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Table of Contents

Fro m th e Boardroom
Na tiona l Scene
Western Scene
West ern Banking
Administrative Objectives
Pri ced Payments Services
Services to Government Agencies





8IdeIaI R...". Bank
of San Flallcisco
MAR 12 1984


Th e Fed eral Reserve Bank of San Francisco is one
of twelve reg ional Reserve Banks whic h, together w ith
th e Boar d of Gov erno rs in Wash ington, D. C. , comprise
th e na tion's cen tral bank. The Federal Reserve Bank of
San Francisco serves the Twelf th Federal Reserve
Dis trict, wh ich includes Wash ingto n, O regon ,
California, Arizona, Neva da, Utah , Idaho, Alaska ,
Hawai i, Guam an d Ame rican Samoa.
As the nat ion's cen tral ba nk , the Federal Reserve is
respo nsib le for det erm ining and carryi ng o ut o ur
na tio n 's mo ne tary po licy. It also is a bank regu latory
agency, a provide r of who lesa le priced banking services ,
an d th e fiscal age n t for the United States Treasu ry.
Th e An nu al Report of the Fed eral Reserve Bank of San
Fra nc isco provides a review of the wes tern cen tra l bank's
ro les in carrying out these System respo nsibilities agains t
th e back grou nd of the ma jor economic, legislative,
regu latory a nd ad minis tra tive develo pmen ts in 1983.


From the Boardroom

John J. Balles
Presid ent

Caroline Leon etti Ahmanson
Chai rman of the Board

Alan C. Furth
Deputy Chairman

Th e nati on al eco nomi c re cove ry in
1983 w as w elcom e new s after the
d eepe st recession si nce World War
II. Rea l g ross nati on al pr oduct gr ew
6. 2 percent o ve r th e year; im p ress ive
ga ins we re ma de in emp loyme n t
a nd fur th e r inroa ds were ma de
agai nst infla tio n. Co ns ume r spen d ­
ing w as a leading con tr ib u to r to th e
recovery, a ided in th e firs t part of th e
year by hous ing a nd by bus iness
s pe n di ng on equ ipment. By yea r­
e nd, th e une mplo y m ent ra te had
dropped to 8 .2 percent from its
rece ssion pe a k 000.8 percent
re corded in Decem ber 1982 . Inflati on
decli ned for th e second s tra igh t
yea r, a s th e increase in th e a vera ge
le ve l o f p rices o f a ll goods a nd
se rvices produced in the U. S . fell
from 4.4 percen t in 1982 to 4 .1
percen t. Th is improveme n t was all
the mo re rema rkabl e when compared
to the average in fla tion rate o f 9.4
pe rce n t for 1980-1981.
F u r ther eco no m ic ex pa ns io n is
expec te d in 1984 w ith real GNP
foreca st to grow between 4 and 5
p ercent. H owever, co n tin ued large
fed e ral bud get d e ficit s co n tribu tin g
to hi gh real (in fla tio n -a dj us ted )
inte res t rat e s in th e U nited St ates
m a y lim it th e rec ove ry o f ce rta in
secto rs of th e economy. In 1983, the
ad ve rse effec ts of h igh rea l interest
rates were mos t eviden t in a n unu s­
uall y la rg e deficit in o ur fo reig n
bal an ce o n goods a nd se rvices . A
larg e ca p ita l infl o w from a bro ad ,
a tt rac te d b y hi gh re al interest ra tes
in th e Ll.S.; push ed up th e fo reig n
ex cha nge va lue o f th e d ollar a nd hurt
U .s . ex ports w h ile a t th e sa me tim e
e nco u raging im ports much mo re
t ha n is ty p ica l at thi s st a ge o f a
business recoverv . The re a lso were
in d ications that the hou sin g in d us­
try may ha ve fel t the effects of hi gh
real ra tes in the last quarter of 1983
when new housing starts tapered off
sign ifica n tly.
For m on etary policy, the challenges
in 1983 involved maintaining an
a n ti-infla tionary stance in the face of
hi gh federal deficits and interna­


tiona! financia l strains, wh ile a t the
same time p romoti ng co ntinued
eco no mic exp a ns ion . The challe nges
were mad e mo re diffi cult bv the
un cert ain ty ca use d by the im pact of
financial d eregul ation and othe r
factors o n th e cha racter of th e mon e­
tary ag gr egat es, and by the unu su­
aJly sharp decline in the velo city of
M1 in th e ea rly pa rt of the year. In
res pon se, less emp has is was placed
o n M1 as a g u ide to po licy a nd the
tar get s for th e o the r mon etary
aggrega tes were ad justed as the
FOMC so ug h t to co pe with th e
increased uncertainty facing it.
Beca use federa l de ficits are forecas­
ted to stay extrao rdi na rily high
throughout th e 1980s (es tima ted to
rem ain clos e to 5 pe rce nt of GNP
based on current tax and spending
progra ms), they pose one of the
rna jor issues facing economic policy­
makers for th e next few vea rs.
Ind icati on s of th e d e ficit~ crowdin g
o ut spe ndi ng o n expo rts alrea d y
h a ve a ppeared , a nd conce rn grows
that bu siness s pe ndi ng o n plant a nd
eq uipme nt a nd spe ndi ng o n hous­
in g also w ill suffer. Co ntin ued large
deficits th ere fore s how signs of
squeezing o u r major sources of
comparat ive adva ntag e in w o rld
markets, prod uc tiv ity and a rising
s ta ndard o f living .
In addi tio n to the respo nsi bility for
mak ing monetary po licy, th e Fed eral
Reserve also plays a n importan t ro le
in the nati on's payme nts me ch an­
ism. In 1980, th e Co ngr ess passed
the Mon etary Co ntro l Act to promo te
grea te r efficiency in th e paym e nt s
mechanism by mandating access to
Fed er al Reserve services at exp licit
prices for all depository ins titu tions
subject to reserve requirements.
Last year, th e Fede ral Reserve
completed its last major pricing of
services w he n it inco rp orated th e
cos t of check floa t in to new check
collection fee sche d u les .
In th is Dis trict, the mandat e has
fostered close scru tiny of service
levels, cost s, a nd pri ce structures

throughou t th e ind us try as the
Fed era l Reserve con tinues to
e nco urage the efficiency of payments
se rvices bo th fo r th e ben e fit of the
co ns umer and to fulfill its public
interest responsibili ties .
For the Fed er al Rese rve Bank of Sa n
Franci sco, tw o ma jor 1983 man age­
me n t objectives-cost-containment
an d autom at ion-comb ined with a
s tro ng co ns u me r relations program
hel ped th e Bank provide high
q u ality, cost-effec tive serv ices.
Moreover, th ese efforts allow ed the
Bank to pro pose a 1984 budget only
4 .6 percen t high er than that of1983.
The Bank's com mitment to meeting
th e future need s of the Distri ct took
tan gible form in the dedi cation of a
new head qu arters building in Sa n
Francisco on Marc h 2. Since then ,
the San Francisco Bank also em­
barked on a conceptua l design for a
new building to hou se op erations in
Los Ange les . In bot h cases, existi ng
ac tivi ties had ou tgrow n th e o riginal
facilities a nd " state- of-the- art "
technology was need ed to improve
se rvices. Automa tion efforts also are
evid e nce of th e Bank's orientation
toward th e fu tu re . In 1983, they
included ma jor compu ter up grad es,
e nha nce me nts to intra- d istrict
co m m u nicatio ns sys tems , and active
participatio n in System-wi de efforts,
suc h as that to imp leme nt an auto­
ma ted sys tem for handling secu rities,
developed a t thi s Bank. Combined ,
the Bank's a nd Sys tem's efforts w ill
help the Fed e ral Reserve meet th e
goal of imp roving the nation' s
pay me n ts mech an ism .
Man agemen t be nefited gre a tly
during 1983 from th e broad -bas ed
exp erience and ju dgme nt of the
Bank's directors at its headquarters
office and at its fou r bran ches.
Th e d irector s provided gu ida nce o n
majo r man agement d ecision s and
plann ing goa ls. In addi tion, they
s upplied information on eco no mic
and finan cial condi tio ns to s u pport
th e Fed eral Reserve's formulation of
monetary policy. Tod ay, 37 public­


spirited men and wome n serve as
directors , re presen tin g a g rea t
va riety o f pub lic a nd business inter­
ests from ma ny areas of th e West.
We are gra tefu l to all of these indi ­
viduals and to th ose who complet ed
terms as di rectors during 1983. Th ey
are: Ole R. Mettl er (Pres id ent an d
Cha irm an of the Boar d , Farme rs &
Me rcha nts Bank of Ce ntra l Ca lifor­
nia, Lod i, Ca lifornia) a nd J. R.
Vaug ha n (Se nior Mem be r, Rich ard s,
Watson, Dreyfuss & Ge rsho n, Los
Angeles, California) at our San
Francisco office; James D. McMah on
(President and Chief Execu tive
Officer, Western United Nation al
Bank, Los Ange les, Ca liforn ia) a t
Los Ange les; J. L. Ter te ling (P resi­
d ent, The Ter teling Co mpa ny , In c.,
Boise, Idah o) of Sa lt Lake City; and
Virgini a L. Pa rks (Vice President
for Finance and Treasurer, Seattle
University, Seattle, Washington)
at Sea ttle .
Finally, we wis h to exp ress o u r
a pprec ia tio n to th e o fficers a nd staff
w hose efforts a nd d ed icati on mad e
1983 a su ccess. The ir cha llenge was
to consolida te the cha nges mandated
by the Mon etary Control Act and to
develop an approac h to meeting th e
lon g-ran ge need s of the Twelfth
Distri ct's finan cial commu nity .

Ca ro line Leonetti Ahma nson
C ha irma n of the Board

,~ J . ~


[o hn ] . Balles
Presi de n t

National Scene

The yea r jus t ende d ma rked the first
fu ll yea r of recovery from the
dee pes t recession since World War
II. The recovery was cha rac terized
by stron g consume r spend ing,
h o u sin g, and business in vestment
in equ ip men t. Nevertheless, it was
not typical of pa st busi ness cycle
u p turns. The combination of a no n­
in flatio nary mon eta ry pol icy a nd
large fede ra l deficits res u lted in high
" rea l," or infl ati on-ad justed , int er­
es t rat es that dep ressed the expo rt
sec to r, stim ulated import s an d may
ha ve d ampened int er est- sensitive
sectors of the econ om y. By year­
e nd , th er e were indication s th at the
da mpe ni ng effect may have beg un
to mat e rializ e in th e hou sing ind us­
try w hic h, up until th en , had
recove red sig nif ican tly fro m its
recess io n low.

