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r   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1!  Collection: Paul A. Volcker Papers Call Number: MC279  Box 11  Preferred Citation: Congressional Correspondence,July-October 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/c440 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. They further agree to request permission of the Princeton University Library (and pay any fees, if applicable) if they plan to publish, broadcast, or otherwise disseminate this material. This includes all forms of electronic distribution.  Copyright The copyright law of the United States (Tide 17, United States Code) governs the making of photocopies or other reproductions of copyrighted material. Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or other reproduction is not to be "used for any purpose other than private study, scholarship or research." If a user makes a request for, or later uses, a photocopy or other reproduction for purposes not permitted as fair use under the copyright law of the United States, that user may be liable for copyright infringement.  Policy on Digitized Collections Digitized collections are made accessible for research purposes. Princeton University has indicated what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids. However, due to the nature of archival collections, it is not always possible to identify this information. Princeton University is eager to hear from any rights owners, so that it may provide accurate information. When a rights issue needs to be addressed, upon request Princeton University will remove the material from public view while it reviews the claim. Inquiries about this material can be directed to: Seeley G. Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) mudd@princeton.edu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressional Correspondence July-October 1981  •  • October 30, 1981  The Honorable Delbert L. Latta House of Representatives WashinLton, D. C. 20515 Dear Mr. Latta: Thank you for your letter of October 27 on behalf of your constituent, Mr. Austin M. Eisaman, questioning what the Lovernment charges the Federal Reserve System for printing our paper currency. The Federal Reserve System pays the Treasury Depattment $20.60 per thousand notes--a little over each--without regard to the face value of the note. Federal Reserve notes, incidentally, are the only type of currency now produced for circulation. They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60-per-thousand price reflects the Bureau's full cost of production. Federal Reserve notes are printed in $1, $2, $5, $10. $20, $50, and $100 denominations only; notes of $500, $1000, $5000. and $10,000 denominations were last printed in 1945.  2e  As further background on Federal Reserve notes, I am enclosing a pamphlet entitled "U. S. Currency", which may be of interest to Mr. Eisaman. I hope this information is helpful to you. let me know if I can be of further assistance. Sincerely, (Signed) Donald J. Winn Donald J. Winn Assistant to the Board Enclosure CO:vcd (V-316) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mrs. Mallardi  Please  DELBERT L. LATT 15rti DISTRICT, OHIO .  -  • Cong. Liaison Office will *pare reply  A  Covess file Pitileb *atm puse  ?acyresattatites Xashinstxm, p.c. 20515  !7  October 27, 1981  /f 3  The Honorable Paul A. Volcker Chairman Federal Reserve System 20th St., & Constitution Ave., N.W. Washington, D.C. 20551 Dear Chairman Volcker: I have been contacted by my constituent, Mr. Austin M. Eisaman of Napoleon, Ohio. Mr. Eisaman would like to know what the government charges the Federal Reserve System for printing our paper money. I would greatly appreciate any assistance you would be able to provide me in fulfilling Mr. Eisaman's request for information. Thank you in advance for your cooperation, and I will look forward to hearing from you. With all best wishes, I remain rely yours,  ERT L. LATTA resentative to Congress  'a DLL:lt   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COM M ITTEES: RULES BUDGET  •  I lit •  .0 'co  :6  GOti ••  •  r001,410 0 :  BOARD OF GOVERNORS  44 4 r).  OF THE  : **Ctkt  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  • -A •'...,;11[1[1[11 e,  RAL RES • •..• •  October 29, 1981  The Honorable Robert A. Young Member of Congress 4154 Cypress Road St. Ann, Missouri 63074 Dear Mr. Young: Thank you for your letter of October 8 requesting comment on correspondence you received from Mr. Lawrence A. Kiefer. Mr. Kiefer states that his social security check and his civil service annuity are directly deposited into his account at the Gateway Federal Employees Credit Union. In the past, Mr. Kiefer received a deposit notice indicating that the deposit had taken place. The bank, however, has discontinued this service. Consequently, Mr. Kiefer does not receive written notification of the deposit until he receives his account statement several days or several weeks after the transfcrs have been made. Mr. Kiefer believes this policy is not in keeping with the intent of the Electronic Funds Transfer Act. The Act and the Board's implementing Regulation E are designed to protect consumers in their EFT transactions. EFT permits consumers and others to transfer funds electronically without the use of checks. Consumers may use EFT to authorize the direct deposit of payments due to them, such as wages, social security benefits, dividends, and other similar repetitive deposits. Under Regulation E, an institution is allowed to choose among three alternative methods of providing notices to consumers regarding their deposits. First, a depository institution may choose to notify consumers in each instance that the pre-authorized credit has been made. Second, to help reduce costs, the regulation permits institutions to provide notice only when a scheduled transfer is not made. Third, as a further cost-reducing alternative, the regulation permits the institution to supply consumers with a telephone number that they may use to verify whether or not a transfer has been made. The Board believes that supplying these alternatives provides essential consumer protection and, at the same time, enables financial institutions to establish systems tbat meet the needs of their customers in the most cost-effective way.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  jIL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  411  The Honorable Ro ert A. YounL Page Two  I cannot deternine from nr. Kiefer's correspondence whether the credit union now meets any of these notice requireuents. The Federal Reserve has supervisory authority only for State banks that are members of the Federal Reserve System. Gateway Federal Employees Credit Union is subject to the supervisory authority of the National Credit Union Administration. Accordingly, I have forwarded your letter to that agency for furtherr. comment. I hope this information will be useful to you. let me know if I can be of further assistance. Sincerely, (Signed) Donald J. Winn Donald J. Winn Assistant to the Board cc:  Office of Consumer Affairs National Credit Union Administration Street, N. W. 1776 Washington, D. C. 20456  SJP:AFC:vcd ON -299) bcc:  Ms. Potkai Mrs. Mallardi  Please  Ill  Action assigned Janet Hart•  3ERT A. YOUNG SECOND DisTRiCT MISSOURI  1317  WALTER L. MEYER  DISTRICT ADMINISTRATOR 4154 CYPRESS ROAD ST. ANN. MIssOuRi  nNGWORTH BUILDING  Congre55 of tbe Ziniteb *WO 3Douge of ilepre5entatibt5  WASHINGTON, D.C. 20515 (202) 225-2561  COMMITTEES:  12325 MANCHESTER ROAD DES PERES, M ISSOURI  63131  (314) 965-8800  tila5bington, D.C. 20515  PUBLIC WORKS AND TRANSPORTATION SCIENCE AND TECHNOLOGY   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  63074  (314) 425-7200  October 8, 1981 C,  Lo co  r • •  "r1  Fi  CD  rn  Mr. Paul A. Volcker, Chairman Federal Reserve System Twentieth Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Volcker, The attached correspondence is sent for your review. According to my constituent, Mr. Lawrence A. Kiefer, his credit union is not notifying him as required under The Electronic Fund Transfers Act, Regulation E. Please advise if in your opinion there is a violation of the Act. Thanking you in advance for your kind assistance to my request and looking forward to your reply addressed to my district office in St. Ann, Missouri, I remain, Sincerely,  Rober Membe RAY:ev Enclosure  ./  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  --4  ,,)  77 r-  ; ,  f  ,  •  • Ut3 i98i  Octhber  1, 1981  Representative Robert A. Young 4154 Cypress Road St. Ann, Missouri 63074 Subject:Electronic Fund Trafsfers (EFT) Dear Congressman Young: 22nd On Septemier4I wrote a letter to the Gateway Federal Employees Credit Union on the above subject and I gave your office a apy.  I received their answer in a letter dated September 23rd and hand carried a copy to Mr. Gary Vamestad of your office.  Mr, Elmestad advided me to talk again with Mr. Ed Meinrichs of the Credit Union. I did this and so advised Mr. Ilmestad of our conversation.  Mr. Heinrichs was  firm in stating that the receipt acknowledgement and the monthly statement were duplications of each other.  Mr. Beinrichs is correct in his statement, however,  ay Civil Service annuity for say September is received iy ETF at the end of August and is posted on my August statement which I receive from the Credit Union about the tenth of the month following.  MY Sficial Decurity cheek is reveived by ETF  on the second or third of the month OWENS) and will not be shown'en my statement which I will receive  about the tenth of  October. I feel that I skould be sent  a receipt within a day or two after the Credit Union receives my money by ETF. I thought that was the intent bf the regulation  If I had my Civil Service Annuity and my Social Security checks nailed to ny home h1)0,,I send them to the Credit Union they would be acknowlegted with a receipt from the Credit Union so I cannot accept their rationale as being too costly. Please follow through on this and keep me advised.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely yours, Lorrence A. Kiefer  (  SFP  iqP1  September 22. 1981  Gateway Federal EMployees Credit Union P. O. Rox 26007 St. Louis. Mo. 63136 Attention: Mr. Vd Hainrichs tear Mr. Heinrichs: According to information which your office sent me concerning Electronic Fund Trandfers (EFT) you agreed to notify me when a deposit had been received.  MY Federa1 Civil Service Annuity and my Social Security checks are being sent directly to you.  Up unitl this month (September) I have been receiving a deposit  notice. Uhen I didn't receive my notices this month I oontacted Rick from your office and was advised that this service was being discontinued. I cannot understand your rationale for this change. If these checks were mailed directly to my home and  deposied them by mail or in person I would be given a  deposit slip wouldn't I? I believe this to be a disservice to retired people and woild like for you to explain your reasoning and consider changing back to your original committment.  Sinceray,mari, ( 2 7t P--eN1 A Lawrenc• at leisfeib ccsJohn Shipman. Chairman of the Board Congressman Robert A. Young   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Gateway Federal Employees Credit Union P.O. Box 26369 6401 Stratford St. Louis, Missouri 63136 . (314) 385-8800 SepteTber 23, 1981  Lawrence Kiefer  Dear Mr. Kiefer; ase in The receipts was eliminated because of cost and incre direct deposits. deposits were The receipt and monthly statements showing these duplications of each other. Sincerely,  Edwin S. Hinrichs Manager  cc: John L. Shipman, Chairman of the Board  fit  So. •••••• emipme Immll.• WON   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4  4  c  i iii NCL idiemparrino  lor a•mattomegino ••••••I Csaler  October 28, 1981  The Honorable Sam M. Gibbons Chairman Subcommittee on Trade Committee on Ways and Means House of Representatives 20515 Washington, D.C.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Dear Chairman Gibbons: Thank you for your recent letter inviting the on Board to testify before your Subcommittee's hearing fiscal U.S. trade policy and the impact of monetary and policies. Governor Henry C. Wallich is looking forward to appearing on behalf of the Board on November 3. Sincerely, S/Paul A,voickeE  CO:pjt (#V-291 & 702)  bcc:  Gov. Wallich Ted Truman Mrs. Mallardi (2)v  Goy. Wallich will testify; Mr. Truman handling statement  tr. 111  •  SAM M. GIBBONS, FLA., CHAIRMAN  NINETY-SEVENTH CONGRESS  SUBCOMMITTEE ON TRADE  DAN ROSTENKOWSKI, ILL. JAMES R. JONES, OKLA. ED JENKINS, GA. THOMAS J. DOWNEY, N.Y. FRANK J. GUARINI, N.J. JAMES M. SHANNON. MASS. DON J. PEASE. 01-110 KENT HANCE, TEX. GUY VANDER JAGT, MICH. BILL ARCHER, TEX. BILL FRENZEL, MINN. L. A. (SKIP) BAFALIS, FLA. RICHARD T. SCHULZE, PA. EX OFFICIO BARBER B. CONABLE. JR., N.Y.  DAN ROSTENKOWSKI, ILL-, CHAIRMAN COMMITTEE ON WAYS AND MEANS  COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES  JOHN J. SALMON, CHIEF COUNSEL A. L. SINGLETON, MINORITY CHIEF OF STAFF DAVID B. ROHR, STAFF DIRECTOR  WASHINGTON, D.C. 20515 SUBCOMMITTEE ON TRADE  October 5, 1981  Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th & Constitution Avenues, N.W. Washington, DC 20551 Dear Mr. Chairman: The purpose of this letter is to formally invite you to testify before the Subcommittee on Trade of the House Committee on Ways and Means during a major comprehensive oversight hearing this fall on U.S. trade policy. For your information, I am enclosing a copy of the press release announcing the subject matter of the hearing. As your agency has been advised, the hearing will begin on Wednesday, October 28, and continue through Tuesday, November 3, as necessary. During this period the Subcommittee will receive testimony only from Administration and other public witnesses. Witnesses will be scheduled for morning appearances, continuing in the afternoon as necessary to complete discussion. The second phase of the hearing will consist of testimony from invited private sector witnesses, to be held at a later date as the full Committee's schedule permits. The basic framework of the hearing will be to determine, first, what U.S. trade policy is, what U.S. trade interests and objectives are, and how U.S. trade policy is made and implemented; second, what are the trade problems and the international trade environment we face in the 1980's and beyond, and how might they be influenced by the United States or resolved; and, third, whether existing U.S. policies and legislative tools and their administration and international trade institutions are adequate to meet the challenge, and what changes may be necessary or desirable. Within this context, the hearing will focus in-depth on specific trade issues and policies and on the administration of U.S. trade laws.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .  •  •  WO  Honorable Paul A. Volcker October 5, 1981 Page Two  Within this framework, the following subjects will be among the areas of major focus: -- The near and long-term outlook for the U.S. balance of trade and payments, particularly in relation to exchange rate changes and the impact of Administration monetary, fiscal, and other domestic economic policies; the impact of international bank lending policies on U.S. exports. -- The role of inflation and budget considerations in determining trade policy; the extent trade implications are considered in the development of U.S. monetary and other economic policies; the role of trade policy in addressing balance of trade and payments deficits. -- The nature and adequacy of Administration economic policies to maintain and restore U.S. domestic and export competitiveness and to deal with structural adjustment problems, particularly in high technology sectors, including the roles of the free market and of industrial policies. Your participation in a panel on these subjects with representatives from USTR, the Department of the Treasury, and the ' Council of Economic Advisers at a mutually convenient date between October 29 and November 3 would make a valuable contribution to Congressional understanding of the U.S. international trade position and the Administration's policy response. Sin  rely,  .  --4-"---C:1, 4.t. Sam M. Gibbons Chairman SMG/MJWc Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  1  •  ' FOR THE PRESS FOR IMMEDIATE RELEASE AUGUST 7, 1981  SUBCOMMITTEAN TRADE PR#10 COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES WASHINGTON, DC 20515  CHAIRMAN SAM M. GIBBONS (D-FLA.), SUBCOMMI TTEE ON TRADE COMMITTEE ON WAYS AND MEANS, U.S. HOUSE OF REPRESENTATIVES ANNOUNCES OVERSIGHT HEARINGS ON U.S. TRADE POLICY Representative Sam M. Gibbons (D-Fla.), Chairman of the Subcommittee on Trade of the Committee on Ways and Means, U.S. House of Representatives, today announced that the Subcommittee will hold oversight hearings in late September or in October on U.S. trade policy, including policy objectives, development, coordination and administration; administration and adequacy of U.S. trade laws; trade agreements policy, impl ementation, and enforcement; and specific trade policy issues. Specific dates, times, location, and form at of the hearings will be announced as soon as possible. The hearings will be limited to testimony from invited witnesses representing the Administration and the interested public on the following illustrative list. The Subcommittee will welcome suggestions or proposals regardin g policies or programs in addition to the topics listed. 1. U.S. trade policy framework, developm ent, coordination, and administration. -- Elements and objectives of United Stat es trade policy, and their relationship to policy goals of major foreign trading partners; -- U.S. competitive position overall and for major sectors in the near and long-term;  .  -- Role and functions of the U.S. Trade Representative and of other Executive branch agencies in trad e policy development and administration, interagency trade poli cy coordination; -- Role of non-trade agencies and of the private sector in developing trade policy; -- Relationship of trade policy goals to non -trade considerations (e.g., national security, fore ign policy, inflation, employment, budget). 2. Multilateral and bilateral trade agre ement policy, issues, and implementation. -- Multilateral Trade Negotiations agre ements, in particular the agreements on government procurement (including NTT agreement with Japan), subsidies/countervai ling duties (including U.S. subsidy commitment and countervailing duty policy toward developing countries), antidumping, customs valuation, product standards, and civil aircraft: Implementati on, monitoring and enforcement by Executive branch agencies (inc luding the Foreign Commercial Service); foreign government complian ce; GATT dispute settlement; -- GATT and OECD issues and work programs on remaining trade barriers and international trading rules (tra de in services, international safeguards agreement, counterf eiting code, rules of origin, international fair labor standards, agri culture, steel, export financing, etc.);   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (MORE)  I . .  -- Bilate410 trade objectives and isAlOs (e.g., Japan, European Communities, Canada, Mexico); relationship of bilateral arrangements to a multilateral trading system. 3. Domestic trade policy, including administration and adequacy of U.S. trade laws and industry competitiveness policies; specific international trade policy goals and issues. -- Administration and adequacy of U.S. trade laws, in particular, import relief, section 337, section 301, antidumping (including steel trigger price mechanism), countervailing duties, customs, agricultural laws; -- Industrial policy and analysis, including trade monitoring; productivity and technology improvement for domestic and export competitiveness; structural adjustment measures; developments in major industry sectors (e.g., aircraft, electronics and telecommunications, steel, automotive, textiles, including renewal of the Multifiber Arrangement); -- Export policy and administration, including legislation on trade disincentives; export promotion efforts, export financing, and export controls; -- Investment policy and issues, including trade distorting incentives and disincentives (e.g., foreign - domestic content and performance requirements); -- Developing country policy and issues, including Caribbean Basin policy, Generalized System of Preferences, North/ South issues, and commodity agreements; East/West trade policy. Testimony will be received by the Subcommittee from invited public witnesses following appearances by officials from the Executive branch. Any interested person or organization may file a written statement for inclusion in the printed record.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Further details will be announced in a future press release. **********************************  P  1  •  • October 28, 1981  The Honorable Albert Lee Smith House of Representatives Washington, D.C. 20515 Dear Mr. Smith: Thank you for your letter of October 1 concerning the treatment of real estate brokers under the revised Regulation Z (Truth in Lending). You are concerned that real estate brokers will be considered to be arranging credit in seller-financed transactions and therefore required to give Truth in Lending disclosures. The Board recently considered the issue of what "arranging credit" means and has issued a proposal that deals with determining what activities constitute arranging credit. In the proposal (a copy of which is enclosed) the Board requests comment on a number of possible factors that might be considered in determining what it means to arrange credit. Some of these factors include: involvement in developing or negotiating credit terms and helping to complete credit documents; transmitting or conveying the terms of the offer; procuring or soliciting a credit extender; advising the credit extender or consumer about the financing terms; and whether or not a fee is involved. In the proposal the Board specifically requests comment on whether real estate brokers who assist in seller financing should be considered arrangers of credit and subject to Truth in Lending disclosure responsibilities. As I am sure you are aware, Senator Garn has introduced a bill, S. 1720, that would exclude arrangers of credit from the Truth in Lending Act. This would serve to relieve real estate brokers involved in seller-financed transactions from disclosure responsibility under the Act. We look forward to receiving any comments that you or your constituents may have on the Board's proposal. Sincerely, MPE:CO:pjt (#V-283) bcc: Maureen English Mrs. Mallardi (2) Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (p.r. dtd. 10/20/81)  Si/au'A,Volcker  Subjecte to be considered at Board Meeting 10/2  • 49,4,  • ALISERT LEE SMITH, JR. 6TH DISTRICT, ALABAMA  •  1723 LONGWORTH HOUSE.KFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-4921 R. T. GREGG  COMMITTEES:  ADMINISTRATIVE ASSISTANT BUDGET VETERANS' AFFAIRS 1800 FIFTH AVENUE NORTH BIRMINGHAM. ALABAMA  Concgrefs of the Elniteb tato  35203  (205) 254-1525  Potustofilepregentatiba isbington,10.C. 20515  ;  r f  October 1, 1981  A r  The Honorable Paul A. Volcker Chairman Federal Reserve Board Federal Reserve Building Washington, D. C. 20551  :71  C:)  1  •••••• ••  rj e  Dear Mr. Chairman: The housing industry, as you well know, is suffering from a malaise caused by high interest rates. No longer can the average American family afford to buy a home. Every industry associated with housing is severely depressed. At a time when the policy of the U. S. Government is to stimulate the economy with a comprehensive package of tax cuts and budget reductions as well as to reduce the regulatory burden which has choked American business, it seems inappropriate that a regulation . proposing to define real estate brokers as "arrangers of credit" (which makes them obligated to provide all truth in lending disclosures in seller-financed transactions) is under serious consideration at this time. I do not take issue with the purposes of truth in lending legislation. I believe its impact will continue to be generally positive, especially with the passage in 1980 of amendments simplifying the Truth In Lending Act. And as you know, Senator Garn, Chairman of the Senate Banking Committee, has stated this result was clearly not the focus of the Senate Banking Committee when it began the task of simplifying truth in lending in 1977, nor when it discussed the specific problem of "multiple creditors." The implications for the real estate industry, especially at this time, ought to be seriously considered with regard to costs and potential liability produced by unavoidable compliance errors. Also of great concern to me is the costs of administering this program. The National Board of Realtors has proposed delaying implementation of the effective date of the revised Regulation Z until April 1, 1983. This seems to be the most sensible solution, especially in light of current market conditions. It would give   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Paul A. Volcker Page Two October 1, 1981  the real estate industry time to fully investigate and resolve potential problems associated with the "arranger of credit" issue. I, therefore, respectfully request you to consider delaying implementation of the revised Regulation Z, especially since there is no widespread evidence of consumer deception with regard to seller-financed transactions. With best wishes, I am Sincerely yours, a4IteALL446 ALBERT LEE SMITH, JR. Member of Congress ALS/ro   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • October 26, 1981  The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives 20515 Washington, D.C. Dear Chairman St Germain: I am writing to express strong support for H.R. 4603, the Deposit Insurance Flexibility Act. As we know, the thrift industry is undergoing substantial strain, and this bill would enhance the powers of the supervisory authorities to deal with problem situations as they may arise. Essentially, the bill augments the existing powers of the regulatory agencies in two ways. First, it extends the capital infusion authority of the insurance agencies. Second, it clarifies and broadens the merger and acquisition arrangements available to the regulators. These provisions are important for providing assistance to thrift institutions and for managing the resources of the insurance funds. This is a limited bill that is modest in scope and temporary in duration. It is not designed to bring about fundamental change or reform in the financial system. However, it is needed at the present time to arm the supervisory agencies with necessary tools and flexibility in a period of severe stress and strain on our financial institutions. I would hope that Congress would act promptly to enact this legislation. Such action would not and should not prejudice or eliminate the need for subsequent consideration in the near term of fundamental issues relating to structural changes in the financial system. Sincerely,  DS:DJW:pjt bcc: Mrs. Mallardi (2)(/-  •  C.,/ 1 7(?.-2Yeii —XL1  a.  BOARD OF GOVERNJ;)RS OFTHE  FEDERAL RESERVE SYSTEM WASHINGTON,E1 C. 20551  PAUL A  OCT  1981  vOLCKER  CHAIRMAN  The Honorable Benjamin S. Rosenthal, Chairman Commerce, Consumer, and Monetary Affairs Subcommittee Committee on Government Operations Rayburn House Office Building, Room B-377 Washington, D.C. 20515 Dear Chairman Rosenthal: I am pleased to respond to your recent request for information for use by the Commerce, Consumer and Monetary Affairs Subcommittee in connection with its inquiry into federal regulatory agency enforcement of the Community Reinvestment Act. In your letter of September 15, 1981, you requested the CRA portions of the most recent two examinations conducted by the Board with respect to Chemical Bank, Manufacturers Hanover Trust Company and Bankers Trust Company, all of New York City; copies of all comments received by the Board and by the three above-mentioned institutions regarding CRA statements or the performance of these institutions in helping to meet credit needs of their communities for the period covered by the past two examinations; and a list of all applications by these institutions for new branches, acquisitions or mergers, together with any determinations made by the Board based on CRA considerations for the period covered by the past two examinations, including comments made upon these applications by the Board's staff.. The list you requested of applications by the three institutions is enclosed. No applications from Bankers Trust Company were acted on in the period specified in your letter. Only three applications raised CRA issues. We will provide you with copies of the Board and Reserve Bank orders in these cases, and the one other in which the Board issued an order, those portions of the staff and Reserve Bank memoranda that discuss CRA issues, as well as public and other comment letters associated with the applications that are in our files. For reasons set forth more fully below, the staff has deleted the few references to confidential examination report information from the memoranda being provided to you.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  5  11 ..  111  .....  The Honorable Benjamin S. Roeenthal, Chairmnn  .2_  •  Lettere submitted directly to the three named banks, by membern of the public for inclusion in their CRA Mee, are not routinely copied to the Board or to the Federal Reserve Bank of New York. Accordingly, the public comment letter, we are also providing to you --consisting of all that we have, including letters relating to the four referenced applications--may not include all letters submitted directly to the banks by members of the public. Such doeumente are on publi c file in each of the banks. If you wish, my stnEf will assist in any way it can in the event the Subcommittee's staff encounters difficulty obtaining these documents from the banks. The above represents most of the information contained in Board files that in responsive to your request. believe, however, that it would be inappropriate for me to transmit CRA portions of the two most recent consumer affairs reports of examination of the three banks in reeponse to the request contained in your Septemt,er 15 letter. This juCgment is based upon longstanling Boari praettce an0 polic y regarding the confidentiality of examination report information. The effectiveness of the examination process requires that examinations be conducteJ under ci,rcumstances that promote the greatest possible freedom of communication bstween bank officials and examiners, as well as the greatest freelom of expression by the exnminers thems elves. We strongly believe that these objectives can be accomplished only by preserving rigid confidentiality as to reports of examination. If bank officials have cause to believe that information they provile lay be expose?! to others outside the examining agency, or if examiners believe that their analyses anl julgments will be subject to outside scrutiny, inhibitions and distortions of expression will inevitably be createl, with the likely result that the effectiveness of the examination proce ss will be impaired. I hope that the enclosed materials will be helpful to your Subcommittee. Sineerely,  bcc:  Messrs. Bradfield Bleier Sicilian° Winn Ms. Gadziala  SLS:blchase   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BENJAMIN S. ROSENTHAL, N.Y., CHAIRMAN JOHN CONs'ERS, JR., MICH. ELK:ENE V. ATKINSON, PA. STEP`....1 L. NEAL, N.C. DOUG BARNARD, JR., GA. PETER A. PEYSER, N.Y.  Action copies sent to Mr. Bra-Ifieh an-1 Miss Hart for coor-lination of reply0 NINETY-SEVENTH CONGRESS  Comm;of tbe Einiteb tato  LYLE WILLIAMS, OHIO HAJL DAUB. NEBR. WILLIAM F. CLINGER. JS, PA. JOHN MILER. IND.  MAJORITY—(202) 225-4407  31)otoSeofilepresSentatibesS COMMERCE. CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. Z0515  r r 1 C_  CID CO  7 . 4 . ).  r—  -17  September 15, 1981  C:7 C)  -n CD  ;Z  ••  Hon. Paul A. Volcker, Chairman Board of Governors Federal Reserve System Washington, D.C. 20551  IMO  Dear Mr. Volcker: The Commerce, Consumer and Monetary Affairs Subcommittee is conducting an inquiry into federal regulatory agency enforcement of the Community Reinvestment Act (CRA). In this connection, please make available to the subcommittee the CRA portions of the most recent two examinations conducted by your agency for the following institutions: Chemical Bank, Manufacturers Hanover Trust Co. and Bankers Trust Co., all located in New York City. Also, please supply copies of all written comments received by your agency and by these institutions about the CRA statements or the performance of these institutions in helping to meet credit needs of their communities for the period covered by the past two examinations.  (  Finally, please supply a list of all applications by these institutions for new branches, acquisitions or mergers together with any determination made by your agency based on CRA considerations for the period covered by the past two examinations; including comments made upon these applications by your field office staffs. Please have your staff contact Theodore J. Jacobs of the subcommittee staff. Sincerely,  Benja n S. Rosenthal Chairm BSR:jv   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  October 26, 1981  The Honorable Mark 0. Hatfield United States Senate Washington, D. C. 20510 Dear Senator Hatfield: Thank you for your letter of September 30 requesting comment on the enclosed correspondence from your constituent, Ms. Nancy L. Cole, regarding the cost of producing United States currency and coin. The Federal Reserve System pays the Treasury Department $20.60 per thousand notes--a little over 24 each--without regard to the face value of the note. Federal Reserve notes, incidentally, are the only type of currency now produced for circulation. They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60-per-thousand price reflects the Bureau's full cost of production. Federal Reserve notes are printed in $1, $2, $5, $10, $20, $50, and $100 denominations only; notes of $500, $1000, $5000, and $10,000 denominations were last printed in 1945. Coins are produced by the Treasury's Bureau of the Mint, and its costs in fiscal year 1980 were as follows; Pennies Nickels Dimes Quarters Halves Anthony Dollar  ••••  4.1••  IOW  $7.00 per thousand $19.00 per thousand $9.55 per thousand $21.71 per thousand $40.41 per thousand $30.94 per thousand  The Eisenhower Dollars were last minted in 1979 at a cost of $83.13 per thousand. I hope this information is helpful to you. know if I can be of further assistance. Sincerely, JHE:TEA:CO:vcd OV-287) bcc: Mr. Epps Mr. Allison Mrs. Mallardi  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (Signed) Donafd .1. Winn  Donald J. Winn Assistant to the Board  Please let me  Action assigned Mr. Allison  •  MAtRK O. HATFIELD   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  t,,•  OREGON  1981 OCT -?Zri-af&ZI.crfez Zenate WASHINGTON, D.C. 20510  OFFICE  "  September 30, 1981  el/  Mr. Paul Volker Federal Reserve System 21st Street & Constitution Avenue Washington, D.C. 20551  Dear Mr. Volker: Enclosed please find a copy of the communication I have received from Ms. Cole. Your comments on this matter would be appreciated. So that I may furnish this individual with an appropriate response, please return the enclosed correspondence with your reply. Thank you for your attention to this inquiry. Kind regards. Sincerely,  Mark 0. Hatfield United States Senator MDH/rsc Enclosure 22064  •  f   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • September 22, 1981  Senator Mark:O. Hatfield United States Senate CoTrunittee on Appropriations Washington, D. C. 20510 Dear Senator Hatfield: How much does each denomination of money listed below cost the Federal Reserve to make? 