3n.0"2 .ice:.  .772  2.141 .771  2.405 .929  2.705 .0ci :  .171  .174  .181  .188  26..805  30.079  35.271  39.257  TAXES FEDERAL TAXE: STATE, LOCAL, AND OTHER TAXES  .2A7 .209 .059  .001 -.07:5 .037  -.684 -.690 .006  -1.017 -1.021 .004  TOTAL EXPENSE AFTER TAXES  27.073  7-40.02.1  .743 .267 .430 .0-43 .450  -.123 .001 -.129 .023 -.152  -2.680 -.604 -1.995 .004 -1.999  -3.912 -1.017 -2.894 •  TOTAL NON-OPERATING INCOME TOTAL INCOME  4.291 1.107 .736 .878  EXPENSE  TOTAL OPERATING EXPENSE COST OF FUNDS (INTEREST) ACCOUNT THIRD-PARTY ACCOUNTS FHLB ADVANCES OTHER BORROWED MONEY 10TAL NON-OPERATING EXPENSE ..  • •  TOTAL EXPENSE BEFORE TAXES  34.69 ,  NET INCOME  NET INCOME BEFORE TAXES TAX ES NET INCOME CASH DIVIDENDS ON sTocr NET INCOME AFTER TAXES DIV.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  08  -288.7,7  •  12/02/:::0 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  AREA/YEAR  AS Y. OF AVERAGE NET ASSETS NET AVERAGE WORTH INTEREST SAVINGS COST OF NET GROSS 7. OF INTEREST FUNDS DEPOSITS INCOME INCOME EXPENSE  U.S 50:1 80 81:1 21:2  AVERAGE COST OF SAVINGS  AVERAGE YIELD ON MORTGAGES  9.16 9.0  6.74 6.*.?. 5.73 5.01  .17 -.04 -.65 -.90  9.74 10.15 10.56 11.04  8.06 2.79 10.02 10.84  7.05 7.30 2.93 9.69  8.74 9.51 10.79 11.60  10.79 11.68  10.28  81:1 21:2  5.75 5.22 4.54  -.02 -.12 -.71 -1.07  9.27 .71 ':) 10.04 10.38  7.40 P..2' 9.34 10.17  6.86 7.47 3.47 9.24  3.17 8.81 9.97 10.80  7.99 8.73 9.94 10.8::  3.79 9.00 9.39 9.64  DIST. 20:1 20:2 21:1 21:2  5.96 . .A0 . 5.0? 4.34  -.20 -.22. -.43 -1.00  9.10 9.46 9.93 10.27  7.97 8.37 9.52 10.37  6.81 7.41 ,•.-........... ,  8.59 9.03 10.20 11.05  e.s5 10.10 11.02  PI ST. Co: 1. 80:2 81:1 81:2  7.05 6.75 6.22 5.57  .12 .07 -.52 -.80  9.19 9.75 10.10 10.54  7.62 --,c, .., 9.43 10.25  6. 7/:.  7.47 8.49 9.24  8.30 9.01 10.21 11.04  5.24 4.44  9.57 9.99 10.22 10.22  7.85  -.11 -.76 -1.04  10.06 10.89  7.09 R.0-) 9.17 9.94  8.45 9.47 10.77 11.58  10.72 11.65  9.01. 9.35 9.76 10.11  7.00 1-.. 70 6.05 5.32  .17 -.04 -.71 -.98  9.48 10.02 10.2 10.77  7.79 8.A2 9.82 10.63  7.00 7.77  8.44 9.'?") 10.58 11.33  S.21 9.27 10.59 11.44  9.10 9.42 9.79 10.10  DIET. 1 fi;o: 1  ['1ST. 4 80:1 30 2 81:1 21:'  ['1ST. 5 20:1 20:2 81:1 21:2  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6.84  9.23  9.55  8.04 3.'•'1 11.07  E:.27 9.41  9.91  C. 3.65 9.01  9  0.85 c.,,c;=; 9.87  12/02/20 16:2( I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  AREA/YEAR  NET AS % OF AVERAGE NET ASSETS WORTH AVERAGE NET % OF GROSS INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  ['1ST. 6 20:1 80:2 01:1 81:2  AVERAGE COST OF SAVINGS  AVERAGE YIELD ON MORTGAGEE  A.53 6.'5 5.65 5.00  (:)0 -.64  9.27 9.97 10.24 10.85  7.92 8.63 9.91 10.70  7.21 8.01 9.09 9.8'  2.5C: 9.41 10.69 11.40  0.42 9.39 10.7? 11.52  6.26 5.93 5.27 4.54  .13 -.08 -.74 -.98  9.46 9.97 10.20 10.78  7.70 R.92 10.A1  6.95 7.77 0.07 9.61  2.43 9.29 10.56 11.26  9.'1 10.53 11.39  6.24 5.22 5.09 4.24  .11 -.34 -. -1.19  9.22  7.22  6.62 7.74 0.06 9.55  8.41 9.5? 10.00 11.56  8.16 9.47 10.S3 11.66  9.-)9 c'.71 10.0A  ['1ST. 9 S0:1 :E:0: 2 21:1 21:2  6.24 5.R9 5.15 4.36  7.26  0.24 9.83 11.18 11.97  0.73 9,2? 11.26 12.11  1.23 9.62 10.09 10.49  DIST. lu 20:1 80:2 SI:1 S1:2  0.47 9.A? 11.02 11.85  9.29 9.A3 10.06 10.43  9.24 9.R7 11.29 12.23  9.70 10.04 10.50 10.91  D1ST. 7 SO:1 20:2 S1:1  F: 1: 1  DIST. 11 20:1 81:1 81:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Q.so  10.22 10.70  10.11 10.90  -.13 -.73  10.06 10.41 10.92 11.39  2.14 9.07 10.37 11.12  7.45 7.05 6.33 5.56  .35 -.02 -.71 -.92  9.8S 10.27 10.67 11.16  7.S9 8.89 10.13 10.91  9.51  S.60 9.65 10.95 11.71  7.61 7.2.7/ 6.69 6.05  .24 .18  10.46 10.76 11.23 11.76  6.774 9.13 10.37 11.21  7.29 7.77 8.99 9.74  9.51 9.93 11.25 12.10  -.61  9.46 10.21  6.76 7.71  •9.09 9.42 9.91 10.22  0.9A 9.:9 '.69  :=1.9A  12/02/80 1/.:,:2() I.M. - HIGH1 ':'PER FORECAST - HIGH INTEREST RATES  AREA/YEAR  AS % OF AVERAGE NET ASSETS NET WORTH AVERAGE % OF NET GROSS INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  DIST. 12 80:1 80:2 81:1 81:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7.65 7.2..7, 6.59 5.84  .21 .12 -.52 -.76  10.24 10.62 10.96 11.47  C.27 8.77 9.97 10.80  6.90 7.42  9.03 9.56  8.50  10.83  9.24  11.66  AVERAGE  crisT OF SAVINGS  6.7S 9.45 10.81 11.74  AVERAGE YIELD ON MORTGAGES  9.64 9.94 10.35 10.72  •  12/02/80 16:2( I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, i930:1 DISTRICT 1  1 _  40 10 17 1.? 11  4 5 7  12 0  8 -  4  S .  6  23 117 269 192 45 46 117 72: 42 47 109 90 29 25 68 45 22 30 43 36 9 19 21 45 13 25 22 0 0 0 0  7  en,  9  10  11  12  TOTAL  67 189 101 221 101 46 70 51 93 33 45 67 48 29 20 71 23 6A 24 12 37 19 45 10 = 10 17 5 18 13 13 0 0 0 0 0  64 27 21 18 19 11 25 0  46 25 20 16 12 9 14 0  1490 661 637 424 206 173 318 0  9 - 117 302 292 672 492 213 436 265 602 220 205 142 1 2 4 6 7 9  %  27.17 16.49 15.2.9 10.58 7.63 4.32 7.93 .00  CUMLATIVE TOTAL %  1490 2151 S. 2212 2518 7-tA91 4009 4009  4.9.54 80.12 S7.75 92.07 100.00 100.00  4009 100.00 4009  100.00  37. 17  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 -0.20 Tn 0.00 -0.40 TO -0.0 -0.60 Ti' -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL UEPOSITS, 1980:1 DISTRICT 1  1 2 ? 45 6-  •^7.  3  4  6  7  e".  9  10  11  12  53 171 199 382 223 157 265 142 291 155 147 109 47 101 80 201 123 45 174 9? 227 50 40 d'") 9 4 16 43 17 7 20 14 42 5 C. 7 14 4 39 14 9 4 16 12 39 6 •::: 1 0 C) 0 1 0 4 1 1 0 0 0 0 0 0 0 0 0 0 0 0  7 - 117 302 292 672 472 213 486 265 603 220 205 142' 1 4 6 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  2415 1206 202 173 13 0  %  4.0.24 30.03 5.04 4.32 .32 ,00  CUMLATIVE TOTAL %  4009 4009  4.0.24 90.32 95.36 99.68 100:00 100.00  4009 100.00 4009  100.00  2415 2621 '.:r710A  12/02/80 16:20 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:: DISTRICT  1 1 -  4 5 6 7 R  24 13 22 14 15 11 13 0  -  3  4  77 111 40 48 42 27 34 17 21 12 51 27 0  é.  131 103 Cl-. 77 109 79 107 67 102 6'3 45 68 53 0  7  47 110 40 62 44 72 C. 24 24 16 41 18 49 0 0  C.  2.6 43 47 ;9  47 0  9  10  11  12  TOTAL  %  87 AO 75 79 89 78 125 0  42 31 46 29 31 14 27 0  71 35  33 21 27 18 18  869 550 6.15 54:3 534 7J.A6 527 0  21.63 12.72 15.34 13.67 13.22 9.13 12.1'. .00  22 17 10 24 0  C .  15 0  9 - 117 302 292 672 492 213 486 265 603 220 205 142 1  ,_ 4 6 7 8 -  CUMLATIVE TOTAL %  869 1419  3116 2482 4009 4009  21.68 25.40 50.74 64.41 77.7? 86.85 100.00 100.00  4009 100.00 4002  100.00  GREATER THAN 0.40 0.20 TO 0.40 0.0C) TO 0.20 -0.20 TO 0.00 -0.40 TO -0.20 -0.60 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:2 DISTRICT  1 1 , - _ .2. 45f-. -  3  4  7  9  10  11  12  53 151 184 332 303 153 240 129 240 136 133 101 48 106 35I 211 141 42 158 92 238 68 51 27 --.)-) 57 7 25 1A A6 26 12 54 ...,_ 4 6 9 7 19 7 51 21 A 24 19 59 9 9 8 --, ,_ 0 1 0 6 1 3 9 3 3 0 0 0 000 0000 0 0 0  7 - 117 202 292 672 492 212 486 265 603 220 205 142 GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  2169 1267 304 239 20 0  %  54.10 31.60 7.52 5.9A .75 00  CUMLATIVE TOTAL %  2169 343A 2740 2:979 4009 4009  54.10 05.71 93.29 99..25 100.00 100.00  4009 100.00 4009  100.00  12/02/20 16:.20 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:1 DISTRICT 1 __ 1 --, 2 4 54!•i: -  .-, ' . 4 ,:,  5. .30 3 20 10 2A 12 .-,.., ,....., 14 25 19 41 54 135 0 0  .--....), 29 27 .7 'R  21 43 99 0  6  5  24 26 33 42 58 9:::  18 16 29 25 46 71 391:.7 277 391:. 0  7  0 ,  9  11  12 --  TOTAL  , 9 25 32/:. 12 '0 ,-. , 13 3 19 3 14 o . 10 20 , -.)---,. 10 19 15 3A 12 42 10 21 54 20 44 22 22 40 74 '79 '7 .: 30 97 1;( ) : . : 1T; - 128 79  7 10 11 7 11 35 61  211-: 164 22'. 205  0  0  0  0  0  0  10  0  0  9 - 117 :02 292 672 42 213 486 265 603 220 205 142 1 4 5 6 ? _  %  CUMLATIVE TOTAL %  5.31 4.09 5.61 7.11  576 2160  213 377 602 S27 9.63 1273 14.27 1249 53.28 4009  5.31 9.40 15.02 22.12 31.75 46.12 100.00  0  .00 4009  100.0()  4009 100.00 400c,  100.00  386  GREATER THAN 0.40 0.2() TO 0.40 0.00 TO 0.20 -0.20 Tu 0.00 -0.40 TO -0.20 -0.60 TO -0.4(' LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1981:1 DISTRICT 1  1 3 4 56 -  ' 3  4  5  A  7  42 122 157 279 252 131 209 48 94 9'3 200 149 52 141 15 39 24 88 48 15 76 10 32 17 92 41 15 55 ... --, --_, 0 , J 2 12 . 1 0 0 0 0 0 0 0  9  10  11  12  94 197 106 114 SO 90 184 72 " 42 18 42 110 21 9 23 91 9 15 10 6 21 5 A 1 0 0 0 0 0  7 - 117 302 292 672 492 213 426 265 603 220 205 142 1 4 5 6 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CUMLATIVE TOTAL %  TOTAL  1792 2019 2524 2945 4009 4009  44.72 75.31 87..90 93.40 100.00 100.00  4009 100.00 4009  100.00  1793 1224 505 421 64 0  44.72 20.".R 12.60 10.50 1.A0 .00  12/02100 16:2( I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:2 DISTRICT 4  1  5  A  7  C.  9  10  11  14 16 (.7) 13 4 13 1 11 15 17 11 17 12 4 16 14 11 10 11 17 23 27 9 21 24 7 07, 27 27 32 19 35 14 35 12 12 32 35 63 50 26 54 17 44 26 125 151 495 349 143 340 218 450 159 0 0 0 0 0 0 0 0 0  17 6 14 17  0 4 7  4 6 7 -  9 - 117 302 292 672 492 213 456 265 1 4 5 A 7 9  12  TOTAL  4 6 7 10 18 29  120 101 132 192 280 395 2775 0  220 205 142  %  CUMLATIVE TOTAL %  3.19  120 229  3.44 4.79  5c;c,  5.71  9.85 1234 69.22 4009 ▪ 00 4009  13.94 20.93 30.72 100.00 100.00  4009 100.00 4009  100.00  A.ciR  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.2() TO 0.00 -0.40 TO -0.A0 TO -0.z0 LESS THAN UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1901:2 DISTRICT  1 1  4 5 6  44 19 19 3  4-  4  A  7  112 145 -)2.0 20.3 110 173 76 75 166 138 62 124 46 35 105 71 15 67 59 35 149 74 23 112 9 22 6 3 10 0 0 0 0 0 0  69 72 48 58 12 0  9  10  11  12  TOTAL  %  134 163 105 164 37 0  81 73 35 24 7 0  95 49 26  65 41 16 17  1449 1089  36.14 27.16 14.67 19.06 2.97 .00  0  0  7 - 117 302 292 672 492 213 486 265 603 2.20 205 142 1 2 4 A 7 -  GREATER THAN 6.0 4.0 TO 6.0 2.0 TO 4.0 0.0 TO 2.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F.UMLATIVE TOTAL %  3126 :=n90 4009 4009  36.14 63.31 77.97 97..03 100.00 100.00  4009 100.00 4009  100.00  764 119 0  1449 A-  Paul A. Volcker July 9, 1981  Dick: one conversation, Following our teleph berty of modifying I have taken the li n , which I hope I ca your letter to me t. re of a draf consider in the natu with developing d We are moving ahea mption that the a program on the assu em has altered itF Home Loan Bank Syst Federal Reserve earlier view about and perhaps I lending to thrifts, ther tomorrow will want to get toge or Tuesday.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  p.  July 9, 1981  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Paull The Federal Home Loan Bank Board wishes to express our position concerning Federal Reserve lending to savings and loan associations and Federal Home Loan Banks at this time. The Bank Board takes the view that lending by the Federal Reserve System to S&L associations, both for adjustment credit and longer-term credit, is a useful complement, under current circumstances, to lending by the Home Loan Bank System, consistent with the provision of the Depository Institution Deregulation and Monetary Control Act of 1980.  To the extent that the Bank Board may have felt  that institutions should first exhaust credit availability from the Federal Home Loan Bank System, we believe that such a requirement, as previously interpreted, needs reevaluation and is not appropriate at this time.  The Bank Board will be happy to cooperate and provide input  concerning appropriate programs. We would like to further recommend that the Federal Reserve Board and the Federal Home Loan Bank Board work together to reestablish provision of Federal Reserve Bank credit to the Federal Home Loan Bank System, should such credit extension become necessary.  We look forward  to cooperating with you in the development of such a program.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  z ,•••  -2We have received excellent cooperation in working toward the implementation of Federal Reserve credit to thrift institutions, and we are appreciative of the efforts of you and your staff in this regard.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Richard T. Pratt  • 1700 G Street N Wasninpton. D.0 2055: Feoerai Home Loan hank System  Federal Home Loan Bank Board  Feoer81 Home Loan Mortoape Corooratio, Feoeral Sayinos and Loan insurance Corporation  RICHARD T. PRATT CHAIRMAN  1081  The Honorable Paul A. Volcker Cha'rman Board cvernors of the Washington, D. C.  20551  Dear Paul: 17,,dc-ral Home Lo7ln Board wishes to express our position concerning Federal Reserve lendinr to savi= and loan associations and Federal iiome Loan Bank: at this time. The Board en„G-c, rages the Federa Reserve Banks/to insti,tute 1endinc7 u S'E.;.—s to S&L assoc;tions, both,tr ad,lust ,..nt credit ' ----and 1 t_er term credit, 0.7,ns'stent with the rrovisis of the De itgr_y Institutions Der_ ,.laIion and Vonetary Control Act of 80 .111he Bank Board will be happy to cooperate and provid€T input concerning appropriate programs. To the extent that the fikeamPow F_edera1-a7nLe =f_Ey_LLam may have felt that institutions should ( tdwic.,(Ail, first exhaust credit availability from the Federal Home Loan Bank System, we believe that such a requirement ' not cons-istents------ --17,-: , 1 41-V1 the—taw- and---wd---be 4eiapproriate . p at thi _ We would like to further recommend that the Federal Reserve Board and the Federal Home Loan Bank Board work together to reestablish provjsions of Federal Reserve Bank credit to the Federal Home Loan Bank System, should such credit extension become necessary. We look forward to cooperating with you in the development of such a program% We have received excellent cooperation in working toward the implementation of Fed:Pal Reserve credit to thrift institutions, and we are appreciative of the efforts of you and your staff in this regard. Sincerely,  Richard T. Pratt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '  , I r  J.  1700 G Stre•t. N W  ; •  _  Federal Home Loan Bank  • 4  rtgik  \  washington, D C. 20552  10 5 VI 9: t  F•deral Horne Loan Bank System Federal Horne Loan Mortgage Corporation  II II  I  JUL 1 3  lJoi  Federal Savings and loan Insurance Corporation  OF I tiE kICHARD 7 PRATT CHARMAN  Elliott G. Carr President Robert M. Henderson Chairman Savings Banks Association of Massachusetts 50 Congress Street Boston, Massachusetts 02109 Dear Gentlemen: Thank you for your letter of June 16, 1981 expressing concern with thrift institutions' access to the Federal Reserve discount window. The Bank Board appreciates your concerns and has been working with the Federal Reserve Board to resolve issues raised in connection with We are receiving excellent cooperation from Federal Reserve credit. Federal Reserve Board Chairman Paul Volcker and his staff and we hope appropriate solutions to problems with thrift institutions' access to Federal Reserve credit will be reached shortly. Sincerely,  Ys/ Richard T. Pratt' Richard Pratt cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Paul A.Volcker, Chairman Federal Reserve Board Frank E. Morris, President Federal Reserve Bank of Boston Raymond H. Elliott, President Federal Home Loan Bank of Boston  1700 G Street, N.W. Washington, D.C. 20552  Federal Home Loan Bank Board  Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  RICHARD T. PRATT CHAIRMAN  June 19, 1981  Honorable Paul Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Paul: With regard to our 5 p.m. meeting today, I thought you might like a draft copy of our proposed bill, which we have entitled the "Thrift Institutions Restriinuring Act of 1981." It is accompanied  by a section-by-section analysis, as well as by an interlineation showing the relationship of the provisions of the bill to current law. Sincerely,  Richard T. Pratt enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  CHANGES IN EXISTING LAW MADE BY THRIFT INSTITUTIONS RESTRUCTURING ACT OF 1981   https://fraser.stlouisfed.org i Federal Reserve Bank of St. Louis  1.  Section 102: Section 5(a) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(a))  institutions an (ail)]In order to provide local mutual thrift for the provide which people may invest their funds and in order to and rules such under authorized, financing of homegithe Board is inorganization, the for provide to regulations as it may prescribe, associations of regulation and operation, examination, corporation, , or "Fedto be known as "Federal Savings and Loan Associations" institutions of case the in only ((but eral[mutuaD savings banks" located which, prior to conversion, were State mutual savings banks savings mutual State in States which authorize the chartering of banks, provided such conversion is not in contravention of State to law)jand to issue charters therefor, giving primary,consideration fainstituhome-financin the best practices of Eocal mutuaDthriftEnd tions in the United States. rAn association which was formerly organized as a savings bank under State law may not convert from the mutual to the stock form of ownership. An association which was formerly organized as a savings bank under State law may not convert from the mutual to the stock form of ownership.' An association which was formally organized as a savings bank under State law may, to the extent authorized by the Board, continue to carry on any activities it was engaged in on December 31, 1977, and to retain or make any investments of a type it held on that date, except that its equity, corporate bond, and consumer loan investments may not exceed the average ratio of such investments to total assets for the five-year period immediately preceding the filing of an application for conversion and such an association which was formerly organized as a savings bank under State law shall only be permitted to establish branch offices and other facilities in accordance with the limitations imposed by State law controlling applications of a savings bank organized under such State law, provided that such an association: (A) shall be exempt from any numerical limitations of State law on the establishment of branch offices and other facilities, and (B) may, in any case, subject to the approval of the Board, establish branch offices and other facilities lir its own Standard Metropolitan Statistical Area, its own county or within thirty-five miles of its home office, but only in its State of domicile. An association which was formerly organized. as a savings bank under State law shall be subject to the requirements of State law (including any regulations promulgated thereunder and any sanction for the violation of any such law or regulation) in effect at the time of conversion, in the State of its original charter— (A) pertaining to discrimination in the extension of home mortgage loans or adjustment in the terms of mortgage instruments based on neighborhood or geographical area, (B) pertaining to requirements imposed under the Consumer Credit Protection Act, if the Board determines that State law and regulations impose more _stringent requirements than Federal law and regulations. (2) A Federal mutual savings bank may make commercial, corporate, and business loans except that— (A) not more than 6 per centum of the assets of such a bank may be so loaned; and (B) such loans may only be made within the State where the bank is located or within 76 miles of the bank's home office. (8) In addition to the authority conferred by paragraph (1), Federal mutual savings bank may accept demand deposits in connection with a commercial, corporate, or business loan relationshiD   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  for the duos't or .1 nvest_z t _he ment of funds and —for _ _ extension of credit for homes and other goorls_ and services,  (a) 2.  Section 103: Section 5(b)(1) and (2) of the Home Owners' Loan Act of 1933 (12 U.S.C. S1464(b)(1), (2))  capital in the form of "(b)(1) An association may raise , or other accounts, for such savings deposits, shares periods of time (all of fixed, minimum, or indefinite section as savings which are referred to in this accounts, [an d a ll of or in the form of such demand a- account§4 tions regula which shall - as are authorized by its charter or by , have the stmel such passbooks, of the Board, and may issue r p e m i t ts accoun evidence of cl)iri. certificates of deposit, or other demand lic savings accounts and i as are so authorized. _All priority upon liquidation. accounts shall have the same bligors of an association[savings] Jid-rffiii—FirTacdounts and -o provided by its charter shall, to such extent as may be be members of the or by ,regulations of the Board, voting rights and such such association, and shall have ed. Except as may provid other rights as are thereby ation's charter associ be otherwise authorized by the of savings case in the or regulation of the Board less than [thirty] not of terms accounts for fixed or minimum t accoun s saving fourteeq days, the payment of any to ation associ the shall be subject to the right of ty] thir ouri than less require such advance notice, not the of r charte by the days, as shall be provided for of the Board. The tions regula the association or s in the event payment of withdrawals from/account [savings] withdrawals in full an association does not pay all ation,, where (subject to the right of the associ be sUbject to such shall ) notice e applicable,, to requir by the assorules and procedures as may be prescribed of the Board, but ciation's charter or by regulation ized in writing author as any association Which, except t of any withpaymen by the Board, fails to make full an unsafe or in be to drawal when due shall be- deemed the meaning within ss busine unsound condition to transact befSavings accounts may nts /Accou n. of subsection (d) of this sectio transfer on negotiableshall not] subject to check or to withdrawal or authorization to the or transferable or other order or  [but] association, as  for withdrawal or transfer of savings accounts upon nontranserable or r oi authorization]  the Board may by regula This section does Associations may establish remote service units the purpose of crediting savings or demand accoun not prohibit debiting such accounts, crediting payments on loans establishment of] and the disposition of related financial transactions by associations] as provided in regulations prescribed by the Board. (2) To such extent as the Board may authorize by regulation or advice in writing, an association may borrow, may give security, may be surety as defined by the Board and may issue such notes, bonds, debentures, or other obligations, or other securities!, &Including rxcept] capital stocv/, as the Board may so authorize."   fil https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (3  3.  Section 104: Section 5(i) of the Home Owners' Loan Act of 1933 (12 U.S.C. S1464(i)) e, is eligible to becom into[jncluding "(i)(1) Any institution that is, or f itsel rt conve Lpgaln Bank/may ngs asavingsi a member rig a Federal[tome : r iation or Federal Savings Assoc Loan and a FederarIavings hank] , is Actit. land in so doing may chan e directly Bank under this ,_ r er from the mutudl form to the stock form, or the loan I:and any State stock savings and for at form stock in existed on instituti type Institution may (if sucE its charter to a least the 4 years preceding March 31, 1980) convert of 51 per ceni vote a upon Federal stock charter under this chapter, to consider called meeting legal a tum or more of the votes cast at  such action',  but such conversion shall be subject to such rules and regulations as the Board Ahall prescrrrMr"Imay] and thereafter the converted association shall be entitled to all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations incorporated pursuant to this Act. (2) Subject tc the rules and regulations of the Board, any Federal association may convert itself from the mutual form to the stock form of organization, al or from the stock form to the mutual form, and any Feder l Federa a from n association may change its designatio Savings and Loan Association to a Federal Savings Bank,  Qr the reverse. [savings and loan] (3) Any Federal/association may convert itself into a savings and loan or savings bank type of institution organized pursuant to the laws of the State, District, Commonwealth, or Territory (hereinafter referred to in this section as the State) in which the principal office of such Federal association is located: Provided,/(i)[M] That the State permits the conversion. of any savings and loan or savings bank type of institution of such State 7=r1(2)] into a Federayassociation:/(ii) n77777h conversion and [savings Federaliassociation into such a State institution is deter loan] in cast sion conver such of favor in vote mined upon the [savings and/ person or by proxy at a special meeting of members or loan] stockholders called to consider such action, specified by the law of the State in which the home office of the Federal association is located, as required by such law for a State-chartered institution to convert itself into   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a vote of less a Fe'eral association, but in no event upon such meeting, at t than 51 per centum of all the votes cas nts reciprocally and upon compliance with other requireme law for te Sta equivalent to the requirements of such on into a uti the conversion of a State-chartered instit the ting to4•1(3)] of mee Federal association;illial that notice ed and vid ein pro her as vote on conversion shall- be given ice shall the ; not ary ess no other notice thereof shall be nec to vote thereon, led cal is g expressly state that such meetin ce such noti and f, reo as well as the time and place the and no/twenty] rty thi sti at lea d, shall be mailed, postage prepai to g, tin mee the of e dat i 5ixty days prior to the more tharl( [thirty] ol ass era Fed the of rd reco each member or stockholder of the of ks boo the on wn sho ciation at his last address as the /General Counsel of the Federal eral [Gen ManaarFederal association and to ct of Columbia; of the Federal Home Loan Bank Board!, Washington, Distri Savings and Loan( iv) that,r-Insurance Corppon the effecoration] d the tochase has repur n iatio tive date of the conversion, the assoc ury; Treas the of tary Secre the by s share its tal amount invested in 1 the , Home rsion conve of date tive effec the upon if, and (5) that ia-; asso the of s share d recor of Owners' Loan Corporation will hold ned; (6) that tion, its approval of the conversion has been obtai  E  on of a - mutual associa-\ in the event of dis-sdruti the members or shareholders of tiSail after conversion, on a mutual basis in the the association will share in exact proportion to their assets of the association in the t credits; (v) that, relative share or accoun er aft on of a stock associati itable. event of dissolution equ an olders will share on ] conversion, the stockh t a vi association; and the of ets ass the basis in date that be effective upon the such conversion shall been e hav this chapter shall new all the provisions of a of ce upon the issuan located; fully complied with and is on ati rein the associ whe te Sta the by charter g into a Statet its act of convertin it being provided tha eement to be agr an shall constitute chartered institution l Savings era Fed uirements that the bound by all the req ose under imp y all leg Corporation may nce ura Ins n Loa and g Act, as of the National Housin IV le Tit of 403 n tio sec shall upon d, and the association nde ame ter eaf her or now issue securities r be 'authorized to conversion and thereafte issue by the approved at the time of tly ren cur m for any in ation for issuance n Insurance Corpor Loa and s ing Sav [thstrict or l era Fed xte institutions in such Sta red insu Territory.] r ila sim by   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (5 )  Pn  conversion upon a vote addition to the foregoing provision for ion chartered as a Federal saving o the members only any associat having outstanding shares held and loan association, including any Home Owners' Loan Corpora or Treasury by the Secretary of the institution upon an equitabl tion, may convert itself into a State ons or otherwise, by the Fed basis, subject to approval, by regulati the Federal Savings an by eral Home Loan Bank Board and Provided, That if the insurance of ac Loan Insurance Corporation] with such conversion, the notic counts is terminated in connection by law and regulatio provided and other action shall be taken as . accounts of for the termination of insurance  (4) Any aggrieved person may obtain review of a final action of the Board or the Federal Savings and Loan Insurance Corporation Which approves, with or without conditions, or disapproves a plan of conversion from the -mutual to the stock form, only by complying with the provisions of subsection (k) of section 408 of the National Housinv Act within the time limit and in the manner therein _prescribed, which provisions shall apply in all respects as if such final action were an order the review of which is therein provided for, except that such time limit shall commence upon publication of notice of such final action in the Federal Register or upon the giving of such general notice of final action as is required by or approved _under regulations of the Corporation, whichever is later. (5) To the extent authorized by the Board, any Federal savings bank chartered as such prior to the enactment of this paragraph may continue to make any investment or engage in any activity not otherwise authorized under this subsection, to the degree it was permitted to do so as a Federal savings ban prior to such enactment. y this paragraph may be utilized The authority con erre loy_any Federal association t € acquires, by merger or consolidation, a Federal savings bank enjoying grandfathered rights hereunder."  (6: 4.  Section 105: §1725(j))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Section 402(j) of the National Housing Act (12 U.S.C.  (j)E1) Except as otherwise provided in this subsection, until June 30, 1976, the Corporation shall not approve, under regulations adopted pursuant to this subchapter or section 1464 of this title, by order or otherwise, a conversion from the mutual to stock form of organization involving or to involve an insured institution, except that this sentence shall not be deemed to limit now or hereafter the authority of the Corporation to approve conversions in supervisory cases. The Corporation may by rule, regulation, or otherwise and under such civil penalties (which may be cumulative to any other remedies) as it may prescribe take whatever action it deems necessary or appropriate to implement or enforce this subsectionj  (1) Other than as provided in section 5 of the Home Owners' Loan Act of 1933, as amended, no insured institution may convert from the mutal to the stock form except in accordance=ith the rules and regulations of the Corporifion.  (2)[The number of applications for conversion which the Corporation may approve pursuant to such regulations prior to such date shall be determined by the Corporation but shall not in any case be in excess of 1 per centum of the total number of all insured institutions in existence on the date of enactment, exclusive of the number of applications submitted for filing prior to May 22, 1973. Provided, That the Corporation shall process to final determination any application submitted for filing prior to May 22, 1973, pursuant to regulations in effect and adopted pursuant to this subchapter or section 1464 of this title, with further proviso that, with respect to a plan of conversion of any such applicant which, before May 22, 1973, has given written public notice to its accountholders of adoption of a plan of conversion or has obtained waiver forms from substantially all its new accountholders subsequent to the giving of such notice, such plan need not require payment for stock distributed to accountholders as of a record date prior to the date of such notice. (3) Notwithstanding any other provision of law, an insured institution converting in accordance with this subsection may retain its Federal charter. The Corporation shall not, however, permit the conversion of Federally chartered associations in States the laws of which do not authorize the operation of State chartered stock associations, except that the prohibition contained in this sentence shall   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Puerto of Columbia, the Commonwealth of ItOt apply to the District in are there domiciled  tutions o, or a State where all insured insti ered. chart ederally a final action of ny aggrieved person may obtain reveiw of (4gA k n which apratio Federal Home Loan Bank Board or the Corpo of converplan a s prove disap es, with or without conditions, or the proviwith ying compl by only ction pursuant to this subse the time n withi title ns of subsection (k) of section 1730a of this shall sions provi which , ribed it and in the manner therein presc rethe order an were n actio final such :'apply in all respects as if limit time such that except View of which is therein provided for, e of such final action in notic of n catio publi upon ence comm gull such general notice of of g givin the Register or upon ?it Federalactio ations of n as is required by or approved under regul h final e Corporation, whichever is later. and more often as 5) The Corporation shall, at least annually ess on the exerCOngr the umstances require, render reports to . ction subse iise of its authority under this this subsection the Corpo.i. (6) In implementing the provisions of so as to achieve (A) as ed grant 'ration shall regulate the approvals (B) an equitable dise; icabl pract as rsion such geographical dispe rting institutions; (C) an tribution with respect to the size of conve chartered and Federally State 'appropriate distribution between filing; (E) flexibility to of iness timel (D) chartered institutions; into account the the extent possible in plans of conversion takingns; (F) the meettutio insti :characteristics of particular converting results as it nable reaso other such (G) ing of capital needs; and interest, c publi may consider necessary or appropriate in the  8)  5.  