The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
•I*
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ri
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 12
Preferred Citation: Congressional Correspondence, September 1982 [Folder 1]; Paul A. Volcker
Papers, Box 12; Public Policy Papers, Department of Rare Books and Special Collections, Princeton
University Library
Find it online: http://findingaids.princeton.edu/collections/MC279/c454 and
https://fraser.sdouisfed.org/archival/5297
The digitization ofthis collection was made possible by the Federal Reserve Bank of
St. Louis.
From the collections of the Seeley G. Mudd Manuscript Library, Princeton, NJ
These documents can only be used for educational and research purposes ("fair use") as per United
States copyright law. By accessing this file, all users agree that their use falls within fair use as
defined by the copyright law of the United States. They further agree to request permission of the
Princeton University Library (and pay any fees, if applicable) if they plan to publish, broadcast, or
otherwise disseminate this material. This includes all forms of electronic distribution.
Copyright
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Under certain conditions specified in
the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of
these specified conditions is that the photocopy or other reproduction is not to be "used for any
purpose other than private study, scholarship or research." If a user makes a request for, or later
uses, a photocopy or other reproduction for purposes not permitted as fair use under the copyright
law of the United States, that user may be liable for copyright infringement.
Policy on Digitized Collections
Digitized collections are made accessible for research purposes. Princeton University has indicated
what it knows about the copyrights and rights of privacy, publicity or trademark in its finding aids.
However, due to the nature of archival collections, it is not always possible to identify this
information. Princeton University is eager to hear from any rights owners, so that it may provide
accurate information. When a rights issue needs to be addressed, upon request Princeton University
will remove the material from public view while it reviews the claim.
Inquiries about this material can be directed to:
Seeley G. Mudd Manuscript Library
65 Olden Street
Princeton, NJ 08540
609-258-6345
609-258-3385 (fax)
muddgprinceton.edu
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Congressional
September 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Joint Statement
before the
Subcommittee on Domestic Monetary Policy
of the
Committee on Banking, Finance and Urban Affairs
United States House of Representatives
Washington, D. C.
September 23, 1982
by
Robert H. Boykin, President
Federal Reserve Bank of Dallas
E. Gerald Corrigan, President
Federal Reserve Bank of Minneapolis
Frank E. Morris, President
Federal Reserve Bank of Boston
Lawrence K. Roos, President
Federal Reserve Bank of St. Louis
Anthony M. Solomon, President
Federal Reserve Bank of New York
_ _All
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Introduction
We are pleased to have this opportunity to
contribute to your examination of the activities and
policies of the Federal Reserve district banks and their
implications for monetary policy.
After consulting
with the Subcommittee, we are presenting the views of
all five of us in a joint statement on the following
issues:
(1) pricing of Federal Reserve services and
related matters;
(2) difficulties related to the expansion of
reserve requirements;
(3) cooperation between the Reserve Banks on
the one hand and the commercial banks
and thrifts on the other hand; and,
(4) matters related to the Reserve Bank boards
of directors, including the representation
of women, minorities, and representatives
of thrift institutions on the boards, and
their role in the formulation of policy.
The other areas of questioning relate more to
individual Reserve Bank activities and our own opinions
on various issues related to monetary policy.
Accordingly,
in addition to this joint statement we are each prepared
to testify separately regarding these latter issues.
Pricing of Federal Reserve Services
As the Subcommittee knows, the Monetary Control
Act of 1980 (MCA) mandated among other things that all depository institutions have access to Federal Reserve Bank payment
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2
services, and that the Federal Reserve Banks charge
explicit fees for such services.
The MCA further requires
that, over the long run, such fees be set in such a way
as to recover the full costs incurred by the Reserve Banks
in providing these services--including the so-called
"private sector adjustment factor" (PSAF).
The MCA
specifies that the Federal Reserve should set its fees
giving due regard to "competitive factors and the
provision of an adequate level of such services nationwide."
Finally, the MCA requires that the Fed price (or
eliminate) Federal Reserve float.
The legislative history of the MCA suggests that
our services should be priced in such a way as to encourage
competition and to enhance the overall efficiency of the
payments mechanism.
In this context, we believe that
it is important that these specific mandates of the MCA
also be viewed in the larger context of the Federal Reserve's
traditional and historical public responsibilities relating
to the safety and integrity of the payments mechanism.
Explicit pricing of Federal Reserve payments
services was phased in on a service-by-service basis over
the 12-month period ending January 1982.
Thus, all payments
services were explicitly priced within five months of the
date specified for beginning the implementation of pricing.
Similarly, since the MCA was signed into law, Federal Reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3
float has been reduced from about $4.9 billion to
$1.8 billion.
This reduction has increased our payments
to the U.S. Treasury by about $350 million.
The initial pricing of Federal Reserve services
posed a host of difficult questions and issues for the
Federal Reserve Banks.
Not the least of these was the
impossibility of our prejudging, with any degree of
precision, the timing and magnitude of volume adjustments
that would accompany the introduction of explicit prices
for Fed services.
Obviously, shifting patterns of volume
would have important implications for the nature and speed
of resource adjustments made by the Reserve Banks, in the
wake of pricing, as well as for our ability to meet certain
of the specific mandates of the MCA.
In fact, the aggregate volume loss incurred by
the Reserve Banks since the advent of pricing has been
relatively modest, although there have been fairly pronounced
differences from one Fed office to the next.
For all
services at all Federal Reserve offices, the overall drop
in volume has been close to 20 percent.
However, when
allowance is made for volume shifts among the different
Reserve Bank "products," as well as differing patterns
of resource utilization at the Reserve Banks, the volume
decline is more modest, on the order of 15 percent.
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4
In the check processin
area, which accounts
for about three-fourths of the total cost of all priced
services, we have seen check processing volume decline
by a similar amount, although about half of the decline
in processed check volume was offset by a rise in "fine
sort" or packages of sorted checks handled by the
Reserve Banks.
In addition, the rapidity with which
check volume has fallen off, and the unevenness in this
trend among the Federal Reserve offices, suggests to us
that much of the decline has resulted from the establishment by the commercial banks of local clearing arrangements.
This development, which contributes to the overall
efficiency of the payments mechanism, has long been
favored by the Reserve Banks.
Looking at the overall cost-revenue picture,
the results to date are mildly encouraging.
In the early
months of pricing, the Reserve Banks as a group encountered
a fairly sizable gap (reaching almost 30 percent) between
total costs (including PSAF) and revenues.
That gap
reflected a combination of factors including volume losses,
shifts in the composition of processed volume, the problems
inherent in making resource adjustments in the short run
and some of the inherent difficulties in the initial setting
of prices.
appreciably.
More recently, the revenue gap has narrowed
For example, we tentatively estimate the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5
revenue gap for the three months ending in August to
average about 15 percent.
Thus, based on these preliminary
data, the Banks as a group are covering all of their actual
costs, but are not yet recouping the 16 percent private
sector adjustment factor.
We anticipate a further narrowing
of the remag gap over the closing months of this year
and the elimination of the gap during 1983.
The progress that has been made to date in
narrowing the cost/revenue gap reflects a three-pronged
program aimed at cost containment, the repricing of our
services, and efforts to better adapt our services to the
needs of depository institutions.
In all of this, the
Federal Reserve remains sensitive to its underlying
obligation to work toward fostering greater efficiency in
the payments mechanism and to its ongoing public responsibes regarding the payments system.
In this connection, we would now like to address
one specc matter related to pricing in which this
Subcommittee has expressed a particular interest, namely
the effects of pricing on Reserve Bank employment.
Effect of Pricing on Reserve Bank Employment
At the outset, we should note that long before
passage of the MCA and the implementation of pricing for
Reserve Bank services, the Federal Reserve Banks had undertaken major cost containment efforts.
To a considerable
extent, these efforts were spurred by technological advances
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
6
that laid the groundwork for significant improvements in
"back office" operations.
At the Reserve Banks, the
emphasis has been on high-speed equipment for processing
checks and currency and the adaptation of state-of-the-art
telecommunications technology to our funds and securities
transfer services.
Through these efforts, the Reserve
Banks have been able to achieve major reductions in the
real unit costs of providing services between 1974 and 1980.
These developments have served to enhance the
efficiency of the payments mechanism.
The associated
containment of operating costs has also worked to increase
the payments made annually to the United States Treasury.
The emphasis the Reserve Banks have placed on
improving the efficiency of our back office operations has,
of course, resulted in substantial reductions in employment.
For example, between 1974 and 1980, total Federal Reserve
employment in these areas fell by more than 17 percent.
Since the onset of pricing in 1981, employment in check
processing alone has been reduced by nearly 13 percent,
or 720 people on a Systemwide basis, and we would expect
further, although more modest, reductions in the months
ahead.
These employment reductions have been achieved in
a manner that sought--and we believe successfully--to minimize the impact of these dislocations on our employees.
objective has been accomplished through a combination of
This
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
attrition, retraining and reassignment of employees in
the affected departments to other areas of our operations
and voluntary separations supported by early retirement
provisions, severance pay, and assistance in finding other
employment.
While it is difficult to be precise, we
believe it is fair to state that normal employee turnover
and attrition have accommodated the vast majority of the
workforce reductions that have occurred in the Reserve
Banks, not just in the post-pricing periods, but for the
post-1974 period as a whole.
In the foregoing remarks, we have outlined with
a necessarily broad brush the initial experience of the
Federal Reserve Banks in operating in a priced service
environment.
What is not and cannot be captured in such
a summary is the scope of the challenges this transition
has represented to the Reserve Banks.
Indeed, while the
initial transition to a priced service environment has
been completed in a timely manner, much remains to be done.
For example, important (and controversial) changes
in check collection procedures that will significantly accelerate the collection of checks have recently been proposed
by the Federal Reserve Banks.
Similarly, in the near term,
we will be announcing the details of the next (and, we hope,
the last) phase of our float reduction and pricing efforts.
In these and other efforts, we will remain sensitive to the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
8
requirements of the MCA, the views and needs of a wide and
diverse group of depository institutions and to our continuing responsibilities regarding the efficiency and
integrity of the payments mechanism.
In all of this, we
believe good progress has been made in a relatively short
amount of time and that we are well on the road to fulfilling
the expectations embodied in the MCA.
We might add that to a significant degree our
progress to date has been facilitated by coordination and
cooperation among the 12 Federal Reserve Districts.
Each
Reserve Bank administers prices locally for certain services
furnished in its territory based on relevant volume, cost,
and other factors for those services.
Broader questions of
pricing policy and strategy are coordinated through the
System 'Pricing Policy Committee chaired by President Corrigan,
which includes both Federal Reserve Board and Reserve Bank
personnel, and the Conferences of Presidents and First Vice
Presidents of all 12 Reserve Banks.
Reserve Requirements
A major objective of the MCA was to extend
reserve maintenance and reporting reauirements to all
depository institutions in order to attain a higher degree
of control over the money supply.
This approach has
obviously entailed significant costs as well as benefits.
From the standpoint of the Reserve Banks, both the large
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
9
increase in the volume of data to be handled and the need
to service and collect data from a wide range of new
institutions--most of them very small and with differing
financial structures--led to a substantial increase in
resources dedicated to this activity--both human and
computer.
These additional costs to the System were a
natural consequence of the imposition of universal reserves.
As for those depository institutions that were
subjected to reserve requirements for the first time,
the additional burdens imposed upon them fall into two
broad categories:
the cost of holding reserves in the
form of non-interest bearing assets, and the operating
costs associated with reporting requirements.
We recognized
early on that relatively little additional improvement in
monetary control would result from imposing these burdens
on the thousands of very small institutions; thus, there
has been a broad consensus within the Federal Reserve-as, we believe, in the Congress as well--that the smaller
institutions be exempted from the more burdensome aspects
of reserve requirements where possible.
The only question
is how best to do this.
To date, the potential problem posed by the
imposition of reserves on these smaller institutions has
been held to a minimum.
The Congress made an important
contribution in this regard by allowing for the orderly
phase-in of reserves for nonmembers.
We have seen a high
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
10
degree of cooperation among the nonmember banks, the thrifts,
the credit unions and their respective primary supervisors
in smoothing the phase-in of reporting and reserve requirements
For our part, the Reserve Banks have made intensive
efforts to minimize the burdens as well.
We have permitted
the small institutions--under $15 million in deposits--that
are not exempt from reporting requirements to file reports
with us quarterly--rather than weekly--at their option.
We have also held field meetings which have enabled us to
make contact with literally thousands of institutions to
explain reserve requirements and our reporting and reserve
maintenance procedures.
As you know, the Federal Reserve Board has been
providing an administrative deferral from reserve and
reporting requirements for institutions with less than
$2 million in deposits measured as of year-end 1979.
This
administrative deferral is scheduled to expire at the end
of this year and we believe it should be replaced by
legislative action of a more permanent nature.
In this
regard, we are pleased that the House has acted favorably
upon the proposed Reserve Requirements Reform Act of 1982
(H.R. 6222) which represents a sensible approach to this
matter, in our view.
It provides that the first $2 million
in reserveahle deposits for all institutions (with an
annual adjustment) would he exempt from reserve requirements.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
11
In testifying on the Senate proposal toward the
same ends last fall, Chairman Volcker indicated that
either the $5 million deposit size cutoff in that bill,
or exempting the first $2 million in reserveable liabilities-the approach taken in your bill, Mr. Chairman--was acceptable.
More recently, in testimony before this Subcommittee
regarding your proposal, Vice Chairman Martin expressed the
Board's support for a legislative solution to replace its
administrative exemption.
To put the matter into perspective, of some
40,000 depository institutions in the United States only
a bit more than half are presently filing regular deposit
reports.
(Substantially all of the non-reporting institutions
are credit unions.)
Furthermore, approximately 80 percent
of the institutions that do report need not actually hold
reserves with the Reserve Banks.
This is because their
reserve requirements can be and are being met by their
holdings of vault cash.
In a sense, no additional monetary
cost is being imposed on them--other than the cost of
reporting itself.
In the absence of legislation along the lines of
the bill passed by the House last week, the result would
be that an additional 18,000 depository institutions-44 percent of the total of such institutions--would have
reserve requirements extended to them when the Board's
administrative exemption expires.
Under your proposal,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_
12
all of these institutions, plus an estimated 6,000 that
are presently subject to reserves, would be exempt.
In
our view, this should be quite adequate to alleviate
the burdens on the smaller institutions, while not
compromising in an important way the Federal Reserve's
degree of control over the money supply.
On balance,
although other approaches are obviously possible, we
think this approach is a good one and we would endorse
its adoption by the Senate.
Degree of Cooperation Between the
Reserve Banks and the Commercial Banks
and Thrift Institutions
The MCA brought about very significant changes
in the relationship between the Federal Reserve System
and the thrift institutions, as well as large numbers of
commercial banks that had not previously been members of
the Federal Reserve.
We recognized from the outset the
need to open lines of communication to these institutions
and develop working relationships as quickly as possible.
We also recognized the desirability of incorporating their
views and concerns more explicitly into the deon-making
processes of the Federal Reserve System.
One area in which this can and should be
achieved
sS
providing for representation of these
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
13
institutions on Reserve Bank and branch Boards of
Directors.
We would like to briefly review some of
the mechanisms that are in place already.
Thrift Institutions Advisory Committees
To date, eight of the Reserve Banks have formed
some type of advisory committee to explicitly solicit the
views and concerns of thrifts and other nonmember depository
institutions.
While the exact format and composition of
these committees vary among the different Reserve Banks,
in general they all provide a forum for the discussion of
the broadest possible range of issues of mutual .interest
to the Federal Reserve and the affected institutions.
By
and large, membership of these committees consists of
senior officials of savings and loan associations, mutual
savings banks, and credit unions.
Ih some cases, officers
of the respective trade associations participate as well.
Senior officials of the Reserve Banks meet with these
advisory groups on a periodic basis, and a full interchange of information and advice is encouraged.
These
sessions typically deal with matters such as Reserve Bank
services, discount window administration, and issues arising
in connection with the work of the Depository Institutions
Deregulation Committee.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
14
Financial Institutions'
Visiting Program
All 12 of the Federal Reserve Banks have
established formal programs under which their officers or
designated representatives make periodic visits to the
commercial banks and thrift institutions in their Districts.
Many purposes are served by these visits, including:
informing the institutions and their managements, many of
whom have little or no prior direct experience with the
Federal Reserve, of our policies and operations; discussing
and explaining the services offered by the Reserve Bank and
the related prices; assisting .in the resolution of operating
problems that may arise in the use of Reserve Bank services
(this is obviously especially important for our many firsttime users); developing a feel for the effect of Federal
Reserve policies at the "micro" level, in terms of the
day-to-day experiences of small depository institutions;
and ascertaining the views of their officers regarding
current trends and developments.
Meetings for Chief Executive Officers
Shortly after the passage of the MCA, the Reserve
Banks began a variety of educational meetings for nonmember
commercial banks and thrift institutions to explain the
implications of that major legislation and to open discussions
with senior officials of the thrift industry.
On an ongoing
basis, about half the Reserve Banks regularly sponsor
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
15
meetings for chief executive officers of various types of
financial institutions, including the thrifts.
To sum up, we have made much progress in
establishing lines of communication with thrift institutions
and nonmember banks.
Just as important, we have established
close and cooperative relationships with the Federal Home
Loan Banks and other primary regulatory authorities for
these institutions.
Obviously, much remains to be done,
and the mutual learning process goes on--but we are confident
that we are moving in the right direction.
Reserve Bank Boards of Directors
The final topic for which we felt a joint response
was appropriate is the composition of the Reserve Banks'
Boards of Directors, proposals for increasing the representation of thrift institutions on the Boards, and the role
of the Boards in formulating policy.
With respect to the present composition of the
Reserve Bank Boards, in terms of representation of women,
minorities, and the thrift industry, we are submitting the
relevant data from all 12 Reserve Banks and their branches
as an exhibit with this statement.
The exhibit sets forth
the names and primary business affiliations of all of the
directors of the Reserve Banks and their branches, and also
gives breakdowns according to the occupations currently
represented, the number of women and minorities on the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
16
Boards, the representation of women and minorities in
each year since 1975, and the representation of thrift
institutiS ns.
While these data should furnish the "long"
answer to your question, we would like now to present the
"short" answer highlighting the more significant points.
First, a very broad spectrum of interests and
S.ckgrounds is represented on the boards of the Reserve
Banks and their branches.
The occupations occurring most
frequently are, in descending order, banking, manufacturing,
education, agriculture, real estate and construction,
wholesale and retail trade, non-bank financial institutions,
and services.
Over the 1975 to 1982 period, progress
•
has been made in adding women and minorities to our
boards:
The number of women on Bank and branch
boards has grown from four in 1975, about
one percent of all Reserve Bank directors
to 30 in 1982, for about 11 percent of the
total. This includes 11 women on the
Reserve Bank head office boards, of which
two presently serve as Chairpersons.
There were 13 minority group members, or
5 percent of the total in 1975 and 16 minority
group members, or 6 percent of the total this
year, with somewhat higher representation
in the 1979-1981 period. One minority group
member presently serves as a Deputy Chairman
of a Reserve Bank board.
We believe there is room for improvement in
representation of minority group members and women on the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
17
Reserve Bank and branch Boards of Directors, and we
consider increased participation by both groups to be an
objective we are committed to achieving.
In this regard,
you have asked us to discuss our plans for achieving
increases in 1983 and beyond.
First, by way of background it should be noted
that there are some practical limitations on the rate at
which progress can be achieved in increasing the representation of women and minorities.
Since the three
directors within each Class serve staggered terms,
normally only one appointment will be made each year in
each Class.
Also, six of the nine directors on the
Reserve Bank boards--those in Classes A and B--are elected
by the member institutions, and the degree to which they
solicit recommendations from the Reserve Bank management
varies from District to District.
However, the Board of
Governors does request our recommendations in fulfilling
its reponsibility to appoint the Class C directors, and
this has been a primary vehicle for accommodating additional representation for women and minorities.
On the other hand, a majority of the directors
of the Reserve Bank branches are appointed directly by
the Reserve Bank boards, with the remainder appointed
by the Board of Governors, and the Federal Reserve Act
does not specify any particular qualifications or other
criteria for their appointment.
In addition, there are
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
18
25 Federal Reserve Bank branches altogether, as compared
with 12 parent Federal Reserve Banks.
Finally, the
branches by and large serve smaller geographic regions
than do their parent banks.
With all of these considera-
tions in mind, we regard the branch boards as a logical
means for increasing the representation of women and
minorities, as well as of thrift institutions.
At the present time, some of the Reserve Banks
have completed their plans regarding appointment of branch
directors for 1983, as well as for recommendations to the
Board of Governors regarding both branch and Class C
appointments to the Reserve Bank boards.
However, we
understand that some other Reserve Banks have not completed their plans, and we can thus reply only in general
terms.
But our understanding is that among those that
have established plans, the proposed representation of
women and minorities--as well as of thrift institutions-will generally be maintained or increased.
Thrift Institutions
The representation of thrift institutions poses
a somewhat different question from that of women and
minorities.
At present, there are no representatives of
thrift institutions on Reserve Bank boards, and only
5 on branch boards.
There are, however, one Reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
19
Bank director
and six branch directors who are affiliated
with thrift institutions in a significant capacity-director, advisory director, trustee, or officer--but not
as their primary occupation.
We in the Federal Reserve are in general agreement
that thrift representation should be increased, especially
now that the thrift institutions hold reserves and have
access to Federal Reserve services under the MCA.
Over the
past several years, the Reserve Banks and the Board of
Governors have examined a variety of proposals to achieve
this objective.
On balance, we would favor the approach
outlined below.
First, there is obviously room to increase the
representation of thrift institutions on the branch boards.
We believe this approach is especially advantageous for
the smaller thrift institutions that furnish credit, and
may seek to use Reserve Bank services, in the regional
territories served by the Reserve Bank branches.
Since
there are no statutory restrictions on the qualifications
of branch directors, the branch boards provide a logical
way to increase their representation in a straightforward
manner.
Second, we favor increased thrift representation
on the Reserve Bank head office boards as well.
In our
judgment, this can be achieved through the present
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
20
structure, by means of the Reserve Banks making
recommendations to the Board of Governors for appo
ment of thrift industry representatives in Class C.
Under the Federal Reserve Act, including the 1977
amendments, the Class C directors are appointed to
represent the public generally, giving due--but not
exclusive--consideration to the interests of agriculture,
commerce, industry, services, labor, and consumers.
In our judgment, these criteria are broad enough to
encompass thrift institutions, and do not impose any
legal impediment to their appointment through Class C.
Historically, the Board of Governors had
taken the stance that as a matter of policy representatives of institutions engaged in any form of lending
should not be included in Class C, since the interests
of lending institutions were already represented by
the Class A directors.
However, with the enactment of
the 1977 amendments to the Federal Reserve Act we have
noted, and especially the MCA, this consideration no
longer carries the weight that it did in the early days
of the Federal Reserve System.
Accordingly, we under-
stand that the Board as a general matter is willing
to appoint thrift industry representatives as Class C
directors.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
21
Role of Directors in Policy Formulation
Finally, we would like to briefly discuss the
role of our directors in the formulation of policy.
As
you know, the Reserve Bank directors have the initial
responsibility for setting the discount rate, subject to
review and determination by the Board of Governors.
In
discharging this responsibility, the directors regularly
report on, and take into account, general economic and
business conditions as well as economic conditions in
their local areas.
The Boards of Directors may, if they
wish--and often do--communicate these observations
directly to the Board of Governors in connection with
their actions on the discount rate.
Furthermore, in our experience, the directors
often use the opportunity of a discount rate discussion
to comment on underlying economic conditions, monetary
policy, fiscal policy, and related matters.
Indeed, it
is necessary for them to consider and discuss these
matters in order to make well-informed decisions regarding
the discount rate, since that policy tool does not operate
in a vacuum.
The directors' reports on business conditions
are used by most of the Reserve Banks in compiling the
"Current Economic Comment by District"--which we refer
to colloquially as the "Red Book"--a briefing document
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
22
given to FOMC members, in advance of each FOMC meeting.
The "Red Book" is prepared for the purpose of aiding the
FOMC in identifying economic and financial developments
in addition to economic expectations in various industries
and regions of the country.
One other way in which the directors serve as
a conduit for regional input to national policy formulation
is through the Conference of Chairmen and Deputy Chairmen
of the Federal Reserve Banks.
This group meets semi-
annually with the Federal Reserve Board in Washington,
affording an opportunity for the interchange of views.
It might be added that these interchanges
operate in both directions.
Their ongoing contact with
Federal Reserve policy formulation through discussion
of the discount rate, as well as through the other
avenues we have noted, enables our directors to communicate the overall thrust of Federal Reserve policy in
general terms to their respective business and regional
communities.
Finally, it should be mentioned that the
directors play a significant role in the oversight of
the management and operation of the Reserve Banks.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
23
They bring the knowledge and expertise garnered in their
own business and community activities to such matters as
reviews of budgets, expenses and major capital acquisitions,
development of personnel and compensation policy, appointment of Reserve Bank officers, and operating and financial
audits of Reserve Bank operations.
Exhibit I
-1FEDERAL RESERVE BANK OF BOSTON
Term
expires
Dec. 31
Service
Beoan
President
Bank of Maine, N.A.
244 Water Street
Augusta, Maine 04330
1982
1-1-80
Mr. Henry S. Woodbridge, Jr. 1
12-11-28/$1.7b
401-278-8410
Chairman of the Board and
Chief Executive Officer
Rhode Island Hospital
Trust National Bank
One Hospital Trust Plaza
Providence, Rhode Island 02903
1983
1-1-81
Mr. James Stokes Hatch
8-22-43/$15mm
203-824-5423
3
President
Chief Executive Officer
c/o The Canaan National Bank
Main Street
Canaan, Connecticut 06018
1984
1-1-82
Mrs. Carol R. Goldberg
3-25-31/$345m
617-463-4323
2
Senior Vice President
The Stop & Shop Companies, Inc.
P.O. Box 369
Boston, Massachusetts 02101
1982
8-3-78
Mr. Joseph A. Baute
1-30-28/$72m
603-352-4448
1
Chairman and
Chief Executive Officer
Markem Corporation
150 Congress Street
Keene, New Hampshire 03431
1983
1-1-81
Dr. George N. Hatsopoulos
1-7-27/$250m sales
617-890-8700
3
Chairman of the Board
and President
Thermo Electron Corporation
101 First Avenue
P.O. Box 459
Waltham, Massachusetts 02254
1984
3-8-82
Class A:
Group
Mr. H. Alan Timm
* 1-15-26/$70m **
207-622-7161
2
Class' B:
1 - Member, Executive Committee,
Conference of Chairmen
2 - Chairman, Executive Committee,
Conference of Chairmen
3 - Vice Chairman, Executive Committee,
Conference of Chairmen
**
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Date of birth.
