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FEDERAL RESERVE BANK
OF NEW YORK




A N N U A L REPORT
1987

FEDERAL

RESERVE

BANK

OF NEW YORK

May 13, 1988
TO:

Depository Institutions
in the Second Federal Reserve District

I am pleased to present the Seventy-Third Annual Report
of the Federal Reserve Bank of New Y o r k .

In this year's annual

report, Edward J. Frydl and Dorothy M. Sobol, both officers in
the bank's research department, have written an essay regarding
the evolution of efforts to cope with the external debt problems
of developing countries since the outbreak of the debt crisis in
1982.

The essay provides a useful historical perspective on both

the origins of the problem and on efforts to contain and manage
it over the past several years.

In the essay, Mr. Frydl and Ms. Sobol suggest that
despite disappointments on a number of fronts, more has been
achieved in this effort than is often recognized.

They also

stress that continuing progress in managing and ultimately
resolving the debt problems of the developing world rests
crucially on the maintenance of an environment in which the
"community of interest" among all parties to the process must be
preserved and enhanced.

I hope you will find this historical overview of the
debt problem of value and interest.




E. Gerald Corrigan
President




Federal Reserve Bank
of New York

SEVENTY-THIRD
ANNUAL REPORT
F o r the Year
Ended
D e c e m b e r 31, 1987

Second Federal Reserve District




Contents:
Page

A PERSPECTIVE ON THE DEBT CRISIS, 1 9 8 2 -8 7 ......................................................................................

5

The Community of Interests.......................................... .............................................................................

8

SETTING THE PATTERN: THE RESPONSE TO MEXICO’S C R I S I S ...............................................................

10

The August 1982 Shock.............................................................................................................................

11

Emergency Liquidity Assistance.................................................................................................................

11

Structuring Bank Fin an ce..........................................................................................................................

12

SOME EARLY SUCCESS.............................................................................................................................

15

Adjustments in the Major Debtor C oun tries...............................................................................................

17

THE BAKER INITIATIVE.............................................................................................................................

20

Economic and Structural Reform.................................................................................................................

22

The Financing Process................................................................................................................................

25

The Multilateral Institutions.......................................................................................................................

26

A BALANCED APPROACH..........................................................................................................................

28

Financial Statem ents................................................................................................................................

31

Changes in Directors and Senior Officers.....................................................................................................

34

List of Directors and Officers

39




................................................................................. ...................................




S e v e n ty-th ird A n n u a l R e p o rt
F e d e ra l R e s e rve B a n k o f N e w York

A PERSPECTIVE ON THE DEBT CRISIS, 1982-87
Edward J. Frydl
V ic e P re s id e n t a n d A s sista n t
D ir e c t o r o f R e se a rc h

Dorothy M. Sobol
R e s e a rc h O ffic e r a n d S e n io r E c o n o m is t

In 1982, the onset of widespread payments disruptions ended a period of heavy lending
to developing countries (LDCs) and signaled the beginning of the debt crisis. International
bankers and policymakers faced a threat of financial disorder on a global scale not seen
since the Depression. The response that evolved to address the crisis was deeply rooted
in commonly accepted principles of financial relations that have governed the postwar
period: international cooperation, official liquidity support, commitment to free trade
and world economic growth, and a combination of conditional finance and debtor
country adjustment with multilateral oversight. The process of managing the debt problem
has been flexible and tailored on a case-by-case basis to circumstances in individual
countries. At the same time, it requires a long-term commitment to cooperate by all
key parties that has at times been hard to achieve.
From early on, the management of the debt crisis has been criticized in many ways.
Some have felt that creditors should be forced to accept losses or grant debt relief;
others that exposures should be assumed by multilateral agencies. In the past year or




5

so, criticisms have grown louder. Highly visible developments such as the Brazilian
moratorium on interest payments, extensive additions to loan-loss reserves by international
banks, declines in the secondary market prices for LDC debts, and a new proposal for
refinancing part of Mexico’ bank debt have all worked to intensify interest in the
s
process of managing the debt crisis. Much of the recent commentary has had a pessimistic
tone. To assess properly how the process is working, however, it is necessary to step
back from the daily headlines and look at developments from a longer term perspective.
The process of managing the debt problem has two major and interrelated long-term
goals: (1) to improve LDC economic and financial performance with a view toward
sustaining economic growth and, over time, restoring the creditworthiness of individual
debtor countries and (2) to reduce the vulnerability of the international banking system
to risk on LDC loans. Progress has been made toward reaching both objectives, but at
different rates (Chart 1).
Most positively, banking system exposure relative to capital has declined rapidly.
For example, from the end of 1982 to the end of 1987, the exposure of nine U.S.
money center banks to a group of heavily indebted developing countries, the so-called
Baker 15,* fell from 212 percent of primary capital to 90 percent. Comparable or even
larger declines took place for other classes of banks as well. These reductions exceeded
expectations held in the early stages of the debt crisis. The declines in exposure ratios
resulted in large measure from the efforts of banks, spurred by regulatory concern, to
broaden their capital base as well as from a careful management of their creditor
positions. In the more recent past, innovations in financing agreements between individual
debtors and creditors have contributed to a continued lowering of outstanding exposures.
In some cases, however, these reductions in exposure have weakened the commitment
of some small banks and some larger regional banks to the process of debt rescheduling
and LDC lending. This, in turn, complicated negotiations and sometimes led to long
delays in putting together financing.
Progress toward the second and more fundamental goal of restoring LDC credit­
worthiness has been somewhat of a struggle. Yet, more has been achieved in this regard
than is widely perceived and in some cases— notably Colombia and Chile— progress
has been rather striking. On balance, however, measures of LDC financial health have
shown a mixed picture since the debt crisis started. For example, most relative measures
of external debt and debt-service requirements have not improved, in part because of
* The Baker 15, so named because they were singled out by Treasury Secretary Baker in his October 1985
debt initiative, will be the principal reference group cited in this essay. Basically, the group comprises the
major debtor countries of the developing world: Argentina, Bolivia, Brazil, Chile, Colombia, Cote d’Ivoire,
Ecuador, Mexico, Morocco, Nigeria, Pferu, the Philippines, Uruguay, Venezuela, and Yugoslavia.

6




Ch art 1.

DEBT S T R A T E G Y O BJ ECT IVE S

Pr og re ss in m ee t i n g debt s tr at eg y
ob jec tiv es has d i v e r g e d s o m e w h a t . W h i le
b a n k e x p o s u r e has fa ll en d r a m a t i c a ll y . . .

. . . LDC fi n a n c i a l m e a s u r e s are m ix e d .
Debt ratios rose on ba la nce since
the crisis b e g a n . . .

. . . but r e s c h e du li n gs ste adied the
debt s e r vi c e b u r d e n . . .

. . . a n d interest c o v e r a g e is
g e n e r a l l y better.

* I n c l u d e s a d j u s t m e n t s f o r e s t i m a t e d a r r e a r a g e s in 1 9 8 6 a n d 1 98 7.
Sources:




IM F , F e d e r a l R e s e r v e B a n k o f N e w Y o r k .

7

limited growth and adverse trends in the terms of trade.
Although debt burdens remain relatively heavy, the proportion of short-term debt to
total debt has fallen sharply for the Baker 15 since the onset of the crisis, from 21
percent in 1982 to 8 percent in 1987, owing largely to reschedulings. This lengthening
of the maturity structure of LDC debt has provided many debtors with a more manageable
stream of debt-service payments. In addition, interest costs on the debt relative to
exports have declined. For the Baker 15, this ratio fell from 31 percent to 26 percent
between 1982 and 1987.
Continued efforts to reach the more basic goals of sustained growth and restored
creditworthiness are needed. In recent years, the heavily indebted countries have been
able, after a long and deep recession, to maintain fast enough economic growth to yield
gains in real per capita income, although these gains have been well below the Vh
percent per capita growth that they achieved in the past. Moreover, no major developing
country that rescheduled its debts since the start of the crisis has been able to restore
dependable access to world credit markets, even though the financial condition of a
number of the Baker 15 countries has improved. In short, while important progress has
been made over the past several years toward the long-term goals of managing the debt
problem, major challenges still lie ahead.

The Community off Interests

From the outset, the official community chose to play an active role in LDC payments
difficulties rather than leave debtors and creditors on their own. Official representatives,
particularly the Managing Director of the IMF and the Chairman of the Federal Reserve,
stressed the community of interests all parties had in containing and resolving the crisis.
The goal of creditor governments, private creditors, and the international financial
institutions was an orderly restoration of debt service. Over the longer term, official
actions aimed to promote economic recovery in developing countries and to restore
their normal access to the international financial markets. The IMF helped the process
along, encouraging all participants to act responsibly and playing its traditional role as
economic advisor and provider of short-term balance-of-payments finance.
The responsibilities of the borrowing countries were to change their economic policies




