Full text of Federal Reserve Bulletin : April 1989
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VOLUME 7 5 •
NUMBER 4 •
APRIL 1 9 8 9
FEDERAL RESERVE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D . C .
PUBLICATIONS COMMITTEE
Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood
• Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Edwin M. Truman
The FEDERAL RESERVE BULLETIN is issued monthly under the direction of the staff publications committee. This committee is responsible for
opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by Mendelle T.
Berenson, the Graphic Communications Section under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles.
Table of Contents
227 THE ESTABLISHMENT AND
EVOLUTION OF THE
FEDERAL RESERVE BOARD: 1913-23
In the first decade after the passage of the
Federal Reserve Act, the Board evolved
under the pressure of circumstances in
ways not foreseen by the framers of the act.
244 UNDERSTANDING THE BEHAVIOR
OF M2 AND V2
This article examines the properties of the
M2 aggregate and of its velocity, V2, the
ratio of gross national product to M2—
particularly over the one- to two-year intervals that are associated with monetary targeting and over which V2 has fluctuated by
substantial amounts.
255 TRANSFER RISK IN U.S. BANKS
The expansion of international lending has
made an analysis of country risk an essential element in the overall evaluation of the
financial condition of the largest U.S.
banks.
259 TREASURY AND FEDERAL RESERVE
FOREIGN EXCHANGE OPERATIONS
The dollar, which had moved lower in November, found support at the end of November and recovered through most of December and January to return to levels that
had prevailed in the autumn.
263 STAFF STUDIES
In "M2 per Unit of Potential GNP as an
Anchor for the Price Level," the authors
develop a measure for a long-run equilibrium price level that is proportional to the
stock of M2 per unit of potential GNP.
Deviations of the actual price level from the
equilibrium price level provide a good forecast of changes in the inflation rate over
periods of one year or more.
265 INDUSTRIAL PRODUCTION
Industrial production increased an estimated 0.3 percent in January.
267 STATEMENTS TO CONGRESS
Alan Greenspan, Chairman, Board of Governors, discusses corporate restructuring
and the need for reducing the federal budget
deficit, and says that it would be unwise to
restrict arbitrarily corporate restructuring
and that the budget deficit must be brought
down, before the House Committee on
Ways and Means, February 2, 1989.
272 Chairman Greenspan discusses recent monetary policy and plans for the future within
the framework of the Board's Monetary
Policy Report to the Congress, before the
Senate Committee on Banking, Housing,
and Urban Affairs, February 21, 1989.
[Chairman Greenspan presented identical
testimony before the House Committee on
Banking, Finance and Urban Affairs, February 22, 1989.]
278 Chairman Greenspan outlines the views of
the Board on the legislation for the reform
and recovery of the thrift industry and says
that the Board supports this comprehensive
package of proposals to strengthen the thrift
industry and depository institutions in general, before the Senate Committee on Banking, Housing, and Urban Affairs, February
23, 1989.
282 Chairman Greenspan reviews briefly where
the economy has been over the past year
and where it appears to be going to bring
into focus the challenges that face monetary
and fiscal policymakers, before the Senate
Committee on the Budget, February 28,
1989. [Chairman Greenspan presented identical testimony before the House Committee on the Budget, March 2, 1989.]
287 ANNOUNCEMENTS
Change in the discount rate.
Expression of support for the reform and
recovery program for the thrift industry
announced by President Bush.
Amendment to Regulation H (Membership
of State Banking Institutions in the Federal
Reserve System).
Interpretation to Regulation H.
Comment requested on a series of revised
proposals regarding the finality accorded
ACH credit and debit transactions processed by Federal Reserve Banks.
Changes in Board staff.
Availability of some Federal Reserve statistical releases through the computerized bulletin board of the Department of Commerce.
Change in the database used in compiling
the statistical appendix to the BULLETIN.
290 RECORD OF POLICY ACTIONS OF THE
FEDERAL OPEN MARKET COMMITTEE
At its meeting on December 13-14, 1988,
the Committee approved a directive that
called for some immediate firming of reserve conditions, with some further tightening to be implemented at the start of 1989,
assuming that economic and financial conditions remained reasonably consistent with
current expectations. In keeping with the
Committee's usual approach to policy, the
conduct of open market operations would
be subject to further adjustment during the
intermeeting period based on indications of
inflationary pressures, the strength of the
business expansion, the behavior of the
monetary aggregates, and developments in
foreign exchange and domestic financial
markets. Depending on such developments,
some added reserve restraint would be acceptable, or some slight lessening of reserve
pressure might be acceptable. The reserve
conditions contemplated at this meeting
were expected to be consistent with growth
of M2 and M3 at annual rates of around 3
percent and 6V2 percent respectively over
the four-month period from November 1988
to March 1989. The intermeeting range for
the federal funds rate was raised by 1 percentage point to 7 to 11 percent.
297 LEGAL DEVELOPMENTS
Various bank holding company, bank service corporation, and bank merger orders;
and pending cases.
AI FINANCIAL AND BUSINESS STATISTICS
These tables reflect data available as
of February 24, 1989.
A3 Domestic Financial Statistics
A46 Domestic Nonfinancial Statistics
A55 International Statistics
A71 GUIDE TO TABULAR PRESENTATION,
STATISTICAL RELEASES, AND SPECIAL
TABLES
A76 BOARD OF GOVERNORS AND STAFF
A78 FEDERAL OPEN MARKET COMMITTEE
AND STAFF; ADVISORY COUNCILS
A80 FEDERAL RESERVE BOARD
PUBLICATIONS
A83 INDEX TO STATISTICAL TABLES
A85 FEDERAL RESERVE BANKS,
BRANCHES, AND OFFICES
A86 MAP OF FEDERAL RESERVE SYSTEM
The Establishment and Evolution
of the Federal Reserve Board: 1913-23
Say re Ellen Dykes, of the Division of Research
and Statistics at the Board of Governors, and
Michael A. Whitehouse, of the Board's Office of
the Secretary, prepared this article.
When, on December 23, 1913, Woodrow Wilson
signed the act establishing the Federal Reserve
System, he felt grateful, he said, for having had a
part in "completing a work . . . of lasting benefit
to the business of the country." The nation had
been without an organization performing central
banking functions since the charter of the Second
Bank of the United States had expired in 1836.
Financial stresses caused by the Civil War and a
series of devastating liquidity crises and bank
failures, especially the Panic of 1907, had focused public awareness on the need for banking
and monetary reform. The Congress passed the
Aldrich-Vreeland Act of 1908, which provided
for the issuance of currency in an emergency.
The act also created the bipartisan National
Monetary Commission, headed by Senator Nelson Aldrich, to study banking and currency reform and to develop some recommendations.
After making a detailed study of banking in
Europe and North America, the commission in
1912 published its findings in 38 massive volumes. Aldrich formalized the commission's recommendations in a bill, generally known as the
Aldrich Plan, calling for one central bank and 15
branches.
Although members of the Congress agreed on
the need for reform and on its general goals, they
differed strongly on its shape. The Aldrich Plan
stirred up a deep-seated distrust of the centralization of power and of the banking establishment. Alternative plans, which attempted different balances between public and private
interests and between central and regional control, were proposed. The members finally overcame their partisan differences and adopted the
plan forged by President Wilson, Congressman
Carter Glass, and Senator Robert Owen, which
became the Federal Reserve Act—an act "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."
While the process of investigation, discussion,
and compromise leading to the act had ended
with President Wilson's signature, another long
process was beginning: that of organizing and
establishing in practice the central banking system of the United States and of developing new
policies and tools to meet the changing needs and
circumstances of the economy. At the time of the
signing, Paul Warburg, one of the members of the
first Board, said prophetically that "the Federal
Reserve Act as passed should not be considered
as a finality, and . . . actual experience in its
operation would prove the need of important
modifications or amplifications." 1
The process of modifying and amplifying the
act over the next 10 years was far from smooth.
H. Parker Willis, the first Secretary of the Board,
in a rhetorical flourish implied that it could even
be considered a war: "[The struggle that produced the Federal Reserve Act] is not merely a
chapter in financial history; it is also an account
of the first battle in a campaign for safe and
scientific banking that has only just opened." 2
Willis's metaphor was apt. During its first decade, the System struggled to gain acceptance
while facing the stresses caused by World War I
and its aftermath.
1. Paul M. Warburg, The Federal Reserve System: Its
Origin and Growth, vol. 1 (Macmillan, 1930), p. 141.
2. Henry Parker Willis, The Federal Reserve System:
Legislation, Organization and Operation (Ronald Press,
1923), pp. 20-21.
228 Federal Reserve Bulletin • April 1989
The System was to consist of the Federal
Reserve Board in Washington; Federal Reserve
Banks, each in its own district and known by the
name of the city in which it was located; and
member banks, that is, all national banks and
those state-chartered banks willing and qualified
to join. Initially, all the parts of the interdependent System struggled for acceptance. While
separating those parts is often difficult, this article focuses on the struggles of the Board, which
was to be, according to President Wilson, the
"capstone" of the new Federal Reserve System.
During its formative years, the Board had its own
problems of establishing its authority, of recognizing the possibilities of its tools, and of developing its role as a policymaker. By the end of
1923, 10 years after the passage of the act, the
Board was beginning to resemble the influential
policymaking body it is today.
PROVISIONS OF THE FEDERAL
ACT
RESERVE
The Federal Reserve Board was established by
Section 10 of the Federal Reserve Act. This
section carefully spelled out the organizational
aspects of the Board, which was to consist of
"seven members, including the Secretary of the
Treasury and the Comptroller of the Currency,
who shall be members ex officio [that is, by
virtue of their offices], and five members appointed by the President of the United States, by
and with the advice and consent of the Senate."
Making the members presidential appointees
was an attempt by the framers of the act, and of
President Wilson in particular, to keep the System under a centralized public authority so as to
balance the power of private "money interests."
The earlier Warburg and Glass plans, while giving the government some voice, had given the
banks that were members of the system (by
subscription to stock in the regional banks) representation on the Board; and the Aldrich plan
had even given the banks essential control (for a
comparison of the features of the various proposals, see the box on pages 230 and 231.). But
President Wilson, believing that interested, private parties should not sit on a board of control,
stated:
[T]he power to direct this system of credits is put
into the hands of a public board of disinterested
officers of the Government itself who can make no
money out of anything they do in connection with it.
No group of bankers anywhere can get control; no
one part of the country can concentrate the advantages and conveniences of the system upon itself for
its own selfish advantage. 3
Through presidential appointment of the members of the Board, the framers of the act hoped to
avoid a system that had even the appearance of a
monopolistic institution likely to fall victim to
partisan politics as had the First and Second
Banks of the United States.
Section 10 further stipulated that no more than
one of the five appointive members was to be
selected from any one Federal Reserve District
and that the President should have "due regard
to a fair representation of the different commercial, industrial and geographical divisions of the
country." At least two Board members were to
be "persons experienced in banking or finance."
These provisions for membership of the Board
were intended to limit the degree to which the
Board was subject to partisan pressures and to
help ensure that it would not be dominated by
any one interest group or region. In particular, a
majority of the framers wanted to avoid giving
substantial control to New York financial interests. The requirement that two members be
knowledgeable in banking and finance was intended to ensure that the System would be
governed by sound and "scientific" principles in
addressing the commercial and financial needs of
the nation.
While the President was to select the members
of the Board and to designate one as Governor
and another as Vice Governor, no direct line of
communication was set up between the Board
and the President. The salaries and operating
expenses of the Board were to be paid from the
earnings of the Reserve Banks rather than from
congressional appropriations, but the Board was
to make a full report of System operations to the
Congress annually.
3. Letter, Woodrow Wilson, to Oscar Wilder Underwood,
October 17, 1914, in Arthur S. Link (ed.), The Papers of
Woodrow Wilson, vol. 31 (Princeton University Press, 1979),
p. 172.
The Establishment and Evolution of the Federal Reserve Board: 1913-23
These arrangements were intended to help insulate the Board from pressures from the executive
and the legislative branches.
In a further attempt to insulate the Board from
partisan politics, Section 10 provided for 10-year
terms for Board members. These terms were
longer than those of any other executive appointees except for those of the federal judiciary,
which were lifetime appointments, and that of
the Comptroller General, which was for 15 years.
The first appointed members were to serve varied terms of 2 , 4 , 6 , 8, and 10 years, so that future
appointments would be staggered and any future
President would be unlikely to appoint a majority
of the Board.
Powers and Duties of the Board
While the organizational aspects appeared in one
section, the powers and duties of the Board were
spread throughout the act. Section 11 gave the
Board the functions of examining the "accounts,
books, and affairs" of the Reserve Banks and of
the member banks; of permitting or requiring a
Reserve Bank to rediscount the discounted paper
of other Reserve Banks and to fix the rate for
such rediscounting; 4 of regulating the amount of
gold reserves held against Federal Reserve
notes; of supervising and regulating the issue and
retirement of these notes; of changing the number and designation of Federal Reserve cities;
and of carrying out various supervisory and
regulatory functions concerning the Reserve
Banks. But other powers and duties of the Board
appeared in sections dealing with additional organizational and functional elements of the System. For example, the Board's power to designate three of the nine directors of each Reserve
Bank appeared in Section 4; its duty to determine
or define the character of the paper eligible for
discounting fell under Section 13; and its power
regarding rates of discount fell under Section 14,
"Open-Market Operations."
Besides being spread throughout the act, the
Board's functions were in some cases presented
vaguely and indirectly, almost as an afterthought. For example, each Reserve Bank's
4. The term "rediscount" is no longer in use.
229
power to establish rates of discount was "subject
to review and determination of the Federal Reserve Board." What "determination" meant was
not clear, and so the line between the Reserve
Banks' power and the Board's power in fixing
discount rates was left ill-defined. In other instances, provisions in one part of the act seemed
to contradict or overlap provisions in other parts.
Thus, Section 11(a) authorized the Board to
"examine at its discretion the accounts, books,
and affairs of each Federal Reserve bank and of
each member bank," and Section 21 empowered
the Comptroller of the Currency to "appoint
examiners who shall examine every member
bank at least twice in each calendar year and
oftener if considered necessary" and later referred to the examinations "made and conducted" by the Comptroller of the Currency.
There were two reasons for such lack of precision. First, the act was a political compromise
between different conceptions of what the Federal Reserve System as a whole, and the Board
as part of that System, was to do and was not to
do and what kind of checks and balances were
needed. Having a public body oversee a system
of privately owned commercial banks raised
questions not only about lines of authority but
also about what the Board's function was and
how the Board was to fulfill it. The attempt to
satisfy different interests led at times to vagueness and even to contradiction. Second, the type
of system that was set up by the act was new and
untried. Thus, even some provisions that were
less vague, such as the number and the qualifications of persons to be on the Board and the
ability of the Board to alter Reserve Districts and
cities, were later reinterpreted and amended as
circumstances required.
