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L . . ) : . , r „,. , ,. ,. 4._k ;., , https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r...., t....' e : , ,. r),(., -2( 1 Collection: Paul A. Volcker Papers Call Number: MC279 Box 9 Preferred Citation: General Correspondence, 1982 September-December; Paul A. Vokker Papers, ce Box 9; Public Policy Papers, Department of Rare Books and Special Collections,Printon University Library Find it online: http://findingaids.princeton.edu/collections/MC279/c316 and https://fraser.stlouisfed.orearchival/5297 The digitization ofthis collection was made possible by the Federal Reserve Bank of St. Louis. From the collections of the Seeley G. Mudd Manuscript Lthrary, 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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Weis has it for action, but the response is not due to Mr. Denkler until Dec. 2896 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Supp. Services checking on response. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4=119 BOARD OF THE FEDERAL RESERVE SYSTEM OF GOVERDRS .6PV (O- 0 41/C C" c — /o( 0z33 7)1>, 3/3 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS T E FrftAL RESERVE SYST P / 9' 7 9f3 • 41%-(201-7 44 3/ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis AMERICAN BANKERS ASSOCIATION 1120 Connecticut Avenue, NW. Washington. D.C. 20036 EXECUTIVE DIRECTOR GOVERNMENT RELATIONS Gerald M.Lowrie 202/467-4097 September 13, 1982 The Honorable Jake Garn United States Senate Washington, D.C. 20510 The Honorable Donald W. Riegle United States Senate Washington, D.C.20510 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue,N.W. Washington, D.C. 20551 Dear Gentlemen: The American Bankers Association, in its letter of August 27, responding to Senator Riegle's request for a summa ry of our views as to why S. 2879 is unacceptable to banki ng, indicated that we had discussed with the minority staff at its invitation a number of amendments including "a new section which would provide the opportunities for bank service corporations to engage in similar financially related services engaged in by savings and loan service corporations." In a letter from Senators Garn and Riegle dated September 10, after describing the contents of a Committee amendment to S. 2879, they observed that "modification of service corporation powers to authorize additional banking activities are currently under active discussion with the Federal Reserve Board and we are optimistic that progress can be made." The Bank Service Corporation Act presently authorizes two or more banks to join together to form a corporation to provi de very limited processing services for banks. We believe the existing language of the Act should be broadened as to the types of services a bank service corporation can perform as well as to whom such services can be provided. -"•-•111IMIN AMERICAN BANKERS ASSOCIATION CONTINUING OUR LIMA OF September 13, 1982 SHEET NO. 2 As a bare minimum, bank service corporations should be able to provide any services excluding the taking of deposits that a bank may perform or a bank holding company may perform by order or regulation under section 4(c)(8) of the Bank Holding Company Act. Further, the service corporation should be allowed to offer these services to the public. These services may now be provided by operating subsidiaries of banks. However, for smaller banks the financial and operational flexibility of a bank service corporation may offer a far more desirable approach to providing the services. For instance, it would substitute for the current requirement that an operating subsididary of a national bank must be at least 80 percent owned by the bank, a limit, tied to capital, on the maximum amount a bank could invest in a service corporation. With the exclusion of deposit taking, there can be no substantial geographic limitation arguments made against such expanded activities. If a bank service company is limited to what banks may do and what bank holding companies may do, and the investment of each bank is limited, it is difficult to see any reasonable objection. And, so as to fully understand the modest nature of our proposed expansion of the Bank Service Corporation Act, it needs only to be contrasted with the vast array of services and activities that savings and loan service corporations are authorized to perform. Such services include: 1. originating, purchasing, selling and servicing mobile - loans secured by real estate or first liens on homes - loans for repairing, improving, equipping or furnishing residential real estate - educaional loans; 2. acquiring of unimproved real estate for prompt of development and subdivision, principally for construction housing or for resale to others for such construction; mobile 3. acquiring improved residential real estate and homes to be held for rental; https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis AMERICAN BANKERS ASSOCIATION CONTINUING OUR LETTER OF September 13, 1982 SHEET NO. 410 3 d 4. issuing credit cards and engaging in any activity relate to this activity. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis It seems only fair to banking and to the public that banks should be allowed the extra flexibility of bank service corporations to provide the services in which a bank or bank holding company may engage. Sincerely, 241 tklj71 Gerald M. Lowrie xecutive Director Government Relations https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis AMERICAN BANKERS ASSOCIATION 1120 Connecticut Avenue, N.W. Washington, D.C. 20036 EXECUTIVE DIRECTOR GOVERNMENT RELATIONS Gerald M.Lowrie 202/467-4097 September 13, 1982 gill The Honorable Jake Garn United States Senate Washington, D.C. 20510 The Honorable Donald W. Riegle United States Senate Washington, D.C. 20510 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System 20th and Constitution Avenue,N.W. Washington, D.C. 20551 Dear Gentlemen: The American Bankers Association, in its letter of August 27, responding to Senator Riegle's request for a summary of our views as to why S. 2879 is unaccept able to banking, indicated that we had discussed with the minority staff at its invitation a number of amendments including "a new section which would provide the opportun ities for bank service corporations to engage in similar fina ncially related services engaged in by savings and loan service corporations." In a letter from Senators Garn and Riegle dated September 10, after describing the contents of a Committee amendment to S. 2879, they obse rved that "modification of service corporation powers to authorize additional banking activities are currentl y under active discussion with the Federal Reserve Board and we are optimistic that progress can be made." The Bank Service Corporation Act presentl y authorizes two or more banks to join together to form a corporat ion to provide very limited processing services for bank s. We believe the existing language of the Act should be broa dened as to the types of services a bank service corporat ion can perform as well as to whom such services can be provided. I AMERICAN BANKERS ASSOCIATION CONTINUING OUR LETTER OF September 13, 1982 SHEET NO. 2 4Ma As a bare minimum, bank service corporations should be able to provide any services excluding the taking of deposits that a bankillay perform or a bank holding company may perform by order or regulation under section 4(c)(8) of the Bank Holding Company Act. Further, the service corporation should be allowed to offer these services to the public. These services may now be provided by operating subsidiaries of banks. However, for smaller banks the financial and operational flexibility of a bank service corporation may offer a far more desirable approach to providing the services. For instance, it would substitute for the current requirement that an operating subsididary of a national bank must be at least 80 percent owned by the bank, a limit, tied to capital, on the maximum amount a bank could invest in a service corporation. With the exclusion of deposit taking, there can be no substantial geographic limitation arguments made against such expanded activities. If a bank service company is limited to what banks may do and what bank holding companies may do, and the investment of each bank is limited, it is difficult to see any reasonable objection. And, so as to fully understand the modest nature of our proposed expansion of the Bank Service Corporation Act, it needs only to be contrasted with the vast array of services and activities that savings and loan service corporations are authorized to perform. Such services include: 1. originating, purchasing, selling and servicing - loans secured by real estate or first liens on mobile homes - loans for repairing, improving, equipping or furnishing residential real estate - educaional loans; 2. acquiring of unimproved real estate for prompt development and subdivision, principally for construction of housing or for resale to others for such construction; 3. acquiring improved residential real estate and mobile homes to be held for rental; https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis AMERICAN BANKERS ASSOCIATION • CONTINUING OUR LETTER OF September 13, 1982 SHEET NO. 3 • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4. issuing credit cards and engaging in any activity related to this activity. It seems only fair to banking and to the public that banks should be allowed the extra flexibility of bank service corporations to provide the services in which a bank or bank holding company may engage. Sincerely, Gerald M. Lowrie Executive Director Government Relations tv. LAW OFFICES MILTON W. SCHOliEV SUITE 1107 cxv,c.c. 1750 PENNSYLVANIA AVENUE, N. W. WAsaniaroN, D. C. 20006 (202) 303 4901 September 21, 1982 By Messenger The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 Re: Petition to rescind May 28, 1982, "informal" staff interpretation of Regulation B, Equal Credit Opportunity, regarding consideration of income and signature requirements under equal management provisions of community property state laws Dear Mr'. Chairman: On July 23, 1982, I filed a petition with the Board requesting that the Board rescind the above -captioned interpretation. I am taking this opportunity to reiterate my request that the Board, itself, consider that petition, inasmuch as both the Federal Trade Commission and the Department of Justic e are relying on the interpretation as grounds for threatened litigation. My client and other creditors have been in legal controversy with the Federal Trade Commission since June 1979 regarding the very issues addressed in the interpretation. Right or wrong, the interpretation will be relied upon by the other enforcement authorities and the courts as a definitive statement of the law without notice to creditors or opportunity for them to be heard. As noted in my petition, the interpretation is procedurally deficient, because it effectively amends Regulation B, but denies my client and other creditors in community property states the opportunity to participate in what is, in effect, a rulemaking proceeding. Therefore, I request that the Board, in accordance with its Rules of Procedure, consider the matter, publish its determination for comment, and decide the proper prospective interpretation of its regulation. The referenced interpretation also departs from the Board's long standing practice of declining to interpret provisions of state law. Instead, it undertakes to interpret the highly complex (and differing) provisions of the laws of seven states without analyzing the specific provisions of any one of https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis LAW OFFICES MILTON W. SCHOBER The Honorable Paul A. Volcker September 21, 1982 Page 2 those state laws. Thus, the interpretation also suffers from the defect of oversimplified generalization. Not only does the interpretation effectively amend Regulation B, it also purports to give that amendment retroactive effect back to March 23, 1977, thereby subjecting my client to the threat of substantial civil penalties at the hands of the Federal Trade Commission for past practices that complied with the regulation as promulgated. Without warning or opportunity for comment, the interpretation changes the ground rules in the middle of the ball game; moreover, it applies them retroactively to the opening kick off. This is precisely the type of regulatory burden that should be removed from -- not heaped on -- the back of American commerce. Substantively, the referenced interpretation requires that, when only one spouse applies for credit, a creditor must consider the income of both the applicant and the nonapplicant spouse when evaluating the application in an equal management community property state, even though it prohibits the creditor from requiring the signature (i.e., the personal liability) of the nonapplicant spouse on the note or other evidence of indebtedness. This prohibition is applicable even when the income of the nonapplicant spouse is necessary to satisfy the creditor's ordinary standards of creditworthiness for individual credit. The interpretation applies equally to all creditors subject to Regulation B: banks, savings institutions, retailers, consumer finance companies, and mortgage bankers. Thus, it will require banks, for example, to grant credit on the basis of the income of a nonapplicant spouse without the assurances of personal liability of that spouse for the debt. In effect, it will require banks (and other creditors) to grant credit for which they will have no basis for collection in the event that the community status of future earnings is terminated before the credit extension is repaid. For example, when an aerospace worker is transferred from a McDonnell-Douglas plant in California (a community property state) to a McDonnell-Douglas plant in Missouri (not a community property state), all wages earned after the date of transfer are not community property and, thus, are not available to satisfy a debt for which that worker has no personal liability. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 es. LAW OFFICES MILTON W SCHOBER The Honorable Paul A. Volcker September 21, 1982 Page 3 Similarly, spouses in Louisiana (a community property state) can enter into a voluntary partition of community property after credit is extended and thereby terminate the community property status of future earnings. Such a partition is effective as to all third parties, including creditors. La. Civ. Code. Art. 2336. From and after the date of filing of such a partition wi.th the clerk of court, the earnings of the nonsignatory spouse would not be community property and, therefore, not available to pay the debt in the event of default. These are just a few of the myriad of examples of events that could place future income of the nonapplicant, nonsignatory spouse beyond the reach of a creditor. The net result of full implementation of the referenced interpretation will be to require banks and all other creditors to accept a substantial amount of potentially uncollectible paper, thus impairing liquidity and undermining the already hard pressed credit markets in this country. The only alternative will be for creditors to restrict severely, or eliminate entirely, the availability of unsecured and undersecured credit in community property states. Such was not the purpose of the Equal Credit Opportunity Act. The interpretation is substantively incorrect and procedurally deficient. Albeit a staff interpretation, it has the effect of amending Regulation B and deciding, ex parte, a long standing dispute between my client (as well as other creditors) and the Federal Trade Commission without notice, hearing, or opportunity for comment. I reiterate my request that the Board review the entire proceeding and rescind the interpretation. Should you have any questions about this request or my petition of July 23, I will be delighted to discuss them with you at your convenience. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Yours ve y truly, A;Uk 0'4/ Milton W. Schober • *ft fi/ 02 tOtilt)fr. VECkt.A. LOCK fgaSEP \6 IBERS ?ICI?... ,y4 gict tv‘ I M. NORTH WALPOLE, NEW HAMPSHIRE 05101 OfIC,E.'Or AREA CODE 603 445-5543 NC. //4/1/,?_ ‘/ -ecelL 3/ _ a ,, j4-02"/_/ , r 7, 1 e -/ 4- 4, j , / / 1Z‘ . 2 -Z -' ---" ne''''',-e.4' https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 7 ! 1A-- N-/14 / )-) ,--z,e2t_z _3_, Sl4anufaateteAs and 7,,77 EvziopmEnt cStizeitifii tl jt12/;-7) / 4 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CCP INC. •••••. • Continental Congress Press, Inc. Suite 125 900 Old Koenig Lane Austin, Texas 78756 (512) 454-2459 Mr. Paul Volker and other Fed. Reserve Board Members c/o Federal ReservT Board Washington DC Sept 3, 1982 Gentlemen: Have just completed reading the Wall Street Journal report of your approval to system Banks to drop delivery of physical proof of ownership of Certificate of Deposit ownership, I decided to make my view known to you. The article contains the justification: to ease paperwork, meaning of course a reduction in labor also, summing less money the Banks have to spend, adding of course to profit, if any. Is the customer's interest considered at some point? I mean that in the context ,Is there any advocate (a live person) asserting the customer's position? The question is rhetorical only, I don't expect an answer. Not all out there wish to headlong plunge in the electronic age. I personally vaunt something in hand that tells me I have $10,000 and can prove it. If that statement seems to indicate to you a suspicion that I might fear the possibility of being cheated at some point in time you are reading it right. The list of convicted, accused, and dismissed bank employee embezzlers is a long one. With the skill some have in computer tomfoolery I have no doubt transactions can be (will be, probably are now) erased to fit the situation. Maybe I will just buy gold. