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Annual Report
Federal Reserve Bank
o f Chicago

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Head O ffice
230 South LaSalle Street
Chicago, Illinois 60690
Detroit Branch
160 West Fort Street
Detroit, Michigan 48226
Des Moines O ffice
616 Tenth Street
Des Moines, Iowa 50309
Indianapolis O ffice
41 East Washington Street
Indianapolis, Indiana 46204
Milwaukee O ffice
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304 East State Street
Milwaukee, Wisconsin 53202

For additional copies o f this report, contact
the Public Information Center, Federal
Reserve Bank o f Chicago (,i 12/122 5 111)

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T h e F ed eral R eserve B ank o f C h ica g o is one of 12 regional Federal

Reserve Banks that, together with the Board of Governors in Washington,
D.C., serve as the nation’s central bank. The Federal Reserve’s primary
responsibility is to foster a flow of money and credit through the economy
that promotes economic growth and a stable dollar. Each Reserve Bank also
issues the nation’s currency and coin, regulates and examines commercial
banks and bank holding companies, and provides banking serv ices to the U.S.
government and to depository'Institutions within its district. The Federal
portions of Illinois, Indiana, Michigan, and Wisconsin.

Message from the President 2
1985 in Revieiv

4

Executive Changes

20

Directors

21

Advisory Councils

23

Officers

24

Financial Statements

26

President Silas Keehn

For the Federal Reserve Bank of Chicago, 1985 was a year of significant
accomplishment. Confronted by challenging circumstances in the national
and international environment and particularly in the region we serve, we set
ambitious objectives in each area of our activity, and in each area, we
achieved them.
Indeed, in one area, our financial service activities, the Bank achieved a
particularly important milestone during 1985. A process of transition that
dramatically altered the nature of the Bank’s participation in the payments
system was set in motion by Congress in 1980 by the Monetary' Control Act.
The Bank’s solid performance in its priced service activities during 1985 gives
us confidence that this transition has been successfully accomplished.
This achievement, significant in itself, has even
larger implications that should be noted. The
payments system represents, in essence, the pipeline
through which our nation’s economic activity flows.
The participation of the Reserve Banks in the
payments system, therefore, has served as a critical
adjunct to their broader responsibilities for the
smooth functioning of both the economy and the
financial system. The need for the Federal Reserve
Bank of Chicago to continue as an important and
effective participant in the payments system, then,
relates in a fundamental way to our overall monetary
policy responsibilities.
In the area of our supervisory' and regulatory
responsibilities, the challenges and the accomplishments
were also extremely significant. The stress in our
financial system was nowhere felt more acutely than
by the many agricultural banks in our District. While
the process of adjustment has resulted in the closing
of a distressing number of institutions, the problems
have been confined to the individual institutions—
they have not become systemic—indicating that the
supervisory' process can and has responded effectively.
Also during 1985, this Bank, through its
economic research and monetary policy activities,
achieved considerable success in expanding our
understanding of the forces shaping the economy of
the region we serve and, importantly, in sharing this
growing expertise with private and public entities
that have a common interest in regional economic
development. At the same time, we can also take
pride in our accomplishments during 1985 as a
participant in monetary' policy. In the face of some
particularly challenging circumstances, the Federal Reserve System succeeded
in forging a policy consistent with sustained economic growth and the lowest
level of inflation in more than a decade.
The expansion, now entering its fourth year, continues to move forward.
Our economy has created more than eight million new jobs since the
prev ious peak, a remarkable achiev ement. Even more notable, particularly
from the monetary policymaker’s perspective, is that the expansion has
proved so durable, and yet inflation has not reemerged as a significant threat.
But beneath the surface of this good economic news, there has been a
buildup of some significant imbalances that provide cause for concern.
It is particularly—and painfully—clear to all of us in the Midwest that the
expansion has been quite uneven in different regions of the country as well as
among various sectors of our economy. Despite strong gains in employment

nationally in 1985, manufacturing jobs continued to decline and the
agricultural sector remains extremely depressed.
Conditions in these sectors, so critically important to the Midwest, are
tied to another imbalance that characterizes the economy today—our
international trade deficit, which has climbed relentlessly to new records.
Moreover, for the first time in seven decades our nation became a net external
debtor in 1985, and should recent trends continue, we will become the
world’s largest debtor nation before the decade is out.
The escalation of our debts to the rest of the world has been driven in
turn by another imbalance—the fiscal deficit. That imbalance is the common
denominator in the various weaknesses that threaten our economy.
That this nation has incurred enormous budget deficits during a period
of sustained economic expansion has been most inappropriate—and without
historical precedent. To be sure, some encouraging progress was achieved in
1985 to place the deficit over the longer term on a declining trend. But a
number of very difficult choices will have to be made to turn these brighter
prospects into reality. If our nation is not up to the task, the favorable trends
in economic growth, interest rates, and prices will be reversed.
Paralleling the succession of record fiscal deficits, debt continues to
build across all other segments of our society. In turn, this greater leveraging
of both households and corporate America adds another element of
vulnerability to an already fragile financial system. Constrained by regulatory
barriers that have outlived their usefulness, and buffeted by drastically changed
economic circumstances, our nation’s banks and thrifts have had to contend
with significant asset and earnings problems during the past few years. While
not systemic, the problems clearly have been a disturbing element.
Against this background, the real success story of 1985 was not simply
the economy’s continued growth, but rather that this growth was achieved in
the face of such unfavorable circumstances. And it is these circumstances that
provided some of the most significant challenges faced by the Federal Reserve
Bank of Chicago during 1985 and that also underscore its achievements.
What the Bank has been able to accomplish is in large part an outgrowth
of the invaluable input and support of the institutions and individuals we
work with and serve. Most importantly, the Bank’s achievements are visible
evidence of the outstanding commitment and efforts put forth by its
directors, officers, and most particularly, our corps of dedicated employees
that are, in essence, the Federal Reserve Bank of Chicago.
While each and every' one of these individuals has played a vital role in
the Bank’s success, it is also appropriate to highlight the contribution of one
person in particular—Stanton R. Cook—who completed the maximum of two
terms on our Board of Directors at the end of 1985, having served as Chairman
for the past two years after four years of service as Deputy Chairman.
Stanton Cook has been unstinting in his commitment of time, energy',
and interest on behalf of the Bank. He guided our Board during a period of
unprecedented change in the economy and financial system, and his strong
leadership and direction were invaluable. We are indebted to him for his
important contribution to our Bank and the Federal Reserve System.
While we have indeed been fortunate to have benefitted from Stanton
Cook’s association with the Bank, we are likewise fortunate that his
leadership role has been assumed by Robert J. Day who has served as our
Deputy’ Chairman. With Robert Day now at the helm, and with the constant
dedication of our entire Board and staff, we can look to the future, fully
confident in the Bank’s continued commitment to providing the highest
possible level of service to the public, our region, and its financial institutions.

