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4 1 ?(7'•'El   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  19 20  Collection: Paul A. Volcker Papers Call Number: MC279  Box 10  Preferred Citation: Congressional Correspondence, April 1980; Paul A. Volcker Papers, Box 10; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c428 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  .ril 2,  1911k;;;  koseat,.:1 C:441E4041* LkuLteotx;itteeti ctc. lasul„er igAtittary Aff4i.ra k.o.AAtttutl GIA clooViarDWAAt , ;. - 00rutium-, of v:urrosoatetiv4s kv4sti:,1zact044, 2051S ;Alex Cairxtau imbeuthal °Moak you for your 'utter ofrt1 22 reqlmAti:1-, review of the i:oar4ressional Xasuarch :i.strvice analytis of: tslo loo.*lative history of CI* ueobaukia, ! prohitAtionz of tot. Corapacy Act. A tosper.s will b* SUbstlittdO, tocetnor with ,:owernvr our ;ay It s wullieb's teetixolay. in advdDce of thit t-ttALri Uncersly.  RN1 A. Volck“  Z)044t (#V-16.1) Mta3Cal. and lAmley (for follow-up) Cove wellicl 7iallitZdi (2) 1.."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BENJAMIN'S. ROSEKTNAL, N.Y., CHAIRMAN ROBERT T. MATSUI, cALpr.  •  EUGINE V. ATKINSON, PA. FERNAND J. $T GERmAIN. CONYERS. JR.. MICH. ELLIOTT N. LEVITAS. GA.  •  JOEL DECKARD, IND.  NINETY-SIXTH CONGRESS  Coitgre5 of tbe Einiteb  LYLE WILLIAMS. OHIO JIM JEFFRIES, KANS.  MAJORITY—(202) 215-4407  tatti  3Don5e of ileprecqtttatitierS COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM 0-377 WASHINGTON. D.C.  20515  April 22, 1980  Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Chairman Volcker: I am writing in connection with the forthcoming subcommittee hearing on foreign bank holding companies and the Federal Reserve's administration of the nonbanking prohibitions of the Bank Holding Company Act, now scheduled for May 15 and 16.. The subcommittee has received from the American Law Division of the Congressional Research Service an analysis of the legislative history of the nonbanking prohibitions of the Bank Holding Company Act, with special attention to the exemptions for foreign corporations. I am writing to request a Federal Reserve review of this analysis, a copy of which is enclosed. If possible, I would appreciate having the Federal Reserve's review and substantive comments at least two days before the May 15 opening of the hearing. The principal questions on which I would appreciate the Federal Reserve's review and comment are these: 1.  The CRS report finds no congressional explanation of or Federal Reserve comment on the need for the 2(h) exemption which was first enacted in the 1966 Amendments. Can the Federal Reserve clarify the background behind this provision of the 1966 Amendments?  2  The CRS report indicates (pages 13-14) that prior to the 1970 Amendments the 4(c)(9) exemption was a narrow technical clarifying provision to exempt foreign banks from unintended application of the divestiture requirements. Then in the 1970 Amendments this provision was substantively broadened to apply to "any company organized under the laws of a foreign country the greater part of whose business is conducted outside the United States." The testimony of Federal Reserve Board Chairman Arthur Burns prior to enactment of the 1970 Amendments (page 16 of the CRS report) stated, "we believe bank holding companies that are principally engaged in banking abroad should be allowed to retain interests in foreign-chartered nonbanking companies that are also principally engaged in business outside the United States" (emphasis added). The CRS report found no other legislative history on this section that would explain why the final   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Hon. Paul A. Volcker  2  April 22, 1980  language adopted was substantially broader than the request of Chairm an Burns, in that this provision was not limited, as Chairman Burns had suggested, to cases where the parent holding company is principally engaged in banking abroad. Can the Federal Reserve add any information about the history of this provision of the 1970 Amendments that might clarify the reasons for this difference between the request of Chairman Burns and the final language adopted? 3.  The CRS report implies that there is no legislative history that would clarify the precise meaning intended by the words "principally engaged in the banking business outside the United States." Was this langua ge for Section 4(c)(8) in the 1956 Act and Section 2(h) in the 1966 Amendments based upon Federal Reserve suggestions or drafts? If so, are there any Federal Reserve statements or other communications to Congress that would clarify what was understood by those words at the time of enactment of this provisions?  In addition to responses to these specific questions, it would be helpful to have the Federal Reserve's general evaluation of whether the enclosed CRS report dated March 21, 1980, presents comprehensively and accurately the full background of the Section 2(h) and Section 4(c)(9) provisions of the Bank Holding Company Act. Can the Federal Reserve supply any further background information that would clarify the history of these exemptions? Please treat the enclosed CRS report as a confidential document that is not to be circulated or discussed outside the Federal Reserve, except as may be necessary in preparing the Board's response to this inquiry. Sinchr ly,  Ben,aMin S. Rosenthal ChaVman Enclosure BSR:tb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •0  •Congressional Research Stvice The Library of Congress  Washington. DC 20540  LEGISLATIVE HISTORY OF THE NONBANKING PROHIBITIONS OF THE BANK HOLDING COMPANY ACT  This report contains a legislative history of the nonbanking prohibitions of the Bank Holding Company Act and the exemptions for foreign corporations, with special emphasis on the role of the Federal Reserve Board ( in getting these exemptions into the Act.  The report is in three sections  covering (I) the general nonbanking prohibitions of the Act, (II) the §4(e)(9) exemption, and (III) the §2(h) exemption.  Each section examines  the relevant provisions of (1) the original 1956 Act, (2) the 1966 amendments, (3) the 1970 amendments, and (4) the International Banking Act of 1978.  A brief history of these four laws is provided at the beginning  of the discussion of each in the first section of the report. We note initially that a "bank holding company" is defined in §2 of the Bank Holding Company Act of 1956, as amended ( .12 U.S.C : §§1841-185p) as "any company which has control over any'bank or any company that is or becomes a bank holding company by virtue of this Act."  12 U.S.C. §1841(a)(1).  I. The General Nonbanking Prohibitions   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1956 Act The original Bank Holding Company Act appears at 70 Stat. 133, 84th  CRS-2  Cong., 2d Sess. (1956).  Its history, according to Senate Report No. 1095,  84th Cong., 2d Sess. (1956), was as follows: During the present Congress, Senator Capehart, for himself and Senators Beall, Douglas, Fulbright, Payne, Sparkman, and Frear, in February 1, 1955, introduced S. 880. A similar bill, H.R. 2674, was introduced in the House of Representatives. Hearings on H.R. 2674 were held by the House Committee on Banking and Currency on February 28 and March 1, 2, 3, 4, 7, 8, and 9 in 1955. Following these hearings, H.R. 6227 was Introduced in the House, superseding H.R. 2674, On May 20, 1955, the House Committee on Banking and Currency favorably reported H.R. 6227, without amendment. House Report 609 accompanies the bill. After debate, H.R. 6227 was amended and passed by the House on June 14, 1955. On June 28, 1955, Senator Robertson introduced S. 2350. On July 5, 6, 7, 11, 12, and 14, 1955, the committee's Subcommittee on Banking held hearings on S. 880, S. 2350, and H.R. 6227, as passed by the House of Representatives. Following the hearings, the subcommittee met in executive session and after thorough discussion agreed upon a compromise bill (S. 2577), which Senator Robertson, for himself and Senators Bricker and Bennett, introduced in July 19, 1955. In executive session on July 21, 1955, the committee ordered this bill reported favorably to the Senate, after adopting a comparatively minor amendment. 1/ Subsequently, the Senate amended and passed H.R. 6277 in lieu of S. 2577, o the House concurred in the Senate amendment, and on May 9, 1956 the bill became law.  1/ S. Rep. No. 1095, 84th Cong., 1st Sess. 4, reprinted in 1956 U.S. Code Cong. & Ad. News 2485. In researching this report, all reports and hearings mentioned in the above quotation have been checked, as well as all debates on the bills mentioned. (H. Rep. No. 609 is reprinted at 101 Cong. Rec. 8038-8051 (June 13, 1955.) In addition, we have examined Part 2 of S. Rep. No. 1095, issued by the Senate Committee on Banking and Currency in the 84th Cong., 2d Sess. (It appears in part at 102 Cong. Rec. 6757-6759 (April 23, 1956), but is not reprinted in U.S. Code Cong. & Ad. News.)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-3  As enacted in 1956, §4(a) of the Bank Holding Company Act (12 U.S.C. §1843(a)) prohibited bank holding companies generally from owning Ircon voting shares of any company which is not a bank, or engaging in any business other than banking.  This provision apparently was basic to the  Act, as Senate Report No. 1095 says that according to testimony of William McChesney Martin, Jr., Chairman of the Board of Governors of the Federal Reserve System, one of the two principal problems that created the need for federal regulation of bank holding companies was The combination under single control of both banking and non-banking enterprises, permitting departure from the principle that banking institutions should not engage in business wholly unrelated to banking. Such a combination involves the lending of depositors' money, whereas other types of business enterprises, not connected with banking, do not involve this element of trusteeship. 2/ Another reason for the nonbanfang prohibition, the Senate Committee said, was the danger to a bank within a bank holding company controlling nonbanking assets, should the S company unduly favor its nonbankfng• Speratio requiring the bank t_s customers t makel use S such nonbanking enterprises as a condition to doing business with the bank. 3/ House Report No. 609 said: The reasons underlying the divestment requirement  1956 U.S. Code Cong. & Ad. News at 2483. The other principal problem was the possible "concentration of commercial bank facilities in a particular area under a single control and management." 3/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Id. at 5; 1956 U.S. Code Cong. & Ad. News at 2486.  CRS-4  are simple. As a general rule, banks are prohibited from engaging in any other type of banking enterprise than banking itself. This is because of teS to depositors which might result where the bank finds itself both the borrower and the lender. It is for this reason, among others, that statutes limiting the investments of banks have been passed by both the Congress and State legislatures. . Whenever a holding company thus controls both banks and nonbanking businesses, it is apparent that the holding company's nonbanking businesses may occupy a preferred position over that of their competitors in obtaining bank credit. It is also apparent that in critical times the holding company wcIS nonhanking businesses may be subject to a strong temptatiI n to cause the banks which it controls to make loans to its nonbanking affiliates even though such loans may not at that time be entirely justified in light of current banking standards. 4/ Federal Reserve Board Chairman Martin, in the Senate hearings, said that the Board favored a bill that would Require hank holding companies within a prescribed time to divest Lhemselves of their nonbanking interests, with a minimum of specc exemptions, but with administrative authority to make certain ited exemptions with respect to companies engaged in bank-related businesses and with respect to situations in which an exemption would be desirable to prevent hardship or to protect the public interest.  5/  However, Chairman Martin said that to the extent the divestiture requirement  4/ H.R. Rep. No. 609, 84th Cong., 1st Sess. 16 (1955). 5/ Hearings on 6227 Before a Subcomm. of the Senate Comm. on banking and Currency, 84th Cong., 1st Sess., at 44 (1955). See also Hearings on2674 Before the House Comm. on Banking and Currency, 84th Cong., 1st Sess., at 14. The latter hearings (at 23-83) contain a reprint of Concentration of Banking in 010 United States, a staff report of the Board Governors of the Federal Reserve System submitted to the Subcomm. on Monopoly of the Senate Select Comm. on Small Business and issued as Committee Print No. 7, 82d Cong., 1st Sess. (1952).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0  CRS-5  of H.R. 6227 relates to obligations, as distinguished from shares of stock, of nonbanking enterprises, the Board, believes that it goes further than necessary. Single control of both a bank and a nonbanking business is usually made possible by control of stock rather than ownership of obligations. 6/ Section 4(c) of the 1956 Act contained eight exemptions from the nonbanking prohibitions, two of which are noted here: §§4(c)(6) and 4(c)(8). (In 1966 they were amended slightly and renumbered §§4(c)(8) and 4(c)(9), respectively; and in 1970 they were amended to their present form.)  The  original §4(c)(6) permitted bank holding companies to own "shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which the Board .  . has determined to be so closely  related to the business of banking or of managing or controlling banks to be a proper incident thereto.'. . ."  The original §4(c)(8) permitted bank  holding companies to own "shares held or acquired . . . in any company which is engaged principally in the banking business outside the United States." The legislative history of the original §4(c)(8) will be discussed in the second section of this memorandum. .As for the original §4(c)(6), Senate Report No. 1095 states: In the opinion of your committee, certain activities of a financial, fiduciary, or insurance nature are obviously so closely related to banking as to require no divestment by a bank holding company. For example, the operation of a credit life-insurance program in  6/ Id. at 78. See also House Banking and Currency Comm. Hearings at 17. Congress apparently accepted this suggestion.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-6  connection with bank loans is clearly within the scope of banking operations as presently conducted. So is the operation of an insurance program under which the insurance proceeds retire the outstanding balance of the mortgage upon the death of the mortgagor in cases where the bank holds the mortgage. However, there are many other activities of a financial, fiduciary, or insurance nature which cannot be determined to be closely related to banking without a careful examination of the particular type of business carried on under such activity. For this reason your committee deems it advisable to provide a forum before an appropriate Federal authority in which decisions concerning the relationship of such activities to banking can be determined in each case on its merits. 7/  1966 Amendments (Public Law 89-485) Senate Report No. 1179 sets forth the history of the 1966 amendments: In accordance with section 5(d) of the act, the Federal Reserve Board which administers it reported to Congress in 1958 and annually thereafter recommending amendments to the act on the basis of the Board's experience under it. S. 2353, introduced by the chairman of the committee, by request, on August 3, 1965, contained recommendations made by the Federal Reserve Board in 1965. . . S. 2418 was introduced by Senator Horse and a number of other Senators on August 16, 1965. . . During 1965 the House Banking and Currency Committee held hearings on two separate bills, H.R.,7371 . . . ti and H.R. 7372. . . . -H.R. 7371 was reported June 21, 1965 (H. Rept. 534), and H.R. 7372 was reported July 26, 1965 (H. Rept. 680). H.R. 7371 passed the House September 23, 1965. . . . The bill was referred to the Senate Banking and Currency Committee. The Committee requested the Federal Reserve Board to undertake a study to ascertain what institutions might be affected by the bill. A questionnaire was distributed to all 14,000 commercial banks, and a committee print was issued setting forth  7/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Note 1, supra at 13; 1956 U.S. Code Cong. & Ad. News at 2494.  CRS-7  several hundred companies which would presumably be affected by S. 2353. In addition the committee prepared and issued a committee print setting forth the text of the bills pending before the committee, S. 2353, S. 2418, and H.R. 7371. Hearings were held on the bill on eight different days in March, printed as part 1 of the hearings. Further hearings were held on May 2, 3, and 4, which were printed as part 2 of the hearings. After consideration of the testimony at the hearings, a committee print was prepared by the chairman and distributed to the members of the committee on May 10 for their consideration at an executive session of the Subcommittee on Financial Institutions Co be held on May 12, subsequently postponed to May 18. The Subcommittee on Financial Institutions at its meeting on May 18 reported the committee print bill to the full committee, after two amendments had been made to the chairman's committee print, and the full committee voted to report H.R. 7371 to the Senate with an amendment striking out all after the enacting clause and inserting the substitute bill agreed upon by the committee. 8/ Subsequently, the Senate amended and passed H.R. 7371, the House concurred in the amendment, and on July' 1, 1966 the bill became law. Section 6 of the 1966 amendments added §2(h), which is discussed in the third section of this report, and §8 of the 1966 amendments contained a number of changes to some of the particular exemptions set forth in §4 of the to Act. In introducing the 1965 hearings of Senate Banking and Currency Committee, Chairman Patman said that the Board "strongly favors the objectives of the bill [H.R. 10668, 88th Cong., 2d Sess.]. major broadening amendment.  But, the Fed proposed a  H.R. 7371 incorporates most of the Fed's  8/ S. Rep. No. 1179, 89th Cong., 2d Sess. (1966); reprinted in 1966 U.S. -tode Cong. & Ad. News 2385-2386.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-8  9/ recommendations.  1970 Amendments (Public Law 91-607) Senate Report 91-1084 outlines the history of the 1970 amendments: H.R. 6778 was introduced on February 17, 1969. Hearings were held by the House Banking and Currency Committee and the bill was reported favorably by that committee on July 23, 1969. It was passed by the House of Representatives, with amendments adopted on the floor, on November 5, 1969. The Senate Banking and Currency Committee held extensive hearings on this and other bills between May 12 and 28, 1970. Other bills dealing with the same subject matter and considered in those hearings were S. 1664, introduced by Senator Sparkman and Senator Bennett on March 24, 1970; S. 1052, introduced by Senator Proxmire on February 18, 1969; S. 1211, introduced by Senator Sparkman on February 28, 1969; and S. 3823, introduced by Senator Brooke on May 11, 1970. The committee subsequently ordered that the bill be favorably reported with an amendment in the nature of a substitute. 10/ Subsequently, H.R. 6778 was alnended and passed by the Senate, which requested a conference.  A conference report was agreed to by both Houses,  9/ Hearings on H.R. 7371 Before the House Committee on Bankingand ldurrency, 89th Cong., 1st Sess., at 3 (1965), In researching the legislative history of the 1966 amendment we also examined the Hearings on S. 2353, S. 2418, and H.R. 7371 Before a Subcomm. of the Senate Committee on Banking and Currency, 89th Cong., 2d Sess. (1966); the Hearings on H.R. 7372 Before the Subcomm. on Domestic Finance of the House Committee on Banking and Currency, 89th Cong., 1st Sess. (1965); the Hearings on H.R. 10668 and H.R. 10872 Before the House Committee on Banking and Currency 88th Cong 2d Sess. (1964); and the debates on H.R. 7371, 89th Cong., 2d Sess. No debates were found on S. 2353 or S. 2418, 89th Cong., 1st Sess., or on H.R. 10668, 10749, 10770, 10872, or S. 2561, 88th Cong., 2d Sess. 10/ S. Rep. No. 91-1084, 91st Corr., 2d Sess. (1970); reprinted in 1970 U.S. Code Cong. & Ad. News 5519, 5520.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-9  and on December 31, 1970 the bill became law. "The primary purpose" of the 1970 amendments was - to modify the Bank Holding Company Act of 1956 to bring under its provisions those companies controlling one bank, in addition to those companies controlling more than 11/ one bank." However, the 1970 law also amended §§4(c)(8) and 4(c)(9) to their present forms.  These provisions had been §54(c)(6) and 4(c)(8),  respectively, in the 1956 Act, and had been amended slightly and renumbered in 1966.  The change in 54(c)(9) will be discussed in the second section of  this report; the 1970 amendments made seven changes in S4(c)(8), which in 1956 permitted bank holding companies to own shares of any company all the activities of which are of a financial, fiduciary, or insurance nature and which the Board after due notice and hearing, and on the basis of the record made at such hearing, by order has deterrined to be so closely related to teausness of banking or of managing or controlling banks as to be a proper incident thereto and as to make it unnecessary for the prohibitions of this section to apply nSrder to carry out the purposes of this Act. The first change (in the order it appears in 54(c)(8)) made by the 1970 amendments was the deletion of the word "all"; the second change was the deletion of the requirement that the activites of the exempted company be of a "financial, fiduciary, or insurance nature."  on, the Neither deletiIi  11/ Id.; 1970 U.S. Code Cong. & Ad. News at 5522. The Federal Reserve Board supported this purpose; see Hearings on H.R. 6778 Before the House Comm. on Banking and Currency, 91st Cong., 1st Sess. (1969), at 196-237; Hearings on S. 1052, S. 1211, S. 1664, S. 3823, and H.R. 6778 Before the Senate Comm. on Banking and Currency, 91st Cong., 2d Sess. (1970) at 139-165.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  12/ conference report concluded, had "great significance." The third change, . in the words of the conference report, was replacing the language "due notice and hearing" with "due notice and opportunity for hearing," [which] was made at the recommendation of the Federal Reserve Board so that the Board would not be required to hold hearings in all cases involving Section 4(c)(8) applications, but should hold hearings in all cases where a contest was raised. The fourth change, the report continues, was  13/  •  [t]he inclusion of the term "(by order or regulation)" [which] was made to indicate that the Board could act under Section 4(c)(8) either by order in specific cases or by regulation in a general classification or category of cases in order to provide maximum flexibility as a procedural matter in administering this section. 14/ The fifth change in §4(c)(8) was the deletion of the phrase "the business of"; this the conference report said was done on recommendation of the Federal Reserve Board to indicate "that a nonbank subsidiary's activities should be related to banking (or managing or controlling banks) generally, rather than to the specific business carried on by the subsidiary banks of 15/ the particular company involved." The sixth change was the removal of the last clause of §4(c)(8) because, as the conference report said, "it adds absolutely nothing to the  12/ H. Rep. No. 91-1747, 91st Cong. 2d Sess. (1970); reprinted in 1970 U.S. Code Cong. & Ad. News 5561, 5565, 5566. 13/ Id. at 1970 U.S. Code Cong. & Ad. News at 5566. 14/ Id. 15/ Id. at 5567.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • CRS-11  16/ meaning of the provision. . . .  Therefore, it is redundant. .  Finally, the 1970 amendments added two new sentences to §4(c)(8) that provide additional guidelines for the Board in applying the exemption. In essence, the Board is required to consider the public benefit of granting an exemption. In hearings before the House Committee on Banking and Currency, Board Chairman Martin discussed the importance of maintaining the separation between banking and other commerce: The Board unanimously agrees that there are sound reasons for separating banking and commerce, and that it is essential, if this policy is to continue, to bring one-bank holding companies under the Bank Holding Company Act. And all the members of the Board agree that public benefits in the form of greater convenience, gains in efficiency, and keener competition should flow from encouraging innovation by one-bank holding companies as well as multibank holding companies in offering services to the public. In determining whether a bank holding company should be authorized to engage in a particular activity, the prospects of realizing such benefits must be weighed against the risks of perverse consequences that led Congress to separate banking from other businesses. In my judgment, the greatest risk is in concentration of economic power. If a bank holding company combines a hank with a typical business firm, there is a strong possibility that the hank's credit will be more readily available to the customers of the affiliated business than to customers of other businesses not so affiliated. Since credit has become increasingly essential to merchandising, the business firm that can offer an assured line of credit to finance its sales has a very real competitive advantage over one that cannot. In addition to favoring  16/ Id.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -12-  the business firm's customers, the hank might deny credit to competing firms or grant credit to other borrowers only on condition that they agree to do business with the affiliated firm. This is why I feel so strongly that if we allow the line between banking and commerce to be erased, we run the risk of cartelizing our economy. . . 17/  International Banking Act of 1978 (Public Law 95-361) The history of the International Banking Act of 1978, is set forth in Senate Report 95-1073 as follows: On April 7, 1978, the House of Representative passed 1i.R. 10899, the International Banking Act of 1978. The Subcommittee on Financial Institutions held a hearing on H.R. 10899 on June 21, 1978, its third hearing on related legislation, receiving testimony from the Federal Reserve Board. . . . On July 26, 1978, the full Banking Committee met In executive session and unanimously ordered H.R. 10899 favorably reported by a voice vote, with an amendment in the nature of a substitute. 18/ Subsequently, the Senate amended and passed H.R. 10899, the House agreed to the Senate amendments, and on September 18, 1978 the bill became law.  Sec-  tion 8 of the International Banking Act of 1978 sets forth the relationship between hanks covered by the Act and the Bank Holding Company Act with regard to nonbanking activities, and §8(e), as discussed in the third section of this report, amends §2(h) of the Bank Holding Company Act.  17/ Note 11, supra, at 196-197. Chairman Burns quoted this language in the hearings before the Senate Banking and Currency Committee. Note 11, supra, at 140. 18/ S. Rep. No. 95-1073, 95th Cong., 2d Sess. 2 (1978); reprinted in U.S. Code Cong. & Ad. News 1421, 1422.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-13  II. The §4(c)(9) Exemption  1956 Act  (in which the original version of §4(c)(9) was enacted as §4(c)(8))  Senate Report No. 1095, Part 2, states: Section 2(c) of the bill as reported [and as enacted and as still in effect] defines - bank - so as to exclude any organization which does not do business within the United States. Thus, technically any foreign banking subsidiary of a bank holding company would he a nonbanking investment and would be required to be divested pursuant to section 4 (a) of the bill. The Federal Reserve Board would probably exempt such foreign banking subsidiaries from divestment by applying the provisions of section 4 (c) (6) [today §4(c)(8)], which authorizes the Board to exempt companies of a financial nature which are so closely related to the business of banking as to be a proper incident thereto. However, in order to make it unmistakably clear that foreign banking subsidiaries are not subject to divestment, the committee added a new subparagraph (8) to section 4 (c) specifically exempting such subsidiaries. The amendment provides that the divestment requirements shall not apply -to shares held or acquired by a hank holding company in any company which is organized under the laws of a foreign country and which is engaged principally in the banking business outside the United States. 19/ No other reference pertaining to permitting bank holding companies to own foreign hank subsidiaries was found in the legislative reports or debates, or in comments by the Board at committee hearings.  19/ Note 1, supra, at 4-5. this quotation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  (12 U.S.C. §1843(c)(9))  Section 4(c)(8) was enacted as set forth in  CRS-14  1966 Amendments The 1966 amendments renumbered §4(c)(8) to §4(c)(9) and changed it to provide that the divestment requirements shall not, with respect to any bank holding company, apply to -shares of any company which is or is to be organized under the laws of a foreign country and which is or is to be engaged principally in the banking business outside the United States. No legislative history of this change has been found; it does not appear to be of major significance.  1970 Amendments 'Section 103(5) of the 1970 amendments changed §4(c)(9) to its present form, which is: shares held or activities conducted by any company organized under the laws of a foreign country the greater part of whose business is conducted outside the United States, if the Board by regulation or order determines that, under the circumstances and subject to the conditions set forth in the regulation or order, the exemption would not be substantially at variance with the purposes of this Act and would be in the public interest. Two basic changes seem evident: (1) the exemption was amended to permit ownership of companies "the greater part of whose business is conducted outside the United States," rather than just companies "engaged principally in the banking business outside the United States," and (2) Board approval was required for an exemption.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The wording of the 1970 amendment to §4(c)(9) is  CRS-15  20/ very close to that of the House bill, H.R. 6778, as passed. The amendment to §4(c)(9) that was proposed in the Senate bill, S. 1664, did not include either change that was made in the provision; however, other parts of S. 1664 contained provisions somewhat similar to the changes that were enacted.  The provision that resembles the first change -- allowing bank  holding companies to oc.m nonbanking companies the greater part. of whose business is conducted outside the United States -- would have added a §4(c)(12) that would have allowed bank holding companies to own "shares lawfully acquired and owned by a subsidiary of a bank holding company if both the subsidiary and the company issuing the shares are organized undcr the laws of a foreign country and do not operate in the United States." The provision that resembles the second change -- requiring Board approval for bank holding companies to own foreign companies -- would have amended §4(c)(5) to permit bank holding companies to os.m "shares acquired and held in the manner, kinds, and amounts specifically permissible for national banks under the provisions of Federal statute, law, and regulation issued pursuant thereto."  The reason this provision resembles the second change  is that under §25 of the Federal Reserve Act (12 U.S.C. §§601-632) national banks may acquire foreign banks only with Board approval. With this background, we quote from Board Chairman Arthur Burns testi-  20/ The amendment to §4(c)(9) in H.R. 6778 was adopted on the floor (as §4(c)(12)) after being introduced by Representative Ashley. 115 Cong. Rec. 32909 (Nov. 4, 1969); 115 Cong. Rec. 33141 (Nov. 5, 1969). The debates appear to reveal little as to the purpose of the two changes to 44(c)(9).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • a  CRS-16  mony before the 1970 hearings of the Senate Banking and Currency Committee: We also recommend that the exemptions in section 4(c)(5) and section 4(c)(9) be amended, as provided in S. 1664, so as to preclude the possibility that a bank might establish a holding company to acquire a foreign bank without obtaining Board approval, which would be required under section 25 of the Federal Reserve Act if the bank made the acquisition directly. Coverage of one-bank holding companies requires a new look at how the act should apply to foreign banks and foreign bank holding companies. Several banks chartered in New York and California are subsidiaries of foreign one-bank holding companies. A number of foreign-chartered banks have offices of one kind or another in this country. Taken literally, the definition of "bank" in section 2(c) of the act, together with section 2(h), would seem to apply the divestiture requirements of section 4 of the act in a number of these situations. The Board sees no useful purpose in this. We think the objectives of the act can be accomplished without covering domestically chartered banks that do no business in the United States, except as an incident to their foreign operations. Moreover, we believe bank holding companies that are principally engaged in banking abroad should be allowed to retain interests in foreign-chartered nonbanking companies that are also principally engaged in business outside the United States. We do not believe Congress intended the act to be applied in such a way as to impose our ideas of banking upon other countries. To do so might invite foreign retaliation against our banks operating abroad, to the detriment of the foreign commerce of the United States. The provisions of the House-passed bill authorizing the Board to grant exemptions in this area would be most useful in dealing with these problems. 21/ The first paragraph of Mr. Burns' above testimony appears to express  21/ Note 11, supra, at 145-146. In the 1969 hearings of the House Banking and Currency Committee, note 11, supra at 203, Chairman Martin's comments Included a paragraph identical to Chairman Burns' first paragraph quoted above, except that Mr. Martin referred to H.R. 9385 instead of S. 1664.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CF.S-17  his support fS r the second change made to §4(c)(9) -- requiring Board apprI val.  The rest of teSuota  appears directed only at foreign hank  holding companies, so is discussed in the third section of this report, which concerns §2(h).  However, from the sentence beginning with "Moreover,-  it appears that Mr. Burns supported the first change made to §4(c)(9) -allowing bank holding companies to own foreign nonbanking companies least as it applies to foreign bank holding companies.  International Banking Act of 1978 This law did not amend §4(c)(9), although its amendment of §2(h) affected §4(c)(9), as noted in the next section of this report.  III. si  The §2(h) Exemption  (12 U.S.C. g1841(h))  1956 Act The §2(h) exemption did not appear in the ornal Bank Holding Company Act of 1956. 1966 Act Section 6 of the 1966 amendments added §2(h), which provided that the application of the Bank Holding Company Act   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  shall not be affected by the fact that a transaction takes place wholly or partly outside the United States or that a company is organized or operated outside the United States: Provided, however, That the prohibitions of section 4 of this Act [12 U.S.C. §1843] shall not apply to shares of any company organized under the laws Sf a foreign country that does not do any b ness within the United States, if such shares are held or acquired by a hank holding company that is principally engaged in the banking business outside the United States.  CRS-18  The only comment on the §2(h) exemption found in the committee reports on the 1966 amendments was the following restatement of the exemption by the Senate Committee on Banking and Currency: "a holding company principally engaged in a foreign banking business would not be required to divest shares of a nonbanking company that is organized under foreign law and does no 22/ business in the United States." No floor debates were found on the section, 23/ nor were any Board comments on it found in the relevant hearings.  1970 Amendments The 1970 amendments did not affect §2(h).  Federal Reserve Board Chair-  man Burns, however, at the hearings of the Senate Committee on Banking and Currency quoted on page 16 of this report, suggested a change which was adopted in part in the 1978 amendment.  To repeat the relevant sentences:  Coverage of one-bank holding companies requires a new look at how the act should apply to foreign hanks and foreign bank holding companies. Several banks chartered in New York and California are subsidiaries of foreign one-bank holding companies. A number of foreign-chartered banks have offices of one kind or another in this country. Taken literally, the definition of "bank" in section 2(c) of the act, together with section 2(h), would seem to apply the divestiture requirements of section 4 of the act in a number of these situations. The Board sees no useful purpose in this. We think the objectives of the act can be accomplished without covering domestically chartered banks that do no business in the United States, except as an incident to their foreign operations.  22/  Note 8, supra, at 2392.  23/  Note 9, supra.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-19  In I ther words, under §2(h) as enacted, a hank holding company principally engaged in the banking business outside the United States could own shares of a nonbanking company organized under foreign law only if the nonbanking company did no business in the United States.  The Board did not believe  it necessary to prohibit hank holding companies principally engaged in the banking business outside the United States from owning subsidiaries doing only incidental business in the United States.  International Banking Act of 1978 Section 8(e) of the International Banking Act of 1978 substituted for the proviso in the original §2(h) the following: The prohibitions of section 4 of this Act [12 U.S.C. §1843] shall not apply to shares of any compcny organized under the laws of a foreign country (or to shares held by such company in any company engaged in the same general line of business as the investor company or in a business related to teIusness of the investor company) that is principally engaged nIusness outside the United States if such shares are held or acquired by a hank holding company organized under the laws of a foreign country that is I rincipally engaged in the banking business outside the United States, except Thus, the 1978 amendments in part adopted the Board's 1970 suggestion. Bank holding companies principally engaged in the banking business outside the United States and organized under the laws of a foreign country (this latter requirement was not in the original §2(h)) may now, in the words of  24/ The non-quoted portion of this provision is discussed on pages 22-23 of tIis report.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • CRS-20  Senate Report No. 95-1073,  own shares of a foreign nonbanking company that 25/ directly or indirectly does business in the U.S." And, as they may do this  without Board approval, the 1976 amendments to §2(h) apparently supersede, 26/ with respect to those bank holding companies now covered by §2(h), the requirement of §4(c)(9) for Board approval.  Prior to the 1978 amendments,  the Board, in Regulation Y, which it promulgated pursuant to §4(c)(9), had prohibited foreign bank holding companies from owning or controlling 25Z or more of the voting shares of any foreign nonbanking company doing business 27/ in the United States. Although this provision is still on the books, §2(h) apparently permits bank holding companies organized under the laws of a foreign country and principally engaged in the banking business to own any percentage of shares of a foreign company, even if it is doing business in the United States, provided it is principally engaged in business outside the United States. Senate Report 95-1073, after noting this expansion of the right of foreign bank holding coupanies to own nonbanking companies, added:  25/ S. Rep. No. 95-1073, 95th Cong., 2d Sess. 16 (1978); reprinted in 1978 U.S. Code Cong. & Ad. News 1421, 1436. The parenthetical language in §2(h) is discussed on pages 21-22 of this report. 26/ The legislative history does not appear to indicate why domestic hanks principally engaged in a foreign banking business were not included. 27/ Specifically, 12 C.F.R. §225.4(g)(2)(v) provides that a foreign bank holding company may own or control voting shares of any foreign company doing business in the Unit?d States provided, among other things, the foreign company is not a subsidiary of the foreign bank holding company. 12 U.S.C. §1841(d) defines a "subsidiary" as a company 25 or more of whose voting shares are owned or controlled by a bank holding company.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -a  CRS-21  In expanding the exemption contained in §2(h) of the Bank Holding Company Act, it is not the intention of the committee to restrict the Federal Reserve Board's authority to grant further exemptions under §4(c)(9). The committee recognizes that Regulation Y currently exempts from the prohibitions of section 4 the ownership by a foreign bank holding company of less than 25 percent of the shares of a foreign nonbanking company principally engaged in business outside the United States, even if that company is engaged directly or indirectly in activities in the United States . that are not incidental to the company's non-U.S. activities. Section 8(e) is not intended to affect that provision of regulation Y. 28/ In Senate hearings on the International Banking Act of 1978, Federal Reserve Board Chairman G. William Miller said of the proposed §8: We certainly donot want to have section 8 read as trying to inhibit the normal growth of foreign manufacturing industrial corporations affiliated with foreign banks, whose investments In the United States are in our interest. So there may be a couple of technical points that we would like to call to the staff's attention, but in general the intent of section 8 is certainly proper. 29/ As for the parenthetical language in §2(h), Senate Report 95-1073 says: The committee the general line company in which has an ownership  has embraced the concept that of business of a U.S. nonbanking a foreign bank holding company interest through a foreign non-  28/ Note 25, supra, at 17; 1978 U.S. Code Cong. & Ad. News at 1437. 29/ Hearings on H.R. 10899 Before the Subcomm. on Financial Institutions of the Senate Committee on Banking, Housing, and Urban Affairs, 95th Cong., 2d Sess., at 61 (1978). No comments by the Board on §8 were found in Hearings on H.R. 7325 Before the Subcomm. on Financial Institutions Supervision, Regulation and Insurance of the House Committee on Banking, Finance and Urban Affairs, 95th Cong., 1st Sess. (1977).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  banking company must be the same as or related to the business of that foreign nonbanking comIn adopting the language within pany. . . . parentheses, the committee intends to use as a model the line of business test and categories of the Standard Industrial Classification (SIC). 30/ (The report proceeds to explain the SIC). The language of §2(h) omitted from the quotation of it on page 19 of this report contains two limitations on the right of bank holding companies organized under the law of a foreign country and principally engaged in the banking business outside the United States to own shares of a foreign company principally engaged in business outside the United States.  One is  that the foreign company (A) may engage in the securities business only 4.  to the extent a bank holding company may do so and (E) may engage in the United States in any banking or financial operations or types of activities permitted under §4(c)(8) only with Board approval.  