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Annual
^Report
V^> 1972
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
jfetter of Transtnittal
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
Washington, May 22, 1973
THE SPEAKER OF
THE HOUSE OF REPRESENTATIVES.
Pursuant to the requirements of Section 10 of the Federal Reserve
Act, as amended, I have the honor to submit the Fifty-Ninth Annual
Report of the Board of Governors of the Federal Reserve System.
This report covers operations of the Board during the calendar
year 1972.
Yours respectfully,
Arthur F. Burns, Chairman.
Contents
Part 1 Monetary Policy and the
U.S. Economy in 1972
3
INTRODUCTION
15
15
16
19
20
21
23
DEMANDS FOR GOODS AND SERVICES
Real output
Consumer income and outlays
Business fixed investment
Inventories
Residential construction
Government outlays
25
MANPOWER
29
29
31
33
WAGES, LABOR COSTS, AND PRICES
Wages
Productivity and labor costs
Prices
37
FEDERAL FISCAL POLICY
41
42
47
51
54
MONETARY POLICY AND FINANCIAL MARKETS
Monetary policy
Monetary aggregates
Intermediated credit flows
Demands on securities markets
59
61
63
U.S. BALANCE OF PAYMENTS
Goods and services
Capital flows
Part 2 Records, Operations,
and Organization
67
RECORD OF POLICY ACTIONS—BOARD OF GOVERNORS
105
RECORD OF POLICY ACTIONS—FEDERAL OPEN MARKET
COMMITTEE
189
FEDERAL RESERVE OPERATIONS IN FOREIGN
CURRENCIES
191
VOLUNTARY FOREIGN CREDIT RESTRAINT PROGRAM
195
195
197
198
199
LEGISLATIVE RECOMMENDATIONS
Reserve requirements
Lending authority of Federal Reserve Banks
Federal Reserve Bank branch buildings
Proposals relating to the regulation of holding
companies
Loans to bank examiners
Purchase of obligations of foreign governments by
Federal Reserve Banks
Interlocking bank relationships
Bank investments for community development
200
200
201
201
203
203
204
206
LITIGATION
Bank holding companies—Antitrust actions
—Review of Board actions
Regulation J—Collection of checks and other
items by Federal Reserve Banks
207
BANK SUPERVISION AND REGULATION BY THE
FEDERAL RESERVE SYSTEM
Examination of member banks
Federal Reserve membership
Bank mergers
Bank holding companies
Foreign branches of member banks
Foreign banking and financing corporations
Actions under delegation of authority
207
209
210
211
213
213
214
BANK SUPERVISION AND REGULATION BY THE
FEDERAL RESERVE SYSTEM—Continued
214
215
Bank Examination Schools
Truth in Lending
216
216
216
217
217
218
219
219
220
FEDERAL RESERVE BANKS
Examination of Federal Reserve Banks
Earnings and expenses
Holdings of loans and securities
Volume of operations
Payments mechanism developments
Loan guarantees for defense production
Foreign and international accounts
Bank premises
221
221
BOARD OF GOVERNORS
Income and expenses
228
230
234
235
236
237
238
240
242
242
243
244
246
STATISTICAL TABLES:
1. Detailed statement of condition of all Federal Reserve
Banks combined, Dec. 31, 1972
2. Statement of condition of each Federal Reserve Bank,
Dec. 31, 1972 and 1971
3. Federal Reserve Bank holdings of U.S. Government
and Federal agency securities, Dec. 31, 1970-72
4. Federal Reserve Bank holdings of special short-term
Treasury certificates purchased directly from the
United States, 1967-72
5. Open market transactions of the Federal Reserve System during 1972
6. Bank premises of Federal Reserve Banks and branches,
Dec. 31, 1972
7. Earnings and expenses of Federal Reserve Banks
during 1972
8. Earnings and expenses of Federal Reserve Banks,
1914-72
9. Volume of operations in principal departments of Federal Reserve Banks, 1969-72
10. Number and salaries of officers and employees of Federal Reserve Banks, Dec. 31, 1972
11. Federal Reserve Bank interest rates, Dec. 31, 1972
12. Member bank reserve requirements
13. Maximum interest rates payable on time and savings
deposits
STATISTICAL TABLES—Continued
247
248
14. Margin requirements
15. Fees and rates under Regulation V on loans guaranteed
pursuant to Defense Production Act of 1950, Dec. 31,
1972
16. Principal assets and liabilities, and number of commercial and mutual savings banks, by class of bank,
Dec. 31, 1972, and Dec. 31, 1971
17. Member bank reserves, Federal Reserve Bank credit,
and related items—end of year 1918-72 and end of
month 1971 and 1972
18. Changes in number of banking offices in the United
States during 1972
19. Number of par and nonpar banking offices, by Federal
Reserve district, Dec. 31, 1972
20. Number of par and nonpar banking offices, by State
and other area, Dec. 31, 1972
2L Description of each merger, consolidation, acquisition
of assets or assumption of liabilities approved by the
Board of Governors during 1972
249
250
254
256
256
258
280
MAE
*
OF
FEDERAL RESERVE SYSTEM—DISTRICTS
FEDERAL RESERVE DIRECTORIES AND MEETINGS:
282
284
285
286
310
Board of Governors of the Federal Reserve System
Federal Open Market Committee
Federal Advisory Council
Federal Reserve Banks and branches
INDEX
Tart 1
cMbnetaryJPolicy
and the
Zl. ^. Sconotny
in 1972
Introduction
The performance of the U.S. economy during 1972 was unusually
favorable. Most aggregate measures of economic behavior showed
the largest improvement since the mid-1960's.
• Real output of goods and services (GNP) grew by 7.6 per
cent from the fourth quarter of 1971 to the fourth quarter
of 1972. This was substantially more than the 5 per cent
growth during 1971 and was in sharp contrast to the small
over-all decline experienced during 1970.
• Total employment expanded by 2.4 million persons from
December 1971 to December 1972, and nonfarm payroll employment by 2.7 million, the largest gains since 1966. The
unemployment rate declined from nearly 6.0 per cent at the
beginning of the year to about 5.0 per cent at the close.
• The rate of inflation abated somewhat after imposition of
economic controls in August 1971. Over the six quarters
following mid-1971, the fixed-weight price index for gross
private product, which is the broadest available measure of
price behavior in the private economy, rose at an average
annual rate of 3.0 per cent. In the preceding six-quarter
period, the rise had been at a rate of 4.7 per cent.
• Real earnings of U.S. workers rose substantially. Over the 12
months ending December 1972, weekly earnings in the private nonfarm sector advanced by 6.2 per cent, while the
consumer price index rose 3.4 per cent. The slower advance
in prices relative to earnings resulted basically from a strong
gain in productivity, or output per manhour.
Moreover, the resurgence in economic activity was well balanced
and solidly based. Real output increased vigorously throughout the
year, as shown in Chart 1, and all major sectors of the economy contributed to the expansion in demand. The year featured large and
steady gains in consumption, a further substantial increase in residential building, and a sizable expansion in business fixed investment.
Government purchases rose 7.5 per cent from the fourth quarter of
1971 to the fourth quarter of 1972. State and local government units
1. INDICATORS OF ECONOMIC PERFORMANCE
MILLIONS OF PERSONS
NONAGRICULTURAL
EMPLOYMENT
WEEKLY EARNINGS
1970
1971
1972
NOTE.—Gross national product (GNP) and price index: Changes from preceding quarter
compounded at annual rates, based on seasonally adjusted data from the Dept. of Commerce, Bureau of Economic Analysis. Change in real GNP is based on 1958 dollars.
Other series: Dept. of Labor, Bureau of Labor Statistics. Employment data are seasonally adjusted. Earnings are averages for private nonfarm production workers.
accounted for most of the increase—-as shown in Chart 2 on page 6.
Business inventory accumulation was larger than in 1971, hut it remained unite moderate relative to (he expansion in sales.
Net foreign trade, however, continued \o have an unfavorable impact on domestic business. While merchandise exports rose 14 per
cent in 1972. imports increased even more sharply. The vigorous expansion of the domestic economy accounted for much of the increase
in imports, but higher dollar prices for foreign goods following the
late 1^71 changes in foreign exchange parities were also a factor. As
a result, the net U.S. balance on exports and imports of goods and
serxices was in deficit by about $4,5 bilhon. as compared with a small
surplus in !C)7I and substantial surpluses in earlier postwar years. The
over-all U.S. balance of payments fas measured by official settlements J remained in heavy deficit—by about $11 billion (apart from
SDR allocations)—-although ibis was much less than in 1971 when
extraordinary outflows of short-term capital had occurred.
The sharp rise in domestic spending put upward pressure on
interest rates in l()72 because such spending was financed in part
by very high levels of public and private borrowing. Short-term
interest rates rose considerably, as reilecled by an increase in the
rale on 3-month Trcasuiy bills from a low of 3.20 per cent early
in the year lo an average of more than 5.00 per cent in December.
Long-term rales, however, changed relatively little over the course
of the year. Yields on new corporate bond issues and on municipal
securities declined moderately, on balance, while yields on longerterm Treasury bonds rose under pressure of increased supplies.
Mortgage rales were generally stable, as both the volume of savings
llowing into mortgage lending institutions and mortgage credit expansion continued at record levels.
Some narrowing in the yield spread between long- and short-term
securities is typical during periods of cyclical expansion in business.
But the markedly different behavior of rales in these two types of
markets in 1972 was attributable in part to special factors. First,
Treasury borrowing requirements, while somewhat smaller than
in 1971, did put greater pressure on domestic short-term credit
markets. Although foreign central banks continued to invest much
2. GOVERNMENT OUTLAYS
BILLIONS OF DOLLARS
155
S T A T E A N D LOCAL P U R C H A S E S
^
135
115
95
^
0
+
0
20
I
1970
I
1971
1972
NOTE.—National Income Accounts (NIA) data at seasonally adjusted rates, from Dept.
of Commerce, BEA. Transfer payments include net interest payments, subsidies, and net
deficits of government enterprises. Combined deficits throughout (Q4 '72 estimated) exclude
surpluses of State and local government retirement funds, which amounted to $7.4
billion (annual rate) in the final quarter of 1972.
of the expansion in their dollar reserves in U.S. Treasury debt,
the over-all total of such placements was far below that of 1971.
Moreover, these banks put three-quarters of the total into higheryielding coupon issues, in contrast to their 1971 emphasis on Treasury
bills. Second, the volume of private long-term security issues declined
appreciably, as the flow of internal funds available to corporations
from depreciation allowances and retained profits improved sharply.
Finally, efforts under Phase II of the economic stabilization program to moderate the increase in wages and prices—along with the
slowing in inflation that actually took place—may well have induced
some decline in the inflation premium required by investors for longterm commitments of funds.
The behavior of wages and prices during 1972 was significantly
more favorable, on balance, than in other recent years. There was a
3. SELECTED INTEREST RATES
PER CENT PER ANNUM
10
1970
1971
1972
For notes, see Chart 16, p. 42.
temporary bulge in the first few months following termination of the
wage-price freeze in November 1971, but after that the increase in
both wages and prices moderated on balance. For example, the index
of average hourly earnings in the private nonfarm economy, adjusted
for overtime premiums in manufacturing and for interindustry shifts
in employment, rose at an annual rate of 5.9 per cent from January
1972 to January 1973. This compared with a 7.0 per cent rate of
increase before the freeze in 1971.
Consumer prices of nonfood commodities rose 2.5 per cent during
1972, compared with 4 per cent in the 12 months before the freeze;
increases in prices of services also slowed appreciably. Consumer
food prices, however, rose nearly 5 per cent during 1972, reflecting
the larger consumer demands associated with rising personal incomes
and the shortages in supplies of meats and some other foodstuffs in
the market. It should be noted that prices of raw agricultural products
were exempted from the controls because of the serious problems
inherent in balancing supply and demand at non-market-determined
prices in the absence of rationing.
A major factor contributing to moderation in the inflation of
nonfood commodity prices during 1972 was the stepped-up growth
in productivity. Real output per matihour in the private nonfarm
economy increased by 4.7 per cent, compared with a 3.5 per cent
gain in 1971 and minimal growth in the preceding several years.
Combined with smaller wage gains, this increase in output meant
that the rising trend in unit labor costs was slowed markedly, to only
about 1.5 per cent. The large rise in productivity resulted in part
from the sharp gaie in total output, which permitted economies in
the use of manpower. Similarly, the upsurge in business volume
made it possible to spread overhead costs over more sales; this permitted a large increase in profits with only moderately larger profit
margins.
Thus, some slowing in inflation would probably have occurred
during 1972 even in the absence of formal controls. But restraints
on wages, prices, and profit margins also appear to have contributed
to the moderation that actually occurred. Permissible increases in
most wages and prices were limited by the program, and in some
instances there were enforced rollbacks of Increases that had been
put into effect. Moreover, the existence of the program tended to
discourage inflationary behavior in the policies and plans of business firms and the public generally.
Phase III, announced in January 1973, introduced additional
iexibility into the program. But the intent remains one of strong
resistance to inflationary behavior, both on a broad scale and in
individual cases, and the goal is to reduce further the over-all rate
of inflation.
During 1972 both fiscal policy and monetary policy were directed
toward encouraging more vigorous expansion in economic activity
and achieving a higher level of utilization of the Nation's labor
and other economic resources. As a part of the new economic
program announced in August 1971, tax policy was liberalized in
several respects to stimulate demands by the private sector of the
economy and to provide additional spending incentives. The Federal
excise tax on automobiles was repealed, the investment tax credit
was reinstated at 7 per cent, and certain tax reductions that had
been scheduled for later were advanced to January 1, 1972. In
addition, programmed Federal expenditures were boosted, largely
with respect to transfer payments and grants lo State and local
governments.
As a result of these changes, Federal outlays rose by $26 billion
in the calendar year 1972 as compared with an increase of $16
billion in calendar year 1971. It was expected that the changes
would result in a large Federal deficit i\w the calendar year 1972.
But in fact the deficit on a national income account basis declined
to $18.5 billion from $21.7 billion in the previous year. 'Tax revenues
were buoyed by the upsurge in economic activity and, in addition,
by a change in tax-withholding schedules at the beginning of the
year, which resulted in substantial, continuing overpayments on
individuals' taxes during all of 1972. Converted to a full-employment basis, which compares expenditures with the tax. revenues
that would be produced by an economy operating at high employment. I he fiscal position shifted from a $4 billion surplus in calendar
year lc)71 to approximate balance in 1972.
Monetary policy also was in a moderately stimulative posture
through most of 1972. Reserves available to support private deposits (Chart 4, page 10) were increased by 9.7 per cent as compared with a 7.2 per cent expansion during 1971. The money
stock narrowly defined—that is, including currency and demand
deposits—also rose more rapidly during 1972—8.3 per cent as
against 6,6 per cent in 1971. This, of course, not only reflected
the more vigorous growth in activity during the period but also
helped to finance it. It should be noted, however, that when the
increase is calculated as the change from the fourth quarter of 1971
to the fourth quarter of 1972, the money stock rose less than either
real or current-dollar (INP.
The money stock more broadly defined-—to include also consumer-type time deposits at commercial banks and other thrift
institutions—continued lo expand at about the same high 13 per
cent rate as during 1971, And other sources of bank f u n d s main! y large negotiable certificates of deposit (CD's)—provided
more funds for bank credit expansion than In 1971. Credit thus
was readily available from banks and other institutional lenders to
finance private and public spending, Expansion in credit and money
was not large enough lo satisfy all demands, however, so short-term
Interest rates rose considerably over the course of the year whereas
4. SELECTED MONETARY INDICATORS
PERCENTAGE CHANGE
16
0
12
PER CENT PER ANNUM
FEDERAL FUNDS RATE
MILLIONS OF DOLLARS
NET
BORROWED
RESERVES
800
1970
1971
1972
NOTE.—RPD's and Mi are quarterly changes at annual rates, based on seasonally
adjusted data# RPD's are reserves to support private nonbank deposits. Mi is currency
held outside the Treasury, F. R. Banks, and the vaults of all commercial banks, plus
demand deposits other than interbank and U.S. Government.
Federal funds rate and net borrowed reserves are monthly averages of daily figures.
10
uUeu^i iale>. on mou long-term seiuriticN showed relatively little net
vhaovu
Upward pressure on short-term inletest rates continued inlo
^;iify !*)7JL and the Federal Reserve discount rale was raised in
fwo >M ps H' ! .» percentage point each to 51 ? per cent 1 be discount
rnw: had no1 Iv-..n changed in 1072 :is short-term market rates
fluctuated as<i»und it. first falling below and then in the latter part
• «f the \car rising above if,
Economic activity rose especially sharply in the closing months of
the year, with production, sales, and employment all expanding vigorously. Real GNP increased at on 8,0 per cent annual rate in the
fomfh vjuuticr, and the unomploymcnt rate moved Mgnifieantly It>wer.
Bv the ye;ir-iv'.uL rhe prospects seemed clearlv to point in the direction of ,t continued sukstantifi* upward mtnnentum in 1073.
Indications early iy 1073 arc that business outlays on new plant
nnd equipment will be rising rapidly and that inventory investment
may accelerate in line with the rising trend (if business sales. Consumer spending, which was exceptionally Mrong in the fourth quarter
of 1972, will v n y likely K buoyed in coming months by sizable
tV'\?nd*; of Federal faxes overwifhheld during 1072, as well as by
t/nr>hn>iim\ gains in cn^pioyment and inc*»nii\ State and local government expenditures arc to receive substantial financial assistance
*rom tin" general n^cnuc-sharing payments of the Federal Governnvnu whirl] Ci>mjnenccd—~wilh a retroactive disbursement-—only
wry ^itc in 107 2.
Only reNiclcfiifjf construction seems likely to be moving down
following .^ years of record-high activity. But both building permits
and honsmg starts, which lend construction outlays, remained
o.vhvnvh strong through the end of 1972. so any appreciable
decline in such outlay s is likely to he deferred until the latter part
of 1073.
fhe foreign trade outlook also appears more favorable than
ia 1^72. I*xports should be stimulated by the high and rising levels
o\ economic activity prevailing in most major countries and by the
i'ijrfhet- improvement in competitive position likely to stem from the
Hi per cent devaluation of the dollar announced by I lie President
MI} February 12, 1073. Domestic production that competes with
imports will also be stimulated as a rcsull of the increase in dollar
1!
prices of imported goods. Thus, the physical volume of imports will
tend to be limited, although—as in early 1972—the total dollar
value of imports may be inflated by these higher prices. Past experience, both here and abroad, indicates that progress toward a
better balance of payments position will be slow and gradual, but
the further change In dollar parity in February should make an
additional contribution toward that end.
Summarizing, there is good reason to belie¥e that the U.S. economy will continue to expand at a relati¥ely rapid rate in the period
ahead. And as the economy approaches maximum levels of practicable resource utilization, the nature of the demand—management
problem facing governmental policy will be in process of change.
Rather than the stimulus that was needed to encourage rapid economic reco¥ery, the Eeed increasingly may be to restrain the expansion in economic acti¥ity to insure that future growth will
moderate to a rate consistent with the Nation's longer-mn potential.
The administration's new budget plans for the remainder of the
fiscal year 1973 and for iscal 1974 recognize this need. If the
spending totals proposed are not exceeded, the rise in Federal
outlays during calendar year 1973 will be substantially smaller than
during calendar year 1972. Tax refunds will keep the deficit large
in the first half of 1973, but thereafter revenues will be expanding
in line with growth in the economy. Under these conditions, the
slower rise planned in Federal expenditures would imply appreciably
less iscal stimulus by the second half of 1973 and on into 1974.
Monetary policy too must be responsive to the financial requirements imposed by the needed moderation in economic growth to
a more sustainable, noninflationary pace. Although expansion in
the monetary aggregates continued comparatively rapid in the latter
part of 1972 as demands for funds intensified, reserves to support
this expansion were being provided more reluctantly, and efforts
by banks to adjust their positions by other means put .upward
pressure oa short-term, interest rates. Less of the recent rise in bank
reserves has stemmed from open market operations, and more
from further increases in the average level of temporary bank accommodation at Federal Reserve Bank discount windows.
If the past is any guide, the Inning in monetary conditions over
12
recent months should soon result in moderation in the rate of
monetary expansion, Developing monetary restraint affects monetary growth and economic activity with some lag, since it lakes
time for borrowers, lenders, and investors to adjust to changed
financial conditions. Thus, the cumulative effects of monetary
actions in 1972—particularly those initiated in the latter part of
the year—will be working for some time toward restraint of monetary
expansion and of aggregate demand in the future.
In any event, prospects at the beginning of the year make it
unlikely that the needs of the economy in 1973 will or should call
for the degree of monetary stimulus provided in 1972, Monetary
policy is a flexible instrument for influencing the economic environment, however, and it will be in a position to respond to
changing needs as economic developments unfold during the year.
13
Demands for Goods
and Services
The stepped-up pace of economic expansion that became evident
in the fall of 1971 strengthened measurably in 1972, and at the
year-end growth was continuing at a very rapid pace. The new
economic policy that had been initiated in August 1971, including
a freeze on prices and wages followed by Phase II controls, contributed to the faster economic expansion as well as to the easing
of inflationary pressures.
As employment and incomes rose strongly and inflationary expectations abated, consumers became more optimistic and they
increased their spending appreciably. Demands for housing continued
strong, and residential construction activity surpassed to a substantial
extent the very high levels reached in 1971.
Business attitudes improved with the growth in sales and the
better prospects for profits. New orders increased, and business commitments and outlays for fixed investment began to add considerably
to the vigor of the expansion. As the year progressed, business also
stepped up the pace of inventory investment.
Governments, too, contributed to the large advance in over-all
spending in 1972. In contrast to these generally expansive demands,
net exports shifted from a small surplus in 1971 to a sizable deficit
in 1972, as the increase in imports far exceeded that in exports.
REAL O U T P U T
Measured in current prices, GNP increased rapidly in 1972—
by almost 10 per cent for the year as a whole. At the same time,
the rise in the GNP implicit price deflator slowed to 3 per
cent, as compared with a 5 per cent average increase for the two
preceding years. As a result, the increase in real GNP for the
year as a whole amounted to 6.4 per cent—more than twice the
1971 rise and the largest since 1966. Growth in real GNP was
rapid in every quarter of 1972; in the fourth quarter it was at an
15
5. CHANGES IN GNP
BILLIONS OF DOLLARS
40
CURBE
REAL
1970
1971
1972
NOTE.—Based on quarterly data (constant-dollar series, 1958 dollars) at seasonally
adjusted annual rates, from Dept. of Commerce, BEA. Changes are from preceding quarter.
annual rate of 8.0 per cent, about double the economy's long-run
potential rate of expansion.
The surge of aggregate demands in 1972 resulted in sharp increases in industrial output and nonfarm employment and in a
significant reduction in unemployment. Over the 12 months ending
in December industrial production increased more than 10 per
cent; consumer goods, business equipment, and materials all made
appreciable contributions to this expansion. Nonfarm payroll employment was 2.7 million persons, or almost 4 per cent, above a
year earlier. The unemployment rate declined during the second
half of the year to 5.1 per cent in December; a year earlier the
rate had been 6 per cent.
CONSUMER INCOME AND OUTLAYS
Personal income increased somewhat more sharply in 1972 than
in 1971—8.5 per cent for the year as a whole compared with
less than 7 per cent in 1971. Although the rate of growth in
average hourly earnings slowed, employment was up sharply and
16
Table 1: GROSS NATIONAL PRODUCT
Type of measure
1972
1971 \
1970
1
1
1
,
II
i
i
Iff
IV
In biUio is ofdoiU rs
j
I
Current d o l l a r s . . . . . . . . . . .
1958 d o l l a r s . . . . . . . . . . . . . .
1,050
742
,7,
' I ,IJ2
I ,HV-) ! i
( ,164
784 767 i
\SI2
rioct
Percema gc cinnuc from pivc
uit annual raus
|
Current dollars
1958 dollars
Implicit deflator (1958 = 10)). . . .
0
5
5. 5
12,0 !
2*7 j
!
4.7 |
6.4
3.0 ,
5.1 !
11.4 i
9.4 !
6.3
11.0
8.0
1.8
2.4
2.8
1
Quarterly data are seasonally adjusted annual rates.
NOTE.—Basic data from Department of Commerce, Bureau of Economic Analysis.
total wages and salaries Increased by 9.5 per cent, compared
with less than 6 per cent the preceding year. Transfer payments—for example, social security benefits and unemployment
insurance—also increased substantially, but less than they had in
1971. However, the growth in disposable personal income was
somewhat less than in 1971, because the gain In such income was
held down by a change in Federal income-tax-withholding schedules,
which resulted in sizable overwithholdings.
Nevertheless, consumers stepped up their spending and borrowing briskly, responding to strong gains in employment, increased
overtime, and strengthened confidence as evidenced by surveys
relating to consumer attitudes about economic prospects and financial positions. The rate of personal saving for the year as a whole
declined to about 7 per cent of disposable income, from more than
8 per cent in 1971.
In current dollars, consumer spending was about S3 per cent
higher than in 1971. Purchases of new autos and household durable
goods were especially strong, but spending for nondurable goods
and services also rose considerably. Increases in the physical volume
of purchases were sizable for all three major categories, in real
17
6. CONSUMER INCOME, OUTLAYS, AND SAVING
PERCENTAGE CHANGE
1972
NOTE.—Income and spending are changes from preceding quarter, based on quarterly
data at seasonally adjusted annual rates, from Dept. of Commerce, BEA. Saving rate is
personal saving as percentage of disposable personal income.
terms, total consumer spending was up 6 per cent, well above the
4 per cent increase recorded for 1971.
Sales of new automobiles—both domestic-type and imports—
reached a new high of 10.8 million units for the year, up from
10.2 million units in 1971. In the fourth quarter total auto sales
reached an annual rate of 11.7 million units, the highest of the
year. The sharp increase in purchases of household durable goods
was associated not only with rising incomes but also with the record
number of new housing units being completed and occupied. This
large increase in consumer spending for durable goods was facilitated
by a record increase in the use of instalment credit.
Consumer demands were still exerting a stimulating influence
on the economy at the end of 1972. Incomes were advancing with
exceptional rapidity as a result of continued strong gains in output
and employment and of a 20 per cent boost in social security benefits, with initial payments on October 1. It is expected that the
unusually large amount of tax refunds anticipated for the first half
18
of 1973 because of overwithholding during 1972 will add to both
disposable incomes and spending.
BUSINESS F I X E D I N V E S T M E N T
An important factor in the expansive thrust of the economy in 1972
was a marked increase in business spending for new fixed capital.
Outlays for new machinery and buildings were 14 per cent higher
than in 1971; measured in real terms this represented an increasee
of 10 per cent.
The rise in spending for business fixed capital reflected a number
of factors: the strong expansion in industrial production and an
associated rise in the rate of capacity utilization; the greatly improved
performance of aggregate profits; and the stimulative effects of a
further acceleration in depreciation schedules and the late-1971
restoration of the investment tax credit, which applies to purchases
of new equipment. For the year as a whole purchases of machinery
and equipment in current dollars were about 16 per cent above
the 1971 volume. Because the increase in prices of such goods in
7. BUSINESS FIXED INVESTMENT
RATIO SCALE, BILLIONS OF DOLLARS
120
110
100
90
CONSTANT
DOLLARS
80
1970
1971
1972
NOTE.—Quarterly data, at seasonally adjusted annual rates, from Dept. of Commerce,
BEA. Constant-dollar series is in terms of 1958 dollars.
19
1972 was quite moderate, most of this large rise in outlays represented physical volume. In the equipment category, truck sales were
especially strong; the number of units sold was up 25 per cent from
1971. The increase in business outlays for new construction was
more moderate, with little change in real terms.
Most of the increase in fixed investment outlays in 1972 occurred
outside of the manufacturing sector. Expenditures by public utilities
rose strongly, reflecting continued sizable gains in demands for
energy as well as more rigorous standards for pollution controls.
Communications and commercial firms also increased their investment sharply. The increase in spending for new plant and equipment
by manufacturing firms in 1972 was much more moderate; however, the rise of 4 per cent contrasted with a decline of about
6 percent in 1971.
Late in 1972 businessmen's intentions to spend for plant and
equipment in the year ahead appeared to be in the process of
upward adjustment, reflecting—among other factors—rising orders
for hard goods and a growing backlog of such orders. The survey
taken by the Department of Commerce in December 1972 showed
plans for a 13 per cent rise in spending for new plant and equipment
in 1973, with larger increases being planned by manufacturers
than by other sectors of the economy. Earlier private surveys
taken in the autumn had indicated a rise of around 10 per cent.
INVENTORIES
An upturn in inventory investment finally developed in 1972. As
a general rule, inventory investment increases rapidly early in a
cyclical expansion, but in this one such spending had continued
quite moderate throughout the first year of recovery following the
fourth-quarter 1970 trough. This reflected in part the absence of
any net liquidation during the 1969-70 recession. Although recovery in sales in 1971 had resulted in a decline in inventory/sales
ratios, at the end of 1971 such ratios were still rather high for that
stage of the cycle.
Businessmen began to increase inventory investment in the second
quarter of 1972 in response to the continued rapid increases in
sales and production, and the rate of such accumulation accelerated
as the year progressed. Toward the year-end, accumulation reached
20
8. BUSINESS INVENTORIES AND SALES
CHANGE, BILLIONS OF DOLLARS
12
INVENTORIES/SALES
1970
1971
1972
NOTE.—Dept. of Commerce data: Inventory change (NIA), quarterly data at seasonally
adjusted annual rates, from BEA. Inventories/sales ratio, based on book value and
sales data seasonally adjusted, from Bureau of the Census; book value, end of quarter;
sales, quarterly average.
an annual rate of $10 billion, as measured in the NIA accounts.
With sales gains outstripping inventory increases, the ratios of
inventory book values to sales in a number of areas were reduced
further, and by the end of the year they were approaching historically
low levels. Further growth in inventory accumulation is suggested
by these low ratios, as well as by rising backlogs of unfilled orders,
by more numerous reports of delays in deliveries, and by continuing
rapid increases in sales.
RESIDENTIAL CONSTRUCTION
Outlays for private residential construction, which had increased
sharply in 1971, advanced further in 1972. A record supply of
mortgage credit, available at relatively stable interest rates and on
liberal terms, supported a strong expansion in demands for both
new and existing dwelling units. For the year, residential outlays rose
25 per cent in current dollars and about 20 per cent in real terms.
21
Private housing starts accelerated to a peak seasonally adjusted
annual rate of more than 2.4 million units in the first quarter of the
year, almost double the low rate reached 2 years earlier. While the
rate fluctuated thereafter below the first-quarter high, the 1972 total
came to 2.4 million units. This was 15 per cent more than in 1971,
the first year in which starts exceeded 2 million units.
Reflecting in part builders' attempts to adjust to further increases
in the cost of land and other items, multifamily structures—which
include condominiums—continued to account for more than twofifths of total starts. However, upgraded demands for these and
for other types of dwellings were also a conspicuous factor in
the over-all advance. Nonsubsidized units, which generally incorporate more space and other amenities than do units that receive
Federal subsidies, accounted for all of the rise in multifamily structures. In contrast, the number of subsidized starts—for which new
commitments were suspended altogether in early 1973—dropped
9. RESIDENTIAL CONSTRUCTION
RATIO SCALE, BILLIONS OF DOLLARS
60
50
40
30
CONSTANT DOLLARS
i
I
20
MILLIONS OF UNITS
2.5
1.5
1970
1972
NOTE.—Dept. of Commerce data: Expenditures, quarterly data at seasonally adjusted
annual rates, from BEA. Constant-dollar series is in terms of 1958 dollars. Housing
starts, monthly data at seasonally adjusted annual rates, from Bureau of the Census.
22
appreciably in 1972 from the highs reached in 1970 and 1971.
Shipments of new mobile homes, which are not included in housing
starts or in residential construction outlays, also achieved a new
high in 1972. Such shipments totaled about 575,000 units, an increase of 15 per cent from 1971.
At the year-end demands for housing remained strong, vacancy
rates were relatively low, and mortgage funds were still in ample
supply at rates little changed from a year earlier. However, it appeared unlikely that the number of starts in 1973 would match
the 1972 total in view of (1) the extent to which the backlog of
demand had been satisfied by sustained high levels of production
(2) the large and growing number of completions of earlier starts
in prospect, and (3) other factors.
GOVERNMENT OUTLAYS
Purchases of goods and services by the Federal Government rose
strongly in the first half of 1972 as the result of a Governmentwide pay increase in January and the rebuilding of defense inventories depleted by activities in Vietnam. In the second half of
the year, however, defense purchases dropped sharply and nondefense buying slowed; as a result, Federal purchases declined. For
the calendar year as a whole, Federal purchases rose about 8.5 per
cent—virtually all because of increased pay and higher prices.
State and local government purchases rose by about 10 per cent
in 1972—the same increase as in each of the past 3 years. Employee
compensation, as usual, accounted for much of the gain. Employment rose about 4.5 per cent; about one-third of this increase represented the number of jobs added under provisions of the Public
Employment Act—a program funded in large part by the Federal
Government. As in other recent years, there was little growth in
purchases of structures in 1972, in large part because the demand
for new educational structures has lessened.
During 1972 there was a dramatic improvement in the over-all
fiscal position of State and local governments. Although expenditures continued to rise rapidly, revenues rose even faster, especially
in the fourth quarter when the first payments under the Federal
revenue-sharing program were received. As a result, State and
23
local governments achieved a surplus of about $12 billion (NIA
basis) for the calendar year com pared with a surplus of less than $5
billion in 1971 and with deficits in 1967 and 1968. However, there
remained wide differences in the fiscal position of individual governmental units.
Table 2: CHANGES IN MAJOR COMPONENTS OF GROSS
NATIONAL PRODUCT
In billions of dollars
1972 <
Item
1970
1971
1972
II
46.1 :
GNP
Personal consumption expenditures .
Durable goods
Nondurable* goods
Services
,.
Saving rate {level, in pt'r ci'ut^ , , .
Fixed investment.
Residential structures
Nonresidential
. ,..
Inventory change
Exports.
Imports.
Govt. purchases of uooris ami ser\ices
Federal. . ,
Defense
Other
Slate ami local .
1
. ..
74.0
48.1
1 3. 0
18.' 5 { 13,7
21.
5
V). 1 :
37.3 |
III
101.4
31.0
30,3 !
24.6
30.9
56.1
12 6
21.4
22. i
15. 6
4. <)
4,
5. 8
17 . 3
2.9
8.9
s, 7
15.2
4.7
4.8
5.6
17.1
2. 2
8. 4
6. 5
* • )
A 0 \
h ^
•». 2
6, 4
7.6
1.1
-•1.4 '
2. 4 j
16.1
t!. 4
26.2
if. 4
14 h
id. 5
4. 3
(>. 3
4 .3
I 2
3
3,2
I, 6
7.9
2.6
5,4
- 2.9 • - 1 . 3
2.3
•-i. 3
4 .6
1.7 •
2.9
-- 2 5
7. 4
5.7 .
6T
4.9
7. 6
12.5
21.8
- J, 3 '
i.' i
ii. 3
13.8
!. 3
.3 7
4. <S
12. 5
,N i)
4, 5
V h
I.V Si
Derived from quarterly lotals at seasonally utfjasied annual
Nort»- --Basic data from Hept. of Commerce, Bf:A,
24
\
. -1
.I
3.(1
2.3
7
.6
7
" I
1.8
4.4
2.6
- .1
5. 2
5. 3
8.
5. 0
4. 8
2
3, 5
4
2 *4
S <)
.7
2. 3
1.5
3.7
_ |, 4
- I. l>
.6
5. 0
6
4.2
Manpower
Labor markets tightened significantly in 1972 in response to the
sharp rise in real output. Gains in employment were large and
persistent all year, but it was not until near midyear that the jobless
rate, which had held close to 6 per cent for a year and a half, began
to decline.
Growth in employment had begun to accelerate in late 1971,
and it continued at a rapid pace through most of 1972. By December
nonfarm payroll employment had risen by 2.7 million persons from
a year earlier. Gains in manufacturing were especially strong during
most of 1972, as increased spending for investment and strong
demands for autos and other consumer durable goods stimulated
rapid growth in employment in the major metal-producing and
metal-using industries. By December total manufacturing employment, at 19.4 million persons, had risen by some 900,000 over the
year, and the average factory workweek had increased appreciably.
But manufacturing employment was still 900,000 below the peak
level of 1969, when defense production was supporting a high level
of factory output.
Employment growth also accelerated in nonindustrial activities
10. NONFARM PAYROLL EMPLOYMENT
1968=100
115
TOTAL
95
1970
1972
NOTE.—Based on monthly data, seasonally adjusted, from Dept. of Labor, BLS.
25
in 1972. In services, finance, and trade, the total number employed
rose by 1.2 million, about one-third more than during 1971. Federal
civilian employment was cut slightly, but State and local governments increased their payrolls by 475,000 over the year ending in
December—including about 150,000 jobs provided by the Federally
financed public employment program.
Little progress was made in reducing unemployment until early
summer, however, as much-larger-than-normal increases in the
labor force about matched the rise in employment. Rapid gains in
the civilian labor force in the winter and early spring reflected not
only a rise in participation rates in response to increases in employment opportunities but also the entry into the civilian labor market
of several hundred thousand young men as the size of the Armed
Forces was reduced further. Toward midyear, however, growth of
the civilian labor force slowed, in part because the size of the
11. LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
MILLIONS OF PERSONS
CHANGE IN:
PER CENT
8
UNEMPLOYMENT RATE
1970
1971
1972
NOTE.—Basic data, Dept. of Labor, BLS. For civilian labor force and employment, 1970
and 1971 are changes from preceding year; the 1972 changes are annual rates calculated
from half-year averages of seasonally adjusted data. Unemployment rate is monthly, seasonally adjusted.
26
Aimed Foices leveled oft aftci a decline of 1.2 million from the
high in October iMoK. Altogether over the >car ending in December
VAC civilian labor \m\x increased l>v more tkio 1.8 miilion persons.
Rell^cliiig continued strong gains hi employment and slower growth
in the labor force, the unemployment rate declined irregularly after
May to 5,i per ecu! in Oecembei.
The decline in oncnsphi\ nieiit was most pronounced among men
25 \e:u*s of ;\iv and over-—reflecting largely the strong recovery In
manufacturing and biuc-coliar employmeni. Nevertheless the jobless
raw for this age group, at 2 8 pet cent in the fourth quarter, remained
above ifie exceptionally low rale oi! late l%9. Unemployment among
Negroes (10 per cunl J and younger workers (about 16 per cent)
changed iatfc irom I he high rales of late 1971 and early 1972,
In 1973 Hit size of the Armed Forces t% expected to decline only
a iiitk fluffier, dud growth of the civilian labor force may be closer
to lite 1 5 million expeeted per yenr OD the basis of population
growth and trends h\ partieipulion iitfts, Sticli a situation would
he coiuHjeivv.' !c^ a further txdticiion in the unemployment rate if
coipk.nnu n! guifu e<MUinue at a rapid pace.
/*: LABOR FORCh, KMFLOYMKNT. AND (UNEMPLOYMENT
Viilvx, whkii aic monthly a \ c r a g e rates in
Vc.»r c!stiif»*4 fourth q i u u t e r ut*
,\ !H'.
•
O>i'UH •.f'oi ,<,<;
j ,408
-441
i
,
} . :• 51
1,257
-353
!
{
I, M 0
t ,4119
i
3.5
10.3
I , (>()8
— 262
5.3
i 8
*.•>
M:u. .'0 t-> ,U
Wmuer,, jOarv.i . p ^ \
{J.I
:
!
\A
UK5
;
l?*2
!(V«
2.8
8.7
52
15 6
4.7
10. J
3,5
5! 4
3.6
i» u* alh>>v f<»i {he introduction
i ah.^f. U
3.1
4.8
of
new
I .»ix,r Suitisfics.
27
Wages, Labor Costs, and Prices
Progress was made in 1972 in reducing inflationary pressures. The
program of wage and price controls initiated in August 1971 contributed to a slowing of the rise of hourly compensation, and with
gains in productivity accelerating, the rise in unit labor costs
moderated sharply. Price developments, particularly as measured
by the comprehensive GNP fixed-weight index for the private
economy, reflected the more favorable labor cost situation and the
impact of price controls. The consumer price index posted a somewhat smaller increase during 1972 than in the pre-control period
of 1971, and the rise in industrial wholesale prices slowed appreciably. On the other hand, prices of farm products and processed
foods increased much more rapidly than before controls.
On January 11, 1973, the President requested a temporary
extension of the Economic Stabilization Act of 1970—the
legal underpinning of the wage and price control program—
and announced some important changes in the Phase II
program. The new program—referred to as Phase III—is
intended initially to maintain, with some modifications, the
basic wage and price standards established in the early period
of controls, but heavier reliance is placed on voluntary
compliance and self-regulation. The requirement for prenotification of wage and price increases by large firms has
been eliminated. However, foods beyond the farm level,
health services, and construction remain under mandatory
controls. The Price Commission and the Pay Board were
abolished, and authority for the new program was centralized
in the Cost of Living Council.
WAGES
The Pay Board, as originally set up, was charged with the task
of limiting wage increases. Accordingly, it established standards
for generally permissible pay increases consistent with the announced
goal of reducing the rate of price increase to a range of 2 to 3
29
per cent. Including an allowance of about 3 per cent for Jong-term
growth in productivity^ the general wage and salary standard established by the Board called for a limit of 5.5 per cent on increases
in wages and salaries and "covered" fringe benefits. In addition,
the Board permitted increases in certain other qualified fringe benefits, and this in effect raised the over-all standard for compensation
to as much as 6,2 per cent. Considerable flexibility was also built
into the Board's regulations, including procedures for upward adjustment in the standards if necessary to correct gross inequities
and to deal with other special situations.
The rise in money wages was slower in 1972 than in 1971. For
the 12 months ending January 1973 (that is, the year following the
post-freeze bulge in wages), adjusted hourly earnings of production
and nonsupervisory workers in private nonfarm industries—the
measure that most closely approximates changes in wage r a t e s increased by about 6 per cent; this compares with an annual rate of
increase of nearly 7 per cent both in the pre-control period of 1971
and from January 1971 to January 1972. But the slowing was concentrated ia the interval from January through August. Thereafter,
the rise in wages was more rapid than earlier in the year. Because
of the moderation of price increases, real wages of production
workers in the private sector, which had begun to advance in 1971
following several years of little or no growth, rose more than 2,5
per cent over the course of 1972.
Experience in 1972 varied among individual industries, but over
Table 4: CHANGES IN A¥EEAGE HOURLY EARNINGS
Seasonally adjusted annual rates, In per cent
Industry
Tola! private nonfarm
j Aug. 1970- i Aug. 197!-- ' Jan. 1972- ; July 1972- I Jan. 1972-I Aug. 1971 \ Jan. 1972 ! July 1972 | Jan. 1973 1 Jan. 1973
i
6.9
Mining...
Construction
Manufacturing
6. 8
7. 8
6,
I ran portation and public titII- ;
iti s
;
Wh esale and retail trade
j
Fina nce, insurance, and real estate'
Serv
8. •J
6. 0
6. I )
7. 3
j
7.0
;
9 ,2
6 '.8
6 .5
I I.8
5 5
*5!o
7 .6
•
4.7
j
6.8
i
i
'
4 .4
3. 2
4. 9
8 .9
10 .5
.3
6.7
6.9
5,7
8 .5
4 .9
4 .8
j .7
9.2
4.7
4,8
5.3
!
I
9 .4
4 .4
4 .8
7
i
!
I
,
J
5.9
—Average
g hourlyy eaminus of private
p
noni'arni production
p
and supervisory
p y
workers,, adjusted
j
only,
overtime
hours.
Basic
data
from
Dept
off
id dustry shifts
hif and,
d in
i manufacturing
fi
l for
f
i
h
B i
d
f
D
S
Labor, BLS.
Nor
for int
30
the entire 12 months the slowing of the rise in wages was most
pronounced for the services and trade sectors. Hourly earnings in
construction, which continued to be under the control of the Construction Industry Stabilization Committee, increased by about 7
per cent over the 12-month interval. In manufacturing, hourly earnings rose appreciably less than in the immediate pre-control interval.
However, some industry groups realized larger increases in 1972
than in 1971. This was true especially for transportation and public
utilities; in these industries there were large wage increases for
telephone workers, railroad workers, truckers, and dockworkers,
mainly as a result of deferred-wage increases under collective bargaining agreements negotiated before controls were introduced.
In most industries the rise in hourly earnings accelerated in the
closing months of 1972. The reasons for this are not entirely clear,
but the acceleration appears to reflect in part a clustering of both new
and deferred wage increases roughly a year after the 1971 freeze
and in part a generally stronger labor market.
PRODUCTIVITY AND LABOR COSTS
Productivity increased sharply in 1972, as is typical of periods of
strong growth in output. Output per manhour in the private nonfarm economy rose 5.1 per cent over the four quarters of 1972—
double the long-term trend of 2.6 per cent. This performance exceeded the sizable 4.4 per cent rise in productivity in 1971, and it
was in sharp contrast to 1969 and early 1970 when there was
virtually no growth.
Employee compensation, which includes both wages and fringe
benefits, increased 6.9 per cent over the course of 1972, compared
with 8.1 per cent over the first half of 1971. The stepped-up pace
of growth in productivity together with this slowing of the rise in
employee compensation resulted in a sharp reduction of the rate of
increase in unit labor costs. For the private nonfarm economy, such
costs rose only 1.6 per cent during 1972—and they were virtually
unchanged in the middle two quarters. This compares with increases
of more than 8 per cent during 1969 and 5 per cent during 1970.
In 1973, gains in productivity may fall well short of those in 1972,
particularly if real growth moderates to a more sustainable rate, as
is widely expected. Further progress in restraining cost pressures is
31
12. PRODUCTIVITY, COMPENSATION, AND COSTS
PERCENTAGE CHANGE
OUTPUT PER
MANHOUR
(1
COMPENSATION
PER MANHOUR
1970
1972
NOTE.—Data are from Dept. of Labor, BLS; changes are based on half-year averages
of seasonally adjusted quarterly estimates for the private nonfarm economy.
thus heavily dependent on the changes in wages and other employee
benefits, emphasizing the importance of an effective Phase III
program.
In appraising wage prospects, it should be noted that measures to
restrain wage increases are continuing in Phase III. The fact that
workers covered under expiring contracts have realized significant
gains in real income may be conducive to some moderation in demands for higher wages. However, the number of workers involved in
major contract negotiations, which was relatively small in 1972, will
increase substantially in 1973. Contracts covering 4.7 million workers
either expire or provide for wage reopenings. These include such key
industries as trucking, railroads, rubber, electrical equipment, and
autos. Furthermore, a heavy round of bargaining is anticipated in the
construction industry, as many of the agreements signed in 1972
covered only one year.
32
PRICES
The moderation of the pace of price advance during 1972 was fairly
general, except for prices of farm products, foods, and some materials. The fixed-weight price index for gross private product rose at
an annual rate of about 3 per cent after a post-freeze bulge in the
first quarter; this compares with an average annual rate of about 5
per cent in the first two quarters of 1971 preceding the 90-day
price freeze.
Prices of food products at the farm level, which are not controlled,
increased 19 per cent during 1972—considerably faster than in any
other year since 1950. In December wholesale prices of livestock
were 22 per cent above a year earlier; eggs, 26 per cent; and grains,
44 per cent. Prices of processed foods and feeds, however, rose less
rapidly than those of farm products. Nevertheless, the average rise
for this category for the year ending December amounted to 11.5
per cent. Because of the sharp rise in prices of farm products and
foods, the total index of wholesale prices rose faster in 1972 than
in the pre-control period from December 1970 to August 1971.
On the other hand, the rise in prices of industrial commodities
moderated appreciably during 1972, reflecting mainly improvement
in prices of producers' finished goods and fabricated materials. Price
rises continued to be very sharp for many raw materials, including
such important commodities as hides, skins, and wool. Lumber and
Table 5: PRICE CHANGES
Seasonally adjusted annual rates, in per cent
Item
Wholesale prices, total. .
Industrial commodities
Farm products, processed foods, and
feeds
Consumer prices, total.
Foods
Other commodities
(less foods)
Services1
..
1972
Dec.
1969Dec.
1970
Dec.
1970Aug.
1971
Dec.Mar.
Mar.June
JuneSept.
Sept.Dec.
2.2
3.6
5.2
4.7
4.9
4.2
4.9
4.9
6.7
3.2
9.6
2.0
6.5
3.6
-1.4
6.5
7.0
4.8
17.4
30.1
14.4
5.5
2.2
4.8
8.2
3.8
5.0
2.9
4.5
3.6
7.2
2.4
4.4
2.2
0.0
2.7
3.1
4.6
7.0
4.1
3.0
3.2
5.2
1.0
3.9
3.4
4.7
2.5
3.6
Dec.Dec.
1
Derived from data not adjusted for seasonal variation.
NOTE.—Basic data from Dept. of Labor, BLS.
33
13. PRICES
PERCENTAGE CHANGE
15
WHOLESALE:
CONSUMER:
1969
1970
1971
PHASE!
PRE-FREEZE
NOTE.—Based on data from Dept. of Labor, BLS. Changes measured from last month
of previous period to last month of indicated period. Pre-freeze interval extends from
December 1970 to August 1971; Phase II, from November 1971 to December 1972; changes
for both intervals are annual rates, based on seasonally adjusted data.
plywood also advanced at very fast rates, but price advances for
other building materials and metals moderated.
Consumer prices rose 3.4 per cent over 1972 compared with an
annual rate of 3.8 per cent in the pre-control period of 1971. But
retail food prices advanced by almost 5 per cent and meat prices by
more than 10 per cent during 1972. In contrast to food prices, there
was a marked deceleration of the rise in the cost of services as well
as a more moderate slowing for nonfood commodities. The full
extent of the improvement in costs of services in 1972 compared
with the pre-freeze months of 1971 was masked by the sharp
decline in mortgage interest costs in the earlier period. When home
financing costs are excluded, the rise for service costs in 1972
dropped to about half the early-1971 rate. The slowing of the rise in
costs of medical care—which seems to reflect in considerable part
the impact of controls—was dramatic; and rents, utility costs, and
other major services rose at substantially reduced rates.
In early 1973 it appeared that a somewhat faster rise in prices
34
was in immediate prospect As noted earlier, some pick-up in the
rise in unit labor costs seemed likely, following the marked slowing
in 1972, Indeed, such costs were raised at the outset of the year,
when the employer tax for social insurance was boosted sharply.
Prices of farm products rose sharply further in January, and food
prices are expected to continue to rise rapidly for sonic months.
More generally, strong domestic and world demands relative to
supply have been exerting increasing pressure on prices of materials,
especially of internationally traded commodities.
Following an upward spurt in prices of farm products and foods
in the early months of 1973, however, retail food prices may tend to
level off. Contributing to this is a prospective significant increase
in per capita food supplies, particularly of meats, in the second half of
1973.
35
Federal Fiscal Policy
In fiscal years 1971 and 1972 large Federal deficits were generally
accepted as appropriate, first to cushion the recession of 1970, and
then to stimulate recovery. As recovery turned into vigorous expansion, however, the administration recognized that continued sharp
increases in Federal spending and large deficits would be inappropriate in the developing environment of high and rising levels of
output and employment. A major effort was made, therefore, in
the budget document released in January 1973 to limit increases
in spending, and the expansionary thrust of fiscal policy is indicated
to moderate greatly as calendar year 1973 progresses.
The unified budget deficit of $23.2 billion that was realized for
fiscal year 1972, while large, was $15.6 billion less than had been
projected in the January 1972 budget document. Outlays did accelerate sharply in the spring of 1972, but the anticipated speed-up was
not fully realized. More than half of the $4.7 billion short-fall in
spending in fiscal year 1972 was due to the unexpected delay in the
enactment of revenue sharing and to lower payments on unemployment insurance. Defense spending, however, increased sharply in
the spring of 1972—about in line with budget projections.
Federal budget receipts in fiscal year 1972 turned out to be $10.8
billion higher than had been projected, in part because of the rapidity
of economic expansion but mainly because of an unusual amount of
overwithholding of personal income taxes related to the introduction
of a new withholding schedule in January 1972. This development
will reduce Federal net receipts in the spring of 1973 when individuals file their tax returns for 1972.
Prior to adjournment in October 1972, Congress enacted legislation that would increase outlays in fiscal year 1973 to a level some
$6 billion to $8 billion above the $250 billion proposed by the
administration in September 1972. The administration requested
Congress to enact a ceiling of $250 billion on outlays for the fiscal
year 1973. Although such a ceiling was not enacted, the administration has indicated that it intends to hold spending to that level by
adopting various economies, and by impounding appropriated funds,
if necessary. The new budget indicates that economies are planned
37
in fiscal years 1^73 and 1974 in a large number of areas, fn addition, the budget calls for large sales of assets (negative outlays) in
these two fiscal years.
Spending in the first two quarters of fiscal year 1973 (that is,
the second half of calendar 1972) was in line with the proposed
$250 billion. Outlays for national defense, while still strong, fell
significantly below the levels attained In the latter half of fiscal year
1972. As expected, nondefense spending increased very sharply in
the last quarter of calendar year 1972, rellecting two factors: the 20
per cent boost in soeial security benefits, effective in October 1972,
which costs about $8 billion annually; and the first payment to State
and local governments under the new general revenue-sharing program, which is expected to cost more than S5 billion in the first full
year. However, payments made for revenue sharing in December
1972 and in January 1973 covered revenue-sharing accruals for all
of the calendar year 1972; quarterly payments, beginning in April
1973, will be much smaller.
The budget document issued in January 1973 anticipates that the
deficit in fiscal year 1973 will total about $25 billion—a little larger
than the deficits realized in fiscal years 1971 and 1972—but that
the deficit in fiscal year 1974 will be reduced to less than $13 billion.
The full-employment budget, on a unified budget basis, is projected
to show a deficit of around $2 billion in fiscal year 1973 and an
approximate balance in fiscal year J974,1
1
The administration's estimate of full-employmenr receipts does not Incorporate the effect of any o\er\\ iihhoiding that is regarded as transitory.
Inclusion of such overwithholdiny would h;i\e redtsced the full-employment
deficit in fiscal year 1972 and inereased this deficit in fiseal year 1973.
Table 6: FEDERAL BUDGKT SUMMARY
Fiscal-year totals, in billions of dollars
Item
Budget receipts
Budget outlays
..J
Surplus or deficit ( - - ) . . . . .
Full-employment surplus, or deficit (—:. . .
'• Estimates,
N O T E , — D a t a from t h e Budget
38
N70
f<)?i
Pi 3
196 J>
188 , 4
21 f*4
208.6
- 2 .8 ,
-- 23 . 0 <
- 23,2 !
;
4 ,l> :
•- 3 , 9 !
2 .6
oj the (>,S. Cunennnent,
Fiscal
.
1972
23i
Year
.'•*
'
IWe
225 J$
;
7974.
249 , 8
-24
2 .3
1 1974c
256. 0
26K* ?
- 12. ?
3
14. CHANGING PATTERN OF FEDERAL OUTLAYS
PER CENT OF TOTAL OUTLAYS
60
NATIONAL DEFENSE
40
20
4
I
1965
I
I
1967
I
I
1969
I
1
I
I
0
1971 1972 1973 1974
FISCAL YEARS
•Three components of this total are shown below (please note differences in scales for
the two grids).
NOTE.—Data from the Budget of the U.S. Government, Fiscal Year 1974.
As shown in Table 6, budget outlays are expected to be about
$250 billion and $269 billion in fiscal years 1973 and 1974, respectively. The projected growth of $18 billion to $19 billion in
spending in these two fiscal years amounts to about 7.5 per cent
annually. In the fiscal year 1972 budget outlays increased by 9.7
per cent, and the annual increase over the previous decade had
averaged about 8 per cent. Budget receipts are projected in the
budget document to increase to $225 billion and $256 billion, respectively, in fiscal years 1973 and 1974. No significant tax changes
are proposed in the new budget.
There has been a significant shift in the composition of Federal
outlays in recent years. Although outlays for national defense are
projected to increase absolutely, their proportion of total budget expenditures, as may be seen in Chart 14, has declined from more
39
than 40 per cent in fiscal years 1967 and 1968 to a projected
figure of about 30 per cent in fiscal years 1973 and 1974. On the
other hand, the proportion of total budget outlays devoted to "income security" has risen from less than 20 per cent a few years ago
to about 30 per cent. (Social security benefits, including medicare,
are the biggest component of this category, which includes also such
other supports to income as Federal retirement benefits, veterans'
benefits, unemployment insurance, and public assistance.) Federal
outlays for health programs have also risen as a percentage of
the total.
A broadly similar picture is evident when outlays (NIA basis)
are shown as a proportion of full-employment GNP, as in Chart 15.
It is evident from this chart that direct Federal demands on resources
have decreased as a proportion of full-employment GNP along with
the relative decline in defense purchases. But this decline has been
offset by a large absolute and relative increase in spending for a
great variety of programs that add directly to incomes of individuals
without the provision of a current service—as in the case of transfer
payments—and by an advance in Federal grants-in-aid to help State
and local governments provide for a wide range of needs.
15. FEDERAL EXPENDITURES NIA
Relative to Full-Employment GNP
PER CENT
22
TOTAL
I
I
1969
FISCAL YEARS
I
i
1971
1972
i
1973
i
0
1974
NOTE.—Basic data on expenditures are from the Budget of the U.S. Government, Fiscal
Year 1974. Data on full-employment GNP are F.R. estimates.
40
Monetary Policy and
Financial Markets
Federal Reserve policy in 1972 concentrated on fostering financial
conditions conducive to achieving sustainable growth in real economic activity and employment, consistent with the administration's
Phase II objective of moderating inflationary pressures. To attain this
goal, the Federal Open Market Committee (FOMC) took actions
designed to provide reserves sufficient to support growth in the
monetary aggregates appropriate to a substantial gain in economic
activity and an improved rate of resource utilization.
Demands for money and credit were strong in 1972 as the
economy expanded vigorously. With demands large, the narrowly
defined money stock (M1) expanded at an 8.3 per cent rate, and
the bank credit proxy at a little under 12 per cent, somewhat more
rapid increases than in 1971. Reserve provision through open market
operations, as indicated by the rise in nonborrowed reserves to support private nonbank deposits, was more restrained than in the
previous year. As a consequence, short-term interest rates rose substantially after the winter of 1972 and upward pressures continued
into early 1973. The Federal Reserve discount rate was raised by
Vi percentage point to 5 per cent in mid-January of 1973 and by
another Vi percentage point in late February. Partly as a result of the
cumulative impact of 1972's developing monetary restraint, the rate
of monetary expansion moderated in early 1973.
Interest rates on long-term securities and residential mortgages
remained quite stable throughout 1972, reflecting in part the slower
rise in prices in the economy and the reduction of inflationary
expectations. In addition, demands placed on securities markets by
the U.S. Government, by State and local governments, and by businesses moderated. The total volume of external financing still remained historically high, however, and the bulk of this demand was
met through financial institutions—especially the demands for consumer and mortgage loans and business demands for bank loans.
41
16. INTEREST RATES
PER CENT PER ANNUM
10
SHORT-TERM
1970
LONG-TERM
1971
1972
1970
1971
1972
NOTE.—Monthly averages except HUD (based on quotations for one day each month).
Yields: U.S. Treasury bills, market yields on 3-month issues; prime commercial paper,
dealer offering rates; conventional mortgages, yields on first mortgages in primary markets,
unweighted and rounded to nearest 5 basis points, from Dept. of Housing and Urban
Development; corporate bonds (Federal Reserve series), averages of new publicly offered
bonds rated Aaa, Aa, and A by Moody's Investors Service and adjusted to an Aaa basis;
U.S. Govt. bonds, market yields adjusted to a 20-year constant maturity by U.S. Treasury;
State and local govt. bonds (20 issues, mixed quality), Bond Buyer.
MONETARY POLICY
In its day-to-day implementation of monetary policy during 1972,
the FOMC placed somewhat greater emphasis on bank reserves
while continuing to give weight to money market conditions. At the
same time the longer-run financial objectives of System policy continued to be concerned with various monetary aggregates, interest
rates generally, and credit conditions.
The bank reserve measure emphasized by the FOMC was reserves
available to support private nonbank deposits (RPD's)—total member bank reserves less reserves required against U.S. Government
and interbank deposits. Because short-run fluctuations in the latter
two types of deposits have only limited impact on economic activity
42
and are often large and erratic, the S\siem generally is prepared to
accommodate changes in demands for those deposits, fn view of the
inherent volatility of U.S. Government and interbank deposits,
growth In RPD's is considerably more stable on a month-lomonth
and quarter-to-quarter basis than thai for total reserves. However.
RPD's too fluctuate fairly widely in the very short run, because
week-to-week and month-to-month movements in private demand
deposits, which serve as the principal medium of exchange in the
economy, arc highly volatile,
fe the first quarter of 1972 System open market operations provided for fairly rapid expansion in RPD's. as monetary policy was
directed toward creating conditions favorable to rapid economic
recovery and toward making up for the shortfall in the growth of
Mx (currency plus private demand deposits adjusted) late in 1971.
Since growth in the monetary aggregates had proceeded at very
high rates during February and March, however, the System subsequently provided nonborrowed RPiTs more reluctantly, and RPD
growth slowed to an annual rate of about 6.5 per cent in the second
quarter—considerably less than In the first. Expansion in M, also
dropped substantially below its first-quarter rate,
Table 7: GROWTH IN BANK RESERVES
,.)7i
Item
1972
If>72
!
III
i
Total res*
Rosen .\s to support private tieposit s ^RPDV...
Nonbo rrowed reserves..,
Nonbo iTowed RPD's...
i
X. 1
8.2
|
IO]7
-.244
;
IV
III
l
;
14,2
9 . •> •
|
10.6
4.8
,4
36(1 i
789
3.6
9.7
7. 1
(y.to
13.1
7.2
-.vS
5.0
1
-••
111 111!It
:
per cc nt
!
10. {>
J --
MEMO:
Borrovs ed reserves
If
1
ons of dollars"
0 !
_4j
1
Quarterly changes, shown al seast :ill\' adjusted annual rates, are calculated from the
amounts outstanding (adjusted for eha; :ges in reserve requirements) in the last month of each
Annual
changes calculated from Oeeen: ,T averages.
J
Quarterly changes are calculated IV
adjusted for chaimes in reserve icquiren
the last mouth o\ i\idi quarter, not annuaii/ed.
changes calculated from December avc:
average
quarter.
xl and
Annual
43
In the second half of the year continued rapid expansion in
economic activity resulted in increased bank demands for reserves
to support additional credit and in monetary expansion. While the
growth rate of total RPD's rose again to the high levels reached in
the first quarter, reserve provision through open market operations
was increasingly restrained, and more of the reserve expansion late
in the year was the result of increased borrowing by member banks
from the Federal Reserve Banks. During the last quarter of the
year nonborrowed RPD's increased by a nominal amount, but banks
increased their average borrowings by more than $700 million.
Although bank reserves grew rapidly during 1972 as a whole,
growth in the demand for reserves was even greater, and this
contributed to a tightening of money markets as the year progressed.
Until about mid-February, short-term interest rates continued the
decline that had begun by the fourth quarter of 1971, as reserves
expanded rapidly. During the second quarter, however, demands for
money and bank credit increased faster than the Federal Reserve
was willing to supply reserves, and the excess demand for funds
generated upward pressures on market rates of interest. This pattern
continued during the remainder of the year, and by the end of
December most short-term rates had increased more than 2 percentage points from their February lows. Even so rates were still somewhat below the high levels experienced in July 1971,
Following the increase in open market rates, commercial banks
adjusted their prime rates upward in several stages—from, a low of
4Vi per cent In early spring to 6 per cent just before the year-end,
and then to 6!4 per cent in early 1973. (As already noted, the
Federal Reserve discount rate, unchanged at 4Vi per cent throughout 1972, had been raised to- 5 per cent in mid-January 1973 and
to SVi per cent in late February.) While short-term rates increased,
most longer-term rates showed little change on balance^ reiecting the
substantial lows of funds into capital markets and the continuing
moderation in long-term credit demands in securities markets during
most of the year.
In addition to its strictly monetary policy actions the Federal
Reserve made several other regulatory changes in 1972 that had
significant effects on financial markets. One area of action related
to stock market credit. In the early months of 1972 total credit
extended by brokers and bank^ for the purpose of purchasing or
44
carrying securities had expanded substantially. When It subsequently
appeared that further growth In stock market credit might contribute
to inflationary pressures, the Board of Governors raised initial
margin requirements on stocks in an effort to forestall such growth.
This increase, effective November 24, raised requirements to 65
per cent from the 55 per cent level that had prevailed since December 1971. In an earlier security credit action—effective September
18, 1972—the Board had introduced a technical amendment to its
margin regulations designed to improve the quality of stock market
credit; under the amendment, customers with low-margin accounts
must increase their equity when offsetting sales and purchases of
stock collateral are made on the same day.
On November 9 the Board Instituted two key changes In its
Regulations D and J that affected the reserve positions of member
banks. These changes were not designed to meet any general monetary policy objective but rather to restructure reserve requirements
against Federal Reserve member bank deposits on a more uniform
basis {Regulation D) and to speed up and modernize the Nation's
check-clearing system (Regulation J ) . In an effort to neutralize the
impact of the changes insofar as monetary policy was concerned,
implementation was timed to coincide with a period of regular
seasonal reserve needs and was coordinated with open market operations. The net effect of these two regulatory changes was to provide
about $1.1 billion of the seasonal reserve need.
Prior to the change in Regulation D there were two classifications
of banks for reserve purposes: reserve city and country. Most
banks in the major financial centers were classified as reserve city
banks, and all other banks were classified in the country bank category. Under that system some smaller banks carried the heavier
reserve requirements of a reserve city classification simply because
of their geographical location, whereas a few large banks benefited
from their country bank status.
Over the years the large reserve city banks have tended to exhibit
greater deposit volatility than the smaller country banks. Such conditions indicated a need for the reserve city banks to maintain greater
liquidity in the form of reserves, as protection against potentially
large deposit outflows. However, with the evolution of our modernday banking system, credit markets have become national in scope,
and reserve requirements based on geographical considerations are no
45
longer appropriate. The change In Regulation D eliminated the
geographically based distinction between reserve city and country
banks for reserve purposes and established a new system of graduated reserve requirements for net demand deposits that is based
solely on the amount of deposits and is applicable to all member
banks, 2
The effect of the change in Regulation D alone was to- reduce
member banks* required reserves by roughly $3.2 billion in the
aggregate. With the exception of a few very large banks that had
preYiously enjoyed country bank states, each member bank realized
some reduction in its required reserves, with the exact amount
depending on the amount of the bank's deposits and its previous
status as reserve city or country bank.
Prior to the November 9 change in Regulation J, most member
and nonmember banks located outside Federal Reserve Bank or
branch cities had been required to remit funds one or more business
days after the checks were presented for payment by the Federal
ResefYe. Most banks located within such cities, in contrast, had
been required to remit on the same business day the checks were
received,3 Initially, the reason some banks had been permitted to
remit on a delayed basis was because of transportation and communication problems, Speciically5 banks that were located a considerable distance from Federal Reserve clearing facilities needed
additional time in order for remittance drafts to reach their Federal
Reserve office.
'J According to this system the required reserve ratios applicable to the
various portions of a bank's deposits are as follows:
Amount of net demand deposits
(in millions of dollars)
2 or less
2-40
10-100
100-400
Over 400
Reserve percentage
applicable
8
10
12
13
Previously the required reserve ratio oe the first $5 million of net demand
deposits had been 17 per cent for reserve city banks and tlVi per cent for
country banks, and the required ratio on such deposits of more than $5 million
had been 17% and 13 per cent, respecti¥ely.
3
Nonmember banks remit for checks presented by the Federal Reserve
through member bank correspondents.
46
However, expanded use of both carrier services and wire transfers of funds has greatly improved the communication among banks
and has removed the need for additional remittance time. Recognizing these developments, the change in Regulation J required essentially all banks to whom the Federal Reserve presents checks for
collection to remit on the same day that the checks are presented.
The effect of the change in Regulation J was therefore to give
rise to a once-and-for-all drain of reserves at the banks that had
previously benefited from delayed remittance for their checks. In
the aggregate, before counting offsets, this drain amounted to
roughly $4.4 billion. Slightly more than half of this aggregate was
offset by reserve gains due to faster crediting by the Reserve Banks
on checks presented to them for collection that are drawn on banks
in the same Federal Reserve territory as the collecting bank. If
this partial offset is taken into account, the reserve drain for member
banks resulting from the change in Regulation J amounted to
about $2.1 billion. For those banks that experienced a significant
adverse effect, temporary waivers of penalties on reserve deficiencies
are being permitted to cushion the impact of the changes.
MONETARY AGGREGATES
In addition to the 8.3 per cent growth in Mx already noted for
1972, the broadly defined money stock, M2 (M x plus commercial
bank time and savings deposits other than large negotiable CD's),
grew at a rate of 10.8 per cent, and M 3 (M 2 plus deposits at mutual
savings banks and savings and loan associations) increased by 12.9
per cent.
The expansion in Mx was relatively even on a quarter-to-quarter
basis, but the month-to-month growth showed considerable variation. Because of essentially random factors that affect demand for
money in the short run, it is not unusual for months of large growth
or months of little growth to occur without any evident, clear cause
that would explain demand in the particular short period. For this
reason much less weight is given to monthly movements than to
quarterly movements as a factor to be considered in monetary policy
decisions.
The following examples indicate how extreme the monthly movements in the money stock may be—and some of the reasons. After
47
rapid expansion early in 1972, growth in M1 slowed in May and
June, reflecting not only System efforts to slow the rate of expansion
in RPD's but also the build-up in U.S. Treasury balances as a result
of higher withholding rates on 1972 personal tax liabilities. On the
other hand, in both July and December, expansion in Mx was unusually large. In July most of the growth in Mx occurred around
the holiday period. In December the rapid growth resulted in some
part from a contraseasonal increase in demand deposits held by
State and local governments that reflected the disbursements of
Federal revenue-sharing funds early in December. The December
expansion was followed by little net change in M1 on the average
in January 1973.
Consumer-type time and savings deposits increased sharply through
the early months of 1972 when market yields on competing assets
were falling relative to the rates offered on such deposits. Thus,
first-quarter growth rates of the broader measures of the money
stock, M2 and M 3 , were not only considerably above the growth
rate for Ml9 but also at the highest levels since the first quarter
17. GROWTH IN MONETARY AGGREGATES
11
1970
1971
1972
1970
1971
1972 |
MONETARY AGGREGATES
Mi: Currency held outside the Treasury, F.R. Banks, and the vaults of all commercial
banks, plus demand deposits other than interbank and U.S. Govt.
M2: Mi plus time deposits at commercial banks other than large certificates of deposit.
M;\\ M-i plus deposits of mutual savings banks and savings capital of savings and loan
associations.
48
of 1971. Thrift deposits expanded somewhat less rapidly as 1972
progressed, but net inflows remained quite strong despite the increasing attractiveness of yields on competing open market securities.
Some larger commercial banks had lowered rates on consumer-type
accounts at the beginning of the year in an effort to keep such
accounts from experiencing excessive growth, but by July most banks
were offering rates at or close to ceiling levels.
Growth in bank credit during 1972—as measured by the adjusted
credit proxy 4—was supported not only by increases in demand and
consumer-type time and savings deposits but also by a sharp rise
in net sales of CD's. Commercial banks bid aggressively for
such funds, and negotiable CD's outstanding increased by more
than $10 billion between January and December, an amount that
exceeded the sizable increase recorded in the preceding year. Banks
did not borrow any significant amounts in the Euro-dollar market
during 1972, in part because of the high marginal reserve requirement
4
Total member bank deposits subject to reserve requirements, plus Eurodollar borrowings, bank-related commercial paper, and certain other nondeposit items.
1970
1971
5^3
1972
1970
I
1971
1972
|
ADJUSTED
CREDIT PROXY
Adjusted credit proxy: Total member bank deposits subject to reserves, plus Euro-dollar
borrowings, bank-related commercial paper, and certain other nondeposit items.
NOTE.—Quarterly rates of growth derived from daily-average data for last month of
the quarter relative to those for last month of preceding quarter.
49
on this type of borrowing and in part because of the availability of
domestic CD's.
The expansion in CD's did not begin until after the first quarter,
when growth in other time deposits began to slow, but it continued
strong throughout the remainder of the year with only minor slowdowns occurring in June and October. As yields on alternative shortterm money market instruments began to rise, and as business loan
demands on banks continued strong, banks increased offering rates
on CD's in order to compete for additional funds. By the end of
December rates on negotiable CD's sold by prime New York banks
had reached 5l/i per cent—2 percentage points above the first-quarter
18. MAJOR SOURCES OF BANK FUNDS, 1972
BILLIONS OF DOLLARS
50
40
TIME AND SAVINGS DEPOSITS^
EXCL. LARGE CD's
J
M
M
J
J
N
NOTE.—Time and savings deposits other than large certificates of deposit and private
demand deposits are for all commercial banks. Time and savings deposits other than large
CD's exclude those due to domestic commercial banks and to the U.S. Govt. as well as
balances accumulated for repayment of personal loans. Large CD's are negotiable CD's
issued in denominations of $100,000 or more by major commercial banks. U.S. Govt.
deposits and nondeposit sources of funds data are for member banks only.
50
low. With month-to-month fluctuations in total demand deposits
and total time deposits partly offsetting one another, the bank credit
proxy maintained relatively stable growth throughout the year, increasing at about a 10 to 12 per cent annual rate in each of the four
quarters.
INTERMEDIATED CREDIT FLOWS
As a result of several factors—including the nature of credit
demands, the strong preference on the part of the public for demand
and time deposits, the associated developments in interest rates, and
others—financial institutions supplied a substantially larger volume
of funds than in 1971. Banks, other depositary institutions, and contractual institutions such as insurance and pension funds accounted
for more than four-fifths of the total advanced, an even larger share
Table 8: FUNDS SUPPLIED TO NONFINANCIAL SECTORS IN
CREDIT AND EQUITY MARKETS
In billions of dollars
1972
Sector supplying
1971
1972
III
All sectors
U.S. Govt. and sponsored credit agencies.
Federal Reserve System
Foreign sources
Private financial institutions
Commercial banking
Savings institutions
Insurance and pension funds
Other
Net funds raised in credit and equity
markets by financial institutions *. . . .
Funds advanced by private domestic
nonfinancial sectors in credit and
equity markets2
Households
Nonfinancial business
State and local governments
MEMO: Net change in institutional
deposits and currency held by private
domestic nonfinancial sectors
IV
168.1
139.4
161.2
153.9
216.9
6.0
8.8
27.3
.2
10.8
11.0
3.8
17.2
7.9
5.6
-3.0
9.3
-6.3
16.5
-2.2
12.7
124.9
49.8
42.1
30.2
2.8
153.2
65.3
49.6
32.8
5.5
137.5
57.3
49.5
27.2
3.5
139.3
49.6
48.8
37.0
3.9
151.0
64.8
49.9
31.7
4.6
184.8
89.1
50.1
35.2
10.4
156.3
7.4
9.6
19.6
9.7
17.9
22.5
28.2
-1.0
-16.8
-20.3
-27.5
-1.2
7.7
14.4
A
4.8
9.3
8.4
29.3
16.0
7.7
5.6
5.8
-4.9
.9
9.8
42.4
17.7
11.4
13.2
95.7
107.2
122.0
87.2
106.1
113.2
1
Bonds, notes, commercial paper, loans from home loan banks, equities, and mutual fund shares.
Includes borrowing by Federally sponsored credit agencies.
2
Total funds advanced less amounts supplied by groups above plus net credit and equity funds raised
by financial institutions.
NOTE.—Data from flow of funds accounts. Quarterly data are at seasonally adjusted annual rates.
51
than in the preceding year. Funds advanced directly by domestic
nonfinancial sectors increased following a small decline in 1971, while
foreigners accounted for a substantially reduced—though appreciable
—volume of identified domestic credit supplies, a reflection of the
smaller accumulation of dollars by foreign central banks.
Total loans and investments at commercial banks rose substantially from the 1971 year-end level, exceeding by a sizable margin
the $50 billion growth during 1971. Banks channeled more than 80
per cent of the 1972 increase in their available funds into loan expansion and put less in securities than they had in 1971.
Strengthening of loan demands at banks was the principal reason
why banks showed less interest in acquiring securities in 1972.
However, another factor was that Treasury financings were smaller
than in 197.1. After the first quarter of the year banks added only
19. BANK CREDIT, 1972
PERCENTAGE CHANGE
PERCENTAGE CHANGE
25
25
TOTAL
•ill
wmmmmmm-
I
Q2
Q4
Q2
Q4
Q2
04
Q2
Q4
25
NOTE.—Quarterly data are changes based on seasonally adjusted totals at annual rates.
Total loans and investments and business loans have been adjusted for transfers between
banks and their holding companies, affiliates, subsidiaries, or foreign branches.
52
marginally to their holdings of U.S. Government securities. On the
other hand, acquisitions of other securities—primarily State and
local government issues, but also Federal agency securities-—were
larger than those of Treasury securities, even though they too
remained well below the high rates of late 1970 and early 1971.