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ohn A. Waller it's not a good ) do with the ecline in busit thing we are i Ian ization that O. to Rockford .here. r, multi-inhnology to a otive, aeroustries busi https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Receive a FREE safety bag with your next deposit ,fil,,,arsintBpaanul/ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis e::;ttFe.Drc :Dr LF:A1 Administration Group The First National Bank of Saint Paul 332 Minnesota Street Saint Paul, Minnesota 55101 Operations Division 612- 291-5324 t-lipt Ni September 3, 1982 1S112 SEP -7 04 951 RETvED_ itif: CHAii$,HAP OrFiCE 1(0 71 Mr. Paul J. Volker Chairman, Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Volker: The Federal Reserve Board recently issued proposals to modify its check processing and collection procedures. These comments are due September 20, 1982. We believe we will be unable to effectively comment on by the deadline. The effect of these changes plus the check processing prices and the soon to be implemented return of charge backs and adjustments represent major nation's check collection system. these proposals recently issued electronic change to the To do merely an adequate job of commenting will require additional time, therefore, we urgently request a 30 day extension of the Request for Comment issued by the Board. Your help in this matter would be deeply appreciated. Sincerely, Charles E. Amer Chairman and Chief Executive Officer Member First Bank System it https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis First Bank p Saint Paul https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The First National Bank of Saint Paul 332 Minnesota Street Saint Paul, Minnesota 55101 e:)ARD f•Et,EF: AL REStiiE Administration Group Operations Division 612- 291-5324 September 3, 1982 1982 SEP —7 1.1 1 •• 0• 95I REVIVED OrriCE Og ihE CHAMP-1,V piLoy Mr. Paul J. Volker Chairman, Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Volker: The Federal Reserve Board recently issued proposals to modify its check processing and collection procedures. These comments are due September 20, 1982. We believe we will be unable to effectively comment on by the deadline. The effect of these changes plus the check processing prices and the soon to be implemented return of charge backs and adjustments represent major nation's check collection system. these proposals recently issued electronic change to the To do merely an adequate job of commenting will require additional time, therefore, we urgently request a 30 day extension of the Request for Comment issued by the Board. Your help in this matter would be deeply appreciated. Sincerely, _ Charles E. Amer Chairman and Chief Executive Officer Member First Bank System It First Bank Saint Paul I k p The First National Bank of Saint Paul 332 Minnesota Street Saint Paul, Minnesota 55101 f•::::Ic.".F:Al Administration Group Operations Division 612- 291-5324 95I 192 SEP —7 RECEIVER OFFICE Og- September 3, 1982 Mr. Paul J. Volker Chairman, Board of Governors Federal Reserve System Washington, D. C. 20551 Dear Mr. Volker: The Federal Reserve Board recently issued proposals to modify its check processing and collection procedures. These comments are due September 20, 1982. We believe we will be unable to effectively comment on by the deadline. The effect of these changes plus the check processing prices and the soon to be implemented return of charge backs and adjustments represent major nation's check collection system. these proposals recently issued electronic change to the To do merely an adequate job of commenting will require additional time, therefore, we urgently request a 30 day extension of the Request for Comment issued by the Board. Your help in this matter would be deeply appreciated. Sincerely, z https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , Charles E. Amer Chairman and Chief Executive Officer Member First Bank System 11 Lewis D. Rosenthal 25 October 1982 Chairman Eederal keserve Board 20th Street & Constitution Avenue Isashington, DC Dear Sir: Are we supposed to believe that the decline in interest rates and the up—coming election are unrelated events? The "Eed" is responding to 'Ithite House pressure or, on its own, wishes to help the current administration. There is no more reason for lower interest rates now than there was many months ago. They are long overdue. Very truly, 3315 btanford Street Hyattsville, MD 20783 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis t.. -1".* ..4t• -7;-4:4! ,_r t,- RAND RAND RAND ggi RAND Associates P.0.Box 520271, Miami, Florida 33152 Telephone(305)264-7208 Group, Inc. October 20, 1982 Mr. Paul Volker, Chairman Federal Reserve Bank 20th and Constitution Avenue Washington, D. C. 20551 Dear Mr. Volker: Since there seem to be questions, as well as concern, about our current, very high unemployment; it is worthwhile to consider the significance of the following employment demand function: 2 2 N =C-aW + bY N is average, yearly, private employment W is average, national, hourly wage (nominal, lagged 1 year) Y is nominal GNP 2 For the entire postwar period, since 1946, R is almost 100% and the "t" statistics are -23.59 and 42.76! Employment wage elasticity was almost exactly one for 1981 while NOMINAL national product elasticity was 0.90. In other words, increase in average wage rate sharply decreases total employment but increase in NOMINAL (contrasted from real) GNP increases employment to a great degree. Certainly this should be kept in mind by those who formulate our national economic policy. Though my own theories on this may be subject to dispute, I do not think anyone can argue with the historical experience that includes right up to the present time. Your reactions and comments would be very much appreciated. SJR:je https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Public Securities Association One World Trade Center New York. New York 10048 (21i.)66-1900 Eth:Pf, 1931 OCT 20 FBA PP !:O FEU' OFF-ICE C'' ; October 19, 1982 2If? Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Federal Reserve Building Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: On October 12, 1982 the Board of Directors of the Public Securities Association announced its support for corrective federal legislation clarifying the right to the timely liquidation of securities held subject to repurchase by a debtor. Immediately following announcement of this position, a letter was sent to the Chairmen of the House and Senate Judiciary Committee urging prompt consideration of such amendments. A copy of this letter is enclosed for your information. The PSA shares your view that the most propitious approach would be enactment of amendments specifically exempting repurchase transactions from the automatic stay and avoidance provisions of the Bankruptcy Code. We know that both the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York have already been actively engaged in efforts seeking such corrective legislation. Consequently, it is our hope that we may work together in seeking prompt Congressional consideration of this matter before prevailing uncertainties further contract liquidity in the repo market. Sincerely, Larr F. Clyde Chairman LFC:sc enclosure https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Public Securities Association One World Trade Center New York. New York 10048 (212) 466-1900 gee- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis October 12, 1982 The Honorable Robert J. Dole Chairman Subcommittee on Courts Committee on the Judiciary United States Senate Washington, D.C. 20510 Dear Mr. Chairman: The Public Securities Association urges Congress to consider at the earliest possible time technical amendments to the Bankruptcy Reform Act of 1978 (the "Code") which would clarify the rights of parties to repurchase agreements ("repos"). These amendments should specifically except repo transactions from the automatic stay and avoidance provisions of the Code to insure timely liquidation in the event of default. Enactment of such amendments is necessary in order to avoid severe adverse consequences to all sectors of the government and municipal securities markets. PSA is the national trade association which represents approximately 300 commercial banks and broker-dealers which underwrite, trade and sell U.S. government securities and state and municipal tax exempt securities. Thirty-five of the thirty-six "primary" reporting government securities dealers are members of PSA. Recent developments have called into question the ability of the holder of the securities which are the subject of a repurchase transaction to liquidate the securities in the event of a default. The failure of Drysdale Government Securities, Inc. and the reorganization of Lombard-Wall, Inc., prove the necessity of such legislation. On September 16, 1982, the Bankruptcy Court for the Southern District of New York ruled in the Lombard-Wall proceedings that the repo in question was subject to the automatic stay provisions of the Code. As the Federal Reserve Board and the Federal Reserve Bank of New York informed you, "if repos are subject to the automatic stay in bankruptcy, the rippling effect of the potential loss of liquidity or capital on market participants could generally disrupt the repo market..." It is important that the repo market be protected unnecessary disruption. Th from any is market represents th e largest single sector of our entire capi tal market system. It is of critical importance because repos are the principal means of financing the market for U. S. governme nt securities and other money market instruments. In addition , repos are used, almost daily, as part of the Federal Reserve open market operations as an instrument for executing domestic moneta ry policy. Moreover, th e country's major institutional and fiduciar y investors make heave us e of repos. For these investors, includin g such entities as state and local governments, pension funds, mu tual funds, banks, thrift institutions, and large corporations, repo s have become an essential tool of cash management. Adjustments to the Bankru ptcy Code would remove th ties and concerns which ese uncertainnow threaten both the gove rn ment and municipal securities markets. Revi sions to the Code which wo uld provide for a specific exemption for re po transactions from the au tomatic stay provisions appear to be al l that is needed to remedy this situation. This approach would also insure that repo participan ts will be afforded the same treatment with respect to the stay and av oi dance provisions of the Code which Public Law 97-222 already explic it ly grants stockbrokers, securities cleari ng agencies, commodities br okers, and forward contract merchants in conn ection with securities co nt racts, commodities contracts and forward cont racts. In fact, P.L. 97-2 22 was enacted in order to avoid the ve ry same concern that the fa il ure of one firm could lead to insolvency of other firms, thereby th re atening the collapse of the entire ma rket they service. PSA urges that amendmen ts be adopted quickly to We believe that a specif avoid such risks. ic exception for repos fr om the automatic stay and avoidance provisions of the Code will achieve this objective. Very truly yours, LFE/mm https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Larry F_ Clyde Chairman • 1,L 1.11C._ • THE SENATE 1932 OCT 18 mi••A-rn OF NEW YORK 17,.9 OFF1 E CAROL BERMAN SENATOR 9 DISTRICT LEGISLATIVE OFFICE BUILDING ALBANY NEW YORK 12247 518 455-3371 COMMUNITY OFFICES 516 295-1979 NASSAU 516 431 1910 LONG BEACH 212-471 3638 QUEENS 212-525 0960 QUEENS COMMITTEES CONSUMER PROTECTION RANKING MINORITY MEMBER GOVERNMENT OPERATIONS ACTING RANKING MINORITY MEMBER EDUCATION COMMERCE 6. ECONOMIC DEVELOPMENT INVESTIGATIONS 6. TAXATION MENTAL HYGIENE TRANSPORTATION INTERSTATE COOPERATION HANDICAPPED SUBCOMMITTEES AVIATION TOURISM October 15, 1982 LEGISLATIVE COMMISSION ON WATER RESOURCE NEEDS ON LONG ISLAND Mr. Paul Volker, Chairman Federal Reserve Board Washington D.C. 20551 Dear Mt. Volker: I am writing to urge you to open and camplete a new investigation into the background of the investors for First American Bankshares, formerly, Financial General Bankshares, which recently took over the Community State Bank of Albany, New York. As I testified on September 30, 1982, before the House of Representatives Subcommittee on Commerce, Consumer and Mbnetary Affairs, a thorough investigation of the members of that Arab consortium was never completed. I urge you to carefully investigate whether their background is suitable for the running of a bank in the United States. Abdullah Darwaish, former financial counselor for Abu Dhabi who is now under house arrest in the United Arab Emirates, signed for Abu Dhabi the March 1982 agreement between Financial General Bankshares and the Banking Board. At least two months before that date, Danaaish was a personna non grata in Abu Dhabi, for embezzling or fraudulently investing nearly $100 million of his country's funds. (Samli Arabian and Kuwaiti officials are also in the Consortium.) I intend to call for legislation in New York State to mandate strictpr guidelines and deeper investigations. I was astonished to learn that in New York, with regulations more stringent than those of the Federal government, the Banking Board never had any personal contact with the Arab investors they were investigating. The Federal government and other states also need to adopt more stringent policies. Meanwhile, additional foreign acquisitions of banks should not be allowed until there are specific procedures for in depth investigations of all foreign investors. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis S. • Page Tx October 15, 1982 I urge you to do your part to prevent unsuitable foreign investors flail taking over American banks. With many thanks for your anticipated prompt response. Sincerely, Carol Berman State Senator, 9th S.D. CB:jk r•-• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Bank of anquillA AnQUIIIA, MISS. 38721 November 22, 1982 3121 CI rill 11 '6 P". LAD GRP f"..4 Q.:4) C3 ..0 -"1•Yi -n f•J -.1 r1 C: Poi W an 3-' , ,— 1) op rt-1;;::--t-ii Chairman Paul A. Volcker Federal Reserve Board 20th Street & Constitution Ave., NW Washington, D.C. 20551 Dear Mr. Volckr: You haven't heard anything yet. When the saving public feels the full impact of "Withholding at Source" and realizes what is happening to the money they are trying to save for old age and other things, you will be flooded with complaints, fussing, cussing and gnashing of teeth. If you will look back on all the paper work the Federal government has put on the banking system the past few years and compare with the cost being transfered to the banking customer, you will see that the depositor is going to pay the freight in the long run. If this is not true, then the banking system is broke. I hope you and your constituents can get together and realize the cost our Congress is putting on the public cannot be justified by the supposed gains of the "Internal Revenue". We in the working world of the public would appreciate all the consideration you can give us in the REVERSAL of "Withholding at Source". Thank you. Sincerely, ,00.e M. R. Stewart President _BRanch offices: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ca4py mcwepsville Pollinq Fmk The First National Bank & Trust Company SCOTT L. GRAHAM — Chairman of the Board https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 23, 1982 L1-.) CD • r t,. " 1 46.1.10;.) —1 C) Mr. Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 20th & Constitution Washington, D.C. 20551 1-...., --.... al...... rr •:n -.7 -0:::: ......r7 --1-1 INJ CI r •, :--;.• 7,• r--- --- • .• • Dear Chairman Volcker: Beginning December 31, 1982, reports of conditio n and income filed by federally insured banks quarterly will include a supplement reporting all past due data and other non-conform ing loans. Beginning June 30, 1983, this information will be availabl e to the public. As we are all well aware, this evolved out of the debacle of the Penn Square situation and the attendant difficulties which it has created for several larger banks throughout the country. For some time I have observed the legislative process, and it would appe ar that each time an individual bank fails, there is a plethora of ensu ing legislation. Much of this is brought about, I feel, by the fail ure of the regulators who cry for additional legislation to give them the power they need to assure the country of a sanitary banking community. Strangely, however, with all of the gnashing of teet h over improprieties in the banking system, I have never heard of a bank regulator or examiner losing his job because he did his job poor ly, which any reasonable man, I believe, would have to agree coul d at least contribute to major bank failures. Along with this, there are some 14,000 different banking institutions within the United States, and this number of inst itutions creates some insulation and padding one from the other, so that all do not make the same mistakes at the same time, and that the failure of one or more within the system may be absorbed by the others with rela tively little injury. Most importantly, however, has been the integrity and conf identiality between the bank, the regulatory and examining bodies, and the customer. The disclosure requirements will negate that confidential ity for the customer, and do considerable injury to a process whic h in the past has allowed injured banks the time, space, and opportunity to heal its wounds. POST OFFICE BOX 70 • BROKEN ARROW, OKLAHOMA 74012 • 918/251-5371 .: s• 77 ' ''....-.1 r-- .- - 7 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Paul A. Volcker, Chairman -2- November 23, 1982 It would appear that the disclosure provisions set forth in the GarnSt. Germaine Depository Institutions Amendments of 1982 may, in fact, perform a coup de grace upon infirm banks. It should be further noted that savings and loans and credit unions are exempt from this disclosure. Thus, I request that you oppose and do what you can to remedy this dangerous experiment. Sincerely, Scott L. Gra Chairman of the Board SLG:mg t: - r •Qk w • .1861 NOV OFFa c. L 2 26 on 9: 0..NDUSTRIA VALLEY BANK AND TRUST COMPANY AY. JOSEPH A. GALLAGHER CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER November 23, 1982 The Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 20th & Constitution Avenue, NW Washington, DC 20551 3 Dear Mr. Volcker: You have been one of the few courageous leaders of our time by calling for and implementing policies essential, though painful. You have also said that the pain will have to be shared by all, and there has been a tremendous amount of suffering by millions of Americans and American business, as well. Therefore, I am shocked to read the remarks attributed to you in the enclosed Wall Street Journal article. How can you even, as a political expedient, justify "white washing" the international loan situation in fact recommending a double standard of accountability for the large international lenders. It is particularly inappropriate to allow the large banks to boast of huge earnings increases and in the case of one of the most vulnerable, to state publicly that they will return 18% on equity over the decade of the eighties. Mr. Volcker, when the little people of this nation who have been crushed over the last several years -- when the small businessmen, thrift industry executives, home builders, farmers, etc., learn that you are proposing a double standard, they will have a right to react in disgust. It's time to stop the dishonesty; stop the bankers from the major money market banks from stating that countries don't default; time to make them take orderly write-offs; time to stop accruing interest that can't be paid! In this way, our citizens will have confidence in government and will, in fact, be willing to suffer. Double standards lead to suspicion, selfishness and chaos, and gives license to everyone to develop his or her own standard of conduct. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I V B BUILDING • 1700 MARKET STREET • PHILADELPHIA. PENNSYLVANIA 19103 The Honorable Paul A. Volcker November 23, 1982 Page Two Int&rnational lending has contributed substantially to our domestic problems. We drain our economy, subsidize other countries to build plant and equipment so they can ship product into our country at prices which American companies can't compete and then become their captive since they can't repay the debt. Finally, please be honest and complete the "surgery" which you wisely deemed to be necessary. Sincerely, seph Ayllagh JAG:rlc 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 article Citations: Number of Pages Removed: 1 Bacon, Kenneth H. "Volcker Offers Plan to Reduce Debt Strain On Developing Nations, Cut Default Risk." Wall Street Journal, November 17, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I 41.0 3 141 Cfrin6z/Y1 /ge4W rauz d=te./viv, \J6e04 Pdcai a't)t Atre___p ,e,-ed64 OA ' ane r7 Ce94 a-edyi 27--24 --/6A41A,&1) /42, tA74:dvlou_ 44,7 la, x774 74, tkc., JaAf-f /7(2 ; (04114- t//C Zbitri n4.