Owners' Loan Act of 1933 Section 106: Section 2(d) of the Home (12 U.S.C. §1462(d))  § 1462.  Definitions  As used in this chapter— (a) The term "Board" means the Federal Home Loan Bank • Board. , Luis: , • -v-.: (b), (c) Omitted. (d) The term "association" means a Federal savings and loan  association or a Federal EmutuaDsavings bank chartered by the Board under section 1464 of this title, and any reference in any other law to a Federal savings and loan association shall be ••, deemed to be also a reference to a FederalEiputuagsavings bank, unless the context indicates otherwise.  6.  Section 107: S1726(a))  (12 U.S.C. Section 403(a) of the National Housing Act  • § 1726.  ity provisions Insurance of accounts and eligibil In•urance of account•  Corporation to insure the account (a) It shall be the duty of the and Federal Enutuah  loan associations of all Federal savings and loan, the accounts of building an insure savings banks, and it may banks tive coopera and tions associa savings and loan, and homestead District, to the laws of the State, ng accordi d operate and • • organized ed. organiz they are chartered or Territory, or possession in which  7.  Section 108: Section 408(a)(1)(A) of the National Housing Act (12 U.S.C. S1730a(a)(1)(A))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "(A) "insured institution" means a Federal savings and loan association, a Federal savings bank, (4- a building and loan, savings and loan, or homestead associationj. or a cooperative bank, the accounts of which are iTisured by the Federal Savings and Loan Insurance Corporation;"  9  8.  Section 201: Section 5(c)(1)(B) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(B)) Investment authority  (c) An association may to such extent, and subject to such rules and regulations as the Board may prescribe from time to time, invest in, sell, or otherwise deal with the following loans, or other investments: (1) Loans or investments without percentage of assets limitation: Without limitation as a percentage of assets, the following are permitted:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (A) Account loans.—Loans on the security of its savings accounts and loans specifically related to negotiable orderof-withdrawal accounts. B) Single-family and multi-family mortgage loans.— Loans on the security of liens upon residential real property in an amount which, when added to the amount unpaid upon prior mortgages, liens or encumbrances, if any, upon such real estute does not exceed the appraised value thereof, except that the amount of any such loan hereafter made shall not exceed 662/3 per centum of the appraised value if such real estate is unimproved, 75 per centum of the appraised value if such real estate is improved by offsite improvements such as street, water, sewers, or other utilities, 75 per centum of the appraised value if such real estate is in the process of being improved by a building or buildings to be constructed or in the process of construction, or 90 per centum of the appraised value if such real estate is improved by a building or buildings. Notwithstanding the  a  above loan-to-value ratios, the Board may permit a loan-tovalue ratio in excess of 90 per centum if such real estate is improved by a building or buildings and that portion of the unpaid balance of such loan which is in excess of an amount equal to 90 per centum of such value is guaranteed or insured by a public or private mortgage insurer or in the case of any loan for the purpose of providing housing for persons of low income, as described in regulati ons of the Board.)  Real property loans. -- Loans on the secur ity of liens upon residential or nonresidential _prop  erty."  9.  110/ of the Home Owners' Loan Act )(G) n 5(c)(1 Sectio Section 202: of 1933 (12 U.S.C. §1464(c)(1)(G))  [Bank duositsj "(G)/ Deposits. -- Investments in the time deposits, certificates, or accounts of any bank the deposits of which are insured by the Federal Deposit Insurance Corporation, or in the savings accounts, certificates 9r other accounts of any institution the accounts or Which are insured by the Federal Savings an Loan Insurance Corporation." 10.  ' Loan Act Section 203: Section 5(c)(1)(L) of the Home Owners of 1933 (12 U.S.C. §1464(c)(1)(L)) brokers and "(L) Loans to financial institutions, utions with instit ial financ dealers. -- (1) Loans to agency or an or s State United respect to wR7711 the examinaof ion funct any has instrumentality thereof dealer or broker any to or tion or supervision, ge Comregistered with the Securities and Exchan investments or s ation oblig , loans by missibn, secured tory authority in which the association has the statu ly. to invest direct to enable (2) Loans to financial institutions rements requi ves reser fy satis to such institutions Reserve Act." under section 19(b) of the Federal  11.  Section 204: Section 5(c)(1)(0) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(0))  "(or  Insured Housing tirld Land and Oi/ban EPIeJvelopment ct oy seculfe fi)— Loans nvdt 1-111ell LS • aranteed or it benef the has 7MUttqaqes as erWhich the association ng Housi al Nation of insurance under Title X of the for such insurance, Act or of a commitment or agreement n has the beneiatio [,,,Ihich the assoc [L] or (ipiloans as to Housingand the of IV fit oe'ary guaranted under Title B of the Part under or Urban Development nt or 1968/ opment Devel nity Commu New [Growthr National Urban j'o licy and g and Housin the of 802 ection Act of—T970/or un er fter herea or now as Community Development Act of 1974 for." there ment agree km or after%, in effect/, or of a commitment or March 31, 1980 12. Section 205: Section 5(c)(1)(Q) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(1)(Q)) n may invest Investment companies. -- An associatio any openin es ficat certi or ['],,in, redeem/or hold shares ered regist is Which ny compa end management investment the under sion Commis ge Exchan with the Securities and of lio portfo the and 1940 of Act Investment Company ny's which is restricted by such management compa ized author if only eable chang investment policy, h investments lany] [solely by shareholder votelprimarily to/suc sets restricof-as tagepercen any to (without regard suoseCtion) tion applicable to such investment under this nvest mayii ,without limitaas an association by law or regulation " with deal as to perwise tion other or hold, , sell, redeem centage of asset. [The Board shall prescribe rules and reeulations to implement the  https://fraser.stlouisfed.org :icrns of th:4 .,.:11,parrr,raph.1 pi*vi, Federal Reserve Bank of St. Louis  "(Q)  13.  Section 206: Section 5(c) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (72) Loans or investments limited to 20 per centum of assets. —The following loans or investments are permitted, but authority conferred in the following subparagraphs is limited to not in excess of 20 per centum of the assets of the association for each subparagraph: (A) Commercial real estate loans.—Loans on security of first liens upon other improved real estate.  (B) Consumer loans and certain securities.—An association may make secured or unsecured loans for personal, family, or household purposes, and may invest in, sell, or hold commercial paper and corporate debt securities, as defined and approved by the Board)  Loans or investments limited to 20 per centum of me tollowing loans or investments are perlitted, but adThority conterred in the folIowin subparaciraOhs is limited to not in excess of 20 per cen um of the assets of the association for each subparagraph:  (2)  nnts.  (A) Commercial loans. -- An association may make oans or commercia , corpora e secure or unsecure or business purposes. (B) Consumer loans. -- An association may make secured or unsecured loans for personal, family or household purposes, and loans reasonably incident to the extension of such credit. (C) Certain corporate securities. -- An association may invest In, seil or hOld commercial paper and corporate debt securities, as defined and approved- by the Board. (D) Certain governmental securities. -- An association may iiOnT in, sell or hold obli ations of, or issued by, any State or politicaL s bdivision t ereof_i_includinq any_aaaaa. corporation or instrumentality). Investments limited to 10 per centum of assets. -- The • nq inves men s a e permittea, out autnority conrITTT-Tr In the following subparagraphs is limited to not in excess of fa per centum of the assets of the association for each subparagraph:  (3)  (A) Investment in realty. -- An (association may invest in real property, and suc inves€menf may include, without limitation, subdividing, developing, constructing improvements upon, and renovating such property. An association may own,, rent, lease, manage, operate for income or sell such property; (B) Investment in personalty. -- An association may invest in Tanaible personal property, including, without limitation, vehicles, mobile homes, machinery, eduipment4 or furniture, and may hold such property for rental or  (12)  (4) to l per Cu 11111 of 114,A14. "rniinm or in% e.,tments The following loans or inveAments are permitted, but the authority conferred in the following subparagraphs is lirnited to not in excess of 6 per centum of assets of the association for each subparagraph:  tj  (A) Education loans.—Loans made for the payment of expenses &f college, university, or vocational educatioi. (8),Community development investments.—Investments in real property and obligations secured by liens on real property located within a geographic area or neighborhood receiving concentrated development assistance by a local government under Title I of the Housing and Community Development Act of 1974, except that no investment under this subparagraph in such real property may exceed an aggregate investment of 2 per centum of the assets of the association. And invg.m- mpqr. /Ind investments not (C) Nonconforming loans!—LoansLupon the security of or ptherwise permitted respecting real property or interests therein used for primarily residential or farm purposes that do not comply with "1" / the limitations olhis subsection_ (D) Construction loans without security.—Investments not exceeding the greater of (A) the sum of its surplus, undivided profits, and reserves or (B) 5 per centum of the assets of the association, in loans the principal purpose of which is to provide financing with respect to what is or is expected to become primarily residential real estate where (i) the association relies substantially for repayment on the borrower's general credit standing and forecast of income without other security, or (ii) the association relies on other assurances for repayment, including but not limited to a guaranty or similar obligation of a third party. (Investments under this subsection shall not be included in any percentage of assets or other percentage referred to in this subsectionp The authority 7  _conferred by this subparagraph shall be cumulative of the authority provided in paragraph (2)(A) of this subsection.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  additional 4 Viter loans and investments.—The following D d below: loans and other investments to the extent authorize asso(A) Business development credit corporations.—An undivided and surplus, reserves, general ciation whose its profits aggregate a sum in excess of 5 per centum of or to, lend in, invest withdrawable accounts is authorized to credit ent developm business any to commit itself to lend to, ofcorporation incorporated in the State in which the home to and manner fice of the association is located in the same chartered ons associati the same extent as savings and loan amount of by such State are authorized, but the aggregate such asany of nts commitme and loans, nts, such investme of the centum per sociation shall not exceed one-half of 1 $250,000, or on associati the total outstanding loans of whichever is less.  (1 )  capital -- Investments in the "(B) Service corporations. ation securities of any corpor stock, —o-gligatiOns, or other e hom of the State in which the organized under the laws ire on is located, if the ent office of the associati poration is available forA,ucid cor capital stock of such t and loan associations of/tha purchase only by savings e hom ociations having their State and by Federal ass may make any rein, but no association the / si ice off el, Stat lin such paragraph if its aggregate investment under this sub er this subparagraph would outstanding investment und association, tum of the assets of the [3] exuued/5 per cen -half of the investment except *nat not less than one 1cme) paragraph which exceeds/7777 permitted under this sub , ity mun be used primarily for com centum of assets shall ed, vid Pro ity development purposes. inner-city, and commun Tehi er make an investment und that an association may poraing that the service cor subparagraph notwithstand t is autidrized has tion in whidh investmen by the corpora in a is e associa ion e ome o ice o State 1 a e or purc ase by i ava oc as s a locate., or 11 oan associa ions ings and entities other than sav eral associations havin of that State or by Fed ate. suc t eir ome o ices in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (C)  , certain guaranteed loans] estments. --/ e inv anc Foreign assist /A association mortgages as to which the i) Loans secured by National the of rance under Title X has the benefit of insu such infor t emen commitment or agre Housing Act or of a  E  surance)  Investments in ty ing th6-Denefit of any guaran housing project loans hav 1 of 196 Foreign Assistance 49c' under section 221 of the der lah t ran gua efit of any or loans having the ben eement , or any commitment or agr Act h suc section 224 of her of oans made pursuant to eit with respect to such'l l share capital and capita such sections and in the k. Ban erican Savings and Loan reserve of the Inter-Am g to the acquisition, holdin This authority extends any of t efi ben the ns having and disposition RA loa as 221 or 222 of such Act n tio maec er guaranty und ment mit com any of or ended', hereafter amended or ext ' ty. ran such gua or agreement tor any iii) Investments under clause (i) of this subparagraph F other shall- not be included in any percentage of assets or  nts unpercentage referred to in this subsection] Investme in the d, not exee der Elause (ii) oethis subparagraph shall such of ts asse the of um er cent case of any association,E,1j association. one  (14)  amsogovernment obligations.- An (I)) State and local ded ivi und and s, reserves, surplu is ciation whose general ch whi unt amo t tha in excess of profits aggregate a sum sen d thir the of e pos pur for the determined by the Board auis the National Housing Act t tence of section 403(b) of tions which constitute pruden iga obl thorized to invest in and te Sta e hom ts by the Board, ofsi investments, as defined , corporeof (including any agency the ons isi political subdiv obli) if (i) the proceeds of such ration, or instrumentality the or , ing for rehabilitation, financ gations are to be used reagg the (ii) real estate, and construction of residential aph agr par sub this er estments und gate amount of all inv eral reunt of the association's gen amo the eed exc shall not ded profits. serves, surplus, and undivi  , or issued by  -- An asso— vestment companies. "(E) Small business in or other in stocx, oblivations, CiatIon may invest com an nt me st small business inve securities of an a Sm e th o ction 301 d formed pursuant to se ose t of 1958, for the purp Ac nt Business Investme nk Ba an Lo me of the Federal Ho of aiding members ment st ve y in an ciation may make gystem, but no asso naing ta ts ou e at ph if its aggreg under this subparagra 1 ed ce d ex ul wo is subparagraph Investment under th " n. io at ci sets of such asso per centum of the as  d in this subsection— (0 trifinttions.—As use ial. real property" or "resident (A) the terms "residential inidom con g din clu (in es hom s, real estate" mean leasehold ns that in connection with loa ums and cooperatives, except ade be l shal ns loa units, such on individual cooperative of ons ati bin com , rd) Boa the by quately secured as defined other dwelling units, or comty, per pro ss ine bus and es hom including homes and business binations of dwelling units , or or or incidental business use property involving only min s; ure uct h str suc of ion uct str con property to be improved by s es obligations and extension (B) the term "loans" includ inor n any reference to a loa or advances of credit; and in such a loan or investment; rest inte an vestment includes and ted ns any State of the Uni (C) the term "Stater mea of lth wea mon Com the umbia, States, the District of Col m, Gua ands, the Canal Zone, Puerto Rico, the Virgin Isl ritory or possession of the ter any American Samoa, and United States.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (15)  14.  Section 207: Section 5(c)(8) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(c)(8))  "(8) An association may engage in any activity or venture he Board determines to e reasonably incident to the exercise of the authority conferrealpy tis subsection, or by subsection (b)."  01IND  15.  Section 208: Section 5A(b)(1)(B) of the Federal Home Loan Bank Act (12 U.S.C. §1425a(b)(1)(B))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Liquidity requIrementa; minimum and maximum nmount•1 ruiro and rrprulationa  (b)(1) Any Institution which is a member or which is an insured institution as defined in section 1724(a) of this title shall maintain the aggregate amount of its assets of the following types at not less than such amount as, in the opinion of the Board. Is appropriate: (A) cash; (B) to such extent as the Board may approve for The purposes of this section, time and savings deposits in Federal Ho;ne Loan Banks [and commercial bankt_t institutions- -that are, or are (C) to such extent as t e Board may so approve, such obligations, including such special obligations, of the United States, a State, any territory or possession the United States, or a political subdivision, agency or instrumentality of any one or more of the foregoing, and . bankers' acceptances, as the Board may approve; (D) to such extent as the Board may so'approve, sl..ares or certificates of any open-end management investment company which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of wtlich is restricted by such investment company's investment policy, changeable only If authorized by shareholder vote, solely to any of the obligations or other investments enumerated in subparagraphs (A) through (C); (E) balances maintained in i Federal Reserve bank or passed through a Federal Home Loan Bank or another depository institution to a Federal Reserve bank pursuant to the Federal Reserve Act; (F) to such extent as the Board may approve as liquid, highly rated corporate debt obligations with 3 years or less remaining un,Ill maturity; and (0) to such extent as the board may so approve, highly rated commercial paper with 270 days or less remaining until maturity. (2) The requirement prescribed by the Board pursuant to this subsection (hereinafter in this section referred to as the "liquidity requirement") may not be less than 4 per centum or more than 10 per cent= of the obligation of the institution on withdrawable accounts and borrowings payable on demand or with unexpired maturities of one year or leas, or in the case of institutions which are insurance companies, such other base or bases as the Board may determine to be comparable. The Board shall prescribe rules and regulations to implement the provisions of this subsection.  eligible to becorge, members thereof, and commercial banks.  16.  Sections 301, 302, 303: Section 501 of Public Law 96-221 (12 U.S.C. §1735f-7 note) or the laws "(f) The provisions of the constitution instituOf any State fimiting the ability of a depository acts, contr ce tion to enter into contracts, or to enfor whenever execute„provi ing t at t e institution may, ed at its option, ore-Erare due and payable sums secur or all it ument py the institution's security instr is any part of the real property securing the-loan instituthe ut witho wer sold or transferred by the borro acts to contr apply not shall tion's prior written consent real l entia on resid lien Involving loans secured by a dwelling property,by a lien on stock a1locat71 to a ra i n, corpo ng housi ve unit in a residentialcooperati Except home. ed actur manuf l (777-7-lien on a residentia ant pursu Board Bank Loan as limited by the Federal Home n tutio insti the by ise exerc to subsection gJ herein, ale clause) of sudh option (-hereafter c6I-led a due-on-s of the loan terms the by ned shall be exclusiveI 9over institution the of ies remed and s contract, and all right ned by the contract. pnd borrower shall be fixed and gover subsection (g), In the exercise of its authority under ve appropriate obser to the Board may require institutions rized autho consumer safeguards to the extent it is ana loan 9s sav1n al to require such observance by Feder 'associations."  to -The Federal Home Loan Bank Board is authorized [and to publish] [and] or retations — nterp ns,/i latio rregu rulea issue (A) this of tion Menta XMovals governing the imple section; and  /(g)(1) [(0] "  rized officials, (B) delegate authority to duly autho interpretaissue to Boara the employees or agents of tion of menta imple the ning tions or approvals gover this section. laws of any "(2) No provision of the constitution or iture forfe or enalt lit liabi State im osin an aith good in ed omitt or done shall apply to any act tion preta inter , ation regul rule, in conformity with any Federal Home Loan 9r approval under this section by the pretation or inter any with rmity Bank Board or in confo of the Board approval by an official, employee or avent retations inter issue to Boara the dul authorized b dures proce such under on secti this or approvals under nding thsta notwi for, there ribe presc as the Board may rea, sucn fule, that, after such act or omission has occur or aeterregulation, or approval is amended, rescindea, to be invalid for minded by judicial or other authority any reaso9t"  (h) This   [(g)] https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tion (f). 1, 1980[.], except for subsec section takes effect on April  (1-7)  17.  Section 401: Section 408(m) of the National Housing Act (12 U.S.C. S1730a) "(m) Notwithstanding any other provision of State or Federal law, except as provided in subsections (e)(2) 1 hereof, the Corporation, upon its determination and that severe financial conditions exist which threaten the stability of a significant number oc insured institutions, or of insured institutions possessing significant financial resources, may authorize, in its discretion, and where it determines such authorization would lessen the risk to the Corporation, an insured institution that is eligible for assistance pursuant to section 4Ubttl or this Act to merge or consolidate with, or to transfer its assets and liabilities to, any other insured institution or may authorize any savings_and loan holaina company to acauire control of said insured institution or to aCauire the assets or assume the liabilities thereof. Oeraers, consolidations, transfers and acquisitions under this subsection shall be on such terms as the Corporation In considering authorizations under this shall provide. subsection, the need to minimize tinancial assistance L'- quired of the Corporation shall be the paramount consiaeration, but e erfbef=--An€.merrrr the Corporation shalf—gike- a re-isona tne r011owing sequenc!e: in subsection transactions under this type within tne samtr same the ot First, between institutions same type in the ot ns tate; secon•, le w-of different institutions different States; third, between of institutions between fourth, types in the same State; and slifferent types in different States."  18.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Section 402: Section 408(e)(2) of the National Housing Act (12 U.S.C. S1730a(e)(2))  • (2) The Corporation shall not approve any acquisition under subparagraphs (A)(i) or (A)(ii), or of more than one insured institu- • tion under subparagraph (B), of paragraph (1) of this subsection....,., an transaction except in accordance with this paragraph. In every case, the Corpounder subsection (m) ration shall take into consideration the financial and managerial rehereof sources and future prospects of the company and institution involved, and the convenience and needs of the community to be served, and shall render its decision within ninety days after submission to the Board of the complete record on the application. Before approving any such acquisition, the Corporation shall request from the Attorney General and consider any report rendered within thirty days on the competitive factors involved. The Corporation shall not approve any proposed acquisition— (A) which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the savings and loan business in any part of the United States, or (B) the effect of which in any section of the country may be substantially to lessen competition, or tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed acquisition are clearly outweighed in the public interest by the probable effect of the acquisition in meeting the convenience and needs of the community to be served.  •  (13) 19.  Section 403: Section 5(0) of the Home Owners' Loan Act of 1933 (12 U.S.C. §1464(o)) "(o) Notwithstanding any other provision of this section or State aw, and consistent with tne purposes of this Act, the Board may authorize (or in the case of a Pederarassociation, require) the conyerston association of a mutual savings and loan Federal stock savings and a into or mutual savings bank savings bank, or charter stock Federal loan association or ion or Federal associat loan an a Federal stock savings ot, or merge with assets the acquire stock savings bank to and regulations rules the under ion such a mutual institut approval of the its n conditio may Board pf the Board. The bank under this savings mutual a of ion acquisit conversion or Deposit Federal the by insured ly previous was subsection that uepusrt teaeLai tfte rrom receipt the upon ion Insurance Corporat the of ication indemnif le reasonab of ion Insurance Corporat Federal Savings and Loan Insurance corporation tor iossseg that may be incurred' by the latter as a consequence ot its insurina the accounts of such institution, as agreed to by on the Corporations. Authorizations under this subsecti be made only to assist an institution in receivership, or if severe the primary Federal supervisor has determined that y of an stabilit the threaten which exist ns conditio l financia improve to institution and that such authorization is likely the financial condition of the institution, or when either of the Corporations has contracted to provide assistance to Housing puch institution under section 406 of the National Act. Act or section 13 of the Federal Deposit Insurance  20.  Section 404(a): Section 406(f) of the National Housing Act (12 U.S.C. S1729(f))  [1n] [a] of an insured defaultl "(f)(1) In order to preventlthe institution insured institutionj. or in order to restore an financial severe in default to normal operation, or, when a signiof v .conditions exist which threaten the stabilit insured of or ficant number of insured institutions, institutions possessing significant financial resources, in order to lessen the risk to the Corporation posed by an insured institution under such threat of instability the Corporation is authorized, in its oole discretion and upon such terms and conditions as it may determine, to make loans to, to make deposits in, to purchase the assets or securities or to assume the liabilities of, or to make a contribution to, olch an insured institution ed. or „alasb an insured institution)so threaten [in default]   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (19)  "(2) Whenever an insured institution is in default or, in the judgment of the Corporation, is in danger of default whenever severe financial conditions exist •flp  *0  I  le• -  insured institutions, or of insured institutions possessing zignificant finanGial resources, and in order to lessen the xisk to the Corporation posed by an insured institution kinder such threat of instability, the Corporation/is authorized, [may] in its sole discretion, in order to facilitate a merger or consolidation of such insured institution with another insured institution or the sale of/assets of such insured [tne] institution and the assumption of its liabilities by another insured institutionj. and upon such terms and conditions as the Corporation may determine, to purchase any such assets or assume any such liabilities, or make loans Dx contributions to, or deposits in, or purchase the securities of1 such other insured institution, or guarantee such other insured institution against loss by reason of its merging or consolidating with or assuming the liabilities and purchasing the assets of such insured institution in or in danger of default, or under threat of instability. The Corporation may provide any party acquiring control of, merging with, consolidating with or acquiring the assets of an insured institution under section 40S(m) of this Act with such financial assistance as it could _provide an insured institution under this subsection.  [contribution or guarantee] [made] "(3) No/assistance shall be/provided pursuant to[paragraphs (1) 0/ this subsection in an amount in excess of that which (2) of] the Corporation finds to be reasonably necessary to save the cost of liquidating, including paying the insured accounts of, such insured institution in or in danger of default, Dr under threat of instability, but if the Corporation determines that the continued operation of such institution is essential to provide adequate savings or home financing services in its community, such limitation upon the amount of/assistance shall not apply. [a contribution or guarantee]   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (20) 21.  Housing Act Section 404(b): Section 406(b) of the National (12 U.S.C. §1729(b)) Federal savings and loan association is "(b) In the event that a be appointed as conservator or In default, the Corporation shall such (1) is authorized (i) to take receiver and [is authorized] as take such association, [(2)] (ii) to over the assets of and operate condition, t solven and sound a in to put it such action as may be necessary another insured institution, [(4)] (iv) [(3)] (iii) to merge it with over gs and loan] association to take to organize a new Federal [savin orderly proceed to liquidate its assets in an its assets, [or (5)] (v) to or (vi) to make such other disposition manner, [whichever shall appear] [insured [to] in the best interest[s] of the of the matter as it deems to be ation, Corpor default], its savers, and the members of the] association [in in band ation. associ obligations of the and (2) shall pay all valid credit in ed provid shall pay[the] insurance as any event the] The Corporation obligations ot such association]. The credit section 405 [and all valid Corporation of an insured account in any surrender and transfer to the with default shall subrogate the Corporation such association which is in the which right any affect but shall not respect to such insured account, any or t accoun his of n portio uninsured insured member may have in the proipate in the distribution of the net partic to have may right which he " ation. of the assets of such associ ceeds remaining from the disposition  22.  Section 405: Section 16 of the Federal Home Loan Bank Act (12 U.S.C. §1436) I 1411116. Reserves and dividends tal/Caoh Federal Home Loan Bank shall carry to a reserve account semiannually 20 per oentum of its net earnings until said reserve account shall show a credit balance equal to 100 per centum of the paid-in capital of such bank. After said reserve has reached 100 per centum of the paid-in capital of said bank, 5 per centum of its net earnings shall be added thereto semiannually. Whenever said reserve shall have been impaired below 100 per centum of the paid-in capital it shall be restored before any dividends are paid. Each Federal Home Loin Bank shall establish such additional reserves and/or make such charge-offs on account of depreciation or impairment of its assets as the board shall require from time to time. No dividends shall be paid except out of net earnings remaining after all reserves and charge-offs required under this chapter have been provided for, and then only with the approval of the , board. The reserves of each Federal Home Loan Bank shall be invested subject to such regulations, restrictions, and limitations as may be prescribed by the board, in direct obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association, in mortgages, obligations, or other securities which are or ever have been sold by the Federal Home Loan Mortgage Corporation pursuant to section 1454 or section 1456 of this title, and In such securities as fiduciary and trust funds may be invested in under the laws )f the State in which the Federal Home Loan Bank Is located.  "(b) Notwithstandina subsection (a) or any other provision of this Act, if the Board determines that ,severe financial conditions exist threatening the stability of member institutions, it may suspend tinoorarjjy the requirements under subsection (al that a portion of net earnins be set aside semi— annuaily by each Federal Home Loan Bank to a reserve account and permit each, Federal FOMQ Loan Bank to declare and pay divide_nds out of undivided profits. Thrf_t_i_ILLftends shall he paid in accordance with subS_OcIAQn_La)._1"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (2-1) 23.  