Some Unsettled
Issues
The issues regarding the Board that the act left
unsettled can be grouped into three categories:
(1) the Board's relation to the government, primarily the Department of the Treasury; (2) the
Board's relation to the rest of the Federal Reserve System; and (3) the Board's specific role or
mission within those frameworks. During the
first decade of the Board's existence, the need
for its independence from the Treasury became
Major twentieth-century plans for a governing body for the central banking system
Plan, bill, or act
Name
Date
Governing body
Name
Number
of
members
Term of office
(years)
Composition
Function
Secretary of Treasury; Comptroller of the Currency; U.S.
Treasurer; 6 members of Congress; 20 chairmen of
branches; 12 others voted by
stockholding member banks;
a salaried board governor
Issue notes based on commercial
bills and gold; fix the discount
rate and rediscount short-term
commercial paper; maintain central cash reserve; establish
branches; manage and supervise
activities of 20 regional bank
associations
Warburg Plan
November
1907;
revised
April
1908
Board of
Managers
42
1, or until their
successors
qualify
Fowler Plan
February
1908
Court of
Finance
17
Serve until age
6 members from Atlantic coast;
72, unless
6 from Mississippi region; 4
majority of
from Pacific coast; all experiCourt exenced in business and banktends appointing; one at-large appointee to
ment
preside over court; all
appointed by the President
Aldrich Plan
January
1911
Reserve
Association
Board
45
3
Secretaries of Treasury, ComAct as fiscal agent for government;
merce, Labor, and Agriculture;
determine discount rate for
Comptroller of the Currency; 14
short-term commercial paper,
bills of exchange, and so on;
members elected by boards of
engage in open market
branches; 12 representing stockpurchases
holding interests; 12 representing agriculture, commerce, and
industry; governor and deputy
governor
Owen Bill
May 1913
Board of
Governors
of the
National
Currency
7
Serve at the
pleasure of
the President
Secretaries of Treasury and Agriculture; Comptroller of the Currency; 4 governors appointed
by President: 1 knowledgeable
in commerce, 1 in manufacturing, 1 in transportation, and 1 in
banking and credit
Issue notes based on secured bank
assets; consider appeals from
member banks not satisfied with
rulings from regional associations; manage central gold reserve
Exercise general supervision over
reserve banks and examine
accounts of national and
reserve banks; act as fiscal agent
for government; adjust boundaries and districts of reserve
banks if necessary; supervise
issuance of national currency;
suspend for no more than 30
days reserve requirements specified in bill; approve reserve
bank accounts in foreign countries; oversee foreign exchange
operations
Glass Bill
June 1913
Federal Reserve Board
Secretaries of Treasury and Ag- Examine accounts of reserve banks
riculture; Comptroller of the
require or permit reserve banks to
Currency; 4 board members
discount paper of any other reappointed by the President, at
serve bank; establish mandatory
least 1 experienced in banking
weekly discount rates upon each
class of paper; suspend for no
more than 30 days reserve requirements specified in bill; supervise
and regulate the issuance of notes
to reserve banks; prescribe rules
for reserve banks to engage in
open market operations
Vanderlip Plan
November
1913
Governing
Board
7 members appointed by the
President; nonpartisan,
government board
Approve rediscounting; oversee
clearinghouse operations; issue
bank notes
Federal Reserve December
1913
Act (GlassOwen Bill)
Federal
Reserve
Board
Secretaiy of Treasury;
Comptroller of the Currency;
5 members appointed by the
President with due regard to
commercial, industrial, and
geographical representation,
with at least 2 members
experienced in banking and
finance
Supervise and regulate the issuance
and retirement of Federal Reserve
notes; reclassify Reserve Districts
and add Reserve Banks if
appropriate; supervise the
activities and audit accounts of
Reserve Banks; select 3 directors,
including chairman, of each
Reserve Bank board; require or
permit Reserve Banks to
rediscount paper of other Reserve
Banks; approve discount rates set
by Reserve Banks; issue
regulations regarding Reserve
Bank open market operations
Federal Reserve June 1922
Act amended
Federal
Reserve
Board
Secretary of Treasury;
Same as above
Comptroller of the Currency;
6 appointive members; added
agricultural representative and
eliminated requirement for 2
members to be experienced in
banking or finance
Federal Reserve August
Act amended
1935
(Banking Act
of 1935)
Board of
Governors
of the
Federal
Reserve
System
7 members appointed by the
President, representing
financial, agricultural,
industrial, and commercial
interests, and geographical
divisions of the country;
removed Secretary of
Treasury and Comptroller of
the Currency from Board
Exercise authority over national
monetary and credit policies
and, as part of the Federal Open
Market Committee, help set
open market policy
232 Federal Reserve Bulletin • April 1989
clearer; its struggle for power with the regional
Reserve Banks, particularly the New York Bank,
intensified; and its sense of its own mission and
how to carry it out strengthened and solidified.
The Board's Relation to the Treasury. Because
the Board was a public body charged with overseeing the nation's financial institutions, those
who drafted the act believed that the Board
clearly had to have a close relation with the
Treasury. That close relation, however, raised
the issue of the System's independence from the
Treasury, which soon became manifest in three
conflicts involving the Board: (1) about the respective responsibilities of the Treasury officials
who sat on the Board and of the members
appointed by the President; (2) about the Board's
financial accountability; and (3) about the division of powers between the Treasury and the
Board.
The Secretary of the Treasury and the Comptroller of the Currency (a Treasury Department
official) sat on the Board and voted as part of the
duties of their respective offices. Thus, the Treasury had a substantial influence on the decisions
of the Board. The Secretary of the Treasury was
designated by the act as the Chairman of the
Board, but the responsibilities of this position
were not spelled out. The appointed member
designated by the President as Governor was the
"active executive officer," but his duties, too,
were left unclear. Later, Secretary of the Treasury William McAdoo interpreted "active executive officer" to mean "manager and administrator." But the heavy influence of the Treasury and
the lack of a clear definition of roles put some
strain on the relations among the Board members.
The act gave the Board the power to levy an
assessment on the Reserve Banks to pay its
expenses, including the salaries of members and
staff, and thus made the Board independent of
the congressional appropriations process, though
it required the Board to make a yearly report to
the Congress. The Treasury, however, claimed
the right to audit the Board's books as the
Board's funds were initially construed to be
public moneys. As early as December 19, 1914,
the U.S. Attorney General ruled on this issue,
saying that while the moneys the Board had were
public and thus were subject to audit by an agent
of the Treasury, the Board was an independent
board or government body separate from the
Treasury. Despite the ruling, the debate continued for a long time. (The issue of financial
independence was settled with the Banking Act
of 1933, which stated that the Board's funds were
not to be construed as public moneys. But the
lingering issue of accountability was not settled
until the Federal Banking Agency Audit Act of
1978, which authorized the General Accounting
Office to audit the Board.)
The division of powers between the Board and
the Treasury also was cloudy. Some of the
functions that the act gave to the Board overlapped those of the Treasury, as in the examination of member banks. Also, the Comptroller of
the Currency chartered national banks, all of
which were required to be members of the System, so the question arose as to who had regulatory power over them. (This confusion over
supervisory and regulatory jurisdiction has been
settled over the years through informal agreements among the System, the Comptroller, and
the Federal Deposit Insurance Corporation. Generally, the System has authority over state member banks and bank holding companies; the
Comptroller has authority over nationally chartered banks; and the FDIC oversees state nonmember banks.)
The issue of the Board's, and the System's,
independence from the Treasury caused conflicts
between the two agencies and among the Board
members themselves. (It was defused in part by
the Banking Act of 1935, which removed the
Secretary of the Treasury and the Comptroller of
the Currency from the Board and placed responsibility for monetary policy solely in the hands of
the Board and the newly established Federal
Open Market Committee.)
The Board's Relation to the Reserve Banks. As
established by the act, the Board had an ambiguous position vis-a-vis the Reserve Banks. The
Board was a central public body having supervisory and regulatory powers over private commercial banks that were members of the System.
To help ensure that commercial bankers' concerns would be heard, the act established the
Federal Advisory Council, consisting of one rep-
The Establishment and Evolution of the Federal Reserve Board: 1913-23
resentative from each Reserve District elected by
the member banks of that District, who acted as
the banks' representatives to the Board. The
council was, however, empowered only to receive and provide information and to make recommendations. The Board had its representative
at each of the Reserve Banks: one of the three
Class C directors it appointed was designated the
Federal Reserve Agent. The delineation of powers between the Agent and the Governor (now
called the President) of the Reserve Bank was at
first unclear. By the end of the first decade,
however, the Governors had emerged as the
principal leaders of their respective Reserve
Banks.
But the Board was more than the government
regulatory agency that President Wilson characterized as analogous to the Interstate Commerce
Commission. It also had managerial duties and
served to direct, coordinate, and guide the System's activities. In his 1914 opinion on the status
of the Board, Attorney General T.W. Gregory
stated that the Board was "not merely supervisory, but . . . a distinctly administrative board
with extensive powers." These powers, however, had to be defined.
According to the act, the Board and the Reserve Banks would exercise jointly the functions
of issuing and retiring Federal Reserve notes.
But the act assumed that cooperation and coordination between the Board and the Reserve
Banks, as well as among the Reserve Banks,
would be automatic. 5 One example of the problems arising from this assumption regarded the
discount rate, which each Reserve Bank was
empowered to set for its own district. Was the
rate to be uniform or to vary across the country,
and was it to depend on the type of paper that
was being discounted? If the rates were to vary
geographically, might not money accumulate in
one Reserve District while draining away from
another, a situation that the act was intended to
prevent? Who would then decide when the rate
was to change, and what principles were to
govern this decision?
5. Milton Friedman and Anna J. Schwartz, A Monetary
History of the United States, 1867-1960 (Princeton University Press, 1963), p. 190.
233
Each Reserve Bank could engage in open
market operations "at home and abroad" for its
own earnings. Who would regulate the competition for funds that might arise among the Reserve
Banks? How would the others fare against the
New York Bank, the one that was the largest and
most influential and likely to do the most business? How were policies regarding the discount
rate and those regarding open market operations,
which could work against one another, to be
coordinated?
In international operations, who would speak
for the System, and what body would take the
initiative? After the passage of the act and even
before the selection of the first Board, J.P. Morgan, Jr., and other bankers and businessmen told
the Reserve Bank Organization Committee, a
committee established by the act to designate the
Federal Reserve cities and districts, that one
Reserve Bank, probably in New York, should be
of "commanding importance," especially with a
view to its recognition by the central banks of
Europe. 6 Secretary of the Treasury William
McAdoo and Secretary of Agriculture David
Houston, both on the committee, put forward the
contrary view that the activities of all 12 Reserve
Banks should be coordinated through the Board
and that the Board should be the entity to which
the foreign authorities looked. In practice, however, the New York Reserve Bank became the
principal representative in international affairs
during the early years of the System. This situation arose because of the superior knowledge and
experience in international finance and the close
contacts with foreign bankers of that Bank's
governor, Benjamin Strong.
The Board's Mission. Much rhetoric surrounded the establishment of the Board. President Wilson called it the "Supreme Court of
Finance," and William McAdoo saw it as a
"bulwark against financial disaster." 7 But the
rhetoric did not fit the reality of the Board's job
as outlined in the act.
6. "Commanding Bank Most Needed Here," New York
Times, January 7, 1914.
7. "New Reserve Board Sworn into Office," New York
Times, August 11, 1914.
234
Federal Reserve Bulletin • April 1989
The Board's role and its means for filling it
were not well defined because the framers of the
act were concerned about limiting the Board's
powers and because the System's role in the
economy and the tools of monetary control had
not been tested and thus were not well understood. Was the Board to be the partly automatic
regulator of an organization that was generally
passive except when an emergency required it to
accommodate commerce and business? Or was
the Board to be the central policymaker in a
System that actively participated in regulating
the economy through managing the availability of
money and credit? The discussion in the Congress just before the passage of the act was
indicative of the concerns that the legislators had
about the powers of an activist central bank. Said
Congressman Rufus Hardy of Texas: "A central
bank, so much desired by Wall Street. . . [would
have] powers for evil which the Board does not
have. . . . The Board could not loan, earn, own,
or borrow one dollar. It could not finance an
enterprise. It could not finance a candidate or a
campaign." 8 What the Board could or should do
was not so clear.
In its First Annual Report, published less than
six months after it was sworn in, the Board
rejected a passive role for the Reserve Banks
and, by extension, for itself: The System's
"duty" was "not to await emergencies but, by
anticipation, to do what it can to prevent them." 9
But because the Board was unsure of its mandate
for setting policy as well as of the tools at its
disposal and also because it immediately faced an
extraordinary situation—World War I—it could
not act according to this principle.
The muddiness in the division of powers between the Board and the Reserve Banks and
between the Board and the Treasury, as well as
in the conception of the Board's mission, led to
floundering and conflict in the early years of the
System. How powers were to be divided and
duties performed had to be worked out by trial
and error in an ever-changing economic milieu.
In its first 10 years, the Board began to establish
itself within the System and in relation to the
8. Congressional Record, September 13, 1913, p. 4865.
9. Board of Governors of the Federal Reserve System,
First Annual Report, 1914 (1915), p. 17.
Treasury Department and to learn what tools it
had and how to use them in setting and carrying
out policy. Under pressure of circumstances, the
Board, and the rest of the System, evolved in
ways not foreseen by the framers of the act.
THE FIRST
BOARD
The first Federal Reserve Board was sworn into
office on August 10, 1914, after a selection process that was long and difficult for several reasons.
First, President Wilson had to wait for the Reserve Bank Organization Committee to select
Federal Reserve cities and draw District lines
because the act specified that not more than one
appointive member could come from any one
Reserve District.
Second, Wilson was aware of a widespread
belief that the success of the Reserve System
depended on his selections. Like the First and
Second Banks of the United States, the Reserve
Banks had been assigned a 20-year charter, and
Wilson wanted the System to last. (In the McFadden Act of 1927, the Congress showed its
agreement with Wilson's position by extending
the Reserve Banks' charter indefinitely.) While
the composition of the Board had been addressed
in the act, demands persisted from various quarters that Board members have certain credentials. Some interests, for example, urged that a
member of a labor union, a farmer, and a former
U.S. President be placed on the Board. Wilson
had to consider these requests and weigh their
importance.
Third, the confirmation process took time.
Two of Wilson's original choices—Richard 01ney, a lawyer from Boston and a former Secretary of State, and Harry A. Wheeler, a Chicago
businessman and a former president of the U.S.
