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Federal Reserve Bank of St. Louis

table of contents


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Federal Reserve Bank of St. Louis

from the boardroom ................................

3

perspectives on a century of change ........

4

directors' perspectives ..............................

9

highlights of 1999 .................................... 13
directors .................................................. 20

1


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Federal Reserve Bank of St. Louis

From left (standing):
John E Moore, First Vice President
Nelson C. Rising, Deputy Chairman
Robert T Parry, President
Seated:
Gary G. Michael, Chairman

2

from the boardroom
The year just ended was the culmination of several years of
preparation to ensure the banking system's readiness for Y2K. In
addition, it was a year in which we continued to respond efficiently and creatively to our customers' needs. Handling these
diverse demands required exceptional dedication from our
employees, and we thank them for their continued high level of
achievement, professionalism, and dedication.

Just this last summer, I, as president of the Federal Reserve Bank
of San Francisco, was part of a delegation that visited central
bankers in Japan and China. We were interested in learning more
about economic and financial developments in their countries
and gaining a better understanding of banking conditions and
financial sector reforms that are taking place there. Information
such as this, along with the invaluable grassroots information on
local economic conditions provided to us by our directors, is key
to the formulation of a successful monetary policy.

It was also the year in which the entire Federal Reserve System
celebrated its 85 th year of service. At the end of 1913, President
Woodrow Wilson signed the Federal Reserve Act, creating the
Federal Reserve Banks that opened throughout the country the
following year.

We want to extend particular thanks and appreciation to those
directors and advisory council members who retired from Federal
Reserve service at 1999 year end: on the Portland Branch Board,
Gary T Duim (Vice Chairman - Retired, U.S. Bancorp, Portland,
OR) ; on the Salt Lake City Branch Board, Nancy S. Mortensen
(Vice President - Marketing Services, Zions Cooperative Mercantile Institution, Salt Lake City, UT) ; from the Seattle Branch
Board, Tomio Moriguchi (Chairman and CEO, Uwajimaya, Inc. ,
Seattle, WA); and from the Twelfth District Advisory Council, its
Chairman, Bailey (Biff) S. Barnard (Senior Vice President, Allied
Capital Corporation, San Francisco, CA) .

The influence of the Federal Reserve is now felt far beyond what
the early founders could have imagined. Two of our directors
profiled in this Report are from states that did not exist 85 years
ago - Alaska and Hawaii. In addition, the Pacific Rim countries
are now a significant focus of this Bank.


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Federal Reserve Bank of St. Louis

JW-r.7
Gary G. Michael
Chairman

3

Robert T Parry
President

· perspectives on a century of change
The Federal Reserve Bank of San Francisco, along
with the rest of the Federal Reserve System,
celebrated its 85 th anniversary on November 16,
1999. It was on that day in 1914 that the San
Francisco office officially opened for business in
rented quarters at the rear of the Merchants National
Bank. The staff consisted of a couple dozen employees, many on loan from
local banks. They initially
busied themselves receiving and counting gold
from member banks,
recording capital stock
subscriptions, and issuing
capital stock receipts .
Things were to change
rapidly in the next few years as
check collection began and as the
Federal Reserve Banks played a
critical role in securing the funds
necessary to carry on World War I.

by karen flamme


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Prior to the establishment of
the Federal Reserve System,
banking was marred by
periodic financial panics
that contributed to bank
failures , business bankruptcies, and general economic depressions. Locally
owned, independent banks flourished , many with
dangerously low reserves. In 1907 a particularly
severe loss of confidence in the stability of some

4

banks caused yet
another bank run
and panic. It had
become clear to
many that the
country needed an
"elastic" currency that
could increase in volume when the demands
on banks necessitated it. Without that, there was
no way for banks to bolster reserves when
confronted with exceptional demands.
Congress responded by creating the National
Monetary Commission, chaired by Senator Nelson
W. Aldrich, to conduct a comprehensive study and
recommend necessary and desirable changes to the
money and banking system of the United States.
This task was not an easy one. Nevertheless, within
a couple of years, reform plans began to emerge.
There ensued lengthy debates with battle lines
generally being drawn between the progressives,
primarily representing the small town businessman
and farmer, and the conservatives, mainly representing the powerful eastern business and banking
establishment.


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Contentious arguments sprang up with each new
proposal, but President Woodrow Wilson and his
advisers persevered in developing and securing
congressional passage of a monetary reform plan
that became known as the Federal Reserve Act and
that was ultimately signed into law on December 23,
1913. The 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."
The Federal Reserve Act combined central with
regional power by dividing the country into 12
Federal Reserve districts, each under the supervision

of a Federal Reserve Bank. At the apex of the new
central banking system was the Federal Reserve
Board in Washington, D.C. , composed of the
Secretary of the Treasury, the Comptroller of the

5

Currency, and five others appointed by the President
for 10-year terms. (Later, the Banking Act of 1935
changed the composition of the Board and renamed
it the Board of Governors of the Federal Reserve
System.)
All national banks in each district were required to
join the Federal Reserve and those state banks that
so chose could also join. (At the end of 1913 the
U.S. had some 27,000 commercial banks- more
than twice as many state banks as national ones.)
Member banks were required to invest six percent of
their capital and surplus in their regional Reserve
Bank. The Reserve Bank, in turn, could make loans
to member banks by rediscounting their commercial
paper, buy and sell government bonds, and issue a
new currency - Federal Reserve notes.

The Act stipulated that a nine-member board of
directors representing the interests of banking,
industry, commerce, agriculture, and the general
public would govern each regional bank.

In May of 1916 our Bank in San Francisco had 25
employees. The check collection operation started in
July 1916, and by the end of that year the staff had
more than doubled to about 60. In addition , U.S.
participation in World War I put a tremendous
workload on the Federal Reserve Banks as they
carried out their role as fiscal agents of the government. The first Liberty Loan was floated in 1917,
and the volume of work and number of employees
increased rapidly. The Federal Reserve Banks actively
promoted the sale of the four Liberty Loans and the
Victory Loan , which were issued to raise funds to
support the war effort.
The summer of 1914 was a busy time for organizers
of the Federal Reserve Bank of San Francisco.
Directors were selected for the Twelfth District
bank, office space was located, and a staff was
hurriedly assembled.
The opening date for all Reserve Banks was set for
November 16, 1914, in order to make the reserve
provisions of the Federal Reserve Act effective even
though it was clear that the banks wouldn't be ready
for normal business transactions that quickly. War
had broken out in Europe four months before
the banks were set to open, and help from the
banks was needed to alleviate the credit strain
that was occurring.
When the doors first opened for business,
it wasn't clear just what the business of Federal
Reserve Banks would entail. There were no precedents to guide the banks, and each bank had to work
out its own procedures.


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Federal Reserve Bank of St. Louis

The Bank also expanded geographically in 1917.
In order to give good service to member banks
throughout the District, the Spokane Branch was
opened on July 26, followed by the Seattle
Branch on September 19 and Portland on
October 1. On April 1, 1918, the Salt Lake City
Branch opened. It was nearly two years later January 2 , 1920-that the Los Angeles Branch
opened its doors. By May 1921 the District
boasted a total staff of 1306 - 637 at the head
office and 669 at the five branches.
At the end of 1923 the San Francisco staff
moved out of temporary locations and into the
Bank's newly built headquarters at 400
Sansome Street, a location that it would occupy
for the next 60 years. The Spokane Branch was
closed in 1938, but the other branches remain in
service to the present time.

6

Since those early days of central banking, further
legislation has been enacted to clarify and supplement the Federal Reserve Act of 1913. Key laws that
have affected the Federal Reserve are the Banking Act
of 1935; the Employment Act of 1946; the 1970
amendments to the Bank Holding Company Act;
the International Banking Act of 1978; the Full
Employment and Balanced Growth Act of 1978; the
Depository Institutions Deregulation and Monetary
Control Act of 1980; the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989;
and the Federal Deposit Insurance Corporation
Improvement Act of 1991 .