Banks channeled a considerable proportion of their increased
resources into business loans, which expanded at especially rapid
rates in the last two quarters of 1972. Early in the year, most of the
expansion in such loans was concentrated at banks outside New
York City, which tend to serve the needs of smaller regional firms.
Meanwhile, larger corporations continued to rely on other sources-—
including a greater volume of internally generated funds—for financing, lo the second half of the year, however, both banks in New
York City and those outside encountered strong credit demands
from corporations seeking working capital to finance inventories and
enlarged operations. As businesses sought more credit at banks, they
sought less in capital markets.
Consumers borrowed record amounts dining 1972 to finance purchases of durable goods. As a result of their borrowing at commercial banks, the banks* share of total consumer credit increased during
the year.
Real estate loans extended by commercial banks also rose
rapidly in a year when total mortgage debt was expanding at the
fastest rate since 1955. However, approximately two-thirds of the
growth in residential mortgage debt outstanding in 1972 was
accounted for by nonbank savings institutions, with savings and
loan associations maintaining their dominance in that market.
Despite the record level of demands, which carried housing starts
to a new high, contract interest rates on residential mortgages
remained relatively stable. This reflected the availability of mortgage
funds from both bank and nonbank sources and some secondary
support from Government sponsored agencies. Insofar as the volume
of net lending on Government-underwritten residential mortgages is
concerned, there was sonic further moderation, however, reflecting
in part increased competition from conventional mortgages on which
lower downpayments were instituted by savings and loan associations following further liberalization of regulations by the Federal
Home Loan Bank Board in 1971.
53
DEMANDS ON SECURITIES MARKETS
Demands on securities markets moderated in 1972, as total funds
raised by corporations and government units declined and corporations met a larger share of their reduced financing needs through
mortgages and bank loans. Flotations of securities by the U.S.
Government, by State and local governments, and by corporations
all fell below the substantial volumes issued in 1971. This reduction
of demand pressures on securities markets was an important factor
contributing to the stability of long-term interest rates during the year.
Table 9: FUNDS RAISED IN CREDIT MARKETS BY
NONFINANCIAL SECTORS
In billions of dollars
Sector, or type of instrument
Total funds raised
By sector:
U.S. Govt.*
Other
...
Nonfinancial business
State and local governments
Households
Foreign
By type of instrument:1
U.S. Govt. securities .
. .
Corporate and foreign bonds
Corporate equity
State and local govt. debt 2
Mortgages....
Residential
Other
Bank loans n.e.c
Open market paper
Consumer credit.
Other loans
1971
1972
1972
I
II
III
IV
156.3
168.1
139.4
161.2
153.9
216.9
25.5
130.8
63.0
20.6
41.6
5.6
17.3
150.8
70.6
14.6
62.0
3.5
5.4
134.1
64.4
16.2
49.3
4.2
17.5
143.7
72.1
11.7
58.4
1.6
8.3
145 6
62.0
16.7
64 8
2.0
38.1
178 8
83.9
13.8
74 9
6.2
25.5
20.3
13.5
20.2
47.0
34.9
12.1
13.0
-.4
10.4
6.9
17.3
13.7
12.4
14.4
64.3
46.8
17.5
21.6
-.3
19.2
5.5
5.4
12.9
10.3
15.1
54.5
39.0
15.5
17.1
2.9
13.1
8.1
17.5
14.7
15.9
12.9
64.2
46.4
17.8
14.7
.3
18.0
2.9
8.3
13.0
11.8
16.1
68.2
49.6
18.5
19.0
-5.5
18.7
4.3
38.1
14.3
11.4
13.5
70.2
52.1
18.0
35.6
1.0
26.1
6.8
1
2
Public debt securities and budget agency securities.
Includes both long- and short-term borrowing.
NOTE.—Data are from flow of funds accounts; quarterly figures are at seasonally adjusted annual
rates.
Several developments that have already been mentioned helped to
hold down the Treasury cash deficit in 1972. One was the largerthan-anticipated increase in tax revenues. Another was that the
growth in Federal spending was restrained. As a result of these and
other developments, the Treasury was able to reduce its borrowing
from the public during the calendar year to about $15 billion, more
54
than $9 billion less than it had borrowed in 1971, This reduction was
a major factor in reducing supply pressures in the securities markets.
Continued weakness in the U.S. balance of payments and Its associated impact on international ilows of funds led to sizable accumulations of dollars by foreign central banks. Although these funds
would probably have been invested in U.S. markets in any event,
accumulation in central batiks directed their investment in marketable
{$4.3 billion I and nonmarketable ($3.8 billion) Treasury issues.
These purchases supplied more than half of the Treasury's total borrowing needs.
Table 10: U.S. GOVERNMENT FINANCE
In billions of* dollars
197
Item
Deficit . , .
HI
I?. 4
It , 8
24 8
15. 3
5 0
H i
7 5
15 2
-- 10
4.
3. f
I 1 1
2 1
3 4
t ash
_
Total horro\\inu from p iiWic .
Ncl hakr, if Rescne purclu KSCS of"
1 reas»r> securities
investo s.
M.irkvuh Ic:
a. Imx js?n
b, Otlu
Nonmark cu-blc;
iJ. 1 Ol\ign
24.8
11.4
Amount hi anvixi b> i huiH'CS
assets am tuhci ficn ss , , . .
pn\
...
h. Oilu
Bono w in u 1roni ail'so irecs bv budget
iij-'cncics
Monioi.uuk
Nti hor
1
5
tiiin cat
SpOMSOl cd aj'oncfe
i-ciieral Reserve puvcha:- cs of
•igciicy issues. , . ,
_
j
«;
1
t)
3
_. i 3
8. 2
-- i.
h
•i
7
i. J
1
5
8
It should be noted, however, thai acquisitions of marketable
Treasury debt by foreign official institutions had been much larger in
lc)7l than they were in 1972, Furthermore, the U.S. public had been
a large net seller of such debt in 1971. While acquisitions of marketable debt by the public in Ic)72 amounted to about S3.5 billion,
this represented a shift of neatly $14 billion from 1971 since the
public had sold more than S 1(1 billion in that year.
Interest rates on short- and long-term Government securities followed divergent patterns during 1972. Short-term rates, which had
55
declined rather sharply following the imposition of the President's
new economic program in August 1971, reversed course in early
1972 and rose significantly over the last 9 months of the year in association with the large demands for short-term credit generated by
the accelerating economy and the progressive firming in monetary
policy.
Long-term rates, on the other hand, remained quite stable throughout 1972. The lack of significant upward yield pressure in this sector
enabled Treasury debt managers to be increasingly innovative in their
approach to financing the debt. One of their announced aims, in addition to maintaining the average maturity of the debt, was to develop a viable market in long-term Government issues. Toward this
end the Treasury issued a total of $3.4 billion of securities to the
public in the 10-year maturity area in the February, May, and August
refundings. In addition, it sold $625 million of 20-year bonds in early
January 1973; this was the longest maturity offered to investors in
about 10 years.
In contrast to the Federal sector. State and local governments
moved into a budget position of substantial surplus during 1972. Net
issues of securities by these governments declined from the peak
volume of 1971. There was relatively little growth in capital outlays,
and nonborrowed funds were readily available, as both tax revenues
and Federal grants increased. Expenditures rose less rapidly than did
receipts, and these governments were able to strengthen further their
liquidity positions, which had already been improved by the large
volume of securities sold in late 1970 and 1971.
Interest rates on long-term municipal bonds fluctuated in a narrow
range during 1972, Although banks reduced their acquisitions of
these securities doling the year, the impact of this reduction on interest rates was offset by the decline in new-issue volume and by the
increase in purchases by fire, casualty, and marine insurance cornpanics, which were seeking tax-exempt income.
Corporate noniinancial businesses also benefited from the rising
pace of economic activity in 1972. The general improvement in earnings, the increase in capital consumption allowances under the Asset
Depreciation Range guidelines, and the slower-than-usual growth in
dividend payouts resulting from restraints applied by the Committee
on Interest and Dividends as part of the Phase II controls program
56
all contributed to a substantial rise in the availability of internal funds
of corporations. Furthermore, like State and local governments, corporations had engaged in record amounts of long-term financing late
in 1970 and in 1971, and in that way they had restructured their
balance sheets and improved liquidity positions in the aggregate.
Corporations needed larger amounts of funds in 1972 because of
rising outlays for plant and equipment and growing needs for working capital. However, they reduced their dependence on securities
markets by financing a larger proportion of their needs with internally
generated funds, bank loans, and mortgages. Public offerings of bonds
by corporations dropped significantly, the drop more than offsetting
a slight increase in private bond placements and equity offerings. The
decline in capital market financings was particularly evident for
manufacturing corporations. Public utilities continued to rely on the
securities markets to meet their needs for growth and modernization,
and they utilized equity capital to a larger extent than usual. Financial
firms continued to enter the long-term bond markets in large numbers
in 1972, in order to improve their capital positions and to prepare for
the task of financing the growing short-term credit needs of the
economy.
57
U.S. Balance of Payments
Attention was focused in 1972 on the lack of progress toward equilibrium in the U.S. balance of payments after the realignments of exchange rates agreed to at the Smithsonian meeting in December 1971.
The year was relatively free of hectic speculative activity, but pressure on the pound sterling at midyear led to the temporary abandonment of a fixed rate for that currency and a renewal of speculative
flows into some other European currencies. Also, a large and persistent flow of funds to Japan, coupled with an undiminished Japanese
trade surplus, enormously swelled that country's international reserves. Though there were large inflows of foreign capital to purchase
U.S. securities, and some sizable inflows of liquid funds at times, for
the year as a whole there was no significant repatriation to the United
States of the capital that had moved to other currencies in 1971.
The failure of such a return flow to materialize reflected in part
the relatively higher levels of interest rates abroad, especially in the
early months of the year, and in part the continuing uncertainty about
the eventual effects upon U.S. exports and imports of the exchangerate changes of 1971. After early 1972, exchange rates against the
dollar of the currencies of most industrial countries remained above
their central rates or parities, and many countries adopted controls
or various types of special reserve requirements or other barriers to
protect them from large inflows of foreign capital.
Soon after the end of 1972 exchange markets became increasingly
unsettled, as the extent and persistence of the large U.S. deficit and
the counterpart surpluses of some other countries were more clearly
perceived. Speculation against the dollar in favor of other currencies,
primarily the German mark and the Japanese yen, rose dramatically
in late January and early February of 1973. In the light of these
conditions, and because of the need to achieve a speedier adjustment
of the underlying imbalance in U.S. international transactions, the
President announced on February 12 that he would request Congress
to authorize a devaluation of the dollar by 10 per cent. This step was
taken in consultation with other countries and in the expectation that
its effects on the exchange rates for the dollar in terms of the cur-
59
20. INDUSTRIAL PRODUCTION
RATIO SCALE, 1963=100
180
160
UNITED STATES
,
140
120
I
I
1970
I
1972
NOTE.—Seasonally adjusted quarterly data from the Organization for Economic Cooperation and Development. Data for fourth quarter of 1972 partly estimated.
rencies of other industrial countries would in general not be neutralized by other par-value changes. The Japanese yen was allowed
to float, and it quickly appreciated by about 16 per cent relative to
the U.S. dollar.
In the course of 1972 economic activity rose in most industrial
countries but lagged somewhat behind the upswing in the U.S.
economy. In a number of European countries price inflation was
accelerating early in the cyclical advance. Monetary restraint was
commonly adopted as a countermeasure, and several countries moved
to offset interest-induced inflows of funds through special controls
or reserve requirements. In the United States also, short-term interest
rates were rising, as demand in most sectors of the private economy
strengthened rapidly.
A large over-all deficit was registered in the U.S. balance of payments in 1972, but it was not swollen by an enormous net outflow
of capital as had happened the year before. In terms of official settlements, the deficit for the year was $10.8 billion (apart from SDR
allocations) compared with more than $30 billion in 1971. The bal-
60
ance on current account and long-term capital (the so-called basic
balance) probably registered a deficit somewhat greater than the $9.3
billion deficit of 1971. There were divergent swings in the currentaccount and capital-account components of the basic balance: The
balance on goods and services worsened by about $5 billion in 1972,
to a deficit of about $4.5 billion, while net long-term capital flows
probably improved by a somewhat smaller amount.
21. U.S. BALANCE OF PAYMENTS
SEASONALLY ADJUSTED ANNUAL RATES
BILLIONS OF DOLLARS
MAJOR COMPONENTSOFFICIAL SETTLEMENTS
SEASONALLY ADJUSTED ANNUAL RATES
BILLIONS OF DOLLARS
OVER-ALL BALANCES
BALANCE
60
20
MERCHANDISE
EXPORTS
20
20
40
20
ALL OTHF:
I
I
1970
1
I
I
1972
I
1970
I
1972
Excludes SDR allocations.
GOODS AND SERVICES
A number of factors combined to push the U.S. trade balance to a
deficit of $6.8 billion in 1972—about $4 billion larger than the one
in 1971. The major influence was the rapid rise of economic activity
here in advance of similar developments abroad. In addition, prices
of U.S. imports rose sharply, responding to both the devaluation and
the general increase in world prices, while export prices in terms of
dollars increased much less. These changes in relative prices were
61
only just beginning in 1972 to yield the reallocations of production
and consumption patterns necessary to halt the worsening trend in
the U.S. trade balance that had been developing since 1965.
The strongest feature of U.S. export performance in 1972 was the
rise in shipments of agricultural products—from $7,8 billion in 1971
to a total of $9.5 billion. By the last quarter of 1972 such shipments
were at an annual rate of $11 billion, reflecting the shortage of these
commodities in Russia and other countries and a very rapid rise in
their prices. Sales of agricultural products in 1973 are expected to
continue at a very high rate. Exports of machinery and industrial
supplies, supported by the build-up in economic activity abroad, were
rising during the year.
While the Yalue of exports rose by 14 per cent from 1971 to 1972,
the value of imports rose by 22 per cent. Prices (as measured by unit
values) rose 3 per cent for exports and 7 per cent for imports. In
real terms, imports rose by about 14 per cent, about double the rise
in real GNP, a typical reaction of imports to a sharp step-up in demand, Increases in imports were registered in all major commodity
groups; a particularly significant feature was the acceleration of petroleum imports from $ 3 % billion in 1971 to $4% billion in 1972.
During 1973 the trade balance should begin to benefit measurably
from the devaluation of 1971; the net effects of the further realignment of exchange rates early in 1973 will probably not be large until
the following year. Other strong influences will also be operating.
Most important will be the evolution of demand pressures and of
relative costs and prices in the United States and in other industrial
countries. This factor will be helpful if this country can continue to
moderate inflationary pressures, and if other countries move steadily
toward reasonably full utilization of their productive capacity. The
United States will also need to compete more effectively for the trade
of nonindustrial countries, many of which will be able to increase
their imports in 1973 on the strength of their reserve gains in recent
years and of a continuing rise in demand for their exports.
There was some reduction in the surplus in the nontrade elements
of the U.S. current account in 1972. Part of this resulted from smaller
net receipts of investment income, as interest payments to foreigners
—mainly interest paid to foreign official holders of claims against the
United States—rose faster than receipts from U.S. direct investments
62
abroad. There was also an increase in net U.S. military expenditures
as military sales fell off.
CAPITAL FLOWS
In 1972 the net outflow of long-term private capital from the United
States was probably less than $1 billion—a striking shift from the
recorded net outflow of more than $4 billion in 1971. One change
between the two years was in direct-investment outflows, which apparently declined from their record high in 1971. A striking feature
of developments in 1972 was the upsurge in foreign purchases of U.S.
corporate securities. For the year as a whole such purchases totaled
some $4.5 billion, including $2.4 billion of corporate stocks purchased
in U.S. markets, of which $1 billion came in the fourth quarter, and
$2 billion of debt issues offered by U.S. corporations in foreign markets, mainly tofinancedirect investments abroad.
Net outflows of U.S. Government grants and credits were somewhat less in 1972 than in 1971, but they were rising at the year-end
and they will probably be considerably larger in 1973.
Table 11: U.S. BALANCE OF PAYMENTS
In billions of dollars, seasonally adjusted
1972
1971
1972«
-2.7
-6.8
48.8
55.7
-1.7
42.8
45.5
Services, remittances, pensions, net..
U.S. Govt. grants and credit, net. . .
Long-term private capital, net
1.9
-4.4
-4.0
-3.6
-.6
-.9
-1.0
Balance on current account and longterm capital
-9.3
-10.2
-3.6
-2.4
-11.0
-7.8
-1.5
-2.8
3.7
-.5
.8
-.1
-6.9
3.9
-30.5
-10.8
Item
Merchandise trade balance
Exports
Imports
Nonliquid short-term private capital, net.
Errors and omissions
Liquid private capital, net
Of which: Liabilities to foreign
commercial banks
Official settlement balance (excluding
SDR allocations).
-1.9
11.4
13.4
-1.6
12.3
13.9
-1.6
13.3
14.9
-.0
-.6
.3
-.8
-.1
.3
-1.2
-.1
-1.8
-2.2
-2.6
.6
-1.1
1.4
-.5
-1.9
-.2
-1.0
-.6
2.6
.5
1.0
.3
2.1
-3.4
-1.0
-4.8
-1.6
11.8
13.5
.1
0
Fourth-quarter data partly estimated.
NOTE.—Dept. of Commerce data with some F.R. estimates. Details may not add to totals
because of rounding.
63
Recorded flows of private short-term capital in 1972 were inward,
on balance, in contrast to a net outflow of more than $10 billion in
1971. Whereas in 1971 there had been an outflow of nearly $7 billion
to commerical banks abroad when U.S. banks repaid all but a relatively small part of their borrowings in the Euro-dollar market, in
1972 there was a sizable inflow as the U.S. agencies and branches of
foreign banks brought in short-term funds from abroad. (The agencies and branches of foreign banks are not subject to the same reserve requirements on their liabilities to foreigners as are banks that
are members of the Federal Reserve System).
Large swings in the "errors and omissions" item in the accounts
provide a crude indicator of flows of funds in response to speculative
pressures. Apart from such flows this balancing item is usually negative, and its normal level in recent years has been around $1 billion.
According to early estimates, the balancing item in 1972 was larger
than normal, but far smaller than the $11 billion figure for 1971,
most of which had represented capita! outflows through unrecorded
hedging and through leads and lags in commercial payments.
64
"Parti
Operations, and
Organization
Record of Policy Actions of the
Board of Governors
J A N U A R Y 4, 1972
AMENDMENTS TO RULES REGARDING DELEGATION OF
AUTHORITY
Effective with respect to applications received by the Reserve Banks
after January 21, 1972, the Board amended its Rules Regarding Delegation of Authority to expand the authority of the Federal Reserve Banks
to approve certain applications by bank holding companies to acquire
shares of a bank.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Maisel, and Brimmer. Votes
against this action: None.1
In August 1971 the Board had delegated to the Reserve Banks
substantial authority to approve the formation of one-bank holding
companies and had dispensed with the publication of an order and
statement in cases approved by a Reserve Bank.
In light of experience and in a further effort to expedite handling
of the volume of applications received under the Bank Holding Company Act, as amended, the Board now delegated to the Federal Reserve Banks the authority to approve (1) the acquisition by a bank
holding company of additional shares in a subsidiary bank to the
extent that the shares were acquired through the exercise of rights
received as a bank shareholder, and (2) the acquisition by a registered bank holding company of a controlling interest in the shares of
a newly formed bank if no objection to the proposed acquisition was
made by the bank's supervisory authority, if no new significant policy
issue was raised by the Board proposal, and if the Reserve Bank
determined (a) that the general condition of the holding company
and its bank subsidiaries was satisfactory, (b) that the holding com1
There was one vacancy on the Board at the time this meeting was held.
67
pany had a proven record of furnishing needed special services, management, capital funds, and general guidance to its subsidiary banks,
or had the potential to provide these services in the case of a relatively new holding company, and (c) that bank subsidiaries of the
holding company did not hold more than 20 per cent of the total
commercial bank deposits in the relevant market area and that the
holding company was not one of the dominant banking organizations
in the State.
The Board's action also made clear that the delegation in August
1971 to Reserve Banks of authority to approve the formation of a
one-bank holding company included the authority to approve merger
and Federal Reserve membership applications incidental to such
formations.
JANUARY 20, 1972
AMENDMENT TO REGULATION Y, BANK HOLDING
COMPANIES
Effective February 1, 1972, the Board amended Regulation Y to permit bank holding companies to act as investment advisers to investment
companies, including mutual funds.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Maisel, and Sheehan. Vote against
this action in part: Mr. Brimmer.
In May 1971 the Board made its initial determination with respect
to activities so closely related to banking or managing or controlling
banks as to be permissible for bank holding companies under the
1970 amendments to the Bank Holding Company Act. One of those
permissible activities was acting as investment or financial adviser,
including serving as the advisory company for a mortgage or a real
estate investment trust and furnishing economic or financial information. At that time the Board indicated that acting as investment adviser to an open-end investment company was not regarded by the
Board as within the description of the approved activity, but that
it was considering whether to propose expanding such activity to
include acting in that capacity. In August 1971 the Board published
68
a notice of proposed rulcmaking that would expand the activities of
an investment or financial adviser to permit serving in that capacity
to an investment company registered under the Investment Company
Act of 1940.
On the basis of a hearing subsequently held and in light of other
comments received, the Board determined that bank holding companies might provide investment advisory services to open-end
and/or closed-end companies. The amendment to Regulation Y now
adopted added to the list of permissible activities that of serving as
investment adviser, as defined in Section 2(a) (20) of the Investment
Company Act of 1940, to an investment company registered under
that Act.
In the course of the deliberations several questions were raised as
to the scope of the activity permitted, particularly in view of certain
restrictions imposed by pertinent sections of the Banking Act of 1933
(Glass-Steagall Act provisions) and by the United States Supreme
Court's decision in Investment Company Institute v. Camp. The
scope of the approved activity was spelled out in a published interpretation in which the Board concluded that a bank holding company
might exercise all functions customarily permitted an investment adviser except to the extent limited by the Banking Act of 1933.
The Board interpreted the Glass-Steagall Act as prohibiting a bank
holding company from sponsoring, organizing, or controlling a mutual
fund. However, the Board did not believe that this restriction applied
to closed-end investment companies so Jong as they were not primarily or frequently engaged in the issuance, sale, and distribution
of securities.
The Board also stated that a holding company engaging in the
approved activity might not, among other things, (1) sell or distribute securities of any investment company for which it acted as investment adviser; (2) act as investment adviser to an investment company that had a name similar to the name of the holding company
or any of its subsidiary banks; or (3) purchase for its own account
securities of any investment company for which it acted as Investment
adviser; purchase, at its sole discretion, any such securities in a
fiduciary capacity; extend credit to any such investment company; or
accept the securities of any such investment company as collateral
for a loan to purchase securities of the investment company.
69
Governor Brimmer dissented from that portion of the action relating to open-end investment companies because of conflict-of-interest
implications. It was his view that it would be difficult to maintain complete separation between the investment advisory activities of a bank
holding company and the sales and promotional activities involved in
the distribution of shares of the open-end investment trust.
J A N U A R Y 31, 1972
GUIDELINES FOR IMPROVING THE PAYMENTS MECHANISM
The Board authorized the issuance of guidelines for use by the Federal Reserve System throughout the Nation in establishing regional centers for overnight processing and settlement of checks.
Votes for this action: Messrs. Burns, Robertson,
Daane, Maisel, and Sheehan. Votes against this
action: None. Absent and not voting: Messrs.
Mitchell and Brimmer.
On June 17, 1971, the Board had issued a statement of policy that
reflected the Federal Reserve System's sense of urgency in modernizing the system for making financial payments throughout the United
States. The changes suggested were essentially transitional steps looking toward the eventual replacement of checks in large part by
electronic transfers of funds. Among the improvements in the national
means of making payments to which the Board gave high priority
were the extension of present clearing arrangements in cities with
Federal Reserve offices into larger zones of immediate payment and
the establishment of new regional clearing facilities in other areas of
the country. In both cases, settlements would be made in immediately
available funds.
The guidelines now issued were in furtherance of these stated objectives. Specifically, the guidelines gave basic directions to the Reserve Banks for the establishment and operation of Regional Check
Processing Centers in communities where trade, business, and financial activities were substantially related and where check volume warranted upgrading of check-handling facilities. New Federal Reserve
70
regional clearing centers were to be opened only in areas not presently served on an immediate-payment basis by existing Federal
Reserve offices, and where check volume and the absence of alternative facilities made additional Federal Reserve service essential. The
new system would make maximum use, consistent with improved
service to the public, of check-processing centers operated by commercial banks or nonbank agents. It was contemplated that the new
system would become operative region by region as soon as practicable, and that clearing arrangements would cross State or Federal
Reserve district boundaries.
M A R C H 9, 1972
AMENDMENT TO FOREIGN CREDIT RESTRAINT PROGRAM
GUIDELINES
Effective immediately, the Board amended the guidelines covering
foreign credits and investments by U.S. banks and other financial institutions to prevent subsidiary banks in a holding company from consolidating a newly acquired lending ceiling with ceilings of other banks in the
same holding company.
Votes for this action: Messrs. Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Messrs. Burns and Maisel.
Consolidation of ceilings among holding company members had
been permissible if only one of the banks in question had a ceiling on
November 11, 1971, when the guidelines were last revised. The modification now adopted was designed to safeguard the express intention
of the Board to make ceilings available to banks that wanted to enter,
and actively engage in, the foreign lending field. If ceilings designed to
allow banks to develop directly a foreign lending business were to
become available to banks already established in that business, the
purpose of the ceilings would be lost, and their use could lead to an
unintended expansion of aggregate foreign lending by U.S. banks
presently in the business.
71
APRIL 11, 1972
AMENDMENTS TO MARGIN REGULATIONS
Effective May 15, 1972, the Board amended Regulation G, Securities
Credit by Persons Other Than Banks, Brokers, or Dealers, Regulation T,
Credit by Brokers and Dealers, and Regulation U, Credit by Banks for
the Purpose of Purchasing or Carrying Margin Stocks, to incorporate
requirements for the continued inclusion of a stock on the list of overthe-counter (OTC) margin stocks.
Votes for this action: Messrs. Burns, Robertson,
Daane, Brimmer, and Sheehan. Votes against this
action: None. Absent and not voting: Messrs.
Mitchell and Maisel.
In the amendments, the Board set forth the criteria that over-thecounter stocks must continue to meet in order to remain on the list
of OTC margin stocks (which are subject to the Board's margin requirements concerning securities credit transactions). The criteria
adopted for continued listing were substantially the same as those
published for comment earlier in the year. Stocks that appear on the
list have not been approved, in any way, by the Board and are included only on the basis of meeting and continuing to meet prescribed
criteria.
A P R I L 26, 1972
REGULATION Y, BANK HOLDING COMPANIES
The Board issued an interpretation relating to its previous determinations that the following five activities were not so closely related to banking or managing or controlling banks as to be a proper incident thereto
under Section 4(c)(8) of the Bank Holding Company Act: (1) equity
funding; (2) underwriting life insurance that is not sold in connection
with a credit transaction by a bank holding company, or a subsidiary
thereof; (3) real estate brokerage; (4) land development; (5) real estate
syndication. The principal purpose of the interpretation was to provide
a central place where interested persons could readily find a list of
72
activities thai the Board, in considering individual applications, had determined to be nonpermissiblc for bank holding companies.
(1) Equ ity fu n ding
Votes for this action: Messrs. Burns, Mitchell,
Daanc. Maisel, Brimmer, and Sherrill. Votes against
this action: None. Absent and not voting: Mr.
Robertson.
On November 9, 1971, the Board adopted the position that there
was no reasonable basis for a determination that equity funding (the
financing of sales of mutual fund shares and life insurance policies as
a package) was so closely related to banking as to be a proper incident thereto. The affiliation of a bank with an equity-funding company would violate the congressional policy embodied in the GlassSteagaii Act of divorcing commercial and investment banking and
could give rise to potential conflicts of interest and unsound banking
practices. The term "equity funding"* was subsequently changed to
'Insurance premium funding."
(2) Underwriting life insurance
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Maisel, and Brimmer. Votes
against this action: None.1
On December 16, 1971, the Board took the position that there
was no reasonable basis for a determination that underwriting general life insurance was closely related to banking. In reaching this
conclusion the Board took into account (a) the record of the hearing and the written comments received on the proposal (published for
comment in January 1971) to include as a permissible activity acting
as insurer either for the holding company and its subsidiaries or with
respect to insurance sold by the holding company or any of its subsidiaries as agent or broker, and (b) considerations in its 1957
denial of the application of Transamerica Corporation to retain Occidental Life Insurance Company of California.
1
There was one vacancy on the Board between Nov. 15, 1971, and Jan. 4,
1972.
73
(3) Real estate brokerage
Votes for this action; Messrs. Burns, Robertson,
Daane, Maisel, Brimmer, and Sheehan. Votes
against this action: None, Absent and not voting:
Mr. Mitchell.
On March 23, 1972? the Board concluded that there was no reasonable basis for determining that real estate brokerage was a permissible activity for bank holding companies under Section 4(c) (8).
In reaching this determination, the Board noted that many banks
have traditionally performed real estate brokerage services for their
fiduciary accounts, but It concluded that since trust departments often
perform varied commercial functions for their trust customers^ this
in Itself would not provide a sufficient basis for a determination that
such activity was closely related to banking. Further, it did not appear
to the Board that any net beneit would result to the public from the
performance of this activity by bank holding companies.
(4) Land development
Votes for this action: Messrs, Burns, Robertson,
and Brimmer. Votes against this action: Messrs.
Mitchell and Sheehae. Absent and not voting:
Messrs. Diane and Maisel,
On March 28, 1972? the Board determined that there was no- reasonable basis for a determination that land development was permissible under Section 4 ( c ) ( 8 ) as an activity closely related to banking,
principally because land development could not be considered as an
incidental activity to commercial banking and because entry into this
ield by bank holding companies might result in unsound banking
practices and other adverse effects that are not outweighed by benefits to the public.
Messrs. Mitchell and Sheehan dissented because they would have
preferred that a proposal to include land development as a permissible activity be published for public comment before Board action
was taken, although they concurred in general with the reasons underlying the Board's action.
74
(5) Real estate syndication
Votes for this action: Messrs. Robertson, Daane,
Brimmer, and Sheehan. Vote against this action:
Mr. Mitchell. Absent and not voting: Messrs.
Burns and Maisel.
On April 4, 1972, the Board concluded that real estate syndicate
activities, which would include organizing, promoting, selling partnership interests, and acting as the sole general partner of a real
estate syndication, were not closely related to banking and should
not be considered as permissible. It was also the Board's view that
real estate syndication activities would be inconsistent with the
policies of the Glass-Steagall Act inasmuch as a holding company
subsidiary would be actively engaged, on a continuing basis, in selling interests in numerous real estate syndications. There would be no
demonstrable benefits to the public from permitting bank holding
companies to engage in this activity that would outweigh conflictof-interest considerations arising from the sale of limited partnership
interests.
Governor Mitchell dissented from the action on the grounds that
if the general partnership feature were removed, denial would be
inconsistent with Board positions in the closed-end mutual fund and
real estate investment trust areas.
In September 1972 the interpretation was expanded to include
management consulting, property management, and operation of
savings and loan associations as activities not permissible for bank
holding companies under Section 4(c)(8). These three activities are
covered in separate policy actions.
MAY 30, 19^2
REGULATION Y, BANK HOLDING COMPANIES
The Board authorized issuance of an interpretation of Regulation Y
outlining the types of investments that bank holding companies may
make in projects designed primarily to promote community welfare.
75
Votes for this action: Messrs. Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Messrs. Burns and Maisel.
"Making equity and debt investments in corporations or projects
designed primarily to promote community welfare, such as the economic rehabilitation and development of low-income areas" was
included in the initial listing of activities determined by the Board
to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto under the Bank Holding Company
Act, as amended.
In the interpretation now issued, the Board emphasized its intent to
enable bank holding companies to take an active role in helping to
promote community welfare. Within the category of permissible
investments outlined by the Board were (1) low- and moderateincome housing projects and (2) projects designed explicitly to create
improved job opportunities for low- or moderate-income groups.
Although the interpretation focused primarily on low- and moderateincome housing, the Board made it clear that the interpretation was
not intended to limit projects to that area. Other investments designed primarily to promote community welfare were considered
permissible but were not defined, in order to provide bank holding
companies flexibility in approaching community problems. However,
the permitted activity was not intended to provide a vehicle for bank
holding company entry into general commercial activity, which is
prohibited by the Bank Holding Company Act, and the Board indicated that applications would be carefully reviewed to assure compliance with the desired objectives.
JUNE 5, 1972
AMENDMENT TO REGULATION Y, BANK HOLDING
COMPANIES
Effective June 6, 1972, the Board amended Regulation Y for the purpose of clarifying the scope of investment advisory activity permissible
for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act.
76
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, and Sheehan. Voles against this
action: None. Absent and not voting. Mr. Brimmer.1
The Board included "acting us investment or financial adviser" in
its initial listing adopted in May ll)71 of activities so closely related
to banking or managing or controlling banks as to be permissible for
bank holding companies tinder the Bank Holding Company Act, as
amended. In the amendment now adopted, the Hoard defined in more
precise terms its intent to permit bank holding companies to act as
investment or financial adviser only to the extent of (1) serving as the
advisory company for a mortgage or a real estate investment trust;
(2) serving as investment adviser, as defined in Section 2(a)(20) of
the Investment Company Act of 1940. to an investment company
registered under that Act; (3) providing portfolio investment advice
to any other person; (4) furnishing general economic information
and advice, general economic statistical forecasting services, and
industry studies fas contrasted with management consulting); and (5)
providing financial advice to State and local governments, such as
with respect to the issuance of their securities.
In a related action taken on May 18, 1972, the Board determined
that "management consulting" was not an activity that was so closely
related to banking or managing or controlling banks as to be a proper
incident thereto.
Votes for this action; Messrs. Burns, Robertson,
Mitchell, Daane, and Brimmer. Voles against this
action: None. Abstaining: Mr. Sheehan. Absent
and not voting: Mr. Mitisel.
The Board viewed management consul!ing as including, but not
limited to, the provision of analysis or advice as to a firm's (i) purchasing operations, such as inventory control, sources of supply, and
cost minimization subject to constraints: (21 production operations,
such as quality control, work measurement, product methods,
scheduling shifts, time and motion studies, and safely standards; (3)
L
There was one Yacancy on the Board at the time this meeting was held.
77
marketing operations, such as market testing, advertising programs,
market development, packaging, and brand development; (4)
planning operations, such as demand and cost projections, plant location, program planning, corporate acquisitions and mergers, and
determination of long-term and short-term goals; (5) personnel
operations, such as recruitment, training, incentive programs, employee compensation, and management-personnel relations; (6)
internal operations, such as taxes, corporate organization, budgeting
systems, budget control, data-processing-systems evaluation, and
efficiency evaluation; or (7) research operations, such as product
development, basic research, and product design and innovation.
This view was incorporated by footnote into the amendment to
Regulation Y that was adopted on June 5, 1972, as were certain
other explanatory or technical changes.
At the time of the initial determination with respect to the permissibility of the investment or financial adviser activity, the Board
had indicated that it was considering whether to propose expanding
the activity to include management consulting. The Board now
reached the conclusion that the public benefits—such as increased
convenience and efficiency of operation—that might be expected to
result from holding company entry into the management-consulting
field would not outweigh potential adverse effects, the most serious
of which would be possible conflict of interest. It was the Board's view
that circumstances might conspire to make the objective, independent
point of view—which the management consultant purports to offer—
difficult to maintain. In addition, to permit bank holding companies
to engage in the business of advising commercial enterprise would,
in the Board's judgment, represent an extension of banking influence
into the realm of commerce in contravention of congressional purpose to maintain separation between banking and commerce.
J U N E 20, 1972
AMENDMENTS TO REGULATION D, RESERVES OF MEMBER
BANKS, AND REGULATION J, COLLECTION OF CHECKS AND
OTHER ITEMS BY FEDERAL RESERVE BANKS
Effective in two steps in late September and early October 1972, the
Board amended Regulation D so as to apply the same reserve requirements to member banks of like size, regardless of the bank's location.
78
Also, the Board amended Regulation J, effective September 21, to require all banks served by the Federal Reserve check-collection system to
pay—in immediately available funds—for checks drawn on them on the
same day the checks are presented for payment by the Federal Reserve.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None,
In March 1972 the Board had published in the Federal Register
for comment proposed changes in Regulations D and J designed to
make reserve requirements of member batiks and Federal Reserve
check-collection procedures more equitable and more efficient.
According to the proposals ail banks, city and country, member and
nonmember, would be placed on the same basis with regard to
Federal Reserve check collection, and member banks of equal size
would be subject to equal reserve requirements. The proposed revision of Regulation J represented a further step in the effort fostered
by the Federal Reserve, in cooperation with the commercial banking
system, to modernize the Nation's check-collection system.
It was expected that a total release of about $3,5 billion from the
restructuring of reserves through the amendment of Regulation D
would be partially absorbed by the immediate reduction in float of
$2 billion resulting from the change in Regulation J. This amount of
float would result from the present practice whereby so-called country
banks pay checks presented by the Federal Reserve in funds that
are not available for use until the next business day following
presentment of the checks for payment.
As a result of these regulatory changes it was expected that about
$1.5 billion of reserves would be released. However, it was intended
that Federal Reserve open market operations would be adapted, as
needed, to neutralize the effects of the release of reserves on monetary
policy.
Previously, reserve requirements for member banks had been
dependent on whether a bank was located within or outside a reserve
city. Under the amendment to Regulation D now adopted, the reserve
requirements on net demand deposits were restructured solely on the
basis of the amount of such deposits held by a member bank, without
regard to its location, and the ratios established for the various
portions of a bank's deposits were as follows:
79
Amount of net demand deposits
(in millions of dollars)
2 or less
2-10
10-100
100^400
Over 400
Reserve percentage
applicable
8
10
12
13
The new reserve ratios were to become effective in two steps.
During the period September 21-27, the first three ratios would be
applied to net demand deposits of $100 million and less. In addition
the 11 ¥2 per cent ratio formerly applied to demand deposits between
$100 million and S400 million for reserve city banks would be
reduced as a first step to \6Vi per cent. During the period September
28—October 4 this latter ratio would be reduced further to 13 per
cent. The purpose of phasing in the new reserve structure was to
avoid any unduly large release of reserves at any given point in time.
In its deliberations, the Board gave careful attention to situations
where a bank's funds available for investment would be significantly
reduced by the new check-collection procedures. To alleviate such
situations, Federal Reserve Banks were authorized to grant temporary
waivers for periods up to 21 months of penalties on certain deficiencies in member bank reserves attributable to the changes in Regulations D and J. In addition, the Board subsequently issued guidelines
that the Reserve Banks were to follow in providing credit to nonmember banks in the event that the new check-collection rules
resulted in a significant impairment of the liquidity of a nonmember
bank or in the impairment of the bank's ability to serve its
community.
The Board recognized that changes in the regulations, as now
adopted, and that early activation of plans for Systemwide Regional
Check Processing Centers could effectively lessen the investable
funds of some banks. Within the context of improving services, the
Board indicated that one of its highest priorities was to accelerate the
development of Regional Check Processing Centers.
In September 1972—prior to the dates on which the amendments
were scheduled to become applicable-—the effective dates of the
amendments to Regulations D and j were postponed because a
temporary restraining order by the U.S. District Court for the District
of Columbia had been issued on a petition filed by the Independent Bankers Association of America and the Western Independent
80
Bankers. Strict compliance with the court's order would have restrained implementation only as to a limited group of banks and only
with respect to Regulation J. However, in view of the adverse effect
on the payments mechanism if implementation of the Regulation J
proposals were fragmented, and considering the adverse impact on
monetary policy should the reserve requirement adjustment under
Regulation D be put into effect without the accompanying changes
in Regulation J, the Board postponed the effective dates of both
regulatory amendments pending judicial determination and subsequent Board action.
On October 19, 1972, the U.S. District Court for the District of
Columbia denied a motion for a preliminary injunction sought by the
plaintiffs on the ground that the plaintiffs had failed to carry the
burden of establishing (1) that they would be irreparably injured if
the amendments to Regulation J were put into effect and (2) that
they would be likely to succeed on the merits of the case after full
trial. This decision was consistent with the decision rendered on
October 10, 1972, by the U.S. District Court for the Central District
of California in an action brought by a group of California banks
seeking to enjoin full implementation of the Board's Regulation J;
the latter court decision on a motion for preliminary injunction was
based on these same grounds.
Following these court determinations, the Board decided that the
changes in Regulation J would take effect on November 9 and that
those in Regulation D would take effect in two steps beginning
on that date. The amendments to Regulation D that had been
scheduled to be effective for the period September 21-27, 1972,
would be effective for the period November 9-15, 1972, and the
amendments that had been scheduled to become effective on September 28, 1972, would become effective November 16, 1972.
JUNE 29, 1972
REGULATION Y, BANK HOLDING COMPANIES
The Board determined that property management services are not so
closely related to banking or managing or controlling banks as to be
permissible activities for bank holding companies under Section 4(c)(8)
of the Bank Holding Company Act, as amended.
81
Votes for this action: Messrs. Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None. Absent and not
voting: Mr. Burns.
In September 1971 the Board had published for comment a proposal to amend Regulation Y so as to permit bank holding companies
to perform property management services, which the Board defined
as encompassing farm management, the management of office buildings and other business or industrial properties, the management of
residences ranging from single-family dwellings to high-rise apartment buildings, and the management of the air rights above—or the
oil and mineral rights below—a particular parcel of land.
On the basis of the record of a hearing subsequently held and of
written comments received, the Board concluded that property
management services were not closely related to banking or managing or controlling banks; moreover, it was the Board's view that
possible benefits to the public from adoption of the proposal, such
as greater convenience, increased competition, or gains in efficiency,
were outweighed by possible adverse effects, such as unfair competition, conflicts of interests, and unsound banking practices.
Accordingly, the Board withdrew the September 14, 1971 proposal.
This action was not intended to limit the authority presently conferred by statute or regulation on bank holding companies and their
subsidiaries to engage in certain property management activities. The
Board specifically pointed out that bank holding companies and their
subsidiaries might continue to engage in property management
activities with respect to the following: (1) properties held in fiduciary capacity; (2) properties owned by the holding company or its
subsidiaries for conducting its own bank and bank-related operations;
and (3) properties acquired by the holding company or a subsidiary
as a result of a default on a loan.
JULY 12, 1972
AMENDMENTS TO MARGIN REGULATIONS
Effective September 18, 1972, the Board adopted amendments to
Regulation G, Securities Credit by Persons Other Than Banks, Brokers,
82
or Dealers, Regulation T, Credit by Brokers and Dealers, and Regulation
U, Credit by Banks for the Purpose of Purchasing or Carrying Margin
Stocks, designed to improve the quality of stock market credit.
Votes for this action: Messrs. Burns, Robertson,
Daane, Brimmer, Sheehan, and Bucher. Votes
against this action: None. Absent and not voting:
Mr. Mitchell.
Under the amendments, use of the "same-day substitution" rule
would be ended in accounts where the debt, adjusted as defined in
the regulations, was more than 60 per cent of the market value of
the stock collateral in the account. The same-day-substitution rule
permits customers, without regard to margin requirements, to substitute one security for another in their accounts through offsetting
purchases and sales made on the same day. The change was designed
to strengthen the equity position of low-margin accounts when offsetting sales and purchases of collateral were made on the same day.
The basic amendment had originally been published for comment
on April 28, 1972, and it was subsequently modified on the basis of
industry comment with respect to the manner of calculating the status
of margin accounts.
Regulation T was also amended to permit short sales of stock into
which bonds were convertible to be made in the special convertible
debt security account if the bonds were held in the account. This
technical amendment, which had been published for comment in July
1971 but had not been acted upon, was now adopted in light of
industry comment.
JULY 25, 1972
AMENDMENT TO REGULATION T, CREDIT BY BROKERS
AND DEALERS
Effective September 5, 1972, the Board amended Regulation T with
respect to credit for the combined acquisition of mutual fund shares and
insurance.
Votes for this action: Messrs. Burns, Robertson,
Daane, and Sheehan. Votes against this action:
None. Absent and not voting: Messrs. Mitchell,
Brimmer, and Bucher.
83
The amendment eliminated the requirement that in order to be
eligible for the provisions relating to "special insurance premium
funding account," which designation was changed from "special
equity funding account," a creditor must be the issuer, or a subsidiary
or affiliate of the issuer, of programs that combine the acquisition of
mutual fund shares and insurance. Also, the amendment clarified
that creditors who arrange credit for the acquisition of mutual fund
shares and insurance would be permitted to sell mutual fund shares
without insurance under the provisions of the section relating to
special cash accounts.
AUGUST 3, 1972
REGULATION Y, BANK HOLDING COMPANIES
The Board decided that at the present time, in the absence of further
congressional guidance, the operation of savings and loan associations
was not a permissible activity for bank holding companies.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Mr. Bucher.
In May 1971 the Board had implemented its regulatory authority
with respect to nonbanking activities of bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act by amending Regulation Y so as to list the activities initially found by the
Board to be so closely related to banking or managing or controlling
banks as to be permissible for bank holding companies. At that time
the Board had announced that the operation of a savings and loan
association was not included within the scope of authorized activities
for bank holding companies but that it was considering whether to
expand the list to include such activity.
In reaching its present decision not to include the operation of
savings and loan associations on its list of permissible activities, the
Board noted that Congress had created a statutory framework for
savings and loan associations that was separate from the statutes
governing commercial banks. Under these statutes, different rules had
been established for the two kinds of institutions on such matters as
84
branching, taxation, and ceilings on rates paid to attract savings.
A statute had also been enacted governing savings and loan holding
companies, separate and distinct from the Bank Holding Company
Act. This statutory pattern suggested past intent on the part of Congress to maintain savings and loan associations as specialized lenders
to finance housing, with specialized rules appropriate to that role. It
was the Board's view that acquisition of savings and loan associations
by bank holding companies could tend to blur this congressionally
established structure.
Proposals for affiliation of banks and savings and loan associations
in a holding company system involved broad questions of public
policy that, in the Board's opinion, should not be decided until Congress had had an opportunity to consider the matter. Suggestions for
changes in rules governing specialized thrift institutions had been
made by the President's Commission on Financial Structure and
Regulation (the "Hunt Commission") as well as by others. It was
expected that the next Congress would have occasion to consider
thoroughly relationships between banks and savings and loan associations.
The action now taken did not affect previous Board decisions permitting affiliations of thrift institutions and commercial banks in Rhode
Island, which decisions had been reached in light of the history of
affiliation of mutual thrift institutions and commercial banks in Rhode
Island as well as on the basis of a hearing held and comments received.
AUGUST 31, 1972
REGULATION Y, BANK HOLDING COMPANIES
The Board authorized the issuance of an interpretation of Regulation
Y to clarify the nature of insurance activities previously found to be so
closely related to banking or managing or controlling banks as to be
permissible for bank holding companies.
Votes for this action: Messrs. Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None. Absent and not
voting: Mr. Burns.
85
Effective September 1, 1971, the Board had amended Regulation Y
to specify certain types of insurance agency activities in which bank
holding companies might engage under the 1970 amendments to the
Bank Holding Company Act. In the course of administering this regulation, a number of questions had been raised concerning the scope
and terms of the Board's regulation, and the interpretation was now
issued to set forth some of the Board's views, as follows:
Insurance "for the holding company and its
subsidiaries"
The Board regards the sale of group insurance for the protection of
employees of the holding company as insurance for the holding company and its subsidiaries.
Insurance "directly related to an extension
bank or a bank'relaied
firm."
of credit by a
(1) This provision is designed to permit the sale, by a bank
holding company system, of insurance that supports the lending
transactions of a bank or bank-related firm in the holding company system. The Board regards the sale of insurance as directly
related to an extension of credit by a bank or bank-related firm where
(i) the insurance assures repayment of an extension of credit by the
holding company system in the event of death or disability of the
borrower (for example, credit life and credit accident and health
insurance); or (ii) the insurance protects collateral in which the bank
or bank-related firm has a security interest as a result of its extension
of credit; or (iii) the insurance is other insurance which is sold to
individual borrowers in conjunction with or as part of an insurance
package (as a matter of general practice) with insurance protecting
the collateral in which a bank or bank-related firm had a security
interest as a result of its extension of credit. Examples that fall within
(iii) above are: (a) liability insurance sold in conjunction with insurance relating to physical damage of an automobile when the purchase of such automobile is financed by a bank or bank-related firm;
and (b) a homeowner's insurance policy with respect to a residence
mortgaged to a bank or bank-related firm,
(2) Other types of insurance may be directly related to an extension of credit, A bank holding company applying to engage in the
sale of such other types should furnish information showing that such
insurance is so direct!v related.
(3) A renewal of insurance, after the credit extension has been
repaid, is regarded as closely related to banking only to the extent
that such renewal is permissible under Section 225.4 (a) (9) (ii) (c)
of Regulation Y.
(4) The Board generally regards insurance protecting collateral
where the security interest of a bank or bank-related firm was obtained by purchase rather than by a direct extension of credit by the
holding company system as not being directly related to an extension
of credit by a bank or bank-related firm. However, if such security
interests are purchased on a continuing basis from a firm or an individual and the interval between the creation of the security interest
and its subsequent purchase is minimal, the Board may regard such
purchase as an extension of credit. Full details of the transactions
should be provided to support a holding company's contention that
such insurance sales are directly related to an extension of credit.
Insurance "directly related to the provision of other financial
services by a bank or . . . bank-related firm." This provision is
designed to permit the sale by a bank holding company system of
insurance in connection with bank-related services (rendered by a
member of the holding company system) other than an extension
of credit. Among the types of insurance the Board regards as directly
related to such services are: (i) insurance against loss of securities
held for safekeeping; (ii) insurance for valuables in a safe deposit
box; (iii) life insurance equal to the difference between the maturity
value of a deposit plan for periodic deposits over a specified term
and the balance in the account at the time of the depositor's death;
(iv) in connection with mortgage loan servicing that is provided by
a bank or bank-related firm, insurance on the mortgaged property
and/or insurance on the mortgagor to the extent of the outstanding
balance of the credit extension, provided that the mortgagee is a
beneficiary under such types of insurance policies; and (v) insurance
directly related to the provision of trust services if the sale of such
insurance is permitted by the trust instruments and under State law.
Insurance that "is otherwise sold as a matter of convenience
to the purchaser, so long as the premium income from sales
within . . . subdivision, fiijfc) does not constitute a significant portion of the aggregate insurance premium income of the holding
company from insurance sold pursuant to . . . subdivision (it)."
87
(1) This provision is designed to permit the sale of insurance as
a matter of convenience to the purchaser. It is not designed to permit
entry into the general insurance agency business.
(2) The term "premium income" means gross commission income.
(3) The Board generally will regard premium income attributable
to "convenience" sales as not constituting a "significant portion" if
the income attributable to convenience sales is less than 5 per cent
of the aggregate insurance premium income of the holding company
system from insurance sold pursuant to Section 225.4(a) (9)(ii) of
Regulation Y.
SEPTEMBER 7, 1972
AMENDMENTS TO REGULATION T, CREDIT BY BROKERS
AND DEALERS, AND REGULATION U, CREDIT BY BANKS
FOR THE PURPOSE OF PURCHASING OR CARRYING
MARGIN STOCKS
Effective October 16, 1972, the Board amended Regulations T and U
so as to exempt from margin requirements certain credit extended to
so-called "block positioners" and "third-market makers" and to apply
new reporting requirements to exchange specialists.
Votes for this action: Messrs. Burns, Mitchell,
Brimmer, and Sheehan. Votes against this action:
None. Absent and not voting: Messrs. Robertson,
Daane, and Bucher.
The amendments exempted from margin requirements credit extended to block positioners and third-market makers. Block positioners are securities firms that stand ready to hold substantial
blocks of stock for their own account to facilitate the sale or purchase by their customers—primarily institutions—of quantities of
stock too large to be absorbed by normal exchange transactions.
Third-market makers are firms that make off-exchange markets in
stocks that are listed on exchanges.
88
The proposal had evolved over a period of time, and it reflected
conclusions reached in light of assessment of economic and financial
market conditions and of comments and suggestions made by representatives of the industry and by major exchanges on proposals
previously issued. The amendments now adopted were modified
slightly as to detail from the proposal published by the Board for
comment in May 1972.
Under the amendments, the minimum block of stock that could
qualify for the exemption from margin requirements must have a
market value of $200,000. A block would also cease to be eligible
for exemption credit if not sold by the block positioner within 20
business days, although limited extensions—no more than 5 days
each—could be allowed by the stock exchanges or the National Association of Securities Dealers. Exchange specialists would be required
to report transactions in blocks acquired on exempt credit.
The Board's amendments were adopted simultaneously with registration and reporting requirements imposed by the Securities and
Exchange Commission pertaining to the same subjects.
S E P T E M B E R 13, 1972
EXTENSION OF FEDERAL RESERVE BANK CREDIT TO NONMEMBER BANKS
The Board authorized the Federal Reserve Banks to extend credit to
nonmember commercial banks for the purpose of mitigating any possible hardships that might temporarily be placed on such banks by
implementation of the changes in Regulation J that were scheduled to
become effective on September 21, 1972.1
Votes for this action: Messrs. Burns, Robertson,
Daane, Sheehan, and Bucher. Vote against this
action: Mr. Brimmer. Absent and not voting: Mr.
Mitchell.
1
Implementation of the changes in Regulation J was delayed until Nov. 9,
1972, as noted on pp. 80 and 81.
89
The Board's authorization permitted the Reserve Banks to use
either direct loans to nonmember banks or conduit loans through
member banks. The Board indicated that the rate on a direct extension may not exceed the rate applicable to member banks under
Sections 13 and 13a of the Federal Reserve Act, the lowest lending
rate at any given Federal Reserve Bank, and that the rate to be paid
by nonmember banks on an indirect extension of credit may not
exceed the rate paid by the member bank plus a small additional
charge to reflect the member bank's administrative costs and assumption of risk on the loan.
Mr. Brimmer dissented with respect to the use of a rate equal to
the discount rate for credit under Sections 13 and 13a. He believed
that a penalty rate should be established for both direct and conduit
loans on the ground that any nonmember bank that used Federal
Reserve credit should pay a higher rate than a member bank.
On September 18 the Board published guidelines for use by the
Federal Reserve Banks in providing credit to nonmember banks in
any instances where the changes in Regulation J resulted in a
significant impairment of the liquidity of such banks or of their ability
to serve their communities.
O C T O B E R 26, 1972
AMENDMENT TO RULES REGARDING DELEGATION OF
AUTHORITY
Effective with respect to applications received after October 30, 1972,
the Board amended its Rules Regarding Delegation of Authority to incorporate revised guidelines for use of the Federal Reserve Banks acting
under delegated authority in processing applications to form one-bank
holding companies.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None.
In August 1971 the Board had delegated to the Reserve Banks
authority to approve applications for the formation of one-bank
holding companies while retaining exclusive authority to deny such
applications. At that time the Board had established standards to
be used as guidelines by the Reserve Banks in approving applications
90
under delegated authority. (Applications that did not meet those
standards were to be forwarded to the Board for action.) The procedure had been designed to expedite the handling of applications
to form one-bank holding companies.
Subsequently, various comments had been received to the effect
that the guidelines were being applied in a manner more restrictive
than was desirable and that the guidelines were having an unduly
adverse effect upon the transferability of bank stock. On the basis
of a public oral presentation before members of the Board and
in light of other comments received, the Board issued revised guidelines and incorporated them into the Board's Rules Regarding Delegation of Authority. The guidelines covered such matters as the debt
incurred by a holding company to acquire a bank and the requirement that an equal offer be made to all shareholders of a bank.
O C T O B E R 31, 1972
AMENDMENT TO REGULATION Z, TRUTH IN LENDING
Effective November 6, 1972, the Board amended Supplement III to
Regulation Z so as to exempt certain credit transactions in Wyoming
from the disclosure and rescission provisions of the Federal Truth in
Lending Act.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None.
Section 123 of the Truth in Lending Act provides that the Board
shall exempt from the disclosure and rescission requirements of the
Act any class of transactions within a State if the State law provides
requirements substantially similar to those imposed by the Federal
law and there is adequate provision for enforcement.
Inasmuch as the State of Wyoming had met these criteria, the
Board granted that State an exemption from the Act applicable
to all classes of credit transactions in the State except: transactions
in which a Federally chartered institution is a creditor; consumer
credit sales of insurance by an insurer in which the insurer is the
creditor; consumer loan transactions in which a licensed pawnbroker
is a creditor; and transactions in which a common carrier is a
91
creditor. The Board earlier had granted similar exemptions from the
Federal Act to Maine, Massachusetts, Oklahoma, and Connecticut.
NOVEMBER 2, 1972
AMENDMENTS TO REGULATION Z, TRUTH IN LENDING
Effective December 15, 1972, the Board adopted clarifying amendments to Regulation Z with regard to liability for unauthorized use of all
credit cards. Effective June 1, 1973, the Board also amended Regulation
Z with respect to disclosure requirements on billing statements.
Votes for this action: Messrs. Burns, Robertson,
Brimmer, Sheehan, and Bucher. Votes against this
action: None. Absent and not voting: Messrs.
Mitchell and Daane.
Considerable uncertainty had prevailed in the credit-card field as
to whether exemptions in the Truth in Lending Act and Regulation
Z for extensions of credit for business or commercial purposes applied
to restrictions on the unsolicited issuance of credit cards and to the
limits on liability for their unauthorized use. The purpose of the
amendments to become effective December 15 was to make clear that
all credit cards—whether used for personal, family, household, agricultural, business, or commercial purposes—were covered by the
maximum liability limit of $50 for unauthorized use and that they
could be issued only upon the request of a prospective cardholder.
These amendments do not affect the business exemption in its application to the disclosure, rescission, and advertising requirements.
The validity of these amendments has been challenged in a suit
against the Board that was filed on December 14, 1972, in the
U.S. District Court for the District of Columbia.
The technical amendments that are to become effective June 1,
1973, provide that: (1) disclosure of a nominal annual percentage
rate on billing statements in open-end credit accounts will be required
even though no finance charges are imposed during the billing cycle
(many creditors have been making this disclosure, although previously
not required under the regulation); (2) disclosure of minimum finance
charges on billing statements will be required; and (3) two earlier
92
interpretations dealing with computation of the annual percentage
rate and disclosure of the balance on which it is computed will be
incorporated into the regulation. The effective date of June 1, 1973,
will allow time for those lenders and businesses that are affected by
the amendments to reprint disclosure statements and to change their
computer programming, if necessary, to take account of the changes
in the regulation.
The amendments had previously been published for public comment and certain technical adjustments had been made on the basis
of comments received.
The Board also issued an interpretation detailing the application
of the regulation to open-end credit plans with variable-rate features.
N O V E M B E R 7, 1972
AMENDMENTS TO FOREIGN CREDIT RESTRAINT PROGRAM
GUIDELINES
Effective immediately, the Board adopted clarifying amendments to
the guidelines covering foreign credits and investments by U.S. banks
and U.S. nonbank financial institutions.
Votes for this action: Messrs. Burns, Robertson,
Brimmer, Sheehan, and Bucher. Votes against this
action: None. Absent and not voting: Messrs.
Mitchell and Daane.
The amendments now adopted were essentially administrative in
nature and were designed to be neutral with respect to capital outflows
authorized under the voluntary foreign credit restraint program guidelines. The revisions did not affect the foreign lending and investment
ceilings of banks and other financial institutions. One amendment extended to nonbank domestic subsidiaries of bank holding companies
treatment already afforded to domestic subsidiaries of Edge Act corporations with regard to offsetting foreign assets by foreign borrowings. In amending the provision, the Board recognized that some
banks now utilized domestic subsidiaries of their holding companies
to make foreign investments in the same manner as banks had been
using domestic subsidiaries of Edge Act corporations.
93
Other amendments incorporated into the foreign credit restraint
program guidelines several technical and clarifying interpretations
made by the Board since the November 1971 revision of the guidelines.
NOVEMBER 22, 1972
AMENDMENTS TO MARGIN REGULATIONS
Effective November 24, 1972, the Board increased the margin requirements from 55 per cent to 65 per cent for credit extended by brokers,
dealers, banks, and other lenders to finance the purchase or carrying of
stock and also increased the required deposit on short sales from 55 per
cent to 65 per cent. In making the increases, the Board amended the
Supplements to Regulation G, Securities Credit by Persons Other Than
Banks, Brokers, or Dealers; Regulation T, Credit by Brokers and Dealers; and Regulation U, Credit by Banks for the Purpose of Purchasing
or Carrying Margin Stocks. No changes were made in the 50 per cent
margin requirements applicable to loans made for purchasing or carrying convertible bonds or in the 70 per cent retention requirement applicable to undermargined accounts. The latter requirement specifies the
portion of the proceeds of a sale of securities that must be retained in a
margin account if the equity in that account does not meet the margin
requirements.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Sheehan, and Bucher. Vote
against this action: Mr. Brimmer.
The action covered new extensions of credit by brokers and dealers
(Regulation T) and credits by banks and other lenders (Regulations
U and G, respectively) for the purpose of purchasing or carrying
securities registered on a national stock exchange or named in the
Board's over-the-counter margin list. The change in margin requirements was the first since December 6, 1971, when they were reduced
from 65 to 55 per cent.
In making the change, the Board acted under the authority granted
in the Securities Exchange Act of 1934 to prevent excessive use of
credit to finance securities transactions. The Board noted that margin
debt had increased sharply over the past year. Such debt at brokers
and dealers had risen about $3 billion since November 1971, and the
94
amount outstanding at the end of October was $7.8 billion, a record
level. At banks also, loans for the purpose of purchasing or carrying
margin securities had increased by a relatively large amount since
November 1971.
The Board also npted that recent behavior of the stock market
suggested that margin credit, following a leveling off in late summer,
was again in process of expanding and that further rapid increases in
such credit could stimulate inflationary expectations.
Governor Brimmer dissented because he believed that the statistics
actually available did not show any significant increase in stock market credit in recent months and thus did not justify an increase in
margin requirements at this time. Instead, he would have preferred
to wait for the figures on margin credit due in mid-December. In his
opinion, changes in margin requirements should not be geared to the
behavior of stock prices, but to the actual use of stock market credit
to purchase or carry securities.
D E C E M B E R 1, 1972
AMENDMENT TO FOREIGN CREDIT RESTRAINT PROGRAM
GUIDELINES
Effective immediately, the Board amended the voluntary foreign credit
restraint program guidelines to exempt from the ceilings foreign assets
acquired in connection with settlement of claims under insurance and
guarantees of the U.S. Overseas Private Investment Corporation.
Votes for this action: Messrs. Burns, Robertson,
Daane, Brimmer, Sheehan, and Bucher. Votes
against this action: None. Absent and not voting:
Mr. Mitchell.
Prior to the adoption of this amendment, purchases of foreign
assets acquired in the manner described above by U.S. banks and
other U.S. financial institutions would have been subject to guideline
ceilings, even though no new capital outflow would have resulted.
Since the principal focus of the voluntary foreign credit restraint program was on measures that would reduce the outflow of U.S. capital,
no useful purpose would have been served by continuing to subject
such purchases to the guideline ceilings.
95
D E C E M B E R 11, 1972
AMENDMENT TO REGULATION Y, BANK HOLDING
COMPANIES
Effective December 11, 1972, the Board amended Regulation Y to
permit bank holding companies to engage in underwriting credit life and
credit accident and health insurance that is directly related to extensions
of credit by a bank holding company system.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Sheehan, and Bucher. Votes against this
action: None. Absent and not voting: Messrs.
Daane and Brimmer.
Certain types of insurance business were among the 10 activities
originally proposed by the Board as closely related to banking when
it announced plans in January 1971 to amend Regulation Y as a first
step toward implementing the 1970 amendments to the Bank Holding
Company Act. Following a hearing and in light of comments received,
in August 1971 the Board had approved an amendment to Regulation Y outlining certain types of insurance agency activities that it
found to be closely related to banking and consequently permissible.
The Board had also considered but had decided not to adopt at that
time a general regulatory provision as to whether insurance underwriting activities are closely related to banking.
The amendment now adopted followed consideration by the Board
of the record of a hearing in March 1972 on the subject of credit
insurance underwriting and of comments received with respect to the
hearing, together with the Board's prior experience in the field of
bank holding company insurance activities. To assure that engaging
in the underwriting of credit life and credit accident and health insurance can reasonably be expected to be in the public interest, the
Board indicated that it would approve only those applications in
which an applicant demonstrated that approval would benefit the
consumer or result in other public benefits. Normally such a showing
would be made by a projected reduction in rates or an increase in
policy benefits because of bank holding company performance of this
service.
Under the amendment the operation of a credit life and credit
accident and health insurance program, including the underwriting of
such insurance directly related to extensions of credit by a bank
96
holding company system, was determined to be closely related to
banking. The Board was of the view that operation of such a program not only would provide the borrower with financial security
in the event of death or disability but also would assure a bank or
bank-related firm of repayment of a credit extension.
In reaching this conclusion, the Board also took into consideration
the legislative history of the Bank Holding Company Act, which indicated that Congress felt that the operation of a credit life and credit
accident and health insurance program was closely related to banking.
FOR T H E YEAR 1972
DISAPPROVALS OF RESERVE BANK ACTIONS
TO CHANGE DISCOUNT RATE
The discount rate remained unchanged throughout 1972 at AV2
per cent, the level established on December 10, 1971. Key short-term
interest rates fell somewhat below the discount rate early in 1972,
but by the latter part of the year such rates had risen above the discount rate as vigorous expansion in economic activity and associated
demands in credit markets led to increasing pressures in the money
market. Over the course of the year, the Board disapproved several
actions taken by the directors of a number of Federal Reserve Banks
to change the discount rate, including actions to lower it during the
January-March quarter and to raise it during the September-December period. Late in the year the Board became increasingly convinced
that the trend of interest rate developments might soon require a
higher discount rate, and a few days after the turn of the year—on
January 12, 1973—it approved an increase of V2 percentage point
to 5 per cent at all of the Reserve Banks. The increase brought the
discount rate into better alignment with prevailing short-term market
rates.
The general economic and financial conditions that the Board considered in arriving at its discount rate decisions during the year are
reviewed elsewhere in this ANNUAL REPORT, particularly in the dis-
97
cusslon of the U.S. economy contained in Part I and in the policy
record of the Federal Open Market Committee In Part I I
During the January-March period, proposals were received from
a number of Federal Reserve Banks to lower the discount rate to
4 or 414 per cent. The Board's disapprovals were based in large part
on a view that the proposed reductions might foster misleading expectations at home and abroad regarding the future course of monetary
policy.
During the last 4 months of the year, the Board disapproved a
series of actions taken by the directors of several Federal Reserve
Banks to raise the discount rate to 4% or 5 per cent. While the immediate circumstances surrounding the successive disapprovals and
the speciic reasons for them varied, throughout this 4-month period
the Board was concerned that an increase in the discount rate—unless
clearly called for to keep that rate aligned with short-term market
rates-—might mislead the public with regard to the general thrust
of monetary policy and precipitate a substantial and unwanted increase in market rates of interest.
In particular, concern was expressed that Phase II of the economic
stabilization program might tend to be undermined if the Federal
Reserve took an action that was followed by an upward movement
in a wide range of interest rates, including quite possibly some institutional lending rates. While institutional lending rates on consumer
loans and home mortgages might not be directly affected, it was felt
that the rates charged by large banks to prime business customers
would be especially sensitive to an increase in the discount rate under
prevailing conditions, Various other factors™—including the moderate
growth of bank reserves and of the monetary aggregates during most
of the period and the timing of Treasury financing operations—were
also seen as weighing against the proposed increases in the discount
rate during the period.
Late in the year the growing evidence of vigorous expansion in
economic activity, the rise in short-term interest rates, and the renewed, rapid growth in the monetary aggregates led the Board to
conclude that a higher discount rate might well be needed in the relatively near future. However, in their decision on December 18 to disapprove several proposed increases, a majority of the Board mem-
98
hers still thought that prevailing uncertainties in financial markets and
the imminence of important Treasury financing operations made it
advisable to postpone an increase in the rale. When the increase to
5 per cent was approved on January 12, 1973, the substantial advances that had occurred earlier in short-term market interest rates
indicated that the change in the discount rate clearly lagged, and was
precipitated by, the market adjustments.
Individual members dissented from some of the Board's disapprovals of proposed increases in the discount rate during the last 4 months
of 1972. fii their judgment, particular proposed increases were warranted by current and prospective economic and financial conditions
•—and also by the rise that was taking place in member bank borrowings and by the desirability of keeping the discount rate in close alignment with short-term market rates. They also felt that an increase in
the rate would have a beneficial impact on public psychology by
focusing attention on the System's determination to resist inflationary
pressures in the economy. In their view, a higher discount rate would
be consistent with the thrust of the System's over-all monetary policy
and would not be likely, under prevailing circumstances, to have any
significant or lasting impact on market interest rates,
In proposing changes in the discount rate during the course of
1972. the directors of individual Federal Reserve Banks took note
of current and prospective economic and financial developments and
indicated a desire to maintain the discount rate in relatively close
alignment with short-term market interest rates. "The directors suggested that small and fairly prompt adjustments in the discount rate
would avoid the need for sizable and potentially disruptive changes
and would have the advantage of facilitating the administration of
the discount window at the Federal Reserve Banks. As the year progressed, many directors felt that an increase in the discount rate
would also serve a useful purpose in signaling the System's determination to avoid an overly expansionary monetary policy.
The individual Board decisions and the votes taken were as follows:
99
Disapproval of Discount Rate Reductions
JANUARY 31, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of St. Louis on January 27 establishing a discount rate of
4 per cent (a decrease from AVi per cent).
Votes for this action: Messrs. Burns, Robertson,
Daane, Maisel, and Sheehan. Votes against this
action: None. Absent and not voting: Messrs.
Mitchell and Brimmer.
FEBRUARY 18, 1972
The Board disapproved actions taken by the directors of the Federal
Reserve Banks of St. Louis and Kansas City on February 10 and 17,
respectively, to reduce the discount rate to 4 per cent, and by the directors of the Federal Reserve Bank of Philadelphia on February 17 to
lower the rate to AVA per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Mr. Maisel.
FEBRUARY 25, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of St. Louis on February 24 to reduce the discount rate
to 4 per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Mr. Maisel.
MARCH 9, 1972
The Board disapproved actions taken by the directors of the Federal
Reserve Banks of Kansas City and St. Louis on March 2 and 9, respectively, to lower the discount rate to 4 per cent.
100
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, and Sheehan. Votes
against this action: None. Absent and not voting:
Mr. Maisel.
Disapproval of Discount Rate Increases
SEPTEMBER 1, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of Kansas City on August 31 to raise the discount rate to
43A per cent.
Votes for this action: Messrs. Robertson,
Mitchell, Daane, Sheehan, and Bucher. Vote
against this action: Mr. Brimmer. Absent and not
voting: Mr. Burns.
SEPTEMBER 5, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of Boston on the same date to raise the discount rate to
43A per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Brimmer, Sheehan, and Bucher. Votes
against this action: None. Absent and not voting:
Mr. Daane.
SEPTEMBER 29, 1972
The Board disapproved actions taken by the directors of the Federal
Reserve Bank of Boston on September 18, of the Federal Reserve Banks
of New York, Philadelphia, and Kansas City on September 21, and of the
Federal Reserve Bank of Chicago on September 28 to increase the discount rate to 43A per cent.
Votes for this action: Messrs. Burns, Mitchell,
Daane, Sheehan, and Bucher. Vote against this
action: Mr. Brimmer. Absent and not voting: Mr.
Robertson.
101
OCTOBER 3, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of Boston on October 2 to raise the discount rate to 43A
per cent.
Votes for this action: Messrs. Burns, Mitchell,
Daane, and Sheehan. Vote against this action:
Mr. Brimmer. Absent and not voting: Messrs. Robertson and Bucher.
OCTOBER 10, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of New York on October 5 to increase the discount rate
to 43A per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Sheehan, and Bucher. Votes against this
action: None. Absent and not voting: Messrs.
Daane and Brimmer.
OCTOBER 16, 1972
The Board disapproved actions taken by the directors of the Federal
Reserve Banks of Dallas and Boston on October 12 and 16, respectively,
to raise the discount rate to 43A per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, and Bucher. Vote against this
action: Mr. Brimmer. Absent and not voting: Mr.
Sheehan.
NOVEMBER 20, 1972
The Board disapproved an action taken by the directors of the Federal
Reserve Bank of Kansas City on November 16 to increase the discount
rate to 43A per cent.
Votes for this action: Messrs. Burns, Robertson,
Mitchell, Daane, Brimmer, Sheehan, and Bucher.
Votes against this action: None.
102
DECEMBER 18, 1972
The Board disapproved actions taken on December 14 by the directors
of the Federal Reserve Banks of Richmond and Chicago to increase the
discount rate to 43A per cent and by the directors of the Federal Reserve
Bank of St. Louis to raise the rate to 5 per cent.
Votes for this action: Messrs. Burns, Mitchell,
Daane, and Bucher. Votes against this action:
Messrs. Robertson and Brimmer. Absent and not
voting: Mr. Sheehan.
The result of the Board's actions was to continue in effect the
rates on discounts and advances contained in the existing rate schedules of the Federal Reserve Banks, which had been established in
December 1971.
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Record of Policy Actions of the
Federal Open Market
Committee
The record of policy actions of the Federal Open Market Committee
is presented in the ANNUAL REPORT of the Board of Governors pursuant to the requirements of Section 10 of the Federal Reserve Act.
That section provides that the Board shall keep a complete record
of the actions taken by the Board and by the Federal Open Market
Committee on all questions of policy relating to open market operations, that it shall record therein the votes taken in connection with
the determination of open market policies and the reasons underlying each such action, and that it shall include in its ANNUAL REPORT
to the Congress a full account of such actions.
In the pages that follow, there are entries with respect to the policy
actions taken at the meetings of the Federal Open Market Committee
held during the calendar year 1972, including the votes on the policy
decisions made at those meetings as well as a resume of the basis for
the decisions. The summary descriptions of economic and financial
conditions are based on the information that was available to the
Committee at the time of the meetings, rather than on data as they
may have been revised later.
It will be noted from the record of policy actions that in some
cases the decisions were by unanimous vote and that in other cases
dissents were recorded. The fact that a decision in favor of a general
policy was by a large majority, or even that it was by unanimous vote,
does not necessarily mean that all members of the Committee were
equally agreed as to the reasons for the particular decision or as to
the precise operations in the open market that were called for to
implement the general policy.
Under the Committee's rules relating to the availability of information to the public, the policy record for each meeting is released approximately 90 days following the date of the meeting and is subsequently published in the Federal Reserve Bulletin as well as in the
Board's ANNUAL REPORT.
105
Policy directives of the Federal Open Market Committee are issued
to the Federal Reserve Bank of New York as the Bank selected by
the Committee to execute transactions for the System Open Market
Account. In the area of domestic open market activities the Federal
Reserve Bank of New York operates under two separate directives
from the Open Market Committee—a continuing authority directive
and a current economic policy directive. In the foreign currency area
It operates under an authorization for System foreign currency operations and a foreign currency directive. These four Instruments are
shown below in the form in which they were in effect at the beginning of 1972. No revisions were made in the foreign currency instruments during the year; changes in the other Instruments are shown
In the records for the individual meetings.
CONTINUING AUTHORITY DIRECTIVE WITH RESPECT TO
DOMESTIC OPEN MARKET OPERATIONS
(in effect January 1, 1972)1
1. The Federal Open. Market Committee authorizes and directs the
Federal Reserve Bank of New York, to Che extent necessary to carry out
the most recent current economic policy directive adopted at a meeting
of the Committee:
(a) To buy or sell U.S. Government securities and securities that
are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States in the open market, from
or to securities dealers and foreign and international accounts maintained at the Federal Reserve Bank of New York, on a cash, regular,
or deferred delivery basis, for the System Open Market Account at
market prices and, for such Account, to exchange maturing U.S. Government and Federal agency securities with the Treasury or the individual agencies or to allow them to mature without 'replacement;
provided that the aggregate amount of U.S. Government and Federal
agency securities held in such Account at the close of business on the
day of a meeting of the Committee at which action is taken with re1
O n Jan. 1, 1972, the lower limit on interest rates on repurchase agreements arranged by the Federal Reserve Bank of New York, specified in paragraph l(c) of
this directive, was temporarily in a state of suspension pursuant to an action taken
by the Committee on Dec. 23, 1971. See policy record for meeting held on Jan, 12,
1972, section headed "Ratification of earlier actions."
