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) / . , r Is, ,. . .; ,____.'' ,.2)f   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Collection: Paul A. Volcker Papers Call Number: MC279  Box 11  Preferred Citation: Congressional Correspondence, November-December 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/c442 and https://fraser.stlouisfed.orearchival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. 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Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) mudd@princeton.edu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressional Correspondence November-December1981  L   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • 'Unita)Zfatez Zenate WASH I NGTON. D.C. 20510  December 31, 1981198zg!Hs r-  Mr. Paul A. Volker Board of Governors of the Federal Reserve System Washington, D.C. 20551 Dear Paul: Your kind holiday greetinc was most appreciated. B.A. joins me in wishing you a year of joy and happiness.  r13  December 31, 1981  The honorable William Proxmire United States Senate Washington, D. C. 20510 Dear Senator Proxmire: ommending Mr. Bill W. Thank you for your letter rec Consumer Advisory Council. s rd' Boa the of ber mem a as Dixon ounced the appointment On December 14, the Board ann Advisory Council, to sucer sum Con its to s ber mem new of nine ire this year. For your exp ms ter se who s son per se ceed tho ss release that lists those pre a ing los enc am I on, ati inform appointed to the Council. inees and received Mr. Dixon was on the list of nom ly, the number of positions tab ret Reg n. tio era sid con l carefu on to the number of qualified ati rel in ll sma is led fil to be persons were nominated and 500 ost alm r, yea s Thi es. ine nom s on the Council. Thus, factor gs nin ope e nin the for d ere consid ns and experience of each tio ica lif qua al son per the ond bey decision. The Board made a s rd' Boa the o int d ere ent e nomine to achieve geographic repree, mpl exa for , ort eff ted concer e Bank districts, and to erv Res lve twe the ng amo ion sentat on among consumer and financial ati ent res rep of e anc bal a p kee ls rd also tried to select individua Boa The . sts ere int ry ust ind ment the backgrounds and ple com l wil ns tio ica lif qua whose s whose terms continue through ber mem l nci Cou of ns tio ica qualif 1982 and 1983. erest in the Council The Board appreciates your int future recommendations. r you e hav to d ase ple be ld and wou Sincerely,  Enclosure (12/14/81 P.R.) CO:vcd (V-382) incoming) bcc: Mrs. Bray (w/copy'of Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Cong. Liaison Office will drdft response JAKE GARR, UTAH, CHAIRMAN  JoolViTosvER, JOHN HEIN", PA. WILLIAM L. ARMSTRONG, COLO. RICHARD G. LUGAR. ALFONSE M. D•AM \TO, N.Y. JOHN H. CHAFEE, R.I. HARRISON SQ.,4ITT, N. MEX.  HARRISON A. WILLIAMS. JR, WILLIAM PROXMIRE. WIS. ALAN CRANSTON, CALIF. DONALD W. RIEGLE, JR., MICH. PAUL S. SAREtANES, MD. CHRISTOPHER J. DODD, CONN. ALAN J. DIXON, ILL.  M. DAMYY WA:_L, STAFF DIRECTOR HOWARD A. MENELL, MINOFUTY STAFF DIRECTOR AND C.OUNSEL  'ZICnifeb Zia-fez Zenate COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS  C  WASHINGTON, D.C. 20510  December 16, 1981  Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Federal Reserve Building 20th Street and Constitition Avenue Washington, D. C. 20551  4/sF7/  -T". """) 0)  Dear Chairman Volcker: I take pleasure in recommending Bill W. Dixon, First Vice President, First Wisconsin National Bank, Milwaukee, Wisconsin, to serve on the Consumer Advisory Council of the Federal Reserve. Bill Dixon is highly qualified for this position. He has been a retail banker for thirty-one years. For the last year and a half he has served on a special interest rate committee created by the State of Wisconsin Legislature, helping to completely revise consumer interest rate laws in Wisconsin. At the present time, he serves on a Legislative Committee for the American Bankers Association, the Wisconsin Bankers Association's Legislative Committee, and also on the Wisconsin Installment Bankers Association Legislative Committee. At the First Wisconsin, he is responsible for all retail credit responsibilities, which include instalment loans, student loans, charge cards and is also responsible for the development of electronic banking. He is also a Vice President and Director of the Tyme Corporation, which is a shared EFT system in Wisconsin, and has become one of the more successful in the country. I enclose a copy of Bill Dixon's biography for your view. I sincerely hope that you will give Bill Dixon's nomination your most deliberate consideration.  WP:lmt Enclosure cc:  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Dolores S. Smith  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/Biographical Info Citations:  Number of Pages Removed: 1  Biographical info, Bill W. Dixon, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  •  December 23, 1981  CONFIDENTIAL  The Honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman Rosenthal: I share the concerns expressed in your recent letter regarding the need to preserve the public interest considerations in any proposal to refinance the loan to Placid Oil Company. As you know, in the context of the Voluntary Credit Restraint Program then in effect, the Federal Reserve interposed no objection to the original restructuring of the Uunt indebtedness on the understanding that the arrangements were for the purpose of the orderly disposition of the remaining silver positions held by the Hunt interests and would provide safeguards against further speculation by the Hunts. I recently received a letter from Placid Oil Company outlining certain specific terns of a proposed refinancing. After reviewing the letter, I informed Placid that I did not feel the essential provisions and protections would be adequately served by the proposal described. A copy of Placid's letter and my reply are enclosed. Sincerely,  Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  December 23, 1981  CONFIDENTIAL  The Honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations house of Representatives Washington, D.C. 20515 Dear Chairman Rosenthal: I share the concerns expressed in your recent letter regarding the need to preserve the public interest considerations in any proposal to refinance the loan to Placid Oil Company. As you know, in the context of the Voluntary Credit Restraint Program then in effect, the Federal Reserve interposed no objection to the original restructuring of the Uunt indebtedness on the understanding that the arrangements were for the purpose of the orderly disposition of the remaining silver positions held by the hunt interests and would provide safeguards against further speculation by the Hunts. I recently received a letter from Placid Oil Company outlining certain specific terms of a proposed refinancing. After reviewing the letter, I informed Placid that I did not feel the essential provisions and protectionc would be adequately served by the proposal described. A copy of Placid's letter and my reply are enclosed. Sincerely,  Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  ..c ; 'of GOvIt'W BOARD • • ul • c•-).* .  .Rat. RES .. • • ••  •  OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551  December 23, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable F. James Sensenbrenner, Jr. House of Representatives Washington, D. C. 20515 Dear Mr. Sensenbrenner: Thank you for your letter about the Board's recently published proposal attempting to clarify Regulation Z's defin ition of an "arranger of credit" which would require real estat e brokers to give Truth in Lending disclosures in seller-finan ced transactions. I can understand your concerns about this issue which is inherently difficult. On the one hand, no one wants to add unnecessarily to the burden of government regulation ; on the other, there is a real concern by some groups that "crea tive financing" accounts for a large share of all housing finan ce and that it is important that both buyers and sellers be adequately protected. Under the amended Truth in Lending Act, a person who regularly arranges for the extension of consumer credit from those who do not regularly extend credit may be subject to the disclosure requirements of the Act. The Board's proposal (enclosed) would amend the definition of "arranger of credit" in revised Regulation Z to describe more clearly an arranger of credit and, if adopted, would cover some real estat e brokers who arrange seller-financed transactions. In the proposal, the Board specifically requested comment on whether such real estate brokers should be considered arrangers of credi t and subject to disclosure responsibilities under the amended Truth in Lending Act. As I am sure you are aware, S. 1720, introduced by Senator Garn, includes a provision that would exclude arran gers 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. Altho ugh no action was taken on this provision by Congress prior to adjourning last week, legislation was adopted (H.R. 4879) delaying the effective date of the amended Truth in Lending Act from April 1 to October 1, 1982, thereby providing Congr ess more time to change the law if that is determined to be desirable.  .00   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Like you, I am concerned about any unnecessary paper work and liability exposure, and I appreciate your takin g the   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable F. James Sensenbrenner, Jr. Page Two  time to share your views about this difficult matter. I can assure you that your comments will receive the fullest consideration. Sincerely,  Enclosure (Oct. 20, 1981 P.R.) MPE:AFC:DS:DJW:vcd (#V-353) bcc:  Maureen English Mrs. Mallardi (2)  F.JAMESSENSENBRENNER,JR. NINTH DISTRICT. WISCONSIN CO/MM ITTEE ON THE JUDICIARY  A ctiOn assigne  Yari et Ha et  •  WASHINGTON OFFICE:  •  COM MITTEE ON SCIENCE AND TECHNOLOGY  ROOM 315 CANNON HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 202-225-5101 DISTRICT OFFICE: 120 BISHOPS WAY BROOKFIELD. WISCONSIN 414-784-1111  Congre55 of the Elniteb tate5 pouise of ikepre5entatibei4 Viastington, ri.e. 20515 4  December 7, 1981  Honorable Paul AL. Vblcker Chairman Federal Reserve Board Washington, D.C. 20551  c7.7  .77.7)  Dear Mr. Chairman: real estate brokers naw are considered that n ntio atte my to ght brou been has It oses. "arrangers of credit" for Regulation Z purp losure principles to arrangers of credit. disc ying appl t abou d erne conc very I am e paperwork and require realtors to nsiv exte nd dema will ty bili onsi resp This rfere Such obligations will certainly inte y. ilit liab ming assu of risk the take rable mortgage financing for their favo ide prov to ity abil s tor' real the with clients. Banking Committee, has stated that te Sena the of rman Chai , Garn Jake Senator lenders was never the intention as ers brok te esta real of on tati rpre an inte Truth in Lending Act. This is of his Committee during revision of the cipated the development of this anti r neve ress Cong that t fac the by evident new financing technique. in desperate shape. At this is stry indu te esta rral the e, awar As you are me a burden which they are illassu to ed forc be not ld shou tors time, rcal take into consideration these se plea to you urge I orm. perf to prepared realtors can more effectively and h whic with tion solu a gn desi and , problems easily deal. Thank you f  attention to this mattPr.  Sincer  F. J  FJS/bg   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NSENBRENNER, JR., ngress  53005  • ....... •. •.oF GOvtR,I, • .• 0 0 .* •co 1". •0 •-71 g• • -A .-S. xs .cl' •  • BOARD  OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 205SI  ,,) • .1.. tn. 44,.  b '‘AL RES • • •.• • •  December 23, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Bill Lowery House of Representatives 20515 Washington, D.C. Dear Mr. Lowery; Thank you for your letter concerning deregulatory proposals that were on the agenda for the recent meeting of the Depository Institutions Deregulation Committee. As you point out, the DIDC has an inherently difficult task--trying to deregulate interest rates in order to improve the return to savers, while at the same time taking into consideration the condition of troubled financial institutions. As you know, the Committee decided to defer consideration of the proposals until its next meeting which has been scheduled for March 22, 1982. Sincerely,  S/Paul A. Wicket  NB:pjt (#V-377) bcc: Mr. Bernard Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  w/  o  .4  A  ion assigned Mr. Bernard  •  WASHINGTON OFFICE 1331 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-3201  BILL LOWERY 41 ST DISTRICT. CALIFORNIA  'COMMITTEES:  DISTRICT OFFICE: 880 FRONT STREET, Room 6-S-15 SAN DIEGO, CALIFORNIA 92188 (714) 231-0957  BANKING, FINANCE AND URBAN AFFAIRS  SCIENCE AND TECHNOLOGY  CONGRESS OF THE UNITED STATES HOUSE OF REPRESENTATIVES  13 December 15, 1981  Mr. Paul Volcker Federal Re5erve Board 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: appear before the Subcommittee As you know, on December 16, Secretary Regan will to testify on the structure on General Oversight of the House Banking Committee will meet to consider and actions of the DIDC, and later in the day the DIDC itory accounts. I proposals to deregulate several different types of depos before these meetings. address this letter to you to express my concerns menting the mandate given it The DIDC faces a very difficult dilemma in imple commercial banks would like by Congress under P.L. 96-221. On one hand, large ly as possible in order the liability side of the ledger deregulated as quick have come to be called to allow them to compete more effectively with what non-traditional 'near banks', i.e. money market mutual funds and other On the other hand, small entities entering the financial Dcrvices industry. gs banks favor a very commercial banks, savings and loans, and mutual savin slow deregulation schedule for obvious reasons. (Title II of P.L. 96-211) The Depository Institutions Deregulation Act of 1980 the DIDC approaches this clearly indicates the intent of Congress as to how problem. I quote: hereby finds that Section 202(a) of the law states: "The Congress market rate of (2) all depositors... are entitled to receive a mically feasible return on their savings as soon as it is econo for depository institutions to pay such rate." Committee shall work toward Further, Section 204(b) states: The Deregulation n on their savings with providing all depositors with a market rate of retur institutions." due regard for the safety and soundness of depository t which accompanied P.L. 96-221 To avoid any misunderstanding, the Conference Repor extension of Regulation Q to states: "The legislation provides for a six-year in a market environment..." permit thrifts to organize themselves to compete   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Mr. Paul Vblcker page two  As you are surely aware, the thrift industry is currently experiencing very serious problems. Certainly this disruption has been caused by the recent unprecedented rise in interest rates. Both the size and composition of the portfolios of our major thrift institutions have made it very difficult for them to adjust quickly to the destabilizing effects of this rise in interest rates. Under these circumstances, I submit that further deregulatory actions by the DIDC in the immediate future would indicate a total disregard for the "safety and soundness" of these depository institutions and at this point it is obviously not economically feasible for thrifts to pay increased rates. In view of the c,cverity of this situation, I strongly urge you to postpone any further deregulatory actions until Congress addresses pending legislation which would also deregulate the assets of the thrift industry.  Sincerely,  BILL LOWERY Member of Congress BL/sw   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "  -flr\A  n\610  Of 331 V•  .. ; ••'of Govt  -40  .•  •a, .0  14, ' o•• tr%  • -n  i•-• • •  •.4 1:0  • •<,  BOARD OF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20SSI  «„.  kAL.Rt.s  December 23, 1981  • • •..• • •  PAUL A. VOLCKER CHAIRMAN  The Honorable Fortney H. Stark Chairman Select Revenues Subcommittee Committee on Ways and Means House of Representatives 20515 Washington, D.C. Dear Pete: Before any additional time passed, I wanted to respond in writing to your recent letter regarding the Board's providing reports on the impact of the All Savers Certificate (ASC). My staff has, as you requested, contacted Ms. Boyle to determine the particular information that we can usefully provide, and my impression is those discussions are proceeding fruitfully. I very much want to be as helpful as possible to the Congress in providing information on ASCs. As you may know, I have had serious reservations about the ASC, and I think it is important to be able to determine what impact it has had on deposit flows and at what cost to the Treasury. However, to be frank, I would like to avoid the Board's committing itself to a regular quarterly report, but rather provide you with the information we now collect on whatever kind of schedule you and your staff find most useful. This is partly a matter of husbanding our resources, which are stretched relatively thinly in this period of personnel cutbacks and exceptional demands for economic and regulatory analysis. But it also reflects my judgment--based on the experience since you first wrote--that the ASC is not proving to be the important phenomenon that many expected. Since the influx of funds in the first week they were offered, ASCs have attracted a rather modest amount of deposits. Moreover, it is clear that the overwhelming share of the ASC inflows represent nothing more than a shifting of monies that would otherwise have been held in other financial assets, particularly other time and savings deposits. Under the circumstances, it may be presumed that the economic effects of the ASCs, although very difficult to isolate and quantify, are very limited. This should not be surprising. It is no simple matter to design a special direct incentive for saving that will result in a significant amount of new saving. As with the ASC, the likely impact in most cases will be a reshuffling of portfolios to take advantage of the tax break; tax revenues will be lost with little impact on savings and capital formation. I would   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  c,.)  •  •  The Honorable Fortney H. Stark Page Two  hope that the Congress in its future efforts to enhance saving and investment will focus more on closing the gap between spending and taxes, for large budgetary deficits absorb scarce private savings while they contribute to financial market pressures that offset the incentives to capital formation provided by accelerated depreciation and other measures. I trust that my staff will be able to reach a satisfactory arrangement with Ms. Boyle; we do want to provide what information we can in the interest of assisting in the formulation of effective fiscal policies. Should there be any problem, do please let me know. Sincerely,  MJP:DS:pjt (#V-337 & V-345)  bcc:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Mr. Prell Mr. Kichline Mrs. Mallardi (2)  `FQRTNEY H.(PETE)STARK  COM MITTEES  9TH DISTRICT. CAUFOFtNIA  4 .  •  >   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  CONGRESS OF THE UNITED STATES  WAYS AND MEANS DISTRICT OF COLUMBIA SELECT NARCOTICS  HOUSE OF REPRESENTATIVES WASHINGTON, D.C. 20515 October 29, 1981 2-) /`  on c0  Hon. Paul Volcker Chairman Federal Reserv Washington,  7C CD  CO  Dear Mr ,J of the Committee on Ways and Means have Several Me expressed to me their concerns about the consequences of "1"--"All Savers Certificates," and proposals are already circulating for amendments to and revisions of savings incentives in the tax code. The Committee will undoubtedly face major legislative initiatives next year as the December 31, 1982, expiration date of the "All Savers" provision approaches. We are therefore requesting that you send us quarterly reports based upon the information gathered by the Federal Reserve Board as you monitor the sales of "All Savers Certificates" and attempt to assess the impact of those sales on financial markets and institutions, the housing industry, Federal revenues, and general economic conditions. We are especially interested in any evidence that the "All Savers Certificates" are or are not influencing aggregate savings. I appreciate your cooperation in this request. Please ask your staff to contact Ms. Jayne Boyle of the Subcommittee staff to describe the type of information that the Board will be able to provide.  y H. Stark man ect Revenues Subcommittee Committee on Ways and Means FHS:wkv  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • December 23, 1981  The Honorable Harold L. Volkmer House of Representatives 20515 Washington, D.C. Dear Mr. Volkmer: Thank you for your letter concerning deregulatory proposals that were on the agenda for the recent meeting of the Depository Institutions Deregulation Committee. The DIDC has an inherently difficult task--trying to deregulate interest rates in order to improve the return to savers, while at the same time taking into consideration the condition of troubled financial institutions. As you know, the Committee decided to defer consideration of the proposals until its next meeting which has been scheduled for March 22, 1982. Sincerely, ;J/Paul A. VO04. I - re..044—  NB:DS:pjt (#V-363) bcc: Mr. Bernard Mrs. Mallardi (2) \,  •  HAROLD L. VOLKMER •  CONGRESSIONAL DISTRICT  Action assignel Mr. Bernar  6  DISTRICT OFFICES! LEE VIOREL  M ISSOURI  DISTRICT ADMINISTRATOR Room 370  Cotigre5 of tbe Viniteb Matz  1007 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C.  FEDERAL BUILDING  20515  (202) 225-2956  63401  HANNIBAL, M ISSOURI (314) 221-1200  PotuSe of Aeprefentatibet(  535 RUE ST. FRANCOIS FLORISSANT, M I SSOURI  Clia5bington, D.C. 20515  HOUSE COMMITTEE ON AGRICULTURE  63031  (314) 837-1688 1181 S. DUCHESME ST. CHARLES, M I SSOURI  HOUSE COM MITTEE ON  December 11, 1981  122 BOURKE MAC.ON, M I SSOuR1  MINDY A. TRACHTENBERG   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  63552  (816) 385-5615  ADMINISTRATIVE ASSISTANT  Mr. Paul Volcker Federal Reserve Board 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: I am writing in order to urge that you consider the suspension of implementation of proposed new savings accounts for Savings and Loan institutions until Congress has the opportunity to review them. Many of the Savings and Loans in Missouri are currently in dire straits with continuing losses and reserves being depleted. These newly proposed changes will hasten their demise. It is my understanding that the DIDC's purpose is to strengthen, rather than speed up the demise of, such institutions. Therefore, I strongly urge you to consider a moratorium on the implementation of these new savings accounts. Your consideration of this suggestion will certainly be appreciated by the Savings and Loans in my district and, I am sure, across the nation. If further information is needed, or if I may be of any assistance, please do not hesitate to contact me. Sincerely yours,  Harold L. Volkmer Member of Congress HLV/js/jc cc:  Mr. Dr. Mr. Mr.  63301  (314) 946-5649  SCIENCE AND TECHNOLOGY  William Isaac Richard R. Pratt Edgar F. Callahan Charles E. Lord  .