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Federal Reser.rreBank
of Dallas
Annual Report 1979
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
To Member Banks in the
Eleventh Federal Reserve District:
1979 was an active year in the Eleventh Federal Reserve District. Production was at high levels in both industry and agriculture. Drilling activity for oil and gas was stepped up. Economic growth was boosted by continued in-migration of both lirms and families as well as the strong demand for the region's mqjor products and
services. Labor markets have been tight, andjob-hopping has been widespread, especially tn the larger
metropolitan areas.
Financial institutions have responded to, and contributed to, the region's continued rapid economic
development, while also adapting to the ongoing flow of regulatory changes. Bank examinations and holding
company inspections have become much more comprehensive and, in some respects, more detailed as well.
The structure of banking has continued to change, although probably less than it appears on the surface. New
charters have been issued by both the State authorities and the Comptroller of the Currency; multibank holding
companies have acquired additional banks; and a large number of one-bank holding companies have been
orgarized. Banking service levels, competition, prolitability and "soundness" all appear to have moved positively.
Monetary policy during 1979 was designed to restrain the growth of money and bank credit and to slow
the pace of inflation. The first was achieved, albeit somewhat erratically; the latter was not.
Monetary growth was very slow in the ffrst quarter of 1979, very strong in the second and third quarters,
and moderate in the fourth quarter. Bank credit, on the other hand, increased strongly during the lirst three
quarters and slowed to a moderate pace only in the fourth quarter following strident policy actions taken early
in October.
Interest rates were fairly stable during the Iirst half of 1979, softened perceptably around mid-year, and
then rose sharply beginning in July-August. By year-end, yields on money market instruments had settled back
from their October peaks, but yields on AAA corporate bonds had moved above their October-November highs.
The bank prime rate, at lSYu percent, was down by one-half point from its November peak.
the monetary policy actions in October were taken in an environment of greater-than-expected strength in
economic activity, accelerating inflation, declining exchange value of the U.S. dollar, and, as noted above, excessively strong growth rates for money and bank credit. The actions included an increase of one percent, to
12 percent, in the Federal Reserve Banks' discount rates, imposition of an additional reserve requirement of 8
percent on acquisitions- of "managed liabilities" above the amounts held in a base period for large banks, and
a
basic change in method of condrrcting open market operations, with Federal funds permitted tJseek marketdetermined levels while the Fedenl Reslrve directs iis efforts to achieve desired m'onetary growth by influencing t}re growth of total reserves.
policy measures had the desired effects of slowing both monetary and bank credit growth rates in
- Ih"!"
the fourth- quarter and imparting greater stability to the exchinge value of the dollar. Similar results had been
achieved for a number of months following a somewhat simllar-package of policy actions in November 1978,
excepting that growth ofbank credit continued unabated
Inflation, however, has
_gainedadditional momentum, augmented by foreign as well as domestic
developments.-It has proved more diflicult to constrain thanias
generally beiieved possible. the constraining
p_olicies, therefore, have been inadequate and have been the subieC't ofongoing review and reevaluation.
Generally, it is believed the rigtrt medicine has been prescribed.'If that view is correct, the dosage must have
been inadequate. Clearly, the restraint of inflation will remain high on the list of problems to be-addressed in
1980.
The rising volumes ofchecks, clurency, wire transfers, and supervisory and regulatory activities have required some increase in staff at the Federal Reserve oflices in the District in 1g7g. Atteniion has
been
directed to achieving and maintaining appropriate service levels as well as close control of expenses. yolr comments and suggestions during the yealhave been helpful in this respect, and I would
you ro continue to bring to our attention any instances where a better balancd may be struck between
"rr"ooru!"
sirvice and
expense.
Your continuing int€rest in matt€rs related to Federal Reserve membership is appreciated also. The Congress continues to grapple with this many-faceted issue and, hopefully, will be able to resolve it soon
in a way
that serves the needs of effective monetary policy and equity arnong all Iinancial institutions engaged in providing payments services.
^^ In this report are presented the usual {lnancial statements for this Bank, the directors and of{icers ofeach
oflice, and brief comments on the major services provided. We will welcome any inquiry or suggestions you
may have on these or other matters as we move through 19g0.
Sincerely,
President
Contents
IrtterfromthePresident
Monetary Policy:
1979 in Retrospect
Dlrectors
Changes in Directors
andOfffcers
1979Earnings....
1979Operafions...
StatementofCondition
EarningsandExpenses
VolumeofOperations
Officers
......2
4
6
...... L0
...11
.........14
.......20
.......81
........42
......99
Monetary Policy:
L979 in Retrospect
Monetary policy in 1979 was designed to
foster ftnancial conditions
conducive to
moderate economic expansion, slowing inflation, and a degree of stability in the exchange
value of the dollar in international
money
markets.
Besides monetary policy, the
economy was affected by many other factors
such as government spending and taxing decisions, a usually low consumer savings rate
and instability abroad.
In February 1979 the Federal Open Market
Committee pursuant to the full Employment
and Balanced Growth Act of L978, sometimes
referred to as the Humphrey-Hawkins
Act,
established the following ranges within which
they expected the yearly growth
of the
monetary aggregates to fall: M1, lL/z-4Vz percent; lvft, 5-8 percent; IvIs, 6-9 percent; and
bank credit, 7Vz-lOVz percent. The range for
Mr reflected an estimate that the shifting of
funds from demand deposits to ATS accounts
and NOW accounts would depress M1 growth
relative to normal by around 3 percentage
points. These ranges were reviewed and reaffirmed at midyear.