The U.S. economy performed well in 1985, the third consecutive year of
expansion—a duration rarely exceeded in peacetime. Moreover, there was
little evidence that the economy was winded by its 37-month climb.
Employment, retail sales, construction, and factory output all ended the year
at record highs. The stock market broke new ground. Inflation remained at
the lowest rate in more than a decade. Most forecasters for 1986 saw further
growth and continued modest inflation.

The generally healthy tone of the U.S. economy, however, could not mask
a number of problems. Some were immediate, such as the foreign trade
deficit, the agricultural crisis, and the politically charged question of the
federal budget deficit. Others, such as rising personal and business
indebtedness and stresses on the financial system, attracted increasing
attention in 1985. In this environment, the atypical behavior of the monetary
aggregate M1, which serves as a guide for monetary policy, presented an
additional challenge to policymakers.

The value of the U.S. dollar trended downward during most of 1985.
However, the U.S. economy continued to be buffeted by the sharp rise in the
value of the dollar during the first half of the 1980s, resulting in an all-time
high U.S. trade deficit.
Between early 1980 and 1985, the U.S. dollar almost doubled in value
relative to the German mark, and more than doubled in value relative to the
French franc and British pound. Its appreciation relative to virtually all other
major world currencies was equally significant. The rise, which peaked in
February 1985, has had a profound impact on the United States economy. In
part, the impact was positive for U.S. consumers and businessmen. U.S. prices
of foreign goods and supplies were kept considerably below where they
otherwise would have been, helping to keep inflation relatively low and
expanding the purchasing power of U.S. residents. On the other hand, the
rising value of the dollar, combined with slow growth in demand abroad,
inflicted hardship on many sectors of the U.S. economy as the cheaper
foreign-produced goods displaced U.S. goods in markets here and abroad. As a
result, U.S. exports stagnated and imports rose. In 1985, the trade deficit
reached $124 billion, about five times the level of 1981.
Tlie country’s growing deficit in trade and other current account
transactions was financed by borrowing abroad and by liquidation of U.S.owned foreign assets. These developments have resulted over the years in an
erosion of U.S. net international wealth. The year 1985 represented a
watershed in this trend as the United States became a net international debtor
for the first time since World War I.
In the latter part of 1985, the U.S., together with the governments of
Germany, Japan, the United Kingdom, and France ( the so-called Group of Five
or G-5) launched an effort to bring down the value of the dollar through
active intervention in the foreign exchange markets, and through
coordination of domestic economic policies. The effort was in part designed
to forestall protectionist moves that would seriously jeopardize the flow of
commerce between the United States and its trading partners.
Tlie joint action put further pressure on the dollar’s already downward
trend. By the end of 1985, the dollar had depreciated by about 25 percent in
its trade-weighted average value against the world’s major currencies, a
decline that sets the stage for improving U.S. international economic
relations.

The nation’s agricultural sector has been dramatically affected by the
international trends of the early 1980s, a phenomenon still painfully apparent
in 1985.
U.S. crop production rose 5.5 percent and livestock production 3
percent from the year before. Production of corn and soybeans, the two

dominant crops grown in the Seventh Federal Reserve District, were up 16
percent and 13 percent respectively, with corn far surpassing the 1982
record. But the expanded production coincided with further declines in
market demand, especially from abroad. Exports of both corn and soybeans
fell to 8-year lows. Several factors have contributed to the slide in farm
exports—the high value of the U.S. dollar, changing trade patterns, sharply
expanded production elsewhere in the world, and U.S. price supports that
undermined the price competitiveness of U.S. crops in world markets.
The combination of expanded production and weaker demand
depressed commodity prices and farm earnings again in 1985. The index of
prices received by farmers fell to a 7-year low, down 10 percent from the
1984 high. The lower prices meant lower farm sector earnings and lower
returns on assets, and thus further large declines in farm land values. Farm
land values in the District, on average, fell 20 percent in 1985, and are now
some 42 percent below the 1981 peak. The drastic declines in land values,
which account for three-fourths of farm sector assets, have reduced the
equity of all land owners. Perhaps one out of every six commercial farm
operators is facing serious problems and possible insolvency.
The financial stress among farmers has led to reduced earnings and
sharply rising loan charge-offs among farm lenders. Commercial banks
nationwide charged off about $1.3 billion, or 4 percent, of their farm loans in
1985, up from roughly $900 million in 1984. Hardest hit was the Farm Credit
System (FCS). Accounting for about a third of the roughly $200 billion in
outstanding farm sector debt, the FCS, composed of 37 separate banks and
numerous borrower-owned local cooperatives, is the leading supplier of
credit to farmers. For 1985, the FCS reported a net loss of $2.7 billion, which
contrasted sharply with net profits of $373 million in 1984.
Two pieces of federal legislation enacted in late 1985 offer some help for
agriculture. An amendment to the Farm Credit Act of 1971 should help
restore confidence in the FCS. The Food Security Act of 1985, signed on
December 23, extends and modifies the provisions of existing government
farm programs for 5 more years. Among other things, the Act lowers support
prices for most grains and soybeans, in recognition of the need to enhance
the competitiveness of U.S. commodities in world markets. Simultaneously,
the Act insures that government payments to crop farmers will offset most of
the loss from lower support prices.

With the ongoing agricultural crisis and large job losses linked to the
strong dollar, economic recovery in the Seventh Federal Reserve District
continued to lag that of the nation in 1985. Some 45,000 jobs were lost in the
District’s manufacturing sector in 1985, despite a continued strong
performance by the auto industry In the nonmanufacturing industries,
District employment growth was positive, but only about two-thirds the
national increase of 4 percent in 1985.
The decline of the Midwest relative to the rest of the nation has been
evident for more than a decade, in recession and recovery' alike. The long
cyclical decline did not end in 1985. But there were some hopeful signs.
The brutal revaluation of farmland may be nearing its end. Some analysts
look for a bottom to the land price decline in 1986. Lower-valued farm real
estate, linked with changes in farm support programs, and cheaper energy',
could help to boost agriculture, particularly in the Midwest.
The Midwest’s manufacturing sector continues its painful process of
realignment with the new economic realities. New technologies are being
applied to the old industries. The Midwest—particularly the area from Ann
Arbor and Detroit to Cincinnati known as Automation Alley—is the center for

about 5 percent of GNP, an historically high proportion.
Huge budget deficits have serious ramifications for the nation. As noted
by Federal Reserve Board Chairman Paul Volcker:

a growing robotics industry and provides most of the customers for that
industry' as well. In biotechnology', Midwestern research is concentrating on
applications for agriculture and for the food and drug industries, all important
components of the Midwestern economy. Computer softw are and
communications research companies are springing up west of Chicago to add
to the alreach- considerable strengths of the Midwest in those fields.
Perhaps the most hopeful sign of a Midw estern renaissance lies in the
growing realization that Midwestern governments and industries must begin
to act in the area’s common interest. Regional cooperative efforts—in which
the Federal Reserve Bank of Chicago has been deeply involved—have
focussed the attention and energies of the Midwest on economic realignment
and recovery. But the task at hand remains a substantial one.

