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FEDERAL
RESERVE
BANK
OF
CLEVELAND
[ ANNUAL
REPORT
1992 J
CD
President's Foreword
CD
A Continent WilhoUl Borders
@
Comparative Financial Statement
@
Officers
@
Directors
@
Small Bank Advisory Council
@
Small Business Advisory Council
William H. Hendricks
(left, standing);
John R. Miller
(right, standing);
Jerry l.Jordan
(seated)
~the second hair or 1992, economic expan-
Some applaud the prosperity promised by
sion resumed at a healthy pace. Although the
less restricted trade among nations, while
structural adjustments that have hampered
others decry the threat to investment and
the recovery are not yet complete, there is no
employment represented by such rreedom.
reason to expect that the current ravorable
It is this controversy, based on dirferent
trends will not continue.
perceptions or the nature and erfects of international trade flows , that makes NAFTA a par-
Clearly, the emphasis on capital investment
ticularly timely and worthwhile subject ror
and the development of the nation's infra-
this year's annual report essay.
structure, as well as government budget
rerorm, will support the stable growth of the
In the essay, we explore the benefits of free
nation's economy. Because the Federal
trade, examine the probable effects of lAFTA,
Reserve has fostered a low inflation environ-
especially on the Midwest, and suggest ways
ment for the past several years, we believe that
that the Midwest can strengthen its competi-
monetary policy has contributed importantly
tive position. Given the context or the chang-
to improving long-run growth.
ing world economy, TAFTA will present a
Concern about the economy's potential for
change should ultimately strengthen the
growth has brought other, related issues into
region.
clear challenge, but a constructive response to
sharper focus . One such issue concerns our
nation 's position in the world market and
The Federal Reserve Bank or Cleveland will
America's continuing prosperity, especially as
continue to take a leading role in public policy
these may be affected by the North American
discussions such as NAFTA, and continue
Free Trade Agreement (NAFTA).
AFTA, a
LO
improve the efficiency and quality or our ser-
United States-Canada-Mexico pact, will con-
vices to the depository institutions in our
solidate and extend the reductions in tariffs
region. During 1992, the District was quite
and other barriers to trade between the three
successful in these erforts due to the contribu-
countries, if it is approved by the three gov-
tions of many people, including our 23 direc-
ernments as expected later this year.
tors, representing banking, business,
agriculture, consumer, and labor interests,
As has always been the case, the move toward
our Small Bank and Small Business Advisory
more open trade brings controversy with it.
Councils, our officers, and our employees.
In particular, the Bank has been fortunate to
We are grateful for the guidance of the
receive the guidance and leadership of
Cleveland directors who completed their
William H. Hendricks, first vice president,
terms of service: Laban Pjackson ,jr. (chair-
who has retired from the Bank after having
man of Clearcreek Properties), who served
served the District and the Federal Reserve
since 1987; and Frank Wobst (chairman and
System for more than 34 years. Bill's contribu-
chief executive officer of Huntington
tions to the Fourth District and the Federal
Bancshares Incorporated), who served since
Reserve System are well-known - he played a
1987. Special thanks are due to the directors
significant ro le in creating the Federal Reserve
of the Fourth District's two branch offices
System's automated clearinghouse system
who completed their terms: Clay Parker Davis
and in upgrading its electronic funds transfer
(preSident and chief executive officer of
network. Over the last few years, he spear-
Citizens
headed the development of the Federal
Cincinnati board since 1990; and William F.
Reserve System's new currency processing
Roemer (chairman and chief executive officer
equipment. Bill brought a very high level of
of Integra Financial Corporation), who served
dedication and integrity to his varied respon-
on the Pittsburgh board since 1990.
ational Bank), who served on the
sibilities, and he will be missed.
Finally, I want to express my appreciation for
I also want to express appreciation to john R.
the contributions made by the officers and the
Miller (former president and chief operating
employees of the FourLh DistricL during 1992.
officer of Standard Oil Company of Ohio),
who served as chairman of our board of directors since 1991 and who was a member of our
board since 1986. Whenjohn completed his
term of service in 1992, he left the Bank in a
stronger position to meet the challenges of
the future . We are indebted to him for his wise
counsel, leadership, and dedication .
h~
jerry L.jordan
"W
RADE IS IN ITS
FI DS ITS OW
ATURE FREE,
CHAN EL,
A D BEST DIRECTETH ITS OW
COURSE;
A D ALL LAWS TO GIVE IT RULES A D DIRECTIO S,
A D TO LIMIT AND CIRCUMSCRIBE IT,
MAY SERVE THE PARTICULAR E DS OF PRIVATE ME ,
BUT ARE SELDOM ADVANTAGEOUS TO THE PUBLIC."
AI1
Essay 011 the East Il1dia Trade
Charles D'Avenant (1697)
~ notion of goods and services, labor
regions into a tightly integrated economy, free
and capital nowing freely across the vast
trade within the borders of the United States
spaces of the United States is commonplace to
has allowed our country to approach its
Americans. Although the United States is
fullest economic potential. The nation 's grand
stratified by countless layers of governments,
experiment of internal free trade , steered by
most of which have some power to tax goods
market forces, has helped make our economy
and services, our founders saw the benefit of
the largest and most productive in the world ,
unfettered commerce among the various
which is a splendid testimony to D'Avenant 's
political entities. Most goods and services are
seventeenth-century observation.
transported across government boundaries
without restrictions of tariffs or quotas; businesses have free access to markets across the
BORD E RL E SS
TRAD E
country; people can live and work anyplace
~hin the last few years, two opportuni-
they choose.
ties have arisen to expand free trade beyond
the borders of the United States to include
Yet, even within this highly integrated market
Canada and Mexico. In 1987, Canada and the
economy, spatial distances, cullLlral differ-
United States entered into a free-trade agree-
ences, resource endowments, special skills or
ment, which set up a schedule to eliminate
technologies, and simply the quirks of history
tariffs and quotas on most goods shipped
lead to specialization and thus regional eco-
between the two countries. On August 12,
nomic diversity. Free trade across state bor-
1992, Mexico joined Canada and the United
ders allows regions to do what they do best.
States in announcing a trilateral agreement to
Ohio produces steel products and automo-
create a free-trade zone that would encompass
biles in abundance; California and Florida
the entire North American continent.
grow oranges. The exchange of citrus products for steel girders or for cars yields gains to
consumers and workers in all three regions.