to reduce internal and external imbalances and to maintain their debt servicing. Policy
goals involved, among other actions, keeping exchange rates competitive so as to
encourage import substitution and export growth, reducing fiscal deficits, ending subsidies
on many domestic goods, and achieving positive real interest rates. Export expansion
was viewed as the key to an improved current account position and a reduced debt
burden in the long run.
The creditors, too, had their responsibilities. Commercial banks, of course, had the
key role of providing appropriate amounts of new funding if countries carried out their
adjustment programs. Creditor governments had to arrange reschedulings of their own
claims on debtors and support the banks’ rescheduling efforts. In a few cases, until an
IMF program was approved and a borrowing plan agreed upon, governments provided
short-term bridge financing to tide a debtor country over. Such funds, frequently arranged
under the auspices of the Bank for International Settlements, played a very important
role both in providing limited amounts of short-term official finance and in signaling
the willingness of the industrial countries to support the overall process.
This cooperative structure worked well in the immediate wake of the crisis. Over
subsequent years, however, the community of interests has, at times, been difficult to
maintain. The debtor countries found that implementing stabilization programs was
often politically and economically difficult. In some of the Baker Plan countries, newly
elected democratic governments were coming into power after long stretches of nondemocratic rule. Not surprisingly, these governments faced enormous challenges in
seeking simultaneously to solidify democratic institutions while coping with the debt
problem. Many countries found it difficult to sustain the kinds of policies needed to
meet performance criteria and, consequently, to obtain conditional IMF resources. The
IMF attempted to deal flexibly with these difficulties in administering its programs.
Where the overall thrust of a country’ adjustment effort was satisfactory, the Fund was
s
willing to grant waivers on certain performance targets. Despite that stance, however,
some debtor countries grew ever more cautious regarding relationships with the Fund.
Banks worldwide became increasingly frustrated by recurring negotiations and the
growing reluctance of smaller, less-exposed banks to take part in new money arrangements.
Differences in accounting rules, tax policies, and regulatory practices among creditor
countries also contributed to differences in the attitudes of some banks to the process.
Concern about progress on international debt problems was growing in October 1985
when Treasury Secretary Baker put forward his debt initiative. It stressed the need for
new financial resources from banks and called on the World Bank, in particular, to add
to its flows. These were all familiar themes. The new feature in Secretary Baker’s plan
was an emphasis on growth-oriented adjustment policies rather than a principal reliance




9

on macroeconomic stabilization and demand restraint. These structural adjustment policies
are broad-ranging: they encompass trade liberalization, such as reduced tariffs and
quotas; financial liberalization, such as expanded access for foreign direct investors;
deregulation, including eliminating subsidies, rationalizing exchange rate regimes, and
removing interest rate controls; and privatization of public sector enterprises.
Progress has been made in following up on the Baker initiative, but it has often been
overlooked by focusing on difficulties. The kinds of economic and structural reform
policies called for require a demanding long-term commitment, and success among the
debtor countries in implementing such steps has been uneven. In some cases, external
economic changes, such as commodity price declines, have complicated stabilization
efforts. On the financing side, also, some difficulties emerged. Longer delays in getting
agreement on bank lending packages worked to slow the overall pace of bank lending.
In addition, international banks, first abroad and later in the United States, increased
their reserves against possible losses on their LDC loans. These developments, together
with renewed financial and economic troubles in some of the major debtor countries,
underscored the difficulties in sustaining the broad-based cooperative and complementary
efforts needed ultimately to solve the debt problem.
Perceptions about how the debt problem is working out, though, have been overly
affected by dramatic events like the Brazilian moratorium. Important, but less dramatic,
positive steps have been widely overlooked. Some debtor countries, like Mexico, have
made impressive strides in diversifying their export base; others, like Chile, have
expanded the array of investments open to capital from abroad. In addition, innovations
worked into recent reschedulings and new money packages have provided mutual
benefits of greater financial flexibility and hold great potential for the future.

SETTING THE PATTERN:
THE RESPONSE TO MEXICO’S CRISIS

The reaction to the Mexican payments shock of August 1982 established a framework
for providing emergency liquidity, structuring bank finance, and making IMF oversight
and support of adjustment efforts the centerpiece of the process. These became key
10




features of managing the initial phase of the LDC debt crisis and they worked with
notable success in the years just following its onset.

The August 1982 Shock
Mexico’ payments difficulties surfaced against a worsening economic environment for
s
the country: in the summer of 1982, the industrial countries were in the midst of a
recession; real interest rates had turned sharply positive; and prices of commodities,
including oil, were declining. Mexico’ payments problem stemmed from a marked
s
decline in its current account balance, combined with massive bouts of capital flight.
To finance its external deficits, the country increased its foreign borrowings and drew
down reserves. As a result, external debt mushroomed, reaching almost $80 billion by
the end of 1981, equal to 272 times the country’ export earnings. Moreover, as the
s
current account worsened, banks extended credit at shorter maturities, so that by 1982
close to one-third of Mexican external debt was due within a year.

Emergency Liquidity Assistance
Mexico’ immediate need in the summer of 1982 was for liquidity. In response to that
s
need, the United States and other governments acted promptly to mobilize financial
support for the country. A special meeting of the central banks of the Group of Ten
(G-10) countries was held the week following Mexico’ August 12 announcement of
s
its debt-servicing problem. The meeting led later in the month to a financial package
for Mexico of $1.85 billion. This money was to serve as a bridge to funds that would
be forthcoming from the IMF once a program was in place. Of the $1.85 billion
package, the United States provided $925 million, other G-10 countries contributed
another $750 million, and Spain added $175 million.
Rapid agreement was also reached between Mexico and the U.S. government on
other forms of financing. There had already been discussions within the Treasury as to
the merit of buying Mexican oil for the U.S. strategic reserves were Mexico to face a
payments crisis. Accordingly, the Exchange Stablization Fund of the Treasury provided
the Bank of Mexico with $1 billion in a short-term swap arrangement, enabling Mexico
to meet immediate payments needs. These drawings were quickly repaid with the
proceeds from an advance payment on oil purchases by the Department of Energy.




11

The immediate reaction to Mexico’ financial plight clarified a very important point:
s
namely, that arrangements for providing liquidity support on an international level work
well. Speed and creativity were hallmarks of the response to the crisis. To this day the
Mexican shock of August 1982 represents the biggest liquidity emergency of an inter­
national nature that officials have faced, and the success in dealing with it underscores
the usefulness of the current informal understandings among central banks and their
governments. The essence of the debt crisis for Mexico and other LDCs, however, lay
not just in dealing with a short-term liquidity emergency but also in managing the long­
term payments problem. For that, a more structured approach was necessary.

Structuring Bank Finance
The structure that evolved in the Mexican case set a pattern for troubled LDC debtors
on key features of commercial bank finance: the advisory committee format, concerted
lending, the mutual interdependence of bank lending and Fund programs, and the
treatment of other private credits.
In the Mexican case, great efforts were made to draw as many banks as possible into
agreement. An advisory committee was set up to contact the hundreds of banks worldwide
with Mexican debt and to engage them in a financing package for the country. The
most significant step, however, was the initiative of the Managing Director of the IMF,
who told the banks that they would have to provide Mexico with new money as a
condition for his recommending approval of Mexico’ program.
s
This was a sharp adjustment in the way the Fund normally did business. Typically,
an IMF program was negotiated on the basis of assumptions about the volume of private
capital inflows. With a Fund agreement in hand, a debtor country could then work out
arrangements with its lenders. But because the threat of slippage in the Mexican case
was so great, the Fund had to raise the cost of noncooperation. Because the banks
would not usually commit any new loans until an adjustment plan was agreed to, the
move set up a strong mutual dependence between IMF programs and new money
packages. The success of this tactic in the Mexican case created a powerful precedent.
Initially, the banks were taken aback by the Managing Director’ announcement.
s
However, the Chairman of the Federal Reserve, who had been working closely with
the Managing Director throughout the crisis, stressed that, “in such cases where new
loans facilitate the adjustment process and enable countries to strengthen their economies
and service their international debt in an orderly manner, new credits should not be
12




subject to supervisory criticism.” This succinctly stated the core of supervisory policy
for dealing with the early phase of the debt crisis. In effect, Chairman Volcker was
saying that regulators recognized that new bank lending associated with an IMF-supported
adjustment program could improve the value of outstanding bank loans. Regulators
would not take special supervisory initiatives regarding such new money packages in
a context in which a country remained current on its interest obligations. This statement
provided reassurance to the banks on new conditional lending. Of course, for reasons
including, but not limited to, the LDC debt crisis, bank regulators were consistent in
their call for strengthened bank capital positions.
As to which debt to include in the rescheduling, Mexico and its bank creditors quickly
agreed that government bonds would continue to be serviced on their original maturity
schedule. The bond debt could be easily excluded from the rescheduling because it
was of small size. Also, it would have been much more difficult to arrange reschedulings
with a relatively large number of widely dispersed bondholders than with banks.
While no one disagreed that debt owed to banks by the government or its agencies
would be rescheduled, Mexican private sector debt to international banks was another
matter. In Mexico’ case, exchange controls had been put in place at the end of the
s
summer to stem the outflow of dollars, making it difficult even for profitable companies
to obtain the foreign exchange needed to service their external debt. To meet this
problem, the Mexican government called on private sector debtors to reschedule their
own debt on an individual basis. In return for peso payments by the private sector
debtors, the central bank agreed to provide foreign exchange to service the rescheduled
debt in line with an agreed maturity schedule. This scheme basically resulted in the
Mexican government taking on the future foreign-exchange risk but not the credit risk
of its private sector debtors.
Another pressing problem concerned the placements with Mexican banks in the
interbank markets in London and New York. These amounted to some $6.5 billion, of
which about 90 percent was due within six months. Unless rollovers could be arranged,
all the emergency funds Mexico was putting together could have leaked out through
the interbank market. Freezing the deposits at the branches outside Mexico, it was
feared, could trigger a disruption in the dollar interbank market. Through their global
network, banks on the advisory committee together with Mexican officials pressed
lenders to roll over their placements. As a result, there were no serious leakages in
these initial months.
Loans to the private sector and interbank placements were not formally included in
the rescheduling process. But in practice both were subject to risks similar to those on
loans to the public sector. This was a theme that would echo through the debt crisis