Today the Federal Reserve's duties fall into four
general areas:
• conducting the nation's monetary policy by
influencing the money and credit conditions in
the economy in pursuit of full employment and
stable prices;
• supervising and regulating banking institutions to
ensure the safety and soundness of the nation's
banking and financial system and to protect the
credit rights of consumers;
• maintaining the stability of the financial system
and containing systemic risk that may arise in
financial markets; and

term partisan political pressures, its operations
are financed from its own resources. The entire
System is subject to congressional oversight and
makes regular reports to Congress on its
activities and plans for monetary policy.
However, the central bank's day-to-day policy
and operational decisions do not require
congressional or presidential approval.
The seven-member Board of Governors in
Washington, D.C. , oversees the Federal Reserve
System. Its members are appointed by the President
of the United States and confirmed by the Senate to
serve 14-year terms, staggered so that one term
expires each even-numbered year. The President
designates a Chairman and Vice Chairman from the
Board to serve four-year terms.
Each District Reserve Bank has a head office board
of nine directors chosen from outside the Bank. Three
directors are chosen by and represent banks that are

Each of the Federal Reserve Bank of San Franciscd s
four branches - Los Angeles, Portland, Salt Lake
City, and Seattle - has its own seven-person Board
of Directors, four appointed by the head office board
and three by the Board of Governors.
These boards provide the Federal Reserve System with
a wealth of grassroots information on economic
conditions throughout the Twelfth District. In
addition, directors oversee the Reserve Bank operations, select the Bank's president and first vice
president, and advise the Bank's president and the
Board of Governors on the general direction of
monetary policy by recommending the Bank's
discount rate - the interest rate a Reserve Bank
charges eligible financial institutions to borrow funds
on a short-term basis.
The discount rate, open market operations, and
reserve requirements are the three tools the Federal
Reserve uses to conduct monetary policy. The primary
tool is open market operations, as managed by the
Federal Open Market Committee (FOMC). The
FOMC is composed of the Board of Governors and
five of the 12 Federal Reserve Bank presidents. The
president of the Federal Reserve Bank of New York is
a permanent member, and the other presidents serve
one-year terms on a rotating basis. All 12 presidents
participate in every FOMC discussion , but only those
serving as members may vote . The actions taken by

• providing certain financial services to the U.S.
government, to the public, to financial institutions, and to foreign official institutions, including
playing a major role in operating the nation's
payments system.
The Federal Reserve System still operates as an
independent agency of the United States government.
In keeping with the founding philosophy that ensures
autonomy and protects the central bank from short-


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members of the Federal Reserve System. The other
directors, selected by District member banks or the
Board of Governors, represent the general public.

7

the FOMC regulate the amount of reserves available
to depository institutions, set ranges for the growth
of the monetary aggregates, and direct operations
undertaken by the Federal Reserve in foreign
exchange markets.
Responsibilities of the regional Reserve Banks have
expanded considerably over the past 85 years, as
have the staffing levels. The way our work is done
also has changed dramatically. While a banker in
1914 was well equipped
to handle a day's work
with adding machines,
punched card tabulators,
typewriters, duplicating
machines, and basic
check-writing equipment,
today's banker operates
in an electronic world.
Reserve Banks provide banking services to both
depository institutions and the federal government.
For depository institutions, the Fed maintains reserve
and clearing accounts and provides such payment
services as processing checks, electronically transferring funds , and distributing and receiving currency
and coin. Fedwire electronic transfers of funds and
securities in the District now average 118,400 per
day, for a dollar volume of $124 billion. Checkprocessing machinery, operating at speeds up to
100,000 checks per hour, handles approximately
8.9 million checks per day, six days a week.


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The Federal Reserve acts as the banker, or fiscal
agent, for the federal government. It maintains
the U.S . Treasury Department's transaction
accounts; pays Treasury checks; processes electronic
payments; conducts nationwide auctions of Treasury
securities; and issues, services, and redeems U.S.
government securities.

From its beginning as the westernmost outpost of the
Federal Reserve System, the Twelfth District has
grown to rank first in the size of its economy. Its
53 .2 million people account for 19. 7 percent of the
total U.S. population, and its $1.42 trillion annual
personal income accounts for 19.9 percent of the
nation's total personal income. And the District
continues to grow.

As the banking system has grown, so has the
supervisory and regulatory role of the Federal Reserve. Fed personnel work in conjunction with other
federal and state financial authorities to ensure the
financial soundness of financial institutions and the
fair and equitable treatment of consumers in their
financial dealings.

8

In 1921 an employee writing in the Bank's
employee publication reflected on the Bank's
first seven years of growth and predicted, "In the
expansion and development of the Federal Reserve
System in the years to come there will be new and
interesting problems with which to wrestle. In their
solution will come opportunities for all thinking men
of ability, energy, and vision. " The author was
wrong about gender, but got the rest of it right.

director's perspective: warren k.k. luke
Head Office Director Warren K. K. Luke describes his family's bank- Hawaii National Bank
- as a community bank. It was founded in 1960 by his father K.J. Luke , whose ancestors
came to Hawaii from China in the 1870s and began then to establish deep roots in the
Hawaiian community. Opening day of the bank was record setting for the only federally
chartered bank in Hawaii. By the 3 p.m. closing time , the bank had $6.25 million in deposits,
and now, some 40 years later, it has expanded to 13 offices. K.J. Luke is now chairman
emeritus of the board, and daily operations are overseen by son Warren , chairman and
president, who has been an officer of the bank since 1972.
The similarities between father and son are striking - both graduated from Harvard
University's Graduate School of Business, both started their business careers in real estate
development, both have four children, and both are committed to maintaining a true
community bank.
Because it is a small, local bank, Hawaii National Bank's prosperity
is directly linked to the prosperity of the Hawaiian economy,
which has been in a downward spiral for the past 10 years.
Businesses have had to adjust to this situation, and recently the
decision was made to buy out shareholders, go private, and
make the bank family-owned to accomplish its long-term goals.
Warren Luke explains that keeping the bank accessible to all its
customers and developing strong personal relationships is a
critical adjunct to the technology that his bank also embraces.
He believes that these hard economic times bring out entrepreneurs who can benefit from a strong relationship with a
community banker.

It is this type of grassroots information on both the Hawaiian
and Pacific Rim economies that Luke brings to the Federal
Reserve Bank of San Francisco as he serves his third term as
the first director from Hawaii.


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Federal Reserve Bank of St. Louis

9

Serving on the Fed board is but one of Luke's many public
service commitments. He holds leadership positions in
numerous banking, educational, charitable, and community
organizations on local, regional, and national levels. In
addition, he remains active in various aspects of real estate
management and development.
In the 40 years since Hawaii became a state and Hawaii
National Bank opened its doors, the Luke family has witnessed
a lot of changes. In the early days business was often done on a
handshake, and people thought very hard before they filed for
bankruptcy. Many of the local businesses that started soon after
the war are now being taken over by the next generation.
These businesses must now make some tough decisions about
whether they can continue to operate as a closely held or
family business. When Luke talks to his
customers about concerns such as these, he
understands their situation because he has
gone through it himself. In fact, it is giving
just that kind of service - helping customers succeed in business as well as in family
relationships - that is most rewarding to
him as a banker.

director's perspective: betsy lawer
When Seattle Branch Director Betsy Lawer tells you she grew up in the family bank, she really means it. At the time she was born, her parents lived in a second
story apartment in the building that housed the First National Bank of Anchorage , and she remembers chatting with (and dropping toys on) customers as they
entered the bank.
The bank was founded in 1922, and in 1941 Lawer's grandfather, Warren N. Cuddy, bought a controlling interest and became the bank's president, beginning a
family legacy which would last into the next century. His son, D. H. Cuddy, succeeded him and still serves as chairman of the board and president of the bank.
Granddaughter Betsy Lawer continues the family enterprise as vice chairman and chief operating officer.
As the eldest of six, Lawer had the privilege as a child to accompany her father on his Saturday morning customer calls to Alaska businessmen, many of them
independent souls who had built their own businesses. She listened, learned, and developed a strong respect and admiration for the personal aspects of banking.
She began working for the bank during summer vacations as soon as she could, progressing through a wide variety of jobs.
Looking back, Lawer recalls Alaska's first oil lease sale in 1969 in Prudhoe Bay and the tremendous impact it had on
the future of the state. The sale netted over $900 million , and deposits on that sum were loaded into bags and flown
by chartered jet to New York City because its location in the Eastern Standard Time zone allowed the money to earn
an additional day's interest. First National Bank of Anchorage aided in supervising the transaction , and Lawer, on
her way back to college at Duke University, was lucky enough to ride along in that chartered jet. She returned to
college and promptly changed her major to economics. Now, as a director of the Federal Reserve Bank of San
Francisco, she appreciates being able to apply her theoretical education in economics.
Lawer keeps her finger on the pulse of the community, both as a banker and as a community leader. Her grandmother, a former chairman of the bank, headed the first United Way drive in Alaska, and Lawer is proud to follow in
her footsteps . As a community banker, she balances the diverse needs of the populations served by the bank's 28
locations - ranging from rural fishing villages to metropolitan cities. In each case, understanding the customers'
banking needs in order to provide them with the service and technology they need to do business remains the bank's
primary goal.
Lawer provides critical input to the Seattle Branch Board on Alaska's economy. Because Alaska's economy is relatively small, small changes in it make a big difference, and its importance as an international export hub is significant. She also uses the Fed as an important resource for advice and counsel in operational areas.
While the Alaskan economy and the customer base have changed dramatically during her family's years with First National Bank of Anchorage, Lawer is proud
that the bank's guiding philosophy, as stated by her grandfather more than 50 years ago, is still intact. The goals are: safeguard the depositors' money, serve the
community in which the bank operates to the limits of the bank's deposits, capital, and personnel; and provide the employees with adequate wages, the tools to
do their jobs, and a comfortable place to work. And, if you do that, a proper return is earned for the shareholders.