Chamber of Commerce—declined their appointments. A third choice, David D. Jones, a Chicagoan who was a close friend of the President,
encountered strong opposition because he had
been a director of International Harvester, a trust
that in 1914 was under indictment for illegal
restraint of trade. Jones was ultimately rejected
by the Senate. A fourth choice, Paul M. Warburg, a partner in the Wall Street investment firm
of Kuhn, Loeb & Company, met with suspicion
The Establishment and Evolution of the Federal Reserve Board: 1913-23
because of his ties to the New York "money
interests" and because of his backing of the
Aldrich Plan and his original opposition to the
Federal Reserve Act. After testifying before the
Senate Banking Committee, Warburg, who had
protested at being the only nominee besides
Jones requested to appear, was finally confirmed.
Besides Warburg, the appointive members of
the first Board were Frederic A. Delano, president of the Monon Railway, from Chicago;
Charles S. Hamlin, a lawyer from Boston and a
former Assistant Secretary of the Treasury;
William P.G. Harding, president of the First
National Bank of Birmingham, Alabama; and
Adolph C. Miller, a noted economist and former
professor at the University of California, who
was at that time an Assistant Secretary of the
Department of the Interior. President Wilson
designated Hamlin as Governor and Delano as
Vice Governor. These appointments, particularly those of Warburg and Harding, who were
exceedingly knowledgeable about banking, were
welcome to the business and banking communities. The Commercial and Financial Chronicle
noted at the time that "the sentiment of the
financial community as a whole on learning of the
president's nominations for the Federal Reserve
Board has been one of profound relief." 10
Once appointed, the Board members were not
directly responsible to the President, who had no
formal channel of communication to the Board
and no legal power over Board policies.11 But in
practice, the presence of the Secretary of the
Treasury and the Comptroller of the Currency on
the Board gave the Executive Branch considerable weight; and the differing interests were
expressed in quite a bit of friction between the
"Treasury" faction, which included Hamlin as
well as the ex officio members, and the "nonTreasury" faction, which included Delano, Warburg, and Miller. In 1916, when Hamlin was
reappointed to the Board for a 10-year term,
some members of the Board objected to his
continuing as Governor because his close connection to the Treasury threatened the Board's
10. In Gerald T. Dunne, "The Federal Reserve: The First
Foundations," Business Horizons (Winter 1966), p. 56.
11. Donald F. Kettl, Leadership at the Fed (Yale University Press, 1986), p. 4.
235
independence and because they wanted a rotation of the governorship. So President Wilson
appointed Harding as Governor and Warburg as
Vice Governor.
EARLY
TASKS AND ISSUES:
1914-17
The first task of the Board was to complete the
establishment of the System begun by the Reserve Bank Organization Committee. The Board
had a great deal of work to do before November
16, 1914, the date Secretary of the Treasury
McAdoo had set for the opening of the Reserve
Banks. The Board members selected three Class
C directors for each of the 12 Reserve Banks (the
Class A and Class B directors were elected by
the member banks in each Reserve District);
drafted uniform bylaws for the Reserve Banks;
dealt with staffing and housing the Reserve
Banks; oversaw the design and printing of the
new Federal Reserve notes; supervised the transfer of gold reserves to the Reserve Banks from
the subtreasuries; set guidelines for the types of
paper that were eligible for discounting by the
Reserve Banks; and worked out a mechanism for
discounting.
On October 20, 1914, soon after announcing
the appointment of the Class C directors, the
Board called a meeting in Washington of the
directors and other officers of the Reserve Banks
to deal with practical items that required uniformity and cooperation among the Reserve Banks,
such as a check-clearing and -collection system
and a method of accounting. Some of the executive officers (or "Governors," as they then
were called), especially Benjamin Strong of the
New York Bank and Alfred L. Aiken of the
Boston Bank, recognized the need to continue
such meetings and helped to establish a conference of Governors that met several times a year
to discuss common concerns and objectives. The
"Governors Conference" began to take on a life
of its own, to issue resolutions on System policies, and to criticize rulings and orders from the
Board. In January 1916, the Board decided to
check the authority of the Governors Conference
by refusing to approve its expenses for a secretary and for travel not undertaken at the behest
236 Federal Reserve Bulletin • April 1989
of the Board. The Board also insisted that any
meetings of the group take place in Washington
at a time designated by the Board. Some Governors complained that the Board was exceeding
its mandated authority; but the Board prevailed
and, through this early internal contest, began to
define and exert its authority within the System.
Some of the tasks of setting up the System,
complex in themselves, were made even more
difficult because of opposition from various quarters. The establishment of a universal par checkclearance system, for example, was opposed by
many member banks, particularly those in small
towns, that did not want their "exchange
charges," or processing fees, abolished since
these were a means of earning income. (This
issue actually went into litigation, and the case
was not settled until a 1923 Supreme Court
decision affirmed the right of a Reserve Bank to
collect checks within its District for other Reserve Banks, for member banks, and for affiliated
nonmember banks without paying an exchange
charge.)
In a further effort to strengthen the System and
to unify U.S. banking, the Board issued regulations fixing the conditions under which state
banks could join the System (under the terms of
the act, national banks were required to become
members within a year or forfeit their federal
charters). But the state banks, finding those
conditions less satisfactory than the ones under
which they currently operated, did not rush to
join.
At the same time, the Board was developing its
own staff and operations. To support its work,
the Board hired a staff of 45 from 1,250 applicants, dealing with considerable pressure from
various sources for particular appointments; established three divisions—the Correspondence
Division, the Division of Reports and Statistics,
and the Division of Audit and Examination—and
a legal department under the charge of a general
counsel; and appointed two administrative officers, the secretary (H. Parker Willis) and the
assistant secretary (Sherman P. Allen). In accordance with the act, Treasury Secretary McAdoo provided office space in the Treasury Building for the Board and its staff. This arrangement
was disturbing to some of the Board members,
who suggested moving the Board's operations to
Chicago to mitigate what seemed at times to be
overwhelming Treasury influence.
In May 1915, the Board created the FEDERAL
RESERVE BULLETIN as a monthly publication to
"afford a general statement concerning business
conditions and events in the Federal reserve
system that will be of interest to all member
banks." The provision of statistical and other
information on a consistent basis for all Reserve
Districts was another move toward coordination
and unity.
Soon after the Board took office, it was asked
to review the decisions of the Reserve Bank
Organization Committee regarding the designation of Federal Reserve cities and the drawing of
District lines. Pittsburgh and Baltimore had requested designation as Federal Reserve cities in
place of Cleveland and Richmond respectively.
Some areas, such as Fairfield County, Connecticut, had applied to be transferred from one
Reserve District to another. A few members of
the Board believed that the System would be
more efficient with fewer Districts. Since the
capital of some of the Reserve Banks was close
to the statutory minimum of $4 million and since
transferring territory among Districts could in
some cases reduce capital below the limit, the
Attorney General was asked for an opinion about
the Board's power to readjust the Reserve Districts. On November 22, 1915, the Attorney
General said that the Board could not reduce the
number of Reserve Districts or Reserve Banks
below 12, and on April 14,1916, he indicated that
the Board could not change the location of any
Reserve Bank but that it could adjust the boundary lines of the Districts.
Policy
Questions
According to the act, one of the main functions of
the System was to "furnish an elastic currency,"
that is, a currency that would respond to the
regional, seasonal, and cyclical needs of the U.S.
economy as well as its emergency needs. The
discounting of "eligible" paper would be the
primary policy tool with which to achieve this
elasticity. Each Reserve Bank was to set its own
discount rate, subject to "review and determination" by the Board. The act assumed the coordination of discount policy to be automatic,
The Establishment and Evolution of the Federal Reserve Board: 1913-23
relying on the gold standard and the "real bills"
doctrine. That doctrine held that if credit were
issued only on the basis of short-term, selfliquidating paper associated with goods in commercial transactions, money and credit would
expand and contract with the volume of goods
produced. However, the Board quickly saw the
necessity for developing a Systemwide discount
policy so that all the Reserve Bank discount
rates, even if differing among the Districts, would
at least bear a consistent relation to one another.
In an effort to standardize Reserve Bank practices, the Board defined the different classes of
paper that were eligible for discount and decided
on a schedule of graduated rates based on the
maturity and character of the paper discounted.
Carrying out such tasks and deciding on such
sensitive issues would have been difficult enough
in peacetime; but even as the Board was being
sworn in and the System was being organized,
war erupted in Europe. In the time of uncertainty
as to whether the United States would enter the
war, the Board adhered to a policy of strengthening the System for preparedness in case of the
declaration of war. It attempted to maintain the
liquid character of the Reserve Banks' assets, to
concentrate and conserve the gold supply within
the System, and to discourage excessive expansion of credit. In May 1915, the Board established the Gold Settlement Fund, with each
Reserve Bank depositing with the Treasury
$1 million in gold or gold certificates. With the
Board acting as a clearinghouse, the fund eliminated the need for shipments of gold in adjusting
balances among Reserve Banks. In September
1916, the Federal Reserve Act was amended to
permit member banks to carry all required reserves as balances with the Reserve Banks. In
June 1917, the act was amended again in accordance with Board recommendations to make
membership in the System more attractive to
state banks and trust companies, to modify reserve requirements to increase the gold holdings
of the Reserve Banks, and to make gold more
available as a basis for elastic note issue. Also,
the Reserve Banks began to issue Federal Reserve notes against not only gold but a combination of gold and commercial paper. Whereas
earlier the centralization of the gold supply had
been seen as a way of discouraging excessive
237
expansion of money and credit, now it was seen
as a way of encouraging needed expansion. As a
result of these changes, the Federal Reserve note
was becoming, rather than an occasional emergency currency, the most important constituent
of the U.S. "circulating medium."
Emergency
Measures
While the declaration of war in Europe in the
summer of 1914 served to moderate opposition to
the System, it diverted attention from longerterm issues to emergency measures. Although
the United States was not yet directly involved in
the war, the country's economic and financial
systems were from the first affected by the European conflict. Fortunately, the Congress had
extended the Aldrich-Vreeland Act of 1908 until
June 30,1915, which helped to prevent a panic by
providing for the issuance of notes through national currency associations. This extension enabled the Board to respond to other emergency
conditions caused by the war.
At first, the war curtailed ocean transportation
and disrupted international trade, creating strains
in commodities markets and hardships for U.S.
farmers, particularly those growing cotton. The
cotton crop in 1914 had been the largest on
record, and the collapse of the cotton export
market (which took about 60 percent of the
cotton farmers' output) and the closing of the
cotton exchanges in the United States and England brought pressures from the Congress on the
Board to help support the price of cotton and to
provide credit assistance to cotton farmers. In
January 1915, the Board approved a plan for a
Cotton Loan Fund subscribed to by commercial
banks to supply long-term loans to farmers.
When hostilities started in Europe, the United
States was a debtor nation. Its outstanding obligations to Europe, primarily to England, were
large, and a substantial volume of securities
payable in Europe were about to mature. To
prevent a drain of gold that could endanger the
U.S. banking system and to facilitate gold payments between countries, the Board and the
Treasury helped set up in September 1914 a $100
million Gold Exchange Fund from which international payments could be made. Although only
a small portion of the fund was used before it was
238 Federal Reserve Bulletin • April 1989
terminated in March 1915, the existence of the
fund did help to prevent panic, restore confidence in the economy, and provide an interim
solution to the gold exchange problem until the
Reserve Banks were fully operational.
As the war in Europe continued, the financial
and monetary situation of the United States
changed. Many financial centers in Europe experienced difficulties, and several stock exchanges
closed. London gave way to New York as the
major world credit market, and large foreign
credits were negotiated in the United States.
Exports, particularly those of war-related goods,
increased dramatically, and gold poured into the
country. From August 1914 to April 1917, the
gold stock of the United States almost doubled,
to $2.85 billion.
THE BOARD DURING WORLD WAR I:
1917-18
When the United States declared war on Germany on April 6, 1917, the Board and the Reserve Banks found themselves involved in new
duties and subjected to new pressures. Just before the declaration of war, Secretary of the
Treasury McAdoo charged the System, which in
1915 had been made a receiver and distributor of
government funds, with a new fiscal-agency
function: that of issuing and redeeming shortterm Treasury certificates to prepare for the
floating of the $2 billion Liberty Loan of 1917.
The Board objected both to the amount of the
borrowing and to the low rate of interest for the
first certificates, which were for $50 million at 2
percent. In response, McAdoo threatened to
invoke the Overman Act, which would have
allowed him to take over the System's funds to
gain immediate control of all U.S. banking reserves in the emergency. The Board withdrew its
objections. During the war, the System assisted
the Treasury in floating four Liberty Bond issues;
by October 1918, $17 billion in bonds had been
floated. Because of this heavy borrowing, the
federal government debt expanded from roughly
$1 billion in June 1916 to $21 billion in December
1918.
Discount
Policy
In its discount policy, the Board faced conflicting
objectives: (1) facilitating the war-financing,
emergency operations of the Treasury, which
meant keeping discount rates low, to allow the
financing of the government debt at low rates,
and (2) preventing the overexpansion of credit to
protect business and commerce, which meant
raising interest rates and using "moral suasion"
to encourage a "policy of common sense practical economy" (that is, appealing to commercial
interests to borrow and the banks to lend only for
legitimate business needs and not for speculative
purposes). 12 Most often, the Board sought to
facilitate the Treasury's financing. Thus, the
Board urged the Reserve Banks to establish
preferential discount rates on loans to member
banks secured by government obligations as
compared with discounts of commercial paper.
By 1918, the Board looked toward the time when
"the war obligations of the Government have
been digested, and the invested assets of the
Federal Reserve Banks have been restored to a
commercial basis, [so that] rates can be established with reference to the commercial requirements of the country." 13
Strengthening
the
System
During the war, the Board continued its efforts to
strengthen the System. After the 1915-16 influx,
the movement of gold into the United States
virtually ceased as European countries went off
the gold standard. The Board attempted to conserve the U.S. gold supply by limiting exports of
gold to neutral countries. It also attempted to
make membership in the System more attractive
to state banks. President Wilson supported these
efforts, saying that membership in the System
was a "solemn obligation," and many banks
took heed. During the System's first year of
operation, 17 state banks joined; by June 1919,
spurred by appeals to patriotism and concerned
about possible war emergencies, 1,042 state
banks had joined, bringing the total number of
12. Fourth Annual Report, 1917 (1918), p. 9.
13. Fifth Annual Report, 1918 (1919), p. 87.
The Establishment and Evolution of the Federal Reserve Board: 1913-23
System members, including the 7,780 national
banks, to 8,822. Responding to the growing complexity of the economic and financial system, the
Board in 1918 added the Division of Analysis and
Research to its staff with headquarters in Washington and a working office in New York.