The other limitation is  that no domestic office or subsidiary of a bank holding company or subsidiary thereof holding shares of the foreign company may extend credit to a domestic office or subsidiary of the foreign company on terms more favorable than those afforded similar borrowers in the United States.  Senate Report  95-1073 contains the following comment on these limitations: When seeking to engage in activities which are closely related to banking and are permissible under section 4(c)(8) of the Bank Holding Company Act, section 8(e) requires a foreign nonbanking company in which a foreign bank holding company directly or indirectly owns share to obtain prior approval of  30/ Note 25, supra.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CRS-23  the Federal Reserve Board. This insures that a foreign hank cannot evade the requirements of section 4(c)(8) through the use of exempt foreign subsidiaries. Furthermore, under section (8)(c), no U.S. office or subsidiary of any hank holding company or any subsidiary thereof which holds shares in a foreign nonbanking company in which a foreign bank holding company directly or indirectly holds shares may extend credit to such foreign nonbanking company on terms more favorable than those afforded similar borrowers in the United States. The com— mittee believes the non—preferential loan provision should be strictly administered to insure that the exemption afforded under section 8(e) does not give foreign—owned U.S. [nonbanking companies] cost advantages over domestic nonbanking companies. 31/  Henry Cohen Legislative Attorney American Law Division March 31, 1980  31/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Note 29, supra at 17; 1978 U.S. Code Cong. & Ad. News at 1437.  ^rri' gifik:444;..4r4 Jo= j.  kp4s4$  Rol.-rvliont?.Ativs  3itQt:;:t:515  Thank yokA for your reoeut letter in wick you elpressed yotir 4uz-pcxt for cuttinc wv4rnment speadin to heir reduce ii:flatiooary pressure:4 an..: lo*er interest rateA. I also appreci4to your senllini; samples of r.eisseqes pvti to,vo received frOm "“aacessee .A;ilders who expreused their desire to l'ievo intesist rittura. reOuced an4 inf2Ation lirousht un,ler contrr>l. qtAle Iuz!sreitaild trtat trIc rise in iatff;reat rates dssociated with tho curretA policy of rionetary r.ftltr3int, in conjunctior, with the on-wins hirlb ratie of inflation, haii hal particularly andesizable effects on your coastitoents associRted with ti.v. howe'auildinc inciustry, tho zolicy now beinQ purouod Qy tuts Federal Aoserve is essenti1 to any anti-lrflationsry effort. Uufortunately, seal, a policy, carri4W oLt in the face of cradit cocuAtiored by rapid inflation aziá intonse inflationary exl,ectationer Lj iitt it consideraLltr ursward pressure on iuterust riatists ig tbe neer term. Only wheu it 1-icomes clear that intiz.tion will moderate will thovo prezsures abate an4 interest rates shc:44 a sustained decliAs. The Federal iZeservti, however has not rpeen insensitive to Last r‘-letivu tArstatees of monetary striocency on tes ;Iouwinc 0*Ictor. aaard'e recently amouniced ulrcr4rem of cre.lit rcstraint WA6 dosi(:qted ta part to reduce the disruption of normal flow of furis, into .tn , resi:AntiAl oortgagie mar%et. ieverthelcus. thin is only 4 f • lartiaI solution to tlqe pro%Nlopz az4, WIL you roccocnise, lowlerel Reservt polivy mast eaucouented by responsible fiscal policy. In particular, budget cuts of sufficient magnittmle to eliminate the current deficit are needed. 5ucl, cutu would curb infl4tionary forces an4 allow irterost rates to fell by ra4taciri,4 t::41 pressure placed on credit narkete by the Federal Goveramont's trorrowinq requirements.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  10,4  y="nrwai.ue Jotlu Jo r,kiincall  look forwarj to worsAin.; wtt yt4u yckur colledu‘ io the CoAr:re4s to fW aiolutions to 3ur uationt9"lcricuis 44c-cinor1c protaiews, Aorcarely,  Mai A. Wig  Lw.J1Ji. (4V-156) hc ir. 4.ch1inc Ms, taal ra.2.4a1lardi (2) "."  •  ,  JOHN .J. DUNCAN  COMMITTEES:  2r1 DISTRICT. TENNESSEE WAYS AND MEANS 2458 R AYPURN HOUSE  Orricr BUILDINO oOlka (AREA CODE 202) 225-5435  COUNT IES:  Congre55 of tlit initcb6tate  PLOVNT CA/41PRELL  JOINT COMMITTEE ON INTERNAL REVENUE TAXATION  )1:nicse of 1kepresSentatibe5  C LA IltORNE NOY  Ulazijington, D.C. 20315  LOUDON MCMINN muNp.,r  April 17, 1980  SCOTT UNION  Honorable Paul Volcker Chairman Federal Reserve Board 21st Street and Constitution Avenue, N. W. Washington, D. C. 20551 Dear Mr. Chairman: I am forwarding to you several 2 x 4 boards received from my constituents /t which symbolize their concern over the current plight of the housing industry. I am extremely concerned over this situation, and the President's policies which advocate high interest rates and tight credit policies. These high interest rates are causing serious problems in all portions of this country's economy, but none so serious as those roaring through the nation's building industry. I feel that the high interest rate policy is ill-advised and is, at best, only a questionable cure for the problem of inflation. However, the depression now being felt by the home building industry is one which will have a drastic effect on the country for years to come long after inflation has subsided. I refer here to the shortage of suitable .housing which is already acute, and which is not being helped at all by the high interest rates. I hope you will. use this opportunity to reexamine the overall direction in which you have steered this country, and reexamine the numerous negative longterm effects which 'high interest rate/tight crEtlit policies have caused. It is time the government quits making innocent people pay for shoddy economic management on the part of the federal government and other problems arising from years of deficit spending. Thank you for your assistance in this matter. sincerely  11•••••••  I' fi) JOHN J. D CAN Memberof Congress   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  JJD/11 ENCLOSURES  •  • .• Of COVE • R •  •  •  CM  BOARD OF GOVERNORS Or THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  RAL RES  PAUL A. VOLCKER  • • •..• • • CHAIRMAN  April 28, 1980  The Honorable Wendell H. Ford United States Senate Washington, D.C. 20510 Dear Senator Ford: I appreciate and share your concern regarding the difficulties being faced in the housing, automotive, agricultural, and related sectors of the economy. There is no doubt that conditions have deteriorated in recent months, in response to an acceleration of inflation and governmental policies designed to bring inflation under control. The series of monetary and credit actions announced by the Board on March 14 were devised to help supplement the restraining effect of high interest rates on economic activity as part of the government's general anti-inflation effort. Under its Special Credit Restraint Program, however, the Board encouraged commercial banks to give priority to maintaining a reasonable flow of funds to small businesses, farmers, homebuyers, and others with limited alternative sources of funds. Special deposit requirements placed on increases in certain types of consumer credit--including credit cards and unsecured personal loans-specifically excluded funds advanced against car purchases, and mortgage credit to buy or improve homes. In addition, the Board announced on April 17 a temporary seasonal credit program to help small banks under liquidity pressures to meet the credit needs of their communities, including farmers and small businesses.  ,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Excessive inflation cannot persist over time, of course, unless fueled by excessive expansion in money and credit. Thus the basic thrust of Federal Reserve policy is, and will remain, aimed at maintaining moderate growth in aggregate money and credit. The process of assuring a moderate rate of growth in money and credit so as to fight inflation is obviously not easy or painless. Hopefully, the anti-inflation measures announced by the Administration and the Board will hasten the day when inflation and inflationary pressures will ease, credit demands will weaken, and interest rates will decline from their present levels.  tr,„ A/tf„,Ay tevi 7(zej ik0,2,  A  The Honorable Wendell H. Ford Page Two  I look forward to working with you and your colleagues in the Congress in finding solutions to our nation's economic problems.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  (21d)ettiltP-  WENDELL H. FORD  CON Al ITTE Fs:  KENTUCKY  COMMERCE. SCIENCE AND TRANSPORTATION  PUTtifeb Zinfez Zenate  ENERGY AND NATURAL RESOURCES  WASHINGTON, D.C. 20510  April 10, 1980  Dear Mr. Chairman: As I travel through Kentucky during this Easter recess, it is obvious that the Federal Reserve Board policies regarding interest rates are having a devastating effect on the economy. No serious businessman questions the need for restrictions on credit for consumer buying, but the present policies are depressing all segments of the economy. Those crucial areas of the economy that the nation needs to promote and protect are being hit hardest and the nation will be hard-pressed to withstand the shock. The homebuilding industry, automobile industry and farmers are caught in a squeeze that threatens their very existence. Expansion of plants for jobs is at a standstill, improvements to promote productivity can't move forward, and energy conservation measures lay on the drawing boards. The policies are creating layoffs and bankruptcies. Small businessmen, including farmers, operate on a small margin on profit. Twenty percent interest simply means that many of them will fail. Let me suggest an alternate strategy that must be considered--a strategy that emphasizes larger down payments, limitation on credit cards, and greater restriction on lending practices instead of unlivable interest rates. These practices do have a place in our effort to reduce inflation and represent a much preferable alternative to the current strategy. The present policies apply across the board and are having a counter effect. Businessmen are wondering if they can survive on a month to month basis. Farmers are having problems handling loans from previous years and are wondering if they can afford another loan for the upcoming season. Unemployment is rising, and bankruptcies are reaching record levels. Something must be done to change this direction before it is too late, and lower interest should be step one. J  DISTRICT OFFICES, 343 WALLtra L EX I NG TON  AVENUE K ENTUCK Y  (606) 213 2484   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4O04  I72-C NEW FEDERAL BUILDING  305 FEDERAL BUILDING  LOUISVILLE K ENTUCXY  0W ENS110RO. K ENTucxY 42301 (502) 685-sise  (502) 582-6251  40202  r* .er" v r7•7 • - -' , t . °111  s  • as  Page two  I strongly urge a reversal of Federal Reserve Board policies on interest. The present policies are counter productive. The policies are fueling inflation and depressing all segments of the economy, because higher interest costs are simply being passed on to the consumer. We need to avoid the destructive effect of high interest rates on segments of the economy that need to be helped instead of hurt, and focus our attention on other areas that so flagrantly fuel inflation. I urge that this matter be given immediate consideration and the highest priority by the Board.  ket  Sincerely,  1L-mad•Ge, The Honorable Paul A. Volcker Chairman Federal Reserve System 20th Street and Constitution Avenue Washington, D. C. 20551   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r  •  •••  •  O  .) CA  P y4 //  • of Govi-4;•.  •rn  BOARD (3 .- 50VERNORS  .c  4E  FEDERAL RESERVE SYSTEM viAsHiNoToN, D. C. 20551  ,;•••`. •  -  /  PAUL A. VOLCKER  • 1RAL RE-S‘"• • • • •.. • •  C 1-IAIRMAN  April 28, 1980  The Honorable Henry S. Reuss Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman Reuss: Your letter of March 28 suggests that an interest rate decline is desirable at this time, and that the Federal Reserve call on the banking system to bring rates down. Market rates have dropped considerably in recent days, and if such lower rates are sustained, bank lending rates are .likely to follow. Fundamentally, however, a sustained lower level of—rates depends on an abatement of inflationary psychology and/or an easing of inflationary credit demands. This can best be encouraged by continued prude nce in monetary and fiscal policies. In a later letter, dated April 3, you have proposed that we consider three technical changes in our reserve requirement and discount window procedures. Please be assured that your proposals, as well as others, are under activ e consideration by the Federal Reserve as we move to implementation of the Depository Institutions Deregulation and Monet ary Control Act of 1980. Sincerely,  /t4,)  '(ke  /  , 1 • cit'ePatAi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  c,  HENRY S REUSS, WIS.. CHAIRMAN THOMAS L. ASHLEY, 01110 WILLIAM S. MOORHEAD. PA.  •  •  FERNA.ND .1. ST GERMAIN, R.I. HENRY B. GONZALEZ, TEX. .•  JOSEPH G. MINISH, N.J. FRANK ANNUNZIO. ILL. JAWS M. HANLEY, N.Y. PARREN J. MITCHELL. MD. WALTER E. FAL/NTROY, D.C.  U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS  STEPHEN L. NEAL. N C. JERRY M. PATTERSON. CALIF.  NINETY-SIXTH CONGRESS  JAMES .1. BLANCHARD. MICH. CARROLL HUBBARD, JR., KY. JOHN J. LAEALCE. N.Y.  2129 RAYBURN HOUSE OFFICE BUILDING  WASHINGTON, D.C. 20515  GLADYS NOON SPELLMAN, MD. LES AuCOIN, OREG. DAVID W. EVANS. IND.  .1. WILLIAM STANTON, OHIO CHALMERS P. WYLIE. OHIO STEWART B. McKINNEY. CONN. GEORGE HANSEN. IDAHO HENRY J. HYDE. ILL RICHARD KELLY. FLA. JIM LEACH, IOWA THOMAS B.(VANS. JR DEL. S. WILLIAM GREEN, N.Y. RON PAUL, TEX. ED BETHUNE. ARK. NORMAN D. SHUMWAY, CALIF. CARROLL A. CAMPBELL JR.. S.C. DON RITTER, PA. JON HINSON. MISS.  ns-uo  NORMAN E. DAMOURS, N.H. STANLEY N. LUNDINE. N.Y. JOHN .1. CAVANAUGH, NEOR. MARY ROSE °AKAR. OHIO JIM MATTOX, TEX. BRUCE F. VENT°. MINN. DOUG BARNARD. GA. WES WATKINS. OKLA.  April 3, 1980  ROBERT GARCIA. N.Y. MIKE LOWRY, WASH.  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. Dear Chairman Volcker: I want to call your attention to three reforms which would enhance the Federal Reserve's ability to control the money supply and fight inflation. I have, over the last three years, suggested these reforms and have been repeatedly told, especially in the case of lagged reserve requirements, that they may be implemented when the Federal Reserve's membership problem is solved. The membership problem has been solved with the passage and signing into law of the Depository Institutions Deregulation and Monetary Control Act of 1980 on March 31, 1980. 1. End Lagged Reserve Requirements the the the ous  Experts inside and outside the Federal Reserve have condemned present system of lagged reserve requirements and have advised that system is a serious impediment to monetary control. I would hope Federal Reserve could immediately return to the system of synchronreserve requirements used by the Federal Reserve prior to 1968. 2. Staggered Closing Dates  At the end of this year nearly 40,000 financial institutions will, under the Depository Institutions Deregulation and Monetary Control Act of 1980, have authority to offer transaction accounts and be required to meet reserve requirements on these accounts at specified intervals. If we were to continue the system now in operation for member banks, where all 5,400 member banks must come up with their required reserves at the close of business on Wednesday, there would be an intensification of the mad scramble in and out of reserves that now exists every Wednesday afternoon. The mad scramble sends the Federal funds rate into wild gyrations Wlich make open market operations more difficult and are a disturbance to financial markets. The Federal Reserve should implement a system of staggered closing dates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • • The Honorable Paul A. Volcker April 3, 1980 Page  Two  3. Tie the Discount Rate to a Market Rate To avoid both disturting announcement effects of arbitrary changes in the discount rate and subsidies to the large banks when the discount rate is below the market rate, the discount rate should be immediately tied to a market rate. I think the Federal Reserve should implement these reforms at once. We cannot afford more prolonged delays in improving the tools we have to fight inflation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Henry S. Reuss Chairman  •  •  CM  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  RAL RE' ••••••.  PAUL A. VOLCKER CHAIRMAN  April 28, 1980 The Honorable Carroll Hubbard House of Representatives Washington, D.C. 20515 Dear Mr. Hubbard: I appreciate and share your concern regarding the difficulties being faced by housing and related sectors of the economy. There is no doubt that mortgage, housing, and other markets have deteriorated in recent months, as inflation accelerated and the supply of credit has run below potential demand. The Federal Reserve is cognizant of the special problems that high interest rates have created in mortgage, housing, and other markets. In designing the Special Credit Restraint Program announced March 14, the Board asked commercial banks to give priority to maintaining a reasonable flow of funds to small businesses, such as local builders, and to serving the liquidity needs of thrift institutions. The special deposit requirements applying to increases in consumer credit specifically excluded mortgage credit for the purchase or improvement of homes. In addition, the special deposit requirements imposed on any further expansion in the assets of money market mutual funds should help curb the shift of savings toward the central money market, leaving more funds available in local markets to help meet local credit demands, including those associated with housing. Furthermore, I have urged the banking community to make special efforts to accommodate the appropriate credit needs of small businesses, homebuilders, consumers, and farmers. Also, the Federal Reserve has long supported changes in regulatory processes that will make credit more readily available for housing during periods of high interest rates. Measures enhancing the ability of thrift institutions to compete for funds, such as the recently enacted legislation calling for deregulation of depository institutions, are an important contribution in this regard.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Carroll Hubbard Page Two  Given the immediate outlook for depressed real estate activity, the Congress itself may wish to consider special programs to aid housing through this difficult period. The benefits expected from specific measures, however, should be weighed carefully against the likely costs. The types of program used in the last housing downswing to provide residential mortgage credit at below-market interest rates undoubtedly would provide some support for housing in the short run. On the other hand, federal borrowing to finance such programs might put upward pressure on market interest rates and intensify the problems being experienced - by the thrift institutions. Use of special subsidy programs, moreover, could call into serious question the resolve of the Federal Government in fighting inflation. In any event, solutions designed to aid the mortgage and housing markets will not go to the core of the problem facing these and other sectors of the economy. The inflationary process must be halted. As inflation abates and inflationary expectations dissipate, market interest rates will recede, , pressures on the depository institutions will ease, and the supply of credit will improve. With lower costs of residential I mortgage loans and generally more stable conditions in all financial markets, housing--a sector highly dependent on outside funding--should be among the first areas of the economy to benefit.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I look forward to working with you and your colleagues in the Congress in finding solutions to our nation's economic problems. Sincerely,  /i /4&et€  , 4lif,1lk-c/ /(ke a,tt /7)((  .w  CARROLL HUBBARD AT LARGE MAJORITY WHIP  CONGRESSMAN PIT DISTRICT. KENTUCKY  204 CANNON Hour Orr Ice BUILDING WASHINGTON, D C. 20515 (202) 225-3115   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CommITTErs:  BANKING. FINANCI: AND URBAN AFFAIRS  Congtr55 of tbe Ziniteb *tatc5  MERCHANT MARINE AND FISHERIES  A)ott5t of 1itsprt5entatibe5  CHAIRMAN. SUBcOMMITTEE ON PANAMA CANAL  61.1a1iington, D.C. 20315 April 14, 1980  Non. Paul Volcker Chairman Federal Reserve System 20th St. and Constitution Ave., N.W. Washington, D.C. 20551 Dear Paul: I am writing you today to add my voice, as one who represents homebuilders, real estate agents, small businessmen and farmers in western Kentucky, in opposition to the continued policy of the Federal Reserve Board to force up interest rates through restrictive reserve requirements. I do understand the need for monetary action to restrict the money supply. Certainly, I realize that an economic downturn is called for if we are to cool inflation. But I believe that a 20 percent prime rate has already achieved this purpose, and has already brought recessionary conditions to western Kentucky. It is time, I think, to "loosen the screws." I am inundated by pleas from farmers who, even if they can secure credit, are sure to lose money at current interest rates. I hear from builders and realtors and car dealers, whose businesses are at a standstill, and are facing bankruptcy. I hear from small businessmen, who cannot compete for funds in the current environment with their corporate counterparts, and whose survival is at stake. I urge, on behalf of these people who are most vulnerable to the current high interest rates, to allow these rates to fall. I think the necessary amount of blood has been drawn, and that credit controls now in existence will be sufficient to ensure effective control of the money supply. ank you for your consideration of these thoughts. forward to receiving your response. With best wishes for you, I am &Sincerely yours,  Carroll Hubbard Member of Congress CH:fe  I look   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  V-156  -7  4.;  Ir  t. • tw -  to -  •  4 4 v , 4-  t  I  ti  r. ;7.4, t.  7-  4.  • t"4:  4  t‘,t1  t:.T.171:02  II  t  lf  ‘,/t-'44.• •  ,r 0-41 cv—,1 *fltireA  of141, wttt. c474t  •sfr;r1.  (7! trAttn,.: tt.1 tr.; rt1-1!!!.  tn  • .r !  f:41.9-9rs lc,s_rce'elks tr.s 14.A4r5. te1int.lt for prL tr.!As to t1n1/ ¶rt 7e ;rt;Iii7.  :;-?.  t1- 11r;-:!. 1rtfs1.1171st  t. Xvlr:OKA-  1-7.1t n;.;;Gto 114-40,1 7 -44t-rt7%,;04-#. 7?-tActitr 'TJAts I0114,4 Is tl',46 mdtat intorclit Qmtx:#.1i2.4t *.rn. irwkantiy Ii reto 4111 t7-:-t_!-•.. vwl,oct4f.Wrg tr.fIttti frAr !AlAinttsc,t7av?.1 It ex.q.1.t14 rf-41101!!17. •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Bill Boner Page Two  so sorely need to increase our productive capacity and enhance its efficiency. Nevertheless, there is no pain less or easy way to eliminate the hardships that ultimately stem from rapid inflation. For its part in reducing inflatio n, the Federal Reserve must persist in its efforts to maintain control over the growth of money and credit. It is only with reduced inflation that we can look forward to a prosperous econ omic environment, and one which small business will find attracti ve and profitable. I hope these caments prove useful to you. Siryerely, Aitt,Zig/it ' /A  4(  aolv-,Yyvt;ta),(A"-% hug • Pliki  1141A /41  Action assigned M  BOA_ BONER  Kichline  •  •  5Th i DISTRICT  TENNESSEE  DISTRICT OFFICE:  552 U.S. Coum-Housc NASKVILLIC. TENNrssre 37203 615-251-5295  commilmrs, PUBLIC WORKS Art0  WASHINGTON OFFICE!  TRANSPOR EATION  4tk4s0 (1.7,ongrer')f.-') of flit Ziniteb 4Nhatt5  VETERANS AFFAIRS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CANNON  ROOM 118 HOUSE OFFICE BUILDING 202-225-4311  3IptifSe of ileprtssentatibei5 Ulagbington, 3.(!:. 20515 April 9, 1980  Mr. Paul A. Volcker, Chairman Federal Reserve System Twentieth Street and Constitution Avenue, NW Washington, DC 20551 Re:  Mr. Thomas Summers, President Cowan Stone Company 480 Craighead Street, Suite 201 Nashville, TN 37204  Dear Mr. Volcker: In response to a request for assistance, I am writing to express my interest in Mr. Thomas Summers and the Cowan Stone Company. Mr. Summers has expressed his concerns to me about the high interests rate's effect on his company's situation. Cowan Stone Company began construction on a new plant when the interest rate was considerably lower than the approximately 207 they must pay now. Mr. Summers tells me that his company has borrowed $2 million andanticipatesborrowing an additional $3 million to allow completion of the project. He is interested in being advised whether any action is anticipated to allow ongoing projects to be allowed to borrow money at a consistent interest rate. In other words, if a company began a new project that could not reasonably be stopped, would alternatives be available to ensure that they could obtain the money needed to complete the project at a interest rate comparable to the initial money they borrowed. Mr. Summers indicates that such action would protect the interests of companies currently engaged in expansion. In conformity with your policies and procedures, we ask that this request receive every courtesy and consideration. Please keep me advised of the status of the request and forward correspondence to my district office. Thank you for your attention. Sincerely,  Bill Boner Member of Congress  THISZTATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  ;  April 28. 1960  The iionorable Robert Moroen Urite0 Itetes senate wAshingtor, D, C. 20510 Dear senator Morf,:en I and other nembers of the roard can readily understand the circumstances that prompted your letter about the , takeover of the Liggett foreign bank financinc of the intended Group, Inc. hy Orand metropolitan Limited. / know that you understand that as a general 'Natter the Federal Reserve cannot directly interject itself into tl.e affairs of foreign banks operatinc under the lows. re(lulations, and policies of other scvereion 9overnments. Powever, the Federal Reserve has made inrruiries ei;out this particular situation with the appropriPte !iritiab authorities. And, while those auelorities were rleinly *ware of our concerns and were venerally supportive of the sir's of the Cpecial Credit Restraint Prow,.arP, they deemed it inappropriate to intercede directly in this or ary other inrlividual transaction. llowever, I would not want to leave the impression that foreign central banks and monetary authorities are insensi have written to the tive to our efforts. As you nay now heads of the major central banks around the *Sold askim,: that they urele their v.ajor banks to limit their loans to U.S. residents in line with the objectives of the Prograr. A copy of that letter is enclosed. The response of the forein central bankino comunity, both in terms of specific actions aimed at informir‘7 their banking institutions of their support for cur Program and in terms of their generally surnortive conversations with Federal rmonrve officials, has been encouraging. ve will continue to do all we can to ensure that the objectives of our Proqram are uneerstcod and respected both at bore end abroad. Sincerely, S/Ja!1IA. Voicka  vnclosure FCCTvcci (MV-152) & 181)  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Identical letters also sent senators Ruddleston & to Fore & Cong. Neal  Action assigned Mr. Corrigan  .  41110  0  11(MII , ‘4 1.-• , ClIAITTMA KM !AM P17, ;r7..  HARMION A • •  •••.r" riA/1•4  It'l  AL1.4 A• Au r • •.;  T  TI • .  TOAI  II I  II  P. •  IN: 1'1  VIII•1  1.4 ,••  44.1111AM ••••4(  r.AT/IK,P4 KA•  --z'AcIfer; ,c1tctfe  A•,/' • AI •  • '  Ill-  P.  ;,• 1.4 •,  Ictitirtt) ,  ....A,  ••••••-.  C /'•".1111f ••• P.4  • .I •  ••••••  MA, /  Mr  A•I. I ,  AN  .I.TAT  rut,  ..TAT  /,••.C.F r-• C  I—IN RANKING. HOUSING. AND  UFMAN AFFAIRS  I  MI!  • T'AVA,  WASHINC;1ON. D.C. 20510  I • ••  April 15, 1980  Paul A. Volcker  .  Chairman Board of Governors Federal Reserve System Federal Reserve Building Constitution Avenue and 20th Street, N.W. Washington, D.C. 20551 U . Dear Mr. Chairman: As a member of the Senate Banking Committee, I have been deeply concerned about the prospects of foreign banking interests taking advantage of the current economic conditions in our country to finance takeovers of American businesses contrary to the Credit Restraint Program announced by the Federal Reserve Board on March 14, 1980. Members of the Committee and other members of the Congress have indicated strong support for the compliance of foreign banks with the limitations of the Restraint Program. A company acting in defiance of the program can enjoy the extraordinary advantage of being able to buy the stock of a target company at depressed prices, to the detriment of American shareholders, because potential competitors for the stock are restrained from bidding by the Credit Program.  or  concern is the announced plan by The current focus Grand Metropolitan Limited, a British conglomerate, to make a tender offer April 18th to take over Liggett Group, using a $350 million loan from Barclays Bank International Limited and International Westminister Bank Limited. Earlier disclI sures by Grand Metropolitan revealed that it had been buying up Liggett shares using a line of credit from S.G. Warburg & Company, a British concern. Reports in the press indicate that Grand Metropolitan, if successful, plans to sell most of Liggett's assets and to keep only two or three Liggett subsidiaries. If true, this would appear to constitute a prime example of a non-productive takeover, the type of transaction frowned upon by the Credit Restraint Program. While I and those who join me in writing recognize that the Federal Reserve Board's Credit Restraint Program is voluntary and that foreign banks have been requested to abide by the "substance and spirit" of the Program, we believe that the Board's   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1111,  r  01.•  01111  Honorable Paul A. Volcker April 15, 1980 Page 2  policies are entitled to and are normally accorded great respect by both domestic and foreign banking interests. Accordingly, we are requesting that you make an appropriate inquiry into the situation which we have described and about which we are all deeply concerned. With all best wishes, it--e • *.  Sincerely,  tte.0  -  A Walter D. Huddleston  Robert Morgan  //10' 44"). 01 ,' 4.1A Wendell H. Ford RM/apd Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CeStephen L. Neal  .-3001(  ••• • .••••  •••  _  7-..•  •  •  4-"•1  .UK Firm Plans Offer for Liggett Of:$415 Million Bid by Grand Metropo1itar)1 Faces Variety of. iIwdlii . ,And Wasn't Welcomed By a WALL STRrET .7ut:RNAI. Staff Ruivrirr  NEV' YORK—Grand Metropolitan Ltd.. a British conglomerate, said it plans a 5-115 million tender offer for Liggett Group Inc. Although the long-anticipated proposal wasn't welcomed by Liggett and faces a variety of hurdles, Grand Metropolitan said it hopes to begin a O-a-share offer for Uggett common Friday...1, ! : ' •••:•-; . But the timing of any offer Is clouded by conflicting state and federal legal requiremints. • •-• • ‘• • • The British concern currently owns 9.5%* of Liggett and has sought for some time to gain a direct foothold in the U.S. liquor Industry. The two companies are long-time partners in the spirits business: Uggett distributes JdzI3 Scotch 'whisky, the U.S.'s largest-selling Scotch, and Grand Nietropolltan distills it. ..•:, , . IJggett hadn't any immediate comment , on the latest offer. A spokesman said the; board will meet soon, possibly as .early as today, to discuss the proposed offer.. '. • • Waging Legal Rattle 't. • . Liggett already is waging a legal battle 'to prevent further share purchases by the British concern. The fight began:after Grand Metropolitan about,doiibled its stake. In Liggett to 9.5% last month. Liggett then contacted the North,. Carolina secretary - of state, who filed Suit under the state's takeover-disclosure law. •• .• • Because a state judge issued a preliminary injunction against further, purchases., Grand Metropolitan can't legally begin the offer on Friday., 7 But the Bntish company said it. has "made the required filing" necessary under North Carolina's takeover-disclosure law. It said a" state court hearing on Its motion to begin the offer is scheduled for Thursday at 2. .0 p.m. . • • ..• -News of the offer sent Liggett shares soaring on the New York Stock Exchange qmposite tape. After trading as high as $45.25, the stock fell back to close at $44.25, uri .56.25. • . I . Speculation About Unit • • -• v. Grand Metropolitan finance director Clif-, ford Smith, in New York yesterday, said' that Liggett rr,anagement hadn't sought discilssions with Grand Metropolitan by late xesterday afternoon and that Grand Metropolitan didn't plan to seek discussions with Liggett. But "we want this to be a friendly thing and we'd always be— prepared to talk . with 'hp !•71-111,1C111  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ke• CI! '•.! ll.( er of`er if it •4;re..-J .J dstrI unit, ritdli!,,.,lon its cern Exarid Securities the Under B irl the U.S offer rtvlations change ('rim year, Grand this ('.11 ;y that went into eff(.ct the filing from days five Metrop..ntan has to proeither .r:ision rl, firm date to make a offer. proposrd al;ndon the to ceed with or to the directly respond didn't Smith .Mr. Metropolitan Grand Nkliether question s of would abandon the offer if Liggett agreed to sell the- Paddington unit on acceptable terms. Rut he stressed that "we have more than one objective" in investing in the U.S. -We're looking for more than wines and • .• ." spirits," he said. • Liggett's wines and 'spirits unit, dominated. by J&B, accounted for. 34% of the company's• operating earnings last ye-ar., Liggett alsu. has interests in cigarets, chewing tobacco, pet foods, soft drinks and,sport• • .. • ing goods. -%7'.-• s • • •• • • "White Knight" Possibility Wall .Street sources noted that although the. proposed. S50a--share price is attractive when compared. with recent market prices .for Liggett common, which have ranged In the, rnid-$30s over the past few months,'It Is only about seven slimes the $7-a-share estimates that analysts have given for Liggett's 19S0 earnings. •.. • That raises the possibility that if Liggett Is able to come up with a "white knight". bidder, there may be plenty of room left for higher offers. Major acquisitions over the past year or so frequently have involved payments of about 11 to 12 times earnings. Asked whether Grand Metropolitan would consider increasing its price if a competing bidder surfaced, Mr. Smith said, "we'll cross that bridge when 1,ve come to It. This offer is a very serious one and we have given It a lot ••!• of thought." .' •.. •;-',' -• .4 , include. would offer proposed t ender .•-•' •The cash prices of $114.94 a share' for Liggett's.. . $5.S_cumulative -. Convertible. prOerencc for Its 7%`share Cur.nitla% tstok.and $67.50 a • t:c7.•' • tive _preferred 754Z.i..-• a _Friday Start for the Offer Is blocked, bY_coareaction; Grand Metr.opolitatt said It • -•:wilrstaii`as -sciari.as legally possible. it"-r a' • N - As; .5••• .4. SEC In 1.its Metropolitan disclosed rand" • • ••••• ••• •P • • • • '••• 103.•••• .50 #• .•• filing 'that a subsidiary his borrowed $3 million from .two London' banks toe help'flnance the proposed Offer. The balance of the S415 million offer will be financed 'from Grand Metropolitan's working capital. --.-- •• However, the timing of any Grand Metropolitan offer for Liggett remain's.. clouded.. both by pending litigation-and the differences In the new SEC tender -offer'ruleSind„, requirements of North Carolina's Tender Offer DiScloSUre'Act.. ;:?; SEC.regulations require a decision in whether to launch the offer by this Friday.However; under the North Carolina law, with which Grand Metropolitan has been *ordered to comply, there Is a waiting period of 30 days before any offer can begin. Grand Metropolitan said that it asked the North Carolina court yesterday to permit the offer to meet the SEC . .schedule. ,• • .• . •.. . t  •••••••  •  it  •.  lp  t•Ge  Court Action Grand NIttropolitan said It went into era] district court In New Jerey to seu'? judgment that the SEC regulations preen New Jersey and Delaware takeover laws. Separately, Liggett said It plans to ci Its cigaret-making operations from April to May 6 to reduce inventory.:. • The diversified ,compaay's tobacco e ployes, already working a four-day wv week because of slack demand for Ligge, cigaret brands, would receive early paid cations during the period. There are ab 1,100 employes at, the company's.'ciga• !operations In Dtirnam, N.C.; *Mk  ADrII 26, 1900  The tonerabli wee Watkine !4oese tlf Representatives 4ashino4ton D. C. 20S15 Doer  '-ratRins  Thank you for your lotter of April 1 re47sreirc the ho4&4ebuilding intluotry. The Federal Reserve shares your concerns about the effects of the current perio4 of monetary rostreint oo homebuilders. as well os on certain other crouy-•s such es tamers end small business** with limited finanoinc: 41ternatives. within Moe post two years. the Weral Reserve end other financial institution regulatory wcencies ?Pam. taken stars to help miticatt4e the effects of risine; interest rates on the flow of funds to the housing seetor. 443ile this VAT's:et cannot be olirtinated entirely, the Federal Reserve remains acutely *wore of the special difficulties facts ,7 the housinu and construction industries. vithin the overall quidelines of tha recently &darted voluntary tlpecisl CreOit Aestraint Progree., banks nre encoureee to ,-r.ainteis the avallebility of futds to honebuyers xts well At to other small businesses with limited access to cltern4te sources of finencinc. witl- respect to the Fa5eral !?eserve's supervisory responsVAlities, stanelard exepination proceeures require full consideration of all relevant factors when reviewing loan portfolios. Chief emonq these considerations ere the underlying value of col1tteral4 the *Malty of borrowers to resolve their iifficulties and the effects of mieril econorzic anti financial conditions. These proeedur*a have lonv enabled us to f:rit.e an accurate essessrient of the financial condition of indivies1 honks while remainio47 sensitive to the difficulties of particular borrowers and economic sectors. The concerns you *rave expressed are similar to thoss recently received from the FAtifyrAl lascrihed in a letter   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Wes Watkins Page Two  Association of Home Builders. The NAHB has requested that the bank regulatory agencies take steps to ensure that examiners are cognizant of the current condons facing the home building industry. This matter has been referred to the Federal Financial Institutions Examination Council since it relates to the superon of thrift institutions as well as commercial banks. I should point out that any action taken with respect to this matter would have to maintain the integrity of the examination process and ensure the agencies' ability to promote the safety and soundness of the financial institutions industry. Sincerely,  AdvdziA i2 /1  ".44J(b  44-e  47c -644ro- ruemA7 ak.th vC446 etale•icil tal,e44a$TriAfA Attu it;14‘zetAi/c4a)-  1 Action assigned Mr. Ryan  •  WES WATKINS 3RD DISTRICT. OKLA.)-40MA (202) 225-4565  •  COMMITTLEilt BANKING, FINANCE AND URBAN AFFAIRS  MAJORITY ZONE WHIP  r  CONGRESS OF THE UNITED STATES  CHAIRMAN  SCIENCE AND TECHNOLOGY  HOUSE OF REPRESENTATIVES  CONGRESSIONAL RURAL CAUCUS  SELECT  •••  COMMITTEE ON AGING  WASHINGTON. D.C. 20515  April 1, 1980  4113' '  Mr. Paul A. Volcker Chairman Federal Reserve System Twentieth St. g Constitution Ave., N.W. Washington, D.C. 20551 Dear Mr. Chairman: Today, the home building industry is facing one of the toughest economic climates it has known in a long time. The credit squeeze in combination with other factors in the economy has almost brought the homehuilding industry to its knees.  Olt  This industry is hoping for at least 1 million single-family starts this year, a decline from the higher levels of 1977 and 1978. The decline of over 1 million unit starts could very well have the effect of 1.6 million full-time job losses, plus losses in tax revenues to local governments and billions in wages. The need for housing is growing but with construction loan rates at 21-23T, and people facing mortgage rates of 16-177;, it is almost impossible for the industry to survive. During this time of hardship, many homebuilders are having to face their local banker and re-evaluate their financing position. At this time, I would like to encourage you to have your bank examiners give their full considerations to the homebuilder's loans recognizing the conditions they are working under and the hardships they are incurring. Thank you for your time and attention to this request. Any relief you can give to the homebuilding industry will be deeply appreciated.  ;  N  Sincerely, \")  WES WATKINS Member of Congress e-se •••• IF ° ••; ‘ Y . .  law   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  L.._ OKLAHOMA DISTRICT OFFICES:  203 POST OFFICE BUILDING DUNCAN, OKLAHOMA  73533  (405) 252-1434  ,  232 POST OFFICE BUILDING ADA, OKLAHOMA  74820  (405) 436-1980  118 FEDERAL BUILDING MCALESTER, OKLAHOMA (918) 423-5951  74501  Atn-il 26. 19$C  G. %Allier vilitehurst mouse of Aepresentstives C. 20513 Weebinoton, Dear Mr. vhitehurat' ?tank you for your varch 27 letter ftnclosiw, rorrespon.. clAntce froz Mr. C. Roy *.ellay of the U. s. crlt.;it Corporation in rortscutb. Virginia. Mr, Volley expressos contern about 016 imt of p*ct of the consumer craviit restraint proram on refinerciniA t0-16 fc,ortqale transactions. The creait restraint regulation represents an effort tpy the noard to help achieve the goals of the President's antiMislocetion to consumers and inflation proqratm re;lulatten, the rioard carefully cre!liters, teforo iv:ortinc weiqhed the potential lApact On various sw7-ents of the economy. • reco47nise4 that a regulation of this nature night sees. unduly Uurslassowte to some am, miobt produce results that would appear POWundesirable to coneumers and creditors in the pest future. ever. any short-term adverse impact of the provram on creditors ust be weighed ecleinct the 1on44-rankle benefits to and cswer the economy Of reducing inflation. The relulation in a temporary measure, desivnea to help relieve rrorrent inflmtionery presslIree. You eay be sure that the T•.:41r41 will net extend it beyond t!..e time necessary to achieve tlqgt lb addition, shoulA the titviaence qathere? it tbe next few result p.onthe indicate that the burdens it-posed on consumers and creeitors are Jisproportionate to any beneficte1 effect on the economy, the kAlord certainly would consider tneltinq appropriate changes in the proran. I would likv to point out. however. that the requlatisn, toqether with staff interpretations of its pre.ninions, recoqnises the special nature of home mortgerm trenimetisma in a number of ways. ?or example. eeeond mortqaces fnr hone iviroviament purposes are exempt fropl the recIlirements of the revelations ;4-hi1e we do net b*lievli that the change. that Mr. Xelley at this tia e understand his concerns proposes should be at snd appreciate your brinOng his views to the Pioardla attention. Sincerely CY.vcd (*V-120) bee: Claudia Yerus Mrs. mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1/9_Latvi  4 G. WILLIAM WHITEHURST 2ND DISTRICT, VIRGINIA  Action assigned  32  t Hart .11v  WASHINGTON OFFICE: 2427 RATPURN BUILDING WASHINGTON. CD C. 20513  commiTTErs; ARMED SERVICES SUBCOMMITTEES  (202) 225-4215  Congre55 of tbe innitcb ptate5  MILITARY INSTALLATIONS AND FACILITIES  CHARLES H. FIT 2PATRICK ADMINISTRATIVE ASSISTANT  0:Inge of itpreMItatibeiS  CONSTITUENT SERVICE OFFICE  RESEARCH AND DEVELOPMENT  815 FEDERAL BUILDING NORFOUK, VIRGINIA 23510 (804) 441-3340  Oilagbington, t).C. 20315  PERMANENT SELECT COMMITTEE ON INTELLIGENCE  VERENA C. wASSERmAN OF F ICE M A NA E  SuecommiTTEES. PROGRAM AND BUDGET AUTHORTZ ATION  ROOM 601. P EM BROK II ONE  OVERSIGHT  VIRGINIA BEACH, VIRGINIA  23482  (804) 490-2393 U S. DELEGATE TO NORTH ATLANTIC ASSEMBLY   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BLANCHE M. BoYLES OFFICE MANAGER  March 27, 1980  The Honorable Paul A. Volcker Chairman Federal Reserve System 21st Street and Constitution Avenue, NW Washington, D. C. 20551 Dear Mr. Chairman: I am enclosing a copy of a letter which I have just received from Mr. C. Roy Kelley, who is with the U. S. Credit Corporation in Portsmouth, Virginia,. I would appreciate it very much if the views which he expresses could receive every consideration by the Federal Reserve System. A report from you would also be appreciated. With all best wishes, I remain Sincerely, ‘  4..