13

generally. For example, the arrangements for the Brazilian rescheduling early in 1983
would require explicit standstill conditions for interbank positions with the offshore
branches of Brazilian banks. That action created much consternation among banks for
it made clear that international interbank deposits bore country risk. In the case of
Chile, where term debt owed by the private sector accounted for close to 50 percent
of the country’ total external debt, bank creditors pressured the government to take
s
more direct responsibility for the performance of private sector obligations when these
ran into trouble. Ultimately, the Chilean government agreed to assume the debts of
Chilean banks, but not of other private firms.
The Mexican case laid down a basic pattern for handling bank loans to LDCs:
• Loans to governments of all bank creditors worldwide were rescheduled under
terms negotiated through the advisory committee. Banks rescheduled near-term
obligations only, typically those for the current year and the succeeding year. Later
multiyear rescheduling agreements (MYRAs) would be lined up for some of the
prominent debtors after periods of good performance. MYRAs aimed to smooth
the profile of scheduled amortizations and often called for special monitoring
procedures once the rescheduling country was no longer using Fund resources.
• Spreads and fees on the reschedulings as well as the new money packages were
initially set rather high compared to pre-crisis levels. For example, in the Mexican
case, rescheduled loans carried a 1 percent fee and either l 3/4 percent over the
U.S. prime rate or l 7/s percent over LIBOR. Mexico had been paying less on
average before the crisis hit. For other countries rescheduling costs would be
comparable.
• Interbank lines and private sector loans were clearly subject to country risk, but
were not formally included in reschedulings in the same way as loans to governments.
Only bond debt was specifically excluded from debt-servicing interruptions. This
was of little benefit to LDCs, however. Although securities were a de facto senior
obligation to bank debt, the bond market was not open as a source of new money
to debtor countries.
• Bank packages, official reschedulings, and IMF agreements were linked. This put
pressure on reluctant creditors and promoted more rapid arrangements. It would
emerge later, however, that even conditioning Fund programs on setting up the
bank packages first would not be enough to overcome the friction caused by
14




requiring the active support of some banks. Marginal creditors had little to lose
from taking a hard line and could hope to escape entirely from any new money
commitments by not cooperating. Over time the need to consolidate creditor positions
in order to get a more efficient bargaining process would become pressing.

SOME EARLY SUCCESS

Within a year and a half of Mexico’ difficulties, some 26 developing countries worldwide
s
rescheduled over $50 billion in debt with their private and official creditors and adopted
economic stabilization programs. Although financial problems were widespread, most
debtor countries addressed them in a cooperative way and seemed to be grappling
effectively with their economies in a favorable world environment. The volume of
world trade rebounded, expanding 3 percent in 1983 and almost 9 percent in 1984.
Inflationary pressures were contained and interest rates declined. Moreover, recovery
in the industrial world strengthened the prices for non-oil commodities in dollar terms,
halting the downturn in the Baker 15 terms of trade by 1984 (Chart 2).
In the early years of the crisis, neither debtors nor creditors doubted that the LDCs
would have to adopt some tough measures to reduce their external deficits and borrowing
needs. Although banks had provided LDCs a substantial amount of funds through
concerted lending arrangements in 1983— almost $13 billion to the Baker 15— it was
clear that new bank lending would not come easily despite the obvious interests of the
banks in supporting the overall process. Strong economic policies were needed, not
only to reduce imbalances but also to maintain access to bank and Fund monies.
Stabilization efforts required disciplined monetary policies, competitive exchange rates,
positive real interest rates and noninflationary wage policies, as well as reductions in
government budget deficits through spending restraint, reduced subsidies, and increased
taxes. The goal of the programs was basically to reduce domestic demand and raise
the prices for tradable goods. By this means, exports would rise, imports would fall
through both income and price changes, and the external deficit would decline.
Retrenchment was the necessary first stage of adjustment; indeed, debtor countries
would likely have had to restrain demand more if the IMF had not been overseeing the
process. But macroeconomic stabilization alone could not serve as a complete long-




15

Ch art

2.

THE E C O N O M I C E N V I R O N M E N T

K e y fe a tu re s o f the g l o b a l e c o n o m y t u rn e d out f a v o r a b l y fo r LDC f in a n c ia l pro sp ects .

E x pe cte d C h a n g e for 1 9 8 3 - 8 7
under " M o d e r a t e ly O ptim istic”

Actual Change

S ce n a rio for LDC R e c o v e ry *

1983-87

3 .0

3 .3

5 .0

4.1

OECD g ro w th
A verage annual
percentage change

O ECD in flatio n
A verage annual
percentage change

Interest ra tes

-200

-187

C u m u la t iv e ba sis p o in t c h a n g e
in s ix -m o n th LIBO R

. . . but w e a k c o m m o d it y p rices . . .

. . .

l e d to w o r s e n i n g t e r m s o f t r a d e t h a t

d is ru p te d ch a n ce s for re c o v e r y .

* Fr o m R o n a l d l e v e n a n d D a v i d R o b e r t s , " L a t i n A m e r i c a ’ s P r o s p e c t s f o r R e c o v e r y , ” F e d e r a l R e s e r v e
B a n k of N e w Y o r k Q u a r t e r ly R e v ie w , A u tu m n 198 3.
S o u rc e s :

O E C D , IM F , F e d e r a l R e s e r v e B a n k o f N e w Y o r k .

16




term policy. The hope was that strong steps in the early phase of adjustment would
make a significant contribution to restoring debtor country creditworthiness. Over the
longer run, it was clear that emphasis would have to be put on tackling the hard problem
of structural reform.
That strategy seemed to be yielding gains, as countries began to put their policies in
place. In 1983, the Baker 15 countries cut their combined current account deficit by
two-thirds from its 1982 level. They reduced the deficit to near-balance in 1984 from
almost $51 billion two years earlier (Chart 3). In large part, the 1983 successes in
external performance resulted not from strong growth in exports, whose volume increases
were offset by price declines, but from declines in imports. Import volumes for the
Baker 15 fell 21 percent in 1983; further reductions were made the next year.
By 1984, many of the Baker Plan countries were able to report renewed export
growth, spurred in part by the lagged results of earlier exchange rate depreciation.
Strong external performance in these years was also aided by improvements in some
commodity prices, such as those for agricultural raw materials, food, and beverages.
But recovery in the industrial world helped the most. The value of U.S. imports from
the Baker 15 increased by 14 percent in 1984 over their 1982 level.

Adjustments in the Major Debtor Countries

The relative optimism about the working of the debt strategy in the initial years of the
crisis was prompted largely by the successes of Mexico and Brazil. In Mexico, the
new government of President de la Madrid vigorously implemented a series of important
policy initiatives. Subsidies on food and utilities were cut, public sector expenditures
were reduced, and the real exchange rate was sharply devalued. Exchange controls
were gradually eased, and by the end of 1983, interest arrears on private sector debt
had been eliminated. The country met its government deficit target in 1983 but somewhat
overshot the 1984 goal of 5.5 percent of GDP
Mexico had some early success reducing the rate of inflation, from close to 100
percent in 1982 to 59 percent in 1984; but by year-end 1984, the country was still
above its target of a 40 percent inflation rate. Moreover, Mexico was able to record
positive real interest rates only intermittently during those early years.




17

Ch a rt 3.

LDC E X T E R N A L A C C O U N T S

E xtern al adju stm e n t h a s b e en a brig h t

. . . was generated

light fo r th e LDCs.

reliance on im po rts, . . .

A n im p re ssiv e

tra d e su rp lu s . . .

B i l l i o n s of

B a k e r 15 T r a d e B a l a n c e

dollars

20

J___ I __ I __ I __ I __ L
_ _ _ _

-10
1980

81

82

83

84

85

86

87

. . . b r i n g i n g n e a r - b a l a n c e in t h e
current accounts.

1980

Sources:

I MF, F e d er a l

18



Reserve Ba nk

81

of N e w

82

York.

83

84

85

86

87

m o stly b y c o m p re s s in g

On its external accounts, however, Mexico’ performance was even stronger than
s
anticipated. In 1983 the country posted a $12 billion swing in its current account, to a
$5 billion surplus, largely through a reduction of imports and a spurring of non-oil
exports. The country replayed its strong performance the next year with a $4 billion
current account surplus.
Marking Mexico’ overall success, banks agreed to a new money package of $3.8
s
billion in early 1984. Loan spreads were reduced below those of a year earlier, to a
range of 1Vs-1V2 percentage points, and the maturities and grace periods were extended.
In addition, the country and the banks agreed in principle in September on a MYRA
covering $43.7 billion with lower spreads and longer maturities. This agreement had
a number of novel features, including provisions to allow IMF monitoring of Mexico
even after its Fund program had elapsed and options to permit non-U.S. banks to switch
part of their exposure into nondollar currencies. The Mexican MYRA was not only a
prime illustration of the evolutionary aspects of the prevailing debt strategy but also
renewed evidence of the ability of debtors and creditors to work together in support of
mutually beneficial results.
Like Mexico, Brazil made clear progress in 1983 and 1984. In February 1983, it
devalued the cruzeiro by 23 percent against the U.S. dollar and undertook a three-year
program supported by the IMF The current account deficit improved sharply and the
trade surplus jumped from $800 million in 1982 to $6.5 billion a year later. A surge
in manufacturing exports the following year brought a small current account surplus.
Strong export performance reversed three years of recession, with real growth of 5.7
percent recorded for 1984. In addition, the government took steps to reduce the fiscal
deficit: subsidies were cut, particularly in the agricultural sector, the public sector wage
bill was lowered by measures to reduce guaranteed increases in real wages, and public
investment was reduced.
As in Mexico, inflation was the difficult aspect of adjustment. Despite policies to
consolidate the budget system and control spending, the rate of inflation more than
doubled between 1982 and 1984. Price pressures were in part a side-effect of a large
depreciation and the cuts in subsidies. However, the growing monetary costs of servicing
the inflation-indexed domestic debt of the public sector were a prominent factor behind
the price rises, suggesting that inflation in the heavily indexed Brazilian economy had
become self-reinforcing.
The course of the LDC debt crisis has never been uniform across countries. While
Mexico and Brazil had their share of success in these early years, certain other countries
were faring less well. In Argentina, for example, economic and financial problems
predated the Mexican crisis and grew worse as the country passed through a political




