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FEDERAL RESERVE BANK
OF SAN FRANCISCO
~~~i6 7
1989
.. · 1 ANNUAL REPORT
9
Table of Contents
From the Chairman
From the President
Organization Chart
Highlights of 1989
Directors
2
4
14
16
21
The cover painting, created by William Rosenthal, Graphics Specialist,
suggests the balancing and creative tension that Bank management will
experience as the Bank faces the challenges of the 1990s.
The interviews inside question key Bank management on anticipated
developments in their particular areas and the steps the Bank is taking
to address these challenges. The 1988 Annual Report looked back at the
Federal Reserve's first 75 years . The 1989 Report looks forward to
preparations for the next 75 years.
The Federal Reserve Bank of San Francisco is one of twelve regional
Reserve Banks which, together with the Board of Governors in
Washington, D.C., comprise the nation's central bank.
~CII
Reserve
of San
As the nation's central bank, the Federal Reserve is responsible for
making and carrying out our nation's monetary policy. It also is a bank
ax-. regulatory agency, a provider of wholesale priced banking services, and
,."th fiscal agent for the United States Treasury.
e
Francisco
MAR 8 139::1
LIBRARY
The Federal Reserve Bank of San Francisco serves the Twelfth Federal
Reserve District, which includes the nine western states-Alaska,
Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah and
Washington-Guam, American Samoa, and the Northern Mariana
Islands.
This District is the largest in terms of geographic size and population,
and the busiest in terms of economic activity considering employment,
income and the diversity of industries-all of which affect the structure
of banking in the West.
To serve this expansive region, the San Francisco Reserve Bank has five
offices: the headquarters in San Francisco, and offices in Los Angeles,
Portland, Salt Lake City, and Seattle. Each office provides financial
services to the public and banking institutions in its locale.
From the Chairman
It has been an honor to preside
as Chairman of the Board of
D irectors on the seventy-fifth
anniversary of the Federal
Reserve Bank of San Francisco . A
diamond jubilee is always cause
for celebration because it is a
measure of past achievements
and implies that one has been
well prepared for the future.
Directors have assisted in that
preparation throughout the
Bank's history. We offer indepen
dent assessments of business
conditions for consideration in
setting monetary policy. We also
contribute business expertise in
overseeing management and
f inancial issues.
From a bus inessperson's
perspective, the Twelfth Federal
Reserve District is blessed with an
unusually dynamic economy that
draws on an enormously diverse,
talented, and growing labor force .
Fundamental strengths that
should stand the region in good
stead over the long term include
its proxim ity to Asia and the
Pacific Basin, its leadership in
high-technology research and
development, a rich supply of
natural resources, and its overall
large size and diversity.
Trade with many rapidly growing
Asian countries will co ntinue to
stimulate both export sales and the
financial activities that keep our
port cities bustling . Indeed, trade
and service industries accounted
for more than 60 percent of the
West's job growth in the past
five years .
Our technological leadership
should help us in such manufactur
ing sectors demanding innovation
as semiconductors, biotechnology,
and computers . The strength of
the commerc ial aircraft i nd ustry
plus the District's overall health
should mitigate the effects of de
clines in defense contract activity.
2
Natural resources and
recreational attractions would
seem to ensure a basis for
further growth. During the past
two years, most western farmers
have enjoyed healthy income,
lumber and paper producers have
benefited from record output, and
there has been a resurgence in
copper, gold, and silver min ing .
Entertainment centers and the
West 's scenic wonders will
continue to draw more and more
visitors from throughout the world.
Historically, our economic, social,
and natural resources have
resulted in population growth far
exceeding the national average.
We can expect future growth to
stimulate further the demand for
goods and services .
Future growth w ill also present
some of our major challenges .
Residents of establ ished
metropolitan areas, for example,
are already familiar with environ
mental concerns, overburdened
transportation systems, and high
housi ng costs, to say noth ing of the
problems of crime, drugs, and the
education crisis.
In add it ion, while the West as a
whole tends to do well, economic
growth continues to be uneven
across its various parts. Economic
conditions in Alaska depend
strongly on the performance of the
oil industry; mining activities are
more important to the Salt Lake
City area . Arizona continues to
adjust to a downturn in its real
estate prices at the same time
that real estate and construction
activities are picking up in the
Puget Sound area and other
parts of the Pacific Northwest.
Californ ia also is experiencing a
slowing of real estate activities
from their heated pace of the last
few years.
The Federal Reserve will continue
to play an important part in
establishing an environment that
fosters continued economic health.
The participation of the publ ic,
through Reserve Bank directors,
in the Federal Reserve's
decision-mak ing is unique among
government institutions. It is a
trad ition we are proud to uphold .
In closing, I want to express the
thanks of the Board to all the
employees of the Bank who
performed so well and with such
dedication at the time of the Bay
Area earthquake. As Bob Parry
reports in his comments, the Bank 's
performance in the fac e of this
challenge was extraordinary. We
are very proud of the courage and
skill of our people.
Robert F. Erburu
Chairman
From left, Carolyn S. Chambers, Deputy Chai rman , Robert T. Parry,
President, Robert F. Erburu, Chairman, and Carl E. Powell, First Vice Presid ent.
3
From the President
A s Bob Erburu has pointed out, a
seve nty-f ifth ann ive rsary can be
an au spic iou s event. We at the
Fed eral Reserve Bank of Sa n
Franc isco have tried to mak e sur e
ou r seve nty- f ifth is an especially
favora ble ind ication of w hat is
to com e.
The Federa l Reserve operate s
in an e nviro nme nt affected by
advances in electronic technology
and continual, major regulatory
and economic changes.
We mu st res p o nd to the c ha llen ges
presented and exp lo it opp ortu nit ie s
in every facet of our op e ra tion s.
In the pages that follow key sta ff
membe rs talk about so me
respo nses that involve the w ho le
Fede ral Reserve System a nd ot he rs
that are initiatives particu lar to the
San Franci sco Reserve Bank and
reg ional conditions.
In the area of wholesale bank ing
servi ces, our goals are a s broad
a s th ey are sim p le. We strive to
im pro ve ou r se rvi ces to financ ia l
insti tuti ons in a ll market seg ments
so their cu stome rs, and ultimately
the publ ic at la rge, will benefit
from an impro ve d paym ent s
syste m.
Th e watchwo rds in thi s area are
co nso lidatio n, standard ization,
and a utomation. The approaches
represented by those word s have
help ed us enhance the quality,
effic iency, and integrity of our
ser v ices.
4
Ou r p repared ness wa s proven
a fter the Octobe r 17 earthq uake in
the San Franci sco Bay A rea . W e
recovered our computer system
and co mm unications netwo rk
wi thi n two -and -a -half hou rs wi th
no lo ss of data . Acco rd ing to ou r
co ntingency p lan, the Los Ange les
Branch was prepared fo r a
rel ocation of San Franci sco
functions, but relocation proved
unnecessary. All critical customer
services were provided to f inancial
institutions the ne xt day, a s
sched ul ed.
Anoth er of the Federal Reser ve's
vi ta l policy re spon sibilit ies is the
super visio n and reg ula tio n of ba nk
holdin g com pan ies a nd state
cha rt ered membe r ban ks. We have
th e charge of e ncouragin g a nd
mainta i ni ng a safe and so und
ba nk ing syste m and of en suring
compliance with community
d evelopment legislation.
The tremendous chal lenges in th is
area in clud e the need to refor m
th e d epo sit insur a nce system, to
pl an fo r ex pa nd ed bank pow er s,
and to cope wi th ex tended inte r
sta te banking activity in o ur
D istr ict in 1990 . To meet th ese
chall enges, we require a ski llful
a nd k nowl ed g ea b le wo rk fo rce .
We are comm itted to the ongo ing
edu cat ion of examiners and
continue to do research in cu rrent
banking issues.
I al so would like to me ntio n the
esta blis hment at our Bank of the
Cente r fo r Pacific Basin M one
tary a nd Eco nom ic Stud ie s. The
count ri es of the Pacific Basin
a re of growing impo rta nce to
the Un ited States. For some time,
ou r trade with them ha s exce ed ed
o ur trade w ith t he Europ ea n
com mun ity. He re at the ed ge of the
Pacif ic Ocean, we are particularly
well- situated to make a unique
contribution through the Center
to policy-oriented research on
mon etary and financ ia l issues.