-1-4-%-k‘/--  G. WILLIAM WHITEHURST GWW:RL Enclosure  •  •  •  t4 U.S,CREDIT CORPORATION 330 County Street, Suite 301, P. 0. Box 698, Portsmouth, VA 23705 Telephone: (804) 397-7000  March 24, 1980  The Honorable G. William Whitehurst 2427 Rayburn House Office Building Washington, D.C. 20515 Dear Bill: The Credit Control Act as implemented by Executive Order 12201 places restraints on the extension of credit to home owners. Specifically, the regulation applies to loans for which the collateral provided is already owned by the borrower. The credit restraints will effectively eliminate many refinancing and secondary mortgage programs that have normally been available to the home owner. Home ownership is a key element in securing the well being and stability of the family unit. Traditionally, home owners have been encouraged to carefully build and safeguard the equity in their homes in order that the equity might provide family security in times of financial need. The ability to refinance or to take a second mortgage has been a method of funding the family need. Millions of Americans have confidently relied on these sources to meet their family requirements for debt consolidation, costs of education, and to cover the higher costs of living brought about by our inflationary economy. Implemention of the Credit Control Act, as it is presently worded, will severely restrict the ability of home owners to respond to the financial needs of their families. Homes will be lost to foreclosure due to the inability to consolidate overbearing consumer credit installment payments that will be increased by the restraints of the Act. Home owners with fine credit ratings will risk the loss of those ratings, if they are unable to meet the pressures of escalating payments due to the inability to effectively utilize the equity in their homes to ease their monthly payment burdens. The Act will encourage new home purchasers to obtain maximum loan amounts rather than encourage large down payments since the use of the equity after the initial purchase might be restricted. Family saving through the development of home equity will thus be discouraged. Mortgage loans where the proceeds are used to purchase the collateral or for home improvements are not covered by the regulation. Encouragement should be given to exclude all home owner mortgage loans from the Act.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S .  6-•  Page 2 March 24, 1980  It might be said that special interest groups can take positions that would call for elinination of many provisions of the Act. my position is that home owners are a very special group that deserve the ability to utilize the equity values in their properties for any needed purpose. Since-Fly, )(-3, C. Roy Kelley CRK:tlm   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  memimmir  ROARD Or GOVERNORS 7r fl4E  FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20551  PAUL A. VOLCKER CHAIRMAN  April 28, 1980  The Honorable Jim Wright House of Representatives Washington, D.C. 20515 Dear Mr. Wright: I have read your letter and Mr. Hammett's letter to you concerning the treatment of credit used to finance exports under the Federal Reserve's Special Credit Restraint Program. As you know, in the Board's initial policy statement on the Special Credit Restraint Program and in subsequent press releases concerning the administration of the Program, it has been made clear that certain classes of credit would be viewed as having a "high priority" and would therefore not be subject to special restraint. Export credit is one of those types of credit so designated. In the administration of the Program, we have avoided using the term "exempt" for any class of lending including those high priority uses of credit simply because the semantical connotation of that word would unduly complicate the administration of the Program. But, we have made it very clear that banks that are at or near the upper end of the 6-9% limit should cut back on lending to large business borrowers that have access to alternate sources of funds in order to sustain lending to the high priority users of credit. And, we have also said that where banks are generally confining new lending to these priority areas, they would be justified in exceeding the quantitative limit. Looked at in this light, I believe that the policy statement and guidelines issued by the Federal Reserve in connection with the Special Credit Restraint Program are sensitive to the concerns you and Mr. Hammett have raised and which I share. I appreciate the opportunity to comment on this issue.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •  Sincerely,  JIM WRIGHT TEXS A Mi,JORITY LEADER   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congre55  of die 'Unita) 6tateg  ibouot of iktprestntatibeg  Office of tbe Sibioritp 3Leaber tillassliington, 33.C. 20515 March 28, 1980  tk4  Hon. Paul A. Volcker Chairman, Board of Governors Federal Reserve System Federal Reserve Bldg. Constitution and 20th Washington, D. C. 20551 Dear Mr. Chairman: Enclosed is a copy of a letter from an extremely knowledgeable constituent of mine from Fort Worth regarding the need to exempt loans intended to finance foreign commercial sales from credit restrictions. Your consideration of the concerns he expresses would be greatly appreciated. If you could let me hear from you in this regard I would greatly appreciate it. Very best wishes.  •  V'  • 40•4  ?,  11)'••  \  44•• 0. • gar  •  ••  .4 •  •  1.411, ,:•,_ 44 As.. 1•••  S  g 44•• •• • AI •  -•`.%  • •  al  .  41• 14.  •: 4  •ir  a•.0 al...1 1  • ••  vs,  rott` etCrt•)•. YE %A'.  t•'. I .'""  ,•••••••• •••,;,,t  • r.•• t•  narch 26, 19"e.,0  •••. • ..t•••• _  ••."14  ••• •., ••• 6 •••••2•  •:16,•- • ..•..•' <1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Il•  honorable Jim Wri V.4.1  United Statr---_ Washinaton, D. C.  •" r'c--esentatives 20515  ATTENTION: •'•  credit control  Dear Congress:7,3n ;;right: This is to request that, if you f;nd it has merit, your office to t!..! Federal P...?serve Board that it exer:..pt from the six to r:ine .n^reas^ restriction the following: Crezlits an-' extensions of ore:lit to the United Statcs citizens relating to sales of goods in foreign co=erce. The rectson .„ this sugcoct4 on is that the deficit in tlie United r.tates currcnt-account balnnce of payr.ents in recent years has har; an inflationary impact in the U.S. Farme:cs, manufacturr,rs and othert sellers of goods to foreign purchasers should ;o1- be subject the sa7o scrutiny by lenders as Dersons engaged in co7...7crce purely within the United States, since reduction of balance c' paym:.nts deficit would itself be an anti-infintionacy measure. Althouqh the current-account balance of payr7ents dizficit chrank last year, I understand that. calr' cf scrvice3 accounted trade defic;t. calc! of goods was over $29 billion year. Wall S'.:reet Journal, Mar. 1980, page 3). 4..• 4  .— 4-“  •• r-  Psn  Thank you for your consideration of this requelst. vcwrs •••  HAROLD D. HAKY.r7T HDH:cip   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  rirril 18, 10°0  The ;:ororaLln (;. Porerthal Chpirt-:Pm rrerce, Cormmor, ard rul:ro:littee on Monrqary Alfnirs CorrAtter7, or (3ovcrmrant (7,porntions Pouse of Nuprr.scyntativs /oshirr-ton, P.C. 20515 Prsnc.nthal:  DPar  As roPritc4 in your lctt.t. of 77zmrch 13, T am  r1eAre,1 to enclono 1 cony c'  t  rrler vIy  JimriQm V. Poupt  on Tbe EffPct of Yortin-Acquisitionc on the Perforrnance of n.r. ran-11s.  711oull you 'rrlvt--. any iurf3tions !Ar. T/oupt can be  revehrl It 452-3371.  CO:jmr (V-88) hcc: Coy. Coy. rartee Vrs. VallPrdi (2)  •  Of GOve •. R4, •*. 0  •  • BOARD OF GOVERNORS or  fr •  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  'T[f ittiikt'E; •<" '[! • , t- • %: 4‘e‘ .C•;t4,2 5 :" . RE.S" •• • ••• • ••   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PAUL A. VOLCKER CHAIRMAN  April 18, 1980  The Honorable John C. Culver United States Senate Washington, D.C. 20510 Dear Senator Culver: This is in response to your letter of March 28 urging the Federal Reserve to advance credit to non-member banks of rural areas so they can better accommodate the credit needs of their agricultural customers. The new temporary seasonal credit program announced by the Board of Governors yesterday is explicitly designed to help small banks under liquidity pressure meet the credit needs of their communities. Thus, I believe it is responsive to both the concerns and the suggested action outlined in your letter. The Board's action will help to assure that credit is available to agriculture and small business. The Board's release which describes the specifics of the new program is enclosed for your information. If you have additional questions or comments on these credit arrangements, please let me know. Sincerely,  daeo Enclosure  1 ol pifrettm elLefoad- C(/,(:( Y(fcts6  (tad u/4614  0L  tel2  am,VeRZi  Ti4,/ wca,0,4:4/4t, 64,ezet,/  •  Action aired Mr. Axilrod  JENNINGS RANDOLPH, W. VA., CHAIRMAN E3MUP 4 S. MUSK IF. MAINE Miter ro•PVFL. ALASKA LLOYD Di NTSEN, TEX. OVENTIN N. BURDICK. N. OAK.  ROBERT T. STAFFORD. HOWARD H. BAKER. JR.. PETE V. oomrwict, N. MEX. Jot4N H. CNA f R I. ALAN K. 9IMPsON, WYO.  JOHN C r tiIN R IOWA GARY HAP- T. COLO. LARRY PRESSLER, S. OAK. DANIf I PATRICK MOVNIHAN, N.Y. JOHN W. YAGO, JR., STAEF ntForcTon BAILEY GUARD, MINORITY STAFF DIRECTOR  9Arti1eb Ztafez;„Senate COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS WASHINGTON. D.C. 20510  I I  l  h  ;  March 28, 1980 pilIMMERY.  The Honorable Paul A. Volcker Chairman Federal Reserve Board of Governors 21th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: As you know, the Senate this afternoon gave final approval to the Depository Institutions and Monetary Control Act of 1980. This legislation includes new authority to allow non-member banks to use the discount window. I am writing to urge that this new authority be implemented as rapidly as possible to make funds available to hard pressed agricultural banks which cannot meet the credit needs of their farm customers. The planting season in the corn belt is only a few weeks away, yet, as was pointed out in our earlier discussions, many banks in Iowa and neighboring states have insufficient funds to meet the high seasonal demand of the farm community. This problem is particularly acute in the corn belt states west of the Mississippi River where the grain sales suspension and severe rail transportation problems have drastically reduced the movement of grain to markets. As a consequence, the money needed to finance the 1980 crop is simply not available in this region of the country. Use of the discount window by non-member banks could open up a major new source of funds at more affordable rates. The key to effective implementation will he to make these discounted funds available on a realistic set of terms, without unduly burdensome requirements or conditions. I urge you to establish policies and guidelines for implementing this legislation which will make it as easy as possible for non-member banks to use this new borrowing power, and to do so as quickly as possible. I know from discussions with rural bankers in my state that if this is done, many of them will he willing to borrow these discounted funds and make them available on a low -profit seasonal basis to local farmers and businesses in need. Iowa bankers, farmers and businessmen are not seeking credit to finance frills but to finance investments that are essential to the nation's food production. Current credit conditions in my state are jeopardizing adequate food production, a consequence that could lead to far greater inflation in the months and years ahead.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  mt, .17  ^  1.•  4  •  THE HONORABLE PAUL A. VOLCKER MARCH 28, 1980 PAGE TWO The new authority under the Depository Institutions and Monetary Control Act offers great potential to channel our limited financial resources wisely. I hope you will take every possible step to assure that this potential is fulfilled. Thank you for your immediate attention to this matter and for your assistance thus far in stressing in the banking community the need to direct available credit toward farm, small business and other high priority needs.  JCC:gg   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  t  117-4! 2..  SIONNIOr  -  set*.  ,  r -  •  • .• • of cot,/ • • • 0.3  P.•  DOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON,0 C  20551  • PALREs'' ?".• ••• 44 .• •  PAUL A. VOLCK ER CHAIRMAN  April 15, 1980  The Honorable Guy Vander Jagt House of Representatives Washington, D.C. 20515 Dear Mr. Vander Jagt: I appreciate and share your concern regarding the difficulties being faced by housing and related sectors of the economy. There is no doubt that mortgage, housing, and associated markets have deteriorated in recent months in response to an acceleration of inflation and governmental policies to bring inflation under control. High interest rates, unfortunately, are an inevitable and unavoidable by-product of rapid inflation confronting.us today. Borrowers, anticipating further price increases and increased nominal incomes, are willing to pay relatively high interest rates, while lenders are seeking high rates in order to offset the prospective erosion of the purchasing power of later repayment. The Federal Reserve could offset the resultant pressures on interest rates by expanding the supply of money at an accelerated pace; however, such a policy would add fuel to the fires of inflation and lead before long to still greater upward pressures on rates. The Federal Reserve is fully cognizant of the special problems that high interest rates have created in mortgage, housing, and other markets. In designing the Special Credit Restraint Program announced on March 14, the Board asked commercial banks to give priority to maintaining a reasonable flow of funds to small businesses and to serving the liquidity needs of thrift institutions. There have been other actions undertaken as well by the Board and federal government agencies to attempt to moderate the impact of high inflation and monetary restraint on the housing sector. Even so, it is clear that many individuals and firms currently are experiencing hardships. The process of bringing inflation under control unfortunately is not easy or painless. Hopefully, the anti-inflation measures announced recently by the Administration and the Board will hasten the day when inflation and inflationary pressures will ease, credit demands will weaken, and interest rates will decline. I look forward to working with you and your colleagues in the Congress in finding solutions to our nation's economic problems.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  „. ,  •,„  // 4  - I  • /,/  • 8,f  •  i  / 1./  //  • •/' •  I  ,  I  I  (4..  1.1.'1"/  ";44 ,:r •Ie  -.4e  GUY VANDER JAGT 9rvt DISTRICT, MICHIGAN  •  OAction assigned Mr. Kichline  2334 Ftromurtm HOUSE Orricr BUILDING TELEPHONE:(202) 225-3511 COMMITTEE:  ROOSEVELT PARK 950 WEST NORTON AVENUIE MUSKEGON, M ICHIGAN  Congraz of tbe Unita)6tate5  WAYS AND MEANS ADMINISTRATIVE ASSISTANT JAmES M. srARLING, JR.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DISTRICT OFFICES:  3Ipufse of lieprefsentatibe55  31 WEST 8TH STREET HOLLAND, MICHIGAN (616) 396-3849  Ulatbington, D.C. 20315 April 7, 1980  Honorable Paul Volcker, Chairman Board •of Governors •of the Federal Reserve System Federal Reserve Building Constitution between 20th & 21st Streets washington, D. C. 20551 Dear Chairman Volcker: Excessive growth in Federal spending, financed by increases in deficits and taxs, and the increasing costs imposed by government overregulation have crippled investment, caused declines in real income and productivity, and have been the major cause of the acceleration in during 1979. More percent •13.2 inflation from 4.6 percent during 1976 to cate •that inflation has accelerated even further to an recent figures annually adjusted rate of 18 percent. After contributing to inflation through excessive expansion of the money supply over the past 5 years the Federal Reserve Board, starting in October of 1979 is now attempting to fight inflation with tight credit policies which serve to force up long-term interest rates. Without an adequate slowdown in spending growth, tight monetary policies will simply add to long-run inflation by reS supply. Clearly, real estate is causing shortages in the housing sufferinS a disproportionate burden of the fight against inflation.  :nd  Everyone suffers from the effect of inflation and sacrifices will be necessary to bring it under control, but we must make certain vital sectors and industries are not wiped out in the process.  I ask that you give serious consideration to easing the currently tight credit policies and lower interest rates to encourage investment in housing. Sincerely,  GVJ:m  Guy Van er Jagt Member of Congress  49441  (816) 733-3131  49423  . I  ••• • • Of GOt't • • ' 0_0 R,t, • .*c .‘•=7:11 : 79q, •c).• •  .7/ • _.., • -..•  P7APD Pr 7373VERNOPS  FEDERAL RESERVE SYSTEM v,AsHINGTON, D. C. 20551  • • f4At. R.  PAUL A. VOLCKER C HAI RMAN  April 18, 1980  The Honorable Charles E. Grassley House of Representatives Washington, D.C. 20515 Dear Mr. Grassley: On March 13 you wrote to me suggesting that the Federal Reserve use its discount window to moderate pressures on the liquidity of small banks in rural areas as a means of helping to assure adequate financing of farm production loans in Iowa and other rural states. And on April 2 you wrote to me requesting that the Federal Reserve offer a special discount for small business and agricultural loans. Letters from you and others, along with economic intelligence collected partly through our system of regional Federal Reserve Banks, have helped the Board to identify the severity of current pressures on financing for farmers and small businesses. The new temporary seasonal credit program announced by the Board of Governors yesterday is explicitly designed to help small banks under liquidity pressure meet the credit needs of their communities. Thus, I believe it is responsive to both the concerns and the suggested actions outlined in your letters. The Board's action will help to assure that credit is available to agriculture and small business. The Board's release which described the specifics of the new program is enclosed for your information. If you have additional questions or comments on these credit arrangements, please let me know. Sincerel,1y;,,  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (.  CHARLES E. GRASSLEY 3o DISTRICT, IOWA  Action a q sianed to Mr. AxiLrod mop  DISTRICT OIVICES: NNW 210 WATERLOO BUILDING 531 CONIVICIRCIAL STREET  1227 LONGWORTH HOUSE OFFICIE BUILDING WASHINSTON. 0 C.  20515  (202) 225-3301  WATERLOO, IOWA  Congre5 of the Ziniteb  tatei  jDousSe of 1kepresSentatibt5  COMMITTEES: AGRICULTURE  309-31 I POST Ovrtcc EknLoiroo 211 Norm., DELAWARE Avemut MASON CITY, IOWA  50401  (515) 424-3613  BANKING FINANCE AND URBAN AFFAIRS  Klasliington, 33.e. 20515  SELECT COMMITTEE ON AGING   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  50701  (319) 232-6657  13 WEST MAIN STREET MARSHALLTOWN, IOWA  50156  (515) 753-3172  March 13, 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 Chairman Volcker: There is a critical shortage of funds in Iowar, and other rural states for crop production loans. Ifc6 this situation is not remedied in the next two months, there will be a significant reduction in food production. It is my understanding that the Federal Reserve Act affords the Board the opportunity to offer a lower discount rate for agricultural paper. While I realize that this action by the Board cannot be a long-term policy, it is crucial that this action be taken immediately to help even -out the effect of restrictive credit growth and ease the painful adjustment process that apparently is much easier in the money centers. If this action cannot be taken, I respectfully request the Board to make alternative suggestions to remedy the credit shortage in rural areas of America. Sincerely,  CHARLES E. GRASSLEY Member of Congress CEG:bbh  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  • ../r4;i4  8,144:014T4'  134.. fl;•=7:1 CP • ct. Vyai;i7 71 i ' f  .1..-VrEMV  prVERNCIF“A  FEDERAL RESERVE SYSTEM o. c. 20551 PAUL A. VOLCKER CHAIRMAN  April 18, 1980  The Honorable Charles E. Grassl cy . House of Representatives Washington, D.C. 20515 Dear Mr. Grassley: On March 13 you wrote to mc sug gesting that the Federal Reserve use its discount window to moderate pressures on the liquidity of small banks in rural areas as a means of helping to assure adequate financing of farm production loans in Iow a and other rural states. And on April 2 you wrote to me requestin g that the Federal Reserve offer a special discount for small business and agricultural loans. . Letters from you and others, along with economic intelligence collected partly through our system of regional Federal Res erve Banks, have helped the Boa rd to identify the severity of current pressures on financing for farmers and small businesses. The new temporary seasonal cre dit program announced by the Board of Governors yes terday is explicitly designed to help small banks under liquid ity pressure meet the credit nee ds of their communities. Thus, I believe it is responsive to bot h the concerns and the suggested actions outlined in your letter s. The Board's action will help to assure that credit is available to agriculture and small business. The Board's release which described the spe cifics of the new program is enclosed for your information. If you have additional questions or comments on these credit arrangements, please let me know. Sincerely, /) • Ii/.  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHARLES E. GRASSLEY  DISTRICT OFFICES:  30 DISTRICT. IOWA  210 WATERLOO BUILDING 531 COMMERCIAL STREET  4;227 Lor•sowon-ru HOUSE OFFICE BUILDING WASHINGTON. D.C.  20515  (202) 225-3301  WATERLOO. ItrAfA  Congre55 of tbe V.Initeb 6tatt5  AGRICULTURE  309-311 POST OFFICE BUILDING 211 NORTH DELAWARE AVENUE  31outt of ikepretqutatibe5  commr-TrEs.  MASON CITY, IOWA  Nia.gbington,;le. 20515  13 WEST MAIN STREET  SELECT COMMITTEE ON AGING  MARSHALLTOWN. IOWA  /\prfl  (5131 753-3172  2, 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 Chairman Volcker: Thank you for sending the background material which explains the goals of the Special Credit Restraint Program. I note that you exempt banks with less than $300 million in assets from the monthly reporting requirements In loans and commitments. While I am usually the first to 4!iplaud the reduction of paperwork burden, I think that it is critically important that the Board be aware of the impact of its policies on rural banks with respect to loans for agricultural and other small business purposes in the near future. My constituents have advised me that the Board's expectations that banks would adjust lending rates and other terms to meet the special needs of small businesses, including farmers, is simply not taking place. Therefore, I think it is essential that the Board offer a special discount for small business and agricultural paper, especially in areas served by banks whose assets are under $300 million. These are the banks that are experiencing liquidity and capital ratios which are below average. The result is that these banks are unable to make loans to those individuals whose credit needs are critical. Please advise me if you intend to take steps to relieve the unequal burden placed on farmers and small businesses by your policies. Furthermore, I would appreciate receiving copies of any reports that have been or are being prepared on this subject.  a 5a2.91..-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  50401  (515) 424-3613  BANKING. FINANCE AND URBAN AFFAIRS  CEG:rbh  50701  (319) 232-6657  c2--1A-4_,  Si  e ely  4, CH RLES E. GRASSLEY Member of Congress  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  ,  50156  April 21, 10,10  .4onorab1.e Marty Ruse. 1.0use of Repreeentetives Yashiogton. D. C. :WM Dear Mr. Rnesol. Thank you for giving se the opportunity to comment on the difficulties beino famed by your constitttents as a result of the impact of credit ti tic on houtting. There is no 4touht thet mortgage ani! Iltmstag merVets 'haw* deteriorated sharply in recent• month* as the auprly of cm-it has rum below rotential devand, As a result, residentiel not,structilm is apt to crop tlurther &wing the period illmeAlately ahead. So, too, is the volwlos of real estate market transactions. The Federal Reserve is fully cognisant of the epeciel protiems faced by proopeetive purchasers and by builelerc in ttAt current liver4et. In designing the Special Credit Restra.int !wrol;rsm avnounced oe Marcll 14, the .Votard *shed commercial tanks to give priority to maintaining a reasonable flow of fund* to small businesses, suet= as local builders, end to serving the llquiAity seeds of ttrift institutions. The special deposit reguirerents applying to increases in oonsumer credit specifically excluded mortgage credit for the purchase or iPprovemest of horNes. In adedition, the special deposit requirements lppesed on any further expansion in the areas of money weeket mutual funds should Ttelp curb the shift of savings toward the central messy market. leaving were fonds available in level markets to help swot loeal amends, including thee* associated with housing. northerner*, I have repeatedly urged tt.,0 benkin community to sake special of'.forts to accommodate the eppropriete credit needs of swell bosinoesee, heaelbuilrIers, oorsurlsrp, zind farrlers. Also, the Federal neserve hes long surported end eontineee to press for cheeges in remastory process,* that will 'rake credit aore readily ovailable Cr houaing derinc, poriods of tiO, interest rates. !A/impure* enhancinc: the ability of thrift institutions to compete for funds, such as the recently enacted leOslation calling ter deregulation of depositary institutions are an important eea. trihttloo in this regard,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  norable !Aarty Rusoo Pao0 2  Civen the immediate outloo)r for ,ifTr‹:Issio real estate nctivity. the Compress itself oay y1,1, to consider opeciAl probler.n to ^iti housinq throuqh this difficult period. The 1:enmfits expectecrt-or. specific measures, however, should be wel4he4 carefully aveinst the likely costa. The types of prrane twee in the last tmusinc tilownswing to vrovide residential Inortgeo, ere4it at below-vitrket interest rotes undoubtedly woulA provide spore support for housing in the short run. Or the other ban& federal borrowinq to finance such programs mivht put further urward pressure on rarket interest rates and intonsify the problems being experienced by the thrift institutions. Use of special subsidy procramx, noreover, could call iEto serious question the resolve of the federal clovernrent in fiihting inflation. In any event, solutions .estoned to atil themmortrimes ane housing varkets will not cm to the core of the problem facinevi these and other sectors of the economy. The infletionarr protest; must he halted. Ai ircD5tion :*ates Find inflationary exrectetions dissipate, market interest rater, will recode, pressures on thE? depositary institutions will ease, ana the supply nf ereflit will improve. A.th lower coots of reoilential rortcele, lc:Inn and generally note stable conditions in all financial i.aeketsit, housinv1-. wonc the sector hirjhly dependent t)tt outside fundino—shnuld first areas of the isconof,le to benefit. T loon fr:rward to worLing with you end your colleagues in the Concress in findinc solutions to our nation's econoric prok.lerm. !7Incere1y,  SLNIA.mpeuir  LWJSZ:XPB:1 r (07-135) A 1_)cc: Mr. Vichline Ms. TAng Mrs. Mallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned Mr. Kichline  • MARTY RUSSO COMMITTEES:  WAYS AND MEANS  111  41/  3RD DISTRICT. ILLINOIS  Congrefs5 of tbe Zinitcb  SELECT COMMITTEE ON AGING  OFFICES:  206 CANNON HOUSE OrFICE BUILDING WASHINGTON. D.C. 20515 202-225-5736  'tateg  PousSe of AtprefSentatibefS  10634 SOUTH CIcERO OAK LAWN. ILLINOIS 60453 312-353-8093  Ularsbington,33.e. 20515 April 1, 1980 (:.. Mr. Paul A. Volcker, Chairman Federal Reserve Board 20th Street and Constitution Ave., N.W. Washington, D.C. 20551 Dear Mr. Volcker: In recent weeks, my office has been sent zr.”Inrle'ss distress signiire by individuals and groups concerning the credit tightening policies of the Federal Reserve Board and their effect on the housing industry. I would like to bring your attention to this widespread concern and urge your consideration of measures to bring relief to the housing industry. I am sure you are aware that by mid-March, new and existing home sales were off by more than 30% in many areas and that national housing starts had fallen to below 1.6 million, the steepest decline in 30 years. The American dream of home-ownership is quickly becoming elusive in today's climate of unaffordable credit. Not only are Americans unable to buy and sell their most important single asset, but many home-builders, realtors and subcontractors find themselves on the verge of bankruptcy. .The resulting impact on the economy is disastrous, crippling the nation's productivity and costing millions in federal and state revenues. Real output, jobs, investment and productivity do not appear to be wellserved by the Federal Reserve Board's current policies. For demand has not just been limited; it has been choked. In the most productive sectors of our economy, interest rates are simply too high. I commend the anti-inflation efforts of the Carter Administration and of the Federal Reserve Board, in particular. However, I urge the Chairman to recognize the widespread personal and economic hardships which have occurred as a result of the Federal Reserve Board's most recent actions, and hope the Chairman will take whatever measures are necessary to relieve this situation. Thank you for your consideration. With best wishes, I am,  Member of Congress MARIdk   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  40111011111.1,  ILL  5:-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  411  c  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  PAUL A. VOLCKER CHAIRMAN  April 21, 1980  The Honorable Edward Madigan House of Representatives Washington, D. C. 20515 Dear Mr. Madigan: Thank you for giving me the opportunity to comment on your concerns regarding high interest rates, particularly r___.ey affect farmers and small businessmen. The level of interest rates is largely a reflection of the rapid rate of inflation we are experiencing and the deeply embedded expectations that prices will continue to climb. in this environment, interest rates are high mainly because demands for credit to finance purchases are strong, while lenders are reluctant to extend credit without being compensated for the declining value of the dollars they will receive in repayment. The only way we are likely to achieve a lasting decline in interest rates is if there is a lowering of inflation and inflationary expectations. Maintenance of reasonable control over growth of money and credit is an essential ingredient in the fight against inflation. The Federal Reserve recognizes that periods of tight creS it create particular problems for borrowers who rely primarily on lending institutions for financing. In implementing a inflationary policies, the Board has tried to recognize the special needs of small businessmen and farmers. Banks have been encouraged to maintain the availability of funds to these borrowers, and we will be monitoring the distribution of credit closely to ensure that these objectives are fulfilled. Moreover, the Dcpository Institutions Deregulation and Monetary Control Act of 1980, signed by the President on March 31, makes credit at the Federal Reserve discount window available to all depository institutions. Under this provision, nonmember banks and other financial institutions in rural areas and small towns should be able to borrow funds at the base level discount rate, which is currently 13 percent. To facilitate that process at the earliest possible time, we have introduced a simplified seasonal borrowing program described in the attached announcement. T believe it is responsive to your cIncerns.  -  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Edward Madigan Page Two  We all recognize that restraint in the growth of credit will to some degree affect small businessmen and farmers in spite of the efforts I have just outlined. However, in the longer run these enterprises can prosper only in an environment of price stability. It is only with reduced inflation that we can look forward to a more prosperous economic environment. Sincerely, it(ta.11"4  Enclosure  Action assigned Mr. Kickline  EDWARD R. MADIGAN ILLINOIS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Conisrez5 of Hie Unita! 'tate 3t)otise of ikepre5entatibe5 Zliasbingtott, 30.C. 20515 March 28, 1980  41  Mr. Paul Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue between Twentieth and Twenty-first Streets Washington, D. C. 20551  Ansanommel  Dear Mr. Chairman: I have been listening carefully to the discussions about the need for a balanced federal budget, and I intend to support a balanced federal budget, because I believe that it is the most important thing that we can do to address the problem of domestic inflation. I want to call your attention to the very real possibility that a balanced federal budget, plus tight credit controls, plus high interest rates, will, in all probability, be more of a shock than the economy can absorb. Most of the farmers and small businessmen have a constant need for borrowing money. They do not have the option of getting by without the borrowed money if they intend to have an inventory or intend to put in a crop. Many larger businesses also operate with financed inventory, and high rates of interest are simply being passed on in the form of higher prices.  Irmiromm—  If the federal budget is balanced, I would hope that these credit restrictions would be eased and that the interest rates would be brought down. I sincerely believe that failing to do that will ,e use this country's economy to be plunged into very difylc it times. ve  Yo  truly,  1, Edward Madigai Representati  vdni in Congress  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  fotP":  Arra, 21. 19$0 The ::onoreble Lerkley 'Loden :Louse of Representatives , ashington, D.C. . 20515 4.44ar AAr, I appreciated the opportunity to moot with ttoi, Iowa delegatioL and cliseues the impact of both inflatiotl and counterinfletionary policy. The copies of the letters you have reeently sent along dramatieelly underline the seriousness of the situation particularly as it effects farmers and smell sinessmen. As 1 indicate0 to you, it in ny firin conviction that we must take and maintain a strong stance against inflation, Your CO4COKTIO end those of your constituents regarding lAch interest rates are understandable. Yet the level of intere*t rates is lervaly a reflection of the rapid rate of inflation and the deeply iallaedt.ed expectations that prices will continue to climb. The ealy way we are likely to achieve a lastinc decline in interest rates is with a lowering of inflation and inflationary expectations. Ve recognize that periods of tiOt credit create particular problem* for farmers and small Lusinesses. In ilnplemanting antiinflationary policies, the Board has tried to recognise special needs of these groups. banks have be encouraged to oiaintain the availatility of fund& to thcse borrower*, sad we will be 'monitoring tDe distriL)ution of credit closely to ewers that these objectives are fulfille4. floreiover, the Nwomitory Institutions Deregulation arul %onetary Control Act of ISW.4, signed by the President on 1-,arch 31, sakes credit at the rederal Pee*rve discount window avail. a.)le to all depository institution*. Vildttr this PrOVISiOn, beaks and other financial institutions in rural areas and ziu.all towns; should Le able to borrow funds at the base level ciscount rate, which is currently 13 perodat. To facilitate that process, last week we iutroduced a simplified seasonal borrowing prograsL. I Lave eAcloscd the announcement and walievo it is directly responsive to your concern. We all recognise that restraint in the igrowt11 of credit will to sous decree affect small t.uainessmen anJ farners *n spite of VA efforts I have just outlined. aowever, in the longer run   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  onorable verkley Value ',Alto  Ltt6iie ontorprisota C4Z proorer only in ar enviroomort of *xice st4a4lity. It is onlf Wit4 reduced inflation that we can look forward to * mot:a prosperok;s economic environnant. Cincerely,  Wom mac  Unclosuro  (Press release Otd. 4/17/S0.)  JSZtPAV:pjt (4V-110) beel Mr. Mr. Zaisol Nallardi (2)0/   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ckr  Arril 21. 19GO  The Hemeretae willies Premmire Cbairmism Committee aro 41*rakin, veeleini:1 am4 Urban Affairs usited States Senate ueshinilt*n, D. C. 20511 Depr Cbsimen ProxpAre. I hove reed your letter to Secretary Miller and fuily understand your concerns, re will be iu tpueb. gincorely.  ECT7_ved (WV-140  I,cc.  Jerry Cnrrican (for follow-up) rr. rntersen  •  WILLIAM PROXMIRE, WIS., CHAIRMAN  HARRISON A. WILLIAMS. JR., NJ. ALAN CRANSTON, C-ALJF. ADLAI S. STEVENSON, ILL. ROOERT MORGAN, N.C. DONALD W. RIEGLE, JR., MICH.  rAut  S. SARELANES, MD. DONALD V. STEWART. ALA. PAUL E. TSONGAS, MASS.  JAKE CLARN. UTAH JOHN TOWER. TEX.  1111 JOHN HEINZ, PA. WILLIAM L. ARMSTRONG, COLO.  NANCY LANCKM KASSISAUM, KANS. RICHARD G. WGAR, IND.  KENNETH A. MC LEAN, STAFF DIRECTOR M. DANNY WALL, MINORITY STAFF DIRECTOR MARY FRANCES DE LA PAVA, CHIEF CLERK  Action assigned to copy to Mr.  . Corrigan with info ersen  'AJCIviteb „States Zenale COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510  April 11, 1980  The Honorable Paul Volcker Chairman Federal Reserve Board 20th & Constitution Avenue, nw 20051 Washington, D.C. Dear Paul: Enclosed is a copy of a letter I've just written to Secretary Miller as Chairman of the Chrysler Corporation Loan Guarantee Board. I feel very strongly about this situation and I hope you will give it careful attention. Best wishes. Sincerely  illiam Proxmire, U.S.S.  enc.  Ne. • '•  .•  i/"1::!".°• r I .01"IP"  freoo.:4, 4  11111101-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Nr-Ye'',4•4•,"  • - •7 ••• '  .• •  -,•••• .  •  • " .• Itietwir_ . •. ‘11  • •  ItARrLs.c.`4 A. 1.%!! L'•'', jr1.. NJ. Al PJ4 Lit CALIF. ALM Al I. nit.vc.t.t.c.,.4.  kota-cr roi:int.c.  NC. VP .:.1.1-. •  W.  •  micit.  PAUL S.  ' MD. DONALD 1%. SlYWA -41", ALA. PAUL Jr.  S.  ..1 41.:EGA -04.U1A14 J44..4 IL 14Z, Ik. L. 4 •  r• .. C01.0 . •  P:CUAIL.. G. LU..  Cu ife COM M  Pl./..L-114 A. MC Le''4. STA; F DAto,.t' WALL, MIA.STArr MAPY iltAnCrS LL LA PAY:..  C  ,  4t-1  IT rr_c ON 14.7'41<it. „ HOUSiti: UnUAN At- FA:W.;  Dini CLIPPC  WASHINGTCN. D.C. 20510  April 11, [90  The ilonorahle C. WillHam Chairman, Chrysler Corporation Loan Guarantee Board U. S. Department of the Treasury Washington, D.C. 20220 D3ar  Ir  Chair=n:  I am deeply concerned about the inability uf the Chrysler Corporation to come up with a financing plan consistent with the requirements of the Chrysler Corporation Loan GuaranteL. Act as indicated by the Board in its March 31 Report to the Congres. I am particul;,:rly conerned plan about the numer. AS waivers from the Act's financi) which the Company is reportedly planning to rogues,. 1.:hile the Act gives the Board some leeway in considering adjustrIonts to the Act's financing plan, the combind and cumulative impact of the Cnpany's proposed a:iustments would, in my opinion, ,.esult in a financing package that is inconsistent with at least the spirit, ii not the letter, of the Act, The Congress had two key objectives in mind when it specified the shares of the financing plan to be assumed by the various parties with a stake in Chrysler's sui..rival. The first was to ensure that there be an actual commitment of new and additional private credit resources by Chrysler's banks, The purpose of this requirement was to provide for a separate and independent judgment by the private sector about the future financial prospects of the company. The second objective was to provide for some meaningful sacrifice on the part of those parties who stood to gain the most stockholders and . from a Chrysler hail -out -- the compan:'s dealers, This v:as to be achieved by the requirement that the company issue S50 million in new capital stock to be sold to the general public and that the company's dealers subscribe to an additional $50 million in new, non-interest bearing capital issues,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable G. William ;liner April 11, 1980 Page Two  nth of these objectives would be swept aside by the company's propose,I financing plan. According to the Board's March f-port, the (1:v;wsti: hanhs have declined H) :!1;y ‘.;Tht.h rw;ition th;it their ass:i.: should be lthiLei to inter(!sc concessions and deferral of interest and principal paymee'':. These same banks take the. position that they arc not obligated to provide any more credit pursuant to the pre-existing lines of credit that were outstanding last October. The failure of Chrysler's domestic banks to agree to provide any new cash suggests that their own evaluation about the company's future prospects di. .rs significantly from the proje(Aions presented by Chi; :ler. If Chrysler's domest.ft banks persist in this position, I do not see how the Board can determine that there is a "reasonable assurance" that the guaranteed loan will be repaid as required by the Act. If private lenders who are most familiar with the Company's financial condition and future prospects are unwilling to commit .ly additional new credit resource, even as part of a total . Inancing package involving federal guarantees, it is difficult to underst;old why the Federal government should step in. The company's proposed financing plan would also eliminate any requirement to raise additional equity capital. The purpose of the Act . s equity financin s., requirement was to provide the company with access to non -interest bearing financing while at the same time imposing some meaningful sacrifice on the part of the company's stockholders and dealers. The Congress recognized that it would 1Je difficult to sell equity shares. to the general public withol: substantially diluting the value of the equity of the compal::'s existing stockholders. Nonetheless, the Congress believed this w, a reasonable sacrifice considering the potential benefit that will accrue to the company's stockholders if the recovery plan succeeds. By the same line of reasoning, the Congress felt that it was not unreasonable to require that the company's dealers contribute at least $50 million in non -interest bearing investments. Both of these requirements would be ignored by the proposed financing plan submitted by the Company.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Alv  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable G. Will April 11, 1980 Page Throe  Miller  1 urge that the Board reject the proposed financing plan as submitted by the company and insi!;t that it come up with a revic: plan that is !!!orcin Leering with the requirements the Chrysler Ccirp.