The System as a whole gained strength and
prestige because it was able to facilitate the
mobilization of funds for the war effort and to
help bring the country through the collapse of the
European financial and commodity markets. The
Board itself, however, felt that it was losing
control not only to the Treasury but also to the
New York Reserve Bank, which operated under
the forceful and able leadership of Benjamin
Strong. After the first Liberty Loan, the Treasury began to bypass the Board and to deal
directly with the Reserve Banks, particularly the
New York Reserve Bank. In 1917, in an effort to
define its authority, the Board discontinued the
regular meetings of the Federal Reserve Agents
and those of the Governors of the Reserve
Banks. It also took the stand that "in all vital
matters of general policy calling for prompt and
decisive action concentration of responsibility
without division of authority is indispensable." 14
But the Board was still hampered in its attempt to
assume leadership by its location in Washington
with no immediate access to financial markets,
with only a limited research staff, and within too
easy reach of the Treasury's influence.
AFTERMATH
OF WORLD WAR
1:1918-23
As a result of the war, the United States became
a creditor nation. At first, domestic production
surged with the increases in exports and U.S.
government expenditures, both of which remained high for some time after the Armistice
was signed on November 11, 1918. With the
increase in reserves resulting from the inflow of
gold and from the use of Treasury bonds as
collateral for advances to member banks, credit
expanded. The expansion of credit and a surge in
demand for consumer goods, which had been
pent up during the war years, contributed to
14. Fourth Annual Report, 1917 (1918), p. 29.
239
postwar inflation. During 1919, speculation and
consumption increased while production began
to drop off and, with the lifting of the gold
embargo, gold began to flow out. In its Annual
Report for 1920, the Board described the postwar
economy in strong language: the year was "characterized by an unprecedented orgy of extravagance, a mania for speculation, overextended
business in nearly all lines and in every section of
the country, and general demoralization of the
agencies of production and distribution." 15
The Discount
Rate and
Controversy
As early as December 1918, members of the
Board were stressing the connection between
low discount rates and excessive expansion of
credit and inflation. However, the Board, led by
Governor Harding, believed that its duty was to
cooperate with the Treasury, which wanted to
float a Victory Loan in 1919. In April 1919, the
Board discussed at length suggestions by several
Reserve Banks to raise the discount rate but
decided to keep the rate low to discourage competition with the buying of Victory bonds and to
assist the Treasury in keeping the government's
interest payments low. It did, however, express
concern over the unhealthful tendencies in the
process and discussed acting after the close of
the Victory Loan campaign. During that campaign, the Board attempted to use moral suasion
by issuing warnings to member banks to restrict
credit except for essential purposes.
By 1920, the wholesale price index was more
than twice its 1914 level, and the Board and the
Reserve Banks saw clearly that, despite the
Treasury's opposition, something had to be done
to contain inflation and speculation. In January,
with approval from the Board, the discount rate
was raised from 43A percent to 6 percent. Member bank borrowing from the Reserve Banks still
continued to mount: it went from $1.8 billion in
June 1919 to $2.5 billion in May 1920. In May, the
Board approved another increase—to 7 percent—initiated by the New York Reserve Bank
and three other Reserve Banks, which went into
effect in June.
15. Seventh Annual Report, 1920 (1921), p. 1.
240 Federal Reserve Bulletin • April 1989
These increases in the discount rate contributed to a brief but severe recession in business
activity and to a collapse in prices in 1920-21.
There was a precipitous liquidation of discount
credits at the Reserve Banks, accompanied by a
large-scale contraction of money in circulation.
The agricultural sector was particularly affected:
farmers who had incurred large mortgage and
capital obligations on the basis of high wartime
prices found the carrying costs beyond their
means when prices dropped. Farm mortgages at
many small banks became uncollectable, and in
1921 more than 500 banks failed.
Although the price collapse was international
in scope, the System received much of the blame
for the situation. Many of the buyers of the
Liberty bonds at low interest rates discovered
that bond prices fall when market rates rise and
were resentful that the System had imposed
capital losses on them so soon after they had
bought the bonds. Charges were made in the
Congress against the System, the Board, and
even Governor Harding personally. Some members of the Congress claimed that the System was
acting for its own benefit and not for the economy and that the System had discriminated
against certain sectors, especially agriculture.
Some asserted that the situation showed the
misuse of funds by the Board and that some
Board members acted for their own gain. Even
Comptroller of the Currency John Skelton Williams, who sat on the Board, charged that the
Board and the Reserve Banks had conspired to
drive up rates to create deflation for the profit of
bankers.
In an effort to resolve the controversy, the
Board requested a congressional investigation.
The Joint Congressional Commission of Agricultural Inquiry started hearings in August 1921 and
submitted a report to the Congress in January
1922. The commission concluded that the Federal Reserve System had erred in not acting
sooner to raise interest rates. It also established
that the charges of discrimination against agriculture or of personal gain had no basis. Most
important for the evolution of the Board and the
System, the commission noted that the System
was in a difficult position vis-a-vis the Treasury,
and it emphasized that the Federal Reserve
should answer, not to the Treasury, but to the
Congress. Thus, the commission, as had the
Attorney General earlier, underscored the principle of the Board's independence from the Treasury.
Changes
in the Board
After the war, the membership of the Board,
which had remained intact for nearly four
years, underwent repeated changes. One seat
changed four times in five years: Delano had
resigned in 1918 to serve in the U.S. Army
overseas, and in 1919 Henry A. Moehlenpah
filled his place, to be followed in 1920 by David
C. Wills, in 1921 by John R. Mitchell, and in
1923 by George R. James. From 1918 to 1921, the
Vice Governorship had three occupants—Paul
Warburg, Albert Strauss, and Edmund Piatt—
and the office of Secretary of the Treasury
and Chairman of the Board had four—William
McAdoo, Carter Glass, David Houston, and
Andrew W. Mellon.
In 1922, as a result of the congressional investigation, an amendment to Section 10 of the act
provided for an additional member of the Board
to represent agricultural interests. In 1923, Milo
D. Campbell of Michigan was appointed to that
new position. But he died suddenly after having
served on the Board only eight days, and Edward
H. Cunningham of Iowa replaced him.
Governor Harding's term expired in 1922, and
Daniel R. Crissinger, who had been Comptroller
of the Currency, was appointed to fill the vacancy in 1923. In that year, too, Henry M. Dawes
assumed the office of Comptroller and membership on the Board. By the end of the first decade,
only two of the original members—Charles S.
Hamlin and Adolph C. Miller, both of whom had
been reappointed—were still serving (they
served until 1936).
By the end of the war, the Treasury could no
longer house the staff of the Board, which now
numbered 345. While the Board members, the
Secretary, the General Counsel, and the Gold
Settlement Division still had offices in the Treasury building, the Division of Reports and Statistics and the Division of Operations and Examinations were in two other Washington locations
and the Division of Analysis and Research was in
New York. Coordination was at best difficult.
The Establishment and Evolution of the Federal Reserve Board: 1913-23
Thus, the Board began planning for its own
quarters, which would not be completed until
1937.
The Board and the Reserve
Banks
During the postwar period, power in policymaking began to shift from New York to Washington,
a process that continued for some years. In May
1922, the Division of Analysis and Research
moved from New York to Washington, and in
September of that year Walter W. Stewart replaced H. Parker Willis as director of that division. In 1923, the division was combined with the
Office of Statistician and renamed the Division of
Research and Statistics under the directorship of
Stewart.
After the wartime hiatus in their meetings, the
Governors of the Reserve Banks, led by Benjamin Strong, again sought the right to consult as a
body. In May 1922, the Governors Conference
met in Washington with the Board's approval
(that group meets today as the Conference of
Presidents). At that meeting, the Reserve Bank
Governors set up the Committee of Governors
on Centralized Execution of Purchases and Sales
of Government Securities by Federal Reserve
Banks. As originally conceived, this Governors
Committee was to coordinate the Reserve
Banks' purchases and sales of government securities; however, it soon began to influence policy
and, as with the Conference of Governors before
the war, it came into conflict with the Board. In
March 1923, while Strong was in Colorado recuperating from an episode of tuberculosis, the
Board asserted its jurisdiction over Reserve
Bank open market operations, disbanded the
Governors Committee as it was then composed,
and reappointed the same officials to a new
committee that would operate under the aegis of
the Board. Despite disagreements about the right
of the Board to act in such a manner, the Open
Market Investment Committee, as it was called,
had its first meeting on April 13, 1923. The
Board's action brought open market operations
under its direction for the first time and reduced
the autonomy of the individual Reserve Banks in
carrying them out. It also signaled a major
change in policy.
Changes
241
in Policy
The breakdown of the gold standard in several
countries during the war and the issuance of
government securities to finance the war effort of
the United States heralded the beginning of the
end of the gold standard and the real bills doctrine as a guide to policy. There was a growing
recognition among System officials that the securities transactions had affected bank reserves and
thus economic conditions. Also, the large
amount of speculation during 1919-20 had
showed that regulations, even with the most
precise definition of eligibility, could not control
the ultimate use of Federal Reserve credit.
These changes in the Board's thinking on
policy are indicated in the Tenth Annual Report.
First of all, the Board and the System shifted
from the sole reliance on changes in discount
rates to the inclusion of open market operations
in carrying out general credit policy. Thus, the
Board stated the principle that Reserve Bank
purchases and sales of government securities
should be made with reference to prevailing
credit conditions and for the accommodation of
commerce and business, not just to provide
earnings to the individual Reserve Banks or to
facilitate Treasury financing operations. This
statement put open market operations under the
same guiding principle as that prescribed by the
act for the discount rate. Second, the Board
indicated that the need for coordination and
uniformity in pursuing open market operations
was the basis for its actions in setting up the
Open Market Investment Committee. It also
affirmed the need for uniformity in setting discount rates. Third, in recognition that it could not
prevent speculation by defining the kinds of
paper that were eligible for discounting, the
Board asserted the principle that the quantity of
paper discounted was as important as the quality
in guarding against the overexpansion of credit.
In these statements, the Board demonstrated its
growing ability to analyze and adapt to new uses the
tools it had and its growing recognition of itself, not
merely as a regulator, but as a policymaking body.
The questions of the centralization of power within
the System, of independence from the Treasury,
and of the mission of the Board were not settled, but
the process was under way.
242 Federal Reserve Bulletin • April 1989
BIBLIOGRAPHY
Anderson, Clay J. A Half-Century of Federal
Reserve Policymaking, 1914-1964. Philadelphia: The Bank, 1965.
Beckhart, Benjamin H. The Federal Reserve
System. New York: Columbia University
Press, 1972.
Board of Governors of the Federal Reserve System. Annual Report, for the years 1914-23.
Washington: Board of Governors, 1915-24.
. Banking and Monetary Statistics. Washington: Board of Governors, 1943.
Chandler, Lester V. Benjamin Strong: Central
Banker. Washington: The Brookings Institution, 1958.
Clifford, A. Jerome. The Independence of the
Federal Reserve System. Philadelphia: University of Pennsylvania Press, 1965.
Dunne, Gerald T. A Christmas Present for the
President. St. Louis: The Bank, 1964.
. "The Federal Reserve: The First Foundations," Business Horizons (Winter 1966),
pp. 49-60.
Eccles, George S. The Politics of Banking. Salt
Lake City: University of Utah, 1982.
Elliott, David C. "The Federal Reserve System,
1914-29," in Herbert V. Prochnow, ed.,
The Federal Reserve System. New York:
Harper & Brothers Publishers, 1960, pp.
295-316.
Friedman, Milton, and Anna J. Schwartz. A
Monetary History of the United States, 1867—
1960. Princeton, N.J.: Princeton University
Press, 1963.
Glass, Carter. An Adventure in Constructive
Finance. Garden City, N.Y.: Doubleday, Page
and Company, 1927.
Goldenweiser, E.A. American Monetary Policy.
New York: McGraw-Hill Book Company,
1951.
Harding, W.P.G. The Formative Period of the
Federal Reserve System. Boston: Houghton
Mifflin Company, 1925.
Harris, S.E. Twenty Years of Federal Reserve
Policy, vol. 1. Cambridge, Mass.: Harvard
University Press, 1933.
Hepburn, A. Barton. A History of Currency in
the United States. New York: Macmillan,
1915.
Johnson, Roger T. Historical Beginnings . . . The
Federal Reserve. Boston: The Bank, 1977 (reprinted, 1982).
Kettl, Donald F. Leadership at the Fed.
New Haven, Conn.: Yale University Press,
1986.
Laughlin, J. Lawrence. The Federal Reserve
Act, Its Origins and Problems. New York:
Macmillan Company, 1933.
Link, Arthur S., ed. The Papers of Woodrow
Wilson. Princeton, N.J.: Princeton University
Press, 1979.
McAdoo, William G. Crowded Years. Boston:
Houghton Mifflin Company, 1931.
Miller, A.C. "Federal Reserve Policy," American Economic Review, vol. 11 (June 1921), pp.
195-206.
Noyes, Alexander D. " A Year after the Panic of
1907," Quarterly Journal of Economics (February 1909), pp. 185-212.
Parthemos, James. "The Federal Reserve Act of
1913 in the Stream of U.S. Monetary History," Federal Reserve Bank of Richmond
Economic Review, vol. 74 (July/August 1988),
pp. 19-28.
Reed, Harold L. The Development of Federal
Reserve Policy. Boston: Houghton Mifflin,
1922.
. Federal Reserve Policy 1921-1930. New
York: McGraw-Hill Book Company, 1930.
Rowe, J.Z. The Public-Private Character of
United States Central Banking. New Brunswick, N.J.: Rutgers University Press, 1965.
Sprague, O.M.W. "The Crisis of 1914 in the
United States," American Economic Review,
vol. 5 (September 1915), pp. 499-533.
Stein, Herbert. Government Price Policy in the
United States during the World War. Williamstown, Mass.: Williams College, 1939.
Timberlake, Richard H. The Origins of Central
Banking in the United States. Cambridge,
Mass.: Harvard University Press, 1978.
U.S. Congress. Federal Reserve Act. Public
Law No. 43. 63 Cong. 2 Sess. 38 Stat. 251.
Washington: Government Printing Office,
1913.
Warburg, Paul M. The Federal Reserve System:
Its Origin and Growth. 2 vols. New York:
Macmillan Company, 1930.
West, Robert Craig. Banking Reform and the
The Establishment and Evolution of the Federal Reserve Board: 1913-23
Federal Reserve, 1863-1923. Ithaca, N.Y.:
Cornell University Press, 1977.
White, Eugene N. The Regulation and Reform of
the American Banking System, 1900-1929.
Princeton, N.J.: Princeton University Press,
1983.
243
Willis, Henry Parker. The Federal Reserve System:
Legislation, Organization and Operation. New
York: Ronald Press Company, 1923.
. The Theory and Practice of Central
Banking. New York: Harper & Brothers Publishers, 1936.
244
Understanding the Behavior of M2 and V2
This article was prepared by David H. Small and
Richard D. Porter of the Board's Division of
Monetary Affairs. Michael V. Vaccaro provided
research assistance.