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.  One dollar bill Two dollar bill Five dollar bill Ten dollar bill Twenty dollar bill Fifty dollar bill One-hundred dollar bill One-thousand dollar bill Ten-thousand dollar bill All Federal Reserve Notes Penny Nickel Dime Quarter Fifty cent piece Susan B. Anthony Dollar Eisenhower Dollar  If the Federal Reserve does not make all of these, who does? If you can not answer these questions, please forward this letter to the person or persons who can. Thanking you in advance.  )61-fte / NssNancy L. Cole 12 S. E. 196th Portland, Oregon  97233  ii   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r  •  BOB DOLE UNITED STATES SENATE  October 23, 1981  Dear Paul: I am delighted that you were able to come for breakfast this morning with members of the Senate Finance Committee. The breakfast was both productive and enjoyable. I believe a great deal of useful information is gained by such informal get togethers.  -Z .4„ : 444;) The Honorable Paul A. Volcker Chairman Federal Reserve System Washington, D.C. 20051  Jr. yvvr,  October 23, 1981  The Remorable George S. Danielson Chairman, Subcommittee on Administrative Governmental Relations Law Committee on the judiciary U.S. Souse of Representatives 20515 Washington, D.C. Dear Ns. Chairman: I am pleased to submit views responding to the Snecutive override of "major rules" provision contained in H.R. 746, as amended by your subcommittee. On several occasions in the past the Board has expressed to the Congress and the Administration consistently strong support for efforts to improve the regulatory process and to enhance public participation in regulatory proceedings. I am pleased to do so once again. HAL 746, as amended, contains a provision which would allow the President to designate a proposed agency action as a "major rule" thus triggering very complex procedures, such as a series of detailed and complex cost benefit analyses. I am very concerned that these new requirements would result in a substantial increase in paperwork, additional costly informational burdens on both the agency involved and the public, judicial challenges, and, most important, lengthy delays in adminigtrative action. It is my judgment that the objectives of regulatory eimplification and avoidance of unnecessary regulatiom would not be accomplished by an additional layer of administrative requirements. Bxecutive override, as applied in the *major rule" concept, would only add still another and unnecessary complexity at a time when we are working towards simplification and streamlining of regulatory rulemaking. However, there is an additional reason to be concerned about Executive override in the rulemaking process, particularly with respect to the operations of the Federal Reserve System. As I know you are avere, the Congress created the Federal Reserve System in 1913 as an independent entity in order to emphasise the insulation of the credit regulation process from the function of financing the government. Long experience demonstrates that the separation of those two functions can make a vital contribution to a more stable and effective domestic monetary sysitem. Therefore, I would be particularly ooncerned about Ihrecutive override as applied to the functiona of the Federal Reserve System. This is not only true because of the broad policy considerations I have just outlined, but also because of the tact that this would run   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ihe Memorable George U. Danielson Page IND  directly counter to one of the major objectives that Congress sought to achieve in creating specialised agencies. The significant mandate that the Mutoutive would receive under the override conoept to interfere in the regulatory process could significantly defeat the purpose of assuring regulation based on expert .ludgment on the merits of both general policy amd particular cases. Because of the significance of the Executive override provisions I have limited my comments In this letter to this provision. Additional comments on other aspects of the bill will be submitted separately. Sincerely.  trha  MB:MEABAtuarrt  10/23/81   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NM  VD.  •  • October 23, 1981  The Honorable Frank Annunzio Chairman Subcommittee on Consumer Affairs and Coinage Committee on Banking, Finance and Urban Affairs House of Representatives 20515 Washington, D.C. Dear Chairman Annunzio: Thank you for sending us your views on the proper treatment of cash discounts in the staff commentary on Regulation Z. I want to assure you that we both have the same objective in assuring that all consumers are treated equitably and fairly. Although the final commentary which has just been issued (a copy of which is enclosed)ls somewhat different than what you suggested, I can assure you that we considered your concerns very carefully. In the end we felt compelled to adhere to the position that had been proposed for public comment. So that you will have the benefit of the staff's thinking on this issue, I have asked that they prepare the enclosed discussion of the issue. Although in this case our views may differ, we always value your advice, and we hope that you will feel free to continue to provide us with the benefit of your insight. Sincerely,  .„ SZ Pa4 or ••••  Enclosures GG:DS:pjt (#V-235) bcc: Mr. Hurst Mr. Garwood Mrs. Mallardi (2)  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •ATTACHMENT  III  .  "CASH CARD DISCOUNTS"  The cash discount amendments to the Truth in Lending Act provide that "any discount from the regular price offered by the seller for the purpose of enducing payment by cash, checks, or other means not involving the use of an open-end credit plan or a credit card shall not constitute a finance charge . . . if such discount is offered to all prospective buyers . .  ii  (§ 167(b)).  The suggestion has been made that merchants offering discounts under a "cash card" plan where only members of the plan get the discount must treat the amount of the discount as a finance charge to credit purchasers who pay full price.  The Regulation Z commentary, on the other  hand, states that merchants may offer special discounts to certain groups of customers (even if cash payment is also required to get the discount) without the discount becoming a finance charge to other purchasers.  This  position is based on the fact that there are cash customers (non "cash card" holders) who pay the same price as credit customers who are members of the special group ("cash card" holders).  As a result, the discount cannot pro-  perly be considered a cost of credit, a basic test of what constitutes a finance charge, since the full price is paid both by cash purchasers who do not belong to the "cash card" plan and credit purchasers. This position is consistent with the Cash Discount Act.  The act  allows discounts that would otherwise be finance charges to be excluded if certain conditions are met, including that they be made available to all prospective purchasers.  However, it does not make finance charges of  discounts that do not otherwise meet the definition.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Discounts that are  .  •  .  • 2-  -  based purely on whether cash or credit is used fit the definition of finance charge.  On the other hand, the discount addressed in the commentary is a  discount based upon other criteria -- membership in a particular club or organization -- that, in addition, requires cash payment.  To the extent  it is the intent of Congress to prohibit a merchant from offering a special club member discount that requires cash payment, a clear statutory provision to that affect is probably needed. It should be noted that a position other than that reflected in the commentary could cause problems for merchants, consumers, and others involved in special discount programs, and would probably result in the discontinuation of the few discount plans of any kind currently available.  This  would appear to frustrate the overall objective of Congress to encourage discounts, and seems at odds with the general desire to reduce regulatory burden.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a- -.0060-41111Y  • ar  It • .  A:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  411vtion assigned Janet Hart  ri.t  •  L  THOMAS B. EVAN':  Oltir) lArYt_ GEORGE C. Wn1ITLI.f, N GREGORY W. CA.'MA•  U.S. HOUSE OF EPRESENTATIVES NINETY-SCV— 4TH CONGRESS SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE OF THE  CO \IMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS ROOM 2I2 HOUSE OFFICE BUILDING ANNEX No.1  WASHINGTON, D.C. 20515  August 20, 1981  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551  4  1,  •, R  •-  7T  •• czlo  Dear Mr. Chairman: As you know, I am a strong supporter of discounts for consumers who pay by cash, and was the original sponsor of the recently enacted Cash Discount Act. It has come to my attention that the Board's proposed official staff commentary on Regulation Z would, by its interpretation of the term "finance charge", appear to permit and perhaps even encourage, circumvention of the Cash Discount Act. A crucial purpose of the Cash Discount Act was to stop cash discount discrimination. It was to have cash discounts offered to every prospective customer, not to just a select few. If a merchant has a cash discount program and a customer pays cash, he should get the cash discount. The cash customer should not have to have a special card, be a member of a club or organization or have to meet any kind of condition to obtain a cash discount. Any conditions on a cash discount program besides cash payment, result in unfair discrimination against all cash customers who are refused the discount. Yet, the Board's proposed official staff commentary appears to permit cash discount discrimiratioL. Under the law, a seller who offers a cash discount that does not meet the requirements of the Cash Discount Act must treat the amount of the discount as a finance charge with respect to credit card customers and provide Truth in Lending disclosures. The Board's proposed official staff commentary interpretation of "finance charge" appears to hold that a cash discount offered to only a particular group of customers is not a finance charge with respect to a credit card customer, even though such a cash discount would violate the Cash Discount Act because it is not offered to all prospective customers. This would result in circumvention of the Cash Discount Act and the Truth in Lending Act. It would turn the Cash Discount law on its head.  114  -Or   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Paul A. Volcker  An illustration of why such a cash discount is a finance chdrge is that, in a cash discount program such as several organizations have, a custom,2r who is a member of the program, but pays by credit card must pay a higher amount (the amount of the discount) for an item than another member who pays by cash. This discount constitutes a finance charge because it is not a charge "of a type payable in a comparable cash transaction". Any cash discount that for any reason is offered in a manner that is not in conformity with the Cash Discount Act is a finance charge imposed upon a credit card customer. Consequently, I believe the Board should withdraw this interpretation of finance charge from the official staff commentary to prevent circumvention of the Cash Discount Act and the Truth in Lending Act. Furthermore, since the Cash Discount Act repealed any rule or regulation of the Board pursuant to section 167(b) of the Truth in Lending Act and regulatory authority previously in section 167(b), the proposed official commentary should not contain any language that interprets a cash discount. I would appreciate your careful consideration of my comments. With every best wish, Sincerely, •  Frank Annunzio Chairman  •  •  - v.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20SSI  October 22, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Alfonse D'Amato United States Senate 20510 Washington, D.C. Dear Senator D'Amato: Thank you for your letter of September 23 requesting comment on S. 1508, which would exempt time deposits of international banking facilities (IBFs) from deposit insurance and insurance assessments under the Federal Deposit Insurance Act. Before commenting on the specific provisions of S. 1508, I would like to reemphasize that the Board believes that the establishment of IBFs at United States banking offices will enhance the international competitive position of banking institutions located in the United States and in addition, hopefully, increase domestic employment in the financial sector of the economy. Accordingly, the Board takes a major interest in legislation, such as yours, aimed at improving the operating effectiveness of the IBFs. Basic to our analysis of S. 1508 is the fact that IBFs are intended to operate in a similar manner to offshore branches currently employed by institutions operating in the United States. A natural and logical consequence of this concept is to approach the treatment of IBF deposits as foreign deposits for purposes of both deposit insurance and insurance assessments. Under present law, deposits at foreign branches of U.S. banks are not now subject to insurance or insurance assessment, accordingly, I feel that it is both appropriate and necessary that similar treatment should be accorded to IBF deposits. Should,in the future, a compelling case be made for the application of deposit insurance to overseas deposits of branches of U.S. banks,then it would follow that deposit insurance and insurance assessments should be applied to IBF deposits. I would also point out two considerations which played a significant role in the Board's analysis of the proposal contained in S. 1508--the first relates to the need for deposit insurance and the second affects the competitive impact of insurance assessments. On the first point, I would note that IBF deposits must be in minimum denominations of $100,000, and in almost all cases would be expected to exceed the maximum   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Alfonse D'Amato Page Two  level of deposit insurance. Also, depositors with resources of this magnitude are not generally in the class that needs the protection of deposit insurance, but are more in the category of the sophisticated investors able to protect their interests through knowledge of the marketplace. On the second point, as you point out in your statement on the bill, the international financial marketplace is highly competitive and the imposition of insurance assessments on IBF deposits would put U.S. banks at a competitive disadvantage against their foreign counterparts who are not subject to this cost. This factor was also one of the reasons for the Plard's decision to exempt IBF deposits from reserve requirements. As you again point out, the narrow margins in international markets make it all the more important to avoid putting the branches of U.S. banks at a competitive disadvantage, especially when the extra costs could impair their ability to compete. Thus, I believe, it is both necessary and desirable to exclude IBF deposits from deposit insurance and assessment. However, to assure equality of treatment for both IDF and foreign deposits, it would be desirable to draft the proposed legislative action to provide the same treatment for IBF deposits as for the foreign deposits of the branches of United States banks. I hope you will find these comments useful in your further consideration of this legislation. Sincerely,  MB:PSP:DS:pjt (#V-274) bcc: Mr. Bradfield Mr. Pilecki Mrs. Mallardi (2) Legal Records(2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  GEORGE HANSEN SECOND DISTRICT, IDAHO IDAHO DISTRICT DMU S: UPPER SNAKE RIV ER VALLEY BOX 740, IDAHO FALLS. IOANO 83401 TEL.. 523-5341  1125 LONGWORTH BUILDING WASHINGTON, D.C. 20515 TEL.: (202) 225-5531 COMMITTEES•SUBCOMMITTEES  :  AGRICULTURE FORESTS. FAMILY FARMS, AND ENERGY LIVESTOCK, DAIRY, AND POUL TRY DOMESTIC MARKETING. CONS UMER RELATIONS, AND NUTRITION  Cottgref5i of the Ziniteb Ot atecs jtiousse of ikepreZentatibev tillasbington,  BANKING, FINANCE AND URBAN AFFAIRS  20515  DOMESTIC MONETARY POLI CY (RANKING MEMBER) FINANCIAL INSTITUTIONS SUPERVISION. REGULATION AND INSURANC E iNTERNATIONAL TRADE, INVE STMENT AND MONETARY POLICY  October 21, 1981  SOUTHEASTERN IDA HO 250 S. 4TIL SUITE 220 POCATELLO, IDAHO 8320 1 TEL.: 236-6980 MAGIC VALLEY 1061 BLUE LANES BOULEVAR D NORTH TWIN FALLS. IDAHO 8330 1 TEL.: 734-6466 WESTERN IDAHO 442 BORAH FEDERAL BUILDING 308 NORTH 8TH STREET BousE, IDAHO 83701 Tu.: 334-1876  The Honorable Paul A, Volcker, Chairm an The Federal Reserve Board Constitution Ave. be tween 20th & 21st St reets Washing D.C. 20551 Dear I would deeply appr eciate having an au tographed picture of you for my "goodguy" rogues gallery. Many thanks in adva nce for your cooper ation and assistance. It is a plea sure to be your coll eague in government service. Sincerely, 4 --  GEORGE HPIL Member of Congress GVH:gss  -.1e,1 1.40  E1  ,,o -64130 W61 J1' "  .  • •  RUDY BOSCHWITZ MINNESOTA  •  •  9.1Cniteb Ziatez Zertale WASHINGTON, D.C. 20510  October 21, 1981  un co. CD —4 ;N.) C1)  Honorable Paul Volcker Chairman Federal Reserve Board Washington, D.C. 20551  :=C .. CP CP  Dear Chairman Volcker: I'd like to express my appreciation for your assistance on the radio interview. I know (from personal experience!) how difficult it is to set aside an hour in a day that is always too short to get everything done, and I thank you for taking that time to come up to the Hill. It has indeed been a pleasure to get t gether with you and discuss issues in an informal ashion. It has helped me understand the dif icult /task you face, and I hope my support has bee and ill continue to be useful to you. /// Sinerely,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CN Rudy Boschwitz Unitpd States Senator  -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • October 21, 1981  The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D.C. 20510 Dear Chairman Garn: Thank you for your letter of September 14 concerning an inquiry you received from Mr. Ted Wetterau, Chairman of Wetterau Incorporated. Chairman Volcker received a similar letter from Mr. Wetterau, and I am pleased to enclose a copy of the Chairman's response, along with the enclosure. As you will see in Chairman Volcker's response, we have forwarded Mr. Wetterau's letter to the Chicago Regional Office of the Comptroller of the Currency since that office would have supervisory authority over the loan by Continental Illinois. I am also forwarding a copy of your letter to the Congressional Liaison Office at the Office of the Comptroller of the Currency here in Washington. Please let me know if I can be of further assistance. Sincerely, (Signed) Dned L Vnm Donald J. Winn Assistant to the Board Enclosures CO:AFC:DJW:pjt (#V-256) bcc: Congressional Liaison OCC Mrs. Mallardit//   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • October 6, 1981  Mr. Ted C. Wetterau Chairman of the Board and Chief Executive Officer Wetterau Incorporated 8920 Pershall Road Hazelwood, Missouri 63042 Dear Mr. Wetterau: offer for I have received your letter concerning the tender As I ated. the shares of Wetterau Incorporated by Empire Incorpor current Board's understand it, Wetterau Incorporated appears on the Wetterau stock, list of OTC Margin Stocks. Bank credit to purchase on U (12 CFR 221) therefore, is regulated under the Board's Regulati and the loan is es if a loan is made by a bank to punchase the shar secured, directly or indirectly, by any stock. er We were unable to determine from the facts in your lett tal Illinois loan you the applicability of Regulation U to the Continen or unsound lending fe mentioned or whether the loan involves an unsarty of forwarding a copy practice. Accordingly, we are takino the libe Regional Office of the of your letter and this letter to the Chicago nois is under that Comptroller of the Currency as Continental Illi iries should be agency's supervisory jurisdiction. Additional inqu addressed to that oflice. er from For your information, I am enclosing a copy of a lett tender offer case which our staff to a U.S. District Court in 1976 in a also involved Empire Corporation. Sincerely,  Paul A. Volcicer  Enclosure  ••)s. • ••• • •••••  OP  cd  s'A 4.;  ..*`; •• • •1:r,  -04 *  May 28, 1976 ,  The honorable Frank A. I:aufman, Judge United States District Court for the District of haryland United States Court house Baltimore, Naryland 21202  744  .4t`  •••  •  Dear Judge Kaufman: Re:  '  Pargas Inc. v. Empire Gas Corporation, et al; Civil Action No. K76-676, United States District Court for the District of Maryland  •v.  The Court has requested the views of the Office of the General Counsel on four questions relating to an issue raised in the above-captioned case.  We have been asked by the Board's General Counsel to respond to this  rt. •  d  request as this Division has been assigned the responsibility for the  ^  •  adriinistration and interpretation of the Board's regulations under section 7 of the Securities Exchange Act of 1934 ("Exchange Act") . A claim has been made by Pargas, Inc. ("Pargas"), in an action seeking injurictive and other relief, that a loan to finance a tender offer by Empire Gas Corporation ("Empire") for the stock of Pargas, a security d  ' d on the New York Stock Exchange, was arranged by a broker-aealer . liste ; in violation of the Board's margin regulations. ./'  The Court has propounded four specific questions with respect to that claim and asked the Board's staff to aid its deliberations by responding to them.  11w   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  It should be noted that the following views are solely -  those of the Board's staff and that because of time constraints, it has  •  • • • •  •  •  • GI  •, •  •  — 2 •  3e questions to the Loard for its not been possible Co present the consideration.  follow: The questions and our responses  4  QUESTION NO. 1 offers in general? Does Regulation T apply to tender VLSPOi:SE TO QUESTION LC. I les.  .7(a) of the rectilation, Except as provided in section 220  ntained T cpplies to credit extended, mai n tio ula Reg ow, bel ted quo is ch whi carrying for the purpose of purchasing or ler dea or ker bro a by ed ang arr cr is our ed securites). Accordingly, it any securities (other than exempt ties to credit used to purchase securi opinion that Regulation T applies pursuant to a tender offer. QULSTION NO. 2 tender offer by Does Regulation T apply to the Empire in this case? RESPOi:SE TO QUESTION h0. 2# n T (12 CFR 220.7(a)) states: Section 220.7(a) of Regulatio . A creditor may arrange Arranging for loans by others er of credit to or for any custom nce ena ilt i:C oii ion ens ext the for ditions as upon the same terms and con son per any by or dit cre h suc of Part, may under the provisions'of this or, dit cre the ch n whi upo se tho only upon credit to sucn customer, but h suc in nta mai or end ext f sel him not apply t this limitation shall tha ept exc s, ion dit con and ms ter such to the arranging by a creditor: 221 of this Chapter (I) for a bank subject to Part maintain credit on (Regulation U) to extend or securities, or margin securities or exempted •  (2  ' or maineain credit for for any person to extend carrying a security. the purpose of purchasing or , with instalment (including sale of a security payments or other credit features) in a trans- -  ft   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •.  •. 'c  . rit'•.•  • ... • • .  . _  ye,  •  qr.•  • . J . .40 •f• . • •••••,•  ..4.-  .1to.  .•  -  •  _ _  •••  _  • •  •. •af 7,:.  t  •  ire'.•• •  g,r •  -  nctior unich is exempt inv.! the reristrstien oi 1.63 bv • requirentr oi the Lecuritios virtue of section 4(2) oi that ict (15 00;.L. i7d(2)) 1.rovided, That: (i)  (ii)  the credit to be extended or maintained vili not. of. violate the provisions of.farts 7.(.17.anj this Chapter; end_ creeil vill not be used to purCizse or carry a security that is punlicly-held. For the lAirpose be decred to cf this parareih, a security it is (a) n si-cnrity of a te "vublicly-oeld" C1PVS that is rcr:istereu, cr 1.111 be yvquired to istinf circumstances be rer.islered (tzssu...ine, re(!uirine reristration continue Lo prevail) within !Joys ritr the last da7 of thc. tiscal year of 00 issuer, under section li ol the Act or woule brroc,nired Lo be reristered except tor the eAe::pticna ct subsection i.rovidoo by para7rerhs WU) and cr (b) a security. of n class any portion oi uzis re-istered under sectiGn 5 oi thr 77e) and in .r.ecuritios Act of 1933 (15 the iEbuer is re(tuireu ccr:nection ifith .mien tile purieLic reports under section 15(d) of the /XL.  uion  inforcsttivn ve hove reccivvd, the fnllowier alier,ed  facts are relevant LO our consideration ot this huestion.  Flyth, East..-on,  Oaced a  .Lillun t, Co., Inc. ("Adlyth, Lastn:a1"), a brol.er tcleptrane call to Cohtrecrlof Illinois hatioTici hank  iiust Lo. of  Chica7o ("continr:ht:'1") tor the purpose oi obtcinine Lac tinancinc tor. s CV5:1 terijer otter  L.arire tor tn.! stock of Par,_:os.. 'cueser;ucntiy, a  loan coomitLvnt oi $5(;,1:r..0,900, was ready to fronire by Continental. (olytn, LeStr..an .7.ay als..) have particiialtod in other telephone conversations •••  or Neetins concerm7  LhC  tender oil.er).  Lechuse o question was raised  as to tiether ur pot toe telcOone call ioy Glytn, Lastuan to Continental uivut ue viewed as in cotltrovenLion ot Eciulz,tion 1, it Lies decided that the loan cornitr.ent snould be perritted to lapst. , •.4.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '  t.:  Ectire then coutectc.d  •  4  • •  •  • •  •  11 11) ‘  •  •  — 4 Missouri, . ("Mercantile") of St. Louis, Mercantile Trust Company; N.A ons and ch it had regular banking relati whi h wit ks ban two the of one o, k, First National Bank of Chicag ban er oth 's ire Emp n. loa an outstanding the financing. Mercantile, for t ues req 's ire Emp ed ect rej had previously t tinental and was limited in wha Con n tha k ban r lle sma h muc a however, was s than the laws to a sum consideraoly les it could lend under banking $50,000,000 needed.  prior Continental Mercantile was advised of the  tile, s which led to its lapse. Mercan commitment and the circumstance its bank in the loan, decided that after agreeing to act as agent tacted to $5,000,000, it therefore con participation must be limited dent banks. and received their pon res cor pal nci pri its Continental, one loan for a sum of $45,000,000. agreement to participate in the the term "creditor" which is Blyth, Eastman, comes within dealer Regulation T as "any broker or defined in section 220.2(b) ot ional securities exchange." including every member of a nat n section 220.2(c) of Regulatio in d ine def is " mer sto "cu m Tne ter • ing jointly, (i) to or for act s son per of up gro or son T to include 'any per ining phasis supplied), or mainta [em ing ang arr , ing end ext whom a creditor is would be a customer of ire Emp n, tio ini def s thi er any credit• . ." Und arranged by Blyth, Eastman. was n loa the if n tma Eas th, Bly t Regulation T applies to this tha n nio opi our is it ly, According activities of Blyth, Eastman the t tha ) (1 ds fin rt tender ortui LI the Cou by Empire constittited er off uc‘ teu the for ing in seeking to secure financ end xegung of the Exchange Act ani 14e the hin vit dit cre an "arranfine of 90 per cent participation......:. n with loa le •ti cc. Mer the t ••• lation T and (2) tha •. ,  Oft  -r•  • .. ..  IF ....• .1".7.1 -• ••• ,•- •••••• sob .. ••••p• •1 " 1111 • r •- ...-- .. .0,!le* 44O. V.: r.4- 4 .4• 4•' • •• 11. INII• • *A.: ..... ..- •''': .• . •. : '.,... . !,%te. %,-.. -  -  . ••••0•  •••   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •. •••me •  1.  •  t -... ' - ', ..*-- - - • -, Ls,- • ;•—.:-' -7--T. : ... -. — , —r*.• 7 . .w..12.,.:..". %*--,... .- . ... .40.• *.46 . „.„ s01.4.41114P.M.,. ..:.k...•,...... '  ....•  . 4,1.7., ...... •......:.. , , . „. . • ... ,, „„, .,„„ ..., ,„,;_, 1„, , , 4, 4,„:21,--4  .  •.  .  ry  .......  "04 .  . ....n. : 1 : 7  i.  .  v  I • •  •  ••  •  — 5 — t as that initially by Continental, is, in fact, substantially the same credi committed by Continental.  We regret that we cre unable to offer more It is our view that the facts, as  definitive advice in this response.  ultimately determined by the Court, are critical to the answer.  QUESTION NO. 3 If there is an arraneing in violation of Regulation' T, is the borrowing pursuant to the loan so arranged a violatibn of hegulation X?  RESPOhSE TO QUEST101; UO. 3 No.  Regulation X (12 CFR 204) was adopted by the Board to  out the provisions of be effective Novemoer 1, 1971 in order to carry Law 91-508 enacted Title III of the Foreign Bank Secrecy Act (Public October 26, 1970).  That Act amended section 7 of tne Securities  for the first time, Lxchance Act of 1934 ("Exchange Act") by requiring, cable to the appropriate that borrowers comply with the margin regulations appli the purpose of purchasing category of lenders when obtaining credit for securities. Section 224.2(a) of Regulation X provides: Credit obtained from within the United States. A borrower shall not obtain any purpose credit from within the United States unless he does so in compliance with the following conditions.  rm (2) Credit obtained from a broker/dealer shall confo which is to the provisions of Part 220 (Regulation T), hereby incorporated in this part (Regulation X). When ulation the term "broker/dealer" is used in this part (Ileg uding X), it means a person who is a broker or dealer,-incl every member of a national securities exchange, and ler." includes a foreign branch or subsidiary of a broker/dea ".  • *r- ".  ••.• • • 0 •• . •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •-• *  •• •  •• • • s  .  * .* . WY • . *  •• .  •  • 0- - • • •••t• A.  A ..q• "•  .  '•  '  ••• •  .•  •  • 2..  coolorto to the (..;) Credit cljainer: rro,7; r .cept ior nt,,ction rrovisions oi . lart 2i1 krrruLtiou U), c. 0:evulation L) hxce.;:t tor r.uch section, earl: is hervby incorporntt. in this 1-4:11 lt:crulation ;..). 'Wien tho • tem "bank" is ulcd in this par- t (rerolotioo Y.), it reans • • a bank tlrot is subject to Fart 221 (t-onlation ihis provision oi i%erulntion X !..oLes it illcFal ler a borrouer to obtain creclit troy. o i,rokcr-t;caler in c::cens ol vhat. L;o2 brc.ker-declr cnn lend.  It does not anpear that tste spvcitic lonfAiage of. herulation  it ille  tor tut: horraocr to ooloin credit "ra- rnnfTd" by ti i,ro‘.er-dealPr  makes  in e-,:cess oi ..alut the broker-dr.aler conlq e%tvod,.providet; the credit ter:.:n corT.ply witu tin! rrcvinic,n oi  rerulcliod zwi.licble to the ler.der, vh.ich  Lerulbtion L.  in this cnse, t:euld  t:e note, not:ever, tnat.an ' Oecausc it  arranvt!d loco, rlthc..lch it .ray not violate  U, could pcssih17 be cctinc;.ble throurh duos not violate tc!.u1:.tion such cs those concerned with "sic:in.  tnronrh otcr rult:c ol  Ly r:le Court in t.toprer v. C.oldrar,  nuettio".  f.  (ltt. Cir. 1:1;31.): •••••-..   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  bruer errPtr.e:reut oi  .. •  4  lc.aus can Oe eniercya threnvzi  othert- i:e  various :_!uciuiLtrolive.disciptiw:ry :1;.:nctions rrevitled i1V  the  A ct,  or ity injunctive relicl or even crii7inal  prorccottun at sucli saLcLiors ray 1,e applicable in !%rticvliir circi..:-rtancos Lo a Lrcier or anyont‘ wit; 1/ lc hin t.lisconduct.." oidE.  • 1/  Lee sl.;o: Lunuy v.  red,.r;.:t  .•.• •.  Itoar- ti Interp.retLtiou at 1: ' CuN fed. Eec. •  an0  • •  •  ,  •  r.  • •  a  00ESTION NO. 4  ,fr  .  lt there what are the loan (b) the  is a violation ot either or both regulations, the possible effects of ich a violation on and on (a) the broker-dealer who arranged it. borrower, and (c) the lending banks?  • •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  RESPONSE TO QUESTION E0. 4 It is our view, as stated in response to C.uestion No. 3, that there would be no violation of Regulation X ii a credit which a bank would be allowed to extend under the terws of gegulation V, is arranged by a oroker in violation of section 220.7(a) of Regulation T.  Furthermore, the etfect  of any violation on the loan itself appears to us to be a question ior the Court to decide as it will involve a determination of the rights of the various parties concerned.  We wish to indicate, however. our agreement  with the reasoning of the Court in Alaska Interstate Company v. Ncaillan, 402 F. Supp. 532. 556 (D. C. Lel. 1975), which ascribed to the Eoard a regulatory concern witn credit flowing into the market which is obtained for a customer through the efforts of a broker-dealer. Accordingly. our •  discussion will be confined to the possible ef,fects of a Regulation T violation on the broker-dealer. the borrower and the lending bank.  Effect on the broker-dealer A broker-dealer who has arranged a prohibited loan, of course, violates Regulation T.  It is our opinion that such a violation could  subject the person to possible action by the Securities and Exchange Commission ("SEC") under section 21 of the Exchange Act, (15 U.S.C. 78u(d)). to possible recission of any relevant contract under section 29(b) of that Act (15 U.S.C. 78cc(b)), to possible disciplinary action by any self-regulatory agency ot uhich the broker-dealer is a member pursuant to section 6(b)(6) of • •  • . .417  •  qk • „ O.  P  4• • ...Ow•  ••••••o•  ••• Air  .• •  AP •••• • /  •  •• •  • • ;ID •••  •  •  Oo  • •• •41 . ••• .• • • • ip p,  a.. ••:11e.  •t••••  .• •  .•  r pi:-.  •  . .,  .  r  — 8 —  ..  to suits brougnt under the implied the Act, (15 U.S.C. 78i(b)(6)) as well as ly recognized in this area when right of action which the Courts have consistent •  .  law which allows recovery initiated by an ap.grieved person under basic tort te intended for the to a proper person injured by a violation of a statu 2/ protection of persons ot that class.—  Effect on the borrower  •  borrower for whom If a loan has been illegally arranged, the g and abetting a the loan was arranged could be found liable for aidln violation of Regulation T.  It is our opinion that the borrower could  on 21 of the be subject to injunctive action by the SEC under secti brought under the Act (15 U.S.C. 78u(d))and to suits by a proper party on tort law. implied right of action mentioned apove based  Effect on lending banks e in a loan It is our view that a bank should not participat tion of section which has been arranged ny a broker—dealer in viola •••  would be permitted under 220.7(a) of Regulation T, even though the lcan and abet a violation kegulation U, because such act or practice would aid )) and section of section- 7(c) of the Exchange Act (15 U.S.C. 74(c ,  220.7(a) of Regulation T.  If the_appropriate federal banking regulatory  participation was ha agency had reasonable cause to believe that such business of such bank or unsafe and unsound practice in conducting the agency could institute ceaseconstituted a violation of the law, the banking  675, 680 (C.A. 5, 1959). . 27---See Ejldenberg v. Bache & Co., 270 F. 2d  1,•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - •  . •• olsr  •  .1.  9  4••••  nnd—desist proccedi nts pursuant to se ction 8(b)(1) ol the Federal Deposi t Insurance tct (12 0.ti.C. 1816(b)( 1)). The bank poss ibly could also be subject to an action broueh t by the SEC in it s discretion unde r section 21(d) ol the Exchange Act • (15 U.S.C. 7i:w(d )) or a privnte suit by a proper part y in tue sane manner as explained abov e.  Additional iniormat ion lhe lollowine addi tional inforration wuich may aid tne Court in its deli beration is attach ed: (1)  (i.)  Loord press releas e dated 1:ovember 13, 1975, which announced an amen dment to section 220.7(a) of 1,egulntion T. 