Impro vemen ts in em ployment were
im pressive, whi le fur the r gai ns we re
made in reducing in flatio n . By the
fourth qua rter, total employment
h ad increased 3.5 percent, or 3.4
milli on jobs , from its low point the
yea r be fore . This is 45 percent more
th an th e typical increase for the
sa me stage of a recovery. Com bined
w ith slower grow th in th e labor
fo rce, e m ploy me n t gai ns allowe d
th e civi lia n une m ployme n t rate to
d ro p to 8.2 per cent by Decemb er,
d o wn sha rp ly from the 10.8-percen t
cycli cal high in December.1982.

Inflati on in 1983 decline d for th e
second straig ht yea r. Th e ave rage
level of p rices of all goods and
se rvices produced in th e Un ited
States, measur ed by th e GNP
implicit price de flator, increased 4.1
percent over the four quarters of 1983
com pared with 4.4 pe rce n t in 1982.
These rates represented a remarkable
im prove me nt over th e av erage
9.4- percen t inflation rate for 1980 and
1981. Co nsumer prices showed eve n
more im provemen t, inc reas ing jus t
over 3 per cent in 1983, o r less than
a third th eir ave rage rate of increase
in 1980 and 1981.

Unemployment Rate

Consumer spending, housing
and business spending on
equipment led the recovery


11 - - - - - - - - - ­

10 --------~~
Progress Through th e Year
Th e eco n om ic recovery, as measured
by g rowth in the real G ross National
Product (GNP), began mo destly in
th e firs t q ua rte r of 1983 but grew
mo re rob us t in m id- year . From the
four th q uarter of1982 to the four th
q uarter of1983, rea l G NP rose 6.2
percent, o r onl y s lightly less th an the
6.8 perce n t average of th e first years
of th e five business cycle up tum s
since th e early 1950s .
Real GNP

8 ­ +-t - - - - - --+--­

7 ---11--­





1600 - - - - - - - - ­

1500 ------=--F-~_r_











- -

6 -t---~_+----


Bill io ns of 1972 Dollar s











[982 1983

Co ns u me r spendi ng was a lead in g
contributor to th e recov ery in 1983.
Despite its slow start in the first
quarter, cons ume r spe nd ing by
mid-year surpassed the average
increase at the same stag e of pa st
bu s iness recoveries. Housing and
busi ness s pend ing on eq uipme nt
a lso were exce ptio na lly stro ng . By
the four th q ua rter, resid ential
construction s pendi ng was ab out 40
percent above the level a year ea rlier
compar ed with an average first year
advance of on ly 25 percent. The
pickup in busi ness eq u ipment
spe nd ing was a welcome surp rise .
By th e e nd of 1983 it ha d incr eased
20.4 pe rce n t in real terms, com pared
wi th th e com pa ra ble average cyclical
a dvance of9.5 pe rcent.

6-Month Commercial
Paper Rate and Inflation

16 ---------:~6-Mo n th

Commercial Paper Rat;


14 -----~~:--12 -----~-:-----+-


2 L..J





In contrast, both the foreign sector
and business spending on structures
were much we aker in 1983 than the
historical norm . Spending on
business structures, adjusted for
inflation, usuall y increases by the
final quarter of the first yea r of
recovery but, at the end of 1983,
these expenditures were still slightly
below their level a year earlier.
The weakest sector in 1983 was our
foreign trade in goods and services.
Typically, weakness in the inter­
national balance on goods and
services develops during the early
stages of economic recovery. The .
export-import ch art illustrates this
pattern by comparing the average
differen ce between exports and
im ports of goods and services (as
percent of G NP) from six previous
business upturns and the present
recove ry. An upswing in the U.S .

usually cau ses domestic income to
grow faster than incomes abroad,
spurring a greater demand for
imports that outstrips the demand
for exports; the foreign balance
con sequently declines. The U.S.
balance on exports and imports of
good s a nd se rvices , however, has
been much weaker than normal
durin g this recovery, deteriorating
from a $5.6 billion surplus in the
fourth quarter of 1982 to a $18.7
billion defic it by the end of1983. The
unprecedented weak performance
of the forei gn sector is due to the
high value of the U.S . dollar in
foreign exchange markets and, to a
lesser degree, the unusually slow
pa ce of economic recoveries abroad .
A high value for the dollar made
U.S. exports less competitive in
w orld markets and the prices of
foreign goods and services more
a ttractive to U.S. residents. As a
resu lt, growth in U.S. exports lagged
while our imports surged.
Exports Minus Imports"
an d the Business Cycle
Percent o f GN P

1.5 - - . . . , . . . . - - - - - ­


Ave rage of Six
Previou s Cycles

0.5 --+--+-r;.;.;....----~

Quarters from Tro ugh

-1.0 _ _.....L..


"Expo rts and imports of good s and services

Not a Typical Recovery
Past recoveries typicall y have seen
more balanced growth among the
ma jor economic sectors than the
present one. The peculiarities of
1983 were due to a mixture of
exp an sionary fiscal policy and.
anti-infl ationary monetary policy
th at have resulted in high " real", or
inflation-ad justed, in terest rates.

Federal Deficit as Percent of GNP
Percent of GNP

8- - - - - - - - ­






~ ,),





19821 983

Expan sionary fiscal policy in the
form of large federal government
de ficits placed upward pr essure on
interest rates during 1983. Measured
on a unified budget basis, the federal
deficit was $195 .3 billion for fiscal
1983, or approximately 85 percent of
available net savings from the private
sector and state and local govern ­
ments. According to the Congre s­
sional Budget Office, the projected
deficits for the 1980s will avera ge
close to $200 billion through 1986,
or 5 percent of GNP, even as the
economic expansion proceeds .
Treasu ry borrowing to finan ce these
deficits competes with pri vate credit
demands and tends to keep interest
rat es high . High interest rate s, in
turn, discourage spending by
business and households, thereby
ensuring that enough resources are
transferred from the private sector to
meet the federal government's larger
demands. The impact of federal
deficits falls heavily on interest­
sensitive spending such as housing,
consumer durables and business
capital investment, alth ough in 1983
the effects on consumer and business
spending were offset in part by
the final 10 percent cu t in person al
income tax rates, and by the
accelerated depreciation allowa nces
provided in the Economic Recovery
Act of 1981.
The toll of high real interest rate s
was most prominent in 1983 in the
unu sual weakness in our foreign

account mentioned earlier. High real
U.S. interest rates attracted capital
funds from abroad which pushed
the dollar's value significantly above
the level consistent with the differ­
ence in price levels between the
United States and its major trading
partners. The competitive position
of U.S. relative to foreign goods and
services deteriorated, producing the
marked decline in our international
balance on goods and services des­
cribed above. In 1983, this problem
reached record proportions.
The International Debt Situation
Weakness in the export sector of the
economy also was aggravated by the
international debt crisis as several
less developed countries (LDCs)
adopted austerity measures to meet
international debt repayment
obligations. Designed to cut back
imports to bolster foreign exchange
earnings, these measures resulted in
a drop in U.S. exports to Latin
America - the region hardest hit by
the debt crisis - of23 percent
between 1981 and 1982.

these provisions were broadly con­
sistent with the proposals made in
April by the three federal banking
agencies - the Comptroller of the
Currency, the Federal Deposit
Insurance Corporation and the
Federal Reserve.
Problem areas remain, however.
Brazil has had trouble operating
within the terms of agreement for its
IMF loans, and the Philippines is
experiencing both capital flight and
difficulties in gaining new credits
from commercial bankers concerned
with political instability in that
country. A sharp decline in 1983 in
international bank lending, particu­
larly by moderate-sized banks,
increased the burden on the larger
banks, governments and inter­
national lending agencies. Finally,
continued high U.S. real interest
rates exacerbated the liquidity
problems of LDCs because the
interest cost of a significant part of
their debt is tied to Ll.S. rates.

Resolving international
debt problems depends on
continued cooperation and a
sustained economic recovery

Further progress in resolving the
LDC debt problem will continue to
depend upon cooperation among
the LDCs, banks, and international
agencies, and on a sustained
economic recovery both here and in
other industrialized nations.

Some progress was made toward
defusing the LDC debt crisis in 1983.
A restructuring of the public debts of
Mexico and Brazil was accomplished
and progress toward the same goal
has been made for other large LDC
borrowers. In addition, a substantial
increase of over $30 billion in
the International Monetary Fund's
resources and an increase of about
$11 billion in the General Arrange­
ments to Borrow provided that
agency with larger funds for loans to
countries with severe international
payments difficulties. The authori­
zation for the $8.4 billion increase in
the U.S. contribution was coupled
with provisions to tighten controls
over U.S. bank lending abroad;

Monetary Policy
In 1983, the Federal Reserve con­
tinued to pursue an anti-inflationary
policy that, at the same time, would
promote the economic recovery then
underway. As the year began,
monetary policy faced a number of
important challenges. A primary
challenge was to provide the basis
for an economic recovery without
re-awakening fears that monetary
policy had become inflationary. The
problems of designing an effective
monetary policy were made espe­
cially difficult because of
uncertainties about the impacts of
continued high federal budget
deficits and international financial
strains on the economy.


Another area of uncertainty concer­
ned the method by which the
Federal Reserve has implemented
monetary policy, namely, the
targeting of monetary aggregates.
Financial deregulation in the form of
the new Money Market Deposit
Account (MMDA) introduced in
December 1982 and the debut of the
Super-NOW in January 1983 raised
questions as to how movements
in the monetary aggregates should
be interpreted as the public adjusted
its portfolio to the new accounts
over the year.
Velocity and Ml Growth
(Semi-annual Rate of Change
on an Annual Basis)
Ch'l llgC' ( °'0)

15 - - - - - - - - - - ­
10 - - - - - --H:---i--r

o- - - - - --+--+-i­
-5 - - - - - - - -:"..+­


In addition, there was considerable
concern about the continued useful­
ness of M1 as a policy guide given
the surprising decline in its velocity
in 1982. At the time, the decline
raised concerns that financial dereg­
ulation and other factors had
fundamentally changed the character
of MI. M2 and M3 also had unusual
velocity declines, but their declines
were less pronounced in relation
to normal cyclical patterns.