The persistence of deficits of such awesome dimensions
worsens our long-run prospects for economic growth,
ensures that a substantial portion of our future income will
have to be sent abroad to finance indebtedness to foreigners,
and perpetuates the difficulties of our industries that
compete in world markets. By contributing to high real
interest rates, the deficits help to support a high exchange
value of the dollar, weakening the ability of farmers and
others exposed to trade pressures to repay loans. Moreover,
the rapid growth of federal debt exacerbates financial
problems elsewhere in the economy. The high real interest
rates raise the debt service costs of all borrowers, including
those overseas with debts to U.S. banks.

While the national economy completed a third year of expansion, there
was a record S212 billion federal budget deficit in fiscal 1985, the latest in a
string of huge federal budget shortfalls. U.S. Treasury debt has more than
doubled over the past five years, and will surpass the $2 trillion mark in 1986.
Federal budget deficits as a percent of GNP typically rise in recessions and
early recovery periods, then decline as an economic expansion matures.
However, in the current expansion federal budget deficits have remained at

The likelihood of continued record federal budget deficits may have
been reduced in December when the President signed the “Balanced Budget
and Emergency Deficit Control Act of 1985,” commonly referred to as
Gramm-Rudman. While both the constitutionality and workability of this law
Federal Reserve Note, 1914.

Federal Reserve Note, 1914.

i '/■-

are in doubt, its enactment can be viewed as a commitment on the part of the
Congress and the Administration to work toward reducing budget deficits
over the coming years.

Private Debt: A growing burden
Like federal debt, debt of American consumers, firms, and municipalities
continued to expand at a rapid pace in 1985. This continued rapid debt
accumulation increases the vulnerability of some firms and individuals to
adverse changes in the economy or financial markets.
Outstanding consumer installment debt as a percent of disposable
income climbed to a record level in 1985. In addition, delinquency rates on
consumer debt have been rising since 1984, although they remain well below
1980 peaks. But despite the rise in debt, household assets and net worth are
at record levels and households in the aggregate appear to be in a
comfortable financial position. Nonetheless, individual households with
excessive debt and low assets could experience difficulties if the economy
were to turn downward.
The rise in nonfinancial corporate debt has occurred despite lower
external financing needs as cash flow outpaced increases in spending on fixed
capital and inventories. A significant portion of the corporate debt rise can be
traced to the extraordinary' pace of mergers, leveraged buyouts, and stock
repurchases of the past two years. Resulting corporate stock retirements
significantly exceeded new issues in both 1984 and 1985, and corporate
debt-to-equity ratios rose sharply.
As a result, the default risk of U.S. firms has increased, a factor reflected
in the unusually large number of downgradings in bond ratings in a period of
economic expansion. Firms that have increased their leverage are now more
vulnerable to a period of weakness in their line of business, and some may be
more vulnerable to increases in interest rates, adding another element of
fragility to an already strained financial system.

Signs of stress on America’s financial system were evident once again in
1985. The number of bank failures reached another post-Depression record,
particularly because of problems in agriculture, real estate, and energy loans.
While the Farm Credit System reported sizable losses and sought financial
assistance from Congress, many savings and loan associations continued to
operate with negative tangible net worth, despite higher earnings. Moreover,
the failure of several government securities dealers resulted in losses for some
banks, thrifts, and municipalities, and undermined confidence in private state
deposit insurance funds.
The strains on the financial system seen over the past few years are the
outgrowth of many factors. Heavy debt in some industries, particularly
agriculture, real estate, and energy, have been exacerbated by difficulties

associated with adjusting to a less inflationary environment and/or
heightened competition from abroad. At the same time, financial institutions
continue their own adjustment to a less regulated environment.
Thus far, regulators have been able to contain financial system problems.
While confidence in privately-insured deposit funds was shaken last year, faith
in the federal deposit insurance funds, and the ability of regulators to prevent
various strains on the financial system from spreading, continues to be strong.

1

For all the seriousness of these problems, policymakers can be gratified
by the performance of the economy in 1985. Economic growth continued at
a more sustainable pace, employment gains were impressive, and inflation
remained subdued. Moreover, forecasts generally suggest a continuation of
these trends. However, the making of monetary policy in 1985 was made
more difficult by the unusual behavior of M1 relative to the economy.
Throughout 1985, growth in M l—the narrowest measure of money,
including currency, demand deposits, and other checkable deposits such as
NOW accounts—was well above targeted ranges set by the Federal Reserve
System’s Federal Open Market Committee. In the past, such rapid M1 growth
usually presaged faster real GNP growth and/or more inflation. The dilemma
faced by monetary' policymakers, then, was reconciling the conflicting signals
from rapid Ml growth with what was actually happening in the economy.
The setting of monetary and credit aggregate growth ranges has been a
central part of monetary' policy for over a decade. Indeed, since 1975, when
such ranges were first reported to Congress, they have provided the primary'
means for communicating monetary' policy plans to Congress and the public.
The usefulness of money and credit aggregates as monetary policy guides,
however, rests on the existence of a predictable relationship between them
and the economy.
For most of the postwar period, M1 was the most reliable guide. But in
1982-83 and again in 1985, Ml rose more rapidly than history suggests was
consistent with economic performance. For example, if historical
relationships between Ml and the economy had held in 1985, nominal GNP
growth would have been nearly triple what actually occurred. Adding to the
policy dilemma was a deterioration in relationships between the economy
and other monetary and credit aggregates as well, although the problem
seems more acute for Ml.
The deterioration of M1 as a policy guide seems to have many causes.
One stems from the international situation. A larger part of domestic demand
for goods and services in recent years has been satisfied by imports. As a
result, domestic output or GNP has been outstripped by' domestic spending
which may be more closely tied to Ml. Another factor stems from financial
deregulation. Interest-bearing checking accounts included in Ml are now
more widely available. Such accounts serve not only as transactions balances,
but also provide savings services to their owners. Another factor, and perhaps
the most important one, is interest rates. Growth of M1 appears to have
become more responsive to changes in interest rates over the past few years,
as interest rates have fallen sharply.
Given the unusual behavior of M1 relative to the economy last year, the
FOMC accepted Ml growth above its growth range. The behavior of Ml and
other money' and credit measures w'as evaluated in light of what was
happening in the economy, inflation, and financial and international markets,
including the exchange value of the dollar.
It is still not clear whether M l’s unusual behavior last year will become
the norm or whether its historical relationship will reemerge. So far real
economic growth continues with few signs of stalling, and inflation remains
moderate, at least by recent standards. Without good guideposts to the future
behavior of the economy, however, policy decisions are much more difficult.
The ever present growth-vs.-inflation tradeoff remains. Too tight a policy
could stall the expansion, while too loose a policy could reignite inflation.
Despite the many difficulties, recent economic performance and a favorable
outlook increase confidence that policy makers will meet the challenge
successfully.

