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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Collection: Paul A. Volcker Papers Call Number: MC279 Box 12 Iiig. Citation: Congressional November 4-December 1983; Paul A. Correspondence,II UI 28,IiUIIIHUI 1t 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/c466 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. 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Mudd Manuscript Library 65 Olden Street Princeton, NJ 08540 609-258-6345 609-258-3385 (fax) email@example.com https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congressional Correspondence November-December 1983 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON December 28, 1983 RAIL RES • •..• • PRESTON MARTIN VICE CHAIRMAN The Honorable Henry J. Hyde House of Representatives 20515 Washington, D.C. Dear Mr. Hyde: In the absence of Chairman Volcker, I am responding to your letter of December 23 requesting an extension of the comment period with respect to the application of Citicorp to acquire First Federal Savings and Loan Association of Chicago. The Board has extended the comment period to January 9 and rescheduled the hearing to January 11 to provide some additional time to persons interested in commenting. As the enclosed press release notes, the limited comment and hearing period has been set based on information from the Federal Home Loan Bank Board that the application presented an emergency situation requiring immediate action by the Board. The brief extension has been granted because the Board has received a number of urgent requests for additional time in view of the interruption of normal work schedules during the Holiday period. Sincerely, Preston Martin Enclosure DJW:pjt (V-234, 83640) bcc: Gov. Martin Mrs. Mallardik-i (Encl.: p.r. dtd. 12/28/83) Action assigned Mr. Bradfield 2104 RAYBURN HOUSE OFFICE BUILDING WASHINGTON. D.C. 20515 (202) 225-4561 HENRY J. HYDE 617r4 DiSTRICT, ILLINOIS COMMITTEES: JUDICIARY FOREIGN AFFAIRS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tato Congre55 of tbe Enittb 3Dou5e of ikeprefSentatiba alasVngtott,1113.e. 20515 December 23, 1983 t, 1 ;-) ; I • • NJ Honorable Paul A. Volcker, Chairman Board of Governors Federal Reserve System Marriner S. Eccles Building Constitution Avenue, N.W. Washington, D.C. 20551 Dear Paul: ly, is greatly The Illinois Bankers Association, understandab in connection with concerned about the 15-day comment period ngs and Loan Assothe Citicorp purchase of First Federal Savi feel they are being ciation of Chicago. Quite frankly, they January 5th, hustled -- the 15-day comment period runs out us, their pleas for and in view of the Christmas holiday upon at least 30 days has merit. fit to extend Therefore, I am most hopeful that you will see the spirit of fairness the comment period at least 30 days, in to the Illinois Bankers Association. With best personal regards, Very tr ly yours, Hyd HJH:ffw • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WAS December 28, 1983 PRESTON MARTIN VICE CHAIRMAN The Honorable Dan Rostenkowski House of Representatives 20515 Washington, D.C. Dear Mr. Rostenkowski: In the absence of Chairman Volcker, I am responding to your letter of December 22 requesting an extension of the comment period with respect to the application of Citicorp to acquire First Federal Savings and Loan Association of Chicago. The Board has extended the comment period to January 9 and rescheduled the hearing to January 11 to provide some additional time to persons interested in commenting. As the enclosed press release notes, the limited comment and hearing period has been set based on information from the Federal Home Loan Bank Board that the application presented an emergency situation requiring immediate action by the Board. The brief extension has been granted because the Board has received a number of urgent requests for additional time in view of the interruption of normal work schedules during the Holiday period. Sincerely, Preston Martin Enclosure DJW:pjt (V-236, 83643) bcc: Gov. Martin / Mrs. Mallardi (Encl.: p.r. dtd. 12/28/83) DAN ROSTENKOWSK I . Action assigned Mr. Bradfield ComPAITTEEs CHAIRMAN 8TH DISTRICT, ILLINOIS COM M ITTEE ON WAYS AND MEANS Congo% of tbe tiniteb tate5 CHAIRMAN JOINT COM M ITTEE ON 3i)ou5e of l'epre5entatibeg tillacsbington, D.C. December 22, TAXATION 20315 1$98 /.. rrl N, Honorable Paul A. Volcker Chairman Federal Reserve Board 20th Street and Constitution, N.W. Washington, D.C. 20551 •, I •...... --- :.....— r,-1 Dear Paul: I am writing to ask that the Federal Reserve Board extend the comment period by an additional thirty days beyond the current deadline of January 5, 1984. As you know, the acquisition of First Federal Savings and Loan by Citicorp has met considerable opposition within the State of Illinois. It is feared that investments will be taken out-ofstate, thus hurting the economy of Illinois. I urge your consideration of my request to allow citizens of Chicago to comment on this matter that will have a considerable impact on them. I look forward to hearing from you shortly. Thank you in advance for your consideration. With best wishes for the new year, I remain Sinc ly yours, n Rostenkowski Member of Congress DR/wy https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rn --, I. December 27, 1993 The Honorable William Proxmire Vnitnd States Senate Washington, D.C. 20510 Dear Senator Proxmire I appreciate your letter of November 2n bringing to my attention a problem in interpreting Truth in Lending perceived by 'Ir. Kenneth J. Artis of Verex Assurance, Inc. Mr. Artis was concerned about the proper way to treat FA mortgage insurance premiums in making Truth in Lending disclosures, particularly in cases where the premiums are financed as part of the mortgage loan. I am assured that our staff has been in contact with members of your staff as well as with Mr. James Lynn of Verex Assurance to discuss this issue. We have explained the proper way to treat the insurance premiums for purposes of calculating the "amount financed" and have pointed out the provision in the official staff commentary to Pegulation 7 that addresses the issue. I trust that this has resolved the technical questions Verex had, and I regret any confusion on the part of Verex or ourselves in obtaining a clearer answer earlier. Mr. Artis does raise a larger issue in his letter, however, and I would like to address it. !Te ob'ects to the Board's policy of not issuing individual written sta'f interpretations or TZegulation Z. We are certainly sympathetic to Mr. Artis' desire to comply with the law, and we un9erstand that at times it can be difficult to be certain that a particular course of action is correct. At the same time, our fourteen years of experience with Truth in Lending has shown us that the search for certainty through the issuance of individual staff opinions can itself produce more co-iplicated rules. The Board staff originally attempted to answer each and eNrcry question raised about the regulation in interpretative letters. Although this practice was intended to aid creditors in complying with thc law we found that it in fact created an enormous volume of regulatory material. The cumulative effect of the 1,5n0 or so letters was to complicate rather than facilitate compliance by layering one set of distinctions on top of another. As a complement to the Congress' extensive amendments that simplified the Truth in Lending Act in 19R0, the Board decided to replace the hundreds of individual letters with a single vehicle for interpreting the regulation—and that is the official staff commentary. The commentary gathers all the rules https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis P The Honorable William Proxmire Page Two into one place and presents them in an easy-to-use format which is keyed to the regulation. I am told that, in this particular instance, the commentary does in fact address the point raised by Verex. Sometimes that is not the case, so the commentary must be updated. That is done on a regular periodic schedule, with public comment solicited on all issues before they are adopted in final form. Our hope is that by providing guidance in this orderly and predictable way rather than through the issuance of letters on an al hoc basis, we can offer the most assistance to the most people in complying with the law At the one extreme, we don't want to take on the job of vetting particular computer programs or every "special case," but we do want to provide a clear base for accurate interpretations. In this instance, the g^neral policy of trying to avoid specific interpretations apparently led to confusion on the part of Vcrex euen though the staff commentary dealt with the point at issue. I hope we can make that kind of confusion even rarer in the future. Sincerely, EM:CO:PAV:pjt (4V-224, 83499) bcc: Ellen Maland Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Garwood JAKE GARN, UTAH. CHAIRMAN JOHN TOWER. TEbkS JOHN HEINZ PENNSYLVANIA WILLIAM L APm STRONG, COLORADO ALFONSE M D AMATO. NEW YORK SLADE GORTON. WASHINGTON PAULA HAWK.NS, FLORIDA MACK MATTiNGLY. GEORGIA CHIC HECHT. NEVADA PAUL TRIBLE. VIRGINIA WILuAM PROKMIRE. WISCONSIN ALAN CRANSTON, CAuFORNIA DONALD W RIEGLE, JR . MICHIGAN PAUL S SARBANES MARYLAND CUT CHRISTOPHER J DODD.CONNECTI ALAN J DIXON ILLINOIS JIM SASSER. TENNESSEE Y FRANK R. LAUTENBERG. NEW JERSE TOR M. DANNY WALL, STAFF DIREC STAFF DIRECTOR KENNETH A. McLEAN, MINORITY https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1Llnittd etates c5Ernate COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 (44, November 29, 1983 I-, CI) CD ;2- (A.) ' 7-1.-:Ci " I --r1 --' 1 17) : • .... '•, uri rri C C.7"! • CP CA3 cker The Honorable Paul A. Vol Chairman Board of Governors Federal Reserve System ion Ave., N.W. Twentieth Street & Constitut Washington, D.C. 20551 Dear Mr. Chairman: to Assurance, Inc., is trying ex Ver e, min of nt tue sti con A er performing calculations und for ms gra pro er put com devise FHA 203 and 245 programs. d nge cha ly ent rec the for Z e the Regulation Reserve Board would examin l era Fed the if it e iat rec I would app ex is proceeding Ver if g tin wri in w kno me enclosed materials and let properly under Regulation Z. e in this matter. I appreciate your assistanc cc: Ellen Maland Division of Consumer Affairs •I -4 Kennelh3. Arils Director -Corporate Communication November 10, 1983 Mr. Kenneth A. McLean Minority Staff Director Senate Banking Committee Room 545 ilding Dirksen Senate Office Bu Washington, D.C. 20510 Dear Ken: e this past ur time on the telephon yo r fo ch mu ry ve u yo ng ki tly May I begin by than in our problem is grea st re te in ur Yo . 83 19 8, Tuesday, November appreciated. sation. summarize our phone conver me t le e, nc re fe re ur For yo ograms to ers, offers computer pr om st cu s it to e ic rv se y ar nce charge, VEREX, as an ancill on Z; i.e., APR, fina ti la gu Re r de un ed ir qu re want to perform calculations schedule. Naturally, we t en ym pa d an ts en ym pa of l become amount financed, tota tion Z. This task has la gu Re to m or nf co ms ra og pr rtgage be certain that the y has developed new mo it un mm co g in nd le e th as specific increasingly complex , before detailing the So . le ab rd fo af re mo g in e Board instruments to make hous that the Federal Reserv e iz as ph em to nt wa I w, no d example to be addresse going problem. position presents an on e entire mortgage insuranc e Th s. an pl 5 24 d an 3 20 s anged it ng The FHA recently ch nced by simply increasi na fi be y ma d an e nc va ad in ted ard premium is now collec the Federal Reserve Bo at ts ac nt co l ia it in r Ou . loan ow tne amount of the home s, but did not even kn an pl A FH e th in ge an ch e of th e were not only unaware e these individuals ar us ca be g in rt ce on sc di is This And mmunity. what FHA insurance is. on Z for the lending co ti la gu Re ng ti re rp te in tivity. charged with icant part of lending ac if gn si a s te tu ti ns co g in nd residential le Reserve Board was that l ra de Fe e th by us to ation given The initial inform ed part of the amount er id ns co be to is m iu em surance pr financed mortgage in al said that it should ci fi of e rv se Re l ra de Fe ly, another financed. Subsequent e amount financed. not be included in th https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . Nre,, Assurance, Inc 7066 150 E. Gilman Si.. Box 07 Madison WI 537 60S-257-2527 R0O-356-80R0 800-3.62-8070(NA ithin Mr. Kenneth A. McLean November 10, 1983 Page 2 on to a written interpretati r fo d ke as we n, io at tu using si nFaced with such a conf uter program was in co mp co r ou at th us re su ction to as ity resolve the contradi lties and civil liabil na pe in lt su re t no d ul on Z and wo t formance to Regulati sponse to this reques re e rv se Re l ra de Fe e omers. Th to VEREX or our cust ints: consisted of two key po ternst giving written in ai ag cy li po rm fi a s The Federal Reserve ha 1. on Z. pretations of Regulati l cy, the written Federa li po is th to de ma re we would Even if an exception 2. l" and, therefore, ia ic ff no "u be d ul wo the Reserve interpretation d civil liability in an s ie lt na pe t ns ai ag rve provide no protection from the Federal Rese s on ti ta re rp te in g in ct event of other confli Board. Federal r serious concerns, ou to se on sp re ry to ac re satisf A (an When pressed for a mo opinions from the FB n te it wr g in in ta ob d commende s) or the Reserve personnel re h-in-Lending matter ut Tr in y it or th au or onsibility ing an agency with no resp ld, would be produc to re we we h, ic wh ciation, Mortgage Bankers Asso blication. their monthly trade pu in c pi to e th on e articl second consistent with the on ti si po a n ke ta s ha g community verbally ceived. We are now The mortgage lendin re we at th n io in op serve Board , to unofficial Federal Re rrect approach; i.e. co e th is is th at th But, ral Reserve e amount financed. assured by the Fede th om fr ms iu em pr e that rtgage insuranc l Reserve, we feel ra exclude financed mo de Fe e th th wi ce en d on our experi lenders rather than a ge quite frankly, base ga rt mo of s su en ns co to rely on a with authority and d we are being forced ge ar ch cy en ag nt me n by the govern firm position take is important area. responsibility in th ey d final, why do th an rm fi is on ti si po able Federal Reserve's situation is unreason If, in fact, the is th at th e ev li be writing? We conform to refuse to put it in possible effort to y er ev ng ki ma e y if ar we s and civil liabilit ie because, although lt na pe t ns ai ag d te e left unprotec Regulation Z, we ar position_ the Federal Reserve's in ge an ch r he ot an there is violate the law unwitto nt wa t n' do We the right thing. Ken, we want to do tingly. examples of our Truthed os cl en e th at requesting of you th e Board and that they rv se Re Therefore, we are l ra de Fe e th ations be reviewed by their conformance to to as on in-Lending calcul ti ta re rp te official, written in stomers to provide us with an ntly asked by our cu ue eq fr is X RE VE e us her, beca tablish a Regulation Z. Furt nts, we need to es me ru st in ge ga rt mo tions so r atypical official interpreta develop programs fo n, te it wr , ly me ti th Z and are provide us wi process that will mance to Regulation or nf co of d re su as be any stomers are ility should there ab that we and our cu li l vi ci d an s ie ntial penalt tions. relieved of any pote e Board interpreta rv se Re l ra de Fe g in subsequent conflict https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Kenneth A. McLean November 10, 1983 Page 3 el frustrating to us. We fe y el em tr ex is n io at tu si e th the You can be sure that a drug, but is told by st te to A FD e th s nt wa at like a drug company th st." ison someone, then we'll te agency that, "If you po bing our rmation package descri fo in an u yo nt se ve ha I , ook" Along with this letter ve included a "cookb I' , so Al m. ra og pr ng di en ry to Regulation Z/Truth-in-L will be self-explanato it , rt pa st mo e th r fo , at in explanation. I trust th s about it, please be on ti es qu y an ve ha u yo ld Shou you and your staff. touch. Product eague, James E. Lynn, ll co my e uc od tr in to ke li d loped the At this point, I woul e man who has both deve th is m Ji . er tt ma e th e Fed's Manager at VEREX, into had to contend with th s ha d an X RE VE at m ra og pr is Regulation Z computer In this matter, my role s. se on sp re g in us nf co d an So, I contradictory opinions culate the problem. ti ar d an u yo t ac nt co to than ll be really nothing more you and your staff wi at th on rs pe e th as m Ji h would like to establis . this matter in the future dealing with regarding interest is issue. Your keen th g in lv so re in us r fo e essenc Ken, time is of the is very gratifying. Thank you. Kenneth J. Artis C4/8/A https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1111,43 LC)gile - 2 PnorVAtit Doug Pet.rrf.re,r. (-hairran Sutwornittee on Comm*rce, an flonet4riry Affoirr committee on Govtirnmcnt Oporatior liclus of Reprefmntetiv*s "iririttczr, r, r,20515 c4atrItim Aarrtitr: Thank you for your letter cotIcerning to for calculating the 'Private Sector 3W-JustrwT.t. Factor' 1984. I appreciate having thtt .3etl*?fit of yr)ut fLatiIet t on tie su'olect. As you may know, the Poar,', actin, r;r: request from the American eankers Association, extend thf puhlic commert period on the PSAP until Nmeboher 20, allowing for the holiday SesSon and for the time neeAto enalyre 07^ comments received, we now anticipata t!lat PEA? w117 cci. before the Board for final actior January early February. By that time, r tzill also have the tsenefit of the views and comments of the ineotprldettt accounting firm reviewing pricing matters anci ts1 report of the General Accounting Office, which I believe delver into the PSAP calculation in some detail. In the meantime--ar to 4. on the conservative side--we have established cheek pricfs tor 1984 which **sume tecoveries for taxes and capit,Y which are approximately 44 million greater than that iwp loe 4y the PSAP properel for puhlic comment. indicate that the Poarci conedieler t ••,cptility of uzing a separate PSAF for fNxch Fecieral Re4f-t district an4 calclaating the PsAr Sas4Iad upnn cturent or valuatiore of the long-lived fixed assets $.,mployed in pric ro,rvfe^m* Pe'‘eral comments received to eata have discusaef fq" these points are important and c"fmrl, end both tiave . *n4 continue to be the subject . constiraiAe analysis vitilin the rerlers1 Reserve. I do tt 7-^!t'r- r:,fr tat continuing analy-,1r. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11 1r* tO fc-roc,t, Pec,rv corri-qA T ret core *.'iegro..e t r .• , thet • cw-,t;t4ctilL Lrt r 4%;,cgclicAtinns cn,mpl_itox rit=Jation, Vcr*.: ivpr4Adintly. Ap'ocf• Perfftrv... ft Lt:vrvtrv=s fc,r t:bco. noi?t pt, r„ltior,a) flt;, Ptrift,r47, v. ir itn tt ti'irttti-AGn41 irt.c!1.t P.('!(,ral Reor,Je cfficiev,t n4ti3noll parImpts preurf! foilovee ctrik4i ro t!ust ,„ va1u4107.ior c> t'N'e Syzten. t s:c1 araunt of Pcfeer.,0 As buildings equipment, that ia oke cf iluok values is conbistiPnt nitr,,rctices and acrouut generally accepted lrib. cipAe As intlicstel in the materials prosetntel to you ur Oct&lor Se le#83 response to questions you rafter) concerning 00,-Avrit1. Reserve pricee rvice activities, use of sarket values loule result in substantial inefficiencies if the Pederal asarve's competitors eld nrot alco Ute nartet values. in mddition, appreciation of asset value* under amarket value *putsch would necessarily have to be treated 47.8 irco**. qnally, as sulgeste0 in the October submission, it is by no „witars1 /4 elect th4t t441 market value of the Pecic,ral Reserve's AsS0tS specifically devoted to priced service activities are, ih fact, out of line with book values. In tnie regarii, I woult also emphasise that for some years the Federal Reserve Banks app/ied capital budtleting rrocaJures--including 'hurOle sta arislysise--to the acquisition of new assets. We are taking A fresh look at these procedures to insure they are compatible environment and that they are pplied https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis _ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Bradfield NINETY-EIGHTH CONGRESS JUDO GREGG, N WILLIAM F CLINGER, JR. PA TOM LEWIS, FLA Congrems of tbe Ziniteb ktatos MAJORITY-(202) 226-4407 DOUG BARNARD, JR., GA., CHAIRMAN RONALD D COLEMAN, TEX. JOHN M SPRATT, JR , S.C. JOHN CONYERS, JR , MICH. '_IOTT 11 LEVITAS, GA. HENRY A. WeMAN. CALIF. Iptuk of 1lepresSentatibe5 COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS RAYBURN HOUSE OFFICE BUILDING, ROOM B-377 WASHINGTON, D.C. 20515 November 15, 1983 Hon. Paul A. Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Mr. Volcker: 13 request for public comment on I am writing in response to the Board's October or Adjustment Factor ("PSAF") for 1984 the methodology for calculating the Private Sect in writing is to express my concern over (Docket No. R-0485). My principal objective for public comment certain important the Board's failure to include among the topics ment, require further Board review. matters of PSAF methodology that, in my judg Monetary Affairs Subcommittee held As you know, the Commerce, Consumer, and cy Subcommittee on the Federal Reserve's joint hearings in June with the Monetary Poli to financial institutions. These hearings pricing of its check clearing and other services of its obligation under Section 107 of focused principally on (a) the Fed's fulfillment es that cover the full costs of providing the Monetary Control Act of 1980 to charge pric ges might be needed in the Fed's pricing these services and (b) the extent to which chan statutes, in order to ensure a fair policies or other practices, or in the relevant is currently preparing a report that will competitive environment. The subcommittee System's adherence to this pricing mandate evaluate many aspects of the Federal Reserve ronment its policies and practices have envi ive etit comp the of ness fair the and report will necessarily be delayed for established. Final approval and release of this nvenes in 1984, by which time the Fed's several weeks, however, until the Congress reco closed. I want, therefore, to express current comment period on the PSAF will have nt es related to the private sector adjustme my personal views at this time on certain issu ve review by the Board. factor while this general subject is under acti ested in its release of October 13 for While the revisions that the Board has sugg ate sector adjustment factor is computed improving the methodology by which the priv compliance with the pricing mandate of represent constructive efforts toward improved less there is a need, in my judgment, for the Monetary Control Act of 1980, neverthe ment on two additional topics in particular. fundamental Board review of and public com comment on (a) the desirability and The Board should consider and should seek public icly a separate private sector adjustment probable effects of computing and reporting publ rability of and proper methodology for factor for each Fed district; and (b) the desi d or market valuations of the long-lived fixe ent curr on ions ulat calc F PSA the ng basi assets employed in priced services. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 the accuracy The objective behind both of these suggestions would be to improve reported to the public of the cost data available internally to the Federal Reserve and is important so that on the total costs of providing priced services in each district. This district at levels that it can be determined whether the Fed has set its prices in each language of the Monetary recover the full costs in that district. Although the current d at levels that cover Control Act does not require that the Fed's prices be establishe ess and the public are full costs in each district separately, nevertheless both Congr be a fair competitive keenly interested in this issue because of their concern that there environment for private sector competition with the Fed. Separate PSAF for Each District antially between major Commercial land values and space rental rates vary subst hed data provided by the Federal Reserve cities, as can be seen from the attac Correspondent banks that compete with the Fed Congressional Research Service. cities than in others. therefore face higher actual or implicit costs for space in some banks located in the In order for the Fed to compete fairly with the correspondent ost cities providing an unfair high-cost cities, without the Fed facilities in other low-c s charged for check clearing subsidy to the Fed facilities in the high-cost cities, the price (among other things) these services in each district should be differentiated to reflect geographical differentials in commercial space costs. Fed costs in either of Commercial space costs should be incorporated into total d. In the case of rented two ways, depending on whether the space is rented or owne ct the proper costs (assuming facilities, the actual rentals paid will automatically refle d facilities, however, the space the rentals are at market rates). In the case of owne pricing purposes in a more indirect costs must be incorporated into total Fed costs for and (b) the portion of the manner through (a) depreciation charges on the buildings buildings and land. private sector adjustment factor that reflects the m-wide PSAF and using it The Fed's present practice of computing a single syste amount does not properly allow to mark up all system prices by a uniform percentage al space costs, nor does for geographical differences in real estate values and commerci ently, Fed districts with it give proper treatment to owned vs. rented facilities. Inher and rental rates are subsidized major owned facilities in areas of high real estate values d services facilities are in by the uniform PSAF markup, while districts whose price rty values and rents are in effect owned facilities located in areas of more modest prope us with which to subsidize overcharging for priced services in order to generate a surpl the first group. cation of a uniform This geographical disparity is made more severe by the appli g varying amounts of rental system-wide PSAF to mark up the prices of districts havin t based on the asset valuations facilities. The system-wide PSAF contains a componen do not represent system assets. of the system's land and buildings, but rental facilities providing services in rented Consequently, the PSAF markup applied to the costs of related PSAF markup. The facilities should not include any of the land-and-buildingregardless of the degree of use net effect of the application of a system-wide PSAF a subsidy to those districts having of rental facilities in a given district is, therefore, overcharges in the districts having a little or no rented facilities in use, paid for by higher percentage of rented facilities. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ion to, and should seek For these reasons, the Fed should give serious considerat ts of computing and reporting public comment on, the desirability and probable effec 3 Fed district, so that the publicly a separate private sector adjustment factor for each greater accuracy. costs of providing services in each district will be known with PSAF Based Upon Current Asset Values ces to properly The failure of the Fed's current cost structure for priced servi rental costs, as described reflect geographical differentials in actual or implicit space and application of separate above, can not be corrected solely by the computation methodology currently private sector adjustment factors for each district, using the rtions would still remain employed in all other respects. Substantial geographical disto (i.e., depreciated because (a) the Fed's current methodology bases the PSAF on book valuations of the land and historical cost) valuations rather than on current or market book valuations to the structures employed in priced services; and (b) the ratios of the involved differ widely from current or market valuations of the land and structures district to district. separate PSAF for The effect of using the present book valuations to compute a icts with old structures each district would be that the PSAF adjustments in the distr understated relative to the and land that have been owned for many years would be more recently purchased PSAF adjustments in the districts with newer structures and systematically understate land. This would result because the book valuations would with predominantly older the true amount of land and structures capital in the districts newer capital. If in the capital as compared with the districts with predominantly covered by fees charged, aggregate all Fed costs (including the PSAF) were exactly have unnecessarily high then the districts with the newer land and structures would other districts, where the prices that would be subsidizing unfairly low prices in the land and structures were older. of book valuations In addition to the geographical distortions it causes, the use certain districts can be that seriously understate current land and structure values in depreciation allowance for argued to cause a material understatement of both the PSAF that is based on structures devoted to priced services and the portion of the has already been addressed land and structure asset values. I am aware that this issue on October 5 to the questions and rejected in the responses submitted by Mr. Corrigan t 15, but I believe that the posed by Mr. Fauntroy and myself in our letter of Augus reasons cited for rejection of this idea are not valid. nt or market valuations In his response Mr. Corrigan rejected the idea of using curre ds that (a) "the use of book of the relevant assets in computing the PSAF on the groun value accounting system...does values is universal in private business" and (b) "a market statements are inaccurate. not exist and would have to be developed". Both of these that private business In the first statement Mr. Corrigan asserts, in substance, capital it employs, when the does not base its prices on the current values of the amounts to an assertion that current values differ materially from book values. This ctive uses and, in essence, private business does not employ its capital in the most produ mize profit. As a blanket does not know how to (or else does not bother to) maxi statement is not credible. generalization and criticism of U.S. business practice, this ciated historical cost It is true, of course, that private businesses use depre ting to the public. It is widely valuations of long-lived assets in their financial repor nting measures of income and recognized, however, that these traditional book accou a highly misleading picture of financial position based on historical asset costs may give been substantial inflation, a firm's profitability and financial condition when there has https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 decisions relating to matters of pricing and that any business that bases its internal substantial risk of making faulty and investment solely on these book accounts runs a not properly measure cost under business decisions. In essence, these book accounts do conditions of current or recent inflation. profession has recently Because of this fundamental difficulty the accounting irements, reflected currently in the developed alternative accounting methods and requ 33 on "Financial Reporting and Financial Accounting Standards Board's Statement No. now required of large nonfinancial Changing Prices". The supplementary disclosures reports of income and net assets firms by this FASB statement present two additional book measures of income and (shareholders' equity) to supplement the conventional of changes in the general price equity, one incorporating corrections for the effects ific price changes on the value of level and the other adjusting for the effects of spec ies. the firm's property, plant, equipment, and inventor supplementary inflationWhile the FASB requirement for the disclosure of this nonbanking firms at present, the adjusted financial information only applies to large ty. Mr. Corrigan's statement that methods are equally applicable to any business enti computing the Fed's costs on the a suitable accounting methodology does not exist for equipment is therefore not correct. basis of the current values of its property, plant, and ideally suited to the need to put Not only does such a methodology exist, but it may be on a basis that fairly reflects its the Fed's cost accounting in the priced services area true costs. ideration to, and should seek For this reason, the Fed should also give serious cons er methodology for basing the PSAF public comment on, the desirability and prop long-lived fixed assets employed in calculations on current or market valuations of the value accounting expressed in FASB priced services, using the principles of current Statement 33. Conclusion need to be overcome in order I understand that substantial technical problems may that is consistent with sound accounting to implement this latter suggestion in a manner able group of comparable firms will principles. In particular, the cooperation of a suit ure of return on equity that will be needed in order to derive the current value meas be required for the PSAF calculation. the cost structure for Fed The geographical distortions that currently pervade ed in any other way, however. It is services, as explained above, can not be eliminat matter up for review and public very important, therefore, for the Fed to open this that the Fed's true costs will be comment in order to resolve these difficulties, so prices charged. properly reported and properly incorporated into the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, Alou Doug Binard, Jr. Chairman DB:dpt:v Congressional Research Service The Library of Congress Washington. DC 20540 PRICES FOR COMMERCIAL SPACE RENTAL IN NINE SELECTED U.S. CITIES Walter S. Albano Reference Librarian Congressional Reference Division November 4, 1983 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Prices for Commercial Space Rental in Nine Selected U.S. Cities* (in dollars) CBD** AVERAGE CBD RANGE OUTSIDE CBD AVERAGE OUTSIDE CBD RANGE Atlanta 17.86 12.50-27.00 14.25 11.35-20.00 Boston 26.04 16.00-39.00 17.50 15.50-22.00 Chicago 18.50 16.00-30.00 13.50 12.50-18.50 Cleveland 17.50 16.50-22.80 14.00 12.00-16.00 Dallas 19.88 17.50-23.25 15.55 12.00-22.50 Kansas City 15.00 13.00-18.00 14.50 12.00-23.00 New York*** 41.61 24.75-67.75 32.46 20.75-42.75 Philadelphia 18.75 16.50-25.00 14.00 11.00-20.00 San Francisco 35.00 30.00-40.00 22.00 20.00-24.00 * = Rental rates per square foot for Class A space as of June 30, 1983. ** = Central business district. midtown Manhattan; outside CBD - downtown Manhattan. SOURCE: Office Network, Houston, Texas. r- Lr.,!.. 