19

sea-change that led to the collapse of the military government. Despite an extensive
financial package in 1984, economic problems, particularly the growth of public spending,
remained stubborn. Inflation soared, reaching close to 700 percent by year-end. Other
debtor countries, too, were having a difficult time controlling public sector expenditures
and inflationary pressures as 1985 approached. In Peru, the public sector deficits far
exceeded targets and there, as in Nigeria, the Philippines, Uruguay, and Yugoslavia,
price pressures were acute. While inflation troubled a number of Baker 15 countries,
most took actions to address their problems and recorded substantial gains in their trade
and current account balances in the early years of the crisis.
Despite the external improvements for Mexico, Brazil, and others, no Baker 15
country regained access to the international credit markets in these initial years: the
restoration of creditworthiness, a continuing objective of the debt strategy, clearly would
require a sustained commitment to sound policies of both a macroeconomic and structural
nature. Many factors contributed to this state of affairs. None of the major debtor
countries managed to control inflation, which appeared thoroughly entrenched. Such
persistent high inflation raised the riskiness of financial investments in the debtor
countries. The difficulties some debtors had in sustaining adjustment colored the market’
s
perceptions of all potential borrowers, even the good performers. Finally, some international
banks that had earlier participated in loan syndicates made strategic business decisions
to withdraw from sovereign lending to LDCs. As 1985 unfolded, the stubborn features
of the debt problem and the need for a long-term commitment to resolve them were all
the more evident.

THE BAKER INITIATIVE

The first phase of the debt crisis had been a necessary period of reschedulings and
adjustments in macroeconomic policy. The international financial system had functioned
well through a period of enormous stress. While banks strengthened their balance
sheets, debtor countries had started on the road to recovery. By the fall of 1985,
however, it was clear that renewed momentum was needed (Chart 4). As the annual
meeting of the IMF and the World Bank approached in the fall of 1985, the international
community was keenly aware of the fact that the next phases of the LDC debt problem
20




C h a r t 4.

LDC P E R F O R M A N C E

A fte r a s e v e re recessio n, d e b to r co u n tries
h a v e h a d a lim ite d

. . . but h ig h in flatio n . . .

m e a s u r e o f success

re storin g liv in g stan d ard s, . . .

Percent

4

2

0
-2

-4

-6
19 70 -79

19 7 0 -7 9

. . . h a v e contributed to h o ld in g

. . . a n d p e rsis te n t in t e r n a l deficits . . .

d o w n investm ent.

Percent

G o v e r n m e n t D eficits as a P e r c e n t a g e of G D P
G D P w e i g h t e d a v e r a g e f o r B a k e r IS

0

-2

-4

-6

1980

S o u rc e :

81

82

83

84

85

86

87

IM F .




21

would require some fresh thinking and initiative. What may not have been so apparent—
at least with the benefit of hindsight—was just how much had been accomplished since
the dark days of 1982, when the threat of an international economic and financial crisis
was avoided.
Against this background, Secretary Baker proposed his initiative to move to a growthoriented process, which meant, in part, undertaking structural reform in debtor economies
to break down entrenched inefficiences. To ensure sufficient financing from both private
and official sources to lubricate the whole process, the Secretary called on commercial
banks to provide $20 billion in new loans over the following three years to the fifteen
countries he identified as being most heavily in need. Further, to supplement bank
finance, the Secretary called on the multilateral development banks, notably the World
Bank, to increase their disbursements by $3 billion a year.

Economic and Structural Reform

After the Baker Plan was put forth, changes were taking place in the economic environment
that would complicate the implementation of sound economic and structural reform
policies. Average growth in the industrial world was slowing to under 3 percent. The
boom in the United States had given way to a more sustainable expansion but no
acceleration took place elsewhere in 1985 and 1986. The pattern of growth contributed
to a sharp drop in non-oil commodity prices. Also, at the end of 1985, the OPEC price
structure was breaking apart, leading to an unprecedented reduction in oil prices that
exacerbated the problems of the oil-producing LDCs. The overall terms of trade moved
sharply against the Baker 15. Lower inflation and interest rates in the industrial countries
were not enough to offset the impact of the terms of trade decline. It became difficult
in this environment for the debtor countries to sustain their improved trade picture
while restoring some measure of economic growth.
In that general timespan, some positive developments were also taking place. Adjust­
ment in Argentina, for example, seemed to be progressing. After a long spell of policy
ineffectiveness and worsening creditor relations, the government had announced in
June 1985 a shock program designed to halt the surging inflation rate. The plan included
various fiscal actions, a wage and price freeze, the fixing of the exchange rate, and the
22




creation of a new currency unit, the austral. Inflation slowed dramatically to an annual
rate of under 45 percent in the second half of 1985, and the public sector deficit fell.
Growth resumed late in the year, and the external accounts improved sharply.
In early 1986, the freeze was lifted. Despite subsequent efforts to strengthen fiscal
control, including several rounds of wage and price freezes, inflationary pressures and
the fiscal deficit mounted sharply in 1987. Moreover, strong domestic demand, lower
prices for major exports, crop losses due to bad weather, and tardy exchange rate
adjustments sent the current account into a steep decline in 1986 and 1987.
The government turned to the IMF in 1987 and received a 15-month standby for
SDR 1.1 billion in July. As part of the new program, the banks agreed to reschedule
some $30 billion in debt and to provide Argentina with a new term-credit facility of
$1.55 billion and $400 million of new trade credits. A novel aspect of the Argentine
agreement was that it offered a range of options for participating banks. These included
a bonus fee for early commitment to the package and an exit bond that would carry a
lower yield than the bank loan but excuse the holder from future concerted lending.
Brazil introduced its shock plan, the Cruzado Plan, in February 1986 to deal with
accelerating inflation of close to 250 percent. The Cruzado Plan fixed the exchange
rate, created a new currency unit, ended most forms of indexation, and froze prices
and wages, but only after a sharp wage increase. The initial wage increase combined
with the price freeze led to a surge in domestic demand and an import boom that rapidly
ate away at Brazil’s trade surplus. Inflationary pressures, originally suppressed under
the freeze, reemerged. Attempts toward the end of the year to stem the inflation failed,
and price rises mounted to triple-digit levels in early 1987. In February 1987, as
international reserves fell and economic growth slowed sharply, the government declared
a moratorium on payment of interest on medium- and long-term debt. However, a
major devaluation and the resumption of the use of a crawling peg to maintain the
cruzado’ competitiveness helped raise the trade surplus to $11.2 billion for the year.
s
The moratorium disrupted the process of managing Brazil’ debts, and by the turn of
s
the year, the country was acting to restore relations with its creditors.
Mexico was among those battered by the collapse of oil prices in 1986. The Mexican
economy went into recession that year, with domestic economic activity falling by 3.8
percent and inflation in triple digits. An aggressive exchange rate policy, which the
country had initiated in mid-1985, helped to counter the impact of the oil price decline
on overall economic activity. The exchange rate policy paid off in a gain of close to
40 percent in agricultural and manufactured exports, which together with some benefits
from lower world interest rates, held the current account deficit in 1986 to roughly
$1.3 billion. As domestic monetary conditions tightened, there was some repatriation




23

of flight capital in 1986. At the same time, the higher domestic interest rates led to
sharp increases in the costs of servicing domestic debt and a rise in the public sector
deficit to more than 16 percent of GDP. In November 1986, the Mexican government
adopted a new economic stabilization program that was supported by an 18-month IMF
standby of SDR 1.4 billion; the program called for the restructuring of official and
bank debt, together with a new money package and more than $2 billion in net dis­
bursements from the World Bank in 1986 and 1987.
The 1986 Mexican package was notable in several important respects. For one, the
IMF arrangement included provision for additional finance should Mexico’ oil prices
s
fall below a floor level. Second, the bank agreement, which provided for new money
of $6 billion, specified that $500 million of principal was to be guaranteed by the World
Bank. Third, the bank agreement also allowed for additional financing under certain
circumstances: $1.2 billion if a shortfall in Mexico’ export receipts threatened the
s
financing of the public sector investment program and $500 million, half guaranteed
by the World Bank, if recovery failed to materialize according to a specified formula.
This package, which integrated the World Bank more actively into a Fund financing
package than ever before, provided Mexico with its lowest interest spread to date,
13/16 percent over LIBOR. The complex deal was another milestone in the process of
designing increasingly sophisticated and flexible loan structures. But this complexity,
together with concern about the oil market and greater creditor resistance generally,
made for a drawn-out approval process.
Thereafter, the Mexican economy started to turn around. Following one quarter of
negative growth, economic activity picked up by mid-1987, spurred by a firming in
oil prices and record growth in manufactured exports. The country built its foreign
exchange reserves up to $15 billion.
Mexico made strong gains, especially in restructuring its exports away from dependence
on oil, but inflation remained a problem, as it did for many other LDCs. The growing
fiscal deficit pushed inflation higher during 1987, up to an annual rate of nearly 160
percent by year-end. Late in the year, the government introduced a series of additional
measures to stabilize the economy and curb inflation, including steps to speed up
privatization and restructure public sector enterprises.