The Federal Reserve responded to
these two sources of un certainty
about the aggregates by making
some adjushnents to its mon etary
targeting over 1983. First, the Fed eral
Open Market Committee, th e ma jor
monetary policy arm of th e Fed ,
decided to place less th an the usu al
weight on the narrow transactions
aggregate Ml, which in recent yea rs
often ha s served as th e primar y
inte rmediate tar get. Thi s decision
w as ca rried over from th e O ctober
1982 meetin g w he n th e Committee
began de-emphasizin g M1. At its
Februa ry 1983 meeting, the FOMC
established a monitoring range,
in s tea d of a tar get ran ge, for M1 of 4
to 8 percent from the fourth qu arter
of 1982 to the fourth qu art er of1983.
The new deposit instruments also
affected the tar get ranges for the
broader monetary agg rega tes. For
example, it was widely expected that
the introduction of MMDAs would
cause funds to flow in to M2 and
temporarily distort its gro wth . The
impacts of the new instrument were
expected to be especially large in the
first quarter of 1983 and to persist
throughout the year. The FOMC's
reaction was to establish a ta rget
range for M2 from a base of
Februa ry-March of1983 to the fourth
quarter of 7 to 10 percent. The
Committee also es tablished a tar get
ran ge o f 6lf2 to 9 1h perc ent for M3
from the fourth qu arter of1982 to the
fourth quarter of 1983, and a mon i­
toring range o f 8 1h to 11% percent
for total domestic non-finan cial debt
over the same period .

The decline in velocity that occurred
in 1982 carried over into the first
qu arter of 1983 although it appeared
th at this phenomenon was largely
o ve r by mid-year. In retrospect, this
de cline seems to have been the
re sult in part of the drop in inflation
in ea rly 1982, and a subsequent
decline in nominal short-term inter­
es t ra tes in the latter part of the year.
To a lesser extent perhaps, the velo­
city decline wa s related to increases
during the recession in pre cautionary
d emands for short-term finan cial
asse ts, includi ng the NOW accounts
in M1. At mid -yea r, the FOMC
mo ved the base of the M1 mon itor­
in g range forward to the second
quarter of 1983, and establi shed a
new (hi gher) 5 to 9 percent ran ge
th at extended to the fourth quarter
of the year.

Continued massive deficits
threaten to undermine our
standard of living
At yea r-en d , two of the monetary
aggreg ates, as well as total debt, wer e
w ith in their ranges for 1983.
M1 finished slightly above the
m id point of its range, M2 marginally
below its midpoint. M3 ended the
ye a r just abo ve the upper bounda ry
of its tar get ran ge .

The Outlook
The economic expansion is expected
to co n tin ue in 1984 w ith real G N P
g rowing bet ween 4.0 and 5.0
percent. The unemployment rate is
expec ted to decl ine moderatel y over
the year, but will rema in abo ve the
levels that would indicate a bu ild-u p
of inflationary pressures. Inflat ion in
1984 therefore should be up onl y
modestly over 1983 barring an y sub­
stantial food or energy price increases.


Bas ed on current tax and spending
programs, large federal defi cits are
projected to con tin ue into the
fu ture . According to the Congres­
sio nal Bud get Office, they will grow
from 3. 0 percent of GN P in 1984 to
4.6 percent by 1989; this com pares
with an average of 2.0 percent
durin g the 1970s . Th ese stru ctural
d ef icits , so -ca lled becau se thev will
persist des pite con tinue d recovery
in the econ om y, w ill absorb an
unu su ally large sha re of the nation 's
ou tpu t ov er the de cade. Mu ch of this
tran sfer of resources from the pri ­
vate to the publ ic sector w ill come at
the expense of housin g, investment
in bu siness plant a nd equ ipmen t
a nd the forei gn trad e secto r (that is,
lo we r ex po rts a nd output in the
import-competing sec tors) . Thus,
th e co n tin ued massive deficits
threaten ultimatelv to undermine
U.S. com petitiveness. productivity
and stand ard of living.

Western Scene
The Twelfth District's economy,
al tho ug h slow to begin its recove ry,
g rew w ith increased vigor as 1983
progressed . In keeping w ith the
national pattern, ga ins in employ­
m ent first came mainly from a turn­
around in the demand for in teres t­
se ns itive spending, parti cularl y
hou sin g . Risin g con sumer spend ing
a lso provided a major stim u lus
for the regional econom ic recovery
as consumers sharply increased
their ou tlays for all retail goods
a n d services, but especially for
durable goods.
Employment Gains
One key indicator of the strength of
the West's recovery was a 4.3-percent
rate of employment growth over the
course of the year that surpassed the
nation 's performance . Arizona was
the s tar performer w ith employm ent
g row th o f just over 8 percent, but
employment in Utah, Washington,
Idaho, Ne vada and California also
g re w faster than the national
a ver age . As of December 1983, th e
unemployment rates in Arizona and
Cali forn ia had dropped we ll below
th e national average, while in Utah
th e unemployment rate rem ain ed
below the national average , as it had
during the 1981-82 recession. Only
in Hawaii, Oregon and Alaska was
em ploy men t growth over the course
of 1983 below the national avera ge .
Oregon's poor performance was due
to the renewed weakness which
developed in national homebuild ing
a n d related industries in the second
half of 1983. Hawa ii showed signs of
sig ni fica nt im p rov emen t late in the
yea r a nd its unemployment rate in
a ny event remained below the
national av e rage as it had during
the 1981-82 recession.

G rowth of Employment





























• Decem be r 1981- December 1982
• Decem be r 1982-D ecem ber 1983

Recovery's Progress
The s ta tes in the Pacific Northwe st
were amo ng the first to bounce back
fro m th e recession as the turnaround
in na tional housi ng boosted
em ploymen t in local construction,
lu mber a nd other housing-related
indu stri es . This early strength
provid ed a major impetus to the
Tw elfth District's recovery although
the slowdown in western and
national housing activity which
began a fter Au gust adversely
aff ected Oregon 's economy.
In the seco nd qu arter of 1983, the
recove ry began to boo st basic
materials ind us tries such as
chemica ls and paper, a nd spread to
capital goo ds industries such as
non-electrical ma chinery. At the
same time bu siness capital s pe nd ing
began to revive, the demand for
cons umer durables continued to
pick up, s purring employment in
both ret ail trade and automobile
manufactu rin g . And the rise in
person al income throughout the
nation spurred tourism in the West,
parti cularly Hawaii, helping to
give th at state the lowest
unempl oyment rate in the region.

The ae ros pace a nd electronics
industries became major so urces of
stre ng th to the regional economy as
1983 pro gressed . Because the West
is home to numerous military bases
and man y of the nation 's leading
aer ospace and electron ic eq u ipmen t
manufactu rin g firms , the region
ben efitted throu gh out the year from
th e high er lev el of Federal
gove rn men t defense sp ending.
In Haw aii, this stimulus took the
form of increased expe nd itu res for
military payrolls and local purchases.
Other states - including California,
Wash ington , Arizona and Utah ­
experienced a n increase in the Fed­
er al govern men t's demand fo r aero­
spa ce equip ment, including a ircraft,
missiles a nd electron ic products .

Aerospace and electronics
industries were major sources
of strength
Emp loyment in the aeros pace a nd
electronics in d ustries accelerated in
the seco nd qu arter of 1983, when
business demand for electronics
products picked up. Th e only excep­
tion was in Washington , where
declining ba cklogs in commercial
aircraft orders reduced ae rospace
payrolls throu gh out th e yea r. At
year-end, however , there was
optimism th at the co n tinue d ga in s in
defense business would com bine
with grow ing com mercia l aircra ft
orders to halt future layoffs .

Western mining, agriculture
and energy industries showed
persistent weakness
Persistent Weaknesses
Despite the general strength of the
region's recovery, some sectors
showed unusual or persistent weak­
ness. Western producers of copper,
lead and zinc - located mainly in
the Intermountain states ­
continued to operate at low levels of
capacity utilization because of excess
worldwide production of their
products. In Arizona, Utah, Nevada
and Idaho, a declining demand for
gold and silver caused a drop in
metal mining and processing
industry employment.

Abundant supplies and relatively
low prices for energy products "
reduced coal production and
synthetic fuel development in Utah,
while opposition to the construction
of nuclear plants continued to
depress uranium mining in that
state. Cutbacks in oil drilling and
exploration activity, caused by a
drop in the world price of oil, hurt
Alaska, which also suffered from
weakness in logging and fish pro­
cessing industries.

The Outlook
Further progress seems assured for
the western economy in 1984, with
the gains matching the national
performance. Increased defense
and business capital spending
should increase employment in the
West's capital goods industries.
Further boosts in consumption
expenditures as disposable income
continues to rise should help the
retail trade, service and tourist­
related industries. Exports of
agricultural products also may rise
as foreign economies strengthen.

The huge increase in housing
promises to make homebuilding
less of a stimulus in 1984 although
Western housing starts may rise
moderately. Unless homebuilding
activity improves further, Oregon's
recovery could prove vulnerable
because of its heavy dependence on
the lumber industry. Prospects for
significant recovery in the West's
metal and energy mining operations
are not promising. On balance,
however, the West should do as well
as the nation in 1984.

In agriculture, lower farm operating
costs were offset by bad weather and
a fall in exports. On balance, net
farm income rose only slightly. The
continued weakness in both the
mining and agricultural sectors kept
western rural communities depres­
sed in comparison with metropolitan
areas as 1983 drew to a close.