%ration 1.0:111 CtININnilee Act. Sinc  ,ly,  lam Proxmit Chairman  WP:km1  cc:  The Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System The Honorable Elmer B. Staats Comptroller General of the United States  •  •  April 21, 1,00  Me "morello Al Wirt ':ellui1,0 of Repreeemtativs C. 20515 7)etir I ipiprociate awl share your concern re/ardint., the 3ifficu1t4es being facet: by limning and related sectors of the econorl. There is ne, doubt thnt mortc;ave, housioc, end 410010clate4ivkot halve doteriorate,3 jr recent months as the supply of cr*dit has run below potential deimand. As a result, honealon47 with its ,1,--ort:ts for wood products a9d other construction notarial*, is 4pit to drop farther durinq the period too, is the volume et real estate market transactions'. PeZeral ituserve is fully cognisant of tha special prv1;14v-s t!tet t11qt. intereet rotes he's created in mortcaqm, houeinv, and relatc.0, varkets. Ts desigeleg the Special Credit Restraint rror:ram antounced on !larch 14, the asoara asUe4 commercial banks remoonablo flow of funds to to give priority to tieintaininc anall busiresseet such es local tvilders, end to worldinc the liquialty needs of thrift institutions, The special etepoolt requiremeete epplying to Increases in vonsumer credit specifically exclude . nortlaqes for the purchase or tiprovermnt of homes, Tn addition/ the aoecial deposit requirements ir,posed on any further exparsion in the asacts of rioney eAret mutual funds should help curt' the shit or savincis toward tIA) central looney rarket, leaving tuelds Available in lace' narVets to help meet local credit deman4r, includity; those associatee -with bouslag. Tto  Furt-14:oroza, I bay* r.rezt.11y virrsed the booking coorunity to ..ak* .zecial efforts to aceonrodate credit needs of small businapmf”1, hovsing, and farmers. Alec. the Federal Peservn has Ion-% rirp,ort.z° a.rd continuos to press for change, in reculatory procesncs Ctut will flake credit *ere readily available for housin:: Aurinl period* of hi7h interest rotes. measures erbancinQ the etAlity of thrift institutions to co-st tor fut-:is, euch as 4th,t4 recently enacted 1.felation callinc dereoulktion of dikre%31tery institutions, ere an i-iportant con tributtrot in this rItard,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Denorable Al swift Page Twe'  The process of t%xintaining moderate (trowtb it money 404 cridit *o es to fili‘t infletion is obviously not quick, at if we fail now, the discomfort and wry. or painless difficulties, later will be all Vie 14ora serious. The ieleral Reseffift, of course, coul4 try to aocelerat a ,2lowntum in interest rates in the er tern by pwrin- ur the roney supply. 10100,4m, sucil actions woule sltortly be reflecte4 in a nulekenel pm, of infletioc that woul4 undoubtedly lend to even 1-iutler interest rates nore eAfficulties in housing and related ,,srkets. and still larfior increases in the consumer price irgiemes. agree tLat there axe numWOUS other steps tbst :overn;Ael%t end industry can end should take to curs inflation. The anti-inflation fAkesures eenoanced by President Carter recently, inclu=linc fiscol rostrairkt an tax chances that in crease proavetivity, 'ire 3 rajor step in e-ct rmar!. .t11 a coordinated svproech of this type, inflation evuld abate and inflationary pressures issipett. Interest rites could then be expected to reced*. anti the supply of credit to impro,43/ / hope ue are speciw: the first sivr of that now. A.th lever cools of residential parte/me loons and qenerally !--ore stable, coaditims is ell financial "markets, housing—a sector dependent on outside fandisc—should be anoom the first areas of the economy to benefit. I loci* forwer,1 to worlcin,-: *with you and your collescues in the Comiress in Unclii-. stllvtions to our nation's economic f;incerely. Whig A. Volcker ItMir!!jn:JP!!:1-..7.,V vc   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  51/0kr Otimps..s.ALL".. (rv,127)  Eichline risher vrc. rallardi (2)  •  z AL SWIFT 20 DISTRICT, WASHINGTON  •  Action assigned Jim KichF COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE  EVERETT OFFICE 201 FEDERAL BUILDING  Congre55 of tije tilniteb 41)tate5 31)oufq of IkepresSentatibesS  (206) 252-3188 BELLINGHAM OFF-1cE 309 FEDERAL BUILDING (206) 733-4500  Ulassbingtort, n.e. 20315  TOLL FREE 1-800-562-1385  SUBCOMMITTEE ON  COMMUNICATIONS  SUBCOMMITTEE ON ENERGY AND POWER  1511 LONGWORTN HOUSE Orricr BuluDiPia WASHINGTON, DC. 20313 (202) 223-2605  April 1, 1980 Paul Volker, Chairman Federal Reserve Board Twentieth Street F Constitution Avenue, NW Washington, D.C. 20551 Dear Chairman Volker: I am writing you today to express my deep concern over the Federal Reserve Board's policy of escalating interest rates. This policy of continuing to pump up the prime rate seems somewhat analogous to the arcane medical practice of bleeding the patient in an attempt to cure him. If the first bleeding did not work, the logic was that you would bleed the patient more. Too often, they finally bled the patient to death in a misguided effort to cure him. I'm fearful this is the current prescription being offered by the Federal Reserve. While I understand the rationale for higher interest rates, they simply aren't working as a cap on inflation. And because they aren't working, these high interest rates are in themselves inflationary. They only serve to spur on the inflation pyschology that troubles our nation. Certainly, these interest rates are adversely affecting the entire nation. And one of the first victims of this tight money/high interest rate squeeze is the housing market. Any crunch in housing packs a triple punch for my region. First, it hits my District as it does many others, slowing housing starts. Second, my District is hit again because a substanial part of its economy is based on the wood products industry, ranging from raw timber to finished products. When the housing market is hampered because of high interest rates it forces more and more mills to shut down, laying off workers in small communities where often the saw mill is the only major industry in town. In addition, my area is straining under an unprecedented growth. Thousands of people are streaming annually to the Northwest, and with them comes the increasing demand for housing. Under the best of market conditions, builders are scrambling to construct enough housing to keep abreast with the demand. Sadly, the construction rarely keeps pace with the demand, further exacerbating the price of housing for our region.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  •  Volker, Page 2 April 1, 1980  The soaring cost of housing further distorts the Consumer Price Index, making consumers and businesses press for higher wages and prices. I realize there is little Congress can do directly about the Board's high interest rate policies. But there are numerous other steps that Congress and the Federal Reserve Board can take to curb inflation -- balance the budget, cut government spending, increase credit control, encourage individual savings and capital formation, provide incentives for research and development and restrict oil imports, to name several. I'm confident these steps can go a long way to reverse the inflation psychology the spurs wage and price increases. Pursuit of higher interest rates -- which are proving to be inflationary in themselves -- is unnecessary as well as detrimental. I urge you in the strongest possible terms to stop the spiraling interest rates so we can keep our economy moving. To do otherwise is to deny businesses a chance to function and to deny families an important chance to own a home of their own.  vif Membei' of AS/mhw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  qngress  •  • BOARD OF GOVERNC1R5 OFTH ,  /5/ 11°‘‘.0PIA/44,z,  FEDERAL RESERVE SYSTEM WA'3HINGTON. D.C. i70551  April 24, 1980  The Honorable David L. Boren United States Senate Washington, D.C. 20510 Dear Senator Boren: Thank you for your comment on correspondence you Nash, President of the United ing the Treasury tax and loan  letter of April 11 requesting received from Mr. William R. Bank of Tulsa, Oklahoma, concerndirect investment program.  The Federal Reserve Banks merely act as the fiscal agents for the Treasury Department by administering the tax and loan program. On March 24, Mr. rash was informed by Board staff that his correspondence was being forwarded to Mr. Paul H. Taylor, Fiscal Assistant Secretary of the Treasury Department, for response. By copy of this letter, I am requesting that Mr. Taylor furnish you a copy of his reply to Mr. Nash. Please let me know if I can be of further assistance. Sincerely yours,  (Signed) Donald J. Winn Donald J. Winn Special Assistant to the Board  cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Paul H. Taylor Fiscal Assistant Secretary Department of the Treasury 1500 Pennsylvania Avenue, N.W. Washington, D.C. 20220  DAVID BOREN  CHAIRMAN. SUBCOMMITTEE  OKLAHOMA  UNEMPLOYMENT AND RELATED PROBLEMS  •  wASHINGTON OFFICE.  COMMITTEE ON FINANCE  440 RussriL DutLoiNa WAsHINGToN. D.C. 20510  'ZICitifeb Zfafez Zenafe WASHINGTON. D.0  MC MOEN  20510  COMMITTEE ON AGRICULTURE.  OFFICES  NUTRITION AND FORESTRY  621 NORTH ROOINsON, SUITE 350 OKLAHOMA CITY, OKLAHOMA  73102  April 11, 1980  Roserty S. KERIII BUILDING 440 Sou-n.4 HousyoN TULSA, OKLAHOMA 74127   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  !S  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20515 Dear Mr. Volcker: Enclosed is a copy of a letter we received from Mr. William R. Nash, President of the United Bank of Tulsa, Oklahoma, regarding the Treasury Tax and Loan Direct Investment Program. I believe Mr. Nash has made a valid point; that this proposal could have a discriminatory effect on many small banks. I appreciate your careful attention to this matter. Sincerely, 01111•••1•11.11.  David L. Boren United States Senator DLB/mah cc:  Mr. William Nash  Enclosure  Pr...., ^4v,  F  r  r--..,--. I •  ;  vE  IE •  1 OF Fi"..;fr i.10X 77(10 •  CI• LA••)'.1A741:t • I'1  tt 4  flp 1 1  :.  4r, •  Or/ "".r 1/7:7ZN E .j W I. lir- : . )1 - -I k...%:‘..:9" .::•-• -a - • r•..7 -N  . ,  t_ --...._.* •.. \ ...-..',. I .,- . 4.....-'  sz.N. cavo  BOREN  FF1nAlE1111  ft7lch 11, 10  ""'"'•  7 1920 CCL:'Ld 6 Gov.. :,'ashinoter C. Re:  o6 the Ferina,t Reseitve System 20551  ETUILD Washinston, D.C. 20510  Theasuny Tax and Loan Di/Lect Investment Pug/Lam  The TAeamety Vepattinent' new diAcct investmeat ptog!tam totatty disctiminates agaiast the 6mlEt bankso Ametica by demanding that the maximum batance be set ot a IN:n.irumo $5 mittion ras 4o o ti the bank's 1979 Theasuty Tax and Loan depots. It ha6 made it impoisibte tio,e, the smaet banks to pakticipate. -The 'tufts ACI?uC that the bank be plepated on cne (1(1(1'6 notice to ptedgc coaateu,at $5 mtLion 0,1 mc..-Lc. Most .smat,f bantzs neve.., have $5 mittion o tf coite.'HU. !Jost o the cot-fateAat that .smaet banks have is not acceptabtc fco'L rterfging to the Fed. W; stAcqtu :ieet that we 3houf.d not be di.sc,14minated against and shoutd be al:cwed to accept these ditect deposits acing with the big bankso Ametica. aAe the 6illanciat institutions who p/ovide 6unds dwi individuats and smatt bu.S.ineZ6C/5 in um( community o4 Ametica. At the ptesent time, most o ti us al.e in despetate need o deposits 60 we. can coatinue ploviding .toan4 to CuStOrrIMS in oul own 'commuIN:tLe6. The. $5 mittion maximum batance shoutd be toweked substantatty to a 4igu,te a.lound $1 mittion Ok betten yet $500,000. This is one time a tittte extta papek won.k wowed benc tiit the Nation. Sinceitely, , •i WiffiRm R. Nash P-Lcdent  cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Fcdetat Re 'we. Bank o6 Kansa6 City Amctican Banhets As.sociation Mahoma SankeAs Association Congtessman James R. Jones Cong'Les,sman LI:e6 Watkins ,/,§enato,t David BoAen Soiatn Hotly Be:Union  TREASURY TAX ANC) LC \N NOTE OPTION I) POSITARY  .-  OM [ER TO RECEIVE 01111C,1 INVESTML  •  ,Neerit of the I Initro  Bank of Kaii,rs Cat \,  I taialici inst •Int.on„I 1 leasury TaN and I 'JI positary designated in accordance v.'ith 31 C.F.R. Part 203 the Of fteor otfeis t reeeRe form the Treasury direct investments in its note in accord with the terms con '11th 7 of :he Procedural Instructions for Treasury Tax and Loan Depositaris, and in accord v.ith the notice arrangement 1 in toragr,e ,h 2 Offeror undrrstdoils find arjr04"; that, upon credit of an amount of dirict imestment to its note, such .i:t Tit th provision: of 31 ('..F.11. P.,ft 203 without regard to its origin as a direct investment.  I  ;1! f, 11)1 ,7i:(.1,c I, dcrr.pl diirc  )1.si  '705 pill — 1.1W  •ive r if fl.ror only)  • n r !,,  I  to a one hiy prior n Thee arrargeenent.  t'C s III Vi`St I  ,, ne-day  t (`  samr day notice arrangement try checking below.  did one-ddy prior notice yivailable to class "C" note option depositaries  f fl'i ICC' to di reuuirements statc.41sosubpAragrloh B(2).of.kec.tior.1_, . Procedural Instructions for 1rea-wry Tax and Loan Depositaries. The Offoror's maximum balance must exceed by cjoast? rn:TLA) an amount equal to 4"1, of its Ti & L credits for the previous 'er, B 1 on the books of the Federal Reserve Bank of Lty, the total amount of creilits (exclir,iv. of niicct Investments) processed through Offeror's Treasury tax and loan account '  •  I !I I  !'  during calendar year 19/9 was $..___2_,6114._8_11,21.  Rawd on •()t feror  the above, Offeror hereby establishes the maximum balance of its note account at  finders: inds and. awe. s that:  Of form may pro!,pectively revoke its of ter to receive direct investments by t- uhmitting written notice to that effect to the F- eder Re:mrve !Link of its District. Such ,el,orat ion is effective only upon receipt by such Federal Reserve Bank. ft  offew  which is also a cl WY", "C" depositary, can not chan je its previously selected notice arrangement except by ewecution of a nevi Offer to Receive Direct Investment and delivery thereof to the Federal Reserve Bank of its District. Ari  ()It, lot cilt1 (Thailrlf! the rnaxillItIrl balance of its note account only under procedures established by the Federal Reserve ik of its Distric.t for that purpose Offeror understands that, if any such change prevents Offeror from meeting the ,ii uuinl it ytequitwnoills of subparagraph B(2) of section 7 of the Procedural Instructions for Treasury Tax and Loan Depositaries, the contract evidcnced by this document will have been rescinded by mutual agreement. 1/ff-tor ;11,11l pledge cc !lateral as prescribed in subparagraph F of section 7 of the Procedural Instructions for Treasury Tax and Loan Depositaries. Collateral doficionci,!‘s will result in disqualification as a direct investment depositary. lerol eXpli",%iy ,191ITS to ;111•11)1i, Aditl(irliT to itc r101,e, all amounts allocated to it in accordance with the allocation formula .1 ,ed in paragraph D of section 1 of th.- Procedural Instructions for Treasury Tax and Loan Depositaries. Offeror expressly waives decline to at:opt such amounts for so long as this Offer remains in effect.  G. Of +Igor understands and agrees that an/ reference in this Off,J to 31 C.F.R. Part 203 of the Procedural Instructions for Treastir v Tax and Loan Depositaries in:luit's any future changes in those documents, if and when such changes arc' made.  10390174  19331  7  UN'TED BANK P 0 BOX 7'700 74105 TULSA, OK  I (Jul  OAT 1:  T11 LE  h!• (oieg;ing Offer i hereby accepted and Offeior is qualified to receive direct investments effective   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  111 LE  t•  t  EDE RAL RESERVE_ RANK Fi;CAL Arl ENT OF 1HE 1 ED 5t ATUS  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  TREASURY 'LAX & LOAN DIRECT INVESTMENT PROGRAM  The United States Treasury has announced revisions to the TT & L Direct Investment Program. This program provides for the investment of excess funds in the accounts of Note Option Treasury Fax and Loan depositaries which elect to receive such funds. Thr primar y purpose of the Direct Investment Program is to assist 1 reasury in the management of its excess operating cash balances. In January 1979, procedures for direct 'nvestments in the notes of Class C Treasury Tax & Loan depositaries became effective. The procedures are being expanded to permit investments in the note of any Note Option IT & L dteppsifavybit.ejeWo.sarticipate in the program. The new procedures are to become effective on.Jui7e• 2,1 si!'And will be incorporated in Section 7 of the Procedural Instructions for TT & L Depositaries. Participation in the program will be limited to Note Option depositaries which elect to receive direct investments in the form of deposits to their Treasury Tax and Loan note account. Each participating depositary must designate a maximum balance for its note account which is at least $5 million greater than 4% of its total tax and loan credits, excluding direct investments, in the preceding calendar year. For example, a depositary which processed a total of $100 million in tax deposits in 1979 would be required to designate a maximum balance of at least $9 million ($100 million X 4% = $4 million + $5 million = $9 million) in order to participate in the Direct Investment Program. (Class k and Class B depositaries Which elect to receive dirediiiveitifienti*illbe notified -,7 by% teleptione, one business day in advance of the actual investment. Class C depositaricl may participate in the program under one of the following two arrangeinents:- 7 1) Notification provided, by telephone, one day in advance of the actual investment. 2) Notification provided, by telephone, one day in advance or on the same day as the actual investment depending on type of investment announced by Treasury. Class C depositaries which elect to receive investments on the same day notification is provided are also obligated to accept investments under the one-day advance notice arrangement. The amount of each direct investment will be determined by Treasury based upon the total "capacity" of all participating depositaries. Capacity is the difference between a depositary's maximum balance and that depositary's actual balance. For instance, a depositary who has designated a maximum balance of $10 million and whose current note balance is 53 million would, therefore, possess a capacity of $7 million. The amount of funds received by each participant will be based upon a percentage of its capacity. Inói instance, howevcr, will a direct investment be made for an amount less than $500,000./ 1-he Federal Reserve Bank will report to Treasury daily a dollar total representing the total caplcity of all depositaries electing to receive direct investments. The Treasury will determine the total amount which will be directly invested. based upon a percentage of the total capacity. The Federal Reserve Bank will notify each participant of the amount of the direct investment it will receive and the date the credit will be made to its TT & L account. (over)  .  r  •  IP  E  141 1.:1)Ei? 1 .1  Ii.‘N Is" ()I.'  • •1, %(si r)e-r ()r 1 lir 1 7 •41 rr t) A NHAH  Crl  IC‘Nt•ii1S ( 1IrrY rA-rr.4 641914  March 7, 1980  To All Note Option TT& I. Depositaries in the Tenth Federal 1teserve District: The Treasury Department has announced that effecti‘e June 1, 1980, the TT&L Direct Investment Program w ill be revised to extend the program to Class A and B depositaries on a one-day notice basis. Additionally, Class C depositaries will be offered the chance to participate in same-day notice deposits. The direct investment program involves deposits of the Treasury's excess operating cash to TT&L note accounts of depositaries that elect to participate. Interest is charged on direct investment deposits beginning on the same day that deposits are made. The program is currently offered only to Class C note option depositaries on a one-day notice basis. The enclosed material describes the program in more detail. 'rhe purpose of this letter is to invite you to review the enclosed material and determine whether you wish to participate in the TI&L Direct Investment Program. Following are several points you should consider in making your decision. Neither the frequency and timing of direct investments nor the length of time that direct deposit funds are left in rut. note balances are very predictable. Since the program was implemented for Class banks in early 1979, we have found that direct investments are rather infrequent and that the majority of direct investments are withdrawn soon after they are de posited. •••°4   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  At the time we receive notification from the Treasury that a direct investment is to be made, we will advise you if additional collateral will be needed to cover your deposit. Collateral must be pledged on the same day that the investment is deposited to your note account. This implies that direct investment banks must have the ability to provide additional collateral within one or two days of notification, or must continually maintain sufficient collateral to cover any potential direct investment. The Treasury has advised us that collateral deficiencies will result in disqualification of a direct investment participant. We are enclosing Nk it 11 this letter a detailed description of the direct investment program and an offer form to receke direct investments. If you are interested in participating in the direct investment program, please complete the enclosed offer form and return it to this office by March 31. 1980..lf you have any questions regarding the program, please contact Tom Gonterman at one of the following numbers: Local Calls 881-2414 Missouri Banks — (8(X)) 892-2420, Extension 2414 Banks Outside of Nfissouri — (8(X)) 821-7777, Extension 2414 FEDERAI, RESERVE BANK OF KANSAS CITY Fiscal Agent of the United States  19g0  The 14onerat1e Jesse -elms United States -ensite stesbinAlton, n, ct 20S10 Dear  ator  Aft rleasee, to reopen:, In Vr.tirnan Voleker's absence, to your letter of March 27 rof3erdino the Fair Crelit Allinc: Act, which require* creditor* Omit irons credit cords or extend revolvlcrent to send. consusiere a 'notice of their error resolution ri0As %t least somi-annually. Ifoo esX td!‘ether tier, is any wey to deter, mins the eetire complies°, coot af this requirement, talkino into account both the coot to the henkinc industry and to tieFederal Reserve ryster,. 7oard hes no data fryer which total coats of the notice requirement to the bankint,1 inaustry or to creditors vener ally pAcbt be projected. The KoarWs staff die. conduct a lirolte.1 survey several years aqty to try to determine the cost oc comrlie!. *ad to obtain information 407;ott the extent to vihiclt-: consumers v4Trr ettercisin,7 their ricbts urtler the Fair Credit TAllie onl rt7.w, Creeit Opportunity P‘cts. Me staff solecte0 nine lar,:fek creditors, reprosantirr;; a cross section of the credit Inlustry that were 14411eve42 to have reatlily available macor&s. ktost of the coctranit.L however, were sot able to provide precise cost fioures. Four of the corvenies did estirlate costs related to 03" error resolution notice tftnqinc fron $25,000 to $67,000 annmally. Those eirtiL,ates were l*ruely for printinc costs since tl'e Acts and recfulotiors Jo not rinTulre a *operate manioc of the notice. trelosed is * copy of the re4eTtll afT44rve 71410tAP article that detailed the results of the survry‘ You sloe asked el.;$out the cost to the Fos:lora' Reserve einem) there is Aystem of adftitisterinf: the notice reluirent a prescribed ?err: set forth in the regulation enf3 r,ost institu. titan* print the notice en the heck of their perloilic statements,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  PottorAtac ZoNes-41 -elvo Two  ^dministratien of the notice provision involves rAniral !ftort for bark ewesiaare and, thusi rlaimsl cost to the pfstem. As Mr. Talon nentiened in his letter of maret 6, the Toerd has lon7 sumorted eliminating the semi-annual notice requirement in favor of 4 shorter ~nary that could be civen OA periodic statemects. We *re pleased that in the Truth in Lending simplification end Reform Aet• whiff% was siqred into law at the on4 of March, the semi,c-annual notice was et least ept. ehAn00.4 to an annual requirtl-,  34t0)  1pfi1 t 'Mr! I hove this infortvAtiers will rmn be of further essistonms, p1e3se Iet r)inow. :tincerely.  /14 5 151 F, 7:,n4.110SUria  Paces 363-366, YR 1,viletin, ,flAy 197S  aS:MTV:ved (v-134) bee:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Delores Smith Pre, Mallardi (lov. Sehtiltz  JESS.7.7. HELMS NORTH CAROLINA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ction assigned Janet Hart  4li  •  'Unita Zfafez ,Zenate WASHINGTON. D.C. 20510  March 27, 1980  Mr. Paul Volcker Chairman Board of Governors Federal Reserve System Constitution Avenue Washington, D.C. 20552 Dear Mr. Volker: I recently received the enclosed letter from Mr. Donald Winn concerning a request related to the Truth in Lending Act. I would greatly appreciate an additional response in this matter. Is there any way of determining the cost of conforming with this requirement that people are constantly sent forms in conformance with the Fair Credit Billing Act. I am speaking of the enitre cost to the Federal Reserve System of administering this and the cost to the banking system. Of course all these costs are ultimately borne by the American consumer as I'm sure you know. I appreciate your assistance in this regard.  Sincerely,  Mart4  JESSE HELMS:hmn  •  BOARD OF OOVERNORS OF THE  FEDERAL RESERVE SYSTEM/larch 6, 1980 WASHINGTON  The Honorable Jessie A. Helms United States senate Washington, D.C. 20510 Dear Senator Helms: writing in response to your request for comment on the enclosed correspondence you received from Jno. D. Palmer of Wilson, South Carolina. Hr. Palmer questioned why, as a credit card holder, he "forever receives" copies of government rules and regulations governing use of that card. He expressed further concern that, as a stockholder and director of the bank that sends these notices, unnecessary expenses are incurred which do not promote efficient and profitable operations. RM  The Truth in Lending Act reouires that open-end credit account holders be sent semi-annual statements that outline how billing errors must be disputed under the law and the bank's responsibilities in case of such disputes. This statement is sent so that cardholders are reminded periodically of the procedure they must follow should their statement contain unauthorized charges or otherwise be incorrCt. There are two methods that cteaitois...may follow to satisfy this requirement. The Truth in Lending AO.requires banks to supply a version of the statement both with the initOjdisclosures and at least semiannually. The text of the stateverit.:Jpecified by Regulation Z, but the semi-annual delivery requi.reillent:js in the statute. However, as an alternative to sending thiEOrtatent semi-annually, Regulation Z permits the creditor to send a shoOer Version of the statement on or with each billing statement. The puri.'for providing this "short form" alternative was to reduce costs and promote efficiency (by reducing the statement's length and the need for special handling and by accommodating preprinting of the entire billing statement) and enhance the protection of consumers by reminding them of their rights more frequently. Mt. Palmer's bank may wish to consider using the "short form" alternative as a cost reduction measure. The Board has twice recomaended to Congress that the semi-annual statement requirement be eliminated from the statute in favor of a summary disclosure on each periodic statement: once in connection with Truth In Lending simplification legislative recommendations in 1977 and once in testimony recommending coordination of the new electronic funds transfer requirements and the open-end credit requirements of the Truth in Lending Act in 1979. I hope this information is useful to you. I can be of further assistance.  Please let me know if  Sincerely yours,  Donald J. Winn Special Assistant to the Board Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IP"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 25. 1980  The Ponorable William Proxekirp Chairman Comittee on 1-anking, Pousim:; and t'rban Aifairs United rstates Senate wAshine:ton, D. C. 20510 near Chairrian Proxmire In Chairrilan Volcker' absence, I am writing In reference to your letter of Noveriler 5 1979, en closing correspondence from Mr. Levin of the Ytank of rinwood, Racine, uisconsin, and Mr. Gertenbach of the lorth Side Bank, Racine, Wisconsin, concerning an appli cation by Peritacte Racine Corporation. Racine. Wieenrglr. for the Foard's approval of tIle formation of a banl., holdinq company. fn April 21, 1980. the bard announced its denial of this application. Enclosed is a copy of the Board's Order relatinq to tie action. Sincerely yours. (Signed) Donald J. Winn Donald J. inn Fpecial Assistant to the :11closre  MIX.vcd (01-118, 1979) bcct  Mr. Xadish Mrs. Mallardi (2) &/.  z 44.  •  •  WILLIAM P110X4AIIIIE. WIS.. CHAIRMAN  Kg*P. sor+ A.  WII_LJAMS. JR.. NJ.  ALAN C RAN S7044. C.A10. ALAI L. STEVENSON. ILLROBERT PADA GAN N.C. DONALD , 4%. RIEGLE. JR.. MICH. PAUL S. 1..Aft RANIS MD.  JAR, CLARK_ UTAH N Tuve 41 TR .1044N HlIPi. PA w LLIA m ETRO 44G, COLO. NANCY LA I4DoN PLASSI BAUM, PLANS. RIC-HARCI Q. LUGAR, P40.  DONALD V*. ST[WAR T. ALA..  'ZCnifeb ,Stafez -Senate  PAUL C 7SC14GAS. MASS. KENNETH A. MC LEAK STAPP DIRECTOR U. DANNY WALL. Mir...ORME $1 APP DIRECTOR MARY PRANCES DC LA PAPA, CHILP CLERK   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C.  20510  April 25, 1980  The Honorable G. William Miller Chairman, Chrysler Corporation Loan Guarantee Board U. S. Department of the Treasury Washington, D.C. 20220 Dear Mr. Chairman: I understand that the Chrysler Corporation Loan Guarantee Board may reach a decision very soon on Chrysler's request for the !.1.5 billion in Federal loan guarantees authorized under P. L. 96-185. The purpose of this letter is to request that the Committee on Lanking, Housing and Urban Affairs be kept fully informed on a continuing basis of the status of discussions between the Board, ani its representatives and staff, and the various parties involved in negotiating the financing and operating plans and other materials r.Y;uired for Chrysler to qualify for the Federal loan guarantees. Given the Committee's responsibility to oversee the implementation of the Loan Guarantee Act and to ensure that all of the conditions of the Act are met, I believe it is essential that we be kept apprised of all developments on an ongoing basis. As you know, the Act provides that the Loan Guarantee Board must make a number of determinations before entering into commitments tc guarantee loans to the Chrysler Corporation and that a written reFort setting forth each such determination and the reasons therefor m..„-st be transmitted to the appropriate committees of the Congress not less than 15 days prior to the issuance of any guarantee. This r2p3rt should give a full and detailed justification of the Board's decision with respect to providing the Federal loan guarantees, whether positive or negative, along with an explanation of the re .sons for making each of the required determinations. I expect that the Committees involved will scrutinize this .- ..cT;rt and all supporting materials carefully, in order to assess 0:other all of the requirements of the Act have been met. It appears to we that the financing and operating plans submitted to the Board  •  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable G. William Miller April 25, 1980 Page Two  by the Chrysler Corporation on April 17, 1980, fail to meet these requirements in a number of respects. The attached memorandum prepared by Senate Banking Committee staff details the major concerns raised by the April 17 plans. I trust that these concerns are being addressed in the course of the Board's deliberations. I feel certaill that you and the other members of the Loan Guarantee Board takc very seriously the determinations you must make with respect to reasonable assurance of repayment of the guaranteed loans and the ability of Chrysler to continue as a going concern and remain viable after 1983 without any further Federal financial assistance. It is apparent to me that ensuring strict curipliance with the rest of the requirements of the Act is a threshold condition for making such determinations. SipceRel  vi liam Chairman Encicsure  Mel)].  ff•EMNIM Will be handled by Joe Coyne or Don Winn •  •  ARMED SERVICES ENVIRONMENT AND PUBLIC WORKS JUDICIARY SELECT COMMITTEE ON SMALL. BUSINESS  JOHN C. CULVER low.%  Zfalcz -.Senate WASHINGTON. D.C. 20310 April 25, 1980  Mr. Paul Volcker, Chairman Board of Governors of the Federal Reserve System Constitution Avenue between 20th & 21st Washington, D.C. 20551 Dear Mr. Volcker: We cordially invite you to participate in a congressional conference entitled "High Noon for the Economy: Proposed Remedies -- Are Wage and Price Controls Necessary?" This one-day forum is the first in an economic summit series initiated to explore comprehensive strategies to curb inflation, reduce unemployment and encourage real growth in the economy. It will be held on Thursday, May 15, 1980, in the Dirksen Senate Office Building (Room 6226) from 9 a.m. to 12:30 p.m. and from 2 p.m. to 3:30 p.m. The conference will bring members of Congress and the Administration into a round-table, spontaneous dialogue with leaders of industry, labor, agriculture, small business, state government, representatives of the investment community and nationally known economists. The purpose is purely informational -- to get the best in contrasting viewpoints on further steps that can be taken to deal with the nation's economic problems.  rk;  VI*  The economic summit series is being planned by members of Congress in cooperation with the Fund for New Priorities in America, which has assisted in the organization of more than 35 major congressional conferences over the past 11 years. We hope you will join us in this important and timely forum on May 15. Please call David Thompson or Barbara Schmitz in Senator Culver's office for any additional information -(202)224-3744.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Or7". I.  HOWARD. METZENBAUM  i/2(.464.0k,X4 OHN C. CULVER  0411  Arril 1C. 19SO  i'he 1,r  Tsonrias ChairrAn subc:, ittee orn rmsumer Affairs Committee on PankitKI, usinoy and Urban Mfairs qnite/1 ltats Sonata ashinfyton, D. C. 20510 Dear Clutirmar Tson(las. TbAnk you for your letter of April C invitinq the Board to testify before your Subcommittee at hearincs to review Titles T end II of S. 19211 Tbe Fair Financial TnformaLion Practices Act. I am pleasee to infor you that Governor Nancy F. Teters will appear on bebalf of the Poarii at 1000 a.m. on April 30. ktincertly, _  CO:slo (4V-139) CC:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Governor Teeters Janet Part Mrs. Mallardi (2)  •  WILLIAM PROXMIRE, WIS., CHAIRMAN  HARRISOY A. WILLIAMS, JR., N.J. ALAN CRANSTON. CALIF. ADLA1 E. STEVENSON. ILL ROBERT MORGAN, N.C. E.toNALD W. RIEGLE, JR., MICH. PAUL S. SARBANES. MD. DONALD W. STEWART. ALA. PAUL E. TSONGAS, MASS.  •  JAKE GARN, LITAH JOHN TOWER, TEX. JOHN HEINZ, PA. WILLIAM L. ARMSTRONG. COLO. NANCY LANDON KASSEr1AUM. KANS. RICHARD G. LUGAR. 1N0.  KENNETH A. MC LEAN. STAFF DIRECTOR M. DANNY WALL., MINORITY STAFF DIRECTOR MARY FRANCES DE LA PAVA, CHIEF CLERK  • 'llerviteb Ziatez Zenate COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C. 20510  April 8,  The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551  Letwore. 1.111Cw.. i  Dear Mr. Chairman: The Consumer Affairs Subcommittee will conduct three days of hearings (April 22, 23 and 30) to review Titles I and II of S. 1928 - The Fair Financial Information Practices Act. "r72. It4Y+  We are aware of the Board's particular interest in Title II - The Fair Credit Information Practices Act.  rul.1"1•  On behalf of the Subcommittee, I wish to extend an invitation to the Board to present its views on this proposed legislation at the hearing to be held on the morning of April 30th in Room 5302 of the Dirksen Building.  t 1.•  ..  Best wishes.  Paul E. Tsongas, Chairman Consumer Affairs Subcommittee Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ^ • .1:11!  ••••••••• :  4.1, • .  at  •  •  •  .-0.• 4.W.  •  ,• '‘• ••••••••  •.i. WILLIAM PROKMIRE, WIS., CHAIRMAN HARIRSON A. WILLIAM!, JR.. N.J. ALAN CRANSTON, CAUF. . ADLAI K. STEVENSON, ILL. ROBERT MORGAN, N.C. ..•0 DONALD W. RIEC.ILE, JR., MICH. PAUL S. SARSANES, M0. DONALD W. STEwART, ALA. PAUL E. TSoNGAS, MASS.  JAKE GARN, UTAH • JOHN TOWER, TEX. JOHN HEINZ, WILLIAM L. ARMSTRONG. C01-0. NANCY LANDON KASSESAUM, KANS. RICHARD G. LAJGAR, IND.  4 1 1  OA.  'ZICnifeb Zfafez ,Senate COMMITTEE ON BANKING. HOUSING, AND URBAN AFFAIRS  KENNETH A. Mc LEAN, STAFF DIRECTOR U. DANNY WALL, MINORITY STAFF DIRECTOR MARY FRANCES DC LA rAVA, CHIEF CLERK  WASHINGTON, D.C. 20510  GUIDELINES FOR WITNESsEs  1.  These guidelines apply to all hearings of the Senate Committee on Banking, Housing and Urban Affairs, unless otherwise indicated.  2.  All hearings will begin at 10:00 A.M. in Room 5302, Dirksen Office Building, unless otherwise indicated.  3.  Committee rules require that all witnesses submit at least 100 copies of their written statements 48 hours prior to their appearance. Sundays and holidays are not to he included in determining this 48 hour period. Statements should be delivered to Room 5300, Dirksen Office Building, Washington, D. C. 20510. Strict adherence to this rule is essential in order that Committee members may review the statements before the hearing, thus enahling the participants to more thoroughly discuss the issues involved. Statements will not be released to the news media prior to the day of your testimony.  4.  Oral presentations must be limited to a brief summary not to exceed 10 minutes. Your complete statement will be printed in the hearing record.  5.  Please complete the attached card and bring it to Room 5300 prior to the hearing. You will be given copies of statements of those testifying with you at that time.  Please supply the address to which you prefer the reporter's transcript delivered for your correction. Kindly turn this card in at Room 5300 Dirksen Office Building prior to giving your testimony.  +. • kiiipossP  rz44 1111PIRRIlor.  ion is appreciated. •-•‘.  (Name)  (Organization)  (Business address)  (City and State)  (Phone)  (ZIP Code) S.  SENATE BANNING, HOUSING   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  AND  URBAN AFFAIRS COMMITTEE 30-545-h  -  aro  . ••  . • ••  • I •7...  April 11, 1980  TheMoserablie Wreak Aonunaio Chairman L4bcommittee on Consorter Affairs committee 4111 Banking, nuance tin4 ;Crime Affairs i'louso of adkprommentatives wasngton. D.C. 20515 Lear Chairmen ANDAUSio; Thank you for your letter of April 9 recardinq 1egislatiQ4 you plan to introdiqce celled the Fair Credit Practices Act. As indicated iz ty letter to you of April $, Governor IA:eaters will appear arei behalf of the iloard at your hearings on April 23. As you requested, her testimony will also take into account tha Fair Credit Practices Act. Sincerely,  CO4pjt (v-144) bcc: Gov. Teeters Janet Kart tire, Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FRANK ANNUNZIO, ILL.. CHAIRMAN GLADYS NOON SPELL MAN. MD. BRUCE F. VENT°. MINN. • $A4•LLTER E. FAUNTROY. D.C. MITCHELL, MD. PARREN  THOMAS B. EVANS. JR.. DEL. CHALMERS P. WYLIE, OHIO DON RITTER. PA.  U.S. HOUSE OF REPRESENTATIVES  CURTIS A. PR INS. STAFF DIRECTOR  NINETY-SIXTH CONGRESS  1,5 SUBCOMMITTEE ON CONSUMER AFFAIRS  TELEPHONE: 225-9181  OF THE  COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS ROOM 212 HOUSE OFFICE BUILDING ANNEX  WASHINGTON, D.C. 20515  April 9, 1980 (Lig Honorable Paul A. Volcker Chairman Federal Reserve Board 20th Street & Ccnstitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: On April 1, I invited you to appear before the Subcommittee on Consumer Affairs on Wednesday, April 23 at 10:00 a.m. to testify on H.R. 6928, the Cash Discount Act. On April 15, I plan to introduce legislation to be called the Fair Credit Practices Act to amend the Truth in Lending Act to prohibit a creditor from applying any adverse change in a credit card account to purchases a consumer has already made. I have enclosed a copy of the proposed legislation. Accordingly, I would appreciate it if you would testify on both the Cash Discount Act and the Fair Credit Practices Act on April 23. There has been a change in the location of the hearings. be held in Room 2128 Rayburn House Office Building.  The hearings will  Your presentation should be limited to ten minutes; however, your written statement for the record may be of any length. The Subcommittee requires a minimum of 50 copies of the prepared statement no later than Monday, April 21. The statements should be delivered to the Subcommittee office, Room 212, 300 New Jersey Avenue, S.E. If you have any questions, please contact Curtis Prins, Staff Director of the Subcommittee on Consumer Affairs at 225-9181. With every best wish, Sincerely,  Frank Annunzio Chairman Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  96th CONGRESS 2nd SESSION  (OrighmIsnallireaNliq0erl  H.R.  IN THE HOUSE OF REPRESENTATIVES  Mr.  Annunzio .  introduced the following bill; which was referred to the Committee on  A BILL (Insert title of bill here)  To amend the Truth in Lending Act to prohibit application of any change in an open end credit plan to any credit extended prior to the effective date of the change, and for other purposes.  1  Be it enacted by the Senate and House of Representatives of the United  2 States of America in Congress assembled, that this Act may be cited 3 4  as the "Fair Credit Practices Act". Sec. 2. The Truth in Lending Act (15 U.S.C. 1601 et seq ) is  5  amended by inserting after section 171 the following:  6  "§172 Limitation on amendment of an open end credit plan  7 8 9  "Notwithstanding the Credit Control Act (12 U.S.C. 1901 et seq.) or any other provision of law "(a) No creditor may apply any change in any term of an open  10  end credit plan to any credit extended prior to the effective  11  date of the change, if the change --  _  'W‘.41• -  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  "(1) increases the annual percentage rate, the amount of the finance charge, any other charge, penalty or fee, or the minimum periodic payme' "(2) imposes any new charge, penalty or fee; "(3) reduces any grace period during which no finance charge is assessed; or "(4) decreases the period between payments or the maximum maturity of any extension of credit. "(b) Prior to a creditor making any change in any term of an open end credit plan, the creditor shall mail or deliver to the obligor a clear written notice of the change not less than sixty days prior to the effective date of the change.". Sec. 3. The first sentence of section 105(a) of the Truth in Lending Pct (15 U.S.C. 1604(a)) is amended to read as follows; "The Board shall prescribe regulations to carry out the purposes of this title, except with respect to section 172.". Sec. 4. This Act shall take effect on April 15, 1980, except with respect to section 112 of the Act.  This Act shall take effect with respect to  section 112 of the Act on the date of enactment.  96th CONGRESS 1 SESSION  H.Rnd  1A  A BILL (Intwert title)  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  To amend the Truth in Lending Act to prohibit application of any change in an open end credit plan to any credit extended prior to the effective date of the change, and for other purposes.  Tv Ir.  Annunzio  , 19  —Referred to the  Committee on  V i.110111111.41100 PRIFITIPic, QUICIL  16-81304-1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April U. 13  The Honorable L;ructo Y. Vent° us ef Represontative2s 2C,S1S t4ashingtoo. D.C. Mr. Ventol Thank yea for your March 21 letter conforning possible actioas Liy the Sclera regerdin,7 the suspensior of usury limits ar.44t iupoeltion of sew terms on existinr; credit oerd balances. hoye that your concerns wets satisfactorily addressed by Governor Teeters' testinony before the imbeennittee on Consumer Affair* of the House Banking Committee on march 26. On April 2, the Doard adopted am amomdmost to its con sumer credit restraint regulatios that addressee the issues you raise. Lnclosed is s copy of the ememdmemt and a press release doodrillting the posra's action. After carefully considerincl the Wems of sway commenters, includiaq members of the Contreras anti mommemor representatives, the Scud believes that its action will protest cossuwers, while permitting further reductions in the growth of consumer credit, thereby ultipately easinc inflationary pressures, •  Plocaa let ;-,e know If / can 1-.0 of furtor ansistance. Sincurely0  !';ncloaure RCP;CO4pjt (3V-101) bcc Liob Plows Mrs. Mallurdi (2)  Action assinmed Bob Plows --copy (liven CciPror Teeters 1111111  FRUCE F. VENTO Arm Disrmtcr. MINNESOTA  >USE COMMITTEE ON NKING. FINANCE ANC) URBAN AFFAIRS  230 CANNON HOUSE OFFICE BUILDING  SUBCOMMITTEES  (202) 225-6631  ECONoMIC sTABiLIZATION  Concsre55 of tbe Zinittb 6tate5  RoBERT E. HESS ADMINISTFTATIVE ASSISTANT  CoNSumER AFFAIRS HOUSING AND COM mUNiTY DEvELOPMENT  31)ott5e of ilepresUntatibrq  DISTRICT OFFICE  Zi/lasbington, /IC. 20515  Room544  HOUSE COM MITTEE 0/k4 INTERIOR ANO INSULAR AFFAIRS  FEDERAL BUILDING AND U S. CouRr Housc SUBCOMMITTEES,  318 NORTH ROBERT STREET SAINT PAUL. MINNESOTA  ENERGY AND THE ENVIRONMENT  55101  (612) 725-7869  NATIONAL.-PARKS AND INSULAR AFFAIRS  March 21, 1980  Paul Volcker, Chairman Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D. C. 20551  -73 •••••■•••  :  cr.  