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10

director's perspective: a.w. clausen
A. W. Clausen has a long, distinguished career in banking. In 1970, at age 46, he was selected to head Bank of America and over the next 20 years served as its
president, chairman, and chief executive officer. During the 1970s he also served terms as president and Twelfth District member of the Federal Advisory Council (for
the Board of Governors of the Federal Reserve) and as a director of the Federal Reserve Bank of San Francisco. Clausen left Bank of America in 1981 to serve a term
as president of the World Bank, then returned to lead Bank of America. Now, in his retirement, Clausen remains an involved participant in banking and business
issues, particularly in the international arena.
Perhaps, surprisingly, it was the love of a young lady, not the love of banking, that initially got him into the business. Clausen arrived in Los Angeles in 1949 after
graduating from the University of Minnesota law school to "woo and pursue" his sweetheart. He took a job counting cash for Bank of America at $180 per month
and thus began what would turn out to be a banking career - and a marriage - that would span the next 50 years.
In 1949, when Clausen joined Bank of America, college graduates, especially those with an added law degree , were in short supply. He was soon selected for the
bank's two-year management training program rotating through a variety of assignments. He held several permanent branch assignments and then was promoted to
bank administration in the corporate finance area. In 1963 he moved to San Francisco as head of the corporate finance department in northern California. Seven
years later he was named president and chief executive officer.
During his career Clausen has seen the Federal Reserve both from the inside - as a director and Federal Advisory Council member - and from the outside - as a
customer. Clausen recalls his service on the Fed board as a learning experience affording him the opportunity for a behind-the-scenes look at how the Fed operates
and why it has certain rules and regulations. He remembers being on the customer side of dealing with the Fed during troubled financial times at B of A, and, as he
reflects on those times, he encourages the Fed to continue its assertiveness in bringing discipline to the banking system. He also commends the Fed for having an
increasingly enlightened view of commercial banks and for adopting regulations that recognize the more competitive world in which commercial banks operate today.
When asked to comment on major changes in banking over the past 50 years, Clausen is quick to cite paper
processing as number one. He is proud that Bank of America was at the forefront of developing the magnetic ink
character recognition system for check handling, which had significant ramifications in reducing float and speeding
processing throughout the world.
Looking forward , Clausen is excited about the impact of the Internet and the possibilities it affords for the future
of banking, and he hopes the financial sector will not fight it, but will use it to its fullest advantage.
From his vantage point at the head of the world's largest commercial bank, Clausen faced challenges and helped lead
the vast growth and change in banking. He says he's very lucky to have had these opportunities, and, when asked to
pass along his secret of success, he quotes an inscription on a piece of driftwood he treasures: "When all else fails , don't
forget sheer dumb luck. "


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11

executive committee


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Federal Reserve Bank of St. Louis

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

12

highlights of 1999
The primary focus of our Bank during 1999 was to
ensure the banking system's operational readiness
for the transition to the year 2000. Our activities
capped off a multi-year effort to prepare our
internal systems and to ensure the preparedness of
financial institutions' systems that support the
nation's payments systems. As a regulator of
financial institutions and the nation's money
manager, our charter directs us to ensure safety
and soundness in the operations of financial
institutions, to provide stability in financial
markets, and to maintain the smooth functioning
of the nation's payments system.
Throughout the year we tested applications with
the depository institutions that are our customers,
implemented updated systems, reviewed institutions' readiness plans, and regularly communicated our progress to the public. We produced the
brochure "How Is the Banking Industry Preparing
for Y2K?" in four languages and distributed it to
more than 150,000 constituents, along with
providing speakers on the subject of Y2K readiness for 45 events and 22 seminars. Our Bank's
credit and risk management area prepared District
financial institutions to obtain short-term credit in
the event of Y2K-related liquidity problems.
We also devoted considerable resources to
ensuring that adequate supplies of cash would
be available to meet the higher demand for


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Federal Reserve Bank of St. Louis

currency expected in the days leading up to the century
rollover weekend.

Financial Services
The Bank did not allow its Y2K preparations to
eclipse other critical, long-standing objectives. In
our financial services functions, we continued to
focus on promoting electronic transactions and
transitioning customers from paper-based delivery
of transaction information to electronic delivery.
In addition, we prepared for the Systemwide
consolidation of two of our fiscal agency functions,
TreasuryDirect and Treasury Tax and Loan (TT&L),
in 2000.
In another significant event, we received final
approval from the Board of Governors to establish
a cash operations center in Phoenix to meet the
cash needs of the growing Arizona market. We will
break ground on that facility in the spring of 2000
in preparation for a September 2001 opening.
In the retail payments area, the Bank continued
to promote electronic payments and electronic
collection of paper-based payments by offering
competitive and innovative services. The Bank's
Automatic Bill Payment (ABP) Program is a joint
marketing program that enables utilities, municipalities, and newspapers that share common customers

13

to coordinate direct payment promotional efforts
using a common enrollment form. The San Francisco
Bay Area ABP Program, which started in 1997, now
includes 14 billers and 30 financial institutions with a
total of 222,000 enrollments.
In addition, the Bank provided project leadership
for the Treasury Point of Sale Check Conversion
project, which is testing the feasibility and consumer
acceptance of converting check payments made at
the point of sale to ACH debit transactions for faster
processing and speedier collection. By year-end,
the U.S. Patent Office had two payment terminals
generating ACH debits, and a number of other
Treasury agencies were on track to convert checks
in 2000, including the Department of Veterans
Affairs Canteen Service, the Bureau of Printing
and Engraving, and the U.S. Customs Office.
Also, to promote electronic collection of checks, the
Bank expanded its pilot of "Deposit MICR" services,
adding a sizable financial institution with subsidiary
banks in the Portland and Seattle zones to its
customer base. The Bank's pilot of deposit MICR
services includes the capture, sorting and imaging
of transit and "on us" checks, as well as "proof of
deposit" type services and item encoding. By
enabling financial institutions to eliminate back
office operations associated with handling paper
items, these services make electronic check callee-

tion much more economical for financial institutions,
particularly when they also provide images
of paid items in their customers' monthly account
statements in lieu of returning the physical items.
In order to provide higher levels of service and
operate more efficiently through enhanced automation platforms, we continued to lead the Enterprisewide Check Adjustments (EWA) project for the
System. This application is the largest distributed
processing application in the Federal Reserve. It will
provide improved cross-District adjustments processing capabilities, as well as a platform for Webbased submission and tracking of cases, resulting in
better efficiency in back room operations and
enhanced services to both local and national
customers.

Economic Research
The Bank contributes to the formulation of sound
monetary and regulatory policy through academic
research on topics of policy concern to the Federal
Reserve , timely and high-quality data reporting, and
outreach to increase the public's understanding of
the Federal Reserve as the nation's central bank.
Research efforts in 1999 were concentrated in three
key areas: structural change in the economy and the
conduct of monetary policy, financial crises in


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emerging-market economies, and financial services
industry restructuring and supervisory policy.
The Bank's Center for Pacific Basin Monetary and
Economic Studies hosted an international conference on the theme "Financial Crises in Emerging
Markets. " The event brought together nearly 100
researchers and policymakers from foreign central
banks, international organizations, academia, and
the Federal Reserve to discuss the role of the
financial sector in the occurrence of banking and
currency crises in emerging market countries,
particularly in Asia.