„

_

Postage Currency, f862.

Despite the various imbalances in the economy, the Federal Reserve was
able to achieve its overall monetary policy goals in terms of a healthy and
growing economy in 1985. The economic upswing continued through its
third year, inflationary pressures remained in check, and the unemployment
rate dropped to its lowest level since 1980.
To accomplish this, the Federal Reserve, as always, had to travel a narrow
course. On one side, too tight a policy could seriously damage the fragile
prosperity. On the other side, too loose a policy could recreate the inflation
which poisoned the 1970s.
The reason navigation is always difficult is that
monetary policy operates with a lag. A policy that seems
appropriate today given the state of the economy may be
completely inappropriate by the time that policy actually
has an effect. Thus, good policy depends on a combination
of knowing where the economy is going and how a given
policy action will affect that direction.
Those who work in the Bank’s economic policy and
analysis areas provide the information and supporting
analysis to help President Silas Keehn make such policy
judgments in his role as a participant in the Federal Open
Market Committee—the Fed’s chief policy making body'. As
part of his responsibility as a member of the Committee,
Keehn provides first-hand, grass-roots information on
current economic conditions and emerging trends in the
Seventh Federal Reserve District.
To help provide this information, Bank staff members
gather, compile, and analyze a wide range of statistics and
other information to determine the current and longrange outlook for the District economy. This information, along with input
from other sources such as the Bank’s board of directors, is ultimately
incorporated into national monetary policy.
Along with these ongoing activities supporting current policy decisions,
the Bank also gave special emphasis during 1985 to researching some of the
fundamental relationships that underlie monetary policy and the behav ior of
the economy. The results of these studies were shared with the broader
economics profession in 1985 through a variety' of papers and published
articles.
The Bank also sought during 1985 to contribute to a more thorough
understanding of economic conditions and prospects in the region it serves.
To this end, the Bank provided support for a variety of important cooperative
studies directed at improving the long-run economic performance of the area
within the Seventh District.
These efforts include the Bank’s participation in a cooperative venture
undertaken by Illinois, Indiana, Michigan, and Wisconsin and four other Great
Lakes states. The Bank played a major role in preparing a statistical
compendium for the region entitled, 7he Great Lakes Economy: A Resource
and Industry Profile o f the Great Lakes States. The information developed
was meant to serve as a common basis for a better understanding of the

region’s economic position and performance, and can be used to develop
common regional strategies.
A similar effort was sponsored by the Wisconsin Strategic Development
Commission, a public/private partnership created by the governor of
Wisconsin. The Commission issued its report in 1985,
containing a long-range strategic plan for stronger economic
performance in Wisconsin, with a particular focus on
developing job growth in the state. The Bank assisted the
-■sm
u
Commission’s study groups by collecting and analyzing the
data that provided a basis for assessing the state’s economic
strengths and weaknesses.
The Bank is also continuing its participation in a study
sponsored by the Commercial Club of Chicago. While
assisting in the Club’s Jobs fo r Metropolitan Chicago project,
the Bank has collected and analyzed data on different aspects
of the Chicago metropolitan economy. The Bank has also
started preliminary work on a strategic economic plan for
the Detroit area sponsored by the Detroit Renaissance
Commission.
In a related effort, the Bank continued in 1985 to
promote a two-way flow of information with various groups
across the District. By improving such communication, the
Bank can expand its understanding of the regional economy
HPHE U ni ted St a t e s cnfure the Payment
and also share its expertise with other interested parties.
o f the within BILL, and -will draw Bills
The formation of two new Federal Reserve Bank of
o f Exchange for the Intereft annually, i f de­
manded, according to a Refolutian o f C O N ­
Chicago advisory groups—the Advisory Council on
G R E S S , o f the \%ih o f March, 1780.
'
Agriculture and the Advisory Council on Small Business—
was aimed at improving the Bank’s input from these sectors.
The Councils each met twice with President Keehn and
Printed by H A L L and SELLERS
other senior Bank officials to discuss general economic
policy issues as well as developments and prospects in the
agricultural and small business areas. Council members,
selected from nominations by organizations representing
agriculture and small business in the Seventh District, were
chosen to assure representation of different organizations
Massachusetts Bill of Credit, 1780.
and geographic areas as well as a mixture of small business and agricultural
activities.
The first citizens o f the United
An expanded series of economic' forums featuring the Bank’s president
States had an early lesson in
and economic research director provided another important avenue for
inflation that we recall today
communication during 1985. Sessions held in each of the District’s 5 states
with the expression “not worth a
permitted the Bank’s top monetary policy participants to discuss the general
continental.” This 1780 $5
economic outlook, regional conditions, and monetary policy issues and
Massachusetts bill o f credit was
actually worth $200 in the
objectives with financial institution executives and other business leaders
currency issued by the
representing 18 of the region’s metropolitan areas.
Continental Congress to finance
the Revolutionary War.

The number of banking organizations supervised and monitored by the
Federal Reserve Bank of Chicago is among the largest within the Federal
Reserve System. This responsibility, complicated by the rapidly changing
environment in which financial institutions function, has become more
critical in recent years—and more challenging.

Bank of the United States Note,
1840, and Federal Reserve Bank
Note, 1918.

As a regulator, the Bank helps to establish the framework of policies and
rules within which depository institutions must operate. As a supervisor, it
administers these policies and monitors the condition of the banks and bank
holding companies under its jurisdiction. As a lender of last resort, the Bank
contains disruptions in the financial system by assisting depository institutions
that experience temporary, seasonal, or emergency needs for credit.
These activities provide a stable environment in which the various
participants in the economy can conduct financial transactions, as well as an
environment that encourages efficiency and competition in the financial
marketplace. As a result, the
interests of depositors and
borrowers alike are protected.
During 1985, the Bank carried
out these responsibilities by helping
to maintain stability and public
confidence in the face of
considerable stress in the financial
system. While there were numerous
problems for individual institutions,
they were contained—they did not
become systemic. At the same time,
the Bank helped to improve the
supervisory7process itself.
Because supervision and
regulation should foster a banking
system that responds quickly to
changes in the financial
environment, the supervisory' and
regulatory function itself must be
equally responsive. Such an
increased responsiveness was the
goal of many of the Bank’s 1985
activities.
The Bank has been a leader, for example, in applying automation to the
supervisory' function. The increased use of electronic data analysis assists in
the critical “early warning" stage of bank monitoring by quickly identifying
institutions that require attention. In the field, examiners use personal
computers to analyze and assess individual firms. Personal computers also
shorten the time for processing examination reports, producing data which is
more timely and, therefore, more meaningful. This innovative adaptation of
automation to the supervisory' function should be even more valuable in the
future as changes engendered by interstate banking add to the complexity of
the Bank’s workload.
Similarly', changes in bank surveillance programs were adopted by the
Federal Reserve Board in 1985 with a dual purpose in mind: to prevent
problems from developing at banking institutions, and to identify and quickly
resolve problems should they occur. The new policies call for increased