Although trade is already well established
among the three countries, the now of goods
and services is still restricted by some tariffs
The potential of an integrated economy is
and barriers. The North American Free Trade
much greater than the sum of each region 's
Agreement ( AFTA) , if ratified, would elimi-
isolated efforts. By linking these diverse
nate tariffs on most shipments between the
three countries within 10 years. It wo uld also
the United States, has presented fewadjust-
remove limits on international investment,
ment problems in a more open trading envi-
liberalize trade in services (including bank-
ronment. Mexico, in contrast, with its lower
ing), protect intellectual propeny, and estab-
labor costs and less-developed economy, is
lish environmental and worker safety
seen by some to be a threat to u.s. jobs. Oppo-
standard s.
nents assert that eliminating trade barriers
between Mexico and the United States would
As a result, trade among the three nations
invite the exodus of jobs to Mexico, as well as
cou ld approach the high level of mobility of
introduce a host of problems regarding th e
merchandise and factors of production
environment and worker safety.
(except labor) that has nourished within the
United States for more than two centuries.
NAFTA has been heralded as a major step in
MIDWEST
JOBS
~ile critics generally agree that
AFTA
unleashing the combined competitive powers
wi ll raise overall well-being, they argue that
of the three
the costs are borne disproportionately by
onh American economies. By
linking the United States with its first- and
workers in specific industries and in certain
third-largest trading partners, AFTA would
regions. They point out that the hardship
create the world's largest trading bloc, with 370
experienced by a single worker displaced
million consumers and $6 trillion in output.
from his or her job because of increased competition will greatly exceed the gains realized
The further integration of the three economies
by anyone consumer who enjoys the benefits
promises to raise the standards of living of all
of lower prices.
three nations. The benefits spring from each
nation 's ability to focus on producing those
Many Midwest workers feel panicularly vul-
goods and services for which it has a compar-
nerable to NAFTA. They fear that much lower
ative advantage, redUCing costs by spreading
wages and less stringent regulations in
large investments over larger markets, and
Mexico will lure businesses and jobs away
indUCing more efricient operations through
from this region , leaving them with fewer job
stiffer competition. As a result, U.s. busi-
prospects and lower wages. Their fears have
nesses will not only be more efficient in pro-
been fueled by the lackluster growth of
viding goods and services to u.s. co nsumers,
Midwest manufacturing employment, by the
but they also will be more competitive with
well-publicized downsizing of many large cor-
Asian and European companies, further bol-
porations, and by the rapid growth in the
stering growth and prosperity at home.
number of production facilities just inside the
Mexican border.
On the other hand, not everyone shares the
same enthusiasm for the passage of AFTA.
This essay focuses on a narrow but important
While many see
issue: What effect wi ll free trade with Mexico
AFTA as a continuation of
the liberalization of onh American trade
have on Midwest jobs? The perspective offered
begun by the Canada-U.s. Free Trade
is framed in terms of competitive advantage
Agreement ( FTA) of 1987, others see a serious
and adjustment to change. How does a region
threat in including Mexico in the pact.
create and sustain a competitive advantage in
Canada, with its similarities to the Un ited
jobs and thus a high standard of living? How
States in wages and other economic aspects,
can businesses and workers prepare for the
products and industries that yield high-paying
and its long-standing trade relationships with
opportunities afforded by freer trade in general and by
AFTA in particular?
~ potential loss of cenain types of jobs
1960s, the Midwest maintained an advantage
resulting from the series of trade liberalizallon
over much of the rest of country, enjoying per
initiatives, of which
capita income as much as 10 percent higher
AFTA is the most recent
and most publicized , is a solemn reminder of
than the national average. Since then, the
the wrenching restructuring the Midwest has
Midwest's advantage has steadily eroded and
experienced during the past several decades.
is now slighLly below the national average.
Increased competition came first from regions
within the United States, and more recenLly
ADAPTING
from foreign economies.
TO
CHANGE
~at happened to the Midwest's domi-
Perhaps the Midwest's most effective competi-
nance in key industries that supported lhe
tor has been the sOUlhern states. This was not
region 's standard of Iiving? Some have argued
always the case. During the first half of this
that the region simply could not compete with
century, tens of thousands of workers from
the lower wages of the South. Others add that
the rural South were drawn into the higher-
the products thal built this region and this
paying faclOry jobs in the Midwest. For exam-
country - steel, automobiles, lires - are no
p le, at the turn of the century, steel workers in
longer the cornerstone of u.s. economic
the Midwest earned nearly 70 percent more
development.
CD
than their counterparts in the South.
REGIONAL PER CAPITA INCOME AS A PERCENT OF U.s. PER CAPITA 1 COME
Percent
After World War II ,
the tide turned . As
transportation costs
120.-------------------------------------------------------------~
100
-----------------------------------
------
80
declined with new
investment in high-
60
ways and railroads,
40
the South's lower
wages and less restrictive labor practices
aLLracted businesses
away from the
20
1940
1945
GREAT LA.KES/U.S.
1950
1955
1960
1970
1975
1980
- - SOUTHEAST/u.S.
Source: U.s. Department of Commerce, Bureau of Economic AnalysIs
Midwest and other
regions of the country. During the 1960s and
Both explanations are valid, but they raise a
1970s, the South gained close to two million
more basic question: Why was the Midwest
manufacluringjobs relative lo the rest of the
unable
nation . Much of this increase came at the
spawn the next generation of productive
expense of the Midwest.
industries? The answer lies at the root of com-
lo
generate new ventures that could
petitive advantage.
The reallocation of resources, particularly the
infusion of new investment, helped raise living
A region's competitive advantage is not meas-
standards in the South. The region 's per capita
ured by specific industries or products, but
income rose from 30 percent below the nation-
by the talents and resources that allow a
al average in 1950 lo 10 percent below in 1990.
region
During the 1950s and the first half of the
industries with expanding, more productive
lo
replace declining, less efficient
1985
1990
ones. The Midwest attained and preserved its
Second, local special interest groups, includ-
dominance ror decades primarily through
ing labor unions, trade associations, and
innovation - by discovering and implement-
political coalitions, lobbied ror protectionist
ing new and better ways to compete and by
legislation and administrative rules, or acted
successrully bringing these ideas to market.
in collusion to innuence prices and wages.
Such measures may have appeared at first to
The advantage or low ractor costs, principally
be successrul in preserving the benefits
low wages, is only secondary to the advantage
derived earlier, but in the end they resulted in
or profitable ideas. Economies expand and
higher costs and less innovative activity, bOlh
develop by adding new kinds or activities.
or which reduced the competitiveness or the
History is rull or examples in which regions
cumstances and opportunities.
region and its ability to adapt to changing cirhave been propelled by the cumulative efrect
®
or incremental ideas. Henry Ford saw the
Change is inevitable in a dynamic market
advantage or assembling automobile parts
economy. As industries mature, their prod-
built by small local suppliers. From this initial
ucts, which initiall y embodied new and
efrort, the auto industry was born. Andrew
unique technologies, are more easily repli-
Carnegie started the organization that would
cated. Regions, and nations, with low ractor
eventually become
u.s. Steel by acquiring a small rorge that
~E ADVANTAGE OF.. .LOW WAGES IS 0
LY SECO DARY TO THE
made axles ror a local
railway car builder.