106
spec! to a current economic policy directive shall not be Increased or
decreased by more than $2.0 billion during the period commencing
with the opening of business on the day following such meeting and
ending with the close of business on the day of the next such meeting;
(b) To buy or sell prime bunkers' acceptances of the kinds designated in the Regulation of the Federal Open Market Committee in the
open market, from or to acceptance dealers and foreign accounts maintained at the Federal Reserve Bank of New York, on a cash, regular,
or deferred delivery basis, for the account of the Federal Reserve Bank
of New York at market discount rates: provided that the aggregate
amount of bankers* acceptances held at any otic time shall not exceed
(1) $125 million or (2) 10 per cent of the total of bunkers* acceptances outstanding as shown in the most recent acceptance survey conducted by the Federal Reserve Bank of New York, whichever is the
lower;
(c) To buy U.S. Government securities, obligations that are direct
obligations of, or fully guaranteed as to principal and interest by, any
agency of the United States, and prime bankers1 acceptances with
maturities of 6 months or less at the time of purchase, from nonbank
dealers for the account of the Federal Reserve Bank of New York
under agreements for repurchase of such securities, obligations, or
acceptances in 15 calendar days or less, at rates not less than {! ) the
discount rate of the Federal Reserve Bank of New York at the time
such agreement is entered into, or 12) the average issuing rate on the
most recent issue of 3-month Treasury bili», whichever is the lower,
provided that in the event Government .securities or agency issues
covered by any such agreement are not repurchased by the dealer pursuant to the agreement or a renewal thereof, they shall be sold in the
market or transferred to the System Open Market Account; and provided further that in the event bankers' acceptances covered by any
such agreement are not repurchased by the seller, they shall continue to
be held by the Federal Reserve Bank or shall be sold in the open
market.
2. The Federal Open Market Committee authorizes and directs the
Federal Reserve Batik of New York, or, if the New York Reserve Bank
is closed, any other Federal Reserve Bank, io purchase directly from the
Treasury for its own account (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks)
such amounts of special short-term certificates of indebtedness as may be
necessary from time to time for the temporary accommodation of the
Treasury; provided that the rate charged on such certificates shall be a
107
rate VA of 1 per cent below the discount rate of the Federal Reserve
Bank of New York at the time of such purchases, and provided further
that the total amount of such certificates held at any one time by the
Federal Reserve Banks shall not exceed $1 billion,
3, In order to insure the effective conduct of open market operations,
the Federal Open Market Committee authorizes and directs the Federal
Reserve Batiks to lend U.S. Government securities held in the System
Open Market Account to Government securities dealers and to banks
participating In Government securities clearing arrangements conducted
through a Federal Reserve Bank, under such instructions as the Committee may specify from time to time.
CURRENT ECONOMIC POLICY DIRECTIVE
(In effect January 1, 1972)
The information reviewed at this meeting suggests that real output of
goods and services is increasing more rapidly in the current quarter than
it had in the third quarter, but the unemployment rate remains high.
Increases in prices and wages were effectively limited by the 90-day
freeze, which ended in mid-November. Since then some wage and price
increases have occurred, but other increases requested have been cut
back or not approved by the Pay Board and the Price Commission. The
narrowly defined money stock changed little in November and has not
grown on balance since August. Inflows of consumer-type time and
savings deposits to banks remained rapid in November and the broadly
defined money stock continued to increase moderately. Expansion in the
bank credit proxy stepped up as U.S. Government deposits and nondeposit liabilities increased on average. After advancing in the latter part
of November, most market interest rates have been declining recently, and
discount rates at four Federal Reserve Banks were reduced by an additional one-quarter of a percentage point. The U.S. foreign trade balance
was heavily in deficit in October, In recent weeks net outflows of shortterm capital apparently have been substantial, market exchange rates
for foreign currencies against the dollar on average have risen further,
and official reserve holdings of some countries have Increased considerably. In light of the foregoing developments, it is the policy of the Federal Open Market Committee to footer financial conditions consistent with
the aims of the new governmental program, including sustainable real
economic growth and increased employment, abatement of inflationary
pressores, and attainment of reasonable equilibrium in the country's balance of payments.
108
To implement this policy, the Committee seeks to promote the degree
of case in bank reserve and money market conditions essential to greater
growth in monetary aggregates over the months ahead, while faking account of international developments.
AUTHORIZATION FOR SYSTEM FOREIGN
CURRENCY OPERATIONS
'in effect January 1, 1972)
1. The Federal Open Market Committee authorizes and directs the
Federal Reserve Bank of New York, for Sxstetn Open Market Account,
to the extent necessary to carry out the Committee's foreign currency
directive and express authorizations by the Committee pursuant thereto:
A. To purchase and sell the following foreign currencies in the form
of cable transfers through spot or forward transactions on the open
market at home and abroad, including transactions with the U.S. Stabilization Fund established by Section 10 of the Gold Reserve Act of 1934,
with foreign monetary authorities, and with the Bank for International
Settlements:
Austrian schillings
Belgian francs
Canadian dollars
Danish kroner
Pounds sterling
French francs
German marks
Italian lire
Japanese yen
Mexican pesos
Netherlands guilders
Norwegian kroner
Swedish kronor
Sw iss francs
B. To hold foreign currencies listed in paragraph A above, up to Hie
following limits:
( 1 ) Currencies purchased spot, including currencies purchased
from the Stabilization Fund, and sold forward to the Stabilization Fund,
up to $1 billion equivalent:
(2) Currencies purchased spot or forward, up to the amounts
necessary to fulfill other forward commitments:
109
(3) Additional currencies purchased spot or forward, up to the
amount necessary for System operations to exert a market influence but
not exceeding S250 million equivalent; and
(4) Sterling purchased on a covered or guaranteed basis in terms
of the dollar, under agreement with the Bank of England, up to $200
million equivalent
C. To have outstanding forward commitments undertaken under
paragraph A above to deliver foreign currencies, up to the following
limits:
(1 ) Commitments to deliver foreign currencies to the Stabilization Fund, op to the limit specified in paragraph 1B(1) above; and
(2) Other forward commitments to deliver foreign currencies,
up to $550 million equivalent.
D. To draw foreign currencies and to permit foreign banks to draw
dollars under the reciprocal currency arrangements listed in paragraph
2 below, provided that drawings by cither party to any such arrangement
shall be fully liquidated within 12 months after any amount outstanding
at that time was first drawn, unless the Committee, because of exceptional circumstances, specifically authorizes a delay.
2. The Federal Open Market Committee directs the Federal Reserve
Bank of New York to maintain reciprocal currency arrangements
("swap"' arrangements) for System Open Market Account for periods up
to a maximum of 12 months with the following foreign banks, which
are among those designated by the Board of Governors of the Federal
Reserve System under Section 214.5 of Regulation N. Relations with
Foreign Banks and Bankers, and with the approval of the Committee to
renew such arrangements on maturity:
Amount of
^
arrangement
Foreign bank
(milljons of
dollars equivalent)
Austrian National Bank
200
National Bank of Belgium
600
Bank of Canada
1,000
National Bank of Denmark
200
Bank of England
25000
Bank of France
1,000
German Federal Bank
1,000
Bank of Italy
1,250
Bank of Japan
1,000
Bank of Mexico
130
110
Foreign bank
Netherlands Bank
Bank of Norway
Bank of Sweden
Swiss National Bank
Bank for International Settlements:
Dollars against Swiss francs
Dollars against authorized European
currencies other than Swiss francs
Amount of
arrangement
(millions of
dollars equivalent)
300
200
250
1,000
600
1,000
3. Currencies to be used for liquidation of System swap commitments
may be purchased from the foreign central bank drawn on, at the same
exchange rate as that empkned in the drawing to be liquidated. Apart
from any such purchases at the rate of the drawing, all transactions in
foreign currencies undertaken under paragraph I (A) above shall, unless
otherwise expressly authorized by the Committee, be at prevailing market
rates and no attempt shall be made to establish rates that appear to be
out of line with underlying market forces.
4. It shall be the practice to arrange with foreign central banks for
the coordination of foreign "currency transactions. In making operating
arrangements with foreign central banks on System holdings of foreign
currencies, the Federal Reserve Bank of New York shall not commit
itself to maintain any specific balance, unless authorized by the Federal
Open Market Committee. Any agreements or understandings concerning
the administration of the accounts maintained by the Federal Reserve
Bank of New York with the foreign banks designated by the Board of
Governors under Section 214.5 of Regulation N shall be referred for
review and approval to the Committee,
5. Foreign currency holdings shall be invested insofar as practicable,
considering needs for minimum working balances. Such investments shall
be in accordance with Section 14(e) of the Federal Reserve Act,
6. A Subcommittee consisting of the Chairman and the Vice Chairman
of the Committee and the Vice Chairman of the Board of Governors
lor in the absence of the Chairman or of the Vice Chairman of the
Board of Governors the members of the Board designated by the Chairman as alternates, and in the absence of the Vice Chairman of the Committee his alternate) is authorized to act on behalf of the Committee
when it Is necessary to enable the Federal Reserve Bank of New York
111
to engage in foreign currency operations before the Committee can be
consulted. All actions taken by the Subcommittee under this paragraph
shall be reported promptly to the Committee.
7. The Chairman (and in his absence the Vice Chairman of the Committee, and in the absence of both, the Vice Chairman of the Board of
Governors) is authorized:
A. With the approval of the Committee, to enter into any needed
agreement or understanding with the Secretary of the Treasury about the
division of responsibility for foreign currency operations between the
System and the Secretary;
B. To keep the Secretary of the Treasury fully advised concerning
System foreign currency operations, and to consult with the Secretary on
such policy matters as may relate to the Secretary's responsibilities; and
C. From time to time, to transmit appropriate reports and information to the National Advisory Council on International Monetary and
Financial Policies.
8. Staff officers of the Committee are authorized to transmit pertinent
information on System foreign currency operations to appropriate officials of the Treasury Department.
9. All Federal Reserve Banks shall participate in the foreign currency
operations for System Account in accordance with paragraph 3 G O ) of
the Board of Governors' Statement of Procedure with Respect to Foreign
Relationships of Federal Reserve Banks dated January 1, 1944.
10. The Special Manager of the System Open Market Account for
foreign currency operations shall keep the Committee informed on conditions in foreign exchange markets and on transactions he has made and
shall render such reports as the Committee may specify.
FOREIGN CURRENCY DIRECTIVE
(in effect January 1, 1972)
1. The basic purposes of System operations in foreign currencies are:
A. To help safeguard {'he value of the dollar in international exchange markets;
B. To aid in making the system of international payments more
efficient;
C. To further monetary cooperation with central banks of other
countries having convertible currencies, with the International Monetary
Fund, and with other international payments institutions;
D. To help insure that market movements in exchange rates, within
the limits stated in the International Monetary Fund Agreement or estab-
112
lished by central bank practices, reflect the interaction, of underlying
economic forces and thus serve as efficient guides to current financial
decisions, private and public; and
E. To facilitate growth In international liquidity in accordance with
the needs of an expanding world economy.
2. Unless otherwise expressly authorized by the Federal Open Market
Committee, System operations in foreign, currencies shall be undertaken
only when necessary:
A. To cushion or moderate fluctuations in the flows of international
payments, if such fluctuations (1) are deemed to reflect transitional
market unsettlement or other temporary forces and therefore are expected to be reversed in the foreseeable future; and (2) are deemed to be
disequilibrating or otherwise to have potentially destabilizing effects OE
U.S. or foreign official reserves or on exchange markets, for example, by
occasioning market anx.iet.ies, undesirable speculative activity, or excessive leads and lags in international, payments;
B. To temper and smooth out abrupt changes in spot exchange
rates, and to moderate forward premiums and discounts judged to be
disequilibrating. Whenever supply or demand persists in influencing exchange rates in one direction, System transactions should be modiied or
curtailed unless upon review and reassessment of the situation the Committee directs otherwise;
C. To aid in avoiding disorderly conditions in exchange markets.
Special factors that might make for exchange market instabilities include
(1) responses to short-ran increases in international political tension, (2)
differences in phasing of international economic activity that give rise to
unusually large interest rate differentials between major markets, and
(3) market rumors of a character likely to stimulate speculative transactions. Whenever exchange market instability threatens to produce disorderly conditions, System transactions may be undertaken, if the Special
Manager reaches a judgment that they may help to reestablish, supply and
demand balance at a level more consistent with the prevailing flow of
underlying payments. In such cases, the Special Manager shall consult
as soon as practicable with the Committee or, in. an emergency, with the
members of the Subcommittee designated for that purpose in paragraph
6 of the Authorization for System foreign currency operations; and
D. To adjust System, balances within the limits established in the
Authorization for System, foreign, currency operations in light of probable
fu.tu.re needs for currencies.
3. System drawings under the swap arrangements are appropriate when
113
necessary to obtain foreign currencies for the purposes stated in paragraph 2 above.
4. Unless otherwise expressly authorized by the Committee, transactions in forward exchange, cither outright or in conjunction with spot
transactions, may be undertaken only (i) to prevent forward premiums
or discounts from giving rise to diseijiiilibrating movements of short-term
funds; (ii) to minimize speculative disturbances; (iii) to supplement existing market supplies of forward cover, directly or indirect!)', as a means
of encouraging the retention or accumulation of dollar holdings by private foreign holders: (iv) to allow greater flexibility in covering System
or Treasury commitments, including commitments under swap arrangements, and to facilitate operations o( the Stabilization Fund; (v) to facilitate the use of one currency for the settlement of System or Treasury
commitments denominated in other currencies; and (vi) to provide cover
for System holdings of foreign currencies.
MEETING HELD ON JANUARY 11,1972
1. Current economic policy directive.
The information reviewed at this meeting suggested that the rate
of growth in real output of goods and services (real gross national
product) had stepped up in the fourth quarter of 1971 and that
prices, which had been subject to Government controls since midAugust, had risen relatively little from the third to the fourth
quarter. Staff projections suggested that the faster pace of growth
in real GNP would continue in the first half of 1972.
In December nonfarm payroll employment and industrial production rose further, although to a large extent the gains were
attributable to post-strike recovery in coal mining. The unemployment rate edged up to 6.1 from 6.0 per cent in November. Retail
sales fell in December, according to the advance report, in part
because sales of new cars dropped from the high rates prevailing
during the first phase of the new economic program.
The rates of increase in prices and wages, which had slowed
sharply during the freeze in effect from mid-August to midNovember, picked up afterward. Under the post-freeze program,
some increases in wages—both previously scheduled and newly
negotiated—were allowed to go into effect, some of the many
pending applications for price increases were approved, and a
general increase in residential rents was authorized.
The latest staff projections for the first half of 1972 were similar
to those of 4 weeks earlier, although the expansion now expected
in consumer spending was not so rapid. Also, the projected rise
in Federal outlays in the first quarter had been increased as a consequence of a recently enacted Government pay raise effective
in early January. It was still anticipated that business capital
outlays, residential construction, and State and local government
expenditures would grow at substantial rates and that business
inventory investment would increase further.
The Finance Ministers and central bank Governors of the Group
of Ten, meeting at the Smithsonian Institution in Washington,
reached agreement on December 18 regarding revaluations of foreign
115
currencies against the dollar and a widening of permissible margins
for exchange rate fluctuations. Following announcement of the
agreement, market exchange rates for major foreign currencies
against the dollar generally moved up to levels a little above their
new lower limits. Outflows of short-term capital from the United
States—-which had been very large during much of 1971—came
to a halt, and some funds flowed back before the year-end.
However, the U.S. basic balance of payments remained in deficit
and foreign official reserves declined only a little.
Demands for business loans at commercial banks remained
weak In December, and most large banks reduced their prime
rates around the end of that month. Real estate and consumer
loans continued to expand at a rapid pace In December and banks
sharply increased their holdings of securities.
The narrowly defined money stock (private demand deposits
plus currency in circulation, or Mt), which had not grown on
balance from August to November, rose somewhat from November
to December. Over the fourth quarter Mi increased at an annual
rate of about I per cent, after rising at rates of about 3.5 per cent
over the third quarter and 10 per cent over the first half of 1971.!
Inflows of savings to commercial banks increased in December
and the money stock more broadly defined (Ml plus commercial
bank time deposits other than large-denomination CD's, or M2)
rose at a substantial rate. Growth in the bank credit proxy—dailyaverage member bank deposits, adjusted to include funds from
nondeposit sources—also was substantial as the average volume
of both large-denomination CD's outstanding and U.S. Government deposits expanded. At the same time, banks reduced their
outstanding borrowings of Euro-dollars by large amounts. Over
the fourth quarter M2 and the proxy series increased at annual
rates of about 8 and 9.5 per cent, respectively.
System open market operations in the period since the last
meeting of the Committee had been complicated by year-end
churning in the money market and by uncertainties regarding the
likely volume of reflows of short-term capital following the SmithGrowth rates cited are calculated on the basis of the daily-average level in the
last month of the period relative to thai of the preceding period.
116
sonian Agreement, It was expected that if the reiows were large
they would be accompanied by hea¥y foreign central bank sales
of Treasury securities. In order to leave scope for future outright
purchases of securities to moderate the market impact of such
sales, the System made extensive use of repurchase agreements
In the latter part of December to supply reserves on a temporary
basis. In fact, however, reiows during the period were of quite
modest dimensions.
Over the period as a whole System operations had been
directed at fostering a substantial easing in money market conditions, against the background of the behavior of the monetary
aggregates—particularly the continuing sluggishness of Mx. The
Federal funds rate was about 35/s per cent at the time of this
meet ing, down from the level of about 4% per cent prevailing at
the time of the preceding meeting. In the 4 weeks ending January
5, member bank borrowings averaged $110 million compared
with $395 million in the preceding 4 weeks.
At the time of this meeting interest rates on most types of
market securities were lower than they had been in mid-December.
Short-term rates had fallen, in part because of the easing of money
market conditions associated with the System's reserve-supplying
operations and because of anticipations oe the part of market
participants of still greater ease. EYCE with the auction oe
December 22 of $2.5 billion of tax-anticipation bills, Treasury
bill rates had come under strong downward pressure as the reiow
of short-term capital from abroad—and the consequent sales
of bills by foreign central banks—proved to be far less than the
market had expected. OE the day before this meeting of the
Committee, the market rate on 3-month bills was about 3.00
per cent compared with 3,95 per cent 4 weeks earlier.
Declines In rates tor long-term securities were much more
moderate. Early in the period capital markets were still under
the influence of the Treasury's November financing, and later
they were affected by discussion of the possibility that the February
financing----the terms of which were expected to be announced
near the end of January—would include an advance refunding.
Public offerings of new corporate bonds were light, as is usual in
December, but offerings of new State and local government bonds
117
were contraseasonally large. It was expected that the volume
of corporate issues would rebound in January but that issues
of State and local governments would taper off.
Yields In the secondary market for Federally insured mortgages
declined slightly further in December. Inflows of savings to
nonbank thrift institutions, which had slowed in November,
increased in December as the relative attractiveness of savings
shares and deposits was enhanced by the further declines in
market interest rates.
In the Committee's discussion considerable concern was
expressed about the persistent sluggishness of key monetary aggregates, and a number of members advocated action to provide
sufficient reserves to support the faster monetary growth that they
believed was required by the economic situation and outlook. It
was noted in this connection that the level of member bank
reserves, as well as that of Mu had changed little during the fourth
quarter despite a progressive easing of money market conditions.
In the interest of assuring the provision of reserves needed for
adequate growth in monetary aggregates, the Committee decided
that in the period until its next meeting open market operations,
while continuing to take appropriate account of conditions in the
money market, should be guided more by the course of total
reserves than had been customary in the past.
The members also agreed that in the course of operations
account should be taken of international developments and. beginning late in the month, of the forthcoming Treasury financing.
In placing greater emphasis on total reserves, the Committee
took note of a staff analysis suggesting that moderate rates of
growth in M, and M<> in January and February were likely to be
associated with a large increase in total reserves from December
to January and then a decline in February—mainly as a consequence of recent and anticipated changes in U.S. Government
deposits, and allowing for the 2-week lag between member bank
deposits and required reserves. Against the background of this
analysis, a majority agreed that an annual rate of growth in total
reserves of roughly 20 to 25 per cent from December to January
would be satisfactory, provided that it could be attained without
undue easing of money market conditions.
118
The following current economic policy directive was Issued
to the Federal Reserve Bank of New York:
The information reviewed at this meeting suggests that real
output of goods and services increased more rapidly in the fourth
quarter than it had In the third quarter, but the unemployment rale remained high. In recent weeks wage and price developments have reflected some increases that had been deferred under the 90-day freeze.
The narrowly defined money stock, which had not grown on balance
from August to November, rose somewhat in December, while both
the broadly defined money stock and the bank credit proxy increased
substantially. Market interest rates, particularly short-term rates, have
declined in recent weeks. After international agreement was
reached in December on new central exchange rales and on wider
margins of permissible variation, market exchange rates for major
foreign currencies against the dollar initially moved to levels a little
above their new lower limits. The volume of capital reflows to the
United States has been modest, however, and the underlying U.S.
balance of payments remains in deficit. In light of the foregoing
developments. It is the policy of the Federal Open Market Committee to foster financial conditions consistent with the aims of the
new governmental program, including sustainable real economic
growth and increased employment, abatement of inflationary pressures, and attainment of reasonable equilibrium in the country's
balance of payments.
To implement this policy, while taking account of international
developments and the forthcoming Treasury financing, the Committee seeks to promote the degree of ease in bank reserve and
money market conditions essential to greater growth in monetary
aggregates over the months ahead.
Votes for this action: Messrs. Bums, Clay,
Daane. Maisel, Mayo. Mitchell. Morris. Robertson,
and Sheehan. Votes against this action: Messrs,
Hayes. Brimmer, and Kimbrel.
Messrs. Hayes. Brimmer, and Kimbre! differed somewhat in
their reasons for dissenting from this aelion. Mr. Hayes considered the emphasis placed on total reserves as an operating target
lo be an undesirable step; in his judgment, reserves were much
less meaningful than other measures, such as the monetary and
,19
credit aggregates and Interest rates, as an Instrument for working
toward the Committee's basic economic objectives. Also, he
was reluctant to issue a directive that might involve a substantial
further easing of money market conditions, since the Committee
had already moved rapidly In that direction and since it appeared
to him that the economic outlook had improved somewhat in
recent months. He was concerned about the risk that a further
sharp decline in short-term interest rates might subject financial
markets to unnecessary whipsawing and might tend to rekindle
ieiationary expectations.
Mr. Brimmer shared the majority's views concerning broad
objectives of policy at this time, and he indicated that he would
have voted favorably on the directive were it not for the decision
to give special emphasis to total reserves as an operating target
during coming weeks. In his judgment the Committee should have
had more discussion of the implications of that decision, and in
any case it should have postponed the decision until after it had
held a contemplated meeting to be devoted primarily to discussion
of its general procedures with respect to operating targets.
Mr. Kimbrel favored supplying reserves at a rate that would
accommodate orderly economic expansion. He voted against
the directive because he thought it involved risks of depressing
short-term interest rates to unsustainably low levels and of producing excessive rates of growth in the monetary aggregates in
the future.
2. Ratification of earlier actions.
Earlier in the course of this meeting the Committee, by unanimous
vote, ratified the action taken by the members on December 20,
1971, adding the clause "while taking account of international
developments'"1 at the end of the final sentence of the current
economic policy directive then in effect.
Also, with Mr. Robertson dissenting, the Committee ratified
the action taken by vote of a majority on December 23, 1971. to
suspend, until close of business on the day of the next meeting,
the lower limit (specified in paragraph l(c) of the continuing
authority directive with respect to domestic open market operations) on interest rates on repurchase agreements arranged by the
120
Federal Reserve Bank of New York with nonbank dealers. The
suspended provision specified that such repurchase agreements
were to be made t%at rates not less than (1) the discount rate of
the Federal Reserve Bank of New York at the time such agreement
is entered Into, or (2) the average issuing rate on the niost recent
issue of 3-month Treasury bills, whichever is the lower."
The two actions in question had been taken for reasons set
forth in the policy record for the meeting held on December 14,
1971. Mr. Robertson dissented from ratification of the second
action for the same reasons that had led him to dissent from the
action itself, as described in that policy record.
121
MEETING HELD ON FEBRUARY 15, 1972
1. Current economic policy directive.
The information reviewed at this meeting indicated that in the fourth
quarter of 1971 real GNP had grown at an annual rate of about 6 per
cent, compared with (downward revised) growth rates of about 3.5
and 2.5 per cent in the second and third quarters, and that prices had
risen relatively little in reflection of the 90-day freeze imposed in
mid-August. Staff projections suggested that the faster pace of
growth in real GNP would be sustained through the first half of
1972, and that prices were likely to rise sharply for a time in the
post-freeze period.
In January industrial production and manufacturing employment
increased somewhat, although the average workweek in manufacturing declined after having risen for several months. Total nonfarm payroll employment advanced substantially further, and the
unemployment rate edged down to 5.9 from 6.0 per cent in December. Weekly data suggested that retail sales increased a little in
January, following a substantial decline in December.
The wholesale and consumer price indexes rose sharply from
November to December, reflecting in part the mid-November termination of the 90-day freeze. About half the rise in both indexes
was accounted for by increases in foodstuffs, which are largely
uncontrolled, and in imported goods and other items exempt from
the controls. Wage rates also rose substantially in December when,
under the post-freeze program, some increases—both previously
scheduled and newly negotiated—were allowed to go into effect.
However, the advance in wage rates slowed in January.
The staff's projection of growth in real GNP in the first half of
1972 was about unchanged from 5 weeks earlier, although expectations for some major categories of expenditure were altered. Thus,
the projected expansion in Federal purchases of goods and services
—which had been raised 5 weeks earlier to reflect the Government
pay increase effective in early January—was raised further to reflect a concentration of outlays in the second quarter of the year,
roughly in line with the administration's late-January estimates
of the Federal budget for the 1972 fiscal year. On the other hand,
the prospective gains in consumer spending were scaled down
122
mode*ntclx,
ftijil
sales
sulting
p a t ! n Uccin-»}r
HI i u u v
iiiiu e s U e i k C
in s u b s t a n t i a l
iU-ii
\iv\\
o \ c i v, n h h o l d m v
A'- i n l l i e p r c \ H'tr^ p i o j e c f i o n
outlays,
residential
CKpeiidifurv's
business
In
Mivemor\
ftire»rn
iippiwuitcd
Una-
ear!>
u»ses{»nrift
llicii
o j fiic
a n d Sfak
{'or
faxes.
'\jLfieenu"uf
go\ eminent
rates a n d thai
Iniiher,
rnosf
iiui}or
currencies
and e a r i v i ' e b r u a r s ,
values. i')\er
\v(>, a s m a l l
a m i local
HKM^.I^-
rau><
in J a t t t s u n
Smithsi>mau
liuTe
in
w e i e re-
income
lit N u l > s t a n l n i l
uoulvi
market^.
new cenlial
Fehfiiary,
of s l i e n g f h
svfictiufe^
tit p e r s o n a l
!o t i u m
ai.*ains( t h e d o l l a r
l<» o r a i x n e
me
continue
exefiany:
lack
H w a s a n t i c i p a t e d flia< b u s i n e s s c a p i t a l
consuuetion,
v, o n l d
fbc f c < . c n i
\\ i t b b o i d m g
OH iJecenjber
surplus
rising
t h e s\ h o l e p e r i o d
18
from
through
in t h e L f .»S. b a l a n c e
of
p a \ m e > U s <vu t h e ol'ii^ ia» • • • i i l l o r n c t i t s baM*». ,»s s e l l o u s of f u n d s t o ( h e
rnned
SKues
deficit
on
I he
allei
uinviif
laasui)
Ih*.v
4 t\
f
fi e : i u ui ^ v : t v s o M K ' w h M
aecouni
JikJ
»u»imul
HMiur,
k
rnnrs
:
\K
: a i u ! in f c h i t i a f \
c^! . r * fjcf
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r
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und
a pJC r c i t H u h u t 1
tU!»J
iiuiluii<))?, i l i i s I ' c b n u M ' N
b\yh
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\ month
^ ^
pci'cciit itote a n d a
(> s* p e r i.vfti bon^.1 ft"; T M l i a u . - ' e ' * H I S M I O m a t u r i n j j
a lltfNliif; 1
liou
:u e x c e s s o f t h e
transi'ictions.
JJ* t h a t if"1 i t s n i i d - l ' e b r u a r y
aunojmcv<» oi; JaiHKii}
Iifiaiiv <i)': il U O M U ! i d k ! a i p a * a
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ni
eu(utteuu'ji(
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!i T e h -
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w»a..' r e d e e m e d
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i
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Mu1 {MiblK'lv
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S L 2 bll-
held
issues
l\<i ^ a s h . a n d t h e T r e a s u r y
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^.'ciivialK
Iroiii
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weeks,
deficit
LiHk'K
in fis^d
l
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issues,
(lie e v a e t
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numerous
Horn
timing of
\ s \ u M d d \ . (l>; ( a ! r - u i n a i k / ! <. t s . ' - J i i f u t i ^ , : U K J o t h e r s p o s t -
poficil
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h*o?ith
i. s i J i . ' n u a n
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whai
of a large!
I U K ! b^ e n a t u i c m a i c d .
<»l p t o s p c \ n \ c
vorpojaie
olKTiii4^
h a d risen in leccnt
h i f i \ * i i i i > f : t o ( h e n e w \. s h m a i c s
H t u i r thitti
HI fe^u'iion
MMsojKtlh
ii» u ^ i u t * i i i i e r c s l
v,i i i c \ ^ i ' i s r ; o . » ; i t r
issues
itifes. I nt h e
rose
sonie-
u i u J v ' t h a i o i M<!,!c a n d l o i a J g o \ e m i n e n t
IS511CS dwt-iJUCd.
\jihl
ot
^ l u ^ n (v'/r:> m U ' U s i
1
fhs < / o f u m h ' h . ' e
•'liui.il d e m a n d s
HI
nuwics
in tC'pon^e
ha>j U'»:VMM'/(J v i n c e t h e l a s t
couilitions
meeting
iostr'Miy i'ii\ a?e d o m e s t i c a n d foreign
)<»* > h - > f ? - K * r i » » s* « m i n e " , a ^ u e l i a s t o h u t h e t
niark'/i
fair
'hca>ui\
b ' i j T'ales
easing
IKK! risen e a / l \
•
w
.
)
in the period, reflecting expectations of heavy Treasury financing
In the short-term area, but after that they fell back. At 3.00 per
cent on the day before this meeting, the market rate on 3-month
bills was about the same as 5 weeks earlier.
Contract interest rates on conventional new-home mortgages and
yields 1E the secondary market for Federally insured mortgages
continued to decline in January. Inflows of savings funds to nonbank thrift institutions rose sharply further—approaching the record
high rates of early 1971—in part because of the continuing decline
in yields available on short-term market securities relative to the
rates paid on savings shares and deposits.
Business loans at commercial banks increased somewhat in January, but business loan demand apparently remained relatively
weak, and major banks again lowered their prime rates. Real estate
and consumer loans continued to expand rapidly, and banks further
increased their holdings of securities other than Treasury issues.
Following the January 1 1 meeting of the Committee, System
open market operations had been directed at fostering substantial
growth in total member bank reserves in January, while continuing to take appropriate account of conditions in the money market,
After late January, System operations gave primary emphasis to
maintaining steady conditions in the money market while
the Treasury was engaged in its refunding operation. Total reserves
were indicated to have grown from December to January at an
annual rate of 28 per cent on the basis of earlier seasonal adjustment
factors, and at about a 21 per cent rate on the basis of the factors
emerging from the annual revision of seasonal adjustments, completed shortly before this meeting. In late January and the first
half of February the Federal funds rate fluctuated around 3!4 per
cent, down froni 3% per cent at the time of the Committee's meeting on January 1 1. In the 5 weeks ending February 9, member bank
borrowings averaged about $20 million compared with $110 million
in the preceding 4 weeks.
Growth in the narrowly defined money stock (private demand deposits plus currency in circulation, or Mt)» remained relatively slow
in January. However, money more broadly defined (Mt plus commercial bank time deposits other than large-denomination CD's, or
M2) grew at a fast pace as inflows of savings to commercial banks—-
124
like those to nonbank thrift Institutions—rose sharply further.
Growth was also rapid in the adjusted bank credit proxy—dailyaverage member bank deposits, adjusted to include funds from, nondeposit sources —allhough the average volume of outstanding largedenomination CD's declined moderately and Government deposits
changed little.
In continuation of a discussion begun, at a meeting on the previous
day, the Committee considered the relative merits of money market
conditions and various measures of member bank reserves as
fc
'operating targets"—that is, as variables for guiding day-to-day
open market operations in the effort to achieve its intermediate
monetary objectives and, in the process, contribute to the Nation's
basic economic goals. Some arguments were advanced in favor of
placing about the same degree of emphasis on money market conditions as had been customary prior to the meeting on January 1 I.
However, the Committee concluded that in the present en\ironnient it was desirable to increase somewhat the relative emphasis
placed on reserves while continuing to take appropriate account of
money market conditions. Committee members believed that doing
so would enhance their ability to achieve desired intermediate
monetary objectives. These include the performance of various
measures of money stock and bank credit that are supported by
reserves as well as interest rates and over-all liquidity and credit
conditions. At the same time, the members believed that reservesupplying operations should be conducted so as to avoid disturbing
effects in money and credit markets.
At this meeting the Committee decided to express its reserve
objectives in terms of reserves available to support private eoebank
deposits—-defined specifically as total member bank reserves less
those required to support Government and interbank deposits. This
measure was considered preferable to total reserves because shortrue fluctuations in Government and interbank deposits are sometimes large and difficult to predict and usually are not of major significance for policy. It was deemed appropriate for System open
market operations normally to accommodate such changes ie
Government and interbank deposits.
The Committee agreed that the economic situation and outlook
at this time called for growth ie the monetary aggregates at moderate
125
rates. If look note oJ a stall' analysis suggesting that, over the months
of l ; ebruary and Marc!) combined, such growth was likely to be
associated with expansion in the reserve measure employed at about
an H per ecu! annual ralw Line! possibly with some Firming of money
market conditions, The members decided that it would be desirable
to seek growth in the reserve measure in the February-March period
at an annual rale in a range of u to 10 per cent, while avoiding both
sharp short-run fluctuations and undesirably large cumulative
changes in money market conditions in either direction in the period
between meetings. The}' also decided that some allowance should
be made in the conduct ol opeialions lor any significant deviations
that might de\e!op between the actual rates of growth in the monetary aggregates and the moderate growth rales expected.
The members also agreed that account should continue to be
taken of international developments, and that to the extent feasible
fhe (foveiiiiiiCiit securities pui chased m icserve-supplying operations
should include intermediate- and longer-term issues as well its Treasury bills,
Finally, it was understood thai the Chairman might call upon the
Committee to consider ihe nted for supplementary instructions if
if appeared during the period be!ore the next scheduled meeting that
the Committee's several ohieUhes j n d constraints were iiol being
met sutistactoiih
The following i urrent economic pohe\ directhe was issued to
the Federal Rescue Haul- '»t W w York'
Tbt
piil
of
information
iMn-$is
r e v i e w e d at i h i \ m e e tin g indicates itiar l e a l
uttii
v;r^ "tVk,^ :nv.]'/nsed
fuuic
rap<«ll\
in the
*n\l-
fourth
q u i i i l e r than it had in me rnifvi q i i i i n e r . hit! IIic i m e m p l o y u i t M U
iate
r t i i u i i i i i ' t ! h i r h , 1M»I tin. cun^ nf q i t a r f r r . oreiwtii IN p r o j r e t e d ai a late
i!i?se
!u
fl);jt
December,
Waft
tiiuf
ul
in
Jhe
pur!
h Miuis
vjtiaitei
reilechnx 1
rates also fv>v suh^unttiutl}
iiacl been d e t e u v t i
ftndei
V ^ I H V I I h u d u«'t y d ' W . i
rose s i w n e w h a t in l'h\.r^iiher
fluids
ut
bank
"Ji)\i
iiicf e.tj.ed sharpis
of
the
0-da\
*>)\ }>.iKv.\>.\:
weie alUmed
I he nurrc^wlv
iu^n
Akij\v-i
:ud Januat 1 ) . inh>n\s
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u
H I DeeeHiiHi v v l k i i s o a i c
tUx" f i a v * /
cffe*'L b i l l the ri,v.j s l o w e d iu Jaruiaty.
sunk
Pficc^
lerntination
uhti'i
mstiniu'wns
in
freezi
iueitascs
;o g o
into
ilefmed nn>ne\
to Niueuibei,
o f tune ;UK1 s a v i n g s
»?u.reused ;»harpl>
iti J o h u a i ) ' , and b o i ! i J]JC f)n:a«l^. •Jein»ed m o n e y --jtuek a m i llie bank
c r e d i t p n » \ \ e\pd«ft!eJ r a p i i l l \
126
Soi^»e sh»>rt'ferni i n t c r e s i r u k s h a \ c
<feOi'pi<'<f
Mother
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the
b,n>*
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c rt*itst'% t
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r»t
payments.
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nnnkei
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2, Continuing authority directiv
boll
f i n s w ^ i t f k i f k
h v i ,K^>piCit
' . ' » > < i { ! l ( i . * i s l\H
, « - < . »
oto{i<iai\
• r •: n -
through January 11. 1972, specified that such repurchase agreements were to be made %%at rates not less than (1) the discount rate
of the Federal Reserve Bank of New York at the time such agreement is entered into, or (2) the average Issuing rate on the most
recent issue of 3-month Treasury bills, whichever is the lower/"
Votes for this action: Messrs. Burns. Hayes.
Brimmer. Clay. Daane. Kimbrel, Maisel, Mayo,
Mitchell, Morris, and Shechan. Vote against this
action: Mr, Robertson.
This action was taken on recommendation of the System Account
Manager, to provide against the contingency that under existing
rate limitations it might not prove feasible to enter into repurchase
agreements during coming weeks in the volume likely to be found
desirable to meet the Committee's objectives for member bank
reserves. It was understood that rates below 3lA per cent would not
be used without prior notification to the Committee.
The action of January 26 was ratified at today's meeting. Mr.
Robertson dissented from the ratification as well as from the original
action for reasons similar to those underlying his dissent from the
similar action taken in December. He preferred to have needed
reserves injected into the banking system by means of outright purchases of Treasury securities in the open market rather than through
repurchase agreements with Government securities dealers. In his
judgment such agreements actually constituted subsidized Joans to
dealers, and he saw no justification for increasing the subsidy by
making them at lower and lower rates of interest.
3, Rewisictn of gyideiine for operations in agency issyes.
On August 24. 1971, when the Committee had first authorized
outright operations in securities issued by Federal agencies, it had
approved certain initial guidelines for the conduct of such operations with the understanding that they would be subject to review
and revision as experience was gained. At this meet ing the Committee revised guideline 5 under which purchases were limited
to issues outstanding in amounts of $300 million or over in cases
where the obligations have a maturity of 5 years or less at the time of
128
purchase, and to issues outstanding in amounts of $200 mi]lion or
over in cases where the securities have a maturity of more than 5
years at the time of purchase. As revised, the guideline specified that
the maturity of the obligation should be taken as of the time of issuance, rather than as of the time of purchase, in determining
whether It was eligible for purchase.
Votes for this action: Messrs. Burns, Hayes,
Brimmer, Clay, Daane, Kimbrel, Maisel, Mayo,
Mitchell, Morris, Robertson, and Sheehan. Votes
against this action: None,
This action was taken on recommendation of the System Account
Manager, on the grounds teat from a practical standpoint it was
undesirable for an obligation, initially eligible for purchase and
perhaps already held in the System Account to become ineligible
merely because its maturity had shortened with the passage of time.
129
MEETING HELD ON MARCH 21, 1972
1. Current economic policy directive.
The latest estimates of the Commerce Department indicated that
real output of goods and services had risen at an annual rate of nearly
6 per cent in the fourth quarter of 1971, and it appeared that expansion in real GNP was continuing at about that rate in the current quarter. Prices rose substantially in the first few months following the
mid-November termination of the 90-day freeze.
In February industrial production and nonfarm payroll employment continued to expand, and estimates of both measures for January were revised upward by substantial amounts. The average
workweek in manufacturing increased sharply, more than recovering the reduction of January, and the unemployment rate declined
further to 5.7 from 5.9 per cent in January. The number of housing
starts expanded substantially further. However, retail sales—according to the advance report—remained at the December-January level.
The wholesale price index continued to rise at a rapid rate in January and February. In addition to sizable advances in prices of industrial commodities—which for the most part had been expected
in the first few months after termination of the 90-day freeze—there
were large increases among foodstuffs. However, the advance in
wage rates slowed after an initial post-freeze surge in December.
Staff projections suggested that growth in real GNP would be
somewhat faster in the second quarter than in the first, in large part
because of acceleration in consumer expenditures. It was expected
that consumer spending would be buoyed by a more rapid rate of
expansion in disposable personal income—as many taxpayers took
steps to remedy the overwithholding of taxes that had resulted from
the introduction of new withholding schedules at the beginning of
this year. It was expected also that the rise in prices would moderate
from the high rate that followed termination of the freeze.
The deficit in U.S. merchandise trade remained large in January, about equaling the average of the preceding 9 months. Between mid-February and mid-March speculative outflows of funds
from the United States raised the deficit in the over-all balance of
payments and put further downward pressure on exchange rates for
the dollar against other major currencies.
Short-term interest rates had increased considerably In recent
weeks, selecting in large part expanding market supplies of Treasury
hills and firming money market conditions. From February 14
through March 20, the Treasury added $300 million to its weekly
Issue of bills, aed on March 1 it auctioned a $3 billion strip of 15
outstanding issues of bills. In addition, the System sold sizable
amounts of Treasury bills in order to absorb bank reserves that were
supplied as the Treasury reduced its balances at the Federal Reserve
Ranks. Oe the day before this meeting of the Committee, the rate
on 3-month bills was about 3.85 per cent compared with a recent low
of about 3.00 per cent in mid-February.
Interest rates on long-term securities had changed little on balance since mid-February after having increased partly in reaction
to late January estimates of a larger Federal deicit in iscal 1972
(han had been, anticipated. The spread between rates on short- aed
long-term securities had been extremely wide by historical standards, aed it remained wide even after the recent rise in short-term
rales. In February, as in January, the volume of new corporate aed
Slate and local government bonds issued publicly was below the
monthly average of 1971. It appeared that the volume of such issues
would not change much in March.
Yields in the secondary market for Federally insured mortgages
declined somewhat further ie February, reaching a level about onehalf of a percentage point lower than ie the summer of 1971. The
rates of inflow of savings funds to nonbank thrift institutions slowed
from their exceptionally rapid pace of January, bet they were still
taster than the average rates of the second half of 1971. Despite the
recent rise ie yields available on short-term, market securities, the
rules paid oe savings shares aed deposits remained relatively attractive.
Business loans at commercial banks expanded more rapidly in
February than at any other time since the summer of 1971 when loan
demand had been stimulated by developments in foreign exchange
markets, bet expansion was concentrated ie a relatively few iedeslues. Real estate aed consumer loans continued to increase at
high rates and banks added a large amount to their holdings of securities, especially Treasury issues.
Following 6 months of slow growth, the narrowly deieed money
13 J
stock (private demand deposits plus currency In circulation, o r M , )
increased sharply in February—in part because of a substantial reduction in U.S. Government deposits at commercial banks. Inflows
of savings funds to commercial banks—although smaller than in
January—remained large, and continued rapid growth was recorded
for the niore broadly defined money stock (M, plus commercial
bank time deposits other than large-denomination CD\s, or M 2 ).
Growth moderated in the bank credit proxy—-daily-average member
bank deposits, adjusted to include funds from nondeposit sources
—chiefly because of the reduction in Government deposits. Including rough estimates for March, it appeared that over the first quarter
M| and M2 would expand at anneal rates of about 9.5 and 13.0 per
cent, respectively, and that the bank credit proxy would rise at a
rate of about 10.5 per cent. 1
System open market operations since the February 15 meeting
of the Committee had been directed at fostering growth in reserves
available to support private nonbank deposits—the measure employed by the Committee to express its objective for bank reserves
—at an annual rate between 6 and 10 per cent in the February-March
period while at the same time avoiding both sharp fluctuations and
large cumulative changes in money market conditions. As the period
progressed, it appeared that the reserve measure was growing at a
rate of 10 per cent or slightly faster. It also appeared that the firstquarter growth rates developing for the monetary aggregates were
somewhat above the rates the Committee had expected. As a result,
operations were directed toward limiting the growth in reserves,
and money market conditions were allowed to firm. The Federal
fynds rate, which had fluctuated around 314 per cent in the second
half of February, rose to about 4 per cent at the time of this meeting.
Member bank borrowings averaged about $60 million in the 2 weeks
through March 15 compared with about $35 million in the preceding 3 weeks.
The Committee agreed that the economic situation continued to
call for moderate growth in the monetary aggregates, although at
rates less rapid than those likely to be recorded for the first quar1
Growth rates cited are calculated on the basis of the daily-average level In the
last month of the quarter relative to the last month of the preceding quarter.
132
ter. The members took account of a stall' analysis suggesting that
moderate rates of growth in the aggregates over March and April
combined were likely to be associated with expansion in reserves
available to support private nonbank deposits at an annual rate of
about 1 1 per cent in those months, and probably with some further
tightening in money market conditions, ft was indicated that such
developments would not necessarily have much lasting effect on
capital markets, in. view of the unusually wide spread existing
between long- and short-term interest rates.
The Committee decided to seek growth in the reserve measure
employed at an annual rate in a range of 9 to 13 per cent during the
March-April period while avoiding both sharp day-to-day fluctuations and large cumulative changes in money market conditions. The
members also decided that some allowance should be made in the
conduct of operations if growth in the monetary aggregates appeared to be deviating significantly from the rates expected; that
account should be taken of international developments and of the
Treasury financing of relatively small size that was being contemplated; and thai reserve-supplying operations should continue to include to the extent feasible purchases of intermediate- and longerterm Government securities as well as Treasury bills. It was under™
stood that the Chairman might call upon the Committee to consider
the need for supplementary instructions before the next scheduled
meeting if it appeared that the Committee's objectives and constraints were eot being met satisfactorily.
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
The information reviewed at this meeting suggests thai real outpot of goods and services is increasing in the current quarter at
about the stepped-up rale attained in the fourth quarter of 1971.
Several measures of business activity have strengthened recently
and demands for labor have improved somewhat, but the unemployment rate remains high. Wholesale prices continued to rise rapidly
In January and February, in part because of large increases in prices
of foods. However, the advance in wage rates slowed markedly after
the post-freeze surge in December. Following a period of sluggish
growth, the narrowly defined money stock increased sharply in February, partly reflecting a substantial reduction in U.S. Government
deposits. Inflows of time and savings funds at bank and nonbank
133
thrift institutions continued rapid in February, although below January's extraordinary pace. Short-term interest rates have risen considerably in recent weeks while \ields on long-term securities have
changed little on balance. Exchange rales for most major foreign currencies against the dollar appreciated further in February and early
March, as reeurrent speculative outflows of capital added to the U.S.
balance of payments deficit, In light of the foregoing developments,
it is the policy of the Federal Open Market Committee to foster tinaneial conditions conducive to sustainable real economic growth and
increased employment, abatement of inflationary pressures, and
attainment of reasonable equilibrium in the country's balance of payments,
To implement this policy, while taking account of international
developments and possible Treasury financing, the Committee seeks
to achieve bank reserve and money market conditions that will support moderate growth in monetary aggregates over the months ahead.
Votes for this action: Messrs. Burns, Hayes,
Brimmer. ColdwcIL Daane. Hastburn, MaeLaury,
Maisel, Mitchell, Robertson, Sheehan, and Winn.
Votes against this action: None.
2. Continuing authority directive.
On February 2{), 1V)72, the Committee members bad voted to
Increase from $2 billion to S3 billion the limit on changes between
Committee meetings in System Account holdings of U.S. Government and Federal agency securities specified in paragraph Ha) of the
continuing authority directive with respect to domestic open market
operations.
Votes for this action: Messrs. Burns, Hayes.
Brimmer. Cla\. Daane. Kimbrel. Maisel, Mayo,
Mitchell. Morris, Robertson, and Sheehan. Votes
against this action: None.
This action, which was ratified by unanimous vote at today's
meeting, had been taken on recommendation of the System Account
Manager as a temporary precautionary measure. The Manager had
advised that increased !ee\v;n for System sales of Government and
fvdt-fal a g u i i \ \^c\nitlv^
niii\t\\ v \ / i l be l o q u n e d *11 i m p l c m c w i n g
fbc C o m m i t t e e ' s p**\K\ d t r e c r r * e durinn t h e [ v n o d b e f o r e t h e n e x t
m e e t i n g HI v i e w i«f tbt l a r r i \>>i11nie *'»* ^alcs thai h a d a l r e a d y b e e n
r e q u i r e d bevaUM.' uf t h e { e d u c t i o n in I'KV.SU n b a l a n c e ^ at 1-cderal
Ke-sen e R a n k s
A i ihh m e e t i n g , after rhe M n n a p i h a d ad* !Ncd that t h e l a r g e i
l u n i i n o ion^trr a p p e a r e d H k H y t r bw* iicetJed, the C o m n u t t e e
a i t i e n d c d p a r a g r a p h U a ) i.'f t h e eoitfununiZ a u l h o r i l y d n e e t i v e t o
r c s t o a Hie 5.^ hilfuni 11 in it tha? h,ui ' v e n ii! elfcxt p i i o i to t h e a c t i o n
on J h e b i u a r y ,1 H ;.
\ oU's f\w this aetKHi: Me:»>rs. fkints, Flaves,
iiriTUHjer, i ' u i d w e l f , D a a u c , I : ; i H t h u f i i , M a c l . a u i y ,
\ l m s e l . M i t c h e l l . R u h e j r M ) n SliCi-lsati, a i u i W h i n ,
V o t e s ;iira«f\ ,t fhis ;kli*>n N«>nt\
On Maieh 7, 1^72, a n)aji>rity oi' Couujninee meiuhers had voted
to suspend, until the elose of bus'niCh\ on March 2 ! , l c /72. the lower
limit t.scl t\>f1li in paragraph U.L) of the continuing authoritv directive) on interest rates on repurchase agreerneius t R l v s ) itrranged by
the Federal Reserve Bank of New York with nonhank dealers. The
provision in tjuc,sti<^n- •• which had also bc.cn suspended for the periods from December ? J . ! ^ 7 I « thr\>uuh January 1 1. 1^72. and from
Jaoiiii?) 2(> ihrout'h IVbfuaiv 15, 197.?-•• specified that such R F ' s
were to f'»e made %*:il rates noi less ilun- ( I ) the discount rate of the
Federal Rescive Bank uf New York nl the time such agreement is
entered into, or (2) the average issuing rate on the most recent issue
of 3-month Treasury hills, whichever U the l o w e r / *
Votes for this a«.tiocr Messrs. Haves. C'oUwefl,
Daane. Fasthunu MaeLaur), MitehelL Sheehasi,
<if]tl Wiiifi, Votes against this action: Messr.-*. Riioi
mer and Robertson.
Absent UJK! not \oiing: Messrs Ruins and Maisel.
This action had been taken on recommendation of the Manager,
to provide against the contingency thai under existing rate limitations it might noi prove feasible ft) enter into R l r s during coming
days in the volume itKely to be found desirable to meet ihc Committee \s objectives for inciiiber bank reserves. It was understood that
rates below 3!4 per cent would not be used without prior notifica™
tion to the Committee.
Mr. Brimmer had dissented from this action because he felt that
excessive reliance was being placed on RP's in open market operations. He was also disturbed about the frequency with which RP's
had been made recently at rates below the lower limit that would
obtain in the absence of Committee action to suspend the relevant
provision of the continuing authority directive. He thought that
since such RP rates were typically below yields on 3-month Treasury
bills, their continued use might give the market a misleading impression of the Committee's policy objectives.
Mr. Robertson had dissented from the action in question for the
same reasons underlying his dissents from similar actions taken in
December and January. He preferred to have needed reserves injected into the banking system by means of outright purchases of
Treasury securities in the open market rather than through RP's
with Government securities dealers. In his judgment such agreements actually constituted subsidized loans to dealers,
The action of March 7 was ratified by unanimous vote at today's
meeting. Messrs. Brimmer and Robertson, having recorded their
dissents from the action of March 7, did not consider it necessary
to dissent also from the ratification.
3. Fiewieif of continuing authorizations.
This being the first meeting of the Federal Open Market Committee following the election of new members from the Federal Reserve
Banks to serve for the year beginning March 1, 1972, and their
assumption of duties, the Committee followed its customary practice of reviewing all of its continuing authorizations and directives.
The Committee reaffirmed the continuing authority directive with
respect to domestic open market operations, the authorization for
System foreign currency operations, and the foreign currency directive in the forms in which they were presently outstanding.
Votes for these actions: Messrs, Burns, Hayes,
Brimmer, Coldwell, Daane, Eastburn, MacLaury,
Maisel, Mitchell, Robertson, Sheehan, and Winn.
Votes against these actions: None.
136
In connection with the review of the continuing authority directive for domestic open market operations, the Committee took special
note of paragraph 3, which authorized the Reserve Banks to engage
in lending of U.S. Government securities held in the System Open
Market Account under such instructions as the Committee might
specify from tinie to time. That paragraph had been added to the
directive on October 7, 1969, on the basis of a judgment by the Committee that in the existing circumstances such lending of securities
was reasonably necessary to the effective conduct of open market
operations and to the effectuation of open market policies, and on
the understanding that the authorization would be reviewed periodically. At this meeting the Committee concurred in the judgment of
the Manager that the lending activity in question remained necessary
and, accordingly, that the authorization should remain in effect subject to periodic review.
137
MEETING HELD ON APRIL 17, 1972
This meeting was called by the Chairman for the afternoon before
the meeting scheduled for April 18, 1972, to enable the Committee
to consider certain matters before it without infringing on the time
available for its deliberations on current monetary policy.
1. Continuing authority directive.
The Committee amended paragraph l(c) of the continuing authority
directive with respect to domestic open market operations to provide
that interest rates on repurchase agreements (RP's) arranged by
the Federal Reserve Bank of New York with nonbank dealers
should be determined by competitive bidding unless otherwise
expressly authorized by the Committee. Prior to this action, interest
rates on RP's had been administratively determined by the System
Account Management, subject to the provision of paragraph l(c)
that they should not be less than (1) the discount rate of the Federal
Reserve Bank of New York or (2) the average issuing rate on
the most recent issue of 3-month Treasury bills, whichever is lower.
(On three recent occasions—December 23, 1971; January 26, 1972;
and March 7, 1972—the Committee had suspended this provision
for periods of a few weeks, on the basis of advice from the System
Account Manager that it might otherwise not prove feasible to enter
into RP's in the volume likely to be found desirable to meet the
Committee's current reserve objectives.) Although no upper limit
was specified in the continuing authority directive, in practice RP
rates ordinarily had not been set higher than the discount rate.
The amended paragraph read as follows:
To buy U.S. Government securities, obligations that are direct
obligations of, or fully guaranteed as to principal and interest by,
any agency of the United States, and prime bankers' acceptances
with maturities of 6 months or less at the time of purchase, from
nonbank dealers for the account of the Federal Reserve Bank of
New York under agreements for repurchase of such securities,
obligations, or acceptances in 15 calendar days or less, at rates
that, unless otherwise expressly authorized by the Committee, shall
be determined by competitive bidding, after applying reasonable
138
Jimitatious on flic volume ri avzreuncnts with intln kiual dealers;
provided ih'it HI the event Cl*ncinincnl securities or agcruy issues
ooNCtctl I n ai>% ^utii a g t e e p i e n t are not i^fniu ikiseJ h \ the ifealei
puisua?;? t*> the a g r e e m e n t «H a icfiew.tJ t h e r e o f , l i t e r shall h e sole)
in ilu: maikof or t r a n s f e n e c i to t h e S v s t e i n # )pen M a r k e t Ae« omite
a u J pr°v ttJeif Inrifici (hat in llu: e w o t h a r i k i t : / aev\ % pUUK'cs v'o\Tcfi.'ii
hy a n y s u c h d f j e e t n u i f are ri*»t r e p u i c h a s e t l h \ t h e sellei , f h e \ shall
c o n t i n u e t o Nc% heltf In iHe l ; eder;i! K r s - r v e !!j}ik <*-i >h.iJI he •*(»!<!
in the o p e n m a i k e t
Voio
J~c*i
this
:n*iiefii"
Messis,
Hiiro^,
liav's.
Brimmer, C.\»k!welL Daane, rii.sthuni.. \Jaci.auiy.
Mai so I. MifoheN, R<"»hcttson, S'leeiKin, arni Wnu\,
V«>les uuainst this aeiion. None,
This action was Liken on lecomnieiklanon of a stall committee
appointed to stiuly eetiain matters lektiine to R I r s , l*he Mull
eommithv Couiul that sueh agrt*eme?Hs piovuie u useful means lor
supplying, reserve^ *\'horr the tiitfienfetl tfservr neecis are large but
are likeh- h» he of a short duration, and that exLsfioti procedures
for sect in 11 UP rates had worked fairly well on the whole, Howevei,
trie stall' committee also concluded iiiat a competitive bidding
procedure would haw certain advantages. In particular, it mould
niiiiiiiit/t^ the unwarranted "announcement effects^ that had sewneflines resulted when market participants attached an unintended
pohc\ significance to changes in the KP rate. Seeoiiifh , it \venikl
insure that (he costs to dealers of funds obtained through System
repurchase agreements were closely related to the costs of funds
available to them from alternative stniics,
The Open Market C'onmnitec concir>vd in these Iniilings of" the
stall* committee ami decided to experiment with a procedure under
which lates ini HP's with nonhank dealers would be establisheii
through competitive bidding, aflei applyitig reasonable limitations
on the volume oi R P \ with iiuJiv ulual dealers. In view of lite
possibility that eireiinisianees inighf arise under which acompetni\e
bidding procevlure wemld not be desiiablc, prt^visiun was matie for
fhe use of other procedure's when expressly authorised h\ the Open
Market (\>mn>ntee.
139
2. Rewision of guideline for operations in Federal agency
issyes.
At this meeting the Committee revised the sixth of the guidelines
for the conduct of System operations ie securities issued by Federal
agencies. Initial guidelines had been approved on August 24, 1971,
with the understanding that they would be subject to review and
revision as experience was gained, and guideline 5 had been revised
on February 15, 1972. Prior to today's action, guideline 6 had
specified that System holdings of any one issue would not exceed
10 per cent of the amount of the issue outstanding, but that there
would be no specific limit on aggregate holdings of the issues of
any one Federal agency. The revision consisted of an increase in
the limit oo holdings of any one issue to 20 per cent, and the
addition of a provision that aggregate System holdings of the issues
of any one agency would not exceed 10 per cent of the amount
of outstanding issues of that agency.
Votes for this action: Messrs. Burns, Hayes,
Brimmer, ColdwelL Daane, Eastburn, MacLaury,
Maisei, Mitchell, Robertson, Sheehan, and Winn.
Voles against this action: None.
This action was taken on the grounds that it would reduce the
number of occasions on which the System might have to reject
offers of particular issues that were priced attractively relative to
other issues, while maintaining the principle that System operations
in agency issues should be conducted on a limited scale so as not
to dominate the market for such issues.
140
MEETING HELD ON APRIL 18, 1972
Current economic policy directive.
The information reviewed at this meeting suggested that real output
of goods and services had grown in the first quarter of 1972 at
about the stepped-up rate attained in the fourth quarter of 1971,
and that prices had risen at a relatively fast pace in the first quarter,
in part because of the mid-November termination of the 90-day
freeze. Staff projections suggested that the rate of growth in real
GNP would increase somewhat in the current quarter and that the
uptrend in prices would moderate.
In March retail sales increased sharply after having changed little
for several months. Industrial production continued to grow at a
substantial rate, employment rose appreciably in manufacturing and
other nonfarm establishments, and the average factory workweek
remained near the high level reached in February. However, the
unemployment rate moved back up to 5.9 per cent from 5.7 in
February, reflecting a very large increase in the civilian labor force.
Housing starts dropped in March from the extraordinary high they
had reached in February.
The uptrend in wholesale prices of industrial commodities continued in March at about the relatively rapid rate prevailing since
mid-November, when the 90-day freeze had ended. However,
average prices of foodstuffs declined, after having risen sharply
in February, and the increase in the total wholesale price index
was small. Average hourly earnings of production workers on
private nonfarm payrolls now were estimated to have advanced
at a more rapid pace in January and February than had been
indicated by earlier data, and they rose appreciably further in
March.
According to staff projections, growth in real GNP would pick
up in the second quarter mainly because of a sizable advance in
consumer spending. Such spending would be buoyed by a much
larger gain in disposable income than in the first quarter, when
an increase in personal income tax payments under the new withholding schedules had dampened the rise. The staff projections
suggested that both Federal purchases and State and local govern-
141
ment outlays would continue to expand at moderate rates and that
the rise in, residential construction outlays would slow as housing
starts declined from a record level. It was expected that business
capital outlays, in line with recent surveys, would continue to
increase, but at a less rapid pace than in the first quarter.
Projections for the second half of the year suggested some further
step-up in the rate of growth in real GNP. It was anticipated that
disposable income and consumption expenditures would increase
at a faster pace; that business capital outlays would continue to
grow at moderate rates and inventory investment would increase
further; that State and local government expenditures would expand
substantially; and that net exports would improve in lagged,
response to the earlier realignment of exchange rates. Oe the other
hand, Federal outlays were expected to rise at a slower pace than
in the first half of the year and residential construction activity
was expected to level off.
In foreign exchange markets the dollar had strengthened somewhat siece mid-March and the deficit in the U.S. balance of
payments on the official settlements basis had been small, in
contrast with preceding weeks when the dollar had weakened In
association with speculative outflows of funds. Markets had been
influenced in recent weeks by the rise in short-term interest rates
le the United States relative to those abroad and by the enactment
on April 3 of the Par Value Modification, Act, which raised the
U.S. official price of gold from $35 to $38 per ounce. In, February
the value of U.S. exports fell much more than the ¥alue of imports
and the delcit in merchandise trade increased from the already
large amount ie January.
Short-term interest rates generally had continued to rise siece
the Committee's meeting on March 21, in response to some further
tightening in money market conditions and to evidence of gathering
strength in economic activity and rising credit demands. However,
the market rate oe 3-month Treasury bills, at about 3.85 per cent
on the day before this meeting, was unchanged from 4 weeks
earlier. Demands for bills of short maturities had expanded in recent
weeks, and the prospective supply was reduced when the Treasury
announced oe March 21 that it would no longer add $300 million
to its weekly issues of ^1-day Mils, as it had been doing since
February 14.
142
In association with increases in yields on most types o! short-KM m
securities ami growing uncertainties about the course of intercsr
rales in general, rates on !ont_?-tenn securities also had ilnficd
upward ^iiice the March meeting The combined volume of new
corporate and Stale and UKUI s/overnment bomb publicly issued
changed liitle in March, remaining weil below the monthly average
of ]*•>"/1: the volume ol offering appeared likely to increase
somewhai m April.
Contract interest rates on conventional new-home moit^a^es
declined vln*li(ly in March while yields in the secondary market
for Federally insured mortgages changed little, follows of savings
hinds to nonbank thrift institutions icmamed ver\ JanL'C fur the
first quarter as a whole they approximated the extraordinaitly high
rates of the same period ot 1^71
At commercial hanks, business loans outstanding rose in Match
at the stepped-up pjee of February, and real estate and con>umer
Joans continued to expand rapidly Hanks increased sharply ttether
ihcir holdings of both U S. Cjo\eriuiieiit and other securities. In
reaction to strengthening loan demand and advances in money
market rates, most major banks raised their prime rales front 4-%
to 5 per cent m late March and early April,
Growth in the narrowly defined money stock (private demand
deposits plus currency in circulation, or A/,) remained rapid in
Maieh. However, growth in the more broadly defined money stock
(Mi plus commercial bank tone and savings deposits other than
large-denomination CD's, or M2) slowed somewhat. Inflows of
.savings funds to commercial banks, while still strong, continued
to moderate—-reflecting in part the increases in yields available on
short-term market securities and earlier reductions in rates paid
by banks on time ant! savings deposits Over the first quarter, Mt
and M2 grew at annual rates of about C).S and 13,5 per cent,
respectively, compared with rates of about 1 and K per cent over
the fourth quarter of I*)?I.1 Chiefly because of large swings in
U.S. Government deposits, the rate of growth in the bank credit
proxy-—daily-average member bank deposits, ac!justed to include
s
Growth rates cited aie calculated on the h.tsih of the iiaii\ -average level in
the last month of the tpntifer relathe to that in the Jus! month oi the preceding
quarter
143
funds from nondeposit sources-—increased sharply In March after
having slowed In February.
System open market operations since the March 21 meeting of
the Committee had been directed at fostering growth in reserves
available to support private nonbank deposits at an annual rate in
the March-April period of 9 to 13 per cent while at the same
time avoiding sharp day-to-day fluctuations and large cumulative
changes in money market conditions. It appeared at present that
the reserve measure employed would actually grow over the
March-April period at an annual rate of about 13.5 per cent, but
a technical adjustment to the underlying data—which did not affect
the deposit measure—accounted for about 1 percentage point of
the rate of growth in the measure of reserves, The Federal funds
rate had risen from about 4 per cent at the time of the March
21 meeting to around 4lA per cent in recent weeks. Member bank
borrowings averaged about $105 million in the 4 weeks ending
April 12 compared with about $45 million in the preceding 5 weeks.
The Committee agreed that the economic situation called for
growth in the monetary aggregates at rates somewhat more moderate than those recorded for the first quarter of the year. The members
took account of a staff analysis which suggested that somewhat
more moderate rates of growth over April and May combined were
likely to be associated with expansion in the volume of reserves
available to support private nonbaek deposits at ae annual rate of
about 9 per cent in those months and probably with some further
tightening of money market conditions.
The Committee decided to seek growth in the reserve measure
employed at an annual rate in a range of 7 to 11 per cent during
the April-May period and to accept, if necessary, somewhat firmer
money market conditions in order to achieve growth in that range
in existing circumstances, while continuing to avoid sharp fluctuations and large cumulative changes in money market conditions.
The members also decided that account should be taken of the
forthcoming Treasury financing and of developments ie capital
markets, and that some allowance should be made in the conduct
of operations if growth in the monetary aggregates appeared to
be deviating significantly from the somewhat more moderate rates
expected. It was understood that the Chairman might call upon
the Committee to consider the need for supplementary instructions
144
before the next scheduled meeting if il appeared that the Committee's objectives and constraints were not being met satisfactorily.
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
The in format ion reviewed at this meeting suggests thai real output
oi goods and services grew in the first quarter at about the stepped-up
rate attained in the fourth quarter of 1971. Most measures of business
activity have shown strength recently and demands for labor have
improved further, but the unemployment rate remains high. The
rise in wholesale prices slowed in March as some farm and food
products declined sharply, but the rise in prices of industrial commodities remained substantial. Wage rales also rose substantially
in Mareh and over the first quarter as a whole. The dollar has
strengthened somewhat in exehange markets in reeent weeks, and
the over-all U.S. balance of payments deficit on the official settlements basis has been small. In January and February merchandise
imports continued to be considerably in excess of exports.
The narrowly defined money stock expanded rapidly tn February
and Mareh, bringing the annual rate of growth over the post 6 months
to about 5lA per cent. Inflows of consumer-type time and savings
deposits to hanks have been strong thus far this year, although they
moderated us the first quarter progressed; inflows to nonbank thrift
institutions remained very large. Mainly reflecting swings in U.S.
Government deposits, a modest increase in the bank credit proxy
in February was followed by a large increase in March. Market
interest rates generalI\ have continued to rise in recent weeks.
In light of the foregoing developments, it JS the policy of the
Federal Open Market Committee to foster financial conditions
conducive to sustainable real economic growth and increased employment, abatement of inflationary pressures, ami attainment of
reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of capital market
developments and the forthcoming Treasury financing, the Committee seeks to achieve hank reserve and money market conditions
that will support somewhat more moderate growth in monetary
aggregates over the months ahead.
Votes for this action: Messrs. Bums, Hayes,
Brimmer, Coldwell, Daane, Eastburn, MacLaury,
Maisel, Mitchell, Robertson, Sheehan, and Wine.
Votes against this action,: None.
145
MEETING HELD ON MAY 23, 1972
Current economic policy directive.
Estimates of the Commerce Department indicated that real output
of goods and services had grown at an annual rate of 5.6 per cent
in the first quarter—about the same rate as in the fourth quarter
of 1971—and growth appeared to be accelerating in the current
quarter. Staff projections suggested that the growth rate would
increase further in the second half of 1972.
In April industrial production rose at a faster pace than earlier
in the year, reflecting widespread gains in output among consumer
goods, business equipment, and materials. Employment in manufacturing and other nonfarm establishments continued to expand,
and the average factory workweek increased sharply. However,
the unemployment rate remained at 5.9 per cent. According to
the advance report, retail sales declined in April—following an
upsurge in March—but they remained well above the monthly
average in the first quarter. Housing starts continued to fall from
the extraordinary high reached in February, although part of the
reported decline for April may have reflected statistical problems.
Wholesale prices of farm and food products, which had declined
in March, were about unchanged in April, but prices of industrial
commodities continued to rise at the substantial rate of the preceding 4 months. The consumer price index rose somewhat, after
having been stable in March; over the 2 months, retail prices of
foods changed little. The advance in average hourly earnings of
production workers on private nonfarm payrolls remained fairly
rapid.
Staff projections continued to suggest that growth in real GNP
would accelerate in the current quarter, with a step-up in inventory
accumulation from a very low rate in the first quarter now expected
to account for a part of the acceleration. Consumer spending, which
had increased more in the first quarter than had been estimated
earlier, was expected to continue upward at a substantial rate; such
spending would be buoyed by a larger gain in disposable income
than in the first quarter when a sizable increase in personal income
tax payments under the new withholding schedules had dampened
146
the
n:n'
It
v-as
a i i t i t i|Kf!v"iJ
1 bat
bfisf$icv»
eapital
ouila\s
would
e o i i l i n u e l u i i K ' K a s c . I'*i«¥ ni it k\s,'> t a p i d p a e e i r u m H» t h e l i r s t q u a r t e r ,
and
I h a ! t h e D M * in i r \ k k * i s f i a ! e t m s t i u e t i o u
oiulavs
P r o j e e t i o j t s i o ^ f j v -vji o m l *i,t!I of t h e v e e r
would
sit>w.
l i l e t h o * e of ^ w v e k s
e a r h e i , M i r p e v f e d s o m e f H i t h e r ii.se nt tin 1 r a t e of r e a l C L N P g r o w t h
lr w a s
still
antu'ipated
expenditures would
»'Utiay* a n d
that
n k * n . \ t s e a! a f»^ft^
invmln'y
iin'f^-tna'itl
fltal n o r c \ n o n * w o u l d ir<»pro\ v %
that
!ln % i ' x p a i i M c u i
IOIOIIH1
disposable
lit f v d c n i l
would
O n \\w
capilaf
fo c N p a i i < l ,
ar.ti
o t ! ; c i h a n d , it w a s e x p c c l e d
<nitl-nys w o u l d
constitutor-
consumption
hy^incss
^ onnnue
t o t i n : c \ l c i i ! t h a i h a d h t v i s ^Ui T ; ? » ¥ stod in llw
rnid t h a t r e s i d e n t i a l
;md
p ; t , c c , fluif
outlast
slow - although
(HCMOUS
\vouid
not
pfoj^cHoiiN—
icvr!
or)'.
h x c b j . n r c i a h / s r\>j if h e d o l l a r ^ r a m ' . l Hir-si r n a i o r l o i e i i 1 ! ! c u r r e n cie>
had
chaihjrd
!tilk4
>fiicc
nud-Mateli
I ' .v»
1'iu*
balance
p a y m e u i N o n tfi? o l l i e i a ^ s e U l e i u e n K b a ^ . i ^ b a d f v i n \n s h j f h t
l e t k - e i i h i : ,'i;; i!?t!o\\ o l p > i \ a i e w t p H ; t ' , ; - p e v v i a i ! v
l!i<i!ed S l a t e s
ib
tin.
M
nrst
hat! i l o w e d
? h i \ \\ .p i n w o u i r a - ^
'j
ni^nili;
out.
1'tic
,»l
t^JJ
pu\ incut'-
prwuu*
haianec
h«.<d » e n » ; ; m e u '
fi; ^is'iieM u ,
deliijf
was
i>K\i(!v i e d i K e d h y t h e
'Jeltcif
in n i e i e h u n d ? - - t .
if,uk'
MSOII i t n u , l o tin:
the hea\'^
whvn
apparent^
'Ilk*
vdh
net
s
hahihee
liquidity
basis
alHi%>m i h I!K
mMov* of i a | ) H « i !
u*nia»ned
iveoided
«in
vN'v'ef s .
lit M a i c ! ' « Ciie
Lirv
H i u i NLk% l i n i i i i c
! f c a ^ u r y ,tfitn «IHU e t i o<» ' \ ) H ( i . ' ( ' i l i a ! us i\\
(
delict
i .tpiiaf
<»»- t h e
/ev.^ni
of
siupius.
7
HIL (! w o u l d r e f u n d o u ! \ .> 1 . '< h i l l i t > n o i t h e S J 4 bi11 n-?i tit p u « > i K J \
i i r l d d v i n jiKiturttJ)' o n M a s
U»r c a s h
<<* ,i
hi
fin'
refunding
#
) ',«. vii n*«! „ at ;«n
!>%n0 i n , l ! h . n
}.;»»;e o l
avou;.1"
I** y « e l t l d
pn^e
l
I *% a n d t h a t if v-. o u l d j e d ^ e u i r h o I n i L t i i c e
I':t/asi, 5 f \
fi'ie
>\eK.i;N
,i b o n i i
ptii;
[iialuui:;.!
;'•'• |»rf e e * n .
l i H ' J ' / s t ( . " J i % i > it* t u l \ h
C'onnuiik\ '> nK^tiiiP
d
i o n "ixMii
I:1!
tiW'i
\\%ntUi
h i ' le.*s
hiii'jv
.«
e,t.!)
IJKIII
tn
fK!4f
i > / i0
iJ i ^ i'
iurl'ui''
, i . *(d,»"
l i t A
Hit
m T ^ ' p
'•>*, e o i , d
f
iM?<, nr.if, d ,
. i n ' J *>t.<U
i'''X,,if.;
Ulii\i>\
i n !fic
p a ' U v
h ;
i s s u e d h:»d d e e i i n e d s w h i e w h a f
» l'^\is
possible
u V !',;nl\
h ^ j t o w a i v •,
eeuL
i M N :,
ietHu.JV
d! r « hV : d V \ l
^ J I A{«ni
< *f <«<„"•-*'» ^ . M ' p v M » i h , '
> I ,1*5 h i l l i u i i
M pi/t
If v«, a^ t h o u g h t
r . t H .t-< \ \ \ h * x ' i l ^ ' s ' l
six",hi:.\
! V\*kr?,ie
a
5
atkliom*;!
» ? ;. k !d 4
*lou^
v
\
a m ! k > va l y . o 1 , »
in ' \ r * : i l a n d a
d : e *. v '
1
u
;
\ h e
afki
al
un
ihai
however, interest rales—-especially short-term rales—had tended
upward again partly in response to sonic tinning in money market
conditions and to three Treasury auctions of bills in a short period
of time. The market rate on 3-month bills was 3,19 per cent on
the day before this meeting, compared with a low of 3.42 per
cent In early May and 3.85 per cent on the day before the April
meeting.
Contract Interest rates on conventional new-home mortgages and
yields in the secondary market for Federally insured mortgages
rose somewhat in April; In both cases the increases were the first
in many months. Inflows of savings funds to nonbank thrift Institutions slowed, but they remained at a relatively advanced pace.
At commercial banks, business loans outstanding expanded in
April at a faster pace than in the first quarter, and real estate and
consumer loans continued to grow rapidly. Banks added only a
small amount to their holdings of Government securities and
reduced slightly their holdings of other securities; in the first
quarter, they had added substantial amounts of both.
Growth in the narrowly defined money stock (private demand
deposits plus currency in circulation, or Mx) slowed to an annual
rate of about 8 per cent in April from an average rate of about
12 per cent in February and March. Inflows of savings funds to
commercial banks continued to slacken, and growth in the more
broadly defined money stock (Mt plus commercial bank time and
savings deposits other than large-denomination CD's, or M2) also
moderated to a rate of about 8 per cent, from an average rate
of 13 per cent in February and March. However, expansion in
the bank credit proxy—daily-average member bank deposits, adjusted to include funds from nondeposit sources—remained rapid,
reflecting increases in both U.S. Government deposits and the
volume of large-denomination CD's outstanding.
System open market operations since the April 18 meeting of
the Committee had been directed at fostering growth in reserves
available to support private nonbank deposits (RPD's) at an annual
rate in the April-May period of 7 to 11 per cent and growth in
the monetary aggregates at somewhat more moderate rates than
earlier, while at the same time avoiding sharp day-to-day fluctuations and large cumulative changes in money market conditions.
It appeared at present that RPD's would actually grow over the
148
April-May period at an annual rate of 7.5 per cent. Since the April
meeting the Federal funds rate had continued to fluctuate around
the 414 per cent level reached in early April. Member bank borrowings averaged about $115 million in the 5 weeks ending May 17
compared with about $105 million the preceding 4 weeks.