24




T h e Fin an cin g P r o c e s s

In the years following the Baker initiative, international banks continued to reschedule
debt extensively. In 1986-87, about $135 billion of bank debt was rescheduled for the
Baker 15, about 50 percent of the total outstanding bank debt for the group. Terms and
conditions negotiated were generally easier than those in the earlier round of reschedulings.
Spreads were shaved to 13/16 of a percentage point for Mexico and Argentina and
7/8 of a percentage point for the Philippines, compared to a range of 1Vs-F/s percentage
points for these countries in earlier reschedulings. Maturities were extended significantly,
even out to 19-20 years in the cases of Argentina and Mexico . For a number of countries
the reschedulings were of a multiyear character.
Assessing the overall performance of private net lending flows under the Baker
initiative is more complicated, however. There were sometimes delays in reaching
agreement on concerted lending packages. Still, two large packages— a total of $7.7
billion for Mexico and almost $2 billion for Argentina— were put together since 1985,
as well as new facilities for other countries, such as Colombia, Ecuador, and Nigeria.
International banks may have extended funds under concerted lending arrangements in
the 1986-87 period in amounts somewhat below expectations, but the banks were
responsive to the financing needs of those debtor countries that were implementing
economic policy reforms and maintaining businesslike relations with creditors.
Outside of the concerted lending structure, changes were taking place on other fronts.
Some private and public sector loans were repaid. In addition, many banks began
exchanging claims for equity positions in the debtor countries and selling debt to
nonfinancial companies that wanted to invest. Throughout the crisis, most banks maintained
intact, or even increased, trade lines that continued to be serviced. Credits provided
by nonbanks, however, showed a small decline on balance over 1986-87, even in terms
of the dollar, which depreciated sharply during that period.
Concentrating on the flow of funds masks some interesting and important trends
regarding the structure of financing. In general, both restructurings and new money
packages have shown greater sophistication in design over the past two years. The socalled menu of options available to creditors has grown richer and includes such innovations
as expanded choices for interest rate pricing, new cofinancing efforts with the official
sector, exit bonds of one variety or another, as well as debt-equity conversions.
Some of these new techniques help to reduce the exposure of banks generally and
promote in an orderly way the consolidation of claims into the hands of creditors who
have long-term relationships with the countries. Mexico and Chile, for example, have




25

had particularly successful debt-equity programs that have reduced the stock of bank
debt of each country by some $1.5 billion to $2.5 billion over the past two years. Many
of the Baker Plan countries have, in fact, put debt-equity programs in place recently.
As another example, late in 1987, Mexico announced that it would offer creditor
banks the chance to tender existing debt, at a discount from face value, against a new
security carrying a higher yield and collateralized on its principal by U.S. government
securities. In addition, the amount of debt successfully tendered would be excluded
from the base for future new money commitments. The scheme was a modest success;
Mexico accepted $3.7 billion of bank debt tendered, reducing its overall indebtedness
by $1.1 billion.
Other techniques serve different purposes. Interest retiming, which allows for interest
to be paid yearly instead of semiannually, was used in the rescheduling for Chile as a
means to provide effective short-term financing without expanding new money com­
mitments. The 1987 Argentina rescheduling offered a premium to banks that committed
to the new money package before a specified time and was helpful in obtaining a quick
agreement. The variety of these innovations illustrates the greater flexibility and imag­
ination that has been brought to the financing process to the mutual benefit of debtors
and creditors.

The Multilateral Institutions

The third element of the Baker strategy, beyond structural adjustment and growth and
bank finance, was the role of the multilateral lending institutions. The call was for the
World Bank, especially, to expand its lending to heavily indebted LDCs. This it has
done to a large extent: commitments to the Baker 15 rose to about $13.0 billion in
1986-87 from $8.9 billion in 1981-82; disbursements increased to $11.3 billion from
$5.2 billion in the same time frame (Chart 5).
The World Bank’ efforts to adjust its programs and emphasis to the changing cir­
s
cumstances of the debtor countries have brought with them some important challenges
for the Bank itself. For example, looming capital constraints have been exacerbated by
the weakness of the dollar in the foreign exchange market, since the capital base of the
26




World Bank is denominated in dollars, but a significant portion of the institution’ assets
s
is held in nondollar currencies. Furthermore, the Bank has been cautious in its use of
guarantees in cofinancing arrangements out of concern for jeopardizing its high credit
rating and thereby raising its costs as a financial intermediary. For these reasons and,
in addition, to enable the Bank to play the role envisioned for it in Secretary Baker’
s
initiative, the World Bank is seeking from its member governments a substantial increase
in its capital base.
Since the Baker initiative, the trend in net IMF credit has reversed its earlier direction.
In 1983, net Fund credit to the Baker 15 totalled about $6 billion and was a significant
buffer to the contraction of private finance. In 1986 and 1987, however, IMF credit
net of repayments to these countries was declining. The Fund had extended substantial
amounts earlier under traditional standby arrangements, which called for repayments
in a medium-term time frame. The shift in the net flow of IMF resources was not

C h a r t 5.

WOR LD B A N K A N D IMF LEN DING

As f o r t h e i n t e r n a t i o n a l i n s t i t u t i o n s ,
t h e W o r l d B a n k a c c e l e r a t e d its
disbursem ents . . .

. . . but net IMF c r e d i t w e n t into r e v e r s e .

B i l l i o n s of
dollars

14
12

10
8

6
4
2

0
1980

Sources:

World




81

82

83

84

85

86

87

B a nk , I MF.

27

widespread, however. If Brazil’ repayment obligations are excluded, the IMF has on
s
a net basis provided some $1.5 billion to the Baker countries in 1986-87.
A central role for the Fund in the debt strategy remains crucial. The IMF is closely
reviewing a number of possibilities for improving its effectiveness:
(1) modifications of its lending arrangements, to provide funds over a longer
period and on a contingent basis to deal with fluctuations in the external
environment;
(2) changes in the design of adjustment programs, to put a greater emphasis on
structural adjustment policies;
(3) changes to streamline the use and number of performance criteria without
undercutting the effectiveness of these criteria as a guide for adjustment.

A BALANCED APPROACH

Relative to the size of the problems that emerged in 1982, progress in addressing the
debt crisis should be judged to be, on balance, encouraging. The approach that has
evolved to deal with the crisis has proved to be flexible in adapting to the special
circumstances of different debtor countries while upholding the general commitment
of participants to the community of interests. This approach appeals to the enlightened
self-interest of both debtors and creditors and works to their mutual advantage over the
long run. It seeks a balance among the responsibilities of providing financing, undertaking
policies of economic adjustment, and maintaining multilateral oversight and financial
support of the whole process.
Experience over the years of the debt crisis has revealed the overall benefits of this
basic approach. A major international financial crisis of global proportions was averted.
Looking back on the initial stage of the crisis, it seems clear that resort to any course
other than the one built on mutual self-interest would have risked serious conflict and
disorder.
A balanced approach was appropriate for dealing not just with the immediate aftermath
of the initial shock but also with developments over the longer term. The community
of interests on which a balanced approach is based has endured rather well against the
pressures and tensions it has faced. Certainly, there have been problems and setbacks,
28




but overall the basic commitments have remained intact. Dramatic but selective actions
that challenged the cooperative balanced approach, such as payments stoppages or
highly publicized provisioning, may have had a disproportionate effect on perceptions.
However, behind those events, a good deal of quiet progress has been made on a number
of fronts. The debtor countries as a group have preserved most of the improvements
in their current account balances. Many countries have taken steps to begin the process
of structural reform in their economies. New techniques in financing arrangements
have promoted greater flexibility for creditors while achieving improved terms and
conditions for debtors.
More remains to be done, however. Although positive growth rates have been restored
in many countries, they are, by and large, still well below the potential increases in
output that those economies can accommodate. Inflation has been widespread and
persistent, and efforts to address it through macroeconomic policy and structural reform
should be intensified. Delays in putting together financing arrangements have, at times,
been too long; participants in the financing process must keep seeking new ways to
increase its responsiveness.
Views may differ on the best tactics to deal with these difficulties while moving
toward the basic goals of sustained growth, restored competitiveness, and reduced risk.
A fundamental commitment to the community of interests, however, has to remain the
keystone of future efforts to manage the debt problem. That basic strategy has a record
of reasonably good performance and it is the only approach that treats the incentives
for financing and adjustment in a balanced way.




29




Financial Statem ents
STATEMENT OF EARNINGS AND EXPENSES FOR
THE CALENDAR YEARS 1987 AND 1986 (In dollars)

1987

1986

Total current earnings.................................................................

5,610,066,755

5,555,360,431

Net expenses*..........................................................................

171,855,794

212,628,002

Current net earnings

5,438,210,961

5,342,732,429

Additions to current net earnings:
Profit on sales of United States government
securites and Federal agency obligations (n e t).........................

13,476,274

21,891,327

Profit on foreign exchange (n e t)...................................................

434,830,746

486,745,710

All other..................................................................................

149,447

1,135

Total additions..........................................................................

448,456,467

508,638,172

Deductions from current net e arnin gs...........................................

7,915,250

12,498,114

Net additions

440,541,217

496,140,058

Board expenditures....................................................................

20,642,300

24,112,100

Federal Reserve currency c o s t s ...................................................

53,905,512

53,649,878

Total assessments

74,547,812

77,761,978

Net earnings available for distribution

5 .8 0 4 .2 0 4 .3 6 6

5 .7 6 1 .1 1 0 .5 0 9

27,204,022

Assessment by the Board of Governors:

Distribution of net earnings-.
Dividends p a id ..........................................................................

30,455,531

Transferred to surplus.................................................................

75.044.550

26.560.650

Payments to United States Treasury (interest on Federal Reserve notes)

5,698,704,285

5,707,345,837

Net earnings distributed

5 .8 0 4 .2 0 4 .3 6 6

5 .7 6 1 .1 1 0 .5 0 9

SURPLUS ACCOUNT
Surplus— beginning of year.........................................................