Both industries nour-
ADVANTAGE OF PROFlTABLE IDEAS. ECO OMIES EXPA DAD DEVELOP BY
ADDING
EW KIDS OF ACTIVlTIES.
ished in the Midwest,
because the region 's
businesses made better products and pro-
costs, particularly low wages, are able to repli-
duced them more efficiently than anyone else.
cate the production process even though their
In return , these ventures yielded high returns
workers may not necessarily be as skilled nor
and high wages.
their managers as creative.
But the success and dominance or these
Workers have a choice as industries mature
Midwest industries unintentionally retarded
and market conditions change. They can
the rurther development or innovations and
either remain competitive by accepting lower
crippled economic growth ror basically two
wages or by applying and enhancing their tal-
reasons. First, the region 's dominant indus-
ents to increase productivity and thus com-
tries kept skilled labor and entrepreneurial
mand higher wages. Southern workers initially
motivation in short supply. As long as these
were willing to accept hair the wage rates or
industries orrered suffiCiently high-paying,
Midwest workers. The cost advantage lured
secure job opportunities to area workers,
mature industries to the South. First came tex-
there was little unemployed talent and little
tiles rrom New England, rollowed by tire and
incentive to develop new products or to im-
automotive products rrom the Midwest.
prove substantially upon existing processes.
Yet, as many or these industries reached
But ractor supply conditions continually
maturity and unions controlled access to the
change, and competitive advantage based
relatively rew new jobs created by these indus-
primarily on ractor costs is rragile. With rew
tries, the region did not attract the immigrants
impediments to shelter uncompetitive indus-
that it had earlier.
tries, as is the case with the borderless nature or
interstate commerce, the leadership of indus-
that a region's competitive advantage is more
tries sensitive to factor costs often shifts rapid-
enduring when it is built on the skills, knowl-
ly. Today's low-labor-cost region may be
edge, and ingenuity of its people rather than
displaced by a different region tomorrow.
when it is based on low factor costs. Therefore,
the issue facing the Midwest in particular, and
The South has lost its clear cost advantage
the nation in general, is much broader than
over the Midwest as the wage gap between the
simply the question of whether these regions
two has narrowed. Atthe same time, southern
will lose jobs to Mexico.
industries, such as textiles and apparel , have
increasingly come under sliff competition
The question is whether or not Midwest busi-
from lower-wage Asian countries. Like the
nesses and workers are prepared to break
Midwest, the South faced the same choice:
with the past and develop new products and
competitiveness through low wages or
new processes that will allow this region to
through higher productivity. Over time the
capitalize on its competitive advantages.
South has improved in other areas, such as its
Many Midwest manufacturers have made sig-
development of a more highly skilled labor
nificant progress toward improving their com-
force , its investment in a more extensive
petitive advantage during the last 10 years.
infrastructure, and its creation of more tech-
Continuing to do so will increase the region 's
nologically advanced industries.
competitiveness not only with Mexico, but
also with the rest of the world , including other
LESSONS
FROM THE PAST
parts of the United States.
~ basic lesson drawn from the Midwest's
experience with interregional competition is
({)n October 7, 1992, the heads of state from
Mexico also joined the General Agreement on
Canada, Mexico, and the United States met in
Tariffs and Trade (GATT) , which brought it
San Antonio, Texas, to announce the comple-
into compliance with international standards.
tion of two years of negotiations for a
orth
American Free Trade Agreement. Despite the
By 1989, the percentage of items requiring
Significance of the October ceremony, comple-
export licenses fell from 92 percent to 22 per-
tion of negotiations among the three nations
cent, the maximum tariff was lowered from
did not signal the beginning of trade Iiberaliza-
100 percent to 20 percent, and the trade-
lion wilhin
weighted tariff was halved . A year later, 80
onh America. It simply ratified
an ongoing process between the United States
percent of Mexican goods entered
and ilS
American markets under preferential or zero
onh American neighbors that had
been evolving since the mid-1980s.
orth
tariffs. Mexico also dismantled investment
controls and encouraged privatization of
In 1985, while the United States and Canada
slate-controlled enterprises.
were negotiating the Canada-U.S. Free Trade
Agreement, Mexico was undergoing the most
dramatic unilateral dismantling of trade barri-
INCREASED
TRADE
ers ever initialed. As part of this effort, it nego-
~ipments among the three countries
tiated an understanding with the United
have increased considerably since trade
States that limited certain Mexican subsidies.
liberalization began in the mid-1980s. Mexico
9
is the fastest-growing major U.s. export mar-
U.s. investment in Mexican plants and equip-
ket. u.s. exports to Mexico to pped $33 billion
ment has contributed to much co nste rnation
in 1991. nearly three times more than in 1986.
among midwesterners because of th e fear that
Mexico recently surpassed Japan to become
businesses will pick up en masse and move
the second-largest market for u.s. manufac-
their operations to Mexico to take advantage
tured goods. Conversely, more than 80 per-
of low labor costs. In reality, with the close
cent of Mexican exports are destined for the
linkages between domestic companies and
United States, making the United Sta tes
their affi liates, the net effect of u.s. investment
Mexico's largest foreign market.
in Mexico has been to create add itionaljobs
in the United States by c. ·panding export
This increase in trade reOects more than sim-
opportunities. For instance, domestic compa-
ply the worldwide trend toward greater trade;
nies export more to their Mexican affiliates
it demonstrates that a reduction or elimina-
than their Mexican subsidiaries ship back to
tion of tariffs has a stimulative efrect. U.s.
the United States.
exports of textiles and
apparel to Mexico
more than doubled
. . gj{: u.s. COMPANIES ARE RESTRICTED FROM INVEST!
GI
MEXICO, THEY
since 1986, as a direct
result of tariff red uctions and an expand-
WILL I VEST IN OTHER COUNTR IES THAT ARE MUCH FARTHER FROM OUR
BORDERS A D LESS LIKELY TO INTEGRATE WITH OUR ECONOMY.
ing Mexican market.
Overall, U.S. exports
to Mexico have increased at nearly twice the
The Midwest has particularly benefited from
rate of u.s. exports to the rest of the world. As
direct investment in Mexico, since a large
a result, the s hare of U.S. exports to Mexico
share of the capital goods req uired to build
has risen from 5.5 percent in 1986 to 7.9 per-
and equip plants in Mexico are produced in
cent in 1991.
the Midwest. For examp le, Ohio's exports to
Mexico increased 140 percent between 1987
u.s.