As part of its responsibility of reporting to the
U.S. Congress, the Federal Reserve System establishes ranges for the growth of various monetary aggregates over the coming year. These
ranges are set so as to foster the ultimate objectives of the Federal Reserve, mainly stable economic growth and stable prices. The relations
between these aggregates and income and prices,
therefore, bear both upon the appropriate width
of the target range set for each aggregate and
upon the proper response of policy should one of
them deviate from its range.
This article focuses on the properties of the M2
aggregate and of its velocity, V2, the ratio of
gross national product to M2. The time frame is
the intermediate run—the one- to two-year intervals that are associated with monetary targeting
and over which V2 has fluctuated by substantial
amounts. The article shows that much of the
intermediate-run variability in this velocity measure can be explained by changes in the opportunity cost of holding M2 balances, defined as a
market interest rate less the average rate paid on
M2 deposits. Those changes, in turn, depend
upon the rate-setting behavior of depository institutions: the more quickly and the more fully
deposit rates adjust to changes in market rates,
the more stable will be the opportunity cost of
M2 and, therefore, the more stable will be V2
itself. Empirically, the average rate on M2 deposits tends to respond sluggishly to changes in
market rates, so that opportunity costs vary
significantly over the intermediate run but vary
far less in the long run as deposit rates adjust.
Given the history of market rates, these two
relations—between V2 and M2's opportunity
cost and between the opportunity cost and market rates—account for much of the past variabil-
ity of V2. Nonetheless, predictions about the
relationship of movements in M2 and in gross
national product still embody much uncertainty.
While the forecasts from models of M2 demand
and deposit rates developed by the staff of the
Federal Reserve Board are reasonably accurate,
the interval since the deregulation of deposits in
M2 has not been long enough for confidence to
have been built in specific estimates of these
relationships. Moreover, even if the links among
market rates, deposit rates, GNP, and M2 demand were stable and fully understood, uncertainty about shocks elsewhere in the economy,
and about the interest rate changes needed to
offset them, would still neccesitate judgment in
setting the appropriate path for M2.
To shed light on these issues, this article first
reviews the recent behavior of V2 and its determinants. It then examines the Board's formal
model of M2 demand, which explicitly traces the
relations between M2 on the one hand and income, prices, interest rates, and its other determinants on the other; and it reports simulations
of that model to quantify the importance of the
relationships governing the determination of M2
demand and deposit rates and of the uncertainty
surrounding them. An appendix provides a brief
exposition of the model.
HISTORICAL BEHAVIOR OF V2,
OPPORTUNITY COSTS, AND DEPOSIT
RATES
The velocity of M2, V2, has fluctuated about a
generally flat trend over the last three decades
(chart l). 1 However, some evidence suggests
1. This observation refers to "contemporaneous velocity"—that is, the current level of GNP divided by the current
level of M2. An alternative measure of the link between M2
and the gross national product is "leading velocity," in which
current GNP is divided by a past level of M2. Using previous
values of M2 allows for lags between changes in M2 and their
effect on GNP and thereby potentially provides a more stable
245
1. V2 and leading velocity
Velocity
Leading velocity i
V2 mean (1959:1-1988:4)
1960
1970
1980
1988
that the introduction of money market deposit
accounts at the end of 1982 had a once-and-for-all
depressing effect on the average level of V2.
With their transaction features and attractive
offering rates, MMDAs apparently drew in funds
that previously had been held outside M2 and
thereby lowered V2.
2. Velocity and the opportunity cost of M2
of MMDAs.3 Indeed, the simple correlation between V2 and M2's opportunity cost is 0.78 over
the period from 1959:2 to 1988:4.
The opportunity cost of M2, in turn, moves
less than market interest rates because the average rate on M2 deposits—the M2 own rate—is
adjusted in the wake of changes in the Treasury
bill rate; obviously, greater adjustment tends to
stabilize opportunity costs more. 4 From 1959:2
to 1988:4, the standard deviation of the Treasury
bill rate was 3.23 percentage points while that of
the opportunity cost of M2 was only 1.53 percentage points. In the 1960s and 1970s, most of
3. Opportunity cost of M2 and its components
Percent
Opportunity cost
Components
1960
B I I I B I I I B I I I B I I I B I M B
1960
1970
1980
1988
Changes in M2's opportunity cost appear to be
the main factor causing V2 to deviate from its
trend (see chart 2).2 The relation between V2 and
the opportunity cost of M2 seems reasonably
stable, even after the extraordinary initial growth
measure of velocity. The use of leading rather than contemporaneous velocity appears to smooth some of the variations
in V2, but it does not affect the major swings in velocity,
including those of recent years (see chart 1). The mean level
of contemporaneous velocity is lower than that of leading
velocity because, for any given period, the latter uses a
smaller number—that is, an earlier value of M2—in the
denominator. Here, M2 is lagged two quarters. Hereafter, the
concept of velocity used throughout this article is the contemporaneous measure.
2. The opportunity cost of M2 is the three-month Treasury
bill rate less the average rate paid on M2 deposits. These
rates and all other rates used in this article are effective
annual yields.
1970
1980
1988
the adjustments made to the M2 deposit rate
involved changes in rates that were under Regulation Q; these adjustments were generally made
in lagged response to the upward trend in open
market rates. However, since the deregulation of
deposit rates began in mid-1978, the rate on M2
has generally responded more sensitively to
changes in market rates. As a result, the M2
3. In view of the relatively attractive rates paid on MMDAs,
the introduction of these accounts may have decreased the
long-run equilibrium opportunity cost of M2 balances, increasing
the demand for this aggregate and lowering its velocity. After
their introduction in December 1982, MMDAs (not seasonally
adjusted) promptly grew to 13 percent of M2 (seasonally
adjusted) on average during 1983:1.
4. The M2 own rate is defined as the deposit-weighted
average of the observed rates paid on M2 deposits; each type
of deposit is weighted by the value of its ratio to M2, lagged
one quarter. Currency and demand deposits are assumed to
earn no explicit interest.
246 Federal Reserve Bulletin • April 1989
4. The federal funds rate and M2 deposit rates
Slowly adjusting rates
the last shows the M2 own rate. Much of the
recent responsiveness of the M2 own rate to
changes in market rates, and therefore much of
the increase in the stability of the M2 opportunity
cost, stems from the closeness with which the
rates on small time deposits and on money market mutual funds have followed short-term open
market rates. When short-term market rates have
risen, that closeness has promoted the stability of
V2 in two ways: first, by permitting those instruments to retain deposits; and, second, by making
them attractive to funds in other components of
M2 that might otherwise have left the aggregate
altogether.
MODELING M2 DEMAND
DEPOSIT RATES
opportunity cost has been considerably more
stable since 1983 than it was during the late 1960s
and most of the 1970s, even though the variability of market rates was roughly the same in the
two periods (see chart 3). The standard deviation
of the M2 opportunity cost over the four years
ending in 1988:4 was 48 basis points, the lowest
value for any four-year interval in two decades.
Chart 4 shows the recent historical relations
between the individual M2 deposit rates and the
federal funds rate, which serves as a proxy for
short-term open market rates. The first panel
relates the funds rate to the more slowly adjusting M2 deposit rates—the rates on other checkable deposits, savings deposits, and MMDAs;
the second panel shows the relation with the
more quickly adjusting rates on small time deposits and on money market mutual funds; and
AND
To explore the implications of these relationships
for setting the target range for M2 and for dealing
with deviations from that range, the Federal Reserve staff has developed an econometric model of
the relationship of M2 to GNP and to market interest rates. The model has two components: the
demand for M2 by the public and the rate-setting
behavior of depository institutions.5
The relation between V2 and the opportunity
cost of holding M2 balances, which is exhibited
in chart 2, forms the basis of the staff econometric model of the demand for M2. In the model,
the ratio of M2 demand to GNP (that is, the
reciprocal of V2) is affected primarily by the
opportunity cost of M2. 6 The model also specifies the short-run dynamics by which M2 demand, and hence V2, adjusts toward its long-run
level; these adjustments include, among other
things, current and lagged responses to changes
in nominal GNP, personal consumption expendi-
5. For a full discussion of this and other models, see
George R. Moore, Richard D. Porter, and David H. Small,
"Modeling the Disaggregated Demands for M2 and Ml in the
1980s: The U.S. Experience," in Board of Governors of the
Federal Reserve System, Financial Sectors in Open Economies: Empirical Analysis and Policy Issues (the Board,
forthcoming, 1989).
6. The long-run demand for M2 also includes a time trend
and a dummy variable to account for the introduction of
MMDAs. These variables are only marginally significant and
drop out altogether when the sample period starts in 1960:1
rather than in 1964:1, for example.
Understanding the Behavior of M2 and V2
5. Response of M2 to increases of 1 percent in the
scale variables and in the opportunity cost of M2
Elasticity
Elasticity
247
counts adjust more slowly, as chart 4 makes
evident. In addition, as tests conducted with the
staff model indicate, apart from rates on small
time deposits, offering rates adjust downward
faster than they adjust upward.
6. Response of M2 own rate and opportunity cost
to increases and decreases in the federal funds rate
Basis points
tures, and the M2 opportunity cost, and to previous changes in M2 itself.
The estimated behavioral responses of M2
demand to increases in the scale variables, nominal GNP and personal consumption expenditures, and in the M2 opportunity cost unfold
fairly smoothly and nearly monotonically over
time, although they exhibit some overshooting of
their long-run values (see chart 5).7 As estimated,
the demand for M2 takes slightly less than a year
to respond fully to shocks to GNP, but needs
about a year and a half to respond fully to shocks
to opportunity costs. The long-run elasticity with
respect to changes in opportunity costs is estimated to be -0.057; that is, a 1 percent increase
in opportunity costs induces a 0.057 percent
decrease in the level of M2.
The response of M2 demand to a change in
market rates is more complex because the lagged
adjustments of offering rates result in changes in
opportunity costs long after the initial movement
in market rates. The staff model links deposit
rates to the federal funds rate. After allowing for
costs of servicing accounts, deposit rates are
assumed to adjust one for one with the funds rate
in the long run. 8 The speed of this adjustment
varies significantly across the different types of
M2 deposits; the rates on the more liquid ac-
Chart 6 shows the estimated responses of the
M2 own rate and the M2 opportunity cost to
changes of plus and minus 100 basis points in the
federal funds rate. During the first quarter following the rise in the funds rate, the Treasury bill
rate is estimated to increase about 90 basis
7. In computing the scale variable elasticity, the two scale
variables entering the M2 demand model are changed in
tandem by the same percentage amounts.
8. In "Modeling the Disaggregated Demands," Moore and
his colleagues provide some evidence that this assumption is
warranted.
An exception to the one-for-one adjustment is the rate on
other checkable deposits, which is subject to a "reserve tax"
on the margin. The reserve tax is assumed to be 12 percent,
equaling the marginal reserve ratio for OCD balances in
excess of the low-reserve tranche. For the other non-MlA
deposit rates, the reserve tax should reflect the 3 percent
marginal reserve ratio applicable to nonpersonal time and
savings accounts at institutions with too little vault cash to
avoid being bound by reserve requirements. But since this
requirement is not applied to all nontransaction accounts, the
average tax is generally considerably less than 3 percent. For
simplicity, the model assumes it is zero.
Change in funds rate
Increase
—
Response of M2 opportunity cost
—
Decrease
mm
0
i
i
m
4
i
i • •
i i • •
i
8
12
Quarters after shock
i
MI
16
i
1
K!
20
248
Federal Reserve Bulletin • April 1989
points. But, because rates on small time deposits
and on money market mutual funds respond
relatively quickly, the average M2 offering rate
moves up about 40 basis points (top panel),
leaving a net increase in the opportunity cost of
about 50 basis points (lower panel). After two
quarters, the Treasury bill rate has completed its
adjustment and the opportunity cost starts to
decline as M2 deposit rates continue to adjust
upward, albeit sluggishly.
Combining the model of M2 demand with that
of deposit rate setting produces a model of the
monetary sector in which M2 demand is tied to
GNP and the federal funds rate. The response of
M2 demand to a change in the funds rate follows
a humped profile, as shown by the black lines in
chart 7. The opportunity cost initially falls after a
decrease in the funds rate (as in chart 6), working
to increase M2 demand. However, as the deposit
rates continue to decline, the opportunity cost
begins to rise and the demand for M2 weakens,
though remaining above its original value. As
7. Response of M2 with respect to an increase of
1 percent in the federal funds rate
Absolute value of elasticity
Stochastic simulations of money demand and deposit rates
Quarters after shock
chart 7 shows, the short-run elasticity peaks
seven quarters after the shock in the funds rate at
-0.14, about twice the absolute value of the
long-run elasticity of -0.073. 9
STABILITY OF THE DEMAND FOR M2 AND
ASSOCIATED TARGETING ISSUES
The usefulness of M2 as a guide to monetary
policy depends not only on the strength of M2's
relationships to income and interest rates, but
also on the stability and predictability of those
relationships. An impression of the stability of
the equation for M2 demand can be gleaned from
the forecasts of the annual growth rates of M2
shown in table 1. These forecasts are mainly
within the model's estimation period—1964:1 to
1986:2; they represent dynamic simulations of
the model, in which past values of GNP and the
M2 opportunity cost are exogenous. 10
As indicated by the correlation of 0.907 between the actual and forecasted growth rates, the
model captures the swings in M2 growth reasonably well. The table also shows that changes in
the M2 opportunity cost make the more significant contributions to short-run swings in M2
growth (column 4), while changes in GNP and
personal consumption expenditures account for
more of the slowly evolving changes in trend M2
growth (column 5).
The implied forecasts of V2 using the forecasted levels of M2 and historical values of GNP
that are shown in chart 8 indicate the model's
ability to track the relation between V2 and
opportunity costs. However, the divergence of
the actual and simulated values starting in 1987 is
as pronounced as any in the estimation period
and largely reflects the overprediction by 1.8
points of M2 growth in 1987 (see table 1). This
9. Strictly speaking, this elasticity depends both upon the
level of interest rates at which it is evaluated and upon the
associated magnitude of the change in interest rates. However, in experiments testing federal funds rates of 4 percent to
16 percent, the elasticity varied by only 0.002.
10. Whether to use dynamic or static simulations is an issue in
models such as the staffs model of M2 demand, in which there
are lagged dependent variables. Static simulations use historical
values for the lagged dependent variables, while dynamic simulations use model forecasts of the variables.