Western Banking
The e ffects o f ma jor legislation
enacted in 1980 and 1982 combined
to create a new o per ating environ­
ment for the banking ind ustry in
1983 . Deposit deregulation was the
most im po rta n t, but br oader th rift
lendin g and holding co m pa ny
powe rs also ch anged the bankin g
e n viro n me n t by effectively placing
sav ings and loan associations in
direct competition with banks for
a lm os t the enti re arra y of retail
bankin g se rv ices . Moreo ver, a ne w
rash o f e ffo rts to expand bank
holding company activities, as well
as to es ta blis h " non ba nk" banks
(ins titu tions th a t eith er take d e posits
o r make commercial loans, but not
bo th), h ighlighted aggr essive
co m pe titio n in the market for
financi al serv ices.
Deposit Deregulation
Deregu lation o f deposit rates hit
w es te rn banks a nd S&Ls with full
fo rce in 1983. The introduction of the
Money Market Deposit Accou nt
(MMDA) in mid -Dec ember 1982 and
the Super-NOW in January 1983
g a ve de pos ito ry in s titu tions the
a u th o rity to offer "market" rates on
depos its of $2,500 or m ore. Then,
in O ct ober, d eregulati on of all time
deposits with o riginal maturities
g rea te r than 31 da ys left onl y a small
portion of banks and S&Ls deposits
s u b jec t to rate regu la tio n .
Billions of doll ar s flow ed into the
unregulated acco u n ts, re structuring
the bal ance sheets of depository
in s titu tio n s in the process.

Mo ne y Market Deposit Accounts
Billions of Dolla rs

400- - - - - - - - - ­
300 ----:---.......:.--+---;--­
T hrift s









Sep t







the account. Western S&Ls garnered
$35 billion in MMDA d eposits ­
o ver o ne-fift h of all their de posits.
The money market funds, on the
o ther hand , los t not only market
s hare, but also s u ffe red signific ant
net outflows o f funds .
As much as on e-third of bank a nd
thrift fu nd s flowing into MMDAs
were " new " fu nd s th at enabled
these institutions to reduce th eir
reliance on " p ur chased fu nds" such
as lar ge denomination negotiable
CDs, fed funds and repurcha se
agreements . Large CDs outst anding
at western banks, for example, de­
clined fro m 32 percen t to 20 percent
of th eir liab ilities . The success of the
MMDAs, howe ver, wa s not costless,
as District ban ks and S&Ls reported
a $14 billion decline in the lower-cost
passbook savings deposits.

The bankin g ind ustry e merge d as
the clear leade r in the MMDA battle
in th e West and in th e nation , largely
because it offered higher yields and
bonuse s in the initial weeks th an
S&Ls, m u tu al savin gs banks , and
cred it unions . By year-end , we stern
banks a lo ne held more than $51
billion in MMDAs, or about 21
percent of their total domestic
depo sits. In contrast, western thrifts
lost tot al retail saving s market share
to commercial banks, but were able
to att ract sign ificant net inflows with


Slow Loan Growth
The influx of MMDA funds sent
ba n ks and S&Ls scram blin g to find
profitable lending opportunities in
1983. Consume r credit provided the
most attractive lendin g market as
man y western banks made a concer­
ted e'ffort to pr omote th ei r ins ta ll­
ment loan and credit card products.
Boosted by th e rise in con sumer
spend ing on durable good s, banks
experienced the first sustained
increase in consumer lending
since 1979.
The residentia l mo rtgage market
s howed con siderable s tre ng th
despite a rise in mortgage rat es in
the late sp ring and early summer.
S&Ls extended the lion 's sha re o f
mortga ge credit in the West, as
their mortga ge loans o u ts ta n d in g
g rew by 17 percent in 1983. Western
banks' real es ta te loan s outst an­
ding , by contrast, grew onl y 3
percent, alth ou gh thi s fig u re
und erstates banks' o rigi na tio n
activity since most o f their fixed
rate mortgage loans were so ld in
the seco nda ry market.
By contrast, improvement in
corporate cash flow s a nd better
terms in debt a nd equ ity allowed
man y corpora tion s to reduce their
depend ence o n s ho rt-te rm ba nk
borrowing. O verall, we ak d emand
for business credit limited the
domestic loan g row th o f western
banks to a s luggish 5- pe rcent rate,
well below the moderate 8.5-percent
ra te for ban ks nationwide . Foreign
loan portfolios also co n tracted
slightly as lesser developed coun­
tries (LDC) continued to face prob­
lems se rv icing their debts . Western
S&Ls fa red much better ov erall;
their loan po rt folios gr ew by 19 per­
cent because of the pickup in
mortgage lending and the ir broade r
consumer lending powers .

On balance, banks and S&Ls
enjoyed a reduction in their overall
cost of funds because of lower inter­
est rates in 1983. S&Ls managed to
show positive aggregate earnings of
$1.1 billion in 1983 despite the
lingering effects of poor loan quality
and interest rate mismatches. Loan
losses at banks, however, placed a
significant drag on their earnings
growth. Deterioration in the quality
of LDC, housing, and energy-rela­
ted loans, in particular, resulted in a
60-percent increase in loan loss
provisions in this District, with the
problem much more severe at some
banks than others. Nevertheless,
most western banks posted
increases in earnings over the
level in 1982.

A new banking environment
in 1983 was highlighted by
aggressive price competition
A primary source of earnings
growth for banks in 1983 was the
sharp 25 percent increase in fee and
fiduciary income. Banks raised fees
to recoup the cost of providing here­
tofore "free" services, particularly
deposit services, and expanded the
array of financial services offered.
Supervisory and Credit Services
Developments in this Reserve
Bank's supervisory, regulatory, and
credit activities confirmed the gen­
erally healthy condition of banks
and banking organizations in the
Twelfth District in 1983. But despite
improved earnings for most institu­
tions, many individual banks
continued to be troubled by the
effects of the recession that ended in
late 1982, although their problems
were less severe than banks in the
rest of the country.

Conditions at 16 of the 137 commer­
cial banks and bank holding com­
panies examined by this Reserve
Bank warranted formal corrective
programs. These institutions suf­
fered from depressed earnings and
problems with liquidity brought on
by a combination of the legacy of the
1981-82 recession and regional prob­
lems with asset quality, especially
poorly performing western real
estate, energy-related, and interna­
tionalloans. Such conditions hit
small commercial banks hardest,
with more such banks failing
nationally in 1983 than 1982.
The economic environment, poor
loan quality, and a federal funds rate
that exceeded the discount rate for
most of 1983 led a post-war record
number of institutions to seek ac­
commodation at the discount
window. Although most borrowed
for short-term adjustments, 23 of the
102 borrowing institutions sought
credit for extended periods to meet
seasonal or more acute liquidity
strains. In general, institutions con­
tinued to pledge large balances of
collateral to secure potential borrow­
ings, and, at the end of1983, the five
offices in this District held $18.5
billion collateral in total.
The San Francisco Reserve Bank
continued successfully to coordinate
examination efforts with related state
and federal regulatory authorities in
such programs as the Alternating
Examination Program and the
Extended Examination Cycle
Program. These efforts have
resulted in greater cooperation,
coordination and significant cost­
savings for all involved.


The Bank's examination policies also
continued the trend toward focusing
on the internal audit procedures of
depository institutions. This ap­
proach extended into credit services
as exem plified by the Qualified Loan
Review Program. Implemented in
late 1982, this program qualifies
institutions to pledge certain types
of customer paper as collateral for
advances at the discount window
and for Treasury Tax and Loan
deposits without the Reserve Bank's
prior analysis and approval of the
financial condition and creditworth­
iness of the pledging institution's
customers. Instead, the Reserve
Bank, along with the appropriate
other supervising agency, judges
the institution's financial soundness
and loan review program.
For all examinations in 1983, this
bank used the new Commercial
Bank Report of Examination
adopted by the Board of Governors
near the end of 1982. The new report
was designed to reflect current con­
ditions and practices in the industry
by incorporating additional empha­
ses on interest rate sensitivitv and
items recorded off the balanc~ sheet,
revised definitions and guidelines
relating to capital adequacy! end-of­
quarter financial statements! and
extensive peer group comparisons.
The San Francisco Reserve Bank also
embarked on a long-term objective
to im prove the efficiency and quality
of administrative functions in its
supervisory! regulatory and credit
services by automating activities
that permit the cost-effective appli­
cation of computer technology. This
effort is a response to the increasing
volume and complexity of regula­
tory data as the financial industry
continues to expand and diversify.

Exa m p les of ne w deve lopme n ts
wi thi n th e ban king indus try were
mos t ev iden t in th e ty pes of ba n k
h olding co m pa ny (BHC) appl ica­
tio n s processed in 1983. BHC form a­
tions co n tin ue d at a brisk pace
a lthough their nu mbe r decli ned
after rising in each of th e last th ree
vears. In 1983, however, the com­
p lexity of ap p lica tio ns submi tted
increased , as d id the nu m be r of BH C
applica tions to expand non -banki ng
o p e ra tio n s a nd to acq uire add itio nal
banks . Alth o ugh many applica tio n s
deal t w ith thrift a nd loan com­
panies, co n s u m e r fina nce , and
insurance underw ritin g, more sign i­
fican t fo r the s tr uc ture of banking in
the fu ture, we re applications to
engage in rece n tly approved
a c tiv ities s uc h as d iscount brokering
and the se lling of fu tures con tracts.
Banking organizatio ns also co n tin ­
u e d to ex pa n d th ei r in terna tio nal
ba nking facilities and Ed ge Co rp o ra­
tion ope ra tions , as 20 of the forme r
were es tablis he d or approved and 3
of the latte r we re esta blis hed in 1983.
In addi tio n, th e Bank Export Se r­
vices Ac t, passed by Congress in
1982 , p ro d u ced app lica tions by
seven ba n kin g or ga n izati o ns to esta­
b lish Ex p o rt Tradi ng Compa n ies in
th e Twelfth District. These ne w
compan ies w ill s trive to promo te
expor t grow th by offering such
services as marke ting assis tance,
freig h t forwardi ng, a nd insura nce
a n d financ ing of all ty pes
of domes tically produced goods
a n d raw m a te rials .

