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The Federal Reserve Bank of San Francisco

1998 Annual Report
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The Federal Reserve Bank of San Francisco is one of 12
regional Reserve Banks which, together with the Board of
Governors in Washington, D.C., comprise the nation's central
bank.
From the Boardroom
Looking Forward*
Looking Backward*
Executive Committee
Highlights of 1998*
Branch Operations
Summary of Operations
Bank Officers
Branch Officers
Boards of Directors
1999 Advisory Council
12th Federal Reserve District
Financial Statements

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 regulatory agency, a provider of
wholesale priced banking services, and the fiscal agent for the
United States Treasury.
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.
To serve this expansive region, the San Francisco Reserve
Bank has five offices: our headquarters in San Francisco and
offices in Los Angeles, Portland, Salt Lake City, and Seattle.
Each office provides financial services to the banking
institutions in its locale.
*Note: These articles are best viewed with a 4.x browser.

Previous Annual Reports:
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2003
2002
2001
2000
1999
1998
1997
1996
1995

Annual
Annual
Annual
Annual
Annual
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Annual
Annual
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Annual

Report
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Report

The Federal Reserve Bank of San Francisco

1998 Annual Report
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Last year was an important one for the Federal Reserve Bank of San Francisco in that we both celebrated our history
and looked toward our future. The year 1998 marked the 85th anniversary of the establishment of the Federal Reserve
System. It was December 23, 1913, when President Woodrow Wilson signed into law the Federal Reserve Act. The
Federal Reserve Act stated that its purposes were "to provide for the establishment of Federal reserve banks, to furnish
an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of
banking in the United States, and for other purposes." Further legislation has clarified and supplemented these original
purposes through the years, but our underlying goals remain.
This Bank has a long history of outstanding accomplishments. During
1998 we once again reached important milestones that you will read
about in this Report, and we assured our operational readiness to enter
the next century.
Our directors provided us with invaluable information and leadership
throughout the year. Their independent assessment and knowledge of
economic and financial conditions throughout our District are essential to
the formulation of monetary policy. We thank them all for their
contributions.
In particular, we want to express our sincere thanks and appreciation to
those directors and advisory council members who retired from Federal
Reserve service at 1998 year end: on the Head Office Board, its Deputy
Chairman, Cynthia A. Parker (Executive Director, Anchorage
Neighborhood Housing Services, Inc., Anchorage, Alaska), and Stanley
T. Skinner (Chairman and CEO [Retired], Pacific Gas and Electric Co.,
From left, Nelson C. Rising, Deputy
San Francisco, CA); on the Los Angeles Branch Board, its Chairman,
Chairman (1999); Cynthia A. Parker,
Anne L. Evans (Chairman, Evans Hotels, San Diego, CA), and Stephen
G. Carpenter (Director, California United Bank, Encino, CA); on the
Deputy Chairman (1998); Robert T.
Portland Branch Board, its Chairman, Carol A. Whipple (Proprietor,
Parry, President; John F. Moore, First
Rocking C Ranch, Elkton, OR), and Thomas C. Young (Chairman,
Northwest National Bank, Vancouver, WA); on the Salt Lake City Branch Vice President; and Gary G. Michael,
Chairman.
Board, its Chairman, Richard E. Davis (President and CEO, Salt Lake
Convention and Visitors Bureau, Salt Lake City, UT), and Roy C. Nelson
(President [Retired], Bank of Utah, Ogden, Utah); on the Seattle Branch Board, Constance L. Proctor (Partner, Alston,
Courtnage, Proctor & Bassetti, LLP, Seattle, WA); and the Twelfth District Member of the Federal Advisory Council, David
A. Coulter (Chairman and CEO [Retired], BankAmerica Corporation, San Francisco, CA).

Gary G. Michael
Chairman

Robert T. Parry
President

The Federal Reserve Bank of San Francisco

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The countdown is on for 01/01/2000 ­­ the start of the new century. On the last day of 1999
celebrants around the world will wait for the stroke of midnight with a mixture of excitement,
curiosity, and trepidation. Some will greet the new year at parties planned years in advance,
while others will be sitting in their offices wondering whether they started planning far
enough in advance. Will the much­ballyhooed Y2K computer meltdown occur?

2000 AD:
Y2K Computer
Glitch

For the Federal Reserve the concern is not only to be certain that
our internal systems are Y2K compliant, but also that we fulfill our
charter as a regulator of financial institutions and as the nation's
money manager. Some critical tasks spelled out in the Federal
Reserve's charter are to ensure safety and soundness in the
operation of financial institutions, to provide stability in financial
markets, and to maintain the smooth functioning of the nation's
payments system. It's hard to imagine that back in 1913, when
members of Congress empowered the Federal Reserve System
with these responsibilities, they could have envisioned a day
when the financial system would be threatened more by outdated
computer code than by banking panics.
Basically, it's just that ­­ outdated computer code ­­ that sits at
the root of the Y2K problem which, depending on the newspaper
you read, may cost as much as $860 billion worldwide to fix. Until
recently, computers have traditionally used two­digit numbers, rather than four­digit, to
represent years ­­ "98" for 1998 instead of "1998" ­­ to optimize space on very expensive
mainframe processors. Thus, 2000 may be miscalculated by the electronic brain as 1900. In
that case the software would not be able to perform certain functions or would produce
erroneous results. This has the potential to affect not only mainframe and personal
computers, but also machinery, appliances, security systems, and other devices with
embedded microchips.