- /de /L-eZZ‘w( A4-eAArcO-r7tAd 001-( plat ,6t=ottiZe /14614-"-c</vt olifruto- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /-0-ewr 4,0A jori„ z-Le e AA, \ zitto ,t,(H L/0 444-T/LaArc- ,F4 dufay, z4 4. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis kl-o-k-enrc4, d\c€A7t-61 414A4 oft-6, ( ,a7-7Yvt-e ,A4A adATzAi&c_ //7.4, , // 4-a u,o CotAv cti.‘„A vAd W/-166 44d-u4r-L-1 ?s,‘-r-t-;1_,?kui;c6Aa- 44;a.0 a4AA (Aft,a 4 WV7/4-e (7414/1 ei012Zat.di/1471 U (14 Ole /(Fei,d cw, JA\d/!;YI5 7-& 4161/f 4 ra, ylf,,&ko5 ,O-7u?4qaXec(. orou • ;43 1)\1 \ 0 "I. tcT° https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 16, 1982 dairman Paul A. Volcker Federal Reserve Board 20th St. and Constitution Ave. N.W. Washington, D.C. 2055/1 Dear Sir: Have read some newspaper accounts of talk by a few elected officials toward curbing independence of the Federal Reserve Board. I feel political intrusion might be a grave mistake and would appreciate information as to what private citizens can do in support of the Board's present status. Sincerely a2;igm-,4(4, William P. Scott, Jr. F:07.F0 rF BANKoFAMERICA 113;2NOV 23 nt,111: 28 OFF4CE ; ROBERT W. FRICK CASHIER'S DIVISION Executive Vice President and Cashier November 22, 1982 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D.C. 20551 Dear Chairman Volcker: Bank of America requests that eIeera Reserve Board consider the matters discussed below before establishing any reserve requirements on the new deposit account announced November 15, 1982 by the Depository Institutions Deregulation Committee ("DIDC"). In this Bank's response to the DIDC's request for comments, we recommended that depository institutions be granted maximum flexibility to design the new account themselves. Only by allowing a truly deregulated account could DIDC have permitted depository institutions to offer accounts "directly equivalent to and competitive with money market mutual funds", as required by the Garn-St Germain Depository Institutions Act of 1982 (the "Act"). In light of the restrictions and limitations imposed by DIDC on the new account, we urI- the Board to avoid imposing non-earning reserve requirements on the new account. Exemption from Reserve Requirements. If the new account is subject to reserve requirements, it inherently cannot be equivalent to money market mutual fund accounts, which are not subject to any reserve requirements. For this reason alone, the Board should not impose any reserve requirements on the new account. Moreover, the Act does not compel the Board to impose any reserve requirements on the new account. The only reference in the Act to reserve requirements is in .5 327(c)(3), which spees certain conditions under which the new account must be exempt from transaction account reserves. The Act does not specify any other type or level of reserve requirements. As a legal matter, therefore, the Board is not required to establish reserve requirements on the new 0 account. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION • BOX 37000 • BANK OF AMERICA CENTER • SAN FRANCISCO.CALIFORNIA 94137 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker Page Two November 22, 1982 The minimum opening and maintenance balance requirements, as well as the other limitations placed on the new account by DIDC, make it impossible for it to be equivalent to money market funds. With the possible exception of the provision allowing unlimited transfers by telephone (which we address below), DIDC placed such stringent restrictions and limitations on withdrawals from the new account during a statement cycle that customers will be compelled to use the new account primarily as an investment vehicle in the way savings accounts are now used. The primary motivation for customers to place funds in the new account will be its high yield and its liquidity. Customers will tend to see it as a higher yielding alternative to savings accounts. Indeed, we expect a considerable portion of savings accounts in depository institutions to be converted to the new account. Since the new account must be used analogously to a savings account, the same reasoning that justifies a zero reserve requirement for savings accounts should apply. Telephone Transfers. If the Board determines that allowing unlimited telephone transfers from the new account during a statement period will cause the new account to be a transaction account, i.e., a reasonable substitute for checking or NOW accounts, we recommend that depository institutions be permitted to contract with their customers for both a "transaction" and a "non-transaction" version of the account. The non-transaction version would not be subject to transaction account reserve requirements and would permit a maximum of six telephone transfers during a statement period. The transaction version would be subject to those reserve requirements but would allow unlimited telephone transfers to other accounts of the holder or to third parties, if permitted by DIDC. Both versions would allow unlimited withdrawals in person at a bank office, from an automated teller machine, or by mail or messenger. The limits established by DIDC on transactions of other types would, of course, apply to both versions of the new account. We stress that the only difference in the two versions would be the applicable reserve ratios, which would be keyed to the telephone transfer privileges for which the customer contracts. Enforcement of the Transaction Limit. If the transaction limit is exceeded in any month on a non-transaction version of the new account, we recommend that the depository BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION • BANK OF AMERICA CENTER • BOX 37000 • SAN FRANCISCO, CA 94137 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker Page Three November 22, 1982 institution holding the account be required to maintain transaction account reserves on balances in that account for the rest of the reserve period in which excess withdrawals are made. At the beginning of the next reserve period, the depository institution should be authorized to treat the account again as a non-transaction account. We believe temporary treatment as a transaction account is the only fair procedure, since a customer has little or no control over the date drafts are posted. For example, if a payee holds up a draft, the customer could, entirely inadvertently, exceed the limit in one reserve period while falling below it in a previous reserve period. The DIDC recognized that this situation would occur and required institutions to contact customers in such event. If the account were required to be treated permanently as a transaction account thereafter or some other penalty imposed, both customer and depository institution would be penalized for the actions of a third party. Temporary transaction account treatment will avoid this unfair result and also ensure that the transaction limit is enforced equitably by all depository institutions. Alternatively, the Board could require period averaging of transactions which would tend to minimize violations of the maximum number permitted per period. Interest on Reserves Against the New Account. We believe the only way to make the new account equivalent to and competitive with money market mutual funds is to avoid placing any reserves on the account. Nevertheless, if the Board should decide to impose a reserve requirement on the new account, we urge the Board to pay interest at a marketdetermined rate on those required reserves. It would then be possible for depository institutions actually to offer a deposit account directly competitive with money market mutual funds, or for depository institutions to absorb the costs arising from reserve requirements. We are not aware that payment of interest on those reserves would have any adverse effects on monetary policy implementation. We strongly urge the Federal Reserve Board to avoid any restrictions that would inhibit the new account and violate the Congressional mandate in the Garn-St Germain Act to provide an account that is "directly equivalent to and competitive with money market mutual funds." Sincerely, R.W. Frick Executive Vice President and Cashier RWF:mq BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION • BANK OF AMERICA CENTER • BOX 37000 • SAN FRANCISCO,CA 94137 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ; P.?Fr4i >71,2 54 19Ei NOY 22 P e PFEENFP OFFIC1 00-2-4/1 1:1E.- Tetucit-, -eataffmaissai Z1 --tf/f --(1 le-tc,--71._ -17 / e9 X:4 /(.44_._.e - ei) 2 ' 4) 1 -et-tj-d--e 61-71-e ) 1--y.a ,41/4k_e e:c4_€ ok__eA4-tu-et`i _e-766et .2'47 fA't , 47 /-14 Zr4/ . j cz-Zet, /4c-cerr 2-1 )( 011 L.42-'Z-i / (<1-C10 cit2Le ler? )2-E a>1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis /,52 4 7 i i /t e _t,c-li-c.(1-e 4 tA-4 /(6) i/29 aZeee-eL 6/11/1 ••:" • • ,•,,, •22 ,.• November 9, 1982 Mr. Paul Volker, Chairman Federal Reserve System Washington, D. C. 20051 3to Dear Mr. Volker: I wish, as a citizen, to write to you and commend you on your past strong stand in fighting inflation. I suppose you get few fan letters from ordinary citizens such as myself. You have devoted great effort and in many cases been attacked for your determination to reduce inflation to modest amounts. I want you to know that I realize that you have actually made what money I have and what savings I have worth more in the process. That is the bottom line to me and the country. Thank you. It is my perception that the public and the politicians no longer feel that inflation is a problem but that the tool that you used to fight inflation is the problem--high interest rates. I do personally now wonder if we wouldn't be batter off with lower interest rates, something down near the inflation rate to see if inflation can be stablised at about the inflation rate. Let me mention as a consumer I need much lower rates in order to buy a car or a home which would help the economy. Our local rate is still around 16 Z except on special car models or something like that. I believe that a independent Federal Reserve Policy is best for us but I am concerned that if interests rate aren't dropped by the Federal Reserve then the congress will begin to control them. You are in a better position than I to know what can and can not be done in this situation but I hope that you will find the evidence of decreasing loan demand and a flat economy enough to justify lower interest rates soon. It seems to me that soonP- rr later we have to see if lower interests will raise inflation or not, by trial and error. If lower interest rates did not raise inlfation then there would be no harm trying them. If lower rates increased inflation then the rates could be again raised. In the meantime hower the lower rates could give a much needed boost to the economy, I think. I tried to understand the latest inflation figures and according to my understanding one of the main 'rises In the components was in medical expenses with a rise of 11%. I wonder if it is realistic to think that medical costs can be in control by interest rate control. I mean that component is controlled by the industry of medicine and the cost of new equipment and cures. Therefore I wonder if a rise there should be cosidered to have the same weight as the other components. I also understand that the oil market will be soft the next couple of years so energy costs shoule be flat. Food costs are coming down due to low prices for farmers and this makes many famers and ranchers need loans to survive. They must also need now interest rates to help them survive. Since you have done such an effective job in fighting inflation I wonder if perhaps the problem of inflation is behind us and indeed the problem is becoming high interest rates. It appears to me that a 16Z interest rate could also be construed as a factor in driving inflation up 1^-1110•,•••••- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nit/4j* .4 or holding in flation up slig htly due to th hope you will e cost of mone consider my id y for loans. ea. I have no am a common I economics back everyday Americ ground and an Citizen th of the tight at is beginnin money and high g to feel the pi interest rates. tell inflatio nch As far as I ca n is not both n personnally ering my income of inflation th anymore. I am anks to you an getting ahead d others who have worked on it so hard. I really feel that you are a dedicated pe responsibility rson to the ta for and I thin sk you have th k you have do wonder if you e ne an excellen have come to re t jo b. al iz control but th e that you ha I do ve at most people brought inflat do not presentl have brought ion under y have the pe interests rate rception that s under contro you l and down to a correspondin I personnall g level. y feel that yo u could bring not sure that is in flation down important any to zero but longer. I also rates can be had I am wonder if perhap with no increase s lower inte at all in infl that the rossib rest ation. It appe ility now exis ars to me ts that you mi significaliatr ght drop intere without any incr st rates ea se in lower oil prices inflation at al , lower food pr l. With likely ices, and the almost zero ,inf like indeed we lation even with might get an interest ra we have had in te drop much lo the last few we wer than eks. I hope yo letter or by an u will not be of y question or su fended by this ggestion that I have. You have done a remarkable good job for which ha proper credit rdly any one ha and I doubt that s given you they will. picture upside Yo u have turned th down and restor e inflation ed us to an al the inflation most stable cond picture. You ha ition in ve won that ba continue to ma ttle and I hope ke the right de you will cisions regard ing the present situation. I think is is ve ry valuable to keep the Federa control. l Reserve indepe I hope that ther ndent of e wi ll be less of a ba policies and mo ttle regarding re cooperation your soon. We as ci of all our gove tizens need the rnment leaders attention to help remove problems by a us from our pres route that is ap ent economic propriate and pr ompt. 101 - I hope that yo u will soon be able to lower than in the reci the discount ra ent past. te even more I admisre your sucess and your efforts to have better opportun lower inflation ity for the futu and a re for peoples I hope te that savings and ne you understand th ed s. e man in the st well enough to reets personal know that we ne problems ed the lower in time that you fe te rest rates at th el we can have e earliest them. Please keep up the good work an d I wish you to I know you have best in your ef one of the toug forts there. hest jobs in th an extra outsta e nation and yo nding job for u have done us. I hope you cont you are doing re in ue warding. to find the job I am a personal appreciate what fan of yours an you have done d I personally for our country. I know. God bless you in It ha s been difficul your life and wo t rk. Sincerely, A7/04.40.-/ ummie H. Rogers https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RAYMOND S. LIVINGSTONE M10v -8 r'35 November 2, 1982 Mr. Paul Volcker, Chairman Federal Reserve Board Washington, DC Dear Chairman Volcker: • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis I suspect that the Chairman of the Federal Reserve Board receives very few letters from lay members of the general public. I have two reasons for writing this one. neither First, let me say that as a private citizen who is I am an economist nor involved in banking or finance, ciple, prin of most grateful for your courage, and position supply to y in endeavoring to control the growth of mone uction of prod a rational relationship with the nation's goods and services. ss, which I confide Stick by your guns! My only uneasine growth in money supply to you as a supporter, is that the both in producpresently runs somewhat ahead of gains reassured if money tivity and GNP. I would feel even more selected range, supply growth was at the low end of your for the time even though this resulted in greater pain have good reasons being. However, I have confidence you for what you are doing. nclature on which Second, is a matter of semantics and nome I would really appreciate your view. of inflation, Do we not cloud a correct public perception others to every when the word is applied by the media and result prim form of price increase, including those that ships alone? manly from changes in supply-demand relation economic sense, Should not use of the word inflation, in an increases caused be reserved to describe only those price or credit placed principally by rises in the amount of money in circulation, which results in a fall in the unit value of currency, and a consequent rise in prices? https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 0 Mr. Paul Volcker 11/2/82 page 2. There is support in the dictionary for this view. My opinion is that the confidental and economic mental health of the country would be bolstered by this perception and distinction. Would it be appropriate for the Federal Reserve to suggest accuracy to the media in usage of the word inflation, and the correct attributing of causes for important price changes? Sincerely, Raymond S. Livingtone RSL/dhj https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis j9ettle:74pt docecz/eS, cAc. ow.A.44fevt sioweae iygeo /aa/7 saf./.4.d4 -(//15-oes9 .,1;w9.90/alera November 17, 1982 0 -Ti '11 C) The Honorable Paul A. Volcker Chairman Board of Governors The Federal Reserve System Washington, D.C. 20551 Z.1 17-1 rrl r 77• r•CO friP Dear Paul: (A) C:) I enjoyed reading Ken Bacon's excellent review of your recent Boston address in today's Journal. Our research certainly agrees with your conclusion that "the danger of creating excess liquidity isn't so much immediate when there is so much surplus capacity and unemployment." Your letter last December regarding my Gold Commission testimony was appreciated, as was your assessment that the Board staff would be particularly interested in my view on interest rates. On that point, I am very proud of my firm's forecasting record on interest rates over the last two years, as reviewed in the enclosed report. Page 6 of the report reviews our position at point 5 on the final graph, i.e., my statement before the Senate Finance Committee on May 18, 1981. That was the paper you forwarded to the Staff last December. The most recent forecast, point 8, was issued just before rates began to collapse in July. I met with Secretary Regan one afternoon in Washington shortly after our July forecast and Don can attest to my conviction on lower rates at that time. Also enclosed is a corporate brochure that was recently completed by our firm. It provides a concise review of our research activities. Best regards, David Bostian, Jr. DBB/lh r- :; WILLIAM A. JUMP MEMORIAL FOUNDATION WASHINGTON. D. C. 20250 011, Honorable Paul A. Volcker, Chairman Board of Governors of the Federal Reserve System 12th & Constitution Avenue, N.W. Washington, D. C. 20551 UE5 -.. : v •-•• M7 -t•• .