466,001,350

439,440,700

Transferred from net earnings......................................................

75.044.550

26.560.650

Surplus— end of year

5 4 1 ,0 4 5 ,9 0 0

4 6 6 ,0 0 1 ,3 5 0

includes a $49 million credit applied to expenses by the Federal Reserve Bank of New York on behalf of all twelve Reserve
Banks, resulting from the implementation of FASB87— Employers' Accounting for Pensions— effective January 1987.




31

S TA TE M E N T O F C O N D ITIO N
In dollars

Assets

DEC. 31, 1987

DEC. 31, 1986

Gold certificate account..............................................................

3,177,290,421

3,145,946,460

Special drawing rights certificate account.....................................

1,489,000,000

1,489,000,000

C o in ........................................................................................

16,279,966

14,120,224

Total

4,682,570,387

4,649,066,684

................................................................................

2,786,700,000

134,250,000

Advances

United States government securities:
Bought outright*.......................................................................

70,429,481,550

64,078,918,598

.............................................

3,645,235,000

13,691,465,000

.......................................................................

2,430,086,784

2,538,623,843

.............................................

1,315,470,000

2,313,535,000

80,606,973,334

82,756,792,441

1,311,198,153

Held under repurchase agreements
Federal agency obligations:
Bought outright

Held under repurchase agreements

Total loans and securities
Other assets:
Cash items in process of collection

.............................................

934,827,927

Bank premises..........................................................................

33,425,781

32,247,470

All o t h e r t ................................................................................

3,444,024,737

4,378,765,998

Total other assets

4,412,278,445

5,722,211,621

Interdistrict settlement account...................................................

1,448,815,867

(5,576,252,155)

Total assets

includes securities loaned— fully secured.....................................
tlncludes assets denom
inated in foreign currencies revalued m
onthly at m
arket rates.

32




9 , 1 0 3 ,0 3
1 5 ,6 8 3

926,730,000

8 7 ,5 5 1 ,8 1 8 ,5 9 1

1,447,575,000

S TA TE M E N T O F CO N D ITIO N
In dollars

31,1 9 8 7

Liabilities

dec.

Federal Reserve notes (n et).........................................................

70,471,503,947

dec.

31,1986

61,693,101,848

Reserve and other deposits:
..............................................................

11,652,719,955

14,639,122,344

.....................................

5,312,879,052

7,587,759,178

Foreign— official accou n ts.........................................................

130,344,855

173,759,073

O th e r.....................................................................................

437,345,892

517,660,394

17,533,289,754

22,918,300,989

Depository institutions

United States Treasury— general account

Total deposits
Other liabilities:
Deferred availability cash ite m s...................................................

875,600,715

1,157,759,287

................................................................................

1,188,151,817

850,653,767

Total other liabilities

2,063,752,532

2,008,413,054

Total Liabilities

9 0 ,0 6 8 ,5 4 6 ,2 3 3

8 6 ,6 1 9 ,8 1 5 ,8 9 1

.

541.045.900

466,001,350

S u rp lu s .................

541.045.900

466,001,350

Total Capital Accounts

1 ,0 8 2 ,0 9 1 ,8 0 0

9 3 2 ,0 0 2 ,7 0 0

Total Liabilities and Capital Accounts

9 1 ,1 5 0 ,6 3 8 ,0 3 3

8 7 ,5 5 1 ,8 1 8 ,5 9 1

All other*

Capital Accounts
Capital paid in . . .

includes outstanding foreign exchange commitments valued at market rates.




33

Changes in Directors and Senior Officers
Peter Fousek, Executive Vice President and Director of Research,
died on December 28, 1987. Mr. Fousek joined the Bank in 1950
and served in the Research and Foreign Functions before becoming
the Vice President in charge of Personnel and the Bank’s first Equal
Opportunity Officer. He later returned to Research and Statistics
as Economic Adviser and then Director of Research. In 1987 he
also served as Associate Economist of the Federal Open Market
Committee.

in d i r e c t o r s .
In December 1987, the Board of Governors of the
Federal Reserve System redesignated John R. Opel Chairman of the board of directors
and Federal Reserve Agent for the year 1988. Mr. Opel, Chairman of the Executive
Committee of International Business Machines Corporation, Armonk, N.Y., has been
serving as a Class C director and as Chairman and Federal Reserve Agent since January
1987; in addition, he served as a Class B director of this Bank from January 1981
through December 1986.
ch a n g e s

Also in December, the Board of Governors appointed Ellen V Futter a Class C
.
director for a three-year term beginning January 1, 1988. As a Class C director, Ms.
Futter, who is President of Barnard College, New York, N.Y., succeeded Virginia A.
Dwyer, former Senior Vice President-Finance of American Telephone and Telegraph
Company, New York, N.Y. Miss Dwyer had been serving as a Class C director since
January 1985 and as Deputy Chairman since January 1987.
In December 1987, member banks in Group 3 elected J. Kirby Fowler a Class A
director, and reelected John F Welch, Jr. a Class B director, both for three-year terms
beginning January 1, 1988. Mr. Fowler, President and chief executive officer of The
Flemington National Bank, Flemington, N.J., succeeded Robert W Moyer, President
.
and chief executive officer of Wilber National Bank, Oneonta, N.Y., who had served
as a Class A director since January 1985. Mr. Welch, Chairman of General Electric
Company, Fairfield, Conn., has been serving as a Class B director since January 1985.

34




In February 1988, member banks in Group 1 elected John F McGillicuddy a Class A
.
director for the unexpired portion of the term, ending December 31, 1988, from which
Lewis T. Preston had resigned. M McGillicuddy is Chairman of Manufacturers Hanover
r.
Trust Company, New York, N.Y. Mr. Preston, who is Chairman of Morgan Guaranty
Trust Company of New York, New York, N.Y., had served as a Class A director since
January 1986.
Buffalo Branch. In December 1987, the board of directors of this Bank redesignated
Mary Ann Lambertsen Chairman of the Branch board for the year 1988. Mrs. Lambertsen,
Vice President-Human Resources of the Fisher-Price Division of The Quaker Oats
Company, East Aurora, N.Y., has been a director of the Branch and Chairman of the
Branch board since January 1986.
At the same time, the board of this Bank appointed Norman W Sinclair a director
.
of the Buffalo Branch for a three-year term beginning January 1, 1988. Mr. Sinclair,
President and chief executive officer of Lockport Savings Bank, Lockport, N.Y., succeeded
Ross B. Kenzie, Chairman of Goldome FSB, Buffalo, N.Y., who had served as a
Branch director since January 1985.
Also in December, the Board of Governors of the Federal Reserve System appointed
Paul McSweeney a director of the Buffalo Branch for a three-year term beginning
January 1, 1988. Mr. McSweeney, Executive Vice President of the United Food and
Commercial Workers District Union (Local 1), AFL-CIO, Buffalo, N.Y., succeeded
Joseph Yantomasi, UAW Consultant, United Auto Workers, Buffalo, N.Y., who had
served as a Branch director since January 1985.

in s e n io r o f f i c e r s .
The following changes in official staff at the
level of Vice President and above have occurred since the publication of the previous
Annual Report:
c h a n g e s

Mary R. Clarkin, Vice President, resigned from the Bank effective September 11,
1987. Ms. Clarkin had joined the Bank’ staff in 1960 and became an officer in 1975.
s




35

Effective October 1, 1987:
Suzanne Cutler, formerly Senior Vice President, was appointed Executive Vice President
and assigned responsibility for the Operations Group.
James H. Oltman, formerly Executive Vice President and General Counsel, was
designated Executive Vice President and Special Counsel and assigned senior oversight
of the Accounting, Personnel, and Planning and Control Functions and of the new
Funds and Securities Group. His assignment as the officer in charge of the Legal
Function was terminated.
Ernest T. Patrikis, formerly Deputy General Counsel, was appointed Executive Vice
President and General Counsel and assigned as the officer in charge of the Legal
Function.
Frederick C. Schadrack, formerly Senior Vice President, was appointed Executive
Vice President, continuing as the officer in charge of the Bank Supervision Group.
Stephen G. Thieke, formerly Senior Vice President, was appointed Executive Vice
President and assigned as the officer in charge of the new Credit and Capital Markets
Group.
The assignment of Chester B. Feldberg, Senior Vice President, to the Loans and
Credits Function was terminated; his assignment to the Bank Supervision Group was
continued.
Roberta J. Green, formerly Vice President, was appointed Senior Vice President,
assigned senior oversight of the new Payments System Studies Staff, and designated
as the officer in charge of the Loans and Credits Function.
Charles M. Lucas, formerly Vice President, was appointed Senior Vice President
and assigned as the officer in charge of the International Capital Markets Staff.
Cathy E. Minehan, formerly Vice President, was appointed Senior Vice President
and assigned as the officer in charge of the new Funds and Securities Group.

36




Robert M. Abplanalp, Vice President, formerly assigned to the Planning and Control
Function, was assigned senior oversight of the Cash Processing and Check Processing
Functions.
Carol W Barrett, Vice President, was assigned supervisory responsibility for the
.
Electronic Payments Function.
Joseph P Botta, Vice President, formerly assigned to the Cash Processing Function,
.
was assigned to the Automation and Electronic Payments Group with responsibility for
the new Long-Range Planning Staff.
Ralph A. Cann, III, Vice President, was assigned senior oversight of the Accounting
Function and the Planning and Control Function.
John M. Eighmy, Vice President, was assigned senior oversight of the Building
Services Function and the Service Function.
Richard J. Gelson, Vice President, formerly assigned to the Statistics Function, was
assigned as the officer in charge of the Accounting Function.
George R. Juncker, formerly Chief Compliance Examiner, was appointed Vice President
and assigned as the officer in charge of the new Payments System Studies Staff.
Joan E. Lovett, formerly Assistant Vice President, was appointed Vice President
and assigned supervisory responsibility for the Open Market Function.
Susan F Moore, formerly Assistant Vice President, was appointed Vice President
.
and assigned as the officer in charge of the Statistics Function.
Robert A. O’Sullivan, formerly Chief Financial Examiner, was appointed Vice President
and assigned to the Bank Examinations Function.
William L. Rutledge, Vice President, was assigned to the Bank Examinations Function;
his assignment to the Banking Applications Function was continued.