In th e area of co ns u me r edu cati on
and protec tio n, most complain ts to
which th e cons umer affairs unit
responded co nce rned unregu lated
ma tters s uc h as se rv ice charges and
d e p osit dis p u te s typically involving
a utomatic teller machines , whi le
most re g ula tory inquiries fell un d e r
the Tru th-in-Lend ing reg u lat io n .
Consu mer affa irs a lso maintai ned its
o u treac h ac tivi ties by providi n g
speakers to ba nki ng and credit asso­
cia tion semina rs, offe rin g the
Ed uca tio nal a nd Ad visory Se rvice to
sta te member banks to h e lp th e m
u nd e rst a nd and comply wi th
consumer law s a n d regulati ons, and
d evelo pin g comm u n ity co ntacts .
Community co n tac ts prov ide in ­
form ation for exami nation s of
compliance wi th th e Com mu nity
Reinvestmen t Ac t. They a lso he lp
th e Bank iden tify and eva lua te
community developme nt programs
it may be able to assist. Examples
in clu d e the Ne ig h bo rhood H o u sing
Services and Bay Ar ea Resid e nt ia l
Investmen t and Develo pm e n t
G rou ps , w hic h ha ve the co m mo n
objective of d evelo p ing affordable
ho us ing th rough a part nership of
communi ty represen ta tive s , loca l
governme n ts and fina ncial ins titu ­
tio n s; the Res e rve Ban k's role is to
facilita te co m m u n ica tion among
the differen t par ties .


Administrative Objectives

Durin g 1983, the focu s o f the admi n­
ist rati on of th e Sa n Fran cisco Fed er al
Reser ve Ban k shifted from comple­
tin g th e ma ny ope ra tiona l cha nges
mand at ed bv the Mon et arv Co n tro l
Ac t o f 1980 to o ne o f fu lly adap ting to
th e changes th at occurred in the
tran sition , a nd plann ing for th e
fu tu re . Th e dedication of th e Bank's
ne w headquarters office in Sa n
Francisco o n March 2, 1983 sign ified ,
in a se nse, both a commitment to the
long-ran ge needs of the Twelfth
Dist rict's financial communitv, a nd
re cog ni tion o f th e fundam en tal
ch an ges in th e Federal Reserve
Syste m's a pproach to so me of its
trad ition al roles . Sp ecifically, the
Co ng ressio na l mandat e to price
Rese rve Ban k services to recov er
cos ts , a nd to ens ur e open access to
th ose services, led thi s Ban k to
emp has ize sta te -of-the-a rt facilities
for se rv ice d eli v e rv an d cos t­
containm ent to m ~ ke th ose services
e fficien t an d mar ket ab le.

Cost Containment
Th e Twelfth Distri ct's emphas is on
co n tain ing cos ts pe nnea ted all parts
o f th e budget process a nd resu lted,
in 1983, in internal rea lloca tions of
resources a nd new in itiat ives to
. dampen th e u pward trend in
expenses. A key elemen t in cost­
containment was th e adoptio n of an
a u tomation stra tegy that has yielded
both additional con tro l ov er the
investment of resources in computer
eq u ip me n t and e fficiencies in opera­
tions amenable to au toma tion . This
Reserve Bank also revised medical
a nd hosp ital ins u ra nce plans for
em ployees and achieved add itiona l
sav ings in ne w a rmo red carrier
co n tracts a nd new s taffing me thods
fo r cu rrency processing .
O v erall, th e Sa n Franci sco Bank's
cos t-co n ta in me nt e fforts held 1984
expe ns es to $114,383,000 (within
bu dget) a nd allowed the Bank to
p ropose a 1984 budget only 4.6
p ercent high er th an that of 1983.

Facilities Planning
Co m ple tio n of th e Fed eral Reserve
Ban k o f Sa n Fran cisco's new head­
q ua rte rs facility capped several
years o f e ffort in planning and
co ns tructio n. To meet th e cha ngi ng
and gro wi ng need s of the Twelfth
Dist rict, the building was design ed
to facilita te au to ma tion to impr ove
Ban k serv ices.

Increased use of computer
technology is the key
Em p loyees forme rly housed in
several d iffe rent locati on s, man y in
leased s paces , we re brought together
unde r o ne roof w ith e no ug h spa ce
for expa ns ion. Life-su pport and
elec trical sys te ms comp leme nt the
Ba n k's co mp u ter-ass isted opera­
tion s, and high -securi ty sp ace should
acco m mo da te grow th in cas h and
fiscal age ncy ope ratio ns th rou gh the
next 30 years . Th e ne w bu ilding's
d at a center co nta ins facilities
for ad d itio na l p rocessors, s torage
m ed ia, a nd telecommunication s
eq uip me n t, a nd its ne w
telecommunications control center
e m p loys th e la test control and
sw itching technology.
In additi on to housing the Reserv e
Bank 's ad m in istra tion and banking
se rv ices , a portio n of the new
bu ilding is dedi cated to public
ed uca tio n in eco no mics . An exten­
s ive ex hi bition, called The World of
Economics, is hou sed in the build ing's
lobby. Co ns isting of twe nty- three
se pa ra te ex hi bits that range from a
mural d epic ting th e de velo p ment of
eco no mic th eo ry to com puter ga mes
th at pe rm it the pa rticipa nt to
sim ulate th e man agement of fisca l
and monet ary policy, the m ulti­
media exh ibition is o pen to th e
publ ic every wee kday.

New h eadquarters building in San Francisco


In June of 1983, the Board of G over­
nors a uthorized the Bank to pr oceed
on th e conce ptua l design of a new
building for its Los An geles Branch
office. Existing oper ations alre ad y
hav e outgrown the Los Ang eles
facility built in 1929 and expa nd ed in
1953. Moreover, primary mechanical
and electrical building sys tems a re
outdat ed , and specia l facilities, such
as th e cash va ults, are in ad equat e.
The pro posed new bu ild ing, on a
site adjacent to th e old, w ill pr ovid e
for all exis ting opera tiona l need s of
cas h, checks, and comp u ter services
a nd for their ex pa nsion in th e fore­
seea ble futu re. The new bu ildin g also
will have a back- up so urce o f po wer
and other critica l sys tems for emer­
gencies . In su m, the new facility will
he lp th e Bran ch meet th e cha llen ge
of supplyin g effective and efficien t
banking se rvices to on e of the na­
tion's fast est gro w ing com m u nities.

Automation Efforts
The Federal Reserve Ban k of Sa n
Franci sco's com mitme n t to a utoma­
tion efforts has res ulted from
emphasizin g th e qu ality of service
performed at th e lowest cost cons is­
tent with modem man agement
techniques, app licable technology,
and security . In ad d ition, th e Bank
views th e increased use of comp u te r
technology as a key mean s of fulfil­
ling its public int erest respon sibility
to promote im proved pay me nts
se rvices in th e financia l ind us try.

Planning, impl em enting a nd
develop ing resou rce-sha red
a pp lications systems (tha t is, those
sys tems for w hich the costs of
de velopm ent are sha red by Rese rve
Banks) as part of the Federal Reserve
System's Au toma tion Program wa s
the major emphasis of th e Reserve
Bank's computer services staff in
1983. Last yea r, Bulk Dat a and
Administrati ve Message sys tem s
were succ essfull y imp lemen ted and
plans were com pleted to impl ement
the Funds Tran sfer, Cus tomer
Information an d Automa ted
Clearing Hou se (ACH) resou rce­
shared system lat e in 1984 or ea rly
in 1985, and th e Int egr at ed
Accounting Sys tem in 1985.

As the de velop er of the highl y
s uccessfu l SHA RE sys tem for a uto­
mated secu rities han dl ing, th is Ban k
continues its lead er shi p role wi thin
the Federal Reserve Sys tem Au to­
mation Program. The SHA RE
system has been installed at a
number of Reserve Ban ks, including
St. Louis, Dallas and Kansas City,
and is nearing final installation in
Chicago. Installation s in 1984 are
planned for Cleveland , Boston and
Atlanta . Moreover, the Twe lfth
District was chosen to be th e
developer of th e System's resource­
s ha red Sta tis tical Dat a Reporting
Syste m-STAT. STAT will bu ild on
the Microd ata Processing Efficiencies
(MIPE) sys tem d eveloped by Sa n
Francisco, an d initial ava ilability is
planned for ea rly 1985.

A commitment to the
long-range needs of the
Twelfth Di strict's
financial community
The Bank also retain ed its leader ship
role in establish ing nation wid e
automation pol icy throu gh th e pa r­
ticipation of se nior man agem ent in
the two national committees that se t
the direction for th e Sys tem 's auto­
mati on program s; man y of th e Bank's
se nior technical staff also se rve on
various nati on al task forces.
Internal au toma tion efforts included
completing a ma jor comp uter up­
grade progr am for th e San Francisco
data center with th e installa tion of a
new central processor. Bran ch
computers were up graded in Los
Angeles and Salt Lake City, an d
Portland and Seattl e will see sim ilar
upgrades early in 1984. Ins tallation
of the new equipme nt in San Fran ­
cisco in th e first qu art er of 1984 for
chec k processin g support will enab le
all offices to process checks under a
s ta nd ard operatin g env iron me nt.

Pr oposed new Los An geles Branch


This w ill lead to reduced operati ng
and support cos ts as well as a
uniform check p rod uct and a
common base for backing up our
District-w ide p rocessi ng.
In 1983, th e Ba nk ins talled a new
cha rgeb ack sys tem to su pport the
a lloca tio n of a ll District dat a proces­
sing cos ts o n the basis of the actua l
use of resources . Thi s sys tem is now
a major factor in un der standing and
monitoring resource use, and in
developing cos t-based prices for
compute r services .
The new in tradis trict com m unica­
tion s net w o rk (SPINE), ta rgeted for
co m plet ion by mid -1984, uses sta te­
of -the -ar t telecom mu nicati on tech­
nology to provide improved se rvice
with lo w er internal opera ting cost s
to the Ban k. In th e latter part of 1983,
all older ter minals in fina ncial insti­
tu tion s co n nec ted to our network
w e re re p lace d wi th new personal
compu ters as part of this project.