monitoring through reports submitted to the Fed, combined with more
frequent on-site inspections and examinations of banking organizations. To
implement this program change, the Chicago Fed began, in 1985, to augment
its examination staff. Eventually, 40 to 45 individuals are to be added—an
increase of approximately 20 percent. In addition, an examination office is
being established in Des Moines, which will bring Bank field staff closer to its
constituency.
Despite heavy' demands on the Bank’s staff within the Seventh District,
the Bank was able to help respond to critical events outside the region.
During the savings and loan crises in Mary land and Ohio, Chicago Fed
personnel traveled to these areas to provide assistance and guidance.
While enhanced surveillance provides a protective sheath for the banking
system, other new regulatory' policies and programs were adopted in 1985 to
strengthen the system internally and make it more resilient. Capital adequacy
guidelines for bank holding companies and state member banks were
upgraded in 1985 to provide a better cushion in times of financial strain.
Another area of regulatory concern and policy action in 1985 related to the
growing volume of transactions on large-dollar electronic funds transfer
systems. While this growth has increased speed and efficiency in the
payments mechanism, it also produced an undesirable by-product—increased
risk. In response, the Board of Governors approved a new policy covering
Fedwire, the Federal Reserve’s network, as well as the private large-dollar
transfer systems. Essentially, the policy is aimed at reducing credit exposure,
also referred to as daylight overdrafts, through voluntary measures that take
effect in early 1986.
The Federal Reserv e Bank of Chicago played a key role in implementing
this policy by coordinating the development of educational programs and
materials used throughout the Federal Reserve System. In addition, the Bank
sponsored seminars across the Seventh District to familiarize the many
institutions under its own jurisdiction with the new policy.
Continued stress in the agricultural sector during 1985 led the Board of
Governors to revise its seasonal credit program. Again, the Chicago Fed

Between the Revolutionary and
Civil Wars, private banks issued
much o f the paper currency that
circulated in the U.S. But without
a general system o f banking
regulation, there was a lack of
confidence in banks, and in their
notes, underm ining the smooth
operation o f the econom y.
Citizens Bank of Gosport, Indiana
Note, 1857.

played an instrumental role by assisting Board staff in the development of a
liberalized program. Within the District, the Bank sponsored a series of
seminars, and staff appeared at various banking association meetings to
introduce and explain the details and benefits of the revisions.
Concomitant with the Bank’s responsibilities for supervising and
regulating financial institutions is a responsibility to foster a better
understanding of regulatory issues and problems. To this end, the Bank

sponsors a wide-ranging program of research to identify and analyze these
issues, and many such issues are highlighted each year at the Bank’s
Conference on Bank Structure and Competition. The 21st annual conference,
held in 1985, was the largest in conference history, and provided a forum for
regulators, researchers, and bankers to exchange views on current topics
such as deposit insurance and the problems facing agricultural banks.
The Bank’s concerns extend beyond the institutions that it monitors, and
into the communities that these institutions serve. Since the Community
Reinvestment Act (CRA) was passed, the Bank has continued to increase its
emphasis on developing strong relationships between financial institutions
and their communities. These relationships often result in the creation of
partnerships of the public and private sectors in community restoration,
maintenance, and support and in other community-related activities.
During 1985 the Chicago Fed furthered these objectives by visiting
community groups in 15 Seventh District cities to determine area needs. This
information was then shared with member banks that serve those
communities. Also, meetings were held to familiarize banks with
Neighborhood Housing Services, an organization that promotes the
revitalization of housing in designated areas. Additionally, in order to assist
the banks in implementing their community reinvestment objectives,
conferences were sponsored on related programs.
Repurchase agreement seminars held in Chicago, Detroit, and
Indianapolis represented another significant educational effort on the part of
the Chicago Fed. The three sessions were designed to acquaint investors with
risks and safeguards associated with these investments.
Despite the stress weathered by the financial system during the past year,
the basic soundness of the system and public confidence in this soundness
were both maintained. Of equal importance is the fact that enhanced policies
and procedures better position the Federal Reserve System to meet the
challenges that future years will surely bring.

In providing financial services, the Bank achieved considerable success in
1985. Perhaps the most tangible measure of this success is the fact that the
Bank fully recovered the costs of providing services. A less tangible but more
far-reaching and fundamental result is the assurance that the Bank will
continue to play an active role in the payments system.
Since its inception, the Federal Reserve’s role in the payments system has
been a vital and necessary’ component of its overall responsibilities for the
smooth operation of the economy and the financial system. Among their
various activities today, the Reserve Banks clear checks, transfer funds, issue
currency and coin, process electronic payments, issue U.S. government
securities, and process tax deposits and food stamps. Everyday financial

The series o f innovations that
have improved our nation’s
payments system traces back to
the colonists. The first paper
m oney authorized by a
governm ent in the Western
World was issued in 1690 by the
Province o f Massachusetts Bay,
and other colon ies follow ed its
exam ple.
Colonial New Jersey
Bill of Credit, 1776.

. One Shilling.
T is Death to counterfeit.

X>0<>C»C<X^»XXX>0<>C'<XXXX

TJu-RXINGTOS 'hi fyiivy-,
Vri/iL’d by Ifcfic Collins

transactions—ranging from using a quarter to buy a newspaper to writing a
check to purchase a savings bond—can be taken for granted as the result of
these and other services provided by the Fed Banks. By serving as a pipeline
through which many of the nation’s financial transactions are funneled, the
Chicago Reserve Bank and its counterparts help to assure the effective
operation of the nation’s payments system and, in turn, the stable functioning
of the economy.
The Bank’s success as a service provider during 1985 can be traced back
to the challenge presented to the Federal Reserve by the passage of the
Monetary Control Act of 1980. That legislation required the Fed to price
many of the services which were previously offered free and to recover all
relevant costs of providing these serv ices—including even an imputed
amount that the Fed would have to earn if it were a private firm, to cover
such items as taxes and a fair return on capital. The goal of the Federal
Reserve Bank of Chicago, then, became two-fold: to fully recover costs related
to providing priced services, and to continue its traditional role of promoting
a more efficient and effective payments system.
To achieve these objectives, each of the five offices of the Federal
Reserve Bank of Chicago pursued two main goals during 1985:
improving its ow n efficiency and offering new or improved services.
Among the new check services featured by the Bank was a High
Dollar Group Sort Culled program which allowed small depositors to
collect some large-dollar items one day earlier. Another new service
offered by the Bank was in response to an amendment to Regulation J
strengthening notification requirements for returning large-dollar
checks. Through the Large-Dollar Return Item Notification service,
institutions returning such items can choose one of several options
for notifying the institution where the check was first deposited of
the return. Also, deadlines were extended, allowing depositors more
time to prepare and transport work, and the Bank expanded the
Check Processing Analysis service to all District offices in 1985.
Through this service, an institution’s check volumes are analyzed to
determine how' it can receive better availability or make better use of
Federal Reserve services.
Complementing the introduction of new services, operations
were increasingly automated in order to improve efficiency. As part
of this effort, new' automated methods to process rejected cash
letters and rejected checks were introduced. By eliminating the need
for special manual handling, the time needed for processing these
items w'as reduced. Check processing was also improved by
automating the cash letter receiving process.