INVESTMENT
~trade between the two nations has
and 1991, whereas Ohio's exports to th e rest
or the world increased only 68 percent.
Industri al machinery accounted for the
grown, so has U.S. investment in Mexican
largest share of Ohio's exports to Mexico, and
production facilities. Investment has provided
in creased 160 percent during those five years.
a needed infusion of capital into Mexico while
linking Mexican production to the vast
Some may question whether more jobs would
network of u.s. operations, contributing to
have been created in the United States, and
the integratio n of the two economies.
the Midwest, if U.s. companies had not
Through their international production net-
reality is that if U.S. companies are restricted
works, U.S. companies transfer inputs and
from investing in Mexico, they will invest in
moved some operations to Mexico. But the
products among regionally dispersed facili-
other countries that are much farther from
ties, benefiting from cross-regional specializa-
our borders and less likely to integrate with
Lion, economies of scale, and increased
our economy.
competition.
~en wilh lh ese grea l slrid es in o pening lh e
U.s. rigures will be used ror co mparisons. For
bord er between Mex ico and th e United Slales
exa mple, th e Uniled Slales' overall producli vi-
over th e lasl d ecade, restricti ons s ti ll remain
ly is fi ve limes higher lh an Mex ico 's, which
in key induslri es, including a Ulo mobil es and
refl ecls bOlh a higher qualilYlabo r rorce a nd
agricu llure. AFTA n ego li alio ns have p aved
mo re intense capilal in veSlm enl. Th e Uniled
lh e way lO reduce lh ese tarirrs in th e neX llen
Slales will likely maintain lhis ad vantage, sin ce
years. Fu rth erm ore, the agreement in stilulio n-
il devoles fi ve lim es mo re o r ilS gross do mesti c
alizes th e poli cy cha nges and conrers a d egree
producl (GDP) lO research and d evelopment
o r perman ence by locking in do meslic p olicy
lh an d oes Mex ico, a nd il sp end s lwice lh e
changes wilh internali o nal lreali es. Th e efrecl
share o r GDP o n pub lic ed ucalio n .
o r NAFTA o n th e Mid wesl, ir and w hen il is
Ol o nly is th e Mid wesl's co mpelilive edge
ralified by Co ngress and th e legislalures o r lhe
olh er lwO co untries, d epends o n lwO basic
broader-based lh an Mex ico 's, bUl il is also
raclors: th e co mpeti live ad vantage o r th e va ri-
in key areas lhal are mo re likely to s uslain il,
o us indus lries in Mex ico and th e Midwesl,
a nd lh al yield higher relurns and wages. As
and th e eX lent to wh ich
®
lh e world prepares lO enter the lwe nty-firsl
AFTA rurth er
reduces lrad e barri ers.
ce ntury, mOS l agree lhal a na li on 's co mpelilive advantage will dep end o n th e s kill s o r ilS
COMP E TITIV E
p eopl e. Th ey gen erale th e id eas , pUllh em
E DGE
into prac tice, and make sure lh allhe fin al
~XiCO'S s ingle grea lesl ad vanlage over
p roducls are o r th e hig hesl qualilYand are
lh e Mid wesl, and over th e entire Uniled Slales,
mOS l effi ciently produced .
is s ignificantly lower
lab or COSlS. Lab or
co mpensalion in
Mexico is o nly o nesevenlh lhal in lh e
Mid wes l. However,
low labor COSlS is o nly
o ne o r m any raclors
Billions of u .S. Dollars
35 r----------------------------------------------------------.
30
5
0
lage o r a regio n o r a
-5
o r the labo r rorce, lh e
capacity lO produce
-10
[
U
1982
U
1983
D EXPORTS
U
1984
o IMPORTS
r-
r-
r-
r-
r-
r-
IO
co mpelilive ad van-
r-
r-
20
15
-
r- -
25
lhal d elermin e lh e
co untry. Th e qualilY
-
u.s. TRADE W ITH MEXICO
r-
u u
1985
1986
U
u
1987
1988
u
u
1989
1990
-
new lechn ologies, lhe
region 's pUblic inrrastructure, and th e cost o r
1991
IJ NET
Source: u.s. Department of Commerce. Internalional Trade Admmlslrallon
ease o r access to markels, th e co ndili o n o r lhe
n
WINN E RS
AND
LOSERS
malerials also weigh heavily in lh al d ecisio n.
~ven th e dirreren ces in wage rales
With respecl to lhese attributes, th e Midwest
wo uld exp ecl labo r-inten sive sectors in th e
has a sizabl e advantage over Mex ico. Sin ce lh e
Uni led Slales lO lose rro m
Midwest is rep resentalive o r th e u.s. eco no my,
capilal-inten sive seClors lOgain . Sludi es
belween Mexico and th e Uniled Slales, o ne
AFTA, a nd
using sophisticated models confirm this rule
industrial machinery operations are generally
of thumb.
less efficient than their counterparts in other
regions of the country, while rubber and plas-
The clear losers from the u.s. perspective are
tics plants are slightly more efficient. Produc-
likely to be the apparel, furniture, and glass
tivity improvements have been forthcoming
products industries. The net gainers for the
in these and other Midwest industries.
United States will probably be chemicals, capi-
Continued productivity advances relative to
tal equipment, metals, and rubber and plastics.
the rest of the nation will strengthen the
Midwest's prospects of benefiting from
In every case, the industries that are slated to
AHA.
lose to Mexican production offer considerably
lower wages and achieve lower productivity
than the industries that are apt to be net win-
@
THE
AUTO
INDUSTRY
ners. In fact, with the exception of the rubber
~ auto industry is a speCial case in the
and plastics industry, industries that are net
NAFTA negotiations. It is treated separately in
winners offer among the highest wages of any
the
manufacturing industry.
existing linkages with maquiladora industries
AFTA agreement, in part because of its
of Mexico. Maquiladora refers to Mexican
The expected inability of low-wage U.s.
plants that are set up along the border primar-
industries to compete with their Mexican
ily for the processing or secondary assembly
counterparts underscores the importance
of components imported from the United
of productivity in establishing an industry's
States. These components are imported duty-
competitive advantage. In every case, the low-
free and are subject only to a value-added tar-
wage industries (losers) have higher labor
iff when shipped back
costs per unit of oUlputthan the higher-wage
which is an allractive arrangement under the
industries (gainers) because of much lower
existing tariff structure.
to
the United States,
labor productivity.