'board letter dated February 27, 1974, relatine. to the retinnncinr! oi bnnk loans, the proceeds of vhich were used to purchase stock, in which the Board concluded th at it would not re ra rd section 220.7(c) of Keeula tion as applicable the broker—dealer vithdr ew from the transa cticn and liLdled his future relntions with the issuer.  (3)  boatJ letter doted Aur,ust 3, 1973, in which Lhe hoard discussed pe rmissible as as prohibited activities of a brok er—dealer in connec tion wiLh a proposed linancin p ot tde pbrchase of securities involved in tae El Vases Ustural Gas Co . divestiture. 'r;e elope the 81)ove coroents will be he lpful to the court in its consideration et this case. Very truly yours,  hoeert S. Assistant lArector •  LL/ktV:is . cc: Ei,adden, Al!s, "^ tr. Steptoe Johnson Office ol the Cenera l Counsel, Lecuriti er "A txcqacr.e LOVI ibnien   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .•  ction assigned Jack Ryan  lb  JAKE GARN, UTAH, CHAIRMAN JOHN TOWER, TEX. JOHN HEINZ. PA. WILLIAM L. ARMSTRONG, COLO. RICHARD G LUGAR, IND. ALFONSE M. D'AMATO, N.Y. JOHN H. CHAFEE R.I. HARRISON SCHMITT, N. MEX.  o  ,410 DOARD  HARRISON A. WILLIAMS, JR., N.J. WILLIAM PROXMIRE, WIS. ALAN CRANSTON, CALIF. DONALD W. RIEGLE, JR., MICH. PAUL S. SARBANES, MD. CHRISTOPHER J. DODD, CONN. ALAN J. DIXON, ILL.  .;II •  '11Cnifeb Zfafes  I  /  M. DANNY WALL, STAFF DIRECTOR HOWARD A. MENELL, MINORITY STAFF DIRECTOR AND COUNSEL   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COMMITTEE ON BANKING, HOUSING, A URBAN AFFAIRS  dk.  e  6  PP; /  WASHINGTON, D.C. 20Rterir,r.  9.. 30  Cr; r  September 14, 1981  Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th Constitution Ave., NW Washington, D.C. 20551 Dear Chairman Volcker: Enclosed is a letter which I have received from Ted Wetterau, Chairman of Wetterau Incorporated concerning an attempted takeover of that company. The letter suggests the possibility that federal margin requirements may be violated in connection with loans to finance this transaction and, further, that the loans involved are not consistent with sound lending practices. I would appreciate your assistance in responding to Mr. Wetterau's inquiry. Sincerely  Jake Garn Chairman JG/jda Enclosure  • Wetterau Incorporated  • September 4, 1981  Senator Jack Garn, Chairman Senate Banking Committee United States Senate Washington, D.C. 20510  Dear Senator Garn: We need your help. As Chairman of the Board and Chief Executive Officer of Wetterau Incorporated, a $2 billion food wholesaler headquartered in St. Louis, Missouri, I have a matter of utmost urgency to bring to your attention. A small propane gas company named Empire Incorporated, located in Lebanon, Missouri, has made an unfriendly tender for the common shares of our company. Empire has become notorious by initiating a number of unfriendly tenders in recent years and because of litigation, both civil and criminal, in which they have been involved. The initial tender would have brought their holdings to slightly over 20 percent. Subsequently, they have announced their intention to acquire tendered shares amounting to approximately one-third of the outstanding shares of our company. All of this stock is being acquired with borrowed money. Empire is a company with $40 million in net assets. Its most recently reported long-term debt was $48 million. Some time ago, Empire negotiated a revolving line of credit of $100 million with Continental Illinois of Chicago and the Security Pacific National Bank of Los Angeles. Prior to the unfriendly tender, it drew down $15 million of this line which we presume was used both as working capital and to acquire 4.9 percent of Wetterau shares through blind holdings. Since the tender offer was made, Empire has gone back to Continental Illinois, its lead bank, with a request to pull an additional $45 million from its revolving line. The purpose of this additional credit is to buy tendered Wetterau shares. It is our understanding that Security Pacific, to their credit, backed away from the agreement because of the proposed use of the funds. Continental Illinois, however, apparently made a loan of some $33,750,000 to Empire for the purpose of acquiring shares of Wetterau. In depositions taken from the loan officer of Continental Illinois, our attorneys were advised that not only did Continental plan to proceed with the loan, but also would grant the loan at bargain rates to a company with neither the balance sheet nor earnings to support the loan. Empire is late in reporting its final quarter's earnings, even on a preliminary basis, but indicated that there will be a substantial loss for the year. It was indicated that the loan Continental would grant Empire would have an 18-1/2 percent cap on it.  8920 PERSHALL ROAD, HAZELWOOD, MISSOURI 63042 (314) 524-5000 ..Nks..444,0i.ftw101444:'ApIti*..INTM1410,1W;yylv--KC   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  , 7-1ther•sii? V.:a-4111Ire*Pe't4s-VO `14111$4494'04.441* "54•11.411V--A.$7  -- 4  -r-s so. 4-,  mu •  _  ,  •  •  .  • Page 2  September 4, 1981  Members of the banking community who are aware of the circumstances of this loan have indicated that their cash flow analyses support our contention that it cannot be repaid without stripping the assets of Wetterau Incorporated or by reselling- the shares. In a period when legitimate businesses are having difficulty in acquiring capital for expansion which would lead to additional employment and increased productivity, I cannot understand why abuses of the banking system are tolerated.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  We are in the midst of this battle now.  We need your help today.  Sincerely,  //,..c ,icri/r/zZ&44-ei-d Ted C. Wetterau Chairman of the Board and Chief Executive Officer  1  1  r  t   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ...•.• f GOvt •. R4,•. 0•  •  .  •ro .. • C •-n "-A ..1.-cf, • .4,  . 1; t•-• 1 -2.. ,-). 44.,. .  • BOARD OF GOVERNORS Or THE  FEDERAL RESERVE SYSTEM  ,  WASHINGTON, D. C. 20551 PAUL A. VOLCKER CHAIRMAN  October 16, 1981  The Honorable Jack Brooks Chairman Committee on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman Brooks: In accordance with Section 236 of the Legislative Reorganization Act of 1970, this letter outlines the response of the Federal Reserve to the GAO report (GGD-81-79) dated August 18, 1981, on the Federal Reserve's bank holding company supervision program. The GAO report raises a number of issues and makes a number of related recommendations concerning the frequency and scope of on-site holding company inspections and the role of off-premise surveillance The Federal Reserve's detailed response to the conclusions and activities. recommendations of the GAO are contained in a letter dated June 12, 1981, and included in Appendix II of the final report. This letter will address the specific recommendations made by the GAO and the actions taken by the Federal Reserve. With respect to on-site inspections, the GAO recommends i) greater flexibility in scheduling inspections based upon nonbank risk, surveillance results and perceived need; ii) steps to increase examiner expertise in evaluating nonbank activities and to ensure that such activities are adequately considered in the inspection process; and iii) the limitation of on-site inspection tasks to only those which are needed in each case. The Federal Reserve agrees with the spirit and intent of these recommendations and has taken a number of steps to enhance the flexibility of the inspection process and improve the allocation of inspection resources. In January of this year, the Federal Reserve revised its inspection frequency guidelines to extend the time between inspections of sound companies and to place greater emphasis on inspecting companies whose financial conditions suggest greater levels of risk. The Federal Reserve's revised inspection policy explicitly relates the frequency of on-site inspection to risk as reflected in the size of the holding company and its nonbank activities, the degree of holding company leverage, overall financial condition rating, and the results of on-going surveillance activities. In addition, the Board has reiterated that. when in conflict, special inspections of problem companies, regardless of size, should take precedence over the required periodic inspections of sound holding companies; and the System's operations review procedures will ensure that this policy is implemented. Indeed, the GAO notes on pages 32 and 33 of the report that recent Federal Reserve steps have clarified the flexibility of the System's frequency policy and have  11110 •  e".   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Jack Brooks  -2 fi  demonstrated that the Federal Reserve is committed to implementing a flexible inspection approach. While the Federal Reserve has taken these steps to augment flexibility and focus greater attention on companies with financial weaknesses, the Board believes that continual periodic inspections of large holding companies is essential, given the importance of such organizations in regional and national banking markets and their role in the nation's financial system. The evaluation of risk-taking and credit-extending nonbank subsidiaries of bank holding companies has long been an essential element of the Federal Reserve's holding company inspection program. The System's inspection report includes separate evaluations of significant credit-extending subsidiaries and classification of their assets. Moreover, the Federal Reserve's inspection manual contains numerous chapters devoted exclusively to specific nonbank activities. System schools also include sessions on nonbank activities, although the Federal Reserve is currently giving consideration to intensifying its instruction curriculum dealing with credit-extending nonbank subsidiaries. The Board believes that the Federal Reserve's past and current efforts with respect to the inspection of nonbank subsidiaries ensure that the risks posed by these companies and their potential impact on bank subsidiaries are thoroughly assessed and factored into the evaluation of the consolidated banking organization. The Board endorses prudent efforts to limit on-site inspection activities to those tasks which can only be performed on the premises of the bank or holding company. With this in mind, the Federal Reserve has revised the chapter on surveillance in its supervision manual to place greater emphasis upon off-premise analysis of financial factors through use of the bank holding company performance reports. Examiners are also instructed to utilize judgment in the application of inspection procedures to holding companies with varying financial conditions and operating characteristics. While the Board supports these actions and the efficiencies they can produce, it believes that certain minimum procedures must be performed in all cases to ensure that relevant facts or conditions are not overlooked in an effort to streamline the inspection process. Such procedures are spelled out in the System's supervision manual. Concerning surveillance activities, the GAO report calls for more definitive guidelines for directing and evaluating Reserve Bank efforts and for a reassessment of nonbank subsidiary reporting requirements. It should be noted that surveillance techniques have been developed relatively recently, and some differences among Reserve Banks are warranted due to regional differences in banking structure and the desirability of encouraging innovation. Nonetheless, the Federal Reserve has developed minimum guidelines with respect to the basic screening, analysis, and follow-up processes and, as the GAO points out, has taken a number of other positive steps in conjunction with Reserve Banks to improve the surveillance program and to facilitate the development and sharing among Reserve Banks of new methods of financial surveillance. The Board believes that its guidelines strike an appropriate balance between the need for central direction and the desirability of encouraging regional flexibility and innovation. In addition, the Federal Reserve has developed a bank holding company performance report that has assisted greatly in the on-going monitoring of holding company financial condition and in scheduling on-site inspections. These steps and other actions to more centrally direct and coordinate Systemwide surveillance projects will   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The Honorable Jack Brooks  3  •  strengthen the System's overall surveillance efforts. The question of nonbank data raises a number of issues relating to regulatory burden and supervisory need. While the Federal Reserve could utilize additional information on nonbank subsidiaries and is contemplating requesting such data, the costs and benefits of imposing additional reporting burden on bank holding companies at this time will have to be carefully evaluated. As already noted, the Federal Reserve obtains information on nonbank subsidiaries during on-site inspections and receives nonbank information from the annual report that is required to be filed by each holding company with the Federal Reserve. In light of this, the Federal Reserve is undertaking numerous efforts to improve the utilization of the information it already receives, including computerization of data on small holding companies for monitoring and screening purposes, and better computer identification of the size and performance of credit-extending nonbank subsidiaries of the parent holding company. The GAO recommends that the Federal Reserve explore the concept of having bank examiners from other Federal agencies conduct certain holding company inspection tasks in conjunction with their examination of the bank subsidiary. The report acknowledges the potential difficulties in scheduling and resource availability and suggests that such an approach may be most appropriate for one-bank holding companies that do not have nonbank subsidiaries. The Federal banking agencies under the auspices of the Federal Financial Institutions Examination Council have made considerable progress in the last several years in coordinating the supervision of holding companies and their subsidiary banks. Formal policies have been adopted which call for interagency coordination with respect to examinations and corrective action for large companies and all problem companies. Moreover, interagency efforts are underway to strengthen coordination even further. In particular, the Federal Reserve is currently discussing with the Office of the Comptroller of the Currency the possibility of conducting concurrent examinations of certain holding companies and their bank subsidiaries in order to eliminate the possibility of supervisory duplication, overlap and inconsistency; to further improve interagency coordination; and to realize potential efficiencies in the use of examiner resources. As part of a review of its holding company inspection program, the Federal Reserve intends to explore the idea of requesting that bank examiners obtain information on certain holding companies, as well as the possibility of greater reliance upon surveillance and on-going financial monitoring, off-premise analyses, limited scope examinations, and additional scheduling flexibility in the planning and conduct of on-site inspections. The purpose of this review will be to continue to make maximum efficient use of limited examiner resources and to direct these resources to companies whose financial condition and/or operating characteristics warrant increased supervisory attention. Any steps taken by the Federal Reserve, however, to introduce greater flexibility or to request the performance of certain inspection tasks by the other banking agencies will have to be implemented in a manner that is consistent with the agencies' resource availability and with the Federal Reserve's statutory responsibility for the safety and soundness of bank holding companies.  •4  -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Jack Brooks  4-  •  With respect to the interagency coordination of holding company and subsidiary bank supervision,, the GAO has not found any cases in which banks have failed or have been threatened with failure due to inadequate interagency coordination. In addition, the Board notes that the GAO has not found eviden ce to justify a legislative restructuring of holding company supervision. The Board is committed to continue on-going efforts to ensure interagency coordi nation and efficiency in the supervision of bank holdling companies. Sincerely, A, :•:ckec   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • . •• of G0tit";.. •0 4, • 0,, .• Cr *. •. oo .  . -ri .  . • (0.4,  : 2• f-- • ,-). • ... ,--) . / 1 4..  • BOARD OF GOVERNORS OF THE  FEE)ERAL RESERVE SYSTEM WASHINGTON, D. C. 205S1  PAUL A. VOLCKER CHAIRMAN  October 16, 1981  The Honorable William V. Roth, Jr. Chairman Committee on Governmental Affairs United States Senate Washington, D.C. 20510 Dear Chairman Roth: In accordance with Section 236 of the Legislative Reorganization Act of 1970, this letter outlines the response of the Federal Reserve to the GAO report (GGD-81-79) dated August 18, 1981, on the Federal Reserve's bank holding company supervision program. The GAO report raises a number of issues and makes a number of related recommendations concerning the frequency and scope of on-site holding company inspections and the role of off-premise surveillance activities. The Federal Reserve's detailed response to the conclusions and recommendations of the GAO are contained in a letter dated June 12, 1981, and included in Appendix 11 of the final report. This letter will address the specific recommendations made by the GAO and the actions taken by the Federal Reserve. With respect to on-site inspections, the GAO recommends i) greater flexibility in scheduling inspections based upon nonbank risk, surveillance results and perceived need; ii) steps to increase examiner expertise in evaluating nonbank activities and to ensure that such activities are adequately considered in the inspection process; and iii) the limitation of on-site inspection tasks to only those which are needed in each case. The Federal Reserve agrees with the spirit and intent of these recommendations and has taken a number of steps to enhance the flexibility of the inspection process and improve the allocation of inspection resources. In January of this year, the Federal Reserve revised its inspection frequency guidelines to extend the time between inspections of sound companies and to place greater emphasis on inspecting companies whose financial conditions suggest greater levels of risk. The Federal Reserve's revised inspection policy explicitly relates the frequency of on-site inspection to risk as reflected in the size of the holding company and its nonbank activities, the degree of holding company leverage, overall financial condition rating, and the results of on-going surveillance activities. In addition, the Board has reiterated that, when in conflict, special inspections of problem companies, regardless of size, should take precedence over the required periodic inspections of sound holding companies; and the System's operations review procedures will ensure that this policy is implemented. Indeed, the GAO notes on pages 32 and 33 of the report that recent Federal Reserve steps have clarified the flexibility of the System's frequency policy and have   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • The Honorable William V. Roth, Jr.  • -2  demonstrated that the Federal Reserve is committed to implementing a flexible inspection approach. While the Federal Reserve has taken these steps to augment flexibility and focus greater attention on companies with financial weaknesses, the Board believes that continual periodic inspections of large holding companies is essential, given the importance of such organizations in regional and national banking markets and their role in the nation's financial system. The evaluation of risk-taking and credit-extending nonbank subsidiaries of bank holding companies has long been an essential element of the Federal Reserve's holding company inspection program. The System's inspection report includes separate evaluations of significant credit-extending subsidiaries and classification of their assets. Moreover, the Federal Reserve's inspection manual contains numerous chapters devoted exclusively to specific nonbank activities. System schools also include sessions on nonbank activities, although the Federal Reserve is currently giving consideration to intensifying its instruction curriculum dealing with credit-extending nonbank subsidiaries. The Board believes that the Federal Reserve's past and current efforts with respect to the inspection of nonbank subsidiaries ensure that the risks posed by these companies and their potential impact on bank subsidiaries are thoroughly assessed and factored into the evaluation of the consolidated banking organization. The Board endorses prudent efforts to limit on-site inspection activities to those tasks which can only be performed on the premises of the bank or holding company. With this in mind, the Federal Reserve has revised the chapter on surveillance in its supervision manual to place greater emphasis upon off-premise analysis of financial factors through use of the bank holding company performance reports. Examiners are also instructed to utilize judgment in the application of inspection procedures to holding companies with varying financial conditions and operating characteristics. While the Board supports these actions and the efficiencies they can produce, it believes that certain minimum procedures must be performed in all cases to ensure that relevant facts or conditions are not overlooked in an effort to streamline the inspection process. Such procedures are spelled out in the System's supervision manual. Concerning surveillance activities, the GAO report calls for more definitive guidelines for directing and evaluating Reserve Bank efforts and for a reassessment of nonbank subsidiary reporting requirements. It should be noted that surveillance techniques have been developed relatively recently, and some differences among Reserve Banks are warranted due to regional differences in banking structure and the desirability of encouraging innovation. Nonetheless, the Federal Reserve has developed minimum guidelines with respect to the basic screening, analysis, and follow-up processes and, as the GAO points out, has taken a number of other positive steps in conjunction with Reserve Banks to improve the surveillance program and to facilitate the development and sharing among Reserve Banks of new methods of financial surveillance. The Board believes that its guidelines strike an appropriate balance between the need for central direction and the desirability of encouraging regional flexibility and innovation. In addition, the Federal Reserve has developed a bank holding company performance report that has assisted greatly in the on-going monitoring of holding company financial condition and in scheduling on-site inspections. These steps and other actions to more centrally direct and coordinate Systemwide surveillance projects will  •  • The Honorable William V. Roth, Jr.  -3  strengthen the System's overall surveillance efforts. The question of nonbank data raises a number of issues relating to regulatory burden and supervisory need. While the Federal Reserve could utilize additional information on nonbank subsidiaries and is contemplating requesting such data, the costs and benefits of imposing additional reporting burden on bank holding companies at this time will have to be carefully evaluated. As already noted, the Federal Reserve obtains information on nonbank subsidiaries during on-site inspections and receives nonbank information from the annual report that is required to be filed by each holding company with the Federal Reserve. In light of this, the Federal Reserve is undertaking numerous efforts to improve the utilization of the information it already receives, including computerization of data on small holding companies for monitoring and screening purposes, and better computer identification of the size and performance of credit-extending nonbank subsidiaries of the parent holding company. The GAO recommends that the Federal Reserve explore the concept of having bank examiners from other Federal agencies conduct certain holding company inspection tasks in conjunction with their examination of the bank subsidiary. The report acknowledges the potential difficulties in scheduling and resource availability and suggests that such an approach may be most appropriate for one-bank holding companies that do not have nonbank subsidiaries. The Federal banking agencies under the auspices of the Federal Financial Institutions Examination Council have made considerable progress in the last several years in coordinating the supervision of holding companies and their subsidiary banks. Formal policies have been adopted which call for interagency coordination with respect to examinations and corrective action for large companies and all problem companies. Moreover, interagency efforts are underway to strengthen coordination even further. In particular, the Federal Reserve is currently discussing with the Office of the Comptroller of the Currency the possibility of conducting concurrent examinations of certain holding companies and their bank subsidiaries in order to eliminate the possibility of supervisory duplication, overlap and inconsistency; to further improve interagency coordination; and to realize potential efficiencies in the use of examiner resources.  1  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  As part of a review of its holding company inspection program, the Federal Reserve intends to explore the idea of requesting that bank examiners obtain information on certain holding companies, as well as the possibility of greater reliance upon surveillance and on-going financial monitoring, off-premise analyses, limited scope examinations, and additional scheduling flexibility in the planning and conduct of on-site inspections. The purpose of this review will be to continue to make maximum efficient use of limited examiner resources and to direct these resources to companies whose financial condition and/or operating characteristics warrant increased supervisory attention. Any steps taken by the Federal Reserve, however, to introduce greater flexibility or to request the performance of certain inspection tasks by the other banking agencies will have to be implemented in a manner that is consistent with the agencies' resource availability and with the Federal Reserve's statutory responsibility for the safety and soundness of bank holding companies.  I.  •••••  • *   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Williar, Roth, Jr.  -4  -  •  With respect to the interagency coordination of holding company and subsidiary bank supervision,,the GAO has not found any cases in which banks have failed or have been threatened with failure due to inadequate interagency coordination. In addition, the Board notes that the GAO has not found evidence to justify a legislative restructuring of holding company supervision. The Board is committed to continue on-going efforts to ensure interagency coordination and efficiency in the supervision of bank holdling companies. Sincerely, „./P.w: A. .--:chor   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IMP  •  • October 15, 1981  The Honorable S. I. Hayakawa United States Senate Washington, D. C. 20510 Dear Senator Hayakawa: Thank you for your recent letter cerf4D eft&lf of Mr. Angeles S. Anonuevo, Jr., who has expressed an interest in employment with the Federal Reserve System. I have forwarded Mr. Anonuevo's information to our Division of Personnel, and he will be hearing from them shortly. We appreciate your interest in our employment program. Sincerely, (Signed) Donald 1  Winn  Donald J. Winn Assistant to the Board  KW:CO:vcd (V-286) bcc:  Ms. Warehime (for follow-up) Mrs. Mallardi  Action assigned Mr. Shannon  •  S. I. HAYAKAWA CALIFORNIA  COMMITTEES:  AGRICULTURE, NUTRITION, AND FORESTRY  804RL! - 7- T,  FOREIGN RELATIONS  .9-1Crtifeti Zfafez Zenate  SMALL BUSINESS  WASHINGTON, D.C. 20510  1961 OCT -2 Pt.; 1?: 10 OFFICE Ci"  September 23, 1981  ET: F L;  /frb  Governor Paul Volcker Board of Governors Federal Reserve System Washington, D.C. Dear Governor Volcker:  I am herewith enclosing a resume from one of my constitu— ents, whom I have already notified of this action.  I would  appreciate your reviewing the resume and contacting the applicant 95  to whether you feel his qualifications would be beneficial to  the new Administration. Realizing how busy you are at this time, I am most grateful for your attention to this matter. Sincerely,  g  u,i  AWL/ At441.44111L,  S. I. Hayakawa SIH:pws Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  June 15, 1981  The Honorable S. I. Hayakawa Senator, United States of America Senate Office Building Washington, D. C. 20510  Dear Mr. Hayakawa: I am interested in working for the Federal Government. I am 31 years old of Filipino ancestry. I have 10 years of banking experience and at present work as Operations Officer. I have been trying to get employment with the Federal Reserve Bank of San Francisco, Los Angeles Branch, and with the Comptroller of Currency, Los Angeles Office. I would like to seek your help in getting employment with the Government. I would work for any branch of the government where my experience and education (B.A. in Economics from the University of St. Thomas, Philippines) would be most useful. I hope to receive a reply from your office.  Sincerely,  Ig-e/W-(e((el) Mr.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  f  ngeles S. Anonuevo, Jr.  ,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •a•  -  October 15, 1981  The Honorable Glenn English Chairman Subcommittee on Government Information and Individual Rights Committee on Government Operations House of Representatives Washington, D. C. 20515 Dear Chairman English: Thank you for your letter of October 2 inviting the Board to appear before your Subcommittee's hearing on the plans and policies of the Federal Reserve for the provision of electronic fund transfer services. I am pleased to inform you that Mr. Theodore E. Allison, Staff Director for Federal Reserve Bank Activities, will appear on behalf of the Board on October 22. Sincerely,  CO:vcd (V-289) bcc:  Mr. Allison Mrs. Mallardi (2)L,-  GLE:iir'ENGLISH, OKLA., CHAIRMAN  Cong. Liaison Office will rlo memo to Chairman; Mr. Allison has been notifillf hearing  TED WEISS, N.Y. HENRY A. WAXMAN, CALIF. JOHN L. BURTON, CALIF.  THOMAS N. KINDNESS, OHIO JOHN N. ERLENBORN, ILL. WENDELL BAILEY, MO.  NINETY-SEVENTH CONGRESS  JOHN CONYERS, JR., MICH.  Congre55 of tbe Einiteb  225-3741  tate5  koluSeofilepreantatibeZ GOVERNMENT INFORMATION AND INDIVIDUAL RIGHTS SUBCOMMITTEE OF THE  COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, Room B-349-B-C WASHINGTON. D.C. 20515  c1D CO  c"--)  October 2, 1981 cli *  Honorable Paul Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution, NW Washington, D. C. 20551  CC  Dear Mr. Chairman: I request your appearance before the Subcommittee on Government Information and Individual Rights on Thursday, October 22, 1981, to testify regarding the plans and policies of the Federal Reserve for the provision of electronic funds transfer (EFT) services. The hearing should provide an opportunity for the subcommittee and the Federal Reserve Board to explore a variety of questions regarding the authority and resources of the Federal Reserve System in the delivery of EFT services. In particular, the subcommittee is interested in the current procurement of hardware and the operational design of the Federal Reserve Communications network under the FRCS '80 plan. We are also interested in what the Federal Reserve believes its appropriate role to be in the provision of telecommunications and related information services. As we prepare for the hearing, the staff may request copies of pertinent documents from the Board of Governors and the district banks. The hearing will begin at 9:30 a.m. in Room 2203 Rayburn House Office Building. Fifty copies of your prepared testimony should be delivered to the subcommittee office 48 hours in advance of your appearance. If you or your staff have any questions, please contact Christopher Vizas, counsel to the subconunittee, at 225-3741. Cordially,  GE:cv:bm   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -}0.\\A • . t . ,,••.0f GOV : 0 . 1'4,•  BOARD OF GOVERNORS OF THE  :,1.4o •. . •0 • -*I • —k . ..t., ..<1"  1,  - c).060  FEDERAL RESERVE SYSTEM  !-- • Ln • .1... Ll C•. .•  WASHINGTON, O. C. 20551  October 15, 1981  The Honorable Robert J. Lagomarsino House of Representatives 20515 Washington, D.C. Dear Mr. Lagomarsino: Thank you for your letter of October 7 on behalf of your constituent, Mr. Jim Jordan, who is interested in information about the Federal Reserve. I hope the following will be useful. The Board of Governors is an agency of the Federal Government, and its seven members are appointed by the President with the advice and consent of the Senate. The Board is required by law to make an annual report to Congress, and members of the Board, especially the Chairman, are called upon frequently to testify before Congressional committees. The Federal Reserve is not operated for a profit and returns substantial sums to the U.S. Treasury each year. The earnings of the Federal Reserve System are derived chiefly from interest on U.S. Government securities held in the System's Open Market Account, which are acquired as a part of the System's monetary policy actions. The System returns all earnings in excess of expenses to the U.S. Treasury; in calendar year 1980 payments to the Treasury by the Federal Reserve amounted to $11.707 billion. With respect to Mr. Jordan's question regarding stock ownership, as provided for by law, the stock of the Federal Reserve Banks is held entirely by commercial banks that are members of the Federal Reserve System. However, ownership of that stock is in the nature of an obligation incident to membership and does not carry with it the attributes of control and financial interest ordinarily attached to stock ownership in corporations that are operated for the purpose of making a profit. The amount of stock that member banks are required to own is specified by law. The stock may not be sold or pledged as security for loans, and dividends are limited by law to 6 per cent per year. If a Reserve Bank were liquidated, any surplus would go to the U.S. Government, not the stockholders.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Mk  •  The Honorable Robert J. Lagomarsino Page Two  As further background on the System, I am enclosing five pamphlets on the structure of the Federal Reserve System, which may be of interest to Mr. Jordan. Also enclosed are two publications; one describes the historical evolution of the Federal Reserve and the other the purposes and functions of the System. Please let me know if I can be of further assistance. Sincerely, (Signed) Donald 1. Winn  Donald J. Winn Assistant to the Board Enclosures CO:pjt (#V-298) bcc: Mrs. Mallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Will be handled by Cong. Liaison Off`ice et-  ROBERT J. LAGOMARSINO 19TH DISTRICT, CALIFORNIA 2332 RAYBURN BUILDING WASHINGTON, D.C. 20515 202-225-3601  •  • Congrel of the tiniteb  ASSISTANT REGIONAL WHIP. PLAINS AND WESTERN STATES  COMMITTEE ON FOREIGN AFFAIRS SUBCOMMITTEES: INTERNATIONAL ECONOMIC POLICY AND TRADE RANKING MINORITY MEMBER  tatel  .177 , )  INTER-AMERICAN AFFAIRS  Pou5e of Atpreantatibt5  COMMITTEE ON INTERIOR AND INSULAR AFFAI RS SW:EOM mITTEES: INSULAR AFFAIRS RANKING MINORITY M EMBER  litiazbington, 31D.C. 20515 October 7, 1981  q91  IC; CD  1„ •  PUBUC LANDS AND NATIONAL PARKS  1.  % C  -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Cr'  Un. Paul Volcker Chairman Federal Reserve Board Federal Reserve Building Constitution Ave. between 20th grid 21st streets Washington, D.C. 20551 Dear Mr. Chairman: Enclosed is a memorandum regarding my constituent, Jim Jordan, who is interested — _ in information about the Federal Reserve. I would appreciate your comments on behalf of Mr. Jordan. Thank you.  RJL:klm enclosure  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  11°  JIIIDAN, JIM  111 B:  GENERAL INFORMATION REQUEST  OCT  DATE:  7  October 5, 1981  STAFF MEMBER  June Porter  PHONE  XX  VISIT  ,  JIM JORDAN  CONSTITUENT'S NAME: ADDRESS:  PHONE: area code  INFORMATION REQUESTED:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  e System. Wants information regarding the Federal Reserv Does the Federal Government own stock in it? Sent to Washington.  LETTER   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Catherine, Don said no written response. I called Cong. Kindness office and said that the Chairman has his letter and he appreciates receiving it. The girl indicated she would pass this on to the Congressman. Carol  10/21  THOMAS N. KINDNESS 8114 DisTRicr. Opito  •  •  CONGRESS OF THE UNITED STATES HOUSE OF REPRESENTATIVES October 14, 1981  2434 RArsuRha num.:Dm* WASHINGTON, D.C. 20515 (202) 225-6205 646 HIGH STREET HAMILTON, OHIO 45011 (513) 895-5656 Tou. FREE: 1-800-582-1001 234 EAsT MAIN STREET GREENVILLE, OHIO 45331 (513) 548-8817  Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Dear Mr. Volcker: Your letter of October 8, 1981, is very much appreciated. Thank you. I do not intend to take up unnecessarily the time of you and your staff; and no response to this letter is necessary or expected. It is my intention only to try to add to the information and "feel" of the circumstances noted in the economy which might be of value to you and the Board of Governors, since these are matters, in the end, of judgment, as you correctly stated in your very good letter. I will attempt to report to you such conditions as I find pertinent from time to time, in order to possibly enrich the basis for judgment. Today's observation: farmers in our part of Ohio will be forced to reduce plantings of winter wheat this year, thus reducing next year's harvest of wheat, in the hope that they can do better by raising soybeans on the same land next year. If this judgment is widespread, wheat supplies will be down, prices up, soy beans will be abundant, prices down, farm bankruptcies up, all related to high interest rates influencing planting decisions. Thank you for your patient consideration. cerely yours,  t  _1-// " i/);(/'Y4ad---  THOMAS N. KINDNESS Menber of Congress TNK/jr   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  alP  rhfut • 111 6 0 44A:.  •  IRA • .••  GOVi  .  V-0.11) BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  .o • Ln •  WASHINGTON, D. C. 20551  ‘c,  16AL •• • • •  October 13, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Jack Fields House of Representatives Washington, D.C. 20515 Dear Mr. Fields: Thank you for your letter of September 24 regarding Federal Reserve policy and the impact of high interest rates. I want to assure you that I and the other members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest i-ates is a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected 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. The end result of the process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Mt.  The Honorable Jack Fields Page Two  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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughout the economy. There have been a few favorable signs this year on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh direct effects of high interest rates on spending decisions. There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. I am convinced that we are making progress. It is incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic vitality and lower interest rates. That is what all of us want in the long run--even if there may be differences in opinion on how we can get there. I do not underestimate the difficulties of the present situation. The threshold of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflation around--or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. These are all matters, in the end, of judgment. I appreciate very much you taking the time to communicate your assessment of the situation. Sincerely,  SiPaul A. Volckei  (MJP:JLK:RS:)CO:pjt (#V-277) bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  JACK FIELDS 81-H UiSTRICT, TEXAS  COM M ITTEE ON PUBLIC WORKS AND TRANSPORTATION COM M ITTEE ON MERCHANT MARINE AND FISHERIES  Congre55 of 01110 tbe &tato Jima of Aeprezentatibess • Etiaobington, ;D.C. 20515  September 24, 1981  W  Mr. 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  r7-1  v. )  ,  V• —•  4 (/ CD  Dear Mr. Volcker:  N.)  I am writing to express my deep concerns regarding the toll high interest rates are taking on our economy. Throughout the August recess I became acutely aware of the disastrous effects high interest rates are having on small businesses and homeowners in my district. These individuals are desperately trying to salvage their concerns while interest rates remain prohibitively high. I believe a change in the Federal Reserve's monetary policy is warranted to provide relief for the small businessman, the farmer, the unemployed, the young family and millions of others who are being severely hampered by high interest rates. Mr. Volcker, I realize there is no easy solution to these harsh economic realities. It is the responsibility of the Congress to enact additional budget-cutting legislation in an attempt to eliminate the huge federal deficit and eventually balance the budget. I intend to support this legislation to cut federal spending further. However, I believe the Federal Reserve should play a more active role in the overall effort to improve the economy by easing the tight control over the money supply. Mr. Chairman, I firmly believe we need greater cooperation between the Administration and the Federal Reserve to provide for a cohesive and consistent monetary policy. I implore you to consider a less stringent monetary policy with the ultimate goal of bringing the interest rates down. S ncerely  CK DS ember of Congress JF:ckr  PLEASE RESPOND TO: 0510 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 202/225-4901   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  D12605 EAST FREEWAY, SurrE 920 FIRST STATE BANK BUILDING HousToN. TEXAS 77015 713/451-6334  •  • BOARD OF GOVERNORS OF THE  FEDERAL. RESERVE SYSTEM WASHMGTCK D C 20551  October 13, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Elwood H. (Bud) Hillis House of Representatives Washington, D.C. 20515 Dear Mr. Hillis: Thank you for your letter of September 24 regarding Federal Reserve policy and the impact of high interest rates. I want to assure you that I and the other members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest rates is -a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected 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. The end result of the process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  "It *In  The Honorable Elwood H. (Bud) Hillis Page Two  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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughout the economy. There have been a few favorable signs this year on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh direct effects of high interest rates on spending decisions. There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. I am convinced that we are making progress. It is incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic vitality and lower interest rates. That is what all of us want in the long run--even if there may be differences in opinion on how we can get there. I do not underestimate the difficulties of the present situation. The threshold of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflation around--or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. These are all matters, in the end, of judgment. I appreciate very much you taking the time to communicate your assessment of the situation. Sincerely, S/Paul  (MJP:JLK:RS:)CO:pjt (#V-280) bcc: Mrs. Mallardi (2)  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Wu!wk.&  •  ELWOOD H."BUD" HILLIS STHCHSTMCT,INDWAA  •  WASHINGTON OFFKID 2429 RAY Eutmi BuiLDIPAI Tf o.t ii:70,1E: 202-225-5037  • EJARD sk7:  COMMITTEES: HOUSE COMMITTEE ON VETERANS' AFFAIRS HOUSE ARMED SERVICES COM MI TTEE  eougrel of tbe Eniteb fPurse ot ReprOentatibeC SO'  CHAIRMAN: REPUBLICAN TASK FORCE ON ENERGY AND ENVIRONMENT  tuadinatont lz.c. 20515  CIA ICI: 42  OFFICE C2F  September 24, 19.81  Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building 20551 Washington, D.C.  FC:KOMO orricSs sH MAIN STHEET 1-1.1.-}-PHONE: 457-4411  5114  /11  '  /1.NDERsoN cwrice: 25 \Mk ST 7TH S rra-FoNc; €A2-802.3  14 1,1  Manion oFv,C114 220 N.C.,..?!..J.4 P.O. rik.m..DINS Ts.t...E.rhuNc:562-7272  Dear Chairman Volcker: I read with interest reports of your recent testimony before the Senate Banking Committee in which you stated that lower Interest rates will require an additional $100 billion in budget cuts. As a Member of Congress who strongly supported the budget cuts which passed the House and Senate this summer, I recognize that more cuts will be needed in order to bring us closer to our goal of a balanced Political realities, though, will make these new federal budget. cuts extremely difficult to accomplish in a timely fashion. In the meantime, high interest rates continue to threaten the success Farmers, realtors, home builders, of our economic recovery program. the automobile industry and small businesses throughout our economy simply can not survive under conditions of prolonged high intereat rates. I recognize that the Federal Reserve Board has unique responsibilities and must keep the nation's money supply in close check. However, I fear that current monetary policies have become so severe that they are creating as many economic problems as they are intended to solve. The Administration is pledged to reduce budget deficits and I am convinced that Congress will ultimately take the necessary steps to If that requires additional bring the federal budget into balance. But cuts of up to $100 billion, I am prepared to support such cuts. economic recovery is also dependent on the willingness of the rederal Reserve Board to recognize political realities and providu some measure Such action by the Board would actually help of interest rate relief. alleviate some of our budget deficit problems by decreasing the amount of money needed to pay the interest on the national debt. It is clear that continued high interest rates will cause irreparable While I understand that the damage to many sectors of our economy. Federal Reserve Board is not a political institution, I nevertheless urge you to consider these factors when setting the monetary policy for our country.   EHH/ms https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincer  ELWOOD H. (BUD) HILLIS MEMBER OF CONGRESS  •  —41  ••'of GOV;•• .0 • ... 41.V\ ;;;4* tr*. •co 9 ‘ +\` i; :0  •,  BOARD  FEDERAL RESERVE SYSTEM  g • , L )•  • .4 . .c1"  OF GOVERNORS OF THE  WASHINGTON, D. E. 20551  c.t". 44/ .  .RALRE..  October 13, 1981  • •..• •  PAUL A. VOLCKER CHAIRMAN  The Honorable Gus Yatron House of Representatives Washington, D.C. 20515 Dear Mr. Yatron: Thank you for your letter of September 25 regarding Federal Reserve policy and the impact of high interest rates. I want to assure you that I and the other members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest rates is,a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected 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. The end result of the process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  A eia,1111.a.  pa.  The Honorable Gus Yatron Page Two  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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughout the economy. There have been a few favorable signs this year on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh direct effects of high interest rates on spending decisions. There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. I am convinced that we are making progress. It is incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic vitality and lower interest rates. That is what all of us want in the long run--even if there may be differences in opinion on how we can get there. I do not underestimate the difficulties of the present situation. The threshold of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflation around--or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. These are all matters, in the end, of judgment. I appreciate very much you taking the time to communicate your assessment of the situation. Sincerely,  (nJP:JLK:RS:)CO:pjt (#V-276) bcc: Mrs. Mallardi (2)  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  GUS YATRON 6TH DISTRICT, PENNSYLVANIA  •  •  MENIBER: COM MITTEE ON FOREIGN AFFAIRS  REPLY, IF ANY TO:  Congre55 of tbe tiniteb fitate5  645 PENN STREET READING, PENNSyLVANIA  19601  Pon5e of ilepresSentatibtO  PHONE:(215) 375-4573  SUBCOM M ITTEE ON INTERNATIONAL OPERATIONS SUBCOMMITTEE ON INTER-AMERICAN AFFAIRS COMMITTEE ON POST OFFICE  AMERICAN BANK BUILDING POTTSVILLE, PENNSYLVANIA  Wa4ington,ae. 20515  17901  AND CIVIL SERVICE SuBcomm ITTEE ON CIVIL SERVICE  PHONE:(717)622-4212  I1  SUBCOMMITTEE ON CENSUS AND POPULATION  2267 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 PHONE;(202)225-5546  September 25, 1981 CD  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551  rrt tO 77-  uD CD  •^!t fl r-  un rn CO "" _  Dear Mr. Chairman: I am writing you to express my deep concerns over the continued tight money policy of the Federal Reserve System. While I understand the need to restrict the money supply to bring inflation under control, I believe the current policy is excessive and is jeopardizing the economic renaissance Congress set into motion earlier this year, Moreover, thousands of small businesses and farmers are faced with bankruptcy, the unemployment picture is being complicated, and homeownership is becoming increasingly less of a reality to the average American family, I am appealing to you to review the policies of the Federal Reserve and to take actions which will ease interest rates. With best regards, Sincer  ( 04-4L ...,///46 GUS YATR Member GY/kdb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  aktm-N._ Congress  77.;   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  October 14, 1981  The Honorable Ernest F. Hollings United States Senate Washington, D. C. 20510 Dear Senator Hollings: Thank you for your recent letter endorsing the invitation of Mr. Carpenter for me to speak at the Annual Economic Outlook Conference in Greenville. As much as I would have liked to attend the Conference, I have been forced by my calendar to send regrets to Mr. Carpenter. I can never seem to find time to do all of the things that I should be doing. A member of my staff, however, has been in contact with Mr. Carpenter and provided him with the names of several possible representatives from the Federal Reserve who might be available for the December conference. With best regards. Sincerely,  cc:  Mrs. Mallardi #194, 197  JRC:tjf  IDENTIAL LETTERS TO: The Honorable Strom Thurmond United States Senate  The Honorable Carroll A. Campbell, Jr. Member of Congress   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  October 14, 1981  The Honorable Ernest F. Hollings United States Senate Washington, D. C. 20510 Dear Senator Hollings: Thank you for your recent letter endorsing the invitation of Mr. Carpenter for me to speak at the Annual Economic Outlook Conference in Greenville. As much as I would have liked to attend the Conference, I have been forced by my calendar to send regrets to Mr. Carpenter. I can never seem to find time to do all of the things that I should be doing. A member of my staff, however, has been in contact with Mr. Carpenter and provided him with the names of several possible representatives from the Federal Reserve wno might be available for the December conference. With best regards. Sincerely,  cc:  Mrs. Mallardi #194, 197  JRC:tjf  (ke(  IDENTIAL LETTERS TO: The Honorable Strom Thurmond United States Senate  The Honorable Carroll A. Campbell, Jr. Member of Conaress  •  Va. 'I.  ) ERNEST F. HOLLINGS SOUTH CAROLINA  commmmrs: BUDGET: RANKING DEMOCRAT  OFFICES: 1835 ASSEMBLY STREET COLUMBIA, SOUTH CAROLINA 29201 803-765-5731  Zfafez Zenafe 115 SENATE OFFICE BUILDING  103 FEDERAL BUILDING SPARTANBURG, SOUTH CAROLINA  WASHINGTON, D.C. 20510 29301  APPROPRIATIONS STATE, JUSTICE, COMMERCE. AND THE JUDICIARY: RAN:, :ING DEMOCRAT DEFENSE LABOR, HEALTH AND HUMAN SERVICES, EDUCATION ENERGY AND WATER DEVELOPMENT LEGISLATIVE  202-224-6121  803-585-3702 242 FEDERAL BUILDING GREENVILLE, SOUTH CAROLINA 29603 803-233-5366 112 CUSTOM HOUSE 200 EAST BAY STREET CHARLESTON, SOUTH CAROLINA  October 5, 1981  COM MERCE, SCIENCE, AND TRANSPORTATION COMMUNICATIONS: RANKING DEMOCRAT SURFACE TRANSPORTATION SCIENCE, TECHNOLOGY, AND SPACE DEMOCRATIC POLICY COMMITTEE  29401  OFFICE OF TECHNOLOGY ASSESSMENT  803-724-4525  NATIONAL OCEAN POLICY STUDY  233 FEDERAL BUILDING FLORENCE, SOUTH CAROLINA 29503 803-862-8135  Mr. Paul Volcker, President Federal Reserve Board Constitution Avenue between 20th and 21st Streets Washington, DC 20551 Dear Mr. Volcker: I write today to follow up on an invitation sent to you by Mr. W. L. Carpenter of Greenville, South Carolina, who is Chairman of the 7th Annual Economic Outlook Conference. As you are aware, Mr. Carpenter invited you to be the featured speaker at the Conference. This is a prestigious gathering and the program is always outstanding. If your schedule is such that you could arrange to be there, this tradition of excellence would continue and your appearance would be the real highlight of the 1981 Conference. I know you would enjoy yourself and I hope you will be able to accept Mr. Carpenter's invitation. With warm regards, I  EFH/kk   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -4  9fi :11  _i0  9-.1.30 1861 I ;:!!  , 0   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 PAUL A. VOLCKER  October 14, 1981  CHAIRMAN  .  The Honorable Strom Thurmond United States Senate Washington, D. C. 20510  ..  Dear Senator Thurmond: Thank you for your recent letter endorsing the invitation of Mr. Carpenter for me to speak at the Annual Economic Outlook Conference in Greenville. As much as I would have liked to attend the Conference, I have been forced by my calendar to send regrets to Mr. Carpenter. d I can never seem to find time to do all of the things that I shoul be doing. A member of my staff, however, has been in contact with Mr. Carpenter and provided him with the names of several possible representatives from the Federal Reserve who might be available for the December conference. With best regards.  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  Clik  MAN STROM THURMOND. S.C., . BIDEN, JR., DEL. JOSEP EDWARD M. KENNEDY. MASS. ROBERT C. BYRD, W. VA. HOWARD M. METZENBAUM. OHIO DENNIS DECONCINI. ARIZ. PATRICK J. LEAHY. VT. MAX BAUCUS. MONT. HOWELL HEFLIN. ALA.  CHARLES McC. MATHIAS, JR., MD. PAUL LAXALT. NEV. ORRIN G. HATCH. UTAH ROBERT DOLE. KANS. ALAN K. SIMPSON. WYO. JOHN EAST. N.C. CHARLES E. GRASSLEY. IOWA JEREMIAH DENTON. ALA. ARLEN SPECTER. PA.  'Unitas Zfatez Zenctle COMMITTEE ON THE JUDICIARY  VINTON DEVANE LIDE. CHIEF COUNSEL QUENTIN CROMMELIN, JR., STAFF DIRECTOR  WASHINGTON. D.C. 20510  October 6, 1981  Hon. Paul A. Volcker, Chairman Federal Reserve System 20th St. & Constitution Ave., N.W. Washington, D. C. 20551 Dear Mr. Chairman: It has recently come to my attention that you have been invited to address the 7th Annual Economic Outlook Conference in Greenville, South Carolina, during December. I am pleased to endorse this invitation and hope that you will be able to give it every consideration. I believe that you would find this group to be most enthusiastic and that you would be-well received. The conference is jointly sponsored by Clemson University, Furman University, and The Greater Greenville Chamber of Commerce, and it is my understanding that they are flexible as to the exact date in December which would be most convenient to your schedule. I hope you are doing nicely, and with kindest regards and best wishes, iii4piLy sj, pitoolene‘...4.04...101.41160. )Ytfi:Wlebtpo Strom Thurmond ST/o  CIS  -•‘  ..•••••  •  vs.)  ra  •  VI N WEBER  DisTRIcT.  M INNESOTA  •  WASHINGTON OFFICE: 314 CANNON BUILDING WASHINGTON. D.C. 20515  COMMITTEE ON SCIENCE AND TECHNOLOGY  (202) 225-2331  Congre55 of the Zilniteb  suscommITTEES:  tate5  Vole'tit 31eprefsentatibeg  ENERGY DEVELOPMEr4T AND APPLICATIONS SCIENCE, RESEARCH, AND TECHNOLOGY  Zilazbingtott,;D.C. 20515  LEONARD SWINEHART ADMINISTRATIVE ASSISTANT DISTRICT OFFICES: R00M 135 720 ST. GERMAIN ST. CLOUD, M INNESOTA  56301  (612) 252-7580 COMMITTEE ON SMALL BUSINESS  208 COLLEGE DRIVE MARSHALL, M INNESOTA  SUBCOMMITTEE:  (507) 532-9611  TAX. ACCESS TO EQUITY CAPITAL, AND BUSINESS OPPORTUNITIES ASSISTANT REGIONAL WHIP REPUBLICAN POLICY COMMITTEE   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  October 19, 1981  Mr. Paul Volker Chairman of the Board of Governors Federal Reserve Board 20th & Constitution Ave. N.W. Washington, D.C. 20551 Dear Mr. Chairman: I would like to ask you to appear before the Minnesota Agri -Growth Council's annual meeting on November 17, I realize this is short notice but I feel that this would be an extremely important group for you to address. This is a statewide group representing every segment of agriculture and agribusiness. I am confident that your appearance would draw at least 1500 people and make the event an unqualified success. I believe the Council is an important political faction in Minnesota. Your appearance would benefit those of us who are running in 1982 and will count on this group for support. I would greatly appreciate a favorable response. If you wish to speak with me personally on this matter, please call. Thank you for your consideration.  reilY/6 ! / / /0 -ber\J M mber of Congress  VW/ls/11  56258  HOUSE OF REPRESENTATIVES HENRY S. REUSS, WIS., CHAIRMAN RICHARD BOLLING, MO. LEE H. HAMILTON, IND. GILLIS W. LONG, LA. PARREN J. MITCHELL, MD. FREDERICK W. RICHMOND, N.Y. CLARENCE J. BROWN, OHIO MARGARET M. HECKLER, MASS. JOHN H. ROUSSELOT, CALIF. CHALMERS P. WYLIE, OHIO  •  •  Congre55 of the Einiteb  (CREATED PURSUANT TO SEC. 5(a) OF PUBLIC LAW 304, 79TH CONGRESS)  JAMES K. GALBRAITH, EXECUTIVE DIRECTOR   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tate5  JOINT ECONOM IC COM M ITTEE WASHINGTON. D.C. 20510  SENATE ROGER W. JEPSEN, IOWA. VICE CHAIRMAN WILLIAM V. ROTH, JR., DEL. JAMES ABDNOR, S. DAK. STEVEN D. SYMMS. IDAHO PAULA HAWKINS, FLA. MACK MATTINGLY, GA. LLOYD BENTSEN, TEX. WILLIAM PROXMIRE, WIS. EDWARD M. KENNEDY, MASS. PAUL S. SARBANES, MD.  October 20, 1981  The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.O. Washington, D.C. 20551 Dear Chairman Volcker: I have been asked by The Ohio University to invite you to give a Edwin and Ruth Kennedy Lecture during the winter term of this academic year (January-March 1982). Ohio University is the oldest University west of the Appalachian Mountains (with 14,000 students) and the Kennedy Lecture Series is an important and distinguished part of the University's cultural life. The invitation would be to give a lecture on any convenient weekday evening during January, February or early March. Ohio University will, of course, cover all your expenses and will offer you an honorarium if such payment is possible. As an economist with the Joint Economic Committee who has been enormously impressed not only by your testimony before us, but by your actions as Chairman, I personally hope you might be able to accept the offer to present this lecture. For more information or a response, feel free to call me at 224-2485. Sincerely,  VLA/C644/  K. V-ukti,h_  Richard K. Vedder Economist* *Before joining the JEC I served as Chairman, Department of Economics, Ohio University.  WALTER E. FAUNTROY, D.C., CHAIRMAN PARREN J. MITCHELL, MD. STEPHEN L. NEAL. N.C. DOUG BARNARD, JR., GA. HENRY S. REUSS, WIS. JAMES J. BLANCHARD. MICH. CARROLL HUBBARD, JR., KY. BILL PATMAN, TEX.  •  •  GEORGE HANSEN, IDAHO RON PAUL, TEX. BILL McCOLLUM. FLA. BILL LOWERY, CALIF. ED WEBER, OHIO JAMES K. COYNE, PA.  U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY  H2-179, ANNEX NO. 2 WASHINGTON, D.C. 20515 (202) 225-7315  OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS N INETY-SEVENTH CONGRESS  WASHINGTON, D.C. 20515  November 2, 1981  PERSONAL AND CONFIDENTIAL The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Paul: I have noted that Mobil Corporation is offering to buy Marathon Oil Company, and has arranged $6.3 billion in bank loans and lines of credit for this purpose. At a time when interest rates are still high despite recent declines, and small businesses, farmers and homebuilders are suffering because of tight credit, it is unconscionable that Mobil can absorb so much of the limited credit supplies for such an unproductive acquisition. As a Member and Chairman of the Subcommittee on Domestic Monetary Policy of the House Banking Committee, I know that you share my concern about the credit-market impact of these merger activities. I believe that it is now time for the Federal Reserve Board to do more than express concern. I ask you as Chairman of the Board to call upon the chief executive officers of the leading banks in this country to cease making loans and extending lines of credit for such unproductive activities as the Mobil/Marathon merger. I believe that such a request and suggestion from you would have a salutory effect on credit markets in these troubled times.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  With kindest personal regards, Sincerely, ‘1 6;. /1-1/2 Walter E. Fauntroy Chairman  1  C/F'ROLL A. CAMPBELL, JR. 4TH DISTRICT, SOUTH CAROLINA  •  ovipe  OM ITTEE ON APPROPRIATIONS ldl  SUEWOMMITTEES:  COMMERCE, JUSTICE, AND STATE, THE JUDICIARY AND RELATED AGENCIES  WASHINGTON OFFICE: Room 408 CANNON HOUSE OFFICE BUILDING  TREASURY, POSTAL SERVICE, GENERAL GOVERNMENT  202-225-6030  Congre55 of the Elniteb tato  DISTRICT OFFICES: P.O. Box 10183, FEDERAL STATION GREENVILLE, SOUTH CAROLINA ,  29603  30ousk of Aeprefientatibeti  803-232-1141  P.O. Box 1330 .""--SPARTANBURG, SOUTH CAROLINA 803-582-6422   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  LEGISLATIVE BRANCH  obington,)1D.C. 20515 29304  September 30, 1981  1 CD  Mr. Paul Volcker, Chairman Federal Reserve Board Washington, D.C. 205S1 Dear Mr. Chairman:  1  cn  rn OD  Attached is a copy of a letter to you from Mr. Bill Carpenter of Gjeenville, South Carolina, inviting you to be the featured guertm—Trnker at the 7th Annual Economic Outlook Conference in Greenville in December of this year. I would like to take this opportunity to add my personal endorsement to this invitation and ask that you give every consideration to accepting this engagement, schedule permitting. This year's conference promises to be outstanding, and your presence and contribution would greatly enhance its success. Thank you for your attention in this matter. Sincerely,  ell Carroll A. Member of Congress CAC:sjb   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •••••••••  •  • ESTABLISHED 1902 J. E. SIRRINE COMPANY ENGINEERS  ARCHITECTS  POST OFFICE BOX 5456 GREENVILLE  PLANNERS  SOUTH CAROLINA 29606 TELEPHONE (803) 296-6000  September 24, 1981  Mr. Paul Volcker, President Federal Reserve Board Federal Reserve Building Constitution Avenue Between 20th and 21st Street Washington, D. C. 20551 Dear Mr. Volcker: In December, we will have the 7th Annual Economic Outlook Conference in Greenville. It is jointly sponsored by Clemson University, Furman University, and The Greater Greenville Chamber of Commerce. I am chairman for the 1981 event. We would consider it an honor if you could be with us as our featured guest speaker. Larry Kudlow will be with us from the Office of Management and Budget. We would add a regional (Dr. Donald Ratajcsak, Georgia State University) and state/local (Jim Lindley, CEO, South Carolina National Bank) economic emphasis to build on your goverment viewpoint. Our format is flexible but has generally had a "headliner" presentation of 20-30 minutes, followed by shorter economic analysis on the regional and state level. Then, a panel of the speakers to answer questions from the audience which can be 2 hours, including a be/ very stimulating. The entire program is over in 3-31 ginning lunch. Some of our past speakers from government have been Bert Lance, Malcolm Toon, and John Connally; industry - Bob Fluor and Cliff Garvin; financial/economic - Alan Greenspan, Louis Rukeyser, and many others. We like to have our conference in mid-December and could schedule it for any day between the 14th and the 18th. If the week before or after could be easier for you, I'm sure we would try to meet your schedule, and I am sure we can help out to ease your travel arrangements.  •  4. - •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1. I  SIIIINE COUPANT  Mr. Paul Volcker, President Federal Reserve Board  -2-  September 24, 1981  The attendees will be mostly from South Carolina, North Carolina, and Georgia. We would expect 500-750 people, as this event has become the highlight of the year. I am attaching a previous announcement of the conference. I hope you will be able to come. a stimulating session.  You can expect a warm reception and Truly yours, J. E. SIRRINE COMPANY  W. L. Carpenter Chairman /sb  bcc:  Mr. Ms. Mr. ilr.  Carroll Gray Betti Taylor Hayne Hipp Robert_S. Small  -  CamEbe)1 QCongressman -Senator Strom Thurmond—  Ago  • *of GOvi • • '0 4'12. o.  •  • BOARD OF GOVERNORS OF THE  • co .  `P ..•  •0 • -n • --A "S•  FEDERAL RESERVE SYSTEM  i— • (.1 • c•-) 44,.  WASHINGTON, D. C. 20551  October 9, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Mickey Edwards House of Representatives Washington, D. C. 20515 Dear Mr. Edwards: I appreciate your recent letter in which you express concern about high interest rates and monetary policy. I am sure you are aware that my colleagues and I share your concern about the effects of high rates on businesses that are heavily dependent upon credit. The question, of course, is how to get rates down, not just for a month or two, but so they stay down. The crux of the problem lies in the inflationary process that has been so strong, complicated as well at present by the reality and outlook for deficits. In a real sense, extraordinarily high interest rates have been the symptom of the disease, and the only way lower rates of interest can be sustained is by gaining control over inflation. As we see it, the Federal Reserve's current policy of restraining the growth in money and credit is essential in the fight against inflation. An attempt to force interest rates lower by accelerating growth of money and credit would ultimately produce higher rates of inflation and interest rates, and any progress made would be lost. The next attack on inflation would then only be more difficult and painful. A considerable part of the stress in financial markets is associated with concern over the federal budgetary situation. Additional efforts on the part of the Congress and the Administration to place the budget convincingly on track to balance or surplus, I believe, would be helpful in relieving pressures on markets. I encourage the Congress to do all it can in bringing expenditure growth in line with receipts. I would note that sensitive short-term market rates are two to three percent or more below their peaks this summer. At the same time the bond market--which is greatly affected by expectations--has performed badly, and the prime rate is indeed sluggish, although somewhat lower, We need to build confidence that our policies can and will work, and I see signs of progress, even though I well realize these are times that try our patience.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • The Honorable nickey Edwards Page Two  Thank you for taking the tire to share your concerns with me, and I am enclosing a recent statement before the Budget Committee that goes into these issues in a little more detail. Sincerely,  Enclosure  (9/16/81 stmt. before Senate Budget Cmte.)  CEH:JLK:PAV:vcd (#V-259) bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Ms. Headly Ms. Wing Mrs. Mallardi (2)/7  M ICKEY EDWARDS  Action issigned Mr. Kichline  sr'17TH DiSTRICT. OKLAHOMA PP°  APPROPRIATIONS  1  •  111  COMMITTITS:  SUBCOMMITTEE ASSIGNMENTS, 208 CANNON HOUSE OFFICEIFUILDING WASHINGTON. D.C. 0515  Com:oaks of die Elniteb  (202) 225-2132  MILITARY CONSTRUCTION ,  FOREIGN OPERATIONS  PotWe of AeprOentatibesS Elagbington,Ile. 20515  DISTRICT OFFICEI 717 OLD FICIST OFFICE BUILDING OKLAHOMA CITY. OKLA. 73102 (405) 231-4541  •  September 16, 1981  The Honorable Pau/ A. Volcker Chairman, Board of Governors Federal Reserve System 20th Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: I have seen first hand, in Oklahoma, the terrible effects of the Federal Reserve Board's policies on credit and monetary growth. Throughout Oklahoma, farmers and small-town merchants are in seriou:_,, and increasing, trouble. Bank officials in small towns in Oklahoma are hoping bank examiners will be lenient in their examination of outstanding bank loans because bankers know that calling in loans now could ruin farmers and small businesses. Since the Federal Reserve initiated its tight money policy, interest rates have climbed to a level not seen in this country for more than a century. The Program for Economic Recovery that passed Congress this past summer laid the foundation for new growth in the American economy. Every current economic indicator verifies that this growth is occurring. But high interest rates can bring this growth to a halt. The Congressional Budget Office, in its report to Congress last week, predicted a strong growth period in the near future and attributed that in part to the work the Congress has done this past summer. The report also warned that the growth could be stopped if interest rates do not come down. It is clear that the Program for Economic Recovery will work if given a chance. The only thing that stands in the way of a return to a health economy is the Federal Reserve's restrictive policy. While I share your concern that a sudden drop in interest rates to a level of seven or eight percent could cause an inflationary demand for money, a more gradual reduction, starting at a rate of 13 or 14 percent, would nonetheless be adequate to stimulate new investment, plant expansion, homebuilding, and other important signs of a healthy economy.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • . The Honorable Paul A. Volcker September 16, 1981 Page Two  I urge you to review the Federal Reserve's policy and take immediate action to lower the interest rate and give the Economic Recovery Program the chance it needs to succeed. or  cerely, C4  Mickey E 1Member o  i  ME/dms   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ards Congress   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • October 9, 1981  The Honorable J. William Stanton Ranking Minority Member Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Bill: Thank you for your letter asking the Federal Reserve System to cooperate with the House Banking Committee's planned field hearings in November. I would be more than happy to assist the Committee by providing economic profiles of the areas in which the hearings are to be held. I have instructed the Reserve Banks in the areas the Committee plans to visit to prepare research papers on the local economies. Greg Wilson and Dr. Godfrey Briefs of your staff can expect to hear directly from our Reserve Bank personnel. If they have any questions, please contact Don Winn at 452-3457. Sincerely,  WRM:RS:vcd (#V-288) bcc:  Dick Syron Mrs. Mallardi (2  Action assigned Bill Maloni FERNAND J. ST GERMAIN, R.I., CHAIRMAN HENRY S.NREUSS, WIS. B. GONZALEZ, TEX. JOSEPH G. MINISH, N.J. FRANK ANNUNZIO, ILL. PARREN J. MITCHELL, MD. WALTER E. FAUNTROY. D.C. STEPHEN L. NEAL, N.C. JERRY M. PATTERSON, CALIF. JAMES J. BLANCHARD, MICH. CARROLL HUBBARD. JR., KY. JOHN J. LAFALCE, N.Y. DAVID W. EVANS, IND. NORMAN E. D'AMOURS, N.H. STANLEY N. LUNDINE, N.Y. MARY ROSE OAKAR, OHIO 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. HOYER, MD.  •  •  J. WILLIAM STANTON, OHIO CHALMERS P. WYLIE, OHIO 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 BILL 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. 225-4247  U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS 2129 RAYBURN HOUSE OFFICE BUILDING  WASHINGTON, D.C. 20515  September 28, 1981  Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System Washington, D.C. 20551 Dear Mr. Chairman: During October and November, the House Banking Committee will hold field hearings on the state of the economy. Chairman St Germain announced that these hearings "would attempt to draw a complete picture of economic conditions as they impact on workers, small businesses, farmers, consumers and other groups." I am writing to ask if the Federal Reserve would provide the Members of our Committee with background information on the local economy for each of the six cities and regions which we will visit. The respective Federal Reserve banks are in a perfect position to compile this information, which would be of great benefit to all Members of our Committee. So that Members will have an opportunity to review these background reports in a timely fashion, I would ask that this economic background material on the St. Paul -Minneapolis area be delivered sometime during the week of October 12 in prepara tion for our hearing on- th6 19th. If youf-staff has any questions about this material, please have them contact Mr. Greg Wilson or Dr. Godrey Briefs of my staff at 225-7502. Thank you for your assistance. Since7C  ours,  William Stanton JWS/gwm   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  a  •  FERNAND J. ST GERMAIN. R.I.. CHAIRMAN HENRY S. REUSS. WIS. HENRY B. G ONZALEE. TEX. JOSEpH G. MINISH. N.J. FRANK ANNuNZIO. ILL. /k.NRREN J. MITCHELL. MD. WALTER E_ FAUNTROY. D.C. STEPHEN L. NEAL. N.C. JERRY M. PATTERSON. cAur. JAMES J. BLANCHARD. MICH. CARROLL HUBBARD. JR.. KY. JOHN .1. LAFALCE. N.Y. DAVID W. EVANS. IND. NORmAN E. °AMOURS. N.H. STANLEY N. LUNDINE. MARY ROSE OAKAR. OHIO JIM MATTOX. TEX. BRUCE F„ VENTO. MINN. DOUG BARNARD. JR.. GA.  U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS N NET Y-SEV ENT H C-ONGRESS 2129 RAYBURN HOUSE OFFICE BUILDING  WASHINGTON, D.C. 20515  September 17, 1981  ROBERT GARCIA. N.Y. MIKE LOWRY. WASH. CHARLJES E. ScHUMER. N.Y. BAR N EY FR A N M A_S.S. BILL PATMAN. WILLIAM J. COYNE. PA. STENY H. HOTER. MD.  ):00 A.M. londay, )ct. 19 ;t. Paul/ linneapolis  •  •  J. WILLIAM STANTON. OHIO CHALmERS P. WYLIE. OHIO STEWART Et. McKINNEY. CONNGEORGE HANSEN. IDAHO HENRY J. HYDE. ILL. Jtm LEACH. IOWA THOMAS B. EvANs. JR.. DEL. RON PAUL. TEX. ED BETHUNE. ARK. NORMAN D. SHuMWAY. cAur. STAN PARRIS. VA. ED WEBER.OHIO MEL McCOLLUM. FLA. GREGORY W. C.ARmAN. N.Y. cEoRGE C. WORTLEY. N.Y. MARGE RoUKEMA. BILL LOWERY. CAUF. JAMES K. COYNE. PA.. DoUGLAS K.. BEREU TER. NEBR. ZZ_S-  nr ./  MEMO TO:  All Members of the Committee on Banking, Finance and Urban Affairs  FROM:  Fernand J. St Germain, Chairman  SUBJECT:  Field Hearings on the Economy  Field hearings on the economy will open at 9 A.M., Monday, October 19, in St. Paul-Minneapolis followed by hearings in: Seattle, Friday, November 6 Tucson, Saturday, November 7 Chicago, Monday, November 9 Atlanta, Friday, November 13 Providence, Monday, November 23 The specific sites for each hearing, transportation plans, and other  details will be released just as soon as preliminary advance staff work is completed. '   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  rER!.:V4nJ.•61- pERMAIN. R.I,CHAIRmAN Nr .;Ry s7nFuSS. wIS. I • EN R Y B. Goll"ZAL E=c, TEX. JOSCPH G. MINISI-4. NJ. FRANK ANNuNZio. ILL. PARREN J. PAITCHELL, mD. WALTER E_ FAuNTRoY. D.C. ISTE.PHEN L. NEAL, N.C. JERRY M. PATTERsoN. CALIF. JAmES J. BL.ANCHARD. MICH. CARROLL HuoDARD. JR, KY. JoHN J. LAFALCE. N.Y. DAvID W. EvANS. IND. NOR mAN E. trAmOURS. N.H. STANLEY N. LUNOINE. N.Y. MARY ROSE oAKAR. OHIO 11 /4 MATTOX, TEX. BRUCE F. VENTO. MINN. DOuG BARNARD. JR.. GA. ROBERT GARCIA. N.Y. mIKE LOwRY. WASH. :HARLLs E. scHUMER. N.Y. aARNEY FRANK. MASS. 3ILL PATMAN. TEX. NILLIAM J. EOYNE, PA. i;TL -NY H. MOYER. MD.  •  •  wILLIAm STANTON. OHIO cHALmERS R. WYLIE. 0)-fic, STEwART B. PAcKINNEY. CONN. GEORGE 1-4ANSEN. NENRY J. WIDE. /0AHO ILL. Jim LEAcH. OWA THomAs Et. EANS.JR, DE-L. RoN PAut„ TEL ED I:IL-mut-1E. RK. NoRmAN D. SI1MWAy. cAuF. STAN PARRIS.‘. ED WEBER. OHI  U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS 2129 RAYBURN HOUSE OFFICE BUILDING  MccOLLUM/A . GREGORY W. CA4AN. N.y. GEORGE C. W0Fr:y. mikRGE ROUKEA44.2. BILL LOWERY. CAI. jAmEs K. COYNE..  WASHINGTON. D.C. 20515  DOUGLAS K- BERL:R. NE:54.. 2.2_5-42.Gr  FOR IMMEDIATE RELEASE:  WASHINGTON,D.C., Sept. 10 -- Chairman Fernand J. St Germain announced today that the Banking, Finance and Urban Affairs Committee will conduct coast to coast grass roots hearings on the economy during October, November and December.  Mr. St Germain said the Committee would attempt to draw a complete picture of economic conditions as they impact on workers, smoll businesses, farmers, consumers and other groups.  "We have a great mass of rhetoric and aggregate economic data compiled by Federal agencies and various trade associations, but a shortage of information from the grass roots -- the people on the receiving end of. economic policies who must daily face the crush of high interest rates, shortages of credit, deteriorating public facilities, and the continuing ravages of inflation," Mr. St Germain said.  Mr. St Germain said it was his intention to open the hearings to as many people as possible so that all aspects of the economic problems in local areas could be aired.  "The Committee will be conducting long sessions, beginning early and running into the night and utilizing Saturdays and Sundays where necessary," the Chairman said.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  10  (more)  • -2r  The hearings will be held in Provid ence, Rhode Island; Atlanta, Georgia; Chicago, Illinois; Minneapolis, Minnesota; Tucson, Arizona; and Seattle, Washingto n. Dates for the hearings will be annnounced later. Mr. St Germain said the cities sel ected would provide the Commit tee with information on problems in the different geographical regions wit h varied economies and characteristics.  Mr. St Germain said the Committee will analyze the testimony and dat a from the hearings and issue a report on the grass roots findings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7  • .•• o• f GOvz. •..  as.  ONfiLt6442L,  • BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  •0 • ni '  H. • •  WASHINGTON, 0. C. 20551  .cfs i?AL RE.S.• •• •  October 9, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Thomas N. Kindness House of Representatives Washington, D.C. 20515 Dear Mr. Kindness: Thank you for your letter of September 15 regarding Federal Reserve policy and the impact of high interest rates. I want to assure you that I and the other members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest rates is a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears-reflected 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. The end result of the process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • The Honorable Thomas N. Kindness Page Two  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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughout the economy. There have been a few favorable signs this year on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh direct effects of high interest rates on spending decisions. There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. I am convinced that we are making progress. It is incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic vitality and lower interest rates. That is what all of us want in the long run--even if there may be differences in opinion on how we can get there. I do not underesitmate the difficulties of the present situation. The threshold of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflation around or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. These are all matters, in the end, of judgment. I appreciate very much you taking the time to communicate your assessment of the situation.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely, S/Paul A. WM;  (MJP:JLK:RS:)CO:pjt (#V-263) bcc: Mrs. Mallardi (2)  /THOMAS N. KINDNESS  •  •  2434 RArsuRN BuILDING WASHINGTON, D.C. 20515  8TH LieSTRICT, OHIO   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (202) 225-6205  CONGRESS OF THE UNITED STATES  646 HIGH STREET 45011  HAMILTON, OHIO  (513) 895-5656  HOUSE OF REPRESENTATIVES  ToLL FREE: 1-800-582-1001  234 EAST MAIN STREET  September 15, 1981  GREENVILLE, OHIO  45331  (513) 545411317  ? 3 Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th Street and Constitution, NW Washington, D.C. 20551 Dear Chairman Volcker: This one more voice must be raised, in concern if not in anger, about the need for the interests of the American people to be served by the Federal Reserve, in balance with the interests of financial institutions. I suggest that the time has arrived to gradually ease restriction of the monetary supply sufficiently to accommodate the real economic growth which can occur in the United States under conditions which are now established and developing. On a comparative basis, U.S.-based and other international corporations already find it attractive or necessary to provide manufacturing jobs in other nations, rather than in the United States, for a variety of reasons. Add to those other reasons a great enough difference in the cost of borrowing funds to produce goods in another country, pay for shipping the goods to the United States, and still improve profits, then Sir, we are in trouble. Under such circumstances, not nearly enough growth in real U.S. wealth will occur, and the Federal budget cannot be balanced. Interest rates must come down before too many business decisions are made upon the basis of the new tax law changes and the expectation of our relatively tight monetary policy continuing indefinitely.  Mk  •  •  , i   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Paul A. Volcker September 15, 1981 Page.2  — I am neither an economist, a financial expert, nor a magician; but I am a very concerned observer of conditions occurring in many little parts of our Nation's life, and a great believer in the magic of a free enterprise economy, filled with people who are II ready to go" and to rebuild America, together. Thank you for your patient consideration. ncerely  ours,  THOMAS N. KINDN SS Member of Congress TNK/vf  1  •  OVQ.c.o."-tQ ( V- Qlp(4, BOARD OF GOVERNORS OF THE  .•  FEDERAL RESERVE SYSTEM  • (,) • (-) .• .  WASHINGTON, D. C. 20551  •C • • .4 •  11'  RA L RES • • •..• • •  October 9, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Ron Marlenee House of Representatives 20515 Washington, D. C. Dear Mr. Marlenee: Thank you for the recent letter from you and your colleagues regarding Federal Reserve policy and the impact of I want to assure you that I and the other high interest rates. members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. I must take issue with your assertion that my "inaction" is unresponsive to the national effort to improve our First of all, let me point out that I do not like economy. It is important to high interest rates any more than you do. note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic The current level of interest rates is a result of prospects. stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank However, longer-term interest rates have reserves has lessened. remained high reflecting in part the continued skepticism about These developfuture price developments I referred to earlier. ments point out the limits of the Federal Reserve's influence If the Federal Reserve were to attempt on market interest rates. to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected in the very depressed bond markets--that the government is in fact not committed to seeing the fight against inflation through to a The added monetary stimulus would intensify price successful end. pressures in the economy, worsening the inflation problem that is The end result of the at the root of today's high interest rates. process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • bk The Honorable Ron Marlenee Page Two  Some of the damage of severe financial stress can be averted, however, if less of the burden of restraint is The credit-sensitive sectors of placed on monetary policy. the economy would benefit greatly if, in particular, there were a less substantial federal government demand on the debt Sustained, large budget deficits, which appear unmarkets. avoidable 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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughThere have been a few favorable signs this year out the economy. on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh decisions. direct effects of high interest rates on spending There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. It is I am convinced that we are making progress. incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic That is what all of us want vitality and lower interest rates. opinion in the long run--even if there may be differences in on how we can get there. I do not underestimate the difficulities of the presThe threshold of patience and pain is and will ent situation. I hope and trust we will also not underestimate be tested. the dangers of failing to turn inflation around--or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. I These are all matters, in the end, of judgment. appreciate very much you and your colleagues taking the time to communicate your assessment of the situation. Sincerely, S/Paul  VoIcitec  MJP:JLK:RS:pjt (#V-266) bcc: Mr. Prell Ms. Wing Mrs. Mallardi (2) Identical letters also m sent to: Congressmen Dan Marriott, Walter Jones, Edward Derwinski, Joe Skeen, Clint Roberts, Arlant Stangeland, James Howard, and Bill Alexander.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  tion assigned Mr. Kichline  o  RON MARLENEE MONTANA  •  MONTANA OFFICES: 312 9TH STREET. SOUTH GREAT FALLS, MONTANA  WASHINGTON OFFICE:  Congre55 of die Ifiliteb  409 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.0  59405  (406) 453-3264  20515  (202) 225-1555  tate5  CM -,-;2717 Fleecy Avmsut, NORTH BILLINds- :Isionri-ANA '59101  )65i-6753',  ( -3  Pott5e of ilepre5entatibesS September 18, 1981  LFPEE  —  -SOO-332-5965  Ulasbingtort, 13.e. 20515 7D  Mr. Paul Volcker, Chairman Federal Reserve System 20th St. & Constitution Ave. N.W. Washington, D.C. 20551  CD  Dear Mr. Volcker: Today's interest rates are the highest this nation has seen in over a century. We believe it is imperative that the Federal Reserve review its monetary policies with the goal of easing these interest rates. The people of this nation are now endeavoring to control inflation through self-discipline and support of Congressional and Presidential action. Your inaction can only be interpreted by the people of this nation as unresponsive to a unified effort by the Administration, Congress, and the people to increase productivity, provide jobs and actually reduce inflation and interest rates. The President's economic stimulus package will be frustrated if these exorbitant rates are not lowered. The current rates are having a disastrous effect on our economy and the ability of small businesses, farmers and others to keep operating. In addition, reinvestment by industry is dampened and the creation of new jobs will be seriously affected. The impact of these results simply cannot be underestimated. Most of the 13 million jobs we hope to create in the next few years will come from small businesses, but only if they can expand or new ones can be created. Current high interest rates will not allow this type of activity. Mr. Chairman, these interest rates are already forcing the closure of many small businesses throughout the nation. The number of car dealerships has declined by more than 1,900 dealers, home sales have dropped significantly as have the number of housing starts. Jobs lost due to these business failures will not be regained if interest rates do not drop. The policies of the Federal Reserve System have a major effect on interest rates, and in our opinion are now one of, if not the major, roadblock to economic recovery. We urge you to review the policies of the Federal Reserve and to take actions to lower interest rates. Sincerely,  Ron Marle  e  M.C.  BIG HORN BLAINE CARBON CARTER MC CONE MUSSELSHELL PETROLEUM   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CASCADE PHILLIPS  Dan M  M.C.  CHOUTEAU CUSTER DANIELS DAWSON FALLON FERGUS GARFIELD GOLDEN VALLEY HILL JUDITH BASIN POWDER RIVER ROOSEVELT ROSEBUD SHERIDAN STILLWATER SWEET GRASS TETON PRAIRIE RICHLAND TR EA SUR E VALLEY W HEATLAND W ISAU X YELLOW STONE  ...  •  .0  f i  •  Mr. Paul Volcker September 18, 1981 Page 2  Edward Derwinski, M.C.  rlan Stangela  M.C.  es Howard, M.C.  c  r  Clint Roberts, M.C.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  _. ' litA. ' 1 Bill Alexander, M.C.  1  1  •  •  ol-a(41)  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  October 9, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Roy Dyson House of Representatives Washington, D.C. 20515 Dear Mr. Dyson: Thank you for your letter of September 21 regarding Federal Reserve policy and the impact of high interest rates. I want to assure you that I and the other members of the Federal Reserve Board share your concern about the stresses being created in the economy by high interest rates. While some sectors of the economy have seemed to be quite resistant to the prevailing financial pressures, others clearly have been hit hard by the rising cost of credit. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest rates is a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected 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. The end result of the process would inevitably be higher not lower rates.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Roy Dyson Page Two  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. It is my hope that the public's recognition of the sincerity of the government in its commitment to anti-inflationary restraint will show through in wage and price decisions throughout the economy. There have been a few favorable signs this year on the inflation front, but I'm afraid that these signs have in considerable degree reflected the impacts of the very harsh direct effects of high interest rates on spending decisions. There has been little evidence of the kind of substantial change in psychology that can greatly ease the adjustment from an inflationary to a non-inflationary economy. I am convinced that we are making progress. It is incumbent upon us in government to grasp the opportunity to pursue policies that will overcome the existing skepticism and move us more rapidly toward an environment of greater economic vitality and lower interest rates. That is what all of us want in the long run--even if there may be differences in opinion on how we can get there. I do not underestimate the difficulties of the present situation. The threshold of patience and pain is and will be tested. I hope and trust we will also not underestimate the dangers of failing to turn inflation around--or to put it more positively, the enormous opportunity we have to change the debilitating economic trends of the past decade or more. These are all matters, in the end, of judgment. I appreciate very much you taking the time to communicate your assessment of the situation. Sincerely,  S/Paul A.NSW  (MJP:JLK:RS:)CO:pjt (#V-267 bcc: Mrs. Mallardi (2)  COMPAMMES:  Action assignerl Mr. Kichline  ARMED SERVICES SUBCOM M ITTE ES: SIAPOWER AND STRATEGIC AND CRITICAL MATERIALS  4111  ROY P. DYSON FIRST DISTRICT. MARYLAND  Congre55 of the tiniteb  MILITARY INSTALLATtONS AND FACiLIT1ES  Pou,Se of AepresSentatibt5  MERCHANT MARINE AND FISHERIES  ILtazbingtott, 13.e. 20515  1020 LONG WORTH HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515  •  tato  SUBCOMMITTEES: WILDLIFE AND FISHERIES COAST GUARD  September 21, 1981  (202) 225-5311 TONY M PAPPAS ADMINISTRATIVE ASSISTANT WALDORF FIVE CENTER SUITE 105. ROUTE 5 P.O. Box 742 WALDORF. M AR YLAND 20601 (301) 645-4844 SUITE 703 ONE PLAZA EAST SALJ SBURY. MARYLAND 21601 (301) 742-9070 20 EA ST FULFORD AVENUE BEI- AIR. M AR Y LAND 21014 (301) 838-3063  Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Volcker:  CD  (-3  c-7.; ..,..., -17 F..-; r1  ---rn ill.--  t_r=1 GJ C./1  7-71 —0  rs..) .....0  rr.-•  r  ) 3•>  '7)  r—  7.77  '71  In the first three quarters of 1981 over a thousand businesses were forced to close; the reason--high interest rates. Small businesses, farmers and others dependent on short term credit are unable to continue to operate with interest rates holding at their present levels. Most of the 13 million jobs we hope to create in the next few years will come from small businesses, but only if they expand or if new ones can be created. Current high interest rates are not conducive to the formation and expansion of small businesses, thus jeopardizing the possibilities of creating new jobs. The people of this nation are fighting inflation on two fronts; through their own efforts and by urging the government to control its spending policies. Both the Administration and Congress have responded to these efforts by initiating one of the most massive spending and tax reduction programs in this nation's history. Your continued policy of monetary restraint is proving to be inconsistent with attempts by the Administration, Congress and the American people to increase productivity, provide new jobs and reduce inflation and interest rates.  Sin,c  RD: SFS:bf  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ROY DYSON Member of Congress  )  r.—...  Over the last three years Americans have seen a dramatic, almost canclysmic, change in interest rates. In a single twelve month period we sAw interest rates rise and fall almost 22 percentage points--the largest ch4Tige this country has ever witnessed. Today, interest rates remain near theiF highest levels. I believe it is imperative that the Federal Reserve review its current monetary policies with the goal of easing interest rates and stabilizing interest rate fluctuations.  The policies of the Federal Reserve have a major effect on interest rates and, in my opinion, are a major obstacle to economic recovery. I urge you to review the current monetary restraint fostered by your Board and take actions to lower interest rates.  -  •7 ;71  •  INN"' -r BOARD  ‘  OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  October 8, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable James D. Santini House of Representatives Washington, D.C. 20515 Dear Mr. Santini: Thank you for your recent letter in which you urge that the Federal Reserve attempt to ease credit conditions by relaxing its monetary targets. First of all, let me point out that I do not like high interest rates any more than you do. It is important to note that Federal Reserve policy is not directed toward maintaining any particular level of interest rates but rather on promoting a rate of growth of money and credit that is consistent with reducing inflation and improving our long-term economic prospects. The current level of interest rates is a result of stubbornly high inflationary expectations and the application of the monetary restraint needed to reduce inflation in the face of continued strong private credit demands and the need to finance the large federal deficit. As you know, there has been some reduction in shortterm interest rates in recent weeks and the pressure on bank reserves has lessened. However, longer-term interest rates have remained high reflecting in part the continued skepticism about future price developments I referred to earlier. These developments point out the limits of the Federal Reserve's influence on market interest rates. If the Federal Reserve were to attempt to artificially reduce interest rates by pouring reserves into the banking system, such a shift in the direction of policy would serve only to heighten the already deep-seated fears--reflected 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. The end result of the process would inevitably be higher not lower rates. I would note here that in a period of rapid financial innovation such as the present, growth in the monetary aggregates must be interpreted carefully. In particular, the recent apparent   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable James D. Santini Page Two  weakness in the narrow, or Ml-B, definition of money likely is a misleading indicator of the degree of monetary tautness. The evidence appears to suggest that the recent sluggishness in this measure thus far in 1981 has resulted from more intensive application of sophisticated cash management techniques by firms and even individuals that permits a reduction in holdings of transaction balances relative to levels of spending. By contrast, the M2 and M3 definitions of money, which include highly liquid alternatives to such transaction balances, are growing near or above the upper ends of their respective ranges. Interest rates will fall to permanently lower levels only when market participants are convinced that the restoration of price stability is a realistic expectation. In recent months we have seen the first tentative signs that inflation is beginning to slow. Consistent policy actions that allow such evidence to accumulate will eventually bring with them the lower interest rates we all seek. The road toward lower interest rates will be shortened by prompt evidence that steps are being taken to reduce the burden federal credit demands are placing--or expected to place--on credit markets, increasing the share of the economy's scarce savings available for private sector investment. Disciplined monetary policy in conjunction with a policy of curtailed public spending does entail some strains in the 1-iort run. But both approaches are essential in order to achieve the basis for lower interest rates and sustained economic growth over the long term. It is my sincere hope and conviction that as we make further progress against inflation, interest rates will decline further. Sincerely, S/Paul A. Volcker  TB:TDS:JLK:RS:pjt (#V-251) bcc: Messrs. Brady, Simpson, Kichline Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  °JIM SANTINI NEVADA  WASHINGTON OFFICE, 2429 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515  TELEplioNE:M2)225-5965  st) -  or pcY.  COMMITTEES: INTERIOR AND INSULAR AFFAIRS  pep  .  SUBCOMWTTEES:  I  MINES AND MINING, CHAIRMAN PUBLIC LANDS AND NATIONAL PARKS  Congre5 of tbe Einitettfieettefi  DISTRICT OFFICES: 4-620 FEDERAL BUILDING 300 LAS VEGAS BOULEVARD SOUTH LAS VEGAS, NEVADA 89101 SU!rE  ,P  jipticSe of ilepre55entatibeZ Tala5bington, Z).C. 20 "f-gfg 0?--  TELEPHONE:(702) 385-6575 SUITE 1139 FEDERAL BUILDING 300 BOOTH STREET  t  Q  ENERGY AND COM MERGE  Pt!  SUBCOMMITTEES:  e  lMERCE, TRANSPORTATION AND TOURISM OVERSIGHT AND iNVESTIGATIONS  SELECT COM M I TTEE ON AGING SUBCOMMITTEE:  September 8, 1981  RENO, NEVADA 89502 TELEPHONE,(702) 784-5657  HOUSING AND CONSUMER WM/VESTS U.S. CONGRESSIONAL TRAVEL AND TOURISM CAUCUS, CHAIRMAN  Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: Most Americans would agree that the economy with its spiraling interest and inflation rates, and high unemployment, is the number one problem facing our nation today. During my recent August visit to Nevada, I found that a majority of my constituents are pleased with Congressional initiatives to reduce federal spending and cut taxes. But with the prime interest rate at 20 percent and mortgage interest rates at 17 percent, it is not surprising that Nevadans are crying out for a sensible credit policy. I agree that we must curb the inflationary pressures which fuel high interest rates. That is why I supported the President's "Program for Economic Recovery" to cut taxes and reduce spending. I will continue to do everything I can to bring the budget under control by 1984. In July of 1980, the prime interest rate was 11.48 percent. In July of 1981, the prime interest rate was 20.39 percent! I don't believe that 20 percent interest rates will cure this nation's economic woes. Long-term economic recovery depends on stimulating production and today's interest rates are counterproductive to that goal. Therefore, I respectfully urge the Federal Reserve Board to consider relaxing money supply targets, without jeopardizing firm control over the overall growth of money and credit. Thank you for your kind consideration. With all best wishes, •  AMES D. SANTINI Member of Congress JDS:sam  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • October 7, 1981  The Honorable Walter r. Fauntroy Chairman Subcorznittec on Domestic Iflonetary Policy Committee on banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Walter: Thank you for your letter of September 23 inviting thc Board to appear before your Subcorrittce hcarinns on tile present and prospective conditions of credit markets, includinp the impact of Federal budget deficits on the nvailal,ility and price of credit. Governor Lyle L. Gramley is looking forward to appearing on October 27 at 10:00 a.m. Sincerely,  CO:vcd (V-269) bcc:  Gov. Gramley Mr. Kichline Mrs. Mallardi (2)  •  WASOI-EF. E. F1LNTROY, D.C., CHAIRMAN PARREN J. MITCHELL. MD. STEPHEN L. NEAI N C. " DOUG BARNARD. JR.. GA. HENRY F REUSS WIS. JAMES .1, 3LANCI1ARD, MICH. CARROLL HUBBARD. JR., KY. BILL PATMAN, TEX.  Don Winn will discuss with Chorman  •  GEORGE HANSEN, IDAHO RON PAUL. TEX. BILL McCOLLUM, FLA. BILL LOWERY. CALIF. ED WEBER. OHIO JAMES K. COYNE, PA.  U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON DOMESTIC MONETARY POLICY  H2-179, ANNEX NO. 2 WASHINGTON, D.C. 20515 (202) 225-7315  OF THE  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS N INETY-SEVENTH CONGRESS  WASHINGTON, D.C. 20515  September 23, 1981  -T1 c-) r  """. C  cxa  r  (1) r  -  —0  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Room B-2046 20th and Constitution Avenues, N.W. Washington, D. C. 20551  •  '71  • ••  Cr)  Dear Paul: On Tuesday, October 27, 1981, the Subcommittee on Domestic Monetary !' Policy will begin a series of hearings on the present and prospective conditions of credit markets. On that first day, it is my intention to begin the exploration of the impact of Federal deficit financing on the uses and distribution of credit. As you know, there has been considerable dispute over the impact that any deficit and its various forms of financing may have upon the supply and distribution of credit, and on inflation and the conduct of monetary policy. Accordingly, I would like to ask that you or your designee testify before the Subcommittee on your projections of the probable size of the deficit for FY-82, FY-83, and FY-84 if there are no significant further budget cuts or tax increases, and the impact that such deficits are likely to have upon the availability, distribution, and price of credit. I would, further, like you to discuss various credit conservation mechanisms which could be applied to alleviate the adverse impact of deficit financing, as well as the advisability of further amendments to the Monetary Control Act. I am, too, particularly interested in exploring with you the appropriate monetary policy for the Federal Reserve System to follow if large deficits occur in the next year. It would be useful for the Committee to be advised, therefore, of previous Accords which the Federal Reserve has had with Treasury Department on financing the Federal deficit, and their impact on the economy, particularly upon the conduct of monetary policy. You or your designee are requested to testify on Tuesday, October 27, 1981, at 10:00 a.m. before the Subcommittee on these matters. A room for the hearings is being arranged, and we will inform you of the hearing location when that is set. You are invited to bring with you such staff as you think may be appropriate to assist you in answering technical questions.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • Letter to: 9/23/81 Page 2  •  The Honorable Paul A. Volcker  Committee available to the You should bring press and others  rules require that 150 copies of your statement be made Subcommittee no later than 48 hours prior to your testimony. additional copies with you if you wish to assure that the will have your statement.  Any questions that you and your staff may have concerning this request should be directed to Howard Lee, Staff Director, of the Subcommittee, who may be reached at 202-225-7315.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely yours,  Walter E. Fauntroy Chairman  •  ioN11.  .  o•  .•  • BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  •0  • • •-k  WASHINGTON, O. C. 205S1  "1.1"`  ,RALcks.•• • •..• •  October 7, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Sam B. Hall, Jr. House of Representatives Washington, D. C. 20515 Dear Mr. Hall: Thank you for your recent letter regarding high interest rates. I agree with you that the current financial situation is an unhappy one and that high interest rates, if they were to persist, would be an impediment to the sort of economic performance we would all like to see for this nation in the years ahead. Thus I cannot argue with the thrust of your suggestion that the Federal Reserve, the Administration, and the Congress should work together to achieve lower interest rates. I am a bit concerned, however, by the suggestion--as I read your letter--that the Federal Reserve has it within its powers to "assure interest rate reductions." The scope for the System to effect changes in interest rates is limited, and you have put your finger on one of the other key factors in rate determination--namely, federal spending. A credible commitment to monetary restraint is essential to the attainment of a sustained reduction in interest rates, and so, too, is a commitment to fiscal policies that point clearly toward elimination of the large federal budgetary deficits that burden financial markets. As you know, the bond markets have experienced a very substantial setback in past months as a result of intensified concern about the prospects for the federal budget--suggesting that, as remarkable as has been the progress in spending reduction achieved to date, it must be viewed as only an initial step. With respect to the issue of corporate mergers, I am troubled by the possibility that the managers of some of our leading companies are devoting a good deal of their time, intellect, and energy to endeavors of questionable economic value, Our country desperately needs to focus its efforts on productivityenhancing activities that can raise living standards. However, as dramatic as have been several highly publicized merger deals, the credit market impacts have been, in reality, quite limited. The credit flows involved in the transactions actually consummated have been considerably smaller than suggested by the volume of   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The Honorable Sam B. Hall Page Two  Jr .  