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1992

ANNUAL

REPORT

F E D E R A L R E S E R V E B A N K OF CHICAGO

. . . into a brave new world

The Federal Reserve Bank of Chicago is one of 12 regional
Reserve Banks across the United States that, together with the Board
of Governors in Washington, D.C., serve as the nation's central bank.
The role of the Federal Reserve System, since its establishment by an
act of Congress passed in 1913, has been to foster a strong economy,
supported by a stable financial system.
To this end, the Federal Reserve Bank of Chicago participates in the formulation and implementation of national monetary
policy, supervises and regulates banks and bank holding companies,
and provides financial services to depository institutions and the U. S.
government. Through its head office in Chicago, branch in Detroit,
and regional offices in Des Moines, Indianapolis, and Milwaukee, the
Federal Reserve Bank of Chicago serves the Seventh Federal Reserve
District, which includes major portions of Illinois, Indiana, Michigan,
and Wisconsin plus all of Iowa.

1 9 9 2 ANNUAL

REPORT

FEDERAL RESERVE BANK OF CHICAGO

MESSAGE FROM MANAGEMENT

2

INTO A BRAVE NEW W O R L D
FDICIA

4

T H E REGION

8

THE BANK

IN

1992

FINANCIAL STATEMENTS

DIRECTORS AND ADVISORY C O U N C I L S

OFFICERS

EXECUTIVE

CHANGES

12

18

20

22

24

J f at times during the past year many of us
felt like we were cast on a voyage in a sea of change,
there were a number of reasons. Despite the statistics
that confirmed that the U. S. economy had emerged
from recession, other realities told us that this recovery, so unlike any other, was still a myth for those without jobs. Industries and firms that had for decades
symbolized the success of the American economy
were undergoing wrenching changes that spotlighted
their failure to adjust to new competitive pressures.
Within the financial industry, while balance sheets,
financial conditions, and bank earnings all improved,
a deluge of new legislative mandates were being
issued that did as much to create uncertainty as to
clarify the outlook.

MESSAGE
FROM
MANAGEMENT

2

The new global environment, the competitive forces that have been unleashed, the changing
rules of the game, the transformation of once reliable
economic relationships—all suggest that we are operating in a brave new world, a world that is sometimes
tumultuous, just a little bit frightening, in many ways
promising, and in every way exciting, challenging, and
hopeful. The articles that follow take a look at this
brave new world from three different perspectives:
the banking industry as it confronts a sweeping array
of new legislative mandates; the regional economy as
it traverses a simultaneous course of industrial restructuring and cyclical recovery; and the Federal Reserve
Bank of Chicago as it carries out its ongoing responsibilities in a continuously evolving economic and
financial environment.
As we strive to navigate these tides of change,
we become increasingly mindful of our dependence
on certain constants—our need for anchors if we are
to avoid being cast adrift on our journey into the
brave new world. A number of constants provide continuing direction for the Federal Reserve System and
underlie the 1992 achievements of this Bank, which
are highlighted later in this report. The first set of
constants relates to the overriding goals that guide
our operations, namely economic growth based upon
a foundation of price stability; a sound financial system that inspires public confidence and serves public
needs; and an efficient and effective payments system
that supports a smoothly functioning economy.

A second set of constants relates to the fundamental strengths provided by the Federal Reserve's
unique structure. The System's regional composition
and its blending of public and private elements provide
it with a broad-based perspective and an independence
from partisan influences that for the past eight decades
have served it well in the pursuit of these important
public goals.

an important transition in that Bill Conrad was
named First Vice President, succeeding Dan Doyle,
who retired following 36 years of distinguished service
to the Bank and the System. While we cannot help but
miss an individual of Dan's caliber, we are assured by
our knowledge that Bill brings to the post extraordinary skills and the same sense of commitment that
Dan did for so many years.

The third set of constants has to do with the
caliber and commitment of the individuals associated
with the Federal Reserve and responsible for its
achievements. The Federal Reserve Bank of Chicago
is especially fortunate to be served by an outstanding
group of directors who so unselfishly give their time
and expertise to the Bank. We particularly want
to express our gratitude to two directors who completed their terms at the end of 1992, B.F. Backlund
and Paul Schierl, each of whom provided insightful
perspectives and leadership that helped guide our
activities for the past six years.

And it is this shared commitment that is
the last constant we wish to mention. During 1992,
Bank management and staff took some time to step
back from day-to-day operations and explicitly articulate the values that always have implicitly defined us
as an organization. There was fundamental agreement across the Bank on our four defining values:
integrity, in how we conduct our affairs; respect, in how
we treat each other; responsibility, in how we approach
our jobs; and excellence, in how we seek to carry out
our duties. So long as we stay firmly focused on our
values, we can be fully confident of our continued
success no matter what the world may have in store.

While our board provides the overall governance for the organization, our officers and staff are
the constants who are directly responsible for our
achievements. The past year, in one sense, represented

RICHARD CLINE,
S I L A S KEEHIS,

CHAIRMAN

PRESIDENT

From left:
Deputy Chairman
Robert Healey,
First Vice President
William Conrad,
President Silas Keehn,
and Chairman
Richard Cline.

3

F D I c I A :
U S H E R I N G I N A BRAVE N E W WORLD
The Federal Deposit Insurance Corporation Improvement Act has been called
the most important banking legislation to be enacted since the 1930s. In the following essay,
Silas Keehn, President of the Federal Reserve Bank of Chicago, discusses some of the
implications of the Act for Seventh District depository institutions.

If several decades ago banks and other depository institutions operated in a safe
harbor, they are now in the midst of a tempestuous voyage. The most recent
episode of turbulence on this sometimes difficult passage was the enactment of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).
The most obvious aspect of FDICIA is the sheer bulk of the legislation—
its many rules that already are affecting depository institutions. But while the
length and breadth of the Act are notable, there also is a more subtle and significant change being brought about by FDICIA: a more

FDICIA is a milestone

important role for market forces in determining the
viability of depository institutions.

in the necessary transition

To be sure, some of the Act's provisions are

to an uncertain,

intended to replicate market forces, which have been

yet exciting, environment—

diminished because of the distorting effect of the fed-

a brave new world.

eral safety net. And, like most imitations, even the
best-intentioned effort by regulators to simulate the
market never quite matches the original. In the final

analysis, however, the passage of FDICIA means that market forces have moved to
the forefront in determining success or failure.
FDICIA, of course, is only one of a number of events and trends that
together have fundamentally changed the banking industry. Nevertheless, it is an
important milestone in the transition to an uncertain, yet exciting, environment—
a brave new world, if you will. While sometimes turbulent, this transition is a necessary process that should result in a healthier, more vigorous financial industry.

4

•

WITH THE PASSAGE OF FDICIA, BANKS AND OTHER DEPOSITORY

INSTITUTIONS ARE VOYAGING INTO A BRAVE NEW WORLD IN WHICH

MARKET FORCES PLAY A MORE IMPORTANT ROLE
IN DETERMINING SUCCESS OR FAILURE.

