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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Collection: Paul A. Volcker Papers Call Number: MC279 Box 11 Preferred Citation: Congressional Correspondence, March-August 1982 [Folder 2]; 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/c451 and https://fraser.stlouisfed.org/archival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ These documents can only be used for educational and research purposes ("fair use") as per United States copyright law. By accessing this file, all users agree that their use falls within fair use as defined by the copyright law of the United States. 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Policy on Digitized Collections Digitized collections are made accessible for research purposes. Princeton University has indicated what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids. However, due to the nature of archival collections, it is not always possible to identify this information. Princeton University is eager to hear from any rights owners, so that it may provide accurate information. When a rights issue needs to be addressed, upon request Princeton University will remove the material from public view while it reviews the claim. Inquiries about this material can be directed to: Seeley G. Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) muddaprinceton.edu https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CHAIRMAN, BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE URNANDIST GERMAIN 1ST DISTRICT, RHODE ISLAND 2108 RAYBURN HOUSE OFFICE BUILDING WASHINGTON. D.c. 20515 TEL.: 202-225-4911 204 JOHN E. FOGARTY BuILDING PROVIDENcE, R.I. 02909 TEL.: 401-528-4323 Congrez5 of tbe Viniteb &tato PoufSe of ikepreZtntatibeti Warsbington, ri.C. 20515 R.I. ToLt. FREE TELEPHOM 1-800-662-5110 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 29, 1982 4), FINANCIAL CHAIRMAN, SUBCOMMITTEE ON SION, VI SUPER I NSTITUTIONS REGULATION AND INSUFtANCE ?.2) 3 ( -14 t r..... C eel 0 —4-r) cri c.: cif C., g 3=11 C) VW ID , C. 7:1 r)C. " ri .'- I... r.... 1 IN.) --ii7) r I ( . .......?. ::::7 ''... The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve Constitution Avenue Washington, D. C. 20551 . " c"-J a:. J . ; rl (JO of Ms. Janet M. This is to express my interest in the candidacy the Federal Reserve Scacciotti of Rhode Island for a position on Consumer Advisory Council. Officer of Ms. Scacciotti is President and Chief Executive the second largest Guild Loan & Investment Company, a subsidiary of In addition to these commercial bank in the State of Rhode Island. ilities within duties, my constituent has numerous other responsib Rhode Island Share the parent corporation and is a Director of the and Deposit Indemnity Corporation. n. She is I recommend my constituent for your consideratio en her immediate highly respected within her profession and, giv ted financial servinvolvement with the operation of consumer-orien Consumer Advisory ices will, I am confident, be a fine asset to the Council. J St Germain Member of Congress FJStG:dMh . t co, Dear Mr. Chairman: Sincerely, 1"!et 3C https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis August 2, 1982 The Honorable Lindy (Mrs. Hale) Boggs House of Representatives Washington, D. C. 20515 Dear Mrs. Boggs: In Chairman Volcker's absence, I would like to thank you for your letter of July 22 recommending Mr. David S. Willenzik as a member of the Board's Consumer Advisory Council. I can assure you that Mr. Willenzik's qualifications will receive full consideration when the Board makes the 1982 appointments to the Council. We will be in touch with you when the selections are made. Again, thank you for your interest. Sincerely, / 11 Preston Martin CO:vcd (V-170) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi Mrs. Winkler Li/40Y DA FtS. HALE') BOGGS, M.G. 2o DISTRICT. LOU'SIAN* WASHINGTON OPTICIrs 2353 RAYBURN BUILDING WASHINGTON, D.C. 20515 (202)225-6636 COM PAITTES: AJPPROPR I ATIONS PEG KAVA1JIAN ADMINISTRATIVE ASSISTANT CongresSo of the Einiteb tato jbotifie of Repregentatitn0 DISTRICT OPTICS: 1012 HALE BOGGS FEDERAL 13un-otsca 500 CAmP STRtrr NL-w ORLEAtts, LouisI ANA 70130 (504) 589-2274 leassbington,0.e. 20515 July 22, 1982 r° Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System 20th and Constitution Avenue, N.W. Washington, D.C. 20551 _.,. um 2 CS) rr7 m -r1 ••31 C . ) rn 7,) -T1ri el — rn rn.c. c•-.,• rri -_-4. -.t-:: -' .:3 -5. r...11 (..... = C= rca C3 7:31 llt Tn. 0. 1.".... ry•-ry-fi VI ,C3 .c . ,.r • `-•r.:cr• ...... ..., .ri. fn Y.? 1%0 • • . co) It has come to my attention that the Federal Reserve Bank of Atlanta has offered its nomination of Mr. David S. Willenzik for a position on the Federal Reserve Board Consumer Advisory Council. I am excited about this nomination and I would like to offer for your consideration the very positive impression that I have of Mr. Willenzik. I am sure that, by this time, you have had the opportunity to review his biographical materials, so you are aware that he is a lifelong resident of New Orleans, Louisiana. He is an associate with a prestigious law firm in my Congressional District and he comes to me highly recommended by a full partner in that firm, who is a trusted friend. I am not personally acquainted with Mr. Willenzik, yet I feel equipped for recommending him because I have had the opportunity, for some years, to observe him as an active, professionally successful citizen in our community. He is recognized as having excelled in his legal specialization, banking and consumer regulatory compliance, and I feel it is important, too, to make note that he has not confined his fine work to New Orleans or even to Louisiana, but has achieved prominence on a national level, as well. I am certain that the Board of Governors will want to give Mr. Willenzik every consideration in choosing individuals for the Consumer Advisory Council. Sincerely, Lindy (Mrs. Hale) Boggs, M.C. LB:tr https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 7.--.:. c,c::• Dear Mr. Chairman: With every good wish and appreciation for your time, CO C. , • •co •0 • -n .•,c)oF GOvt . •. ger.. u.' I-- • (-) • • -4 .Z. .<1, A, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 , I) / 1 4 ,. .RA L RE.S . • •..• • July 29, 1982 PAUL A. VOLCKER CHAIRMAN The Honorable Frank R. Wolf House of Representatives Washington, D. C. 20515 Dear Mr. Wolf: Thank you for sending me a copy of your recent letter to Secretary Regan regarding the idea of a Federal Letter of Credit Corporation, as propounded by Mr. E. Joseph West. Mr. West clearly is attempting to address an important problem--that is, the high level of long-term interest rates and the impact of high long rates on financing patterns and the economy. Mr. West is, I think, correct in attributing at least part of the "blame" for high nominal interest rates to a reluctance of traditional institutional buyers of long-term fixed income obligations to take the plunge again today. Too many of these investors have suffered major capital losses in the past and they are afraid that they might experience reverses again by a renewed upswing in interest rates. But I think it's important to understand why these fears exist. One cause, I believe, is the fact that inflationary expectations for the long telm have not been greatly lowered, owing to the fact that the recent abatement of inflation has been brief and postwar history shows cycles in inflation around a persistent uptrend. Another factor is the prospect of large and growing federal budget deficits extending into the indefinite future, with the implication that there will be a continuing pressure of Treasury borrowing in the credit markets. It seems to me that our most urgent priority must be to address these fundamental causes of the sustained tension in the long-term debt markets. But that is not to say that we should not be looking to other means of improving financial and economic conditions. Unfortunately, I find myself somewhat less enthusiastic about Mr. West's proposal. I see a very troubling potential for the intrusion of the federal government into the allocation of capital in ways that would not be in keeping with our basic traditions and that could easily result in reduced economic efficiency. And at the same time, I think that there is reason to be skeptical about the degree to which such a device would be effective in lowering long-term rates generally. It's more likely that some borrowers would achieve savings (an implicit subsidy from the taxpayers), although, unless certain arbitrage constraints were laid down, much of the benefit could accrue to lenders in the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • The Honorable Frank R. Wolf Page Two form of extra profit. In general, the proposal's effects would not be dissimilar from those of any other long-term loan guarantee program--and, as you know, the proliferation and growth-of federal loan guarantees and other credit assistance measures hav_e come under considerable criticism. 4 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis As a final note on the proposal, given the allocative/subsidy nature of the proposal, I don't believe it appropriate that the Federal Reserve be given the responsibility for administering the program. The Discount Window is a distinctly different enterprise, being solely a mechanism for dealing with liquidity problems in the context of general economic and financial considerations. I'm sorry to be so negative. I commend you and Mr. West for your interest and effort in seeking to deal with our economic difficulties, but I'm sure that you would want nothing less than my frank appraisal. If I can be of further assistance, please let me know. Sincerely, r- JLK:MJP:WRM:vcd (V-162) bcc: Ms. Wing (2) Mrs. Mallardi (2) Mr. Prell CCWMITTEES: PUBLIC WORKS AND TRANSPORTATION FRANK R. WOLF MTH D/STRICT. V/RGINIA PLEASE RESPOND TO ADDRESs CHECKED WASHINGTON OFFICE: suscom m rrrEES: O POST OFFICE AND CIVIL SERVICE fluscom mirrEEs: ilitts'bington,0.C. 20515 CES: CONSTITUENT SERVICES OFFI I3 WATER RESOURCES jr)oult of AtpreiSentatibet4 414 CANNON BUILDING WASHINGTON n.C. 20515 5-5136 ‘ (202) 22 O AVIATIoN Congrvz of the tiniteb tatess CIVIL SERVICE HUNIAN RESOURCES July 21, 1982 1651 Oua M EADOW Ro. SUITE I 5 MELEAN, V/RGINIA 22102 (703) 734-1500 POSTAL OPERATIONS AND SERvICES 19 E. MARKET ST. ROOM 4B LrEssuRo. VIRGINIA 22075 (703) 777-4422 up OM 1N4 -71 ••••!‘ ryi 1'111 C— Volcker The Honorable Paul Chairman d Federal Reserve Boar Washington, D.C. "r1rri rCr, • Tr./ Z."") r" • f•-,1 1%. .7=1 131C • rr < Po •• f.1.1 •••• LO : Dear Mr. Chairman --.••••• I recently sent '; er tt le a of py co I am enclosing a matter pertains to is th As n. ga Re easury to Secretary of Tr review and comments ur yo te ia ec pr ap would r interest rates your operation, I we lo to al os op pr is of th ion of Credit Corporat on the feasibility er tt Le l ra de Fe a on of through the creati merit and would like of al de t ea gr has a action and attention I believe this idea re ur yo te ia ec pr her. I would ap to pursue it furt to this idea. n on this proposal, io at rm fo in al on ti t. y addi input on this concep If I can provide an d an ts gh ou th . I welcome your please let me know ur assistance, Many thanks for yo ncerely, ""7:: ran R. Wol Member of Co FRW:sjb enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CLED FIBERS MADE WITH RECY INTED ON PAPER PR RY NE IO AT THIS ST CONI ITTEcal :FRANK R. WOLF OTN DISTRICT. VIRGINIA • PUBLIC WORKS AND TRANSPORTATION SUNCOOK IA ITT GES: PLEASE RESPOND TO ADDRESS CHECKED WASH!NGTON OFK ICE Congerscs of tbe Ziniteb tate5 AVIATION WATER RESOURCES 414 C.A.N NON BuiLo3No WASHINGTON, D.C. 20515 (202) 225;1136 Poule of Atpres5entatibuS POST OFFICE AND CIVIL SERVICE Ulafsbington,;3.e. 20515 suncomm ITTEES CONSTITJENT SERVICES OFFICES: July 23, 1982 HUMAN RESOURCES O O • 1651 OLo M EADOW Ro. SurrE 115 MCLEAN, VIRGINIA 22102 (703) 734-1500 CIVIL SERVICE POSTAL OPER ATI ONS AND SERVICES 19 E. MARKET ST. R00Al 4B LEESBURG, VIRGINIA nus (703) 777-4422 The Honorable Donald T. Regan Secretary Department of the Treasury Washington, D.C. 20220 RE: Establishment of a FEDERAL LETTER OF CREDIT CORPORATION to lower interest rates through the stimulation of long-term loans and investments. Dear Mr. Secretary: Many believe that success or failure of the Administration's Economic Recovery Package, which I support, may hinge on an aspect of the economy over which the President has no control -- the continuation of high interest rates. I am becoming increasingly concerned and am keenly aware that the nation's financial markets are generating similar doubts over the prospcets for realizing economic recovery without a lowering of the interest rates. I would like to share with you an innovative proposal presented to me recently by a member of my Business and Development Advisory Council, Mr. E. Joseph West. Mr. West is a Chartered Financial Analyst associated with Drexel Burnham Lambert, Inc. and suggests that high interest rates may be due to the substantial shortening in average maturities of loans and investments by the nation's depository and lending institutions and is not due to high inflationary expectations in the market. Given this hypothesis, Mr. West's solution holds great interest for me as a catalyst in triggering interest rate decline. A Federal Letter of Credit Corporation (FLOCC) would be established through legislation to issue Letters of Credit to qualified depository and lending institutions. FLOCC would guarantee certain financings (such as long-term public bond issues), if those institutions commit the raised funds to loans and/or investments of 20-year maturity or longer. The Federal Reserve Board, acting as the Fiscal Agent of the United States, would establish through regulation which institutions would qualify and for what amounts they would be eligible. It would be regulated in much the same manner as the Discount Window is regulated by the Fed. I believe Mr. West has a viable idea which could be the mechanism needed to reinstill confidence in long-term lenders and investors. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RECYCLED FIBERS THIS STATIONERY PRINTED ON PAPER MADE WITH • The Honorable Donald T. Regan July 23, 1982 Page Two I am enclosing Mr. West's most recent letter to me which outlines his proposal in detail. I urge your careful and thoughtful consideration of this approach in resolving the problem of high interest rates. The free-market characteristics of the proposal are interesting, and it might be noted that the size of any such Letter of Credit Program would decline with lower interest rates because the spread between agency paper and high-grade corporate paper would narrow substantially as rates dropped. I request your advice, counsel, and personal attention to this proposal. I welcome your comments and would welcome the opportunity to meet with you on this matter. With best regards, cerel rank R. Wolf Member of Congress FRW:sjb Enclosure cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Chairman Paul A. Volcker Counsellor Edwin Meese, III The Honorable David Stockman Mr. E. Joseph West Drexel Burnham Lambert escoinPOPIA7(0 MEMBER OF PRINCIPAL STOCK AND C01.04100ITY EXCKANGES • SUITE 800 INTERNATIONAL SQUARE 1850 K STREET, NORTHWEST WASHINGTON,D.C.20006 C202)862 28T7 E.JOSEPH WEST CHARTERED FINANCIAL ANALYST July 21, 1982 The Honorable Frank R. Wolf Member of Congress 414 Cannon Building Washington, D. C. 20515 RE: ESTABLISHMENT OF FEDERAL LETTER OF CREDIT CORPORATION (FLOCC) TO STIMULATE LONG-TERM LOANS AND LOWER INTEREST RATES Dear Frank: In response to your request and as a follow-up to my letter of June 24 and our meetings of June 24 and 29, 1982, I have outlined below the main concepts behind the -proposed establishment of the FEDERAL LETTER OF CREDIT CORPORATION and the associated amendments to the Federal Reserve Act to facilitate the Federal Reserve Bank(s) acting as Fiscal Agent for the newly-established FLOCC. As you know from my previous correspondence, it is my hypothesis that the lack of correlation between the declining rate of inflation over the past two and one-half years and the still relatively-high (but slowly declining) rates of interest across the money market spectrum is due not to high inflationary expectations but to the substantial (and persistent) shortening in the average maturities of loans and investments by the nation's depository and lending institutions. This shortening of maturities has been particularly pernicious since the last major secular low in interest rates during 1976. This phenomenon has accelerated demand in the shorter-term money markets, thus creating very high real rates of interest. It has been my suggestion that a mechanism and a national policy be established to incent our depository and lending institutions to make longer (and long) commitments such as mortgage loans, at lower than prevailing rates of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Wolf e Frank R. l b a r o n o H e Th Page 2 2 July 21, 198 l Mortgage a n o i t a N l dera tion of Fe l Business i l d a a m r S t e e h h t t In and establish interest. an Program o o L t V d e e t h f t a r d d an be sue Association ion should t a l s i ch would is g i e h l w , , n N o O i I t T a A (such as T CORPOR Administr I s D g E n R i C c n a F n O i f in TTER titutions, eing certa s e a FEDERAL LE n t i n a y r r a o u g t i t s depo Credi percentage qualified Letters of e y e b r h ) t s e u o s t s two ond i f funds by o long-term b t s o ed funds to c s i a r r i e h e t h t g n mmit thus loweri maturity. itutions co r t e s g n n i o l e s r o o h t ear points, if Letter of nts of 20-y t e p m m t e s x e E v n i x e Ta n loans ana7or milar to th i s e b ear or so i y d l u t o s w a p s C e O These L r for th anks with a b l u r p e o t p n e s c g n anci oney Credit Fin eby large m r e h w Credit) the , e c f n o a n r i e f t t e L municipal e (through a wn revenue e o t n n k a r e a l u t g t i l ly AAA credit f relative o s e u s s i public bond with . orporation c authorities c i l b u p g a FLOCC bein e United h e t h t f o e t n n i e g d a m si One could i by the Pre d e t n i o ement that p r p i a u q e e v r i a f ( d s nts , an 15 director minal amou k offering o c n o t e s s a c h i c l r b u pu er years). red to p i i u l q r e a States), a r e s e t b i in for LOCs Fannie Mae t a applicants e s r LOCs in a o c f s e e h e t f s a g w n s rgi guarantees of stock (a ome by cha s c ' n C i C O n L r F a e d . do oul and ulticial banks The FLOCC w r y e t m i m u o q c e s s a r e old nner the same ma l Reserve its stockh a r y e b d e d F e k e c a h be b . T t s Treasury would first e t a t S Fiscal Agen d e s t a i n e U l e o h r t le nal mately by ate its ro s traditio t t i i l i n c i a f t c o a t CC to Board would Regulation e t a g romulgated p l u m s o a r w p V d l n u o ati t and wo s governmen er as Regul u n n o a i m r a v e m a y s b ve ees in the and Executi oan guarant t l c A e h n t o i e t t c a u od e facilit Defense Pr ions of th e t h c t n u r F e d g n n u i d en agencies refer to L H. Hackley e d s r a a e w l o P H 3). . y 2 b , May 197 History Order 911 m e A t s : y s S k n a e B v r e erve t Federal Res e Federal Res h t f Reserve Ac o l s a r o r n e r d e e v F o G e entation. m nts to th (Board of e e l m p d m n i e m a e t l ita hnica d to facil e r Various tec e d i s n o c lly ld be ut initia of 1913 shou b , s m r o f ny can take ma r o s Secretary n o o p t s a t s s e a u q e e l r and Your ro letters to of inquiry r e r v e o t c t e e l t a a i Counsellor appropr , d r n e it might be a k c l s o e V i p o ul A. n with c Chairman Pa s Donald Rega a h c u s parties d Stockman. i d v e a t D s e e r l e b t a n i or and the Hon , e s e e M n i w role of Ed e h t n i e c rvi at your se m er. a I , t s a other matt y n a r o As in the p s thi sultant on n o c r o r s, o s advi nal regard o s r e p t s e With b https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis West ose yst ancial Anal n i F d e r e t ar EJW:krw https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 28, 1982 The Honorable Claiborne Pell United States Senate 20510 Washington, D.C. Dear Senator Pell: I appreciate your letter of July 23 recommending Ms. Janet M. Scacciotti as a member of the Board's Consumer Advisory Council. I can assure you that Ms. Scacciotti's qualifications will receive full consideration when the Board makes the 1982 appointments to the Council. be in touch with you when the selections are made. Again, thank you for your interest. Sincerely, CO:pjt (#V-163) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2) We will CHARLES MC C. MATHIAS, JR., MD., CHAIRMAN MARI( O. HATFIELD, OREG. HOWARD M. MAKER, JR., TENN. JAMES A. MC CLURE, IDAHO JESSE HELMS, N.C. JOHN W. WARNER VA. PIC/BERT DOLE, KANS. WENDELL H. FORD, KY. HOWARD W. C.ANNON, NEV. CLAIBORNE PELL, R.I. ROSERT C. MYR°. W. VA. HARRISON A. WILLIAMS, JR., N.J. JOSEPH E. DI GENOVA, STAFF DIRECTOR AND CHIEF COUNSEL JOHN S. CHILDERS, DEPUTY STAFF DIRECTOR WILLIAM MC WF/ORTER C.00HRANE, MINORITY STAFF DIRECTOR 'Aleniteb eStafez Zerrate COM M ITTEE ON RULES AND ADMINISTRATION WASHINGTON, D.C. 20510 1I CC. -n -n rrl July 23, 1982 - 671 71.1 7! "1-" ▪ C rrt A.S) , 7/ . •• The Honorable Paul Volcker Chairman Federal Reserve Board 20th Street & Constitution Avenue, NW Washington, D.C. 20551 cn Dear Mr. Chairman: I am writing on behalf of Ms. Janet M. Scacciotti, the President of Guild Loan and Investment Company in Providence, Rhode Island. Ms. Scacciotti has applied for one of the vacancies on the Fed's Consumer Advisory Council. I believe she is eminently qualified to serve on the Council, and urge you to appoint her to this important policy position. As President and Chief Executive Officer of Guild Loan and Investment Co., Ms. Scacciotti is responsible for management of a financial institution with assets of $225 million. Guild is a subsidiary of Old Stone Corporation, the second largest commercial bank in Rhode Island. In her position with Guild, Ms. Scacciotti has directed consumer-oriented financial services and become intimately familiar with the Fed's regulatory framework. She is one of the highest ranking women in the Rhode Island banking community. I believe Ms. Scacciotti would enhance the work of the Consumer Advisory Council, and I very much hope that you will give her application every favorable consideration. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Warm regards. Ever sincerely, Claiborne Pell BOARO OF GOVERNORS AA/v, i'l\ezzA-424 (v-/s6) OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 2DS51 July 27, 1982 RAUL A. VOLCKER CHAIRMAN The Honorable William Proxmire United States Senate 20510 Washington, D.C. Dear Senator Proxmire: I appreciate having the benefit of your views on the n on plans of the Federal Reserve Banks to present checks draw . reserve city banks up to 12:00 noon beginning August 1, 1982 As you are aware, the Federal Reserve System is comem, and, mitted to improving the efficiency of the payments syst will as part of that effort, speeding check collection. This (not just reduce the amount of "float" in the banking system disbursement Federal Reserve float), and incentives for "remote" check collection to minimize the period between check payment and will be reduced as well. Continuing presentment up until 12:00 noon, together the Federal with a number of other steps to be initiated by accomplishment Reserve in the near future, will contribute to the l a later hour of these objectives. Because presentment up unti plans, the is a central element in the Federal Reserve's overall ly with the Reserve Banks began discussing this matter informal cially banking community several months ago, and in June offi 12:00 noon notified all the affected banks that the change to presentment would take effect on August 1, 1982. r Since that time, a number of banks and some of thei be some transicorporate customers have indicated that there may entment. While tional problems associated with 12:00 noon pres eve that they we are sensitive to those problems, we also beli checks will continue are manageable because the vast majority of ce with existing to be presented to city banks much in accordan will be presented schedules and only a small percentage of checks the latest hour at as late as 12:00 noon. Indeed, noon will be , presentment of which presentment will take place. In practice will take place checks by virtually all Federal Reserve offices we recognize the in advance of the noon limit. Moreover, while the corollary later presentment hour will inconvenience some, iating the check is later deposit deadlines for many banks init benefit. On balance, collection process, which will be a distinct banks. we believe the changes will be welcomed by most https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable William Proxmire Page Two https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Hawever, in order to ensure that these changes in check collection procedures are digested by banks and their customers with a minimal amount of difficulty--consistent with the general thrust of your suggestion--we have modified the schedule for implementation of later presentment in order to provide a further six week period over which the changes will be implemented. Beginning August 2, the Reserve Banks will present , checks to reserve city clearinghouses not later than 11:00 a.m. unless the Reserve Bank is currently presenting checks after s that time. Federal Reserve offices in at least four District banks, already present checks as late as 12:00 noon to some city s and offices in eight Districts present checks to some bank ss outside of the reserve city at 12:00 noon or later. Unle s some unforeseen problems are encountered, the Reserve Bank 16, will adopt the 12:00 noon presentment schedule on September ent 1982. In the interim period, we estimate that about 90 perc last of the banks affected by this change will receive their the presentment of checks from the Federal Reserve at about ent same time as today or not later than one hour beyond the curr ed schedule. I might also add that corresponding to the phas s Bank implementation of later presentment times, the Reserve certain will also be phasing in later hours for the deposit of phaseclasses of checks at Federal Reserve Banks. During this might in period, it is possible that Federal Reserve float y and increase but any such rise in Fed float will be temporar of modest proportions. I am also sensitive to the point you have made conlosing its cerning the desirability of the Federal Reserve disc that longer run plans in payment services operations. In the respect, on July 29, E. Gerald Corrigan, President of the System's Federal Reserve Bank of Minneapolis, and Chairman of ce to outPricing Policy Committee, will hold a press conferen e areas. line the future plans of the Federal Reserve in thes meeting a Later in the day, Mr. Corrigan will participate in Bankers with several hundred bankers arranged by the AmericanIf your . Association on pricing of Federal Reserve services please contact staff is interested in attending these functions, . Joseph Coyne in our Public Affairs Office at 452-3215 Again, thank you for your interest in this matter. the concerns I hope the actions I have cited are responsive to expressed in your letter. Sincerely, EGC:MJII:NS:PAV:pjt (ffV-156) bcc: Mr. Hallmon Mrs. Mallardi (2) tag! WILLIAM PROXMIRE Action assignei Neal Soss WISCONSIN https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 'ZICrtifeb Zfafez Zenafe WASHINGTON, D.C. 10510 July 21, 1982 o -Rrt -.61% 0;3 re' -c, 0:, ,,- /. r17:-.. c,.o ...14 ...1 ' /to The Honorable Paul Volcker Chairman, Board of Governors of the Federal Reserve System Washington, D.C. ) i: -PF r.-• - C.--••• -4, c.,c) r--- ;---, fr ri-n 7-1 o r-, r..) <J) __.;tr., , N ...An re .:-...... ., . . :7; c,1 ....vg rtlIe. • , C..-/ c;':r --.. SC, rn '' ,7: 1 '' -1- -,, T. LS) .. ) r% cn Dear Mr. Chairman: I understand that effective August 1st, the Federal de Reserve Bank plans to establish a uniform, nationwi s. This time of 12:00 noon for the presentment of city item Reserve new policy is presumably intended to reduce Federal credit float and to provide the nation's banks with better availability. ed, It is hard to quarrel with these objectives. Inde rts by as you know, I have been a strong supporter of effo cy of the Fed to reduce float and to improve the efficien have talked the nation's payment system. At the same time, I ern over to some bankers who seem to have a justifiable conc to implement the procedure which the Federal Reserve is using has been its proposed new policy. In particular, concern without expressed to me that the new policy is being adopted to comment. adequate notice or opportunity for affected banks Reserve Those banks who compete directly with the Federal d that this new Banks in clearing checks are especially concerne ral Reserve policy might be part of a longrange plan of the Fede their market Banks to use their regulatory powers to enhance contrary to share. Such tactics would, of course, be directly to foster fair the Monetary Control Act of 1980 which attempts commercial competition between the Federal Reserve Banks and ring services. banks in the provision of payment and check clea ementation of Since there is no apparent urgency to the impl Federal Reserve the proposed new policy, I would hope that the that its impact could ost ope its effective date_for 30 days so ran be more on di erent s-egiffe-firg -of theTTraing community— if the Federal adequately assessed. It would also be helpful changes in its Reserve could disclose its longrange plans for check clearing and payment service operations. -/- ../: ,0 C* --;-' .' r..-7; ,, -14 • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 July 27, 1982 RAUL A. VOLCKER CHAIRMAN The Honorable Glenn M. Anderson House of Representatives 20515 Washington, D.C. Dear Mr. Anderson: Thank you for your recent letter regarding the policies of the Federal Reserve and the need for lower interest rates. As you know, there has been a noticeable decline in rates in the past couple of weeks, and the Federal Reserve has lowered its discount rate by one-half percentage point. Still, there's no denying that interest rates remain higher than most of us would like to see, and a further decline clearly is desirable. The recent drop in rates came in the context of moderation in the pace of monetary expansion, and I believe that is a crucial fact. The Federal Reserve has it in its power to push down interest rates--particularly short-term rates--by pouring reserves into the banking system and fueling rapid growth of money, but such an approach almost inevitably will lead to greater inflationary pressures and heightened inflation expectations. Consequently, any relief from high interest rates achieved through such means will prove temporary, and before long the cost will be even higher rates and a deteioration of the economy. The only way the Federal Reserve can contribute to a sustained decline in interest rates is by maintaining the monetary restraint necessary to put the economy back on a noninflationary growth path. But monetary policy is not the only factor bearing on interest rate developments. The demands of the federal government on the credit markets play a major role, and I have therefore stressed the importance of altering the course of fiscal policy in order to provide investors with the basis for a confident expectation that reasonable budgetary balance will be attained as the economy expands in the next few years. I share your concerns about the impact that high interest rates are having on many segments of our population. The strains those rates are creating are evident to all, and they call for urgent action on the part of policymakers. I commend the Congress for the effort it is making now, and I believe that success in implementing firm budgetary action coupled with prudent restraint on money should create a healthier economy. Sincerely, MJP:JZ:pjt (fV-155) bcc: Mr. Prell Ms. Wing (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sgul A. Voickec COMMITTEES: Action assigned Mr. Kichline GLENN M. ANDERSON PUBLIC WORKS AND TRANSPORTATION •.-32D DISTRICT, CALIFORNIA BUILDING 2410 RAYBURN HOUSE OFFICE 20515 WASHINGTON. D.C. TELEPHONE: (202) 225-6676 Congressis of tbe tiniteb iikatez 11)oufse of Repre5Sentatib0 300 LONG BEACH BOULEVARD (P.O. Box 2349) LONG BEACH, CALIFORNIA 90801 tEitosbington, /IC. 20515 TELXPHONE: (213) 548-2721 • CHAIRMAN, AVIATION SUBCOMMITTEE • MEMBER. SURFACE TRANSPORTATION SUBCoMMITTEE • mEMBER, WATER RESOURCES SUBCOMMITTEE MERCHANT MARINE AND FISHERIES • MEMBER, FISHERIES AND WILDLIFE CONsERVATION AND THE ENVIRONMENT SUBCOMMITTEE • MEMBER, MERCHANT MARINE SUBCoMMITTEE July 15, 1982 • MEMBER, PANAMA CANAL SUBCOMMITTEE PLEASE ADDRESS REPLY TO MY: IR WASHINGTON OFFICE O LONG BEACH OFFICE Paul A. Volcker Chairman Federal Reserve System , N.W. 20th Street and Constitution Avenue Washington, D.C. 20551 • MEMBE TR ANSP COMM I rn NATIOlicg TATIOttepLIWAT41j9f tj rrl N./ ON • mEMB ' . ...t 1 7 , PORT C111M,LCUS 31 • MEMBEIS WPB11_.)INGi-CAUCgi6 -.... •M ; 1 1 1-9 i''''15 NJ ) —IC- 7r E/ rt 1,- -- 7-;rT1 3:3 (DO -.....s.:..., :M C7 4 . .1-11: ; .r:r,• -47 1.-1 r'r fil." . x.- -: r.---: .. -11: NJ Dear Mr. Volcker: continuing concern I am writing to express my deep and ng interest rates down to over your Board's inaction to bri an consumer. a level acceptable to the Americ over the need to Respecting your legitimate concern feel that there comes a control the rate of inflation, I the high interest rates time when you must realize that aging to the consumer as in effect today are just as dam see the housing industry double-digit inflation. Today, we s unable to acquire a home in disarray, young married couple ustry facing record low of their own, the automobile ind small, independently sales, and literally thousands of owned businesses collapsing. ntry getting back on the Frankly, I can not see this cou long as we face continuing track of economic prosperity as I urge you to immediately high rates'of interest. Hence, to reduce interest rates take any steps available to you purchase their homes, so that Americans can once again es of life which current automobiles and other necessiti •- sible. high interest rates make inc GLENN Membe 1 NDERSON Congress GMA/wj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CLED FIBERS ON PAPER MADE WITH RECY THIS STATIONERY PRINTED https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 27, 1982 The Honorable Dante B. Fascell House of Representatives Washington, D.C. 20515 Dear Mr. Fascell: I appreciate your letter of July 16 recommending Mr. Walter S. Falk as a member of the Board's Consumer Advisory Council. I can assure you that Mr. Falk's qualifications will receive full consideration when the Board makes the 1982 appointments to the Council. We will be in touch with you when the selections are made. Again, thank you for your interest. Sincerely, SZfag( ." CO:pjt (#V-152) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2) ['ANTE B. FASCELL • 40 ' 0 15TH DISTRICT, FLORIDA Cong. Liaison Office will prepare response CHARLES R. O'REGAN ADMINISTRATIVE ASSISTANT COMMITTEES: FOREIG AFFAIRS IRMAN: INTERNATIONAL OPERATIONS SUBCOMMITTEE MEMBER: INTERNATIONAL SECURITY AND SCIENTIFIC AFFAIRS SUBCOMMITTEE CongrosE4 of tbe tatel Pourie of AeprefSentatibel GOVERNMENT OPERATIONS MENIDER: LEGISLATION AND NATIONAL, SECURITY SUDCOM M ITTEE lEirosbington, 1D.C. 20515 COMMISSION ON SECURITY AND COOPERATION IN EUROPE CHAIRMAN CANADA—UNITED STATES INTERPARLIAMENTARY GROUP CO-CHAIRMAN. U.S. DELEGATION July 16, 1982 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 4Is Co ""r1 -'1 C-, rrt =D -gm -lel 2rn :I y —- ra OM N. C.,. = r" ,IN4 Cif C; " : 1 Z : . :22 :=1 -'i- :X (-0 Z :1,.:r. r•-1 :7) lib. r-- t z-.. ite 4=0 rx-- cp _.. CD 44 • i ..ri rri —•174 ::: , .Z:c.) •<r-..r..: ' -.1 '_1 .... % ;7. ......... cn Dear Mr. Chairman: It is with pleasure that I place in nomination the name of Mr. Walter S. Falk for the Consumer Advisory Council. Mr. Falk has been a prominent member of Florida's financial community since 1947, when he founded the Metropolitan Mortgage Company in Miami. As president, he has supervised the company's overall operations, including loan origination, underwriting, servicing and placement of loans with investors. In 1959, Mr. Falk was one of the principal supporters of the Florida Mortgage Brokerage Act, legislation designed to protect consumers from unscrupulous lenders by subjecting the industry to the scrutiny and regulation of the Florida Department of Banking and Finance. The act requires testing and licensing of mortgage brokers and mortgage solicitors in addition to requiring financial solvency and bonding. In tribute and acknowledgement of Mr. Falk's efforts in passage of this landmark legislation, he holds Mortgage Broker's License No. 1 in the State of Florida. Since the time of the bill's original passage, Mr. Falk has been an active proponent of improvements to the act, including the 1977 amendments which established the Florida Mortgage Brokerage Guarantee Fund, an industry-funded institution which can compensate an individual for damages suffered as a result of acts committed by a licensed mortgage broker or solicitor. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -/ ro1 : r"'" ? z . z ('''' 44 . :..- -2- Association of Mr. Falk is a past president of the Florida Brokers Association, Mortgage Brokers and the South Florida Mortgage r in the State of and was elected 1969's Outstanding Mortgage Broke Comptroller of the Florida. In 1977, Mr. Falk was called upon by the mmittee on Usury which State of Florida to serve on his Special Subco t of the State's then was charged with the task of evaluating the impac consumers and 10% usury ceiling on the availability of capital for him and to the financial institutions and to make recommendations to Governor. National In addition, Mr. Falk was a Director of the Central Chairman of the Bank of Miami for eight years and currently serves as Board of Lincoln Savings and Loan Association. ve's ConWalter Falk's qualifications for the Federal Reser ience in mortgage sumer Advisory Council are outstanding. His exper great value and banking and his commitment to the consumer would be of appointment. I urge you to give every possible consideration for https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, k c-Ge a43LL TE B. FASCE D Member of Congress DBF/KS .4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 27, 1982 The Honorable Lawton Chiles United States Senate 20510 Washington, D.C. Dear Lawton: I appreciate your letter of July 20 recommending Mr. Walter S. Falk as a member of the Board's Consumer Advisory Council. I can assure you that Mr. Falk's qualifications will receive full consideration when the Board makes the 1982 appointments to the Council. We will be in touch with you when the selections are made. Again, thank you for your interest. Sincerely, SIN CO:pjt (#V.1157) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2) Ar CLO will prepare response •-LAWTON CH I LES COMMITTEES: FLORMA APPROPRIATIONS BUDGET' GOVERNMENTAL AFFAIRS Zfatez Zertafe SPECIAL COM MITTEE ON AGING DEMOCRATIC STEERING COMMITTEE July 20, 1982 CZ) The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washingt . 20551 rn ‹n= 'Iri -,r-) — rrl t_C) CO • C r— ro 17. 7./ r-- = .... (---, c--..) M ..-ri ""r1 cr. •.:-. -.4 CD c:rri. r:a :17. CD t 77,...