In pursuit of its open market objectives, the System needed to
provide fewer reserves than it would otherwise have provided
because a large amount of reserves was supplied by a reduction
in the Treasury's balance at the Federal Reserve Banks and by
the moneti/.ation of the gain in the dollar value of the gold stock
that resulted from the recent increase in the U.S, official price of
gold. In late April the System met temporary needs for reserves
by making repurchase agreements with nonbank dealers; interest
rates on those agreements were established by competitive bidding,
in accordance with a Committee decision on April 17, lc)72 In
this initial use of the experimental auction procedure, no major
difficulties were encountered.
The Committee agreed that the economic situation called for
growth in the monetary aggregates over the months ahead at rates
somewhat slower than those recorded in recent months. After taking
account of recent changes in deposits and lagged reserve requirements, the Committee decided to seek growth in RPD's at an annual
rate in a range of 7.5 to 11,5 per cent dining the May-June period
while continuing to avoid sharp fluctuations and large cumulative
changes in money market conditions. If was recognized that growth
in RPD's within that range might be associated with some firming
of money market conditions. The members also decided thai some
allowance should be made in the conduct of operations if" growth
in the monetary aggregates appeared lo be deviating significantly
from the rates expected and that account should be taken of capital
market developments and possible Treasury refunding. A^ at other
recent meetings, if was understood that the Chairman might call
upon the Committee to consider the need for supplementary instructions before the next scheduled meeting if it appeared that
the Committee's objectives and constraints were not being met
satisfactorily,
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
149
'The information reviewed at this electing, including recent data
for such measures of" business activity as industrial production and
employment, suggests that real output ol' goods and services may
be growing at a faster rate in the current quarter than in the two
preceding quarters, but the unemployment rate remains high. In
April wholesale prices of farm and food products changed little-—
after having declined in March-—hut the rise in prices of industrial
commodities remained substantial. The consumer price index, which
had been stable in March, increased somewhat. Wage rates continued to rise at a substantial pace. The U< ,S balance of payments
on the otlieial settlements basis has been in small surplus since
mid-March, but the payments balance on the net liquidity basis has
apparently remained in deficit. In March merchandise imports continued to be considerably in excess of exports,
Growth in both the narrowly and broadly defined money stock
slowed in April from the rapid rates in February and March. Inflows
ol savings funds to nonbank thrift institutions also slowed, but they
remained at a relatively advanced pace, Reflecting it further Increase
In U.S. Government deposits and a rise in ihc outstanding volume
of large-denomination CD's, the bank credit proxy continued to
expand at a rapid rale. In recent weeks, market interest rates have
fluctuated in a narrow range.
fn light ol the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions
conducive to sustainable ical economic growth and increased employment, abatement ot inflationary pressures, and attainment of
reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of capital market
developments and possible Treasury refunding, the Committee seek\s
to achieve bank reser\e mid money market conditions that will
support somewhat slower growth in monetary aggregates over the
months ahead
Vote** for thi> action; Messrs, Burns, Hayes.
Hriioiiiii. Ci»lvl\sell. Daaik-. Hastburu. MaeLaury.
Mitchell. Sheeban, and Wim\, Votes auainst tins
action; None.
Ak'-cnt and noi voting: Me>%is. Maisej and
Robertson.
MEETING HELD ON JUNE 19-20, 19721
Current economic policy directive.
The information reviewed at this meeting suggested that real output
of goods and services was rising in the second quarter at a faster
pace than the 5.6 per cent annual rate recorded in the first quarter.
A moderately higher rate of growth appeared to be in prospect
for the rest of 1972.
In May retail sales increased sharply, according to the advance
report, and were well above the first-quarter average. Industrial
production continued to expand, with gains reported among consumer goods, business equipment, and materials. Payroll employment rose substantially further in manufacturing and other nonfarm
establishments, but because of another large addition to the civilian
labor force, the unemployment rate remained at 5.9 per cent.
Wholesale prices of farm and food products rose considerably
in May, following little change in April, and prices of industrial
commodities continued upward at about the average rate of earlier
months this year. Average hourly earnings of production workers
on private nonfarm payrolls advanced at a slower pace than they
had in the preceding 3 months.
The latest staff projections of real GNP for the second half of
1972, which suggested some further increase in the over-all rate
of expansion, were similar to those of 4 weeks earlier. It was
anticipated that disposable income and consumption expenditures
would rise at a somewhat faster pace; that business capital outlays
would continue to expand, although not so rapidly as had been
suggested in the previous projections; and that inventory investment
would increase appreciably. It was expected that Federal purchases
of goods and services would expand moderately further and that
residential construction would level off.
In foreign exchange markets, speculation involving a number
of European currencies had developed since the last meeting of
the Committee. The exhange rate for sterling against the dollar
had declined significantly while rates for most continental currenlr
This meeting was held over a 2-day period beginning on the afternoon of
June 19, 1972, in order to provide more time for the staff presentation concerning
the economic situation and outlook and the Committee's discussion thereof.
151
cies had risen; the spread between sterling and several other
currencies had widened to the maximum specified under the European Community monetary agreement. Through early June the U.S.
balance of payments was in surplus on both the official settlements
basis and the net liquidity basis, as recorded and unrecorded inflows
of short-term capital to the United States continued to exceed the
deficit on current and long-term capital account. The excess of
merchandise imports over exports in April, however, had been even
larger than in February and March.
Since the Committee's meeting on May 23, market interest rates
oe both short- and long-term securities had fluctuated in a narrow
range—declining somewhat early in the period and rising again
later. Rates had edged down in late May in part because of a
Treasury decision not to refund $1.2 billion of bonds maturing
on June 15 and expectations in the market that the Treasury would
not borrow new funds until late July. Moreover, the combined
volume of new publicly issued corporate and State and local
government bonds had declined somewhat further in May and
appeared likely to remain at a reduced level in June. Later in the
period rates moved up again, in part because of the effects oe
investor expectations of reports that suggested further strengthening
in economic activity and indications of some firming in money
market conditions. Markets for Treasury notes and bonds also were
influenced by discussion of the possibility that the Treasury might
undertake an advance refunding. The market rate for 3-month
Treasury bills was 3,92 per cent on the day before this meeting
compared with 3.79 per cent 4 weeks earlier.
Contract interest rates on conventional new-home mortgages
were unchanged from April to May while yields in the secondary
market for Federally insured mortgages rose slightly. Inflows of
savings funds to eonbank thrift institutions continued to moderate.
At commercial banks, business loans outstanding expanded in
May at about the stepped-up rate of April, and real estate and
consumer loans continued to grow rapidly. Banks also added a
substantial amount to their holdings of securities, especially securities of State and local governments.
Growth in the narrowly defined money stock (private demand
deposits plus currency in circulation, or Mt) slowed further in May.
However, inflows of savings funds to commercial banks increased,
152
after having fallen off in the preceding 3 months, and growth
stepped up somewhat In the more broadly defined money stock
(Mj plus commercial bank time and savings deposits other than
large-denomination CD's, or M2). Over the April-May period, Mt
and M2 grew at annual rates of about 6 and 8 per cent, respectively,
compared with rates of about 9 aed 13 per cent in the first quarter
of 1972.2 Expansion in the bank credit proxy—daily-average
member bank deposits, adjusted to include funds from eoedeposlt
sources—remained rapid as baeks, especially those experiencing
strong demands for business loans, acted aggressively to Increase
the volume of large-denomination CD's outstanding.
System open market operations since the May 23 meeting of
the Committee had been directed at fostering growth le reserves
available to support private nonbank deposits (RPD's) at an annual
rate ie the May-June period between 7.5 aed 11.5 per cent and
growth In the monetary aggregates at rates somewhat slower than
those recorded earlier this year, while avoiding sharp day-to-day
fluctuations and large cumulative changes In money market conditions, It appeared at present that RPD's would grow over the
May—June period at a rate of about 7 per cent. The average Federal
funds rate had been slightly below 4Vi per cent since the beginning
of June, compared with about 4lA per cent In May, In the 4 weeks
ending June 14 member bank borrowings had averaged about $115
million, approximately the same as In the preceding 5 weeks.
As at its May meeting, the Committee agreed that the economic
situation called for moderate growth in the monetary aggregates
o\zv the months ahead. After taking account of recent changes
m deposits and the 2-week lag in reserve requirements, the Committee decided to seek growth in RPD's at ae anneal rate ie a
iiinvx of 4.5 to 8,5 per cent during the June-July period while
continuing to avoid sharp fluctuations and large cumulative changes
in money market conditions. As before, it was recognized that
pursuit oi the objective for RPD's might be associated with some
iirming of money market conditions. The members also decided
iliiil some allowance should be made in the conduct of operations
tf grow Hi IE the monetary aggregates appeared to be deviating
-Rased ««n the change ie the daily-average levels from March to May and from
lV*.omJ"vr u* March.
153
significantly from the rates expected, and that account should be
taken of capital market developments and possible Treasury financing. As at other recent meetings, it was understood that the
Chairman might call upon the Committee to consider the need for
supplementary instructions before the next scheduled meeting if
it appeared that the Committee's objectives and constraints were
not being met satisfactorily.
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
The information reviewed at this meeting, including recent data
for such measures of business activity as industrial production,
employment, and retail sales, suggests that real output of goods
and services is growing at a faster rate in the current quarter than
in the two preceding quarters, but the unemployment rate remains
high. In May wholesale prices of farm and food products advanced
appreciably—after having changed little in April—and the rise in
prices of industrial commodities remained substantial. The most
recent data suggest some moderation in the pace of advance in wage
rates. The U.S. balance of payments has been in surplus in recent
weeks on both the official settlements basis and the net liquidity
basis. In April, however, the excess of merchandise imports over
exports was even larger than in February and March. Some strains
have developed in international financial markets recently, involving
European currencies.
Growth in the narrowly defined money stock slowed further in
May, while growth in the broadly defined money stock stepped up
somewhat as inflows of consumer-type time and savings deposits
to banks expanded considerably; over the April-May period, growth
in both measures of the money stock was well below the high rates
in the first quarter of the year. The outstanding volume of large-denomination CD's increased substantially further in May. and expansion in the bank credit proxy remained rapid. In recent weeks,
market interest rates have continued to fluctuate in a narrow range.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions
conducive to sustainable real economic growth ami increased employment, abatement of inflationary pressures, and attainment of
reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of possible
Treasury financing and developments in capital markets, the Committee seeks to achieve bank reserve and money market conditions
154
that will support moderate growth in the monetary aggregates over
the months ahead.
Votes for this action: Messrs. Burns, Brimmer,
Bucher, Cold well, Daane, Eastburn, MacLaury,
Mitchell, Robertson, Sheehan, Winn, and Treiber.
Votes against this action: None.
Absent and not voting: Mr. Hayes. (Mr. Treiber
voted as his alternate.)
Subsequent to this meeting, on July 6, 1972? Committee
members voted to amend this current economic policy directwe
by adding a reference to international developments ie the final
paragraph. As amended, that paragraph read as follows:
To implement this policy, while taking account of possible
Treasury financing, developments in capital markets, and international developments, the Committee seeks to achieve bank reserve
and money market conditions that will support moderate growth
in monetary aggregates over the months ahead.
Votes for this action: Messrs. Brimmer, Bucher,
Cold well, Daane, Eastburn, MacLaury, Robertson,
Sheehae, Wine, and Treiber. Votes against this
action: None.
Absent and not voting: Messrs. Burns, Hayes,
and Mitchell (Mr. Treiber voted as Mr. Hayes'
alternate.)
In the 3 days preceding this action, foreign central banks had
actiitiivd fan1!* amounts of dollars in the process of maintaining
L xdtiiftge rales for their currencies within the internationally agreed
margins. The System Account Manager advised that, insofar as
flit investment of these and any additional fends that might be
acquired by the foreign central banks took the form of purchases
o{ U.S. Treasury bills ie the market, they would teed to exert
Juwnward pressures on bill rates. In the interests of the U.S.
I ,ilance of payments and International confidence in the dollar, the
members decided that open market operations should be conducted
valti a view to avoiding significant declines ie bill rates, insofar
155
as that was consistent with the objectives agreed upon by the
Committee on June 20, 1972. Specifically, It was decided that (1)
to the extent feasible, reserve additions required to meet the
Committee's objectives should be made by means other than
purchases of Treasury bills, and (2) foreign official demands for
bills, If heavy, should be met to the extent feasible by sales of
bills from the System's portfolio, with any undesired reserve effects
offset by other means. The members agreed that the dlrecti¥e should
be amended to affirm the Committee's intention to authorize such
operations.
In casting their affirmative Yotes, a number of members indicated
that while they believed the authorization desirable they thought
it should be used with restraint. Mr. Brimmer noted that he favored
the action not only on the international grounds cited but also
because he thought a significant decline in bill rates would have
adverse domestic implications.
156
MEETING HELD ON JULY 18, 1972
Current economic policy directive.
The information reviewed at this meeting suggested that growth
in real output of goods and services in the second quarter of 1972
had been much faster than the annual rates of between 5.5 and
6 per cent recorded in the two preceding quarters and that the
rise in prices had slowed considerably from the first to the second
quarter of the year. Staff projections suggested that growth in real
GNP would remain rapid in the second half, although not so rapid
as in the quarter just ended.
In June industrial production continued to expand, reflecting
gains in output of business equipment and of materials, but the
pace of the expansion—as in May—was well below that in the
first 4 months of the year. Total nonfarm payroll employment was
unchanged from May, following three sizable monthly increases.
Although employment in manufacturing declined somewhat, the
average factory workweek remained relatively high. The unemployment rate dropped to 5.5 per cent from 5.9 in May, but the
decline was concentrated among younger workers and might have
reflected in part seasonal adjustment problems at the end of the
school year. Retail sales declined, according to the advance report,
after having increased sharply in May; sales in the second quarter
as a whole were substantially higher than in the first quarter.
Wholesale prices of farm and food products rose considerably
further in June, and prices of industrial commodities continued
upward at about the average rate of earlier months this year. The
advance in hourly earnings of production workers on private nonfarm payrolls, which had slowed in May, remained small in June.
Staff projections of real GNP for the second half of 1972 were
generally similar to those of 4 weeks earlier. However, the rate
of growth anticipated was less rapid than that in the second quarter,
which now appeared to have been substantially greater than had
been expected. It was anticipated that the rise in disposable personal
income in the second half would be somewhat faster than in the
second quarter and that expansion in consumption expenditures
would remain strong—with the recently enacted increase of 20 per
cent in social security benefits contributing to the gains in the fourth
quarter. It was still expected that State and local government
157
purchases of goods and services would increase substantially; that
business capital outlays would rise moderately and inventory investment appreciably; and that residential construction would level
off.
In foreign exchange markets, speculation Intensified in mid-June.
The United Kingdom lost a substantial amount of reserves In
supporting its exchange rate, and early on June 23 it announced
that the rate for sterling would be allowed to float and that its
exchange markets would be closed for 2 days. Uncertainty and
speculation then focused on the dollar and led to the closing of
official markets in all major countries—although in some European
countries, not before central banks had acquired a substantial
amount of dollars in the process of maintaining their currencies
within the limits of the Smithsonian Agreement. When exchange
markets were reopened around the end of June, controls on capital
inflows into some countries were tighter. At the time of this meeting
of the Committee, speculative pressures against the dollar had
abated somewhat, hut exchange rates for most major foreign
currencies were at or close to their ceilings against the dollar. The
rate for sterling had declined about 5 per cent from the level
prevailing before it was allowed to 11 oat.
U.S. merchandise exports increased in May while imports
changed little, and the trade deficit receded from the exceptionally
large figure in April. The average deficit in the April-May period,
however, was substantially greater than that in the first quarter of
the year.
Since the last meeting of the Committee, interest rates on most
short-term market securities had risen somewhat, partly in response
to gradual finning in money market conditions. Rates on shorterterm Treasury bills were an exception, reflecting anticipations of
demands for Treasury securities by those foreign official institutions
that had been acquiring dollars; at 3.c)2 per cent on the day before
this meeting, the market rale on 3-month bilts was unchanged from
4 weeks earlier.
In maikets for long-term securities, interest rales on corporate
and Slate and local government bonds rose somewhat in the latter
part of June but declined again in early July: at the time of this
Committee meeting yields on long-term bonds generally were little
changed from 4 weeks earlier. The combined volume of new
[58
publicly issued corporate bonds and of Slate and local government
bonds changed little from May to June; the volume appeared likely
to expand in July,
Contract interest rates on conventional new-home mortgages and
yields in the secondary market for Federally insured mortgages
both were unchanged from May to June. Inflows of savings funds
to nonbank thrift institutions increased somewhat In June, hut the
average rate of inflows in the second quarter of fhe year was well
below the exceptional pace in fhe firs! quarter.
At commercial banks, real estate and consumer loans outstanding
continued to expand rapidly in June, but business loans declined
after having expanded substantially throughout the first 5 months
of the year—and banks reduced their holdings of securities other
than those of the U.S. Government. Despite fhe measured decrease
in business loans, part of which may have been attributable to
seasonal adjustment problems, loan demand was reported to have
remained basically strong, In late June most major banks raised
their prime rales from 5 to 5*4 per cent.
Growth in the narrowly defined money slock (private demand
deposits plus currency in circulation, or ,V/,) in June remained ''!•*•.r
to the relatively slow rate recorded in May, Sluggishness in June,
however, may have reflected temporary effects of the speculation
in foreign exchange markets and outflows of funds from the iTni?ed
States after midmonth. and weekly data suggested a sharp increase
in the rate of expansion in early July. Growth in the more broadly
defined money stock (Alj plus commercial bank time and savings
deposits other than large-denomination CD's, or ,Vf2) icrnained
substantial in June, as inflows of eonsu ner-type time and sa\ ings
deposits to banks continued at a relatively high rate. Hxpnnsion
in the hank credit proxy---daily-itveraiK: member hank deposits,
adjusted to include funds from nondeposii sources- slowed
sharply, reflecting a marked reduction in I ] .S. (}overnnu;nt deposits.
System open market operations in the petiod since the June 19-20
meeting of the* Committee had been directed at fostering growth
in reserves available to support private nonhank deposits fRPD'si
at an annual rate in the Junc-Jul> period of between 4,5 anil H»5
per cent, while avoiding sharp day-to-day fluctuations: and large
cumulative changes m money market conditions. Since JuK U
when Committee members voted to amend the current economic
policy directive to take international developments into account,
operations also had been conducted with a view to providing and
absorbing reserves in ways thai avoided significant declines in
Treasury bill rates that might otherwise have resulted from heavy
foreign official demands for bills. It appeared at present that RPD's
would grow over the June-July period at a rate of about 8.5 per
cent. The Federal funds rate rose to about 4% per cent from just
under 4l6 per cent shortly before the preceding meeting. In the
4 weeks ending July 12 member bank borrowings averaged about
$180 million, compared with about $115 million in the preceding
4 weeks.
The Committee agreed that the economic situation continued to
call for moderate growth in the monetary aggregates over the
months ahead, and it decided to seek growth in RPD%s at an annual
rate in a range of 3 to 7 per cent during the July-August period
while continuing to avoid sharp fluctuations and large cumulative
changes in money market conditions. The members also decided
that account should be taken of the forthcoming Treasury financing,
of developments in capita! markets, and of international developments, and that some allowance should be made in the conduct
of operations if growth in flic monetary aggregates appeared to
be deviating significantly from the rates expected. As al other recent
meetings, it was understood thai the Chairman might call upon
the Committee to consider the need for supplementary instructions
before the next scheduled meeting if it appeared that the Committee's objectives and constraints were no! being met satisfactorily,
The following current economic policy directive mas issued to
the Federal Reserve Rank of New York:
The information reviewed at this meeting suggests that real output
of goods and servuvs increased :tt y faster rate in the second quarter
than in the t\M> preceding quarter^. In June the unemployment rale
declined, bin it was still substantial. Wholesale prices of farm nnd
food produces advan* ed appreciably further in June and the rise
in prices of industrial commodities remained substantial Recent data
MigL'esi moderation "m 'he puce of advance in wage rales. In forciiin
exchange markets. !'«>iJowing disturbances leading to a floating, of
the pound sterling, the dollar has come under pressure1 and the
tesen es of Fi?r*«pe:in • Yiifmf banks ba\c increased xharph In May.
160
the excess of merchaedise Imports over exports remained large,
though a little less than in April.
Growth in the narrowly deieed moo.ey stock was relatively slow
in May and June, but preliminary weekly data suggest a pickup
in early July. Growth in the broadly defined money stock was more
substantial as iniows of consumer-type time and savings deposits
to banks remained strong. Expansion in the bank credit proxy slowed
sharply in June as U.S. Government deposits declined markedly.
In recent weeks, long-term interest rates have changed little; rates
in short-term markets have advanced, except for those oe shortermaturity Treasury bills.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions
conducive to sustainable real economic growth and increased employment, abatement of ielationary pressures, and attainment of
reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of the forthcoming
Treasury financing, developments in capital markets, and international developments, the Committee seeks to achie¥e bank reserve
and money market conditions that will support moderate growth
in monetary aggregates over the months ahead.
Votes for this action: Messrs. Burns, Hayes,
Brimmer, Bucher, Daane, Eastburn, MacLaury,
Robertson, Sheehan, and Wine. Vote against this
action: Mr. Cold well.
Absent and not voting: Mr. Mitchell.
Mr. Coldwell dissented from this action, because in his judgment
average growth in bank reserves within the speciied range for July
and August and the associated expansion in the money supply might
build a base for excessive economic stimulation. He was concerned
about the effects both on the domestic economic situation, in the
context of heaYy stimulation from iscal policy, and oe international
inanciai problems.
161
MEETING HELD ON AUGUST 15, 1972
Current economic policy directive.
Preliminary estimates of the Commerce Department, indicated that
real output of goods and services had grown at an annual rate
of about 9 per cent in the second quarter—compared with upward
revised rates of about 6.5 per cent in the two preceding quarters—
and that the rise in prices in the private economy had moderated.
Staff projections suggested that economic growth would remain
rapid in the second half of the year—although it would slow
appreciably from the second-quarter rate. It was expected that
growth would be somewhat more rapid in the fourth than in the
third quarter.
In July retail sales rose sharply—according to the advance
report—and more than recovered the decline in June. However,
industrial production registered only a small increase and employment in nonfarm establishments declined somewhat, in part because
floods following tropical storm Agnes curtailed output and employment in the eastern part of the country. The over-all unemployment
rate remained at 5.5 per cent, as the rate declined for men aged
25 and over but increased for those under 25.
The advance in hourly earnings of production workers on private
nonfarm payrolls, which had been slow in May and June, was
moderately faster in July. The rise in wholesale prices of industrial
commodities was small, but prices of farm and food products rose
sharply further, registering their largest monthly increase of the
year to date. In June the consumer price index rose very little.
Staff projections suggested that expansion in consumption expenditures and in business inventory investment would be strong
in the current quarter, although less so than in the second quarter;
that business capital outlays would rise less rapidly; and that
residential construction would level off. For the fourth quarter, it
was anticipated that consumption expenditures would be stimulated
by payment of the 20 per cent increase in social security benefits,
scheduled to begin in early October, and that growth in State and
local government purchases of goods and services would be increased if, as assumed, Federal revenue sharing was enacted.
162
In foreign exchange markets, relative calm had been restored
since the July meeting of the Committee, following a month of
turbulence during which I lie I'nitcd Kingdom had allowed sterling
to float and some F.uropean countries had acquired substantial
amounts of dollars in the process of keeping exchange rates for
their currencies within the limits of the Smithsonian Agreement.
After a meeting on July 17-IS, the Finance Ministers of the
European Community reaffirmed their intention to maintain ihe
exchange rates and margins of the Smithsonian Agreement, and
speculation on a joint Huropean Community iloat against the dollar
subsided. Also in support of the Smithsonian Agreement, the
Federal Reserve renewed operations in the foreign exchange markets and reactivated its swap network with other central banks.
in subsequent weeks, the reserves of the central banks of most
industrial countries changed little* and exchange rates Cot some
major currencies backed away from their upper limits.
U.S. merchandise exports, imports, and the trade deficit changed
little in June. For the second quarter as a whole, the deficit was
substantially greater than thai in the firs! quarter of the year,
On July 26 the Treasury announced that in its mid-August
refunding it would offer holders of notes and bonds maturing during
the remainder of 1^72 an opportunity to exchange their holdings
for the following issues: it 3'2-year, 51U per cent note priced to
yield 5.96 per cent; a 7-year, 6V4 per cent note at par; and a 12-year.
b3/n per cent bond priced to yield 6.45 per cent. In addition, holders
of securities maturing in November lS^-4 and February ic>75 were
given the opportunity to exchange them tor the longer-ten?] note
and the bond. This combination of a refunding and pre- re fund ing
wits highly successful. Of Ihe $19.6 billion of eligible securities
held by the public, about $8 billion were exchanged for the new
issues--$3.9 billion for the shorter-term note. $3 billion for the
longer-term note, and $ L ! billion for the bond. Only about $600
million or 26 per cent of the pubiich held issues maturing this
August were redeemed for cash.
Since the Committee's meeting on July IS, market interest rales
on both short- and long-term securities had declined somewhat on
balance, in part because the Treasury's o\er-ail demands for new
cash in recent months had fallen short of those that had been widely
expected. Moreover, the combined volume of new publicly issued
163
corporate bonds and of State and local government bonds had
declined somewhat from June to July, and a further decline had
appeared in prospect for August.
In markets for short-term securities, the absence of a short-term
issue in the Treasury's August financing had exerted sonic downward pressure on rates for 'Treasury hills and private instruments.
The market rate on 3-month bills was 3.87 per cent on the day
before this meeting, compared with 3.(>2 per cent on the day before
the July meeting and an interim low of 3,77 p e r € e n | a t the
beg I fining of August,
Contract interest rates on conventional mortgages on new homes
rose slightly from June to July, but rates on the much larger volume
of new loans on existing homes remained stable. Yields also were
stable in the secondary market for Federally insured mortgages.
Inflows of savings funds to nonbank thrift institutions increased
further in July and were substantially above the second-quarter rate.
At commercial banks, real estate and consumer loans continued
to expand rapidly in July, and outstanding business loans rose
substantially after having declined in June. Ranks reduced their
holdings of U.S. Government securities, as the Treasury's net
borrowing demands were smaller than customary in July.
Growth in the narrowly defined money stock (private demand
deposits plus currency in circulation, or M,) was unusually rapid
in July following low rates of growth in May and June. Expansion
in the more broadly defined money stock (Af, plus commercial
bank time and savings deposits other than large-denomination
CD's, or M2) was a little faster in July than in June, despite a
marked reduction in inflows of consumer-type time and saving
deposits to banks. Growth was substantial in the bank credit
proxy—daily-average member bank deposits, adjusted to include
funds from nondeposit sources—reflecting not only a sharp rise
in private demand deposits but also an increase in the outstanding
volume of large-denomination CD's.
System open market operations in the period since the July 18
meeting of the Committee had been directed at fostering growth
in reserves available to support private nonbank deposits (RPD's)
at an annual rate of between 3 and 7 per cent in the July-August
period, while avoiding sharp day-to-day fluctuations and large
cumulative changes in money market conditions. Through most
164
of ihe period it had appealed thai growth in RPl.Vs might exceed
the target ran^e. For that reason, and also because the monetary
aggregates were expanding rapidh . the System undertook to slow
the increase in reserves to the extent feasible in light of the
large-scale Treasury refunding then in piocess, At present it appeared that MPP\s would grow o\er the July -August period at a
rate of about 6 5 per cent. The Federal funds rate had risen from
about 4%. per Lent at the time of the preceding meeting to around
4v4 per cent in recent days. In the 4 weeks ending August 9 member
hank borrowings averaged about $250 million, compared with
about $180 million in the preceding 4 weeks.
The Committee agreed that the economic situation continued to
call for moderate growth in the monetary aggregates over the
months ahead. If ileekied to seek growth in RPD"s during the
August-September period at an annual rate in a range of 5 to c)
per cent • a rate which was expected to be associated with some
moderation m monetary growth. While recognizing that pursuit of
the objective for KPITs might he associated with some firming
of mone\ market conditions, the Committee agreed that a marked
(inning, v*. hieh might precipitate unduly sharp increases in interest
rales in a sensitive market atmosphere, should be a\oided The
memhcis also decided that in the conduct of operations, account
should be taken of developments in capital markets and international developments, and that sonic allowance should also be made
in operations if growth in the monetary aggregates appeared to
be deviating significantly from the rates expected, It was understood that the Chairman might call upon the Committee to consider
the need for supplementary instructions before the next scheduled
meeting if financial developments suggested that the Committee's
purposes ami constraints were not being met satisfactorily
The following current economic policy directive was issued to
the Federal Reserve Bank oi New York;
The information reviewed at this meeting indicates that real output
nf goods and services increased at «t rapid rate in the second quarter,
ant! continued though less rapid growth appears in prospect for the
current quarter. 'The unemployment rate v,i\s lower in June and July*
but it was still substantial. The pate of advance in wage rates hits
slowed on balance in recent months, and the rate of increase in
tiveiaiie prices ol all goods and services in the private economy-
165
moderated in the second quarter. In July, the rise in wholesale prices
of industrial commodities slowed, but wholesale prices of farm and
food products rose sharply further. Since mid-July foreign exchange
market conditions have been quiet and the central hank reserves
of most industrial countries have changed little. In June, the large
exeess of U.S. merchandise imports over exports persisted.
The narrowly defined money stock grew at an unusually rapid
rate in July, following relatively slow growth in May and June.
Growth in the broadly defined money stock remained substantial,
although inflows of consumer-type time and savings deposits to
banks slowed appreciably. The bank credit proxy expanded sharply
in July, reflecting strength in both private demand deposits and
large-denomination CD's, fn recent weeks, interest rates on most
market securities have declined somewhat on balance, and the
Treasury completed a highly successful refunding.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions con
ducive to sustainable real economic growth and increased employment, abatement of inflationary pressures, and attainment of reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of developments
in capital markets and international developments, the Committee
seeks to achieve bank reserve and money market conditions that
will support moderate growth in monetary aggregates over the
months ahead,
Votes for this action: Messrs. Burns. Hayes,
Brimmer. Bueher. Cold well, Daane. Eastburn.
MacLaury, Mitchell, Robertson. Sheehan, and
Winn. Votes against this action: None.
166
MEETING HELD ON SEPTEMBER 19, 1972
Current economic policy directive.
The information reviewed at this meeting suggested that growth
in real output of goods and services in the third quarter would
be substantial although well below the annual rate of 9.4 per cent
recorded in the second quarter. Growth was expected to be more
rapid in the fourth quarter than in the third and to remain at a
fast pace in the first half of 1973.
In August retail sales continued to expand, according to the
advance report, and they were substantially greater than the monthly
average in the second quarter. Industrial production rose moderately, after having increased little in June and July; part of the
gain was attributable to recovery from the effects of tropical storm
Agnes. Nonfarm payroll employment, which had been adversely
affected by strikes as well as by the storm, rose appreciably in
August. Reflecting a large increase in the labor force as well as
in employment, the unemployment rate—at 5.6 per cent—was
essentially unchanged from the rate in June and July.
The advance in hourly earnings of production workers on private
nonfarm payrolls in August, as in July, was moderately faster than
in the second quarter. The rise in wholesale prices of farm products
and foods remained rapid, and the advance in prices of industrial
commodities, which had slowed in July, resumed the somewhat
faster pace of earlier months this year. In July the increase in the
consumer price index was larger than in the immediately preceding
months, chiefly because of a sharp rise in retail prices of foods.
Staff projections continued to suggest that expansion in consumption expenditures would be strong in the fourth quarter, in
part because of the 20 per cent increase in social security benefits
scheduled to begin in early October. It was also anticipated that
growth in State and local government purchases of goods and
services would be raised by enactment of Federal revenue sharing;
that business fixed investment would continue to increase, in line
with recent surveys; that residential construction would level off;
and that, in response to sustained expansion in final takings of
goods, inventory investment would rise appreciably further.
Foreign exchange markets had remained relatively quiet since
167
mid-August. Ae Increase ie short-term interest rates In the United
States relative to those Ie other major countries had contributed
to a further strengthening of the dollar against major European
currencies, and central bank reserves of most industrial countries
had continued to change little. In July both U.S. merchandise
Imports and exports Increased, and the trade deficit was virtually
unchanged from the high ieYei of the two preceding months.
Market Interest rates generally advanced In the Interval between
the August and September meetings of the Committee. Increases
In rates were significantly larger for short-term than for long-term
securities and were greatest for Treasury bills. Bill rates had been
unusually low relative to other short-term rates, reflecting mainly
demands for bills associated with foreign central bank acquisitions
of dollars and with the absence of a short-term Issue IE the
Treasury's August refunding. Ie the intermeeting period, however,
foreign central banks sold bills on balance, and Treasury financing
operations added to the market supply of bills. The impact of the
change In supply—demand relationships was magnified when a
firming In money market conditions just before the Labor Day
weekend strengthened market expectations of farther Increases In
Interest rates In an environment of strong economic expansion. On
the day before this meeting the market rate on 3-month bills was
4.65 per cent, compared with 3.87 per cent on the day before
the August meeting.
In markets for long-term, securities. Increases in rates were
greater for Treasury Issues than for other securities, chiefly because
the rise In short-term rates Induced dealers to reduce their Ie¥eetorles of the new longer-term Issues acquired Ie the Treasury's August
refunding. The volume of new publicly Issued corporate bands had
declined moderately from July to August, and a large decline
appeared In prospect for September. While the volume of new State
and local government bonds had Increased somewhat In August,
It appeared likely to decline again In September.
Contract Interest rates on conventional new-home mortgages and
yields Ie the secondary market for Federally Insured mortgages
were stable from July to August. Inflows of saYings to nonbank
thrift institutions slowed from the rapid rates in June and July.
At commercial banks, outstanding business loans Increased
sharply further IE August, and real estate and consumer loans
168
continued to expand inputly. Flank-; aj'tun reduced theii holdings
of U.S. Government securities—-as the Treasury's net borrowing
demands remained smaller than eustomarv t\>r that season of the
year—-but they incieastd their holdings oi other securities. Late
in the month, in response lo the strength in loan demands and
to Increases In short-term market rales of interest most banks raised
I heir prime rates from 5% to 5% per cent
Growth in the narrowly defined money slock (Mt).k which was
rapid In July following relatively slow rrowth on the average in
May and June, fell back In August. Hxpansion in ilie inure broadly
dcieed money stock (M2T and in the batik credit proxy 3 also
slowed, despite substantial increases in eonsiuner-iype time and
savings deposits and le the outstanding volume of iar^e-denomination CD's. In late August and early September, however, the
money stock grew more rapidly than It had on the average In
August.
System open market operations in the period since the August
15 meeting had been guided by the Committee's objective of
fostering growth in reserves available lo support private eoebaek
deposits (RPD's) at an annual rate of between 5 and 9 per cent
in the August-September period, subject to the proviso that money
market conditions should not be permitted to firm markedly. Pursuit
of the RPD target was complicated b> the need to absorb reserves
at a time when the market supply of Treasury bills was increasing.
Early in the period, RPD's—and the monetary aggregates—appeared to be expanding rapidly. As the System acted to restrain
growth in reserves, short-term, interest rates began to rise sharply
and financial markets became increasingly sensitive; this was especially evident just before the Labor Day weekend when a number
of banks misjudged their reseiYe needs and bid the Federal funds
rate up as high as 5% per cent. In order to aYoid a marked firming
in money market conditions and unduly sharp increases ie interest
rates, for a time the System supplied reserves more generously.
1
Private demand deposits plus currency in circulation,
Mj plus commercial bank time and savings deposits other than large-denomination CD's,
3
DaIly-average member bank deposits, adjusted to include funds from
nondeposit sources.
2
169
At the time of this meeting it appeared that growth in RPD's
would be quite rapid in September, and that the average rate of
growth in the August-September period would exceed the upper
limit of the target range by a significant amount. However, most
of the overage evidently would reflect a temporary increase in
excess reserves—and member bank borrowings—around the Labor
Day weekend. Apart from the rise In excess reserves, growth in
RPD's appeared to be at about the upper limit of the target range.
The Federal funds rate, which had been around 4% per cent at
the time of the preceding meeting, currently was about 5 per cent.
In the 5 weeks ending September 13 member bank borrowings
averaged about $440 million, compared with about $250 million
ie the preceding 4 weeks.
The Committee agreed that the economic situation called for
growth in the monetary aggregates in coming months at rates less
rapid than those that now appeared likely to be recorded for the
third quarter. At the same time, the members noted that conditions
in financial markets were still highly sensitive. They also noted
that the prospective relationships among bank reserves, monetary
aggregates, and money market conditions were more than usually
uncertain because of the difficulties of forecasting the behavior of
banks during the period of adjustment to the amendments to
Regulations D and J that were scheduled to become effective
September 21, 1972. The situation was further complicated by
uncertainty as to whether implementation of the regulatory actions
would be delayed as a consequence of certain coyrt proceedings
currently under way.
The Committee took note of a staff analysis suggesting that an
average rate of expansion in RPD's in September and October in
a range equivalent to 9,5 to 13.5 per cent4 would be likely to
lead to more moderate growth ie monetary aggregates over the
months ahead. The members decided to seek an RPD growth rate
4
The RPD range originally considered by the Committee incorporated
adjustments for the estimated effects that the scheduled changes in the Board's
Regulations D and I would have on the prospective relationship between growth
rates in RPD's and in the monetary aggregates. However, It was agreed that
those adjustments would be inappropriate if there were a delay in Implementing
the changes, and since such a delay in fact occurred, the adjustments are omitted
in the figures cited.
170
in that range—-preferably, in the lower part-—unless disturbances
arose in financial markets or unless growth rates in the monetary
aggregates appeared to be falling far short of expectations. In view
of the sensitive stale of financial markets and the uncertainties
associated with Regulations I) and J, the\ also decided that the
System Account Manager should have more than the usual degree
of discretion in making operating decisions and that he should give
more than customary attention to money market conditions, while
continuing to avoid marked changes In such conditions. Ft was
agreed that account also should be taken of international financial
developments, and it was understood that the Chairman might call
upon the Committee to consider the need for supplementary instructions before the next scheduled meeting if it appeared that
the Committee's objectives and constraints were not being met
satisfactorily.
The following current economic policy directive was Issued to
the Federal Reserve Bank of New York:
The Information reviewed at this meeting suggests a substantial
increase In real output of goods and services In the current quarter,
although well below the unusually large rise recorded in the second
quarter. In July and August, wages and prices advanced somewhat
more rapidly on balance than in the Immediately preceding months,
while the unemployment rate remained substantial. Foreign exchange market conditions have remained quiet In recent weeks and
the central bank reserves of most Industrial countries ha¥e continued
to change little, le July, the large excess of U.S. merchandise
imports over exports persisted.
In August on average, growth slowed in the narrowly and broadly
defined money stock and in the bank credit proxy, but in recent
weeks the money stock has been expanding more strongly. Since
mid-August, Interest rates on Treasury Mils have Increased sharply,
while yields on most other market securities have advanced more
moderately.
ID light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster ieaecial conditions coeduclve to sustainable real economic growth and Increased employment, abatement of Inflationary pressures, and attainment of reasonable equilibrium in the country's balance of payments.
To Implement this policy, while taking special account of the
effects of possible bank regulatory changes, developments in credit
171
markets, and international developments, the Committee seeks to
achieve hank reserve and mone> market conditions that will support
more moderate growth in monctarv aggregates over the months
ahead,
Votes for this action: Messrs, Burns, Hayes.
Brimmer, Bueher, Coldwell, Daane. Hastburn,
Mayo. Mitchell, and Sheehan. Votes against this
action: Messrs. MacLaury and Robertson,
Absent and not veiling: Mr. Wirin. (Mr. Mayo
voted as Mr. WinrTs alternate.)
Mr. MacLaury dissented from this action because he had become
increasingly disturbed by the rapid rates of growth in the aggregates, given the prospective strength of the economy, and he felt
that the Committee's current operating procedures did not assure
that money market conditions would be permitted to tighten sufficiently to slow this excessive monetary growth in the near future.
Mr. Robertson dissented because of his belief that with the
existing potentiality for increased inflationary pressures, the* Committee was not doing enough to curb the rate at which reserves
were being fed into the banking system by the federal Reserve
and to slow down the rate of growth in the monetary aggregates,
in his view, the fall ore to do so might result in a new ground
swell of inflation later on.
172
MEETING HELD ON OCTOBER 17,1972
Current economic policy directive.
The information reviewed at this meeting suggested that expansion
in real output of goods and services in the third quarter had been
substantial, although well below the unusually large gain recorded
in the second quarter. Staff projections continued to suggest that
growth would be more rapid in the fourth than in the third quarter
and that it would remain at a fast pace in the first half of 1973.
In September industrial production rose appreciably for the
second successive month, and nonfarm payroll employment also
continued to expand at a substantial rate. However, the labor force
again grew at about the same pace as total employment and—at
5.5 per cent—the unemployment rate was essentially unchanged
from its level in the three preceding months. Retail sales declined
in September, but because of the sizable gains that had been
recorded in July and August, sales were considerably higher in
the third quarter than in the second.
Average hourly earnings of production workers on nonfarm
payrolls continued to advance at a moderate pace in September,
and the rise in wholesale prices of both industrial commodities
and farm and food products slowed appreciably. In August the
total consumer price index rose at a moderate rate although retail
prices of foods increased substantially further.
Staff projections continued to suggest that expansion in consumption expenditures would be strong in the fourth quarter, in
part because of the 20 per cent increase in social security benefits
beginning in early October. It was still anticipated that State and
local government purchases of goods and services would grow
somewhat more rapidly; that business fixed investment would
continue to expand; that residential construction would level off;
and that inventory investment would increase further. It was expected, moreover, that defense expenditures would rise following
a marked drop in the third quarter.
In foreign exchange markets the dollar had strengthened further
against most European currencies since mid-September. Inflows
of capital to the United States—reflecting both improved confidence
in the dollar and a firming in short-term interest rates in this country
relative to those abroad—had continued to offset the persistent
173
deficit in the current account of the U.S. balance of payments,
and the centra! bank reserves of most industrial countries had
continued to change little. In August U.S. merchandise exports
expanded more than Imports, and the trade deficit declined somewhat.
Long-term interest rates had been stable in recent weeks. Markets
generally had been influenced by growing optimism about peace
in Vietnam and by the possibility of enactment of a ceiling on
Federal expenditures, and bond markets also had been affected by
a sharp drop in the volume of new publicly issued corporate bonds
from August to September. Although the volume of such issues
appeared likely to rebound in October, it was expected to be
relatively small for the fourth quarter as a whole. Interest rates
on short-term securities had edged higher, in part because the
Treasury had increased the size of its monthly auctions of 1-year
bills. On the day before this meeting the market rate on 3-month
bills was 4,80 per cent, compared with 4.65 per cent on the day
before the September nieeting.
Contract interest rates on conventional mortgages rose slightly
from August to September, but yields in the secondary market for
Federally insured mortgages changed little. Inflows of savings funds
to noobank thrift institutions remained substantial in September,
although well below the rapid pace in June and July.
At commercial banks, outstanding real estate and consumer loans
continued to grow rapidly In Septeniber. However, expansion in
outstanding business loans slowed sharply from the rapid pace in
August, apparently in association with less than the usual amount
of corporate borrowing to meet September tax payments, Banks
increased their holdings of U.S. Government securities—-after having reduced them in July and August—and continued to add to
their holdings of other securities, le early October, primarily in
response to increases in short-term market rates of interest, most
banks raised their prime rates from SVi to 544 per cent.
Both the narrowly defined money stock (Mt)1 and the more
broadly defined money stock (M2)2 grew in Septeniber at about
'Private demand deposits phis currency In circulation.
Mi plus commercial bank time and savings deposits other than large-denomination CD's.
2
174
the moderate rates recorded In August. Over the third quarter,
however, Mi and M2 grew al rates of about 8.5 and 9,5 per cent,
respectively, compared with rales of about 5.5 and H,5 per cent
over the second quarter. 3 Growth in the bank credit proxy 4 was
somewhat more rapid In September than in August, mainly because
of an increase In U.S. Government deposits.
System open market operations in the period since the September
19 meeting had been guided by the Committee's decision to seek
growth in reserves available to support private nonbank deposits
(RPP's) a! an annual rate in a range of 9.5 to 13,5 per cent In
the September-October period—in order lo support more moderate
growth in the monetary aggregates in the months ahead-—ynless
disturbances arose in financial markets or unless growth in the
monetary aggregates appeared to be falling far short of expectations. In fact, financial markets were calm and both M, and M2
seemed to be growing moderately. At the time of this meeting
it appeared that growth in RPD's over the September-October
period would be close to the lower limit of the target range. The
Federal funds rate was about 5 per cent in the days before this
meeting, unchanged from the level prevailing just before the
preceding meeting. In the 4 weeks ceding October 11 member
bank borrowings averaged about $560 million, compared with
about $440 million in the preceding 5 weeks,
The Committee agreed that the economic situation called for
growth in the monetary aggregates over the months ahead at rates
less rapid than those recorded over the third quarter as a whole.
Taking account of a staff analysis of the relationship between
reserves and the monetary a^giegaies, the Committee decided that
its objectives for the aggregates would be fostered by growth in
RPD's during the October-November period at an annual rale
within a range of 6 to 11 per cent. Accordingly, the members
agreed that open market operations should be directed al constraining RPD growth within that range, while continuing to avoid
marked changes in money market conditions. The members also
3
Growth rates cited are calculated on the bastN of the daily-average level in
the last month of the quarter relative to that in the last month of the preceding
quarter.
4
Daily-average member bank deposits, adjusted to include funds from
nondeposit sources.
175
decided that account should be taken of the effects of bank regulatory changes, should they be implemented; of 'Treasury financing
operations; and of developments in credit markets. 5 Moreover, they
agreed that some allowance should be made in the conduct of
operations if growth in the monetary aggregates appeared to be
deviating from an acceptable range. As at other recent meetings,
it was understood that the Chairman might call upon the Committee
to consider the need for supplementary instructions before the next
scheduled meeting if significant inconsistencies appeared to be
developing among the Committee's various objectives and constraints.
The following current economic policy directive was Issued to
the Federal Reserve Bank of New York:
The information reviewed at this meeting suggests a substantial
increase in real output of goods and services in the third quarter,
although well below the unusually large rise recorded in the second
quarter. In September wages and prices advanced moderately, while
the unemployment rate remained substantial. In the U.S. balance
of payments, the current account deficit has been largely offset by
capital inflows in recent weeks, and the central bank reserves of
most industrial countries have continued to change little. In August,
the excess of U.S. merchandise imports over exports declined
somewhat,
The narrowly and broadly defined money slock expanded at
moderate rates in August and September, following large increases
in July, but the bank credit proxy continued to grow rapidly. Since
mid-September, short-term interest rates have increased somewhat,
while yields on most long-term securities have changed little.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions conducive to sustainable real economic growth and increased employment, abatement of inflationary pressures, and attainment of reasonable equilibrium in the country's balance of payments.
5
It was noted at the meeting that the amendments to Regulations D and J,
Initially scheduled to become effective on September 21, 1972, but postponed
as a result of court proceedings, might be implemented during the October-November period. Following the Board's decision on October 24 to implement the
amendments as of November 9, 1072, the range of tolerance for the RPD growth
rate was modified to 9 to 14 per cent in a technical adjustment to take account
of the effects of those regulatorv actions cm the relationship between reserves
and the monetary aggregates.
176
TY« if?i|*l;*oit" i n < hi'« p o l k ' v . v . u t l c T afcut< .«' * ^ UJF?» of t h o H U T K
o f p o s s i b l e b a n k t v ^ o h t i o n c h i d e s . l r e a > t t c v l u i i i f k ITI-/ , » p c r a i f u n s ,
a n d d e v e l o p m e n t * i n er« n i l f i i r t r l . e l s , t h e C o i ] ! i H i f f « \ ' v / o k s t o <K'liu*\e
b a n k f c s c i " c ^Pcd m o m . " ) ii»«n k*. t ^ n n d i i i e r . s t u d t " . i l l s u p p o r t m o r *
n K H i c r a t i * ^ l o w t h i n m*5iit v u<i\ ;ii^ r :ic|.-li^"^ <«^»>k? t h e n h » n t h . \ a h t - a i )
Thai'i r c T o r J c v ( n \ t h o t h i r t l q i i n ' i r i " .
\ ' o t c s for this action: M e s s r s B I J H ? V Haj'i.s,
B r i r m n r r , Ruchcr. <'<>ldwr!i. D^JJUC
r.asthufn.
Ma^i.aiif) 1 , Milch<'li. R«>h*,'rff,»>fi
Sht*rh«o, und
Winii Votes against thi.s action: None.
MEETING HELD ON NOVEMBER 20-21, 19721
Current economic policy directive.
The information reviewed at this meeting suggested that real output
of goods and services, which had expanded at an annual rate of
about 6 per cent in the third quarter, was growing more rapidly
in the current quarter. Moreover, staff projections continued to
suggest that growth would remain at a fast pace in the first half
of 1973.
In October expansion in industrial production remained rapid,
reflecting widespread advances among consumer goods, business
equipment, and materials. Employment in manufacturing again rose
substantially, contributing to another large gain in total nonfarm
payroll employment. As in the preceding 3 months, however, the
labor force also increased appreciably, and the unemployment
rate—at 5.5 per cent—was stable. Retail sales, according to the
advance report, continued to expand in October about as fast as
they had from the second to the third quarter. Housing starts
remained near the high level of August and September.
The rise in wholesale prices was exceptionally small in October
as industrial commodities were virtually unchanged, on the average,
and farm and food products rose little. Among industrial commodities, prices of a number of materials advanced but prices of
automobiles and trucks declined. Average hourly earnings of production workers—which had risen sharply in September, according
to revised data—continued to advance at a faster rate than earlier
in the year. In September the consumer price index increased
considerably, reflecting a sharp rise in foods and substantial increases among other commodities; services continued upward at
a slow pace.
Staff projections suggested that strong expansion in consumption
expenditures would continue in the first half of 1973, in part because
of Treasury refunds of the unusually large overwithholdings of
personal income taxes in 1972. It was also anticipated that business
1
This meeting was held over a 2-day period beginning on the afternoon of
November 20, 1972, in order to provide more time for the staff presentation
concerning the economic situation and outlook and the Committee's discussion
thereof.
178
fixed i n v e s t m e n t w o u l d rise at a fairl\ fast p a c e , as s u g g e s t e d hy
r e c e n t survey.s of b u s i n e s s s p e n d i n g {'thins: that Stale and local
j.'.overnment p u r c h a s e s oi <;oods and s e r v i c e s w o u l d c o n t i n u e to
u r o w r a p i d l y ; a n d thai i n v e n t o r ) i n v e s t m e n t w o u l d rise- s o m e w h a t
further in r e s p o n s e to s u s t a i n e d e x p a n s i o n m linai Miles oi g o o d s ,
In foreign e x c h a n g e m a r k e t s the d o l l a r had s t r e n g t h e n e d further
a g a i n s t m o s t f u i r o p e a n c u r r e n c i e s in recent w e e k s , hut the J a p a n e s e
\ e n had r e m a i n e d al its c e i l i n g rate a g a i n s t the d o l l a r . T h e p e r s i s t e n t
detieit in t h e c u r r e n t a c c o u n t of the l T . S . b a l a n c e of p a y m e n t s had
b e e n otl'set in l a r ^ e part by c o n t i n u i n g inflows of p r i v a t e c a p i t a l
to the U n i t e d S l a t e s .
In S e p t e m b e r U.S. m e r c h a n d i s e i m p o r t s w e r e s t a b l e w h i l e e x p o r t s d e c l i n e d s o m e w h a t and the t r a d e deficit r e m a i n e d large I rom
the s e c o n d to the third q u a r t e r , i m p o r t s rose s o m e w h a t less than
e x p o r t s , and m o s t of the rise in i m p o r t s reflected i n c r e a s e s in
industrial m a t e r i a l s in a s s o c i a t i o n with the s t r o n g g r o w t h in d o m e s tic b u s i n e s s a c f h ity
O n O c t o b e r .15 the T / c a s u r v a n n o u n c e d that in Hs m i d - N o v e m b e r
linaiicini? it w o u l d j u c u o n a 4 - \ c a i . C>! ; per cent note to r e d e e m
S I . 3 billion of m a t i n i n g uofes a n d tu raise S I . " ' billion of new
c a s h ; the n o t e s w e r e issued on N o v e m i x r 15 at an a v e i a g e price
to yield 6 . 2 0 per c e n t . T h e O c t o b e r a n n o u n c e m e n t also i n d i c a t e d
that the T i c a v t m w o u l d n i c e ! the bulk o; iis hir^e I K ' c c i n b e r January cash, r e q u i r e m e n t s t h r o u g h a combinatii">n of bill an*i note
i s s u e s . L a t e r , ihe 'lrea-iif"\ a n n o u n c e d thai on Xove**' >rr 1~ and
2^ U Wiuikl a u c t i o n a total of S4 5 billion o! t a x - a n t i c i p a t i o n bills
with April and J u n e m a t u r i t i e s .
T h e m o r e f a v o r a b l e c l i i n a t e in s e c u r i t i e s m a i k e i s that had
cfnefLT0il in m i d O c t o b e r
in r e s p o n d (o o p t i m i s m a b o u t p e a c e in
\ ietn.un and j>rospt. cts ihat 1 edi nil e x p e j u h t u r e s w o u l d he held
down
had c o n t i n u e d in r e e e e l v e e f ^ . and nhukci r a t e s of Miietesl
Meneri.iK had d eJiiH.d. i \ - * r c a s e > had hi\u
f.rejlci in Uii^e ten)i
tlum io slivirt-ted-t m a r k e b . r efleefin i i! tiivKJeration ir. over-aM d e ni:uids f\>r U^ny-icuv
iiifnis
•i,hiii>;.irh the \*>iiuite ol iv*\\ p u b i k l y
issucvi c o r p o r a t e i*<Hius !\i'H^:ru!^ d ii; ^ > c i < '?r fI ronj a M l J !l (>!i s «
*hicei! h:\kl in S e p ! e ; r J v ( . a., h.id beer* e
Mich K- tK's ,?^jn tii'/.s hK*.]} I-« iui! ;;j';nn ;
ID maikot.N tor shoit-tcrru veeiiriiies, de
e c k \h
\ he
in r
vO
Jaie
V e ^ i ! I ; l it v
2:
> hod he en
s had fie e n
179
anticipated. On the day he Tore this meeting the market rate on
3-month Treasury bills was 4.70 per cent, compared with 4.80
per cent on the da\ before the October meeting.
Contract inteiest rates on conventional mortgages and yields in
the secondary market for Federally insured mortgages both were
virtually unchanged in October. Although inflows of savings funds
to nonbank thrift institutions slowed somewhat from September
to October, they remained substantial.
At commercial banks, expansion in outstanding business loans
was again rapid in October, after having slowed sharp!)' in September, and growth in must other categories of loans also was
strong. However, bank holdings of securities declined, reflecting
a sizable drop in portfolios of U.S. Government securities.
Growth in both the narrowly defined (A7t)- and the more broadly
defined ihl2f money stock changed little in October from the
moderate rule-, in the preceding 2 months and lemained well below
the rates til about H.5 per cent tot \lt and kK5 per cent for Mj
recorded over the third quarter as a whole. i I/Apansion in the bank
credit proxy"' changed little from the rates in the preceding 2
months, although the increase in the outstanding volume of largedenomination CD's was the smallest since March.
S\stem open market operations in the fecent penod had been
guided h\ the Committee's decision ui it-, October meeting to seek
bank reserve and money market conditions that would support more
moderate rate> of monetary growth than thos^ recorded in the third
quarter. S\sicm operations had been directed tow aril maintaining
growth in reserve^ available to support pn\ale nonhauk deposits
fRPDVf at an annual rale in a range of {) to 14 per cent in the
October- November period, while continuing to avoid marked
chanues tn mohe\ uiurkif cuidnioiis .md Liknnf account ol Treasurx
"'Privace
*<jftn\!h
I k
\Jt-n«111M> J ' ^ ' " ' J K
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arc
pU
>..('*. < i : ; ' k ' ' t
«ii t \ \. i i K i K i
•"Oi»i{\ -'tXvhii'c
m e ?
180
iher
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?
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j'rom
J i n r
n u n
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itJKJ
h.illk
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ul.Hot\
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c i U d ' i S ' v '
r
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1
o l t i n ' i n v n n e r b m : p ^ n o d ( h e *'a*e • *( : ' i u > U ! ' i n K i ' j ) •• h a d a p p c u x ^ l
|M b e w j i h s t f
ilia!
mine,
ulfh*4i°!>
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r'u* i u u n
( u n i t . 'Ie m a i d
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fjte
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nini't!
;i|'.i\\
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the
between
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resoixe^
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u
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and
ol
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the Sv*ien«
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of
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usual
1
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L
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the
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ip |}i
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for
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the
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d m ,
ai'ieed
:iikir
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niou'
(rt;iMbi'i
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with
bank
about
4 ^ i el!*u
h'i t h e m o n e l a i \
rak»n;
lur
eiuiin.'
ab»HH
u:laHt>nship
I , **, hi»."h K \ . . i n n :
I K K !p t e \ a d e < l
v vvk*»
a\e?atvd
riiilh^!!
The
vail
the
the
i">e-. r> e ^ u e t e d
iff K f d e i
t iiine
,i\ iMe:\ite-,
>'.>i»Mvieiabie
JI;H1
h i \ n\
lhar.
n? ;s
f
(hat e"\<>hed
Alliion^l"! d,»\ l o i l a \ r»neuia(i^ns
lnijH't
a»vd
period
and
{. a n - a ; is- M I 1 ,
; '
1*^ a
\u>uid
fl a p j K
??ionciar\
^d'atise
ai't'ivi!att^
bv>lls
' M I C (HIKIKJM^
^ H ! H Jt'T'A aJ*- i ' !
liit,
i uosidriu^h*
Jhatie
s
V i v u i M h c i
i-fft*.
o* , . i i t i c d
a n d nn>!Klar\
,
; J', j <* M i i M l H i . '
liov. ever.
«it , j - t e e p t a h J \ *
dill'eieu Uofn the K'I'.IIMIINIHP t
Thi 1 ehaiu'.e*. m Re',:u!aliu!t\
on
of
{he O e t r i v r
pel eeni
H 1 J N e •*. \ p a n d m ?
xtppean'd
I'NK'iH.
alld
ce^i^nniH.
-auan^ii
. i ^ t - i e t ' o U 1 •• o \ v i j
»etoidvi!
,t
sta!-
* # \ *• r
ilie
eeaiiiimetl
:m»nth-.
the. t h u d
ai;jJ\^.i^
ol
llir
**;
ahvad
i;ii:nloi ,IN
pii»ie«.ted
Committee decided that its objectives regarding the aggregates
would be served by open market operations directed at fostering
growth in RPD's during the November-December period at an
annual rate within a ratine of 6 to 10 per eent. while continuing
to avoid marked changes in money market conditions. The members
also decided that allowance should be made in the conduct of
operations if growth in the monetary aggregates appeared to be
deviating from an acceptable range and that account should be taken
of the continuing effects of the bank regulatory changes implemented in early November, ft was understood that the Chairman
might call upon the Committee to consider the need for supplementary instructions before the next scheduled meeting if significant inconsistencies appeared to be developing among the Committee's various objectives and constraints.
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
The information reviewed at this meeting, including recent data
for industrial production, employment, and retail sales, suggests
that real output oi goods and services is growing more rapidly in
the current quarter than in the third quarter. However, the unemployment rale has remained substantial. The increase in wages has
been larger in recent months than earlier this vear. Consumer prices
rose considerably in September, but the October rise in wholesale
prices was small. In recent weeks, the current account deficit of
the U.S. balance of payments has been offset in large part by capital
inflows; while the reset yes of Japan have increased substantially
further, those of other industrial countries have changed little. In
September the excess of U.S. merchandise imports o\er exports
remained large.
In October rates of growth in the monetary aggregates changed
relatively little from preceding months, with expansion in the
narrowly defined money stock again quite moderate. Since mid-October interest rates generally have declined.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions conducive to sustainable real economic growth and increased employment, abatement o( inflationary pressures, and attainment <»f reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of" the effects
182
of recent hank reyr'iiatory cliiiin:e\, the Committee seeks to achieve
hank ieser\e and mone\ market conditions that n i l ! support inure
modeiale tirowth in monetary aggregates over the months alieatf
than reeorded m the thiui quarter.
Votes for this action: Messrs Burns, Hayes.
Brimmer, Rueher. Daane. Fasthuni. Mael aur\ .
Miti'heil. Robertson. Sheehan, W'inn. and Francis.
X'ofes against this action; \ o i i e
Absent and not \olim 1 .: \h.
<\>ldweii. (Mr.
Francis' \~uteti as Mr. CoklwelFs alternate.)
MEETING HELD ON DECEMBER 19, 1972
Current economic policy directive.
The information reviewed at this meeting suggested that real output
of goods and services, which had expanded at an annual rate of
6.3 per cent in the third quarter, was growing at an appreciably
faster pace in the current quarter. Staff projections for the first
half of 1973 continued to suggest that growth in real output would
remain strong, although not so rapid as now seemed indicated for
the current quarter.
Industrial production increased substantially further in November
and output indexes for September and October were revised upward; expansion over the 3-month period was very rapid. Led by
employment gains in manufacturing, total nonfarm payroll employment continued to rise at a fast pace in November. The
unemployment rate, which had been virtually stable around 5.5
per cent from June through October, fell to 5.2 per cent in
November. Retail sales in November, according to the advance
report, remained near the level attained in October, which was
sharply above the third-quarter average.
The wholesale price index—which had risen little in October
when prices of automobiles and trucks declined—advanced considerably in November, reflecting sizable increases in both industrial
commodities and farm and food products. Average hourly earnings
of production workers increased little, but their average rate of
advance from August to November exceeded the rate earlier in
the year. In October consumer prices again rose considerably, in
large part because of the annual adjustment in the price measure
for health insurance and increases in prices of other consumer
services. Retail as well as wholesale prices of automobiles declined,
and prices of foods increased little.
Staff projections continued to suggest that expansion in consumption expenditures would remain strong in the first two quarters
of 1973, in part because of large refunds of personal income taxes
withheld in 1972. Recent surveys of business spending plans
reinforced earlier expectations that fixed investment would rise at
a fast pace throughout the first half of 1973. It was also anticipated
that business inventory investment would rise somewhat further
and that State and local government purchases of goods and services
184
would continue to grow rapidly but that residential construction
outlays would level off and then turn down.
The deicit in the over-all U.S. balance of payments had continued large in recent months. In October, however, merchandise
exports had risen more than imports, and the average trade deficit
ie September and October—although still substantial-—-had been
moderately below the high levels of last spring and summer. In
foreign exchange markets over recent weeks, the dollar had remained firm against major currencies other than the Japanese yen.
Interest rates on short-term securities had advanced since the
Committee's meeting in late November, in response to seasonal
expansion in private credit demands, a large increase ie market
supplies of Treasury bills, and some inning in money market
conditions: on the day before this meeting the market rate on
3-month Treasury hills was 5.17 per cent, up from 4.76 per cent
4 weeks earlier. Rates on most types of longer-term securities also
had advanced, although the volume of new public offerings of
corporate and State and local government bonds had declined
moderately from October to November and appeared likely to fail
further in December, in part because of the holidays.
In mid-December the Treasury announced that on December 20
it would auction $2 billion of 2-year, S7/U per cent notes for payment
on December 28. Moreover, the Treasury indicated that in early
January it would oiler $500 million to $750 million of 20- to
30-year bonds.
Contract interest rates on conventional mortgages and yields in
the secondary market for Federally insured mortgages remained
stable in November. From October to November inflows of savings
funds to nonbank thrift institutions continued to slow, although
inflows were still large by historical standards.
At commercial banks, loans outstanding to businesses and to
most other types of borrowers continued to expand at rapid rates
in November. Bank holdings of U.S. Government securities—
which had declined in October—rose in association with a substantial increase in Treasury deposits that resulted in part from two
Treasury financings during the month. Banks also added a substantial amount to their portfolios of other securities.
Growth in the narrowly defined money stock (M,J 1 —which had
1
Private demand deposits plus currency in circulation.
185
been slow in October—Increased appreciably in November but
nevertheless was still moderate, while growth in the more broadly
defined money stock (M2f remained at about the moderate rate
of October. The bank credit proxy3 grew at a relatively fast pace,
reflecting the substantial increase in Treasury deposits and a rise
in the outstanding volume of large-denomination CD's. In early
December expansion in Mt quickened, and it now appeared that
the average rates of growth in the monetary aggregates over the
second half of the year would be relatively rapid.
System open market operations since the November meeting had
been guided by the Committee's decision at that meeting to continue
to seek bank reserve and money market conditions that would
support more moderate monetary growth than the annual rates of
about 8.5 per cent for Mi and 9.5 per cent for M2 recorded over
the third quarter.4 Accordingly, operations had been directed toward
fostering growth in reserves available to support private nonbank
deposits (RPD's) at an annual rate in a range of 6 to 10 per cent
in the November-December period, while avoiding marked changes
in money market conditions and taking account of the continuing
effects of the bank regulatory changes implemented in early November.
Through much of the inferineeting period the rate of growth in
RPD's had appeared to be substantially above the specified range,
and the System had acted to restrain expansion in nonborrowed
reserves. As a result, money market conditions had firmed. The
Federal funds rate had risen to about 5Vi per cent in the days before
this meeting from about 5 per cent at the time of the preceding
meeting. Member bank borrowings had increased to an average
of about $655 million in the 3 weeks ending December 13 from
about $640 million in the preceding 5 weeks, and in the last few
days before this meeting borrowings had risen substantially.
At the time of this meeting it still appeared that RPD's would
grow over the November-December period at a rate somewhat
-M\ plus commercial hank time and savings deposits other than large-denomination CD's.
•'^Daily-average member hank deposits, adjusted to include funds from nondeposit sources,
'Growth rates cited are calculated on the basis of the daily-average level in
the last month of the quarter relathe to that in the last month of the preceding
quarter.
186
above the specified range. However, the excess was not large, and
in part it was attributable to a shift in the multiplier relationship
between reserves and deposits that reflected greater-than-anticipated
expansion in deposits at large member banks—which are subject
to higher marginal reserve requirements—and lower-than-anticipated expansion at smaller banks.
The Committee agreed that the economic situation called for
growth io the monetary aggregates at slower rates than those that
appeared likely to be recorded for the second half of 1972. At
the same time, the members noted that financial markets were still
adjusting tii the firming in money market conditions thai had
occurred in recent weeks. They took account of a staff analysis
of prospective reserve-deposit relationships which suggested that
the Committee's objectives for the aggregates might be served by
fostering growth in RPITs during the December-January period
at an annual rate within a range of 7 to II per cent. However.
tn view of the rapid expansion in monetary aggregates since the
preceding meet ing, the members concluded that reserve-supplying
operations that would result in an easing of money market conditions should be avoided unless the annual rate of RPD growth
appeared to be dropping below 4 per cent. Accordingly, they
decided that open market operations should be directed at fostering
RPD growth during the 2-month period within a range of 4 to
1 1 per cent, while continuing to avoid marked changes in money
market conditions. They also agreed that io the conduct of operations account should be taken of the forthcoming Treasury financings and possible credit market developments, and that allowance
should be made in operations if growtli in the monetary aggregates
appeared to be deviating from an acceptable range. It was understood that the Chairman might consider calling upon the Committee
to appraise the need for supplementary instructions before the next
scheduled meeting if significant inconsistencies appeared to be
developing among (he Committee's various objectives and constraints.
The following current economic policy directive was issued to
the Federal Reserve Bank of New York:
The information reviewed at this meeting, including strong recent
gains In industrial production, employment, and retail sales, suggests that real output of goods and services is growing more rapidly
187
in the current quarter than in the third quarter. The unemployment
rate has declined. Wage rates increased little in November, following 2 months of large increases. Consumer prices rose considerably
again in October, and wholesale prices rose sharply in November.
The over-all deficit in the U.S. balance of payments has remained
substantial in recent months, but there has been a moderate reduction
in the excess of U.S. merchandise imports over exports since last
spring and summer.
In November rates of growth in the monetary aggregates generally
remained moderate, but expansion in the narrowly defined money
stock quickened in early December. In recent weeks most market
interest rates have tended upward.
In light of the foregoing developments, it is the policy of the
Federal Open Market Committee to foster financial conditions conducive to sustainable real economic growth and increased employment, abatement of inflationary pressures, and attainment of reasonable equilibrium in the country's balance of payments.
To implement this policy, while taking account of Treasury
financing operations and possible credit market developments, the
Committee seeks to achieve bank reserve and money market conditions that will support slower growth in monetary aggregates over
the months ahead than appears indicated for the second half of this
year,
Votes for this action: Messrs. Burns. Hayes.
Brimmer, Bucher, Coldwell, Daane. Eastburn.
MacLaury, Mitchell, Robertson. Sheehan. and
Winn. Votes against this action: None.
188
Federal Reserve Operations
in Foreign Currencies
During 1972 the System reduced its outstanding commitments to
foreign central banks under the reciprocal swap network by $1,230
million equivalent (at pre-August 15, 1971 exchange rates). The foreign currencies required to effect these repayments were obtained
through a combination of market purchases, purchases directly from
the foreign central banks, and a U.S. Treasury drawing on the International Monetary Fund of $217 million equivalent in sterling. At
the year end outstanding drawings, which had totaled $3,045 million
at the time of suspension of use of the network on August 15, 1971,
stood at $1,585 million equivalent in Swiss and Belgian francs.
Losses realized on repayments during 1972 totaled $55 million.
The suspension of the use of the swap network was lifted by the
President in July in conjunction with his decision that the System
should intervene in the exchange markets to help end speculation
against the dollar, which followed the floating of the British pound.
To this end the System sold $21 million equivalent of German marks
and $10 million equivalent of Belgian francs in late July and early
August. The marks were sold from System and Treasury balances,
while the Belgian francs were obtained through a swap drawing on
the National Bank of Belgium. This drawing was repaid within a few
days, as the Belgian franc moved below its ceiling and the System
was able to purchase the requisite amount of francs in the market.
Other market operations involved the purchase of marks and
guilders for possible future market sale and the purchase of sterling,
Swiss francs, and Belgian francs for the purpose of effecting swap
repayments.
189
Voluntary Foreign Credit
Restraint Program
The Voluntary Foreign Credit Restraint (VFCR) program continued
without major change during 1972, on the basis of the guidelines as
revised in November 1971. Most of the amendments adopted by the
Board during 1972 were designed to clarify existing provisions or
to simplify reporting procedures. However, one amendment extended
to one class of. bank affiliates the same limited foreign-borrowingoflEset provision that had already been made available to other bank
affiliates, and another exempted foreign assets acquired in connection with acts taken by the Overseas Private Investment Corporation
to settle claims. As intended, the impact of the 1972 amendments
on the general level of restraint was negligible.
Since November 1971, banks previously without VFCR ceilings
could adopt a ceiling for nonexport foreign lending and investing
equal to 2 per cent of their total assets as of December 31, 1970.
During 1972, 87 commercial banks adopted such ceilings, amounting in the aggregate to $406 million. However, some of these "newcomer" banks either did not engage in foreign lending during the
FOREIGN ASSETS OF U.S. BANKS
Item
Number of reporting banks
1971,
Dec. 31
194
1972
Mar. 31
June 30
Sept. 30
200
205
203
Dec. 31
219
Millions of dollars
Aggregate c e i l i n g . . . .
.
Assets held for own account subject to restraint
Aggregate net leeway
,
10,032
10,069
10,103
10,121
10,252]
8,955
1,078
8,835
1,254
8,684
1,419
8,807
1,314
9,109
1,143
Assets exempted from VFCR
Canadian assets
Export credit other than to residents of
Canada
Other
3,347
536
4.571
830
4,765
876
5,348
927
3,299
112
4.516
799
3,586
131
3,546
195
3,690
199
4,222
199
12,302
13,351
13,255
13,572
14,457
TOTAL assets held for own account
191
FOREIGN ASSETS OF U.S. AGENCIES AMD BRANCHES OF
FOREIGN BANKS
1972
Item
1971.
Dec. 31
N u m b e r of reporting institutions.
Mar. 31
June 30
Sept. 30
Dec. 31
53
53
57
60
Millions of dollars
Assets of the types subject to r e s t r a i n t . . . . . .
1,943
2,183
2,110 !
2,277
2,878
Assets of the types not subject to restraint.
Canadian a s s e t s . . . . . . . . . . . . . . . . . . . . .
Export credits
1.066
1,213
273
793
335
878
1,290 i
315 1
975 1
1,458
335
1,123
1 ,799
389
1 ,410
T O T A L assets held for own account
3,009
3,396
3,400 j
3,735
4 ,676
year or did not acquire enough foreign assets to report them. The
total number of banks actively participating in the VFCR program
increased in 1972 by 25—to a total of 219—and the aggregate
ceilings by $220 million, to $10,252 million.
The volume of foreign lending and investment by U.S. banks that
was subject to VFCR ceilings remained little changed during 1972.
At the end of 1972 banks' foreign assets held for their own account
and subject to restraint were $154 million more than the $8,955
million held at the end of 1971; however, because of the entry of
additional banks into the program, the aggregate net leeway at the
end of 1972 was $65 million above the end-of-1971 level of $1,078
million.
Of the foreign assets not subject to restraint, banks' holdings of
Canadian claims rose by $391 million. Following the removal of all
export credits from restraint in November 1971, banks substantially
expanded their lending activity in that field. At the end of 1972,
export credits outstanding (other than to residents of Canada) were
$923 million, or 28 per cent, above the December 1971 level. While
banks' own foreign assets (including those exempt from the VFCR)
rose by $2,155 million from the end of 1971 to December 31, 1972,
their foreign assets subject to restraint rose by $154 million, as
mentioned earlier.
U.S. agencies and branches of foreign banks were requested to
continue to act in accordance with the spirit of the VFCR guidelines
192
throughout 1972. In addition, they were asked for the first time to
submit monthly reports on their foreign asset positions. Because
these institutions rely on foreign sources of funds to a much higher
degree than do U.S. commercial banks and because they operate
differently from U.S. banks in other respects, they have been treated
FOREIGN ASSETS OF U.S. NONBANK FINANCIAL INSTITUTIONS
AND NONPROFIT ORGANIZATIONS REPORTING UNDER
VFCR GUIDELINES
A m o u n t s shown in millions of dollars
Amount j
Dec. 31, !
1972
Item
Deposits a n d money market instruments, foreign countries except
Canada
j
Short- a n d intermediate-term credits, foreign countries except i
Canada *
:
Long-term investments, developed countries except C a n a d a ;
!
Net investment in subsidiaries, affiliates, a n d branches - . , . . . . . !
Long-term bonds and credits
j
Stocks : i . . . . . . . . , ,
i
i
T O T A L holdings of assets subject t o c e l l i n g . . , . . , . ,
Foreign-borrowing offset
T O T A L holdings less o f f s e t , , . . . . , , . , . , . . . , , , . . . .
Ceiling
Net leeway
, .
Changes from Dec. 31,
1971
Amount
i Per cent
+ 228.6
69
+ 48
140
-10
-6.7
\m
+ 21
445
224
+ 12.5
-208
1,067
-232
156
+ 79
911
-31!
1,556
645
-226
+ 85
96
+ 16
-15.7
+ 102.6
-25.5
ASSETS NOT SUBJECT TO CElLlNtI
Export credits
Investments In Canada:
Deposits and money market instruments.
Short- and intermediate-term credits l
Net investment in subsidiaries, affiliates, and branches 2,..
Long-term bonds and credits.
Stocks
Direct obligations of international institutions of which I.U.S.
is a member
Long-term imestments in developing countries:
Net investment in subsidiaries, affiliates, and branches-...
Long-term bonds and credits.
....
Stocks,
Otherwise "covered" stocks acquired after Sept. 30, 1965,
U.S. markets from U.S. investors.
Otherwise "covered" assets acquired after Dec. 31, 1967,
"free delivery" items
....,,,
TOTAL holdings of assets not subject to ceiling....
MEMO: Total holdings of foreign assets
......
.
325
185
952
9,121
-5
_ 4
mi
+ 80
+ 582
- 305
i .199
+ 159
59
1 ,118
109
+ 20
+ 222
-23
+ 20
+
-23.
+ 15,3
+ 47
+ 24
+ 2.3
34
-3
15,083
^737
+ 5.
16,149
+ 5113
+ 3.
1
Bonds and credits with final maturities of 10 years or less at date of acquisition.
- Net investment in foreign branches, subsidiaries, or affiliates in which the U.S. institution has an
ownership interest of iO per cent or more.
3
Except those acquired after Sept. 30, 1965, in U.S. markets from U.S. investors.
193
In a special category under the program. During 1972 the number
of these institutions reporting increased by 9 to a total of 60, as shown
in the table oe page 192. The agencies and branches that reported at
the end of 1972 showed holdings of foreign assets of the types subject
to restraint of $2,878 million; this was $935 million above their
holdings at the end of 1971, an increase of more than 48 per cent.