Section 406(a): Section 402(d),(i) of the National Housing Act (12 U.S.C. §1725(d),(i))  rhts nein) o pt. rat Inn•  (d) For the purposes of this subchapter, the Corporation shall . to borrow money, and to issue notes, bonds, debentures, Lay-c po‘ker or other such obligations upon such terms and conditions as the Federal Home Loan Bank Board may deterrnineV'Moneys of She Corporation not required for current operations shall be deposited in the Treasury of the United States, or upon the approval of the Secretary of the Treasury, in any Federal Reserve bank, or shall be invested in obligations of, or guaranteed as to principal and interest by, the United States. When designated for that purpose by she Secretary of the Treasury, the Corporation shall be a depositary of public money under such regulations as may be prescribed by the Secretary of the Treasury, and may also be employed as fiscal agent of the United States, and it shall perform all such reasonable duties as depositary of public money and fiscal agent as may be required of it. Insured institutions shall be depositaries of public money and may be employed.iis fiscal agents of the United States. The Secretary of the Treasury is authorized to deposit public money in sucl insured institutions, and shall prescribe such regulations as may be necessary to enable such institutions to become depositaries of public money and fiscal agents of the United States. Each insured institution shall perform all such reasonable duties as depositary of . public money and fiscal agent of the United States as may be re with the connection collection in of services including it of quired taxes and other obligations owed the United States.  except that int erest on loans from the Federal Home Loan Bank shall be not less than their current marginal cost of funds, taking into account the maturies involved, and loans from the Federal Home Loan Banks shall be adequately secured, as determined by the Federal Home Loan Bank Board,  1L••as• I. r•rpor•tion  (i) The Corporation is authorized to borrow from the Treasury, tbc Secretary of the Treasury is authorized and directed to loan to the Corporation on such terms as may be fixed by the Corporation and the Secretary, such funds as in the judgment of the Federal Home Loan Bank Board are from time to time required for insurance purposes, not exceeding in the aggregate $750,000,000.0utstanding at any one time, and the Corporation hereafter shall not exercise its borrowing power under the first sentente of subsection (d) of this section for the purpose of borrowing money from any other from the Treasury source). Provided, That each such loan ishall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the making of such loan: Provided further, That nothing in this subsection shall prevent the Corporation from issuing debentures in at• cordance with the provisions of subsection (b) of section 1728 V this title.. For The p-u-rposes of this subsection the Secretary of the Treasury is authorized to use as a public-debt transaction the proceeds of the sale of any securities hereafter issued under the Second Liberty Bond Act, as now or hereafter in force, and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force, are extended to include such loans. Any such loan shall be used by the Corporation solely it carrying out its functions with respect to such insurance. All loant and rer,a ments under this subsection shall be treated as public-deb: transactions of the United States.  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I-  .•  Lo.FF2r-As  7  (22)  24.  Section 406(c): Section 11 of the Federal Home Loan Bank Act (12 U.S.C. S1431)  (k) The Federal Home Loan Banks are authorized Loan to make loans to the Federal Savings and board, but the by directed as Corporation, Insurance Act. Housing sub'ect to Section 402(d) of the National  25.  Section 407: Section 404 of the National Housing Act (12 U.S.C. §1727)  "(h) Notwithstanding any other provision of this section, the Corporation, upon its determination that extraordinary financial conditions exist increasing the risk to the Corporation, may terminate distribution, of shares of the secorldary reserve and utilize said If reserve on the same basis as the primary reserve. such resume ma oration Cor the •therwise authorized ions distribution upon its determination t at sal con no longer exist." 26.  Section 501: Section 17(a) of the Federal Home Loan Bank Act (12 U.S.C. S1437(a))  1487. Federal Home Loan Bank Board; creation; composition; powers and duties; salaries; independent agency; report to Congress (a) The board shall supervise the Federal Home Loan Banks created by this chapter, shall perform the other duties specifically prescribed by this chapter, and shall have power to adopt, amend, and require the observanee of such rules, regulations,- and orders as shall be necessary from time to time for carrying out the purposes of the pro /ions of this a ter The board shall 'have power to suspend or remove any director, officer, employee, or agent of any Federal Home Loan Bank, the cause of such suspension or removal to be communicated in writing forthwith to such director, officer, employee, or agent, and to such Federal Home Loan Bank.  "Notwithstanding any other provision of law, the Board may from time to time make such provision as it deems ,appropriate authorizing the perforiaance by any officer, employee, agent or administrative unit thereof of any function of the Board (including any function of the Federal Savings and Loan Insurance Corporation), except with regard to promulgation of rules and regulations Itccordance with the Administrative Procedures Act, and adjudications subject to such Act,"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (23) 27.  Section 502: Section 5(d)(8)(A) of the Home Owners' Loa n Act of 1933 (12 U.S.C. §1464(d)(8)(A))  (8)(A) The Board may in its discretion apply to the Unit ed States district court, or the Unit ed States court of any territor y, within the jurisdiction of which the home office of the association is located, for the enforcement of any effective and outstanding notice or order issued by the Boa rd under this subsection (d), and such courts shall have jurisdic tion and power to order and require compliance therewith; but exce pt as otherwise provided in this subsection no court shall have juri sdiction to affect by injunction or otherwise the issuance or enforcem ent of any notice or order und er this subsection, or to review, modify, suspend, terminate, or set 'asid • e any such notice or order. Any court having juri sdiction of any proceeding instituted unde r this subsection by an asso ciation or a director or officer thereof, may allow to' any such partyo uch reasonable expenses and attorney s' fees as it deems just and proper; and such expenses and fees shall be paid by the associat ion or from its asseta.  28.  , which prevails_,  Section 503: Section 405 (d)(3) of the National Hou sing Act (12 U.S.C. §1728(d)(3)) "(3)(a) Notwithstanding any limitation in thi s title or =any other pro vision of law relating to the amount of deposit insura nce available for any one account/L I Funds invested in an ins ured institution pursuant to a pension or profitEsharing plan des cribed in section 401(d) of the Internal Revenue Cod e of 1954, as amended, and funds inv ested in an insured institution in the form of individual retirement accounts as described in section 408(a) of the Internal Revenue Code of 1954 as amended, shall be insure d in the amount of 4$100,0003 4500,000 per account; (ii) Funds invested in an insured institution ursuant to a trusteed emn loyee benetit plan sha ll. be Insure in the amount o 10, S., per rus es a e; and (iii) Funds invested in an insured instituti on n the form of an accoun t of any State deferred compensation plan as described in section 457 of the Internal Revenue Code of 1954, as amended, shall be ins ured in the amount of $500,0 00 per each employee's con =ibutions t.o such accounts. (b) As to any plan qua lifying under sectio n 401(d) or sedc i-rion 408(a) of the Int as amended, ernal Revenue Code of term "per account" mea 195 4,t f fe ns the present vested and ascertainable interest of each benefi ciary under the plan, excluding any remainder interest cre ated by, or as a result of, the plan."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (24) 29.  Section 504: Section 10 of the Federal Home Loan Bank Act (12 U.S.C. S1430)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  44 (a) Each Federal Home Loan ank is authorized to maiffiffor mortgages, home rof security upontth members its to -vances obligations of the United States, or obligations fully guaranteed s, and by the United States, subject to such regulations, restriction shall advance such rAny Prescribe. may Board the as i )imitation be subject to the following limitations as to amount: (1) Irsecured by a mortgage insured under the provisions of subchapters I, II, VI, VIII, or X of chapter 13 of this title, the advance may be for an amount not in excess of 90 per centum of the unpaid principal of the mortgage loan. (2) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of six years or more, or in cases where shares of stock, which are pledged .as security for such loan, mature in a period of six years or more, 'the advance may be for an amount not in excess of 65 per centum -of the unpaid principal of the home mortgage loan; but in no case shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home mortgage loan. oth(3) If secured by a home mortgage given in respect of any in an amount for be not shall advance the loan, mortgage er home excess of 50 per centum of the unpaid principal of the home mortexgage loan; but in no case shall the amount of such advance the securing estate real the of value the of centum per -ceed 40 lome mortgage loan. (4) If secured by obligations of the United States, or obligations fully guaranteed by the United States, the advance shall not be for an amount in exci.ss of the face value of such obligations3  (b) No home mortgage shall be accepted as collateral security for an advance - by a Federal Honie Loan Bank if, at the time such advance is made (1) the home mortgage loan secured by it has more than thirty years to run to maturity, unless such home mortgage is insured under the National Housing Act, as amended, or insured or guaranteed under the Servicemen's Readjustment Act of 1944, as amended, chapter 37 of Title 33, or (2) the home mortgage exceeds a sum equal to the dollar limitation under the first proviso of the first sentence of section 1464(c) of this title for each home or other dwelling unit covered by such mortgage, or (3) is past due more than six months when presented, unless the amount of the debt secured by such home mortgage is less than 50 per centum of the value of the real estate with respect to which the home mortgage was given, as such real estate was appraised when the home mortgage was made. For the purposes of this subsection and subsection (a) of this section the value of real estate shall be as of the time the advance Is made and shall be established by such certification by the borrowing For the institution, or such other evidence, as the board may require ourooses of this section, each Federal Home Loan Bank shall have power to make, or to cause or require to be made, such appraisals and other Investigations as it may deem necessary. No home mortgage otherwise eligible to be accepted as collateral security for an advance by a Federal Home Loan Bank shall be accepted if any director, officer, employee, attorney, or agent of the Federal Home Loan Bank or of the borrowing Institution is personally liable thereon, unless the board has specifically approved by formal resolution such acceptance.  (25)  (c) Such advances shall be made upon the note or obligation of the member or nonmember borrower secured as lar.1131-UlefUll this secbardmay approve or de-tifin, bearing such rate of interest as termine, and the Federal Home Loan Bank shall have a lien upon and shall hold the stock of such member as further collateral security for all indebtedness of the member to the Federal Home Loan Bank. At no time shall the aggregate outstanding advances made by any Federal Home Loan Bank to any member exceed[welv3itimes the amounts paid in by such member for outstanding capital stock held by it, or made to a nonmember borrower exceed EwelvD Imes the value of the security required to be deposited under subsection .;41) of section 1426 of this title.  30.  to.ie pirt  Section 505: Section 405(a) of the National Housing Act (12 U.S.C. S1728(a))  Amount of Inouranee  (a) Each institution whose application for insurance under this subchapter is approved by the Corporation shall be entitled to instil. . ance up to the full withdrawal or repurchasable value of the accounts of each of its members and investors (including individuals, partnerships, associations, and corporations) holding withdrawable or repurchasable shares, investment certificates, or deposits. in " — els institution ; except that no member or investor (other than a member or investor referred to in subsection (d) of this title) of any such institution shall be insured for an aggregate amount in excess of $100,000./For the purpose of clarifying and defining the insurance coverage under this subsection, subsection (d) of this section, and subsection (b) of section 1724 of this title, the Corporation is authorized to define, with such classifications and exceptions as it may prescribe, terms used in those subsections and in subsection (c) of section 1724 of this title and the extent of the insurance coverage resulting therefrom.  "Whenever the liabilities of an insured institution for accounts shall have been assumed by another insured, institution or institutions, whether by way of merger, congolidation, or other statutory assumption, or pursuant... to contract, all accounts so aqsumed shall have separate insurance which shall terminate at the end of six months from the date such assumption takes effect or, in the case of any certificate account the earliest maturit date after the six-month period."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (26)  31.  Section 506: Section 6(c)(2) of the Federal Home Loan Bank Act (12 U.S.C. §1426(c)(2))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ; Minimum subscriptions; retirement of oversubscriptions; limitations oaacellation of oversubscriptions; aggregate unpaid loan n informatio principal; report• and  n eligible to (C) (1) The original stock subscription of each institutio become a member under section 1424 of this title shall be an amount equal to 1 per centum of the subscriber's aggregate unpaid loan principal, but not less than $600. The bank shall annually, as of the close of the calendar year, adjust, at such time and ir, such manner and upon such reguterms and conditions as the Federal Home Loan Bank Board rnay by . lations or otherwise prescribe, the amount of stock held by each member so that such member shall have invested in the stock of the Federal Home Loan Bank at least an amount calculated in the manner provided in the next preceding sentence (but not less than $500). If the bank finds that the Investment of any member in stock is greater than that required under this subsection it may, unless prohibited by said Board or by the . provisions of paragraph (2) of this subsection, in its discretion and upon of application of such member retire the stock of such member in excess the amount so required. Said Board, in its discretion, may, by regulabe tions or otherwise, provide for adjustments in amounts of stock to Issued or retired in order that stock may be issued or retired only in entire shares. (2)ahe provisions of paragraph (1) of this subsection shall be subject to the following limitations: (1) No member which is a member on September 8. 1961 shall be permitted to reduce its stock to an amount which is less than the that a memamount held by it as of the close of such date, except is not less which amount an to stock its reduce time any at ber may of the than 2 per centum of its aggregate unpaid loan principal as (but beginning of the calendar year in which the reduction is made such not less than $500): Provided, That if the amount to which aggremember's such of centum per 2 than less is reduced so Is stock such gate unpaid loan principal as of the close of Septembe: 8, 1961 in its reduction may be made only to such extent as said Board discretion may by regulations or otherwise provide. , no ' uubsection (11a Notwithstanding any other provision of this purmember any to respect with bank any by taken be action shall the suant,to any of the foregoing proAsions of this subsection If ng effect of such action would be to cause the aggregate outstandi . (c) subsection of last sentence or_the meaning the within advances, of • of rction 1430 of this title or within the meaning of regulations the @sill Board defining said term for the purposes of this sentence, made amounts by such bank to such member to exceed twenty time.' the such paid in by such member for outstanding capital stock held by member. retire(3) Except as provided in subsection (1), of this section,'upon for the ment of stock of any member the bank shall pay such member or, at the stock retired an amount equal to the par value of such stock, which would election of the bank, the whole or any part of the payment ess of the otherwise be so made shall be credited upon the indebtedn value to par in equal stock event, such either In bank. the member to be, shall the amount of the payment or credit, or both, as the case may be canceled. e unpaid (4) For the purposes of this subsection, the term "aggregat a subscriber's loan principal" means the aggregate unpaid principal of and similar or member's home mortgage loans, home-purchase contracts, • obligations. s or other(5) Tge Federal Home Loan Bank Board, by regulation wise, may require each member to submit such reports and information as said Board, In its discretion, may determine to be neceAsary or appropriate for the purposes of this subsection.  (27)  32.  Section 507: Section 8a of the Federal Home Loan Bank Act (12 U.S.C. §1428a)  There is hereby created a Federal Savings and Loan Advisory Council, which shall continue to exist as long as the Board biannually determines. as a matter of formal record, after consultation with the Director of the Office of Management and Budget, with timely notice in the Federal Register, to be in the public interest in connection with the performance of duties imposed on the Council by law. The Council shall, in all other respects, be subject to the provisions of the Federal Advisory Committee Act. The Council shall consist of one member for each Federal Home Loan Bank district to be elected annually by the board of directors of the Federal Home Loan Bank in such district and twelve members to be appointed annually by the Board to represent the public interest. Each such elected member shall be a resident of the district for which he is elected. all members of the Council shall serve without compensation, but shall! bei entitled to reimbursement from the Board for traveling expenses incurred In attendance at meetings of such Council The Council shall meet as ng on, et c o o um a, at eas w ce a year and oftener if requested by the Board The Council may select its chairman, vice chairman, and secretary, and adopt methods of procedure, and shall have power-(1) To confer with the Board on general business cond -tions, and on special conditions affecting the Federal Home Loan Banks and their members and the Federal Savings and Loan Insurance Corporation. ,(2) To request -information, and to make recommendations, with respect to matters within the jurisdiction of the Board and the Federal Savings and Loan • Insurance Corporation. - •  the Federal "Subject to the provisions of §7 of of alternates and Advisory Committee Act, all members entitled shall be the Council may be compensated and • - .•- • V. . • • • - 9 Council," of'such j.ncurred in attendance at meetings •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  V,  (28)  33.  Section 508: Section 6(i) of the Federal Home Loan Bank Act (12 U.S.C. S1426(i))   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Withdrawal or removal of members; surrender and cancellation of stock (i) Any member other than a Federal savings and loan association may withdraw from membership in a Federal Home Loan Bank six months after filing with the board written notice of intention so to do, and the board may, after hearing, remove any member from membership, or deprive any nonmember borrower of the privilege of obtaining further advances. if. in the opinion of the board. such with any member or nonmember borrower (i) has failed to comply pursuant made board the of on regulati or provision of this chapter a bank of member thereto; (ii) is insolvent: Provided, That any associaloan and savings which is a building and loan association, deemed tion, cooperative bank, or homestead association shall be ons insolvent if the assets of such member are less than its obligati able withdraw its of to its creditors and others, including the holders of a accounts; or (iii) has a management or home-financing policy g character inconsistent with sound and economical home financin inthe case, such or with the purposes of this chapter. In any the Fed= debtedness of such member or nonmember borrower to stock capital the and ed, liquidat be eral Home Loan Bank shall shall be member such by owned Bank Loan Home Federal the in Upon the liquidation of such indebtedsurrendered and cancele to the ness suc mem er or nonmember borrower shall be entitled of tion cancella and r surrende upon and, l, collatera its return of its to equal sum a such capital stock, the member shall receive except cash paid subscriptions for .the capital stock surrendered, of a capital n paid-i the that finds board the time any that if at result a as impaired Federal Home Loan Bank is or is likely to be Home of losses in or depreciation of the assets held, the Federal amount the from withhold board the of order the on shall Loan Bank to be paid in retirement of the stock a pro rata share of the amount of such impairment as determined by the board.  voluntary - provided, however, that in the case of a 4 j prpd depirie wlthdrawal, *uch liquidatj.on shall be .  "  .•  I• - •  -•1 -  . •  I-  •-  tn Any ppnAlties applicable to such prepayment.".  oecember 2S, 11110  Xt. John Deltem Chairmen Fedora/ Nome twin Sank Ware, 1704 C Street, NA. 20352 Washington, D.C. Dear JGrass This is in rearms* to Jay Jaftis's letter of December IS, 1906, concerning pepesed guidelines for the purchase of Federal feuds by Federal Rome Lose Seats. The proposals appear to be reasonable, in vien of the sits limitatiors curreatly iu place em the total vellums of Federal fuade sold by federal Dame Loan auks. Me do not amtiolpato that eap emtreordiaary reportial tageitremeate weed be establiahed, the volmMe of rodeael funds purchased sem be sods a part of the escieting streetmce. Ampordissly, inp have se silent's, to your finaliving the pespeeel. Mk appreciate your cooperatiom in keeping es advised of year plans. Sincerely,  bcc:  Na. Mallardi (2) Chairman Log 93216  CTS:bho 12/29/90   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  41PWINI  1700 G Street, N W  _AO^. Federal Home Loan Bank Board  Washington. 0 C 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  JAvJANIS Chairman  DEC  7,t)  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve Board System Washington, D.C. 20551 Dear Paul: The most current numbers we have on the condition of StiLs are not encouraging. I thought it would be helpful for you to have the following update: Profitability: For the first half of 1981, we expect that 75 percent of the S6Ls will have negative earnings. For the second half of the year there will be approximately 73 percent under water. This compares to our estimate for 1980 of SO percent with losses for the second half of the year and 30 percent for the first half. Note that these estimates are based on a medium interest rate scenario. Under a high interest rate scenario, the percent with losses in 1981 approaches 82 percent. Return on Assets: is estimated ROA for 1981 -- under the medium interest rate scenario at between -.35 to -.40. Under a high interest rate scenario, the range is -.65 to -.90. FSLIC Fund: Based on our current problem hook cases -- under a worse case scenario the losses to the insurance fund could reach as high as $2.5 billion. The book value of the fund is S5.8 billion, but the market value is probably closer to $4.6 billion. Fnclosed are a couple of charts and the backup simulations for your staff to review and compare with their own. On the first chart you can see our interest rate assumptions. eI C  ,a Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  y,  I  RCA PROJECTIONS FOR LC, KDIUM, AND HI H INTEREST RATE SCENERIOS  / / LOW  P E R C E N T   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  \, , ,  • • •  • •  MEDIUM  S  • •  • 4.......  •••••••  •••••••  ........  e.....  al....  •••••••  op..  ......  _  •  ,• S N  ,, ,• ,, , . ,. ,...  2 1380  li I Gil  1 1  2 1961 LOW-SCUD LINE MEDIUM-DOD LINE HIGH-DOTTED LINE  Dicember 2 •  19HO  OPER Interest Rate Scenario Semi-annual Averages and Implications for RCA  80:2  Low 81:1  81:2  80.2  Xedium 81.1  81.2  80.2  High 81.1  81.2  -mC Rate  13.0  10.5  9.9  13.1  13.5  12.9  13.2  15.5  14.9  2-1/2 Certificate Rate  10.8  11.0  10.85  10.8  12.0  12.0  10.8  12.0  12.0  Jumbo Rate  14.6  11.9  11.2  14.7  15.15  14.40  14.8  17.15  16.80  Mortgage Contract Rate  12.25  13.25  13.00  12.30  14.25  14.0  12.35  15.0  14.75  -.04  -.03  .39  -.04  -.40  ROA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -.35  -.04  -.65  -.90  I. M. - LUW1 - LOW INTERET FATES E1:1  4'  I.  • • •  r 1; c,•-•':- Nr:i..,111  1 -r  1.2,-rF  F r  (us)  .•. :71o1T 17AANcli  472.234 457.24 15.000 .000  425.227 4%:3.727 16.509 .000  2..i51  `..;41  I IC,  11.41 .. 7:41.07a •.:4.279  2.449  1/ , .2A0  17.726  55.740  5S.1S6  AO.531  62.457  1.973  2.062  2.172  2.270  6.433  1('.046 12.137  C.61:4  '7 F T'::  L  57-14,..233  .000  tNET) i I t!Tf  517.547 4 7)0.:42 is. 11...776*  E1:2  5.421  5.6:E:5  5.939  /-..251  5:32.272  612.163  643.237  61 , 9.730  475.137 104.540 :1:70.646 1 4c'. 272  493.979 109.775 33'7;1.205 1 (- . ",  524.97R 102.370 422.603 761  542.973 97.735 445.242  1:5. :24 22.074  174.644 39.917  196.r.Y.P. 41.997  1,1):..477 211./62 43.437  2.000  5.000  E  hcrol.INTc; AL17:0UNF5 TIDT()L r,vr F ATF*:. ' 11 \T7'1F p• I-:mc '3  !".. RTY ALCOUNTc: i!ura, :nWED MONEY F-4 OTHLP 11!,.C.,UfLEI MONEY IN Ho II 17 7,-,-; 1 .: i . I F. I ::. 1,:r.1 I: F.: Vii.'1.; I- i. •,.F-:11-1 I. r •i.-- I ! 11 c; r HER t. T(F.1 T iii11)1  1_1()BI1 IT IE=.  •  •  .620 54.936 40.345 14.071  /-.0.109 43.073 17.015  /-.1.9R0 44.499 17.4e.2  47.777 13.516  7.0.--:9  7.357  7.E:23  :7!.1/-.9  .217  .227  .237  .247  2.6:1:5  2.R27  4.053  4.217  :,5()9  :3. -'41  9.450  9.31  550.19?  611.524  636.717  ?7'.0R0  21.:::13  33.019  LET WIDRTP  Z:E1 t:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TH  1 7' '' ' I.M. - LOW INTEREST F:cTEE. c.0:1  r '( T It 1G I NCOME. :mi!.-..r-s.r.: . )1 1W1 ME ruRTITI..41- LOp-iNS !! LONUF.ALTS c i:fr 1."-ILP 7. -,1ti CITHFR LCI:INS .. r..."c-:'1.;t1:11:.--; !, DEPO 1 - 1.--; :;,. r :--"--r. 7-',':-.1 .-. D *EEC. ( U'E:) .. i r•ori L.,:u-)r4 F-LEs F., Ei I sc.. co_IN T S ... 17ILL .0 T EP (..!“- F,;(1T INCi INC OME ... t'If('L!ior: TOTAL  EPA T 1N1, I NI: CAME I Ni= : 1 41E  iJ,1)1* INC  E X F'ENSE  ''YET 1.':: F.Yr IDS ( INTEREST ) 'I'AVINC, ACATOUNP; 1HIT<D-rt. 4.:TY ACAT'OUNTS .. [7 IA! P (,Lo.'ANI:F orpER ii-.POPED MONEY  ..• • •  TOTAL NON-0PEFALJING EXFEN.E  27.141 :5.6.48 21.111 .:::96 .762 ...3.30 . 720 .773  79.F.'"' 1 ::7. ::::•i7 --..-, /..7-7, A.............4-AJ  .412  :33.551 31.::::53 26.1'7'2 1.400 3. 151.:. 1.105 .806 .392  .429  .453  .475  31.809  34.026  3.:=118  3.987  4.209  4.426  '22. 314 19.949 .000 2.096 .772  25.71E: 22.98:3 .019 2.141 .771  27.472 24.430 .050 2.312 .680  27.541 -'4.269 . 105 2.491 .677  . 171  .174  .182  .190  30.079  :31.862  32.157  .001 -.035 .037  .029 -.010 .041  .474 .115  STAFF:- LOCAL, 17,ND OTHER TAXES ToTAL EYPEN'=E AFTER TAXES  27.073   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .f367 3.415 .777 .:32:3 .811  :31.355 27. 195 24-.514 .9A4 2. .-?75 1.042 • .705 .855  29.951  .747 .207 .059  HET I NC :?1E r:EFIDRE TA XE'.7TAXE':. NET IHrivE CASH DIVIDPJEIS ON STOII-Y NET INI.JiME (WIER TAXES !, DIV. • •  E'1: 2  27.553  191- AL PYPENSF PEFORE TAxES 1'0' 1 ..17.  '31: 1  .748 .2/ ,7 .4..]:0 .030 .450  -. 128 .001 -.129 .0'3 -.152  31.891  32.747  -.0574 .029 -.032 .030 -.112  1.:369 1.279 .074 1.205  1  4'  ....10.1.411111111011••••••••••••• •  s-es,  ..."••••••  $106111A11106.6.••••  •  1L/02/:0 15:41 I.M. - LOW1  - LtJ 1NrE.PE1 NET t.JIRTH  :  kATES  uF AVERAGE NET AS':.ET'. AVERAGE NET INTEREST '=.AVINGS CO'T.:T OF C.ROSS FUNDS INrEPET INI:uME INCOME EXPENSE  --  AVERAGE Cri'=„T OF  AVERAGE YIELD ON t M.GAGE:E.  .17  9.74  C.06  7.05  S.74  8.53  9.16  -.01  10.15  3.79  7.80  9.51  9.43  7.89  9.56  9.50 9.83  .39  10.49  3.49  7.52  9.15  9.71  S.22  7.47  9.75  8.33  7.57  8.91  8.37  9.39  8.10  7.32  8.65  3.5E:  10.26  9.0/ ,  10.09  1 1  S.17  ):  -.12  '31:1 ._,.  45  .09  7.*:"Ff  79  8.73 9.24 Cd 53  DIET. ,:•(): 1  -.20  9.10  7.97  6.31  8.59  8.38  -.2:::  9.46  7.41  9.03  3.65  7.61  9.0ft  5.27  -.17  9.63  2.39 G:.47  5.20  .10  9.76  8.23  7.36  1 :,.....,.): 2  7.05 /.. 7:E:  .12 .07  9.19  7.62  6.76  8.30  3.04  3.35  9.75  8.28  7.47  9.01  P).91  9.18  81:1 1:2  6.47 6.47  .02 .35  9.79 10.01  3.39 8.14  7.56  9.10  9.05  9.43  7.29  8.82  3.73  9.71  9.57  7.85  7.08  8.45 9.47  8.27 9.41  9.35.  8.39 8.52  8.02 8.1(1 7.73  •_ 1: 1  E:.  8.96  •  9.20  II I !.i. I.. 3  T. 4 :1 1  1  I  I: 1 :   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  5.51  -.11 -.11  5.49  9.99 10.09 10.29  9.53  9.52  9.67  9.11  9.06  9.93  9.27  9.42  9.22  9.72 9.95  '7.00  .17  9.43  7.79  7.00  3.44  6.70 /.  -.01  10.02 10.0  8.62  7.77  9.32 9.40  7.47  9.03  -.11  10.25  9.01  9.10  12/02P80 15:41 I.M. - LOW1  orER  FORECAST - LOW INTEREST RATES  NET AS OF AVERAGE NET ASSETS Wf*TH -------------AVERAGE NLT GRO.7.S OF INTEREST SAVIN6S Crr:J OF r!;r:_r:ATS IM_OIE INCOME EXPENSE INTEREST FUNDS _  AVERAGE COST OF SIY.,'INtL;S  AVERAGE YIELD ON  :71 ST. 4 6..53 1 21:2  5.93 5.99  .0':: .00 -.03 .41  9.2.7 .97 10.02 10.29  7.'771 ::-;,A:-3 3.77 8.39  7.31 3.01 3.05 7.66  3.58 9.41 9.48 9.06  .13 -.02 -.14 .26  9.46  7.78  6.95 7.77 7.87 7.54  9.29 9.37 9.01  8.41 9.53 9.61 9.20  8.16 9.47 9.59 9.10  9.43 P"  8.84 9.83 9.86 9.34  8.73 9.82 9.90 9.274  Q.9.62 9,9R 10.27  3.60  3.47 9.A? Q.73 9.20  f3.43 9.50 9.04  9.09 9.49 10.09  Tivc-..iT. 7 5 '11:1 21:2  5.55  10.0n 10.24  3.69  2 9.21 2.93  9.29 9.61 9.86  DIST. 7,:j  .11 5 :7;  21: 2  5.40 •5.30  :7:0: 1  .-7:  81: 1 :71:2  5. .4  '71:1  .10  10.17  8.98 2.62  7.74 7.35 7.47  .22 -.12 -.u7 .40  le).0/1-. 10.41 1n.5/. 10.7/  3.14 9.07 9.1? 3.67  7,34 7 ..27 8.32 7.34  -..:4 .7)  3.94  1  1 =1:  7.45 7.(:)5 6.4'3 4.6.1  - 0.7. .36  10.27 10, 10.61  2.39 :E: 99 2.60  1().46 10.76 10.-4  3.73 9.13 Q.13 8.68  7.71 7,:7:0 7.39  9.73 9.29  cg  29 9.62' Q.97 10.24  11   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .24 7  nc,  7.(d1  .12  /.-  7.77 7.41  .51 9.34 2.939.37  9.70 10.04 10.40 10.70  12/02/:i.0 I.M. - LOW UPLR FukEllAST - LOW INIFP.E4- RATES  rw- r WuRIH (147 /  AS  OF AVEAGE NET ASSET AVERAGE COST OF INTEREST SAVINGS Fijkar7; EXrLN'1.E I N $ 1F.T  NET INLUME  P:ST. 12 7.65 7.:29 =1:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .21 .12 .c'7' .51  10.24 lc.'./.„2 10.67 10.'4  77  7.42 7.50 7.15  Q.61  AVERAGE CO'i.1 OF  AVERAGE YIELD ON ":1RTGAGLc  - H I.M. urLR FOF:ECAST - LOW INTEREST RTE'  ANNUALIZED NET INi_ONE AS A PERCENT OF AVERAGE NET ASET;, 12:30:1 DPi4RICT  1 1 _ -_' 4 _. I. 7 •::::  _ _  40 10 17 lr.' 11 :? 12 m  _ -  4  C:  A  :3 117 2//"/ l'-','2 ilr:, 46 117 7E: 4 : 47 109 '7'0 -c2';' ,..-.. 1.,::: 45 ( I-2 2 ) 43 3A :/, 9 31 19 45 13 35 32 0 0 0 0  - 117 202 .2Q2 672 1 -  1 -  7  -  7  Q  10  11  12  TOTAL  i:7 1:E_:17, 101 221 101 9P. .3.:1; 46 70 51 45 67 43 22 29 20 71 22 66 24 12 37 19 45 10 5 17 10 23 5 13 25 13 -.:::: 13 0 0 0 0 0  64 37 21 1E: 19 11 4-,  46 25 20  0  0  1420 661 637 424 306 172 313 0  212 4:3a.-,  220  16  12 9 14  142  LUMLATIVE %  27.17 16.4'7; 15-_:.:0 10.5'3 7.6  1420 2151 2733 2212 351::.: 4...::: 2691 7.'7/.3 4009 .0() 4u@9  4,..io2 100.00  37.1 5'./' , 69.5, ' S0.1. 92.0 100.0( 1 00.04 11.10.(),  CiPEAIRR rHAN 0.40 0.20 0.40 0.00 TO 0.20 -0.20 TO 0.00 -0.40 TO -0.20 -0.60 TO -0.40 LC7:C. Ul:DLFINED TOIAL  1Jr.1T U0RTH  ns  A PERCENT OF TOTAL DEPO3IT'7, 1930:1  DISTRICT .  1 - -  ,  53 171 47 101  •, -. _  4  1/:.  7 1 f.  14 0 0  7 - 11 7  1 4  -  4  /,  3  9  10  11  12  l'' - 9 3:. : -.:3 3:::3 157 7t.c--, 142 2'71 155 147 109 '30 2(1 1 123 45 174 93 227 50 40 25 ..:-/ 5 4.3 17 7 30 14 '2 42 2 .:, 4 ":::,' 14 E: A 4 16 13 29 () m 0 1 1 3 4 1 2 0 0 () I.; 0 (z) 0 0 0 0 0 6 72 492 213  IT.,(,E(ITER THAN /-..0 TO A.0 3.0 TO 4.0 0.0 TO 3.n TH-N 0.0  1.i,!1 ,LFINrrs 7,1!(-4_  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  :65 /.03 220 205 142  TOTAL  2415 1206 202 172 13 0  %  CUMLATIVE rOTAL %  4009  60.- 4 90.32 95.24 99,43 1 of). 00 100.00  4002 100.00 400'' 7  100.00  60.24 20.0::: 5.04 4.22 .32 .00  2415 3/:.21 23:3 2296 400'74  15:4! I.M. - LOW1 - LOW INIEF.Frr.T PArEc_,  OPER  ANNUALIZED NET  INIZOME AS A PERCENT OF AVERA6E NET ASSETS, 1980:2 I.V7TPICT  4  1  1  24 1:"  4 5  14 15 11 13  7  7  5  47 110 40 6: 44 24 :I:3 24 16 41 1:.7: 49 ()  77 111 131 103 40 4S 77 33 42 10S' 7*-7, 27 34 107 17 102 13 62 31 27 62 51 0 0 0  22 C. 43 47 47 0  27 A.0 75 79 Cc/ 72 125 0  10  11  42 21 46 '9 21 14  71 25 '5 22 17 10 24 0  /  0  - 11; "::02 1 -  -  11  I .  