Since the program first began in 1965, 143
On the basis of this list of industries, the
auto plants have opened along the border,
scenario is relatively bright for industries
employi.ng close to 100,000 Mexican workers.
and workers within the four Fourth Federal
Because of the existing networks between
Reserve District states (Kentucky, Ohio,
Mexican and U.S. plants, reducing tariffs and
Pennsylvania, and West Virginia) and the
quotas on autos and auto pans will not have
Midwest. More than twice as many workers in
much effect on U.S. production. But it will
Fourth District states are employed in indus-
increase output in Mexico by integrating
tries that are likely to gain from
maqUiladora industries with the rest of the
AFTA than
in industries that are at risk of losing employ-
Mexican economy.
ment. Roughly 30 percent of the four states'
manufacturing workers are in industries that
Estimates of NAFTA-related job losses in the
are likely to expand because of open borders
u.s. transportation industry are generally
with Mexico. Sixty percent of these workers
quite modest, typically at only about one-half
are concentrated in industrial machinery and
of 1 percent of existing employment during
primary metals industries.
the next 10 years. The real losers in the auto
industry are likely to be countries that are not
However, Midwest industries will reap the
part of AHA. The greater increase in
gains from NAFTA only if they remain com-
Mexican auto-related exports to the United
petitive with industries in the rest of the
States will be offset by fewer u.s. imports
United States. At this point, Midwest steel and
from other countries. At the same time, free
lrade wilh Mexico will resull in grealer plant
specialization , which will cause lemporary
disp lacement or workers, bUl will eventually
increase the efficiency or the induslry.
Increased efficiency or orth American
aULOmakers will enhance lheir abililY lO compele wilhJapanese and European producers,
ultimalely saving U.s. jobs. In the meantime,
lhe orth American auLO induslry is grappling wilh the painrul process or downsizing
in order lO reduce ilS chronic problem or overcapacily. Gaining access lO a growing Mexican
markel ror aULOmobiles may help domestic
firms deal wilh the overcapacilY problem.
SMALL
EFFECTS
~many ways, il is difricu illo assess lhe
impaclor AFTA on Mexico and the Uniled
Slales because the agreement is quile dirrerent
rrom previous rree-lrade pacls. The European
experience and the recent Canada-U.S. Free
Trade Agreement joined countries or similar
slandards or living, wages, and lechnical proficiency, while the dirrerences belween Mexico
and the Uniled Slales (and Canada) are slark.
The racllhal Mexico's hourly labor compensalion cosls are only one-seventh lhose or lhe
Uniled Slales apLly sums up the dirrerences.
Several mitigating ractors, however, lead mOSl
analysts to conclude thallhe efrect or AFTA
on the United Slates, and even on Mexico, will
be small. Gains ror the United States are estimaled LO be less than 1 percent or GOP over
the lO-year period in which tarirrs are
reduced . Gains ror Mexico may be as high as
10 percent or GOP, depending on the extent
LO which roreign investment and productivity
increases are realized .
Even lhough Mexico stands to gain the mOSl
rrom open borders, since it is the smallest and
least developed or the lhree economies, its
economic developmenl benefils the Uniled
Slales direcLly. Increased prosperily promoles
polilical slabililY and progress LOward grealer
democracy in Mexico, which slrenglhens a
polilical and economic partnership
belween the lWO
nations. Formalizing
lhese policies by
entering into an internalionallrealy rurther
ensures lhallhese iniNORTH AMERICAN GDP
lialives will Slay on
course.
These relalively small
gains reOecl several
moderaling raclors.
o CANADA
Trade reslriclions
o MEXICO
o UNITED STATES
belween the Uniled
Source: IMD Intemauonal , The World
Slales and Mexico
oj Compel III veness Repel I. 1990.
have already been
Lausanne. Switzerland.
reduced lO low levels.
Mexican goods coming across our border are
subjeclLO an average larirr or only about 5 percent, while U.s. products going into Mexico
are laxed al only aboul a 10 percent rate.
Furthermore, much or the trade among the
lhree countries is nOl subject to tarirrs: early
85 percenl or Mexican products currently
enter the Uniled Slales duty-rree.
Since Mexico's economy is quite small relalive
LO that or the United States, increased Mexican
exports will have a relatively small errect on
U.S. production. Labor and capilal will move
extensively across sectors within Mexico,
leading LO substantial displacement or
Mexican workers, bUl much less displacement or u.s. workers. In addition, the impact
on the United States will be rurther limited
because part orthe increase in imports rrom
Mexico will substitute ror imports rrom olher
low-wage countries.
~ gains from integra ling lWO economies
lhe supply of high-skilled workers could nOl
wilh vasLly different levels of capital and labor
keep up wilh the increase in demand .
skills resull primarily from increased specializalion and relocaLion of produclion facililies .
The excess supply of low-skilled workers is
NAFTA is expected to boost u.s. employment
partly auribulable to Mexican immigration,
wilhin the range of 100,000 lO 300,000 work-
which accounts for aboul 10 percent of lhe
ers during the nexl 10 years as a resull of
increase in low-skilled workers during lhe
greater efficiencies from specializalion and
pasl decade. MOSl of the problem simply
economies of scale.
reflecls the facllhal more sophislicaled lechnology and the shifllO a service- and
However, lhese eSlimales represent nel gains,
®
informalion-based economy require skills
in which jobs gained due lO increased exports
beyond lhose lhal can be oblained wilh only a
are offsel by jobs losl due lO in creased
high school educalion. Allhough a grealer per-
imports. Some labor organizalions place lh e
centage of high school graduales now go on
number of displaced workers close lO
lO
500,000. A widely ciled sLUdy foresees aboul
enough workers wiLh sufficienl skills lO fill
110,000 displaced workers nationwide from
their needs.
college, companies are slill unable lO find
increased imports.
AFTA will nOl intensify the problem, alleasl
THE
LESS-SKILLED
nOl from the supply side. Il has no provision
for an increase in immigralion. On the con-
c 0isplacement is by no means a unique
trary, one purpose of AFTA is lO provide
resull of free trade. During an economic
viable employmenl opportunilies for
downlurn , the proportion oflhe unemployed
Mexicans in Mexico, which will reduce Lhe
who losllheir jobs involuntarily has climbed
incenlive for lhem lO seek employment in lhe
lO as high as 60 percenl. Moreover, upwards
Uniled Slales.
of 20 percenl of all jobs in the economy
change hands in anyone year. To pUllhese
eSlimales inlo perspecLive, U.s. employment
WORKER
ASSISTANCE
declined by 1.6 million from the lime lhe
<Oiflhough the nel employment effecls of
economy peaked in mid-1990 until year-end
NAFTA are expecled LO be small, workers will
1992.
be displaced. Even [or workers who have lhe
necessary skills lO meellhe requirements of
Less-skilled workers will be mOSl affecled by
lhe new jobs lhal will be crealed from lrade,
induslrial reslructuring resulting from
searching for a job is cosLly, particularly if il
NAFTA. Induslries lhaL are likely lO directly
entails searching for employmenl in olher
compeLe wilh Mexican firms offer the lowesl
induslries, in new occupaLions, or in olher
wages and have the lowesl produclivity.
communilies.