••••••11k  •  • December 23, 1981  The Honorable James M. Shannon house of Representatives 20515 Washington, D.C. Dear Mr. Shannon: Thank you for your letter concerning deregulatory actions of the Depository Institutions Deregulation Committee. The Committee has an inherently difficult task--trying to deregulate interest rates in order to improve the return to savers, while at the same time taking into consideration the condition of troubled financial institutions. As you know, the Committee decided to defer consideration of proposals that were on its agenda for the December 16 meeting until its next meeting which has been scheduled for Varch 22, 1982. Sincerely, Vatil A, Vo!cket  NB:pjt (1W-358) bcc: Mr. Bernard Mrs. Mallardi (2)  Identical ltr. also sent to Cong. Hubbard. (V475).   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  4  tion assignel Mr. Bernarl  40  A  • •  •  JAMES M. SHANNON  WASHINGTON OFFICE:  5TH DISTRICT, MASSACHUSETTS  224 CANNON BUILDING WASHINGTON, D.C. 20515  COMMITTEE:  (202) 225-3411  WAYS„AND MEANS  ) Cy. suracom •.• ITTEES: LHEALTH 7 TRADE  Congre5cs of the ZLIniteb *Mess  DISTRICT OFFICES: 11 LAWRENCE STREET LAWRENCE, MASS. 01840  jf)outt of itpre5entatiinti  (617) 683-5313 134 MIDDLE STREET LOWEU-, MASS. 01852  flia5bington, D.C. 20515  (617) 459-0101 LEXINGTON, MASS. (617) 862-1847  c_ Li_ 1 CD c-  December 10, 1981 Mr. Paul Volcker Federal Reserve Board 20th St. & Constitution Ave., NW Washington, DC 20551 Dear Mr. Volcker: As you know, there has been a great deal of controversy over the DIDC proposals of September 22, 1981. Lndeed, thirty-eight of the forty-three members of the House Banking Committee have written to you requesting a postponement of these rulings until Congressional hearings can be completed on them. The Banking Oversight Subconilnittee will hold its second day of hearings on this matter on December 16, 1981. I strongly urge that the DIDC postpone the decisions of September 22, 1981 and take no further action until Congress has had an opportunity to study them carefully. I am very concerned about the adverse effect these rulings are having on the thrift industry. Very  Membe JMS:tor   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ly your  on of Congress  r(V62,4,(&:  •  ( v  3Sts)  BOARD OF GOVERNORS . •co .. .m '.4 .....,.,  .0  0, Tr.  i: I--.• 61. .1...  c,. %:',,,e) .4"' • Rts •••t'RAL •• •...  OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  December 23, 1981  PAUL A. VOLCKER CHAIRMAN  The Honorable Barber B. Conable, Jr. House of Representatives Washington, D.C. 20515 Dear Mr. Conable: Thank you for your letter regarding an inquiry by your constituent, Mr. Carl L. Meskill of Spencerport, New York, who is concerned about the penny shortage and speculative hoarding of pennies. The Federal Reserve System and the Bureau of the Mint are aware of the current limited availability of the penny and are actively taking steps to resolve the situation. Since December 1979, the demand for the penny has greatly exceded the available supplies, due in large part to the specula:ive hoarding of pennies when copper prices escalated. To meet the growing demand, the Federal Reserve System early in 1980 began to allocate pennies on a monthly basis, based on 1979 payout levels. This program had to be extended throughout 1980 and 1981 because demand continued to exceed supply despite a decline in copper prices. While the shortage seems basically a result of speculative hoarding, it is also due to unintentional hoarding by the public--the accumulation of pennies in piggy banks, drawers, bottles, etc. Currently, the demand for pennies is running at approximately 1.4 billion per month, with the Mint's total monthly production being around 1.1 billion. This production shortage, which mainly is attributable to budget constraints at the Mint, had led to a continuing allocation program at the Federal Reserve offices. Commercial banks and retail establishments have initiated campaigns to encourage the public to return their accumulated pennies to circulation. The offering of a premium by Chemical Bank of New York is not practiced nationwide, but is one example of the various measures being taken to increase available supplies. The Federal Reserve System and the Mint do not endorse the offering of premiums for pennies; however, we do, through various media, attempt to dissuade people from hoarding pennies for speculative purposes. In January 1982, the Mint will be introducing a new penny composed mainly of zinc. This should result in substantial annual savings in production costs and greater penny   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The Honorable Barber B. Conable, Jr. Page Two  availability over the long term. However, for the immediate future it is anticipated that the speculative hoarding of pennies could very well increase, placing heavier demands on available supplies. To alleviate some of the pressure, until sufficient penny supplies are available, the Federal Reserve System will continue to employ an allocation system that is designed to be as equitable as possible. Regarding Mr. Meskill's concern that an investor could obtain a substantial amount of newly minted pennies for speculative purposes, the system of distribution and allocation of Mint coin does not allow for such occurrences. Mint coin is solely distributed to the Federal Reserve offices and then to member banks, who release the coin to their customers. With the present shortage of pennies, it does not seem feasible that a commercial bank would release large sums of pennies to a single individual. I hope this letter answers the questions raised by your constituent, and I assure you the Federal Reserve is doing everything possible to ease the burden of the present shortage. Please let me know if further information would be useful. Sincerely, Eagi MLB:CO:DS:pjt (#V-355) bcc: Ms. Barfoot Mrs. Mallardi (2)  n ction assigned Mr. Alliso  O B.ARBER B. CONABLE,JR.  •  NEW YORK, 35TH DISTRICT  Congre0 of tbe Eniteb  COMMITTEES: WAYS AND MEANS STANDARDS OF OFFICIAL CONDUCT  WASHINGTON OFFICE: 237 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515  tate5  (202) 225-3615 DISTRICT OFFICE: 311 FEDERAL OFFICE ButuDING 100 STATE STREET ROCHESTER, NEW YORK 14614  PollsSe of ileprerSentatibefi Ellassbington,)13.C. 20515  (716) 263-3156  JOINT COM M I TTEE ON TAXATION  December 8, 1981  A3s< 7.7 n •  The Honorable Paul A. Volcker, Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: Enclosed is a letter from a constituent, Carl L. Meskill of Spencerport, New York, regarding the current shortage of pennies, and his experience at the bank when he took his in. I would appreciate whatever comment you may wish to make on the situation, and whether any steps are being taken to curtail hoarding. Very truly yours,  ex.„ Barber B. Conable, Jr.  C/m Enclosure  4   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  e 0 •,  •  • December 3, 1981 .  The Honorable Barber Be Conable Jr. Representative,New York Sir; Well here we are -- back to that old penry-ante stuff again. .I have enclosed a recent news clipping on the penny-roll game that'should prove interesting. A couple of months ago I had turned-in quite a few rolls of pennies, As per their inas well as some nickels and dimess to a local bank. ess plus a date .-structions,I had marked each roll with my name and addrp to accomplish. which took nearly an hour and a half plus writer's cram After receiving the cash I then asked for the_manager. I informed him all that I had just turned in a quantity of rolls to this girl here "But"(I added) - "you make damned marked as required with my name. sure that none of these coins are released again from your bank with my name on the rolls,— or you are g4ng to be in deep hot water". were to call me and inform me that "If some joker.weeks from now name they had received such a roll,full of plugs,frem your bank with "my" g here again on this roll --- you will have had it', "I will be returnin one,an attorney,and two,I will accompanied with two particulat and for all": be armed -- then we will settle this penny-roll stuff once released again if "Remember"(I added) "that these are now "your" coinsl and - not mine"1 "My from "your" bank they will have "your" name on them:.. responsibility for these coins ends here right now% ring a bonus of 20% Now,according to .4is clipping,some banks are offe here. Imagine Something is wrong just for exchanging U S.coinage. newely-minted pennies, what some bigr.rhig could do investing $1-millien in shortage),and then releashoarding them away for over a year(to create a This type of stuff(in itsino- them at a 20% profit(long term at thatY.veritable Pandora's box full e )can add to inflation,not to mention the of abuses that are possible here, a Jerusalem temple of Tm thousand years ago an individual c.leaned out Today it might reauire more gangs of money7changers by using a switch'. either some sensible legislation tor autOmatic weaponi:y than a switch I would much rather prefer the former to the latter. and explosives. he Soviet Now the manipulation of such coinage and currency in't we get laws with teeth Union is a serious crime. Perhaps it is time that to send such criminals in -Plem here too. .We may not have a . Siberia here er might be a but Fort Drum,up near Watertown,in the dead of wint to good substitute? considered as among United States currency and coinage . should not be ,gold,Hummel goods to be bartered and manipulated -- like diamonds We have far too ma,ny hoarders of ures o cwis s or stocks and bonds etc -up prices. We goods today,all doing so to create shortages and jack don't need any more of this breed'.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  "  Carl L. Meskill  " ,.. /....,-.."*".---""'  Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections.  Citation Information Document Type: Newspaper article Citations:  Number of Pages Removed: 1  Petruno, Tom. "Banks Pay Bonuses to Attract Pennies." Times-Union (Rochester, NY), December 1, 1981.  Federal Reserve Bank of St. Louis  https://fraser.stlouisfed.org  WILLIAM L. ARMSTRONG  •  •  COLORADO  'Al(niteti Zfafez ZertateWASHINGTON. D.C. 20510  70ia. 404 a flq Fo • lZ i ealkROS   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 21, 1981  The President The White House Washington, D.C. 20500 Dear Mr. President: I am very much concerned to learn that you are being advised to postpone balancing the federal budget beyond your stated goal of 1984 or to disavow completely balancing the budget as a major objective of your Administration. I strongly recommend that you reject such advice. Since an economic upturn is expected early next year, in any event, it might appear that postponing needed fiscal discipline would do little harm. But long-range damage to the economy is inevitable, as you have often pointed out. Federal budget deficits of the magnitude now forecast will eventually lead to renewed inflation, unacceptable interest rates, investment stagnation and joblessness. As for the political consequences, it could take years to recover the credibility our Party would lose if we back away from so basic an article of Republican faith as the balanced budget. The Democrats are gloating because of news reports that you may reverse your commitment on either budget or tax issues. To do so would confirm what they have always contended...that it is impossible to both cut taxes and balance the budget. They are wrong, just as they have been consistently wrong in their management of the nation's financial policies for many years. It will be difficult, but we can and must achieve a balanced budget within the framework of the lower tax rates which your leadership has already made possible. In the process of doing so, we can turn the present budget crisis into the greatest political opportunity since the advent of the New Deal. Franklin Roosevelt demonstrated, at a time of national financial crisis, how to build and strengthen a powerful political coalition in the face of intractable economic problems. The New Deal was an economic failure but a towering political success.  •  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The President December 21, 1981 Page Two  •  Roosevelt blamed all of the problems of the era on the "Hoover Depression" and, at the same time, created an aura of better days to come. Roosevelt's first step was to tag Republicans as the cause of all 's the problems and successfully make the GOP scape-goat for all his program failures. Thus he built the political framework that gave him the time and confidence needed to put his programs firmly in place. In some ways, our situation today is remarkably similar to 1933. Only today, the Democrats, after years of wielding power are moving strongly to reverse the roles of the two parties. In speech after speech, Democratic leaders are attempting to rewrite the history of this economic crisis and blame it on us. They even have the temerity to posture themselves as the party of fiscal responsibility. It will be a travesty if they succeed in portraying the Reagan program as a failure before it is tried and convince the voters they should be returned to power to correct the very problems they created! Your State of the Union address will be delivered at one of the great decisive moments of history. Because of this fact, and your undisputed ability to persuade, this speech could become a turning point of epic proportions. I therefore suggest that you can unite the Republican Party and the nation with a message containing these basic elements: Define the magnitude of the financial mess and emphatically credit the Democrats with creating it. After a year of struggling with this legacy of mismanagement, we now can report the full dimension of the crisis which threatens the well-being of every citizen. During a quarter century of liberal Democratic Congressional dominance, federal spending increased from $68.5 billion to 10 times that amount -- $660 billion. The national debt skyrocketed from $271 billion in 1954 to nearly one trillion dollars now. This indebtedness does not include over $1.5 trillion of unfunded obligation built into the Social Security system by the Democratic Congress. There are a myriad of other unfunded liabilities in the form of loan guarantees and other obligations that have been deliberately concealed from the American people and which should now be revealed and explained. After years of reckless irresponsibility, inflation had skyrocketed from .5% to 12.4%, a 24-fold increase. The prime interest rates leaped from 1.6% to 21.5%. The federal government is now borrowing nearly 50% of all of the new capital that our entire economy can generate, compared to 19% in 1955. The damage to every citizen and enterprise in this land is massive. While we acknowledge and commend the statesmanship and courage of individual Democrats who have fought for fiscal responsibility, as a party, the Democrats fully deserve to have their shocking performance labeled with a term as politically devastating as the "Hoover Depression."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  The President December 21, 1981 Page Three  •  Re-emphasize that the GOP_program for economic recovery is primarily for middle America, the nation's working men and women and their families. The Democrats are trying, with some success, to label your Economic Recovery Tax Act as a "rich man's" tax cut and welfare for big companies. They are skillfully resurrecting slanders used against us for half a century and upon which, I regret to say, we remain vulnerable. We must get back on the attack. The Democrats claim to have cut taxes repeatedly in the last few years; yet the average working family's tax bill has risen dramatically. Jimmy Carter came to office promising he would never raise taxes for middle income families. Yet the median family's tax bill went up during his term. More and more families find their income, after taxes and inflation, going down year after year. In the next few weeks, we must remind middle-income families of the failures and broken promises of the prior Administration. At the same time, I strongly urge you to re-emphasize the direct benefits of our program of personal tax reductions, indexing and business cuts to America's working men and women and their families. And warn against the coming effort to repeal these historic tax reductions. Recommend specific reforms needed to reduce by at least half the cumulative deficits of the next three years and balance the budget in fiscal year 1984. During the last few months, there has been so much discussion of deficits that there is real danger our senses will be overloaded and our perspective dulled. The deficits now being projected (estimates ranging from $276 to $476 billion in the next three years) are not merely large. These deficits are colossal, stupendous. If we treat such deficits as IImanageable" or "acceptable" we invite an economic and political disaster. Nor can we dismiss the deficit forecasts as failing to take into account effects of our supply-side tax program. On the contrary, even the most pessimistic of the various forecasts assumes solid growth in GNP and real progress in bringing down inflation and interest rates. Some people actually think expectations for the econonmic recovery may be too optimistic (especially in view of the tight money policy of the Fed) which only emphasizes the urgent need to match tax cuts with appropriate reductions in spending. Economists disagree among themselves about the exact way in which federal budget deficits impact on inflation. Some argue deficits become inflationary only if monetized; others emphasize the main danger is that deficits push interest rates to abnormal levels; still others point out that deficit financing diverts savings away from urgently needed investments in private sector productivity thereby making the entire economy less and less efficient.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The President December 21, 1981 Page Four  But on one point I find little or no disagreement. The public firmly believes that budget deficits are, in fact, a prime cause of inflation. The resulting decisions by which individuals and firms attempt to protect themselves profoundly affect patterns of investment, savings and consumption and tend to make the whole situation worse, thereby further reinforcing the original belief. This process is already welladvanced. But there still remains a deep, ingrained faith in you and your Administration as the last, best hope for bringing budgets, and inflation, under control. If this faith is lost or compromised, the kind of private economic arrangements people will make can only produce an increasingly chaotic situation. Even granting this premise, some of your advisers doubt it is possible to enact a program to achieve the needed results. Political considerations, they contend, require more gradual budgetary approach with less restraint and fewer "revenue enhancements." This general approach is highly reminiscent of our gradualism policy in Vietnam. It will have the same result, in my opinion. A prominent economist neatly posed the question: "If now, the most classical, hardline conservative President in fifty years accepts indefinite deferral of a balanced budget, if he says that balancing the budget was 'only' a goal, who will any longer be inhibited by fear of deficits? In that case, what will restrain political pressures for endless expenditure increases and tax giveaways?" In other words, how do we get even conservative Senators and Representatives to vote for restraining veterans benefits, food stamps, housing and other popular programs if we tell them there is no definite date by which balancing the budget is absolutely imperative? But it is heartening to recall the 50-47 vote on the sense of the Senate resolution during the last week of the session: "...it is the sense of the Senate that Federal outlays be reduced and the Federal budget be balanced through spending reductions in all parts of the budget, including entitlement programs, and revenue increases achieved other than through changes in the accelerated cost recovery system or the individual rate reductions recently enacted..." To those who remain skeptical in the face of all these considerations, I can only say, as you are reported to have asked your Cabinet, "If not the Reagan Administration - who? If not now - when?" Obviously, this is not the place to go into detail on the budget itself. But I do want to offer two general observations about the basic priniciples involved: First, there can be no sacred cows if we are going to balance the budget by 1984. Even defense spending, which I am personally loath to touch, must be restrained below presently projected rates of increase.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  The President December 21, 1981 Page Five  entitlement program. The same is true of virtually every spending and cements" or whatever Nor can we rule out some tax measures, revenue enhan the needed restraint they may be called. I can see no way to leverage oles and imposing on the spending side without closing some tax looph the lines you have some modest user fees and excise tax increases, along not contradict, and proposed earlier this year. These tax changes would and, not incidentally, would actually enhance, our basic supply-side tax cuts rich. help to blunt criticism that our tax cut favors the t is being Second, we've got to dispel the notion that the budge t is being cut,sliced, cut. All the alarmist talk about how the budge sing the public. We must hacked, and in other ways dismembered is confu being reduced (hopefully remind them that while some specific programs are budget will be larger a few will even be abolished!), each year's total ng the rate of than the prior year. We are only talking about slowi ing. increase, not actually reducing total federal spend Which brings me to my final recommendation... e. Re-establish optimism and hope for the futur ated -- including The need for economic reforms you have long advoc become increasingly both tax reductions and a balanced budget -- has fication for our program is evident in recent months. The economic justi Congress reconvened after mounting every day. Amazingly, however, since The initiative has the August recess, we have been losing momentum. defensive mentality switched to our opponents. In some quarters, a country so urgently seems to be emerging. The leadership which this needs cannot spring from such an attitude. to believe in the We must provide a rational basis for the people keeping faith with our economic and political future of this country by positive new image for promises. But it is also important to create a a vision of a better our own programs and a new vocabulary that portrays idea that is broad future. (The "Incentive Society" is an example of an ite image from and appealing, as was the New Deal, but creates an oppos .) You have the unsurthe highly taxed and regulated society we now have rship. passed ability to provide this vision and leade ign (complete In doing so, I urge you to mount a major nationwide campa , media blitz, etc.) with volunteer campaign organizations in every state itution. A in support of a balanced budget amendment to the U.S. Const studied. Probably number of responsible proposals have been developed and has been recommended the most logical for you to back is the version which Having been through for floor action by the Senate Judiciary Committee. called up by the hearings and markup, it has been reported and can be ate and thoughtful Majority Leader at any time. Moreover, it is a moder e and avoids the pitfalls proposal which enjoys broad support in the Senat of an unduly restrictive amendment.  •  •  I   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The President December 21, 1981 Page Six  Such a constitutional amendment is unlikely to gain the needed twothirds majority for Congressional passage in the near future. But popular support for the concept is overwhelming as evidenced by extensive polling data, scholarly writing and resolutions of support by more than thirty state legislatures. By endorsing and actively supporting such an amendment, you will greatly enhance its possibility of ultimate passage which could become the crowning achievement of your Presidency. But even if we never succeed in passing the amendment, the fight is well worth making because doing so will provide opportunities to greatly strengthen your hand in dealing with Congress. Submitting a thoroughly documented and supported proposal to enhance Presidential rescission authority can have a similar effect. It is a disgrace to tie the hands of the President in the manner now required by rescission and deferral procedures. Unnecessary billions have been spent during the Ford, Carter and Reagan years because of these irresponsible procedures. Virtually every state and local executive and, of course, private sector CEO's, have vastly more flexibility to manage than does the President of the United States. I therefore suggest you challenge Congress to either "fish or cut bait" on this issue...either cut back on marginal, unnecessary or wasteful spending or give the President a reasonable opportunity to do so through enhanced rescission power. In this matter, as in others, I urge you to follow your own instincts which so often have proven correct. An equivocal program is likely to fail; a bold message will succeed. erely,  W lliam WLA:wak  . Armstrong  •  0  Chart furnished courtesy of Sen. William L. Armstrong  900  FEDERAL BUDGET OUTLAYS  _  Si ; civ/ '  800  / 700  -  /  600  -  cn z 0  500  —I —I CO  400  300  -  CARTER  REAGAN  200  -  100  1-  •  1974  75  76  77  Source: Office of Management & Budget  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  78  79  80  81  82  83  •  •  Charts furnished courtesy of Senator William L. Armstrong  300  NATIONAL DEBT  INFLATION  INTEREST RATES  CONSUMER PRICE INDEX  3 MO. T-BILLS  250 1967=100  T-BILLS 15-PRIME 19  200 8__ z 150  cc  400  _ 100  300  4 200 100  1940  50  60  70  80  90  Sou., 9totorttoot A1 WIWI el Itto Unood States   https://fraser.stlouisfed.org Federal 0 Reserve Bank of St. Louis  1940  50  Soot, Stahel.* Abtoroct  60  70  80  1940  UrOtott Stair  50  Why Interest Rates Are High Federal Government's Increasing Share of New Capital in theCredit Markets  C itizert Borrowings  Citizen Borrowings  7 / 7 // Federal Government Borrowings / 43%  Federal overnment • Borrowings 16%'  1981  1965-9  Average  Average  Total new capital available for loan by year  Source Office of Management  Budget  60  Souro• 141o1o..c.70 SUrtPottcAt 11.• tOotod Stoles 0,1,..osil Two, to 1970 F.conoroto Inel.cotot•  70  80  COMPARISON OF DEFICIT PROJECTIONS  FCBR  1  Domenici Plan  1  Mark-up Base  1  OMB Preliminary  2  CB0  FY82  FY83  FY84  FY82  FY83  FY84  FY82  FY83  FY84  FY82  FY83  FY84  FY82  FY83  FY84  Revenues Outlays Deficit  658 695 37  713 732 19  775 774 1  655 722 67  710 759 49  794 794 0  655 732 77  701 797 96  756 859 103  630 727 97  662 789 126  694 840 146  625 735 110  655 820 165  695 910 215  Percent Change Revenues Outlays  9.3 5.3  8.3 5.3  8.7 5.7  8.8 9.3  8.5 5.1  11.7 4.5  8.8 10.8  7.0 8.9  7.8 7.7  4.5 10.1  5.1 8.5  4.8 6.5  3.8 11.4  4.8 11.6  6.1 11.0  1  Assume original Administration growth figures.  2 In his presentation to the Senate leadership on December 9, Stockman revised these figures: Deficit projections: 86 85 84 83 82 175 167 152 148 107 This assumes no cuts beyond President's recommendations for tax changes, defense, entitlements, and appropriations.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  • December 21, 1981  The Honorable W. Henson Moore house of Representatives 20515 Washington, D.C. Dear Mr. Moore: Thank you for your letter concerning deregulatory proposals that were on the agenda for the recent meeting of the Depository Institutions Deregulation Committee. The DIDC has an inherently difficult task--trying to deregulate interest rates in order to improve the return to savers, while at the same time taking into consideration the condition of troubled financial institutions. As you know, the Committee decided to defer consideration of the proposals until its next meeting which has been scheduled for March 22, 1982. Sincerely,  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  NB:DS:pjt (#V-357) bcc: Mr. Bernard Mrs. Mallardi (2)v/ ); Identical ltrs. sent to: Representatives Natcher (V-359 ); Gingrich (V-360); Andrews (V-361); Whittaker (V-362 Smith DeNardis (V-364); AuCoin (V-367); Glickman (V-369); Wortley (V-370); Hoyer (V-371); Fowler (V-372); Jones (V-374); ); V-376); Weaver (V-379); Stanton (V-380); Nichols (V-385 and and Coleman (#809); Sens. Huddleston & Ford (V-365) Packwood (V-368).  Action assigne4 Mr. Bernar4 W. HENSON MOORE 6TH DISTRICT, LOUISIANA  •  •  WASHINGTON OFFICE: 2404 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-3901  COM M ITTEE ON WAYS AND MEANS SUBCO M M ITTEES 01;ERSIGHT PUBLIC 'ASSISTANCE AND UNEMPLOYMENT COMPENSATION SELECT R EVENUE MEASURES  DISTRICT OFFICES:  Congrel5 of tbe iLiniteb 6tate5  236 FEDERAL Butunar40 750 FLORIDA STREET BATON ROUGE, LOUISIANA 70801 (504) 344-7679  Pott5e of iItproSentatibeZ  MOBILE OFFICE  Ellatbington, D.C. 20515  HAM MOND TELEPHONE (504) 345-4929  CD  December 10, 1981 4 )  Mr. Paul Volcker Federal Reserve Board 20th & Constitution, N.W. Washington, DC 20551 Dear Mr. Volcker: I am informed the DIDC panel intends to proceed with a decision on on deregulation of financial institutions over a four-year period this December 16. I would urge you as a member of this panel to delay decision for 90 days. Thrift institutions throughout Louisiana advise me insufficient time exists to react to new conditions sought under the current the four-year deregulation phase-in due to begin February 1982. When g DIDC panel was created several years ago, it was my understandin to legislative history and instruction held a transition period of up read six years would be provided and this understanding was widesp within the financial community. To move with speed now apparently leaves many thrift institutions now facing near insolvency with new ions competitive challenges at a time when their own operating condit It is do not permit a fair competitive opportunity to lure deposits. current for this reason that I would recommend a 90-day delay in the schedule of deregulation activity. With kindest personal regards, I remain Sincerely yours,  W. Henson Moore Member of Congress WHM:cu   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 17, 1981  The Honorable Jake Garn, Chairman Committee on Banking, Housing and Urban Affairs United States Senate Washington, D.C. 20510 Dear Jake: very much appreciate your taking the time to come off the Senate floor in the midst of last week's activity to address the Conference of Chairmen and Deputy Chairmen of the Federal Reserve Banks. Your address, short as it WA$ 1 amply filled the bill of making our directors more fully aware of the current status of banking legislation. We are sorry that there was not ample time for a full range of questions. but everyone indicated they were quite impressed with your presentation. Thanks again. Sincerely,  RRobinson:RSyron:cic bcc:  Mr. Allison Mr. Bischoff Robtns9n,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHALMERS P WYLIE HOUSE OF REPRESENTATIVES WASHINGTON, D. C. 20515  FIFTEENTH DISTRICT OHIO  December 17, 1981  CAW ,  CD  nn CO  The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N. W. 20551 Washington, D. C.  c.0  di  Dear Chairman Volcker: Thank you very much for joining me Tuesday at the House Recording Studio. May I express my appreciation for your taking the time from a busy schedule to appear for the taping session. I was very pleased with the final product and only wish more time had been available for our discussion of your views on interest rates, inflation and federal deficits. You did an excellent job of explaining complex economic issues in an easily understandable way. Warmest best wishes for a happy holiday season, my friend. Sincer  almers P. ylie Representa ve to Congress CPW:C  NEMO', S. REUSS, WIS., CHAIRMAN RICHARD BOLJ-ING. MO. LEE H. HAMILTON, IND. GILI.IS 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, 09410 JAMES K. GALBRAITH, EXECJJTIVE DIRECTOR  •  •  Congre55 of tbe Ziniteb *tato JOINT ECONOMIC COMMITTEE (CREATED PURSUANT TO SEC. 5(a) OF PUBLIC LAW 304. 79TH CONGRESS)  ROGER W. JEPSEN, IOWA, VICE CHAIRMAN WILLIAM V. ROTH, JR.. DEL. JAMES ABIDNOR, S. DAK. STEVEN SYMMS, IDAHO PAULA HAWKINS, FLA. MACK MATTINGLY, GA. LLOYD BENTSEN. TEX. WILLIAm PROXMIRE, WIS. EDWARD M. KENNEDY, MASS. PAUL S. SARBANES, MD.  WASHINGTON, D.C. 20510  December 16, 1981  Mr. Bryon Higgins Assistant Vice President and Economist Federal Reserve Bank of Kansas City Kansas City, Missouri 64198 Dear Mr. Higgins: I was disappointed by your letter of December 4. 1. It was not responsive to my request to be allowed to comment on your article in the Economic Review. I therefore repeat that request and ask that you respond to it. I did not make it frivolously. 2. I did not criticize you and Mr. Faust because you used a "complex" procedure for predicting MI6's velocity. I criticized you for using a "Quixotic and myopic" procedure. Quixotic means visionary and impracticable. Myopic means short-sighted. Complex means composed of interconnected parts. There is nothing wrong with complex research if the results are suitable for practical purposes. However, your results are not. In this regard, it would help if you truly took a longer view. The short run contains much too much noise to explain. Trying to explain it must be expected to fail. It would appear a non-sequitur to conclude that the behavior of velocity is erratic because you cannot explain its movements from one quarter to the next. And the fact that you tried to explain these movements with lagged data does not mean that you took the longer view. Taking the longer view means to me explainina longer run changes in velocity. Try triennium to triennium changes, or at least year on year. I have done that. It is not hard. You don't even have to be complex. And most important, if the right M1B is used, plain M1B that is, velocity's behavior is stable and predictable. For the record, here are year on year percentage changes 1956 from to 1980. You can compute triennium changes from this beat the naive prediction that M1B's velocity will increase 3.4 It could have been made in 1967, for example. It predicts well since then and very well in the years since 1971.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  in M1B's velocity series. Try to percent per year. in the years  •  • Mr. Bryon Higgins December 16, 1981 Page Two  Year  % Change in V  Year  % Change in V  1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967  4.12 4.71 0.10 6.56 3.80 1.47 5.10 1.99 2.92 3.98 4.48 1.79  1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980  2.05 2.12 1.38 1.73 2.84 4.22 2.99 3.38 5.03 3.84 3.93 3.92 2.30  3. Your reasons for focusing on shift adjusted M1B are not persuasive. What the FOMC focuses on is irrelevant for research on the stability of velocity. Using the FOMC's money measure rules out testing whether some other measure is better. Moreover, the FOMC has switched its focus from time to time. Thus focusing on what the FOMC focuses on, requires constructing a composite money supply series and using it. Finally, the only test of whether the Board's adjustment of M1B in 1980 and 1981 makes sense is to see whether it is the behavior of velocity of adjusted M1B or that of plain M1B which more closely conforms to the historic behavior of our exchange media money's velocity. In this regard, the winner is plain M1B. Copies of our correspondence are being sent to Paul Volcker, Karl Brunner, Milton Friedman, and Allan Meltzer. Sincerely,  Robert E. Weintraub Senior Economist REW:cg   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Henry Wallich,  .  •  ".  •  • .  FEDERAL RESERVE BANK OF KANSAS CITY KANSAS CITY  MISSOURI 64198  BRYON HIGGINS ASSISTANT VICE PRESIDENT AND ECONOMIST  • _•  December 4, 1981  Mr. Robert E. Weintraub Senior Economist Joint Economic Committee Congress of the United States Washington, D.C. 20510  ,. •  --4;41;00.f, " 11 Dear Mr. Weintraub: • .  Thank you for your comments on our article. In response, I would like to clarify the reasons for choosing the methodology with which you took issue.  .  •  • —1~1"  • -.c-c•"'","•-1,11\ ,'t••• . 41:3111r:fn.  -.,.— _ 44.yr ei.-116:1:1111 .404.-J. ' ,,r-IWO Af,' -__zr,:_44-"-‘- •... ' -1 '  -.WO  ' .4t ,4100 . • . •••.,  4.  • -  74"-  •  ,; .1 -..%44   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The formula used for predicting Ml-B velocity is admittedly complex, but it is derived from a conventional specification of a money demand function. In the spirit of the Cambridge version of the quantity theory of money, it seemed to us most appropriate to begin the analysis of velocity by focusing on the determinants of the public's demand for money balances. In doing so, it was necessary to choose one of many specifications for the money demand function. We chose the simple specification, which is presented in detail in footnote 11 on page 10 of the article, that has been used by Stephen Goldfeld and many others who have estimated money demand functions. Converting this simple money demand function into a velocity equation requires substantial algebraic manipulation, thereby yielding a velocity equation that may seem unduly complex. Most of the complexity results from the inclusion of the lagged money stock in the money demand function to capture lags in the public's response in adjusting money balances to desired levels. This allowance for lagged adjustment allows one to take a longer run view of changes in velocity even within the context of a quarterly model. For all of these reasons, we chose the particular specification for the velocity equation  .'. :  , - ,••••••••  :•  •  December 4, 1981  Page 2  rather than a simpler specification, which would have implied a more complex money demand function than the one from which our velocity function was derived.  -  :SYS  -  Use of Ml-B adjusted for shifts into NOW accounts reflects our judgment that this is the relevant magnitude for computing velocity in 1981. Our judgment is based primarily on two factors. First, the FOMC has emphasized shift-adjusted Ml-B rather than observed Ml-B in policy implementation this year. Both the long-run ranges and the short-run target paths have been expressed in terms of shift-adjusted Ml-B for reasons outlined by Chairman Volcker in several statements before the Joint Economic and other Congressional Committees. Because we emphasized in our Economic Review article the importance of predicting velocity for policy implementation, it seemed natural to choose the aggregate actually used by the FOMC in the conduct of monetary policy.  S•  -, •  •  •'  .4  •  ,  - ”ver41.111011WW4orftroc-reepestrir   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The second reason we chose to use Ml-B adjusted was that survey evidence developed by the Federal Reserve seems to suggest it is a more accurate measure of the public's transactions balances than is Ml-B unadjusted. Some of the funds transferred into NOW accounts in 1981 were previously held in savings accounts and other nontransactions assets. If Congress had not authorized nationwide NOW accounts, it is reasonable to believe that some of the funds transferred into NOW accounts would have continued to be held in assets that could not be used as a transactions medium. As a result, measured Ml-B overstates the true amount considered by the public to be transactions balances. Of course, the Precise magnitude of the adjustment necessary to remove the distorting impact of tne onetime transfer of funds into NOW accounts is uncertain, as we noted in the article. However, the best available evidence provided by the staff of the Board of Governors suggests that the adjusted Ml-B series we used in our study is a reasonable approximation of the "true" amount of transactions balances held by the public.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Thank you again for providing us with your thoughts on the velocity behavior of Ml-B.  Bryon Higgins Assistant Vice President and Economist   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  BOARD OF GOVERNORS OF E FEDERAL RESERVE SYST EM \\..  TO:  DATE:  December 16  Chairman Volcker  FROm: John E. Ryan (  You may wish to re d this before your call. It's not clear which Federal regulator he consulted.  ,..Senate Banking, Housing & Urban Affairs Committee  •  FAT  I  For further information contact: Curt Burnett (202) 224-1337 or Laurie Snow (202) 224-1336  News ,elease FOR IMMEDIATE RELEASE DECEMBER 9, 1981  GARN DETAILS BANKING BILL PLANS; SAYS COMMITTEE WILL NOT ACT ON 'REGULATORS BILL' Jake Garn WASHINGTON, D.C. — .Senate Banking Committee Chairman een the banking said today a "significant consensus" is developing betw ion to modernize and savings and loan industries on his proposed legislat ng the way for committee and restructure the nation's financial industry, pavi and Senate action on the bill early next year. At the same time, Garn announced that: Committee will not -- The Senate Banking, Housing and Urban Affairs bill," giving federal regulators consider this year the so-called "regulators' institutions. new powers to deal with troubled financial banking committee's -- Sen. Alfonse D'Amato (D-N.Y.), chairman of the ings on Treasury securities subcommittee, has been asked to hold hear to establish "bank Secretary Donald Regan's proposal to allow banks activities and revenue securities affiliates" to underwrite mutual fund bill -- S.1720 -- after bonds. Garn said the committee will mark-up his the conclusion of the D'Amato hearings. he and Sen. D'Amato Commenting on the regulators' bill, Garn said r members of the committee, consulted with federal regulators and othe itions do not make it necessary cond rent "cur that on lusi conc the to ing lead gency, stop-gap measure -- apart to consider the bill -- essentially an emer long-term structural changes from the rest of S.1720, which provides for y solutions. which would reduce the need for such emergenc n very closely, but the "We will continue to monitor the situatio the bill would apply to a very \emergency supervisory powers contained in condition appears to be manageable few troubled financial institutions whose   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ns," the chairman said. under existing laws and economic conditio Sen. D'Amato and New Garn said he has received the concurrence of Siebert on his assessment. York State Superintendent of Banks Muriel L._ mark-up and approve S.1720 Although the banking committee will not - more -  •  ....04...:46.r.4.00.01.4  +0 •  : • ••••  • • ".  •  •  2/GARN DETAILS BANKING BILL PLANS; SAYS COMMITTEE WILL NOT ACT ON 'REGULATORS BILL' ythis year because of time constraints, "I believe we accomplished ever bill thing that we could reasonably have hoped for in introducing the last October. ussion "Our principal objective was to encourage a vigorous and open disc builders and among the banking and thrift industries, the realtors, home ions to others about necessary changes to enable financial institut needs and demands survive and prosper while adjusting to changing consumer chairman said. in a period of high inflation and interest rates," the top of the table. "We wanted to put controversial issues squarely on  The  but were intended to specific recommendations never were set in concrete ing the nation's financial focus discussion on the serious problems confront of hearings conducted industry which came to light in the two major sets by the committee this year," he said. ensus" between the The result has been a "significant developing cons , "based on enlightened banking -and savings and loan industries, Garn said long differences must be self-interest and growing awareness that decadeson's financial industry, resolved in the face of rapid changes in the nati lete in many cases. which have made existing laws and regulations obso long way toward bridging "In a matter of months, they have come a very on federal regulation of the the gap between their traditional positions Bankers Association and the financial industry, and I commend the American r responsiveness and willingness U.S. League of Savings Associations for thei merits of S.1720," the chairman to search for common ground in assessing the , significant progress has been said. "Although discussions must continue achieved," he said. he received from Roy G. The senator released a copy of a letter B. O'Connell, president of the Green, chairman of the board, and William a key provision of S. 1720 -League, concerning a compromise position on ing powers while phasing-out expanding thrifts' non-residential lend ntage or "differential" the quarter-percent deposit rate interest adva they enjoy over commercial banks.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  - more -   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  3/GARN DETAILS BANKUL BILL PLANS; SAYS COMMITTEE WILL NOT ACT ON 'REGULATORS BILL' The League, in the letter, proposed that the interest differential be phased out over a four-year period ending in April, 1986, while the percentage of a thrift's assets that could go into commercial lending/ demand deposits would be allowed to rise.  "A phase-out of the differential  coupled with a phase-in of the most significant powers for stabilizing thrift institution assets and liabilities would provide a realistic, predictable timetable for modernization of our system of depository institutions," the letter said. Noting that this proposal represents "a logical middle ground," the letter said "it will enable thrift institutions to evolve in a gradual, orderly manner and eventually permit housing finance specialization to flourish by choice rather than statutory restrictions." By engaging in expanded non-residential lending activities, thrifts could strengthen their financial base and alleviate the mortgage and credit squeeze caused by cyclical fluctuations in the housing market and erratic interest rate changes, the letter explained. The League also indicated it would not object to provisions in S. 1720 liberalizing real estate lending by national banks and allowing all depository institutions to underwrite revenue bonds or issue and sell mutual fund services. Passage of the regulators' bill or "bare bones" legislation this year was opposed by the League. "Certainly, any Congressional action this year addressing the supervisory assistance subject must confront as well the more fundamental competitive and economic problems faced by all thrift institutions," the letter said. "At a bare minimum...any regulators' bill must include a Federal preemption of restrictions on the exercise of due-on-sale clauses, authority for commercial lending, and corporate demand account powers." A recent letter from Gerald M. Lowrie, executive director of government relations for the American Bankers Association, indicated a shift from the association's initial opposition to expanding thrifts' lending powers, Garn said. An ABA Special Committee on Thrift Institution Restructuring and Mortgage Finance has recommended that some additional asset powers be granted to thrift institutions, ranging from overdraft loans for transaction accounts to unrestricted investment in education loans. The committee made its recommendations conditional on the repeal of the interest rate differential and a provision of the law requiring the Federal Home Loan Bank Board to encourage and promote savings and loan associations. In addition, the ABA indicated its willingness to consider commercial lending powers, although it is currently opposed. "I believe there is significant common ground in the modified positions of the ABA and the U.S. League resulting from the introduction of S. 1720," Garn said. "Over the next few weeks, we will continue to nt, foster discussions between the two groups to broaden areas of agreeme interested and we will expand our efforts to address the concerns of other groups, including the realtors, the homebuilders, and consumer groups. of This whole effort has been designed to enlist the participation types as many groups as possible in building a strong consensus for the ual and of changes in the financial industry which will benefit individ industry groups alike, the chairman stated. m," "If we can continue these discussions and maintain this momentu Garn said, "I am confident the Senate will pass and send to the House ze which will moderni very early next year a modified version of S.1720, it to perform well the laws governing the financial industry and enable as we near the 21st Century."