Dollar amounts represent ass
ets of banking instituti
ons, and assets
or annual sales of non
banking institutions.
- Federal Reserve Bank of Boston (Continued)
Class C:
Term
expires
Dec. 31
Group
Service
Becan
Mr. Thomas I. Atkins
3-2-39/Not available
212-245-2100
DEPUTY CHAIRMAN
General Counsel
National Associ!tion for the
Advancement of Colored People
1790 Broadway
New York, New York 10019
1982
1-1-80
Mr. Michael J. Harrington
9-2-36/Not available
617-246-3420
Harrington, Keefe, and
Schork, Inc.
40 Salem Street
Lynnfield, Massachusetts
1983
1-1-81
1984
1-1-79
Mr. Robert P. Henderson
4-9-31/$173m
617-276-3003
CHAIRMAN
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
01940
Chairman and
Chief Executive Officer
Itek Corporation
10 Maguire Road
Lexington, Massachusetts 02173
.1 I
3FEDERAL RESEJNE BANK OF NEW YORK
Term
expires
Dec. 31
Class A:
Service
Began
Mr. Gordon T. Wallis
2- 15-19/$16.7 b
212-487-6330
1
Chairman of the Board
Irving Trust Company
One Wall Street
New York, New York 10015
1C:=9
1-15-80
Mr. Peter D. Kiernan
8-1 5-23/$2.35
518-447-44P3
2
Chairman and President
Norstar Bancorp Inc.
1450 Western Avenue
Albany, New York 12203
1983
1-01-81
Mr. Robert A. Rough
5-9-39/$78m
201-948-3300
3
President
The National Bank of Sussex
County
Branchville, New Jersey 07826
1924
1-1-82
1
President
Union Pacific Corporation
345 Park Avenue
New York, New York 10154
1982
8-6-80
2
President and
Chief Executive Officer
International Business Machines
Corporation
Old Orchard Road
Armonk, New York 10504
1923
1-14-81
3
Chairman of the Board
Allied Corporation
P.O. Box 3000 R
Morristown, New Jersey
1934
1-01-92
Paul Garrett Professor
of Public Policy and
Business Responsibility
Columbia University
703 Uris Hall
New York, New York 10027
1932
6-17-77
Senior Partner
Shearman and Sterling, Attorneys
53 Wall Street
New York, New York 10005
1933
2-6-76
Class B:
Mr. :1 1il1iam S. Cook
09-06-22/S6.2b
212-826-8203
John R. Opel
1-5-25/S27b
914-765-4750
Mr. Edv;ard L. Hennessy, Jr.
3-22-28/S5.5b
201-455-4811
07960
Class C:
Dr. Boris Yavitz
6-4-23/1,250 Students
212-280-3401
DEPUTY CHAIRMAN
Robert H. Knight, Es:.
2-27-19/2nd largest in U.S.
212-483-1000
CHAIRMAN
Mrs. Gertrude G. Michelson
6-3-25/$2. 7b
212-560-4312
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Senior Vice President
R. H. Macy & Company, Inc.
151 W. 34th Street
Naw York, New York 10001
2-10-78
BUFFALO BRANCH
Appointed by Federal Reserve Bank:
Miss M. Jane Dickman
8-14-23/Among top ten
716-856-6565
Partner
Touche Ross & Co.
Main Seneca Building
237 Main Street - Suite 1602
Buffalo, New York 14203
Mr. Arthur W. Richardson
12-29-26/$1.3b
716-262-2982
Chairman of the Board
Chief Executive Officer
Security Trust Company
1 East Avenue
Rochester, New York 14638
Mr. Carl F. Ulmer
11-17-26/$32m
716-549-1000
President
The Evans National Bank of Angola
Box 191
Angola, New York 14006
Mr. Edward W. Duffy
4-30-26/$18.4b
716-843-5881
Chairman of the Board
Marine Midland Bank, N.A.
One Marine Midland Center
Buffalo, New York 14240
Term
expires
Dec. 31
Service
Becan
1982
1-01-77
1932
1-01-80
1983
1 984
1-01-82
Appointed by Board of Governors:
Mr. Frederick D. Berkeley, III
8-7-28/$28.7m
716-343-2216
CHAIRMAN
Mr. John R. Burwel/
10-25-39/$2.1m
716-232-2450
Mr. George L. Wessel
10-2-23/122,000 members
716-852-0375
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Chairman of the Board and
1982
President
Graham Manufacturing Company, Inc
.
26 Rarvesl.er Avenue
Batavia, New York 14020
President
Rollins Container Corporation
100 Kassau Street
Rochester, %tie York 14605
President
Buffalo AFL/C10 Council
686 Ellicott Square Building
Buffalo, Kew York 14203
2-02-77
1983
1-01-79
1984
1-01-79
-5FEDERAL RESERVE BANK OF PHILADELPHIA
Class A:
Group
Mr. Donald J. Seehold
9-6-22/$51.6m
717-275-3740
3
Mr. Roger S. Hillas
4-11-27/$2.7b
215-585-5228
Mr. Douglas Eugene Johnson
6-15-39/$185.5m
201-892-1900 x358
Term
expires
Dec. 31
1
2
President
The First National Bank of
Danville
Corner Mill and Bloom Streets
Danville, Pennsylvania 17821
Chairman and President
Provident National Bank
P.O. Box 7648
Philadelphia, Pennsylvania
1982
(P.O.
Service
Regan
6-25-78
Rox 279)
1983
1-01-81
1984
1-01-82
19101
Chairman and President
Ocean County National Bank
501 Arnold Avenue
Point Pleasant Beach, New Jersey
08742
Class B:
Mr. Eberhard Faber, IV
10-22-36/$16m
717-474-6711
1
Chairman of the Board and
Chief Executive Officer
Eberhard Faber, Inc.
Crestwood
Wilkes-Barre, Pennsylvania
1982
1-01-80
18773
Mr. Harry A. Jensen
7-17-18/$891m
717-397-0611, X2212
2
President and
1983
1-01-80
Chief Executive Officer
Armstrong World Industries, Inc.
Liberty and Chariot Streets (P.O.
Box 3001)
Lancaster, Pennsylvania 17604
Mr. Richard P. Hauser
12-20-34/$2.4b
215-422-1885
3
Chairman and
Chief Executive Officer
John Wanamaker
1300 Market Street
Philadelphia, Pennsylvania
1984
1-01-79
1982
1-01-77
1983
1-01-81
1984
1-01-82
19101
Class C:
Dr. Jean A. Crockett
4-20-1 9/15,854 Students
215-243-7637
CHAIRMAN
Robert M. Landis, Esquire
12-21-20/188 Lawyers
215-972-3765
DEPUTY CHAIRMAN
Mr. George E. Bartol, III
4-20-21/$49.4m
215-732-7700
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Chairman
Professor of Finance
Department of Finance
Wharton School
University of Pennsylvania
Philadelphia, Pennsylvania
Partner
Dechert Price & Rhoads
3400 Centre Square West
1500 Market Street
Philadelphia, Pennsylvania
19104
19102
Chairman of the Board
Hunt Manufacturing Cor*any
Suite 1300, 1405 Locust Street
MI\
-6FEDERAL RESERVE BANK OF CLEVELAND
Class A:
Term
expires
Dec. 31
Group
Service
Beclan
Mr. John W. Alford
10-21-12/$248.5m
614-349-8451
2
Chairman of the Board and
Chief Executive Officer
The Park National Bank
50 North Third Street
Newark, Ohio 43055
1982
1-01-77
Mr. J. David Barnes
8-23-29/$14.9b
412-232-4961
1
Chairman of the Board
Mellon Bank, N.A.
Mellon Square
Pittsburgh, Pennsylvania
1983
1-01-81
Mr. Raymond D. Campbell
15230
3
Director
The Oberlin Savings Bank Co.
Oberlin, Ohio 44074
1984
1-01-82
Mr. John W. Kessler
3-7-36/Not available
614-224-9561
2
President
John W. Kessler Company
100 East Broad Street
Suite 1501
Columbus, Ohio 43215
1982
1-01-80
Mr. E. Mandell de Windt
3-31-21/$3.4b
216-523-4617
1
Chairman of the Board
Eaton Corporation
100 Erieview Plaza
Cleveland, Ohio 44114
1983
1-01-81
Mr. Richard D. Hannan
9-16-30/
513-272-1111
3
Chairman of the Board and
President
Mercury Instruments, Inc.
3940 Virginia Avenue
Cincinnati, Ohio 45227
1984
1-01-82
Mr. W. H. Knoell
8-1-24/$779.3m
412-343-4626
DEPUTY CHAIRMAN
President and
Chief Executive Officer
Cyclops Corporation
650 Washington Road
Pittsurigh, Pennsylvania 15228
1983
1-15-81
Mr. John D. Anderson
5-17-22/$800m
419-893-5050
Senior Partner
The Andersons
P.O. Box 119
Maumee, Ohio 43537
1982
1-01-81
Mr. J. L. Jackson
1-31-32/$55m
606-231-5310
CHAIRMAN
Executive Vice President and
President - Coal Unit
Diamond Shamrock Corporation
1200 First Security Plaza
Lexington, Kentucky 40507
1984
1-01-79
Class B:
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
CINCINNATI BRANCH
Appointed by Federal Reserve Eank:
Term
expires
Dec. 31
Service
Sedan
Mr. Oliver W. Birckhead
6-20-22/$1.2b
513-651-8900
Chairman of the Board and
Chief Executive Officer
The Central Trust Company, N.A.
Fifth and Main Streets
Cincinnati, Ohio 45202
1982
1-01-80
Mr. O. T. Dorton
6-15-20/$69m
606-789-4001
President
Citizens National Bank
P.O. Box 670
Paintsville, Kentucky 41240
1983
1-01-81
Mr. Richard Fitton
4-18-27/$386m
513-867-4711
President and
Chief Executive Officer
First National Bank of
-Southwestern Ohio
P.O. Box 476
Hamilton, Ohio 45012
1984
1-01-81
Mr. Sherrill Cleland
9-21-24/1,250 Students
614-373-4643
President
Marietta College
Marietta, Ohio 45750
1984
1-01-81
Sister Grace Marie Hiltz
4-20-20/3,500 Beds
51 3- 922-9775
President
Sisters of Charity Health Care
Systems, Inc.
345 Neeb Road
Cincinnati, Ohio 45238
1982
1-01-80
Mr. Clifford R. Meyer
9-25-23/Not available
513-841-8225
CHAIRMAN
President and Chief Operating
Officer
Cincinnati Milacron Inc.
4701 Marburg Avenue
Cincinnati, Ohio 45209
1983
5-01-81
Mr. Don Ross
3-29-27/Not Available
606-299-5334
Owner
Dunreath Farm
6335 Winchester Pike
Lexington, Kentucky 40509
1984
1-01-82
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-8-
PITTSBURGH BRANCH
Term
expires
Dec. 31
Appointed by Federal Reserve Bank:
Mr. William D. McKain
3-29-27/$83.3m
304-232-0110
President
Wheeling National Bank
1145 Market Street
Wheeling, West Virginia
Service
Becan
1982
1-01-80
26003
Mr. Ernest L. Lake
12-27-22/$42m
814-725-4541
President
The National Bank of North East
P.O. Box 270
North East, Pennsylvania 16428
1983
1-01-81
Mr. Robert C. Mils=
12-15-24/$6.5b
412-355-2251
President
Pittsburgh National Bank
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15222
1984
1-01-82
Mr. James S. Pasman, Jr.
12-20-30/$5.2b
412-553-4715
Executive Vice President
of Finance
Aluminum Company of America
1501 Alcoa Building
Pittsburgh, Pennsylvania 15219
1984
1-01-82
,1982
2-08-80
1983
1-08-80
1984
1-01-82
Appointed by Board of Governors:
Dr. Robert S. Kaplan
5-2-40/5,500 Students
412-578-2265
Dean
Graduate School of Industrial
Administration
Carnegie-Mellon University
Pittsburgh, Pennsylvania 15213
Mr. Milton G. Hulme, Jr.
10-12-26/$243m
412-273-5268
CHAIRMAN
President and
Chief Executive Officer
Mine Safety Appliances Company
600 Penn Center Boulevard
Pittsburgh, Pennsylvania 15235
Mr. Quentin C. McKenna
9-2-26/$312m
412-539-5221
President and
Chief Executive Officer
Kennametal Inc.
P.O. Box 231
Latrobe, Pennsylvania 15650
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FEDERAL RESERVE BANK OF RICHMOND
Term
expires
Dec. 31
Class A:
Service
Began
Mr. William M. Dickson
11-21-29/541 .9m
304-647-4500
2
President & Senior Trust Officer
1982
The First National Bank in Ronceverte
P.O. Drawer 457
Ronceverte, West Virginia 24970
1-01-80
Mr. J. Banks Scarborough
8-20-28/527m
803-346-3181
3
Chairman and President
Pee Dee State Bank
P.O. Box 458
Timmonsville, South Carolina
1-01-81
Mr. Joseph A. Jennings
8-12-20/$3.8h
804-782-5202
1983
29161
1
Chairman and Chief
Executive Officer
United Virginia Bankshares Inc.
and United Virginia Bank
P. O. Box 26665
Richmond, Ya 23261
1984
1-01-82
Mr. James A. Chapman, Jr.
9-30-21/S30.2m
803-472-2121
3
Chairmen of the Board and
Chief Executive Officer
Inman Mills
P.O. Box 207
Inman, South Carolina 29349
1982
1-01-80
Mr. Leon A. Dunn, Jr.
10-6-38/S1 5.4m
919-443-4101
2
Chairman, President, and
Chief Executive Officer
Guardian Corporation and
Subsidiaries
P.O. Box 4305
Rocky Mount, North Carolina
1983
1-01-81
Chairman of the Board and
Chief Executive Officer
Commercial Credit Company
300 St. Paul Place
Baltimore, Maryland 21202
1984
1-01-82
Mr. Paul E. Reichardt
4-26-18/$479m
202-624-6191
DEPUTY CHAIRMAN
Chairman of the Board
Washington Gas Light Company
1100 H Street, N.W.
Washington, D.C. 20080
1982
7-20-79
Dr. Steven Muller
11-22-27/9,555 Students,
5555.2m
301-366-3590
CHAIRMAN
President
The Johns Hopkins University
Charles and 34th Streets
Baltimore, Maryland 21218
1983
1-1-78
Mr. William S. Lee, III
6-23-29/$6.1b
704-373-4283
Chairman of the Board and
Chief Executive Officer
Duke Power Company
P. O. Box 33189
Charlotte, North Carolina 28242
Class B:
Mr. Paul G. Miller
12-13-22/$5.3b
301-332-3760
1
27801
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1984
1-01-82
-10-
BALTIMORE BRANCH
Term
expires
Dec. 31
Appointed by Federal Reserve Bank:
Service
Bevan
Mr. Hugh D. Shires
4-14-18/$116.2m
301-777-4600
Senior Vice President
First Mational Bank of
Maryland
P.O. Box 1685
Cumberland, Maryland 21502
1982
1-01-80
Mr. A. R. Reppert
3-4-19/$216.9m
304-624-3400
President
The Union National Bank of
Clarksburg
P.O. Box 2330
Clarksburg, West Virginia 26301
1982
1-01-77
Mr. Joseph M. Gough, Jr.
8-8-27/$65m
301-475-8081
President
The First National Bank of
St. Mary's
5 East Park Avenue
Leonardtolen, Maryland 20650
1983
1-01-73
Cr. Pearl C. Brackett
1-6-19/$6.3m
3017467-9905
Deputy Manager
Baltimore Regional Chapter of
American Red Cross
(MAILING ADDRESS:
4100 North Charles Street
Baltimore, Maryland 21218)
1984
1-01-78
Mr. Edward H. Covell
4-15-21/$18m
301-822-3000
CHAIRMAN
Vice President for Governmental
and Industry Affairs
Country Pride Foods Limited
P.O. Box 799
Easton, Maryland 21601
1982
1-01-80
Mr. Robert L. Tate
6-13-24/$25m
301-539-0787
Chairman
Tate Industries
601 W. West Street
Baltimore, Maryland
1983
1-01-81
1984
1-01-82
Appointed by Board of Governors:
Mr. Thomas H. Maddux
10-2-27
301-837-9550
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
21230
Executive Vice President and
Chief Operating Officer
Easco Corporation
201 North Charles Street
Baltimor,, Maryland 21201
-n-
CHARLOTTE BRANCH
Term
expires
Dec. 31
Auointed by Federal Reserve Bank:
Mr. W. B. Apple, Jr.
11-4-30/S54.2m
919-342-3346
President
First National Bank of Reidsville
P.O. Box 2037
Reidsville, North Carolina 27320
Mr. Marvin D. Trapp
12-24-29/Si 97m
803-775-1211
President and Chief Executive
1982
Officer
The National Bank of South Carolina
P. O. Drawer 1798
Sumter, South Carolina 29150
Mr. Nicholas W. Mitchell
5-31-13/S277m
919-725-5371
Chairman of the Board
Piedmont Federal Savings and
Loan Association
P.O. Box 215
Winston-Salem, North Carolina
Mr. Hugh M. Chapman
9-I1-32/S970m
803-765-8203
1982
1983
Service
Began
12-27-74
2-11-82
1-01-81
27102
Chairman of the Board
The Citizens & Southern rational
Bank of South Carolina
P.O. Box 727
Columbia, South Carolina 29222
1984
1-01-79
Dr. Naomi G. Albanese
10-17-16/950 Students
919-379-5980
CHAIRMAN
Dean
School of Home Economics
University of North Carolina at
Greensboro
Greensboro, Worth Carolina 27412
1982
1-01-77
Mr. Wallace J. Jorgenson
10-23-23/S7m+
704-374-3761
President
Jefferson-Pilot Broadcasting Co.
One Julian Price Place
Charlotte, North Carolina 28208
1983
1-01-82
Dr. Henry Ponder
3-28-28/2,000 Students
803-254-7253
President
Benedict College
Harden and Blanding Streets
Columbia, South Carolina 29204
1984
1-01-79
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
-12FEDERAL RESERVE BANK OF ATLANTA
Class A:
Term
expires
Dec. 31
Service
Beaan
Mr. Dan B. Andrews
7-13-27/$46m
615-446-5151
2
President
First National Bank
P.O. Box 666
Dickson, Tennessee 37055
1982
1-1-80
Mr. Hugh M. Willson
9-20-25/$22m
615-745-0261
3
President
Citizens National Bank
P.O. Box 220
Athens, Tennessee 37303
1983
1-1-78
Mr. Guy W. Botts
7-12-14/$3.7b
904-791-7714
1
Chairman of the Board
Barnett Banks of Florida, Inc.
P.O. Box 40789
Jacksonville, Florida 32231
1984
1_1_79
Mrs. Jean McArthur Davis
7-9-24/$12m
305-754-4521
3
President
McArthur Dairy, Inc.
6851 N.E. Second Avenue
Miami, Florida 33138
1982
12-1-77
Mr. Harold B. Blach, Jr.
10-29-31/$6m
205-322-3551
1
President
Blach's Inc.
1928 Third Avenue, North
Birmingham, Alabama 35203
1983
1-1-81
Mr. Horatio C. Thompson
8-5-14/$608m
504-775-6181
2
President
Horatio Thompson Investment, Inc.
P.O. Box 1027
Baton Rouge, Louisiana 70821
1984
2-16-79
Class B:
Class C:
a
Mr. John H. Weitnaver, Jr.
5-21-26/$205m in sales
404-586-2810
DEPUTY CHAIRKAN
Chairman and
Chief Executive Officer
Richway
P.O. Box 50359
Atlanta, Georgia 30302
1982
1-1-80
Mr. William A. Fickling, Jr.
7-23-32/$95m
912-742-1161
CHAIRMAN
Chairman and Chief Executive
Charter Medical Corporation
P.O. Box 209 Macon, Georgia 31202
1983
3-6-78
Mrs. Jane C. Cousins
6-29-24/300 licensed
salespersons
305-667-4815
President and
Chief Executive Officer
Merrill Lynch Realty/Cousins
5830 S.W. 73rd Street
Miami, Florida 33143
1964
1-8-82
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BIRMINGHAM BRANCH
Appointed by Federal Reserve Bank:
Mr. C. Gordon Jones
9-27-27/$85m
205-353-0941
President and
Chief Executive Officer
First National Bank of Decatur
P.O. Box 1488
Decatur, Alabama 35602
Miss Martha A. McInnis
7-28-37/Not available
205-277-7050
Executive Vice President
Alabama Environmental Quality
Association
3815 Interstate Court
Suite 202
Montgomery, Alabama 36109
Mr. Henry A. Leslie
10-15-21/$253m
205-265-8201
President and
Chief Executive Officer
Union Bank and Trust Company
P.O. Box 2191
Montgomery, Alabama 36197
Mr. William M. Schroeder
8-1-42/$26.6m
205-668-0711
Chairman and
President
Central State Bank
P.O. Box 180
Calera, Alabama 35040
Term
expires
Dec. 31
Service
Beaan
1982
1-1-80
1982
1-1-80
1983
1-1-81
1984
1-1-82
Appointed by Board of Governors:
Mr. William H. Martin, III
2-17-31/$26m
205-767-0330
CHAIRMAN
Mr. Samuel R. Hill, Jr.
5-19-23/14,000 Students
205-934-3493
Mr. Louis J. Willie
8-22-23/$20m
205-328-5454
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
President and
Chief Executive Officer
Martin Industries, Inc.
P.O. Box 128
Florence, Alabama 35630
President
University of Alabama in
Birmingham
Office of the President
University Station
Birmingham, Alabama 35294
1982
12-4-75
1983
1-1-81
Executive Vice President
1984
Booker T. Washington Insurance
Co.
P.O. Box 697
Birmingham, Alabama 35201
1-1-79
-14-
JACKSONVILLE BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Whitfield M. Palmer, Jr.
3-28-29/$25m in sales
904-732-2715
Chairman
Mid-Florida Mining Company
P.O. Box 367
Ocala, Florida 32670
1982
1-1-80
Mr. Billy J. Walker
3-4-31/$1.8b
904-358-6930
President
Atlantic Bancorporation
General Mail Center
Jacksonville, Florida 32231
1982
1-1-80
Mr. Gordon W. Campbell
8-17-32/$1.2b
813-224-5616
President &nd
Chief Executive Officer
Exchange Bancorporation, Inc.
P.O. Box 25900
Tampa, Florida 33630
1963
1-1-81
Mr. Lewis A. Dorian
3-21-30/$90m
904-433-2299
President
The Citizens and Peoples
National Bank
P.O. Box 1072
Pensacola, Florida 32595
1984
1-1-82
Mr. Copeland D. Kewbern
8-22-11/$10m
813-971-0440
CHAIRMAN
Chairman of the Board
Newbern Groves, Inc.
P.O. Box 17237
Tampa, Florida 33682
1982
1-1-77
Mrs. Joan W. Stein
2-2-29/$28m
904-725-9272
Partner
1983
Regency Square Properties, Inc.
1200 Barnett Regency Tower
Jacksonville, Florida 32211
(MAILING ADDRESS:
P.O. Box 2718
Jacksonville, Florida 32232-0033)
Dr. Jerome P. Keuper
1-12-21/5,000 Students
305-723-3701
President
.
Florida Institute of Technology
P.O. Box 1150
Melbourne, Florida 32901
kToointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1984
1-1-78
1-1-79
-15-
MIAMI BRANCH
ADoointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. M. G. Sanchez
12434,$40
305-941-2810
President and
Chief Executive Officer
First Bankers Corporation of
Florida
P.O. Box T
Pompano Beach, Florida 33061
1932
1-1-80
Mr. Daniel S. Goodrum
7-11-26/$1b
305-457-5300
President and
Chief Executive Officer
Century Banks, Inc.
P.O. Box 757
Ft. Lauderdale, Florida 33302
1983
1-1-81
1984
7-1-82
President
Barnett Bank of Fort Myers, N.A.
P.O. Box 338
Fort Myers, Florida 33902
1984
1-1-32
Ms. Sue McCourt Cobb
8-18-37/80 Attorneys
305-579-0543
Attorney
Greenberg, Traurig, Askew,
Hoffman, Lipoff, Quentel
and Wolff, P. A.
1401 Brickell Avenue - PH -1
Miami, Florida 33131
1982
1-1-82
Mr. Eugene E. Cohen
11-1-17/Not available
305-448-5E22
CHAIRMAN
Chief Financial Officer and
Treasurer
Howard Hughes Medical Institute
P.O. Box 330837
Coconut Grove,' Florida 33133
1983
1-1-81
Yr. Roy Vandegrift, Jr.
12-5-20/53.6m
305-924-5551
President
Roy -Van, Inc.
P.O. Box 619
Pahokee, Florida
1984
2-19-79
Yr. E. ilwyd Ecclestone, jr.
Mr. Stephen G. Zahorian
8-24-38/S1 69m
813-936-6656
Managing Partner
PGA National
P.O. Box 3267
West Palm Beach, Florida
33402
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
33475
-16-
NASHVILLE BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Beoan
Mr. Charles J. Kane
1-2-20/$1b
615-748-4177
Chairman and
Chief Executive Officer
Third National Bank in Nashville
Nashville, Tennessee 37244
1982
1-1-80
Mr. John R. King
10-16-24/$60m
615-246-4121
President
The Mason and Dixon Lines, Inc.
P.O. Box 969
Kingsport, Tennessee 37662
1982
1-1-30
Mr. James F. SmIth, Jr.
12-11-29/$500m
615-521-5134
Chairman and
Chief Executive Officer
Park National Bank
P.O. Box 511
Knoxville, Tennessee 37902
1983
1-1-81
Mr. Michael T. Christian
1-24-43/$75m
615-639-2181
President and
1984
Chief Executive Officer
First National Bank of Greeneville
P.O. Box 777
Greeneville, Tennessee 37743
1-1-82
Appointed by Board of Governors:
•
Mrs. Cecelia Adkins
9-3-23/represents
6.3m people
615-256-5284
CHAIRMAN
Executive Director
Sunday School Publishing Board
330 Charlotte Avenue
Room 319
Nashville, Tennessee 37201
Mr. Robert C. H. Mathews, Jr.
6-16-27/Not available
615-244-2130
Managing General Partner
R. C. Mathews, Contractor
P.O. Box 22149
Nashville, Tennessee 37202
Mr. C. Warren Neel
12-6-38/5500 Undergrad
615-974-5061
Dean
1964
College of Business Administrati
on
716 Stokely Management Center
The University of Tennessee
Knoxville, Tennessee 37916
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1982
1-1-77
1983
12-21-76
1-1-82
-17-
NEW ORLEANS BRANCH
Term
expires
Dec. 31
Appointed by Federal Reserve Bank:
Mr. Patrick A. Delaney
6-19-32/$1.7b
504-586-7209
Chairman and President
Whitney National Bank of
New Orleans
P.O. Box 61260
New Orleans, Louisiana 70161
Mr. Ben M. Radcliff
9-25-24/$702,000
205-666-7252
President
Ben M. Radcliff Contractor, Inc.