Workers wilh a high school educaLion or less
Low-skill workers will have more difficulty find-
have experienced a decline in real earnings
ing employment, and lhey will require eXlensive
over the past decade, while college graduates
training in order lO be productive in the work-
have enjoyed a gain in real wages. This income
place. These people need assiSLance lO pay
disparity arose because the supply of low-
lui lion as well as lO support lhemselves and
skilled workers exceeded lheir demand, while
their families while completing a course of study.
Worker assiSlance remains one of the major
issues lO be laken up by Congress before
AFTA can be raLified. Experience has shown
lhallhe mOSl effeclive programs reach dislocaled workers as soon as possible, provide job
search assiSlance lO workers who have lhe
skills and backgrounds Lhey need for new
jobs, offer occupalional relraining and basic
skills lraining, and provide supplemental
income during the relocalion process.
Several exisLing governmenl programs
already provide such services, including
Trade Adjuslment Assislance (TAA),
Economic Dislocalion and Worker
Adjuslmenl Assislance (EDWAA),Job
Training and Placement Assislance UTPA),
and unemployment insurance benefils. Of
lhese programs, only TAA was enacled specifically lO provide lraining and income supplement lO workers displaced by liberalized
~ NOrLh American continenl is well on ilS
way lO borderless Lrade. During the lasl decade,
lremendous gains have been made in eliminaling the barriers lO the free now of goods and
services among Canada, Mexico, and lhe
Uniled Slales. We believe AFTA will ensure
lhal U.s. firms and workers will reap the full
benefiLs of the markel oppOrLUnilies of free
lrade by improving on lrade rules and providing a slable environment for fUlure inveSlmenL.
The success of the Midwesl, and olher regions
of the country, in benefiling from NAFTA
depends on the willingness of business leaders
and workers lO adapl LO changing condilions
by offering new producLS and implementing
innovaLive produclion lechniques.
Local indusLries and intereSl groups cannOl
successfully resiSL the direclions lhal markel
forces are pushing the regional economy. As
declining indusLries give way LO growing ones,
lrade. In the neXl several months, Congress
will evaluale the adequacy of lhese programs
in redislribuling some of the gains from free
lrade and in providing the lraining and job
placement services necessary for an efficienl
lransilion.
Government programs alone cannOl solve lhe
problem of a poorly lrained labor force.
Grealer involvement of the privale seClor in
lhe educalional syslem would help improve
lhe lraining received by workers, as well as
lhe educalion received by sludents before
lhey enter the work force . Businesses have lhe
mOSl immediale knowledge concerning lhe
skills required in the workplace. Cooperalion
belween businesses and schools would help
lO close the gap belween whal is offered in
lraining programs or in schools and whal
businesses need in lheir employees.
some businesses will close lheir doors and
some workers will be displaced . The evidence
seems LO indicale, however, lhal the passage
of AFTA would nOL open a noodgale of
producLs into the Uniled Slales, nor would iL
provoke a mass exodus of jobs into Mexico.
AFTA merely raLifies an ongoing lrend .
Even the small nel effecls produced by
AFTA are likely lO lead lO some unemployment as adjusLments are made. InSlead of lrying lO preserve jobs lhal are less producLive
and lower paying, the beller slraLegy is for
workers lO acquire the skills necessary lO
qualify for jobs in the growing, more compeLiLive seCLors. In a dynamic economy, bOLh
declining and advancing induslries exiSl side
by side. The diversilY wiLhin and across
regions, unimpeded by lrade barriers, offers
ample opportunilY for the kind of induslrial
reslrucluring necessary lO promoLe economic
growlh and lO offer workers a beller fUlure.
STATEMENT
OF
CONDITION
For years ended December J I
1992
[ ASSETS ]
@
$
1991
Gold certificate account
Special drawing rights certificate account
Coin
Loans and securities:
Loans to depOSitory institutions
Federal agency obligations bought outright
U.S. government securities:
Bills
Notes
Bonds
Total U.S. government securities
Total loans and securiLies
-0340,680,714
-0378,205 ,795
8,924,796,483
7,438,416,401
2,205,304,963
$ 18,568,517,847
$18,909,198,561
8,299,003,637
6,352,112,831
2,022,987,976
$ 16,674,104,444
$ 17,052,310,239
Cash items in process of collection
Bank premises
Oth er assets
Interdistrict settlement account
TOTAL ASSETS
442.406,029
35.939,937
1.682.967,122
1,420.144,348
$ 23,730,651 ,431
353.848,298
34,300.807
1,777,907,651
1,765,980,255
$ 22,351 ,530,518
658,000,000
556,000,000
25 ,995 ,434
$
692,000,000
645,000,000
30,183,268
[ LIAB ILITIES]
Federal Reserve notes
Deposits:
Depository institutions
Foreign
Other depOSits
Total deposits
$21 ,679,962,723
$ 19,949,460.886
1,340,703,323
8,451,200
14,900,693
$ 1,364,055,216
1.571,163,262
7,755,000
87,808,726
$ 1,666,726,988
Deferred availability cash items
Other liabilities
TOTAL LIABILITIES
220,326,754
113,869.638
$ 23,378,214,331
269,814,840
143,216,304
$ 22,029,219,018
$
$
[ CAPITAL ACCOUNTS ]
Capital paid in
Surplus
TOTAL CAPITAL ACCOUNTS
TOTAL LIABILITIES AND CAPITAL ACCOU TS
176,218,550
176,218,550
$ 352,437,100
$23,730,651 ,431
161,155,750
161,155,750
$
322,311,500
$ 22,351 .530,518
INCOME
AND
EXPENSES
FO I years elided DCCC/llberJ I
1991
1992
[CURRENT
INCOME]
Interest on loans
Interest on government securities
Earnings on foreign currency
Income from services
All other income
Total current income
[CURRENT
$
$
74,893 ,149
7,166,749
$1,173 ,664,499
$
$
$
477,189
1,181 ,833,460
129,935,784
43,638,765
635,040
$ 1,356,520,238
EXPENSES]
Current operating expenses
Cost of earnings credits
CURRENT ET I COME
[PROFIT
$
51,177
1,083,681 ,615
127,851,245
43 ,856,164
284,196
$1 ,255,724,397
AND
77,244,050
8,545,603
$1 ,270,730,585
LOSS]
Additions to current net income
Profit on foreign exchange transactions
Profit on sales of government securities
All other additions
TOLal additions
$
Deductions from currenl nel income
Loss on foreign exchange Lransactions
All other deducLions
TOLal deductions
Net additions or deductions
$
$
$
[DIST R IB UTION
OF
NET
Dividends paid
Payments to U.s. Treasury
(interesL on Federal Reserve nOLes)
Transferred to surplus
Total dislributed
65,585 ,542
10,279
65 ,595 ,821
57,985,932
$
$
$
$
21 ,833,126
8,018,932
935
29,852,993
-06,240
6,240
29,846,753
1,751 ,906
9,694,406
7,795,200
18,485,886
$1,087,645 ,575
6,028,900
16,602,497
$1 ,268,251,535
$
$
Cost ofUnreimbursable Treasury Services
Assessments by Board of Governors
Expenditures
Federal Reserve currency costs
ET 1 COME AVAILABLE FOR DISTRIBUTIO
-07,605 ,686
4,203
7,609,889
INC O ME]
10,100,417
1,062,482,358
15,062,800
$1 ,087,645,575
9,032,226
1,223,419,259
35 ,800,050
$1,268,251,535
@
As oj December 31, 1992
Jerry L.Jordan
Andrew J. Bazar
Vice President
President
& OieJ Execulive Officer
Jake D. Breland
William H. Hendricks
Vice President
First Vicc Presiden t
William S. Brown
@
Randolph G. Coleman
Vice President
Senior Vice President
Andrew C. Burkle,Jr.