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • December 16, 1981  The Honorable Bill Nichols House of Representatives Washington, D. C. 20515 Dear Mr. Nichols: Thank you for your letter of December 4 forwarding correspondence from Mr. Harold D. King, Chairman of the Peoples Bank, Pell City, Alabara. Mr. King was concerned that the Depository Institutions Deregulation Committee might postpone the implementation of the new IRA/Keogh account that was authorized by the Committee at its meeting on September 22. As you may know, I voted in favor of creating this new account at our September meeting. I also voted in favor of retaining it when the Committee members were subsequently polled regarding the account. I have enclosed a copy of the DIDC press release on this issue for your information. Please let me know if you would like any further information. Sincerely,  Enclosure (11/20/81 DIDC P.R.)  NB:RS:vcd (V-351) bcc:  Mr. Bernard Mrs. Mallardi (2)  Bernard Action assigned N4r. COMMITTEE ON ARMED SERVICES  BILL NICHOLS RD DISTRICT, ALABAMA  1  DISTRICT OFFICES. 2417 RAYBURN BUILDING WASHINGTON, D.C. 20515 PHONE: (202) 225-3261  Congre55 of the Unita!6tate5 ji?ousSe of iItpresSentatibe5  COUNTIES: LEE AUTAUGA LOWNDES C.ALHOUN MACON CHAMBERS RANDOLPH CLAY CLEBURNE RUSSELL TALLADEGA COOSA TALLAPOOSA ELMORE   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Wassbington, Z.C. 20515  FEDERAL BUILDING ANNISTON, ALABAMA PHoNE: 236-5655 FEDERAL BUILDING OPELIKA, ALABAMA PHONE: 745-6222 115 EAST NORTH SIDE TUSKEGEE, ALABAMA PHora: 727-6490  December 4,1981  Mr. Paul A. Volcker Chairman Depository Institutions Deregulation Committee 20th and Constitution Avenue, Room B 2120 Washington, D.C. 20551  ,  •4I  Dear Mr. Chairman: Attached is correspondence I have received from Harold D. King, Chairman of the PeoplesBank, Pell City, Alabama expressing his bank's favoring the continuation of recent DIDC ruling allowing a new 18 month CD with no interest rate ceiling to be used in conjunction with IRAs. While I take no position in this matter as a Member of Congress, I am pleased to pass along Mr. King's correspondence and ask that it be made a part of the official proceedings as the DIDC considers this issue. Sin  rely,  Bi  41. 2) M. Nichols, 66'  BN:cm Enclosure cc:  Mr. Harold D. King Chairman The Peoples Bank Post Office Box 508 Pell City, Alabama 35125  1   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • THE PEOPLES BANK  POST OFFICE BOX 508  PELL CITY, ALABAMA 35125  November 10, 1981  Telegram Sent To:  Hon. Donald T. Regan, Secretary Department of Treasury Washington, D.C. Hon. Paul E. Volker, Chairman Federal Reserve Board Washington, D.C. 20551 Hon. William Isaac, Chairman Federal Deposit Insurance Corp. Washington, D.C. 20429 Hon. Charles E. Lord Office of the Comptroller of the Currency Treasury Department Washington, D.C. 20219 Hon. Richard Pratt, Chairman Federal Housing Loan Bank Board 600 17th Street Washington, D.C. 20552 Hon. Ed Callahan Credit Union National Association 1760 G Street, N.W. Washington, D.C.  I was very pleased with the DIDC's September 1981 ruling that created a new 18 month no ceiling rate CD for use in IRA/Keogh accounts effective 12/1/81. It has come to my attention that the DIDC is being asked to rescind its ruling and not allow this CD to become effective 12/1/81. I believe that to rescind your ruling would be a terrible mistake and in total disregard of the act that authorized the DIDC. I believe it would be very damaging to the banking system and to my bank in particular. Our program to market this new CD for IRAs is complete and ready to go.  4.1011V  _  irkmr  •  • -Page 2-  To rescind would de rive m bank of ore deposits that I .tes IIr 0 sming o se so •e resent ruililantigestraints. Those who want you to rescind have only one goal in mind and that is to kill the deregulation of Regulation Q. DIDC has already given them a "foot in the door" with the rescission of the 50 basis point rise in savings rates. The integrity of the DIDC is at stake. If it was a good decision in September, and I think it was, it is still a good decision in November, 1981. I cannot buy the argument of the S&Ls that deregulating IRA accounts would cost too much money at a time when they are on the brink of failure. It does not square with the fact that 2 year CDs when / they have been paying the maximum rate on 21 their banking competition has been paying 1% to 2% below the maximum allowable. If they are concerned with cost of funds it appears to me they should have capped their 30 month CD below the allowable rate as I have done. I urge you not to rescind your ruling to allow an 18 month no rate ceiling CD for use with IRA accounts. This is the first ruling that truly will help all financial institutions because it clears up a lot of operational problems. Yours very truly,  Harold D. King Chairman HDK:sp   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  r  ,•  •  •  DecemLer 15, 1981  The honorable Mack Mattingly United States Senate Washington, D.C. 20510 Dear Senator Mattingly: Thank you for your letter of December 10 requesting comment on correspondence you received from Mr. Barry Looper regarding the Board's proposal to amend the definition of "arranger of creait" in revised Regulation Z. Under the amended Truth in Lending Act, a person wno ". . . regularly arranges for the extension 6f consumer credit . . ." from persons who do not regularly extend credit, may Le subject to the disclosure requirements of the Act. Tne Board's proposal (a copy of which is enclosed) deals with determining what activities constitute arranging credit. In the proposal the Board specifically requested 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. Mr. Looper, in his letter, indicates that he does not believe that real estate brokers should be considered to be arranging credit in seller-financed transactions and therefore required to give Truth in Lending disclosures. The comment period on the proposal recently ended and we are now in the process of reviewing the comments received. Let me assure you that Mr. Looper's comments will receive the fullest consideration. As I am sure you are aware, Senator Garn has introduced a bill, S. 1720, that would excluae 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 appreciate receiving your constituent's views. Please let me know if I can be of furtner assistance. MPL:CO:pjt (#V-366) bcc: Maureen Lnglish Mrs. Mallardi,/  Sincerely, Malont (Signed) William R. William R. Maloni Special Assistant to the Board  Lnclosure   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  V  4•4.4ACK MATTINGLY GEORGIA  •  •  COM MITTEES: APPROPRIATIONS GOVERNMENTAL AFFAIRS JOINT ECONOM IC ETHICS  'Alenifeb Zfafez Zenafe WASHINGTON, D.C. 20510  December 10, 1981  co,   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  366  u-  '  The Honorable Paul Volcker Federal Reserve System 12th and Constitution Avenue, N.W. Washington, D.C. 20551 Re:  Harry Looper, III 1344020007  Dear Mr. Chairman: I have received correspondence, copy attached, from my constituent requesting assistance. Your prompt attention and response will be greatly appreciated. Should you need additional information, please feel free to contact my staff assistant, Robert Lee. Sincerely,  d4(64,47 Mack Mattingly MM/rel Enclosure  •  •  _ 4_ REALTY WCR LD .   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  F  REALTY WORLD, — Looper Realty loo W. Crawford Street, Dalton, GA 30720 T(dephone. (404) 278-89/.6  Board of Governors Federal Reserve System Federal Reserve Building Washington. D.C. 20551 1980 Revisions of the Truth-in-Lending Act  Re:  Gentlemen: I would appreciate the Board's favorable consideration under the 1980 revisions of the Truth-in-Lending Act, to exempt the real estate broker from the rLquirements of Regulation 7.--dealing with all Truth-in-Lending disclosures thereunder. It is mv unaerstanding that Senator Jake Carn, Chairman of the Senate Committee on Banking, Housing and Urban Affairs, has presented the Board substantive statements concerning this matter and we are in full accord with his statements. Your favorable treatment of exempting the real estate broker from these requirements will assist greatly in the continuation of a major industry in this country, which has suffered tremendously for many months now. I sincerely appreciate your consideration. Sincerely, Y ..,,e , cI. — z .1.,___ Harry Broke cc:  I . Looper,I?--  Rep. Rep. Sen. Sen. Sen.  Larry McDonald Ed Jenkins Sam Nunn Mack Mattlingly Jake Garns  S  "We'll cover it all  Jor you n."  Each office ineependently owne,1 and opei /ell  . •. 1JIM l'it • /1111111111  '.0-75:0"• w's-5  4 f te  .  1111I  SIMI/ I ;)  AI j: 11P • •  II  REPLTY WORLD.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  REALTY WORLD,. — Loot:KJ Realty loo vv. C;rawtord Street, Dalton, GA 30720 Telephone:(404) 278-89A  The Honorable Jake Carn Chairman United States Senate Committee of Banking, Housing and Urban Affairs Washington, DC 20510 Re:  1980 Revisions of the Truth-in-Lending Act  Dear Senator Garn: I have read your letter of July 24, 1981, to Paul Volcker, chairman ? Federal Reserve Board, requesting the Board?s reconsideration of the treatment of a real setate broker under the 1980 revisions of the.Truth-in-Lending Act, I want to add my support of your stated position and request you to continue to do everything within your power and ability to press for the exemption of the real estate broker from this burden, I greatly appreciate your understanding of our industry and wish to thank you for your support, Sincerely,  /f7 . Harry 8; Looper, Broker cc:  Rep. Rep. Sen. Sen,  rii  Larry McDonald Ed Jenkins Sam Nunn Mack Mattlingly  gr.r,s "We'll cover it all ...for you..." Eac  office indepamelently Poinird end  sled  • • of G01/4- •.  BOARD OF GOVERNORS  R •  OF THE  ••z) -0 •--t *.•S•   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  December 14, 1981  RAL RE. • • •..• •  PAUL A. VOLCKER CHAIRMAN  The Honorable Carroll A. Campbell, Jr. House of Representatives Washington, D. C. 20515 Dear Mr. Campbell: Thank you for your recent letter endorsing the invitation its annual of the South Carolina Bankers Association to address convention next May 6-9. Unfortunately, I already have a speaking commitment for the d to send my dates of the Association's meeting and have been force take part in a regrets. I accepted an invitation many months ago to where I am a member program during that period at the Mayo Foundation of the 'lard of Trustees. er Perhaps I will be able to get to South Carolina at anoth time. With best regards. Sincerely,  yip CARROLL AI CAMPBELL. JR. 4TH DISTRICT, SOUTH CAROLINA  •  •  PLEASE RESPOND TO ADDRESS CHECKED  COMMITTEE ON APPROPRIATIONS WASHINGTON OFFICE: R00M 408  0  SUBCOMMITTEES:  CANNON HOUSE OFFICE BUILDING COMMERCE, JUSTICE, AND STATE, THE JUDICIARY AND RELATED AGENCIES TREASURY, POSTAL SERVICE, GENERAL GOVERNMENT  202-225-6030  Conge55 of tbe aniteb •'--)tate5  LEGISLATIVE BRANCH   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  jDoutie of ReprOentatibeci  DISTRICT OFFICES: P.O. Box 10183, FEDERAL STATION GREENVILLE, SOUTH CAROLINA  29603  803-232-1141  obington, 1D.C. 20515 ' xoil;  P.O. Box 1330 0 SPARTANBURG, SOUTH CAROLINA 803-582-6422  December 10, 1981  Hon. Paul A. Volcker, Chairman Federal Reserve Board 20th and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: Attached is a copy of a letter to you which I recently received from John G. P. Boatwright, President of the South Carolina Bankers Association, inviting you to address the Association's annual convention in May, 1982, on Hilton Head Island, South Carolina. I would like to take this opportunity to add my strong personal endorsement to this invitation and ask that you give every positive consideration to accepting, schedule permitting. Thank you for your attention in this matter, and please let me know if I can ever be of assistance to you in any way in the future. Sincerely,  Carroll A. Campbell, Jr. Member of Congress CAC:sjb  6  29304  y   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  November 11, 1981  The Honorable Paul A. Volcker Federal Reserve System 20th and Constitution Avenue Washington, D. C. 20551 Dear Chairman Volcker: The South Carolina Bankers Association extends to you a cordial invitation to be one of our guest speakers during its annual convention May 6-9, 1982. The conventipp will be held at the Fyatt on Hilton Head Island, South Carolina. We coula arrange for you to be on the program eith er Friday or Saturday morning, whichever best suit s your schedule. Our Executive Vice President for the Association will check with your office during the week of November 16 to determine whether it is a possibility that you will be able to be with us. Our Association customarily reimburses expenses to all guest speakers. We would be most hopeful that you and Mrs. Volcker could come down for the whole weekend. Sincerely,  John G. P. Boatwright President cbj   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  The honorable Jake Garn Chairman Committee on Banking, housing and Urban Affairs United States Senate 20510 Washington, D.C. Dear Chairman Garr': s to The Board has appointed nine new member ceed those persons its Consumer Advisory Council, to suc ald R. Christensen, whose terms expire this year. Mr. Ger was among those whom you recommended for appointment, selected to the Council. n 500 The selections were made from more tha pleased at the nominees this year, and the Board was ividuals whose large number of highly qualified ind tion. For your inforname6 were submitted for considera ease announcing the mation, I am enclosing a press rel board's selections. in the We very much appreciate your interest Mr. Christensen. Council and thank you for recommending Sincerely, S/Patil A, Volcket  Enclosure CO:pjt (see #562) bcc: Mrs. Bray Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  {J.E  4 1981  Tne honorable Sam Nunn United States Senate 20510 Wasnington, D.C. Dear Senator Nunn: The Board has appointed nine new members to its Consumer Advisory Council, to succeed those persons whose terms expire this year. Mr. E.C.A. (Ld) Forsberg, Sr., whom you recommended for appointment, was among those selected to the Council. The selections were made from more than 500 nominees this year, and the Board was pleased at the large number of highly qualified individuals whose names were submitted for consideration. For your information, I am enclosing a press release announcing the Board's selections. We very much appreciate your interest in the Council and thank you for recommending Mr. Forsberg. Sincerely, SZPaul A. Volcket  Lnclosure CO:pjt XXXX (see #603) bcc: Mrs. Bray Mrs. Mallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  DE C 1 4 1981  The honoraLle William Proxmire United States Senate iNashington, D.C. 20510 Dear Senator Proxmire: The Board has appointed nine new members to its Consumer Advisory Council, to succeed those persons whose terms expire tnis year. Ms. Meredith Fernstrom, wnom you recommended for appointment, was among those selected to the Council. The selections were made from more than 500 nominees this year, and the Board was pleased at the large number of highly qualified individuals whose names were submitted for consiaeration. For your information, I am enclosing a press release announcing the Board's selections. We very much appreciate your interest in the Council and tnank you for recommending Ms. Fernstrom. Sincerely,  Saul A.112,tasu  Enclosure CO:pjt (see #V-223) 1.)cc: Mrs. Bray Mrs. Hallardi (2)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  •  pu 14 1981  The Honorable Mark Hatfield United States Senate Washington, D.C. 20510 Dear Senator Hatfield: The Board has appointed nine new members to its Consumer Advisory Council, to succeed those persons whose terms expire this year. Mrs. Janet J. Rathe, whom you recommended for appointment, was among those selected to the Council. The selections were made from more than 500 nominees this year, and the Board was pleased at the large number of highly qualified individuals whose names were submitted for consideration. For your information, I am enclosing a press release announcing the Board's selections. We very much appreciate your interest in the Council and thank you for recommending nrs. Rathe. Sincerely,  seat 1101,51g4  Enclosure CO:pjt (see #532) Lcc: Mrs. Bray Mrs. Mallardi (2) XXXKXXXIX Identical ltr. also sent to Sen. Packwood (see #602)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Congressman S- _./e Neal House of Representatives 2463 Rayburn Building Washington, D C 20515  •  44•1°'"  Oae a  Congressman Steve Neal House of Representatives  •  yr.  Congto of tbe Einittb tato potia of tepreventatibez STEVE NEAL 5TH DISTRICT. NORTH CAROLINA  December 10, 1981  The Honorable Donald T. Regan Chairman Depository Institutions Deregulation Committee 15th & Pennsylvania Avenue, N. W. Washington, D. C. 20220 Dear Mr. Secretary: I wrote to you on October 22, 1981, asking that the Depository Institutions Deregulation Committee permit the thrift industry a breathing spell, in view of that industry's current instability, before considering further deregulation orders. On October 27, 1981, I joined other members of the House Banking Committee in signing another letter to you asking essentially the same thing. Since I have not received a reply to either letter, I can only assume that the answer is no. The DIDC appears to be moving full-tilt in its deregulation campaign and has, in fact, scheduled a meeting for December 16 at which it intends to consider yet another package of orders that will raise the operating costs of thrift institutions. I implore you, Mr. Secretary, to give strong consideration to an immediate moratorium on DIDC action. The DIDC members may be pursuing their own visions of a new financial marketplace, but across the country millions of people are worried about the condition of local institutions, where they have invested their savings, and about the lack of affordable houses and mortgages. Let me assure you that ordinary people are more concerned about these things than about regulations and economic theories. Surely the DIDC could desist for a few months while the Congress polds hearings on the future of the financial system and while local thrift institutions and small banks regain their stability. We need a pause in the deregulation process, Mr. Secretary, until we determine where we are going.  .•  WASHINGTON OFFICE: 2469 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 PHONE:(202)225-2071  cc: members of the DIDC   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  HOME OFFICE: 421 FEDERAL BUILDING WINSTON-SALEM. NORTH CAROLINA 27101 PHONE:(919) 761-3125   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • December 10, 1981  The honorable Delbert L. Latta House of Representatives Washington, D. C. 20515 Dear Mr. Latta: In Chairman Volcker's absence, I would like to thank you for senuing us a copy of Mr. William H. Price's letter supporting the Chairman's position on imposing reserve requirements on money market mutual funds. At this point, legislation imposing reserve requirements on money market funds is not under active consideration, although we continue to believe it important both from the perspective of monetary control and equity among financial institutions. The issue of a possible new short-term instrument to better enable depository institutions to compete with the money market funds is a complex one. Such an instruLlent would improve the competitive position of depository institutions, but this benefit could be offset by the potential impact on the already severely depressed level of thrift institutions. Sincerely,  Frederick H. Schultz RS:DJW:vcd (#V-346) bcc: Mr. Bernard Mrs. Mallardi (2)v/ Mrs. Winkler TICKLER:  SEND DIDC PRESS RELEASE AFTER DEC. 16 MTG.  web  Aciin assigned Mr. Bernard f DELBERT L. LATTA 51-14 DisTRicr, 01410  •  Trawess of tile Pniteti States Amer of Pprrsandatites 211515 Amtzhiiistrat, November 23, 1981  400  The Honorable Paul A. Volcker, Chairman Federal Reserve System 20551 Washington, D. C. Dear Mr. Chairman: For your convenience, please find enclosed a copy of your letter to my constituent, Mr. William H. Price, IT, of Maumee, Ohio, as well as a copy of his letter to me concerning reserve requirements. Needless to say, I hope you will keep me advised of the status so that I, in turn, can advise Mr. Price. Thank you in advance for your cooperat_ion and I look forward to hearing from you. With all best wishes, I remain Sili  ely yours,  BERT L. LATTA Representative to Congress DLL:bk Enclosures   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  7:7  COM MITTEES: RULES BUDGET  .fr   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  oi  WILLIAM H. PRICE II  November 14, 1981 Congressman Delbert L. Latta 2309 House Office Bldg. Washington, D. C. 20515 Dear Del: As you know I have suggested that approp riate action be taken to require reserves be maintained by money market funds which would make the banks and saving s and loans more competitive with these funds. It wou cause the money or some of it that is inv ld probably also ested in these funds to get back into circulation whi ch would aid the entire economy. It should be obvious to all tha t the economy is sick which it must be if the inflationary problems are to be worked out. Getting more money int cir o culation without the Federal Reserve Board printing more wou ld certainly be helpful to the major ailing industries. Subsequent to our conversations and correspon dence on the above, I wrote Mr. Volcker, Chairman of the Federal Reserve System. Enclosed is a copy of his rep ly which is selfexplanatory. Please note the following: (1)  He requested the authority to impose res erve requirements on money fund shares.  (2) He is currently considering the aut horization of a short-term instrument whose attributes in com par to existing deposit accounts, more closely par ison allel those of the money market mutual funds. I strongly urae when this is published that you see fit to support Mr. Volcker's position. Sincerely,  H. Price II WHP:dm cc:  Paul Volcker  4  4  ••• (0 , b• •.• .... : --.----..14, ,•. ••—•'/,:. ''''' •'''' :F:. . : ( '''.. •• "'"•-:>. ..4.1..-- ... si\v".• :.5: : 7,. . 1::•••••,r.e..it-/..7.,A 11 ..  i3DARD  DF GOVERNORS OF THE  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  tz: f .ri F,),., !t. •;-..\,.14,11,,,_ . ..c., . . : . -4,-••.-,,...z.....—... (..," -.....L•••-•- 0:.•-. .  .7.1 '..4.:[if  October 26, 1981  .