As was true of U.S. commercial banks, export credits granted by
agencies and branches of foreign banks increased rapidly; on December 31, 1972, these credits were $617 million above the 1971 level—
an increase of 80 per cent.
By the end of 1972, holdings by nonbank financial institutions of
assets subject to ceilings had declined by nearly $250 million—or 18
per cent—from the level of $1,300 million at the end of 1971. This
development left the VFCR reporting institutions with a net leeway
of about $650 million after adjustment for the foreign borrowing
offset. On the other hand, holdings of assets not subject to restraint
increased by about $750 million. About $200 million of this increase
resulted from new investment in developing countries, about $160
million represented increased investment in direct obligations of international institutions of which the United States is a member, and the
$360 million remaining rclected increased investments in Canada.
194
Legislative Recommendations
Reserve requirements. The Board recommends that reserve
requirements set by and held with the Federal Reserve be made
applicable to all financial institutions that offer money-transfer services in essentially the same manner as do member banks. This would
provide the most rational and equitable system of reserve requirements, particularly in view of the evolution toward the use of checktype transfers by thrift institutions.
The present limited application of Federal Reserve reserve requirements—to member banks alone—is an anachronism. Formerly, member banks held a much larger proportion of the deposits of all commercial banks, so inequities were considerably less significant. In
1945, for instance, member banks held approximately 86 per cent of
total commercial bank deposits. This figure had eroded over the years,
however, reaching 80 per cent in 1970 and approximately 78 per
cent by the end of 1972.
The principal reason for this erosion unquestionably is the variance that exists between reserve requirements imposed on member
banks compared with those set for nonmember banks. Banks that
are not members of the Federal Reserve System have a competitive
advantage. Although in most States the nominal reserve percentage
for banks is comparable with that imposed on member banks, the
reserves required by the States may be carried in the form of what
are effectively earning assets: Government obligations and correspondent balances. Reserves maintained with the Federal Reserve, on the
other hand, are nonearning assets, even though they are used to
some extent for clearing purposes. Therefore, as banks strive for
greater earnings, there is an ever-present incentive for member banks
to withdraw from the System or for newly chartered State banks to
elect not to join the System.
During 1972 five banks with deposits of $100 million or more
withdrew from Federal Reserve membership. One of these banks
had deposits of nearly $500 million. Of the 265 newly formed commercial banks in 1972, 199 elected nonmember status as State banks
while only 13 State banks elected to become members upon organi-
195
zation. An additional 53 newly chartered national banks became
members of the Federal Reserve System, pursuant to Federal statutory requirements.
Since I960, 701 banks have left the System through withdrawals
(including conversions from national to State charters) and mergers.
During the same period 67 newly chartered State banks elected to
join the System, but 1,483 newly chartered State banks declined to
do so. Member banks in 1960 totaled 6,174 out of a total commercial bank population of 13,472. At the end of 1972 there were
5,705 member banks out of a total of 13,928 batiks.
Part of the Federal Reserve's concern that reserve requirements
apply to all depositary institutions has arisen because of the growing
volume of financial transactions that are taking place outside
member banking institutions. With respect to commercial banks, for
instance, fully one-quarter of the increase in demand deposits over
the past decade has been at nonmember institutions. Yet all demand
deposits—whether they be in member banks, nonmember banks, or
mutual savings banks—are equally a part of the Nation's money
stock. In order to facilitate the implementation of monetary policy,
the same reserve requirements should apply to these increasing deposits.
The proposal to extend reserve requirements to institutions other
than commercial banks has become increasingly relevant as savings
banks and other financial institutions have begun to seek, and in
some cases obtain, power to offer third-party transfer services. In
the State of Massachusetts, for example, savings banks have instituted a form of interest-bearing account subject to a "negotiable
order of withdrawal" (NOW)—an instrument similar to a check.
The NOW accounts add somewhat to the effective money stock outside the direct control of the monetary authority. In California, savings and loan associations arc seeking entry into an electronic money
transfer system operated by California banks. Direct entry would
enable them to charge and credit the savings accounts of their customers as if those accounts were checking accounts, (The Board has
submitted comprehensive legislative suggestions dealing with a number of the problems created by these developments.)
The Board by regulation in 1972 restructured its reserve requirements for member banks so that required reserves now are a function
196
simply of bank size, (See page 78.) The regulatory modifications
have produced a smoother progression of reserve requirements
against increasing deposit-size categories. If the Board's proposal
regarding the extension of reserve requirements is enacted, the Board
intends to make additional changes in the structure of Its requirements to provide greater equity and flexibility among all institutions
covered by the requirements and to facilitate the transition for those
newly covered.
Accordingly, the Board recommends that:
(1) Federal Reserve reserve requirements be applied to the demand deposits of all depositary institutions that accept deposits subject to withdrawal by check. The Reserve Banks would be authorized
to extend credit to such institutions on the same basis as they now
extend it to member banks.
(2) All institutions offering to individuals and families savings
accounts that are subject to withdrawal by check or similar means
("family accounts") should be required to maintain identical reserves against these accounts with the Federal Reserve System, in
accordance with regulations to be established by the Board. Limited
access to the Federal Reserve's discount window might be provided
to institutions maintaining such reserves.
Lending authority of Federal Reserve Banks, As a complement to the Board's recommendation regarding the extension of
reserve requirements to financial institutions offering checkingaccount-typc services and the extension of Federal Reserve Bank
borrowing privileges to these same institutions, the Board again urges
enactment of legislation that would permit member banks to borrow
from their Reserve Banks on the security of any sound assets without
paying a "penalty" rate of interest whenever technically ineligible
paper is presented as collateral. Under Section 13 of the Federal
Reserve Act, Federal Reserve Banks may extend short-term credit
to member banks on their promissory notes secured by obligations
eligible either for purchase or for discount by the Reserve Banks.
Obligations eligible for purchase include those issued or
fully guaranteed as to principal and interest by the United States or
aey agency thereof, cable transfers, bank acceptances, bills of
exchange, and certain municipal warrants. Obligations eligible for
discounting are limited to notes that are issued or drawn for agricul-
197
tural, industrial, or commercial purposes and that ha¥e a maturity
at the time of discount of not more than 90 days (or 9 months In
the case of agricultural paper).
Under Section 10(b) Reset¥e Banks are authorized to extend
credit to member banks secured simply by collateral Yiewed as
satisfactory by the Reserve Banks. HoweYer, Section 10(b) also
provides that such credit extensions "shall bear interest at a rate not
less than one-half of 1 per centum per annum higher than, the
highest discount rate in effect" at the Reserve Bank making the loan.
The result of this prcwision is that many perfectly sound member
bank loans cannot qualify as security for Federal Reserve advances
except at the penalty rate of interest prescribed in Section 10(b).
This is true men though the quality of the "ineligible" collateral may
be equal to that of presently "eligible" paper.
Examples of currently "ineligible" paper include home mortgages
and municipal obligations. Presumably, all FHA-insured and VAguaranteed loans would become eligible as collateral for advances
under the Board's proposal; such a development would tend to
encourage member banks to increase their portfolios of such obligations. Moreover, the Board could, by regulation, prescribe limitations
on the extensions of such credit to prevent abuses.
Federal Reserve Bank branch buildings. Under Section 10 of
the Federal Reserve Act the aggregate costs of branch bank buildings
constructed by the Federal Reserve System after July 30, 1947, may
not exceed $60 million. This amount has been almost fully utilized
or earmarked for construction projects, thus making it necessary for
the Board to seek additional legislative authority. Branches of Federal
Reserve Banks perform important public services, including especially
the handling of currency and coin and the processing of checks. As
the economy grows, the workload of the Banks and branches also
expands. The Board, in its legislative recommendations in 1971 and
1972, said it believed the present dollar limitation on costs of branch
bank buildings to be unnecessary and recommended that the limitation be repealed. The Board reiterates this recommendation. The
Board estimates that $71 million will be needed over the next 5 years
to cover costs of buildings proper for branch baek building programs.
Analysis of the System's building needs is continuing, to ensure the
maximum public benefits for each dollar spent.
198
Proposals relating to the regulation of holding companies.
a. Cease-and-desist
orders. Under present law, there is no
Federal administrative remedy for violations of law by a bank holding company or any of its nonbanking subsidiaries (that are not also
subsidiaries of banks). The Board may either refer the violation to
the Department of Justice as a criminal violation or work the matter
out with the holding company, or it may lake no action. The Board
recommends that the Financial Institutions Supervisory Act of 1966
be expanded to authorize the Board to initiate ccasc-and-desist proceedings to prevent an unsafe or unsound practice in conducting the
business of the holding company or to prevent violations by the
holding company of a law, rule, or regulation, or any condition
imposed by the Board in connection with the granting of any
application or other request by the holding company; and to issue
appropriate cease-and-desist orders against any bank holding company or subsidiary thereof under the A c t including, and notwithstanding any other provision of law, authority to require prompt
divestiture of a nonbanking subsidiary by a bank holding company
where the continuation of ownership or control of such eonbanking
subsidiary by a bank holding company would be inconsistent with
the public interest.
b. Acquisition by holding company of a "failing harnkT The
Board recommends that Section 1Kb) of the Bank Holding Company Act be amended to include provisions, similar to those in the
Bank Merger Act, under which (1) comments by a bank supervisor
on a proposed take-over of a "failing*' bank may be required to be
submitted within 10 days (rather than the usual 30 days); (2) the
Board may inform the Attorney General of an emergency requiring
expeditious action and thereby shorten from 30 to 5 the number of
days between approval of the transaction by the Board and the day
consummation becomes permissible; and (3) the Board may dispense
with comments from the bank supervisors and the Attorney General
where immediate action has been found to be necessary to prevent a
probable bank failure and the transaction may be consummated
immediately upon approval by the Board,
c. Retention by holding company of hank stock acquired as a
result of a debt previously contracted. Section 4 of the Bank
Holding Company Act authorizes the Board to extend from 2 to 5
199
years the time within which to dispose of stock in nonbanking
organizations acquired by a holding company pursuant to a debt
previously contracted. The reasons underlying that authorization
seem equally applicable in the case of bank stock. Accordingly, the
Board recommends that Section 3 be amended to parallel the provisions of Section 4 in this respect.
d. Limitations on reducing, lending on, or paying out a bank
holding company's capital. Member banks are required to comply
with several limitations on reducing, lending on5 or paying out
capital. (See Federal Reserve Act, Section 9, paragraphs 6 and 11,
and Revised Statutes, Sections 5199, 5201, 5204, and 5205.) The
Board believes there is a need for some similar limitations OE bank
holding companies and their nonbank subsidiaries, so as to prevent
the undermining of the capital position of the entire bank holding
company system.
e. Intercorporate dealings. Federal Reserve Act Section 23A
(12 U.S.C. 371c) limits extension of credit between banks and
their affiliates, including bank holding company parents and collateral
affiliates. The Board favors legislation to extend this provision to
cover some purchases of assets by banks from affiliates, sales by
banks to affiliates, or fees or other charges paid to affiliates. In the
Board's judgment such legislation may be necessary in some instances
to prevent misuse of bank resources.
Loans to bank examiners. Title 18 of the U.S. Code, "Crimes
and Criminal Procedure," prohibits loans to a bank examiner by any
bank that the examiner is authorized to examine. For several years
the Board has favored modification of this prohibition to permit a
Federally insured bank to make a home mortgage loan to a bank
examiner under appropriate statutory safeguards. The Board now
believes that a bank examiner may experience difficulties in being
prevented from obtaining other forms of bank credit, such as loans
to finance the education of his children, automobile loans, home
improvement loans, credit-card loans, and other types of consumer
credit. For that reason, the Board favors legislation to permit loans
to a bank examiner to be made in accordance with regulations
prescribed by the agency employing the examiner.
Purchase of obligations of foreign governments by Federal
Reserve Banks, Under present law, balances that the Reserve Banks
200
acquire in foreign central banks In connection with the System's
foreign currency operations may be invested in prescribed kinds of
bills of exchange and acceptances, On occasion these investment
media have not been conveniently available. To facilitate economic
use of such balances, for several years the Board has favored enactment of legislation that would permit Reserve Banks, subject to
regulation of the Board, to invest in obligations of foreign governments or monetary authorities that will mature within 12 months
and are payable in a convertible currency. The Board again recommends such legislation.
Interlocking hank relationships. Section 8 of the Clayton Act
generally prohibits interlocking relationships between a member bank
and any other bank located in the same or an adjacent community.
During 1970 the Federal Reserve System made an extensive review
of interlocking bank relationships and concluded that Section 8
should be amended in several respects to protect the public against
situations arising in which the risk of abuse of an interlocking relationship outweighs the likelihood of benefit. The major extension
favored by the Board would apply the prohibition to interlocks
between any depositary institutions in the same or an adjacent community, with an appropriate delay to permit a gradual phasing out
of prohibited relationships.
In one respect the Board considers that the present law is
unnecessarily restrictive. The law presently prohibits interlocking
service as a "director, officer, or employee/' The Board believes that
the purpose of the law would be better served by limiting the
applicability of the prohibition to service as a "director or an officer
or an employee with management functions,"
Bank investments
for community development. As leading
institutions in their communities, banks arc expected to participate
in programs for the improvement of the community. In some cases
this responsibility can be fulfilled by contributing funds or services.
In others, the appropriate form of participation is an investment in
stock of a corporation established for a particular purpose, such as
to promote the economic rehabilitation and development of lowincome areas, In the Board's judgment, limited investments in such
corporations arc in the public interest and should be encouraged by
appropriate legislation.
201
Accordingly, as a method of encouragement, the Board recommends legislation expressly to authorize national banks to invest In
community corporations established by them or by other local
organizations. Such legislation would not itself authorize State member banks to invest in such corporations, because the corporate
powers of a State-chartered bank are a matter of State law. Nonetheless, it would encourage investments by banks in those States that do
not prohibit banks from making such investments. It should also
encourage States that do prohibit such investments to re-examine
their position.
To assure that the investments do not have an adverse effect on
the soundness of our Nation's banks, the Comptroller of the Currency
and the Board of Governors should be authorized to impose limitations on the nature and scope of those investments by national banks
and State member banks under their respective jurisdictions.
202
Litigation
Bank holding companies—Antitrust
actions. During 1972
the Federal courts announced actions in three cases brought by the
U.S. Department of Justice to prevent the consummation of bank
acquisitions by registered bank holding companies. Two other such
cases filed by the Department of Justice are pending in the Federal
courts. In each case the complaint alleged that the effect of the proposed acquisition would be substantially to lessen competition, or to
tend to create a monopoly in violation of Section 7 of the Clayton
Act (15 U.S.C. 18). The caption of each case and a brief description
of its status are as follows:
United States v. First National Bancorporation, Inc., et al., filed
July 1970, U.S.D.C, District of Colorado. This case was dismissed
by the District Court on the grounds that the Government failed to
prove that the acquisition would substantially lessen competition or
tend to create a monopoly in commercial banking in the Greeley,
Colorado, market or substantially lessen competition in the correspondent banking field (329 F. Supp. 1003 (1971)). In November
1971 the Department of Justice filed an appeal, which the U.S.
Supreme Court accepted for review. The case was argued before that
Court during October 1972 and is awaiting decision.
United States v. First National Bancorporation, Inc., et al., filed
December 1970, U.S.D.C, District of Colorado. The proceedings in
this case (relating to Security State Bank of Sterling, Colorado) have
been suspended pending the outcome of the Greeley case referred to
in the preceding paragraph.
United States v. United Virginia Bankshares Incorporated, et al.,
filed February 1970, U.S.D.C, Eastern District of Virginia. A stay
against consummation of the acquisition was lifted by the District
Court in February 1971. The case was then tried and dismissed by
the District Court on the grounds that the Government failed to prove
that the acquisition would substantially lessen competition or tend to
create a monopoly in commercial banking in the Prince William
County market (Memorandum Order September 1972). The time to
file an appeal has not yet expired.
203
United States v. Trans Texas Bancorporation, inc., et al. This case
was filed March 1972, U.S.D.C., Western District of Texas, to prevent formation of a proposed bank holding company to consist of
four banks in the El Paso market. The case was then tried and dismissed by the District Court on the grounds that the Government
failed to prove that the proposal would substantially lessen competition or tend to create a monopoly in commercial banking in the El
Paso market (Memorandum Order November 1972). Consummation
of the proposal has been stayed. The time to file an appeal has not
yet expired.
United States v. County National Bancorporation. This case was
filed April 1972, U.S.D.C., Eastern District of Missouri, to prevent
consummation by the County National Bancorporation, Clayton, Missouri, of the acquisition of Big Bend Bank, located In Webster Groves,
Missouri. The case was then tried and dismissed by the District Court
on the grounds that the Government had failed to prove that the
acquisition would substantially lessen competition or tend to create
a monopoly in commercial banking in the St. Louis market (Memorandum Order December 1972). The tinie to file an appeal has not
yet expired.
Bank holding companies—Review of Board actions. Eight
civil actions raising questions under the Bank Holding Company Act
were lied during 1972; one of the cases filed during 1971 remains
pending.
In National Association of Insurance Agents, Inc. v. Board of
Governors, filed September 1971, U.S.C.A. for the District of Columbia Circuit, petitioner asked the Court to review and set aside a
regulatory action by the Board to simplify certain procedures in connection with applications under Sections 3 ( a ) ( l ) and 4 ( c ) ( 8 ) of
the Bank Holding Company Act. In December 1971 the Board
suspended the operation of that regulatory action as it relates to
Section 4 ( c ) ( 8 ) and published proposed regulatory amendments that
include modifications of the suspended procedures. The Court proceedings have been suspended pending final outcome of the Board's
proposed amendments. (For the action establishing the procedures,
see the Federal Reserve Bulletin for September 1971, page 723; for
the proposed amendments, see the Federal Register for December
28, 1971, page 25048.)
204
In National Association of Insurance Agents, Inc., el ah v. Board
of Governors, filed October 1972, U.S.C.A. for the District of Columbia Circuit, petitioners asked the Court to review and set aside an
interpretation issued by the Board relating to the types of insurance
agency activities that are considered by the Board to be closely related to banking and in which bank holding companies or their subsidiaries may engage. {The Board's interpretation was published in
the Federal Register for September 13, 1972, pages 18520 and 18521,
and it appears in the Federal Reserve Bulletin for September 1972,
pages 800 and 801.)
In Western Bancshares, Inc. v. Board of Governors, filed September 1972, U.S.C.A. for the Tenth Circuit petitioner has requested
the Court to review and set aside an Order of the Board denying
applications for retention of a bank and continuation of the activities
of a general insurance agency, (For the Board's Order, see the Federal Reserve Bulletin for September 1972, page 843.)
In Gravois Bunk, el al. v. Federal Reserve Bank of St. Louis,
et al., filed July 1972. U.S.C.A. for the Eighth Circuit, petitioners
have urged the Court to review and set aside an Order of June 12,
1972, of the Federal Reserve Bank of St. Louis, acting under delegated authority, approving the application of Manehester Financial
Corporation, St. Louis, Missouri, to acquire The National Bank of
Affton, Affton, Missouri, a proposed new bank.
In Lewis & Clark State Bank v. William B. Camp, et al., filed July
1972, U.S.D.C. Eastern District of Missouri, an action challenging an
application by Boatmen's Bancshares, Inc., St. Louis. Missouri, to
acquire Boatmen's National Bank of North St. Louis County, a proposed new bank, was dismissed by the Distriet Court for lack of subject-matter jurisdiction.
In Lewis & Clark State Bank v. Board of Governors, et ah, filed
October 1972, U.S.C.A. for the District of Columbia Circuit petitioner has requested judicial review of a Board Order approving the
application of Boatmen's Bancshares, Inc., St. Louis. Missouri, to
acquire Boatmen's National Bank of North St. Louis County, a proposed new bank. A motion by petitioner for a stay of the Board's
Order pending judicial review was granted during December 1972.
(For the Board's Order, see the Federal Reserve Bulletin for October
1972, page 923.)
205
In Missouri State Bank & Trust Company v. William B. Camp,
et aL, filed July 1972, U.S.D.C., Eastern District of Missouri, an
action challenging an application by Commerce Bankshares, Inc.,
Kansas City, Missouri, to acquire Commerce Bank of St. Louis, National Association, a proposed new bank, was dismissed by the District Court for lack of subject-matter jurisdiction.
In Bankamerica Corporation v. Board of Governors, iled July
1972, U.S.C.A. for the Ninth Circuit, petitioner asks the Court to
review and set aside an Order of the Board denying an application
of Bankamerica Corporation, San Francisco, California, to engage in
certain personal property leasing activities under Section 4(c)(8)
of the Bank Holding Company Act.
In American Fletcher Corporation v. Board of Governors, filed
October 1972, U.S.C.A, for the District of Columbia Circuit, petitioner asked the Court to review and set aside a regulatory action by
the Board declining to include at the present time operation of sa¥ings and loan associations on its list of acuities in which bank holding companies may engage. (For the Board's statement, see the
Federal Reserve Bulletin for August 1972, page 717.) The petition
for judicial review on agreement of the parties was dismissed by the
Court during January 1973.
.Regulation J—Collection of Checks and Other Items by Federal Reserpe Banks. In Independent Bankers Association of America, et aL v. Board of Governors, Iled September 1972? U.S.D.C. for
the District of Columbia, and in Community Bank, et aL v. Federal
Reserve Bank of San Francisco, et aL, iled September 1972,
U.S.D.C. for the Central District of California, actions were brought
challenging certain amendments to the Board's Regulation J that
require payment of cash items on the day of presentment. In each
case the Board's motion for summary judgment was granted during
early 1973.
206
Bank Supervision and
Regulation by the
Federal Reserve System
Examination of member banks. Each State member bank is subject to examinations made by direction of the Board of Governors or
the Federal Reserve Bank of the district in which it is located by
examiners selected or approved by the Board. The established policy
is for the Federal Reserve Bank to conduct at least one regular examination of each State member bank, including its trust department,
during each calendar year, with additional examinations if considered
desirable. In most States concurrent examinations are made in cooperation with the State banking authorities, while in others alternate
independent examinations are made. All but 27 of the 1,092 State
member banks were examined during 1972.
National banks, all of which are members of the Federal Reserve
System, are subject to examination by direction of the Board of Governors or the Federal Reserve Banks. However, as a matter of practice they are not examined by either, because the law charges
the Comptroller of the Currency directly with that responsibility. The
Comptroller provides reports of examination of national banks to the
Board upon request, and each Federal Reserve Bank purchases from
the Comptroller copies of reports of examination of national banks
in its district.
The Board of Governors makes its reports of examination of State
member banks available to the Federal Deposit Insurance Corporation, and the Corporation in turn makes its reports of insured nonmember State banks available to the Board upon request. Also, upon
request, reports of examination of State member banks are made
available to the Comptroller of the Currency.
In its supervision of State member banks, the Board receives, reviews, and analyzes reports of examination of State member banks
207
and coordinates and evaluates the examination and supervisory functions of the System. It passes on applications for admission of State
banks to membership in the System; administers the public disclosure
requirements of the Securities Exchange Act of 1934, as amended,
with respect to equity securities of State member banks within its
jurisdiction under the 1934 Act, and the provisions of the Act giving
responsibility to the Board for regulating security credit transactions;
prescribes regulations pursuant to the Truth in Lending Act for financial institutions and other firms engaged in extending consumer
credit and administers these regulations in their application to State
member banks; administers the provisions of the Fair Credit Reporting Act, the Currency Transaction Reporting Act, and the Civil
Rights Act of 1968 in their application to State member banks; and
under provisions of the Federal Reserve Act and other statutes, passes
on applications for permission, among other things, to (1) merge
banks, (2) form or expand bank holding companies, (3) establish
domestic and foreign branches, (4) exercise expanded powers to
create bank acceptances, (5) establish foreign banking and financing
corporations, and (6) invest in bank premises an amount in excess of
100 per cent of a bank's capital stock.
By Act of Congress approved September 12, 1964 (Public Law
88-593), insured banks arc required to inform the appropriate Federal banking agency of any changes in control of management of such
banks and of any loans by them secured by 25 per cent or more of
the voting stock of any insured bank. In 1972, 32 such changes in
ownership of the outstanding voting stock of State member banks
were reported to the Reserve Banks as changes in control of these
member banks. Arrangements continue among the three Federal
supervisory agencies for appropriate exchanges of reports received
by them pursuant to the Act. The Reserve Banks send copies of all
reports they receive to the appropriate district office of the Federal
Deposit Insurance Corporation, the Regional Administrator of National Banks (Comptroller of the Currency), and the State bank
supervisor.
Upon receipt of reports involving changes in control of State member banks, the Reserve Banks are under instructions to forward such
reports promptly to the Board, together with a statement (1) that the
new owner and management are known and acceptable to the Re-
208
LOANS TO EXECUTIVE OFFICERS
Period covered
(condition report
dates)
Oct. 29 , 1971 - Dec. 31, 1 9 7 1 . . . . .
Jao. 1, 1972^Apr, 20, 1972 . ..
Apr. 2! . 1972 —
June 30, 1 9 7 2 . , . . .
July 1, 1972 —
Sept. 30. 1 9 7 2 . . . .
Oct. 1, 1972--Dec. 3 1 , 1 9 7 2 . . . . .
1
Coin Dilation of data f
Total loanK to
executive officers
Ranges of
interest rate
charged (per cent)
Nu ni her
Amount (dollars)
7,483
21,655,792
1 -18
8,833
24.959,692
1-18
7.485
22,257,060
1-18
8,085
25.118,261
1-18
0)
condition report of Dec. 31, 1972, has not been completed.
serve Bank or (2) that they are not known and that an investigation
is being made. The findings of any investigation and the Reserve
Bank's conclusions based on such findings are forwarded to the
Board.
By Act of Congress approved July 3, 1967 (Public Law 90-44),
each member bank of the Federal Reserve System is required to include with (but not as part of) each report of condition and copy
thereof a report of all loans to its executive officers since the date of
submission of its previous report of condition. Since the Board's 1971
ANNUAL RI-.PORT was released, member banks have submitted, as
required by law, the data that appear in the table above.
Federal Reserve membership* As of December 31, 1972, member banks accounted for 41 per cent of the number of all commercial banks in the United States and for 61 per cent of all
commercial banking offices, and they held approximately 78 per cent
of the total deposits in such banks; these figures compare with 42
per cent, 62 per cent, and 79 per cent, respectively, at the end of
1971. Stale member banks accounted for 12 per cent of the number
of all State commercial banks and 25 per cent of the banking offices,
and they held 50 per cent of total deposits in State commercial banks.
Of the 5,705 banks that were members of the Federal Reserve
System at the end of 1972, there were 4,613 national, banks and 1,092
209
State banks. During the year there were net Increases of 13 national
and net declines of 36 State member banks. The decline in. State
member banks was offset in part by the organization of 53 new
national banks and by the conversion of 12 nonmember banks
to national banks. The decrease in State member banks reflected
mainly 36 withdrawals from, membership and 12 conversions to
branches incident to mergers and absorptions.
At the end of 1972 member banks were operating 17,954
branches, facilities, and additional offices, 869 more than at the close
of 1971; this included 946 de novo branches and 3 established
facilities.
Detailed figures on changes in the banking structure during 1972
are shown in Table 18, pages 254 and 255.
Bank mergers. Under Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828 (c)), the prior written consent of the
Board of Governors of the Federal Reserve System must be obtained
before a bank may merge, consolidate, or acquire the assets and
assume the liabilities of another bank if the acquiring, assuming, or
resulting bank is to be a State member bank.
In deciding whether to approve an application, the Board is required by Section 18(c) to consider the impact of the proposed
transaction on competition, the financial and managerial resources
and prospects of the existing and proposed institution, and the convenience and needs of the community to be served. The Board is
precluded from approving "any proposed merger transaction which
would result in a monopoly, or which would be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States." A
proposed transaction "whose effect in any section of the country may
be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in, restraint of trade,"
may be approved only if the Board of Governors is able to ind that
the anticompetitive effects of the transaction would be clearly outweighed in the public interest by the probable effect of the transaction
in meeting the convenience and needs of the community to be served.
Before acting on each application the Board must request reports
from the Attorney General, the Comptroller of the Currency, and the
Federal Deposit Insurance Corporation on the competitive factors in-
210
voked in each transaction. The Board in turn responds to requests by
the Comptroller or the Corporation for reports on competitive factors
in¥olved when the acquiring, assuming, or resulting bank is to be a
national bank or an insured nonmember State bank.
Bering 1972 the Board disapproved one and approved 19 of these
applications, and it submitted 145 reports on competitive factors to
the Comptroller of the Currency and 95 to the Federal Deposit Insurance Corporation. In addition, the Federal Reserve Banks approved three merger applications on behalf of the Board of Governors
pursuant to delegated authority, As required by Section 18(c) of the
Federal Deposit Insuran.ce Act, a description of each of the 22 applications approved by the Board or the Reserve Banks, together
with other pertinent information, is shown in Table 21, pages 258—79.
Statements and/or orders of the Board with respect to all bank
merger applications, whether approved or disapproved, are released
immediately to the press and the public. These statements and/or
orders set forth the factors considered, the conclusions reached, and
the vote of each Board member present.
Bank holding companies. During 1972, pursuant to the provisions of the Bank Holding Company Act of 1956, as amended, the
numbers of proposals acted on by the Board, and by the Federal Reserve Banks under delegated authority, were as follows:
Section
Section
3(a)(l)..........
3(a)(3). . . . . . . . . .
3(a)('5)
4(v)iH).
4(cMl2). . . . . . . . .
4(d)............
Bo JRt
Rcscrvt j Banks
Approved
Denied
Approved
68
248
2
59
..........
11
IS
44
30
"' i .i' " '
Permit ted
251
68
In addition to the above, 36 determinations were made by the
Board pursuant to Section 4 ( a ) ( 2 ) of the Act.
Board statements and/or orders with respect to applications,
whether approved or denied, arc released immediately to the press
211
[Tabulation referred to on facing page.]
Abu Dhabi . . . . . . . . . . . .
Argentina . . . . . . . . . . . . . .
Austria . . . . . . . . . . . . . . . .
Bahamas . . . . . . . . . . . . . .
Bahrain . . . . . . . . . . . . . . .
Barbados . . . . . . . . . . . . . .
Brand . . . . . . . . . . . . . . . .
Belgium . . . . . . . . . . . . . . .
Bolivia . . . . . . . . . . . . . . . .
Brazil . . . . . . . . . . . . . . . . .
Canal Zone . . . . . . . . . . . .
Colombia . . . . . . . . . . . . . .
Dominican Republic . . . . .
Dubai . . . . . . . . . . . . . . . . .
Ecuador . . . . . . . . . . . . . . .
El Salvador . . . . . . . . . . . .
Fiji Islands . . . . . . . . . . . . .
France . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . .
Greece . . . . . . . . . . . . . . . .
Guam . . . . . . . . . . . . . . . . .
Guatemala . . . . . . . . . . . . .
Guyana . . . . . . . . . . . . . . .
Haiti . . . . . . . . . . . . . . . . .
Honduras . . . . . . . . . . . . . .
Hong Kong . . . . . . . . . . . .
India . . . . . . . . . . . . . . . . .
Indonesia . . . . . . . . . . . . . .
Ireland . . . . . . . . . . . . . . . .
Israel . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . .
Jamaica . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . .
Lebanon . . . . . . . . . . . . . . .
212
1
38
1
94
2
4
2
7
3
21
2
28
15
3
15
1
3
17
27
14
6
3
1
1
3
19
11
6
4
2
7
7
21
3
3
Liberia . . . . . . . . . . . . . . . .
Luxembourg . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . .
Mariana Islands . . . . . . . . .
Marshall Islands . . . . . . . .
Mexico . . . . . . . . . . . . . . .
Monaco . . . . . . . . . . . . . . .
Netherlands . . . . . . . . . . . .
Netherlands Antilles . . . . .
Nicaragua . . . . . . . . . . . . .
Pakistan . . . . . . . . . . . . . . .
Panama . . . . . . . . . . . . . . .
Paraguay . . . . . . . . . . . . . .
Peru . . . . . . . . . . . . . . . . . .
Philippines . . . . . . . . . . . . .
Puerto Rico . . . . . . . . . . . .
Qatar . . . . . . . . . . . . . . . . .
Saudi Arabia . . . . . . . . . . .
Singapore . . . . . . . . . . . . . .
Switzerland . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . .
Trinidad and Tobago . . . . .
T r u c i a i S t a t e of S h a r j a h . . .
Truk Islands . . . . . . . . . . .
United Kingdom . . . . . . . .
Uruguay . . . . . . . . . . . . . . .
Venezuela . . . . . . . . . . . . .
Vietnam . . . . . . . . . . . . . . .
Virgin Islands (U.S.) . . . .
Virgin islands (British) , .
2
1
5
1
1
5
1
6
3
3
4
32
6
8
4
19
1
2
11
8
3
2
6
1
1
49
4
4
3
20
3
Other (West Indies) . . . . .
13
Total
.................
627
and the public, and orders accompanied by statements are published
in the Federal Reser¥e Bulletin. The material sets forth the factors
considered, the conclusions reached, and the vote of each Board
member present, Actions by the Federal Reserve Banks are reported
to the press and the public in the Board's weekly H.2 release. Board
actions on applications under Sections 4(c)(9) and 4(c)(13) are
not published, but reports of such actions are a¥ailable for inspection
upon request.
Annual reports for 1971 were obtained from all registered bank
holding companies pursuant to the provisions of Section 5(c) of the
Act. At the end of 1972, there were 1,567 bank holding companies
in operation.
Foreign branches of member banks. At the end of 1972, 107
member banks had in active operation a total of 627 branches in 73
foreign countries and overseas areas of the United States; 79 national banks were operating 565 of these branches, and 28 State
member banks were operating 62 such branches. The number and
location of these foreign branches were as shown in the tabulation
on page 212.
Under the provisions of the Federal Reserve Act (Section 25 as
to national banks and Sections 9 and 25 as to State member banks),
the Board of Governors during the year 1972 approved 80 applications made by member banks for permission to establish branches in
foreign countries and overseas areas of the United States. During
the year, member banks opened 67 branches overseas and dosed 17.
Foreign banking and financing corporations. At the end of
1972 there were six corporations operating under agreements with
the Board pursuant to Section 25 of the Federal Reserve Act relating
to investment by member banks in the stock of corporations engaged
principally in international or foreign banking. Four of these "agreement" corporations were examined during the year by examiners for
the Board of Governors, Another one did not sign an agreement with
the Board until the second half of the year. The remaining agreement
corporation is a national bank in the Virgin Islands and is owned
by a State member bank in Philadelphia.
During 1972, under the provisions of Section 25(a) of the Federal
Reserve Act, the Board issued final permits to 10 corporations to
engage in international or foreign banking or other international or
213
foreign financial operations, and 10 corporations commenced operations, while three were merged into other corporations and ceased to
exist. At the end of the year there were 87 corporations in active
operation under Section 25(a). Nine of these corporations operate
a total of 14 overseas branches. Examiners for the Board of Governors examined 80 of these corporations during 1972.
Actions under delegation of authority. Pursuant to the provisions of Section 11 (k) of the Federal Reserve Act, the Board of
Governors has delegated to the Reserve Banks (1) authority to approve, on behalf of the Board, certain applications of State member
banks to establish domestic branches, to invest in bank premises, to
declare certain dividends, and to grant a waiver of 6 months' notice
by a bank of its intention to withdraw from membership in the Federal Reserve System, and (2) certain other authorities. Under authority granted in (1) above, the Reserve Banks approved 257
branch applications, 61 investments in bank premises, 10 applications
of State member banks to declare certain dividends, and 39 waivers
of notice of intention to withdraw from membership in the Federal
Reserve System. Under authority granted in (2) above, the Reserve
Banks approved 1,071 applications.
The Board has delegated certain, authorities to the Director or
Acting Director of the Division, of Supervision and Regulation.
Under this authority 255 actions were taken. In addition, the Director
or Acting Director of the Division of Supervision and Regulation is
authorized under Section 18(c)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)(4)) to furnish to the Comptroller of
the Currency and the Federal Deposit Insurance Corporation reports
on competitive factors involved in a bank merger required to be
approved by one of those agencies if each of the appropriate departments or divisions of the appropriate Federal Reserve Bank and the
Board of Governors are of the view that the proposed merger either
would have no adverse competitive effects or woeld have only slightly
adverse competitive effects, and if no member of the Board has indicated an objection prior to the forwarding of the report to the
appropriate agency. Under this authority 210 competitive factor reports were approved.
Bank Examination Schools. In 1972 the Board's Bank Examination School conducted two sessions of the School for Examiners, three
214
sessions of the School for Assistant Examiners, and one session of the
School for Trust Examiners. The Bank Examination. School was
established in 1952 by the three Federal bank supervisory agencies,
and from 1962 through 1970 was conducted jointly by the Federal
Reserve System and Federal Deposit Insurance Corporation,
Since the establishment of this program, 4,796 persons have attended the various sessions. This number includes representatives of
the Federal bank supervisory agencies; the State Banking Departments of Arizona, Arkansas, California, Connecticut, Florida,
Georgia. Idaho, Indiana, Kentucky, Louisiana, Maine, Michigan^
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire,
New Jersey, New Mexico, New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota,
Tennessee. Utah, Vermont, Virginia, Washington, and Wyoming; the
Treasury Department of the Commonwealth of Puerto Rico; and 20
foreign countries.
Truth in Lending. A report entitled Annual Report to Congress
on Truth in Lending hn* the Year 1972 was submitted separately,
pursuant to the Truth in Lending Act (Title I of the Consumer Credit
Protection Act (Public Law 9 0 - 3 2 1 ) ) .
215
Federal Reserve Banks
Examination of Federal Reserve Banks. The Board's Division
of Federal Reserve Bank Operations examined the 12 Federal Reserve Banks, 24 branches, and 2 facilities during the year, as required
by Section 21 of the Federal Reserve Act. In conjunction with the
examination of the Federal Reserve Bank of New York, the Board's
examiners also audited the accounts and holdings related to the
System Open Market Account and the foreign currency operations
conducted by that Bank in accordance with policies formulated by
the Federal Open Market Committee, and rendered reports thereon
to the Committee. The procedures followed by the Board's examiners
were surveyed and appraised by a private firm of certified public
accountants, pursuant to the policy of having such reviews made on
an annual basis.
Earnings and expenses. The accompanying table summarizes the
earnings, expenses, and distribution of net earnings of the Federal
Reserve Banks for 1972 and 1971.
Current earnings of $3,792 million in 1972 were 2 per cent higher
than in 1971. The principal changes in earnings were an increase of
EARNINGS, EXPENSES, AND DISTRIBUTION OF NET EARNINGS
OF FEDERAL RESERVE BANKS, 1972 AND 1971
In thousands of dollars
Item
1972
1971
Current earnings
Current expenses
3,792,334
414,606
3,723,370
377,185
Current net earnings
Net addition to or deduction from (—) current net
earnings
3,377,728
3,346,185
-49,616
94,266
Net earnings before payments to U.S. Treasury
Dividends paid
Payments to U.S. Treasury (interest on F.R. notes)
3,328,112
46,183
3,231,268
3,440,451
43,488
3,356,560
50,661
40,403
Transferred to surplus
216
ST6 million on l),S. Government securities and a decrease of $6
million on loans.
Cifftvnf expenses were S3? million, or 10 per cent more than in
1971, Statutory dividends to member bank> totaled S46 million, an
increase of $3 million from 1971. I'his rise in dividends reflected
mi increase in capital and surplus of member batiks and a consequent
increase in the paid-in capital slock of the Federal Reserve Banks,
Payments to ihe Trcasiuy as interest on Federal Reserve notes
totaled $3,231 million for the year, compared with $3,357 million
io 1971. This amount consists of all Met earnings aftci dividends
and the amount necessary io bring surplus \o the level ol paid-in
capital.
Expenses of the Federal Reserve Banks also included costs of
$83,75 for one regional meeting incident io the Treasury Department savings bond program.
A detailed statement of earnings and expenses \4 each Federal
Reserve Bank (kiting 1972 is shown in 1 able 7 on pages 238 and
239 and a condensed hKtorical siatemcui in Table -S on pages 240
and 2 4 1 .
Holdings
of loans
and securities.
The table on page 218 shows
holdings, earnings, and average interest rales on loans and securities
of the Federal Reserve Banks during the past 3 years,
Average dailv holdings of loans, and securities during 1972
amounted to **»? 1.391 million—an increase of $5,571 million over
197L Holdings of loans decreased $9 { million, whereas there were
increases of $5,654 million in l-.S. Government securities and $8
million in acceptances.
The average rates of interest on holdings were down from 5,06
per cent to 4,47 per ceni on loans, from 4,94 pet cent Io 4,61 per
cent on acceptances, and from 5,66 per cent to 5.31 per cent on
U.S. Government securities.
J'olume of operations* Table 9 on page 242 shows the volume
of operations in the principal departments of the Federal Reserve
Banks for 1960-72.
Loans decreased ilitriog IIK year as the number of borrowing banks
fell to 8 10 from 901 in 1971.
The establishment of several new regional clearing centers and
the expansion of immediate payment area*- during the year, together
217
R E S E E ¥ E BANK E A R N I N G S ON LOANS AND
S E C U R I T I E S , 1970-72
itern and \ear
Iota!
Loans
Acceptances
U.S.
Govt. 1
securities
In millions of dollars
Average dally holdings: 2
1970 . . . . . . . .
1971 . . . . . . . . ,
1972 . . . . . . . . .
. .
..
...
59.072
65,820
71,391
Earnings:
1970.................. ....
•
1971
1972
i
3,827.1
3 719.6
3,789.7
!
826
; 413
! 322
1
|
'
!
65
81
89
50.6
20.9
14.4
4.7
4.0
4.1
58,181
65,326
70,980
3,771.8
3,694,7
3,771.2
i
i
Average rate of interest:
1970..................
1 9 7 1 . . . . . . . . . . . . . . . . . . ....*'
1972.................. ....'
In per cent
:
6.48
5,65
5.31 i
6.13
5.06
4.47
7.23
4.94
4.61
6.48
5.66
5.31
1
Includes Federal agenc\ obligations.
- Based on holdings at opening of business.
with continuing growth in the movement of funds, are reflected in a
significant increase in the volume of checks handled, A further indication of growth in the movement of funds, through the use of the
Federal Reserve communications network, is the 17 per cent increase in the volume of transfers of funds. The number of coins received and counted posted a sizable increase^ responding to heavier
demand.
Payments mechanism developments. During the year Federal
Reserve Banks continued the expansion and development of improved check-processing arrangements, as they pursued the objectives established in a policy statement issued by the Board of Governors on June 17, 1971. This statement placed high priority on
efforts to improve the Nation's payments mechanism. By the end
of 1972? 24 regional clearing centers were in operation, with an
additional 15 scheduled to become operational by mid-1973. Six of
218
these centers are entirely new operations, begun in cities other than
the previous 37 locations of Federal Resef¥e offices. In addition to
providing faster clearing of checks, such centers will offer a new
level of service to remotely located commercial banks.
Loan guarantees for defense production. Under the Defense
Production Act of 1950, the Departments of the Army? Navy, and
Air Force, the Defense Supply Agency of the Department of Defense, the Departments of Commerce, Interior, and Agriculture, the
General Services Administration, the National Aeronautics and Space
Administration, and the Atomic Energy Commission are authorized
to guarantee loans for defense production made by commercial banks
and other private financing institutions. The Federal Reserve Banks
act as fiscal agents of the guaranteeing agencies under the Board's
Regulation V.
During 1972 the guaranteeing agencies did not authorize the
issuance of any new guarantee agreements. Loan authorizations outstanding on December 31, 1972, totaled $52 million, which was also
the total, of outstanding loans. Of total loans outstanding, 15 per cent
on the average was guaranteed, During the year approximately $4
million was disbursed on guaranteed loans, all of which are revolving
credits,
Aethority for the V-loan program, unless extended, will terminate
ofl June 3O5 1974
Table 15 on page 248 shows guarantee fees and maximum interest
rates applicable to Regulation V loans.
Foreign and international accounts. Assets held for account of
foreign countries at the Federal Reserve Banks increased $8,758
million in 1972. At the end of the year they totaled $65,156 million: $11,450 million of earmarked gold, of which $905 million
represented the increase resulting from the change in par ¥aiue of
the U.S. dollar in May 1972; $50?934 million of U.S. Government
securities (including secerities payable in foreign currencies); $325
million in dollar deposits; $179 million of bankers* acceptances purchased through Federal Reserve Banks; and $2,268 million of miscellaneous assets. The latter item consists mainly of dollar bonds issued
by foreign countries and international organizations. Assets held for
international and regional organizations increased $1,377 million to
$13,191 million; this amount includes an increase of $322 million
219
in earmarked gold resulting from the change In par ¥alee of the U.S.
dollar.
In 1972 new accounts were opened In the names of Bangladesh
Bank, Narodowy Bank Polski, and the Central Bank of Yemen; the
account ia the'name of the Yemen Currency Board was closed.
The Federal Reserve Banks did not make any Joans on gold in
1972.
The Federal Reserve Bank of New York continued to act as depositary and fiscal agent for international and regional organizations.
As fiscal agent of the United States, the Bank continued to.operate
the Exchange.Stabilization Fund pursuant to authorization and instructions of. the Secretary of the Treasury, Also on behalf of the
Treasury Department, it administered foreign assets control regulations pertaining to assets in the United States of North Vietnam,
Cuba, the People's Republic of China (pertaining to assets blocked
before May 7, ! ( )7J), and North Korea, and their nationals, and to
transactions with those countries and their nationals.
Federal Reserve bank premises. During 1972 the Board authorized construction of new buildings for the Philadelphia and Boston
Banks, a coin vault addition to the Pittsburgh Branch and a temporary
coin facility addition to the present Boston Bank,
With the approval of the Board, the Dallas and Atlanta Banks
and the Helena Branch acquired properties for future expansion.
The Boston Bank acquired an existing underground facility in
Amherst, Massachusetts, for use as a duplicate records storage
center. An annex building for records storage was purchased by the
Chicago Bank to replace rented facilities lost through termination
of a lease agreement.
The Cincinnati and Memphis Branches occupied their new banking quarters, and the ¥acated Memphis Branch, building property
was sold.
Table 6- on page, 237 shows the cost and book value of bank
premises owned and occupied by the Federal Reser¥e Banks and of
real estate acquired for banking-house purposes.
220
Board of Governors
Income and expenses. The accounts of the Board for the year
1972 were audited by the public accounting firm of Touche Ross &
Co.
ACCOUNTANTS' OPINION
Board of Governors of the
Federal Reserve System
We have examined the balance sheet of the Board of Governors of the
Federal Reserve System as of December 31, 1972, and the related statements of assessments and expenses, and changes in financial position for
the year then ended. Our examination was made in accordance with
generally accepted auditing standards, and accordingly included such tests
of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The financial statements for the
preceding year were examined by other independent public accountants.
In our opinion, the aforementioned financial statements present fairly
the financial position of the Board of Governors of the Federal Reserve
System at December 31, 1972, and the results of its operations and
the changes in its financial position for the year then ended, in conformity
with generally accepted accounting principles applied on a basis consistent
with that of the preceding year.
Touche Ross & Co.
Certified Public Accountants
Washington, D C .
January 29, 1973
221
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
BALANCE SHEET
December 31
ASSETS
W n ^ ^
~ "1971
OPERATING FUND:
Cash.,,
Miscellaneous receivables and advances.
Stockroom and cafeteria inventories—at cost (firstin, first-out method)
T o t a l operating f u n d , . . . . . . . . . . . . . . . . .
$ 5,564,301
92,076
$ 5}5OOf211
58,222
5! ?950
39,195
5,708,327
5,597,628
792,352
4,298,315
2,015,858
22,031,509
792,852
4,284,181
1,673,599
9,771,715
29,138,534
16,522,347
$34,846,861
$22,119,975
$ 2,827,929
187,054
368,533
1,662,319
S 1,722,014
157,997
327,602
............
PROPERTY F U N D :
Land and i m p r o v e m e n t s . . . . . . . . . . . . . . . . . . . . . . .
Building
Furniture and equipment, . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress. . . . . . . . . . . . . . .
...
Total property f u n d . . . . . . . . . . . . . . . . . . .
LIABILITIES A N D F U N D
OPERATING
BALANCO
FUND:
A c c o u n t s payable a n d accrued e x p e n s e s . . . . . . . . .
I n c o m e taxes w i t h h e l d . . . . . . . . . . . . . . . . . . . . . . . .
Accrued p a y r o l l . . .
Retention on c o n s t r u c t i o n - i n - p r o g r e s s . . . . . . . . . . .
Fund balance:
Balance, beginning of year
Assessments over (under) e x p e n s e s . . . . . . . . . . . .
5,045,835
2,207,613
3 ? 39O ? O15
(2,727,523)
1,120,546
2,269,469
Balance, end of y e a r . . . . . . . . . . . . . . . . . . . . . . . .
662 ? 492
3,390,015
T o t a l operating f u n d , . . . . . . . . . . . . . . . . .
5,708,327
5,597,628
16,522,347
8,868,106
12?699,379
(83,192)
7,720,419
(66,178)
12,616,187
7,654,241
29,138,534
16,522,347
$34,846,861
$22,119,975
PROPERTY
FUND:
Fund balance:
Balance, beginning of y e a r . . . . . . . . . . . . . . . . . . .
Additions—at c o s t . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals—at c o s t . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Increase.
Total property fund, end of year. . . . . . . . . . . . .
See notes to financial statements.
222
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
STATEMENT OF ASSESSMENTS AND EXPENSES
Year ended December 31
^ J 9 7 2 ^
~
1971
'
ASSESSMENTS LEVIED ON FEDERAL RESERVE B A N K S :
For Board expenses and additions to p r o p e r t y . . . . .
For expenditures made o e behalf of the Federal Reserve B a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assessments. . . . . . . . . . . . . . . . . . . . .
$35,234,500
$32,634,000
23,957,493
22,882,713
64,191 ? 993
55,516,713
17,167,836
1,605,754
718,917
535,104
400,714
663,988
2,658,376
304,183
298,855
217,391
103,566
134,438
222,274
56,472
15,101,752
2,005,986
687,419
431,034
346,746
628,287
2,189,655
271,489
227,229
194^298
93,778
121,319
131,639
52,855
27,645
168,796
28,338
138,041
25,284,309
22,649,865
12,677,714
7,714,666
37,962,023
30,364,531
28,957,493
22,832,713
66,919,516
53,247,244
EXPENSES :
For the B o a r d :
Salaries. .
Retirement and insurance contributions. . . . . . . .
Travel expenses.
Legal, consultant and audit fees. . . . . . . . . . . . . . .
Contractual services. . . . ' . . . . . . . . . . . . . . . . . . . . .
Printing and binding—net
..
Equipment, office space and other rentals . . . . . .
Telephone and telegraph
Postage and expressage
Stationery, office and other s u p p l i e s . . . . . . . . . . . .
Heat, light and power
Operation of cafeteria—net. . . . . . . . . . . . . . . . . . .
Repairs, maintenance and a l t e r a t i o n s , . . . . . . . . . .
Books a n d subscriptions
System membership, Center for Latin America
Monetary S t u d i e s . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous—net..........................
For additions to property—net of recovery on disposals of $21,665 in 1972 and 55,753 in 1971. . . . .
Expenditures for printing, issue and redemption of
Federal Reserve Notes, paid on behalf of the
Federal Reserve B a n k s / . . . . . . . . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . .
ASSESSMENTS OVER ( U N D E R ) EXPENSES. . . . . . . . . . . . . .
$(2,727,523 > S 2,269,469
See notes to financial statements.
223
BOARD OF GOVERNORS-OF THE FEDERAL RtstR\t SYSTEMSTATEMENT-OF CHANGES IN FINANCIAL POSITION
Year ended December 31
SOURCE OF FUNDS:
Assessments o f er (under) e x p e n s e s . . . . . . . . . . . . . . .
N e t increase in p r o p e r t y f u n d , ; . 7 ; . . . ; . . . . .
Increase in retention o n c o n s t r u c t i o n - i n - p r o g r c s s . . .
Increase in a c c o u n t s p a y a b l e a n d accrued e x p e n s e s . .
Increase i n accrued p a y r o l l . . . . . , . . . . , . , . . . . . , , .
Increase in Income taxes w i t h h e l d , . . . . . , , . ,
Decrease in miscellaneous receivables a n d advances
S < 2,727,523 > S 2,269,469
12,616,187
7,654,241
1,662,319 . . . . . . . . . . .
1,105,915
669,830
40,931
92,748
29,057 . . . . . . . . . . .
...
,
99,374
APPLICATION OF FUNDS:
Additions to property—net:
Construction-in-progress. . . . . . . . . . . . . . . . . . . . .
Furniture and e q u i p m e n t . . . . . . . : . . . . . . . . . . . . . .
Building........7,............ ,V..':.........
12,726,886
10,785,662
12,259,794'
342,259
•.. 14,134
7,332/893
314,442
6,906
.. 12,61"6,187
Increase in miscellaneous receivables and advances.. • '
33,854
Increase in stockropni and cafeteria inventories.....
12,755
Decrease in income taxes withheld.
INCREASE IN CASH.
7,654,241
.
7,930
66,196
12,662,796
7,728,367
64,090
$ 3,057,295
S
NOTES TO FINANCIAL - STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Assessments made by the Board on the Federal -Reserve Banks for Board expenses aad additions to property are calculated based upon expected cash needs (and
are accrued when assessed. Board expenses and property additions are recorded on
the accrual basis- of accounting.
Assessments and expenditures made on behalf of the Federal Reserve Banks
for the printing, issue and redemption of Federal Reserve Notes-are .recorded ..on
the cash basis and produce results which are not materially different from those
which would have been produced on the accrual basis of accounting.
Property additions are charged to expense in the Operating Fund in the year
of acquisition; recoveries on the-disposal of'property are-recorded as a reduction
in expense in the Operating Fund in the year of disposal. When property is acquired
or sold, the property accounts in the Property Fund are increased or reduced at full
cost, with a corresponding increase or decrease in the property fund balance. Because
of the short duration and temporary nature of the Board's leases, leasehold improvements have not been capitalized in the Property Fund.
The Board is self-insured against loss of its building and furniture and equipment from ire or other casualty. The construction-In-progress is covered by builder's
224
B()'\RD OF G()M KNORS OF T
' iif*. FtOERAt Rl-Sr.KW: SVSI I'M
NOTES TO FINANCIAL STATEMENTS—Continued
risk insurance in excess of the cost of the work to December 31, U)72. Coverage for
other customarilv insured risks, such as workmen's compensation insurance and
comprehensive general liability insurance, is carried bv the Board,
CONST RUC HON-I N- PR* K « RI-:SS
The Martin Building and North Garage are currently under construction. The
estimated cost is $41.300.000. a portion of which will be recovered from the Department of Interior under an agreement whereby the Board will build the North Garage
(.including the above ground park,). The garage will be for the use of both Federal
Reserve and Department of Interior employees.
The retention on eonstruction-in-progress represents five percent of the general
construction contract and is to be paid at satisfaetor> completion of the contract,
expected to be during 1974,
LONG-TERM LEASES
The Board leases outside office and parking space under leases expiring from
December 31, 1973 to December 31. 1077. Because the leases may be terminated
with six months notice commencing in 1974, the onl\ fixed future rental commitments
are:
1973-$1,093,000
1974^- 557,000
RETIREMENT PLANS
There are two contributory retirement program* for employees of the Board,
About 8 4 r r of the employees are covered by the Federal Reserve Board Plan. All
new members of* the stall* who do not come directly from a position in the Government arc covered by this plan. The second, the Civil Service Retirement Plan, covers
till new eniplo>ees who come directly from Government service, Employee contributions are the same under both plans, and benefits arc similar, being based upon the
Civil Service Plan,
Under the Civil Service Plan. Board contributions match employee payroll
deductions while under the Federal Reserve Plan, Board contributions are actuariaily
determined annual!}.
Additionally. emplo\ees of the Board have been authorized to participate in
the Federal Reserve Svstem's Thrift Plan. Under this plan, the Board adds a fixed
percentage to allowable employee savings.
Total Board contributions to these plans totaled SI,394,036 in 1972 and
SI,831,173 in l l )7I, The reduction in Board contributions to the Federal Reserve
Retirement Plan reflects utilization of surplus reserves, which resulted from investment gains. Such gains are being utilized to reduce contributions in the current and
future years. There arc no unfunded prior service costs under either plan.
225
(Statistical Tables
1. DETAILED STATEMENT OF CONDITION OF ALL FEDERAL
RESERVE BANKS COMBINED, DECEMBER 31, 1972
(In thousands of dollars)
ASSETS
Gold certificates on h a n d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gold certificates due from U.S. Treasury:
Intcrdistrict settlement fund . . . . . . . * . . . . . . . . . . . . . .
F.R. Agents* fund. .
,
.
Total gold certificate account
Special Drawing Rights certificate account
F.R. notes of other F.R. Banks
Other cash:
United States notes
Silver certificates.
National bank notes and F.R, Bank notes. .
Coin
Total other cash
,
Loans to member banks secured by—
U.S. Govt. and agency obligations. .
Other eligible paper,.",,,.
Other paper (Sec. 10<b>>
1,278
7,741,12!
2, 56!,000
10,303,399
41)0,000
1,158,876
,
......
,
279
102
133
312,709
,
.
313,223
.
877. 554
1,049, 380
54.020
Loans to others. . . . . . . . . . . . . . . . . . . . . .
Foreign loans on gold
Total l o a n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptances:
Bought outright
Held under repurchase agreement
.........
Federal agency obligations:
Bought outright
,
Held under repurchase agreement
U.S. Govt. securities:
Benefit outright:
"Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,664.685
Certificates.
Notes
.
. 36.681,435
Bonds
3,462,370
Total bought outright
1,980,954
70,461
36,306
1,311,364
13.000
69,8O8.4tO
Held under repurchase agreement. .
97,500
Total U.S. Govt. securities
Total loans and securities.
Cash items in process of collection:
Transit items
Exchanges for clearing house
Other cash items
Total cash items In process of collection
Bank premises:
Land
Buildings (including vaults)
Fixed machinery and equipment.
Construction account
1,980,954
69,905,990
73,318,075
8,443,753
345,850
1,992,928
.
.
1 30,810
81,036
37,980
Total builcllnes.
,.
249,826
Less depreciation allowances. . . . . . . . . . . . . . . . . .
120,827
Total bank premises.
Other assets:
Claims account closed bonks
Denominated in foreign currencies
Gold clue from U.S. 1 reasury for account International Monetary Fund
Reimbursable expenses and'other items receivable.
*
Interest accrued .
Premium on securities.
Deferred charges
......
Real estate acquired for banking-house purposes
Suspense account
,
All o t h e r . . . . . . . . .
10,782,531
64,865
128,999
If3»S64
192, 341
11, $92
680, 072
73, 447
4, 552
3; 055
88 978
11, 114
Total other assets.
1,065,451
Total assets. . . . . .
97335,419
228
1.—CONTINUED
LIABILITIES
K R . notes:
OiuMundJm' 'issued to I'M. Ranks' . . .
.....
Less lick! h> «ssuin«i K K . Banks
. . . . .
hot warded foj redemption
,
, . . ,,
I .R. notes, net unelndes notes hold In U.S. f icasti'y
and b} F.R, Banks other than is.sura« Bank':
Deposits.
MemK'i Hank teserves. . . .
,
. . . .
U.S. Ircasutvr General ;uv<>uni
,,
,. ,
j-orcitiii.....
...
. . .,,
. .
, , ..
Other d e p o s n s ,
Nonmeinber bank Cle.<unu accounts
OHiccis'viiul ccnifk'd CIK-VKS .
Reserves ot' corpora lions iloini.1 Io4cl*-*ii b.niknir <n
finanduj',. . . . . .
.
..
.. , . . ,
l n t e n u u o n . i l orj.'jpi/atioir;
.. ..
. ,,
St'crciaiv uj I K\>siny sjv«.ittl u c j o u m .
AlUnhe'f. .
. . . .
I o u t oilier dcpoMt>
59,913,141)
1,8?5.6(W
...
DcfVi^if auHlaNiir, Kjsh item*
Ofhcr tf.iWliiK's:
V e i n e d dividends unpaid
l.Vearned tliscuiini
Hisconnt on seviniues . .
Snndrs items pa>able.
Alt tAiiJi * " .
5S4.272
h n a t other liablliiic
Total !i,*b»hues.
..
CAPITAL
CapiUtl paid in
Sin plus
Other caj'ttai accounts
ACCOUNTS
. . . . .
:
l o i a i iiibilities and capita 1 .ueonnt*.
C vMttin^ent liabilsi> <>» a t w p i a n c c i ptuvhas^d fm
?«I2 ,845
191 ,845
,535 ,419
on
1
n u t i n j ' the w n* this iicsn inc{>itlcs ihc sui nfVutHituw, o\fvn\c% pi>»li! atu! I
dividends, winch are ,;iov;d «>ur o-i l\\ , >L MV I ^ N e 7, ,\r>, J 5H ami :.t'»,
N»>n. -\nk)tiiifs m bonlfa^e l u v inv'tva»e Hems shown in ihe iioani'^ \\>.vl;i\
of the F.K. Banks
229
2. STATEMENT OF CONDITION OF EACH FEDERAL RESERYE BANK, DECEMBER 31, 1972 AND 1971
(In millions of dollars unless otherwise indicated)
New York
Boston
Total
Item
Philadelphia
Cleveland
Richmond
i
1972
1971
Gold certificate account
..,..,.....,.,,.
Special Drawing Rights cert if. acct.
F.R. notes of other F.R.. B a n k s .
Other c a s h . . . . .
10,303
400
1,157
313
9,875
40D
1,135
261
504
23
16*)
14
Loans:
Secured by U . S . G o v t . a n d agency obligations.
Other
...........
1,975
7
39
59
Acceptances:
Bought outright.
i lekt under repurchase a g r e e m e n t s . . . . . . . . . . . .
70
36
80
181
Federal agency obligations:
Bought outright.
Hold under repurchase a g r e e m e n t s . . . . . . . . . . . .
1,311
485
101
62
i69»808 ^68,996
1,222
98
1972
1971
2,064
93
206
17
1,957
l
)3
164
21
632
2^
54
10
926
17
93
70
36
80
181
........
23
332
13
117
101
72
27
98
3»28i
3,334
17,702
98
16,714
1,222
3,841
3,823
1972
1971
1972
1971
1972
1971
1972
1971
ASSETS
U.S. Govt. securities:
Bought outright.
...
Held under repurchase a g r e e m e n t s . . . . . . . . . . . .
n
572
23
144
471
23
82
11
885
33
76
39
973
33
69
27
1,013
36
121
36
894
36
100
38
52
3
39
98
36
5,225
5,492
5,216
5,162
5,53!
5,366
5,201
965
13
1,088
13
194
........
73,318
71,104
3,402
3,357
19,177
18,432
4,006
3,850
5.517
Cash items in process of collection.
Bank premises
Other assels:
Denominated In foreign c u r r e n c i e s . . . . . . . . . . . .
IM F gold deposited 2 . . . . . . . . . . . . . . . . . . . . . . .
All o t h e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,782
194
15,648
150
376
29
840
2
2,543
7
2 922
447
5
303
3
597
27
192
17
144
757
9
i
50
1
17
2
10
1
41
58
211
4
144
183
10
874
45
39
71
54
71
53
Total a s s e t s . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,533
99,491
4,567
5,006
24,368
23,928
5,232
5,283
7,262
7,694
7,631
7,424
Total loans a n d s e c u r i t i e s . . . . . . . . . . . . . . .
..
981
24
LIABILITIES
F.R, notes.
.......... .
Deposits:
Member bank reserves
U.S. Treasurer—General account.
Foreign
Other;
I M F gold deposits - . . . . . . . . .
All other
...
Total d e p o s i t s . . . . .
,.,....,
.
......
Deferred availability cash items. ,
....
.......
Other liabilities and accrued d i v i d e n d s . . . . . , , .
Total liabilities.
C. AP! I AL
tin
i'.li,
54,954
3,116
2,925
14,809
13,462
3,647
3,237
4,752
4,473
5,315
4,803
25,505
1,855
325
27,748
2,020
294
936
lid
13
1,116
149
13
7,073
388
111
6,960
387
88
1,011
121
15
1, 164
155
14
1 5^2
144
26
11969
164
25
1,248
164
15
1,515
98
14
:' "84<V
144
1,237
12
17
"570
144
706
28,525
3 i,443
1,071
1,295
8,142
8,285
1,171
1,357
1,743
2,191
1,458
1,668
6.951
557
95,94?
10.963
647
98,007
285
27
863
140
1,627
168
307
29
581
5S2
41
847
47
734
40
834
43
4,499
689
29
4,938
23,954
23,542
5,154
5,207
7,118
7,558
7,547
7,348
793
793
742
742
34
34
34
34
207
207
193
193
39
39
38
38
72
68
68
42
42
38
38
99,491
4,567
5,1)06
24,368
23,928
5,232
5,283
7,262
7,694
7,63!
7,424
179
254
8
47
66
9
13
16
23
9
13
62,492
2 578
57,490
2,53d
3,306
190
5,107
182
15,482
673
f4,0l>3
Ml
3,725
78
3,335
98
4 691
218
5,482
167
59 ,914
54,954
3,116
2,925
14,809
1 3»462
3,647
3,237
4.92'">
177
4,752
4.473
5,315
4.%2
159
4,803
2,670
2,561
(>l ,015 55,875
250
3,070
500
175
3,000 "j 5]560" 13,800
6<»»)
3,300
3,150
4,700
35D
4,400
501
5,025
485
4,520
63,576
3,320
3,175
15,560
3,90(1
3,450
5,050
4,750
5,526
5,005
"24"
" ' 24
*2l'
'33*
" ii'
41
ACCOUNTS
Capita! paid in
.
,. .....
Surplus . . .
, ...
Oilier capita! a c c o u n t s . . . .
Total liabilities and capital accounts
Contingent liubilit}
correspondents.. .
5l)»9i4
acceptances
purchased tor foreign
.,,.,........
NOTE STATFMFNT
F.R. notes:
Issued to F.R. Bank by F.R, Agent and outstanding. . . . . . .
Less held by issuing Bank, and forwarded for redemption. ,
F.R. notes, net ' . . . , . .
Collateral held by F.R. Agent for notes issued to Bank;
Gold certificate account.
U.S. Cio\t. securities.. . . .
l o t a l collateral
For notes see end of table.
5S.545
14,300
Is)
to
2. STATEMENT OF CONDITION OF EACH FEDERAL EESEEVE BANK, DECEMBER 31, 1972 AMD 1971—Continued
(In millions of dollars unless otherwise indicated;
Atk tnta
St. Louis
Chicago
Mi nnt apolis
Item
1972
1971
197!
1972
1972
1971
1, K46
70
102
40
1,785
70
X2
2H
534
15
}5
21
262
3
52
211
79
47
Kansas City
1971
1972
Dallas
1971
1972
1972
San Fr aneisco
1971
1972
197!
i, 289
49
118
35
1,833
49
129
30
199
10
ASSETS
Gold ceitiftcate account.
Special Dravmii', Rights certif. acct,
KR. notes of oihcr l-.R. Hanks
Other cash
Loans:
Secured by L'.S. Govt. and agency
obligations
Other '
647
375
166
40
205
88
7
346
15
40
17
78
7
27
5
25
7
31
8
2
1
433
15
39
42
546
15
41
26
378
14
44
14
7
5
41
20
57
22
184
67
3tO48
3,180
9,805
9,529
98
14
48
14
Acceptances:
Bought outright ,
Held under repurchase agreements
Federal agency obligations:
Bought outright.,,
,
Helti under repurchase agreements
U.S. Govt. securities:
Bought outright,,,
...........
Held under repurchase agreements.
72
19
26
9
52
........
3,H3I
1 otal loans and securities. .
Cash hems in process of"collection. . . . . , . , .
Bank p r e m i s e s . . . . . . .
Other assets:
Denominated in foreign
currencies,
IMF gold deposited 2
All other
928
15
Total a s s e t s . . . . . . . . . . . . . . . . . . . . . .
5,872
27
3,784
11,231
11,282
2,508
2,649
1,367
........
1,252
2,753
3,811
11,704
11,364
2,607
2,668
i»395
1,262
2,812
2,820
3,146
3,202
10,188
9,606
1,528
1,459
16
2,498
16
444
15
854
15
457
30
70s)
678
17
707
1,102
9
1,181
1,354
8
7
1
969
17
1
25
2
'"'in'
""27'
26*
"""'33'
""isi"
' " ' U4
15,958
3,705
4,521
13,044
13,125
13
29
43" '" " " 4 i '
6, Oil
126*
15,392
3,982
4
"""is"
2,021
2,795
35'
2,076
4,079
4,463
12
10
' ""*35'
4,360
LIABILITIES
1,041
2,320 I
2,298
1,003
102
1,373 l: 1,437 I 4,748 : 5,086
124
83 I
174 •
213
16 1
16 !
37 j
35
3,191
2,809 I 10,064
1,682
144
20
1,725
139
19
27
13
Total d e p o s i t s . . . . . . . . . . . . . .
I, 866
1,940 ! 3.800 j 4,185
976
1»206
760
1 J 29 t
672
1,150 1 1,192 j 1,884
335
585
356
546 !
23 I
Deferred availability cash i t e m s .
Other liabilities and accrued dividends
33 I
)
Total l i a b i l i t i e s , . . . . . .
CAPO At
5,762 i
51
32 j
5,931
88
_!
k
)4
..__
549
52
"7
,015
154
10
814 |
142 !
10 i
3,516 ' 3,751
190 :
255
43 '
42
57 «
20
9,573
2,315 ! 2,045
F.R. notes.
Deposits:
M e m b e r bank r e s e r v e s , . , , . . , . , . ,
U.S. Treasurer- -General a c c o u n t ,
Foreign........
...............
Other:
I M F gold deposits s . . . . . . . . .
AM o t h e r . . . . . . . . . . . . . . . . . . .
315
15
2fJ
I.___
j 15,144 I 15,736 i
682
59
1,328
164
7,046
12
66 1
1,585 : 1,530 i
746 I
422
24 I
715 !
35 1
4,399 ! 4,274 \ 4,439
3,651
81
1,556 j 5,025 j 5,415
949
110
69K '
77 !
12,846 ; 12,935
ACCOUNTS
Capital paid i n . . ,
Surplus
Other capital a c c o u n t s . .
50 '
50 '
55
55
124
124
27
27
25 !
43
43
32
41 '
4i ;
99 •
99 !
.......
Total liabilities and capital '
accounts
. ...
Contingent liability on acceptances pur- <
chased for foreign c o r r e s p o n d e n t s , . . . . . . . !
F.R. NOTE STATEMENT
Collateral held b> F.R, Agent for notes
issued to Bank.
Gold certificate account.. . . . . . . . .
U.S. CiovL securities.
Total collateral... , , . . . . . . . .
15,3*12 | 15,958 j 3,705 j 3,982
1
17
12
27
j
F.R. notes.
t
Issued to F.R. Bank by F.R, Agent and j
outstanding. . ,
«
Less held by issuing Bank, and for- 1
warded for redemption..,
F.R. notes, net 3 . . . . . . . . . . . . . . . . .
5,872 I 6,031
M j
i1
6 '
,909 j
2,431 ;
336 !
in j
2,021
0 1
1
4
4,1)79
b
8
4,463 | 4,360 j 4,52!
it \
13,044 j 13,125
10 i
14
23 j
52
7,438 i
ft ,825
1
j
399
3,039
10, 399
208
20)
335
3* 19!
2
10, 064
9
9 ,573
j
2,321) j
1
t ,078
94 H
2,405
2, I 24 |
2,418 !
2.275
93 j
37
34
90
79 j
120 |
142
s
1,041
914
2,315
2,1)45 |
2,298 j
2J}}
392
364
7,046 i
6 , 46 f
1
5110
i, 500
' '3 ,
ioo
3 ,10U
700
9, 900
10,
i
700 !
,300 ;
155 1
2,330 j
2,130 j " i ,
10 ,000 1
2,485 !
2,285 j
9
155 ,
1
ioo
.100
' "970
' -\45lV
970
2 450
'2J75*
2,175 •
|
5
2,330
7,600 j
2,485 1 2,335
7,600 j
5 '
2,480 1
•7
;o66
7 , 000
i
* Less than $500,000,
ts)
* Includes securities loaned—fully secured by U.S. Govt. securities pledged with F.R,
|*> Banks.
a
^
(iold deposited by the IMF to mitigate the impact on the U.S. gold stock of purchases
by foreign countries for the purpose of making gold subscriptions 10 the IMF under
quota
increases. The United States has a corresponding gold liability to the IMF.
•J Includes F.R, notes field by U.S Treasury and by K R . Batiks other than the issuing
Bank,
3. FEDERAL RESERVE BANK HOLDINGS OF U.S. GOVERNMENT
AND FEDERAL AGENCY SECURITIES, DECEMBER 31, 1970-72
(In millions of dollars)
December 31
Type of* Issue
and date
1972
Treasury bonds:
1966-71. . .
1967-72 J u n e . , . .
1967-7 2 S e p t . . . . ,
1967-72 Dec. . . .
1971 Aim
1971 N o v .
1972 Feb
1972 Aug
1973 Aug
1973 Nov
1974 F e b .
1974 M a y . . . . . . .
1974 N o v . . . . . . .
1975-85.
1978-83.....
1980 Feb
1980 Nov. . . .
1981 Aug
1982 F e b .
1984 Aug
1985 M a y . . . . . .
1986 N o v . . . . .
1987-92. . . . . . .
1988-93
1989-94........
1990 F e b . . . . . .
1995 F e b . .
1998 Nov
- '2
j
2 '•<>
1
4'
3?g
!'
;.
4
4
4
I
j
i
'
331
411
200
304
68
Xi*4 ;
132
78
41^
4iv
4!4
3?- 8
4
l
!
^ i '•>
i
^j'"
1
6 (i H
3 4
6l s
434
4
4'x
1 '')
i
•
'
1
;
i
i
T o t a l . . . . . . . . . . ..
I
1971
145
74
114
270
283
47
292
496
24
77
84
149
264
381)
180
292
68
124
76
122
73
105
47
207
462
24
72
84
2
3,286
140
234
*>
4»4
2,38?
6
5-8
155
58
89
125
188
260
197
126
199
312
141
254
53
99
19
73
41
338
24
45
80
2
1,770
2,626
2,513
232
284
963
5 2^3
1,876
1 ,087
90
3,728
67
2 372
462
2,507
898
I
2,940
74
63
1,578
456
286
HI
7,233
137
225
,37?
129
1,345
43
82
1,718
2,618
202
181
888
5,005
1,103
995
*"* 223'
250
952
5,180
1,849
1,076
31
3,722
'3]707'
2,314
390
2,507
2,506
*335*
456
714
47
2,448
336
2.568
2 425
512
16
2 392
30')
2.462
2,201
36,681
35,554
1971
-89
-1(18
-130
-197
-149
67
31
20
12
23
1
9
270
283
* "85*
34
-155
31
19
5
-188
-260
* *23"
65
68
39
37
15
26
58
49
33
105
16
207
124
I
26
4
3?
3?
3.12
4»*
1970
89
108
130
Total.
Treasury notes:
Feb. 15, 1971—C...
Feb. 15, 1971—D. .
May 15, 1971 — A . . .
May 15, 1971—E...
Aug. 15, 1971 — F . . .
Nov. 15, 1971—B . .
Nov. 15, 1971—G . .
Feb. 15, 1972—A...
Feb. 15, 1972—C...
Apr. I, 1972—EA.
May 15, 1972—B...
May 15, 1972—1). .
Aug. 15, 1972—E...
Nov. 15, 1 9 7 2 — F . . .
Feb. 15, 1973—C...
Feb. 15, 1973—D. .
May 15, 1 9 7 3 - 4 . . .
May 15, 1973—E.. .
Aug. 15, 1973—B.. .
Feb. 15, 1974—C...
May 15, 1974—D. .
Aug. 15, 1974—B...
Nov. 15, 1974—A...
Feb. 15, 1 9 7 5 - A . . .
Feb. 15, 1975—E...
May 15, 1975—B...
May 15, 1 9 7 5 - - F . . .
Aug. 15, I 9 7 5 - - C . . .
Nov, 15, 1975—D. .
Feb. 15, 1976—A...
Feb. 15, 1 9 7 6 - F . . .
May 15, 1976—B...
May 15, 1 9 7 6 - E . . .
Auu. 15, 1976—C...
Nov. 15, 1976—D. .
Feb. 15, 1977— A . . .
Aue. 15, 1977—B...
Feb. 15, 1 9 7 8 - A . . .
Nov. 15, 1978—B.. .
Aug. 15, 1979—A...
Increase or decrease (—)
during—
Rate of !
Interest \
'«per cent) j
176
^74
-1,578
^140
-234
-2,381
-129
-1,345
_43
40
~8
2,513
9
34
II
53
27
tl
59
6
67
72
" *"308"
* * * 609 *
"2 2 9 2 '
'217
33.236
346
"'898'
10
456
57
3!
56
27
106
224
512
1,127
-286
-81
-7,233
3
9
.......