P.O. Box 8277
Mobile, Alabama 36608
Mr. Paul W. McMullan
2-6-29/$373m
601-544-4211
Chairman and
Chief Executive Officer
First Mississippi National Bank
P.O. Box 1231
Hattiesburg, Mississippi 39401
Mr. Jerry W. Brents
11-10-41/$402m
318-232-1211
President and
Chief Executive Officer
First National Bank
P.O. Box 90-F
Lafayette, Louisiana 70509
Service
Beaan
1982
1-1-80
1982
1-1-80
1983
1-1-81
1984
1-1-82
AQ,r)ointed by Board of Governors:
Ms. Sharon A. Perlis
11-2-44/Not Available
504-834-3700
Mr. Leslie B. Lampton
7-30-25/$95m
601-948-3472
CHAIRMAN
Mr. Roosevelt Steptoe
11-28-34/
504-771-5020
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Attorney
Suite 215
433 Metairie Road
Metairie, Louisiana
President
Ergon, Inc.
P.O. BOX 1308
Jackson, Mississippi
1982
1-1-82
1983
1-1-81
1984
1-1-82
70005
39205
Chancellor
Southern University
Baton Rouge Campus
Southern Baton Rouge Post Off
ice
Baton Rouge, Louisianna 70813
-18FEDERAL RESERVE BANK OF CHICAGO
Class A:
Term
expires
Dec. 31
Group
Mr. Patrick E. McNarny
4-16-35/$140m
219-722-4111
2
Mr. 011ie Jay Tomson
5-3-35/$35m
515-228-5315
3
Mr. Roger E. Anderson
7-29-21/$41h
312-828-7703
1
President
First National Bank of Loganspo
rt
One First National Plaza
Logansport, Indiana 46947
President
The Citizens National Bank of
Charles City
P.O. Box 517
Charles City, Iowa 50616
Chairman of the Board
Continental Illinois
National Bank and
Trust Company of Chicago
231 South La Salle Street
Chicago, Illinois 60593
Service
Began
1982
1-1-80
1983
1-1-81
1984
8-25-80
Class 8:
Mrs. Mary Garst
3-25-28/Not available
712-684-2266
1
Mr. Leon T. Kendall
5-20-28/$756m
414-347-6486
2
Mr. Dennis W. Hunt
3-21-32/$1.3m
712-297-7571
3
Manager of Cattle Division
Garst Company
218 South Fifth
Coon Rapids, Iowa 50058.
Chairman of the Board and
Chief Executive Officer
Mortgage Guaranty Insurance
Corp.
250 E. Kilbourn Avenue
Milwaukee, Wisconsin 53202
President
Hunt Truck Lines, Inc.
West High Street
Rockwell City, Iowa 50579
1982
1-1-79
1983
1-1-81
1984
1-1-79
1982
1-7-80
1983
1-30-78
1984
2-3-78
Class C:
Mr. Stanton R. Cook
7-2-25/$947m
312-222-3300
DEPUTY CHAIRMAN
Mr. John Sagan
3-9-21/$23.5b
313-323-2450
CHAIRMAN
Mr. Edward F. Brabec
12-17-30/6,500 members
312-421-1010
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
President
Tribune Company
435 North Michigan Avenue
Chicago, Illinois 60611
Vice President - Treasurer
Ford Motor Company
The American Road
Dearborn, Michigan 48121
Business Manager
Chicago Journeymen Plumbers
Local Union 130, U.A.
1340 West Washington Blvd
.
Chicago, Illinois 60607
DETROIT BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Becan
Mr. Dean E. Richardson
12-27-27/$4.5b
313-222-4970
Chairman
Manufacturers National Bank of
Detroit
100 Renaissance Center
Detroit, Michigan 4243
1982
1-1-80
Mr. Lawrence A. Johns
10-10-28/$59m
517-772-9471
President
Isabella Bank and Trust
P.O. Drawer 100
Mount Pleasant, Michigan
1983
1-1-78
48358
Mr. James H. Duncan
6-13-25/$1.7b
625-383-9297
Chairman and
Chief Executive Officer
First American Bank Corporation
108 E. Michigan Avenue
Kalamazoo, Michigan 49007
1984
1-1-79
Mr. Thomas R. Ricketts
3-4-31/$3.5b
313-643-9500
Chairman and President
Standard Federal Savings and
Loan Association
2401 W. Big Beaver
Troy, Michigan 48084
1984
3-1-81
Mr. Russell G. Mawby
2-23-28/$792m
616-965-1221
CHAIRMAN
President and Trustee
W. K. Kellogg Foundation
400 North A/enue
Battle Creek, Michigan 49016
1982
1-1-80
Dr. Karl D. Gregory
3-26-31/12,000 Students
313-377-3295
Professor; Management and
1983
Economic Consultant
School of Economics and Management
Oakland University
Rochester, Michigan 48063
Mr. Robert E. Brewer
1-9-32/$15.5b sales
313-643-1640
Executive Vice President Finance
K mart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
!noointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1984
3-24-81
1-1-82
-20FEDERAL RESERVE BANK OF ST. LOUIS
Class A:
Group
Term
expires
Dec. 31
Service
Began
1982
1-1-80
Mr. Donald L. Hunt
9-1-37/$23m
618-295-2364
3
President
First National Bank of Marissa
111 North Main Street
Marissa, Illinois 62257
Mr. Clarence C. Barksdale
6-4-32/$3.2b
314-554-6201
1
Chairman and
1983
Chief Executive Officer
Centerre Bank National Association
P.O. Box 267
St. Louis, Missouri 63166
1-1-81
Mr. George M. Ryrie
11-3-21/$97m
61 8-463-221 1
2
President
First National Bank & Trust Co.
P.O. Box 517
Alton, Illinois 62002
1984
1-1-79
Mrs. Mary P. Holt
2-26-21/$379,000
501-664-3177
2
President
Clothes Horse
5 Fields Building
University Avenue at "R" Street
Little Rock, Arkansas 72207
1982
1-1-80
Mr. Frank A. Jones, Jr.
4-8-27/S6m sales
(home phone) •
901-685-6916
3
President
Dietz Forge Company
(Mailing Address:
137 Perkins Extended
Memphis, Tennessee 38117)
1983
1-1-81
Mr. Jesse M. Shaver
11-16-19/$1.5b
502-589-2108
I
Consultant
Allis-Chalmers Corporation
455 South Fourth Street
Louisville, Kentucky 40202
1984
1-1-82
Mr. Armand C. Stalnaker
4-24-16/$1.5b
314-444-0652
CHAIRMAN
Chairman of the Board
1982
General American Life Insurance Co.
P.O. Box 396
St. Louis, Missouri 63166
1-1-77
Dr. William H. Stroube
6-24-24/13,490 Students
502-745-3151
Department of Agriculture
Western Kentucky University
Bowling Green, Kentucky 42101
1983
2-7-78
Mr. W. L. Hadley Griffin
5-17-18/$400m
314-854-4100
DEPUTY CHAIRMAN
Chairman of the Board
Chief Executive Officer
Brown Group, Inc.
P.O. Box 29
St. Louis, Missouri 63166
1984
1-1-82
Class B:
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-21-
LITTLE ROCK BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Beaan
Mr. William H. Bowen
5-6-23/5403.6m
501 378-3221
Chairman and
Chief Executive Officer
The Commercial National Bank of
Little Rock
P.O. Box 1331
Little Rock, Arkansas 72203
1982
1-1-80
Mr. William H. Kennedy, Jr.
9-8-17/$157.2m
501-534-1131
Chairman of the Board
National Bank of Commerce of
Pine Bluff
P.O. Box 6208
Pine Bluff, Arkansas 71611
1983
1-1-81
Mr. Gordon E. Parker
1-6-24/S146.3m
501-863-3181
Chairman of the Board and
President
The First National Bank of
El Dorado
P.O. Box 751
El Dorado, Arkansas 71730
1384
1-1-79
Mrs. Shirley J. Pine
9-18-30/9,238 enrollment
501-569-3155
Department of Cominicative
Disorders
University of Arkansas at
Little Rock
33rd & University
Little Rock, Arkansas 72204
1984
1-1-79
Mr. E. Ray Kemp, Jr.
9-15-24/S250.5m in sales
501-376-5200
Vice Chairman of the Board and
Chief Administrative Officer
Dillard Department Stores, Inc.
P.O. Box 486
Little Rock, Arkansas 72203
1982
3-4-77
Mr. Richard Y. Warner
5-23-29/$980m
501-226-2511
CHAIRMAN
Group Vice President
Wood Products Group
Potlatch Corporation
P.O. Box 390
Warren, Arkansas 71671
1983
Mr. Sheffield Nelson
2-23-41/Sib
501-372-6241
Chairman of the Board, President
and Chief Executive Officer
Arkla, Inc.
P.O. Box 751
Little Rock, Arkansas 72203
1984
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1-1-82
-22-
LOUISVILLE BRANCH
Term
expires
Dec. 31
Appointed by Federal Reserve Bank:
Mr. Howard Brenner
9-16-19/$61.3m
812-547-2323
Vice
Tell
P.O.
Tell
Mr. Frank B. Hower, Jr.
11-26-28/$1b
502-566-2708
Chairman of the Board
City National Bank
Box 128
City, Indiana 47586
Service
Began
1982
1-1-77
Chairman and
Chief Executive Officer
Liberty National Bank and
Trust Company
P.O. Box 32500
Louisville, Kentucky 40232
1983
1-1-81
Mr. R. I. Kerr, Jr.
4-10-23/$551m
502-587-8891
President and Managing Officer
Greater Louisville First Federal
Savings and Loan Association
One Financial Square
Louisville, Kentucky 40270
1984
1-1-82
Mr. John E. Darnell, Jr.
10-20-21/$200m
502-926-3232
Chairman of the Board,
President and Chief Executive
The Owensboro National Bank
P.O. Box 787
Owensboro, Kentucky 42301
1984
3-23-82
Dr. James F. Thompson
6-1-26/8,000 Enrollment
502-762-4188
CHAIRMAN
Professor of Economics
Murray State University
Murray, Kentucky 42071
1982
1-1-77 •
Mr. William C. Ballard, Jr.
9-10-40/$1.3b
502-561-2087
Executive Vice President Finance and Administration
Humana, Inc.
P.O. Box 1438
Louisville, Kentucky 40201
1983
12-11-80
Sister Eileen M. Egan
1-11-25/1 ,000 Students
502-585-9911
President
Spalding College
851 S. Fourth Street
Louisville, Kentucky 40203
1984
1-1-79
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-23-
MEMPHIS BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Earl L. McCarroll
5-2-15/$62.3m
501-763-8101
President
The Farmers Bank & Trust Co.
P.O. Box 688
Blytheville, Arkansas 72315
1982
4-13-78
Mr. Wayne W. Pyeatt
9-22-24/Not available
901-725-1311
President
Memphis Fire Insurance Company
P.O. Box 40968
Memphis, Tennessee 38104
1983
1-1-81
Mr. Edgar H. Bailey
5-8-26/$1.1b
901-523-2961
Chairman and President
Leader Federal Savings and
Loan Association
P.O. Box 3410
Memphis, Tennessee 38103
1934
1-1-82
Mr. William M. Matthews, Jr.
8-25-32/$1.2b
901-523-6101
Chairman of the Board and
Chief Executive Officer
Union Planters National Bank
of Memphis
P.O. Box 387
Memphis, Tennessee 38147
1984
1-1-82
Mrs. Patricia W. Shaw
7-26-39/$56m
901-525-3641
Executive Vice President
Universal Life Insurance
Company
480 Linden Avenue
Memphis, Tennessee 38125
1982
9-22-80
Mr. Donald B. Weis
3-21-35/$1.3m
501-735-4501
CHAIRMAN
President
Tamak Transportation Coro.
P.O. Box 1985
West Memphis, Arkansas 72301
1983
1-1-81
Mr. G. Rives Neblett
5-25-43/Not Availalbe
601-398-5121
Attorney
Neblett, Bobo & Chapman
P.O. Box 63
Shelby, Mississippi 38774
1984
1-1-82
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-24FEDERAL RESERVE BANK OF MINNEAPOLIS
Class A:
Term
expires
Dec. 31
Group
Service
Bevan
Mr. Henry N. Ness
2-21-18/S 110m
701-293-2261
1
Senior Vice President
The Fargo National Bank
Main at Broadway
Fargo, North Dakota 58124
1982
1-1-80
Mr. Vern A. Marquardt
7-5-22/$24m
906-524-6172
2
President
Commercial National Bank of
L'Anse
1 E. Broad Street
L'Anse, Michigan 49946
1983
1-1-81
Mr. Dale W. Fern
2-25-27/$34m
715-684-3366
3
President and Chairmen of
the Board
The First National Bank of
Baldwin, Wisconsin
P.O. Box 145
Baldwin, Wisconsin 54002
1984
1-1-82
1
Chairman
Western Surety Company
908 West Avenue North
Sioux Falls, South Dakota
1982
1-1-80
Class B:
Mr. Joe F. Kirby
12-14-22/$38m
605-336-0850
57101
Mr. Harold F. Zigmund
4-11-19/$180,000
218-327-6201
3
President and
Chief Executive Officer
Blandin Paper Company
115 South West First Street
Grand Rapids, Minnesota 55744
1983
1-1-81
Mr. William L. Mathers
9-29-23/$3.5m
406-232-4425
2
President
Mathers Land Company, Inc.
314 So. Merriam
Miles City, Montana 59301
1984
1-1-82
Sister Generose Gervais
9-18-19/1,050 Beds
507-285-5158
Administrator
St. Mary's Hospital
2414 South Seventh Street
Rochester, Minnesota 55901
1982
10-10-78
Mr. William G. Phillips
3-3-20/387.4m
612-340-3301
CHAIRMAN
Chairmen and
Chief Executive Officer
International Multifoods
1200 Multifoods Building
Minneapolis, Minnesota 55402
1984
1-1-79
Dr. John B. Davis, Jr.
9-14-21 /1 730 Students
612-696-6207
DEPUTY CHAIRMAN
President
Macalester College
St. Paul, Minnesota
1954
1-1-82
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
55105
-25-
HELENA BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Becan
Mr. Jase O. Norsworthy
2-21-26/$4.3m
406-252-8432
President
The N.R.G. Company
Box 1315
Billings, Montana 59103
1982
1-1-79
Mr. Roger H. Ulrich
5-15-25/Not Available
406-654-2340
President
The First State Bank of Malta
Malta, Montana 59538
1983
1-1-82
Mr. Harry W. NeKlon
6-14-31/$97m
406-587-9222
President
First National Bank
P.O. Box 730
Bozeman, Montana 59715
1982
1-1-50
1982
1-1-81
1983
1-1-82
Appointed by Board of Governors:
Mr. Ernest B. Corrick
11-25-20/$4b
406-258-5511
CHAIRYAN
Mr. Gene J. Etchart
12-26-16/Not available
406-228-2835
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Vice President and General Manager
Champion International Corporation
Jimberlands - Rocky Mountain
Operation
(MAILING ADDRESS:
115 Takima Drive
Missoula, Montana 59801)
Past President
Hinsdale Livestock Company
P.O. Box 429
Glasgow, Montana 59230
•
-26FEDERAL RESERVE BANK OF KANSAS CITY
Class A:
Term
expires
Dec. 31
Group
Service
Began
Mr. Howard K. LODflis
4-9-27/S63m
316-672-5611
2
President
The Peoples Bank
(MAILING ADDRESS: Krey Co.
Ltd., P.O. Box 926, Pratt,
Kansas 67124)
19B2
5-10-79
Dr. Wayne D. Angell
6-28-30/$3m
913-242-6100
3
President
Council Grove National Bank
(MAILING ADDRESS: 1341 South
Mulberry, Ottawa, Kansas 66067)
1983
6-13-79
Mr. John D. Woods
12-6-29/$807m
402-348-7990
1
Chairman and
Chief Executive Officer
The Omaha National Bank
17th and Farnam
Omaha, Nebraska 68102
1984
1-1-79
Mr. Charles C. Gates
5-27-21/Not available
303-744-4288
1
President and
Chairman of the Board
Gates Rubber Company
999 South Broadway
P.O. Box 5887
Denver, Colorado 80217
1982
1-1-80
Mr. James G. Harlow, Jr.
5-29-34/$1.7b
405-272-3195
3
President and
Chief Executive Officer
Oklahoma Gas and Electric Co.
P.O. Box 321
Oklahoma City, Oklahoma 73101
1983
1-1-78
Duane Acker
3-13-31/19,982 Students
913-532-6221
2
President
Kansas State University
Anderson Hall
Manhattan, Kansas 66506
1984
1-1-82
Mr. Paul H. Henson
7-22-25/54.4b
913-676-3301
CHAIRMAN
Chairman
1962
United Telecommunications, Inc.
(MAILING ADDRESS: United Telecom,
Box 11315, Kansas City,
Missouri 64112)
1-1-77
Mr. John F. Anderson
4-12-24/52.1b
816-459-6216
President and
Chief Executive Officer
Farmland Industries, Inc.
3315 North Oak Traffic Way
Kansas City, Missouri 64116
1983
1-1-81
Dr. Doris M. Drury
11-18-28/7,858 Students
303-753-2427
DEPUTY CrIAIRRAN
Professor of Economics:
Director of Public Affairs
Program - University of Denver
10879 E. Powers Drive
Englewood, Colorado 80111
1984
1-1-80
Class B:
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-27-
DENVER BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Becan
Mr. Delano E. Scott
1-3-19/$77m
303-879-0550
President and Chairman
1982
The Routt County National Bank of
Steamboat Springs
P.O. Box 1237
Steamboat Springs, Colorado 80477
1-1-77
Mr. George S. Jenks
3-11-27/$900m
505-765-2525
Chairman and
Chief Executive Officer
Albuquerque National Bank
P.O. Box 1344
Albuquerque, New Mexico 87103
1982
1-1-81
Mr. Kenneth C. Naramore
11-27-20/$127m '
307-682-5144
President
Stockmen's Bank & Trust Company
Box 3004
Gillette, Wyoming 82716
1983
1-1-80
Mr. Donald D. Hoffman
11-2-23/$900m
303-893-3456
Chairman
Central Bank of Denver
P.O. Box 5548 T.A.
Denver, Colorado 80292
1984
1-1-82
2771 South Eaton Way
Denver, Colorado 80227
1982
1-1-80
President and Chief Executive
Officer
J.N., Inc.
P.O. Box 2850
Cody, Wyoming 82414
1984
2-1-62
Appointed by Board of Governors:
Mr. Alvin F. Grospiron .
4-17-16/Retired
303-988-6930
Vacancy
Mr. James E. Nielson
5-24-40/Not Available
307-578-1322
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-28-
OKLAHOMA CITY BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Marcus R. Tower
4-12-20/$1.1b
918-588-6541
Vice Chairman of the Board
Chairman of the
Credit Policy Committee
Bank of Oklahoma
P.O. Box 2300
Tulsa, Oklahoma 74192
1982
1-1-81
Mr. Walter L. Stephenson, Jr.
1-22-30/$170m
405-233-3535
Chairman and
Chief Executive Officer
Central National
Bank and Trust Company
P.O. Box 3448
Enid, Oklahoma 73701
1982
1-1-77
Mr. William H. Crawford
5-4-38/$40m
405-335-2126
President and
Chief Executive Officer
First National Bank and
Trust Company
P.O. Box A
Frederick, Oklahoma 73542
1983
1-1-82
Mr. Samuel R. Noble
8-12-25/Not available
405-226-1900
Chairman of the Board
Noble Affiliates, Inc.
P.O. Box 1486
Ardmore, Oklahoma 73401
1982
1-1-79
Mrs. Christine H. Anthony
12-18-16/Retired
405-843-4785
CHAIRMAN
6707 N.W. Grand Boulevard
Oklahoma City, Oklahoma 73116
1983
1-14-78
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-29-
OMAHA BRANCH
Appointed by Federal Reserve Bank:
Term
expires Service
Dec. 31 .2.s2r_i_
Mr. Donald J. Murphy
3-15-18/$475m
402-536-2102
Chairman and
Chief Executive Officer
United States
National Bank of Omaha
P.O. Box 3408
Omaha, Nebraska 68103
1982
1-1-81
Mr. Joseph J. Muckfeldt
3-23-34/$59m
308-436-5061
President
Gering National Bank and
Trust Company
P.O. Box 100
Gering, Nebraska 69341
1983
1-1-78
Mr. William W. Cook, Jr.
2-19-37/$50m
402-228-3333
President
Beatrice National Bank and
Trust Company
P.O. Box 100
Beatrice, Nebraska .
68310
1983
1-17-80
Appointed by Board of Governors:
Mr. Robert G. Lueder
11-14-22/$30m
402-339-1000
CHAIRMAN
President
Lueder Construction Company
Suite 500
11128 John Galt Boulevard
Omaha, Nebraska 68137
1982
1-1-79
Mrs. Gretchen S. Velde
8-16-23/Not available
402-391-8400
Chairman of the Board
Swanson Enterprises
The Swanson Building, Suite 304
8701 West Dodge Road
Omaha, Nebraska 68114
1983
1-1-80
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-30FEDERAL RESERVE BANK OF DALLAS
Class A:
Group
Mr. John P. Gilliam
12-24-37/$9m
817-932-5204
3
Mr. Miles D. Wilson
1-7-33/$39m
713-865-3181
Mr. Lewis H. Bond
7-31-21/$2b
817-338-8110
Dr. Kent Gilbreath
12-28-45/9,702 Students
817-755-1211
Dr. J. Wayland Bennett
10-13-23/23,129 Students
806-742-2876
Chairman of the Board & Presid
ent 1983
The First National Bank of Be
llville
P.O. Box 128
Bellville, Texas 77418
1
Chairman of the Board and
Chief Executive Officer
Texas American Bancshares
Inc.
P.O. Box 2050
Ft. Worth, Texas 76101
Class C:
Mrs. Margaret S. Wilson
8-7-30/$9m
512-451-8448
Mr. John V. James
7-24-18/$2.9b
214-746-6704
DEPUTY CHAIRMAN
Mr. Gerald D. Nines
8-15-25/$480m
713-621-8000
CHAIRMAN
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
3
2
President and
1982
Chief Executive Officer
First National Bank in Valley
Mills
Box 278
Yalley Mills, Texas 76689
2
Class B:
Mr. Robert D. Rogers
6-10-36/$313m
214-637-3100
Term
expires Service
Dec. 31 _13.e...22._
President
Texas Industries, Inc.
8100 Carpenter Freeway
Dallas, Texas 75247
Associate Dean
Hankamer School of Business
Baylor University
Waco, Texas 76798
Charles C. Thompson, Profes
sor
of Agricultural Finance and
Associate Dean
College of Agricultural Sc
iences
Texas Tech University
P.O. Box 4190
Lubbock, Texas 79409
Chairman of the Board and
Chief Executive Officer
Scarbroughs Stores
P.O. Box 5879
Austin, Texas 78763
1984
1-1-80
1983
3-22-79
1984
1-1-79
1983
Owner
1984
Gerald D. Mines Interests
2100 Post Oak Tower
Houston, Texas 77056
(MAILING ADDRESS: Federal
Reserve
Rank of Dallas. CtAtiAn r
m.11_
1-1-79
1982
1982
Chairman of the Board
Dresser Industries, Inc.
P.O. Box 718
Dallas, Texas 75221
1-1-80
1-1-77
1-1-81
1-1-79
-31-
EL PASO BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Stanley J. Jarmiolowski
5-18-39/$34m
915-593-1333
Chairman of the Board and
Chief Executive Officer
Interfirst Bank El Paso,
National Association
Box 9715
El Paso, Texas 79987
1982
7-9-81
Mr. Claude E. Leyendecker
10-15-22/$29.8m
505-546-8871
President
Mimbres Valley Bank
P.O. Box 1050
Deming, hew Mexico 88030
1983
1-1-78
Mr. Ernest M. Schur
8-25-18/$175m
915-332-7311
Chairman of the
Executive Committee
Interfirst Bank Odessa,
National Association
P.O. Box 4798
Odessa, Texas 79760
1984
3-13-80
Mr. Gerald W. Thomas
8-3-19/17,066 Students
505-646-2035
President
New Mexico State University
Drawer 38C
Las Cruces, New Mexico 88003
1984
1-1-82
Appointed by Board of Governors:
Mr. A. J. Losee
1-18-25/5500,000
505-746-3508
CHAIRMAN
Shareholder
Losee, Carson, & Dickerson
Professional Association
P.O. Drawer 239
Artesia, New Mexico 88210
1982
1-1-77
Mr. Chester J. Kesey
4-17-25/$3m
915-447-2324
CHAIRMAN PRO TEM
C. J. Kesey Enterprises
(MAILING ADDRESS:
2 Briar-wood Circle
Pecos, Texas 79772)
1983
1-1-78
Ms. Mary Carmen Sauced°
2-5-25/60,173 Students
915-779-5481
Associate Superintendent
1984
Central Area
El Paso Independent School District
6101 Hughey Drive
El Paso, Texas 79925
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1-1-82
HOUSTON BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Will E. Wilson
2-28-16/$325m
713-838-9288
Chairman of the Board and
Chief Executive Officer
First Security Bank of
Beaumont, N.A.
P.O. Box 3391
Beaumont, Texas 77704
1982
1-1-80
Professor Raymond L. Britton
8-20-24/28,900 Students
713-749-1277
Labor Arbitrator and
Professor of Law
University of Houston
(MAILING ADDRESS: 6146 Olympia
Drive, Houston, Texas 77057)
1983
10-12-78
Mr. Ralph E. David
10-31-27/$80m
713-233-4401
President
First Freeport National Bank
P.O. Drawer H
Freeport, Texas 77541
1984
1-1-79
Mr. Thomas B. McDade
6-21-23/$12b
713-236-5413
Vice Chairman
Texas Commerce Bancshares, Inc.
P.O. Box 2558
Houston, Texas 77001
1 984
1-1-82
Mr. Jerome L. Howard
8-4-16/$174m
713-525-8000
CHAIRMAN
Chairman of the Board and
Chief Executive Officer
Mortgage & Trust, Inc.
P.O. Box 2885
Houston, Texas 77001
1982
1-1-77
Mr. Paul N. Howell
9-13-18/$139m
713-658-4000
CHAIRMAN PRO TEM
Chairman of the Board and
President
Howell Corporation
1010 Lamar Building
Suite 1800
Houston, Texas .77002
1983
1-1-81
Mr. George V. Smith, Sr.