77' ROTARY INTERNATIONAL DISTRICT #779 L.: I 7- 7 E3 EC 27 F:! 17: 32 r ROTARY FOUNDATION AND SCHOLARSHIP COMMITTEE December 22, 1983 RUSSELL COX, CHAIRMAN FLYING POINT ROAD FREEPORT, MAINE 04032 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis j!11 ti Honorable Paul Volcker Chairman The Federal Reserve Constitution Avenue Washington, D. C. 20551 Dear Mr. Volcker: In several of my talks in this Rotary District I refer to the fact that the Rotary Foundation's Scholarship Program is the largest of its kind in the Free World and call your name As an example of the future leaders we select. All Rotarians are proud of your accomplishments. The Brunswick, ME Rotary Club would be highly honored, Mr. Chairman, if you would address the Club one Monday in the spring. We would make any adjustments necessary to comply with your schedule. Also, we would plan a joint meeting with another club as there would be great interest in your talk. Naturally, we would defer to you as to media coverage. Since leaving the Foreign Service a few years ago I am getting a great deal of personal satisfaction out of working with the various Rotary programs, especially the Rotary Fellows. I would be glad to hear from you or one of your assistants regarding this invitation, and trust that you will be able to take the long route to Washington from New York some Monday and come by for lobster and address the Club. Sincerely, Russell Cox cc: Charles LeDuc • ' L. ... L.0 (1:1 • ' .'..1%.40STX0101.11401,K, • AP. 7)c,-2-1br 19 , 1q83 The Honorable Donald W. Riegle, Jr. United States Senate Washington, D. C. 2n510 Dear Senator RiegleThe Board today announced the appointment of new members to the Consumer Advisory Council, for terms beginning in January 1984. The Council serves an important role in advising the Board on its regulatory duties in the consumer financial services area. For your information, I am enclosing a press release that lists those appointed to the Council. We are especially grateful for the interest you have taken in bringing qualified nominees to the Board's attention. We were impressed by Mr. Jay J. DeLay's qualifications. As you know, however, there were only a limited number of positions to be filled, and you may be interested that more than 200 individuals expressed a desire to serve. Factors beyond each nominee's personal qualifications necessarily entered into the Board's decision. These included the need to maintain an even balance of consumer and industry interests, to include representation of women and minorities and to achieve a geographic balance among the twelve Federal Reserve Districts. In addition, because members' three-year Council terms are staggered, the Board also sought in its new appointments to complement the background, experience, and qualifications of current members who have one or two remaining years on the Council. The combination of all of these factors made the selection process particularly difficult, and regrettably many highly qualified nominees will not have the opportunity to serve on the Council at this time. The Board appreciates your interest in the Council and would be pleased to have your future recommendations. Sincerely, • .2. c..$1;, ;,,r.le Enclosure CO:vcd Identical letters sent to those on attached list. bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mrs. Bray Mrs. Mallardi (2) Or. Senator or Representative Nominee Sen. Strom Thurmond Cong. Butler Derrick Sen. Ernest F. Hollings Cong. Carroll A. Campbell Cong. Thomas F. Hartnett Cong. Floyd Spence Kathleen Goodpasture Smith Sen. John Glenn Cong. Marcy Kaptur Ralph C. Kunze Cong. Charles W. Stenholm William N. Aitken Cong. David Dreier Gilbert Hamblet Cong. Martin Olav Sabo Cong. Vin Weber Michael B. Fisher !I It 19 II 91 Cong. Gerry Sikorski Cong. Michael A. Andrews Ann Kelley Cong. Dan Coats Sen. Dan Quayle Sen. Richard G. Lugar Sen. Slade Gorton Howard L. Chapman Chrmn. Jake Garn Sen. Jesse Helms Sen. John P. East Cong. James G. Martin Ralph C. Clontz, Jr. Cong. Tom Daschle James M. Cremer, Esq. Cong. Richard H. Lehman James B. Werson Cong. Doug Barnard Mary Jane Large, Esq. Cong. Bill McCollum Moseph M. Mason, Jr., Esq. Minority Leader Robert H. Michel Benjamin P. Shapiro, Esq. Sen. David Pryor Jack E. Adams Chrmn. Brian Donnelly Joseph P. McEttrick Cong. James G. Martin Sen. Jesse Helms Cora Louise Nelson Sen. Jim Sasser H. Bruce Throckmorton Sen. Paul S. Sarbanes Sen. Charles Mc. Mathias, Jr. Margie H. Muller Sen. Paul E. Tsongas William E. Donoghue https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis It It ft 99 99 99 99 99 It It ft Sen. Bob Dole Joseph L. Eaton Cong. Robert J. Mrazek Harvey Harris Sen. Rogert W. Jepsen Sen. Charles E. Grassley Cong. Thomas Tauke Terry T. Tilton Cong. Bill Frenzel Cong. Trent Lott Cong. Ron Marlenee Cong. Jack Kemp Cong. Jack Edwards Sen. Ernest F. Hollings Cong. Beryl Anthony, Jr. Republican Leader Robert H. Michel Sen. William L. Armstrong Cong. Butler Derrick Sen. David Durenberger Sen. Paul Laxalt Cong. William E. Dannemeyer Sen. Walter D. Huddleston Sen. Donald W. Riegle, Jr. Joan M. Whalen https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Il II II II It II II It II II II It IT IT IT II It It II II It II II It II It II II II II II It II II It It It II II It II II II II II II It It December 1, 19R3 The Honorable Ike Skelton House of Representatives Washington, D. C. 20515 Dear Mr. Skelton. The Board has appointed eight new members to its whose Consumer Advisory Council, to succeed those persons you terms expire this year. Mr. Steven M. neary whom to the recomnendel for appointment, was among those selected Council. The selections were made from more than 200 the large nominees this year, and the Board was pleased at were number of hihly qualified individuals whose names I an submitted for consideration. For your information, ctions. enclosing a press release announcing the Board's s2le We very much appreciate your interest in the Council and thank you for recommending Mr. Okinaga. Sincerely, SiTeul A. Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (p.r. dtd. 12/19/83) CO:pjt bcc: Mrs. Bray Mrs. Mallardi (2) v/ O'n-f December 19, 1983 The Honorable Christopher J. Dodd United States Senate Washington, D. C. 20510 Dear Senator Dodd: The Board has appointed eight new members to its Consumer Alvisory Council, to succeed those persons whose you terms expire this year. Mr. Lawrence S. Okinaga, whom recommended for appointment, was among those selected to the Council. The sr:!lections were male from more than 200 nominees this year, and the Board was please' at the larae number of highly qualified individuals whose names were submitted for consideration. For your information, I am . enclosing a press release announcing the Board's selections We very much appreciate your interest in the Council and thank you for recommending Mr. Okinaga. Sincerely, Enclosure (p.r. dtd. 12/19/83) CO:pjt bcc: Mrs. Bray Mrs. Mallardi (2) y/ Identical ltrs. also sent to: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Senators Matsunaga & Inouye Chairman Garn • of GOvt •• BOARD OF GOVERNORS 0'• OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 RAL RE-S.• • •..• • December 19, 1.983 PAUL A. VOLCKER CHAIRMAN The Honorable Fernand J. St Germain Chairman Subcommittee on Financial Institutions Supervision, Regulation and Insurance Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Chairman St Germain: Thank you for your letter of November 21 concerning late payment fees and penalties imposed by banks. An enclosed letter from Mr Thomas G. Vincent to Congressman Coughlin states that such penalties have proliferated in the last few years. Mr. Vincent states that often the lateness of payments results from delays by the U.S. mail or by internal processing delays at the bank receiving the payment and suggests that large customers making late payments through electronic means are not penalized. You ask for comments on Mr. Vincent's proposal to limit all penalty payments to a single charge of 1/12 of the current prime rate times the overdue amount for each month or portion thereof for which a payment is overdue. As a general principle, the establishment of late payment fees and penalties is a prudent banking practice that serves to provide an extra incentive for persons owing debts to make payments in a timely fashion. In this regard, a review of an institution's ratio of past due loans is a fundamental part of an examination by the regulatory agencies and late payments are considered to be an early sign of possible credit weakness of individual borrowers. At the same time, it is also necessary to assure that customers are informed concerning late payment fees and that such charges are imposed and administered in an evenhanded manner. The Board has implemented legislation that affects customers in the area of timeliness of loan payments. Banks and other creditors are required under Regulation Z--Truth in Lending (12 C.F.R. Part 226)--to disclose the amount of late payment fees or charges in connection with an extension of credit (12 C.F.R. §§ 226.6(b), 226.18(1)). Thus, borrowers can be fully aware of the potential penalties for failure to make payments on time, and can take this potential cost into account when shopping for credit. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Protection is also provided by Regulation Z to borrowers making payments on credit cards and other open-end n rnand J. St Germai Fe e bl ra no Ho The Page Two credited to a be st mu ts en ym general rule, pa less a delay in a un As t ip . ce ts re un co of ac te unt as of the da or other fee co ge ac ar ch 's er e om nc st na a cu a fi itor specifies d not result in ed ul cr wo a if ng ti , li on r, ed cr diti e is not follow 6.10(a)). In ad ur 22 ed oc S pr R. F. at C. th 2 1 ( but edit for the making payments cr ve gi l il st procedure for st e , the creditor mu . If a dispute concerning th er om st cu e th by ys to five calendar da er may be able om st cu e th , rs payment within occu procedure in t of a payment on ti lu so re r ro time of receip er by of the billingection afforded ot pr e Th ). take advantage 13 2 C.F.R. S 226. are, in effect, Regulation Z (1 substantial in that creditors g spute involvin di y an le nd those rules is ha to ve a procedure required to ha . consumer credit ers provides consum es ur ed oc pr e te thes umstances of la rc The existence of ci e th n ai pl r, ive avenue to ex charge. Furthe d te la a of ty with an effect di ishe solve the vali lities establ ci fa t en ym payments and re pa as automated ch e of electronic su us e, d rv se se ea cr re in deral the d home bankctor and the Fe an se ks e or at tw iv ne pr er e tell by th by CH), automated ( es us ho ng payments cited te cleari la of es us ca ce the ing, will redu !fir. vincent. yment penalpa te la on t mi a federal li e I believe that e as an effectiv ral rv se n ca es fe rable. Such s while fede ties is undesi mely fulfillment of obligation es of consumer ur ti as r me fo y e ar iv ss nt ce ce in e ne and procedures ions provide th is es ov fe pr e es ry th to of la s regu suring disclosure as by on ti ec prot disputes. for resolving r ovide any furthe pr n ca we if know Please let me e. ew of this issu vi re ur yo in assistance Sincerely, -221, 83446) PSP:GTS:vcd (V cki bcc: Mr. Pile Mr. Schwartz G. C. Log 288 ) Legal Files (2 Ms. Amberg t; i 277cd4--z---t 0 7%-71, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rL) Action assigned Mr. Bradfield FERNANF1 J ST GEILMAIN, P.1, CHAIRMAN FR.AN:KAINUNZIO. ILL CARROLL HUBBARD. JR.. KY. NORMAN E 0 AMOURS, N.H. DOUG BARNARD. JR. GA. JOHN J LAFALCE NY. MARY ROSE OAKAR, OHIO BRUCE F VENTO, MINN. ROBERT GARCIA. NY. CHARLES E SCHUMER. N.Y. BILL PATMAN, TEA. STEPHEN L NEAL. N.C. BARNEY FRANK. MASS. RICHARD H LEHMAN, CALIF. JIM COOPER. TENN. BEN ERDREICH. ALA. THOMAS FL CARPER. DEL U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND INSURANCE CHALMERS P VVYLIE OHIO GEORGE HANSEN. IDAHO JIM LEACH IOWA ED BETHUNE, ARK STEWART B McKINNEY, CONN. NORMAN D SHUMWAY, CALIF. BILL MCCOLLUM, FLA. BILL LOWERY, CALIF. GEORGE C WORTLEY, N.Y. DAVID DREIER. CALIF. OF THE AFFAIRS COMMITTEE ON BANKING, FINANCE AND URBAN NINETY-EIGHTH CONGRESS WASHINGTON, D.C. 20515 November 21, 1983 The Honorable Paul A. Volcker Federal Reserve System 20th & Constitution Ave., N.W. Washington, D.C. 20551 Dear Chairman Volcker: m Congressman Enclosed you will find correspondence I have received fro concerning the late Lawrence Coughlin and his constituent, Thomas C. Vincent, your comments on the payment penalties imposed by banks. I would appreciate this whole area of issues and recommendations raised in Mr. Vincent's letter as ing most heavily on increased bank fees is a topic of growing concern, often impact those segments of society least able to absorb the costs. I would Inasmuch as Congressman Coughlin has asked for my comments, appreciate that you respond to me for my review. S'ncerely, F rndi J. t Germain Chair an F3StG:jTo Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , r" F1 : f 7ZP l C" '" 7 C=I LAWRENCE COUGHLIN , https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis .'1 13TH DISTRICT. PENNITI.TARUL , , COMMITTEE ON APPRCPRIATIONS WAsmAcTooOmM ami 2447 RAviviim sw (202) 22S-6111 N._ Congrr55 of tfie Unite) Eptattg Thouge of ilepresentatibel RANKING MINCAITY MEMBER SuBCommyTTEE ON TRANSPORTATION SURCOmumu ON DISTRICT OF COEuMBIA DISE 210 Ornct i(17 ONE MCNTGONIERY PLAZA Nosatstorm. PENNSYLVANIA 15401 (215) 1774040 SW1755 fsbington. D.C. 20515 1 /-1 1233 MENsti SuliCommtral ON NUO-thoEPEADENT AGENCIES October 12, 1983 Write SMICT corimirril ON NARCOTICS Honorable Fernand J. St. Germain Chairman Committee on Banking, Finance and Urban Affairs 2129 Rayburn House Office Building Washington, D.C. 20515 Dear Mr. Chairman: Attached is a copy of a letter I have received from one of my constituents concerning increasing late payment penalties charged by banks. I believe Mr. Vincent raises a good point with respect to the difficulty of knowing precisely when payments are actually delivered to a bank or processed internally by it. Any comments you or your staff could make concerning this matter and any consideration your committee may be giving to it would be of great interest to my constituent and myself. With all best wishes, Cordially, 1"-7 •.7 • • • 1▪ 1 4.- .1A r lk•• !Pt% LAWRENCE COUGHLIN LC:rb Enclosure 4.4qoPy. .111 September 13, 1983 The Hon. R. Lawrence Coughlin 2467 Rayburn Building Washington, DC 20515 Dear Mr. Coughlin, onve action taken to prohibit unreas ati isl leg see to e lik ld wou I tal agencies (local, state, and able charges by banks and governmen late payment of bills. These federal taxing authorities) for tly during the last three years mos -ted tia ini e hav s ion zat ani org e Payment Penalty, in addition to an absolutely unreasonable 5% Lat alty becomes due because of the interest. In many cases, the pen simply from processing time within or l Mai S. U. of ry ive del in delay paying the bill has no way of deterthe agency itself. The person t and has no choice but to pay the mining what caused the late paymen have late payments which are penalty. Other American businesses ey: in the range of 134 to 2%. somewhat in line with the cost of mon are escape this administrative nightm The large businesses, of course, hough I doubt very much that when by electronic money transfers. Alt and payments are made one or two the electronic system is disrupted indeed applied. I recommend that are ies alt pen se the t tha e lat s day ks and governmental agencies all penalty payments being made to ban 2 of the current prime rate times be limited to a single charge of 1/1 portion of a month which a paythe overdue amount for each month or ment is overdue. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the above would be greatly Any action you could take regarding appreciated. Sincerely Thomas G. Vincent 77,'"nirwrr iP • December 19, 1qR3 a, The Honorable John Glenn United States Senate Washington, D. C. 20510 Dear Senator Glenn of your constiI am pleased to inform you that one Manager, Communicating tuents, Ms. Louise McCarren Herring, has been apointed to Arts Credit Union, Cincinnati, Ohio, ry Council beginning in serve on the Roard's Consumer Adviso January 1984. ablished by The Consumer Advisory Council was est on the exPrcise of its Congress in 1176 to advise the TIo_Ircl tion laws and on duties under the consumer credit protec Council by law repreother consumer-related matters. The and of the financial sents the interests both of consumers members, whose threecommunity. The Council consists of 30 the Council with year terms are staggered to provide continuity. s year were The eight new members appointed thi For your information, selectel from more than 200 nominees. cing the Board's I am enclosing a press release announ selections. Sincerely, Egauf A. VcIcker Enclosure (p.r. dtd. 12/19/83) CO:pjt bcc: Mrs. Bray Mrs. Mallardi (2) ' ed list (changing constituents ach att the to t sen s. ltr Identical names). https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Attachment A INDUSTRY REPRESENTATIVES Credit Unions Nominee and Current Position (1) Louise McCarren Herring Manager Communicating Arts Credit Union Cincinnati, Ohio District Recommended by 4 P1. Esq. Joa •e Faulkne al Assistance New Ha Assoc necticut en, New F mer CAC Member) •3 j_Lai should Relieves that credit unions ." ons Uni dit Cre of her Mot e With COMMENT: Nicknamed "th ome financial supermarkets. bec to try not and ter rac l cha n credit retain their specia ues to manage a 6.R millio tin con , ce en ri pe ex on uni dit cre union over 50 years of member of a group of credit ing viv sur t las The s. ber mem union with 4,800 ming CUNA. At 73 years for ion tut sti con the ft dra to representatives who in 1934 met mely outspoken." of age, characterized as "extre Automobile Finance Company (2) Robert F. Murphy President General Motors Acceptance Corporation Birmingham, Michigan Robert B. Ev ns Pre ident nancial Amer can Ser i s Association Washinz on, D. C. Fo J. Ch.irman o the Board edit Company F,,rd Motor "earhorn, Mic gan -4e4---,"10--(..4.) :7 u,1 A C is the financing GMA 0. 198 ce sin ent sid Pre h GMAC. 1982, GMAC financed COMMENT: Thirty years wit In . er ur ct fa nu ma e bil omo aut gest ates. Annual retail subsidiary of the world's lar St ted Uni e th in cks tru ger cars and over 1.7 million new passen ng exceed $35 billion. finance receivables outstandi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 c;( INDUSTRY REPRESENTATIVES Attorney Nominee and Current Position (3) Lawrence S. Okinaga (Oriental) Carlsmith, Carlsmith, Wichman and Case Honolulu, Hawaii District Recommended by 12 Ch stopher J. Dpidd States Snate Unit Spark M United S sunaga tes Senate Jake arn Uni d States nate 4.1 iL niel K. Inouye United States Senate firm (largest in state of COMMENT: Since 1976, partner in a 70-person Honolulu law financial institution Hawaii) and spends considerable time on state and federal commercial banks, credit issues. Represents several Hawaiian thrift institutions, matters. Active in unions and retailers on consumer credit and other regulatory and consumer credit community affairs. Has extensive background in many regulatory areas. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2 ENTATIVES CONSUMER AND COMMUNITY REPRES Specialists Housing/Urban Revitalization Nominee and Current Position (4) Rachel G. Bratt Assistant Professor Department of Urban and Environmental Policy Tufts University Medford, Massachusetts District Recommended by k E. Mo F Presi.-4t Federa oston o 'serve ' Bank )geL4%---4tT-t1-L,„AL A: • s earned a Ph.D. from MIT' ng vi ha r te af , 76 19 in on t positi of a COMMENT: Started curren s also been a member ha , 82 19 e nc Si . ng ni an Pl d ies an Department of Urban Stud and evaluation studies. ch ar se re od ho or hb ig ne t ou s ie ty consulting firm which carr rcester Massachusetts Ci Wo e th in r to na di or Co t en lopm unseling programs to co of y Served as Community Deve ud st ed nd D-fu HU ch Associate on a search/ Manager's Office, Resear sitions related to re po r he ot l ra ve se in d an , yers ated in a variety ip ic rt Pa assist low-income homebu t. en pm lo ve de ic licies and econom consulting on housing po , and agency proceedings. ws ie rv te in s, op sh rk wo s, of conference (5 Mervin Winston (Black) President Metropolitan Economic Development Association Minneapolis, Minnesota E. t-rald Corr an Presis t serve Bank Federal nn ea•lis of 9 )114,mt: ado,( g /3 r '714 t tLt C' oting the formation om pr in al nt me ru st in , MEDA since 1981 e Bank, "demonrv se Re COMMENT: As President of e th to g in rd co ac ty businesses and, concerns." MEDA is a er and operation of minori um ns co d an or it ed d awareness of cr assists businesses at th on strated a sensitivity an ti za ni ga or e nc na ent and mainte siness consulting Bu nonprofit business developm a. ot es nn Mi in s nt de hnic minority resi ation link between ic un mm co owned and managed by et a as ts ac DA ME are provided, and Formerly Corporate y. it un mm co and development services ss ne si bu a ot oups in the Minnes the majority and minority gr oration and Director of rp Co n so ud -H on yt Da r fo ns computer sciences in A. M. Director of Audit Operatio an ed rn Ea t. oi on r the city of Detr l Business Innovati al Sm a Department of Budget fo ot es nn Mi e th of ty. Current member Minnesota Advisory 's on ti ra st from Ohio State Universi ni mi Ad ss ne e U.S. Small Busi Research Commission and th Council. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis VES CONSUMER AND COMMUNITY REPRESENTATI Government Nominee and Current Position (6) District Recommended by Steven M. Geary Associate General Counsel, Consumer Credit Missouri Division of Finance Jefferson City, Missouri 8 Richard F. Halliburton Dep ty Director Leg l Aid of Western issouri Kans s City, Missou (CAC EMBER) •-•••)-13. M. E. ope Contro Branc h anager Generals otor Acceptance Corp. ssouri St. Loui Jackson B. Darre Direct Misso ri Hi se of R resent tives Je erson Ci y, Missouri Ike Skelton U.S. House of Representatives of the time serving as t mos e, nc na Fi of on si vi Di e th h COMMENT: Seven years wit of borrowers and lenders, ms ble pro h wit t ac nt co ly Dai . or Supervisor of Consumer Credit Assisted in drafting maj s. er tt ma er um ns co on on ti ga and experience in state liti Published articles in the e. ur at sl gi le e at st e th r fo n consumer credit legislatio the Missouri Continuing in it ed cr er um ns co on r te Missouri Bar Review and a chap Legal Education Handbook. Consumer Education Specialist 5 (7) Margaret M. Murphy Assistant Professor and Coordinator of the Economic Education Program Johns Hopkins University Baltimore, Maryland Rob Presid erve Bank Feder Richmo 7); • e, fJ J. tir 13j, on the Maryland Council of or ct re Di e iv ut ec Ex ng ti Ac COMMENT: Formerly the Loyola College, Virginia at d hel s on it is po ng hi ac te University. Founder s Economic Education. Prior er tg Ru and , rk Yo New iversity of Polytechnic Institute, City Un n at Columbia, Maryland. io at uc Ed ic om on Ec r fo er nt erships and past director of the Ce and publications. Memb s on ti ta en es pr l na io at uc ed Numerous consumer economics Currently, producer and . ns io at ci so as n io at uc ed and in a range of economics e program at Howard Public TV. director of a public servic https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4 ACADEMIC (8) Nominee and Current Position Recommended by Frederick H. Miller Professor of Law University of Oklahoma College of Law Norman, Oklahoma Ralp Law Profess niversity of America Catholi Schoo of gton, Was (F MER CAC C IRMAN) District iekt, ) 01j CLA, iously sity of Oklahoma. Prev er iv Un e th at w la of r so es lahoma COMMENT: Since 1966, prof e year as Counsel to an Ok volved on d an rm fi w la , io Oh , us in spent 4 years at a Columb ate Laws and is actively St m or if Un of on si is mm on Co o would bring to the wh e firm. Currently serves on me so as d be ri sc De ents Code. int." in drafting New Uniform Paym nt" and a "balanced viewpo me dg ju of ce en nd pe de d in an Council "objectivity consulting activities. Numerous publications and https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5 . I https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis December 15, 1983 The Honorable Robert G. Torricelli House of Representatives Washington, D. C. 20515 Dear Mr. Torricelli: Thank you for your letter of .December 1. The Board is pleased to provide Chief Paul Dittmar with one of our security badges for his collection and subsequent display. The Board's Chief of Security, Mr. Ken Wood, is in the process of forwarding the badge directly to Chief Dittmar. Please let me know if we can be of further assistance. Sincerely, Donald J. Winn Assistant to the Board RF:CO:vcd (V-226, 83523) bcc: Ken Wood Bob Frazier Mrs. Mallardii ......••••••••••• Action assigned Mr. Frost A •••••••••• IRA ..;r1MOM, re• •••••• •Jo, AP • - 11.-% • WASHINGTON OFFICE OFFICE BUILDING 317 CANNON HOUSE WASHINGTON. DC 20515 202-225-50431 ROBERT G. TORRICELLI • TM DISTRICT. NEW JERSEY DISTRICT OFFICE COMMITTEES FOREIGN AFFAIRS 27 WARREN mut SUITE 201 071101 HACKENSACK NEW JERSEY 201441-1111 SCIENCE AND TECHNOLOGY Couress of the lanittd tats touse of Represtntatitns Illazhinton, D.C. 2o515 rn 22'1 e6 C:=0 ria 7-0 Tv' r— C=7 —r1 i'vwt rT1 . iO D 49-0 rn •••••••• December 1, 1983 Dear Sir: the Leonia. New of f ie ch e th om fr a letter Enclosed please find in my district. d te ca lo is h ic wh nt rtme Jersey Police Depa ghting a display case highli h is bl ta es to ke li encies of the ag The Chief would t en em rc fo en w la om the various m in shoulder patches fr enough to assist hi od go be se ea Pl . nt rnme United States gove r your jurisdiction. de un es ci en ag e os th om obtaining patches fr le d extend every possib ul wo u yo if d te ia It would be apprec ank you for your Th s. or av de en s hi f in courtesy to the Chie matter. cooperation in this With best regards. Sincerely. ROBERT G. TORRICELLI Member of Congress RFT:dp https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S V A • S. BOLOUGH cy. LEONIA • f4t settled • ••V•...• WI%Xr• LEONIA POLICE DEPARTMENT Telephone: (201) 944-0800 PAUL W. DTITMAR CE ILI OF POUCE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dear Sir: department Lieutenant Michael Machinski of this g a police shoulder has been assigned the task of assemblin newly remodeled patch for collection and display in our headquarters. patch I would appreciate your sending a to add to our display. olved, Should there be any cost inv essary fee for this we would be willing to pay the nec and consideration service. I thank you for your time in this matter. Tours Tinily o-A4-C— T Paul Dittmar Chief of Pollee Leonia Polio. Department Leonia, Yew 47erooy 07605 December 14, 1983 The Honorable Alan J. Dixon United States Senate Washington, D. C. 20510 Dear Senator Dixon! During my testimony before the Committee on Banking, ested a list Housing and Urban Affairs on September 13, you requ the development of of possible limitations to shape and direct basic aareeinterstate banking expansion. I think we were in eved by such ment that a most important objective to be achi s among larger limitations is to avoid concentration of resource iented banks. banks and to ensure the viability of community-or In my testimony, I emphasized the already existing the trend in the large measure of interstate banking activities, a reciprocal states towards authorizing interstate banking on rt basis, and the tendency of existing restrictions to dive ral avenues of bankers' energies into areas foreign to their natu azard and comexpansion. To avoid the Problems of uneven, haph convenience in the petitively unfair development, assure greater establish a provision of banking services to the consumer, and Congress to more uniform structure, I urged that it is time for address the issue of interstate banking. g At the same time, I stressed that in proceeding alon r basic public this road we had to take full account of othe t local control policy ob-lectives--our traditional concern abou y banks, and of banking, the viability of healthy communit from excessive avoidance of all of the dangers that could arise Company Act now concentration of resources. The Bank Holding excessive conrequires us to take into account avoidance of s on the noncentration of resources in all of our decision McFadden Act banking activities of bank holding companies. The expansion by banks and Douglas Amendment, which limit interstate have had as one and bank holding companies, respectively, also of resources by of their objectives control of concentration state lines. prohibiting the consolidation of banks across Douglas To the extent that the 1cFadden Act and/or the I agree with AmenThent are relaxed to allow interstate banking, the need for you that consideration will have to be given to s through alternative means to limit concentration of resource applied to consolidations of banks. The antitrust laws as ic market ' banking provide no real limitation on geograph organizations extension mergers among the largest banking markets in which because they focus on narrow local geographic le presence. the acquiring party generally has no or very litt https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Alan J. Dixon Page Two The enclosed 3112,72ndix prepared by my staff catalogues a alone number of specific limitations that could be used, either ng. I or in combination, to phase in or limit interstate banki the do not yet feel that we have a fully viable formulation of and combination of methods that is both effective, practical, you to economically defensible. I would be pleased to work with of develop a pronosal that would meet our mutual obective constrengthening the banking system while avoiding excessive number centration of banking resources in the hands (3', a limited of financial institutions. We have a good deal of evidence bank about the ability oF small banks to meet successfully large for conlpetition and, within a carefully constructed framework interstate banking, I believe we can assure this result. Sincerely, S[Paul 1. Volcket Enclosure BMC:JVM:MB:vcd bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ms. Chaiffetz Mr. Mattingly Mr. Bradfield Legal Files (2) Mrs. Mallardi (2)/ ••-••• •••••.,••••,..