37

Barbara L. Walter, formerly Assistant Vice President, was appointed Vice President
and assigned as the officer in charge of the Dealer Surveillance Function.
Betsy Buttrill White, formerly Assistant Vice President, was appointed Vice President
and assigned to the Banking Studies and Analysis Function.
Herbert W Whiteman, Jr., formerly Vice President, was designated Security Adviser,
.
with responsibility for the Electronic Security and Security Control Staffs.
Effective December 1, 1987, A. Marshall Puckett, Payments System Adviser, retired.
Mr. Puckett had joined the Bank’ staff in 1963 and became an officer in 1967.
s
Effective January 1, 1988:
Thomas C. Baxter, Jr., formerly Counsel, was appointed Associate General Counsel.
Joyce E. Motylewski, formerly Counsel, was appointed Associate General Counsel.
Robert V. Murray, formerly Assistant Vice President, was appointed Vice President
and assigned as the officer in charge of the Service Function.
Effective January 22, 1988, Richard G. Davis, formerly Senior Economic Adviser,
was designated Senior Vice President and Director of Research and assigned as the
officer in charge of the Research and Statistics Group.

In January 1988, the board of directors of this
Bank selected Willard C. Butcher and Thomas G. Labrecque to serve during the year
1988 as the member and alternate member, respectively, of the Federal Advisory Council
from the Second Federal Reserve District. Mr. Butcher is Chairman of The Chase
Manhattan Bank (National Association), New York, N.Y, and M Labrecque is President
r.
of that bank. On the Council, Mr. Butcher succeeded John F McGillicuddy, who was
this District’ member of the Council during 1986 and 1987.
s
f e d e r a l

a d v is o r y

38




c o u n c il

.

Directors of the Federal Reserve Bank of New York

DIRECTORS

Term expires Dec. 31 Class

J o h n E M c G i l l i c u d d y .......................................................................................................................
Chairman of the Board, Manufacturers Hanover Trust Company, New York, N.Y.

1988

A

A lberto M . P a r a c c h i n i ....................................................................................................................
Chairman of the Board and President, Banco de Ponce, Ponce, Puerto Rico

1989

A

J. K irby F o w l e r .....................................................................................................................................
President and Chief Executive Officer, The Flemington National Bank and Trust Company,
Remington, N.J.

1990

A

R ich a rd L . G elb ..................................................................................................................................
Chairman of the Board, Bristol-Myers Company, New York, N.Y.

1988

B

J ohn A . G e o r g e s ..................................................................................................................................
Chairman of the Board, International Paper Company, Purchase, N.Y.

1989

B

J ohn F. W e l c h , J r ...................................................................................................................................
Chairman of the Board, General Electric Company, Fairfield, Conn.

1990

B

J ohn B r a d e m a s .....................................................................................................................................
President, New York University, New York, N.Y.

1988

C

J o h n R . O p e l, Chairman and Federal Reserve A g e n t .............................................................
Chairman of the Executive Committee, International Business Machines Corporation, Armonk, N.Y.

1989

C

E llen V. F u t t e r .....................................................................................................................................
President, Barnard College, New York, N.Y.

1990

C

DIRECTORS— BUFFALO BRANCH

R . C arlos C arballada ....................................................................................................................
President and Chief Executive Officer, Central Trust Company, Rochester, N.Y.

1988

M a r y A n n L a m b e rts e n , C hairm an ...............................................................................................
Vice President-Human Resources, Fisher-Price Division of The Quaker Oats Company, East Aurora, N.Y.

1988

D o n a ld I. W ickham ...........................................................................................................................
President, Tri-Way Farms, Inc., Stanley, N.Y.

1988

M atthew A u g u s t i n e ...........................................................................................................................
President and Chief Executive Officer, Eltrex Industries, Inc., Rochester, N.Y.

1989

H arry J. S ullivan ..............................................................................................................................
President, Salamanca Trust Company, Salamanca, N.Y.

1989

P aul M c S w e e n e y ..................................................................................................................................
Executive Vice President, United Food and Commercial Workers District Union (Local 1), AFL-CIO,
Buffalo, N.Y.

1990

N o rm a n W. S i n c l a i r ...........................................................................................................................
President and Chief Executive Officer, Lockport Savings Bank, Lockport, N.Y.

1990

MEMBER AND ALTERNATE MEMBER
OF FEDERAL ADVISORY COUNCIL— 1988

W i l l a r d C. B u t c h e r , Member
Chairman of the Board, The Chase Manhattan Bank (National Association), New York, N.Y.
T h o m a s G . L a b re c q u e , Alternate Member
President, The Chase Manhattan Bank (National Association), New York, N.Y.




39

Officers of the Federal Reserve Bank of New York
E . G e r a l d C o r r i g a n , President
*THOMAS M . TlMLEN, First Vice President

SAM Y. CROSS, Executive Vice President
Foreign
SUZANNE C u t l e r , Executive Vice President
Operations
JAMES H . O ltM A N , Executive Vice President
and Special Counsel
Funds and Securities; Accounting; Personnel;
Planning and Control

E r n e s t T. P a t r ik is , Executive Vice President
and G eneral Counsel
Legal
FREDERICK C. SCHADRACK, Executive Vice President
Bank Supervision
P e t e r D . STERNLIGHT, Executive Vice President
Open Market
S t e p h e n G . ThiEKE, Executive Vice President
Credit and Capital Markets

ACCO UN TIN G

DATA P R O CE S S IN G (Continued)

JAMES H . OLTMAN, Executive Vice President
and Special Counsel
RALPH A . CANN, III , Vice President
R ic h a r d J. G e l s o n , Vice President
LEON R . HOLMES, Assistant Vice President
DONALD R . A n d e r s o n , Manager, Accounting D epartm ent
JANET K. R o g e r s , Manager, Accounting Departm ent

R o b e r t W. D a b b s , M anager,
Operations and Communications Support Departm ent
P e t e r M . G o r d o n , M anager,
Fedwire and Communications O perations D epartm ent
G e r a l d H a y d e n , M anager,
G eneral Computer O perations D epartm ent
JOHN C . HEIDELBERGER, M anager (Evening Officer)
K e n n e t h M . L e f f l e r , M anager,
A nalytical and Contingency O perations D epartm ent

AUDIT
JOHN E . F l a n a g a n , G eneral Auditor
ROBERT J. A m b r o s e , Assistant G eneral Auditor
L o r e t t a G . A n s b r o , A udit Officer
EDWARD J. CHURNEY, Manager, Audit A nalysis D epartm ent
E l i z a b e t h S . Irw in-M cC aU G H E Y , Manager, Auditing
D epartm ent

LO N G-RAN G E PLANNING
JOSEPH P BOTTA, Vice President
L e n n o x A . MYRIE, M anager

S Y S T E M S D E V E LO P M E N T

AUTOMATION AND ELECTRONIC
PAYMENTS GROUP
ISRAEL SENDROVIC, Senior Vice President
DATA PR O C E SS IN G
PETER J. F u llE N , Vice President
RONALD J. C l a r k , A ssistant Vice President
JAMES H. G a v e r , Assistant Vice President
GEORGE LUKOWICZ, Assistant Vice President
*Elected early retirement effective July 1, 1988.

40




S u s a n C . Y o u n g , Vice President
Om P BAGARIA, Assistant Vice President
PATRICIA Y. J u n g , Assistant Vice President
MONIKA K . N o v ik , Assistant Vice President
VlERA A. CROUT, M anager,
Common Systems D epartm ent
C hristoph er M . K e l l ,
Systems D evelopm ent Officer
J o sep h E. M c C 0 0 L , M anager,
Funds Transfer Systems D epartm ent
M iria m I. WlEBOLDT, M anager,
D ata Systems D epartm ent

Officers

(Continued)

BANK SUPERVISION GROUP

LO ANS A N D C R E D ITS

F r e d e r ic k C. SCHADRACK, Executive Vice President

ROBERTA J. G r e e n , Senior Vice President
F r a n k li n T. L o v e , M anager,
C redit and D iscount D epartm ent

B A N K E X A M IN A TIO N S
C h e s t e r B. F e l d b e r g , Senior Vice President
R o b e r t A. O ’S u l l i v a n , Vice P resident
W il lia m L. R u t l e d g e , Vice President
JAMES K . H o d g e t t s , C h ief Compliance Examiner
KATHLEEN A . O ’N e i l , C h ief Financial Examiner
ISRAEL BerKM AN, Examining Officer,
M ultinational Banking D epartm ent
BARBARA A. K l e in , Examining Officer,
International Banking D epartm ent
A . JOHN M a h e r , A ssistant C h ief Examiner,
S pecialized Examinations D epartm ent
THOMAS R M c Q u e e n e y , A ssistant C h ief Examiner,
International Banking D epartm ent
GERALD P. M in e h a n , Assistant C h ief Examiner,
M ultinational Banking D epartm ent
ERIC K. T a rlO W , A ssistant C h ief Examiner,
C ompliance Examinations D epartm ent
ALBERT T o s s , A ssistant C h ief Examiner,
D om estic Banking D epartm ent
WALTER W. Z u n ic , Examining Officer,
International Banking D epartm ent