In pre parin g fo r a con stantl y
chan g in g environm ent , w e a re
gu ided by w e ll-es ta b lis hed g o a ls
and a se nse of respo nsi bi li ty to the
p ub lic and f ina ncial insti tuti o ns.
We a re he re to serve, in a
respo nsive and efficie nt mann er.
Our success in doin g so, for so
many decades, is a tribute to th e
contributions of our sta ff and
directors. Indeed , they are th e
ones who keep us cont inua lly
revisin g and innovat ing , al w ay s
adapting to chan g e and prepar in g
fo r the future.
I thank them, includ ing those
d irectors who compl eted te rms
of ser vi ce in 1989: on th e San
Franci sco Board, Rayburn S.
De zember (Cha irma n of t he Board
and Ch ief Executive Offic er,
Central Pacific Corporation ,
Bakersfield, CAl and John C.
Hampton (President and Ch ief
Executive Officer, W il lam ina
Lumb er Compa ny, Portla nd ,
OR ); on the Los Angele s Branch
Board, Howa rd C. McCrady
(Vi ce Chai rman , Vall ey National
Corporation, Phoen ix, A Z); on
th e Portland Branch Board ,
Paul E. Bragdon (Ass istan t to the
Gove rnor for Education , State of
O regon , Salem); on the Salt Lake
C ity Branch Board, Robe rt N . Pratt
(Pres id ent and Chief Op erating
Officer, Bonneville Pacific Co rp .,
Salt Lake City, UT); and on the
Seattle Branch Board , Caro l
Ny g ren (Partner, Lave nth o l &
Ho rwa th, Seatt le, WA), Ir ma
G o ertzen (Goertzen & A ssoc iates,
Health Care Consultants, Sea ttle,
WA), and W illia m S. Randall
(Cha irman, President and Ch ief
Executi ve Office r, First Inters tat e
Ba nk of Wash ingto n, N .A. ,
Seattle, WA).
~Pa: 7
Preside nt
Hang-Sheng Cheng, Vice President, International Studies
The San Francisco Reserve Bank will
open the Center for Pacific Basin
Monetary and Economic Studies
starting in 1990. How did the Center
come about?
The Center is a culmination of 15 years' eff o rt. Th is Ban k was a p ioneer
in economic research in the Pacific Basin area back when very few
people in the United State s or a nywhere else reco gnized the Pacific
Basin's g rowing importa nce to the wo rld economy.
Over the years, the Bank has conducted re search on Pacific Basin
eco no mi cs, spo nso red international conferences, promoted central bank
cooperation by servi ng as the center institution for the Clearin ghou se for
Pacific Basin Central Bank Economic Research, and hosted visting staff
memb er s from Pacific Basin central banks.
All these activ ities will continu e unde r the Center but they will benefit
from a more formal structure and an expanded scope. The Center w ill
have four resident staff eco no mis ts. In add ition, it can accommodate
up to three visiting scholars to interact with the staff economists and
on e another.
The Center will conduct re search sem inars and inte rn ati o na l
conferences, and w ill have its own publicat ions fo r wo rldwide
dissemination .
What issues will the scholars in the
Center be focusing on?
Being a central bank, we want this Center to focus on monetary and
f inancial sub ject matters a s they relate to macroeconom ic developments
and policies in Pacif ic Bas in countries . Looking into the 1990s, we see
two broad issues confronting all Pacif ic Basin countries .
The first one, of course, is trade . The Center will focus on the macro
eco no mi c aspects, that is, empha size trade in relat ion to national output,
domestic inflation, and economic growth, rather than trade's impact on
specific ind ustr ia l sectors.
The second issue is grow ing international financial mark et integration
among Pacific Basin countr ies and its imp a ct on national economic
growth and the conduct of monetary policy. The U .S. financial market
is the mo st sophisticated, but markets in the othe r co untries a re rap idly
evo lving . Given our superio r technology in fi na nci a l bu sines ses, o ur
experience, and our expertise, we have a lot to contribute to
enhancement of knowledg e in thi s area.
What is the significance of
this Center?
We 're at the beginning stage. But it's exc iting to build something of
enduring value to the Federal Reserve and the nation.
We live in an inte rdep ende nt wo rld . A s such, the importance of the
Pacific Basin to the U.S. economy will certainly cont inue to grow into
the ne xt century.
The United States is very lacking in its understanding of the economie s
of the regi o n. The Ce nter can do its pa rt to enhance awa renes s and
understanding .
You migh t call the Center the Federal Reserve's cont ribution to
international understanding . It will serve as the Federa l Reserve 's
li stening post on the Pacific Region .
5
Marilyn Garland
Manager of Employment and Employee Relations
What changes does the Bank expect
in the workforce of the 7990s?
We expect major changes, some stemming from demographic pattern s
and some from so cieta l changes .
For example, we'll be looking at the maturing of the baby boom
generation and the emergence of what we might call the "baby bust"
generation . We also anticipate more minorities and females in the
workplace .
With the on-going advances in technology, we see increased d emand
for skilled workers, espe c ia lly those proficient in the use of p er sonal
computers and othe r high -technology appl ications.
At the same time, there is growing conce rn about the adequacy of
education and the qualifications of entry-level workers.
What kind of work environment will
these changes result in?
For one, the competition for qualified workers will become more intense
as a resu lt of the baby bust generation.
We, as an employer, will need to offer more adaptable program s
for salary and benefits admin istration, as well a s policies that can
accommodate part-tim e work, job sharing, fl exible schedules, etc.
We w ill al so have to focus efforts on training and development to ensure
that the skills of employees are up-to-date and that entry-level workers
have the necessary basic skills.
These policy changes seem to entail
a change of attitudes on the part of
employers .
The 1990s will be a decade of change for both managers and workers.
The Bank will have to exhibit fle xibility and sen sitivity in order to adapt
to the chang ing work fo rce .
This w ill enable us to effectively utilize all of our human resources since
each person, regard less of race, sex, and age, and perhaps because
of those differences, has a positive contribut ion to make to the future
of the Bank.
We're fortunate in that we have already benefited from the divers ity
of the Twelfth District. We are confident that our staff will be able to
respond to the challenge s of the future as well .
6
Sara Garrison, Se n ior Vice President, Finance and Product
Manag e m ent, and Manager, System Electronic Access
Functions Office
From all accounts, banking has
embraced the era of electronics.
Electronics can speed the flow of
payments, ensure timely delivery and
accuracy, provide additional auxiliary
information such as tracking and
control procedures, and offer greater
security. How does the Federal
Reserve intend to fit into this
electronic environment?
Don't forget electronics offers tremendous cost-co nta inment and
productivity advantages over a manual, labor-intens ive environment.
The Fed is responsible for the efficiency of the payments mechan ism .
Since the basic payments mechani sm is al ready very efficient and
smooth-running , the way w e can improve upo n it is by enco ura gi ng
broader use of e lectronic access vehicles to take advantage of the
efficiency and quality gain s that can be made through further
automa tion.
Du ring the pa st few years , we've taken a fo rward-look ing approach
by sta ndard izi ng and improving the el ect ronic payments system . Our
strategic issues inc lud e what types of services or serv ice enhancem ents
we need to connect e lectron ical ly, how we can respond to the increasing
demand for more timely information services, and, probably eq ua lly
importa ntly, what types of securi ty we need i n suppo rt of variou s
serv ice s.
We ' re al so looking at how we can encourage electronic access in those
area s where it ha s not been used extensively, such a s check payments
and securities servi ces.
In other words, we are promoting a variety of electronic mechanism s to
improve the payments mechan ism.
For example, we a re standa rd izing and simplifying co mp ute r- interfa ce
protoco l specifications so that more institutions can link up with us.
Can you be more specific?
We ' re tryi ng to get sma ller depo sitory inst itutions to use a standard
int ell ig ent terminal so ftw are package for access to Federal Reserve
service s. We are now in the p rocess of conve rting f rom software
products that are unique to each Reserve District to one standard
software package developed by the New York Fed, called FEDLINE II.