12  21 27 12 12 15 0 1 42  TuTAL  %  5c;0 615 542 534 366 5.7 0  21.62 13.72 15.24 12.67 13.22 9.13 12.15 .00  CUMLAT1VE TOTAL %  c)/9 .  141Q -'034 C .  211/ , 2482 4009 4009  (.)•77.' 1 00.00 4009  25.4(i 50.74 64.41 77.T: 26.8E: 100.00 100.00 100.00  1-_,PEATER THAN 0.40 Q.20 TO 0.40 •) 00 1 II n. 20 -0.20 TO 0.00 -0.40 TO -0.20 -0.60 TO -0.40 I ErIS THAN -c,./.0 HNI.EFINLD TOTAL  NEr WORTH  A  nu.' ENT LE TOTAL DEPOSITS, 19: : :0:2  DIS1RICT 4  1  1  151 4:3 1011. 7  :!F".  7  .7;  0  0  - 11' -:02 -  -  5  7  10  11  12  :303 153 248 129 240 136 133 101 25 211 141 42 158 92 63 51 27 P 4 6 16 6d 57 12 54 , 26 7 51 59 9 21 19 6 24 9 0 2 6 0 1 2 2 0 C 0 0000 0 0 /.72  1.REA1ER THAN 1.0 TO 6.c., 7:.0 TO 4.0 0.0 Tn 3.0 LESS TI 1' 0.0 LINDEFINE'D   https://fraser.stlouisfed.org • Federal Reserve Bank of St. Louis  6  ::1?  142  TOTAL  2169 1267  %  c_74.10 31./10 7.52 F..96 .75 .00  CUMLATIVE TOTAL %  2169 3434 3740 37)79 4009 400c1  54.10 85.71 973.29 99.25 100:00 100.00  4009 100.00 4009  100.00  00'001 00'00T 00'00I SL'26 SL'6L 6L'St  600V 0000T 600V 00' Et'C SS'OI 90'0C.  1V101 BAIIV-INA3  7VI  0 0 Ogi C t7tL TV7I LC 9S0I  1VJO1  7I  S CI CI I  IT  07: CO9 0 0 V 91 OT 0L I. 9L. VOZ T7I ::1  OT  c, v S: OV LS (:.''t  O't  Ul 01 Hi  (-.  "9 1.0H.L. 92V CI7 70V 7.L.9 C.) O O C 7I / 7I L:7 1 9V  L  0   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0 7  -  0 IL LI  _.  .--/  ---------------  _MUSD.] I:TC0I '3lISOd30 --IVIOL .1:1 IN:17  :iN ',4 ..),) H1,01-1 11  it.#101 09'0- NVH1 OV*0- 01 07'0- 01 00'0 01. 07"0-1 07'0 01 000 0 01 07'0 Ot'u NtJH.1. :flitLijO , 00V 00'00I 600t 00"(..)0I 00'cic•I  I8•79 v0'Sv )g'IC  600V 000V SSVC 9C0C SISZ 97.0I  00' LO'T S6'6 LI 'VT LL 'VT 91 ti 70'ZI  SVL  idiot % 3.NIIkriunD  %  0 VZS 665' 89g (7.6S C99 SIS SVL  1V1.01  ;717  7VI (.71)7 (7177 ::":0?  ST OT ST SC ST  7I  0 97 .77 ST CC OC IL  II  0 V7. 07  6V 97 )V  QI  0 0 SIT 9V 7V 6L 0S LS SS 16  c,  6C (L7 /T  ._.  0 TZ SI  0 17 9/  6L OL 9L  .-..  9  r7,  _ - V - 7  II -  7.7:.Yri 2 0 0 99 , 7L  t/ VC 9C  t,/  L  —  0 I  LI SOT 7IT CIT  0:.: T:L"  SIT 71.C'I  T /  II LI  T7  V  - )T11-1 1. I:1861 'S.1.3S3V 13N BOUlliW .1.1 1113.71>J3.-1 k) Ski 3WODNI I3N 1337.I1Vniii;J  S31t0:J 1:133:T3INI  -  >111.10  TMO1 - *WI  41,  I.M. - LOW1 OFER FORECAST - LOW INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:2 DISTRICT 1  1  -  ••=r, A 7 _  4  7  rir  r)  10  11  42 120 177 384 250 127 237 113 297 129 141 24 43 112 08 30 79 46 92 84 25 64 21 67 37 81 14 32 20 48 37 10 41 47 3'11 10 4 C. 22 10 21 38 21 16 27 7 C! C./ 13 7 7 13 0 20 0 6 -7 15 A 13 28 12 39 0 0 0 0 0  12  20 6 4 4 0  117  ,d2 2'2 672 4'?2 213 47.6 2.4.5 603 22o 2.)5 142  1 -  GrEATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 -0.20 Ti:' 0.00 40 TO -0.60 TO LE'3S THAN IMULFINED roTAL  1 -  -  TOTAL  2116 642 491 29/ , 181 9R  0  %  52.78 16.01 12.25 7.38 4.51 2.44 4.61 .00  CUMLATIVE TOTAL %  2116 2758 3249 354 3726 3824 4009 4009  52.7( I:.  83.4. 92.94 100.0( 100.0(  4009 100.00 4009  1.!0TH AS A rERCENT OF TOTAL DEPOSITS, 1981:2 DISTRICT 4  1  -  1  --  -  11  170 '11 2S  1 7  17 16 1 0  TI-(N  L!   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6:7!  10  11  27.4 111 234 107 206 119 117 207 143 42 132 89 203 74 53 73 38 14 73 37 94 12 le=1 75 *5 11: 42 27 12 11 • 12 4 16 4 f 0. 0 0  -7'2 17.72 4.74:: 21=7:  • -1)  7  10  TO 4.0 TO 3.0 THAN  i:'65 603  12  TOTAL  38 lo  1201 440 36'7' 55 0  1  142  I.  48.67 29.6 10.98 9.03 1.37 .00  CUMLATIVE TOTAL %  1*='51 ,7,152 .3592 39t..4 .. 4009 4009  100.'00 100.00  4007'100.00 4009  100.00  43.67  12/02/80 17:32 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES ASSETS  31:1  MORTGAGE LOANS AND CONTRACTS . FIXED RATE vARIAPLE RATE RENEGOTIATED PATE  00  MOPIGAGE-BACLED SECURITIES (US) CIINSUMF:R LOANS OTHEP LOAN.= INVESTMENT SECURITIES . PEAL ESTATE OWNED IXED A3SETS (NET) 0THER ASSET.=  472.224 457.234 15.000 .000  495.227 470.727 16.500 .000  514.060 487.778 15.482 10.801  531.711 494.332 14.582 22.747  22.151  22.628  23.381  24.073  .000  2.449  6.390  9.960  16.960  17.726  55.740  53.136  60.124  41.932  1.973  2.o42  2.159  2.251  7.7E:2  :3.204  8.576  5.4:31  TOTAL ASSETs  81:2  18.977  5.949  532.272  412.163  439.003  4/A.026  475.187 104.540 370.646 149.923 3.325 125.324 :742.074  498.979 109.775 239.20`.; 105.956 4.3.A8::: 174.444 .39.917  520.97: 98.97. 421.993 96.741 82.977 197.973 44.282  533.978 91.425 447.352 87.564 95.A87 215.592 4.1107  •.P.00  3.000  5.00C)  LlABILITIU1  ACrOUNTs PA'I'SPOOi ACCOUNTS CEF-1IFICATES, TOTAL EYISTING CERTIFICATES nEw 2-1/2 4 YEAR CER1. Mmc. c $ no, nof)4THIRD-PARTY ACCOUNT': PuF4-OWCD MONEY FHLP ADVANCES OTHER DOPROWED MONEY  0  •  •  54.936 40.345 14.091  60.109 4 7:.093 17.015  62.941 44.967 17.974  6'3.225 43.714 19.511  7.02.9  7.359  7.764  8.110  .217  .227  .237  .246  DEF-EPPED CREDITS  3.6.35  3.827  4.022  4.1/.  01HER LIABILITIES  ..509 0  8.941  9.378  9.741  550.193  .:-=:0.243  408.321  434.435  32.030  31.926  30.679  LOANE IN PROCEsS -cECIFIC RESERVES  TOTAL LIABILITIES  NET WORTH  NET WORTH  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  12/02/80 17:33 I.M. - MEM OPER FORECAST - MEDIUM INTEREST RATES INCOME  20:2  81:1  81:2  27.141 '7,5.648 21.111 .896 2.762 .820 .720 .773  29.521 27.837 22.628 . 3.415 .977 .R23 .811  21.841 30.350 41.019 3.744 1.043 .642 .849  34.406 22.73C; 2/-..2R6 1.476 3.847 1.107 .736  .412  .429  .450  .471  27.553  29.9c;1  32.292  24.877  3.218  2.087  4.194  22.216 19.949 .000 2.096 .772  25.912. 22.983 .01Q 2.141 .771  29 24.27::: .050  31.774  1.233  2. /:./..0  .171  .174  .121  . 189  26.:::05  30.079  33.93:3  34.357  TAES . FEDERAL TAXES STATE, LOCAL, AND OTHER TAXES  .'09 .059  .001 -.025 .037  -.402 -.416 .014  -.376 .07'0  TOTAL EXPENSE AFTER TAXES  27.073  1-40.0R1  .742 .267 .420 .030 .450  -.122 .001  -1.640 -.402  -.1202.3 -.152  -1.247  TOTAL OPERATING INCOME INTEREST INCOME MORTGAGE LOANS & CONTRACTS . CONSUMER AND OTHER LOANS INVESTMENTS DEPOSITS MORTGAGE-BACFED SEC. (US) FROM LOAN FEES F, DISCOHNTS ALL OTHER OPERATING INCOME .. IITAL NON-OPERATING INCOME TOTAL INCOME  C,C.  EYPENSU  FOTAL OrERATING EXPENSE 11ST OF FUNDS (INTEREST) SAVINC, ACCOUNT-:. THIRD-PARTY ACCOUNT' 7. FHLD AIWANrEc: OTHF_P PORROWED MONEY 1-01- fIL NON-OPERA-TING EXPENSE TOTAL EXPENSE BEFORE TAXES  .841  •  Cry--7  :7:A.000  NET INCOME  NIT INLOME DEFORE TAXES TAX ES NET INCOME CASH DIVIDENDS ON sTocr NET INCOME AFTER TAXES & DIV. .   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .010  -1.479 -.356 -1.122 .018 -1.139  12/02/80 17:33 I.M. - MEDI  ':'PER FORECAST - MEDIUM INTEREST RATES  (ONEA/YEAR  NET AS % OF AVERAGE NET ASSETS WORTH AVERAGE Y. OF NET GROSS INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  80:1 80:2  6.74 6.39 5.85 5.43  .17 -.04 -.40 -.35  9.74 10.15 10.45 10.24  5.99 5.75 5.32 4.91  5.96  8.0A 2.79  AVERAGE COST OF SAVINI3S  AVERAGE YIELD ON MORTGAGES  9.27  7.05 7.20 8.52 8.72  8.74 9.51 10.31 10.60  8.53 9.43 10.29 10.52  9.16 9.50 9.22 10.21  -.07 ' 9.27 -.12 9.71 -.50 -.52 10.20  7.60 2.22 8.94 9.  6.S6 7.47 8.11 8.44  8.17 2.81 9.55 9.92  7.99 2.73 9.51 9.29  5.79 • 9.60  -.20 -.23 -.47 -.52  9.10 ''.4/c. 9.85 10.16  7.97 :::::.3.9 9.11 9.49  6.81 7.41 8.17 2.51  P.59 9.03 9.76 10.13  8.23 8.55  8.38 ...--1.A.  10.04  9.28  5.94  .12 .07 -.--:(-) -.31  9.19 9.75 9.99 10.35  7.62 2.22 ' 7/.02 9,33  6.76 7.47 5.11 8.43  R.30 9.01 9.78 10.13  8.04 8.91 9.72 10.09  8.85 9.1? 9.51 9.81  ."6 -.11 -.50 -.47  9.57 9.99 10.27 10.63  7.85 0 00 9.A0 9.9'  7.o2 e.o7, 8.74 9.02  8.45 9.47 10.2? 10.57  8.27 9.41 10.27 10.57  9.01  51:2  6.34 5.95 5.36 4.27  5 80:1 20:2 81:1 81:2  7.00 6.70 6.17 .J.74  .17 -.04 -.47 -.44  9.43 10.02 10.22 10.52  7.79 8.62 '9.39 9.71  7.00 7.77 8.42 8./ , 9  8.44 9.32 10.1" ) 10.42  81:2  1 1 51:1 31:2  11:1 21: 2  5.13 4.70  9.66  HIST. 7.05 6.78 81:1 81:2  ['1ST. 4 :E:0: SO:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  C. 9.27 10.11 10.41  9.72 10.04  C:.10 9.42 10.05  12/02/80 17:2:7:: I.M. - MED1 OPER FORECAST - MEDIUM INTEREST RATES  rREA/YEAR  NET AS % OF AVERAGE NET ASSETS WORTH AVERAGE GROSS NET % OF INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  01ST. 6 SO:1 20:2 81:1 S1:2  6.5?  .03 .00  9.27 9.97  -.31  10.64  .13 -.08 -.50 -.45  9.4A 9.97 10.19 10.59  .11 -.34 -.71 -.65  AVERAGE COST OF SAVINGS  AVERAGE YIELD ON MORTGAGES  R.4S  9.09  e.92  9.41 10.22 10.49  10.24 10.52  9.87 10.21  9.29 10.09 10.40  S.23 9.21 10.05 10.37  S.96  9.69  6.95 7.77 8.47 3.75  9.65 9.97  9.3*: 9.C7' 10.11 10.50  7.82 8.:=48 9.67 9.92  6.68 7.74 3.46 S.69  8.41 9.53 10.23 10.61  S.16 9.47 10.22 10.60  9.29 9.67 10.00  5.2S 4.00  .7.9 -.13 -.47 -.'29  10.0A 10.41 10.79 11.16  8.14 9.07 9. 10.15  7.26 8.27 9.01 9.24  S, .94 9.2.3 10.67 10.90  2.72 9.83 10.72 10.95  9.A2 10.04 10.41  7.45 7.05 6.45 5.9S  -.02. -.4A -.32  10.27 10.55 10.95  7,39 8.89 9.A9 9.97  6.76 7.71 S.42 3.  8.60 9.A5 10.42. 10.74  8.47 9.62 10.50 10.75  9 63 10.02 10.36  7.61 7.29 A.22 6.52  .24 .12 -.12 .00  10.46 10.76 11.12 11.57  S.7? 9.13 9.39 10.16  7.29 7.77 S.55 8.76  9.51 9.93 10.74 11.00  9.24 9.87 10.73 10.98  9.70 10.04 10.45 10.R3  5.77 5.41  7.92 3.68 9.46 9.75  7.31 8.01 3.67  7.7S 2.52.  DIET. 7 6.7'A Su:2 81:1 S1:2  ct):1 : 1.1:1 :  4.94  6.?4 5.82 4.67  PIST. 9 6.34 S1:1 81:2  DIST. 10 CO:1 S1:1 S1:2  DIST. 11 SO:1 ?1:1 81:2.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  12/02/S0 17:2:I: I.M. - MED1 OPER FORECAST - MEDIUM INTEREST RATES  AREA/YEAR  DST. 12 CO:1 SO:2 S1: 1 S1:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NET AS % OF AVERAGE NET ASSETS WORTH AVERAGE GROSS INTEREST SAVINGS COST OF NET OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  7.65 7.29 71 6.27  .21 .12  10.24 10.62 10.(:!5 11.27  8.27 8.77 9.54 9.86  4..90 7.42 S.11 8.37  9.56 10.26 10.67  AVERAGE COST OF SAVINGS  8.78 9.45 10.30 10.61  AVERAGE YIELD ON MORTGAGES  9.64 9.Q4 10.31 10.64  12/02/80 17:2: : I.M. - MEDI  ':'PER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:1 DISTRICT 1  40 10 17  1  11 8 12  3  en,•j  45 42 29 32 24 45  (  A  4  117 269 192 46 117 73 47 109 90 63 45 30 43 3A 9 31 19 13 25 0 0 0  7  8  9  10  11  12  TOTAL  67 139 101 221 101 46 70 51 W.:: 38 45 67 48 92 29 20 71 23 AA 24 12 37 19 45 10 C. 17 10 23 18 35 13 C 13 0 0 0 0 0  64 37 :31 13 19 11 25 0  46 25 20 16 12 9 14 0  1490 661 637 424 304 173 318 0  - 117 302 292 672 492 213 48A 245 60:=: 220 205 142 1 _ 4 5 1.  7 -  CUMLATIVE TOTAL %  %  37.17 16.49 15.89 10.53 7.63 4.32 7.93 .00  1490 2151 278.2 3212 2513 3691 4009 400.7'  37.17 53.65 69.54 80.12 87.75 92.07 100.00 100.00  4009 100.00 4009  100.00  GREATER THAN 0.40 0.20 TO 0.40 0.0c) Ti: 0.20 TO 0.00 -u.4') TO -0.20 -0./. , 0 Ti) -0.40 LEES THAN -0.A0 UNFJEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:1 DISTRICT 1  4  5  6  7  :3  C ) .  10  11  12  171 199 323 157 265 142 291 155 147 109 101 RO 201 123 45 174 93 227 50 40 " 4__. 14 9 48 17 7 30 14 42 P. .... 14 c.-, 4 39 14 4 14 13 39 :..i: 6 0 0 0 1 1 0 3 4 1 2 0 0 0 0 0 0 0 0 0000 7 - 117 302 292 672 492 213 436 265 603 220 205 142  1 -  4 5 A 7  -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  2415 120A 202 173 13 0  %  40.24 30.0R 5.04 4.22 ▪ 32 .00  CUMLATIVE TOTAL %  2415 3421 3823 399A 4009 4009  60.24 90.32 95.36 99.68 100.00 100.00  4009 100.00 4009  100.00  12/02/80 17:33 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:2 DISTRICT  1 2 4 6 _ 7 -  2  4  1  2  24 12 22 14 15 11 13 0  77 111 131 103 40 48 92 77 30 42 109 79 27 34 107 67 28 17 102 6r:: 13 63 45 31 27 6r..4 574 51 0 0 0 0  A  7  47 110 40 6:3 44 72 24 03 24 68 16 41 18 49 0 0  8  9  28 87 25 60 36 75 42 79 47 89 39 73 47 135 0 0  10  11  12  TOTAL  %  42 31 46 29 31 14 27 0  71 35 -)c.. ._.) 23 17 10 24 0  38 21 27  369 550 615 54E: 534 ..--v-A 527 0  21.68 13.72 15.34 13.67 13.32 9.13 13.15 .00  le 18 ...) 15 0  - 117 302 292 672 492 213 486 265 603 220 205 142 1 4 5 A 7 9 -  CUMLATIVE TOTAL %  21.68  869 1419 20744 2582 3116 342 4009 4009  35.40 50.74 64.41 77.7:.:: 36.8 100.00 100.00  4009 100.00 4009  100.00  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 TO 0.00 -0.40 TO -0.20 -0.A0 TO -0.40 LESS THAN -0.A0 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:2 DISTRICT 1  4  4  5  6  7  10  11  12  TOTAL  %  CUMLATIVE TOTAL %  1 - 52 151 184 ''::r.:; 303 153 248 129 240 126 133 101 -. - 43 10/, 05 211 141 27 42 158 92 238 68 51 3 _ 7 ....... 1A 6/ , 26 12 54 22 57 4 9 6 P. 9 Q 47 19 59 19 7 51 21 6 24 0 3 0 5 - ' 1 9 6 0 . ' 7 3 3 1 0 0 0 0 6 00000000  2169 1267 304 239 30 0  54.10 2169 31.60 3436 7.53 3740 5.962:979 .75 4009 .00 4009  54.10 85.71 93.29 99.25 100.00 100.00  7 - 117 302 292 672 492 213 48/ , 265 603 220 205 142  4009 100.00 4009  100.00  1 2 4 5 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,  •  12/02/80 17:2 I.M. - MED1  ':PER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERA GE NET ASSETS, 1981:1 DISTRICT 1  At-  46 27  1  11 1:2 16 37 1S .30 37 105 0  4 5 A 7  - 1 17 202 1 2 4 6 7 -  42  4  5  A  49 40  33 24  14 26 5 44 13 2? 26 22 47 17 50 32 5A 24 42 41 6S 29 RO 31 S1 45 S6 59 175 135 275 0 0 0  29 50 4A 106 73 114 247 173 0 0 0 INFO  7  8  9  10  11  12  TOTAL  17 S 17 24 42 38 74 0  35 16 27 21 34  17 9 12 11 37 16 40 0  366 245 356 398 409 592 1443 0  19  53 0  672 492 21•2 424 265 603 220 205 142  %  CUMLATIVE TOTAL %  9.12 346 6.11 611 8.23 967 9.93 1345 15.19 1974 14.77 2566 4009 .00 4(..)09  9.1: 15.24 24.1: 34.0' 49.24 64.01 100.0( 100.0(.  4009 100.00 4009  100.00  GREATER THAN 0.40 O. -'0 TO 0.40 0.00 TO 0.-'0 -0.20 TO 0.00 -0.40 TO -0.20 -0.60 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1931:1 DISTRICT 1  4  5  7  S  10  CUMLATIVE TOTAL %  11  12  TOTAL  45 125 160 239 259 137 215 101 207-: 112 117 47 94 207 152 4S 146 89 195 79 54 13 40 78 29 12 74 100 14 14 10 29 15 40 15 46 31 9 15 3 1 12 0 5 17 5 0 0 0 0 0 0 0 0 0 0  S5 33 10 S 1 0  1855 46.35 1S5S 1244 21.03 3102 456 11.37 3558 397 ' 9.72 3950 59 1.47 4009 0 .00 4009  100:00 100.00  7 - 117 202 292 672 492 213 454 265 603 220 205 142  4009 100.00 4009  100.00  1 4 6-  1 4 • 6 7 -  GREATER THAN 6.0 4.0 TO 6.0 2.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  %  46.35 77.33 88.75  .0rAweroatamargaiONIIIMININIMms~......... •  ivinummoswi. 4 2"  ......dimmomommi  12/02/80 17:32 I.M. - MEDI OPER FORECAST - MEDIUM INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981:2 DISTRICT  1 2  6  39  9  12 4 5  33 1'7> .74 27 112 0 0  7  A  4  ' 7:  1  CfN If.  32 32 37 34 32 A5 0  60 44 39 27 75 45 24 52 108 80 102 77 204 157 0 0  7  16 41 10 12 3.3 29 44 21 31 AP. 30 40 67 22 49 33 81 48 152 107 0 0  9  10  11  12  TOTAL  %  61  23 12 25 29 36 33 62 0  45 26 21 30 19 20 44 0  20 11 15 23 23 18  421  10.50 7.03 9.65 12.42 14.57 14.57 :?1.25 .00  38 73  0  0  - 117 302 292 672 472 213 431:. 265 603 220 205 142  CUMLATIVE TOTAL %  421 703 1090 15sa 2172 2756 4009 4009  68.7 100.0(, 100.(N.)  4009 100.00 4009  100.0(.1  387 49S 524 584 1253 0  10.50 17.54 27.1c' 39.61  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 -0.20 TO 0.00 -0.40 TO -0.20 -0.40 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1981:2 DISTRICT 1  1 4 4-  2  3  4  6  7  34 127 154 260 231 121 200 48 79 81 126 142 58 123 14 70 17 42 37 96 5:3 5A 19 87 14 49 18 115 C. 2 15 A 5 1 2 0 0 0 0 0 0 0  P  78 RR 45 45 9 0  9  170 161 112 127 27 0  11  12  TOTAL  %  94 105 75 54 26 21 16 20 5 7 0 0  71 44 11 13  1649 1139 555 579 87 0  41.13 2S.41 13.84 14.44 2.17 .00  10  3  0  7 - 117 302 292 672 492 213 481:. 245 603 220 205 142  1 2 4 5 6 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CUMLATIVE TOTAL %  1649 2788 3343 3922 4009 4009  69.54 83.3c 97:8: 100.0( 100.0(  4009 100.00 4009  100.0(  12/02/80 16:20 I.M. - HI6H1 OPER FORECAST - HIGH INTEREST RATES 00.1 L. •  ASSETS  472.234 457.234 15.000 .000  MORTGAGE LOANS AND CONTRACTS FIXED RATE VARIABLE RATE RENEGOTIATED RATE  OTHER LOAN'; CASH !, INVESTMENT SECURITIES .  OS  495.227 478.727 1A.500 .000 •-.+•"",  MORTGAGE-BACYED SECURITIES (US) ; CONSUMER LOAN.  RO:2  LAC-. -4...  81:1  C. 81:  512.564 486.739 15.504 10.321  527.904 491.787 14.622 21.475  23.311  2.899  .000  2.449  6.371  9. E:89  16.9A0  17.726  18.312  18.R42  55.740  58.186  59.947 2.153  REAL ESTATE OWNED  1.973  FIXED ASSETS (NET)  7.782  3.204  8.551  OTHER ASSETS  5.431  5.685  " •:e •.• • 7  582.272  612.168  637.141  659.271  475.187 104.540 370.646 149.923 3.325 185.324 22.074  498.979 109.775 389.205 105.956 68.688 174.644 39.917  518.979 96.010 422.968 96.761 79.69? 199.808 46.707  534.978 25.5:. 449.282  .A7,0  300  2.000  5.000  54.9--46 40.845 14.091  60.109 42.093 17.015  63.911 45.435 18.476  70.141 49.651 20.490  7.259  7.734  .217  .227  .237  .244  DEFERRED CREDITS  2.635  3.827  4.007  4.155  OTHER LIABILITIES.;  2..507  8.941  9.342  9.670  550.193  5!.30.243  607.210  632.237  32.080  31.926  29.927  27.029  TOTAL ASSETS  6.155  LIABILITIES  SAVING ACCOUNTS PA3SB001. ACCOUNTs CERTIFIrATES, TOTAL EXISTING CERTIFICATES NEW 2-1/2 4 YEAR CERT. MMI s $100,000+ THIRD-PARTY ACCOUNTS BORROWED MONEY FHLB ADVANCES OTHER BORROWED MONEY LOANS IN PRorEss SPECIFIC RESERVES  TOTAL LIABILITIES  88.977 219.242 53.497  NET WORTH  NET WORTH  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  12/02/80 16:2( I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES INCOME  TOTAL OPCRAT1N6 INCOME INTEREST INCOME MORTGAGE LOANS & CONTRACTS . CONSUMER AND OTHER LOANS INVESTMENTS & DEPOSITS MORTGAGE-BACI ED SEC. (US) FROM LOAN FEES & DISCOUNTS ALL OTHER OPERATING INCOME ...  81:1  81:2  27.141 25.648 21.111 .896 2.762 .880 .720 .772  29.521 27.837 22.628 .867 3.415 .977 .223 .811  32.141 30.680 24.600 1.061 3.974 1.044 .614 .847  34.275 33.261 26.:330 1.533 4.291 1.107 .726 .878  .412  .429  .449  .468  27.553  29.951  :32.590  25.343  3.318  2.987  4.182  4.271  22.816 19.949 .000 2.094 .772  25.918 .935 .019 2.141 .771  J - 0.902 27.518 .050 2.405 .929  34.69:: 30.902 .105 2.705  .171  .174  .181  .182  2/-..805  740.079  25.271  TAXES FEDERAL TAXES STATE, LOCAL, AND OTHER TAXES  .267 .209 .059  .001 -.07:5 .037  -.684 -.690 .006  TOTAL EXPENSE AFTER TAXES  27.073  TOTAL NON-OPERATING INCOME TOTAL INCOME  EXPENSE  TOTAL OPERATING EXPENSE COST OF FUNDS (INTEREST) SAVING ACCOUNTS THIRD-PARTY ACCOUNT': FHLB ADVANCES OTHER BORROWED MONEY "TOTAL NON-OPERATING EXPENSE .. TOTAL EXPENSE BEFORE TAXES  -,=-7 4_,J, .7.,c,. .....,  -1.017 -1.021 .004  34.5  38.238  -2.680 -.604 -1.995 .004 -1.999  -3.912 -1.017 -2.894 .003 -2.897  NET INCOME  NET INCOME BEFORE TAXES TAXES NET INCOME CASH DIVIDENDS ON sTocr NET INCOME AFTER TAXES ?_, DIV.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .748 .267 .430 .0.30 .450  -.128 .001 -.129 .02 -.152  12/02P:::0 14:20 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  AREA/YEAR  AS % OF AVERAGE NET ASSETS NET AVERAGE WORTH INTEREST SAVINGS COST OF NET GROSS % OF INTEREST FUNDS DEPOSITS INCOME INCOME EXPENSE  U.S 80:1 2 :1 :31:2  DIST. 1 fi<0:1 80:2 81:1 21:2  SO:1 20:' 81:1 81:2  DI ST. 3 Co:1 20:2 81:1 21:2  01ST. 4 20:1 20:2 81:1 01:2  01ST. 5 80:1 20:2 81:1 :31:2  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4.74 4.'39 5.73 5.01  5.99 5.75 7-2  4.54  .17 -.04 -.90  9.74 10.15 10.56 11.04  -.02 -.12 -.71 -1.07  9.27 9.71 10.04 10.28  -.20 -.23  9.10 9.4/.  S.06 2.79 10.02 10.84  7.A.0 0 , .7 -) 9.24 10.17  0.74 9.51 10.79 11.60  9.41: 10.79 11.62  6.04 7.47 S.47 9.24  8.17 2.21 9.97 10.00  7.99 2.73 9.94 10.03  P.79 .7) 9• 30  6.81 7.41 ,==  8.59 9.02 . 10.20 11.05  2.85 10.10 11.02  8.65 .01 9.33  8.30 9.01 10.21 11.04  11.07  9.07  9.41 10.72 11.65  9.01. 9.35 9.74 10.11  -1.00  10.2,9  6.22 5.57  .12 .07 -.52 -.00  9.19 9.75 10.10 10.54  9.43 10.25  6.76 7.47 8.49 9.24  C. 5.24 4.44  -.11 -.76 -1.04  9.57 9.99 10.28 10.82  8.80 10.06 10.89  8.02 9.17 9.94  8.45 9.47 10.77 11.53  7.00 6.70 6.05  .17 -.04 -.71  9.42 10.02 10.32 10.77  7.79 2.4) 9.82 10.63  7.00 7.77  9.21 '  9.55  10.50 11.33  4.34 •  9.52 10.37  7.62  AVERAGE YIELD ON MORTGAGES  7.05 7.20 S.93 9.69  5.9A 5.Ao 5.07: 4.34  7.97  AVERAGE COST OF SAVINGS  S.44  9.16 9.50 9.91 10.23  9.64  8.04 :3.  C. 9.27 10.99 11.46  9.10 9.42 9.79 10.10  12/02/20 16:2i I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  AREA/YEAR  NET AS % OF AVERAGE NET ASSETS WORTH AVERAGE % OF NET GROSS INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  01ST. 6 80:1 80:2 21:1 81:2  "..00  01ST. 7 80:1 20:2 R1:1 81:2  6.26 5.93 5.27 4.54  01':T. 7 2 80:1 Ro:2 21:1 01:2  it, /  .00 -.64 -.R5  9.27 9.97 10.34 10.85  AVERAGE COST OF SAVINGS  7.92 8.68 9.91 10.70  7.31 R.01 9.09 'Z.:32  8.52 9.41 10.69 11.48  9.39 10.72 11.50  7.78  2.43 9.29 10.56 11.26  2.23 9.21 10.53 11.39  AVERAGE YIELU ON MORTGAGEE  9.02 9.42 9.91 10.23  -.74 -.  9.46 9.97 10.30 10.73  9.8.0 10.61  A. 7.77 8.27 9.61  6.24 5.88 5.09 4.24  .11 -.24 -.95 -1.19  9.22 9.22 10.22 10.70  7.82 8.88 10.11 10.90  6.6R 7.74 2.86 9.55  8.41 9.53 10.80 11.56  8.16 9.47 10.83 11.66  9.71 10.06  ['1ST. .7, 80:1  6.24  21:1 81:2  5.15 4.36  .29 -.13 -.73  10.04 10.41 10.92 11.39  8.14 9.07 10.37 11.1S  7.36 8.27 2.46 10.21  2.84 9.2? 11.12 11.97  2.72 9.23 11.26 12.11  9.23 9.42 10.09 10.49  7.39 10.27 10.67 11.16  3.89 10.13 10.91  6.76 7.71 2.23 9.51  8.60 9.45 10.95 11.71  2.47 9.A? 11.02 11.85  9.7'9 9.62' 10.06 10.43  10.46 10.76 11.22 11.76  8.73 9.13 10.37 11.21  7.29 7.77 8.99 9.74  9.51 9.93 11.25 12.10  9.24 9.37 11.29 12. 23  9.70 10.04 10.".0 10.91  .13  ['1ST. 10 80:1 80:2 S1:1 S1:2  7.45 7.05 6.33 5.56  .35 -.08 -.71 -.92  01ST. 11 S0:1 :30:2 81:1 81:2  7.61 7.27 6.6.9 6.05  .24 .13   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -.61  R.92  R.9A  12/02/20 1./._,:20 I.M. - HIGH' ':'PER FORECAST - HIGH INTEREST RATES  AREA/YEAR  AS % OF AVERAGE NET ASSETS NET WORTH AVERAGE % OF NET GROSS INTEREST SAVINGS COST OF DEPOSITS INCOME INCOME EXPENSE INTEREST FUNDS  DIST. 12 20:1 :?(): 2 81:1 21:2   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7.6F, 7.29 6.59 5.84  .21 .12 -.52 -.76  10.24 10.62 10.96 11.47  2.27 8.77 9.97 10.80  6.90 7.42 9.24  9.03 9.F.A 10.83 11.66  AVERAGE COST OF SAVINGS  6.78 9.45 10.81 11.74  AVERAGE YIELD ON MORTGAGES  9.64 9.94 10.35 10.72  12/02/80 16:2( I.M. - HIGH! OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:1 DISTRICT 1  40 10 17 19 11  1 2 4  7 8 -  12 ()  4  45 42 29 32 26 45 0  6  117 269 192 46 117 78 47 109 90 25 63 45 20 43 746 9 31 19 13 25 22 0 0 0  9  7  10  11  12  TOTAL  67 189 101 221 101 46 70 51 92 33 45 67 48 92 29 20 71 -.:. 66 24 12 27 19 45 10 17 ... 10 ...-, -_,-. ) ,... 18 35 13 58 13 0 0 0 0 0  64 27 21 18 19 11 -._.0.4.. 0  46 25 20 16 12 9 14 0  1490 661 627 424 306 173 318 0  9 - 117 202 292 672 492 213 436 265 603 220 205 142 1 -  4 5 6 7  %  37.17 16.49 15.39 10.".8 7.63 4.7-42 7.93 .00  CUMLATIVE TOTAL %  14.'70 . 2788 2212 3518 rk 91 4000 4009  37.17 53.65 69.54 80.12 S7.75 92.07 100.00 100.00  4009 100.00 4009  100.00  S  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 TO 0.00 -0.40 Ti' -0.20 Ti' -0.4n LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:1 DISTRICT 1  3  4  N.)  6  7  r.  10  11  12  53 171 199 332 157 265 142 291 155 147 109 47 101 20 201 123 45 174 93 227 50 40 25 7 2.0 4 16 9 43 17 14 42 F. R 2 7 14 4 39 14 13 39 9 16 4 6 C) 0 1 1 0 0 1 4 1 2 0 0 0 0 0 0 0 0 0 0 0 0 0  1  4 5  7 - 117 302 292 672 492 213 436 265 603 220 205 142 1 4 6 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org • Federal Reserve Bank of St. Louis  TOTAL  2415 1206 202 173 13 0  %  CUMLATIVE TOTAL %  60.24 2415 3023 399A 4009 4009  A.0.24 90.22 95.36 99.68 100:00 100.00  4009 100.00 4009  100.00  5.04 4.32 .7-42 .00  12/02/80 16:20 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1980:2 DISTRICT 3  1 2  24 1:3  4 5  14 15 11 13 0  7 C.  4  5  6  77 111 131 103 40 42 77 33 42 109 79 27 34 107 67 28 17 102 68 31 13 A".1 45 51 27 68 53 0 0 0 0  7  47 110 40 63 44 72 24 83 24 6.r--; 16 41 18 49 0 0  8  9  ,,, -,.. 27 25 60 36 75 43 79 47 09 39 78 47 135 0 0  10  11  42 31 46 29 31 14 27 0  32 71 25 21 ,... .:-_, 27 -)-.,:. 4... 13 17 1R 10 ' ... 24 15 0 0  12  9 - 117 302 292 672 492 213 486 245 603 220 205 142 1 4 7 -  TOTAL  %  869 550 615 548 534 .=:46 527 0  21.68 13.72 15.34 12.67 13.32 9.13 13.15 .00  CUMLATIVE TOTAL %  $69 1419 20C:4 2582 3114 3482 4009 400(:'  21.6E: 35.40 50.74 64.41 77.7? 86.85 100.00 100.00  4009 100.00 400c/  100.00  GREATER THAN 0.40 0.'0 TO 0.40 0.00 TO 0.20 -0.20 Tu 0.00 -0.40 TO -0.20 -0.60 TO -0.40 LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1980:2 DISTRICT 1  1 4 -  2  3  4  5  7  •-•  9  10  11  12  C. 53 151 184 303 153 248 129 240 1!"':6 133 101 48 106 211 141 42 158 9' '238 7 68 51 27 7 25 16 61 9 6 , 26 12 54 22 57 4 7 19 7 51 21 6 24 19 59 9 9 1 0 1 2 3 9 3 0 0 0 0 0 0 0 0 0 0 0 0  7 - 117 202 292 672 492 213 434 265 603 220 205 142 1 4 C. 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  %  CUNLATIVE TOTAL %  1167 243A 3740  54.10 05.71 93.29  4009 4009  100.00 100.00  4009 100.00 4009  100.00  2169 1267 304 239 20 0  54.10 31.60 7.58 5.96 .75 .00  ,  12/02/C0 16: 7'0 I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1931:1 DISTRICT 1  1 2 57  9  4  5 30 3 20 10 26 12 25 14 25 19 41 54 135 0 0  25 29 27 28 :7:1 43 97 0  5  6  1C 16 29 2F. 46 93 71 277 0 0 24 26 33 42  10 15 7:5 40 97 0  7  C.  3  13 20  12 20 74 2? 170 0  Cr  10  11  12  TOTAL  %  2/, 19  12 2 10 10 22  7'0 14 19 21 22 30 77 0  7 10 11 7 11 35 61 0  213 164 225  5.31 4.09 5.61 7.11 7.63 14.27 53.CC .00  42 4/, AA 0  12F: 0  117 302 292 672 492 21:71 43/ , 265 603 220 205 142 1 2 4 5 6 7 C",  CUMLATIVE TOTAL % C.  213 377 602 S1.37 1273 1C49 4007 40(y7,  9.40 15.02 7 '2.13 21.75 46.12 100.00 100.00  4009 100.00 4007  100.00  2SA 576 2160 0  GREATER THAN 0.40 0.21) TO 0.4() 0.00 TO 0.20 -0.20 TO u.o0 -0.40 TO -0._:() -0.60 TO -0.4(' LESS THAN -0.60 UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1981:1 DISTRICT 1  1 2 4 -  2  3  4  7  42 132 157 279 252 17-:1 209 42 9A 93 200 149 15 749 24 SC 4C 15 76 10 32 17 73 41 15 55 3 2 1 12 2 0 0 0 0 0 0 0 4  C  9  10  11  12  94 197 106 114 r-::() 90 184 73 53 42 113 9 42 110 21 9 15 10 23 71 6 21 A 1 0000 0  7 - 117 202 292 672 492 213 436 265 603 220 205 142 1 ? 4 A 7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 TO 4.0 0.0 TO 3.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TOTAL  •/  •  CUMLATIVE TOTAL %  1773 44.72 1793 7:0.5F1 3019 1226 ' 12.60 3524 505 10.50 2945 421 1.A0 4009 64 .00 4009 0  44.72 75.31 87..70 100.00 100.00  4009 100.00 4009  100.00  ▪  1  12/02/20 16:2(. I.M. - HIGH1 OPER FORECAST - HIGH INTEREST RATES  ANNUALIZED NET INCOME AS A PERCENT OF AVERAGE NET ASSETS, 1981::: DISTRICT 1  1 23 4 5 6 7 3 -  4  =  A  7  0  9  10  11  12  , Q --, .7, 14 16 13 4 1:7 :: ,L.4_ 1 , 17 -› 0 11 17 15 11 2 12 17 4._ 4 6 -:. 4 16 22 -'0 14 10 11 6 11 14 , 7 17 23 20 27 9 21 ..., 24 7 17 9 27 27 .3c3 32 19 35 14, 35 12 ...-) 4_ 4_ 12 32 35 6: 50 24 54 17 44 26 14 83 185 151 495 349 143 340 218 450 159 113 n 0 0 0 0 0 0 0 0 0 0  8 4 6 7 10 18 89 0  9 - 117 302 292 672 492 213 43A 265 603 220 205 142 1 •4 5 •7 R 9 -  TOTAL  120 101 133 192 280 295 2775 0  %  CUMLATIVE TOTAL %  3.19 123 2.52 229 3.44 ::47 4.79 Fic;r:, 4.9R 839 9.35 1234 69.22 4009 .0n 4009  13.94 20.9. 30.73 100.00 100.00  4009 100.00 4009  100.00  2.1c 5.71  GREATER THAN 0.40 0.20 TO 0.40 0.00 TO 0.20 TO 0.00 -0.40 TO -0.4.0 TO -0. ') LESS THAN UNDEFINED TOTAL  NET WORTH AS A PERCENT OF TOTAL DEPOSITS, 1901:2 DISTRICT 1  1 -. 3 4 5 6  -  4  5  /.  7  '3-' 112 145 230 203 110 173 44 76 75 166 138 62 124 .z.._.c- 105 71 19 46 ...-. 15 67 .7: 19 59 ,... 149 74 23 112 3 9 -.' 22 6 3 10 0 0 0 0 0 0 0  69 78 43 58 17 ' 0  9  10  11  12  TOTAL  134 163 105 164 37 0  31 73 ,:,-. 24 7 0  9. 49 .76 30 5 0  6.5 41  1449 1039  14  588  17 3 0  764  7 - 117 302 292 672 492 213 436 265 603 220 205 142 1 2 4 5 •7 -  GREATER THAN 6.0 4.0 TO 6.0 3.0 Ti) 4.0 0.0 TO 2.0 LESS THAN 0.0 UNDEFINED TOTAL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  %  36.14 27.1A 14.67 19.04  CUMLATIVE TOTAL %  1449 2533 2126 3570  119  2.97 4009  0  .00 4009  26.14 62.21 77.97 97,03 100.00 100.00  4009 100.00 4009  100.00  BOARD OF 150VEFRNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 2055- 1  •-4  •  Ar•• 0'. • AL RES • •  •• ••••  PAUL A. VOLCKER  December 9, 1980  CHAIR MAN  The Honorable Jay Janis Chairman Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D. C. 20552 Dear Mr. Janis: Thank you for your letter of November 26 concerning lenders in Wisconsin who include interest rate adjustment provisions in their mortgage borrowers notes. Wisconsin law requires lenders to make disclosures to their n Z. that are similar to, but not the same as, those required under Regulatio provided. need be For instance, no example of the effect of a rate adjustment be excused from may law Wisconsin the with complying lenders You ask whether making the additional Regulation Z disclosures. The Board is certainly in a mood to simplify regulations where which possible, as you can see by the revision of the Regulation Z proposal your request examined have we and comment, has just been proposed for public however, I with a sympathetic eye with this in mind. For several reasons, ask. you as do to able be not will we have reluctantly concluded that ons The present statute would apply, of course, to the transacti not do ) exception minor one (with s you have in mind, since the amendment present Act, come into effect until April 1982. The only mechanism under the an requires ons transacti regulated and Regulation Z, for exempting statelaw state the that Board the by application from a state and a determination nt. enforceme for provision is substantially similar and that there is adequate broad quite to apply to s The Board has uniformly interpreted these provision have never categories of transactions, such as all open-end credit plans. We mortgages. rate variable as granted exemptions covering such a narrow category to act began we if e I would see serious problems of enforcement and complianc federal of mix new on individual items like this one so that there was a whole and state requirements for each state. Looking to the future, you pointed out in your letter that the revision of Regulation Z which the Board published for comment last May did for not contain any requirement for showing a hypothetical increase in rate variable mortgages. You suggested that this would be a reason for lifting strongly the requirement by rule in the meantime. This omission, however, was n regulatio the of draft second the and s, criticized by a number of commentor a of e disclosur requires week last approved by the Board for publication   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Jay Janis •  -2-  hypothetical example. In order to make the requirement more realistic, hence more useful to consumers, the creditor would be allowed to structure an example which fitted the particular transaction in question, rather than using the specific format required in the present rule. In light of the revised proposal, however, it isn't clear to me that it would be proper for the Board to exempt lenders complying with the Wisconsin law--particularly since variable rate transactions are becoming so common (and controversial). I am generally disposed to relieve regulatory burdens where possible, as you know, but I am afraid that this situation is one in which it is still more appropriate to require the federal disclosures. Sincerely,  4(-  acii fe411 bwou I /tagil gtig Oexii-,4cti-pico,d,idpia.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  1700 G Street, N.W. Washington, D C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Savings and Loan Insurance Corporation  Federal Home Loan Bank Board JAY JANIS Chairman  November 26, 1980  31) Chairman The Honorable Paul Volker, s Board of Governor Federal Reserve System 20th & Constitution Ave., N.W. Washington, D.C. 20551  d.051(  Dear Chairman Volker: er stance in a Truth in Lending matt This is to request your assi n. onsi Wisc in ers borrowers and lend that affects a large number of gage ft lenders in Wisconsin use mort thri As I understand it, 80% of n. isio prov nt rate adjustme notes containing a standard interest ers implementing such a clause lend , .053 Pursuant to Wisc. Stat. §138 res ions and must make certain disclosu are subject to certain restrict re losu disc of ent irem exception of the requ to borrowers. With the sole the and ease hypothetical .025% incr of information pertaining to a all as the Annual Percentage Rate, designation of the interest rate ired requ are (8) by 12 CFR 226.8 (b) the disclosures currently required by the Wisconsin statute. circumstances additional Lenders allege that under these are at best unnecessary and at disclosures on a Regulation Z form res furthermore, additional disclosu worst confusing to the borrower; on ed pass lender which would be would entail added expense to the consumer under the Wisconsin to the borrower. I agree that the lation protections afforded under Regu statute appears to have all the her, Furt tional disclosures. Z and would not be well served by addi the of Z omits the requirement the proposed revision of Regulation rmainfo your recognition that such hypothetical increase, indicating ng ruli a these reasons, we request tion is not always pertinent. For the to meet the requirements of that would permit Wisconsin lenders onsin losures required by this Wisc Truth in Lending Act by making disc on Z material. statute without additional Regulati as e adjustments will be made Since approximately 15,000 of thes prompt attention to 1, 1980, I would appreciate your ' 0 it/ of December er. matt this ,i.ncerely yours,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Jay Reccivod Gek.L.A Log No. Dnte Out  /  NOV 26 1;.;:. z///f  July 15, 19i0  Dear Jay: I've just now read the material you sent regarding the near-term outlook for housing starts which hat] arrived when r wat4 in the Far Zest. As always, your views are thoughtful and useful. The next ftw rionths will tell us a lot! Sincerely,  The qonorable Jay Janis *Itersammossiga Chairman Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D. C. 20552  CC:  Mr. Kichline Mr. Fisher  RMF/JLKAGC:slw t2215  P.S.