5

The Goals ofFDICIA
The primary goal of FDICIA was to develop a framework for reducing the costs
of deposit insurance. To this end, FDICIA restricts banking practices and activities that might produce risk to the financial system, limits the power of the Federal
Deposit Insurance Corporation (FDIC) to protect uninsured depositors, and
circumscribes the ability of undercapitalized banks to borrow at the Federal
Reserve's discount window. The Act also explicitly states the regulator's duty to
take prompt corrective action against a depository institution with a deteriorating
capital position, a new procedure that forces institutions to close before they
reach technical insolvency.
Unfortunately, however, FDICIA also contains a great many regulatory
provisions that seem excessively intrusive. One can understand Congress' desire
to prevent any problems that would result in taxpayer costs. Yet, many of
FDICIA's provisions, improperly administered, could leave regulators in a position
of micro-managing an institution. As a result, regulators have been—and must
continue to be—as even-handed as possible in implementing and administering

As depository
institutions are more
fully exposed to the
discipline of the

the more burdensome requirements of the Act.
Additionally, FDICIA's failure to achieve the twin goals of broadening
activities and reducing regulation for well-capitalized institutions was very disappointing. As depository institutions are more fully exposed to the discipline
of the marketplace, they should also be allowed to benefit further from the
potential rewards.

marketplace, they

FDICIA's New Realities
should also be allowed
to benefit further
from the potential

On a more positive note, one of the most important provisions in FDICIA is the
system of prompt corrective action, which clarifies the appropriate response to a
deterioration of an institution's capital position. In the past there has been some
inconsistency as well as some uncertainty as to how the process should proceed.

rewards.

Appropriately, regulators still can use their judgement; yet in a fundamental
sense, the road map is much clearer. Both sides benefit from knowing what is
expected as certain events take place. Importantly, the market plays a key role
because the principal factor determining whether a problem institution fails is
its ability to raise new capital.
Another important provision of FDICIA is the restriction on discount
window loans to undercapitalized institutions. In the past, the Federal Reserve
has been able to "work" institutions through liquidity problems through the explicit or, perhaps even more importantly, the implicit use of the discount window.
This no longer is the case.

6

An environment
in which market

Thus, depository institutions need to rethink

forces, not regulatory

their strategies for dealing with liquidity issues. A solvent
institution's ability to survive a liquidity problem depends

pressures or legislative

less on the regulators' view of the institution and more on

walls, determine the

the market's judgement. With greater restrictions on the

viability of depository

discount window, undercapitalized institutions need to

institutions is an

rely more on other commercial institutions to be their
lender of last resort. The Federal Reserve's role in coor-

exciting destination.

dinating the organization of a private-sector support
package is much more limited.
Under this new system, market forces and

Congressional mandates usually will cause institutions to be sold, closed, or recapitalized before there is extreme deterioration. However, should an institution
slip through the various checks, there likely will be losses to uninsured depositors.
Such losses may come as a disappointing surprise, especially to those depositors
who have come to rely on a large institution being "too big to fail." Thefirstsurprise of this type could cause other uninsured depositors to re-evaluate the soundness of their banking institution. This is the appropriate response, but it could
result in uncomfortable pressures for some institutions.

A Rewarding Destination
Undeniably, the financial industry and its regulators are operating in a new environment. It is very important that we understand the significance of the changes
mandated by FDICIA; those who ignore them do so at their own peril. Fortunately
depository institutions in the Seventh Federal Reserve District, with strong capital
positions and relatively healthy earnings, are well positioned to prosper.
Despite the uncertainty that inevitably occurs, I believe such change is
absolutely necessary. In fact, we should seriously consider additional change such
as reducing regulation and allowing broader activities for well-capitalized institutions. While more can and should be done, I believe FDICIA has been successful
in elevating the role of the market. We now are operating in an environment in
which market forces, not regulatory pressures or legislative walls that impede
competition, determine the viability of depository institutions. While not a safe
harbor, I believe this is an important step toward an exciting—and ultimately
rewarding—destination.

SILAS KEEHN,

PRESIDENT

The Midwest for many years has travelled an arduous path in a difficult economic environment. From a
historical perspective, the region appeared to be slowly
losing ground, caught in the grasp of inexorable longterm trends that moved with the strength and speed of a
glacier. But beneath the surface, a dynamic change has
been taking place.
More than ever, Midwest firms are faced with a
world of changing markets and ever-increasing competitive pressures. But now, after massive investment and significant restructuring, the region's image as the nation's
"rustbelt" has been superceded by an emerging image as
the center of lean and agile manufacturers. Today, the

The Regional Economy
MOVING
FORWARD
IN A
BRAVE
NEW
WORLD

8

more vibrant and resilient Midwest economy is better
able to compete with other regions, both in the United
States and abroad.

due to a number of factors such as relatively high labor
costs, older and less efficient facilities, and expensive
energy requirements.

A Crucial Hurdle

The region's economic evolution is evident in the
apparent reversal of some of its negative long-term trends.
Between 1963 and 1985, for example, total employment
grew by 76 percent nationally while rising just 46 percent
in the Midwest. This lackluster performance was attributable largely to sluggish job growth in manufacturing, the
cornerstone of the Midwest economy. More recently, however, the region's performance has improved relative to
the United States. This improved performance is reflected
in preliminary employment data, which indicates that
the District has fared relatively well during the 1990-91
recession and recovery.

The Midwest recently overcame a crucial hurdle on
its journey in this brave new world of continually increasing competitive pressures—the 1990-91 recession.
Recessions traditionally had been an especially difficult
experience for the Midwest because of its heavy concentration of industries that are sensitive to economic
cycles. (The Midwest is defined here as the states of
the Seventh Federal Reserve District: Illinois, Indiana,
Iowa, Michigan, and Wisconsin.) Compounding the
problem, the Midwest's relatively mature industries had
found it difficult to compete with newer rivals in other
regions and countries. The region's difficulties were

BASED ON ITS PERFORMANCE DURING THE

1990-91

RECESSION

AND RECOVERY, THE MIDWEST APPEARS TO HAVE
MADE SIGNIFICANT PROGRESS ON ITS JOURNEY
IN A BRAVE NEW WORLD.

9

Hitting Bottom
A look at the earlier 1981-82 recession provides a
perspective for judging the recent performance of
the economy. The region hit bottom during the early
1980s; more than 1.5 million people lost their jobs,
most of them in the manufacturing sector. The Midwest struggled through much of the rest of the decade, even as other regions—such as those on the East
and West coasts—prospered.
But the 1981-82 recession was also a turning
point for the Midwest. In succeeding years, weak
firms either failed or relocated to lower-cost regions,
and inefficient plants were closed or downsized. At
the same time, massive capital spending took place.
After 1984, regional manufacturers invested an average of 5 to 10 percent more in equipment per production worker annually than the rest of the nation.
In concert with these efforts, Midwest producers also
began to adopt "lean" manufacturing techniques to
improve efficiency.
The combination of closing inefficient facilities and investing in new or existing plants began to
show dramatic results. Manufacturing productivity in
the Midwest improved significantly, outpacing the

THE

REGION'S

A Curve in the Road
As the regional economy picked up speed, it hit
a treacherous curve: the 1990-91 recession. How
did the Midwest fare? The recession was relatively
mild for the region, compared with the national
average or to past experience. For example, while
the nation lost some 2 million jobs during each
of the last two recessions, the region's job loss was
about 300 thousand in 1990-91 compared with
1.5 million in the early 1980s.
The region's improved performance owes
much to a manufacturing sector that was significantly more competitive after years of investment
and downsizing. Unlike its poor performance relative to the nation during the 1981-82 recession, the
region's manufacturing sector performed at about
the same level as the rest of the U.S. during 1990-91.
The improvement was broad-based. During the
1981-82 recession, growth in Midwest manufacturing production lagged the national average in 16 of
17 industries. The story was different in 1990-91—
the Midwest outperformed the nation in 12 of 17
industrial categories.