In the fall it became clear that the effect of
ATS and NOW accounts on money supply
growth was to depress it by about LVz percent
rather than 3 percent. Consequently, the
lVz-to 4Vz-percent range translated into an
equivalent range of3 and 6 percent. The actual
growth experienced for the targeted aggregates, fourth quarter 1978 to fourth quarter
1979, were: M1, 5.5 percent; Ms, 8.4 percent;
IYb, 8.e percent; and bank credit, 15.9 percent.
Responding to instability in the foreign exchange markets which threatened the value of
the dollar and to accelerating growth in the
money supply measures, the Federal Reserve
on October 6 made changes in all of the
primary tools for monetary control. In recent
years the Federal Open Market Committee had
fixed a relatively narrow range within which
Federal funds would trade on a weekly average
basis. Open market operations were conducted
to keep the interest rate within the range, and
sometimes the result was undesired growth in
bank reserves. Under the new procedures the
Federal funds rate will be allowed to fluctuate
over a wide range. Greater emphasis will be
placed on control of bank reserves, which affect bank credit and money supply growth.
Member banks which are short of reserves
may borrow from their Federal Reserve Bank.
The discount rate. at which member banks borrow, had been increased from 9.5 percent in
January 1979 to L\ percent in September
L979. As part of the October 6 program, the
4
rate was raised to 13 percent from 11 percent
to discourage borrowing. Moreover, the Board
indicated that the discount rate would be
managed flexibly to control member bank borrowing.
Another part of the October 6 program was
the establishment of an 8-percent marginal
reserye requirement on increases in "managed
liabilities". "Managed liabilities" include large
time deposits (9100,000
and over with
maturities of less than one year), Eurodollar
borrowings, repurchase agreements against
U.S. Government
and federal
agency
securities, and Federal funds borrowings from
a nonmember institution.
These "managed"
liabilities grew over $17 billion in the three
months prior to October and contributed a
signiffcant part ofthe funds used by the banks
to expand credit and the money supply over
that period. The marginal reserve requirement
is intended to raise the cost of this source of
funds to the banking system and thereby
restrain the growth of bank credit.
The Federal Reserve, in February 1980,
reported to the Congress long term targets for
money supply growth, fourth quarter tg79 to
fourth quarter 1980. They used new delinitions of money stock data. After exhaustive
study, the Board announced monetary data
definitions to be used in the conduct of
monetary policy would consist ofi MrA which
equals crurency plus demand deposits (net of
foreign demand deposits); MrB which equals
M1A plus other checkable deposits (including
ATS, NO'!V, share drafts and mutual savings
bank demand deposits); M. which equals M1B
plus overnight repurchase agreements (RP's)
issued by commercial banks, Eurodollar overnight deposits at Caribbean branches of U.S.
banks, money market mutual firnd shares, savings and small time deposits at all depository
institutions; and IvIswhich equals Ms plus large
time deposits at all depository institutions,
and term RP's issued by commercial banks and
savings and loan associations. These measures
are intended to more broadly cover the liquidity
provided by the {inancial sector and the Federal
Reserve System.
In general the 1979 growth of these new
monetary aggregates did not slow as much as
the System's old money measures. Flowever
with Federal Reserve policy now more directly
focused on monetary growth and total reserves
and the Federal funds rate motefree to respond
to market forces, and the new money growth
rates targeted for slower growth in 1980, the
monetary restraint on inflation is expected to
be more effective.
Directors
Head Offlce Board. Seated left to right: Stewart Orton, Gerald D. Hines, Paul A. Volcker (Chairman
of the Board of Governors), Irving A. Mathews, Emest T. Baughman (President of the Federal
Reserve Bank of Dallas). Standing left to ri6lht: FrankJunell, Kent Gilbreath, Robert H. Boykin (First
Vice President of the Federal Reserve Bank of Dallas), Gene D. Adams, kwis H. Bond, J. Wayland
Bennett.
Federal Res etve Bank of Dallas
Irvtng A. Mathews
Kent Gilbreath
(Chairman and Federal Reserve Agent),
Chairman of the Board and Chief Executive Of{icer,
Frost Bros., Inc., San Antonio, Texas
Professor of Economics,
Department of Economics and Finance,
Baylor University, Waco, Texas
Gerald D. Htnes
FrankJunell
(Deputy Chairman), Owner, Gerald D. Hines Interests,
Houston. Texas
Chairman of the Board,
The Central National Bank ofSan
San Angelo, Texas
Gene D. Adams
Angelo,
Stewart Orton
President, The First National Bank of Sevmour.
Seymour, Texas
Chairman of the Board and Chief Executive Offfcer
Foley's, Division of Federated Department Stores, Inc
Houston, Texas
J. Wayland Bennett
Charles C. Thompson Professor ofAgricultural
Finance
and Associate Dean, College ofAgricultural
Sciences,
Texas Tech University, Lubbock, Texas
Margaret S. Wilson
Chairman of the Board and Chief Executive Officer,
Scarbroughs Stores, Austin, Texas
Lewls H. Bond
Chairman of the Board and Chi€f Executive Offfcer,
Texas American Bancshares Inc.. Fort Worth. Texas
6
El Paso Branch Board. Seated left to rightr Jose{ina A. Salas-Porras, A. J. Losee, Paul A. Volcker
(Chairman ofthe Board ofGovernors), Ernest T. Baughman (President ofthe Federal Resen'e llank
ofDallas), ChesterJ. Kesey. Standingleft to right: Joel I,. Koonce,Jr.(Vice president in Charge ofthe
El Paso Branch), Charles A. Joplin, Claude E. kyendecker, Arthur L. Gonzales.