John M. Davis
Senior Vice President
& Director oj Rescarch
Vice President
Jill Goubeaux Clark
Vice PreSident
John]. Ritchey
Senior Vice President
& General Counsel
& Associate General Counsel
Patrick V. Cost
Vice President & General Auditor
Samuel D. Smith
Se nior Vice President
Lawrence Cuy
Vice President
Donald G. Vincel
Scnior Vice President
Creighton R. Fricek
Vice President
Robert F. Ware
Senior Vice President
Elena M. McCall
Vice President
John]. Wixted,jr.
Senior Vice President
R. Chris Moore
Vice Presiden t
Sandra PianailO
Vice Prcsident & Secretary
Robert W. Price
Vice President
Edward E. Richardson
Vice President
Mark S. Sniderman
Vice President
& Associate Director oj Research
Joseph
c. Thorp
Vice President
Roben Van Valkenburg
Vice President
Andrew W. Watts
Vice President
& Regulatory Cou nsel
Margrel A. Beekel
A sistant Vice President
Terry N. Bennett
Assistant Vice President
ThomasJ. Callahan
Assistant Vice President
& Assistant Secretary
Randall W. Eberts
Assistant Vice President
& Economist
John]. Erceg
Assistant Vice President
& Economist
William T. Gavin
Assistant Vice President
& Economist
Bunon G. Shulack
Assistant Vice Presidcnt
William]. Smith
Assistant Vice Presidcnt
Edward]. Stevens
Assistant Vice Presidcnt
& Economist
James B. Thomson
Assi tant Vice Prcsidellt
& Economist
Walker F. Todd
As istant General COUIISel
c~
Rcscarcil Officer
Henry P. Trolio
Assistant Vice President
Darell R. Wiurup
Elaine G. Geller
Assistant Vicc Prcsident
Assistant Vice PrCSldcrH
Robert]. Gorius
Assistant Vice President
Norman K. Hagen
Assistant Vice President
Eddie L. Hardy
Examining Officer
David P.Jager
Assistant Vice President
Rayford P. Kalich
Assistant Vice President
[CINCINNATI]
Charles A. Cerino
scnior Vice President
Roscoe E. Harrison
Assistant Vice President
Barbara H. Hertz
Assistant Vice President
Jerry S. Wilson
Assistant Vice PrTsidcnt
Kevin P. Kelley
Assistant Vice PresidCllt
John E. Kleinhenz
[PITTSBURGH]
Assistant Vice President
Harold]. Swart
William]. Major
Senior Vice President
Assistant Vice President
Raymond L. Brinkman
Laura K. McGowan
Assistant Vice Presidellt
Assistant Vice President
Lois A. Riback
James W. Rakowsky
Assistant Vice President
Assistallt Vice President
Robert B. Schaub
David E. Rich
Assistant Vice Presidcnt
Assistant Vice President
John P. Robins
Examining Officer
Terrence]. Roth
Assistant Vice President
Susan G. Schueller
Assistant Vice President
[COLUMBUS]
Charles F. Williams
Vice President
®
As oJ December 31, 1992
[
CLEVELAND DIRECTORS
(standing) Alfred C. Leist;
john R. Hodges; Frank Wobst;
Laban P.jackson,jr.
(seated) William T. McConnell:
Chairman John R. M!lIer
[ CLEVELAND ]
Chaim1Qn & Federa l Reserve Agent
J ohn R Mill er
Fonner President & ChieJOperati ng Officer
William T McConnell
President, The Park National Bank, Newark, Ohio
Standard Oil Company oj Ohio, Clevelalld, Ohio
Do uglas E. Olesen
Deputy Chaim1Q /l
A Will iam Reyn old s
Chairman &C11ieJExea,tiveOfficer
GenCorp, Fai rlawn, Oh io
Verna K. Gibson
President & C11ieJExecutive OJJicer
Battelle Memorial Institute, Columbus, Ohio
FrankWobst
Chairman & C11ieJ Executive Officer
Huntington Bancshares Incorporated, Columhus, Ohio
Business Consultan t, Columbus, Ohio
J ohn R Hodges
Preside nt, OhioAFL-CIO, Columbus, Ohio
Federal AdviSOry Council Representative
J ohn B. McCoy
Laban P.Jackson,jr.