3-19-26/$5m
713-453-8546
President
Smith Pipe & Supply, Inc.
P.O. Box 24099
Houston, Texas
77015
1984
2-29-80
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-33-
SAN ANTONIO BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. George Erannies
12-25-43/S30m
915-347-6375
Chairman of the Board and
President
The Mason National Bank
P.O. Box N
Mason, Texas 76856
1982
1-1-80
Mr. John H. Garner
4-1-21/$343m
512-881-6878
President and
Chief Executive Officer
Corpus Christi National Bank
P.O. Box 301
Corpus Christi, Texas 78403
1963
1-1-78
Mr. Charles E. Cheever, Jr.
5-17-28/$191m
512-824-0444
President
Broadway National Bank
P.O. Box 17001
San Antonio, Texas 78286
1984
1-1-79
Mr. Joe D. Barbee
12-25-23/S11.4m
512-968-7502
President and.
Chief Executive Officer
Barbee-Neuhaus Implement Company
P.O. Box 386
Weslaco, Texas 78596
1984
1-1-82
Mr. Pat Legan
1-7-21/$14m
512-341-7206
CHAIRMAN PRO TEM
Owner
Legan Properties
4402 Vance Jackson, Suite 200
San Antonio, Texas 78230
1982
1-1-77
Dr. Lawrence L. Crum
7-25-33/43,000 Students
512-471-4358
CHAIRMAN
Professor of Banking and Finance
The University of Texas at Austin
(MAILING ADDRESS: 3920 Sierra
Drive, Austin, Texas 78731)
1983
1-1-80
Mr. Carlos A. Zuniga
11-1-27/$1m
512- 723-6311
Zuniga Freight Services, Inc.
P.O. Box 89
Laredo, Texas 78040
1984
1-1-79
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-34FEDERAL RESERVE BANK OF SAN FRANCISCO
Class A:
Term
expires
Dec. 31
IrL221 .a
Service
Beaan
Mr. Frederick G. Larkin, Jr. 1
12-28-13/$26.1b
213-613-6037
Chairman of the
Executive Committee
Security Pacific National Bank
P.O. Box 2097, Terminal Annex
Los Angeles, California 90051
1982
1-1-77
Mr. Ole R. Mettler
9-7-17/$197m
209-334-1101
2
President and Chairman
Farmers & Merchants Bank of
Central California
P.O. Box 380
Lodi, California 95240
1983
1-1-78
Mr. Robert A. Young
10-28-20/$51m
206-695-1311
3
Chairman and President
Northwest National Bank
P.O. Box 1867
Vancouver, Washington 98668
1984
1-1-79
3
Chairman of the Board
C. L. Peck Contractor
3303 Wilshire Boulevard
Los Angeles, California
1982
1-1-74
Senior Member
Richards, Watson, Dreyfuss &
Gershon
333 South Hope Street
Los Angeles, California 90071
1983
1-1-78
President and CEO
Yeyerhauser Company
Tacoma, Washington 98477
1984
1-1-82
Mrs. Caroline Leonetti Ahmanson
4-12-18/275 Students
213-275-4282
CHAIRMAN
Chairman of the Board
Caroline Leonetti, Ltd.
c/o Mrs. Howard Ahmanson
9500 Wilshire Boulevard
Hollywood, California 90212
1982
1-1-80
Mr. Alan C. Furth
9-16-22/$4.3b
415-541-2136
DEPUTY CHAIRMAN
President
Southern Pacific Company
1 Market Plaza
San Francisco, California
1984
1-1-80
Mr. Fred W. Andrew
1-26-27/$68.3m
805-832-1111
President and Chief
Executive Officer
Superior Farming Company
3501 Stockdale Highway
Bakersfield, California 93309
1983
1-1-80
Class B:
Mr. Clair L. Peck, Jnr.
11-18-20/Not available
213-381-6711
Mr. J. R. Vaughan
1-28-16/Not available
213-626-8484
1
Mr. George H. Weyerhauser
8-8-26/$4.9b
206-924-3000
90010
Class C:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
94105
•
4.
-35-
LOS ANGELES BRANCH
Term
expires
Dec. 31
Appointed by Federal Reserve Bank:
Mr. Bram Goldsmith
2-22-23/$1.4b
213-550-5711
Chairman of the Board
City National Bank
400 North Roxbury Drive
Beverly Hills, California
Service
Began
1982
1-1-80
1982
1-1-82
1983
1-1-78
Chairman and
1984
Chief Executive Officer
California Federal Savings
5670 Wilshire Boulevard - 15th floor
Los Angeles, California 90069
1-1-82
Mr. Togo W. Tanaka
1-7-16/$5m
213-620-5760
President
Gramercy Enterprises
445 South Figueroa, Suite 3750
Los Angeles, California 90071
1982
1-1-79
Mrs. Lola M. McAlpin-Grant
9-23-41/1,223 Students
213-642-2914
Assistant Dean
Loyola Law School
1440 West Ninth Street
Los Angeles, California
1983
1-1-80
1984
1-1-82
Mr. William L. Tooley
4-23-34/2.5m sq. ft.
of office space
213-382-8211
Mr. James D. McMahon
1-20-26/$10Dm
805-255-9611
Mr. Robert R. Dockson
11-6-17/$6b
213-932-4001
Managing Partner
Tooley and Company,
Investment Builders
3303 Wilshire Boulevard
Los Angeles, California
90210
90010
President
Santa Clarita National Bank
23929 W. Valencia Boulevard
Valencia, California 91355
Appointed by Board of Governors:
Mr. Bruce M. Schwaegler
4-23-37/$500m
213-486-5363
CHAIRMAN
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
90015
President
Bullock's - Bullocks Wilshire
7th and Hill Street
Los Angeles, California 90014
•
-36-
PORTLAND BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Servi...2
Berlan
Mr. Herman C. Bradley, Jr.
4-23-31/$11m
5036.998-8734
President and
Chief Executive Officer
Tr -County Banking Company
P.O. Box 377
Junction City, Oregon 97448
1962
5-29-R1
Mr. William S. Naito
9-16-25/$11m
• 503-228-7404
Vice President
Korcrest China Company
P.O. Box 3458
Portland, Oregon 97208
1983
1-1-81
Mr. Jack W. Gustavel
12-31-39/$84m
208-654-1446
President and
Chief Executive Officer
The First National Bank of
Korth Idaho
P.O. Box 1409
Coeur d'Alene, Idaho 83814
1984
1-1-79
Chairman of the Board and
Chief Executive Officer
United States National Bank
of Oregon
P.O. Box 4412
Portland, Oregon 97208
1984
1-1-82
Mr. Phillip W. Schneider
9-22-1 3/4,000,000 members
503-292-2759
Former Northwest
Regional Executive
National Wildlife Federation
8755 S.W. Woodside Drive
Portland, Oregon 97225
1982
1-1-78
Mr. John C. Hampton
2-10-26/Not available
503-297-7691
CHAIRMAN
Chairman and President
Willamina Lumber Company
9400 Southwest Barns Road
Suite 400
Portland, Oregon 97225
1983
1-1-81
Ms. Carolyn S. Chambers
9-15-31/$79m
503-485-5611
Executive Vice President
and Treasurer
Liberty Communications, Inc.
P.O. Box 7009
Eugene, Oregon 97401
1984
1-1-82
Mr. John A.,. E1orriaga10-20-23/$5.1m
503-225-5778
p.
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
4-
-37-
SALT LAKE CITY BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Fred H. Stringham
12-19-26/$349m
801-973-5020
President
Valley Bank and Trust Company
2510 South State Street
South Salt Lake, Utah 84115
1982
1-1-78
Mr. Albert C. Gianoli
12-18-18/$8m
702-289-4441
President and
Chairman of the Board
First National Bank of Ely
P.O. Box 479
Ely, Nevada 89301
1983
1-1-81
Mr. Spencer F. Eccles
8-24-34/$3.6b
801-350-5329
President and
Chief Executive Officer
First Security Corporation
P.O. Box 30006
Salt Lake City, Utah 84125
1984
4-30-80
Mrs. Lela M. Ence
9-19-27/22,000 Students
801-581-6995
Executive Director
1984
University of Utah Alumni Association
155 South Central Campus Drive
Salt Lake City, Utah 84112
1-1-82
Mr. Robert A. Erkins
1-20-24/Not available
208-352-4460
Geothermal Agri/Aquaculturist
White Arrow Ranch
Box 108
Bliss, Idaho 83314
1982
1-1-78
Mr. J. L. Terteling
1-25-37/$25m
208-376-6700
President
The Terteling Company, Inc.
P.O. Box 4127
Boise, Idaho 83704
1983
1-1-78
Mr. gendell J. Ashton
10-31-12/71,000 Circulation
801-237-2188
CHAIRMAN
Publisher
Deseret Mews
P.O. Box 1257
Salt Lake City, Utah
1984
1-1-79
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
84110
-38-
SEATTLE BRANCH
Appointed by Federal Reserve Bank:
Term
expires
Dec. 31
Service
Began
Mr. Donald L. Mellish
11-1-27/$600m
907-265-2929
Chairman of the Board
National Rank of Alaska
P.O. Box 600
Anchorage, Alaska 99510
1982
1-1-78
Mr. Lonnie G. Bailey
12-5-39/$50m
509-928-9600
Chief Operating Officer and
Executive Vice President
Farmers & Merchants Bank of
Rockford
N. 10 Argonne Road
Spokane, Washington 99206
1983
1-1-81
Mr. John N. Nordstrom
3-14-37/Not Available
206-628-2357
Co-Chairman of the Board
Nordstrom, Inc.
1501 Fifth Avenue
Seattle, Washington 98101
1984
1-1-82
-Ir. G. Robert Truex, Jr.
5-29-24/$5m
Chairman
Rainier Bancorporation and
Ranier National Bank
P.O. Box 3966 T24-1
Seattle, Washington 98124
1984
1-1-82
Mr. Merle D. Adlum
2-21-19/Not available
206-623-0733
President
1982
Puget Sound District Council
Maritime Trades Department, AFL/CIO
1501 Norton Building
Seattle, Washington 98104
1-1-78
Dr. Virginia L. Parks
5-1-39/4,150 Students
206-626-6505
Vice President for Finance and
Treasurer
Seattle University
12th and Columbia
Seattle, Washington 98122
1983
1-1-78
Mr. John W. Ellis
9-14-28/$450m
305-453-6731
CHAIRMAN
President and
Chief Executive Officer
Puget Sound Power & Light Company
Puget Power Building
Bellevue, Washington 98009
1984
1-1-82
Appointed by Board of Governors:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Exhibit II
OCCUPATION CJ1ARACTERISTICS OF
FEDERAL RESERVE BANK AND BRANCH DIRECTORS
(as of August 1982)
Occupational
Category
Branche
Federal Reserve Ranks
No.
No.
% of 108
Totals
p. of 2li
% of 169
1.
Banking
36
33
73
43
109
39
2.
Manufacturing
19
18
11
7
30
11
3.
Education
9
8
19
11
28
10
4.
Agriculture
8
7
10
6
18
6
5.
Wholesale &
Retail Trade
7
6
6
4
13
5
6. Services
3
3
7
4
10
4
7.
Professional
4
4
5
3
9
3
8.
Real Estate &
Construction
7
6
7
4
14
5
Communications
2
2
4
2
6
Non-Bank Financial
4
4
a5
Labor and
Arbitration
1
9.
10.
11.
12.
Consumer & Civic
Representatives 1
,
13
3
2
5
3
6
13.
Utilities
3
2
14.
Mining 4 Extraction
1
5
3
6
2
15.
Transportation
3
3
2
6
2
16.
Unclassified
77.
Vacancies
Total*
*
NOTE:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3
•••••
108
100
Totals may vary due to rounding.
169
100
277
1001
REPRESENTATION BY WOMEN AND MINORI
TIES
ON BOARD OF DIRECTORS OF THE
FEDERAL RESERVE BANKS AND BRANCHES
(As of August, 1982)
.'1
Federal Reserve Banks
A
B
C
Branches
Total
Bank Appointed
Total'
Board Appointed
Total . •
,
.
ltwortv409
4
7
11
6
4.-•;
_19
30
10
-'1).
r.".•
Minorities
a.
Blacks
•;
9
b.
Hispanics
•••
/NA
3'
c.
Orientals
•••
3
-
I
•••
'a
d,
Native
Anericans
2
,
REM
4111.0•••••■•••••••••
Total Minorities
1
1
3
12
15
"
•
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
'
;
'MS
REPRESENTATION BY WOMEN AND MINORITIES
ON BOARDS OF DIRECTORS OF THE
FEDERAL RESERVE BANKS AND BRANCHES
1975
Women
1977
1976
1978
#
%
0
%
0
%
if
4
1%
6
2%
17
6%
?3 8%
%
1979
1980
1981
1982
#
%
#
%
# !I
#
7-
30
11%
30
11%
28
30
11,
10%
Minorities
a. Blacks
5
2%
6
2%
7
3%
13
5%
14
5%
13
5%
11
4%
b. Hispanics
*
5
2%
7
3%
7
3%
5
2%
5
2%
5
2%
3
1%
1
-
1
-
1
-
1
_
I
_
2
1%'
2
1%
2
1%
2
1%
*
c. Orientals
d.
Native
American
Total
Minorities *
13
5%
16
6%
1
15
5%
20
7%
21
IMO
•••
8%
20
7%
16
6%
411.11P
BASE
269
269
269
269
Information not available.
Percentages are rounded to the nearest number
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
275
275
275
277
REPRESENTATION OF THRIFT INSTITUTIONS
ON BOARDS OF DIRECTORS OF THE
FEDERAL RESERVE BANKS AND BRANCHES
(As of August 1982)
Directors Whose Primary Occupations Are With Thrif
t Institutions
Federal Reserve Bank Boards
Branch Boards
Total
0
5
5
Directors Otherwise Affiliated With Thrift Inst
itutions
Federal Reserve Bank Boards
Branch Boards
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Total
1
6
7
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Statement by
Frank E. Morris
President, Federal Reserve Bank of Boston
before the
Subcommittee on Domestic Monetary Policy
of the
Committee on Banking, Finance and Urban Affairs
United States House of Representatives
Washington, D.C.
September 23, 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I am pleased to be able to participate in this Hearing.
The following are my responses to the questions posed by
Chairman Fauntroy which are not dealt with in our joint
statement.
What has been your bank's involvement with community and
scholarly activities? In this connection, I would be
pleased to know what work -training programs, upward
mobility programs, affirmative action policies, forms
for small and minority businesses, and research activities your bank has been and is presently engaged in doing.
Perhaps the most fundamental contribution of the Bank
to the region we serve is our research program on the
New England economy.
This program which absorbs a sizable
part of our research budget, has over the years led to the
Bank becoming known as a center for objective expertise
on New England economic problems.
Our regional research
staff routinely services requests for data and analysis
from New England Governors and Mayors.
They were actively
involved in the resolution of the financial crises of the
State of Massachusetts and the City of Boston.
We have cultivated close contacts with the New England
academic community.
Two prominent economists, James
Duesenberry of Harvard and Robert Solow of MIT, have
served as Chairmen of the Board of Directors of our Bank.
We solicit the views of a panel of prominent New England
economists prior to each FOMC meeting and transmit them
-1-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-
to the FOMC members as part of our contribution to the
Red Book.
We sponsor one or two conferences a year on
some topic of pressing interest.
These conferences have
served to strengthen the ties between the Bank and the
academic community.
In a conference to be given next
month on government policies to influence the savings rate,
we will have papers presented by faculty members from Harvard,
MIT and Yale, as well as by economists from outside the region.
The Bank is actively involved in efforts to resolve
the social, as well as the economic problems, of our
region.
I serve as chairman of the Tr -Lateral Council
for Quality Education, a business group which seeks to
improve the quality of the Boston School System.
I am
also Vice Chairman of the Boston Private Industry Council,
a member of the Advisory Council to the Coalition of
Northeast Governors and a member of the Coordinating
Committee (sometimes known as "The Vault"), which is a
business group concerned with the problems of the City of
Boston.
We encourage Bank officers to get involved in
community affairs.
Among other affiliations, our officers
are directors of the Neighborhood Housing Services, the
Massachusetts Higher Education Assistance Corporation
and the New England Education Loan Marketing Corporation.
As a member of the Tr -Lateral Council for Quality
Education, the Bank has entered into a partnership
arrangement with South Boston High School under which we
contribute to enriching the educational experience of the
- 2_
N.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
students.
We also seek to prepare students for entry into
the world of work by counseling, teaching them how to participate in a job interview, and providing the experience of a
part-time or summer job.
Twenty-five students from the
South Boston High School worked in the Bank this summer.
The Bank operates a Skills Development Center in
which disadvantaged young people who do not meet our
minimum employment standards are taught clerical skills
and good work habits.
Seventy-eight trainees have
graduated from the program and have been placed in
permanent jobs, including sixty-six placements within
the Bank.
One graduate of the Skills Development Center
is now a computer programmer.
The Bank is a member of the New England Minority
Purchasing Council and, as part of our affirmative action
program, has an annual target for purchases from minority
vendors.
The status of business and financial liquidity, in
the economy as a whole and in your District, and the
implications for monetary policy.
The lack of economic growth during the past three
years, together with declining profitability and high
interest rates, has depressed business liquidity to a
record post-war low.
For nonfinancial corporations, the
debt-to-asset ratio now has reached 60%, well above the
customary 50% established in the late 1960s and 70s.
During the 1980s to date, about two-thirds of business
borrowing has been short term.
-3
_
High leverage and high
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
interest rates have pushed the ratio of debt service charges
to cash flow above 50%, well above the 30% ratio that
prevailed during most of the 1970s.
A drop in the rate
of return on assets has been responsible for much of the
erosion in business liquidity.
The rate of return on
total nonfinancial corporate assets is only about twothirds of its level in the late 1960s and early 1970s.
While we have no direct estimates of regional business
liquidity, there is no reason to believe that conditions
in New England differ sharply from those nationally.
Nonetheless, we know of no major New England corporation
which is currently suffering a severe liquidity squeeze.
The major decline in interest rates of recent weeks has
undoubtedly helped to ease the situation of many firms
and the sharp rise in common stock prices should make it
feasible for some of them to strengthen their equity positions.
The commercial banks of New England are in good
condition, undoubtedly reflecting the relatively strong
performance of the New England economy.
While it is too
early in the game to form a final conclusion, my impression is that loan losses at New England commercial
banks, while showing a rising trend, may not be as
serious as the loan losses suffered in the 1974-75
recession.
The thrift institutions of New England are highly
liquid, reflecting very conservative asset management
since 1975.
We have seen very few forced mergers of
-4 _
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
thrift institutions in New England, in large part
because their capital positions tend to be substantially
stronger than the thrift industry nationally.
The implication for monetary policy is that the
Federal Reserve must remain alert to evidence of any
generalized liquidity problem and to any development
which might threaten the viability of the financial markets.
Employment and business conditions in the economy,
as a whole and in your District, and the implications
for monetary policy.
The New England States have weathered the recession
relatively well.
Unemployment rates throughout most of
the region have been consistently below the national
average.
During the first six months of 1982, the
average unemployment rate in New England was 7.8 percent,
which compares with the U.S. figure of 9.1 percent.
Total
employment has tracked closely the national trend, despite
the loss of approximately 50,000 state and local government
/
2.
jobs in Massachusetts attributable to Proposition 21
This relatively strong performance reflects the
transformation of the New England economy, with competitive high technology companies gradually replacing the
old-line industries.
Some of our high technology companies
have been adding to their employment rolls right through
the recession.
New England is also benefiting from the
upturn in defense procurement, which is cushioning, for
many companies, the decline in consumer demand for their products.
-5-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
On the other hand, New England is heavily dependent
on capital goods production.
Many high technology
products are investment goods, and the region is still
active in machine tools and other more traditional capital
goods industries.
These companies have been living off
their order backlogs.
New orders are weak because of
high interest rates and the strength of the dollar on
the foreign exchange markets, which has made our exports
less competitive in world markets.
More than anything
else, these companies need public policies which will
reduce the cost of capital and render financially feasible
investments which have been shelved because of high cost
of money.
Policies which expand total demand without
bringing interest rates down are not going to meet the
needs of New England's capital goods producers.
The relative importance of further reductions in
inflation at this time compared with the state of
employment and business conditions and liquidity.
We are at a delicate juncture for monetary policy.
We must have a policy which provides a financial base
for a sustained upturn in economic activity while, at
the same time, providing assurance to the financial
markets that the Federal Reserve continues determined
to reduce the rate of inflation in the years ahead.
To
restore the economy to a healthy state, produce a substantial decline in the unemployment rate, and generate
the increases in productivity necessary to produce rising
-6
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
real incomes for the people of the United States, we
must reduce the costs of capital for new investment.
A precondition for a healthy economy is a healthy bond
and stock market.
To generate a healthy bond and stock
market, we must convince the investor that the inflation
rate is going to continue to decline in the years ahead.
This is why inflation control must not take a back seat
to any other policy objective.
Disinflation is a painful business. We have paid a
heavy price for the gains we have made thus far, but the
gains are real and critically important.
The inflation
rate is down substantially, we have seen a surprisingly
large decline in the rate of advance in wages and
salaries and there is evidence of fundamental changes
which will show up in sizable productivity gains as
the economy turns up.
We have begun to lay the found-
ation for a strong economy for the balance of the 1980s.
Yet these developments are viewed with a heavy
layer of skepticism by many players in the investment
markets.
They saw the inflation rate decline and wage
rate increases decelerate in the wake of the 1974-75
recession, but it proved to be purely a cyclical phenomenon.
Because we were unwilling then to continue to
give high priority to inflation control coming out of
the 1974-75 recession, the gains won at such heavy cost
soon evaporated and we moved quickly back to staglation-with high unemployment and double digit inflation.
-7-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
After the 1974-75 recession business liquidity improved
only superficially.
During the late 1970s, rising inflation
eroded business profitability while inevitably increasing
the cost of long-term financing.
As a result of this
experience, I believe that a steady reduction of inflation
is a precondition for sustaining growth and attaining
acceptable levels of employment and business liquidity in
the 1980s.
We should learn from the experience following the
1974-75 recession, but many in the financial markets are
not sure that we will.
When they are convinced that we
will stay the anti-inflation course, long-term interest
rates will come down sharply.
The appropriateness and viability of the monetary targets
currently used by the Federal Reserve, specifically the
M-1 aggregate, and your views on alternative targets,
including the monetary base, a credit target, GNP, or
targetting of real or nominal interest rates.
I have come to the conclusion that we can no longer
measure the money supply of the United States with any
kind of precision.
By that I mean that we can no longer
draw a clear line between money and other liquid assets.
Innovation and the computerization of the financial
system are revolutionizing the manner in which the
American people handle their cash balances.
This has
brought us to the point where any definition of the
money supply must be arbitrary and unsatisfactory; i.e.,
-8-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
it must include assets that some people view as short-term
investments (not transactions balances) and exclude other
assets that some people consider part of their transactions
balances.
Cash Management, Sweep, and Money Market Accounts
are making "idle" transactions balances disappear.
In
the future, people may have much less need for transactions
balances --funds may pass from a buyer's cash management
account to a seller's cash management account, existing as
transactions balances only long enough to complete the trip.
All of the monetary aggregates can be distorted by
shifts from one type of liquid asset to another, shifts
which have no significance for monetary policy.
To an
increasing degree, longer -term securities and real assets
have also become an abode of purchasing power because these
assets may be tapped for transactions purchases on
demand through modern credit arrangements.
More and
more purchasers look to their "lines of credit" rather
than their check book balances in completing their
transactions.
Thus, we have a serious measurement problem with
the concept of money.
We have been attempting to deal
with this problem by periodically revising the definition
of the money supply.
This raises another issue.
What
we call M-1 in 1982 is not the same thing that we called M-1
in 1975.
There is no necessary reason to believe,
therefore, that the new M-1 (and its successors of future
-9 _
I
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
years) will behave in the same manner relative to nominal
GNP as the old M-1.
Furthermore, M-1 velocities have
risen more rapidly in recent years in response to rising
interest rates.
Presumably, as interest rates move down,
we should expect a slowing in velocity --but when and by
how much?
With all the uncertainties surrounding both
the measurement of M-1 and its relationship to the nominal
GNP, I have concluded that the monetary aggregates, particularly M-1, are no longer suitable guidelines for
monetary policy.
My suggested alternative is total liquid assets, which
is both stably related to the nominal GNP and unaffected
by shifts from one type of liquid asset to another.
I should add that the problems with M-1 as a target
for policy are problems for the future, not the present.
If we had been implementing a total liquid assets target
in 1982, we should probably have chosen a range of 8 to
11 percent.
The growth rate for total liquid assets thus
far in 1982 has been somewhat above the upper limit of
this range.
Thus, a switch to total liquid assets would
not have produced an appreciable difference in monetary
policy in 1982.
-10-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Statement by
Anthony M. Solomon
President, Federal Reserve Bank of New York
before the
Subcommittee on Domestic Monetary Policy
of the
Committee on Banking, Finance and Urban Affairs
United States House of Representatives
Washington, D. C.
September 23, 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Good morning, Mr. Chairman.
I am
Anthony Solomon, President of the Federal Reserve Bank
of New York, and I thank you for this opportunity to
contribute to your examination of the activities and
policies of the Federal Reserve district banks and their
implications for monetary policy.
After consulting with
the Subcommittee, Presidents Boykin, Corrigan, Morris,
Roos and I have submitted a joint statement addressing
some of your auestions and areas of concern with respect
to the Reserve Banks collectively.
Therefore, in my
separate remarks today, I will present my own views and
those of the New York Reserve Bank regarding the following matters:
(1)
our Bank's involvement with community and
scholarly activities, including forums for
small and minority business and other members
of the community and our economic research
efforts;
(2)
our policies and practices in the area of
equal employment opportunity and affirmative
action, and related matters;
(3)
economic conditions in the economy as a whole
and in our District, including employment and
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2
business liquidity and how they factor into
our thinking regarding inflation and monetary
policy; and
(4)
the appropriateness and viability of the
monetary targets being used, specifically Ml,
and the possible use of alternative measures.
For convenience, I will discuss these topics
in the order they are presented in your inquiry.
Community and Scholarly Activities
The Federal Reserve Bank of New York maintains
extensive links with consumer and community groups in
the District.
We are also committed to providing a full
range of informational and educational publications
concerning the work and objectives of the Federal Reserve
to general audiences as well as more detailed and
analytical publications aimed at professional and
scholarly audiences.
In order to inform the public about their
rights and responsibilities under consumer credit
legislation, we produce a large number of pamphlets,
including some in the Spanish language in recognition
of New York's sizeable Hispanic community.