•.itAL FCES •  PAUL A. VOLCKER CHAIRMAN  Mr. William H. Price II L Dear Mr. Price: Thank you for your letter of September 30, 1981, and your kind words of support. In your letter you suggest that reserve requirements be extended to money market mutual fund shares. As you may know, in a recent testimony before the House Subcommittee on Domestic Monetary Policy, I requested the authority to impose reserve requirements on money fund shares that can be used for transaction purposes. We believe that this extension of reserve requirements would assist the Federal Reserve in formulating and implementing monetary policy and would enhance the competitive equity between various financial intermediaries. ,I regret to report, however, that the Congress has failed to 4 - ct on our proposal. You may, however, be encouraged to know that the Depository Institutions Deregulation Committee (DIDC) is considering several proposals to improve the competitive position of commercial banks and thrifts. Specifically, at its December meeting, the Committee will consider the authorization of a short-term instrument whose attributes, in comparison to existing deposit accounts, more closely parallel those of the money market mutual funds. In preparation for that discussion the Committee will shortly be publishing for comment a set of proposals for such an instrument. I urge you to take advantage of this opportunity to make your views known. Sincerely, 1  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 9, 1981  The Aonorable Floyd D. Spence House of Representatives Washington, D. C. 20515 Dear Mr. Spence: Thank you for your recent letter endorsing the invitation of the South Carolina uankers Association to address its annual convention next May 6-9. Unfortunately, I already have A speaking commitment for the dates of the Association's meeting and have been forced to send my regrets. I accepted an invitation many months ago to take part in a program during that period at the Mayo Foundation where I am a menber of tne 6oard of Trustees. Perhaps I will be able to net to South Carolina at another time. With best regards. Sincerely,  bcc:  Mrs. Nallardi  JRC:tjf (41C--  AP  FLOYD SPENCE  2ND DISTRICT, SOUTH CAROLINA WASHINGTON OFFICE. 2427 RAYBURN HOUSE OFFICE BUILDING AREA CODE 202. 225-2452  COMMITTEES: ARMED SERVICES STANDARDS OF OFFICIAL CONDUCT  Congre55 of tbe Elniteb -'1-)tato  COUNTIES:  j[put4e of Repretentatibet4  CALHOUN ALLENDALE LEXINGTON BAMBERG ORANGEBURG BARNWELL RICHLAND  DISTRICT OFFICES: THURMOND FEDERAL BUILD!NG, Room 1449 1835 ASSEMBLY STREET COLUMBIA, SOUTH CAROLINA 29201 AREA CODE 803. 765-5871 AND 372 ST. PAUL STREET, NE. ORANGEBURG, SOUTH CAROLINA 29115 AREA CooE 803. 536-4641   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • teatbington, ri.e. 20515  W. A."AL" COOK ADMINISTRATIVE ASSISTANT W. L. "SoNNY" SANDERS DISTRICT REPRESENTATIVE  December 4, 1981  The Honorable Paul A. Voldker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenues, NW Washington, D.C. 20551  "ri  Dear Chairman Volcker:  '71  I understand that you have received an invitation to be a guest speaker at the annual convention of the Sauth Carolina Bankers Association in May. I believe the invitation wus extended by Mr. John P.G. Boatwright, President of the Association.  ••  Zr.  I hope that you will make every effort to accept Mr. Boatwright's invitation. I believe you will enjoy visiting South Carolina and I can assure you that you will be warmly received there. With kindest regards, I dm Sincerely,  FLOYD NIEffiber  FDS/cq  CI:11F11.1 1" 1" 1 ..  ENCE Congress   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 9, 191  The Honorable dutler Derrick House of Representatives Washington, D. C. 20515 Gear Mr. Derrick: Thank you for your recent letter endorsing the invitation of the South Carolina Bankers Association to address its annual convention next May 6-9. Unfortunately, I already have a speaking commitment for the dates of the Association's meeting and have been forced to send my regrets. I accepted an invitation many months ago to take part in a program during that period at the Mayo Foundation wnere I am a member of the Board of Trustees. Perhaps I will be able to get to South Carolina at another time. With best regards. Sincerely,  bcc:  Mrs. Mallardi  JRC:tjf  •  BUTLER DERRICK 3D DisTRicr, SOUTH CAROLINA  •  DISTRICT OFFICES:  Posr  OFFICE  Box 4126  ANDERSON, SOUTH CAROLINA  29622  (803) 224-7401 SAUL D. WEINER ADMINISTRATIVE ASSISTANT  133 CANNON  HOUSE OFFICE BUILDING  D.C. 20515 (202) 225-5301  WASHINGTON,  Conare55 of tbe  niteb tette  31)ou5t of Ileprefientatibeti  DISTRICT MANAGER BARBARA GAINES  5 211 AIKEN,  Uleusbington,/D.C. 20515  COMMITTEES:  FEDERAL BUILDING YORK STREET,  N.E.  SOUTH CAROLINA (803) 649-5571  29801  RULES 129  SELECT COMMITTEE ON AGING   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  FEDERAL BUILDING  GREENWOOD. SOUTH CAROLINA  (803) 223-8251  December 3, 1981  Paul A. Volcker Chairman, Board of Governors of the Federal Reserve System 20th & Constitution Avenue, N.W. Washington, D.C. 20551  C:71  • ••11•11.  Dear Mr. Chairman: It is my understanding that the South Carolina Bankers Association has extended an invitation to you to be a guest speaker at their annual convention in May of 1982. This convention will be held on Hilton Head Island and should be both enjoyable and informative. I know that the South Carolina bankers would benefit greatly from your remarks and I would like to take this opportunity to encourage you to join them in May. With kindest regards, I am Respe  BU Me  RICK er of Congress  D/mp  THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS  29646   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  December 9, 1981  The Honorable John L. Napier House of Representatives Washington, D. C. 20515 Dear Mr. :iapier: Thank you for your recent letter endorsing the invitation of the South Carolina 3ankers Association to address its annual convention next May 6-9. Unfortunately, I already have a speaking commitment for the dates of the Association's meeting and have been forced to send my regrets. I accepted an invitation many months ago to take part in a program during that period at the Mayo Foundation where I am a member of the uoard of Trustees. Perhaps I will be able to get.to South Caro1ina at another time. With best regards. Sincerely,  bcc:  Mrs. Mallardi  JRC:tjf  •  ‘100"  1'  JOHN L. NAPIER  •  FfOOMi511 LONGWORTH HOUSE 0FFICE BUILDING  GTH DISTRICT, SOUTH CAROLINA  WASHINGTON, D.C.  20515  202-225-3315 COMMITTEE: HOUSE COMMITTEE ON AGRICULTURE  DISTRICT OFFICES:  Congree;5 of the tiniteb •--)tato  SUBCOMMITTEES:  34oufSe of ReprWntatibet  TOBACCO AND PEANUTS COTTON, RICE AND SUGAR CONSERVATION, CREDIT AND RURAL DEVELOPMENT  leatbington, ri.e. 20515  201 WEST EVANS P.O. Box 1931 FLORENCE, SOUTH CAROLINA  HORRY COUNTY COURTHOUSE 29521  CONWAY, SOUTH CAROLINA 803-248-6247  ASSISTANT REGIONAL WHIP   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  November 30, 1981  The Honorable Paul A. Volcker Federal Reserve System 20th and Constitution Avenues Washington, DC 20551 Dear Chairman Volcker: 4 •  On November 11, 1981, the South Carolina Bankers' Association wrote inviting you to be one of the guest speakers during the annual convention to be held May 6-9 at Hilton Head, South Carolina. I am writing to urge that you seriously consider accepting this invitation to be with the bankers of South Carolina. If there are additional questions you have, or if I can assist you in any other way, please let me know. With best wishes, Yours very truly,  John L. Napier Member of Congress  JLN/  29503  803-667-9551  fa,  igk  • ........ f GOvt •.  .••  BOARD OF GOVERNORS  '9+%  : .,12 ., *0 •-n  •  O• .• 7i• u.i• I— • (e) • .. (,) • <4.,'  .-4 •. As  OF THE  FEDERAL RESERVE SYSTEM  1?ALREst•  WASHINGTON  December 9, 1981  FRECIERICK H. SCHULTZ  •• • •  VICE CHAIRMAN  The Honorable Spark Matsunaga United States Senate Washington, D. C. 20510 Dear Senator Matsunaga: In Chairman Volcker's absence, I am pleased to respond to your recent letter requesting information on behalf of your constituent, Myles Nishida. Myles asks about the efforts of the federal financial supervisory agencies to deter bank robberies and suggests that metal detectors be installed in all bank entrances. In 1968, Congress passed the Bank Protection Act, 12 U.S.C. §§ 1881-1884, which required each federal financial supervisory agency to promulgate regulations establishing minimum standards for security devices and procedures to discourage bank robberies. One of the provisions of the Act is that the devices and procedures required by the' agencies be "reasonable in cost." (12 U.S.C. § 1882) In response to this mandate, the Board promulgated its Regulation P (12 C.F.R. Part 216) (enclosed) to establish minimum security devices and procedures for Federal Reserve Banks and state member banks. Minimum standards are set for surveillance systems, robbery and burglary alarm systems walk-up or drive-in teller stations, as well as for vaults, safes, safe deposit boxes, night depositories, and automated paying or receiving machines. The standards do not require metal detectors, and it does not appear that this proposal has ever been considered by the agencies. In adopting Regulation P, the Board was concerned with providing each bank's management with the flexibility to determine what security devices would be appropriate for its particular situation. The regulation is in large part based on the premise that banking offices located in high crime areas would need many devices which would not be appropriate for small banking offices in areas substantially free from crimes against financial institutions. Therefore, the regulation requires each state member bank to designate a security officer who is charged with determining the security devices appropriate for each office of the bank, taking into consideration a number of factors including level of crime, amount of money or other valuables stored there, and cost of the devices. (12 C.F.R. §§ 216.2, 216.2(a) and (b)) If the security officer   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  `Is  •  The honorable Spark Matsunaga Page Two  decides that devices which fall below the minimum described in an appendix to the regulation are sufficient for the bank's protection, the bank is required to maintain records stating the reasons for this decision. (12 C.F.R. 6 216.3(c)) To make sure that banks adopt adequate security procedures, the Board has reserved to itself the authority to require corrective action if the Loard deems security measures inadequate in any particular circumstance. (12 C.F.R. 5 216.6) The Board believes that the existing regulation has served the purpose of bank protection well without subjecting individual banks to the requirement of purchasing costly security devices not necessary for their particular circumstances. A requirement that all banks purchase and man metal detectors at each entrance to every branch would be costly, particularly for banks whose offices have multiple facilities. Accordinaly, for most banks the installation of metal detectors at every office could not be cost-justified. However, it may be worthwhile for a bank to consider metal detectors for its branches on a voluntary basis. I wish Myles continued success in his scouting career. Please let me know if I can be of further assistance. Sincerely,  ti I Frederick H. Schultz (JRA:GTS:)CO:pjt (WAT-352) bcc: Gov. Schultz i..44P° . Mrs. Mallardi   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CHIEF DEPUTY DEMOCRATIC WHIP  SPt:RK M. MATSUNAGA HAWAII  wAsNINGToN oFFIcE: 4203 DIRKSEN BUILDING WASHINGTON, D.C. 20510  •  •  9-1Cnifeb Zfafes ,5ertate  COMMITTEE ON ENERGY AND NATURAL RESOURCES COMMITTEE ON FINANCE  WASHINGTON, D.C. 20510 HONOLULU OFFICE:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  COM M ITTEE ON VETERANS' AFFAIRS  November 12, 1981  3104 PRINcE KuHi° BuILDiNG HorvoLuLu, HAWAII 96850  Honorable Paul A. Volcker Chairman The Board of Governors Federal Reserve System 20th and Constitution, N.N. Washington, D.C. 20551  S3131'1-,  MEMBER:  33CI  Dear Mr. Volcker: Nishida, a My assistance has been requested by Myles al Boy Scout, in obtaining information on the Feder r of bank Supervisory Agencies' efforts to reduce the numbe that metal robberies in our Nation. Myles has proposed as a preventive detectors be installed in all bank entrances measure. rs so I would appreciate your comments on these matte endeavor to that I may be fully responsive to Myles in his earn a Merit Badge in Citizenship. Thank you for your assistance. Aloha and best wishes. Sincerely,  Spark Matsunaga U. S. Senator  LO :01,.. 8- AO 4."  •  MAJORITY MEMBERS: PAUL. SIMON. ILL., CHAIRMAN WILLIAM D. FORD, MICH. PETER A. PEYSER, N.Y. JOSEPH M. GAYDOS, PA. TED WEISS, N.Y. IKE ANDREWS, N.C.  CONGRESS OF THE UNITED STATES  DENNIS E. ECKART, OHIO CARL D. PERKINS, KY., EX OFFICIO  MINORITY MEMBERS: E. THOMAS COLEMAN, MO. JOHN N. ERLENBORN, ILL. ARLEN ERDAHL, MINN., EX OFFICIO LAWRENCE J. DE NARDIS, CONN. WENDELL BAILEY, MO.  HOUSE OF REPRESENTATIVES COMMITTEE ON EDUCATION AND LABOR  225-8881   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  SUBCOMMITTEE ON POSTSECONDARY EDUCATION 320 CANNON HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515  December 7, 1981  Honorable Paul A. Volcker Board of Governors Federal Re erve System 0551 D.C. Washingt De a r Cha  ma  er:  Thank you for your recent letter advising me of the Board's modification of Regulation Z governing the application of Truth-in-Lending provisions to the Guaranteed Student Loan origination fee. I certainly appreciate your taking such prompt action on this matter. Best wishes for the Holiday Season! ially,  aul Simon Chairman PS/wbd  •  MARK O. HATFIELD OREGON   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  'llerrifeti Ziafez Zenale WASHINGTON, D.C.  December 7, 1981 rn  Mr. Paul A. Volcker Chairman, Federal Reserve System Twentieth Street and Constitution Avenue N.W. Washington, D.C. 20551 Dear Chairman Volcker: Your letter of December 1, 1981, has been received, and I appreciate your interest and concern regarding the problems related to origination fees charged in federally-insured and guaranteed student loans. I am aware of the revisions in the regulations made by the Federal Reserve and am deeply appreciative of this action. Thank you for your efforts in resolving this troublesome issue. Kind regards. Sincerely,  Mark O. Hatfield United States Senator  MOH/rnw  •  .  • of (.017  A.A.% - .  711F_  • • 7. •:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  BOARD OF GOVEPNIIPS  ,*;  .....  • , • ...  .•:•••••.,  WASHINGTON  , . /At •  • // ••  FEDERAL RESERVE SYSTEM  •  •  A',1L RC ° .•  December 7, 1981  FREOERICK H. SCHULTZ VICE CHAIRMAN  ••••••  The honorable Jack Brooks Chairman Committee on Government Operations house of Representatives Washington, D. C. 20515 Dear Chairman Brooks: In Chairman VolcLer's absence, I would like to thank you for the opportunity to review and comwent on tho General Accounting Office report of October 20, 1981, entitled, "Continued lailure of Departments and Agencies to Take Effective Action on Audit Findings." While the Federal Reserve System was not included in this study nor in earlier reports covering this same subject, GAO did complete a thorough review of Federal Reserve internal auuit practices earlier. In its August 8, 1981 report on Federal Reserve Internal Audit Practices, the GAO rade two recomendations, Changes have been instituted to implement both recommendations. First, Reserve Lank audit standards have lwen amended to require follow-up by Bank general auditors of all operational reviews conducted by the Board of Governors' audit review staff. The Board will continue to monitor this , area in subsequent lescrve Bank reviews. Second, the Board has strengthened its operations review program throuh Ole appoinment of an audit 1:Inager and has charged the proE.,ram with specific follow-up re:Tonsibility on all of its reviews. The Federal Reserve has a strong cormitment to an :,ifective audit program, and \-e believe our procedures, particuof the imptovcwents which you suriTsted, are sound larly in .ind in Jccord with the prvie::!:ional :;I:indards called for in the CA0 repot- L. Please let me Lnow information.  you would .ike any further  JS:RS:vcd (V-347) Sincerely, bcc: Mr, Stark Mr. Kakalec Mr. Mulrenin Mr. Garwood Mr. Dave Robinson rredericl. li. Schultz , Mrs. Winkler Mrs. Mallardit/  /s(  "MN"  " •••••••••11/Nr....O.11.191V. ••  Ir • . .  "7.77-c.  Irrallt  •••  '  r  MAJORITY MEMBERS JACK BROOKS, TEX.,'CHAIRMAN L. H. FOUNTAIN, N.C. DANTE B. FASCELL, FLA. BENJAMIN -S. ROSENTHAL, N.Y. DON FUQUA, FLA. JOHN CONYERS, JR., MICH. CARDISS COLUNS, ILL. JOHN L- BURTON, CALIF. GLENN ENGLI.' OKLA. ELLIOTT H LEVITAS, GA. DAVID W. EVANS, IND. TOBY MOFFETT', CONN. HENRY A. WAXMAN, CALIF. FLOYD J. FITHIAN, IND. TED WEISS. N.Y. MICHAEL L. SYNAR, OKLA. EUGENE V. ATKINSON, PA. STEPHEN L.. NEAL, N.C. DOUG BARNARD, JR., GA. PETER A. PEYSER, N.Y. BARNEY FRANK, MASS. HAROLD WASHINGTON, ILL. TOM LANTOS, CALIF.  ac4A-sd  MINORITY MEMBERS  111  NINETY-SEVENTH CONGRESS  Congre5 of the Viniteb  FRAIVK HORTON, N.Y. JOHN N. ERLENBORN, ILLCLARENCE J. BROWN, OHIO PAUL N. MC CLOSKEY, JR., CALIF. THOMAS N. KINDNESS, OHIO ROBERT" S. WALKER. PA. M. CALDWELL BUTL ER. VA. LYLE WILUAMS, OHIO H. JOEL DECKARD, IND. WILLIAM F. CLINGER, JR., PA, RAYMOND J. MCGRATH, N.Y. HAL DAUB, NEBR. JOHN HILER, IND. DAVID DREIER, CALIF, WENDELL BAILEY, MO. LAWRENCE J. DE MARDIS, CONN. JUDD GREGG, N.H.  Mai  PotisSe of leprefSentatibeii COMMITTEE ON GOVERNMENT OPERATIONS  2157 1;tipburn Jiyitige Office Akita:ling Fila5bington, /IC. 20515  M.voRrry-225-SOSI MI NOR rry-225-5074  November 20, 1981  I/7  Honorable Paul Volcker Chairman of the Board of Governors Federal Reserve System 20551 Washington, D.C. Dear Mr. Chairman: Enclosed for your review and comment is a copy of the Government Operations Committee report entitled "Continued Failure of Departments and Agencies to Take Effective Action on Audit Findings." The Committee found that audit resolution in the Federal Government is still ineffective and untimely and, as a result, the Government is not realizing savings. Other findings included in the report are that audit resolution remains a low priority in many agencies; and management is not fully accountable nor committed to effective and timely audit resolution. I would appreciate your reviewing this report and advising me of the steps you are taking to insure that your board has an effective system for resolving audit findings. Sincerely,  JACK Chai Lf) c_  Enclosure  c.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ,CC1KS an   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  Union Calendar No. 178 House Report No. 97-279  97th Congress, 1st Session  CONTINUED FAILURE OF DEPARTMENTS AND AGENCIES TO TAKE EFFECTIVE ACTION ON AUDIT FINDINGS  ELEVENTH REPORT BY THE  COMMITTEE ON GOVERNMENT OPERATIONS  OCTOBER 20,1981.—Committed to the Committee of the Whole House on the State of the Union and ordered to be printed  U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1981  86-453 0  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  •  COMMITTEE ON GOVERNMENT OPERATIONS JACK BROOKS, Texas, Chairman FRANK HORTON, New York L. H. FOUNTAIN, North Carolina JOHN N. ERLENBORN, Illinois DANTE B. FASCELL, Florida CLARENCE J. BROWN, Ohio BENJAMIN S. ROSENTHAL, New York N. McCLOSKEY, JR., California PAUL a DON FUQUA, Florid N. KINDNESS, Ohio 1AS THON JOHN CONYERS, JR., Michigan 1A'ALKER. Pennsylvania S. RT ROBE CARDISS COLLINS, Illinois BUTLER, Virginia WELL CALD M rnia Califo JOHN L. BURTON, Ohio AMS. WILLI LYLE GLENN ENGLISH, Oklahoma a Indian ARD, DECK JOEL a ELLIOTT H. LEVITAS, Georgi ER, JR., Pennsylvania CLING F. IAM WILL a Indian S, DAVID W. EVAN RAYMOND J. McGRATH, New York TOBY MOFFETT, Connecticut HAL DAUB, Nebraska rnia Califo HENRY A WAXMAN, JOHN HILER, Indiana a Indian AN, FITHI FLOYD J. WENDELL BAILEY, Missouri TED WEISS, New York ENCE J. DENARDIS, Connecticut LAWR MIKE SYNAR, Oklahoma JUDD GREGG, New Hampshire EUGENE V. ATKINSON, Pennsylvania MICHAEL G. OXLEY, Ohio na STEPHEN L. NEAL, North Caroli a Georgi DOUG BARNARD, JR., PETER A. PEYSER, New York BARNEY FRANK, Massachusetts HAROLD WASHINGTON, Illinois Tom LANTOS, California WILLIAM M. JONES, General Counsel Jot-4N E. MOORE, Staff Administrator ELMER W. HENDERSON, Senior Counsel JOHN M. DUNCAN, Minority. Staff Director  LEGISLATION AND NATIONAL SECURITY SUBCOMMITTEE JACK BROOKS, Texas, Chairman FRANK HORTON, New York DANTE B FASCELL, Florida JOHN N. ERLENBORN, Illinois DON FUQUA, Florida M. CALDWELL BUTLER, Virginia ELLIOTT H LEVITAS, Georgia WILLIAM F. CLINGER, JR., Pennsylvania DAVID W. EVANS, Indiana HENRY A. WAXMAN, California RICHARD C. BARNES, Staff Director  E[  LETTER OF TRANSMITTAL  HOUSE OF REPRESENTATIVES, Washington, D.C, October 20, 1981.  Hon. THomAs P. O'NEILL, Jr., Speaker of the House of Representati ves, Washington, D.C. DEAR MR. SPEAKER: By direction ment Operations, I submit herewiof the Committee on Governth the committee's eleventh report to the 97th Congress. The com study made by its Legislation and Natmittee's report is based on a ional Security Subcommittee. JACK BROOKS, Chairman.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  CONTENTS . II. III. IV.  SU mmary Findings Recommendations Introduction A. Historical interest in auditing B. Effectiveness of audit resolution V. Discussion A. The magnitude of unresolved audit findings B. Objectives and scope of OMB policy guidance on audit resolution C. OMB policy guidance provisions and changes in audit resolution D. OMB oversight of agencies' audit resolution practi ce E. Audit resolution in civil agencies F. Audit resolution within DOD VI. Conclusion (V)  Page  1 4 5 6 6 7 8 8 10 11 12 16 19 23   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • Calendar No. 178  97TH CONGRESS /St  HOUSE OF REPRESENTATIVES  Session  I 1  REPORT No. 97-279  CONTINUED FAILURE OF DEPARTMENTS AND AGENCIES TO TAKE EFFECTIVE ACTION ON AUDIT FINDINGS  OCTOBER 20, 1981.—Committed to the Committee of the Whole House on the State of the Union and ordered to be printed  Mr. BROOKS, from the Committee on Government Operations, submitted the following  ELEVENTH REPORT BASED ON  A STUDY  BY THE  LEGISLATION AND NATIONAL  SECURITY SUBCOMMITTEE  On October 7, 1981, the Committee on Government Operations approved and adopted a report entitled "Continued Failure of Departments and Agencies To Take Effective Action on Audit Findings." The chairman was directed to transmit a copy to the Speaker of the House. I. SUMMARY This report is a result of a follow-up study by the Subcommittee on Legislation and National Security on the executive departments' and agencies' progress in improving their audit resolution systems. An earlier study of this subject was reported by the Subcommittee on June 18, 1979.' This report is based on a study and hearings conducted by the Subcommittee and a review performed by the General Accounting Office.2 The hearing included witnesses representing the GAO; Office of Management and Budget; and Departments of Agriculture, Commerce and Defense. 1 H. Rept. No. 96-279, First Report by the Committee on Government Operatio ns, "Failure of Government Departments and Agencies to Follow Up and Resolve Audit Findings," June 18, 1979. 