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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Collection: Paul A. Volcker Papers Call Number: MC279  Box 11  Preferred Citation: Congressional Correspondence,July-August 1981 [Folder 1]; Paul A. Volcker Papers, Box 11; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c438 and https://fraser.stlouisfed.org/archival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. 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St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman St Germain: In response to your letter of August 12, I am pleased to enclose responses to written questions submitted Ly Congress man Bereuter and Congresswoman Roukema in connection with the hearing before your Committee on July 21, 1981. Please let me know if I can be of further assistance. Sincerely /  sank rt, Vo!cite(  Enclosures cc:  The Honorable Douglas K. Dereuter The Honorable Marge Roukema  CO:pjt (#V-230) bcc: Mr. McKelvey Mr. Kichline   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IN\J\A  Chairman Volcker subsequently submitted the following responses to written questions from Congressman Bereuter in connection with the hearing before the House Banking Committee on July 21, 1981.  (I)  Commerce Department figures indicate that the ratio of fixed capital to output in the farm sector is three times that in manufacturing. The ratio of inventory to output also is approximately three times that in manufacturing. Of course, this means a heavy reliance on credit in the agricultural sector. Vice Chairman Frederick Schultz, of the Federal Reserve Board of Governors, recently told the House Agriculture Committee that a change in resources of agricultural banks (i.e., a shift from heavy reliance on passbook and low-cost savings instruments to money market certificates) is tying formerly local agricultural banks into national credit markets and therefore into higher national rates. What answer does the Federal Reserve have for my farm constituents who fear that high interest rates will bankrupt them any day now?  A.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  High interest rates have unquestionably had an adverse effect on farmers, as indeed they have on other credit-sensitive sectors such as housing, automobiles, and small business.  But, it is important to bear in mind  that interest rates are high because inflation and the demand for credit have remained high.  The Federal Reserve would do the agricultural  community no service in loosening its resolve to slow monetary growth; in all probability interest rates would soar to new highs as inflation worsened.  As current efforts by the Federal Reserve to control the money  supply and by the Administration and Congress to cut Federal spending and reduce the Federal deficit take hold, we should be able to look forward to a sustained reduction in interest rates. As discouraging as the current situation may seem, there are some reassuring aspects to the condition in which farmers find themselves. For example, while the Commerce Department figures you cite on capital and inventories relative to output are correct, it may surprise many   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  to find that farmers' debt relative to total assets--somewhat less than 20 percent--is much lower than for the manufacturing sector.  This is  because farmers hold a lot of land, which has appreciated greatly in value over the years.  Although this appreciation hasn't alleviated the  squeeze that inflation has put on cash flow, it certainly provides a somewhat different picture of their overall financial position. Perhaps because of this, farmers have not, in general, experienced difficulty in obtaining credit over the last year or two.  Indeed, as  Vice Chairman Schultz pointed out in his testimony, loan deposit ratios at rural banks are currently in a comfortable range, indicating reasonable credit availability and the rates paid on loans at these banks, while high, are somewhat under the national average.  (2)  A recent study released by the Tnternntional Monetary Fund urges use of an "incomes policy" as well as monetary and fiscal policy to fiPht inflation. The Reagan Administration opposes such a suggestion. Do you hnve any views on an appropriate incomes policy, if any, which we should pursue? Pleaso elaborate.  A.  I do not support an incomes policy to supplement current monetary and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  fiscal policy, as explained more fully in mv response to Representative Roukema's question.  As also indicated in that response, if any incomes  policy were implemented, I would favor a carrot—and—stick type of approach, like TIP, presuming that administrative complexities could be ironed out.  (3)  A.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  A June 29 Business Week article suggested that the government should shift to short-term debt to take the pressure off long-term markets in the private sector. Do you agree? Please explain.  There is a presumption underlying this question that relative supplies of securities, particularly Treasury debt, are the principal determinants of the shape of the yield curve.  While I do not dispute the notion that  a significant shift towards shorter-term Treasury financing would influence rate relationships, I think that other fundamental factors are at work holding long-term rates high.  The chief one, in my view, is that  the evidence of progress in controlling inflation is as yet inconclusive; market participants thus expect interest rates in general to remain quite high for some time to come.  I think also that the prospect of heavy  Treasury financing needs in coming quarters, regardless of the fonm of this borrowing, has taken its toll all along the maturity spectrum. Besides, to the extent that a shift towards shorter-term borrowing did relieve pressures in long-term markets, it would merely shift these pressures into shorter-term markets which already are under considerable strain.  Chairman volcker subsequently subliitted the following response to a written question from Congresswoman Roukemi in connectioq with the hearing before the House Banking Committee on July 21, 1981.  On page 11 and 12 of your statement, vim make clear the importance of II greater caution and restraint in both wage and price behavior." This point is emphasized by your further comments about a "crucially important round of union wage bargaining (which) begins next January, potentially setting a pattern for several years ahead." Are you suggesting that we institute an incomes policy? kind of incomes policy would you suggest?  If so, what  Can you envision a carrot and/or stick approach which efficiently accomplishes your goal of "greater caution and restraint?" What is the role of government, if any, in such a policy? What suggestions do you have for both labor and management as they enter this round of union wage bargaining? Please be specific.  A.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I do think that it is critically important for labor and management alike to exercise restraint in their wage settlements and pricing decisions in the months and quarters ahead.  So far the encouraging signs have been  mainly on the price side, although fairly recently there have been some tentative indications of easing in wage pressures in some sectors of the economy.  I am hopeful that as time passes the collective bargaining  process--left to its own devices--will confirm these indications, and I consequently do not endorse an incomes policy at this time. The plain fact is that incomes policies have never worked very well during peacetime in this country, in contrast to most European countries where they have been tried much more frequently and with somewhat more success in some instances. difference in experience:  I think there are basic reasons for this Ours is a more heterogeneous workforce, and  the wage-setting process in the United States is much more decentralized.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -2-  Moreover, the tradition of private decisionmaking on economic matters, including wage determination, is more deeply entrenched here than it is in Europe.  And, the approaches we have tried in incomes policy have  tended to be less comprehensive. It seems to me that any policy that is successful must take account of these differences.  This means, for one thing, that the role of govern-  ment should not be one of direct involvement and intervention in private decisionmaking.  That is one reason why I have long been intrigued by  the so-called carrot-and-stick approach, as illustrated by the tax-based incomes policy (TIP) proposals, which reward and penalize decisions on the basis of how they are made in the private sector.  However, such  policies entail significant administrative complexities, and I have yet to see an imaginative plan that also is workable. Absent such a solution, I believe we have little choice but to point out the consequences of inflationary behavior by wage and price setters and encourage the forces of competition bearing on price and wage decisions.  The impact of import controls, regulation, and such legislation  as Davis-Bacon are all relevant in that connection.  The heavy calendar  of collective bargaining now slated for 1982 will constitute a litmus test for national economic policy.  By that time the parties sitting  down to the negotiating table will have witnessed more than two years of systematic efforts to slow monetary growth, and quite possibly a significant improvement in general price trends.  If vou ask me what  specific advice I would have for them, I would suggest that they look hard at that evidence, assess realistically the determination of national policy in unwinding inflation and then adjust their expectations accordingly.  We  -3-  at the Federal Reserve have repeatedly indicated that we will not supply enough money to finance both high inflation and strong economic growth; firms or groups of workers that attempt price or wage increases inconsistent with that fact will be acting in a way that is contrary to both their own and the national interest.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .41/  Chairman Volcker  FERNAND J. ST GERMAIN, R.I., CHAIRMAN HENRY S. REUSS, WIS. HENRY n. GONZALEZ. TEX. JOSEPH G. MINISH, N.J. FRANK ANNUNZIO. ILL. PARPEN J. MI I CF4CLL. MD. WALTER L FAUNTROY. D.C. STEPHEN . NEAL, N.C. JERRY M. PAETERSrDN, cAur. JAMES J. BLANCHARD. MICH. cAnnoLL HUBPARD, JR.. KY. JOHN J. LAVALCE, N.Y.  Action assigned to Mr. Axilrod  J. WILLIAM STANTON, OHIO CHALMERS P. wYur, omo STEWART B. McKINNEY, CONN. GEORGE HANSEN, IDAHO HENRY J. HYDE. ILL. JIM LEACH, IOWA THOMAS B. EVANS, JR., DEL. RON PAUL, TEX. ED BETHUNE, ARK. NORMAN D. SHUMWAY, CALIF. STAN PARRIS, VA. ED WEBER, OHIO BIU_ McCOLLUM. FLA. GREGORY W. CARMAN, N Y. GEORGE C. WORTLEY, N.Y. MARGE ROUKEMA, N.J. BILL LOWERY, CALIF. JAMES K. COYNE, PA. DOUGLAS K. BEREUTER. NEBR.  U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS N I N ETY-SEV ENTH CONGRESS 2129 RAYBURN HOUSE OFFICE BUILDING  1. I, A ' I t STANLE.Y N. Lk I... MARY ROSE OAKAFt, C JIM MATTOX, TEX. BRUCE F. VENTO, MINN. DOUG BARNARD, JR., GA. ROBERT GARCIA. N.Y. MIKE LOWRY. WASH. CHARLES E. SCHUMER, N.Y. BARNEY FRANK. MASS. BILL PATMAN, TEX. WILLIAM J. COYNE, PA. STENY H. HOVER. MD.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  WASHINGTON, D.C. 20515  August 12, 1981  2/5-4247  3° Honorable Paul Volcker Chairman, Board of Governors Federal Reserve System Washington, D.C. Dear Chairman Volcker: Enclosed are questions raised by Members of the Committee regarding your testimony on July 21, 1981.  Your consideration and prompt  reply will be appreciated. Sincerely,  Fernand J. St Germain Chairman Enclosure  Cr.)  rxr  1:2 C=  a  .•  QUESTIONS TO (31AIRMAN VOLCKTR FROM HON. DOUGLAS K. BEREUTER  (1) Gaunerce Department figures indicate that the ratio of fixed capital to output in the farm sector is three times that in manufacturing.  The ratio  of inventory to output also is approximately three times that in manufacturing. Of course, this means a heavy reliance on credit in the agricultural sector. Vice Chairman Frederick Schultz, of the Federal Reserve Board of Governors, recently told the House Agriculture Committee that a change in resources of agricultural banks (i.e., a shift from heavy reliance on passbook and low-cost savings instruments to money market certificates) is tying formerly local agricultural banks into national credit markets and therefore into higher national rates. What answer does the Federal Reserve have for my farm constituents who fear that high interest rates will bankrupt them any day now?  (2) A recent study released by the International Monetary Fund urges use of an "incomes policy" as well as monetary and fiscal policy to fight inflation. The Reagan Administration opposes such a suggestion.  Do you have any views on  an appropriate incomes policy, if any, which we should pursue? Please elaborate.  (3) A June 29 Businessweck article suggested that the government should shift to short-term dcbt to take the pressure off long-term markets in the private sector.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Do you agree?  Please explain.  QUESTIONS TO CHAIRMAN VOLCKER FROM HON. MARGE ROUKEMA  On page 11 and 12 of your statement, you make clear the importance of "greater caution and restraint in both wage and price behavior." This point is emphasized by your further comments about a "crucially important round of union wage bargaining (which) begins next January, potentially setting a pattern for several years ahead." Are you suggesting that we institute an incomes policy?  If so, what kind  of incomes policy would you suggest? Can you envision a carrot and/or stick approach which efficiently accomplishes your goal of "greater caution and restraint?" What is the proper role of government , if any, in such a policy? What suggestions do you have for both labor and management as they enter this round of union wage bargaining?   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please be specific.  •  i9 ) BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  August 31, 1981  PAUL A.VOLCKER CHAIRMAN  The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman St Germain: I am writing in regard to H.R. 4005, the proposed "AntiInflation Lending Act of 1981." As you will recall, I communicated my general view earlier to the Committee's staff; however, I felt that I should now express my opinion more formally. While I cannot help but be sympathetic to the basic objectives of the legislation--namely, to fight inflation and encourage the most productive use of credit--I nonetheless have serious reservations about it on a practical level. I believe that it would be very difficult to implement such a program in a manner that would be at once fair and effective. Depository institutions, for example, are only one source of credit, albeit an important one. Certainly many potential borrowers for "unproductive" purposes would be able to turn elsewhere in the domestic or international credit markets. There is also a general problem of defining what uses of funds are speculative or unproductive, and even productive uses of credit may be inflationary in their impact on the economy. Once an initial arrangement was worked out, there would surely need to be a mechanism for dealing with complaints about unfair treatment and for resolving disagreements among lenders about the interpretations of the guidelines, that process, judging from our experience with the credit restraint program last year, would likely prove costly and cumbersome. All of this shouldn't be taken to mean that I don't have some concerns about the recent rash of takeover bids, potentially financed by bank credit. I have repeatedly stated to the Congress, bankers and others that it is important that the banks exercise sound prudential standards and appropriate caution in considering these loans.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ' *1 The Honorable l'ernand J. St Cer a in Page Two  I hol.c tilat these corrunents will prove helpful as you consider this legislation. Sincerely,  S/Paul A. Volckec MJP:JLK:RS:pjt (VV-195) bcc: nr. Kichline nr. Prell Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •  FERNAI, J. ST GERMAIN, R.I., CHAIRMAN HENPv s. nruss. Wis. HENRY D. GONZALEZ. TEX. JOSEPH G NIINISH, NJ. FRANK ANNuNZIO, ILL. PARPEN 1. MITCHELL, MD. WALTER E. FAUNTROY. D.C. STEPHEN . NEAL. N.C. JEPRY M. vArTTRSON, CALIF. JAmES J. In ANCHARD. MICH. CARROLL HUBBARD. JR.. KY. JOHN J -ALCF, N.Y. DAVID W i vAN ,1, NORmAN E. 0 AM...)u.?i, STANLEY N. LIJNOINE. N.Y. MARY °AKAR, OHIO JIM MATTOX. TEX. BRUCE r. VENTO, MINN. DOUG BARNARD. JR., GA. ROBERT GARCIA. N.Y. MIKE LOWRY. WASH. CHARLES E. SCHUMER. N.Y. BARNEY FRANK. MASS. BILL PATMAN, TEX. WILLIAM J. COYNE, PA. STENY H. MOYER, MD.  Action assigned Mr. Kichline  U.S. HOUSE OF PrEPRESENTATIVES COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS 2129 RAYBURN HOUSE OFTACE BUILDING WASHINGTON. D.C. 20515  July 9, 1981  223-42.47  Honorable Paul Volcker Chairman, Board of Governors Federal Reserve System 20551 Washington, D.C. Dear Mr. Chairman: Please find enclosed a copy of H.R. 4005, a bill that would, under certain circumstances, permit depository institutions to enter into agreements to emphasize loans that combat inflation and improve productivity. I would appreciate having your written comments on this legislation by the end of the month. I have also enclosed a press release which gives some additional background on this legislation. Sincerely,  Fernfi.nd J. St Germain Chad/man Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  J. WILLIAM STANTON OHIO CHALMERS P. WYLIr ol110 STEWART B. McKINNEY. CONN. GEORGE HANSEN, IDAHO HENRY J. HYDE. ILL. JIM LEACH, IOWA THOMAS B. EVANS. JR., CEL.. RON PAUL. TEX. ED BETT-IUNE. ARK. NORMAN D. SHIJMWA C.ALIF. STAN PARRIS. VA. ED WEBER. OHIO BILL McCOLUJ M. FLA. GREGORY W. CARMAN. N.Y. GEORGE C. woRTLF r. N.Y. MARGE ROUKEM N J. DIU_ LOWERY. CALii . JAMES K. COYNE, PA. DOUGLAS K. BEREUTER. NEBR.  H „mi.,s.,(,(),,,;„,,,„ ,,.:„„), .R.4005 To coinhat inflation and improve productivity.  • ,• 14- Z.:  r  • mu"  IN THE HOUSE OF REPRESENTATIVES .1t•NE 24, 1981 Mr. 1{Et•ss (for himself and Mr. ST GEammt•;) introduced the following hill: which Nvas referred jointly to the Committees on Banking, Finance and Urban Affairs. and the Judiciary  A BILL To combat inflation and improve productivity. 1  .  .4'0 •  Bc it enacted by the Senate and House of Representel.r  .) tires of the United States of Anierica in Congress assembliil, 3 That this Act may be cited as the "Anti-Inflationary Lending.1 Act of 1981".  \  5  •  Six. 2. Section 11 of the Federal Reserve Act (12  . P" \ •  (;  . 248) is amended by adding at the end thereof the  •  •  •f7 ,4`1  7 tollmvilig: "(o) During periods in which it finds inflationary (Inn-  •'‘ . .3•  • '.  6.•  9 gers present, the Board may, by majority vow, pertnif 10 depository institutions to enter into agreements, notw ith-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • .ik ' V  •  V.‘  "..‘4t r• A'..14.4' • Ab.•  aye, .anift  0 1; i,14. 4 144 * ,Ott   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  f  • )  tr:77--Arair— 1 standing- anv provision of anv Federal or State ant itro,t to emphasize loans that comhat inflation. \\There flit  Vo.,;•44r" • g..(144  1.'!1  )  •) interest will be served, the Board shall initiate discussions •i looking toward sUch agreements and determine the timing, 5 participants, and implementing techniques of such agreer•  ments. The Attorney General must approve of  alIV  49(44 41.1elit-  11C11  SINIndff•••.•011.•••••1••••-•  7 agreement before it  111:1V 1)(` 11111)1('IllelltVd." .  yr+  01•110101111111MMIMMINIIMPIEN.  •  N t t,dr  •  ‘-  111 • •  ••••  • 'N.  •••* •  16.37.1.  'sr • ••••••  , 41  •  4  • !to,ir • .ce  •Fellt,14;  ilews  from the °Vice of  ConglessnianGHeRryGS'Ituss vvISCONSIN-5Tri DISTRICT 2413 RAYBURN HOUSE OFFICE BUILDING VVASHINGTON, D.C. 20515  OR RELEASE:  202-225-3571  For Immediate Release June 24, 1981  REUSS-ST GERMAIN BILL WOULD PERMIT CREDIT GUIDANCE, LOWER INTEREST RATE ON ANTI-INFLATIONARY LOANS  Reps. Henry S. Reuss (D-Wis.) and Fernand J. St Germain (D-R.I.), Chairmen of the Joint Economic Committee and the House Committee on Banking, Finance, and Urban Affairs, today introduced the AntiInflationary Lending Act of 1981 to lower interest rates by permitting the Federal Reserve and the Attorney General to work out agreements with the nation's leading banks to concentrate lending in inflationary times on "loans that combat inflation". They pointed out that such agreements would increase lending,  and thus reduce interest rates, on loans for such anti-inflationary purposes as housing, agriculture, capital investment in new plant and equipment and energy conservation.  The agreements would make money  less available, and interest rates higher, for loans for such inflationary purposes as commodity speculation, such as Bunker Hunt's recent attempt to corner the silver market, and for corporate takeoversthat simply bid up the price of existing assets. Banks participating in the arrangements would be exempted from the antitrust laws. The bill carries out the Democratic Recommendations in the March 2, 1981, Annual Report of the Joint Economic Committee: "The Administration and the Federal Reserve should encourage the banking system to develop effective methods to prevent destabilizing bursts of bankfinanced lending for speculative and purely financial purposes, which make less credit available to enhance productivity and thus fight inflation." The bill also follows the recommendation made in testimony earlier  this month before the Joint Economic Committee by Gaylord Freeman, retired Board Chairman of the First National Bank of Chicago for:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  2  "the enactment of an amenument to the antitrust laws that would provide that whenever and so long as the Board of Governors of the Federal Reserve System shall declare that it is in the public interest to restrain the rate of growth in bank credit, it shall not constitute a violation of any antitrust laws for groups of bankers to agree together to mutually restrain the rate of growth in their loans, either in total or in such types of loans as they may consider especially inflationary..." "If the legislation- were adopted, would the bankers assume the responsibility when so requested by the Federal Reserve? Probably only a small group would, but they would be a group of the largest banks, capable of asserting a most anti-inflationary influence. Bankers, like other businessmen, are interested in current profits, but they tend to take a longer view of their operations and assume a somewhat greater responsibility to maintain a stable economy." "We are encouraged by Gaylord Freeman's belief that the country's largest banks would patriotically join the battle against inflation by discouraging speculative lending, provided they were assured that their patriotism would not be rewarded with an antitrust prosecution," the Congressmen said.  "Why not give the banks' better  angels a chance to fly?"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •• of GOV ( ' R4,• • Qo  •c)  C' THE  FEDERAL, RESERVE SYSTEM  .O A 0: 14,  BOAPD OF 730VERNORS  •  4..) •  WASHINGTON, D. C. 205SI  <<"  .August 28, 1981  PAUL A. VOLCKER CHAIRMAN  The honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations house of Representatives Washington, D.C. 20515 Dear Chairman Rosenthal: I am writing in response to your telegram of July 17 regarding the Mobil tender offer for shares of Cono co. You asked that I advise you of our actions in response to this take-over bid. Since the time of your wire, it has, of course, beco me clear that Mobil was unsuccessful in its tender, and my unde rstanding is that takedowns under the Mobil credit line establis hed to help finance the tender offer have been repaid. As your wire suggests, some of the concerns that have been expressed with respect to this and other take-ove r attempts relate to questions of industrial structure and the degree of competitiveness in various sectors of the economy. While we at the Federal Reserve are interested in what occurs in that regard, it is a field in which we have no direct influence or poli cy responsibility. I assume, however, that you have addresse d inquiries to those agencies that do have regulatory responsibilities in the area. As regards the financial side of the issue, we did not take any special action with respect to the Mobil financing. We have, of course, followed closely credit developm ents surrounding the take-over bids for Conoco. The number and size of the credit lines involved in that incident were, as is well known, very large, but I think it fair to say public perception of the impact may have been exaggerated to the extent the lines were essentially duplicative and in substantial part met by foreign bank s. In the end, only one company, and one credit line (of itse lf substantial size) was entailed in the Conoco acquisition. We cannot know the extent to which that situatio n may be indicative or a precursor of other large fina ncings for take-overs. We would naturally be concerned about poss ible implications for supervisory or monetary policy of such developm ents.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .The Honorable Benjamin S. RosentlIal Page Two  As regards che supervisory aspects, the large sums involved fur individual banks would suggest the need for careful appraisal by lending banks both of the economic rationales for such combinations and the implications for their total commitments. This is not to say that the companies involved are not solid enterprises. But I am concerned whether the speed with which some of these loan syndicates appear to have been pulled together has, in fact, permitted adequate analysis, either of the individual credit or the implications for the bank's commitment, liquidity and capital positions, including its ability to service other established lines of business. Concerns of this kind should be reflected in our normal supervisory surveillance. What I characterized above as monetary policy consequences encompasses the import of your references to credit market impacts of the take-overs. In the broadest context, take-over loans in themselves should not be a drain on our limited supply of savings, because stockholders selling out should have funds available for reinvestment (or for loan repayment). However, in the short run, and particularly as the financing is focused on the banking sector, the credit demands associated with the take-overs can have some short-run impacts on the distribution of credit. Thus, the total commitments and loans of commercial banks may be expanded, and bank credit and the monetary aggregates could be affected, a fact that would have to be considered in conducting monetary policy. In committing themselves to a large volume of take-over loans, banks may restrict their lending to other potential borrowers --the concern you expressed in your wire. This would, to the extent that these other borrowers do not have access to alternative credit sources, potentially be harmful to the economy. I do not want to suggest that there is evidence that the banks have acted imprudently or that the bank credit impact of the recent spate of acquisition attempts became in any sense a dominating influence on trends in bank credit; I would also note that while all sectors of the economy are being faced with the burdens of high interest rates and the effects are particularly painful in the area of homebuilding and elsewhere, credit availability appears to have been maintained for small businesses, farmers, and consumers alike. I should also emphasize that much of the take-over financing has been arranged with foreign banks beyond our direct supervisory control, and such financing could be arranged through other channels outside the banking system. The Federal Reserve is not itself ordinarily in a position to make judgments about   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Benjzimin S. RosenLial -Page Three  which mergers may be justified in terms of econ omic rationale and pro6uctivity and which are not, and there is a strong presumption that decisions about the allocation of credit should be left to individual institutions and market incentives. All of these considerations militate against the sort of "action" you suggested. We will, of course, continue to observe and monitor developments in this area, and I have indicate d on a number of occasions to bankers or others my concern over the possibility of a kind of infectious competitive fervor about take-overs distorting banking judgments or the credit mark ets. Sincerely,  Paul A. VolcIcer  MJP:PAV:pjt OV-204) bcc: Mike Prell Mr. Ryan Mr. Kichline Mrs. Mallardi (2) •  IDENTICAL LETTER ALSO SENT TO:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman David Obey, Task Force on Economic Policy and Productivity, House Budget Committee.  •  BOARD OF .)OVERNOR5 CF •  •• .0 • ••1  WASHINGTCN, D. C. 20551  •, •„  •  • • 1RAL • • • .. • •  HE  FEDERAL RESERVE SYSTEM  cz.4 •  August 27, 1981  PAUL A. VOLCKER CHAIRMAN  The honorable Fortney h. Stark, Jr. house of Representatives Washington, D. C. 20515 Dear Mr. Stark: Thank you for your letter requesting my comments on H. R. 3465, a bill that would amend the Investment Company Act of 1940 to permit banks, bank holding companies and savings and loan associations to sponsor, organize, advise and distribute the shares of an investment company registered under that Act. This would presumably include securities of open-end funds (commonly known as mutual funds), and closed-end funds investing in equity securities, corporate bonds, municipal bonds, and money market instruments. Your bill raises a number of important issues concerning the separation of commercial and investment banking activities that is now embodied in the Banking Act of 1933 (Glass-Steagall Act). The Federal Reserve Board has in the past considered a number of questions relating to commercial bank participation in securities markets as dealer or underwriter, but it has not specifically addressed whether the law should be changed to allow full bank participation in the business of offering and distributing shares of investment companies. In my view,Board consideration of your proposals should occur as part of a comprehensive review of the laws and regulations governing the role of commercial banks in financial markets, taking into account the evolution of the financial system since the early 1930's, and changes in the regulatory and economic framework within which that system functions. The Board's staff is developing the background information necessary for such a review, but Board consideration of these matters is not likely to occur before the fall. Whatever the Board's views about the proper division of commercial and investment banking over the long run, I would like you to know that from my own perspective I have serious reservations about the wisdom of allowing banks and other depository institutions to offer money market mutual funds at this time. The convenience of purchasing these   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Fortney H. Stark, Jc. Page Two  very instruments at local offices of depository institutions, as well as the aura of safety and soundness that they would acquire by being associated with such an institution, could make them very attractive to y ,ople currently holding savings and smaller denomination time deposits. Outflows from these deposits would have to be met either by acquisition of higher-cost funds through marketrelated instruments or by reductions in earning assets. Further, because of Investment Company Act restrictions on self-dealing, the investment company's assets could not be reinvested in the CDs of the bank or S&L adviser without an exempting order from the SEC. Thus, purchases of shares in a money market fund sponsored by a bank or S&L would not necessarily keep these funds from being invested outside the service area of the sponsoring institution. Depository institutions would benefit from offering fund shares by maintaining a financial relationship with customers who might otherwise have moved their savings to an existing money market fund and they would gain a small amount of income from servicing and advising the funds. however, smaller banks and thrifts could find that offering such funds, or having them offered by other depository institutions, would significantly erode deposits and reduce earnings at a time when the profitability of these institutions is already under considerable pressure. A more direct way of approaching the problem would be to permit banks and thrifts a deposit instrument that would compete more directly with money market funds, a matter within the province of the DIDC, upon which I serve. In considering that possibility, we have needed to take account of the strong concerns of depository institutions about maintaining current, relatively low cost, sources of funds. To put the point directly, the heavy pressures on earnings of many depository institutions limit flexibility in taking steps that otherwise, and at the appropriate time, would appear desirable. I would also bring to your attention . certain proposals we have made for reasons of competitive equity and improving monetary control, to place reserve requirements on money market mutual funds to the extent those funds arc used as transactions balances. Thank you for the opportunity to comment on your proposals. I will send you more definitive views when they are developed by the Bcard. Sincerely, DLK:PAV:pjt (#V-163) bcc: Mr. Kohn Mr. Plotkin Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  S/Paul A. Volcket  • •  e*DRTNEYIL(PETE)STARK 9TH DisTIR  CAW )01N1 A  towerilrYtigt  Action assigned to Mr. Mannion.  1N AYS AND MEANS DISTRICT OF COLUMBIA SELECT NARCOTIC S  CONGRESS OF THE UNITED STATES HOUSE OF REPRESENTATIVES  el .  WASHINGTON, D.C. 20515  • 4  1  MAW C PJ. • •  U  tne. "  •  .••••.• C.1 . •  ar  La;I„L.  cp  et: 41( CC  June 15, 1981  ) 74 4J   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CC) CT)  LA-  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Paul: Recently I introduced legislation that would permit banks, bank holding companies, and savings and loan associations to establish investment companies and sell shares in those companies to their customers. The purpose of my bill, H.R.3465, is to provide financial institutions with an opportunity to compete with money market mutual funds. I would appreciate your views on this legislation. Sincer  Hon r4416 e Fortney H. Stark, Jr. Menber of Congress  FHS/eg  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  $.7„.„ (.„N,;,,.:„ H .R.3465 Isl. sEssioN  milend the IoNe,:tment ('olop:olv .ki.t of 19  and for other porpo.r.  IN THE HOUSE OF REPRESENTATIVES 19S1 nIvrred j(610Iy to Ow Mr. STARK intmdumi Ow Wnwing hM: which Cmmnittees fm Ranking. Fill3MT Mid Vrhan AffaiN and Energy and Cfmmwn.c  A BILL To amend the Investment Companv • Act ot 1940, and for other purposes. 1  Be it enacted by the Senate and House of llepresentatires of the United States of America in Congress assembled,  3 That the Investment Companv Act of 1940 is amended bv 4 adding the following new subsections at the end of section 22  5 of such Act (15 U.S.C. 80a-22): (i  "(h) Notwithstanding paragraph Seventh of section  7 51:36 of the Revised Statutes of the United States, as amend8 ed (12 U.S.C. 24), section 5, 20, 21, or 32 of the lianking 9 Aet of 1933, as amended (12 U.S.C. :3:35, 377, :378, or 78),   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1 or the Banking Holding Companv Act :I 11:111k, a  (11 1!):)(;, aS :1111('Ilded,  bank holding company or a subsidi:irv thereof, or a  :3 savings and loan associat ion4  "(1)  111:1V  organize, sponsor, operate, control, or  5  render investment advice to an investment company  (;  (including a company which would be an investment  7  company except for the provisions of section 3(c)(1) of  8  this title), or  9  "(2) may underwrite, distribute, sell, or issue se-  10  curities of any such investment company which is orga-  11  nized, sponsored, operated, controlled, or so advised by  12  a bank, a bank holding company or a subsidiary there-  13  of, or a savings and loan association: Proridcd, That  14  officers and employees of banks or savings and loan as-  15  sociations who sell such securities meet such standards  16  with respect to training, experience, and sales practices  17  as the Comptroller of the Currency and the Federal  18  Borne Loan Bank Board, respectively, shall prescribe  19  by regulations. A. savings and loan association shall not  20  be deemed to be a "broker" or "dealer", as those  21  terms are used in the Securities Exchange Act of  22  1934, by reason of its engaging in any of the functions  23  described in this subsection. As used in this subsection,  24  the terms "bank holding company" and "subsidiary",  25  with respect to a bank holding company, have the  3165--ih  sr a   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  meanings given them in section 2 of the UNTO. Holding.)  Comp:mv Act of 195G.... 0  . . •• of GOvE'  •••  •0 :"." •clo — *0 .-,1 'A . .1* e ..,,  ,44,% O. 1: H. In* , .1 4(.. .  BOARD OF 30VERNORS OP THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  August 26, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Christopher J. Dodd United States Senate Washington, D.C. 20510 Dear Senator Dodd: Thank you for your letter of August 11 seek ing further views of the Federal Reserve Board about a possible federal usury ceiling for consumer, agricultural, and busi ness loans. The Board has for some time held the view that interest rates for consumer loans and other types of credit are best determined in markets unconstrained by rate ceilings of any kind. If some ceiling is to be established nonethel ess, the Board remains vigorously opposed to using the discount rate as an index to which the ceiling might be pegged. Under these circumstances, you have asked what the Board would regard as an appr opriate rate for indexing purposes, should the Congress deem it necessary to establish a federal usury ceiling. It may be that none of the available rate measures would make an ideal index, given the broad spec trum of loans potentially covered by the proposed Credit Deregulation and Availability Act of 1981. At the least, a serviceable inde x rate should be genuinely market-determined, not administered by individual market participants or by federally related agen cies. The selected peg rate should also reflect, as nearly as possible, yield movements in markets for alternative investments with maturities similar to maturities on the loans to be regulated. The discount rate is clearly inappropriate under either criterio n, because it is a policy rate set by the Federal Reserve on loans of quite short maturity. Much more suitable as a possible index for consumer loans would be the U.S. Treasury's 3-ye ar or 5-year constant maturity rate series, in view of the dept h that characterizes the markets for these uniform-quality medi um-term Treasury securities. You have also asked for the Board's view about an appropriate markup over the recommended inde x rate. Unfortunately, no single markup could apply reasonably to every type of consumer loan, given wide differentials in risk , loan size, and other factors. For a small loan to a borrower of relatively poor credit rating, the higher servicing costs and large allowance for possible default would require a markup substantially higher than for a large-downpayment loan secured by a new automobile. Current   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  t •  The Honorable Christopher J. Dddd Page Two  usury laws in many states, for instance, permit annual percentage rates to range up to 36 percent on at least soMe portion of a small personal loan. Given recent yields on 3- to 5-year Treas ury securities of between 15 and 16 percent, a markup of 20 percentage points or more would be necessary merely to duplicate the ceilings prevailing under the small loan laws of several states --limits that in many cases were set some time ago when market rates were lower than they are now. Regarding other questions in your letter, I am enclosing the study on industry concentration that you requested. Also enclosed are pages copied from a Federal Reserve Bank of Boston publication, the Functional Cost Analysis, which present estimates of costs and net returns on installment lending (excluding credit card operations) for three size groups of commercial banks. Pages from the reports for 1973, 1976, and 1979 provide the historical perspective that you desired for comparison with 1980. These data reflect returns on all loans outstanding, not just on new loans made, and the cost-of-money figures represent average rathe r than marginal costs; thus the data are not directly applicable to calculating the finance rate currently necessary to maintain an historical average yield. Thc comparison of 1980 figures with earlier data, however, does demonstrate that profitability on consumer lending dropped sharply during 1980. I hope these comments are helpful to your deliberations. Please let me know if I can be of further assistance. Sincerely,  szpaul A. Yolcket  Enclosures CAL:RMF:JSZ:MJP:pjt (07-227) bcc: Mr. Kichline Mr. Fisher Mr. Luckett Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  Chrmn. Volcker  Action assigned to Jim Kichline JAKE GAriN, OJT %H.(AAIRMAN  JOHN TOWER. TEX, JOHN HEINZ, rA. WILLIAM L  HARRISON A. WILLIAMS. JR.. N.J. wILLIAmi PROx*AIRE, WIS.  ARMSTRONG, COLO  RICHAIR0 G  LUGAR. NO. A.i.roN - I kit 0 A MATO N.Y. JOHN H. CH•rif  I  HARRISON SCHMITT. 14. MEX.  ilil  At_AN CRANSTON. CALIF. (x-INALD W. RIEGt E, JR.,  MICH. SARRANES, MO. CHR ,STOPHER J. DOOD, CONN.  •••, ••.? . .  rmit.  ALAN J. DIXON. ILL.  'ZICrtiteb  M. DANNY Witt t rArr DIRECTOR HOWARD A. MENELL. MI4ORITy •.T.AFF DIRECTOR AND C(..1.1NSFL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r, I  af  r, I  •  , e 5enale isoi nuri 12 r1,1 : 53  COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS  WASHINGTON, D.C. 20510  en:WE CIF T•':  August 11, 1981  Honorable Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue Washington, D. C. 20551 Dear Mr. Chairman: During the July 21, 1981, hearing of the Senate Financial Institutions Subcommittee on S. 1406, the Credit Deregulation and Availability Act of 1981, Governor Nancy Teeters testified that, "If the Congress should choose to impose a federal usury limit rather than to remove interest rate controls altogether, the Board would strongly advise against tying such a ceiling rate to the Federal Reserve discount rate ...." I would appreciate it if the Fed could give me the benefit of its thinking as to what might be a more appropriate rate to use should the Committee decide to pursue the idea of a federal usury limit. In addition, I would appreciate it if the Fed could suggest how much above such a rate a usury ceiling might be set in order to achieve the twin objectives of encouraging competition and at the same time preventing the charging of unconscionable interest rates in captive markets where there is no competition. In this regard, I think it would be useful if you could indicate what rate of return banks have historically made on consumer loans, what their present return is now and what interest rate would be necessary under present circumstances in order for them to meet their historical average.  (  Finally, during the hearings the Consumer Bankers Association testified that the Fed studied a number of firms and the degree of concentration in 213 Standard Metropolitan Statistical Areas and 233 county markets between 1966 and 1975 and concluded  1  4%  2-  nced that more markets experienced structural changes that enha ciate competition than changes that reduced it. I would appre it if you would furnish me with copies of those studies. 3, Please provide the information by Wednesday, September act Peter Kinzler, 1981. If you have any questions, you should cont Affairs Minority Counsel, Senate Banking, Housing and Urban Committee, at 224-9213.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Thank you for your cooperation in this matter. Sincerely,  CI r CJD:pkt  •  Jig ... q••o F Goviii,... \qp.• .• . 1,',1 II • !,,, 1. . ,..,', i- .411 dg :.: . e -''- 1 .-i.4 '1, -4`' • .• ',z)  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  ••0FA, '—c-F.cx- •• • •. —AL RE.• •..• •'  PAUL A. VOLCKER CHAIRMAN  August 26, 1981 The Honorable Larry Pressler United States Senate Washington, D.C. 20510 Dear Senator Pressler: Thank you for your recent letter regarding the impact of high interest rates. I appreciate having the views of your constituents, as well as your own about monetary policy. I want to assure you that my colleagues and I share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy seem to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. The Federal Reserve has not sought to bring about these high rates. Rather they are the inevitable result of the application of the measured monetary restraint needed to reduce inflationary forces in the economy. The only way in which the Federal Reserve could, in the short run, bring relief from the high rates, is by pouring reserves into the banking system and thus stimulating faster credit growth and faster monetary expansion. But, such a shift in the direction of policy would serve only to heighten the already deep-seated fears --reflected, among other places, in the very depressed bond markets--that the government is in fact not committed to seeing the fight against inflation through to a successful end. The added monetary stimulus would intensify price pressures in the economy, worsening the inflation problem that is at the root of today's high interest rates. We cannot end inflation without resolute application of policies of restraint on aggregate demand. Some of the damage of severe financial stress can be averted, however, if less of the burden of restraint is placed on monetary policy. The credit sensitive sectors of the economy would benefit greatly if, in particular, there were a less substantial federal government demand on the debt markets. Sustained, large budget deficits, which appear unavoidable unless there is further progress in cutting expenditures, can only tend to squeeze out private borrowers who do not have, in effect, first call on the nation's financial resources.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  BOARD OF.GOVERNORS OF THE  The honorable Larry Pressler Page Two  It is my hoke that the public's recognition of the sincerity of the government in its commitmen t to anti-inflationary restraint will show through in wage and pri ce decisions throughout the economy. There have been a few fav orable signs recently on the inflation front, but I'm afraid that these considerable degree reflected the impacts of the signs have in very harsh direct effects of high interest rates on spending dec isions. There has been little evidence of the kind of change in psychology that can greatly ease the adjustment from an inflation ary to a noninflationary ecnnomy. It is incumbent upon us in government to grasp the opportunity presented by these glican erings of progress to pursue polic-;es that will overcome the existi ng skepticism and move us morarapidly toward an environment of greater economic vitality and lower interest rates. As you can imagine, I am aware of the proposals for alteration of the Federal Reserve. I am par ticularly concerned that they might divert attention at this cru cial juncture from the economic realities with which we must contend. You may well be right that an easing of rates would defuse some of the political criticism the System is attracting, and you wil l readily understand that no onewwould welcome declines in interest rat es more than I-if those declines reflect and are consistent wit h success on the anti-inflationary effort. However, I fear tha t the "joy" would prove short-lived if we sought lower interest rat es at the expense of jeopardizing progress on inflation. Indeed, the effort would in -hose circumstances be counterproductive--not onl y interests of the Federal Reserve, but more important to the ly, to the nat,ion. I try not to underestimate the difficulties of the present situation, economically or politically. The thresh old of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflat ion around --or to put it more positively, the enormous opportunity chauge the debilitating economic trends of the pas we have to t decade or more I would be delighted to continue this dialogue ove r breakfast or otherwise if you so desire. ,•••  Sincerely, S/Paul A. Voickg  MJP:JSZ:PAV:pjt:sep ON-228) bcc: Mr. Kichline Mr. Prell Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned to Mr. Kichline. ii:111 PACKWOOD, ORE°  CHAIRMAN  ,I  BARRI , GOLDWATER. ARIZ. HARRISON H. SCHMITT. N. MEX.  HOWARD W. CANNON. NEV. RI till( LI_ •. LONG. LA.  JOHN C. DANFORTH. TAO. NANCY LA NOON IS A SIT DAUM, KANS.  ERNEST r. HOLLINGS. S.C. DANIEL K. INOUYE. HAWAII  LARRY PRESSLER. S. OAK. --.PCJCCE GORTON, v. A Sm.  WENDELL N. rono. KY. DONALD W. RIEGLE, JR., MICH.  TED STEVENS. ALASKA  J. JAMES EXON. NEWT,  DOC KASTEN. WIS.  HOWELL HEFLIN. ALA.  WILLIAM m. oirrehiorwrrre, cHirr covevsrL Jun•way L. SARVIS. SAINORITy CHsEIF COUNSEL EDWIN K. MALL, MINORITY GENERAL COUNSEL  "ZUnifeb ,Sfafez Zertafe COMMITTEE ON COMMERCE. SCIENCE. AND TRANSPORTATION WASHINGTON. D.C. 20510  P I  •  • • -  '  1961 AUG 13 n 4 P: 48 OFT1:1  e  ;  August 7, 1981  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th Street & Constitution Avenue Washington, D.C. 20551 Dear Chairman Volcker: I have just returned to Washington from South Dakota where I held a number of listening meetings across the state with my constituents. My constituents have informed me in the loudest and most direct manner that the current high interest rates are destroying the economic base of the state. The farms and small businesses of South Dakota are being crushed by the current rates because of their high dependence on credit. Farmers must borrow constantly to produce the year's crop. If family farmers are unable to borrow money at reasonable rates, and if small businesses do not have access to loan funds, the way will be paved for the corporate takeover of these enterprises. Many of the people I met with in the building and construction industry told me that they are currently on the verge of going out of business. Many in the housing industry have already gone out of business because of the slump in sales caused by the astronomically high interest rates. Some of my State's banks report that they have only thirty percent of their funds loaned out because few people can afford to borrow at the current rates. If present trends continue unabated, it is apparent that irrepairable damage will be done to many individuals engaged in agriculture and small business, as well as the economy at large. Therefore, I urge you to use your powers to seek the earliest possible reduction in interest rates. As you know, there are currently a number of proposals being discussed in the Congress regarding modifications of the Federal   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  i tf •.  •  Honorable Paul A. Volcker Page 2 August 7, 1981  Reserv's powers. I believe it would be the preferable and more orderly process if the Board took action on this matte r of interest rates. Otherwise, the extreme pressures which are building up in Congress because of interest rates may lead to a drastic and perhaps oversweeping revision of the Federal Reser ve Board. A move to reduce interest rates would go far to easin g these pressures and to restoring the vigor of our economy. Thank you for your consideration of this matter. Sin  arry Unite LP/jck   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ely,  ssler tates Senator  41.  August 26, 1931  The honorable John Tower United States Senate Washington, D.C. 20510 Dear Senator Tower: I am writinc in response to your request for comittent on correspondence you received from Ms. Joanne Potter. Ms. Potter's letter concerned Manufacturers hanover Trust Company's denial of her application for VISA and Master Card accounts. The Federal Reserve Lank of New Yorl- received identical correspondence from us. Potter on April 14, 1981, conducted an investigation of the natter, and responded to her on July 29, Manufacturers reviewed Ms. Potter's applications for VISA and 1981. Master Card and, based upon the bank's curient crcdit has approved both credit applications. Consequently, it is our understanding that this problem has been satisfactorily reso lved. I hope this information is helpful to you. me know if I may be of further assitance. Sincerely, (Signed) Wi  R. daniQw.  William R. Ealoni Special Assistant to the Board SJP:sep (#V-214) bcc: Ms. Potkai Mrs. nallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please let  JA.Kr  GARR, LITAH, CHAIRMAN  Action assigned Ja.net Hart  JOHN TO'. ER, TEX. J:.4IN HEINZ, PA.. riILLIAM L— ARMSTRONO, COLO.  HARPISON A. WILLIAMS, JR.. N.j. WILLIAM PROXMIRE, NIS. ALAN CR ANSTON. C.ALI  RICHARD G. LUGAR. IND. ALFONSE M.[...AMATO, N.Y. ."09•44 H. CHATEE R.I.  DONALD  JR.. MICH. PAIJL S. SARRANIS. PAD. CHRISTOPHEA J. DODD, CONN.  HARRISON &CHM ITT, N. M  AIJIN  w. ntrot.x,  DIXON,  sTArr  DIR ECTOR M. DANNY WALL, HOWARD A. MENIELL, MINORITY STAFF DIRIECTOR ANZ) COUNSEL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Zfafes Zetrate COMMITTEE ON SIANK1NG, HOUSING, AND URBAN AFFAIRS WASHINGITON, D.C. 20510  ("D  r) I*1 C3 -"IP "r1 ••-4  u5 co c_ r-  •••si  UD T.:11 _IC  July 23, 1981  •• ;  The Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D. C. 20551 Dear Mr. Chairman: Enclosed is a copy of a self-explanatory letter that I have received from Joanne M. Potter, Houston, Texas, concerning her credit card problem with Manufacturers Hanover Trust Company. I would very much your reviewing this letter and sending me a response in order that I may reply to my constituent. Sincerely yours, 111•••••••••••••.••••••••••  John Tower JT:tbr enclosure  • f• I  •' 1 . !el  .   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  April 6, 1981  Sen3tor John Tower Chairman, Senate Armed Services Committee 142 Russell Senate Office Building Washington, D.C. 20510 Sir: Enclosed is a letter I sent to Manufacturers Hanover and Trust Co., concerning their biased and discriminatory practices towards a spouse of a military person (active or retired). I would appreciate your follow-up on this matter. Sincerely, ,  /1) (26t-7,Y(  Joanne N. Potter Copy to:  Manufacturers Hanover Trust  Api it u,  i:61  •  Supervisor Retail Card Services Department Manufacturers Hanover Trust Co. :uff ..' Avenue hicksvil -le, NY 11801 Sir: This is a letter to protest your biased and discriminatory policies and also to inform you of an inconsistent policy interpretation between your Credit Division and your Collection Division. My husband, Bert T. Potter, and I, Joanne M. Potter, had exemplarily maintained a joint Master Charge (card) account with you for approximately four years. In mid -January, 1981, Bert included a letter with our account payment requesting that his name be dropped from the account and that it be in just my name. About a week later, Bert returned a phone call to Mrs. Santori of your Collection Division. She was most courteous and suggested instead of dropping his name from our account, it would be much easier to perform a "Marital". She indicated the "Marital" was a MHT routine practice and that: 1. 2.  Bert and I cut our Master Charge cards in half and return them to her. Close out our account.  She said applications would then be sent to us in case either of us desired to open a new account which would routinely be accomplished because of MHT's "Marital" policy. Bert expressed concern about closina the account but was assured there would be no problem. Thus the above was accomplished. I received my application form about a week later (end of January) from Mrs. Santori. I completed and returned it to MHT almost immediately. On Saturday, March 14, 1981, I received a "Denial" from your Credit Division and the reasons given were not Germane to Your "rarital" policy as Mrs. Santori presented to Bert. A copy of the "Denial" is attached. On Monday, March 16, 1931, Bert phoned Mrs. Santori to get the "story". She could not understand the "Denial" but affirmed that your "Marital" policy was as she had described it in January. Again she was most cooperative and courteous and referred Bert to your Credit Division. Understandably, Bert could not get any information from your Credit Division because of the Privacy Act. So on Tuesday, March 17, 1981, I phoned and talked to the Credit Division. After my conversation, I truthfully believe that your Collection and your Credit Divisions have different concepts of your "Marital" policy. I also believe MHT is biased and discriminatory against women.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Page -2- As concerns your "denial" reasons, Fert retired, honorably, from the U. S. Coast Guard (as a Commander (0-5)) in 197 and since then we have resided at the above address. We moved every two to four years prior to 1978, and we have only lived here since his retirement which, in turn, has caused insufficient time for my local employment. I believe your residency and length of employment reasons biased and discriminatory against spouses of military personnel (active or retired). Furthermore, they should not even be an issue in your "Mar:tal" policy, as presented by Mrs. Santori. A reconsideration is requested. Sincerely, (-)  Aanne M. Potter  Copy to:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Senator John Tower Chairman, Senate Armed Services Committee Rep. Melvin Price Chairman, House Armed Services Committee Senator Alan K. Simpson Chairman, Senate Committee on Veteran's Affairs Rep. G. V. (Sonny) Montgomery Chairman, House Committee on Veteran's Affairs National Organization For Women VADM Charles S. Minter, Jr. USN (Ret.) President, The Retired Officer's Association Thomas G. Bousquet, Attorney at Law Credit Bureau, Houston, TX Federal Reserve Bank of New York  cox;  cn ;=-)  ;LI  C)  0 c-4 tio eTt  C's  co al • 40 •-•  -4 [  *el .1 :D H lee .4:  :;••• 0 rY.  . 44  0  (1)  41.  n •1: to  •  )  (-) E -•  •-1.  ( )  n  (Li 4-4  ) 1 ills  . .4 . 4  i 4:  1  .1; u)  fe• E-1 0  :1:  rY. 0 11, I  fl  ) 4-  t ()  •• F-1 0 () C)  , . 114  1 • lel pi e l2 !:1 ▪ . E •1 1re. • • (n , 1-1 0 id 14 E-4  ▪  rf, fel F--4  tie (4 0 (4 1.14  111  1-1  •1:  11  z  U)  If)  4-1  :4  Iri)  • .-1  44 0 0  :1: (.)  •  1  () 1  laI -J  I  W.  1 -4 [  (1 4  )  • •4: () )  c) . 7.  ill :1; E. i  (14  0 s_l .1 0  1-1  :4 O E i  „ .-  ILI  n ..-> o  r,i ,_. :4 u) Fe •r, ,e:() '  (I)[ I 1- 1 :Z4 CI U) (4.1  P. 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".  .4:  ,I. 0  ' -I " 1- 1 1-4  (r. 1 41 0 LI)  n co c i ri, ki o [ i to c) ce. lie  .i-11 :--. :1:  /-1  n r_)  4:  u) (11 :4 i 4 E 4  El :I: Ill C1'. 11 4 0 to lIl ir) *A: 0 E-4 C) :-) ..-". r) 14 N . .1  H -1  t--1 LA  El  Ai.  t--4 0 1/1 :4  Ili  F-4  Z .1_ U r4 0 E-4 Ill •-• E i (-) ° E-1 (1) -r. :4 0  0 11 1-1 III E I () :fa, .c E 1 I-I C)  C.) C.) 1 1 1  Li  4 [I) itll: lu) -t: ril *Z C:1 0  1,1 ..-:.  F- 4  • hi  4  C)  Ill  4  (4 4  :_-) i i ::)  4-1 0 i 1 .--1 ..L. ." 41. .  I 4 .... hi  --4 (11 [II  in  [Ji  •__I re, 0  41  I 1  E-) • 14  (-4  1 1  4 0 ,-) 4 -4  .....  el: •  111 :•I U) ..': 14 ()  I-I  1 1 (7) .--  :•4 `71. i li iPii  4-4  I  4  I  ri :.) .1  . r1.I, ..l i -1,' -1 O F I : -.:1 3 ' E rl . 4 r11 - [11 cn 0 _'.1 ill 11 1 7e-; 01 I-4 U) 0 til El ri:  :_-)  0 :1') :3 ....=:. 0 ill  1  :" . E4 -1. I.-1 P-4 (.) co .1: (D :_.) -, ' 7 - :,::. -1: Ili ,, ... 14 „ ;_.--) :r1, 1-4 III 1 1 1  ;I : i  lal  4  ": . 4 -) () i  1 -1  1  C) 1  :1* . (..) 01  ril ill  W. 4"I,  1 14  (n .. u) se. Le. 0 '... i).: ():.:. (.) 14 fll 1111-1 Ill ; A  • 4 U1 :1•-:  . 'I  ie.. III IA; ;I: tr'. te. .1:(-1 i e 1 I () e. 0 ):  I___-4  01 14 41  0):3 o c). (:.,-.,.:  u) (I'. •1:  4 1  :-.".  (ei  61:  o .1 . , 1 i :_i .1 : A 1/1  1  ..11.1:-: ()  () te.  141  .1:, t • u) u)  ; 1 ;I: Ai: (..)  ••  e  •  • I:  ••••••••••  a) ._  ()  •-• -C  0 CL  0 •-•  1.1J  0  (1..) .  cr)  a)  rt.) a) a_   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COIPANY  iNvvs , N,194a4L \)- t)a(-) .  .  •• of GOIT ••  •Q '41-  R4,..  • ‘.- ,O" . 0-15 •• ••coc ;,..4, •• //;;; •c : .• .. • .T. 1 1 ... r • -4 ‘ ••-s-<••• \:V14{{ 1{,U1 \' ''' • ....-? . e":,-;•44 ..:: :<.. • • Oc•-••-' _' --- ,9- .• '. RAI RI ''.  