The San Francisco Ban k also has
placed a major emphasis o n curta il­
ing the future growth of au toma tio n
costs. It has embarked on a stra tegy
of using the micr o processor to p ro­
vide users with increased automa tion
su ppo rt at smaller incremen tal
cos ts. Th is technology, w hic h com­
pleme nts the use of large dat a base
orien ted processo rs and w hich has
been high ly successful in cus tome r
ne two rks for electronic access to
services, will be a fund amental
aspect of future automa tio n stra te­
gies . In ad d itio n, the Ba nk co nt inu es
to a na lyze the capacit y of ex isting
p rocessors a nd to tune th e ir perfor­
mance for bett e r service.
As part of ong oing effor ts to suppo rt
the Ban k's se rvices, several major
projects were started in 1983 in the
areas of co ntinge ncy backu p a nd
d isaster recovery plannin g, q uality
assura nce , and securi ty en ha nce­
me nts. Com bined, these efforts
wi ll posi tion the Bank to ma in tain
a lead ersh ip role in au to ma tion
a nd comm u nicatio ns a nd to meet
new and changin g business
require me nts in a cost -effective
and responsive manner.


vice Prt...;id,nl

GenNal Audilur
Robert L C,lCcht'!1




LourcE. Re ith

General Auditor

A......i,l .ml
C e nl' r,ll ,\ udilo r

CuI (;l(f w.mi

\1.10 Blurl!('lllh,JI

Audit O fficer
Petcr H-,ieh

Audit Oilin'r


Ch.HIl:"() RO\"ol'rl

C .;lr".' G . HtX'l h

A~S<K : Gent'Tal
Co unsel ­
Rote-t D. v\ljlllJrcJ ••

Assoc . wneral
~\' llh ,lm L. Coopl.' r

A....t . vice PH....

, " " ix '. C l' ne r,)1
. Cou nse l
[)!lU~ld" K,Sb .l\\

& wcr t.lrv
Elj/. ~ht-lh R.·l'rl:.·tvln,:l(\

Exec utive vic e Pre...ident
Di..trill Department..

Distr ict Dep a rtm ent s

" POl() .... m ..

${<nior vic e Pre
...lder n&
Director ot Research

Senio r vi ce Presid ent
lntema! Cons ulta nt
Robert v, .....1 Ci ll

Vice President
Fdcililil'S Planning
\Vil h,ullK Glf ller

Vile President
F,lCi li li~ Planning
O n-n L. Cbn..te nse n

Vice President
Accoun ling

... .. h. )('I \ \' K, ·ro.l n

Adelte Polev

A,,~1. Vice Pre'S.
Finan cia l Planning & Cont ro l

Assl. Vice P~.
Accou nti ng Automation

Gft'gOry B. W i l l i a m ~

Sh(lron Reisdorf

Acco c nt iog Officer
Thnnl,l<'R. Thaa nurn

Per sonnel and
Adm inistrative Services

Viet' President

Vice Pres ide nt
Bank hamin..rtion
'aerle E. Borchert

BHe & Inlern ational Regu lation
Har rv wGreen Pre .
App lic.ltinn.. and Ana ly..."
Robert 1 . lohn~ton

Supe rvisin~

O fficer
Sail lake City
ThllrH p,,\\('Gr,ll h

Vice Preside nt
Credi t & COm>ume r Affai rs
W. Gordon Smith

vi ce Presid ent
Bdnl< Sl udi~
Jon n t 1. Beebe

Asst. Vice Pres.
BHC & Intern ational Regu lation
I{od rl('y' E. Reid

Hank &-Consume r R ~. O fficer
\ V,]" OI' l. RII'hJ rd ..

Vice President &
A..soc . Direc tor of Rt"<t"m .n
loseph R. Aio;Kn.Jno


Asst . vic e Pres .
& Eco nomi ..t

H,lfl ~·St lt'n~

District Credi t OHicN
Do nald R. li e h

Research Officer
lo hn P. Judd

Computer Servi ces

Senior Vice Prt'Sidenl
John L Clt<,nn

Vice Presid ent
District SecurityrBldg. Oi\l i~ion

A~s( . Vice Pres .
Ad m in. Servin ...
J,m_ I.Ten$il'

Vice President
Compuler Operations
Edw ard Dugan

Vice President
Comm. Support Service,

p, G .lllow,lV

l,lrr\'\V,l... nen
h Vice Pres.
Co rpo ra te Perwnnel
Sn-vr-n F. \-Vnl lm m l'

As.,I. Vice Pres ,
Corporate Personnel
P.:\.. Tarbutton


A~~1. Vice Pres.
Com pute r Operation')

Oi' lrkl O pe ra tion.. Admin .

P,llntk Ton~

\1.I Wf 'l"11E 'hll'lch

System v Officer
toan l. Mo~hold,lm

Sysle rn~ Ofiic c r

1 Fuch ..

Svsterrs Of flcer
Iud\' A lohnstom­

Po rtl and

los Angeles

vlce Prt"'lident
Ilt>t·flir ."1. "",Htin

A~sl .

Vice Pre....

,\ ~t.

Vice Pre....

Pavme nt Service, Services

RO"<" C . ·\.,.hllldn

C h,Jrlt"l. t luti~h-rlt'r

Sl'( u r i l k~

Asst. vke Pre'S
Admin . Services
Brent M. Dux bu ry

As.,!. Vice Pres .
Barbara L. Coman

Scr\'kl'" Officer

r heodorf:' A. Schroeder


;\... Vice Pre<>.
f indoc idl Services
. .. drv Ellen 'o,\.artln

Asst. vic e Pres .
Payments Services

As\t . vi ce Pres .
Custodv Con t ro l

A....t, vtc e Pres.

H . W ill iam Pennington

Dean C. Connemwn

.... . TimOlh v

Fina n

Federal Reser ve Bank of San Francisco

Organization Chart

February L 1984




vice- Pre-;. iden t

Sld li..lic al & Data Sen ke,

Sa ra K. GdrrN >rl

A....1. vice Pr~ .

Legi..ldli \ l'"..t

Verle B. lonn-.fon

Inl N n.llio n.. t Rcpo rh Off icer


R ('port~ Of fic er

G<li IA . Iavlor


Distri ct Operations


S.F. Bank Oper ati on s


Oi!llricl Fin,mcial Service">
lohn F HOOI;('f


,\ ....1. Vice Pnos.

A..,t. Vice' Pres .

,.\....1. Viet.' PrN .

fin.lnci .lISt-ni<. ~

Srturitie-o Services

Electioni<' Pavments

Cbeck Seni<:t • .

'.' dnn.J F. Perno

BtuceH Ibomp-on

Rl:lht'rT ()'Dorl(~hul'

O<""~.l'" 0. Knud-en


C....h Servlccs Off ice r

I nH . W()ng


Sea tt le

Sal t l ake Cit y

vice Prp.;,idenl
SJ Il Lake City
:\. C r.:anlljotn'klfl

AssI.VK: 'P1'eo.

"\\..(,1.v ice P~.

A.... .vk e Pre-.

Pd,.menl.. Servi ces

SU'>Jn I . Rubt'rI':-on

Kt'nl'1t.'th l. Peterson

( lK l uc _ ' n in...
h x
E Ronald LIAA ·!t

A..sf. vice Pn. ...
And~·"i .. &,

Co nt rol
G,lh."r '\ n-.cll

Finandal Senke-;.

A.... . Vice Pres.
Anoll.,...i5& Control

\Vi ll1<l C. Ft"rl'n~' 11

cer.lI d R. Dattme


vice Pres.

A""l. vice Pres.


Of;n w Sht't·"

M\I. Vice Pres .



Robert R. Ric hard..

f in.l n ci d l S('-r\'ic e s O ffice r


,)" dr <'J I' \Vnk o M

Branch Operations
(Show n fro m le ft to righ t, s tandi ng)
Rich a rd C. Du n n, Se nior Vice President, Los Angeles
A ngelo S . Carella , Vice President, Portlan d
H. Pe ter Franzel, Se nior Vice Pre sid ent, Distric t O pera tions Administra tion
David J. Ch ris terso n, Vice President, Sa n Francisco Ope rations
(sea ted )
G erald R. Kelly, Senior Vice President, Sea ttle
Richar d 1. Gri ffith , First Vice President
A . G ra n t H olm an , Vice President, Salt Lake City


Priced Payments Services


Whe n Co ng ress passed the
Mo ne tary Co n tro l Act (MCA) of
1980, it so ug h t not o nly to promo te
grea ter competi tio n in fina ncia l
ma rke ts th rou gh deregul ati on , bu t
a lso grea ter efficie ncy in the
pa yme n ts mech ani sm. It d id th e
Ia tte r by ma nd a tin g access to Fede raI
Reserv e services a t ex plicit pri ces for
all depository ins titutions s ubjec t to
reserve requ ireme n ts . Th e pri cing of
paymen ts services was to be phased
in over d iffer en t pe riods of tim e
d ep end ing on th e service in volved .
In 1983, th e Federa l Rese rve
com pleted its last ma jor p ricing
of se rvices by incorpo rating the cos t
o f check floa t int o ne w check
collectio n fee sched u les.
The Fede ra l Reserve Bank of San
Fra nc isco has responded to the
m andat es of the Monetary Control
Act by instituting strict cost-contain­
ment me asures, pursuing efficiencies
from automation, and by continually
improving the quality of its services
in response to the needs of the
financial community in the nine
wes te rn states it serves.
The Twel fth Federal Reserve District
is th e most p opulous in the System .
It is also th e lar ge st in terms of geo­
g ra p hic size an d industrial activity.
Th is western regio n has a popu lation
of ove r 38 m illion people spr ead ove r
five d iffe re nt tim e zo nes . Withi n this
area, la rge com me rcia l banks tend to
look to th e Fede ral Reserve for
h ighl y au toma ted services, compa t­
ible w ith th eir int ernal opera ting
syste ms, w h ile sma ller institution s
ofte n see k mo re s pecia lized, lab or­
intensive serv ices . Furthermo re, the
n eeds of d eposit o ry inst ituti on s vary
by locati o n a nd the circ ums tances o f
their local env iro nme nt.

O ne ke y means by which this
Reserve Bank lea rn s o fand resp onds
to th e needs of more than 4,000
depository institu tions is throu gh
th e activities of service-orie nted
officers a nd accoun t man age rs in its
five offices . Th ese members of o ur
s taff are respo nsib le for developin g
a nd mai n taini ng customer relation ­
s h ips wi th ins titu tion s in their
separa te zones . Their effo rts a re
coordina ted cen trally in the Sa n
Fra ncisco headq uarters office
th ro ugh Distric t Financia l Se rvices .
Th is un it co nd uc ts marke t research
a nd Dis trictw ide serv ice informa tion
p rog rams such as a series of
broc h ures, prod uced in 1983,
d esign ed to exp lain each of the
Fe de ra l Reserve 's se rvices .