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I'll hold my breath as to what the latest data mean. s/PAV  1700 G Street, N.W. Washington, D.C.20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance Corporation JAY JANIS Chairman  June 20, 1980  Honorable Paul A. Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Paul: I don't think housing starts will rebound nearly as fast as people think. The main reasons are -1.  New home sales dropped very sharply in recent months. This means builder inventories are increasing.  2.  The thrift institutions still have not significantly increased their commitment activity. The pipeline is almost empty, and it will take some time for it to build up again.  3.  Both builders and buyers are in a hesitant mood. Builders want to see some positive numbers before they put large amounts of new starts in the ground. Buyers are waiting to see if mortgage rates go any lower.  4.  Deposit flows into thrifts remain weak. This situation will reverse itself with the higher DIDC "floors", but there is a time lag involved before the effects are felt on starts.  5.  The economic recession over the next several months will increase the problem of affordability, at least in the short run.  Attached is a memo which deals with these issues on a more detailed basis. Sincerely,  Ja Attachment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System  Federal Home Loan Bank Board  Federal Home Loan Mortgage Corporation Federal Sayings and Loan insurance Corporation  OFFICE OF POLICY AND ECONOMIC RESEARCH  June 18, 1980  MEMORANDUM FOR:  Federal Home Loan Bank Board  FROM  :  Marshall A. Kaplan  SUBJECT  :  Monthly Report on Housing Developments  Housing starts declined to a seasonally adjusted annual rate of 920 thousand units in May from 1.04 million units in April. The decline was almost entirely in multi-family starts. Single-family starts declined only modestly to a seasonally adjusted annual rate of 616 thousand units from 631 thousand units in April, remaining below the low point of 667 thousand units reached in the '74-'75 housing decline. In contrast to the sharp decrease nSusing starts, building permit activity_ rose to a seasonally adjusted annual rate of 806 thousand units in May from 789 thousand units in April. However, the May rate of permit activity was substantially below that of any month during the current housing decline except for April and well below the previous low of 968 thousand units in March. Building permit activity in April would normally have implied a level of 900 thousand starts or less instead of the 1.04 million starts actually recorded; and even the low level of housing starts in May was consistent with and possibly somewhat higher than would normally be implied by I- rmit activity in May. In particular, single-family starts Sf 616 thousand units in May was greater than would be implied S y the single-family permit activity of 489 thousand units. Single-family starts would have been lower if it were not for a decline in the backlog of unutilized building permits. Thus, unless single-family permit activity improves in June, single-family starts could decline to a new low. In contrast to single-family starts, multi-family starts were weaker than would be implied by multi-family building permit activity. In contrast to the normal pattern, multi-family starts were less than multi-family permit activity. Multi-family starts typically exhibit an erratic month-to-month behavior and could well bounce back to some extent in June.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 2 During the current housing recession, there has been a considerable divergence in the pattern of decline among geographic regions. Over the past year, housing starts have declined only about 25 percent in the Northeast--although from a low level. In contrast, housing starts in the North Central states declined almost 70 percent and, in May, were actually slightly below the level of housing starts in the Northeast, which is normally a very much smaller housing market. The geographic region with the second largest decrease in housing starts was the West, where starts have declined almost 60 percent during the past year. Housing starts in the largest housing market, namely the South, declined by about 40 percent over the past year and accounted for about half of total starts in May.  Analysis of Housing Market Developments I emphasized in last month's housing report that the level of housing starts in April, although low, was stronger than implied by the basic forces at work in the housing market. This was confirmed by the sharp drop in housing starts in May. Continued weakness in the housing market still seems likely through the third quarter --despite declining interest rates--because of the following reasons: New home sales plunged sharply to a seasonally adjusted 1. annual rate of 364 thousand units in April. During the '74-'75 housing recession, new home sales reached a low point of 416 thousand units. As a result of the sharp drop of new home sales in April, total unsold homes escalated to 12 months of sales. This exceeded the peak of 10.4 months reached in February 1975. Unless new home sales recover sharply, builders now have significant excess inventories to work off. 2. Commitment activity of thrift institutions has continued low through at least the end of May. Thus, builders have a limited stock of mortgage loan commitments to draw on. Reports indicate that, despite the low level of new home sales, the latter has been supported to some extent by the ability of larger builders to subsidize financing terms of unsold homes as well as the willingness of some lenders to provide below market permanent financing to builders for whom they are providing construction financing. Builders will want to see concrete evidence of a turn3. around in new home sales and some progress in reducing unsold inventories before stepping up housing starts. In addition, lenders should want to see evidence of some significant absorption of builders' inventories before extending significant new lines of credit to builders.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  -3 4. There is the question of the time lag involved before thrifts can be certain that their savings flows will be improving adequately enough to support a substantial increase in mortgage lending. Despite the attractive interest rate on 2-1/2 year certificates, savings flows of S&Ls were weak in early June after having strengthened in late May. Moreover, S&Ls are continuing to reduce advances; and it appears that S&Ls will be reluctant to increase loan commitments significantly before improving their balance sheets by reducing reliance to some extent on short-term money that would be vulnerable to a turnaround in interest rates, if this should occur. 5. The economic recession will be an important constraint to any housing recovery. Even if the decline in interest rates persists, the ability of households to afford housing it being eroded by the fact that households continue to experience a decline in real income. This will continue; and the recession is bound to raise questions in the minds of households not directly affected by the recession with respect to whether this is a good time to purchase a home_ and assume an increased debt burden. It does appear that S&Ls are abandoning the emphasis on money market management. However, given the still only moderate recovery in savings flows and the desire of S&Ls to reduce reliance on borrowed money, S&Ls continue to be cautious in getting back into the mortgage market. This is reflected in the fact that S&Ls continue to be cautious in reducing mortgage interest rates to levels necessary to generate a substantial volume of mortgage originations. It is likely, because of the recession and consumer uncertainty, that a lower mortgage interest rate will be necessary to turn on mortgage demand in a big way than the mortgage interest rate that could still generate substantial mortgage demand when credit markets were tightening.  The following represents my current projection of housing starts through the second quarter of 1981: Housing Starts, Historical Data and Projections (quarterly average, seasonally adjusted annual rates)  Total 1979   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1st 2nd 3rd 4th  Qr. Qr. Qr. Qr.  1.67 1.82 1.81 1.59  SingleFamily 1.15 1.26 1.23 1.06  2-4 Units .11 .12 .14 .12  5 o More Units .41 .44 .44 .42  - 4 -  ,  Housing Starts, Historical Data and Projections (quarterly average, seasonally adjusted annual rates) Continued  Total  SingleFamily  2-4 Units  5 or More Units  1980  1st 2nd 3rd 4th  Qr. Qr. Qr. Qr.  1.26 .96 .96 1.10  .79 .60 .60 .70  .11 .10 .09 .10  .36 .26 .27 .30  1981  1st Qr. 2nd Qr.  1.35 1.46  .93 1.00  .10 .11  .32 .35  1976 1977 1978 1980  1.54 1.99 2.02 1.07  1.16 1.45 1.42 .67  .09 .12 .13 .10  .29 .41 - .46 .30  Full Year  C-_--Marshall A. Kaplan Deputy Director Attachment:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Table  ..  Key Monthly Housing Statistics (all figures in thousand except where noted) '  May 1980 'tarts I/ 1 unit structures 2-4 unit structures 5 or more unit structures ermits authorized I/ 3/ obile Hume Shipments 1/ ew Home Sales 1/ edian new Home Sales Price verage New Home Sales Price Existing Home Sales 1/ edian Existing Home Sales Price Total Unsold Homes Completed Under Construction Not Started Total Unsold Homes as Ratio to Sales 2/ Completions 1/ 1 Unit Structures 2-4 Units Structures 5 or More Unit Structures Total Units Under Construction 2/ 1 Unit Structures 2-4 Units Structures 5 or More Unit Structures  1/ Seasonally Adjusted Annual Rate 2/ Seasonally Adjusted 3/ Revised to Reflect Expanded Number of Permit Issuing Areas  4  Digitized for•FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Apr. 1980  Mar. 1980  Feb. 1980  Jan. 1980  Dec. 1980  Nov. 1979  Oct. 1979  Sept. 1979  Aug. 1979  ;July 1979  June 1979  May 1979  Apr. 1979  1,039 631 101 307 789 201 364 $o4.1 $73.9 2,420  1,041 617 91 333 968 226 459 $62.7 $71.4 2,750  1,330 786 101 443 1,168 270 546 $65.0 $77.0 2,990  1,419 1,002 127 290 1,271 276 584 $63.2 $72.5 3,210  1,548 1,055 110 383 1,247 241 571 $61.5 $72.6 3,350  1,522 980 114 428 1,287 251 617 $63.9 $74.2 3,450  1,710 1,139 129 424 1,418 293 674 $62.3 $71.5 3,870  1,874 1,237 123 514 1,695 268 716 $66.1 $77.1 3,900  4,788 1,237 152 399 1,622 277 738 $63.9 $74.2 3,790  1,764 1,222 130 412 1,563 282 768 $63.8 $71.8 3,750  1,910 1,276 123 511 1,639 279 698 $64.1 $74.3 3,620  1,801 1,229 120 452 1,648 271 713 $63.0 $71.8 3,830  1,750 1,273 112 364 1,517 277 730 $62.7 $71.1 3,740  N.A. $60.4 359 N.A. 123 N.A. 181 N.A. N.A. 55  $59.5 370 120 192 58  $59.0 381 118 204 58  $57.9 392 118 216 57  $56.5 403 117 227 59  $55.6 409 112 236 61  $56.3 414 105 247 63  $57.3 414 101 244 69  $57.7 419 97 249 73  $57.9 420 93 257 70  $56.8 420 94 255 71  $55.9 425 90 252 83  $54.7 416 89 246 81  N.A. 12.0 N.A. 1,895 N.A. 1,128 144 N.A. N.A. 623  10.3 1,666 1,091 114 471  8.9 1,832 1,230 118 484  8.0 1,857 1,276 125 386  8.7 1,880 1,328 146 406  8.0 1,831 1,240 134 457  7.5 1,819 1,255 128 436  7.4 1,963 1,228 121 614  6.9 1,747 1,214 121 412  6.6 1,776 1,229 125 422  7.2 1,837 1,320 126 391  7.2 2,007 1,341 109 558  7.0 1,964 1,389 124 451  989 540 72 377  1,064 590 76 399  '1,095 622 75 398  1,163 669 79 415  1,160 662 79 419  1,188 687 82 419  1,212 705 83 423  1,227 716 83 427  1,235 717 83 435  1,242 719 80 442  1,248 725 80 442  1,251 732 80 439  1,264 742 77 445  920 616 91 213 806 N.A. N.A. N.A. N.A. N.A.  N.A. N.A. N.A. N.A.  Paul A. Volcker  % /01 14k A ‘,1;" ; itet 4, ,,. 1  1  '. 1$, .41,4 6 047 IsF/44.40  ,t p= (I 4 P  1*  9 ) 4 f   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  FEDERAL HOME LOAN BANK OHIO •  KENTUCKY • TENNESSEE  2500 DuBois Tower • Cincinnati. Ohio 45201 • P.O. Box 598  CHARLES LEE THIEMANN PRESI DENT  October 31, 1980  Mr. Jay Janis, Chairman Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D.C. 20552 Dear Jay: At the October CIC meeting, you asked me to explain in greater detail my concerns over the treatment of deposit balances of savings and loan associations in Federal Home Loan Banks and commercial banks. The Monetary Control Act of 1980 requires that depository institutions maintaining transaction accounts hold reserves against these accounts either directly or indirectly with the Federal Reserve. Before calculating its reserve requirement, a savings and loan is permitted to deduct any balances "due from" its correspondent bank from its transaction account deposits, but not balances "due from" its Federal Home Loan Bank. It is argued that since the correspondent bank is required by Regulation D to hold reserves against the association's balance at the bank, the "due from" deduction prevents double reserving of the same transaction account balance. Since Federal Home Loan Banks are not required to hold reserves against member deposits, associations are not permitted to use the "due from" deduction. In deciding whether to hold balances with a correspondent bank or its Federal Home Loan Bank, an association must consider the yield on the two alternatives. When an association maintains a given balance in its account at a correspondent bank, that bank will generally deduct the reserves it must hold against this balance before calculating the credit the association earns on the balance. At present. a large bank that is a member of the Federal Reserve System usually deducts $16.25 out of every $100.00 maintained in the account under the current 16.25 percent reserve ratio. The association is credited with earnings, at some agreed upon rate, on the remaining $83.75. When an association maintains a balance at a Federal Home Loan Bank, it is credited with earnings on the entire balance since no reserve requirement is imposed. Offsetting the higher yield for a given balance, however, is the increase in reserves the association must hold because it cannot deduct any balances "due from" its Federal Home Loan Bank. Thus, for every $100.00 deposited with its Federal Home Loan Bank, an association with more than $25 million in transaction accounts must maintain additional non-earning reserves of $12.00 at the present 12 percent reserve ratio. In effect, the association will earn interest on only $88.00.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6S-  Mr. Jay Janis, Chairman Page 2 October 31, 1980  From the numbers cited, it is clear that the Federal Home Loan Banks are currently in a position to provide a somewhat better yield to members holding demand balances with them. Also, the immediate impact of reserving transaction accounts will not be significant since reserve balance requirements will be small during the initial phase-in. These issues are clear. What I find disturbing and the issue which I feel needs to be immediately addressed is the fact this decision changes the fundamental competitive balance which has been established in several legislative decisions and reverses the very intent of Congress in excluding demand deposits held with the Federal Home Loan Banks from reserve requirements. The Federal Home Loan Bank Act provides that "(e)ach Federal Home Loan Bank shall have power to accept deposits made by members of such Bank . . . ". I have always interpreted this authority as a way to provide services to members and to generate a source of funds to assist the Bank's lending activities in support of housing. No subsequent piece of legislation has modified or restricted these powers, The Monetary Control Act of 1980 presumably because the intent remained constant. specifically excludes demand deposits held with the Federal Home Loan Banks from reserve requirements and permits members of the Bank System to maintain reserves with the Federal Home Loan Banks. To me, the implication is very clear. The legislation is an affirmation of the original intent to allow the Federal Home Loan Banks to retain a special banking relationship with their members. Down through the years, this relationship has benefited the nation through the efficient mobilization of resources within the savings and loan industry for the support of housing finance. The present reserve calculation procedure of the Federal Reserve challenges the basic doctrine of allowing the Federal Home Loan Banks to hold deposits and excluding these deposits from reserve requirements. The same paragraph of the Bank Act quoted above goes on to prohibit the Federal Home Loan Banks from providing banking services not explicitly authorized. Although the Federal Home Loan Banks provide many deposit services to members, they have never been able to offer a set of services that would make a commercial relationship with a Federal Home Loan Bank as attractive as with a commercial bank. The exclusion of Federal Home Loan Bank deposits from reserve requirements provided a yield advantage to offset the obvious advantages of commercial banks. The decision of the Federal Reserve, if allowed to stand, will change the present structure to the detriment of the Bank System, but more significantly to the detriment of the members and housing. We must recognize that reserves against transaction accounts at all depository institutions will be equalized within eight years. This will eliminate any yield advantage we currently enjoy. Beyond diminished ability to offset with yield the inherent advantages of commercial banks, this action will distinguish the Bank's deposits as something distinct and inferior. The only other institutions whose deposits are not eligible for inclusion in the "due from" category are those of non-U.S. offices of domestic and foreign banks and certain trust companies.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Jay Janis, Chairman Page 3 October 31, 1980  The Federal Home Loan Banks cannot maintain or expand their role as a source of funds for housing to replace the funds lost to such vehicles as money market funds if the very basis for the current position is undercut. There is also a slight distortion in the asset composition of savings and loans caused by this decision. Even if associations were to receive the same yield from both the Federal Home Loan Banks and commercial banks, to hold deposits with a Federal Home Loan Bank requires they hold both the demand deposit and the reserves. A little more of the available assets of the industry must be held in a liquid form and a little less in mortgages. I point this out only because it is a further illustration of the manner in which an interpretation of the Monetary Control Act by the Federal Reserve has a perverse effect on housing. I hope I have made both the facts of the reserve accounting procedure and the nature of my concerns clear. I am certain that there are many inconsistencies which will come out of interpretations of H.R. 4986. We must make certain that the broader goals, such as housing for the nation, do not suffer from such narrow and technical interpretations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Best wishes,  1L‘, Charles Lee Thiemann  170  Street, N.W.  Washington, D.C. 20552 Federal Home Loan Bank S',,stem  Federal Home Loan Bank Board  Federal Home Loan Mortgage Corporation Federal Savings and Loan Insurance Corporation  September 23, 1980  Mr. William Wallace, Staff Director Board of Governors of the Federal Reserve System Twentieth Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Wallace: Chairman Janis has asked me to respond to your letter of August 29. I agree that it is important to pursue as soon as possible the joint feasibility study on the conversion of third-party payment instruments issued by savings and loan associations to electronic payments. I have asked plan Chase of this Office to contact your staff to discuss the formation of a joint working group. I would also like to thank you for the copy of the Federal Reserve PACS expense report which you provided to me under cover dated August 4. I look forward to continued joint efforts between our agencies on the many issues which we face. Sincerely,  -014_7 (Jiafries W. McBride, Director Office of District Banks cc: Chairman Janis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE  •  *0  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 OFFICE OF THE STAFF DIRECTOR FOR FEDERAL RESERVE BANK ACTIVITIES  &AL REs -s.• *  •• • • • • • •  August 29, 1980  The Honorable Jay Janis, Chairman Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D. C. 20552 Dear Chairman Janis: Chairman Volcker has asked me to resp ond to your letter of July 28. We are delighted that the Bank Board has accepted our invitation to participate in a joint feasibil ity study on the conversion of third-party payment instruments issued by savings and loan associations to electronic payments. We believe that this study has considerable merit at this time because of the impact of the Monetary Control Act of 1980 on operating costs at depository financia l institutions. I would like to suggest that an appropri ate way to initiate our study is for the designated members of your staff to contact Jim Kudlinski, Director of the Division of Federal Reserve Bank Operations, to develop a study plan and to form a joint working group. Although both the Federal Reserve and the Home Loan Bank System have substantial resources committed to implementation of the Monetary Control Act, I believe that it is important to pursue this study as early as possible. We appreciate your support of this study effort and look forward to continued cooperation with your staff.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely, // AY/ William H. Wallace Staff Director   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD  OF GOVERNORS  or  THE FEDERAL RESERVE SYSTEM  August 7, 1980  Jim: Per our conversation yesterday.  Karl Scheld  1700 G Street, N.W. Wanhington, D.C. 20552 Federal Home Loan Bank System  Federal Home Loan Ban!: Goarci  Fedora' Home Loan Mor:iiaga Corporation Federal Sayings and Loan Insurance Corporation  JAY JANIS Chairman  July 28, 1980  ,  6's  rft  . --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 Paul: Thank you for your letter of July 8, 1980 which conveyed the action of the Federal Reserve Poard in authorizing the Federal Reserve offices to provide cross-zone presentment to all depository financial institutionsbelieve this action will facilitate the clearing of NOW drafts for many savings and loan institutions. In your letter, you also invited the Bank Board to join with you in a feasibility study on the conversion of third party payment instruments issued by savings and loan associations to electronic payments. I believe such a study could lead to increased efficiencies in the clearing of NOW drafts and we would be pleased to join with you in this feasibility study. In addition, I share your concern with the choice of routing and transit numbers which associations may use on their payment instruments. The Bank Board will continue to encourage associations' use of their own routing and transit number. I would like to express my appreciation for the efforts of the Federal Reserve Board and staff in considering the payment instrument clearing needs of savings and loan institutions.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Ja  Janis  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  Federal Home Loan Bank Board  JAY JANIS Chairman  July 28, 1980  Honorable Paul A. Volcker, Chairman Federal Reserve Board Federal Reserve Building Washington, D.C. 20551 Dear Paul: I thought you would be interested in the attached. It appears that the "bring-a-friend" approach is proliferating. imerely,  CS —  is  Attachment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Magazine article Citations:  Number of Pages Removed: 1  Gross, Laura. "Savings Drive Goes Interstate." American Banker, July 21, 1980.  Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  July 3, 19P0  The Honorable Jay Janis Chairman Federal Howe Loan Bank Board 1700 G Street, N.W. Washington, D.C. 20552 Dear Jay: The Federal Reserve Board has reviewed its policy on the delivery and presentment of checks and other payment instruments across territorial boundaries of Federal Reserve offices ("cross-zone delivery and presentment). It has concluded as fnllews. The Reserve Banks are authorized to provide cross-zone presentment to all depository financial institutions under the following terms:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1. The Reserve Banks will arrange transportation (at the expense of the payor financial institution or its agent) for crosszone presentment, provided that the items can be presented to the anent on the same banking day that the items would have been presented within the territory of the Federal Reserve Bank. The return item deadline shall be calculated from the time of presentment of these iteGs to the agent. The payor financial institution and its agent shall agree to comply with all applicable return item requirements. If a scheduled air carrier is used for transportation purposes and the time of the flight is changed without adequate notice for alternative transportation, the Reserve Sank will place these items on the next available flight and presentment will have occurred at the dock of the Federal Reserve Bank. This procedure will be followed until alternative arrangements can be made to present payment items on a timely basis within the territory of the agent. 2.  In those instances where presentment to the agent on a regular basis can not occur on the same banking day that these items would have been presented to the payor financial institution within the territory of the Reserve Bank, presentment shall  The ;ionorable Jay Janis  e  occur at the dock of the Reserve Elank. The Reserve Bank shall provide assistance to the payor financial institution or its agent in arranging transportation to the territory of the agent. The return item deadline shall be calculated from the time of presentment of these items to the aoent at the dock of the Reserve Bank. The nayor financial institution and its agent shall agree to comply with all applicable return item requirements. 3. The Reserve Banks shall negotiate these arrangements on a case by case basis, with consideration given to the needs of both parties with respect to efficiency, timeliness, and cost. 4.  In all instances, the Reserve Banks shall charge the payer financial institution for its cash letters upon presentment.  5. Existing Reserve sank policy on the cross-zone delivery of automated clearinghouse payments is not affected by this decision. The Board expects the Reserve Banks to cooperate fully with the Federal Home Loan Banks in implementing this policy. Though the Board believes that cross-zone presentant could result in some inefficiencies In the payments mechanism, the Board has decided to authorize the Reserve Banks to offer this service because it may help some thrift institutions to minimize operating disruptions associated with offering third-party payment instruments for the first time. Moreover, the Board believes that, when combined with efforts to convert HOW account payments to electronic payments, its actions will contribute to the long-term improvement of the payments mechanism. Therefore, I invite you to join with us in a feasibility study on the conversion of third-party payment instruments issued by savings and loan associations to electronic payments. In addition, I would like to solicit your support in encouraging savings and loan associations to use their own routing/transit numbers on their payment instruments. I look forward to continued cooperation between our agencies, and receiving your response to our study proposal. Sincerely. (signeJ) Paul A. Volcker  MJH:mrk   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  c4 : 71 /4/1 S : E  1700 G Street, N.W. Washington, D.0 20552 Federal Home Loan Bank System  Federal Home Loan Bank Board  Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  JAY JANIS Chairman  March 21, 1980  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Mr. Chairman: According to the requirements of the Federal trade Commission Act, Title 15, U.S.C. Section 57a(f)(6), I am submitting the first Annual Report of the Federal Home Loan flank Board, for the calendar year 1979. This report describes our activities to fulfill Section 18(f) of the Act. Sincerel,  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Savings and Loan Insurance Corporation JAY JANIS Chairman  MAR 2 1 1980  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Mr. Chairman: According to the requirements of the Federal 1ra.de Commission Act, Title 15, U.S.C. Section 573(0(6), I am submitting the first , tnnual Report of the Federal Home Loan Ban!: F,o:Tr!, for the calendar year 197 This report describes our activities to fulfill Section 18(f) of the Act. Sincerely, is/ Jay Janis Jay Jani:i Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ANNUAL REPORT TO CONGRESS ON SECTION 18(f) OF THE FEDERAL TRADE COMMISSION ACT  FEDERAL HOME LOAN BANK BOARD March 14, 1980  INTRODUCTION This is the first annual report describing the activities of the Federal Home Loan Bank Board (Bank Board) in fulfilling its responsibilities under Section 18(f) of the Federal Trade Commission Act. Those responsibilities are: (1) to identify unfair or deceptive trade practices and to adopt regulations prohibiting such practices; (2) to receive and take appropriate action upon complaints directed against insured savings and loan associations; and (3) unless certain exceptions apply, to promulgate regulations applicable to insured associations that are substantially similar to rules prescribed by the Federal Trade Commission, within 60 days after such rules take effect.  DEPARTMENT OF CONSUMER AFFAIRS Bank Board activities relating to unfair and deceptive trade practices are now administered through the Department of Consumer and Civil Rights(DCCR) of the Office of Examinations and Supervision (OES). DCCR works through the OES Departments of Examinations and Supervision for the investigation and enforcement activities related to consumer and civil rights. OES has twelve field offices out of which examinations are conducted. Supervisory Agents, located in each of the twelve Federal Home Loan Banks (FHLBanks), design enforcement measures based on the findings of violations during examinations. DCCR has the following major responsibilities:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1.  Receive, analyze, and respond to consumer and civil rights complaints and inquiries; forward complaints to the appropriate FHLBank for investigation; and monitor the irn.estigation and resolution of complaints.  2.  Coordinate consumer and civil rights functions with the FHLBank and district staffs to assure uniform practic,sc.  3.  Propose and assist in the development of consumer and civil rights training for examiners and Supervisory Agents.  4.  Identify and recommend for policy consideration or rulemaking industry practices which may be unfair or deceptive, and assist in development of new policy or rules to eliminate such practices.  5.  Coordinate Bank Board consumer and civil rights activities with other federal financial regulatory agencies.  6.  Assure that consumer interests are understood and considered in development of Bank Board regulations.  _ 2_  7.  Provide information to consumers and to organizations representing consumer or civil rights interests.  ENFORCEMENT ACTIVITIES Complaints against practices of savings and loans are received in both Washington and the districts. DCCR records complaints received in Washington and forwards them to the districts for investigation. The districts prepare records for those complaints received directly and reports back to DCCR. Upon completion of the investigation and corrective action, DCCR is notified of the disposition of the complaint. Supervisory Agents determine appropriate corrective action for any violations using enforcement guidelines set by OES. In 1979 the Bank Board received 3,536 complaints: 486 in Washington and 3,050 in the districts. Of these, 333 complained of discrimination in lending, 2,161 complained of other problems relating to mortgage transactions and 1,042 complained of problems relating to savings accounts. During 1979, 3,197 complaints were resolved: in 1,495 cases, the institution was upheld; in 541 cases, action was taken upholding the complaint; 480 cases were referred to a more appropriate authority; and 681 cases either required no response or no action. The Bank Board also receives numerous inquiries related to consumer matters both by telephone and letter. Where the inquiry indicates a probable complaint, the caller is encouraged to file a written complaint with the Bank Board. Many of these calls ultimately result in formal complaints to the Bank Board or another financial regulatory agency. The Bank Board's Consumer Complaint Records system, developed in 1977, was computerized in 1979. The first complete computer reports were available in October 1979. The new computer system is designed to produce statistical reports on complaint status and to maintain information for up to three years on all complaints received. The systems should enable the Bank Board to determine the status of different complaints and to measure the investigation performance of each district. Enforcement activity resulting from regularly scheduled examinations follow procedures similar to those for complaints. Upon identifying violations, the examiner in most instances encourages association management to take corrective actions with respect to those matters not requiring action by the board of directors. As a consequence, the vast majority of violations, particularly those of procedural and technical nature, are resolved during the course of the examination. The Supervisory Agent normally seeks written confirmation of the corrective actions taken by management from the institution's board of directors. Corrections of those violations not resolved during the examination is normally accomplished through written correspondence with the association's board of directors. During   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  1979, the Supervisory Agents issued 2,248 letters requesting corrective actions on consumer and civil rights matters: 549 letters dealt only with civil rights matters, 538 letters dealt with other consumer issues and 1.161 letters dealt with both civil rights and other consumer issues. In addition, the Supervisory Agents met with management or the directorate of 167 institutions to reinforce requests for corrective action. The Bank Board has seldom found it necessary to resort to formal legal action to obtain compliance with applicable laws and regulations by insured institutions. During 1979, 20 investigations on civil rights issues were conducted by the Office of General Counsel.  