1901 AD:
First
Transatlantic
Wireless
Message

1900 AD

The fix is not simple, obvious, or inexpensive but can be done

We think of
successfully. It requires tedious searching through computer
much of it written in outdated languages by programmers
calendars as factual code,
who may have long since retired.
and scientific. In
Planning for the year 2000 began throughout the Federal
truth, they are merely Reserve System in 1995, when tasks were defined and a
timeline was established to ensure that any necessary
a socially agreed
modifications would be made to our internal systems to enable
them to function normally over the century date change. Key
upon system of
steps in the process include assessing the scope of changes
keeping account of
and resources needed to reach compliance, modifying program
testing all systems (including contingency plans), and,
time. Calendars form code,
finally, implementing the updated systems. A critical phase of
a basis for planning the project is testing ­­ internally and externally with
vendors, and other service suppliers such as
agricultural, hunting, customers,
utilities, transportation providers, and environmental systems.
and migration cycles;
for divination and
prognostication; and
for maintaining
cycles of religious
and civil events.

The Reserve Banks now have completed the renovation and
testing of our internal systems, and we are satisfied that all
financial service applications of the Federal Reserve are Y2K
ready. Testing applications with depository institutions will
continue throughout 1999.
In addition to readying its own systems, the Federal Reserve
System is working closely with other regulators and depository
institutions to oversee the preparations of the banking industry
as a whole. To facilitate this process, the System has
spearheaded an extensive awareness and educational process.

1800 AD
1799 AD:
Rosetta Stone
found
Communication is a key element of the
Federal Reserve effort to ensure banking
industry readiness for Y2K. Fed
representatives meet regularly with
other regulators and trade associations
to assess progress, share information,
and facilitate information dissemination.
A Century Date Change (CDC) web site
at www.frbsf.org/fiservices/cdc/ provides
immediate, up­to­date communication
regarding the project. The Fed regularly
communicates with financial institutions
in the United States via newsletters
designed to guide constituents through a
maze of data on the subject and
provides updates and information about
resources, problems, and solutions. A
booklet, "Small Business and the Year
2000," was produced for depository
institutions to distribute to their
customers. Institutions which have
electronic relationships with the Fed
receive regular bulletins alerting them to
information such as timelines, details of
testing, and information resources.

United States legal code
does not specify an
official national calendar
­­ use of the Gregorian
calendar in the U.S. stems
from an Act of the British
Parliament in 1751, which
specified use of the
Gregorian calendar in
England and her colonies.

1700 AD
1695 AD:
Bank of England
established

The Chinese calendar
names years by
pairing one of 10
signs related to the
Chinese
constellations with
one of 12 animals of
the Chinese zodiac.
This pairing creates a
60­year cycle.
January 1, 2000, will
fall in the Chinese
year of the Earth
Rabbit.

Outreach efforts reached a peak in mid­1998 with a series of
seminars offered throughout the country for depository
institutions. In the Twelfth District alone more than 1,200
participants attended 16 seminars in 10 locations to receive
updates and ask questions regarding regulatory and readiness
issues. Later in the year, the Federal Reserve scheduled a
national satellite teleconference, which reached viewers
gathered in more than 200 locations nationwide to learn more
about testing, liquidity issues, and contingency planning and to
have their questions answered.
As part of our regulatory role, the Federal Reserve is
concerned with making sure that Y2K problems don't adversely
affect the safety and soundness of the country's financial
system. In conjunction with interagency guidelines, we review
Y2K readiness of banks, bank holding companies, and other
financial institutions. We have established testing and readiness
requirements and regularly review institutions' project plans
and progress as part of our examination of risk management
and sound business practices.

1601 AD:
First Welfare
Program
Contingency planning is a crucial part of our Y2K
readiness plan. This contingency planning involves
looking beyond automated systems and developing a
way to keep operating without customary resources. It
requires testing, more testing, and refining various
scenarios. The Fed's contingency and event

scenarios. The Fed's contingency and event
management plans are dedicated to being able to
respond quickly to unforeseen circumstances.

accounts.

Another key responsibility of the
Federal Reserve is ensuring that
enough currency and coin are in
circulation to meet the public's
demand. This demand typically
changes with the level of economic
activity and with the seasons of
the year. For example, during
holiday seasons additional coin
and currency are placed into
circulation and then eventually
returned to depository institutions
by merchants. Depository
institutions, in turn, ship the
excess to their regional Reserve
Bank, where it is credited to their

Time is the most valuable thing
a man can spend.
Theophrastus(d.278
B.C.)
From Diogenes
Laertius, Lives of
Eminent Philosophers.

The word "calendar"
comes from the Roman
term "kalendae," which
refers to the first day of
each month. Kalendae
is derived from the
Latin "calare" ­­ to
announce solemnly, to
call out.

It is expected that the holiday season,
coupled with the turn of the century, will
cause the demand for coin and currency
to increase at the end of 1999. Some
individuals may choose to hold extra cash
during the century rollover in case
operating problems should affect any
retail payment system. Also, since about
two­thirds of U.S. currency is held outside
the United States, there may be increased
foreign demand. To meet this demand,
the Federal Reserve has increased
substantially its fiscal year 1999 print
order from the Bureau of Engraving &
Printing over the 1998 level. This
increased amount of currency either in
circulation or in vaults at the Federal
Reserve and the Bureau will enable us to
fill our customers' currency orders
quickly.