- • - C) „.c. I-,•,-,-r-1 :IC (-I'll< ' ": ;__ ..)".' LC) IV a) Mr. Falk has been a prominent member of Florida's financial community since 1947, when he founded the Metropolitan Mortgage Company in Miami. As president, he has supervised the company's overall operations, including loan origination, underwriting, servicing and placement of loans with investors. In 1959, Mr. Falk was one of the principal supporters of the Florida Mortgage Brokerage Act, legislation designed to protect consumers from unscrupulous lenders by subjecting the industry to the scrutiny and regulation of the Florida Department of Banking and Finance. The act requires testing and licensing of mortgage brokers and mortgage solicitors in addition to requiring financial solvency and bonding. In tribute and acknowledgement of his efforts in passage of this landmark legislation, Mr. Falk holds Mortgage Broker's License No.1 in the State of Florida. Since the time of the bill's original passage, he has been an active proponent of improvements to the act, including the 1977 amendments which established the Florida Mortgage Brokerage Guarantee Fund, an industryfunded institution which can compensate an individual for damages suffered as a result of acts committed by a licensed mortgage broker or solicitor. Mr. Falk is a pastpresident of the Florida Association of Mortgage Brokers and the South Florida Mortgage Brokers Atsociation and for 1969 was elected Outstanding Mortgage Broker in the State of Florida. In 1977, Mr. Falk was called upon by the Comptroller of the State of Florida to serve on his Special Subcommittee on Usury which was charged with the task of evaluating the impact of the State's then 10% usury ceiling on the availability of capital for consumers and financial institutions and to make recommendations to him and to the Governor. I1 .1 .. '." ' I highly recommend Mr. Walter S. Falk to you for appointment to the ConsuFer Advisory Council. His qualifications are outstanding and I urge you to give him every possible consideration. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LZ rn 7 1.1 Xx• Ns ) .... :::, ....". .....A. De rri ...v. , • Me. -":: r.: . ,i14 Mb. Honorable Paul A. Volcker Page TWo July 21, 1982 In addition, Mt, Falk was a Director of the Central National Bank of Miami for eight years and currently serves as Chairman of the Board of Lincoln Savings and Loan Association. Mt. Falk is committed to the consumer and I urge you to give him every possible consideration for appointment to the Consumer Advisory Council. Sincerely LAWTCN CHILES Ir/hbk https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • July 27, 1982 The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives 20515 Washington, D.C. Dear Chairman St Germain: I appreciate your letter of July 19 recommending d's Consumer Mr. Michael M. Van Buskirk as a member of the Boar Advisory Council. I can assure you that Mr. Van Buskirk's when the Board qualifications will receive full consideration makes the 1982 appointments to the Council. We will be in touch with you when the selections are made. Again, thank you for your interest. Sincerely, , JO https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CO:pjt (#V-154) bcc: Mrs. Bray (w/copy of incoming) Mrs. Mallardi (2) CLO will prepare response FERNAND J. ST GERMAIN. R.I,CHAIRMAN • FRANK ANNUNZIO, ILL. CARROLL HUBBARD, JR., KY. Nr._•RMAN E. D AMOURS. N.H. JIM MATTOX. TEX. JOSEPH G. MINISH. NJ. DOUG BARNARD, JR., GA. JOHN J. LAFALCE, N.Y. DAVID W. EVANS. IND. MARY ROSE OAKAR, OHIO BRUCE F. VENT°. MINN. ROBERT GARCIA. N.Y. CHARLES E. SCHUMER, N.Y. BILL PATMAN, TEX. U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE CHALMERS P. WYLIE, OHIO GEORGE HANSEN, IDAHO JIM LEACH, IOWA ED BETHUNE, ARK. STEWART B. McKINNEY, CONN. NORMAN D. SHUMWAY, CALIF. ED WEBER OHIO BILL McCOLLUM. FLA. BILL LOWERY. CALIF. GEORGE C.. WORTLEY, N.Y. OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS NINETY-SEVENTH CONGRESS WASHINGTON, D.C. 20515 rri July 19, 1982 r-r1 cp — 47) C-. r— Ito .M1/1•0 ry ‹r: Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 • tri It is with a great deal of pleasure that I add my endorsement to that of my colleague, Bill Stanton, of Mike VanBuskirk as a member of the Consumer Advisory Council. I recall very clearly Mike's interest in and grasp of consumer issues that came before the Subcommittees on Financial Institutions and Consumer Affairs during his service as Administrative Assistant to Congressman Wylie, a member of both Subcommittees. This exposure certainly well qualified Mike for his current association with Banc One of Columbus, Ohio. As important as this legislative background is, however, I think for consideration of Mike as a member of the Consumer Advisory Council his current responsibilities with Banc One in the sensitive area of consumer relations preeminently qualifies him for membership on the Council. Many consumer groups who have occasion to come before the Committee, particularly the Subcommittee on Financial Institution Supervision, Regulation and Insurance, have expressed their respect for his knowledge of community goals, reflecting most favorably on Mike and Banc One. I might add that the Staff Director of the Subcommittee on Financial Institutions Supervision, Regulation and Insurance, who has dealt with Mike on numerous occasions during his service with Banc One on national consumer legislative matters relating to financial institutions, enthusiastically concurs in my judgment of Mike's outstanding qualifications for membership on the Consumer Advisory Council. Sincerel and J. St Germain irman 71 .-1"" 1 2> 70 MItvc, FIL.f0.4 7;7=12 : 1 •44; WIT TT' r":".1 Dear Mr. Chairman: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tav coo 2r cs =" -.. Aer • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congressional Mail Priority Handling Date: e/2 -- Board of Governors of the Federal Reserve System Control No. 1/ 4/-./ To: Please review promptly the attached orrespondence from Scnator/Congressman 42_ and let me have your suggestions in rough draft. In order to meet the chairman's requirement for a response within five (5) working days, it will be fi necessary for me to have your reply by The final letter will be signed by: 004hairman Volc er ( ) Mr. Winn Please indicate below the name and extension of the person who drafts the reply. When reviews are required within your Division, please complete these before forwarding the draft reply to me. Reply drafted by: Ext. If there are any problems or questions please give me a call; otherwise, please return this form directly to me with the draft reply and any attachments that are appropriate. Carol O'Brien Room B-2125A, Ext. 2735 FR 7 (Rev. 9/80) .1. COMPOTTTEES AND SUBCOMMITTEES: 'TOM TAUKE ENERGY AND COMMERCE /04/0 DISTRICT. IOWA FOSSIL AND SYNTHETIC FUELS ENERGY CONSERVATiON AND POWER TELECOMMUNiCATIONS, CONSUMER PROTECTION. AND FINANcE CONGRESS OF THE UNITED STATES SELECT COMMITTEE ON AGING HUMAN SERVICES July 27, 1982 0 -1r1 -et r) rn z) e= -,-/ pi Mr. Paul A. Volcker Chairman Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 t.i:" OD r....• 3=s = CI , ...4c -.., rT, ryj CD 1). CI5 •?. r— 7.) c) rn 1 ca cncl X .r..C:) in -11 mr" N) rri < r-, rn 3:31 r— --j. ::>:::7 ',. ." .4:: r 1 '... f"-• i...1 S= 3C 20 1...'' 7.1 _..1. = X C.1 r.: ...Y? . .-1 ..-.0 ir CA) 4110 v.i 41 ..... Dear Mr. Chairman: Last year, representatives of the Iowa Savings and Loan League had the privilege of meeting with David Stockman to discuss interest rates, the state of the economy, and other issues of particular importance to the savings and loan industry. This year, the Iowa Savings and Loan League is deeply interested in arranging a similar meeting with you to discuss these and other concerns. Specifically, representatives of the Iowa Savings and Loan League would like to meet with you here in Washington at your convenience for approximately thirty minutes. If such a meeting could be arranged, I would be deeply appreciative, and I am sure that the representatives of the Savings and Loan League would greatly benefit from your discussion. For further information about this request, please don't hesitate to contact me or my Administrative Assistant, Mrs. Pat Wichser, at 225-2911. I am looking forward to your response, and I appreciate your consideration of this request. Best wishes. Member of Congress TT: jw COMMUNICATIONS SHOULD BE DIRECTED TO THE OFFICE INDICATED. 0 319 CANNON HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 (202) 225-2911 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 698 CrNTRAL AvENuE DUISuqUE. IOWA 52001 (319)557-7740 0 1756 Fins"' AVENUE, N.E. CEDAR RAPIDS. IOWA 52402 (319) 366-8709 0 116 SouTH SECOND STREET CLINTON, IOWA 52732 (319) 242-6180 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 23, 1982 The honorable J. William Stanton house of Representatives 20515 Washington, D.C. Dear Bill: It was most thoughtful of you to recommend Mr. Michael M. Van Buskirk to be a member of the Board's Conburner Advisory Council. Mr. Van Buskirk is fortunate to have you as an advocate. Mr. Van Buskirk's credentials are most impressive and I can assure you that his qualifications will receive full consideration when the Board makes the 1982 appointments to the Council. You may be sure that I will be in touch with you when our selections are made. Sincerely, S4 NI CO:WRM:pjt (#V-151) bcc: Mrs. Mallardi (2) J. WILLIAM STANTON • 11T14 Divnetcr, OHIO 2466 RAYBURN BUILDING WASHINGTON, D.C. 20515 PHONE AREA CooE 202, 225-5306 DISTRICT OrFICES: 170 NORTH ST. CLAIR STREET PAINESVILLE, OHIO 44077 PHONE: AREA Coot 216, 352-6167 Congreiz of the Einiteb COM M 1TTEE ON BANKING. FINANCE AND URBAN AFFAIRS tea; Poute of Repretientatibet MANTUA POST OFFICE 10748 NORTH MAIN STREET M ANTUA, OHIO 44255 PI4ONE. AREA Coox 216. 274-8444 Rlassbington, 0.C. 20515 COMMITTEE ON SMALL BUSINESS Cc, 444 r) 111 July 13, 1982 °'11 • r') rl"; (17 ‹,;"- ( --11. ; ) ) ; ,- Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. 20551 P :..3 Dear Mr. Chairman: It is my pleasure to endorse the nomination of Mr. Michael M. VanBuskirk to your Consumer Advisory Council. I believe that Mike is well qualified to several reasons. First, he would bring a unique Having served as the Administrative Assistant to he is familiar with the development of the basic disclosure statutes that fall within the purview Congressman Wylie has served for many years as a on Consumer Affairs. This provided Mike with an of many of the consumer statutes. serve on this Council for perspective to the Council. Congressman Chalmers Wylie, consumer credit and financial of the Council. As you know, member of the House Subcommittee exposure to and an understanding Second, as the Community Affairs Officer for Banc One Corporatio n of Columbus, Ohio, he is currently immersed in the application of these same statutes. His responsibilities bring him into contact with other lenders, individual consumers, consumers' organizations, community organizati ons, and State and Federal legislators. Finally, his ties to the State of Ohio would compliment the geographic diversity of the Council members. In conclusion, I strongly endorse Mike's nomination and appoi ntment. Sincere J. JWS:jsd cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ms. Dolores S. Smith ,t iam Stanton COMMITTEE ON BANKING, FINANCE AND a' URBAN AFFAIRS 16. WASHINGTON OFFICE SURCOMMITTMS: 2238 RAYBURN BUILDING HOUSE OF REPRESENTATIVES WASHINGTON, D.C. 20515 HOUSING TELEPHONE:(202) 225-2965 INTERNATIONAL FINANCE HOME OFFICE INTERNATIONAL TRADE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS SUBCOM M ITTEES: FEDERAL OFFICE BUILDING 34 CIVIC CENTER PLAZA. # 921 Congre55 of tbe Zittiteb OVERSIGHT AND INVESTIGATIONS WATER AND POWER RESOURCES tate5 SANTA ANA, CALIFORNIA 92701 TELEPHONE: (714) 835-3811 ji)otu5e of Repregentatibe0 JERRY M. PATTERSON 38TH DISTRICT OF CALIFORNIA C.) 1 7:1E6r. vo July 23, 1982 t-T rrl rrl :3/IC 73 9? IN4 C71) Dear Mr. Chairman: On behalf of the Orange County Chamber of Commerce, and its President and Chief Executive Officer, Mr. Lucien Truhill, it is my pleasure to invite you to address the 20th Annual "Economic Outlook Conference" to be held in Anaheim, California on Wednesday, October 20th. This Conference is the largest of its kind in the country today. It has consistently attracted major private sector and government leaders as speakers and participants. For instance, Dr. Richard Lesher, the President of the Chamber of Commerce of the U.S.A. will address this year's conference as will California U.S. Senatorial contenders Jerry Brown and Pete Wilson. As you may know, Orange County has a population in excess of two million people; it is the 19th largest S.M.S.A. in the nation; and is served by five members of the House of Representatives. The 0.C.C.C. has over 5,000 firms as active members this year and is one of the most aggressive chambers of commerce in the United States. They have sent out letters of invitation and brochures to approximately 40,000 persons in the business world and expect attendance at this conference to be in excess of 1500 persons. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tz C-) C= r- X' r— ) rrCW.11 .'r7 C7) c) r " r-1. -t Paul Volcker, Chairman Federal Reserve Board 20th & Constitution Ave., N.W. Washington, D.C. 20551 ""t f 4 17, C) rri ..Z: !...1 r.e, ,, „. Mr. Paul Volcker July 23, 1982 Page Two w• It is my sincere hope that you can find time in your schedule to be the keynote speaker at this conference. If you could respond to me by phone or letter prior to August 10th, it would facilitate the 0.C.C.C.'s final planning and printing arrangements. If you have questions or wish to inquire about scheduling or other arrangements, please call me at (202) 225-2965. In my absence, you may wish to speak to my Administrative Assistant, Duayne Trecker, who is working closely with Mr. Truhill and the Chamber staff on the program arrangements. Hoping to see you on October 20th in Anaheim. Cordially, M. PATTERSON U.S. Congressman JMP:dth https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .. July 21, 1982 The Honorable Paula Hawkins United States Senate 20510 Washington, D.C. Dear Senator Hawkins: ittee During the hearing before the Joint Economic Comm on Federal on June 15, you requested additional information ing efforts, Reserve System expenses, float reduction and pric and automated clearinghouse pricing. For your information, I I have furnished am pleased to enclose a copy of the information the hearing. to the Committee for inclusion in the record of Sincerely, , 1r https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Enclosure CO:pjt bcc: Earl Hamilton Ted Allison Mrs. Mallardi (2) •-'- Insert paye 76 (aJC nearing 6/15/82) In response to Senator Hawkins, Chairman Vcicker subsequently furnished the following information for inclusion in the record of the hearing: Federal Reserve System Expenses By any measure, the Board of Governors during the past decade has maintained firm control over expenses of the Federal Reserve System, especially in light of its greatly expanded responsibilities during the period. Indeed, the rate of increase in the Board's expenses (6.8 percent annually on average from 1971 to 1981) nas been less than that of either the Consumer Price Index (8.4 percent) or the GNP Deflator (7.2 percent). Expenses for the System as a whole (all Reserve Banks and assessment for the Board of Governors) increased at an average annual rate of 9.8 percent. The implied average annual increase in real terms of around 2.6 percent (9.8 percent less than the GNP Deflator) has covered much larger average annual workload increases in areas where volume is measurable: commercial checks 7.5 percent, currency 5.1 percent, food stamp processing 3.6 percent, and funds transfers 20.8 percent. In "non -measurable" areas, Federal Reserve responsi- bilities also have grown significantly, mainly as a result of the Bank Holding Company Act amendments of 1970, the Consumer Credit Protection Act and other ory consumer related legislation, the International Banking Act, and the Deposit Institutions Deregulation and Monetary Control Act. Supervision and Regulation resources were strained to handle work resulting from mergers of commercial in inbanks and acquisitions by bank holding companies and the expanded role spection of bank holding companies, as well as from other industrywide changes in the commercial banking business. In the monetary policy area, there have been increasing demands for more frequent and timely statistical reporting as the public's awareness of the importance of monetary policy has increased. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2 We might also note that during this period, 1971-1981, when the Federal Reserve System's average annual increase in expenses was 9.8 percent, the nondefense budget of the federal government increased at a rate of 14.0 percent, and that of the legislative branch at a rate of 12.2 percent. In the more recent period 1974-1981, the System's expense growth on an average annual basis was only 8.3 percent (versus the federal government's nondefense budget of 14.7 percent), and employment at Federal Reserve Banks decreased during the period by 11 percent (versus 3.8 percent growth for the federal government). (Between 1974 and 1979, our drop in employment was 13.6 percent; the passage of the Monetary Control Act in 1980 required additional employees mainly for maintaining the new reserve accounts required by the law and the implementation of pricing and billing procedures). Efficiency in check collection, the System's major production area, contributed greatly to our financial performance: the unit cost in this activity increased by only 6.6 percent between 1974 and 1981 unadjusted for inflation (the increase in inflation during these years was 68.6 percent). From 1950 to 1981, total System expenses increased at an annual rate of 8.0 percent, approximately the average annual growth rate of the Gross National Product, which was 8.1 percent. During the same period, the federal government's nondefense budget outlays increased at a rate of 9.5 percent and those of the legislative branch at a rate of 10.4 percent. Of course, data on Federal Reserve System expenditures over such a long period are not meaningful without taking account of the qualitative and quantitative changes in our service levels and regulatory responsibilities during the period. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 3 Float Reduction and Pricing Efforts The Federal Reserve has made a major commitment to eliminating float. During the thirteen week period ending on June 2, 1982, average daily float was only $1.9 billion, compared to $4.8 billion during the thirteen week period prior to passage of the Monetary Control Act. Thus, in a little over two years, float has been reduced, through operational improvements, by 60 percent. Indeed, the GAO in its recent report on Federal Reserve Check Clearing operations noted that the Federal Reserve had made significant reductions in float since enactment of the Monetary Control Act, indicating also, of course, that a substantial amount still remained. The Federal Reserve has retained its momentum in reducing float, and, since the GAO's report, float has been reduced by a further $.8 billion or 42 percent. The System is also developing a comprehensive plan and timetable for eliminating and then pricing any remaining float. The plan will be completed and announced publicly during the summer of 1982 and will include both a timetable for further float reductions through operational improvements and a schedule for explicit pricing of any remaining float. We plan to have reduced float to well below $1 billion by early 1983, and we will continue to aggressively reduce and hold down float levels as the principal means of meeting the objectives of the Monetary Control Act. Although the remaining float does result in a loss of revenue to the Treasury, compared to its complete elimination or full pricing, the Federal Reserve's projections of positive net revenues to the Treasury under the Monetary Control Act have been realized. The latest estimates of the MCA's impact on Treasury revenue, both for 1981 and prospectively for 1982, show a modest net increase in net Treasury revenues from the pricing and reserve requirement provisions of the Act. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 4 Automated Clearinghouse Pricing The Federal Reserve has adopted an incentive pricing strategy to stimulate use of the automated clearinghouse (ACH) services. Pricing for ACH services was implemented on August 1, 1981, and since that time commercial users of the ACH service have paid $727,000 for services that cost the Reserve Banks $6.2 million. The Board has decided to phase out its price incentives for the ACH service over the next three years. To achieve a smooth transition to a fully costed price, the Board plans to increase ACH prices in stages. When 1982 prices are implemented later this year, they will be set to recover 40 percent of the current full cost of production, including the private sector adjustment factor. The ratio will rise to 60 percent in 1983, 80 percent in 1984, and 100 percent in 1985. The incentive pricing strategy will contribute to economic efficiency and continued technological innovation which in the long run will result in lower overall costs to society. If fully costed prices were implemented imme- diately, the price increase would be substantial and could very well cause many users of the ACH service to revert to paper checks. Our pricing strategy recognizes that the ACH service is attractive from the perspective of cost, security, and convenience and that it should be given a chance to grow. At the same time, it recognizes that the private sector should have the opportunity to assess the risks associated with developing competitive ACH systems. By gradually reducing the Federal Reserve's support to the ACH mechanism, the potential negative repercussions of a substantial, one-time, price increase can be avoided and some stimulus for future volume growth will be provided https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis % .• - over the short run. 5 In addition, during this time, the private sector will be able to evaluate the costs and benefits of the ACH service and thus decide whether competitive ACH facilities and networks would provide an adequate return on investment. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis % https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 20, 1982 The Honorable Jim Wright Majority Leader House of Representatives Washington, D.C. 20515 Dear Mr. Wright: The Board of Governors of the Federal Reserve System is pleased to forward to you its Monetary Policy Report to the Congress pursuant to the Full Employment and Balanced Growth Act of 1978. Sincerely, SiPaul A. Vo!del Enclosure DJW:pjt bcc: Mrs. Mallardi (2) Identical letters sent to those on attached list. House Jim Wright Majority Leader (H-148 Capitol Bldg.) Robert H. Michel Minority Leader (H-230 Capitol Bldg.) Thomas S. Foley Majority Whip (H-114 Capitol Bldg.) Trent Lott Republican Whip (1622 LHOB) Fernand J. St Germain, Chairman Committee on Banking, Finance and Urban Affairs (2129 RHOB) J. William Stanton Ranking Minority Member Committee on Banking, Finance and Urban Affairs (2129 RHOB) James R. Jones, Chairman Committee on the Budget (214 HOB Annex I) Delbert L. Latta Ranking Minority Member Committee on the Budget (214 HOB Annex I) Henry S. Reuss, Chairman Joint Economic Committee (G-133 DSOB) Clarence J. Brown House Ranking Minority Member Joint Economic Committee (G-133 DSOB) Walter F. Fauntroy, Chairman Subcommittee on Domestic Monetary Policy of House Banking Committee (H2-109, HOB Annex II) Dan Rostenkowski, Chairman Committee on Ways and Means (1102 LHOB) Barber B. Conable Ranking Minority Member Committee on Ways and Means (1102 LHOB) Benjamin S. Rosenthal, Chairman Subcommittee on Commerce, Consumer and Monetary Affairs of House Gov't. Opers. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (B-377 RHOB) .. • Senate Howard H. Baker, Jr. Majority Leader (S-233 Capitol Bldg.) Robert C. Byrd Minority Leader (S-208 Capitol Bldg.) Ted Stevens Majority Whip (S-229 Capitol Bldg.) Alan Cranston Democratic Whip (S-148 Capitol Bldg.) Strom Thurmond President Pro Tempore (209 RSOB) Jake Garn, Chairman Committee on Banking, Housing and Urban Affairs (5300 DSOB) Donald W. Riegle, Jr. Ranking Minority Member Committee on Banking, Housing and Urban Affairs (5300 DSOB) Robert Dole, Chairman Committee on Finance (2227 DSOB) Russell B. Long Ranking Minority Member Committee on Finance (2227 DSOB) Pete V. Domenici, Chairman Committee on the Budget (203 Carroll Arms Annex) Ernest F. Hollings Ranking Minority Member Committee on the Budget Roger W. Jepsen, Vice Chairman Joint Economic Committee Lloyd Bentsen Senate Ranking Minority Member Joint Economic Committee https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 20, 1982 The Honorable George Bush President of the United States Senate 20510 Washington, D.C. Dear Mr. Vice President: The Board is pleased to submit its Monetary Policy Report to the Congress pursuant to the Full Employment and Balanced Growth Act of 1978. Sincerely, Wool A. Volcker, Enclosure DJW:pjt bcc: Mrs. Mallardi (2) Identical letter sent to: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 The Honorable Thomas P. O'Neill, Jr. Speaker of the House of Representatives (w/two copies of the report) e f\rv,„4, \16,sdar,,gL * ... . .• of GoveZ• q4,•„ -.1.-° .. •. co . '0 • -n ..." 0. LJ .' i-- • (..1 • cl „ 4<,. .A, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RA L RE.S • • •.• • • • WASHINGTON, D. C. 20551 July 15, 1982 PAUL A. VOLCKER CHAIRMAN The Honorable Benjamin S. Rosenthal Chairman Subcommittee on Commerce, Consumer and Monetary Affairs Committee on Government Operations House of Representatives Washington, D. C. 20515 Dear Chairman Rosenthal: Thank you for your letter of June 30 requesting information for use by the Commerce, Consumer and Monetary Affairs Subcommittee in connection with its forthcoming hearings on foreign investments in U. S. banks. You indicated that you have directed your staff to review the adequacy of the Board's reporting requirements and regulatory standards which govern the U. S. activities of foreign organizations that control U. S. banks. As part of this review, you have requested a copy of the Annual Report of Foreign Banking Organizations, Form F.R. Y-7, filed by the Hongkong and Shanghai Banking Corporation for December 31, 1981, and access for the Subcommittee staff to inspect and take notes on their Foreign Banking Organization Confidential Report of Operations, F.R. 2068, and their Report of Intercompany Transactions for Foreign Banking Organizations and their U. S. Bank Subsidiaries, Form F.R. Y-8f. Enclosed with this letter is a copy of the Annual Report (F.R. Y-7) filed by the Hongkong and Shanghai Banking Corporation for 1981. Arrangements have been made for members of your staff to have access to and inspect at the Board the quarterly F.R. Y-8f reports that have been filed. These reports of condition which are obtained as part of the bank supervisory process contain sensitive financial information. I note your assurances that the contents will be treated with caution and discretion by members of your staff, and I request that they not be disclosed in any manner. As for the Confidential Report of Operations (the F.R. 2068) filed by the Hongkong and Shanghai Banking Corporation, the Board's policy to afford these reports the highest degree of confidentiality is based on our careful assessment of what is required to maintain effective supervision of foreign banks in the United States. When the Board prepared its reporting requirements for foreign banking organizations under the International Banking Act, the report forms were published in draft form in order to obtain comment from the affected parties on the scope https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Benjamin S. Rosenthal Page Two of the information requested and the manner in which it was to be provided. Almost without exception, the comments received noted that much of the information requested was not available to the public even in the home countries of the reporting organizations where, in the context of the home country regulatory structure, its retention is believed to promote confidence in the strength of banking institutions. A number of foreign regulatory authorities emphasized the extremely confidential nature of some of the information and urged the Board to take this into account in determining the final reporting requirements and the protection that would be given to the information submitted. The Board has taken a number of steps specially designed to ensure appropriate handling of this information. When the final reporting requirements were issued, the Board stated that the information contained in the F.R. 2068 was the kind ordinarily obtained through the examination process and the Board would hold that information confidential under the exemption contained in section (b)(8) of the Freedom of Information Act (5 U.S.C. 552(b)(8)). No exception has been made to application of this exemption. The Board has instituted strict security procedures for these reports to assure that access to them was limited on a need-to-know basis and that access was for supervisory purposes only. Foreign banks and foreign supervisory authorities have accepted and rely upon the Board's assurances on these points. Given the location of these institutions outside the United States, the Board's effectiveness in exercising its supervisory responsibilities rests in large measure on the ability to conduct open and candid communication with them and with their home country supervisors. If foreign banks and foreign regulators have cause to believe that information submitted to the Board under a guarantee of confidentiality may be released to others outside the bank regulatory agencies, the Board's ability to obtain accurate data and full cooperation in the future will be hindered. As y'ou know, the United States bank regulatory agencies have as a matter of longstanding policy declined requests for access to examination data and, in the circumstances under consideration here, I am convinced that any exception to that policy would be harmful to the objective of effective supervision of foreign banks in the United States. Please contact Frederick R. Dahl of the Board's Division of Banking Supervision and Regulation (452-2726) about the arrangements for the F.R. Y-8f and for any other information about the reporting requirements applicable to foreign banking organizations. FRD:NPJ:vcd (V-145) bcc: Mr. Dahl Ms. Jacklin Mr. Bradfield Mallardi (2) EnclostiEg. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, ^ LYLE WILLJAMS, OHIO HAL DAUB, NEBR. WILLIAM F. CLINGER, JR , PA JOHN MILER, IND, BENJAMIN S. ROSENTHAL, N.Y.. CHAIRMAN • JOHN CONYERS, JR., MICH. EUGENE V. ATKINSON. PA. STEPHEN L. NEAL, N.C. DOUG BARNARD. JR., GA. PETER A. PEYSER. N.Y. ILAFtEUVIA B. KENNELLY, CONN, NINETY-SEVENTH CONGRESS Congre55 of the ?Liniteb tate5 MAJORITY-(202) -1:7) 225-4407 Pou5tofikepre5entatibeiS COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515 7. . CD ti5 CCI 0"*.0 June 30, 1982 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D.C. 20551 fri C... CD x, C Inn rr: Dear Mr. Chairman: — CD ) 4,-..,(D c- -r1 Co..) M.," CD m --0 CT) Cf. CAA As you know the Commerce, Consumer, and Monetary Affairs Subcommittee has" scheduled two days of hearings on foreign investment in U.S. banks for.August 1,4 la___441 preparation for these hearings I have asked the subcommittee staff to the adquacy of Federal Reserve reporting requirements and regulatory rev standards for, and supervision of, foreign bank holding companies, particularly as applied to holding companies with extensive other affiliated business activities. Accordingly, in connection with this review I am requesting that the Federal Reserve provide a copy of Hongkong and Shanghai Bank's annual report to the Federal Reserve (form F.R. Y-7) for calendar year 1981 or the most recent other fiscal year; and on access for the subcommittee staff to inspect and to take notes as needed Hongkong and Shanghai Bank's a. Foreign Banking Organization Confidential Report of Operations (form F.R. 2068) for calendar year 1981 or the most recent other fiscal year; and Reports of Intercompany Transactions for Foreign Banking Organizations and Their U.S. Bank Subsidiaries (form F.R. Y-8f) for all calendar quarters since HSBC became subject to this reporting requirement. The subcommittee recognizes the confidential and potentially sensitive the nature of the information reported on forms 2068 and Y-8f and will treat information they contain with caution and discretion. I would appreciate a prompt response to this response, if possible no later the July 9. erely, amin S. Rostenhal Chairman BSR:dtv https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis c-) r• r< r: ) -< r-, te, 2. M 7 " f'.. Jr 11- a rri (x) Ci C) r " 3> ,1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 15, 1982 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: As requested in your letter of June 24, I am pleased to enclose my responses to the questions posed in connection with your Subcommittee's continuing oversight review of foreign Investment in the United States. Sincerely, Enclosures AFC:vcd (V-140) bcc: Mr. Blattman Mr. Kline Mr. Ryan Mrs. Mallardi (2) v • . I. Number of Banks The state member banks that presently have retail banking facilities in Broward and/or Dade counties in Florida are: 1. Safrabank, Miami 2. Dadeland Bank, Miami 3. Southern Bank of Broward County, Broward County 4. First City Bank of Dade County, Coral Gables 5. Bayshore Bank of Florida, Miami 6. Plaza Bank of Miami, Miami 7. Sunset Commercial Bank, Miami 8. Hanover Bank of Florida, Plantation 9. Bank of Florida in South Florida, South Miami Safrabank and Dadeland Bank have a greater than 25 percent foreign ownership interest. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • II. Ownership of Individual Banks BHC: Popular Bancshares Corp., Miami, Florida Sub: Bank of Miami a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. USA d. necember 30, 1970 e. BHC owns 100.0 percent of Bank. f. Company became a bank holding company as a result of amendments to the Bank Holding Company Act, effective December 30, 1970. g. (1) On September 3, 1980, Bank acquired by merger, Inter-American Bank of Miami. (2) On June 15, 1982, BHC was involved in a change in control notification. .As a result of the .notification, Francisco E. Blanco (citizen of Spain; resident of the Netherlands Antilles) will own between 42.5 percent to 75.5 percent of BHC. h. Head office of bank - Dade County; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BHC: Barnett Banks of Florida, Inc., Jacksonville, Florida Sub: Barnett Bank of Miami a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. USA d. May 9, 1956 e. BHC owns 99.72 percent of Bank f. (i) sg. (1) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis On January 1, 1977, a. Barnett Bank of b. Barnett Bank of c. Barnett Bank of d. Barnett Bank of e. Barnett Bank of acquired by merger: Miami Beach Miami Bay Harbor Island Westchester N.A.; Dade County Midway, Miami (2) On July 1, 1981, acquired by merger: . a. Barnett Bank of Homestead Ft. Lauderdale County, b. Barnett Bank of Broward (3) On December 31, 1981, acquired by merger: a. First State Bank of Miami h. Head office - Dade; Branches - Dade i. Proposed acquisitions: 1. Manatee County Bank 2. Carrollwood Bank . BHC: Capital Bancorp, North Bay Village, Florida Sub: Capital Bank a. Abel Holtz owns 62.2 percent of BHC. Mr. Holtz has owned his interest (prior to 1975) before BHC formation on May 22, 1981. b. USA c. USA d. RHC formed on May 22, 1981. e. BHC owns 100.0 percent of Bank. f. (i) g. (1) On March 24, 1982, approval was granted to merge with First State Bank of Oakland Park, Florida. (2) On December 30, 1977, acquired by merger: a. Capital Bank of Kendale b. Capital Bank of Miami (3) On May 1, 1975, changed name from Bank of North Bay Village to Capital Bank of North Bay Village. (4) On December 30, 1977, changed name from Capital Bank of North Bay Village to Capital Bank. h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • BHC: Central Bancorp, Inc., Miami, Florida Sub: Central Bank & Trust Co. a. (1) From January 1, 1975 to June 1977, 37.2 percent was owned by Mrs. Candance Mossler. (2) In 1977, 37.2 percent was transferred to the Estate of Mrs. Candance Mossler. b. USA c. USA d. July 31, 1969 e. BHC owns 98.83 percent of Bank. f. g. At November 1, 1978, approval granted to establish de novo insurance subsidiary. Currently not active. h. Head office - Dade; Branches - Dade https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BHC intends to create de novo bank in an unspecified county not currently located • % . BHC: Eagle National Holding Co., Miami, Florida Suh: Eagle National Bank of Miami a. Humberto Vegalara Rojas & Jaime Michaelson Vorive jointly own 87.9 percent of BHC prior to 1975. b. Colombian c. Curaco, Netherlands, Antillesi/ d. January 30, 1957 e. BHC owns 100.0 percent of Bank. f. (i) g. Bank's name changed on November 2, 1981, from "Central National Bank of Miami." h. Head office - Dade; Branches - Dade i. Banco de Colombia, S.A., Bogota, Colombia, and Banco de Colombia, S.A., Panama City, Panama, were granted approval (1/23/82) to acquire 93 percent of Bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . 1/ Eagle National has parent - "Sabrina Properties" chartered in Curaco. % BHC: Century Banks, Inc., Ft. Lauderdale, Florida Sub: Century National Bank of Broward a. (1) (2) Marvin L. Warner - owns 42 percent of BHC. No principals had a greater than 25 percent ownership interest between January 1, 1975 and April 1981. b. N/A c. USA d. March 31, 1970 e. BHC owns 100.0 percent of Bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis f. (i) g. (1) On October 1, 1977, acquired a. Broward National Bank of b. Lauderdale Lake National c. Century National Bank of by merger: Plantation Bank Ft. Lauderdale (2) On July 1, 1978, acquired by merger: a. Century National Bank of Coral Ridge (3) h. On June 23, 1-976, name changed from Broward NB of Ft. Lauderdale to Century National Bank of Broward. Head office - Broward; Branches - Broward A change in control notification giving Mr. Warner his 42 percent ownership interest was not disapproved by the Federal Reserve Board in April 1981. •. BHC: Citizens & Southern Holding Co., Atlanta, Georgia Sub: Citizens & Southern International Bank, Miami, Florida a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since b. N/A c. Georgia d. March 24, 1969 e. 100.0 percent f. (i) g. On December 31, 1981, location changed from Miami to Atlanta, Georgia. h. Edge Corp. in Dade. i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BHC: None Sub: City National Bank of Hallendale, Broward a. Leonard Abeso owns 34 percent and Samuel Friedland owns 37.1 percent of Bank since August 8, 1970. b. USA c. None d. N/A e. Board controls 76.5 percent of Bank. f. ii - OCC g. No changes in ownership or control. h. Head office - Broward; Branches - Broward i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • BHC: Florida Commercial Bank, Inc., Miami, Florida Sub: Commercial Bank & Trust Co. a. No principal has had a greater than 25 percent ownership at January 1, 1975 or since. N/A c. USA d. April 29, 1965 e. BHC owns 99 percent of Commercial Bank & Trust Co. f. (i) g. None h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • BHC: None Sub: Continental National Bank, Miami, Florida a. Charles Dascal directly owns 14.45 percent; controls 58.2 percent through voting trust. b. USA c. None d. N/A e. N/A f. ii - OCC g. No changes h. Head office - Dade; Branches i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dade N. BHC: None Sub: County National Bank of South Florida, North Miami Beach, Florida. a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. None d. N/A e. N/A f. (ii) - OCC g. On June 1, 1981, Bank changed name from County National Bank of North Miami Beach. h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . BHC: Consolidated Bancshares, Inc., Hialeah, Florida Sub: Consolidated Bank, N.A., Hialeah, Florida a. (1) Jose Alvarez-Stelling acquired 80.1 percent of BHC in December 1977. (2) Prior to Jose Alvarez-Stelling, no principal had a greater than 25 percent ownership interest. b. Venezulean c. 1/ d. March 31, 1971 e. BHC owns 100.0 percent of Bank. f. (i) On February 2, 1982, Bank acquired by merger - Deerfield State Rank, Deerfield Beach, Florida. (2) On September 1, 1977, Bank changed name from FNB in Hialeah, Florida, to FNB of Greater Miami. (3) On February 2, 1982, Bank changed name to Consolidated Bank, N.A., Hialeah, Florida. g. (1) h. Head office - Dade; Branches --, Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. '............. 1/ Consolidated's parent is Marsh Investment BV, Rotterdam, Netherlands. Marsh Investments BV's parent is Marsh Investments N.V., Curaco, Netherlands, Antilles. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BHC: Flagship Banks, Inc. Sub: Flagship National Bank of Miami a. No principal has had a greater than 25 percent interest at January 1, 1975 or since. b. N/A c. USA d. October 25, 1966 e. BHC 99.0 percent of Bank. f. (i) g. (1) (2) At May 1, 1978, At May 1, 1978, Gables. (3) At May 1, 1978, Miami. (4) In August 1978, Edmond Safra. name changed from Flagship FNB of Miami Beach. acquired by merger - Flagship FNB of Coral acquired by merger - Flagship National Bank of sold Flagship Bank of Adventura, Dade County to h. Head office - Dade; Branches - Dade i. A change in control notification was not disapproVed by the Federal Reserve Board in July 1981. Mr. Frank Smathers, Jr. sought to increase his ownership interest from 13.3 percent to 19.0 percent. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BHC: Great American Banks, Inc., North Miami Beach, Florida Sub: Great American Bank a. (1) From January 1, 1975 to July 1978, no principal had a greater than 25 percent ownership interest. (2) Marvin L. Warner owns 76.6 percent of ComBank, which owns 32.2 percent of BHC. ComBank acquired its controlling interest on July 5,1978. b. USA c. USA d. April 13, 1971 e. BHC owns 99 percent of Bank. f. (i) On November 30, 1979, acquired by merger - Great American Bank of Homestead. (2) On November 26, 1979, name changed from 1st American Bank of Dade County to Great American of Dade County. (3) On December 29, 1978, name changed from 2nd National Bank of North Miami to 1st American Bank of Dade County. (4) On December 29, 1978, Bank changed its charter from national to state non-member. g. (1) h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • BHC: Landmark Banking Corp., Ft. Lauderdale, Florida. Sub: Landmark First National Bank a. No principal has a greater than 25 percent ownership interest at January 1, 1975 or since b. N/A c. USA d. March 31, 1979 e. BHC owns 99.73 percent of Bank. f. (i) g. On July 1, 1977, acquired by merger: 1. Landmark Bank of North Ft. Lauderdale 2. Landmark Bank at the Ocean, Ft. Lauderdale 3. Landmark Bank of Plantation 4. Landmark Bank of West Broward 5. Landmark Bank of Pompano Beach 6. Landmark Bank of Sunrise h. Head office - Broward; Branches - Broward i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RHC: Pan American Banks, Inc., Miami, Florida Sub: Manufacturers National Bank, Hialeah, Florida a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. USA d. BHC acquired Bank in November 1981. P. BHC owns 100.0 percent of Bank. f. (i) g. (1) At December 31, 1977, acquired by merger: a. Pan Am Bank of Kendale Lake, Dade County b. Pam Am Bank of Miami c. Pan Am Bank of Dade County, North Miami Beach d. Pan Am Bank of Miami Beach e. Pan Am Bank of West Dade (2) At January 16, 1982, acquired by merger: a. Pan Am Bank of Palm Beach County, West Palm Beach h. Head office - Dade; Branches i. Proposed cash sale of Palm Beach Bank to, and subsequent merger with, Miami Bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dade r BHC: Popular Bancshares Corp. Sub: Northside Bank of Miami, Miami, Florida a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. USA d. December 30, 1970 e. 100.0 percent f. Company became a bank holding company as a result of amendments to the Bank Holding Company Act, effective December 30, 1970. g. (1) On September 12, 1979, Bank changed name to "Inter-American Bank of Miami." (2) On September 30, 1980, Inter-American Bank of Miami merged with Bank of Miami. (3) On June 15, 1982, BHC was involved in a change in control notification. As a result of the notification, Francisco E. Blanco (citizen of Spain; resident of Netherlands Antilles) will own between 42.5 percent to 75.5 percent of BHC. h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . BHC: Pan American Banks, Inc. Sub: Pan American Bank of Miami a. No principal has had a greater than 25 percent ownership interest at January 1, 1975 or since. b. N/A c. USA d. October 31, 1969 e. BHC owns 99.78 percent of Bank. f. 0) g. (1) (2) At a. b. c. d. e. December 31, Pan Am Bank Pan Am Bank Pan Am Bank Pan Am Bank Pan Am Bank 1977, BHC acquired by merger: of Kendale Lake, Dade County of Miami of Dade County, North Miami Beach of Miami Beach of West Dade At January 16, 1982, BHC acquired by merger: a. Pan Am Bank of Palm Beach County, West Palm Beach h. Head office - Dade; Branches - Dade i. Proposal approved on 11/81 for the acquisition of Manufacturers National Bank, Hialeah. Proposed cash sale of Palm Beach Bank to Miami Bank for subsequent merger into Miami Bank. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . . BHC: Safracorp., Miami, Florida Sub: Safra Bank a. Edmond L. Safra b. Brazilian c. USA d. April 10, 1979 e. 100.0 percent f. (i) g. (1) On June 19, 1981, became member of Federal Reserve System. (2) Mr. Safra purchased 100 percent of Bank in August 1978 from Flagship Banks Inc. (Flagship Bank of Adventura). h. Head office - Dade; Branches - Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. s. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ,._ RHC: Southeast Banking Corp., Miami, Florida Sub: Southeast FNB a. Charles E. Schmidt - 39.4 percent of outstanding preferred shares. Mr. Schmidt acquired these shares in 1981. Cede & Co. (non beneficiary fiduciary) holds 27.7 percent of common stock. Prior to 1981, Cede & Co. was a non beneficiary fiduciary for common shares totaling less than a 25 percent interest. No other principal had a greater than 25 percent ownership interest at January 1, 1975 or since. b. USA c. USA d. October 2, 1967 e. BHC owns 99.87 percent of Bank f. (i) g. (1) At July 7, 1979, BHC acquired by merger: a. Southeast Bank of Dadeland, Dade County b. Southeast Bank of Tamiami, Dade County c. Southeast Bank of Westland, Hialeah d. Southeast Bank of Coral Way, Miami e. Southeast First NB of Miami, Miami (2) At October 1, 1980, BHC acquired Community Bank of Pinellas, Seminole, Florida. (3) At December 31, 1981, BHC acquired by merger: a. Southeast Bank of Panama City, Bay County b. Southeast NB of Bradenton, Bradenton c. Southeast Bank, Ft. Lauderdale d. Southeast Bank of Ft. Myers e. Southeast Bank of Ft. Pierce f. Southeast Bank of Jacksonville g. Southeast Bank of Pinellas, Largo h. Southeast Bank Trust Co., N.A., Miami i. Southeast National Bank of Naples j. Southeast Bank of Volusia, New Smyrna Beach k. Southeast Bank of Orange Park 1. Southeast Bank of Orlando m. Southeast Bank of Pasco n. Southeast FNB of Sarasota o. Southeast Bank of Tampa p. Southeast Bank of Indian River, Vero Beach q. Southeast Bank of Wildwood r. Southeast Bank of Winter Haven https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • (4) At June 30, 1981, merged with its Orlando Bank, Forest City Bank. h. Dade (1) BHC a. b. c. d. has entered into agreement to acquire: Marion Rank Community Bank Coral Springs Bank Halifax Bank (2) A change in control notification was received on May 17, 1982. A group of 11 individuals, currently owning 9.97 percent of BHC, seeks to increase their aggregate ownership to 24.99 percent. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • . . . BHC: United Bancshares, Incorporated, Maimi, Florida Sub: United National Bank of Miami a. Gerald Katcher and Howard Scharlin each own 34 percent. No other principal has had a greater than 25 percent ownership interest between 1975 to 1982. b. USA c. USA d. September 28, 1981 e. 100.0 percent f. (i) g• On October 30, 1978, Bank acquired by merger Dade, Dade County. h. Head office- Dade; Branches- Dade i. No change of control notice or application regarding bank or parent bank holding company submitted to Federal Reserve in 1981 or 1982 to date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Southeast NB of North •• 0 Action assigned Mr. Ryan • BENJAMIN S. ROSENTHAL, N.Y., CHAIRMAN JOHN C.ONYERS, JR., MICH. ElZGENE V. ATKINSON, PA. STEPHEN L. NEAL, N.C. DOUG BARNARD. JR., GA. PETER A. PEYSER N.Y. BAREtARA B. KENNELLY, C.ONN. NINETY-SEVENTH CONGRESS Congre55 of tbe thiteb tate5 3Doua of RepreckntatibesS LYLE WILLIAMS. OHIO HAL DAUB, NEBR. WILLIAM F. CLINGER, JR , PA. JOHN HILER, IND. t•IAJORITY-(202) COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF TH E COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515 June 24, 1982 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D. C. 20551 Dear Mr. Chairman: I am writing to all three federal bank regulatory agencies, in connection with the Commerce, Consumer, and Monetary Affairs Subcommittee's continuing oversight review of foreign investment in the U.S., to request information about (a) the number and identities of foreign-owned banks in South Florida and (b) ownership information about certain specific banks in South Florida. Please provide the requested information by 21111Y___14_1982. I. Number of Banks Please state the number of state member banks that presently have retail banking facilities in Broward and/or Dade counties in Florida. Please identify by name all of the above which are at least 25 percent foreign owned at the present time. II. Ownership of Individual Banks For each bank identified below that is currently or was at some time since January 1, 1975, either a state member bank or a holding company subsidiary, please provide the following information about every principal owner (those individuals owning 25 percent or more) of the bank or holding company (i) at January 1, 1975, and (ii) at all subsequent dates on which there was a change of principal or controlling ownership: a. name b. citizenship c. if the control is exercised through a holding company, the country of holding company incorporation or domicile d. date of acquisition of controlling interest https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 225-4407 •• 2 • e. percent of ownership f. whether Federal Control Act, or the acquisition of controlling ownership was reviewed by (i) the Reserve under the Bank Holding Company Act or the Change in Bank Act, (ii) another federal agency under the Change in Bank Control (iii) no federal agency. In addition, for each state member bank or holding company subsidiary covered in the answers above please: g• report any changes of name, charter changes, mergers, or other changes of status during the period January 1, 1975, to the present; h. give the county in which the bank's head office is or was located and whether it has or had any retail banking facilities in Dade or Broward counties; and state whether any proposed change of controlling ownership not already identified above has been the subject of any application or notice submitted to the Federal Reserve in 1981 or 1982. The banks for which this information is requested are: Bank of Miami Barnett Bank of Miami Capital Bank Central Bank & Trust Co. Central National Bank Century National Bank of Broward Citizens and Southern International Bank City National Bank of Hallandale Commercial Bank and Trust Co. Continental National Bank County National Bank First National Bank of Greater Miami Flagship National Bank Great American Bank Landmark First National Bank Manufacturers National Bank Northside National Bank Pan American Bank of Miami Safra Bank Southeast First National Bank United National Bank of Miami Sincerely, enjamin S. Rosenthal Chairman BSR:dtb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 14, 1982 The Honorable Jake Garn Chairman Committee on Banking, Housing, and Urban Affairs United States Senate Washington, D. C. 20510 Dear Chairman Garn: Thank you for your letter of July 6 requesting my testimony on monetary policy pursuant to the Full Employment and Balanced Growth Act of 1978. I am looking forward to appearing before your Committee on Tuesday, July 20. Sincerely, CO:vcd (V-149) bcc: Mr. Axilrod (w/copy of incoming) Mr. Prell Mr. Kichline Mrs. Mal1ardi (2) III : * https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis \ July 14, 1982 The Honorable Fernand J. St Germain Chairman Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman St Germain: Thank you for your letter of July 12 requesting my testimony on monetary policy pursuant to the Full Employment and Balanced Growth Act of 1978. I am looking forward to appearing before your Committee on Wednesday, July 21. Sincerely, , CO:vcd (#V-148) bcc: Mr. Axilrod (w/copy of incoming) Mr. Prell Mr. Kichline Mrs. Mallardi (2) A • July 9, 1982 The Honorable William Proxmire United States Senate Washington, D.C. 20510 Dear Senator Proxmire: I am pleased to respond to the questions posed in your letter of June 28 concerning the use of vehicles for official purposes. As you know, section 638a of Title 31 of the U.S. Code applies to vehicles purchased with appropriated funds and, while the statute does not technically apply to the Federal Reserve, the Board policy on use of motor vehicles is consistent with its provisions. Under Board policy, the six passenger motor vehicles operated by the Board to meet its official transportation needs may not be used for transportation of Board members or other Board employees between their residence and their place of employment, unless security requirements or exigent circumstances make such transportation essential. In accordance with this policy, these vehicles are available solely for official business and none is assigned to the exclusive use of any member of the Board or its staff. For same time, transportation has usually been provided to and from my residence (which happens to be within walking distance) in accordance with the provisions of the policy concerning use of vehicles for security reasons. This transportation arrangement is one of several security measures that the Board put into place in response to threats directed towards me as Chairman of the Board. A security professional now typically accompanies me on all trips and all drivers have received special motor vehicle training to deal with threatening situations. The annual cost of the specially trained drivers used for security purposes is $32,157. Overtime costs average an additional $5,000 per year. The drivers are, of course, available for business transportation during the day. Depreciation of the vehicles used for this transportation is estimated at about $125 per month and operating costs at about $145 per month. I hope this satisfactorily answers the questions that you raised. JD:MB:WRM:PAV:pjt (V-141) Sincerely, bcc: Messrs. Denkler Et Bradfield 4Ea4 Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis JAKE GA/RN, UTAH, CHAIRMAN JOHN TOWER, TEX. DONALD W. RIEGLE, JR., MICH. JOHN HEINZ, PA. WILLIAM PROXMIRE, WIS. WILLIAM L. ARMSTRONG, COLO. ALAN CRANSTON, CALIF. RICHARD G. LUGAR, IND. PAUL S. SARBANES, MD. ALFOMSE M.°AMATO, N.Y. CHRISTOPHER J. DODO, CONN JOHM11. CHAFEE. R.I. ALAN J. DIXON. ILL. HAARISON -JACK- SCHMITT, N. MEX. JIM SASSER, TENN. ACHOLAS F. SRADY, N.J. M. DANNY WALL, STAFF DIRECTOR Al-INERT C. EISENBERG, ACTING MINORITY STAFF DIRECTOR 11Cnifeb Ziafez -Senate COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C. CD 20510 un co June 28, 1982 c-_ rn rri C: rTi ,3 ("D r•.) — r", "v- CD , Mr. Paul A. Volcker Chairman Federal Reserve System Twentieth St. & Constitution Ave., NW Washington, D.C. 20551 =a ..,,-71 rn —4c) rr: < Cr, rn (.11 cD ) 4-11 77- Dear Mr. Volcker: Title 31, Section 638a of the U.S. Code states that government automobiles may only be used for "official purposes", and that "official purposes" does NOT include being driven to and from home. In additiono, cars may not be assigned for the exclusive use of officials. There are some exceptions to the law, namely the President, the Secretary of a Department (not under secretaries, heads of agencies, boards, etc.), doctors on out-patient duty, individuals on field service great distances from their offices, etc. I would, therefore, like to make the following inquiries about the use of cars under your jurisdiction. 1) What officials by title, if any, are driven to and from home? 2) To what officials is a car assigned for his or her exclusive use? 3) If an official is driven to and from home, in view of Title 31, Section 638a, what is the specific legal jurisdiction for the practice? Please cite the precise language of the law or your rationale for permitting such a practice to exist. 4) What is the annual cost of the chauffeurs or drivers of such vehicles, including their overtime pay? 5) What is the annual cost of the vehicle in terms of depreciation, maintenance, gas, oil, etc.? I would appreciate an early and prompt reply. It is my intention to make the replies a part of the public record. ____________„_, Sincer https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Wil iam Proxmire, U.S.S. 1 -I .OE GOvt;?•.. ..•,0 •." . .. •0 • .11 • -A %I.es •.", RE-5 •• •4.RAL • •.• • • • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 July 9, 1982 PAUL A. VOLCKER CHAIRMAN The Honorable Gregory W. Carman House of Representatives 20515 Washington, D.C. Dear Mr. Carman: Thank you for your recent letter asking for my views on a couple of recent pieces in The Wall Street Journal. Those pieces raise a number of issues, some of which pertain to the basic thrust of monetary policy and some of which are more technical in nature, involving the way policy is specified and implemented. On the technical side, both the lead editorial and the column by Frank Morris reflect concerns about the shortcomings of monetary aggregates as intermediate targets. Especially in a world in which financial institutions and practices are changing rapidly, one clearly must be careful in using the various money stock measures as policy guides. A degree of flexibility in monetary targeting is essential, and this has been our approach. We have kept a close eye on other financial and economic developments to ensure that we were not led astray by any aberrant behavior in the basic money measures. This is not to say that we shouldn't be studying alternative approaches, including the use of other quantity or price variables as targets; research proceeds in the Federal Reserve System and elsewhere, and we can only hope that it will yield improved policy techniques. I might note that the Journal's remarks about the good performance of the economy under the Bretton Woods agreement raise some questions in my mind. It is not at all clear that one can reasonably attribute that performance to the constraint of gold convertibility, as the article suggests. Indeed, it has been argued that that constraint was a loose one, with the result that the U.S. was able to focus its policies primarily on domestic concerns while dollar claims built up abroad--at least to the point where the credibility of the convertibility was weakened and the system was abandoned. But even if the Journal's analysis in this regard may be questioned, I do think exchange rate movements can provide some useful information about whether monetary policy is on the right track, and we do pay attention to them. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Gregory W. Carman Page Two When it comes to the proper interpretation of Under Secretary Sprinkel's comments regarding monetary policy, I have no particular quarrel with the Journal's analysis, but I would suggest that questions on this score are best addressed to him. I might say that we will be addressing many of these issues shortly in our mid-year monetary policy report to the Congress and in a response to the Joint Economic Committee's Recommendation No. 8 regarding monetary policy. And I expect we'll be discussing them when I appear before the Banking Committee in a few days. I look forward to seeing you then. Sincerely, MJP:NS:pjt (#V-138) bcc: Mike Prell Mrs. Mallardi (2) -// https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Axilrod WASHINGTON OFFICE: Git4 ORY W. CARMAN THIRD DISTRICT, NEW YORK 1729 LONGWORTH HOUSE OFFICE BUILDING P* WASHINGTON, D.C. COM M ITTEES: BANKING, FINANCE AND URBAN ,AFFAIRS Congrem5 of tbe Unittb 6tatos SUECOM M I TT EES INTERNATIONAL TRADE, INVESTMENT AND MONETARY POLICY HOUSING AND COMMUNITY DEVELOPMENT 20515 (202) 225-3865 3i)ouSe of RepreStntatibig DISTRICT OFFICE: 322A MAIN STREET HUNT INGTON, NEW YORK 11743 (516) 549-8400 Wasbington, 31D.C. 20515 GENERAL OVERSIGHT AND RENEGOTIATION CONSUMER AFFAIRS SELECT COM M ITTEE ON AG ING June 22, 1982 SUBCOMMITTEES: LC) CC) 1".4 -r^. RET:-EMENT INCOME AND EMPLOYMENT HOUSING AND CONSUMER INTERESTS r • r•-. r-7 f"" .7- -.000 •4,6 . 