• .. 7r,F, JM -,-.. -- eat C -- i ..• -.74 Dear Mr. Volcker: -.7. .74i Cfl Today, when so many mistakenly believe "bureaucrat" to be a dirty word, the William A. Jump Memorial Award is more important than ever. We need your help to see that young Federal career workers receive proper recognition for distinguished service in public administration. As you know, the Federal government must retain exceptional, dedicated young career workers to be completely effective and responsive. Promotions, pay raises, "perks" and benefits are not the only ways to keep them from moving to the private sector. Bureaucrats are people, too, thus praise for exceptional work counts, and the Jump award, the most prestigious of its kind, is a kind of "Academy Award" in its field of activity. A good deal more important than the "Academy Award," to be sure, is the fact that the Jump award deals with real life, not mere acting. We are certain that there are career workers in your agency, under 37, who meet the requirements of nomination for this award. We urge you to nominate one of them as outlined in the enclosed brochure. The winner, or winners, will join a distinguished group of "bureaucrats" who have been so honored since the Jump award began in 1950. The Board of Trustees of the William A. Jump Memorial Foundation is a distinguished group and will make certain that anyone nominated by your agency will receive careful consideration for the award. We are sending this letter to the heads of all government agencies as we have done in the past. Many excellent nominations have been made in the past and the prestige of the Jump award depends upon the quality of those nominations. We trust that all agencies will forward nominations, but we need your help--indeed the help of all department and agency chiefs--to make this possible. We suggest that if someone in your agency earns the Jump award gold key, it will not only boost his or her morale, but perhaps strengthen the morale of all dedicated civil servants vants in your agency. Sincerely, L ESTHER C. LAWTON, Chairman WILLIAM A. JUMP MEMORIAL FOUNDATION https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r" -• ' • v, Mr. Volcker, Could I please have a copy of the report to the Fed that put economic growth at 2%? Many thanks, M.G. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Iron Law of Percentages Dear Mr. Volcker, You do not have the right to remain silent as a leader - in the face of undeniable and ominous mathematical figures. The state of the economy message of January 1982 spoke of 5.2% Gross National Product growth, which would double consumption in 14 years. The mid-year economic report downgraded such growth to 4.4%, which would double consumption in 16 years. (Today's economists, from Friedman to communists, still gung ho on production,still fail to equate production with consumption). Obviously, if population grows by 1% (2 million) a year, the economy would have to grow by 1% to maintain the present uneven living standards. For how long could 1% be sustained for the U.S. with the rest of a bankrupt world awaiting a turn? 1% doubles in 70 4.4%, doubling every 16 years, would, in years. only a fraction of 16 years, bring back the resource shortages and inflation of the 1973-80 syndrome. If the economic growth of the 1950's and 1960's is no longer sustainable, it is also unnecessary. Unemployment can be solved by limiting immigration and population, by sharing employment, by retraining, and by transferring unemployment compensation and other funds to pension funds so that people can retire earlier to make way for the restive young. To start all this, cut out the political makebelieve and bring the real conditions on this little planet home to everyone through realistic growth predictions. Only then will the invisible hand work again! Politely but firmly yours, AA-I Michael Grogan Mr. Paul A. Volcker kI • MARTINSBURG WEST VIRGINIA 1 OFF r•[. /141 ':4 December 3, 1982 Mr. Paul A. Volcker Chairman Board of Governors of Federal Reserve System Federal Reserve Building 20th Street & Constitution Ave., N.W. Washington, D.C. 20551 Dear Mr. Volcker: We wish to call your attention to a violation of banking regulations. It is our understanding that bank loans must be prS.•llateralized and that both commercial banks and savings institutions are restricted with respect to securities underwriting activities. First, we believe United Virginia Bank is providing a line of credit to The Investment Group, Inc. (which we believe is not registered as a Broker/Dealer with the National Association of Security Dealers or the Securities & Exchange Commission) for the purpose of buying shares in Viking Way Limited Partnership. Secondly, we believe that a group of banks and S & L's are pledging their assets for a fee through an associate (SIMCO) for the sole purpose of raising a risky partnership's credit rating relating to an industrial revenue bond to build a motel. If the partnership were credit worthy in the first place, there would be no need for this subterfuge. We are astonished to learn it is possible to buy a high bond rating which will permit banks, trusts and other institutions to purchase a security which would not otherwise be considered a legal list investment grade security. State Industrial Revenue Bonds are not reviewed by the S.E.C. and the West Virginia Commissioner of Securities does not have a right to review the prospectus or Confidential Memorandum. The Mayor of the City of Martinsburg receives a salary of $100 per month. The Martinsburg City Council is also strictly part time with varying backgrounds. In any event, the City of Martinsburg has not made an independent review of the facts and has relied on the representations of the promoters. continued *tam\ ssukt) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1-81 & RT 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 I MARTINSBURG WEST VIRGINIA TO: FROM: Mr. Paul A. Volcker, Chairman Board of Governors of Federal Reserve System Mr. Frank R. Supik PAGE TWO December 3, 1982 erned that As you know, at this time, depositors are conc bles. If the many S a L's and banks are having financial trou k it will, partnership defaults on its obligations, as we thin ncial press. the ramifications will be very visible to the fina immediate Since this transaction is imminent, I hope some this matter steps will be taken by your Agency to investigate to prevent this transaction from taking place. er with In any event, I would like to discuss this matt your Agency. Very truly yours, FRANK R. SUPIK General Manager FRS:tw - Encs. cc: P.S. Senator Proxmire (with cover letter and documents) There is also enclosed a copy of letters sent to the Department of Housing and Urban Development which will furnish you with additional information. CERTIFIED MAIL - RETURN RECEIPT REQUESTED iketaCiAk 1 1-81 & RT. 9 EXIT 16E 1•49ZD. MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 OPERATED BY MARTINSBURG HOSPITALITY CORP UNDER LICENSE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (I ' s Ol• c MARTINSBURG WEST VIRGINIA OP https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis November 29, 1982 Mr. Samuel R. Pierce, Jr. Secretary Dept. of Housing & Urban Development 451 Seventh Street, S.W. Washington, D.C. 20410 Re.: Objection to City of Martinsburg, West Va. Application for H.U.D. - Urban Development Action Grant No. B 00-AB-54-0037 For 1.2 Million Dollars Dear Mr. Pierce: We are a profitable, modern 121-room hotel. However, we expect ourselves and a proposed unneeded 120-room hotel which is to be built with a 1.2 Million Dollar Urban Development Action Grant subsidy to go bankrupt. We understand that the City of Martinsburg, like all cities, needs money, but is this need to be satisfied at the cost of destroying a viable business enterprise? As you know, approximately a year ago we committed ourselves to add 53 more rooms to our hotel to meet the future needs of the community even though our .market cannot absorb this capacity for several years. No government money is to be used for this improvement. In addition, we are committed to add two tennis courts, a jogging track and Holidome (which will enclose our present swimming pool, a new jacuzzi, sauna, exercise room and other amenities). We will build the Holidome and amenities no matter what happens, but must keep the 53-room addition on hold because it would be economic suicide to build on more rooms in the face of unfair competition created by a government subsidized hotel. Mr. Van Wyk, a local developer of subsidized homes (who does not have any hotel experience), decided to turn his talents to promoting the construction of a hotel to keep himself busy. I have reviewed the July 13, 1982 feasibility study prepared by Laventhol & Horwath for Mr. Van Wyk and submitted by the City of Martinsburg in support of the U.D.A.G. Application. The study is geared to specifically sell the project to H.U.D. In continued ikotatalk "'"'l 1-81 & AT 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 % II MARTINSBURG WEST VIRGINIA TO: FROM: RE.: Mr. Samuel R. Pierce, Jr. Mr. Frank R. Supik Objection to Martinsburg Application for U.D.A.G. November 29, 1982 Page Two my 15 years in hotel development and operations with Intercontinental Hotels Corporation (Pan American World Airways subsidiary)9 Marriott Hotels and Holiday Inn, I have never seen a feasibility study which concluded that a project is not feasible. These studies are bought and paid for by the promotor who has a vested interest in having the study support his position. The study arrives at a totally inaccurate conclusion that the proposed 120-room hotel project is feasible from a market standpoint. The crucial but inaccurate projections are as follows: (1) The feasibility study projects the proposed motel's room occupancy to be in 1984 - 68%; 1985 - 72%; 1986 - 74%. Our own occupancy (verified by an independent CPA) was for 1979 - 66%; 1980 - 67%; 1981 - 64%; 1982 - 63% EST. It is our contention that there is no way that the proposed motel will take all our business. Even if we split the available business, each will only obtain 30 - 35% and both properties will be in deep trouble. (2) The feasibility study projects the proposed motel's restaurant and bar business to be: 1984- $960,000; 1985- $1,070,000; 1986 - $1,157,000. Our own restaurant and bar business (verified by an independent CPA) was for 1979 - $383,800; 1980 - $436,800; 1981 - $456,500; 1982 - $430,000 EST. As you can see our restaurant and bar business is about half the amount predicted for the proposed motel. We cannot give credence to these projected figures because we know and understand the Martinsburg market for full service restaurants. We also have seen many additional fast food outlets open here including the just opened Shoney's Big Boy Restaurant which is situated adjacent to the site of the proposed motel. (3) The feasibility study alludes to a possible extensive convention and meeting market if facilities are available. continued ikoevitaLk sdkkkv.1 1-81 & RT 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 OPERATED BY MARTINSBURG HOSPITALITY CORP UNDER LICENSE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MARTINSBURG WEST VIRGINIA 11, TO: FROM: RE.: Mr. Samuel R. Pierce, Jr. Mr. Frank R. Supik Objection to Martinsburg Application for U.D.A.G. November 29, 1982 Page Three For five years we have been trying very hard to attract this type of business but have had very little success. Martinsburg is just not a destination location where people like to hold a convention. The Holiday Inn System Marketing Group is well organized, competent and has been very aggressive on our behalf. The West Virginia Department of Economic Development has also made a mighty effort on our behalf, but also to no avail. We can truthfully say that the number of conventions and meetings that we have not been able to accommodate can be counted on the fingers of one hand. When the Washington, D.C. Convention Center is completed, it will be virtually impossible to attract sizeable conventions. As for small to medium size meeting and group business, we can and do easily accommodate the modest amount of available business. The City of Martinsburg, West Va. has been in existence over 200 years. Its present population and business growth is almost static. There is no 1)resent need for more motel rooms. If the U.D.A.G. subsidy is given, the proposed motel will have an unfair competitive advantage over us during a period of years when I believe there will be a glut of hotel rooms in the Martinsburg market. Common sense tells us the market will not instantaneously double to absorb 120 rooms which the promotor intends to build. We are gravely concerned that if Mr. Van Wyk's 120-room hotel is built, both our hotel and his will face going bankrupt. Mr. Pierce, I have asked you the following question several times: If the proposed motel project goes forward with the encouragement and support of U.D.A.G. funds, who will assist us or rescue us from the resulting financial difficulties? I have never received a response to this question from you or anyone else. All eyes seem to be riveted on the 1.2 Million Dollar Grant and how the City can get it as soon as possible, regardless of the devastating consequences its utilization may have on other parties. continued , *RAMA ZWAI 1-81 & AT 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 OPERATED BY MARTINSBURG HOSP1TALITY CORP UNDER LICENSE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis MARTINSBURG WEST VIRGINIA • Mr. Samuel R. Pierce, Jr. Mr. Frank R. Supik Objection to Martinsburg Application for U.D.A.G. TO: FROM: RE.: November 29, 1982 Page Four At a time when we are desperately trying to reduce the federal budget, our resources should be directed to only the most needed projects. Mr. Pierce, please prevent this misuse of public fund. Respectfully, FRANK R. SUPIK General Manager FRS:tw cc: Ms. Margaret B. Sowell Director, Office of U.D.A.G. Other individuals and organizations CERTIFIED MAIL - RETURN RECEIPT REQUESTED ikvastakk zwizI 1-81 & RT 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 OPERATED BY MARTINSBURG HOSPCTALITY CORP UNDER LICENSE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis dr egi MARTINSBURG WEST VIRGINIA April 7, 1982 Mr. Samuel R. Pierce, Jr. Secretary Dept. of Housing and Urban Development 451 Seventh Street, S.W. Washington, D.C. 20410 Re.: Objection to City of Martinsburg, West Va. Application for H.U.D. - Urban Development Action Grant No. B 00-AB-54-0037 For 1.2 Million Dollars Land Acquisition Cost Dear Mr. Pierce: This letter furnishes additional information to support our January 12, 1982 letter contending that Foxcroft land acquisition costs are overstated. (1) (A) The U.D.A.G. Application indicates the 5.32 acres involved are worth $350,000. (B) The Foxcroft appraisai submitted to H.U.D. indicates the $350,000 is the appraised value of 8 acres (see attached Exhibit A). (C) On this basis the computation should be: $ 43,750 8 acres)$350,000 X 5.32 acres = and not $232,750 $350,000 (2) Further, even $43,750 per acre appears high when you consider the following: (A) On Oct. 31, 1980, Van Wyk Enterprises, Inc. conveyed 4.3 acres of the property we are discussing for $43,000. This equals $10,000 an acre (see attached Exhibit B). (B) On May 4, 1977 we purchased approximately 13 acres adjacent to our Holiday Inn for $150,000. This equals $11,538 an acre. continued skc',GRICICI\)%4F11. 1-81 & FIT. 9 EXIT 16E MARTINSBURG, WEST VIRGINIA 25401 PHONE 304/263-8811 OPCIIATCID ny MATITIPNVAIUCIO HOSPITALITY corn. WADE H ocudsr. Am.& https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • MARTINSBURG WEST VIRGINIA TO: Mr. Samuel R. Pierce, Jr. FROM: Mr. Frank R. Supik Objection to Martinsburg RE: Application for U.D.A.G. Land Acquisition Cost April 7, 1982 Page Two (C) On June 15, 1973 property located on Interstate 81 Inn about 10 miles from our Holiday Inn was purchased by Days C which was abstracted for $16,447 an acre (see attached Exhibit same appraisor). from another appraisal prepared by the ained in the U.D.A.G. We feel this discrepancy and others cont Application invalidate the proposal. Respectfully, FRS:tw - Encs. cc: FRANK R. SUPIK General Manager ••••• Ms. Margaret B. Sowell Director, Office of U.D.A.G. In addition copies were sent to other parties CERTIFIED MAIL - RETURN RECEIPT REQUESTED if cGeka211‘ '10‘)/Z. I 1-81 & RT. 9 EXIT 1GE MARTINSBURG. WEST VIRGINIA 25401 PHONE 304/263-8811 OPIIIATECI IlY MARTINSTUMG HOSPITALITY COPP UNDER LICENSE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 l•• :SOUTHERN :NVESTORS Management Company, Inc. 1111 South Foster Drive, Suite E Post Office Box 14244 Baton Rouge, Louisiana 70808 (504) 923-2410 October 21, 1982 Viking Way Limited Partnership c/o Van Wyk Enterprises, Ind. 600 Foxcroft Ave. Martinsburg, West Virginia 25401 Gentlemen: The Following commitment survives and replaces all previous commitment and amendment documents issued by Southern Investors Management Company, Inc. and Southern Investors II, a Louisiana Mortgage Partnership in Commendam. The Investment Committee of Southern Investors II, a Louisiana Mortgage Partnership in Commendam (hereinafter referred to as Southern) acting through its agent Southern Investors Management CompE5-17, -Inc. thereinafter referred to as SIMCO) has approved the issuance of a collateralized Guarantee Agreement in connection with the funding of a $4,800,000 Industrial Revenue Bond Financing loan to be made to Viking Way Limited Partnership. The SIMCO conditional Commitment for Guarantee obligates Southern Investors and SIMCO to provide and furnish to you a collateralized "Guarantee" for your use in connection with the financing of your acquisition of a five acre tract of land and the development of a 120 room motor inn with a lounge, restaurant and meeting-banquet facility in Martinsburg, West Virginia (the "Premises"). Section 1. A. At or prior to consummation of the Loan (as such term is hereinafter defined), we will issue our corporate collateralized Guarantee (the "Guarantee Agreement"), which shall be acceptable to you, setting forth our unconditional undertaking promptly to guarantee your obligations under the terms and conditions of the Bonds (as such term is hereinafter defined) upon request of the holder(s) thereof if (a) during the Guarantee Period (as such term is hereinafter defined) an event of default shall have occurred under the Bonds. The Guarantee Agreement will be secured by a pool of mortgage backed securities or Federal National Mortv49e Assocxaion ConvntioniIa Mortgage-Tacked recurifies, which 61al1 5e acceptable to you, having a fair maiket value at the Commencement Date (as such term Digitized " for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis October 21, 1982 Page 2 of 6 4.440 is hereinafter defined) of not less than $7,560,000 (150%) and at all times thereafter during the Guaran tee Period of not less than 150% of the outstanding principal balance of the Bond Financing Loan (collectively, the "Guarantee Securi ty"). The Guarantee Security will be owned solely by us, fre e and clear of all liens, claims and encumbrances, and will be fre ely transferable. The Guarantee Security will be pledged to the Bond Trustee (as such term is hereinafter defined) during the Gua rantee Period. B. If you elect to finance a bond purcha se under a Repurchase Agreement, it is understood that Loan documentation shall provide that a Repurchase Def ault may, at our option, constitute an event of default under the Bonds. C. On or before October 30, 1982, we will furnish you with evidence, which shall be acceptable to you, demonstrating (i) the commitment of a pool of single family mortgage backed securities or the commitment of Federal Nation al Mortgage Association to the creation of the Guarantee Security, (ii ) our due authorization to consummate the transactions contempla ted hereby and (iii) the commitment of our Savin s and Loan Ass ociation partici2apts, to fprovide the co atera .4 or the Guarantee Security: — D. We understand that it is presently contemplated that the Loan will be consummated on or bef ore April 1, 1983 and we will take all steps necessary to facili tate such consummation, and the performance of our obligations under this section, on or before a date specified by you (which may be no sooner than December 20, 1982, nor after January 20, 1983.) Time shall be of tSe essence with respect to performance of our obligations hereunder. Section 2. As used herein, the term "Loan" shall mean a loan of $4,800,000 to you from the cit y of Martinsburg, West Virginia (the "City") upon the follow ing terms and conditions: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis v . -4 (a) Security: The loan shall be evi denced by the Bonds and secured by (i) a first mor tgage lien against the Premises and (ii) a security int erest against certain personal property to be located within the Premises and your interest under the Management Agreement from Hotel Investors Cor poration or any alternative management group app roved by SIMCO. You are to provide a three (3) year gua rantee to cover any negative operating cash flow def icits in a form acceptable to SIMCO. This 3 year guarantee is our only recourse to Viking Way Limited Par tnership. , . .