We meet with
consumer groups to discuss common concerns and, when we
receive complaints from bank customers that might imply
a violation of the regulations, we investigate and
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3
assure that an appropriate response is made to the
customer.
We also conduct educational seminars, some
of them in conjunction with the New York City Department
of Consumer Affairs and the Board of Education, for such
varied audiences as instructors of the Youth Opportunity
Program, counselors at the Budget and Consumer Credit
Counseling Services, school teachers of social studies
and members of the Harlem Consumer Education Council.
Thus far in 1982, we have held nine of these seminars.
We reach other audiences, too.
About once a
month I host a meeting for business and community leaders
in our District, where we exchange viewpoints on the current state of the economy.
Other senior officials of the
Bank hold similar meetings around the District, three
times a year.
We are aware of the importance of the Community
Reinvestment Act and have an active and ongoing contact
with groups, both private and governmental, whose major
focus is housing and urban lending.
This is in addition
to our statutory duty to monitor compliance by statechartered member banks, which we fulfill through the bank
examination process.
We also are responsive to inquiries we receive
from the general public.
In the first half of 1982, the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4
Public Information division in New York responded to
almost 100,000 inquiries.
Many of these involved our
role as fiscal agent for the Treasury, as people wanted
to know about government securities and how to buy and
sell them.
Other questions were about regulation or
the central bank services we perform, and we have prepared a number of educational booklets about the work
of the Federal Reserve that we send out on request.
Research and Scholarly Activities
Our research and scholarly activities are
quite extensive.
The primary publication outlet for
these efforts is our Quarterly Review, a widely read
journal of economics containing articles that range from
discussions of the regional economy to examinations of
money market instruments and monetary policy options.
To give you a complete picture of all the types of
matters covered in our Quarterly Review, I have submitted as an exhibit a listing of all of our articles
over the past few years.
We also make available a
variety of economic papers written by our research
staff.
We keep in close touch with the academic com-
munity and other economists.
We invite professors and
others to conduct seminars at the Bank and our economists
are frequently invited to lecture or conduct seminars
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5
at universities and elsewhere.
In adon, we conduct
special seminars at the Bank for college teachers of
money and banking, and for members of international
organizations and foreign central banks.
The research activities at the Federal Reserve
Bank of New York are basically policy oriented--they are
geared to assist in the formulation of domestic and
international policies in the broadest sense.
A good
part of our research work is devoted to current analyses
of economic and financial developments in the United
States, in foreign economies and international markets,
and in our region.
At the national level, we follow very closely
innovative practices in the financial markets that
might affect the interpretation of the monetary aggregates,
the implementation of monetary policy, or the stability
of aur economic and financial system.
We are concerned
with the implementation of monetary targets and with the
outlook for the Federal deficit.
Some of the issues we
have examined recently are the effects of tight shortrun control of money, the role of money market funds as
a substitute for money, and the relationship between
the Eurodollar market and domestic financial markets.
We are also very concerned about the prospects
for economic growth and inflation.
In that connection we
have recently studied the effect of the international
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6
value of the dollar on exports and imports and on
domestic prices.
Internationally, we have examined other
nations' fiscal and monetary policies sand have looked
into their experiences with financial innovation.
We
have investigated their methods of implementing monetary policy and the effects of developments abroad on
U.S. economic growth and inflation.
We also analyze
the situation of the less-developed countries, with
particular focus on their balance of payments and
their international debt, and the economic and
financial position of the OPEC nations.
At the regional level, we have done a number
of studies of New York City's tax structure and have
examined regional economic growth and inflation
compared with that of the nation as a whole.
In
evaluating New York City's attractiveness as a place
to work and for employers to locate, we have looked
into such matters as the cost to businesses and
individuals of subway delays, and have started a
study of the costs of crime.
Equal Opportunity Policy
As an employer and member of the community,
the Federal Reserve Bank of New York is committed to
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
maintaining a work environment in which all individuals
receive equal treatment and equal opportunity without
regard to their race, color, religion, national origin,
sex, age, or handicap.
This commitment is an integral
aspect of our personnel management and employee
relations activities including recruitment, selection,
promotion, compensation, benefits, training and
education, and counseling.
Affirmative Action
Since the early 1970's the New York Reserve
Bank has conducted an Affirmative Action Program, which
is aimed at increasing the representation of minorities
and women in upper level salary grades and in our
official staff, primarily by promotion from within
the Bank.
In the aggregate, minorities and women are
well represented at our Bank, comprising 40 percent
and 55 percent of our total staff, respectively.
Each
year we review our targets and our progress in meeting
them, and set new goals for the current year.
In broad terms, our Affirmative Action Program
consists of four major efforts:
First--Establishing specific Affirmative
Action goals which are approved
by our Board of Directors;
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I
8
Second--Developing detailed action plans
for recruitment and advancement
of minorities and women;
Third--Implementing or carrying out of
these action plans;
Fourth--Monitoring our results against
goals and reporting them to our
Directors.
We have a record of continuing progress
toward increasing our representation of minorities and
women in senior level jobs and in official positions.
Over the past five years minority representation in our
senior salary grades has improved from 12 percent in
1977 to 15.5 percent in 1982.
Women have increased
their representation in those grades from almost 19 percent in 1977 to 24 percent in 1982.
There were five
minority group members in our official ranks in 1977;
today we have eight, and our goal for 1982 is 10 (or
7.5 percent of our official staff).
There were 12 women
officers at the Bank in 1977; today there are 24, and
we intend to have 27 women officers (or 26 percent of
our official staff) by year-end.
Affirmative Action for the Handicapped
Since 1976, the Bank's Board of Directors has
approved an Affirmative Action Program for the Handicapped.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
9
The Bank recruits handicapped individuals and insures
The
equal opportunity for all handicapped employees.
Bank has instituted programs designed to increase
supervisors' awareness and understanding of the concerns of handicapped employees and has made alterations
to its physical plant to accommodate the disabled.
Bank-Sponsored Upward Mobility Programs
Over 40 in-Bank training programs are offered
each year to assist our employees in developing jobrelated skills and to prepare them for increased
responsibility.
Among the courses offered are English
as a second language, supervisory training, writing and
office skills, and management skills training.
In
addition, an equal employment opportunity awareness
program "Fair Play," is presented to supervisory
personnel.
Interview skills workshops are held to
improve employees' interviewing skills and prepare
them for opportunities available through our job posting
system.
Most job openings at the Bank are filled
through the job posting system, which emphasizes equal
opportunity for all qualified applicants.
Counseling
is available to all employees to assist them in
reviewing career opportunities at the Bank and in
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
10
determining their qualifications for specific job
openings.
This summer, the Bank sponsored a Minority
Summer Internship Program.
This program provided
summer employment in professional positions to
minority college students interested in a career in
the banking industry.
The objective of the program
is to assist in the identification and recruitment
of qualified minority students about to enter the
marketplace.
The program was limited to college
juniors and seniors.
We feel it was highly success-
ful and plan to repeat it in 1983.
During the past years, we have increased
participation by minorities and women in our
Executive Training and Development Program, and the
Management Training Program.
These programs are
designed specifically to identify and develop promising
candidates for supervisory and managerial positions.
Special emphasis is placed on the following areas:
•
Seminars to help upwardly mobile
employees to objectively identify
their career aspirations and strengths;
Instruction in communication skills
(both written and oral) and confidence
building;
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I,'
Increasing exposure to Federal Reserve
poes, procedures, projects, etc.
and
Development of interpersonal and
leadership skills to prepare the employee
to supervise others.
Community Involvement
The Bank supplements its internal affirmative
action efforts by participating in a variety of special
community action programs, and actively pursues new
opportunities to enhance its community involvement.
Some of these are as follows:
1.
National Urban League's Black Executive
Exchange Program
A program in
which black businessmen and women from
a variety of fields lecture at predominantly black colleges and universities
to supplement classroom instruction,
acquaint students with a wide variety
of career opportunities, and provide
positive role identification.
2.
American Economic Association (AEA) Summer
Program for Minorities -- This program
is administered by AEA, hosted by Yale
University, and funded by the Sloan
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
12
Foundation, the AEA, the Board of
Governors of the Federal Reserve System
and a number of Federal Reserve Banks,
including the Federal Reserve Bank of
New York.
The objective of the program
is to identify promising prospective
minority Ph.D. candidates with the
necessary undergraduate training in
economic theory and analysis.
3.
Open Housing Center -- An employer-sponsored
service which provides assistance in locating
housing in New York City for employees and
assists employees who feel they have been
discriminated against in locating suitable
housing.
4.
Various New York City and New York State
Sponsored Programs
a. Youth Opportunity Campaign - A
program administed by the New York
State Employment Service which provides summer jobs for economically
disadvantaged high school and
college students.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
13
b. School Work Exploratory Educational
Program (SWEEP) -- A workshop
sponsored by the New York City Board
of Education and the National Alliance
of businessmen to provide high school
students with exposure to a variety
of career opportunities through onthe-job observations.
On many occasions, our officers and employees
are asked to participate in business and career forums
sponsored by corporate and academic institutions.
To
give just two examples:
New York University and Citibank Business Career
Forum for Minority Students -- A program designed
to acquaint minority students with graduatelevel study in business and businessmen and
women who are also members of minority groups.
Minority Job Fair -- Sponsored by the
National Organization of Black University
and College Students held at Howard
University in Washington, D.C.
Finally, I should add that in the coming month,
we will become a member of the New York/New Jersey
Minority Purchasing Council, Inc. to enhance participation
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
14
by minority vendors in supplying goods and services to
the Bank.
Economic Conditions and Monetary Policy
The long-run goal of monetary policy is to
reduce inflationary pressures by gradually slowing the
growth of money to a rate consistent with noninflationary
expansion in business activity.
And the Federal Reserve
has been moving toward that goal.
M1 growth in 1979 was
less than in 1978, in 1980 less than in 1979, and in 1981
below 1980.
This slowing in money growth is now being
reflected in lower inflation rates and in expectations
of reduced inflationary pressures for some time to come.
The financial markets are becoming convinced of the
Federal Reserve's resolve on the inflation front.
Because inflationary psychology had become
deeply entrenched in economic decisions and expectations
the reduction in inflation has been a painful process.
Profit margins have been squeezed, especially in those
firms that had bet on a continuation of inflation, and
unemployment is up sharply.
Nor have the effects been
even across all regions or sectors of the economy.
Homebuilding and the auto industry have been among the
hardest hit because of their sensitivity to the cost of
credit.
But hopefully the worst of the bad economic
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
15
news appears to be behind us, and we believe that the
Federal Reserve's monetary targets are sufficient to permit
economic growth in a noninflationary environment.
To
foster such growth, the FOMC has tentatively decided to
retain the 1982 targets for M1 growth for 1983.
While the Federal Reserve generally expresses
its long-term goals in terms of monetary targets,
particularly M1 growth, many other economic factors
are taken into consideration.
Broader measures of money
and liquidity as well as credit aggregates are monitored
by the Federal Reserve System.
In addon, the Federal
Reserve Bank of New York, like the other Reserve Banks,
keeS s in touch with business conditions in its District
as well as national economic trends.
The New York Bank,
however, is unique in that it operates in the Government
securities market on behalf of the FOMC, as well as in
the foreign exchange markets.
Moreoever, the Second District contains the
world's foremost financial center.
Most dealers in
U.S. securities are located in New York City, many of
the nation's largest banks are headquartered there, and
more than half of the Treasury's securities are sold
through New York financial institutions.
As a result,
the New York Federal Reserve carefully follows developments in the national and international financial markets
and brings that perspective to FOMC meetings.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
16
In recent months, the strength and resiliency
of our financial markets have been tested by events
like the failures of Drysdale Government Securities and
Penn Square National Bank.
There is also market concern
about a number of domestic and international credits.
Appropriately, reviews of market practices and credit
procedures are being undertaken which will ultimately
strengthen our financial system.
At the New York Reserve Bank, we have taken
a particularly active role in working to improve
practices in the Government securities market.
We
have also been closely involved with efforts to relieve
concerns in the international financial markets--notably
involving Mexico in recent weeks.
Along with a perspective on financial markets,
the New York Reserve Bank brings an overview of the
regional economy -- one of the nation's largest
FOMC meetings.
to
Business conditions in the Second
District have deteriorated during the current recession,
but the decline has not been as severe as in other
parts of the nation.
Total employment in New York
State has not fallen nearly as much on a percentage
basis as it has for the nation as a whole.
S.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
17
In part, this is due to the concentration
in New York of financial and service industries which
tend to be less sensitive to business downturns.
Manufacturing employment, although declining sharply
in New York since last summer, has not fallen as much
as it has nationwide.
So while the recession has
affected New York, there are also reasons to be
optimistic about the ability of New York's economy
to withstand recessionary forces better than in the
past when New York's losses were considerably greater
than for the nation.
And at this juncture, there are also reasons
to be less pessimistic about the national outlook as
well.
Inflation rates are down, interest rates have
declined, and most of the inventory adjustment has
been completed.
Thus, while some questions remain about
the exact timing, the economy appears to be poised for
a period of modest business recovery
a recovery that
will not be accompanied by a resurgence of inflationary
pressures as long as the Federal Reserve maintains its
monetary discipline and the Congress continues to work
toward a closer balancing of Federal receipts and
expenditures.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
18
The Federal Reserve's commitment to monetary
discipline, however, should not be interpreted as
rigid adherence to monetary targets, particularly in
the short run.
The Federal Reserve is prepared to
allow money growth to be above or below target for
brief periods of time when the circumstances suggest
that special factors are coming into play.
In 1981,
the rapid growth of money market funds appeared to be
reducing M1 growth as consumers transferred part of
their transactions balances to money funds, and others
learned what a convenient mechanism money funds could
be for managing cash balances more efficiently.
Under
such circumstances, the Federal Reserve was willing to
tolerate below-target growth for a period of time.
In contrast, during 1982, special factors
seemed to be adding to M1 growth.
The sharp decline
in business activity late last year and early this year
prompted consumers to build up their precautionary
balances -- primarily in the form of NOW accounts and
savings deposits.
With M1 being raised by growth in
nontransaction deposits during late 1981 and early 1982,
the Federal Reserve felt that M1 growth around the top
of the annual range was acceptable.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
19
The buildup in precautionary balances eased
in the second quarter of this year, but if economic
turS ulence and uncertainty led again to stronger than
anticipated demands for money and liquty, the FOMC
would tolerate growth somewhat in excess of the annual
range for a period of time.
The Federal Reserve would
look to a variety of factors in making such a decision,
including the behavior of different components of the
money supply, movements in velocity, and the condition
of banking and financial markets.
But we do not plan
to respond strongly to various "bulges" or "valleys"
in monetary growth at times when the demands for money
and liquidity may be exceptionally volatile.
The Federal Reserve will need to continue
its flexible approach to policy in the long run also
as the financial markets continue to change and new
ways are found to manage cash balances more efficiently.
Sweep accounts, NOW accounts, money funds, retail and
corporate RPs, and Eurodollars -- all have raised
enough questions in recent years about the usefulness
Sf M1 by itself as a guide to policy.
In summary, we have traveled a long way on
the road toward greater price stability and a healthy
foundation for sound economic expansion.
It would be
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
20
a tragic mistake not to finish the journey.
The
Federal Reserve remains firm in its anti-inflationary
stance, but flexible in its approach to policy, and
fully intends to aim for money growth consistent
with economic recovery in the years to come.
In that
sense, the Federal Reserve's Ml target, after allowance for normal velocity, can be viewed as effectively
setting a cap on nominal GNP growth.
As inflation
recedes, the monetary targets will automatically
permit more room for real economic growth.
And that
appears to be the stage of the process we are now
entering -- less inflation and more economic growth.
Contents
Issue
Summer 1980
Author
United States and the World Economy (speech)
N4ii.i;TI
. Solomon
Current developments
The business situation
The financial markets
John Wenninger
Leonard G. Sahling
Reforming New York City's Property Tax: Issues and Options
Mark A. Willis
Perspective on the United States External Position
Since World War II
III.arke
The Pricing of Syndicated Eurocurrency Credits
an
Monetary Policy and Open Market Operations in 1979
ight
Treasury and Federal Reserve Foreign Exchange Operations
(interim report)
•
Autumn 1980
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ii.rIii.iii
Innovation
in Canada
Laurie Landy
Current developments
The business situation
The financial markets
Marcos Jones
Leonard G. Sahling
Recent Trends in the Federal Taxation of Individual Income
Carl J. Palssh
Increasing Personal Saving:
Robert DeFina
Can Consumption Taxes Help?
Treasury and Federal Reserve Foreign Exchange Operations
(semiannual report)
-8_
Scott E. Pardee
Issue
Winter 1980-81
Contents
In Memoriam:
John Henry Williams 1887-1980
Inflation and Stock Values:
Is Our Tax Structure the Villain?
Cutting the Federal Budget:
Growth Can Be Reduced
Analyzing How Fast Expenditure
Current developments
The business situation
The financial markets
Global Payments Problems:
Spring 1981
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Author
Stephen V.O. Clarke
Marcelle Arak
James R. Capra
Marcos Jones
John Partlan
The Outlook for 1981
William J. Gasser
Oil Price Decontrol and Beyond
Paul Bennett,
Harold Cole, Steven Dy
Social Security and Savings Behavior
Paul Wachtel
Treasury and Federal Reserve Foreign Exchange Operations
(interim report)
Scott E. Pardee
New York City's Economy in 1980
Rona B. Stein
The Economic Costs of Subway Deterioration
Daniel E. Chall
Current developments
The business situation
Highlights of the recent national income and
product account revisions
The financial markets
Steven Dym
Deborah Jamroz
David Beek
The Decline in Personal Saving
Donald Cox
The LDC Debt Burden
David Roberts
Financial Innovation and Monetary Indicators in Japan
Dorothy B. Christelow
Treasury and Federal reserve Foreign Exchange Operations
(semiannual report)
Scott E. Pardee
-9-
Contents
Issue
Summer 1981
a
I)
Autumn 1981
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Recent Instability in the Demand for Money
John Wenninger,
Lawrence Radecki. and
Elizabeth Hamnond
Bank Lending to Non-OPEC LDCs: Are Risks Diversifiable?
Laurie S. Goodman
The National Defense Budget and Its Economic Effects
James R. Capra
Current developments
... The business situation
A
itThe finaticial markets
1.
Author
Paul Bennett
Marcos Jones
I
Bankers' Acceptances
William C. Melton,
Jean M. Mahr
International Diversification by United States Pension Funds
Edna E. Ehrlich
Excess Reserves and Reserve Targeting
David C. Beek
Current developments
The business situation
New York experiences renewed strength in personal income
The financial markets
Sharon P. Smith
Rona B. Stein and
Mark A. Willis
Marcos Jones
Evolution and Growth of the United States Foreign
Exchange Market
Patricia A. Revey
Treasury and Federal Reserve Foreign Exchange Operations
(semiannual report)
Sam Y. Cross
-10-
I eaue
Winter 1981-82
Spring 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Author
Contentq
Innovations in the Financial Markets
Marcelle Arak
Monetary Policy Without Regulation Q
Betsy Buttrill White
Money Market Mutual Funds and Monetary Control
John C. Partlan, Michael Doteey.
and Steven Englander
Original Issue Deep Discount Bonds
Andrew Silver
The SDR in Private International Finance
Dorothy Meadow Sobol
Lensing -- A Financial Option for States and
Localities?
Mark A. Willis
Current economic developments
Leonard Snhling
National Gas Controls and Decontrol
Paul Bennett, Deborah Kuenstner
Combining Decontrol of Natural Gas with a
New Tax on Producer Revenues
James R. Capra
David C. Beek
Short-run Monetary Control:
Some Possible Dangers
An Analysis of
Lawrence Radecki
The Eurodollar Conundrum
Edward J. Frydl
Mortgage Designs, Inflation. and Real Interest
Rates
Marcos T. Jones
-11-
Issue
Summer 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Contents
Author
Dollar Appreciation. Foreign Trade, and the U.S. Economy
Robert A. Feldman
turodollar Arbitrage
Lawrence L. Kreicher
The Cost of Capital:
Now High Is It?
Patrick J. Corcoran
Leonard C. Sahling
The First Concurrent Resolution and the Budget Outlook
James R. Capra
Impact of "Buy Downs" on Affordability and Home Prices
Robin DeMagistris
New York's Economic Performance
William W. Greer
Ronn B. Stein
Edward M. Tepper
Mark A. Willis
Foreign Banking in the United States:
and Supervisory Perspective
-12-
A Regulatory
Betsy Buttrill White
a
%
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
TESTIMONY OF
LAWRENCE K. ROOS
PRESIDENT
FEDERAL RESERVE BANK OF ST. LOUIS
BEFORE THE
SUBCOMMITTEE ON DOMESTIC MONETARY POLICY
OF THE
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
WASHINGTON, DC
SEPTEMBER 23, 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
,
Question 3:
What has been your bank's involvement with community and scholarly
activities?
In this connection, I would be pleased to know what
work-training programs, upward mobility programs, affirmative action
policies, forums for small and minority businesses, and research
activities your bank has been and is presently engaged in doing?
The Federal Reserve Bank of St. Louis has maintained a
formal Affirmative Action Plan for the past 10 years.
The plan
is designed to encourage women and minorities to apply for
positions particularly in the management, professional, and
technical fields such as administration, operations, data
processing, and bank examination.
The results reflect that the
Bank has been able to maintain or increase the number of women
and minorities in upper grade levels during the past several
years while the total number of staff members has declined.
Achievement of the Bank's Affirmative Action Plan has been
supported by its accelerated commitment to the following
community work-training and scholar cooperative programs
consisting of 60 percent females and minorities:
American Institute of Banking Work Study Program
St. Louis University Cooperative Program
•
Southern Illinois University Cooperative Program
International Visiting Scholar Program
The Bank through its upward mobility programs has promoted
179 staff members of which 62 percent were females and 26
,
I
..
.
-
percent were minorities.
2
-
Programs that we have found to be the
most successful include the:
.
District Management Development Program
.
System Management Development Program
.
Bank Job Posting Program
.
Bank Career Planning Program
.
Special entry level training programs
In addition, our Bank has participated in local community
activities involving forums, workshops, and special projects for
small and minority businesses.
Our role in these activities is
to provide technical assistance in community reinvestment to
both the public and the banks.
Those organizations with which
we have close contact are the:
•
Small Business Association
Neighborhood Housing Services of St. Louis
Community Development Commissioners of St. Louis and
St. Louis County
•
St. Louis Association of Community Organizations
The research activities of our Bank are primarily
concentrated in the area of monetary theory and policy.
the topics investigated are:
Among
relationships between money growth
and income, output and employment; relationships between fiscal
policy and economic activity; relationships between reserve
variables and money; impact of bank regulation on financial
markets; and studies in individual bank behavior.
The results of these studies are published in the Federal
Reserve Bank of St. Louis Review.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I
In addition, the Bank
‘
%
46,
-
3
-
publishes data on monetary, economic, agricultural, regional,
and international trends.
The research staff participates
widely in teaching and disseminating information on monetary
policy in seminars at colleges and universities, as well as at
meetings of a great variety for local, national, and
international organizations.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
or
g
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Questio
wThhoe sta
l
y
,
a
liquidity,
d
mplications
oo
Financial liquidity reflects simply the ability of
financial institutions to lend to prospective borrowers.
Financial institutions in our district do not appear to lack
loanable funds. Despite the increase in business bankruptcies
and some resultant losses to financial institutions in this
seeking new
ggr
district, financial institutions are aessively
borrowers and continuing their lines of credit with existing
borrowers. This is particularly true of smaller institutions
which sell their surplus funds in the federal funds market
because their loan demand is low compared to their available
loanable funds.
Business liquidity also reflects the ability of businesses
to borrow. There is evidence that financial institutions are
g activity
displaying increAsed selectivity in their lendin•
greater
gly conscious •of •
as they have became increasin•
gh most large and visible
non-repayment risk. Even thou•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_ 5 -
business failures have been associated more with mismanagement
than with a general credit squeeze, financial institutions are
currently wary of making marginal loans, even at what might have
previously been considered reasonable interest rates.
Consequently, businesses that are perceived as being higher-risk
borrowers, either because of their product line or for other
factors, are finding funds to be less available at current
rItes.
In this sense, their liquidity has been impaired.
In summary, I see little evidence that credit flows are
overly restricted because of any significant lack of bank
reserves.
Therefore, I IS not believe that a more expansive
monetary policy would improve the liquidity of businesses that
now find themselves unable
551orrow at current market rates.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_
6 -
Question 2:
Employment and business conditions in the economy, as a whole and in
your District, and the implications for monetary policy.
In the 8th Federal Reserve District, business conditions
are "flat."
Manufacturing activity has been declining, retail
sIles in real terms are about on par with last year's.
industries, however, are expanding.
Service
Residential construction is
slightly above its postwar low, and commercial construction is
slowing from its all-time high.
Although average agricultural
incI me in this district will be somewhat lower than last year,
the drop has not reached crisis proportions.
Livestock growers
are enjoying excellent margins and grain growers expect a bumper
crop.
Prices, however, will be lower.
Hardest hit are the
approximately 2.5 percent of all farmers who bought land at
extremely high prices and have had to finance it at high
interest rates.
Unemployment in the district, on average, is similar to the
national level.
Illinois, Indiana, Kentucky, Missppi and
Tennessee have higher-than-national unemployment (in the 10 - 12
percent range); Missouri and Arkansas are lower (8•.5 - 9.5
S.rcent range).
For the economy as a whole, I expect output growth to be
slI w for the remainder of the year.
If money continues to grow
at a rate of 5 - 5-1/2 percent, economic activity should pick up
in the second or third quarter of 1983.
This implies that there
will not be much improvement in unemployment until the middle of
1983.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ment
I would like to point out, however, that while unemploy
of
figures are very high, total civilian employment as a percent
ent
population is also very high--almost as high as the perc
achieved at previous cyclical peaks.
About 58 percent of the
57 percent
population was employed in July 1982 as compared with
in 1951, 58 percent in 1956, 1969 and 1973, and 60 percent in
1979.
Each of these years was viewed as a full employment
period.
Thus, current unemployment figures do not imply the
cs would
serious contraction in spending that similar statisti
have implied in the past.
Regarding monetary policy, I have no doubt that a sharp
y increase
acceleration in money growth would produce a temporar
in output growth and a temporary decrease in unemployment.
I would like to underscore the word "temporary."
But
Because
ed
economic decisionmakers have learned that inflation is relat
ed,
to money growth, and that inflation is not easily eliminat
markets now respond to monetary acceleration much more quickly
than they did in the past.
This means that inflationary
money
expectations are formed very rapidly and that any boost in
growth is quickly translated into higher prices and higher
interest rates.