Banking Supervision and Regulation
In addition to handling successfully its Y2K-related
supervisory responsibilities, the Bank's supervision
function continued to focus on emerging risks,
particularly in the supervision of large, complex
banking organizations (LCBOs). In this regard, we
deepened our expertise in global bank supervision,
the supervision of new information technologies
used in the delivery of financial services, and credit
risk modeling techniques used by financial
institutions. We also enhanced our Asia supervision
program and our reputation as a leading expert in
Asia. We continued to strengthen our safety and
soundness and compliance supervisory programs
for regional and community banking organizations

14

by focusing on ongoing monitoring of, and outreach
to, our supervised entities. In this matter, we were
able to address emerging issues in a timely,
cooperative manner.
In the Community Affairs area, the Bank continued
to develop innovative outreach programs and to
promote partnerships between financial institutions
and community groups, focusing particularly on
increasing the availability of credit to tribal lands. In
this regard, the Bank convened and facilitated 25
meetings for bankers and tribal representatives on
various Indian reservations in the Pacific Northwest,
Idaho, and Utah. These gatherings have resulted in
several financial institutions developing tribe-specific
partnerships with loan commitments for mortgage
and commercial lending on tribal lands.

branch operations


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From left (standing):
Gordon R. G. Werkema, Executive Vice President, Northern Region
Raymond H. Laurence, Senior Vice President-in-Charge, Portland
Mark Mullinix, Senior Vice President-in-Charge, Los Angeles
Seated:
Andrea P. Wolcott, Vice President-in-Charge, Salt Lake City

15

summanz of operations


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Volume {in thousands)
1997

1998

4,626,649
654,068

4,739,673
483,942

5,369,630
367,350

105
751

76
673

63
527

2,313,792
54,466
35,251

2,312,860
52 ,103
34,591

2,312,940
46,034
33,849

24,058

26,622

27,088

428,564

499,527

574,872

478

463

647

86

77

130

1999

Custody Services

Cash Services
Currency notes paid into circulation
Food stamp coupons processed
Securities Services
Other Treasury original issues
Book-entry securities processed
Payments Services

Check Services
Commercial checks collected
Government checks processed
Return items processed
Electronic Payments Services
Wire transfers processed
Automated clearinghouse
transactions processed
Discounts and Advances
Total discounts and transactions*
Number of financial institutions
accommodated*

* Whole number (not in thousands)

16

bank officers

as of december 31, 1999

Robert T. Parry

John P Judd

Eliot E. Giuili

President and Chief Executive Officer

Vice President and
Associate Director of Research

Director

John E Moore
First Vice President and Chief Operating Officer

Andreas Hauer
Donald R. Lieb

Director

Vice President

Jack H. Beebe
Senior Vice President and Director of Research

John S. Hsiao
Ronald E. Mitchell, Jr.

Director

Vice President

Sara K. Garrison
Senior Vice President

Ann Marie Kohlligian
Robert D. Mulford

Director

Vice President and Counsel

David W. Walker

Michael J. Murray
Senior Vice President

Elizabeth M. O'Shea

Director

Vice President

Terry S. Schwakopf
Senior Vice President

Kenneth M. Kinoshita
Deborah S. Smyth

Associate General Counsel

Vice President

Susan A. Sutherland
Senior Vice President

Bonnie R. Allen
Michael J. Stan

Assistant Vice President

Vice President

D. Kerry Webb
Senior Vice President

Barbara J. Beckman
Sallie H. Weissinger

Assistant Vice President

Vice President and Director of Public Information

Thomas R. Burke

John H. Parrish
General Auditor

Patricia A. Welch

Assistant Vice President

Vice President

Richard K. Cabral

Jet Auer de Saram
Vice President and General Counsel

James M. Barnes

Assistant Vice President

Director

Elizabeth R. Masten
Vice President and Secretary of the Board

James J. Callahan
Kenneth R. Binning

Assistant Vice President

Director

Frederick T. Furlong


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Vice President

Teresa M. Curran
Harold H. Blum

Assistant Vice President

Director

Reuven Glick

Lee C. Dwyer

Vice President

Assistant Vice President

17

bank officers

as of december 31, 1999

Alice Farrell

Philip M. Ryan

Mark Spiegel

Assistant Vice President

Assistant Vice President

Research Officer

Louis "Skip" George

Daniel K. Shaw

Bharat Trehan

Assistant Vice President

Assistant Vice President

Research Officer

Todd A. Glissman

Gordon S. Tannura

Roxana R. Tsougarakis

Assistant Vice President

Assistant Vice President

Financial Planning and Control Officer

Ellen M. Hamilton

James J. Tenge

Mary E. Wujek

Assistant Vice President

Assistant Vice President

Information and Technology Services Officer

Beverley-Ann Hawkins

Dale L. Vaughn

Assistant Vice President

Assistant Vice President

Peter K. C. Hsieh

Elizabeth L. Wood

Assistant Vice President

Assistant Vice President

Michael E. Johnson

Angela D'Alessandro

Assistant Vice President

Examining Officer
(On loan to the Board)

Craig B. Knudsen
Assistant Vice President

Barbara A. Bennett
Strategic Planning Officer

Mark Levonian
Assistant Vice President

Joseph P Mattey
Research Officer

Ellsworth E. Lund, Jr.
Assistant Vice President

Gary P Palmer
Banking Studies Officer

Joy Hoffmann Molloy
Assistant Vice President

Glenn D. Rudebusch
Research Officer

Darren S. Post
Assistant Vice President


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

18

bank officers

asofdecember31,_19_99~ ~

Los Angeles Branch

Northern Region

Mark Mullinix

Gordon R. G. Werkema

Senior Vice President

Executive Vice President

Robert G. Wiley
Vice President

Roger W. Replogle
Director

Marla E. Borowski
Assistant Vice President

Robert C. Johnson
Assistant Vice President

Mark E. Koegel
Assistant Vice President

Linda J. Westerschulte
Assistant Vice President

Portland Branch

Salt Lake City Branch

Raymond H. Laurence

Andrea P Wolcott

Senior Vice President

Vice President

Sean J. Rodriguez

Jed W. Bodily

Vice President

Assistant Vice President

Mary E. Lee

Gerald R. Dailing

Assistant Vice President

Assistant Vice President

Robert D. Long

Richard B. Hornsby

Assistant Vice President

Assistant Vice President

Robin A. Rockwood

Seattle Branch

Assistant Vice President

Gale P Ansell

Jose Alonso

Assistant Vice President

Examining Officer

Mark A. Gould

Anthony P Dazzo

Assistant Vice President

Cash Services Officer

Lynn M. Jorgensen

L. Sherann Mack

Assistant Vice President

Business Development and EPS Officer


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Jimmy E Kamada
Assistant Vice President

Kenneth L. Peterson
Assistant Vice President

19

CJ)
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Chairman of the Board and
Federal Reserve Agent
Gary G. Michael
Chairman and CEO
Albertson's, Inc.
Boise, Idaho

Sheila D. Harris
Consultant
Harris Consulting
Litchfield Park, Arizona

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

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

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

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

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

George M. Scalise
President
Semiconductor Industry Association
San Jose , California

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

Federal Advisory Council Member
Walter A. Dads, Jr.
Chairman and CEO
BancWest Corporation
Honolulu, Hawaii

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

20


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Linda Griego
President and CEO
Los Angeles Community
Development Bank
Los Angeles, California

Chairman of the Board
Lonnie Kane
President
Karen Kane , Inc.
Los Angeles, California

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

William D. Jones
Chairman, President and CEO
Citylink Investment Corporation
San Diego, California

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Liam E. McGee
President
Bank of America Southern California
Los Angeles, California

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

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

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Chairman of the Board
Nancy Wilgenbusch
President
Marylhurst University
Marylhurst, Oregon

Karla S. Chambers
Vice President and Co-Owner
Stahlbush Island Farms, Inc.
Corvallis, Oregon

Phyllis A. Bell
President
Oregon Coast Aquarium
Newport, Oregon

Christian R. Rasmussen
Executive Vice President
U.S. Bancorp
Business Banking Group
Portland, Oregon

Patrick Borunda
Director
Oweesta Fund
First Nations Development Institute
Yacolt, Washington

Guy L. Williams
President and CEO
Security Bank
Coos Bay, Oregon

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

22

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

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

H. Roger Boyer
Chairman
The Boyer Company
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

J . Pat McMurray
President
First Security Bank, N .A.
Boise, Idaho

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

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

23


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

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

Mary E. Pugh
President
Pugh Capital Management, Inc.
Seattle, Washington

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

Helen M. Rockey
President and CEO
Just for Feet, Inc.
Seattle, Washington

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

Peter H . Van Oppen
Chairman and CEO
Advanced Digital Information
Corporation
Redmond, Washington

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

24

Chairman
Walter E Payne, Jr.
President and CEO
Blue Diamond Growers
Sacramento, California
Vice Chairman
Don M. "Duff" Willey
Chief Executive Officer
The Utah Auto Collection
Salt Lake City, Utah
Members

Paula R. Collins
Chief Executive Officer
WDG Ventures, Inc.
San Francisco, California
Paul Ecke, III
Chairman and CEO
Paul Ecke Ranch
Encinitas, California
Ed P Mayne
President
Utah AFL-CIO
West Valley City, Utah

Barbara Bry
Vice President,
Business Development
Proflowers.com
La Jolla, California

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

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

Lawrence S . Okinaga
Partner
Carlsmith Ball
Honolulu, Hawaii


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

25

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

t\.)