credit lines arranged. roreover, in simple terms, mergers involve only a transfer of ownership of existing assets and do not absorb any of the real saving in tho economy that might be used to finance investment in new plant and equipment. And, finally, if our experience with credit controls last year proved anything, it is that attempting to channel credit to preferred uses or away from less desirable uses is extremely difficult in our highly fluid domestic and international financial markets--and that efforts to do so can have very deleterious side effects. While the situation certainly deserves continued watching, at this point I believe the better course for public policy is to rely on our highly competitive markets to route credit in an economically efficient manner and look to anti-trust policy to avoid undesirable industrial concentration. These are difficult times for the nation, as we endeavor to put the economy back on the track toward prosperity and price stability. Constructive dialogue on policy is needed; I welcome this opportunity for an exchange of views, seeing it as part of such a dialogue. Sincerely,  W4tyyfigA4iak, 104t,iviou,6144,"  Y,5t)0(pritamkt/att a.td(eigaidettetff)A, ./1-(4z(- / Sczt  I   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CelgtottaA. Vie4  j CY :/t /W  •  r  •  SAM B. HALL. JR.  318 CANNON HOUSE OFFICE  FIRST DISTRiCT  WASHINGTON, D.C. 20515  STATE OF TEXAS  TmEprioNE:(202)225-3035  COMMITTEES: J• UDICIARY SUBCOMMITTEES: CRIMINAL JUSTICE IMMIGRATioN, REFUGEES, AND INTERNATioNAL LAw  CongreooftbeZinittb tatc5 jpoufit of ileproentatibeti tilusbingtott,;3.e. 20515  cRiME VETERANS• AFFAIRS SUBCOMMITTEES:  September 25, 1981  U.S. FEDERAL BUILDING, ROOM G 15 MARSHALL, TEXAS  75670  TELEPHONE (214) 938-8388  U.S. POST OFFICE AND FEDERAL BUILDING ROOM 210--PARIS, TExAs 75460 TELEPHONE: (214) 785-0723  CHAIRmAN, cOMPENSATION, PENSION AND INSuRANCE OVERSIGHT AND INVESTIGATIONS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  U.S. POST OFFICE AND FEDERAL BuiLDING Room 401—TEXARKANA, TEXAS  75501 TELEPHONE:(214) 793-6728  Honorable Paul A. Volcker Chairman - Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D. C. 20551 Dear Mr. Chairman:  cp , -- 1 -1 cp ro.  ut, c... __ (l) 7 -1-1  CI :.".." -11--1  ---. 3  :-.1., c, _ .›. '.. -7,J ; 7"--  (-4 — -.(-) ri•I-rin —  TNO '...--, A recent statement by you to the effect that a sign]. • -41 . cSRt ,...-._.. , .1: reduction in Federal spending is necessary to reduce hig1.1.., -2:.., :r.) interest rates is certainly on target in my judgement. tl -A4 -') .77 -.‹ ( -I have endeavored to support the President in reducing speriaing?. :--. ::-.. •-: and balancing the budget. -P"' rv  While it is indeed unfortunate that some segments of the financial community have responded negatively to the Administration's economic initiatives, it is clear that high interest rates and the shortage of lending money is having a bad psychological effect on middle America as far as the overall economic program is concerned. Of course, it will be months, indeed years, before the budget and tax reductions will impact the economy in a positive way, but if the sentiment in my Congressional District is a general indication of the mood of the Country, we have got to explore ways to reduce interest rates immediately. In other words, strong, highly visible action on the part of the Federal Reserve at this time could galvanize public confidence in the future of the American economy. It would appear meaningful, therefore, for the Federal Reserve to establish a dialogue with the people by assuming a more public role in working with the White House and Congress in a mutual effort to articulate a national commitment and goal for achieving interest rate reductions. Such an effort, in my opinion, would not serve to threaten the independent character of the Federal Reserve and would assure the American people that a national commitment, of which the Federal Reserve is a part, exists in the highest councils of government to provide a better game plan for bringing interest rates down to specific and acceptable levels within a reasonable time frame.  '  r   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  2-  In embarking on this errand of national commitment, the Federal Reserve should assure intere st rate reductions commensurate in significance with the his toric spending reductions secured by Congress. As an institution, the Federal Reserve should move forward in step with the cooperative efforts of the White Hou se and respective houses of Congress. Further, the Federal Reserve should do everything possible to direct private credit markets awa y from unproductive lending practices. Perhaps corporate mergers present a good place to start. According to informatin ava ilable to me, billions upon billions of credit dollars are use d to finance these ventures. During times of tight money supply, such misdirection of credit is killing the American far mer, homebuilders, small businessmen and other productiv e and job-producing participants in our market economy. I commend these remarks for your attent ion, and with kindest regards, I am Sincerely,  am B. Hall, Jr.  • 1")'\ex,  • . .• • f Gove •.. ... . .40 tr *. .. •o ; • -T, • .--1 .1. .11',..,  IY\0212a4A. v - au)  BOARD OF GOVERNORS OF TH E  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  f•-• • v) • A.. ‘'). 4<.,.  October 6, 1981  The Honorable James V. Hansen House of Representatives Washington, D.C. 20515 Dear Mr. Hansen: Thank you for your letter of September 29, on behalf of one of your constituents, requesting answers to the following questions about the Federal Reserve System. 1.  Who are the members of the Board?  Answer: The Board of Governors presently is made up of Chairman Paul A. Volcker, Vice Chairman Frederick H. Schultz, and Governors Henry C. Wallich, J. Charles Partee, Nancy H. Teeters, Emmett J. Rice, Lyle E. Gramley. I am enclosing biographical sketches of the members of the Board and a pamphlet which contains additional information about the Board. 2.  How are funds received to pay Board members'  salaries? Answer: As provided in the Federal Reserve Act, the salaries of the Board members as well as all other expenses of the Board are paid from assessments of the Federal Reserve Banks. Earnings of the Federal Reserve Banks are derived primarily from interest received on their holdings of securities acquired through open market operations and on their loans to member banks. Such earnings go first to the payment of expenses (including assessments by the Board of Governors to defray its expenses), the statutory 6 percent dividend on Federal Reserve stock required to be purchased by member banks, and any additions to surplus necessary to maintain each Reserve Bank's surplus equal to its paid-in capital stock. Remaining earnings are then paid into the U.S. Treasury. 3.  How are Board members selected?  Answer: Members of the Board are nominated by the President and confirmed by the Senate. There are certain statutory guidelines that the President must follow in appointing Board members. For example, only one Board member may be selected to serve at one time from any one of the 12 Federal Reserve districts;   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable James V. Hansen Page Two  and the President, in appointing Board members, is required to give due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. 4. What happens to the interest paid on funds collected by the Board? Answer: As stated in the answer to question 2, the net earnings of the Reserve Banks are paid into the U.S. Treasury. In recent years, System payments to the Treasury have averaged 90 percent or more of gross receipts. In calendar year 1980 payments to the Treasury amounted to $11.707 billion. 5.  Who has jurisdiction over the Board?  Answer: The Congress has ultimate authority over the Federal Reserve and oversees the activities of the System through relevant committees. The general goals of the Federal Reserve have been set forth in the Full Employment and Balanced Growth Act of 1978, in which Congress laid out for the Federal Reserve, as well as for the President, the directives of promoting full employment, balanced growth of real income, adequate productivity growth, and reasonable price stability. Moreover, the Board is required by law to make an annual report to the Congress and' members of the Board, especially the Chairman, are called upon frequently to testify before Congressional committees. 6.  How long do Board members serve?  Answer: Board members are appointed to 14-year terms. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office. 7.  How can a member be removed from the Board?  Answer: The Federal Reserve Act states that members of the Board can be "removed for cause by the President." I hope this information will be useful to you. let me know if I can be of further assistance. Sincerely, CO:AFC:pjt (#V-282) bcc: Mrs. Mallardi  (Signed) Donald L Vilna Donald J. Winn Assistant to the Board  Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Please  •  Nob  /NV144 , 4 4 . / 1 4  110  t/- o/3)  (  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  October 5, 1981  The Honorable Ted Stevens Assistant Majority Leader United States Senate Washington, D. C. 20510 Dear Senator Stevens: Thank you for your letter of September 22 to Chairman Volcker requesting comment on the enclosed correspondence from Mr. Fredrick E. Wentz concerning the Monetary Control Act of 1980 (Title I of P. L. 96-221) and H. R. 3599, introduced by Congressman Ron Paul. Mr. Paul's bill would repeal the Monetary Control Act. As you are aware, Congress, in the Monetary Control Act, took the step of imposing Federal reserve requirements on all depository institutions because it believed that universal reserve requirements were necessary to assist in the fight against inflation. Repeal of the Act would impair the Board's ability to conduct monetary policy by exempting large portions of the money supply from one of the most basic tools used by the Federal Reserve to influence the quantity of money. Mr. Wentz' concern about the Monetary Control Act relates to a relatively minor provision of the Act which has given rise to a great deal of misunderstanding. This provision authorizes the Federal Reserve to purchase obligations of foreign governments. 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 owrv foreign currencies. Until passage of the Monetary Control Act, the Federal Reserve did not have any convenient 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   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  4   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ______ ___ Page PrInnr-1  Tnr  111  qtrvunno  Two  purchase U. S. government and agency securities, certain shortterm oblisations of State and local governments, bankers' acceptances, and bills of exchange. However, with the passage of the lonetary 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 conjunct!.on 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 borroT-er) the debt 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 oblir,ations merely provides the System with the opportunity to earn interest on foreign currencies which are needed to conduct foreign exchange operations and which otheruise would constitute non-interest bearing assets When the authority is used, all that is provided is foreign currency, which constitutes a debt of another country, and not Federal Reserve credit. I hope that this is helpful to you. if I can be of further assistance.  Please let me know  Sincerely, "fr r  Donald J. Winn Assistant to the floard Enclosure CO:AFC:vcd OW-273) bcc:  Mrs. Mallardi  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • October 5, 1981  The honorable Gillis W. Long house of Representatives Washington, D. C. 20515 Dear Mr. Long: Thank you for your letter of September 25 endorsing the nomination of David B. Ward, Esq., to serve on the Board's Consumer Advisory Council. I can assure you that rr. Ward's qualifications will receive full consideration when the Board makes the appointments to the Council. I appreciate your interest in the Council. Sincerely,  CO:vcd 0V-281) bcc:  Mrs. Bray (w/copy of incoming) Mrs. Mallardi •  •  FORMER CHAiRMEN THOMAS S. FOLEY (WASH.) PHILLIP BURTON (CALIF.) OLIN TEAGuE (TEX.) DAN ROSTENKOWSKI (ILL.) EUGENE KEOGH (N.Y.) ALBERT THOmAS (TEX.) FRANCIS WALTER (PA.) MELViN PRiCE (ILL.) JOHN ROONEY (N.Y.) WILBUR MILLS (ARK.)  GERALDINE A. FERRARO  Patturratir Taurus Pause of leyfrescittatiiirs  GILLIS W. LONG cm...mmAN  SECRETARY  FORMER sEcRETARIES SHIRLEY CHISHOLM (N.Y.) PATSY MINK (HAWAII) LEONOR K. SULLIVAN (MO.) EDNA F. KELLY (N.Y.)  306-307 ANNEX #1 HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202)225-9141  ALVIN FROM STAFF DIRECTOR  September 25, 1981 • 1  Honorable Paul A. Volker, Chairman Federal Reserve System Board of Governors Federal Reserve Building Washington, D.C. 20551  un CO _  --n  (de) -70  ---r  !NJ  • ; „  Dear Chairman Volker: It has been brought to my attention that the Board is in the process of reviewing nominations to fill a number of vacancies on its Consumer Advisory Council and that among the names being considered is that of David B. Ward, Esq., an executive of Beneficial Management Corporation of Morristown, New Jersey. In my opinion, Mt. Ward would make an excellent choice for appointment as a representative of the financial cammunity in your efforts to balance membership among creditors, consumers and others. For example, as Senior Vice President of his corporation's Government Relations Department, which oversccs Beneficial's regulatory and legislative activities on behalf of its affiliated depository institutions, consumer finance companies, insurance companies and retail credit operations, Mr. Ward has an extensive knowledge of the kinds of credit and related issues which came before the Council. In addition, Mt. Ward's background as a practicing attorney and as an active member of various credit related associations and institutions gives him invaluable experience and training which would prove to be of great benefit to the Consumer Advisory Council.  OfiL/afm cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Frederick H. Schultz Henry C. Wallich Nancy Hays ToctPrs J. Charles Parbee Emmett J. Rice Lyle E. Gramley  .7  -  ••• ;  •• ••=1•••  r-  With best wishes, I am  r"  rri —  :;; -.-  I am pleased to endorse his nomination to the Council.  rn  7:• 'r •  rr t..7...•_.' r-ri 7_, .7> r-  ••••44  V  OCT 2  1981  The HOOOKAIAC Pernant; J. St Germain Chairman COmmittee om Banking, Finance and Urban Affairs Souse of Representatives Washington, D. C. 20515 Dear Chairman St Germains At yesterday's Subcommittee marker, souneel remarked that *institutions of the same type .in Section 1(a) of 11.11. 4603 riders to institutions eligible for assisting* emolor section 406(f) of the uatiomal Housing Act, that is, saving, amd loan associatiome and Federal mutual savings banks insured by the fideral Savings and Loam Insurance Corporation. This is to advise that the intent of tbe regulators in drafting this provision was to distinguish among imstitutiome on the basis of a thrift-commercial bank distinction. Accerdiagly, ae a general matter, a State-chartered mutual savings bemk Lammed by the IOW would be regazded by the Federal acme Loan Bank Seerd se din imetitutlem ct the same typo for puxposas of section 8(a). Sincerely, ell  , -;/fg  MB:ids 10/5/81   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  c  •  • • '  . 41 0 .•  BOARD OF GOVERNORS OF THE  ••ci.  FEDERAL RESERVE SYSTEM  :  FQ• H•  .RALREs.• •  •  WASHINGTON, D. C. 20551  October 2, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable J. William Stanton Ranking Minority Member Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Mr. Stanton: In 1976 the Congress asked the Board to undertake a study of Section 23A of the Federal Reserve Act and propose needed amendments. This statute places quantitative limitations on a bank's transactions with affiliated companies and requires that all bank loans or extensions of credit to affiliates be fully secure d. After extensive study, the Board concluded that Section 23A had major shortcomings and clearly was in need of amendment. First, the statute in some areas is unduly restrictive and should be modified in a manner that would still give banks adequate protection. Second, the statute is poorly drafted and organized. For many years, these shortcomings have made compliance with and enforcement of the statute difficult for bankers and bank supervisors. Finally, the statute contains several potentially dan4er ous "loopholes" which, if permitted to continue, could expose banks to undue risk. In both March 1978 and April 1979, the Board submitted to the Congress a detailed proposal to amend Section 23A. No action was taken on the bills during the Ninety-Fifth or Ninety-Sixth Congress. The Board continues to believe that Section 23A needs amending. Accordingly, the Board included its Section 23A proposal among its legislative recommendations in the Board's Annual Report to the Congress that was transmitted on May 15, 1981. Consistent with this position, the Board is now forwarding the enclosed draft bill to the House Banking Committee, along with a brief summary of the Board's principal recommendations and a detailed discussion paper explaining the reasons for the proposed amendments. Sincerely,  StPatil A. VOcket  Enclosure BT:RS:vcd bcc: Mr. Talley   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mrs. Mallardi (2)/  •  •  •  Govt/ i4;••  BOARD OF GOVERNORS  ..* •.  OF THE  FEDERAL RESERVE SYSTEM  ' ---  •  •  WASHINGTON, D. C. 20551  • [f ••eo .1%"",f,4;  Psz144%,' • PAUL A. VOLCKER  RS‘" • • ••fkAL .• • •.•  October 2, 1981  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: In 1976 the Congress asked the Board to undertake a study of Section 23A of the Federal Reserve Act and propose needed amendments. This statute places quantitative limitations on a bank's transactions with affiliated companies and requires that all bank loans or extensions of credit to affiliates be fully secured. After extensive study, the Board concluded that Section 23A had major shortcomings and clearly was in need of amendment. First, the statute in some areas is unduly restrictive and should be modified in a manner that would still give banks adequate protection. Second, the statute is poorly drafted and organized. For many years, these shortcomings have made compliance with and enforcement of the statute difficult for bankers and bank superv.isors. Finally, the statute contains several potentially dangerous "loopholes" which, if permitted to continue, could expose banks to undue risk. In both March 1978 and April 1979, the Board submitted to the Congress a detailed proposal to amend Section 23A. No action was taken on the bills during the Ninety-Fifth or Ninety-Sixth Congress. The Board continues to believe that Section 23A needs amending. Accordingly, the Board included its Section 23A proposal among its legislative recommendations in the Board's Annual Report to the Congress that was transmitted on May 15, 1981. Consistent with this position, the Board is now forwarding the enclosbd draft bill to your Committee, along with a brief summary of the Board's principal recommendations and a detailed discussion paper explaining the reasons for the proposed amendments. Sincerely,  S/Paul Enclosure BT:RS:vcd bcc: Mr. Talley   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Volche  Mrs. Mallardi (2)  -Nu  , \o,.. ...-g-oer r.„. 1.. t,\I.t... ., • .• • oF GOvt' •  TP•  khe') pj:  •  • BOARD OF GOVERNORS 0 F TH E  FEDERAL RESERVE SYSTEM  ..--, : . -' :\[f OP,',-A i ...e: ' ' .1---.1'.K_:.4:,_-:.`‘,• .Rai_ 0 - .5 ‘•' . ••..•• •  WASHINGTON, D. C. 20551  October 2, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Harrison A. Williams, Jr. Ranking Minority Member Committee on Banking, Housing and Urban Affairs United States Senate yashington, D. C. 20510 Dear Senator Williams: In 1976 the Senate Banking Committee asked the Board to undertake a study of Section 23A of the Federal Reserve Act and propose needed amendments. This statute places quantitative limitations on a bank's transactions with affiliated companies and requires that all bank loans or extensions of credit to affiliates be fully secured. After extensive study, the Board concluded that Section 23A had major shortcomings and clearly was in need of amendment. First, the statute in some areas is unduly restrictive and should be modified in a manner that would still give banks adequate protection. Second, the statute is poorly drafted and organized. For many years these shortcomings have made compliance with and enforcement of the statute difficult for bankers and bank supervisors. Finally, the statute contains' several potentially dangerous "loopholes" which, if permitted to continue, could expose banks to undue risk. In both March 1978 and April 1979, the Board submitted to the Senate Banking Committee a detailed proposal to amend Section 23A. While the Board's draft legislation was introduced on both occasions, no action was taken on the bills during the Ninety-Fifth or Ninety-Sixth Congress. The Board continues to believe that Section 23A needs amending. Accordingly, the Board included its Section 23A proposal among its legislative recommendations in the Board's Annual Report to the Congress that was transmitted on May 15, 1981. Consistent with this position, the Board is now forwarding the enclosed draft bill to the Senate Banking Committee, along with a brief summary of the Board's principal recommendations and a detailed discussion paper explaining the reasons for the proposed amendments. Sincerely,  SZPaul A. Volcitec  Enclosure BT:RS:vcd bcc: Mr. Talley Mrs. Mallardi(2) ‘I  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ' .•'. 400f GOv - t• ii, 4;..  • •co •c •••.,  4., .4.,,  •  •  0,,• . .\\ cp •  r444-411'.4‘4 j 1 r.;Al "::  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  "•4.R.ALREst••  WASHINGTON, D. C. 20551  October 2, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D.C. 20510 Dear Chairman Garn: In 1976 the Senate Banking Committee asked the Board to undertake a study of Section 23A of the Federal Reserve Act and proposed needed amendments. This stat ute places quantitative limitations on a bank's transactions with affiliated companies and requires that all bank loans or exte nsions of credit to affiliates be fully secured. After exte nsive study, the Board concluded that Section 23A had majo r shortcomings and clearly was in need of amendment. First, the stat ute in some areas is unduly restrictive and should be modified in a manner that would still give banks adequate protection. Seco nd, the statute is poorly drafted and organized. For many year s these shortcomings have made compliance with and enforcement of the statute difficult for bankers and bank supervisors. Fina lly, the statute contains several potentially dangerous "loo pholes" which, if permitted to continue, could expose banks to undue risk. In both March 1978 and April 1979, the Boar d submitted to your Committee a detailed proposal to amend Section 23A. While the Board's draft legislation was intr oduced on both occasions, no action was taken on the bills duri ng the Ninety-Fifth or NinetySixth Congress. The Board continues to believe that Sect ion 23A needs amending. Accordingly, the Board included its Section 23A proposal among its legislative recommendations in the Board's Annual Report to the Congress that was transmitted on May 15, 1981. Consistent with this position, the Board is now forw arding the enclosed draft bill to your Committee, along with a brie f summary of the Board's principal recommendations and a detailed discussion paper explaining the reasons for the proposed amen dments. Sincerely, S/Paul A. VojciteL  Enclosure bcc: Senator Cranston BT:RS:vcd bcc: Mr. Talley Mrs. Mallardi (2)v  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • October 1, 1981  The Honorable Leo C. Zeferetti Chairman Select Committee on Narcotics Abuse and Control House of Representatives Washington, D. C. 20515 Dear Chairman Zeferetti: Thank you for your letter of September 24 inviting the Board to appear before your Committee's public hearing in Fort Lauderdale, Florida, to examine the effectiveness of the Government's investigation and prosecution of cases to trace, seize and forfeit moneys and other assets derived from drug trafficking. I am pleased to inform you that Mr. John E. Ryan, Director, Division of Banking Supervision and Regulation, will appear on behalf of the Board on October 9. Sincerely,  Sgaul A. Yolckec CO :vcd (#V-271) bcc:  Mr. Ryan Mrs. Mallardi (2)  .4r  •  Maloni will discus s with Goo Schultz LEO C. ZEFERETTI. N.Y. CHAIRMAN  PETER W. RODINO, iPt.. N.J. CHARLES B. RANGEL, N.Y. .;:ORTNEY H.(PETE) STARK. CALIF. GLENN ENGLISH, OKLA. BILLY L. EVANS, GA. JAMES H. SCHEUER. N.Y. CARDISS COLLINS, ILL. DANIEL K. AKAKA. HAWAII FRANK J. GUARINI, N.J. ROBERT T. MATSUI, CALIF. EX OFFICIO: MARIO BIAGGI, N.Y. DANTE B. FASCELL. FLA. LINDY BOGGS. LA. BARBARA A. MIKULSKI, MD. EARL HUTTO. FLA. GEORGE DANIELSON, CALIF. WALTER E. FAUNTROY. D.C..  TOM RAILSBACK, ILL. RANKING MINORITY MEMBER  Riouse  acprescritatiurs  SELECT COMMITTEE ON NARCOTICS ABUSE AND CONTROL  ROBIN L. BEARD. TENN. BENJAMIN A. GILMAN, N.Y. TENNYSON GUYER. OHIO LAWRENCE COUGHLIN, PA. ROBERT K. DORNAN, CALIF. LAWRENCE J. DENARDIS, CONN. E. CLAY SHAW. JR.. FLA. EX OFFICIO:  WASHINGTON, D.C. 20515  MATTHEW J. RINALDO, N.J. ROBERT L. (BOB) LIVINGSTON. LA. CHARLES F. DOUGHERTY. PA. HENRY HYDE, ILL.  ComMITTEE PHoNE 202-225-1753  PATRICK L. CARPENTIER CHIEF COUNSEL  Room H2-234, HousE OFFICE ButuDING ANNEx Z  ROSCOE B. STAREK III MINORITY COUNSEL.  September 24, 1981  r.  r, 1  The Honorable Paul A. Volcker Chairman Federal Reserve System 20th Street and Constitution Avenue, NW Washington, DC 20551 Dear Mr. Chairman:  nn -10  "'"  !NJ  ;1' (  _ , r.  _.?  -173  CD  The Select Committee on Narcotics Abuse and Control, on Friday, October,9, 1981, will conduct a public hearing at the Fort Lauderdale, Florida, City Hall, 100 North Andrews Avenue, Fort Lauderdale, Florida. The Committee will examine the effectiveness of the Government's investigation and prosecution of cases to trace, seize and forfeit moneys and other assets derived from drug trafficking. The hearing will focus upon the effectiveness of the reports required of financial institutions under the Bank Secrecy Act and the efficacy of other related laws used to prosecute traffickers and seize and forfeit their assets. The hearing will also address those laws which limit investigations to identify and trace assets. We will solicit recommendations for changes in the laws to strengthen financial prosecutions. In addition, the Committee will address the role of Federal banking regulations and auditing agencies in criminal financial investigations as they relate to narcotics traffickers. The Committee will also examine the impact on the banking community of increased regulatory schemes that would enhance financial investigations. We would appreciate your appearance or that of your designated representative to address these issues. The Rules of the House of Representatives require that each witness deliver 50 copies of his statement to the Committee at least 48 hours prior to the hearing date. The witness will be asked to deliver a brief summary of that statement at the hearing, with the full text to appear in the hearing record. It is also requested that the statement not be released to the press prior to appearance before the Select Committee.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ••:  ;•  •"7  .4. . •  •  •  . The Honorable Paul A. Volcker September 24, 1981 Page 2  For further information or arrangement of final details, please contact Mr. Patrick L. Carpentier, Chief Counsel of the Select Committee, at 225-1753. Thank you very much for yo in this important issue.  valuable assistance and cooperation  ZEF irman  TTI  LCZ:pcn   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  1  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  LARRY PRESSLER  )t. T  SOUTH DAKOTA  UNITED STATES SENA431  00'-2  WASHINGTON, D. C. 20510  OFHCE. 01'  September 29, 1981  Mr. Paul A. Volcker Chairman Federal Reserve System Washington, D.C. 20551 Dear Mr. Volcker: This is to acknowledge and thank you for the two books you sent me. I certainly appreciate your prompt response and am happy to have these informative additions to my library. I am very happy we had the opportunity to exchange views on important issues and I look forward to working with you in the future. Thank you again for your thoughtfulness. Sin  Larry Pr sler United ates Senator LP/aw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  September 29, 1981  The Honorable Frank Annunzio Chairman Subcommittee on Consumer Affairs and Coinage Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman Annunzio: Thank you for your letter of September 23 inviting the Board to appear before your Subcommittee hearings on the issue of Federal preemption of State usury laws. Governor Nancy H. Teeters is looking forward to appearing on October 7 at 10:00 a.m. Sincerely,  CO:vcd (V-268) bcc:  Governor Teeters Robert Fisher Mrs. Mallardi (2)  FRANK ANNUNZIO, ILL., CHAIRMAN FERNAND J. ST GERMAIN, R.I. HENRY B. GONZALEZ. TEX. JOSEPH G. MINISH. N.J. BILL PATMAN, TEX.  Don Winn has memo into Chairman re Gov.  •  Te[ers testifying  THOMAS El. EVANS, JR., DEL. CHALMERS P. WYLIE, OHIO GEORGE C. WORTLEY. N.Y. GREGORY W. CARMAN, N.Y.  U.S. HOUSE OF REPRESENTATIVES N INETY-SEVENTH CONGRESS  CURTIS A. PRINS, STAFF DIRECTOR  SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE OF THE  TELEPHONE: 225-9181   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS ROOM 212 HOUSE OFFICE BUILDING ANNEX No.1  WASHINGTON, D.C. 20515  C) -11 "1-1  :7 rn .7.7) 73 ' 1 1 7-r-, .-)  September 23, 1981  ......... t.-C) CO  _.—  (1, 7.71 -7:1  N.) -4:::-  !• 1 .  rt ..-. I'..  C..:  c_. 1 -7..1 t....:  .-. 1-.)  t - . ,..„ --iv c.. .......  -1)  Honorable Paul A. Volcker Chairman Federal Reserve Board Federal Reserve System Washington, D.C. 20551  7-11  Dear Mr. Chairman: The House Banking, Finance and Urban Affairs Subcommittee on Consumer Affairs and Coinage plans to hold hearings on Wednesday, October 7, 1981,to consider the issue of Federal preemption of State usury laws. Two bills on this issue have been referred to the Subcommittee: H.R. 2501, the Interest Rate Deregulation Act of 1981, and H.R. 3172, a bill to authorize loans at interest rates in excess of certain State usury ceilings. I have enclosed copies for you. I wish to invite you to appear before the Subcommittee on Wednesday, October 7, 1981, at 10:00 a.m. The hearings will be held in Room 2128 Rayburn House Office Building. Your presentation should be limited to ten minutes, however, your written statement for the record may be of any length. The Subcommittee requires a minimum of 50 copies of the prepared statement at least 48 hours prior to your scheduled appearance. The statements should be delivered to the Subcommittee office, Room 212 Annex #1, 300 New Jersey Avenue, S.E., by Monday, October 5, 1981. If you have any questions, please contact Curtis Prins, Staff Director of the Subcommittee on Consumer Affairs and Coinage at (202) 225-9181. With every best wish, Sincerely,  Frank Annunzio Chairman Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 97TH CONGRESS iST SESSION  H.R.2501  To deregulate interest rate ceilings on business, agricultural, and consumer credit transactions, and for other purposes.  IN THE HOUSE OF REPRESENTATIVES MARCH 12, 1981 Mr. LAFALCE introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs  A BILL To deregulate interest rate ceilings on business, agricultural, and consumer credit transactions, and for other purposes. 1  Be it enacted by the Senate and House of Representa-  2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Interest Rate Deregula4 tion Act of 1981". 5 6  TITLE I—BUSINESS AND AGRICULTURAL LOAN SEC. 101. Section 511 of the Depository Institutions  7 Deregulations and Monetary' Control Act of 1980 (94 Stat. 8 161; Public Law 96-221) is amended to read as follows:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 2 1  "SEc. 511. The provisions of the constitutions or the  2 laws of any State expressly limiting the rate or amount of 3 interest, discount, points, finance charges or other charges 4 which may be charged, taken, received, or reserved shall not 5 apply in the case of a business or agricultural loan.". 6  SEC.  102. Section 512 of the Depository Institutions  7 Deregulation and Monetary Control Act of 1980 is amended 8 to read as follows: 9  "SEc. 512. (a) Except as provided in subsection (b) of  10 this section, the provisions of this part shall apply with re11 spect to business and agricultural loans made on or after 12 April 1, 1980. 13  "(b) The provision of this part shall not apply to any  14 business or agricultural loan made in any State after the date 15 (on or after April 1, 1980, and prior to April 1, 1983), on 16 which such State adopts a law or certifies that the voters of 17 such State have voted in favor of any provision, constitution18 al or otherwise, which states explicitly and by its terms that 19 such State does not want the provisions of this part to apply 20 with respect to loans made in such State, except that such 21 provision shall apply to any loan made on or after such date 22 pursuant to a commitment to make such loan which was en23 tered into on or after April 1, 1980, and prior to such date. 24  "(c) A loan shall be deemed to be made on or after April  25 1, 1980, if such loan—  41h1  •  • 3 the  1  "(1)(A) is funded or made in whole or in part  t of  2  during such period, regardless of whether pursuant to a  ges  3  commitment or other agreement therefor made prior to  not  4  April 1, 1980;  5  "(B) was made prior to or on April 1, 1980, and  ons  6  bears or provides for interest during a period after  ied  7  April 1, 1980, on the outstanding amount thereof of a  8  variable or fluctuating rate; or  of  9  "(C) is a renewal, extension, or other modification  re-  10  of a loan made prior to April 1, 1980, and such renew-  'ter  11  al or extension or other modification is made with the  12  written consent of any person obligated to repay such  iny  13  loan; and  ite  14  "(2)(A) is an original principal amount of $25,000  on  15  or more ($1,000 or more on or after the date of enact-  of  16  ment of the Housing and Community Development Act  17  of 1980 or any amount on or after the date of enact-  18  ment of the Interest Rate Deregulation Act of 1981);  )1y  19  or  ch  20  "(B) is part of a series of advances if the aggre-  Lte  21  gate of all sums advanced or agreed or contemplated to  n-  22  be advanced pursuant to a commitment or other agree-  te.  23  ment therefor is $25,000 or more ($1,000 or more on  ril  24  or after the date of enactment of the Housing and  25  Community Development Act of 1980 or any amount   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  4 1  on or after the dates of enactment of the Interest Rate  2  Deregulation Act of 1981).".  3 4  TITLE II—CONSUMER LOANS SEC. 201. Title  V of the Depository Institution Deregu-  5 lation and Monetary Control Act of 1980 is amended by 6 adding at the end thereof the following new subpart: 7 8  "PART D—CONSUMER LOANS "SEc. 531. (a) The provisions of the constitution or the  9 laws of any State expressly limiting the nature, rate, amount 10 of, or manner in which interest, finance charges or other 11 charges or fee, including the imposition by a creditor of trans12 action fees and access fees pursuant to an open-end credit 13 plan, which may be charged, taken, received, or reserved 14 shall not apply to an extension of consumer credit. 