Growth of Payments Services
Cha nge (°'0)

40 -~:.::------:--30 --+-T-~~-T-

20-+-+-- -+-- ....;;...­

o----.....;:~---:-- 10 - - - - - -....:0:--:-­

In tot al, abou t 250 new cus tomer
rela tionships we re es tablished in
1983, and ap prox ima tely 700 ins titu­
tions in th e Twelfth Dis trict now us e
Reserve Bank se rvices . Through the
knowledge ga ine d fro m these
relation ships, thi s Reserve Bank
continues to en ha nce its priced
payments services.
Check Services
In terms o f th e resour ces used , the
San Fran cisco Rese rve Ban k's largest
p riced paymen ts service is check
p roc essing. In the latt er half of 1983,
du e to a nu m ber of Systemwide
improvemen ts, the Twelf th Dis trict
handled the la rgest vo lume of
checks of a ny District in the Federal
Rese rve Sys tem .


20 1~IL-..~~-~::;_'_ I=~~I
1 9~2 "19~ 3

New Sys tem pro grams impleme nted
in check services last year included
noo n presen tm en t, sev eral prod uc t
en hanceme nts and imp rovements to
the Fede ral Reserve's trans portat ion
netw or k. In combi nation , th ese pro­
grams res ul ted in more favorab le
depos it de ad lines and a one -da y
improveme nt in the co llection time
of approximately th irty percen t of
the items han dl ed by th e Federa l
Reserve Syste m . After th e imp le­
men tation of new d eposi t dead lines,
the Federal Reserve expa nde d its
check so rting equipmen t to acco m­
modate the red uced a mo u n t of time
ava ilable for processing . In ad d itio n,
the Sys tem develo ped a natio na l
mon itorin g sy s tem to track de livery
and credit performance o n indivi d ua l
cas h lette rs so tha t che ck floa t ca n be
appropriately assigned to deposito rs .

Funds Transfer
The Twe lfth Dist rict's on line fund s
trans fer se rvice con tin ue d to grow in
1983, es pe cially w ith th e increas ing
pop ularity of the m icrocomputer­
based serv ice-FedLine . This bank
con tinued to install Fed Line termi ­
nals and , in the process, increased
th e tot al number of cus to mers
accessing our services th rough
dia l-u p com p u ter con nec tio ns to
ap proxi ma te ly 450.

Strong customer relations
help to identify and respond
to the needs of financial
At first, FedL ine was d eveloped to
allow a w ider ra nge of subsc ribers to
tran sfer fund s directly through th e
Fed eral Reserve's com m u n icatio ns
sys tem- Fed w ire . Du ring 1983, th e
Ban k expand ed its capabilities
further to allo w cus to me rs to plac e
orde rs for cu rre ncy an d coin, an d
made subs ta n tial progress toward
provid ing cu stome rs wi th the ability
to request acco untin g info rm atio n
throu gh FedLine . In ad di tion , th e
terminal device u sed by leased lin e
electro n ic access cus tomers was
cha nged to a mi cro processor for
compatibility wi th FedLin e .
Th e cha nge also provid es be tte r
service to lea sed line cus to me rs .

Automated Clearing House
Th e Bank's Autom at ed Clea ring
Ho use (ACH) service rem ained an
im porta n t a nd rapidly growing
service in 1983. ACH consists of the
exc ha ng e and de livery of e lectro nic
p ayments items. In 1983, a new
program to handle Co rpo rate Trad e
Payme nts was impl em ented in Jun e,
an d night cycle pr ocessin g was
ex te nded to all ty pes of tran sactions.
Fo r 1984, th e Ban k plan s to con tinue
work ing wi th th e private sector to
d evelop and expa nd the ACH
fu rthe r. While incentive pricing has
been em ployed as a mean s to
e nco urage rapid growth in this
electro n ic service, th e cos t recovery
target fo r thi s service has increa sed
a nn ua lly. S tarting at 40 per cent in
1983, th e target wi ll be raise d 20
percent in each subseque nt year.
By 1986, the Feder al Reserve System
pl ans to have phased in full reco very
of all costs for ACH se rvice.
Thi s challenges Reserve Banks to
m aintain low cos ts w hile identi­
fying o p po rtu nities for sti m ulating
wider acce p ta nce of efficie nt
e lectro nic pa yme nts.
Cash and Securities Services
Th e Federal Reserv e Sys tem play s
a n important ro le in meeting the fin­
a ncia l com m u nitv's need s for cash
a n d Treasury sec~rities services .
Th e d eman d for coin and cu rren cy
th rou ghout th e Tw elfth Dist rict
re ma ined high in 1983 des pite
grow th in th e use of othe r payments
se rv ices . The Federal Reserve circu­
lat es new Fed eral Rese rve notes,
wi thd raws un fit bills from circula­
tion , a nd accommoda tes tran sfers of
de no mi na tions amo ng financial
ins titu tio ns . Coi n also is collected ,
co u n ted and redi stributed by th e
Federal Reserve Sys tem . Whil e the
transportation of cu rrency and coin
is priced, pro cessing and relat ed
ac tivities ar e provided as a gov­
e rn me n t service. Du ring 1983, cash
orde ring was added to FedL ine
service to e nab le fina ncial institutions
to order cas h de liveries promptl y
a nd easily.


Growth of Cash Services
Chan ge (%)

32 - - - - - - - - ­
Pa id in to Circulation

24 -


16 -

..:.....;.---+-; - - --f-­

o --+~----.;=-....;.~

- 8'










1982 1983

" Does no t includ e weigh ed coin,
so 1977 figu re is not comp a rable.
"Ii"Change in mint sh ipments.

This Bank also provides a variety of
sec u rities services to financial ins ti­
tutions in th e Twe lfth District, inclu­
d in g safekeeping and transferring of
boo k-e n try sec u rities , purchase and
sa le of G overnment sec u rities, and
co llection o f non cash item s . The
pricing o f book-e ntry sec uri ties se r­
vices has prom pt ed in itiatives to
red uce costs, fore mos t among w hich
is a reconfiguration of our data
co m m u n ica tions network.

Summary of Operations
Volume (thousand s)

Custody Services
Cash Services
Currency paid in to circu la tion
Coin paid in to circulat ion


4,779,4 09





.. 333,5 12










Securities Services
Savi ngs Bond s or igina l iss ues
Savings Bonds red emption s proce ssed *
O ther Treasu ry original issues
Food co u po n s processed




. .1,234

Payments Mechanism Services
Check Processing Services
Commercial checks processed
Fine sort bu nd les processed"
G overnmen t checks proc ess ed
Ret u rn items processed
Electronic Funds Transfer Services
Wire tran s fers processed
Au toma ted cleari nghouse tran saction s processed

Discounts and Advances
Total d iscou nt s and ad vances"
Nu mber of fina ncia l ins titution s accommoda ted*
"Nu mbe r (no t in th ousan d s)
1 Unusu all y

high vo lu me o f payo ut du e to im plementa tion of d irect mint shipmen ts to banks


Management Committee
(Shown from left to right, standing)
John J. Carson, Senior Vice President
Thomas C. Warren, Senior Vice President, Computer Services
(sea ted)

Richard T. Griffith, First Vice President

John J. Balles, President

Kent O. Sims, Executive Vice President, District Departments


Services to Government Agencies

The Federal Rese rve Syste m
provides a di verse array of service s
to the Treasury De partment as well
as other go ve rn me n t agencies.
The se services fall in to three overall
catego ries : mana gem ent of th e
pu blic deb t; processing of gove rn ­
ment payments; and maintenance of
th e na tion's cu rre n cy and coin
sup p ly. Due to its lar ge size, the
Twelfth District is a major provide r
of govern m en t services.
The Federal Rese rve acts as the
conduit between private "i ssuing
agent s" of gov ern me n t financial
instruments a nd the Treasu ry De­
partment. It also accommod ates
requests from individuals for pur­
chasi ng certain government tenders,
prim arily Treasury bills. Th e demand
for savin gs bonds and Treasury bills
has proved to be qu ite ela sti c w ith
res pect to in teres t rat es . New com­
pet itive programs a nd stable ra tes in
1983 caused sa ving s bonds volume
to hold s teady at 1982 levels, an d
Treasury issues to decline sub­
stantially. As an agent for th e
Treasu ry, th e Fed also con centrates
Treasury Tax an d Loa n d ep osits
from collecting finan cial in stitutions
and busin esses .

Th e Federal Reserve System also
acts as agent for the fed eral gov ern­
ment in making tran sfer pa yments
to ind ividuals . The se go vern me n t
payments to individuals are made in
th ree ways: electronically, through
food coupo ns, a nd through Trea su ry
che cks. The federal gov ern me n t's
use of electron ic payments thr ough
the Au toma ted Clearin g Hou se
(ACH) has accelera ted in recent
years and promises con tin ue d
growth in the fu ture . In 1983, gov ­
ernment payments rep resented 75
per cent of Federal Res erve ACH
volume . Th e Fed collects , sorts,
cancels and de stroys food coup ons
after circulati on. It also collects all
government checks for payment,
forwa rds accounting data to th e
Treasury, and ships checks to selec­
ted storage sites. The Twelfth District
is the coun try's largest processor of
govern me n t checks. To mak e the se
op erations more efficient, thi s Bank
has in tegra ted them into its ove rall
pro cessin g capability for electronic
and pape r payments systems .
As m entione d earlier, an imp ortant
fun ction o f the Fed eral Reserve is to
mak e coin and currencv available to
fin an cial inst itutions . The proces­
sing of coin a nd curren cy is provided
as a govern men t service . In 1983, the
San Francisco Distri ct automated
maj or porti on s of the coun ting and
sorting of bills. For this pu rpose, it
add ed three new high-speed cur ­
rency processin g units to the eleven
alr ead y in pl ace at the Branch
offices. Th ese high-speed processing
un its detect counter feit money and
d estroy un fit o r mutil ated currency,
thereby im proving the qu ality of the
currency in circul ation. The San
Fra nc isco Bank also is coop erating
w ith othe r Reserve Banks in efforts
to develop even more efficient
and effecti ve "second gen eration"
currency processin g equipme n t.