IMPROVED

OUTLOOK OWES

FACTURING

manufacturing sector outpaced the nation for the
first time in several years, aided by a falling dollar
that boosted exports.

M U C H TO A

SECTOR

MORE C O M P E T I T I V E

OF I N V E S T M E N T

THAT

AFTER

AND

MANU-

IS

YEARS

DOWNSIZING.

nation during the expansion. Estimates of the relative
improvement in the Midwest's manufacturing sector
suggest that efficiency in the region improved about
20 percent more than the rest of the nation during
the last half of the 1980s.
As a result, manufacturing jobs decreased
even as output increased. Fewer employees were required to produce more goods—a positive trend from
a competitive standpoint, but one that resulted in fewer jobs and painful dislocations for many. While difficult, the process began to produce results. By 1987,
the Midwest showed signs of renewed vigor as its

The Midwest's service sector, which is
linked to the vitality of manufacturing, also performed respectably during the 1990-91 recession.
With its emphasis on the financial and business
needs of the manufacturing sector, the region's
service sector historically has lagged the nation and
has been less resilient during recessions. During
the 1981-82 recession, for example, the Midwest's
service sector grew at a substantially slower rate than
the nation's. In contrast, the region matched national growth in the sendee sector during 1990-91.
The service sector may have been helped by the
steadier performance of the manufacturing sector,
which provided a boost for business services. With
growth in other categories as well, the service sector
proved to be less susceptible to the vagaries of the
national economy.

There's Good News and Bad News
The news is not all good. The U.S. recovery from
the 1990-91 recession has been anemic compared to
historical standards, especially in terms of employment. While the Midwest has recovered at a slightly
faster pace following the recession, employment
growth in the District, as in the nation, has been
less than robust.

The national recovery has been marked by
restructuring activities that have hampered a brisk
rebound, but may help to set the stage for sustained
future growth. Hobbled by factors such as efforts to
strengthen balance sheets and intensive business
restructuring, the economy has followed an erratic
course, moving in fits and starts. Typically the United
States experiences a strong rebound after a recession.

THE

MIDWEST'S

STRONG

THE

RELATIVELY

PERFORMANCE

RECESSION

INDICATES

THAT

AND

DURING

RECOVERY

I T IS B E T T E R

TO C O M P E T E W I T H

OTHER

ABLE

These adjustments were evident in the national economy during 1992: employment grew
slowly, but productivity improved significantly, registering the largest annual increase in 20 years. This
development may be due to a number of factors
such as aggressive cost cutting, increased use of overtime and temporary workers, and the availability of
new computing and communication technologies.
In the Midwest, the subdued recovery also
may be attributable in part to the more diversified
regional economy. With less dependance on cyclically sensitive industries, recessions are not as devastating but recoveries are not as buoyant. Thus, the
more diversified and competitive regional economy
has been a stabilizing force in the national economy
in recent years, a new role that is infinitely preferable to the wild gyrations of the early 1980s.

REGIONS,

Journey'sEnd ?
BOTH H E R E

AND

ABROAD.

But in the seven quarters following the 1990-91 recession, the nation averaged a relatively anemic real GDP
growth of 2.3 percent, although a strong showing at
year-end 1992 was a promising sign for the future. In
contrast, quarterly growth ranged from 4 to 11 percent following the 1981-82 recession.
While the economy picked up speed over
the course of 1992, national employment increased
slowly, moving up in the first half but gradually declining in the second. Like the nation, the Midwest has
performed somewhat lethargically in terms of job creation. According to preliminary data, the region has
increased employment by about 130,000, or an increase of 0.8 percent from the trough of the recession,
only slightly better than the national increase of
0.5 percent representing some 500,000 jobs. (Revised
employment data for the District states indicate an
even higher increase of 1.3 percent, but comparable
data for the nation will not be released until mid1993.) Still this performance, while not as strong as
might be hoped, is a vast improvement compared to
the region's more typical pattern of deep recession
and partial recovery.
The relatively weak employment growth in
the nation and the region may reflect gains in productivity, which, by definition, mean doing more with less.
Over time, productivity gains will boost real wages and
living standards. In the short run, however, improved
productivity involves difficult adjustments.

While the outlook is more promising, the Midwest
faces formidable challenges. Manufacturing will remain the core of the Midwest economy. While more
diversified, the region will continue to have a high
percentage of cyclical industries that are subject to
the swings of the national economy.
A major factor will be the domestic auto
industry, which still is in the painful process of
improving its competitiveness. Although it appears
that production will pick up in early 1993, the
restructuring effort in the auto industry likely will
continue during the first half of the 1990s, slowing
the growth of manufacturing jobs. Additionally,
exports—a source of strength in recent years—
are expected to rise slowly in the short term due
to slowing economies abroad.
Nonetheless, the region fared somewhat
better than the rest of the nation during the
recession and recovery, a significant improvement
compared with the 1981-82 recession. The Midwest's improved performance indicates that its basic
industries are working their way back to world-wide
competitiveness, a promising development that
should have a strong ripple effect on the regional
economy. While not at journey's end, the Midwest
has made great strides in surviving, and even
thriving, in a brave new world.

11

T H E F E D E R A L RESERVE B A N K OF C H I C A G O W O R K E D IN

1992

TO H E L P G U I D E A N D S H A P E E V E N T S IN A B R A V E NEW W O R L D , CARRYING O U T

ITS R E S P O N S I B I L I T I E S IN A C O N T I N U A L L Y

CHANGING

T E
H
B N
A K
I
N
1992:
Providing Leadership in
a Brave New World

ENVIRONMENT.

The rapidly changing economic and financial
landscape poses an array of exciting challenges for the
Federal Reserve Bank of Chicago. As the following
selection from the Bank's 1992 efforts and initiatives
illustrates, the Bank strives, in turn, to lead the way as
it travels across that interesting terrain.
SUPERVISORY

FOCUS ON

FINANCIAL

SYSTEM

REDUCING
RISK

Increasing competition and innovation within the financial services industry clearly produce benefits but also
raise the specter of greater risk. In order to help foster
financial stability within this increasingly turbulent environment, the Bank's supervision and regulation staff

To help foster financial
stability within an
increasingly turbulent
environment, the Bank's
supervision and
regulation staff placed
increased emphasis on
risk avoidance.

placed increased emphasis on
risk avoidance by enhancing its
analytical activities and techniques. Staff members continued to hone their special expertise on the derivative markets
and asset securitization, serving
as a System resource on these
topics. The effort to "stay
ahead of the curve" of industry
developments was also reflected
in a program of ongoing monitoring of key financial services
firms and markets as well as increased emphasis on staff development programs.