BOARD Or 730VERNORS TH E  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  August 25, 1981  PAW_ A. VOLCKER C HAI RMAN  The Honorable Ronald M. Mottl House of Representatives Washington, D.C. 20515 Dear Mr. Mottl: I am writing in response to your letter of Xugust 11 in which you express concern about Federal Reserve policy and urge that I resign. As you might expect, I am not inclined to get into a personal defense. It would, in any event, detract from a discussion of the more substantive issue raised by your letter. That more substantive issue is whethe r we are pursuing a policy aimed, as you put it, at ben efiting the "privileged few." I must take strong exception with such an assertion. Our policies are directed toward solvin g the problem that most Americans have identified as our nation 's greatest economic ill--namely, the inflation that has escalated over the past decade, imposing increasing strain s and distortions on our financial system and economy. The Federal Reserve has only limite d tools at its disposal in fighting inflation. But it can make an absolute crucial contribution: it can impose the res traint on the growth of money that is a necessary ingredient in any effort to restore price stability. This is precisely what the System is endeavoring to do. It is seeking a gradual modera tion of the trend growth of money, with an eye toward achieving non-inflationary rates of expansion as soon as is possible wit hout undue disruption of the economy. Monetary policy is inherently a rather blunt instrument; the burden of restraint falls uneven ly across sectors of the economy. Those areas of activity whe re expenditures tend to be credit financed feel direct and rel atively strong initial effects. This is not inherently a matter of big business versus small business and consumers: the impact cuts across such lines. Some of the unevenness of anti-infl ationary restraint can be avoided if less of the bur den were to be placed on monetary policy. If, in particular, the fed eral government's demands on   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The Honorable Ronald n. Mottl Page Two  tl:L. credit markets are reduced through budgetary restraint, then the Lurden of the fight against inflation can be Gpread more evenly. Much of the tension in the capital markets today, in fact, reflects concerns among investors that large federal deficits will need to be financed for some time to come. I recognize that these arc very difficult times for many in our economy. Some hopeful signs of progress in the antiinflation battle have become visible of late. It would be a tragedy, particularly given the costs that have been iticurred to date, if we were to back off in our effort now. If, instead, we stick to our course with a degree of patience, I believe we can look forward to the achievement of a healthier economic environment in which all Americans will have greater opportunity for prosperity. Sincerely, S/Paul 11 Volcker MJP:JSZ:AFC:pjt (#V-229) bcc: Mr. Kichline Mr. Zeiscl Mr. Prell Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned to Mr. Kichline. SUI3URE3^ N CAUCUS FOUNDER ANCI CO-CHAIRMAN  RONALD M. MOTTL 23D DIVTRICT. OHIO cciAmrrrrEs1  WASHINOTON orr.cr, 2459 RAYIPURN Hausa Orricc DUILDINO Ta.ars-ioNe, (202) 225-5731  VETERANS' AFFAIRS Sum0mwrrcrf.: CHA1RmAN, 1-40`1'!TALS AND HEALTH CARE  Congrt55 of the Einittb igatts'  DI STRICT' OrFIC r3• 2951 FEDCRAL OPTIC( BIJILDIHO CLEVTLAND. 01410 44199  31)oui5e of Iltprefsentatibui taagbingtonAD.c. 20515  Trt_r_prooNc: (216) 522-4382  HOUSING AND MEMORIAL AFFAIRS  ENERGY AND COMMERCE  14812 OfTROIT AVENUE. /207 LAIC UNDO°. OH io  OVERSIGHT AND  August 11, 1981  TELECOMmUNiCATIoNs. CON. :.uMER PROTECTION. AND FINANCE  44107  Tin-Errata; (216) 522-7152 5393,14.41mRoAo 44129  PARMA. OHIO  Tii..iPi4orsr,(216) 522-7090  (""t -11  Mr. Paul A. Volcker Chairman, Board of Governors Federal Reserve System Twentieth Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman:  CD -an rr:  (4.C.3  .11%1 ' ler% :77  Cr)  I am writing to protest, once again, your appalling monetary CO policy which keeps the construction, home sales and auto industries in a depression, but which permits the giant corporations to have almost unlimited lines of bank credit at the cheapest available rates. It must sicken the young couple struggling to save a down payment on a home and meet a 17 percent mortgage, to read reports such as that appearing in yesterday's New York Times stating that at least 13 major corporations have lined up $46 billion in credit lines ranging in size from $1 billion to $6 billion. Yet these massive purchases of credit are not for the purpose of improving this nation's productive capacity -the Times reported that most of the credit arrangements are to finance takeovers of other companies. Aside from banks turn can coerce profitable  the staggering size of these credit lines while the small borrowers away, these corporations reportedly such low interest rates as to make the loans barely for the banks.  These reports simply demonstrate what I and many others have feared as the Fed blindly pursues a tight money policy. That is, it is the small businessman and the individual home or car buyer who suffer from Fed policies, while the business giants merrily roll along borrowing and spending as they please. Perhaps that is why your policies find such favor in the corporate board rooms. Such policies are an affront to the average American. I again urge your resignation, so that we might restore public faith that our economic policies are implemented for the benefit of all and not for the privileged few. erel  RO ALD M. MOT'L Member of Congress RMM/km  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .  •  August 25, 1981  The Honorable Robert E. Badham Rouse of Representatives Washington, D.C. 20515 Dear Mr. Badham: Thank you for your letter of August 20 recommending Mr. Michael E. Thomas to serve on the Board's Consumer Advisory Council. I can assure you that Mr. Thomas' qualifications will receive full consideration when the Board makes the appointments to the Council, to fill the positions of individuals whose terms expire on December 1981. I appreciate your taking the time to bring him to our attention. Sincerely, S/Paul  Volcket  CO:sep (0-237) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  *ARMED SERVIct 51./RCOkIv  COMMITTEE  wasi4INGToN orrocc,  Tr  1108 LONGWORTH HOUSE Orrtcr BulUDINO  PROcUREMENT AN') MILITARY NUCLEAR S1—:,TEMS  WASHINGTON. D.C.  20515  (202) 225-5611  RE' ,, ARCH AND CEVELoRMI NT HOUSr: ADMINISTRATION CON1N1IT TEE  Congre55 of tlic laniteb aqatc5  cHOCOMMITTEES: COMMITTEE ORGAP.IlzATION  PoufSe of ;teprOentatibt5  DISTRICT orricr, 1649 WESTCLIFF DRIVE NEWPORT BEACH. CALIFORNIA  92660  (714) 631-0040  ACCOUNTS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ROBERT E. BADHAM DISTRICT.CALIFORNIA  40TH  411/ August 20, 1981  Mr. Paul M. Volker, Chairman Board of Governors of the Federal Reserve Board Washington, D.C. 20551  Dear Mr. Volker: I understand that the Board will soon begin the process of evaluating the candidates to fill the vacancies on the 1982 Consumer Advisory Council. I am pleased to recommend the nomination of Michael E. Thomas for membership on the council. Michael is a constituent of the 40th Conaressonal District, which I represent in the United States House of Representatives. After scanning Michael's resume, you will soon discover that he is well versed in finance, economics and systems, all of which would make him a valuable addition to the council. I would appreciate your consideration of Michael and have enclosed a copy of his resume for your review.  CordiaZ r7/-f 1}/ / ROBERT E. BhDHAM Member of Congress  .*  REB:an:jl Enclosure  I' • 0:0  Sam.  r .  •• •  :7;  •  -)  •  rt  _771 ^ CO :''t  ..L"*"•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  August 6, 1961  The lionoraple Ray Kogovsek House of Representatives 'ilashington, D. C. 20515 1;ear Conressman Kogovsek: Thank you for your recent letter outlining the program for 50 community leaders from 4estern Colorado that you and Congressman tirown are arranging. Unfortunately, a prior commitment will prevent me from participating in the prcgram. The September 30 date conflicts with the annual meeting of the International Monetary Fund and World Bank which will reguim my attention during that particular week. However, Governor Lyle E. Gramley has agreed to represent the 3oard at the seminar and will be pleased to meet with your group beginning at 3:15 p.m. on that date. Sincerely,  cc:  Mrs. Mallardi #216  JRC:tjf IDENTICAL LETTER TO CONGRESSMAN HANK BROWN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  twgust 6, 1961  The Honoraple Ray Kogovsek House of Representatives 4ashington, D. C. 20515 '6ear Congressman Kogovsek: Tnank you for your recent letter outlining the program for 50 community leaders from *stern Colorado that you and Congressman Brown are arranging. Unfortunately, a prior commitment will prevent we from participating in the program. The September 30 date conflicts with the annual meeting of the International Monetary Fund and World Bank which will require my attention during that particular week. However, Governor Lyle E. Gramley has agreed to represent the 3oard at the seminar and will be pleased to meet with your group beginning at 3:15 p.m. on that date. Sincerely,  cc:  Mrs. Mallard. ' #216  JRC:tjf IDEATICAL LETTER TO CONGRESSMAN HANK BROWN  4-7;)tate5 Congre511 of tbe Elnittb' 3bouot of Reprecientatitig JUL 3°"I°: 34  3 re 2°51PrFIGE " a°ingt"' July 27, 1981  to The Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue between 20th and 21st Streets Washington, D. C. 20551 Dear Chairman Volcker: On September 30 and October 1, we will serve as co-hosts for a Western Colorado Washington Seminar. It is expected that approximately fifty community leaders from areas of the Third and Fourth Congressional Districts of Colorado that lie west of the Continental Divide will spend two days here in Washington listening to and asking questions of representatives of both the Executive and Legislative Branches. We invite you to be a participant in this program, and would be grateful if you could meet with our group from 3:15 to 4:00 on Wednesday, September 30. We recognize the problems with scheduling, but it is our hope that an invitation extended in advance will find you with an opening in your schedule at the time mentioned above. If there is a need to shift to some other time during the twoday period, we will do everything possible to make the change, because we are anxious to have your participation in this event. Either Vera Lou Durigon, (225-4761) or Bill Cleary, (225-4676) will be waiting to work with your office in making the arrangements. a  Again, it is our sincere hope that you will be able to take part in this program. Thanking you in advance, we remain Sincerely yours,  irl r4C7 RAY KOGOVS Member of Con ressv ell   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,-  HANK BROWN Member of Congress  fr fro ,  GREGORY W. CARMAN THIRD DI STR ICT, NEW YORK  WASHINGTON OFFICE: 1729 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515  COMM ITTEES  (202) 225-3865  BANKING. FINANCE AND URBAN AFFAIRS  Congre  of the Einiteb  tate5  SUBCOMMITTEES: INTERNATIONAL TRADE, INVESTMENT AND MONETARY POLICY HOUSING AND COMMUNITY DEVELOPMENT  ji)oute of RepreOntatib0  DISTR ICT OFFICE: 322A MAIN STREET HUNTINGTON, NEW YORK (516) 549-8400  11743  Utietzbington, Ile. 20515  GENERAL OVERSIGHT AND RENEGOTIATION CONSUMER AFFAIRS SELECT COM MITTEE ON AGING  August 6, 1981  SUBCOmmiTTEES: RETIREMENT INCOME AND EMPLOYMENT HOUSING AND CONSUMER INTERESTS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  M  U0  The Honorable Paul A. Volcker Chairman Federal Reserve Board 20th St. and ConstitutioAve. NW Washington, D. C. 20051  =21  .  tip  Cl  1:51  Dear Mr. Chairman: Thank you for your recent letter regarding Money Market Iiinds as it relates to H.R. 2980. I am sorry for the delay in responding but I have studied the issue carefully. I have concluded that the points you raised are correct and that H.R. 2980 should not be supported. Therefore, I will not support enactment of this measure. I certainly appreciate the time and effort you clearly took to express your opinion on this matter, and I hope you will keep me abreast of your thinking on the other important issues of the day. I pledged, when elected, that I would reflect the good, decent, common sense of the people, and you have made that pledge a reality. With kind regards, I am Cordially,  Gre ry W. Carman Member of Congress  •  . •oF GOv ▪ •. ' 0 t4' • q-  ••  ROARD DF.GOVERNORS  /-//,‘  OF THE  • :6 poi  ---•5 c‘' •• •0  FEDERAL RESERVE SYSTEM F— •  WASHINGTON, D. C. 20551  c•5 •  R- • •• ' (?4LR— OA' • • • • ...•*  August 20, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Ted Stevens Chairman Subcommittee on Civil Service, Post Office, and General Services Committee on Governmental Affairs United States Senate Washington, D.C. 20510 Dear Chairman Stevens: Thank you for your letter on the problem of senior executives leaving the Federal Government due to inadequate pay. This is a serious concern for the Federal Reserve, as I am sure it is for other government agencies, and I appreciate the opportunity to comment. As you know, the Federal Reserve Board is not part of the Federal Government's Senior Executive Service (SES); however, compensation of the Board's official staff parallels very closely the SES pay structure, including the limitation on pay. Our inability to grant salary increases to our top-level people has had a harmful effect on morale and has severely distorted pay relationships. As a result of this problem, salary distinctions are insufficient to reflect accurately differences in levels of responsibility. Due to the pay cap on executives salaries, the Board's officer salary structure is so severely compacted that the salaries of 76 percent of the Board's official staff are currently frozen; after October 1 of this year, assuming retention of the pay cap, that figure will increase to 91 percent. Because of the pay compaction problem, the Board is faced with the problem of promoting employees to higher levels of responsibility with little or no increase in salary. Within the past year, a number of key officials have resigned from the Board, partly or largely for reasons dealing with inadequate compensation. Most of these employees have accepted employment offers which exceeded their Board salaries by 70 percent and more. (You may be interested in the enclosed listing of officers who left the Board in 1981.) Although Federal salaries cannot match those in the private sector, an increase in salary level s of modest proportions may have averted the exodus of some of these people. Thus far this year, the annualized attrition rate for   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -  The Honorahly Ted :tevyns Page Two  the Board's official staff is exc,eedini, 20 pereent, almost double the rate experienced in 1980 andlnearly triple the rate experienced in 1979. In the post, when pay was more competitive and the attrition rate for our key senior offil,cials was fairly low and stable, most of ouy vacancies were quicklly filled. But with the recent sharp increase in resignations among our key officials, it has become extremely difficult to find replacie ments with the quality of experience necessary to cover 'critica l nrens. Unfortunately, we can no longer rely as luiavily on recr uitinh competent replacements from outside of the h,deral Reserve due to the increased gap between our salary lelels and thos e offered in the private sector. The Federal Reserve has traditionally been staffed at senior levels by people intent on making the Federal Reserve their career. However, to an increasing degree,, we now find ourselves training people who aff- er a number of year:leave for greater financial rewards. Uhile many dedicated individuals have made sacrifices in thy past, today's salary ;:ip is too great for us to expect to be ahle to retain many of thes e individuals. I am greatly concerned that lul"ther erosion of talent could result in a decline of overall Board effectiveness. I realize that in a period of severe budgetin restraimt it is difficult to argue for pay increases for the highest paid government workers. However, I do believe the situation has beco me sufficiently serious that the only responsilde course is to take prompt action to lift the pay cap. Agaln, thank you for the opportunity to comment. Sincerely,  Wool A. Volcker __ ev,e-ckNikAk ETM:JW:RS:vcd (V-222) bcc :   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Vice Chairman Schultz Mr. Mulrenin Mr. Weis Mr. Syron Mr. Salvaggio Mrs. Mallardi (2)  -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Officers Leaving the Board in 1981 (As of 7-28-81)  1. 2. 3. 4. 5. 6. 7. 8. 9. 10.  Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer  New Salary  Reason  $ 90,000 61,000 110,000 62,000 125,000 90,000 90,000 75,000 70,000  Retirement Pay Pay Pay Greater Opportunity Pay Pay Pay Pay Pay and Greater Respon.  August 17, 1981  The iloporaLle Ld Bethune Kouse of Pepresentatives ;;aohin(jton, D.C. 20515 Ucar 1:6; Thank you for your letter of July 23 recommending D. Yancey as a mcmlier of the Board's Consumer Advisory Council. I cr.n assure you that rr. Yancey's qualifications will receive full consideration when the Board makes the 1981 appointracnts to the Council. Again, thank you for your interest. Sincerely,  SZ CO:pjt CA7-225) bcc: Er.i. Bray (w/copy of incoming) Lrs. (2).7   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  EQ. BETHUNE  COMMITTEES:  2ND DISTRICT. ARKANSAS  BUDGET BANKING, FINANCE AND URBAN AFFAIRS  Congre55of tbeillnitebtate5 WASHINGTON OFFICE: 1535 LONGWORTH HOUSE OFFICE BUILDING WAsHiNGToNrki).C. 20515 • (202) 2Z5-2506  Aptick  DISTRICT OFFICE: 1527 FEDERAL BUILDING 700 WEST CAPITOL LITTLE ROCK, ARKANSAS 72201 (501) 378-5941  of ikeprezentatibeg  Wasijington, 33.e. 20515  • •  :•• •  •• •.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a:  :.;4ry. .16% L r-  CO •  July 23, 1981 )  The Honorable Paul A. Volcker Chairman Board of Directors Federal Reserve System Washington, D. C. 20551 Dear Mr. Chairman: By the attached letter to Dolores Smith of your staff, I have suggested the potential appointment of E. D. Yancey, of Searcy, Arkansas, to the Fed's Consumer Advisory Council. Anything you can do to make certain that this suggestion receives serious consideration will be appreciated.  Member of Congress ts.  EB/jct  :  Enclosure  •  1.;  . •  •  ED  r  E'.::i. HUNE  ....  11 "(a.T DANK INC. FINANCE AN= URDAN At F- AIRS  Coligre5fsvi.tbe011itebtates' /.'_.1-11NG Tor.)N Ls  1535 LON(_.',.% 111 1-10(ISU OFF ICL WAr.04INGTON. D C. 20515 (202) 221.:-25C.,6   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DISTRICT OF F ICE:  IC.E"  3I)ou.s.)e 1 of Ikeprt5nitatilm5 Martintort, 73.e. 20315  1527 FLDFRAL Dt/ILOINa 700 Wrsr CAF'l TOL LI1 TLE ROCK. ARKANSAS 7;.2 (501) 378-5941  July 23, 1981  Ms. Dolores S. Smith Assistant Director Division of Consumer and Community Affairs Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Ms. Smith: Recontly I was advised by the Federal Reserve Board of its desire to receive the nomination of qualified individuals to serve on its Consumer Advisory Council. By the enclosed resume, I would like to suggest that serious consideration be given to tho posslbility of naming E. D. Yancey, of Searcy, Arkansas, to one of those positions. Until recently, Mr. Yancey served as the Chief Executive Officer of First Security Bank in Searcy. That experience, plus many other related experiences as an entrepreneur, consultant and community activist, give E. D. a unique capacity to speak authoritatively to the needs of consumers within the framework of the Federal Reserve. I think he would make an outstanding addition to the Advisory Council and help the Fed meet its obligations under the Consumer Credit Protection Act. If I can provide any additional information, please don't hesitate to contact me. Sincerely,  Ed Bethune Member of Congress EB/jct Enclosure  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information.  Citation Information Document Type: Resume Citations:  Number of Pages Removed: 3  Resume, E.D. Yancey, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  (N\ascv,i4L. -a •  0V (•( I  f  •  • 7,/ •`  ::1 : "4  '•  b  •  . ‘-‘, 15 • )4: .•  '4' •  _ . • ..  BOARD OF  50VERNORS  CV "HE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  August 17, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable William E. Dannemeyer House of Representatives Washington, D.C. 20515 Dear Mr. Dannemeyer: On behalf of the members of the Board, I am responding to the issues you raised in your letter of July 27. I read it with great interest and with concern because I believe it refle cts some serious misunderstanding of monetary policy and the trend of monetary growth. Let's agree that today's high interest rates owe their existence in some degree to past and current inflation, and set aside the legitimate debate about how much excessive monet ary growth accommodated inflation in the past. What matters now is looking ahead. Contrary to your observation, I think you would be hard pressed to find very many people, particularly in finan cial markets, who think there is no visible direction to monetary policy. While they may not necessarily agree with it, I think most observers now have a clearer view of the thrust of monetary policy than has been true for some time, and that the money supply is "under control." That does not mean we can control, or should try to control, money fluctuating from week to week or month to month . On the issue of expectations, while these influences are very difficult to nail down, there is no straight-forward reason for short-run fluctuations in money growth by itself to result in a high level of interest rates. The public's demand for money is inherently very volatile from week to week or from month to month , and the compelling conclusion of much empirical work done here and elsewhere is that to eradicate the resulting short-run variations in money would require extremely large fluctuations in interest rates. Moreover, all evidence indicates these rate fluctuations would serve no useful purpose, because short-run variations in money leave no significant imprint on the economy (since the impact of money on economic activity is distributed over a lengthy time span). You also raised questions about actual monetary growth and about Federal Reserve operating procedures. On the forme r issue, I should note that the figures you cite on monetary growt h are calculated in terms of six-month moving averages. That does not happen to be the way we typically present our targets, but   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable William E. Dannemeyer Page Two  certainly there have been fluctuations over a period of a quarter or two. nore important, the data you cite are not adjus ted for shifts into NOW accounts from Eaving accounts and other assets. Failure to make this adjustment can result in serious disto rtions, and a misreading of the trend. The reasons for the high growt h rates you cite are (1) a surge in the money stock last summer for four or five months and early fall, much of which offse t the weakness in the spring, and (2) the lack of proper allow ance for the impact of shifting out of savings deposits and other such assets into NOW accounts. I think that if you examine the enclosed chart from our mid-year report, you will see that Ml-B growth thus far this year have been quite moderate. In fact, through July it has falle n below the 3-1/2 percent lower bound of its range--a performanc e that seems appropriate in light of the relatively strong growt h in the broader monetary aggregates and the evident changes in the public's cash management behavior. (I would gather from the testimony of several Administration officials before Congress as well as their public statements, that the Administration also views this performance as consistent with its desires for monetary restraint.) As regards the question of operating procedures, I frankly believe that the outstanding issues on this score are of second order importance. Many of the changes in procedure that have been mentioned frequently would be of limited value in terms of monetary control over time spans of economic significance, say several months. The question is whether these changes would be worth the sizable costs they might impose, in some cases, on financial institutions and markets. We are, however, continuing to examine various options, such as a return to contemporaneous reserve accounting or a change in discount window policy, that might enhance short-run monetary control. Finally, with respect to the impact of federal budget deficits on interest rates, it is our view, and I might note, obviously that of most credit market participants that, other things equal, large federal demands on the credit markets do add to the upward pressures on interest rates. Too many factors are involved to give a simple quantitative answer to the question of how much of a deficit reduction would be necessary to resul t in a significant decline in interest rates; all that can be said with reliable accuracy is that, the more the Congress does to restrain federal spending and reduce the deficit, the less will be the pressures on credit markets.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable William E. Dannernyer Page Three  I hope that these remarks will be helpful. While I don't necoarily expect you to agree with our policies, no one is well-served Ly unnecessary confusion about what we are doing. If you would like to explore these issues further, please let lac know. Sincerely,  SZPaul A. Mau  Lnclosure  xaexax MJP:JSZ:RFS:pjt (4V-213) bcc: Mr. Prell Mr. Zeisel Mrs. Lallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ml-B   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Billions of dollars Annual Rates of Growth Adjusted  450  060  ,••••  •••••  • woo'  ..••••  ••••••  woo  goo  woo  loom  3', 2°o 430  ••••••  00° , "'"'"  .••••  440  .00  • •••• ••01.  420  410  1  1  1980  1  1  1  1  1  1  1 1981  1  1 •  1  2 2 Percent 1980 04 to 1981 June  • 610  ogio  1980 04 to 1981 02  0 7 Percent  • VALLIAM E. DANNEMEYER 39TH DISTRICT. CALIFORNIA  REPLY. IF ANY TO. •' •  COMMITTEES: , ENERGY AND COMMERCE  WASHINGTON orricrs C 1032 Lowswonru Housr Orricr Bun. WASHINGTON. D.C. 20515 (202) 225-4111  POST OFFICE AND CIVIL SERVICE  DISTRICT MTGE: 1370 BREA BoutroArto Surra 108  Congre5 of tbe tinitcb iptate5  0  FULLERTON. CALIFORNIA 921135 (714) 992-0141  31)ouck of itepresientatiinz lazutington, rte. 20515 rin  (.40 CD  July 27, 1981  C.• r •I  TN,  A o'  Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 20th at Constitution, N.W. Washington, D.C. 20551  r-  C) (":"3  CO  .7)  1:71 • 110 '71  r $i  ••••••  r) 7 ' 0  • 1•1•• • •  Dear Chairman Volcker:  f•J CD  •  •  It is certainly no secret that high interest rates are due to excessive growth in the money supply, over which you have jurisdiction. It is equally clear that interest rates are remaining at or near record levels because of erratic fluctuations in monetary growth. And it is becoming more apparent that growing concern over economic indicators is due to our psychological conditioning that interest rates will continue to rollercoaster at a high average because there is no visible direction to monetary policy. The President has stated that he wants steady but moderate (i.e. slow) growth, a policy which the Federal Reserve Board must implement. Do you contend that the Fed cannot control monetary growth in this manner ? And if you can control it, why is this not being undertaken? If it is being undertaken, do you feel that you have effective control over the situation? Milton Friedman, in an article published in Newsweek (June 15, 1981), argues that, regarding the setting of and achieving target rates of growth, "the Fed has adequate power to do so. The failure reflects rather the Fed's unwillingness to change its operating procedures to enable it to control monetary growth more promptly and more reliab ly." Do you agree with Dr. Friedman's contention that you do indeed have the authority to implement monetary policy? If you do, why is the Fed not using all available options to ensure proper implementation? Furthermore, Mr. Chairman, you testified on July 22 that you aim to hold Ml-B growth to 3.5% rather than midway in the 3.5-to-6% range of six months ago. Money stock measures printed in the June 1981 Econom ic Indicators, prepared by the Council of Economic Advisers, however, contradict this assertion that rates have been in the 3.5-to-6% range.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  ••  From the attached chart, we find that Ml-B has been growing at a rate of from 6-to-10.2% (annual rate) in the past five months, proceeding in a generally downward trepd from the high of 13.4% set in October of last year. How do you reconcile "in the 3.5-to-6% range" from 6-to10.2%? Finally, if deficits -- because of enlarging the money supply by having to finance the debt -- are a chief cause of high interest rates, how much will the FY 1982 deficit (currently projected at $60.7 billion) have to be pared in order to bring down interest rates? There is small wonder why businessmen and economists from Wall Street to Main Street mistrust promises of control and direction of the money supply. They are banking on continued confusion.  Very truly yours,  /7 /  r ,1(7 7 7 • /4:',1) /  ' 7ce }.>  am L Vanrierri441: Member of Congres/ Vti1i  WED/bn Encl   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a) b) c) d) e)  MONLY STOCK 1 COMPONENTS JAN Ml-A 375.1 Ml-B 44.1 M2 1,261.6 M3 307.5 419.8 total 2,408.1 change +30.7  1981 MONETARY AGGREGATES (in $ billion) FEB 367.2 54.0 1,274.5 312.2 423.3 2,431.2 +23.1  MAR 365 8 60.0 1,292.6 307.5 416.4 2,442.3  APR 3 MAY 3 366.6 364.9 67.1 66.6 1 304.1 1 312.2 306.5 316.1 n/a 1112 ___ (2,044.3) (2,059.8) (+18.4) (+15.5)  CHANGE ON ANNUAL BASIS a) b) c) d) e)  MONLY STOCK AGGREGAMS Ml -A Ml-B M2 M3  JAN -.8 +10.2 48.4 +12.7 n/a  FEB -8.0 +7.2 +7.8 +12.1 n/a  MAR -10.4 +6.9 +9.1 +12.3 n/a  APR -11.7 i8.5 +10.4 +12.5 n/a  MAY -.0 ---1-73 +6.0 +9.2 +11.5 n/a  Notes: 1 - components are separated in order to show individual changes   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ml-A = currency + demand deposits + travelers checks Ml-B = other checkable deposits at banks & thrift institutions M2 = overnight repurchase agreements & Eurodollars + money market mutual fund shares + savings & small time deposits at banks & thrift institutions M3 = large time deposits +-term repurchase agreements = other liquid assets (Savings bonds + short-term Treasury securities + bankers' acceptances + commercial paper + term Eurodollars 2 - components are added to show aggregates M1 -A = a) only Ml-B = a) + b) M2 Ml-B + c) M3 = M2 + d) M3 + e) - totals in parentheses do not include L component  ••  1977-80 !,!ONETARY AGGREGATES (in $ billion) VnNLY STOCK AGGREGATES Ml-A Ml-B M2 M3 L  1977 331.4 336.4 1,296.4 1,462.5 1,722.7  1978 354.8 364.2 1,404.2 1,625.7 1,936.5  1979 372.7 390.5 1,525.2 1,775.1 2,151.1  1980 387.7 415.6 1,669.4 1,963.5 2,377.4  (:;. CHANGE ON ANNUAL BASIS MONEY STOCK AGGREGATES Ml-A Ml-B M2 M3 L  1977 n/a n/a n/a n/a n/a  1978 +7.1 +8.3 +8.3 +11.2 +12.4  1979 +5.0 +7.2 +8.6 +9.2 +11.1  1980 +4.0 +6.4 +9.5 +10.6 +10.5  ECONOMIC INDICATORS  1977 17-918.0 +11.6  1978 271-5U.1 +12.4  1979 2,413.9 +12.0  1980 2,626.1 +8.8  1981:1 2,853.0 +19.2  CPI (1967=100) % change  171.7 +5.8  187.1 +7.1  208.4 +11.4  233.9 +12.2  250.9 +8.8  Deficit  -53.6  -59.2  -40.2  -73.8  -79.6  GNP ($bil) % change  1  Notes: 1 - 1981 data for GNP is for first quartor, data for CPI is May, data for deficit is July Mid-session Review of Budret  Source: Economic Indicators, June 1981, prepared for the Joint Economic Committee by the Council of Economic Advisers   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • • • .. •  c' t (•( )1./ • .  BOARD Or 60VERNORS OF  THE'  FEDERAL RESERVE SYSTEM 7  WASHINGTON, O.  