1600 AD

As 1999 continues, the Fed will continue to test, anticipate, plan, and do everything possible to
provide for the smooth operation of the payments sector and the safety and soundness of the
nation's banking system. We have taken prudent actions to make sure that 01/01/2000 is truly
the first day of a happy new year and new century.

1500 AD

The Federal Reserve Bank of San Francisco

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What was the country like the last time people were waiting for the calendar to turn to a new
century? What was it like to live in America on New Year's eve 1899, and what was on the
minds of people as they waited to welcome 1900?

1492 AD:
Columbus'
Voyage

December 31, 1899, was a snowy Sunday night in New York
City, but that couldn't put a chill on the optimism and eagerness
many residents felt as they anticipated the new century. Times
were good. Prosperity had returned to the country after the
election of President William McKinley of Ohio in 1896. Even the
government was prosperous with the Treasury showing a $46
million surplus of income over expenditures. Thus, the period
came to be referred to variously as the Age of Optimism, the
Age of Confidence, and the Age of Innocence. There were 45
states, and the population of the nation was 76 million and
growing rapidly. America was already becoming the "melting
pot" with one­third of its residents foreign born or children of
foreign born. The center of the country was still definitely
eastward with nearly 3,500,000 people living in New York. San
Francisco had only 342,700 residents and Los Angeles had
102,000. Portland was not far behind with 90,400. Seattle and
Salt Lake City boasted populations of 80,700 and 53,500, respectively.
An editorial in the January 1, 1900, New York Times proclaimed, "The year 1899 was a year
of wonders...in business and production. It would be easy to speak of the 12 months just
passed as the banner year were we not already confident that the distinction of highest
records must presently pass to the year 1900....The outlook on the threshold of the new
year is extremely bright."

1407 AD:
Public Banking
1400 AD

There is some debate whether
the 21st century actually begins
in 2000 or 2001. Because there
is no year "0" in the Gregorian
calendar, the 1st century began
in A.D. 1. Following the
mathematics, each century
begins with '01 (1801, 1901) and
ends with '00 (1900, 2000),
indicating that the 21st century
actually begins January 1, 2001.

The view into the 20th century from the West
Coast was equally hopeful. The San Francisco
Chronicle, in its December 31, 1899, issue,
reported, "The financial strength and stability
of San Francisco, the money center of the
Pacific Coast, are seen to be better than ever
before. The banks have increased their
resources wonderfully, the gain in the last
four months being over $8,800,000."
Most people ­­ more than 60 percent ­­ lived
on farms or in rural areas. But the move both
to the cities and westward was underway.
Although most workers were still employed in
agriculture, manufacturing employment was
increasing quickly. In 1898, for the first time
the U.S. exported more manufactured goods
than it imported. "Big business" was beginning
as smaller companies were being acquired by
industry giants such as Amalgamated Copper,
and U.S. Steel.

1302 AD:
First Mariner's
Compass

There were vast differences in lifestyle between those on the farm and those in the
city. And it wasn't easy to travel between the two. Few were adventuresome or
wealthy enough to spend about $1,500 for an automobile. The bus and truck were
not yet invented. The railroad and the horse and wagon were still the main forms of
transportation. Some 193,000 miles of railroad track crisscrossed the country while
there were only about 150 miles of paved highway. A town not on the railroad was
virtually remote. City dwellers could take the electric trolley, which expanded the
radius of the city to outlying residential areas and made its center somewhat more
accessible.
If you wanted to ride a subway, you
would have to go to Boston, while New
York and Chicago offered elevated
railroads. Once you got to the city, you
might see some incandescent lights, but,
most likely, gas street lights, and city
homes of only the most wealthy were
electrified. The tallest building in the
country was the Ivins Syndicate Building
in New York, rising 29 stories. New York,
Chicago, and Philadelphia each had more
than a million residents.
In addition to the disparity between rural
and city life, there were vast differences
between the wealthy and the poor, and
social problems such as child labor,
slums, and disease were emerging as
industry and immigration boomed. The
average American worker earned 22
cents an hour ­­ less than $500 a year.
But you could buy eggs for 12 cents a
dozen, a sirloin steak for 24 cents a
pound, and stop by the soda fountain for
a 5­cent root beer float, 10­cent sundae,
or 5­cent lemon phosphate.

1300 AD

The International Date
Line is an imaginary line
located halfway around
the globe from the Prime
Meridian. East of the line
it is one day earlier than
to the west, so that a
person crossing the line
east to west gains, or
repeats, one day, while a
person crossing west to
east loses one day.
Without this date change,
persons traveling around
the globe in a consistent
direction would be off
local time by exactly one
day upon return to their
starting point.

1215 AD:
Magna Carta
Signed
1200 AD

The "tropical year"
consists of a fractional
number of days, the
exact number of which
remains unknown
(approximately
365.24219). While most
other measurements
allow larger units to
contain exact numbers
of smaller units (a dollar
is exactly 100 cents),
time measurement is
based upon a pre­
defined, though
indeterminable,
number.

Medical problems were a great concern. Influenza,
pneumonia, tuberculosis, diphtheria, and typhoid were
among the leading causes of death. The average life
expectancy for men was 46.3 years and for women, 48.3
years. Wealthy people in the heart of a city might have
running water, but those outside probably did not. The
American diet suffered since transportation of fresh food
was highly impractical. Most people were without fresh
fruit and vegetables during the winter months. Railroads
had refrigerator cars, but the home electric refrigerator
was yet to be invented.
Public education was becoming more available, especially
through the high school level. Nearly all states outside the
South had compulsory education laws by 1900, and the
national rate of illiteracy had declined from 20 percent in
1870 to 10.7 percent in 1900. Wages for the average
teacher were $325 per year.