Complementing risk avoidance activities, risk
identification remained a major thrust. In addition to
meeting the demands of the Bank's substantial workload of examinations, inspections and regulatory applications—among the heaviest in the System—department staff maintained close communications with individual institutions supervised and stayed abreast of
emerging trends and issues. This effort was enhanced
by the continued use of an "examiner responsible"
approach, in which an examiner or team of examiners
has ongoing responsibility for an institution.
NEW

REGULATORY

DEMANDS

MET

Recent legislative initiatives have posed challenges for
the regulated and regulator alike. The numerous provisions of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA) covered a broad range of
issues—Truth-in-Savings, discount window administration, bank capital requirements, prompt corrective
action, real estate lending standards, and foreign bank
supervision, to name but a few. Each provision translated into a number of tasks at the Reserve Bank level, including staffing and training, interpretation and communication of new rules to depository institutions, and
implementation of new responsibilities. In the area of
foreign bank supervision alone, the Bank's examination
activity doubled in 1992.
At the same time, the Bank continued to
assist institutions in meeting other regulatory requirements. Educational efforts related to community reinvestment opportunities and the development of
training materials on new daylight overdraft rules for
System-wide use were two examples of such initiatives.

RESEARCH
PROVIDE

EFFORTS
POLICY

D E S I G N E D TO

LEADERSHIP

Analyzing the underlying relationships that drive
our very dynamic economy has never been an easy
task. In the current environment, with the accelerating pace of change transforming our nation's basic
economic and financial structures and an economic
recovery unlike any previous experience, this challenge has intensified. Against this uncertain backdrop, the Bank's 1992 research efforts focused on
issues that would aid the increasingly complicated
task of developing appropriate System monetary and
regulatory policies.
Regional research meant to shed light on the
District's economic restructuring included projects
through REAL, the Regional Economics Applications
Laboratory established jointly by the Bank and the
University of Illinois to use input/output models to
predict regional economic activity. Other studies
analyzed the effects of regulation and state and local
government policies on economic activity, while
a number of efforts, such as research on NAFTA, actually looked far beyond the District's borders. Also
paralleling the District economy's increasingly global
linkages, the Bank worked with a variety of bi-national
groups, taking an active role in the establishment and
work of the Council of Great Lakes Industries and
cosponsoring a conference, Shaping the Great Lakes
Economy, with the Great Lakes Commission.
The restructuring of the economic and
financial systems also shaped the monetary policy
research agenda, and again the prime objective was
to provide a sounder basis for policy formulation.
Studies focused on three themes: explaining the
links between credit markets, monetary policy, and
economic growth; improving the identification of
monetary policy's impact; and determining how
changes taking place within various sectors of the
economy alter policy's effectiveness.
Financial research similarly sought to focus
on issues that would contribute significantly to designing effective regulatory policy in an increasingly complex environment. To keep pace with the ongoing
evolution of the U.S. financial system and improve the
assessment and control of financial system risk, studies
looked at the impact of risk-based capital requirements on bank growth, the role of moral hazard in

13

the thrift industry, and the effect of margins on
volatility in the futures markets. The Bank's 28th
annual Conference on Bank Structure and Competition, entitled Credit Markets in Transition, provided
a forum for leading analysts from academia, government, and the industry to discuss these and other
issues transforming our financial system.
EXPERTISE
NEW

EXTENDED

TO

DEMOCRACIES

The shrinking world and the rapid shift toward market-based economic systems placed a number of new
and very exciting demands on the Chicago Reserve
Bank in 1992. In each of the Bank's primary activities—economic research,
bank supervision, and payStaff members were
ments services—staff memcalled upon to conbers were called upon to
contribute their expertise
tribute their expertise
toward the development of
new economic and finantoward the development
cial systems and structures
in a variety of locations
of new economic and
around the world. Working
financial systems and
temporarily with the Treasury Department and other
structures in locations
agencies, staff members
assisted in a variety of
around the world.
efforts. Bank examiners
travelled to Hungary to assist that nation's central
bank outline a bank regulatory framework, to the
Republic of Georgia to participate in a review of central bank activities, to Tanzania to help develop an

14

examination process, and to Bulgaria to advise onsite bank examiners about credit review techniques.
Similarly, assistance was provided to the Republic of
Kyrgystan in applying economic modelling to help it
in its transition from a planned to a market economy
and to Hungarian officials attempting to develop a
private payments system. The year also brought a surge
of visitors from Eastern Europe and developing African
and Asian nations into the Bank to gain insight into
central bank and financial industry activities.
PROGRAMS
TOMORROW'S

EDUCATE
LEADERS

While staff members provided their expertise at a variety of locations around the world, the Bank's economic
education programs sought to share information with
future economic and financial leaders at home. Efforts
aimed at teachers and classrooms included more than
30 workshops and seminars conducted by Bank staff to
help educators present economic concepts and issues
to their students. The Bank's second annual Districtwide economic education conference, entitled Growth
and Change in the Midwest Economy, was held and conference materials were published in a format that provided teachers across the District with classroom-ready
materials. A variety of other teaching aids were produced including a school calendar featuring award-winning
children's drawings depicting economic concepts.
Bank staff also continued its active participation on a
System team developing a new video-based classroom
teaching package to broaden understanding about
money, banking, and the Federal Reserve.

E L E C T R O N ICS U S E D TO
STREAMLINE

BANK

REPORTING

The pace of change transforming the economic and
financial environment intensifies the Bank's and
System's need for timely and accurate data from
District financial institutions. At the same time, the
Bank has sought, where possible and within its power,
to minimize and even reduce the regulatory burdens
confronting institutions today. Against this background, the Bank implemented the Fedline facility enabling District depository institutions to electronically
submit the weekly report of deposits. From the point
of initial testing with depository institutions early in
1992, the Bank was able to convert 311 institutions to
electronic transmission of their weekly deposit reports,
which are used as the basis for the Federal Reserve's
measures of the nation's money supply as well as
calculation of reserve requirements. By year-end
three bank holding company reports also were made
available for electronic submission.
PROGRESS T O W A R D
PAYMENTS

ELECTRONIC

FOSTERED

Harnessing technology's potential has been a key
strategy of the Chicago Reserve Bank for meeting its
broader goal of enhancing the efficiency of the payments system. In each area
In each area of
of financial services provided
to District depository institufinancial services
tions, the Bank has placed
an emphasis on electronic,
provided to District
information-based products.

depository institutions,

The most visible
effort has been related to the
the Bank has placed
Federal Reserve's all-electronan emphasis on
ic ACH (automated clearinghouse) initiative. To meet
electronic, informationthe mid-1993 target date, 575
based products.
District institutions were connected electronically to the
Chicago Reserve Bank in 1992—the largest total in
the System for the second year in a row, bringing
total connections to 1,372. With only a handful of
institutions remaining to be converted, the Bank fully
expects to meet its deadline, and now has more customers accessing services electronically than any
other Reserve Bank. With this progress in electronic
access, the Bank was able to reduce the off-line or
manual volume of funds transfer traffic by more than
one-third during 1992. In addition, the Bank now
has more institutions submitting savings bond orders
electronically than any other district, a major goal in
the Regional Delivery System project.