Interaction with customers continued to play a key role in the Bank’s
check operations in 1985. A case in point: A total of 20 seminars were held
with financial institutions to discuss how the new notification requirements
for returning large-dollar checks would affect the Chicago Fed and its
customers. Customer feedback was also an important goal of a survey
conducted to gather customer input on services as well as sessions held to
discuss customers’ experiences with the check adjustment and return item
functions.
In the cash, fiscal agency, and securities services areas, special emphasis
was placed on improving efficiency. For example, the Detroit Branch
improved securities services by consolidating activities, cross training
employees, and encouraging automation in its savings bond payroll program.
Similarly, the Chicago Office consolidated the safekeeping and noncash
collection operations to provide additional flexibility in staffing.
A similar emphasis on improving services and efficiency took place in
electronic services. For wire transfer customers, a new service was
introduced through which the Bank now stores certain key information so
that customers can easily make recurring transfers. In addition, a service
enabling customer institutions to receive information about their ACH and
check activities was enhanced in 1985 and became available from all District
Offices under its new name, ENHANCED MONEY POSITION. The Bank also
continued to improve the communications network connecting customers to
its electronic services. The process of converting institutions with higher
wire-transfer volumes from older technology' to more up-to-date interactive
terminals and personal computers was completed in 1985 and additional
institutions were connected to the network.
In the ACH area, faster processing of transactions and other
improvements were achieved by implementing new computer software. The
Bank also concentrated on expanding the electronic delivery of ACH
information by updating and enhancing the ACH file transmission system. In
addition, new automation in the processing of ACH return items resulted in
the near elimination of the costly and time-consuming process of receiving
paper items. This technology was also utilized by the Bank to design
Database Returns. This new service, to be available early in 1986, will
simplify’ and accelerate ACH return item processing by enabling subscribers
to process a return item electronically rather than by completing a lengthy
paper form. Automation also play ed a key role in increasing efficiency in net
settlement services by enabling 15 times the previous volume to be reliably
handled without an increase in staff.
These achievements and others in previous years have enabled the Bank
to successfully complete the transition necessitated by the passage of the
Monetary' Control Act of 1980. As the Bank enters the second half of the
decade, it stands poised to continue to play a significant role in shaping and
fostering further improvements in the pay ments system.

Executive
Changes

Chairman Stanton R. Cook,
President and Chief Executive
Officer, Tribune Company,
Chicago, Illinois
At year-end 1985, Stanton
Cook com pleted the maximum
o f two full three-year terms as a
director o f the Federal Reserve
Bank o f Chicago, having served
the last two years as chairman
follow ing four years o f service
as deputy chairman. During his
tenure, he provided invaluable
leadership and counsel to the
Bank, guiding it through a
period o f enorm ous challenge
and change.

Directors
Three new directors joined the Chicago Fed board in 1985: Barry F.
Sullivan and Fdward D. Powers were elected by the largest and smallest
District banks respectively, and Marcus Alexis was appointed by the Board of
Governors. In addition, the Board of Governors redesignated Stanton R. Cook
chairman of the board and named Robert J. Day deputy
chairman for 1985.
Day replaced Edward F. Brabec, president, Chicago
Federation of Labor, w7 completed the maximum two full
ho
terms as a director. Also completing their terms at year-end
1984 were Charles M. Bliss, director, Harris Bancorp, Inc. in
Chicago, and Dennis W. Hunt, president of Hunt Truck Lines,
Inc. in Rockwell City, Iowa.
In Detroit, Richard M. Gillett was named to the Branch
board by the Chicago Fed directors replacing James H.
Duncan, chairman and chief executive officer. First of
America Bank Corporation, Kalamazoo. Also, Robert E.
Brewer and Thomas R. Ricketts were reappointed by the
Board of Governors, and the Detroit directors reappointed
Russell G. Mawby Branch chairman for 1985.
New Chicago Fed directors as of January71, 1986 are
John W. Gabbert, president and chief executive officer, First
National Bank & Trust in La Porte, Indiana, and Max J.
Naylor, owner and operator of a grain and livestock farm in
Jefferson, Iowa. Gabbert was elected by7medium-sized banks
and Naylor was elected by the largest banks. They replace Mary7Garst and
Patrick E. McNarny, w7 completed two full terms on the board.
ho
Also for 1986, Robert J. Day was designated chairman and Marcus Alexis
was designated deputy chairman by the Board of Governors. Day replaces
previous chairman Stanton R. Cook who completed two full terms on the
board, while Alexis assumed Day’s former post as deputy chairman.
Selected to the Branch board effective January71, 1986 were Phyllis E.
Peters, director, professional standards review, Touche Ross & Company of
Detroit, and Donald R. Mandich, chairman and chief executive officer of
Comerica Bank—Detroit. Peters, who was appointed by the Board of
Governors, and Mandich, selected by the Chicago Fed board, replace Russell
G. Maw by and Charles T. Fisher. Robert E. Brewer was appointed Branch
chairman for 1986, replacing Maw7 in that position.
by

Officers
Officers promoted in 1985 were Thomas G. Ciesielski, vice president in
charge of Human Resource Services; Bonnie Bates, assistant vice president,
System Communications Center; Joan M. DeRycke, assistant vice president
and assistant secretary, Office of the Bank Secretariat; and Teri J. Kurasch,
assistant general counsel, Legal Department.
New officers appointed in 1985 were Assistant Vice Presidents David S.
Epstein and Geoffrey C. Rosean and Assistant Chief Examiners Douglas J. Kasl
and William H. Lossie, all in the Supervision and Regulation Department;
Charles M. Lund, assistant vice president in charge of the Milwaukee Office;
Auditing Officer Angelina Chin; Operations Officer Maria H. Coons, Support
Services; Research Officers Paul L. Kasriei and Steven H. Strongin; Operations
Officer Jerome D. Nicolas, Check Services and Operations; Assistant Counsel
M. Kathleen O’Brien, Legal Department; and Yvonne H. Montgomery,
operations officer, Detroit Branch.