••••% APPENDIX LIMITATIONS ON INTERSTATE BANKING king described below The limitations on interstate ban sing-in interstate banking or fall into two categories: pha zation that may be acquired ani org of e typ or e siz the ng limiti . These general principles by an out-of-state organization a number of different could be modified or varied in d objective. combinations to achieve a desire To Large Metropolitan Areas Limit Interstate Expansion it interstate banking to One approach would be to lim areas of the country that ted ula y pop vil hea ge, lar y vel relati king competition. For example, ban e ens int to d ome ust acc are ks panies could establish new ban com g din hol k ban ate -st -of out ated in Primary Metropolitan or acquire existing banks loc tan Statistical Areas or in oli rop Met and as Are al tic Statis ces In view of the size and resour es. nti cou ted ula pop y vil hea these areas, it is anticipated in ing rat ope ons uti tit ins of the flexibility to manage the that these areas would have ht result from interstate additional competition that mig smaller e minimizing the impact on tim e sam the at le whi g kin ban with approach could be combined s Thi . ons uti tit ins ity mun com aimed described in this memorandum s que hni tec er oth the of e som banking resources in order to at avoiding concentration of es. g institutions of different siz kin ban of y iet var a in nta mai https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis tate Acquisitions Limit the Number of Inters erstate banking would Another method of phasing-in int tate acquisitions that may be ers int of ber num the it lim be to has ion each year. This approach made by a banking organizat nk te in switching to multi-ba been used by at least one sta e., Pennsylvania). statewide holding companies (i. Regional Interstate Banking on a regional basis Authorizing interstate banking g to evolve over a period of would allow interstate bankin into the country would be divided ch, roa app s thi er Und time. upings ation or by voluntary gro isl leg l era fed by her eit regions be located in a region would s ion zat ani org g kin Ran . of states any uisitions of banks located in permitted to expand by acq now in A regional arrangement is state within that region. s, --Connecticut, Massachusett tes sta d lan Fng rew ee thr effect in and Rhode Island. de novo banks or possibly of ons iti uis acq on, iti add In owed on an extra-regional small institutions might be all a horization could extend for aut al ion reg the er, eov Mor basis. king organizations would be ban ch whi er aft , iod per e tim limited A anywhere in the united States. authorized to acquire banks ide has been used to allow statew regional phasing-in approach A disadvantage of this k. Yor New and sey Jer New in branching s that have no economic rie nda bou on ies rel it t tha is approach s ization of banking in thi kan bal to d lea ld cou and nce significa t were left in place. country if the regional concep t may be Acquired Limitation on Size of Bank tha the banking organization of e siz the on n tio ita lim A g to allow interstate bankin ed loy emp be ld cou ed uir acq to be by ions from being acquired zat ani t org ges lar the t ven pre but to ited acquisitions could be hib pro of ss cla the r. the one ano on might limit the acquisiti law The s. way l era sev in defined te ions (as measured by absolu zat ani g org kin ban t ges lar of the ts) in ted percentage of deposi sta a r ove l tro con or k, ran size, t ion that is among the larges zat ani org an by ket mar or a state would generally prevent the ch roa app s Thi te. sta r the in ano h state from consolidating eac in s ion zat ani org t ges lar very ng Another method of limiti . tes sta er oth in t ges lar with the among would be to limit mergers ks ban g gin mer the of e the siz ions in the country. the largest banking organizat Acquiring Bank Limitation Based on Size of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ld also be limited by Concentration of resources cou uisition when a banking acq by ion ans exp e tat ers int e restricting a regional or nationwid on e siz n tai a cer s che rea organization the size limitation, it s che rea ion zat ani org the er basis. Aft small de novo or possibly by might be authorized to expand could be based on a n tio ita lim e siz The . ons iti foothold acquis deposit figure. For te olu abs an on or ts osi dep percentage of stated t controlled more than a example, any organization tha tory institutions in the osi dep in ts osi al dep tot of percentage uiring be prohibited from acq country or in a region would establish and acquire de ld cou but ks ban ng sti exi additional would ks. Another approach ban ld tho foo ly sib pos or gest novo banks, acquisition for the lar by ion ans exp e tat ers int ld be to limit allow de novo or footho but e, wid ion s nat ion zat ani banking org ions. expansion by those organizat subsidiaries Permitting Expansion only by state flexibility over Finally, in order to preserve hed e banking might be accomplis banking institutions, interstat h s Amendment rather than throug by modification of the Dougla ts serve autonomous banking uni repeal of McFadden so as to pre t to state regulation. This in the individual states subjec and itive equality in branching step would help assure compet in and state banks, particularly other matters between national by limit or prohibit branching the twenty-six states which that in states that now have laws banks within the state, and m branching into the state. prohibit out-of-state banks fro https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis p BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM .. /- • ,-, • 4-) C.... •A • -S•...vt‘A., • .RAI_ R. WASHINGTON, O.C. 2OSSI December 6, 1983 The Honorable Jesse Helms United States Senator P. 0. Box 2944 Hickory, North Carolina 28603 Dear Senator Helms: er 18 requesting Thank you for your letter of Novemb r constituent, eived from you couunent on correspondence you rec olina, regarding his Car th Nor , tte rlo Cha of wn Bro Mr. L. H. his money for the purept acc not ld cou it t tha ice bank's adv chase of a Series EE savings bond. necessary to suspend The Treasury recently found it ked the authority to lac it e aus bec ds bon s ing sav the sale of acted to increase the ss gre Con the il unt t deb l ona incur additi umed subsequent to res e wer es sal d Bon it. lim t statutory deb Congressional action. the Treasury's beon act ks Ban e erv l Res era Fed The ted States. As such, they half as fiscal agents of the Uni decisions such as that in only administer Treasury policy bond sales. Accordingly, connection with the suspension of Commissioner of the Public gg, I have asked Mr. William M. Gre complete discussion of the Debt, to provide you with a more Treasury's recent action. . Please let me ful use is on ati orm s inf thi e hop I istance. know if I can be of further ass Sincerely, Donald J. Winn Assistant to the Board Mr. William M. Gregg GDM:CO:vcd (iV-220, 83436) bcc: Mr. Manypenny / Mrs. Mallardi i CC: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Allison JESSE hELMS •.. v NORTH CAROLINA https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /ZICitifeb ,Stalez Zertafe WASHINGTON. D.C. 20510 ,•••") BCI\FJ.1 CF CTIERff37,7:: CF TEE r:CF-7.:41 07 E33 NOV 21 1):3, 12: .'"" 1 •• November 18, 1983 Mr. Paul A. Volcker Federal Reserve System 20th. Street and Constitution Ave., NW Washington, D.C. 20551 Dear Mr. Volcker: Enclosed please find a copy of a recent letter I have received from Mr. L. H. Brown, 2310 Rocky Knoll Drive Charlotte, North Carolina 28210 regarding questions he has about the current purchasing of EE Government Bonds. Certainly, I would appreciate your looking into this situation and advising me of your findings. Please correspond with me about this matter through my Hickory District office P.O. Box 2944, Hickory, North Carolina 28603. Thank you for your assistance in this matter. Sincerely, JESSE HELMS U. S. Senator JH:jo/sk Enclosure eI t•iN • ç %f4 c . • 041 ILA • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ..-9 celiZe-e Dit.e, __e-eZzitz ,z ,751-te J4c4 ___ _itt,i. ez,,-eC_ --hz.rfr a,dtz-e,aLeee_ ,etui--u- /6-c2 ttc-ez c-;e„ ,z-t:f Ce--71,9-7a-ia w-,EI -0-Z6 TA", l Wi-L / / (4iaL6t144z; ,&tc- t aolcct. 71ze_ a-Z(Liaya 6.X& .-Zte- ata,ce„ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis lt . • Ca-7t-e- reLe/ , x, )6/. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis December 1, 1983 The Honorable Jim Sasser United States Senate Washington, D. C. 20510 Dear Senator Sasser: . of November 21 Thank you for your letter essed on behalf of Mr. Mitchell Crawford, who has expr an interest in employment with the Federal Reserve System. Mr. Crawford's material is currently being sion reviewed by the Board's Legal Division. Our Divi g the of Personnel will contact him directly regardin status of this review. We appreciated having your recommendation on behalf of Mr. Crawford. Sincerely, KW:CO:vcd (V-222, 83462) bcc: Ms. Warehime fi /I) ( Action assigned Mr. Shannon COMMITTEES: 2;1 M SASSER F TENNESSEE APPROPRIATIONS BANKING, HOUSING AND URBAN AFFAIRS 'AICrtifeb Zfafez Zerrafe WASHINGTON. D.C. 20510 BUDGET GOVERNMENTAL AFFAIRS SELECT COMMITTEE ON SMALL BUSINESS November 21, 1983 +PI ' 1 ) - The Honorable Paul Volcker Chairman Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D. C. 20551 cn CD. Dear Mr. Chairman: I am writing to bring to your attention the resume of Mr. Mitchell Crawford, Attorney at Law, Franklin, Tennesssee, who is interested in a job relocation to the Washington, D.C. area. Mitchell Crawford has distinguished himself through his legal expertise both in private business and in Tennessee's state and local governments. Among his civic awards, he was named one of the four Tennessee Outstanding Men of the Year in 1966 and was a highly-lauded candidate for Mayor of Chattanooga in 1971. The enclosed endorsement editorial from the CHATTANOOGA TIMES praised Mitchell's ability and, especially noteworthy, his temperament in fulfilling the obligations of a job. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Vanderbilt is my alma mater so I cannot speak too highly of Mitchell's legal training. This, of course, has been enhanced through the experiences of his professional career. I believe Mitchell Crawford could make a valuable contribution to the Federal Reserve System. I know him personally and I am pleased to be able to recommend him to you most highly. I would most appreciate your checking your personnel roster for openings for positions where Mitchell Crawford may apply or stop by your office for an interview. erely, Jim a ser /United States Senator Cr) •• f ; CO C...7 -...... - N) . 1 r; - _ 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 "Mitchell Crawford for Mayor." Chattanooga Times (Tennessee), February 28, 1971. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org / REFERENCES Ray L. Brock, Jr. Justice, Tennessee Supreme Court Supreme Court Building Nashville, Tennessee, 37219 John. Siegenthaler, Publisher and Editor The Tennessean 1100 Broadway Nashville, Tennessee, 37203 Senator James R. Sasser 231A Russell Senate Office Building Washington, D.C., 20510 Judge Ralph Kelley Referee in Bankruptcy Federal Building Chattanooga, Tennessee, 37402 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information. Citation Information Document Type: Resume Citations: Number of Pages Removed: 2 Resume, Mitchell Crawford, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis It is requested that your response be provided in duplicate. It will be appreciated if you will address the envelope to: SENATOR JIM SASSER 260 RUSSELL SENATE OFFICE BLDG. WASHINGTON, D. C. 20510 Action assigned Bradfield; info copy to Garwood RICLIARZ: H. LEHMAN 18TH DISTRICT, CALIFORNIA 7 COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE ON INTERIOR AND INSULAR AFFAIRS 1319 LONGWORTH BUILDING WASHINGTON, D.C. 20515 (202) 225-4540 Congress of tlie Unita ,,,tates 1iint5c ofigepretientatitms -n rn Illasbington. D.C. 20515 December 1, 1983 r r7:71 r-n 1-I1 3 Cr r '1 -- C73 •‹: ker Honorable Paul A. Volc Chairman Federal Reserve System 1 Washington, D.C. 2055 rn - c:• Co •••••. 41. r: Dear Chairman Volcke d pects of the banking an unts as ny ma of on ti la gu re e de acco As you are aware, th anges in the types of ch ny ma t gh ou br s ha es stri e changes financial services indu ble to consumers. The result of many of thes aila t what accounts ou ab s er um ns co and other services av of s nd on confusion in the mi rates of interest are e has been considerable iv ct fe ef e th at wh s, eir need are best suited to th and other questions. competing accounts, e popular press. th d pe ca es t no s ha s et financial mark pport for a "Truthsu g in ow The confusion in the gr is e er th articles point out, access to all of ee fr ve ha s er um As the two enclosed ns co at at guaranteeing th ere to 'invest' wh t ou ab s on si in -Savings" law aimed ci de ed n is ssary to make inform ll for this legislatio ca e the information nece th r he et wh t ou ab d concerne their savings. I am is real or imagined. h ic wh ed ne a on up based et Deposit Accounts rk Ma y ne Mo d an es at ic All Savers Certif it and switch ba g, in is rt The introduction of ve ad ng di ea instances where misl placed consumers s ie lt na pe d an es fe are two often-sighted en terest rates, and hidd ing which device in rm te de in ge ta an tactics, "teaser" in dv sa vices at a distinct di of these savings de their needs. was best suited to to insure that con- ed d, te an rr wa if n, io at make inform thoring legisl I am interested in au ed with all of the information they need to provid ion in this area, I at sl gi le g in or pl sumers are routinely ex re gard. However, befo ons as they pertain ti es qu g in ow ll fo decisions in this re e th ance of your agency on would ask the assist to this issue. g of certificates in is rt ve ad e th te la gu ently re , to what do these so Does your agency curr If s? 1. nt me ru st in r savings ent or encourage? ev pr ey of deposit and othe th do es ti vi ti What ac regulations pertain? Please Respond to: WASHINGTON OFFICE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FRESNO OFFICE 1900 MARIPOSA MALL SUITE 301 FRESNO, CALIFORNIA 93721 (209) 487 5760 L STOCKTON OFFICE 808 NORTH CENTER STREET 02 STOCKTON, CALIFORNIA 952 (209) 946 6353 SONORA OFFICE EET 9 NORTH WASHINGTON STR 70 A 953 RNI IFO CAL RA NO SO (209) 533 1426 Honorable Paul Volcker December 2, 1983 -Page two- in the area of advertison ti ac ry to la gu re y an ed at pl Have you contem 2. so, what would be the If s? nt me ru st in s ng vi sa to ing with regard thrust of such regulations? s such as the so-called al os op pr of t ri me e th of d ts Are you convince 3. cy reacted to past attemp en ag e th s ha w Ho w? la " gs "Truth-in-Savin a law? by Congress to enact such d nancial services planne fi of on ti la gu re de r he rt fu e In light of th 4. ss safeguard the public re ng Co e th t gh mi w ho , re tu for the near fu es? regarding these new servic on ti ma or nf si mi le ib ss po from ve preciated. Should you ha ap st mo be ll wi er tt ma is th to Your assistance in ee to contact me. I plan fr el fe se ea pl t es qu re is th cess any questions regarding e current Congressional re th of n io rt po y ar nu Ja e th te review this issue during of January 2nd to facilita ek we e th ng ri du se on sp re and would appreciate your this research. e y, RICHARD H. LEHMAN Member of Congress RHL/fcj ENCLOSURES https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to copyright protections. Citation Information Document Type: Newspaper articles Citations: Number of Pages Removed: 2 Quinn, Jane Bryant. "The Brave New World of CD's." Newsweek, October 10, 1983. Quinn, Jane Bryant. "As Bank Deregulation Progresses, Truth-in-Savings Law Is a Must." Washington Business, October 3, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org PETE V. DOMENIC!. N. MEX., CHAIRMAN ERNEST F. HOLLINGS. S.C. WILLIAM L. ARMSTRONG. COLO. NANCY LANDON KASSEBAUM, KANS. LAWTON CHILES, FLA. RUDY BOSCHWITZ, MINN, JOSEPH R. BIDEN, JR., DEL. ORRIN G. HATCH, UTAH J. BENNETT JOHNSTON, LA. JOHN TOWER, TEX. JIM SASSER. TENN. MARK ANDREWS. N. OAK. STEVEN D. SYMMS, IDAHO GARY HART. COLO. CHARLES GRASSLEY, IOWA ROBERT W. KASTEN, WIS. HOWARD M. METZENBAUM. OHIO DONALD W. RIEGLE, JR.. MICH. DANIEL PATRICK MOYNIHAN. N.Y. Ileniteb ,S3fatC55 COMMITTEE ZCIT ON THE BUDGET J. JAMES EXON. NEBR. DAN QUAYLE, IND. WASHINGTON. D.C. 20510 SLADE GORTON, WASH. IMRD OF 17. 1.1:E I-.03 DEC PI 9: 20 STEPHEN BELL, STAFF DIRECTOR LIZABETH TANKERSLEY, MINORITY STAFF DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • Nip (C_ -.... N 61 u60 62 64 63 65 66 68 67 69 70 72 71 73 74 75 76 77 78 79 80 81 82 .. Individual Income Tax 41 41 46 48 49 49 55 61 69 87 91 86 95 103 119 122 132 158 181 218 244 296 298 289 Corporate Tax (incl. Social Security) 27 28 28 31 34 34 41 48 42 52 50 45 52 61 69 73 76 97 109 122 129 135 131 122 Social Security Tax Paid by Individuals and Governments 8 9 10 11 12 13 15 19 21 24 27 29 33 38 45 51 56 64 72 83 94 109 119 126 12 12 12 13 14 15 13 14 14 15 16 16 15 16 17 17 17 18 18 19 24 41 36 35 Estate & Gift Tax 2 2 2 2 2 3 3 3 3 4 4 4 5 5 5 5 5 7 5 5 6 7 8 Customs Duties 1 1 1 1 1 1 2 2 2 2 2 3 3 3 3 4 4 5 7 7 7 8 9 Miscellaneous 1 1 1 1 1 2 2 2 2 3 3 4 4 4 5 7 8 7 8 9 13 13 17 15 92 94 100 107 113 117 131 149 153 187 193 187 207 230 263 279 298 356 400 463 517 599 618 601 Percentage of Increase Over Previous Year 16% 2% 6% 7% 6% 4% 12% 14% 3% 22% 3% (3%) 11% 12% 14% 7% 7% 19% 12% 16% 12% 16% 3% (3% Inflation (Fiscal Year CPI) 1.4 1.3 1.0 1.2 1.4 1.3 2.2 3.1 3.3 4.8 5.9 5.2 3.6 4.1 8.9 11.1 7.1 7.5 7.1 0.3 13.6 11.1 7.4 3.7 Cumulative Inflation Index* 101 103 104 105 106 108 110 114 117 123 130 137 142 147 160 178 191 206 221 243 276 330 342 Excise Tax TOTAL INCOME * Using a base of 100 for 1959 and compounding thereafter https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 307 00' https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 30, 1983 The Honorable George C. Wortley House of Representatives Washington, D.C. 20515 Dear Mr. Wortley: Thank you for your letter. of November 10 on behalf of Meg Greifl who has expressed an interest in the Board's summer internship program. I have asked our Division_of Personnel to . contact Ms. Greif directly about our application process for summer internships. We appreciate having your.. letter on behalf of Ms. Greif. Sincerely, . KW:CO:pjt (OV-217, 83417) bcc: Ms. Warehime Mrs. Mallardi (2) V/ GEORGE C. WORTLEY 27TH DISTRICT, NEW YORK COMMITTEES: BANKING, FINANCE AND URBAN AFFAIRS 428 CANNON HOUSE OFFICE BUILDING WASHINGTON, D C 20515 (202) 225-3701 Action assigned Mr. Shannon DISTRICT OFFICES 1269 FEDERAL BUILDING SYRACUSE NEW YORK 13260 (315) 423-5657 Congrtgg of tbe Ziniteb ikatecs /)ott5r SUBCOMMITTEES: FINANCIAL INSTITUTIONS SUPERVISION, REGULATIONS AND INSURANCE ECONOMIC STABILIZATION HOUSING AND COMMUNITY DEVELOPMENT OVERSIGHT AND RENEGOTIATION of 1- rprr5tntatilitS afsbington, D.C. 20515 0") • SELECT COMMITTEE ON AGING https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 10, 1983 7f1 Cry ." • ti:=1 'r • r The Honorable Paul A. Volcke Chairman Federal Reserve System Avenue, NW 20th Street and Constitution Washington, DC 20551 Dear Chairman Volcker: Dame at the University of Notre Miss Meg Greif is a sophomore for s Greif would like to apply in South Bend, Indiana. Mis the Federal Reserve System in an internship position with the appreciate your sending her Washington, D.C., and I would well as any available inforappropriate application form as 1984. p program for the summer of mation on the Fed's internshi ns directly to Meg Greif, 117 Lyo Please forward this material e, South Bend, Indiana 46556. Hall, University of Notre Dam Sin It Member GCW: Wortley f Congress .• of Gov •. •. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. E. 20 551 PAUL A. VOLCKER CHAIRMAN November 28, 1983 The Honorable Jack Brooks Chairman Committee on Government Operations House of Representatives Washington, D.C. 20515 Dear Chairman Brooks: As required by 31 U.S.C. § 720, we are submitting our written statement on the Comptroller General's Report to Congress entitled Financial Institution Regulatory Agencies Can Make Better Use of Consumer Complaint Information. As indicated in our letter commenting on an earlier draft, the Board generally supports the purpose of the recommendations made in the report to improve the overall complaint handling efforts of the agencies. The Board has already taken steps to address the issues and concerns that led to those recommendations. However, a few of the specific actions recommended by the report have not been incorporated because we believe that our current program already achieves the objectives of the recommendations. The Board was pleased to note that the report indicates that the agencies' complaint systems often help consumers solve significant problems. Consequently, we believe the report's recommendations are designed to refine, enhance and better document existing policies and programs found to be generally effective. This letter addresses the specific recommendations in light of that belief. Integration of Complaint and Examination Functions The first major area of recommendation deals with achieving greater integration between the complaint handling and other supervisory activities. The report recommends that the agencies revise their complaint handling and examination procedures to include specific requirements for coordinating complaints, examinations, and supervisory efforts. The report suggests that the agencies require follow-up during subsequent examinations to ensure that measures are taken to correct identified violations and to ensure that violations are not affecting similarly situated customers. The report also recommends that the agencies require at least minimal documentation of all actions taken to deal with a complaint. Furthermore, the report recommends that the agencies alter their computerized complaint data systems to identify complaints that may be useful in the examination or supervision process. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Jack Brooks -2 The Board has taken steps to integrate the complaint and examination functions within the System. In 1979, the Board instructed Reserve Banks to ensure that State member banks correct violations detected during complaint investigations and that those institutions that agree to make accommodations to resolve complaints fulfill those agreements. These instructions also require System examiners to review a bank's consumer complaint file at the Reserve Bank prior to an examination. The complaint file is reviewed to identify complaints which require follow-up to ensure that detected violations are subsequently corrected and to determine whether similarly situated customers are affected by the practices in question. In reaching its conclusions that the complaint and examination functions are not sufficiently integrated within the System, the GAO only examined a sample of eight of the System's cases. We believe that the sample may not show such coordination because examiners are not presently required to document these actions in the examination report or workpapers. In addition, we believe that eight complaints is a small sample given the number of complaints the System receives, and may not be representative of the System's overall record of coordinating the complaint and examination functions. Furthermore, in many Reserve Banks, the complaint and examination functions are closely related organizationally and, in many instances, these functions are performed by the same personnel, thus assuring coordination and making documentation somewhat unnecessary. Our own on-site reviews of the Reserve Banks' operations indicate that they generally follow established procedures and appropriately coordinate the complaint function with other activities. However, the Board will reemphasize to the Reserve Banks that they should continue to adhere to these policies and document that they have done so. The report suggests changes to the agencies' data systems which identify complaints that require follow-up to help integrate the complaint and examination functions. We believe that the procedures that we currently use to coordinate the complaint and examination functions are sufficient given the small number of complaints against each State member bank (about one complaint per bank per year). Our procedures require that, prior to an examination, examiners review all complaints received about the subject bank since the last examination to determine whether follow-up is necessary. Such a change to the data systems may be a helpful tool in agencies that receive many complaints against each of its supervised institutions. We believe, however, that our current policy allows us to identify complaints that require follow-up and, therefore, accomplishes the same purpose as the recommendation. Consequently, we do not believe that it is necessary to make this change at this time. Investigation of Discrimination Complaints The report's second major area of recommendation relates to ensuring that appropriate investigations are conducted of all allegations of discrimination. The report recommends that the agencies require local complaint handlers to document reasons for selecting the type of discrimination investigations they perform. The report also recommends that the agencies require that unverified information supplied by institutions during investigations https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Jack Brooks -3- be verified during subsequent compliance examinations. The Board believes that the guidelines it has issued for investigating discrimination complaints, as well as the measures it has taken to monitor the use of these procedures, are effective and address the concerns raised by the report. The Board's instructions for investigating discrimination complaints require that Reserve Ranks perform an on-site investigation whenever elements are present that suggest that illegal discrimination may have, in fact, occurred. Unverified information supplied by institutions is verified during an on-site investigation, if one is deemed necessary, or during the subsequent compliance examination. Reserve Banks, however, may use some discretion in deciding whether and when to perform on-site investigations. We believe that it is important that the Reserve Banks exercise judgment in such cases for two reasons. First, the System receives complaints from consumers that allege discrimination when it is apparent from the information provided that the complaint does not involve illegal discrimination. Second, it would be very costly to conduct an immediate on-site investigation for each complaint of discrimination that the System receives. For example, in the interest of cost-efficiency, and absent the apparent need for an immediate on-site investigation, the Reserve Bank may decide to defer an on-site investigation if an examiner is scheduled to be in the area in the near future. If, for some reason, the Reserve Bank determines that an on-site investigation is not necessary, our procedures have required since January 1, 1983, that the Reserve Bank must prepare a memorandum that explains its reasoning. Use of Complaint Data In Policy Making The third major area of recommendation relates to using complaint data more effectively in policy making. To improve the usefulness of consumer complaint information, the report recommends that the agencies devise and implement consistent industrywide complaint classification and reporting procedures. In addition, the report recommends that the agencies add an additional code to their complaint data systems to identify, and assist in evaluating, potentially unfair or deceptive practices that require further study. The Board agrees that the agencies' complaint information would be more useful if they used consistent complaint categories. The bank regulatory agencies have periodically worked to develop uniform procedures for complaint handling, recordkeeping, and reporting. We have not yet been able to agree on a uniform system because the complaint coding systems serve various purposes in each agency. We are, however, continuing to pursue this matter and are hopeful that positive results will come of our efforts, perhaps prompted by this GAO recommendation. We have considered the draft report's proposal that the agencies add a new code to their data system to assist in identifying and evaluating potentially unfair or deceptive practices that require further study. The Board believes, however, that its present procedures allow it to effectively carry out its responsibilities in this area. In late 1982, the Federal Reserve refined its consumer complaint codes for the computerized logging system to identify with more precision categories of unregulated practices that are https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -41 The Honorable Jack Brooks -4- potentially unfair or deceptive. The computer categories are reviewed at least annually and revised, if necessary, to reflect current consumer concerns. In addition, the Board installed a feature in its computer system in 1980 that signals the receipt of 15 or more complaints per quarter, or 50 annually, about practices that are not subject to existing regulations. The Board's staff prepares quarterly and annual summaries of certain categories of the complaints flagged by this feature to determine whether the facts underlying the individual complaints might indicate an emerging trend necessitating further review. The Board believes that, as the report acknowledges, information from a complaint data system is not guaranteed to reflect all unfair or deceptive practices. Although the Board continues to refine its complaint handling program, we agree that it is necessary to use information from other sources to supplement complaints. As is noted in the report, the Board conducts periodic consumer surveys through the Survey Research Center of the University of Michigan to gain additional knowledge about consumers' banking experiences. The surveys as conducted during 1982 included questions about unregulated practices, such delayed funds availability and service charges on dormant accounts, as well as questions concerning regulated practices, such as perceived discrimination by creditors and truth in lending credit disclosures. The Board monitors r the results of these surveys to improve its administration of the consume in protection regulations. In addition, the Board's complaint procedures, gate appropriate cases, call for enlisting the aid of examiners to investi specific practices of banks, and requesting data and/or summaries from the other bank regulatory agencies regarding similar types of practices in institutions supervised by those agencies. Furthermore, Reserve Bank personnel have been specifically instructed to notify the Board if they become cognizant of practices that they believe may be unfair or deceptive and which may have significantly widespread implications. In closing, we believe the Board's entire complaint system accomplishes the purpose of the recommendations and enables the System to do a good job in fulfilling its complaint responsibilities. We appreciate the opportunity to comment on the final report. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Si cerely, /kleatLA WWI Novemher 2S, 1483 The Honorable David Dreier House of Representatives Washington, D. C. 20515 Dear Mr. Dreier: Thank you for your letter of November 17 urging that the Board postpone action on its proposal to include its interpretation of the term "commercial loan" in Regulation Y, which implements the Bank Holding Company Act. The proposal is part of a major revision of the regulation to clarify its terms, to speed and simplify the applications process, and to incorporate outstanding Board rulings applying the Act' s provisions. Last year, the Board defined the term "commercial loan" to include any transaction representing a credit extension to a commercial organization. This covers the purchase of commercial paper, bankers' acceptances, and certificates of deposit and the sale of federal funds. This revised defi nition was adopted in orler to halt a pronounced and accelerating trend by nonhanking organizations, including insurance comp anies, securities firms, retailers and industrial concerns, to acquire banks. This has been accomplished through a loophole in the Bank Holding Company Act, under which the bank to be acquired ceas es to make commercial loans, an essential ingredient of the "bank" definition under the Act. The bank acquired through this device retains the ability to take deposits from the publ ic, both demand and time, to make loans, to retain federal depo sit insurance and to have access to the payments system, rema ining for all intents and purposes a bank. I have stressed my concern about the broa der ramifications of this development both in my testimon y before the Senate Bankina Committee in September and in my appe arance last April. The legislative history of the Bank Holding Company Act and the basic prudential policies which the Act was intended to effect both indicate that Congress desired the Act to cover all institutions that we commonly think of as banks--i nstitutions that take demand deposits and make loans. The Board believes that the basic Policies of the Act are seriousl y undermined by the nonbank bank phenomenon. The Board's interpretation of commercial loan has been criticized by so12 as a matter more appropri ately for the Congress in view of the broad policy implicat ions involved affecting the entire financial services indu stry. It is for this very reason, however, that the Board acted to prevent preemption of Congressional deliberation and decision in this critical area https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • ••••• The Honorable David Dreier Page Two and to prevent a fait accompli. As we see it, the actions we have taken are designed to preserve the Congressional intent and Congressional prerogatives, and we have been urging, in the strongest terms possible, that the Congress deal with the issue. Specifically, we have urged that Congress impose a temporary moratorium on further acquisitions of nonbank banks and then promptly consider the Administration's proposed Financial Institutions Deregulation Act. The reason Regulation Y has become an issue is because, in revising the regulation, the Board believed it appropriate to incorporate all important interpretations of the Act's provisions, including the Board's definition of commercial loan, and to ask for public comment on these positions. The Board has not yet reviewed the public comments submitted on the proposal and has not made any decision on whether to include the definition in the final regulation. The Board expects to take up consideration of the final regulation before the end of the year, and I can assure you that the Board will consider your request at that time. I appreciate receiving your comments on this matter. Sincerely, k V;:kar VM:MF:CO:vcd (V-218, 83427) bcc: All Board Members Mr. Mattingly Ms. Fein T.C. Log 284 Legal Files (2) Mrs. Mallardi (2) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Bradfield BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE _DAVID DREIER CALIFORNIA SMALL BUSINESS COMM ITTEE WASHINGTON OFFICE: 410 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 TASK FORCE ON CRIME (202) 225-2305 DISTRICT OFFICE: 112 NORTH SECOND AVENUE COVINA, CALIFORNIA 91723 (213) 339-9078 (714) 592-2857 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congm5oftheiLinittb tatez jr)ctisSe of AtpreIentatibeci Magsbington,?lc. 20515 November 17, 19834 / U.S.-MEXICO INTERFARLIAMENTARY CAUCUS VICE CHAIRMAN HEALTH AND ENVIRONMENT TASK FORCE TASK FORCE ON REGULATORY REFORM e n —m rri The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve Board 20th Street and Constitution Ave., N.W. Washington, D.C. 20551 co ;ND Dear Mr. Chairman: I am writing to express my concern over the Y Federal Reserve Board decision to revise Regulation ding the in order to redefine banks and non -banks by expan House definition of a commercial loan. As a member of the I am Committee on Banking, Finance, and Urban Affairs, had well aware of the problems congressional inertia has banks. on your ability to efficiently regulate the Nation's I believe, however, that there is every indication should congressional action on the Administration's bill be forthcoming during the second session of the 98th one regulatory Congress. Therefore, I urge you to po xercise its s the opport action until Congres V. to set f constitutional pr Looking f DAVID DREIER Member of Congress DD: cl BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 PAUL A. VOLCKER CHAIRMAN November 28, 1983 The Honorable William V. Roth, Jr. Chairman Committee on Governmental Affairs United States Senate Washington, D.C. 20515 Dear Chairman Roth: As required by 31 U.S.C. § 720, we are submitting our written statement on the Comptroller General's Report to Congress entitled Financial Institution Regulatory Agencies Can Make Better Use of Consumer Complaint Information. As indicated in our letter commenting on an earlier draft, the Board generally supports the purpose of the recommendations made in the report to improve the overall complaint handling efforts of the agencies. The Board has already taken steps to address the issues and concerns that led to those recommendations. However, a few of the specific actions recommended by the report have not been incorporated because we believe that our current program already achieves the objectives of the recommendations. The Board was pleased to note that the report indicates that the agencies' complaint systems often help consumers solve significant problems. Consequently, we believe the report's recommendations are designed to refine, enhance and better document existing policies and programs found to be generally effective. This letter addresses the specific recommendations in light of that belief. Integration of Complaint and Examination Functions The first major area of recommendation deals with achieving greater integration between the complaint handling and other supervisory activities. The report recommends that the agencies revise their complaint handling and examination procedures to include specific requirements for coordinating complaints, examinations, and supervisory efforts. The report suggests that the agencies require follow-up during subsequent examinations to ensure that measures are taken to correct identified violations and to ensure that violations are not affecting similarly situated customers. The report also recommends that the agencies require at least minimal documentation of all actions taken to deal with a complaint. Furthermore, the report recommends that the agencies alter their computerized complaint data systems to identify complaints that may be useful in the examination or supervision process. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable William V. Roth, Jr. -2- The Board has taken steps to integrate the complaint and examination functions within the System. In 1979, the Board instr ucted Reserve Banks to ensure that State member banks correct violations detec ted during complaint investigations and that those institutions that agree to make accommodations to resolve complaints fulfill those agreements. These instructions also require System examiners to review a bank's consumer complaint file at the Reserve Bank prior to an examination. The complaint file is reviewed to identify complaints which require follow-up to ensure that detected violations are subsequently corrected and to determine wheth er similarly situated customers are affected by the practices in quest ion. In reaching its conclusions that the complaint and examination functions are not sufficiently integrated within the System, the GAO only examined a sample of eight of the System's cases. We believe that the sample may not show such coordination because examiners are not presently required to document these actions in the examination report or workpapers. In addition, we believe that eight complaints is a small sample given the number of complaints the System receives, and may not be repre sentative of the System's overall record of coordinating the complaint and examinatio n functions. Furthermore, in many Reserve Banks, the complaint and examinatio n functions are closely related organizationally and, in many instances, these functions are performed by the same personnel, thus assuring coordinati on and making documentation somewhat unnecessary. Our own on-site reviews of the Reserve Banks' operations indicate that they generally follow establishe d procedures and appropriately coordinate the complaint function with other activities. However, the Board will reemphasize to the Reserve Banks that they should continue to adhere to these policies and document that they have done so. The report suggests changes to the agencies' data systems which identify complaints that require follow-up to help integrate the compl aint and examination functions. We believe that the procedures that we currently use to coordinate the complaint and examination functions are sufficient given the small number of complaints against each State member bank (abou t one complaint per bank per year). Our procedures require that, prior to an examination, examiners review all complaints received about the subject bank since the last examination to determine whether follow-up is necessary. Such a change to the data systems may be a helpful tool in agencies that receive many complaints against each of its supervised institutions. We believe, however, that our current policy allows us to identify complaints that require follow-up and, therefore, accomplishes the same purpose as the recommendation. Consequently, we do not believe that it is necessary to make this change at this time. Investigation of Discrimination Complaints The report's second major area of recommendation relates to ensuring that appropriate investigations are conducted of all allegations of discrimination. The report recommends that the agencies require local complaint handlers to document reasons for selecting the type of discrimination investigations they perform. The report also recommends that the agencies require that unverified information supplied by institutions during investigations https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable William V. Roth, Jr. -3- be verified during subsequent compliance examinations. The Board believes that the guidelines it has issued for investigating discrimination complaints, as well as the measures it has taken to monitor the use of these procedures, are effective and address the concerns raised by the report. The Board's instructions for investigating discrimination complaints require that Reserve Banks perform an on-site investigation whenever elements are present that suggest that illegal discrimination may have, in fact, occurred. Unverified information supplied by institutions is verified during an on-site investigation, if one is deemed necessary, or during the subsequent compliance examination. Reserve Banks, however, may use some discretion in deciding whether and when to perform on-site investigations. We believe that it is important that the Reserve Banks exercise judgment in such cases for two reasons. First, the System receives complaints from consumers that allege discrimination when it is apparent from the information provided that the complaint does not involve illegal discrimination. Second, it would be very costly to conduct an immediate on-site investigation for each complaint of discrimination that the System receives. For example, in the interest of cost-efficiency, and absent the apparent need for an immediate on-site investigation, the Reserve Bank may decide to defer an on-site investigation if an examiner is scheduled to be in the area in the near future. If, for some reason, the Reserve Bank determines that an on -site investigation is not necessary, our procedures have required since January 1, 1983, that the Reserve Bank must prepare a memorandum that explains its reasoning. Use of Complaint Data In Policy Making The third major area of recommendation relates to using complaint data more effectively in policy making. To improve the usefulness of consumer complaint information, the report recommends that the agencies devise and implement consistent industrywide complaint classification and reporting procedures. In addition, the report recommends that the agencies add an additional code to their complaint data systems to identify, and assist in evaluating, potentially unfair or deceptive practices that require further S tudy. The Board agrees that the agencies' complaint information would be more useful if they used consistent complaint categories. The bank regulatory agencies have periodically worked to develop uniform procedures for complaint handling, recordkeeping, and reporting. We have not yet been able to agree on a uniform system because the complaint coding systems serve various purposes in each agency. We are, however, continuing to pursue this matter and are hopeful that positive results will come of our efforts, perhaps prompted by this GAO recommendation. We have considered the draft report's proposal that the agencies add a new code to their data system to assist in identifying and evaluating potentially unfair or deceptive practices that require further study. The Board believes, however, that its present procedures allow it to effectively carry out its responsibilities in this area. In late 1982, the Federal Reserve refined its consumer complaint codes for the computerized logging system to identify with more precision categories of unregulated practices that are https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • 'The Honorable William V. Roth, Jr. -4- potentially unfair or deceptive. The computer categories are reviewed at least annually and revised, if necessary, to reflect current consumer concerns. In addition, the Board installed a feature in its computer system in 1980 that signals the receipt of 15 or more complaints per quarter, or 50 annually, about practices that are not subject to existing regulations. The Board's staff prepares quarterly and annual summaries of certain categories of the complaints flagged by this feature to determine whether the facts underlying the individual complaints might indicate an emerging trend necessitating further review. The Board believes that, as the report acknowledges, information from a cII.int data system is not guaranteed to reflect all unfair or deceptive practices. Although the Board continues to refine its complaint handling program, we agree that it is necessary to use information from other sources to supplement complaints. As is noted in the report, the Board conducts periodic consumer surveys through the Survey Research Center of the University of Michigan to I. in additional knowledge about consumers' banking experiences. The surveys conducted during 1982 included questions about unregulated practices, such as delayed funds availability and service charges on dormant accounts, as well as questions concerning regulated practices, such as perceived discrimination by creditors and truth in lending credit disclosures. The Board monitors the results of these surveys to improve its administration of the consumer IStection regulations. In addition, the Board's complaint procedures, in appropriate cases, call for enlisting the aid of examiners to investigate sI- cific practices of banks, and requesting data and/or summaries from the other bank regulatory agencies regarding similar types of practices in institutiI ns supervised by those agencies. Furthermore, Reserve Bank I- rsonnel have been specifically instructed to notify the Board if they become cognizant of practices that they believe may be unfair or deceptive and which may have significantly widespread implications. In closing, we believe the Board's entire complaint system accomplishes the purpose of the recommendations and enables the System to do a good job in fulfilling its complaint responsibilities. We appreciate the opportunity to comment on the final report. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Si7erely, /kOaldi /9, Tne Honorable Doug Barnard, Jr. Cnairman Subcommittee on ComTnerce, Consuner and Monetary Affairs Com -littee on Government Operations House of Representatives 215 Washin9ton, Pear Chairman RarnarH: nt on the Thank you for vour letter of SPptemher 27, requesting comme tions contained in Federal Reserve System's plans to iinolemont the recommenda atorv Aoencies Can 'Ialfc, tno (A) report entitled, Financial Institution Refpl a copy of the Board's Better Use of Consumer Complaint Inforlation. FnclosPd is on the reco-wenresponse to the Comr,ittee on rovernment Operations commenting the Connittee dations contained in the report. I believe that our letter to is responsive to the questions raised in your letter. Please let me know if I can he of further assistance. Sincerely, Lnclosure bcc: ; 194) Carol O'Brien (Control No. ; SP:ac ll-23-91 CS-30445 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . .• . ' Of GOveR• • 42- BOARD OF GOVERNORS OF THE •0 4,..., -6. c •• -n ; gf• FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ••••-e•\'' [[[[[ •.eo, &AL 12V •; PAUL A. VOLCKER - •' November 21, 1983 CHAIRMAN The Honorable Norman D. Shumway House of Representatives Washington, D.C. 20515 Dear Mr. Shumway: Thank you for your letter of October 25, concerning the on definition of the term "commercial loan" in the proposed revisi of the Board's Regulation Y. The proposal is part of a major simrevision of the Regulation to clarify its terms, to speed and plify the applications process, and to incorporate outstanding Board rulings applying the Bank Holding Company Act's (BHC Act) provisions. Last year, the Board defined the term "commercial loan" to include any transaction representing a credit extension to a commercial organization. This covers the purchase of commercial paper, bankers acceptances and certificates of deposit, and the sale of federal funds. The revised definition was adopted in order to halt the pronounced and accelerating trend by nonbanking organizations, including insurance companies, securities firms, retailers, and industrial concerns, to acquire banks. This development has been accomplished through a loophole in the BHC Act, under which the bank to be acquired ceases to make commercial loans, an essential ingredient of the "bank" definition under the Act. The bank acquired through this device retains the ability to take deposits from the public, both demand and time, to make other types of loans, to retain federal deposit insurance, and to have access to the payments system, remaining for all intents and purposes a bank. In my recent testimony before the Senate Banking Committee and in my appearance last April before that Committee, I stressed my concern about the broader ramifications of this development. The legislative history of the BHC Act and the basic prudential policies which that Act was intended to effect both indicate that ly Congress desired the Act to cover all institutions that we common think of as banks--institutions that take deposits and make loans. The Board believes that the basic policies of the Act are seriously undermined by the so-called nonbank bank phenomenon. The Board's interpretation of commercial loan has been l criticized by some, including the FDIC staff and former Federa Y, Reserve Board Governor Coldwell in letters regarding Regulation as a matter more appropriately for the Congress in view of the ial broad policy implications involved affecting the entire financ services industry. It is for this very reason, however, that the Board acted to prevent preemption of congressional deliberation https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Norman D. Shumway Page Two and decision in this critical area and to prevent a fait accompli. As we see it, the actions the Board has taken are designed to preserve the congressional intent and congressional prerogatives, and we have been urging, in the strongest terms possible, that the Congress deal with this issue. Specifically, we have urged that Congress impose a temporary moratorium on further acquisitions of nonbank banks and then promptly consider the Administration's proposed Financial Institutions Deregulation Act. The reason Regulation Y has become an issue is because, in proposing the revision to the Regulation, the Board believed it appropriate to incorporate all important interpretations of the Act's provisions, including the Board's definition of commercial loan, and to ask for public comment on these positions. The Board has not yet reviewed the public comments submitted on the proposal and has not made any decision on whether to include the definition of commercial loan in the final regulation. The Board expects to take up consideration of the final regulation later this year, and I can assure you that the Board will consider your views at that time. The Board appreciates receiving your comments on this matter. Sincerely, JV'e,:CO:mrk (V-211, 83348) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Mattiligly r. Bradfield (Log ;:280, Eiegal Files (2' Mallard:_ (2) NORMAN D. SHUMWAY 14TH DISTRICT, CALIFORNIA Action assigned Mr. Bradfield COMMITTEES: BAN.CIIG. FINANCE, AND URBAN AFFAIRS MERCHANT MARINE AND FISHERIES Congreo of tbe ZEIniteb tate5 3r)ou5se of Atprelentatibel SELECT COMMITTEE ON AGING as'bingtort, 0.C. 20515 1203 LONGWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-2511 CHRISTOPHER C. SEEGER ADMINISTRATIVE ASS'STANT 1150 WEST RGBINI-1000 OR SLATE 1 A STOCKTON, CAL!FORNIA 95207 (209) 957-7773 (800) 631-2175 LOiS SAHYOUN DISTRICT COORDINATOR October 25, 1983 The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 Dear Mr. Chairman: As a member of the House Committee on Banking, Finance and Urban Affairs, I am keenly aware of the need for Congress to update our Nation's banking laws. The law has not kept pace with technological changes in the banking, financial services and related industries. One result has been considerable confusion and debate over the role of the Federal Reserve and other regulatory agencies in filling the void. The Reagan Administration has drafted comprehensive legislation to address these problems. At the same time, the Federal Reserve Board has proposed a revision to Regulation Y which some say would redefine banks and non-banks by expanding the definition of a commercial loan. I am sure you are aware that some members of the House and Senate, as well as a former member of the Fed's Board of Governors and the Chairman of the Federal Deposit Insurance Corporation, have charged that such changes in Regulation Y would impinge upon Congress' perogative to decide what a "bank" is and who should regulate it. Although my mind is open on this issue, I would appreciate it very much if you would explain why promulgation of the amendments to Regulation Y should precede congressional consideration of pending legislation. With best regards, Sincerely, Nov Norman D. Shumway Member of Congress NDS:cjt https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - If https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 18, 1983 The Honorable Doug Barnard, Jr. Chairman Subcommittee on Commerce, Consumer, and Monetary Affairs Committee on Government Operations House of Representatives Washington, D. C. 20515 Dear Chairman Barnard: I am writing to acknowledge receipt of your letter of November 15 expressing your concern regarding the Board's proposal to amend its procedure for calculation of the private sector adjustment factor (PSAF). I have requested staff to look into the - your letter, and expect to have issues raised in : a response to you in the near future. Sincerely, CO:kbc (4V-216,83411) cc: Gil Schwartz (for *pllow-up) Mrs. Mallardi (2)'' Eq. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 November 18, 1983 PAUL A. VOLCKER CHAIRMAN The Honorable John P. Hiler House of Representatives Washington, D. C. 20515 Dear John: Thank you for your letter of September 27 requesting comments on the specific proposal of Messrs. Kadlec and Laffer and, in general, on U.S. intervention methods and their effects. The Kadlec-Laffer paper seems to me to present a confusing description of the implications of the relationship between the level of spot and forward exchange rates for the dollar (the "forward discount") and the interest differential between dollar and mark assets. These four rates (two exchange rates and two rates of return) are jointly determined. Normally, whatever their levels and assuming no controls or uncertainty about ability to execute contracts (conditions that do exist in the dollar -mark market), the dollar interest rates less the forward dollar discount must equal the mark interest rate; otherwise arbitrage opportunities would develop. Sometimes it is assumed that, to a first approximation, the forward exchange rate (say the mark/dollar rate) represents the market's expectation of the future spot exchange rate. In this context, other things equal, an increase in U.S. interest rates (relative to German interest rates) would typically result in an increase in both the dollar's spot and forward (expected future spot) values. The forward discount on the dollar would also have to increase, however, in order to maintain covered interest parity. That increase in the forward discount reflects the new interest rate relationships; it says nothing about confidence in the dollar, which in fact would have risen in value. Messrs. Kadlec and Laffer seem to lose sight of this fact when they state, "the supreme irony [that] as the dollar rose in value against the mark . . . its expected rate of depreciation . . . increased, elevating U.S. interest rates above their German counterparts." They seem to suggest that the forward discount dete finines interest rates, which is just the reverse of the more widely held view. Messrs. Kadlec and Laffer propose that the Federal Reserve intervene by buying marks against dollars spot and selling marks against dollars forward in order to eliminate The Honorable John P. Hiler Page Two https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rest rates the forward discount on the dollar and drive U.S. inte on is pressed down to German levels. If I assume that such acti d do so hard enough to achieve that result, it presumably woul e, both spot by driving the level of the dollar's exchange valu be accompanied and forward, down drastically. These results would reflecting by increases in the rate of U.S. monetary expansion, ing from the in the first instance the expansion of reserves flow expansionary spot purchases of marks. In other words, a more ency (inflationary) monetary policy will cause a country's curr to depreciate. What the proposal amounts to is a proposal that the exchange Federal Reserve conduct monetary policy according to an tary base in rate rule, namely, expand or contract the U.S. mone g any domestic order to fix the mark/dollar exchange rate, acceptin lts that might interest rate and inflationary (or deflationary) resu standard rule; ensue. In a sense, this is a variation of a gold of U.S. and in this case it would imply constant coordination mmodation to German policies, or if we were passive, U.S. acco German monetary policy. , the While there are pros and cons to such an approach a technical question is far more fundamental than implied by device to intervene in spot and forward markets. The Federal Reserve--consistent, I believe, with the ic--conducts desires of the Congress and the interest of the publ inflation, a monetary policy with the aim of gradually reducing growth of necessary condition for enjoying sustainable, high rtant operaoutput and employment. We have adopted as an impo control of tional guide in the conduct of such a policy the es. While monetary aggregates within appropriate target rang exchange rates we do not welcome erratic fluctuations in dollar to time and, indeed, intervene in the exchange markets from time intervento combat severe disorder, we do not believe that such the achievement tion should normally be allowed to interfere with egates. of our targeted rates of growth for the monetary aggr zes" Accordingly, the Federal Reserve routinely "sterili exchange market the reserve creating or extinguishing effects of intervention, intervention (including the dollar side of foreign rs. Kadlec and which has been much larger than our own). Mess rvention is sterLaffer assert that since exchange market inte rates. While ilized, it, therefore, has no effect on exchange es monetary leav it is true that fully sterilized intervention in the supplies bases unchanged, it does result in a change es denominated in available to the public of government securiti effect on exchange the various currencies. This will have an s are regarded by rates if securities denominated in, say, mark The Honorable John P. Hiler Page Three investors as less than perfect substitutes for securities denominated in dollars, i.e., if investors are "risk-averse". (Kadlec and Laffer implicitly assume that dollar and mark securities are perfect substitutes, i.e., that portfolio holders are "risk-neutral". In this case sterilized intervention would have no effect.) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Whether securities denominated in different currencies are perfect or imperfect substitutes has not been conclusively determined by economic research. The recent Report of the multinational Working Group on Exchange Market Intervention concluded that intervention seemed to be effective in the very short run, which is consistent with my view and with U.S. inyour tervention policy. I am enclosing a copy of the Report for information. I hope you will find these comments helpful. let me know if I can be of further assistance. Please Sincerely, Enclosure RI:3 \7:vcc: (; V-l;6 • 331U) bCC: Tec: "frt:ma-.71 Mrs. Yallarcl: (2) • WASHINGTON OFFICE: 1338 LONDWORTH HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 (202) 225-3915 JOHN P. HILER THIRD DISTRICT, INDIANA COMMITTEES! DISTRICT OFFICE: RIVER GLEN OFFICE PLAZA 501 MONROE STREET, ROOM 120 SOUTH BEND, INDIANA 46501 GOVERNMENT OPERATIONS SMALL BUSINESS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 61trealis ( ge g4tited Maas (219) 234-4431 HOUSE OF REPRESENTATIVES WASHINGTON, D.C. 20515 September 27, 1983 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20511 iiø CD Dear Mr. Chairman: I have followed with As a member of the House Banking Committee, rnational money markets. interest the Fed's recent actions in the inte er and Charles Kadlec, I have read the enclosed paper by Arthur Laff Deutchmark/dollar intervention which touches on the effects of the recent of the "sterilization" and levels serious questions as to the effect proposes some actions utilizing the Fed performed. In addition, the paper the forward markets for dollars and D-marks. a serious response: It seems to me that the arguments deserve ely the intervention in If the Fed was going to neutralize immediat government even attempt support of the D-mark market, why should the the joint intervention effort? purchases of German More interesting is the argument for coupling relatively strong, with marks in the spot market, where the dollar is ard markets, where the dollar sales of German marks for dollars in the forw is relatively weak. a policy would: Do you agree with their assessment that such 1. 