1100 AD

1095 AD:
Crusades Begin

Communication was difficult. The telephone was not yet in
widespread use, typewriters were scarce, and there was
no such thing as a radio. Magazines and newspapers
comprised what then served as mass communication.
There were about 5,000 magazines, most with small
circulation. But the daily circulation of Joseph Pulitzer's
New York World newspaper regularly exceeded one
million. Traveling lecturers and Chautauquas ­­ camp­like
centers for education and entertainment ­­ were popular
sources of learning, as were libraries. By 1900 there were
more than 1,700 libraries in the United States with
collections of more than 5,000 volumes.
At the dawn of the 20th century, most Americans were
filled with optimism, delight, and fascination with the new
inventions that opened worlds and made tasks easier, and
confidence that opportunities for success would continue to
be offered. In the words of New York Senator Chauncey
Depew, "There is not a man here who does not feel 400 percent bigger in 1900 than
he did in 1896, bigger intellectually, bigger hopefully, bigger patriotically."

1008 AD:
World's First
Novel

The Federal Reserve Bank of San Francisco

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From left, John F. Moore, First Vice President; Jack H. Beebe, Senior
Vice President and Director of Research; (seated) Robert T. Parry,
President; Terry S. Schwakopf, Senior Vice President; and Gordon R.
G. Werkema, Executive Vice President.

The Federal Reserve Bank of San Francisco

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As you have read elsewhere in this Report, preparing for the century date change is a top
priority which all of our operating departments addressed in addition to conducting their normal
business in 1998. The modifications and testing of our internal systems are complete, and we
are now focused on testing and retesting both our contingency and event management plans.

Financial Services
Providing cost­effective and innovative services to the financial services industry, the public, and
the U.S. Treasury is a key element of the San Francisco Reserve Bank's mission. From paper­
based payment services like cash distribution and check collection to electronic payment
systems like the Automated Clearing House (ACH) and the large­dollar Funds Transfer and Book­
Entry Securities Systems, the Bank plays a key role in ensuring that the nation's payment
systems are reliable, efficient, and responsive to changing needs.
An important initiative in 1998 was ensuring that banks with interstate branch networks could
manage their reserve account and financial services relationships with the Reserve Banks on a
coordinated, nationwide basis through the new Interstate Branch Banking account structure. Also
in an effort to enhance the accessibility and functionality of its services, the Bank piloted two
"web­based" services during the year: Check Image, which enables financial institutions to view
digitized images of their cleared items online, and Cash Order and Deposit Notification.

One of the Bank's ongoing objectives is to promote
the growth of electronic payments and electronic
collection of checks. In 1998 the Bank expanded its
innovative Automatic Bill Payment Program that
involves major utility companies and their banks in
encouraging their customers to sign up for ACH debit
as a means of bill payment. On the Check side, the
Bank introduced Front­End MICR, a family of electronic
products that enables depository institutions to take
advantage of the full benefits of electronic check
collection and eliminate physical item processing, thus
improving overall efficiency in the payments system.
The Twelfth District is also leading a Systemwide effort
to improve error resolution and customer service by
implementing a common check adjustment processing
system nationwide. Among other features, Enterprise­
Wide Adjustments will facilitate consistent service
levels across the System and streamline cross­district
adjustments processing. When this project is fully
implemented, it will be the largest distributed
application in place in the Federal Reserve System.

The Mayan calendar is
actually based on
several calendars that,
meshed together, mark
the movement of the
Sun, the Moon, and
Venus. The Mayan
divine calendar, the
Tzolkin, pairs numbers
one through 13 with 20
day names to create
mixtures similar to our
days of the week
pairing with dates in a
months: 1­Imix, 2­Ik,
etc., being similar to
Sunday the 1st, Monday
the 2nd.

The Mayan civil calendar,
the Haab, consists of 18
20­day months, plus a
short month of five days.

The Bank also spearheaded the Treasury Offset
Program (TOP) for the U.S. Treasury. The goal of TOP
is to develop an automated system to enable creditor
agencies to locate delinquent debtors and assist those
agencies in withholding offsetting government
payments to those debtors. The potential financial
benefit of this initiative is substantial; in limited

The combined Tzolkin­
Haab cycle, known as the
Calendar Round, covers
approximately 52 years
before all of the cycles
come back to the same
alignment. It is still used

implementation, the debt collected by TOP is already
$5 million.
All offices of this Bank played a key role in informing
and educating the public about the redesigned Series
1996 $20 bill for several months prior to its September
unveiling. Media events, school programs, speeches,
and community partnerships served to promote the
redesigned bill, which incorporates the latest anti­
counterfeiting and low­vision features.

alignment. It is still used
by people in the Mexican
highlands. The Mayan
Long Count records
periods longer than 52
years.
In another milestone involving currency ­­ in this case historical ­­ the Bank's premiere collection of American
Currency, which was put on view in an exhibit in the lobby of the San Francisco office in 1997, was made available
to visitors worldwide on the Bank's web site at www.frbsf.org/currency/. The audience for this magnificent
collection can now include currency experts, historians, students, and the general public, regardless of location;
they can take a virtual tour of the exhibit ­­ 24 hours a day, seven days a week ­­ and explore the U.S. history
which forms the context for the displays.