Electronic products were also emphasized
in providing paper-based check services. Efforts
were directed at expanding usage of the Bank's
innovative electronic cash letter service and MICR
transmissions, and at offering increasingly flexible
payor bank services. In addition to payments transactions, customers also benefitted by receiving and
sending more timely information through the use of
products such as electronically transmitted accounting and billing statements, Treasury Tax & Loan
notification, and large-dollar check notification.
SECURE,

RELIABLE

SYSTEM

PAYMENTS

STRENGTHENED

The huge volume of transactions, their enormous
dollar value, the terrific speed at which they move,
and their global reach, all heighten the potential risk
and ramifications of any, even minor, glitch in the
payments network. Therefore, the Bank continued
to emphasize controls, contingency planning, data
security, and reliability, an effort that included an increased focus on these issues in communications to
staff both within the Bank and at depository institutions District-wide. An indication of the success of this
effort is the fact that the Bank met or exceeded every
target set for the availability of its electronic payments
systems during 1992, achieving the highest level of
availability in the Federal Reserve System.
COMPETITION
HIGHER Q U A L I T Y ,

SPURS
LOWER

COST

SERVICES

Against the backdrop of financial industry consolidation, the Federal Reserve, like many business organizations, confronts weakened demand for its services and
greater competition. In turn, the Fed finds it increasingly difficult to meet the legislative mandate that service revenues match costs, a test designed to assure
that Federal Reserve services contribute to improved
payments system efficiency.
To meet this challenge, the Bank has focused on enhancing services while simultaneously
reducing costs. Specifically during 1992, the Bank
offered new RCPC group sort check services, expanded its innovative service of intermingling check
returns with forward collection items, installed voice
response lines in the ACH and Treasury Tax & Loan
customer service areas, and simplified procedures
and forms in the check adjustment function, an
area which also was a System leader in introducing

optical disk storage to enhance efficiency. Indicating that the efficiency and service enhancement
efforts were successful, the Des Moines Office for
the fourth consecutive year led the System in check
productivity, and the Bank again fully recovered the
costs of providing financial services.
GROUNDWORK

L A I D FOR

COMMUNICATIONS

TOMORROW'S

NETWORK

For the past few years, the Federal Reserve has been
working toward the development of a new communications network that will serve its needs well into the
next century, replacing the current system developed
and managed by the Chicago Reserve Bank. By taking
advantage of the latest
available technology,
FEDNET will enhance
FEDNET will enhance
network efficiency, speed,
network efficiency,
and capacity, enabling the
speed, and capacity,
Federal Reserve System to
move ever increasing flows
enabling the Federal
of transactions and other
information, and to proReserve System to move
vide better and lower cost
ever increasing flows
services to depository institutions and the Treasury.

of transactions and

During 1992, the
Chicago Reserve Bank's
Network Management
Control Center was appointed to develop and manage
the new network—the same role it has played with the
System network now in place—and staff embarked on
the critical process of recruiting, selecting, and contracting the various vendors who will best meet the increasingly demanding communications needs of the
entire Federal Reserve System for years to come.

other information.

1 6

SYSTEM
ROLE

LEADERSHIP
ADVANCED

Managing the System's network operations is only
one example of Bank activities meant to keep it
in the forefront of System affairs and thereby the
changing financial world. Bank management places
heavy emphasis on assuring broad staff involvement
in leading System committees, task forces, and other
groups that provide important direction and coordination for Systemwide activities.
Indicative of the Bank's emphasis on playing a leadership role within the System is its operation of the Federal Reserve System Securities Product Office, which is guiding Fed securities activities
through an important period of innovation and
change in line with the changing needs and operations of the marketplace. Similarly, Bank staff
members play an integral part in virtually every
System group that has been established to deal with
the vast array of issues the Federal Reserve confronts
in carrying out its multi-faceted activities.

W O R K F O R C E I N I T I A T I V E S TO
TOMORROW'S

MEET

CHALLENGES

A variety of Bank efforts in 1992 were directed at assuring that the changing Bank work force will continue
to meet the challenges of the evolving environment.
New formal training programs and informal briefing
sessions were implemented to keep employees current
on emerging issues and expand their skill and knowledge base. Other programs were introduced to help
bridge work/family issues, including the Bank's first
Kid's Day event for employees' children. Most significant, perhaps, was the corporate philosophy project,

OPERATIONS

initiated by a team participating in the Bank's management development program, and, therefore, representing the Bank's future leadership. By helping to articulate the Bank's core values—integrity, respect, responsibility,
excellence—in a simple and precise statement of philosophy, the group provided the entire Bank family with a
meaningful set of guideposts that will help the organization steer a steady course as it continues its journey
through the brave new world.

VOLUMES

number of items

dollar cimount
1 992
CHECK

&

1 991

1 992

1 991

1.9 billion

1.9 billion

ELECTRONIC

PAYMENTS

Checks, NOWs, &
share drafts processed

1.2 trillion

U.S. government checks processed

1.0 trillion

261.6 billion

Fine sort & packaged
checks handled

321.3 billion

620.7 million

598.9 million

50.8 billion

51.8 billion

52.8 million

54.4 million

Automated Clearinghouse
(ACH) items processed

CASH

2.3 trillion

1.8 trillion

513.6 million

396.4 million

32.8 trillion

32.3 trillion

13.0 million

12.4 million

27.9 billion
7.5 billion
691.9 million

25.5 billion
6.0 billion
722.1 million

2.2 billion
733.9 million
5.9 billion

1.9 billion
542.4 million
5.6 billion

6.3 billion
360.0 billion
3.1 billion

6.8 billion
313.8 billion
2.9 billion

145.4 thous.

232.2 thous.

11.8 thous.

14.9 thous.

0.7 billion

Transfers of funds

1.0 billion

119.8 thous.

171.5 thous.

1.7 billion

2.2 billion

870

967

OPERATIONS

Currency received & counted
Unfit currency destroyed
Coin received & counted
SECURITIES

SERVICES

FOR DEPOSITORY

INSTITUTIONS

Safekeeping balance December 31:
Definitive securities
Book-entry securities
Purchase & sale
Collection of securities
& other noncash items

—

—

LOANS TO
DEPOSITORY

INSTITUTIONS

Total loans made during year
SERVICES TO U.S.
AND GOVERNMENT

TREASURY
AGENCIES

Issues, redemptions & exchanges:
U.S. savings bonds
Definitive government securities
Book-entry government securities
Government coupons paid
Federal tax deposits processed
Food stamps redeemed

3.8 billion
0.4
4.4
91.0
142.7
2.4

billion
trillion
million
billion
billion

1.5
0.4
4.5
150.0
120.8

billion
billion
trillion
million
billion

2.1 billion

8.5 million
9.2
1.1
59.3
884.4
473.0

thous.
million
thous.
thous.
million

4.2 million
11.5
1.4
65.9
785.5
416.1

thous.
million
thous.
thous.
million

I

STATEMENT
OF C O N D I T I O N

Year-to-year changes in Reserve Bank assets and
liabilities largely reflect general economic developments
and System monetary policy actions. By purchasing
securities in the open market and making loans to
depository institutions, the Federal Reserve increases
reserves, providing a base for monetary expansion
in accord urith the national economy's growth needs.
1 2/3 1 /92

In 1992, deposits ofDistrict institutions including
clearing balances rose although reserve requirements
were lowered. The overall decline in the Bank's total

1 2/3 1

/9

1

ASSETS

Gold certificate account
Interdistrict settlement account
Special drawing rights
certificate account
Coin

$

1,270,000,000
(3,443,626,096)

$

1,370,000,000
236,606,858

interdistrict fluctuations.