Thus, output and employment gains resulting
lead
from monetary expansion would be short-lived and would
ultimately only to permanently higher inflation and higher
interest rates.
I, therefore, believe that the best policy to
ment
restore normal output growth and thereby reduce unemploy
percent rate
would be to maintain M1 growth currently at 5.5
et
(the top of the Federal Reserve's announced M1 growth targ
W
_
8
-
range), deviate as little as possible from that figure, and
reduce Ml growth in the future by no more than one percent per
year.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
e
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_
9 _
Question 3:
The relative importance of further reductions in inflation at this
time compared with the state of employment and business conditions
and liquidity.
All the evidence that we have accumulated indicates that
the basic rate of inflation begins to decline about one or two
years after monetary growth is reduced.
For example, current
reductions in inflation are the result of the reduced monetary
growth since 1979.
This implies that inflation will continue to
decline, or at least remain at current levels, for a year or so
irrespective of what we do at this time.
But if we are
concerned with current interest rate levels, which are based on
inflationary expectations, a further gradual reduction in money
growth becomes important.
This is particularly true since our
evidence indicates that gradual and steady reduction in money
growth has very little negative effect on output and
employment.
Thus, if we want to lower interest rate levels
without adverse effects on output and employment, a gradual and
steady reduction in money growth, which implies a continuing
slow reduction in inflation, is both feasible and desirable.
w
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
- 10 -
Question 4:
The appropriateness and viability of the monetary targets currently
used by the Federal Reserve, specifically the M-1 aggregate, and
your views on alternative targets, including the monetary base, a
credit target, GNP, or targeting of real or nominal interest rates.
The goal of monetary policy is to affect economic activity
(GNP).
Because the Federal Reserve can directly control only
the monetary base, any policy target--M1, interest rates, or any
other, is simply a short-term indicator of what changes we can
expect to occur in GNP.
Targeting on either the monetary base or GNP alone would
mean that there would be no short-term indicator of policy
actions.
As a result, we would incur both a loss of information
and a greater probability of errors that might easily compound
over time.
Thus, it is generally preferable to target on some
variable that is predictably related both to the monetary base
and to GNP, and one that can be observed in the short run.
Using interest rates as targets brought us to the economic
disarray that prompted a change of emphasis towards monetary
aggregates in 1979.
Interest rates as targets suffer from three
serious deficiencies: (1) The relationship between interest
rates and GNP is tenuous; (2) it is doubtful that monetary
authorities can control interest rates, even in the short run;
and (3) because interest rates are highly visible, there will
always be pressures on the monetary authority to try to
stabilize them at the cost of destabilizing economic activity as
%
T
a whole.
For example, when GNP is increasing at a fast pace,
both credit demands and interest rates rise.
Under such
circumstances, attempts to prevent an increase in interest rates
usually result in supplying additional credit and money, which
further stimulates GNP.
Therefore, policy actions produce
exactly the opposite of what economic stabilization would
require.
Similar procyclical actions typically occur when GNP
growth is falling and reserves are withdrawn to counter any
decline in interest rates.
Although a credit variable may be well correlated with GNP,
it is difficult, if not impossible, to control.
In the absence
of direct credit controls and credit allocation by some
governmental agency, monetary authorities can influence only a
small part of total credit--only that part which arises out of
newly created reserves of financial institutions.
I have
serious reservations about direct credit controls and doubt that
credit allocation would be acceptable to our society.
This leaves Ml which, despite financial innovations and
despite changes in economic behavior, has been reliably related
to the central bank's control variable--the monetary base--and
This
has reliably predicted movements in prices and output.
does not mean that some other variable might not perform
better.
I simply don't know of any that would do so.
In the
absence of a better alternative, I would be extremely reluctant
to abandon M1 targeting and subject the economy to the greater
volatility and greater inflation dangers that would result.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
or
%
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Statement by
E. Gerald Corrigan
President
Federal Reserve Bank of Minneapolis
Before the
U.S. House of Representatives
Subcommittee on Domestic Monetary Policy
September 23, 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Mr. chairman, members of the Subcommittee, I appreciate this opportunity
to testify before the House Subcommittee on Domestic Monetary Policy. In addition to
the joint statement submitted by the five presidents, I would like to comment on the
several questions you have raised that relate more directly to the Federal Reserve Bank
of Minneapolis.
The first of these questions concerns the Minneapolis Fed's involvement
with community and scholarly activities and its efforts and programs in the area of
affirmative action.
Our community involvement activities can be grouped in three broad categories: education, communications, and corporate responsibility. I have attached, for
the record, a summary of such efforts, and will briefly describe highlights of our programs.
Our economic education programs reflect the philosophy that by providing
materials and assistance that fill curriculum gaps and by focusing on teacher training
programs, we can serve the greatest number of people at the lowest cost. Examples of
these efforts include providing staff to elementary schools to assist teachers in developing materials on economic issues generally and on the role of the Federal Reserve particularly and providing teacher training in economics for educators involved in a program
for high-potential elementary students.
One of our most significant curriculum projects was the development of an
instructional unit on consumer credit. The curriculum materials in this unit are being
used in community/adult education programs and in high schools throughout the country,
with more than 3,500 units distributed to date. I should add that all of our economic
education efforts are closely coordinated with the State Councils on Economic Education. In addition, I am a trustee of the Joint Council on Economic Education.
Another important curriculum material developed by the Bank has been
"You're the Banker." a simulation game designed to acquaint students and adults with the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-2
basic economic principles related to money and banking. We are currently extending use
of "You're the Banker" from a board game to use as a computer simulation game.
In the area of communications, we have made special efforts to reach three
groups: depository institutions, agricultural and small business groups, and the business
community generally.
Communication efforts directed at these groups take several
forms. In 1981, Minneapolis Fed personnel gave over 180 speeches to banking, business,
construction, labor, agricultural, educational and service groups throughout the six states
in our district. We have also held a series of seminars around the state of Minnesota on
issues related primarily to agricultural finance, and we have provided program and administrative support to a district organization concerned with agricultural credit. One of
our most significant recent initiatives was the development and presentation of a seminar on economic issues for small business representatives from the district. more generally. we have defined as an important objective the development of working ties between
the Small Business Administration, the Minnesota Commission on Small Business and the
Task Force on Small Business and Economic Stability. From my experience with these
programs I would suggest that their value lies not simply in the information we impart
but, as important, the information, attitudes and concerns that we receive from these
diverse sources.
We meet our corporate responsibilities through two broad functions. First,
we try to participate fully--while acknowledging the special constraints imposed on a
Federal Reserve Bank--in community-based programs. This participation includes a role
within the Minority Business Opportunity Committee; providing staff to the local chapter
of the National Alliance of Businessmen for a program that identifies summer jobs for
minority youth; board membership on the Minnesota Project, a center for public policy
study and community development: active involvement--in terms of staff assistance and
solicitations--with the United Way of Minneapolis: and support services to the '‘,4innesota
Special Olympics.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3
Second, we try to initiate and support programs that are consistent with
our overall responsibilities and that address specific community needs.
Examples of
these programs include a joint education program we have undertaken in cooperation
with the Minneapolis Urban League to provide community residents with practical and
useful skills to cope with individual and family finances.
This "Personal Economic
management Workshop" includes information on budgeting, borrowing, debt repayment,
and tax preparation. Our Consumer Affairs office has, in cooperation with the FDIC.
provided staff assistance to help financial institutions and local groups in a district
community develop a community reinvestment program.
One such program has been
completed and another is planned for the near future.
In a similar vein, and in cooperation with other agencies and educational
institutions, we arranged for conferences and special studies related to economic development issues on Indian reservations in the district. A final example of efforts to match
our particular expertise with community need would be educational programs and briefings on economic conditions that we have provided to the Metropolitan Economic
Development Council, a group formed to provide support to minority businesses.
You also raised, Mr. Chairman, specific questions regarding work-training
programs, upward mobility programs and affirmative action policies.
The Federal Reserve Bank of Minneapolis has, long before my tenure as
president, had a strong commitment to an effective affirmative action program. On an
annual basis, we prepare, monitor, and update an affirmative action plan that sets our
objectives for increasing the representation of women and minorities in the Bank in
general and particularly in professional positions.
I do not believe, however, that numbers are necessarily a good measure of
the actual effectiveness of an affirmative action program. To my mind, the real test of
successful affirmative action is to create an environment in which targeted groups are a
functioning, contributing force within the organization. This points to the need for a
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-4
range of initiatives in areas including recruitment, placement and training of minorities
and other protected classes.
We also have an active program for the handicapped. There are four objectives in that program: eliminating physical and attitudinal barriers, expanding employment and advancement opportunities, providing job-related programs and services, and
supporting community efforts to expand employment for the handicapped.
The research program at the Federal Reserve Bank of Minneapolis is a
balanced effort aimed at making meaningful contributions in three broad areas: first.
macroeconomic research, with an emphasis on issues related to public policy; second,
regional and national issues related to the evolving financial structure; and third, regional economic issues with particular emphasis on agriculture.
While our research staff is small, it has made and continues to make important contributions in each of these areas, including frequent contributions to scholarly
journals. Also, in the past year, one of our economists was on leave to a major university
and two members of the research staff were on leave to the staff of the U.S. Senate
Budget Committee.
Similarly, when consistent with our public responsibilities, our
research staff has participated on special commissions and studies related to state and
local government policy issues here in the Ninth District.
Given the thrust and reputation of the Bank's research program, it is not
surprising that we have maintained close relations with the district's academic community and particularly the University of Minnesota.
We have also, through contract ar-
rangements, made use of academic advisors to our research work.
I would like now to respond briefly to the questions you raised in four
policy-related areas:
the liquidity position of nonfinancial and financial businesses;
employment and business conditions; the trade-offs between further reductions in inflation and improvements in business conditions; and, finally, the appropriateness and viability of the monetary targets currently used by the Federal Reserve.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-5
On a nationwide basis, the liquidity of nonfinancial businesses is at historically low levels by most standards.
While some of the decline in business liquidity in
recent years may reflect growing sophistication in corporate financial and cash management techniques, it is clear that much of the recent slippage in corporate liquidity reflects patterns of economic performance we have witnessed over the last several years.
For example, the long period of essentially escalating inflation experienced
over the past decade or more made borrowing and leveraging very tempting because it
was so easy to paper over mistakes with successively higher product prices. To make
matters worse, the high levels of interest rates that inevitably accompany the inflationary process effectively closed down our long-term capital and equity markets for many
borrowers. Thus, increasingly, the debt incurred in recent years has been of the shortterm variety. For this reason, reopening and keeping open our long-term capital markets
and our equity markets must remain one of the central goals of economic policy generally and monetary policy specifically. In my judgment, this goal can best be realized (or
perhaps can only be realized) in the context of policies that get inflation down and keep
it down.
While it is difficult to find meaningful statistics that focus exclusively on
the liquidity situation of business firms located in the Ninth Federal Reserve District, I
have no reason to believe the situation in the Upper Midwest is materially different than
it is in the nation as a whole. It is possible--given the nature of some of the major business firms in the Twin Cities area--that in the nonfarm sector things may be a shade
better than is suggested by the national statistics. However, when allowance is made for
conditions in the farm sector--which has a very substantial presence in the Ninth District--the overall nonfinancial business liquidity situation in the district is not likely to
differ from the national picture.
The situation with respect to the liquidity of financial firms--banks in
particular--is a little more difficult to read. For example, in the Ninth Federal Reserve
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6
District, certain conventional measures of bank liquidity--such as loan-to-deposit ratios
and liquid asset ratios--suggest that bank liquidity is generally satisfactory. However, on
closer inspection, it would appear that at least some of that statistical evidence reflects
curtailed levels of borrowing growing out of overall economic conditions--particularly in
the farm sector. It is also true in the Ninth District--as for the nation as a whole--that
recent months have seen a deterioration in the quality of credit, as heavy debt burdens in
combination with general economic conditions have cut into the net cash flow and profit
positions of many firms.
Any discussion of liquidity trends would not be complete without adding a
word or two about consumer liquidity, where there are some signs of improvement. For
example, there is now a smattering of evidence to suggest that consumer saving rates
have risen somewhat. Similarly, the rate at which the consumer sector has taken on new
debt has diminished over the past few years. These developments, in combination, have
strengthened the liquidity position of the consumer and, in the aggregate. augur well for
some step-up in spending.
Turning now to employment and business conditions more generally, I would
characterize current conditions for the nation and for the Ninth District as about flat. In
recent months there have been some scattered signs--some straws in the wind—to suggest that overall economic activity and employment might be picking up a bit, but hard
evidence of a generalized recovery is not yet available. When that evidence is at hand, I
expect we will see a recovery which, in its early stages, is modest in strength and driven
largely by consumer spending. The durability and sustainability of the recovery, and thus
its capacity to encompass other sectors of the economy, will depend importantly on our
ability to make and sustain further progress on the inflation front and to avoid another
resurgence of strains and pressures in financial markets stemming from the combination
of private and public credit demands.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
Having said earlier that I do not perceive any major overall differences in
business conditions and employment in the Ninth Federal Reserve District relative to the
economy as a whole, let me make two qualifications to that statement. First, on balance
I believe it is fair to say that the Ninth Federal Reserve District may have fared somewhat better than the nation as a whole in this recent recessionary period. Certainly,
comparative unemployment rates would suggest that conclusion. For example, during the
second quarter of 1982, unemployment for the district as a whole averaged 7.3 percent.
sharply below the national average. The second qualification I would make is that these
overall statistics mask some serious specific problems. Agriculture is one, but in addition there are geographic pockets within the Ninth District where sharp declines in the
production of wood products and copper and iron ore, have produced very high levels of
unemployment and economic distress. More recently, the coal, oil and natural gas producing belts within the district have also been adversely affected by the worldwide
conditions in the energy and related industries.
These circumstances lead quite naturally to your next question regarding
the trade-offs between economic conditions and controlling inflation. In my judgment, it
is important to bear in mind, that in the current circumstances, further reductions in
inflation can and should go hand-in-hand with improvement in employment, business
activity, and liquidity. But, even over the longer term, the economic choices we face do
not involve either/or decisions.
What is before us is a package deal: if we want to
improve the employment picture, increase liquidity, and create the right environment for
lasting and healthy business growth, we have to make further and sustained progress
against inflation. To be sure, there has been meaningful and encouraging progress on the
inflation side, as evidenced by the widespread deceleration in both price and wage increases that has already occurred. But we are by no means "home free" on the inflation
front--a proposition that in my view is underscored by the still-high level of long-term
interest rates prevailing in our financial markets. Such rates suggest to me. and suggest
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
S
rather strongly and directly, that investors are not yet convinced that progress against
inflation will be extended or, indeed, even maintained.
If my reading of the message in long-term interest rates is correct, then it
follows that improvement in employment, and in economic performance more generally,
requires further progress on the inflation side. For, as long as long-term interest rates.
girded by stubbornly persistent inflationary expectations, remain high, recovery in the
interest sensitive sectors of our economy--homebuilding, autos, other consumer durables.
business captial spending--may be sluggish and short-lived. In short, I doubt that we can
have the kind of recovery we desire over time without the full participation of these
sectors—participation that over time will depend upon lower long-term interest rates.
More broadly, I would maintain that the economic history of the past 15
years or so has demonstrated rather unmistakably that perceptions about trade-offs
between inflation and unemployment--while seductive and perhaps relevant in the short
run--were misplaced; inflation and true economic prosperity are fundamentally in conflict. If we want to regain our economic health--and I know that this is not an issue of
debate—then it is essential to bring inflation down and keep it down. Only through this
channel can we, in my opinion, reestablish the lower interest rates so critical to a broad,
durable, and sustainable expansion in our economy. Fortunately, I sense that we are now
in a position in which we can have economic recovery and further progress in winding
down inflation. Maintaining that condition will, however, require persistent discipline on
the part of both monetary and fiscal policy.
Finally, let me respond to your question regarding the current monetary
targets.
Admittedly, monetary aggregate targets have limitations.
We do not always
fully understand, for example, the factors contributing to short-run, week-to-week or
even month-to-month fluctuations in aggregates.
And we are aware that, over longer
periods, the full range of money supply measures are influenced and affected by innovations in financial instruments and practices, as well as by monetary policy and financial
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
9
and economic developments. All of these forces, and others, can at times make it difficult both to predict and to interpret trends in money growth.
But recognizing that the aggregates have some problems does not imply. in
my judgment, that they ought to be abandoned as policy targets. Indeed, I am satisfied
that they are more than adequate guides for policy, given our current institutional and
operating arrangements. The problems that I alluded to earlier do suggest, though, the
necessity of applying experience, judgment, and old fashioned "common sense" in establishing, and then trying to achieve, specific monetary targets. They point out the continuing virtue of closely following several rather than a single aggregate such as MI-both because a particular measure may, from time to time, be influenced by transitory
forces and because there is, in any event, potentially valuable policy information contained in the broader aggregates.
Innovations in payment practices may, at some point in the future, raise
sufficiently serious questions of definition, measurement, and control of the monetary
aggregates that alternative policy targets and techniques will have to be considered.
However, that day is not here. Having said that, let me add that the alternative targets
that have been proffered have serious shortcomings in their own right. While I do not
want to repeat the complete litany here, I would simply suggest that the other potential
policy targets frequently mentioned--real or nominal interest rates, the monetary base,
and so on--will not yield magical solutions to our economic problems. And, while one
particular target may have certain technical advantages over another, even those technical advantages have to be weighed against each other.
And, at least to date, I am
satisfied that the weight of the evidence still points to the wisdom of sticking with the
family of monetary aggregates—with particular emphasis on MI-- as the primary guide
for monetary policy. That is not to suggest that we can be, should be or, in fact, are
indifferent to other considerations in the short run. Nor is it to say that I cannot conceive of conditions and circumstances which might lead me to a different view. How-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
- 10 -
ever, it is to say that balanced and judicious use of the aggregates is operationally and
intellectually the best game in town for contemporary monetary policy. And to repeat
myself, the use of an alternative target will not eradicate the hard choices we face nor
would it eliminate the need for the persistent discipline in our financial policies that is
essential to sustained economic growth and prosperity.
Community Involvement Projects: Summary
1.
Urban League--joint education program
The League's overall program provides community residents with practical and useful
skills to help increase their interest in, and skills to cope with, the current economic
situation. The Personal Economic Management Workshop Series includes:
Budgeting
Borrowing
Debt repayment
Tax preparation and other topics.
2.
Neighborhood Housing Services
Neighborhood Housing Services (NHS) programs are designed to stimulate reinvestment in neighborhoods. The service is based on a partnership of financial institutions,
community residents, and local government. The Bank hosts luncheons to enable the
NHS staff to report to their supporters and solicit new support.
3.
Indian Economic Development Programs
A series of studies was designed to provide the following planning and management
tools in a reservation setting:
Resource identity
Management techniques
Threshhold analysis, economic base study
Linear programming
Three conferences and four special studies were generated in cooperation with other
agencies and educational institutions.
4.
Metropolitan Economic Development Council
The Bank has assisted MEDA, a minority business development advocate, by supporting internal growth through educational programs, training, and briefings on current
economic conditions. (See also Memberships, Minority Purchasing Council.)
5.
Food and Agricultural Policy Seminars, co-sponsor, University of Minnesota
A series of seminars was held around the state of Minnesota on issues important to
agricultural interests in the Ninth District.
Most were related to agricultural
finance. The Bank helped bring in speakers and provided other resources to maximize
the value of the seminars for participants.
6.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Opportunity Workshop
When projects of an appropriate nature arise, e.g., assembling media catalogs, the
Bank uses Opportunity Workshop, a sheltered workshop in Minneapolis.
7.
Community Resource Volunteers Program
The Bank provides resource people to elementary classrooms to assist teachers in
planning and teaching about forms of money and the Fed's role in an efficient
payments mechanism.
8.
Omnibus (A program for high-potential elementary students)
The Bank has provided training sessions for volunteers teaching special units in
economics to Omnibus students.
9.
Business Community Resource Volunteer Program
Bank staff members serve as resource people who participate in career discussions
with senior high school students.
10.
Twin Cities Opportunity Industrial Center
The center retrains hard-to-employ adults for entry into the labor market. The Bank
has provided resource people for classes and seminars in connection with training
programs.
11.
Consumer Education Unit
An instructional unit on consumer credit development has been developed in conjunction with educators and representatives of the credit industry. The unit is to be used
in the teaching of consumer credit concepts and skills in schools, community/adult
education programs, and other similar programs.
12.
State Councils for Economic Education
In cooperation with State Councils in the Ninth District states, the Bank provides a
variety of resources in setting up educational programs and seminars for teachers,
e.g., our teacher-banker workshops. Council programs are then developed and aimed
at teachers and students. This represents a major involvement by Bank.
13.
Tours
Tours are available to the public and to special groups upon request. In 1981 and
1982, groups have included in addition to school groups:
o
o
o
o
o
o
o
14.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
business clubs,
senior citizens,
junior achievement classes,
farmers' groups,
Native American school groups,
AAUW and other women's groups, and
conventions, e.g., finance managers and agricultural economics professionals and
foreign visitors.
Northside Child Development Center
With other businesses, the Bank was involved in founding a child development center
in an urban area of Minneapolis.
15.
Upper Midwest Agricultural Credit Council (UMACC)
The Council is an organization of bank credit specialists that functions as an educational forum for bankers serving rural communities in the Upper Midwest. A Bank
staff person is executive secretary of UMACC, and the Office of Public Information
provides substantial administrative support.
16.
Upper Midwest Council
The Bank was a major supporter of the Council, a regional research group, until its
demise this year.
17.
Small Business Seminars, Initiatives
a.
White House Conference on Small Business
The Bank provided substantial planning, personnel, and adminstrative assistance
to state planning meetings leading up to the 1980 conference.
b.
Small Business Liaison
The Office of Public Information has, as a key objective, maintained close ties
with District (see Memberships, Participations) states' small business. This has
been accomplished, for example, through ties with the Small Business Administration, the Minnesota Commission on Small Business (attendance at annual and
regional meetings), and the Task Force on Small Business and Economic Stability
(organized by SBA to assist small firms with financial problems caused by high
money costs).
Examples of interaction with small business groups include:
18.
o
Small and minority business-sponsored meeting on the effects of economic
policy in March 1982 (Corrigan and staff),
o
Meetings with small and
(Corrigan), and
o
Meeting with the Task Force on Small Business and Economic Stability for
discussion of credit and monetary policy in August 1980.
minority business groups in
November 1981
Minnesota Special Olympics
The Bank provides support services for the Minnesota Special Olympics, thus allowing
Special Olympics to devote more of its resources to programming.
19.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Support for the Arts
a.
Purchases
The Bank purchases for its collection the works of regional artists and has made
an effort to include works by minority and women artists.
b.
Exhibitions
A program of temporary exhibitions has focused on Black artists (a Black History
Week event) and plans to highlight the Southeast Asian community (Hmong
tapestries) and correctional facilities inmates (Arts in Corrections) in upcoming
months.
20.
United Way of Minneapolis Area
The Bank provides substantial support to the annual United Way campaign. Each year
a staff member, who remains on salary at the Bank, spends three to four months as a
United Way Loaned Executive. Bank departments provide members for solicitation
and administrative work, and the Bank holds rallies for employees on Bank time.
21.
You're the Banker
The simulation game, You're the Banker, was developed by the Bank to acquaint
players with the basic economic principles related to money and banking. The game,
in board and computer versions, is used to bring students, educators, and members of
the community in contact with the financial institutions. The game is generally
distributed to schools and banks at the cost of production.
22.
Community Catalyst Role
Presidents of the Bank have been instrumental in concluding a significant study on
future choices facing Minnesota (Commission on Minnesota Futures), initiating an
organization to support academicians studying regional issues (Mid-Continent
Regional Science Association), and arbitrating a major dispute between the University of Minnesota and black students (following the assassination of Martin Luther
King, Jr.).
23.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Community Reinvestment Act/Truth in Lending Activities
The Consumer Affairs Department provides educational services that include
speaking on regulatory issues, distribution of brochures and other materials produced
throughout the Federal Reserve System, and responding to consumers' telephone
inquiries.
The department has also provided a staff person for up to one week to help an
individual SMSA group develop a CRA program (in cooperation with FDIC). One
program has been completed and another is planned for the near future.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Memberships, Participations
Small Business Administration Advisory Committee Council
One staff member serves as a member of the Council Board, which serves as an interface
between small business and the SBA. The Council recommends policies that will enable
SBA to better serve its constituency.
Minority Business Opportunity Committee, Federal Executive Board
Even though not a member of the Federal Executive Board, the Bank elected to participate fully in the Committee's work promoting the development of minority-owned
business, both because of our financial expertise and our commitment to minority business
development.
Minority Purchasing Council
The Council is a subgroup of the Metropolitan Economic Development Council, a minority
business development advocate. The Bank participates in the Minority Business Exchange,
the Council's trade fair, and attends the Council's annual meeting.
National Alliance of Businessmen
Each year since 1972, the Bank has loaned the local NAB chapter a senior staff person to
participate in a program that identifies summer jobs for minority youth.
The Minnesota Project, Board Membership
The Project is a. center for public policy study and community development, with an
emphasis on the implications of public policy decisions for all strata of the state's communities.
vlinnesota Charities Review Council, Board Membership
The Council oversees solicitation and allocation of donations by charitable organizations
operating within the state.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Statement
of
Robert H. Boykin, President
Federal Reserve Bank of Dallas
before the
Subcommittee on Domestic Monetary
Policy of the Committee on Banking,
Finance and Urban Affairs
United States House of Representatives
September 23, 1982
Introduction
It is a pleasure to appear at this hearing to discuss the Activities
and Policies of the Federal Reserve Banks and their Implications for Monetary
Policy.
As you know, certain areas of your inquiries have been addressed in
the joint statement of the five Federal Reserve Bank Presidents who have been
called to appear.
My responses to the issues not covered in the joint state-
ment are as follows.
What has been your bank's involvement with community and scholarly
activities? In this connection, I would be pleased to know what
work-training programs, upward mobility programs, affirmative action
policies, forums for small and minority businesses, and research
activities your bank has been and is presently engaged in doing.
The following is a listing of the major activities of the Bank with
respect to community and scholarly activities:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Work-Training Programs
Computer-trainee program in conjunction with Skyline High School,
Dallas, Texas.
Summer intern programs with minority schools such as Bishop
College, Texas Southern University, and Prairie View A&M
University.
In-House training, including typing, shorthand, and word
processing classes.
Maintenance, electrical and equipment repair training in the
Facilities Department of the Bank.
Bank supported educational program offering full payment for
tuition and books for bank related/job related courses at
colleges in the area.
Upward Mobility Programs
Executive Development Program - emphasis on management development for potential managers and officers.