Economic Research
Formulating and implementing monetary and bank
regulatory policies in a manner that keeps the
economy healthy are primary functions of the Federal
Reserve. The Bank's Research area contributes to this
process by continually studying and analyzing current
economic and financial information which affects policy
decisions. In addition, its outreach efforts play a key
role in interpreting monetary policy and explaining the
purposes and functions of the Federal Reserve to the
public.
A major challenge of the year was to respond to the
currency crisis in Asia with research, policy briefings,
speeches, and publications. Research analyzed the
determinants of the crisis and its severity as well as
the spread of the crisis through financial market
linkages. In addition, a staff member provided
technical assistance to the Asia Development Bank
Institute on site in Tokyo for a month.

During the 20 years
which Rip had slept
away on the
mountainside, great
changes had takend
place. While Rip had
been sleeping
peacefully, a fierce war
had been fought. Now
he was no longer an
Englishman but an
American.
Washington
Irving
Rip Van
Winkle
The Sketch
Book
1820

The department, along with the Stanford Institute for Economic Policy Research, presented a conference on
"Central Bank Inflation Targeting," bringing together some 100 eminent economists from academia, the Federal
Reserve, and foreign central banks to discuss the advisability and methodology of explicit inflation targeting.
Another conference, co­sponsored with the Federal Reserve Bank of Atlanta, addressed "Financial Modernization
and Regulation." It brought together Federal Reserve policymakers and staff as well as academic economists to
discuss the implications of modernization for the design of financial regulatory policy.

Banking Supervision and Regulation
The Federal Reserve, along with several state and federal agencies, supervises and regulates the nation's
financial institutions to ensure their financial soundness and compliance with banking, consumer, and other
applicable laws. Specifically, the Federal Reserve is responsible for supervising all bank holding companies and
their nonbank and foreign subsidiaries; state member banks and their foreign branches and subsidiaries; Edge
Act and agreement corporations through which U.S. banking organizations conduct operations abroad; and U.S.
activities of foreign banking organizations.
The San Francisco Federal Reserve Bank has implemented a strategy that focuses resources in areas of greatest
need, investing in new technology to increase overall effectiveness. The strategy also helps to retain and develop
high performing staff, and strengthen communication and outreach with the banking community.

The first day of the year 2000
on the Gregorian calendar as it
will look on various calendars:
Mayan:
12.19.6.15.0, 9
Ahau 8 Kankin
Islamic: 24 Ramadan 1420

At the end of 1998 there were 70 state
member banks in the District. There were also
201 holding companies with assets of $374.9
billion, 106 agencies and branches of foreign
banks, 15 Edge and agreement corporation
offices, and 29 representative offices.
Applications activity increased somewhat with
244 filings received in 1998, compared to 234
in 1997. Two major cases last year which
involved considerable analysis and staff

Hebrew:
Julian:
Persian:
Ethiopic:
Coptic:
Chinese:

23 Teveth 5760
19 December 1999
11 Dey 1378
23 Takhsas 1993
22 Kivahk 1716
Cycle 78, year 16,
month 11, day 25

involved considerable analysis and staff
attention were the mega­mergers of Bank of
America with NationsBank and Wells Fargo
with Norwest. Applications to form bank
holding companies decreased by 8 from 35 to
27.
Supervision and regulation staff also made
significant contributions to the Bank's outreach
efforts on behalf of Y2K by participating in
numerous educational seminars throughout
the District.

Important functions of the Community Affairs unit are to encourage banks to work with community organizations
to help meet the credit needs of their communities and to monitor compliance with consumer protection laws
relating to credit. In keeping with this, they created and facilitated a series of Sovereign Lending meetings to
address access to credit issues for Native American tribes in Washington, Oregon, Idaho, and Utah. These
seminars brought together tribal representatives, local bankers, and government and nonprofit representatives.
The program has increased lending, spurred the creation of small business centers on several reservations,
improved relationships between bankers and tribal representatives, and led to the adoption of uniform
commercial codes by several tribes.
Other workshops presented during the year encouraged banks' involvement with nonprofit small business
assistance providers and introduced a new concept to provide funds to match deposits low­income customers
place in special savings accounts, helping them to reach specific financial goals.

The Federal Reserve Bank of San Francisco

1998 Annual Report
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From left, Raymond H. Laurence, Senior Vice President­in­Charge,
Portland; Andrea P. Wolcott, Vice President­in­Charge, Salt Lake City;
Gordon R. G. Werkema, Executive Vice President, Northern Region;
and Mark Mullinix, Senior Vice President­in­Charge, Los Angeles.

The Federal Reserve Bank of San Francisco

1998 Annual Report
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Volume (in thousands)
1996

1997

1998

4,317,704

4,626,649

4,739,673

748,535

654,068

483,942

Other Treasury original issues

125

105

76

Book­entry securities processed

829

751

673

Custody Services
Cash Services
Currency notes paid into circulation
Food stamp coupons processed
Securities Services

Payments Services
Check Services
Commercial checks collected

2,188,856

2,313,792

2,312,860

Government checks processed

61,741

54,466

52,103

Return items processed

32,767

35,251

34,591

Electronic Payments Services
Wire transfers processed

22,113

24,058

26,622

Automated clearinghouse
transactions processed

404,974

428,564

499,527

461

478

463

83

86

77

Discounts & Advances
Total discounts & transactions*
Number of financial
institutions accommodated*
*Whole numbers (not in thousands)