Deputy Chairman Robert J. Day, Chairman and Chief
Executive Officer, USG Corporation, Chicago, Illinois

Marcus Alexis, Dean, College o f Business Administration, University
o f Illinois at Chicago, Chicago, Illinois

Mary Garst, Manager, Cattle Division, The Garst Company,
Coon Rapids, Iowa

Leon T. Kendall, Chairman o f the Board and Chief Executive Officer,
Mortgage Guaranty Insurance Corporation, Milivaukee, Wisconsin

Patrick E. McNamy, President a nd Chief Executive Officer,
The First National Bank o f Logansport, Logansport, Indiana

Edward D. Powers, President and Chief Executive Officer,
Mueller Company, Decatur, Illinois

Barry F. Sullivan, Chairman o f the Board a nd Chief Executive
Officer, The First National Bank o f Chicago, Chicago, Illinois

O. J. Tomson, President, The Citizens National Bank o f Charles City,
Charles City, Iowa

Directors
Detroit Branch
(as o f December 31, 1985)

Chairman Russell G. Mawby, Chairman o f the Board and
Chief Executive Officer, W. K. Kellogg Foundation,
Battle Creek, Michigan

Robert E. Brewer, Senior Vice President—Finance, K mart Corporation,
Troy, Michigan

Charles T. Fisher III, Chairman and President, National Bank
o f Detroit, Detroit, Michigan

Richard M. Gillett, Chairman o f the Board, Old Kent Bank and
Trust Company, Grand Rapids, Michigan

Karl D. Gregory, Professor o f Economics and Management,
Oakland University, Rochester, Michigan

Thomas R. Ricketts, Chairman o f the Board and President,
Standard Federal Bank, Troy, Michigan

Ronald D. Story, President, The Ionia County National Bank,
Ionia, Michigan

Federal Advisory Council
The Federal Advisory Council, consisting of one member from each of the
12 Federal Reserve Districts, meets quarterly with the Board of Governors in
Washington, D.C. to discuss business and financial conditions. Chosen by the
Chicago Reserve Bank’s board of directors to represent the Seventh District
during 1985 was:
Hal C. Kuehl, Chairman o f the Board, First Wisconsin National Bank o f
Milwaukee, Milwaukee, Wisconsin.

Reserve Bank Advisory>Councils
Two new advisory councils were formed by the Federal Reserve Bank of
Chicago in 1985 to promote communication with the agricultural and small
business sectors. Council members, along with the organizations they represent,
were:

Advisory Council on Agriculture
Glen Apple, Sandbom, Indiana, American Agriculture Movement o f
Indiana;
Allan Aves, Kirkland, Illinois, Land o f Lincoln Soybean Association;
Susan Bright, Centenille, Indiana, Women Itwolved in Farm Economics;
David Diehl Sr., Dansville, Michigan, Michigan Soybean Association;
Howard Fischer, Neenah, Wisconsin, National Farmers Organization;
Wallace Furrow, El Paso, Illinois, Grain and Feed Association o f Illinois;
John Laurie, Cass City, Michigan, Michigan Farm Bureau;
Malcolm McGregor, Nashua, loiva, Iowa Cattlemen’ Association;
s
George Morton, Lebanon, Indiana, Indiana Beef Cattle Association;
Max Naylor, Jefferson, Iowa, Iowa Com Growers Association;
William Riggan, Washington, Iowa, Iowa Pork Producers Association; and
Lester Wallace, Beloit, Wisconsin, Wisconsin Grange.

Advisory Council on Small Business
John Barnes, Logansport, Indiana, Indiana State Chamber o f Commerce;
Melvin Boldt, Mt. Prospect, Illinois, Independent Business Association o f
Illinois;
Raul Chavez, Indianapolis, Indiana, U.S. Hispanic Chamber o f Commerce;
Jean Hansen, Racine, Wisconsin, Wisconsin Women Entrepreneurs;
Saundra Herre, Racine, Wisconsin, Independent Business Association o f
Wisconsin;
Pearl Holforty, Southfield, Michigan, National Association o f Women
Business Owners;
Jon Kneen, Ottumwa, Iowa, Iowa Association o f Business and Industry;
James Oughtonjr., Dwight, Illinois, National Federation o f Independent
Business;
Gordon Stauffer, Greenville, Michigan, Michigan State Chamber o f
Commerce; and
Connie Wimer, Des Moines, Iowa, National Federation o f Independent
Business.

Advisory
Councils

Officers
(as o f December J 1, 1985)

Silas Keehn, President
Daniel M. Doyle, First Vice President

Central Bank Actimties
Supervision and Regulation
and Loans
Supervision and Regulation

Loans and Reserves

Economic Research and
Information Services
Economic Research

Information Sendees

James R. Morrison, Senior Vice President
Franklin D. Dreyer, Vice President
Roderick L. Housenga, Chief Examiner
Nicholas P. Alban, Assistant Vice President
John L. Bergstrom, Assistant Vice President
David S. Epstein, Assistant Vice President
Douglas J. Kasl, Assistant Chief Examiner
Ruth A. Farb, Vice President

Rose M. Kubush, Assistant Vice President
William H. Lossie, Jr., Assistant Chief Examiner
Geoffrey C. Rosean, Assistant Vice President
Patrick J. Tracy, Assistant Chief Examiner
Alicia Williams, Assistant Vice President

James A. Bluemle, Assistant Vice President

Karl A. Scheld, Senior Vice President and Director o f Research

Patricia W. Wishart, Vice President and
Assistant Director o f Research
David R. Allardice, Economic Adviser and
Vice President
Gaty L. Benjamin, Economic Adviser and
Vice President
George W. Cloos, Economic Adidser and
Vice President
Joseph G. Kvasnicka, Economic Adviser
and Vice President

Larry R. Mote, Economic Adviser and
Vice President
Anne Marie L. Gonczy, Senior Economist and
Assistant Vice President
Jean L. Valerius, Assistant Vice /resident
Paul L. Kasriel, Research Officer
Steven H. Strongin, Research Officer

Nancy7M. Goodman, Assistant Vice President

Check Services and
Operations

Charles W. Furbee, Senior Vice President

Cash, Fiscal Agency, and
Securities Sendees

David R. Starin, Vice President
Daniel P. Kinsella, Vice President
Warren E. Potts, Assistant Vice president

Lawrence J. Powaga, Assistant Vice President
Jerome D. Nicolas, Operations Officer

Wayne R. Baxter, Vice President
PaulJ. Bettini, Vice President
William A. Bonifield, Vice President
Stephen M. Pill, Vice President
Robert W. Wellhausen, Vice President

Allen G. Wolkey, Vice President
Theodore E. Downing, Jr., Assistant Vice President
LeRoy E. Ketchmark, Assistant Vice President
DeWayne W. Baker, Operations Officer

Check Services

Automation and
Electronic Services

William C. Conrad, Senior Vice President

Automation Support and
Computer Operations

Richard P. Anstee, Vice President and
Director o f Autom ation Services
Marlene M. O’Sullivan, Vice President
Kenneth R. Berg, Assistant Vice President

Frank S. McKenna, Assistant Vice President
Charles L. Schultz, Assistant Vice President
James A. Suprinski, Assistant Vice President
Janet M. Terr)7 Assistant Vice President
,