1,036,000,000
29,757,418

1,336,000,000
52,728,683

Loans and securities:
Loans
Federal agency securities
U.S. government securities

1,950,000
670,355,724
36,537,178,964

13,355,000
759,533,872
33,485,862,167

Total loans and securities

assets and currency outstanding reflected day-to-day

37,209,484,688

34,258,751,039

922,908,474
112,034,234
3,380,201,671

798,721,907
111,506,497
4,018,997,160

$40,516,760,389

$ 42,183,312,144

Items in process of collection
Bank premises
Other assets
Total assets
LIABILITIES

Federal Reserve notes

$ 35,484,730,443

$ 37,207,220,663

Deposits:
Depository institutions
U.S. Treasury—general account
Foreign, official accounts
Other

3,422,357,347
0
16,819,000
49,357,129

3,101,621,157
0
18,570,000
211,361,989

Total deposits

3,488,533,476

3,331,553,146

620,709,248
230,600,822

702,095,487
300,713,748

$ 39,824,573,989

$ 41,541,583,044

Capital paid in
Surplus

$

346,093,200
346,093,200

$ '

Total capital

$

692,186,400

$

Total liabilities and capital

$40,516,760,389

Deferred credit items
Other liabilities
Total liabilities
CAPITAL. ACCOUNTS

18

320,864,550
320,864,550
641,729,100

$ 42,183,312,144

STATEMENT
OF I N C O M E

A Reserve Bank's income is largely a by-product
of monetary policy rather than the pursuit ofprofit.
Most of the Bank '5 income is interest on its share of the
System's Open Market Account portfolio of securities,
and, appropriately, the vast majority of this income
is turned over to the U.S. Treasury each year.
Compared to 1991, current income declined as a result
of lower market interest rates as well as a net loss on
System foreign exchange transactions conducted for
currency stabilization purposes. Operating expenses
rose modestly, largely reflecting increased supervisory
responsibilities mandated by legislation.

1991

1992
CURRENT

INCOME

Interest on loans

$

Interest on government
securities
Interest on investments
of foreign currencies
Service fees
All other

$

945,379

2,145,434,724

2,383,565,534

257,123,513
99,463,226
952,994

Total current income
CURRENT

403,053

309,683,301
95,097,878
2,198,281

$

2,503,377,510

$

2,791,490,373

$

176,999,479
28,964,791

$

170,414,496
29,503,710

EXPENSES

Operating expenses
Other current expenses
Total current expenses

205,964,270

Less reimbursement for certain
fiscal agency and other expenses

199,918,206

19,557,478

15,949,065

Current net expenses

$

186,406,792

$

183,969,141

Current net income

$

2,316,970,718

$

2,607,521,232

$

15,087,036

$

16,210,524

ADDITIONS TO
(OR

DEDUCTIONS

CURRENT

NET

FROM)

INCOME

Net profit (or loss) on
sales of securities
Net profit (or loss) on
foreign exchange transactions
Assessment for Board of
Governors expenditures
Cost of Federal Reserve currency
All other—net

(130,523,858)
(15,443,600)
(33,248,750)
(3,272,441)

Net additions (or deductions)

$

Net income available
for distribution
DISTRIBUTION

OF NET

Total income distributed

(13,527,400)
(35,192,869)
(9,554,577)
$

4,352,270

$ 2,149,569,105

(167,401,613)

$

2,611,873,502

$

$

18,583,288

INCOME

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

46,416,592

19,888,623
2,104,451,832

2,572,456,564

25,228,650

20,833,650

$ 2,149,569,105

$ 2,611,873,502

19

DIRECTORS
A N D ADVISORY
COUNCILS
Reserve Bank directors have a general governance responsibility for
the management of operations, approving budgets, expenditures, and

BOARD OF
FEDERAL
OF

DIRECTORS
RESERVE

BANK

CHICAGO

CHAIRMAN

Richard G. Cline
Chairman, President,
and Chief Executive Officer
NICOR Inc.
Naperville, Illinois

Thomas C. Dorr
President and
Chief Executive Officer
Dorr's Pine Grove
Farm Company
Marcus, Iowa

DEPUTY CHAIRMAN

official appointments. In addition, directors provide advice and counsel
to the Reserve Bank president on the state of the economy and financial
system. Reserve Bank directors also determine, subject to review by the
Board of Governors, the Bank's discount rate. To carry out these diverse
duties, the Chicago Reserve Bank and Detroit Branch directors are selected to represent various activities within the District and provide a broad
range of expertise and experience.
The Federal Advisory Council, consisting of one representative
from each District, meets quarterly with the Board of Governors to discuss
economic conditions. The Chicago Reserve Bank's advisory councils
on small business and agriculture provide a vital communication link
between the Bank and these important economic sectors.

Robert M. Healey
President
Chicago Federation of Labor
and Industrial Union Council
AFL-CIO
Chicago, Illinois
Stefan S. Anderson
Chairman, President,
and Chief Executive Officer
First Merchants Corporation
Muncie, Indiana
B.F. Backlund
Chairman and
Chief Executive Officer
Bartonville Bank
Bartonville, Illinois
Duane L. Burnham
Chairman and
Chief Executive Officer
Abbott Laboratories
Abbott Park, Illinois

1992 Board of Directors, Federal Reserve Bank of Chicago, from left to right: Stefan Anderson, Thomas Dorr,
Duane Burnham, David Fox, Paul Schierl, A. Charlene Sullivan, B. F. Backlund, Richard Cline, and Robert Healey.

20

David W. Fox
Chairman, President,
and Chief Executive Officer
Northern Trust Corporation
Chicago, Illinois
Paul J. Schierl
Financial Consultant
Green Bay, Wisconsin
A. Charlene Sullivan
Associate Professor
of Management
Krannert Graduate School
of Management
Purdue University
West Lafavette, Indiana

BOARD OF
DETROIT

DIRECTORS

BRANCH

FEDERAL

ADVISORY

CHAIRMAN

COUNCIL

REPRESENTATIVE

J. Michael Moore
Chairman and
Chief Executive Officer
Invetech Company
Detroit, Michigan

Eugene A. Miller
President and
Chief Operating Officer
Comerica Incorporated
Detroit, Michigan

Charles E. Allen
President and
Chief Executive Officer
Graimark Realty Advisors, Inc.
Detroit, Michigan
Beverly Beltaire
President
P.R. Associates, Inc.
Detroit, Michigan
John D. Forsyth
Executive Director
University of Michigan
Hospitals
Ann Arbor, Michigan
William E. Odom
Chairman
Ford Motor Credit Company
Dearborn, Michigan
Norman F. Rodgers
President and
Chief Executive Officer
Hillsdale County
National Bank
Hillsdale, Michigan
Daniel R. Smith
Chairman and
Chief Executive Officer
First of America Bank
Corporation
Kalamazoo, Michigan

ADVISORY
ON

COUNCIL

AGRICULTURE

Kenneth G. Stremlau
Mendota, Illinois
National Farmers
Organization
Scott E. VanderVeen
Clinton, Wisconsin
Wisconsin Pork Producers