The Federal Reserve Bank of San Francisco

1998 Annual Report
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Volume (in thousands)
1996

1997

1998

4,317,704

4,626,649

4,739,673

748,535

654,068

483,942

Other Treasury original issues

125

105

76

Book­entry securities processed

829

751

673

Custody Services
Cash Services
Currency notes paid into circulation
Food stamp coupons processed
Securities Services

Payments Services
Check Services
Commercial checks collected

2,188,856

2,313,792

2,312,860

Government checks processed

61,741

54,466

52,103

Return items processed

32,767

35,251

34,591

Electronic Payments Services
Wire transfers processed

22,113

24,058

26,622

Automated clearinghouse
transactions processed

404,974

428,564

499,527

461

478

463

83

86

77

Discounts & Advances
Total discounts & transactions*
Number of financial
institutions accommodated*
*Whole numbers (not in thousands)

The Federal Reserve Bank of San Francisco

1998 Annual Report
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Robert T. Parry
President and Chief
Executive Officer
John F. Moore
First Vice President and
Chief Operating Officer
Jack H. Beebe
Senior Vice President and
Director of Research
Sara K. Garrison
Senior Vice President
Michael J. Murray
Senior Vice President
Terry S. Schwakopf
Senior Vice President
D. Kerry Webb
Senior Vice President
John H. Parrish
General Auditor
Robert D. Mulford
Vice President, General
Counsel, and Ethics Officer

Deborah S. Smyth
Vice President

James J. Callahan
Assistant Vice President

James J. Tenge
Assistant Vice President

Michael J. Stan
Vice President

Teresa M. Curran
Assistant Vice President

Elizabeth L. Wood
Assistant Vice President

Susan A. Sutherland
Vice President

Gail A. Garvey
Assistant Vice President

Kevin C. Alecca
Check Processing Officer

Sallie H. Weissinger
Vice President and Director
of Public Information

Elaine G. Geller
Assistant Vice President

Angela J. D'Alessandro*
Examining Officer

Louis "Skip" George
Assistant Vice President

* On loan to the Board

Patricia A. Welch
Vice President
Jet Auer de Saram
Director and Deputy General
Counsel
James M. Barnes
Director
Kenneth R. Binning
Director
Harold H. Blum
Director
Eliot E. Giuili
Director

Elizabeth R. Masten
Vice President and
Secretary of the Board

Andreas Hauer
Director

Barbara Contini
Vice President

John S. Hsiao
Director

Frederick T. Furlong
Vice President

Ann Marie Kohlligian
Director

William K. Ginter
Vice President

Elizabeth M. O'Shea
Director

Reuven Glick
Vice President

David W. Walker
Director

John P. Judd
Vice President and Associate
Director of Research

Kenneth M. Kinoshita
Associate General Counsel

Donald R. Lieb
Vice President
Ronald E. Mitchell, Jr.
Vice President

(As of December 31, 1998)

Bonnie R. Allen
Assistant Vice President
Barbara J. Beckman
Assistant Vice President
Armen Beylerian
Assistant Vice President

Todd A. Glissman
Assistant Vice President

Barbara A. Bennett
Corporate Strategy and
Development Officer

Ellen M. Hamilton
Assistant Vice President

Thomas R. Burke
Accounting Officer

Beverley­Ann Hawkins
Assistant Vice President

Richard K. Cabral
Cash Officer

Peter K. C. Hsieh
Assistant Vice President

Lee C. Dwyer
Electronic Payments and
Fiscal Services Officer

Michael E. Johnson
Assistant Vice President
Craig B. Knudsen
Assistant Vice President
Mark E. Levonian
Assistant Vice President
Ellsworth E. Lund, Jr.
Assistant Vice President

Alice Farrell
Automation Resources
Officer
Joseph P. Mattey
Research Officer
Brian Motley
Research Officer

Joy Hoffmann Molloy
Assistant Vice President

Gary P. Palmer
Information and Technology
Officer

Darren S. Post
Assistant Vice President

Glenn D. Rudebusch
Research Officer

Philip M. Ryan
Assistant Vice President

Mark M. Spiegel
Research Officer

W. Starr Seegmiller
Assistant Vice President

Bharat Trehan
Research Officer

Daniel K. Shaw
Assistant Vice President

Roxana C. Tsougarakis
Financial Planning and
Control Officer

Gordon S. Tannura
Assistant Vice President

Mary E. Wujek
Information and Technology
Officer

The Federal Reserve Bank of San Francisco

1998 Annual Report
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Los Angeles Branch
Mark L. Mullinix
Senior Vice President

Jimmy F. Kamada
Assistant Vice President

Sean J. Rodriguez
Vice President

Mark E. Koegel
Assistant Vice President

Robert G. Wiley
Vice President

Dale L. Vaughan
Assistant Vice President

Robert W. Replogle
Director

Linda J. Westerschulte
Assistant Vice President

Marla E. Borowski
Assistant Vice President

Anthony P. Dazzo
Cash Officer

Robert C. Johnson
Assistant Vice President

Steven E. Jung
Check Processing Officer
Sherann L. Mack
Business Development Officer
Northern Region
Gordon R. G. Werkema
Executive Vice President