FEDLINE II is an inte g ra ted , fu lly secure softw are pa ckage that gives
access to all our se rvices.
We're also putting out several different versions of our bulk data
software, for batch-based systems (as opposed to transaction-based
system s), so we can accom modate more of our med ium- to large
volume user ba se.
And shortly, we'l l be promoting a low-volume, delivery-only PC device
geared toward ACH delivery for our small volume depo sitory insti
tutions . These users , who may on ly rece ive a data file from the Federal
Reserve two to three times a month, are looking for a very simple, very
ine xpe nsive solut ion for rec eiv ing electronic ACH data from us.
7
John Gleason, Senior Vice President, District Operations,
and Chairman of the System Subcommittee on Securities and
Fiscal Services
In what new diredions do you see
Treasury Securities Services moving?
The Fed eral Reserve Banks and the Treasury are moving in the d irection
of making Trea sury securities much more accessible to individual
investors. At the sa me time, we're st rea m li ning and automating the
process: We 're try ing to replace paper hand ling with all-electron ic
processing.
We're moving in these directions very rap idly. I'm talking about a
horizon of the next 5 years, not 10 or 15 years out.
What are some
orientation?
examples of this
The individual investo r is already using Treasury Direct, which is a book
entry system in which investors have the ir own Treasury accounts, and
payments for principal and interest are made d irectly into the investor's
checking or savi ngs account at the ir financ ial insti tutio n.
Treasury Direct ha s made the Federal Reserve the place to go to buy
Treasury securities. As a result, our services have become much more
oriented toward the retail customer.
In 1990 and 1991, most Reserve Banks will be converting to the
Treasury's Reg ional Delivery System for issu ing Savings Bonds. Under
this program , Savings Bond issuing agents wi ll transmit applications and
payments from their customers to our regional processing centers, wh ich
wil l print the bonds and mail them directly to the purchasers.
In 1990, we'll also be installing a new Treasury Tax and Loan (TT& L)
system at all twelve Reserve Banks . That w ill enable us to adapt quickly
to changes in Treasury rules, and to imp le ment those changes
concurrently for all TT&L depositories.
What other changes in the securities
services environment can you identify
and what goals will guide the
Federal Reserve's response to this
environment?
There is constant inno va tio n in the types of securities being issued, and ,
as in the case of stripped securities, new uses are being found for
existing in struments.
Securities markets are also becom ing more international in scope. But
even within the Un ited States , more government agencies are entering
o r reentering the secu rities market and using the Federal Reserve as
their f iscal agent.
We're taking a fundamental look at the whole secur ities transfer system.
What we're aim ing for is a system that can adapt more quickly to
different types of marketable instruments and that will enable us to
make changes simultaneously everywhere.
One option is a more centralized system that would allow us to change
our capability nationwide by testing and install ing in only one site.
We are al so considering building in the capabil ity fo r extended
processing time frames, potentially to the po int of sup po rti ng round-the
clock securities tran sfers.
8
Charlie Huffstetler, Director, Custody Services
Los Angeles Branch
With all the talk about electronic
funds transfer; home bonking via
computer; and debit cards, is there
a future for cash?
Actually, currency deposits throughout the Federal Reserve System
are growing faster than we anticipated. We know what contributes to
growth-economic development, ATM use, cash policies of depository
institutions a nd how they manage their own vault space, and so on
but it's more difficult to establish the relat ionsh ips among the d ifferent
factors and the unique contribution of each.
The ra te of g rowth in the Twelfth D istrict is high er than th e nat ional
average. In Los Angeles alone, we receive 7-10 million notes and ship
out 7-8 million notes a day.
We are actually be ing crowded out of our vault! To us, it doesn't look
like a cashless society will materia lize any time soon.
Our challenge is to manage this deposit growth . We have a zero-loss
sta nda rd , that is, we do not lose a single penny of what in stitutions send
us for safekeeping or processing. At the sa me time, deposit growth
forces us to strive for more efficiency and productivity.
What are your plans for dealing with
this currencydeposit growth?
In the short-term, we have been able to squeeze as much of the
artificiality out of the volume growth as possible by better articulating
and enforcing our cross-shipping policy. This policy says if an institution
deposits currency w ith us, it cannot order currency of the same
denomination from us five business days prior to or following the
deposit of that denomination .
And in the long-term?
Long-term, we are concentrat ing on better sto ra g e, proce ssing , and
automation . Our first gen eration sto ra g e concept is containerizat ion. We
put cu rrency in stackable modules so that we can use the vertical space
in our vaults more efficiently. The second g eneration approach will most
li kely invo lve automated means of retrieving and stacking conta iners.
We may use bar codes and mark sense technology to help with
invento ry control.
In 1990, we will beg in replac ing our present currency processing
equipment. The equipment authenticates, counts and sorts currency,
reads b ills w ith lasers, and automatically destroy s worn currency for
replacement with fit or new. The new equipment w ill allow us to process
more currency at lesser cost with fewer units . They will have about
fifteen percent more capacity. We are al so exploring ways to configure
the equipment to increase productivity.
Finally, we have already begun rev iewing facets of cash operation s to
find further opportunities for automation. We could use computers more
thoroughly to monitor differences in cash counts when we debit and
cred it institution s' accounts; w e could al so use th em for inventory control
and management.
In the future, we might even establi sh remote cu rrency p roc essing unit s.
Right now, these units are located in each of our Branch offices and in
San Francisco . But because the Twe lfth Dist rict encompasses such a
large geograph ic area, un its located nearer la rge and distant f inancial
communities could reduce operations and transportation costs while
increasing convenience for everyone conce rned.
9
Gene Thomas, Senior Vice President
Supervision, Regulation, and Credit
How will more interstate banking
affed supervision and regulation?
We already ha ve so me exper ience w ith interstate supervi sion and
regulation becaus e many bank holding co mpa nies in our D istr ict own
banks in mo re than one state.
The process is moving more and mo re toward an examination of the
consolidated entity, where the uppe r tier company-say, the bank
ho lding company -is the focus of attent ion as the "umbrella" over the
ent ire organ ization . We re ly on reg ulato rs in other districts to examine
and sup ervi se the sub sid iary banks that re side in the ir a rea s. Our
inspectors collect and analyze that information, incorporate it into a
con sol idated report, and present the ir f inding s of the overall f inancial
condition to the management and directors of the upper ti er.
There's always a very high leve l of cooperat ion between fede ral and
state banking agencies. We expect interactions will continue to intensify,
and the linkages will be broader and filled with greater amounts of
information .
To compete in a varied financial
marketplace, banks have been
asking for expanded powers such as
investment banking, insurance, and
real estate development. What
different skills would this demand
of requlators?
I don't know that it re q uir es different ski lls , but it will requi re us to apply
our skill s to a broader ra ng e of supervi sory issues . Exam iners are ve ry
good at ex a mi ning credits on a micro basi s, and the financial condition
of ho lding compan ies on a mac ro ba sis. The introduction of new
products and expanded powers is recognized as one of the major
training challenges and we are putting a lo t of effort into the ongoing
education of examiners.
The most fundam ental change that ha s taken place recently in the
financ ia l indu stry has been deregulation . Congress repealed many
reg ulatio ns that, for decades, governed th e behavior of inst itutions. As a
consequ ence, sup ervi sion, which assesses th e riskiness of that behavio r,
had to be bolste red. Supervision has become more important as the
means of en sur ing that risks a re well-managed and contained, or
accounted for by higher leve ls of ba nk cap ital .
One of the propositions repeatedly put forth is functional supe rvi sio n,
whereby existing agencies would regulate new powers legi slated in
their areas of respo nsib ility. For example, if holding compan ies were
authorized sto ck underwriting powe rs, the Securities and Exchange
Commission , al ready the regulato r of the sto ck market, would assume
supervision of that function . Funct iona l sup ervision, of course, would
make the id ea of consolidated sup ervision more important.
How has the Federal Reserve
planned for the future in supervision?
In specific te rms , we conduct p lanning sessio ns in the fourth quarte r
of each yea r where we draw up a schedule of bank and bank holding
company examinations for the coming year.