0-, •-•-•• ••• The Honorable Paul A. Volcker Chairman Federal Reserve System Twentieth Street and Constitution Ave., N.W. Washington, D.C. 20551 Cn Dear Paul: On June 22, 1982, the Wall Street Journal, on page 34, under the caption, "Review & Outlook, Bring Back Bretton Woods" discussed the need for studying an alternative price rule as a barometer in controlling the monetary supply. On the same page Frank E. Morris, the President of the Federal Reserve in Boston discussed the difficulty of no longer being able to measure monetary supply with any precision. As.a member of the Banking Committee I am most interested in obtaining your counsel concerning these matters. Apparently the Treasury is currently studying proposals to abolish the independence of the Federal Reserve Board. According to the Wall Street Journal, the result might be to cause a tighter, as opposed to an easier, monetary result. I would appreciate your comments concerning this aspect of the article, as well. I have enclosed a photostatic copy of the articles referred to in this letter, for your convenience. Your attention to this matter is greatly appreciated. Sincerely, Gregory W. Carman Member of Congress GWC:KC Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Newspaper articles Citations: Number of Pages Removed: 1 "Review & Outlook: Bring Back Bretton Woods." Wall Street Journal, June 22, 1982. Morris, Frank E. "A Fed President Views the Money Supply." Wall Street Journal, June 22, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis HOUSE OF REPRESENTATIVES WASHINGTON, D. C. 20515 STEVE NEAL NORTH CAROLINA July 9, 1982 The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Paul: I imagine that you at the Fed are taking into account the points made in the attached article. Do you think that you can accurately control "money" growth now? Does the idea expressed in the enclosed editorial make sense? Best hes, EPHEN L. NEAL U. S. Congressman SLN:jb Enclosures t13 CI, r4.0 (.7.; r:....ri j M .r. Cd r-) rri :In C.—. -:). !"-- •w) -1 rTI _- -.4 C) — - rn _., ___ (,,, '-11 -', r *I < (7-,rn -..- ci > .":1 7i... „.. _.. Crr..... :1 AC LID .. -41 I=1 rn -1-1 -ft (../1 r--) 7,..it.,:e: .....-c.) =...A..'rn < ' rli VI CP = 1 ... ...7.:. _s..- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 8, 1982 The Honorable Alfonse D'Amato Chairman Subcommittee on Securities Committee on Banking, Housing, and Urban Affairs Washington, D. C. 20510 Dear Chairman D'Amato: Thank you for your letter of July 2 requesting a detailed report concerning Drysdale Government Securities. I have asked Tony Solomon of the New York Reserve Bank to continue taking the lead role for the Federal Reserve System on this matter. He expects to be able to prepare a report to you by September 15.. Sincerely, S/Paul A, Volcker CO:NMS:dmg-b CV-146 cc: Mrs. Mallardi (2) /AIM SARK UTAH, CHAIRMAN JOIINTOMikilM JOHN HEINZ. PA. ARMSTRONG, COLO. WILLIAM ItrIAP") onimme. A.+JrONSIC M. D'AMATO, N.Y. JOHN H. CHAFEE HARRISON ..JACW' SCHMITT, N. MEX. NICHOLAS I. SHAM N.J. DONALD W. RIEGLE, JR.. MICH. WILI-IAM PROXMIRE, WIS. ALAN CRANSTON, CALJF. PAIJL S. SARRANES, MD. CHRISTOPHER J. DODD. C.ONN. ALAN J. DIXON. ILL. JIM SASSER, TILNN. M. DANP/Y WALL., *TAFF DIRECTOR ALIMENT C. EISENSEACI, ACTING MINORITY STAFF DIRECTOR 2CnifebIvaco Zenafe COMMITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHiNGTON. D.C. 20510 July 2, 1982 co c_. Honorable Paul A. Volcker Chairman of the Board of Governors Federal Reserve System Federal Reserve Building Constitution Ave., between 20th 21st Streets Washington, D.C. 20551 a) CD tf) -4=3 Dear Chairman Volcker: This is to confirm the oral request made by members of the Subcommittee on Securities, at the hearing held on May 25, 1982, for a detailed report by the Federal Reserve Board on the circum stances surrounding the default of Drysdale Government Securities on May 17, 1982. It would be most useful to the Subcommittee's deliberations if your report includes: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1. an explanation of the facts leading up to the default, and the events which followed it; 2. a description of the regulatory and supervisory tools which were available to deal with these events, including the precise nature and limits of direct regulation of all government securities dealers; 3. your analysis of the causes of the Drysdale situation, the potential dangers it posed, and the possibility of future disturbances in the government securities market, including the means by which market practices such as "blind brokering" are developed, policed, and altered (including the role of federal regulators in this process) and the powers which the federal regulators possess to detect, contain and correct market disturbances of any kind; and 4. a summary of any proposals you may be considering to strengthen your supervisory role over government securities dealers, and any recommendations you may have for legislative action. < •TP / • Honorable Paul A. Volcker July 2, 1982 Page 2 We would appreciate your submitting this report to the Subcommittee by September 1S, 1982. At that time, we will request that the Department of the Treasury and the Securities and Exchange Commission provide us with their comments on your report. Thank you for your prompt attention to this matter. Sincerely 1/(7 :1)(i/4 1 Alfonse D'Amato Chairman Subcommittee on Securities cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Honorable Donald T. Regan Honorable John S.R. Shad NICK SARK UTAK CHMItitAte .101,04 TIDC. L.=STRONG,COLO. 1 W 4..utir ,G. LIPGAR, vocpuur hi..FONBE M. DAMATO, N.Y. JONN N. CHAFEE, R.I. HARRISON ...ACK" $01,4117. N. MEX. NICHOLAS F. BRADY. KJ. ALOINT DONALD W RIEGLE, JR.. MICK WILLIAM PROXMIRE. WIS. ALAN CRANSTON, CALIF. PAUL S. BARBANEL MD. CHRISTOPHER J. DODD, CONN. ALAN J. DIXON, ILL. JIM SASSER. TENN. M. DANNY WALL, STAFF DIRECTOR C. EISENBERG. ACTU*0 MINORITY STAPP DIRECTOR 'IlCrtifeb Ziatez Zenate comm tit ITTEE ON BANKING. HOUSING. AND URBAN AFFAIRS WASHINGTON. D.C. 20510 1 July 2, 1982 O 44:1 1"•%0 --rt Tr, 'C rrl c_ Honorable Paul A. Volcker Chairman of the Board of Governors Federal Reserve System Federal Reserve Building Constitution Ave., between 20th 21st Streets Washington, D.C. 20551 r1 CO -2 r ( = 7:1 1:3 co ti) 2, rn —4'7 •••-• r,• < T., or, e•-•••• 7 ; CZ) Dear Chairman Volcker: This is to confirm the oral request made by members of the Subcommittee on Securities, at the hearing held on May 25, 1982, for a detailed report by the Federal Reserve Board on the circumstances surrounding the default of Drysdale Government Securities on May 17, 1982. It would be most useful to the Subcommittee's deliberations if your report includes: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CD 1. an explanation of the facts leading up to the default, and the events which followed it; 2. a description of the regulatory and supervisory tools which were available to -deal with these events, including the precise nature and limits of direct regulation of all government securities dealers; 3. your analysis of the causes of the Drysdale situation, the potential dangers it posed, and the possibility of future disturbances in the government securities market, including the means by which market practices such as "blind brokering" are developed, policed, and altered (including the role of federal regulators in this process) and the powers which the federal regulators possess to detect, contain and correct market disturbances of any kind; and 4. a summary of any proposals you may be considering to strengthen your supervisory role over government securities dealers, and any recommendations you may have for legislative action. - Honorable Paul A. Volcker July 2, 1982 Page 2 We would appreciate your submitting this report to the Subcommittee by September 15, 1982. At that time, we will request that the Department of the Treasury and the Securities and Exchange Commission provide us with their comments on your report. Thank you for your prompt attention to this matter. Sincerely (2)e_ Alfonse D'Amato Chairman Subcommittee on Securities cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Honorable Donald T. Regan Honorable John S.R. Shad https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 7, 1982 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: Thank you for your letter of June 29 inviting the Board to appear before your Subcommittee at hearings on foreign investment in United States banks. Governor Henry C. Wallich is looking forward to appearing, on behalf of the Board, on August 18 at 9:30 a.m. Sincerely, CO:vcd (V-142) bcc: Messrs. Dahl, Gemmill, Bradfield, Ryan (w/copy of incoming) Mrs. Mallardi (2) Mrs. Veenstra 1111P AMAlerS. ROSENTHAL, N.Y., CHAIRMAN JOf N CONYERS, JR., MICH. EUGENE V. ATKINSON. PA. STEPHEN L. NEAL, N.C. DOUG BARNARD JR., GA. PETER A. PEYSER, N.Y. BARBARA B. KENNELLY, CONN. Cong. Liaison Office sent memo to Chairman re Governor Wallich testifying NINETY-SEVENTH CONGRESS Congre55 of tbe Einiteb LYLE WILLIAMS, OHIO HAL DAUB, NEBR. WILLIAM F. CLINGER, JR. PA, JOHN HILER, IND. tate5 MAJORITY—(202) 225-4407 jbousq of ikeprtgentatibet4 COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COM MI TTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING. ROOM B-377 WASHINGTON. D.C. 20515 • June 29, 1982 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Mr. Chairman: The Commerce, Consumer, and Monetary Affairs Subcommittee has tentatively scheduled two days of hearings on foreign investment in U.S. banks for August 17 and 18. I am writing to request the testimony of the Federal Reserve on August 18 at 9:30 A.M. in Room 2247 of the Rayburn Building. The Federal Reserve testimony should cover the following general topics: 1. Financial General: Federal Reserve approval of the application for foreign acquisition of control of Financial General Bankshares, including the standards applied by the Federal Reserve and the investigation of the financial affairs of the principal investors. 2. LITCO: The policy issues relating to government-owned banks that were presented in this case, and the standards alpplied in approving the application. 3. The scope and Foreign holding company supervision and examination: procedures of Federal Reserve supervision and examination of bank holding companies and how the supervision and examination of foreign bank holding companies differs from the supervision and examination of domestic bank holding companies. 4. Foreign individual ownership of U.S. banks: The performance and examination results of those foreign-owned U.S. banks that are controlled by individuals (whether directly or through a holding company), and the particular supervisory problems posed by foreign individual ownership. In addition, the Board witness should be prepared to respond to questions about the acquisition of Crocker by Midland Bank and the proposed acquisition of Hibernia by an Indonesian applicant. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 Requests for specific background information will be forwarded in separate letters. As is specified by the rules of the House, please provide 100 copies of the Board's prepared statement at least 24 hours pr or to the hearing. erel enjamin S. Rosenthal Chairman BSR:dtv https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis fhi* 4o4wrable Jake Gam ,liairvtan Oommitte. on Nonking s 4ousinq an0 Urban Affairs sioiteet States Senate . . . Mr; Aar know trvat wo are On hotlalf of the i;n4r1 of (4:vernors, I wait you to ral 4oserva Aank ctecx clearim Fede on rt re0o e nsiv rehe como the of tive apprecia trai Accuuntino i„ffice, '4e are operations that has riaen ;Irqpiared N!sit the lAen Federal 4eserve has vide reasonable eficeuraned hy the renort es finginqs that tho n tr$ it hv the lonetary Control Ar, givo on reti 01St the nq cisi exer in s ment judg The concerns raised ty thip ewer when and how to price soecific services* a -4anmer Coriet conditions, and are beinf4 ildresseil in the context of mart itsorovinl th$). parkentS systevv; and we ststtnt with our lonq range 9oal in edlression tht, believe that sunstantial Proiress has token *et ntinl the pricino provi4e believe that we have .ione well in ihipleme Qoonths fro. the 44te specisloes of the 44onetary Control Pct. After only five oricinq s wo irvolemented oricinq for fied hy the Monetary Control Act to e for float exolicitly, ill tervicas. Aithouqh we NIVf not yet !hiztin tO oric have tAtera achieved since the substantial reductions in FRe!erai qeserve float 3), Wt; and these reductions nici 'Aonetary Cofttfol ACt wig% Wisted on 4arCh in Fe4eral Reserve revenues for Ned the effect of woratino soqe !Ac.)0 Milton the benefit of the Treasury* transition from an we recognized at the outsets of courses that the to one of pricin9 and 0114PP environhent of nonnriced aed restricted access with regard to r%trketi by :treat uscerteintys tAost *specially aCCe$1 woula , we twien to address the prico•voluwevolume responses to our new prices. in fact cleariftc,1 and automated clearifolhouse coacity issug,. as s0e00 as pricing tor ciNeck es inlicateds reductioo of Fetieral services gas imol%,4knted in AugoSt i90. Ards of remeiniee, float. tAave Peserve float s and ulaening for eitplicit pricinq (AO report has helped ta continually na4 & 'tory high priority* Ev*n sn* tPe in pricinl check clearinl services, ivee invo es iSio kpy the qn s focu our POft SAIW tiont. AC4 sorvices* https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The tionorable Jake (iarn e In its earlier co‘ients on the draft report. the Soard steted that it did not acro.e fully with so:4e of the conclusioes awl recommendatioes of the report. Ratner than restate the views expressed in our letter to hr. Anderson of January 12, 1982. a copy of whice is ettacned to the final 6A0 report. fie woeld like to teke this opportunity to provide inforoatioft on ections that have since Dawn taken to eddress the conceres raised in the report. These actions ralate to the revenue shortfall tn the check clearing service, recovery of the cost of float, ald pnasin4 out of incentive prices for commercial ACS services. Revenue Shortfall in the Chock Cleariql 5!trvice The aiko report recommends thet the Federal *eserve "review end modify prices, wnere appropriate, at least evory 6 moaths until sufficient experience is eained to be certain the financial tareets CAM be reelized.' Wore turning to the substance of the recommendatioe, the tioerl wishes to emphasize thin it dots mot agree that tha revenue shortfall in the check service should be char. atterized as a sobsidy. Prices were sot to recover costs in the lone run. However, because volume losses nave been greater than expected, our current prices are nut fully recovering costs. This snould not be the CeSe over the course of tiAe. This situation is ',wit* distinct from, for mesa*, our auto. seteu clearinghouse pricing Policy, which ievolves a decision by the tiverd not to cnarge during 1982 tne full cost of providinq the auto:vette clearinghouse service. Since we responded to the draft GAO report, numerous further actions neve been taken to deal with the shortfoll. The Reserve nanks hey* airvaey eedified some prices that were not ceesisteot eitn their net revenue tercets, and a thorough revito Is underwey now of the entire coeck pricing schedule. Systimwide„ prices for items that mere underpriced—packecte sort, mixed casn letter and eonmachineable.-were reviewed and new priced' Pet into effect on April l, 1992. Toe System also is reviewing commercial check costs, volumes and revenues to determine new fee scnedules to be announced later this sewer. On the Oistrict level, most of the Reserve Sinks have reviewed and revised local check prices thet were not set properly to achieve their own objectives of efficient checx cleariftg services and full cost recovery. et Dello,. this continual review proCeSS iS a wore etfiCient ot adostinq our fee sceedules them a soliannual review would be since it enables the Reserve aanks to 4,4just their prices rapidly in response te local market conditions. The report also recommends that the board of Govereors "coepare actual voluae and costs with prior estimates at least Quarterly tor each District and office and take necessary action to bring costs and revenue into line.' We Certeinly wee with the thrust of this recommendation. indeed, the System has adopted a maftsqemeet structure for its priced services activities thet epos well peyond the 6A0 recommendetioe. (410 Reserve kirk prepares Oft amnual busi. mess plan which is approved 5y the soard uf t4overnors as part of tne annuel budget review process that includes uelectives tor costs, revenues and volume https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ew. T 7r ARM TA, gonorabie Jake ilarn -1.—•••••••••-eaew• .3. by service for the entire year. In addltien, the Reserve, genes report moothlv on cost, revenue aid volume experience. The Wird staff monitors actual pot. romance agaiewt pleas. and. when actual performance differs significently from the plan s worts with the Reserve 6ank to identify the cause of toe diver. gence and steps that will re4edy the situation. The board has else addressed the GAO recomoandation for preparatioe of financial state*ients for ose in the Anneal Report to snow cleerly both puhlisn the revenues and expenditures associoted wit* oriceb services. ue annually, starting witA 19U2, revenues ant expenses by major service line; and differences petween reventon and costs plus the private sector adjostoeet factor will ofa delineated clearly. The final isA0 recommendation en check service pricini) is ts:at the Board should review the structure of check clearing prices to be certain that they make maximum contribution toward achieving efficient, onsubsilized cneck clearin9 services. As indicated, our check pricing review is nearin9 coilpletion s 4nd new Deices will certainly attempt to achieve that objective. Lfforts to Recover the Cost of Float The reoort recommends thet the board love inmeiliitaly to set a definite timetable for pricing float at the interest rate for Federal funds. As the door/ empftesited in its comments on tne droft itAD report, cot strontoly *elieve tndt efficiency in the payments mechanism can ne achieved uy uttnoqs that pet 4 substantimi part of the burden of float reduction on the pdvor leinks. Con. sistent with efforts tu achieve that objective, the SysteA na% relJceJ float from an average daily level of 14.3 billion in the first quarter of 1480 to an average daily level of $1.4 hillton In the thirteen eeek period from March 3 to June ?, lia. In fact, the most recent nuItoers indicate that average daily float Is currently in the area of $1.S to 0,7 billion. ht are developinq 4 comprehensive end aggressive plan and timetable for the reductions in float, and far explicit pricing of float, which we expect to announce within the next montn or so. We would like to supplement these comments at that tiwe eith * copy of the announcement. Incentive Prices for Commercial !kutomated Clearinqhouse ervices The report recoAelends that the Fedefal Reserve change its pricing dolicy.for the commercial automated clearinghouse service. Specifically, tht report sugoests that 19*.,2 ACH prites be set to recover fell costs. iince we responded to the draft report, the Systeis s Pricing Peltcy Committee nes CtIrwitiCted a thorouit ritview of our ACM pricing policy. Sued on that review, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honarahle Jake 6are - the 3oard has announced a phaseout of its incentive pricing policy tor the Ar'; service over the next three years. To achieve a smooth transition tn A fullY costed price, the Hoard plans to increase its PC4 prices in staots. prices are implemented later this year, they will he set to recover 40 percent of the current full cost of production. including the private sector adjustment factor. The ratio will rise to 6U percent in 1983. HO percent in lt.04,4, and 11;? percent in 19854. Thers were severe) factors that led us to the conclusion that we should phase down our incentive pricing through 198F: rather than end it abruptly. First, if fully costed prices were implemented imeeflately, the price increase would he substantial and could very well cause flatly msers of the ACH service to revert to paper checks. Second. more than 60 percent of all parents processed throunh the ACH are originated by the Treasury tlepartnent. tiecause of our Wilation to provide fiscal agent services to the onite4 States oovernment as efficiently as possible. the Federal Reserve would cootinee to ooerate ACk facilities to disburse payAents for the Treasury Department regerdiess of our policy towards commercial payments. Finoily, uno very necessary inriredient in the private sector's determination of whether to provide ACH services is a volume level of sufficient size. to allow potential providers to offer ACH services at an attrective price. At present, colmercial volume eppears too inw for anyone to produce ACg services profitahly. The ttoard's incentive pricing rolicy has generally been supoorted by the hankinr3 industry; indeed, lettr)rs 4e hove received in recent weeks indicate thdt there are tiany in the orivate sector who believe that the Federal Reserve is moving towards full cost recovery too rapidly. Wo continuo to helieve that the ACM service is beneficial to thy publiC from the persnective of security and convenience end that it should be eneour- tiled to grow so that fully costed prices will tte attractive relative to those of paper checks. At the same time, we recognize that the privste sector should have the knowledge of Federel Reserve pricinn intentions needen for plaening the development of AC4 systcas. Thus, the Federal Reserve has decided to oradually reduce its support tn the AN mechanism. avoiding the potentially negative repercussions of a substantial, one-tioe, price increase and providing some stimulus for future voluve nrowth over the short run. moreover. the private sector Auring this time will he able to evaluate with greater certainty the costs anA benefits of thy Afli service and decide whether competitive ACM facilities and networks woulei provide an adequate return on investment. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Jake Gam The Roar4 appreciates this opportunity to comment on the GAn's final report. As always, we stand ready, at your convenience, to provide additional information and to discuss any of the points liatAte in this or previous responses. Sincerely, Identical Letter Sent to The Honorable Jack (qiooks Chairman Committee on Government Operations Uashington, /J.C. 20515 Th.s. Honorable William? V. Roth, Jr. Chairoan Senate Committee on Covernnent Affairs Washintjton, 0.C. The Honorable FernandM St.10trmain Chairman Housing Banking Committee Washington, 0.C. li/enkj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis if\f\., . fvvx.6.,46_ .,e . •.of Gov4*. • t .. 1: '21'• ,,,. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASH1NGTON.O.E. 20551 Cli. 4c,. July 7, 1982 The Honorable James J. Florio Member of Congress 1 Colby Avenue 08084 Stratford, New Jersey Dear Mr. Florio: Thank you for your letter of June 3 enclosing correspondence from Mrs. James Hanacek requesting comment on an article by Sylvia Porter that recently appeared in newspapers across the The article raises concerns about the growing trend toward nation. "check truncation", that is, the practice of having the depositor's financial institution retain canceled checks rather than returning Based them to the depositor with his or her periodic statement. upon our experience to date, we believe that there are very few, if any, problems that have arisen from check truncation. In recent years, depository institutions have encountered significantly increased operating costs due to increases in salaries 9 The introduction computer equipment, postage, and other expenses. Much of interest-bearing NOW accounts has also increased costs. of these increased costs are passed on to depositors in the form In order to provide customers with lower of service charges. cost services, depository institutions are increasingly turning towards check truncation in order to reduce the amount of paper By retaining customers' checks, depository inthat is handled. stitutions are able to reduce handling and processing costs as As a result, the institution is in a well as postage expenses. better position to pass on these savings to the depositor. Ms. Porter's article recognizes that this is the principal benefit of the check truncation service. Ms. Porter's article, however, cautions that depositors will have less ability to challenge errors if a paper check is We do not believe that this is not returned to the depositor. First, in virtually all instances, the depositor rethe case. The carbon tains a carbon copy of the check for his records. copy contains virtually all of the information that the original copy contains and can be used to identify and verify payments. Second, depository institutions are able to provide microfilm copies of the original in a timely fashion if additional questions arise. Such copies are generally accepted as proof of payment. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis / . The Honorable James J. Florio Page Two There has been no intention on the part of the Government Indeed , the agencies to keep the issue of check truncation quiet. National Credit Union Administration has adopted rules requiring federal credit unions that offer share draft (checking) accounts This rule was adopted after an to truncate customers' checks. Any rules that are adopted by extensive public comment period. federal agencies in this area are subject to the Administrative Procedure Act (5 U.S.C. §§ 551 et seq.), which requires, in most instances, that public comment be solicited before final rules are Accordingly, I would expect that any action by the agencies adopted. to accommodate check truncation would be considered only afer the public has had extensive opportunity to comment on the proposed The Federal banking agencies do not have rules authorizing rules. check truncation by commercial banks because the service is permitted under banks' authority to accept deposits, which is granted There are no plans under consideration by the to them by statute. banking agencies to require that commercial banks truncate checks. Ms. Porter states that there will be a single location We are unaware at which depositor records will be centralized. of any proposals or plans to centralize information concerning depositors, and check truncation does not result in having informa The process involved in check tion available in a central location. The customer's bank (or a bank earlier truncation is as follows. in the collection process) transcribes information from the check The bank onto magnetic tape which is used to service the account. uses the tape to place charges and credits against the account and Images of the front and to prepare an itemized account statement. The original checks back of the check are transferred to microfilm. Should questions are then placed in storage at the customer's bank. arise concerning particular payments, copies of the check could be The original checks are usually destroyed made from the microfilm. by the customer's bank after the passage of a certain time period, typically three to six months after they are paid. Ms. Porter also mentions that check truncation makes it Check truncation does not easier for the IRS to audit taxpayers. nor have any effect on the ability of the IRS to audit returns Depository institutions already keep upon financial privacy. checks microfilm copies of checks regardless of whether or not the Under the Bank Secrecy Act are returned to , the depositor. (12 U.S.C. § 1829b), each insured bank is required to make a microfilm or other reproduction of each check, draft or other payment similar instrument drawn on it and presented to it for U.S.C. under regulations of the Secretary of the Treasury (12 The Department of the Treasury has issued the § 1829(d)(1)). Financial Recordkeeping and Reporting of Currency and Foreign this Transactions regulations (31 CFR Part 103) to implement While only checks of more than $100 are required to be statute. instimicrofilmed under the regulations, in practice depository in the event tutions microfilm virtually all depositors' checks https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis a- orio The Honorable James J. Fl Page Three l Privacy on, the Right to Financia ti di ad In . es is ar m a proble ocedural ovides substantive and pr pr ) 30 -6 95 . .L (P 78 19 Act of ation ress to ensure that inform ng Co by d he is bl ta es ds safeguar These proprotected. is s rd co re l ia nc na fi ' concerning depositors stored ss of where the checks are le rd ga re y pl ap ld wou ns tectio before they are destroyed. onic s the move towards electr The article also question le to loss ers would be more vulnerab om st cu t tha g in gu ar g, bankin has addressed eve that Congress already li be We s. nd fu r ei th of electronic that arise with regard to ns er nc co er um ns co the many of le XX of ic Funds Transfer Act (Tit on tr ec El The s. er sf an funds tr consumers' rights, pros he is bl ta es ) 93 16 § C. P.L. 95-630; 15 U.S. ectronic es with respect to the el ti li bi si on sp re and , ns io tect rded to customers under fo af s on ti ec ot pr The enting transfers of funds. (12 CFR Part 205) implem E on ti la gu Re s d' ar Bo this Act and the the terms and conditions of s re su lo sc di d ie if ec the Act include sp ions, a documentation of transact n te it wr , ns io ct sa an tr T of EF stomer procedure, and limited cu on ti lu so re r ro er d ie if spec transfers. liability for unauthorized y ansfer systems potentiall tr s nd fu ic on tr ec el e ev We beli payments for customers and for the ts fi ne be l ia nt ta bs su e hav are more this regard, EFT systems In y. tr un co the of m is mechan increased ed payments system. This as -b er pap a n tha t en ci effi financial institutions to s st co r we lo in lt su efficiency should re s, given the highly comer om st cu to on sed pas that likely will be ial services industry. nc na fi the of re tu na ve petiti ease let g is helpful to you. Pl I hope that the foregoin rther assistance. me know if I can be of fu Sincerely, Mold) Donald J. Winn Donald J. Winn Assistant to the Board (GTS:PSP:DJWOCO:pjt (#V-125) bcc: Mrs. Mallardi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Cong. Liaison Office will draft response Ink https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congrezzi of the Unita &tato Mattington, D.C. 20515 1 Colby Avenue Stratford, NJ 08084 June 3, 1982 Mr. Paul A. Volker, Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Ave. Between 20th & 21st Sts. Washington, D. C. 20551 Re: Mrs. James Hanacek Dear Mr. Volker: I have enclosed a self-explanatory letter delivered to me by the above named constituent. I would be most interested in receiving your review and reply to this correspondence so that I may advise my constituent accordingly. Please forward to me at my Stratford District Office the results of the action you have taken. Thank you for your cooperation and interest in this matter. Yours ve JAME Mem tru J. L I of Ckngress t JJF/16/ch --n co rrl C.— 7,r) "Tirn 2IC 1 rn 1!)•• rco r?"„I -11 --4C) rrl rn < 3C a r7 tAllo r) < v') Mr-y 29, 19Pr ConEressman, James j. Florio 1 Colby Avenue Suite 1617 r.:trE.tford, New Mrsey ( ) - 8/4 JUN 1 PECV Again, ronrreE.sman Floric, I t‘irn to you for advice in the rLtter tht- attached Lrtic3e which aliired in the "Ca.:Tier Pc:.t" on Thurdhy, May 27, 1982. I have written a lettPr to Glendple Ntional Eank in 7-orheer Township, strongly crposing tyr.f. Di' bank procedurs. Wh(qt annoys MF tht, fact th.st the banks are tryinf' te keep t),ir on te quiet side with no discussions amonc-st the public and I am alarmed that there is a possibility that this could become their way of doing buL;irese. Could you infcr:, me PS to the possibility of E:ny Committee that could o:-, oFe this cl'ange in banking procedures? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Thanking you in advanc, Sincerely, _/' 9 rIC ? e 6 EvelynAanacek (14rs. JEame-s-T 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 Porter, Sylvia. "Banks May Keep Canceled Checks And Keep You Guessing." Courier-Post (Cherry Hill, NJ), May 27, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 7, 1982 The Honorable Tom Harkin House of Representatives Washington, D. C. 20515 Dear Mr. Harkin: Thank you for your recent letter regarding the problem of high interest rates. I agree with you that we need to do something to relieve the pressures holding up rates if we are to ensure a robust and balanced economic recovery. I shall be reporting to the Congress in just a few days regarding the Federal Open Market Committee's decisions regarding objectives for monetary growth over the remainder of 1982 and in 1983. We are mindful of both the need to meet the liquidity requirements of the economy and the need to maintain the basic longer-range, anti-inflationary thrust of monetary policy. As I'm sure you can appreciate, translating these goals into quantitative targets is no simple matter, particularly in a world of rapidly changing financial practices that make even the definition of money somewhat ambiguous. But we shall do our best and I will present to the Congress the rational e for our decisions, as well as our view of the implications of our policy for the economy. I should note that, even if further reduction of the FY 1983 federal deficit may be difficult, there is still much the Congress can do to alleviate tensions in financial markets. As I read the situation, it is not so much the FY 1983 deficit in itself that is so disconcerting to lenders and investors, it is the prospect of an ever-widening structural gap between federal outlays and revenues as one looks out over the years ahead. If the Congress could act now to alter decisively that trend--to ensure progress toward a balanced budget as the economy recovers--then fears that we will have either persistent "crowding out" or eventual inflationary monetary accommodatio n will subside. This should show through in interest rates, especially in the longer-term markets that are so important for home building and business capital formation. In short, I believe the Federal Reserve and the Congress have important work to do if we are to solve the economic problems confronting us. I look forward to working constructively with you and your colleagues to that end. Sincerely, MJP:JLK:vcd (#V-143) bcc: Mr. Prell Ms. Wing Mrs. Mallardi (2) • Action assigned Mr. Kichline DISTRICT OFFICES: TOM HARKIN P.O. Box 264 5TH DISTRICT, IOWA 213 POST OFFICE BUILDING AMES, IOWA 2411 RAYBURN HOUSE OFFICE BUILDING WAsHINGTON, D.C. 20515 (202) 225-3806 CongreE;5 of the Unita &tato 134wcH 229 FEDERAL BUILDING Pou5e of AepreZentatibet4 SPECIAL PHONE FOR THE HEARING IMPAIRED bilazbington,;IC 20515 TTY-202-224-2793 77Y-202-224-6801 50010 (515) 232-6111 COUNCIL BLUFFS. IOWA icp 113 W. MONTGOMERY STREET CRESTON. IOWA 50801 COMMITTEES: (515)782-5727 rtl AGRICULTURE June 29, 1882 SCIENCE AND TECHNOLOGY Lc) -n c— ao rn 7-3 17— Mr. Paul Volker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551 rn (.•.) rn C:) < T=I cz) Our country is in their present level, I economic recovery will to rise to even higher LD P- real trouble. With interest rates at believe we can almost be assured that be very weak indeed. If rates continue levels, there will be no recovery. I need not tell you of the record unemployment or the depression in agriculture and the housing and auto industries, all highly sensitive to interest rates. Bankruptcies are at record levels. The weakness of many companies' balance sheets tells me that the bankruptcy rate could increase dramatically in the next six months. The human suffering and fear is terribly real. Every day, marriages are destroyed by the pressure of today's economic realities. Families will remain apart long after our economy turns healthy again. I understand that the monetary targets have been set as a mechanism to keep a damper on inflation. Many fear a change in the monetary targets could renew an increase in the inflation spiral. Some suggest that such a change would yield to higher interest rates. That will not happen. In real terms, adjusted for inflation, the prime rate is nearly ten points above inflation. Fear of inflation will not boost interest rates. The Congress has now passed a budget resolution with an announced budget deficit of $103 billion. If the Congressional Budget Office assumptions are used, the deficit climbs to $116.4 billion. Many economists suggest that the less favorable CBO assumptions are also optimistic. That is clearly the factor increasing the rates. THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS 7-3 cz) rn • F.; „ Dear Chairman Volker: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 51502 (712) 325-5533 = Mr. Paul Volker Page 2 June 29, 1982 Given the present reality, with a budget resolution passed and the President's position as it is, spending will not fall and taxes will not be raised beyond the requirements of that resolution. The earliest that one can expect to see substantial change in budget policy is next April. I do have hopes that there will be a real change at that time. However, that may be too late to save our economy from taking another serious dive. The only hope the economy has is a change in the Federal Reserve's monetary policy. As you examine your monetary targets, I urge and implore that you adjust those targets upward. Whatever the dangers of increasing monetary growth, they are small compared to the danger of leaving them where they are. I appreciate your consideration in this matter. Sincerely, Tom Harkin Member of Congress TH/grb https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis July 7, 1982 The Honorable J. William Stanton Ranking Minority Member Committee on Banking, Finance and Urban Affairs House of Representatives 20515 Washington, D.C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dear Bill: For your information, I have recently forwarded to Federal Chairman Garn of the Senate Banking Committee a revised Reserve Reserve proposal to amend Section 23A of the Federal Act. were The revision incorporates constructive comments that received as a result of hearings on the legislation. you to have a copy of this revised proposal. Sincerely, SZ_Pau! Enclosure CO:DJW:pjt CW4g4.;_, LaD I wanted BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 July 2, 1982 PAUL A. VOLCKER CHAIRMAN The Honorable George M. O'Brien House of Representatives Washington, D.C. 20515 Dear Mr. O'Brien: Thank you for your recent -letter in which you request my views on the desirability of reducing interest rates by taking actions to speed up monetary growth, an idea that was suggested to you by one of your constituents, Mr. Asa Dempsey. In particular, you indicate that this might be appropriate once a budget was put in place. The question of appropriate monetary growth is, of course, one that is reviewed frequently and carefully by the Federal Reserve, and target growth ranges are reported to Congress each February and July. The target ranges that were annou nced for 1982 in February were chosen to exert continued downward press ure of inflation while at the same time providing adequate scope for an economic recovery this year. Seeking lower interest rates by raising monetary growth objectives, as your constituen t has suggested, runs the risk of heightening fears that the painful but real gains we have made against inflation will be reversed. Moreover, the ultimate result could very well be higher, not lower , interest rates. I would emphasize in this regard that a program of restrained growth in money and credit is not necessaril y synonymous with a high interest rate policy. Quite the contr ary, appropriate monetary restraint is needed to reduce the "inflation premium" component in interest rates and allow them to come down and stay down. At the same time, we must be cognizant of ,the motivations that underlie observed changes in money, and, in particular, try to distinguish between demand for money for transactions purposes in a period of economic expansion and demand for money for precautionary purposes in a period of econo mic uncertainty. From a longer term perspective, however, in order for interest rates to decline and be sustained at a lower level, it is critical that markets be convinced that efforts to lower inflation will not be abandoned. Such a change in attitudes will be hastened by a strong budget program that reduces signi fiCantly the federal government's claim on the nation's scarce savin gs. I have recently discussed the Federal Reserve's conduct of monetary policy at greater length in a speech to the Econo mic Club of Chicago, a copy of which is enclosed. I hope this information is useful to you. TB:TDS:JLK:CO:NS:pjt (V-134) Sincerely, bcc: Messrs. Simpson, Brady Ms. Wing, Mrs. Mallardi (2),....,7,14Vaajtat Enclosure (5/19/82 speech) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAS HINGTON OFFICE: GEORGE M. O'BRIEN 171-H DisTreicr. CP:iMPAITTEE ON APPROPRIATIONS SUBCOM NIITTEES Action assignei Mr. Kichline Congre55 of the Elniteb LABOR, HEALTH AND HUMAN SERVICES. EDUCATION COMMERCE, JUSTICE, STATE AND THE JUDICIARY RANK I NO R EPUBLJCAN tate5 2439 RA YSU R N NOUSE OFFICE SU II-0IMO (202) 225-3635 DISTRICT OFFICE: i i NORTH JOLIET STREET JoLirr, lu_insois 60431 (815) 740-2040 Pou5t of Reprelentatibel attington, 10.C. 20515 TOLL FREE NUMBER (800) 892-9371 June 16, 1982 •-rt ""v1 M C rti t47 CO /1%../ Fri CD M c_ .XJ 2IC ,4 •-•-• Zr: < r-! 