Portland Branch

Seattle Branch

Raymond H. Laurence
Senior Vice President

Gale P. Ansell
Assistant Vice President

Mary E. Lee
Assistant Vice President

Mark A. Gould
Assistant Vice President

Robert D. Long
Assistant Vice President

Lynn M. Jorgensen
Assistant Vice President

Robin A. Rockwood
Assistant Vice President

Kenneth L. Peterson
Assistant Vice President
Salt Lake City Branch

Andrea P. Wolcott
Vice President

Richard B. Hornsby
Assistant Vice President

Jed W. Bodily
Assistant Vice President

Thomas P. McGrath
Assistant Vice President

Gerald R. Dalling
Assistant Vice President
(As of December 31, 1998)

The Federal Reserve Bank of San Francisco

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Federal Reserve Bank of San Francisco
Chairman and
Federal Reserve Agent
Gary G. Michael
Chairman and CEO
Albertson's Inc.
Boise, Idaho

E. Lynn Caswell
Chairman and CEO
Pacific Community Banking Group
Laguna Hills, California

Warren K. K. Luke
Vice Chairman, President,
and CEO
Hawaii National Bank
Honolulu, Hawaii

Deputy Chairman
Nelson C. Rising
President and CEO
Catellus Development Corp.
San Francisco, California

Krestine Corbin
President and CEO
Sierra Machinery, Inc.
Sparks, Nevada

Byron I. Mallott
Executive Director
Alaska Permanent Fund
Corporation
Juneau, Alaska

Robert S. Attiyeh
Senior Vice President and CFO
(Retired)
Consultant
Amgen, Inc.
Thousand Oaks, California

Sheila D. Harris
Consultant
Harris Consulting
Litchfield Park, Arizona

John V. Rindlaub
President, Northwest Region
Bank of America
Seattle, Washington

1
9
9
9

Federal Advisory Council
Member
Walter A. Dods, Jr.
Chairman and CEO
BancWest Corp.
Honolulu, Hawaii
Los Angeles Branch
Chairman of the Board
Lonnie Kane
President
Karen Kane, Inc.
Los Angeles, California

John H. Gleason
Senior Vice President
Del Webb Corporation
Phoenix, Arizona

William D. Jones
Chairman, President, and
CEO
CityLink Investment Corp.
San Diego, California

Lori R. Gay
President
Los Angeles Neighborhood
Housing Services, Inc.
Los Angeles, California

Russell Goldsmith
Chairman and CEO
City National Bank
Beverly Hills, California

Liam E. McGee
President, Southern
California
Bank of America
Los Angeles, California
Linda Griego
Managing General Partner
Engine Co. No. 28
Los Angeles, California

Portland Branch
Chairman of the Board
Nancy Wilgenbusch
President
Marylhurst University

Patrick Borunda
Executive Director
ONABEN ­­ A Native American
Business Network

Marylhurst, Oregon

Portland, Oregon

Phyllis A. Bell
President
Oregon Coast Aquarium
Newport, Oregon

Martin Brantley
President and General Manager
Oregon's 12­KPTV
Portland, Oregon

Karla S. Chambers
Vice President and Co­Owner
Stahlbush Island Farms, Inc.
Corvallis, Oregon

Gary T. Duim
Vice Chairman
U.S. Bancorp
Portland, Oregon
Guy L. Williams
President and CEO
Security Bank
Coos Bay, Oregon

Salt Lake City Branch
Chairman of the Board
Barbara L. Wilson
Idaho and Regional Vice President
U.S. WEST
Boise, Idaho

Maria Garciaz
Executive Director
Salt Lake Neighborhood
Housing Services, Inc.
Salt Lake City, Utah

Jon M. Huntsman, Jr.
Vice Chairman
Huntsman Corporation
Salt Lake City, Utah

R. D. Cash
Chairman, President and CEO
Questar Corporation
Salt Lake City, Utah

Curtis D. Harris
Chairman, President and CEO
Barnes Banking Co.
Kaysville, Utah

J. Pat McMurray
President
First Security Bank, N.A.
Boise, Idaho
Nancy S. Mortensen
Vice President, Marketing
Zions Cooperative Mercantile
Institution
Salt Lake City, Utah

Seattle Branch
Chairman of the Board
Richard R. Sonstelie
Chairman of the Board
Puget Sound Energy, Inc.
Bellevue, Washington

James C. Hawkanson
Managing Director and CEO
The Commerce Bank of
Washington, N.A.
Seattle, Washington

Tomio Moriguchi
Chairman and CEO
Uwajimaya, Inc.
Seattle, Washington

Boyd E. Givan
Senior Vice President and CFO
(Retired)
The Boeing Company
Seattle, Washington

Betsy Lawer
Vice Chair and COO
First National Bank of Anchorage
Anchorage, Alaska

Helen M. Rockey
President and CEO
Brooks Sports, Inc.
Bothell, Washington
Peter H. Van Oppen
Chairman and CEO
Advanced Digital Information
Corporation
Redmond, Washington

The Federal Reserve Bank of San Francisco

1998 Annual Report
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1
9
9
9

Chairman
Bailey "Biff" S. Barnard
Senior Vice President
Allied Capital Corporation
San Francisco, California

Vice Chairman
Walter F. Payne, Jr.
President and CEO
Blue Diamond Growers
Sacramento, California
Members

Barbara Bry
Director
ATCOM/INFO
San Diego, California

Ed P. Mayne
President
Utah AFL­CIO
West Valley City, Utah

Bob L. Vice
President
BLV, Agribusiness Consultants
Fallbrook, California

Thomas E. Cleveland
Chairman and CEO
Access Business Finance
Bellevue, Washington