• (b) Term: Not more than 28 yea rs following the period of construction (not to exc eed twenty-four (24) . months); .• - .••• -, 4 • ••..! ••• . -.• et—••—,.• , .• - ••••—• ••• -• • • Viking Way Limite October 21, 1982 Page 3 of 6 Vartnership (c) Repayment: Interest and principal monthly in installments ot constant (level) payments of principal and interest, payable monthly, based upon an amortization schedule of a full 30 years; (d) Interest Rate: The interest rate for the Loan shall be negotiated by you with the Bond Underwriters, but at no time shall the rate exceed 75% of the prime rate charged from time to time by Chemical Bank, New York, New York ("Chemical Bank"); or 12% per annum, whichever is greater. (e) Prepayment: The Loan shall be subject to such prepayment rights as may be acceptable to you; • (f) Loan Servicing: Unless the Bonds are held by a single party, the Loan shall be serviced by Peoples Bank of Charles Town, West Virginia; or such other servicer as may be designaEeZETSIMCO • (g) Hazard Insurance: The Loan documentation shall provide for fire and multi-peril insurance policies in the amount of the full insurable value of the Premises, copies of which shall be made available to us upon request; and - - (h) Compliance with Internal Revenue Service Regulations: The issuer of the Bonds shall be required at all times to comply with the Internal Revenue Code of 1954, as amended, and the regulations promulgated thereunder, pertaining to industrial development bond .-.-. issues. y, ••• , ,• • .Z.,;:44 • • 1 :,14*., • " • ' . • used herein, the term "Bonds" shall mean the industrial development bonds issued in connection with the Loan, and the 'term "Investor" shall mean the party or parties to whom the Bonds are issued or by whom the Bonds are at any time held. t Jr .6 Section 3: As used herein, the term 'Guarantee Period" shall mean the period commencing on the date (the "Commencement Date") upon which the Loan is consummated (whether or not funded in full) and ending on the 15th anniversary of the Commencement 'Date. - , • , Section 4. Our'obligations under Section hereof shall be conditional on the following: • 4- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis NJ.' •• • _ • r 4 -` (a) Reasonably satisfactory evidence of the ,' availability of (i) $1,000,000 in project funds derived • •' • •• • I ' ' .. • •L • .: 61'• - • . Viking Way Limite — October 21, 1982 Page 4 of 6 •- 'Partnership - from the U.S. Department of Housing and Urban Development, Urban Development Action Grant; (b) Reasonably satisfactory evidence of your equity capitalization in an amount of at least $1,000,000, or an alternative source of such funds by equity contribution, loan and/or otherwise; (c) Compliance with applicable regulations of the U.S. Government and all laws, ordinances, codes and regulations, if any, of any other governmental entity applicable to the Loan and the Premises; (d) Existence of a management agreement (the "Management Agreement") affecting the Premises between you (or your designee) and Hotel Investors Corporation or another hotel management firm acceptable to SIMCO, as the case may be; 1:,.. (e) Receipt by SIMCO of a Commitment for the • collateral required under the Guarantee Agreement from our Savings and Loan Association participants on or before October 30, 1982; •• • (f) Approval of Documents: All documentation for the Loan shall be reasonably satisfactory to our legal counsel; • (g) Organizational Documents: The issuer of the Bonds shall be duly organized and subsisting; .° • • .•.• IC.4 114 .0•• • 0. • ,ftba,:. •.• .•.. . • 4 . (h) Title Insurance: Borrower shall furnish SIMCO and the Bond Trustee a Title Insurance Policy in • " ,the amount of the real estate portion of the "Security" - provided for in the loan as free and clear of all . liens, rights of way, easements and encumbrances (unless otherwise approved in writing by SIMCO, which ,approval shall not be unreasonably withheld) including Mechanic's Lien protection,-written by a Title -Insurance Company that is acceptable to SIMCO, • providing for pending disbursement endorsement, insuring over usury. A current survey of the • "Security" is to be furnished within a reasonable time prior to the date of closing. The survey shall show dimensions and total square feet area of the real ;..?; .7. estate, (b) interior lot lines, if any, (c) dimensions • and locations of improvements, (d) parking areas and easements, if any, (e) location of adjoining streets, — • .4. • •• • _ https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis . ...• • ...1r • • •.• .„ Is -; 1 •4 0 •.. . - ..•. •' • ''"'•4., .4. ;...r_ •••• ; ,'"' • • .l,.• e 0.. 414 •....V: ., .. 4/4 W ... 4 . • • ....4 ,.. • •••• ti• • , :: •• •••••, II . ..- 1". .. $ -4 s. • 1,-..- ..,;•. .".: •',/:*; I " I !,. ....„4..* I; .it; ik .. .. • ;t: 4; .":, „s; ..•. , o '•, ... .. • . -,.. • ••.' ,' :-'-', ,•• ,— - ...''. — . ••••P • 1;0 • • • ..".•44 • 1. • • . " • 14. I •I * ***6 • ' •••"' . ."1-1 't•— . .. ' :• ••• • .,; •.-m••, ,. ••• • '. ' . • .10 • •• V e. I.• • P•• •• I • yiking Way Limite October 21, 1982 Page 5 of 6 •••lt •• I ••••••• • A ••• • .-1,1 • • • > Partnership and (f) other details as to the real property as may be requested by SIMCO. (i) Closing Documents: Loan, we shall receive: At the time of closing of the (i) True, correct and complete copies of all - Loan documents; •t • ..4 • • .•-; . •• --t---: .s4- + • (ii) An opinion of legal counsel, reasonably • acceptable to us, that the Bonds, mortgage, and any other security instruments have been duly executed and delivered and are valid and legally binding obligations of the obligor thereunder and are enforceable in accordance with their terms;. and we shall provide; ... • 3.. 3 , (iii) A Guarantee Agreement and Guarantee Security in form and substance acceptable to you and the lender. • • 21\ -,-.• • • '•• (jL Appraisal: SIMCO shall have been furnished Appraisal of the collateral for this loan from an Appraiser acceptable to SIMCO sufficient in value , conclusion to satisfy the requirements that SIMCO's - loan does not exceed ninety percent (90%) of value of the "Security".207. , ;• • II . • •. • • -Section 5: In consideration for performance of our obligations hereunder, we shall be paid during the Guarantee Period the following: . . ,, - •. •• . ' f. (ar • As a Guarantee7fee'On:'tlie Bonds and'Loan during 4 :the term of the Guarantee period the following fee schedule • • • • ,t • . apply: . • • • • • . •*. —"I.•• ' 54: ••• • • • L•• . •"..., % ..•,•.• ---:--Year: 1 - := :„A. fee of '1.35% per Annum (*) —, •„.e. ,• .".`--;-*'--... . ... -, Year: 2-5 --= A fee of 3..20% per Annum (*) .. ,,.._ • .. . ...)-. Year: 6-15,= A fee of 1.00% per Annum '(*). T1. . !t.-:••• 1 4:.314.4 • . .;.,0 •• •• /"' • : • t. .' i' ,4111 -..••• ...11 - 41 • • '. ' • :.4._, . ': "i • - , .• • .-•.... . • • _ , ,. —', . ' ;..-. -i .....- fee shall be computed and paid monthly based on the .. : - market value of the Guarantee Security as of the Commencement Date, provided, however that if at any time the 1-fair market value of the Security declines and additional '...:"-...„ 'Security is required the Guarantee fee will apply at the .:..!.-: -,,-.. -' _ same rate on the fair market value of the additionally ,,..::„: --required Security. If the Security requirement is reduced ''*..), f : during the Guarantee period the required Guarantee fee will correspondingly - - . • apply • . • • • • . . •t , . •• . .i r ...4,. • • .. -,• t .;•• - .y. . , .." ().,the • , •- e • r..! . • • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis „.• . • • • ,*; 4 pi ...'''It4.:•••;e•-• • . , 4. 11 % 4 •••• • .0 • ; • •• • I •..40.•• e . 41" i•• . •••••it. • . ••••• t •••• •%•• ..• • : • •• • • e. ••• • • • •• e • • ••• .„ . a • ..„ • • . WS. %' • • 7 ••• • • • • •••'''",, -, --,r 4.,-,•,. ,• Iti7;.7-;• - • 4.••. 7 , 1. :•••• .— a 4, ..•,/ 1 4 .4 ".! :• 41,( , , •• re.. • ,... • •,-• ... • . Viking Way Limite rartnership 'October 21,•1982 ' .. Page 6 of 6 • • • s •4 • • • I....v(1- . • •.• m. ...—, 4 .. i ,-) • • • f ••••••• . ..,.. .. (b) As commitment fee, $100,800, this fee is payable to SIMCO as follows: •-,400 $50,400. Payable with the acceptance of this commitment. . $50,400. Payable from the loan and Bond proceeds. (c) As contingent fee, if, as and when available, an amount equal to ten (10%) percent of the net adjusted cash flow payable from the net cash flow retainage as provided for under the proposed syndication structure. This payment is subordinated to: (a) all operating costs, (b) a maximum fourteen percent (14%) preferred return to investors and, (c) the Hotel Investors Corporation management fees, (d) , debt service on the loan, (e) guarantee fee (f) debt service 'On any UDAG loans. , %I.• • • Section 6. If, for any reason whatsoever, you are unable to consummate a Loan on or before April 1, 1982 due to our failure to perform each and every obligations hereunder as and when - required to be performed by us, then and in any such event, the 1, Commitment Fee shall -be refunded to you promptly upon demand. „ . Section 7. This letter shall be governed by and construed under the 1s of the State of Louisiana applicable to agreements made and to be performed wholly therein. • r.. ,s 4 .• . . r• . • •.# •••• Section 8. No term or provision of'this letter may be waived or modified except by written instrument which is executed .by the parties hereto..,. ,.• - •' - .. • Section 9. SIMCO has entered into an agreement with North : -.-. Savin s and Loan Associations of Oxford, Missi-S-Tigi.7— , :Mississippi n'tentIttrOMIM-771!"-- *:.-- 7 .-,-,11-he Association) w ere.y •• • as a ITirinan anirCOmmitment portfolio to the Association on or before -. October 31. , 1982. SIMCO reserves the right to assign this commitment and- its,rights herein to the Association. ,. ; Ij • • l• s • a • i • „. • ••' fl•• . 44. ' * ,• . • SO• , • ---'4 • Section 10. - If Viking Way Limited Partnership is unable to ::". e - Idemonstrate a reasonable source for the repayment of the ',.,. .. ...... _outstanding balance of the bond issue at its maturity, SIMCO will ' provide at the request.of Viking Way Limited Partnership a • . ,• ; ,.t "gap-loan" commitment. The fee for such commitment will be 2% of .,,,• .,,. , . - :-the • • proposed loan amount. The remaining loan terms are to be :.;negotiated between SIMCO and Viking Way Limited Partnership. r .• • - -Section il. ''Tn'the event our guarantee is in'fact called • „. .- upon by the bond holders you must pay 75% of Chemical's prime .•,rate on amounts you owe to us. •le 4 I • 1 ••••• J • ••• r.) • • •. • • •••• • • • • ?. r . • • 4, • ....-1r:•• a •, A ••• O.' • -• • . 2^ , I • •• • ?e''''r • • -• ;.•• 4•44- ;•‘?i••-• • •%. • , • e• • . I. I• • • • •• ' i.r ; 7 041i:,•";...: • • S... .. f ••• e".• ••• • • • X * ••:0,".• • • • • •/ • 'Ls. • 471. • ttr • •, • •••• .1 're r• • :• 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , • •• • . • a • -. n • Viking Way Limite October 21, 1982 Page 7 of 6 • . rartnership Section 12. In consideration of the "Special Collateral Pledge or Bank Letter ot Credit to be provided, it is assumed that the bond rating_is_not to be less than an "A". If the bonds are assessed at a lower rating,j1prrower'may_spncel this Commitment and in'Tees pia-E6 -SIRCO sirall be jmptTefunded. ••••-•••6,-,...ess ..•••••••••, ..."...61. .,MIEIMONSIONIONU This commitment letter and consummation of the transactions contemplated hereby have been duly authorized by our board of directors, and are permitted under all applicable laws, codes, rules and regulations and our charter and bylaws. If the foregoing is acceptable, kindly sign a copy hereof and return it to us not later than October 15, 1982. Upon receipt of this commitment duly executed, it shall be considered in full force and effect to April 1, 1983. 3,. .Very truly yours, • SOUTHERN INVESTORS II a Louisiana Mortgage Partnership in Commendam -e t.t` - • •r••... • • .• • —4 "• • I .•••• . • .• 41111,54 Aae. 1 1; AtieglikCw .401 Hari. y A. •ennhoff, President .5 • Southern Investors Management Company, Inc. .(SIMCO) :• • • a• .• . •• • .7t • '5 .. •• .• ACCEPTED • • - • . • •• •, : r VIKING WAY LIMITED PARTNERSHIP •-• • •r• •••• • •, ... • .• ' • , .• • -• .•• •••• . • • •• ,... .. , r :.7... it .,• . . ... ,• ••t:• • • • ,-....4.--,-:•i,e•!` , ;-, ... •••• • r .. • . ,--:. .y By.. • . . ,.•.•, • t• • ••;:. .... . r •••• • $ •• .• • 7 • • r • • y. - • . ":. 4 •• 0. .• • •.•.-• • . • • • .41 •. 1 :1 •: • • • •51 1.• • . • ' •••• • . „.. • •• ••:•• •• •a••• . • • •• • ••••4•.• •... •••• „i• •. P • • • .• .a• • •• •.• • •• 5,. .. .1 •`. • .. • 7" - a • . •• •, 4 .... ‘ -.1 ; 11 ..• • ..‘ a11: . . ;Is.:44. '" :•* 4 • :;.::: '-'-...1,!4:ft. ..• .•,-. ..a 7 . . .i *.... - • • et • •• • •• .. • - • r: •• - •• iti• • ••••• • • ••• • •• 5.: • c.• .•55:• , •..4 • •• ••••• - 7! 44 : ..• .S. •• ' T. ..4• •1 • .. -. I;.. .-. 1. • 4 :‘• . • .• • •• a 14 •• • ,. SI• •••• s . 7 •. • .• ,.. " • . , , ... •• , L. i• .: • f... :•..: . ,.• .• . • .. r ••• • e' • 0,9 . .• 77 • .', https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis , • '1. :4•! -..•. r • • i . . • • .. • • • • •••• • . . • ; . •: . 5.. ,..0 • b .• . . L e• I• , . 9 • ...- . .....• • (:.. ..: 11 . .: • •..0 ..t .,.:I ' ,, .. • • I• ••• .• • .,. a r . .. • ., ' . ; •••• . .` • 1 • • ..• .• .4 1 . •• • 4 :.• , • • • • .• - • • ••• S.-.. • . ...• . ... . . .,4. • !; 0. ..:I" :••r. • .. • •• • .1? •2 0 - s. t 5 .• , • •••• . soF 4%— . . •1 .., 1 . " _: ' . .• . •• .• • • —• . 4...... ••••.! • ••.• j• . - .5.L ...'... .• • I' '••••1 ., : ••• • Ps —4,i'. • • •••••• p! ." f'•2i.;••ots. I t'l 4 • •• 1 4' ''''.•_' .. • •••. rt'•4. •••• t•••••* r5 , 45 • ••;;•:"••• i • .•:. . . . ' 4 .4* 4'.-• 6 . ..• %.• ..1 . .... • .5, .5. • •• . ..: •. .4 ; • c; •••• . 4 4 •••• • • t • .; • ' • ....1, •1 • • • .1 ••• ‘-7 • .65 WI• • a•-•: .-P 4-4 • . • • • ...• •4 •4*..' 1,P-als... •• •• Am, ,.... •4. . 4 ..' 4. .....:•.••• •: ,ups . t 19.. .t.• ..•:•• 5..s. ••- t-• • 4-;-: -:••1 • ••'a • • ,•••• • • Si. a!"WS" M. - • -. • ; ; ' •• • : .•• 4 40 ••' 'i• 41; ' : •4.. ' ... .: • • ••• • • .. :•• . • .• :'• . . .; :.'.• • •••••••, • • • •. • , • '' • • • •!--k •.4 . ":—.•." • •-• • • •••', L. . I .1 1• 1. • • •• 1.t• " • V. • . • AGRCEMENT This; Agreement stts forth Way the mutual understanding United Partnership ("Owner") and and Cragie notor Virginia. will Ferris & CompanY. IncorporaLed ("Vnderwritsrs") regardin g inn and related facilities Failuro relieve of any oi Incorporitted Martinsburg, forth any obligation Viking the financinu of ('Projec:t") in the conditions set the Underwriters of betwken to below to a West be met proceed with this I inancing. 1. The ("Bonds"), City which of Martinsburg shall be rated ("Issuer") shall at least AA by issue the Standard & bonds Poor' Corporation. 2. The $4,800,000 which financing of 3. approximate i be used for Investors fficieTt the necessary single proceeds from the Bonds the construction shall and be permanent the Project. Southern collateral family shall net rating. mortgage faMily loans mortgage Mortgage amounts and Such Or of Corporation ufficient collateril shall be in sh.l 1 quality by the Federal to obtain the form of participation certifioates bane held pledge in a National eirzgle pool ot Mortgage Assooiation. 4. VanWyk VanWyk, shall https://fraser.stlouisfed.org Asassa. Federal Reserve Bank of St. Louis 5. The be CnterpriSeS, Inc., a corporation wholly the general partner Underwriters shall 10/26 10:51 of owned by Bruce which will bear the Owner. purchase the Bonds, 7208281 #02 o with schedule balloon A payalents on Principal the of to the approval its principals shall any of the Project other shall Underwriters, Prior 8. p:ace Owner shall Suoh to ID. Lague, statements, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis be derived receipt of the Owner by n 1, 11 that the the Trustee or and for to the a) iuterest thfi Underwriters, the and and and Mond arrangement equity capital. p2ovide adequate working the sale of approved of a) all by at partnership limited Action Grant. be a oommerclal the Underwriters which has least 6100.000,000. legal expenses associated all printing expenses for A7 on the b) tax make other an Urban Development and total asset Bonds, i financing to have available suffioient through Owner shall pay b) Owner the acceptable Virginia income the Bonds by purchase of in escrow with department The counsel bond froeiee for (he Bonds ("Trustee") shall The selected a trust the the funds shall 9. as issued. complete the Project interests andior bank other or to the Underwriters satisfactory funds to lien debt provide a written opinion validly been Bonds have Neither the Bonds. obtain first is exempt from Federal aud West Bonds Martinsburg than from the Underwriters. & Johnson, Steptoe 7. subject agreed, the City of by be named the exclusive managing underwriters for nor mutually other Issuer. The Underwriters shall 6. interest such have Ronde shall be hereinafter terms and conditions as shall year. fifteenth the Bonds shall be made annually while be made semi-annually. shall payments amortisation lotol the in (final) payment readily. The be sold nortgigt year a thirty on mature shall Bonds the Bonds to Underwrite - . permit the ludgment of reasonable the in whioh, rates rate or lowest the at interest transcripts, the prelinInary 0) the Bond 7211P.2$11 #01 Tating with official fee, d) signature machine any the expenses 01 and one quarter Issuer financing If reimburse the Underwriters $1,000 of and addition shall in The Underwriters *hail the of the opinion impugns the charaoter 13. informed 14. November 15. separate The Owner Yegarding obtain Underwrite. of and the Owner all shall not Agreement shall the of expenses legal reveal information that keep each other fully by valid both parties or before on 31, 1483. if each party exeoutbs copies. ORATED fERR1S & COMPANY, INCORP CRAIGIE INCORPORATED orated SY:Ferris & Company, Incorp VIKING WAY LIMITED PARTNERSHIP RY:VanWyk Enterprises General Partner Bruoe VanWyk President Robert T. Reeves Senior Vice President t Manager, Bond Departmen DATE; DATE' https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to, to the Bonds_ on March be shall its prinoipals. be oaeouted 5, 1962 and shall expire honds sold. , whioh a "due-diligence" report relevant all matters thiee S10,000. the Underwriters shall This Agreement must This or to dorumeitted expenses up I1abI0 for be equal reason, the Owner any for reasonable, Lot a maximum of the underwriters up to 12. in obtained is not of amount total the percent (3 1/4%) of • 11. Underwriters' discount g) an and f ) all the Trustee , fees of 0) all fen. U54ge 3 • A I% 72f1P2P1 tri_a OF 03 Inc. 1st 1100 SEVENTEEN.TH STREET, N.W./SUITE 613/WASHINGTON, D.C. 20036 (202)785-2571 October 25, 1982 HAND-DELIVERED Ms. Lessie Powell Project Developer Urban Development Action Grants Department of Housing & Urban Development 451 7th Street, S.W. Room 7258 Washington, D.C. 20410 Re: Foxcroft Motel Martinsburg, West Virginia Dear Ms. Powell: The purpose of this letter is to provide the additional information you requested this afternoon. 