Dear Mr. Chairman: I am most disturbed by reports of the Federal Reserve Board's proposed action to override the Truth-in-Lending law and state usury laws. The Board's proposed actions, taken under authorities granted by the Credit Control Act of 1969, are beyond the scope intended by that law and are in serious disregard of consumer rights. These proposed actions will not achieve the intended goal of curbing inflation. credit card limits, under existing market aerest are finally beginning to limit consumer creHowederal Reserve Board's actions to suspend rad to terms and conditions of an existing contractnot it, but instead have the opposite effect. Tll fe into the extension of plastic credit at hrates . This proposal seems more designed to keept and itutios in business rather than to curb inf.  I  The Board, under the cloak of fighting inflation, is pursuing the same high interest, high-handed policy that it has pursued with a passion since last October. This road is littered with casualties. The Board now proposes to implement this same high interest failure in a new arena. Without the safeguards of Truth-in-Lending and usury laws, consumers will most likely face higher finance costs for years to come. Consumers have fought long and hard for Federal and state protection their basic rights in lending. The Board now proposes to throw these rights out the window by permitting higher rates of interest and more stringent credit terms to be imposed without warning and in an arbitrary fashion. In addition, the Board, in clear contravention to the law's intent, would allow these arbitrary actions to be retroactive and to supersede existing contracts. I.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  *.  •  OM,  ft   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  March 21, 1980  Paul Volcker, Chairman Page Two  These proposed policies will cause a great share of the wage earner's dollars to be eaten up by increased finance charges, charges which the consumer would not even have the right to review. This is the worst of all possible circumstances and will surely result in greater consumer debt. I strongly believe this proposed policy should not be implemented. Properly utilized, the powers under the Credit Control Act could and should help target credit to the segments of the economy which need it most. These powers should not be used to run over the rights of consumers and states as is proposed. I look forward to meeting with you before the Banking Subcommittee on Consumer Affairs.  „, Pek..  Sincerely yours,  -r7 Vento Bruce F. Member of Congress BFV:mad  lb  BOARD OF GOVERNORS Of- THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  PAUL A. VOLCKER CHAIRMAN  April 11, 1980  The Honorable Henry S. Reuss Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman Reuss: I wanted to take this opportunity to give you a brief status report on the Federal Reserve's Special Credit Restraint Program and to respond to the issues you have raised concerning the Program in your recent letter and during my appearance before the Joint Economic Committee. And, at the outset, let me express to you my appreciation for your support for the Program. As you know, the quantitative objective of the 'rogram-to limit the growth in loans to a range of 6 to 9 percent--has its origins in the targets for growth in money and credit that were adopted by the Federal Reserve for the year 1980 and presented to your Committee in February. In that sense, the Special Credit Restraint Program should be viewed as a supplement to our basic policy of seeking moderate non -inflationary growth in money over time. The Special Credit Restraint Program was designed to facilitate that objective by providing both borrowers and lenders with more concrete guidance and to help change basic attitudes towards the granting of and use of credit. The qualitative objectives of the Program--the "desirable" and "undesirable" categories of loans--were designed to assist this process further by pointing to general categories of loans that could and should be more easily reduced and by pointing to other categories of loans that should be maintained so as to achieve a reasonable balance in the allocation of credit, both across the country and across various classes of lenders. The Program was not intended to be --nor should it be-straightjacket for the banking system or for individual banks. a For example, in the current market and economic environment, the needs for bank credit could be temporarily swollen due to increased inventory financing, a shift of borrowing from the commercial paper market, or by virtue of thrift institutions   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Henry S. Reuss Page Two  drawing down credit lines at commercial banks. The banking system has a unique role to play in meeting such contingencies and I would not want that process frustrated. These examples also serve to illustrate the point I was attempting to make to you during my testimony to the effect that it simply is not possible to slot each loan into a neat category. For example, if a corporation is experiencing some difficulty in selling commercial paper because its profits have temporarily declined and it is forced to use existing bank lines of credit to secure working capital, is that a "desirable" loan or an "undesirable" loan? Viewed as a purely "financial" transaction, such a loan might reasonably be seen by some as "undesirable". But, viewed in the context of the company's ability to continue to operate, to meet its payroll, and to sustain production, it would seem wholly appropriate. These issues of substance and definition will arise in virtually every loan and if we were to approach the administration of the Program with the rigidities needed to draw such distinctions, the effort would leave the financial system entrapped in a hopeless administrative web. More fundamentally, I do not believe that kind of detail is essential to the success of the Program. The Federal Reserve has already held a series of meetings with banks and other lenders throughout the country to introduce them to the details of the Program and to remind them in a firm and uncompromising manner as to our attitudes toward compliance with the Program. That message is being understood and I am encouraged by the preliminary feedback concerning efforts by the banks to comply with the Program. Let me also assure you that we fully intend to approach our discussibns and consultations with the banks in the cooperative spirit suggested in your letter. But, where we see apparent departures from the aims of the Program, we will press the bank or banks for explanations and for an indication of their plans to bring lending patterns into line with the general objectives of the Program. In your letter you raised the question as to whether we will know if individual lenders are complying with the Program. In developing the reporting forms, we intentionally set out to focus on a blend of qualitative and quantative indicators of lending patterns; to encourage lenders to give increased attention to the purpose of the loans and loan commitments they make; but to increase reporting burdensas little as possible. We believe that the data we have requested, together with the data already available from other reports, and information developed   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Henry S. Reuss Page Three  as part of the regular examination procedure, will provide a sufficient basis for monitoring compliance with the Program. Certainly, I am confident that these data will be adequate to allow us to identify those individual institutions that are exceeding the limits set forth in the Program or generally not complying with the qualitative guidelines. In these instances, we are fully prepared to request additional data and information, including the kinds of specific information referred to in your letter. The knowledge that we are prepared to do this--which I think is already well recognized in the financial community--will go a long way toward insuring compliance by all lenders. And, in the unlikely event that general experience with the Program suggests a systematic noncompliance, we would be prepared to consider requesting these data from all lenders. Short of that finding, I would not want to subject the Federal Reserve and the banking system to the costs, the huge reporting burdens, and the administrative complexities inherent in such an approach. As I have mentioned to you earlier, we are prepared to provide your Committee with periodic data and analysis related to the performance of banks relative to the Program's objectives. However, I would be most reluctant to supply data on a bank-bybank basis even if the names of the institutions were not indicated. Accordingly, I would like to suggest that our respective staffs, and perhaps the Senate Banking Committee staff, meet to work out an acceptable approach that would entail some degree of consolidation or aggregation. Once again, I appreciate your interest and we will keep you posted on the Program.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  /  April 11, 1900  The Honorable Benjamin S. Rosenthal  Cbaireen :0:comnittee on Coneteroa, Consumer, eenetarr Affairs Coneittee on Go rut Operations !:ouse of Repreeentatives lashinetom, D. C. 20515 Dear Chairnan Rosenthal; As you mey know, the eostrd has recently falcon action with rec)erl to chaneine teres on existing open-end credit ccourt balance?, r believe that the enclosed erees release and explanatory material reeerdine that action sul'stentially respond to the concerns that you e:mpressed in your letters of rarch 21 and 25. You also ask in your !arch 25 letter whether a benk's unilateral redection of a custoeer's credit lino constitutes 'adverse ection under the Fxlual Credit Opportunity Act and Rosella. tion neulation r provides that adverse action includes -en unfavoreble change in the terrs ef an account that oem not affect ml/ or a substattial portion of e classification of creditor's accounts 4 Therefore, a t-ank's reduction of credit lines of all its custoeors would not constitute adverse action bacons* the chanee, althour:h unfavorable, would effect all or a substantial portion of the bank's open-end credit *coverts. Tf, however, a bank's decision to reduce the eeeent of available credit was epp1ie4 enly to certain cuateeers rather than across the hoar& this would constitute ilitiverse actioe", and the customers effecter! would balm to be notifiw! ef tlet re'Aection under Regulation Yon also ask whether a tank's requirine a mistorlier to pay .7 bielhor interest rate on an outster.5ine balance if atMitionel money in drawn on a line of credit constitutes -adverse action.. we do not regard that *ts beine an aiiverse :ction because Regulation provi,les that a chenee in the terms of an accourt expressly agreed to by an apelicant' is not adveree action. It 'or example, assumine that the custoeer vere notified of the chanee ns required by t' enclosed apendeent, the use of the account would represent agr rent with the cban-e terns.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Sonorable Renjamin S. Rosenthal Page 2  vith recard to your finel question, if an severs* action is based on a creelt report, the hank is reauired to prewide A not notice under the Pair Credit Reporting Act. Otherwise, we ere *were of any additional Federal law that would be involved. If we can hoof any furt!7er assistance, please let us know. sincerely,  r.nclosurv (p.r. dated 4/2/80)  RCP!JPTIcile.7 (#V-104 & V-109)  bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  fob Plows Mrs. mallardi  Action assirrned Janet Hart BENJAMIN S. ROSENTHAL N.Y.. CHAIRMAN LYLE WILLIAMS, OHIO JIM JEFFRIES. KANS,  ROBERT T. MATSUI, C.ALIF. EUGENE V. ATKINSON. PA.  ELLIOTT H. LEVITAS, GA.  JOWL DECKARD. INO.  NINETY-c'XTH CONGRESS  FERNAND J. ST GERMAIN. R.I. JOHN CONYERS. JR.. MICH.  Congrtfz of tbe Zfititeb  tato  MAJORITY-(202)  3E)ous5e of 1"eprefsentatibef COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE  ROOM B-377 BUILDING• WASHINGTON. D.C.  March 21, 1980  Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Chairman Volcker: The Washington Post of March 20th carried a front page story stating tha•t the •Federal Reserve is contemplating actions that "would allow lenders to raise the interest rate unilaterally on consumer credit, increase the monthly payments on accounts and make other changes without giving advance notice to customers." The article also referred to temporary preemption of "some consumer protection measures." While I recognize the importance of implewonting effective anti-inflation measures, I would be very concerned if these measures in any way abrogated basic consumer credit protections. Please provide a written clarification of the Federal Reserve's plans and intentions referred to in this news article, dealing in particular with the following questions: 1.  How might prospective Federal Reserve a cc e rmta l n mngep e cs etrneiodt ttJiIiI il nt r or eme n tscfreor ad vance noeticee eoraf any rhtvaieon g e os r s rr ec olan n en s e se a ac c nte m p thtseui w permit changes in terms without advance notice?  2  Does the Federal Reserve have under consideration or study any temporary suspension of present truth-in-lending requirements? If so, which requirements?  3  Where the contractual terms of open end credit arrangements permit the creditor to increase the interest rate, minimum monthly payment, or other terms of the credit line and to apply these changes to balances already outstanding at the time of the change, do present truth-inlending requirements mandate disclosure of this fact at the time the credit line is established (or at any other time before debt is incurred that could be subject to such rate or payment changes)?   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  225-4407  ar  Hon. Paul A. Volcker  March 21, 1980  2  4.  Where such disclosures (i.e., disclosures that the contract permits future increases in the rate and/or minimum payment on previously incurred obligations) were not made prior to the time the debt was incurred, will the imposition of interest rate and/or minimum payment increases on previously existing balances give rise to refundable overcharges or other violations under the Truth In Lending Act and enforcement guidelines?  5.  What other consumer protection measures might be preempted by contemplated Federal Reserve actions?  6.  What legal authority does the Federal Reserve rely upon for any such preemption?  7.  Please describe the contents and conclusions of any studies or analyses performed by or in the possession of the Federal Reserve dealing with the impact on the use of consumer credit of any suspension or termination of federal or state consumer credit protection requirements. Sincerely, \, Bebj Ch iman  BSR:tv   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  BENJAMIN S. nosEnn-HAL, N.Y., CHAIRMAN ROBERT T! MATSUI, CALIF.  •  Action assinmed Ianet Ha410 LYLE WILLIAMS. OHIO JIM JEFFRIES, KANS. JOEL DECKARD, IND.  EUGENE V. ATKINSON. PA.  NINETY--!XTH CONGRESS  FERNAND J. ST GERMAIN. R.I. JOHN CONYERS. JR., MICH.  Congtcs5 of tbe  ELLIOTT H. LEVJTAS, GA.  tato  MAJORITY—(202)  3i)oti5e of 1.1epraqtitatibef COMN1ERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, ROOM•B-377  WASHINGTON, D.C. 20515  March 25, 1930 Hon. Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C 20551 Dear Chairman Volcker: This letter supplements my letter of March 21 in which I asked clarification about the plans of the Federal Reserve to alter the consumer protections on open end credit. The eitlfohi ermvtaehet, wbin  o olm ioeas nicct u a mtsoeti n o  n ts, I cop en Bo s o me rs.aforlI n innrgen tio n l ow escefu rt h er e yrovaide p the ry  on tee  1.  The situation described in the letter appears to constitute a unilateral reduction by the bank in the maximum amount of credit that will be extended under the old credit agreement (with an interest rate of 12 percent). The credit maximum is reduced to the exact amount already drawn out by the customer. Does this unilateral action constitute an "adverse action" under the Equal Credit Opportunity Act, and, if so, do the bank's notices to the customer meet the requirements of an adverse action notice?  2.  If the customer draws any more money against the line of credit, thereby activating the amended credit agreement, which in turn causes a higher rate of interest to be charged on the previously existing outstanding balance, does this constitute a unilateral cancellation of the old agreement by the bank? If so, is this an "adverse action" under the Equal Credit Opportunity Act, and do the bank's notices to the customer meet the requirements of an adverse action notice for cancellation of the old agreement?  3.  •  In addition to the ECOA requirements for an adverse action notice, are any other regulatory requirements triggered by the adverse action of the bank in reducing the maximum credit available or cancelling the agreement? 1 Si c ely,  e(  BSR:tv Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Benjamin S. Rosenthal Chairman  225-4407  W ARY WHALEN 130SSART, M.A.. NUTRITION CONSULTAN 240-16 6P,h AVENUE DOUGLASTON, NEW YORK PP , •  12121 428-2377  *Meg. /1 • Tr77!  ":17 e ff  J41-  MAP 24 1cYri  March 18, 1980  Benjamin S. fius.o4laJt,  Honorable Benjamin Rosenthal U.S. House of Representatives Room 2372 - Rayburn Building Washington, D.C. 20515 Dear Congressman Rosenthal:  , C.:  :1 0i7E  .•!  ar: iirri;TS  "3  r  per our telephone conversation and as discussed below, the following summarizes my concerns regarding Citibank, N.A.'s planned interest rate increases on READY CREDIT Accounts: As  1.  I question the legal basis on which Citibank has created a system whereby writing a check for $1.00 after March 25, 1980 can potentially convert a balance at 14%. balance at 12% to a  2.  A review of the "Amended Agreement" reflects substantial changes beyond a mere change in interest rates mentioned in the notification letter.  3.  The letter "invites" holders nf READY CREDIT to maximize their borrowing with concurrent reinvestment Since in Citibank Certificates of Deposit (CD's). CD's count towards the bank's reserves, this practice would allow Citibank to expand its loan base at higher interest rates, thereby fueling the nation's inflation.  In the summer of 1977 my husband nnd I received an invitation to open a READY CREDIT Account with Citibank, N.A. with a line This account was not connected at 12%. of credit for in any way with a credit card or a system of over drafts on a Other pertinent details are included on the checking account. On March 10, 1980 we received enclosed copy of that agreement. a notice of an interest rate increase on this account which is to be tied to the Federal Reserve's discount rate, beginning This letter and the Amended Agreement are also March 25, 1980. Both of these communications raise several questions enclosed. I have discussed these concerns with Citibank and in my mind. I am not satisfied by the answers I received.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2  e-  •  •  My first concern is whether Citibnnk can increase the interest on an existing READY CREDIT Account in the manner they propose to do it, (i.e., ;Amply writing one check whether for $1.00 or will cause the total balance to be computed at the new, higher - and probably ever increasing - interest rate). In my opinion it is punitive to Compute interest in the manner If in fact the bank has the right to raise Citibank proposes. the interest rate, it should only be on amounts added after March 25, 1980 as opposed to the total balance outstanding. From my discussion with Mr. Evan Juro (‘ice President, Citibank, 212-559-1000 ext. 4822) I learned that the bank believes that each If that is 50, then each check should be check is a new loan. treated 115 a separate transaction or loan, with a different rate of interest applied to each. (The whole purpose of this type of account is not to have to re-negotiate each time, but that is another matter.) They should not all be amalgamated at the higher interest rate or treated as a re-financing of the total balance In reply, my understanding of our telephone outstanding. conversation was that Citibank takes the following positions: 1.  Citibank's proposed actions are within the letter and spirit of the law, citing 1085 NYS Banking Law and 12 US Code, Section 85.  2.  That this change in interest rates and the method by which it will be computed "'Is punitive, if you chose to interpret it that way.'"  3.  Citibank believes that when each check is written, it is a re-financing of the entire loan. This, if it is true, is a material fact which was not conveyed to us at the time the READY CREDIT Account was established.  Another Citibank employee (Ms. Anne Morin, Customer Service, 212-750-5000) told me that the bank's right to cancel the agreement at any time allows them to change the interest rate. (Mr. Rod McElligott, Citibank, 212-559-1000 also offered this explanation.) I do not understand how an increase in interest Rather, it seems rates is covered by a cancellation clause. that Citibank is seeking to avoid alienating its customers by cancelling the agreement, while attempting to profit from the It is inconsistent, though Nation's current economic problems. rate certainly profitable, that while increases in this interest will be tied to the Federal Reserve's discount rate, at no time will the interest rate ever be lower than 12% - even if the Citibank's actions discount rate should go down to 7 or 8?4). in regard to READY CREDIT Accounts are consistent with the Citibank corporate objectives discussed in the March 24, 1980 issue of FORTUNE. My second concern is that the notification letter does not call greater attention to the new Amended Agreement which differs Some of the changes are as follows: significantly from the old one.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F  •  OM.  Agreement  Original  Amendments  Amended Agreement  Amendments • The first use of your READY CREDIT Account means you have accepted the terms of this . (Amended) Agreement.  NONE  Using Your READY CREDIT... Use your check at transfer personal  •  3  READY CREDIT transfer any Citibank branch to money into your Citibank checking account.  Using Your READY CREDIT ... Deleted  Default  Default  You will be in default if you don't pay an installment on time or if any other creditor tries by legal other process to take monies or property of yours in our possession  You will be in default if any of the following should occur: You do not pay an install1. ment on time; 2. Any other creditor tries by legal process to take money or other property of yours in OUT possession; 3. You are in default in the terms and conditions of any other agreement, note, or contract with Us. L. Any proceeding under any bankruptcy or insolvency law is started by or against you.  Reducing the Maximum Credit  Reducing the Maximum Credit  NONE  We reserve the right to reduce the maximum credit available If we to you in this account. do so, we will notify you in advance  A review of all the changes in the Amended Agreement reveal that it is not merely amended but substantially changed - in favor of the bank. My third concern involves the lengthy mention of certificates of deposit in this letter. It appears that Citibank has made a subtle invitation to its Ready Credit customers to borrow to their maximum credit allowance before March 25th so that they can This deposit it in Six Month Savings Certificates at Citibank. would make the loans virtually risk free (especially because of the changes listed under Default and the rights claimed under Security) while (as related to me by the Federal Reserve Bank of New York)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4 •  •  the CD's would contribute to the reserves the bank is required to Since Citibank can make $7.00 - $14.00 of loans for each hold. $1.00 in reserve, this course appears to contribute to inflation by making more money available for Citibank to loan, and at higher interest rates. Any assistance or explanations you can give me will be Citibank's slogan is "The Citi never sleeps." appreciated. As far as I'm concerned, it must be because the Citi has a bad conscience.  Very truly yours,  CC:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Honorable Benjamin Rosenthal, House of Representatives Honorable Frank Padavan, NYS Senate Mr. John Chiporis, Office of the Comptroller of the Currency Mr. Robert Abrams, Attorney General, NYS Ms. Muriel Siebert, Superintendent, NYS Banking Department Miss Maland, Federal Reserve Bank of New York Mr. Bruce Ratner, Commissioner, NYC Dept. of Consumer Affairs Mr. Ralph Blumenthal, The New York Times Mr. Robert Miller, WABC-TV Mr. Evan Juro, Vice President, Citibank, N.A. Mr. David Wittmar, Regional Director, Regional Office of National Banks  vft  •  •  ORIGINAL — 1977  CiTIBAJIK  '.bank. N A (") Bo, 3F10 Cf.ror:rt l',1,111on York N Y 117   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Robert T. 13ossart  ACCOUNT NUMBER  MikXIMUM CREDIT  nr PAYMENT SCHEDULE  •  _48 YMENT DATE  25th  We are pleased to inform you ihrt your application In t- a Ready Credit Account has been approved. Your account number, maximum credit repayment schedule and montly payment date are shown above. Fahlosed k a check boot. containing your initial surlily of pelsonaliied checks and transfer forms which you Call start using immediately. A supply of imprinted. encoded checks and transfer forms will be mailed I. on shortl.LTnk the account has a /cm balance for more thj11 to 111011n1S. J StA /14.111C111 oF MIT account \yin he maikd eich month together with a payment notice. You ill note that on the back ;if this letter there is a contract that states the terms and conditiens you a.2rec to be bound by under Read. CrediT719177e read it carefully. The first use of our Ready Credit Account means you've accepted the terms of thc Agreement. If ‘‘e can be of further assistance, please contact your branch.  Sincerely,  1(1-_.ADY CRLDIT Customer Services  Enclosures  The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against cr dit applicants on the basis of sex or marital ,atus. The Federal agency which administers compliance with this law concerning Citibank is Comptroll,-r of the Currency, Consumer Affairs Division, Washington, D.C. 20219.  READf CREDIT AGREEMENT  Ill this ei g ir  lk,ing Your riecdy Credit Account  I  s.1  inij  rit tIllw‘iiils you, ycu your& %%I/II!N Vfn, u: and C..LJ tuu.iI oth ( it 1111 i hi  I, J ost  CITID  ORIGINAL — 477  In'  III(  ..11) C.1)(1)1.1l ()IIIII5IIlI ()I 1)1111i • •  ‘ot) ...mild an) t 1:.ilat (hi" 1, 1  Ill It.id  (,tdsi1u  k.iIiln  n•t  NA.  •• Ifits,  %%lit  %(•1  1)141.'. alc .1( 44 pled I's( sour Reads ()edit tia n%fer chr c Ling ac mint  lit( k  an (A i& ins. I.n Ii to transfer money Into y out (..it,bank  rsonal  Von (an drays these(hr k. fru ans arnornii up fo fl.(fif limit If %wit credit linrit is used up. %,c may reline to pay youi I hrcks Or rnakr- iddittonal loans to 5011 multi this ar,oltnr.nt  Paying In instcilments  ou agtee u ic pas you! Ruath Cicdit 1I.Ivus. bui 'you i ss hat You ow( us in in.tallincnts If th. ri's a ',Amur in sta l l i nen, isd ut (mint. \t,mi ys ill gel niontlils %tau nu ins iii., s di show y. f it i i 1114'1.1%1 but al !r is: $!O, plus FIN/11C CHARGE,and Ans 1.11c 11.1114cs ()1 t )1ilm pl In( 11,,I halanr r is wide! SI(t )11 s Ill pa) 1-s•( I pins MI% FINANCE CHAR(E, and .fft (11.111445 1Vc• "ill il1)1)1 p.)%111C•filS 1(1 I FINANCE CHARGES,(.2) instirant 14 hmgcs, If IllS .('4)1.111•41Litgrs. it ans and( ) prituipal. in that order.  iiisour 'sill1IC  Flow To Pay Paying More 7hEn The Minimum Firh,nce Charges  . 11 111\i.infill let  /1( ) 1 1  r.i‘ini.91•  .111  id  111.11 1).11.II)t I' M I  1).1.111(  iii  III kri  h( II  at any time ptepas the outstanding balaiu  awe to pay  41.414.  II) tilt )11)11)111h slat(  WA S M ail('  merit  ill part or in 11111.  FINANCE CHARGE on the pilot !pal balance in vim Reads Cred it a((011:11  %Vt figure it this way: !. 1Ve start with the. prim 'pal balance- on the first da) of the month!) billing period 2. Fa( h d!I% of that pc r iod we add ans loans mach .and subtrar t payments and other c teditsapplird:oprini ipal. 3 11'e tin n .is 1.4144 the dads balances during the petit KI and multiply this as trage by a daily rate of .03V.V7% •Finalls we multiply this amount by the numb( t of days c livered by ihe statement Tlw torrt•sponding ANNUAL PERCENTAGE RATE is 12%. iliterSEZiriu:pt. C :1•01P.i .111It A rcu 111:6if It IA.6, ;,. &Joie•2.r6. •Tar  Insurance Charges  Late Charges  11 son 1),451 ricr led to IniN Ciedil I AN. Insosant t. Non w ill lc( t 1st. a 4 troll( att of wimp InS111.1111 .hi hi %. in set forth the terms of your coy( tag( If them is an outstanding prim ilial balance in your Ready Cr( du act mint. %rim mornfil. pas nu Ill 55111 in( 111(1( a IILl gr lri ii II )lmililY premium c ow)'mud by applying a dads 13If Of .002% times the outstanding loan balati« fru ('a, h 11,1s c 1)5(1111 In the statement. This raw I11:1 cllbjIt I In ( harige. II sou c11)1)•1 pas an installineni yy ithin ten classalici tilt date dur. yy ys.111( harge sou monthly •IC fru (5(1% SI of the prim ipal of the installment remaining unpaid The laic harge will neser be more than Sri and the sum of all later harges in acalendar year won't be more than $15.  Default  You w i ll be in default if son don't pas an installrric nt on lime of if any other creditor tries by legal plo(('‘‘ to lake' monies or other properv of sours in mu possession. %Ve can then demand that you pas the outstanding 11.11.1114 e at mice. And we can refuse to pay any outstanding cher Ls During default y.ou agree to pay a charge of I crt, a month on the unpaid principal balance.  Security  (,1)1011,01 us if sou default. you gisr us ;m 'ac Wit) int( iri in:My awnint or other ploperty of youtsc timing into our possession We (an then apply your property.14 1.I ITiSI %hat you ov:.c. us.  Collection Costs Irregular Payment:.  Delay In Enforcement  If we h.I%(• In stir nu In (('.11(41what sou owe. you will pas an extra 15% of the ouistanding amounts as law yers• fees and the c cunt msts. But if y01.1 win the III pay your reasonable lawyers' fees and the 114eosts. We can accept lau pay mews or partial pa)111(111%. of our rights under this agreement.  (Ai  inarkcd "pa)Mtn! in full.- without losing any  %Ice (an delay an of our rights under this agreement w idiom losing them.  Joint Accounts  If this is a joint account, each of you will be fulls liable for the amount due under this agreement.  Cancellation  This agree men, can be rani died at any time If we cane el, we will notify you in u riling and give yOU the reasons why.. If you cancel, you rillISt do so in riling Of c..,dr cr. you will remain liable to repay sour outstanding loan balance, with interest and any other charges.  SEE ACCOMPANYING STATEMENT FOR IMPORTANT INFORMATION REGARDING YOUR RIGHTS TO DISPUTE BILLING ERRORS  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3  •  CITIBAN<0  INCREASE IN READY CREDIT INTEREST RATE March 3, 1980  IMPORTANT INFORMATION YOU SHOULD KNOW .  Dear Citibank Customer: Over the past year, interest paid on savings deposits and other sources of funds has steadily increased. For example, Citibank Six Month Savings Certificates purchased during the week beginning March 6 earn 15.563% effective annual yield (on a rate of 14.792%), the highest rate ever. The bank's cost of obtaining funds (including the interest we pay customers on savings deposits) and our operating costs determine the rates we must charge when we lend those funds out. It is obviously not possible for us to pay over 14% on savings deposits while lending this money out at 12%. As a bank we have two choices: to raise our rates or to stop making loans. We believe that you, our customer, prefer to have the option of available credit. In order to continue to provide you with this service, we regrettably must raise the rate of interest on Ready Credit accounts. Effective March 25, 1980, the annual percentage rate (APR) on money borrowed from a Ready Credit account will be 1% above the Federal Reserve's current discount rate -- the rate banks pay to borrow money from the federal government. As the discount rate fluctuates, the APR on your account will change too. Today, for example, the discount rate is 13%. If this rate is still in effect on March 25, your APR would be 14%. How the Changes Affect You You will be charged the current 12% APR on any outstanding Ready Credit balance you owe until we process your first Ready Credit check on or after March 25, 1980. Then, beginning on the first day of your next billing cycle, the new rate will apply to your entire balance due. Example: You currently owe $1,000 at the APR of 12%. You don't increase your Ready Credit balance owed until June 10. Your billing cycle ends June 20. On the 21st of June the APR on your entire balance due will go from 12% to the new annual percentage rate. What About the Future? If the discount rate goes up again, we will Increase the APR on Ready Credit balances to 1% above the new discount rate. This increase will be effective on the first day of the next billing cycle.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (over, please)  The discount rate specifically, and interest tates in general, may well go down in the future. If this happens, the rates will be lowered (but not below 12%) in the cycle in which the decreaie takes place. Your New Agreement Accompanying this letter is a new Ready Credit Agreement that reflects our revised interest rate policy. Remember though, that increased interest rates will apply only when you activate your credit line. Thereafter, increases and decreases in rates will apply automatically. New Rates for Checks Due to rising costs we are also forced to rai ,;e the transaction chdrge on each Ready Credit Check you write to 25c. This charge will be reflected in your APR and included in the finance charge portion of your monthly bill. Citibank plans to continue to extend credit to our customers. The increase in rates for Ready Credit makes it possible for us to meet your credit needs. Thank you for banking with us. the future.  We look forwArd to serving you in  Sincerely,  Gt/Ls-Evan Jyro Vice res dent  Oc„,142  7' --IA: • 14  a. ' L rattivi7  / Ida  P.S. A reminder: Citibank pays 15.563% effective annual yield (on a rate of 14.792%) on Six Month Savings Certificates. Why not call/. ,-,/?(//2 , e or stop by your branch to take advantage of this opportunity to earn more on your money!   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  113  J))  :•C  •••••••• AL••••.  •  •  ••  mean the Ready Cr- Jit account c.vner or bo  this agreement the words you, your and your .e, us and our mean Citibank, N.A.  -711C1r1131r111•1111Mt71111MINOMMIET  •• .  he first use of your Ready Credit account means you have accepted the !rms of this (Amended) Agreement. or making ,bu use your Ready Credit by writing Ready Credit checks !her withdrawals from your Ready Credit account. The Ready Credit can write these .heck can be used wherever checks are accepted. You hocks or make withdrawals for any amount that does not exceed the redit available to you. or ' you have reached your credit limit, we may refuse to pay your checks lake additional loans to you under this agreement.  --mempagnommarimai. 'aying In Installments l'au agree to repay your Ready Credit loans, but you can pay what you ,we us in installments. If there is a balance in your Ready Credit account, each installment is .)U will get monthly statements that will show when of the unpaid principal balance on due. Each installment will be the date the last loan was made but at least $10, plus FINANCE CHARGE, any insurance charge and any late charge Of course, if the ,rincipal balance is under $10, you will pay only the lesser amount plus F:•41.:4:7E CHARGE, and any other charges. We will apply your pay')FINANCE CHARGES,(2) insurance charges, if any,(3) late m harges, II any and (4) principal, in that order. • !,,c1,)!Irnen? v.,I1 Le the same as your most recent agreement •  ...••••I- • •••••  •-- •• •  •  •  •  .• ..  • •-  •^•  iow To Pay 'lake your payments with the payment ticket attached to the monthly :atement r—usrpli=riMISCESEraaCE•  Paying More Than The Minimum You can at any time prepay the outstanding balance in pan or in full. ••••. .  rqrraimel•  •  .4 - ••••.•• at  •  If you have elected to buy Credit Life Insurance, you will receive a certt, cate of group insurance which will set forth the terms of your coverage. l' there is an outstanding principal balance in your Ready Credit account you agree to pay together with your monthly installment a charge for thr 'monthly insurance premium computed by applying a daily rate of 002°, 'times the nutstanding principal balance for each day covered by thr 'statement. This rate is subject to change. We will notify you if the rat, changes If you do not pay an installment within ten days after the daldue: you authorize us to pay this charge and add the cost to your outstand ing loan balance.  Default You will be in default if any of the following should occur: 1. You do nnt pay an installment on time: 2. Any other creditor tries by legal process to take money or other propen of you in our possession; 3 You we in default in the terms and conditrons of any other agreemen: note, or contract with us; 4. Any proceeding under any bankruptcy or insolvency law is started by( against you. We can. then demand that you pay the outstanding balance at once. Ai we can refuse to pay any outstanding checks During default you agree' pay a charge of 1% a month on the unpaid principal balance.  wegazaffiarga_ Security TO protect us if you default, as long as there is an outstanding balancr under this agreement, you agree that we shall have a security interest ir any account or securities of yours in our possession and in any property yours pledged or assigned to us. We can then apply any of this proper' against what you owe us.  • • re • b•••••  4SINEMBN  Knaimmor  Finance Charges You agree to pay a FINANCE CHARGE for each monthly billing period in which there is a principal balance in your Ready Credit account. The FINANCE CHARGE will consist of interest and a service charge (if applicable). We will figure it this way:  Collection Costs If we ha‘e In sue you to collect what you owe, you will pay an extra 15% the outstan;fing amount as lawyers'fees and the court costs But if you w the suit, we will pay your reasonable lawyers' fees and the court costs  warricsim. Irregular Payments •••ki• •  1. The interest rate (corresponding ANNUAL PERCENTAGE RATE)will vary and will be the higher of the following: a)12% per year, or b)10/0 per year above the lowest Discount Rate for 90-day commercial paper in effect at the Federal Reserve Bank of New York during the monthly billing period. The daily periodic rate we use to figure each days interest will be 1/365th of the annual interest rate, but never less than .03287% (for the 12% rate). ?. We will take the principal balance outstanding on each day of the monthly billing period and multiply that amount by the daily periodic rate to arrive at a daily interest amount. At the end of the monthly billing period we total all the daily interest amounts. 3 To the total interest we will add a service charge of 25d for each Ready Credit check we pay or other withdrawals you make from your Ready Credit account during the monthly billing period to arrive at your total FINANCE CHARGE. igEG=11  l_ate Charges If you do not pay an installment within ten days after the date due, you agree to pay a charge of 4ç for every Si of the principal of the installment emaining unpaid. the late charge will never be more than S5 and the sum of all late charges in a calendar year will not be more than S15 10-4,014111it OM. 4111,  NOTE: SEE  1.  •  0:01 • 111," .  a 0.r.J2..  ••••  We can accept late payments or partial payments, even though mark, "payment in full," without losing any of our rights under this agreemen: Q...=i7Jurrizzaw=x-  Delay In Enforcement We can delay enforcing any of our rights under this agreement withc , losing them. spisznzatim..nrs  Joint Accounts If this is a joint account, each of you will be fully liable for the amount d under this agreement, but we may sue either or both of you. ,- 121OP3'7r 1 -"  Reducing The Maximum Credit We reserve the right to reduce the maximum credit available to you in th account. If we do so, we will notify you in advance. ik:=3/;402  Cancellation This ag.erment can be cancelled at any time. If we cancel, we will no: you in writing and give,You the reasons why If you cancel, you must do in writing Of course, you will remain I.able to repay your outstanding lc balance, with interest and any other charges. Sif  REVERSE SIDE FOR IMPORTANT INFORMATION REGARDING YOUR   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  , IMMI AINIIMMEIMINICZNIrall..01111311511111111=MMOW  Insurance Charges  Ising Ycrur Ready Credit Account  •••••■••• .44•••• - -1•••• "'•  owners if this is a joint account. The word!  ••••••  • • •••.,  r4I GHTS  ••••••  •••.• .  1...811 —is .  .•  TO DISPUTE BILLING ERRORS.  -  DOUGLAS BEREUTER i ST DISTRICT. NEBFtASKA  •  •  WASHINGTON OFFICE 1314 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-4806  COMMITTEE ON INTERIOR AND INSULAR AFFAIRS  DISTRICT OFFICES:  SuticommITTEM ENERGY AND ENVIRONMENT  P.O. Box 82454 LINCOLN, NEBRASKA 68501  NATIONAL PARKS AND INSULAR AFFAIRS WATER AND POWER RESOURCES  (402) 471-5400  1045 K STREET  Congre55 of the Einiteb aptate5  COMMITTEE ON SMALL BUSINESS  30oufSe of ?aepre5entatibes5  220 WEST 7-rri STREET P.O. Box 213 WAYNE, NEBRASKA  RURAL CAUCUS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Olitusbington, ri.C. 20515 April 11, 1980  President Jimmy Carter The White House 1600 Pennsylvania Avenue Washington, D.C. 20500 Dear Mr. President: I am in a constant state of amazement at the outrageous disregard the Administration continues to have for our nation's farmers. It would appear that the Administration has plenty it can do to farmers, but little it is willing to do for them in times of dire economic crisis. While I recognize the Administration's belated attempt to soften the flow of the grain embargo by buying up surplus grain, I wonder why it took so long. It appears to be too little, too late. The latest non-action---refusing to use the 1969 Credit Control Law to order banks to make loans available to farmers indicates that the Administration either is ignorant about the crisis facing farmers, doesn't care, or both. The Administration has maintained ridiculously low price supports, slaps the farmers with a harmful grain embargo, of questionable effectiveness, drags its heels on any transportation help to move grain, taxes them heavily to support other government programs, and then... says "don't come to us when you need help." I don't know what else I can say to underscore the problem being faced in rural America. Years of low supports, the current credit, deteriorating transportation, high costs and the apparent disregard the Administration has towards farmers has left many people genuinely angry and frightened for their future prospects and the future of the country.  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  68787  (402) 375-3030  411   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  The Administration is in effect telling the farmers to "drop dead"...considering the importance of food to our nation, we may all have to join them. I sincerely regret that over the years the Congress has permitted some of its responsibilities in agriculture to be eroded in the interests of expanded Presidential power. We now have a power vacuum in the failure of the Administration to act, and I fear that all we will see is a war of words while agriculture continues to slide downhill. Sincerely,  DOUGLAS BEREUTER Member of Congress DB/rhs Mr. Paul Volcker Chairman Federal Reserve Board  •  V  f\Tril 14. 1000  Lntt l 1"-,e "encrnhle too-c of ;'rtl--3,-ntltivcs 2n=.)5 shirrto”, •  T,nttr. yc.0 for your 1r,tter of 171/7ch 6, 1990, to ChairrIn Thln co-:,-ncnt on a letter you rceeive0 rror, rr. Volcr r priunstin erc: 0! "ryr, concernirc77 his IRA lccount. "nc1on ,7. vitb -r c - ry er 7 fort. lg.tter ,- 71t21 r/rort.'s lctter ryn, 'Thin, 3;.111!;Arv 29, 19flO, that The Citi7ens T-rrrttly:377rt to itn 11Y, ,7-.41tor. •c prvieuv.ly n.1"sF7n:; r,(1,--c or. the irruen Ontosl vc!hrunry )3, in the 4:.c,r-rs. lcttcr in r rospone. to thr!t. forr lof.ter notes copy or which in enelo‹. 