2. 3. a foreign tend to isolate domestic monetary policy from exchange intervention? foreign exchange narrow the dollar's discount in the forward ctations for markets, thereby reducing the market expe depreciation of the dollar? the market's fear lower dollar interest rates by reducing ar's discount visof dollar depreciation, i.e. as the doll ets narrows, a-vis the German mark in the forward mark with their lower interest rates in the U.S. would converge German counterparts? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Honorable Paul Volcker September 28, 1983 Page 2 the specific In sum, I would greatly appreciate your comments on ods, their effects, proposal and the general comments on intervention meth and alternatives. Thank you for your assistance. Sincer OHN HILER Member of Congress JH/as 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: Report Citations: Number of Pages Removed: 11 Kadlec, Charles W. and A.B. Laffer. "Economy In Perspective: In Search of Success." California: A.B. Laffer Associates, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Congre5 of tbc Unitcb atatt5 1 pou5Se of lepre5entatibt5 ELTiasb 20315 November 15, 1983 The President The White House Washington, D.C. 20500 Dear Mr. President: We cannot support the IMF quota increase, especially in light of Federal Reserve Board Chairman Paul Volcker's latest statements of intent to continue a domestic and international monetary policy of austerity and high interest rates. On the domestic side, according to yesterday's Washington Post, Chairman Volcker obstinately plans to continue the policy of unreasonably high interest rates, in the face of falling prices and an ever-rising dollar. Meanwhile, press reports indicate that Chairman Volcker has also undertaken to try to influence fiscal policy in closed meetings with Ilembers of Congress. According to the reports, Mr. Volcker would offer a quid pro quo of monetary ease and lower interest rates in return for a fiscal policy of higher taxes which is more to his liking. We find this intervention in Congressional fiscal policy-making intolerable -- both because it harms the U.S. economy and undercuts your fiscal programs, and because it confirms that monetary policy is deliberately being kept unnecessarily tight and the economic expansion held hostage to a tax increase. The relentless upward ratchets in interest rates since May -short-term rates are over a percentage point higher -- threaten to reverse the progress we have made on economic growth and employment -without increased inflation -- over the past year. The Federal Reserve's deliberate efforts to slow the pace of the recovery threaten to send the economy into another recession. Under similar circumstances in 1932, the Federal Reserve finally admitted that its policy had been too tight -but the economic (and political) damage had been done. On the international front, by keeping interest rates too high -forcing down prices and forcing up the dollar -- the Federal Reserve is also threatening the international recovery. High interest rates and the rising dollar are killing U.S. basic industries, especially in export and import-competing areas. This directly contributes to the sentiment for counterproductive protectionism. The policy also worsens the plight of the borrowing countries, by increasing the real burden of their dollar debts while cutting the dollar prices of their exports. Under these circumstances, further increasing their debt through the IMF could make the problem worse, not better. die https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Page Two Our opposition to the IMF quota increase has nothing to do with narrow parochialism or "isolationism." As you know, we have serious problems with IMF austerity policies, the lack of realism on the part of lending banks, and the lack of a functioning international monetary system, which have not been addressed. And until the double threat to economic recovery -- high-interest-rate Federal Reserve policy and the lack of a noninflationary system of stable exchange rates -- is removed, we must oppose the IMF quota increase. Sincerely yours, / ,c* • • t‘,N., sor t" . yv. j ,N-AkkaL A . L L2L-te ivf 7(/f4. , P /\ A >c https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ( i) , • 1:(1 1 / 'ai;'";(1 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis JACK KEMP MEMBER OF CONGRESS U. S. HOUSE OF REPRESENTATIVES WASHINGTON. D. C. 20515 (202) 225-5265 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD Cr c.:7 T FEDERAL 1:_ 1:83 NOV I 5 f.:1 II: 58 r hi-L I LIJ _ (-11 rez United States rif America PROCEEDINGS AND DEBATES OF THE yo th CONGRESS, FIRST SESSION AMMIMINM••••••••IIII• Vol. 129 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis No. 144 WASHINGTON, FRIDAY, OCTOBER 28, 1983 House of Representatives NO DEALS. MR. VOLCKER., JUST LOWER THE RATES The SPEAKER pro tempore. Under a previous order of the House, the gentleman from New York (Mr. KENTP) is recognized for 30 minutes. Mr. KEMP. Mr. Speaker, in my 1minute speech today. I referred to the fact that President Reagan finds a large tax increase unacceptable, for good reasons. I also referred to the fact that Senator DOLE claims to have a deal with Federal Reserve Board Chairman Paul Volcker. The deal would link the Senator's package of tax increases without new congressional spending cuts to Federal Reserve lowering of interest rates. I find this deal, too, unacceptable. It is outrageous for the Federal Reserve Board Chairman to be holding the United States and the world economy hostage, in the face of falling commodity prices, in order to exert leverage on Congress to pass a certain piece of legislation. If he can deliver lower interest rates as part of a deal, it means he can also deliver lower interest rates without a deal. What I would like to know, why he does not? I submit the UPI wire stories on the subject for the attention of my colleagues. They should be as appalled as I am at the conduct of monetary policy in this Nation. The articles follow: BUDGET UPDATE . (By Mary Beth Franklin) WASHINGTON.—President Reagan opposes Senate Finance Committee Chairman Robert Dole's broad plan to reduce the Federal Deficit by about $120 billion in the next three years, White House spokesman Larry Speakes said Friday. Dole outlined his plan at a press conference Thursday. It calls for $54 billion in spending reductions and $56 billion in new revenue through fiscal 1986. "I can't say people are jumping with joy" about the plan. Dole said, "but there has been some very positive reaction." He was joined by three Members of his Finance. Committee: Senators John Danforth, Malcolm Wallop. and David Boren. "We find the (Dole) plan unacceptable," Speakes said, "the President remains committed to his own Deficit-Reduction Plan." He said the Dole proposal has "too few spending cuts and a host of new and different kinds of taxes. The negatives far outweigh the positives." BUDGET (By Mary Beth Franklin) WASHINGTON.—Senate Finance Committee Chairman Robert Dole has a broad plan to reduce the Federal deficit by about $120 billion in the next three years. but it's not clear whether the proposal v.ill get much support. Dole outlined his plan, which does not have the administration's support, at a press conference Thursday. It calls for $64 billion in spending: reductions and $56 billion in new revenue through fiscal 1986. "I can't say people are jumping with joy" about the plan, Dole said, "But there has been some very positive reaction." He was joined by three members of his Finance Committee: Senators John Danforth, Malcolm Wallop, and David Boren. "The deficit problem is so serious, we can't wait to do something," Danforth said in support of the vague proposal. "It's the last best chance to reduce the deficit by a substantial margin." There was no indication how the rest of the 20-Member Committee feels about the package. The Congressional Budget Office projects deficits of about $200 billion in each of the next three ycars. Dole said his plan would reduce the Federal deficit to $187.2 billion this year. $154 billion in fiscal 1985 and $132 billion in fiscal 1936. Dole also said that during a closed meeting with Federal Reserve Board Chairman Paul Volcker Thursday morning. Volcker indicated "that if we did the responsible thing on the fiscal side, it would give him more flexibility on the monetary side" to reduce interest rates. The committee's counterpart in the House, the Ways and Means Committee, worked several months to produce a tax reform bill that would raise only $8 billion in new revenue over three years. On the spending side. Dole's savings would not come from new budget cuts. Instead, he would count savings from bills already approved by Congress and from emergency powers bestowed on the President to withhold up to 2.5 percent of appropriated funds, reduce the annual cost-of-lving adjustments in social security and government pension programs by up to 2.5 percent, and scale back the full effect of indexing that links income taxes to inflation beginning in 1985. To avoid any charges of campaign politics, Dole said the emergency power would not take effect until 1985—after next year's elections. • \ "i z . P iL United States of America Vol 129 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis •fte" \ F e":1-17 th PROCEEDINGS AND DEBATES OF THE CONGRESS, FIRST SESSION 90 WASHINGTON, FRIDAY, OCTOBER 28, 1983 House of Representatives FEDERAL RESERVE SHOULD BRING INTEREST RATES DOWN NOW, NOT LATER (Mr. KEMP asked and was given permission to address the House for 1 minute and to revise and extend his remarks.) Mr. KEMP. Mr. Speaker, I want to congratulate the President on his speech last night and say how much I agree with it. I thought he was right in doing what he did both in Grenada and in Lebanon, and I appreciate his leadership. I equally agreed with the President when he announced this morning that he opposes plans to raise taxes in 1983 and 1984 as a way of reducing deficits. He wants to reduce the deficits by continuing the economic recovery and cutting spending and he is right. But I was particularly disturbed this morning to read on the news wire one of fine writers in this town, Mary Beth Franklin of UPI, quoting a Member of the Senate as suggesting that he has a private arrangement with Federal Reserve Board Chairman Paul Volcker. Senator DOLE said that during a closed meeting with Federal Reserve Board Chairman Paul Volcker Thursday morning, Volcker indicated 'that if we did the respon- sible thing on the fiscal side. It would give him more flexibility on the monetary side' to reduce interest rates. Mr. Speaker, how dare Paul Volcker tell someone that he will be lowering interest rates if something is done by Congress, not only does this contradict testimony he gave to the Banking Committee, but if interest rates can come down because of a deal to raise taxes, they can come down right now. With the prices of gold and other commodities falling, there is no market signal that would tell us that we have to tighten up on the money supply and keep interest rates as high as they are now. They are not only hurting the American people, they are hurting our friends and allies in our hemisphere and around the Third World. This is causing pain and austerity throughout the economy of the United States and also of Central and South America and causing havoc with U.S. exports. It is absolutely imperative that the U.S. Congress on a bipartisan basis send a signal to Paul Volcker at the Federal Reserve Board that we expect interest rates to come down right now, not later, not after a deal is made but right now. No. 144 I Not ember 9, 1983 CONGRESSIONAL RECORD — Extensions of Remarks as chair of the 17-member commission in its 18-year history. Ms. Ward-Allen is committed to bringing women into the political and economic mainstream in California.. She is not only politically active but shares her other talents in art, business, and education to motivate and improve the quality of life for all those whom she comes in contact with. The numerous awards Ms. WardAllen has.received for her community work, her contributions to women, and her contributions in the field of education and business are a testament of her exemplary display of public service. I join Ms. Ward-Allen's friends who will gather on November 13 to pay tribute to her. She is an exceptional member of our community and most deserving of the recognition.* WHY MONETARY POLICY SHOULD EASE BY JAMES GALBRAITH HON. JACK F. KEMP OF NEW YORK IN THE HOUSE OF REPRESENTATIVES Tuesday, November 8, 1983 • Mr. KEMP. Mr. Speaker, in the context of unemployment and under utilized factories, I am very concerned with the recent series of statements and signals coming from Federal Reserve Board officials with regards to present and future monetary policies. The gyrations and declines in financial markets in recent weeks reflect. I believe. that concern. The direction these statements are pointing is toward more tightening of credit, a prescription that is potentially very dangerous, in light of declining commodity and gold prices. The gradual and continuing ratchets upward of interest rates since May threaten to reverse the progress we have made on the growth and output fronts since the first of this year. If this pattern continues, the Federal Reserve threatens not only to slow the pace of recovery, but,to send the economy into recession once again in 1984. I urge my colleagues to watch commodity prices and the dollar- price of gold as a better, by far, indicator of future price levels than the monetary aggregates. As Chase Econometrics said in a recent report, "The price of gold and other commodities remains flat and the U.S. dollar has strengthened further, suggesting that inflationary expectations are not worsening." Since that was written, the prices of these commodities have gone down further. • And as the London Economist noted in its October 8 issue, "Commodities may be regarded as the least misleading guide to the inflationary risk the Fed is taking as it tries to encourage growth. Metals, timber, and gold https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis prices have all fallen sharply in the past few months. If the Fed draws heart from this, it might relax its policy a bit and pump in more reserves." Mr. Speaker, I urge the Fed to heed this sagacious advice and reverse what seems to be a decision to tighten credit further. I also commend to my colleagues an outstanding column from Bondweek by James Galbraith, the deputy director of the Joint Economic Committee. Mr. Galbraith lucidly outlines the central role monetary policy plays, not only in continuing our domestic recovery, but also in averting a debt and banking crisis as a result of Third World economic stagnation. Mr. Galbraith rejects the notion that there is a tradeoff between unemployment and inflation, something Republicans and Democrats must unite on if we are to find our way out of the economic quagmire we face today. The article follows: [From the Bondweek. Oct. 31. 1983) WHY MONETARY POLICY SHOULD EASE (By James Galbraith) Since May. the Federal Reserve has moved away from unreStrained support for economic growth. There was a fear, expressed at the time by both the (Federal) Open Market Committee and the Administration, that the recovery might be going too fast. Credit conditions were tightened, interest rates rose, and some sectors of the economy appear to have slowed down. What's going on here? Was there a reason for this summer-time romance with tighter money? When pressed Senate Banking Committee hearing. Federal Reserve Chairman (Paul) Volcker defended his actions by adage:"A stitch in time may save nine." Such vagueness places the follower of monetary decisions in difficulties, forced to guess when the stitch has been taken and when nine have been saved. Is the new order of monetary restraint merely a Dukeof-York maneuver, setting the conditions for declining interest rates from now through next year? Or is it a permanent condition, meaning rising of steady interest rates from now on? Today, the markets are rife with unhealthy uncertainty on this point, made worse by the failure of the Federal Reserve to state clearly the principles on which its policy is based. In either case, the unspoken rationale for restraint so early in a business expansion is a fear of inflation. No one quite wants to say it, but inflation apparently has not been vanquished after all. The battle against inflation, far from being over, will continue through the expansion phase. There is, in particular, a belief that slower recoveries mean less inflation permanently as the economy recovers. But, if this were true, then past recoveries which started slowly should have had better inflation performance than recoveries which started Quickly, in relation to the GNP growth achieved. In general, this is not the case. Experience shows that increa..ses in inflation accompany increases in output pani passu as the recovery proceeds, and, whether the meal is eaten quickly or slowly, the check at the end is the same. If anything, faster early growth rates dampen subsequent in- 7 flation. since at such times faster growth means especiali3. rapid productivity gains. Monetarists recently have been arguing that rapid rates of money grcwth and the sharp fall of velocity since early 1982 are at a a E 531)9 harbingers of a 1984 or 1985 inflation re-therefore a separate cause for bound, an immediate return to monetary restraint. lack of historical Such arguments betray perspective. The increase in money growth in the quarters around the turning point of this business cycle has not been greater than in previous recoveries. It is certainly not greater than required to achieve lower interest rates and recovery in the first place. The declines in velocity of the past six quarters bring M2 velocity back only to the time trend which had prevailed for nearly thirty years prior to 1978. Only the early 1983 drop in MI velocity appears to be out of the ordinary, and that is most readily explained by shifts in the public's monetary portfolio occasioned by deregulation. not by any fundarne-ntal new monetary impetus to growth and inflation. Thus, while inflation will return slowly with recovery, there is no reason to fear rapid growth in the early recovery years, nor any reason to panic at recent monetary trends. And there are affirmative reasons why growth should be pursued without flinching in the months ahead. and a DETAILING THE REASONS FOR GROWTH. First, rapid growth means high productivity gains. These improve competitiveness and help fight inflation. Since productivity gains tend to slow down as the recovery matures, gains foregone through slow growth in the early stages cannot be made up in full later on. Second. rapid growth fights unemployment. With more than 10 million people ;till out of work, every day that new job creation is delayed through slow growth is pointless mass tragedy, without justification as a matter of economics or social justice. Third. if nominal interest rates are not lowered in the period ahead, real interest rates will again rise. This is because inflation expectations of the public are still adjusting to today's 5% inflation rate, and it takes time for the much higher inflation rates of the still-recent past to wash entirely out of current perceptions. As expected inflation a.djusts downward, real rates will rise. and the recovery, which has depended so far to an astonishing extent on interest sensitive sectors like autos and housing. may falter. Ev en 5%, the Administration's forecast, is a lower inflation rate than many people now believe or expect. There surely can be no justification at such inflations for T-bill rate of nearly 9%, let alone a long bond rate of 10.50%. Finally, lower interest rates are needed to avert a political and financial crisis in Latin America which we may not be equipped to handie. We may be approaching the point where the piecemeal approach of IMF stabilization programs, debt rescheduling and public exhortation to private banks will not keep the international financial order glued together. When that moment comes, only rapid growth in the United States and lower interest rates on both domestic and foreign loans will present a hope of preventing political and financial disorders which may—to put the matter mildly—jeopardize the security interests of the United States, not to mention inflict misery on millions of our southern neighbors.• a a WASHINGTON OFFICE BARBER B. CONABLE.JR. 237 CANNON HOUSE OFFICE BUILDING WASHINGTON, D.C. 20515 NEW YORK, 30TH DISTRICT COMMITTEES: Congre55 of tbe tiniteb 6tatesS WAYS AND MEANS STANDARDS OF OFFICIAL CONDUCT (202) 225-3615 DISTRICT OFFICES' -ail FEDERAL OFFICE BUILDING 100 STATE STREET ROCHESTER, NEW YORK 14614 PoluSe of ilepreEientatibeg Uga}sbington,0.C. 20515 (716) 263-3156 JOINT COMM ITTEE ON P.O. Box 85 10 ELLICoTT STREET BATAViA, NEW YORK 14020 (716) 343-6732 TAXATION November 11, 1983 Honorable Paul A. Volcker Chairman Board of Governors Federal Reserve System Washington, D.C. 20551 1-1 7/12 --- C-;) c..0 -c -, -,1 — : --... ----•••+ .• ,..•.' rrt = r-i-, r.1.--,c7, •-• . rr:.4 -70 _ -_ -.:; Am&.; You will recall that in April of this year I talked you about the possibility of an appointment of a very close friend and supporter of mine to the Buffalo Branch of the Federal Reserve Bank. I understand now that a vacancy is coming up next month, and hope you can seriously consider my friend's possible appointment. Dear Paul: His name is John Riedman, and he is a man of the highest standing in our Rochester community. He is the President of one of the largest insurance agencies in the United States. His corporation owns a very substantial block of the stock of the former Security Trust Company in Rochester, recently merged with Norstar. Doubtless he will be a director of the product of the merger. He handles much of the bonding work in upstate New York, and so is knowledgeable about a wide range of business matters. John's relationship to me is long-standing, and for the last four elections, he has been a volunteer campaign manager for me, going far beyond the normal requirements of such assistance. In short, he is an exemplary citizen in my view, a man of many affairs and the highest quality of business judgment, a man familiar with banking matters and insurance matters, and a man likely to be a credit to any form of public service. His availability is indeed fortunate, and I hope you will consider him seriously. I understand that you are out of town this week, and so I will follow this letter with a call sometime next week in the hope that I can talk to you personally about him. In the meantime, we continue here to struggle with fiscal excess, confident that you will correct the defects of our policy . to the extent you have the capacity to do so. Best personal wishes Sincerely yours, Barber B. Conable, Jr. C/1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 8, 1983 The Honorable Walter E. Fauntroy Chairman Subcommittee on Domestic Monetary Policy Committee on Banking, Finance and Urban Affairs House of Representatives Washington, D. C. 20515 Dear Walter: ff to I am enclosing responses prepared by our sta erest on reserves. your questions related to the payment of int t on assumptions Although many of the answers necessarily res es for depositors and projections--especially concerning tax rat d the information and estimates for 1988--I hope you will fin take this opportunity useful as you consider this issue. Let me ng and implementing to reiterate the Board's support for formulati interest on all rea plan that would phase in the payment of ks--particularly quired reserve balances at Federal Reserve Ban ition of interest prohib if Congress were to decide to remove the on demand deposits. ther Please let me know if we can be of any fur assistance. Sincerely, Enclosures DK:vcd (V-203, 83218) bcc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Kohn Mr. Lindsey Mrs. Mallardi (2) how many actually Of the depository institutions required to hold reserves, how many meet their hold reserves on deposit with the Federal Reserve and reserve requirements through vault cash? in the United Out of nearly 40,000 depository institutions located $2.1 million as States, about 16,600 had reservable liabilities in excess of reserve requirements. of October 5, 1983, and hence were subject to positive solely through Of these about 12,000 satisfied their reserve requirements hold a required vault cash, while the remaining 4,600 institutions had to reserve balance at the Federal Reserve.1 n the state by size of 1. (cont.) Would you provide a listing, by state and withi amount of institution, of every such depository institution showing the total and funds held on reserve and the percentile relationship to both varying types of deposit liabilities as appropriate? increasTables 1.A through 1.D provide the available information in n subject to ing degree of detail--broken down by type and size of institutio e week of October 5, reserve requirements and by state--for the reserve maintenanc 1983. tutions are Nationwide totals for commercial banks and all other insti given in table 1.A. Institutions are separated into weekly deposit reporters $2.1 (institutions with $15 million or more in total deposits and more than ters (institumillion in reservable liabilities) and quarterly deposit repor than tions between $2 million and $15 million in total deposits and more $2.1 million in reservable liabilities). As may be seen, the approximately billion in re13,400 weekly reporters held all but $24 million of the $20.6 g October 5, quired reserve balances at the Federal Reserve for the week endin 1983. 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ly Since individual bank data for quarterly reporters are not readi ces Required reserve balances at the Federal Reserve equal reserve balan alently, at the Federal Reserve less excess reserve balances or, equiv at instirequired reserves less vault cash satisfying required reserves tutions with vault cash below their required reserves. Table 1.A ' Institutions Subject to Reserve Requirements (October 5, 1983) Weekly Reporters2 Total Required Reserve Balances at Federal Reserve5 ($ millions) Number of Institutions with Required Reserve Balances Total Number of Institutions 1. 2. All Commercial Others4 Banks All Reporters Quarterly Reporters3 Total All Commercial Others4 Banks Total All Commercial Others4 Banks 20,581 18,668 1,913 24 22 2 20,605 18,690 1,915 4,263 3,187 1,076 343 300 43 4,606 3,487 1,119 13,428 10,006 3,422 3,186 3,029 157 16,614 13,035 3,579 Depository institutions with more than $2.1 million in reservable liabilities. in total deposits, excluding Depository institutions subject to reserve requirements with $15 million or more 1983, and the week ended institutions involved in structure changes between the week ended September 21, on the June 1983 call report. October 5, 1983, and also excluding a few institutions without valid asset data 3. n in total deposits. Depository institutions subject to reserve requirements with less than $15 millio 4. savings banks, savings and Agencies and branches of foreign banks, Edge and Agreement Corporations, mutual loans, and credit unions. 5. ed reserves exceeds their Equal to total required reserves less vault cash for those institutions whose requir vault cash. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- ons exclude available, the remaining tables provided for this and other questi these institutions and examine only weekly reporting institutions. Table 1.B examines depository institutions by state and type. Shown the for each state and institution type are required reserve balances at es Federal Reserve, the number of institutions with required reserve balanc ts $15 at the Federal Reserve, and the number of all institutions with deposi y million or more and reservable liabilities greater than $2.1 million (weekl reporters). Table 1.0 focuses only on commercial banks by state and size class. at Shown for each state and four size classes are required reserve balances e the Federal Reserve, the number of commercial banks with required reserv l balances at the Federal Reserve, required reserve balances at the Federa Reserve as a percent of total assets (as of June 30, 1983) at commercial ing) banks with required reserve balances, the number of all (weekly report a commercial banks, and required reserve balances at the Federal Reserve as percent of total assets (as of June 30, 1983) of all (weekly reporting) commercial banks. As a measure of the relative potential earnings impact t associated with interest on reserves, required reserve balances as a percen of total assets, rather than deposits, seems most appropriate, since the result represents the fraction of assets that is now nonearning and that would receive interest.' Table 1.D provides available data for individual (weekly reporting) institutions broken down by state, institution type and, for commercial banks, size class. 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Shown are the institution's identification number, name, location, Individual institution data for assets are not readily available for savings and loan associations and credit unions. Table 1.B nsl Reserve Balances of Weekly Reporting Depository Institutio a. b. c. Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Commercial Banks Alabama a. b. c. 111553 42 210 Alaska a. b. c. 48902 11 13 Arizona a. b. c. 153747 9 18 Arkansas a. b. c. 68492 42 183 California a. 2901566 166 b. 258 c. Colorado a. b. c. 235154 116 213 Connecticut a. b. c. Delaware Agencies and Branches of Foreign Banks Mutual Savings Banks Edges and Agreement Corporations 2 1 1 2111 2 2 Savings and Loans Credit Unions 1087 10 22 476 1 7 113118 54 240 145 1 3 2659 1 6 53817 15 24 4417 4 6 272 2 11 158436 15 35 72544 49 206 4043 6 20 9 1 3 Total 463298 68 117 1240 16 75 3452335 331 575 0 0 1 13515 21 29 139 3 10 248808 140 253 179931 15 47 846 2 58 134 1 24 0 0 7 180911 18 136 a. b. c. 119634 14 22 0 0 2 0 0 1 0 0 1 119634 14 26 Dist. of Col. a. b. c. 201157 12 15 1152 2 3 0 0 1 3704 6 6 0 0 13 206013 20 38 Florida a. b. c. 558803 130 357 11834 26 32 0 0 4 24859 30 38 42038 35 88 985 3 34 638519 224 553 Georgia a. b. c. 352697 31 276 4255 7 9 3230 2 5 210 3 4 133 3 37 0 0 9 360525 46 340 Hawaii a. b. c. 368 1 8 12 1 2 0 0 1 0 0 4 0 0 1 380 2 16 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis L. See footnote 2, Table 1.A. 58466 62 100 20999 4 8 6766 15 17 a. b. c. /83 lotal Required Reserve Balances ($ thousands) - 10/5 Number of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Commercial Banks ...._ Agencies and Branches of Foreign Banks Mutual Savings Banks Edges and Agreement Corporations Savings and Loans Credit Unions Total 1221 4 9 0 0 3 82142 13 32 5152 16 152 0 0 11 1475546 322 1119 182 1 6 109 2 47 3 1 17 129614 60 415 66322 126 411 0 0 2 155 6 34 48 1 6 66525 133 453 a. b. c. 62903 148 312 0 0 1 3736 17 34 0 0 4 66639 165 351 Kentucky a. b. c. 138173 33 256 0 0 2 936 3 18 0 0 3 139109 36 279 Louisiana a. b. c. 262403 54 248 1334 4 4 7810 20 51 0 0 2 272527 79 306 Maine a. b. c. 21374 7 27 0 0 21 0 0 7 0 0 3 21374 7 58 Maryland a. b. c. 134637 16 73 0 0 4 10338 20 49 44 1 10 145019 37 136 Massachusetts a. b. c. 380663 60 115 8 1 59 1110 1 6 387520 71 330 Michigan a. b. c. 316636 78 325 0 0 2 5996 6 35 1223 4 40 323855 88 402 Minnesota a. b. c. 286626 147 402 0 0 1 5958 10 26 188 2 10 292813 160 441 80921 9 20 Idaho a. b. c. Illinois a. 1431897 260 b. 901 c. Indiana a. b. c. 129320 56 345 Iowa a. b. c. Kansas https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 37410 37 43 3396 4 5 0 0 1 2239 3 142 1087 9 11 980 1 1 104 2 3 41 1 2 Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions a. b. c. Commercial Banks Agencies and Branches of Foreign Banks Mutual Savings Banks Savings and Loans Credit Unions Total 1022 6 15 113 1 1 51805 24 150 1316 4 40 0 0 9 232904 115 512 58 1 2 169 3 8 0 0 2 21674 62 116 0 0 1 893 4 13 0 0 3 71265 105 218 2381 4 5 0 0 4 25723 10 17 0 0 25 0 0 6 0 0 3 11907 15 90 377964 60 133 0 0 17 13039 7 84 0 0 4 391003 67 238 39819 34 81 133 1 1 2425 9 17 0 0 5 42377 44 104 559 1 48 2288 4 15 5491378 281 555 3843 26 86 0 0 7 311246 42 147 -- 72 1 6 0 0 6 17328 57 120 92 3 3 9518 14 117 561 3 15 384632 86 416 Mississippi a. b. c. 50651 16 133 19 1 1 Missouri a. b. c. 231580 110 461 0 0 1 Montana a. b. c. 21447 58 104 Nebraska a. b. c. 70372 101 201 Nevada a. b. c. 23342 6 8 New Hampshire a. b. c. 11907 15 56 New Jersey a. b. c. New Mexico a. b. c. New York a. 4649260 89 b. 180 c. North Carolina a. b. c. 307403 16 53 North Dakota a. b. c. 17256 56 108 Ohio a. b. c. 374461 66 277 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Edges and Agreement Corporations -- 662099 153 185 18149 3 90 8 1 1 159023 31 37 0 0 1 0 0 4 Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions a. b. c. ••••••••-•-• Commercial Banks Agencies and Branches of Foreign Banks Mutual Savings Banks Edges and Agreement Corporations Savings and Loans Credit Unions Total 4400 12 28 0 0 8 283210 161 374 1 1 2 3469 9 16 155 1 12 260492 28 78 0 0 2 2574 8 97 827 4 10 787939 86 430 746 2 6 20 1 2 0 0 9 41320 9 30 0 0 1 1249 9 31 429 1 7 91583 18 89 472 2 8 0 0 2 61677 36 78 2983 10 33 37 1 10 185874 51 303 83463 98 181 15 1 42 1914538 587 1403 2452 10 12 0 0 9 126615 24 54 0 0 2 Oklahoma a. b. c. 278810 149 336 Oregon a. b. c. 159322 10 40 92102 5 5 5443 2 3 Pennsylvania a. b. c. 765853 66 303 3352 6 6 15333 2 12 Rhode Island a. b. c. 40554 6 13 South Carolina a. b. c. 89905 8 50 South Dakota a. b. c. 61205 34 68 Tennessee a. b. c. 182854 40 258 Texas a. 1827513 473 b. 1156 c. Utah a. b. c. 124163 14 33 Vermont a. b. c. 8192 8 25 0 0 6 Virginia a. b. c. 268143 35 149 0 0 3 586 1 1 12366 20 40 12629 2 15 293724 58 208 Washington a. b. c. 289062 19 64 3388 7 13 138 3 4 6029 18 33 1887 6 22 310996 64 147 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 0 2 3547 15 24 10492 11 11 8192 8 32 0 0 1 a. b. c. Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Commercial Banks Agencies and Branches of Foreign Banks Mutual Savings Banks West Virginia a. b. c. 18327 26 175 0 0 1 Wisconsin a. b. c. 108236 46 421 0 0 1 Wyoming a. b. c. 26155 43 65 _..... 0 0 1 a. 18667635 3187 b. 10006 c. 884570 314 401 74219 38 465 Total https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Edges and Agreement Corporations 0 0 1 Savings and Loans Credit Unions 31 1 13 0 0 2 18358 27 191 543 7 52 0 0 15 108779 53 490 27069 46 74 914 3 8 197444 117 152 Total 730135 547 1878 27328 60 526 20581331 4263 13428 Table 1.0 sl Reserve Balances of Weekly Reporting Commercial Bank 10/5/83 Total Required Reserve Balances ($ thousands) Number of Institutions with Required Reserve Balances stic Required Reserve Balances as a percent of Total Dome Assets of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions stic Required Reserve Balances as a percent of Total Dome Assets of All Weekly Reporting Institutions a. b. C. d. e. State Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $750 million$100-$750 $2 billion million $2 billion and above 46427 2 0.90 2 0.90 Total 111513 42 0.85 210 0.56 Alabama a. b. C. d. e. 1232 18 0.14 183 0.02 43741 21 0.77 24 0.72 20153 1 1.43 1 1.43 Alaska a. b. c. d. e. 842 2 0.77 4 0.31 38353 8 1.52 8 1.52 9707 1 1.06 1 1.06 Arizona a. b. c. d. e. 150 1 0.33 9 0.05 7108 4 0.61 5 0.53 15810 1 1.40 1 1.40 Arkansas a. b. C. d. e. 2906 19 0.27 155 0.04 65586 23 1.17 28 1.06 California a. b. c. d. e. 41255 87 0.94 169 0.53 151440 60 1.06 70 0.96 124196 9 1.12 9 1.12 2584675 10 1.40 10 1.40 2901566 166 1.35 258 1.32 Colorado a. b. c. d. e. 17705 85 0.47 181 0.24 114229 28 2.34 29 2.29 51363 2 2.17 2 2.17 51857 1 2.43 1 2.43 235154 116 1.79 213 1.40 Connecticut a. b. C. d. e. 186 3 0.14 28 0.01 10071 7 0.49 14 0.34 28277 3 0.74 3 0.74 141397 2 1.60 2 1.60 179931 15 1.21 47 1.06 1. See footnote 2, Table 1.A. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 48902 11 1.38 13 1.32 130679 3 0.91 3 0.91 153747 9 0.92 18 0.90 68492 42 1.03 183 0.53 a. b. c. d. e. State lotal Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Required Reserve Balances as a percent of Total Domestic Assets of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Required Reserve Balances as a percent of Total Domestic Assets of All Weekly Reporting Institutions Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $750 million$100-$750 $2 billion million $2 billion and above Total 119634 14 1.43 22 1.26 Delaware a. b. c. d. e. 489 2 0.37 7 0.14 33483 8 1.26 11 0.94 85662 4 1.53 4 1.53 Dist. of Col. a. b. c. d. e. 3261 4 1.69 7 0.84 31530 4 2.30 4 2.30 25511 2 1.39 2 1.39 140855 2 2.33 2 2.33 201157 12 2.13 15 2.09 Florida a. b. c. d. e. 17699 45 0.64 231 0.16 168720 73 0.95 114 0.69 228760 10 2.02 10 2.02 143624 2 1.41 2 1.41 558803 130 1.33 357 0.99 Georgia a. b. c. d. e. 1170 8 0.25 246 0.01 43198 18 1.07 25 0.87 51006 2 2.43 2 2.43 257323 3 2.07 3 2.07 352697 31 1.85 276 1.21 Hawaii a. b. c. d. e. 0 0 0.00 1 0.00 368 1 0.20 5 0.02 0 0 0.00 2 0.00 368 1 0.20 8 0.01 Idaho a. b. c. d. e. 860 3 0.44 14 0.14 12892 4 0.88 4 0.88 26987 1 1.69 I 1.69 40182 1 1.78 1 1.78 80921 9 1.47 20 1.36 Illinois a. b. c. d. e. 20753 144 0.28 732 0.07 176619 109 0.75 162 0.56 39673 2 1.74 2 1.74 1194852 5 1.89 5 1.89 1431897 260 1.49 901 1.12 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 10/5/83 Total Required Reserve Balances ($ thousands) Number of Institutions with Required Reserve Balances stic Required Reserve Balances as a percent of Total Dome Assets of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Required Reserve Balances as a percent of Total Domestic Assets of All Weekly Reporting Institutions a. b. c. d. e. Less than $100 million State Commercial Banks Total Domestic Assets--6/30/83 $750 million$100-$750 $2 billion million $2 billion and above 80470 3 1.06 3 1.06 Total 129320 56 0.73 345 0.35 Indiana a. b. c. d. e. 2923 23 0.24 266 0.02 45927 30 0.52 76 0.27 Iowa a. b. c. d. e. 8774 96 0.22 369 0.06 40857 29 0.67 41 0.52 16691 1 1.59 1 1.59 66322 126 0.60 411 0.29 Kansas a. b. c. d. e. 20163 133 0.35 287 0.18 30378 14 0.92 24 0.68 12362 1 1.26 1 1.26 62903 148 0.63 312 0.37 Kentucky a. b. c. d. e. 2259 19 0.23 215 0.02 12449 10 0.56 37 0.20 40066 2 1.81 2 1.81 83399 2 1.63 2 1.63 138173 33 1.31 276 0.61 Louisiana a. b. c. d. e. 4273 21 0.35 192 0.04 91792 27 0.94 50 0.69 77408 4 1.81 4 1.81 88930 2 2.17 2 2.17 262403 54 1.36 248 0.84 Maine a. b. c. d. e. 3997 3 1.87 20 0.38 17377 a. b. c. d. e. 243 3 0.18 49 0.01 7722 7 0.51 17 0.28 Maryland https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 21374 7 1.16 27 0.67 4 1.06 7 0.82 26567 2 1.15 3 0.83 100105 4 0.87 4 0.87 134637 16 0.87 73 0.67 a. b. c. d. e. State Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Required Reserve Balances as a percent of Total Domestic Assets of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Required Reserve Balances as a percent of Total Domestic Assets of All Weekly Reporting Institutions Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $2 billion $750 million$100-$750 and above $2 billion million Total Massachusetts a. b. c. d. e. 4159 12 0.60 55 0.15 74858 41 0.68 52 0.59 12139 3 0.51 4 0.31 289507 4 1.40 4 1.40 380663 60 1.09 115 0.95 Michigan a. b. c. d. e. 5130 29 0.32 230 0.05 53915 38 0.52 84 0.29 44914 8 0.45 8 0.45 316636 78 0.77 325 0.55 Minnesota a. b. c. d. e. 14204 109 0.29 359 0.10 55487 34 0.93 39 0.84 9682 1 0.73 1 0.73 212677 3 1.10 3 1.10 • 207253 3 1.49 3 1.49 Mississippi a. b. c. d. e. 523 3 0.31 105 0.01 9141 11 0.39 26 0.16 11776 1 0.78 1 0.78 29211 1 1.42 1 1.42 50651 16 0.84 133 0.37 Missouri a. b. c. d. e. 11145 70 0.28 403 0.06 44080 34 0.64 52 0.49 87732 4 1.77 4 1.77 88623 2 1.46 2 1.46 231580 110 1.06 461 0.62 Montana a. b. c. d. e. 6560 45 0.38 89 0.20 14887 13 0.73 15 0.63 Nebraska a. b. c. d. e. 13396 87 0.37 185 0.20 37182 13 1.04 15 0.98 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 286626 147 1.10 402 0.80 21447 58 0.57 104 0.38 19794 1 2.25 1 2.25 70372 101 0.88 201 0.61 ) - 10/5/83 Total Required Reserve Balances ($ thousands nces Number of Institutions with Required Reserve Bala l Domestic Required Reserve Balances as a percent of Tota nces Assets of Institutions with Required Reserve Bala ions Total Number of Weekly Reporting Institut l Domestic Required Reserve Balances as a percent of Tota Assets of All Weekly Reporting Institutions a. b. c. d. e. State Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $2 billion $750 million$16-0-$750 and above $2 billion million 2997 1 0.28 1 0.28 15484 1 0.63 1 0.63 Total 23342 6 0.50 8 0.49 Nevada a. b. c. d. e. 498 1 1.09 2 0.69 4363 3 0.41 4 0.38 New Hampshire a. b. c. d. e. 380 7 0.11 45 0.02 11527 8 0.72 11 0.52 New Jersey a. b. c. d. e. 5700 13 0.74 63 0.16 103750 33 0.87 53 0.69 126694 10 1.11 13 0.92 New Mexico a. b. c. d. e. 2612 17 0.35 61 0.10 14678 15 0.58 18 0.49 22529 2 1.11 2 1.11 New York a. b. c. d. e. 5412 19 0.60 94 0.12 143606 39 1.24 55 0.97 195879 15 1.06 15 1.06 4304363 16 1.48 16 1.48 4649260 89 1.44 180 1.41 North Carolina a. b. c. d. e. 738 5 0.31 35 0.04 5379 3 0.61 9 0.25 34899 4 0.67 5 0.59 266387 4 1.26 4 1.26 307403 16 1.12 53 0.99 North Dakota a. b. c. d. e. 7350 48 0.35 97 0.21 9906 8 0.81 11 0.61 -- 17256 56 0.52 108 0.33 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 11907 15 0.62 56 0.28 141820 4 1.45 4 1.45 377964 60 1.12 133 0.90 39819 34 0.75 81 0.52 nds) - 10/5/83 Total Required Reserve Balances ($ thousa rve Balances Number of Institutions with Required Rese of Total Domestic Required Reserve Balances as a percent rve Balances Assets of Institutions with Required Rese ions Total Number of Weekly Reporting Institut Total Domestic Required Reserve Balances as a percent of Assets of All Weekly Reporting Institutions a. b. c. d. e. State Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $2 billion $750 million$100-$750 and above $2 billion million 139298 9 1.21 10 1.14 169220 6 0.71 6 0.71 Total 374461 66 0.82 277 0.60 Ohio a. b. c. d. e. 3359 22 0.29 185 0.04 62584 29 0.67 76 0.35 Oklahoma a. b. c. d. e. 21935 107 0.40 288 0.18 64185 37 0.99 43 0.88 77356 3 2.25 3 2.25 115334 2 2.46 2 2.46 278810 149 1.39 336 1.02 Oregon a. b. c. d. e. 1202 5 0.48 31 0.09 3381 2 0.38 6 0.21 548 1 0.06 1 0.06 154191 2 1.62 2 1.62 159322 10 1.38 40 1.02 Pennsylvania a. b. c. d. e. 1675 11 0.22 188 0.02 38823 33 0.32 93 0.16 81758 11 0.64 11 0.64 643597 11 1.16 11 1.16 765853 66 0.95 303 0.76 Rhode Island a. b. c. d. e. 206 1 0.47 7 0.07 3189 2 0.78 3 0.56 6112 2 0.17 2 0.17 31047 1 0.86 1 0.86 40554 6 0.53 13 0.50 South Carolina a. b. c. d. e. 0 0 0.00 38 0.00 4412 3 0.55 7 0.33 58739 4 1.06 4 1.06 26754 1 1.26 1 1.26 89905 8 1.06 50 0.86 South Dakota a. b. c. d. e. 2981 24 0.34 57 0.15 24035 8 1.18 9 1.12 13767 1 1.27 1 1.27 20422 1 0.68 1 0.68 61205 34 0.87 68 0.74 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis a. b. c. d. e. State Total Required Reserve Balances ($ thousands) - 10/5/83 Number of Institutions with Required Reserve Balances Required Reserve Balances as a percent of Total Domestic Assets of Institutions with Required Reserve Balances Total Number of Weekly Reporting Institutions Required Reserve Balances as a percent of Total Domestic Assets of All Weekly Reporting Institutions Less than $100 million Commercial Banks Total Domestic Assets--6/30/83 $750 million$100-$750 $2 billion million $2 billion and above Total 182854 40 1.12 258 0.66 a. b. c. d. e. 3702 16 0.33 212 0.04 20009 16 0.46 38 0.27 159143 Texas a. b. c. d. e. 66045 290 0.41 916 0.16 402508 161 1.07 218 0.88 282999 14 1.70 14 1.70 1075961 8 2.28 8 2.29 1827513 473 1.56 1156 1.20 Utah a. b. c. d. e. 1341 5 0.60 24 0.15 20717 6 1.08 6 1.08 56906 2 2.21 2 2.21 45199 1 1.89 1 1.89 124163 14 1.75 33 1.60 Vermont a. b. c. d. e. 153 3 0.13 18 0.02 8039 5 0.41 7 0.36 Virginia a. b. c. d. e. 4367 15 0.54 118 0.08 17615 11 0.63 22 0.40 70415 5 1.14 5 1.14 175746 4 1.18 4 1.18 268143 35 1.09 149 0.87 Washington a. b. c. d. e. 1369 9 0.29 50 0.07 7887 4 0.61 8 0.38 22296 2 0.90 2 0.90 257510 4 1.50 4 1.50 289062 19 1.35 64 1.22 West Virginia a. b. c. d. e. 3694 14 0.50 148 0.06 14633 12 0.55 27 0.29 Tennessee https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8 1.46 8 1.46 8192 8 0.40 25 0.28 •P •••• 18327 26 0.54 175 0.16 a. b. c. d. e. 10/5/83 Total Required Reserve Balances ($ thousands) nces Number of Institutions with Required Reserve Bala l Domestic Required Reserve Balances as a percent of Tota nces Assets of Institutions with Required Reserve Bala Total Number of Weekly Reporting Institutions l Domestic Required Reserve Balances as a percent of Tota Assets of All Weekly Reporting Institutions Less than $100 million State Commercial Banks Total Domestic Assets--6/30/83 $750 million$100-$750 $2 billion million Wisconsin a. b. c. d. e. 3208 27 0.24 374 0.02 23974 16 0.64 44 0.31 Wyoming a. b. c. d. e. 9522 35 0.53 57 0.39 16633 8 1.24 8 1.24 Total a. b. c. d. e. 353706 1768 0.40 7899 0.10 2459223 1135 0.87 1814 0.63 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 42849 2 1.66 2 1.66 $2 billion and above 38205 1 1.20 1 1.20 Total 108236 46 1.00 421 0.38 26155 43 0.84 65 0.69 2461420 162 1.26 169 1.22 13393286 122 1.47 124 1.46 18667635 3187 1.26 10006 1.01 3 - and required reserve total assets as of June 30, 1983 (where available) October 5, 1983. balances at the Federal Reserve as of the week ending s of computer Because this table comprises a sizable package of copie printouts, it is attached separately. e provide me with the amount of 1. (cont.) In connection with that display, pleas ve if interest income that each institution might be expected to recei were paid on those reserve balances. ces at the The last column in table 1.D shows required reserve balan Federal Reserve for each institution listed. Assuming interest were to be ces, an estimate of the paid on all of an institution's required reserve balan can be calculated by initial annual payment to each depository institution multiplying this figure by the assumed rate of interest. A reasonable esti- this year would be mate of the rate of interest that might have been paid on the System's around 10 percent--close to the recent rate of earnings to other questions securities portfolio--and this rate is used in responding you submitted. nt With this assumed interest rate, the annual interest payme in the last column. to each institution would be one-tenth of the figure The legislation introduced by Congressman Barnard (H.R. 1013) securities portfolio specifies the rate to be paid as the rate earned on the quarter. of the Federal Reserve System during the previous calendar In a a preference for a letter to you of June 13, 1983, Chairman Volcker indicated and suggested giving more flexible method of setting the rate on reserves, ed to market rates, "the Board discretion to set a rate based on or relat --based on the average or--if it were felt that more specificity was desirable in a current month." yield on, say, the System's Treasury bill portfolio to required It should be noted that restricting interest payments institution for the reserve balances will essentially only compensate each https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis subject to reserve requirements. cost it and its depositors now incur by being ves would not receive Vault cash holdings used to satisfy required reser would be held for interest, which would be appropriate since vault cash ve requirements. operational purposes regardless of the level of reser The d be viewed as a normal opportunity cost of such vault cash holdings shoul atory reserve requireoperating expense, and not as part of the cost of regul ments. ially since This is not true of required reserve balances, espec still have the alternative without reserve requirements an institution would would receive earnings available of opening a required clearing balance that credits. others from Thus, while some institutions would be paid more than tutions that would interest payments on required reserve balances, insti tutions now bearing a receive relatively large payments are also the insti ive to other institucomensurately high burden of reserve requirements relat tions, such as money market mutual funds. represent net All such interest payments would not, of course, tutions. additions to the after-tax income of depository insti Much of these in the form of higher payments probably would be passed along to depositors deposit rates, and taxes would be paid on the remainder. made by the time that the provi1. (cont.) In as much as there will be adjustments figures for the sions of the MCA are fully implemented, please provide ts are expected to be current moment and that time when reserve requiremen fully phased in. the situation It is not possible to make reasonable estimates of full MCA phase in. confronting individual institutions in 1988 after the balances at the Federal Even so, the aggregate amount of required reserve es, together with the Reserve, broken down by broad institutional class balance in each class, number of institutions having a required reserve https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -5- have been projected for that time. Table 1.E contrasts these forecasts for settlement week ending October 1988 with comparable figures for the reserve October 5, 1983. h over the The projections include assumptions about deposit growt in of reserve requirements next five years, as well as the impact of the phase reservable liabilities under the MCA, but abstract from any shifting into it offering rates in response from other sources induced by increases in depos to interest on reserves. Required reserve balances at the Federal Reserve $20-1/2 billion to are expected to rise from the current level of about of interest on reserves. around $36-1/2 billion by October 1988 in the absence ble, please project a breakdown 1. (cont.) To the extent that it is reasonably possi liabilities they of the composition of these reserves to the kind of various kinds of support such as MMDAs, Super NOWs, NOWs, demand, and time. reserves, is Although such a breakdown, even of current required aggregate estimates are not readily available for individual institutions, er 5, 1983 and in the provided in table 1.F, both for the week ending Octob form of forecasts for October 1988. As with table 1.E, this table assumes abstracts from any deposit growth through 1988 and the MCA phase in but that would be induced shifting of funds into various reservable liabilities by interest payments on reserves. required Since vault cash also satisfies reserve requirements, than overall required reserve balances in the aggregate are considerably less red reserve balances reserves, and there is no unique way to apportion requi idual liabilities. by themselves among the separate requirements on indiv ve balances, a proThe table shows two methods of allocating required reser portional method and an ordered method. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 1.E •Institutions with Requi•red Reserve Balances n' at Federal Reserve Banks by Type of Institutio Number of Institutions Commercial Banks II October 5, 19832 Requi•red Number of Reserve Institutions Balances with Required 0 millions) Reserve Balances October 19883 Required fT1i1sIi of Reserve Institutions Balances with Required ($ millions) Reserve Balances 3,253 2 1,73 . 6,014 31,200 18• 4 183 14,346 184 21,700 Large4 9,858 3,070 4,386 5,830 9,500 Small5 546 703 1,150 3,100 1,891 470 34 59 130 400 Mutual Savings Banks 528 65 32 180 200 Credit Unions 555 397 1,027 320 1,700 All Other6 13,486 4,295 20,553 7,794 36,600 Savings and Loans Total its (present weekly reporters). 1. Depository institutions with $15 million or more in total depos of account. Counts of institutions and of 2. The figures are based on estimates of required reserves by type data of required reserve balances. required reserve balances differ slightly from those based on micro iiii of weekly reporters, assuming deposit 3. Projected figures for 1988 are derived using the current group es possible deposit shifts resulting through October 1988 and full phase—in of reserve requirements. Ignor f•rom payment of interest on reserves. s as of December 31, 1977. 4. Commercial banks with $750 million or more in total domestic asset tic assets as of Decmeber 31, 1977. 5. Commercial banks with less than $750 million in total domes ment Corporations. 6. Agencies and branches of foreign banks and Edge and Agree https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 1.F Required Reserve Balances by Type of Deposit (All weekly reporters 1) Amount of Required Reserve Balances ($ millions) Type of Deposit October 5, 19832 Ordered Proportional Allocation5 Allocation4 October 19883 Ordered Proportional Allocation5 Allocation4 MMDAs 600 1,098 1,600 2,400 Super NOWs 579 1,022 6,200 9,100 Other NOWs 1,282 2,273 6/ 12,976 13,830 17,600 18,200 5,116 2,331 11,200 6,900 20,553 20,553 36,600 36,600 Demand Deposits Other Reservable Liabilities Total 1. 2. 3. 4. 5. 6. 6/ total deposits (present Depository institutions with $15 million or more in weekly reporters). rves by type of account. The figures are based on estimates of required rese htly from those based on Total required reserve balance estimates differ slig micro data of required reserve balances. phase-in of reserve Assumes deposit growth through October 1988 and full g from payment of requirements. Ignores possible deposit shifts resultin interest on reserves. nces to a type of deposit Attributes a fraction of total required reserve bala unted for by that type equal to the fraction of total required reserves acco of deposit. against each type Allocates required reserve balances to required reserves ired reserve balances are of deposit in the descending order shown until requ exhausted. rate of interest. After March 1986, all NOW accounts can pay a deregulated lar and Super NOWs. As a result, there will be no distinction between regu https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis red reserve The proportional method attributes a share of requi the share of total required balances to a specific type of deposit equal to that type of deposit. reserves accounted for by required reserves against required reserves (inFor example, if 70 percent of an institution's total deposits, 10 percent cluding applied vault cash) were held against demand 10 percent against other against NOW accounts, 10 percent against MMDAs, and the Federal Reserve reservable liabilities, its required reserve balance at would be allocated in these proportions. The ordered method allocates required types of deposits in reserve balances to required reserves against specific red reserve balances are the descending order shown in table 1.F until requi exhausted. 1983 and 1988 The last column of table 1.F indicates that between and Super NOWs under the amount of required reserve balances backing MMDAs relatively more the ordered allocation scheme is projected to increase by than for other deposits. This situation results from the expectation that NOW accounts as deposit growth is likely to be especially rapid for Super etion of the phase in rate ceilings are removed entirely and from the compl of reserve requirements under MCA.' These estimates do not take into account might arise if only any additional shifts into these deposit categories that a result, boosted reserves backing them earned interest and depositories, as 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis phased in nationEven though MMDA reserve requirements are already fully d in outside New wide and NOW reserve requirements are already fully phase rements on other England, New York and New Jersey, the phase up of requi reserves and hence reservable liabilities will increase total required of allocation, required reserve balances. Under the ordered method NOWs thus would required reserve balances attributed to MMDAs and Super unchanged to the rise even if required reserves against them remained sted before all extent that required reserve balances currently are exhau ed. required reserves against MMDAs and Super NOWs are count N. 7 - - it categories. offering rates on these accounts relative to other depos some new funds Interest on all required reserve balances also could induce not tend to to shift into the different accounts, but such inflows would associated with distort the relative amounts of required reserve balances interest only on the various deposit types by nearly as much as paying reserves backing certain deposits. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis d on reserves diminishing the net If interest is required to be pai vices by the Fed into the Treasury, what ser earnings available to be paid for erve might be further identified presently offered by the Federal Res which a charge might be imposed? 2. See question 3. to a ntify or ascribe the economic worth ide you ld cou e, lin t tha ng Alo ) 2. (cont. ogto the Discount Window? While I rec depository institution of access to readily express quantitatively nize that the value might be difficult eraire nation, I would like consid as it has a confidence value to the ent of something akin to a standby fee tion to be given to the development e) use of the borrowing privilege based on the likely total (or averag l Reserve operated the Discount that could be imposed if the Federa ic without regard to national econom Window solely as a banking convenience erested in learning the total circumstances. Finally, I would be int and the costs of operating the income earned from the Discount Window Discount Window. to develop a meaningful There appears to be no reasonable way . nt window to depository institutions estimate of the value of the discou l a "line of credit" with the Federa Depository institutions do not have eral osed, except perhaps for the Fed Reserve, for which a fee might be imp ch is available only to some small Reserve's seasonal credit program, whi have ready access to the national depository institutions that do not ll amounts. money market and is for relatively sma erve credit is extended in a Aside from this program, Federal Res "line of credit - agreements in e vat pri h wit el all par ect dir no has way that e commitment to make a loan anc adv an der len a m fro s ain obt er row which a bor ch that terms and conditions under whi and is able to negotiate some of the the e solely at the discretion of mad are ns Loa . sed rci exe be may commitment t meet conditions consistent mus ons uti tit ins ing row bor and e, erv Federal Res https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis of ectives--the implementation obj icy pol lic pub of t men ain att with fostering oth financial markets and the smo y erl ord of ce nan nte mai the , icy monetary pol . functioning of the payments system t cateFor adjustment credit, the larges of demonstrate that no other sources gory of borrowing, institutions must -2- are expected to repay the loan promptly, funds are reasonably available, they larly on discount credit to adjust and they are discouraged from relying regu reserve positions. derive a sense of Thus, while depository institutions may well ds ready to serve as lender of security knowing that the Federal Reserve stan c function the discount window last resort, that is a by-product of the basi performs. is imparted not Moreover, it is the case that a sense of security others in the economic system. only to depository institutions, but to all quantitatively the value of this There seems no reasonable way to estimate alone to determine what psychological factor for society as a whole, let ibuted to depository institupart of this quantitative value should be attr tions. lity to make it more Moreover, a reorientation of the discount faci nd therefore one on which a fee closely resemble a private loan arrangement--a tent with the role the discount might be more appropriate--would be inconsis ing stability in the financial window traditionally has played in maintain system. me earned from and Regarding the question pertaining to the inco window, income earned (all in the costs incurred in operating the discount ion in 1982, down from $187 form of interest on loans) totaled $121 mill million in 1981. lied at the disOf course, if reserves had not been supp operations, the net addition count window, but rather through open market folio would have produced a similar to the Federal Reserve's securities port stream of revenue. ow, includThe total cost of operating the discount wind services, was about $6.5 million ing indirect support costs such as computer in 1982 and $5.7 million in 1981. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rve provides are bank and bank Among other functions which the Federal Rese on, monetary policy, and fiscal holding company supervision and regulati rs. Which of these might be agency services to the Treasury and othe other kinds of new services susceptible to fees or fee increases? What d be fee or income generating? might the Federal Reserve offer which woul g interest income on their reserve For example, would institutions receivin as data processing balances wish to utilize possible new services such ncial institution and (including credit card data processing) or fina ysis, I would not contemeconomic data analysis? In economic data anal as a fee generating activity. plate monetary policy or modeling analysis 3. fiscal agency serThe Federal Reserve currently collects fees for for either supervisory and vices from the Treasury, hut does not charge fees policy, as you note, seems regulatory functions or monetary policy; monetary t. especially ill-suited to this kind of treatmen services have no The fees charged the Treasury for fiscal agency sury, since any increase in fees cost or revenue implications for the Trea along with the rest of the paid would be returned by the Federal Reserve, nt securities, to the Treasury. surplus income from its portfolio of governme t be gained by charging the Although some small additional revenues migh the Federal Reserve Banks, this public when it purchased securities through icipation in Treasury financings. would tend to discourage wide public part s are not intended The Board's supervisory and regulatory function ercial banks. primarily to provide services to benefit comm Their aim is with the benefits derived from a rather to provide the public as a whole sound and competitive banking industry. In principle, state member banks, anies could be assessed fees to cover Edge Corporations, and bank holding comp lators have chosen that approach. the cost of supervision, and some other regu onal banks (to the Comptroller of Examination fees are currently paid by nati associations (to the FSLIC); the cost the Currency) and by savings and loan by the insurance fees paid to the of examining nonmember banks is covered https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- FDIC. e areas is contemplated at No change in the Board's policy in thes ge would have to take into account present; the consideration of such a chan ions they are required to undergo whether charging institutions for examinat is appropriate. services with an eye The Federal Reserve is always evaluating new it provides to depository institutions; to improving the quality of services options and the standing order of recent examples include new check deposit wire transfer. to cover the It is anticipated that fees will be charged costs of providing all such services. These services, however, all lie ices that already are being within the traditional range of payments serv offered to depository institutions. The Central Bank's participation in the ng national interest in maintainpayments system is justified by the overridi idence in it and an adequate ing the stability of this system, public conf level of services on a nationwide basis. There would not be such a basis delivery of services in other for the Federal Reserve to enter into the areas--such as data processing. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis !4. to consider In as much as any discussion about interest on reserves ought provide me with a the implications of reserve policy generally, please es the further discussion of the reasons that monetary policy requir lesser ratio imposition of a reserve requirement, the implications that a conduct monetary of reserves has on the capacity of the Federal Reserve to that the policy, the costs to the economy of any heightened difficulty reserve levels Federal Reserve might have encountered with the decreasing reserves, and the and the increase in accounts which are not subjected to entirely upon open efficacy of abolishing reserves altogether and relying market operations for the conduct of monetary policy. ratios of The primary function of reserve requirements expressed as monetary policy.' deposits is to facilitate the Federal Reserve's conduct of deposits that can Required reserve ratios set an upper bound on the volume of from a given be generated at institutions subject to reserve requirements amount of reserves made available to them. As a result, by limiting its Reserve can provision of reserves through open market operations, the Federal exert control over the aggregate level of deposits. Uniform and universal ively the required reserve ratios that are high enough to constrain effect between reserves behavior of institutions would promote the tightest linkage and deposits. That is, when reserve ratios are binding--when depository absence of institutions are holding more reserves than they would in the ements so that such requirements--and when institutions face uniform requir cal, there is their ratios of reserve assets to deposits are virtually identi reserve a reasonably predictable response to an increase or decrease in provision by the Federal Reserve. Federal Work done by Board staff suggests that the precision of the sing proportion Reserve's potential control over money is impaired by a decrea requirements, in the of deposits at institutions "bound" by federal reserve 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis assumed is to A supplemental function that reserve requirements have transactions provide for balances at Federal Reserve Banks through which among depository institution are cleared. -2 ient to satisfy sense that their normal vault cash holdings are not suffic their reserve requirements. Nonbound institutions, particularly nonmember e assets institutions historically, have a lower average ratio of reserv utions. (in the form of vault cash) to deposits than bound instit Thus, net institutions, for shifts of deposits and reserves from bound to nonbound wide given aggreexample, tend to generate additional deposit creation system gate reserves. In addition, the ratio of vault cash to deposits varies , as well considerably across institutions not bound by reserve requirements as over time at these institutions. This factor produces further instability from deposit in the link between reserve and monetary aggregates arising shifts among institutions. Both effects become more significant as the ses. importance of nonbound institutions in the depository system increa The more uniform and universal reserve requirement structure of gs relative the MCA, when phased in, will work to standardize reserve holdin proportion to transactions deposits across institutions and to increase the ning the connecof transactions deposits at bound institutions, hence tighte tion between aggregate reserves and narrow money. From this perspective, to offset a the Garn-St Germain Depository Institutions Act of 1982 worked part of the gains embodied in the Monetary Control Act. The (indexed) exemp- depository tion of the first $2 million of reservable liabilities at all marginal institutions represented a move away from full standardization of of reserve requirements at all institutions, and it also reduced the number anyway institutions whose required reserves exceeded their vault cash held for operational needs. Even so, the Federal Reserve supported this latest legislative operating change because it significantly reduced the administrative and https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -3- reporting and reserve requireburden on small institutions of compliance with rtion of transactions ments and because the associated decline in the propo . deposits at bound institutions was believed manageable The Federal Reserve requirements associated indicated, though, that further declines in reserve begin to be a cause for with any higher base for the exemption cutoff would the Federal Reserve.' concern for monetary policy and could not be supported by requirements Another feature of the MCA was the removal of reserve and the retention of on personal time and savings deposits at member banks s and personal time reserve-free status for money market mutual fund share and savings deposits at nonmember institutions. As required by the MCA, any reserve personal MMDAs at all institutions also were exempted from requirements. nent As a result, the vast bulk of the nontransactions compo of M2 is now essentially not reservable. This situation has weakened the aggregates through Federal Reserve's ability to control the broader monetary a reserves handle. Indirect channels allow the Federal Reserve to influence d side, but not the nontransactions components of M2 and M3 via the deman items would permit. with the precision that reserve requirements on all these "costs to the It is difficult, if not impossible, to quantify the ve might have economy of any heightened difficulty that the Federal Reser in accounts encountered with the decreasing reserve levels and the increase which are not subject to reserves. ." Difficulties for monetary policy requirement coverage arising from any significant erosion in effective reserve emphasized at a would depend on the monetary aggregate (or aggregates) being 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Monetary Policy of Preston Martin, "Statement," Subcommittee on Domestic House of the Committee on Banking, Finance and Urban Affairs, U.S. Representatives, June 16, 1982, p. 5. al Reserve at that time particular time, and the degree to which the Feder ly this aggregate over considered it appropriate to attempt to control close relatively short periods. Federal Reserve objectives for the growth of goals of price stability and money and credit are chosen to further national high employment. g the To the extent that falling reserve ratios, by makin and difficult to predict, relationship between reserves and money more variable achieve monetary objectives, interfere with the Federal Reserve's efforts to mic performance. they could also result in a shortfall in econo worsen the The absence of reserve requirements altogether would Reserve's ability to situation considerably, especially for the Federal control narrow money. The fulcrum of required reserve ratios on which changes ly operates to affect in the reserve base of the depository system ideal of potentially unstable deposits would be completely replaced by the set at each institution, giving -desired - ratios of reserve assets to deposits eposit ratio for the rise to a highly unpredictable average reserve-to-d depository system as a whole. As a result, the impact of Federal Reserve be highly variable and open market operations on the money supply would impossible to project with any confidence. ss, within the context of a system 4. (cont.) In this context, please also discu might occur if the which pays interest on reserves, the impact which reserve levels were increased. of depository Increasing reserve requirements (on any liability ng the number of instiinstitutions) would itself have the advantage of raisi tutions bound by reserve requirements. In this situation, the connection would be somewhat more between reserve provision and the monetary aggregates reliable. the advantage With such an increase, paying interest on reserves has innovative instruments of avoiding the more powerful incentives to create https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -5- that would otherwise outside the scope of the reserve requirements system institutions. result from the imposition of a higher "tax" on depository the Federal There would be no tendency arising from this source to weaken ates and no Reserve's ability to interpret and control the monetary aggreg utions relative erosion in the competitive standing of bound depository instit to other intermediaries. g of the number of times 4. (cont.) Additionally, please provide me with a listin years. reserve requirements have been adjusted within the past ten r than A listing of changes in reserve requirements since 1973 (othe follows. ongoing scheduled phase ins under the Monetary Control Act) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 4.A Stated Purposes of Reserve Requirement Changes June 1973 - Present Action' Effective Date 1973 June 21 Net Increase (+) or Decrease (-) for Required Reserves ($ millions) CDs, CP--impose 3 percent MRR; Eurodollars-lower MRR by 12%2 n.a. +750 Combat Inflation Stimulate Economy Stated Pulpose Influence Specific Kinds of Bank Liabilities Improve Balance of Payments or Strengthen U.S Dollar Further step to restrain excessive credit expansion* July 19 DD, over $2 mil.--raise ratio by 1/2% Oct. 4 CDs, CP, FB-raise MRR by 3% n.a. Dec. 13 CDs, CP, FB-lower MRR by 3% n.a. Action taken in recognition of decline in amount of CDs* CDs, CP, FB-eliminate MRR if over 120 days n.a. Encourage longermaturity liabilities 1974 Sep. 5 Dec. 12 1975 Feb. 13 DD, over $400 mil.-lower ratio by 1/2; TD, 30-179 days-raise ratio by 1%; TD 180 days or more--lower ratio by 2%; TD, first $5 mil. --lower ratio by 2%; and CDs CP, FB-eliminate MRR DD, first $400 mil.--lower ratio by 1/2%; and DD, over $400 mil.--lower ratio by 1% May 22 Eurodollars-lower MRR by 4% Oct. 30 TD, over 4 yrs-lower ratio by 2% * 1. 2. Curb continued use of CDs and similar instruments to finance credit* Further step to restrain credit expansion* Permit banks to improve liquidity Facilitate monetary expansion Strengthen position of U.S. dollar* -65 -350 Augment open market operations to meet seasonal expansion in demand for reserves* Encourage longermaturity liabilities. Respond to lower volume of CDs* -750 -1,100 Provide parallel treatment of Eurodollars and CDs Curb use of CDs and commercial paper to expand credit* Assist in moderate restraint of bank credit Other Encourage longermaturity liabilities* Seasonal expansion Denotes primary purpose or purposes of amendments. deposits; CDs * time deposits in denominations Notation: TD * time deposits; SD * savings deposits; DD * demand ed through commercial paper issued by of $100,000 and over; MRR * marginal resreve requirement; CP * funds obtain an affiliate; FB * certain ineligible finance bills. ities from the marginal reserve At the same time several actions were taken to exclude some foreign liabil requirement on Eurodollars in order to reduce the administrative costs. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- Action Effective Date 1976 Jan. 8 Dec. 30 1977 Dec. 1 1978 Aug. 24 Net Increase (+) or Decrease (-) for Required Reserves ($ millions) TD, 180 days to 4 yrs--lower ratio by 1/2% -340 DD up to $10 mil. --lower ratio by 1/2%; and DD over $10 mil. --lower ratio by 1/14 -550 Loans of foreign branches to U.S. residents--lower MRR from 4% to 1% n.a. Borrowings from foreign branches or unrelated banks abroad--lower ratio from 4% to 0%; and loans of foreign branches to U.S. residents--lower ratio from 1% to 0% n.a. Nov. 2 TD $100,000 or more, obligations of affiliates and ineligible acceptances--impose a supplementary requirement ratio of 2% Vol/. 16 Domestic deposits of Edge corporations and certain branches and agencies of foreign banks made subject to the same reserve requirements as deposits of member banks 1979 Oct. 11 1980 Mar. 12 3. Managed liabilities over a base amount--impose MRR ratio of 8%3 Managed liabilities--lower the base amount and raise MRR ratio by 2% Combat Inflation Stimulate Economy Stated Purpose Influence Specific Kinds of Bank Liabilities Improve Balance of Payments or Strengthen U.S Dollar Encourage longermaturity liabilities* Facilitate monetary expansion Improve the competitive position of U.S. banks abroad Encourage member banks to increase Eurodollar borrowings n.a. +3,000 Moderate the expansion in hank credit Discourage issuance of large CDs Encourage member banks to borrow funds from abroad International Banking Act of 1978 n.a. +355 +1,700 Assist in moderate restraint of bank credit Curb use of managed liabilities to expand credit Further restraint of bank credit Encourage banks to reduce managed liabilities and curb use of managed liabilities to expand credit borrowings, repurhcase agreements Managed liabilities are defined as large time deposits, eurodollar borrowings from nonmember banks against U.S. government and federal agency securities, federal funds and certain other obligations. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis le. Other -3- Action Effective Date Net Increase (+) or Decrease (-) for Required Reserves ($ millions) -980 May 29 Managed liabilities--lower MRR ratio by 5% July 24 Managed liabilities--lower MRR ratio by 5% to 0%; and TD $100,000 or more, obligations of affiliates and ineligible acceptances--eliminate the supplementary requirement. -3,200 Nov. 13 MCA of 19804 -2,900 1982 May. 13 Nonpersonal TD subject to reserve requirement--reduce original maturity by 1/2 yrs to less than 3-1/2 yrs Dec. 23 1983 Apr. 14 Oct. 26 Exemption of first $2.1 mil. of reservable liabilities from reserve requirements n.a. Combat Inflation Stimulate Economy Stated Purpose Influence Specific Kinds of Bank Liabilities Improve Balance of Payments or Strengthen U.S Dollar Ease restraints on use of managed liabilities End temporary action to reduce use of managed Liabilities Improve effectiveness of monetary policy Conform with the newly created ceiling free TD with original maturity > 3-1/2 years -80 Nonpersonal TD subject to reserve requiremnt --reduce original maturity by 1 yr to less than 1-1/2 yrs -85 Conform with the newly created ceiling free TD with original maturity > 2-1/2 years the Monetary Control Act of 1980. Subsequent Initial phase in of reserve requirement structure of d changes in the low reserve tranche for scheduled phase ins of MCA requirements--including indexe transaction deposits--are not shown. n.a.--not available. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis To facilitate deregulation of rate ceilings on time deposits by DIDC The Cam St Germain Depository Institutions Act of 1982 -800 Nonpersonal TD subject to reserve requirement --reduce original maturity by 1 yr to less than 2-1/2 yrs Other To facilitate deregulation of rate ceilings on time deposits by DIDC To facilitate deregulation of rate ceilings on time deposits by DIDC 5. est is paid on reserves, Can you discern any circumstance where, if inter its reserve levels in a depository institution might elect to increase rather than to make excess of its required holdings to earn the interest loans? ces held at Federal If interest were to be paid on all reserve balan red reserve balances at Reserve Banks, as opposed to interest only on requi ces also would earn interest. the Federal Reserve, then excess reserve balan ning asset, having a substanExcess reserves now represent a noninterest-ear est on alternative earning tial opportunity cost in terms of foregone inter assets. s reserves to Depository institutions tend to hold only enough exces arising from unexpecguard against the possibility of reserve deficiencies ring late in the reserve tedly large reserve drains, especially those occur positions are more settlement period when further adjustments to reserve difficult. basis have So far this year, excess reserves on a month-average varied within a range of $400 to $550 million. rate of interIf excess reserves were to receive a market-related tutions could well become est, holdings of excess reserves by depository insti more unstable. excess Institutions would have much less incentive to keep sacrifice involved reserves at a precautionary minimum, since the earnings if not eliminated. in holding such reserves would be substantially reduced, -month would Potentially sizable variations in excess reserves month-to ionship between contribute an added element of instability to the relat aggregate reserves and the money stock. Moreover, buildups of excess by depository instireserves would come at the expense of credit extension acquisitions or reduced tutions, either in the form of lessened securities loan creation. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2- Reserve has supported In light of these considerations, the Federal at Federal Reserve Banks.' interest payment only on required reserve balances Housing and Urban 1. Paul A. Volcker, "Statement," Committee on Banking, es Partee, Affairs, U.S. Senate, September 13, 1983, p. 35 and J. Charl n, "Statement," Subcommittee on Financial Institutions, Supervisio ce and Urban Regulation and Insurance of the Committee on Banking, Finan Affairs, House of Representatives, October 27, 1983, p. 11. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 6. costs of reserves (loss of It has often been argued that the implicit tax. Others have interest) to a depository institution is akin to a institutions in general suggested that banks in particular and depository rate of tax paid by do not pay an adequate rate of tax. Based on the attempt to provide an banks and other depository institutions, please reserves held in accounts imputed rate of tax if the costs of all required taxes paid by banks with the Federal Reserve were added to the rate of and other depository institutions. ctive bank tax There are several alternative ways of measuring effe single correct way. rates, no one of which can truly be said to be the In a provision for income 1982, federally insured commercial banks reported taxes of $3,657 million. e (This figure includes foreign, federal and stat and local income taxes, both current and deferred.) Taxable income before s was $8,583 million, securities gains and losses and extraordinary item implying a tax rate of 43 percent. If taxes are calculated on the basis of percentage falls to 19 total income, including nontaxable income, this $10,661 million in percent; this is because the divisor is increased by rities. nontaxable interest on state and local government secu Since the obtainable on taxable rate of return on these securities is below the rate g in state and local securities, only part of the tax savings from investin s' net profit. government securities flows through to increase the bank The d, may be considered a rest, which is offset by the securities' lower yiel kind of tax. rnment securities Assuming that the yield on state and local gove the rate on equivalent held by banks in 1982 was about 25 percent below may be calculated by taxable securities, an alternative effective tax rate equivalent of $14,215 converting the nontaxable interest into a taxable million, plus an imputed tax of $3,554 million. tax rate of 32 percent. Different results may, of course, be obtained by focusing only on federal taxes. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis This implies an effective -2- ge required During 1982, commercial banks were required to hold avera on. reserve balances at Federal Reserve Banks of $22,622 milli The lost ge federal funds interest on these balances, evaluated at the daily avera rate of 12.3 percent, amounts to $2,783 million. Adding this estimate to e plus imputed actual taxes paid and dividing by the sum of taxable incom tax rate of 57 percent taxes on required reserve balances yields an effective compared to 43 percent. Alternatively, adding this estimate of lost interest taxes on state and on these balances to the actual taxes paid plus imputed le income plus local government securities and dividing by the sum of taxab imputed taxes on imputed income on state and local government securities and 39 percent compared required reserve balances yields an effective tax rate of to 32 percent. ces Other depository institutions also were required to hold balan at Federal Reserve Banks during 1982: savings and loan associations were on and credit required to hold $156 million, mutual savings banks $2 milli unions $7 million. on The lost interest on these balances amounts to $19 milli gs banks and $1 at savings and loan associations, S250,000 at mutual savin million at credit unions. This foregone interest could be added to other taxes to obtain an overall effective income tax rate. However, this exercise on average had is complicated by the fact that in 1982 thrift institutions negative earnings and paid negative taxes. (That is, they had tax losses paid.) that could be used to offset either past or future taxes Thus, adding in order to derive a positive imputed reserve tax to the negative taxes paid result. an effective income tax rate would not give a meaningful Indeed, reasonably be while the foregone interest on required reserve balances may an excise tax than thought of as a kind of tax, it is more in the nature of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis or not the institution has an income tax, since it is payable whether positive earnings. the reserve It should also be noted that the incidence of institutions, in tax probably falls largely on depositors, not depository the form of lower rates of interest on deposits. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7. would presumably The decrease in net earnings paid over to the Treasury gs of the depository be ameliorated by the increase in the taxable earnin of increased institutions. Please indicate as best you can the amount interest paid and revenue which might be received from taxes due on the on income received from the reinvested interest. tes for Tables 7.A through 7.D show Federal Reserve staff estima payment of interest annual Treasury revenue losses that would result from red from the higher on required reserve balances, net of tax receipts recove incomes generated by these interest payments. Tables 7.A and 7.B reflect by type of reservable staff estimates of annual net Treasury revenue losses, required reserve liability, assuming interest were to be paid in full on all balances for 1983 and 1988, respectively. Tables 7.0 and 7.D show estimated st were to be paid net Treasury revenue losses for 1983 and 1988 if intere only on reserves held against MMDAs and Super NOW accounts. e In each table, the first column shows estimated required reserv es less vault balances held at the Federal Reserve banks (required reserv and in total.' cash at bound institutions) by type of reservable liability e balances are To derive the gross annual Treasury losses, required reserv the vicinity multiplied by an assumed annual interest rate of 10 percent, in in recent quarters. of the return on the Federal Reserve's security portfolio alterAlthough the actual rate that would be paid is yet to be determined, proportionnative rates would simply raise or lower Treasury revenue losses ately. The actual loss to the Treasury would be reduced by tax revenues st on against the higher incomes that would result from payment of intere reserves. Hence, to derive net annual Treasury revenue losses (fourth e losses column), the third column multiplies the gross annual Treasury revenu higher incomes. by 1 minus the marginal tax rates assumed to apply to these 1. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1.F, with The figures for required reserve balances also appear in table the exception of those incorporating deposit shifts in table 7.D. -2- As there is evidence that rates paid on various types of deposits typically reflect the differential cost of reserve requirements, it is assumed that the benefits of interest payments on required reserve balances will be fully passed through to depositors in the form of higher interest rates offered on reservable deposits. Hence, the marginal tax rates used in column 3 are those assumed for typical depositors holding each type of account.' Table 7.A shows the estimated initial impact by type of reservable liability if interest were currently being paid on all required reserve halances.2 Required reserve balances are allocated to each type of reservable liability according to the proportion of total required reserves accounted for by each type of reservable liability as of October 5, 1983. Table 7.B shows required reserve balances by type, also allocated proportionately, and assumes deposit growth through 1988 and full phase in of reserve requirements as specified in the Monetary Control Act of 1980. As shown, payment of interest on all required reserve balances would result in an estimated net annual Treasury revenue loss of about $1.25 billion initially, which would increase to about $2.25 billion annually by 1988. 1. For NOWs and Super NOWs, holders are primarily households and a marginal tax rate of 25 percent is assumed. For nonpersonal time and savings deposits and nonpersonal KMDAs, a marginal tax rate of 45 percent is generally assumed; the bulk of these deposits are held by businesses and available data indicate that these deposits are in relatively large denominations. An exception to this general rule is the assumed marginal tax rate of 30 percent applied to nonpersonal MMDAs to derive the upper bound estimate for Treasury revenue losses in 1988 on table 7.D. Since about 70 percent of demand deposits are held by businesses and 30 percent by households, a marginal tax rate of 40 percent is assumed for these accounts. 2. All estimates are based on required reserve balances for weekly reporters only since individual bank data on required reserves are not readily available for quarterly reporters. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 7.A Initial Net Annual Treasury Revenue Loss' Interest on All Required Reserve Balances By Type of Deposit Required X Reserve Balances 2 ($ millions) Interest Rate Paid on Reserve Balances 3 X Marginal Tax ) (1 Rate4 = Net Treasury Revenue Loss ($ millions) 600 X 10% X (1 - .45) . 33 MMDAs 579 X 10% X (1 - .25) . Super NOWs 43 Other NOWs 1,282 X 10% X (1 - .25) = 96 12,976 X 10% X (1 - .40) . 779 5,116 X 10% X (1 - .45) = 281 Demand Deposits Other Reservable Liabilities Total 1,232 20,553 ber 5, 1983 of weekly reporters 1. Based on required reserve balances on Octo only. nces. 2. Proportional allocation of required reserve bala See table 1.F. rates would scale the net 3. Assumed to be 10 percent. Alternative assumed Treasury losses up or down proportionately. benefits through to 4. Depository institutions are assumed to pass all marginal tax depositors in the form of higher offering rates. Hence, type. rates are those assumed for typical depositors of each https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 7.B Net Annual Treasury Revenue Loss Interest on All Required Reserve Balances By Type of Deposit October 19881 Required X Reserve Balances 2 ($ millions) Interest Rate Paid on Reserve Balances 3 X Marginal ) = Tax (1 — Rate4 MMDAs 1,600 X 10% Total NOWs5 6,200 X 10% X (1 — .25) Demand Deposits 17,600 X 10% X (1 — .40) Other Reservable Liabilities 11,200 X 10% X (1 — .45) •Total Net Treasury Revenue Loss ($ millions) 615 2,225 36,600 1. Assumes deposit growth through October 1988 and full phase in of reserve requirements resulting from the MCA (weekly reporters only). Shifts of funds from nonreservable sources to reservable liabilities that may be induced by payment of interest on required reserve balances are ignored, as is appropriate in calculating net Treasury revenue losses. 2. Proportional allocation of required reserve balances. See table 1.F. 3. Assumed to be 10 percent. Alternative assumed rates would scale the net Treasury losses up or down proportionally. 4. Depository institutions are assumed to pass all benefits through to depositors in the form of higher offering rates. Hence, marginal tax rates are those assumed for typical depositors of each type. 5. Under the deregulation of deposits mandated by the MCA, there will be no distinction between NOWs and Super NOWs after 1986. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis first column's total) would be about Gross revenue losses (one-tenth of the on the interest payments would be $2.1 billion in 1983, and tax receipts marginal tax rate of 40 percent. about $0.8 billion, implying an average By ease to about $3.65 billion, with tax 1988, gross interest payouts would incr implied average marginal tax rate of receipts of about $1.4 billion and an 39 percent. liabilities arising In both tables, any increases in reservable e sources that might result from from shifts of funds out of nonreservabl ilities reflecting payment of interest higher offering rates on reservable liab ately ignored. on required reserve balances are appropri Although such shifts balances and an increase in would cause an increase in required reserve not be an increase in net Treasury gross Treasury revenue losses, there would revenue losses. rve balances This is because such increases in required rese er Federal Reserve System holdings would be associated with equivalently larg ral Reserve earnings, which of Treasury securities and an increase in Fede on required reserve balances. would fully finance the higher gross payments sitors reflecting these higher In addition, larger tax receipts from depo tax payments from the prepayments would essentially offset the decline in es that are acquired by the vious private holders of the government securiti Federal Reserve. revenue losses for 1983 Tables 7.0 and 7.D show annual net Treasury on required reserve balances held and 1988 if interest were to be paid only against MMDAs and Super NOW accounts. In contrast to the proportional method these tables assume that all used in the calculation of tables 7.A and 7.B, unts would be eligible to required reserves held against these types of acco itution's required reserve earn interest, up to the amount of each inst balance. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis s from nonreservable As in tables 7.A and 7.B, possible shifts of fund -4payments on reserves are sources into MMDAs and NOWs resulting from interest appropriately ignored. ury revenue loss As shown in table 7.C, the initial annual net Treas required reserve balances on that would result from payment of interest on about $135 million. MMDAs and Super NOW accounts is estimated to be Gross million, with tax receipts on interest payouts are estimated to be about $210 nts of about $75 million, the higher incomes resulting from the interest payme implying an average marginal tax rate of about 35 percent. ories and If interest were paid only on certain reservable categ its earning interest not on others, the higher rates offered on those depos s of funds from nonon their reserve balances may over time induce shift the interest earning interest earning reservable liability categories into categories. ve balances In particular, if interest were paid on required reser against nonpersonal held against nonpersonal MMDAs, but not on balances held on nonpersonal time and savings deposits, higher rates could be offered comparable size and MMDAs than on nonpersonal time and savings deposits of maturities. e substanIn the long run, the resulting rate spread could induc savings deposits to tial amounts of funds to shift from nonpersonal time and nonpersonal MMDAs. in Since such shifts would not result in any increase ble categories), required reserve balances (unlike shifts from nonreserva on required reserve there would be no offset to the larger interest payouts ve holdings of balances in the form of higher earnings on Federal Reser securities. substanThus, net Treasury revenue losses could be increased tially further in this case by 1988. Although the magnitude of such shifts of possible net Treasury to nonpersonal MMDAs are highly uncertain, a range https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Table 7.0 Initial Net Annual Treasury Revenue Loss' Interest Only on ttequired Reserve Balances Held Against MMDAs and Super NOWs Required Reserve Balances2 ($ millions) X Interest Rate Paid on Reserve Balances3 X iarginal Tax ) (1 4 Rate Annual Net Treasury Revenue Loss ($ millions) 1,098 X 10% X (1 - .45) = 60 MMDAs 1,022 X 10% X (1 - .25) = 77 Super NOWs MMDAs plus Super NOWs 2,120 Regular NOWs 2,273 XMDAs plus Total NOWs 4,393 137 X 10% X (1 - .25) = 170 307 October 5, 1983 of weekly reporters 1. Based on required reserve balances on only. balances. 2. Ordered allocation of required reserve See table 1.F. assumed rates would scale the net 3. Assumed to be 10 percent. Alternative Treasury revenue losses up or down proportionately. all benefits of interest payments 4. Depository institutions are assumed to pass s. Hence, marginal tax rates through to depositors in the form of higher rate are those assumed for typical depositors. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5- revenue losses for 1988 incorporating different shift assumptions is presented in table 7.D along with estimates abstracting from such deposit shifts. With no shifts of funds into nonpersonal MMDAs from other reservable nonpersonal sources induced by higher offering rates, annual net estimated Treasury revenue losses are estimated to increase to about $810 million by 1988. With induced shifting, annual net Treasury revenue losses are estimated to range from $1.0 to $1.3 billion in 1988. The low estimate assumes that 25 percent of nonpersonal time and savings deposits are induced to shift into nonpersonal MMDAs and that the marginal tax rate remains at 45 percent. As an upper bound, the high estimate assumes that a maximum of 50 percent of nonpersonal time and savings are induced to shift into nonpersonal MMDAs, with the bulk of the funds being shifted from relatively small denomination accounts, resulting in a lower assumed marginal tax rate. For the low estimate in 1988, gross payments on reserves backing MMDAs and NOWs would amount to about $1.5 billion, implying additional tax receipts of about $500 million and an average marginal tax rate of 33 percent. In the upper bound case, gross payments would be around $1.8 billion, with tax receipts on the additional taxpayer income again around $500 million, but the implied average marginal tax rate assumed is about 28 percent. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 Table 7.D Net Annual Treasury Revenue Loss Interest Only on Required Reserve Balances Held Against MMDAs and Super NOWs October 19881 Required X Reserve Balances2 ($ millions) MMDAs Before Shifts5 After Shifts 6 Low High 7 Total NOWs Before Shifts5 After Shifts 6 Low High MMDAs plus NOWs Before Shifts5 After Shifts6 Low High In Rate Paid on Reserve Balances 3 X Marginal ) Tax (1 Rate4 Annual Net Treasury Revenue Loss ($ millions) 2,400 10% (1 - .45) 130 5,800 9,200 10% 10% (1 - .45) (1 - .3) 320 645 9,100 10% X (1 - .25) 680 9,000 8,800 10% 10% X X (1 - .25) (1 - .25) 675 655 11,500 810 14,800 18,000 995 1,300 of reserve requirements 1. Assumes deposit growth through October 1988 and full phase in resulting from the MCA (weekly reporters only). 2. Ordered allocation of required reserve balances. See table 1.F. Treasury 3. Assumed to be 10 percent. Alternative assumed rates would scale the net revenue losses up or down proportionately. through 4. Depository institutions are assumed to pass all benefits of interest payments are those to depositors in the form of higher rates. Hence, marginal tax rates assumed for typical depositors. by the payment 5. Ignores shifts of funds into MMDAs or Super NOWs that may be induced of interest on required reserve balances. deposits into 6. Assumes induced shifts of funds from nonpersonal time and savings losses, nonpersonal MMDAs but, as is appropriate in calculating net Treasury revenue d by ignores shifts of funds from nonreservable sources into NOWs that may be induce the payment of interest on required reserve balances. Low estimates assume 25 percent of all nonpersonal time and savings balances are induced to shift into t of nonpersonal MMDAs by the higher rates offered. High estimates assume 50 percen sonal all nonpersonal time and savings balances are induced to shift into nonper shifting MMDAs by higher rates. The high estimate also assumes that the bulk of the d comes from relatively small denomination accounts, resulting in a lower assume as marginal tax rate. Note that required reserve balances allocated to NOWs fall t MMDAs shifts into MMDAs occur. This is because the higher required reserves agains cause additional reserve balances to be allocated first to MMDAs and, as some instited tutions then exhaust their reserve balances, fewer reserve balances to be alloca to NOWs. 7. As a result of the deregulation of deposit accounts resulting from the MCA, there will be no distinction between regular NOW and Super NOW accounts after 1986. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 7, 1983 The Honorable Jake Gam Chairman Committee on Banking, Housing, and Urban Affairs United States Senate Washington, D. C. 20510 Dear Jake: , I On behalf of Governor Teeters and myself to our attention want to thank you for again bringing serving on the Mr. Lawrence S. Okinaga's interest in Board's Consumer Advisory Council. issue in The Board expects to consider this ure you that the near future, and I want to ass sideration. Once Mr. Okinaga will receive every con ommendation. again, we appreciate having your rec Sincerely, CO:AFC:vcd (V-210, 83340) bcc: Gov. Teeters Ms. Bray (w/copy of incoming) Mrs. Mallardi (2)v/ JAKE OMEN, LiTAH, CHAIRMAN JOHN TOWER. TEXAS JOHN HEINZ, PENNSYLVANIA WILLIAM L. ARMSTRONG COLORADO ALFONSE M DAMATO, NEW YORK SLADE GORTON. WASHINGTON PALL.A HAWKINS, FLOPIDA MACK MATTINGLY. GEJRGIA CHIC HECHT, NEVADA PAUL TRIBLE, VIRGINIA WILLIAM PROXMIRE. WISCONSIN ALAN CRANSTON, CALIFORNIA DONALD W RIEGLE, JR., MICHIGAN PA'jl S SAABANES MARYAND CHRIS :OPHER J DODO CONNLGTICUT ALAN J CAKON ILLINOIS JIM SALSER, TENNESSEE FRANK R. LAUTENBERG, NEW JERSEY 1.4 DANNY WALL STAFF DIRECTOR KENNETH A McLEAN, MINORITY STAFF DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 17 L. r1 United A3tates eZtnattm— 1. ECV -3 .1 to 6 ' 6 16. • I Pi 2: COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 0- : r • — 6, 'PI t (.1 November 2, 1983 The Honorable Paul Volcker Chairman Federal Reserve Board 20th and C Streets, N.W. Washington, D.C. 20551 Dear Paul: this summer recommending Enclosed is a copy of a letter I wrote Honolulu, Hawaii, be appointed that Lawrence S. Okinaga, a lawyer in er Advisory Council. to the Federal Reserve Board's Consum nding applicant for memI believe that Mr. Okinaga is an outsta ncil, which provides the Board bership on this important Advisory Cou bol of the Board's commitment with guidance and also serves as a sym lic. to serve effectively the American pub qualifications and the The enclosure describes Mr. Okinaga's him. He has an excellent knowlhigh regard in which I and others hold , most importantly, is known for edge of financial and consumer law and his integrity and fair mindedness. you and urge your favorThus, I highly recommend Mr. Okinaga to able consideration of his application. Sincerely, Garn JG/jch enclosure -ULU C.A.Pck. tra.M. CP4AIRMAN vr _NT c P.% coo!RE :."014SIN CALO0110 MICHIGAN W PGL Jilt$ SArtar.P4E5 M&IPTIAND ..Est DOOD CONNECT)C7.71' CHFcS70 , DACA4 J1/4 SASSER. TENI4ESSii L..k.frEkEERG kEW JERSEY FAANK WI P1.045,1,V414.• AAMSTkOwG COLDAADO •..Ew you Wr.S.41%0/4 mAvvic.NIS. FLORIDA Cr mA77,•.GLY. GEOAGLA t.ECKT. i4EvADA VAGINIA D• W' WAj.j. STArr D•RECT,I .C.P..-rf S7A.r4 DIRECT011t KEIvirTs & AA cLEAls Unit tattos COMMTTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WASHINGTON, D.C. 20510 August 4, 1963 Ms. Doloe.es S. Smith Assistant Director Division of Consumer and Community Affairs Federal Reserve Board Washington, D.C. 20551 Dear Ms. Smith: I submit the nomination of Lawrence S. Okinaga, a partner in the Honolulu law firm of Carlsmith, Carlsmith, Wichman and Case, for appointment to the Consumer Advisory Council of the Board of Governors of the Federal Reserve System. Mr. Okinaga's experience as a lawyer familiar with financial institution and consumer credit issues and his involvement in community and civic affairs make him especially well -suited to a position on the Council. His full address and telephone number are: Lawrence S. Okinaga Carlsmith, Carlsmith, Wichman and Case P.O. Box 656 Honolulu, Hawaii 96809 (808)523-2500 A native of Hawaii, Mr. Okinaga spent several years in the Air Force at various locations and as a law student in Washington, D.C. ce before returning to Honolulu in the mid-1970's to engage in the practi Pence, of law. When he returned to Hawaii, Mr. Okinaga clerked for Judge ting Chief Judge of the U.S. District Court in Hawaii, a position reflec Mr. Okithe educational background and intellectual accomplishments of y naga. Since joining the Carlsmith law firm, Mr. Okinaga has quickl achieved a leadership role, as a partner, chairman of the firm's hiring committee, and a member of its long-range planning committee. He has bar associaalso been active as an officer and board member of various ced by tion committees. His esteem as a lawyer is perhaps best eviden Juhis being a member and current Vice Chairman of the State :f J.awaii dicial Selection Committee. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ms. Dolores S. Smith'. August 4, 1983 Paae 2 spends considerable time on a nao Oki Mr. ce, cti pra al leg his In issues. In fact, a few on uti tit ins ial anc l fin era fed and te both sta of Hawaiian institutions on legislayears aao he represented a group ne here with his legal ryo eve sed res imp and tee mit Com s thi tion before k with others. As a result of skills, integrity, and ability to wor the Hawaiian Congressional ch whi ard h reg hig the w kno I e, that experienc ators Inouye and Matsunaga, has delegation, especially my colleagues Sen for Mr. Okinaga. thrift institutions and Mr. Okinaga represents several Hawaiian financial regulatory other commercial banks on consumer credit and developed an excellent undermatters. Through this legal work, he has banking, as well as extensive standing of the entire area of retail ulatory history of the consumer knowledge about the legislative and reg ers and financial institutions. sum con on act imp ir the and s law dit cre s field, Mr. Okinaca has spoken thi in ert exp d ize ogn rec a as er, eov Mor lecal education conferences and s iou at var ues iss g kin ban ail ret on similar meetinas. ellence in his profession, e>c to t men mit com his to on iti add In s. He is a member of a commuMr. Okinaga is active in community affair apanese Chamber of Commerce, nity center board, and of the Honolulu Hawaii Corporation. and he was Secretary of the Bicentennial type of individual who would In my opinion, Mr. Okinaga is the Council's work. He has extenmake significant contributions to the financial institution issues, and dit er cre sum con in e enc eri exp sive in community matters and, d han a d len to g lin wil n bee ays alw he has unquestioned integrity. In of and ded r min fai is he e, els all above as an outstanding candidate you to a nag Oki Mr. d men com hly hig sum, I ry Council. for a position on the Consumer Adviso JG/jch enclosure Removal Notice The item(s) identified below have been removed in accordance with FRASER's policy on handling sensitive information in digitization projects due to personally identifiable information. Citation Information Document Type: Membership application materials Citations: Number of Pages Removed: 2 Application for Membership on Consumer Advisory Council, Federal Reserve Board, for Lawrence S. Okinaga, 1983. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org .R1N https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis s." f•-11 IILAFAYETTEICOLLEGE Office of the President c;\ • November 4, 1983 Dear Mr. Volcker: On behalf of the Board of Trustees and the 1983 graduating class, it is my pleasure to invite you to deliver the Commencement Address at Lafayette College on Sunday, May 27._ We would be pleased VI—have you speak on any topic -61 your choosing. The trustees would also like to recognize at that time your distinguished accomplishments through the awarding of an honorary deree. - The commencement exercises begin at 2:30 p.m. and are preceded by a luncheon hosted by the trustees for honorary degree recipients. It is our custom to pay the travel expenses of the speaker and to furnish a suitable honorarium. I have enclosed a pamphlet about the College for your information. The trustees, faculty, students, and I would be most gratified if you would be able to accept our invitation. Sincerely, Kr, r& David W. Ellis Enc. Mr. Paul A. Volcker Chairman Federal Reserve Board 20th and Constitution N.W. 20551 Washington, D.C. Easton, Pennsylvania 18042 ,A..r....44111111M11411111.1..• •••'•44.11;C;... , ,• tike:yraiiiit..4TA. 1.0'. 64:01111 .4 THE BOARD OF TRUSTEES 1983-84 LIFE TRUSTEES The date of each Life Trustee's appointment appears after each name in the listing. Thomas W. Pomeroy, Jr. (1943), A.B.,LL.B, LL.D, Counsel, Kirkpatrick Lockhart Johnson & Hutchison, and former Pennsylvania Supreme CourtJustice, Pittsburgh, Pennsylvania. Cyrus S. Fleck (1948-1954, 1956), A.B., L.H.D., Retired President, Mack Printing Company, Easton, Pennsylvania. George C. Laub (1958), A.B., LL.B., LL.D., Attorney; Legal Counsel to the College, Easton, Pennsylvania TERM TRUSTEES The term to be served by each Term Trustee appears after each name. John W. Landis (1962-1968, 1976-1986), B.S., Sc.D., Senior Vice President and Director, Stone & Webster Engineering Corporation, Weston, Massachusetts. Eugene H. Clapp, II (1968-1986), B.S., President, Penobscot Capital Investment Company, Weston, Massachusetts. Edward A. Jesser, Jr. (1968-1986), A.B., Director, United Jersey Bank, Mahwah, New Jersey. Walter E. Hanson (1969-1987), A.B., LL.D., Retired Chairman and Chief Executive, Peat Marwick Mitchel & Company; Chairman, Westport, Connecticut. Jeanette F. Reibman (1970-1985), A.B., LL.B., LL.D., Pennsylvania State Senator, Easton, Pennsylvania. Mitchel L. Flaum (1971-1984), B.S., Chairman of the Board, S&S Corrugated Paper Machinery Company, Inc., Scarsdale, New York. William E. Simon (1972, 1977-1986), A.B., LL.D., Chairman, Wesray Corporation and Former Secretary of the Treasury for the United States, New Vernon, New Jersey. Robert H. Britton (1973-1983), A.B., Retired Vice Chairman, Briggs Schaedle & Company, Westfield, New Jersey. Samuel Labate (1973-1983), A.B., M.S., Chairman, Bolt, Beranek & Newman, Inc., Belmont, Massachusetts. Roland Merritt Brown (1975-1985), B.S., M.S., Retired, Department of the Army, Palm Coast, Florida. William W. Lanigan (1975-85), A.B., LL.B., Attorney; Secretary, Morristown, New Jersey. Lawrence J. Ramer (1976-1986), A.B., Chairman of the Board, Pacific Coast Cement Corporation, Los Angeles, California. Thomas A. Holmes (1977-1987), B.S., LL.D., Chairman and Chief Executive Officer, Ingersoll-Rand Company, Greenwich, Connecticut. Charles E. Hugel (1977-1987), A.B., President, Combustion Engineering, Inc.; Vice Chairman, Greenwich, Connecticut. David W. Ellis (Trustee during tenure as President of the College), B.A., Ph.D., LL.D. Sc.D., Easton, Pennsylvania. Arthur J. Rothkopf (1978-1983), B.A., LL.B., Partner, Hogan & Hartson, Washington, D.C. James S. Pasman, Jr. (1979-1984), B.B.A., M.B.A., Vice Chairman and Director, Aluminum Company of America, Pittsburgh, Pennsylvania. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -2Grace M. Allen (1980-1985), B.A., Housewife, Port Washington, New York. Harry V. Keefe, Jr. (1980-1985), B.A., Chairman and Director, Keefe, Bruyette, Woods, Inc., Greenwich, Connecticut. Robert E. Kusch (1980-1985), B.A., LL.B., Attorney-Partner, Ivey, Barnum & O'Mara, Vero Beach, Florida. J.D., Judge, Chesapeake General District Eric O. Moody (1980-1985), Court, Chesapeake, Virginia. Paul O. Koether (1982-1987), A.B., M.A., Chairman, Sun Equities Corporation, Far Hills, New Jersey. Conrad H. Massa (1982-1987), A.B., M.Div., Ph.D., Dean, Princeton Theological Seminary, Princeton, New Jersey. L. Jack Bradt (1983-88), B.S., Chief Executive Officer and Chairman of the Board, S.I. Handling, Inc., Easton, Pennsylvania. Edward L. Hennessy, Jr. (1983-88), B.S., Chairman, Chief Executive Officer, Allied Corporation, Morristown, New Jersey. ALUMNI TRUSTEES The term to be served by each Alumnus Trustee appears after each name. L. Mark Michel (1979-1984), B.A., Wayzata, Minnesota. Fred P. Braun, Jr. (1980-1985), A.B., M.A., President, Creative Enterprises, Inc., President, Zephyr Products, Inc., President, Heatron, Inc., Lake Quivira, Kansas. Boyer L. Veitch (1981-1986), A.B., President, Veitch Printing Corp., Lancaster, Pennsylvania. Richard F. Ehret (1982-1987), A.B.„ Chairman of the Board, Ehret Inc., Philadelphia, Pennsylvania. Thomas F. McGrail (1983-88), A.B., M.B.A., Vice President and General Manager of the Specialty Chemicals Division, ICI Americas, Inc., Wilmington, Delaware. OFFICERS OF THE BOARD Walter E. Hanson, Chairman; Charles E. Hugel, Vice Chairman, William W. Lanigan, Secretary. EMERITI TRUSTEES The term served by each Emeritus Trustee appears after each name. Charles T. Siebert, Jr. (1944-1969), M.E., Retired Director of Trade Relations, United States Steel Corp., Pittsburgh, Pennsylvania. Thomas Roy Jones (1953-1969), B.S., LL.D., Retired Vice Chairman, Schlumberger, Ltd., Carmel, California. in-Chief, Lloyd M. Felmly (1946-1952, 1953-1971), Ph.B., Litt.D., L.H.D., Retired EditorNewark New Jersey News, Brielle, New Jersey. W. Orme Hiltabidle (1954-1972), C.E., Sc.D., Vice Admiral C.E.C., USN retired, formerly with DeLeuw Gather International Consulting Engineers, Doylestown, Pennsylvania. Sumner H. Babcock (1964-1974), B.S., LL.B., Partner, Bingham, Dana & Gould, Wellesley Hills, Massachusetts. G. Herbert McCracken (1963-1974), B.S., Litt.D., LL.D., Chairman of the Executive Committee, Scholastic Inc., Buck Hill Falls, Pennsylvania. Standard, Inc., Joseph A. Grazier (1956-1975), A.D., LL.B., L.H.D., Consultant, American New York, New York. Eugene M. Thore (1968-1976), B.S., LL.B., Litt.D., Attorney, former President, Life Insurance Assoc. of America, Counsel to the law firm of Nossaman, Krueger & Knox, Washington, D.C. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rkal0 -3Hugh H. Jones (1960-1966, 1969-1977), A.B., LL.B., Retired Vice President, Hillman Coal & Coke Co., Amelia Island Plantation, Florida. Ralph K. Gottshall (1953-1978), B.S., Sc.D., Retired Chairman and President, Atlas Chemical Industries (Now ICI Americas, Inc.), Wilmington, Delaware. K. Roald Bergethon (1958-1978), A.B., A.M., Ph.D., Lit.D., LL.D., Litt.D., L.H.D., President Emeritus of Lafayette College and President, New England College, Henniker, New Hampshire. Julius Manger, Jr. (1965-1978), L.H.D., Chairman of the Board, The Center, Inc. Greenwich, Connecticut. James H. Hoffman (1968-1981), B.S., LL.B., Chairman, Executive Committee, Denman Rubber Mfg. Co., Mansfield, Ohio. Harold S. Hutchison (1968-1981), B.S., Retired Chairman & Chief Executive Officer, Mack Printing Co., Easton, Pennsylvania. Herbert P. Harkins (1962-1968, 1973-1982), M.D., M.Sc., Physician, Bryn Mawr, Pennsylvania. Charles E. Snyder (1973-1982), A.B., M.B.A., Retired Assistant Treasurer, Bethlehem Steel Corp., Bethlehem, Pennsylvania. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 'A71"""7" November 4, 1023 The Honorable Paula Hawkins United States Senate Washington, D. C. 20510 Dear Paula: ng the Thank you for your letter of October 19 concerni . marginability of securities trading over-the-counter 1034 Although the Board has had responsibility since regulations under the Securities Exchange Act for writing margin statutory for exchange-traded stocks, until 1968 there was a rities as prohibition against the use of over-the-counter secu was amended collateral in a brokerage account. When the statute to OTC giving the Board authority to amply margin regulations dards that stocks, the Roard stated its intention to develop stan this way were similar to those for listing on an exchange. In -counter stocks the margin regulations would encompass over-the h and with the degree of national investment interest, dept t the secubreadth of market, availability of information abou ce of the rity and its issuer, and the character and permanen -listed secuissuer to warrant being treated like an exchange be flexible in rity. The Board also indicated that it would and future developdeveloping standards in light of exnerience have been ments in the OTC market. Accordingly, the criteria eased or frequently amended and, in most cases, have been and the lowered in response to improvement in the OTC market system (NASDA). development of the NASn's automated quotation to The Board's staff is currently undertaking a study g securities review the feasibility and approoriateness of usin included in qualified for the NASD's National arket System or its List of OTC the NASD's National Daily list as the basis for and requested ":argin Stocks. Board staff has recently met with is a staff data from the NASD to ail in this study. Enclosed erns if the memorandum giving further information about our conc matic marNASD's National Daily list were to be used for auto ome of the ginability. I will keep you advised as to the outc study and any resultant Board action. Sincerely, LH:CO:vcd (V-209, 83270) bcc: Ms. Homer (for follow-up) Mrs. Mallardi (2)/ Enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 4, 1983 Staff Memorandum on Issues Concerning Proposed Use of NASD National Daily List Legal Status and Availability of Public Information https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Since newspapers maintain their own procedures as to which stocks are quoted, there is no guarantee that the entire National,Daily List (NDL) will appear daily in any particular newspaper. This lack of uniformity would present a particular problem for banks and other lenders that must determine which stocks are on the list in order to comply with the Board's margin regulations. The Board has suggested that the NASD consider publishing a formal list that would be available to the public and supplement it with weekly or monthly updates so that lenders could easily refer to it to determine which NASDAQ securities are marginable. The Board files its List of OTC Margin Stocks in the Federal Register to give legal status to the stocks on the List. The Board has encouraged the NASD to discuss with the Securities and Exchange Commission (SEC) a similar formal filing. It is important to recognize that a security is not listed on an Exchange until its issuer completes an extensive application procedure and receives formal listing approval from the SEC. The SEC, therefore, has a record of all exchange- listed securities. Automatic Marginability for Exchange-listed Stocks. Current criticism by the NASD centers on perceived discrimination against stocks carried in the NDL which must meet higher standards than required by some regional exchanges whose stocks are automatically eligible for margin treatment. Generally, the standards of the major exchanges are more stringent than those for the List of OTC Margin Stock. Although the Board's standards may exceed those of some regionalc, the criteria ges where the vast majority of selected to resemble those of the major exchan ize that inequities can be listed stocks are traded. The Board does recogn hanges and that the NDL can, in created by different standards used by the Exc However, these differences fact, have higher criteria than some of them. in 1934 since the status of exchangeemanate from a Congressional decision '34 Act. traded securities is established in the of AMEX and NDL Comparison of Financial and Market Criteria for their NDL in In 1981, the NASD adopted financial criteria ia that had been used as the lieu of the more volatile dollar volume criter criteria are similar in many prior bases for qualification. Although the es. The AlEX requires its respects to the Amex, there are some differenc net worth whereas NDL has no in n lio mil $4 st lea at e hav to ies pan com listing lion in capital to trade in such requirement. (A conpany must have $1 mil 2, it reduced its capital 198 in ia ter cri its d nde ame rd Boa the n Whe NASDAQ). emble that of the AMEX. res y sel e clo mor to n lio mil $4 to $5 m fro criterion . e generally supported the change t tim tha at rd Boa the by ed eiv rec t men com lic Pub maker system when Another difference involves the multiple market ges. compared to the specialist system on exchan The Board has made an attempt ck by the exchange specialist sto a to en giv ics ist ter rac cha the ate to equ ket maintained by a selected a mar in ted ibi exh ics ist ter rac cha the h wit system ff studies demonstrated that sta us vio Pre . ers mak ket mar DAQ NAS of ber num r e at least four market makers ove hav to ck sto OTC an es uir req y lit abi par com of ieve the same depth and breadth ach to er ord in e tim of iod per ed end ext an ble under the exchange specialist ila ava lly era gen y uit tin con ce pri and market ed for inclusion on the NDL. Data uir req are ers mak ket mar two y Onl . system ed if the NASDAQ system has improv ine erm det to D NAS the m fro ted ues req has been ary. requirement is no longer necess er mak ket mar r fou the t tha ent ext an to such https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 3 Period of Seasoning One of the Board's criteria stipulates that a stock must trade six months before it is considered for the List. There are many instances where dramatic changes in price and dealer interest occur after the initial publicity of a new offering has died down. It has been the Board's view that . investors are best protected after a period of seasoning for the stock of Particularly, in a "hot issue" market, the Board has been especially wary placing concept or speculative issues on the List. requirement. The NDL has no such JAKE GARN. UTAH, CHAIRMAN '11.4N TOWER. TEXAS HEIN: PENNSYLVANIA fol ..WIL:!AM L ARMSTRONG, COLORADO FUNSE M DAMATO, NEW YORK SLADE GORTON. WASHINGTON PAULA HAWKINS, FLORIDA MACK MATTINGLY, GEORGIA CHIC HECHT. NEVADA PAUL TRIBLE VIRGINIA WILLIAM PROXMIRE. WISCONSIN ALAN CRANSTON, CALIFORNIA DONALD W RIEGLE, JR . MICHIGAN PAUL S SARBANES, MARYLAND CHRISTOPHER J DODD,CONNECTICUT ALAN J DIXON, ILLINOIS JIM SASSER. TENNESSEE FRANK R. LAUTENBERG, NEW JERSEY M DANNY WALL, STAFF DIRECTOR KENNETH A McLEAN MINORITY STAFF DIRECTOR https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Action assigned Mr. Ryan United e$tats enate COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS C.7.• C=! WASHINGTON, D.C. 20510 C=) October 18, 1983 ,1 , The Honorable Paul A. Volcker Chairman Federal Reserve System Twentieth Street and Constitution Avenue, N.W. 20551 Washington Dear etrafrilla As a member of the Senate and its Committee on Banking, Housing, and Urban Affairs, I have a continuing interest in exploring ways to has improve the United States capital markets. Among other things, this led me to examine the process by which over-the-counter securities become marginable. It appears that modifications in the process will benefit many small and medium sized companies. As you know, these am companies are important sources of employment and innovation. I to particularly interested in helping these companies since, according State the Small Business Administration's most recent survey - The 1983 of Small Business: A Report to the President, Florida's small and medium sized businesses have experienced the fastest rate of growth in the nation. As these companies grow their need for expansion capital frequently cannot be satisfied by using retained earnings or bank loans. As a result, many must go "public" via equity offerings. Therefore, it is imperative that these companies have a liquid marketplace for their securities, not only during their offerings but afterward as well since they will require additional capital during later stages of growth. Many emerging companies have their shares traded in the over-theNational counter market, NASDAQ. Yet, of the 2,378 issues on the NASDAQ, current List, only 1742 or 73% are carried on the Federal Reserve Board's OTC Margin List. Therein lies the problem. For rapidly growing public to companies, marginability is essential since it broadens their appeal investors. However, a substantial number of these companies are not included on the OTC Margin List. As you may know, all exchange-listed securities automatically issues, become marginable when listed on an exchange. Over-the-counter Board. on the other hand, must first meet standards established by the , which are The result is that hundreds of companies in the NASDAQ System marginable. well capitalized and enjoy market interest are currently not s However, in 1981, the National Association of Security Dealer criteria adopted a comprehensive set of financial criteria similar to the July, required for listing firms on the American Stock Exchange. In the typical 2,075 such issues were included on this list. As shown below 636 of NASD company at year-end 1982 was a well capitalized company, yet them are not carried on the Board's OTC Margin List. Average Price Per Share $15 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2 - 7.3 million Average Total Shares Outstanding Average Market Value $109.9 million Average Assets $377.7 million Average Revenues $125.2 million With respect to the problem in my state, there are currently 118 Florida NASDAQ National List companies, of which 56 or 47% are not on the current Federal Reserve Board's list and are therefore not marginable. As an indication of the substantial nature of these companies, as of August 1, 1983, these companies had aggregate assets in excess of $6.3 billion and equity greater than $443 million. Firms in my state and others have another problem. Even after an over-the-counter security qualifies, it takes months before the issue appears on the Board's OTC Margin List. Since the Board only publishes the margin list three times a year, some companies wait four months after qualifying before becoming marginable. Combining this four month waiting period with the six months of required trading history, it's clear that many NASDAQ companies must wait almost a year before they are marginable. I think that a reasonable solution to this problem is for the Federal Reserve to immediately grant margin eligibility to companies on the NASDAQ List. This equitable remedy has a special advantage. It eliminates delays that result from infrequent publishing of the margin list since the NASDAQ National List is released weekly and is published daily in over 80 major newspapers. I believe that granting margin eligible status to companies in the NASDAQ National Newspaper List is a viable solution to problems that exist today and adoption of it will particularly benefit small and medium sized companies through the elimination of artificial impediments in the market for their securities. Sincerely, ........1._ a Paula Hawkins United States Senator PH:ssh enclosure