1. We are committed to raising net proceeds of $1,000,000 through a sale of 98% of limited partnership interests in the partnerships which will develop, own and operate the above-referenced project. The investor limited partners will contribute this amount on the schedule described in our letter of October 22, 1982, to Mr. Bruce Van Wyk. "Bridge" financing from a bank will be used to provide such funds when needed. In addition to the $1,000,000 needed to complete the project the investors will contribute additional funds to the partnership to pay for the costs of the offering (including broker-dealer commissions, legal and accounting fees, and miscellaneous costs), to pay our fees (which shall be reasonable and not in excess of industry norms), to pay the interest in "bridge" financing, and, possibly, to establish project reserves. 2. We have available a line of credit of $5000,000 from the United Virginia Bank whiCh we can use in the event trama4117e Choose to purchase the limited partnership int_erests ourselves raisin. tne tunasE'SMITT.7: 111 114 o t is me o cre it will remain uncommitted east to other projects until the syndication of this project has been completed. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 75:alfla 4 Michigan Office: 411 EAST WASHINGTON STREET/SUITE 100/ANN ARBOR, MICHIGAN 48104/(313)665-6312 • Ms. Lessie Powell October 25, 1982 Page Two • V • 3. Our commitment to syndicate or to purchase limited partnership's interests is subject to the following conditions: a. Our review and approval of the final working drawings and specifications for the project. b. Our review and approval of the terms of the debt financing for the project, including but not limited to the UDAG loan (which loan must be for a period of at least 10 years and must be at a reasonable fixed interest rate with no participation in project cash flow or residuals). c. Our review and approval of the proposed franchising and management agreements with respect to the property. d. An appraisal of the property showing a value of not less than $6,800,000 upon completion. e. A satisfactory market and feasibility stody conducted (or commissioned) by us. 4. We have determined the value of the equity for this project based on projections of net cash flow, tax benefits, and equity appreciation. In our judgement, the anticipated investor benefits justify the net equity investment of $1,000,000 for this project. I believe 4j••'e points cover all of the questions you raised over the phone earlier this afternoon. Please do not hesitate to call if you need additional information or have other questions. Sincerely, INVESTMENT GROUP, INC. Step n B. Smith President cc: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Bruce Van Wyk AFTER HOURS TEL.(2121 633- 3321 CABLE ADDRESS • ALHASEN TELEX 420677, 234510 TELEX 234611.421905 I NCOR PO R AT ED CUTTING DIAMOND • 580 FIFTH AVENUE , NEW YORK, N. Y. 10036 TEL. (212) 575 - 0 290 December 23, 1982 Mr. Paul Volker, Chairman Federal Reserve Board Federal Reserve Bldg. Constitution Ave Between 20th and 21st Street Washington D.C. 20551 Dear Chairman Volker, I thought it is appropriate to send you a copy of the letter send to the President. I Wi4ling you and your family a Merry Christmas and a happy, healthy New Year. I remain, Sincerely yours, Alexander Hasenfeld AH/rd SUNISIDIANY Or Arattaotie•AA INC.01,1.0111.1AT CO https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis December 22, 1982 Mr. Ronald W. Reagan President of the United States of America The White House Washington D.C. Dear Mr. President: After reading the many plans offered to resolve the bank crisis, I found each was missing at least one major piece of the puzzle. I therefore felt I should respectfully submit to you a plan I thought out some time ago. It is obvious, that a great part of the debt owed by the LDC's to the Western banks will never be repaid. This debt may equal or even exceed the net-equity of the entire banking system. If this situation is permitted to continue, it will surely cause a total collapse not only of the entire Western monetary and financial system, but also of its political and social system, leaving us wide open to a total victory by our enemies without firing one missile. I can even foresee an occupation by those forces, because our system will be in such disarray that even the military will not function. Therefore, it is no longer a financial problem of the "private banks", but a political and security problem of first order (DEF CON 1 1/2). The mantle of responsibility lies on the United States and its friends of the Western industrialized countries. Dealing with each insolvency seperately is inadequate. Not only doesn't it solve the problem (also costs more) but it rather aggravates it. The extensions granted just add a non-producing expenditure on their books from which they will never be able to extricate themselves. Because of this uncertainty, the private sector is holding back on vital economic decisions, and does not expand; the LDC's have no liquidity so they cannot import. All this deepens and prolongs the recession, leading to the total collapse. Why wait for the inevitable to happen and only then for the government to step in? It will cost a lot more this way and it will take years to rebuild the confidence of the people in their government and monetary system; why not do it now, and start the recovery immediately. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis "IP An international agency should be created (Age ncy), with the format of the IMF, or perhaps linked to it, like the "General Agreement to Borrow", founded by Western industrialized governme nts on a pro-rata basis. The Agency should "buy" from the banks all loans outstanding to the LDC at a small discount, payable in three years at a minimal interest rate, let us say 2% (they can afford it, after all, they created the problem). The Agency should investigate immediately to the fullest extent the financial situation of each country in default. A plan should be created, that each debtor-country should start to repa y the loan and interest in kind with whatever resources they have. Let us stockpile (even if we don't need it now) all the copper and tin we can get from Zaire and Bolivia. Let us fill to the hilt all our salt mines with Mexi can oil, and so on. We must bail out the banks and the countries anyh ow, let us have something for it. It is still better that these commodities stay with us, then it should be delivered as payment for some Eastern Bloc countries (as was the case in Egypt, Cuba and Argentina). Besides the monetary values of these commodities, there is also a tremendous strategic value. It will keep a lid on undue infla tionary price increases, knowing there is a huge stockpile in governme nt warehouses which could be thrown on the market. (True supply-side econ omics). It will also prevent any future oil embargo, knowing we have 2-3 years supply on hand. Agrarian countries like Argentina and Brazil, should give as payment all the meat, lard, butter we can stockpile, even Polish ham. Those items that we do not wish or cannot stockpile should be distributed as gifts among the poor countries in Africa, East Asia and Central America. Imagine how many friends the United States will gain. This will have a much greater effect than the usual foreign aid. The publi city and debates in Congress, etc. degrades the recipient country. Part of the payment should be in local currencies, for whic h could buy services we could use, like transportation, etc. we The LDC's will benefit even more from this plan. All those presently unemployed miners, roughnecks and lumberja cks besides being a political time-bomb, add to the present economic stagn ation. If these will be reemployed, the economies of those countries will start moving again, will begin to import... As for the future liquidity of the LDC's, each requ est for a loan should be submitted to the Agency. As it maintain s accurate financial records of each country, (with right of on the spot exam ination), they will be best qualified to judge the creditworthiness of each country. If one steps out of line, and austerity measures have to be imposed, the Agency can impose it, unlike a private banker. Imagine a banker should tell "His Excellency, the Finance Minister" how his country should be run. He neither dares (afraid of losing the customer to the competit or bank) nor is he qualified. The authority of the Agency would have added weight. r V011ryik. -.4. U https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • • Once the Agency approves the loan it should be given over to the private sector for competitive bidding; which should be below LIBOR. A 2% override on each loan should be charged as compensation for the Agency's services. A very nice reserve will be accumulated in a relatively short time, which could serve as an FDIC like insurance. Solving the liquidity problem of the LDC will soak up most, if not all the idle capacity of our factories. By removing the dark cloud from the banking system, the private sector will also dare to make intelligent financial descision for new investments and expansions. The first cry of the opposition will be "it is inflationary". The special interest groups will cry that it hurts the domestic producer. None are true. To the former: it will have to happen anyway sooner or later, piecemeal as done to Mexico and Brazil, but without the benefit of the good side effects; for the latter: stockpiling will not hurt the domestic producers, since it will not be marketed. This is just a general outline. If needed, I or any of your competent economists or consultants can work out details. It could be implemented within 2-3 months. The full program could be in place within a year. Wishing you, Mr. President, and your dear ones Merry Christmas and a very happy, healthy new year. Respectfully yours, Alexander Hasenfeld AH/rd 114...",-•••• - • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WARBURG PARIBAS BECKER , AG.BECKER It3t10 -C t-3 C:Frn December 16, 1982 Mr. Paul A. Volcker Chairman Board of Governors Federal Reserve System Constitution & 20th Streets, NW Washington, D.C. 20551 Dear Paul: I have just joined Warburg Paribas Becker Becker as Chief Economist. Enclosed is a copy of the final draft of my December 1982 Monetary Perspective, which you may find of interest. We will be continuing our Decision-Makers Poll of inflationary expectations and should have the results of our current survey by the middle of January. Sincerely yours, Richard B. Hoey Vice President RBH/mg Encl. Dictated But Not Read https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 55 WATER STREET NEW YORK, NEW YORK 10041 TELEPHONE 212/ 747- 4400 TELEX 12-5879 / fr -wI • MONETARY PERSPECTIVE ECONOMICS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis December 14, 1982 HIGHLIGHTS o Federal Reserve policy is consistent with sustained economic expansion. •IP • • o A weak gain in real GNP is expected in the first quarter of 1983, to be followed by faster growth. o We expect a sharp drop in the volatility of interest rates and a persistently positive yield curve in 1983. o The trough in interest rates in 1983 should trace out a gradual saucer shape rather than repeating the spike low of 1980. Richard B. Hoey, C.F.A. Helen Hotchkiss (212) 747-8255 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: Article (draft) Citations: Number of Pages Removed: 18 Hoey, Richard B. "Monetary Perspective." December 14, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis • AM E RICAN DCPRESS AMERICAN EXPRESS COMPANY, 1700 K STREET NW, WASHINGTON, DC 20006 STEVEN M ROBERTS DIRECTOR GOVERNMENT AFFAIRS December 21, 1982 The Honorable Paul A. Volcker Chairman, Board of Governors Federal Reserve System Federal Reserve Building Constitution Avenue, N.W. Washington, D.C. 20551 YIP .• • ' • •• ; 1•) CD • Dear Paul: Jim Robinson mentioned to me that he and you briefly discussed the "tax-exempt CD" program in which Shearson/American Express has been involved. I am enclosing copies of the Official Statement describing the Bonds involved and the linkage between the Bonds and the CD's that are issued by the S&L's in the various programs. If you or your staff need any additional information, please let me know. With best regards. Sincerely, 45‘-Steven M. Roberts SMR:fb Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Edward A. Sheldon, President P.O. Box 459 Bremerton, WA 98310 (206) 479-5100 National Bank of Bremerton 1 December 17, 1982 Mr. Paul Volker, Chairman Board of Governors of The Federal Reserve Bank Washington, D. C. Dear Chairman Volker: Once, each year, I select a whi te knight of the year. I choose a person to ser ve in that capacity based on who I believe to be the individual who has most thoughtfully and int elligently tried to serve what I perceive to be in my best interest. This is a somewhat selfish award, and, therefore, I exercise a certai n amount of subjectivity in choosing that ind ividual. I might add, that I am young enough to belive that the world continues to need a white knight here and there and old enough to recogn ize that white is a very difficult color to keep clean. (Recognizing the latter does away with the necessity of adopting the "fe et-of-clay" backup position.) Because of your activities ove r the last several years, I have chosen you to serve in the capacity of white knight for 198 3. Along a more serious vein, I would like you to https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Page 2. know that I have followed your public statements both in your capacity as Chairman of the Board of Governors and as a member of the DIDC, and that I have come to admire your resoluteness and agree with your many-stated concerns about the safety and soundness of the regulated financial industry. Unfortunately, many of your concerns have gone unheeded and many of your admonitions have gone unheard. Fortunately, however, thoughtful men around the country have been listening. Eventually, they will have an effect. We can only hope that the effect will take place before the damage that has been done by the Congress and the DIDC becomes irreparable. Please accept my sincere appreciation for your unstinting efforts to preserve the financial soundness of our country. Very truly yours, EDWARD A. SHELDON, President NATIONAL BANK OF BREMERTON COACi'D ' FE --- 'No 1982 DEC 20 r' ecember 15, 1982 Mr. Paul A. Volcker OFFiCE C: riiiT Chairman of the Board of Governors Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551 U. S. A. Dear Chairman, As you probably already know, the Nakasone Cabinet recently replaced the Suzuki Cabinet in Japan. On that occasion, I left my position as Minister of Finance for a while. It was a distinct pleasure and honor to have had opportunities to meet with you, to exchange views on the world economic and financial situations, and, sometimes, to work closely with you during my tenure of office. I would like to express my sincere gratitude for all the kindness and thoughtfulness you extended to me during my service. Although I resigned from my post as Minister of Finance, the Liberal Democratic Party is still in power and both the Prime Minister and the new Minister of Finance are my close friends. Therefore, I feel a strong obligation and desire to extend my full support to my party from behind the scenes. I would like to ask for your continued thoughtful understanding and kind cooperation with my successor, Mr. Takeshita, and the Ministry of Finance. If I can help you with any difficult problem you might encounter, please do not hesitate to let me know. I assure you of my &full cooperation in finding a solution. "'"orPIPARI"Nr"""k- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 In the future, I may have an opportunity to visit your country and request the favor of a meeting with you. Also, if you have a chance to visit Japan, please contact me at any time. I would be very glad to adjust my schedule in order to meet with you. At present, and in the future as well, the world economy is becoming increasingly interdependent and it is impossible for one country alone to enjoy economic prosperity. I( Therefore, international cooperation is becoming increasingly important. I would like to further strengthen the friendly relationship now existing between our two countries. Last but not least, I would like to once again express my sincere appreciation to you. I wish you continued health and every success in the future. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis With my warmest personal regards, Sincerely yours, Michio Watanabe &• Michio Watanabe Ministry of Finance Tokyo 100 JAPAN taA,RD .