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Bob L. Vice
President
BL\!, Agribusiness Consultants
Fallbrook, California
Richard S. Walden
President
Farmers Investment Company
Sahuarita, Arizona

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Denice A. Young, CPA
President
Young Real Estate Group
Torrance, California

To: PricewaterhouseCoopers LLP
The management of the Federal Reserve Bank of San Francisco (FRB-SF) 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 , 1999 (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 FRB-SF 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 self-monitoring 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 FRB-SF 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 FRB-SF believes that the FRB-SF maintained an effective process of internal
controls over financial reporting including the safeguarding of assets as they relate to the Financial Statements.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Federal Reserve Bank of San Francisco

r.

by
Robert T. Parry
President
by
John E Moore
First Vice President

26

f)R1cEWA1fRHOVsE[mPERS

I

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

We have examined management's assertion that the Federal Reserve Bank of San Francisco ("the Bank") maintained effective internal control over financial reporting
and the safeguarding of assets as they relate to the financial statements as of December 31 , 1999, included in the accompanying Management's 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 deteriorate.
In our opinion, management's assertion that the Bank maintained effective internal control over financial reporting and over the safeguarding of assets as they relate to
the financial statements as of December 31 , 1999, 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.

San Francisco, California
March 3 , 2000


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

27

fJR1cEWA1fRHOUsf@)PERS

I

Report of Independent Accountants

To the Board of Directors 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 , 1999 and 1998, 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 auditing standards generally accepted in the United States. 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 accounting
principles generally accepted in the United States.
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 , 1999 and 1998, and
results of its operations for the years then ended, on the basis of accounting described in Note 3.

San Francisco, CA
March 3 , 2000


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

28

Statements of Condition

As of December 31 ,
1999

(in millions)

1998
~

Assets

$

Gold certificates
Special drawing rights certificates
Coin
Items in process of collection
Loans to depository institutions
U.S. government and federal agency securities, net
Investments denominated in foreign currencies
Accrued interest receivable
Interdistrict settlement account
Bank premises and equipment, net
Other assets

$

Total assets

1,279
692
30
1,581
12
52 ,028
2,635
524
13,071
221
36

$

72 ,109

$

1,465
1,241
52
1,122
1
57,488
3,574
543
219
28
65,733

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Liabilities and Capital

0

~

Liabilities
Federal Reserve notes outstanding, net
Deposits
Depository institutions
Other deposits
Deferred credit items
Surplus transfer due U.S. Treasury
Interdistrict settlement account
Accrued benefit cost
Other liabilities

$

66,641

$

2,263
8
1,419
371

50,984
3,699
29
1,102
219
7,673
69
14

70
17

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Total liabilities

Capital
Capital paid-in
Surplus

$

70,789

$

63,789

$

660
660

$

972
972

Total capital

1,320

Total liabilities and capital


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

$

72 ,109

The accompanying notes are an integral part of these financial statements.

29

1,944

$

65,733

0

Statements of Income

For the years ended
December 31 ,

(in millions)

1999

Interest income:
Interest on U.S. government and federal agency securities
Interest on foreign currencies
Interest on loans to depository institutions

0

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Total interest income

3,080
37

$

1

3,337
79
1

3,118

3,417

86
30
(82)
(2)
8

84
29
338
5
7

40

463

165
16
22

155
15
21

85
83

80
75

371

347

Other operating income:
Income from services
Reimbursable services to government agencies
Foreign currency (losses) gains, net
U.S. government securities (losses) gains, net
Other income

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1998

Total other operating income

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Operating expenses:
Salaries and other benefits
Occupancy expense
Equipment expense
Cost of unreimbursed Treasury services
Assessments by Board of Governors
Other expenses

1

Total operating expenses
Net income prior to distribution

$

2,787

$

3,533

$

51
(312)
3,048

$

59
27
1,188
2,259

$

2,787

$

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Distribution of net income:
Dividends paid to member banks
Transferred to (from) surplus
Payments to U.S. Treasury as interest on Federal Reserve notes
Payments to U.S. Treasury as required by statute

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Total distribution

~


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

The accompanying notes are an integral part of these financial statements.

30

Statements of Changes in Capital
For the Years Ended December 31, 1999 and December 31, 1998
(in millions)

~

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Surplus

Capital Paid-in

Balance at January 1, 1998 (20 million shares)

$

980

$

Total Capital

945

$

27

Net income transferred to surplus

27
(8)

(8)

Net change in capital stock redeemed (.162 million shares)

1,925

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Balance at December 31 , 1998 (19 million shares)

$

972

$

972

$

(312)

(312)

Net income transferred to surplus
Net change in capital stock redeemed (6 million shares)

$

1,944

(312)

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

$

660

$

660

$

1 1320

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The accompanying notes are an integral part of these financial statements.

31

1. Organization
The Federal Reserve Bank of San Francisco ("Bank") is part of the Federal Reserve System ("System") created by Congress under the Federal
Reserve Act of 1913 ("Federal Reserve Act") which established the central bank of the United States. The System consists of the Board of
Governors of the Federal Reserve System ("Board of Governors") and twelve Federal Reserve Banks ("Reserve Banks"). The Reserve Banks
are chartered by the federal government and possess a unique set of governmental, corporate, and central bank characteristics. Other major
elements of the System are the Federal Open Market Committee ("FOMC") and the Federal Advisory Council. The FOMC is composed of
members of the Board of Governors, the president of the Federal Reserve Bank of New York ("FRBNY") and, on a rotating basis, four other
Reserve Bank presidents.

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The Bank and its branches in Los Angeles, California, Portland, Oregon, Salt Lake City, Utah, and Seattle, Washington , serve the
Twelfth Federal Reserve District, which includes Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, Washington , and the
commonwealths or territories of American Samoa, Guam, and the Northern Mariana Islands. In accordance with the Federal Reserve Act,
supervision and control of the Bank is exercised by a board of directors. Banks that are members of the System include all national banks and
any state chartered bank that applies and is approved for membership in the System.

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Board of Directors
The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve Banks. Each board is composed of nine
members serving three-year terms: three directors, including those designated as Chairman and Deputy Chairman, are appointed by the
Board of Governors, and six directors are elected by member banks. Of the six elected by member banks, three represent the public and three
represent member banks. Member banks are divided into three classes according to size. Member banks in each class elect one director
representing member banks and one representing the public. In any election of directors, each member bank receives one vote , regardless of
the number of shares of Reserve Bank stock it holds .

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2. Operations and Services
The System performs a variety of services and operations. Functions include: formulating and conducting monetary policy; participating actively
in the payments mechanism , including large-dollar transfers of funds , automated clearinghouse operations and check processing; distribution
of coin and currency; fiscal agency functions for the U.S. Treasury and certain federal agencies; serving as the federal government's bank;
providing short-term loans to depository institutions; serving the consumer and the community by providing educational materials and
information regarding consumer laws; supervising bank holding companies, and state member banks; and administering other regulations of the
Board of Governors. The Board of Governors' operating costs are funded through assessments on the Reserve Banks.

C


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

32

The FOMC establishes policy regarding open market operations, oversees these operations, and issues authorizations and directives to the FRBNY
for its execution of transactions. Authorized transaction types include direct purchase and sale of securities, matched sale-purchase transactions, the
purchase of securities under agreements to resell, and the lending of U.S. government securities. Additionally, the FRBNY is authorized by the FOMC
to hold balances of and to execute spot and forward foreign exchange and securities contracts in fourteen foreign currencies, maintain reciprocal
currency arrangements ("F/X swaps") with various central banks, and "warehouse" foreign currencies for the
U.S. Treasury and Exchange Stabilization Fund ("ESF") through the Reserve Banks.