August 14  20551  1981  The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs house of Representatives I Washington, D. C. 20515 Dear Chairman St Germain: This is in further response to your letter to Chairman Volcker concerning the Board's proposed interpretation of NOW account eligibility. After consideration of more than 800 comments received on the proposal, the Board has adopted, effective September 1, 1981, an interpretation regarding NOW account eligibility. Under the interpretation, eligible NOW depositors at member banks will include: (1) all individuals, including sole proprietorships; (2) nonprofit organizations that are described in sections 501(c)(3) through (13) and (19), and 528 of the Internal Revenue Code; and (3) governmental units, if the funds are in the name of or used for the purposes of schools, colleges, universities, libraries, hospitals or other medical facilities. A copy of the interpretation is enclosed for your information. Please do not hesitate to contact me if I can be of further assistanbe. Sincerely, 1Signed) Anthony F. 0010 Anthony F. Cole Special Assistant to the Board Enclosure (8/14/81 P.R.)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  AFC:vcd (V-165) Identical letters to: Sen. Tsongas (V-178) l'w/eCong. Rousselot (V-183) Sen. Stevens (V-148) bcc: Mrs. MallardiL/"--  Cong. Fra4 (V-174) ' L /°. Cong. D'Amours (V-123 & V-160)  Action assigned to Congressional Liaison Office. 416  JAMES A  MC CLURE. 10AHO, CHAIRMAN  MARK O. HAT, ''FLO. Or/EG. '1.1:400J WAIKER, JR.. CONN. P  HENRY M. JACKSON. WASH. -rT JOHNSTON. LA. J. arNNt DALE DUMPERS. ARK.  JOHN W. WARNER. VA. GORDON J. HUMPHREY. N  wrpelri...L H. FORD. KY. HOWARD M. METZ ENSAUM. OHIO SPARK M. MATSIUNAGA. HAWAII  - v. uourPoci. N. MEX. MALCYX.1.4 W LLOP. WYO.  /RANK H DON NIC A  MURKOWSK I, ALASKA r OALA.  JOHN P. EAST. NC. JOHN HEINZ, PA.  1OHN MELCHIOR, MONT PA lit  MICHArl. D. HATHAWAY CHAIR  "ZICniicb Zfalez Zenafi  TIIIONGA I, MASS.  RILL IBRAD4-EY. N.J.  DANSCL A. CiAik.r  BOARD GE GOVERMGRS CF SYSTEM EPU "l  STAEF DIRECTOR A. TRARANDT. CRISP' COUNSEL  I JUN 26  COMMITTEEag ENERGY AND NATURAL RESOURCES  NI 11: 35  zostoRECEIVE0 OFFICE OF iliE CHA:Rnti  WASHINGTON, D.C.  -a. STA/ I DiAL.C.TOR FOR 114g MINORITE'  June 24, 1981  ( Honorable Paul Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenues, N.W. Washington, D.C. 20551 Dear Mr. Chairman: Last year, when the Congress considered the Depository Institutions Deregulation and the Monetary Control Act of 1980, Public Law 96-221, I was a member of the Senate Committee on Banking, Housing, and Urban Affairs. As a member of that committee I was involved in the consideration of the 1980 Act both during its mark-up in committee and during consideration on the floor of the Senate. Having followed the progress of this legislation closely, I was surprised to learn recently that the Federal Reserve Board is proposing to adopt regulations restricting the availability of NOW accounts based on the legislative history of the 1980 Act by denying individuals who own sole proprietorships the right to hold their business deposits in NOW accounts. So far as the Senate Banking Committee is concerned, I am aware of no intention to limit the availability of NOW accounts to individuals acting as sole proprietors, as the Board's proposed regulations would do. When I voted on this legislation both in committee and on the floor of the Senate, it was my intention, and I believe the intention of my colleagues to extend the benefits of NOW accounts to depositors throughout the United States under the same terms and conditions as they were available to depositors in New England, New York and New Jersey at the time of the enactment of the 1980 Act. The Board's suggestion of contrary Congressional intent based on colloquy on a different point on the House floor is so strained as to test the credulity of all but the most ardent opponents of NOW accounts. As you no doubt know, NOW accounts originated at a savings bank in Massachusetts. The early history of these accounts records persistent efforts by some financial institutions' lobbyists to wipe them out by prohibiting them by federal legislation. Only through vigorous effort on the part of the Congressional delegations from Massachusetts and  AM.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  101  e  be •  Honorable Paul Volcker Page 2  June 24, 1981  New Hampshire was a NOW account experiment permitted to proceed in those to states. Then, in the course of the next eight years, NOW accounts gradually spread across the country, but not without opposition from some financial institutions who urged the Congress to continue protecting banks from the possibility of paying interest on demand deposits held by their customers. The Board's most recent proposal to deny NOW accounts to sole proprietors is, I suppose, testimony to the persistence of those financial institutions' lobbyists who have resisted NOW accounts at every turn. Does the Federal Reserve Board seriously believe that its long-standing regulations regarding the holding of NOW accounts by individuals who happen to be sole proprietors of businesses have suddenly become inadequate? Why should rules which seem to have worked well for close to 10 years in Massachusetts and elsewhere now become too difficult for the Federal Reserve Board's staff to administer? Won't a change in the Federal Reserve Board's rules at this date, after banks across the country have learned to operate under the current rules for several months, simply cause the Federal Reserve staff to be deluged with more requests for interpretations? I hope that the Board of Governors, when it takes up this proposed regulation, will resist the importunings of those in the banking business who have consistently urged the Board and the Congress to protect them from their depositors. The proposed regulation is inconsistent with the intent of Congress in passing Public Law 96-221, and it should not be adopted. . 00.00,011..m.11  PAUL E. TSONGAS United States Senator PET/rbt cc:  Oft   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Hon. Irvine H. Sprague, Chairman  v- aL{ • Of GOViz  ...V  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  August 13, 1981  The Honorable Thomas F. Hartnett House of Representatives Washington, D. C. 20515 Dear Mr. Hartnett: Thank you for your letter of August 4 requesting conmient on correspondence you received from Mr. Garland L. Smith. Mr. Smith believes that high interest rates are inflationary and inquires whether the Federal Reserve Board can restrict growth in the money supply without affecting interest rates. He also expresses concern about high interest rates augmenting commercial bank profits. High interest rates are commonly associated with high inflation, but it is high inflation rates that inevitably cause high interest rates rather than the other way around. In a period of rapid inflation, lenders insist upon interest rates high enough to compensate them for the anticipated decline in the purchasing power of the dollars they are lending. Borrowers are willing to pay these high rates because they too anticipate that both interest and principal will be repaid in cheaper dollars. It is widely acknowledged that expansion in money and credit must be reduced if price stability is to be restored, and the Federal Reserve is committed to a policy of lowering money and credit growth over time. A necessary by-product of such a commitment, in the face of strong inflation-related underlying demands for money and credit, is an advance of interest rates relative to inflation. When interest rates rise relative to expectations of inflation, businesses are encouraged to postpone less promising investment projects and households to defer consumption, thus reducing demands in markets and easing upward pressures on prices. Of course, as Mr. Smith suggests, interest rates themselves are a cost of production and can influence prices. However, the relative contribution of interest rates to final costs of most products is small, and the overall effect of an increase in the real cost of credit--that is, interest rates adjusted for inflation--is to reduce upward pressures on prices generally. high interest rates affect commercial bank earnings, as Mr. Smith points out, by increasing the rate of return they receive on loans and other earning assets. At the same time, however, the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The honorable Thomas F. Hartnettil Page Two  cost of funding new loans--which increasingly is done at rates linked to the money market--also increases. Thus, higher interest rates do not necessarily cause bank profits to rise. Indeed, bank expenses have become increasingly sensitive to money market rates as their dependence has grown on six-month money market certificates and other liabilities with rates determined in the money markets. Only with inflation under concrIol will interest rates fall to permanently lower levels and will a firmer foundation be established for our financial system. With the cost of credit more stable, the risk to indivpduals and businesses in making long-range plans will be lessened sidnificantly. Recently, we have seen some tentative signs of a moderation of price pressures. Nevertheless, the underlying rate of inflation is deeply entrenched. Further progress against inflation will be hastened by actions complementing monetary restraint such as prudent fiscal policies that reduce the Federal Government's demand for the economy's scarce savings and by appropriate private sector behavior. I hope this information proves useful to you. me know if I can be of further assistance.  Please let  Sincerely, (Signed) Donald J. Winn Donald J. Winn Assistant to the Board TB:TDS:JSZ:AFC:vcd W-224) bcc: Messrs. Kichline, Simpson, Brady Mrs. Mallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  ••  Action assigncl Mr. Kichlin.6 THOMAS F. HARTNETT / ST DISTRICT. SOUTH CAnoL:NA  STEPHEN L. JONES AomINISTRATIVE ASSISTANT  rsi  c,01.1 IA ITT EE: ARM ET) SER‘"CES  11111  Congre555 of the Einittb  7Doufse of tepresSentatiboS  tateisi mil; -5 r !n! •  t- I  7  Utlazbington,Ile. 20515  August 4, 1981a,  Mr. Paul Volker Federal Reserve Building Washington, DC 20551 Dear Mr. Volker, Enclosed please find a letter concerning the Federal Reserve Policy. It would be greatly appreciated if you would draft a reply to the questions raised by Mr. Smith at your earliest convenience. Thank you for your assistance in this regard, and if I can provide any further information please do not hesitate to call upon me. Sincerely,  Thomas FC.J.Lrtnett, M. C. TFH/js/jt  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  213  I'  JUL2 1°,- 1  11.artnett of P.c7rerentativPr . !:oure WrhinTtcn, -J. 7on.  LPpr  m h077:"F'  Hartnett: vederal RPsPrve Board ray  that  P  rertricted money sunply is  necersnr:. to combnt inflation. To rec-trict the money surply, they take actionr which result in hiE-her intPrest rntes. Hi her interest rates inr—eare t 11^ r.ort of r-oods and services, this is inflationary. Hicher interort rater inorense the cost of operatinf- the 7,overnment and the cost of rervcein - the nntional debt. Thir ir inflationary. Is not the rcrIlltr of hir'h0r interest rtes more inflation instead of less? The 7ederal Reserve Bonrd rertriet the money supply with actionr thnt do not increase interest rates? If this cannot be done wl-y not action by the Conc.ress, to tax the bankr for all profits made from Federal ResPrve potions which result in increased interest rates?   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sinerely, , r, I kf/14 ,  \f.  ' sr  Garland L. Smith  "----C7  k  .. _ .. • of t•ov't • (• V,-. -,_ • 4'4, ' •. • .0 ./-\'• • ,:::, 4 4.. :. 1  ., k'''''''' :...(P_,A , .1, ,  ,.. ,,, , ('- ,_ • 41  BOARD OF U0OVERNORS  or . 1-1E FEDERAL RESERVE SYSTEM  ,...) '4;': fr .4,, . ...e. ..)'::: :k 914 .• 4-R41—RiSt( '•• • • •..• • •  WASHINGTON; G. C. 20551  ...3,A4,14{11'  August 13, 1981  The Honorable Bill Archer House of Representatives Washington, D. C. 20515 Dear Hr. Archer: Thank you for yoir letter of July 28 requesting comment on correspondence you received from Mr. Severin Knutson. Mr. Knutson's letter, which is addressed to the Fed eral Reserve Bank of Dallas, expresses his concerns regarding the application of Bantex Bancshares, Houston, Texas, to become a bank hol ding company by acquiring Greater Houston Bank, Houston, Texas. Mr. Knutson states that he believes the minority shareholders of Greater Houston Bank should have been offered the same compensation for their shares as the majority sha reholders. Unfortunately, Mr. Knutson did not apprise the Res erve Bank of his concerns until some six months after the Reserve Ban k had approved the Bantex application. Consequently, although the Reserve Bank did respond to Mr. Knutson's letter promptly, it was unable to take account of Mr. Knutson's comments during its consideration of the Bantex application. It should be noted, howeve r, that even if Mr. Knutson's comments had been received before the approval of the application, the Reserve Bank's ability to take account of Nr. Knutson's concerns would have been severely limited by relevant judicial decisions. In Western Bancshares v. Board of Governors, 480 F.2d 749 (10th Cir. 1973), the court held that the Board exceeded its authority when it denied a bank holding compan y app the applicant had not made an equal off lication solely because er to all shareholders of the bank to be acquired. I hope that the foregoing will be helpful. me know if I can be of further assistance. REM:CVH:AFC:vcd (#V-215) bcc: Mr. Mannion Mr. Howard Legal Records (2) G.C. Log #338 Mrs. MallardiV   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please let  Sincerely, (Signed) Donald Y. Winff Donald J. Winn Assistant to the Board  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned Mr. Bradfield  PILL ARCHER 7rw D:70 1. Te ..s  Con2ren of Hie iLlniteb (e)tate5  MT MM. NAV; A.,n MEANS  Thouge of iltpre5entatibe5  C•11,7f: 1.:"1:11-1,711 HNIE 0.9r9.:t 13.11.ems  Fults.t.tcmic Hnirsi. Tut.; 770C2  Washington. 3D.C. 20513  2s 1 July 28, 1981  D  ;LI  • N1. . . 4-1  CD Cel  !  r Eh-iiirman Volcker:  -J2Goultvery much appreciate having your !.'cO.Pmen€ on the attached letter which I recently received from one of my constituents in Houston, Mr. Severin Knutson. Thank you very much for your assistanc in this matter. With best wishes, I am erely • Arcler Member of Con(!rcss  Honorable Paul A. Volcker Chairman Federal Reserve System Federal Reserve Building Constitution and 20th Street, N.W. Washington, D. C. 20551 Enclosure  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  71  ,)IN 23-1S-181  (2-zrtb--  CD-C.4 C-(-6\  \N\  L_  . ()c i fs mo Fe_a,  JunL: 17, 1:2181  3'11 Fecic.ral ilesc:rvc .1.37,n% Dalla3 400 South P...karcl Ctrcet Station K T(:-cas 7322:2 (.;erraC;-,'.(.• 71:  I tin'lerst71,77.1 tho Creator Iiouston :•is IT for v.Dproval yrri fcr rt lloldiPg company. I Itati:.2 no ,-)1)jectiori to a conl:r.lny 1)ut I stronlly ol)j-,-,et to the 1,7a:sir it hns or,701-1;.7cd. rf the 0117,111,711 stc)csI7holders and have 1--y Liir.:',ority of stock. and 1•11;;11 finn.nc;., th.c steel: by do17-ntut-.•:: running fron) r;i7;tc ycars en and olDlic,fat(2 tho horit:,7 ctcci.:11c1(1?.rs to tal:o. 1-..-2ep the thcy have that wil.1 not ha-,,.re salc3 ar,..:1 canrr.- t sold tho prc.r...7ont I cnly f:11r -way a 1)271% holc_lin.(?. 1-f) ();‘,..;:-.2•1'.7.od no that the rninority r..•glr,-)i cd_lt of the c.-)tock they own o.s nlajority has is that the minority stoc7rholder.3 have the same intercst, percentage wise. a3 the niajority. This way, the nlinority by ti:.o (7r:1:er:tures issued 1),-y 1.1anl: awl if r-nnt•-•,--,0 ill-, 1,- --,74 „, • •  ,r /" ,  's/  +11 j ‘;' "  A.  Yours  VC17  l'/O  TICE;tiOned  truly,  :;evrrin I:nutson cc: The IIonorabio Jelin G. Tov,rer T_Tnited States Senate  cc: Tlic I-Ionorable Lloyd M. Bentsen, Jr. United States Senate Congrent.;man Dill Archer  —17vuo.  CV-Q.1/8)  .  ••0FGOvt •. .•0 ------- 4, •  ' •0 P.,  • 142 ..  ,''IM2P'• ......r. •  ......  444 Ar "", „41-il: ' 1' •C /4' • '''' r *C. . ••' ' ' 1,''',,f"ittt. •.... -a : '''A irrrrrVt''-c i., • 1 i I i V/1.. •:;" . '4') • I k. .e. •• ter) ";-.':14 -'''•.f.'•`•••• 1 — -k .• A'•11 izt. . • • • • .... •  BOARD OF —JOVERNORS Or THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 205Si  ILL:I,•:"--, --> .  August 7, 1981  PAuL A. vOLCKER r  A1  IA A N  The Honorable Tom Railsback House of Representatives Washington, D.C. 20515 Dear Mr. Railsback: Thank you for your letter of July 24 describi ng your concerns, and those of your constituents, rega rding the impact of high interest rates. I am very concerned about the strains and tensions that high interest rates are creating throughout the economy. As you suggest, the key to lasting relief from high interest rates is the reduction of inflation and inflationary expectations. Ending inflation and regenerating productivity in the American economy are the goals of the President's economic prog ram, and they are primary goals of the Federal Reserve as well . We are seeking to contribute to their achievement by maintain ing a policy of restraint on monetary growth, which also is a major element of the President's program. The real question facing us now is how we get there from here and whether we will have the patience to stay the course. In the current situation, I do not see any "quick fix" for the problem of high interest rates. Some short-run relief from interest pressures might be provided by pumping up the money supply through more generous provisio n of reserves. However, this would ultimately intensify general inflationary pressures reinforcing the tendencies that gave rise to the high interest rate problem in the first place. In fact , the recent behavior of financial markets suggests that anti cipatory responses of investors to an indication of reduced comm itment to anti-inflationary monetary restraint might limit or even prev ent the temporary decline in interest rates. As I see it, we are faced with no real alte rnatives to sticking with the current program. I woul d suggest, however, that the financial markets might respond favo rably to indications of further progress by the Congress and the Administration in putting in place expenditure cuts that are needed to offset the long-range tax cuts recently enacted. In the days since the tax cuts were passed, the bond markets have been quite weak-despite evidence of moderate monetary expansio n and easy pressures on short-term money markets--as particip ants have focused on the huge Treasury financing task ahea d.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Tom Railsback Page Two  I will11 that I could offer greater reassura nce to you and youl constituents that credit-sensitive segm ents of our economy will find happier times just ahea d. In my own view, we arc 1,eginninu to see some progress towa rd reducing inflation. To relent now, would only discard any bene fit from all of the pain and sacrifice we have had so far. Whil e I cannot say exactly when, I am convinced that as infl ation declines7 more decioively interest rates will surcly fall. Thank : i ou again for writing. Sincerely,  S/Paul A. Volcker_ LIJP:JSZ:DS:pjt (4V-218) bcc: 11r. Kichline Ur. Prell nrs. nallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action. assigned Mr. Kichline  'TONI RAILSOACK i9TH ILLirvols  Rcom2104 rtArougN 1.4Duar Orrict DkALDINo YVAsNINtireN. D C. 20515  COUNTIES: CARROLL FULTON RANCOCK HENGCR:ON F4I-NRY ADAMS' (tf RURLA'J (r.'"  Anr* 202-225-5905 MC DONO'JGN ;;CER ROCK 'SLANT) WARniN  I,  ) lt ,A TAPS 011,  •  r  Congtr55 of tbc Ziniteb  tati5  RDON.4 223  FN  3i)oti5e of teproSentatitig0 L/11/  :),/  211-19TH STRI"IT  ;loci* IsLAND.  AhD  Washington, Z.C. 20315,, r.:  isc  P.  r  61201  Aar* 309-791-1681  •  ROOM 25 0..1)  5 !..3 flAN;...06.491 Suer Irr N4  JUDICIARY COMMIT TEE  July 24, 1981  ii-4_1P40111  6145S  AHLA: 309-833-2231  SELECT COMMITTEE ON NARCO1 ICS ADUSE AND CONTROL  The Honorable Paul Volcker Chairman, The Federal Reserve System Washington, D.C. 20551  ,iLovr  Dear Mr. Chairman: Over our July 4th recess I spent a great deal of time with my constituents in Western Illinois. I met with retailers who must turn to short-term financing to carry their inventories; small manufacturers who require additional capital to remain competitive: fanners and homebuilders who operate on borrowed money and depend on customers who borrow money; and representatives of savings and loans who have had to contend with record outflows of deposits and mortgages yielding less than the current interest rate being payed on mortgages. A recurrent theme ran through all of these meetings: persistent and abnormally high levels of interest rates have caused a great deal of financial hardship for those considering or forced by the demands of their businesses to turn to the credit market. These people have had the additional burden of dealing with volatile swings in interest rates over the last year and one-half which, when coupled with high rates of interes and tight credit, has placed many in precarious financial health and dashed the dreams of others to go into business. I am deeply concerned about the burden that record interest rates and tight money have placed on Americans. For all but the largest companies who are able to secure credit well below the so-called prime rate, high interest rates have been a real hardship and given us little hope for relief anytime soon. There is no doubt that our country needs to return to stable and reasonable interest rates. We in Congress share your goal of checking the inflation spiral and removing the inflation expectations which have racked the financial planning of all Americans in recent years. Unfortunately, high interest rates are a pernicious cost of waging the inflation battle. I realize that dealing with inflation is a complex task, made more difficult by less than exact monetary tools, and by variables beyond the control of the Federal Reserve. President Reagan's economic program of balancing the budaet and restoring growth to our economy through budget reductions, tax incentives and regulatory reform, which I support and believe in,should go along way toward reducing the demands government borrowing has placed on the credit market. For government borrowing to finance deficit spending, and to a lesser extent other factors such as pressure from heavy wage increases and credit demand, has been a catalyst to higher interest rates. I am encouraged by reports that inflation has markedly slowed. We must continue our battle against inflation on one front and turn our attention on another front to avoiding a recession. Economic growth contracted in the second quarter of 1981, due in large part to record interest rates. Estimates show that the'real' rate of interest greatly exceed both the Treasury bill rate, and even the most pessimistic appraisal of our underlying inflation rate. I am concerned by the possibility that the Federal Reserves' continued policy of tight money expansion will push our country into a recession; this would place further strain on many Americans who have had to cope with prohibitive interest rates for too long.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTEll ON PAPER MADE WITH  nrcycLrn Finrpc  -41V  The Honorable Paul Volcker  page 2  It is the s• Al businessman, the farmer, the homebuilder, the manufacturer--the most profitable productive sector of our economy-- who have had to absorb the high cost of borrowing by dipping into their savings and capital becau se they are unable to pass along to their customers this additional cost. It is the prospective homebuyer and businessman who have had their hopes shattered by high interest rates. In formulating our country's economic policies we must be mindful of their impact on all Americans. In our effort to fight inflation and restore growth to our economy, we must not lose sight of who must shoulder the burden of unsta ble and high interest rates. I invite your comments on this area of great mutual concern. With thanks in advance for your attention to this issue, I am Sincerely, TdM RAILSBACK MEMBER OF CONGRESS  TFR/ec   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  AV'  August 6, 1981  The honorable William Proxmire United States Senate Washington, D.C. 2051U Dear Senator Proxmire: Thank you fur your letter of July 31 recommending Ms. Mereuith M. Fernstrom as a member of the Boar d's Consumer Advisory Council. I can assure you that Ms. Fernstrom's qualificatio ns will receive full consideration when the Board sele cts new Council memuers sometime this fall, to fill the posit ions of individuals whose terms expire in December 1981 . I appreciate your taking the time to call our atten tion to qualified individuals who could contribute to the Council's work. The Board makes a special effort to achi eve a geographic distribution within the Council, as well as a balan ce in representation amongvarious segments of the credit industry and consumer interests. This task is not an easy one, given the small number of positions (usually around 10) to be filled each year and the large number of highly qualified nomi nees. Again, thank you for your interest. Sincerely,  CO:pjt (#V-223) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assigned Cong. Liaison Office JAKE  GAMY, UTAH. CHAIRMAN HARRISON A. WILLIAMS, JR.. N.J. WILl iAm PRox mint'. WIS. ALAN LRANSToN, cAur. JR., MICH. DoNALD w.  TtX. )044N TOWr ,PA. JOHN mciT. WILLIAM L. A.:MS' R RiCHARD G. LUGAR. FONSE M. D'AMA" JOHN H. CJ4AFFF HARRISON SCHMITT,  &Y. MEX.  PAUL S. SARITANES. MD. rmous rorHroe J DODD, CONN. ALAN J. cuxON, ILL.  M. DANNY WALL, STAr F DIPFCTOR HOWARD A. MENELL, MINORITY STAFF DIRECTOR AND COUNSEL  ••  ?.1Cnif‘  ••• •  •  • J  tafez Zertate  COMMITTLE ON BANKING. HOUSING. AND URBAN AFFAIRS  1g61 Mir; -5  20510  WASHINGTON. D.C.  ris 19: ?3  -r •  July 31, 1981  The Honorable Paul A. Volcker Chairman Federal Reserve Board of Governors Constitution Ave., N.W. Washington, D.C. 20551  hi3  Dear 'qr. Chairman: I am very pleased to nominate Ms. Meredith M. Fernstrom as a candidate for membership on the Consumer Advisory Council of the Federal Reserve Board. Ms. Fernstrom has a unique and extensive background in both consumer affairs and financial services which makes her ideally suited to serve in this capacity. She is known both nationally and internationally as one of this country's leading consumer affairs professionals.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Let me highlight a few of Ms. Fernstrom's career positions and accomplishments: • She is currently Vice President-Consumer Affairs for American Express Company, responsible for monitoring consumer opinion, advising management on policy and marketing decision from the consumer information to the public. • From 1976-80, she was Director of Consumer Affairs for the U.S. Department of Commerce, where she advised the Secretary and departmental officials on the consumer implications of Commerce Department policies and programs, and served on the White House Consumer Affairs Council. • She developed and chairs the Consumer Subcommittee of the EFTS Study Group on the American National Standards Institute Committee on Financial Services, sponsored by the American Bankers Associaton. • She was the first Consumer Education Director for the District of Columbia government, Office of Consumer Affairs, from 1974-76. • She is a member of the Board of Directors of the International Society of Consumer Affairs Professionals, and serves on advisory committees to the Chamber of Commerce of the U.S., the Joint Council on Economic Council, and the Consumer Federation of America. • She has been a frequent speaker and has published articles on the consumer apsects of financial services issues in a variety of national, state and local finanical industries forums.  2. 111..."1  f Ms. Fernstron's resume, a copy of which is enclosed, expands on this record of accomplishments, and indicates her current address and phone number. Vs.  Tristrom is hig-hly respected by consumer, business and government 1:(1. Knowledgeable, objective representation of the consumer interest. tier present responsibilities at American Express will enable her to bring unique insights to the Council's deliberations as well. I believe Ms. Fernstrom will make a valuable contribution to the Council, and I strongly encourage your approval of her nomination. Thank you.  IVP/1mp Enclosure cc: Dolores S. Smith   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information.  Citation Information Document Type: Resume Citations:  Number of Pages Removed: 4  Resume, Meredith M. Fernstrom, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  August 7, 1981  The honorable Bill Lowery house of Representatives Uashington, D. C. 20515 Ddar flr. Lowery: I am enclosing responses to the questions you sent to ue following my testimony before the house Banking Committee on July 21. If I can be of any further assistance, please let me know. Sincerely, sLeaul ii.Votcket  Enclosures  BG:AK:LP:DL:JZ:vcd (V-217) bcc: Mr. Kichline Mr. Zeisel Mr. Lindsey Mr. Promisel Ms. Kusko Mr. Gay Mrs. Mallardi (2)/ 6  4. • ,, • • " 116.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1.  For Lhe past year inflation has been declining from double-digit rates, yet interest rates remain at unprecedented high levels. There are several theories as to why this is happening. What circumstances do you feel are responsible? How long do you expect this situation to exist, assuming a scenario in which other economic factors remain essentially the same?  Despite favorable signs on the inflation front, interest rates, particularly long-term rates, remain at high levels.  One reason is  that market participants have partly discounted recent easing of price pressures as reflecting some reversal of the "special factors" in the energy, food and commodities sectors that had raised inflation rates in 1979 and 1980. Thus, recent easing in the underlying rate of inflation is viewed as being less pronounce  1  indexes.  than the moderation of increases in the various price  In addition, market concerns about the prospective size of the  federal deficit may be contributing to high interest rates.  Even so, as  the next several answers indicate, when inflationary expectations begin to respond to the more permanent lessening of inflationary pressures that I believe is in train, interest rates will begin to move down. /"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2.  One of the theories used to explain the inflation/interest rate relationship that we are presently experiencing is that of "inflationary expectations." If this is in fact the cause of our current interest rates, how can we best turn around the psychology of inflationary expectations?  One element in turning around inflationary expectations is public recognition that a commitment to monetary and fiscal restraint underlies governmental policies.  Another element involves a response to such policies.  in private sector wage and price decisions that shows through in sustained declines in the observed rate of inflation.  As actual price behavior pro-  vides a confirmation of the government's commitment to long-run price stability, a reduction of inflationary expectations will naturally tend to occur. The fundamental prerequisite for this process to unfold is having governmental policies in place that in fact resist inflationary presAures. In this regard, the Federal Reserve is pursuing growth rate ranges for the monetary and bank credit aggregates this year--and has announced ranges for next year--that we believe are consistent with a deceleration'O'f inflation over time.  