In a more general way, since one cannot foresee specific developments
that w il l unfold , we look at systems and organizational matte rs. These
involve budgeting for adequate staffing, staff training, ensuring
competitive compensat ion and th e like so that we can b e p repared
and on call fo r almost any need.
As the centra l bank, we know we w il l be called on to do th ings
considered extraordinary. Our partic ipation in the inter a ge ncy saving s
and loan interve nti o n program in 1989 is an example. W e p rov ided
teams of examiners who, for about a th ree-month period, participated
in the int ervention at seven S&Ls; also, the discount window extended
cred it to a la rg e a il ing thrift experiencing a liquidity strain.
10
Kelly Walsh, Community Affairs Officer
In 7989, the federal regulatory
agencies issued a jointstatement
affirming the importance of the
Community Reinvestment Ad (CRA) .
The CRA was designed to end
redlining and other discriminatory
policies. What is the significance of
the new policy statement?
The policy statement wa s meant to g uid e regu lat ed institution s and
others on the requ irements of CRA , and to identify app ropriate w a ys
for inst itutio ns to meet the ir obligations under the Act. The policy
statement wa s developed f rom the expe rience s of the supe rvis ory
agenc ie s over th e la st el even yea rs.
For a bank to be truly effective in its CRA p rogram s, the sta te me nt say s
that it mu st make CRA a part of its plann ing and manageme nt p roces s.
CRA is foremost a lend ing activity ; it should be dealt with as a matter
of policy ins ide the institutio n; and it shou ld be k nown and unde rstood
throughout the organization .
The policy statement is enlightening in oth er area s as we ll. It specifie s
that the regulators, in their eva lua tio n of a bank 's CRA performance, w ill
no lo ng e r put much reliance on promises of future perfo rmance . It also
encourages bank s to expand their annual CRA sta te ments to inc lude
de scription s of efforts to a scerta in community credit need s, of services
designed to meet those needs, and of program s to market such
services effectively.
The policy stateme nt also has a messag e for community organ ization s.
The regulators expect those organi zations to open up and maintain
comm unications with financial institution s to make the ir need s and
conc erns kn o wn. Community orga nization s are encou raged to comment
on a bank's CRA performance at the earl iest possible time and not to
po stpone co nveying their concern s until an application for bu sine ss
expansio n is f iled by a bank or its hold ing company.
How does the Fed foster the goals
of CRA?
Most of our community affairs function is directed at fac ilitating
communicat ion b etween banks and the ir communities and encouraging
the establishment of various programs-lender consort ia, community
development co rporations (CDCs) and public/private partnerships-to
get funds into area s that are unde rserved and in need of economic
developm ent.
We a re p roud to have help ed in the formation of severa l programs in
recent years to provide affordable housing fina nce and small bu sines s
lend ing in d istre ssed commercial area s. We have also provided
gu idance and support to o rgan ize rs of CDCs within th e d istrict.
What are some of the future
challenges for CRA?
Banks are now providing more leadersh ip in add ressi ng thei r
communities ' needs than ever before, and we foresee th is pattern
continuing . Banks have become mo re sens it ive to the needs of their
communities; they are mo re willing to con side r cr eat ive ways to serve
the ir commun ities; and they have found that community development
lend ing can be profitable.
But there are stil l tremendous unmet credit needs in our commun ities.
The need for affo rdable housing is acute, and the re is a n incr eas ing
need for imp ro ved flows of capital to the sma ll bu sine ss community in
virtua lly eve ry town and city. The re also continues to be a need for
re sources to enhanc e rural eco no mic development efforts. These are
major challenge s to people and in stitution s with an interest in the
econom ic vitality of the ir commun it ies.
11
Larry Washtein, Senior Vice President
Computer Services Group
What is a "communications network"
as you would use the term?
On voic e communication s from telephone to telephone, it's ev erything
between the two telephones that carry the voices through. For data
transm issions, it could be everything between two computers .
An analogy is the line b etween two dixie cups. Our concern is how to
imp rov e and control the string.
Communications has become
important as its own area of study,
almost distind from what occurs on
the communications network. Why?
Long ago, we recognized the im p o rta nce of electronic access in
funds tran sfer because of the sig nif ica nt bu sine ss benefits it confers.
Commun ications networks a re key to electron ic transmissions , and now
we're looking to networks to do more.
We' re also recognizing that communication s networks offer us real
potentia l for chang ing how we conduct a spects of our bu siness. For
exampl e, they are requ ir ed to support centra lized applications and
functions, consolidation, and going to regional processing.
The idea that we could process checks in this Di strict's northern offices
but locate th e data cente r in San Franc isco is only f easible through an
appropriate communicat ion s network .
Commun ications network s al so playa vital role in disa ste r recovery.
They not only support but make possib le a national disaster recovery
site, or various regional and buddy system s to back up the portion of
the system that has been struck down.
The communications env ironment is also increa singly important in
defining and providing a spects of security for data transm issions.
It a llows us to control acces s to the network and to ensure privacy
through encryption .
What has the Federal Reserve
planned in terms of new
communications networks?
The Conference of First Vice Presidents has approved a new network
design for i mp le mentatio n between 1991 and 1994. It would completely
replac e the current interd istrict network and the twelve district networks
with one un ified , integrated , national , and more cost-effect ive network .
lt's meant to satisfy bu sines s req ui rements for incr ea sed rel iab il ity
and availability, for hand ling much higher volumes of data, and
for integrating all communications-voic e, data, and even video .
What we hear on a nationa l level is that we're probably getting into
a 24-hour a dey, 7-days a week network operat ion in the 1990s.
We want that network to be transpa rent to Fed users and cu stomers.
That is, we want them to be able to focus on the business they 're do ing
without being distracted by how they're doing it or where the process ing
center they're communicating with is located.
12
Gordon Werkema, Vice President, San Francisco Operations
What kind of environment will
the Fed face in check services in
the future?
An environment with interstate ban king on a nationwide bas is is on o ur
doorstep . O ur prelim inary research indi cat es that depository instituti ons
w ill wa nt expa nd ed inform ati on serv ice s, w hich w e trad itio na lly ca ll
payor ban k servic es, so they can improve cash management servi ces
they p rovide to the ir customers.
The realization of processing technologies in ch eck s also will greatly
transform our env ironment. We ex pect to automate more of ch eck
processing , for example, in the adjustments process, wh ich has been
labor- int ensive .
We w ill witness the gradual evolution of checks toward a combin ed
paper and electronic payment system, whereas to date it has mainly
been a paper-based system.
What are some examples of payor
bank services?
Payor ban k ser vices invo lve the electronic ext ract ion of inf o rmati on fro m
paper che cks, a nd in many insta nces, transm itting that information to the
paying ban k electro nica lly. That inf o rma tio n can include the magnetic
ink lin e of processed checks o r total s organ ized by the bank's key
corporate accounts.
Payo r ba nk services may be especi ally useful fo r in stit uti ons in remote
lo ca ti o ns, such as A la ska an d Hawa ii. As paper chec ks make thei r way
to thos e loca tion s, the inf o rma ti o n conta ined in them will have b een
transmitted almost immediately after we processed the checks, allowing
the instituti o ns to update acco unts more qu ic kly and provide superior
service to their cu sto mers .
Further down the road, a refined payor bank ser vice could exp loi t
ima g e p rocessing . Image proc essing captures the enti re check front and
back in d igital form. Electron ic imag es of check s can th en be tran smitted
to paying banks and paper checks can remain at the initial point of
entry. In fact, we recently completed a p ilot image project in our
government check operation that has demonstrated clearly the ben efits
of this technology.
These technological advances will
offer institutions a competitive edge,
but they must involve a cost as well.
What about institutions that are not
as sophisticated?
Above a ll, we must cr eate check products that serv e all depository
institutions' needs . We are conducting resea rch that wi ll ind ica te what
electro ni c check services institutio ns want and how much they are w ill ing
to pay fo r them . In 1990, we w ill start develop ing products ba sed on
f inancial institutio ns' and the Trea sury 's needs in this area .
Having sa id that, I has ten to add that the industry looks to the Fed to
be a low-cost provider of basic ch eck clearing services. We intend to
continue to meet that need wh ile seek ing to develop chec k process ing
techno log ies for the fu ture .