Understanding the Behavior of M2 and V2
249
1. Forecasts of annual growth in M2, 1964-88
Percent change, fourth quarter to fourth quarter, except as noted
Contribution to forecasted
M2 growth (per centage points)
Actual
(1)
Forecast
(2)
Forecast
error
(1-2)
(percentage points)
(3)
1964
1965
1966
1967
1968
1969
7.9
8.0
4.8
9.1
7.8
4.4
8.6
6.8
7.1
6.8
8.1
5.2
-.6
1.3
-2.3
2.3
-.3
-.8
.0
-.9
-2.3
1.0
-1.9
-2.6
5.8
8.4
9.5
5.9
10.0
7.8
1970
1971
1972
1973
1974
6.1
13.5
12.8
7.2
5.9
5.4
13.0
13.7
4.8
7.4
.7
.5
-.9
2.4
-1.5
.0
5.6
3.6
-6.7
-2.6
5.6
7.9
10.6
1975
1976
1977
1978
1979
12.1
13.3
11.2
8.0
8.2
11.2
14.7
12.1
7.9
8.9
.9
-1.4
-.9
.1
-.7
2.8
3.8
1.2
-4.7
-3.7
8.7
11.5
11.2
12.2
12.4
1980
1981
1982
1983
1984
8.9
9.3
9.1
12.1
7.7
8.2
8.8
8.7
12.2
7.7
.7
.4
.4
-.1
.0
-.7
-1.3
3.4
2.4
-.6
8.9
10.1
5.9
6.4
9.4
1985
1986
1987
1988
8.9
9.3
4.2
5.3
10.0
8.1
6.0
5.5
-1.1
1.2
-1.8
-.3
2.3
3.0
.3
-1.7
8.2
5.5
5.9
7.3
Year
Summary statistic
Root mean squared error
Mean absolute error
Mean error (bias)
Correlation of actual and
forecasted annual growth..
Scale variables
(5)
11.0
9.9
1.2
1.0
.0
.907
forecast error is relatively large, and it is somewhat disturbing, coming as it does in the first full
out-of-sample year. However, the forecast of M2
growth in 1988 was quite accurate; therefore, the
simulated and actual velocities plotted in chart 8
parallel one another in 1988.
8. Actual and simulated velocity of M2
Opportunity costs
(4)
Velocity
These results lend some credence to future
forecasts of the M2 demand model, at least to
forecasts over such annual intervals and conditional on actual values of income and opportunity
costs; but they fail to incorporate any uncertainty
associated with forecasting opportunity costs.
This issue is addressed in forecasts of M2 growth
based on endogenous deposit rates (table 2,
column 2).11 These forecasts start in 1984:1,
about the earliest these deposit-rate equations
are applicable. 12 For comparison, the forecasts
11. The deposit-rate models use the historical values of the
rates on federal funds and on Treasury bills.
12. Rates on all deposit categories except passbook savings accounts were deregulated by this period. Rates on
passbook accounts were deregulated in 1986:2, but they
move so sluggishly in response to changes in market rates
that using simulated rather than historical values would not
substantially affect the forecasts.
250 Federal Reserve Bulletin • April 1989
2. A l t e r n a t i v e f o r e c a s t s o f q u a r t e r l y g r o w t h in M 2 , 1 9 8 4 : 1 - 1 9 8 8 : 4 , b a s e d o n f o r e c a s t e d
and actual deposit rates
Forecasted deposit rates
Year and quarter
Actual deposit rates
Actual growth
(1)
Forecasted
growth
(2)
1984:1
2
3
4
7.5
7.3
6.3
8.9
6.9
7.3
7.1
8.2
.6
-.1
-.8
.7
6.9
7.3
7.1
8.3
.6
-.1
-.8
.7
1985:1
2
3
4
12.0
6.1
9.7
6.7
9.2
9.7
10.5
9.2
2.9
-3.6
-.8
-2.5
9.3
9.8
10.2
8.6
2.8
-3.7
-.5
-1.9
1986:1
2
3
4
5.5
9.9
11.0
9.6
8.0
7.8
9.3
8.5
-2.5
2.1
1.7
1.0
7.4
7.1
9.0
8.2
-1.9
2.8
2.1
1.4
1987:1
2
3
4
6.1
2.1
3.4
4.9
6.4
5.7
5.4
4.7
-.3
-3.5
-2.0
-.2
6.3
5.8
5.8
5.6
-.2
-3.7
-2.4
-.7
1988:1
2
3
4
6.2
6.9
3.8
3.8
5.4
5.7
5.5
4.5
.7
1.2
-1.7
-.7
6.5
6.2
5.1
3.8
-.4
.7
-1.4
.0
Summary statistic
Root mean squared error
Mean absolute error
Mean error (bias)
1.8
1.5
-.4
in column 4 also start in 1984:1, but they take
past opportunity costs as given.
Although the summary statistics in columns 3 and
5 suggest that the use of forecasted rather than
historical deposit rates has no appreciable effect on
the forecasts of M2 growth, behind these statistics
there is a noticeable difference between the two sets
of forecasts for the period from 1987:4 to 1988:2.
Over this period, the simulated deposit rates result
in M2 growth rates that are around 1 percentage
point lower than those based on historical rates. In
1987 and early 1988, the actual M2 own rate rose
9. A c t u a l a n d s i m u l a t e d o w n rates f o r M 2
Error
(3)
Percent
Forecasted
growth
(4)
Error
(5)
1.8
1.4
-.3
more than the simulated rate (chart 9), producing
higher M2 growth for the forecast using historical
deposit rates.
Table 2 also shows that the relatively accurate
annual forecasts reported in table 1 mask relatively large quarterly errors that tend to offset
one another over the course of a year. These
annual and quarterly forecast results reflect all
errors in the various aspects of the model: possibly omitted variables and other misspecifications of the model, as well as uncertainties about
the estimated values of the coefficients and about
the behavior of the additive residuals in the
model. These last uncertainties are especially
important in evaluating the M2 growth rates that
are likely to be associated with alternative paths
for GNP or interest rates.
Table 3 and chart 7 cast light on this issue.
Table 3 displays confidence intervals for the
elasticity of M2 with respect to the federal funds
rate. 13 It provides estimated standard deviations
13. In principle, these confidence intervals can be computed directly from the model's underlying estimated coeffi-
Understanding the Behavior of M2 and V2
251
3. Responses of M2 to changes in the federal funds rate
Quarters after change
Uncertainty in
money-demand model only
Uncertainty in
money-demand and rate models
Estimate
Standard deviation
Estimate
Standard deviation
Elasticity of M2 with respect to the federal funds rate1
0
1
2
3
4
-.020
-.054
-.087
-.113
-.129
.005
.009
.013
.017
.019
-.020
-.054
-.087
-.113
-.129
.004
.006
.008
.011
.013
5
6
7
8
-.138
-.140
-.138
-.134
.021
.022
.023
.023
-.138
-.140
-.138
-.134
.015
.015
.015
.016
9
10
11
12
-.130
-.126
-.122
-.118
.024
.025
.026
.026
-.130
-.126
-.122
-.118
.016
.016
.016
.016
24
36
48
60 (long run)
-.098
-.086
-.078
-.073
.022
.019
.016
.015
-.098
-.086
-.078
-.073
.012
.011
.010
.009
Change in annualized quarterly growth rates of M2 after increase of 100 basis points
in the federal funds rate (percentage points)
0
1
4
8
12
24
36
48
60 (long run)
-.86
-1.37
-.30
.20
.14
.19
.18
.15
.11
.05
.05
.03
.02
.01
.02
.01
.01
.01
1. Evaluated for a 1 percent increase in the federal funds rate.
for the elasticity of M2 with respect to the funds
rate, after allowing for uncertainties in coefficients and error terms in the equations for both
M2 demand and the deposit rates; and chart 7
shows the confidence intervals around the estimated elasticity of M2 in terms of a band of one
standard deviation about the estimated values.
The elasticity follows the humped pattern discussed earlier, reaching its largest values after
six quarters. The standard deviation around the
elasticity peaks somewhat later, about twelve
quarters after the shock, but then it too begins a
cients, after some distributional assumptions concerning the
estimated coefficients have been made. In practice, direct
computation is fairly difficult when the model is viewed as a
dynamic system and because of the way we have estimated it.
Thus, we have used a stochastic simulation technique to construct the confidence intervals, where random parameter values
are drawn from multivariate normal distributions using the estimated variance-covariance matrixes of the parameters.
steady decline. Table 3 also lists the implied
estimated changes in quarterly M2 growth rates,
and their standard deviations, following an increase of 100 basis points in the federal funds
rate.
In light of the degree of uncertainty that table
3 and chart 7 reveal, the separate contributions of
the equations for M2 demand and the deposit
rates are especially interesting. When we allow
for uncertainty only in the equation for M2
demand, the standard deviation of M2's elasticity
with respect to the funds rate falls approximately
40 percent from its level when uncertainty is
allowed for in the equations for both M2 demand
and the deposit rates.
The remaining coefficient uncertainty involves
the elasticity of M2 demand with respect to GNP.
Here, our measures of uncertainty are necessarily biased downward because, in formulating the
model, a long-run elasticity of unity was imposed
252 Federal Reserve Bulletin • April 1989
and thus no uncertainty arises in this regard.
Nonetheless, the speed with which the model
converges to this long-run elasticity is a function
of freely estimated parameters, and the associated uncertainty can be computed. One standard
deviation of the estimated elasticity is about
one-sixth of the estimated value during the first
few quarters following a change in GNP (see
table 4). Over longer horizons, the standard
deviation falls, reflecting the long-run constraint
of a unitary elasticity and the implied convergence of the standard error to zero.
4. Elasticity of M2 with respect to scale variables1
Estimate
Standard deviation
0
1
2
3
4
.272
.607
.933
1.097
1.155
.067
.089
.059
.035
.042
5
6
7
8
1.153
1.124
1.087
1.054
.054
.055
.047
.035
9
10
11
12
1.029
1.012
1.002
.997
.024
.017
.016
.015
24
36
48
60 (long run)
1.000
1.000
1.000
1.000
.001
.000
.000
.000
Quarters after change
1. The scale variables are nominal GNP and personal consumption
expenditures.
CONCLUSION
This article examines the empirical linkages among
M2, nominal GNP, and the opportunity cost of M2
balances. M2 is apparently rather closely tied to
nominal GNP in the long run, as indicated by the
long-run stability of V2; but changes in market rates
can have significant short-run effects on M2 and V2
through their effects on the opportunity cost of
holding M2 balances. The equation for M2 that was
used to characterize the behavior of that aggregate is
rather standard in terms of variables used to explain
M2—mainly, income and opportunity costs. But the
resulting behavior that is imparted to M2 by the
sluggish adjustment of deposit rates to changes in
market rates is not always recognized.
This sluggish adjustment process for deposit
rates produces swings in the opportunity cost for
M2 deposits that initially widen when market
rates increase but that gradually narrow as deposit rates adjust upward. M2 has, therefore, a
greater response to changes in market rates in the
short run than in the long run. However, the
experience with deregulated rates for most M2
deposits is limited to the 1980s, and therefore the
uncertainty concerning their behavior and effects
on M2 is probably greater than is conveyed in the
model presented here.
APPENDIX: MODEL OF M2
DEMAND
The staff model of M2 demand is an errorcorrection specification, composed of two parts.
The first is a long-run equilibrium money demand
function:
(A.l)
mt = a + yt + 0s, + yTt + et,
where m, = log(M2), yt = log(nominal GNP),
s, = log(Opp t ), Opp is the opportunity cost of
M2, and T is an index for time. 14 The unitary
coefficient on yt assures that this is a velocity
relationship, with the long-run elasticity with
respect to nominal GNP equal to unity.
The second part of the model is a dynamic
error-correction equation of the form
(A.2) Am, = a +
+ 2 CjAm,., + 2
«=i
+ ( =20\ f A y t - i + €„
«=o
where e, is a white-noise error term. Here et_x is
derived from A.l; it is the lagged difference
between the actual and long-run demand for M2,
where the lags avoid problems of simultaneity.
The coefficient b on
in A.2 is negative and
ensures that the short-run demand for M2 will
converge to its long-run demand as expressed in
equation A. 1. The first-difference terms influence
the short-run adjustment of M2 toward its longrun equilibrium. To guarantee that these terms
are logically consistent with the convergence to
and the stability of the long-run equilibrium, an
14. The logarithm of the opportunity cost cannot be used
for all historical periods because at times the opportunity cost
turns negative. In specifying the models, we have used
logarithms for levels of opportunity cost greater than 50 basis
points. Below this level, the logarithm is replaced by its
first-order Taylor series expansion.
Understanding the Behavior of M2 and V2
additional "convergence" restriction is imposed.
This restriction is noted below.
Using A.l to substitute for et_x in A.2 yields
the following form of the model:
(A.3) Am, ~ a - ba - byTt_l - b$st_x
u
+ b{mt_x - y,_,) + 2 c(A/n(_(.
/=I
V
+( =20 dAst-i
The short-run "convergence" restriction that
is imposed on the coefficients is that the coefficients on the changes in consumption and on
Alog (M2,_j) sum to one.
In this equation, the terms are defined as
follows:
C. Control
w
+.\fAy
t-i
J=0
+ €,.
The staff model takes this form, but in Ay we
use personal consumption expenditures rather
than GNP. 15 The estimated model for the sample
period from 1964:1 to 1986:2 is shown below; the
absolute values of the t statistics are shown in
parentheses beneath the estimated coefficients.
Alog(M2), = -.074 - .00008 Time
(6.05)
(2.49)
+ .0045 MMDA
(2.15)
- .011 Taylog(Oppt_x)
(6.78)
253
Consump
DUM83Q1
DUM83Q2
GNP
MMDA
Opp
Taylog
-.185 [log(M2,_,) - log(GAr/V,)]
(6.17)
+ .273 A log (Consump t )
(3.92)
Dummy variable for credit controls: 1 in 1980:2 and 0 otherwise.
Personal consumption expenditures.
Short-run dummy variable for the
introduction of MMDAs; 1 in
1983:1 and 0 otherwise.
Short-run dummy variable for the
introduction of MMDAs; 1 in
1983:2 and 0 otherwise.
Nominal GNP (two-quarter moving average).
Dummy variable for the introduction of MMDAs; 0 through 1982:4
and 1 thereafter.
Opportunity cost of M2.
The natural logarithm for values
of the opportunity cost {Opp)
greater than 50 basis points; the
linear approximation of this function for values of the opportunity
cost less than 50 basis points.
Time-trend variable, with increments of 1 in each quarter.
+ .166 A log(Consump t _ x )
(2.33)
Time
+ .098 A \og(Consumpt_2)
(1.67)
Deposit-Rate
- .008 A Taylog (Oppt)
(5.50)
- .012A C. Control
(3.29)
The deposit-rate equations, like the M2-demand
model, are formulated within an error-correction
framework. The long-run equilibrium relation
between a deposit rate and the federal funds rate
is specified as
+ .026 DUM83Q1
(5.55)
(A. 4)
-.006DUM83Q2 + .462 Alog {M2t_x).
(1.08)
(5.67)
Equations
Ret
= a 0 + a jF,
where Re is the equilibrium deposit rate and F is
the rate on federal funds. This specification im-
R2 = .71; Durbin's h statistic = 1.26; standard
error of the regression = .0043.