El Paso Branch
A.J. Losee
Claude D. Leyendecker
(Chairman), Shareholder, I,osee, Carson, & Dickerson,
P.A. (a lawyers' professional corporation),
Artesia, New Mexico
President, Mimbres Valley Bank, Deming, Neu'Mexico
ChesterJ. Kesey
(Chairman Pro Tem), C. J. Kesey Enterprises,
Pecos, Texas
Arthur
L. Gonzales
President, First City National Ilank of El Paso,
El Paso, Texas
Charles A.Joplin
President, Security National tsank of Rosu,ell,
Roswell, Neu'Mexico
Arnold B. Pelnado,Jr.
Partner, AVC Development, El Paso, Texas
Josefina A. Salas-Porras
Executive l)irector,
BI Language Sen'ices, El Paso, Texas
Houston Branch Board. Seated left to right: Ernest T. Baughman (President ofthe Federal Reserve
Bankof Dallas), PaulA. Volcker(Chairmanof theBoardof Governors),JeromeL. Howard. Standing
left to right: Raymond L. Britton, Ralph E. David, J. Z. Rowe (\'ice President ln Charge of the
Houston Branch), Granville M. Sasryer.
Houston Branch
Gene M. Woodfin
John T. Cater
(Chairman), Chairman of the Board and Chief Execuuve
Oflicer, Marathon Marufacturing Company,
llouston, Texas
President, Bank of the Southwest National Association,
IIouston, Texas
Jerome L. Howard
Ralph E. David
President, First Freeport National Bank, Freeport, Texas
(Chairman Pro Tem), Chairman of the lloard and Chief
Executive Officer, Mortgage and Tmst, lnc.,
Houston, Texas
Granville M. Sawyer
Raymond L. Britton
P. K. Stubblefteld
Labor Arbitrator and Professor ofLaw,
Houslon. I louston. Texas
University of
President, Texas Southern University, Ilouston, Texas
Chairman of the Board, Victoria llank & Trust Company
Victoria, Texas
San Antonio Branch Board. Seated left to right: Pat kgan, Paul A. Volcker (Chairman of the Board of
Governors), Ernest T. Baughman (President of the Federal Reserve Bank oi Dallas). Standing left to
right: Carlos A. Zluu;j{a, Ben R. Low, Carl H. Moore (Vice President in Charge of the San Antonio
Branch), John H. Garner.
San Antonio
Branch
Pat Legan
John II. Holcomb
(Chairman), Owner, Irgan Properties, San Antonio, Texas
Owner-Manager, Progreso Haciendas Co.,
Progreso, Texas
Carlos A. Zanlga
(Chairman Pro Tem), Zuniga Freight Services, Inc.,
I.aredo. Texas
Charles E. Cheever,Jr.
President, Broadway National Bank, San Antonio, Texas
John II. Garner
President and Chief Executive Officer, Corpus Christi
National Bank, Corpus Christi, Texas
Ben R. Low
President, National Bank of Commerce, Kerrville, Texas
Changes in Directors
and. Officers
Dlrectors
and Counctl
Member
Head Offtce Board Irving A. Mathews,
Chairman of the Board and Chief Executive OfIicer of Frost Bros., Inc., San Antonio, Texas,
was redesignated Chalrman of the Board for
1980 by the Board of Governors. Gerald D.
Hines, Owner, Gerald D. Hines Interests,
Houston, Texas, was redesignated Deputy
Chairman for 1980. Margaret S. Wilson, Chairman of the Board and Chlef Executive Officer
of Scarbroughs Stores, Austin, Texas, was
reappointed a Class C Director for a three-year
term beginningJanuary 1, 1980.
Member banks in the Eleventh District
elected two new directors to begin thtee-year
terms effective January 1, 1980. Robert D.
Rogers, President of Texas Industries, Inc.,
Dallas, Texas, succeeded Stewart Orton,
Chairman of the Board and Chief Executive OfIicer of Foley's, Division of Federated Department Stores, Inc., Houston, Texas. John P.
Gilliam, President and Chief Executive Offfcer
of the First National Bank in Valley Mills,
Valley Mills, Texas, succeeded Gene D.
Adams, President of The First National Bank
of Seymou, SeSrmour, Texas.
During the year, Kent Gilbreath, Professor
of Economics, Department of Economics and
Finance, Bay'or University, Waco, Texas, was
elected in a special election to fill a vacancy
created by the appointment of Gerald D. Hines
to a Class C Director before his term as a
Class B Director had expired.
Board
A. J, I.osee,
Dl Paso Branch
Shareholder, Lcsee, Carson, & Dickerson,
P.A., Artesia, New Mexico was reappointed by
the Board of Governors, and Arthur L.
Gonzales, President of the First City National
Bank of El Paso, El Paso, Texas, was reaP
pointed by the Federal Reserve Bank of Dallas
to the El Paso Branch Board, both for tltteeyear terms.
Board
Branch
Jerome L.
Ilouston
Howard, Chairman of the Board and Chief Executive Officer of Mortgage and Trust, Inc.,
Houston, Texas, was reappointed to the
Houston Branch Board for a three-year term by
the Board of Governors.
Will E. Wilson, President and Chief Executive Of{icer of the First Security Bank of
Beaumont, N.A., Beaumont, Texas, was appointed for a three-year term by the Federal
Reserve Bank of Dallas, succeeding P. K.
Stubble{ield, Chairman of the Board of Victoria
Bank & Trust Company, Victoria, Texas.