Executive Secretarial Program - emphasis on upward mobility for
clerical workers.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_
-
Administrative Assistant Program - emphasis on exposing new
college graduates to various areas of the Bank.
_
Career Ladder Establishment - a Bankwide program that establishes career paths in many areas of the organization.
Posting System - allows employees to bid for jobs in other
departments before outside recruiting begins.
Affirmative Action Policies
_
Recruits at minority colleges.
-
Advertises in minority newspapers and publications.
_
Establishes targets toward upward mobility for women and
minores.
_
Seeks and encourages job applications from members of minority
groups.
_
Cooperates in educational programs with Texas Southern University
and Bishop College.
_
Staff members participate in community service activities,
particularly those designed to serve the needs of disadvantaged
members of the community.
-
Conducts In-House EEO awareness seminars.
Participates in career day at minority schools.
_
Two of our branches are heavy minority employers with minorities
representing half of their staffs. All of our offices have
excellent minority representation when compared to community
standards.
Community and Scholarly Activities
_
Conducts meetings on community reinvestment activities with
individuals and organizations throughout the Eleventh Federal
Reserve District.
_
Gives speeches on all aspects of Federal Reserve System activities.
_
Partates in activities with the Joint Council on Economic
Education, the Texas Council on Economic Education, and the
Educational Center for Economic Education at North Texas State
University.
_
Cooperates with universities in programs
economic education and to bring about an
of monetary and economic policy.
g e
pro v
rc
tuon
ig
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3
Participates in community consumer educational fairs, activities,
and various other consumer education meetings.
Hosts meetings and participates in various activities that are
initiated to enhance small business financing and operational
needs.
Participates in the Volunteer Business Council.
Hosts meetings involving community leaders, bankers, businessmen,
and various other groups such as students and community organizations.
Provides support to community activities such as the annual United
Way Campaign, Wadley Blood Bank, and other community sponsored
programs designed to improve the conditions and environment of
all citizens.
The officers and staff of this Bank are members of, or are involved
in, the following organizations and activities:
American Economics Association
Dallas Economists Club
Advisory Council, East Texas State University, Bank Operations
Institute
Dallas Personnel Association
American Society of Personnel Administrators
Advisory Bov.d, Texas A&M University Executive Development
Program
American Institute of Banking
Advisory Committee, Computer Science Cluster at Dallas
Independent School District
American Institute of Certified Accountants
Texas Society of Certified Public Accountants
State Bar of Texas
Dallas Bar Association
American Bar Association
Dallas Management Association
Junior Chamber of Commerce
Chamber of Commerce
American Statistical Association
Zonta Club of Dallas I
Bank Administration Institute
Dallas Agricultural Club
Dallas Council U.S. Navy League
Rotary International
Southwest Roundtable
Houston Personnel Association
American Agricultural Economics Association
Southwestern Social Science Association
Counselor, Southwest Graduate School of Banking, Southern
Methodist University
Lions International
4
Optimist International
Advisory Council, School of Management, University of Texas
at Dallas
Advisory Council, Center of Banking Education, Texas Southern
University
Advisory Council, Texas Tech School of Banking at Lubbock
The status of business and financial liquidity, in the economy as a
whole and in your District, and the implications for monetary policy.
Cash flow positions at businesses throughout the country and in the
Eleventh District are still showing some strain.
Liquidity pressures at
small- to medium-sized firms have increased, as evidenced by the number of
bankruptcies reported.
also evident.
Cash flow problems among agricultural producers are
High and rising production costs, together with falling crop
and livestock prices, have significantly reduced net farm earnings, and the
number of forced farm sales is up.
Cash flow problems in the business sector have also generated
earnings pressures in the financial sector.
Recent business and financial
failures, together with concerns about Mexican and other international credits,
have increased tension in U.S. financial markets.
In recent months loan loss
provisions at commercial banks have been increased and more attention is being
given to problem loan areas.
Earnings pressures at savings and loan institut-
ions, resulting from high funding costs, remain a source of concern.
Lenders are exhibiting some preferences for quality credits and risk
premiums have increased in several sectors.
In the commercial paper market,
the interest rate spread between the medium- and top-quality paper has widened.
The spread between CD rates and Treasury yields also widened temporarily
following recent bankruptcy announcements.
However, the commercial banking sector is relatively liquid at this
time.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Business loan growth since July has moderated and discount window
-5 _
borrowings have dropped off sharply in recent months.
Similarly, in contrast
to 1974, access to the commercial paper and corporate bond markets has not
been closed to lower-rated borrowers.
Both financial and nonfinancial firms
have been able to raise a substantial amount of funds in the credit markets
with most of the borrowing concentrated in the shorter maturity range.
In the Eleventh District, weakness is primarily concentrated in the
energy sector--manufacturing of energy equipment, drilling and energy servicing
industries.
Moreover, similar to the national picture, high borrowing costs
have increased liquidity pressures at small- to medium-sized firms, particularly auto dealerships and residential home builders.
However, despite the
weak energy sector, economic activity in our District is still relatively
strong compared to the rest of the country, and our major financial institutions have been among the top performers during the last several years.
Implications for monetary policy of liquidity strains in both the
financial and business sectors are taken into consideration when setting
policy.
Recently, both long- and short-term interest rates have dropped
sharply and if this decline is sustained, it should significantly reduce
liquidity strains during the second half of this year.
Employment and business conditions in the economy, as a whole
and in your District, and the implications for monetary policy.
Economic indicators seem to imply some improvement in the economy in
the near future.
The index of leading economic indicators has risen for four
consecutive months.
since December 1980.
capital goods.
In July, new factory orders rose at their highest rate
The biggest gain appeared in orders for nondefense
Movements in that statistic often are indicative of future
changes in plant and equipment spending.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6 However, at the present time the economy still is rather weak.
The
manufacturing sector in general, and capital goods manufacturing in particular, have been hit hard by the recession.
The
Auto and home sales are slow.
index of coincident economic indicators fell in June and again in July, and in
August the U.S. unemployment rate was at its highest level since 1941.
The Eleventh District has been hit by recession also.
Last year,
growing weakness in some manufacturing sectors was more than offset by strength
in the energy industry.
But the District economy started to show signs of
recession in the first quarter of 1982, when oil and gas drilling activity
began to decline.
Employment in a number of energy-related industries--
including drilling, oil field equipment manufacture and primary metals--peaked
in March.
Devaluations of the Mexican peso in February and again in August
severely affected retail sales on the border and in San Antonio, one hundred
fifty miles away.
As a result of the devaluations, and because of the slug-
gish economy, District retailing has been weak.
District farmers are suffering from low prices and crop damage.
Over the last two years, Texas farm employment has fallen by more than 10,000.
Low sales in the national housing markets have hurt the District's forest
products industry.
Although the inflation rate abated in July, many of our nation's
economic problems are still tied to inflation and to inflationary expectations.
Certainly, high interest rates reflect investor fears of high inflation.
The
difficulties which have occurred this year in the capital goods markets, the
housing market and, to some extent, the automobile market, are legacies of
past high inflation rates and the resulting high interest rates.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7
Consequently, the implications of the current state of the economy
for monetary policy must be weighed carefully.
While the current economic
situation is serious, any quick fix that could be given by an expansionary
monetary policy would refuel inflation and the expectation of more inflation.
Such a policy would ultimately drive up interest rates and erode our economic
base even further.
This suggests that despite the current weakness of the
economy, it is to the long-run benefit for everyone to encourage an environment of stable prices in which productivity and employment can expand.
The relative importance of further reductions in inflation at this
time compared with the state of employment and business conditions
and liquidity.
We have learned a very painful lesson in this country about inflation.
If left unchecked, inflation will lead to high and volatile interest rates,
increased uncertainty about the future economic environment, and reduced
savings and investment.
Through these channels, inflation ultimately contrib-
utes to inadequate growth in productivity, living standards, and employment
opportunities.
This realization led the Federal Reserve System to adopt a long-term
program to slowly reduce the rate of inflation.
Much progress has been made:
by almost any measure the rate of inflation has been cut in half in the last
several years.
Nevertheless, public skepticism regarding the permanence of
this progress, together with swelling Federal deficits, kept interest rates
high, even while inflation was moderating.
This represented a sharp increase
in the so-called "real", or inflation-adjusted, interest rate, that is the
primary cause of current economic weakness.
Recently, however, the public has accepted some of the reduction in
inflation as more permanent, fostering significant reduction in interst rates.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-8 _
Were we to relax our vigil against inflation, public expectations would reverse
that decline.
Consequently, we feel our current policy provides the only hope
for enduring diminution of interest rates.
Although the choice of an appropriate short-run policy always involves
tradeoffs between competing objectives, the dilemmas are less troublesome now
that substantial progress has been made against inflation.
Present monetary
growth targets can provide sufficient liquidity and credit for a sustainable
economic recovery, which is apparently under way.
Yet these targets are, at
the same time, consistent with further reductions in inflation and interest
rates.
The appropriateness and viability of the monetary targets currently
used by the Federal Reserve, specifically the M-1 aggregate, and your
views on alternative targets, including the monetary base, a credit
target, GNP, or targetting of real or nominal interest rates.
The monetary aggregates the FOMC uses as targets have helped and, I
believe, will help guide policies which will further reduce inflation and make
possible economic recovery and sustainable growth.
Nevertheless, structural
changes in our economy and our financial markets can affect patterns of monetary growth, and we must be willing to adjust our growth targets, revise the
definitions of our aggregates, or even change the type of targets we use when
evidence suggests this is necessary.
For some years, with particular emphasis during the past three, we
have used the monetary and credit aggregates as targets.
Statistical studies
over a number of years have shown that changes in these aggregates are related
to future changes in economic activity.
Of special importance is the evidence
that reductions in the rates of growth of these aggregates will lead to reductions in the rate of inflation.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
_
Tighter control of these aggregates over the last three years has
helped cut the inflation rate in half.
Further gradual reductions in the
rates of monetary growth will ensure further reductions in inflation.
But our
experience in the last three years points out the importance of flexibility
and judgment in using these aggregates.
The rapid pace of change in financial
markets and temporary shifts in the liquidity needs of firms and households
have required us to deviate from our long-term targets from time to time.
We
must continue to reexamine the aggregates' behavior and their relationships
with our economic goals as we set our long-term growth targets.
And, in
setting our short-term targets, we must continue to view recent changes in
money growth in the context of a whole host of economic variables and ind
tors to determine if short-run deviations from our targets are appropriate.
Other strategies, based on alternative targets, appear less attractive.
Among those frequently mentioned is the monetary base.
Although the
concept--merely the sum of bank reserves and currency--appears simple, a
problem arises in adjusting the base for changes in reserve requirements.
If
reserve requirements are increased, for example, a higher amount of base is
necessary to support the same level of deposits and economic activity.
ferent adjustment procedures can yield
substantially different results.
The base has several other deficiencies as well.
Like the money
aggregates, the base is affected by shifts among different types of deposits
such as those caused by the nationwide introduction of NOW accounts in 1981,
or shifts from bank deposits to money market mutual funds shares over a longer
period.
In addition, the economy's need for base money is also affected by
shifts in the public's demand for currency relative to bank deposits and
shifts in deposits among institutions with different reserve requirements.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Direct control of interest rates is another frequently discussed
alternative.
However, our unhappy experience with putting more emphasis on
interest rates in the '60s and '70s is precisely what led us to greater
emphasis on the monetary aggregates three years ago.
When inflation is accel-
erating, small rises in interest rates are unlikely to slow it down.
It has
been possible for interest rates to rise over a long period of time and yet
have inflation accelerate as well, which renders nominal interest rates of
little value in guiding monetary policy.
Real interest rates, which attempt to adjust nominal interest rates
for the rate of inflation, appear to be an improvement.
Unfortunately, the
rate of inflation needed to make the adjustment properly is the rate expected
by borrowers and lenders over the life of the loans or deposits on which the
interest will be paid.
This number is unobservable, so the true real interest
rates are, to some extent, a matter of conjecture.
Furthermore, many factors
can be expected to change the relationships between real interest rates and
other economic variables.
Changes in the rate of inflation, tax structure,
productivity of our capital stock, and size of Federal budget deficits all
alter the level of the real interest rate which would best help us achieve our
goals.
Research done at our Bank indicates that the relationship between real
interest rates and the level of business actives, while significant, is
hiS hly variable and undependable.
The use of nominal GNP as an explicit target of Federal Reserve
policy has some appeal.
A policy of limiting increases in this variable to
those justified by long-term trends in labor force and productivity growth
would ensure our success in controlling inflation without preventing the
economic growth we strongly desire.
The disadvantage is that the Federal
Reserve has no 5irect control over GNP.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
GNP is affected not only by monetary
policy, but also by our nation's budget and regulatory policies, international
events, and unanticipated domestic economic developments.
Because of the long
lags involved in monetary policy, current policy decisions cannot be based on
GNP behavior of the recent past but rather would have to be based on expected
GNP behavior in the distant future.
Such a policy strategy would require
highly accurate forecasts of the future course of our economy--as yet, economic science has not progressed enough to provide us with such forecasts.
Recent attention has also been given to using a broad credit aggregate as a policy target.
While such aggregates are closely related to GNP, it
currently takes several months to compile the data necessary to compute them.
Also, as is the case with GNP, broad credit aggregates cannot be easily
controlled by the Federal Reserve.
They are relatively insensitive in the
short run to changes in either bank reserves or market interest rates.
We do
currently use a credit aggregate, bank credit, as one of our target variables.
Because it is restricted to banks which are required to keep reserves, it
falls much more closely under our control.
In my judgement, our current set of monetary target variables is the
best of a very imperfect set of possible choices.
The search for better
policy guides will and should continue, but, until they are found, careful and
flexible use of our current targets offers our greatest hope of reducing
inflation and providing the foundation for long-term growth.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
September 23, 1982
The Honorable Benjamin S. Rosenthal
Chairman
Subcommittee on Commerce, Consumer
and Monetary Affairs
Committee on Government Operations
House of Representatives
20515
Washington, D.C.
Dear Chairman Rosenthal:
I am pleased to respond further to your letter of
August 18 requesting information on supervisory experience
with banks controlled by foreign individuals.
The enclosed
data have been prepared in response to your request as a joint
effort by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, and the Federal Reserve.
Sincerely,
VFW A.ItOcker
Enclosure
FD:J11:CO:pjt (#V-188)
bcc: Fred Dahl
Jim houpt
Mrs. Mallardi (2) *\./
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
DATA ON U.S. BANKS OWNED BY FOREIGN INDIVIDUALS
The attached tables provide statistics on the supervisory experience of
the
three federal bank regulatory agencies with U.S. banks that are 25 perce
nt
or more owned by foreign individuals.
The data include summaries of examiner
ratings, the frequency of bank violations of U.S. laws and regulation
s, and
the number of consumer complaints about these banks received by the
three
agencies.
The commercial and consumer examination ratings provide indicators
of the
banks' overall financial strength, their adherence to good banking
practices,
and their conformance to U.S. laws and regulations.
In general terms, ratings
of 1 and 2 are excellent to satisfactory; a rating of 3
is less than satisfactory; and ratings of 4 and 5 reflect poor to very poor perfo
rmance.
The data on violations should be used cautiously.
Many violations, for
example, are very technical and are corrected during the exami
nations.
At
times, a single transaction or misinterpretation of law or regul
ation can
result in numerous violations.
Some banks may be cited for relatively large
numbers of violations, yet receive strong management and
compliance ratings
if the nature of the infractions is not serious or symptomati
c of widespread
problems.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 1
1/
U.S. Banks Owned by Foreign Individuals--Canada
& W. EuropeAmounts in $1000
Bank
City
State
Domestic Deposits
June 30, 1982
Coolidge Bank and Trust Co.
Security NB & Trust Co. of NJ
Creditbank
1st City NB of Jacksonville
Biscayne Bank
Watertown
Newark
Cutler Ridge
Jacksonville
Miami
MA
NJ
FL
FL
FL
124,805
52,970
35,283
9,350
92,470
Totalbank
Intercontinental Bank
Southern Florida Bank NA
American Bank & Trust Co.
Alamosa National Bank
Miami
Miami
Riviera Beach
New Orleans
Alamosa
FL
FL
FL
LA
CO
110,301
404,660
16,024
344,059
26,334
Dominion Bank of Denver
Dominion National Bank of
Denver
American Bank of Commerce
Bank of California NA
Denver
CO
19,961
Denver
Phoenix
San Francisco
CO
AZ
CA
19,015
32,004
1,742,416
Number of Banks = 14
Median Deposit Size = $44,127
Total Aggregate Deposits = $3,029,652
1/ Excludes banks owned by foreign banks.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 2
U.S. Banks Owned by Foreign Individuals--Latin American—
-'
Amounts in $000
Domestic Deposits
June 30, 1982
Bank
City
Meadowlands National Bank
Central National Bank of NY
Repulic National Bank of NY
Caribank NA
Dania Bank
North Bergen
New York
New York
Coral Gables
Dania
NJ
NY
NY
FL
FL
33,841
108,102
3,438,257
40,313
159,803
Safrabank
Consolidated Bank NA
Eagle National Bank of Miami
Dadeland Bank
Republic National Bank of Miami
Miami
Hialeah
Miami
Miami
Miami
FL
FL
FL
FL
FL
230,639
362,854
73,195
51,112
466,905
Florida International Bank
Sunshine State Bank
International Bank of Miami NA
Perrine
South Miami
South Miami
FL
FL
FL
37,190
51,443
67,945
Total Number of Banks = 13
Mediam Deposit Size = 73,195
Total Aggregate Deposits = 5,121,599
1/ Excludes banks owned by foreign banks.
State
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 3
U.S. Banks Owned by Foreign Individuals--Middle
East
!"
mounts in $000
Bank
City
State
Domestic Deposits
June 30, 1982
National Bank of Georgia
Altanta
GA
430,999
First Bank & Trust Co.
Marietta
GA
145,524
Bank of the Commonwealth
Detroit
MI
796,824
Du Quoin State Bank
Du Quoin
IL
48,072
First Western Bank
Houston
TX
13,065
Texas Investment Bank NA
Houston
TX
28,415
Peoples Bank
Houston
TX
60,186
Houston
TX
223,787
Phoenix
AZ
438,357
Western Bank
Great Western Bank & Trust
Total Number of Banks = 9
Median Deposit Size = $145,524
Total Aggregate Deposits = $2,185,229
1/ Excludes banks owned by foreign banks.
___
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 4
st'
ar Ea
-F
n Individualsig
re
Fo
by
d
ne
U.S. Banks Ow
Amounts in $000
City
State
Bank
Trust Co.
Liberty Bank &
an Bank
Chinese Americ
Trust Co of NY
Community NB &
nk
Global Union Ba
c State Bank
American Pacifi
e
Bank of Financ
erseas Bank
California Ov
nk
Independence Ba
National Bank
Trans American
.
Bank & Trust Co
Pacific Union
rnia Bank
America Califo
Bank
American Asian
of California
Bank of Canton
ient
Bank of the Or
Redwood Bank
ty Bank
American Securi
Boston
New York
New York
New York
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Moneterey Park
Menlo Park
Palo Alto
San Francisco
San Francisco
San Francisco
San Francisco
Honolulu
Banks = 16
Total Number of
Size = $88,113
Median Deposit
695,945
Deposits = 1,
e
at
eg
gr
Ag
l
Tota
s.
by foreign bank
d
ne
ow
s
nk
ba
1/ Excludes
MA
NY
NY
NY
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
HI
ts
Domestic Deposi
June 30, 1982
12,605
197,976
73,585
21,458
111,757
21,334
102,641
140,201
52,176
41,606
14,024
40,234
177,700
127,177
160,364
401,107
Table S.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1/
Latest Examinationsls,
dua
ivi
Ind
n
eig
For
by
ed
a for U.S. Banks Own
Commercial Examination Dat
Region of
Owner
Canada/
Western Europe
Latin America
Middle East
Far East
Total
Number
of
Banks
14
13
9
16
52
Capital
Rating
2
1
4
9
5
5
23
8
1
2
6
17
3
_
1
4_5
1
2
Composite
Rating
3
2
1
_
4-5
Total
Number of
Enforcement
1/
Actions-
5
4
1
5
4
85
1
31
4
54
7
10
2
0
199
204
3
1
5
0
2
1
1
9
3
1
5
0
24
1
1
3
5
6
1
19
1
1
1
10
1
3
3
4
2
54
6
3
25
2
5
29
1
4
30
7
5
12
10
367
13
5
66
28
301
6
8
by foreign banks.
1/ Excludes U.S. banks owned
by types of violations.
2/ See Table 6 for details
3/ See Table 10 for 'details.
Number of Banks With
Management
Rating
4-5
3
2
_
1
_
_
Number of
Violations
for Banks
Rated
Composite 11
3-5-2
1-2
••••.
Table 6.
1/
ationsin
am
Ex
st
te
La
s,
al
du
reign Indivi
S. Banks Owned by Fo
U.
r
fo
ns
io
at
ol
Vi
n
io
Commercial Examinat
Region of
Owner
Canada/
Western Europe
Latin America
Middle East
Far East
Total
Number
of Banks
5
2
1
4
12
Violations
Exec. Officer
Borrowings
Bank
Secrecy
Other
Total
2
8
31
2
8
0
2
5
0
1
0
4
5
0
1
16
25
1
1
5
2
3
66
18
12
30
3
Lending
Limit
11
2
0
Credit to
Affiliates
examination.
e 3-5 during the latest
it
os
mp
co
d
te
ra
re
we
banks that
1/ Includes only those
by foreign banks.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
d
Excludes U.S. banks owne
Table 7.
Consumer Examination Data for U.S. Banks Owned by Foreign Individuals, Latest Examinations'
—
Region of
Owner
Number
of Banks
Number of Banks With
Consumer Composite
Rating of:
2
3
4-5
1
Total Number of
Violations of
Consumer Banking
?!
Laws & Regulations
Total Number of
Consumer Complaints,
1981-823/
Canada/
Western Europe
14
1
9
4
0
373
79
Latin America
13
0
10
3
0
194
247
9
0
8
1
0
247
24
16
2
12
2
0
383
11
52
3
39
10
0
1,197
361
Middle East
1
Far East
Total
1/ Excludes banks owned by foreign banks.
2/ See Table 8 for details by type of violation.
3/ See Table 9 for details.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 8.
1/
Consumer Violations for U.S. Banks Owned by Foreign Individuals, Latest Examinations-
Region of
Owner
Number
of banks
Equal Cr.
Opportunity
Int. on
Deposits
Truth in
Lending
HMD
Act
Flood
Insurance
Fair Cr.
Reporting
Act
R.E.
Settlement
Act
Other
Total
Canada/
Western Europe
14
28
9
160
2
35
23
31
85
373
Latin America
13
6
23
108
7
8
8
7
27
194
9
94
39
52
2
12
2
5
41
247
16
42
20
187
2
11
21
17
83
383
52
170
91
507
13
66
54
60
236
1,197
Middle East
Far East
Total
•••••,
1/ Excludes U.S. banks owned by foreign banks.
1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 9.
Consumer Complaints Received About U.S. Banks Owned
by Foreign Individuals, 1981-1982I(
Resolution
Region of
Owner
Canada/
Western Europe
Latin America
Middle East
Far East
Total
Number
of Banks
14
13
9
16
52
Bank in
Error
15
33
1
1
50
Bank Correct
24
Questionable
2/
Other
Total
Complaints
16
24
79
37
12
165
247
13
9
1
24
5
2
3
11
39
193
361
79
•41.4r.
1/ Excludes U.!. banks owned by foreign banks.
2/ Includes complaints for which the agencies gave
the consumer general information and then heard
no more about the
matter.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 10. Enforcement Actions in Effect Toward
1(
U.S. Banks Owned by Foreign Individuals, August
31, 1982
Type of Action
Written Agreement
Formal Agreement
Memorandum of Understanding
Amendment to Existing
Cease and Desist Order
Date
May 1982
January 1981
September 1981
June 1981
1/ Excludes U.S. banks owned by foreign
banks.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Condition to be Corrected
Inadequate capital position, poor management
and earnings performance, low asset quality
and growth, and limit certain international
activity.
Poor asset quality; inadequate disclosures
regarding the conditon of the loan portfolio;
mis-matched and inflexible balance sheet; violations of law, including consumer laws.
Inadequate capital and earnings; violations
relating to trust and consumer laws; inadequate
disclosure regarding the condition of the loan
portfolio.
Inadequate capital, improper transactions
with
affiliates.
Table 10. (continued)
Type of Action
Date
Formal Agreement
May 1981
Formal Agreement
January 1981
Condition to be corrected
Improper loans and other transactions with
insiders (self-dealing); poor overall loan
quality and administration; internal control
and internal audit deficiencies.
Non-compliance with Bank Secrecy Act.
Memorandum of Understanding
February 1980
No written loan policy, unsatisfactory loan
loss reserves, inadequate loan documentation,
suspend cash dividends unless approved by FDIC,
poor asset quality, violations of consumer laws.
Memorandum of Understanding
March 1981
Poor asset quality, no written loan policy,
inappropriate accounting policies, poor loan
administration and collection procedures, low
loan loss reserves, violations of consumer laws.
Memorandum of Understanding
October 1981
Memorandum of Understanding
June 1982
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Low asset quality and liquidity, inadequate
loan loss provision, violations of law.
Low capital, inadequate
management policy, poor
inadequate credit files
no overdraft policy, no
poor internal controls:
liquidity and funds
loan policies and
and loan documentation,
internal auditor and
,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Table 10. (continued)
Type of Action
Memorandum of Understanding
Cease and Desist Order
Section 8(b)
Date
August 1982
March 1981
Condition to be Corrected
Poor asset quality, inadequate loan loss
reserves, no written liquidity and funds
management policy, low capital, violations
of laws, poor operational efficiency.
Unacceptable management, inadequate capital
and loan loss reserves, violations of laws,
low asset quality, excessive overdue loan
totals, poor loan documentation.
.
•ISON
,
CM.INUAMIN S. ROSZPITHAL, N.Y.. CHAIRMAN
JOHN CONYERS, JR., MICH.
EUGENE V. ATK I NSON, PA
ZITEPHEN L. NEAL, N.C.
DOUG 'BARNARD. JR., GA.
PETER A. PEYSER, N.Y.
GARAARA L PLENNELLY CONN.
Action assigned Fred Dahl; info copies to Gov.
Wallich, Mr, Germ/Lill & Ms. Jacklin
LYLE WILLIAMS, OHIO
NAL DAIS. NEBR.
WILLIAM P. CLINGER, JR., PA.
JOHN HILER. I.