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Accounting principles for entities with the unique powers and responsibilities of the nation's central bank have not been formulated by the
Financial Accounting Standards Board. The Board of Governors has developed specialized accounting principles and practices that it believes are
appropriate for the significantly different nature and function of a central bank as compared to the private sector. These accounting principles and
practices are documented in the "Financial Accounting Manual for Federal Reserve Banks" ("Financial Accounting Manual"), which is issued by
the Board of Governors. All Reserve Banks are required to adopt and apply accounting policies and practices that are consistent with the Financial
Accounting Manual.
The financial statements have been prepared in accordance with the Financial Accounting Manual. Differences exist between the accounting
principles and practices of the System and generally accepted accounting principles in the United States ("GMP"). The primary differences are
the presentation of all security holdings at amortized cost, rather than at the fair value presentation requirements of GMP, and the accounting for
matched sale-purchase transactions as separate sales and purchases, rather than secured borrowings with pledged collateral, as is required by
GMP In addition, the Bank has elected not to present a Statement of Cash Flows or a Statement of Comprehensive Income. The Statement
of Cash Flows has not been included as the liquidity and cash position of the Bank are not of primary concern to the users of these financial
statements. The Statement of Comprehensive Income, which comprises net income plus or minus certain adjustments, such as the fair value
adjustment for securities, has not been included because as stated above the securities are recorded at amortized cost and there are no other
adjustments in the determination of Comprehensive Income applicable to the Bank. Other information regarding the Bank's activities is provided
in, or may be derived from , the Statements of Condition, Income, and Changes in Capital. Therefore, a Statement of Cash Flows or a Statement
of Comprehensive Income would not provide any additional useful information. There are no other significant differences between the policies
outlined in the Financial Accounting Manual and GMP

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The preparation of the financial statements in conformity with the Financial Accounting Manual requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those
estimates. Unique accounts and significant accounting policies are explained below.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

33

Gold Certificates
The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks to monetize gold held by the U.S. Treasury.
Payment for the gold certificates by the Reserve Banks is made by crediting equivalent amounts in dollars into the account established for
the U.S. Treasury. These gold certificates held by the Reserve Banks are required to be backed by the gold of the U.S. Treasury. The U.S.
Treasury may reacquire the gold certificates at any time and the Reserve Banks must deliver them to the U.S. Treasury. At such time, the
U.S. Treasury's account is charged and the Reserve Banks' gold certificate accounts are lowered. The value of gold for purposes of backing
the gold certificates is set by law at $42 2/9 a fine troy ounce. The Board of Governors allocates the gold certificates among Reserve Banks
once a year based upon Federal Reserve notes outstanding in each District at the end of the preceding year.

0

Special Drawing Rights Certificates
Special drawing rights ("SDRs") are issued by the International Monetary Fund ("Fund") to its members in proportion to each member's
quota in the Fund at the time of issuance. SDRs serve as a supplement to international monetary reserves and may be transferred from
one national monetary authority to another. Under the law providing for United States participation in the SOR system, the Secretary of
the U.S. Treasury is authorized to issue SOR certificates, somewhat like gold certificates, to the Reserve Banks. At such time , equivalent
amounts in dollars are credited to the account established for the U.S. Treasury, and the Reserve Banks' SOR certificate accounts are
increased. The Reserve Banks are required to purchase SDRs, at the direction of the U.S. Treasury, for the purpose of financing SOR
certificate acquisitions or for financing exchange stabilization operations. The Board of Governors allocates each SOR transaction among
Reserve Banks based upon Federal Reserve notes outstanding in each District at the end of the preceding year.

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Loans to Depository Institutions
The Depository Institutions Deregulation and Monetary Control Act of 1980 provides that all depository institutions that maintain
reservable transaction accounts or nonpersonal time deposits, as defined in Regulation D issued by the Board of Governors, have
borrowing privileges at the discretion of the Reserve Banks. Borrowers execute certain lending agreements and deposit sufficient
collateral before credit is extended. Loans are evaluated for collectibility, and currently all are considered collectible and fully collateralized .
If any loans were deemed to be uncollectible, an appropriate reserve would be established. Interest is recorded on the accrual basis and
is charged at the applicable discount rate established at least every fourteen days by the Board of Directors of the Reserve Banks,
subject to review by the Board of Governors. However, Reserve Banks retain the option to impose a surcharge above the basic rate
in certain circumstances.

The Board of Governors established a Special Liquidity Facility (SLF) to make discount window credit readily available to depository institutions in sound financial condition around the century date change (October 1, 1999, to April 7, 2000) in order to meet unusual liquidity
demands and to allow institutions to confidently commit to supplying loans to other institutions and businesses during this period. Under the
SLF, collateral requirements are unchanged from normal discount window activity and loans are made at a rate of 150 basis points above
FOMC's target federal funds rate.

C:


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

34

U.S. Government and Federal Agency Securities and Investments Denominated in Foreign Currencies
The FOMC has designated the FRBNY to execute open market transactions on its behalf and to hold the resulting securities in the portfolio
known as the System Open Market Account ("SOMA''). In addition to authorizing and directing operations in the domestic securities
market, the FOMC authorizes and directs the FRBNY to execute operations in foreign markets for major currencies in order to counter
disorderly conditions in exchange markets or other needs specified by the FOMC in carrying out the System's central bank responsibilities.

Purchases of securities under agreements to resell and matched sale-purchase transactions are accounted for as separate sale and purchase
transactions. Purchases under agreements to resell are transactions in which the FRBNY purchases a security and sells it back at the rate
specified at the commencement of the transaction. Matched sale-purchase transactions are transactions in which the FRBNY sells a
security and buys it back at the rate specified at the commencement of the transaction.

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Effective April 26, 1999, FRBNY was given the sole authorization by the FOMC to lend U.S. government securities held in the SOMA to
U.S. government securities dealers and to banks participating in U.S. government securities clearing arrangements, in order to facilitate
the effective functioning of the domestic securities market. These securities-lending transactions are fully collateralized by other U.S.
government securities. FOMC policy requires FRBNY to take possession of collateral in amounts in excess of the market values of the
securities loaned . The market values of the collateral and the securities loaned are monitored by FRBNY on a daily basis, with additional
collateral obtained as necessary. The securities loaned continue to be accounted for in the SOMA Prior to April 26, 1999 all Reserve
Banks were authorized to engage in such lending activity.
Foreign exchange contracts are contractual agreements between two parties to exchange specified currencies, at a specified price, on a
specified date. Spot foreign contracts normally settle two days after the trade date , whereas the settlement date on forward contracts is
negotiated between the contracting parties, but will extend beyond two days from the trade date. The FRBNY generally enters into spot
contracts, with any forward contracts generally limited to the second leg of a swap/warehousing transaction.

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The FRBNY, on behalf of the Reserve Banks, maintains renewable, short-term F/X swap arrangements with authorized foreign central
banks. The parties agree to exchange their currencies up to a pre-arranged maximum amount and for an agreed upon period of time (up
to twelve months), at an agreed upon interest rate. These arrangements give the FOMC temporary access to foreign currencies that it may
need for intervention operations to support the dollar and give the partner foreign central bank temporary access to dollars it may need to
support its own currency. Drawings under the F/X swap arrangements can be initiated by either the FRBNY or the partner foreign central
bank, and must be agreed to by the drawee. The F/X swaps are structured so that the party initiating the transaction (the drawer) bears the
exchange rate risk upon maturity. The FRBNY will generally invest the foreign currency received under an F/X swap in interest-bearing
instruments.
Warehousing is an arrangement under which the FOMC agrees to exchange, at the request of the Treasury, U.S. dollars for foreign currencies
held by the Treasury or ESF over a limited period of time. The purpose of the warehousing facility is to supplement the U.S. dollar resources
of the Treasury and ESF for financing purchases of foreign currencies and related international operations.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

35

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In connection with its foreign currency activities, the FRBNY, on behalf of the Reserve Banks, may enter into contracts which contain
varying degrees of off-balance sheet market risk, because they represent contractual commitments involving future settlement, and
counter-party credit risk. The FRBNY controls credit risk by obtaining credit approvals, establishing transaction limits, and performing daily
monitoring procedures.
While the application of current market prices to the securities currently held in the SOMA portfolio and investments denominated in foreign
currencies may result in values substantially above or below their carrying values, these unrealized changes in value would have no direct
effect on the quantity of reserves available to the banking system or on the prospects for future Reserve Bank earnings or capital. Both the
domestic and foreign components of the SOMA portfolio from time to time involve transactions that can result in gains or losses when
holdings are sold prior to maturity. However, decisions regarding the securities and foreign currencies transactions, including their purchase
and sale, are motivated by monetary policy objectives rather than profit. Accordingly, earnings and any gains or losses resulting from the sale
of such currencies and securities are incidental to the open market operations and do not motivate its activities or policy decisions.