One vacancy exists on the Flouston Branch
Board effective December 31, 1979 due tothe
resignation of Granville M' Sawyer, former
Texas Southern University,
President,
Houston, Texas.
Branch Board Patl*gan,
San Antonto
Owner, I.egaurtProperties, San Antonio, Texas,
was reappointed to the San Antonio Branch
Board foi a three-year term by the Board of
Governors.
George Brannies, President of The Mason
National Bank, Mason, Texas, was appointed
for a three-year term by the Federal Reserve
Bank of Dallas, succeeding Ben R. I,ow, President of the National Bank of Commerce, Kerrville. Texas.
Lawrence L. Crum, Professor of Banking and
Finance, The University of Texas at Austin,
Austin, Texas, was appointed a director by the
Board ofGovernors effectiveJanuary 1, 1980
to {ill the unexpired portion of a three-year
term ending December 31, 1980, vacated by
JohnJ. McKetta,Jr., E. P. Schoch Professor of
Chemical Engineering,The University of Texas
at Austin, Austin, Texas.
Federal
Advtsory
Councll
Member
James D. Berry, Chairman of the Board and
Chief Executive Officer of the Republic of
Texas Corporation, Dallas, Texas, was reappointed by the Board of Directors of the
Federal Reserve Bank of Dallas for a one-year
term as a member of the Federal Advisorv
Council to represent the District.
Offtcers
Ilead Offtce Official changes during 1979
at the Head Office included:
Arnold L. Hayes, Assistant Vice President,
resigned.
Anthony J. Montelaro was elected to succeed Hayes as Assistant Vice President.
W. M. Pritchett, Vice President, retired.
Adrian W. Throop, Assistant Vice President,
resigned.
John C. Blake, Assistant Vice President,
retired effectiveJanuary 1, 1980.
IJzziah Anderson was elected to Chief Examiner of the Bank to succeed Blake.
Antonio
Houstono
San
El Paso,
Branches There were no of{icial changes during the year at the Branch Banks.
L979 Earnlngs
Gross current earnings of the Federal
Reserve Bank of Dallas were S554.3 million in
L979, current expenses were S38.5 million,
leaving current net earnings of S515.8 million.
Net earnings, after additions, deductions
and assessments, and before paJrnents to the
Treasury, totaled 8504.9 million. Of this,
8496.8 million was paid to the U.S. Treasury
as interest on Federal Reserve notes. Statutory
dividends of S3.9 million were paid to member
banks and 84.6 million was added to surplus.
The Federal Reserve pays to the Treasury all
net earnings in excess of the statutory dividend
to member banks and additions to surplus to
bring it to the level of paid-in capital.
Assessment for expenditures of the Board of
Governors amounted to S2.9 million. There
was an 88 milllon net deduction in the profit
and loss account mainly because of a 8 .2
million net loss on foreign exchange operations
and a net loss of 88.8 million on transactions
in U.S. Government securities. The Federal
Reserve buys and sells Government securities
and foreign exchange for the purpose of lmplementing
national monetary policy. The
transactions are not designed to earn a profit,
however, earnings of the Federal Reserve
from U.S.
System are derived primarily
Government securities acquired through open
market purchases.
Current expenses at S38.5 million were up
12 percent over 1978, largely due to increases
in the volume of checks and currency processed. The number of employees was up 3.4
percent.
L979 Operations
Cash
The new Susan B. Anthony dollar coin was
introduced on July 2, 1979 as a cost-savings
measwe for the U.S. Treasury. Because of its
ten-fold service life advantage over the dollar
bill, it was believed the coin would significantly
reduce the Treasury's cost of producing money
and the Federal Reserue Banks' currency processing costs. While the initial acceptance of
the coin was favorable, this quickly changed
and very few of the coins are now in circulation. During June and July, 87,963,000 was
delivered on request to banks in the Dallas
head offfce area, but during November and
December, S144,000 more of these coins were
received than paid out. A total of 816,905,000
Susan B. Anthony coins have been paid out by
the four of{ices in the District.
The reason most often given for the unfavorable response by the public has been the
size of the coin. Although 9 percent larger and
43 percent heavier than a quarter and
distinguished by a raised 11-sided border, the
dollar coin is frequently mistaken for a quarter.
Also introduced to reduce usage ofone dollar
bills and cut Treasury expenses, the 82 bill has
continued to have a low level of acceptance
during 1979 as well. The 8e bil represented
only .33% of the total notes paid out by the
Federal Reserve Bank of Dallas in 1979. During the year, 567,000 82 notes were received
and 663,500 were paid into circulation, a net
payment of 96,500 $8 notes.
Adaptation continued in 1979 to the conver-
sion to high speed currency processing implemented during 1978. Extensive training of
personnel was required to develop the skills
needed to operate the automated currency verifying, counting, sorting, packaging, and
destruction systems. Because of the conversion to high speed currency processing, the
quality of currency of 85 denominations and
higher classi{ied as "fit" and put back into cirover
culation has improved substantially
previous years. All denominations above 85 are
handled on the high speed equipment. Because
of the large percentage of un{it 81 bills received, they run poorly on the high speed
equipment and are consequently handled
manually. As a result, the quality of S1 bills being circulated is not as good as other
denominations. Procedures providing closer
examination of the bills have been put in place
to improve the quality of S1 bills being recirculated. Widespread use of the Susan B.
Anthony dollar coin would help to reduce processing problems associated with the 81 note.
costs for
Federal Reserve transportation
cu{rency, coin and checks will be increased in
some areas of the country as a result of a decision in a suit brought against the Federal
Resen'e Bank of Richmond the result of which
is to place vendors of services to Federal
Reserve Banks under the Services Control Act.