REGULATORY ACTIVITIES A large number of Bank Board regulations cover areas involving potentially unfair and deceptive trade practices. These regulations are listed in Exhibit A, and include matters as nondiscrimination in lending. Other Bank Board responsibilities in the area of unfair or deceptive trade practices stem from our duty to enforce regulations promulgated by the Federal Reserve under the Consumer Credit Protection Act. The Bank Board also has promulgated regulations implementing the Community Reinvestment Act. The Bank Board's Fair Housing regulation is unique to this agency. It is the only federal regulation that prohibits lending practices which result in redlining. The Bank Board has adopted uniform enforcement guidelines for fair housing violations which establish a range of corrective measures for specific violations to minimize discrepancies of enforcement actions taken by each of the twelve districts. The Bank Board, together with the other federal financial regulatory agencies, adopted Uniform Enforcement Guidelines for Truth in Lending violations which call for reimbursement to customers for certain interest overcharges. In late 1979, the Bank Board conducted a survey to determine whether there are problems with disclosures made on interest bearing saving accounts by savings and loans to customers. Information acquired includes techniques used by savings and loans to explain to new and existing customers interest rates, terms, and penalties.  EXAMINER AND SUPERVISORY TRAINING Training for new examiners includes discussion of industry practices which are unfair or deceptive, or which violate civil rights laws and regulations. In addition to new examiner training, the Bank Board requires continued examiner training on consumer and civil rights matters. These receive increasing attention during both new examiner and continuing examiner training. New examiner training now includes eleven hours of lecture, videotapes, group discussion and case studies on consumer and civil rights matters.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4  The Bank Board held Civil Rights and Community Reinvestment Act training seminars for all its examiners in 1979. Meetings on the same subjects were held with supervisory staff from the twelve districts to ensure that supervisory actions are appropriately responsive to reported violations and consistent with Bank Board policies.  CONSUN1ER EDUCATION The Bank Board issued a basic consumer education brochure in November 1979 which explains the rights and obligations of consumers under the Consumer Credit Protection Act and the Fair Housing Act. The brochure also explains how to complain to the Bank Board. Because publication was so recent, it is not yet possible to measure the brochure's impact on complaint volume. The Bank Board's efforts to provide education for consumers are concentrated in response to requests for training or information. Bank Board staff attended meetings on invitation from civil rights organizations such as the Urban League, NAACP, and consumer groups ranging from meetings scheduled by the White House consumer office to the National Association of Neighborhoods. Some of these meetings involved extensive training by Bank Board staf f on the scope and use of the Community ReinvestmentAdditionally, the Bank Board has worked with the Department of Housing and Urban Development to provide information to industry and private attorneys Si CCPA, Fair Housing, and CRA. Bank Board consumer staff has been working with other federal financial regulatory agencies to identify the need for and develop a course on consumer credit management. During 1979, the task force polled state education departments and companies which prepare education materials to identify materials already available, and types of courses being offered in high school and community Very fey,' school systems have mat2rials which deal directly with colleges. understanding and using the Consumer Credit ProtF—.--tion Act. During 1979, the Bank Board continued its industry education efforts to promote compliance with civil rights and consumer laws. Consumer and civil rights staffs gave lectures ranging from several hours to all day at meetings offered or organized by state leagues. Also prepared during 1979 were two videotapes for use by savings and loans: one on difficult issues of discrimination, the other on I.I. horneownership and credit The Bank Board has also used the FHLBB Journal to provide industry education. During 1979, the Journal included articles of ECOA, CRA, and Fair Housing. One issue dealt specifically with community rei. nvestment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CXHI3IT A Bank Board Regulations (12 'FR) Covering Areas Potentially, Involving Unfair or Deceptive Trade Practics  3ank System Regulations 5526.2(g):  Regulation on calculati?n of savings earnings.  55526.6: Advertising of interest or dividend on savings accounts. Regulations on premature withdrawal penalties.  5526.6-1, 526.7:  Part 528: Nondiscrimination' regulations (lending, appraising, advertising, employment). Nondiscrimination in Federally-assisted programs.  Part 529: 5531.8:  Guidelines on nondiscrimination in lending.  Federal Regulations 5543.1 - 545.4: and other accounts.  Regulations regar-ling terms of savings  5545.4-2(f) - (1): safeyuards. 5545.5: 5545.8-2:  Regulations on remote service unit  Regulations on give-aways by Federals. Regulation on initial lean charges.  5545.8-3: Regulation on loan contracts (including escrow, and due-on-sale provisions). charges, late 55545.8-5(b), 555.15: payment penalties.  Regulation ,and Ruling regarding pre-  5555.8: Ruling regarding representations on when payment on non-discriminatory of interest or dividends begins. Rulin redemption of savings accounts. 5556.9: Statement of policy on imposition of late charges and due-on-sale clauses. Insurance Regulations 5562.10: Regulation prohibiting ad%-ertising prospective insurance of accounts. 55563.1 - 563.3-3, 563.5, 563.7-1: terms of savings and other accounts.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Regulations concerning  - 2 §563.17: policies. 5563.24:  Regulation concerning management and financial  Regulation on sales plans and give-aways.  55563.25, 563.26: 5563.27:  Regulations on  commissions.  Regulation on accurate advertising.  55S3.34: Regulation governing deposit relationships of S&Ls with institutions having "affiliated persons" of S&Ls as directors, or with affiliated perscns themselves. §563.35: Regulation regarding restrictions on loan services (tie-in prohibitions). 5563.40: Regulation on loan processing fees, kickbacks and insurance fees. 5563.41: Regulation restricting real estate transactions with affiliated persons. §563.43: Regulation restricting loans and other investments involving affiliated persons. 5563.44: Regulation placing restrictions on loans involving mortgage insurance.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Savings and Loan Insurance Corporation JAY JANIS Chairman  February 22, 1980  Honorable Paul Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Mr. Chairman: In connection with restoring the quarter point differential to the $10,000 MMC, our analysis of the impact on savings and loan associations for 1980 is as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  $12 Billion in 1980  Increased savings flow: Effect on net earnings: First half of 1980 Second half of 1980  = +1 basis point = +7 basis points  On balance this would seem like a useful thing to do. Sincerely,  ( 7 Jay ianis  FEDERAL HOME LOAN BANK BOARD  mod•  Memo From Office of the Chairman Paul Volcker  To  Date  2/15/80  Subject  I've had several press calls for comments on your recent action. Here is the statement I released.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Federal Home Loan Bank „ Board Aid/N  FEDERAL HOME LOAN BANK SYSTEM  FEDERAL HOME LOAN MORTGAGE CORPORATION  FEDERAL SAVINGS Et LOAN INSURANCE CORPORATION  1700 G Street, NW., Washington, D.C. 20552  Telephone (202) 377-6680  Friday, February 15, 1980  FOR IMMEDIATE RELEASE  STATEMENT BY CHAIRMAN JAY JANIS ON FEDERAL RESERVE ACTION TO RAISE DISCOUNT RATE  We regret that the high rate of inflation has made this action necessary. The short-run effect will be higher interest rates, but in the long run, rates will drop if we can beat inflation.  The future of housing and the thrift industry  depends on getting inflation under control.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Date  ROUTING AND TRANSMITTAL SUP TO:(Name. office symbol, room number, budding, Agency/Post)  //2/0 -2 Initials  Date  14 I/  3. 4. S. Action /Approval As Requested Circulate Comment _Coordination REMARKS  File For Clearance For Correction For Your Information Investigate Justify  Note and Return Per Conversation Prepare Reply See Me Signature  DO NOT use this form as a RECORD of approvals, concurrences, disposals, clearances, and similar actions FROM:(Name, org. symbol, Agency/Post)  Room No.—Bldg. Phone No.  5041-102 * U.S. G. P.O. 1977-241-530/3090   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  OPTIONAL FORM 41 (Rev. 7-76) Proscribed by GSA FPMR (41 CFR) 101-11.206  memo  Federal Home Loan Bank Board  11111  OFFICE OF POLICY AND ECONOMIC RESEARCH  INTER-OFRCE COMMUNICATION  412  FROM:  Richard C. Pickering, Director Statistical Division  DATE:  February 11, 1980  TO:  Federal Home Loan Bank Board  SUBJECT:  Changes in Association Mortgage Commitment Policy and Activity-January 16-31  Changes in association commitment policy slowed during the latter part of January, following the substantial number made early in the month largely in reaction to the usury override legislation. Most of the changes made during the most recent period were of a liberalizing nature and, by monthend, only 4 percent of the associations in our small sample were not making commitments at all. The vast bulk of the institutions surveyed, however, continued to indicate that new commitment activity was,substantially smaller than a year earlier. Additional detail on commitment developments and activity during the second half of January from the survey of large associations conducted by the Federal Home Loan Banks is provided in the following paragraphs and the attached table.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (1) Only 21 percent of the associations surveyed reported changing their commitment policy during the last half of January. This was less than half the 47 percent who had changed policy during the first half of the month and, except for late December, the smallest number of -associations changing policy since we started these surveys in October. Only one or two of the associations making changes in policy indicated their actions were a belated response to the usury override. (2) Nearly three-fourths of the policy changes made during the second half of January were of a liberalizing nature, moderately more than the 60 percent so characterized during the preceding 15 days. The earlier period, however, had been affected by simultaneous liberalizing (starting to make commitments) and restrictive (increasing rates) actions of institutions affected by the usury override. (3) Nearly all (8 of 10) of the restrictive actions taken in late January involved raising the effective interest rate charged for mortgage commitments. Such changes were fairly widely scattered throughout the country.  -2(4) Three-eighths of the liberalizing changes (10 of 27) involved either the reopening of the commitment window or a widening in the types of commitments being made. Approximately 45 percent of the liberalizing changes (12 of 27) represented a reduction in effective interest rate charged for commitments. (5) As a result of the liberalizing changes, the percentage of surveyed associations not making commitments for any type of single family financing was reduced from 8 to 5 percent (6 of the 127 associations surveyed). (6) Approximately 79 percent of all respondents reported new commitment activity substantially smaller in the second half of January than a year earlier. This was approximately the same proportion as had reported substantially smaller activity during the preceding 15 days, but a moderately smaller proportion than reported this to have been the case in December. The percentage of respondents indicating their commitment activity was only slightly smaller than a year earlier was 9 percent, while the percentage indicating activity was the same or larger was 12 percent. Most of the respondents in the latter category were associations that had been either completely or largely out of the market last year because of poor savings flow or usury limitations.  Attachment CC:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F. P. S. R. J. M.  Bolling Brinkerhoff Ewing Fair McBride Miskovsky  C. C. D. S. . I.  an Myers Riordan Stieber Tannenbaum  All RILB Presidents All FULB Economists FI-ILMC Regional VP's  • Survey of Canuitment Policy and Activity of Savings and Loan Associations Regarding Mortgages on Single Family limes a/  Item  (Number of institutions reporting spec ified response) eJeral llome Loan Bank District Des , New Cincin- IndianPittsAll York burgh Atlanta nati c/ apolis Chicago Moines Districts BostonS'  Little Rock  San Topeka Francisco Seattle  127  10  10  10  10  17  10  10  10  10  10  10  10  Changes in commitment policy between January 15 and January 31  27  0  1  3  1  6  1  3  3  3  3  0  3  Type of commitment policy change (Jan. 15-31) total 6/:  37  0  1  3  1  8  1  4  6  6  4  0  3  Restrictive - total Ceased making all new commitments Ceased making new commitments for certain types of loans or classes of borrowers Ceased making firm rate commitments Raised downpayment requirements Raised effective rate charged Other  10  0  0  1  1  1  0  0  1  2  2  0  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  o  1  o  o  o  o  o  o  o  o  o  1  o  o  8  o  o  1  1  o  o  o  1  1  0  0  0  0  1  0  0  0  2 0  1 0 •  0 0  2 0  Liberalizing - total Began making new commitments for certain types of loans or classes of borrowers previously not permitted Reduced effective rate charged Reduced downpayment requirement Other  27  o  1  2  0  7  1  4  5  4  2  0  1  Associations surveyed  10  0  0  1  0  1  0  1  3  3  1  12  0  0  0  0  6  0  3  1  0  1  0  1  3  0  1 0  0 1  0 0  0 0  0 1  0 0  1 0  1  10 6  0 0  2 2  2 1  0 0  1 1  1 1  0 0  1 0  2 0  1 1  0 0  0 0  15 days before Oct. 6: Substantially smaller Slightly smaller Same or larger  43 37 45  1 4 5  3 1 6  9 0 1  3 2 5  4 7 4  4 5 1  1 5 4  2 3 5  5 1 4  1 3 6  6 4 0  4 2 4  15 days ending Oct. 26: Substantially smaller Slightly smaller Same or larger  93 17 15  8 2 0  7 1 . 2  10 0 0  7 o 3  7 7 1  6 2 2  9 0 1  7 2 1  7 1 2  a 1 1  a 1 1  9 0 1  December 1-14 Substantially smaller Slightly smaller Same or larger  116 4 7  8 1 o  8 o z  9 1 o  8 o 2  18 o o  10 o -o  10 o o  9 o 1  7 1 2  10 o o  9 1 o  10 o o  December 15-31 Substantially smaller Slightly smaller Same or larger  105 10 12  6 1 o  9 o 1  a z o  7 1 z  17 2 1  10 o o  10 o o  e o 2  8 o 2  10 o o  4 4 2  8 o 2  January 1-15 Substantially smaller Slightly smaller Same or larger  98 14 15  4 2 4  9 o 1  9 1 0  6 3 1  16 2 0  10 o 0  10 o 0  7 2 1  a o 2  9 1 o  2 2 s  a 1 I  January 16-31 Substantially smaller Slightly smaller Same or larger  100 12 15  6 1 3  9 o 1  10 o 0  4 2 4  15 1 1  10 o 0  10 0 0  6 3 1  8 0 2  9 0 1  4 4 2  9 1 0  Associations not making commitments: January 15 January 31 Year -over-year comparison of new commitment volume:  a/ The associations surveyed are among the tkenty largest in cach-lict S/ Some respondents reported making more than one of the specified policy changes. E/ The number of associations providing year -over -year comparisons of new (Aommitment volume differs somewhat from period to period.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 5, 1979  Dear Jay: We have looked over your proposed rule on Eurodollar borrowings. My people here have no problem. Having said that, the whole thing leaves me queasy. I doubt that any really significant rate advantage will be obtained. I realize you are starting off in a controlled cautious way. But I wonder if this is not one of those things that develops a momentum of its own -- with the explicit objective of saving a few basis points -- and ends up eventually with a larger commitment to the market than you now bargain for. And sooner or later something comes along to leave the initiatives exposed. Take that only as the warning of an old conservative -- and don't let their eyes get too big or the rules too loose. The pressures to relax are predictable. Sincerely,  The Honorable Jay Janis Chairman Federal Home Loan Bank Board Washington, D. C. pay:ccm   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  Fede,r) al Home Loan Bank Board .• JAY JANIS Chairman  OCT 2 9 1979  The Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Twentieth and Constitution Avenue, N. W. Washington, D. C. 20551 Dear Paul: In keeping with our discussion at breakfast Tuesday morning, I would like to provide you with the information that places the Federal Home Loan Bank System's current level of advances into perspective when compared to past periods of credit stringency. As of the end of September, Federal Home Loan Bank advances to FSLIC-insured associations stand at 8.29% of these associations' savings. This ratio reached 9.07% during the 1974 period of credit stringency. As savings rebounded and associations paid back advances during the following year, the ratio declined to a low of 6.19%. At the peak of the 1966 liquidity crisis, advances as a percent of savings reached 6.85%, and the subsequent low in the following year was 3.48%.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I hope you find this information helpful. Sincerely,  170 MG Street. N W Washington, D C 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance-Corporation JAY JANIS Chairman 1-4  Octobcr 10, 1979  Honorable Paul Volcker Chairman of the Federal Reserve Board 20th and Constitution Avenue, N.W. Washington, D.C. 20551  e3..111-1  Dear Paul: While the Federal Home Loan Bank Board has not been asked to comment on the Federal Reserve Board's latest proposal to restructure reserve requirements, the Bank Board feels it is essential that the Fed be provided with adequate powers to implement an effective monetary policy and to control inflation. Therefore, we drafted the enclosed letter. Before sending it to Senator Proxmire, I would appreciate any comments you might have and your thoughts as to whether this letter would be helpful. Sincerely,  JAy 'Janis Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, NW. Washington, D C 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Savings and Loan Insurance Corporation  Federal Home Loan Bank Board JAY JANIS Chairman  October 4, 1979  DRAFT  Senator William Proxmire Chairman, Committee on Banking, Housing, and Urban Affairs U. S. Senate Washington, D. C.  Dear Senator Proxmire: Because of the importance of an effective monetary policy and because of the Bank Board's keen interest in this area, I would like to present the views of the Federal Home Loan Bank Board for your consideration on the proposals before your Committee on restructuring the system of reserve requirements for the implementation of monetary policy. This includes the proposal of the Federal Reserve Board for standby authority to institute supplementary reserves to be imposed on all depository institutions up to a specified maximum percentage. The Bank Board finds itself in agreement with the general approach taken by Chairman Volcker on behalf of the Federal Reserve Board. In particular, we find ourselves in general agreement with the four principles enunciated by Chairman Volcker on pages 21 and 22 of his testimony of September 26. These are that: (1) reserve requirements should be placed on transactions [underlining my own] balances at all depository institutions, (2) standby authority should be provided in the form of supplementary reserves, with such reserves earning a market rate of return, (3) initial reserve ratios on nonpersonal time deposits should be set at zero, as in H.R. 7, but with the understanding that the Federal Reserve would have "some" flexibility to apply reserves to short-term nonpersonal time deposits if needed to protect the dividing line between transactions and time accounts for cyclical purposes, and (4) there should be full pricing and open access to Federal Reserve services, although with some appropriate flexibility.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  'Senator William Proxmire Page Two October 4, 1979  The Bank Board understands the concern of the Federal Reserve Board with the effective conduct of monetary policy and the resulting need for an adequate reserve base. The general principles of the Federal Reserve's position are deliberately stated so as to leave room for different details and nuances with respect to their implementation. I would like to turn now to the details with principles stated above. First, I agree with requirements on transactions accounts. These that are the most liquid and most related to in the economy.  respect to the four the need for reserve are the types of accounts spending decisions  I would like to emphasize that we are here dealing with a definition of transactions accounts much broader than merely demand deposits at commercial banks. Thus, these would include not only demand deposits at commercial banks but a broader range of accounts at all depository institutions--NOW accounts, credit union share drafts, savings accounts subject to automatic transfer services, and telephone bill paying savings accounts in which the number of transactions exceeds a specific figure. In light of this broad concept of transactions accounts, the reserve requirements on these accounts should not be set too high. Otherwise, the result would be to encourage the growth of money substitutes outside of the banking and thrift system that could impair the ability of the Federal Reserve to control monetary aggregates in the broadest sense of the term. In connection with reserve requirements on transactions accounts, there is the question of whether there should be an exemption level similar to that in H.R. 7 or, alternatively, a graduated system, as in S.85, under which reserve requirements would be set at a low level on an initial amount of transactions accounts and higher on accounts above this initial level. The Bank Board prefers an exemption level and, in particular, the $35 million exemption level of H.R. 7. We recognize, however, that a graduated reserve system could be developed whose effect would not be substantially different from that of an exemption. Such a graduated reserve system would be one in which the reserve ratio for the initial volume of transactions accounts was lower than in S. 85 and would extend to a larger volume of transactions accounts than the $5 million specified. Instead of the two-tier reserve ratio of S. 85, we could have a three-tier reserve requirement so that, for example, a 2 percent reserve requirement might be imposed on the first $10 million, a 4 percent reserve requirement on the second $10 million, and a still higher reserve requirement above this.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Three October 4, 1979 Our position above- on an exemption level does not stem from a desire to eliminate most S&Ls from being covered by reserve requirements or covered only in a nominal sense. Rather, our position is the result of two important considerations. First, as will be noted below, under the supplementary reserve requirement proposal, the Federal Reserve will be in a position, if it so chooses, to impose additional reserve requirements on transactions accounts without any exemption level. Second, and most importantly, our support of an exemption level (with a lesser preference for a graduated reserve ratio system) would not impair the effectiveness of monetary policy. Underlying the Bank Board's support of an exemption is the fact that thrift institutions are in a difficult transitional stage in which rate control is becoming less effective and the cost of money is rising rapidly. Whatever the resolution with respect to the mandated phasing-out of rate control contained in the bill recently reported out by your Committee, thrift institutions will find themselves in a position of having to pay market rates increasingly on their funds. Yet, there will still be the constraint placed on their portfolio yield because of the continued dominance of long-term fixed interest rate mortgages in their portfolios. The transition to the use of VRMs appears increasingly likely to be very gradual, and the addition of NOW accounts and consumer credit to thrift institution powers will hardly put them in an immediate position to compete effectively against commercial banks. The latter have had a large head start in offering these types of financial services, and it will take many years before thrifts find that these additional powers have a positive impact on their earnings position. In the Bank Board's opinion, equity does not necessarily argue that thrifts should have the same reserve requirements, including the same exemption levels, as commercial banks given the difficult handicaps noted above under which thrifts will continue to operate for some time. Yet, while we believe that we could make a case for special treatment with respect to reserve requirements of thrifts vis a vis commercial banks on equity grounds, we recognize the political realities of the situation. Let me turn now to the Federal Reserve's proposal for a standby authority in the form of supplementary reserve deposits, with these deposits earning a market rate of return. In supporting this proposal, the Bank Board notes the assurances of Chairman Volcker that this authority would not be used unless the Federal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Four October 4, 1979  Reserve made the determination that monetary policy would not be effective without such supplementary reserves. We note also that these supplementary requirements would be imposed only if five of the seven members of the Board vote for it. The Federal Reserve suggests that thrift institutions be permitted to count these supplemental reserves toward meeting existing liquidity requirements imposed by the Bank Board, thus easing the burden of such reserve requirements. While we endorse this latter proposal, we recognize that this creates problems. It reduces the ability of the 12 regional Banks to raise funds through term deposits from member institutions, thus reducing one source of funds for advances. Also, it could reduce the effectiveness of utilizing reductions in liquidity requirements as a means of stimulating the mortgage market when conditions require this. This is because, unlike other liquid assets, reserves could not be sold off or liquidated, with the proceeds going into the mortgage market or offsetting savings withdrawals. Depending upon the precise level of supplementary reserves, if these should be imposed by the Federal Reserve, there would be less leeway for utilizing reductions in liquidity requirements as a tool of housing credit policy. There is a statutory minimum of 4 percent for the liquidity requirement although the Bank Board's regulations do permit member institutions to go temporarily below the 4 percent minimum liquidity requirement if needed to offset savings outOn balance, despite some reservations, we believe flows. that the use of reserves to meet liquidity requirements would not be a serious enough impediment to the implementation of the Bank Board's housing credit policies; and, in any case, the Federal Home Loan Bank System has other important tools to influence the volume of housing credit. My discussions with Chairman Volcker indicate that he would be willing to waive the supplementary reserves for certain institutions if these institutions are having operational problems. We would emphasize strongly that our endorsement of supplementary reserve requirements on a standby basis and the use of reserve requirements to meet liquidity requirements is dependent upon a market rate of interest being paid upon such reserves. Without such a market rate, there would be a negative earnings impact on thrift institutions that they could ill afford during high interest rate periods.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - Senator William Proxmire Page Five October 4, 1979  This brings me to an important detail with respect to the nature of these supplementary reserve requirements that the Federal Reserve leaves as an open question. In particular, should these be determined as a percentage of transactions accounts or of all accounts held at depository institutions? Moreover, what should be the maximum percentage supplementary reserve requirement permitted? The Federal Reserve has noted that a maximum of 2 percent for supplementary reserves would be adequate if the base included total accounts. However, if only transactions accounts were covered, the percentage would have to be substantially higher in order to ensure an equivalent reserve base. The Bank Board prefers that the base on which supplementary reserves are determined include only transactions accounts. Our reasons for this are the same that we gave above with respect to endorsing basic reserve requirements only on transactions accounts. With respect to the maximum percentage of transactions accounts that could be covered by supplemental reserves, we defer to the judgment of the Federal Reserve although we would hope that, in practice, such supplementary reserves would not be needed or could be applied at a lower than maximum level. I would like to turn now to the treatment of savings and time accounts under the basic--not supplementary--reserve requirements. Both H.R. 7 and S. 85 exempt all savings and personal time accounts from reserve requirements. As the Federal Reserve points out, however, the substantial reserve requirements on short-term nonpersonal time deposits under S. 85 would create difficult competitive problems for depository institutions. It would handicap their ability to compete with alternative sources of savings media issued by institutions not covered by reserve requirements. The Federal Reserve takes the position, therefore, that the desirable approach would be limited authority for the use of reserve requirements on short-term nonpersonal time deposits on a standby basis, with the circumstances for such use "exceptional". The Bank Board endorses this proposal but contingent on the assurance that the circumstances for use would indeed be quite exceptional and would, therefore, not impose a significant handicap over the long-run with respect to the ability of thrift institutions to compete for nonpersonal time deposits. While we would prefer no reserve requirement on short-term nonpersonal time deposits, we defer to the Federal Reserve on the possible need for such authority on a limited, exceptional basis.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Six October 4, 1979  Let me turn now to -the final proposal of the Federal Reserve, namely full pricing and open access to Federal Reserve services. This is a point of view that the Bank Board has endorsed strongly in the past. We note that the Federal Reserve Board's endorsement of this position is qualified to some extent by reference to "adequate flexibility, in timing and application, to minimize the risk of disruptions in banking markets and to protect the availability of a basic level of payments services to all institutions." We assume that these qualifications would not seriously affect the applicability of the full pricing principles.  In conclusion, we endorse the general principles that the Federal Reserve is recommending with respect to changes in the structure and coverage of reserve requirements. The Bank Board has suggested details of implementation that take into account the fact that thrift institutions are going to have a difficult transitional period as rate controls become less important, either through the growing sophistication of savers or a legislatively mandated phasing-out of rate control. Our concern with this problem in no way detracts from our support of the general principles that the Federal Reserve Board advocates with respect to reserve requirements. I thank you for the opportunity to make the views of the Federal Home Loan Bank Board available to your Committee. Sincerely,  Jay Janis Chairman   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D C. 20552  11111  Federal Home Loan Bank Board  Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insurance Corporation  JAY JANIS Chairman  OCT 1 6 1979 Mr. Paul Volcker Chairman, Federal Reserve Board 21st and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: I have sent the letter to Senator Proxmire on the Fed membership bill. Please note the new penultimate paragraph I have added and the change made in the final paragraph on page 5. cerely,  //aY Janis  C—; C) 4..0%  C   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street, N.W. Washington, D.C. 20552  Federal Home Loan Bank Board  Federal Home Loan Bank System on Federal Home Loan Mortgage Corporati on Federal Sayings and Loan Insurance Corporati  JAY JANIS Chairman  !PT.  