15. Personal consumption was used in the short-run components of the model since, in comparison to GNP, it led to
some moderate improvement in the fit. The improved fit may
arise because short-run changes of some components of
GNP, such as business fixed investment and inventories, may
not generate a significant increase in the transactions demand
for money balances in the short run.
254 Federal Reserve Bulletin • April 1989
A.l. Estimated coefficients for alternative deposit-rate models1
Model
Coefficient
Small time deposits
(1)
MMDAs
(3)
MMMFs
(2)
Savings deposits 2
(4)
OCD
(5)
Long-run relation (equation A.4) 3
<*o
-.1628
-1.1565
<*i
1.00
1.00
-1.3024
-1.4274
-1.2499
1.00
1.00
.88
Short-run relation (equation A.6)
r
-.6699
(4.4)
-.71845
(2.6)
-.34572
(2.3)
-.08643
-.20895
-.6699
(4.4)
-.49937
(2.5)
-.11524
(2.3)
-.02881
-.035132
.72711
(14.5)
.58908
(15.8)
.42849
(9.7)
.10712
Ti
.51081
(3.8)
.16294
(2.8)
.040736
8
-.4104
(4.3)
To
-.12112
1. The numbers in parentheses are the absolute values of the t
statistics. Where no number appears, the t statistic was not available.
2. Savings deposit rates have been deregulated only since 1986:2 so
that there are too few observations to estimate the short-run relation.
The short-run parameters were judgmentally set equal to one-fourth of
the values of the corresponding parameters of the MMDA rate
equations. The intercept, a 0 , was set about 25 basis points below the
MMDA intercept.
3. The slope coefficients, a,, are imposed to reflect the marginal
reserve requirements on these accounts.
plicitly assumes that competitive forces will
drive the slope coefficient a! to one minus the
marginal reserve ratio, while the intercept a 0 will
be negative, reflecting transaction costs associated with deposit activity that are not recovered
by fees assessed on the depositor. Of course,
deposit rates need not always be in equilibrium,
and a short-run disequilibrium term, et, is introduced to model the data:
asymmetric upward and downward short-run responses that are evident in the data, we let e"
equal et when et is positive (that is, Rt is above its
long-run equilibrium) and zero otherwise; similarly, we let ebt equal et when et is negative (that is,
Rt is below its long-run equilibrium) and zero otherwise. Then the asymmetric error-correction equation with a lag structure adequate to fit the data is
(A. 5)
Rt = Ret + e, = a 0 + a lFt + er
(A.6) ARt =
+
+
7oAFt
+ 7iAF,_! + 8AR t _ x + ut,
When e, is positive we expect Rt to fall because R, is
then above its long-run equilibrium level; conversely, when et is negative we expect R, to rise
because Rt is then below its equilibrium level.
The second fundamental component of the
model is an error-correction equation that describes how the deposit rate adjusts toward its
long-run equilibrium in response to the existing
disequilibrium and to lagged changes in the deposit rate and the funds rate. To allow for the
where the disturbance term ut is assumed to be
uncorrelated over time. We expect, other things
equal, the fall in R induced by an ea to be larger
than the rise in R induced by an eb of the same
magnitude, so that 0* <
< 0.
Table A. 1 reports the estimates of the parameters
in equations A.5 and A.6 for the models of rates paid
on small time deposits, MMMFs, MMDAs, savings
deposits, and other checkable deposits.
255
Transfer Risk in U.S. Banks
The growth of international lending by U.S.
banking organizations, especially during the last
decade, has added new dimensions to the responsibilities of the federal regulatory agencies that
supervise the operations of U.S. banking organizations. As a matter of general approach and
philosophy, the agencies seek to apply the same
criteria to evaluate both the domestic and the
international activities of banking organizations.
Evaluating international transactions, however,
demands special procedures that take account of
"country exposure"—that is, the amount of lending
to a country—and of "country risk"—that is, the
possibility that adverse economic, social, or political
developments in a country may prevent that country, its businesses, and other local borrowers from
making timely payment of interest or principal to
creditors in other countries. The expansion of international lending has made an analysis of country
risk an essential element in the overall evaluation of
the financial condition of the largest U.S. banks.
A component of country risk is "transfer
risk," which arises when borrowers incur debts
denominated in the currencies of other countries.
Specific government policies, general economic
conditions in a borrower's country, or changes in
the international environment may prevent that
borrower from obtaining the foreign currencies
needed to service its debt. Whatever the cause,
foreign currency may not be sufficiently available
to permit the government and other entities of
the country to service all their foreign debt. In
such circumstances, the condition of the lending
banks suffers.
ler of the Currency, and the Federal Deposit Insurance Corporation—jointly developed an approach
to improving their supervision of the transfer risks
inherent in foreign lending by U.S. banks. The new
system was designed to address transfer risks separately in the bank examination process, rather than
attempt to analyze them in the supervisory framework that is used for evaluating commercial risks. A
common supervisory approach was needed for two
other purposes: to ensure that the bank regulatory
agencies treated transfer risks uniformly; and to
improve the quality and efficiency of regulatory
review by drawing on and coordinating the best
available expertise. The system was built around a
process for reporting country exposure that had
been adopted a few years earlier. This supervisory
system has four parts:
1. The identification in examination reports of
significant country exposures to bring to the
attention of bank management exposures that are
large relative to an institution's own capital.
2. Comments by the agency on large exposures
to individual countries based on a country's
economic condition and on the relation of the
bank's exposure to its capital funds or to the
exposures of its competitors.
3. The identification, or "classification," of exposures to countries with debt-servicing problems.
4. A review of the bank's policies, practices,
procedures, and controls for managing country risk.
Like domestic lending, loans to individual foreign borrowers are subject to legal lending limits,
but otherwise the agencies do not prohibit lending to any country per se. Bank regulators want
assurance, however, that the bank's management and directors are aware of significant exposures and that reasonable procedures are in place
to evaluate the risks.
THE SUPERVISORY
Reporting
Michael G. Martinson and James V. Houpt of
the Board's Division of Banking Supervision and
Regulation prepared this article.
SYSTEM
In 1978, the three regulatory agencies—the Federal Reserve System, the Office of the Comptrol
As the volume of international lending grew
during the 1970s, the regulatory agencies needed
256 Federal Reserve Bulletin • April 1989
more complete and accurate data about the level
of bank exposures. They also needed to ensure
that all banks that engaged in lending to foreign
borrowers had sufficient information on aggregate lending to make informed decisions about
portfolio diversification. The Country Exposure
Report (form 009 of the Federal Financial Institutions Examination Council) was developed in
1976 to provide that information; it has become a
key source of data on country exposure for the
agencies, as well as for many commercial banks
and other interested parties. Initially, banks reported on a semiannual basis, but they began to
file quarterly reports in 1984, as required by the
International Lending Supervision Act of 1983.
As a general rule, a U.S. commercial bank that
has $30 million or more in foreign lending must
file the report.
The report currently consists of 24 different
items of information on lending and covers almost 190 countries. A bank first lists the amount
of credit it has extended to borrowers in a
country and then provides information on any
guarantees by parties in other countries. The
report also categorizes the loans by their remaining maturity and by the sector of the borrower
(bank, public, other). It lists the amount of
lending in the local currency provided by the
bank's local offices and the amount and nature of
certain contingent liabilities. The focus of the
report is the "adjusted" exposure, the result of
transferring the bank's claims from the country
of the "initial" borrower to the country of the
guarantor (if any) and, in the case of claims on
foreign branches of banks, to the home countries
of those banks. Analysis of the various items
reported and of the results of these adjustments
indicates the location of the country risk in a
bank's portfolio.
These individual reports are used to evaluate
the exposure of the reporting institutions. The
agencies hold them in confidence, but much
information about foreign exposure remains
available to the public. Specifically, banks must
disclose their large exposures in annual reports
to their shareholders and in other regulatory
reports. For this purpose, large exposures are
defined as those representing more than 1 percent of the bank's assets or more than 20 percent
of its primary capital. Moreover, each quarter,
the Federal Reserve Board's statistical release,
"Country Exposure Lending Survey" (E.16),
makes available to the public a substantial
amount of information about the foreign exposure of U.S. banks to individual countries. It
provides the information for all reporters combined and also for three subgroups separately:
the nine money-center banks, a group of large
regional banks, and all other reporting banks.
Aggregate data are used principally in making
supervisory and regulatory policy, but they are
also used for identifying the aggregate borrowings of foreign countries from U.S. banks. In
addition, the Federal Reserve submits total figures on U.S. bank lending to each country to the
Bank for International Settlements in Basle,
Switzerland, where they are combined with similar data from banks in other major countries.
These BIS statistics, in turn, provide the public
with information about worldwide lending and
borrowing trends.
Evaluation
Process
In connection with the country-risk procedures
adopted in 1978, the agencies established the
Interagency Country Exposure Review Committee to assess transfer risk and to ensure uniform
treatment of the risks during examinations. The
committee consists of three voting members
from each agency: a staff member from the
agency's Washington office and two of its senior
field examiners who have broad experience in
international banking.
The committee meets three times each year to
review conditions in countries where transfer
risk to U.S. banks is significant. Formal economic analyses of each country are presented to
the members by economists from the U.S. Treasury, the Federal Reserve Bank of New York,
and the Board of Governors. In addition, the
examiners recount views expressed and actions
taken by major money-center and regional U.S.
bank lenders with whom they met prior to the
meeting. Drawing upon this information and using standards promulgated by the agencies, the
members evaluate the transfer risk inherent in
U.S. bank loans to borrowers as a group in each
country discussed.
Transfer Risk in U.S. Banks
CATEGORIES OF RISK
A number of broad categories are used to evaluate transfer risk. The first three apply to loans in
countries that do not have current or imminent
debt-service problems, according to the evidence
available at the meeting. These categories divide
the countries according to potential risk. The
remaining categories apply to countries that already pose transfer risk.
Categories
of Potential
Problems
Countries that are evaluated according to their
potential for transfer risk can range from developed countries and countries with strong balance
of payments positions to countries with relatively
weak balance of payment positions or other
problems that could, unless addressed properly,
lead to debt-servicing problems. The categories
characterize the country as "strong," "moderately strong," and "weak" according to the
degree of transfer risk it poses. These three
categories are used only for determining whether
a particular concentration of exposure warrants
comment in the examination report.
Categories
of Current
Problems
Four other categories are used to identify credits
that currently exhibit transfer-risk problems.
However, for borrowers in these categories the
committee often distinguishes between credit related to trade financing and credit for other
purposes because even countries in severe economic difficulty usually give priority to servicing
their international trade. Once credits are placed
in one of these categories, a more favorable
evaluation is not applied until the country has
demonstrated a sustained ability to service its
debts in an orderly manner. Its economic position, especially with respect to its external accounts, must also show improvement.
The first three categories are various levels of
"classification," and they cover the loans subject to the more serious transfer risks.
The first category of classification, "losses,"
applies to loans to borrowers in countries that
have repudiated their obligations to banks, the
International Monetary Fund, or other lenders,
257
or in countries whose payment records and economic conditions have deteriorated to the point
that any payment is unlikely. The net carrying
value of such loans must be reduced to zero.
The second category of classification, "value
impaired," covers loans that the lender should
not carry at face value. Loans to borrowers in a
country with protracted arrearages, as indicated
by at least two of the following conditions,
receive this evaluation: the country of the borrower has not paid full interest for at least six
months; it has not complied with an IMF-supported or similar program and has no immediate
prospects for doing so; it has not met its obligations on rescheduled debt for one year or more;
or it has no definite prospect for an orderly
restoration of debt service.
When an asset receives this classification, the
agencies require the lender either to charge off a
certain percentage of the original claim or to
establish an equivalent specific reserve, called an
allocated transfer-risk reserve, that is not considered part of bank capital when measuring capital
adequacy. The ratio of this reserve has ranged
from 10 percent to 100 percent.
The least serious of the classifications is "substandard." It applies to loans to borrowers in
countries that have not complied fully with their
external debt obligations, have not adopted satisfactory reform programs, and have not negotiated a viable rescheduling agreement with their
lending banks and appear unlikely to do so.
A final category of transfer-risk problems is
labeled "other transfer-risk problems." Credits
are placed in this category when transfer-risk
problems have prevented borrowers in the country from fulfilling their obligations to service
external debt, as evidenced by arrearages, forced
restructurings, or rollovers. The country is, however, taking steps to restore debt service through
economic reforms, which are usually part of an
IMF-supported program. Two other kinds of
credits fall into this category: those that are being
serviced as scheduled but on which an interruption is deemed imminent; and those that have
previously been categorized in one of the three
classifications just described but for which classification is no longer warranted in light of recent
improvements in debt-service performance.
Such loans are ones that are viewed as subject to
258
Federal Reserve Bulletin • April 1989
more than normal risks, but not enough to be
"classified."
Implementation
Examiners use the evaluations of transfer risk by
the Interagency Country Exposure Review Committee in judging the overall quality of a bank's
assets. They must also consider commercial risk
factors. If the examiner believes that the business risks a commercial borrower poses dictate a
classification more severe than the transfer risk
does, then that more severe classification is
applied. After this adjustment, classified foreign
loans are added to classified domestic loans as
part of the process of determining the overall
quality of the bank's assets and the adequacy of
its capital and reserves.
Examiners may also comment in their reports
about a bank's concentration of exposure to a
particular country relative to the bank's capital
funds. They are required to do so if lending to a
country designated as "weak" for transfer-risk
purposes exceeds 10 percent of the bank's total
capital or if, for a "moderately strong country,"
the exposure exceeds 15 percent of capital. They
do not ordinarily comment on exposures to borrowers in "strong" countries.
These examination comments consist of two
paragraphs. The first contains a brief statement
on conditions prevailing in the country and on
the country's performance under any IMF-supported program. The interagency committee prepares this paragraph. The examiner prepares the
second paragraph. It describes the nature of the
bank's exposure (such as maturities and types of
borrowers) and identifies trends in that exposure.
When it is relevant to do so, the examiner may
compare the bank's exposure with that of other
banks (without revealing identities) and may also
discuss the bank's plans for lending to the country.
Identifying and commenting on concentrations
of credit to borrowers in any one country are
important elements of bank supervision in the
United States. When appropriate, the comments
should prompt senior management and the
bank's board of directors to review their lending
policies and exposures. In some cases, the bank
may revise its strategy about the nature and
amount of lending to borrowers in such a country. If an examiner determines that the exposure
is particularly high (relative to risk factors), or
that the management of international risk poses
other problems, he or she may call attention to
those findings in the summary of the examination
and also in the letter transmitting the examination report. In that case, the bank's board of
directors is required to review and formally respond to the examiner's concerns.