B A N K IN G A P P L IC A TIO N S
CHESTER B. F e l d b e r g , Senior Vice President
W il lia m L . R u t l e d g e , Vice P resident
JEFFREY E I n g b e r , A ssistant Vice President
J a m es P B a r r y , M anager,
Supervision Support D epartm ent

B A N K IN G S T U D IE S A N D A N A L Y S IS
J. A n d r e w S p i n d l e r , Vice P resident
BETSY BUTTRILL WHITE, Vice President
L e o n KOROBOW, A dviser
D o n a l d E. S c h m id , M anager,
Bank Analysis D epartm ent

P AY M EN TS S Y S T E M S TU D IE S
ROBERTA J. G r e e n , Senior Vice President
G e o r g e R . J u n c k e r , Vice President
ANDREW T. H o o k , Senior International Economist

EQ UA L E M P L O Y M E N T O P P O R TU N ITY
DONALD R . M o o r e , Equal Employment O pportunity Officer

FOREIGN GROUP
S am Y. CROSS, Executive Vice President
FO R EIG N E X C H A N G E
MARGARET L. G r e e n e , Senior Vice President
DAVID L. R o b e r t s , Assistant Vice President
PETER S . H o lm e s , Foreign Exchange Trading Officer
W i l l e n e A . J o h n s o n , M anager,
Foreign Exchange D epartm ent

FO R EIGN R ELA TIO N S
I r w in D. S a n d b e r g , Senior Vice President
T e r r e n c e J. C h e c k i, Vice President
G e o r g e W. R y a n , Vice President
CARL W. TurnIPSEED, Assistant Vice President
G e o r g e R . A r r i n g t o n , M anager,
Foreign Relations D epartm ent
G e o r g e H. B o s s y , M anager,
D eveloping N ations Staff
F r a n c is J. ReiSCHACH, M anager,
Foreign Relations D epartm ent

FUNDS AND SECURITIES GROUP
CREDIT AND CAPITAL
MARKETS GROUP

JAMES H . O lt m a n , Executive Vice President and
Special Counsel
CATHY E. M in e h a n , Senior Vice President

STEPHEN G . ThiEKE, Executive Vice President

E LEC TR O N IC P AY M EN TS
D EA LER S U R V E IL L A N C E
B a r b a r a L . W a l t e r , Vice President
EDWARD J. OZOG, A ssistant Vice President
GARY HABERMAN, M anager,
D ealer Surveillance D epartm ent

IN TE R N A T IO N A L C A P ITA L M A R K E TS
CHARLES M . L u c a s , Senior Vice President
CHRISTOPHER J. M c C u r d y , Assistant Vice President
CHRISTINE M . C u m m in g , Senior International Economist




C a r o l W. B a r r e t t , Vice President
H . JOHN COSTALOS, Product M anager fo r Securities Services
HENRY E W ie n e r , Assistant Vice President
DANIEL C . BOLWELL, Electronic O perations Officer
A n d r e w H e ik a u S , Manager,
Funds Transfer D epartm ent
P a t r ic ia H ilt-L u p a c k , Manager,
Securities Transfer D epartm ent

41

Officers

(Continued)

F IS C A L S E R V IC E S

CHECK PROCESSING

W h it n e y R . I r w in , Vice President
FRANK C . ElSEMAN, A ssistant Vice P resident
P a u li n e E . C h e n , Manager,
Government B ond D epartm ent
C a t h e r in e G. M a r z i, Manager,
Safekeeping D epartm ent
J o h n J. S t r i c k , Manager,
Savings Bond D epartm ent

R o b e r t M . ABPLANALP, Vice President
J o h n E S o b a l a , Vice President
F r e d A . DENESEVICH, R egional M anager
(Cranford Office)
STEVEN J. GAROFALO, Assistant Vice President
A n g u s J. K e n n e d y , R egional M anager
( Utica Office)
ANTHONY N . SAGLIANO, Regional M anager
(Jericho Office)
M a t t h e w J. P u g li s i , Manager,
Check Adjustment and Check Processing D epartments

LE G A L
ERNEST T. PatrIK IS, Executive Vice P resident
and G eneral Counsel
THOMAS C . B a x t e r , J r ., Associate G eneral Counsel
J o y c e E . MotYLEWSKI, Associate G eneral Counsel
D o n N . RlNGSMUTH, A ssociate G eneral Counsel
B r a d l e y K . S a b e l , Counsel
R a l e i g h M . T o z e r , Counsel
J o h n S . C a s s id y , A ssociate Counsel
W e b s t e r B. W h it e , A ssociate Counsel

OPEN MARKET GROUP
P e t e r D . STERNLIGHT, Executive Vice President
J o a n E . L o v e t t , Vice P resident
DONALD T. V ANGEL, A ssistant Vice P resident
K e n n e t h J. G u e n t n e r , Manager,
Open M arket D epartm ent
A n n - M a r ie M e u l e n d y k e , Manager,
Open M arket D epartm ent

OPERATIONS GROUP
S u z a n n e C u t l e r , Executive Vice P resident

B U IL D IN G S E R V IC E S
JOHN M . ElGHMY, Vice P resident
JASON M . S t e r n , A ssistant Vice President
PAUL L. M cEviLY , A ssistant Vice P resident
JOSEPH D . J. DeMARTINI, Manager,
Adm inistrative Support S ervices D epartm ent
J o sep h C . M e e h a n , Manager,
Building Services D epartm ent

C A S H P R O C E SS IN G
R o b e r t M . AbPLANALP, Vice P resident
M a r t i n P C usiC K , A ssistant Vice P resident
T h o m a s J. L a w l e r , Manager,
O perations Support D epartm ent
LlLLIE S . W e b b , Manager, Currency Verification D epartm ent
M i c h a e l L. Z im m e rm a n , Manager,
Paying and R eceiving D epartm ent

42




P R IC IN G A N D P R O M O TIO N
HOWARD E C ru m b , Senior Bank Services Officer
BRUCE A. CASSELLA, Bank Services Officer

S E R V IC E
J o h n M . E ig h m y , Vice President
R o b e r t V. M u r r a y , Vice President
W il lia m J. K e l l y , Manager,
Protection D epartm ent
J e r o m e P PERLONGO, M anager (Night Officer)
J o sep h R. P r a n c l , J r ., Manager,
Food and Office Services D epartm ent

PER SO NNEL
JAMES H. O lt m a n , Executive Vice President
and Special Counsel
J a m es O. A s t o n , Vice President
ROBERT C . S criv a N I, A ssistant Vice President
E v e ly n E . K e n d e r , M anager,
Personnel D epartm ent
E la i n e D. MauRIELLO, M anager,
Personnel D epartm ent

P LAN N IN G A N D C O N TR O L
JAMES H. O lt m a n , Executive Vice President
and Special Counsel
R a lp h A . C a n n , III, Vice President
NlRMAL V. MANERIKAR, Assistant Vice President
N a t h a n B ed n aR S H , M anager,
M anagement Information D epartm ent

P U B LIC IN FO R M A TIO N
P e t e r BAKSTANSKY, Vice President
RICHARD H . H o e n iG , Assistant Vice President
MARGARET E . B r u s h , Manager, Public Information
D epartment, and A ssistant Secretary

Officers

(Continued)

RESEARCH AND STATISTICS GROUP

STATISTICS FUNCTION

RICHARD G . D a v is , Senior Vice President
and D irector o f Research

S u s a n F. M o o r e , Vice President
N a n c y BERCOVICI, A ssistant Vice President
P a u la B. SCHWARTZBERG, Manager,
International Reports and Support D epartment

R ES E A R CH F U N C TIO N
M . AKBAR AKHTAR, Vice President
and Assistant D irector o f Research
EDWARD J. F ryD L , Vice President
and Assistant D irector o f Research
P a u l B. B e n n e t t , Senior R esearch Officer
L a w r e n c e J. RADECKI, Senior Research Officer
J o h n WENNINGER, Senior Research Officer
* A . S t e v e n E n g l a n d e r , Research Officer
and Senior Economist
A r t u r o E s t r e l l a , Research Officer
and Senior Economist
S u s a n A . HlCKOK, Research Officer and
Senior Economist
* ROBERT N . M c C a u le y , Research Officer
and Senior Economist
CHARLES A . PlGOTT, Research Officer
and Senior Economist
D o r o t h y M . S o b o l , Research Officer
and Senior Economist

S E C R E TA R Y ’S O FFIC E
M i c h e le S . G o d f r e y , Secretary
MARGARET E. B r u s h , Manager, Public Information
Department, and A ssistant Secretary
T h e o d o r e N . OPPENHEIMER, Assistant Secretary

S E C U R IT Y C O N TR O L
H e r b e r t W. W h it e m a n , J r ., Security Adviser
R ic h a r d P. PASSADIN, Security Officer

*On leave o f absence.

OFFICERS— BUFFALO BRANCH
JOHN T. K e a n e , Vice President and Branch M anager
PETER D . L u c e , Assistant Vice President

B U ILD IN G O P E R A TIN G ; CH EC K;
S E R V IC E

B A N K S E R V IC E S A N D P U B LIC
IN FO R M A TIO N ; PER SO N N EL;
P R O TE C TIO N

D a v id P SCHWARZMUELLER, O perations Officer

R o b e r t J. M c D o n n e l l , O perations Officer




CA S H ; C E N TR A L O P E R A TIO N S ; C R EDIT,
D IS C O U N T, A N D F IS C A L A G E N C Y
G a r y S . WEINTRAUB, Cashier

43




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