• E I 7s; • 1 1982 DEC 20 NI in: I 3 OH- T71: ... • . zeLie_e_e6_ •-• https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 7 • WACHOVIA BANK AND TRUST COMPANY, N. A. WINSTON-SALEM, NORTH CAROLINA 27102 JOHN G MEDLIN, JR. December 16, 1982 PRESIDENT t."334e1 3 The Honorable Paul A. Volcker Chairman of the Board of Governors of the Federal Reserve System Washington, D. C. 20551 , I ‘t74. i https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Dear Paul: Enclosed are two recent speeches containing my usual commercial encouraging support of the Federal Reserve's monetary policy. You are doing a great job, and I hope you have the opportunity to continue it for as long as you feel a willingness and duty to take the heat. With warmest good wishes for the Holiday Season and the New Year, in rely, John G. Medlin, Jr. Enclosures Cr, C.: CJ) • 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: Speeches Citations: Number of Pages Removed: 18 Medlin, John G. "Economic Outlook," before The Greater Concord Chamber of Commerce, Merchants Association Inc., Concord, North Carolina, December 16, 1982. Medlin, John G. "An Economic Perspective," before the Open Student Forum, Davidson College, Davidson, North Carolina, December 14, 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Ell League for Industrial Democracy 275 Seventh Avenue New York, N.Y. 10001 (212) 989-8130 Thomas R. Brooks President Tom Kahn Chairman of the Board Albert Shanker December 15, 1982 Treasurer Judy Bardacke Chairman, Executive Committee Arch Puddington Executive Director VICE PRESIDENTS Sol C Chatkin Charles Cogen Midge Decter Sidney Hook Ernest Nagel Bayard Rustin Mark Starr BOARD OF DIRECTORS Jervis Anderson Shelley Appleton Andrew Biemiller Kenneth Blaylock Charles Bloomstein George Cadbury Jacob Clayman Wilbur Daniels Max Delson Bernard J Englander Paul Feldman Sandra Feldman Samuel Fishman Harry Fleischman Morris Fried Samuel H Friedman Walter Galenson Carl Gershman Roy Godson Ernest Green Feliks Gross Alvin E Heaps Msgr George G Higgins Norman Hill Rachelle Horowitz David Jessup Gilbert Jonas John T Joyce Penn Kemble Leon H Keyseriing Jeane Kirkpatrick Israel Kugler Aaron Levenstein Herbert A Levine William Lindner Seymour Martin Upset Harry Lopatin Julius Manson Jay Mazur Lloyd McBride Bruce A Miller Joyce D Miller Isaiah Minkott Nathaniel M Minkott E Howard Molisani Amicus Most Emanuel Muravchik Benjamin B Naumotf Michael Novak James G O'Hara Frederick O'Neal Paul R Porter Seymour Reisin John P Roche William M Ross Eugene V Rostow Edward Schneider Paul Seabury Bert Seidman Jacob Sheinkman Donald Slaiman Jessica Smith William Stern Irwin Suall Ludmilla Thorne J C Turner Gus Tyler Ben Wattenberg Rowland Watts Charles S Zimmerman https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Paul Volcker Chairman Federal Reserve Board Washington, D.C. 20551 Dear Mr. Volcker: since you have had some personal experience with members of the LaRouche cult, I thought you might enjoy reading the enclosed study. Your comments would be appreciated. Sincerely, atevt- 6)..4vt4Z ARCH PUDDINGTON Executive Director AP:ggw opeiu 153 encl. =2 _11C C=1 •1 NATIONAL COUNCIL Robert J Alexander Jack Barbash Gregory J Bardacke Solomon Barkm Arnold Beichman Albert J Blumenthal Rosemary Bull John L Childs Gerald Coleman Benjamin A Gebiner Robert W Gilmore Simeon Golar Edward F Gray Donald Harrington Paul Jennings Leonard S KandeII Martin C Kilson Henoch MAndelsund Morris Novik Carl Raushenbush Herman Rebhan Frank Riessman Vera Rony Asher W Schwartz Brendan Sexton Patricia Cayo Sexton Boris Shishkin Rebecca C Simonson Sidney Stark, Jr Monroe Sweetland Harold Taylor Mina Wetsenberg Morris Weisz Contributions to the LID aro tax-deductible / LID Is officially accredited to the United States Mission to the United Nations "Education for Increasing Democracy in Our Economic, Political and Cultural Life" / Founded 1905 4141111) https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis E). 1E ISO? DEC 17 fi' .1.11-.,Cr. OFTICE rif 1 • , L i z ' v A --71.11...T /22) ••• Cr r l!: SECURITIES AND EXCHANGE COMMISSIO WASHINGTON, D.C. 20549 ISSZDEC /3 PP: 957 C647111110 OFFICE OF THE CHAIRMAN F; December 8, The Honorable Paul Volcker Chairman Federal Reserve Board 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 73.2 g? Dear Paul: I would like to highlight the SEC's progress in 1982 and solicit your suggestions for future Commission efforts. The SEC is coming down hard on egregious offenders, while reducing the regulatory burdens on legitimate corporations, businessmen, investment bankers, brokers and advisors. During the past year, the Commission has: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis o Processed a record volume of filings and brought the largest number of enforcement actions in several years, despite budgetary constraints and personnel reductions. o Reduced publicly-owned corporations' (and, therefore, their shareholders') expenses by over $350 million per annum and increased companies' financing flexibility, through integration of their registration and reporting requirements, without compromising full disclosures to investors. o Enabled securities firms to make better markets and improve their services to investors by freeing-up about $700 million of security industry capital by updating the net capital rules to take into account the industry's improved financial and operational condition and by permitting the use of letters of credit for clearinghouse deposits and stock loan collateral. o Resolved a seven-year jurisdictional dispute with the Commodity Futures Trading Commission, which has permitted the SEC to authorize trading in Treasury, GNMA, foreign currency, CD and stock index options, which will facilitate government and mortgage financings, international trade and hedging the risks of fluctuating interest rates and securities markets. o Exempted from registration certain offerings up to $5 million and simplified the exemptions for larger private placements. Most states are expected to adopt comparable exemptions, which will be the first joint, state and federal registration exemptions. •• The Honorable Paul Volcker Page Two o Reached an Accord with the Swiss which removes the haven of the Swiss secrecy law from those who would trade on inside information. Progress is also being made in facilitating corporations' ability to communicate with their shareholders, despite the high percentage of securities registered in nominee names; and also in simplifying and improving proxy statements; and SEC releases (in order to obtain greater substantive input from investors, issuers and others). Greater reliance is also being placed on private-sector selfregulation, under the SEC's oversight. For example, the accounting firms which audit most publicly-owned corporations' are now on a three-year peer review cycle. The purpose of these reviews is to assure high auditing standards. They "pay for themselves" by reducing auditors' risks of liabilities to those who rely on their audits. The exchanges and the over-the-counter markets are also enhancing their electronic surveillance systems and transaction audit trails. In addition to exposing possible manipulation and insider trading, audit trails reduce securities firms' transaction reconciliation costs. Effective self-regulation results in better regulation, greater investor protections, lower Commission expenses and more efficient markets. The Commission is also spending more time listening and initiating action in response to investors' and issuers' needs and interest. It has recently held the first Government-Business Forum on Small Business Capital Formation; a Research Forum at which leading securities analysts recommended improvements in the SEC's disclosure and rulemaking practices; a conference on major problems confronting financial institutions and markets in the 1980s; and one with 37 countries' securities regulators on the problems and benefits of the increasing internationalization of securities markets; and is holding a round of meetings with the Fed, FDIC, FHLBB, Comptroller of the Currency, CFTC and other agencies with which we have overlapping jurisdiction; the executive staffs of the exchanges; and with associations which represent investors, analysts, industry and the legal and accounting professions. For the past year, the Commission has also been advocating a task force under Vice President Bush to simplify and improve the regulatory structure of the financial service industries and capital markets. The prospects are favorable that the task force will be launched shortly. I would sincerely appreciate your suggestions for future SEC efforts. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, S.R. Shad *arab . https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 1“4 ItilDEC -9 1r4 4 CANNING COMPANY arrAct General Offices 305 East Main Street P.O. Box 250 Siloam Springs, Arkansas 72761 Tel: 501-524-6431 TVA: 910-720-7260 December 7, 1982 Mr. Paul A. Volcker, Chairman Board of Governors FEDERAL RESERVE SYSTEM Federal Reserve Building Constitution Avenue Between 20th and 21st Street Washington, D.C. 20551 Dear Mr. Volcker: A letter from a backwoods Arkansas economist may be the last thing you need at this point in time. However, I would like to take this opportunity to commend you on what I believe is the best job that has been done by the Federal Reserve System in many years, and that in face of unprecedented difficulties. One of the great mistakes that has been made over the past few years in my opinion is that the nation is in an ordinary recession, recession/ recovery scenario. It has been my belief for a long time, and I have written and spoken widely on this, that the current situation is a result of the convergence of three monumental economic changes. One was the energy crunch of 1973, another was the realization of American fiscal profligacy which could not be continued and the other was the fact that we were in the final stages of the industrial age and moving as rapidly as possible into the post-industrial age or the age of technology. All of these things together have brought to the nation problems which can be solved only in the long run. The very best that we can do is to maintain the greatest degree of stability possible while the problems are laboriously worked out. Although the fight against inflation has resulted in more unemployment, people should be aware of the fact that the current situation of unemployment is deeper than the condition which we call the recession. While unemployment unfortunately hurts many, inflation hurts everybody and particularly those who can least afford to be hurt. I feel that it is absolutely necessary for the Federal Reserve System to maintain a posture which holds down inflation to the greatest degree possible while at the same time easing restrictions which will allow interest rates to come down gradually. At this time I do not believe that most people understand that neither interest rates nor any of the MEMBER National Food Processors Association •11. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Paul A. Volcker, Chairman Board of Governors FEDERAL RESERVE SYSTEM December 7, 1982 Page 2 other prices which we used to consider normal will likely ever be normal again in our system. Every major economic transition in the past has resulted in new and higher price levels which were ultimately matched by higher personal incomes. It is my conviction that this will be so at this time. It is my opinion again that we will be walking an economic tight rope for the next three or four years before we begin to see anything that could be called substantial economic recovery. That recovery will only come when the new technology begins to increase productivity. Unemployment will be a long and laborious battle since literally millions of people will have to be trained or retrained for new tasks in the age of technology. It is my sincere hope that you and your trends of thought will not be sacrificed on the alter of politics. If ever the nation needed strong fiscal leadership, it is now and, if we do not get it we may sacrifice our system to something totally different than it has been in the past. Again, let me commend you on a job well done. Since ALLEi ly yours, NNING MPANY L.H.D. rry, M Corporate Consu ta t for Industrial and uh ic Affairs JVT:ec - 42a • F( = IIFFICh (' ,.... .4...., , .,/ i ED The Philailelphia National Bank FREDERICK HELORING DEPUTY CHAt https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis December 7, 1982 Dear Paul: Enclosed is copy of a paper that I propose to present at a gathering in London next Monday convened by the Group of Thirty. I believe it deals with a matter that is very much in your mind and makes a recommendation or two. Since ly, Mr. Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Washington, D. C. 20551 Enclosure F. Heidring PNEU C. 1-2-49 THE PHILADELPHIA NATIONAL BANK P.O. BOX 78111, PHILADELPHIA, PA 19101 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: Speech Citations: Number of Pages Removed: 8 Heldring, Frederick. "A Regional U.S. Banker's View of the LDC Debt Problem." 1982. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE CONSUMER BANKERS ASSOCIATION Et.:,1•PO c; • 7;:f " 1982 DEC -7 PP.' 6: 55 ... an association for the retail banking professional OFFI;:f. December 7, 1982 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Room B-2046 20th & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: On December 3, 1982, the Consumer Bankers Association wrote you to request that the Federal Reserve Board rescind its imposition of the phase-down "surcharge" on the new money market deposit account and remove all reserve requirements on nonpersonal money market deposit accounts. It has come to our attention that the Board is considering the endorsement of an amendment to the Garn-St Germain Depository Institutions Act of 1982 that would exempt the money market deposit accounts from the transitional provisions of the Monetary Control Act of 1980. We believe this legislation is unnecessary, since the Monetary Control Act already requires that the phase-in provisions not be applied to new accounts such as the money market deposit account. Furthermore, we believe that any legislation addressing this issue should not focus on any single type of new account, but should encompass all new accounts created after April 1, 1980. The Board apparently takes the position that the various new deposit accounts authorized by the DIDC, including the money market deposit account and the All Savers Certificate, do not constitute "accounts which are first authorized pursuant to federal law in any state after April 1, 1980." The Board has therefore applied the transitional provisions of the Monetary Control Act to these various accounts. As a result, member banks are maintaining significantly higher reserves on these new accounts than are nonmember banks. This inequitable situation must be rectified immediately. 1300 N. 17TH STREET ARLINGTON, VA 22209 • 7031276-1750 .111111. 1 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 2 the transitional The Board's application of ts es on these new DIDC accoun rv se re to ts en em ir qu re phase-in ntrol Act. The Monetary Co ry ta ne Mo e th of n io at ol s, is in vi the Board's own regulation by d te en em pl im as t, Ac Control to any schedule "does not apply wn do eas ph e th at th es provid ized ts which are first author un co ac or ts si po de of ry catego 80." in any state after April 1, 19 w la l ra de fe to nt ua purs "the port for the legislation, Re ce en er nf Co e th in ed As stat y new types of deposits or an r fo at th es id ov pr bill ovisions e reserve requirement pr th r te af ed iz or th au ts accoun for ] be no phase-in period ll ha [s e er th e iv ct fe ef become member er member banks or nonth ei r fo ts en em ir qu re e reserv depository institutions." market deposit account In addition to the money 1982, and the All Savers of er mb ve No in ed iz or th au DIDC has September of 1981, the in ed iz or th au e at ic if Cert es of time deposits" ri go te ca ew "n r he ot l promulgated severa ns e Depository Institutio th of y it or th au e th r unde ong these new accounts am ed ud cl In . 80 19 of Deregulation Act and the $7,500 91-day nt me ru st in t si po de ar are the 3-1/2 ye and the ized in April of 1982, or th au th bo e, at ic if rt ce ized in August of or th au e at ic if rt ce ay $20,000 7- to 31-d ese cannot understand how th we y, kl an fr e it Qu . 82 19 accounts as anything other than d te ea tr be n ca ts un co ac after nt to federal law . . . "first authorized pursua the Board's failure to at th nt re pa ap is It April 1, 1980." phase-down schedule e th om fr ts un co ac w ne t except these the Monetary Control Ac of n io at ol vi t an at bl constitutes a and Regulation D. ard to immediately We therefore urge the Bo e Monetary Control Act th of on ti ta re rp te in s reconsider it e of require the maintenanc and amend Regulation D to gories of the new te ca l al t ns ai ag es rv se the statutory re out the imposition of th wi DC DI e th by d te ea s. accounts cr y imposed on member bank tl en rr cu ts en em ir qu re phase-down Drew V. Tidwell General Counsel cc: Members of the Board of l Governors of the Federa Reserve System 0.-14zsr, - . THE CONSUMER BANKERS ASSOCIATION • • • • https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1982 DEC -3 P CrliCE Cr u . qadtssociation for the M b;aDafinking professional L-1,4• December 3, 1982 The Honorable Paul A. Volcker Chairman Board of Governors of the Federal Reserve System Room B-2046 20th & Constitution Avenue, N.W. Washington, D.C. 20551 Dear Chairman Volcker: The Garn-St Germain Depository Institutions Act of 1982 (the "Act") directed the creation of a new market rate deposit account that would be "directly equivalent to and competitive with money market mutual funds." To fulfill this Congressional mandate, the Depository Institutions Deregulation Committee ("DIDC") recently authorized a new money market deposit account to take effect on December 14, 1982. However, as a result of reserve requirements imposed on the account by the Federal Reserve Board, financial institutions cannot offer accounts which are fully competitive with those offered by the money market funds. In addition, the Board has imposed a reserve requirement surcharge on Federal Reserve member banks in direct contravention of the Congressional directive provided in the Act and in violation of the Monetary Control Act of 1982. The interest rate penalties imposed on financial institutions by the Board cannot be overcome unless reserve requirements on the new account are eliminated entirely, or financial institutions are permitted to earn a reasonable rate of return on reserves maintained in connection with the new money market deposit accounts. For the reasons set forth in more detail below, the Consumer Bankers Association urges the Federal Reserve Board to rescind its imposition of the phase-down "surcharge" on the new account and to remove all reserve requirements on the new nonpersonal account. We also urge the Board to authorize the pass-through of earnings on reserves held against the new account either through regulatory action or through its vigorous endorsement of S.3057 and H.R.7341. 