71A. 12f.!0, ar 59,1/2 or olrler ray ccnvr?rt outstandtl-:at TPA r'nesitors invtru.mcInts without in- IRA tirc deresits t0 position or the norririlly requireJ witr7;wel rernity, aryl s!IfInents !".q-1/2 years nn the entAhlish thlt the :e nt which er:rly vit.lrawaln from nn TnA tire clerrrlit wcial vo 71, . lon,:cr he yr:s.1! are vw;lre.., c?ntly withOrow•ls or tirr r'PpoSif. (31- convf.:rsitir r:r ti.no ,leporitn to T-,.ir:11r7r yt1iinc inntrurents rxr. su!-)ject to An interest forfeiture ). :efcr r. rIturitv) ction 217.4() or the T'onrrisr Reoulation penalty c's rrovile:1 in tie r.ennity rules 1-!nVe., heen nOorted (cory enc1oso0). Tr.lern1 !'erosit InntIrr.nc Correrrtien, w17ich re(:ultiton thzit :Ire not rn0 rutlin.1 s7.virr,r r!ora-orcinl nric hy the F^6cral !!ctne Loon '- r-sorvo insurr_1J snvins pnO, lorn re-u1ten ;Irnk 'or 1, r.cnnity is to ,-1 hc T1lrnr7Fr cr t 1-10 nssocintions. irstitutionr to !-- 11,1 ti-.eir loan er.‘7 invertr'ent er7, .b1c! tructl!re of t*eir libilitics. r.arly u-on t1v policics witlyirlc or conversions without ponAty rAr. rermittwl, 1- ewever, : tile runr'n (7(nositrs,:: rrrresent TPA or Ycor, (Y.P. le) rlIr I' '79-1/2 or older Cr is contril:Iltions if the Pirronitor 112 ,Anahle.O. This excertion, which wan ;!,7orter9 in 1975, wns deore(1 of the stntutory rx(wisions contained in proerinte In Cor'e (26 U..C. g 40S). Un.7cr Tot,:q- n1 scction 402 c) !-v he itrihutoJ without iNrosition thnt Ce.'.e section, TPA of- a tnx rOnMltv W1IPP thr) 1P,7 7, rticir=,nt ;Attzlins arP 59-1/2 or in lisrtle,7.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ci7  1  -•  t  •  ;.r!..n;t]ty  cr..pv%, . t7Ans or 777 in thcf ti-c tno rcti  ,  .s ."?:.:.1:771t.i.kr;  11-44.r. IC:t  P:''i'•\•  -;.  .1,r1;:77:  3r.  1.--^ition Jr tc"!-- ,7 rr'*  •  t  thrift- inrtitJticnke nvet7ifiic-f'! in itn orl.! si -n nut"-1 .3,r(%vitft  Xcrt1et—Inf,"1.  pi.t.r  J. trfrIntInt ti "1.'!":•.!Z","  r.c.  Loe7 (9 V-1., ..%•: 71")  CC;  A. (-(- 1c, N. Jcr-(7n.ren  a.  'ZI=r •.‘  r.-..rtAt in irititution•I t'-:t . /41! 1-, ,-%.1?1-(7. !I- e.,.;.-4.1tien, :.iij rir..4'Int.ly the littr,r0..9t  lot ;9  1.119%  410  DELFIERT L. LATTA 51H DISTRICT. OHIO  ction as sicrnecr to A4r. Pete rso COM M ITTEES: RULES BUDGET  Clutwess of 11Ir Ixti Inusr  tztics  "leprescittatiiies  paellittBfint, p.a..  20515  March 6, 1980  The Honorable Paul A. Volcker, Chairman The Federal Reserve System 21st Street and Constitution Avenue, N. W. Washington, D. C. 20551 Dear Mr. Chairman: Please find enclosed a copy of a letter I have received from my constituent, Mr. W. H. Moore, of Bryan, Ohio, concerning his anxiety over his IRA rollover account. I would appreciate your checking into this matter and advising me of your findings so that I can properly respond to the attached incoming letter. Thank you in advance for your cooperation and I look forward to hearing from you. With all best wishes, I remain  ar.e6  .  LATTA Repre entative to Congress DLL:bk Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  L-.--   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  . •  February 15, 1980  Congressman Delbert L. Latta 280 South Main St. Bowling Green, Ohio 43402 Dear Congressman Latta: Please find enclosed a copy of a letter I have received from my bank concerning my IRA rollover account. I particularly call your attention to the part of the first paragraph as regards the early maturity penalty. I most certainly agree with Mr. Witzerman in his statement that this is a very discriminatory action. How in the world can age be considered in such a situation? In any event, would appreciate any assistance you can give us to influence the Federal Reserve Board to be more dlu Thank you. Sincerely,  W. H. Moore  /nt  I  THE CITIZENS NATIONAL BANK  •  P.O. COX SUB  •  BRYAN, OHIO 43506  •  (419)636-4266  ILSTASLisvirD tp1.3  January 29, 1980  Dear  Mr. Moore:  Effective January 1, 1980, Federal Regul ations allow banks to invest retirement funds in the new six month Money Market and 21, year certificates, the rate based on comparable term Treasury securities. The Program has created many problems, such as 52 different interest rates per year on deposits of $10,000.00 or more and 12 rates on those of lesser amounts. In addition, present interpretations require enforcement of the early maturity penalty - six months loss of interest - unless the account happens to be at a three year maturity period. However, the penalty does not apply if you are 591 1 or older. This has a very discriminatory effect. We have filed a lette r with the Board of Governors, Federal Reserve System, protesting the inter pretation. Because of the complexities of handling multi ple rate accounts, we propose changing all accounts held by perso ns 591 / 2 or older to the new 211 year deposit which currently earns 10.4 perce nt compouneled quarterly to yield 10.81 percent. This would be appli ed to all accounts in existence on January 1, 1980, as well as deposits made or new accounts opened during January. The rate for subsequent deposits will be established each month at 11 percent below the Treasury Security rate for 21) years. A minimum of $875.00 will be required and only one depos it per tax year will be accepted. To you who are less than 5911, the decision must be made, perhaps on an individual basis, as to the change. If the penalty is enforced, six months Joss of interest at present rates will take nearly six quarters (11 / 2 years) to make up. 'Therefore, we need authorization to change your account and to assess the six months penalty if the regulators fail to reverse present rules. This penalty will be withdrawn from your account only if necessary to comply with present laws. This program will not but will give the majority in the next few months the penalty, however, there is   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  give us the flexibility we have had in the past, much better earnings. We are hopeful that sometime regulations will be changed regarding the interest no assurance of this. Sincerely, THE CITIZENS NATIONAL BANK  E. M Wit rman Exe utive Vice President & Cashier  April 14, 14.f,10  The Messafeble Don 3. Nwase Heels ef **presentative* Vaehingtes* Ilse. VMS Deer Mr0 Pease4 Thank you for qivino rie the opportunity to cm7znerlt in tIle 40 the difficultie* bein5 faceJ toy your constituents hosing !Amines*. There is no doubt that the tmortvmoe and housing nerNots have deteriorated sharply in recent months, reepeeee to the governmental anti-inflmtion policies larvely that you nestiesed. Its a resat* residential constructior is apt to drop further during the period immediately ahead. t'•o. too* i* the volume of real estate market transaction*. TO6cra1 Reserve is fully eofmnisent of the epecisl problem* fees by oartgese lenders awl t--17 ',guilders in Cho in designing the Special CrecUt Pestroint aurreat market ftocram announced on tInrel, 14* the 'card asked ft,sonrercial bank, te civo priority to raintaining * reasonable aVailability fends to soell humidness*** such as 'oral builders, an to iservinv the liquidity needs of thrift institutions. The special aeposit requirepAmets spplyin9 to increases in conrmlor credit specifically ~laded sortcace creplit for the purchase or improvement of NINros. Ir addition* the special deposit require, its imposed on any further expansion in the assets ef meow mar/get mutual fundv ehould 1.A1p curh the shift of savinels toward the central messy !_iarlret leaving oore funds available in local markets to belp nest local credit dsmAnds, laoluding those associated vith housiml.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rurtheseore, T have repeatedly urived the banking cemenaltr %smoke special efforts to eseemeedste the appropriate credit seeds of small tuaineeSee• hommituildets, censurers* and farmers. A3.so4 the Federal Reserve has long surperted and doetiouse to press for dhasoes la regulatory processes that vi11 r,ake credit mare rowdily available for bcusing during periods of intewedt retas. N4444,48 esheeeing the ability of thrift inatituttems to compete for rued*1 oath as the recently enact0=-1 tedlislatise coiling for derellulatier of depositary institutions, are an impertant °attribution in this rocard.  The Poaereble Don J. Pe Vvve 2  #'  GOOD the immediate outioeik for f', !eptessed real estate  activity, the Congress itself may wish to consider special prescsas to eid beesiso throuvt this Cifficult ported. The bemente espectsd from specific tleasuree# hewevere should be veigbed carefully egainst the likely costs. Me types ef program used to the Last boueinq downswinir: to prcyvide residential mortgage credit at below.seeket interest rates undoubtedly woulti prewide some support for housint.z in the short rm. On the other tar& federal borrowing to finance such programs• micht put ft upward promier* eemertet interest rates mod intensify the problem beim, amperieneed by the thrift isotitutions. use of special labeidy prograws, moreover, could eell into serious queetien the resolve of the federtil flevernnlent in oiqhtinq inflation, Is say egeot. solutions designed to aid the mortoace an4 housing eartats will not go to the core of the problem finfi thaws 006 44,154r eector* of the economy. The inflationary process must be Ilene& As inflation abates and inflationary expectations dissipate, *-arket interest rates will receddir poressut** oo the depositary institutions will ease, and the supply et credit will improve., A.th lower costs of residentiel mortgage loess and *morally more stable conditions in All financial martstS. housinfl--e elector Mghly deceedest on outstie fundin*-•-ahould be among the first arc es cd, the economy to benefit, I look forward to working4 with yeu and year collenowes in the Corress to find aolutions to our Patios's esesemle problems.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  niucorely,  Fet,F:j57:47Pn:k.;.r  cc  !.1r. lachline !!.. Fisher tiallardi (2)  4V-125  •  Ac* assigned to Mr. Kichline DON J. PEASE  •  ADMINISTRATIVE ASSISTANT BETTE B. WELCH  13TH DISTRICT, OHIO  1641 LONGWORTH BUILDING WASHINDTON. D.C. 20515 (202) 225-3401  DISTRICT OFFICE:  Congre55 of tbe inniteb 4NhatO  ROBERT RULL1 1936  LC.  SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE  20315  PARK ROAD, LORAIN  (216) 282-5003  otifSe of 1lepres5entatib0  COMMITTEE ON FOREIGN AFFAIRS  Cooptp-Fo,rrR  PART-TIME OFFICES:  /  MRS. DOROTHY LITMAN 157 COLUMBUS AVENUE, SANDUSKY (419) 625-7193  SUBCOMMITTEE ON EUROPE AND THE MIDDLE EAST  CouHry ADMINISTRATION BUILDING, MEDINA (216) 725-6120  COMMITTEE ON SCIENCE AND TECHNOLOGY  MUNICIPAL BUILDING. BARBERTON (216) 848-1001  March 31, 1980  SUBCOMMITTEE ON SCIENCE, RESEARCH AND TECHNOLOGY  Mr. Paul Volcker Chairman Federal Reserve Board Federal Reserve Building 20th and Constitution Avenue, Northwest Washington, D. C. 20551  ••••••••••  rN)  Dear Mr. Volcker: During the past two weeks, I have met with several dozen of my constituents who happen to be in the housing business---either as realtors or as home builders. As you know, the fight against inflation bears more heavily on some Americans than on others. From my recent conversations, it is clear to me that realtors and builders are being hit extremely hard by our current anti-inflation efforts. The whole object of our anti-inflation efforts is to slow down the economy; for realtors and builders, the economy has come to a screeching halt. For many builders, it will mean bankruptcy if there is not some early easing off of the current high interest rates. For many realtors, it means that there are no sales whatever being made and, thus, no commissions for them and no income for their families. I strongly urge you to consult with your economists and see if there isn't something that can be done to alleviate the catastrophic impact on the housing sector of our society while still hewing to the basic thrust of your commendable efforts to stop inflation. I'm not enough of an expert to tell you what precise steps could be taken, but it certainly does seem unfair to require such a disproportionate sacrifice on the part of one segment of our economy. On behalf of thousands of my constituents, I will be most grateful for your efforts to address this inequity within the framework of your continued commitment to fight inflation. Sincerely yours,  N J. PEASE Member of Congress DJP:bt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS "OW  -  kr.zo  RICHARD G. LUGAR INDIANA  S  •  COMMITTEES: AGRICULTURE. NUTRITION, AND FORESTRY BANKING, HOUSING, AND URBAN AFFAIRS  5107 DIRKSEN OFFICE BUILDING WASHINGTON, D.C.  20510  'Zenifeb Ziateo -.Senate  FOREIGN RELATIONS SELECT COMMITTEE ON INTELLIGENCE  INDIANA OFFICE: WASHINGTON. D.C.  20510  46 EAST OHIO STREET, Room 447 INDIANAPOLIS, INDIANA  46204  April 11, 1980  Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Mr. Chairman: I appreciate very much your thoughtful letter concerning my participation in the development of H.R. 4986, the Depository Institutions Deregulation and Monetary Control Act of 1980. I am deeply appreciative of your extraordinary leadership on this issue of critical importance to the nation's financial institutions and the Federal Reserve System. I was pleased to have been helpful in advocating early on your proposal for a supplemental reserve. I enjoyed very much our visits on this legislative issue, and look forward to many more in the future. Sincerely,  Richard G. Lugar  RGL:bkw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • HOUSE OF REPRESENTATIVES WASHINGTON, D. C. 20515 DOUG BARNARD,JR. 10TH DISTRICT OF GEORGIA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 14, 1980  Dear Paul: Thank you so much for your kind letter of April 7. It is indeed gratifying to participate in such important legislation as the "Depository Institutions Deregulation and Monetary Control Act of 1980." I saw many compromises made by important members of Congress, and this was encouraging to me to know that we could get such cooperation on this bill. I am pleased to be on the Domestic Monetary Policy Subcommittee of Banking, and to have the opportunity of working with you and my other friends at the Fed. As I can be of any service to you at any time, please call on me. Sincerely,  4.—eisuj) Honorable Paul A. Volcker Chairman Federal Reserve System Washington, D.C. 20551  THE WHITE HOUSE WASHINGTON  April 9, 1980 Dear Jim: Thank you for your March 31 letter about interest rates and inflotion. Your recommendation that we tighten credit controls in the form of shorter term loans and loroer down payments makes sense at this stage. In fact, this is consistent with one of the points I announced on March 14 in my five-pronged anti-inflation program, and it has already been picked up by some major retailers. The situation in the housing market as well as the downward trend in retail sales seems to suggest that high interest rates have been effective in discouraging borrowing by restraining the growth of the money supply. Of course, I share your special concern about small businesses and prospective homeowners. In the short run, high interest rates are inflationary, but they must he weighed against the greater evil of giving in to the almost insatiable demand for more money and more credit which, in turn, k caused by inflationary expectations and the desire many people have to convert their assets into real goods. Your point about the psychological factor at work in our society is well taken. I have asked Secretary Miller to review your letter and to respond to you in more detail. I am also sharing your thoughtful analysis with Chairman Schultze and Chairman Volcker. I deeply appreciate the cooperation of the Congress and your own personal pledge to help us balance the 1981 Federal budget as another important step in fighting inflation. You have my assurance that I will continue to monitor the situations you discussed with a view toward fairly distributing the sacrifices to be made as, together, we improve our economy. With best wishes, Sincerely,  The Honorahle James C. Wright, Jr. U.S. House of Representatives Washington, D.C. 20515 cc: Chairman Paul A. Volcker   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  T E-14•111 AJO R I  LEA OEN  •  Congre55  • of ite Oniteb ;/14;-_-•tateg  iatiQ of 1;epre5rntatibes Office of tbe glaforitp licaber VElasi)ington, D.C. 20515  WES =CONGRESSIONAL LIAISON Aj k  March 31, 1980 The President The White House Washington, D. C.  ?(  APR 2 1980  002383c-c_.,  Dear Mr. President: At the risk of sounding like a broken record, I want to call upon whatever influence I may have to plead the urgency of your making a personal intercession to persuade Federal Reserve Chairman Paul Volcker and his colleagues of the impelling need to start interest rates immediately on a downward path. This does not mean I think he should abandon credit restraints. By all means, we must discourage the growth of debt. But high interest rates do not do that, as we have discovered to our great pain. High interest rates merely make it harder to get out of debt. Meanwhile, the misbegotten and simplistic policy of relying on high interest rates over the past year has caused total debt and the inflation rate to skyrocket. It has added approximately $5 billion of totally unproductive dead weight in extra interest charges to the federal budget. High interest has been inflationary, not deflationary. In addition, it has begun to create the first signs of what could become a serious recession. It is axiomatic that high interest rates never stop inflation, except perhaps as an aftermath of plunging the economy into a recession. What disturbs me greatly is the perception that some among your economic advisors actually want to create a recession on the theory that this is the way to halt inflation. They are wrong, Mr. President. That is a bankrupt and a defeatist philosophy. I have the impression that some are actually disappointed that our economy has repeatedly resisted the recessions they've been predicting for more than a year. The reason I am so desperately anxious for you to prevail upon the Fed to use other credit restrictions -- shorter term and higher down payments -- and thus to begin easing interest rates, is that high interest is just about to create a rash of business failures throughout the nation. Even your most recent budget projection pessimistically assumes the inevitablity of a 7.2 percent unemployment rate in the coming year. We can do better than that, Mr. President. We must do better than that. The agonizing work which Senate Majority Leader Byrd and I set in motion just about a month ago, and which has culminated thus far in a House Budget Resolution with a $2 billion surplus, will be set at naught if you allow high interest rates to plunge us into a depression. When unemployment rises by one percentage   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  p .  le President  •  -2-  0  March 31, 1980  point, it automatically adds about $21 billion to the deficit. That would vitiate all our labors. Unemployed people do not pay taxes but consume them through unemployment compensation and other walfare costs. Mr. President, my colleagues from throughout the country tell me essentially the same story that I discover when I talk with people from my own area. Because of high interest rates, home building is on the rocks. Ninety percent of the American people cannot afford to buy a home with these outrageous financirigs charges. Some homebuilders already have gone out of business, and others are on 4 the verge. The same is true of automobile dealers throughout the nation, real estate operators, and small business people in general. Even some small banks and thrift institutions are in serious trouble because of the high interest rates. Unless interest rates come down, and soon, we can expect a rash of failures among small businesses of all types! Of course, we must reduce debt. It has grown astronomically, has fed inflation, and must be abated. From $750 billion in 1960, total debt grew to about $1.3 trillion in 1970, and has soared to about $4.5 trillion in 1980. For every dollar of federal government debt, there are about six dollars of private debt. At the White House on March 13, I promised you that Congress would balance the budget for fiscal 1981. To the extent that it is within my power to do so, I intend to fulfill that pledge. By getting the federal government out of the money market, we shall set an example. But all of that effect can be utterly destroyed by continuing to rely on high interest rates to reduce private debt. Please explain to the Fed that it has the powers to control debt far better by shortening terms of loans and requiring more realistic down payments. The American business community and the American consumers can accommodate to shorter terms of repayment. In the long run, that will be a favor to them. It will make it harder to get into debt, but easier to get out of debt. High interest rates, on the other hand, suffocate them beneath an intolerable burden of debt and make it virtually impossible for small business to keep its head above water and for consumers to survive. Much, very much in our society, is psychological. A balanced budget will have a powerful psychological impact. That impact for good can be doubled, even trebled, if it can be accompanied by a tangible demonstration that interest rates are beginning, at last, to come down! Try it, Mr. President, and you'll see the beneficial results reflected very quickly both on Wall Street and on Main Street of every small city of America, including Weatherford, Texas and Plains, Georgia. I am really very deeply concerned about all this. I think the need is extremely urgent. Most of my colleagues feel the same way. I would be derelict if I did not communicate these thoughts to you, in the most forceful way possible.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely, \  Jim Wright  April 14, 1980  The honorable William Proxmire Chairman Committee on Banking, itousiug and Urban Affairs United States Senate 20510 Washinvton, D.C. Dear Chairman Proxmire. I went to follow up on your 4oint letter with Senator Sarbenee and our conversation concerning your Committee's interest in keeping inforuwd of developnents under the Special Credit Resitraint Program. Specifically, I have asked the staff here to provide your staff witZI copies of all of the letters, reporting forms, and other materials that have been developed by the Federal Reserve in connection with tbe rrogrem. And, we ftre fully prepared to provide you with periodic reports regarding the performance of the Program relative to both its quantitative and qualitative objectives. Chaim:an Reuss has soft a similar request and I am enclosing for your information ny latter to him. You will note that my letter suggests that it might be desirable for my staff to meet with the staffs of both the Senate and House Banking Committees in order to work out a suitable arrangement for making data and information available to your Committees. I would hope that could be done sometime later this week. appreciate your interest in the Special Credit Restraint Program and we will certainly keep you informed. Sincerely.  Enclosure EGC:WW1pjt (WV-105) 1>cc_ Mrs. mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assirmerl to Mr. Axilroi WILLIAM PROXMIRE, WIS., CHAIRMAN HARRISON -4. WILLIAMS, JR.. N.J. ALAN CRANSTON. C-AL1F. ADLA1 E. STEVENSON, ILL. RO9ERT MORGAN, N C. DONALD W. RIEGLE, JR , MICH.  JAKE GARR, UTAH • JOHN TOWER, TFJC. JOHN HEINZ. PA. WILLIAM L. ARMSTRONG, COLO. NANCY LANDON KASSTRI.UM. KANS.  Dc.L.  RICHARD G. LUGAR, IND.  PAUL S. SARBANES, MD. W. STENART, ALA.  -111  •  rZenifeb Ziafez Zenate Ii  PAUL. E. TSONGAS, MASS. KENNETH A. MC LEAN, STAFF DIRECTOR M. DANNY WALL, MINORITY STAFF DIRECTOR MARY FRANCES DS LA PAW.. CHIEF CLERK   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS  WASHINGTON. D.C. 20510  March 24, 1980  The Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Washington, D.C. 20551 Dear Mr. Chairman: At the Banking Committee hearing on Tuesday, Mhrch 18, 1980, several members expressed interest in making sure that the Voluntary Special Credit Restraint Program is hmplemented in a fair, yet forceful manner. As long as the credit restraint under the Credit Control Act as it applies to consumers is mandatory, special care must be taken to assure the public that voluntary credit restraint as it applies to other sectors of the economy is being closely monitored and equitably distributed. As several members of the Committee indicated during the hearin S, there is concern that the Federal Reserve's request for the maintenance of reasonable availability of funds, on appropriate terms and conditions, to small businesses, farmers and others without access to other forms of financing will be overlooked by the banking system. Therefore, we would like to be kept closely informed of compliance with the Voluntary Special Credit Restraint Program and would like also to be kept appraised of those institutions that are unwilling to participate or that knowingly fail to comply with the program.  (  poi* Art$0  We would appreciate your keeping the Committee fully informed of developments under the Voluntary Special Credit Restraint Program, including any modifications thereto. Copies of any letters or report forms sent by the Federal Reserve to the institutions covered by the program should  6 4 A  •  1044.41..   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul A. Volcker March 24, 1980 Page Two  also be forwarded to the Committee. In addition, following the receipt of those periodic reports we would appreciate receiving from the Board summaries of the information cons' tamed in the reports. With regard to those institutions that will be required to file periodic reports under the program, we would like the Federal Reserve Board to request from each an indication of its willingness to comply with, the program and a statement of the changes in decision making, internal arrangements, and operational guidelines that are or will be implemented in order to meet the guidelines established by the program. We would like to thank you in advance for your cooperation in this important matter.  WW0t k;:cm t•Aw  Paul S. Sarbanes United States Senator. rat . . 0  WP/PS:srl  1 ' • :""•" .e. *  •  ..40i • -1. • 4 ,•  •  •••••  v  •  ••  •  ". •  qdlf •  ; .0  •  •  r-s ,  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Avrii 14, 1!n  71ft  14morable Paul SirN5n  1.ubcommittoe 021 'Select n'Tucetion Cmmittee on wcation and LAbor 011Be of Representatives inhinton, DX. 20515 ClAirmen Simon: Thank you for your letter of March 31 rer,Iarelir the campus of Southern Illinois University as * site for tralninc rrogram for beak eaaminers. The selection of a site is beinq handled by the ?leers]. rinanclal Institutions 7Imemlastion Council, thereL'ore, I hove referred your letter to oft* Robert J. Lawrence, E7mcutive Secretary of the Cecil, for consideration. am sure you vilt be bearing fro. Mr. Lawrence in the neAt future, sincerely,  cc: Mr. Robert J. Lawrence lexecutive Secretary Vederal Financial Institutions Exanination Council CO:jrr (V-143) beet Mrs. Mallarai (2)  MAJORITY MEMBERS: PAUL SIMON, ILL.. CHAIRMAN JOHN BRADEMAS. IND. EDWArto P. BEARD, R.I. GEORGE MILLER. CALIF. Au;USTUs E. HAWKINS. CALIF. MARIO BIAGGI, N.Y. EDWARD J.  STACK,  O  •  CONGRESS OF THE UNITED STATES  FLA.  CARL D. PERKINS, KY., EX OFFICIO  (202) 225-5954   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ction assigned John Denkler  HOUSE OF REPRESENTATIVES COMMITTEE ON EDUCATION AND LABOR  MINORITY MEMBERS: N  KRAMER, COLO.  THOMAS E. COLEMAN. MO. ARLEN ERDAHL, MINN. JOHN M. ASHBROOK. OHIO, EX OFFICIO  . ,suircomhfil:yE JUDITH WAGNeR ALLEN CISSELL THOMAS BIRCH SYLVIA CORBIN  SUBCOMMITTEE ON SELECT EDUCATION ROOM 320, CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C.  20515  March 31, 1980  zwP  Mr. Paul A. Volcker, Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. 20551 Washington, D.C. Dear Mr. Chairman: I understand that the Federal Financial Council is seeking a location for a training program for bank examiners. I further understand that one of the sites under consideration for this program is the campus of Southern Illinois University at Edwardsville, Illinois. I would urge you to give SIU-E every consideration. SIU-E is centrally located; it is close to a major transportation center; cultural and recreational facilities are superb; the University has an outstanding library, excellent computer facilities, and a very good business school faculty which could be used as an adjunct training faculty for the bank examiner program. In addition, I am positive that the Chancellor of the S.I.U. system, Dr. Kenneth A. Shaw, would be willing to work with the Federal Financial Council to meet any special needs of the program, including housing for the participants. I appreciate your attention to this matter and look forward to working with you in bringing this p •gram to Southern Illinois University at Edwardsvill My best wishes, dially,  Paul Simon Chairman PS/acd  STAFF  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • BOARD OF GOVERNORS orTF4E  FEDERAL RESERVE SYSTEM w•  •  •  r \j±  r  •  WASHINGTON. 0. C  20551  •  PAUL A. VOLCKER  • 1:'1?A L RE  CHAIRMAN  April 15, 1980  The Honorable Bill Nichols House of Representatives Washington, D.C. 20515 Dear Mr. Nichols: Thank you for your letter of March 28, in which you convey some of the concerns that banking institutions in your Congressional district have regarding regulations in general and some of the Board's regulations in particular. Let me assure you that I share your views about the need to cut down on regulations and unnecessary paperwork, and can sympathize with the problem that bankers have in keeping up with all the regulatory material that crosses their desks. In fact, in 1978 the Board initiated a regulation review process to reexamine all Federal Reserve regulations, which includes analyzing their costs and benefits and redrafting in simple language, and work continues in this area. Your letter mentions the Board's Regulation E, which implements the Electronic Fund Transfer Act, and refers to banks' liability for cashing checks to persons who are deceased. We are aware of the rules regarding a financial institution's obligation to return to the U.S. Treasury social security benefits transmitted for crediting to the account of a person who is deceased and therefore no longer entitled to the benefits. These rules, however, are imposed by the Treasury Department and are not within the scope of the Board's Regulation E. Consequently, we are not in a position to grant any relief. With regard to Regulation B, implementing the Equal Credit Opportunity Act, you ask that the Board consider modifying the adverse action requirement. That provision requires creditors to send a written notice to credit applicants who have been rejected, giving the bank's reasons for the denial. The adverse action requirement is one that is imposed by the statute. It is intended to serve two purposes. First, if a rejection is based on misinformation, providing the adverse action notice makes it possible for the applicant to correct the error and perhaps qualify for the credit requested. Second, the notice serves an educational purpose by apprising credit applicants about the credit standards on which credit decisions are based. In some cases, the notice provides information that will   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •  The Honorable Bill Nichols Page 2  enable a consumer to reapply when the .circumstances that led to the rejection have changed. An applicant who is rejected because of insufficient income, for example, could reapply when his or her income increases. I might also mention that the Board has sought to facilitate compliance with this requirement by issuing a model statement that creditors may use. That model statement, if properly completed, will satisfy the notice requirements of the Act and regulation. Finally, you express concern about the burden imposed on the banking industry as a result of the imposition of additional restraints on insider lending under Regulation 0. The prohibitions on insider lending that have been incorporated in the regulation were specifically mandated by Congress in the Financial Institutions Regulatory and Interest Rate Control Act of 1978. In implementing the statute, it was the Board's desire to minimize any unnecessary restrictions on insider lending while still being consistent with the requirements of the law. We are monitoring the effects of the law and if it appears that changes may be appropriate, the Board will consider what recommendations should be made to the Congress. The Board appreciates having your views. Sincerely,  ,  el'.',/?a-‹  -f° / 1/  / /1 1  p* / ,'./(  , ^ / 101,  '• j -74 1 // '(•'/  (f  12/i/ ,  / • •  I I  /  '  /  BILL NICHOLS 3RD DISTRICT, ALAI/LAMA 2417 F7AYBURN BUILMNG WASWNGTON, D C. 20515 PHONE (202) 225-3261  •  Congre55 of tbe Ziniteb ftateg  LEE LOWNDES MACON RANDOLPH RUSSELL TALLADEGA TALLA POO SA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COM M ITTEE ON AR MED SERVICES  DISTRICT OFFICES  Cotp4-Tic s• AUTAUGA C-ALHOUN CHAMBERS CI—A CLEBURNE COOS A ELMORE  Action assigned to Janet  jiptick  of irproStntatitie5  Ulatijington, Ile. 20515 March 28, 1980  FEDERAL BUILDING ANNISTON, ALABAMA Pv4orsi : 236-5655 FEDERAL BUILDING OPELIKA, ALABAMA PHONE: 745-6222 115 EAST NORTH SIDE TUSKFGEE, ALARAMA PHONE: 727-6490  Honorable Paul Volcker Chaiman, Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D. C. 20551 Dear Mr. Chairman: During the early part of this week, I was pleased to visit with a number of my bankers from Alabama whom we fondly refer to as "small country bankers" since their institutions are generally located in towns in my Congressional District with less than 50,000 population. Because I know of your interest in the fiscal problems of our banking institutions across the country, I would like to pass along to your attention several of the concerns whidh are troubling my bankers. First and foremost, my bankers tell me that they are the most regulateI business in the entire country and that, because of these Federal regulations -- in addition to restrictions written into the law by the Congress -- the chief officials of these banks, who were formerly involved in making loans and discussing financial needs of the average banking customer, are now relegated to desk work to be certain they are in compliance with the mountain of regulations imposed upon their institutions. They refer to Regulation E, which deals with the liability of banks for cashing checks made out to people who may be deceased. My bankers feel that the requirements here are entirely too restrictive and they would like some consideration given towards relieving them from such liability under certain conditions. M_th reference to Regulation B, which I understand care into being as a result of passage of the Equal Credit Opportunity Act and which requires banks to write a letter to each customer who has been turned down for a loan as to the rationale for his being turned down, my bankers tell me that the cost of the additional paperwork involved contributes to some degree to today's high interest rates. I would respectfully hope that soge thought might be given to moderating this directive. Finally, my bankers tell me that Regulation 0, which they feel cage into being as a result of the Bert Lance matter, represents an overreaction on the part of our Federal Government and that figures presented tS them during their visit here in WashingLon bear out the fact that there is a relatively small number of banks who are guilty of violations imposed unI- r this regulation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • Page 2 Honorable Charles L. Schultze March 28, 1980  In short, Mr. Chairman, I am convinced that the bankers in general, and our small bankers in particular, are not out to defraud the public and that a large percentage of the regulations under which our small banks are required to operate and which were designed to help their customers, are actively hurting the very people they were intended to be assisting. I am passing these reflections along to you in hopes that, as your staff deliberates on these and like matters from time to time these suggestions may be of same help to you in • suing your ta airman of the Board of Governors of the Federal serve System.  Bill BN/j  ch. , M. C.  April 7, 1480  The uonorable Jacob K. javit4.4 Wiite4 i...tates Senate 20510 tiashington, D.C. 'ioar jack: I am pleased to encloae responses to the questions you sent as a follow u.i; to the 4icarinqa on March 20 on the President's new economic proposals, Plesie 1st au know if I can be of further assistance.  Laclosoru HP:CO;pjt OfV-112) bcc: Nike Prell (w/enclosure) mrs. Mallard], (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action as signed Mr. Axil rod LLOYD BF:NTSEN, TEX.. CHAIRMAN WILLIAM PROXMIRE, WIS. ABRAHAM RIBICOFF. CONN.  HENRY S. REUSS, WIS. WILLIAM S. MOORHEAD, PA. LEE M. HAMILTON, IND.  EDWARD M. KENNEDY. MASS. GEORGE MC GOVERN, S. OAK. PAUL S. SARBANES. MD. JACOB K. JAVITS, N.Y. WILLIAM V. ROTH. JR., DEL. JAMES A. MC.CLURE. IOAAO  GILLIS W. LONG. LA. PARREN J. MITCHELL. MD. CLARENCE J. BROWN, OHIO MARGARET M. HECKLER, MASS. JOHN H. ROUSSELOT, CALIF.  Congr55 of tbe anittb *taws JOINT ECONOMIC COMMITTEE  ROGER W. JLPSEN, IOWA JOHN M. ALBERTINE. EXECUTIVE DIRECTOR   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  RICHARD DOLLING. MO., VICE CHAIRMAN  •  CHALMERS P. WYLIE, OHIO  (CREATED PURSUANT TO SEC. CIO Or PUBLIC LAW )01. 11TH CONGRESS)  WASHINGTON. D.C. 20510  March 26, 1980  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551  Ilmg•••••••1 I On....  Dear Mr. Chairman: Senator Jacob K. Javits has requested that the enclosed questions be sent to you. They, along with your answers, will be included in the record of the Joint Economic Committee hearing on the President's new economic proposals, which was held on March 20. We would appreciate your reply as soon as possible in order to insert the answers in the final transcript.  z  bums.  Thank you for your attention to this matter. Sincerely, 1  k. !,z_VieJc,"  John M. Albertine Executive Director JA:ccl Enclosure I. • •  • • Ir• • •  fv•  —  ••••• • C40.•  r.  Additional written questions posed by Senator Javits to Chairman Volcker for hearing day of March 20, 1980 1.  Why has the President's anti-inflation program not  focused on the supply side of the economy?  The President has  vit  indicated that we must first have a balanced budget before he would consider any further tax cuts.  Would you interpret that  to mean that the President is only committed to balancing the budget for one year?  What would be the elements of a fiscal  policy that would permit the Federal Reserve Board to begin to bring interest rates down? 2.  What are your views on establishing a two-tier prime  rate that would differentiate between large and small business? Is it not a fact that the small business community is the sector of the economy that will be the most hit by the coming credit crunch?  NEMIROW,-  What remedies would you propose to alleviate  the effects of the credit restraint proc;ram on small business? 3.  What do you expect the impact of the President's anti-  inflation program will be on the value of the dollar in the foreign exchange markets?  Do you believe that we are in the  midst of an international interest rate war?  Is there a  trade-off between domestic and international factors in determining U.S. monetary policy?  If a credit tightening should  develop worldwide, what effect would this have on the oil importing developing countries and their ability to service their present debt burdens and to incur new debt?   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rep:wRIE.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 7, 1980  The Honorable Richard G. Lugar United States Senate Washington, D. C. 20510 Dear Senator Lunar I want to express my appreciation for your constructive role in the aeveloment of O. R. 49P6, the 'Depository Institutions Derequlation and Monetary Control Act of 1980. I' am particularly grateful for the valuable assistance you provided at an early stale in supporting my pro7osa1 for a supplemental reserve. I am confi(2ent tbat the new Act will substantially improve our financial system and will enhance the capacity of the Fe0era1 Reserve to carry out its p‘onetery policies. With warlo regards, sincerely,  DJW:rvcd bcc: Mrs. Mallardi (2) Identical letter to Sen. Stevenson   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 7, 1980  Dear Henry: I want to express my personal connratulations and thanks for your successful efforts resulting in the enactment of H.R. 4936, the "Uepository Institutions eregulation and Nonetary Control Act of 1980." Your leadership and constructive efforts were essential in developine and bringing about the passage of this landnark legislation. I an confident that the leeislation 011 soustantially Improve our financial system and enhance the capacity of the Federal Reserve to carry out monetary policy effectively in the future. With warm regards, Sincerely,  The Honorable Henry S. Reuss Chairman Conmittee on Banking, Finance and Urban Affairs House of Representatives Washington, ).C. 20515 JPB:WW:PAV:pas Identical letter sent to: Senators Proxmire and Cranston and Congressmen Reuss, Stanton, St Germain, Barnard and Wylie  April 7, 1980  mr. Kenneth A. McLean Staff Director Committee on Banking, ousing and Urban Affairs United States Senate 20510 wasnington, D.C, Dear Ken. I want to express my personal appreciation for the work you did on the Depository Institutions Deregulation and monetary Control Act of 1980. The legislation substantially improves the nation's financial system and our capacity to carry out monetary policy. You rightfully deserve to be comended for your contriLutiona and involvement in the passage of this historic legislation. Sincerely,  Identical ltrs. sent to: Paul Nelson, Nessrs, Mar*inaccio, Sivon, Wilson, Verdier, Auerbach, Secrest, nob Weintraub, Mike Flaherty, Mr. Collins.  DJW:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ikpril 7, 1980  The Honorable bigilliarn Prc,xrnire Chairnan Cor'lmittee on Barciting, !iotisinp, and Urban Affairs United States Senate \'‘,ashington, D.C. 20510 i)ear Chairman Proxmire: Thanic you for the coi-cnents in yc..3ur I,tter csf rm tiioar:!'s actions in Invoking consumer crejit restraints un-ler t rr1t 'ontrol Act. I know, the ik.lard has moved with extre..4e reltictance fr r-,is Inatv.r in the hopf.7 the restraints will prove effective arid that it will :.)e - possibV to remove them as soon as possible. You express concern about recent reports that the ,3oard is consicierhg additional steps in connection with consitier credit control that could substantially injure consumers. In particular, you mention reports tat the Board might preempt state statutes setting usury ceilings on interest rates charged consumers, or permit creditors without notice to change the repayment terms on existing consumer credit balances. As Governor Teeters testified on Wednesday, March 26, before the House Subcommittee on Consumer Affairs of the Committee on Banking, Finance aryl Urban Affairs, there have been seriously misleading reports in the press of some exchanges that took place at a meeting the previous week between herself, several Roard staff members, and representatives of the creditor community. The !k)..trri does not have and never has had, any intention f preempting state usury ceilings. ,')Ith respect to creditors' changing account terrsis, however, it is important to note that neither the Truth h Lending Act, nor Regulation 2, currently control whether changes made after ,adequate notice may be applied to existlag acce,int 5alances. The discussion that took place involved the possihility of preempting the lenithy notice requirements in several states Sefore creditors could make adverse changes in the terms of open.en1 (revolving) credit accounts, including reoayment terms. board trtembers have also been concerned out the lack of protection for consumers in the more than thirty states where creditors can apparently change terms on outstanding balances, if the contract so provides. The purpqse of the consumer credit restraint program, of course, is to restrain increases in credit balances. =embers of t'le iAoaire, are very conscious of the hardship that changes In terns applying to existing balances could create for many   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  WI  • IIIit re%  •  Purfre..