Of course, a wide range of fiscal and regulatory Tolicies  also have important roles to play in an overall anti-tinflationary strategy.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3.  Besides having a significant impact at home, interest rates have a great impact abroad. How do high interest rates here affect the economic policies of our principal trading partners? Of the international economy as a whole?  Because the economy of the United States is so large, high interest rates in this country have important effects on other countries.  The basic  thrust of our policy--to achieve a lasting reduction in our inflation rate--is widely appreciated abroad.  However, the short-run effects of this policy, in  terms of output and employment, are transmitted to other countries and, in some cases, exacerbate an already-weak demand situation.  Efforts by foreign  authorities to support the value of their currencies in the face of a strong dollar intensify these effects.  Moreover, high U.S. interest rates impose  financial burdens on countries, including some hard-pressed developing countries, who are borrowing in international markets. However, the level of U.S. interest rates is not the only factor putting downward pressure on the currencies of our trading partners or imposing burdens on developing countries.  All countries--including the  United States--must guard against a temptation to assign undue responsibility for economic problems to external forces. On July 16, I presented my views on this subject in.more detail, before the Joint Economic Committee.  A copy of that statement is attached.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4.  What is the impact of monetary policy on GNP?  Economists generally believe that a policy of monetary restraint places broad limits on the growth of nominal GNP--tha t is, the combined result of changes in real output and the price level.  The Federal Reserve's  policy of monetary restraint is directed toward redu cing inflation.  But  unfortunately, this policy does not work directly on prices, and its initial effects often fall on real output and employme nt.  So long as infla-  tion continues near its current rate and inflationary expectations remain imbedded in economic decisions and institutions, pres sures on interest rates will be intense; and real activity is likely to be cons trained, particularly in credit-sensitive sectors such as housing and auto mobiles.  Over the longer  run, however, the gradual reduction in the expansion of money and credit will lead to an easing of inflation and inflationary expe ctations.  This will set the  stage for stronger--and sustained--real growth, lower interest rates, and •  reduced unemployment.  s.  5.  What is the impact of federal budget deficits on monetary policy?  In an environment of restrained monetary growth, the size of the federal budget deficit is an important determinant of credit market conditions and interest rates.  New borrowing by the federal government, whether to  finance budget deficits or off-budget programs, competes with private demands for a limited supply of credit and inevitably aggravates interest rate pressures.  The demands of the government are insensitive to interest rates  and thus will always be met.  However, if private demands for credit are  strong, rates for other borrowers often will be pushed up in the process. Thus, it is essential that fiscal policy and monetary policy work together in the effort to achieve noninflationary economic growth.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6.  There are several important wage contract negotiations coming up next year. What are the implications for inflation? What role, if any, should the government play in this process?  In 1982, collective bargaining negotiations will take place in major industries including petroleum refining, trucking, rubber, electrical equipment, automobiles, and agricultural equipment.  Altogether, about 31 / 2  million workers will negotiate major new settlements.  However, to the extent  that these highly visible settlements are reflected in other wage decisions, their eventual importance in the overall inflation picture looms much larger than the number of workers involved might suggest. important for another reason.  Negotiations in 1982 are  Over the past decade, wages in many of these  industries have been rising more rapidly than productivity. rising labor costs have put upward pressure on prices.  Consequently,  A fundamental issue  that must be faced by both labor and management is whether workers can continue to receive real wage gains in excess of productivity growth without adverse consequences to firms, industries, and the nation'as a whole. With regard to the role of the government, I believe its4s,funda/' mentally to foster and maintain a competitive economic environment.:. Regulatory policies affecting wage- and price-setting should be critically reviewed. These and other governmental policies aimed at protecting ipcomes and insulating markets from competitive pressures merely will delay tough decisions that need to be made at the bargaining table.  To the extent that these decisions ease  pressures on costs and prices, the result will be greater economic growth, more jobs for American workers, and a speedier return to stable prices and lower interest rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  '4.4LL LOWERY  Action assigned Mr. Kichline  ed 411T DISTRICT. CALIFORNIA  vvAsNiNoToN orricE: 1331 LONGWORTIA HOUSE. OFFICE Bum oiNG WAstiiNoioN. D.C. 20515 (202) 225-3201  •  L0A4 ANT if II BAN;<INC.:FINANCE AND URBAN AFFAIRS  DISTRICT OFFICE 880 FRONT STREET. Room 6-S-15 SAN DIEGO. CALIFORNIA 92188 (714) 231-0957  SCIENCE AND TECHNOLOGY  CONGRESS OF THE UNITED STATES HOUSE OF RErRESENTAT1VES  July 28, 1981  . I:if) ...  r.  _  J ,  t t  I  moThellOorable Paul Volcker, Chairman ---)Boad of Governors of the Federal Reierve System --Washington, D.C. 20551   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Dear Chairman Volcker: I regret that I was not able, due to schedule conflicts, to have an opportunity to address questions to you when you testified before the House Banking Committee on Tuesday, July 21. However, pursuant to the Chairman's announcement during the hearings, I would like to submit additional questions for your earliest response. Thank you for your excellent testimony and your attention to these questions. Sincerely,  BILE LOWERY Member of Congress  BL:slw  •  Questions for Chairman Volcker NA.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1. For the past year inflation hal, been declining from double-digit rates, yet interest rates remain at unprecedented high levels. There are several theories as to why this is happening. What circumstances do you fr?el are responsible? How long do you expect this situation eAist, assuming a scenario in which other economic factors reamin essentially the same? 2. One of the theories used to explain the inflation/interest rate relationship that we are presently experiencing is that of "inflationary expectations." If this is in fact the cause of our current interest rates, how can we best turn around the psychology of inflationary expectations? 3. Besides having a significant impact at home, interest rates have a great impact abroad. How do high interest rates here affect hte economic policies of our principal trading partners? Of the international economy as a whole? 4.  What is the impact of monetary policy on GNP growth?  5.  What is the impact of federal budget deficits on monetary policy?  6. There are several important wage contract negotiations coming up next year. What are the implications for inflation? What role, if any, should the government play in this process?  • • • • oc (.0;•/,• • 4-• ..017 - ,•I ,!.;) .7  ,•`'•  ••  ? 1,„(`C/. f  ,  •  .•••  ,I •.,\ , •- ' .•/, • . z '• .. •  EICIARM  OF ':OVERNOP r) m  FEDERAL RESERVE SYSTEM wn -,r4INGTON, D.C. 2051,t  August 6, 1981  The Honorable Donald J. Mitchell House of Representatives Washington, D.C. 20515 Dear Mr. Mitchell: Thank you for giving us the opportunity to C0111111ent on the concerns expressed by your consti tuent, Mr. R.M. Green, regarding the effect of high interest rates on small businesses. I understand Mr. Green's concern about the level of interest rates. However, these rat es are largely a reflection of the rapid rate of inflation we are experiencing and the deeply embedded expectation that prices wil l continue to climb. As a result, lenders arc reluctant to com mit their funds without being compensated for the declining value of the dollars they will receive in payment. In these circum stances, the only way we are likely to achieve a lasting declin e in interest rates is through a lowering of inflation and inflationary expectations. Since maintenance of control over the growth of money and credit is an essential ingredient in the fig ht against inflation, the Federal Reserve has little choice but to continue to pursue a policy of restraint. Of course, disciplined monetary policy in conjunction with a policy of curtailed public spe nding will entail, in the short run, some strains, such as tho se that arc occurring in financial markets. We recognize that the hi(jh cost of credit creates particular problems for small businesses, especially for borrowers who rely primarily on len ding institutions for financing. However, in the longer run these enterprises can prosper only in an environment of pri ce stability. It is only with reduced inflation that we, and they, can look forward to a more prosperous economic environme nt. We appreciate your forwarding your con stituent's concerns about current economic and financial developments. If I can be of any further assistance, please do not hesitate to let me know. Liincerely, JG:LS:JLK:CO:pJt (#V-208) 'ipleci)DaddLVIria bcc: Mr. Kichline Mr. Slifman Mr. Glassman Donald J. Winn Assistant to the Board Ms. Zickler Mrs. Mallardi (   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  DONALD J. MITCHELL  Action assigned Mr. Kichline  31ST DISTRICT, NEW YORK  2305 RAYBURN HOUSE OFFICE BUILDING  COMMITTEES:  TELEPHONE (202) 225-3665  WASHINGTON, D.C.  ARMED SERV/CES SUBCOMMITTEE ON MILITARY INSTALLATIONS  CeitgrerA of tlit  AND FACIL'TIES SUBCOMMITTEE ON MIL IT ARY PFRSONNFL AND Cc.,MPt.NSAT iON RANKING MINORITY MEMBE,R  tato  ji)oust of ikeprefentettitnt4 tuasbington, n.c. 20313  20515  DISTRICT OFFICES: 319 NORTH MAIN STREET HERKIMER, NEW YORK  13350  (315) 866-1051 11.60 WEsT IhAsisd STREET' JOHNSTOWN, NEW YORK  12095  (518) 762-4508 SUBCOMMITTEE ON INVESTIGATIONS ASSISTANT REGIONAL  wifir  July 24, 1981 ) ) y; /  NEw CITY HALL, THIRD FLOOR LIBERTY PLAZA ROME, NEW YORK  i 3440  (315) 339-0013 (MoN-WEo-Fni) 6 STEUBEN PARK UTICA, NEW YORK  13501  (315) 724-9302  Honorable Paul Volcker, Chairman Federal Reserve Board 21st & Constitution Avenue, NW Washington, D.C. 20551  cc"  r•1  c__ r—  ::•1  rs!  Dear Mr. Chairman:  1 1 1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Enclosed is a copy of a letter I received from Mr. R.M. Green, President of Credle Equipment Incorporated, which warrants immediate attention. [ share Mr. Green's concern that policies of the Federal Reserve Board toward interest rates are hurting our economic recovery process. The recent decline in the GNP is also a signal. Any comments you may have on the future courses of the Federal Reserve Board would be greatly appreciated. Sincerely,  onald J. Mitchell Member of Congress DJM:pgm/m Enclosure cc: Mr. R.M. Green  • T7  (n  r•-  r3  fl  f ''" -Zs e, t., t I Iiiks •1 ( I L r  a .  ,  I  „ cONEsTrIUCTION ^Pdti PAUP4101hAt. MAIVIINI3M V Apdi HOUIPMENT  _.  P 0 Rox 4246, Utica, New York 13504 (315.) 735 4466  22nd July 1981  The Honorable Congressman Donald J. Mitchell House Office Building Waqhington, D. C. 20515  r, dr  1  JUL o  r.1  CongreFsman Mitchell,  This letter is written to ydu, in desp eration, due to the high interest rates we are experiencing today. The busi ness climate in our industry is at a standstill due to lack of cons truction and hi911 interest. This firm, in business for almost fifty yrar s, ncvr experienced such economic difficulties. We have had to lay off ilnployes and now are forced to go on a four day week. No need to toll you what this Ttwons to our , mploy(.c,s and community. Unless the Fede ral Reserve Board obout this high interest, I am afraid that not only our husins, but many others are doomed. On behalf of Credle Equipment,Inc., I strongly urge you to protest the high interest brought about by the Federal Rese rve Board. We are a "small business" located in a "labor surp lus area" involved in the sale, service and rental of construction equipment, tools and supplies. In spite of the fact that the prop er application is on file and we are located a short distance from Grif fiss Air Force Base at Rome, N. Y., we received a very nominal amou nt of business (1980-$4900; 1981-$1850.) We need your nelp...NOW: Very truly yours, CkEDLE EQUIPMENT;IpC. . ,x", //1 Green \-1 President RMG/vg  PLANT: HERKIMER ROAD • ROUTE 5   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .41116.  .• •Y/ • . ▪ •C  sr' • •0 di • -n t iat• .....•  ee)  nOARD OF GOVERNORS  (••  Or THE  FEDERAL RESERVE SYSTEM  1—• • • .  WASHINGTON, D. C. 20551  „. •  AUgust 5, 1981  • • 1RAL 11E.S . • • • • •.. • • •  PAUL A. VOLCKER CHAIRMAN  The Honorable Norman D. Shumway House of Representatives Washington, D. C. 20515 . Dear Mr. Shumway: I am writing in response to your letter of June 22, to further address the concern that you expr essed regarding the security of book-entry Treasury securities held in safekeeping by commercial banks on behalf of their custoM.ers. The issues that you have raised concerni ng the Treasury regulations have again been considered in order to determine the extent to which the book-entry regulati ons are adequate to protect customers in the event the depository inst itution holding such securities fails. We believe that the Treasury's regulations, in conjunction With the procedures empl oyed by the agencies responsible for supervising these deposito ries, provide the necessary degree of control over their record keeping responsibilities as custodians of customer-owned Treasury securities. As these securities are guaranteed by the U.S. Governme nt, the Treasury Dep4ttment continues to assure that, in the event .of a failure by the depository, its obligations would be fully discharg ed. , Therefore, it ds our belief that, in the event of the fail ure of` depository. institution the ability of a customer to obtain his securities is.enst.W. Wtlile your proposed amendment would provide an added degree,pf protection for customers, in view of pres ent safeguards, tile additional costs associated with implementing your proposal could possibly outweigh the benef.its that woul d be gained. The Federal Reserve Banks, under regunt ions issued by the Treasury, serve as fiscal agent for the Treasuri, in issuing and servicing Treasury securities. Acco rdingly, we have forwarded your correspondence to the Honorable H.J. Hintgen, Commissioner of the Bureau of the Public Debt for any comment he may wish to provide. Again, thank you for expressing your view s on this matter. Please do not hesitate to cont act me if I may be of further assistance. DJT/GTS:tn (#V-172) bcc: Ms. Toomer Mr. Schwartz Mrs. Mallardi (2)  Sincerely,  P*&-,090-€4 azkif (au/aavazesi„,14,64  -f1x, mttrem   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7_70talfi th4tiz &toe  „ afiLti ,1 addem,(ta ,v41,4  114 f)• , Avue94.44,/ ,Wo Taitzty  /1„90(4 1 /  ‘,1, 4-‘ P-fV,  NORMAN D. SHUMWAY ION DISTRICT. CALM:MN:A COMMITTril• DANN ,NG. FINANCE. AND URBAN AFFAIRS MERCHANT MARINE AND FISHERIES  1228 LomcwonTm Housr 0rrIc E BUILDING WASHINGTON. D.C. 20515 (202) 223-2511  Congro5 of tbe Zlititeb gptateg  SELECT COMMITTEE ON AGING  CHRISTOPHER C. SEEGER ADM INI STRATI VS A IS i STANT  1045 NootTvi EL Dopt400. Room 5 STOCXTON. CALII , ORNI A 95202  PoufSe of Repreisentatibeg  (209) 464-7612  Wassbington, AC. 20515  June 22, 1981  (  Chairman Paul A. Volcker Board of Governors of the Federal Reserve System Federal Reserve Building Room B2046 20th and Constitution Avenue, NW Washington, DC 20551  u co  CD •NI C") rrl (-1  Fri -11 <  Cc: 7r iNJ rs..)  . r-I r•  Ca Cb 2:0  •" -T1 f rr  -r. ro  t.  •• CD CD  ra -4  •VO r"  Dear Chairman Volcker: I appreciate your letter of May 28, 1981 in response to my inquiry on safekeeping recuirements for Treasury bill book-entry purchasers. Unfortunately, the response did not address the concern that has been brought to my attention regarding the security of the holder of a book-entry Treasury bill in the event of a failure of a commercial bank holding book-entry Treasury bills on behalf of the customer. As your letter pointed out, currert Treasury reculations at 30 CFR 350.6 merely "recommend" that the appropriate safe-keeping procedures be followed; that compliance is merely "voluntary"; and that the customer "should have little problem obtaining his holdings from the bank's receivers." In short, it is precisely this precatory nature of the regulations, rather than a mandatory requiremert, that is the cause for my concern. With you, I am pleased that to date ro losses have been incurred by holders since the initiation of a book-entry system by Treasury. While the problem fortunately has had no practical application, it nonetheless theoretically exists. My hope is that the Federal Reserve Board would make maximum effort to ensure the integrity of these Treasury debt instruments, basically simply paralleling the mandatory safekeeping requirements of the securities industry. With my best regards, Sincerely,  z  A---4/L—  NORMAN D. SHUMWAY Member of Congress NDS:aec   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /143  4N\A.,  Cv t9  • BOARD OF 130VERNORS 0  THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  July 30, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Ron Paul House of Representatives Washington, D.C. 20515 Dear Mr. Paul: Thank you for your letter of July 2 conc erning the pricing of automated clearing house (ACH ) services. The ACH has been recognized as having the potential to offer significant benefits to the publ ic in terms of the decreased cost and increased convenience and security of transferring certain types of payments. This is a conclusion agreed to by the banking industry, the Federal Government, which has successfully used the ACH concept in the Treasury direct deposit program, and by the National Commission on Electronic Funds Transfer (NCEFT), which was established by Congress in 1974 to study electronic funds transfers. The NCEFT further concluded at the time of its study that Federal Reserve involvement in the operation of ACHs was necessary because the private sector was not yet able to operate ACH facilities econ omically without this assistance. Thus, the Board has stated that it regards the Federal Reserve's operation of ACH faciliti es as a research and development program that will provide tech nical data and experience that it hopes will enable the private sect or in the future to operate these facilities in a cost-effecti ve manner. The Board is in the process of establishing and implementing fee schedules for all Federal Rese rve services pursuant to the pricing provisions of the Monetary Control Act of 1980. For all services other than ACH services , the fees published by the Board are based on fully allocated current costs plus a 16 percent private sector adjustment factor. ACH prices, in contrast, are based on costs for processing volumes that are large enough to realize the economies of scal e of a mature environment. Therefore, current prices of 1.0 and 1.5 are lower than the short run costs of this service, although prices will cover full costs eventually. The Board elected to price on this basis because it believes that, over the long run, the ACH will prove to be a much more efficient means of transfer ring funds. This approach should encourage volume growth and, ulti mately, reduce costs to the consumer through greater efficien cy. Although the ACH fee schedule is the subject of litigation, the Board believes that this fee schedule is in accord with prov isions of the Monetary   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  " . 41/•  The Honorable Ron Paul Page T40  Control Act, v,hich provide that over the long run fees shall be established on the basis of all direct and indirect costs, except where the Board determines a need to provide an adequate level of service nationwide. These provisions of the Act indica te that Congress intended the Board to have some flexibility in administering service fee schedules. The Federal reserve Board will review the fee schedule for ACH services each year to insure that in a mature environment prices fully cover costs and that the volume growth and other assumptions involved in setting these prices are reasonable. The Federal Reserve believes that the paper check will continue to play a dominant role in the payments systems for the indefinite future. For certain types of payments, the ACH cannot realistically be expected to displace checks, cash or other forms of electronic money transfers. But for many types of recurring payments, such as direct deposit of payroll and social security payments, the ACII provides a safe, accurate method of payment that reduces society's risks and costs. I hope this information proves helpful to you. let me know if I can be of further assistance. Sincerely, VFW A. Volcker MS:LSA:pjt (V-192) bcc: Michelle Smalley Mr. McEntee Mr. Allison Gov. Gramley Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please  Action assignel Mr. Allison do"  RON PAUL .:ND DSTRICT. TEXAS  CONSTITUENT SERVICE CENTERSI  Room 1234 LONGA. sum HOU',E Of EICE DUlt. (ZO;) 225-5951  Congre5g of tly Uniteb ciotatc5s  CO••••IT TEE ON BANKING F!NAN' AND URBAN AFFAIRS  3i)oli5e of ikepre5entatibt5 Zi/lassbington, 13.e. 20515  RANKING REPuill. ICAN SUSCOMMITI44 ON GENERAL 0,44pis.Grir  July 2, 1981 MEMSER. UNITED STATES Got° Poocy Comr.41ssloN   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1110 NASA ROAD 1. Sutra 100 HousroN. TrxAs 77058 (7i3) 486-9583 6711 BeLLroorr AVENUE. SUITE 307 Housrom. TEXAS 77087 (713) 226-4636 2116 THomPsoN HIGHWAY. SUITE 105 RICHMOND. TExAs 77469 (713) 226-458 101 OYSTER CREEK DRIVE LAKE JACKSON. TEXAS 77566 (713) 297-3961 coNIGREsstoroa_92 Housrow(713)237-1550 LAXE JACK SON'(713) 297-0202  Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: It has been called to my attention by a constituent, Mr. Horace Epperson of Houston, that the schedule of prices announced by the Federal Reserve under the Monetary Control Act of 1980, indicate that the prices for automated clearing house services, 1-11 / 2 per item, will cover only about 1/3 of the cost involved in these services. I would like to know whether that figure is in agreement with your calculations and, if so, your justification for adopting that price schedule since the Monetary Control Act is quite clear on this matter. Thank you very much for replying. Sincerely,  Ron Paul Member of Congress RP/jr 0 -11 -ri n Ill CD 70 --11rn el  7L2 rl a:: (-,rr1 --r— RI :. --, ., ..s. ......,-  un co  r -1 ' cd " r ..., , .1  C.C:  r.---  I LO -v 7 : 0 ^..) -P"' .c-  74 ll, el ..-(....,:"" cn-ri" ril a... ) t."1. --..."__ I) , .-,,.".. +1' r•1 __, --' • -.. --.: t) 71 VI  r'"'"  ...... , .  V- ) c 4 BOARD OF.GOVERNDRS OF THE  • c0  FEDERAL RESERVE SYSTEM  •0 • -n  • .-14 • • e, •• A••  WA5HINGTON, D. C. 20551  RAL • • .• •  August 20, 1981  RAUL A. VOLCKER CHAIRMAN  The Honorable Ted Stevens Chairman Subcommittee on Civil Service, Post Office, and General Services Committee on Governmental Affairs United States Senate Washington, D.C. 20510 Dear Chairman Stevens: Thank you for your letter on the problem of senior executives leaving the Federal Government due to inadequate pay. This is a serious concern for the Federal Reserve, as I am sure it is for other government agencies, and I appreciate the opportunity to comment. As you know, the Federal Reserve Board is not part of the Federal Government's Senior Executive Service (SES); however, compensation of the Board's official staff parallels very closely the SES pay structure, including the limitation on pay. Our inability to grant salary increases to our top-level people has had a harmful effect on morale and has severely distorted pay relationships. As a result of this problem, salary distinctions are insufficient to reflect accurately differences in levels of responsibility. Due to the pay cap on executives salaries, the Board's officer salary structure is so severely compacted that the salaries of 76 percent of the Board's official staff are currently frozen; after October 1 of this year, assuming retention of the pay cap, that figure will increase to 91 percent. Becau se of the pay compaction problem, the Board is faced with the probl em of promoting employees to higher levels of responsibility with little or no increase in salary. Within the past year, a number of key officials have resigned from the Board, partly or largely for reasons dealing with inadequate compensation. Most of these employees have accepted employment offers which exceeded their Board salaries by 70 percent and more. (You may be interested in the enclosed listing of officers who left the Board in 1981.) Although Federal salaries cannot match those in the private sector, an increase in salary level s of modest proportions may have averted the exodus of some of these people. Thus far this year, the annualized attrition rate for   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  Tit(' ihmornhle Ted ;;tev(.1):: Page 'Iwo  the Board's official staff is exceedi.ng 20 perc ent, almost double the rnte experienced in 1980 and nearly trip le the rate experienced in 1979. in the past, when pay 1.1as more competitive and the attrition rate for our key senior officials was fairly low and stable, most of our vacancies were quickly fill ed. But with the recent sharp increase in resignations nnong our key officials, it has become extremely difficult to find repla'em ents with the quality of experience necessary to cover 'critical areas. Unfortunately, we can no longer rely as kavily on rec ruitim, competent replacements from outside of the itederal Rese rve due to the increased gap between our salary lelels and thos e offered in the private sector. The Federal Reserve has traditionally been staffed at senior levels by people intent on making the Federal Reserve their career. However, to an increasing degree., we now find ourselves training people who after a number of yearr, leave for greater financial rewards. Uhile Many dedicate d individuals have made sacrifices in the past, today'S salary rap is too great for us to expect to be able to rcLain many of these individuals. I am greatly concerned Lhat further erosion of talent could result in a decline of overall Board effectivenes s. I realize that in a . period of severe budgetin g resLraint iL for pay increases for the highest paid is difficult to argue government workers. However, I do believe the sitOation has become sufficiently serious that the only responsilde course is Lo take prompt action to lift the pay cap. Again, thank you for the opportunity to comment. Sincerely,  S/Pagl A, Volcker  cy---(J2Aitraw\ki ETM:JW:RS:vcd (V-222) bcc :   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Vice Chairman Schultz Mr. Mulrenin Mr. Weis Mr. Syron Mr. Salvaggio Mrs. Mallardi (2)  - —• w a  4aTer 0.4aos.•  A   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Officers Leaving the Board in 1981 (As of 7-28-81) New  1. 2. 3. 4. 5. 6. 7. 8. 9. 10.  Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer  Salary  Reason  $ 90,000 61,000 110,000 62,000 125,000 90,000 90,000 75,000 70,000  Retirement Pay Pay Pay Greater Opportunity Pay Pay Pay Pay Pay and Greater Respon.  WILLIAM V. ROTH, JR.. DEL.. CHAIRMAN SUSCOM 1.11 IrTTEIE t  CHARL.S PERCY, ILL. TED SrEvEns, ALASKA CHARLES MC C. MATHIAS. JR., MD. JOHN C. DANEORTH. MO. WILLIAM S. COHEN, MAINE DAVID DURENSFRGER, M INN. MACK MATTINGLY. GA.  THOMAS E. EAGLETON, MO. HENRY M. JACKSON. WASH. LAWTON cHiurs, ri.A.  TEO STEVENS, ALASKA, CNA I RM AN CHARLES MC C. MATHIAS, JR., MD.  SAM NUNN, GA. JOHN GLENN. 04-110 JIM SASSER, TENN.  DAVID PR TOR. ARE.  WAYNE A. SCHLEY. STAFF DIRECTOR  DAVID PRYOR. ARK.  WARREN 111. RUDMAN, N.H.  CARL LEVIN  JOAN M. MC ENT EE,  srArr  MICH.  DIRECTOR  'RICrtiteb Zfalez Zenate COMMITTEE ON GOVERNMENTAL AFFAIRS SUBCOMMITTEE ON CIVIL SERVICE. POST OFFICE. AND GENERAL SERVICES WASHINGTON. D.C. 20510  un  n ---1  U3  .." .....  C.3 M  TM = C.)  CD AI  -lir, ...,C., le,'" :1 ....7. (1f11 •v: C.I---1  July 31, 1981  I  c.n •:', C=3 ..  Mr. Paul A. Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Mr. Volcker: Recent press reports have indicated that numerous senior executives are leaving the federal government due to inadequate pay.  It is also reported that the government is  experiencing difficulty in recruiting senior executives. your agency experiencing such problems? detail examples of such problems.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  With best wishes,  Chairman  If so, please  Is  r 1 —  cu  yea •-• •  :::... rip  "..'" .---  73 01  7. rr  r,,-,""1 t,-) --, rrs —I".  ... ,z) -..., k•* :,-.'   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 30, 1981  The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D.C. 20515 Dear Chairman St Germain: During the hearing on July 21, you requested infor mation concerning a study of the credit needs of small businesses. I am pleased to furnish you with a copy of the insert I provided for the record of the hearing. Sincerely, Waul A, Volcker  Enclosure CO:pjt bcc:  Eleanor Stockwell nrs. Mallardi (2)  Insert page 37 (hearing before House Banking July 21, 1981) Chairman Volcker subsequently submitted the following information for inclusion in the record of the hearing.  A three-part study is now underway, under the direction of an Interagency Task Force on Small-Business Finance, in response to the following provision of an act (Public Law 96-302) approved July 2, 1980: "In consultation with the Administrator of the Small Business Administration and the Bureau of the Census, the Board of Governors of the Federal Reserve System, the Comptroller of the Currency and the Federal Deposit Insurance Corporation shall conduct such studies of the credit needs of small business as may be appropriate to determine the extent to which such needs are being met by commercial banks and shall report the results of such studies to the Congress by January 1, 1982, together with their views and recommendations as to the feasibility and cost of conducting periodic sample surveys, by region and nationwide, of the number and dollar amount of commercial and industrial loans extended by commercial banks to small business. Reports shall, when transmitted to the Congress, be referred to the Senate Select Committee on Small Business and the Committee on Small Business of the House of Representatives." The first part of the study comprises a group of background papers which are now in final draft.  