Chaima n, Clearcrecl1 Properties, Lexington, Kentucky
Alfred C Leist
Chai rman, Presidwt & ChieJ Executive Officer
The Apple Creek Banl1ing Co., Apple Creek, Ohio
C11ainllan & ChieJ Executive Officer
Banc One Corporation, Columbus, Ohio
1
®
[
[ C INC INN AT
Cl ClNNATI DIRECTORS
(standll1g) Clay Parker Davis;
Raymond A. Bradbury;
jack W. Buchanan
(seated) Marvin Rosenberg;
Eleanor Hicks
r]
CJwinl1an
Mar vin Rosenberg
Partner
Towne Properties, Ltd., Cincinnati, Ohio
Raymond A. Brad b ury
CJwirnwn
Martin County Coal Corporation, Inez, KenlUc11Y
J ack W. Buchanan
President, Sphar & Company, Il1c., Winchester, Kentuchy
Clay Parker Davis
President & Chief Exccutlve Officer
Citizens National Bal1i1, Somerset, Kentllci1y
Elean or Hicks
Seniol' Partner & Chief Executive Officer
Hicks & Killley, Cillcinnati, Ohio
Harry A. Sh aw, III
Chairman & Chief Executive Officer
Huffy Corporation, Dayt.on, Ohio
Mar vin]. Stammen
President and Chief Executive Officer
Second National Bani1, GreenVille, Ohio
[
PITTSBURGH DIRECTORS
(sta/1dll1g) George A. Davldson,jr.;
Wilham F. Roemer;
I.l" Rendall Harpcr,jr
(seated ) David S. Dahlmann;
Sandra l. PhillIps
1
[ PITTSBURGH ]
Chaimwn
Robert P. Bozzo ne
President & Chlcf Exccutil'e Officer
Allegheny Ludlum Corporation, Pil tsbUl'gh, Penllsyll'anw
David S. Dahlm ann
Presidel1! alld Chicf ExcClItivc Officer
Southwest NatIOnal Corporatioll, Greensburg, Pennsylvania
George A. David son,] r.
Chairman & Chief Executive Officer
COl1solidated Natural Gas Compal1Y, PittsbLlrgh, Pcnl1sylvanw
LN. Rendall Harper,]r.
PI'esident, Americal1 Micrographics Co., Inc.
Monroeville, Pennsylval1ia
Sandra L. Phillips
ExeCUlive Director, Pittsbltl'gh Partl1C1"ship for
Neighborhood DevcioplllCllt, Pittsburgh. Pel1nsylval1ia
J ack B. PiaLl
Chainl1an of the Board
Mil/craft Indus rries, Inc., Washington, Pennsylvanltl
W illiam F. Roemer
Chainnan & Chief Executive Officer
Integra Final1cial Corporarion, Pittsburgh, PennsylvClnw
1
o/~~ rmaJo/'ce~
Q/maIt'rmaJ ~ceOiMUt<f'1991-9rJ
SMALL BA K ADV1S0RY COU ClL
(standing) Danelda Drewes; Ernest]. McFarland; C. Richard
Hubbard; Blair A. Hillyer;j. CUrl Gardner,James C. Willen,
Joe L. Wilson (seated )JamesA. Carr, Thomas F. Hile,
Tiney McComb, David S. Dahlmann
[
-
James A. Carr
President and CEO
The National Bank of North East
North East, Pennsylvania
David S. Dahlmann
President and CEO
Southwest Natiollal Bani! of Pennsylvania
Greensburg, Pennsylvania
Danelda Drewes
President and CEO
The Corn City State Bank
Deshler, Ohio
j. CUrl Gardn er
President and CEO
Irwin Bani! and Tmst Company
Irwin, Pennsylvania
Blair A. Hillyer
President and CEO
The First Natio nal Bank of Dennison
Dennison, Ohio
Thomas F Hite
President and CEO
The Croghan Colonial Banll
Fremont , Ohio
C Richard Hubbard
President and CEO
The Liberty National Bank
Ada, Ohio
Tiney McComb
Chail111Qn, President and CEO
Hearlland Banll
Croton, Ohio
Ernest]. McFarland
President and CEO
First State Banll of Adams County
Winchester, Ohio
J oe L Wilson
President and CEO
United National Bank-North
WJleeling, West Virginia
James C Witten
CIlairman and CEO
First Natio nal Bank of Paintsville
Paintsville, Kentu cky
1
qetUd~ ~Jo/' -(dve&nd
Q/mafflrP~~ £oa?uit!lfJfJ2-fJa!
SMALL BUSI ESSADVI ORY COU\JCIL
r
James E. Bushman
(standlllg) Lee T Todd.jr .. john . Taylor.Jr.: Randall Russell .
james E Bushman; H Edward Rigel
(seated) Brad Roller; Prcsidemjerry L.jordan.jamcs A. Poure
Dr. Randall L. C. Russell
President
Cast-Fab Technologies, In L
CinCll1l1ati, OhIO
Dale C. Phillip
President
Ranbar Tcchnology In c.
Glenshaw. PCllnsylvaliia
Peter . Stephans
President
KifJel Industries InL
Cleveland, OhIO
James A. Poure
Chall1l1an alld CEO
General AlullI & Chellllcal Corporalion
Holland , Ohio
H. Edward Rigel
Owner Operator
Rigel Fanlls InL
Leipsic, Ohio
Brad Roller
President
Swiger Coil Systems, Illc.
Cleveland, Ohio
Sco tt Rusch
Vice PreSident
Anolllatic Corp.
Newark, Oh io
President
Dynalllc!./n L
Wash II1gton. PCI1I1sylvallia
John
. Taylor,Jr.
Chalrlllan and CEO
Kurz-Kosch , In c.
Day toll, 0/110
Dr. Lee T. Todd ,Jr.
Chairman and CEO
DataBeam COI'poratlOll
Lexillgtoll , KenwcllY
Richard D. Zande
Choll"l1wn
R. D. Zandc & AssoCIates, Ltd.
Columbus, 0 /110
l
The Federal Reserve System is
responsible ror rormulating and
implementing U.s, monetary policy,
It also supervises banks and bank
holding companies, and provides
rinancial services to depository institutions and the rederal governmenL
The Federal Reserve Bank or Cleveland is one or 12 regional Reserve
Banks in the United States thaI,
together with the Board or Governors
in Washington , D,C, comprise the
Federal Reserve System,
The Federal Reserve Bank or Cleveland, its two branches in Cincinnati
and Pittsburgh, and its Columbus
Office serve the Fourth Federal
Reserve DistricL The Fourth District
includes Ohio, western Pennsylvania, the northern panhandle or
West Virginia, and eastern Kentucky,
o
printed on recycled paper
Cleveland
1-155 Eas c6ch ScreeC
Clevcla lid, 0 H -14 114
(2 16) 579-2000
Cincinnali
150 Eas t 4rh Sow
Ci nw lIlCI cl , OH 45202
(5 13) 72H787
Pillsburgh
717 Cran CScree c
Plcrsbll rgh, PA 15219
(-l 12) 261-7800
Columbus
965 KlI1gsnllll Pa rkway
Colum bus, 0 1-143229
(61-1)846-7494
This annual report was prepared
by the Public Affairs and Bank
Relauons Department and the
Research Department, Federal
Reserve Bank of Cleveland.
For addillonal copies of this report.
contact the Public Affairs and Bank
Relallons Department. Federal
Reserve Bank of Cleveland. PO. Box
6387. Cleveland. OH 44101, or call
1-800-543-3489.
Design: Michael Galka
Photography: Bill Pappas
@FedFRASER