2GA0 Report. "Disappointing Progress In Improving Systems For Resolving Billions In Audit Findings," AFMD-81-27, January 23, 1981. (1)   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 4  has achin the Department. DOD tion, olu res effective audit resolution orwit e in the area of audit nc ma rf pe or po its ke ed dg ma l le know e Committee that it wil th to nt me it mm co a de ma and has ntal directives on audit me rt pa de o tw ued iss D DO . effecimprovements first steps toward improving the resolution in 1981 which areDOD's audit resolutions. DOD must do tiveness and timeliness of ensure that it achieves effective and much more, however, to luding revising the directives to comply timely audit resolution, inc ance and Committee recommendations. fully with OMB policy guid perform evaluations in deciding on apSpecifically, DOD needs to ectives to provide more stringent audit propriate revisions of its dire directives' success in achieving more resolution requirements. Th n be accurately assessed only by DOD effective audit resolution ca re that the directives' provisions are acting immediately to ensu components in an effective and D DO all by t ou d rie car ly complete 16 detimely manner. Inspectors General, now in olu tion The installation of statutory res ult in improved audit res ld ou sh es, nci age d an s nt me part es. The Inspectors General nci age d an s nt me rt pa de ive cut agencies in the exe e heads of departments anddin gs, and should help by reporting tod th fin uses in resolving audit ab an ms le ob pr nt d ica nif sig nt on er in which departme s an nn ma e th on ss re ng Co e th inform B policy guidance. ently esagencies are carrying out OM pes the Administration's prec emphato Finally, the Committee ho d Efficiency will hel an ity egr Int on l ci un Co hed tablis to audit resolution. If pront me it mm co s on' ati str ini portance size the Adm ld help to underscore the im d finanun vided adequate support, it cou so al role in achieving egr int its d an n tio olu ptres it of aud vernment, and assist in proman Go l ra de Fe e th in nt me ge cial mana develop, implement d to es nci age d an s nt me rt pa ing Federal de resolving audit findings. use more effective means for II. FINDINGS e Federal Government is th in gs din fin it aud of n tio not 1. The resolu a result, the Government is As . ly me ti un d an ve cti ffe ine still funds and other savings. increased realizing substantial sums of re lved audit findings has has been 2. The dollar value of unreso ually more than what track or substantially. Moreover, it is act es still do not properly reported because many agenci report their audit findings.low priority in many agencies. Managed 3. Audit resolution is a d committed to effective an an e bl ta un co ac ly ful t no is ment timely audit resolution. audit resolution in ly me ti d an ive ect eff for ts lowed: 4. Requiremen in place or are not beingmfol t no her eit e ar es nci icials age off ny ma auditors and progra n ee tw be ays del d an s nt r; me ee itr Disagr an independent arb atoon to n tio olu res for ed vat ele ys wa ing are not al tly met for deciding and act timeframes are not consistenect audit findings or allow questioned t audit findings; decisions to rej ency regulations or withouls ag of ion lat vio in de ma en oft contro costs are accounting and collection written justifications; effectivemany agencies; agencies' systems do in cy have not been established unt y resolved; and many agen all fin il gs din fin ck tra on s ys report not alwa te and accurate periodic heads do not receive comple gs. din unresolved audit fin audit results and the status of   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 5  5. While OMB has improved its policy guidance on resolving audit findings, its performance is not what it should be. It has not developed guidelines for resolving contract proposal audits and regulatory audits. Portions of its Circular A-73 are neither clear nor complete. In those areas where policy has improved, OMB has been ineffective in performing oversight to determine how well agencies are complying with OMB guidance. It has not developed effective means to make agencies comply with its guidance. 6. DOD has more serious problems and has been slower to improve its audit resolution systems than any other Federal agency. In the past, DOD has not been responsive to efforts by the Committee to improve its audit resolution. Although DOD recently took steps to make improvements, it must do much more to ensure that it achieves effective and timely audit resolution. III. RECOMMENDATIONS 1. The Director of the Office of Management and Budget should emphasize through policy guidance that top agency management must endorse and promote effective audit resolution. ON1B also should clarify and strehgthen its policy guidance so that: (a) All audits with reported findings or recommendations are included in agency tracking and control systems and elevated for resolution when there are delays or disagreements between -auditors and program officials; (b) Managers clearly understand that control systems should track audit findings until the collection of funds owed, final implementation of procedural changes, or other final disposition; (c) Effective controls are established to fully account for amounts due to the Government, including separate identification of questioned costs recommended to be recovered and of amounts actually recovered; (d) Officials responsible for resolving disputes between auditors and program or administrative officials, and for the acting on delayed audit recommendations are independent of the program audited; (e) Departments and agencies apply OMB policy guidance on audit resolution to procedural findings; and (f) Periodic reports to agency heads include appropriate details to fully inform them of delays and of audit findings rejected as well as sustained. 2. The Director of the Office of Management and Budget should formulate and implement specific guidance for resolution of contract proposal and of regulatory audits. OMB should assure that this guidance is consistently applied in DOD and the civil agencies. 3. The Director of the Office of Management and Budget should require that agency audit resolution systems and major revisions to those systems be reviewed and approved by OMB. Reviews should include periodic assessments of agency audit resolution systems. 4. Foflowing review and submission of the budgets to Congress for fiscal years 1983 and 1984, the Director of the Office of Management and Budget should report to the Committee on Government Operations on OMB's oversight of agency audit resolution practices, including instances in which agency budget allowances were adjusted by amounts corresponding to unresolved audit findings   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  6  •  •  Each report also should include the number of agency audit resolution systems approved, arid the status of unapproved systems. A report should also be made to the Committee by November 30, 1981, on the results of agencies' efforts to meet the September 30, 1981 deadline for resolving outstanding audit findings as required by the Supplemental Appropriations and Rescissions Act of 1980 (Pub. L. 96-304). 5. The Secretary of Defense should ensure that policy guidance contained in departmental directives on audit resolution, and provisions contained in DOD's implementing regulations, carry out fully OMB policy guidance on audit resolution and the recommendations of the Committee. 6. The Secretary of Defense should act immediately to provide for a proper and conclusive determination as to whether legal obstacles exist to placing contract officers under the same oversight and decision-making authority as exist for program, administrative, and other officials. Unless a final determination demonstrates otherwise, the Secretary of Defense should require that DOD policy be revised to place contract officers under the same audit resolution provisions as exist for other DOD officials. The results of this effort should be reported to the Committee by- December 31, 1981. 7. The Director of the Office of Personnel Management should require the executive departments and agencies to include the timeliness and adequacy of audit resolution in the performance criteria of Senior Executive officials and supervisors responsible for audit resolution, and should work with the departments and agencies to see that this is done. The results of this effort should be reported to the Committee on Government Operations by December 31,1981. IV. INTRODUCTION A. HISTORICAL INTEREST IN AUDITING The Committee on Government Operations has long recognized the importance of effective auditing and its integral role in achieving sound financial management in the Federal Government. The Committee's predecessor, the Committee on Expenditures in the Executive Departments, reported the Budgeting and Accounting Procedures Act (31 U.S.C. 67), which provides a complete framework for the budgetary, accounting and auditing procedures currently in place in the Federal Government. Among other provisions, this Act provided the establishment of accounting and internal controls over all funds, property, and other assets in all Federal departments and agencies. A major part of these controls includes the establishment of an effective internal auditing operation. The Inspector General Act of 1978 (P.L. 95-452) and other legislation reported by the Committee on Government Operations, led to the creation of statutory Inspectors General in 16 Federal departments and agencies. Among other responsibilities, the Offices of Inspector General are responsible for conducting and supervising audits and investigations of department and agency programs and operations, and for reporting to agency heads and Congress on significant problems, abuses, and deficiencies relating to the administration of programs and operations.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 11111111111•111  ;  The Committee on Government Operations also reported a bill, passed by the House on May 19, 1981, and pending before the Senate, to establish Offices of Inspector General in the DOD, the Departments of Treasury' and Justice, and in the Agency for International Development. The Committee believes these agencies will benefit from statutory Inspectors General through improved management, efficient use of resources and more emphasis on the elimination of fraudulent and wasteful practices. It believes benefits will be the greatest in DOD. The Subcommittee on Legislation and National Security held hearings and the Committee on Government Operations issued reports in 1977 and 1978 on the effectiveness of the Army Audit Agency, the Air Force Audit Agency, and the Naval Audit Service.5 The Subcommittee also requested GAO reviews of the Inspector General Offices in the Departments of the Army, Air Force, and Navy, and in the Defense Logistics Agency. GAO reported those reviews during 1979. Others in Congress also have been interested in more effective auditing. The Senate Appropriations Committee included language in the Supplemental Appropriations and Rescission Act of 1980 (P.L. 96-304) which required Federal departments and agencies to resolve all outstanding audits by September 30, 1981, and to resolve all new audits within six months. B. EFFECTIVENESS OF AUDIT RESOLUTION Pursuant to the Budgeting and Accounting Act of 1950 (31 U.S.C. 67) the General Accounting Office performed a review in 1978 of Federal departments' and agencies' systems for resolving audit findings. GAO's review encompassed 34 departments and agencies including detailed evaluations of the Department of Defense (Defense Contract Audit Agency); Department of Health, Education and Welfare; Department of Labor; Department of Commerce; Department of Housing and Urban Development; and the Environmental Protection Agency. As a result of that review, GAO reported that $4.3 billion in audit findings, contained in nearly 14,000 audit reports of 34 agencies, had not been resolved.6 GAO attributed this condition to the low priority given audit resolution by agency officials and to inadequate audit resolution systems. In a separate report, GAO found similar conditions existing at the National Science Foundation.7 The Subcommittee on Legislation and National Security held hearings on this report in March 1979 and the Committee on Government Operations issued a report in June 1979 on the failure of Federal departments and agencies to resolve audit findings. In its report, the Committee made several recommendations to the Director of OMB, the Secretary of Defense, and the Director of the Office of Personnel Management which would strengthen Federal departments and agencies audit resolution systems. 6 H. Rept. No. 95-807, Sixteenth Report by the Committee on Government Operations, "Improving Internal Auditing in the Department of the Army," November 3,1977; and H. Rept. No. 95-1675, Thirty-Fourth Report by the Committee on Government Operations, "Improving Interal Auditing in the Departments of Air Force and Navy—An Interim Report," October 2,1978. 6 GAO Report, FGMSD-79-3, p. 7 GAO Report, "The National Science Foundation Needs A Formal System For Followup On Audit Reports," HRD-78-147, October 3,1976.  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  8  •  •  on In continuing its oversight responsibility, the Subcommittee1980 10, June on GAO Legislation and National Security requested e if to followup on its 1978 report on audit resolution to determin Federal departments and agencies had audit resolution systems ine itte place that met ONIB revised guidelines and GAO and Comm stat1981 23, ary Janu on recommendations. GAO issued its report pointing ing that Federal departments and agencies had made disaps review progress in improving their audit resolution systems. GAO' led evaluencompassed 73 departments and agencies including detai erce, e, Comm Forc ations of the Departments of Agriculture, Air the on; Housing and Urban Development, Navy, and Transportati ces AdminCommunity Services Administration; the General Servirati on; and istration; the National Aeronautics and Space Administ that: part in d state the Veterans Administration. The GAO report Although Federal agencies' systems for resolving audit, findings have improved somewhat in the past 2, years progress overall has been disappointing. In 1978 GAO cies identified $4.3 billion in unresolved findings at 34 agen savor , nues reve ties, penal involving potential recoveries, mone ed solv unre ings. GAO now reports $14.3 billion in an ts tary findings at these agencies. GAO also now repor sal additional $10.5 billion in unresolved contract propo audits and $170 million in unresolved findings at agentocies be not in the 1978 report. GAO considers the numbers if er conservative and believes they would be even high cy agencies kept better records of audit findings. dAgen proceaudit reports also contained thousands of unadopte rnme nt dural recommendations that would improve Gove weft s operations and have a substantial dollar impact as Security again The Subcommittee on Legislation and National July 23, 1981 on held hearings on February 25, June 16, and resolve audit findFederal departments' and agencies' failure to ral of the United Gene ings. Elmer B. Staats, then Comptroller and Edwin L. States, discussed the findings of the GAO report,nt and Budget, Harper, Deputy Director of the Office of Manageme audit resolution discussed OMB policy guidance and oversight for . Testimony GAO by d and OMB efforts to address the problems note ctive actions were on department and agency procedures and corre ulture; Joseph R. provided by John R. Block, Secretary of Agric Frank C. Calucci, Wright, Jr., Deputy Secretary of Commerce; and Deputy Secretary of Defense. V. DISCUSSION A.  THE MAGNITUDE OF UNRESOLVED  AUDIT  FINDINGS  ral Government The number of open audit reports in the Fede ld be recovered and the amount of improper expenditures that shoureported that as is dramatically increasing but still unknown. GAO and $24.9 billion of July 1980 there were 28,000 open audit reportsThese figures are in unresolved audit findings at 73 agencies.9ted in October 1978 huge increases from March 1977 figures reporbillion in unresolved by GAO of 14,000 open audit reports and $4.3 GAO Report, AFMD-8I-27, p. 9 GAO Report, AFMD-8I-27, p. 6.  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  9  •  nt for audit findings for 34 agencies.'° Those 34 agencies now accou ngs." findi $14.3 billion of the unresolved $24.9 billion in audit earlier Unresolved contract proposal audits, not counted in GAO'sies not figures, account for $10.5 billion of the $24.9 billion. Agenc on." milli $170 t abou included in the earlier figures account for ngs is GAO noted that some of the increase in unresolved findi reportattributable to agencies' improved systems for tracking and se ing audit findings. However, the figures are conservative becau ol contr from ngs many agency officials continue to remove findi ered, records before final resolution, that is before funds are recov . Many debts are forgiven or findings are determined to be in error collecand nting accou tive agencies also do not have in place effec tion controls for audit disallowances. that Former Comptroller General Staats stated in March 1979 could the lack of an effective system for resolving auditors' findings lannua rs dolla of ons milli be costing the Government hundreds of uFebr in ngs ly.'3 He again emphasized this point during the heari ary 1981, when he stated that: Our review shows that improper and delayed audit resolution is widespread and worsening and is generallyy caused by agencies' failure to comply N.vith OBM's polic guidance in Circular A-73. The Government is losing billions of dollars because agencies are not acting on audit recommendations to recover funds, avoid cost, and improve operations. Although the agencies we studied have taken some action since 1978 to improve their systems, progress overall has been disappointing. • • • We consider the (reported) numbers to be conservative and believe they would be even higher if agencies kept better records of audit findings.'4 ution In an effort to require agencies to instiute more timely resol lemental of audit findings, Congress directed agencies in the Suppto resolve Appropriations and Rescissions Act of 1980 (P.L. 96-304) ve new audit all pending audits by September 30, 1981, and to resol ted that findings thereafter within 6 month timeframes. GAO repor olved audit as of July 1980, $5.3 billion of the $24.9 billion in unres anticipates it that ied findings was over 1 year old." OMB testif deadline. 1981 that Federal agencies will meet the September 30, erce Agriculture agrees that it will meet the deadline, but Commaudit testified that its objective is to reduce its 766 unresolved March 31, findings as of March 31, 1981 to no more than 75 by I° GAO Report, FGMSD-79-3, p. The $14.3 billion consists of $4.9 billion in "GAO Report, AFMD-81-27, pp. 6 & 8. (Note: audits. This represents a $7.6 billion inory regulat in billion $9.3 nonregulatory audits, and report. Regulatory audits are not expected to crease in regulatory audits since GAO's earlier amounts or these findings are not owed have an impact on the Government's budget since the overcharged by oil and fuel suppliers.) been have who ers custom the rather but the Government g.)] [(Totals do not add due to roundin 6. 12 GAO Report, AFMD-81-27, p. ments and Agencies to Follow Up on Audit Findings" before 13 Hearings on "Failure of Depart National Security of the House Committee on Government and tion the Subcommittee on Legisla 22, 1979, [hereinafter cited as 1979 Hear, Operations, 96th Cong., First Session March 21 and ings]. e and Agencies' Continued Failure to Follow Up and Resolv 14 Hearings on "Departments' y of the House Securit al Nation and tion Legisla on mittee Subcom Audit Findings" before the Session, Feb. 25, June 16, and July 23, Committee on Government Operations, 97th Cong., First 1981,[hereinafter cited as 1981 Hearings). , p. 6. 13 GA0 Report, AFMD-81-27  10 .982. Commerce said it will not me,the September 30, 1981 deadline because of findings involving investigations by the Justice Department and lack of control over some findings generated by audit organizations outside of Commerce.'6  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  B. OBJECTIVES AND SCOPE OF OMB POLICY GUIDANCE ON AUDIT RESOLUTION Office of Management and Budget Circular A-73 of March 15, 1978, revised November 2, 1979, provides policies to be followed on the audit of Federal operations and programs and is applicable to all agencies of the executive branch. It supersedes Federal Management Circular 73-2 of September 27, 1973, and is applicable to all internal and external audit functions of the agencies. OMB excludes pre-award audits (contract proposal audits) from some of the provisions of Circular A-73. These audits are of contract proposals based on contractors' cost or pricing data. It, therefore, takes place before rather than after expenditures are made. The GAO reported $10.5 billion of unresolved contract proposal findings in its January 1981 report, including $2.1 billion unresolved for more than 1 year. The Defense Contract Audit Agency accounted for $10.0 billion of the unresolved findings, including $2.0 billion of the findings unresolved for more than one year." OMB believes contract proposal findings may contain opinions on contractor estimates of future costs which are not true "questioned costs." As a result, it believes it would be misleading to include contract proposal audits in the unresolved figures of agencies' audit resolution systems.'8 However, OMB does recognize the importance of assuring that these audits are controlled for proper resolution. Accordingly, Deputy Director Harper stated: * * * these reports (audits) are subject to most of the other elements of the audit follow-up system. Specifically, they must be recorded as open reports until a written determination is made, and they are subject to top management review. * * *."9 The Committee recognizes the different nature of contract proposal audits and understands their consideration in the contract negotiation process. Because of the importance of audit resolution in the Federal Government, and the large amount of unresolved contract proposal audit findings, the Committee believes OMB should provide guidance in Circular A-73 to resolving contract proposal audits, or as an alternative, formulate and implement specific policy guidance to Federal departments and agencies for resolving these audits. Without specific and effective OMB policy guidance, OMB cannot assure Federal departments and agencies are taking effective action to resolve these audits. OMB does not apply Circular A-73 to regulatory audits. The GAO reported $9.3 billion of unresolved regulatory audits in the Department of Energy's Economic Regulatory Administration, including $1.5 billion unresolved for more than 1 year.2° OMB believes that the regulatory audit function which it refers to as "regulatory 1981 Hearings. 17 GAO Report, AFMD-81-27, p. 33. '80MB Circular A-73. 161981 Hearings. 2° GAO Report, AFMD-81-27, p. 36. 