-%•%A.d  The Honorable Alaiaseirtgeos Page Two  consumers, especially lower-income consuroers. There are operational problems however which make it impossible for most creditors, within any reasonable period of tine, to implement the apparently most equita,Dle solution which would be to divide accounts into two portions with the old terms applying to outstanding balances and new terms to new balances. The Board has adopted a solution which I believe is similar to the recommendation suggested in your letter—namely, of providing that payments may be increased in outstanding balances only if the borrower uses the account for additional extensions of credit after receiving reasonable advance notice of the change in terms. I am enclosing a copy of this amendment to the credit restraint regulations. Summary reports on increases in consumer credit extended by several types of covered creditors will oe submitted to the Board by the Reserve Banks, the Horne Loan Banks, and the National Credit Union Administration as part of the administration of the program. Ne shall be pleased to provide your Committee with these summary data, which will show the effectiveness of the restraint program in slowing the expansion of covered consumer credit. Once again, I appreciate your comments on the Board's actions to date. You may be certain that the Board will continue to be sensitive to the problems of consumers, and of all other sectors of the public, in this difficult period. Sincerely,  Enclosure  J1-1:313B:pjt:sep (#V-108) bcc: Ms. Hart Mrs. Mallardi (2)  Identical letter also sent to Chrmn. Tsongas  ft  Action assirrned Janet Hart .  •  WILLIAM PROXMIRE. WIS., CHAIRMAN  HARI SON A. WILLIAMS, JR., N.J.  JAKE GARN, UTAH  ALAN CR AN ?TON, C.AL11 F.  JOHN TOWER. TEX.  ADLAI E. STEVENSON, ILL-  JOHN HEINZ, PA.  ROBIC Fk  r  MORGAN. NI C.  III  411  WILLIAM L. ARMSTFt040. COLO.  DONALD W. RIEGLE, JR., MICH.  NANCY LANDCN KASSEI- AUM. KANS.  PAUL S. SARELANES. MD.  RICHARD G. LUGAR, IND.  DONALD W. STEYVART, ALA.  / a/ Cniteb  Zfcttez Zenate  PAUL E. TSONGAS, MASS.  COMMITTEE ON BANKING. HOUSING. AND URBAN ArF AIRS  KENNETH A. MC LEAN. STAFF DIRECTOR NI. DANNY WALL, MINORITY STAFF DIRECTOR MARY FRANCES DE LA PAVA, CHIEF CLERK  WASHINGTON. D.C. 20510  March 24, 1980 (1 hi  The Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Washington, D.C. 205S1 Dear Mr. Chairman: We wish to commend the Federal Reserve Board for the evenhandedness which it has displayed, to date, invoking the consumer credit restraints under the Credit Control Act.  We are deeply concerned, however, about recent reports indicating the possibility of additional consumer credit control initiatives by the Board which may result in substantial injury to consumers. We arc informed that the Board's staff is presently giving serious consideration to the demands of creditors seeking preemption of various state consumer protection statutes which prohibit creditors from imposing adverse changes in the terms of open-end agreements unless appropriate notice of the change has been provided the borrower substantially in advance of the change. A number of these statutes also prohibit any adverse changes upon existing balances, regardless of tho notice procedure. It is our understanding that a great many creditors could be expected to utilize any such preemption to unilaterally raise the minimum monthly payment due on existing open-end balances. It appears that Truth-In-Lending notice requirements do not IS any particular problem in this context.  4 011  Mak  ft,  While changes in the terms of prospective extensions of openend credit may be justifiable, under the present circumstances, we can see no justification in permitting creditors to take advantage of the current situation by unilaterally demanding higher monthly payments on outstanding balances. For a great many American families, increases in the minimum monthly payment demanded by creditors for existing credit card balances would impose a tremendous strain upon budgets already severely weakened by spiraling inflation. The debt that is already outstanding on those accounts was incurred in the expectation that   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  •  ..•••••••••••  e  Lit  •  • 2 •  the consumer would have a specific number of months to repay it. Many families who relied on these provisions would he placed in financial difficulty if the rules were suddenly changed in the middle of the game. We believe such a change would be both arbitrary and unfair. If the purpose of the present credit controls is to curtail future extensions of open-end credit, then a far more responsible and equit able approach by the Board would be to specifically prohibit creditors from demanding increased minimum monthly payments on existing open-end accounts while permitting shortened notice requirements for adverse changes of terms to be imposed upon prospective open-end extensions of credi t. The practice by some creditors of requiring increased monthly payme nts on outstanding balances only in the event that the borrower utili zes their open-end account for additional extensions of credit after notification of the change in terms, permits the borrower to determine whether they will become subject to the new requirements. If the borrower doesn't wish to pay an increased minimum monthly charge, they may refrain from requesting any additional credit on that account. Many creditors have included language in their open-end agreements which, if permitted by state law and the courts, would allow a creditor to increase the minimum monthly payment of the consumer's outstandin g balance. There is a substantial legal question (dating back to W. T. Grants unsuccessful attempt to invoke such a provision in 1974) whether creditors may impose such adverse changes upon existing balances. Undoubtedly, we could expect a considerable number of creditors to unilaterally impose increased minimum monthly payments on existing balan ces under the banner of the Board's credit control eFforts. If it should appear that the Board permits or encourages creditors to demand increased minimum monthly payments on outstanding credit card balances, this would assuredly cause deepseated public resentment of such an inequitable measure. Shortly after the Board's announcement of the consumer credit controls, a representative of a major national retailer was quoted in the press as indicating that this Corporation would request the Board to preempt state usury ceilings in order to permit creditors to charge whatever they wish on consumer lending. Apparently, a number of other creditors have joined this firm in pursuit of a usury preemption for consumer credit. We understand that the Board may be considering preemption of state interest rate usury ceilings. We would suggest that any move in this direction would be a serious mistake by the Board.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •"7.  •  ...rtai'••4  ".  O  -3  •  If anything, lifting consumer usury ceilings would increase the availability of open-end credit by creditors who will choose to increase their lines of open-end credit to take advantage of the higher rates, despite the Board's deposit requirements.  t-TA;4  wit,S Any such usury preemption would inevitably have an impact upon existing open-end balances. We believe that the establishment of downpayment requirements and increases in the minimum amount necessary to utilize a credit card would better serve the public interest. Of course, as you indicated in your recent testimony before the Committee, any such preemption would require the approval of Congress.  L._  We also wish to request that the Board keep the Committee informed, on a quarterly basis, of the results of the Board's consumer credit controls.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  kstr'•,,•  Best wishes.  -.' aul E. Tsongaf, Cha,4Anan Consumer Affa - s Su mmittee . / / m / r. / ,/---/  // • willi /  rexmir  rman  Committee on Banking, Housing and Urban Affairs  01.  r.•  ••  4^i;.44114*"4"4414.-  April 7, 1980  Ar. John E. Quinn Assistant Couasel Subcommittee on Consumer Affairs Committee on Banking, BOUSillic and Urban Affairs United States Senate ilashington. D.C. 20510 :Jear Mr, Quinn. want to exrrosa my personal appreciation for the wIrk you die on the Depository Institutions Deregulation and Monetary Control Act of 1180. I Know that you played a large role with respect to the Truth in Lending Simplification title. You rightfully deserve to e commanded for your contri:Jutions and involvevent in the passace of this historic letlislation. Sil!ctrelyi S/Paul A. Volchec  Iklentical ltr. to !Is. Pleth Clino (w/Senate Banking) DJW:pit bccl Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 7, 1560  Mr. Robert reinberg Minority Counsel Committee on BanYing. Finance and Urban Affairs House of Representatives 20515 Kashington, D.C. Dear !•:r. Feinberg; I want to express my personal appreciation for the work you di4 on the Depository Institutions Deregulation and Nonetary control Act of 1960. The legislation substantially strengthens our financial system and improves equitable competitive conditions among institutions. You rightfully deserve to be commended for your contributions and involvement in the peonage of this historic legislation. Sincerely.  Letters also sent to Messrs. wall and nrooks (Senate Banking). DWW:pjt bcc4 Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  EXECUTIVE COMMITTEE CO-CHAIRS Margaret M. Heckler Elizabeth Holtzman TREASURER Mary Rose Oakar  41  Action assigned Joe Coyne CAUCUS MEMBERS SENATE Nancy Kassebaum  Congresswomen's Caucus  Nancy Kassebaum Shirley Chisholm Barbara Mikulski Olympia Snowe ERA TASK FORCE Gladys Noon Spellman LEGISLATIVE PROGRAM TASK FORCE Path, la Schroeder OUTREACH TASK FORCE Mrs. Hale (Lindy) Boggs Ann Charnley Smith Executive Director  Q.:ongrefo3 of the Ilniteo *Mutts 2471 113.auburn House of igepresentatiurs 1:1.(1. 211515  (2)2) 225-8790   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  k, i5  HOUSE Lindy (Mrs. Hale) Boggs Marilyn Lloyd Bouquard Beverly Byron Shirley Chisholm Cardiss Collins Millicent Fenwick Geraldine Ferraro Margaret M. Heckler Marjorie S. Holt' Elizabeth HoltzmaW' Barbara Mokulski Mary Rose Oakar Patricia Schroeder Virginia Smith Olympia Snowe Gladys Noon Spellman  April 8, 1980  The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th and Constitution Avenues, N.W. Washington, D.C. 20551 Dear Mr. Chairman: The Congresswomen's Caucus, a bipartisan group of all the women in the U.S. Senate and House of Representatives, would very much appreciate meeting with you to discuss the impact of tightened credit policies on women. In previous meetings with Treasury Secretary Miller and with OMB Director McIntyre, we have discussed the effects of double-digit inflation and federal budgetcutting on women, who generally earn less and have greater need for financial access. Caucus members are eager to hear your views on this important issue and on other subjects of mutual concern. Ann Smith, Executive Director of the Caucus, will contact your office in the next several days to set up a mutually convenient time and date. We look forward to meeting with you. Sincerely,  Elizabeth Holtzman  Ma  t M. Heckler  Co-Chairs Congresswomen's Caucus  (1  •  FR-7 Date  Control No.  BOARD  OF  GOVERNORS  OF THE  FEDERAL  / 5  RESERVE SYSTEM  MAIL CONGRESSIONAL HANDLING PRIORITY ti TO: 6)-5-e, Please review prom tl the attached correspondence from-Renator/Congress and let me have your suggestions in rough d aft. Akatikm., In order to meet the Chairman's requirement for a response within five (5) working days, it will be necessary for me to have your reply by -V - / 7 The final letter will be signed by: \.) sArSk%.". Chairman 41441er Governor 411.8.A0cawmtiter.; Mr. Brenneman, or Mr. Winn Please indicate below the name and extension of the person who drafts the reply. When reviews are required within your Division, please complete these before forwarding the draft reply to me. Reply drafted by:  Ext.  If there are any problems or questions please give me a call; otherwise, please return this form directly to me with the draft reply and any attachments that are appropriate. Many thanks.  Carol O'Brien Room B-2125A  Ext. 2735 dixAstin  %.1{440Now..4466 t*".4  7  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  \1114°L4*-44%  0014104 1  •  EXECUTIVE COMMITTEE CO-CHAIRS Margaret M. Heckler Elizabeth Holtzman  •  •  TREASURER Mary Rose Oakar  Congresswomen's Caucus  Nancy Kassebaum Shirley Chisholm Barbara Mikulski Olympia Snowe ERA TASK FORCE Gladys Noon Spellman LEGISLATIVE PROGRAM TASK FORCE Patriria Schroeder OUTREACH TASK FORCE Mrs. Hale (Lindy) Boggs Ann Charnley Smith Executive Director  (ungregti uf the Iiniteo 247 1 igauburn House of igepreocutatiues illooliington. D.C. 211515  Tel 1202) 225-8790   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tate)3  CAUCUS MEMBERS SENATE Nancy Kassebaum HOUSE Lindy (Mrs. Hale) Boggs Marilyn Lloyd Bouquard Beverly Byron Shirley Chisholm Cardiss Collins Millicent Fenwick Geraldine Ferraro Margaret M. Heckler Marjorie S. HoltElizabeth Holtzmer Barbara Mikulski Mary Rose Oakar Patricia Schroeder Virginia Smith Olympia Snowe Gladys Noon Spellman  April 8, 1980  The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th and Constitution Avenues, N.W. Washington, D.C. 20551 Dear Mr. Chairman: The Congresswomen's Caucus, a bipartisan group of all the women in the U.S. Senate and House of Representatives, would very much appreciate meeting with you to discuss the impact of tightened credit policies on women. In previous meetings with Treasury Secretary Miller and with OMB Director McIntyre, we have discussed the effects of double-digit inflation and federal budgetcutting on women, who generally earn less and have greater need for financial access. Caucus members are eager to hear your views on this important issue and on other subjects of mutual concern. Ann Smith, Executive Director of the Caucus, will contact your office in the next several days to set up a mutually convenient time and date. We look forward to meeting with you. Sincerely,  if  Elizabeth Holtzman  Ma  Co-Chairs Congresswomen's Caucus  4/  Ic:n0  4-ibe  '4*,wiriiA2r  Chairman Sabeenimittto inststiler AttairL; Clammittee on aankinq, Finance 4011 1,3roz Affairs MOM, ad aopsesontativea 20SIS lakathiagteat Sear Chairman Amammitio; Thank you for your Lotter of ,7,0cil 1 invitim: to testify at yeas: hearings ea it.R. MC the Csah 17.iscount Act. I MB plaased to Inform you that Covernor ..ancy  Tittiete2rs  will appear on behalf of the Aoard oa April 23 at 10 Ot, a.m.  Sincerely,  'J/Faul CO:pjt OV-131) bca4   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Gowo, Teeters (Id/incoming) Janet Hart Kra. Nellardi (2)  FRANK'ANNUNZIO, ILL.. CHAIRMAN GLADYS NOON SPELLMAN. MD. BRUCE F. VENT°, MINN. WALTER E. FAUNTROY. D.C. PARREN J. MITCHELL. MD.  •  •  THOMAS B. EVANS, JR., DEL. CHALMERS P. WYLIE. OHIO DON RITTER, PA.  U.S. HOUSE OF REPRESENTATIVES  CURTIS A. PRINS. STAFF DIRECTOR  NINETY-SIXTH CONGRESS  TELEPHONE: 2254181  SUBCOMMITTEE ON CONSUMER AFFAIRS OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS ROOM 212 HOUSE OFFICE BUILDING ANNEX  WASHINGTON, D.C. 20515  April 1, 1980  CO  Honorable Paul A. Volcker Chairman Federal Reserve Board 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: The House Banking, Finance and Urban Affairs Subcommittee on Consumer Affairs plans to hold hearings on A j23, 1980; on H.R. 6928, the Cash Discount Act. I have enclosed a copy o FrreTislation. I wish to invit_/pu_to_appear. before the Subcommittee on Wednesday, April 23 at 10:40_a,m. The hearings will be held in Room 2220.'(bur pr'e'sentation should be limited to ten minutes; however, your written statement for the record may be of any length. The Subcommittee requires a minimum of 50 copies of the prepared statement no later than Monday, April 21. The statements should be delivered to the Subcommittee office, Room 212, 300 New Jersey Avenue, S.E. If you have any questions, please contact Curtis Prins, Staff Director of the Subcommittee on Consumer Affairs at 225-9181. With every best wish, Sincerely,  Frank Annunzio Chairman Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S  2n sEss.,,, H.R.6928 • s:44 -1,m-  To amend the Truth in Lending Act. to encourage cash discounts. L. . ....44•51,4rptilko  IN THE 110USE OF REPRESENTATIVES MARcit 26, 1980 Mr. ANNITNzi() (for himself and Mr. WYLIE) introduced the following bill; which was referred to the (!ommittee on Banking, Finance and ITrhan Affairs milinnummumipaugulipp.-.•  A BILL To amend the Truth in Lending Act to encourage cash discounts. 1  Be it enacted by the Senate and House of Representa-  2 tives of the United States of America in Congress assembled,  4  •--olt 114, 0S Sikiiifitk  • °7"..."714 .. "7"Plif•it - to,.;•  r-  4X . 'rnAte tiai  3 That this Act may be cited as the "Cash Discount Act". 4  SEc. 2. Section 167(b) of the Truth in Lending Act (15  5 U.S.C. 16(i6f(b)) is amended to read as follows: 1 • •••  •  6  "(b) With respect to any sales transaction, any discount  .r  - t  ,• .1  . • se. "•  .•.__  7 offered by the seller for the purpose of inducing payment by 8 cash, check, or other means not involving the use of a credit  t ,  •• • •  t  446 'ii. •1110:4110  ..014040,.  9 card shall not constitute a finance charge as determined 10 under section 106.".   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,  .ae  •••• ..o • ,  ir  IP   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  • 'NAL RES • • •..• •'  PAUL A. vOLCKEP CHAIRMAN  April 9, 1980  The Honorable Jim Wright Majority Leader House of Representatives 20515 Washington, D.C. Dear Mr. Wright: I appreciate your letter of March 20 and your concerns regarding Federal Reserve policy. I, and I am sure other members of the Board, are aware of the hardships that rising interest rates have imposed on many households and businesses across the country. It is our hope that rates will come down in the months ahead. Indeed, we have designed our policies in the way that we feel offers the only real basis for achieving a sustained lowering of interest rates, not just for a few weeks or months, but over time. As you know, the nation is faced with an extremely serious inflation problem, one demanding urgent and concerted action on the part of public policy. Monetary policy has a crucial role to play in this effort, for it is quite clear that inflation can continue only if it is sustained by excessive growth of the money supply. The Federal Reserve is attempting to achieve the moderation of monetary expansion necessary to rein in inflation. It is by no means our purpose deliberately to raise interest rates; rather, this is an inevitable and unavoidable byproduct of monetary restraint in an environment of credit demands intensified by pervasive expectations of rising prices and nominal incomes. As inflation is controlled and inflationary expectations diminish, there should be a tendency for interest rates to decline. Indeed, over time, I know no other way to achieve that result. You have raised a rather difficult question with regard to possible means of rationing consumer credit. The fact is we are not smart or wise enough to make millions of decisions about who is entitled to credit and who is not. To each individual, or farmer, or businessman, his need seems urgent--or at least as valid as the next fellow's. What we do know is that the total demanded, including a huge chunk from  •410   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Jim Wright Page Two  the Federal government, exceeds the amount available. Savings are close to historic lows Consumers and businesses alike, with prices rising, tend to want to buy now and pay later. If they save, we tax the earnings; if they borrow, we give a deduction. In this situation, you may overlook some advantages of price as a rationing mechanism in terms of minimizing the disruptive shortages, inefficiencies, and antagonisms that other "more direct" rationing devices can create. To be sure, higher financing costs can cause substantial hardships for those who are necessitous borrowers, but arbitrary limits on credit use also can cause even greater difficulties when a distant bureaucrat, with the best will in the world, is forced to say "yes" or "no". I believe that the Congress rightly recognized the problems of non-price rationing when it overrode certain usury ceilings. We have not, as you know, sought broad relief from those ceilings in the consumer area, partly for the reasons you suggest, but I think we all must recognize the result ois that lenders increasingly do, under these circumstances, more or less arbitrarily say "no". In any event, I think that the clear trend of recent developments is away from the sort of situation that you describe in which consumer lenders aggressively seek new customers and encourage greater borrowing. I appreciate your taking the time to communicate your thoughts on these matters of great importance. There are very evident differences in our viewpoints on a number of issues, but I hope continued discussion will help to close the gaps and enhance mutual understanding. In that connection, I suspect we can find common ground in the need to reduce Federal competition for available credit-that is one area where neither we, nor anyone else, can say "no", but it leaves less for others. I would be the first to agree that too much of the burden in fighting inflation is left to monetary policy, credit restraint, and ultimately interest rates. I wish it were otherwise. But I do not see how we can meet our responsibilities by creating so Much money we simply inflame the inflationary process. Sincerely,  perjr. . bc,.c.  (Ast v,/,0,2)  -  JIM WRIGHT TEXAS MAJORITY LEADER  Congre55 of tbe Ziniteb *tateg ii)0115C  Office of  of Ilurrstntatibcg  tbe Najoritp Reaber  i  Wasliington,DX. 20315 .)  March 20, 1980 •-i  Hon. Paul A. Volcker, Chairman Federal Reserve Board Constitution Ave. and 20th St., N.W. Washington, D.C. Dear Mr. Chairman: Spread here on the desk before me is Paar, One of today's Washington Post. Just below the fold is a story graphically describing how a young American couple, through no fault of its own, has just fallen over the edge of our easy-credit world into the abyss of personal economic disaster. And on the same page, not six inches away, is another story drIc escribing how the Federal Reserve Board is planning, coldly and methodically, to push other American families over the same precipice. This is economic madness. How long is it going to take the Fed to see that its discredited policy of imposing ever higher rates of interest on American consumers is not working? How long before someone in the Fed is going to realize that inflation cannot be cured by deliberately pushing people further into debt through such steps or allowing lenders unilaterally to raise interest rates on consumer loans? How long before it will occur to the Fed that the only rational way to fiaht inflation is by making it harder for people to get into debt and easier for them to get out? We are given the glib explanation that if we continue the high interest rate policy long enough, it will eventually work by forcing massive loan defaults by consumers. Great Scott! In such a never-never world of twisted logic, you presumably can indeed push interest rates to a level that literally price money out of the market. But such a course would guarantee a serious recession. If that is really the Fed's best solution, heaven help this country. The inexorable march toward even higher interest rates has fed the fires of inflation rather than moderating them. Consumers, given access to easier and easier credit, use it at a heavier and heavier penalty. It is almost like painting a stove red to make it attractive to young children, while building a hotter and hotter fire inside to make sure that they burn themselves when they touch it.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •••••  •  There Is almost no evidence that high interest rates have diminished the money supply significantly. There has been much chortling over the slight moderation of consumer credit expansion in December and January. But if this trend is significant, why is it necessary to consider setting aside state usury laws and taking such appalling steps as permitting unilateral adjustment in credit terms by suspending the Truth in Lending laws to restrict credit? These restrictions are far less fair and far less effective than would be the rationing of consumer credit by more direct means. This program affects a limited area and dollar amounts would not appear to be significant. Also, it cuts across agreements and contracts after the fact. And worst of all, it puts the prime burden of our economic dilemma directly on the backs of those who can least afford it -- the poor. High interest rates have exacerbated price increases contributing 2% to the increase in C.P.I. from January 1979 through January 1980 by increasing mortgage rates. This money availability at higher and higher rates incorporates all the worst features of a "boom and bust" scenario. The present lack of discipline on the issuance of consumer credit is creating more and more serious problems for consumers. In my opinion, the J. C. Penney Company comes off far more statesmanlike in today's news accounts than does the Federal Reserve Board. J. C. Penney raised the minimum purchase on which it will allow time payment, and took steps to slow the proliferation of credit cards. Both actions are designed to make it more difficult for people to get into debt in the first place. The Fed, on the other hand, zealously seeks to punish those who are already trapped in the morass of credit -- blindly pursuing a discredited policy that has never worked in the past, is not working now, and will never work in the future. Does not simple logic dictate the creation of a workable program to encourage consumers to extricate themselves from serious extension of lines of credit? Surely this makes some degree of sense, in light of the fact that even in the face of the Fed's continual escalation of interest, all manner of devices are still being used to urge consumers to borrow anyway. If consumers are willing to pay these interest rates, there can be no doubt that the Fed's action, however well -intended, is not abating inflation, but accelerating it.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Best wishes. Sincerely,  Jim Wright  BOA.RO OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  PAUL A. VOLCKE CHAIRMAN  April 8, 1980  The Honorable Floyd Fithian House of Representatives Washington, D. C. 20515 Dear Mr. Fithian: .or your recent letter in which you export for cutting government spending to ary pressures and lower interest rates. r sending samples of messages you have builders who expressed their desire to euced and inflation brought under con-  ill  While I understand that the rise in interest rates associated with the current policy of monetary restraint, in .conjunction with the on-going high rate of inflation, has had particularly undesirable effects on your constituents associated with the homebuilding industry, the policy now being pursued by the Federal Reserve is absolutely essential to any anti-inflationary effort. Unfortunately, such a policy, carried out in the face of credit demands conditioned by rapid inflation and intense inflationary expectations, brings with it considerable upward pressure on interest rates in the near term. Only when it becomes clear that inflation will moderate will those pressures abate and interest rates show a sustained decline. The Federal Reserve, however, has not been insensitive to the relative harshness of monetary stringency on the housing sector. The Board's recently announced program of credit restraint was designed in part to reduce the disruption of normal flows of funds into the residential mortgage market. Nevertheless, this is only a partial solution to the problem and, as you recognize, Federal Reserve policy must be augmented by responsible fiscal policy. In particular, budget cuts of sufficient magnitude to eliminate the current deficit are needed. Such cuts would curb inflationary forces and allow interest rates to fall by reducing the pressure placed on credit markets by the federal government's borrowing requirements.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ft   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Floyd Fithian  -2-  I look forward to working with you and your colleagues in the Congress to find solutions to our nation's serious economic problems. Sincerely,  WASHINGTON OFFICE,  assigned Mr. Kichline  129 CANNON HOUSE  Dr STRICT OFFICES! 513 MAIN STREET  OFFICE BUILDING WASVIINGTON, D.C.  LArAYETTE, INDIANA  20515  47901  (317) 742-0211  (202) 225-5777  Congre5 of tbe Unita! aptatess  COMMITTEES;  518 SOUTH  AGRICULTURE FOREIGN AFFAIRS GOVERNMENT OPERATIONS  BuFFALO  STREET  WARSAW, INDIANA  46580  (219) 269-1813  jbou5e of 11epraSentatibt5  POST OFFICE Box 539 CHESTERTON, INDIANA  46304  U.Imsbington,13.e. 20515 TOLL FREE ACTION LINE  -OFFICE ON WHEELS"'  (800) 382-7517  TRAVELING REGULARLY THROUGH THE DIST MET  FLOYD J. FITHIAN 2ND DISTRICT. INDIANA  March 27, 1980 Paul A. Volcker, Chairman Federal Reserve Board Constitution and 20th St., N.W. Washington, D.C. 20551 --1  Dear Chairman Volcker: High interest rates are putting hundreds of Indiana home builders out of work. I am writing to indicate my firm support for government fiscal policies which will allow interest rau. tes to return to reasonable levels. At a recent White House meeting which I attended, you said, "The quicker and deeper the cuts in the federal budget "Sr the quicker interest rates can come down." at's what it will take to briterest rates all for it, even if some worte programs I t cut in the process. You ha assurance one Member of Congress, wille no effort he 1981 budget into balance. I'm continuing in favor of a constitutionaldment to e budget--a measure that coulvent us from ugh the hardship of high interates in ome.  I  The people I represent feel strongly about the need to bring interest rates down and inflation under control. Indiana builders have graphically demonstrated their concern, and I want to share the evidence of their concern with you. I am enclosing samples of the messages I've received from Indiana builders in the past few days, for your consideration. Yours for a balanced budget, Sincerely,  ITHIAN F OY Member of Congress FF/em Enclosure  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 9, 1910  'tale Honorable Lloya aentsen Umited States !,lenate Woeitift9ton. D.C.  20510  esr;'.3enator ilentsem Moak you for your lettec of arch 24. askincl Board support for the kllicort Trading Cempeny Act (5. 2379), which would permit bank ownership of export tradinq companies. In a statement submittal as April 3 to the Subcommittee on ukternationei riamos of the Senate isnItinq Committee: GeWernor  wallich stated the Seerdes view that the United states seeds a strong export seeter, and noted Nome of tLt measures taken by te rederal Aereerve in the pest year to increase the long-term capebilitiee at Edge Conlecetions to provide international banking surviees. The statement sets forth the comeerms that would *rise if a beak engaged in nonfinascitl activities. agree with the general position in Governor wellictos statement, a copy at whieh is enclosed. In such matters I find myself a little uneasy about going tee far too fast. I believe that emotion and yeadrathee are required in eonsidering enlarging the mope of balk activities, especially under currenft circumstances. Sincerely/  4nclosure  (Cow. Wallich's statemert dtd. 4/3/80.)  RTG;JIPB:pjt (W-121) bcc: Mr. Gemmill Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned Bob Gemmill LLOYD BENTSEN  COM M rITIEZII:  TEXAS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FINANCE ENVIRONMENT AND PUBLIC WORKS JOINT ECONOMIC  'ZICrti1e6 Zfatez Zertafe WASHINGTON. D.C. 20310  March 26, 1980  The Honorable Paul A. Volcker Chairman, Federal Reserve Board 20th f; Constitution Avenue, N.W. Room B-2046 Washington, D.C. 20551 Dear MT. Volcker: I am writing to urge you and members of the Federal Reserve Board to give careful and sympathetic consideration to S. 2379, the Export Trading Company Act. The purpose of this legislation is to facilitate the formation of U.S. trading companies in order to encourage American exports, make them more competitive in world markets, and help reduce our chronic trade deficit. Over the years we have seen the trading company concept emerge as a primary ingredient in the commercial success of nations such as Japan. I am convinced that U.S. exporters would benefit significantly from services that can only be provided by efficient trading companies with access to the technical expertise and financial resources of our banking community. While in East Asia earlier this year with the Joint Economic Committee, we held nine days of hearings with American business to determine what can be done to increase our competitiveness in the rapidly-expanding markets of that region. Legislation to permit more effective and efficient U.S. trading companies was high on their list of priorities, and S. 2379 is responsive to that concern. S. 2379 would allow reasonable bank involvement in export trading companies, but was carefully drafted to include safeguards against abuse and insure that we do not undermine the traditional separation of banking from domestic commerce in this country. The Export Trading Company Act, for example, specifically limits bank exposure to non-banking risks. Except for an investment Edge Corporation (which accepts no deposits), banking organizations are prohibited from investing more than 10 percent of their capital and surplus in one or more export trading companies. In addition, again with the exception of an investment Edge, no banking organization can invest more than five percent of its capital and surplus or acquire a controlling interest in an export trading company without its bank supervisor being accorded the opportunity to disapprove the investment. Finally, any banking organization with an investment in a trading company is required to deal with that company and its customers on an "arms-length" basis. This restriction is intended to preclude unsound banking practices and prevent competitive advantages.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul A. Volcker Page 2 March 26, 1980  I think that you will agree that these limitations, when combined with the banking agencies' broad regulatory, supervisory, and examination powers and existing legal restrictions on loans to affiliates will effectively prevent excessive bank involvement in domestic commerce if S. 2379 is enacted into law. I believe that current prohibitions against bank ownership constitute a significant impediment to the formation of effective U.S. trading companies, deny important advantages to our exporters, and place this country at a unilateral disadvantage in the competition for world markets. If we are to succeed as a nation in the highly competitive and increasingly important world of trade, we must be prepared to adapt to a changing international environment. Most major trading companies operating in international trade have close and productive working relationships with banking facilities. The ability to provide financing for exports on competitive terms is perhaps the most important element in realizing export opportunities. Bank involvement could help U.S. trading companies meet the crucial test of financing. Foreign branches and affiliates of U.S. banks have developed considerable knowledge of business conditions and export opportunities abroad. They can provide management expertise and help export trading companies develop international markets. The U.S. banking system reaches all segments of our economy, including small and medium-sized business. Under the provisions of S. 2379 U.S. banks could provide an important link between domestic businesses and export trading companies. At a time when United States markets have become the target of an integrated, well-financed, and highly successful trade offensive on the part of our competitors and we have suffered a trade deficit in excess of $60 billion over the past two years, I strongly believe that we must move quickly to remove disincentives to American exports. Enactment of the Export Trading Company Act, which would permit bank involvement in trading companies under specified conditions and controls, would be a welcome and long overdue step in the right direction.  a.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul A. Volcker Page 2 March 26, 1980  I would be appreciative if you could review the provisions of S. 2379. I hope you will agree this legislation meets the legitimate requirements of the Federal Reserve Board and will strengthen America's ability to compete in world markets. Thank you for your consideration of this request.  April 94 IM)  U000rable JohnJ, LaFalce Chairman Yiubccommittee on General nvarei0A and Minority Enterprise ,';onmittell, an Small 04,SiDOS4 rt:ALAIO of Representatives .*ashincitoni D.C. 20515 timer Cimirman talPalca. Than% you for your letter of April 3 invitino the roard to testify before your :ubcommittee on the iltpact of inflation on the st,all business comunity. ar pleammod to intocn you that Vice Chairmen Vrederick R. c'..-tAalta will drper on bohalf of the Losrd on April 17 at 9;00 Sincerely*  C004171t (#V-134) bee. Goy. *Schultz Don k:ohn Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • JONI J. LAFALCE, N.Y.  TIM LEE CARTER. KY. LYLE WILLIAMS. OHIO DOUGLAS K. BEREUTER, NEBR.  CHAIRMAN .11 NIES C. CORMAN, CALIF. ".,JOSEPH P. ADDABRO, N.Y. PARREN J. MITCHELL, MD. HENRY B. GONZALEZ, TEX. FREDERICK W. RICHMOND. N.Y.  8_,States Pomo of iri.irrtsrittn4.itice (foitintittce 5inui11 .3itsinros c$Itlitantntittcr s on Ortirral Chicreislit :tub Tnirrprise  GEORGE NEIDICH SUBCOM M I TTEE COUNSEL  202-Z2S-9321 DOUGLAS L. FRANCISCO MINORITY  pRorrssiowu.  STAFF MEMBER  20Z-Z2.5-4541  2361 puuburn Xouse CDffirt Pasiiirtstrat, p.c. 20515  April 3, 1980  Paul A. Volcker Chairman Federal Reserve Board 20th and C st., N.W. Washington, D.C. 20551 Dear Mr. Volcker: This Subcommittee is presently engaged in a study of the impact of inflation on the small business community. Inflation, which represents our Nation's principal problem, affects large and small business alike. However, by.virtue of their size, small business may face additional hardships. Recent increases in the interest rate and the Administration's new anti-infiation policy have exacerbated the problems for small business. As an agency whose policies impact small business, you are in a position to provide us with your perception of the types of problems confronting small business because of inflation, or Administration efforts to combat inflation. Accordingly, you are invited to testify before the Subcommittee at 9:00 a.m., April 17, 1980 in Room 2359A Rayburn House Office Building, Washington, D.C. Your testimony should specifically address (1) the agency's jurisdiction or involvement relating to small business and/or inflation; (2) the agency's perception of, or approach to, the problems of inflation as they may relate to the small business community; (3) studies, efforts, and actions being undertaken to deal with these problems; (4) specific instances relating to.the impact of inflation on small business; and (5) specific concerns regarding the Administration's anti-inflation policies, or, lack thereof. For the purposes of this hearing, you may submit a statement of any length you deem desirable to adequately cover the subject. Please be prepared to summarize your statement in less than 15 minutes on the day of the hearing. The Subcommittee requests tnat you make available to it 75 copies of the statement no later than the close of business on April 15, along with the names and titles of any persons who may accompany you.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • fat  If you have any questions regarding your appearance before the Subcommittee, please contact Subcommittee Counsel, Robert Brickman, at 225-9321. On behalf of the Subcommittee, I wish to express my appreciation for your cooperation and look forward to receiving your testimony.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  •••  JOHN J. LaFALCE CHAIRMAN  •  z  • BOARD OF GOVERNORS  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  . A L Ri . • •. •  PAUL A. vOLCKER CHAIRMAN  April 9, 1980  The Honorable Charles A Vanik House of Representatives Washington, D.C. 20515 Dear Mr. Vanik: Thank you for your recent letter regarding Federal Reserve policy. I share your sense of deep concern about the effect of the rise in interest rates on homebuilding and construction trades. At the same time, I--joined by the vast majority of economists--believe a policy of monetary restraint, such as is being pursued by the Federal Reserve, is absolutely essential to any successful anti-inflationary effort. Unfortunately, such a policy, carried out in the face of credit demands conditioned by rapid inflation and intense inflationary expectations, brings with it considerable upward pressures on interest rates in the near term. Only when it becomes clear that inflation will moderate will those pressures abate and interest rates show a sustained decline. But I know of no way interest rates can be brought lower, and kept lower, without successfully dealing with inflation. As you know, homebuilding tends to be highly sensitive to changes in interest rates. This is partly a result of the nature of the house itself as a long-lived investment, but it also reflects the nature of financial markets. Thrift institutions, owing to the imbalance in the maturity structure of their .assets and liabilities, tend to encounter liquidity and earnings pressure as interest rates rise. Various innovations, in many instances the result of federal regulatory action, for a time helped to reduce the impact of high interest rates on thrift institutions and the housing industry. But as inflation gathered strength, those defenses were overcome. The Federal Reserve has been sensitive to the relative harshness of monetary stringency on the housing sector. The Board's recently announced program of credit restraint was designed in part to try to maintain a flow of funds into the residential mortgage market. But you are quite correct in suggesting that a broadly based approach to solving our inflation problem is needed,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4.1 , 111.1 ,  • NO  The Honorable Charles A. Vanik Page Two  and would ease the burden on housing and other sectors that are especially sensitive to credit market conditions. I believe that the other parts of the government's anti-inflation program-including the focus on budgetary discipline and on improving productivity--can be important steps in that direction. Budgetary restraint, by reducing Federal competition for funds, should work to directly alleviate the tensions in financial markets. I look forward to working with you and your colleagues in the Congress to achieve that discipline, and to find solutions to our nation's serious economic problems. The real enemy to the homebuilder and the new homebuyer is inflation. The quicker we deal with it, the better off we will be. Sincerely,  PA V: ,S iocc. 1)14. piA„).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  #v-ia,)) c),)  Action assi;ned Mr. Kichline  ri  CHARLES A. VAN I K T WENTY•SECOND DISTRICT. OMIO  •  •  2108 RAYBURN BUILDING WASHINGTON, D.C. 20515 (202) 225-6331  U.S. COURT HOUSE PUBLIC SQUARE CLEVELAND, OHIO 44114 (216) 522-4253  Congre55 of the Einiteb cptatoS  COMM ITTEE ON WAYS AND MEANS CHAIRMAN, SUBCOMMITTEE ON TRADE SUBCOMMITTEE ON HEALTH  Polak of lepreikntatibeE4 filassbington,  -  SUITE 222 S031 MAYFIELD ROAD LYNDHURST. OHIO 44124 (215)522-4252  QC.  March 26, 1980  JOINT TAX COMMITTEE  Honorable Paul Volcker Chairman, Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D.C. 20551 Dear Mr. Chairman: Today, the home builders came to Capitol Hill along with representatives of the construction trades to submit the plight of their industry. The message delivered by this group on prospects for 1980 through 1981 was thoroughly discouraging. Almost one-half of the builders will go out of business - successful and efficient building teams will be dismembered, construction workers will be laid off while suppliers will shut down operations. The entire home building system will be dismembered. Once the industry has been collapsed, start-up costs will mean higher prices to the consumer. Soaring interest rates arc the problem. Credit is a commodity and it is beyond me how inflation can be controlled while interest rate levels. are unrestrained. High interest rate levels have drawn in foreign deposits which arc never to be relied upon for very long. In my judgment, the seriousness of the inflationary problem has been by the crisis of impending recession. One and one-half million unempkyed construction workers and building material suppliers added to one and one-half million unemployed auto workers and component part producers adds up to three million additional unemployed workers by Labor Day--a tragic phenomenon no one wants to face.  