These papers cover a broad range of subjects  related to small-business financing, including sources and characteristics of small-business credit, the impact of various laws and regulations, the effect of changes in banking structure, and the relation between firm size and bank lending terms. The second phase of the study, subject to approval by the Office of Management and Budget, will consist of personal interviews in early fall 1981 with lending officers at a national sample of commercial banks.  The  proposed survey questionnaire is designed to provide a profile of commercial bank practices and experience with respect to their lending to small business. It asks for information about availability of small-business credit at the bank and in its market area, and about the nonprice characteristics of the bank's small-business loans.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  It also includes detailed questions about the  -2-  way the bank prices its loans to small business and how this varies with changes in interest rates generally and how it compares with pricing of loans to large business. The third part of the study will be the recommendations requested by the Congress with respect to future collection of data on bank loans to small business.  They will take into consideration the data needs revealed  by the background studies and the information obtained in the survey of commercial banks.  In drafting these recommendations, the interagency task  force will be examining a variety of options with respect to their feasibility, cost and usefulness.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,w   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 27, 1981  The Honorable Bill Bradley United States Senate Washington, D. C. 20510 Dear Senator Bradley: endorsing Thank you for your letter of July 20 serve on the Board's the nomination of Hr. David B. Ward to Consumer Advisory Council. lifications I can assure you that Hr. Ward's qua the Board makes the will receive full consideration when 1981 appointments to the Council. Al;ain, thank you for your interest. Sincerely,  CO:vcd (#V-207) bcc:  Mrs. Bray (w/copy 91 incoming) Mrs. Mallardi (2)k-/  DILL DRADLEY .:r-lov JERSEY   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  'ZICnitcb Zlafez Zenale WASHINGTON, D.C. 20510  July 20, 1981  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Washington, D. C. 20551  LL-4 Cr3  C—..  - . ,'"3 r\.)  C.J..)  ; - ,:-7 ' . :A  Dear Mr. Volcker: It has been brought to my attention that the Board of Governors of the Federal Reserve System is seeking nominations to the Consumer Advisory Council. I have been advised that the Beneficial Corporation, headquartered in New Jersey, has recommended David B. Ward, Senior Vice President of Government Relations of the Beneficial Management Corporation, to serve on the Advisory Council.  7NJ  While I am not personally acquainted with Mr. Ward he has an impressive background. In addition, the Beneficial Corporation, led by Mr. Finn Caspersen, has an outstanding record of responsible corporate leadership in our state. I hope that you will give their nomination of David Ward careful consideration. ncere  Bill Bradley United States Senator BB/mae  July 17, 1981  The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Wasnington, D.C. 20515 Dear Chairman St Germain: I wanted to thank you for sending me in advance of release a copy of the Committee report, "Iran: The Financial Aspects of the hostage Settlement Agreement."  sor.  I want to compliment the House Banking Committee and you on tne thoroughness nf your investigation and the exten t to which you examined the many rumors and accusations which surrounded this very complex undertaking. I believe that the Banking Committee staff effort, led oy your General Counsel, Mr. Flaherty, not only serves the Couunittee well but will prove a valuable tool to those seeking insight into this dramatic episode in our nation's history. Sincerely,  S  iNRM:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  we  : 44; .•c;Of GOvt. •0 • co •0 •  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM i-t L •  • cr`  WASHINGTON, D. C. 20551  . L RE  ' •..• •  August 19, 1981  The honorable Charles E. Bennett House of Representatives Washington, D. C. 20515 Dear Mr. Bennett: Thank you for yollir letter requesting comment on correspondence you received from your constituent, Mr. Arthur T. Boone, enclosing an article concerning the authority of the Federal Reserve to purchase obligations of foreign governments. This authority was conferred on the Federal Reserve as part of the Monetary Control Act of 1980 (P.L. 96-221). I regret the delay in responding to your inquiry and hope the following information will be useful. The sole purpose of the provision is to facilitate the foreign exchange operations of the Federal Reserve. As part of the Federal Reserve's responsibility to help maintain orderly market conditions, the System has entered into arrangements with several foreign countries to purchase foreign currencies that can be used to defend the dollar. These agreements are called "swap" arrangements. When these swaps take place, the Federal Reserve then owns foreign currencies. Until passage of the Monetary Control Act, the Federal Reserve did not have any way to invest these holdings in order to obtain a return. Since 1914, the Federal Reserve has possessed authority to invest its funds in certain types of securities. For example, the System is empowered to purchase U. S. government and agency securities, certain short-term obligations of State and local governments, bankers' acceptances, and bills of exchange. However, with the passage of the Monetary Control Act, the Federal Reserve can now invest foreign currencies it holds as a result of its swap arrangements in interest bearing obligations. This will result in an increase in Federal Reserve earnings, almost all of which are turned over to the U. S. Treasury. (In 1980, the Board paid the U. S. Treasury $11.7 billion.) Since the new authority is to be used only in conjunction with foreign exchange operations, the provision does not permit the Federal Reserve to "monetize" (i.e., provide Federal Reserve credit in return for a debt obligation of the borrower) the debt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .10  •  The Honorable Charles E. Bennett Page Two  of private persons or foreign countries. Indeed, there is nothing in the Monetary Control Act that touches upon the ability of the Federal Reserve to purchase private debt obligations whatsoever. Use of the authority to invest in )foreign obligations merely provides the System with the opportunity to earn interest on foreign currencies which are needeid to conduct foreign exch ange operations and which otherwise would constitute noninterest bearing assets. When the authority is use,d, all that is provided is foreign currency, which constitutles a debt of another country, and not Federal Reserve credit. Please let me knqr if I can be of further assistance. Sincerely, (Signed) Anthony F. Anthony F. Cole Special Assistant to the Board  AFC:vcd W-171) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mrs. Mallardi 1//  r:1,1•77  CHARLES E. BENNETT MEMDER rt; DISTRICT. FLORIDA  , e,LL  JOHN W. FARLEY  I  SERVICES COMMITTEE  CHAIRMAN OF SEAPOWER SUBCOMMITTEE  Coitgre5 of the Zilitital  .  11-.0  tkitt r" 9' 15  jEpti5e of ikepresz‘entatitigi  JAcKsoNvILLr OFFICE 352 FrornAt. BUILDING 32202 TELEPMNE 1/04-791-2587  CIF 11.E Cv.:,ly  Ulastington,;le. 20515 August 10, 1981  JOHN W. POLLARD. JR. BRENDA DONALDSON   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,  ADMINISTRATIVE ASSISTANT I  ARMED  e •  Office of the Chairman Federal Reserve System Federal Reserve Ruildinn Constitution Avenue Between 20th and 21st Streets Washington, D.C. 20551  THOMAS J. MILLER LEGISLATIVE ASSISTANT  SHARON H. SIEGEL LAURA M. COWAN PATRICIA A. GODDING BARBARA L_ FETHEROLF DARLA E. SMALLWOOD VIRGINIA J FERGUSON WENDY S. LEAVITT SECRETARIES  Gentlemen: I am writing to you again regarding the matter my constituent, Arthur T. Boone, an attorney in Jacksonville, Florida brought to my attention. Have you had an opportunity to review this matter? I will appreciate hearing from you as soon as possible so I may be back in touch with Mr. Boone. May I please have your advices? With kindest regards, I am Since ely,  Charles  Bennett  CEB:lm cc: Arthur T. Boone, Esquire  r  tn :9 I** r—  IL• •  •  7t.t  •4  r -  I  • 1 . 41  C.0  CJ1  THIS STATIONERY PRINTED ON PAPER MADE WITH  Rrcycurr) FITIERS  r  A0044""--.0""'"°°.. //el  a." le  tr-  June 19, 1981 Office of the Chai rman Federal Reserve Syst em Washington, D. C. 20551  Gentlemen: I 'wire received the enclosed letter fr I have reproduced th om allawyer in Jack sonville and e page of the book that he referred to tnowledur of these . I have no mcnetary matters my self. Apparently sentiment in the , there in a strong country to repeal th is bill, the Mone 1960, or at leust ta ry Control Act of certain portionn of it. Could you gi that would be help ve me any Wormatio ful so that I may n thoughtfully adviae my constituent? With kindest rega rds, I am Sincerely,  CM:des Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Charles E. Bennett  • •  ..• _e" e'  .•  PRTHUR T. B0011E, P. AND COUNSEL AT rOPNC Y  Lon  AT  LANA 40.4 CLORIDA  THEATRE  BuILDiNn  JACKS011VILLE.  Lit •  P4c...4(   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  it  3P4:4  Honorable Charles E. 1P-.11nett United States Congressman 2107 iayburn Building Washington, D. C. 20515 IN RE:  THE DUCK BOOK  Dear Charlie: I hand you herewith a copy of Bob White's "Durk Book". On page 20, you will find an article concerning the Monetary Control Act of 1980 and its potential for disaster. I am deeply concerned regarding same and would like to know your position as to its passage and its repeal. Aq T mesnt-ionod before, .0-1Q ..i.115.0Q1;*-,ir.1... .havQ...Luct.n. cqnned . I ti promoting expendi.tures_whic are JeOing ourAreat repub.lic_toyards__ 7.TATion and into a colleFtivist .9overnment. and society.. You will find other parts of Bob White's book entertaining and informative. He certainly has generated and reflects an evergrowing swell of public Awareness to the disasterous consequerv:es of our govermnent's deliberate inflation of the money supply. With best personal regards. Sincerely, -  9 ARTHUR T. BOONE  ATB:sea Enclosure  32202  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Newsletter Citations:  Number of Pages Removed: 1  Sibbet, James. "Let's Talk About...Silver and Gold." Pasadena, CA: Sibbet Publications, April 9, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  ' o ,ZO" '"17D • ••  BOARD OF 130VERNORS  •  rilL  • %'.: r •  FEDERAL RESERVE SYSTEM  •• ' (• r r  WASHINGTON, D. C. 20551  '  August 14, 1981  The honorable Eugene Johnston House of Representatives Washington, D. C. 20515 Dear Ur. Johnston: This is in further response to your letter to Chairman Volcker concerning the ability of nonprofit hospitals to maintain NOW accounts. As you are aware, in April the Board sought public comment on a proposed interpretation to Regulation Q concerning NOW account eligibility. After consideration of over 800 comments received, the Board, effective September 1, 1981, adopted the enclosed interpretation. Under the interpretation, the class of depositors eligible to maintain NOW accounts at member banks will include, among others, all nonprofit organizations that are described in sections 501(c)(3) through (13) and (19) of the Internal Revenue Code. Pursuant to this interpretation, it is likely that all nonprofit hospitals will be permitted to maintain NOW accounts at member banks since such organizations L,enerally qualify for an exemption from Federal income taxation under section 501(c)(3) of the Internal Revenue Code. I hope this information is useful. Please do not hesitate to contact me if I can be of further assistance. Sincerely, (Signod) Anthony F. Cole Anthony F. Colo Special Assistant to the Board Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (8/14/81 P.R.)  AFC:vcd (V-180) bcc: Mrs. Mallardi./  el*  11Cnifeb Ztafez Zenate WASHINGTON. D.C.  20510  July 29, 1981  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Twentieth Street and Constitution Avenue, NW Washington, DC 20551 Dear Mr. Volcker: We would like to thank you for addressing the Republican Senate Intern Program. Your presentation received many positi ve comments from our interns which proved that it was well receiv ed. We hope that next year you will again be able to meet with our interns. Once again thank you for your time and effort. Sincerely, aZILS )k,( Margo rlisle Staff Director Senate Republican Conference   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  E.YAJ--ef) ichard K. Thompso Staff Director Republican Policy Committee  co ":1  s=s (11  11Cnifeb ,Sfafes Zenafe  gOAR9  •"  WASH INGTON, D.C. 20510  :",'r", July 29,  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Twentieth Street and Constitution Avenue, NW Washington, DC 20551  3 I 1111 10: 08  OFFItLE Or ILI:: CUAIR114f4  Dear Mr. Volcker:  We would like to thank you for your presentation to the Senate Republican Interns. We hope that you enjoyed meeting with the young people who have volunteered to help out in our offices. The opportunity for interns to hear members of the administration in person is invaluable and we hope that next year you will again be able to find the time to meet with the Republican interns. Again, we appreciate your time spent with us. Sincerely,  g. 6144.4ames A. McClure hairman Senate Republican Conference   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /Cohn  (00TA4r--g—m. Tower Chairman Republican Policy Committee  •  Islb  ft  11Cnifeb ,Sfaiez -.Senate WASHINGTON. D.C.  BOARD OF GeVERNORS  C.;i7  20510  rEOEPAL: RESERVE June 30,  1 •  kJUL-2 OMA0:53  RECEIVE) OFFICE OF THE CHAIRMAN Mr. Paul A. Volcker Chairman Federal Reserve Board 20th and Constitution, NW Washington, DC 20551 Dear Mr. Chairman: We would like to thank you for accepting our invitation to speak to the Senate Republican Intern Program on July 28 from 3:30 p.m. to 4:30 p.m. in Room 318 Russell Senate Office Building. We are sure that your presentation will be well received and we look forward to it. Once again, thank you for your time and effort. Sin  li,  If  f  , ohn Tower hairman Republican Policy Committee   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ly, •  91/1,t  Jame McClure Chairman Senate Republican Conference  .04  11Crtifeb Zfalez Zertafe WASHINGTON. D.G  20510  June 17, 1981 /  4 1(  Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System 20th and Constitution Avenue, NW Washington, DC 20551 Dear Mr. Volcker, The Senate Republican Conference and the Republican Policy Committee are jointly sponsoring a Republican Intern Program designed to broaden the participation of college students in the political and legislative process. We would be honored to have you speak to the approximately 250 interns anytime between the present date and August 1. The meeting would be held in a Senate office building and preferably in the afternoon. Our program can certainly be organized around your schedule, if you can in fact afford us a one hour meeting. We believe the benefits of this program will prove to be very worthwhile. Over the long-run, we feel the program will stimulate the interns' future in the Republican Party and in the political process. Please contact a staff member of the Policy Committee, Raleigh Kraft, at 224-6-417 to coordinate a convenient time. Thank you for your consideration.  s•  If  John Tower Chairman Republican Policy Committee   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  2/vi et.(4  Jame A. McClure Chairman Senate Republican Conference  1  i!JARII OF r-r".':-.F2112,;;:si •  August 5, 1981  1981 RUG -6  rim  8: 59  OrFIGE 01. 1 Dear Bennett: The President was pleased to receive your July 24 letter, cosigned by Senators Nunn, Chiles, Boren, and Exon, recommending a "domestic economic summit" to discuss the question of interest rates and the current fiscal and monetary policies of our Nation. time to assure you that the concerns you I wanted to take have outlined on these matters are appreciated and shared by President Reagan. The President's advisory staff has been made aware of your assessment, and I have transmitted your request for the "summit meeting" to the appropriate offices. I have asked that your suggestion receive prompt and serious attention. Thank you very much for sharing your concerns with us and, also, for conveying your statement of bipartisan support in the current endeavor to achieve economic revitalization for this country. With cordial regard, I am Sincerely,  Max L. Friedersdorf Assistant to the President  The Honorable J. Bennett Johnston United States Senate Washington, D.C. 20510  MLF:CMP:mdb  response. for DRAFT um enba Weid appropriate incoming, Murray Friedersdorf for CC: w/copy of L. Max to (Please forward DRAFT follow-up.) Reserve Volcker, Federal Pau rman Chai incomin cc: w/copy of System, Wash. D.C. - FYI incoming, Marty Anderson of py w/co CC: Powell Moore - FYI w/copy of incoming, Pam Turner - FYI w/copy of incoming, action for appropriate ll Newe Greg incoming, cc: w/copy of INCOMING RETAINED ORIGINAL HAS NT GEME MANA WE RECORDS ( 4 AllopAC( lite   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  WIL LIAge  V. ROTH, JR., DE L , CHAIRMAN  HARLES H. PERCY, ILL . D STEVENS. ALASKA  'THOMAS F. EAGLETON, MO. HENRY M. JACKSON, WASH.  RARLES MC C. MATHIAS. JR., MD. JOHN C. DANFORTH, MO.  LAWTON CHILES, FLA.  WILLIAM  JOHN GLENN, OHIO  S. COHEN, MAINE  SAM  NUNN, GA.  DAVID DURFNBERGF It, MINN. MACK MATTINGLY, GA.  I/AVID PRYOR, ARK.  WARREN B. RUDMAN, N.H.  CAUL LI VIN, MICH.  JIM  SASSER, TENN.  9.1Cnitcb Zfatez;  Li34623  JOAN M. MC 1.I/fTEE, STAFF DIRECTOR  COM M ITT EE ON GOVERNMENTAL AFFAIRS WASHINGTON, D.C.  20510  July 24, 1981  The President The White House Washington, D.C.  20500  Dear Mr. President: We have given support to the general direction of the Administration's economic program here in the Senate. We share your belief that a reduction of federal spending, federal taxes, and the federal regulatory burden is essential for increased productivity, reduced inflation, and economic revitalization. We are vitally concerned, however, with the apparent absence of coordination between the fiscal and monetary policies of our government. The current fiscal and monetary policies of our nation appear to be on a path where significant conflict, if not a head-on collision, is imminent. The continuation of the high interest rate pattern of the past few months, if allowed to persist, will cause irreparable damage to our economy. We are beginning to have a dual economic policy -- a boom to those with available capital -- a depression for those who must borrow and for businesses depending on long-term credit. When giant corporations borrow tens oi billions of dollars for corporate takeover purposes that make no contribution to job creation and productivity, and potential home buyers cannot find affordable mortgage money, it is time for a reexamination of national economic and anti-trust policy. We also think it would be appropriate in this context for the Administration to re-examine recent policy statements which may have encouraged massive borrowing for merger purposes. Officials of the Administration and the Federal Reserve have repeatedly said that once inflation abates and the public is shown that federal spending will be cut, interest rates would begin to decline. Just recently on May 8, Federal Reserve Board Chairman Paul Volcker said, "interest rates will come down and stay down as we make progress on inflation."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -The -President July 24, 1981 Page 2  are Today inflation is declining but mortgage interest rates percent in not. While consumer price increases declined from 9.6 most rethe first three months of this year to 7.4 percent in the nched cent three months, the mortgage interest rates remain entre est at 16 percent. Historically the spread between mortgage inter Now, rates and the rate of inflation has been about 2 percent. to. however, the interest rate/inflation rate spread has ballooned a 6 to 7 percentage points which implies to many that this is planned and deliberate policy. The Administration's economic advisers, according to Mr. ers, William Niskanen, a member of the Council of Economic Advis high are currently both "confused" and "puzzled" by continuing t ininterest rates. Yet reports from the recent Ottawa summi interest dicated you endorsed and vigorously defended the high rate policy of the Federal Reserve. Just today the Washington Post reported that Treasury Under House Comsecretary for Monetary Affairs Beryl Sprinkel told the is no mittee on Banking, Finance and Urban Affairs that there deficits technical, and no necessary, connection between budget and money growth, or between deficits and inflation. We could not disagree more. Either the government finances ing a deficit by printing money or by competing with and crowd ce business out of the credit markets. Printing money to finan al deficits results directly in more inflation. Increasing feder and borrowing affects inflation by forcing up interest rates, and increasing business costs. Eliminating federal deficits both reducing federal borrowing requirments are pecessary for psychological and substantive economic reasons, and must be accomplished at the earliest possible time. If the high interest rates continue, the Administration's supply side economics cannot work. The survival of our small business and farming community is threatened, many thrift institutions are in serious financial trouble, and the housing industry is near collapse. The majority of businesses, particularly small businesses, will not be able to finance inventories, let alone capital improvements. A tax cut will mean little to small businessmen and farmers who make no profit to be taxed because of exorbitant interest rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  se  ,•  •  The President July 24, 1981 Page 3  ious urge you to address these ser we , ent sid Pre Mr. y, mar sum In te the Administration's era mod to e lat too is it ore ed problems bef stion is whether the anticipat que the it, see we As m. gra fiscal pro s fiscal program has so on' ati str ini Adm the of ect eff stimulative g-term high interest rates lon ued tin con t tha tem sys the overloaded stration does not advocate ini Adm r you If . ult res e abl vit are the ine we hope that it will let its , icy pol e rat st ere int h hig a continued and persuade them to take ity mun com ial anc fin the to wn views be kno es. action to moderate interest rat suggest a "domestic economic lly tfu pec res we , ard reg s In thi , logue between you as President summit" meeting with a full dia Congressional leadership. and e erv Res l era Fed the of r Chairman Volcke would emerge a coordinated re the g tin mee t tha of out e We would hop be clearly understood by can ch whi icy pol ary net -mo cal cohesive fis the American people. but we do believe it is e, cur t tan ins an ect exp not We do interest rates and avoid major of n tio era mod a e iev ach to possible fiscal and monetary policies credit shortages if our nation's are coordinated. port in this effort. We offer you our bipartisan sup Sincerely,  1  p-ec Sam Nunn  Lawton Chiles  Benne  cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman Paul Volcker  `' 124 -/ 7 en 2 Bor :7/ 17d L. av'  Johnston  LARRY P. McDONALD  DISTRICT OFFICES:  7TH DISTRICT, GEORGIA  Room 580, 1sT NATIONAL BANK BUILDING 100 CHEROKEE STREET IYIARI ETTA, GEORGIA  WASHINGTON OFFICE:  Congro of Me Einittb  504 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C.  20515  TELEPHONE:(202) 225-2931  301 FEDERAL BUILDING  Powse of AeprOentatibaS  COMMITTEE: ARMED SERVICES  trilattington, )113.C. 20515  suEscommiTTEEs:  ROM E, GEORGIA  30161  TELEPHONE:(404) 291-7777  POST OFFICE BUILDING ROSSVILLE, GEORGIA  RESEARCH AND DEVELOPMENT  30741  TELEPHONE: (404) 866-2222  SPECIAL SUBCOMMITTEE ON NATO STANDARDIZATION. INTEROPERABILITY AND READINESS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  30060  TELEPHoNE:(400422-4480  July 29, 1981  Mr. Paul Volker, Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue, NW Washington, D. C. 20551 Dear Mr. Chairman: It would be greatly appreciated if you would furnish me with an autographed photo of yourself. Best regards.  -ri  Sincerely,  ',10 "r1;KA  r—  —f,  /"YYte.7140.6(., Larry  .  €.-)Fr; :r  =C'  cDonald ••  LPM/fms 1.1".  CD  4/  ie?  ;"-e-  July 31, 1981  The honorable Bill Nichols house of Representatives Washington, D. C. 20515 Dear 1Lr. jichols: I am pleased to acknowlede receipt of your letter to Chairman Volcker dated July 28 enclosing correspondence from your constituent, Vr. W. DouLlas Amos, and requestin& that his letter and resolution be made a part of the official comment record before the Depository institutions Deregulation Committee ("DIDC"). At its meetin6 on narch 26, 1931, the Secretary of the Treasury was elected Chairman of the DIDC. I have, therefore, torwarded your letter to lir. Gordon Eastburn, Actin& Executive Secretary of the DIDC, Department of the Treasury. I expect you will be hearinL from Mr. Eastburn in the near future. Sin.cerely, (S'ignekl) Uonald  Willa  Donald J. Winn Assistant to the Board  cc:  Mr. Gordon Eastburn  CO:vcd (V-212) bcc:  $'  111••   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Nrs.  Will be referred to Gordon Eastburn per Ed Ettin  BILL NICHOLS 3RD DISTRICT. AL_ARAMA  COMM ITTEE Ot, ARMED srrivicf  DI STit CT Of•ICFS  2A.7 RAYBURN 111),LOING WASHIAVITON. D C.  20515  Congrciics of iljc Elititeb  FHor+r: (202) 225-2261  Lfr. LnANI-4:11 MACVN RANDOLPH Rot,SSrLL AAAAA DI(IA T A 11.A.A•OlOSA   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tate5s  ANNISTON, ALARAA. PHoo, st: 236-5655  jipti5e of ikrprefSentatibr5  COUNT'!"S • Al/TAW:A CAL-NOON CliAPAISEPS CLAY Ct., wit NNE COOSA ELMORE  F 10fPAL DUILDIN  FIEDIERAL  DIPA1  OPCLIKA. ALABAMA PoioNes: 745-6222  Ula5bington, D.C. 20315  115 EAST NORTH SI: / "") /  •  Tusr(rorr. A  /  Poioris : 727-4, 190  /  July 28,1981  -"1  Mr. Paul A. Volcker Chairman Depository Institution Deregulation Committee 20th and Constitution Avenue Room B-2120 Washington, D.C. 20551  C—  rNJ ceD  , (.1  CD  Dear Mr. Volcker: Attached is a copy of a letter I have received from the Alabama League of Savings Associations, as well as a resolution passed "vigorously opposing D1DC's proposal to raise passbook savings rates to 10.5 percent". It is the position of the Alabama League of Savings Associations that such action would increase the cost of doing business a minimum of $33 Million annually in the State of Alabama along which would further compound the trem us financial problems of the thrift industry. I would respectfully request that this letter and esolution be made a part of the official comment or ation.  Bill Nichols, M.C. BN:cm Enclosure cc:  Mr. W. Douglas Amos Executive Vice President Alabama League of Savings Associations 818 South Perry Street Montgomery, Alabama 36104  LI r • ..".1  •—•  ; • •—  .:ri .— *....  C.: -,:,.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ;  Tlie SOUTH riF.-  MONTC•Cmt NY  ALATI•mA  •  (2031  •  •  •  W. DOUGLAS AmOS rxrcuTiva  vic•  PRISIDENT  The Honorable B 11 Nichols U. S. House of epresentatives 2417 Rayburn noise Office Buildi ng Washington, D. 20515 Dear Bill: 1. 7  to call your attent ion to the enclos .d copies of tted bv the Alaba aa League of Savi tgL: Associations ;' in cony .ntion in Mobile, Alabama, July 17 1981.  You will note t tat the resolutiot pertaining to t e "All Savers Act of 1981" ex )resses the Leagt ''s grateful appr .ciation to members of the Sen ite Finance and liouse Ways and Mea ts Committees for their recogniti In of the import )f this legislati n and their action in advan ing it toward ettletment into law. Savings and loan leaders in Alabama are vigorously united in heir position rhat this legis ation is essentiil in any program ministering to the afflictions of the savings au! loan business. At the Mobile convention, dis :tissions in the wneral sessions, able talk at breakfast, lune and dinner, and deliberations bv the League's officers and di ectors underscomd the urgency of the legislation and the concern of the delegate- in obtaining its early passage. As savin;;,-, and oan people in Altbama view the st nation, thc sue no longer a matter for st tdv and deliberat on. TI1E TIME FOR MIMITMENT \ND ACTION IS LW), OVERDUE! Accorlingly, we are delighted that he Senate last wek included a mo ified version of the act in tie 1981 tax bill. Bill, the ho,11 of directors of the Alabama Leagu . meeting during the convontion lirected this office to inform all members of the ALaba:-.71 con ;ional delegation of its concern f )r expeditious action on the 1 .gislation and to solicit aain fr )rtt each member his intention in pursuing the 1 Tislation. This action is initiated not ontv in accord with sentiments of .he savings and loan business b it also in respon;e to the persuas on of its thousands of savers who are awaitimi the enactment of this legislation It is the . dispo ;ition of the board of directors aid the membership of the League t tat this expressin of interest anl request for action are both reasonable and p -oper at this tim'. We shall appreciate very r ich your special :onsideration of his matter and your response :1 t your earliest clonvenience. 'NUT, WE ARE HOPEFUL THAT THE AI \BAMA HOUSE DEED \ITON WILI EXERT IS INFLUENCE IN EVERY POSSTP,1E :AY 10 EXPEDITE 1 :NAL PASSACE 1IS VITAL LEJ;IS-  rATto!:.  16104  263 1604   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ihe Honorable Bill Nichols July 22, 1981 Page "Iwo  In reference to.the resolution opposing the proposal of the Depository Institutiom; Deregulation Committee to raise passbook savings rates to. 10.5 percent, please note that such action would arbitrarily increase the cosi of doing business bv Alabama savings and loan associations a minimum of $33 million the first year. Needless to sav, such rash and contemptible action by the DIDC would further compound the financial disorders of the thrift industry in a most invidious and alarming manner. It is inconceivable to us that any responsible, informed group of regulators would resort to such pernicious action. Any assistance you may render in contravening this proposed DIDC action will be greatly appreciated. Congressional interest in this proposition may prove to be a determining factor in the committee's action. If you should conclude that the language of the D1DC resolution is harsh and severe, you will he totally correct in reflecting the intentions of the membership in adopting the resolution. 