16  riL •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  11  group" should have an audit resolution system similar to that called for in Circular A-73, but that a distinction between regulatory groups and independent audi should be made regulatory groups as operational or programmetors. OMB defines agencies which enforce the standards or rules Feded components of ral agencies are empowered to issue. These groups are not independ operations as such and, in an enforcement role, they ent of agency refunds or adjustments for consumers rather than generally seek seek any' funds owed the U.S. Government. OMB includes as regulato ry audits: the Department of Energy's review of energy pricing regu lations; the Federal Aviation Administration's aircraft inspecti ons; the Nuclear Regulatory Agency's inspection of nuclear reac tors ; and certain enforcement activites of the Equal Employment Oppo rtun ity Commission. The Committee acknowledges a distinction een regulatory groups and independent auditors. It also agrebetw es with OMB that regulatory' groups should have an audit resoluti on system similar to that called for in Circular A-73. Regulatory audi ts by the Economic Regulatory Administration have resulted in more than $40 million being tured over to the U.S Treasury, and more than $340 million being placed in custody of the U.S. Trea sury through March 31, 1981." Because of the importance of audit resolution in the Federal Government, the great amont of unresolved regulato ry audits, and the committee's opinion that regulatory audits fall unde r the category of audits of Federal operations and programs , the Com mittee believes OMB should formulate and implement spec ific poli cy guidance to Federal departments and agencies for resoluti on of regu latory audits. Without specific and effective OMB poli cy guid ance , OMB cannot assure that Federal departments and agen cies are properly resolving regulatory audits. C. OMB POLICY GUIDANCE PROVISIONS AND CHANGE S IN AUDIT RESOLUTION Circular A-73 initially required that agencies designate officials responsible for audit resolution, maintain a reco rd of the action ' taken on audit recommendations, and submit peri agency management on that action. OMB revised odic reports to November 1970 following GAO and Committee Circular A-73 in recommendations, adding requirements for semiannual reports to agen cy heads; procedures for resolving major disagreements betw een audit and program offices; written justification and the lega l basi s for decisions not to seek recovery of amounts due as result of audi t reports; a miximum of 6 months to determine agency acti on on audit recommendations; and periodic evaluations of agencies ' audi t resolution systems. The revised Circular A-73 is much improved porate all the Committee's recommendations but does not incorin its July 1979 report. For example, the Circular does not requ tracking and reporting systems separately identify ire that agency questioned costs that are recommended to be recovered, or that agen cies also separately identify such recoveries in accounting reco rds when they are made. Also, the Circular does not require that officials responsible "1981 Hearings   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  12 °for resolving disputes between auditors and pro gram officials, and for acting on delayed audit resolutions, be indepe ndent of the program audited, although OMB believes this req uir ement is understood. OMB stated that it has begun cons ulta tion s on revisions to the Circular with the executive agen cies, the GAO, and Congressional staff. The Committee is not convinced that agencies ' tracking and reporting systems provide the proper controls and incentives for managers to actively seek recoveries or savi ng, or operational or procedural changes arising from audi to press for t findings. As noted by Chairman Brooks: * * * the basic problem is that agency people, if they operate to save money or to really expedite inte rnal audits to cooperate with A-73, do it on a kind of vol unt ary basis.22 It is largely for this reason that the should include in its A-73 policy guidanCommittee believes OMB directions that agency tracking and reporting systems separatelyceiden tify questioned costs that are recommended to be recovered. Thi s provide agency management and the auditorstype of control will with the means to revieNv and evaluate how well program offi cial agreed upon recommendations to recover or s are carrying out importantly, it will also provide the opport save money. Just as unity to point out areas where improved agency management is needed . The Committee believes agencies should sepa rately identify cost recoveries from audit work so that agency offi cial s, as well as the auditors, OMB, the Committee and others, can accu rately gauge the effectiveness of the Inspectors General pro gra m and other audit activities. This will also help to insure fina l set tlement of these issues. It is not enough to claim savings at the tim e program officials agree to auditors recommendations. Suc h amo unt s should be controlled until actually recovered. GAO doc ume nte d seve ral instances in which agencies claimed savings fro m audi tor' s findings but subsequently did not realize the savings. The Committee also still believes tha offi cials responsible for resolving disputes between auditors and tpro gra acting on delayed or stalled audit resolutions, m officials, and for the program audited. Although OMB believes be independent of understood, the Committee believes it should this requirement is be provided for explicitly in Circular A-73. Certain other provisions should also be provided for explicitly in Circular A-73. The Circular should state clea rly tha t it is applicable to procedural, or non-monetary, findings as as monetary findings. The Committee believes the req uir eme nt would be strengthened to provide better periodic repo rts to age ncy heads. GAO noted several instances where peri odic repo rts to agency heads do not include enough information to ade qua tely inform these officials of what resolution activity has taken place. D. OMB OVERSIGHT OF AGENCIES' AUDIT RES OLUTION PRACTICE In its June 1979 report on audit resoluti on, the Committee found that OMB policy guidance for audit reso lution had been ineffective, 22  1981 Hearings  lig   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  13  and that OMB had not established procedures to adequacy' of the implementation of its policy guid determine the executive departments and agencies. Former ON1 ance within the B Director James McIntyre acknowledged in 1979 that executive agen cies were not adequately resolving audit findings, and that in his jud gment agencies' delay and ineffective audit resolution were into lerable. OMB had revised Circular A-73 in March 1978 to emph asiz e former President Jimmy Carter's concern about audit reso luti on, and to strengthen OMB's provisions for audit resolution. But form er Director McIntyre stated: I do not think it is enough just to issue a Circular .I think we have to have some process of follow-u that agencies are carrying out those circulars.23 p to insure Former Comptroller General Staats, also a form tor of the Bureau of Budget, stated in 1979 that: er Deputy Direc* • • based on my own experience in the GAO with the budget, it is not enough simply' to issue a circand ular or a directive from the OMB. You have to have the budget examiners follow-up and go into those agencies that something is done about it. Agencies can alwaand see ys find good reasons—lack of manpower or whatever—for not doing some of these things even though there is somethin g in writing from the Director.24 To encourage better compliance with the provisio A-73, former Director McIntyre promised that OMB ns of Circular agencies' audit resolution systems in OMB's annu would review agency' budget requests. To further ensure complian al reviews of tee recommended in June 1979 that OMB also requce, the Commitire that agency systems for audit resolution and revisions to thos e systems be reviewed and approved by OMB. The hearings of the Subcommittee demonstrated OMB is not effectively enforcing its policy' guidance, however, that lution. OMB has not adopted the Committee's reco on audit resommendation to require approval of agencies' audit resolution syst ems, nor has OMB carried out its promise to review agencies systems in OMB's annual reviews of agency ' audit resolution budget requests. Former Comptroller General Staats testified in Febr uary 1981 that: In 1979 testimony before this Subcommittee, the former OMB Director said that the agency needed to exte oversight beyond issuing guidelines. He said OMB nd its review audit resolution systems as a part of the would budget process but we understand this has not occurred. Had OMB reviewed agencies' audit resolution would have learned as we did that agencies aresystems, it not complying with Circular A-73 • • s.25 GAO documented case after case which evidence d that agencies were ignoring OMB policy guidance. GAO found that many agencies had not established effective accounting and coll ection controls, established procedures for elevation of disp uted audit findings to independent arbitrators, and ensured that those procedures 1979 Hearings. 24 1979 Hearings. 25 19S1 Hearings 23   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  11111111  •  14  •  were being followed. They were not resolving audit findings in a timely manner; were rejecting audit findings and allowing questioned costs often without documented justifications; and were not always coordinating resolution actions with other affected agencies. GAO also found that agencies' tracking and reporting systems were inadequate or incomplete, including not tracking or controlling audit findings until finally resolved—that is until the recommendations were implemented or the disallowed funds were collected. OMB Deputy Director Edwin Harper testified that OMB has reemphasized its commitment to audit resolution, now including reviews of agencies' audit resolution systems in OMB's budget review process. He stated: I think agencies have incentives for following up on these circulars because, if nothing else, the Office of Management and Budget is darn persistent. We have the opportunity to be persistent in the spring reviews when we hand out initial marks and comments to the agencies and in the fall budget review process, as well as the fact that the Office of Management and Budget has been given the responsibility of central clearance of legislation and testimony. Thus, we have a lot of regular official contacts with the agencies where we have these opportunities to call to their attention deviations of significance from the circulars. In addition to the budget review process which I mentioned, we also have special task forces and special studies that will do in-depth reviews of particular areas. I think these are fairly effective tools as wel1.26 Deputy Director Harper's promises to extend OMB oversight beyond issuing policy guidance echo strongly the promises of former OMB Director McIntyre 2 years ago. As already discussed, former Director McIntyre's promises have gone largely unfulfilled. Notwithstanding OMB's avowed commitment and dedication to more effective audit resolution, the Committee is weary of OMB promises that it will extend its oversight through the budget review process in such a way as to adequately assure that agencies will promptly and effectively resolve audit findings. The Committee believes it is necessary for OMB to require approval of agencies' audit resolution systems, and to propose sanctions where necessary. It recognizes that potential losses to the Government of millions or perhaps billions of dollars could result from ineffective audit resolution and that agencies are making promises and assurances which are strikingly similar to those that were unfulfilled from 2 years ago. Without required approval of agencies' systems, the Committee doubts whether OMB can adequately assure itself, or assure the Committee, that Federal agencies will effectively carry out OMB policy guidance on audit resolution. OMB should require approval of all Federal agency audit resolution systems including those for external and internal audits, contract audits (both post-award and proposal audits) grantee and subgrantee audits, and regulatory audits. In line with the Commit26  1981 Hearings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  •  • 15  olution in the Federal Govtee's continued concern over audit res that OMB report to the Comernment, the Committee recommendsresolution practices, including mittee on OMB's oversight of agency n systems approved, and the the number of agency audit resolutios should be made for the 1983 status of unapproved systems. Report and 1984 fiscal year budgets. Inspectors General, now in The implementation of the statutorypro vide an additional means 16 departments and agencies, should es' audit resolution systems. for OMB to conduct oversight of agesnci General report to the head of The law requires that the Inspectorgnificant problems, abuses, and the agency and the Congress on "si ation of programs and operdeficiencies relating to the administr rings have demonstrated that hea tee mit Com The " . ' ons ati nificant problem and is Goveffective audit resolution is still a sig ernment-wide. ified that the recently estabOMB Deputy Director Harper test ency, designed to facilitate an ici lished Council on Integrity and Effuld also help to emphasize the sho m, Inspectors General progra resolution. OMB Deputy DiAdministration's commitment to audit rector Harper stated: ance of following up The President recognized the import ounced the initial ann on the (audit) findings when heity and Efficiency, who members of his Council on Integr General. were and are the current Inspectors Order setting up the At that time, in the Executive Efficiency, he asked President's Council on Integrity andate someone at a top each of the agency heads to design retary level—who would level—at least at the assistant seclow ing up on the recombe personally responsible for fol l, as well as the GAO. mendations of the Inspectors Genera sibility. They have These individuals have that respon been appointed.27 l, the Council now includes In addition to the Inspectors Genera the Deputy Attorney Genan, the OMB Deputy Director as Chairm igative officer of the FBI, the est eral as Vice Chairman, the top inv Protection Board, the Director Special Counsel of the Merit System t, and representatives from of the Office of Personnel Managemenpectors General. key agencies that do not now have Ins Order and establishment of The Committee hopes the Executiveency contribute to improved the Council on Integrity and Efficiit resolution. The Committee agency accountability for effective audmanagement involvement was reported in 1979 that the lack of top of dollars of unresolved audit the single major reason for billions t the resolution of audit findfindings. The Committee stated tha and management will be held ings is a management responsibility audit process. OMB Deputy accountable for effectiveness of the t: Director Harper agreed, testifying tha top management is absolutelp of nt eme olv inv the ' job. We need to have vital. Systems alone cannot do the the involvement of the people. 27  1981 Hearings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  • • 16  Our auditors, of course, track and develop findings and followup and spot check on them periodically. However, the real corrective action is the manager's responsibility." E. AUDIT RESOLUTION IN CIVIL AGENCIES The GAO reported that, although most Government departments and agencies spend hundreds of millions of dollars annually to audit Federal programs and operations, they still lack effective systems for resolving audit findings. Most Government agencies acknowledged that they still have a long way to go in achieving effective and timely audit resolution. Agriculture Secretary Block testified that: * * * the Department has reviewed the subject (GAO's) report and is in general agreement with the findings and recommendations. The Department has initiated efforts to comply with virtually all of the recommendations contained in the report * * *.29 Deputy Commerce Secretary Wright testified that Commerce has an effective system for performing audits and reporting their results, but lacks an effective system for resolving audits in a timely manner. Deputy Secretary Wright, while acknowledging that Commerce has not been successful in making audit resolution a top priority, recognized the need to do so. He stated: It makes very little sense to expend considerable sums and hours in developing a sound audit and accounting program if disagreements between auditors and program officials remain unresolved and sums owed the Government remain uncollected. I want to assure you that Secre- tary Baldrige and I completely share your concern that audit recommendations be resolved promptly. If agencies do not act on audit recommendations to recover funds, avoid costs and improve operations, the Federal Government will, as the General Accounting Office noted, continue to lose vast sums of money.3° The lack of a strong commitment to audit resolution is a significant factor in agencies' continued inability to effectively manage their audit functions. A strong commitment to audit resolution can only be secured by making Federal officials more accountable for effective audit resolution. Former Comptroller General Staats testified that Federal officials' accountability needs to be strengthened, and that bonuses and merit pay should be based in part on officials' effectiveness in resolving audits quickly and appropriately. Mr. Staats noted that: The lack of individual accountability at the program level prompted the full committee to recommend that the Director of the Office of Personnel Management require executive agencies to include the timeliness and adequacy 1981 Hearings. 1981 Hearings. 3°1981 Hearings. 28  29  •  • •  • 17  of audit resolution in the performance criteria of the Senior Executive Service officials. We (GAO) believe this standard should also be in the performance criteria of merit pay staff. Nevertheless, as we reported in 1978, Senior Executive Service and other management officials are still not sufficiently accountable for their actions in resolving findings. Few agencies include audit resolution in the performance standards of those responsible for resolving audit findings.3' The Department of Agriculture issued a revision on June 12, 1981, to its regulation, "Collection Action on Findings in Audit Report," which requires each agency within the Department to (1) designate officials responsible for the implementation of the audit resolution system, and include this responsibility- in their performance standards and evaluation criteria; and (2) make the timeliness and quality of audit resolution and collection procedures a factor in determining bonuses for Senior Executive Service members and merit pay for supervisors. The Department of Commerce has recently made prompt resolution of audit findings a performance standard for Senior Executive Service members and merit pay employees, and testified that it plans to include prompt audit resolution in the Management by Objective Programs for each agency head in the Department. GAO reported that the lack of accountability persists also because many Federal agencies assign audit resolution responsibility to officials who have inappropriate backgrounds or have conflicting duties. At the Environmental Protection Agency and the Department of Transportation, for example, GAO attributed inadequate audit resolution, in part, to the lack of staff with appropriate academic background, training, or work experience. GAO also claimed instances at Federal agencies where officials responsible for inappropriate expenditures of Federal funds were permitted to reject findings that recommend the funds be recovered. GAO documented a case at the Department of Agriculture in which administrators responsible for approving about $370,000 in loans which auditors determined to be improper rejected a recommendation that the funds be recovered. At the Department of Housing and Urban Development, officials who approved nearly $103,000 in improper rehabilitation expenditures and who retroactively approved the improper sale of the related property, rejected audit findings questioning these activities. GAO found that ineffective audit resolution was also due to Federal agencies' inadequate or incomplete audit resolution systems; that is, requirements for effective and timely audit resolution in many agencies are either not in place or are not being followed. GAO found that many Federal agencies do not have adequate accounting and collection controls over amounts due as a result of audit. Moreover, many agencies which have adequate policies for establishing accounting and collection controls have not carried out these policies. At the Department of Agriculture, for example, the Food and Nutrition Service has not collected potential claims of $10 million outstanding for up to five years, partly because of 31   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  f  1981 Hearinp.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  18 inadequate accounting controls. At the Department of Commerce, GAO found several cases involving hundreds of thousands of dollars in which audits were closed before accounting controls were established. Most agencies have procedures for elevating disputes between auditors and program officials and for elevating delays by program officials in responding to audit recommendations. But GAO found that many agencies' procedures are ineffective or are not being followed: Some agencies have no timeframe for elevating disputes or delays, resulting in some disputes and delays not being elevated for resolvement for one year or more. In some agencies, levels to which disputes or delays are elevated are not always sufficiently independent; and in some agencies, auditors do not evaluate program officials' determinations or auditors' findings. Many agencies, according to GAO, have either not established 6month timeframes for agency officials to respond in writing to audit recommendations, or do not adhere to the timeframes established. In some agencies, officials respond in writing to audit recommendations within established timeframes but do not carry out agreed upon actions in a reasonable time. At the Department of Commerce, GAO documented untimely resolutions in 14 of 33 cases it studies, even though timely resolution of audit findings has been required in the Department since as early as June 1979. The Deputy Secretary of Commerce recently issued a directive to Department officials advising them that prompt resolution of audit recommendations is a top priority of the new Administration, and that audit resolution has been adopted as an administrative priority in the Department's Management by Objective Program. GAO found that Federal agencies in general have been slow to develop and implement procedures which would require that decisions to reject audit findings or allow questioned costs not be made in violation of agency regulations or without written justification. At the Department of Commerce, GAO found that 10 of 33 cases it studies had either inappropriate or no documentation. Findings in the 10 cases totaled more than $1 million. Deputy Secretary of Commerce Wright indicated in his testimony that the Department recently made appropriate written justification of decisions to reject audit findings or allow questioned costs a top management priority. New departmental procedures were developed in April 1981 to require program officials to provide in writing the criteria or legal basis for reinstatement of costs. Many agencies do not track or maintain accurate records of audit findings until they are finally resolved, often considering findings resolved when management agrees to implement audit recommendations. As a result, planned action agreed upon by auditors and management is sometimes not implemented even though auditors have claimed savings from the planned action. The Committee believes agencies must track all audit findings until they are finally resolved. Tracking systems should encompass financial control systems which provide adequate assurances that amounts due as result of audits are properly accounted for. Chairman Brooks stated: The GAO, and I certainly agree, believe that findings should be tracked until ultimate collection.