This requires them to pay wages and fringe
benefits equal to or above levels determined by
the U.S. Department of Labor.
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Checks
Over 1 billion checks were handled by the
Federal Reserve Bank of Dallas and Branches
during 1979, a volume increase of 10 percent.
Return items handling is a particular problem. The ratio of returned checks to total
checks handled by the Federal Reserve Bank of
Dallas was the second largest among all
Federal Reserve offices, apparently because of
unusually widespread use of checks in the area.
For every 100O checks processed by the
Federal Reserve System nationwide, 72 were
returned. In the Dallas territory, more than 18
ofevery 1000 checks processed are returned,
many because of insuf{icient funds in the account to pay the check. The handling of those
checks is a costly and time consuming operation.
Procedures were instituted during 1979 to
expedite return item processing. The items had
been processed on old fashioned proof
machines, in use in this bank since 1946. Conversion to an automated system was begun
during 1979.
The automation process utilizes MICR
technologr, balances the items, generates
return item advices and detail listings and
creates debit and credit entries to member
banks'reserve accounts. The system will provide improved service to member banks by
more timely processing of the return items and
greater accuracy.
The level ofcheck collection float continued
to be of concern during 1979 and further efforts were made to reduce it. Float results
when the Federal Reserve has paid checks
received from member banks for collection
before receiving payment from the banks on
which the checks are drawn. Float is of concern because checks should generally be collected !\"ithin the prescribed time schedule and
large daily variations in float affect the predictability of monetary aggregates and the Federal
Reserve's ability to achieve monetary policy
objectives. Also, since Federal Reserve float
adversely impacts Treasury revenues and is
viewed as "free"credit extended by the Federal
Reserve Banks, reduction of float has become
a politically encouraged goal.
Float also becomes an area of interest should
the Federal Reserve be required to price its ser-
vices. If priced at current interest rates, high
levels of float could substantially increase
check collection prices.
Attention has been directed during 1979 to
changes in check processing which would expedite the movement of checks through the
system. Direct-send delivery performance has
been improved and transportation routes have
been adjusted to insure cash letter delivery
timeliness. Computers with larger check processing capacity were ordered in 1979 and installed early in 1980. Float analysis was
initiated at the head office and each of the
branches.
lDally Rcturn
ltenr Volurnc
Eleventh Federal Resene District
ISZS
Average Number
R€turn Items
f97a
% lncrcase
of
65.379
Average Nunber of
Checks Processed
3,804,OO9
Retum Items as a
Perc€nt of Checks
Processed
l.7Z%
54.A73
4,406,717
80
13
f.6O%
The Board of Governors adopted a policy to
discourage remote disbursement-the
use of
remote banks by businesses to delay presentment of checks. The Board is concerned that
some remote disbursement plans may constitute unsafe and unsound banking. The
primary risk is that the practice could lead to
unsecured extensions of credit by'the remo'te
banks. In addition, the practice may delay
funds availability, and deprive suppliers and
consumers of timely use of funds owed to
them.
Loans
Borrowing by member banks from the
Federal Reserve Bank of Dallas increased in
L979. Daily averageborrowings in the District
were S138.5 million, up 81 percent from
1978. The total number of loans made during
the year was up 16 percent to 1,304 loans. A
total of 811.5 billion was loaned, an increase
of33 percent,
During the year, 57 banks borrowed under
the seasonal credit program which provides a
prearranged line of credit to banks that experience a drain of funds about the same time
each year. The daily average of seasonal borrowing was S28 million.
Discount window policy was changed during
the year to expand the types of collateral acceptable for loans and to permit some of the
borrowing banks to retain collateral on their
own premises. I,oan participations are now acceptable as collateral to secure borrowings.
Member banks in Oklahoma. New Mexico, and
Texas may be authorized to hold in their
possession certain tlpes of collateral through
the off-premises custody arrangements rather
than transfer the collateral to the Federal
Reserve Banks. (I,ouisiana law precludes use
of off-premises collateral arrangements.) The
change makes it convenient for member banks
with a need for additional collateral to use oneto-four family residential mortgages held in
their possesion to secure discount window
borrowings.
Commercial and agricultural
paper, including loan participations,
and
Group 1 municipal securities are also eligible
for off-premises custody arrangements. The arrangements are particulady useful for banks
borrowing for adjustment credit, or short-term
purposes. Currently 15 banks are using the arrangements ranging in size from 887 million in
deposits to over $5 billion.
ACII
An automated clearing house (ACH) provides a means by which electronically recorded
payment instructions, received from or through
a member bank can be conveyed and acted
upon by the relevant ffnancial institution. Settlement is made by crediting or debiting a
member bank's reserve account at the Federal
Reserve Bank. Payments made through ACH's
tahe the place of checks. For example, an
employer may transfer payroll instructions
through an ACH and cause funds to be moved
from his account in a bank to the accounts of
his employees in the same or other banks.
The volume of funds transferred through
ACH's continued to grow during l979.The expansion in volume is largely attributable to the
30 percent increase in government payments.
Stepped-up marketing efforts by participating
banks and businesses brought an increase in
the number of private sector originators of
electronic transfers but this part of ACH is still
in its infancy. Facilities are in place to process
alarge volume of commercial payments but the
volume is still relatively small. This Bank processed 11,501,996 electronic images during
the year,largely governments. New additions
to the government payments processed
through ACH's included those for Marine and
Army retirement and SBA, VA, and WDC
salaries.