7r rT i The Honorable Paul A. Volcker Chairman Federal Reserve Board Federal Reserve Bldg. Constitution Ave. between 20th and 21st Streets Washington, D.C. 20551 C••• I 00 < C.r7 03 ;,;.; • .4 Dear Chairman Volcker: y, A close personal friend and advisor in Illinois is Mr. Asa Dempse who is the president of the UAW local which operates the Ford stamping plant in my district. He is a very concerned person, not only about his union but also about the nation at large and has been of great assistance to me. At a recent meeting with some of the leaders of my community he voiced the comment that as soon as we got the budget in place whether there was any way . we could persuade you to lessen the restraints on the money supply y I thoughthis comments were very astute and I am taking the libert view of asking if you would please give me an expression of your on this possible means of getting our interest rates dawn. C "ally yo rs, GMO: mbj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Geo, 4,/ . 0*Brie Me4ber f Congress m https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis V BOARD OF GOVERNr:R!') OF THE FEDERAL. fiESERVE SY:: HOUSE OF REPRESENTATIVES WASHINGTON, D. C. 20515 HENRY J. HYDE 1982 JUL -6 OP410: SO RECEIVED OFFICE OF iHE CHAIRMAN 6TH DISTRICT, ILLINOIS July 1, 1982 Honorable Paul A. Volcker Chairman Board of Governors of the Federal System Federal Reserve Building Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Volcker: I want to express my profound thanks for your personal contribution to the overwhelming success of our 6th District Advisory Council "Day in Washington" last Monday. Everyone was extremely enthusiastic and, believe me, your time and effort will not be forgotten. All the members of your staff whom we worked with were extremely helpful, and I am sure your important message was very well received. Please let me know when I can be of reciprocal help to you. Warmest regards, nry HJH:fcs yde https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1•01 July 1, 1982 The Honorable Frank Annunzio Chairman Subcommittee on Consumer Affairs and Coinage Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman Annunzio: Thank you for your letter of June 25 regarding your Subcommittee's hearings on H. R. 6124, a bill to extend the Credit Control Act. Vice Chairman Preston Martin will be pleased to appear on behalf of the Board on July 15 at 10:00 a.m. Sincerely, WRM:vcd (V-139) bcc: Vice Chairman Martin Mr. Axilrod Mrs. Mallardi (2) t Cong. Liaison Office discussing appropria te witness with Committee staff ..41 FR ANK ANNUNZIO, ILL., CHAIRMAN RON PAUL, TEX. THOMAS B. EVANS, JR., DEL. CHALMERS P. WYLIE, OHIO GREGORY W. CARMAN, N.Y. FERAND J. ST GERMAIN, R.I. HEIeRY B. GONZALEZ. TEX. JOSEPH G. MINISH, N.J. BILL PATMAN, TEX. STENY H. HOYER, MD. U.S. HOUSE OF REPRESENTATIVES NINETY-SEVENTH CONGRESS CURTIS A. PRINS, STAIFF DIRECTOR SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE OF THE TELEPHONE: 225-9 I RI COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS ROOM 212 HOUSE OFFICE BUILDING ANNEX No. 1 WASHINGTON, D.C. 20515 June 25, 1982 /32 Honorable Paul A. Volcker Chairman Federal Reserve Board 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: The House Consumer Affairs and Coinage Subcommittee of the House Banking, Finance and Urban Affairs Committee, plans to hold hearings on July 15 on H.R. 6124, to extend the Credit Control Act. I have enclosed a copy of the legislation. I wish to invite you to appear before the Subcommittee on Thursday, July 15, at 10:00 a.m. The hearings will be held in Room 2128 Rayburn House Office Building. Your presentation should be limited to ten minutes; however, your written statement for the record may be of any length. The Subcommittee requires a minimum of 50 copies of the prepared statement at least 48 hours prior to your scheduled appearance. The statements should be delivered to the Subcommittee office, Room 212, 300 New Jersey Avenue, S.E. If you have any questions, please contact Mr. Curtis Prins, Staff Director of the Subcommittee on Consumer Affairs and Coinage at 225-9181. With every best wish, Sincerely, Frank Annunzio Chairman Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 97TH CONGRESS 2D SESSION H.R.6124 ensure the availability of credit for and n, atio infl l tro con s, rate rest inte uce To red ic recovery by extending the Credit productive purposes, and promote econom Control Act. TIVES IN THE HOUSE OF REPRESENTA APRIL 20, 1982 ing bill; which was referred to the Mr. ST GERMAIN introduced the follow an Affairs Committee on Banking, Finance and Urb A BILL , and ensure the availTo reduce interest rates, control inflation and promote ecoes, pos pur e tiv duc pro for dit cre of y abilit Control Act. nomic recovery by extending the Credit e of RepresentaBe it enacted by the Senate and Hous 1 gress assembled, Con in a ic er Am of tes Sta ted Uni the of 2 tives l Act(12 U.S.C. 1910) tro Con dit Cre the of 1 21 n tio sec at Th 3 4 is hereby repealed. 5 Control Act (12 SEC. 2. (a) Section 205(a) of the Credit lows: S.C. 1904(a)) is amended to read as fol 6 U. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 1 "(a) Whenever the President determines that such 2 action is necessary or appropriate to reduce high levels of 3 unemployment in any sector of the economy, or to prevent or 4 control inflation or recession, the President may authorize 5 the Board to regulate and control any or all extensions of 6 credit.". 7 (b) Section 206 of the Credit Control Act (12 U.S.C. 8 1905) is amended by redesignating paragraphs (7) through 9 (11) as paragraphs (8) through (12), respectively, and by in10 serting after paragraph (6) the following: 11 "(7) prescribe limitations with respect to credit for 12 nonproductive purposes, including corporate takeovers, 13 and otherwise ensure the availability of credit for pro- 14 ductive and necessary purposes.". 0 HR 6124 IH ••• itirsorRezeAw Congressman FRANK ANNUNZIO 1 1 th Congressional District — Illinois FOR RELEASE MONDAY, JUNE 28, 1982 CONTACT: Curtis A. Prins Subcommittee on Consumer Affairs and Coinage (202) 225-9181 Friday, June 25, 1982 CREDIT CONTROL HEARINGS SCHEDULED FOR JULY 14 AND 15 Hearings to extend the Credit Control Act will he held July 14th and 15th by the House Consumer Affairs and Coinage Subcommittee, its Chairman Frank Annunzio (D.-Ill.) announced today. Although the Credit Control Act expires on June 30th, H.R. 6124, introduced by House Banking Committee Chairman Fernand St Germain and two dozen cosponsors, including Chairman Annunzio, would extend the Act on a permanent basis. In addition, new authority would be placed in the Act to prevent the use of credit for non-productive purposes such as unnecessary corporate takeovers. "At a time when this country faces double digit unemployment, record high interest rates, and a near shutdown in the homebuilding and automobile industries, we cannot allow what credit is available in this country to be used to conduct bidding wars among corporate raiders," said Annunzio. "In 1981, businesses borrowed $34 billion for takeovers and tied up another $70 billion in takeover loan commitments. These takeovers didn't create one new job or do anything to help the overall economic situation of the country. "If we had taken that $34 billion and instead of using it for corporate raids it could have financed 5,666,667 automobiles priced at $6,000 each or it could have financed the purchasing of 566,667 homes costing $60,000 each. We could have turned the economy around if the money had gone for homes and automobiles, but not only did we not do that, but the takeover loans actually damaged our country. "The prime rate is set by the demand for loan funds," Annunzio continued. "The prime rate is supposed to go down when there is no demand for loans, but because there was a demand for takeover loans, the prime rate was kept high, forcing consumers who needed loans to pay record high interest rates. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MORE "Had this new provision in the Credit Control Act been in place last year, the prime rate could easily have been reduced by as much as 400 basis points. Instead, consumers are paying record interest rates now because corporate takeovers played Pac-Man with all the available loan funds." The hearings will be held in Room 2128, Rayburn House Office Building and will begin at 10 a.m. each day. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A complete witness list will be issued next week. # # # . 4 ; GOvt BOARD OF GOVERNORS •co •0 • • 7 , IE t• .• -- ,• FEDERAL RESIRVE SYSTEM it • WASHINGTON, D. C. 20551 ; • e.RAL RE.5 • ••` • • •..• • • PAUL A. VOLCKER March 18, 1982 " CHAIRMAN The Honorable Henry S. Reuss Chairman Joint Economic Committee Washington, D. C. 20510 Dear Chairman Reuss: Thank you for your letter of February 26 forwarding copy a of the Annual Report of the Joint Economic Committee. Your letter calls our attention in particular to Recommendation 8 of the Democratic Members of the Committee which calls upon the Federal Reserve to review various aspects of monetary policy and report to the Congress. I approach your recommendation with mixed feelings. We start from common ground in believing that the techniques and procedures of monetary policy warrant periodic--indeed continuous--review to assure their suitability. Such reviews are, of course, valuable for our internal purposes and have obvious benefit in terms of the Federal Reserve's ability to communicate our policies to the Congress and the public and in turn satisfy the need for accountability. They are all the more significant in a period of rapid change and innovation in financial practices, encompassing financial instruments, institution.), and markets. A',-.. the same time, the Report's characterization of recent evidence as indicating "fundamental flaws in the procedures of monetary formation and oversights" seems to me unwarranted on the basis of the evidence we have. Of course, it will never be possible to devise techniques which are good for all time, nor to reduce complexities to simplicities; every procedure for formulating and implementing monetary policy represents something of a compromise among competing objectives, and can be modified and improved over time. The real difficulties in the current situation lie not in the technical implementation of monetary policy, but rather in reorienting the modes of behavior throughout the economy away from an adaptation to inflationary expectations toward greater price stability. These difficulties are compounded to the extent almost exclusive reliance is placed on monetary policy to combat.inflation, financial markets are burdened by excessive bucrgetary deficits, and by rigidities in the price-wage structure. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis z The Honorable Henry S. Reuss Page Two 1.1 As you know, some of the technical issues of monetary policy were investigated in a major Federal Reserve study last year. The results were published in 1981 in a two-volume study, New Monetary Control Procedures: Federal Reserve Staff Study. This study received considerable professional attention and is the subject of continuing academic review and public discussion. I do not believe that it would be productive at this time for the Federal Reserve to convene a panel of outside advisers with disparate opinions in the thought that some new consensus would spontaneously emerge from such a discussion that has escaped the notice of those of us responsible for conducting policy. You are as aware as I of the variety of professional opinion and schools of thought, taking as their point of departure different analytic frameworks. I believe it far more likely that constructive criticism and analysis would emerge from a continuing process of reaction to concrete policy proposals, actions, and studies by the Federal Reserve. To facilitate that process, and as part of our continuing effort to expose and test our thinking against that of others, I have asked our staff to address the specific points raised in your Report, drawing on available research findings and internal thinking, and to report their findings in convenient form. I intend to submit that report, including any recommendations to the Congress by the Board that are relevant, as part of our next regular Report to the Congress on Monetary Policy pursuant to the Full Employment and Balanced Growth Act of 1978. The results of this study will, of course, be available to the public generally, as well as to professional specialists, and we will look forward to reviewing these issues with the Congress and others who are interested. I do want to thank you for your concern for the improved conduct of economic policy in general and monetary policy in particular, to which I hope the report I have described, addressing the particular questions you have raised, will contribute. Sincerely, • NS:PAV:vcd (V-53) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Axilrod Mrs. Mallardi (2) HO:JSE ")F PLMRESENTATIVIAI SENATE ligNpy mosrpt W. JEPSEH, Muse, CHA/RMAN RJC HARD SO LL I NG, MO. LC: PI. HAM I LTOPl. IND. 1111'.LIS W. LONG, LA. PA*REA J. M ITCHELJ-. MD. PREDERICK W. RICHMOND. PLT. CLARENCE J. IIROWN, OHIO PtGA MET M HECKLER, MASS. JIOHN H. ROUESCLOT, CALIF. CHALMERS P WY1-1 L. 01410 • Congre55 of tbe I/MO etate5 JOINT ECONOMIC COMMITTEE ) Or PUSILJC LAW Mk 71ITH coodeettss) (CREATED PURSUANT TO SEC. JAM ES K. GALBRAITH. ILICECUTTVE DIRECTOR WASHINGTON, D.C. 2010 CNAI NM AN WILJ.-IAM V. ROTH, JR., JAM ES ASDNOR, S. OAK. STEVEN D. 11YRI M S IDAMO PAIJLA HAWK INS, FLA. MACK MATTINGLY, LLOY D BE NTSEN, TEXWILLIAM PROXMIRE. WIS. MEMPAD . K ENNEDY. MASS. PAUL S. 11ARIIAMES. Id . sA. ' February 26, 1982 Ln The Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D. C. -72 NJ Dear Mr. Chairman: I am enclosing a copy of the Annual Report of the Joint Economic Committee, released yesterday. In it, the Democratic Members of the Committee call on the Federal Reserve to undertake a searching review of current procedures of monetary policy formation and oversight. The purpose of such a review would be to develop a more flexible and sophisticated framework within which the Federal Reserve can operate while enhancing the quality of information about monetary policy available to Congress and the public. The specifics of our request are set out in Recommendation 8. I would appreciate an early response outlining the measures you deem appropriate to meet this request. Specifically, I would encourage you to consider calling on a distinguished panel of outsiders to provide advice to the Federal Reserve on it. We regard this recommendation as one of the key ingredients of a program to establish a more workable relationship between the Congress, the Administration and the Federal Reserve in the future. Sincerely, Henry S. Reuss Chairman P.S. I commend Recommendations 9 and 10 to your attention as well, for reasons that will be apparent. Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Recommendation No. 7: Wars End the Interest Rate rld rates damaged the wo st re te in gh hi S. In 1981, U. in the economic ce en id nf co ed in rm economy and unde States. Thev severe to ed it Un e th of ip sh er lead not be allowed st mu s on si us rc pe international re mpetition should be co te ra st re te in of continue. High ional coordination at rn te in er os cl ch replaced by mu economic policy. rve Improve Federal Rese 8: . No on ti da en Recomm cy Coordination li Po d an ty li bi ta Accoun ce has mounted that en id ev , de ca de st For the pa the procedures of in s aw fl l ta en am flaws were only there are fund e es Th t. gh si er d ov monetary formation an e shift from interest rate to th , that change partly corrected by ed de in ; 79 19 r be to in Oc . We call for monetary targeting re fo e th to es ti icul has brought new diff fresh look at the a ke ta to e rv se the Federal Re to the Congress. rt po re d an cy li po ry : formation of moneta specific objectives x si ve ha ld ou sh Such a report t of information abou y it al qu e th e ov pr To im es made available to iv ct je ob cy li po ry moneta e public; the Congress and th nation of monetary di or co e th e ov pr To im and other tools of , cy li po al sc fi polcy, economic policy; r the conduct of fo es in el id gu e id l To prov s of rapid financia s; me ti in cy li po ry ment moneta in monetary instru ge an ch d an on ti innova r the conduct of fo es in el id gu e id To prov supply shocks; of ce fa e th in monetary policy cent years of re in y it il ab st in To evaluate the mmend changes in co re d an y, ne mo the demand for edures that may be oc pr cy li po ry ta mone development; and is th of lt su re necessary as a l antee that Federa ar gu to ys wa se vi To de e full account of th s ke ta cy li po e rv Rese ry, agriculture, st du in of s st re d legitimate inte g small business an in ud cl in , ce er mm and co deral Reserve Fe e th in ed at ul housing, as stip Act. Money Volatility un -R t or Sh ry Ve 9: Recommendation No. is Not a Problem -run that very short ew vi e th th wi ee We disagr y damaged the tl an ic if gn si th y grow iticism of the volatility of mone cr is th at th ge We ur economy in 1981. dispensed with. be e rv se Re l ra Fede lak le"" - https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis STATEMENT OF. REPRESENTATIVE STEPHEN L. NEAL Mr. Chairman, it is hard to believe that this committee would consider giving the credit control powers of H. R. 6124 to any President. I'm particularly surprised that some of my fellow Democrats would want to give these powers to President Reagan. Do we really want to give President Reagan and the Federal Reserve these broad powers to decide who gets credit and on what terms? We have experience with credit controls in this country; that experience is almost totally negative. Most recently, President Carter invoked controls effective March 14, 1980, and terminated them in July of that year. It is clear that those controls slowed economic activity, weakened market confidence and helped to push us into our current deep recession. As controls were placed on retail credit, consumers purchased less, and companies began laying off employees. In the second quarter of 1980, with controls in place, our real Gross National Product declined at an annual rate of nearly 10 per cent (the highest rate for any three-month period since the Great Depression). Unemployment rose from 6.2 per cent in February to 7.6 per cent in July. The sudden drop in economic activity was frightening to behold. The controls_obviously had no lasting effects in Sr 2 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis in bringing down inflation or interest rates. In fact, once the controls were liftedimOMMOMMMOMMEMOMMOIOinterest rates rose quickly. Our experience, then, has been.that credit controls disrupt the market system, result in slower sales and higher unemployment. Whatever short-run benefits controls may offer are overwhelmed by the weaknesses they create in our system. I think that passing H. R. 6124 would be too great a risk to take with our troubled economy, particularly in these times and under this President. A