-~ '




• 0' ••


ederal Reser ve



Head Office

The central-bank functions of the
Federal Reserve are handled
throu gh a n ati onwide network of 12
Federal Reserve Banks and their 25
branches, und er th e policy guid ­
ance, coordination and genera l
supervision of th e Board of Gover­
nors in Washington, D.C The Head
Office of th e Fed eral Reserve Bank
of San Francisco ha s a nine -member
Board of Directors . Each of the
Bank's other offices at Los Angeles,
Portland , Salt Lake City and Seattle
has a seven-member board.
Federal Rese rve directors bring
mana gement experti se to the task
of o verseeing Reserve Bank opera­
tions . Th ey also provi de first-hand
information on key economic devel­
opments in va rious areas of th e
District, complementing the Bank's
internal res earch efforts . In addi­
tion, Board members giv e ad vi ce on
the ge ne ra l direct ion of mon eta ry
policy, especially w ith regard to
the Bank's d iscount rate. Th e He ad
Office Board has specific responsi­
bility for initiating changes in the
discount rate, s ubject to review a nd
a p prov a l by the Board of Go vernors.

Chairman of the Board and
Federal Reserve Agent
Carol ine Leonetti Ahman son
Ch airman of the Board
Caroline Leonetti Ltd .
Holl ywood, California
Deputy Chairman
Alan C Furth
Vice Ch a irm an
Santa Fe Southern Pacific
Corpor at ion and
Presid ent
Southern Pacific Compan y
San Francisco, California



Fred W. Andrew
Ch airman of the Board ,
President and Chief
Executi v e Officer
Superior Farming Compan y
Bakersfield, California

A nd rew

Rayburn S . Dezember
Ch airman
Central Pacific Corporation
Bakersfield , California
Spencer F. Eccles
Chairman , Pre sident and
Chie f Executive Officer
First Secu rity Corporation
Salt Lake City, Utah

Dezern be r


John C Hampton
Chairman, President and
Chief Executive Officer
Willamina Lumber Compan y
Portland , Oregon
Togo W. Tan aka
Gramercy Ent erprises
Los An gele s, Ca lifo rn ia




George H . Weyerhaeuser
President and Ch ief
Executi v e Officer
Weyerh aeu ser Company
Tacoma , Washington
Robert A . Youn g
Chairman of the Board and Pres ident
Northwest National Bank
Vancouver , Washington
Federal Advisory Council Member
Joseph J. Pin ola
Chairman of the Board
First Int erst at e Bancorp
Los An geles , California



Tan aka



Weyerh aeu ser
Federal Adv isory
Co unci l Me m ber

Pin ola

Los Angeles
Chairman of the Board
Bruce M. Schwaegler
Bullock's-Bullock s Wilshire
Los Ang eles , California

Thomas R. Brown, Jr.
Ch airma n of the Board
Burr-Brown Corporation
Tucson, Arizona
Robert R. Dockson
Ch airman and Chief
Executive Officer
Californ ia Federa l Savings a nd
Loan Associa tion
Los Ang eles, Cali fornia



Bram Goldsmi th
Cha irma n of th e Board
City National Bank
Beverl y H ills, California
Lola McAlpin-Grant
Los Ang eles, California


Harvey J. Mitchell
Presiden t and Chief
Executive Officer
Escond ido National Ban k
Escond ido, California
McAlpin-Gran t


Toole y


William L. Tooley
Man aging Partner
Toole y & Compa ny,
Investment Bu ild ers
Los Angeles , Cali fornia

Chairman o f the Board

Paul E. Bragdon
Preside nt
Reed Colle ge
Portland, Oregon
Herma n C. Bradley, Jr.
Preside n t a nd Chief
Execu tive Offi cer
Tri-Co u n ty Banking Com pan y
Ju nc tio n City, O rego n


Bragd on

Caro ly n S. Chambers
C ham be rs Cab le Corn.. Inc.
Eu gene, O regon
John A. Elorriaga
Chairman a nd Chief
Execut ive Officer
United S tates Na tiona l Bank
of O regon
Portland , Oregon

Bradl ey

Cha mb ers

Jack W. G ustavel
President and Chief
Executive Officer
The First Na tio na l Bank
of No rth Id ah o
Coeur d'Alene , Idah o


William S. Naito
Vice President
Nor crest Chi na Compa ny
Po r tland, O rego n
G . "Jo h n ny" Parks
Northwest Region al Director
Internati onal Longs horemen's &
Warehousemen's Union
Po rtland , O rego n




Chairman of the Board
John W. Ellis
Preside nt a nd Chief
Execu tive Off icer
Puget Sound Powe r & Ligh t
Compa ny
Belle vue, Was hing to n
Lonnie G . Bailey
Execu tive Vice President and
Chief Opera ting Officer
Farmers a nd Me rchan ts Ban k
o f Rockford
Spoka ne, Was hing to n

Baile y

Ca ro l Birkholz
Managing Pa rt ne r
Laventh ol & Horwath
Sea ttle, Was hington
Birkh olz

Byron I. Mallott
President and
Chief Executive Officer
Sea laska Corpora tion
Juneau , Alaska

Mal le t

John N . No rds tro m
Co -Chairma n of the Board
N ord st rom , In c.
Sea ttle, Wash ington


W.W. Ph ilip
Chai rma n, Pres iden t an d
Ch ief Execu tive O fficer
Pu get Sound Ba ncorp
Tacom a, Washington
G. Rob e rt Truex, Jr.
Ch airm an
Rai nier Ban cor pora tion and
Rain ier Nationa l Bank
Sea ttle, Wash ing ton

Ph il ip



Salt Lake City
Chairman of the Board
WendellJ . Ashton
Deseret Ne w s
Salt Lake City, Utah

John A. Dahlstrom
Chairman of the Board
Tracy-C ollins Bank a nd
Trust Company
Salt Lake City, Utah


Lela M . Ence
Executive Director
Uni versity of Utah Alumni
Associa tion
Salt Lake City, Ut ah
Albert C. Gianoli
President and Chairman
of the Board
First National Bank of Ely
Ely, N evada
Fred C. Humphreys
Pre sident and Chi ef
Executive Offic er
The Idaho First N ati onal Bank
Boise , Id aho
Da vid Nimkin
Executive Director
Salt Lake Neighborh ood Housing
Services, Inc.
Salt Lak e City, Utah



G ianol i



Robert N . Pratt
White River Shale Oil
Corpor a tion
Salt Lake City, Utah




Comparative Statement of Account
(Thousa nd s of Dollars)
Dece mber 31,

5 1,233,000

5 1,182,000
81, 178






6,879 ,306

8,3 45, 211
8,107, 233



19,091,76 2
20,211, 316



106,4 22

945, 296


- 702,277



25,927 ,744




4,009 ,671











Gold ce r tifica te acco u n t
Special Drawi ng Righ ts cer tifica te account
Oth er cas h
Loan s to d ep ositor y insti tu tions .
Federal Agency obliga tio ns . . .
Un ited S ta tes Govern ment secu rities :
N o ~s . .
Bo nd s


Total United States Government securities
Total lo an s and secur it ies
Ca sh ite m s in pro cess of collectio n
Bank pr e mises
Oper atin g eq uip me n t



Oth er asse ts :
Den o m ina ted in foreign curre ncies
All o the r
In te rd is trict Se ttlemen t Accoun t . . .
Total asset s

Fe d e ra I Rese r ve not es
Depos its :
Tota l d ep os itor y insti tu tions- reserve accoun ts
For ei gn
Oth er d ep osi ts
Total deposits



Deferred a vai labi litv cas h items
O ther lia bilities
Total liabilities


Capital Accounts
Ca pi ta l pai d in
Sur p lus


Total liabilitie s and cap ita l accounts . .


Earnings and Expenses
(Thousands of Dollars)
December 31,


Current Earnings
Disc o un ts and ad vances

United Sta tes G overn ment securities . . . . . . . . . . . . . . . . .. . . . .
Forei gn currencies
Incom e from services

All o the r





Total cu rr ent earnings







Current Expenses
To tal current expenses

Less reimbu rsement for certain fiscal agenc y and other expenses




Net expe nses

Co st of ea rn ings credit . .











Profit and Loss
Curren t net ea rn ings

Addi tions to curren t earnings

Pr ofi t on sales of United Stat es Government securities (net)

AJI o the r


Total ad ditions
Deductions from current net earnings

Loss o n foreign exchange transactions (ne t)

All o the r

Total deductions








- 16,318

- 37,088


- 10,147

- 16,143






Ne t ad d itions (+ ) deduction s (- )

Earn ed credits used by dep ository institutions

Asse ssments by Board of Gov ernors

Board Expend itures
Federa l Reserve currency cos t
Net earnings before paym ents to United States Treasu ry
Div idends pa id
Payments to Unit ed States Treasury (inter est on Federa l Reserve notes)
Tran sferred to surplus

Surp lus Janua ry 1

Surplus December 31





San Fran cisco Office
P.O . Box 7702, Sa n Francisco, Ca liforn ia 94120
Los Ang e les Branch
P.O . Box 2077, Ter m inal An nex, Los Angeles, Califo rn ia 90051
Portland Bran ch
P.O . Box 3436, Por tla nd , O rego n 97208
Salt Lake Cit y Branch
P.O . Box 30780, Sa lt Lake City, Utah 84125
Seattle Branch
P.O . Box 3567, Term inal Annex, Sea t tle, Washi ngto n 98124

This rep ort was prepared by the staff of the Federa l Reserv e Ban k of
San Fran cisco : prod uced by Kare n Rusk; graph ics desi gned by William
Rose n th a l; edi ted by Joh n L. Scaddi ng and Grego ry J. Ton g .
Assistance pro vided by Econo mic Resea rch; Sup ervision, Regulation
a n d Credi t; District Oper ation s; Acco unting; and Compu ter Services .


Fed eral Reserve Ban k of San Francisco
P.O . Box 7702

San Fran cisco, California 94120