To handle the increased volume and to provide more timely service to consumers, Iinancial institutions and corporations using ACH
facilities, the operation was increased to three
shifts, operating 34 hours daily. A schedule
change was installed which provides linancial
institutions an additional ffve hours for initiating interregional debit and credit transfers
such as direct deposit of payroll and
preathoized bill payments.
An extended processing cycle for cash concentration debits using ACH facilities was
initiated to make the service more useful to
corporate treasurers. Those are debits which
are originated by or for a corporation or government entity, typically to collect firnds from the
proceeds of the day's business, deposited at
other financial institutions by the corporation's
or goverument's branches, franchises, or
agents.
the extended cycle was imAlthough
plemented very late in the year, the volume of
debits handled increased to over a 1.2 million
annual rate nationwide by January 1980. The
change also enables commercial banks participating in ACH to process both government
and commercial items during the daytime cycle. Previously, government items had been
processed during the nighttime only.
A large volume increase is necessary to obtain maximrrm cost effectiveness in ACH.
Presently, only three banks in the District have
direct data links with the ACH. In an environ-
ment of increasing energy problems, this tJpe
of arrangement will become more desirable as a
means to reduce transportation costs. An increase in the overall volume of ACH transactions will utilize presently existing capacity to
reduce per item costs and provide operating ef{iciencies for the users of the ACH.
matured coupons are handled by procedures
similar to those used to clear millions of
checks each day. By the use ofbulk processing
rather than individual handling of coupons and
giving provisional credit on an automatic preset
time schedule, the efliciency of coupon processing is greatly increased. The number of accounting entries and reconcilement problems
are decreased also.
Revisions to the computer software used by
this Bank in handling the Treasury Tax and
Loan program provide tax depositories with additional investment cycle information. The investment statements now reflect all of the tax
deposit and withdrawal information on each
cycle statement and enable commercial banks
to manage their TT&L accounts more effectively.
Fiscal Agent
The Federal Reserve is the government's
banker and, as such, performs a variety of functions for the Treasury. Among these are servicing the Treasury's checking account by making
and receiving payrnents for the Treasury,
assisting in the sale, transfer, and redemption
of securities, and handling U.S. Savings Bonds
and food coupons.
Plans for the lirst major revision in the U.S.
Savings Bond Program were initiated by the
Treasury in the early part of 1979. This conversion from Series E and H to Series EE and
HH bonds, respectively, was effective January 2, 1980. The new issues contain changes
in issue price and the length of time to maturity
of the bonds. The transmittal of paid savings
bonds was decentralized from the Dallas oflice
during 1979. Each of the District's bond paying agents may forward their paid bonds and
transmittals to the Federal Reserve Branch
Holdtng Company
One-bank holding companies were organized
in increasing numbers in 1979. This bank
received 83 applications for prior approval to
form one-bank holding companies compared to
46 in 197 8. At year end 1979, there were 17O
such companies in the District, 60 percent
more than one year earlier. Deposits of the
bank subsidiaries of one-bank holding companies grew 33 percent to S4.8 billion, approximately 6.5 percent of total District deposits.
The major reason for most one-bank holding
company formations is reduction of Federal income taxes. Interest payments to service the
debt incurred by a holding company to acquire
a bank's stock are totally tax deductible,
whereas interest deductions by an individual
are generally limited to S10,000 a year. Also, if
a consolidated income tax return is liled,
dividends from the bank to the holding company are not taxed as such income would be if
the dividends were paid to individual
stockholders. The spread ofone-bank holding
companies has a potential to favorably impact
banking in the District. Because the holding
company saves taxes, it can redirect cash to
the servicing of its debt and, at the same time,
reduce the dividends needed from its subsidiary bank. This allows the bank to retain
Sccurltles
Held In Safekecptng
As of December 3l (In lltllions)
Eleventh Federal Reserve Distrtct
lSZg
Tangtble
securities
Book-entry securittes
Total
f97a
% Increase
E 3,586.7
S 3,257.8
10.1
8f5,53f .9
8t2,795.5
Zl.4
s19,118.6 816.058.6
19.1
serving their geographic region thereby
facilitating more timely payment to member
banks.
On October 9, 1979, "cash processing" of
matured corporate and municipal coupons was
initiated. Under this new procedure. the
t7
Edge Act Corporations in the District will incre ase significantly placing greater demands on
the field examination staff.
more earnings, augment its capital, and
become a stronger institution.
The number of multibank holding companies
in the District continued to increase during
1979. Seven applications for formation of an
MBHC were received. The number of MBHC's
increased from 36 to 43 during the -vear.These
43 MtsHC's have 319 subsidiary banks rn'hich
hold 54 percent of the District deposits. This
is up from 274 MBIIC subsidiary banks rvith
51 percent of deposits in 1978. Excluding
deposits of the lead bank in each company,
multibank hoiding companies account for 23
percent of District deposits. Deposits controlled bv MBIIC's increased 14 percent dr"rring
the vear to S39.7 billion.
Consumer Affairs
Consumer regulatory activity increased during 1979 continuing a trend which has been
evident the past two years. The increase is attributable to Congressional action and Board
of Governor implemented changes in existing
regulations and examinations.