NINETY-SEVENTH coNGRESS
oricionrrv—(202) 225-4407
Congre55 of tic Zhittb 6tataS
yooufse of ilepresSentatibes$
COMMERCE, CONSUMER, AND MONETARY AFFAIRS
SUBCOMMITTEE
OF THE
COMMITTEE ON GOVERNMENT OPERATIONS
RAYBURN HOUSE OFFICE BUILDING, ROOM 111-377
WASHINGTON, D.C. 20515
73
F
August 18, 1982
Hon. Paul A. Volcker
Chairman
Federal Reserve Board
Washington, D. C. 20551
Dear Mr. Chairman:
I am writing in connection with the hearings of the Commerce, Consumer, and
Monetary Affairs Subcommittee on foreign ownership of U.S. banks that have now
been scheduled for September 29 and 30 to request the preparation of background
information regarding recent supervisory experience with U.S. banks controlled
by foreign individuals.
In cooperation with the Comptroller of the Currency and FDIC, please prepare
for the Commerce, Consumer, and Monetary Affairs Subcommittee a factual report
covering certain items of information on all foreign -owned banks that are 25
percent or more controlled by foreign individuals, either directly or through
for
holding companies (excluding only those that had been under foreign ownership
tion
less than 6 months at the time of the most recent examination). The informa
requested should be reported separately for four subgroups of these banks,
grouped according to whether the principal owners are from (a) Canada or Western
Europe, (b) Latin America, (c) the Middle East, or (d) the Far East.
The information requested is the following:
1
the
The number, median deposit size, and total aggregate deposits of all
banks in this class;
2
The names, locations, and deposit sizes of the individual banks in this
class;
3
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
in
The supervisory experience of the Federal regulators with these banks
these
terms of financial soundness and performance, including the number of
banks found during 1981 or 1982 to be substandard in terms of capital
adequacy or financial soundness;
2
4.
The adequacy of compliance of these banks with all applicable laws and
regulations for which they are examined, including the numbers of
violations of laws and/or regulations found in examinations during 1981 or
1982, specifying in all cases the particular law or regulation violated and
the nature of the violation found;
5.
A listing, without bank identifications, of all formal supervisory or
enforcement steps seeking to correct unsafe conditions or violations of law
or regulations, such as cease and desist orders, supervisory agreements, or
memoranda of understanding with the bank's board of directors, specifying
the types of conditions to be corrected; and,
6.
The number and specific character of the consumer complaints filed against
these banks during 1981 and 1982.
Please submit this joint report to the Commerce, Consumer, and Monetary Affairs
Subcommittee no later than Friday, September 24.
In addition to this background material, please include in your testimony
for the hearing your general findings with regard to the question of whether
these banks as a group, or any significant subset of these banks, have a supervisory record or consumer complaint record that is significantly different from
(a) the record of comparable domestically owned banks, or (b) their own record
prior to being acquired by foreign owners.
S ncerely,
,
n amin S. Rosenthal
hairman
BSR:dt:b
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
IP
N‘,3
oto
fit
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
September 22, 1982
PAUL A. VOLCKER
CHAIRMAN
The Honorable Gene Chappie
House of Representatives
Washington, D.C.
20515
Dear Mr. Chappie:
Thank you for your letter of August 23 enclosing an
article by Sylvia Porter that recently appeared in newspapers
across the nation. The article raises concerns about the
growing trend toward "check truncation", that is, the practice
of having the depositor's financial institution retain canceled
checks rather than returning them to the depositor with his or
her periodic statement. Based 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, computer equipment, postage, and other expenses.
The introduction of interest-bearing NOW accounts has also
increased costs. Much of these increased costs are passed on
to depositors in the form of service charges. In order to
provide customers with lower cost services, depository institutions are able to reduce handling and processing costs as
well as postage expenses. As a result, the institution is in a
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 not returned to the depositor. We do not believe that
this is the case. First, under standard industry practice
where truncation is in use today, the depositor retains a
carbon copy of the check for his records. The carbon copy
contains virtually all of the information that the original
copy contains and can be used to identify 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
01.
The Honorable Gene Chappie
Page Two
There has been no intention on the part of the Government agencies to keep the issue of check truncation quiet.
Indeed, the National Credit Union Administration has adopted
rules requiring federal credit unions that offer share draft
(checking) accounts to truncate customers' checks. This rule
was adopted after an extensive public comment period. Any
rules that are adopted by 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 adopted. Accordingly, I would expect that any action by the agencies to
accommodate check truncation would be considered only after the
public has had extensive opportunity to comment on the proposed
rules, The federal banking agencies do not have rules authorizing check truncation by commercial banks because the service
is permitted under banks' authority to accept deposits, which
is granted to them by statute. There are no plans under consideration by the banking agencies to require that commercial
banks truncate checks.
Ms. Porter states that there will be a single location
at which depositor records will be centralized. We are unaware
of any proposals or plans to centralize information concerning
depositors, and check truncation does not result in having
information available in a central location. The process
involved in check truncation is as follows. The customer's
bank (or a bank earlier in the collection process) transcribes
information from the check onto magnetic tape which is used to
service the account. The bank uses the tape to place charges
and credits against the account and to prepare an itemized
account statement. Images of the front and back of the check
are transferred to microfilm. The original checks are then
placed in storage, under current industry practice typically at
the drawer's bank. Should questions arise concerning particular payments, copies of the check could be made from the
microfilm. The original checks are usually destroyed 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 easier for the IRS to audit taxpayers. Check truncation
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
The Honorable Gene Chappie
Page Three
does not have any effect on the ability of the IRS to audit
returns nor upon financial privacy. Depository institutions
already keep microfilm copies of checks regardless of whether
or not the checks are returned to the depositor. Under the
Bank Secrecy Act (12 U.S.C. § 1829b) each insured bank is
required to make a microfilm or other reproduction of each
check, draft or other similar instrument drawn on it and presented to it for payment under regulations of the Secretary of
the Treasury (12 U.S.C. § 1829(d)(1)). The Department of the
Treasury has issued the Financial Recordkeeping and Reporting
of Currency and Foreign Transactions regulations (31 CFR Part
103) to implement this statute. While only checks of more than
$100 are required to be microfilmed under the regulations, in
practice depository institutions microfilm virtually all
depositors' checks in the event a problem arises. In addition,
the Right to Financial Privacy Act of 1978 (P.L. 95-630)
provides substantive and procedural safeguards established by
Congress to ensure that information concerning depositors'
financial records is protected. These protections would apply
regardless of where the checks are stored before they are
destroyed.
The article also questions the move towards electronic
banking, arguing that customers would be more vulnerable to
loss of their funds. We believe that Congress already has
addressed many of the consumer concerns that arise with regard
to electronic funds transfers. The Electronic Funds Transfer
Act (Title XX of P.L. 95-630; 15 U.S.C. § 1693) establishes
consumers' rights, protections, and responsibilities with
respect to the electronic transfers of funds. The protections
afforded to customers under this Act and the Board's Regulation E (12 CFR Part 205) implementing the Act include
specified disclosures of the terms and conditions of EFT
transactions, written documentation of transactions, a
specified error resolution procedure, and limited customer
liability for unauthorized transfers.
We believe electronic funds transfer systems potentially have substantial benefits for customers and for the
payments mechanism of the country. In this regard, EFT systems
are more efficient than a paper-based payments system. This
increased efficiency should result in lower costs to financial
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Honorable Gene Chappie
Page Four
institutions that likely will be passed on to customers, given
the highly competitive nature of the financial services
industry.
I hope that the foregoing is helpful to you.
let me know if I can be of further assistance.
Sincerely,
S/Paul A, Voicke(
•
(GTS:PSP:DJW:)CO;pjt (IV-200)
bcc: Mrs. Mallardi (2)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Please
Cong. Liaision Office will draft response
"
'1ST DISTRICT, CALIFORNIA
(202) 225-3076
COMMITTEE ON AGRICULTURE
SUBCOMMITTEES:
COTTON, RICE, AND SUGAR
Congre
FORESTS, FAMILY FARMS,
AND ENERGY
DOMESTIC MARKETING, CONSUMER
RELATIONS, AND NUTRITION
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
0
WASHINGTON OFFICE:
1730 LONGWORTH HOUSE OFFICE BUILDING
WASHINGTON, D.C. 20515
GENE CHAPPIE
of tbe Unita% tate
DISTRICT OFFICE:
270 EAST 4TH STREET
CHICO, CALIFORNIA
jbousse of Reprelentatibet
95926
(916) 893-8363
Ellassbington, Xl.QC. 20515
August 23, 1982
C:)
..411
7,
Chairman Paul Volcker
Federal Reserve Board
20th & Constitution Ave NW
Washington, D.C. 20551
F <
••••••••
•
.1a
Dear Mr. Volcker,
I have recently become aware of plans by some our nation's banks
to change the method by which records of cancelled checks are kept. I
wish to take this opportunity to express my opposition to these proposed
changes.
It is my understandina that cancelled checks will be kept by a centr 1
depository by agreement with various banks. Only computerized statements and
not the checks themselves will be returned to the individual.
This seems to leave open the possibility of increased computer error
without the benefit of the cancelled checks to prove the computer wrong.
Furthermore, the centralization of these records will make it far too
easy for government aaencies and other concerns to gain access to this
confidential information.
In this age of computerized information oatherino, I strongly believe
that it is important to protect the individual's right to privacy as much as
possible. I hope that before these changes are implemented, there will be
opportunities for governmental and private criticism and input.
Thank you for your kind attention.
GENE CHAPPIE
Member of Conoress
GC:WBc
Enclosure
Removal Notice
The item(s) identified below have been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Newspaper article
Citations:
Number of Pages Removed: 1
Porter, Sylvia. "Banks Plan to Keep Your Canceled Checks." Sacramento Union, May 27,
1982.
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
.OF GOV;•.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON. D.C. 20551
September 15, 1982
The Honorable Thomas F. Hartnett
House of Representatives
20515
Washington, D.C.
Dear Mr. Hartnett:
Thank you for your letter of August 24 requesting
comment on the correspondence you received from Mr. Andy
Windham concerning the Federal Reserve System. Mr. Windham
asks several questions relating to the nature of the Federal
Reserve System and its employees.
Mr. Windham wishes to know "who runs the Federal
Reserve?" and seems concerned about the Federal Reserve's independence vis-a-vis other branches of government. The Federal
Reserve System is a creation of Congress under the Federal
Reserve Act of 1913. The Federal Reserve Act states that the
Federal Reserve System shall be composed of the Board of Governors and of up to twelve Federal Reserve Banks. The Board is
an agency of the Federal government, and its seven members are
appointed by the President of the United States with the advice
and consent of the Senate. The Board is responsible, among
other things, for determining monetary policy and generally
supervising the twelve Federal Reserve Banks.
Although the Federal Reserve Banks are organized like
private corporations, their stock, as provided for by law, is
held by commercial banks that are members of the Federal
Reserve System. However, ownership of that stock is in the
nature of an obligation incident to membership and does not
carry with it the attributes of control and financial interest
ordinarily attached to stock ownership in corporations that are
operated for the purpose of making a profit. The amount of
stock that member banks are required to own is specified by
law. The stock may not be sold or pledged as security for
loans, and dividends are limited by law to 6 percent per year.
If a Reserve Bank were liquidated, any surplus would go to the
U.S. Government, not the stockholders. Every national bank is
a member bank by law, and State-chartered banks may voluntarily
choose to be members. Further, Congress recognized that the
Federal Reserve System is a unique institution. For example,
the Federal Reserve Act provides that each Reserve Bank should
have nine members on its board of directors--three persons to
represent banks who are chosen by the member banks in each district, and six persons to represent consumers, agriculture,
labor, and nonbank business--three of whom are chosen by the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Honorable Thomas F. Hartnett
Page Two
member banks in each district, and three of whom are selected
by the Board of Governors of the Federal Reserve System.
The Federal Reserve is not operated for a profit and
returns substantial sums to the U.S. Treasury each year. The
earnings of t.he Federal Reserve System are derived chiefly from
interest on U.S. Government securities held in the System's
Open Market Account, which are acquired as a part of the
System's monetary policy actions. The System returns all
earnings in excess of expenses to the U.S. Treasury; in calendar year 1981, payments to the Treasury by the Federal Reserve
amounted to more than $14 billion.
As a creation of Congress, the Federal Reserve is
required by several Federal statutes to report to Congress
periodically on its actives, policies, and plans, and is
often requested by Congressional committees to testify on, submit, and to make recommendations on legislation affecting the
economy. Each year the Federal Reserve submits an annual
report of its actives to the Congress. Additionally, the
Board of Governors in exercising supervision of the Reserve
Banks requires these Banks to have independent audits and to
report their condition to the Board.
In section 30 of the Federal Reserve Act, Congress
reserved the right to amend, alter, or repeal the Act. Since
Congress created the Federal Reserve System, it could, of
course, alter its character or authority at any time. As you
are aware, Congress has exercised its prerogative a number of
times since the inception of the System, the most recent
instance being the Monetary Control Act of 1980 (Title I of
P. L. 96-221). In virtually all of these instances, however,
the Congress amended the Act to enable the Federal Reserve to
respond flexibly to changing economic conditions. The President, of course, has veto power over acts of Congress, subject
to Congressional override. Thus, both Congress, through the
ability to enact laws, and the President, through his ability
to appoint Board members and veto legislation, retain a certain
degree of control over the Federal Reserve.
Mr. Windham also asks why the United States Treasury
does not own stock in the Federal Reserve System. Paragraph 10
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
F. Hartnett
The Honorable Thomas
Page Three
ides that Federal
ov
pr
t
Ac
e
rv
se
Re
l
ra
Fede
es
of section 2 of the
ed to the United Stat
tt
lo
al
be
l
al
sh
k
oc
st
•
Reserve bank
by banks • • • be • •
s
on
ti
ip
cr
bs
su
l
ta
to
"(s)hould the
nt of capital required
ou
am
e
th
e
id
ov
pr
to
d it
insufficient
Reserve has never foun
l
ra
de
Fe
e
Th
•
•`
•
therefore •
by allotting stock
on
ti
si
po
l
ta
pi
ca
s
it
,
necessary to increase
ntly, the government
ue
eq
ns
Co
.
nt
me
rn
ve
Go
to the United/States
Reserve bank stock.
l
ra
de
Fe
y
an
to
ed
ib
cr
to date, has not subs
e employees of the
th
y
wh
ks
as
m
ha
nd
Wi
Finally, Mr.
the civil service.
by
d
re
ve
co
t
no
e
ar
Federal Reserve System
e System, provided it
rv
se
Re
l
ra
de
Fe
e
th
Congress, in creating
ce in order to insulate
en
nd
pe
de
in
of
ee
gr
res.
with a substantial de
-day political pressu
to
yda
om
fr
s
on
si
ci
e
monetary policy de
ically exempted from th
if
ec
sp
is
d
ar
Bo
e
Thus, for example, th
Board are appointed to
e
th
of
s
er
mb
me
s,
es
appropriations proc
ees are specifically
oy
pl
em
s
d'
ar
Bo
e
th
nt
14-year terms, and
relating to governme
s
on
ti
la
gu
re
e
ic
rv
se
e to
exempted from civil
rvice. With referenc
se
l
vi
ci
ed
fi
si
as
cl
in
employees in the
of the United States
t
ur
Co
e
em
pr
Su
e
th
the Reserve Banks,
e Banks are instrurv
se
Re
e
th
e
il
wh
,
at
s of
1928 recognized th
ey are not department
th
,
es
at
St
ed
it
Un
e
stern
mentalities of th
eet Corporation v. We
Fl
cy
en
rg
me
(E
nt
me
nk
the Federal Govern
6). Thus, Reserve Ba
42
5,
41
S.
U.
5
27
Union Telegraph Co.,
ees of the Federal
oy
pl
em
as
ed
rd
ga
re
ons.
employees are not
vil service regulati
ci
to
t
ec
bj
su
t
no
e
Government and ar
let
is helpful. Please
n
io
at
rm
fo
in
is
th
at
I hope th
further assistance.
of
be
n
ca
I
if
me know
Sincerely,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ww,a4 PONO J.
Donald J. Winn
ard
Assistant to the Bo
BAB:GTS:CO:pjt (#V-198)
bcc: Ms. Belcamino
Mr. Schwartz
Ms. Mekosh
Mrs. Mallardi
Action assigned Mr. Bradfield
THOMAS F. HARTNETT
WASHINGTON OFFICE:
1ST DI - RICT, SOUTH CAROUNA
509 CANNON BUILDING
(202) 2.25-3176
1114
COMM ITTEE:
DISTRICT OFFICES:
ARMED SERVICES
334 MEETING STREET, SUITE 640
CHARLESTON, SOUTH CAROLINA
SUBCOMMITTEE ON MILITARY
29403
(803) 724-4175
PERSONNEL AND COMPENSATION
SUBCOMMITTEE
SEAPOWER AND
-0AL
.1
_STRATEG IC -4ND CRI1
;
•
MATERIALS
,„_;
••••••
?
I
Congrems of tbe ZLiniteb
2,7
CZt
POST OFFICE BOX 1538
BE AUTORT, SOUTH CAROLINA
100tIfq Ot 1teprefientatibel5
leastingtrintO.C. 20515
(1"..
263 HAMPTON STRErr
W A LTE R IDORO, SOUTH CAROLINA
(803) 549-5395
est
August 24, 1982
Mr. Paul A. Volcker, Chairman
Federal Reserve Board of Directors
Federal Reserve Building
Constitution Avenue, between
20th and 21st Streets
Washington, D.C. 20551
Dear Mr. Volcker:
Please find enclosed a letter from Mr. Andy Windham, concerning the Federal Reserve, its organization, operation, and
procedures.
I would appreciate your comments concerning his proposal
and answers to his questions. Thank you in advance for your
assistance.
Sincerely,
Thomas F. Hartnett, M.C.
TH/js/bb
Enclosure
29902
(803) 524-2166
•• g
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tatez
29488
40G 7
4
' Please Publish!
Congressman
Hartnett
,Who Runs The Federal Reserve?
Dear Editor,
On Jan 31, 1982, former Vice-President Walter Mondale, speaking at the opening of the Chicago Gift Show at McCormick place said:
"Nobody understands the Federal Reserve, NOT HIM, not even the Federal Reserve Board members. It's like following a blackbird in the
night. If anyone says that they understand the Federal Reserve Board
and just how it works in the economy, I'd sure like to meet him because I've been looking for 20 years".
A phamplet published by the Federal Reserve Bank called,"The
Hats the Federal Reserve Wears" says on the last page: "Congress
created the Federal Reserve back in 1913 but Congress doesn't run
it. Neither does the President of the United States". Then it adds;
"It is a fairly independent organization within the Government".
I see a problem, however, with that last statement. There are
only 3 branches of Government- Executive (the President), Legislative (the Congress), Judicial (the Courts). Now, if the Federal
Reserve is an organization within the Government and the President
don't run it and the Congress don't run it, does this mean that the
Courts run the Federal Reserve?
This same phamplet which is published by the Federal Reserve
Bank of Philadelphia says: "When the Federal Reserve was created,
its stock was sold to member banks. As stockholders, they elect
some of the directors of the 12 Federal Reserve banks. The other
directors and the officers they select run the Federal Reserve banks
and their 20,000 or more employees, who are not under Civil Service".
I have also learned from other sources the following: Each of
the 12 Federal Reserve banks has 9 directors. Only 3 of these directors are appointed by the Federal Reserve Board, while the other
6 are elected by the member bank stockholders. I have also learned
that when the Federal Reserve Act was passed, it contains a provision that allows the Dept. of the Treasury to purchase shares of
stock in the Federal Reserve banks, but that this option has never
been exercised.
I would like to close this letter by asking our local Congressman three questions. First, who runs the Federal Reserve? Second,
if the Federal Reserve is a public organization, why is it that the
Dept. of the Treasury owns no shares of stock in the System? Last
of all, if the Federal Reserve banks are owned and controlled by the
Government, why is it that its 20,000 employees are not required to
take Civil Service tests? I look forward to your reply.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
sincerely yours,
Andy Windham
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
September 15, 1982
The Honorable Alfonse D'Amato
Chairman
Subcommittee on Securities
Committee on Banking, Housing
and Urban Affairs
United States Senate
Washington, D. C. 20510
Dear Chairman D'Amato:
Enclosed please find a report concerning Drysdale
Government Securities and other recent developments in the
government securities market as requested in your letter of
July 2.
As I indicated in my letter of July 8, the report
was prepared by the New York Federal Reserve Bank under
the direction of President Solomon. I trust this report
is responsive to your request; please let me know if you
would like any additional information.
Sincerely,
Sgaul A.Volcker
Enclosure
PAV:dmg-b(V-146)
bcc:
Mrs. Mallardi (2)
Ilk
FEDERAL RESERVE BANK OF NEW YORK
NEW YORK, N.Y. 10045
AREA CODE 212 791-6173
ANTHONY M. SOLOMON
PprstIDENT
September 16, 1982
The Honorable Joseph G. Minish
Chairman of Subcommittee on General
Oversight and Renegotiation of the
Committee on Banking, Finance and
Urban Affairs
U. S. House of Representatives
Washington, D. C.
20515
Dear Mr. Chairman:
As promised in my letter to you on June 22, 1982,
I'm sending you a report prepared by the Federal Reserve
Bank of New York on "Drysdale and Other Recent Problems of
Firms Involved in the Government Securities Market." The
report was prepared at the request of the Subcommittee on
Securities of the Senate Committee on Banking, Housing and
Urban Development.
The report describes in detail the weaknesses in
market practices and bank controls that enabled Drysdale
Government Securities, Inc., to amass very large speculative
positions. The collapse of the firm, with the attendant
large losses incurred by major banks, led to a general tightening of credit standards. This contributed to the subsequent
withdrawal from the market of Comark and bankruptcy of LombardWall, Inc., as other market participants, including their
clearing banks, became aware of weaknesses that made them
unwilling to continue doing business with the firms.
Our conclusion at this time is that these incidents,
disturbing and costly as they have been to a number of
institutions, do not of themselves justify a hasty move to a
formal regulatory structure for the Government securities
market. We believe there is a good prospect that more
intensive Federal Reserve surveillance of the dealers in
Government securities, and close supervisory scrutiny of
bank practices relative to the Government securities market,
should work toward maintaining an efficient market employing
high business standards. If experience with this approach
does not provide sufficient assurance of sound practices, it
may well be necessary to seek authority from the Congress for
a more formal regulatory approach.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
FEDERAL RESERVE BANK OF NEW YORK
2
September 16, 1982
I am taking a strong personal interest in these
matters and have appointed, as a senior vice president of
the Bank, an individual with broad market experience to
provide forceful leadership to our surveillance efforts.
Already, we have obtained agreement from the primary reporting dealers to make the recognition of accrued
interest a standard feature of operations in the market
for repurchase agreements by early October. We have
strengthened our bank examination practices to pay increased attention to securities clearing and lending
operations. We are also working with the dealers to
develop means for reducing credit exposure associated
with "when-issued" trading of Treasury securities--i.e.,
trading between the Treasury announcement of their sale
and the date the securities are delivered and paid for.
More fundamentally, we are working at developing standards
of capital adequacy of primary reporting dealers.
I trust that the enclosed report will be useful
to you.
Sincerely,
-dir-e,.---Anthony M. Solomon
President
Enclosure
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
k
FEDERAL RESERVE BANK OF NEW YORK
NEW YORK, N.Y. 10 045
AREA CODE 212 791-6173
ANTHONY M. SOLOMON
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
PpcsilDENT
September 15, 1982
The Honorable Alfonse M. D'Amato
Chairman of Securities Subcommittee
Banking, Housing and
Urban Affairs Committee
United States Senate
Washington, D. C. 20510
Dear Mr. Chairman:
As promised, I am transmitting herewith a
report prepared by the Federal Reserve Bank of New York
on "Drysdale and Other Recent Problems of Firms Involved
in the Government Securities Market."
The report describes in detail the weaknesses
in market practices and bank controls that enabled
Drysdale Government Securities, Inc., to amass very
large speculative posi,:ions. The collapse of the firm,
with the attendant large losses incurred by major banks,
led to a general tightening of credit standards. This
contributed to the subsequent withdrawal from the market
of Comark and bankruptcy of Lombard -Wall, Inc., as other
market participants, including their clearing banks,
became aware of weaknesses that made them unwilling to
continue doing business with the firms.
Our conclusion at this time is that these
incidents, disturbing and costly as they have been to a
number of institutions, do not of themselves justify a
hasty move to a formal regulatory structure for the
Government securities market. We believe there is a good
prospect that more intensive Federal Reserve surveillance
of the dealers in Government securities, and close supervisory scrutiny of bank practices relative to the Government securities market, should work toward maintaining an
efficient market employing high business standards. If
experience with this approach does not provide sufficient
assurance of sound practices, it may well be necessary to
seek authority from the Congress for a more formal regulatory approach.
•
2
FEDERAL RESERVE BANK OF NEW YORK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
September 15, 1982
I am taking a strong personal interest in these
matters and have appointed, as a senior vice president of
the Bank, an individual with broad market experience to
provide forceful leadership to our surveillance efforts.
Already, we have obtained agreement from the primary reporting dealers to make the recognition of accrued
interest a standard feature of operations in the market
for repurchase aareements by •early October. We have
strengthened our bank examination practices to
increased attention to securities clearing and lending
operations. We are also •working with the dealers to
develop means for reducing credit exposure associated
with "when-issued" trading of Treasury securities--i.e.,
trading between the Treasury announcement of their sale
and the date the securities are delivered and paid for.
More fundamentally, we are working at developing standards
of capital adequacy of primary reporting dealers.
•pay
I trust that the enclosed report will be useful
to you.
Sincerely,
/
0-1
7
Anthony M. Solomon
President
Enclosure
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A REPORT ON DRYSDALE AND OTHER RECENT PROBLEMS
OF FIRMS INVOLVED IN THE GOVERNMENT SECURITIES MARKET
FEDERAL RESERVE BANK
OF NEW YORK
September 15,1982
Table of Contents
Page
INTRODUCTION AND SUMMARY
1
THE DRYSDALE CASE
Investigation
8
Conditions Which Permitted the Default to Occur
10
Drysdale's Operations
13
Relationship with NYC Banks
19
Intermediary Banks
20
Clearing Banks
25
Chronology of the Drysdale Failure
THE COMARK AND LOMBARD-WALL CASES
28
33
CONSEQUENCES FOR THE MARKET
Market Behavior
39
Repurchase Agreements
41
REGULATORY AND SUPERVISORY TOOLS
42
STEPS TO IMPROVE THE GOVERNMENT SECURITIES MARKET
46
ATTACHMENTS
Loan Balance Federal Reserve System Securities
Retail and Wholesale Repurchase Agreement Circular
Dealer Transactions
Dealer Financing
Executive Vice President Sternlight's letter
to Dealers
President Solomon's letter to Dealers
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I
II
III
IV
V
VI
@FedFRASER