13
Board of Oteectoes
Auditing
Robert 1. Garchetl
General Audhoe
Robert T. Parry
President
and
Chief Execu tive Officer
Peter KC. Hsieh
Audlt Officer
Charles O. Dowden
Audlr Officcr
Southern RI..-g..ioo
Bruce H. Thorn p-sorr
Assistant
General Auditor
Gary G. Hoeth
Audit Officer
North<:rn Reg ion
carl E. Powell
Fin:1 vrce Prcstdcut
and
Chief Operating O!ficer
law
Supervlston, Regulation and Credit
Louls E. Reilly
and General Counsel
Eugene A. Thomas
Senior Vice Prestderu
Supervision. Regulation and Credit
xobcrr D. Mulford
Vice Prestdcnt
and Counsel
Merle E. Borchert
vke Pre sid ...
rnt
Bank gxamtnauons
Douglas R. Shaw
Vice President
and Counsel
Harry w. Grecn
Vice President
SHC and tnrcrnauonal Regulation
Seruos- Vice President
j..'U1CM. warcrman
Ombudsman
W. Star-r Seegmiller
Harold H. Blum
As."!. Vice
Truer
Asst. vtcc President
Bank Exa m in a tio n s
Pre~idcnt
Rodney E. Reid
vice p restdcru
BHC and tnrernauonat Supervlslon
w. Gordon Smith
vtce President
Credit and Consumer Affairs
Rober-t A.johnSlOn
Dlrector
Repor ts and ,\na tys h
Donald R. Licb
Vice President
Otsrrtct Credit
j::llpcsM.&rnes
Asst. vice President
Bank Exarn lriatiorts
gcbcrr e.)ol
Assi. vice Pr
Bank Exami
Kenneth R. Binning
A.sst. Vice President
'\ p p lk. lt iOllS
Ph.Wip .\t. Ryan
Asst. vtcc Prestdcnr
Irnernauonul Inspections
As",!.
Thomas P. McG,.nh
.\.... ,1. Vice srcstdcct
se
Bank zxamtnauons. s.t.C.
Richard S. G"UTlPO:'
Asst. Vico.:: Pr-es idcru
OHC Inspections
W;ryne L. Rickards
As'sL Vice Prcetdcn t
Bank and Convurner Rt·gulation
Thomas j. Backer
l::.x.an:t..i.n.i.ng Officer
OBC rnspecuons. L.A.
uavtd xt. v.wdre
Dtsc-tct Compljancc Officer
Kelly K. Walsh
Communjrv A
Rack Pukuhara
.\Iaoaglog Officer
gupervrston, gegctauoo and Credit
Computer Services
Personnel and Admlrustrauve Services
Elizabeth R. xtasrcn
Vice Prestderu
and SecT"C"CU")' of the Board
Sara K. GaJ
Se n ior vice
Fin ance all
e. Kenneth Arnold
vice President
Dtsu-Icr Security
Secretary's Office
Patrick Tong
Vice Prestderu
Compurcr Operations
.\lichaclj. )-turn)'
Senior Vice President
Admtntstratjon
Laurence wastiuen
Senior Vice prestdcm
Computer Ser-vices
Finance:
Gail A. Tay
Vice Pn:si(
Stausttcs a
joseph B. Fuchs
A~ Vice President
st.
Applications Systems
W,JIlMU K. Ginter
PhllUpsj. Goodenough
A..... Vice President
-;I.
Applications SysleJW.
Pau-Icla K. Lang
vice President
Corpora te Personnel
john Un
ASSI. Vice Pre ...i dent
Systems and Comrouorcaeons
Sylvia A. CunnioWu.llJ
,\.:-;Sl. Vice Pr e stdcru
Oll.ud.i..n..~ and Property vtanagernenr
Su s an G. Porterfield
Vice Prestdent
Ccrnpcnsarion
A.,~t .
Elb..abeth K. Christensen
Financial Planning
and Control Officer
Bar-bara ] .•
A.s.sLVice I
Electronic
jamcs j. 'reogc
/\SSI. Vice President
Admtrustmuve Servict":'>
Vice President
Building and Property 'bnagemenl
Saljlc II. \\ <' in~('J'
·b...
Assn. Vice P rc stderu
Benefi ts and rraining
".:u1CY E. P,
Assl. Vice
zlcctroojc
joan L. Moghadam
Asst. Vice. srcstdern
Applications sysrems
Paige B. Scott
As.~ Vice Prestdcru
n.
Data Security and
Continge-ncy Planning
Portland Branch
Los Angeles Branch
Angelo S. Carella
Senior vlce Prestderu
in Charge
Thurnnc e. Warren
Executive Vice Pre.... denr
t
In Charge
Dean e. Gonnerman
Chartc, I.. Huffsteuer
Director
Custody S(;("~·iccs
'\.~ M .
Th eodore A. Schroeder
Vice Prc s tdcru
Sc c ur tuc s Se rv ice s
.\lark W. Fishback
Cash Services Officer
,\tary Ellen .\tarlin
Director
Admtmsrranon
Breru .\ 1. Duxbury
xssr. vlccPrcs tdem
Adrn inistr-arive Services
Janice Harxllrta
Asst. Vice President
Etcctronjc Payrnent.s
,\.s:51. vrcc Prestdcnr
Payment.'> Services
S~U1
L. Robertson
A..s51. Vice President
Financial Services
and Pubfic Informauon
Leslie R. warrcrs
ASSI. 'dec President
CuslOdy Services
Robert D. Long
Admtnlsu-auve Services Officer
14
VaCU1(
Director
Paytncnts Services
Parncla ] , Robert so n
o\s,t. Vice Pr e s id e n t
Hu man Re source s
Fr-arrk Bc rr tle j Ass!. Vice P res id ent
Rcruen Ilcm.'l'Adju:o;tOll::ots
Thomas W. Rodewald
'\ SSl. Vice President
Checks Processlng
G. Bradley Suodgrase
.~t. Vice Pr<:,;iden t
Financial Services
E
Organ ization Chart
Feb rua ry I , 199 0
I
l
D . Th o m so n
Executjve vt ce P r estdcru
R;lnk Puncnons
nlOTT1~
Cc n lr~, l
Econo m ic Research
John H . Beebe
Senior VIce President
and Director of Research
John P.Judd
Robert C. J o hns on
A..
-.st, Vic e P re s iden t
Bank Exanairta riorts, LA.
Barn es
: P'r
e1lld
enl
uutn aucn s
Public Info rmatio n
Vice President and
Associate Director of Research
Fr-eder-ick T. Furlong
Research Officer
'aacrocconomrc Srudtes
Fi t'n~r g
Adetan W. Th roo p
Rebe rt L.
Resear ch Officer
Macro e con omi c Stud tcs
Vice Pre s ldcru and
Dire ctor o f Pu bUc lnform~ L1on
Hang-Sheng Cheng
Vice President
tnrc -oauonat srcdtcs
RanIDUl j. Pozdena
Vice Prestderu
Danking and RegJon.·'l1Studies
"L.A.
.
Ki;:Uy K . Walsh
Comm u ni ty Affairs Office r
nee Offie!:f
-
Finance an d Produc t vtan age m e nt
Dtstrtct Operations
K. G a r rl~o n
Sc nl o - Vice Pee std em
Hnanc c arid Pr oduct ~l afl aRt'nlO..nl
j o hn w Glt.:ason
:
$idenl
S1:nio r Vtee P1"c
D.i:; r lct Operations
t
S;t r-;l
G .1. ] .\ .
i
T:.lIyJor
Pal rich A. \\ 't-Jdl
Vice P rc ~id ent
Sra lis tio.
Vkc Pn,:$id,-=
nt
St.: Js Uo> :"l d Acc o u ntlnR Se r v ices
u
o
EJiOl F.
crcm
ru rccror
an d Dornesnc
f ina n c ial Rep o rlS
I n t~rna l ion.;.J
:E1I~'OMh
E. lund
A.~ s •. vt cc Presld l'"nt
..ton etary Aggrega te s
and Re!>
cne Rep orb
'rnoma... R. 'rbaanum
A....r. vi c e
,
P~~ldcm
Acco u n tin g
.\ d c Ut: Foley
vtc e Pr e ..tderu
Coepo eaw Pb nn Log
john A. 'rrcccoc
A... I . vlcc P", .' d e n t
~
·sl
Co rpora te Pluutio g
A.>$l. Vic e Pre\idcnt
'
Acc~s.