'lTire
of Funds
Yolume
Transfer
for thc Elcventh I)istrict (In llillions)
Supervisory and
Regulatory Activities
I)ollar volrrrnc
of transfcrs
Number of translcrs
Passage of the Financial Institutions
Regulatory and Interest Rate Control Act of
1978 (FIRA) by Congress in late 1978 caused
signilicant changes to be made to Regulation
O, Loans to Executive Of{icers of Member
Banks, and Regulation L, Management Of{icial
Interlocks, and the enactment of two new
regulations, Regulation S, Reimbursement to
Financial Institutions for Assembling or Providing Financial Records, and Regulation E,
Electronic Funds Transfer. These required the
development of more comprehensive and more
complex examinations and generated a heary
volume of circulars and requests for interpretations. Additionally, FIRA spawned the Change
in the Bank Control Act which added the processing of a new form of application involr'ing
changes in control of state member banks and
bank holding companies. The processing of
other tlpes of applications became more complex due to the requirements of the Community
Reinvestment Act.
Passage of the International Banking Act by
Congress in late 1978 caused a complete
rewriting of Regulation K, International Banking Operations. To date the impact of this
legislation has been minimal. It is anticipated
that as a result of the legislation, the number of
9o Incrcase
1974
1tJ79
83,37U,4tt3.l 52,76U,4r7.O
ta
,1
Use of the F'ederal Resen'e's s'ire transfer systcnr continucd to
incrcase in 1979. C)n-line linkage rvas atldcd to l5 membcr
banks brtnging the total banks in thc I)tstrict in the on-llne
'fransfcr
of F'unds systcn to 60.
Numerous activities at the Federal Reserve
Bank of Dallas are designed to provide the
member banks and public with comprehensive
information about regulatory and consumer affairs and developments. Seminars, speeches,
articles, pamphlets, and individual bank visits
all are used extensively to disseminate information. Consumer complaints involving state
member banks are also processed by the
Federal Resen'e.
18
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Stat etlnen.tof Conditlon
December31
ts79
L978
Assets
Gold certilicate account
Special Drawing Rights
certiffcate account
E 450,831,600
86,000,OOO
28,887,272
Coin
I,oans and Securities:
Loans
Federal agency obli gations
U.S. Government securities . .
Total loans and securities
Cash items in process of collection
Bankpremises. . .
Other assets
Interdistrict settlement account
Total
Assets
93,311,400
409,873,947
5,683,84A,130
6,918,39O,460
r,5L9,72O,827
11.,g4?,766
380,593,133
339,175,363
6,L86,4?,7,477
1,066,060,307
11,538,951
816,948,553
439,119,495
s5,959,383,609
Member bank - reserveaccounts
U. S. Treasury- generalaccount
Foreign
Other.
Totaldeposits. . .
Deferred availability cash items
Other liabilities . .
Total Llabtltttes
Capttal Accounts
Capitalpaidin . . .
Surplus
30
84,964,522,8?,7
2,480,644,974
168,141,932
11,553,900
33,786,990
3,633,556,809
797,770,t70
110,011,383
2,688,067,796
643,279,596
81,075,054
67,m9,750
67,4O9,75O
Total Ltabtltttes and
Capttal Accounts
E,5O?,,372379
z,rco,524,3,94
84,941,583
17,343,000
60,748,933
E9,49O,630,91O
Total Capttal Accounts
57,000,000
L6,574,?'90
184,386,000
4U/,637,724
6,336,366,736
__99,625,44O,41O
Ltabtltttes
Federal Reserve notes
actual circulation.
Deposits:
s 508,703,700
88,376,745,273
68,813,750
68,813,750
E 134,819,500
s 135,647,500
__E9€35,44o4U
88,502,372,779
Earnings and Dxpenses
L978
t979
Current Darnlngs
I,oans
U. S. Government securities
Foreign currencie
All other
Total Current Earnlngs
Current Expenses
Current operathg exp€nses
Federal Reserve cwrency
Total .
I.ess reimbursement for certain
flscal agencyand other expenses
NetExpenses..
E 18,334,391
536,863,656
3,983,165
l16,g0g
I
8,079,987
436,605,080
110,636
60,488
85#,386,43O
8434,856,r.81
36,463,330
4,573,,5*
33,396,187
4,O84,786
41,034,854
36,480,973
?,549,O87
?,,L45,L4L
E 38,485,817
s 34,335,833
515,800,603
400,530,349
Proftt and Loss
Current net earnings
Additions to current net earnings:
All other
Total additions
Deductions from current net earnings:
I.oss on sales of U.S. Government
securities (net)
I,oss on Foreign Dxchange (net)
All other
Total deductions
Netadditionsordeductions(-)
.. ... .. .
7OO,94,3
130,833
7OO,94,3
130,838
I,r82,7M
311,839
3O8,331
6,753,067
88,883,876
105,515
g,7o3,g?4
35,668,458
-8,O01,981
-35,531,6A6
Assessment for expenditures of
Board ofGovernors
2,947,5OO
3,031,300
Net earnings before dividends and
payments to U.S. Treasury.
Dividends paid
504,851,133
3,931,557
36r,967,425
3,618,600
Payments to U.S. Treasury
(interest on F.R. notes)
496,333,565
s58,757,7?,3
Transferred to surplus
Surplus,January L
4,596,OOO
63,813,750
4,591,100
58,823,650
Surplus,December31
g 67,4O9,75O
s 68,813,750
Volume of Operations
Federal Reserve Bank of Dallas
Head Offtce and Branches Comblned
Dollar Amount
Number of Pieces Handled'
1979
[.oans
7978
1,180
r,ao4
Currency received and counted .
434,689,000
396.006.587
Coin received and counted
914,461,(X)O
856.960.087
43,696,(X)O
44,8t8,786
t.979
11,rc4,w,798
4,P'18,371,37g.