17
1,345
43
82
1,718
10
" "21 "
69
64
175
746
81
31
15
*2,*3t4*
390
I
"*27*
" " 48'
16
100
92
2,462
2,201
2,318
3.—CONTINUED
De comber 3
Increase or ck\. reuse ( during
Rate of
interest
t per vent;
T\ pe of issue
and date
1972
Treason bills:
l a x anticipation. , , , , . . . j , ,
Other, due j
Within 3 mos
i
3-6 iiios
After fy mos
if
6,516
.*, 486
29,665
Total
1971
j >70
n»i
751
18,670
7, H2(>
3. 558
14 ,128
? ,740
3 , 345
30.155
25 , % 5
1,222
Repurchase agreements, . . .
U.S. Govt. securities—Total
holdings
\, . , . . . . .
Maiuriim - j
Within 90 <Ja\s. . . . . . . . J
91 d a \ s to i >car . .
. . I, . .
O\or 1 >car to 5 \ e a r s
,;.,.......
Cher 5 >cars to 10 \e.trs. !
Over 10 years.. . * . . . j , .
Federal agency securities: j
Held outright:
Banks for coops . . . .!
Export-Import Bunk .
Fed home loan banks, !
Fed. intermediate
•
crctiit banks
i.........
Federal land banks
!.........
Farmers Home Admin.
Fed. N a t l Mori. Asso i
Govt. Natl. Moil,
;
Assn.- P.C.'s . . . . .
U.S. Postal Service. , .
Wash, Metro. Area
Transit Authority.. .
Total
Held under R p ' s . . . . . . . .
1971
1972
._ i)t)
— 650
981
- 1,310
-72
-490
4.342
H6
213
;
69,906
70.218
§2 ,142
2!.671
16,097
24,484
6, 108
i , 54b
19 741
16,5X3
">5 100
~7Ji64
1,129
14 ,670
2! ,667
19 , 089
6 ,046
669
4.191
1,222
-1,124
8,076
1,930
-486
-616
-1,556
417
24
- 24
156
76
80
22
122
35
-100
106
36
584
i
i
5,071
-5,0X4
6,011
1,618
461
24
9
76
I«MV
14?
36
785
48
14
'20l"
19
2i)
14
1,311
485
826
13
101
4
122
35
201
19
4
485
101
4. FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM
TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE
UNITED STATES, l%7-72
(fn millions of dollars!
Date
1967
Mar. 10
1i
12i
June 15
Sept. 8
9
!0i
1968
Sept. 9
Dec. 10
12
13
1
Amount
149
149
149
87
153
153
153
87
9"*
45
430
Date
Amount
1968
Dec. 14
15'
16
17
430
430
447
596
1969
Apr. 8
9
10
li
12
13 i
14
15!
519
490
976
976
976
514
Date
1969
Apr. 15
16
Sept, 5
6
71
8
9
10
11
12
13
14i
15
16
Amount
502
627
322
322
653
83(1
1,102
862
75()
759
759
513
972
Date
Amount
1970
none
1971
June 8
9
10
It
13i
14
15
16
1972
Sept. 12
79
582
610
593
593
593
243
588
349
38
Sunday or holiday.
NOTE,-—Under authority of Section 14(b) of the Federal Reserve Act.
Throughout the period* shown the interest rate was ,' + per cent below prevailing discount rate of
F.R. Bank of New York. Fo»" data for prior years beginning with 1942. see previous ANNUAL
REPORT. NO holdings on dates not shown.
5. OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE
SYSTEM DURING 1972
(In millions of dollars)
Out
1 I ,b. t u n
1 ota I
(Treasury bi Is
Other within 1 year
,
Month
!
Gross, [ G ross
pur- j
chases i s lies
-
-
-
'
•
•
•
,
Redemptions
F,\ch.,
1
Gross
purchases
Gross
sales
Redemptions
Gross
purchases
1 10
410
155
133
16
10
1!
7
Gross
sales
shifts, *
or
redemp.
-
248
,481
January.,..
February....
March.... .
April. . . . . .
May...,
..
June.......
Inly
August.....
September...
October... .
Vovembei. .
December..,
475 i
29(1
1,294 ;
}}5
2,753
, 286
I WO I .'752
l
),36*) I 8 , b7 I
2,795
2 !425
2,638
2 .880
5,083
, M0
432
850
150
351
135
Total.. .
33,423 j 29 ,786
2,824
2,036 \
2,009 1
2,666 ;
499
24M
I , Sl>4
3,4x1
I ^S2S>
2liK
!, 478
2 254
475 !
' 3) 1
335
I,0)4 !
3,286
2 , 753
,274 . 1,752
, 36') ; 8,673
2 iVS
2,425
2 638
2,880
5
4,640
110
410
155
1,478
135
96
i
.1
29,786
.
* i *3oi"
•>
2,626
— 90
2 ;
432
850
150
300
I
<)
31 841
...
-
1,089
'"42
' ' 360
-135
2,545
87
2,971
ON or 10 vears
Gross
purchases
January.....
February....
March... . . .
April
May.... . . .
June,. . . . .
July
August
Septembei,..
October....
November...
December..
Gros:
sales
t:\ch.
matunt\
- shifts
187
73
92
255
L\ch. \ f,
i l-.xch.
.. 1W ., ;
or t i C ; r o f j Gross j
or,
sales j m a t u r i t y
j " ; sates ' maturity
I shifts ' ; c r u s e s | shifts *
Gros
pur-
-2,026 '.
\.
52
31
126
* 6<>
'79
j
Rerun' *
agree m
vi'.s . (iovi.sccuriues
G ross J
pur*,:luses ,
!
January....
hebruarv....
March,." . , ,
April..... .
May........
June......
July.. . . . . .
August.....
September.,.
October.... .
November...
December.. .
4 722
f , 6l)4
2 6*}>
2 .625
,115
211
1, 736
,171
Total...
31 , 103
Net chaii,
*"«•".'.""(""""
j
20
166'|
' ' '15'
i-2,0'-)4 I
Total..
1
'1-2,260 I
?
j T->
i ,'594
j
i
i
j
!.
!
1
1
i
!
3 , 547 >
4 .8(>3_J
Gross
sales
5,l>45
1 ] W4
2.022
312l>8
!
i
'.
;
i
FVdcr t!
oblii'.iititMi » •, net'
Net
chanue
hi I'.S.
(itni.
securities
U.S. tit
Noir,.- -Sales, redemotions.
I
|
j
- 6(>6
| - 1,854
: 2,22*)
!
3S0
! 1 , 2lii)
' 1 , 3 2 6 'i - 2 5 1
1.736 ! _ 5 3 3
2.451) J — 8 2
1 ,844 J — 8 6 6
3.594 j
220
3,547
4,765 j
405
' 32,228
Outri-ht
j
165
77
S3
lm
" "ill ' :
— 2h
- 3
... 35
_ *>^
157
134
- 3 1 2
•ities. I'cder. i .Irenes obli
Repurchase
agreements
-101
' 16
- 16
25
250
167 j .
B tut'ci
t net ^
riuht
4
Under
re purchase
agreenients
- 181
61
i
—4
-• 2 ^
—6
'74
_ 74
_io
4
-4
7
7
- 8H
-787
- t,789
2,408
472
65
— 65
* 30
— 30
1,386
-221
-570
22
-1,009
206
— (-,
13
Net
change1
-442
36
5%
— 145
nil ban
es.
and neiiati\'C figures reduce S\stem holdings; all other figures increase
6. BAME PREMISES OF FEDERAL EES1EVE BAMKS AMD
BRANCHES, DECEMBER 31, 1972
(In dollars)
F . I . Bank
or branch
Buildings
tjncluding
vaults1) l
Land
| Fixed muj chinery and
equipment
Net
hook yd i tie
Total
2.«>43.179
37,159,050
28,782,511
8,078,616
716,472
i,565,400
26,626,247
2,800,267
4,800,700
4,517,832
477,863
2,486,571
2,154.452
i1,343,128
4,515,171
3,572.665
7,503,746
2,525,243
11,647,849
22 446,940
7,770,531
1,170,977
22,446,940
3,563,118
2,500.681
2,313
2.903.991
1,097,455
625,121
9,986,024
405.188
6,766/160
3,908,615
2,041,218
4,147,454
200,208
6,050,385
1,746,599
1,055,357
3,558,580
l,0f9,6ig
17$,871
15,843
t ,t)*?K (»24
I,448,1 Hi
10,668,114
3,431,012
2,649,669
200,003
3,165,944
5,760,115
6,079,519
1,725,308
1,232,865
173,318
1,654,111
4,444,083
Chicago . ,
Annex....
Detroit,
6,275,490 ! 17,664,7110 ! 10.454,359
50,000 [
1,147,734 I
150,132 I
3,054,697 i
13,591,006
248,054
2,579,483
St. Louis. ,
Little Rock..
Louis\iilo, . . .
Memphis. , , ,
1,675,780
SOU, 104
700,075
1,135,623
'
i
|
i
3,171.719 : 2,913,664
1,963,152 ;
9(»5,202
2,859,819 i 1,056,659
4,216,382 ; 2,086,133
34,394,639
252.871
5,844,08!
7,761,164
3,728,458
4,616,553
7,438,138
Minneapolis......
Helena
,
Kansas City,. .. , .
Den\cr, , . . , , .
Oklahoma City . . ,
Omaha. . . . . . " . . . .
1 ,189,784
15,709
1,340,561
2,997,746
647,686
996.489
| 28,553,613
,
126,401
! 7,567,420
I 3,224,957
' 1 ,511,600
, I,601,728
Dallas
Ft Paso.
Houston.
San Antonio .
3,723,160 :
262,47? !
1 ,959,770 !
448,596 |
San Francisco
Annex , , . , . . .
Los Angctvs. . . . ,
Portland . . , . . , . . ,
Salt take City, . . ,
Seattle.
",.,,.
684,339 !
247,201 i
!,022,6^6 !
207,?80 •
480 222 '
274,777 ;
Boston,,,,...
23,926,695 i 10.289,176 j
13,331,975
1,491,116
2 562 224
New York
Annex,, . ,.
Buffalo. ., .
5,215,656
Philadelphia, .
1,884,357
Cleveland
Cincinnati, , ,
Pittsburgh.. , ,
1,295,49(1
1,444,35s
1,667,994
6,779,694
13,498,836
3,577,294
Richmond
Annex 1 ,
Annex 2 ..
Baltimore, , .
Charlotte.
2,342,774
146,875
394,763
801,779
347,071
5,142.569
256,000
3,468,206
2,009,3K1
i,069,026
Atlanta
Birmingham, ,
Jacksonville .
Annex
Nashville , . . .
New Orleans
1. 304,755
5,804,778
2,000,619
1,706,794
76,236
1,474,678
2,754,272
Total, .
592,679
673,076
7,304, 311) !
410,775
164,004
107,924
592 *42
557.663
1
1
52,739
1,641,650
62,977
1,604,987
3,004,108
2,732,898
7,267,256
29,743,397 ! 29,743,397
205,087 1
45,731
3,053,232
2,274,946
853,051
731 ,{)25
11,961,213
5,498,829
7,383,354
1,758,353
2,063,502
4.H26 832
806 ,341
1,408 574
1,400 390
3,570 804
393,301
714,!B7
570,846
12,120,796
1,462,119
4,082,531
2,419,832 |
6.500,523
832,499
3,135,342
1,514,478
3,783 , 530
124 .000
4,103 ,844
1,678 ,512
1.878 2*8
I , 890
,965
1,862.686
M 1.000
i 608,576
649,432
707,575
I 058.744
6,330,555 I
532,383
401,201 !
336,481
2,691,003
6,735,116
1,158,537
2,535,324
1,832,558
3.066,035
3,224 t 481 i 1,338,822
..I 73,154,424 ! 182.164,829 j S i , 4 2 2 , 0 3 9
336,741,292 1193,863,774
8,497,649
3,012,337
3,330,142
OTHER REAL ESTA 1E ACQU1RI1D FOR BANKING-HOUSE PURPOSES
Boston. . . . .
Philadelphia,
Ck'voland
Cincinnati. . ,
Richmond, , ,
Charlotte. .,
Atlanta
Helena.......
Total,
1
60,000
1,374,514 ;
395,875
40t), 891 j
326,403 '
195,404
305,133
131,739
381,(MM) • , . .
1,171,259 , 1 , 587,496
3,189,959 i 1, 552,25li I 1,587, 496
60,001)
1,374,514
776,875
3,159,646
326.403
195.404
305,133
131,739
6,329,714
I
i
j
I
i
60,000
,374,514
395,875
265,406
326,403
195,404
305,133
131,739
3,054,474
Includes expenditures far construction at some offices pending allocation to appropriate accounts.
237
7. EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1972
(In dollars1)
Total
Item
Boston
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louts
Minneapolis
Kansas
City
Dallas
San
Francisco
<CURRENT EARNINGS
5 894 02 S
1 927 020
509,} 29
1,099,813
168,386
526,694
14,376,315
1,264,110
538,548
629,906
887,701
2«\098
648 885
4,095,809
4,095,809
3,771,209,607 174,721,108 960,264,085 199,459,565 289,932,494 279,471,258 201,495,170 609,927,134 141,189,525 73,638,392 153,516,165 171,213,105:516,381,606
1,117,244
49,9 W
57,654
57,655
75,398
173,510
37,705
25,507
100,905
288,375
46,577
61,007
143,021
34,204
216,217
1,535,548
19,044
20,536
86,393
126,696
33,324
753,586
68,068
49,132
4B.698
79,650
Loans
Aceepiances
U.S. Ciovt. securities
Foreign currencies.
All other
3,792,334,523 176,054,192 971,295,880 200,046,884 29OJ5D, 352 280,100,785 202,756,774 612,154,360 141,543,532
Total
74,048,502 154,138,568 171,952,716 517,491,978
CURRENT IiXPl:NSl->
Salaries;
Orticers. .
.
Lmplo>ees.
Retirement and other benefits..
Fees Directors and others
Traveling expenses.
Fostaue and expressane...
Telephone and t e l e g r a p h . . . . . . .
Printing and supplies.
Insurance.
Faxes on real estate.
Depreciation ( b u i l d i n g s ) . . . . . . . .
Lit»ht heat, power, and water.. .
Repairs and alterations
Rent...
Furniture and equipment:
Purchases
Rentals. .
Alt other
filter-office e x p e n s e s . . . . . . . . . . .
Subtotal
F.R. currency.
Assessment for expenses
Board of Governors.
15,596,648
978.622
186 278 70S 11,852,095
33,728,876
2,328,685
3,291,1 36
149,745
4,873,832
312,155
46,048,583
2 H^S \H2
5 049,075
287,139
15,397,840
879,818
702,230
44,566
8,705,367
1,059,60')
5,091,938
161,37(1
3,879,733
229,897
2,751,013
74,483
3,254,400
531,073
3,265,214
46,858,145
7,929,114
1,030,298
662,562
5,775,079
1,023,5X4
2,837,919
137,192
f ,449,480
853,550
702,051
335,622
1,848,801
11,414,870
22,480,935
7,173,338
-2,451
363,214
1,386 202
576,464
109,984
1,653,004
3,617,006
1,970,859
-1,504,676
375,728,542
31,454,740
24.180,403
1,609,898
80,444,804
6,042,779
1,073,640
979,183
8 690 898 11,705,149
1,563,087 2,140,240
507,915
133,435
363,691
203,295
1,695,052 3,759,710
192,399
221,099
783,267
873,014
26,91)8
55,128
202,714
t>76,328
76,596
228,847
166,463
426 586
135,027
499,468
118,370
72,602
537,308
1,220,282
419,663
121,940
1 676 909
1 335,563
57OO2H
215,961
1,387,653
14,470,549
2,62i\6f7
145,735
394,882
5,329,081
430,935
1,513,381
I>1,682
344,978
519,759
333,623
302,770
146,070
557,499
2,034,590
301,075
— 211.607
1,167,821
1,389,221
1,224,608
14,989,181 24,879,063 10,634,589
1,996,171
4,332,488
2,662,741
327,401
175,661
132,964
709,644
270,900
572,900
5,106,516
S 912 17 * 3,198,913
273,387
634,293
719.768
1,616,496
2,108,556
1,106,346
71,505
70,310
47,254
483.067
1,531,680
430,446
402,879
446,243
780,812
319,049
515,076
291,693
119,327
321,270
527,604
355,915
153,517
18,943
627,052
2,103,613
379,321
188,187
1,083,504
3,222,015
1,203,741
365,296
700,681
1,433,856
181,359
90,469
18,099,265 25 568 500 30,689,292 32,698,728 48,959,118 22,949,639
1,843,399
3,015,015
2,754,940 4,946,457
1,306,336
1,984,684
of
Total..............
35,234,499
1,583,800
442,417,781
27,374,10!
1,048,084
840,074
7,041,604 10,836,861
1,263,156
1,974,380
362,250
98,996
318,714
315,850
2,014,005
3,001,292
200,324
399,100
643,584
1,070,432
2d,8i2
59,922
835.002
564,522
2 020
866,300
153,376
343,015
50,391
133,169
483
4,269
1,339,101
903,427
8,819,050 15,501,524
1,616,005 3,296,192
147,889
78,847
464.0J8
285,141
2,502,565 4,898,915
347,039
320,008
1,228,457
736,570
69,806
31,145
728,652
398,889
375,588
377,974
220,306
178,598
74,825
187,057
1,787
2,570
1,559,077
1,036,397
327,001
63,376
1,659,066
1,162,516
586,646
140,888
16,737,646 23,715,0)1
555,884
1,528,108
2,397,000
5,295,000
1,187,600
801,600
95,635,883 21,900,149 30,633,799 35,525,407 37,850,668
59,200,575
25,443,575
18,095,130
9,148,300
1,816,200
3,221,900
1,821,100
489,797
2,035,368
362,213
111,521
1,496,500
507,759
1 89 * 527
297,419
306,210
19,874,730 31,811,326
1,644,267 4,222,973
1,939,699
4,525,800
26,739,699 23,458,696 40,560,099
Less reimbursement for certain
fiscal agency and other expenses
,
27,811,430
1,473,551]
414,606,351 25,900,550
Net e x p e n s e s . . . . . . . .
5,561,418)
1,211,666
2,539,40!
!,689,468j
2,368,240-
4,877,671 > 1,686,350;
832,820
1,913,808 i
933,336!
2,723,701
90,074,465! 20,688,483 28,094,398; 33,835,939 35,482,428 54,322,904) 23,757,225 17,262,310! 24,825,89! ] 22,525,360! 37,836,398
PROFIT A N D LOSS
Current net earnings.
13,377,728,169 150,153,642! 881,221,4151179,358,401 262,655,954!246,264,846' 167,274,347!557,831,455| 117,786,305; 56,786,191 il 29,312,677|l49,427,356j479,655,580
Additions to current net earnings:
Profits on sales of U.S.
Govt, securities, . . , . .
All other
Total additions.
Deductions from current net
earnings:
Losses on foreign exchange
transactions.............
All other
Total deductions. , . .
Net deduction from ( —) current
ect earnings
3,009,1
2,002,(196
5,011,207
51,897,303
2,729,69!
54,626,994
142,702
87,064;
229,766
769,744)
515,813:
1,285,557!
181,411!
62,994!
229,7611
97.522J
213,656!
128,7371
153,507
113,898
244,4051
327,283!
342,393
267,405
2,332,558 :
2,387,289
13,477,0051
106,638;
2,695,401'
2,575J
4,716,952!
2,917
2,695,401;
11,765,
3,524,7551
2,354!
4,71*1,8471
i
13,583,643, 2,697,976!
1._!_. _!___!_ !
j
4,719,869
L !
2,707,1661
3,527,109!
485,247
459,774
177,00')'
57,2681
126,643 =
123,703!
107,65O|
137,148
1,271 ]
401,006
123,72!
290,967«
183,911!
231,353
138,419,
524,727
7,723.360'
53,12?!
1,325,046
55,77f
1,192,1971
88,127j
2,177,055!
3,326'
2,850,905'
5,743
6,686,668
10,059
7,776,487j
1,880,817}
1,280,324*
2,180,381 j 2,856,648J
6,696,727
113,958i
-49,615,787 -4,490,081 j - 12,298,086; - 2,453,571! - 4,392,586, • 2,364,773 - 3,259,704J -6,831,466' - 1,589,85()' - 1,096,413, --1,949,028; - 2,718,229|- 6,172,000
Net earnings before payments to
U.S. T r e a s u r y , . , . . , . , ,
3,323,112,382 145,663,561 868,923,329] 176,904,830J258,263,368 243.900,073! 164,014,643j550?9W}989(l 16,196,455; 55,689,778; 127,363,649 146,709,127:473,483,580
Dividends paid.
..,..,,.
46,183,719 2,006,870
,928,649 2,344,496. 4,205,725
Payments to U.S. Treasury (interest on R R . n o t e s ) . . . . . . . . . 3,231,267,663 143,785,791} 843,245,!80; 174,072,684 250,144,793
2,419,254i 3,174,260 7,126,10!
1,544,018 !,05i»262| l,964,630| 2»5I9,55&| 5,898,898
I
!
1
1
1
!
23K.204,519iI55,898,833'530,384,188 112,873,437! 53,401,066! 123,529,669! 142,050,921 ;463,676,582
Transferred to or from (—) surplus. . . . , , . .
.,,
Surplus, January 1
50,661,000 —129,100i 13,749,500
487,650 3,912,850^
742,184,050 33,636,750; 192,854,450 38,408,9001 67,881,900!
Surplus, December 3 1 . . . . . . . . . .
792,845,050 33,507,650 206,603,950 38,896,550 71,794,750! 41,564,950J 55,319,550 124,150,150j 26,955,100] 18,132,6Oo| 33,396,800 43,153,350 99,369,650
NOTE,—-Details may not add to totals because of rounding.
3,276,300
4,941,550- 13,489,700; 1,779,000 1,237,450; 1,869,350 2,138,650! 3,908,100
50*378)00u! 110*660,*450j 25J76*it)Gj 16*895* 150j 31»52?*45t3j 41'014*700 95*461*550
8. EAENINGS AND EXPENSES OF FEDERAL RESEEYE BANKS, 1914-72
(In dollars!
Met earnings
before payments to
U.S. Treasury l
Payments to U.S. Treasury
Dividends
paid
Current
earnings
Current
expenses
2,175,252
5.217,998
16.128.339
67.584,417
102,380,583
2,320,586
2,273,999
5,159.727
10,959,533
19,339,633
-141 ,459
2.750,998
9,582,067
52,716,310
78,367.504
181,296,711
122,865,866
50,498,699
50,708,566
38,340,449
28,258,030
34,453,845
29,559,049
29.764,173
28,431,126
149,294,774
82,087,845
16 497,75li
12,711,286
3,718,180
41,801), 706
47,599,595
45,024,484
64,O52,8(»O
70,955,496
27,528,163
27,350J82
27 518,443
26,9(14,810
29.691. 113
9,449,066
16,611,745
13,048.249
52,122,021
56,402,741
WO,.,..
.
1931.,,..
1932.
1933
1934,.... .........
36,424.044
29,701,279
50,018,817
4^,487,318
48,902,813
28,542,726
27,040,664
26,291,381
29.222,837
29,24!,596
7,988,182
2.972.066
22.514,244
7,957,41)7
15,231.40-)
IO,2O8,5\>8
10.029,7(>0
9,282,244
8,874,262
S,781,661
•
!
-
1955
. .
1956...........
1937...
.
1958,.
1959..............
42.751.959
37,900,639
41,253,135
36,261,428
58,500,665
31,577,445
29,874,023
28, HIM), 614
28,911, t>00
28,646,855
9,417,758
8,512.433
10.801,247
9,581,954
12,245,365
8,504,974
7,829,581
7.^4(1,966
8,019,137
8,110,462
!.
|.
I
•.
j.
297 , 667
227 ,44H
176 ,62*
119 ,524
24 ,579
29,165,477
32,963,150
38,624,044
43,545,56+
49,175,921
25,,S 60,02 5
9,157,581
12,470,45!
49,528,455
58,437.788
8,214,971
8,429,936
8.66 >,076
8,911,342
9,500,126
!.
j
I.
I.
j,
82 , 152
141 ,465
1943...
1944.
43,537,805
4t,580,095
52,062,704
69,305,715 |
104,391,829 |
1945........
1946...
1947....
1948.... . . .
1949.,..
142 209 546
150,385,033
158,655,566
304,160,818
316,536,930
48,717,271
57,235,107
65,592,975
72,710,188
77,477,676
92,662,268
92,523,935
95,235,592
197,152,685
226,936,980
10,182,851
10,962,160
11,523,047
I 1.919,80,)
]
!.
i.
i
Period or Bank
A H F.R. Banks,
by vears:
1914-15..
1916.... ..... ....
1917... ..... .,
1918.... .
1919 .............
1920..............
1921.........
1922...
1923...
1924..... .........
1925.......
1^26.
1927...
I1) 28..
1929...
...
1940...
1942...
|
j
j
.
Franchise
tax
217,465 !
1,742,775 !.
0,804,186 !
5,540,684 j.
5,011,832
5.654,018
6,119,673
6,307,035
6,552,717
6,682,496
I
i
!
I
|
i 1 3 4 i 23 *
.
Transferred
to surplus
(Sec 7s
1,154,234
48,354,554
70,651,778
82,916,014
15 w 80S
-65), 904
2.545,513
-3.077.962
2,473,80S
8.464.42S
5,014, 119
21 078 89<>
22 535,597
59,300
8! 458^463 j
9,58*,911 j
12 329 373 I
Interest on
F.R. notes
60.724,742
59,974,466
10,850,605
3,613,056
113,646
6,915,958 I
7,32^,169 I
!;
Under
Sec. 13b
Transferred
to surplus
(Sec. 13b)
818,150
2, 584' 65-)
4,283,231
17,308
-60,521
-2,297,724
-7,O57,6>4
ll.O2O.5S2
-916.851
6,510.075
27,695
102,880
67,304
- 4 1 9 , 140
-425,653
-54,456
-4,333
17,617,358
570.513
244 !72o
326 ,717
135 !o;>3
201.150
3,554.101
40,257,562
48,4tJ>,795
247 , 659
67 ,054
^5 ,605
262,135
27 70S
86,772
75,223,818
166,690,356
193,145,837
607,422
352,524
2.616,552
!,862,433
4,533,*->77
81,969,625
81,467,013
"6, 3o6. 550
18,522,518
21,461,770
1950.
1951.
1952.
1953
1954
1956
1958.
1959.
tWifJ.
W6L
1964
1965
1**7!
1972,
,ifc ft)!
cacti
I .R". Bank, 1914 72: !
Boston
New Y ork . , .
PhUade•Ipltia.
tlexela f i d
i
Richnu )ftd...,
Attautii
Chicao;>
'lota!
HO,571,771
95 ,469,086
104 ,694,091
ft * ,515,020
109.,732,931
231,561, 340
297,059,,097
352/150,,157
398.463,( 224
328,619.!46S
H,0S2 991
13,864,750
14,681,788
15,558,337
16,442,236
196 628 f <58
254 ,873, %$H
291 ,934,1 >34
342 , 5 6 7 / ig5
276
157
21,
28
46,
40,
412.487,931
595,649,092
763^47^530
742,068,150
886,226,116
110 ,060,023
121 , IK2,4*Jf)
131 .814,00*
137 ,721,655
144 ,702,706
502,162,,452
174,44^,
624, *92.
604,470. 670
839,770, 663
17,71 l/)37
18,904,8^7
2O.OMJ.527
21 ,197,452
22,721.687
251 ,740, 721
\SI
401
5 42 ' 70S,' *405
524 ,05 s >5i
9 | 0 ,64'). 768
32, 70), 79 4
K ^ *982,6S2
61 ] 60*. 68 2
5), 214,56 1
601), 7 >1
1,103,385,2^7
941,648,170
I.048.508,335
1,151,120,060
1,343,747, *03
153 .882,275
!6l .274,575
176 ,1*6,134
187. ,273,357
197 [395[S89
963, *77.
783.855.
25/148,225
25,569,54!
7,412,241
8 9 <> .816,
422
1,147,077, 362
0,781.548
1,559,4X4,027
1,908,4*19,896
2 190,403 7^2
2,764.44 V - * 3
3 , 37 *, *6O, 55^
204 ,290,186
207 ,401,I 26
22«».,120,846
242 , 350, n o
2^4 /> 7 3, O )
i , \5h 2 1 s 455
!.702,0*5.
1 ,972,376. 782
2 35t 602
3.090,3*6
s,O27.312
6/)5 »]336
*>]2*6.5 >9
3,877,2«N,444
*,723,369,921
3, 7 4 '2. 3*4.523
377
414
,573, iS'6
, 18-4,800
,606,551
*, 567 1 286, 8s 7
< t 440,451, 196
5,328,112. *82
3 6 , 9 5 4 , 4 1 9 , 7 7 1 | 5l42«».2Oi^
ioial 1914 -7 2
St. I ot;iis. .
Minnci:i polls.
Kansas Cit> .
Dallas.
San l*rt.HKhCO
275,838,994
394,656,072
456,000,260
513,0*7,237
4*8,486.0-40
361 . 24'), 939
I _952, <>45, 400 :
9*. 386*, 8 4 7 , 1)52 | 1 , 168, 9118, } 0 )
2, l»3l>i 7 2 2 . 073 <
?00 , 6 9 8 , S5?
\ 000, 7^7 ^
4 f >, 7 * 6 . 56H
2, 5 *S, 2.5 * , 2M) !
, 7 1 2 , 126
369 .974." <>56
3 2 4 , 501 '
L
6, 043, v '21 , h l 7
! .427, 751 , 200 '
803, 6 3 7 , 423 1
1 . 519, 3 1 4 . K69 j
1. 557 0 o 8 , 5 |i)
4 . 719, 165, 627
756 , 6 7 2 , * l >
3 0 ! , 2M). 494
196 , 0 6 3 , I7<)
310 . 8 ^ 3 , 711
"»67 /)23, 219
54! .153. 258
i 36,954,419,771
5 , 4 2 0 . 2 0 5 , 72«>
i
K72,316,
9 6 4 46 i
l36>/ >sl
879 , 6'S 5. 219
!,5S2 , 1 1 8 , ' i l l
y>' KM '20.J
*o 027. 2""\
39 4*2!4?w
*.(*!9
574,7«r.
40 40 v 2 ^
;
4 6 , 18^,71'J
!
, IKS, 893
I.59S,U')J ,324
8.255,408, U 7
1,741,290,794
2,563 (»22,366
2. 152.?s >8. 38*
7,111, ~^5
68.006.262
5,558,901
4 f 842,447
6,200,IN>
f , 6 0 2 , 5.XX. 1 2 2
49.369.140
265,927,35M
60.0')8.399
K4 84(>,85O
4! , 9 1 ! , * 0 7
45, ^79,29o
28(»T843
>69,{\b
722,406
82,o m
I72*4(H
79,204
2,057,' IN I ,0S9
1 ,487.5.^7,418
I,!30,0)>,K8i
M 1, VJ3, 133
1,212,941!74I
i,294,166.660
4 , 1 9 3 . 9 5 8 . *S1
'20, 586,0.07
*0,802,458
20.877,395
35,386,536
4 *. 62 ?, 9lM
99,100,140
25,313,526
2,755,629
5,202,900
6 / ) 39, 100
560 04'*
7 , ( ^ 7 . Ml
151.045
7.4o4
55,615
64,213
102,08 3
101.421
5,oi,s. 261 ,913
I 0,4,432,'117
56*,S32.541
1, 1^3,021,817
I,202,394,368
3,97 7.8*9,502
:
149.138. WO
On! \l'S
3.231,267,063
897,90),000
8v)7/»O»,000
27, O5*.8Oi)
1 , 296.810,( •53
i , h49 ,455, 64
1 ,907.4>S..!7i>
2,463 , 6 2 S / )S *
41,1*6,551
4<,488,074
1
C iinent earnings less current expenses, plus or minus adjustment for profit and loss
items,
• I he $921.5t7,24(> transferred u» surplus w,h rediweJ h> ilircct chames of S500.000
for eharye-otl' (»« Bank picmLscN i!927t; $139,299,55 7 ror'etmiribiHinns u> capital of
the I ederal Deposit Insurance Corporation >1^34>, and $%657 net upon elin\ination of
7Q9
333i735
3*6,862
887,775
4 2 , 613.I Of
70. 812,30.
45, 5*8. 20:»
«;s" 86 4, 301)
- 465 *H22,8O:»
68 7 , ^9 *, i82
1,662,I4X,277 '
*1,662, J48,2?7 J
35,
849,4911
*20 75)
2.9. 6'M , 3os,492
7.(>77V678.489
i ,621, W*',655
2, IJJ8,8« H i 29,691 . 39s, 44 2
1 *5,411 ;
l
4 * 3 ,41 1
2 ' » 0 ,661
'
r
._».) f\)h :
- 71. % 5J7
5 A'H
i 1, 6S 2
i
-26 5 1 5 i
64 , 8 7 4 ;
-•8 ,674 !
55 .337 !
'
• ) "f. 0 8 9 >
4.'., 6 0 2 . 4
860, 2 S
22f>, 772
.^5, O !>'' 5 f »
471 4 1 4 , 7 >\;
0t», 5S«>. )0
2 4 >,
5 ^
«)0 1
1*9,
5,2 ,0 7 4 ! 72 N
0;) >, 8 H
37* 5 * 6 , 750
4"?, 4 * 0 ^ 8 2s
IO.». 2 ^ 7 ,
o7
-921,517.24^
Sec. 13h suiplus «'1958i, and was increased by $11,131.013 transferred from reserves for
contingencies < 1945., leaving a balance of $792,845,050, on Dec, M, 1972.
N o i r . -Details may not add to totals because of rounding.
9. VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF
FEDERAL RESERVE BANKS, 1969-72
(Number In thousands; amounts in thousands of dollars)
1972
Operation
1971
1969
1970
NUMBER OF PIECES
HANDLED *
Loans.........................
Currency received and counted . . . .
Currency verified and destroyed . , .
Coin received and counted
Checks handled:
U.S. Govt. checks
Postal money orders. . . . . . . . . . .
All other
Collection items handled:
U.S. Govt. coupons paid . . . . . . .
All other
Issues, redemptions, and exchanges
of U.S. Govt. securities
Transfers of funds
Food stamps r e d e e m e d . . . . . . . . . .
6
7
13
23
6.453.899
2.246,740
14.716.546
6,270,732
2,446.244
13,736,840
'6.029,373
2,174.444
•'13,402,165
5,720,499
2,115,564
12,873,277
622,144
183,574
7,158,441
575,118
187,123
6,503,449
M4.210
^27,364
13,118
27,895
617,408
177.257
8,453,733
r
628,602
181,054
7,704,742
11,911
25,720
13,523
^26,928
258.947
9, 494
1,849,647
'258,152
8,148
1,842,026
r
r
«• 276,172
r
7,363
1,277,007
283,175
6,662
519,595
AMOUNTS HANDLED
61.620,130
85,254 860
129.578,588
Loans.
154,305,388
Currency received and counted . . . .
51.535,480
48,783,022
45,718,990
43,273,577
Currency verified and destroyed . . .
12.068,786
13,261,100
12,092,137
It,832,628
Coin received and counted
1.755,727
1,602,994
1,533,972
1,432,623
Checks handled:
U.S. Govt. checks.
2 ^ 163 523
211.996,633
208,858.062
208,155,031
Postal money orders
4,718,577
4,806.963
4,736,564
4,603,938
All other •
3,317,«73.664 r 3,824,868,058 «• 3, 330.673,690 2,774,422,163
Collection items handled:
U.S. Govt. coupons p a i d . . . . . . .
5.825,599
6,239,761
5,702,894
6,849,373
r
All other
24,770.140
20,879,111
21,022,409
19,782,240
Issues, redemptions, and exchanges
of U.S. Govt. securities
2,052.735,038 1,951,122,313 r 1,433,118,703 1,151,579,538
Transfers of funds..
17,916,041,090! 14.858,172,824 12,332,001,386! 9,800,324,538
r
Food stamps redeemed . . .
3,525,383! ' 3,116,904
1.840 JOO
694,394
r
1
2
Revised
Packaged items handled as a single Item are counted as one piece.
Exclusive of checks drawn on the F.R. Banks.
10. NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF
FEDERAL RESERVE BANKS, DECEMBER 31, 1972
President
Federal Reserve
Bank (Including
branches)
Annual
salary
Number
$ 53 000
90 000
48 000
36
100
41
Cleveland
Richmond
Atlanta.......
51
51
51
ooo
Boston........
New York
Philadelphia...
Other oilicers
39
56
51
Chicago.......
St. Louis
Minneapolis. ..
67 500
56 000
48 000
54
47
30
Kansas City . . .
Dallas. . . . . . . .
San Francisco.
56 000
51 000
70 000
43
37
58
Total. . .. .
$692 500
592
1
Includes 1,072 part-time employees.
242
inua
s:t la rte*
:
•
;
i
s
Employees
Number
l
Annual
salaries
Total
Number
Annua:
salaries
913, 900 1,584 $ 12,917,002 1,621 $ 13,883, 902
47,120,899 4,880
50,383, 099
3 172, 200 4,779
10,443, 381
9,436,681 1,281
958, 700 1,239
1 000, 750 1,464
1 349, 800 1,968
1 330, SOD 2,247
It,778,985 1 ,504
15,342^400 2,025
15,364,471
12,830, 735
16,743, 200
16,549, 271
1 330, UK) 3,243
1 114, 800 1,529
786, 700
25,176,574 3,298
11,152.803 1,577
860
26,574, 174
12,323, 603
7,742, 400
10.661), 593 1,549
9,560,441 1,352
15,469,036 2.008
11,682, 193
10,459, 791
16,858, 286
965, 600
848, 350
1 319, 250
1,505
1 ,314
1,949
| $14 893, 950 23,650
5190,887,585 24.254 $206,474, 035
11. FEDERAL EESEEYE BANK INTEREST MATES,
DECEMBER 31, 1972
(Per cent per annum)
Loans to member banks-™
Federal Reserve
Bank
Under
Sees. 13 and 13a
Boston
New Y o r k . . . . . .
4V2
Philadelphia
Cleveland.......
4l/2
4l/2
Richmond......
Atlanta.........
4Vz
Under
Sec. 10ih>
L o a n s to all others
under last par. See. 13 :
6V2
6V2
414
Chicago. . . . . . . .
St. L o u i s . . . . . . . .
4 6%
Minneapolis.
K a n s a s City
4Vi
414
Dallas
San Francisco. .
4'A
5
Discounts of eligible paper and advances secured by si ch paper or by U . S . Govt. obligations or
anv other oblinations eliaible ' r Federal Reserve Batik pur hase. Ma\l
n\aturit> ; l )0 d a \ s except
that diseoui
v have maturities not over
minks. •s' acceptances a n d of agrict
\i\ pape;
6 m o n t h s a td 9 month.hely.
- Advanci
isfaetion of the F.R. Bank. Maximum r uritv: 4 months.
3
•ed by direct
Adva
obligations of", 01* oblig; .tions fu!l> g u t r a n t e e d a s to principal and ti
by, the U . S . Ciovt. o r a n y
agcnc> thereof. Maxim .in maturit} : ^0 d a \ s .
•» As of Sept, I1), 1^)7 (except for Boston, Oct. 2; a n d Atlanta, Oct. 3 P , a rate of 4'/2 per cent was
approved on advances
nonmember banks, to be applicable in special circumstances resulting from
implementation of the t n pending changes in Regulation j .
243
12. MEMBER BANK RESERVE REQUIREMENTS
(Per cent of deposits)
Through July 13, 1966
Net demand deposits ~
Effecthe date 1
1917-June 21 .
1936—AUK. 16. ..
1937-Ma"r. t... , .
M a y I. . . . . . .
1938 -Apr, 16. ..
1941 -Nov. 1 . ......
1942 Aug. 20,
.... .
Sept, 14. .
Oct. 3......
1948-Feb. 27. . . .
June 11. . . . . .
Sept. 24, 16. . . .
1949- M a y 5, 1.
June 30, Jul\ I. .
Aug. 1 ... .
Am, 11, 16.
Aug. 18. .
, .
Aug. 2 5 . . . .
. . .
Sept, I.
1951—Jan. 11, 16. .
Jan. 25, Feb. 1 . .
1953- July 9, 1, .
1954 --June 24,
16 ..
Jul> 2{), Aug. 1 .
1958- Feb. 27, Mar. 1.
MM; 20, Apr. I .
Apr. 17....
Apr. 24.
I960—Sept. I
Nov. 24. .
Dec. 1 .
1962 -July 28
Oct. 25. Nov. 1...
Central teserve
ut\ banks
Reserve city
banks
13
WVz
22",
26
22' s
26
24
22
20
22
24
26
24
10
15
I7'/2
20
17'/i
20
i?"
2
?
20
' " 2 3 '-,'•>
2\
22
2^
24
22
2?
Counirv
l i m e deposits
'all classes
of banks)
3
1
414
5!/4
6
w
12
14
12
14
II)
15
14
714
7
6
n
12
19
18' .
18
19
20
19
18
17',:
I7
20
19 "2
19
18'.
18
17';
}
*
13
14
13
12
tt
I!
16 Vz
12
lev/:
July 14, 1966. fhroiieti November 8, 1972
I Inte deposits 4
•all classes of banks)
Net demand
tie pewits '
l
EffectiYe date
Resenc
cit> banks
Country
banks'
Uiulc-r j Over
Tinier j Over
y\tnil- | $5 mil- S5 mil- i S5 million ! lion i lion < lion
3'A
2
Mar. 16
U nder ! Over
$5 mil- ! $5 million
lion
;. 4
1966—July 1 4 , 2 1 , . . .
Sept. 8, 1 5 . . . .
1967—Mar.
Other
time
Sa\-
.
1968— Jan. 11, 18.. ..
1969-- Apr, 17
1970 — O c t .
1.......
For notes see opposite page.
1AA
17
|
17'j I
12. MEMBER BANK RESERVE REQUIREMENTS—C
Nt'J demand deposits '
H72
No\. *>....
N o \ . If)
. .
.
:
$2
I million
I ami
I under
i
!
S:
million
j
lo
; SIO
' million
i
,
|
- 1 0
|. . . .
X
. .
I
In effeei
P e c .3 1 , ic*72, . . ,
•
-
!
S
|
S10
million
j
to
! 5100
! million
•
%
1
2
i" 7 '''-
Jc. H
,
,
l
I
'
O t h c t time
*l>')n
Ow r
i.nliiru
$ MM
S.<v
i
I
to
m i l - , ni-'s j
S3
• Over
j SIUO | h o n • •
J m i l l i o n • S5
< million '
I
dnd
' inillioii
:
1
: n.idet
•
!
1 0
I line deposits
i
;
, 1:
. i . .
;
I
H
'
'
'
j
I ? " . ;
. .
. . .
.
'
'3
i
j
\
\
X
\
Le-uul r e q u i r e m e n t s - -Dee.. ^ 1 , l'/72;
Net d e m a n d d e p o s i t :
R e s e r v e city b a n k s . . . . . . .
Other banks
. . , . . ,
Time deposits
,,
.
,
,
. . .
.,
. . . . . .
Minimum
10
Mt.ivimum
?2
14
.
1
W h e n t w o d a t e * * a i v s h o w n , m« firs'. a p p l i e s <a> t h e * i i . i t i i v , , i c c t s t i . i l I C W M ' a t r ^ i . - u c i t \ h a n k s
a n d t h e s e e o n d t o ih.: ciKUi*.',e , i t s-><nuv% h a n k s .
:'<ti> D e m a n d d e p o s i t s s u b j e c t t o i c s ^ v v e j v g u i i c m c n t s , w h i c h i v . ' , i n n i n s i w i t h \ « » a 2 \ i ' H S , h a v e
I H C H Jt)tal t l e i i i a n d t i c p u v t t s n u m s e a s h in-sns i n pi,>:esN u ! \ o l f v , ' t n > n . M i j ' d e i u . s n d b a U i n c c - . d u . . i i u . n
d o m e s t i c b a n k s < a h o m i n u s \ \ , n ! o . m , n t d S ' . ' r i e s f i > o n d , U C O H ; U > c!tn <;»•-', I : H ( V f i o d - \ p i . i *. i'M.%
J u n e 30. J')47.
ib< A l l iCifuii-eU » e < e r \ e > « c r c h e l d o n t l c f c u f w i i h F . K , B a n k , I s m . . ? ! , I ' ^ P , u n t i l L i K !'>5'>. S i i u . e
t h e n , m e m b e r K i n k s h a \ c a l s o h u - U I I M V A , J t o v o . u t ! \ . u i l i c >-!J .,-, .- ^ T U S , , S h i i ! o , v > : «.•> i n u - b >uU> -
s p e e t i v e l v . c e n t r a l i c s e n e u » ^ , m d u - s e r \ e c i i > K i i i K s - m ( ^ v v \ s o ; ? k « u d 1 p e r e e m e ' K v J t ' . e D e c . *.
i ' ) 3 5 ) , a n d S e p t . 1, 1 U C>», l e s p e c t i ^ e l v . . i l l u j e m h V r l n t H . s W C K U W ^ ^ K - \ j , * v « > ' s n i a l l v . u i i i ^ . . s h .»> •> *« r u i s
e i l e c t i \ e N o \ . - N , l^fiU.
• c ; W h e n r e q u i i e m e n t v w h e i ! u ' 1 e s a r e u i a d i k i f ' J , c $ c h i k p o s i i t n ; e t \ . ! ; a p p l i e s t o t o , a p n i »»f r l i e
deposits o f eteis hank.
,0' S i n c e O c t . \i\ \UW-), m e m b c i l \ 4 t t k . t h a \ e b e - , u r c ^ u i i c i m u k ' t R e i v u k n i o ' ; M tf» m . m n . m 1 . ie>< i v e >
• t ^ . u n s t b a l a i K o a n o ^ e a s p c . ' i f i c J b a s e d u e i u m i d o a i c s u , oft'. \ - \ t o :'v.-ir r»>u:i'.'i\ i n a n J t c .
I mil
J a n . 7 , 1<J7 j , t h e a p p f t e . i b l e r e s e t ve. p e r c e n t ii»c w a s i t ) p e r <.-.*ut, ^ f l e c u , c d , . i i vl t i e i t b e » aiw 2\i pt. < . c m .
R e g u l a t i o n I ) i m p o s e s a M i n i l a r M . s e f \ e i . - i j u i u ' i i K u i o n I V I H H U I S . M . i * > m e a . ^ p c . i f t c . ! b INC l i o n s } \ u . ' j ^ n
b a n k s b \ d e > m e s t i e o f f i c e s o J a m e m b e j b a n k , I <n d e t a i l s « . o u c c « ' ; i > i a t h e s e t e . . { < u r e m e t H s , s « v a m e n d n u n t s t o K e g t i h i t i o n s 1") j r a ! M .<% d e s : i i b e d i n e a s h c i \ w \ \)
U\}-,}y\>-,
- \ u i i i o j i t \ vi t h e H o a i d t»f < i i r . e u i o i s t o w l a v . i i ^ o> i e J . . » - » u . . c i t i e s a s c e n t r a 1 t v s e i v e c i t i e s %\ i s
t e i m i n a t e d etVeetive Jui> 2S, | 9 o ^ .
'• 1 t l o e t i \ e J . « n . 5 , ! l h J 7 , t i m e d e p o s i t s s a c i i a s ( ' h v J s i « n a ^ a i d . a c i i m i e i t i b . K U H I I H S b e c a m e s u b i c c t
U> t h e s a m e r e q u i t e n u n t s >u» s a v i n g s v l e p ' O s i t s .
S e e a l s o n o t e s 2(b.% 2 < : , a i u i : « J . a b o \ e
« S e e c o l u m n s a l n n e i o r curlksi e f l e u r . e d a t e o fthis ..tie.
* H k v i h e N « » v . l ) , 1 ^ 7 2 , a n e w c s i t u i o a w a s a d o p t e d t o d e s f . t n . - . t . : K M - I V C c i t i e s , , . I H ! o n \\w s a m e
d a t e l v q u i i v n i t n i s l o r t c s e n e s ajjahist n e t d e u i a u d den..sits nt n u m b e r b a n k s \ u - i c . e s u i u J m e d t o
p r o u d e t h a i e a c h m c u i b e i b a n k w i l l m . m u i»n k - . < h c > > e i o ! . ' . i t o t h e ^i/x. ot i i s n e t v i c i n a u - J
Acp^His
I h e n e w i c v i \ c c i t \ d e s u m a i i i i n s a r c a s folU>\\%
\ h a u k b , a \ i a " n e t d c a i d n d d e p o - , ? ! - , o!" m o n t h a n .
S4tM) m i l l m n i s e o n s i ' d e t e d ! o h , u e t h e J i a r a . f u r o t b u s i n e s s , n .. u s . - t - . e c i t \ b a n k , a n . f U K i n e ^ n c e o f
t h e h e a i i o U i e e o f s u c h t< b a n k e r - i r u i t u t e * d e s i - . - u t ( i o n o t m a : p l a c e ; s a s e s e r u c i t > t i t i - . s i n w h i c h
t h e s e a r e I M B a t i k s o r b r a n c h e s a r e a l s o i c s e i u i'mci,
,\\w b a n k s h a s i n e . n e t i k m m d t k p o s t t s u t '
$ 4 0 0 m i l l i o n o r l e s s a t e c o n s i d e i c l t o h a v e t h e dn\rjcu-r
o f b u s i n e s s o l i u « u k s o t U s k l c i»t ! V h C i \ e e i u c j .
a n d v i i e p e r m i t t e d t o m a i n t a i n t e s e r v * . s af r a t i o s s'. t f o ( bank•.<••<of i a u -.ci \ c o i l i e * . I ' o r d e t a i l s c o n c e r u i n u
t h e r e s t n i e t u r i n j i o | lescix-c r e q i i ' U i H e u t s , s e e a m e n d m e n t i t o Re^'iil iih>n I ) a > vles.'jibeil o n p , 7N-NI
of" t h i s R f f ' D i n .
• i l k * 1 6 : Pv'i" t e n t l e q u h e t n e m a p p h c c i t ' o r ! %seek, o n ) % w> l o M n e t r e s c u e u t \ b a n k s . I o< o s h c r
b u n k s , t i i c 1 3 p e r c e n t r e c i u i i e n t e i u \^<is c o n t i n u e d m < h i * tit j~/os<t m t e r v a k
245
13. MAXIMUM INTEREST RATES PAYABLE ON TIME AND SAYINGS DEPOSITS
(Per cent per annum)
Rates Nov. 1, 1933—July 19, 1966
Rates beginning July 20, 1966
Effects /e date
Type of deposit
Nov. 1,
1933
Feb. 1,
1935
Jan, 1,
1936
Jan. 1,
1957
3
2%
Vk
3
Saving deposits:
12 months or m o r e . . . . . . . . . . \
Less than 12 months.
Postal savings deposits: l
12 months or more
Less than 12 months. .
Other time deposits: 2
12 months or more.
6 months to 12 months
90 days to 6 months
Less than 90 days.
(30- 89 days>
1
2
I
3
Jan. I,
1962
;
\
July 17, Nov. 24, Dec. 6,
1963
1964
1965
4
3 Vi
4
V/z
3 Vi
4
3/2
3
Vh
{
i
Effective date
3
2Vz
lxh
3
3
3
2Vi
•
I"
(
I
4
314
2Vz
1
I
4
i
4
4
4
f
1
July 20,
1966
Savings d e p o s i t s . . . . . . . . .
Other time deposits: -3
Multiple maturity:
30- 89 days
90 days-! year. . .
1 year to 2 years. . . .
2 years it nil over,
Sinitle maturity:
Less than $100,01)0:
30 days to i year. .
1 year to 2 years. .
2 years and over...
$100,000 and over:
H)-59 days
4
1
Closing date for the Postal Savings System was Mar. 28, 1966.
For exceptions with respect to foreign time deposits, see ANNUAL REPORTS for
1962,
p. 129; 1965, p. 233; and 1968, p. 69,
3
Multiple-maturity time deposits include deposits that arc automatically renewable
at maturity without action by the depositor and deposits that are payable after written
notiee
of* withdrawal.
4
The rales in effect beginning Jan. 21 through June 23, 1970, were 6lA per cent on
maturities of 30-59 days and 6Vz per cent on maturities of 60-89 days. Effective June 24.
1970, maximum interest rates on these maturities were suspended until further notice.
) 4
Type of deposit
5V 2
'
60-89 d a y s . . . . . . .
90-179 d a y s . . . . .
180 days to 1 year.
1 year or m o r e . . . .
Sept. 2 6 J Apr. 19,
1966
196H
4
4
Jan. 21,
1971)
414
4
!
4 /2
5
5Vz
SVz
f p,
!6'/
7
ll/z
NOTE.-—Maximum rates that may be paid by member banks as established by the
Board of Governors under provisions of Regulation Q; however, a member bank may
not pay a rate in excess of the maximum rate payable by State banks or trust companies
on like deposits under the laws of the Slate in which the member bank is located. Beginning Feb. 1, 1936, maximum rates that may be paid by nonmember insured commercial banks, as established by the 1:OIC» have been the same as those in efleet for
member banks.
14. MAEGIN REQUIREMENTS
(Per cent of market value)
For credit extended under Regulations F (brokers and dealers1,
U shanks:, and G (others than brokers, dealers, or banks?
Period
On margin stocks
Beginning
date
1937—Nov.
• On convertible- bonds
Ending
date
t
1945- • Feb.
On short sales
(Ti
4
50
1945—Feb. 5
July 4
July
5
1946—Jim. 20
1946—Jan. 2! I 1947—Jan. 31
1947—Feb. 1
1949—Mar. 29
1949—Mar. 30
1951—Jan. 16
50
75
100
75
50
75
50
60
70
1951—Jan. 17
1953—Feb. 20
1955—Jan. 4
Apr, 23
1953—Feb. 19
1955—Jan. 3
Apr. 22
1958—Jan. 15
1958—Jan. 16
Aug. 5
Oct. 16
Oct. 15
i960—July 2?
4
50
70
90
I960—July 28
1962-July 10
1963—Nov. 6
1962—July 9
1963—Nov. 5
1968—Mar. 10
7(1
50
70
1968—Mar,
June
1970—May
1972—Dee,
Atis;,
11
June
8
1970—May
6 j 1971—Dec.
4 I 1972—Nov.
Effective Nov. 24, 1972,..
7 !!
5
3i
22 j
70
80
65
55
50
65
NOTE.—Regulations G, T, and U, prescribed In accordance with the Securities Exchange Act of 1934,
limit the amount of credit to purchase and carry margin stocks that may be extended on securities
as collateral by prescribing a maximum loan value, which is a specified percentage of the market value
of the collateral at the time the credit is extended; margin iwjitire.njnB are the difference between the
market value (100 pet* cenn and the maximum loan value. The term margin stocks is defined in the
corresponding regulation.
Regulation G and special margin requirements for bonds convertible into stocks were adopted by
the Board of Governors effective Mar, 11, 1968.
For earlier data, see Banking and Monetary Statistics, 1943, Table 145, p. 504.
15. FEES AND RATES UNDER REGULATION V ON LOANS GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950,
DECEMBER 31, 1972
Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan
Percentage of loan guaranteed
70 or less
75...
80...
85,.,
90
95,.
Over 95'.!'., , '.'.'.'.. .'.'.'., . '.'.",, ' "
Guarantee fee
(percentage of
Interest payable
by borrower)
j Percentage of
i any commitment
j
fee charged
j
borrower
10
15
20
25
30
ID
15
20
30
35
40-50
Maximum Rules Financing Institution May Charge Borrowe
Interest r a t e , . , . , , .
Comniitment rate. .
7 s/z per cent per annum *
Vi per cent per annum
1
Except that the agency guaranteeing a particular loan may from time to time prescribe a higher rate
if it determines the loan to be necessary in financing any contract or other operation deemed bv such
agency to be essential to the national defense.
NOTK.—In any case in which the rate of interest on the loan is tti excess of 6 per cent, the guarantee
fee shall be computed as though the interest rale were 6 per cent.
16. PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF COMMERCIAL AND MUTUAL SA¥INGS BANKS,
BY CLASS OF BANK, DECEMBER 11, 1972, AND DECEMBER 31, 1971
J Asset and Ha hi) it
Mutual sauit^ hank*
Coiiinicicia! hanks
Nonmembei banks
"I.-.ul
National
December
*>VH0
JN4
'«,>(-,
I V I u\tsur>
<»'?
S M
»I '•'. S 0 4
\&? 2 0 0
<•>' 6 0 S
loans
X1
oO! 731
252
?;»\»
5? <
Ut, 260
2 •-'„>] 4 4 *
52
450
950
W i a 10
^2,!50
14
t! '
41 ?, 4C*2
W I
4^
IXui (>
» -« ••> ! 'i»n^s
n,,i. Not available,
^Esii mated
t
!
;
,t|.f,<
Ij
71
4 7 | 4 02
,54ft
,5N»
!
!
•
!
.
, 173
;
\1
' ?i|
M M
j 743 Hi
!
102, -Si t
7i] 441
>6* 1S6
^V 01 2
I ! , 247
2 0 . j 2>
31,
.H4,O85
IS to 1 •)
I.15,'00')
I W)s 4<>0
17 Ob5*
|
(ft
'•) I ,420
HIM i
5,017
1
5,O4K
5(».5.S7
i 8,49!
J J47
1 1 !
41 1
42 261
>7 >
41,140
| 7 297
24
1 \ (43
!<•»;
777
11 I 58
4S',
49 7 j 7
10 214
in.
1,128
!
1 0 , ' *0 0
X ^ 2?
1
2i(*2, 75<i
20f>, 75H
.^M9r
11 , 777
S *, v 12
JO,J75
2 *
^tf
;
;
2 ", 171
47 '(,•? \
79,7>S
{,<()
, 500
, 150
- 1 1 1 , 7 K»
i
2 . 9 10
;
;
15,570
70 , 5!'i>
iVo-?{>
,v>7
41
I ) , S.
2^ ] s
;
,}}*)
i
na
'
'
4 «,}"•'
fI7,J44
3 1 7 , tils)
' } ; " • ' > 7 ^
:
;
2}h i 4 34
No
>!, W 7 2 '
II
,<> t > 3
2^>»>2
Otiv:. linse
lovtl ,.ir-!fa! acccv.nn
!!
r
7i.t'>7
< hher >,iVii! hit s
Cash .c«sots , .
017
2ii
4<
h^
X7
?«»2 279
V
12> (
1 ^-i
Injured
Siaic
! 12 764
f
4 "J
f-,3
7 I
7
i 0 >, S I !
•m
0 )8
V v.>2
i
24', 282
S,05r
61i949
1,551
J , VKi
2,92 >
8l, l >74
1, 4+5
i , 149
4S0
725
Sf,249
7,875
N(>ir.--Ali banks hi the United States,
489
! ! 273
1, I I I
2 082
123
10, 477
70, .SI 4
5,415
10, 435
326
163
17. MEMBER BANK RESERVES, FEDERAL RESERYE BANK CREDIT,
AND RELATED ITEMS—END OF YEAR 1918-72 AND
END OF MONTH 1971 AND 1972
(In millions of dollars)
Factors supplying reserve funds
F.R, Bank credit outstanding
Period
U.S. Govt. securities
Total
Bought
outright
l
Held
under
repurchase
agreements
Float
Loans
Other
F.R.
assets
Ail
other
1918.
1919.
239
300
239
300
1,7661
2,215i
1920.
1921,
1922.
1923.
1924.
287
234
436
134
540
234!
436!
80 i
536
541
4
2.687J
1,144
6181
723!
320'
40 j
781
27;
1925.
1926,
1927.
1928.
1929.
375
315
617
228
511
3
57
31
23
643 !
637 :
582
1,056'
632|
63i
45
63!
24i
1930.
1931.
1932.
1933.
1934.
729
817
1,855
2,437
2,430
775
1,851
2,435
2,430
251:
638'
235'
!
20!
14
1935.
1936,
1937.
1938.
1939,
2,431
2,430
2,564
2,564
2,484
2,430
2,4301
2,564!
2,564!
2,484:
1940.
1941.
1942.
1943.
1944.
2,184
2,254
6,189
11,543
18,846
2,184 : .
2,254'
6,189,.
11,543 :
18,846 ( .
3;
3i
6:
5;
1945.
1946.
1947.
1948.
1949.
24,262 24,262t.
23,350 23,350;.
22 559 22,559j.
23]333 23.333:,
18,885
18,885j.
249;
163
85
223':
78!
1950.
1951.
1952,
1953.
1954.
20,778
23,801
24,697
25,916
24,932
2O.725;
23,605|
24,034;
25,3I8|
24,888'
53
196
663
598
44
67
19
156
28
143
1,368!
1,184;
9671
935 s
808
1955.
1956,
1957.
1958.
1959.
24,785
24,915
24,238
26,347
26,648
24,391 s
24,610'
23,719"
26,252
26,607
394
305
519
95
4!
108
50
55
64
458
1,585'
!,665i
1.424!
1, 2l)6;
1,590:
29"
70 !
66'.
49:
1960.
1961 .
1962.
1963.
1964.
27,384
28,881
30,820
33,593
37,044
26.984!
28,722^
30,478'
33,582;
36,506
400.
159;
342 ;
1,847:
2.300 s
2,9032,600'
2,606;
74
5V
HO:
162
94 ,
199;
20li
}
367
312
560
197!
43
42
4
2
3
10)
4;
7
so;
538,
For notes see last two pages of table.
250
I
38 •
63'
186
l
391
19:
|
80|
94
47!
681
815,
2941
575|.
Gold
stock
Total
Spe- Treasury
cial
Dra w- currency
ing
Rights outcertif. standing
acct.
2,4s
3,292|
1
3,355;
1,563,
l,405i
12i
1,302;
2,873
2,707j.
1,795
1,707
2,639|.
3,373;,
3,642 !
4,212i.
1,709
1,842
1,958
2,009
2,025
1,459?
1,381;
! ,655s
1,8091
1,5831
4,112:
4,205:.
4,092|.
3,854j
3.997 .
1,977
1,991
2,006
2,012
2,022
372
378
41
137
21
1,373|
1,8532,145
2,688
2,463
4,173|.
4,2261.
4,036 ! .
8,238}.
2,027
2,035
2,204
2,303
2,511
38
28
19
2,486
2.5OO1
2,612!
2,601!
2, 593;
10,125}.
I t , 258!
12,760|.
14,512i.
17,644{.
2,476
2,532
2,637
2,798
2,963
2,274
1 9951.2,737!.
2,361
6,679 2,726-,
12 239 :l ,938!
19.745 20,619'
3,087
3,247
3,648
4,094
4,131
25,091;
24,093 :
23,18!
24,097;
19,499)
i
22,216
25,009!
25,8251
26,880
25,885
10,529,
:2,754,
24,244'
24,427;
j
22,706;,
22,695
23,187
22,030
21,713
4,339
4,562
4,562
4,589
4,598
26,507
26.699
25,784)
27,755]
28,771
I
29,338'
31,362i
33,871,
36,418,
39.931)
21,690
2!,949'
22,781!
20,534
19,456
1
17,767^ .
I6,889i. .
15,978;. .
15,513!. .
15,388'..
262 .
146i.
273!.
355i.
390|.
I
378!.
3841.
393;.
500|.
405
10'.
14!,
10..
4,
578!
S80:
535 !
541;
534|
i
75j.
4,636
4,709
4,812
4,894
4,985
5,008
5,066
5,146
5,234
5,311
5,398
5,585
5,567
5,578
5,405
17.—CONTINUED
Factors absorbing reserve funds
32,869
33,918
35,338
37,692
39,619
For notes see last two pages of table.
251
MEMBER BANK RESERVES, FEDERAL RESERVE BANK CREDIT,
AND RELATED ITEMS—END OF YEAR 1918-72 AND
END OF MONTH 1971 AND 1972—Continued
(In millions of dollars)
rucioi h suppiyini* rest, rvc
- —
HintJ S
F.R. Bank credit outstanding
Period
U.S. Ciovt. securities
3
Special
i
I
i
Bought
Total
1965.. ,
1966,..
1967. . .
1968, , .
1%9 , . .
Nov ,
Dec.
10
40,768 40,478
43,655
44,316
4l>, 1 50 48,980
t oans
62,142
6«»(48I
71,111)
290
661
170
M23;
111!
61,783
61.783
62,462
62,462
62.841
64,345
i.*5O4
63.721
63.721
64,764
64,764
65» 518
65,518
65,841
65,841
66,633 " " 302
66,937
67,627
67,627
67,301
67,301
68,157 " 6 K J 5 7
1*323
70,804
69,481
1972—•
Jan ..
Feb, ,
Mar ,
Apr ,
May .
June ,
July.
Alia
Sept .
Oct..
70,202
70,202
68,425 '•68,425
70,754
70,065 " " 689
7t,2S6
71.286
72,611
71,471 "ij4iV
72,462
72,462
71.901
71,901
71,8<>O 71. HM ' " ' 7 8 6
7O,l»15
70.915
71 ,114
71,114
Nov . 70,678 7(1 678
ill
Dec, . 71,230 71.119
Float
2
AH
other
3
Other
F.R.
assets
Gold
stock
Total
6
4
1
51 917
52,937
57,154 ^57,154
1970, . , 62,142
1971, . . 70,804
1972 . . . 71,230
1971 —
Jan .
Feh, .
Mar ,
Apr. .
May ,
June
July.
Aug .
Sept .
Get. .
outright
Held
under
repurcha se
agreements
Treasury
curing
rency
Rights outcertif. standing
acct.
Draw-
5,575
6,317
6 ; 784
6,795
6,852
! 123 67,918' 10,732
I .068 76,515; 10,132
1 260 78,551i 10,410
400 7,149
400 7,710
400 8,313
1 267
400
400
400
400
400
400
400
400
400
400
400
400
2,248
2,49«
2,576
3,443
3,440
18?
193
164
58
64 2 743
335.
39 i
4,261
4,34,1
3,^74
57
261
106
1
308
2 750
263 ; 2,832
391 i 2,550
2 H24
81
I ,051 2,414
446
2,549
778
2,618
2,250
858
3. 1 39
198
212
3,585
146' 2,707
39! 4,343
59
43,340'
47 t 177:
52.031!
56,624:
63,584i
13,733
13,159
It.982
1(1,367
10,367
137'
173!
14b
1861
183;
66.167' 10,732
832 66.443 10 712
54
997 (>8,42I 10,732
138
56 1 169 67,85! 10,732
927 69,268; 10.332
112
62 ! 086 69,661i( 10,332
55 1 209 70,501 10,332
786 70,938' 10,132
107
51
52
5$
261
1 001 72.016: 10,132
1 208 72,358'' 10.132
841 71,9y9 10,132
i ,068 76,515 10,132
75
63
143
83
143
73
63
%
62
70
63
106
i , 280
656
K78
1 ,080
845
7,172
7,213
7,270
7,329
7,390
7,420
7,445
7,479
7,504
7,526
7,563
7,710
j
1,884
tV1 2,715
i
255
60'
. 594
1301
! .O92 ;
23^i
48
501.
1
3,217
2 97^
2,84&
* 299
2^ 224
3, 396
3.643
3,511
2,350
3^974
990
i ,268
774
i ,050
1 ,328
1 ,041
1 ,260
?3,456i
71,865;
75,247!
75,490:
78.039
76.954.
75,539,
77,'248,
75,909
76,504;
74.6331
78,55i 5
j
10,132
9,588
9,588
9,588
10.410
10,410
10,410
10,410
111,410
10,410
10,410
10,410
400 7,759
400 7,824
400 7,895
400 7,949
400 8,020
400 8,066
400 8.095
400 8,152
400 8.200
400 8,249
400 8,283
400 8.313
1
U.S. Govt. securities in chide Federal agency obligations hold under repurchase agreement as of
Dec, U 1966, and Federal agency issues bought outright as of Sept. 29, 1971.
l
~ Beginning with I960 reflects a minor change in concept; see Feb. 1961 Federal Reserve Bulletin,,
P- 3164."
Principally acceptances and industrial loans; authority for industrial loans expired Aug. 21, 1959.
*! file total of F.R. Bank capital paid m, surplus, other capital accounts, and other liabilities and
accrued dividends, less the sum of bank premises and other assets. Beginning Apr. 16, 1969, "Other
F.R. assets," and ''Other F.R. liabilities and capital" are shown separately; formerly, they were netted
together
and reported as "Other I-.K. accounts,"
5
Before Jan, 30, 1934, Included gold held by F,R. Banks and in cheulation.
6
The stock of currency, other than gold, for which the Treasury is primarily responsible—silver
bullion at monetary value and standard silver dollars, subsidiary silver and minor coin, and United
States notes; also F.R. Bank notes and national bank notes for the retirement of which lawful money
has been deposited with the Treasurer at" {he United Slates, Includes currency of these kinds held In
the God
Treasury
tlaiks as well
as that in circulation.
cludi g th
th andh the hF.R.
th
held
G l dUnited
l dandg Treasury
i gold
ld notes
t f ioft IS-JO,dmonetary
kf dtk
against
Slates notes
stiver other than that held against
silver certificates and treasury tunes of IW-KK and the following coin and paper currency held in the
252
f.—CONTINUED
Factors absorbing reserYe funds
t'ur
i-cucv
in"
Cdculatiou
i IiCtiSuiv
' cash
boldings •
'
!
!
42, 05ft
44, 66 "4
47, 226
«\y
760
U7f»
1 , 344
695
5.1,
57, l»93
61," (ti-M
6b, 516
55 548
6t I
56! 304
56, 5"' 2
*V_>
}
5tf, 3 ^ 3
5K ]
5K, X0O
58', 757
59, 157
60, 55K
bU
43)
5'), 7ws
60.' 3;s^
00 M!S
62.
62,
62,
702
20!
415
744
4ii
460
345
467
471
4S3
<II7
454
479
4? 2
45*
477
442
460
Deposits, other
j
iliaii me?nne? Kink
i
rese-ne^,
.
v.Ith I" R, Bank'-! Oth.-r
_
_ • t M,
:
|
>.C'
1
counts
| li'.'as- ; r<>i '
!
i m> , vii'n ' O t h e r • i
hm
416
1 .123
7»)3
1 ,312
976 1
1,064
S5K
1 $22 !
80'* '
1 2/4
1 ,115
987
2 ,102 :
f , N76
1(**9b *
2 ,020 (
^0*
33 7
31 »4
62, 599
63, 5h6
65. 137
155
0 0 511>
543
P. 5
\
;
'
•
;
I,t% !
2 ,020 |
1
SoO •
3?0
40 2
4u!
358
Vsj
,
j
I
'
!
' HS4
{
, 293
1 h7l
2J44 '
2 ,344 !
1 .208
,727 |
1 .394 1 .613 i
! ,182 1
f
T
Trc.tsaiy; sub.sit.liiU1> mhvt
ojtion.ii hank nuUs.
:
Oiiicr
' i .R
tia
' hihru-s
i
ind
> ojpn.jl
I
!
21 i
174
I 'S
216
! 14
653
M7
so;
145
t ,23*
?47
ii
|
58K
J20
7<»9
1 >\7
776
79 1
7 jit
2 0 *>
076
1 c»2
(22
7*4
(•At)
;
i
1 ->N6
j
XJM
2, M19
1
>
,
"
2 ?4o
2, "^02
2 2v-?i
2 2'/)
2' ".ol
2 )7 1
2 , J :>7
77/
7H
097
1.17
1 \7
hf 4
07 7
>
ivt
22S
64?
2,
t»31
2'"* 7
^ 1^
j
7oo
6 !0
, j
*. , - 00
\n j
19?
j
2 ! 247
yij
2
. ," , ' ..
62^
S*0
< *« 1
2, ! i I
44
94
5S4
L!5
i
24 J*) ;
27 7SxS 1
2 "* !O47 i
21
24 *409 i
2 , 2 "f >
177
2V4
1H rf
.. „
J
Wjrh
* "or- i
' ; l\k
• letioy s Re! Ba»ik«> ' .tnd j paired''
iK ,447
1 66
I ^
,*>*i2
t>i 4
•
4, I M
4 ,'3 to
4 6^1
4 > 21
UH? !
»40
2^1
162
Member bank
reserves
H f77«) .
21 « W ,
21 , N18 '
'
-- 1 , \ ** 3
2 C> 4
125
.
;
I
1
46
2 , . ss
^
VI
20
' . " "
'".'
.
and imu
!
.',
2*. 477
2 , 43
24
24
74 , ^ ^U ;
2 s-
25 * 4(>7 '
2*^ . 4 2 4 •
2: . 6' * 7
2 ">
) K2 '
27 ,7iSK ,
?J.
O^U 1
2 N ( 52s !
27 , 8(.»9 ;
27 * 4 i * 5 ;
39
27 '482 !
26 ,185 i
2H , 227 !
27 ,515 j
26 ",75/ 1
25
0^7
' tS7
5 ,423
, 74 1
6jilo
449
5 ,022
5 124
s , 2M
!2t9
, 172
4 ^H
5
s HlU
e , S4K
5 49(1
5 ',745
5,
, XoO
5 427
5 197
%
• , ^71
5^ S f 1
;
!
!
j
S4S
24 , 3 2 !
25 V05
2? , 4 3 9 •
2h , 173 !
2M
232
182
700
_ 901
<0 .0)3 1
32 , 4^ 6 '
52 ',044 i
_ 4611
in 5
1
2*> , 7 2 3 •
2p) , 376 !
29 i
55
29 >67 !
3d . 41 K i
>t;
ti*.)2 j
489
383
726
_ 1 2$29 8
6 J2
3s I ,050
3s J. Hit
!
',
30 , 199 i
30 ', 7X2 '
150
} 0 >b3 ;
682
It i ,*Ci89 1 -- 1 , 417
U3S
.4V>6 I
32 , f19u 1
if
,3 $ ,
i
, 789
7k)h
s , HriH
32 *2^S
32
*U '.72S
M ,H05
L!
32 ',566
33 , 5 0 1
^ X47
ct .K68
<) , 216
3 4 499 J
30 ] 6 7 3
,1)44
""I
98
!
;
j
hXO
_ SKI
f , 02H
297
2, 323
27 i
927
1» 457
_ 118
57 2
cits, I ,R iwh^., K K. llt.ik notes, ami
-N.n, 2V
ut
S e p t . I I , 1 9 6 8 , f i f t i e s a i v csiifti.skd.
fituiiLH t o i n..scr\c p c i i o d 2 w e e k s ps..\ion>. H I <fp<nt i l a t c .
I h c s v f i g u r e s , i u - 1 stntM U-d i!»otu*,h l**5H. I l c f o i c f s )2 > . n j i L i b l - : or,l> m i call d a l e s -sit r * > 0 . i 5 u l S922,
tin* call d a t e s \ m c I k e , 29«. Ik-MniuiV',: .v v pt 12, J S | 6S, . t i i m m H L? f),i«,cii t>n cliJic »>l4"usincss Himsvs fee
r e s e t v c p e r i o d 2 week-* p i o v i o u s u» import tlutc,
1(1
Ik'uinniu).', VH7) i n c l u d e s s e c u r i t i e s l o a n e d - - t u l i v s e c u i e i i I H i>S, (\o\t s;x u n t i e s p l e d g e d ^ t t h
F.K. Banks.
r
1 h i s l i g u r c a i s u i n c l u d e s s e c u r i t i e s s o l d , n o d s e h e d u < t d t o t)e h o u u h t H.K'k, ynciei m a t c h e d Sis'.e
p u r c h a s e !i.invicii»jiis,
!?
BcKinitini: w i t h week e n d i n u N o v . I 5, f ( i72, i i i t l u d o ^4M) u u l i i o n of l e s e f v e d e f i c i e n c i e s on w i n c h
F . H . Ua'.jKs J I C a(U)\\ed. 10 w a i v f j n n a t i i e s fv>r a ti,<!ii,iuon i ^ r i o - l m ev">utiec(it»n w i t h h.ysk a d a p t a t i o n
l o R e g u l a t i o n J a s . t m v u i i c d , e t k \ t n c N<»v. 'i, 1 9 7 2 , t h i s a n h . t m t w a s teihi<,t\t t o $ 2 7 9 iiii'llton o n D e e . 2K>
N o i r . —For desenption of figure*; and discussion of lbe.it signifieanco, see " M e m b e r Bank Reserves
and Related Itcins," Section 10 of Sitpplenuni r«> />\/»iA/»of f#«<i SU/m'twy Stntivti> •>, Jan. 1962
253
to
18. CHANGES IN NUMBER OF BANKING OFFICES IN THE UNITED STATES DURING 1972 »
Commercial banks (incl. stock savings
banks and nondeposit trust companies)
Type of
office
Nature of
change
All
banks
Member
Total
Total
BANKS...
Dec. 3 1 , 1 9 7 1 . . . . . . . . . . . . . . . . . . . .
Changes during 1972:
New b a n k s 2 .
Suspensions.
Ceased banking operations.
Consolidations and absorptions:
Banks converted into branches.
Other.
Voluntary Liquidations 3 . . . . . . . . .
I n t c r d a s s changes;
Nonmember to—
National
State m e m b e r . . . . . . . . . . . . . .