..
Buffingto n CI.1) ;\ti ller
·
V1 ' Pre.sld,- nt
n
'
Oi.strlet o pe eauo os
Dougta....O. Knudsen
,'s." I. vl c c Prt:sldt:nl
Scc urlti es se n ·tee !>
E, Per kins
\ s:>I Vic e srcstdcnt
,
Gordo n Ro ~rkeQ13
C.
Vk c Pn: s ldcnt
Dawn S. Block
Ekctronic
sao Fnncb co o peeauc re,
Flnan<:W Sc rvlccs and
lnsl.a.ll lio n Ma.n:lgem enl
a
B.a.rb
:U'",J. Co n tini
Ele ctrcnjc
~.ancy
"\ C l' C »
A... SI.
Tru dy l. Nlo
As.s L Vice Pn:sidt:nl
Elcctecnjc P:tyll).t:nb
vlce PfC'oidenl
Stephen A. Kaufman
AMI. vjcc President
P:t.ym enLS Serv tcc s
john H. Ubn~
,'\sIi I. li ke Pre siden t
c.a..~h
Scrvtces
,
I
Seattle Branch
Salt Lake Ci ty Br a n ch
G e--ralli R. Kelty
E. Ronalli Ligg cn
,':'krnOt"vice Prcst dem
in Chm-gc
Senior Vice P rc sj dcnr
In Ch a r ge
G~lo.:
P. Anscn
Ass t. \,' le t'
Prt' .~idcnl
Financbl Services
a n d Public lnforrnauon
G, Bndley Snod grass
A.... Vlct.o P rt: ~ident
'I.
Fin.a.ocial se -vrccs
William C. I1'::n.'fl c o
"
Asst. Vice President
Payment) Services
-
jimroyf.K.amaili
.WI. Vice s restd e n t
Adrnmistrnrivc Services
Kenn eth 1. Peters o n
Ass !. vtc e Pr estdem
Gerald R. Du lling
..\"-.sl. Vice Prcstdem
Paymen t.. Services
...
Robert R. Rkhanl"
,"-. . Vice President
..st
Adm l n L
"'U-dlh.. Services
c
D . K er-r-y Webb
,\sst. Vice PrcsidCD!
CustodyServtces
Andrea P. 'xorcon
A.<;S Vice Prestderu
I.
Fit lMle ial Services
CW;[OOySe rvi c es
15
Highlights of 1989
Economic Research
Domestic macroeconomic research focused on the sources of business
cycles-including aggregate demand and supply factors, and financial
constraints; on forecasting current quarter real GNP; on the inflation
unemployment trade-off; on the effects of monetary policy on federal
government revenue; and on potential targets of monetary policy,
includ ing commodity prices, nomina·1 income, and the price level.
International research cons idered the usefulness of exchange rates as
targets for monetary policy, the impact of fiscal policy on interest rates
in the setting of international financial integration, and the role of
exchange rates in determining trade surpluses and economic growth
in certain Pacific Basin countries.
Banking and financial markets research focused on the market's
perception of bank risk, the causes of Japanese entry into California
bank ing , price behavior in California depos it markets, funds transfer
system risk, and deposit insurance reform . The economists directed
drafting of a position paper on insurance reform for the Council of
Federal Reserve Bank Presidents.
Regional economic research studied regional economic cycles, natural
resource pricing, and agriculture and agriculture credit markets. Bank
economists provided support to the Bank President's chairmanship of the
San Francisco Bay Area Economic Forum and produced a major paper
on reg ional transportation problems.
An academic conference focused on the role of supply-side and
financial factors in business cycles, and financial factors and risk in
banking .
The program of Asian visiting scholars was expanded in preparation for
the opening of the Center for Pacific Basin Econom ic and Monetary
Stud ies in 1990.
Public Information
An expanded media relations program involved meetings with editorial
staffs and reporters and senior management and the issuing of news
releases on bank developments and economic research to enhance
public awareness and understanding of the Federal Reserve.
The Salt Lake City Branch insta lled a new lobby exhibition explaining
branch activities and their relation to the Federal Reserve System .
The economics education effort involved offering workshops for high
school teachers in Oregon and Utah and increased direct contacts with
school districts. In addition, a second computer-animated video about
money's relationship to spending was completed for free distribution to
high schools nationwide.
16
Overall, the financial health of state member banks was good and
improving ; earnings at most banks increased and the volume of asset
problems was declining .
.~
..,
Supervision, Regulation,
and Credit
An intensive program of cross-training for commercial and bank holding
company examiners was developed along with a comprehensive on-the
job train ing program for two staff members from the People's Bank
of China .
Examinations at seven troubled saving s and loans we re conducted as
part of the interagency respo nse to national thrift problems . This effort
was an addition to ongoing examination responsibilities and was the
second largest commitment of examiner resources within the Federal
Reserve System.
Also in connection with thrift problems, the Credit Unit participated in a
joint lend ing program to troubled savings and loans and established a
warehouse to contro l collateral security.
At year-end, 21 state member banks were subject to special supervisory
attention, down from 26 at year-end 1986.
Applications to acquire additional banks and nonbank companies
increased significantly with a large number represent ing inte rsta te bank
acquisition s. As a resu lt of applications approved , the Bank extended its
supervi so ry purview over additional banks and other companies in the
Twelfth D istrict.
A financia l reporting system wa s redesigned to provide better access
to financ ial data as well as to enhance data manipulation and reporl
generat ing capabilities. A System application for information on the
structure of banking organ izations was in sta lled and preparations were
made for a national databa se effort, the National Information Center.
A Commun ity Affairs Officer was newly appointed and the Community
Affa irs Un it spo nso red or participated in several community develop
ment conferences around the Di strict. The Un it al so completed three
commun ity profiles in accordance with the commun ity need s assessment
program to id e ntify commun ity credit needs and opportunities.
Major focus was directed at contingency planning and implementation
of a same-day disaster recove ry capabi lity which met the test fo llowing
the October eo rthqucke .
Funds Transfer
Computer- interface cu stomers were converted to new commun ications
protocols, FLASH or FRISC, that provide increased security, reliability,
and integr ity. Institutions were fully converted to the use of the structured
format for third party information in Fedwire messages.
Full day availab ility on Fedwire increa sed from 99 .62 percent in 1987 to
99.89 percent in 1989-the best among Federal Reserve Banks; cr it ical
hours availability increa sed from 99.86 pe rcent in 1987 to 100 pe rcent
in 1989.
17
Automated Clearinghouse
Efforts to promote electron ic access (versu s tran sfer of information by
paper or magnetic tape) to automated clearinghouse service continued
to meet with success a s 85 percent of al l automated clearinghouse return
items were submitted electronically-the highest level of automation in
the Federal Reserve System.
Full back-up capability between San Franc isco and Los Angeles offices
was establi shed in the event of disaster, which proved unnecessary after
the earthquake.
Already strong performance in the Interregional Exchange continued to
improve, averaging a 99.7 percent success rate.
Electronic Access
Efforts foc used on standard izing electronic access mechan isms to
achieve greater consi stency in product offerings.
Imp lementation of a ma inframe-based electronic access database
improved the internal system for managing customer information.
FEDLINE II, an integrated software package that allows depo sitory
institutions access to all electron ic Federal Reserve services, featured
two new services: originat ion of ACH forward items and onl ine access
to securiti es transfer system.
Check Services
New check processing software was put in place in the San Francisco
office, laying the foundation for Seattle, Salt Lake City, and Portland
offices to process checks locally using the consolidated San Francisco
data center.
Tests of d igital image technology demon strated its successfu l use in
a production check processing environment; potential future benefits
include expedited flows of information, improved records and audit
trails, and lower transportat ion costs.
Securities
and Fiscal Services
Ninety-seven percent of Saving s Bond volume wa s converted to E-Z
Clear, which processes pa id bonds in the check clearing system .
Secu rit ies transfer operat ions and defi nitive co Ilatera I hand ling in the
branch offices were consol idated into the San Francisco office.