1300 N. 17TH STREET ARLINGTON, VA 22209 703/276-1750 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker December 3, 1982 Page 2 1. The Board's Phase-Down Requirement Places an Unfair Surcharge on the New Accounts Opened By Member Banks. At its meeting on November 24, 1982, the Board amended Regulation D to classify the new money market deposit accounts as personal or nonpersonal time deposits, depending upon the identity of the individual account holders. The Board also elected to subject the new accounts to zero and three percent reserve requirements, respectively. In adopting the reserve plan, however, the Board also decided to apply the phase-down requirements of the Monetary Control Act of 1980 to the new account. As a result, member banks that are "phasing down" to the zero percent reserve requirement for personal time deposits will be required to maintain reserves of approximately 1.125 percent on such accounts until February of 1984. Similarly, nonpersonal time deposits would be reservable at approximately 3.75 percent during this same phase-down period. Beyond any doubt, this reserve requirement surcharge is an interest rate penalty imposed by the Board on member banks. The additional 1.125 percent reserve requirement on personal money market deposit accounts represents a difference of nine or ten basis points at current interest rates. Therefore, the imposition of this interest rate penalty further impedes the ability of member banks to offer fully competitive deposit accounts and further postpones the goal of competitive equality mandated by Congress. The Board's application of the phase-down schedule to reserves on the new money market deposit account is in violation of the Monetary Control Act of 1980. The Monetary Control Act, as implemented by the Board's own regulations, provides that the phase-down schedule "does not apply to any category of deposits or accounts which are first authorized pursuant to federal law in any state after April 1, 1980." As stated in the Conference Report for this legislation, "the bill provides that for any new types of deposits or accounts. . .there [shall] be no phase-in period for reserve requirements." The new money market deposit account was clearly established by Congress this year in the Garn-St Germain Act and the DIDC obviously created the "new account" after the passage of the Monetary Control Act. Thus, the Board's failure to except the new money market deposit accounts from the phase-down schedule constitutes a blatant violation of the Monetary Control Act and Regulation D. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker December 3, 1982 Page 3 More importantly, the reserve requirement surcharge imposed on member banks lowers the interest rate that member banks can pay to customers and further impedes the ability of these banks to compete with money market funds, which have no reserve requirements at all. Congress clearly intended the Board to modify its reserve requirements in order to achieve the overriding goal of a competitive account. The colloquy on the House floor between Representative Stanton and Chairman St Germain makes it clear that the absolute maximum reserve level for this account is to be zero percent on personal deposits and three percent on nonpersonal deposits. Therefore, in subjecting the new account to the phase-down schedule, the Federal Reserve Board has ignored this Congressional directive, interfered with the efforts of the DIDC to promulgate a competitive account, and further deprived depositors of the opportunity to receive a maximum rate of return on their savings. Therefore, we urge the Federal Reserve Board to rescind its application of the phase-down schedule to the new money market deposit account. In response to concerns expressed about the reserve requirement surcharge, the Board has proposed legislation to eliminate the phase-down for reserve requirements on personal time deposits. Such a proposal would not address the phase-down on nonpersonal deposits and would provide no relief for the anticompetitive effects of the other reserve requirements made applicable to the new money market deposit accounts. More fundamentally, we do not believe that legislation is necessary in this area, since the Monetary Control Act presently requires that no phase-in be applied to the money market deposit account. 2. The Imposition of Any Reserve Requirements Would Violate the Garn-St Germain Act. As noted above, the legislative history of the Act indicates that the new money market deposit accounts are to be reservable at the level for personal and nonpersonal time deposits. The Act itself, however, states only that the new accounts are not to be subject to transaction account reserves. Furthermore, any reserve requirements applicable to the new accounts must be considered in light of the overall Congressional mandate that the new accounts be "directly equivalent to and competitive with money market mutual funds." Accordingly, no reserve requirements can be imposed on the new money market deposit accounts if the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker December 3, 1982 Page 4 effect of such reserve requirements is to render the account less competitive than the money market funds. In analyzing the options available to the Federal Reserve Board in establishing reserve requirements for the new money market deposit accounts, the Board's staff correctly acknowledged that such accounts "may be subject to reserve requirements within the range (0 to 9 percent) specified by the MCA for nonpersonal time and savings deposits." Thus, the staff clearly indicated that the Board could apply a zero reserve requirement to nonpersonal money market deposit accounts. In addition, the staff stated that "at the current level of short term interest rates, a reduction of reserve requirements to zero on nonpersonal MMDAs would amount to roughly 20 to 30 basis points, depending on whether an institution is a nonmember or a member." Furthermore, the Board's staff stated that a zero reserve requirement for both personal and nonpersonal deposits in the new account "would increase the competitiveness of the instrument relative to money market mutual funds." It is precisely this competitive equality that is mandated by the Act. To put this 20 to 30 basis points in perspective, it must be recognized that both Congress and the DIDC have traditionally recognized that a 25 basis point differential is sufficient to provide a significant advantage in the competition for consumer deposits. Such a differential is even more significant in the competition with money market funds for business accounts or institutionally managed accounts where even the slightest rate advantage frequently determines the placement of funds. Thus, recognizing that even a three percent reserve requirement would impose a penalty of 20 to 30 basis points, thereby rendering the accounts non-competitive with the money market funds, the Board should have imposed a zero reserve requirement on both personal and nonpersonal accounts, as required by the Act. Alternatively, the Board must ensure a sufficient return on reserves maintained on such accounts to offset this penalty imposed on nonpersonal money market deposit accounts. That is, if any reserves are to be maintained on such accounts, the Act mandates that such funds not be maintained as sterile, non-interest bearing reserves. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker December 3, 1982 Page 5 We therefore request that the Board reconsider its decision to impose a three percent reserve requirement on nonpersonal money market deposit accounts and that it exercise its authority under the Monetary Control Act to impose a zero percent requirement. 3. Transaction Accounts Are Essential to Compete for Brokered or Institutional Funds. The new money market deposit account approved by the DIDC on November 15 restricts the transactions available to customers to six per month. While six transactions may be sufficient to attract some consumer or personal deposits, this restriction on transactions makes the account wholly inadequate for most business or institutional depositors. Of the $230 billion currently held by money market funds, more than $158 billion is placed by professional money managers for themselves or their clients. These professional money managers transfer funds between accounts daily, and often many times a day. Professional managers would not, and could not, accept a restrictive transaction account such as that currently authorized by the DIDC, unless that account offered a yield substantially in excess of that offered by the unlimited transaction accounts of the money market funds. Thus, no deposit account can be "directly equivalent to and competitive with" the money market funds in the eyes of such professional money managers unless such accounts permit unlimited transactions. The DIDC is currently considering the possibility of authorizing a version of the money market deposit account which would permit unlimited transactions. Should the DIDC approve such a "transaction account," current Regulation D would subject that account to a 12 percent reserve requirement. Such a reserve requirement would translate into a 122 basis point decrease in the interest rate that financial institutions could offer on such a transaction account, at the current level of short term interest rates Thus, even with full transactions, it would be impossible for an account burdened by a 122 basis point interest rate penalty to compete effectively with the money market funds for consumer deposits, let alone for business or professionally managed deposits. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The Honorable Paul A. Volcker December 3, 1982 Page 6 As a result, depository institutions face an impossible dilemma in competing for business or professionally managed funds: they must either offer limited transaction capabilities or suffer a substantial interest rate penalty as a result of sterile transaction account reserves. One solution to this dilemma, of course, would be to eliminate entirely the reserve requirements on both limited and unlimited transaction accounts. We recognize that such a solution would require Congressional action and may not be politically feasible. The dilemma could also be resolved, however, and the mandate for a competitive account fulfilled, through the pass-through of earnings on reserves maintained against the new money market deposit accounts. The Monetary Control Act may already give the Federal Reserve Board authority to provide for the pass through of such earnings by regulation, and we strongly encourage the Board to exercise this authority. At a minimum, we urge the Board to give its full support to legislation such as S.3057 and H.R.7341. The enactment of either of these bills would require Federal Reserve Banks to maintain the reserves on the new money market deposit accounts in special, segregated accounts which would belong to the financial institutions and would be invested on their behalf by the Federal Reserve in government securities. The earnings on these government securities portfolios would be passed through to the financial institutions prorata, after deducting the expenses of maintaining the "earnings participation accounts," as is provided for supplemental reserves under the Monetary Control Act. The Congressional goal of Section 327 of the Act can only be achieved by enactment of such legislation to offset the unfair burden of reserve requirements imposed on financial institutions and to render the new accounts "directly equivalent to and competitive with money market mutual funds." Si rely, rew V. Tidwel General Counsel hr. l'aul A. Volcker November 16, 1982 Chairman or Federal i(eserve The Capital Hail Mrs. soon Fun A lwan Washington, D. C. P. b. Box No. 1560 anto Domingo,Rep. Dominican a 05 Lste 3 cans. Luperon .wInto Domingo, hep.Dominicana 20020 For Requesting to return and pay able my savings deposit amount by uhase k.anhattan Jank 1N.ew Iork" Dear Nr. Volcker: For i. have bad a savings deposi t account on British American Liank since 1971.1 know that are the Chase ;., anhattan 1;ard% being equal of the same 1;ank 1 kave had written was num berless of letters to them saks to return and pay back to me of my deposit and that I also have had many times gone to the bank for asks return payment of my savings depos1tr :At?UtiliaL.1 But until now today I haven't yet rec eive that check from them for repayment to my savings deposit account. I want your succor and your justice 1 thanking you https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis with respects Siricer , ly, hwan 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: Brochure Citations: Number of Pages Removed: 1 British-American Bank Limited. Undated. Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org ft ' 4)(IPAI .., AL 11= , 7 II I IIIIIIIIMI • MnEC cFrItE (7.1 36th International Banking Summer School Sponsored by the American Bankers Association 1120 Connecticut Avenue. N.W. Washington, D.C. 20036 Telex 89-2787 December 3, 1982 Mr. Paul A. Volcker Chairman of the Board of Governors Federal Reserve System 20th & Constitution Avenue, N.W. Washington, D.C. 20551 Co-Directors Willis W. Alexander 12021 467-4211 Ralph Smeda 12021 467-632() Associate DirectorProgram George W. McKinney. Jr. VBA Professor of Bank Management Urziversity of Virginia (804)924-3830 Associate Directors Administration Mary Ellen Led‘kith (202) 467-4071 Rebecca Morter 12021 467-5984 Dear Paul: The 36th International Banking Summer School will be hosted by the American Bankers Association, August 20 - September 2, 1983 in New York City, Washington, D.C., and Hilton Head Island, South Carolina consecutively. The theme will be "Strategic Issues for an Interdependent World." We plan to examine various global influences which are critical to the success of international banking institutions, and to develop perspectives on strategies to compete effectively in this uncertain environment. The enclosed schedule summarizes the program plans and varied formats for group participation in each of the three locations. This year we hope to have representation from about 60 nations and no more than 230 participants. The Board of Governors is invited to nominate one of its staff to participate in the School. The criteria for nomination of bank participants is enclosed for your information and guidance in identifying the appropriate individual from your institution. Please confirm acceptance of your allocation by January 3, 1983. Nomination forms must be received no later than March 1, 1983, for acceptance in the program. We encourage you to assure that participants will attend the whole period of the School, as your allocation in succeeding years may otherwise be affected. AMERICAN BANKERS ASSOCIATION https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Paul A. Volcker December 3, 1982 Page 2 Our Association looks forward to welcoming this prestigious School to the United States. If you have any questions concerning nominations or program, we would be pleased to be of 1.T. Sincerely, ors, 36th IBSS Willis Alexander Executive Vice President American Bankers Association Enclosures https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ra h Smeda Executive Director Education Policy & Development American Bankers Association 4 • CA(If / e t SECURITIES AND EXCHANGE COMMISSI014 7,74Lh7• L:: WASHINGTON, D.C. 20549 Cb4r/vTISS\C° OFFICE OF THE CHAIRMAN 1!62 DEC 13 r t* 9' 57 nnDecember 8, 1518T1- The Honorable Paul Volcker Chairman Federal Reserve Board 20th Street & Constitution Avenue, N.W. Washington, D.C. 20551 g? Dear Paul: I would like to highlight the SEC's progress in 1982 and solicit your suggestions for future Commission efforts. The SEC is coming down hard on egregious offenders, while reducing the regulatory burdens on legitimate corporations, businessmen, investment bankers, brokers and advisors. During the past year, the Commission has: https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis o Processed a record volume of filings and brought the largest number of enforcement actions in several years, despite budgetary constraints and personnel reductions. o Reduced publicly-owned corporations' (and, therefore, their shareholders') expenses by over $350 million per annum and increased companies' financing flexibility, through integration of their registration and reporting requirements, without compromising full disclosures to investors. o Enabled securities firms to make better markets and improve their services to investors by freeing-up about $700 million of security industry capital by updating the net capital rules to take into account the industry's improved financial and operational condition and by permitting the use of letters of credit for clearinghouse deposits and stock loan collateral. o Resolved a seven-year jurisdictional dispute with the Commodity Futures Trading Commission, which has permitted the SEC to authorize trading in Treasury, GNMA, foreign currency, CD and stock index options, which will facilitate government and mortgage financings, international trade and hedging the risks of fluctuating interest rates and securities markets. o Exempted from registration certain offerings up to $5 million and simplified the exemptions for larger private placements. Most states are expected to adopt comparable exemptions, which will be the first joint, state and federal registration exemptions. The Honorable Paul Volcker Page Two o oves the haven of Reached an Accord with the Swiss which rem ld trade on inside the Swiss secrecy law from those who wou information. tating corporations' ability Progress is also being made in facili despite the high percentage to communicate with their shareholders, and also in simplifying of securities registered in nominee names; releases (in order to obtain and improving proxy statements; and SEC ors, issuers and others). greater substantive input from invest on private-sector selfGreater reliance is also being placed . For example, the accounting regulation, under the SEC's oversight corporations' are now on a firms which audit most publicly-owned pose of these reviews is to three-year peer review cycle. The pur "pay for themselves" by assure high auditing standards. They es to those who rely on their reducing auditors' risks of liabiliti he-counter markets are also audits. The exchanges and the over-t systems and transaction enhancing their electronic surveillance ng possible manipulation and audit trails. In addition to exposi securities firms' transaction insider trading, audit trails reduce -regulation results in better reconciliation costs. Effective self ns, lower Commission expenses tio tec pro or est inv r ate gre n, tio ula reg and more efficient markets. e time listening and initiating mor ng ndi spe o als is n sio mis Com The issuers' needs and interest. action in response to investors' and ment-Business Forum on Small ern Gov st fir the held ly ent rec It has Forum at which leading Business Capital Formation; a Research rovements in the SEC's disclosure imp ed end omm rec ts lys ana s tie securi e on major problems confronting enc fer con a ; ces cti pra g kin ema rul and in the 1980s; and one with 37 financial institutions and markets problems and benefits of countries' securities regulators on the securities markets; and is the increasing internationalization of , FDIC, FHLBB, Comptroller holding a round of meetings with the Fed with which we have overof the Currency, CFTC and other agencies ffs of the exchanges; and lapping jurisdiction; the executive sta estors, analysts, industry with associations which represent inv ns. and the legal and accounting professio has also been advocating a task For the past year, the Commission y simplify and improve the regulator force under Vice President Bush to industries and capital markets. structure of the financial service task force will be launched The prospects are favorable that the shortly. suggestions for future SEC efforts. I would sincerely appreciate your https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Sincerely, S.R. Shad