State member to—
National..................
Nonmember. . . . . . . . . . . . . . .
National to —
State m e m b e r . . . . . . . . . . . . . .
Nonmember...............
N on insured to i n s u r e d . . . . . . . .
Net change
BRANCHES AND
ADDITIONAL OFFICES,
^ National !
Mutual
savings
banks
Nonniember
State
Insured
NonInsured
Insured
Noninsured
163
14,273
13,784
5,728
4, §00
1,128
7,875
181
32i
266
-2
265
—2
66
53
13
162
37
_t
I
1
_44
-5
32
-109
2
-106
-10
-2
-1
'-2'
-36
-36
36
1
-22
'-36*
22
5
142
25
-1
-3
4,613
1,092
8,017
206
325
160
16,902
13,102
3,800
5,946
40
983
212
946
68
707
60
239
570
39
7
13!
30
3
-2
140
144
Dec. 3 1 , 1972.
14,413
13,928
5,705
Dec. 3 1 , 1971 4 . . . . .
24,083
22 t 8S8
Changes during 1972:
Be
tiovo..........
Banks converted. .
Discontinued 4 . . , .
Sale of b r a n c h . . . .
1,684
110
-130
1,523
107
-123
, I
-25
2
2
c
'-5'
Interclass changes;
Nonmember to—
National. . . . . . . . . . .
Stale m e m b e r . . . . . . .
State member to—National. . . . . . . . . . .
Nonmember. . , , . , . .
National to —
State m e m b e r . . . . . . .
Nonmember. . . . . . . .
Noninsured to insured,
Facilities reclassitied
as b r a n c h e s . . . . . . . .
Other
.„.,.,.....
Net c h a n g e . . . . . . . . .
Dec. 3 1 , 1972 *.. .
BANKING
FACILITIES
Dec. 3 1 , 1971 * . . . . . . . .
Changes during 1972;
Established.,..,,,.,.
Discontinued........
Facilities reclassilied
as branches. . . . . . .
Other
Net c h a n g e . . . . . .
Dec. 3 1 , 1972. . . . . . . . .
-111
-57
5
18
1,686
5
15
1,526
25,769
_59
53
-22
-111
111
28
57
i
876
3
13
708
168
24,414
17,778
13,810
3,968
216
216
183
170
13
3
-3
3
-3
3
-3
-2
_ s
-3
3
208
208
- Includes a national bank (8 branches) in the Virgin Islands; other banks or
branches
located in the possessions are excluded.
2
Exclusive of new banks organized to succeed operating batiks.
3
Exclusive of liquidations incident to succession, conversion, and absorption
of banks.
3
13
-28
-57
53
2
2
§45
6,591
_1
4
131)
-1
30
1,113
242
33
3
I
-i : . . .
176
4
Excludes
&
12
32
banking facilities.
Provided at military and other Government establishments through arrangements made by the Treasury.
19. NUMBER OF PAE AND NONPAR BANKING OFFICES,
BY FEDERAL RESERVE DISTRICT, DECEMBER Mf 1972
1*% r
T otal
-r
F.R. district
Nonpar
(nonmember)
Member
Hal
No,,, nembcr
Branches
Bra IK lies
Brant
Branches
! Branches
Banks &ofl ices Banks ' &offi ces Batiks & offices Banks & offices' Banks! & offices
DISTRICT
Boston.......
New York
Philadelphia. .
379
475
427
1 775
3
i 791
379
475
427
I, 7 7 5
880
1, 791
219
335
294
1.
3, 401.
1, 250!
160
140
133
582
479
541
Cleveland
Richmond
Atlanta
778
738
195
3 503
859
1
778
713
195
3 4?^
801
1.
463
363
575
315
1. 793'
162
350
133
1,118
h
402'
1,311
668
2,613
1 ,345
1,378
5K9
OIK
318
939
430
498
1, <W> 1,674
530
915
880
163
893
488
155
2,105
1,335
402
376
274
244
813
633
143
225
143
4 , 312
1,292
702
259
151
131
932
24 850 13,643
24, 734
5,705
18, 0 0 !
7,938
6,733
• >
t ,742
,613
Chicago.
St. Louis, . . . .
Minneapolis.
i
Kansas City. ,
Dallas. . . / . . .
San Francisco.
i
1,693
J
1 , 400
1 ,378
J 030
318
, 105
H6
290
5 244
i , 385
402
Total. . . . 13 ,S22
49.
30
58
12
179;
116
20. NUMBER OF PAR AND NONPAR BANKING OFFICES,
BY STATE AND OTHER AREA, DECEMBER 31, 1972
Par
Total
Member
State, or
other area
Nonpar
b
Notmteniher
\
illmnches
, Bfaiuhes1
[Branches
!Brauches!
Brttnches
i Banks'& offices • Banks' & oftkes" Banks & offices Banks' &. offices! Banks & offices
STATE
277 1
HI
15
I'.) 7
156
244
63'.
t 8!
!
14
575'
33 4 !
7o'
U4!
181
3.25H
35
437
?.
24;
170;
U S 1, I 50
719
407
344
76
60 7
394
341
443
153
43
248'
483
143
t ID198
7M
344
76
Alabama . . . ,
Alaska....,,.
Arizona
Arkansas
California . . . .
Colorado... .
Connecticut, . .
Delaware.. . .
District of
Columbia . .
Florida
2771
I4j
57 5'
1 !2 :
Georgia......
Hawaii
Idaho . .
Illinois. . . . . . .
Indiana
Iowa
Kansas
Kentuck\
Louisiana . . .
Maine
43 1
7,
24»
1 ,150407!
h68'
6<>7
341'
238:
43;
4S3'
to;
15:
2521 56|
244;
631
I si
j
256
334;
374!
195
3.258
}5
49 K i
I Id'
j
60
143
4 9 H1
1 10J
112
hi)
3!>4
109
5
4
SI
63
140
27
~6
244
62
265'
Fl4,
2, S66
22
31X
27
12
256
104
13
71
314
}
Id
13
491
180
150
US
ji)7
92
60
24S
2^
168!
5.
ii
1 16,
<) >
104
36
1 2\
2
b
11
1)5
654;
442
10!
40
230
237
i S21
51 S
4in
24')
93
is 1
90
toy
67
392
' 13
ISO
83
S
47
169
133
•>-,
53
277
243
36
164
1 >*>
66
85
74
20.—CONTINUED
Nonpar
(noiimember,)
Menilvr
State, i
other ai
I
'Banks
SI ATECent,
M.mtond
'
New Jersev . , . j
New Mexico !
New York . ., .!
North
|
Carolina , . . !
North
Dakota , . . \
Ohio, . . . . . |
Oklahoma . ;
Oregon,, _...)
Pcitnsvhustia j
Rhode Island .;
112
j <S
1 \\
7 Ut
181
673
14b
441
h
813
1.330
20
406
132
12
4K
93
77
130
20
4fi
95
201
40 (\
132
22^
~45
17<
12
48
0<131
ft! 3
9:
I, 174
1 50
2,61>8
152
40,
233,
1,02ft.
'•'5
2,535 ;
I ,331
71
1, 304
24j
677!
7^
i , 448
H4
3 SO
1 ,017
185
IW
73
1,448
84
Mii)
47
335
2U7
8
206'
Xi>
1 6(*
4 %4
\b
146
441
SI 3
77
2, bS>8
5d5
437
4%
112
155
331
73ft
IK1
210
71
200
f ,174
210
71
209
South
i
04
Ca rolina . . . '
South Dakota . < I *>9
312
Ten!lessee . . . .
1,237
Texas . . .
52
Utah
. ,. ,
40
Vermont , , , j
25b
Virginia .
;
Washim/ton
20.?
West Virginia •
609
\ \ isconsin... •
71
Wyoming . . . ;
C.u..n;*
Hanks & otli.es Banks & offices Banks & offices
i
!
Mass tehust its'.;
Michigan . . . ;
Minnesota . . . j
Mississippi . i
Missouri,
.\
Montana .
Nebiaska . .
Nevada
!
New l i a i n p - •
shire.
... j
OTHER
AREA
Banks & office
&o!lke
1 >t>
400
1(12
505
"94
150
437
45
434
16
84
159
312
1 ,22 *
52
40(1
102
24
SOS
85
581
If
24
151
0 |
SO
25ft
1 5U
ON
l
»f)l
HH
(>t I1)
29
K
207
llo
161
4i~
9f,l
ftoo
I ,(M7
2
203
t>00
71
1
13
1
' 14
1
204
14
60127)
511
I 36"
503.'
50
30 S
200
241'
It!
230;
28;
14;
58!
148*
627!
170
230
17
138.
il!
273
72
C)Uj
loo'
" 20.
i 14
30
742
512
16
106
5'> •
K4J
44 51
16'
57,
230!
Ho;
524'
223)
30!
236i
1)5,
45',
50; *
2't9 r
07;,
14
I
|
I
American
Samoa '•' . . ,
Puerto Rico 3 "
Virgin
Islands'5. . , ,
f
204
S
^ Includes 16 Nt Yt>rk C."it> branches v>C 3 insured nonmomher Puerto Rican banks.
- American Sain
,-t! I
purposes. AH men ;-r bianches in (itiatn aiv
:^ of ("aiifoniia and New York banks,
<
' Fucno Rico an
• Ness York District I'oi check clearing and coliee
All
noil purp<
ot" banks locaievi in ( alii'omi't, Nvw \ ' o r k , ami PeniiNvhani i ( V n a i n blanches t>f Canadian l \ m k s (2
k) Puerto R i u i and 5 in the Virgin bl.mtK a i e incltutcd abt>\e as nonmemher banks, a n d n o m n e m b c r
branches in Puerto Rica include 8 other branches of Cairulsan busks.
N o i r . - C i m i p r i s c s . i ! ! eomtnereia! banking oflkev on which cheeks a t e tlrawn. inducting 20S banking
fitcilities. N u m b e r o! banks and branches diiieis front that in l a b i e IS because this table includes banks
in Puerto Rico a n d the Vitvjn Islar'.ils but excludes banks ant! tins! ct>mpauies o.ti which n o checks are
drawn.
257
21. DESCRIPTION OF EACH MERGKR, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES
APPROVED
BY THE BOARD OF GOVERNORS DURING if)72
CONTENTS
APPLICANT BANK
OTHER BANK
Ashland State Bank of Ashland,
Ashland, Ohio
Ashlund lank & Savings Company, Ashland, Ohio
264
Auglaize County Bank, St. Marys,
Ohio
Home Blinking Company, St.
Marys, Ohio
260
Bank of Idaho, Boise, Idaho
Cassia National lank, Burley,
Idaho
275
Beverly Hills Fidelity lank, Beverly Hills, Calif.
Fidelity Bank, Beverly Hills,
Calif.
267
BOL State lank, Lansing, Mich,
lank of
Mich,
Lansing,
278
Central Trust Company Rochester,
N.Y., Rochester, N.Y.
First National Rank of Painted
Post, Painted Post. N.Y,
271
Citizens Bank of Schoolfield, Danville, Va.
Schoolfield Bank & Trust Company, Danville, Va.
261
Citizens Central
N.Y.
Bank, Arcade,
Citizens State Bank, Lyndonvillc, N.Y,
268
Citizens Commercial Bank, Colin a,
Ohio
Peoples Bank Company, Fort
Recovery, Ohio
272
Commerce Union Bank, Nashville,
Ten it.
Proadway State Bank, Nashville. Tenn.
262
Grand Haven State Hank, Grand
Haven, Mich.
Security First Bank & Trust
CoM Grand Ha\en, Mich,
278
Jefferson Street State lank, Houston, Tex,
Houston-Citizens Bank & Trust
Company, Houston, 'lex.
277
Mechanics and Fanners" Bank of
Albany, Albany, N.Y.
Tanners National Bank
Catskill, Catskill, N.Y.
260
OK Bank, Grand Rapids, Mich,
Old Kent Bank and Trust
Company, Grand Rapids, MiVh.
274
Peoples Mid-Illinois lank, Bloomington, 111.
Peoples Hunk of Bloomingtcn,
Bloomington, 111,
270
Powhatan Community Bank, Powhatan, Va.
Bank of Powhatan, Powhatan,
Va.
265
Lansing,
Page
of
21.—CONTINUED
CONTENTS
Continued
APPLICANT BANK
St.
Paul Trust
p.v.u'c, MJ.
270
vSati<lusk> Security Bsutk, Sandus
kv, Ohio
'
Western Security
iiis^kv, Ohio
San-
279
Sitvaitmiii B:«ik S. Trust Cotnpnn>
Chatham .Savings l a n k , Savan-
265
S»i* l i l l i t ' j l i ,
SJ\
alh'ijh,
SutiThridtfv tiy^ik cif
'• i^\-^.\iiU:
W'i:.
HuJti-
Page
I'niou
I'rust
Company
of
MarjImicL Haitimore. Md.
c>l
Con?ptMJ)s
OTHEE BANK
I itu
lf<?.
Siiutliricl^e National Hank of
<ir< k endah\ Orccudaic, Wis.
274
<'nncrso f 'It> Hank aiicl "hus*
l"ujii|Mi<y, rj'.i'.tTso Ci!;, Mivl>.
lniver.se
Ch>
T n u v r v e City
Bank,
276
("niofi i'«)Ufttv 1 r»st
i-;i/.tk'ib. N . l .
Kvitusixfrj^-Middletown Niittonal
Bank. Mkidiclown. N J .
262
(*neiuhih«
ihd'u
Hank,
^'oiiipaiij.
*
State
Mich.
259
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES
APPROVED
BY THE BOARD OF GOVERNORS DURING 19723—Continued
Name of bank, and type of transaction2
(in chronological order of determination)
Resources
(in millions
of dollars)
Banking offices
operation
No. 1—-The Aiglalze County Bank,
St. Marys, Ohio,
to merge with
The Home Banking Company,
St. Marys, Ohio
To be
operated
(Newly organized bank;
not in operation)
22
SUMMARY REPORT BY THE ATTORNEY GENERAL
(No report received.)
BASIS FOR APPROVAL BY THE BOARD OF GOVERNORS (1-18-72)
The Auglaize County Bank, St. Marys, Ohio, a nonoperating bank
applying concurrently for membership in the Federal Reserve System,
proposes to merge The Home Banking Company, St. Marys, Ohio, which
has deposits of $20,1 million and operates 3 offices.
The proposal is a transaction to facilitate the acquisition of The Home
Banking Company by The Central Bancorporation, Inc., Cincinnati, Ohio,
a bank holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The banking and convenience and needs factors are consistent
with approval of the application.
No. 2—Mechanics and Farmers Bank
of Albany, Albany, N.Y.,
to merge with
The Tanners National Bank of
Catskill, Catskill, N.Y.
{
39.0
4
10.0
2
i
j
SUMMARY RI-PORT BY THE ATTORNEY GENERAL (1-28-72)
The closest offices of the merging banks are separated by a distance of
33 miles. Numerous banking alternatives intervene. The amounts of deposits and loans originated by either bank in the service area of the other
is de minimis. Thus, the proposed merger would not eliminate substantial
existing competition.
Although State branching laws permit intradistrict de novo branching,
home-office protection precludes a consideration of Mechanics fartd
Farmers' Bank of Albany, hereinafter Mechanics] as a potential de novo
entrant into the village of Catskill. Due to the economic nature and
growth prospects of Greene County, and the size and relative market
position of Catskill Bank [The Tanners National Bank of Catskill, hereinafter Catskill BankJ, it would appear that the elimination of Mechanics,
or BNY [The Bank of New York Company, Inc., a holding company],
For notes see p. 279.
260
21.—CONTINUED
j
Banking offices
Resources i
in millions
ol' dollars;
In
j To be
j operation ; operated
Name of bank, and type of transaction''
(in chronological order oi'determination/
SUMMARY RFPORI BY TUT AT TORN IV (JrNrR.u-—Coot,
as a potential entrant into that countv would not result in the elimination
of substantial potential competition. Moreover, due to the sizes of C'atskill
Bank and of the only other independent bank in Greene County, there
does not appear to be any less anticompetitive merger alternative available
to Mechanic^.
We conclude that the proposed merger, if approved, would not have
any significantly adverse effects on banking competition in Greene
County,
B\SIN FOR APPROVAL BY TUT BOARD or GOVJ RNOKS f 1-25-72)
Mechanics Bank, a wholly owned subsidiary of The Bank of New
York Company, hie.. New York, operates 2 offices in I lie cit\ of Albany
and 2 offices in Albany County, in New York's Fourth Banking District.
The holding company has no other banking subsidiary located in the
Fourth District, wherein Mechanic Rank ranks as the Ifith largest of
35 commercial hanks, holding 1J per ce/u of the district's deposits.
Tanners National Bank's 2 offices, both in the village of C'atskill (population 5,3001, arc 33 miles from the nearest offices of Mechanics Bank,
Tanners National Brink, in Greene County, is the smaller of 2 commercial hanks in C'atskill. Four of ilk* 5 competing bank> in the county
arc subsidiaries of rnultihank holding companies and are the largest
banks headquartered in New York's Fourth Banking District.
There is no significant competition existing between proponents, and
home-office protection would not permit Mechanics Bank to establish a
lie nova branch in the \illage of Calskill.
The merger would not have an adverse effect on competition in any
relevant area. 1 he transaction would benefit the residents of Catskill by
the addition of an alternative, full-service facility.
No, 3 - Citizens Bank of Schoolfield.
Danville, Va.,
to nien^e with
SctinolfieW Bunk & Trust Company,
Danville, Va.
j
j
|
j
|
*Newly organized bank;
not in operation,!
19,0
SUMMARY REPORT BY THE ATTORNEY GENERAL
(No report received.)
261
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION O F ASSETS OR A S S U M P T I O N O F L I A B I L I T I E S A P P R O V E D
BY T H E BOAR!) O F G O V E R N O R S D U R I N G 1972 ! — Continued
Name of bank, and type of transaction 2
iin chronological order of determination)
' Resources
• <in millions
i of dollars,1
!
•
Banking offices
:
»
j
i
In
j To be
| operation
operated
BASIS FOR APPROVAL BY THI; BCMRO OF GOVERNORS
{2-11-72)
The sole purpose of this proposed merger is to provide the organizational device whereby First Virginia Bankshares Corporation, Arlington,
Virginia, a bank holding company, can acquire Sehoolfield Bank & Trust
Company. The merger will have no effect on competition or banking
structure in the Danville area. All other relevant factors also being satisfactory the Board finds approval of the application to be in the public
interest.
No. 4- Commerce Lnion Bank,
Nashville, Tenn.,
|
487.0
i
26
|
26
j
to }}h t"i'i' with
Broadway State Bank,
Nashville. Tenn.
I
I
SUMMARY Ri.PoR'r in
mi
i,Newly organized bank;
not in operation)
A T T O R N I Y GFNT.IUL
( N o report received.)
B\sis HJR AFPROVAI BY m r Kn\Ri> OF GOVI-RNORS (2-22-72)
Commerce lliiior Bank, NaslnilJe, which hits deposits of $374.6
million and operates 26 offices, proposes to merge Broadway Stale Bank,
Nashville, a nonoperalini: l*«ank applying coneurrenth for membership in
the I cdcral Reserve System.
1 he proposal is :i Iransuction to facilitate the accjuisition of Commerce
Union Bank by 'iennessee Valley Bancorp, Inc.. Nashville, Tennessee, a
bank holding company.
Hie proposed mu'ger would, in itself, have no adverse competitive
effects, 1 he banking and convenience and needs factors are consistent
with approval of the application.
No. 5 Vtikm Ouwtv Trust Company,
lj"«/.abeih N J..
to mervt
wi>h
Kfiii!Klit!r«-Mid«!lt:tt)Bi! National
iinvn, N,J,
For notes see p. 279.
262
i
«
IM.O
|
i
j
f
I
j
11J
'}
80.(1
i
i
|
>j
I1
\{
6
25
21.—CONTINUED
:
:
BankJiii!, offers
Name of bank, and type of transaction-' ' Resources ',
iin chronological order of determination/ ; •:in ivnih».)iis |
.
j of dollar-..» :
la
j To be
! operation : opera h\\
SUMMARY
RIPORI
UV itir
Ammsi
v C.?i M V \ :
*2-}f»-72*
A l l b u t 2 o f U n i o n T r u s f s o f f i c e s a r e h v a f c d in I n i o i ; < o u n f \ , at
least 25 m i l e s f f o m M i d d l e t o w n . U n i o n T r u s t ' s single M o n m o u t h
i"ov,ni\
o f f i c e , h o w e v e r , is l o c a t e d in F a t o n t o w n . 5 m i l e s s o u t h o f
Middletuwn.
A l t h o u g h s e v e r a l o t h e r b a n k i n g o f f i c e s i n t e r v e n e , t h e r e is p j o h a b h "
>nwv
c o m p e t i t i o n b e t w e e n this ofiiee of U n « o n
h t b ! and Middletown
Ha.:*
M i d d l e t o w n B a n k is t h e 5 t h l a r g e s t o f 1?. b a n k s o p e r a t i n g in M O T * m o u t h C o u n t y , h o l d i n g a b o u t h.5 p e r s v n t o f l o l a l : o u n t \
d e p o s i t s t»n
J u n e 3 0 , 1^70
U n i o n T r u s t ' s F a t o n t o w n otliv.e w a s o p c n e i l dc novn
in
A u g u s t o f 1 9 7 0 , T h u s , U n i o n T r u s t is n o ! n o w a s u b s t a n t i a l f a c t o r in
M o n m o u t h C o u n t ) , a n d t h e i n c r e a s e in c o n c e n t r a t i o n r e s u l t i n g f r o m !he
m e r g e r w o u l d be slight.
M o m e - o t l i c e p r o t e c t i o n p r o v i d e d b y N e w J e r s e y li\w b a r s ( J n i o n ' f n i ' - i
f r o m b r a n c h i n g dv fiava
in M i d d l o t o w n . U n i o n T m s t c o i i l t l c o m p e t e »r
M i d d i o K > v \ n . h o w e v e r , b y o p e u h i t i branehe.-* o n t h e p e r i p h e n - o r p o s s j b } \
t h r c u i g h t h e c h a r l c i i n g o f a n e w b a n k s ia i h v h o l d i n g c o m p a i n
dt:\i'.T.
As noled above, Union
I ' r u s t h a s vilre*td\ u t t e r e d
\ U > n n ) O M t h C o<:'Mv
i/t' inni/
t h r o u g h iis f ' a t o n t o w n ofticc. U n i o n
I t a n t a l s o h a s a p p o ^ ' i - . •.*»
o p e n a 2 n d M o i m i o u t h C o u n t y o f f i c e , in O c e a n T i j w n s l n i p
<t l e w r-iiw *•
s o u t h ot' F a t o n t o v . n.
I here, a r e o t h e r
banking
oJ"gani7atk>n<
w nich
could
be
coosjde-jed
p o t e n t i a l e n t r a n u i u i o M o n m o u t h C o u r ' J . y , b n ; in ^ i c ^ .>f U n i o n T p s s i ' s
d e n i o u s i n u c d d e s i r e to e n t e r t h e c o i i ' i H ,!< e>,\,> \nv ^wi'titf
nuiv vjimjnatc some potential competition.
B\sis ioR
At»rkn\\i
rr«
r u i . H t m n i <»« ( ' i i m . K N i r ^
» V** ? 2 )
U n i o n ( o u n t > T i n s ! f o ) i » p a n \ , i i > c a i e d i-j f ' u S e c o n d U . t n k i M ; ' f>{N|Ti\ i f
i)f N e w
i e r s e y , M * I \ I ^ . prnn'.nily
t h e \»s\.>tt:i N I M \ , H \ m ^ r k e i , \vh':'>,' i!
r a n k s 6 t h itmonii
4 5 b a n k s J o e . t i e d I l h i ' 1 an-* H- »Ui- ^ p n 1 CCHJ
;f t h e
m a i K e t ' s d e p o s i t s . O f its 18 b l a n c h e s , Sti a». in U n i o n ( •/nifil^ aiiii ! v.'".1;
in S o m e r s e t , * r d , \ 1 o n n u » i s i ! ; C o u n t i e s
K wn* b u t - . r - M w u d e i o w n
NjlL-^rii
B a n ! , v ^ i v e s p n i n a n l v : h e n o i t h e i n H - J U ' O ^ o i M o n f n o i M h f <HIV\\
%vhf. n
e n c o m p a s s e s m e T o w n s h i p ' ; 1 NTn.Ull'.%«ov, ?!— u i ^ n ' i n ;»\ m a i n o i ' K v '«; k d -1
o f !t> 5 b i a i i i * h c :«ie l o c a t e d —o1- n e b ak Kviw^luiw.
v h i 1 ; - . i h c ;<.'-> u r . r K
b i a f u h i \ jo,.u»v\i Th*. h o n n ~ i 4 i i / e p,;\*!':. ••» n k . i n - r e •-{' S t ' i i e -*:v . v.?«i'Ji
p n . ^ i b i t s ,/.• >,}\,*
ivi'Awh'iw
i u i o \ t i d d i - ! • - « ; , ^ o . l d r,.u ; .
.t-mow!
i n u M i s u m n M U ' ^ n of the p i o p c v ^ \ i m e i r e j
1
i
Th'
r e l e v . m ' m a r k e ' in w h i c h : o a » u ' ^ I lit.* « ' o m p i - m i ' . ' : r f f , \ i s
,bo
A »bm \ P a i K m a r k e t . •. o n >i u i i i r .'?»:*•«;. r a l ' . o f M ^ ^ ^ a v - ' T h f < >wr
d^k-pl
for
•! lew
vommumt.i'\
In J be v ^ ' - i f i n
' - x i i o n >, * v iif!*J< <n«"'r>>tcs
iSe
F o r n o t e s see p . 279.
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THE BOARD OF GOVERNORS DURING 1972 »—Continued
Name of bank, and type of transaction2
(.in chronological order of determination)
Resources
(in mil lions
of dollars)
Banking offices
In
| To be
operation ' operated
BASIS FOR APPROVAL BY THI: BOARD OF GOYTRNORS—Cont.
the eastern portion of the county. Twelve banks operate 92 offices in this
market; the 4 largest hold 78.8 per cent of total deposits. KeansburgMiddletown Bank ranks 5th, with 6.7 per cent of deposits. The only
office of Union County Trust in this market area is its Eatontown
branch, which holds only a negligible percentage of market deposits. Thus,
consummation of the merger would not Increase deposit concentration
significantly in any area.
Although the closest office of Union County Trust, the Eatontown
branch, is only 5 miles from an office of Keansburg-Middietown Bank,
their service areas do not overlap, and there is no significant competition
between the 2 banks. It is not unlikely that the merger would eliminate
some potential competition between the proponent banks; however, it is
more likely that the merger will stimulate competition in the market
area by increasing Keansburg-Middletown Bank's present ability to compete with the 4 larger banks and with 2 smaller banks that recently have
become affiliated with 2 holding companies in the First Banking District,
each of which holds approximately $1 billion in deposits. KeansburgMiddletown Bank is now less than half the deposit size of the 4th
largest bank in the market.
The financial and managerial resources of the applicant are satisfactory; the same k true of Kean»burg-Middletown Bank, except for the
needed improvement in its capital position, which would attend consummation of this proposal. Therefore, bunking factors lend some support
for approval of the proposal. Convenience and needs considerations also
are consistent with approval in thai they would permit improvement and
expansion of banking services now offered by Keansburg-Middletown
Bank. In the judgment of the Board, consummation of the proposal
would be in the public interest.
No, 6—The Ashland State Bank of Ashland,
Ashland, Ohio.
to merge with
The Ashland Bank & Savings
Company,
Ashland, Ohio
(Newly organized bank;
not in operation)
16.0
SUMMARY RF.PORT BY THI; ATTORNFY GENERAL
(No report received.)
264
21.—CONTINUED
Name of bank, and type of transaction2
(In chronological order of determination;
Resources
(in millions
of dollars)
Banking offices
in
To be
operation ; operated
BASIS I-OR APPROVAI HV nil BOARD t>t Oovi KNORS (3-23-72)
The sole purpose of this proposed merger is to provide the vehicle
whereby First Bane Group of Ohio, Inc., Columbus, Ohio, a bank
holding company, can consummate the acquisition of The Ashland Bank
& Savings Company as approved by the Board on January 25, 1972.
The merger will have no effect on competition or any other of the usual
factors considered in merger proposals; therefore, the Board finds approval of the application to be in the public interest.
No. 7—Powhatan Community Bank,
Powhatae, Va.,
to merge with
Bank of Powhatan, Powhatan, Va,
(Newly organized bank;
not in operation)
35,0
SUMMARY REPORT BY THI ATIORNLY GT.NKRAL (2-8-72)
The proposed merger is part of a plan through which Powhatan Community Bank would become a subsidiary of Southern Bankshares, Inc.,
a bank holding company. The instant merger, however, would merely
combine an existing bank with a nonoperating institution; as such, and
without regard to the acquisition of the surviving bank by Southern Bankshares, Inc., it would have no effect on competition.
BASIS FOR APPRQYAL BY Tin; BOARD OF GOVERNORS (4-4-72)
Powhatan Community Bank, Powhatan, Virginia, a nonoperating bank
applying concurrently for membership in the Federal Reserve System,
proposes to merge Bank of Powhatan, Powhatan, Virginia, which has
deposits of $30,937,000 and operates 3 offices.
The proposal is a transaction to facilitate the acquisition of Bank of
Powhatan by Southern Bankshares. Inc., Richmond, Virginia, a bank
holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The banking and convenience and needs factors arc consistent
with approval of the application.
No. 8—Savannah Bank & Trust Company
of Savannah, Savannah, Ga,
to acquire the assets and assume
the deposit liabilities of
Chatham Savings Bank,
Savannah, Ga.
117.0
10
]
i
4,0
265
21. DESCRIPTION OF EACH MKRGER, CONSOLIDATION, ACQUISITION OF ASSISTS OR ASSUMPTION OF LIABILITIES
APPROVED
BY THE BOARD OF GOVERNORS DURING 1972 ! —Continued
•
Name of bank, and type of transaction" , Resources
(in chronological order of determination; | (in millions
i of dollars)
!
• Banking offices
•_
_
;
j
In
| To be
| operation ! operated
SUMMARY RF.PORT BY TIIL ATTORNI-Y GI-.NF.RAL (2-24-72)
Savannah Bank's main office is located 95 feet from Savings Bank.
Six branch offices of Savannah Bank are located within 3J--'2 miles of
Savings Bank. Both institutions derive virtually all of their business
from Chatham County. Although Savings Bank is a small institution, it
has outstanding residential real estate loans of about $3 million, compared to about $7 million of Savannah Bank. Thus, at least in the savings deposit and residential real estate loan markets, the proposed
merger would eliminate substantial existing competition.
The Chatham County savings market is highly concentrated; the top
firms already hold about 86 per cent of total county savings deposits.
Savannah Bank ranks 3rd among institutions which accept such deposits,
holding about 18.5 per cent of such deposits. Savings Bank holds about
1.3 per cent of such deposits. Thus, the proposed merger would substantially increase the already high concentration in this market.
Finally, the proposed merger would eliminate one of the very few
sources of potential deeoneent ration in the Chatham County commercial
banking market, Georgia law permits a bank to branch only in the
county where its home office is located or into a county where a previously "grandfathered" branch is located. Furthermore, bank holding
companies are restricted to acquiring no more than 5 per cent of the
voting shares of any bank. Therefore, any potential deconcentration in
the Chatham County banking market must, for ait practical purposes,
come from existing banks in the county.
The proposed merger could eliminate existing competition for savings
deposits and real estate loans, increase the already high concentration
in those markets, and entrench Savannah Bank's leading position in those
markets. It would also eliminate Savings Bank as a potential entrant into
full commerical banking in Savannah and Chatham County, Since there
are an extremely small number of potential deconcentrative forces in
Chatham County, and since the branching and holding company laws
as a practical matter prevent other banking organizations from entering
the county. Savings Bank takes on a competitive importance out of proportion to its absolute size. Moreover, iis elimination by acquisition by
one of the dominant banking organizations in the market has particularly serious competitive consequences. We conclude that, despite the
small size of Savings Bank, the proposed merger would dearly have an
adverse effect on both existing and potential competition in Savannah
and Chatham County.
BASIS FOR APPROVAL BY THE BOARD OF GOVERNORS (4-6-72)
Savannah Bank, the 7th largest banking organization in Georgia with
1,3 per cent of total commercial bank deposits in the State, operates 10
banking offices, all in Chatham County (population 187,800), Chatham
Bank, a small savings institution prohibited from accepting demand
266
21.—CONTINUED
Maine of hank, and typo of transaction"
(in chronological order of determination*
\
j
j Resources <
| ('in million"; |
j of dollars' |
Banking offk'vs
_
j
In
S To he
I
BASIS FOR A P P R O \ \L BY T I P ' BOARD ot-
G'*\n?N(\r<v---(V'1!!.
deposits under Stale Maiuies, operate; j stiu:k* office ^ ftei 1'joni Uic
main office of bavunnah Bank. In Chatham C ounty Savannah Hank Is
the 2nd fart'tsl commercial hanking or%".uni/ation in the market. With
respect to lime and savings dcposiU held h\ A\ liiirtncial institutions HI
Chatham County, Savannah Bank and Chiiiham Batik hold 15.4 and 1,2
per tent of such deposits, 'ind following consummation of the piopo^od
transaction. Savannah Hank would continue u> tank 31tl% with \(\(\ per
cent of the market total ot lime and savings deposits. "I he tntnsuction
m'ouki result in the elimination of some dinM vvmpeinton and the oj'.evt
on cpnipetifiofl wcnikl be adverse.
Chatham Bank, ovet ihe past 3 veins, has UVKH e\pciift»».mg a decline
in deposits, and its net current earnings have i w n lowei than the average
fin Georgia hanks of similar si/e. \:\u ihen*<ioi>.'. wilhiu I hi* past 2 \*::nn
C'haiham Bjnk*s president and vice piesid^nt ha v t iiiod; novi (fia! Iin<inciiil institution's only «»iii\c oliiecr is appioathing retiiement age, Chatham Bank Joes not h a \ t a stock-oFHic«!i plan, proiU-shann^, plan, or
retirement syslem. In view of the above Chatham linik dues not appear
capahle of attracting the type of indivuiual wh^ *vou«d bf ahl<; TO siiinulale its giowth I he likelihood of Chatham Bdiik ..on\ctItnc-, ;o a l«!lserviee eommeirial hank as other savinL^ !\»nki« h.»ve ilone i:. iemote
as the individuals who own eoiurol of this bank li\e <»vei M)0 miles from
Savannah, and the record indicates lint liiov a n ' n«*r inieiesk-d in %tic!t a
conveision, 'I hits, the potential foi suh^iantiai !IKMeased ronipciiion
developing hetucen Savannah Bank and Chafh.«m Jkink iv not likely, From
the record, if appears that Savaiuiah Bank ts v\c onf\ financial institsuion
that has sfiown :in\ inicrest u» actjJiii'iru'. Chatham flank, ati(i Snvann.ih
BankN interest has arisen previously hi\:i\isv in the f.iilor instilulion's
ownership of leal est<ile tuar Savannah Bank's nuihi otticc, which it
desires for fiiiui\ expansion purposes.
In the liiiht of Chatham B a n k \ serious nmna.i(cment sueeeviion prohleni, there is no assurance that capable managemenj can be att»acted U>
the Bank in the absence of approval of J he proposed transaetion, Consequemly, the financial and inanaceMai taelnis lend suhsiantial weieht for
approval of this application, and the convenience and »et\ls aspect v»utweigh the adverse competitive consequences <»f this propost d mei>ier.
No, 9 -Bcvorlj Hills Fidelity Bank,
Beverly Hilts, Calif %
ft) in quire the assets and assume
the deposit liabilities of
Fidelity Bank,
'
Bevcrlv Hills, Calif.
I
!
i
j
|
I
'.Nesvh orgci'ii/ed bttiik;
not in t»peration)
!
j
j
ill 0
!
3
1
i
|
267
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OE ASSUMPTION OF LIABILITIES APPEOYED
BY THE BOAED OF GOYERNOES DUEIMG If72 *—Continued
Name of bank, and type of transaction2
(in chronological order of determination)
Resources
(in millions
of dollars)
Banking offices
In
\ operation
To be
operated
Sl-MMARY KfPORT BY Till- A'HORM-Y Gl-NI-RAL
No report received. Requests for reports on the competitive factors
were dispensed with as authorized by the Bank Merger Act to permit
the Board [of Governors] to act immediately In order to safeguard
depositors of Fidelity Bank.
BASIS FOE APPROVAL BY THE BOAED OF GOVERNORS (4-19-72)
On the basis of the information before the Board, including communications from the State Banking Department of the State of California,
the Board finds that an emergency situation exists so as to require that it
act Immediately pursuant to the provisions of the Bank Merger Act In
order to safeguard depositors of Fidelity Bank.
Such anticompetitive effects as will be attributable to consummation
of the transaction will be clearly outweighed in the public interest by
considerations relating to and involved in the emergency situation found
to exist From the record In the case, It Is the Board's judgment that
any disposition of the application, other than approval would be Inconsistent with the best Interests of the depositors of Fidelity Bank, arid the
Board concludes that the proposed transaction should be approved on a
basis that would not delay consummation of the proposal.
No.
Citizens Central Bank,
Arcade, MY.,
to merge with
Citizens State Bank,
Lyndonville, N.Y.
48.0
6.0
SUMMARY REPORT BY THE ATTORNEY GENERAL (3-17-72)
Citizens* [Citizens Central Bank, hereinafter Citizens] nearest office
to Citizens State Bank Is its Elba branch, approximately 30 road miles
away. A branch of another subsidiary of Charter New York Corp., the
Central Trust Company, Rochester, is located approximately 44 miles
from Citizens State Bank, In the Eighth Banking District. The merging
banks draw less than 1 per cent of their business from each other's
service areas, and other subsidiaries of Charter do minimal business in
Citizens State Bank's area. Therefore, no significant amount of existing
competition would be eliminated by the proposed merger.
Since New York law permits intradistrict branching subject to homeoffice protection. Citizens could be permitted to establish new branches
In Orleans County, but not in Lyndonville. The much larger city of
Medina (population 6,000), not closed to branching under the homeoffice-protectioE law, Is located only 7 miles south of Lyndonville, and
For notes see p. 279,
268
21.—CONTINUED
Name of hank, and t>pe of transaction"
(in chronological order of determination*
Resources
in millions
of dollars)
Banking offices
1
In
operation
To be
operated
Sl.MMARY Rr.PoRl' BY THY Ai'IORNlY Gl NI.RAL— Coilt,
therefore could he considered a likely location for dv noxo entry by
Citizens, Nevertheless, in view of Citizens Stale Hank's size and small
share (about 9 per cent) of Orleans County deposits, the nature of its
seivice area, and the existence of other potential entrants, we do not
believe that the proposed merger would have a significantly adverse
effect on potential competition.
BASIS FOR APPROVAL BY mi. BOARD OF GOVLRNORS (4-19-72)
Citizens Central Bank (hereinafter Citizens Central), a subsidiary of
Charter New York Corporation, New York City, operates 6 offices in
New York State's Mimh Banking District, wherein it holds 1.2 per cent
of the district's commercial bank deposits as the 1 1th largest of the
district's 31 banks. Stale Bank operates its only office In Lyndonville
and is the only bank headquartered in Orleans County, the relevant
market, where it controls approximately *) per cent of commercial bank
deposits, A large New Yot k banking organization operates 4 banking
offices in the market and controls the remaining ^i per cent of market
deposits. Slate Bank ranks as the 29th largest bank in the Ninth Banking
District, with 0.2 per cent of the district's total commercial bank
deposits.
The nearest offices of the merging banks arc approximately 30 miles
apart and their service areas do no! overlap. Consummation of the proposal would not significantly increase the concentration of bunking deposits in any relevant area. No meaningful existing competition would be
eliminated by the proposal between the proposed merging banks nor
between any of the banking offices of Charier New York Corporation
and State Bank.
Citizens Central is prohibited from tie navo branching into Lyndonville by home-otFiee protection afforded by New York State laws, and,
absent this* the growth potentials tit* the Lyndonville area would limit
somewhat <((* tiovo entry. Stale Rank, as a small unit bank, is not likely
to expand into the area served by Citizens Bank by (k' novo branching.
Consequently, Ii appears unlikely that consummation of the proposed
merger would foreclose an> significant amount of potential competition
between Citizens Central, Stale Bunk, or between any of the banking
offices of Charier New York Corporation, ft is concluded, therefore, that
consummation of the proposed acquisition would not have an adverse
effect on competition in any relevant market; rattier, the replacement
of the small unit-banking office by the subsidiary of a large statewide
holding company would likely increase competition with the offices of
the large New York State banking organization.
The financial and managerial resources of Citizens Central and State
Bank are satisfactory and the prospects for the resulting bank would be
favorable. Consummation of the proposed merger would improve the
269
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACOUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THE BOARD OF GOVERNORS Dl'RLNC; 1972 '—Continued
Name of bank, and type of transaction(in chronological order of determination)
I
j
sources
millions
of dollars,*
Banking offices
in
in
; To be
ration : operated
i O|pi!
BASIS FOR APPROVAL BY TIIF BOARD OF GOVERNORS-—Cunt
present banking services available to customers oi State Bank by Increased lending capabilities and improving the hanking services to
include the addition of credit-card services, automatic saving plans, and
personal and corporate trust services.
No. 11—St. Paul Trust Company,
Baltimore, Md.«
to merge with
Union Trust Company of Maryland,
Baltimore, Md.
j
j
\
,'
• Newly organized bank;
not in operation)
j
598,0
62
62
SUMMARY REPORT BY THE ATTORNEY GENERAL (4-13-72)
The proposed merger is part of a plan through which Union Trust
Company of Maryland would become a subsidiary of Union Trust Bancorp, a hank holding compan>. The instant merger, however, would
merely combine an existing bank with a nonoperating institution: as
such, and without regard to the acquisition of the surviving bank by
Union Trust Bancorp, it would have no effect on competition.
BASIS FOR APPROVAL BY FI DI R\L Rrsi RVK BANK ON BI.HAIF OF BOARD
OF GOVERNORS UNDIR D M IX.ATI-.D AUTHORITY (4-25-72)
St. Paul Trust Company, a nonoperating hank applying concurrently
for membership in the Federal Reserve System, proposes to merge Union
Trust Company of Maryland.
The proposal is a transaction to facilitate the acquisition of Union
Trust Company of Maryland by Union Tryst Bancorp, Baltimore.
Maryland, a proposed hank holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The bunking and convenience and needs factors are consistent
with approval of the application.
No, 12—Peoples Mid-Illinois Bank,
Bioomington, III,
to merge with
Peoples Bank of Bloomington,
Bloomington, ill
270
.;
|
\
|
j
{Newly organized bank;
not! in operation)
j
64.0
\
,
f
j
j
21.—CONTINUED
•Nilr:ic oi hunk. and type oi' transaction"
• in chr^ik)!ui!icji oruor oi Uetcmtinaiiun <
j Banking offices
Resources t_
__ ___
• in millions .
of dulfarv i
In
. To be
operation ; operated
SI : MSURV
ur in ifti
A I I O R N I V (IIM.RAL (4-26-72)
'I lie proposed rfKTi.tr is pad .>f a plan through which Peoples Bunk
'.»f litiAn^.iifi'inii would Ivcomv a Mihsldiai v of Peoples
Mid-Illinois
c 'o$ porutiuu. <i hunk buk!ini.r company. 1 he instant merger, however,
would n u e l y v<?mhine an existing bank with a nonoperilling institution:
.is such, ,-itd vuihaiif fcguitf \o the actnnsition of the surviving bank by
Peoples Mkf-IIIiiiOi.s Corputation, It would have no effect on competition.
H\SH tttu
Api'Hnvu
in
Ui- ( j U V l K N « « ; f
F F D I R I I , RI-SI RVI
UNI)! R D J I K J A I I D
HANK ON BFIIALF O F BOARD
A l MIORIT\
(5-8-72)
I'cooks Mul'Iiiiuois Bank, a nonoperuting hank applying concurrently
tor membership in the Federal Reserve System, proposes to merge
Peoples iionk of Bloonsiiigton.
[he pjoposal is a '.ran^;jctk»n to facilitate the acquisition of Peoples
Bunk oi Hloomin^ion by Peoples Mid-lllinoi.s Corporation, a proposed
bank holding company.
The pfoposeif merger would, in itself, have no adverse competitive
effects. The blinking and convenience and needs factors are consistent
with approval oi" the application.
No. 13 C entral Trust Company
Rochester, N.Y.,
283.0
14
Rochester, N.Y.,
16
ttt tuvrge nil ft
l i e First National Bank of
Painted Post.
Painted Post, N Y.
JO.O
RI FORT IIY IIII AITOKNLV GT.NTRAI (5-10-72)
The closest office of Central Trust to Painted Post is located at
Praitsbtirgb, about 35 miles north, 'The application indicates that neither
bank draws appreciable banking business from the service area of the
other. Other affiliates of Charter New Yoik Corporation also derive
re!aii\ei\ .small business from the Fainted Post area. It does not appear
that the proposed merger would eliminate significant existing competition.
Under New York law. Central Trust could he permitted to establish
Jt' iiovo branches in or nearer to the service area of Painted Post Bank
[The First National Bank of Painted Post, hereinafter Painted Post Bank].
However, its opportunities 10 do so are limited by home-office protection, A number of other large holding companies arc also potential
entrants info this area.
271
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THE BOARD OF GOVERNORS DURING 1972 "--Continued
Name of bank, and type of transaction2
(in chronological order of determination)
Si
MM
RIPORI
\i\
nu
Resources
(in millions
of dollars)
A I H » R \ M
Banking offices
In
To be
operation ; operated
Cii M R \ J .
Central Trust is the 4th largest bank In the Eighth Banking District,
with approximately 8.5 per cent of its total commercial bank deposits.
Painted Post Bank Is the smallest of 4 commercial banks In its area,
with about 12 per cent of commercial bank deposits. The area's 2 leading
banks are affiliates of large bank holding companies. Painted Post Bank
holds about 5.2 per cent of total Steuben County commercial bank
deposits, while Central Trust's Prattsburgh office holds about 2.4 per
cent.
Although the proposed merger would eliminate Painted Post lank as
an entry YeMde for a bank holding company not already operating in
the Eighth Banking District, we do not believe that the proposed merger
would have a significantly adverse effect on potential competition.
BASIS FOR APPROVAL BY THE BOARD OF GQYEENORS (5-22-72)
Central Trust, a subsidiary of Charter New York Corporation, New
York City, operates 14 offices in the State's Eighth Banking District—13
in Monroe County and 1 in the northern portion of Steuben County.
The First National Bank of Painted Post (hereinafter Painted Post Bank)
has 2 offices in the southeastern portion of Steuben County. The nearest
offices of proponents are approximately 35 miles apart, and no significant
competition exists between the subject banks. Further, no significant competition exists between Painted Post Bank and any of Charter's banking
subsidiaries. It appears no substantial potential competition would be
eliminated because of the limited economic prospects for the area ser¥ed
by Painted Post Bank. As a result of the merger the customers of Painted
Post Bank would be provided with expanded loan and deposit ser¥ices»
trust department facilities, and automated banking services. The convenience and needs factor and the banking factors are consistent with
approval.
No. 14—Tie Citizens Commercial Bank,
Celina, Ohio,
to merge with
The Peoples Bank Company,
Fort Recovery, Ohio
28.0
8.0
SUMMARY REPORT BY THE ATTORNEY GENERAL (6-30-72)
The 2 banks are located about 12 [20] miles apart in Mercer County.
Although Celina, home of Citizens Bank, is the county seat and trading
center for county residents, the banks draw relatively little banking busi-
For notes see p. 279,
272
21.—CONTINUED
;
I
Banking
Name of bank, and type of transaction- ! Resources i _ _
(in chronological order of determination) ! *in millions j
j of dollars) j
in
j
I
! operation I
REPORT
IJV IMF
ArrORNTY
offices
.._...
To be
operated
CII-M RAi.—Coilt.
ness from each other's hometown. Hie proposed merger would appear
to eliminate only a limited amount of existing corn pet i I ion.
The 2 merging banks are available alternatives for a localized area
in Mercer County.
Within Mercer County as a whole, which may overstate the relevant
market, Citizens Bank is the 2nd largest and Peoples Bank is the
smallest of the 7 banks with offices in the county. The merger will
increase Citizens Bank's share of deposits from 25 per cent to 31 per
cent. The share of the 2 largest banks in the county will increase from
51 per cent to 58 per cent. If the pending proposal of the county's
largest bank (also located in Celina) to acquire the 5th largest bank
in the county is approved, the county will be left with only 5 banking
organizations, the largest 2 of which will account for 66 per cent of
county deposits.
In addition to the elimination of one of only a few alternative sources
of banking services for a significant number of customers in Mercer
County, the proposed merger would increase the degree of concentration
of banking resources in this localized market to a level that can be
expected to dampen the vigor of actual and potential banking competition in that market.
We conclude that the proposed merger would have an adverse effect
upon competition, which could be compounded by consummation of the
other pending Mercer County merger proposal.
BASIS FOR APPROVAL BY n«: BOARD OF GOST.RNORS 17-28-72)
The two offices of The Citizens Commercial Bank (hereinafter Celina
Bank) and the single office of The Peoples Rank Company (hereinafter
Fort Recovery Bank) are in Mercer County (population 35,600), where
Celina Bank ranks as the 2nd largest of 7 banks, with 25 per cent of
the aggregate deposits. The nearest offices of the 2 banks are 20 miles
apart with no main road connecting the communities where such offices
are located. Further, 2 banks are situated in the intervening urea and
another bank is located in Foil Recovery. No meaningful competition
exists between proponents, and the Fort Recovery area is not attractive
for cfc m>vo entry since there are presently 2 banking offices serving
this village of 1348 persons.
The proposed merger would have only a slightly adverse effect on
existing or potential competition and the increase in concentration of
banking resources in Mercer County would not significantly affect competition in the relevant area. It would strengthen the Fort Recovery
office and would solve its present management succession problems. The
transaction would make possible expanded loans for Fort Recovery
Bank's customers, as well us other services.
273
21. DESCRIPTION OF EACH MERGER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THE BOARD OF GOVERNORS DURING 1*172 '—Continued
Name of bank, and type of transaction2
(in chronological order of determination}
No. 15—OK Bank,
Grand Rapids, Mich.,
to consoiuhw with
Old Kent Bank and Trust Company,
Grand Rapids, Mich.
Banking OlllCt'S
Resources
(in millions
oi* dollars} !
In
| To be
i operation ' operated
(Newiy organized bank;
not in operation)
759,0
43
SUMMARY RIIPORT BY USE ATTORNEY GLNERAL (7-14-72)
The proposed merger is part of a plan through which Old Kent Brink
and Trust Company would become a subsidiary of Old Kent Financial
Corporation, a bank holding company. The instant merger, however,
would merely combine an existing bank with a nonopcrating institution;
as such, and without regard to the acquisition of the surviving bank by
Old Kent Financial Corporation, it would have no effect on competition.
BASIS FOR APPROVAL BY FEDERAL RLSLRU-; BANK ON BEHALF OF BOARD
OF GOVERNORS UNDER DEIEGATO) AUTHORITY (8-31-72)
OK Bank, a nonoperating bank applying concurrently for membership
in the Federal Reserve System, proposes to merge Old Kent Bank and
Trust Company.
The proposal is a transaction to facilitate the acquisition of Old Kent
Bank and Trust Company by Old Kent Financial Corporation, a proposed bank holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The banking and convenience and needs factors are consistent
with approval of the application.
No, 16—Southridge Bank of Greendale,
Greendaie, Wis.,
1
(Newly organized bank;
not in operation)
/••/ acquire the assets at 1
assume the deposit liabilities of
Southrldge National Bank of
Greendale,
10.0
Greendale, Wis,
SUMMARY REPORT BY THE ATTORNEY GENERAL
(No report received.)
Bxisis FOR APPROVAL BY THE BOARD OF GOVERNORS (10-18-72)
Southridge Bank of Greendale, Greendale. Wisconsin, a nonoperating
bank applying concurrently for membership in the Federal Reserve Sys-
For notes see p. 279,
274
Hanking oil icev '»r
Javt
jsii.tdli
.jit
n;illson-,
To he
a s \ t ; t ' . i$nd as 1 t:?no flu* l i a b i l i t i e s u ^ S o u i h b l e , * «!t?rnd:dr.\ \ \ iM:o?isui
's >'»v { j ' i i j L f i i ; ' i | , r »t^wmi»li<>n vf
Snufhndi:^
b'. Ri«.ir,c B sir orf'Hf<ff?oi! o f ^ V i M O f i h i n , a
iU1'J'<,
lilt
i J , in i i ' ^ i f , ha1'.'-1 n o a»j\tMsc c t ^ i n p c t i t i v e
.k ' n i t ' i k C »inJ '!u'<ls I ' l u i o r v a r c ct'siKisicnl
rdfiMii:' ,i-
!'-'- Bj!llL Of til'tltO,
18,0
R( S'uKi 1 RV | U 7
Si M V \ ( n
i i u t r . ^t <>Hi. v' of B a n k
v i ! ^ . If a f H w u * , r h a f
jijiv
^
liv
N';»iional o l l k c U 3 8
v.i/Uki
no! clioilnaie
i.-jvi'si
>\'M;K
1 'ativ^l
ytais,
'HMtft,
niosf
ihiUUv"
4
of
pn»^p,vK
iar-AM
nvi"
in
i\mk*.
pd D)\in'A
lo
}«);?<'•.
wiji.'h
*t> H t c
Si a h :
h;t\'.'
p«\MH>st*f
nientci*
^ j L i n f t ' . rA)\
pi»H!i!»,\f
vnU'^ui
luMsoirA
of* o s t e n N i w
of'
«/'•
i!«
%
\)i\\Px
>'^c\
the
'inr
IvniK
in
}<h"U'\v w i t h
abiiy!
3?
of
kiaho
per
h
Llii-*r %
• IH kliiltr
I lir
<x' hj:ttu> i n ;* ( a s ^ - a
f h e p j o p o v i i r?uij..'<T
*hf* 2 n d
!
(\
(i)-2O-72|
(Ji'XI.HNf.
sii'f
dionjjl
tiif
AiM'RiVJ\
U < \ii \\ hie,
r<>;
cr<!cH\!
v.oukl
»nfo
1
Buik -
R u a M m ; in L i a h o is htr:h!'>
Hiiiicy
clifiisiialt'
the
a;».\t
/^M-^HaiH'hinp
r
onuirtiv
in
Burlov
Ka?»k
«if>
t'iTirc
i/r
/j^v*;
Hank
*H<,%L
<s •< l i f i i i f u i g
the
in
in
of
the
Idaho
IlowfX'Cf,
facttir
!\><«'sec.iH}c
c o i v e n l r v k - i l As ot the e n d of
is
Binfey
on
tasi
as
the
the
fitftire,
1 *>71. the
>i { a r ; r t ; s ! h a n u s in i h o Siatt* h e n f a p p j o \ i m a * i : i y -S5 p e r r e n i o f i l s C\>m.)KM\t;») b a n I- J c p o M : * , , B.«nk »if M a h f * h e l d : « h , m t 1.1! p e l c o m o f i h c s e
• J x p e - ' t H , u h i U 1 C'jN-.i.i N t i i J o n a ' h o l d n ; o u
ih<tn J p e r i c r i L ' T h e r e a r e
oniv
?«i b ( < i ! k \ i;i !<)i. t'lifjce h i . U c
i^nd t c u n o n n e i i r o w i h in I d a h o i n
f'ev;T>' \C"«r\ h;r- pc»! ! V : ' M s n t n r 5 s . n i t o tr^liwe
nv\\
wAvy
into the 'hanking
PU i n c ^
In i h t > o .MK"MH)siari«.\'s, a c c j i n s i N t y i N o f e \ ^ f i n r ;
Iclalio h a n k s hy
the
S ? ; j t r \ pti'-H-al l e a d e r ^ P K ' v e n t d i e d f . ' e l o p n u ' , ! ! ; <»f o ' h e » h a n k s o f a s i z e
!v.f f )V;'*n ! t o o n a h i o t h o n i ! o c \ u n p / h f i ^ < . ] * - v h a i i i . n u e I h o e l e a d e r s o n a
M.ii'.", 1 i d e - v a l e - i m l Li'irpr .'.^i^H M'fite d i \ { i n » * e n t i : H i o n o f b a n k i n g
in
f ' J a f i o , S n , b . K q n i s i l i o n s : o u i d a l s o ICMSI* in !in* s a m e few h a i f l . t i i i i i n > t i
h r ' i o n ' . . onlVop/in.-.' v j r i i o t h e r in a i l o f ihv Stitttr'N s i t i n i n e a n i l o c a l h a n k -
275
21. DESCRIPTION OF EACH MERCER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THE BOARD OF GOVERNORS DURING 1*172 l—Continued
,
|
Banking offices
Name of bank, and t\pe of transaction2 : Resources ; __
_
(in chronological order of determination,) ; < in millions I
j
| of dollars) |
In
i To be
!
' operation I operated
SUMMARY RI-PORT BY TIIL ATTORNLV GI.-NLRAL—Cont.
Ing markets, with little if any independent coin petit ion. Therefore, we
conclude that the proposed merger of the State's 10th largest kink by
one of Its existing hanking leaders may have an adverse competitive
effect.
BASIS FOR APPROVAL BY THE BOARD OF GOVERNORS (11-7-72)
Bank of Idaho {hereinafter Boise Bank), the sole Idaho banking subsidiary of Western Bancorporation, Los Angeles, Is the 3rd largest bank
in Idaho, with 12 per cent of the deposits held by ail banks situated
therein. It operates 25 banking offices throughout Idaho. Cassia Bank
maintains 3 offices. 2 in Burle\ (population 8300) and 1 in Lava Hot
Springs (population 516). A 4th office, to be located in Heyburn, 4
miies northeast of Burley, has been approved but is not yet open. Proponents' nearest offices are about 39 miles apart, and there is no competition existing between them. Although Idaho permits statewide branching. It seems unlikely Boise Bank would be permitted to establish a
de novo branch in Burley in the foreseeable future because within the
last 2 years the Board has denied Boise Bank's request to establish a
tie nova branch therein. It is concluded that the proposed transaction
would not have an adverse effect on competition in any relevant area.
Boise Bank plans to expand considerably real estate loans in the
Burley area, a service that Cassia Bank has not provided to a significant
degree. The banking factors and the convenience and needs factor are
consistent with approval.
No. 18—Traverse City Bank and Trust
Company,
Traverse City, Mich,,
to consolidate with
Traverse City State Bank,
Traverse Cit\, Mich.
I
•
j
<
;
\
(Newly organized bank;
not in operation)
!
77.0
|
\
I
9
SUMMARY REPORT BY THE ATTORNEY GENERAL (11-2-72)
The proposed merger is part of a plan through which Traverse City
State Bank would become a subsidiary of Pacesetter Financial Corporation, a bank holding company. The instant merger, however, would
merely combine an existing bank with a nonoperating institution; as
such, and without regard to the acquisition of the surviving bank by
Pacesetter Financial Corporation, it would have no effect on competition.
276
21.—CONTINUED
Name of bank, and type of transaction2
(In chronological order of determination)
Resources
('in millions
of dollars
Banking offices
In
| To be
operation operated
BASIS FOR APPROVAL BY THE BO\RI> OF (M>VI;RNORS 11 1-30-72)
Traverse City Bank and Trust Company, Traverse City, Michigan, a
nonoperating bank applying concurrently for membership in the Federal
Eeserve System, proposes to consolidate with Traverse City State Bank,
Traverse City, Michigan, which lias deposits of $67,693,000 and operates
9 offices.
The proposal is a transaction to facilitate the acquisition of Traverse
City State Bank by Pacesetter Financial Corporation, Grand Haven,
Michigan, a proposed bank holding company.
The proposed consolidation would, in itself, have no adverse competitive effects. The banking and convenience and needs factors are consistent
with approval of the application.
No. 19—Jefferson Street State lank,
Houston, Tex.s
to merge with
Houston-Citizens Hank & Trust
Company,
Houston, Tex.
(Newly organized bank;
not in operation)
245.0
SUMMARY REPORT BY THE ATTORNEY GENERAL (8-22-72)
The proposed merger is part of a plan through which Houston-Citizens
Bank & Trust Company would become a subsidiary of First International
Baecshares, Inc., a bank holding company. The instant merger, however,
would merely combine an existing bank with a nonoperating institution;
as such, and without regard to the acquisition of the surviving bank by
First International Bancshares, Inc., it would have no effect on competition.
BASIS FOR APPROVAL BY TTIF BOARD or GOVERNORS (11-30-72)
Jefferson Street Stale Bank, Houston, Texas, a nonoperating bank
applying concurrently for membership in the Federal Reserve System,
proposes to merge Houston-Citizens Bank & Trust Company, Houston,
Texas, which has deposits of $195 million and operates 1 office.
The proposal is a transaction to facilitate the acquisition of HoustonCitizens Bank & Trust Company by First International Bancshares, Inc.,
Dallas, Texas, a bank holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The banking and convenience and needs factors are consistent
with approval of the application.
For notes see p. 279.
277
21. DESCRIPTION OF EACH FIERCER, CONSOLIDATION, ACQUISITION OF ASSETS OR ASSUMPTION OF LIABILITIES APPROVED
BY THK BOAR!) OF (iOVKRXORS DURING V>72 "—Continued
Name of bank, and t\pe o( transaction'5
Cm chronological order of determination)
No. 20 -Grand Haven State Bank,
Grand Haven. Mich.,
to consolidate with
Security First Bank & Trust Co.,
Grand Haven, Mich.
Bankiim offices
Resotsives
'in mill ions
of doll;
Jo
j To be
operation ! operated
(New iy organized bank;
not in operation*
57.0
SUMMARY Rl-PGRT BY IMF. A ITORNEY G l NLRAl ( I 1-2-72)
The proposed merger is part of a plan through which Security First
Bank. & 'Trust Co. would become a subsidiary of Pacesetter Financial
Corporation, a hank holding company. The instant merger, however,
would merely combine an existing hank with a nonoperating institution; as
such, and without regard to the acquisition of the surviving hank by Pacesetter Financial Corporation, it would ha\e no effect on competition.
BASIS FOR APPROVAL BY IHI-. BOARD OF GOVE-.RNORS (11-30-72)
Grand Ifa\en State Bank, Grand Haven, Michigan, a nonoperating
bank applying concurrently for membership in the Federal Reserve
System, proposes to consolidate with Security First Bank & Trust Co.,
Grand Haven, Michigan, which has deposits of $50,379,000 and operates
6 offices.
The proposal is a transaction to facilitate the acquisition of Security
First Bank & Tru^t Co. by Pacesetter Financial Corporation, Grand
Haven, Michigan, a proposed bank holding company.
The proposed consolidation would, in itself, have no adverse competitive effects. The hanking and convenience and needs factors are consistent with approval of the application.
No. 21 -BOI. Slate Bank,
Lansing. Mich.,
to consolidate with
Bank of Lansing,
Lansinu, Mich,
(Newly organized bank;
not in operation.)
143.0
SUMMARY REPORT BY TUI: ATFORNFY GF.NFRAI (12-22-72)
The propo*ed merger is part of a plan through which BOL State Bank
would become a suhsidiary of Northern Stales Financial Corporation, a
bank holding company. The instant merger, however, would merely
combine an existing hank with a nonoperating institution; as such, and
without regard to the acquisition of the surviving bank by Northern
States Financial Corporation, it \vould have no effect on competition.
278
21.—CONTINUED
:
Name oi bank, and i}pe <MV tninsaetion-'
tin chronological order ol dekTmsn<ilion)
Banking oil ices
)Ur CCs
fii
tiiliions
of dcAhtt'h *
r
O| x-ni t S O t l
B\sis j OR APPROV.-U
HY n i r
,
To be
operated
BU\RD o r VJUVIRNORS f 12-22-72)
BOL Stale Bank, t ;uiMn>i, Michigan, a nonoperating hank applying
eoncuneitily for member*.hip in ihe Federal Resci ve System, proposes
to consolidate with Bank of Linking, Linv-ln^ Michigan, which has
deposits of $129,959,000 and operaies ? offices,
The proposal is a Iransaelion U> facilstale fhe direct acquisition of the
voting shares of Bank of Lansing by No/the; n Stales Financial corporation, Detroit Michigan, and the indirect acquisition of Bank of Lansing's
shares hy I"win (kites Coiporation, Wilmington. Delaware, hecau.se of its
ownership of 22.48 pci cent at' ihe voting shares of Northern Slates1
Financial Corporation.
The pjoposed consolidation would, in itself, have no adverse etl'ect
on hanking competition, on the convenience and needs i>J the area, or on
baliking faUois.
No, 22 The Sandusky Security Bank,
Sandtisky, Ohio,
to merge wiih
The Western Security Bnnk.
Sanduskv, Ohio
I
j
sNew!y
organized bank;
not in operation)
48,0
Y RI-P<>KT BY TIU- ATTORNI.Y CJI.NI-.RAL f 11-17-72)
The proposed merger is part of a plan through which The Western
Security Bank would become a subsidiary of BancOhio Corporation, a
bank holding company. The instant oiergcr. however, would merely
combine an existing bank with a nonoperatinu. institution; as such, and
without regard io the acquisition of the surviving bank by BancOhio
Corporation, it would have no effect on competition.
B\sis FOR APPROVAL BY jin- BOVRD OF GOVERNORS (12-27-72)
The Sandusky Security Bank, Sandusky, Ohio, a non ope rat ing bank
applying concurrently for membership In the Federal Reserve System,
proposes to merge The Western Security Bank, Sandusky, Ohio, which
has deposits of $44.5 million and operates 3 offices.
The proposal is a transaction to facilitate the acquisition of The
Western Security Bank by BancOhio Corporation, Columbus, Ohio, a
bank holding company.
The proposed merger would, in itself, have no adverse competitive
effects. The banking and convenience and needs factors are consistent
with approval of the application.
1
During 1972 the Board disapproved 1 merger application, However under Section
18(c) of the Federal Deposit Insurance Act, only those transactions approved by
the Board must be described in its ANNUAL RLPOKI to ( oniiress.
-Each transaction was proposed to be effected under the charter of the llrstnamed bank.
279
THE
FEDERAL RESERVE
SYSTEM ]•
BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES
©
•
wo 4y « H? ^ w , Urt
Legend
• Boundaries of Federal Reserve Districts
• Boundaries of Federal Reserve Branch Territories
© Board of Governors of the Federal Reserve System
® Federal Reserve Bank Cities
• Federal Reserve Branch Cities
-federal Reserve
'Directories and
BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
(December 31, 1972)
Term expires
ARTHUR F. BURNS of New York, Chairman
J. L. ROBERTSON of Nebraska, Vice Chairman
GEORGE W. MITCHELL of Illinois
J. DEWEY DAANE of Virginia
ANDREW F . BRIMMER of Pennsylvania
JOHN E. SHEEHAN of Kentucky
JEFFREY M. BUCHER of California
ROBERT C. HOLLAND, Executive Director
J. CHARLES PARTEE, Adviser to the Board
* ROBERT SOLOMON, Adviser to the Board
HOWARD H. HACKLEY, Assistant to the Board
ROBERT L. CARDON, Assistant to the Board
EDWIN J. JOHNSON, Assistant to the Board
January 31, 1984
January 31, 1978
January
January
January
January
January
31,
31,
31,
31,
31,
FRANK O'BRIEN, JR., Special Assistant to the Board
JOSEPH R. COYNE, Special Assistant to the Board
JOHN S. RIPPEY, Special Assistant to the Board
OFFICE OF EXECUTIVE DIRECTOR
ROBERT C. HOLLAND, Executive Director
DAVID C. MELNICOFF, Deputy Executive Director
GORDON B. GRIMWOOD, Assistant Director and Program Director for
Contingency Planning
WILLIAM W. LAYTON, Director of Equal Employment Opportunity
BRENTON C. LEAVITT, Program Director for Banking Structure
OFFICE OF THE SECRETARY
TYNAN SMITH, Secretary
MURRAY ALTMANN, Assistant Secretary
NORMAND R. V. BERNARD, Assistant Secretary
ARTHUR L. BROIDA, Assistant Secretary
ELIZABETH L. CARMICHAEL, Assistant Secretary
MICHAEL A. GREENSPAN, Assistant Secretary
LEGAL DIVISION
THOMAS J. O'CONNELL, General Counsel
PAUL GARDNER, JR., Assistant General Counsel
PAULINE B. HELLER, Assistant General Counsel
ROBERT S. PLOTKIN, Adviser
DIVISION OF RESEARCH AND STATISTICS
J. CHARLES PARTEE, Director
STEPHEN H. AXILROD, Associate Director
SAMUEL B. CHASE, Associate Director
LYLE E. GRAMLEY, Associate Director
PETER M. KEIR, Adviser
JAMES L. PIERCE, Adviser
STANLEY J. SIGEL, Adviser
MURRAY S. WERNICK, Adviser
KENNETH B. WILLIAMS, Adviser
JAMES B. ECKERT, Associate Adviser
JOSEPH S. ZEISEL, Associate Adviser
EDWARD C. ETTIN, Assistant Adviser
ELEANOR J. STOCKWELL, Assistant Adviser
STEPHEN P. TAYLOR, Assistant Adviser
Louis WEINER, Assistant Adviser
LEVON H. GARABEDIAN, Assistant Director
*On leave of absence.
282
1976
1974
1980
1982
1986
DIVISION OF INTERNATIONAL FINANCE
RALPH C. BRYANT, Director
JOHN E. REYNOLDS, Associate Director
A, B. MERSEY, Senior Adviser
ROBERT F. GEMMILL, Adviser
REED J. IEVINE, Adviser
SAMUEL I. RATZ, Adviser
BERNARD NORWOOD, Adviser
SAMUEL PIZER, Adviser
RALPH C. WOOD, Adviser
GEORGE B, HENRY, Assistant Adviser
HELEN B. JUNZ, Assistant Adviser
DIVISION OF FEDERAL RESERVE BANK OPERATIONS
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Controller
DIVISION OF DATA PROCESSING
JEROLD E. SLOCUM, Director
CHARLES L. HAMPTON, Associate Director
GLENN L. CUMMINS, Assistant Director
BENJAMIN R. W. KNOWLES, JR., Assistant Director
HENRY W. MEETZE, Assistant Director
EDWARD K. O'CONNOR, Assistant Director
RICHARD S. WATT, Assistant Director
283
FEDERAL OPEN MARKET COMMITTEE
(December 31, 1972)
MEMBERS
ARTHUR F. BURNS, Chairman (Board of Governors)
ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New
York)
ANDREW F. BRIMMER (Board of Governors)
JEFFREY M. BUCHER (Board of Governors)
PHILIP E. COLDWELL (Elected by Federal Reserve Banks of Atlanta, St. Louis,
and Dallas)
J. DEWEY DAANE (Board of Governors)
DAVID P. EASTBURN (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond)
BRUCE K. MACLAURY (Elected by Federal Reserve Banks of Minneapolis,
Kansas City, and San Francisco)
GEORGE W. MITCHELL (Board of Governors)
J. L. ROBERTSON (Board of Governors)
JOHN E. SHEEHAN (Board of Governors)
WILLIS J. WINN (Elected by Federal Reserve Banks of Cleveland and Chicago)
OFFICERS
ROBERT C. HOLLAND, Secretary
ARTHUR L. BROIDA,
Deputy Secretary
MURRAY ALTMANN,
Assistant Secretary
NORMAND R. V. BERNARD,
Assistant Secretary
HOWARD H. HACKLEY,
General Counsel
THOMAS J. O'CONNELL,
Assistant General Counsel
J. CHARLES PARTEE,
Senior Economist
STEPHEN H. AXILROD,
Economist (Domestic Finance)
* ROBERT SOLOMON,
Economist (International Finance)
EDWARD G. BOEHNE,
Associate Economist
RALPH C. BRYANT,
Associate Economist
LYLE E. GRAMLEY,
Associate Economist
RALPH T. GREEN,
Associate Economist
A. B. HERSEY,
Associate Economist
WILLIAM J. HOCTER,
Associate Economist
JOHN H. KAREKEN,
Associate Economist
ROBERT G. LINK,
Associate Economist
ALAN R. HOLMES, Manager, System Open Market Account
CHARLES A. COOMBS, Special Manager, System Open Market Account
During 1972 most meetings of the Federal Open Market Committee were
at intervals of four weeks, as indicated in the Record of Policy Actions taken
by the Committee (see pp. 105-88 of this Report).
*On leave of absence.
284
FEDERAL ADVISORY COUNCIL
(December 31, 1972)
MEMBERS
District No. 1—James F. English, Jr., Chairman of the Board, Connecticut
Bank and Trust Company, Hartford, Conn.
District No. 2—David Rockefeller, Chairman of the Board, The Chase
Manhattan Bank (National Association), New York, N.Y.
District No. 3—G. Morris Dorrance, Jr., Chairman of the Board and President, The Philadelphia National Bank, Ardmore, Pa.
District No. 4—John S. Fangboner, Chairman of the Board and Chief Executive Officer, The National City Bank of Cleveland, Cleveland, Ohio
District No. 5—Joseph W. Barr, President, American Security and Trust
Company, Washington, D.C.
District No. 6—Harry Hood Bassett, Chairman of the Board, The First National Bank of Miami, Miami, Fla.
District No. 7—Gaylord Freeman, Chairman of the Board, The First National Bank of Chicago, Chicago, 111.
District No. 8—David H. Morey, Chairman of the Board and Chief Executive
Officer, The Boatmen's National Bank of St. Louis, St. Louis, Mo.
District No. 9—Chester C. Lind, President, First American National Bank of
Duluth, Duluth, Minn.
District No. 10—Morris F. Miller, Chairman of the Board and Chief Executive Officer, The Omaha National Bank, Omaha, Nebr.
District No. 11—Lewis H. Bond, Chairman of the Board and Chief Executive
Officer, The Fort Worth National Bank, Fort Worth, Tex.
District No. 12—A. W. Clausen, President and Chief Executive Officer, Bank
of America National Trust and Savings Association, San Francisco, Calif.
OFFICERS
A. W. CLAUSEN, President
G. MORRIS DORRANCE, JR., Vice President
HERBERT V. PROCHNOW, Secretary
WILLIAM J. KORSVIK, Assistant Secretary
EXECUTIVE COMMITTEE
A. W. CLAUSEN, ex officio
JOHN S. FANGBONER
G. MORRIS DORRANCE, JR., ex officio
HARRY HOOD BASSETT
GAYLORD FREEMAN
Meetings of the Federal Advisory Council were held on February 3-4;
May 4-5; September 14-15; and November 2-3, 1972. The Board of Governors met with the Council on February 4, May 5, September 15, and November 3. The Council is required by law to meet in Washington at least four
times each year and is authorized by the Federal Reserve Act to consult with
and advise the Board on all matters within the jurisdiction of the Board.
285
FEDERAL RESERVE BANKS AND
BRANCHES
(December 31, 1972)
CHAIRMEN AND DEPUTY CHAIRMEN OF
BOARDS OF DIRECTORS
Federal Reserve
Bank of—
Chairman and
Federal Reserve Agent
James S. Duesenberry
Roswell L. Gilpatric
Bayard L. England
Albert G. Clay
Robert W. Lawson, Jr.
John C. Wilson
Emerson G. Higdon
Frederic M. Peirce
David M. Lilly
Robert W. Wagstaff
Chas. F. Jones
O. Meredith Wilson
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Deputy
Chairman
Louis W. Cabot
Ellison L. Hazard
John R. Coleman
J. Ward Keener
Stuart Shumate
H. G. Pattillo
William H. Franklin
Sam Cooper
Bruce B. Dayton
Willard D. Hosford, Jr.
Philip G. Hoffman
S. Alfred Halgren
CONFERENCE OF CHAIRMEN
The Chairmen of the Federal Reserve Banks are organized into a Conference of Chairmen that meets from time to time to consider matters of
common interest and to consult with and advise the Board of Governors.
Such a meeting, attended also by Deputy Chairmen of the Reserve Banks, was
held in Washington on November 30 and December 1, 1972.
Dr. Wilson, Chairman of the Federal Reserve Bank of San Francisco, who
was elected Chairman of the Conference and of its Executive Committee in
December 1971, served in that capacity until the close of the 1972 meeting.
Mr. Lilly, Chairman of the Federal Reserve Bank of Minneapolis, and Mr.
Wagstaff, Chairman of the Federal Reserve Bank of Kansas City, served with
Dr. Wilson as members of the Executive Committee; Mr. Lilly also served as
Vice Chairman of the Conference.
On December 1, 1972, Mr. Lilly was elected Chairman of the Conference
and of its Executive Committee to serve for the succeeding year; Mr. Wagstaff
was elected Vice Chairman of the Conference and a member of the Executive
Committee; and Mr. Wilson, Chairman of the Federal Reserve Bank of
Atlanta, was elected as the other member of the Executive Committee.
286
F.R. BANKS AND BRANCHES—Continued
DIRECTORS
Class A and Class B directors are elected by the member banks of the
district. Class C directors are appointed by the Board of Governors of the
Federal Reserve System.