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U.S. government and federal agency securities and investments denominated in foreign currencies comprising the SOMA are recorded at
cost, on a settlement-date basis, and adjusted for amortization of premiums or accretion of discounts on a straight-line basis. Interest income
is accrued on a straight-line basis and is reported as "Interest on U.S . government and federal agency securities" or "Interest on foreign
currencies," as appropriate. Income earned on securities lending transactions is reported as a component of "Other income." Gains and losses
resulting from sales of securities are determined by specific issues based on average cost. Gains and losses on the sales of U.S. government
and federal agency securities are reported as "Government Securities Gains (Losses) , Net. " Foreign currency denominated assets are
revalued monthly at current market exchange rates in order to report these assets in U.S. dollars. Realized and unrealized gains and losses on
investments denominated in foreign currencies are reported as "Foreign Currency Gains (Losses) , Net. " Foreign currencies held through F/X
swaps, when initiated by the counter party, and warehousing arrangements are revalued monthly, with the unrealized gain or loss reported by
the FRBNY as a component of "Other assets" or "Other liabilities," as appropriate.

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Balances of U.S. government and federal agencies securities bought outright, investments denominated in foreign currency, interest income,
amortization of premiums and discounts on securities bought outright, gains and losses on sales of securities, and realized and unrealized
gains and losses on investments denominated in foreign currencies, excluding those held under an F/X swap arrangement, are allocated to
each Reserve Bank. Effective April 26, 1999, income from securities lending transactions undertaken by FRBNY was also allocated to each
Reserve Bank. Securities purchased under agreements to resell and unrealized gains and losses on the revaluation of foreign currency
holdings under F/X swaps and warehousing arrangements are allocated to the FRBNY and not to other Reserve Banks.

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over
estimated useful lives of assets ranging from 2 to 50 years. New assets, major alterations, renovations and improvements are capitalized
at cost as additions to the asset accounts. Maintenance, repairs and minor replacements are charged to operations in the year incurred.

36

Interdistrict Settlement Account
At the close of business each day, all Reserve Banks and branches assemble the payments due to or from other Reserve Banks and branches
as a result of transactions involving accounts residing in other Districts that occurred during the day's operations. Such transactions may
include funds settlement, check clearing and automated clearinghouse (''ACH") operations, and allocations of shared expenses. The
cumulative net amount due to or from other Reserve Banks is reported as the "Interdistrict settlement account. "

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Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes are issued through the various Federal Reserve agents to
the Reserve Banks upon deposit with such Agents of certain classes of collateral security, typically U.S. government securities. These notes are
identified as issued to a specific Reserve Bank. The Federal Reserve Act provides that the collateral security tendered by the Reserve Bank to
the Federal Reserve Agent must be equal to the sum of the notes applied for by such Reserve Bank. In accordance with the Federal Reserve
Act, gold certificates, special drawing rights certificates, U.S. government and agency securities, loans, and investments denominated in
foreign currencies are pledged as collateral for net Federal Reserve notes outstanding. The collateral value is equal to the book value of the
collateral tendered, with the exception of securities, whose collateral value is equal to the par value of the securities tendered. The Board of
Governors may, at any time , call upon a Reserve Bank for additional security to adequately collateralize the Federal Reserve notes. The
Reserve Banks have entered into an agreement which provides for certain assets of the Reserve Banks to be jointly pledged as collateral for
the Federal Reserve notes of all Reserve Banks in order to satisfy their obligation of providing sufficient collateral for outstanding Federal
Reserve notes. In the event that this collateral is insufficient, the Federal Reserve Act provides that Federal Reserve notes become a first and
paramount lien on all the assets of the Reserve Banks. Finally, as obligations of the United States, Federal Reserve notes are backed by the full
faith and credit of the United States government.

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The "Federal Reserve notes outstanding, net" account represents Federal Reserve notes reduced by cash held in the vaults of the Bank of
$20,956 million , and $17,310 million at December 31 , 1999 and 1998, respectively.

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Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount equal to 6% of the
capital and surplus of the member bank. As a member bank's capital and surplus change, its holdings of the Reserve Bank's stock must be
adjusted. Member banks are those state-chartered banks that apply and are approved for membership in the System and all national banks.
Currently, only one-half of the subscription is paid-in and the remainder is subject to call. These shares are nonvoting with a par value of
$100. They may not be transferred or hypothecated. By law, each member bank is entitled to receive an annual dividend of 6% on the
paid-in capital stock. This cumulative dividend is paid semiannually. A member bank is liable for Reserve Bank liabilities up to twice the
par value of stock subscribed by it.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

37

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Surplus
The Board of Governors requires Reserve Banks to maintain a surplus equal to the amount of capital paid-in as of December 31. This
amount is intended to provide additional capital and reduce the possibility that the Reserve Banks would be required to call on member
banks for additional capital. Reserve Banks are required by the Board of Governors to transfer to the U.S. Treasury excess earnings, after
providing for the costs of operations, payment of dividends, and reservation of an amount necessary to equate surplus with capital paid-in.

The Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66, Section 3002) codified the existing Board surplus policies as statutory
surplus transfers, rather than as payments of interest on Federal Reserve notes, for federal government fiscal years 1998 and 1997 (which
ended on September 30, 1998 and 1997, respectively). In addition , the legislation directed the Reserve Banks to transfer to the U.S. Treasury
additional surplus funds of $107 million and $106 million during fiscal years 1998 and 1997, respectively. Reserve Banks were not permitted
to replenish surplus for these amounts during this time. Payments to the U.S. Treasury made after September 30, 1998, represent payment of
interest on Federal Reserve notes outstanding.

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The Consolidated Appropriations Act of 1999 (Public Law 106-113, Section 302) directed the Reserve Banks to transfer to the U.S Treasury
additional surplus funds of $3,752 million during the Federal Government's 2000 fiscal year. The Reserve Banks will make this payment prior
to September 30, 2000.

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In the event of losses, payments to the U.S. Treasury are suspended until such losses are recovered through subsequent earnings. Weekly
payments to the U.S. Treasury may vary significantly.

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Income and Cost related to Treasury Services
The Bank is required by the Federal Reserve Act to serve as fiscal agent and depository of the United States. By statute, the Department of the
Treasury is permitted, but not required, to pay for these services. The costs of providing fiscal agency and depository services to the Treasury
Department that have been billed but will not be paid are reported as the "Cost of unreimbursed Treasury services."

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Taxes
The Reserve Banks are exempt from federal , state, and local taxes, except for taxes on real property, which are reported as a component of
"Occupancy expense. "

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4. U.S. Government and Federal Agency Securities
Securities bought outright and held under agreements to resell are held in the SOMA at the FRBNY An undivided interest in SOMA activity, with
the exception of securities held under agreements to resell and the related premiums, discounts and income, is allocated to each Reserve Bank on
a percentage basis derived from an annual settlement of interdistrict clearings. The settlement, performed in April of each year, equalizes Reserve
Bank gold certificate holdings to Federal Reserve notes outstanding. The Bank's allocated share of SOMA balances was approximately 10. 752 %
and 12.589% at December 31 , 1999 and 1998, respectively.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

38

The Bank's allocated share of securities held in the SOMA at December 31 , that were bought outright, were as follows (in millions):
1999
Par value:
Federal agency
U.S. government:
Bills
Notes
Bonds
Total par value
Unamortized premiums
Unaccreted discounts
Total allocated to Bank

1998

$

$

19

42

18,979
23,489
8,922
51,409
978
(359)

$

24,519
23,654
8,746
56,961
930
(403)

$

52,028

57,488

Total SOMA securities bought outright were $483,902 million and $456,667 million at December 31, 1999 and 1998, respectively.

The maturities of U.S. government and federal agency securities bought outright, which were allocated to the Bank at December 31 , 1999,
were as follows (in millions):
Par Value
U.S.
Government
Securities

Maturities of Securities Held
Within 15 days
16 days to 90 days
91 days to 1 year
Over 1 year to 5 years
Over 5 years to 10 years
Over 10 years
Total


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

$

$

Federal Agency
Obligations

498
9,883
15,038
13,351
5,495
7,125

$

51 ,390

$

Total
$

498
9,886
15,040
13,352
5,508
7,125

$

51,409

3
2
1
13

19

39

At December 31 , 1999 and 1998, matched sale-purchase transactions involving U.S. government securities with par values of $39,182
million and $20,927 million, respectively, were outstanding, of which $4,213 million and $2,634 million were allocated to the Bank. Matched
sale-purchase transactions are generally overnight arrangements.
At December 31 , 1998, U.S . government securities with par value of $35 million were loaned by the Bank.