1 cannot overestimate the depth and breadth of the furv of Alabama savings and loan personnel in respect to thi,; proposed action by the DIDC. When this office may be of service in any capacity, please let me know. ft is always a personal pleasure to hear from you and to use the facilities of this office to serve you. My very best wishes. Sincerely,  W. Dougli/ a)Amos   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,,..0 SA v/4,6s ,  /MT  / (.,-  , 7 c ; ) : _, .0-.,-: ALSp t_,.-..,. -, •_„..... ., . 2 Ai-  Mobile, Alabama July 17, 1981  WHEREAS the  77:,14 -,*(),  4' .  4",  Savers Act of 1981" should provide urgently  needed tax incentives for savings; and WHEREAS :-:uch legislation should contribute substantially to the improvement:of savings flows in thrift institutions and thereby facilitate the recovery of these institutions from serious financial disorders; and WHEREAS the United States Senate Finance Committee and the Unid Statys House Ways and Means Committee have, recognized the import of Ihis legislation and have moved toward its successful enactment into law; THEREFORE, BE IT RESOLVED:  That the Alabama League of Sav-  ings' Associations meeting in convevtion in Mobile, Alabama, July 17, 1981, expresses its grateful appreciation to all members of the Senate Finance and House Ways and Means Committees; and BE TT FURTHER RESOLVED:  That a copy of this resolution be  forwarded to all members of the above-cited committees.  I certify that. the above is a true and accucate copy of a resolution adopted by the delegates attending the 57th annual convention of th-e Alabama League of Savings Associations.  C/ Do glas Amos EN(,cutive Vice President 'AlaUama Lyague or Savings Associations  •1.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  s\c pi S471, \..)6:1" L.'"i- .1. . -17,-, , ,.., , . s.  ma 1  LV„ LI'  .•  7 At co lb... ,,,  c) , T. ---I  Cr.  NHbilk'. Alabama July 17, 1981  2 AP'  ‘4,.."--: 4; ; •  4  ...---) ‘ ,...q. .--)  • •  WHEREAS the Depository Institutions Deregulation Committee has agreed to issue for public comment an informal proposal to raise savings passbook rates to 10.5 'percent for thrift institutions; and WHEREAS such action would arbitrarily increase the cost of doing business by Alabama savings and loan associations a minimum of $33 million annually; and WHEREAS such rash and contemptible action by the DIDC would further compound the financial problem:-; of the thrift industry in a most invidious and alarming manner; and WHFREAS it is inconceivable that any responsible, informed group of government regulators would rf.sort to such pernicious action at THEREFORE, BE IT RESOLVED:  this tirm ,; That the Alabama League of Sav-  ings Associations meeting in convention in Mobile, Alabama, July 17, 1981posal to raise passbook sa . . yl.s rates to 10.5 percent and appeals to the better sense of the committee to strike down such a preposterous p  ion;  and HF IT FURTHER RESOLVED:  That a copy of this resolution be  forwarded to each member of the DIDC, each member .of Alabama's congressional delegation, President Reagan,U. S. and. National Leagues, and other key coHgro.ssional committee numbers.  I certify that the above is a true and accurate copy of a resolution adopted by the delegates attending the 57th annual convontion of.the Alabama League of Savings ASsociations.  •  ,  July 29, 1981  ••••  •  •• •  . •  The Honorable Frank Annunzio House of Representatives Washington, D. C. .4 '  Dear Congressman Annunzio: '  Thought you might be interested in the attached press clippings concerning a meeting of Federal Reserve officials with the National People's Action group in Chicago. We do try to get around a little to hear from all sides.  • ••  Best regards. Sincerely,  '  Attachment  B  ,  JC:PAV:ccm  7c •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •••..  "  FEDERAL REERVE SYSTEM -  ":';,  ,--)f):;',1  July 29, 1981  r`  11  A. N.'"JLCKEI7  The Eonorable Jake Garn Chailman Committee on Banking, Ho using and Urban Affairs Unite,: States Senate Washington, D.C. 20510 Dear Chairman Garn: During my testimony be fore the Banking Committe Wily 22, I was asked if e on the Federal Reserve co uld prepare a stuy within 30 days on the impact of credit restraint on four :;ectors of the economy: agriculture, constructi on and real estate, .1_1tos and relate d industries, and small business. I believe t:lere was genera l agreement that within such a short time period it would no t be possible or desir,-I ble to attempt to undertake any origin al research. The impa ct of conditions in credit markets on di fferent industries is a complex issue and involves a number of analytical diffftulti es. However, the Federal reserve ha s examined this issue in the past, particularly for small busine ss. Accordingly, I have inst ructed the staff to brin together all the inform g ation that is available wi th whatever analyses are possible in such a short time peri od . I would anticipate transmitting this information to th e Co mmittee in early September, abou t the time Congress re convenes. Sincerely, •,  • , 41 ii•  RS:pjt bcc: Mrs. Mallardi (2) Identical letter also sent to Se nator Riegle.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 28, 19R1  The flonorable Paul Tsone,as Senate washineton, n.C. 2^C15 npAr Senntnr Tannpn,: you mi7,ht be interested in ny reply to a 1Ptter fron your constituent, Willinn H. 7rock, Vice Presiden t an4 Treasurer nf !lemintuck Savinrs nanle of 1,1orthampton, Y'TASS. !(r. nrock hip! sent re a copy of his letter you of July 22. I  thoorbt.  Sincerely, St Paul  Endosures.  ECEttin:kt ref: # 2164  $.4  •  July 22, 1981  Mrs. beulah B. Watson  Dear Mrs. Watson: Senator Garn has asked us to respond to your request for Series E savings bonds information. We have contacted an official at the Treasury Department regarding this matter and understand that the May-October 1981 redemption tables for Series E savings bonds were not made available for public distribution in Seattle until the first week in July. For your convenience, I am providing the following listing of the cash surrender value for your Series E bonds for the months of June and July 1981.  Denomination $500 $1000 $500 $500 $1000 $1000 $500 $1000  Serial Number D-205 M-204 D-102 D-102 M-202 M-202 D-200 M-210  414 301 039 110 142 142 668 281  417E 481E 839E 172E 832E 834E 073E 296E  CASH VALUE June July  Date of Issue June June June June Dec. Dec. Dec. Dec.  1976 1979 1975 1978 1976 1976 1979 1979  $511.20 $828.00 $542.40 $436.40 $951.20 $951.20 $404.00 $808.00  $511.20 $832.40 $542.40 $436.40 $951.20 $951.20 $405.80 $811.60  The serial numbers listed on each of your bonds are uniquely assigned numbers that allow the Treasury Department to maintain records of outstanding bonds by series, denomination, and owner. In the event that you have other Series E bonds which you are considering redeeming, I have requested that the Seattle Branch mail you a copy of tne most recent redemption table. We regret any inconvenience associated with your not being provided this information earlier. Please let me know if I can be of further service. MLB:CO:pjL (v-198) Sincerely, bcc: Mr. Gerald R. Kelly, f", : FRBranch, Seattle Mike Bermudez Mrs. Mallardi-' Donald J. Winn Assistant to the Board cc: The Honorable Jake Garn  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  JAKE GNAW. UTAH JOHN TOWC PP TEX. _KAN HE iNZ PA. WILLIAM L. ARMSTRONG. COLO. pitcHAREI G. LUGAR. IND. Al IONS!' M. Cl'AMATO, N Y. JOHN H CHArEr. R.I. HARRISON SCHMITT, N MEX.  CliAIPIMAN  HARRISON A. WILLIAMS AI AN CRANSTON, CAL If. nONAL0 W. RIEGLE. IR  salc.t4  pAtn.. s. s AAAA NES. MO. CHPHSTOPHER J. DOOD. CONN. AL AN DIXON. ILL.  IRECTOR M. DANNY WALL. HOWARD A. MENELL. MINORITY STAIR DIRECTOR ANO COUNSEL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF 07'..*!.:RrRly Of I hi: SYST!': FILSEiNF. F. 17.47:At.  /PI., N.J.  wit.LeAku eisoxmipte, wis.  'ZICItife6  falcz  mate  COMMIT!' I ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C.  20510  1981 JUL 1 4 (Ifi 11: 51 FECEIVEU OFFICE OF THE CH,AAIRMAN  July 6, 1981  The Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Chairman: I have recently received the enclosed correspondence from Mr. H. F. Davis, Spokane, Washington, in behalf of Mrs. B. B. Watson who was unsuccessful in her attempt to obtain information concerning her savings bonds. I would appreciate your providing the information requested by writing directly to either Mr. Davis or Mrs. Watson. Your assistance is greatly appreciated. Sincerel  Jake Garn Chairman JG:dtr A enclosure  yours,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ina.y 2/8(  Fet4At.  7 -1(4- 5z-(<7;tetetic6 s.  4-icatt.  1-1-ze (A ee-or-4. 4-t-tit-t-11 &-e-4 "  „ 4 4„4, r e.A... ‘8,  64.44"-e7:4: /go,gd.x.  Seddc 0)4  o-a44.•  Qi/76;e2A-c.4.  ••  .••".  f  # •  r  • •  ;  •  6  •  6.6 • # .1k •  , c t1 mic2  raV49.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,‘  cryzAil a•f. al{-i-x (dm,/  6,47 ,LaAfr. cc,vl oLc,:-A)Z42-PS-1-",ff, evfrc-IcLAALyi /6/&e,c4AA21  gaAtz:ef  zvvyt.  -c4 /Y&(ft.  4t-a-144  tka  -CteX4rift  Cel/U-C.Z2  )  IfuctLit:,vt-Ce ‘ yn  a-4-41-4-7  veirt,4 ei}6(Lt ie4.4  it/244 oet des Gatia_int ev-6&L,..t,reZcyr-Letzto‘, c/-4 (`L cct,(2. _ 7z,zz__/, .tjarzteJ1-4 c1-4 irff/, %t/4 / 0a4--cri -1X/set_c-c-e-4/643 j /6c":2-L 4 PZ-1..t-C_C-4_ 11e7t4 '  c14,41A  .42-6zrt"/11-C-iaL  7c.i.c.  . e-i.2/zrz_LL-L-4Lcryt__a_ir-(1  /—cyo  --14/L  7Z 11  4-4 gr4-1 et(1-41-ZAL-1Xe/_i-e-L /1) / 4Vv&  r/ea  k ) ec  • V  0.3.34  cS////3/  V/4  ,ScrAa )4-2e-1)  -Yaaxafte Pfz  40(si  /4(cceverci i'(-) ‹lic'tVxCe‘7710:711-7  AqV"  r*  /S,4-11‘1 . 65ccCrAM AV•(S.6-4,z74,&' a'ith L. if tf,50/ve  /C%';G. c_  U" 14Gall..14-- 0,64/0S  bror‘f,402  oz•Y taerEevei/N/4/6 riete aithr,  Y•44uE op rive icre“ot , v/A/6 Gis7  ;,/,goxICS  /4-S- OP i0A7e  &""'Ne , 144'll/Y147-70iv  P.17* dice /sseig lu.seE /  /979 /97Jt• /9.79 4 P4E./7 76  "•ne-c- /97 6 - d047-c• /9 " 1°tPc /"7  fe/ ( a 7,,s r-7-(6- /41--.7N /AeG- Cc 7iii:- 4vr-V6 ,56X/fIN  (  Afa/vt434-A S' 477  rhl" S7G-ar  4'clrro.t--7 az-a-4-c if ‘...Faiv0 - ..14.t,Au.,,,,,,iiirmeL) c1d4.., ;Al)i -c.ta,(4)..4:eta.4) --gt,--k1J. ,e,ey/?S   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7'welz-Y  x-0/Jt5-LD  -  40 f   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 27, 1981  The Honorable Howell Heflin United States Senate Washington, D.C. 20510 Dear Howell: Thank you for your letter of July 17 recommending nr. Charles S. (Re(1) Dlachledge to serv e on the Board's Consumer Advisory Council. I can assure you that Vr. Dlackledge's qualifications will receive full consideration when the Board makes the 1981 appointments to the Council. I appreciate your taking the time to bring him to our attention. Sincerely,  SZPaul A. Yolcket  CO:pjt (#V-206) nrs. Bray (w/copy of incoming) nrs. nallardi (2) v/  DOB PACKWOOD.  mu-a . rf•A ,Proas.N  MARRY GOLDWATER. ARIZ. HARRISON SCHMITT. N. Mt K. JOHN C. VANI OR TH. MO.  HOWARD W. EANIWIN,  NANCY LANDoN r ASst BAUM. IYANS LARRY  roviss  sukr,r  GORTON  Nrv  ',Ar  RUSSFIL 8. LONG. I_A. ERNFKT F. HOt LINCS. S.0  s DAK. wASH.  DANIF K. INKAJYr, WEN-2,Ft L. H. FORD. KY.  .  J. JAMIE.% EXON. NraR. HOW1LL HEFLIN. ALA.  WILLIAM M. DIETENDERrFIK. CHIrr COUNSEL AUBREY L. SARVIS. MINORITY CHirr C.XXINSFL. IrDW N K HAL L. MIWYRITY GrNIRAL COUNSEL  • r .  Zfatez $_'')crtatc  DONAI" W. RIEGLE. JR.. MiCH.  TrD STY WHS. ALASKA SOS IlitierTrN WIS.  -t.r , .•.  COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION  MI JUL 22 R11 9' 05  ILE f:HAiRohm  PECF.VIED  WASHINGTON. D.C. 20510  Cril7a 07  July 17, 1981  The Honorable Paul A. Volcker Chairman Federal Reserve Board of Governors 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551  4f11 (1)2  Dear Paul: It has come to my attention that Mr. Charles S. (Red) Blackledge, who is the Supervisor of the Bureau of Loans at the Alabama State Banking Department, is being nominated for an appointment to the Federal Reserve Board's Consumer Advisory Council. Red Blackledge is a long-time resident of Montgomery, Alabama, having graduated from Sidney Lanier High School, Auburn University, and the Jones Law School at Montgomery. During the Second World War and the Korean conflict, Red served as a counter-intelligence officer in the Army and served in the South Pacific. Since 1976 Red has been the Supervisor of Loans at the State Banking Department and has been responsible for the administration of the Alabama Small Loan Act and has been designated the Deputy Administrator for purposes of enforcing the provisions of the Alabama Consumer Credit Act as to licensees under the act. I think that Red's experiences as a creditor representative, as a regulator, and his continuing experience as a consumer qualify him to deal with issues in the area of consumer credit and other financial services. As a regulator, he is in contact with daily credit transactions and problems which arise between consumers and creditors.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  I take note also that no present member of the Council represents state regulators and, with the two Georgia members leaving the Council at this time, the southeastern part of the United States will not be represented. I strongly endorse Red's nomination to the Board's Consumer Advisory Council, and I know that he will do a splendid job if he is selected. Thank you very much for your consideration. Very truly yours,  ref.) Howell Heflin HH/adt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 27, 1931  The honorable Bill Bradley United States Senate Washington, D. C. 20510 Dear Senator Bradley: orsing Thank you for your letter of July 20 end serve on the Board's the nomination of Hr. David E. Ward to Consumer Advisory Council. ications I can assure you that nr. Ward's qualif Board makes the will receive full consideration when the 1981 appointments to the Council. Af;ain, thank you for your interest. Sincerely,  SAN  CO:vcd (#V-207) bcc:  Mrs. Bray (w/copy of incoming) Mrs. Mallardi  ...•••.. ..0of GOv1-4 ;•. .* 4'0% •C / •. co , . •• .c ./1 v4.9.y.,,,, 2', ,, • -, ,i. ,. ...:ei1lt. " *..4 1:17=: ‘-`{[Frt : .,•$:/-, , 1.3.L 4 '. i l: ••"";-, :1.4__.---,:..ct ..„......• . )„•,..:---i••-...._ .,.. .• • • . -It PI '`. •  F1OARD  OF GOVERNOPS Or THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 205Si  PAu'.. A. VOLCKEP CHAIRMAN  July 22, 1981  The Honorable William Proxmire United States Senate Washington, D. C. 20510 Dear Senator Proxmire: In your letter of July 9, you requested a summary of the public response to the Board's invitation for comment on possible modifications of the present system of monetary data publication. You also asked for an outline of the Board's current thinking on the matter. Enclosed is a simple tabulation of the letters we have received, as well as a copy of the original press release listing the proposed changes. While some responses could not be unambiguously classified, most could, and the summary table is a reasonable characterization of the returns. (Some responses communicated the collective views of groups, and no attempt has been made to assign weights in accordance with the numbers of people or institutions represented.) As you can see from the first column of the table, about half of the responses supported retention of the current approach to publishing the monetary aggregates. A few of the responses in the "other" category shown in the last column supported the release of more frequent or additional data, while two respondents preferred that the data not be seasonally adjusted. About one-fourth of the responses suggested that we publish only monthly data. As might be expected, respondents most actively involved in money markets felt most strongly about maintaining the current publication schedule. In general, those less directly involved in money markets on a day-to-day basis were more favorable to some change. I think it fair to say that comments given us orally in various forums were along the same lines. The most frequently cited argument for retaining the current approach to publication was that, the more ample the data flow, the less likely it is that release of any single number will have large market impacts. It also was noted frequently that, in the absence of our publication of the data, private analysts would fill the void with their estimates and that the situation might prove no better--or perhaps worse--than that now existing.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable William Proxmire Page 2  I expect that the Board will shortly consider the various questions raised in connection with weekly publication of the money supply. It is our objective to provide the public with meaningful, timely information in a manner that avoids undue disruption of the financial markets. This requires an assessment not only of the market's use of the information, but of the internal problems of producing high quality data on a regular schedule. We shall, of course, communicate to you promptly the outcome of our deliberations. Sincerely,  Enclosures  JAKE GANN. UTAI4. CHAIRMAN JOHN TOWER. TEX. JOHN HEINT. PA. WILLIAM t •RMSTRONO. COLO 1.1.1G•la. *an. ALFONS, M. LI AMATO. N Y JOHN H. CHAFEF  R HARRISON SCHMITT. N  MEX.  14AieIII,SON A. W'LLIAMS. JR.. N J. WILL IAM PROXmloit AL AN CRANSTON. CAI it ooN&L.n W. RITGLIF. . MICH. PA/IL S. SARSANES. Mt). CHR,STOPHER J. DODO. CONN. •LAN /. Dixom, ILL.  M. MANNY WALL, ST At F DIRECTOR HOWARD A. MENELL. MINORITY STAFF DIRECTOR AND COUNSEL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  RoARDCrl".'"FrIlinRI, :17  'ZiCnifeb Zfafez Zenaie COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C. 20510  - •  11: 25 19B1 J111. 16 r\A ?FCEIvED OrfiS.CE  Honorable Paul A. Volcker Chairman Federal Reserve Board Constitution Avenue, N.W. Washington, D.C. 20551 Eear Mr. Chairman: In your letter of March 24, 1981, you indicated that the Board of Governors planned to ask for public comment on the desirability of continuing the present system of public releases of M-1 monetary data. Our understanding is that such a request for comment indeed has been issued and that numerous comments have been received. When you appear before the Banking Committee on July 22, would you please summarize the comments which you have received and outline the Board's current thinking on this topic. Sincere  cluv(-) Jake Garn Chairman / •  USS. JG:lsp  ••  7 ;'./.1.  July 9, 1981  ?7Willi  i  1\  July 16, 1981  The honorable G. William Whitehurst house of Representatives Washingtpn, D. C. 20515 Dear ILr. Whitehurst: Thank you for your letter of July 2 forwarding a copy of a letter addressed to Chairman Volcker that you received from employees of Realty World - Waddell Realty concerning the burden high interest rates have placed on the housing industry. As you requested, I am pleased to enclose a copy of Chairman Volcker's response to Realty World - Waddell Realty. Please let me know if I can be of further assistance. Sincerely, (Signed) Donald I.  Ilnti  Donald J. Winn Assistant to t-he Board linclosure (Chairman's letter dated 7/14/81) CO:vcd (#V-188) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mrs. Mallardi  Cong. Liaison Office checking on status of response to WASHINGTON OFFICE, Mr. Waddell; if not answered this will be assigned2469 RAYBURN BUILDING WASHINGTON. D C. 20515 to Mr. Kichline  G. WILLIAM WHITEHURST 2o DISTRICT. VIRGINIA •  OP  COMmiTTEES:  (202) 225-4215  ARMED SERVICES  JOHN P. MAGILL ADMINISTRATIVE ASSIST/UVT  Congre55 of tile Zfriniteb 5;)tatt5  sueopmul  3t)ou5e of 3Arprefsentatibeg  READiNESS RANK1,40 MINoniTy MEmBER  CONSTITUENT SERVICE 815  reorkAL  BUILDING  NORFOLK. VIRCUNiA  Ulagbington, D.C. 20515  MILITARY INS'At LATIONS II AtPERMANENT SELECT COM m ON INTELLIGENCE  orricEs, 21510  (804) 441-3140 VERENA C. WASSERMAN OFFICE MANAGER  T TEE  ROOIN 601. Plr 1.4'ROA E ONE 23462  suscomMITTEESI  VIRGINIA BEACH. VIRGINIA (804) 490-2193  PROGRAM AND BUDGET AUTHORIZATION  BLANCHE M. BOYLES U S. DELEGATE TO NORTH ATLANTIC ASSEMBLY  OFF/CC MANAGER  July 2, 1981  The Honorable Paul A. Volcker, Chairman Federal Reserve Board 21st and Constitution Avenue, NW Washington, D. C. 20551 Dear Mr. Chairman: You have recently received the attached letter from employees of Realty World - Waddell Realty, Virginia Beach, Virginia, concerning interest rates and the effect they are having on the housing industry. I would appreciate it if the views expressed in the letter could receive every consideration. A copy of your response to Mr. C. J. Waddell and his employees would also be appreciated. Thank you for your consideration in this matter. With all best wishes, I remain Sincerely, CD )  ..  G  C.._  G. WILLIAM WHITEHURST _ c  Attachment on   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  REA ni WORLD   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  REALTY WORLD• — WADDELL REALTY 1 4o -h- ri  :`  (‘  June 16, 1981  ihe honorable P:u1 A. Volcker, Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 Dc:Ar  Titan Volcker:  We ,1:1«t this lett,2r to vou on behalf ot tip - not fhousands, hut - of lives affected by the policies of flur Fcderal Resc.rve Syrtem. 1Afilders . . . Rnaltorq Subcontractors . . Homebuyers and sellers . . . Mortgage Pankers . . . in other words, the An.erican Public suffers at the whim of an unfair and discriminatory system. The Federal Reserve System's control of the interest rite has once 'otain caused havoc in the American housing industr,'. When speak of the populace affected, we often rPicy to active, political and professional, individuals. It is our b( lief that thesr individuals will raise a cry and hue heard from , end of nation to another. Already, it is happening. We speak as a group of Tidewater Virginia Residents (Noultdk, Virginia Beach, Portsmouth, Chesapeake). If the city-ol. Virginia Beach alone sealed its borders and didn't allow another person to enter our population structure, we would still require over 3,000 new units of housing per year just to meet our needs! Already, we cannot supply throu:W apartments and below production new construction the needs of :hi, city. In addition, the critical and crucial ti3e oC the interest iS thru. ,in millions of families out of necs.:ary family living situotions have become eNtie,Ilel‘ prevalonf ad strain to the American family and legal biftli!. .)ver livision to eqnit:y. 1;hy - we question - must. housing tor America be the %,Ictim of Federal money manipulation? Can we as a group change a drastic trend that threatens co endanger ihe entire country. We would like to believe that the individual still counts. And. what lies ahead?  We hope that it is not utter disaster. We'll Cover It All FOI You 'A WORLD ol Ditierence. . r-lic)fl•CP inrlepentlpritly Ownef I Am! 1,0".Iltarl   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Honoralele Paul A Volkk-r, (liairman 0 2  ":;.:(2king to have our voices heard, we remain,  'Sincerel , REA1TY WORLD-WADDELL  . zi/'a lir) -(  Ow:  L. W. Waddell  Owner/Broker  Mel ssa Burdette  Manager/Realtor  C  , ,  Cid e-1 1  (:r/Builder/Brokel  0% 13 11  —."—  o•  lugston  Joe  Broker Associate  .  Broker Msociate  C ugsion  , .k (  <  PqzeldJehns  Realtor  Realtor  •  ( 1( Realtot  Beth Clugston  bert  I CC • L-  1E-  ealtor  Hatbara Jones  NaKcy  •  — —  z(f-* / _ e . c Edith White  Realtor  4! Realtor  The Honorable Ronald Reagan, President United States of America The WL,e House Washington, D. C. 20000 t rcssman William 14hitehurst, 2nd. Dist. of Virginia .Con s.; Congressman Bob Daniel, 4th. Dist. of Virginia Virginian Pilot/Ledger Star - Editor  •  •  rh44 ft\auevv,.01 •  ( V -/id,) • • bf GOvi •. 0 4)4. ••(20• •0 •— . . •C -.el • I-- • •  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  •..• Ts'l•''. • • •.. • •  • • `. ‘ 1, 1:.  July 15, 1981  The honorable Mark 0. Hatfield United States Senator Room 104 Pioneer Courthouse Portland, Oregon 97204 Dear Senator Hatfield: Thank you for your letter of June 30, enclosing correspondence you received from Mrs. A. I. Prugh concerning the debiting of her checking account for a social security check payable to her husband (and received after her husband's death) which she deposited. The Treasury Department has informed us that social security payments received during the current month are for benefits accrued during the previous month. For example, the social security check which Mrs. Prugh received dated January 2, 1981, represented benefits accrued during December 1980. Moreover, under the statutory provisions governing social security benefits, an individual or that individual's estate is not entitled to benefits accrued during the month in which the individual dies. Thus, since Mr. Prugh died during the month of December 1980, he or his estate was not entitled to benefits for the month of December. Apparently, because of the time of notification of Mr. Prugh's death, the Social Security Administration was unable to prevent the issuance of December benefits which were paid by check dated January 2, 1981. In cases such as Mrs. Prugh's, the Social Security Administration sends a stop payment request to the Treasury. Upon receipt of this request, the Treasury determines if the check in question has been processed and paid by the Federal Reserve, which serves as the paying agent for the Treasury. If the check has been paid, the Treasury locates a microfilm copy of the check and attempts to determine the name and address of the depository institution which originally deposited the check with the Federal Reserve. The Treasury then prepares a reclamation request (i.e., a request for a refund of the payment) which is sent to the depository institution. If the Treasury is unable to determine the bank which originally deposited the check, it sends the reclamation request to the Federal Reserve Bank which processed the check. The Federal Reserve Bank determines the name and address of the depositing bank and, acting as Treasury's agent, forwards the reclamation request.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The honorable Eark 0. iiatfield Page Two  Upon receipt of the reclamation request, the depositing bank is expected to recover the funds from the account of its customer. In the interest of good customer relations, a bank should provide reasonable notice to its customer prior to debiting his or her account. Upon recovering the funds requested by the Treasury, the depository institution deposits these funds with a Federal Reserve bank which in turn credits the account of the Treasury for the amount of the original payment. Although this explanation offers little consolation to Mrs. Prugh, I hope that it provides a better understanding of the reasons for her experience. If nrs. Prugh has additional questions about this matter, her nearest Social Security Service Center is prepared to assist her. The address and telephone number of the Service Center is: The Western Program Service Center P. O. Lox 2000 Lichmond, California 94802 (415) 469-5000 I hope that this information is helpful to you. let me know II I can be of further assistance. Sincerely, ..Winti (Signed) Donald .1.  Donald J. Winn Assistant to the Board  MJh:AFC:vcd (V-186) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  N. J. Hallmon Mrs. Mallardi  Please  wit LI:m  v7;01.:  ROTH. J R., DEL., CHAIRmAN  cmAwLrA u.'ri.mcv. it L. TED slt vrp4s. ALASKA  THOMAS F. EAGLETON. MO. HENRy M, JACKSON. WASH.  CHARLES mC C. MATHIAS. JR • MD. JOHN C. DANFORTH. MO. WILLIAM S. COHEN, MAINE  SAM  DAVID DURENRIRGCR, MINN. MACK mATTINGLy. GA. WARREN B. RI/OMAN. N.H.  t0Alkt Ss r r.,t"  AWTON CHILES, FLA. NuNN, GA.  Jim  •  t K,k,  JOHN GLENN, OHIO SASSER. TENN.  DAVID FRYOR. ARK. CARL LEVIN, micH.  9.1Cnifeb ZIalcz Zen  JOAN M. MC ENTEE, STAFF DIRE_CTOR  COMMITTEE ON GOVERNMENTAL AFFAIRS WASHINGTON. D.C.  20510  CO_21  \‘‘?\  ?). 2s  Ni‘te.114 ‘ ? too tteicg  July 24, 1981  The President The White House Washington, D.C.  20500  Dear Mr. President: We have given support to the general direction of the Administration's economic program here in the Senate. We share your belief that a reduction of federal spending, federal taxes, and the federal regulatory burden is essential for increased productivity, reduced inflation, and economic revitalization. We are vitally concerned, however, with the apparent absence of coordination between the fiscal and monetary policies of our government. The current fiscal and monetary policies of our nation appear to be on a path where significant conflict, if not a head-on collision, is imminent. The continuation of the high interest rate pattern of the past few months, if allowed to persist, will cause irreparable damage to our economy. We are beginning to have a dual economic policy -- a boom to those with available capital -- a depression for those who must borrow and for businesses depending on long-term credit. When giant corporations borrow tens of billions of dollars for corporate takeover purposes that make no contribution to job creation and productivity, and potential home buyers cannot find affordable mortgage money, it is time for a reexamination of national economic and anti-trust policy. We also think it would be appropriate in this context for the Administration to re-examine recent policy statements which may have encouraged massive borrowing for merger purposes. Officials of the Administration and the Federal Reserve have repeatedly said that once inflation abates and the public is shown that federal spending will be cut, interest rates would begin to decline. Just recently on May 8, Federal Reserve Board Chairman Paul Volcker said, "interest rates will come down and stay down as we make progress on inflation."