133,104,450
L97a
8,614,984,800
9,680,7L7,2'00
183.883.883
Checks handled:
U.S. Governmentchecks
Postal money orders
All others
9,543,454
9'575,0(X)
965,591,705
882,279,185
86,356,606,850
684.066,8t|3
85,963,0@,977
566,010,577
45O,5O7,988,79E 416,187,895,988
Collection items handled:
U.S. Government coupons paid .
All other
Issues, redemptions, and exchanges
ofU.S. Government securities . . .
Transfers of firnds
Food stamps redeemed
r44,877
147,838
tss,767
136,llO
14,6.t1,779
3,6E3,553
13,322,826
s,163,441
99,903,373
116,884,140
rPackaged items handled as a single item are counted as on€ piece.
8Exclusive of checks drawn on the F.R. Banks.
22
80,480,350
89,190,196
886,480,530
163,851,069
96,349,953,357
99,396,974,1P,9
3,87E,483,145,88O2,772,657,127,513
.iI47,965,894
447,890,518
Officers
Federal
Reserve Bank
of Dallas
....
First Vice
Senior Vice
. , Senior Vice
. . Senior Vice
ErnestT.Baughman
Robert H. Boykin
Joseph E. Burns
George C. Cochran, III . . .
Harry E. Robinson, Jr., . . .
In:J;i:';:sff:
C.J.Pickering....
George F. Rudy
Neil B. Ryan .
E. W. Vorlop,Jr. .
J. A. Clymer
Forrest E. Coleman
BillyJ.Dusek
Richard D. Ingram
AnthonyJ. Montelaro
I,arrl'J.Reck.
MaryM.Rosas
Thomas H. Rust
Jesse D. Sanders
Sammy T. Schulze
Phillip E. Sellers
Robert Smith, III . . .
T. D. Spreng
B. A. Thaxton,Jr.
Cada M. Warberg
UzziahAnderson
Millard E. Sweatt, Jr.
C. L. Vick
::
President
President
President
President
Pre sident
lir"tlr?*T:'$:::
..VicePresident
Vice President and General Counsel
. Vice President
. . . Vice President and Controller
. Assistant Vice President
Assistant Vice President
.... AssistantVicePresident
. . . Assistant Vice President and Assistant Secretary
. . Assistant Vice President
....AssistantVicePresident
... AssistantVicePresident
. . Assistant Vice President
. . Assistant Vice President
. Assistant Vice President
. . Assistant Vice President
. . . Assistant Vice President and Secretary
Assistant Vice President
. Assistant Vice President
. . . Assistant Vice President and Assistant Controller
....ChiefExaminer
. . Assistant General Counsel
. Assistant General Auditor
El Paso Branch
Joel L. Koonce, Jr.
Robert W. Schultz
. Vice President in Charge
. Assistant Vice President
Ilouston
Branch
J. Z. Rowe
Vernon L. Baftee
Sammie C. Clay
C. O. Holt,Jr. . . .
. . Vice President in Charge
. . Assistant Vice President
. . . Assistant Vice President
Assistant Vice President
San Antonlo
Carl H. Moore
Thomas C. Cole
ThomasH.Robertson..
Branch
. . . . Vice President in Charge
. . Assistant Vice President
.. . . AssistantVicePresident
..
January1, 1980
83
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ffistoric Landmark
f)estgnatlon
The Federal Reserve Bank of Dallas was
designated an historic landmark by the City of
Dallas on May 10, 1979, reflecting both the
design of its headquarters building and its role
in the development of the area. According to
the Historic Iandmark Preservation Committee, the functions and responsibilities of the
Federal Reserve Bank of Dallas made it an important faetor in the economic development of
the city, while its distinctive features are
signi{lcant representations
of architectural
style.
The choice of Dallas as the site for the
Federal Reserve Bank reflected its cultural and
economic growth and foreshadowed the importance that {inance, trade, and commerce would
continue to have in the development of the city.
The site for the Federal Reserve Bank building
was purchased in 1918 at a cost of S145,0O0,
after the Bank had been housed in several other
buildings. The cornerstone was laid on April 3,
L930; the building was occupied during
December 1930 to March 1931 and has been
in continuous use since. The exterior of the
building is of white Bedford stone with a
granite base. The elaborate ornamentation
above the doors was set in roug;h stone and
carved after being placed.
The Beaux Arts School of Architecture,
which emphasized the revival of classical
forms, provided the basis for the style used by
the architects, Graham, Anderson, Probast
and White of Chicago. The monumental style ls
said to reflect the solidity and permanence of
the institution
through the emphasis on the
frontal facade, the monumental portico, and
visual strength,
An addition was made to the building in
1939-40, destgned by the architect, Grayson
Gill of Dallas, in which decorative emphasis
was reduced and modernity influenced the
design. This addition provides an example of
the subtle changes that occurred tur architectural philosophy during those times. A second
addttion was made around 1960 in which the
mtd-line cornice lvas removed for fear of structural failure. The physical metamorphosis over
the years reflects the evolution of design
philosophies and changing priorities.
As the building has evolved, the activities
within the Bank have grown and changed.
Automation now plays an important role in the
operations of the Bank-in processing checks,
handling cwrency and coin, transferring funds
among banks, and keepturg track of the daily
transactions between the Bank and its 800
member banks. As the economy of the areahas
grown and the flnancial industry has become
more sophisticated, the services provided to
the commercial banks have expanded. The information
assembled and analyzed by the
Bank's Research Department has become more
comprehenslve and more complex. Changes in
the flnancial environment have given the Bank
ne\rr/ responsibilities
in bank supervision and
regulation and in consumer financial matters.
@FedFRASER