5. Investments Denominated in Foreign Currencies
The FRBNY, on behalf of the Reserve Banks, holds foreign currency deposits with foreign central banks and the Bank for International Settlements
and invests in foreign government debt instruments. Foreign government debt instruments held include both securities bought outright and
securities held under agreements to resell. These investments are guaranteed as to principal and interest by the foreign governments.

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Each Reserve Bank is allocated a share of foreign-currency-denominated assets, the related interest income, and realized and unrealized foreign
currency gains and losses, with the exception of unrealized gains and losses on F/X swaps and warehousing transactions. This allocation is based
on the ratio of each Reserve Bank's capital and surplus to aggregate capital and surplus at the preceding December 31. The Bank's allocated
share of investments denominated in foreign currencies was approximately 16.324% and 18.064% at December 31 , 1999 and 1998, respectively.

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

40

The Bank's allocated share of investments denominated in foreign currencies, valued at current exchange rates at December 31 , were as follows
{in millions) :

1999
German Marks:
Foreign currency deposits
Government debt instruments including agreements to resell

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Foreign currency deposits
Government debt instruments including agreements to resell
Accrued interest

53
1,453

120
1,119

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$

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Total investments denominated in foreign currencies were $16,140 million and $19,769 million at December 31 , 1999 and 1998, respectively.
The 1998 balance includes $15 million in unearned interest collected on certain foreign currency holdings that is allocated solely to the FRBNY


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

OJ
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41

The maturities of investments denominated in foreign currencies which were allocated to the Bank at December 31 , 1999, were as follows
(in millions):
Maturities of Investments Denominated in Foreign Currencies
Within 1 year
Over 1 year to 5 years
Over 5 years to 10 years
Over 10 years

$

2,460
81
94

Total

$

2,635

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At December 31 , 1999 and 1998, there were no open foreign exchange contracts or outstanding F/X swaps.

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Bank Premises and Equipment

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A summary of bank premises and equipment at December 31 is as follows {in millions}:

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23
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135
361
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$

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154
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133
350
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$

221

$

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Depreciation expense was $19 million and $17 million for the years ended December 31 , 1999 and 1998, respectively.

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

42

The Bank leases unused space to outside tenants. Those leases have terms ranging from 1 to 8 years. Rental income from such leases was
$1 million for each year ended December 31 , 1999 and 1998. Future minimum lease payments under agreements in existence at December
31 , 1999, were (in millions) :

2000
2001
2002
2003
2004

$

Thereafter

$

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1.0
0.9
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0.2
0.4
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7. Commitments and Contingencies
At December 31 , 1999, the Bank was obligated under non-cancelable leases for premises and equipment with terms ranging from 1 to approximately
3 years. These leases provide for increased rentals based upon increases in real estate taxes, operating costs or selected price indices.

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Rental expense under operating leases for certain operating facilities , warehouses, and data processing and office equipment (including taxes,
insurance and maintenance when included in rent) , net of sublease rentals, was $738 thousand and $589 thousand for the years ended December
31 , 1999 and 1998, respectively. Certain of the Bank's leases have options to renew.

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Future minimum rental payments under non-cancelable operating leases and capital leases, net of sublease rentals, with terms of one year or
more , at December 31 , 1999, were not material.
Under the Insurance Agreement of the Federal Reserve Banks dated as of March 2, 1999, each of the Reserve Banks has agreed to bear, on a per
incident basis, a pro rata share of losses in excess of 1 % of the capital paid-in of the claiming Reserve Bank, up to 50% of the total capital paid-in of
all Reserve Banks. Losses are borne in the ratio that a Reserve Bank's capital paid-in bears to the total capital paid-in of all Reserve Banks at the
beginning of the calendar year in which the loss is shared. No claims were outstanding under such agreement at December 31 , 1999 or 1998.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is difficult to predict the ultimate
outcome of these actions, in management's opinion, based on discussions with counsel, the aforementioned litigation and claims will be resolved
without material adverse effect on the financial position or results of operations of the Bank.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

43

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8. Retirement and Thrift Plans
Retirement Plans

The Bank currently offers two defined benefit retirement plans to its employees, based on length of service and level of compensation. Substantially
all of the Bank's employees participate in the Retirement Plan for Employees of the Federal Reserve System ("System Plan") and the Benefit
Equalization Retirement Plan ("BEP"). The System Plan is a multi-employer plan with contributions fully funded by participating employers. No
separate accounting is maintained of assets contributed by the participating employers. The Bank's projected benefit obligation and net pension costs
for the BEP at December 31 , 1999 and 1998, and for the years then ended, are not material.

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Employees of the Bank may also participate in the defined contribution Thrift Plan for Employees of the Federal Reserve System ("Thrift Plan"). The
Bank's Thrift Plan contributions totaled $5 million for each year ended December 31 , 1999 and 1998, and are reported as a component of "Salaries
and other benefits. "

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9. Postretirement Benefits Other Than Pensions and Postemployment Benefits

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In addition to the Bank's retirement plans, employees who have met certain age and length of service requirements are eligible for both medical
benefits and life insurance coverage during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan assets. Net postretirement
benefit cost is actuarially determined using a January 1 measurement date .

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

44

Following is a reconciliation of beginning and ending balances of the benefit obligation {in millions) :
1999

1998
~

Accumulated postretirement benefit obligation at January 1
Service cost-benefits earned during the period
Interest cost of accumulated benefit obligation
Actuarial gain
Contributions by plan participants
Benefits paid
Accumulated postretirement benefit obligation at December 31

$

33.1
0.8
1.9
(5.0)
0.2
(1.2)
29.8

$

$

32.1
0.7
2.0
(0.3)
0.2
(1.6)
33.1

$

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Following is a reconciliation of the beginning and ending balance of the plan assets, the unfunded postretirement benefit
obligation, and the accrued postretirement benefit cost {in millions):

1999
Fair value of plan assets at January 1
Actual return on plan assets
Contributions by the employer
Contributions by plan participants
Benefits paid
Fair value of plan assets at December 31
Unfunded postretirement benefit obligation
Unrecognized prior service cost
Unrecognized net actuarial gain
Accrued postretirement benefit cost

a

$

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$

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0.2
(1.6)

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0.2
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29.8
14.3
15.7
59.8

$

33.1
15.9

11.1

$

Accrued postretirement benefit cost is reported as a component of ''Accrued benefit cost. "
The weighted-average assumption used in developing the postretirement benefit obligation as of December 31 , 1999 and 1998,
was 7.5 % and 6.25 %, respectively.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

~

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1998

45

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For measurement purposes, an 8 .75 % annual rate of increase in the cost of covered health care benefits was assumed for 2000. Ultimately, the health care
cost trend rate is expected to decrease gradually to 5.50% by 2006, and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage point change in assumed
health care cost trend rates would have the following effects for the year ended December 31 , 1999 (in millions) :
1 Percentage
Point Increase

0

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Effect on aggregate of service and interest cost components
of net periodic postretirement benefit cost

$

0.2

$

(0.2)

Effect on accumulated postretirement benefit obligation

$

1.9

$

(1.8)

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The following is a summary of the components of net periodic postretirement benefit cost for the years ended December 31 (in millions):

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1999

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Service cost-benefits earned during the period
Interest cost of accumulated benefit obligation
Amortization of prior service cost
Recognized net actuarial gain

$

0.8
1.9
(1.6)
(0.5)

$

Net periodic postretirement benefit cost

$

0.6

$

1998
0.6
2.0
(1.6)
(0.6)
0.4

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Net periodic postretirement benefit cost is reported as a component of "Salaries and other benefits. "

(j)

The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially determined and include the cost of medical and
dental insurance, survivor income, and disability benefits. Costs were projected using the same discount rate and health care trend rates as were used
for projecting postretirement costs. The accrued postemployment benefit costs recognized by the Bank at December 31 , 1999 and 1998, were $10
million and $9 million, respectively. This cost is included as a component of '1\ccrued benefit cost. " Net periodic postemployment benefit costs included
in 1999 and 1998 operating expenses were $2 million for each year.

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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

46

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.
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.

San Francisco Office
P.O. Box 7702
San Francisco, California 94120

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Los Angeles Branch
P.O. Box 2077, Terminal Annex
Los Angeles, California 90051

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.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Portland Branch
P.O. Box 3436
Portland, Oregon 97208

~
........

Salt Lake City Branch
P.O. Box 30780
Salt Lake City, Utah 84130

Twelfth District web
site: http:/ www.frbsf.org

Seattle Branch
P.O. Box 356 7, Terminal Annex
Seattle, Washington 98124

47

Q_

This Report was produced and written by Karen Flamme.
Design and illustrations were created by William Rosenthal.
Color photography by Paul Schulz.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

~

48

printed on recycled paper