Glen Balbach
Warren, Illinois
Wisconsin Milk Marketing
Board

Jerry L. Vandeveer
Frankenmuth, Michigan
Michigan Agri-Business
Association

Leland E. Behnken
Altona, Illinois
Illinois Corn Growers
Association

Donald B. Villwock
Indianapolis, Indiana
Member-at-Large

Marion L. Butler
Blandinsville, Illinois
Illinois Beef Association

Peter J. Wenstrand
Essex, Iowa
Iowa Corn Growers
Association

Jon D. Caspers
Swaledale, Iowa
Iowa Pork Producers
Association

ON S M A L L

ADVISORY

COUNCIL
BUSINESS

Richard E. Leach
Saginaw, Michigan
Michigan Farm Bureau

Phyllis L. Apelbaum
Chicago, Illinois
National Association of
Women Business OwnersChicago Chapter

Barry A. Mumby
Fulton, Michigan
Michigan Soybean
Association

Fernando Chavarria
Rolling Meadows, Illinois
U.S. Hispanic Chamber
of Commerce

Merlin D. Plagge
West Des Moines, Iowa
Iowa Farm Bureau

Noelle A. Clark
Lansing, Michigan
National Federation of
Independent BusinessMichigan

Susan E. Funk
Detroit, Michigan
National Association of
Women Business OwnersMichigan Chapter
J. Paul Jordan
Milwaukee, Wisconsin
Milwaukee Minority
Chamber of Commerce
Susan M. Larson
Chicago, Illinois
National Association of
Women Business OwnersIllinois Chapter
Eleanore A. Levy
West Des Moines, Iowa
National Association of
Women Business OwnersIowa Chapter
D. Larry Sherman
Birmingham, Michigan
Michigan Retailers Association
Toby B. Shine
Spencer, Iowa
Iowa Association of Business
and Industry
Robert J. Stevens
Columbus, Indiana
Member-at-Large
Jude M. Werra
Brookfield, Wisconsin
Wisconsin Manufacturers
and Commerce

1992 Board of Directors, Detroit Branch, from left to right: Norman Rodgers, Daniel Smith,
William Odom, John Forsyth, Beverly Beltaire, Charles Allen, and J. Michael Moore.

21
•

OFFICERS

Silas Keehn
President
William C. Conrad
First Vice President

Appointments to and promotions ivithin the Federal Reserve Bank's

CENTRAL

BANK

ACTIVITIES

INFORMATION SERVICES

Nancy M. Goodman
Vice President

official staff are made by the Bank's board of directors. The board

ECONOMIC: RESEARCH
AND INFORMATION SERVICES

appoints the Bank's president (chief executive officer) and first vice
president (chief operating officer) tofive-yearterms, subject to approval

Karl A. Scheld
Senior Vice President
and Director of Research

Jean L. Valerius
Vice President

by the Board of Governors.

ECONOMIC RESEARCH

SUPERVISION AND

David R. Allardice
Vice President and Assistant
Director of Research

Franklin D. Dreyer
Senior Vice President

Gary L. Benjamin
Economic Adviser
and Vice President

AND REGULATION

Larry R. Mote
Economic Adviser
and Vice President

James A. Bluemle
Vice President

The primary activities of the Chicago Reserve Bank
are divided into eight functional areas, overseen by senior vice
presidents who report to the Bank's president and first vice president.
An additional function, the Auditing Department, reports directly
to the board of directors' Audit Committee. The Bank's senior officers
togetherform the Management Committee and determine the Chicago
Reserve Bank's strategic direction.

Steven H. Strongin
Economic Adviser
and Vice President
Herbert L. Baer, Jr.
Senior Economist and
Assistant Vice President
Anne Marie L. Gonczy
Senior Economist and
Assistant Vice President
Robert H. Schnorbus
Senior Business Economist
and Research Officer
William A. Testa
Senior Regional Economist
and Research Officer

Federal Reserve Bank of Chicago Management Committee, from left to right: Silas Keehn, Richard Anstee, William Conrad,
Karl Scheld, William Gram, George Coe, Charles Furbee, Jerome John, Roby Sloan, Franklin Dreyer, Carl Vander Wilt.

22

STATISTICS

REGULATION AND LOANS

SUPERVISION

Barbara D. Benson
Vice President

David S. Epstein
Vice President
Roderick L. Housenga
Vice President
Geoffrey C. Rosean
Vice President
A. Raymond Bacon
Assistant Vice President
William A. Barouski
Assistant Vice President

S E R V I C E S TO

DEPOSITORY

INSTITUTIONS

NETWORK MANAGEMENT

OPERATIONS AND CHECK SERVICES

Robert A. Bechaz
Assistant Vice President
John L. Bergstrom
Assistant Vice President
George M. Gregorash
Assistant Vice President
Douglas J. Kasl
Assistant Vice President
William H. Lossie, Jr.
Assistant Vice President

CONTROL CENTER

SUPPORT SERVICES

Charles W. Furbee
Senior Vice President

Thomas M. Matsumoto
Assistant Vice President

Richard P. Anstee
Senior Vice President

CASH AND FISCAL AGENCY

David E. Ritter
Assistant Vice President

ADMINISTRATIVE AND

William A. Bonifield
Vice President
Jerome D. Nicolas
Assistant Vice President
Lawrence J. Powaga
Assistant Vice President
Guadalupe Garcia
Operations Officer

Patrick J. Tracy
Assistant Vice President

CHECK SERVICES

Barbara A. Van Den Bossche
Assistant Vice President

David R. Starin
Vice President

Gay Whiting
Assistant Vice President

Diane S. Noble
Assistant Vice President

Alicia Williams
Assistant Vice President
Kathleen E. Benson
Examining Officer
Betty P. Chow
Staff Development Officer
Maureen A. Cummings
Information Processing Officer

OPERATIONS ADMINISTRATION

Angelina S. Chin
Assistant Vice President
Erich R. Mueller
Operations Officer
ELECTRONIC SERVICES

Wayne R. Baxter
Vice President

James M. Rudny
Assistant Vice President

John M. Montgomery
Examining Officer

Charles L. Schultz
Assistant Vice President

James A. Nelson
Applications Officer

Kathleen H. Williams
Assistant Vice President

Maria Semedalas
Accounting Officer

Robert D. Lauson
Vice President
Kenneth R. Berg
Assistant Vice President
Kristi L. Zimmermann
Assistant Vice President
Tyler K. Smith
Operations Officer
CHECK ADJUSTMENT

Richard F. Opalinski
Assistant Vice President
HUMAN RESOURCE SERVICES

Glen Brooks
Vice President
Theodore E. Downing, Jr.
Assistant Vice President
Glenn C. Hansen
Vice President
Margaret A. Koenigs
Assistant Vice President

Thomas G. Ciesielski
Vice President
Sheryn E. Bormann
Assistant Vice President
Angela D. Robinson
Personnel Officer
FEDERAL RESERVE SYSTEM
SECURITIES PRODUCT OFFICE