II  It can be avoided. The Administration and the Federal Reserve system can find a way to administratively roll back interest rates to a tolerable level. If such a way cannot be found, legislative steps of much more severity may be undertaken by the Congress. Time is short! -ely harles A. Vanik Member of Congress  CAV:det   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Artril 9. 1980  The Nomorehle Xd Jones kiouse of Representatives weshington f D.C. 20615 J011403. Thank you for your letter expressing concern ei,oet the iRpeot of high interest rates on small businesses an ?be heavy tJurden that hint. interest rates impose on such borrowurs iaso is of major concorn to the Pederal Reserve. The current level of interest rates is primarily a result of the van" rapid pace of inflation ita our occmoey and expectations on the part of the pot44ic that prices will contiaue to rise. In such an environment, banks and other tenders are milling to extend credit only if Cloy will be compensated for the loss in purchasing power of the dollars they will receive in repayment. It is essential that inflation and inflationary expectations be reduced if we hope to bring &bout a significant reduction in interest rates. ?be 1e6eral Reserve is firmly committed to controlling inflationary pressuges and to echieve this end has teken a rawer of eters to restrain the growth of money and credit. In the it term. such policies may have resulted in further upwtrd pressures on interest rates. The increasinq cost of borrowod funds creetos particular problemz for korrowerso who rely petrarily on lending institution* for finenciml. rbtt Special credit Restraint Prosmaft, recently atutounced tlle Federal Reserve in conjuration with the AdainistratiomOs broad anti-inflation Packs", seeks to avoid uneesseesarily disruptive effects that geeeral credit restraint may have, on particular sectors of the ecoAmuy. M part ef this spegram, the Board set forth guideline* to discourage the extemaies of credit for speculative or nonproductive purposes sad t seeeurego leading irlatitutions to meet the besia needs et established customers—particularly *miller Walsall/0es, farmers. and ethealwith limited 4Ccz.N,Is to financino. when appropriate sad possilaeopLani.40 are urged to aijutt interest rata* sad other terms of lendinfi to accommodate the urgollt re-01.1r1,1 LIvuts ei these atiketermrtt. over tbo lon9er Ten, however, all   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  iionorabl* Page Two  Jones  tgerrowers can but be served by policies designed to remove inflationary biases and to crest's stable esenemic environment in which businesses end farmers can thrive and expatit. you for giving me the benefit et your views.  Sincerely.  §t&iii A. Vokkg  1)4.,714'-.c00:pjt (#v-117) iUchline   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Koix  mallardi (2)  • •• • ••c)of GOveW .•  BOARD OF GOVERNORS 42. •  )0444.44.6.04z \. • Fe)  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  •.Oep RESE,C'••• • • • •..• • •  PAUL A. VOLCKER CHAIRMAN  April 9, 1980  The Honorable Stephen L. Neal House of Representatives Washington, D. C. 20515 Dear Steve: This letter responds to your recommendation last month that the Federal Reserve quickly reinstitute procedures "like those adopted in 1966 and 1969" authorizing use of its discount window for emergency lending to thrift institutions and nonmember commercial banks that are facing serious liquidity problems. I appreciate your concern, and can assure you that the Board has taken steps to ensure its readiness in that respect should conditions warrant. After your letter was written, Congress, as you know, enacted the Depository Institutions Deregulation and Monetary Control Act of 1980. Among other things, this law authorizes the Federal Reserve to lend to thrift institutions and nonmember banks that hold transactions accounts or nonpersonal time accounts, without having to resort to the emergency lending provisions of the Federal Reserve Act to which your letter refers. The Board expects to regularize procedures for implementing all features of this new broadened access by July 1. The Board announced on March 31, however, that we are prepared to provide assistance immediately to eligible institutions that are facing unusual funding needs. A copy of the press release is enclosed. For institutions and businesses that are not covered by the new legislation and might encounter severe near-term liquidity problems, the emergency lending provisions of the Federal Reserve Act to which your letter refers, are, as before, ready for use if needed. Sincerely,  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assianed to Mr. Axilel •  Congre5g of the laiiteb  r-  ji1 oti5Se of 1kepre5entatibei4 STEVE N EA L 5m DISTRICT, NORTH CAROLINA  March 10, 1980  I.  The Honorable Paul A. Volcker Chairman Federal Reserve Board Constitution Avenue and 20th Street Washington, D. C. 20551 Dear Mr. Chairman: As you know, many thrift institutions and many banks that are not members of the Federal Reserve are experiencing severe liquidity problems. Because of the recent sharp rise in interest rates and because of the inadequate return on their portfolios, these institutions are caught in an extremely difficult squeeze. I am particularly worried about the stability and survival of our savings and loan institutions and small er banks, which are of enormous economic and social importance in my part of the country for their suppo rt of housing and other needs of our people. In view of the emergency conditions developing in these institutions, I suggest that it is time for the Federal Reserve Board to provide emergency credit to any thrift institution or non-member bank with liquidity reserve problems. In 1966 and in 1969, the Federal Reserve Board , pursuant to Section 19(e) of the Federal Reserve Act and 201.5 of Regulation A, permitted Reserve Banks to use as securities for advances, assets acquired from mutual savings banks and other non-Federal Reserve depository institutions. The Board also authorized Reser ve Banks to discount for such institutions paper defin ed as eligible in the Federal Reserve Act.  WASHINGTON OFFICE' 331 CANNON HOUSE OFFICE sUILDING WASHINGTON. D.C. 20515 PHONE:(202) 215-2071   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  HOME OFT10Et 421 FEDERAL E3u Lott+a WINSTON-SALEM, NORTH CAROLINA  DISTRICT MOBILE OFFICE: TRAVELS THE DISTRICT To SERVE You  27101  PHONE:(919) 761-312_5  _  -  1 441111/4: 144110.11111   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Paul A. Volcker March 10, 1980  Page 2  Considering the terrible conditions under which savings and loan institutions must operate today, it seems appropriate to me, at this time, to again implement the program that was put in place to assist non-member depository institutions in 1966 and 1969. I would welcome your views on this suggestion. Respect  lly,  a'4  —  /f  PHEN L. EAL U. S. Congressman SLN:jb  • lk  4.  •  #6...::11/46700:3:Dtt.  xpril 1, 19P0  The Fonorsble Jarry N. Patterson House of Representatives washincton, r. C. 20!1, Deer kr. Patterson, / Atv, remrendino to your request for comment on ti-e enclosed letter received fror: your constituent, Mr. Pobort L. Colin. mr. Colin uubriitted threw n;erios R seviaqs bonds to the Crocker Kational ink on December 6, 1979. Crocker ”ational forwards./ these Series M eavinqs bonds to the Federal Reserve )4rseth in Los hnomlee fcr reMenrtion. Ns of ,Mareh 4, 1900, neither mr. colin nor CroO:ar ';ptional )1441 recelVe4 any word from V..,e Colin's series r se=virwl, Federal Reserve an to the status t)0. bonds. this ttor and deterrAnee, that tlqa account of the Union ink Federal Reserve !,rancts croJited of Los Anmeles inatedid of the account of the Crocker Rational Osnk. This error has beer rectified, anti a Treasury check for MOO has beew tzlililed to the Crocker National Bank for Mr. Colin. We IMVentiote0  we rermet this error that has caused your constitttent weeks of delay. Tf I pay be of further assistance, r1Pnre let me know. 5incerely yours, (Signed) Donald J. win& rmr.ald J. inn SpeciAl :assistant to the Aoard MelOMUre  FY:WW:vcd (4V-103) bcc: Mr. 'dace ns. Young Mrs. Ma11ardit7 Mr. Dunn (Los Anf7e1es)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS SVOCOMMITTEFS:  •  JERRY M,PATTERSON 38TH DISTRICT OF CALIFORNIA  HOUSING FINANCIAL INSTITUTIONS INTERNATIONAL TRADE  Congre55 of die Uniteb gptatt5  HOME OFFICE: VERLYN N. JENSEN DISTRICT REPRESENTATIVE DANIEL H. YOUNG ADMINISTRATIVE ASSISTANT FEDERAL OFFICE BUILDING 34 Civic CENTER PLAZA.  COMMITTEE ON INTERIOR AND INSULAR AFFAIRS SUSCOM M ITT E s•  j0ou5e of Iktpre5entatibefi Znacsbington, 33.C. 20315  NATIONAL PARKS  SANTA ANA, CALIFORNIA  TELEPHONE: (714) 835-3811 WASHINGTON OFFICE: GREGORY W. SANDERS ADMINISTRATIVE ASSISTANT  WATER AND POWER RESOURCES  HOUSE OF REPRESENTATIVES  PLEASE REPLY TO:  WAst-tip4Grom. D C.  Li WASHINGTON OFFICE  20515  TIL1I.P1-10N[i (202) 225-2945  [J HOME OFFICE  March 17, 1930  Mr. Paul A. Volcker Vice Chairman Federal Open Market Committee Twentieth Street and Constitution, NW Washington, DC 20551 Dear Mr. Volcker: I have received the attached correspondence from  constituent of nine.  I would appreciate it if you would review the leLter and let me know what, if anything, can be done to resolve the concerns raised in the letter. Thank you for your attention to this matter. (Cordia ly, 1 RRY mber JMP/kf Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  921 92.701  Action assiomed Bill Wallace  PAIIILRSON f Congress  r‘i -C11 T ..  9-=-N  -y  !-)  (Iv ) —f  -9 9  -\'‘  t, (Ty  4'  • _c plt  C) 7t  S.  -17  -141 / -?!  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L^  Ltio  0 C  hLe_- v 7 /it  1,4  eel  ittLL  ft  ILO  eil  ( 7 / ^sco cfrxt-  5  c- 74 1 al_  '( 7 4-  Adtt r7c  /7  el.:C  itL)or  PC-4 C_1  cc--•  _s (cit. 1--  CA  ci P0tI.JE  Yoc7  ( "c'tc  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ttt t_.=•A,/  e  (L (. .) C  A 41 --/-,  ;  IlL  (L.  .3 c Ci. u- c  CA  .1 6.  •  Cc) / Lc_ ft  e-f 41261 Oivatt_c_ )  It  -  92.  4.2  t.1_, I4  3 I  g  D  cIc  Susi- 4-  L Cs-  fi, 54.,. f r  11  a vt.c  lt(.1 - d(  (1 ii\S wL'""  &*-(6 -- -1 56.c-  st.,. C.  Z aid cies ik.,47c £_c CcLefe...-rd  4-1  C_ L6 c  c  C  4c6-(c? s  ci  Robert L. Colin  4//6-C,(im.6-fL  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 3, 193(  ?be Memorable Senjapin S, 14)senthel Chairman 4ubcommittee ea Commareas Conatmer aId Mometery Affairs Committee On Goviarm-scat Operations mouse of Representatives ^ashin9ton, D.C. 20S1S Dear Chairman Rose/Abell Thank you for your letter of February 2e% 1980, enpreasin your views as the peopeeed Annual Report of !Foreign Sank UolQing Companims. Foreivn Sankey sad Voreiqn Parent Companies (Form Y.R. Y-7). As you Immo the board issuod the proposed report for cot.nent by iatereste4 parties on October 29. 1979, and the period tor conment recently expired as March 4, 1960. 1110 proposed report was issued by the beard in fulfilling its res4ponsibi1itLos under tr4e ink 1-to1dieg Company Act of 1956 and the International Rankinifj Act of 19744 It is directed to foreign banks that conlauct their U.S. basicity; operations through a bent. branch, agency, or comr.ercial lemdisw company. The proposed report is designed to gather sufficient informatics to assess the foreign organtsatien'a consolidated eperstiems, gemsral financial condition, and ability to serve as a continuing source of strength to its U.S. hankinq operations. Your concern witn respect to obtaining information as the report to determine whether a foretell ovlanizatiem is 4sprincipel1y eogaged La banking' is noted. you indicated, the beard has undertaken a review of its reoulations issued pursueat to aection 4(c)(9) of the Bank Holding Company Act. Thom regulations sat forth the criteria that a fereivn orelanireidee meet meet in order to oualify as a foreign beak holdinq esspopw• While the revisions of these regulatioms have not him' iims&Sase by the Sew& the final revision of the TA. Ti will   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (0 TPInTeti *11.111   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  xper uL ovilmoq sAels, fooci (99-AO ard:IT  '140.1031.1V7 °Vgatt*U00 pore liteso4uT znoA a414T>oadd, on  '4,0v Ault4m00 suoyleynhol 5uTpIon xusu 0141 4o (6)(3)p uonalag 2opun pousin 02149110 01 s*T4IATImit buiVrequou vouerielmo situmea wn bulAusq  ;o wroAst ot44 Iturzaeau-J, uoTvimao;uT Apsininuas uTimoTo  Te44uo4os *s- urostrwro ovmsolion  BENJA,‘IN 5. ROSENTHAL, N.Y.. CHAIRMAN ROBERT T. MATSUI. CALIF. EUGENE V, ATKINSON. PA. FERNAND J. ST GERMAIN. R.I. ..1HN CONYERS. JR.. MICH. tt.UOTT H. LEVITAS, A.  -1-1-(1 Tack r+  •  LYLE WILUAMS, OHIO JIM JEFFRIES, KANS. JOEL DECKARD, IND.  NINETY-SIXTH CONGRESS  Congre of tije Unita .:11)tateii  MAJ0RITY-(202) 225-4407  3bott5e of 11epre5entatibefi COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE  I 66 '  OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515  February 26, 1980  Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: I am writing to express certain concerns and comments about the Federal Reserve's proposed annual reporting requirements for foreign banks and bank holding companies on Form F.R. Y-7. (The proposal in question is Docket No. R-0256.) One important objective which this report should be designed to serve is the objective of providing the financial information necessary to determine whether the foreign consolidated organization is "principally engaged in banking." It is not clear that the proposed reporting requirements will be adequate to meet this objective. The Board has for some time had under study a revision in the definition of "foreign bank holding company." At the time a new definition was proposed for public comment in April 1979, the Board stated that "The proposed rule wOuld amend the definition of 'foreign bank holding company' to include only those foreign organizations principally engaged in banking outside the United States." The Board then went on to state that it would be undesirable for the exemption afforded by section 4(c)(9) of the Bank Holding Company Act "to be extended to a foreign organization that is not principally engaged in banking." Because of the prospective importance of the concept of "principally engaged in banking" to any revised definition of "foreign bank holding company" and to the Federal Reserve's general regulatory responsibilities under the Bank Holding Company Act, it is essential that the proposed new Y-7 annual report provide the necessary financial information for determining whether each foreign organization qualifies as "principally engaged in banking." Since the Board has not yet specified by what specific test or tests it will determine whether a foreign organization meets this requirement, it would seem essential for the Board to include within the Y-7 report requirement sufficient financial information to enable it to determine whether a given foreign organization qualifies as "principally engaged in banking" under any of the alternative possible definitions or tests now under consideration by the Board.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Hon. Paul A. Volcker  2  February 26, 1980  It would be beyond the scope of this comment to state comprehensively what financial information should be required in order to meet the general objective stated above. The present proposal appears to be particularly weak in two respects, however: 1.  The test of materiality for determining whether financial information must be reported for a controlled foreign company appears to permit an exemption for very significant amounts of overseas nonbanking business, under certain circumstances. If a foreign banking or holding company organization has many small affiliates or associated companies, no one of which meets the materiality test individually, then under the present proposal no information would be required about these companies even if in the aggregate their combined incomes or revenues are large relative to the parent firm's income or revenue. In other words, under the present proposal no information would be required about any of these companies even if their aggregate combined size, or the parent's aggregate combined investment in these companies, is clearly material. Consequently, it would appear necessary to provide in the report requirements a maximum limit on the aggregate amounts of income, revenue, invested capital, etc., that can be exempted from the reporting requirement through the operation of the materiality test.  2.  The proposed reporting requirement does not clearly require the reporting of gross operating revenues as part of the income statement for any entity for which financial reports are required, nor does it clearly identify gross operating revenues as one of the financial measures on which the materiality test will be based. Assets, net income, and invested capital all have serious limitations as a statistical basis for comparing the banking and nonbanking portions of a diversified organization to determine compliance with the "principally engaged in banking" requirement. While there are also limitations in the use of gross revenues for this purpose, the limitations in the use of gross revenues are of a different nature than the limitations with the other financial measures. Consequently, pending final determination of how it will determine whether a firm is principally engaged in banking, the Board should retain the option of using gross revenue statistics and should require the inclusion of gross revenues among the income statement information that is reported. The Board should also include gross revenues among the various financial measures that determine whether a company meets the materiality requirement.  I hope these comments will be helpful to the Board in its determination of the final form for the Y-7 annual reporting requirement for foreign banks and bank holding companies.  Benja Chair BSR:tb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S. Rosenthal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Dear Jim: Your letter to Chairman Volcker points out some of the very difficult issues confronting the Administration, the Congress and the Federal Reserve in this troublesome period. I know the present level of interest rates imposes real burdens on both consumers and businesses, and we all hope to see somEI improvement before too long. Over the longer run, the only way we are going to be able to get any lasting and substantial reduction in interest rates is by bringing inflation under control. In this regard, the work you and your colleagues in the House and Senate have been doing to try to balance the 1981 budget is the single most important step that can be taken to bring about lower interest rates. Thanks for sending me a copy of your letter. . 1T will plan to seek an appointment with you soon to review the interest rate situation in more detail. Best wishes. Sincerely, (1- 1611c.c.) C. William '11.11c'r  The Honorable Jim Wright HOUSE, of Representatives Washington, D.C. 20515  JIM WRIGHT  •  •  Thus MAJORITY LEADER  Congres5 at tbe initeb  'tate  *potize of ArprtOtntatibtO Office  of tbe Iflajoritp leaber  attington, s.C. 20515  March 20, 1980  Hon. G. William Miller Secretary Treasury Department 15th and Pennsylvania Ave., N.W. Washington, D.C. 20220 Dear Mr. Secretary: Here is a copy of a letter I sent to Paul Volcker today. If Mr. Volcker and his economic wrecking crew are allowed to persist in their misguided efforts, the Administration can no longer count on my unquestioning, down -the-line support of its other economic initiatives. As a good soldier, I have fought hard to help the Administration balance the budget. But it makes no sense at all for us to be working so assiduously to restore the economy to health on this end of the street, while Mr. Volcker and his associates are methodically dismembering it at the other. Best wishes.  k  \V ,m Wright  Enc.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /1114,erg•tioi"'  e:71ii`n:7d,)  307/  JIM WRIGHT Toms MAJORITY LEADER  Congre55 of OU5t Office  Me Vniteb  'tate  of ileprettnfatibet  of tbe filajoritp Keaber  Elagbingtoo. 0.C. 20515 March 20, 1980 Hon. Paul A. Volcker, Chairman Federal Reserve Board Constitution Ave. and 20th St., N.W. Washington, D.C. Dear Mr. Chairman: Spread here on the desk before me is Page One of today's Washington Post. Just below the fold is a story graphically describing how a young American couple, through no fault of its own, has just fallen over the edge of our easy-credit world into the abyss of personal economic disaster. And on the same page, not six inches away, is another story describing how the Federal Reserve Board is planning, coldly and methodically, to push other American families over the same precipice. This is economic madness. How long is it going to take the Fed to see that its discredited policy of imposing ever higher rates of interest on American consumers is not working? How long before someone in the Fed is going to realize that inflation cannot be cured by deliberately pushing people further into debt through such steps or allowing lenders unilaterally to raise interest rates on consumer loans? How long before it will occur to the Fed that the only rational way to fight inflation is by making it harder for people to get into debt and easier for them to get out? We are given the glib explanation that if we continue the high interest rate policy long enough, it will eventually work by forcing massive loan defaults by consumers. Great Scott! In such a never-never world of twisted logic, you presumably can indeed push interest rates to a level that literally price money out of the market. But such a n, course would guarantee a serious recession. If that is really the Fed's best solutio heaven help this country. The inexorable march toward even higher interest rates has fed the fires of inflation rather than moderating them. Consumers, given access to easier and easier a stove credit, use it at a heavier and heavier penalty. It is almost like painting red to make it attractive to young children, while building a hotter and hotter fire inside to make sure that they burn themselves when they touch it.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - 2 There is almost no evidence that high interest rates have diminished the .money supply significantly. There has been much chortling over the slight moderation of consumer credit expansion in December and January. But if this trend is significant, why is it necessary to consider setting aside state usury laws and taking such appalling steps as permitting unilateral adjustment in credit terms by suspending the Truth in Lending laws to restrict credit? These restrictions are far less fair and far less effective than would be the rationing of consumer credit by more direct means. This program affects a limited area and dollar amounts would not appear to be significant. Also, it cuts across agreements and contracts after the fact. And worst of all, it puts the prime burden of our economic dilemma directly on the backs of those who can least afford it -- the poor. High interest rates have exacerbated price increases contributing 2% to the increase in C.P.I. from January 1979 through January 1980 by increasing mortgage rates. This money availability at higher and higher rates incorporates all the worst features of a "boom and bust" scenario. The present lack of discipline on the issuance of consumer credit is creating more and more serious problems for consumers. In my opinion, the J. C. Penney Company comes off far more statesmanlike in today's news accounts than does the Federal Reserve Board. J. C. Penney raised the minimum purchase on which it will allow time payment, and took steps to slow the proliferation of credit cards. Both actions are designed to make it more difficult for people to get into debt in the first place. The Fed, on the other hand, zealously seeks to punish those who are already trapped in the morass of credit -- blindly pursuing a discredited policy that has never worked in the past, is not working now, and will never work in the future. Does not simple logic dictate the creation of a workable program to encourage consumers to extricate themselves from serious extension of lines of credit? Surely this makes some degree of sense, in light of the fact that even in the face of the Fed's continual escalation of interest, all manner of devices are still being used to urge consumers to borrow anyway. If consumers are willing to pay these interest rates, there can be no doubt that the Fed's action, however well -intended, is not abating inflation, but accelerating it.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Best wishes. Sincerely,  Jim Wright   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  C4/,  APR  4 7980  donorable t.lievieton (71-tiles, nutirroart  Subcctrwttem on Federal SpielAloft Prartices --I Open .04v,rftirent ...o - -mr4;ttee ors Goverm-ntertal Affairs State* 'cenate Tashirmton, rt.f". 711 I A near or. cNairratts etccortissnce 'kith  the R.PqrAternonts  of tFte Government in the  Stirkshine Act, I am pleasegf to submit the t‘otrff's third Annus! **port coverirw., the If plerkertstion of iti atiministrativ." resportsibiliti•s untler the enienliar year 197".  Sirtrereiv,  Waal A. Voi.tiet  nrte:tsime  111ENTICAL LETTERS V-7,14T PAV:evjj  — see Attache-I list  et riurinz,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Richardson Preyer, Chairman Subcommittee on Government Information and individual Rights rornmittee on Government Operations House of Representatives Washington, n.c. 2051 5 The Honorable Thomas P. O'Neill, Jr. Speaker of the House of Representativec washington, fl.C. 203!3 The Honorable Walter F. Mondale President of the United States Senate Washington, n.r.. ?05I0  April 3, 19$0  hosoreole Fernand J. St GIMMOSin Chairmam Sabeemmittee am Financial Institutions Sapervisies, 110yu1dtion an4 Insurance Committee em bankin9, Finance and Urban Affairs nOutia of Nepresentatives bisshinciton. D.C. 20SIS iAter cheirmem at (.4ormain. Thank you for your letter of 'Carel 24 inviting the hoard to testify before your Subcommittee at hearins on proposals to extend end amend the Rome Morton* Disclosure Alcct (10.L. 94-200), which expires on June 2*, 1990. atz plesse to inforin you that Governor emmett J. Rice will appear on behalf of the goard on April 16 at 1010, a.m. Sincerely.  COlpjt (V-116) bcc: Gov. Rice Is. Hart nrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FERNAND J. ST GERMAIN, R.I., CHAIRMAN FRANK ANNUNZIO. ILL. JAM,LS M. I-4ANLEY, N.Y. CARROLL HUBBARD. JR.. KY. JERRY M. PATTERSON. CALIF. THOMAS L. ASHLEY. OHIO NORMAN E. D'AMOURS. N.H. JOHN J. CAVANAUGH, NEBR. JIM MATTOX. TEX. JOSEPH G. MINISH, N.J. WALTER E. FAUNTROY, D.C. DOUG BARNARD. GA.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHALMERS P. WYLIE, OHIO HENRY J. HYDE, ILL.  U.S. HOUSE OF REPRESENTATIVES  GEORGE HANSEN, IDAHO JIM LEACH. IOWA CARROLL A. CAMPBELL. JR., S.C. ED BETHUNE, ARK.  SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-SIXTH CONGRESS  WASHINGTON, D.C. 20515  March 24, 1980  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Chairman: As you know, the Home Mortgage Disclosure Act (P.L. 94-200) expires on June 28, 1980. This Subcommittee will be conducting hearings on proposals to extend the Act after the Easter recess. Various proposals, including S. 2291, have been introduced relating to HMDA and it is anticipated that other bills will be introduced prior to the April hearings. The Administration's proposals for extension of the Act are included in S. 2290. The Subcommittee plans to schedule testimony by your agency on Wednesday, April 16 at 10:00 a.m. in Room 2220 of the Rayburn House Office Building. We would want your testimony to include an analysis of how HMDA has operated and comments on the various proposals to extend and amend the Act. In accordance with Committee rules, you are asked to submit 150 copies of your written testimony 24 hours in advance of your appearance. So that the members may have ample time to question all witnesses please limit your oral testimony to 10 minutes. The entire statement will, of course, be printed in the record and made available to all members prior to the hearing. cincerely,  nand airman FJStG:gLj  St Germain  NNW   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •• .•  GOvi •• •  • DOARD OF GOVERNORS  •0  •0 • Ti •  #  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20551  • PAUL  A. VOLCK ER  CHAIRMAN  March 31, 1980  The Honorable Ron Paul House of Representatives Washington, D. C. 20515 Dear Mr. Paul: You wrote in late February asking for my comments on your bill to repeal the Credit Control Act of 1969. Since then, of course, the President has employed the powers of the Act to authorize the Federal Rese rve to restrain credit in three precisely limited area s -consumer credit and credit advanced by money market funds and nonmember banks. Under present conditions, these particular limi ted measures usefully supplement overall policies of monetary and fiscal restraint that remain at the core of the nation's effort to curb inflation. When the rate of infl ation ebbs, and financial markets come to function in a more normal environment, the need for the Credit Control Act can and should be reexamined -- in light of, among other things, our current experience with the Act. As you know, the grant of powers in the Act is far more sweeping than our limited use was in these exceptional circ umstances. The breadth of the powers troubles me. Sincerely,  dal  Action assigned to Steve Axilrod  .101P  •  RON PAUL 22NO DISTRICT. TEXAS  DTSTRIcT 1110 NASA ROAD 1 SUITE 406 HOUSTON. TEXAS  WASHINGTON OFFICE, Room 1234 LONGWORTH HOUSE  Or F ict  WASHINGTON. D C.  BUILDING  Congtr55 of tbe Ziniteb *tateg  20515  (202) 225-5951  HOUSTON CONGRESSIONAL HOT LINE (713) 237-1550  77058  (713) 333-2566 8709 MARTIN Lu-rmrpe KING BOULEVARD HOUSTON. TEXAS  3i)oti5e of 3atpre5entatibeszi Washington, D.C. 20315  77033  (713) 733-7525 301 SCXJTH 9TH STREET. SUITI Rictimorvo. TEXAS  77469  (713) 342-9628 LUCE JACKSON CONGRESSIONAL HOT LJNE  101 OYSTER CREEK OptivE  (713) 297-0202  LAKE JACKSON, TEXAS 77566 (713)297-3961 (713)393-1895  February 22, 1980  The Honorable Paul Volcker ChaiIman, Federal Reserve Board •Governors of Twentieth Street & Constitution Ave., N.W. Washington, D.C. 20551  Dear Mr. Chairman: I want to thank you for your testimony before the House Banking Committee on February 19, and especially for your statement about the uselessness of the Credit Control Act of 1969. As you may know, I have introduced a bill to repeal the Credit Control Act, H.R. 3886, a copy of which is enclosed. I would welcome your support for this particular bill or for any substitute that would accomplish the same purpose. I thought your omments during the hearings concerning the damaging effects of credit controls were excellent, and they pleased me greatly. Could you let me know what you think of my bill? Thank you.  Sincerely,  Ron Paul Member of Congress  enclosure  N  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  LI  . ,1 , •4•4r. •  111111111111111101111111  96TII CONGRESS iST SESSION  'ro  H.R.3886 repeal the ('redit ('ontrol Act of 1969. •.  `1$•  •; ! 1 . •  IN TIIE HOUSE OF REPRESENTATIVES MAY 2, 1979 11r. PAUL introdliced the following bill; which was referred to the Committee on linnk•mg, Finance and Urban Affairs  A BILL '1'0  1  repeal the Credit Control Act of 1969.  Be it enacted by the Senate and House of 1?epresenta-  2 tires of the United States of America in Congress a.s.sembled, 3 That the Credit Control Act of 1969 (Public Law 91-151) 4 is repealed.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0  .  . sj;.,  Arril 3, 1980  The Honor:0,14s Cleary P. Oessales Chisimun contLittee 06 LittereatiOnal Development Institutiess sad Finesse Committee on Banking, nuance sod Urban Affairs House of Representatilies washinvton, D.C. 20515 Dehr  Gontalcs,  Thank you for your letter of ir:erch 26 invitinr• me to testify before your Su'committee on  6411.  I Rue Looking forward to appearing en April 16 at 10100 a.m.  nincerely t L1612,34.1  CO:pjt (#VVVIN V.114) bcc; Mr. Siegman Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  HENRY B. GONZALEZ. TEX., CHA IRMAN  HENRY J. HYDE, THOMAS B. EVANS, JR., DEL-  JO.r .-tPH G. MIN'cH, N.J. WILLIAM S. MOORHEAD. PA. JOHN J. LAFALCE, N.Y. MARY ROSE OAKAR. OHIO THON)*S L. ASHLEY, OHIO STEPHEN L. NEAL. N.C. LES AuCOIN. OREG.  L I ED BET HUNE. ARK. NORMAN D. SHUMWAY. CALIF.  JOHN J. CAVANAUGH. NEBR. HENRY S. REUSS, WIS.  J. VI'ILLIAM STANTON. OHIO  U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT INSTITUTIONS AND FINANCE OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS iii*  CONGRESS  WASHINGTON, D.C. 20515  March 26, 1980  The Honorable Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: I am writing to follow-up • on my request that you •appear before this Subcommittee to discuss the importance of H. R. 6811, which provides for United States participation in the International Develop ment Association Sixth Replenishment and U.S. membership in the African Development Bank. A copy of this bill and the two National Advisory Council reports pertinent to it are enclosed. The Administration argues that the proposed authorizations are essential and cannot be reduced or delayed without substantial harm to Pmerican foreign policy interests and world economic well-being. At the same time, the Administration, and yourself, argue for a balanced budget. The point I wish you to address is whether or not you agree with the Administration's assessment of the importance of this legislation and whether or not you feel it should be among those proposals unaffected by budget reductions. I had understood from our conversation that you would, indeed, I- willing to appear before the Subcommittee, but subsequently numerous telephone conversations between my staff and yours have produced no commitment on your S. It is frustrating that efforts even to maintain communication have been difficult owing to your staff's frequent failure to return telephone calls. I understand, of course, the great burden upon you and your staff at this time, but it is essential that if this particular legislation is to advance, your comments as the undisputed leader of United States economic policy be heard by the Subcommittee.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  z  4• ewe.  The Hon. Paul A. Volcker Page -2-  March 26, 1980  Accordingly, I am writing to request that you arrange to appear before this Subcommittee on April 16th, at 10 o'clock A.M., to provide testimony on the bil1,1T712. 6811-7 Sincerely yours,  nzalez Member of Congress Chairman  Enclosures: (3) H.R. 6811 NAC Report on Membership in the African Dev. Bank NAC Report on Proposed Replen. IDA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • APR  rfif) torsonabler 1„,1r,...rtort 47.?•tilett, S:ncsrerroittrtfr txt Peilerhl Sp-/-14i-ng ;Ingi ()pry; C.o.tvfrr.•:,11‘rit tetv on Cov,prro-mntat Atfr,irs I 211tIfd State-it 'vashinItoolv 11)  ken  f-friir,t,r-tents 11,0::t, I sir". D11,Y71,Si':'  %DIP cAlon.va'ar yes, to  *4aar,-!'t,rLr  tt`i''^'  174).  v.  ere!  e  SZeaul A. VoLcii4  rtflOVIre  VIENTICAL LE1TT:*;4S nAthevjj  V.It• c  T(.1 —  tt R  •••1lit  t.  r  nniril Report cov,tdr,-,  tttinn '1,1 :14 4-4;r,-irOlInTit,,v,P. r+±.sportsi''Alti,ls  f  4 1980  AC; F14,.irtn.-  a   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Richardson Preyer, Chairman Subcommittee on Government Information and Individual Rights Committee on Government Ooerotions House of Representatives Washington, D.C. 2051 5 The Honorable Thomas P. O'Neill, Jr. Speaker of the House of Representatives Washirw,ton, D.C. 2051 5 The Honorable Walter F. ondale President of the United States Senate Washington, fl.(. 20510  Ili  MIR A HA SA IS:escort.cO4.. cmA I R SA  CHARLES H. PER  THOM A I Ir. MAO LETON. MO. LA WTON CHILES. FLA.  WILLIAM  SAM NUNN, OA. )c1H GLENN, 01410 JIM SASSER. TENN.  CHARLES MC C. MATHIAS. JR., MD. JOH14 C. DANFORTH. MO.  DAVID PRYOR, ARK. CARL LXVIPS, MICH.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IRRICOM M MST'  4W  HENRY M. JACK SON. WASH.  JACOSI K. JAVITS. NV. V. ROTH, JR_  •  Action assinned Mr. Allison  LA WTON CHILES, FLA., CHAIRMAN  SAM MINN. GA. DEL.  HENRY U. JACK SON, WASH. DAVID PR TOR, ARK.  TED STEVENS. ALASKA  JOHNC.DAWORTKMO. WILLIAM V. ROTH, JR., DEL. CHARLES MC C. MATHIAS. JR.. MD.  RONALD A. CHI1000 CHICr COUIN SILL AND STAFF D4RECTOR  S. COHEN, MAINE DAVID DURENBERGER, MINN. WILLIAM  RICHARD A. WTO NI AN CHI  CXXJINSEL AND *TAT? D I R CCTOR  "AlCnifeb Zfatez --Senate COMMITTEE ON GOVERNMENTAL AFFAIRS SU BCOM M I TTEE ON FEDERAL SPENDING PRACTICES AND OPEN GOVERN M ENT (202) 224-021 1 WASHINGTON. D.C. t0610  March 3, 19P ) 1  Honorable Paul A. Volcker Chairman Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D. C. 20551  Dear Chairman Volcker: The Government in the Sunshine Act (Pub. L. 94-409) requires that "[e]ach agency subject to the requirements of this section shall annually report to Congress regarding its compliance with such requirements...." We request your agency to include in your annual report the information listed in the attachment to this letter. If you have already filed your annual report, pleas supplement it to provide the additional information concerni all of the areas listed herein. Please include these items in all your future annual reports on the Sunshine Act. Your report should cover calendar year 1979. In addition, we would appreciate receiving your comments and general views regarding your experience in implementing the Sunshine Act. This information is helpful to us in our continuing oversight responsibilities. Please send the Senate Subcommittee on Federal Spending Practices and Open Government copies of your meeting announcements as they are made.  S March 3, 1980 Two Page  Your 1979 Sunshine report should be submitted directly to the Speaker of the House and the President of the Senate by April 4, 1980. Copies of your report should also be sent to the House Subcommittee on Government Information and Individual Rights and the Senate Subcommittee on Federal Spending Practices and Open Government by the above date. If further information or assistance is required, please contact Janet Studley, General Counsel, Subcommittee on Federal Spending Practices and Open Government, at 224-0211 or Tim Ingram, Staff Director, Subcommittee on Government Information and Individual Rights at 225-3741.  VC4  11 1 -) Ad— /AZ  RICHARDSON PRtYER Chairman House Subcommittee on Government Information and Individual Rights  Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  LAWTON CHILES Chairman  S  Attacfnent  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ANNUAL REPORT Government in the Sunshine Act  1.  AGENCY NAME  2.  CALENDAR YEAR. This is the year being reported, i.e., the report due in 1930 will be for calendar year 1979.  3.  MEETINGS: A.  Total number of Open  B.  Total Number of Closed  C.  Total Number of Partially-Closed  Total Number of Meetings  Indicate the total number of meetings in each of the three categories listed. The designation of a meeting as either "open" or "closed" is selfexplanatory. The designation of a meeting as "partially-closed" indicates that a portion of the meeting's agenda was open to the public and the remainder was closed. This designation counts as one "partially-closed" meeting as long as any two or more consecutive sessions are held continuously without an announced recess period between them. 4.  REASONS FOR CLOSING OR PARTIALLY CLOSING MEETINGS. A.  Indicate the number of times specific exemption(s) were cited alone or in combination with other exemptions, as the basis for closing or partially closing meetings, as follows: Exemption 1  5  Exemption 4  2  Exemption 4+ Exemption 6  3  Exemption 10  1  Total  11  •  2  The total should equal the number of closed and partially-closed meetings reported in item 3. B.  Explain the agency's policy regarding: (1) budget meetings; (2) meetings at which Congressional testimony is discussed; (3) briefings of agency members by staff (include a description of the extent to which records of such briefings are available to the public and what guidelines have been established by the agency to govern the conduct and use of staff briefings). Include the number of times and under which exemptions such meetings were closed. The Committees are concerned that some agencies are improperly closing such meetings.  5. DESCRIPTION OF LITIGATION. Describe any litigation brought against the agency under 5 USC§552b,including any costs assessed against the agency in such litigation (whether or not paid by the agency), and any settlements reached in any such legal action. 6. NOTATION VOTING. Describe the agency's use of seriatim notation procedure (i.e. members vote sequentially on paper on the basis of circulated written materials). Include a discussion of the availability to the public of: (1) a record of notational votes; (2) the circulated written materials which provide the basis for decisions reached by notation voting; and (3) any other methods employed by the agency to explain to the public the underlying reasoning of decisions reached in this manner. 7. PUBLIC OBSERVATION. Describe steps taken by the agency to provide meaningful public observation of its open meetings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Include a discussion of: (a) what the agency does to ensure that the public attendees are able to understand the substance of the items discussed  3  at open meetings; (b) availability of staff papers, reports and other background information; (c) specific procuedures for making such background or working papers available to the public; and (d) agency's policy with respect to use of cameras and recording devices by public observers at open meetings. 8. PUBLIC NOTICE. Describe the process and methods of notifying the public of agency meetings. Include: (a) public locations of meeting notices; (b) tabulation of the number of days notice given for all of the agency's meetings; and (c) number of times less than seven days notice has been given to the public. 9. PUBLIC INTEREST. Discuss in detail the procedure the agency has established for the consideration of the public interest during the agency's determination to open or close a meeting. 10. RELEASE OF TRANSCRIPTS, RECORDINGS, AND MINUTES OF CLOSED MEETINGS. Describe the agency's procedure for determining whether transcripts, recordings, or minutes may be withheld from the public.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Include a discussion of the procedures which the agency uses: (a) to review periodically the continued application of an exemption to transcripts, recordings, and minutes; and (b) to make available to the public transcripts, recordings and minutes. Provide a copy of any index system prepared by the agency to assist the public in obtaining and using transcripts, recordings, and minutes of closed meetings. Describe the factors that are indexed (e.g. status of transcript, date of meeting, subject matter). If the agency maintains transcripts, recordings or minutes of its open meetings, describe the indexing system, if any, utilized. Include a tabulation of the total number of requests the agency has received for transcripts or for the opportunity to listen to recordings of closed meetings and the number of requests granted and denied. Describe the kind of review procedures a request is given, including by whom, and how long it takes the agency to respond to requests and to complete such review.  4  11.  REQUESTS TO OPEN. Describe the agency procedure for an individual to request that an agency meeting be open. Include any procedures for agency reconsideration of a prior decision to close a meeting.  12.  FORMAL COMPLAINTS. Describe the substantive complaints the agency has received on its Sunhine procedures and practices. Include a discussinn of the agency's disposition of each such complaint.  13.  EX PARTE COMMUNICATIONS. Provide a copy of agency guidance supplied to members and staff regarding ex parte communications.  •   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