Laura E. Naumes
Vice President
Naumes, Inc.
Medford, Oregon

Richard S. Walden
President
Farmers Investment Company
Sahuarita, Arizona

Paula R. Collins
Chief Executive Officer
WDG Ventures, Inc.
San Francisco, California

Lawrence S. Okinaga
Partner
Carlsmith Ball
Honolulu, Hawaii

Don M. "Duff" Willey
President
Willey Motors, Inc.
Bountiful, Utah

Paul Ecke III
Chairman and CEO
Paul Ecke Ranch
Encinitas, California

Peter H. Parra
Chairman
Board of Supervisors
Fifth District, County of Kern
Bakersfield, California

Denice A. Young, C.P.A.
President
Young Real Estate Group
Torrance, California

The Federal Reserve Bank of San Francisco

1998 Annual Report
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San Francisco Office
P.O. Box 7702
San Francisco, California 94120
Los Angeles Branch
P.O. Box 2077, Terminal Annex
Los Angeles, California 90051
Portland Branch
P.O. Box 3436
Portland, Oregon 97208
Salt Lake City Branch
P.O. Box 30780
Salt Lake City, Utah 84130
Seattle Branch
P.O. Box 3567
Seattle, Washington 98124­3567

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This Report was produced and written by Karen Flamme.
Design and illustrations were created by Mark Hendricks.
Sidebars and layout were completed by Dylan Frederick.
Color photography by Paul Schulz.

The Federal Reserve Bank of San Francisco

1998 Annual Report
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S*

February 11, 1999

To: PricewaterhouseCoopers LLP
The management of the Federal Reserve Bank of San Francisco (FRB­SF) is responsible for the
preparation and fair presentation of the Statement of Financial Condition, Statement of Income, and
Statement of Changes in Capital as of December 31, 1998 (the "Financial Statements"). The Financial
Statements have been prepared in conformity with the accounting principles, policies, and practices
established by the Board of Governors of the Federal Reserve System and as set forth in the Financial
Accounting Manual for the Federal Reserve Banks, and as such, include amounts, some of which are
based on judgments and estimates of management.
The management of the FRB­SF is responsible for maintaining an effective process of internal controls
over financial reporting including the safeguarding of assets as they relate to the Financial
Statements. Such internal controls are designed to provide reasonable assurance to management and
to the Board of Directors regarding the preparation of reliable Financial Statements. This process of
internal controls contains self­monitoring mechanisms, including, but not limited to, divisions of
responsibility and a code of conduct. Once identified, any material deficiencies in the process of
internal controls are reported to management, and appropriate corrective measures are implemented.
Even an effective process of internal controls, no matter how well designed, has inherent limitations,
including the possibility of human error, and therefore can provide only reasonable assurance with
respect to the preparation of reliable financial statements.
The management of the FRB­SF assessed its process of internal controls over financial reporting
including the safeguarding of assets reflected in the Financial Statements, based upon the criteria
established in the "Internal Control Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this assessment, the management of
the FRB­SF believes that the FRB­SF maintained an effective process of internal controls over financial
reporting including the safeguarding of assets as they relate to the Financial Statements.
Federal Reserve Bank of San Francisco
by
Robert T. Parry
President
by
John F. Moore
First Vice President

PricewaterhouseCoopers LLP
Report of Independent Accountants

To the Board of Directors of the
Federal Reserve Bank of San Francisco

We have examined managements assertion that the Federal Reserve Bank of San Francisco ("FRB
San Francisco") maintained effective internal control over financial reporting and the safeguarding of
assets as they relate to the Financial Statements as of December 31, 1998, included in the
accompanying Managements Assertion.
Our examination was made in accordance with standards established by the American Institute of
Certified Public Accountants, and accordingly, included obtaining an understanding of the internal
control over financial reporting, testing, and evaluating the design and operating effectiveness of the
internal control, and such other procedures as we considered necessary in the circumstances. We
believe that our examination provides a reasonable basis for our opinion.
Because of inherent limitations in any internal control, misstatements due to error or fraud may occur
and not be detected. Also, projections of any evaluation of the internal control over financial reporting
to future periods are subject to the risk that the internal control may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may

changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, managements assertion that the FRB San Francisco maintained effective internal
control over financial reporting and over the safeguarding of assets as they relate to the Financial
Statements as of December 31, 1998, is fairly stated, in all material respects, based upon criteria
described in " Internal Control ­ Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
[Signed PricewaterhouseCoopers LLP]
San Francisco, California
March 5, 1999
PricewaterhouseCoopers LLP
Report of Independent Accountants

To the Board of Governors of The Federal Reserve System
and the Board of Directors of the Federal Reserve
Bank of San Francisco

We have audited the accompanying statements of condition of the Federal Reserve Bank of San
Francisco (the "Bank") as of December 31, 1998 and 1997, and the related statements of income and
changes in capital for the years then ended. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
As discussed in Note 3, the financial statements were prepared in conformity with the accounting
principles, policies, and practices established by the Board of Governors of The Federal Reserve
System. These principles, policies, and practices, which were designed to meet the specialized
accounting and reporting needs of The Federal Reserve System, are set forth in the Financial
Accounting Manual for Federal Reserve Banks and constitute a comprehensive basis of accounting
other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Bank as of December 31, 1998 and 1997, and the results of its operations for
the years then ended, on the basis of accounting described in Note 3.
[Signed PricewaterhouseCoopers LLP]
San Francisco, California
March 5, 1999
*As of December 31, 1998