15  "(b) Notwithstanding subsection (a), the consumer pro-  16 tection and regulatory provisions of the constitution or the 17 laws of any State shall remain in full force and affect. 18  "SEc. 532. The term 'extension of consumer credit'  19 means credit made available by a creditor to a natural 20 person, primarily for personal, family, household, investment, 21 home-acquisition, or home improvement purposes, whether 22 secured or unsecured and without regard to the nature of the 23 property securing the indebtedness including the refinancing 24 of credit made available for such purposes, but excluding 25 credit subject to the provisions of section 501 of this title.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 5. 1  "SEc. 533. (a) Except as provided in subsection (b) of  2 this section, the provision of section 531 shall apply with 3 respect to any extension of consumer credit made on or after 4 the effective date of the Interest Rate Deregulation Act of 5 1981. 6  "(b) The provisions of section 531 shall not apply to any  7 extension of consumer credit in any' State made on or after a 8 date (on or after the effective date of the Interest Rate De9 regulation Act of 1981 and prior to a date three years after 10 such effective date) on which such State adopts a law or 11 certifies that the voters of such State have voted in favor of 12 any provision, constitutional or otherwise, which states ex13 plicitly and by its terms that such State does not want the 14 provisions of this part to apply with respect to loans made in 15 such State, except that such provisions shall apply to any 16 loan made on or after such date pursuant to a commitment to 17 make such loan which was entered into on or after the effec18 tive date of the Interest Rate Deregulation Act of 1981. 19  "(c) Any law or certification adopted by a State or its  20 voters pursuant to subsection (b) of this section may specify 21 that portion of the extensions of consumer credit made in 22 such State to which the provisions of section 531 will not 23 apply. 24  "SEc. 534. The Board of Governors of the Federal Re-  25 serve System is authorized to issue rules and regulations and   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 6  ementation of pl im e th g in rn ve go s on ti 1 to publish interpreta 2 this part.".  Institutions ry to si po De e th of 8 52 n SEC. 202. Sectio 3 80 is amended 19 of t Ac l ro nt Co ry ta ne 4 Deregulation and Mo the Federal Credit of ) vi )( (A 5) 7( 10 on ti ec 5 by inserting "S nal Housing Act,". io at "N s rd wo e th r te af t" 6 Union Ac I—EFFECTIVE DATE I I E L T I T 7 all be the sh t Ac is th of te da e iv ct SEC. 301. The effe 8 t.  Ac 9 date of enactment of this  0   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 97T11 CONGRESS isT SESSION  H.R.3172  To authorize loans at interest rates in excess of certain State usury ceilin gs.  IN THE HOUSE OF REPRESENTATIVES APRIL 9, 1981 Mr. ALEXANDER introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs  A BILL To authorize loans at interest rates in excess of certain State usury ceilings. 1  Be it enacted by the Senate and House of Representa-  2 tives of the United States of America in Congress assembled, 3 That title V of the Depository Institutions Deregulation and 4 Monetary Control Act of 1980 is amended by adding at the 5 end thereof the following: 6 7 8  "PART D  GENERAL USURY OVERRIDE "OTHER LOANS  "SEc. 531. (a) If the applicable rate prescribed in this  9 section exceeds the rate a person would be permitted to 10 charge in the absence of this section, such person may in the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  2  •  tion or 1 case of any loan, notwithstanding any State constitu of this 2 statute which is hereby preempted for the purposes loan, 3 section, take, receive, reserve, and charge on any such ess of 4 interest at a rate of not more than 1 per centum in exc n, on 5 the discount rate, including any surcharge thereo erve 6 ninety-day commercial paper in effect at the Federal Res is lo7 bank in the Federal Reserve district where the person 8 cated. 9 10  "(b) If the rate prescribed in subsection (a) exceeds the e rate such person would be permitted to charge in the absenc  y pre11 of this section, and such State imposed rate is thereb taking, 12 empted by the rate described in subsection (a), the n is al13 receiving, reserving, or charging a greater rate tha shall be 14 lowed by subsection (a), when knowingly done, n car15 deemed a forfeiture of the entire interest which the loa n. If 16 ries with it, or which has been agreed to be paid thereo who 17 such greater rate of interest has been paid, the person rt of 18 paid it may recover, in a civil action commenced in a cou the 19 appropriate jurisdiction not later than two years after unt 20 date of such payment, an amount equal to twice the amo rving, 21 of interest paid from the person taking, receiving, rese 22 or charging such interest. 23 24 25  "(c) For the purpose of this part"(1) the term 'loan' includes all secured and unsecured loans, credit sales, forbearances, advances, re-  H.R. 3172-ih  •  • ..   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3 1  newals or other extensions of credit made by or to any  2  person or organization;  3  "(2) the term 'interest' includes any compensa-  4  tion, however denominated, for a loan;  5  "(3) the term 'organization' means a corporation,  6  government or governmental subdivision or agency,  7  trust, estate, partnership, cooperative, association, or  8  other entity; and  9  "(4) the term 'person' means a natural person or  10  organization.  11 12  "EFFECTIVE DATE OF PART D  "SEc. 532. (a) The provisions of this part shall apply  13 only with respect to loans made in any State during the 14 period beginning on July 1, 1981, and ending on the earlier 15 of16  "(1) April 1, 1983, or  17  "(2) the date, on or after July 1, 1981, on which  18  such State adopts a law or certifies that the voters of  19  such State have voted in favor of any provision, consti-  20  tutional or otherwise, which states explicitly and by its  21  terms that such State does not want the provisions of  22  this part to apply with respect to loans made in such  '23  State,  24 except that such provisions shall apply to any loan made on 25 or after such later date pursuant to a commitment to make   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4 14pich loan which was entered int. or after July 1, 1981, 2 and prior to such later date. 3  "(b) A loan shall be deemed to be made on or after July  4 1, 1981, if such loan5  "(1) is funded or made in whole or in part after  6  July 1, 1981, regardless of whether pursuant to a  7  commitment or other agreement therefor made prior to  8  July 1, 1981;  9  "(2) was made prior to July 1, 1981, and bears  10  or provides for interest on or after July 1, 1981, on  11  the outstanding amount thereof at a variable or fluctu-  12  ating rate; or  13  "(3) is a renewal, extension, or other modification  14  made on or after July 1, 1981, of any loan, if such  15  renewal, extension, or other modification is made with  16  a written consent of any person obligated to repay  17  such loan.  18  "(c) This part does not apply to any loan secured by a  19 residential manufactured home unless the loan meets the re20 quirements of section 501(c).". 0  H.R. 3172-ih   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • September 23, 1981  The Honorable Lloyd Bentsen United States Senate Washington, D. C. 20510 Dear Senator Bentsen: Thank you for the opportunity to comment on thc concerns that you and your constituent, Yr. Zac Lentz, have expressed regarding an increase in passbook ceiling rates. As you may know, at its meeting Septerber 21-the Depository Institutions Deregulation Committee voted to increase the pass:)ook rate by one-half percentage point to 5-3/4 percent at commercial banks and 6 percent at savings and loan associations and mutual savings banks. I voted against the increase because of concerns that arc similar to those of yoursclf and Mr. Lentz. The issuo of how quickly the passbook ceiling ratc should be raised to market levels is obviously a difficult one_that involves balancing what may at least appear to be conflicting objectives. There is no question that it is desirable to raise the rate of return to savers, particularly those of limited mean:). On the other hand, higher interest payments on passbook accounts will probably place added pressure on many depository institutions at a time when their earnings are already under a great leal of strain. In my judgment, the balancing of these interests did not justify an increase in the passbook rate of one-half of a percent at this time. However, I woule, note that the inercase the Committee voted was significantly loss than many thrif institutions had feared. Sincerely,  ND:RS/tn (V-252) bcc: Mr. Bernard Mrs. nallardi (2)  LLOYD BENTSEN  •  •  COMMITTEES:  , 80 41  -4,0  TEXAS  tjV I R  ,FINANCE 0.1:1j4 /yeasPUBLIC wO RKS  .EbdfiplAtc  '°-1Z it 4'  ?Anita)Zialez -Senate WASH I NGTON. D.C. 20510  Septemher 4, 1981  Honorable Paul A. Volcker Chairman The Federal Reserve 20th and Constitution Avenue, N.W. -r;ashington, D.C. 20551  •  495/  Zr -9 p4 OFF-Ic6,op_s.c47/1/.7)  A$'  Dear Mr. Chairman: I am quite concerned over the potential impact of a major increase in the interest rate ceilings on passbook savings accounts. Such a move at this time would be a major drain on our already-weakened savings institutions and would largely offset the efforts of Congress to attract lower-cost deposits into our financial institutions through the new All-Savers' Certificates which were authorized in the Economic Recovery Tax Act. Congress quite clearly stated the intention to phase out interest rate ceilings when it passed the Depository Institutions Deregulation Act. I believe that you should phase out these ceilings gradually, giving the industry time to adjust, rather than precipitously throwing them off. Enclosed is a letter from a knowledgeable constituent which expresses similar views. I would apreciate your responding to his letter as well as my own. Sincerely,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •  ROBE RI.J. DOLE, KANS., CHAIRMAN BOB PACYWOA. OREG.  RUc SELL B. LONG, LA  WILLIAM V. ROTH, JR , DEL.  HARRY F. BYRD. JR., VA.  JOHN C. DANFORTH. MO.  LLOYD BENTSEN. TEX.  JOHN H. CHAFFE. R.I.  SPARK M. MATSUNAGA. HAWAII  JOHN HEINZ. PA.  DANIEL PATRICK MOYNIHAN. N.Y.  MALCOLM  WALLOP, WYO.  DAVID DURENBERGFR. MINN.  MAX BAUCUS. MONT. DAVID L. BOREN, OKLA.  WILLIAM L. ARMSTRONG. COLO.  BILL BRADLEY. N.J.  STEVEN D  GEORGE J. MITCHELL. MAINE  SYMMS. IDAHO CHARLES E. GRASSLEY, IOWA  'ZCsrvifeb Zfafez  mace  COMMITTEE ON FINANCE WASHINGTON D.C. 20510  ROBERT E. LIGHTHI7FR, CHIEF COUNSEL MICHAEL STERN. MINORITY STAFF DIRECTOR  September 3, 1981  Mr. Zac Lentz South Texas Savings P.O. Box 2118 Victoria, Texas 77901 Dear Zac: Thank you for your letter concerning the proposal before the Depository Institutions Deregulation Conunittee to increase the interest rate ceilings on passbook savings accounts. As you know, the DIDC is required by law to consider an increase in the rates on passbook savings accounts at its meeting on September 22. However, the law does not require that the ceilings be raised at that time. At the last DIDC meeting Mr. Sprague, representing the Federal Deposit Insurance Corporation, tossed out the idea of increasing the passbook interest rate ceiling by 5%. I have been told that such a move had not previously been considered, and Sprague is no longer Chairman of FDIC and thus is not a member of the DIDC. I agree that an immediate increase of that magnitude would be very hard to absorb. It would be particularly hard on the already-beleaguered thrift industry, and it is doubtful that in the short run such an increase would attract enough deposits to offset the impact of the increased interest costs. Since this decision will be made by the DIDC, I have taken the liberty of forwarding copies of your letter to all the members of the DIDC. I have enclosed a copy of the letter which I sent with your letter. It was good to hear from you again, and I will continue to follow the deliberations of the DIDC on this issue. Sincerely, j: iff , — Iloy   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Bents  •  41°  September 24, 1981  The Honorable G. William Whitehurst House of Representatives Washington, D.C. 20515 Dear Mr. Whitehurst: Thank you for your letter of September 17 enclosing a copy of a letter addressea to Chairman Volcker from Mr. E. Spencer Wise regarding interest rates. As you requested, I am pleasea to enclose a copy of Chairman Volcker's response to rr. Uise. Please let me know if I can be of further assistance. Sincerely, T  , '41  Donald J. 7inn Assistant to the Board  Enclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CO:sl (#V-265) bcc:  Nrs. nallardi  G. WILLIAM WHITEHURST 20 DISTRICT, VIRGINIA  •  •  WASHINGTON OFFICE: 2469 RAYBURN BUILDING WASHINGTON, D.C. 20515  C.OMMITTEES:  (202)225-4215  ARMED SERVICES  JOHN P. MAGILL ADMINISTRATIVE ASSISTANT  SUBCOMMITTEES: READINESS RANKING MINORITY MEMBER MILITARY INSTALLATIONS AND FACILITIES  Congre55 of the ZEIniteb Otate5 poufs/ of RepresSentatibefS  CONSTITUENT SERVICE OFFICES. 815 FEDERAL BUILDING NORFOLK, VIRGINIA 23510 (804) 441-3340  ifilleffsbington, ri.C. 20515  VERENA C. WASSERMAN OFFICE MANAGER  PERMANENT SELECT COM M I TTEE ON INTELLIGENCE  Room 601, PEMBROKE ONE 23462  WBODMWTTEES:  VIRGINIA BEACH, VIRGINIA (804) 490-2393  PROGRAM AND BUDGET AUTHORIZATION  BLANCHE M. BOYLES U.S. DELEGATE TO NORTH ATLANTIC ASSEMBLY   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  OFFICE MANAGER  September 17, 1981  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551  r77 CZ)  r,  r  rn r\.)  •-•-•c•• :7) • yi  rr7  Dear Chairman Volcker: You have recently received the attached let±er ../ from Mr. E. Spencer Wise, 5106 Atlantic Avenue, Virginiacni Beach, Virginia 23451. I would appreciate it if his views' could receive every consideration. If you would send me a copy of the reply which is made to Mr. Wise, I would be most grateful.  •  Sincerely,  , Za‘t)X,oa" G. WILLIAM WHITEHURST GWW:RL Attachment  •  • / C; t 4Zr  r E  -"(a fy,k  / c„,/ /C--)'  6; .  gz  icys /e-.44  n es cly e  e f::-T  r--.S  7;S-(  ••  ,9_ C j6SSI 7,1(r . vi ,< Li/; /-rk  •  E-  firke j  k  C&I.C.'%/  e4 //oe ccs arc he4-/Li, /1-7/c  s -74-4  4,s SY/  Lie -e  71  1 ( [ 4,  / I  / "4(-- 741(12-  r  S71--  ,P  4 /  r  if  TES 0P1 E tip u/t/T/L 77/ E 1i/4. -r -c• ( , /,L7Z,4 ) /5 SOrieEN2E0 ) ).7- or ,4E 6 /1/ 1-t //1/7- 49Es--/- " 34e  C  4,i/ I  ‘.•  .  /  / 4 r-  AC-:0 LI 04  (7.•‘"VT"  /:ti.}  ;4(," I  /  ,47  •C  II'  I,. , ny ,i*u2_ ,/ y( /I (.:1* (4,4. /N0  i•2 v• / Li G.', ‘. , 11 • / -•  '/If44  7"  n  , el doe6 Col Cri2er ess mos, 4&,),^a/ yj  . /( res0.  •  )4 le--q  7L /L.  4),Z  kit///4.04( s-1/ 6,c A/\7t //" /  4r_s-c4( a vy'  „ifs, C 41-11  e e$wit 4 PA 2,4  /frfc .1  ,  Cew/c:  pOe  ti  / 42  ,s, /4c1PJATIC,s  tS  1)-2-  C if4S  list_  e3rt Z)  1"f#1.1Z el E' ‘  lfZ4 /Yr ( 6, 74.# — .  cAl IACV ..AL  , i„  / .•  /_4 C—  (.e-re,44,  -7%.1 9  t./ e   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ke-fait t.  , 4 4 /e /Z)  ,  /  71. 6  -<  fr14/ c.  ior.4,  674:r1r-  cry e eff if/i -sc ,014/f 4uz_   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  September 24, 1981  The Honorable Larry Pressler United States Selate Washington, D.C. 20510 Dear Senator Pressler: DuLing o6.1- discussion the other day I promised I would send you some information about the origin and functions of the Federal Reserve System. I have enclosed two publications that touch on those issues; one describes the historical evolution of the Federal Reserve and the other our responsibilities. The Purposes and Functions piece was published in 1974 and is being updated to reflect the Monetary Control Act and the change in our operating procedures. I thought our discussion was useful and I'd be happy to talk again any time. Sincerely, SOW  Enclosures RS:sl bcc:  Mrs. Mallardi (2),  do  -vs •  • • ' •of GOvi •. •9 R •  F  UOARO OF GOVERNOR': , OF THE  'C" • cz,  FEDERAL RESERVE SYSTEM  :c5  • -n  r•-• • -1" , )  \ • {,, ▪• ' C • •  ‘4,/ V •  • Rt • • •..• •  WASHINGTON, D. C. 20551  September 23, 1981  The Honorable Marc Lincoln Marks House of Representatives Washington, D.C. 20515 Dear Mr. Marks: Thank you for your letter of August 19 to Chairman Volck0,concerning the authority of the Federal Reserve to purchase shortterm obligations fully guaranteed as to principal and interest by a foreign government or agency. Your constituents' concern about the Monetary Control Act relates to a relatively minor provision of the Act which hd!J given rise to a great deal of misunderstanding. This provision authorizes the Federal Reserve to purchase obligations of foreign governments. 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 currencie:3 that can be used to defend the dollar. These agreements are called "swap" arrangements. When these swaps take place, the Federal Reserve thyn owns foreign currencies. Until passage of the Monetary Contr ol Act, the Federal Reserve did not have any convenient way to invest thesc 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 examp le, the System is empowered to purchase U.S. government and agenc y 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 Reser ve 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  arA  •  •  ste.  The Honorable Marc Lincoln Marks 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 Peserve to rurchase 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 needed to conduct foreign exchange operations and which otherwise would constitute noninterest bearing assets. I hope that this is helpful to you. know if I can be of further assistance.  Please lot me  Sincerely,  Donald J. Uinn Assistant to the Boar,1  (CTS:WRM:)CO:AFC:pjt (#V-234) bcc: Mrs. Mallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Response will  prepar64 by Cong„. Liaison Office WASHINGTON  •  ft  1424 LONGWuRTH HOUSE orr:WASHINGTON. D.C. 2 -1 (202) 225.5406  17 P.  Cortgre55 of tfic Uniteb *tatc5 POU5C Of ikeprtiSentatibe5  DISTRICT OFFICE!. 10S FEDERAL OFFICE BUIL:- NG ERIE, PENNISY VANIA  91 CAS,STATE  Z.Ziasijington, 33.C. 20315  IG'  (014) 455.1313 !',.fIr  SHARON. PENNSYLVANIA (412) Dal—C)....  LT 16:46  205 CHrstNut S,RtET 911ILA01/11.1.2. PENNSYLV•NtA :6335  r, HEALTH AND LONG•TLRM CARE  1•14) 724.6713  m,  August 19, 1981  1 N.)  Chairman Paul Volcker Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551  I  7•J CJ1  Dear Chairman Volcker: I have received many inquiries concerning the Monetary Control Act of 1980. Specifically, my constituents are concerned about the inclusion of Title I, Sec. 105 (b) (1) and (2), the provision authorizing any Federal Reserve Bank to buy and sell short-term obligations fully guaranteed as to principal and interest by a foreign government or agency. The individuals are worried that in our monetizing the foreign government's debt, by increasing the money supply in such a manner we would be increasing the inflation rate. I would really appreciate any information you could provide me regarding this provision in the Monetary Control Act, including any implementation of the Fed's right to authorize such action up to this time, and the ramifications of such an action occurrin'; on our money supply and inflation rate. I greatly appreciate your attention to this matter.  cerely,  Marc L ncoln Marks Member of Congress  MLM/ted   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • It  .•  •  ••  .• • OT G°Vt • • 0 R • •  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM  •  WASFiINGTON, D. C. 20551  •. - 11[1:FF  c,.  •..4‘ep..''X',; •• ERAL RES." • • • •..• • •  September 22, 1981  The honorable John G. Fary Chairman Subcommittee on Public Buildings and Grounds Committee on Public Works and Transportation house of Representatives Washington, D. C. 20515 Dear Chairman Fary: Thank you for your letter of September 3, addressed to Chairman Volcker, concerning plans to hold hearings on the current and projected space needs of the Federal Government. Mr. Mannion, the Board's Deputy General Counsel, has beon in touch with Ms. Nancy Vatalli of your staff, and in a recent conversation indicated to her that it appears that the Board is not the kind of agency that was meant to be covered by your request. As was indicated to Ms. Vatalli, the Board's property is not subject to the jurisdiction of the General Services Administration, nor were the cost of the Board Building and the Federal Reserve Annex borne by government appropriations. The provisions of the Federal Reserve Act vest the Board with sole authority over its property, 12 U.S.C. § 243. In addition, the Board receives its funds from assessments on the Federal Reserve Banks and by statute, 12 U.S.C. § 244; such funds are not construed to be government funds or appropriated monies. Since your inquiry is directed at property under the control of the General Services Administration and future space needs of those government agencies that might impact upon the federal budget, we do not believe that you intended to cover the Board in your request. Even though we believe our inclusion in your survey was inadvertent, we are pleased to supply information concerning the Board Building and the Federal Reserve Annex that may be of help to you. Unfortunately, we do not have data in the form requested in the attachments to your letter. The Board Building contains 242,000 gross square feet and its construction was completed in 1937 at a cost of $3.5 million. It was renovated in   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  110  The honorable John G. Fary Page Two  1977 at a cost of $9.3 million. The Federal Reserve Annex contains 730,000 gross square feet and its conttruction was coupleted in 1974 at a cost of $41.3 million. At the present time, there are no plans for increased space needs through 1986 and, in fact, the Board is attempting to maintain or contract the number of its personnel, which numbered 1,529 as of June 30, 1931. I hope that this information is of help to you. Sincerely, (Sipa) Donald L WWI Donald J. Winn Assistant to the Board  REM:CO:vcd (#V-243) bcc:  Mr. Bradfield (G.C. #277) Mr. Mannion Mr. Don Anderson Mrs. Mallardi  JAMES J. HOWARD, N.J., CHAI GLENN M. ANDERSON, CALIF. ROBERT A. ROE, N.J. JOHN B. BREAUX, LA. NORMAN Y. MINETA, CALIF.  DON H. CLAUSEN, CALIF. GENE SNYDER, KY. JOHN PAUL HAMMERSCHMIDT, ARK. BUD SHUSTER, PA.  ELLIOTT H. LEVITAS, GA. JAMES L. OBERSTAR, MINN. HENRY J. NOWAK, N.Y. ROBERT W. EDGAR, PA. MARILYN LLOYD BOUQUARD, TENN.  BARRY M. GOLDWATER, JR., CALIF. TOM HAGEDORN, MINN. ARLAN STANGELAND, MINN.  JOHN G. FARY, ILL. ROBERT A. YOUNG, MO. ALLEN E. ERTEL, PA. BILLY LEE EVANS, GA. RONNIE G. FLIPPO, ALA. NICK JOE RAHALL II, W. VA. DOUGLAS APPLEGATE, OHIO GERALDINE A. FERRARO, N.Y. EUGENE V. ATKINSON, PA. DONALD JOSEPH ALBOSTA, MICH. WILLIAM HILL BONER, TENN. RON DE LUGO, VIRGIN ISLANDS GUS SAVAGE, ILL. FOF0 I. F. SUNIA, AM. SAMOA BUDDY ROEMER. LA. BRIAN J. DONNELLY, MASS. RAY KOGOVSEK, COLO.  NEWT GINGRICH, GA. WILLIAM F. CLINGER, JR., PA. GERALD B. H. SOLOMON, N.Y. HAROLD C. HOLLENBECK, N.J. H. JOEL DECKARD, IND. VVAYNE R. GRISHAM, CALIF. JIM JEFFRIES, KANS.  •  BOAR0 a:7  61.1orit5 anb Trangportation  1981 SEP -gurfiii/bac of ikepres'entatibe5 Prnif:  iloom 21G3, REr4  tIFFICE: °F - •  turn Jf)ou5e Office itiluilbing  sbington, D.C. 20515  rita-t44,NE:  AREA CODE  202. 225-4472  JACK FIELDS, TEX. GUY MOLINARI, N.Y. E. CLAY SHAW, JR., FL-A. BOB MC EWEN, OHIO FRANK WOLF, VA. SALVATORE J. D'AMICO, SPECIAL COUNSEL AND STAFF DIRECTOR RICHARD J. SULLIVAN. CHIEF COUNSEL CLYDE E. WOODLE, CHIEF ENGINEER LARRY REIDA, MINORITY COUNSEL  September 3, 1981  Honorable Paul A. Volcker Cnairman, Board of Governors of the Federal Reserve System Washington, D.C. 20551 Dear ivir. Chairman: The Subcommittee on Publ ic Buil dings and Grounds of the House Committee on Publ ic Works and Transportation pl ans to commence in-depth hearings on Septenj.lm_2 - 2,__1.984-1— concerning the past, current and projected space needs of the Federal government. During the hearings, major emphasis wi 1 I be focused on space under the jurisdiction of the General Services Administration (GSA), the government agency charged wi th primary jurisdiction for providing space to house departments and agencies and provide general ly for the housekeepi ng functions of the executive branch. In this regard, the Subcommittee wi 1 I thoroughly review impl ementation of Publ ic Law 92-313, which authori zed GSA to charge agencies rent for space they occupy in order to (1 ) induce savings by maki ng Federal agencies account for the cost of the space they occupy and (2 ) al low GSA to improve service to customer agencies by providing greater fl exibil ity in funding publ ic buil dings activities. In addition, emphasis wi 1 1 be focused on properety acqui red or leased under the independent authority of departrnents and agencies, general ly. As such, the avail abil ity and accuracy of data on the attached sheets regarding past, current and future space needs of your agency wi 1 1 pl ay a signi ficant role in assessing federal space needs. A projection of future space requirements must be made to consider cost-effective pl anning in view of current Judgetary restraints. This information wi 1 1 al low the Subcommittee the opportunity to forecast not only changes attributable to budget cuts in particul ar programs under tile jurisdiction of your agency but al so the opportunity to fine-tune space currently util i zed for such activities. Oct]y, the Subcommittee wi 1 I receive further testimony on H.R. 1938, a bil 1 to establ ish the Publ ic Buil dings Services in the General Services Administration, and for other purposes, and S. 533, a bil I cited as the "Publ ic Buil dings Act of 1981." Your cooperation in providing the requested data to the Subcommittee by September 17, wi 1 I be appreciated. It is further requested that an empl oyee of your departnent or agency contact Nancy Vi tal i or Tom Qui 1 I an, Committee staff, at 223-9161 , so that any questions rel ating to this data can be clarified, as wel 1 as a date for your appearance before the Subcommitttee can be arranged. Every best wish. Si ncerely,  Encl3sure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  John G. Fary Chairman, Subcommittee on Publ ic Buil dings and Grounds  •  • BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  September 21, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Jake Garn Chairman Committee on Banking, Housing and Urban Affairs United States Senate 20510 Washington, D.C. Dear Chairman Garn: The Federal Reserve Board staff has completed the enclosed study, as requested by the Committee on Banking, Housing and Urban Affairs, of the potential implications of the acquisition of thrifts by bank holding companies. The study suggests that, in general, policy and economic considerations that have been the basis for precluding bank holding companies from acquiring thrifts have diminished or are relatively insignificant. While problems of regulatory inconsistency among the various agencies with responsibilities over the institutions involved in an inter-industry acquisition could arise, the report also suggests such problems could be resolved with reasonable ' coordination. The report also identifies potential benefits resulting from enhanced competition and wider accessibility to services in consumer finance markets. In forwarding this staff study to you, I would emphasize that the Board has not yet completed its own consideration of the public policy questions involved in affiliation of commercial banks and thrifts. That consideration will be proceeding in the weeks ahead, taking account of the present strained situation of some thrift institutions and legislative initiatives. As you know, the Federal Reserve has statutory authority to approve bank holding company acquisitions of thrifts. As a matter of policy, the Board, in evaluating all the circumstances during the 1970's, did not approve such acquisitions, and we have refrained from entertaining such proposals over the past year in the light of our own -and Congressional concern that the question be restudied and evaluated in the light of current and prospective developments. In view of the rapid changes now taking place in U.S. financial markets, and with the new analysis before us, that approach is now being reexamined.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • The Honorable Jake Garn Page Two  The immediate question before us is whether a bank holding company should in any circumstances be allowed to acquire a thrift institution that is in serious financial difficulty. As you know, the Federal Reserve has supported passage of the so-called Regulators' Bill, which would provide certain tools enhancing the ability of the supervisory agencies to deal with distressed thrift institutions. Among other things, that bill includes criteria specifying limited circumstances in which cross-industry acquisition of thrifts would be allowed. Other sections of the bill would also help the supervisory agencies in maintaining the viability of troubled thrifts, thereby reducing the number of instances in which it may be necessary to have a thrift acquired by another institution. In the absence of this legislation, the Board believes that the public interest may dictate that the Federal Reserve may soon need to use its existing, broader statutory authority to approve bank holding company acquisition of thrifts on a caseby-case basis; in the particular instance of troubled thrifts, any adverse effects may be more than compensated by substantial public benefits. In my own view, taking into consideration the trend toward provision of thrift institutions with full banking powers, some of the adverse factors underlying more general disapproval of bank holding companies acquiring thrifts may be • diminishing. However, as indicated above, the Board has not yet reached a policy conclusion in this area. Sincerely,  Enclosure  IDENTICAL LETTER TO SENATOR WILLIAM PROXMIRE  PAV:pjt bcc: Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  yr"  .•• • • •• of GOvt •.  •  • BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  September 18, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Mike Lowry Member of Congress 107 Prefontaine Place South Seattle, Washington 98104 Dear Mr. Lowry: Thank you for your letter of August 27 concerning a constituent in Burien, Washington, who is having difficulty obtaining pennies for his grocery business. Unfortunately, the difficulty in obtaining the one-cent coin in the Seattle-King County area is an experience that is currently being shared nationwide. In fact, a recent survey of all Reserve Banks and Branches indicated that 62 percent of the Reserve offices are receiving continuous complaints about penny availability. The Federal Reserve System and the Bureau of the Mint are aware of the current limitations in the availability of the penny and are actively taking steps to resolve the situation. The following paragraphs explain these steps, as well as the events surrounding the recent growth in penny demand. The increase in penny demand over the past two years has far exceeded the historical growth in coin demand and pushed production levels to the limit of the Mint's capacity. In February 1980, demand for pennies was running 87 percent above the same period in 1979. This unusually large increase was attributable to the public's withdrawal of pennies from circulation when copper prices rose from $.93 per pound in December 1979 to a peak of $1.43 in February 1980. By March 1980, the demand for pennies so greatly exceeded available supplies that the Federal Reserve System began to allocate cents on a monthly basis, based on 1979 payout levels. This program has had to be continued throughout 1980 and into 1981 because demand has continued to exceed supplies, despite the decline in copper prices. The same phenomenon of extraordinary penny demand occurred in 1974 when the price of copper peaked at $1.41 per pound. Such speculative withdrawal of pennies from circulation, and the resulting high demand levels, can be expected to occur   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Mike.wry• Page Two  again if tho price of copper increases Nbove $1.00 pound. To counter such demand, the Bureau of the Mint proposed a chansc in the metallic composition of the penny from 95 percent coppe r and 5 percent zinc to 97.6 percent zinc and 2.4 per-cent copper. proposal was approved and introduction of the new zinc penny This is scheduled for December 1981: This change in corTositio n should reduce or eliminate the speculative demand for the one-cent Coin, and result in greater penny- availability and a substantia l ani:ual savings in production costs due to tho lower zinc price (zinc averaged less thnn $.45 per pound in 1980). It should also be mentioned that the current Federal Reserve System demand for pennies is runnin approxim ately 1.4 billion per month; however, total monthly production is aroun d 1 billion, due to budget constraints at the Mint. These short age ,; are unavoidable, given the budget situation, and will mean continued allocations by the Reserve offices until production or the new zinc penny reaches maximum levels and the /lint is the necessary funding to meet penny demand. While the Reser \e offices would like to satisfy all commercial needs for the one -cent coin, the supply has been severely limited. Ther eiore, to alleviate some of the pressure, until sufficient penny supplies are available, the Federal Reserve System has and will continue to employ what we believe to be a fair and equit able allocation system. I hope this letter answers the questions raised by your constituent •and assure you that we are doing everything possible to ease the burdens of the present shortages. Sincerely, Wakil A. Voicku  MLB:CO:vcd (#V-241) Gov. Gramley bcc: Margaret L. Barfoot Mr. Allison Mrs. Mallardi (2) V Mr. App   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Action assignel Mr. Allison  •  MIKE i.OWRY SEVENT1' DISTRICT  commITTEEst • BANKIF ;G, FINANCE AND URBAN AFFAIRS  WASI '4GTON 1206 LONGWORTH  ISE OFFICE BUILDING WASHINGTON D.C. 2051ri (202) 2 5-3106  107 PREFONTAI, PLAcE Soti TH SEATTLE, WA`_ • 'NGTON 9810 4 (206) 4 2-7170  .  tgrezzoitbt POID5e Of ikr teatbington,  ittbatatess Itatibe5 20515  August 2,  SUBCOmmMEESI HOPSING AND COMMUNITY DEVELOPMENT INTERNATIONAL TRADE. INV ESTMENT AND MONETARY POLICY INTERNATIONAL DEVELO PMENT INSTITUTIONS AND FINANC E MERCHANT MARINE AND FISHERIES SUBCOMMITTEES: FISHERIES. WILDLIFE CON SERVATION. AND THE ENVIRONMENT COAST GUARD AND NAVIGA TION  Paul Volcker Chairman, Board of Governors Federal Reserve System Washington, D.C. 20551  PANAMA CANAL/OUT ER CONTINENTAL SHELF  Dear Chairman Volcker: Recently a grocer in th e town c):7 Burien, Wash ington called my office asking for assistanc in ob ta in ing pennies for his business. he had asked his b,ink for ad di tional pennies to meet customer demand but was Lold th at the bank wos also in short supply an d had been unable to ha ve its alloLment increased by the Seattl e Federal Peserve Bank . As you undoubtedly kn ow, businesses such as stores require a grea grocery t deal of change during th e course of a day. While a number of factors may influe nc e the av„ailability of pennies at any one time, I believ e th e government should take all necessary steps to ensu re that an adequate supply of its currency is available to the public. I would appreciate yo ur having appropriate of the Board review personne] the penny supply situ at io n in the SeattleKing County area and take whatever steps ne cessary to improve the distribution and availability of pennie s to the public. Thank you for your at tention to this matter respond to my office . Please at 107 Prefontaine Plac e South, Seattle, WA. 98104. !