The Class A directors are chosen as representatives of member banks and,
as a matter of practice, are active officers of member banks. The Class B
directors may not, under the law, be officers, directors, or employees of banks.
At the time of their election they must be actively engaged in their district
in commerce, agriculture, or some other industrial pursuit.
The Class C directors may not, under the law, be officers, directors, employees, or stockholders of banks. They are appointed by the Board of
Governors as representatives not of any particular group or interest, but of
the public interest as a whole.
Federal Reserve Bank branches have either five or seven directors, of
whom a majority are appointed by the Board of Directors of the parent
Federal Reserve Bank, and the others are appointed by the Board of Governors of the Federal Reserve System.
DIRECTORS
Class A:
William M. Honey
Ralph A. Mclninch
Mark C. Wheeler
District 1—BOSTON
Term
expires
Dec. 31
President, The Martha's Vineyard National
Bank, Vineyard Haven, Mass
1972
President, Merchants National Bank of Manchester, N.H
1973
President, New England Merchants National
Bank, Boston, Mass
1974
Class B:
F. Ray Keyser, Jr
Vice President, Vermont Marble Company,
Proctor, Vt
1972
G. William Miller
President, Textron, Providence, R.I
1973
W. Gordon Robertson. .General Trustee, Bangor, Maine
1974
Class C.Louis W. Cabot
Chairman of the Board, Cabot Corporation,
Boston, Mass
1972
John M. Fox
President and Chief Executive Officer, H. P.
Hood & Sons, Charlestown, Mass
1973
James S. Duesenberry.. .Professor of Economics, Harvard University,
Cambridge, Mass
1974
287
F.E. BANES AND BRANCHES—Continued
DIRECTORS—Continued
District 2—MEW YORK
Term
expires
Dee. 31
Class A:
Arthur S. Hamlin. . . . . .President,The Canandaigua National Bank and
Trust Company, Canandaigua, N. Y . . . . . . . . .
William S. Renchard... .Chairman of the Board, Chemical Bank, New
York, N . Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Norman Brassier. . . . . . . C h a i r m a n of the Board and Chief Executive
Officer, New Jersey Bank, NLA., Passaic,
N.J....................................
Class B:
Maurice R. Forman. . . .Chairman of the Board, B. Forman Co.,
Rochester, N . Y . . . . . . . . . . . . . . . . . . . . . . . . . .
Maurice F. Granville... .Chairman of the Board, Texaco, Inc., New
York, N . Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Frank R. M i l l i k e n . . . . . .President, Kennecott Copper Corporation,
New York, N . Y , . . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1974
1972
1973
1974
Class C:
Ellison L, Hazard. . . . . .Chairman of the Executive Committee, Continental Can Company, Inc., New York,
N.Y.................". ................
Alan J. Pifer. .
President, Carnegie Corporation of New York,
N.Y.
Roswell L. Gilpatric. , . .Partner, Cravath, Swaine & Moore, Attorneys,
New York, N . Y . . . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1974
BUFFALO BRAN€Ii
Appointed hy Federal Reserve Bank:
David J. Laub. . . . . . . .Chairman of the Board, Marine Midland BankWestern, Buffalo, N . Y , . . . . . . . . . . . . . . . . . . .
William B.Anderson... .President, The First National Bank of Jamestown, N.Y.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Angel© A. Costanza. . , .President and Chief Executive Officer, Central
Trust Company, Rochester, N . Y . . . . . . . . . . .
Theodore M. McClure.. President, The Citizens National Bank and
Tryst Company, Wellsvillc, N . Y . . . . . . . . . . .
Appointed hy Board of Governors:
Morton Adams. . . . . . . .President, Curtice-Burns, Inc., Rochester, N.Y,
Rupert W a r r e n . . . . . . . . . President, Trico Products Corporation, Buffalo,
N.Y............................ .......
Norman F. Beach. . . . . .Vice President and General Manager, Kodak
Park Division, Eastman Kodak Company,
Rochester, N . Y . . . . . . . . . . . . . . . . . . . . . . . . . .
288
1972
1973
1973
1974
1972
1973
1974
F.R. BANKS AND BRANCHES—Continued
Term
expires
DIRECTORS- -Continued District 3 -PHILADELPHIA
Dec. 31
Class A:
William R . C o s b y , . . . . . C h a i r m a n o f t h e B o a r d , Princeton B a n k a n d
T r u s t C o m p a n y , P r i n c e t o n , N . J . . . . . . . . . . . . 1972
R i c h a r d A . H e r b s t c r . . , . P r e s i d e n t , l.ewistown T r u s t C o m p a n y , L e w i s town, P e l . , . . . . . . . . . .
. . . . . . . . . . . . . . . 1973
(Vacancy)................ ........
1974
Class J.Edward J, D w y e r . . . . . . . C h a i r m a n a n d Chief Executive Officer, ESB
Incorporated, Philadelphia, Pa..
. 1972
(Vacancy).....
1973
C, G r a h a m Bervvind, J r . . President and Chief Executive Officer, Berwind
C o r p o r a t i o n , Philadelphia, P a . . . . . . . . . . . . . 1974
Class C:
Bayard L. E n g l a n d . . . . . Retired C h a i r m a n of Board, Atlantic City
Electric C o m p a n y , Ventnor, N . J . . . . . . . . . . 1972
J o h n R. Coleman
President. Huverford College, Haveriord, Pa., . 1973
Edw. W . R o b i n s o n . J r . . .President, Provident H o m e Industrial Mutual
Life Insurance C o . , Philadelphia, P a . . . . . . . . . 1974
District 4—CLEVELAND
Class A:
David L. Brumback, Jr.. President, Van Wert National Bank, Van Wert,
Ohio
. . . . . . . . . . . . . . . . . . . . ' . . . . . . . . . . ' 1972
Edward W. Barker. . . . .President. First National Bank of Middletown,
Ohio...
,
. . . . 1973
A. Bruce B o v v d e n . . . . . . .Vice Chairman of the Board, Mellon National
Bank and Trust Company, Pittsburgh, P a . . . 1974
Class B:
R. Stanley L a i n g . . . . . . . Dayton, O h i o .
1972
J o h n L. Gushman. . . . . . C h a i r m a n of t h e Board a n d Chief Executive
Officer, Anchor Hocking C o r p o r a t i o n , L a n caster, O h i o
1973
D o n a l d E . N o b l e . . . . . . . President and Chief Executive Officer, Rubbermaid i n c o r p o r a t e d , Wooster, O h i o . . . . . . . . 1974
289
F.R. BANKS A N D BRANCHES—Continued
DIRECTORS—Continued
D i s t r i c t 4—CLEVELAND—Cont.
Term
expires
Dec. 31
Class C.Albert G. C l a y . . . . . . . .President, Clay Tobacco Company, Mt. Sterling, K y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1972
, .Chairman of the Executive Committee, The
J. Ward Keener
B. F. Goodrich Company, Akron, O h i o . . . . 1973
Horace A. Shepard. . . . .Chairman of the Board and Chief Executive
Officer, T R W inc., Cleveland, O h i o , . . . . . . 1974
C IMC INN ATI BRANCH
Appointed by Federal Reserve Batik:
Paul W. Christensen, Jr., President, The Cincinnati Gear Company, Cincinnati, Ohio
Robert E. H a l l . . . . . . . . . P r e s i d e n t , The First National Bank and Trust
Company, Troy, O h i o . . . . . . . . . . . . . . . . . . . .
William S. Rowe. . . . . . .President, The Fifth Third Bank, Cincinnati,
Ohio..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Paul W i l l i a m s . . . . . . . P r e s i d e n t , Second National Bank, Ashland, Ky.
1972
1972
1973
1974
Appointed by Board of Governors:
Phillip R. S h r i v e r . . . . . . .President, Miami University, Oxford, Ohio. . . 1972
Clair F. V o u g h . . . . . . . . . V i c e President, Office Products Division, IBM
Corporation, Lexington, Ky.,
1973
Graham E. Marx.
President and General Manager, The G. A.
Gray Company, Cincinnati, O h i o , . . . . . . . . . . 1974
PITTSBURGH BRANCH
Appointed by Federal Reserve Bank;
Robinson F, Barker. . .Chairman of the Board and Chief Executive
Officer, PPG Industries, Inc., Pittsburgh, Pa..
John W. Bingham. .. ...President, The Merchants and Manufacturers
National Bank of Sharon, Md.
Merle E. Gil Hand... . . .Chairman of the Board and Chief Executive
Officer, Pittsburgh National Bank, Pittsburgh, Pa...
Charles F. Ward. . . . . . President, Gallatin National Bank, Uniontown,
Pa.....................................
290'
1972
1972
1973
1974
R E . BANKS AND BRANCHES—Continued
DIRECTORS—Continued District 4 - CLEVELAND—Cont.
Term
expires
Dec. 31
PITTSBURGH BRANCH—Continued
Appointed by Board of Governors:
Lawrence E. Walkley. . , Retired President, Westinghouse Air Brake
Company, Pittsburgh, P a , . . . . . . . . . . . . . . . 1972
Robert E, K i r b y . . . . . . . . President, Industry and Defense Company,
Westinghouse Electric Corporation, Pittsburgh, P a . . .
, 1973
Richard M. C y e r t . . . . . President. Carnegie-Mellon University, Pittsburgh, P a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
District 5—RICHMOND
Class A:
Hugh A, C u r r y , . . . . . . . .President and Chief Executive Officer, The
Kanawha Valley Bunk. Charleston, W. Va.. . 1972
Thomas P. McLachlen. .President, MeLaehlen National Bank, Washington, D . C . .
1973
Edward N. Evans. . . . . .President, Farmers & Merchants National
Bank of Cambridge, M d . . . . . . . . . . . . . . . . . . 1974
Class B:
R o b e r t S. S m a l l . . . . . . . . President. D a n River Inc.. Greenville, S . C . . . . . 1972
H . Dail Hoiderness. . . . .President, Carolina Telephone a n d Telegraph
Company, T a r b o r o , N . C . . . . . . . . . . . . . . . . . . 1973
H e n r y C . Hol'heimer, I I . . C h a i r m a n , Virginia Real Estate Investment
Trust, Norfolk, V a . . . . . . . . . . . . . . . . . . . . . . . 1974
Chm C.Robert \V. Lawson, J r . , , Managing Partner, Charleston Office, Steptoe
& Johnson, Attorneys, Charleston, W. Va.. . 1972
Stuart S h u m a t e . . . . . . . President. Richmond, Fredericksburg a n d
Potomac Railroad Company, Richmond, Va. 1973
E, Craig W a l l S r , . . . . . . C h a i r m a n of the Board, Canal Industries, Inc.,
Conway. S . C . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1974
F.R. BANKS AND BRANCHES—
Continued District 5—RICHMOND—Cont.
Term
expires
Dec. 3!
BALTIMGEE BRANCH
Appointed by Federal Reserve Bank:
J. R. Chaffinch, J r . . . . . . President, The Denton National Bank, Denton,
Md....................................
James J. Robinson..
Executive Vice President, Bank of Ripley,
W. Va.. .
J. Stevenson Peck. . . . . .Union Trust Company of Maryland, Baltimore,
Md,...................................
Tilton H. Dobbin, . . . . .President and Chairman of the Executive Committee, Maryland National Bank, Baltimore,
Md....................................
Appointed by Board of Governors:
Arnold J. Kleff, Jr., . . . .Former Manager, Baltimore Refinery, American Smelting and Refining Company, Baltimore, M d . . . . . . . . . . . . . . . . . .
........
John H. Fetting, J r . . . . . .President, A. H. Fettieg Company, Baltimore,
Md....................................
James G. B a r l o w . . . . . . . P r e s i d e n t , West Virginia University, Morgantown, W. V a . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1973
1974
1972
1973
1974
CHARLOTTE BRANCH
Appointed by Federal Reserve Bank:
J. Willis Cantey. . . . . . . .Chairman and Chief Executive Officer, The
Citizens & Southern National Bank of South
Carolina, Columbia, S . C . . . . . . . . . . . . . . . . . .
C. C. C a m e r o n . . . . . . . . . C h a i r m a n of the Board and President, First
Union National Bank of North Carolina,
Charlotte, N.C..
....................
H. Phelps Brooks, Jr.. . .President, The Peoples National Bank, Chester,
S.C....................................
L. D. Coltrane s I I I . . . . . President, The Concord National Bank, Concord, N . C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appointed by Board of Governors:
Robert C. E d w a r d s . . . . . President, Clemson University, CJemsoti, S.C...
Charles W. D e B e l l . . . . . . General Manager, North Carolina Works,
Western Electric Company, Inc., WinstonSalem, N . C . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charles F. Benbow. . . . .Vice President, R. J. Reynolds Industries, Inc.,
Winston-Salem, N . C . . . . . . . . . . . . . . . . . . . . .
292
1972
1973
1973
1974
1972
1973
1974
F.K. BANES AMD TtRASiZlUlS-Continued
DIRECTORS—Continued
District 6—ATLANTA
Term
expires
Dec. 31
Class A:
William B. M i l l s . . . . . . . P r e s i d e n t , T h e F l o r i d a N a t i o n a l B a n k , Jacksonville, F l a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1972
A, L. E l l i s . . . . . . . . . . . . . C h a i r m a n of t h e B o a r d , First N a t i o n a l B a n k ,
T a r p o n Spr.in.gs, F l a . . . . . . . . . . . . . . . . . . . . . . 1973
J a c k P . K e i t h . . . . . . . . . . P r e s i d e n t , First N a t i o n a l B a n k of West Point,
G a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
Class B.Philip J . L e e . . . . . . . . . . . V i c e President, T r o p i c a n a P r o d u c t s , I n c . ,
Tampa, F l a . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1*>72
Hoskins A. Shadow.... .President, Tennessee Valley Nursery, Inc.,
W i n c h e s t e r , T e n e . . . . . . . . . . . . . . . . . . . . . . . . 1^7,*
O w e n C o o p e r . . . . . . . . . . P r e s i d e n t , Mississippi C h e m i c a l C o r p o r a t i o n ,
Y a z o o C i t y , M i s s . . . . . . . . . . . . . . . . . . . . . . . . 1974
Class C:
F . Evans F a r w e l l . . . . . . . P r e s i d e n t , Milliken a n d Farwell, Inc., N e w Orleans, L a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1972
J o h n C . W i l s o n . . . . . . . . P r e s i d e n t , Home-Wilson, Inc., Atlanta, G a . . . . 1973
H. G . P a t t i l l o . . . . . . . . . . P r e s i d e n t , Pattillo Construction C o m p a n y ,
Inc., D e c a t u r , G a . . . . . . . . . . . . . . . . . . . . . . . . 1974
BIRMINGHAM BRANCH.
Appointed by Federal Reserve Bank:
Harvey T e r r e l l . . . . .
. . C h a i r m a n •*! t h e Board, T h e First N a t i o n a l
Bank oi Birmingham, A l a . . . . . . . . . . . . . . . . .
Wallace D . M a l o n e , J r , . . President ami C h a i r m a n of t h e B o a r d , T h e
I irst Hittunnl Bank of Dothan, A l a . . . . . . . .
C 1 ogan T a y l o r . . .
. C h a i r m a n of the Board, T h e First State B a n k
or*O\tord, Ala. . . . . . . . . . . . . . . . . . . . . . . . .
W . Eugene M o r g a n .
. Prusidivsf a n d Chief Executive Officer, T h e
Fitsf N a t i o n a l Bank of Huntsville, A l a . . . . .
1972
1973
1973
1974
Appointed by Board of * h <tvr/>« >r.v *
Frederick G . Koenig, Jr I'rostOont atkl < 'iwrf Executive Officer, A l a b a m a
ih PitHftu/i'. i ^iporation, Birmingham, Ala. 1972
D a v i d M a t f a e w s . . . . , P r c i J c n i , I'«u\M\^ty of A l a b a m a , University,
Ala. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . W73
William C . B a u e r . . . , . . ? > asuiait, HoiilU Central Bell, B i r m i n g h a m ,
\la..
. ,
.........................
i ! i7J
293
F.R. BANKS A N D BRANCHES—Continued
DIRECTORS - -Continued
District 6-- ATLANTA—Cont.
Term
expires
Dec. 31
JACKSONVILLE BRANCH
Appointed by Federal Reserve Bank:
James G. Richardson. . .Chairman of the Board and President, The
Commercial Bank and Trust Company of
Ocala, Fla
..
Malcolm C. Brown. . . . .President and Chairman of the Board, Florida
First National Bank at Brent, Pensacola,
Fla.....
A. Clewis H o w e l l . . . . . . .President, Marine Bank & Trust Company,
Tampa, Fla.. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guy W. B o t t s . . . . . . . . . .Vice Chairman of the Board, Barnett Bank of
Jacksonville, N.A., Jacksonville, F i a . . . . . . .
Appointed by Board of Governors:
Henry K. Stanford.
President, University of Miami, Coral Gables,
Fla.......
Henry Cragg.
Vice President, The Coca-Cola Company Foods
Division, Winter Park, H a , . . . . . . . . . . . . . . .
Gert H. W. Schmidt. . . .President, Television 12 of Jacksonville, Fia..
1972
1973
1973
1974
1972
1973
1974
NASHVILLE BRANCH
Appointed by Federal Reserve Bank:
Edward C. Huffman. . . .Chairman of the Board and President, First
National Bank, Shelbyville, Tenn.
Dan B. A n d r e w s . . . . . . . President, First National Bank, Dickson,
Term.
Edward G. N e l s o n . . . . . . President, Commerce Union Bunk, Nashville,
Tenn.
Thomas C. Mottern. . . .President, Hamilton National Bank of Johnson
City, T e n n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appointed by Board of Governors:
John C. Tune. . . . . . . . . .Partner. Boiler, Me Hugh, Butler, Tune &
Watts. Attorneys. Nashville. Tenn.
James W. Long. . . . . . . .President. Robertson County Farm Bureau,
Springfield, Tenn,
Edward J. B a l i n g . . . . . . . P r e s i d e n t , University of Tennessee, Knoxvilie,
Tenn...................................
294
1972
1973
1973
1974
1972
1973
1974
F.E. BANKS AND BRANCHES—Continued
DIRECTORS—-Continued
District 6—ATLANTA—Cont.
Term
expires
Dec. 31
NEW ORLEANS BRANCH
Appointed by Federal Reserve Bank:
H. P. Heidelberg, J r . . . . .President, Pascagoula-Moss Point Bank, Pascagouia, M i s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom A. Flanagan, J r . . . . President, Lakeside National Bank of Lake
Charles, L a . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lawrence A. Merrigan.. President, The Bank of New Orleans and
Trust Company, New Orleans, L a . . . . . . . . .
Archie R. McDonnell... President, Citizens National Bank, Meridian,
Miss...................................
1972
1973
1973
1974
Appointed by Board of Governors:
Edwin J. Caplan. . . . . . . P r e s i d e n t ,
Caplan*s Men's Shops, Inc.,
Alexandria, L a . . . . . . . . . . . . . . . . . . . . . . . . . . 1972
Broadus N, B u t l e r , . . . . .President, Dillard University, New Orleans,
L a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1973
Fred Adams, J r . . . . . . . . . P r e s i d e n t , Cal-Maine Foods, Inc., Jackson,
M i s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
District 7 ^
Class A:
Edward Byron Smith. . .Chairman of the Board, The Northern Trust
Company. Chicago, 1 1 1 . . . . . . . . . . . . . . . . . . . . 1972
Melvin C. L o c k a r d . . . . President, First National Bank, Mattoon, 111... 1973
Floyd,F. Whitmore... .President, The Okey-Vernon National Bank,
Coining, I o w a . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
Class B.William H. Da¥idsoo
. President, Harley-Davidson Motor Co., Inc.,
Milwaukee, W i s . . . . . . . . . . . . . . . . . . . . . . . . . 1972
Howard M. Packard. , .Vice Chairman, S. C. Johnson & Son, Inc.,
Racine, Wis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1973
John T. H a c k e t t . . . . . . . Executive Vice President, Cummins Engine
Company, Inc., Columbus, I n d . . . . . . . . . . . . 1974
Class C:
Emerson G. Higdon.. .Chairrian of the Board, The Maytag Company, Newton, I o w a . . . . . . . . . . . . . . . . . . . . . 1972
John W. B a l r d . . . . . . . . President, Baird & Warner, Inc., Chicago, 111.. 1973
William H. Franklin. .Chairman of the Board, Caterpillar Tractor
Co., Peoria, 1 1 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
295
F.R. BANKS AND BRANCHES—Continued
DIRECTORS—Continued District 7—CHICAGO—Cont.
Term
expires
Bee, 31
DETROIT BRANCH
Appointed hy Federal Reserve Bank:
George L. Whyei.
.President, Genesee Merchants Bank & Trust
Company, Flint, Mich.
Roland A, Mewhort. . . .Chairman, Manufacturers National Bank of
Detroit, Mich., . .
Ellis B, M e r r y , . . . . . . . . .Chairman of the Board, National Bank of
Detroit, Mich.,
Harold A. E l g a s , . . . . . . . President, Gaylord State Bank, Gaylord, Mich.
1972
1972
1973
1974
Appointed by Board of Governors:
W, M. Defoe, . . . . . . . . . C h a i r m a n of the Board, Defoe Shipbuilding
Company, Bay City, M i c h . . . . .
. . . . . . . 1972
L. Wm. Seidman... . . . . Resident Partner, Seidman & Seidman, Grand
Rapids. Mich..
. . . 1973
Peter B. Clark .
Chairman of the Board and President, The
Evening News Association, Detroit, Mich... 1974
District 8 - S T . LOUIS
Class A:
Cecil W. Cupp, J r . . . . . . . President, Arkansas Bank & Tru*>t Company.
Hot Springs, Ark.,
1972
Bradford Brett, . . . . . . . . President, The First National Bank of Mexico,
Mo..
.
. . . 1973
Edwin S. J o n e s . . . . . . . . . C h a i r m a n of the Board* First National Bank
in Si. Louts, Mo.
J974
Class B:
iid\uti\! J. Sehnuck . , . .Chairman of the Board, Sehnuck Markets, Inc.,
Bridgeton. Mo... ,
1972
Fred I. Brown. Jr. , . .President. Arkansas Foundry Company. Little
Rock, Ark
1973
James M. Tuhokki , . .President, Mead Johnson & Company, Evansville, Ind....
1974
296
P.M. BANKS AND
DIRECTORS—Continued
District 8 - ST. LOUIS
-Cunt.
Term
expires
Dec, 31
Class C:
Sam C o o p e r . . . . . . .
...President, HitniKo Products, Division oi
Krafreo Corporation. Memphis, h-rm.
1972
Harry M. Young, Jr..
Vieiiose Farms, ilernclon, K\. ,
.
1973
Frederic M. Pelrce... ..Chairman of the Hoard and Chief Executive
Otfieer. General American Life insurance
Company, St. Louis, M o . . .
. . .
. , 1974
L11TLF. ROtlK BRANCH
Appointed by Federal Reserve Bank:
Ellis E. Shelton. . . . . . . .President, The First National Bank of Fayetteville, Ark.. , . . . . . .
,
Wayne A. S t o n e . . . . . . . .Chairman of the Board and Chief Executive
Oflicer, Simmons First National Bank of
Pine Bluff. Ark.
Edward M, Penick. . . . . President and Chief Executive Officer, Wort hen
Bank & Trust Company, Little Rock. Ark.. .
Will H. K e l l e y . . . . . . . . President and Chief Executive Officer. The Suite
First National Bank of Texarkana, A r k , . . . .
1972
1972
1973
1974
Appointed hy Board oj Governors:
Jake Hartz, Jr.. . . . . . . . . P r e s i d e n t , Jacob Hart/ Seed Co., Inc.. Stuttgart, Ark..
. .
.,
1972
Roland R. Remmel. , . Chairman of the Board, Southland Building
Products Co., Little Rock. Ark.
1973
Al Pollard, . . . . . . . . . . . President. AI Pollard & Associates. Little Rock,
Ark.............
. . . . . . . . . . . . . . . . . . . . 1974
LOU1S¥1LLE BRANCH
Appointed by Federal Reserve Bunk :
Paul Chase, . . . . . . . . . .President. The Bedford National Bank, Bedford. I n d . . . . .
, , 1972
Herbert J. Smith, . . . . . .President. The American National Bank &
Trust Company of Bowling Green, Ky.. . . 1972
Harold E. Jackson..... .President, The Scott County Stale Bank,
Scottsburg. I n d . . . . . . . . . ,. .. . . . . . . .
. 1973
Hugh M. Shwab. . . . . . . C h a i r n - a n of the Boards, First National Bank
of Louisville and The Kentucky Trust Company, Louisville, K y , . . . . . . . . . . . . . . . . . . . . . 1974
297
F.R. BANKS AND MRANCMES—Continued
DIRECTORS—Continued
District 8—ST. LOUIS—Gont.
Term
expires
Dec, 31
LOUISVILLE BRANCH—Continued
Appointed by Board of Governors:
James H. D a v i s . . . . . . . . Chairman and Chief Executive Officer, Porter
Paint Company, Louisville, K y . . . . . . . . . . . .
1972
William H. S t r o u b e . . . . .Associate Dean, College of Science and Technology, Western Kentucky University, Bowling Green, K y . . . . . . . . . . . . . . . . . . . . . . . . . . .
1973
James C. Hendershot. . . President and Chief Operating Officer, Reliance
Universal, Inc., Louisviile? K y . . . . . . . . . . . . .
1974
MEMPHIS BRANCH
Appointed by Federal Reserve Bank:
James R. F i t z h u g h . . . . . . Executive Vice President, Bank of Ripley, Tene.
Wayne W. P y e a t t . . . . . . . P r e s i d e n t , National Bank of Commerce, Memphis, T e n n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J. J. White. . . . . . . . . . . . P r e s i d e n t , Helena National Bank, Helena, Ark.
Garner L. H i c k m a n . . . . .Chairman and President, The First National
Bank of Oxford, M i s s . . . . . . . . . . . . . . . . . . . .
1972
1972
1973
1974
Appointed by Board of Governors:
William L. Giles. . . . . . . P r e s i d e n t , Mississippi State University, State
College, M i s s . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alvin Huffman, J r . . . . . . President, Huffman Brothers Incorporated,
Blytheville, Ark..
C, Whitney B r o w n , . . . . .President, S, C. Toof & Company f Memphis,
Tenn...................................
1972
1973
1974
District 9—MINNEAPOLIS
Class A:
John Bosshard.,
. . . Executive Vice President, First National Bank
of Banger, W i s . . . . . . . . . . . . . . . . . . . . . . . . . .
Philip H. N a s o n . . . . . . . . C h a i r m a n of the Board, The First National
Bank of Saint Paul, M i n n , . . . . . . . . . . . . . . . .
Roy H. J o h n s o n . . . . . . . . P r e s i d e n t , The First National Bank of NegauEee, M i c h , . . . . . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1974
Class B:
David M, H e s k e t t . . . . . . President, Montana-Dakota Utilities Co.,
Bismarck, N . D . . . . . . . . . . . . . . . . . . . . . . . . . .
Dale ¥ . Andersen. . . . . .President, Mitchell Packing Company, Inc.,
Mitchell, S . D . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John H. B a i l e y . . . . . . . . .President, The Cretex Companies, Inc., Elk
River, M i n n . . . . . . . .
.................
298
1972
1973
1974
P.iL BANKS AND BRANCHES—Continued
DIRECTORS—Continued Dis trie t 9- - MINNKA POLLS - - Con I.
Term
expires
Dec. 31
Class C:
David M, L i l l y , . . . . .
. .Chairman ot* flit* Board. The Toro Company,
Minneapolis. Minn...,
Russ B. Hart. . . . . . . .President, Hart-Alhin Company, Billings,
Moot,...
B r u c e B . D a y t o n , . . . . . . C h a i r m a n of the B o a r d , D a y t o n
Hudson
Corporation. Minneapolis, Minn,. . . . . . . . .
1972
1973
1974
IiFLEX\ BRANCH
Appointed by Federal Reserve Bunk:
E. Lowry Kunkel... , . ['resident. First National Bank, Buttc, Mont., . 1972
Robert I. P e n n e r . . . . . . President, Citizen^ First National Bank,
Wolf Point, M o n t . . . . .
..
1972
Richard D. R u b l e . . ...President, Missoula Bank of Montana,
Missoula, Mont..
. . . . . . . 1973
Appointed by Board of Governors:
Warren. B. Jones. . . . . . Secretary-Treasurer, Two Dot Land and
Livestock Company. Hariovvton. Mont.. , , .
William A. Cordingles . Publisher, Great Falls Tribune, Great Falls,
Mont..... . . .
1972
1973
D i s t r i c t 10- K A N S A S C I T Y
Class A:
Roger D . Knight, J r . . . . .Chairman of the Board, United Banks of
C o l o r a d o . Inc.. Denver, C o l o . . . . . . . . . . . . . .
C. Mose M i l l e r . . . . . . . . Chairman ot* the Board and President, The
Farriers and Merchants State Bank, Colby,
Kan.
J o h n A. O ' L e a r y . . . . . . C h a i r m a n of the Board, The Peoples State
Bank, Luray, K a n . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1974
Class B:
Cecil O. E m r i c h . . . . . . . .President, C. O. Emrich Enterprises, Norfolk,
Ncbr..
Alfred E . J o r d a n . , , , . .Vice President, T r a n s W o r l d Airlines, Inc.,
K a n s a s City, M o . . . . . . . . . . . . . . . . . . . . . . . .
F r a n k C . L o v e . . . . . . . . .President. Kerr-McGee C o r p o r a t i o n , O k l a h o m a City, O k l a . . . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
1974
299
F.R. HANKS AND BRANCHES—CmHhiued
DIRECTORS -Continued District 10- KANSAS CITY-~-Cont,
Term
expires
Dec. 31
Class C:
Wiliard Deere Hostbrd,
J r . . . . . . . . . . . . . . . . . .Retired Vice President and General Manager,
John Deere Company, Omaha, Nebr.. . . . . 1972
Robert T. P e r s o n , . . . . . .President and Chairman of the Board, Public
Service Company of Colorado, Denver, Colo. 1973
Robert W. Wagstatt*. . . .Chairman of the Board and President, CocaCola Bottling Company of Mid-America,
Kansas City, M o . . . . . . . . . . . . . . . . . . . . . . . . 1974
DKNVER BRANCH i
Appointed by Federal Reserve Bank:
Robert L. T r i p p . . . . . . . .President. Albuquerque National Bank. Albuquerque, N . Mex.
1972
Dale E , Hinman. . . . . . .Chairman of the Board, The Greeley National
Bank, Greeley, C o l o . . . . . . . . . . . . . . . . . . . . . . 1972
J o h n W. Hay, J r . . . . . . . . President, Rock Springs National Bank, Rock
Springs, W y o . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1973
Appointed by Board of Governors:
David R. C. B r o w n . . . . .President. T h e Aspen Skiing Corporation,
Aspen. C o l o . . , . .
...
....
M a u r i c e B . Mitchell . , . C h a n c e l l o r , University of D e n v e r , C o l o , . . . . . .
1972
1973
OKLAHOMA CITY BRANCH
Appointed by Federal Reserve Bank:
Marvin Millard. . . . . . . .Chairman of the Board, National Bank of
Tulsa. Okla.
1972
Hugh C. Jones
Executive Vice President, The Bank of Woodward, O k l a . . . . .
1972
W. H. McDonald. . . . . .Chairman of the Executive Committee, T h e
First National Bank and Trust Company of
Oklahoma City, O k l a . . . . . . . . . . . . . . . . . . . . . 1973
Appointed by Board of Governors:
Florin W. Z a l o u d e k . . . .Manager, j . I. Case Implements, Kremlin,
Okia.
1972
Joseph H. Williams. . . . .President and Chief Operating Officer, The
Williams Companies, Tulsa, O k l a . . . . . . . . . . 1973
300
F.R. BANKS AND BRANCHES—Continued
DIRECTORS—Continued D i s t r i c t l i — K A N S A S CITY—Gont.
Term
expires
Dec, 31
OMAHA BRANCH
Appointed by Federal Reserve Bank :
Edward W. Lyman. . . . .President, The United States National Bank
of Omaha, Nebr.
S. N. Wolbach
. . . President. The First National Bank of Grand
island, Nebr,
Glenn Yaussi.,
..Chairman of the Board, National Bank of
Commerce Trust & Savings, Lincoln, Nebr...
1972
1973
1973
Appointed by Board of Governors:
Henry Y. Kleinkauf. . . . President, Natkin & Company, Omaha, Nebr.. 1972
A. James Ebel. . . . . . . . . V i c e President and General Manager, Cornhysker Television Corporation, Lincoln,
Nebr...................................
1973
District li^-DALLAS
Class J.M u r r a y K y g e r . . . . . . . . .Chairman of t h e Executive Committee, T h e
First National Bank of Fort Worth, Tex... . 1972
J. V. K e l l y . . . . . . . . . . . . . P r e s i d e n t . The Peoples National Bank of Belton, Tex.. . . . . . . . . . . . . . . . . . . . . . . . . .
. 1973
A. W. Riter, J r . . . . . . . . . .President, The Peoples National Bank of Tyler,
Tex.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
Class B:
C. A. Tatum, J r . . . . . . . . C h a i r m a n of the Board and Chief Executive
Officer, Texas Utilities Company, Dallas,
Tex.
. . . . . . . 1972
Carl D. N e w t o n . . . . . . . Chairman of the Board, Fox-Stanley Photo
P r o d u c t s , Inc., S a n A n t o n i o , T e x . . . . . . . . . .
H u g h F , S t e e n . . . . . . . . . P r e s i d e n t , Ei P a s o N a t u r a l G a s C o m p a n y ,
El P a s o , T e x . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1973
1974
Class C;
Philip G . H o f f m a n . . . . . . President, University of H o u s t o n , T e x , . . . . . . . 1972
J o h n L a w r e n c e . . . . . . . . . C h a i r m a n of t h e B o a r d , Dresser I n d u s t r i e s ,
I n c . , Dallas, T e x . . . . , , , . . .
1973
C h a s . F . J o n e s . . . . . . . . . D e a n , College of Business A d m i n i s t r a t i o n ,
University of H o u s t o n , T e x . . . . . . . . . . . . . . . 1974
301
F.R. BANKS AND BRANCHES—Continued
DIRECTORS—Continued
District il—DALLAS—Cont.
Term
expires
Dec, 31
EL PASO BRANCH
Appointed by Federal Reserve Batik :
Archie B. Scott.
.President. The Security State Bank of Pecos,
Tex,.
Sam D. Young, J r . . . . . .President, El Paso National Bank, El Paso,
Tex..
..
... .
Cuilen J. Kelly
.. . . President, The First National Bank of Midland,
Tex.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wayne S t e w a r t . . . . . . . . .President, first National Bank in Aiamagordo,
N. M e x . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appointed by Board of Governors:
Allan B. Bowman. . . . . .President and General Manager, Banner Mining Company, Tucson, Ariz.
Herbert M.Schwartz... .President, Popular Dry Goods Co., Inc., El
Paso, Tex..
.
Gage Holland..........Owner, Gage Holland Ranch, Marathon, Tex..
1972
1972
1973
1974
1972
1973
1974
HOUSTON BRANCH
Appointed by Federal Reserve Bank:
W. G. Thornell. . . . . . . .Chairman of the Board and President, The
First National Bank of Port Arthur, Tex.. . .
John E. W h i t m o r e . . . . . .Chairman of the Board and Chief Executive
Officer, Texas Commerce Bank National
Association. Houston, Tex. . . . . . . . . . . . . . .
Kline McGee. . . . . . . . . . C h a i r m a n of the Board, Southern National
Bank of Houston, Tex..
Seth W. D o r b a n d t . . . . . .Chairman of the Board and President, First
National Bank In Conroe, Tex..
1972
1972
1973
1974
Appointed by Board of Governors:
Geo, T. Morse. J r . . . . . . .Vice Chairman of the Board and Chief Operating Officer, Peden Industries, Inc., Houston, Tex.
1972
M. Steel Wright, J r . . . . .Chairman of the Board, Texas Farm Products
Company, Nacogdoches. Tex..
1973
R. M. B u c k l e y . . . . . . . . . President and Director, Eastex Incorporated,
SiLbee, T e x . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
302
F.R. BANKS AND BRANCHES—Continueii
DIRECTORS—Continued
Term
expires
Dec. 31
District 11—DALLAS-Cont.
SAX ANTONIO BRANCH
Appointed by Federal Reserve Bank:
T o m C, Frost, J r . . . . .
. C h a i r m a n of the Board. T h e Frost N a t i o n a l
Batik of San A n t o n i o , T e x , . . . . . . . .
W. O. R o b e r s o n . . . . . . . . President, First National Bank at Brownsville,
Tex.. . . . . . . . . .
E a y M . Keck, J r . . . . . . . . C h a i r m a n of the Board and President, U n i o n
National Bank of L a r e d o . Tex..
.....
L e o n S t o n e . . . . . . . . . . . . President, T h e Austin National Bank, Austin,
Tex,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1972
1972
1973
1974
Appointed by Board of Governors:
W. A. B e l c h e r . . . . . . . . . .Veterinarian
and rancher,
Corazon
Ranch,
Brackettviile, Tex.
Irving A. Mathews, . . . .Chairman of the Board and Chief Executive
Officer. Fro^t Bros., Inc., San Antonio, Tex..
Marshall Boykin, III... .Partner, Wood, Boykin & Wolter, Corpus
Christi, Tex.
1972
1973
1974
District 12 -SAN FRANCISCO
Class A:
Carroll F . B y r d . . . . . . . . C h a i r m a n of the Board a n d President, T h e First
National Bank of Willows, C a l i f , . . . .
..
R a l p h J. V o s s . . . . . . . . . .President, First National Bank of Oregon,
Portland, Orcg.
Carl E. S c h r o e d e r . . . . . .President, T h e First National Bank of O r a n g e
County, O r a n g e , C a l i f . . . . . . . .
. ,. . . . .
1972
1973
1974
Class J.J o s e p h R o s e n b l a t t . . . . . . H o n o r a r y C h a i r m a n of* t h e B o a r d , T h e E i m c o
C o r p o r a t i o n , Salt L a k e City, U t a h . . . . . . . . 1972
M a t r o n K e n d r i c k . . . . . . President a n d C h a i r m a n o f t h e B o a r d , Schlage
L o c k C o m p a n y , S a n F r a n c i s c o , C a l i f . . . . . . . 1973
Charles R. D a h l . . . . . . . . President C r o w n Zellerbaeh, S a n Francisco,
C a l i f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974
303
P.M. BANKS AND BRANCHES—Continued
Continued District 12^-SAN FRANCISCO—Cont.
Term
expires
Dec, 31
Class C:
S. Alfred H a l g r e n . . . . . . Senior ¥ice President, Carnation Company,
Los Angeles, C a l i f . . . . . . . . . . . . . . . . . . . . . . . 1972
O. Meredith W i l s o n . . . . President and Director, Center for Advanced
Study in the Behavioral Sciences, Stanford,
Calif...................................
1973
Mas O j i . . . . . . . . . . . . . . . P r e s i d e n t , Oji Bros. Farm, Inc., Yuba City,
Calif...................................
1974
LOS ANGELES BRANCH
Appointed by Federal Reserve Bank:
W. Gordon Ferguson. . . President, National Bank of Whittier, Calif....
Linus E. S o u t h w i c k . . . . . President, ¥alley National Bank, Glendale,
Calif...................................
Carl E. H a r t n a c k . . . . . . . President^ Security Pacilc National Bank, Los
Angeles, C a l i f . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rayburn S. Dezember... Chairman of the Board and President, American National Bank, Bakersleld, C a l i f . . . . . .
1972
1973
1973
1974
Appointed by Board of Governors;
Leland D . P r a t t . . . . . . . . P r e s i d e n t , Kelco Company, San Diego, Calif.., 1972
Edward A. S l o a n . . . . . . . P r e s i d e n t , Sloan's Dry Cleaners, Los Angeles,
Calif...................................
1973
Ruth H a n d l e r . . . . . . . . . . P r e s i d e n t , Mattel, Inc., Hawthorne, Calif,... 1974
PORTLAND BRANCH
Appointed by Federal Reserve Bank:
James H . S t a n a r d . . . . . . Vice President, First National Bank of
McMinnville, G r e g , , . . . . . . . . . . . . . . . . . . . . . 1972
Frank L. S e r v o s s . . . . . . . P r e s i d e n t , Crater National Bank of Medford,
O r e g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1972
LeRoy B. S t a v e r . . . . . . . Chairman of the Board and Chief Executive
Officer, United States National Bank of Oregon, Portland, O r e g . . . . . . . . . . . . . . . . . . . . . . 1973
Appointed by Board of Governors:
John R. H o w a r d . . . . . . . President, Lewis and Clark College, Portland,
Oreg.
1972
Frank A n d e r s o n . . . . . . . . F a r m e r , Heppner, O r e g . . . . . . . . . . . . . . . . . . . . 1973
304
F.R. BANKS AND BRANCHES—Continued
DIRECTORS—Continued District 12—SAN FRANCISCO—Cont.
Term
expires
Dec, 31
SALT LAKE CITY BRANCH
Appointed by Federal Reserve Bank:
Roderick H. Browning , President, Bank of Utah, Ogcien. U t a h .
1972
Roy W. Simmons. . . , , , President, Zions First National Bank, Salt Lake
City, U t a h . . . . . . . , . . . . . . . . . . . . . . . . . . 1972
Joseph Bianco. . . . . . . . . C h a i r m a n of the Board and President, Bank of
Idaho, Boise, Idaho
. . . 1973
Appointed by Board of Governors:
i Vacancy)
. ..
...
TheodoreC. Jacobsen. . .Chairman of the Board, Jaeobsen Construction Company, Inc.. Salt Lake City, Utah..
1972
1973
SEATTLE BRANCH
Appointed by Federal Reserve Bank:
A. E. S a u n d e r s . . . . . . . . .Vice Chairman of the Board, Puget Sound
National Bank. Tacoma. W a s h . . . . . . . . . . . . 1972
Philip H. S t a n t o n . . . . . . . President, Washington Trust Bank, Spokane,
Wash......
. . . . . . . . . . . . . . 1972
Joseph C. Baillargeon. . .Chairman of the Board and Chief Executive
Officer, Seattle Trust & Savings Bank, Seattle,
Wash....... ...
1973
Appointed by Board of Governors:
C . H e n r y B a c o n , J r . . . . .Vice C h a i r m a n of t h e B o a r d , S i m p s o n T i m b e r
C o m p a n y , Seattle, W a s h . . . . . . . . . . . . . . . . . .
T h o m a s T. H i r a l . . . . . . . P r e s i d e n t , Quality Growers C o m p a n y , Inc.,
Woodinville, W a s h . . . . . . . . . . . . . . . . . . . . . . .
1972
1973
305
F.R. BANKS AND BRANCHES—Continued
PRESIDENTS AND VICE PRESIDENTS
(December 31,1972)
Federal
Reserve
Bank
President
First Vice President
or branch
Boston.
Frank E. Morris
E. O. Latham
New York... Alfred Hayes
William F. Treiber
Buffalo
Philadelphia.
David P. Eastburn
Mark H. Willes
Cleveland . . . Willis J. Winn
W. H. MacDonald
Cincinnati
Pittsburgh
Richmond. . . Aubrey N. Heflin
Robert P. Black
306
Vice Presidents
D. Harry Angney
Lee J. Aubrey
Foster K. Cummings
Luther M. Hoyle, Jr.
Donald A. Pelletier
Laurence H. Stone
James T. Timberlake
Daniel Aquilino
Norman T. Byrnes
R. W. Eisenmenger
Niels O. Larsen
Richard E. Randall
J. M. Thayer, Jr.
Richard A. Walker
David E. Bodner
W. H. Braun, Jr.
Charles A. Coombs Richard A. Debs
Peter Fousek
Edward G. Guy
Alan R. Holmes
John T. Keane
Leonard Lapidus
Robert G. Link
Fred W. Piderit, Jr. Everett B. Post
Peter D. Sternlight T. M. Timlen, Jr.
Thomas O. Waage
Angus A. Maclnnes, Jr.
Edward A. Aff
Edward G. Boehne
Thomas K. Desch
Joseph R. Joyce
G. William Metz
William E. Roman
Robert R. Swander
Hugh Barrie
Joseph M. Case
William A. James
A. A. Kudelich
L. C. Murdoch, Jr.
Kenneth M. Snader
John E. Birky
George E. Booth, Jr.
Paul Breidenbach
Roger R. Clouse
Elmer F. Fricek
R. Joseph Ginnane
W. H. Hendricks
William J. Hocter
John J. Hoy
Harry W. Huning
Frederick S. Kelly R. Thomas King
Robert E. Showalter Donald G. Vincel
Robert D. Duggan
Fred O. Kiel
James H. Campbell
Charles E. Houpt
L. W. Bostian, Jr.
John G. Deitrick
H. Ernest Ford
A. V. Myers, Jr.
James Parthemos
John F. Rand
Aubrey N. Snellings
William F. Upshaw
W. T. Cunningham, Jr.
Welford S. Farmer
William C. Glover
John L. Nosker
C. D. Porter, Jr.
R. E. Sanders, Jr.
Andrew L. Tilton
F.R. BANKS AND BRANCHES—Continued
PRESIDENTS AND VICE PRESIDENTS—Continued
Federal
Reserve
Bank
or branch
President
First Vice President
Vice Presidents
Richmond—
Cont.
Baltimore
H. Lee Boatwright, III
A. A. Stewart, Jr.
Gerald L. Wilson
Stuart P. Fishburne
Jimmie R. Monhollon
J. Gordon Dickerson, Jr.
Albert D. Tinkelenberg
Charlotte
Culpeper1
Atlanta
Monroe Kimbrel
Kyle K. Fossum
Birmingham
Jacksonville
Miami1
Nashville
New
Orleans
Chicago
Robert P. Forrestal
Robert E. Heck
J. E. McCorvey
Richard A. Sanders
Pierre M. Viguerie
Dan L. Hendley
Edward C. Rainey
W. M. Davis
Jeffrey J. Wells
George C. Guynn
Robert P. Mayo
Ernest T. Baughman
Detroit
St. Louis . . . Darryl R. Francis
Eugene A. Leonard
Little
Rock
1
Harry Brandt
Billy H. Hargett
Arthur H. Kantner
Brown R. Rawlings
Charles T. Taylor
Carl E. Bierbauer
George W. Cloos
LeRoy A. Davis
R. W. Dybeck
Elbert O. Fults
V. A. Hansen
Edward A. Heath
Ward J. Larson
R. A. Moffatt
J. R. Morrison
R. M. Scheider
Karl A. Scheld
Harry S. Schultz
Bruce L. Smyth
Jack P. Thompson Allen G. Wolkey
William C. Conrad
Daniel M. Doyle
Ronald L. Zile
Leonall C. Andersen
Joseph P. Garbarini
Jerry L. Jordan
D. W. Moriarty, Jr.
Charles E. Silva
Howard H. Weigel
Gerald T. Dunne
W. W. Gilmore
John W. Menges
F. G. Russell, Jr.
Harold E. Uthoff
John F. Breen
Not considered a branch.
307
F.R. BANKS AND BRANCHES—Continued
PRESIDENTS AND VICE PRESIDENTS—Continued
Federal
Reserve
Bank
or branch
President
First Vice President
St. Louis—
Cont.
Louisville
Memphis
Donald L. Henry
L. Terry Britt
Minneapolis . Bruce K. MacLaury
M. H. Strothman, Jr.
Helena
Kansas City. George H. Clay
John T. Boysen
Denver
Oklahoma
City
Omaha
Dallas
Vice Presidents
Frederick J. Cramer Ralph J. Dreitzler
L. W. Fernelius
Lester G. Gable
Thomas E. Gainor Roland D. Graham
Douglas R. Hellweg John A. MacDonald
David R. McDonald Clarence W. Nelson
John P. Olin
C. A. Van Nice
R. W. Worcester
Howard L. Knous
W. T. Billington
Thomas E. Davis
Joseph R. Euans
J. David Hamilton
M. L. Mothersead
George C.
H. R. Czerwinski
Raymond J. Doll
Roger Guffey
Wayne W. Martin
Robert E. Thomas
Rankin
William G. Evans
Robert D. Hamilton
Philip E. Coldwell
T. W. Plant
El Paso
Houston
San
Antonio
San
Francisco.. John J. Balles
A. B. Merritt
T AO
.LOS
Angeles
Portland
Salt Lake
City
Seattle
308
Robert H. Boykin Leon W. Cowan
Ralph T. Green
Larry D. Higgins
James A. Parker
W. M. Pritchett
T. J. Salvaggio
T. R. Sullivan
E. W. Vorlop
Frederic W. Reed
James L. Cauthen
Rasco R. Story
Carl H. Moore
A. S. Carella
D. M. Davenport
H. B. Jamison
D. V. Masten
Louis E. Reilly
Kent O. Sims
J. H. Craven
W. H. Hutchins
G. R. Kelly
Rix Maurer, Jr.
R. G. Retallick
J. B. Williams
P. W. Cavan
W. G. DeVries
W. M. Brown
A. L. Price
W. R. Sandstrom
F.R. BANKS AND BRANCHES—Continued
CONFERENCE OF PRESIDENTS
The Presidents of the Federal Reserve Banks are organized into a Conference of Presidents that meets from time to time to consider matters of
common interest and to consult with and advise the Board of Governors.
At a meeting on February 9, 1971, the Conference elected Mr. Francis
(President of the Federal Reserve Bank of St. Louis) and Mr. Kimbrel
(President of the Federal Reserve Bank of Atlanta) Chairman and Vice
Chairman, respectively, for the remainder of 1971 and for the forthcoming
Conference year, ending with the March 1972 meeting. At the meeting on
March 20, 1972, Mr. Kimbrel and Mr. Coldwell (President of the Federal
Reserve Bank of Dallas) were elected Chairman and Vice Chairman, respectively, for the remainder of 1972 and for the forthcoming Conference year,
ending with the March 1973 meeting.
At the February and March 1971 meetings, Mr. Joseph P. Garbarini
(Federal Reserve Bank of St. Louis) and Mr. H. Terry Smith (Federal
Reserve Bank of Atlanta) were appointed Secretary and Assistant Secretary,
respectively. Mr. H. Terry Smith and Mr. Robert Smith, III (Federal Reserve
Bank of Dallas) were appointed Secretary and Assistant Secretary, respectively, at the March 1972 meeting.
CONFERENCE OF FIRST VICE PRESIDENTS
The Conference of First Vice Presidents of the Federal Reserve Banks
was organized in 1969 to meet from time to time, primarily for the consideration of operational matters. Effective March 1, 1971, Mr. Lewis (First
Vice President of the Federal Reserve Bank of St. Louis) and Mr. Fossum
(First Vice President of the Federal Reserve Bank of Atlanta) were elected
Chairman and Vice Chairman, respectively, of the Conference. Mr. Joseph
P. Garbarini and Mr. H. Terry Smith were appointed Secretary and Assistant
Secretary, respectively. On August 3, 1971, Mr. Leonard (First Vice President
of the Federal Reserve Bank of St. Louis) was elected Chairman to succeed
Mr. Lewis, who retired on July 31, 1971.
On May 2, 1972, the Conference elected Mr. Fossum as Chairman and
Mr. Plant (First Vice President of the Federal Reserve Bank of Dallas) as
Vice Chairman, and appointed Mr. H. Terry Smith and Mr. Robert Smith
III, as Secretary and Assistant Secretary, respectively, for the forthcoming
Conference year.
309
Index
Page
Acceptances, bankers':
Authority to purchase and enter into repurchase agreements
107
Federal Reserve Bank holdings
217, 218, 228, 230, 232
Federal Reserve earnings
217, 218, 238
Open market transactions during 1972
236
Repurchase agreements
107, 120, 127, 135, 228, 230, 232, 236
Assets and liabilities:
Banks, by classes
249
Board of Governors
222
Federal Reserve Banks
228-33
Balance of payments (See U.S. balance of payments)
Bank Examination Schools
214
Bank examiners, loans to, legislative recommendation
200
Bank holding companies:
Board and Reserve Bank actions with respect to
211
Delegation by Board of certain authority to Federal Reserve
Banks regarding, amendment of rules
67, 90
Foreign credit restraint program guidelines, amendments
relating to
71, 93, 20(M)3
Legislative recommendation
199
Litigation
203-06
Regulation Y:
Amendments
68, 76, 96
Interpretations
69, 72, 75, 77, 81, 84, 85
Bank mergers and consolidations
210, 214, 258-79
Bank premises, Federal Reserve Banks and branches .220, 228, 230, 232, 237
Bank supervision and regulation by Federal Reserve System
207-15
Banking offices:
Number, changes
254
Par and nonpar, number
256
Board of Governors:
Audit of accounts
221
Delegation of certain authority:
Actions under
211, 214
Amendment of rules
67, 90
Foreign credit restraint program
71, 93, 95, 191-94
Income and expenses
221-25
Legislative recommendations
195-202
Litigation
203-06
310
INDEX
Page
Board of G o v e r n o r s — C o n t i n u e d
M e m b e r s a n d officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy actions
Regulations (See R e g u l a t i o n s )
R e p o r t t o Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T r u t h in L e n d i n g (Sec T r u t h in L e n d i n g )
Branch banks:
Banks, b y classes, changes in n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . .
F e d e r a l Reserve:
Bank premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 0 ,
B r a n c h buildings, legislative r e c o m m e n d a t i o n . . . . . . . . . . . . . . . . . . .
Directors
282
..............................................67-103
215
223
254
237
198
...............................................287^305
Vice Presidents in c h a r g e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 6 - 0 8
F o r e i g n b r a n c h e s of m e m b e r b a n k s , n u m b e r a n d location . . . . . . . . 2 1 2 , 2 1 3
Capital accounts:
Banks, by classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
F e d e r a l Reserve Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 9 , 2 3 1 , 2 3 3
C h a i r m e n a n d D e p u t y C h a i r m e n of F e d e r a l Reserve Banks . . . . . . . . . . .
286
Clearing a n d collection:
P a y m e n t s m e c h a n i s m , guidelines for improving, a n d d e v e l o p m e n t s . . 7 0 , 2 1 8
Regulation J, a m e n d m e n t , a n d litigation . . . . . . . . . . . . . . . . . . . . . . . . 7 8 , 2 0 6
V o l u m e of o p e r a t i o n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217, 2 4 2
Commercial banks:
Assets a n d liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
B a n k i n g offices, changes in n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254
F o r e i g n credit restraint p r o g r a m . . . . . . . . . . . . . . . . . . . . 7 1 , 9 3 , 9 5 , 1 9 1 - 9 4
N u m b e r , by class of b a n k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
Reserve r e q u i r e m e n t s against d e m a n d deposits, legislative
recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195
C o n d i t i o n statement of Federal Reserve Banks . . . . . . . . . . . . . . . . . . . . 2 2 8 - 3 3
Credit (Sec also L o a n s ) ;
B a n k holding c o m p a n i e s , extension by, a m e n d m e n t of R e g u l a t i o n Y , ,
96
F e d e r a l Reserve Banks, lending a u t h o r i t y . . . . . . . . . . . . . . . . . . . . . . . 8 9 , 197
Stock m a r k e t credit (See Stock m a r k e t c r e d i t )
T r u t h in L e n d i n g (Sec T r u t h in L e n d i n g )
Defense p r o d u c t i o n loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 9 , 2 4 8
D e m a n d s for goods a n d services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 - 2 4
Deposits:
Banks, by classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
F e d e r a l R e s e r v e B a n k s . . . . . . . . . . . . . . . . . . . . . . . . 2 2 9 , 2 3 1 , 2 3 3 , 2 5 1 , 253
311
INDEX
Page
Deposits—Continued
R e s e r v e r e q u i r e m e n t s (See Reserve r e q u i r e m e n t s )
T i m e a n d savings, m a x i m u m permissible interest rates, table . . . . . . . .
246
D e p u t y C h a i r m e n of F e d e r a l R e s e r v e Banks . . . . . . . . . . . . . . . . . . . . . . . .
286
Directors, Federal Reserve Banks a n d branches . . . . . . . . . . . . . . . . . . .287-305
D i s c o u n t rates at F e d e r a l Reserve B a n k s (See Interest r a t e s )
D i s c o u n t s a n d a d v a n c e s by F e d e r a l Reserve B a n k s (See L o a n s )
Dividends, Federal Reserve Banks . . . . . . . . . . . . . . . . . . . . . . . . ,216, 239, 240
Earnings, Federal Reserve Banks . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 6 , 238, 240
Examinations:
F e d e r a l Reserve B a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
216
F o r e i g n b a n k i n g a n d financing c o r p o r a t i o n s . . . . . . . . . . . . . . . . . . . . . .
213
M e m b e r banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207
State m e m b e r b a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207
E x e c u t i v e officers of m e m b e r b a n k s , l o a n s t o , r e p o r t i n g r e q u i r e m e n t s . . . 2 0 9
Expenses:
B o a r d of G o v e r n o r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 1 - 2 5
F e d e r a l Reserve B a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 6 , 2 3 8 , 2 4 0
Federal Advisory Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
285
F e d e r a l agency o b l i g a t i o n s :
F e d e r a l Reserve B a n k h o l d i n g s a n d e a r n i n g s . , 2 1 7 , 2 1 8 , 2 2 8 , 2 3 0 , 2 3 2 , 2 3 4
G u i d e l i n e s for o p e r a t i o n s in, revisions . . . . . . . . . . . . . . . . . . . . . . . . 128, 140
O p e n m a r k e t t r a n s a c t i o n s of F e d e r a l Reserve S y s t e m d u r i n g 1 9 7 2 . . . . 2 3 6
R e p u r c h a s e a g r e e m e n t s . . . . . 1 0 7 , 120, 127, 135, 2 2 8 , 2 3 0 , 2 3 2 , 2 3 5 , 2 3 6
F e d e r a l fiscal policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 - 4 0
Federal Open Market Committee:
A u d i t of System A c c o u n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
216
C o n t i n u i n g a u t h o r i z a t i o n s , review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
F o r e i g n currencies, review of o p e r a t i o n s . . . . . . . . . . . . . . . . . . . . . . . . .
189
M e e t i n g s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105, 2 8 4
M e m b e r s a n d officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
284
Policy actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 5 - 8 8
Federal Reserve Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
286
Federal Reserve Banks:
A s s e s s m e n t for expenses of B o a r d of G o v e r n o r s . . . . . . . . . . . . . . . 2 2 3 , 2 3 8
Bank premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220, 228, 230, 232, 237
B r a n c h e s (See B r a n c h b a n k s )
Capital accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .229, 2 3 1 , 233
Chairmen and Deputy Chairmen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
286
C h e c k clearing a n d collection, a m e n d m e n t of R e g u l a t i o n J
a n d litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 , 2 0 6
Condition statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228-33
312
INDEX
Page
Federal Reserve Banks—Continued
Delegation b y Board of certain authority t o . . . . . . . . . . . .67, 9 0 , 211, 2 1 4
Directors . , ' . . . . . . . . . . . . . . . . . . . . . . ! . . . . . . . . . . . . . . . . . . . . .287-305
D i s c o u n t r a l e * { S\\ Interest raic>>
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 6 , 239, 2 4 0
Fnrnings a n d expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 6 , 238, 2 4 0
Lxamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 2 1 6
Foreign and international accounts . . . . . . . , , , . . . . . . . . . . . . . . . . . 2 1 9
I,ending authority:
E x t e n s i o n o f credit t o n o n m e m b e r Kinks . . . . . . . . . . . . . . . . . . . . . .
89
Legislative recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Officers a n d e m p l o y e e * , n u m b e r a n d s a l a r k s . . . . . . . . . . . . . . . . . . . . . . 2 4 2
Payments mechanism, guidelines f o r improving, and developments . .70, 2 1 8
P r e s i d e n t s a n d V i c e P r e s i d e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306—08
Profit a n d loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 9
P u r c h a s e o f foreign govt. obligations, legislative r e c o m m e n d a t i o n . . . . 2 0 0
U.S. Govt. securities (See U.S. Govt. securities)
Volume of operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,217, 2 4 2
Federal Reserve notes:
C o n d i t i o n statement d a t a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .228—33
C o s t o f printing, issue, a n d rede nipt Ion . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 3
I n t e r e s t p a i d to T r e a s u r y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 i 7 , 2 3 9 , 2 4 0
Federal Reserve S\slew:
Rank Fxamination Schools . . . . . . . . . . . . . . . .
........... ,. .. 214
B a n k s u p e r s ision a n d r e g u l a t i o n b y . . . . . . . . . . . . . . . . . . . . . . . . . . , 2 0 7 - 1 5
F o i e i i i n c i e d i t r e s t r a i n t . . . . . . . . . . . . . . . . . . . . . . . . 7 1 , *>3, *>5, 1 9 1 - 9 4
Foreign jnrrenc> operations (See Foreign currency operations)
M a p o f Federal Reserve districts . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 0
Membeiship .............. . . . . . . . . . . . . . . . . . . . . ............
209
P a y m e n t s m e c h a n i s m , guide lines f o r improving, a n d d e v e l o p m e n t s . . 7 0 , 2 1 8
Financial m a r k e t s and moneian- poiicv . . . . . . . . . . . . . . . . . . . . . . . . , 4 1 - 5 7
H \ c a i policy. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 - 4 0
Fi'jreiiiii a n d i n t e r n a l i t > n a l a c c o u n t s o t F e d c i r * ! R e s e r v e B a n k s . . . . . . . . 2 1 9
t-'orewn b a n k i n g anti liiLtnciiig corpt»raiit)us, e x a m i n a t i o n a n d o p e r a t i o n , 2 H
F o r e i g n b r a n c h e s o f m e m b e r h a n k s , n u m b e r ant? l o c a t i o n , . , . . . . . . 2 1 2 , 2 1 3
F o r e i g n credit restraint p r o g r a m . . . . . . . . . . . . . . . . . . . . . . 7 1 , 9 3 , 9 5 , 1 9 1 - 9 4
Y'oreigfi c u r ^ n c ^ ' o p e r a t i o n s :
A u t h o r i z a t i o n a n d directive . . . . . . . . . . . . . . . . . . . . . . . . 106. If)1)-14, 1 3 6
Federal Reserve earnings o n foreign eurreueies . . . . . . . . . . . . . . . . . . 2 3 8
i r w e s t m e n l o f R e s e r v e B a n k s 1 f n r c i i : n c u r r e n t if- i n f o i e i g u g o v t .
obligations, legislative recommend.itiv>n , . , . . . . . . . . . . . . . . . . . . . . 2 0 0
M c \ icvv . . . . . .
..... ...... . . . . . . . . . . . . . . . . . . . . . . . . . . ....
189
313
INDEX
Page
Gold:
T a b l e s showing gold certificate accounts of KeserYe B a n k s a n d
gold stock . . . . . . . . . . . . . . . . . . . . . . . 2 2 8 , 230, 2 3 1 , 232, 2 3 3 , 250, 2 5 2
Insured commercial banks:
Assets a n d liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 9
B a n k i n g offices, changes i n n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 4
Interest rates:
Defense production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 8
F e d e r a l Reserve B a n k s :
Decisions f o r year 1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 7 - 1 0 3
Increases, disapprovals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1 - 0 3
Reductions, disapprovals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
M a x i m u m permissible rates on time a n d savings deposits, table . . . . . . 2 4 6
Interlocking bank relationships, legislative r e c o m m e n d a t i o n . . . . . . . . . . . 2 0 1
Interpretations, Board of G o v e r n o r s :
B a n k holding c o m p a n i e s :
Activities closely related to b a n k i n g . . . . . . . . . . . . . . . . . . . . . . . 6 9 , 7 5 , 8 5
Activities n o t closely related t o banking . . . . . . . . . . . . . . . . 7 2 , 7 7 , 8 1 , 8 4
Investments:
Banks:
By classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 9
F o r c o m m u n i t y development, legislative r e c o m m e n d a t i o n . . . . . . . . 2 0 1
F e d e r a l Reserve Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 8 , 230, 2 3 2
L a b o r costs—-wages a n d prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 - 3 5
Legislative r e c o m m e n d a t i o n s :
B a n k holding c o m p a n i e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
B a n k investments for c o m m u n i t y development . . . . . . . . . . . . . . . . . . . . 2 0 1
F e d e r a l Reserve B a n k s :
B r a n c h buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
L e n d i n g authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
P u r c h a s e of foreign govt. obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 0
Interlocking b a n k relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 1
L o a e s to b a n k examiners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 0
Reserve requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Litigation:
B a n k holding c o m p a n i e s :
Antitrust actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 3
Review of Board's actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 4 ,
Regulation J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 6
314
INDEX
Page
L o a n s (See alsi> C r e d i t ) :
Bank e x a m i n e r s , legislative r e c o m m e n d a t i o n . . . . . . . . . . . . . . . . . . . . .
B a n k s , b y classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defense production loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219,
E x e c u t i v e officers of m e m b e r b u n k s , r e p o r t i n g requirements . . . . . . . . .
Federal Reserve Banks:
Holdings and earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217, 218,
Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lending authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,
V o l u m e . . . . . . . . . . . . . . . . . . . . . .217, 218, 228, 230, 232, 242, 250,
S t o c k m a r k e t credit (See Stock m a r k e t c r e d i t )
200
249
248
209
238
243
197
252
Manpower
....................................................25—27
Margin requirements:
Securities c r e d i t t r a n s a c t i o n s :
E x e m p t i o n of c e r t a i n credit e x t e n d e d to block p o s i t i o n e r s
a n d t h i r d - m a r k e t m a k e r s , a m e n d m e n t of R e g u l a t i o n U . . . . . . . . .
88
O v e r - t h e - c o u n t e r m a r g i n stocks, c r i t e r i a for c o n t i n u e d listing,
a m e n d m e n t of R e g u l a t i o n s G , T , a n d U . . . . . . . . . . . . . . . . . . . . .
72
S t o c k s , i n c r e a s e , a m e n d m e n t of R e g u l a t i o n s G , T . a n d U . . . . . . . .
94
T e c h n i c a l a m e n d m e n t of R e g u l a t i o n s Ci, T . a n d U . . . . . . . . . . . . . .
32
Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247
M e m b e r b a n k s (See also N a t i o n a l b a n k s ) :
A s s e t s , liabilities, a n d c a p i t a l a c c o u n t s . . . . . . . . . . . . . . . . . . . . . . . . . .
249
B a n k i n g offices, c h a n g e s in n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254
B o r r o w i n g f r o m R e s e r v e Bunks, legislative r e c o m m e n d a t i o n . . . . . . . . .
197
Examination
................................................
207
E x e c u t i v e officers, l o a n s t o , r e p o r t i n g r e q u i r e m e n t s . . . . . . . . . . . . . . . . .
209
Foreign branches, n u m b e r and location . . . . . . . . . . . . . . . . . . . . . . . 2 1 2 , 213
I n t e r l o c k i n g r e l a t i o n s h i p s , legislative r e c o m m e n d a t i o n . . . . . . . . . . . . . .
201
Number
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2(W, 2 4 9
R e s e r v e r e q u i r e m e n t s {See Reserve r e q u i r e m e n t s )
R e s e r v e s a n d related i t e m s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
State m e m b e r b u n k s (Sec S t a l e m e m b e r b a n k s )
M e m b e r s h i p in F e d e r a l R e s e r v e S y s t e m . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Mergers and consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . .210, 214, 2 5 8 - 7 9
M o n e t a r y policy, review of 1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3—64
M o n e t a r y policy a n d financial m a r k e t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41—57
M u t u a l savings b a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 9 , 254
National banks:
A s s e t s a n d liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B a n k i n g offices, c h a n g e s in n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
254
315
INDEX
Page
National banks—Continued
Foreign branches, number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213
i n v e s t m e n t s for c o m m u n i t y d e v e l o p m e n t , legislative r e c o m m e n d a t i o n . 201
Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .209, 249
Nonniember banks:
Assets a n d liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
B a n k i n g offices, c h a n g e s in n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254
F e d e r a l Reserve Bank credit, extension t o , in certain instances , . , . , .
89
R e s e r v e r e q u i r e m e n t s against d e m a n d deposits, legislative
recommendatloE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195
Over-the-counter securities (Sec Stock m a r k e t c r e d i t )
P a r a n d n o n p a r b a n k i n g offices, n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . .
256
P a y m e n t s m e c h a n i s m , guidelines for Improving, a n d d e v e l o p m e n t s . . , 7 0 , 2 1 8
Policy a c t i o n s :
B o a r d of G o v e r n o r s :
D i s c o u n t rates at F e d e r a l Reserve B a n k s :
Decisions for year 1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 7 - 1 0 3
Increases, disapprovals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101-03
Reductions, disapprovals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100
F e d e r a l Reserve Bank credit, extension t o n o n m e m b e r b a n k s
in certain Instances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
F o r e i g n credit restraint p r o g r a m guidelines, amendments . . . . . 7 1 , 9 3 , 95
P a y m e n t s m e c h a n i s m , guidelines for i m p r o v i n g . . . . . . . . . . . . . . . .
70
R e g u l a t i o n s ( f o r details of Board's actions, see R e g u l a t i o n s ,
B o a r d of G o v e r n o r s )
Federal Open Market Committee:
A u t h o r i t y to effect t r a n s a c t i o n s in System A c c o u n t , including
c u r r e n t e c o n o m i c policy directive . . . 1 0 6 - 1 4 , 115, 122, 130, 138, 141,
146, 151, 157, 162, 167, 1 7 3 . 178, 184
C o n t i n u i n g a u t h o r i t y directive on d o m e s t i c o p e r a t i o n s . . , . 1 0 6 , 120, 1 2 7 ,
128, 134, 136, 1 3 8 , 140
C o n t i n u i n g a u t h o r i z a t i o n s , review . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
Foreign currency operations, authorization and
directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106, 1 0 9 - 1 4 , 136
P r e s i d e n t s a n d Vice Presidents of Federal Reserve B a n k s :
C o n f e r e n c e of Presidents a n d C o n f e r e n c e of First Vice Presidents . . . . 3 0 9
List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 6 - 0 8
Salaries of Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
242
P r i c e s — w a g e s and labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29—35
Profit a n d loss, F e d e r a l Reserve B a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . .
239
316
INDEX
Page
Meal estate, loans to bank examiners, legislative recommendation . . . . . .
200
Record of policy actions (See Policy actions)
Regulations, Board of Governors:
D, Reserves of Member Banks:
Amendments to apply same requirements to- banks of like size . . . .
78
Delegation of authority, amendment of rules . . . . . . . . . . . . . . . . . . . . . 67, 90
G, Securities Credit by Persons Other Than Banks, Brokers, or Dealers:
Over-the-counter margin stocks, criteria for continued listing,
amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Stocks, increase in certain margin requirements, amendment . . . . . . .
94
Technical amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
J, Collection of Checks and Other Items by Federal ReserYe Banks:
Amendments to require banks to pay for their checks same day
presented for payment by Federal Reserve . . . . . . . . . . . . . . . . . .
78
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206
T, Credit by Brokers and Dealers:
Mutual fund shares and insurance, credit for combined acquisition,
amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
Over-the-counter margin stocks, criteria for continued listing,
amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Reporting requirements, new, for exchange specialists,
amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Stocks, increase in certain margin requirements, amendment . . . . . .
94
Technical amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
U, Credit by Banks for the Purpose of Purchasing or Carrying
Margin Stocks:
Exemption from margin requirements of certain credit extended
to block positioners and third-market makers, amendments . . . . . .
88
Over-the-counter margin stocks, criteria for continued listing,
amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Stocks, increase in certain margin requirements, amendment . . . . . . .
94
Technical amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Y, Bank Holding Companies:
Nonbanking activities:
Activities not closely related to banking, interpretations .72, 77, 81, 84
Insurance agency activities, interpretation , . . . . . . . , . . . . , . . . . , ,
85
Investment advisory activity permitted;
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68, 76
Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
Investments in projects designed primarily to promote
community welfare, interpretation . . . . . . . . . . . . . . . . . . . . . . . .
75
Underwriting credit life and credit accident and health
insurance directly related to extensions of credit, amendment . ,
96
317
INDEX
Page
R e g u l a t i o n s , Board of G o v e r n o r s — C o n t i n u e d
Z, T r u t h In L e n d i n g :
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91, 92
Repurchase agreements:
B a n k e r s ' acceptances . . . . . . . . . . . . . . . . 107, 120, 127, 228 ? 2 3 0 , 2 3 2 , 236
F e d e r a l agency obligations . . . . . . . . . . . . . . . . . . . . 120, 127, 135, 2 2 8 , 2 3 0 ,
232, 2 3 5 , 2 3 6
U.S. G o v t . securities . . . . . . . 107, 120, 127, 135, 2 2 8 , 2 3 0 , 2 3 2 , 2 3 5 , 2 3 6 ,
250, 2 5 2
Reserve r e q u i r e m e n t s :
Legislative r e c o m m e n d a t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195
Member banks:
Regulatory changes, a m e n d m e n t of Regulation D . . . . . . . . . . . . . . . .
78
Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
244
Reserves, m e m b e r b a n k s :
Reserve r e q u i r e m e n t s (See Reserve r e q u i r e m e n t s )
Reserves a n d related Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
Salaries:
B o a r d of G o v e r n o r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223
F e d e r a l Reserve B a n k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
242
Savings bond meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217
Securities (See specific types of securities)
Special D r a w i n g Rights . . . . . . . . . . . . . . . . . . . . . . . . 2 2 8 , 2 3 0 , 232 ? 2 5 0 , 2 5 2
State m e m b e r b a n k s :
Assets a n d liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
B a n k i n g offices, changes In n u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254
C h a n g e s in control, reporting r e q u i r e m e n t s . . . . . . . . . . . . . . . . . . . . . . .
208
Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207
Foreign branches, number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213
I n v e s t m e n t s for c o m m u n i t y d e v e l o p m e n t , legislative
recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201
M e r g e r s a n d consolidations . . . . . . . . . . . . . . . . . . . . . . . . . , 2 1 0 , 2 1 4 , 2 5 8 - 7 9
N u m b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 9 , 249
Stock m a r k e t credit:
Margin requirements:
E x e m p t i o n of certain credit extended to block positioners a n d
t h i r d - m a r k e t m a k e r s , a m e n d m e n t of Regulation U . . . . . . . . . . . . .
88
I n c r e a s e In certain r e q u i r e m e n t s , a m e n d m e n t of Regulations
G, T , and U . .
........................ ^.............
94
Technical a m e n d m e n t of Regulations G , T , a n d U . . . . . . . . . . . . . . .
82
M u t u a l fund shares and insurance, credit for c o m b i n e d acquisition,
a m e n d m e n t of Retaliation T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
318
INDEX
Page
Stock market credit—Continued
O v e r - t h e - c o u n t e r m a r g i n s t o c k s , criteria for c o n t i n u e d listing,
a m e n d m e n t of R e g u l a t i o n s G . T , a n d U . . . . . . . . . . . . . . . . . . . . . . .
72
R e p o r t i n g r e q u i r e m e n t s , n e w , for e x c h a n g e specialists, a m e n d m e n t
of R e g u l a t i o n T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
System O p e n M a r k e t A c c o u n t :
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..................
216
A u t h o r i t y to effect t r a n s a c t i o n s in . . . . . . 1 0 6 - 1 4 , 115, 122, 130, 1 3 8 , 1 4 1 ,
146, 1 5 1 , 157, 162. 167, 1 7 3 , 178, 184
F o r e i g n c u r r e n c i e s , review of o p e r a t i o n s . . . . . . . . . . . . . . . . . . . . . . . . .
189
T r a i n i n g activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
214
T r o t h in L e n d i n g :
Regulation 2 , a m e n d m e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 . 92
R e p o r t to C o n g r e s s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
215
U . S . b a l a n c e of p a y m e n t s :
F o r e i g n credit r e s t r a i n t p r o g r a m . . . . . . . . . . . . . . . . . . . . 7 1 . 9 3 , c>5, 1 9 1 - 9 4
Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 9 - 6 4
U.S. Govt. securities:
B a n k h o l d i n g s , by class of b a n k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
249
F e d e r a l R e s e r v e Bank e a r n i n g s . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 7 , 2 1 8 , 238
Federal Reserve Bank holdings . . . 2 1 7 , 218, 228, 230, 232, 234, 250, 252
Open market operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105-88, 236
R e p u r c h a s e a g r e e m e n t s . . . . . . . . . 107, 120. 127, 135, 2 2 8 , 2 3 0 , 2 3 2 , 2 3 5 ,
236, 250, 252
Special certificates p u r c h a s e d d i r e c t l y f r o m U n i t e d S t a t e s . . . . . . . . . . .
235
U . S . G o v t . a g e n c y o b l i g a t i o n s (Sec F e d e r a l a g e n c y o b l i g a t i o n s )
V l o a n s (Sec D e f e n s e p r o d u c t i o n l o a n s )
V o l u n t a r y foreign credit r e s t r a i n ! p r o g r a m
. . . . . . . . . . . . . 71, 93, 95,
W a g e s , l a b o r costs, a n d prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191-94
29-35
319
@FedFRASER