Electronic Funds/Securities
Transfer

Glen Brooks, Vice President
James M. Rudny, Assistant Vice President

Susan H. Riis, Administrative Officer

George E. Coe, Vice President
Bonnie Bates, Assistant Vice President

R. Steve Crain, Assistant Vice President

System Communications Center

Support Functions
Carl E. Vander Wilt, Senior Vice President and Chief Financial Officer

Financial and
Management Sendees

Glenn C. Hansen, Vice President
Jerome F. John, Assistant Vice President

Financial Management
and Management Services

Gerard J. Nick, Assistant Vice President

Financial Institution Accounts

Richard P. Bush, General Auditor
Angelina Chin, Auditing Officer

Office o f the General
Auditor

William H. Gram, Vice President, General Counsel, and Secretary

Office o f the General
Counsel

George W. Steffen, Assistant General Auditor

Teri J. Kurasch, Assistant General Counsel

M. Kathleen O’Brien, Assistant Counsel

Joan M. DeRycke, Assistant Vice President and Assistant Secretary

Legal Senices
Office o f the Bank Secretariat

Support Sendees
Adolph J. Stojetz, Vice President
Robert D. Lauson, Vice President
Robert A. Ludwig, Vice President
Gerald I. Silber. Assistant Vice President

Administrative Services
Facilities Planning and
Management

Maria H. Coons, Operations Officer
Thomas G. Ciesielski, Vice President
Colleen M. Walsh, Personnel Officer

General Sendees
Human Resource Sendees

District Offices
Roby L. Sloan, Senior Vice Iresident and Branch Manager
Frederick S. Dominick, Vice President and Assistant Branch Manager
Joseph R. O’Connor, Assistant Vice President
F. Alan Wells, Assistant Vice President
Richard L. Simms, Jr., Assistant Vice President
Yvonne H. Montgomery, Operations Officer

Detroit Branch

Regional Check
Processing Centers
Thomas P. Killeen, Vice President
Allen R. Jensen, Assistant Vice President
Charles M. Lund, Assistant Vice President

Management Committee, Federal Reserve
Bank of Chicago, from left to right:
(seated) C. Vander Wilt, D. Doyle, S. Keehn, R. Bush;
(standing) W. Gram, W. Conrad, R. Sloan,
C. Furbee, K. Scheld, J. Morrison.

Des Moines Office
Indianapolis Office
Milwaukee Office

As of December 31

1985
Gold certificate account
Interdistrict settlement account
Special drawing rights
certificate account
Coin
Loans and securities:
Loans
Federal agency securities
U.S. government securities
Total loans and securities
Cash items in process of collection
Bank premises
Other assets:
FDIC assumed indebtedness
Other
Total other assets
Total assets

Federal Reserve notes
Deposits:
Depository7institutions
U.S. Treasury—general account
Foreign
Other
Total deposits
Deferred availability cash items
Other liabilities
Total liabilities
Capital paid in
Surplus
Total capital
Total liab ilities and capital

1,451,000
(262,579)

1984
1,510,000
(5,426,572)

620,000
28,933

646,000
25,713

31,509
906,423
19,588,158
20,526,090

2,969,218
1,145,354
21,737,967
25,852,539

958,107
22,001

592,582
21,393

3,222,905
1,417,924
4,640,829

3,500,000
1,345,618
4,845,618

27,984,381

28,067,273

23,723,605

23,872,609

2,545,056
0
21,000
109,010
2,675,066

2,797,116
0
19,650
112,801
2,929,567

848,575
254,773
27,502,019

446,318
363,553
27,612,047

241.181
241.181
482,362

227.613
227.613
455,226

27,984,381

28,067,273

Year ending December 31
1985
1984
C u rren t in com e

Interest on loans
Interest on government securities
Interest on investments of
foreign currencies
Service fees
All other
Total current income

318,485
1,986,310

420,196
2,274,308

32,009
81,575
1,600
2,419,979

28,493
75,115
1,537
2,799,649

133,522
21,098
154,620

131,008
28,128
159,136

10,751
143,869

10,217
148,919

2,276,110

2,650,730

12,145

6,671

169,406
(35,416)
(696)
145,439

(59,581)
(33,855)
(720)
(87,485)

C u rren t expenses

Operating expenses
Other current expenses
Total current expenses
Less reimbursement for certain
fiscal agency and other expenses
Current net expenses
Current net in com e
A d d itio n s to ( o r d ed u ctio n s fr o n t)
c u rre n t n et e a rn in g s

Net profit (or loss) on sales
of securities
Net profit (or loss) on foreign
exchange transactions
Board of Governors assessment
All other—net
Net additions (or deductions)
Net earnin gs available
for distribution

2,421,549

2,563,245

14,199

12,142

2,393,781
13,569

2,515,375
35,728

2,421,549

2,563,245

D istrib u tio n o f n et ea rn in g s

Dividends paid
Payments to U.S. Treasury (as interest
on Federal Reserve notes)
Transferred to surplus

Statement
o f income
(in thousands o f dollar

Number

Dollar amount

1985

1984

1.0 trillion

1.0 trillion

123.2 billion

126.2 billion

286.7 million

284.2 million

1985

1984

Checks, NOWs, and share
drafts processed
Fine sort and packaged
checks handled
U.S. government checks
processed
Automated clearinghouse (ACH)
items processed
Transfers of funds

54.9 billion

56.2 billion

65.9 million

65.7 million

456.2 billion
20.6 trillion

314.8 billion
18.3 trillion

92.3 million
8.5 million

68.5 million
8.0 million

Currency received and counted
Unfit currency withdrawn
Coin received and processed

17.0 billion
2.8 billion
457.3 million

15.8 billion
2.7 billion
439.1 million

1.6 billion
480.7 million
3.4 billion

1.5 billion
441.0 million
3-2 billion

12.8 billion
145.2 billion
3.1 billion

12.0 billion
119.9 billion
2.8 billion

0.5 million
—
22.1 thousand

24.5 thousand

1.1 billion

1.2 billion

331-4 thousand

341.8 thousand

93-4 billion
—

722.5 billion
—

2,856
271

6,076
413

5.1 billion
3.4 trillion
338.3 million

5.3 billion
2.9 trillion
436.0 million

300.4 thousand
990.8 thousand
366.0 thousand

303-4 thousand
981.9 thousand
552.1 thousand

2.8 billion
84.1 billion
1.5 billion

2.4 billion
83-5 billion
1.6 billion

26.9 million
837.2 thousand
3310 million

26.7 million
832.5 thousand
375.3 million

Safekeeping of securities:
Definitive, year-end balance
Book entry, year-end balance
Purchase and sale of securities
Collection of bonds, coupons
and other noncash items

Total loans made during year
Institutions accommodated
Marketable government
securities issued, exchanged
and redeemed:
Definitive securities
Book entry securities
U.S. government coupons paid
U.S. savings bonds issued,
exchanged and redeemed
Federal tax deposits processed
Food stamps processed

1.9 billion

1.8 billion

0.6 million

sa