Dara L. Hunt
Assistant Vice President and
Securities Product Manager

Jeffrey B. Marcus
Assistant Vice President

DISTRICT

OFFICE OF THE GENERAL AUDITOR

DETROIT BRANCH

Jerome F. John
General Auditor

Roby L. Sloan
Senior Vice President and
Branch Manager

Robert M. Casey
Assistant General Auditor
OFFICE OF THE GENERAL COUNSEL

OFFICES

Frederick S. Dominick
Vice President and Assistant
Branch Manager

COMMUNICATIONS SERVICES

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

Patrick A. Garrean
Assistant Vice President

George E. Coe
Senior Vice President

LEGAL SERVICES

Yvonne H. Montgomery
Assistant Vice President

SUPPORT

FUNCTIONS

AUTOMATION AND

LOANS AND RESERVES

William J. O'Connor
Assistant Vice President

Richard P. Bush
Vice President

MANAGEMENT SERVICES

Barbara T. Kavanagh
Financial Markets Officer

Gerard J. Nick
Vice President

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

BANKING SERVICES

Michael R. Jarrell
Examining Officer

Daniel L. Westrope
Examining Officer

FINANCIAL AND MANAGEMENT
SERVICES

ACCOUNTING SERVICES

Stephen M. Pill
Vice President and
Data Security Officer

John A. Valenti
Information Support Officer

Robert J. Sandusky
Systems Officer

GENERAL SERVICES

AUTOMATION SUPPORT

R. Steve Crain
Assistant Vice President

Elizabeth A. Knospe
Assistant Vice President and
Assistant General Counsel

Joseph R. O'Connor
Assistant Vice President

Brenda D. Ladipo
Assistant Vice President

Yurii Skorin
Assistant Vice President and
Assistant General Counsel

Frank S. McKenna
Assistant Vice President

Anna M. Voytovich
Assistant Counsel

Karen L. Rosenberg
Assistant Vice President

OFFICE OF THE BANK

DES MOINES

SECRETARIAT

L. Edward Ketchmark
Assistant Vice President

Richard L. Simms, Jr.
Assistant Vice President
F. Alan Wells
Assistant Vice President
REGIONAL OFFICES

Joan M. De Rycke
Assistant Vice President and
Assistant Secretary

INDIANAPOLIS

Donna M. Yates
Assistant Vice President
MILWAUKEE

Anthony J. Tempelman
Assistant Vice President

23

EXECUTIVE

CHANGES

DIRECTORS

OFFICERS

Members of the Federal Reserve Bank of Chicago's board
of directors are selected to represent a cross section of the
Seventh District economy including consumers, industry,
agriculture, services, labor, and varying sizes of commercial
banks. The nine-member board includes three bankers
and three nonbankers elected by member banks. Three additional nonbankers are appointed by the Board of Governors
in Washington, D.C. The board's chairman and deputy chairman are designated by the Board of Governors from among
its three appointees.

In 1992, the Bank's First Vice President, Daniel M. Doyle,
retired after providing 36 years of distinguished service to
the Bank, including 17 years as First Vice President.

Similarly, the Board of Governors selects three nonbankers to serve on the seven-member board of the Bank's
Detroit Branch. Four additional directors are selected by the
Chicago Reserve Bank board. The Branch board selects its
own chairman each year. All Reserve Bank and Branch directors serve three-year terms, with a two-term maximum.
Director appointments and elections at the Chicago
Reserve Bank and its Detroit Branch effective in 1992 were:
Richard G. Cline designated Chairman.
Robert M. Healey designated Deputy Chairman.
Stefan S. Anderson and Thomas C. Dorr elected directors.
Duane L. Burnham appointed director.
J. Michael Moore designated Branch Chairman.
John D. Forsyth and Daniel R. Smith appointed Branch directors.
At year-end 1992, the following appointments and
elections to terms beginning in 1993 were announced:
Richard G. Cline redesignated Chairman and appointed
to a second three-year term as a director.
Robert M. Healey redesignated Deputy Chairman.
Arnold C. Schultz (Chairman and President,
GNB Bancorporation, Grundy Center, Iowa) and
Donald J. Schneider (President, Schneider National, Inc.,
Green Bay, Wisconsin) elected directors, replacing
B. F. Backlund and PaulJ. Schierl, who each completed six
years of service on the board.
J. Michael Moore redesignated Branch Chairman and
appointed to a second three-year term as a Branch director.
Norman F. Rodgers appointed to a second three-year term
as a Branch director.
ADVISORY C O U N C I L S

The Federal Advisory Council, which meets quarterly to discuss business and financial conditions with the Board of Governors in Washington, D.C., is comprised of one member
from each of the 12 Federal Reserve Districts. Each year the
Chicago Reserve Bank's board of directors selects a representative to this group. Eugene A. Miller served as the Seventh
District's representative in 1992 and was reappointed by the
Chicago board for 1993.
Members of the Bank's two advisory councils, who
are selected from nominations by Seventh District small business and agricultural organizations, served the second year of
their terms in 1992. The councils provide a vital communication link between the Bank and these important sectors.

24

Appointed to the First Vice President post was
William C. Conrad, who has been with the Bank for 33 years
and, prior to assuming his current responsibilities, was Senior
Vice President in charge of Electronic and Automation Services.
Mr. Conrad also served previously as Senior Vice President and
Manager of the Bank's Detroit Branch.
The Bank's board of directors also acted on the
following promotions within the official staff during 1992:
George E. Coe to Senior Vice President in charge of
Automation and Communications Services.
A. Raymond Bacon to Assistant Vice President,
Supervision and Regulation.
William A. Barouski to Assistant Vice President,
Supervision and Regulation.
Robert A. Bechaz to Assistant Vice President,
Supervision and Regulation.
Dora L. Hunt to Assistant Vice President,
Federal Reserve System Securities Product Office.
Elizabeth A. Knospe to Assistant Vice President
and Assistant General Counsel, Legal Services.
Jeffrey B. Marcus to Assistant Vice President,
Management Services.
Barbara A. Van Den Bossche to Assistant Vice President,
Supervision and Regulation.
Gay Whiting to Assistant Vice President,
Supervision and Regulation.
Kathleen H. Williams to Assistant Vice President,
Electronic Services.
New officers appointed by the board in 1992 were:
Robert M. Casey to Assistant General Auditor, Auditing.
Michael R. Jarrell to Examining Officer,
Supervision and Regulation.
Barbara T. Kavanagh to Financial Markets Officer,
Supervision and Regulation.
James A. Nelson to Applications Officer,
Supervision and Regulation.
Angela D. Robinson to Personnel Officer,
Human Resource Services.
Robert J. Sandusky to Systems Officer,
Automation Services.
Maria Semedalas to Accounting Officer,
Accounting Services.
Daniel L. Westrope to Examining Officer,
Supervision and Regulation.

HEAD

OFFICE

230 South La Salle Street
P.O. Box 834
Chicago, Illinois 60690-0834
DETROIT

BRANCH

160 West Fart Street
P.O. Box 1059
Detroit, Michigan 48231-1059
DES M O I N E S

OFFICE

616 Tenth Street
P.O. Box 1903
Des Moines, Iowa 50306-1903
INDIANAPOLIS

OFFICE

8311 North Perimeter Road
P.O. Box 2020B
Indianapolis, Indiana 46206-2020
MILWAUKEE

OFFICE

304 East State Street
P.O. Box 361
Milwaukee, Wisconsin 53201-0361

FEDERAL RESERVE BANK
OF CHICAGO

For additional copies of this report,
contact the Public Information Center,
Federal Reserve Bank of Chicago,
at 312-322-5111.

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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102