$111 Ca . S.41  cr) .  nr. !'„,j  c.; lir "  Or)  •'L.1 o,  Sincerely,  C.:  CX  44, CC s  CT)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  to_  MIKE LO Membe f Congress  September 18, 1981  The 'donorable Frank R. Wolf House of Representatives . Washington, D. C. 20515 Dear nr. Wolf: Thank you for giving mc the op portunity to co concerns ot many of your constituents about high inte mment on the rest rates. I understand and am high interest rates place on fully sympathetic to the burdens that the businesses and individu most heavily dependent on credit. Dut it should Le re als that are co inflation is the basic sour ce of the difficulties; the gnized that cost of Lorrowin, „ money has become inflated ju st as pr ic e: ; on other goods have. The current level of intere st rates reflects inflation buildinL, for many years, co that has been mpounded by expectations th at price increases will continue to be quite rapid. Recognizing the role of mone y in the inflationary proc the Federal Res, rve is purs ess, uing a policy that restrict s the growth oi money and credit. Lut monetary policy cannot carr y alone. As you mentioned, President Reagan's economic the burden reco program of tax and spending cuts is also important in th very tion fiCilt. iluch has been e inflaaccomplished in cutting spen ding, but the battle is far from won. Despite the great progress that has been made, we are still faci ng the prospect of largo de ficits in the next few years at least. We ar c no w at a critical po the battle to gain control over inflation, and it is im int in perative that the Administrrition and Co ng re ss rc du ce budget outlay Any indication of backing away from the objective of at s further. taininf, a balanced budget would sure ly intensify pressures in th e markets and make the steps necessar y to control inflation more and painful. difficult I cannot offer predictions as to when we can ex sec an easing in interest rates except that with the ap pect to monetary policy in place, propriate the sooner budgetary policy is convincingly on track, the so oner we can hopc for a redu ctio inflation and interest rate s and a return to a more stab n in prosperous environment. le and I hope you find my cormen ts helpful, and I assure yo that I appreciate hearing of u your concerns. CEH:JSZ:vcd (V-249) bcc: Ms. Wing Ms. Headly   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  °,0;  Sincerely, • 72),  •  Acton assigned Mr. Kichline INRANK R. WOLF 10TH DISTRICT  VIRGINIA  SOAR° cr  WASHINGTON OFFICE  f.-Rd s, tI sieitk ---,,,v:, ‘.....  POST OFFICE AND CIVIL SERVICE  Th,.•  PLEASE RESPOND TO ADDRESS CHECKED  COMMITTEES:  Congre5g of tbe Einiteb  414 CANNON BUILDING  31)ouse of ilepretentatiba‘  WASHINGTON, D C. 20515 (202) 225-5136  SUBCOMMITTEES: CIVIL SERVICES HUMAN SERVICES POSTAL OPERATIONS  SEP -9 PH 9: 28  REf. Iliattington, 11D.C. 20515 OFFICE. OF TIT  CONSTITUENT SERVICES OFFICES: 1651 OLo MEADOW Ro. SurrE 115 MCLEAN, VIRGINIA 22102 (703) 734-1500  sePtember 81  1981  R  SUBCOMMITTEES: AVIATION  C..-i.ellPH4  WATER RESOURCES  19 E. MARKET ST. R00M 4B LEESBURG. VIRGINIA 22075 (703) 777-4422  Mr. Paul A. Volcker Chairman Federal Reserve Board 21st and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Volcker: I have received several dozen letters in the past few weeks from my constituents in Northern Virginia relating their economic plight directly attributable to high interest rates. These letters have come from small businessmen, home builders realtors, construction contractors and mortgage bankers who are deeply concerned about the cause and effect relationship between soaring interest rates and the deterioration of the housing industry and its related businesses. I also have heard from frustrated middle-income earners who can't afford to pay sky-high mortgages inflated by high interest. They all are pleading for their growing financial burdens fueled by high interest and inflation to be eased. Frankly, I don't have a satisfactory answer for them. That is why I am writing to you to ask that you explain the Federal Reserve Board's current monetary policy. I would hope that you also could offer some indication when interest rates will begin to drop, now that President Reagan's economic recovery program of tax and spending cuts is in place. I would appreciate a reply as soon as possible to this request. cer  R. Wolf Member of Congr FRW/jjs   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  •  • BOARD OF GOVERNORS .' • co -4..... : ' 0 11 —1.1 ...-4 %,C41‘ :)[[ !7, El [: 'r RALO ••...•.•  tr,. :2' I— • ,-, • (.1. 44.,.  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20ESI  .a ..  September 18, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Bruce F. Vento House of Representatives Washington, D.C. 20515 Dear Mr. Vento: I am pleased to have the opportunity to comment on several issues we were unable to pursue adequately at the hearings last July before the House Banking, Finance and Urban Affairs Committee. The first two issues you raise relate to concerns about the equitable distribution of a restricted supply of credit. The Federal Reserve monitors developments in credit markets regularly and carefully, to remain informed as to both the volume and terms of credit flows to various borrowers. Recently, the staff completed a study, at the request of the Senate Banking Committee, discussing the impact of credit stringency on the sectors about which you expressed particular concern; I have enclosed a copy of that report. In it, we concluded that housing, agriculture and automobiles are areas of the economy that have been demonstrating particular weakness in recent quarters. With respect to small business, it was difficult to generalize due to a lack of data and to the fact that these businesses are present throughout the economy. A number of factors have played a role in the current difficulties of these sectors, including weather conditions for agriculture and past price increases for autos and houses, but it is clear that credit conditions also have been important in reducing activity in these markets. To some extent, this reflects the nature of the goods or services involved. Home purchases, for example, involve extremely large outlays, financed by credit, and are often postponable, so it is not surprising that the housing industry has been especially hard hit by high interest rates. I do not believe that credit conditions have been materially affected by loans for takeovers and other financial purposes. The amount of credit involved with the takeovers is not that large relative to total flows in the economy, and many of the lines were essentially duplicative. Also, foreign banks are responsible for many of the lines of credit associated with recent takeover activity. In current circumstances in which many firms and industries are in significant difficulty, I can understand your concerns about takeover loans. I share some of those concerns, however, in the broadest sense takeover loans in themselves should   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  %Or  The Honorable Bruce F. Vento Page Two  not be a drain on our limited supply of savings, because stockholders selling out obtain funds that are available for reinvestment (Or for loan repayment), thereby recycling these funds back into the credit markets. However, I recognize that in the short run, and particularly as the financing is focused on the banking sector, the credit demands associated with the takeovers can have some impacts on the distribution of credit. In committing themselves to a large volume of takeover loans, banks may restrict for a time their lending to other potential borrowers, but any such effects should be quite small and short-lived. The Federal Reserve also shares your concern about the impact of high interest rates on certain sectors of the economy. In my view, it would be a mistake, however, to attempt to deal with this problem by allocating credit to certain sectors of the economy. Our limited experience with credit controls last spring convinced me that this approach is undesirable. Cne important step that can be taken to diminish pressure on capital markets and to reduce interest rates is to cut down on the volume of borrowing by the federal government. I have spoken out frequently cn the need for Congress and the Administration to work together to pare outlays to bring them more in line with prospective receipts. These actions will help to reduce interest rates to private borrowers both by reducing the amount of credit preempted by the federal sector and by bolstering the convictions of investors that all parts of government are committed to consistent and coordinated anti-inflation policies. I hope you find these comments useful. Sincerely,  Enclosure DLK:JLK:CO:DR:pjt (#V-I 210) bcc: Mr. Kohn Mr. Kichline Mrs. Mallardi (2) Yr(Encl. 9/1/81 study, "The Impact of High Interest Rates on the Housing, Automobile, Agriculture, and Small Business Sectors")   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BRUCEF.VENTO II.T11 DISTRICT, MIMNITSCrTA  Actio4pssigneri Mr. Kichline  t  HOUSE cr)%1LA IT Tf U ON EIANKING FINANCE AND URBAN AriAIRS  •  -egirCANNoP4 Housr Orricr Oulu:mm.3 WASHINGTON.  C.  20515  (202) 225-6631  Congt55 of tlie Ziniteb gptato5 Poufse of 3Arprei4entatibefS  Disioticr R 0064 150 Mugs PARK PLACC  13.C. 20515  405 SISt 1ST S TWIST  SAINT PAUL. MINN.  rA  551c  (612) 725-7724   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  HOUSE COM M TrE ON INTERIOR AND INSULAR AFFAIRS  -k)M P.4 ITT EE *LECT-r HOUSE) I -,1 ON Ad-44G .T cz) •. *n :rn C.__ 1.; r T1 .- (.7 C r-, 7 . .-_-_-, _ -"r,  July 27, 1981  Honorable Paul Volcker Chairman, Board of Governors Federal Reserve Board Federal Reserve Building Constitution Avenue Washington, D.0 20551  •r -1 ...,... : ....:: ./r1 1 : :Z.") :--......za Y _.  • :-... ,i rN) ,•„ r , —4: I  CO  —11 . C  ., CO C  CD L71  Dear Mr. Volcker: I took a great interest in the testimony you presented last week before the House Banking, Finance and Urban Affairs Committee. However,1 due to our limited questioning time, I was unable to pursue several issues of concern to me. Thus, I am now submitting several questions in writing. First, I am disturbed about the uneven effect the Feds tight monetary policy has had on our economy. In particular, I am disturbed by the lack of credit equity under the Fed's policy. s'hile large, cash rich corporations appear to have no trouble lining up immense, below prime lines of credit for mergers or takeover attempts, our small business, agricultural and home building sectors are in dire straits for lack of affordable credit. Each week papers report new stories of failing farmers and bankrupt businesses. Has the Fed established any economic criteria for determining aL what point our agricultural, small business and housing sectors will have suffered too much damage? And, has the Fed developed any contingency plan to provide better credit equity to these sectors if relief does not come soon? Second, I have strong concerns about the disproportionate supply of our scarce credit resources that are being controlled by large corporate concerns. The Conoco takeover mania that has drawn considerable attention in the news media has illustrated the immense lines of credit that these corporations are able to raise for purely financial purposes with what appears to be little undue concern tor interest rate levels. Has the Fed undertaken any study of who is receiving credit_ in our economy, what prices are being paid in interest rates and how this credit is being used? I think such a study would be a useful tool in attempting to establish a more equitable credit agenda for this country. I would also appreciate learning your thoughts on possible alternatives the Fed has considered to help curb speculative or purely financial lending and ensure that our credit resources are channeled into productive concerns. My third area of concern regards the use of a trigger mechanism for a third year tax cut. Do you think conditioning a third year tax cut to  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  7  ( 7'  I-::i  /I  At  al' . .•• of GOvt •. '0 i? •  .7. 'i--.4- etl: ( co0,/,-6.. ,,--4,-7,,  ..) • O ,70'44/ •, ‘o; • . ,,,o' i , ifi '•-.,-, 4s. .„ ' ,[i[i .:4'<'-0 - 6-= .• ••.eRAL Rts • • • •.• •  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20SSI  • September 18, 1981  The Honorable L. H. Fountain House of Representatives Washington, D. C. 20515 Dear Mr. Fountain: Thank you for your letter of August 27 requesting comment on the concerns of your constituent, Mr. Sherrill Faw. Mr. Faw suggested that the Federal Reserve Board develop programs to increase productivity and to discourage the "unproductive" use of credit for mergers. He also urged that interest rates be lowered as an aid to the housing industry. The Board of Governors, of course, recognizes the importance of increasing productivity in the economy, but we have no direct influence in this area. The Federal Reserve has followed closely credit developments surrounding recent merger bids. We believe that lending and coullaitment activity associated with takeover financing is unlikely to have a lasting impact on the cost or availability of loans to other borrowers. Moreover, in the broadest context, takeover loans in themselves should not be a drain on our limited supply of savings. The proceeds from stock sales are available for reinvestment or for loan repayment, both of which recycle funds back into credit markets. We recognize that--because financing is concentrated in the banking sector--in the short-run credit demands associated with takeovers may restrict for a time certain institutions from lending to other would-be borrowers. This outcome would, to the extent that such borrowers have no alternative credit sources, potentially be harmful to the economy. However, in light of the temporary nature of these disturbances and the lack of evidence that the actions of the banks have significantly curtailed the flow of credit to other borrowers, we feel that the imposition of controls on merger-related transactions would not be a proper course for public policy. Our feelings in this regard are reinforced by the likelihood that significant costs would be associated with attempts to interrupt the free flow of credit in our financial system. The Federal Reserve is well aware, of course, of the adverse effects of high interest rates in the homebuilding industry. It would be unwise, however, for the Board to induce   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • Page 2  •  •  our economic performance is prudepL and advisable? Will the three year tax cut proposal have any effect on the Fed's ability to set or maintain a monetary policy? Do you see any kind of trade off in terms of expectations? For example, which, in your opinion, is more stabilizing 1911ey market, an expectation of continued tax reduction or a more prudent approach that hinges on economic performance? I realize that you have been reluctant to voice a strong opinion on the tax cut. However, I would urge you to become more vocal on fiscal matters which will impact on our economic conditions. While monetary policy is indeed separate and distinct from fiscal matters, the two are closely interrelated. Certainly, coordinated monetary and fiscal policies provide a much more effective comprehensive economic policy than one in which fiscal and monetary work against each other. The Fed was created by Congress as an independent body that could chart its own course without being burdened by political concerns. It is important that we know and understand your direction and concerns so that we can attempt to fashion a complementary fiscal policy. Thank you very much for your attention to these matters. Warm regards. 1  B  BFV/cm  ce F. Vento ember of Congress  I  411  The honorable L. il. Fountain Page Two  a decline in market interest rates by fostering a more rapid expansion of money. Such An action would only exacerbate inflationary pressures and ultimately lead to higher interest rates and even greater economic difficulties. A sustained lower.ing of interest rates will be possible only when actual and anticipated inflation slow substantially. As Faw indicated, an appropriate fiscal policy has an inportant role in the fight against inflation. Only if there is a credible, lons-range commitment to both fiscal and monetary restraint can we hope to see a reversal of the expectational spiral that has given such powerful momentum to the rise of wa{,es, prices, and interest rates. I hope that these comments will be helpful. me Lnow if I can be of further assistance. Sincerely, Mid)Donald  Winn  Donald J. Winn Assistant to the Board  JLF:RMF:JLK:vcd (V-240) cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Kichline Mr. Fisher Mr. Freund Mrs. Mallardi  Please let  ••• ",;,*'  AkAction assigned Mr. Kichline  L. H. FOUNTAIN  IIP  SECOND DIS TRICT  WASHINGTON OFFICE:  •  NORTH CAROLINA  wALTER J. PITTMAN ADMINISTRATIVE ASSISTANT  MEMRER  TED L. DANIEL EXECUTIVE ASSISTANT  Congre5E; of tijc Unita( .7-7)trite  COMMITTEE ON GOVERNMENT OPERATIONS  2.23 RAYBURN HOUSE OFFICE BUILDING  gious5t of iktpresSentatit30  SUBCOMMITTEE: CHAIRMAN, IHTERC.OVERNMENTAL RELATIONS AND HUMAN FIcsouncts  WASHINGTON.  Zillasibinaton, att. 20515  DISTRICT OFFICEs  commir-ILL ON  August 27, 1981  FOREIGN AFFAIRS  I  EDGCCOMDC COUNTY Orr;ct BUILDING TARDORO, NORTH CAROLINA 27886  f  SUBCOMMITTEES: INTERNATIONAL SECURITY ANO SC I ENTIFIC AFFAIRS  C. 20515  TELEPHONE:(202) 225-4531  TcLr_plionic, (919) 823-4200  EUROPE AND THE M IDDLE E.AST   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Paul A. Volcker Chairman Federal Reserve System Rederal Reserve Building Washington, D. C. 20551 Dear Mr. Chairman: Enclosed is a self-explanatory letter I have received from Mr. Sherrill Faw of Wilkesboro, N.C. I'm sure we all share Mr. Faw's concerns, and any information which you could supply on this matter will be appreciated. With thanks and kindest regards, I am Sincerely, 4 ‹:/ ; r:/0 /4? •4:4L4A-El.d L. H. Fountain  LHF:gw Enc.  r  r•••  r  1  , 7  AUG211981 41 ,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ..91corri# Jaw Cowirtidion Conylculy, "Customer Satisfaction is Our Business"  201 CURTIS BRIDGE RD. P. O. BOX 779 WILKESBORO, N.C. 28697 Phone: 667-7161  August 18, 1981  Representative L. H. Fountain U. S. House of Representatives Washington, D.C. 20515 Dear Representative Fountain: In order to provide the American Dream of Home Ownership to the Citizens of North Carolina, it is imperative that interest rates be lowered to reasonable levels. This would then enable the building industry to again sell and build houses, thereby increasing employment, and cash flow for the economy. I would like to ask you to continue working for additional budget cuts and program deferments in order to reduce the federal deficit and permit lower interest rates. Also, please encourage the Federal Reserve Board to develop a more equitable program to encourage productivity, discourage use of credit for unproductive programs such as mergers, and lower interest rates. Thank you for helping the Citizens of North Carolina and the Building Industry.  Sherrill Faw President SF/tls   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • September 18, 1981  The Honorable Alan Cranston United States Senate 20510 Washington, D.C. Dear Alan: Thank you for your letter of September 11 recommending Mr. Ilichael 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. I appreciate your taking the time to bring him to our attention. Sincerely,  CO:pjt (#V-257) bcc: Mrs. Bray (w/copy Mrs. Mallardi (2)  of incoming)  •  •  ALAN CRANSTON   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CALIFORNIA  'ZICnifeb Ztatez -Senate WASHINGTON, D.C. Z0510  September 11, 1981  CD "-r1 " . 1  t (7"- )  I  7  _; •  ;r r -  7T .,  '1  Mr. 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, I'm pleased to recommend two Californians from the Los Angeles area, Michael Roster and Michael E. Thomas, for appointment to the Federal Reserve Consumer Advisory Council. As you can see from the enclosed, Michael Roster is an attorney with considerable experience in every facet of the consumer credit field. Mike Thomas has been a manager in the Fluor Corporation for several years and, as such, has monitored the activities of the Federal Reserve Board and Consumer Council. I believe both are well qualified to serve on the Council and hope you will give them your most thoughtful consideration. Best wishes,  Enclosures  • •  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, Michael Roster, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Alan Cranston  July 7, 1981  U.S. Senate Washington,  D.C.  20510  Deaf Senator Cranston,  Consumer Advisory Council Confirmation of Nomination  Attached is a copy of correspondence nominating me for membership on the Consumer Advisory Council of the Federal Reserve System.  Being one of your loyal constituents, I  would appreciate your confirmation of my nomination to the Council. As you are aware, the Consumer Advisory Council was established in 1976 to advise the Board of Governors on the exercise of its duties under the Consumer Credit Protection Act and on other related matters.  The Council's membership  is intended, to the extent possible, to represent all interests in the area of consumer financial services regulations.  In my position as domestic cash manager for the Fluor Corporation, I have professionally monitored activities of the Board and Council for several years and find that a member with my background appears warranted for the following reasons-  •  A majority of the Council's membership represents academic or financial institutions.  Only a few members are not of  these institutions and it is aconcern whether the needed  1  scope and impartiality in its recommendations can exist given the Council's current composition.  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Senator Alan Cranston  July 7, 1981 2  •  There is an obvious absence of corporate representation on the Council.  Yet a major push for the development  of new financial services has often come from the corporate sector in response to and in anticipation of employee needs.  Much of my time has been spent in the identification,  analysis, design and implementation of employee services for both the banking and corporate environments. •  The trend in financial services will continue to be toward automated services.  The need for individuals on the  Council well versed in both finance and systems is obvious. I have operating backgrounds and conceptual experience in both of these areas. In summary, there is a need on the Council for someone who can address issues from both a conceptual and experiental viewpoint, who is versed in consumer needs from a non institutional perspective, and can view issues representing the interests of the consumer, financial and corporate sectors.  I hope you concur with my nomination and give  it your full support as I have a sincere desire to serve you and our fellow constituents in a constructive and beneficial manner.  Respectfully yours,  Michael E. Thomas  •  •  CALIFORNIA CANADIAN BANK 700 SOLJT H FLOWER ST REET • LOS ANGELES. CALIFORNIA 90017  J. J. QUINN  June 26, 1981  Senior Vice President ".••  Board of Gcwernors of the Federal Reserve System W'ashington, D.C. 20551 Attention: Dolores S. Smith, Assistant Director Division of Consumer and Community Affairs Gentlemen: Consumer Advisory Council Nomination for Membership Michael E. Thomas As a member of the consumer finance community for over twenty years, I am pleased to nominate Michael E. Thomas for membership on the Consumer Advisory Council. Michael has experience and knowledge that will bring to the Council a creative and contemporary view of consumer and other financial services, with particular emphasis on the developing area of electronic banking. As domestic cash manager for the Fluor Corporation, he has become known for his design and developmental abilities in the use of electronic funds transfer, automated teller services, etc., helping to make Fluor one of the industry leaders in employee services and cash management. While representing over 25,000 Fluor employees nationwide, he has become intimately involved with the banking services needs of the consumer and is able to judge these needs from the banking and corporate viewpoints. Michael will bring to the Council the ability to see several sides of an issue, based on his years of practical experience. Through an advanced degree in finance and business economics and as a lecturer on economics at colleges in the area, Michael is able to view issues within a theoretical framework as well. Michael has had extensie experience in systems development as a member of Fluor's computer services department, where he was responsible for project systems in the Western Hemisphere. In this capacity, he has learned the technical possibilities and constraints of data processing and has been able to relate its applications to the public and private environments. In summary, I heartily recommend Michael for a aosition on the Consumer Advisory Council. He offers a unique combination of experience, kmowledge and interest in the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 2  automated financial services areas that is sure to serve the Council and the consumer well.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Very truly yours,  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, Michael E. Thomas, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  •  -- The names and affiliations of current Council members (and the expiration date of their term of office) follow:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Chairman Ralph Rohner Professor Catholic University Law School Washington, D.C. December 31, 1981 Vice Chairman Charlotte H. Scott Professor of Business Administration and Commerce University of Virginia Charlottesville, Virginia December 31, 1982 Arthur F. Bouton President-elect American Association of Retired Persons Little Rock, Arkansas December 31, 1983 Julia H. Boyd Alexandria, Virginia December 31, 1982 Ellen Broadman Attorney Consumers Union Washington, D.C. December 31, 1982  Joseph N. Cugini President & General Manager Westerly Community Credit Union Westerly, Rhode Island December 31, 1983 Richard S. D'Agostino Senior Vice President Girard Bank Philadelphia, Pennsylvania December 31, 1982 Susan Pierson De Witt Assistant Attorney General and Chief of Consumer Protection State of Illinois Springfield, Illinois December 31, 1983 Joanne Faulkner Attorney New Haven Legal Assistance Association, Inc. New Haven, Connecticut December 31, 1982 Luther R. Gatling President Budget & Credit Counseling Service New York, New York December 31, 1983  James L. Brown Director Center for Consumer Affairs Milwaukee, Wisconsin December 31, 1981  Vernard W. Henley President Consolidated Bank and Trust Company Richmond, Virginia December 31, 1982  Mark E. Budnitz Associate Professor Emory University School of Law Atlanta, Georgia December 31, 1981  Juan Jesus Hinojosa Partner Hinojosa & Ortiz McAllen, Texas December 31, 1982  ••   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Shirley T. Hosoi Vice President, Strategic Planning First Interstate Bancorporation Los Angeles, California December 31, 1982 George S. Irvin President George Irvin Chevrolet Denver, Colorado December 31, 1983 F. Thomas Juster Director Institute for Social Research Survey Research Center University of Michigan Ann Arbor, Michigan December 31, 1982 Richard F. Kerr Cincinnati, Ohio December 31, 1981 Harvey M. Kuhnley President and Chairman of the Board Twin City Federal Savings & Loan Association Minneapolis, Minnesota December 31, 1981 Robert J. McEwen, S.J. Professor of Economics Boston College Chestnut Hill, Massachusetts December 31, 1982  Margaret Reilly-Petrone Professor of Economics Montclair College Upper Montclair, New Jersey December 31, 1982 Rene Reixach Staff Attorney Greater Upstate Law Project Rochester, New York December 31, 1982 Florence M. Rice President Harlem Consumer Education Council New York, New York December 31, 1981 Henry B. Schechter Director Office of Housing and Monetary Policy AFL-CIO Washington, D.C. December 31, 1981 Peter D. Schellie Partner Bingham, Dana & Gould Washington, D.C. December 31, 1982 Nancy Z. Spillman Director for Economic Education and Professor of Economics Los Angeles Trade Technical College Los Angeles, California December 31, 1983  Stanley L. Mularz President Trans Union Credit Information Company Chicago, Illinois December 31, 1983  Richard A. Van Winkle President Lockhart Finance Company Salt Lake City, Utah December 31, 1981  William J. O'Connor, Jr. Partner Phillips, Lytle, Hitchcock, Blaine & Huber Buffalo, New York December 31, 1983  Mary W. Walker President National Bank of Walton County Monroe, Georgia December 31, 1981  • •  September 18, 1981  The honorable Douglas Bereuter House of Representatives Washington, D. C. 20515 Dear Ur. Bereuter: Thank you for your recent letter in which you express concern on behalf of your constituents about high interest rates. colleagues and I fully understand your alarm about the hardships that the high level of interest rates is imposing on businesses that are heavily dependent on credit. Unfortunately, there is no short-term solution to their problem. The only way to get sustainable reductions in rates is by attacking the source of the difficulty, and that is inflation. As you point out, over the years monetary policy has been alone in the inflation fight. President Reagan's economic recovery program of tax and spending cuts supplies a long missing coluponent of a comprehensive anti-inflation program. However, despite the progress that his plan achieves, we are still faced with the prospect of large budget deficits in the next few years at least. As you well know, this places added stress on the already strained financial markets. But, more importantly, the deficits reinforce dcep-sated fears of market participants that the government is not going to succeed in bringing the budget to balance. The Administration and Congress rust now cut budget outlays further to dispel those fears and relieve some of the strain. The course that must be followed in order to gain control of inflation is obviously not easy or painless. But if we falter, either by relaxing monetary restraint or by detouring from the path to a balanced budget, inflationary pressures will intensify, pushing interest rates still higher, and any progress made will have been lost. The next attack on inflation would then only be more difficult and painful. I hope that my comments are helpful to you. Once again, thank you for taking the time to sh,are your concerns with me. Sincerely, CEH:JSZ:vcd (#V-250) bcc: C. E. Headly J. S. Zeisel Mrs. Mallardi (2) \i   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  3/Paul A. Volcket  COMi 1ITTEE ON INTERIOR AND IRMNSULAR AFFAIRS  •  •  804RD oF G  SUBCOMMITTEES: WATER AND POWER RESOURCES ENERGY AND ENVIRONMENT  FEBETAL  INSULAR AFFAIRS  " s  1981 SEP -9  COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS suRcommITTEES: HOUSING AND COMMUNITY DEVELOPMENT  L.(  Congre55 of tbe  ECONOMIC STABILIZATION GENERAL OVERSIGHT AND RENEGOTIATION  Pottle of Aeprelentatibel  RURAL CAUCUS  Massbingtott, XI.C. 20515  DOUGLAS BEREUTER  nvERN'Rc • },‘  L  1ST DISTRICT, NEBRASKA WASHINGTON OFFICE:  Nic• 4314 LONGWORTH HOUSE OFFICE  PP 2: 15  tau.  BUILDING WASHINGTON, D.C. 20515 (202) 225-4806  DISTRICT OFFICES: 1045 K STREET P.O. Box 8Z887 LINCOLN, NEBRASKA 68501 (402) 471-5400 P.O. Box 213 WAYNE, NEBRASKA 68787 (402) 375-3030  September 8, 1981  Honorable Paul A. Volcker Chairman Federal Reserve System Twentieth and Constitution Ave., N.W. Washington, D.C. 20551 Dear Chairman Volcker: I have recently returned from a month long visit across the length and breadth of my District. At each stopping point, I heard farmers, small business owners, builders and others express their deep frustration and concern at the persistence of high interest rates. Many individuals told me frankly that they may lose their livelihoods if interest rate relief does not come soon and I believe them. These vital segments of our economy, so dependent upon credit for normal business needs, simply cannot endure under the current economic conditions. President Reagan has presented to the American public a bold four point n economic recovery program" designed to rid our country of high inflation, high unemployment, low productivity and high interest rates. Prior to the development and implementation of this program, the Federal Reserve Board, under your able leadership, has been alone in the battle against the monster of inflation. Now that the Congress has overwhelmingly approved the President's program, monetary policy need no longer carry the inflation battle alone; deep spending cuts and tax reduction incentives should help equalize the inflation fighting burden. At this point, therefore, I believe that the Federal Reserve should reexamine its monetary control policies. Although continued monetary restraint is ESSENTIAL in the long-term battle against inflation, we must recognize the disastrous short-term effects which unrelenting high interest rates are having upon many sectors of the economy. I would hope that some carefully crafted short-term relief may be devised soon. Otherwise, many farmers, small business owners and home builders may not be in business to profit from the economic propsperity which the Reagan "economic recovery" program will bring.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  d  •  •  . my  -  2  -  Your attention and that of the Board to these points is appreciated. Thank you. Best wishes,  -4Z0 Builaf UTER DOUGLA Member of Congress DB/ssn cc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Beryl Sprinkel Under Secretary of the Treasury for Monetary Affairs  1  1  •  • September 17, 1981  The Honorable Marjorie S. Holt House of Representatives Washington, D.C. 20515 Dear Ms. Holt; Thank you for your letter of August 24 concerning the role of monetary policy in the effort to defeat inflation. I fully agree with your view that a strong anti-inflation monetary policy stance, working together with fiscal constraint, will pay handsome dividends for the economy in the future. As you have noted, several areas of the economy--such as housing, agriculture, and small business--have been affected much more adversely than other sectors by the high cost of credit. The uneven impact of monetary policy was discussed during my recent appearance before the Senate Banking Committee, and you may be interested in the enclosed staff study on this subject. But solving the problems now being felt by those sectors suffering most from the high cost of credit is a difficult matter. Any additional program involving direct federal government expenditures would add to an already difficult budgetary problem. Funds budgeted for defense and the revenues foregone from tax reductions already portend difficulties in keeping spending in line with revenues. Just as inflation and high interest rates hurt particularly the most credit-sensitive sectors, such as housing, agriculture, and small business, relief from these forces will benefit these sectors the most. Thus, the fundamental solution to these difficulties is to combat inflation in general by attacking its root causes, including excessive monetary growth and the burdensome demand for credit by the government sector. Again, thank you for your words of encouragement and support. Sincerely, SiPaul A. VPIchoc  Enclosure JLF:DFS:JSZ:CO:DS:pjt (#V-238) bcc. Messrs. Kichline, Zeisel, Seiders, Freund Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  J
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