Honorable il11iar Froxmirr Cheirman, Co:tmittee on Cankinr7, Housini, and Urban Aff-iirs United States Senate Washington, D.C. 20510 Deer  r. Chairman:  ctive ;.:onet_Jry colicy Decauce of the ir.17ortance of ,7n effe interest in thir arc!p, and because of the Eank Doarj's k.e.:1 ra1 oe Lo,In 1.I would like to nresent the view: of the pror,ocals before Bank Board for your consieration on the ryster or re7.erve rer,uir ,-:your Comxittee on rectructurin7 the inclues tary cilcy. Yi ments for the implerentatien of Tone ority rotl: f:c)r , L'e:3er..31 r.es7rve the proro1 of the: all on sed impo be to institute supplementary reserves to , 7.nta72. d raxiux :crc. depository institutions uc.: to P. s7ocifie with the (7encrol The '6ank T.Joarcl finis itself in agrecr.ent .7'.erol the : of f behal on approtch taken by Chairman Volcker ,711 'en..?r in s olve ourr fin0 i:eserve 2oard. In perticular, we Tr.n Chair '. iatcf cnunc oo ac:reement witn the four rrincirl :rony Volcker on pages 21 arc: 22 of his tosti sciould be -1.cce,i, nts uir ree These .1re that: (1) reserve 11 iolo.741tory t [underlininc r:17 own] hlance on transaction 7rovii_..c-i in 3houlJ institutions, 12) stanny LuLhority such rocrv:s the form of sup71crentary reserves, with i:1 reserv(_' init (:) rn, retu of narket rete earnin at zcrc-,, r!.1 in e set lo shcu sits on nong:ersonal ti;oe depo thnt the felier,21 r,ecerv H.R. 7, but with the urKlerstan,iinli y reserves to short-trn. would have "sore" flexibility to e1,71 to rrotcct tro nonpersonal time der,osits if nece0 .-rcoonts - c)r cyclicEl line beween transactions an tir,e eno purposes, and (1) there :Moult', h with sor:e to Federal Reserve services, althcl, flexibility.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page Two  The Uank Board understards the concern ot the Ueof?ral Peserv e Board with the effective conduct of monetcry resulting nec6 for an adec.uate reserve base. ne lener7, 1 of the Fe(;.eral I<eserve's position do1i!2.errtely 7t.7,teu c..o PC to leave rooT for different details and nuances with r(-•ee t to their implowentation. I would like to turn now to the details rincirles stateci above. First, I zlgree with requirflents on trans;Ictions account7. These that ere the most liruid anci o,oct relate to in the eccnoL,y.  wit re.:2ect to the tour tho nond for resrve are the ty. of necounts s7-enin, (iccisions  I would like to eize that we aro here ceil jr ith z (!ofiition of transaction: accounts ruch broader than 7erclv deceit at cry.,mercial banks. Mos, thece incluj not onJy 6p7,7,n,1 depcsita at coni7ercial banks hut :7 'cc'nt t all depository intitutiorT--= .-ernunts, creit unic.r::11rrr trafts , savings accounts subject to -1!.ltoratic transfer !--,ervice!:, ,7, n(1 telnrh ow? bill paying savincis accounts in which the nucr cf trctiors exceeds a specific figure. In light of thin LroF1:', concc-t of tr7n ,-actions accounts, the rescrvc rcl-Hremcnts on thosn 3c7.unts !;:hr.n1:, not be set too hir,11,. Gtherwirie, the result wouii hy to the orowth of :roney ou5stitutes ooticle of ti. t!;r;rt system that could impair the ability of the FeCer?1 Pncerv to control ;T,onetary ac .;r7re:!ates in the broact , ;en7c t).2terT In connection with reserve rec:ulrellent on tr.:,n.77actior7 -cco!)rt • there is the question of wh;?ther there shoulr, similar to that in ;.E. 7 or, alternotively, as in S.85, unoer hhich reserve recuirrent: !cv level on an initial arount of transactions Per.unt .7,r% 1-: i..71r accounts above this initial level. The 'Thr;7 ;fl exemption level ant., in particular, the rillionctic level of H.R. 7. +'e recognize, however, th3t syste7 could be develo!- ed whose effet voul('. net different from that of PI) exo7tion. .-,uch a system hould be one in which tie resr.rve ratio for ti initi1 volurre of transactions accounts was lowr:r t'.:1 in -n' extend to a larger voluire of transartions arcount7: t;.c. million specified. Instead of the: to-tier reserv rLtio Gf S. we coule4 have a three-tier reserve recuirercnt tht, tor example, a 2 r:ercent reserve rerAlireqent iri:Iht Le ii:rce . f on first ,;10 million, a 4 rPrcent res2rv ,... recuire-cont (-,11 thr, $l6 million, an,; a still hiqher re; . ,ervc roc-iirn7,nt zriovr   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Paqe Threc,  (Jur 7osition .7.bove on n exomrtion Ceon not r:ter fro. : a sire to eliTinate root S&Ls from beinl vrcc by rer:uir2:nents or c4-werecl only in a noa- iral sense.arhr, our position is the result cf two important ccnnioeretions. as will be noted below, unuor the sunplowentary rrs-2rv(, went r,rorosal, the Federal eserve will be in r. -olition, if It so chooces, to L7pose aSIditional renerve or action.: accounts without ..ny exeirDtion )cv-1. ::ccinj, an: 'o;t irl.ortantly, our :Iurrort cf ne:tcr7T,tion 1evc1 (with a lrsrer rreferenco for a qr uetc reerve ratio s) .:001.) not i-r'air the effectiveness of -onctary rolicv. rerve  Cincl,?rlyinf; the i—lnk sul:port cf z*.n iEtL fact that thrift IntItutJcn rn in n dif.ficult stae in which rate control i7 Y.,eccFnin 1r7= nffcctive 7n(:,th cost of men:!y Is risin Lilatover roolutin ;,ith resect to rilooln,:!-cet of rPt. control In thk , cill re.cently re7ort out by your tlrift ir-, :titutions will find themselve2 in a 7,07.itior of rnvin7: to -7,17 ffarket rot(is incrersin -qy en their fnnOr-,. ot, t!,,will be the conz!traint oli:ccd on th.7!ir rortfoli thc continud Oominance of lewl-tcr.,r tic intro:t ;ort:es in their i:ortfolios. The transition to the !:,, of V. increasingly likelv tet-,e. very .:ri2juz., 1, an. thr, accounts an con7...umer crer;it to thrift institutin;.: ncw.7,rr hardly put tJ.,em in an ponition to co- ..,to cfiectival .2. Alain3t cc7rerci1 The 1t- ter In offer1n9 these tyy,es of financial services, c.r6 it takc many years before thrifts fin that those rcwer7hevc t positive impvet on their carrin;ls In th2 bank Lo.!rd's opinion, otlity r,7t cr7t1 th6t thriftr shoulC1 .lave the ia:.c rocorvo the same exemption levels, an co7-7 ,-;r(. ..i(11 iver t'A; hrIndicars nott(i abov urWer v:hich ttirift for i;orl-o lioc. 'lot, whi1 helicw, that we 7. cm: for special treAtment rcscect to rrervc rt,'7.111r, 7nts of thrifts vis o viu corerciol banks on WT r;occ7ni:n thc! rcPlitlec ci the situation. Let . c,e turn mw to the Feeer,-.1 i.crv re fnr stancil aut;-,ority in the [err of su7;n17.-r-ntri with tbese enrnin2 a -arv,et rate of r(,turn. In nur:norti:!0 this 1.roposa1, the r2.t..nk coar notro ‘olckcr that this author it not tr.•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page Four  Reserve vade the determination that wonotz:ry !Tolirv not be ettective without soct; sunrlcnIentrv reFerve, . not that these sup,7leentary recuirent rnj hc i.r.fe(; only if five of the neven members of the .3c)7.1r1 vot for it. The Federal Peserve sur;ests that thrift i:;tit..Dtion:1,hc permitted to count those supr1o,r7r:rta1 rccorv7 rec.tinl existin; rer:uirorents ir'nrze by the C.:7,1 !etr(., 1 thus easing the huraen of ouch reserve rerirontn. Yhile we en(orse this letter prorosal, we reccflni77 problems. It reduces the ability of the 12 re7ionpl to raise fun..is throuoll ter71 Oef:ocits, frac 7,PH ,r thus reducin,7 one rource of fe.,w'iri for ,71Jw1(707. it could reduce the effectivnc.r of in iv-; a means of r-,tidq11,7stinT market when conrAtions rer.uire this. This other assets, reserves could not be (.;ff cr 11 dated, with the 7 1 rocee3s 2oin, .7 into tho .7.ortwlf_fe 77e,rt or offsettin,2 savingr, with:Ir3wa13. De.17:)nciin on th rr(lci7 level of supplementary renerve:-3, if these bhrul(.. by the Federal C.ecerve, there woul:j he less for 9tili7in reductions in lioulility rccwire.77ent:7 ns a tool houircredit t.olicy. There is st7,tutory iniiu rf • nercrnt .(1t7 1..Vuh'ity rec:uirement altourjh the ;:ank Thard's ::.erdocr institutions tr ,-;r) te7norp.rily t41 , minilou7 liruidity reuire7-.e:!t if t to ofit (_,T1 is,nlance, 6esnite re7.r_irvatior-, that the use or rcorlp-?s to :rect. 11(:u1Cit7 not he a serious encu(71; c:crtatior of the Bank Uoar6's lioucino crec:it an6, in c3se, the Cederzi Ilome Loan i3ank 1:;yster7h othcr tools to influence the volurn of hourin-, crcf,it. with Cnairran 'iolcker to waive ti e sup0e7enti-lry rcorvc : if these institutions, . ire tiFIvin7; We would eLl-lphasize stronlly that our en6orse7ent ef irentary reserve reruir(=rr-r,nts on a tanc3;:y .7.nf'. the use of reserve reruirentr to upon a rarket oi interest out such rnte, there wou10 hc ; niv-. o -.rrinon i7.nact on thrift institutions t:1;:t they cou1(1 ill affort't'rinLic.71) interest rate iorio0s.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page Five reeect to the ahis brings me to an irT,ortent detail with re-entr that the Foeeral neture of these supplerentory reeerve rec:ui ieulor, shouln the,7e Feserve 'coves as an °nen c_uestion. In t'.art account:, er of be determined es a percentage of transctions ioreover, n? tutio insti all accounts held Pt dc*ository reserve reeuireary ement surnl should be the maximur rercentaqe 1..ederal Reerve 1165 noteL thet e ment permittedi .1 1he : e.'eeuate if of 2 rercent for sur:pleentery reserves wouh: trancactions enl, if er, flowev nts. the base incluried total accou subst(nntiaccounts were covered, the percentale woulJ heve race. e reeerv elent cc:niv an ally higher in order to ensure ic eueleeentory The i]ark Board rreters that the baec cn e eccounte. ctiein trenss only e includ reserves are 6etermine with rer7eet &hove eleve we that reasons for this ere the sa7ec ectione tr,Ine on only s reent to endorsino basic reserve reeui tionc trenc cf te.le percen um 7axinaccounts. V;ith respect to the -.(-erer we ven, rerer .:1 , lexent sop: 1)y 1 : accounts thct could te covere , we :yould hoer to the judent of the i'ejeral Feserve elthounh '0 net he nee. es lerv ry :eenta cu7ple that, in practice, such . or could be auAied at a lower than m:ixirrum level t.L.e e,avin -ee I would like to turn no to the treat:lent cf res—rve re-eireeeente. accounts under the basic—not suel.leTentery— corsce,il ti." eccounte., and 6. bb exeit all s,:Jvin3 both th.k. e pointe out, howfrom reserve rer;uiree,entc. As t114.-? Peer711 Peeerv si.ort-tere eon-neri.‘onol ever, the substantial reserve requirerente on reeTetitive rrcble;.:1% tie deposits unc:er S. 85 vould create jifficult tc eT teir for deT:ository institutions. It woule hanOic 1nr7ti cori:-ete with alternative sources of savin -'n Todie e .eeerv l e7!erc tutions not covered by reserve reeuirc:Tente,. 'The aleerencil weLli takes the position, therefore, that t".e clesirehle e on ehortroeent ree:ii be limite6 authority for the use of. reserve circeewite. hy tere nonpersonal tLe Her.:osits on e stend stances for such use "excertionz:1". on the Ine Tank Uoard endorses this rropocal but continnent cuit,T Le i inJ,ec. use assurance that the rircurstances for sienificent hanic3-, exceptional ar .! wou16, therefore, not 17eose e tnrift institution of y a!Alit over the ion -run with resrect to the e eoule prefer no tfhilo to compete tor now2ereonol tire deposits. Oefr tie^ ecnal reserve recuirement on snort-terr nonver rity autno such for nceJ e to the Federal I=eserve on the cihl a limited, t,ZGIS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Pr  Page Six  Let re turn now tn the final rrorof...,-)1 tL;:er:orve, nacrely Lull -2ricin(7 crien noccss to r3erv1crs. Thin a point of vi, r4 thz,t the 13nrk 1- oPr stror'l" in the 7,ac.t. 1;e! notz that tne Foderal T'eserv-? crrr.,en7ent of thi rtnition i alifi6 to ncre extent y rofncr, to "arrjuzte flexiollity, in ti,r.inr) nrvi tc rick of :21cru::t1onT; ir brking thc. availability of a Jr' level of T..rt7 to n11 inrtitutionr.7. e zc that thce - ;oo1 ,f7 not ,f.fect the ,.:7.7licability of. the fL?1I nricin, In conclusi, we i-no.7:r the (7: -. .r1 th:!t th FeLleral Pererve is recc cndir 1th rr-set7!t tc in the structurc ccvera:7e of rcl-;erv,-.! Lonrd h ugqested rjet;tilq intn account the f.".ct that thrilt inctitoticrirs tr)iVC a rifticsllt trz.nsitional rr‘rinc: C7 rte c:.7rtr ,T1 eitticr t(!rcu ,-7 t;!c or 7 -_,..7orr• or ... 1e7inlatively cl ccntrnl. J-2ur concern with this :) - roblo.71 ih to way rzc ro7 our 711- .-- nrt the generel rrincirl.?r; that the l-Wers1 with re:rr!ct to rcrve recuirer...entr. would like to strr.ss wy fefAiniz aotit thr, of Con.)rer,r, ca11n7 witn thir: It 211..: !%c c7xtree1y userul, I oelieve, fer t!r r,rorr. u.1“ - to nc unoerstoe indutry 1:77t :7- rfln I tn.?n% you for tiic OrOrttinit'! Home Lonr ::ank 12nard ;:vai17th., to r:ur   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  •  Pc,.„-f 1  10-11 F3OARD  OF  Paul---  GOVERNORS  OF THE  Question?  FEDERAL  RESERVE SYSTEM  Do you want to answer  this by letter or rather call Janis and tell x  him I don't think that the letter hurts our cause..  It would be nice if a sentence could be  added near the beginning or near the end urging prompt legislative resolution of this issue. Points in the letter worth noting. (1)  Ladt paragraph --page 2--  persuaded  Could Janis be  to fudge a bit on the $35 million  exemption level.  Could he be persuaded to  come down in support of an exemption level somewhere between the $35 million in the House-passed bill and the graduated formula in , 2 S. 85. (2)  page 5--First paragraph& second paragraph.  Note that Janis asks that the supplemental be placed only on transaction accounts.  I think  we shouldn't try to talk him out of this. Logically it is the position the FHLBB would take and the U.S. League has already taken  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  GOVERNORS  OF  BOARD  OF THE  FEDERAL  RESERVE SYSTEM  a similar position.  (3)  page 5 bottom-- Should we try to weaken  the last paragraph a little?  As noted I think that the letter is generally supportive and helpful and feel that the points mentioned could be well handled by a Volcker call to Janis.  Ken G.  Ls rs-.47)  -r"1 IL  c  bV I  Ar%)i  S  a  Lisa_  Ot  Ot-  — Pr"  te 1-4 rep)/ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A  y y rA ftee."14;  1)A  en,  e:4 0--• -r  1  At  1),„ C"), rit.)-r,—,/, 4"fiolr, • •  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation Federal Sayings and Loan Insuran.ca-Corporation  Federal Home Loan Bank Board  ts" —4 t_c)  JAY JANIS  C7) C—) —4  Chairman  October 10, 1979  Honorable Paul Volcker Chairman of the Federal Reserve Board 20th and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Paul: While the Federal Home Loan Bank Board has not been asked to comment on the Federal Reserve Board's latest proposal to restructure reserve requirements, the Bank Board feels it is essential that the Fed be provided with adequate powers to implement an effective monetary policy and to control inflation. Therefore, we drafted the enclosed letter. Before sending it to Senator Proxmire, I would appreciate any comments you might have and your thoughts as to whether this letter would be helpful. • cerely,  J 5.7 Janis Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ji  1700 G Street, N.W. Washington, D.C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Savings and Loan Insurance Corporation JAY JAN IS Chairman  October 4, 1979  DRAFT  Senator William Proxmire Chairman, Committee on Banking, Housing, and Urban Affairs U. S. Senate Washington, D. C.  Dear Senator Proxmire: Because of the importance of an effective monetary policy and because of the Bank Board's keen interest in this area, I would like to present the views of the Federal Home Loan Bank Board for your consideration on the proposals before your Committee on restructuring the system of reserve requirements for the implementation of monetary policy. This includes the proposal of the Federal Reserve Board for standby authority to institute supplementary reserves to be imposed on all depository institutions up to a specified maximum percentage. The Bank Board finds itself in agreement with the general approach taken by Chairman Volcker on behalf of the Federal Reserve Board. In particular, we find ourselves in general agreement with the four principles enunciated by Chairman Volcker on pages 21 and 22 of his testimony of September 26. These are that: (1) reserve requirements should be placed on transactions [underlining my own] balances at all depository institutions, (2) standby authority should be provided in the form of supplementary reserves, with such reserves earning a market rate of return, (3) initial reserve ratios on nonpersonal time deposits should be set at zero, as in H.R. 7, but with the understanding that the Federal Reserve would have "some" flexibility to apply reserves to short-term nonpersonal time deposits if needed to protect the dividing line between transactions and time accounts for cyclical purposes, and (4) there should be full pricing and open access to Federal Reserve services, although with some appropriate flexibility.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Two . October 4, 1979 The Bank Board understands the concern of the Federal Reserve Board with the effective conduct of monetary policy and the resulting need for an adequate reserve base. The general principles of the Federal Reserve's position are deliberately stated so as to leave room for different details and nuances with respect to their implementation. I would like to turn now to the details with principles stated above. First, I agree with requirements on transactions accounts. These that are the most liquid and most related to in the economy.  respect to the four the need for reserve are the types of accounts spending decisions  I would like to emphasize that we are here dealing with a definition of transactions accounts much broader than merely demand deposits at commercial banks. Thus, these would include not only demand deposits at commercial banks but a broader range of accounts at all depository institutions--NOW accounts, credit union share drafts, savings accounts subject to automatic transfer services, and telephone bill paying savings accounts in which the number of transactions exceeds a specific figure. In light of this broad concept of transactions accounts, the reserve requirements on these accounts should not be set too high. Otherwise, the result would be to encourage the growth of money substitutes outside of the banking and thrift system that could impair the ability of the Federal Reserve to control monetary aggregates in the broadest sense of the term. In connection with reserve requirements on transactions accounts, there is the question of whether there should be an exemption level similar to that in H.R. 7 or, alternatively, a graduated system, as in S.85, under which reserve requirements would be set at a low level on an initial amount of transactions accounts and higher on accounts above this initial level. The Bank Board prefers an exemption level and, in particular, the $35 million exemption level of H.R. 7. We recognize, however, that a graduated reserve system could be developed whose effect would not be substantially different from that of an exemption. Such a graduated reserve system would be one in which the reserve ratio for the initial volume of transactions accounts was lower than in S. 85 and would extend to a larger volume of transactions accounts than the $5 Instead of the two-tier reserve ratio of million specified. S. 85, we could have a three-tier reserve requirement so that, for example, a 2 percent reserve requirement might be imposed on the first $10 million, a 4 percent reserve requirement on the second $10 million, and a still higher reserve requirement above this.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Three October 4, 1979 stem from Our position above on an exemption level does not by reserve ed cover being a desire to eliminate most S&Ls from r, our Rathe . sense al requirements or covered only in a nomin First, ions. derat consi position is the result of two important requireve reser ary ement as will be noted below, under the suppl if ion, posit a in be ment proposal, the Federal Reserve will transon ts remen requi ve it so chooses, to impose additional reser most and d, Secon . actions accounts without any exemption level (with a lesser importantly, our support of an exemption level would not impair m) preference for a graduated reserve ratio syste the effectiveness of monetary policy. tion is the fact Underlying the Bank Board's support of an exemp itional stage that thrift institutions are in a difficult trans and the cost in which rate control is becoming less effective with respect of money is rising rapidly. Whatever the resolution in the ined to the mandated phasing-out of rate control conta tuinsti t bill recently reported out by your Committee, thrif market pay to g tions will find themselves in a position of havin the be still rates increasingly on their funds. Yet, there will nued conti the se of constraint placed on their portfolio yield becau their in ages dominance of long-term fixed interest rate mortg rs increasingly appea VRMs of use the to portfolios. The transition NOW accounts and likely to be very gradual, and the addition of hardly put consumer credit to thrift institution powers will tively against them in an immediate position to compete effec start in offering commercial banks. The latter have had a large head take many years these types of financial services, and it will s have a positive before thrifts find that these additional power impact on their earnings position. sarily argue In the Bank Board's opinion, equity does not neces ts, including remen requi ve reser that thrifts should have the same given the difficult the same exemption levels, as commercial banks continue to operate handicaps noted above under which thrifts will make a case for some time. Yet, while we believe that we could ts of remen requi ve reser to ct for special treatment with respe recognize we ds, groun y equit on banks thrifts vis a vis commercial the political realities of the situation. for a standby Let me turn now to the Federal Reserve's proposal deposits, with authority in the form of supplementary reserve In supporting n. retur of these deposits earning a market rate of Chairman ances assur the this proposal, the Bank Board notes unless the Federal Volcker that this authority would not be used   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Pase Four . October 4, 1979  Reserve made the determination that monetary policy would not be effective without such supplementary reserves. We note also that these supplementary requirements would be imposed only if five of the seven members of the Board vote for it. The Federal Reserve suggests that thrift institutions be permitted to count these supplemental reserves toward meeting existing liquidity requirements imposed by the Bank Board, thus easing the burden of such reserve requirements. While we endorse this latter proposal, we recognize that this creates problems. It reduces the ability of the 12 regional Banks to raise funds through term deposits from member institutions, thus reducing one source of funds for advances. Also, it could reduce the effectiveness of utilizing reductions in liquidity requirements as a means of stimulating the mortgage market when conditions require this. This is because, unlike other liquid assets, reserves could not be sold off or liquidated, with the proceeds going into the mortgage market or offsetting savings withdrawals. Depending upon the precise level of supplementary reserves, if these should be imposed by the Federal Reserve, there would be less leeway for utilizing reductions in liquidity requirements as a tool of housing credit policy. There is a statutory minimum of 4 percent for the liquidity requirement although the Bank Board's regulations IS permit member institutions to go temporarily below the 4 percent minimum liquidity requirement if needed to offset savings outOn balance, despite some reservations, we believe flows. that the use of reserves to meet liquidity requirements would not be a serious enough impediment to the implementation S f the Bank Board's housing credit policies; and, in any case, the Federal Home Loan Bank System has other important tools to influence the volume of housing credit. My discussions with Chairman Volcker indicate that he would be willing tS waive the supplementary reserves for certain institutions if these institutions are having operational problems. We would emphasize strongly that our endorsement of supplementary reserve requirements on a standby basis and the use of reserve requirements to meet liquidity requirements is dependent upon a market rate of interest being paid upon such reserves. Without such a market rate, there would be a negative earnings impact on thrift institutions that they could ill afford during high interest rate periods.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator William Proxmire Page Five . October 4, 1979  This brings me to an important detail with respect to the nature of these supplementary reserve requirements that the Federal Reserve leaves as an open question. In particular, should these be determined as a percentage of transactions accounts or of all accounts held at depository institutions? Moreover, what should be the maximum percentage supplementary reserve requirement permitted? The Federal Reserve has noted that a maximum of 2 percent for supplementary reserves would be adequate if the base included total accounts. However, if only transactions accounts were covered, the percentage would have to be substantially higher in order to ensure an equivalent reserve base. The Bank Board prefers that the base on which supplementary reserves are determined include only transactions accounts. Our reasons for this are the same that we gave above with respect to endorsing basic reserve requirements only on transactions accounts. With respect to the maximum percentage of transactions accounts that could be covered by supplemental reserves, we defer to the judgment of the Federal Reserve although we would hope that, in practice, such supplementary reserves would not be needed or could be applied at a lower than maximum level. I would like to turn now to the treatment of savings and time accounts under the basic--not supplementary--reserve requirements. Both H.R. 7 and S. 85 exempt all savings and personal time accounts from reserve requirements. As the Federal Reserve points out, however, the substantial reserve requirements on short-term nonpersonal time deposits under S. 85 would create difficult competitive problems for depository institutions. It would handicap their ability to compete with alternative sources of savings media issued by institutions not covered by reserve requirements. The Federal Reserve takes the position, therefore, that the desirable approach would be limited authority for the use of reserve requirements on short-term nonpersonal time deposits on a standby basis, with the circumstances for such use "exceptional". The Bank Board endorses this proposal but contingent on the assurance that the circumstances for use would indeed be quite exceptional and would, therefore, not impose a significant handicap over the long-run with respect to the ability of thrift institutions to compete for nonpersonal time deposits. While we would prefer no reserve requirement on short-term nonpersonal time deposits, we defer to the Federal Reserve on the possible need for such authority on a limited, exceptional basis.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Seri,ator William Proxmire Page Six ' October 4, 1979  Let me turn now to the final proposal of the Federal Reserve, namely full pricing and open access to Federal Reserve services. This is a point of view that the Bank Board has endorsed strongly in the past. We note that the Federal Reserve Board's endorsement of this position is qualified to some extent by reference to "adequate flexibility, in timing and application, to minimize the risk of disruptions in banking markets and to protect the availability of a basic level of payments services to all institutions." We assume that these qualifications would not seriously affect the applicability of the full pricing principles.  In conclusion, we endorse the general principles that the Federal Reserve is recommending with respect to changes in the structure and coverage of reserve requirements. The Bank Board has suggested details of implementation that take into account the fact that thrift institutions are going to have a difficult transitional period as rate controls become less important, either through the growing sophistication of savers or a legislatively mandated phasing-out of rate control. Our concern with this problem in no way detracts from our support of the general principles that the Federal Reserve Board advocates with respect to reserve requirements. I thank you for the opportunity to make the views of the Federal Home Loan Bank Board available to your Committee. Sincerely,  Jay Janis Chairman   https://fraser.stlouisfed.org l Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  October 18, 1979  Dear Jay: I appreciate the letter and all your help. Sincerely,  The Honorable Jay Janis , 4 • *".....^.0 416%, Chairman Federal Home Loan Bank Board Washington, D. C. 20552  PAV:ccm #2297  1700 G Street, N.W. Washington, D C. 20552 Federal Home Loan Bank System Federal Home Loan Mortgage Corporation  Federal Home Loan Bank Board  Federal Sayings and Loan Insurance Corporation JAY JANIS Chairman  OCT 1 6 1919 Mr. Paul Volcker Chairman, Federal Reserve Board 21st and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: I have sent the letter to Senator Proxmire on the Fed membership bill. Please note the new penultimate paragraph I have added and the change made in the final paragraph on page 5. cerely,  ay Janis 6 /7/  In  L. L_   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1700 G Street. IN W Washington D C 20552  rd Federal Home Loan Bank Boa  m Federal Home Loan Bank Syste Corporation age Mortg Loan Home l Federa ance Corporation Federal Sayings and Loan Insur  JAY JANIS Chairman  197(  re Honorable rl11lart Frox:A kin,7, Ean on Chairran, Co:r.mittee s iir Aff an Housing, and Urb United States 3erate Washington, D.C. 20510 Deer Mr. Chairman: coney ance of an ofCective ', 5ecause of the irrort are r thi 5oar3's kern interest in e and because of the Bank 'ov the view of the I would like to present s Leforc siCration on the pro-cr.-711 ve ror,uirBank Eoard for your con .er re7 cturin, the cyster of inclues your Coxxittee on rectru hIz . rAion of -oretery rd icy ments for the implerent ,ral f.oc2rvc, cord or . lejt the prorol of thf, d on all y reserves to be impose to institute supplementar Ic.rc2nto7c. :r iru up to a nrecified rax depository institutions Cie (7encral itssqf in agreef-,ent with The 'Lank Soar0 fins ederol .7.' the of .Dn ,dolckcr on behalf l era Ien approech tal;en by Chairm in ves ular, we find oursel :.n irT ieserve Board. In partic Cha rrincirlec cnunciot a9reemant witn the four -t- tcbc,r 2. 22 of his testi:^.ony of ;Th Volcker on 72ages 21 and t)e d oul sc, crvo reouiremnnts )o -)c:litcry These (ire that: (1) res inc my own] balances in on transactions [un6erlin authority shoulJ e :rovi.:: n institution3, (2) stan,Thy rv: , . recf uch . 7 h wit ?lcrentary reserve.7, ,up the forca of : erw_. return, (2) inItiol res ot ret Aet oar c g nin in ear set p.t osits 2!'icu10 der e tiw l ona ? prs erv: non ,Tht 1 on - ninTI thnt the Fel!:r.7 urv2.ert,: H.F. 7, but wita the z xibility to e,T:ly reserv would haw! "sore" fle t toc ,.. .ro to o (le nee ts if cyclicr.1 nonpergnal tiae deposi anC tir-e ,-.ccoonts for ons cti nsa tra o:ien 6,-;r:e7.3 line beween shoulCi 20 fv11 ...- ricir1:7 en.; .riate :tc rurposel, end (4) there o., vices, althou-h wit to Federal io,.3erve cer flexibility.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rwo  The Dank ioarci un(lerstards thr? concern o' th Lril Pef::erve oarci with the effective conduct of r.onetzry olic n,' t2 rcsuiting need for an ader:uatc reserve base. Thc -Jerez- 7. 1 of the Fe(4.eral 1<eserve'n porition .!Ire deli!- crrtely -totr-1 to leave roor. for Clifferent :Jetailn and nuances it tc their impleg:.entation. I would like to turn now to the oetells tc Inc tour crincir,les stateci above. First, I zigree with thr, nof-, for rerva reriuirflents on transElctions (.ccount7. Theo are the ty; of Fccountc that ere tile most llruii n6 oct relnte,.; to snen(An: C:cis ions in the eccnory. I would like to oll- nri2e that we aro hcr,.. (‘c,-11ir with if mition of transaction: accounts troaLler tnan 7. - oroly :lerrant. at coercial banks. Thus, the woulC incluck, not only ,,e7an ! depcsito at coni7ercial ;7r.kti hut k:roader l'snna of acc7'unt.7 nil dcrository im7titutirn7--= creo.it ,:ratts, savingn accounts subject to nutcratic transfer sorvicr-4, bill 12aying saving:: accounts in which the number of traactions exceec1c a specific fimure. In li7ht of thir; hronc., concet of act ions accounts, the rscrve rc'7nirPrrents cn not he set toe hiqL. (..:therwise, the result wotlL h c: the ,:lrowth of :Tone, 'sulstitutes out,7;icit% of th:- !):'n 1;in, trift system that could imrair the ability of the FeCerl l'rlzer vc to control monetary er:rer7:Ites in the broacrz,t 7:vnsc: In connection with reserve ruirewmts on tr:!:-,:- cticr- -ccoi)rt there is the c.uestion of wh:,ther there c,houlr_ , an similar to that in ;.E. / or, alternotively, a as in S.85, un.der which reservr, rocwire.7,ent:: cuL i et. Icy level on an initiml amount of transactions accc-:unt 7.r% hi -!!!