Full back-up capability for securities transfer serv ice in the event of
disaster wa s established in Los Angeles for the San Franci sco office.
A new Trea sury Information Center in th e lobby of the Salt Lake City
Branch g iv es securities customers access to inf o rmat io n on marketable
Treasury securities and Sav ings Bonds via touch-screen computer units.
Service availability for secu rities transfers averaged 99 .98 percent for
fu ll days and was 100 percent during criti cal hours in 1989-the be st
performance among Federal Reserve Banks.
18
Cash Services
A newly formed Cash Automation Steering Committee will develop a
five-year plan to maximize automation in cu rrency handl ing .
Seven remote coin term inals operated by private coin faci lities verified
and warehoused coins, thereby improving access to supplies and
reducing the costs of transportation and operations.
Preparations were made to insta ll second-generation currency
process ing equipment.
Summary of Operations
Volume (in thousands)
1987
1988
1989
3,044,958
5,443 ,894
275,531
3,207,649
5,468,011
295,264
3,405,037
5,015,454
309,852
3,835
3,534
3,437
217
128
303
283
142
303
278
396
685
2,853,718
87,945
32,090
3,022,928
83,867
35,714
3,082,631
82,827
37,676
13,285
14,224
15,431
174,933
210,867
245,740
1,037
1,013
1,329
115
104
129
Custody Services
Cash Services
Currency paid into circulation
Coin paid into circulation
Food coupons proces sed
Securities Services
Savings Bonds original issues
Savings Bonds redemptions
proces sed
Other Trea sury original issues**
Book-Entry Securities processed
Payments Services
Check Services
Commercial checks collected
Government checks processed
Return item s proces sed
Electron ic Payments Services
Wire transfers processed
Automated clearinghouse
transactions processed
Discounts and Advances
Total discounts and advances*
Number of f inancial in stitutions
accom modated*
*Whole number (not in thousands)
**Includes volume processed in the Treasury D irect System
19
Management Committee members:
(From left)
Thomas D. Thomson, Executive Vice President
Carl E. Powell, First Vice President
Robert T. Parry, President
M ichael J. Mu rray, Senior Vice President
Thomas C. Warren, Executive Vice President, Los Angeles
==;
Branch Operations :
(From left)
E. Ronald Liggett, Senior Vice President in Charge, Salt Lake City
Carl E. Powell, First Vice President and Chief Operating Officer
Angelo S. Carella, Senior Vice President in Charge, Portland
Thomas C. Warren, Executive Vice President in Charge, Los Angeles
Gera ld R. Kelly, Senior Vice President in Charge, Seattle
20
Advisory Council on Small
Business and Agriculture 1990
Board of Directors
Federal Reserve Bank of
San Francisco
Chairman
Fred W. And rew
Partner
Andrew & W ill iamson Sales Co .
Bakersfi eld , Cal ifornia
Chairman of the Board and
Federal Reserve Agent
Robert F. Erburu
Chairm an of the Board and CEO
The Times Mirror Company
Los Ang el es, Cal ifornia
Erburu
Vice Chairman
Deputy Chairman
Carolyn S. Chambers
Presid ent and CEO
Chambers Commun icat ion s Corp .
Eugene, O regon
Chambers
Barry Baszile
Presid ent
Baszile Metal s Service
Los Angeles, Ca liforn ia
R. Bla ir Hawke s
Presid ent and CEO
Ireland Ban k
Malad City, Ida ho
Donald Butler
President
Shasta Food s International, Inc.
Gonzal es, California
Hawkes
Corde ll W. Hul l
Exec utive Vic e President and
Director
Bechtel Group, Inc.
San Franc isco, CA
Warren K. K. Luke
President and Director
Hawa ii National Bancshares, Inc.
and Vice Chairman of the Board
Hawai i National Bank
Honolulu, Hawaii
Anne Chadwick
Manag er, Trade Policy-Agriculture
California State World Trade
Commi ssion
Sacram ento, Cal iforn ia
Lonear W. Hear d-Davis
President
James 1. Heard Management
Corporation
Cerri tos, Ca liforn ia
Luke
John N. Nord strom
Co-Cha irman of the Board
Nord strom, Inc.
Seattle , Wa shington
Nordst rom
W il liam E. B. Siart
Chai rman of the Board, Presid ent
and CEO
First Interstate Bank of Ca Iifo rnia
Los An ge les, Californ ia
W ill iam L. Tool ey
Cha irman
Toole y & Co ., Investment Build ers
Los Ang el es, Cal ifornia
Paul Haz en
Preside nt and Chief Operating
O ff icer
We lls Far go Bank, N .A . and We lls
Far go & Co .
San Franc isco , Cal ifornia
G eorge M. DeMe deiros
Corporate Presiden t-Retired
Da iry man's Co-op Crea mery
A ssociation
Tulare, Californ ia
Robert L. Hancock
President
Avtech Corporation
Seattle, Wa shington
Siart
Jame s A. Vohs
Chairman , Presid ent and CEO
Kais er Foundation Health Plan, Inc.
and Kais er Foundation Ho spital s
Oakland, California
Federal Advisory Council
Member
Sandra A. Suran
Busine ss Con sultant
and Former Small Business
Ad vocate, State of Orego n
Lake Os we go , O regon
Tooley
Boyd R. Poulton
Partner
Price, Poulton & Company
Burl ey, Idaho
Park Price, III
Presid ent
Park Price Motor Company
Pocatello, Ida ho
Vohs
Leslie Tang Schill ing
President
L.T.D.D., Inc.
San Franci sco, Cal ifornia
Hazen
Henry J. Voss
Director
California Department of Food and
Agriculture
Sacramento, Cal iforn ia
21
Los Angeles Branch Board
The greatest strength of th is region is its econom ic d iversity and the
absence of dependency on a single ind ustry. The other great strength
is its geog raph ic location a s part of the Pacific Rim.
Burke
The reg io n's main econom ic challenge is to contin ue steady env iron
menta lly sou nd growth. The great size of this dynam ic marketplace
w ill a lso make uneven demands on the resources of th is region .
Blakely
Board of Directors
los Angeles Branch
Chairman of the Board
Yvonne Brathwa ite Burk e
Partner
Jones, Day, Reav is & Pogue
Los Angeles, Cal ifornia
Jensen
Ross M . Bla kely
Chairma n of the Executive
Co mmittee of the Board
Coa st Sav ings and Loan
Los An geles, Ca liforn ia
Fred D. Jensen
Cha ir ma n of the Boar d, Preside nt
a nd CEO
Na tiona l Bank of Long Beach
Long Beach, Ca lifo rnia
Lovejoy
Lozano
Da vid R. Lovej oy
Vice Chairm an
Security Pacif ic Nation al Bank
Los Ang eles, Cal iforn ia
Ignac io E. Loza no, Jr.
Edito r-in -Ch ief
La Op inion
Los Ang eles, Ca lifornia
Richa rd C. Seav er
Cha irma n
Hyd ril Compa ny
Los A ngeles, Ca lifo rnia
Ha rry W. Todd
Ma nag ing Par tner
Ca rl isle Enterp rises, L.P.
La Jo lla , Cal ifo rnia
22
Seaver
Todd
Portland Branch Board
Th is region 's sources of econom ic strength incl ud e a stable, wel l-tra ined
work force, good availab le open spaces close to population centers,
on abundant supply of water, low energy rates, and environmental
protection pol icies that lead most of the states in the notion .
Hilliard
Compton
Our challenge is to diversify o ur economy away from a natura l resource
bose, solve our reliance on property ta xes as the principal source of
ed ucation fun ding, and address the cost of do ing b usi ness in O reg o n,
w hich may keep some compa nies from lo cat ing in ou r sta te .
Board of Directors
Portland Branch
Chairman of the Board
W illiam A. Hill iard
Editor
The Oregon ian
Portlan d, O rego n
Kimball
Phillips
Stuart H. Co mpton
Cha irman and CEO
Pio neer Trust Bank. N.S.
Salem, O regon
Stephen G . Kimba ll
Preside nt and CEO
Boker Boyer Bancor p
Wa lla Wa lla . Was hington
Stepp
Wayne E. Phill ips. Jr.