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  *•  •  The President July 24, 1981 Page 2  Today inflation is declining but mortgage interest rates are not. While consumer price increases declined from 9.6 percent in the first three months of this year to 7.4 percent in the most recent three months, the mortgage interest rates remain entrenched at 16 percent. Historically the spread between mortgage interest rates and the rate of inflation has been about 2 percent. Now, however, the interest rate/inflation rate spread has ballooned to 6 to 7 percentage points which implies to many that this is a planned and deliberate policy. The Administration's economic advisers, according to Mr. William Niskanen, a member of the Council of Economic Advisers, are currently both "confused" and "puzzled" by continuing high interest rates. Yet reports from the recent Ottawa summit indicated you endorsed and vigorously defended the high interest rate policy of the Federal Reserve. Just today the Washington Post reported that Treasury Undersecretary for Monetary Affairs Beryl Sprinkel told the House Committee on Banking, Finance and Urban Affairs that there is no technical, and no necessary, connection between budget deficits and money growth, or between deficits and inflation. We could not disagree more. Either the government finances a deficit by printing money or by competing with and crowding business out of the credit markets. Printing money to finance deficits results directly in more inflation. Increasing federal borrowing affects inflation by forcing up interest rates, and increasing business costs. Eliminating federal deficits and reducing federal borrowing requirments are necessary for both psychological and substantive economic reasons, and must be accomplished at the earliest possible time. If the high interest rates continue, the Administration's supply side economics cannot work. The survival of our small business and farming community is threatened, many thrift institutions are in serious financial trouble, and the housing industry is near collapse. The majority of businesses, particularly small businesses, will not be able to finance inventories, let alone capital improvements. A tax cut will mean little to small businessmen and farmers who make no profit to be taxed because of exorbitant interest rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The President July 24, 1981 Page 3  ess these serious In summary, Mr. President, we urge you to addr Administration's problems before it is too late to moderate the is whether the anticipated fiscal program. As we see it, the question fiscal program has so stimulative effect of the Administration's m high interest rates overloaded the system that continued long-ter on does not advocate are the inevitable result. If your Administrati that it will let its a continued high interest rate policy, we hope persuade them to take views be known to the financial community and action to moderate interest rates. estic economic In this regard, we respectfully suggest a "dom you as President, summit" meeting with a full dialogue between Congressional leadership. Chairman Volcker of the Federal Reserve and ge a coordinated We would hope out of that meeting there would emer rly understood by cohesive fiscal-monetary policy which can be clea the American people. believe it is We do not expect an instant cure, but we do rates and avoid major possible to achieve a moderation of interest monetary policies credit shortages if our nation's fiscal and are coordinated. We offer you our bipartisan support in this effort. Sincerely, __  /31 ( : Lawton Chiles  " , , - " j 7 ..//C-Sam Nunn  avid L. Boren  -7  James Exon 1 ‘ 1  cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman Paul Volcker  Benne  Johnston   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 41. loil  .;- 444w .  ..idatamer  4t4444. 4n4suli:olit;4k4, .C.  4(i.511.t  4.1*44 44uotac M114,114er 14.Auki. y‘u fiwk VAL( lifittor of J.Ily 14 luvltia4 tn. A604:‘: Co4 akpoor 44klor* o kestatle 11;:z61, oroLcwriAliii two 1.44-Act tx,at 46:big-rout tatotect rtittla L4Nrie 4.44 tu* riousluNi ilku‘ futwit product* induatri4s, 4r4oloy le looktav i.,r1w4r4 00V0i1444 141* t.%? 44040Atariaip os Juily 27 st 4•0i. 414ceraly. VPickec  COsPit (11V-I$0 toCc; %,QV. taral,,lay Proll Ars.  (.4)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 15, 1981  The honorable Joseph G. ninish Chairman Subcommittee on General Oversight and Renegotiation Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman ninish: Thank you for your letter of July 13 inviting the Board to appear before your Subcommittee on the General Accounting Office's report on the Bank Secrecy Act. I am pleased to inform you that John E. Ryan, Director, Division of Banking Supervision and Regulation, will appear on behalf of the Board on July 23 at 10:00 a.m. Sincerely,  CO:vcd (#V-196) bcc:  Jack Ryan Mrs. Mallardi (2)  JOWH G. MINISH, N J.. CHAIR mAN HENRY r GONZALEZ. TEX. FRANK ANNUNZIO, ILL. PARtrFN J. MITCHELL. MD. DOUG B‘RNARD, JR , GA. WALTER E FAUNTROY. D.C. MAR f ROSE /DAKAR. OHIO JIM MATTOX, TEX. .10,...RNEV . FRANK. MASS.  RON PAUL. TEX. BILL McCOLLUM, I '.A ED WEBER, OHIO MARGE ROUKEMA. N J. GREGORY W. CAR.AAN.  U.S. HOUSE OF REPRESENTATIVFF; SUBCOMMITTEE ON GENERAL OVERSIGHT AND RENEGOTIATION  BOB LOF TUS, STAFF DIRECTOR   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  GEORGE C. WORTLEY, N.Y. DOUGLAS K. BEREUTER, NEBR.  OF THE  C01,1MITTEE ON BANKING, FINANCE AND URBAN AFF P\Icr; 225 2828  NINETY-SEVENTH CONGRESS  WASHINGTON, D.C. 20515 LC)  r I  July 13, 1981  The Hon. Paul A. Volcker, Chairman, Board of Governors of the Federal Reserve System, Federal Reserve Building, Constitution Avenue bet.20th and 21st Streets, Washington, D.C. 20551. Dear Chairman Volcker: On July 23, 1981, the Subcommittee on General Oversight and Renegotiation will hold a hearing at which the General Accounting Office will present the final report on its study of the enforcement of the Bank Secrecy Act. We would like to invite you to testify in response to the G.A.O.'s findings. The hearing will be at 10:00 a.m. on Thursday, luly 23rd in Room 2128 of the Rayburn House Office Building.  Sincerely yours,  oseph G. Minish, Chairman.  .C"""  JOSE, '1  MINISH.  EtiAIRMAN  °W.NRY D. GONZALEZ. TEX. ERANK A,..4'/NZIO. ILL. DARREN I. MrtCHELL. MD. DOUG nAnNArm. JR . GA. WALTER E rAtiNTROY. 0 C. MARY ROSE °AKAR. OHIO JIM MATIOX, TEX. DARNEY FRANK. MASS. 11.41. 0 ' b0B LOF1 US. STAFF DIRECTOR  U.S. HOUSE OF REPRESENTATIVES  PON PAUL TEX. BILL McCOLLUM. rt.‘ ED WEBER. OHIO MARGE ROUKE\TA. N J. GREGORY W. CAT/MAN. N.Y. GEORGE C. WOTITt.EY. N.Y. DOUGLA$ K. BEREUTER. NEBR.  SUBCOMMITTEE ON ',ENERAL OVERSIGHT AND RENEGOTIATION OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS Tri..Trtlyvvr 225-2828   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NINETY-SEVENTH CONGRESS  WASHINGTON, D.C. 20515  RULES FOR WITNESSES TESTIFYING BEFORE THE SLIIICOMITTEE  To ensure informative and orderly hearings, the Subcommittee requests that its witnesses follow the procedure outlined below:  30 copies of your written testimony should be sent to the Subcommittee office (B-303 Rayburn Housr. Office Building) three days before you are scheduled to appear, if at all possible. In no event should your testimony be delivered to the Subcommittee office later than 24 hours before your scheduled appearance.  You may wish to limit your oral presentation to a summary of your written testimony.  In that event, your written  statement will be entered in the hearing record in full.  #  #  #  .• • • of col., • • CI (R4 • ti4  PO OF 0 VEPNC : • •,  '• • •••* "  ."`. • •  ::: :  _ •  : rd. ,  •  FEDERAL REL;ERVE SYSTEM r4G -fo,i,o. C. 20551  - 0-• •• it,'  PAUL A.  vOLCKE  ColAIPMAN  July 22, 1981  The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D. C. 20510 Dear Chairman Garn: In your letter of July 9, you requested a summary of the public response to the Board's invitation for comment on possible modifications of the present system of monetary data publication. You also asked for an outline of the Board's current thinking on the matter. Enclosed is a simple tabulation of the letters we have received, as well as a copy of the original press release listing the proposed changes. While some responses could not be unambiguously classified, most could, and the summary table is a reasonable characterization of the returns. (Some responses communicated the collective views of groups, and no attempt has been made to assign weights in accordance with the numbers of people or institutions represented.) As you can see from the first column of the table, about half of the responses supported retention of the current approach to publishing the monetary aggregates. A few of the responses in the "other" category shown in the last column supported the release of more frequent or additional data, while two respondents preferred that the data not be seasonally adjusted. About one-fourth of the responses suggested that we publish only monthly data. As might be expected, respondents most actively involved in money markets felt most strongly about maintaining the current publication schedule. In general, those less directly involved in money markets on a day-to-day basis were more favorable to some change. I think it fair to say that comments given us orally in various forums were along the same lines. The most frequently cited argument for retaining the current approach to publication was that, the more ample the data flow, the less likely it is that release of any single number will have large market impacts. It also was noted frequently that, in the absence of our publication of the data, private analysts would fill the void with their estimates and that the situation might prove no better--or perhaps worse--than that now existing.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Jake Gam Page 2  I expect that the Board will shortly consider the various questions raised in connection with weekly publication of the money supply. It is our objective to provide the public with meaningful, timely information in a manner that avoids undue disruption of the financial markets. This requires an assessment not only of the market's use of the information, but of the internal problems of producing high quality data on a regular schedule. We shall, of course, communicate to you promptly the outcome of our deliberations. Sincerely,  S/Paul  Enclosures  Vol_cisec  (p.r. dtd. 4/2/81)  SHA:pd (#V-202) bcc: Mr. Axilrod Mrs. Mallarda (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  identical letter also sent to Senator Proxmare.  .:Y CF PUBLIC C.-1.7.'1.-NT PUB LIC.ATICN Oi t%:"I'CILEC:,7;I ES July 20, 1981  'Type of resrencnt  Carr.rcial  Fotain Currcnt Schedule  1 I.k.ek  13  Barking Organizations  4  'thrift Institutiors  1  Securities Pr!aler:_-; C4J-lor Irsti tuticrs  5  EQ0scr.,111y i•.:.-3justed Data  Only Monthly  1  7  4  1  2  4  4  1  1  1  1  Other Corperzaticrs  3  2  Acacerric  2  1  Other Individuals 'Ibtal: Total Pesponses:  6 34  •  1  4•1.11•1  1  Oth.3r1  17  66  Incluchs a wic12 variety of res p-)r-ses rangir.q frcn rrore.y stock data cr. a &lily basis to discontin uing tne ptblimtion of rz-ori2tar y statistics altocether.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  July 14, 1931  The honorable Nichael D. Barnes • house of Representatives 1;ashinLton, D. C. 20515 bear Ur. Lames: I was pleased to read of the recent recipients of the GonLressional Excalibur Award. I share your belief that this award will make the public more aware of the fine contributions federal employees make, as well as encourage federal uorkers to continue to strive for outstanding accomplishments. The 1;oard of Governors of the Federal Reserve System is indeed honored to participate in the program, but at the present time we do not have any nominations for the award. lany thanks for providing thc opportunity for us to participate in your excellent program. Sinccrely, S/Paul A. VgickeL  TD:BAP:vcd W-187) bcc:  A. V. Digioia Barbara Pilla Mrs. Mallardi (2)  0  Action assigned. Mr. Denkler  •.. . MICHAEL D. BARNEq Ein-4 rj SI PICT, MARYL. Arg.  ,  •  -5-=.3. -e  •  MI I 111. ON FOREAGN AFFAIRS r)NIMITTF1- 5 t),F0PF AND THE MIDDLE' F AST !NTT RNA It ,NAL ECONOMIC POLICY AND TRADE.  w*SHINGToN 1607 LON:NOR TH VV45.-1, 4GroN. 0 C  ;"-`51`,  COM IM I TTE E ON TI-IE  JUDICIARY  1:.')21 225-5341  . , mOoThwiwIstr(rmiNT,( •,  P5 5  ••  A rf N  Comes's' of tlic Zlititcb *tatt5  4.,11  SPR‘N'., MAR v :AN  jOotise of ikcpre5entattbes  (301) SIN-4SY% SPECIAL PHONE_ FOR rt., ETEARING IMPAIRED TTY-224-2793  T3.C. 20313 June 18, 1981  IMMIGR'ATION. REFUGEES AND INTERNATIONAL LAW ADMINISTRATIVE LAW AND GrWERNMENTAL RELATIONS  CON1N11 T TEE- ON THE DISTRICT OF COLUMBIA SUBCOMMITTEE JUDICIARY. MANPOWE R AND EDUCATION  TTY-224-3997  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20551 Washington, D.C. Dear Mr. Volcker: I continue to welcome nominations from your Agency for upcoming Congressional Excalibur Award presentations to honor excellence in public service. Award ceremonies are expected to take place on Capitol Hill in September and later this year to cite outstanding special federal workers in 1981 and to recognize their acnievements in serving their country and their tellow citizens. Recently honored in April at the tourth presentation of the ExcaliOur Award was a seven-member team of the Chicagobased Environmental Protection Agency for environmental and cost-savings contrioutions to rural lakes' projects in five Great Lake States. This Environmental Review Group, which sought a simpler and cheaper solution to conserving clean water, included: Eugene Wocjik, chief; Alfred E. Krause; Theodore L. Rockwell, Jr.; Kathleen Schaub; Gregory A. Vanderlaan; Catherine Grissom Garra; and Cynthia Wakat. Using innovative technology such as laser beams, satellites, infrared lights, and ultravioletc, cc) fluorescence, the team effort is resulting in the rebuild4Mg c.J.0 -le,c_ and maintenance of local, on-site sewage systems. Meanwh;*t local and federal governments are being saved some $51 mid4miop And taxpayers could be saved an astounding $1 billion or 24ke, if the same methods were used on all of the 171 rural lakes of their region, these EPA workers estimate.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Nom  Honorable Paul A. Volcker PagP 2 Jum. 18, 1981  In my home district just outside the nation's capital and as Chairman of the Federal Government Service Task Force, I am well acquainted with other hard-working, dedicated and creative individuals who are highly productive and cost-conscious. Outstanding nominations from your Agency can help tell their story to the American people in order to encourage leadership, initiative, efficiency, and over-all achievement in government service. Together, we can focus on the positive aspects of good government in order to counter the negative image of "bureaucracy" and to attract talented people into meaningful public service. I look forward to hearing from you about future Excalibur Award candidates. Please send nominations as soon as possible for consideration for the 1981 presentations to my new office, 401 Cannon House Office Building, Washington, D.C., 20515, Attn: Linda Katz. A fact sheet and other information is enclosed for your interest. Sincerely,  Michael D.  MDB/lk Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  arne  MICHAEL D. BARNES aTH DISTRI  1. MARYLAND  ASSISTANT MAJORITY WHIP  COMMITTEE ON FOREIGN AFFAIRS CHAIRMAN,  WASHINGTON OFFICF 1607 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D C. 20515 (202) 225-5341  INTER-AMERICAN AFFAIRS MEMBER. HUMAN RIGHTS AND INTERNATIONAL ORGANIZATIONS  SPECIAL PHONE Fon THE HEARING IMPAIRED  COMMITTEE ON THE DISTRICT OF COLUMBIA  TTY-22S-5384  MONTGOMERY COUNTY OFFICE: SUITE 302  Congre51 of tbe Zlititeb OtateiS  MEMBER GOVERNMENT OPERATIONS  AND METROPOLITAN AFFAIRS  jijouSe of iltprtgentatiing  11141 GEORGIA AVENUE WHEAToN, MARYLAND 20902  asbington,;D.C. 20515  (301) 946-6801  CHAIRMAN. FEDERAL GOVERNMENT SERVICE TASK FORCE  EXCALIBUR AWARD FACT SHEET  •  ,. ;  •  .7. 7'. i'rz ! .10.0e Pnrrirr; t bo t t c  I. , .  f.r ..1 ); t... ;7.-7 o.,t. /lc!'  t;ic (2:2n;?Pc..:lional  ,zrd in !,,,, nfc7ti:.'es and  WHAT ARE ITS OBJECTIVES? •  To recognize and honor outstanding contributions made by federal civilian and military personnel  •  To publicize such achievements and thereby enhance public appreciation of the merit and performance of government employees  •  To help counter the negative views and erroneous criticism of government commonly voiced today  •  To encourage initiative and excellence in performance by government employees  •  To help attract talented persons to the federal service  WHAT ARE THE CRITERIA FOR THE SELECTION OF NOMINEES? On a regular basis, candidates for the Excalibur Award will be sought who exemplify: •  Unusual efforts or leadership in solving problems at local, national, or international levels  *  Outstanding scientific, technical, or administrative achievements  •  Superior service to the public, such as the .improvement of efficiency including simplification of government regulations  •  Ability to overcome obstacles to organizational objectives, such as   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,EXCALIBUR AWARD  2  FACT SHEET  making substantial savings in expenditures High personal integrity and moral character and courage in dealing with difficult or sensitive problems The degree of individual effort, imagination and initiative involved in a specific achievement and the impact of the contribution on the agency and the public  WHO IS ELIGIBLE AND HOW ARE NOMINATIONS MADE? All federal career civilian and military employees are eligible. Normally, each award will go to one individual, but a small team of persons who have worked jointly on a project may also be considered. Nominations are invited on a continuing basis from heads and other officials of federal departments and agencies, from other organizations and from the general public. Nominations summarizing the individual's achievement should not exceed one page in length. These persons should advise Rep. Michael D. Barnes, Room 401 Cannon House Office Building, Washington, D.C. 20515 (202-225-5341) of their nominees.  WHO WILL SELECT THE AWARD RECIPIENT? Final selections are to be made by an impartial committee, appointed by Rep. Barnes, composed of eight distinguished citizens drawn from a wide variety of professions and experiences. The Chairman of the Excalibur Award Selection Committee is Mr. Harry McPherson, attorney and former White House Counsel to President Lyndon Johnson. Other Selection Committee members include: Hon. Joseph D. Tydings, attorney and former U.S. Senator from Maryland; Mr. Nicholas Nolan, Secretary-Treasurer of the American Federation of Government Employees; Dr. Estelle Ramey, professor of Physiology and Biochemistry at Georgetown University and selected to the President's Advisory Commission on Women; Mr. John Heller, Assistant to the Comptroller General of the United States; Mr. Robert R. Nathan, economic consultant; Mr. Gary Hymel, Administrative Assistant to House Speaker Tip O'Neill; and Dr. Douglas Labier, psychoanalyst and researcher for the Washington-based project on technology, work and character. HOW IS THE AWARD GIVEN? The award will be granted periodically in the form of an honary citation. It will be presented by Rep. Barnes at a ceremony held at the U.S. Capitol, in the presence of other members of Congress, officials of the executive branch, members of the Excalibur Award Selection Committee, and representatives of the media.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0f.• GOvt •.  PC-JAPE) OF GOVERNORS OF THE  • co• • •••I   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ..•  FEDERAL RESERVE SYSTEM  'Fit':  V.'ASHINOTON, D. C. 2055 1  PAuL A. vOL EKE P CHAIRMAN  July 22, 1981  The Honorable William Proxmire United States Senate Washington, D. C. 20510 Dear Senator Proxmire: In your letter of July 9, you requested a summary of the public response to the Board's invitation for comment on possible modifications of the present system of monetary data publication. You also asked for an outline of the Board's current thinking on the matter. Enclosed is a simple tabulation of the letters we have received, as well as a copy of the original press release listing the proposed changes. While some responses could not be unambiguously classified, most could, and the summary table is a reasonable characterization of the returns. (Some responses communicated the collective views of groups, and no attempt has been made to assign weights in accordance with the numbers of people or institutions represented.) As you can see from the first column of the table, about half of the responses supported retention of the current approach to publishing the monetary aggregates. A few of the responses in the "other" category shown in the last column supported the release of more frequent or additional data, while two respondents preferred that the data not be seasonally adjusted. About one-fourth of the responses suggested that we publish only monthly data. As might be expected, respondents most actively involved in money markets felt most strongly about maintaining the current publication schedule. In general, those less directly involved in money markets on a day-to-day basis were more favorable to some change. I think it fair to say that comments given us orally in various forums were along the same lines. The most frequently cited argument for retaining the current approach to publication was that, the more ample the data flow, the less likely it is that release of any single number will have large market impacts. It also was noted frequently that, in the absence of our publication of the data, private analysts would fill the void with their estimates and that the situation might prove no better--or perhaps worse --than that now existing.  z a  a.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable William Proxmire Page 2  I expect that the Board will shortly consider the various questions raised in connection with weekly publication of the money supply. It is our objective to provide the public with meaningful, timely information in a manner that avoids undue disruption of the financial markets. This requires an assessment not only of the market's use of the information, but of the internal problems of producing high quality data on a regular schedule. We shall, of course, communicate to you promptly the outcome of our deliberations. Sincerely,  Enclosures  PRELP.1-21;IN CF PUBLIC Crt.T.T2IT PUBLICATICN OF METARY AOGRECA7F-S  July 20, 1981 114..=1144111.111.01.  Publish t;ot Seasonally  Plype of  Petain Current  Responnt  Schedule  CQui,ercial 13ar.ks  Delay 1 Week  13  jested Data  1  Only Monthly  Othe.r  7  4  1  2  4  4  1  1  Be.r.king Organizatiors  4  Thrift Irstitutiors  1  Securities Eealers & Other Financial Irsti tutiors  5  Other Corporaticrs  3  2  Acaclerric  2  1  Other Ir.dividuals Tbtal:  6 34  Total Pesponses:  66  1  1  • 1  2-  17  12  4  _V Includes a wide variety of resyx)n.ses ronc:Ting frcri publ ishinc money stock data on a Om ly basis to discontinuing the inblication of roretary statistics altocpther.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  04“:"AnitiMINIVIWPWCIVIVIIANNOOSIWIMIabw.  16.41.  FEDERAL RESERVE press re ease °I1  r  . 4, 4 11311M5SAMPTSPINTRVII.MbellAWM.1216fici  e•a, ' ;1.i.n.v114;.0.41111:1714.3,4*-140M34- %-ee  7.4,7 •••.•••  For immediate release  April 2, 1981  The Federal Reserve Board today invited public comment on the desirability of continuing to report money supply data on a weekly basis, or whether another reporting procedure should be used. Weekly money supply statistics are erratic and often poor indicators of underlying trends, Board Chairman Paul A. Volcker said in a recent letter to Senators Jake Garn and William Proxmire, the chairman and former chairman respectively of the Senate Banking Committee. The Board has not concluded that the present procedure should be changed and will continue to publish money supply data each Friday, as it has in the past. In his letter, the Chairman said: "There is considerable merit to the'view that weekly data as such convey little information and that weekly seasonal adjustments are subject to substantial uncertainty.  However, the Board is not  certain at present that the public interest would necessarily be better served if any of the alternatives noted (in the letter) were adopted." As possible alternatives to the present procedure, the following options are being considered:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (OVER)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  -2-  1.  To delay weekly publication an additional seven days to incorporate more data.  2.  To publish only data that are not seasonally adjusted.  3.  To publish data only monthly--as is now the case with the broader definitions of money--or use moving average data.  To assist in the assessment of the publication schedule, the Board requested comment on the desirability of continuing .the present procedure or of shifting to another option.  Comments, which need not  be limited to the options above, should be sent to Thomas D. Simpson, chief of the Banking Section, Division of Research and Statistics, Federal Reserve Board, Washington, D. C. 20551. A copy of the Chairman's.letter is attached -0-  •  neAPO OF GIWERNORS  • >-  OF  •  TI  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  r 1 1•::•' .1' 7 . ; / r  ‘, PAin, A. VOLCKER  "  CHAIRMAN  March 24, 1981  The Honorable Jake Gam Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D. C. 20510 Dear Chairman Garn: The concerns and questions raised in the recent letter from you and Senator Proxmire about weekly money supply data have been discussed and debated by the Federal Reserve Board, the Federal Open Market Committee, and the staff for some time. The issues are extremely important and strong arguments--other than Freedom of Information Act implications--can be made for and against publication of weekly data. There is nearly unanimous agreement by all observers that weekly money statistics are extremely erratic and therefore poor indicators of underlying trends. Mille monthly data can often deviate considerably from such trends, the weekly observations are particularly "noisy". Week-to-week changes are quite large and recent estimates indicate that the "noise" element—attributable to the random nature of money flows and difficulties in seasonal adjustment--accounts for plus or minus $3.3 billion in weekly change two-thirds of the time. Such a large erratic element appears intrinsic to money behavior, rather than implying poor underlying statistics. In 1980, weekly M-1A and M-1B statistics revised on average only about $300 million between the first published and "final" data several weeks later, though in twelve weeks, revisions were larger than $500 million, and the largest single revision   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  was $1.6 billion. The great preponderance of active market participants are by now aware of the highly volatile nature of the weekly series. Publication has had that educational advantage, and the data to be used with a certain caution. However, from time to time overreactions have occurred.  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Jake Carn Page 2  As a result of concerns about the reaction to and significance of weekly figures, the Federal Reserve has considered possible revisions LA iS ,rreut pui)lication schedule or to its method of presentation. (ne option might be tO delay weekly publication an additional seven days to incorporate more data--an important issue with additional reporters under the Monetary Control Act. This could reduce revisions to the weekly statistics. On the other hand, this option would increase the risk of inadvertent leaks and would increase the interval over which market participants might react to guesses and rumors of money stock changes, based in part on fragmentary data such as .may be available in the weekly figures from large banks on deposits and loans. Even if no greater volatility in interest rates occurred over the unpublished interval, lagged publication of a more accurate, but still different than expected, change in weekly money might simply postpone the market reaction. In anv event, weekly revisions are usually small, as noted above, relative to the underlying volatility of the series. Another option might be to publish seasonally unadjusted money data in order to reduce the "importance" of the statistics. Our concern here is that market participants would then create their own seasonally adjusted series. The availability of a large number of conflicting series would only heighten market confusion, and might inevitably lead to questions to the Federal Reserve about what it considers to be the - normal seasonal- change in a particular week if what might seem to be an unusual change occurs in a seasonally unadjusted figure. Another approach might be to puhlish data only monthly--as is now done, because of data reporting problems, with M-2 and M-3--and/or to publish weekly, but only a moving average series of weeks. Under the monthly approach, market participants would still try to estimate weekly series from bank balance sheets and clearing house data, and the market could be swept by rumors and guesses on movements in the money supply. And they would also probably attempt. to glean the weekly number from a moving average series. In any event when a monthly figure was finally published, deviations from market expectations could cause yet further changes in .interest rates as the new information was incorporated into market expectations. I might note that this has not been a significant problem with monthly publication of N-2 and M-3. A relatively small portion of these aggregates are supported by reserves, and they have played a less important role in the day-to-day targeting process than M-l. In general, there is considerable merit to the view that weekly data as such convey little information and that weekly seasonal adjustments are subject to substantial uncertainty. However, the Board is not certain at present that the public interest would necessarily be better served if any of the alternatives noted above were adopted. While no one can be sure of their judgment in this respect, it does  •  •  The i!onorable Ji,e Garn Page 3  seem possible that volatility of money market conditions Could be encouraged by misinterpretation of fragmentary data as well as by the continued availa— bility of the present weekly data. We will, of course, continue to review the money supply publication schedule, taking account of the constraints imposed by the Freedom of Infor— mation Act. To aid in our assessment of the value of weekly money supply data, we plan to ask for public comment on the desirability of continuing the weekly series, or of shifting to the options noted above. Our decision will be taken in the light of those comments. Should Freedom of Information Act requirements present difficulties in the light of the appropriate course, we will consult with you further. I appreciate your interest in these questions. to all of us.  4,0?  Identical letter also sent to Senator Proxmire.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  They are of concern  Mike Pre11 and Dick Syron are aware of request JAKE GARN. UTAH, CHA'RMAN JOHN.T0iNE TEX. *OHM HEiNE, PA. WILLIAM L. ARMSTRONG. COLO. RICHARD G. LUGAR. IND. Al FONSF M. D AMATO. N.Y. JOHN H CHArrE NA. HARRISON SCHMITT, N. ME*  HARRISON A  WII LIAM, JR.. N.J. WILl IAM prpoychount WIS. ALAN CRANSTON. CALIF. DONALD VV. RIEGLE, JR., MICH. PAUL S. SARRANES. (vow STOPHIrn J. DODO CONN. ALAN J. DIXON. ILL.  M. DANFIV WALL. STAFF DIRECTOR HOWARD A. ME14ELL. MINORITY STAFF DIRECTOR ANO COUNSEL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FIOARt Cr !"1-  /Z1Crtifeb ,..T3talc15Zellafe COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C. 20510  July 9, 1981  4,1.91-1m.  II: 25 Mil 6 I J111. 19B1 PECEIVED C,IV-IAMAkl OFFICE OF la.  t (,  Honorable Paul A. Volcker Chairman Federal Reserve Board Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: In your letter of March 24, 1981, you indicated that the Board of Governors planned to ask for public comment on the desirability of continuing the present system of public releases of M-1 monetary data. Our understanding is that such a request for connent indeed has been issued and that numerous comments have been received. When you appear before the Banking Committee on July 22, would you please summarize the comments which you have received and outline the Board's current thinking on this topic.  Jake Garn Chairman / '  Willi USS. JG:lsp  *ILL  1\i
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