(_r accounts abov,:, this initial level. The 7,r.n;.exemption level an, in particular, the 43!. . rillion level of h.h. 7. oe reccnize, that .:;rt(-H syrte7 coulo be develorefJ whose effect %!r.,,.:1.; net he different tro::., that of an exotien. Hdch systei ould !7,r' one in which t!lo reserve r7Iti for tlo initial voluwe of trenctions accounts was lowor t'Fn in extend to a larger volui!e of transactions zi(-7 ,:at 7; million specified. Instead of the two-tier f S. Jf.:), we coulc: hnvp a throe-tier reserv e r(.,c:uire7cnt i0 example, a 2 ::ercent reerve re-uirerrent zi:Tht nn tn, first ,;10 :- 7,rcent resrv^ .:cconc, SIG million, an,; a still iiiihor reservr7 rec.Jirr,7--rt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  --......m111111111111111111111111111r  Paqe Ihree  uur z!bove on !!ot frc, : a tire to eliTinAtr., most S&Vs fro:7 ein cvrc y re7crve rer2u1rents or c:wered only in a norAral ;arhcr, Gur position ic the result of two important ccnf:i...Itionn. Nr.7•7t, Ps will be noted below, under the Eiunrl ,ntry rcrvL r:t(:uir frent rrorosal, the I,Pderal Tkoarve will ho io -nlition, if It so ohooLes, to 1:7pose aciditional rervc r i1r:nts on tr:..h7act1on:, accounts ,,,ithout any exe7:tion lcvl. -ost ir!.lortantly, our flurrcrt of r (7.!tc:Ttion iv.J (:Ath a rroferenco for a qrneuate(!: rese?rve ratio !iy::t- r?.1 '2r)olo not the effectivenens of f-onotary Gndorlyin; tl.“2 rk ozird's Tu,77ort iF fact that thrift Institutions aro in n tr7ne;itirio:)1 stcge in which rate control 17 b000•min2 tho cost of mcn:!y is risincl hatever 1,ith reoct to thr? 1-hasincj-eut of rat 7r.rtrol rontninr.: in tho cill rc.contly re7ort: , out your trift ir-..titutions will find the7:!so1va- in a 7.or.:itior of P3vin7 to -Jlv 117arket rat.'n 1ncroasIni7ly cn thcir fon0. irt, th-ro will :Ail: be the conztrint .'1.:!cc(2 on t'smir rortfoli the continud 0o7incnee cf irtero:t r:Jte in their I.ortfollor:. The transition to the !Ir:(, of V! "r.t 71:•77 -,r7 increasingly likely to very .:irtjuel,nri thr? of '— accounts ano con7:u7er credit to thrift institution ---, -F‘r7 '1111 haroly put t.tic in an ir,rrt.iPtr. position to cffectivolz 71,7,7,in3t hankr7. 7.1“2 1.-tter on'T trt In offerin9 these types of finncial servic, c,r.0 it ii1 take rrany years before thrifts find that tho•.io a positivo l!r.pact on their rninon irir, In tl-:2 L- *.lark Lc)'rc'' iit :c -n :7t that thriftr. shoul :Ive the r.2cPrve the lame exem2tir:n levels, as hcndicars notcc a:.- ove) urWer rhich thrift,3 1.111 ctir'u for L.-o:Tvtire. :et, whil thtit w: coly1 for special treatfr.ent 6,ith rcscect to roprve thrifts vis vi coorci.n1 nan .v.3 on e' :uity th:-? trio situation. Let  ro turn not: to tne  Pr,Ec‘rv .,: 1 -  autority in tho for!: cf zor;r1e;-(7ntz,r; with tese c2rnin,73 7-arket re.turn. Tn tis roricl, the r:.1koarc notrs tho 17. -.1!r,rc2.7. Niolcker tht,t thic autority woul0 not 17.. tr)1 11 ,77. , t'sc -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  in' t  c;-:-r:,  Pale l'eur  Peserve vade the :Ictrninr..tic)n tnat .,onet:uv aeol not be rfiective without so&; su:.nicllentE,rv rerervr—;. nt that thes suppleentary recl...irelnents roulC: 17ci only if five of the :even merber!: of the, -Clor,r or it. ahe Federal reserve nucts that thrift ititotion. :, rerrnitted to count these supr1o.-ent7:1 rcrv trt' rf-2f.tin4 exictin(1 lic]uldity rcr: uirorcnts thus easin the huraen of such reserve ;hile we endorse this latter rroposal, we r:!colni7c:tt thi: problems. It reducer the ability of the 12 rein.r r.1 to raise fun.is throucjh ter71 uef,ocits troc thus reducin,7 one cource of funOs fcr it could reduce the effectivfncr', of r- .1iction in licuidity r -2uu1re!:-onts z,s i TeP.ns of sti.T.u1,-tinmarket when conc'itione: rcr, uire this. Thin in other licluid assets, reservcss ceuli! not 5e solo off r liuidate(":, with the r A )rocee0s 1c:in.-7 into the cortri&(!e T. Irt or offsettityl s.wings withrawals. i)er'ndj rv on th rrrci-:! level of svpplementary re:wryer:, if thee &hculc e cy the Fe6:,sral t?e!7,:rve, there woul he less 1(7sew 1- c,r tiliriri reductions in Lftui ,lity reoPire.-rento (1:; a tool ,;f: housir l cre6it '.:11nre is cf nercent 11ruL'it,./ reeuiren.ent altoulh the ;:c.:hk r)arc'J's if Inctitutions tc rle.; te7norPri1y liruidity rec_uire7-rnt if to otL, ..,:t rrtlanee, desnit.: no= rec7r2rvi:tion -, !ii that the use 0 reserves to 71!7,ct not be a seriou n:;u7h to th,7 of the E3ank noarO's llousinr) creOit an,21, in r.ny case, the Federzl liom^ Lon riank Syst othrLr i tool: to influence the volur- r of hourirsiorr, with Cilirr:in Volckr to waive tesu!:!- 1 -entary rcserve: for certrsin it these in-titution:f. o7:or3tionl uo wouLi stronlly thr‘t cur ,7,n:!er7!e nE 1- entary resorve rer- uirer'ent: c,n a str,n1sy of reserve recuirc,7-Fnt.7 to rneet li(eioitv rer'uir2,2rt 7. upon a r.arket rz. t interert 1- 1n1 m i. 7 ithout such a , Y:.7.1-1,:ct rinte, there 'ou1,1 `..;e 3 i'i rrini--ct on thritt inctitut1,-011: thrni cou1:1 ill affcc,! .7rrir7 intere3t rate J:ricOr-..   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Pa.71e Five res;ct to the This brings mc to an iirportant detail wit thnt the 2oecral ,ntr re-c rec:ui nature of these surTlernentary renc_,rve :; these :Lhcalt feserve leaves as an oncn cuestion. Tn of or nts acr:cu s be determineci es a percentage of transrIction ,r, vc 'orco n? all accounts held at r.:01-_.oitery institutio rcsel-rvo reouireshould he the maximum rercentacle ournlcentary r 'ayimu;.0 tit : note' ment permitted? The 2edr_tral 1:erve WAs tr., if -,‘-!ua , woul..: of 2 rercent for supplementry reserves ctions trnsa only if the base Included total accounts. Eowevcr, antisubst t hav accounts were covered, the percentale would tae. vQ reser ally higher in order to ensure an cc:uivalent c! rurrle7entory ,fers th,Ft the )ar:e on The Dank floard rr: 7 r.ccountr.. wtr ctionf reserves are determiner.: include only trans3 v.ith r^r-.2et ahov reasons for this are the same that we oave ,nc.nction!L tri or , to endorsino basic reserve roeuire::.ents °nil tranw*ctions of ntre accounts. .itn reorct to the 7i;xiTum perce von, ec",efer reror l accounts that could he covered by su1oontz i here :ronl, we unh FIltho , to the ju&I;Tnnt of the Federal reserve te neee,7 nr,t %/oulC rves r.l.se that, in rractice, such curTloTentary . level uP, or could be applied at a lower than mPxlr Lavin -,n crx ti:cc would like to turn now to the treat:Iont of ruirntr.7. serve ry—re renta accounts under tho basic—not sui-,11(?r , , LcccJunt: nal cf.:ro ns and J. 6L; exert all si4vi both d.h. howout, s roint ve Perer il Pee7ler from reserve rec:uirerrents. As the onal on .71.rt-trr ncn-ever, the substantial reserve requirorent tiv rti cult diffi e tixe deposits unc:,n. 0. 85 would creat z.%t.ility to tlan:qcaT. for der:ository institutions. It would 1n7ti!1 savin7 corpete with alternative sources of ts. li.c.n reuirc tutions not covered hy reserve ahle ay:roacil wet:1J takes the position, therefore, that t_le desir reTert-, on st- ortrec-ui ve reser of use be limited authority for the 1.1asio, with thc cir:707.c.tcrr nonpersonel tire dc,7osits on a stanhy ntances for such Use nexcc,rtiom.:1". ncent on the Ine liank Ltoord c.rvlorsPc this prootal hut- ec.nti cuit: imc for assurance that the rircurstancec osc! : ir:not would, therefore, excel_ti:)nF11 an cC tnrift icotitut Ion over the lr_Nno-run with resicet to the prefer no its. depos to compete for non!-:erc7onci1 1efor , oit. ^S til rrena nonTe ,reserve rer-uirecnt on short-ter on rity r.:h autno to the fecieral eserve on the Lasis.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F'Age t;ix  Let re turn now to t.r. nar7c1y Lull :ricinc- ;.reorer cr to ihi3 is, a of view tt :nFr . in th? 1:=!. not C;ot tie Fcf.ier:,1 e.r,.orse-ert of this rooition iL; :y refr:r:- noo to ":voz-Ae flexi:Ality, in t!.,e ri7.k of „l'icru:Alor:, - ir LzIrkin: rrt-ct availe:)ility of zi na.lir! level c,f rp/..).7rt' 7:,rvicc-:: to ::11 ts!tw.:.e th:it thcso iool..7 not r.sric.o%ly rffect the cr.rlicability of the full -ririnIN COnCIUSIC.0, We c-n;;;:rr,e eerii Kererve lc rco-cn,Ari.:1 in the structurc ccve of r,.7,crvi-.! Lent-6 hi.:3 CUe,20Sted Cetrill cf t -11“1 intn acccunt the ii•tct tit thrilt int7titJticnr1 err- - nin.; ajLi icilt. trensiticnal thcc!;.7 the ,.7,fcwin,: :o71, 1, .tic- . rttiz% of e:, fier , or r 10717.1otive1.1 ' rhasi^:4-out rz.to ccntrl. concern with this in no vziy trrct 1.- or- our .:1.- .- f)rt cL the generel t'n.lt the t'e0eral ..7f,rvo witt: rezTr!ct to riverve recnirentr,. 1 would like to stress wy felin17; ,75r7,c!lt th^ of Con-roc wit tkH ' thir: ..‘o,7!r. It extrer,ely uceftil, I :Delieve, for -7/-n!7r.H rul“. anc; unoerstoe ty the industry 1:;:t I  tisn't you for  i4 ome Loar   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  thc. or:-ortunit‘: ,nvaiinNln to y(r :incerc17,  1:ty  •  fl,  Federal Home Loan Bank Board  meMO  OFFICE OF ECONOMIC RESEARCH  INTER-OFFICE COMMUNICATION  FROM:  Ken Biederman  DATE  September 4, 1979  TO:  Acting Chairman Miller  SUB=  September G Meeting with Chairman Volcker: Agenda and Attachments  Developments and Outlook Bank Board Housing Outlook Key Monthly Housing Statistics Forward Lending Commitments  1.  Housing A. B. C.  2.  Savings Developments and Outlook D. MMC Activity E. Savings Receipt Activity  .  3.  Sources and Uses of Funds F. S&L System: Sources and Uses of Funds  4.  S&L Earnings G. S&L Detailed Earnings Data: 1974-78 H. Selected Financial Ratios: First Half-1979  5.  Reg Q -- Small Saver Issues  6.  Countercyclical Housing Finance Options I. Bank Board Policy Paper   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A.--Housina Outlook Housing Starts, Historical Data and Projections (quarterly average, seasonally adjusted annual rate) (Millions of Units)  Total  • Single Family  2-4 Units  5 or More Units  1977  1st 2nd 3rd 4th  qr. qr. qr. qr.  1.74 1.94 2.04 2.15  1.25 1.60 1.47 1.55  .11 .12 .12 .14  .35 .38 .45 .46  1978  1st 2nd 3rd 4th  qr. qr. qr. qr.  1.80 2.10 2.04 2.07  1.24 1.46 1.44 1.49  .11 .12 .13 .14  .41 .52 .48 .45  1979  1st 2nd 3rd 4th  qr. qr. qr. qr.  1.62 1.84 1.68 1.45  1.12 1.26 1.16 1.00  .10 .12 .12 .11  .40 .45 .40 .34  1980  1st qr. 2nd qr.  1.45 1.60  1.00 1.13  .11 .12  .34 .35  1.54 1.99 2.02 1.65  1.16 1.45 1.42 1.14  .09 .12 .13 .11  .29 .41 .46 .40  Full Year 1976 1977 1978 1979   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  13.7-Key Monthly Housing Statistics (all figures in thousands except where noted)  tarts 1/ 1 unit structures 2-4 units structures 5 or more unit structures ermits authorized 1/ 3/ obile home shipments 1/ ew homes sales 1/ edian new home sales price verage new home sales price xisting home sales 1/ edian existing home sales price otal unsold homes Completed Under construction Not started otal unsold homes as ratio to sales 2/ ompletions 1/ 1 unit structures 2-4 units structures 5 or more unit structures otal units under construction 2/ 1 unit structures 2-4 units structures 5 or more unit structures  July 1979  June 1979  1,749 1,223 119 457 1,521 N.A N.A. N.A. N.A. N.A.  1,935 1,295 121 516 1,639 N.A 679 64.2 74.2 3,560  1,835 1,226 119 490 1,618 271 718 $63.1 $72.0 3,860  Apr. 1979 1,745 1,278 115 352 1,517 273 724 $62.7 $71.1 3,760  Mar. 1979 1,786 1,266 116 404 1,621 270 784 $60.4 $68.5 3,650  Feb. 1979  Jan. 1979  . Dec. 1978  June 1978  1,381 953 76 352 1,425 272 697 $61.2 $68.7 3,620  1,679 1,139 124 416 1,442 311 774 $60.3 $67.7 3,710  2,074 1,539 119 416 1,827 303 802 $59.9 $67.1 4,160  2,093 1,439 143 511 1,988 270 830 $56.7 $63.2 3,820  N.A. N.A. N.A. N.A. N.A.  $56.8 $55.9 423* 426* 93* 90* 257* 252* 73* 84*  $54.7 $53.8 416* 416* 89* 94* 246* 240* 81* 82*  $51.9 393 97 231 65  $52.0 408 99 246 62  $50.9 419 99 258 62  $48.5 422 83 252 78  N .A. N.A. N.A. N .A. N .A.  7.5* 7.3* 1,871 2,029 1,437 1,347 132 98 402 584 1,251 1,244 723 729 80 79 447 436  7.2* 6.6* 2,015 1,957 1,438 1,412 126 142 451 403 1,259 1,304 740 770 77 79 432 455  7.1 1,894 1,376 121 397 1,344 793 84 447  6.7 1,815 1,331 115 369 1,360 812 86 463  6.2 1,888 1,418 121 351 1,345 799 85 461  6.1 1,876 1,341 111 421 1,296 775 78 442  N.A. N .A.  N.A. N .A.  / Seasonally adjusted annual rate / Seasonally adjusted / Revised to reflect expanded number of permit issuing areas Based on new survey sample and not comparable to data preceding March, 1979. New sample has a higher level of total unsold homes about 3 percent higher than old sample.  Meai,s not available https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  May 1979  C.--Forward Lending Commitments of FSLIC-Insured Savings and Loan Associations Year and Month  1976 July Aug. Sept. Oct. Nov. Dec.  Outstanding Commitments to Originate or Purchase Mortg_4g_cl Total Amounts % Distribution % Distribution by Expected (5 millions) by Type Disbursement Period Seasonally Actual Adjusted Origination1Purchase 5_ 1 mo. 2-3 mos. 4-6 mos. 7-12 mos. >12 mos.  Attachment E  New Mortgage Commitments Made Outstanding CommitX Distribution Total Amount ments for Non-Mortgage by Ty.e Loans and Securities ($ millions) Origination Purchase  16,122 15,605 15,289 15,163 15,310 14,683  14,969 15,077 15,366 16,029 16,696 17,335  83.4 82.7 82.2 82.0 80.8 80.0  16.6 17.3 17.8 18.0 19.2 20.0  40.8 41.3 41.7 39.8 41.9 40.0  27.9 26.7 27.2 28.1 26.1 26.1  16.1 16.5 15.6 16.0 16.4 16.4  10.4 10.6 10.6 11.2 10.6 11.7  4.8 4.9 4.8 5.0 5.0 5.8  7,481 7,363 7,161 7,007 7,115 7,051  91.6 91.1 90,2 88.1 86.3 87.3  8.4 8.9 9.8 11.9 13.7 12.8  1,667 1,761 1,727 1,795 1,928 1,990  Feb. 1ar. Apr. May June  11,933 16,622 19,088 20,996 22,015 21,785  17,425 17,740 18,443 19,139 19,294 19,750  79.1 79.6 81.8 83.7 84.3 84.1  20.9 20.4 18.2 16.3 15.7 15.9  38.9 40.2 41.5 41.2 42.3 41.9  27.2 26.7 27.9 29.3 27.1 28.4  16.6 16.9 15.1 14.9 15.4 16.0  12.5 11.7 10.9 10.4 10.3 9.2  4.7 4.5 4.6 4.2 4.6 4.4  6,498 7,854 10,909 10,966 11,225 11,166  83.9 85.7 89.1 91.7 91.3 91.3  16.1 14.3 10.9 8.3 8.7 8.7  2,075 2,228 2,409 2,462 2,529 2,789  July Aug. Sept. Oct. Nov. Dec.  21,670 21,667 21,406 21,333 21,054 19,694  20,196 20,894 21,127 22,409 22,688 23,119  84.3 84.3 84.4 84.2 84.2 83.1  15.7 15.7 15.6 15.8 15.8 16.9  41.4 41.4 41.8 40.9 41.2 39.3  28.2 28.0 29.0 28.9 27.8 28.7  16.1 16.0 15.3 16.0 16.0 16.7  10.1 10.3 9.7 10.4 11.0 11.5  4.2 4.3 4.1 3.8 3.9 3.9  9,847 10,925 9,980 9,455 10,019 8,430  90.7 91.5 91.7 91.7 92.1 90.1  9.3 8.5 8.3 8.3 7.9 9.9  2,963 2,871 3,109 3,359 3,293 3,462  19,349 20,425 22,095 23,169 23,704 22,711  22,630 21,845 21,431 21,178 20,848 20,623  83.3 84.3 85.3 86.2 86.5 86.4  16.7 15.7 14.7 13.8 13.5 13.6  37.6 38.7 39.0 38.5 39.9 38.4  29.5 28.8 28.9 29.7 28.0 28.4  16.9 16.8 16.8 16.7 16.8 17.3  11.9 11.7 11.3 11.3 11.3 11.5  4.0 4.0 4.1 3.8 4.0 4.4  7,514 8,315 11,012 10,556 11,179 10,220  91.8 91.7 92.5 93.4 94.0 93.7  8.2 8.3 7.5 6.6 6.0 6.3  3,530 3,473 4,070 4,128 4,138 4,310  22,188 21,849 Sept. 21,457 Oct. 21,316 lov. 20,565 9ec. 18,769  20,698 21,049 21,457 22,320 22,065 21,978  86.2 85.7 85.9 86.1 86.3 85.7  13.9 14.3 14.1 13.9 13.7 14.3  38.2 38.8 39.1 38.7 38.2 35.9  28.7 28.1 28.2 27.8 27.1 26.5  17.3 16.7 16.4 16.6 16.9 18.0  11.7 12.0 12.3 12.4 12.7 13.7  4.2 4.3 4.1 4.5 5.1 5.9  8,921 9,923 9,094 9,582 8,633 6,929  92.6 93.7 93.7 93.6 -94.5 93.3 '  7.4 6.3 6.3 6.4 5.5 6.7  4,201 4,118 4,122 4 ,287 4,243 4,056  6,411 6,973 9,769 11,430 10,007  89.7 91.2 93.1 93.7 95.4 93.8  10.3 8.8 6.9 6.3 4.6 6.2  3,937 3,980 3,676 3,602 3,559 3,589  9,255  92.4  7.6  3,375  1977  Jan.  1978  Jan. Feb. Mar. Apr. ,May. June July Aug.  1979  Jan. Feb. Mar. Apr. May June  17,925 18,895 20,913 22,71 23,359 22,582  20,965 20,209 20,284 20,760 20,544 20,510  84.6 84.6 85.9 86.A 87.3 86.3  15.4 15.4 14.1 11.4 12.7 13.7  33.0 34.9 36.9 36.6 37.5 35.8  27.9 27.2 26.9 27.3 26.8 27.1  18.5 17.6 16.7 16.0 16.5 17.2  14.3 14.1 13.7 13.8 13.6 13.7  6.2 6.2 5.8 6.2 5.7 6.2  July  22,181  20,691  85.4  14.6  35.1  27.0  17.6  13.9  6.3   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  10,559  Associations D.--Six-Month Money Market Certificates (MMCs) at FSLIC-Insured Savings  Period 1978 -  June July Aug. Sept. Oct. Nov. Dec.  1979 -  Jan. Feb. Mar.  (Dollar amounts in millions) Estimates for All Insured Associations Reported Data for Large Associations* Change ding (End of period) Outstan Outstanding (End of period) Change During of Percent During Percent of Period Total Savings Amount Period Savings Total Amount 5,400 1.3 5,400 2,538 1.5 2,538 6,390 2.9 11,790 3,008 3.3 5,546 3,290 3.7 15,080 1,545 4.2 7,091 4,258 4.7 19,338 1,998 a/ 5.4 9,096 7,692 6.5 27,030 a/ 3,463 7.3 12,538 8,580 8.6 35,610 . 3,719 a/ 9.5 16,289 6,720 10.0 42,330 a/ 2,898 11.0 19,188 15,210 13.5 57,540 6,660 14.6 25,848 6,740 15.0 64,280 2,745 a/ 16.1 28,620 8,934 16.7 73,214 3,687 a/ 17.8 32,343 2,306 17.2 75,520 954 18.3 33,297 2,580 17.9 78,100 1,182 19.0 34,479 1,420 18.2 79,520 604 19.3 35,083 6,306 2,740  Apr.  10 20 30 Month  May  10 20 31 Month  35,790 36,243 36,652  19.6 19.8 20.0  586 a/ 453 409 1,448  80,850 r/ 81,870 r/ 82,780 T-*/  18.5 18.7 18.9  1,330 1,020 910 3,260 r/  June  10 20 30 Month  36,857 37,317 37,935  20.1 20.3 20.4  205 460 618 1,283  83,280 r/ 84,320 1.--/ 85,700 --r-/  18.9 19.2 19.2 r/  500 1,040 1,380 2,920  July  10 20 Month  38,607 r/ 39,253 -  20.7 21.0  87,340 r/ 88,810 -  19.6 19.9  1,640 r/ 1,470  672 r/ 646 r/  tions. 247 associations holding about 41 percent of all savings at FSLIC-insured associa - Adjusted for effect of merger. r/ - Ruvined.  *   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  E.-Estimated Net New Savings Receipts of Insured Associations (billions of dollars)  1978-  1979-  August-  Entire Month  1st 10 Days  2nd 10 Days  Remainder of Month  2.0 1.3 1.1  0.8 0.9 0.5  0.4 0.2 0.7  3.2 2.4 2.3  2.6  1.3  1.0  1.8 2.0 1.5 1.6 1.7 2.1 1.6 1.5 1.7 1.1 0.7  1.0 1.3 -0.3 1.4 0.3 1.1 0.8 0.3 0.6 0.4 0.1  0.4 0.3 0.7 0.4 @ 0.7 0.2 -0.1 @ @ 0.1  4.9 3.2 3.6 1.9 3.4 2.0 3.9 2.6 1.7 2.3 1.5 0.9  Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.  1.9 1.6 1.9 0.7 1.2 1.6 1.6 1.4 1.2 1.8 1.4 0.9  0.9 0.4 0.8 -0.7 0.9  0.1 0.1 -0.1 0.4  1.0 0.5 -0.4  0.4 -0.1 0 n.?  Jan. Feb. Mar. Apr. May June July  2.8 2.0 2.2  0.9 0.5 1.1 -1.4 0.7 0.1 0.5  U.7 0.1 -0.2 -0.1 -0.2 0.1 -0.3  4.4 2.6 3.1 -1.5 1.6 1.5  1972 1973 1474 1975 1976 1077 1978 1979  0.8 -0.3 -0.2 1.0 1.1 1. 1.4 0.9  0.4 -0.4 -0.4 0.2 0.6 0.8  0.5 -0.5 -0.6 0.1 0.3  1.7 -1.2 -1.2 1.3 2.0  9.2 9.  2.1  Year and Month 1976Oct. Nov. Dec. 1977Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.  1.1 1.3 1.1  @ - Less than $50 million. r/ - Revised.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0.9 0.7  0.7 -0.1  0.1 u.3  2.9 2.1 2.6 0.4 2.1 1.7 2.8 2.1 1.6 2.7 1.4 0.7  1.3  2.6  Sources and Uses of Funds (Billions of Dollars) MOST PROBABLE  MAJOR INTERNAL SOURCES  1977  1978  1978 3Q 2Q  1979 1Q  1980 2Q 1Q  1979 4Q  Savings  50.2  44.2  38.8  12.4  9.5  11.6  10.7  7.6  7.3  8.3  14.3  11.0  Loan Repayments  48.5  52.3  48.7  11.3  14.0  14.1  12.9  13.3  13.0  12.0  11.2  11.5  Advances  4.2  12.1  6.7  1.1  3.8  3.8  3.4  Other Borrowings  4.4  2.8  3.7  13.8  15.4  15.4  3.1  3.8  4.0  4.5  3.4  4.0  4.0  4.0  102.2  107.3  95.0  22.4  29.2  28.6  27.1  20.1  28.4  25.0  21.5  20.0  25.0  14.2  10.9  1.0.9  2.8  2.7  2.7  2.7  2.7  2.9  2.6  2.7  2.7  2.7  8.9  8.4  8.5  8.5  9.3 \  _1  EXTERNAL SOURCES  ii.jisfI Sales  MAJOR USES Loans Made Loans Purchased  LIQUIDITY RATIO (End of Period) RETURN ON ASSETS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  8.5  8.5  . S  .81  .83 '  8.7 .68  -2  1.  EARNINGS DATA G.-- SAVINGS AND LOAN ASSOCIATION INCOME, EXPENSE,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BY ASSOCIATION SIZE AND FHLB DISTRICT, 1974-78  Association  Net Income To Average Assets  Current Earnings As of Current Net Worth  Total Asset Yield  Mortgage Yield  Average Cost of Money  United States 1974 1975 1976 1977 1978  .54 .47 .64 .79 .83  129.03 103.97 152.72 206.43 212.11  7.48 7.50 7.85 8.05 8.39  7.49 7.69 7.98 8.22 8.47  6.13 6.30 6.36 6.41 6.63  Over $1 Billion 1974 1975 1975 1977 1978  .56 .51 .70 .90 .95  173.41 123.45 165.77 254.65 259.17  7.53 7.57 7.86 8.07 8.46  7.49 7.69 7.94 8.22 8.51  6.25 6.37 6.40 6.43 6.70  $500 Million -51 Billion 1974 1975 1976 1977 1978  .46 .41 .59 .74 .81  118.20 75.64 147.67 225.03 213.36  7.49 7.51 7.84 8.01 8.35  7.50 7.65 7.94 8.17 8.41  6.23 6.37 6.38 6.40 6.62  S250 Million-5500 Million 1974 1975 1976 1977 1978  .51 .45 .60 .74 .80  111.60 89.44 157.64 199.96 201.25  7.42 7.44 7.80 7.99 8.32  7.46 7.66 7.94 8.17 8.41  6.12 6.28 6.33 6.37 6.59  $100 Million-5250 Million 1974 1975 1976 1977 1978  .52 .45 .61 .73 .77  105.11 103.09 140.54 180.64 190.13  7.45 7.48 7.85 8.05 8.36  7.49 7.68 7.98 8.22 8.46  6.06 5.26 6.34 6.40 6.59  550 MIllion-S100 Million 1974 1975 1976 1977 1978  .59 .51 .66 .77 .81  130.38 112.92 142.97 182.44 192.49  7.48 7.52 7.89 8.10 8.40  7.52 7.74 8.05 5.29 8.52  6.01 6.25 6.36 6.44 6.61  $25 Million-550 Million 1974 1975 1976 1977 1975  .62 .52 .66 .76 .78  143.05 127.19 154.94 168.65 180.56  7.45 7.50 7.90 8.11 8.43  7.51 7.76 8.09 8.32 8.57  5.95 6.22 6.35 6.43 6.60  $10 Mi1 1 i0n-525 Million 1974 1975 1976 1977 1978  .67 .52 .69 .78 .80  148.68 134.01 175.54 181.66 199.67  7.42 7.39 7.84 8.11 8.42  7.52 7.76 8.09 8.38 8.59  5.F35 6.13 6.25 6.41 6.56  Under $10 Million 1974 1975 1976 1977 1972  .65 .40 .52 .63 .78  126.97 98.80 132.27 152.13 204.02  7.35 7.31 7.78 8.07 8.45  7.43 7.72 8.07 8.37 8.65  5.65 5.92 6.10 6.26 6.47   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Net Income To Average Assets  Current Earnings As % of Current Net Worth  Total Asset Yield  Mortgage Yield  Average Cost of Money  Dist. 1 --Boston . 1974 • 1975 1976 1977 1978  .29 .22 .28 .38 .43  61.10 61.25 77.84 201.17 164.09  7.39 7.45 7.72 7.86 8.10  7.42 7.66 7.83 8.03 8.19  6.04 6.21 6.19 6.20 6.34  Dist. 2--New York 197-4 1975 1976 1977 1978  .47 .38 .50 .56 .57  82.03 72.97 109.70 156.67 183.83  6.99 6.87 7.45 7.59 7.86  7.17 7.32 7.57 7.76 7.95  5.91 6.04 6.09 6.13 6.34  01st. 3--Pittsburgh 1974 1975 1976 1977 1973  .53 .43 .56 .68 .72  79.06 102.41 146.53 192.27 208.88  7.29 7.32 7.72 7.89 8.18  7.33 7.56 7.86 8.07 8.29  5.97 6.16 6.25 6.23 6.48  Dist. 4--Atlanta 1974 1975 1976 1977 1978  .58 .44 .60 .72 .79  102.78 76.96 117.46 176.20 199.23  7.52 7.58 7.82 7.97 8.30  7.57 7.74 7.95 8.14 8.39  6.16 6.35 6.36 6.38 6.59  Dist. 5-- Cincinnati 1974 1975 1976 1977 1978  .57 .50 .61 .76 .81  248.54 112.70 205.22 282.29 226.24  7.43 7.46 7.81 8.03 8.33  7.52 7.71 7.98 8.23 8.44  6.06 6.23 6.32 6.39 6.58  Dist. 6--Indlanaoolis 1974 1975 1976 1977 1978  .59 .45 .56 .64 .75  127.65 76.70 141.56 175.63 189.23  7.44 7.45 7.76 7.95 8.28  7.50 7.67 7.95 8.19 8.42  5.88 6.15 6.22 6.33 6.53  Dist. 7--Chicago 1974 1975 1976 1977 1978  .42 .35 .52 .64 .70  109.10 91.99 130.99 152.53 177.30  7.19 7.27 7.71 7.94 8.28  7.28 7.51 7.85 8.12 8.39  6.08 6.23 6.37 6.45 6.65  3.  Net Income To Average Assets  Current Earnings As of Current Net '..Jortn  Total Asset Yield  Mortgade Yield  Average Cost of Money  6.12 6.33 6.46 6.50 6.70  Dist. 8--Des Moines 1974 • 1975 1976 1977 1973  .48 .43 .58 .71 .72  97.71 114.23 131.38 186.68 191.07  7.39 7.44 7.86 8.03 8.35  Dist. 9--Little Rock 1974 1975 1976 1977 1973  .58 .50 .70 .81 .84  125.71 110.44 141.55 157.75 177.25  7.72 7.74 8.10 8.28 8.60  7.66 7.83 8.18 8.39 8.61  6.25 6.50 6.59 6.65 6.31  Dist. 10--Topeka 1974 1975 1976 1977 1973  .62 .49 .65 .82 .91  154.84 92.30 149.35 205.81 237.15  7.69 7.69 7.98 8.20 8.54  7.62 7.80 8.08 3.33 8.57  6.24 6.48 6.55 6.61 6.76.  Dist. 11 --San Francisco 1974 1975 1976 1977 1973  .59 .60 .86 1.08 1.11  309.82 173.37 243.16 325.33 263.76  7.76 7.30 8.05 8.30 3.71  7.61 7.83 8.14 8.46 8.76  6.31 6.39 6.42 6.46 6.75  Dist. 12--Seattle 1974 1975 1976 1 977 1973  .62 .71 .86 1.08 1.11  130.17 151.86 173.36 200.26 233.91  7.75 7.82 8.15 8.36 8.78  7.72 7.96 8.32 8.57 3.87  6.13 6.27 6.32 6.35 6.63   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7.45 7.66 7.94 8.17 8.41  N.B.:  DATA FOR 1979 ARE PRELIMINARY AND SUBJECT TO REM;IWI  H.-Selected Financial Ratios for FSLIC-Insured Associations (half-year data annualized in percent)  Item  United States  Boston  New York  Pittsburgh  Atlanta  Federal Home Loan Bank District Cincin- IndianLittle Des nati apolis Chicago Moines Rock  San Topeka Francisco Seattle  Net income/average assets  1978-11 . 1979-I Change  0.83 0.69 -.14  0.47 0.37 -.10  0.57 0.37 -.20  0.66 0.57 -.09  0.77 0.69 -.08  0.82 0.70 -.12  0.80 0.65 -.15  0.69 0.60 -.09  0.72 0.64 -.08  0.85 0.66 -.19  0.93 0.82 -.11  1.11 0.92 -.19  0.84 -.18  6.69  5.93 6.00  6.27 6.17 -.10  7.03 7.09 .06  6.17 6.20 .03  6.98 7.04 .06  6.45 6.48 .03  6.27 6.30 .03  6.12 6.23 .11  6.33 6.38 .05  7.21 7.28 .07 .  7.60 7.59 -.01  7.49 7.5! .0  6.79 7.23 .44  6.46 6.84 .38  6.52 6.98 .46  6.67 6.97 .30  6.71 7.12 .41  6.73 7.13 .40  6.65 7.11 .46  6.84 7.19 .35  6.81 7.17 .36  6.93 7.43 .50  6.88 7.27 .39  6.97 7.54 .57  6.82 7.30 .48  Cost of savings 1978-11 1979-I Change  6.65 7.08 .43  6.31 6.70 .39  6.36 6.76 .40  6.52 6.80 .28  6.61 7.01 .40  6.62 7.02 .40  6.64 7.08 .44  6.71 7.04 .33  6.68 6.99 .31  6.84 7.31 .47  6.75 7.16 .41  6.77 7.35 .58  6.62 7.10  Mortgage portfolio yield 1978-11 1979-I Change  8.54 8.70 .16  8.22 8.37 .15  7.92 8.04 .12  8.35 8.46 .11  8.43 8.56 .13  8.46 8.70 .24  8.52 8.67 .15  8.50 8.60 .10  8.46 8.62 .16  8.69 8.88 .19  8.65 8.80 .15  8.87 9.06 .19  8.96  1.02  Net worth/savings  1978-pee. 1979-June Change  6.71 .08  Cont. of funds  1978-11 1979-1 Change   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .16  July 24, 1979 -1gned to Stimulate Housing I.-Bank Board Policies Desi housing and mortgage lending This paper first discusses the cies scenario and Bank Board poli outlook under the current economic ing hous e ulat stim cies designed to It then outlines Bank Board poli . p falloff in housing activity and mortgage lending under a shar neither the economic recesIt should be noted briefly that or the orojected decline in sion that we appear to be in now ous as in 1974-75. Thus, real housing starts should be as seri ; 1.3 percent in 1974 and 1975 GNP declined, respectively, 1.4 and 2.36 million units in 1972 while housing starts declined from unemployment rate for all to 1.16 million units in 1975. The percent in 1974-75, and from occupations rose from 4.5 to 9.0 industry, more than we 8.2 to 21.8 percent in the construction nary period. currently expect during this recessio Bank Board's Current Housing Outlook vity is fully justified A reasonable decline in housing acti the economy, some of which in light of inflationary pressures in lf. So far the decline in emanated from the housing sector itse le, in large part because of housing activity has been reasonab ificates tied to the 6-month the authorization of money market cert of the overbuilding that T-bill rate in June, 1978 and the lack our analysis indicates a occurred in the early 1970s. However, will decline more sharply. high probability that housing starts ssion that we now appear The result will be to aggravate the rece production well below to be experiencing and result in housing that implied by demographic needs. ant decline in housing Two factors point to a more signific weaker half of this year. First is the starts during the second ry sito depo r s as well as othe savings flows generally through S&L' mum maxi the reduction in the institutions, largely the result of certificates and removal et ceiling interest rate on money mark commercial banks on MMCs of the differential between thrifts and ent or higher. This adverse when the 6-month T-bill rate is 9 perc April, and there is normally impact on savings flows dates only from an adverse impact a time lag of 3 to 6 months before this has recession that appears on housing activity. Second, the economic s of inflation, to have begun, combined with continued high rate me and consumer confidence implies a reduction in real consumer inco impact on housing that will be having an increasingly negative psychology as a force sales despite the role of inflationary housing demand. holding up   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -1-  Based on the above analysis, the Bank Board expects housing starts to total 1.65 million units this year compared to 2.02 million units last year. Housing starts, which averaged a seasonally adjusted annual rate of 1.84 million units in the second quarter, could well decline to 1.45 million units by the fourth quarter. Some recovery in housing starts is possible in early 1980 if we get a significant decline in interest rates before the end of this year, but the high rate of inflation and the continued uncertainty about the U.S. dollar raise questions about how much of a decline in interest rates we can expect. In fact, at the moment, interest rates are on the rise again. What are the implications of the above for economic policy? In anticipation of a recession - persisting perhaps trough the end of this year, with a parallel decline in housing starts,. the Bank Board has prepared itself to restimulate housing, with due consideration to the impact on inflation. Any major moves toward stimulating housing would be undertaken after appropriate consultation with the Administration and the Federal Reserve Board. Success of such moves will be dependent on consumer demand for housing being responsive to increased mortgage credit availability.  Bank Board Policies to Stimulate Housing Activity Ths following actions to stimulate housing and mortgage lending can be taken by the Bank Board without any legislative action: 1.  Reduction of liauiditv reouirements against S&L deposits from the present 6 percent to anywhere down to 4 percent. A reduction in liquidity requirements of 1/2 of 1 percent potentially can release $2.3 billion in S&L funds for mortgage money although there is no certainty that the full amount would flow into mortgage lending. We estimate that the impact of a reduction in liquidity requirements of 1/2 of 1 percent would be to increase housing starts on an annualized basis by 7 thousand units in the quarter following this action and by 8 thousand units in the subsequent quarter. Further reductions in liquidity requirements would magnify this expansionary impact. A reduction in liquidity requirements to the minimum statutory 4 percent would add to housing starts by 28 thousand units on an annualized basis in the quarter following this action and 32 thousand units in the subsequent quarter.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -3-(loans) to (2) Increasin9 the availability of advances al Home Loan member thrift institutions from the Feder ase in advances Bank System. We presently project an incre of this year of $3.8 billion during the second half under our current advances policy. billion) An increase to $6 billion (rather than $3.8 ase incre during the second half of this year would lized an annua housing starts by 20 thousand units on and units in thous 22 basis in the fourth quarter and ntly curre is the first quarter of 1980 over what cial finan projected. The Bank Board's current should an strategy would permit a timely response increase in advances be-reouired. be A more dramatic step to stimulate advances would basis by stand a on for the Bank Board to have ready advances a specially priced advances program under which m Syste Bank priced below the cost of funds to the d could be lent to member institutions over a perio dized of 6 months. The impact of a $3 billion subsi started advances program spread over 6 months, if starts ng housi ase incre in September, would be to in the basis lized by 26 thousand units on an annua units and thous 28 fourth quarter of this year and by in the first quarter. Mort(3) Raising activity levels of the Federal Home Loan s gage Corporation from $6 billion in mortgage commitment this year to $7. billion. The Mortgage Corporation is already preparing contingency plans for doing so, d which would involve an $8 billion rate in the secon d raise y iatel immed half. If the commitment level were ng housi ional to this rate, this would imply addit starts of 18 thousand units on an annualized basis in the fourth Quarter of this year and 20 thousand units in the first quarter of next year over what is currently projected. A more dramatic step for the Mortgage Corporation would be to institute a tandem purchase program at a below borrowing market interest rate utilizing the Bank Board's in done was This power with the Treasury Department. d sente repre 1974. A tandem program of $3 billion that age Mortg the of an add-on to the existing commitment level ase would incre Corporation and instituted in September by an annualized level cted proje housing starts above their er of this year quart h fourt the rate of 26 thousand units in next year. of er ouart first and 28 thousand units in the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • -4(4) Reexamina Req. Q ceilings, in particular the maximum rate allowable on the new 4 year savings certificate. Presently, thrifts are permitted to pay . 1 percentage point below the interest rate on 4 year U.S. Government securities. The ceiling could be raised by reducing this difference so that savings flows would be stimulated. However, the practicality of this depends upon the financial position of thrifts, which, at the moment, is weaker than recent years. The above measures can, of course, be used in varying degrees. A substantial use of the above measures to stimulate housing would be contingent upon meaningful evidence of a decrease in mortgage and housing activity. This would be evidenced, for example, by a sharp decline in forward loan commitments of S&Ls -and a - persistent decline in housing sales. Attached is the current Bank Board outlook for housing. Attachment   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102