Vice President
Phill ips Ranch. Inc.
Baker, Oregon
Suran
Weight
E. Kay Stepp
President
Portland General Electri c
Portland. Oregon
Sond ra A. Suran
Business Consultant
Lake Os wego, Oregon
G . Da le Weig ht
Cha irman of the Board. Presiden t
and CEO
The Benja min Fra nk lin Savings and
Loan Associat ion
Portland , Oregon
23
Salt lake City Branch Board
Th is region has a world-cla ss bu sine ss enviro nment poi sed for healthy
ex pa nsio n. Key stren gth s incl ud e a larg e w ell -educated and highl y
mot ivated w o rk forc e, ex ce lle nt tran sportation f or moving ra w ma teri a ls
a nd f inis hed p roducts, and a n ou tsta nd ing quality o f lif e.
Whee ler
The reg ion's primary chall eng es invol ve ongoing developm ent of qual ity
education programs and ba sic inf ra structure elements to support furthe r
g rowth in the dynamic decad e of the 19905 .
Christensen
Board of Directors
Salt Lake City Branch
Cha irm a n of the Board
Don M . Wh eeler
President
W heeler Mac hinery Co mpa ny
Salt La ke City, Utah
Eaton
Ge ra ld R. Christensen
President and Chairman
First Federal Saving s Ban k
Salt Lake City, Uta h
Curtis H. Ea to n
Vice Presid ent; M a nager,
Comm unity Ban king Area a nd
M emb er of Boa rd o f D irecto rs
First Security Ban k o f Idah o, N .A .
Twin Fall s, Ida ho
Hanson
Kelson
Ronald S. Ha nso n
Preside nt
Zio ns First Nationa l Bank
Salt Lake City, Utah
M ichael
Vi rginia P. Kelson
Senio r Consultant
Ral ston & Assoc iat es M a na gement
an d Tra ining Co nsulta nts
Salt Lake City, Uta h
Ga ry G . M ic ha el
Vi ce Chai rma n, Ch ief Finan cial a nd
Corporate Developm ent Offic er
Al bertso n's, Inc.
Bo ise, Idaho
D. N . Ro se
Presid ent and CEO
Mountain Fuel Supply Company
Salt Lake City, Utah
24
Rose
Seattle Branch Board
Washington state is in a very favorable competitive position . Business
costs are low while property values, rental rates, and labor costs favor
economic g rowth . Alaska's major strengths will continue to includ e
tour ism, fis hing , mi ning, and paradoxica lly, growth in the u.s. mi litary
presence. Mi lita ry budget cuts bode well for Alaska where it is far
cheaper to ma inta in active force s with in rea sonable great circle di stance
of potential world hot spots.
Kennedy
Ma jor cha l le nges to the reg ion are fina nc ing and regu lating growth.
In banking, attracting sufficient capital will continue to be a major
challenge. A significant concern is the decline of the Prudhoe Bay oil
field. Explorations in new areas are showing promise, but the quantity
and quality of crude left to be found is still unknown.
Beeksma
Board of Directors
Seattle Branch
Cameron
Chairman of the Board
Bruce R. Kennedy
Chairman and CEO
Al aska Air Group, Inc.
Seattle, Wash ington
B. R. Beek sma
Cha irman of the Board
InterWest Savings Ban k
O ak Harbor, Wa shington
Gerry B. Cameron
President and Chief
Op erating Officer
U .S. Bank of Wa shing ton , NA
Seattle, Washing ton
Gray
Larison
Robert P. Gray
Presid ent
Nati onal Ban k of Al a ska
An cho rage, Ala ska
Runstad
H . H. Larison
President
Columbia Paint & Coating s
Spo kane, Wash ington
Judith M . Runsta d
Partner
Foster, Pepper & Shefelma n
Seattl e, Wa shingto n
Russell
Geo rge F. Russell, Jr.
Chairman
Frank Russell Company
Tacoma, Washington
25
Comparative Statement of Account
(Thousands of Dollars)
December 31 ,
1989
1988
Assets
Gold certificate account
Special Drawing Rights certificate account
Other Cash
.
.
.
1,402,000
992,000
77,206
1,429,000
670,000
66,964
Loans to depository institutions
.
220
10,301
Federal Agency obligations
.
795,571
894,497
United States Government securities:
Bills
Notes
Bonds
.
.
.
12,751,915
11,142,450
3,757,221
14,481,234
11,678,066
3,842,942
Total United States Government securities
Total loans and securities
.
.
27,651,586
28,447,377
30,002,242
30,907,040
Items in process of collection
Bank premises
Op erating equipment
.
.
.
1,409,038
149,708
32,015
1,361 ,760
151,027
35,103
Other assets:
Denominated in foreign currencies
All other
.
.
4,323,816
1,000,609
1,296,176
643,112
Interdistrict Settlement Account
.
(2,007,957)
(2,057,633)
Total assets
.
35,755,812
34,502,549
Federal Reserve Notes
.
25,863,292
24,845,628
Deposits:
Total depository institutions-reserve accounts
Foreign
Other deposits
Total deposits
.
.
.
.
7,546,848
20,700
128,965
7,696 ,513
7,449,120
21,300
26 ,095
7,496,515
Deferred credit ite ms
Other liabilities
.
.
1,234,897
357,290
1,170,131
407,965
Total liabilities
.
35,151,992
33,920,239
Capital paid in
Surplus
.
.
301,910
301,910
291,155
291,155
Total liabilities and capital accounts
.
35,755,812
34 ,502,549
Liabilities
Capital Accounts
26
Earnings and Expenses
(Thousands of Dollars)
Decembe r 31,
1989
1988
Current Earnings
Di scounts and ad vances
United States Government securities
Foreign currencies
Income from services
Al l other
.
.
.
.
.
5,748
2,469,140
143,352
78,683
2,197
2,243
2,372,524
42,680
73,807
1,709
Total current earnings
.
2,699,120
2,492,963
Total current expen ses
.
Less: rei mb ursement for certain f iscal agency and other expen ses
Net expenses
.
157,421
0
157,421
144,904
12,061
132,843
Current Expenses
Co st of earning s credits
.
15,585
9,807
Current net earnings
.
2,526,114
2,350,313
Profit and Loss
Add it ion s to current net earnings
Prof it on prior pe riod adjustments
Profit on sales of United States Government
securities (net)
Profit on foreign exchange tran sactions (net)
A ll other
Total additions
.
.
.
.
.
1,281
174,406
1,357
177,044
Deduction s from current net earnings
Loss on foreign exchange transactions (net)
All other
Tota l deducti on s
.
.
.
0
Net additions (+) or deductions (-)
..
177,044
Cost of Unre imbu rsed Treasury Services
..
(6,691)
(2,253)
.
.
(12,316)
(18,860)
2,665,291
(11,939 )
(1 9,188)
2,247 ,521
17,714
2,636,822
17,591
2,229,846
10,755
291,155
301,9 10
84
291,071
29 1,155
A ssessments by Boa rd of Governors
Board expenditures
Fede ral Reserve currency costs
Net earnings before paym ents to the United States
Trea sury
Dividends pa id
Payments to the United States Treasury (interest on
Fede ra l Reserve Notes)
.
..
.
(69,412)
..
Transferred to sur pl us
Surplus, January 1
Surplus , December 31
72,544
45
72,589
.
.
27
.t:i"
..' '; ' 11'
'
,
.
~
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o
Hawaii
..
Twelfth Federal Reserve District
San Francisco Office
P . Box 7702, San Francisco, California 94120
.O
Los Angeles Branch
P . Box 2077, Terminal Annex, Los Angeles, California 90051
.O
Portland Branch
P.O. Box 3436, Portland, Oregon 97208
Salt Lake City Branch
P.O. Box 30780 , Salt Lake City, Utah 84125
Seattle Branch
P
.O. Box 3567, Terminal Annex, Seattle, Washington 98124
This Report was designed and produced by Karen Ru sk and written by
Gregory J. Tong and Karen Rusk. Cover illustration, map and graphics
were created by William Rosenthal. Color photography by Paul Schulz.
28
Arizona
Federal Reserve Bank of San Francisco
P.O. Box 7702
San Francisco, California 94120
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