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  19  I  llk.you just resolve it by saying theikilk but you soever.32 not get the money, it is of no purp Deputy Commerce Secretary Wright agreed, in his prepared statement, that: Since the GAO review, the (Commerce) Inspector General has developed plans for tracking recommendations until they are recorded as receivables and the Department's financial managers have developed plans under which the Department's finance offices will follow recorded receivables through to collection. When fully implemented, which should be not later than October 1, these new procedures should have the double benefit of (a) reducing or eliminating the problem or premature closing, and (b) providing the Department with a needed capability for readily reporting the total amount of money recovered as a result of audit disallowances.33 Partly as a result of inadequate tracking and financial control over audit recommendations, many agency heads do not receive complete and accurate reports on audit results and the status of unresolved audit findings. GAO found also that many reports which are provided to agency heads do not contain information on audit amounts sustained, collected, or written off. This type of information could help to gauge audit effectiveness and help determine where improved agency management may be needed. Federal departments and agencies also widely ignore the OMB Circular A-73 requirement that they coordinate corrective action when audit recommendations involve more than one program, agency, or level of government. Departments and agencies should adopt a policy that the organization making the audit must coordinate its corrective action with that of other affected organizations. F. AUDIT RESOLUTION WITHIN DOD No other agency has more serious problems or has been slower to improve its audit resolution systems than the Department of Defense. Unresolved audit findings in the DOD total $12.9 billion, including $10.5 billion in contract proposal audits and $2.4 billion in post-award and internal audits, of which more than $3 billion has been unresolved for over one year. These figures do not include unresolved audit findings in the Departments of the Army and the Navy, both of which did not routinely tabulate total unresolved findings.34 DOD acknowledges its ineffective audit resolution performance and promises improvement. Deputy Defense Secretary Carlucci testified: Mr. Chairman,(Defense) Secretary Weinberger and I are both convinced that the Department of Defense has not done a good job of audit follow-up in the past. I can assure you that we will have an effective follow-up procedure in place in the very near future.35 32 33 34 35  1981 Hearings. 1981 Hearings. GAO Report, AFMD-81-27, p. 33. 1981 Hearings.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  • • 20  DOD has a long history of problems in resolving audit findings. In its 1979 review, the Committee concluded that DOD had significant management problems in resolving audit findings. The Committee was particularly critical of DOD's lack of reliable management data on the status and effectiveness of the contract audit process. This criticism was understandable considering the size of DOD's procurement budget and significant resources devoted to the contract audit function. In view of these problems, and because the DOD was unable to testify when the Subcommittee held hearings in April 1979 on this subject, the Committee recommended that the Secretary of Defense review the DOD audit resolution system and report the results of the review to the Committee by December 31, 1979. The review was to have specifically evaluated the propriety of actions taken by procurement officials on audit reports. DOD reported to the Committee on December 31, 1979, but failed to address the adequacy of its audit resolution system or the propriety of actions taken by procurement officials on audit reports. The DOD report said only that audit resolution procedures were established and that "management oversight" was requested over procurement officers' actions on audit reports. The report did not discuss the adequacy of the audit resolution procedures, the propriety of procurement officers' action or results of the management oversight. In February 1981, former Comptroller General Staats testified: The impact of the system deficiencies at the Department of Defense seems to be the most significant. In fiscal year 1981, $142.7 billion, almost 25 percent of the national budget, went to defense. The new administration is expected to increase this outlay ($1.65 trillion over 5 years).36 The DOD issued departmental directives on January 16, 1981 and August 31, 1981 for resolving audit findings. The January directive, entitled "Policies for Follow-up on Audit and Internal Review Reports," applies to audit findings and recommendations by GAO and by DOD audit and internal review organizations. It excludes contract audit findings and recommendations. The August directive, entitled "Policy for Follow-up on Contract Audit Recommendations," applies to contract audit recommendations by the Defense Contract Audit Agency. The January directive required DOD components to develop implementing regulations within 180 days of the directive's January 16, 1981 issuance. DOD is in the process of evaluating components' proposed systems to ensure that they comply with the requirements of OMB Circular A-73 and the requirements of DOD's January directive. The August directive on contract audits requires DOD components to develop implementing regulations within 30 days of the directive's August 31, 1981 issuance, and requires that resolution systems for contract audits be fully operational by September 30, 1981. Former Comptroller General Staats testified that DOD's January 1981 directive was originally drafted in late 1979, issuance was delayed until January 1981 because of management's objection to including contract audit findings in the same audit resolution system. 36  1981 Hearings.  •  •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  21 • • • • contract proposal (pre-award) audits generally include Contract audits and post-award audits. As mentioned earlier, contract proposal, or pre-award audits are audits of contract proposals based on contractors' cost or pricing data. Post-award audits generally include incurred cost audits and defective pricing audits. Incurred cost audits, including overhead reviews, are designed to assure contracting officials that costs claimed by contractors are allowable, applicable to the contract and reasonable. Defective pricing reviews are made to determine if accurate, complete, and current cost or pricing data was submitted by contractors in accordance with Public Law 87-653, the Truth in Negotiation Act of 1962. Both types of audits frequently recommend the disapproval of a portion of the contractor's claim or the recovery of funds. Costs are normally questioned because, in the auditors' opinion, they are not allowable under the contract because of public law, Government regulations, contract terms or unreasonableness in amount. The Defense Contract Audit Agency's incurred cost audits separately identify unsupported costs (lack of documentary evidence) and cost avoidance (potential improvements in contractor operations). Defective pricing audits also identify questioned costs for which the auditors recommend recovery. Although OMB policy guidance contained in Circular A-73 draws a distinction between only pre-award audits and other audits, DOD has issued separate policy guidance directives for all contract audits, including post-award as well as pre-award. The Committee questions DOD's distinction. OMB and the Committee agree that there is no need for a distinction between post-award contract audits and non-contract audits. DOD has presented the possibility that legal, administrative, or other obstacles exist to putting contract auditors and contracting officers under the same audit resolution regulations that exist for auditors and program or administrative officials, but the Committee has not been convinced that such obstacles do exist. Consequently, until convincing argument is demonstrated otherwise, the Committee believes that regulations for resolving post-award contract audit findings should be at least as stringent as regulations for resolving non-contract audit findings. Moreover, while the nature of pre-award contract audits may differ somewhat from post-award contract audits and other audits, most, if not all, of the OMB and DOD policy guidance that exists for resolution of other audits should apply equally .to resolution of preaward audits. Essentially, the objectives and policy guidance provisions of OMB Circular A-73 should be included in DOD's departmental directives on audit resolution and carried out fully in DOD components' implementing regulations. Particularly with respect to post-award and internal audits, the departmental directives should require that components' audit resolution systems provide for a complete record of action taken on all audits with associated procedural changeL, on disallowed, suspended or questionable costs. The Committee holds that the resources applied to issuing these audit reports demand that they be tracked until final resolution. It is for this reason that the Committee is concerned about the thresholds included in DOD directives. These thresholds establish limits in determining what findings and disputes between auditors and man-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  • 22  agers will be included in DOD systems for resolving post-award contract audits and internal audits. DOD should ensure, through its departmental directives and implementing regulations, that DOD program, contract, administrative, and other officials make written determinations on audit findings except as discussed below within 6 months from issuance of the audit report, and that resolution actions are consistent with laws and regulations. Written justifications should be provided for all decisions not to seek recovery of funds recommended to be recovered. Final resolution action should proceed as rapidly as possible. DOD officials indicated, and the Committee agrees, that determinations need not necessarily be made within 6 months for pre-award audits. DCAA Director Starrett explained: Proposal evaluations, however, are considered a little bit different. Timely settlement of audit reports related to proposals is driven by the need for the goods or services that are being produced. It is not the audit report in itself that is not being used because it presents a problem of any kind; the timing of the use of that audit report depends upon when you have to have the item or the service that is being procured.37 Semiannual reports should be submitted to the heads of DOD components on the status of audit reports over 6 months old, the number of reports or findings resolved during the period, collections or offsets made, and demands for payment made. Because of the nature of pre-award audits noted above, semiannual reports for pre-award audits may not be necessary. DOD's directive on resolving contract audits provides that officials, review boards, or panels responsible for resolving contract audit disputes and delays review the contracting officer's proposed disposition of contract audit recommendations when that contracting officer intends to resolve the issue in a manner substantially different from the contract auditor's reported recommendations. The official, review board or panel is allowed only to recommend, rather than decide, the action to resolve the dispute or delay. The Committee believes such provision provides contracting officers with too much latitude for rejecting audit findings and recommendations, and for rejecting the recommendation of officials, review boards or panels responsible for reviewing disputes and delays. Barring conclusive determination of legal objections, the Committee believes officials, review boards, and panels responsible for resolving or reviewing audit disputes and delays should have authority to determine the final resolution action. Without such authority, the Committee believes there may be inadequate provision for proper and effective audit resolution in the DOD. It is also concerned that officials, boards, or review panels responsible for resolving audit disputes and delays may not be sufficiently independent of both the audit function and the program, contract, or administrative function audited. Without independence, there is inadequate assurance that disputes and delays will be reviewed or arbitrated in a responsible, reasonable, and objective manner. Auditors as well as program, contract, administrative, and other officials must be accountable for the decisions they make 37  19S1 Hearings.  a  .   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  .  • •  23  • •  and the responsibilities they carry out. It is important that the role of audits in achieving sound financial management not be diminished or compromised by failing to adequately provide for ready avenues of appeal and review. Deputy Secretary Carlucci explained that all DCAA pre-award audit findings will come under review if the negotiated contract action is $500,000 or more. He estimated that this provision would encompass over 90 percent of DCAA findings on all pre-award audits of negotiated contract actions.38 The Committee believes that a threshold which encompasses over 90 percent of pre-award audit findings is probably sufficient to comply with the Committee objectives for effective audit resolution and sound financial management. DOD's January 1981 directive and August 1981 directive are encouraging first steps toward improving DOD's audit resolution effectiveness. Directives and policy guidance, however, cannot completely ensure fulfillment of more effective audit resolution. DOD must also act immediately to ensure that its policy directives on audit resolution are implemented by all DOD components in a complete, timely, and effective manner. The directives may signal changes in DOD's past resistance to more effective audit resolution. Mr. Carlucci's promises of further improvement also are encouraging. DOD must now continue its efforts toward improving audit resolution effectiveness. It must make completion of its audit resolution systems a department-wide priority as well as ensure that the systems' subsequent operation is a department-wide priority. DOD should provide for periodic evaluations of its audit resolution systems, and the effectiveness of its policy guidance and implementing regulations.  [  VI. CONCLUSION Effective and timely audit resolution is an important responsibility of agency management in carrying out programs of the Federal Government in an efficient, economical and effective manner. The Committee on Government Operations on many occasions has emphasized the importance of effective and timely audit resolution. The recent hearings by the Subcommittee on Legislative and National Security again reaffirm the Committee's interest and commitment to improved resolution of audit findings, and demonstrates that improved audit resolution and agency management commitment are intergral steps toward improved financial management in the Federal Government. The hearings by the Subcommittee support GAO's conclusions that Federal agencies have made disappointing progress in improving their systems for resolving billions of dollars in audit findings. Two years ago, agencies acknowledged that substantial improvements were needed in their audit resolution systems. Agencies made promises and assurances to the Committee that they would make audit resolution a high priority, and that they would take steps to improve the effectiveness and timeliness of their audit resolution systems. Those promises and assurances have not been fulfilled. Audit resolution systems are still incomplete and ineffective. Agencies have ignored OMB policy guidance on the establish38  1981 Hearings.  -  .  ,  [   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  • • 24  ems, of their audit resolution systaudit of ment as well as the operation tinued to treat resolution isand agency management has con Committee rejects claims that sat findings as a low priority. The in improving systems and in resolvfactory progress is being madeue of unresolved audit findings has oluing findings. The dollar val orted on the problem of audit res increased since GAO first repnt 2 years ago. Also, requirements for tion in the Federal Governme olution in many agencies are either effective and timely audit res lowed. not in place or are not being folw plans for improving their audit Agencies are developing ne in stated a renewed commitment d a resolution systems, and have aga resolution. But new plans, ande it aud ely tim d an ive ect to eff ient to convincingly mfic suf t no are nt me it mm co d ieved. stated renewe resolution will indeed be achreduce it aud ed ov pr im t tha te tra ons d and operated effectively to Systems must be implementelved audit findings and carry out the the current backlog of unresofindings in an effective and timely resolution of future audit ove manner. ms and has been slower to impr DOD has more serious proble any other agency of the Federal an its audit resolution systems th ed efforts by the Committee and hin Government. DOD has resist re effective audit resolution wit1981 mo to d lea ld cou h ic wh st others nuary 1981 directive and Augu the Department. DOD's Ja steps toward more effective audit resodirective are important first much more however to ensure that it lution DOD. DOD must do audit resolution. The directives' sucachieves effective and timely ive audit resolution, however, can be cess in achieving more effect D acting immediately to ensure that d out by accurately assessed only by DO guidance directives are carrie manner. icy pol its of s ion vis pro the plete, effective, and timely all DOD components in a comective oversight nor adequately imOMB has not provided eff guidance to meet Committee objecproved and revised its policy audit resolution in the Federal Govtives for effective and timely guidance and oversight could assist ernment. Improved OMB policy timely resolution of audit findings. in assuring more effective and Committee's recommendations to OMB's refusal to carry out theroval of agencies' audit resolution perform oversight through appreviews of agency budget requests, systems, and through annualg to see that its policy guidance is have resulted in OMB failin ly by Executive Branch agenive ect eff d an y tel ple com t ou carried oved audit resolution revipr im te ora orp inc to l usa ref has cies. OMB's commended by the Committee ive re ce an id gu icy pol its in cut e sions ve audit resolution in th Exe also contributed to ineffecti resolution could be achieved if OMB to Branch. More effective audit tracking and reporting systemsrecy en ag ed uir req ce an id gu be policy costs that are recommend to separately identify questioned y identify cost recoveries resulting covered, as well as separatelions would provide a more accurate ovefrom audit work. Both provis management and areas where impr gauge of agencies' financial ective audit resolution could also be ment is needed. More eff ance explicitly required independent achieved if OMB policy guid findings and delays by program offiarbitration of disputed audit commendations. Explicit statements re cials in responding to auditpol ance to procedural as well as id gu icy B OM of y lit abi of the applic  4~1111111111111iiii   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  • •  • •  25 monetary fin dings could a tion. lso ensure m ore effective Agency mana audit resolug ement still h the effective a s pri mitment by and timely resolution ofme responsibility for ens resolution sy agency management canaudit findings. A stronguring effective and stems are developed, impl help to ensure that ag comagement can timely manner. A strong emented, and operated iency effectiveness be better secured by icommitment by agency n an for bonuses a in resolving audit findi ncluding Federal managmanngs as a perf n ormance criteerrs' The Committd merit pay. e ia e will continu in this area e to monitor un ti l F it e d eral agencies is satisfied w audit findin i ' ment and Bugs. It is asking the Direth their progress in resefforts olving to improve thdget to report back to tchtor of the Office of Man a ee Government e The implemen 's record in tCommittee on OMB effogrt s should provi tation of the statutor his area. d y e O f a f d i d c itional mean agencies, as w s for OMB ea of Inspectors General e l l a s C nd Executive o n gress and oth assess the ef f e e r c s t , i v t e o n e p s rovide oversi Branch s of efforts to audit finding g Integrity ands and recommendations.improve agencies' resolutht and Executive Bra Efficiency, if provided The newly created Councion of resolution an nch, could help to undersadequate support withinil on agement in t d its integral role in ach core the importance of a the eral agencies he Federal Government, ieving sound financial mudit in resolving a to develop, implement aand assist in prompting anudit findings. nd use more Fe effective mea dns 0  o  1  •  • ••'of GOVE .•• 0 .••41-  BOARD OF GOVERNORS OF THE  . -1 ,VIV A‘ .**;:o4 it)0'\ i: A/ •0 .,  FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551  F-. • h• .1.. h. 4‹.,.  • -4 • <1' *.A,  December 4, 1981  .RAL Ftt.S"   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  ••..•••  PAUL A. VOLCKER CHAIRMAN  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 the South Carolina Bankers Association to address its annual convention next May 6-9. Unfortunately, I already have a speaking commitment for the dates of the Association's meeting and have been forced to send my regrets. I accepted an invitation many months ago to take part in a program during that period at the Mayo Foundation where I am a member of the Board of Trustees. Perhaps I will be able to get to South Carolina at another time. With best personal regards. Sincerely,  bcc:  Mrs. Mallardi JRC:tjf  .••'of GOviii.. y,l, •PC9 ,,,-,-1*_'`.*0 :co 7,"•.--;:','"  •• -nO efi," r z  •-k ' •  ' T4 I.,4 \  r  -f.3 ,  .. C'' IL,i  BOARD OF GOVERNORS OF THE  • ..  FEDERAL RESERVE SYSTEM  La.) i— •  WASHINGTON, D. C. 20551  Ln. A... ''). ,• . ‘4  December 4, 1981  .res0:44.  Rt. • •..• •'  tRA L : . •   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  RAUL A. VOLCKER CHAIRMAN  The Honorable Ernest F. Hollings United States Senate Washington, D. C. 20510 Dear Senator Hollings: on Thank you for your recent letter endorsing the invitati annual of the South Carolina Bankers Association to address its convention next May 6-9. Unfortunately, I already have a speaking commitment for ed to the dates of the Association's meeting and have been forc to take send my regrets. I accepted an invitation many months ago dation where part in a program during that period at the Mayo Foun I am a member of the Board of Trustees. her Perhaps I will be able to get to South Carolina at anot time. With best personal regards. Sincerely,  bcc:  Mrs. Mallardi JRC:tjf 'I'  •  •  •  Decelzber 4, 1981  The Honorable Wayne Dowdy House of Representatives WashinEton, D.C. 20515 Dear Mr. Dowdy: Thank you for your letter and accompanying correspondence from your constituents regarding deregulatory actions by the Depository Institutions Deregulation ComLiittee (DIDC).  I want to assure you that I understand  your concerns for the viability of savings and loan associations and will bear them carefully in rind at the next meeting of the DIDC, which is scheduled for December 16.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Sincerely,  Sgaul A, Volcker  NB:vcd (V-344) bcc:  Mr. Bernard Mrs. Mallardi (2)
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