Examiners also evaluate the procedures the
bank uses to manage and control its international
lending program. Specifically, they review three
aspects of the bank's systems: (1) the measurement and monitoring of country risk; (2) the
procedures for establishing and changing limits
on lending to any one country; and (3) the
procedures for evaluating overall country risk.
Any material deficiencies in these areas are also
criticized.
CONCLUSION
The approach the federal bank regulatory agencies take to evaluating international lending integrates concerns about transfer risks into the
overall evaluation of a bank. The Interagency
Country Exposure Review Committee enables
the agencies to centralize decisionmaking, ensure uniform treatment of foreign lending, and
conduct an efficient supervisory review of transfer risks. The related examination procedures
ensure that both the supervisory agencies and
bank management recognize significant transfer
risks when evaluating concentrations and the
overall condition of the bank.
•
259
Treasury and Federal Reserve
Foreign Exchange Operations
This quarterly report, covering the period November 1988 through January 1989, provides
information on Treasury and System foreign
exchange operations. It was presented by Sam
Y. Cross, Manager of Foreign Operations of the
System Open Market Account and Executive
Vice President in charge of the Foreign Group of
the Federal Reserve Bank of New York. Christopher Rude was primarily responsible for preparation of the report.1
The dollar moved lower in November, continuing the decline against most major currencies that
had begun in late September. The dollar then
gradually found support at the end of November
and recovered through most of December and
January to return to levels that had prevailed in
the autumn. The U.S. monetary authorities intervened to resist the dollar's decline in November and early December and to resist the dollar's
rise in January.
The reversal of the dollar's downward momentum during the period reflected shifts in the
market's assessment of the strength of the U.S.
economy, of the prospects for exchange rate and
monetary policies in the United States and elsewhere, and of the effectiveness of the U.S.
administration in dealing promptly with pressing
economic issues.
THE DOLLAR ' s DECLINE IN
NOVEMBER
When the three-month period opened in November, market sentiment toward the dollar was
decidedly negative. With statistics released in
October suggesting that U.S. economic expan1. The charts for the report are available on request from
Publications Services, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551.
sion might be moderating, market participants
assumed that U.S. monetary policy would not be
tightened further. They expected that the interest
differentials that had attracted inflows into dollardenominated assets might not continue to be so
favorable. Moreover, concerns about the pace of
international adjustment had been aroused by
recent trade figures. Not only had the trade
surpluses of Germany and Japan showed renewed strength, but also the U.S. trade figures
released in mid-October showed that the U.S.
trade deficit had widened in August. Market
participants began to doubt that the substantial
trade improvement the United States had experienced during early 1988 would continue. In
addition, market participants expressed growing
impatience with the lack of progress being made
in reducing the U.S. fiscal deficit and with what
seemed to be a lack of urgency given to the issue
during the 1988 election campaign.
The dollar's decline through October gained
momentum late in the month, especially against
the yen. Some Japanese investors sold dollars to
protect the yen value of their assets against a
further drop in the dollar, and many Japanese
exporters hedged their dollar receivables well
into 1989. The Japanese currency benefited, too,
from a favorable market assessment of the ease
with which the Japanese economy had shifted
from an emphasis on external demand to one on
domestic demand, as well as from Japan's ability, as a major oil importer, to benefit from
declining oil prices.
By the beginning of November, the dollar had
given up most of its midyear gain against the yen
to trade at ¥125.65. The U.S. monetary authorities continued the intervention operations
started at the end of October to counter downward pressure on the dollar. These operations
involved purchases totaling $350 million against
yen during the first two days of November.
260 Federal Reserve Bulletin • April 1989
1. Federal Reserve reciprocal currency arrangements
Millions of dollars
Institution
Amount of
facility,
January 31, 1989
Austrian National Bank
National Bank of Belgium
Bank of Canada
National Bank of Denmark
Bank of England
Bank of France
German Federal Bank
Bank of Italy
Bank of Japan
250
1,000
2,000
250
3,000
2,000
6,000
3,000
5,000
Bank of Mexico
Netherlands Bank
Bank of Norway
Bank of Sweden
Swiss National Bank
700
500
250
300
4,000
Bank for International Settlements
Dollars against Swiss francs
Dollars against other authorized European
currencies
Total
600
1,250
30,100
At the time of the presidential election in the
United States, sentiment toward the dollar became even more negative after comments by
foreign officials brought the U.S. budget deficit
issue back onto center stage. Market participants
questioned whether a new administration could
successfully negotiate a budget compromise with
a Congress controlled even more than before by
the opposition party. Market participants were
also skeptical that the Group of Seven (G-7)
countries would remain committed to exchange
rate stability after additional comments from
abroad indicated that other countries' intervention operations to support the dollar might come
into conflict with the efforts of the G-7 to keep
their own domestic inflation rates under control.
The dollar continued to come under selling pressure, and, in the period from November 9
through November 16, the U.S. monetary authorities purchased another $625 million against
yen in coordination with the Bank of Japan. U.S.
and other G-7 officials also made statements
expressing continuing official commitment to exchange rate stability.
Although the dollar benefited temporarily from
these actions, it remained under pressure during
the rest of November. The release of October
U.S. retail sales and industrial production figures
indicating that economic growth in the United
States continued to be strong, as well as a rise in
short-term dollar interest rates, had little positive
impact on market sentiment. The U.S. trade
report on November 16, showing that the trade
deficit had narrowed in September and suggesting that the market's earlier concerns about the
pace of international adjustment might have been
exaggerated, was also largely ignored.
Near the middle of the month, the selling
pressure on the dollar intensified, and the U.S.
monetary authorities broadened their intervention operations to include the mark. Between
November 17 and December 2, the U.S. authorities purchased a total of $630 million against
marks and a further $795 million against yen in a
series of intervention operations that were conducted in cooperation with the Bank of Japan,
the Bundesbank, and other foreign central banks.
The dollar reached its lows of the reporting
period on November 25 at ¥120.65 against the
yen and DM1.7085 against the mark. At these
levels, the dollar was more than 4 percent lower
against the yen and the mark from its level at
the beginning of November and roughly IIV2
percent lower than its autumn highs. Although
the dollar had declined by comparable amounts
against both currencies, against the yen it was
only marginally higher than its record low
of ¥120.20, reached on January 4, 1988.
STABILIZATION AND
IN DECEMBER
RECOVERY
Market participants gradually came to believe
that the G-7 monetary authorities were still committed to exchange rate stability. The authorities
were seen as showing a consistent presence in
the exchange market.
At the same time, market participants sensed
from policy decisions taken by foreign central
banks—including an increase of 1 percentage
point in base lending rates in the United Kingdom on November 25—that containing potential
inflationary pressures worldwide was a policy
priority. Against this background, U.S. economic statistics that had been released earlier
and that revealed unexpected strength in the
economy were seen in a different light. Market
participants were also impressed by the strong
labor market statistics for November released in
Treasury and Federal Reserve Foreign Exchange Operations
261
2. Drawings and repayments by foreign central banks under special swap arrangement with the U.S. Treasury1
Millions of dollars; drawings or repayments ( - )
Central bank drawing
on the U.S. Treasury
Central Bank of the Argentine Republic
National Bank of Yugoslavia
Central Bank of Brazil
Amount of
facility
Outstanding,
October 31,
1988
November
December
January
Outstanding,
January 31,
1989
265.0
50.0
250.0
0
0
0
47.7
*
*
0
-46.9
.8
1. Data are on a value-date basis.
*No facility.
early December. Noting that short-term dollar
interest rates had firmed during November, they
came to believe that the Federal Reserve might
soon tighten its stance again, either via money
market operations or by raising the discount rate.
In addition, market participants were impressed with the extent to which the dollar rallied
when a speech by Soviet General Secretary
Gorbachev, at the United Nations on December
7, proposing Soviet arms reductions, was temporarily seen as providing scope for the United
States to reduce its budget deficit through defense spending cuts. Even though the euphoria of
the moment quickly passed, the episode created
a renewed sense of two-way market risk.
Under these circumstances, the foreign exchange market slowly shed its negative view of
the dollar during the rest of December. Many
market participants, who during October and
November had postponed purchasing dollars for
commercial and investment purposes, began to
reenter the market. At the same time, investors
who had previously increased their hedging of
dollar exposures now lowered their hedge ratios,
taking note of the widening of interest rate differentials favoring dollar assets and the increased
costs of hedging. The dollar's gradual recovery
did not waiver in mid-December when the Bundesbank increased its Lombard rate by Vi percentage point, and several other European central banks also announced increases in their key
lending rates. Instead, with the year-end approaching, demand for dollars from bank customers and by bank dealers themselves, who
moved to square positions in increasingly thin
markets, kept the dollar relatively well bid. Although dealers were skeptical that the dollar's
firmer tone would carry over into the new year,
the dollar closed the year at DM1.7725 against
the mark and ¥124.85 against the yen, V/i percent higher than its lows of late November.
THE DOLLAR
'S RISE IN
JANUARY
In January, sentiment toward the dollar grew
bullish. Actions and statements in the political
sphere contributed to a sense of optimism about
the new administration. Signs of Federal Reserve
tightening early in the month added to the dollar's upward momentum. As January progressed,
several reports showing continued strength in the
U.S. economy, together with Chairman Greenspan's reiteration in congressional testimony of
the Federal Reserve's concern about the dangers
of inflation, supported expectations that dollar
interest rates would continue to firm. Also, the
market interpreted certain statements by foreign
officials as implying a readiness of the G-7 industrial nations to tolerate a further appreciation of
the dollar. In this atmosphere, market participants shrugged off the report on January 18 of a
sharp rise in the U.S. trade deficit in November.
As the dollar moved up through levels not seen
for several months, market participants continued to reduce their dollar hedges and reverse
commercial leads and lags. Moreover, investors
noted the relatively good performance of the
dollar through 1988, and reports circulated of
widespread Japanese and European interest in
buying dollar-denominated securities. In the process, bidding for dollars became at times quite
strong. The force of the dollar's rise was directed
particularly against the German mark and other
European currencies.
By mid-January the dollar had moved up to
DM1.8713 against the mark and ¥128.52 against
the yen. On January 19, the Bundesbank an-
262 Federal Reserve Bulletin • April 1989
3, Net profits or losses ( - ) on U.S. Treasury and
Federal Reserve current foreign exchange operations, November 1, 1988-January 31, 19891
Millions of dollars
Item
Valuation profits and losses
on outstanding assets
and liabilities as of
January 31, 1989
Federal
Reserve
U.S. Treasury
Exchange
Stabilization
Fund
155.3
155.4
1,004.8
789.4
1. Data are on a value-date basis.
nounced a further increase of Vi percentage point
in its Lombard rate and a similar increase in its
discount rate. Several other European central
banks also raised key lending rates. The rate
increases, supported by coordinated intervention, injected a note of caution in the market,
and, for a time, the dollar's upward momentum
stalled. But the dollar soon resumed its rise to
reach its period highs of DM1.8795 against the
mark and ¥130.55 against the yen on January 31.
It thus closed the three-month reporting period 5
percent higher against the mark and V/i percent
higher against the yen relative to its levels at the
start of November. On a trade-weighted basis, as
measured by the staff of the Federal Reserve
Board, it was 4 percent higher on balance.
As the dollar moved up in January, the U.S.
monetary authorities intervened to counter the
rise. From January 6 to January 27, the U.S.
authorities intervened on 12 days to sell a total of
$1,880 million against marks in coordination with
the Bundesbank and other foreign central banks.
In summary, for the period as a whole, the
U.S. monetary authorities purchased a total of
$2,400 million during November and December—$1,770 million against Japanese yen and
$630 million against German marks—and sold
$1,880 million against German marks during January. The U.S. Treasury, through the Exchange
Stabilization Fund (ESF), and the Federal Re-
serve participated equally in the financing of all
intervention operations.
The ESF also received $62.2 million equivalent
of Japanese yen in principal repayments and
interest payments under the Supplementary Financing Facility of the International Monetary
Fund.
For the November-January period, the Federal Reserve and the Treasury realized profits of
$155.3 million and $155.4 million respectively.
As of the end of January 1989, cumulative bookkeeping or valuation gains on outstanding foreign
currency balances were $1,004.8 million for the
Federal Reserve and $789.4 million for the ESF.
These valuation gains represent the increase in
the dollar value of outstanding currency assets
valued at end-of-period exchange rates, compared with the rates prevailing at the time the
foreign currencies were acquired.
The Federal Reserve and the ESF regularly
invest their foreign currency balances in a variety
of instruments that yield market-related rates of
return and that have a high degree of quality and
liquidity. A portion of the balances is invested in
securities issued by foreign governments. As of
the end of January 1989, holdings of such securities by the Federal Reserve amounted to
$1,457.9 million equivalent, and holdings by the
ESF amounted to the equivalent of $1,821.3
million.
In other operations, on November 22, 1988,
the Central Bank of the Argentine Republic drew
$79.5 million from a $265 million swap facility
with the ESF. This facility was provided as part
of a $500 million short-term financing package
arranged in October 1988 by a number of monetary institutions. Argentina repaid $31.8 million
on November 23, 1988, and $46.9 million on
January 26, 1989.
ESF short-term facilities with the Central
Bank of Brazil and the National Bank of Yugoslavia expired in November 1988. There was no
activity in either facility during the period.
263
Staff Studies
The staff members of the Board of Governors of
the Federal Reserve System and of the Federal
Reserve Banks undertake studies that cover a
wide range of economic and financial subjects.
From time to time the results of studies that are
of general interest to the professions and to
others are summarized in the FEDERAL RESERVE
BULLETIN.
The analyses and conclusions set forth are
those of the authors and do not necessarily
STUDY
indicate concurrence by the Board of Governors,
by the Federal Reserve Banks, or by the members of their staffs.
Single copies of the full text of each of the
studies or papers summarized in the BULLETIN
are available without charge. The list of Federal
Reserve Board publications at the back of each
BULLETIN includes a separate section entitled
"Staff Studies" that lists the studies that are
currently available.
SUMMARY
M2 PER UNIT OF POTENTIAL
Jeffrey J. Hallman,
GNP AS AN ANCHOR FOR THE PRICE
Richard D. Porter, and David H. Small—Staff,
LEVEL
Board of
Governors
Prepared as a staff study in the winter of 1988-89
The velocities of the monetary aggregates have
been quite variable during the current decade,
leading some economists to conclude that the
monetary authority cannot use any of the aggregates as a reliable anchor for the price level. This
study questions that conclusion as it applies to
M2: its velocity relative to the gross national
product, while somewhat variable in the short
run, has shown a flat trend over most of the
twentieth century. This stability has likely
stemmed in recent years from the flexibility of
most rates paid on M2 deposits and, in earlier
decades, from the flexible administration of Regulation Q and the introduction of new instruments. As a consequence of this stability, a
comparatively reliable long-run link between M2
and the price level exists.
The study's analysis of M2 and prices starts
with the question, What long-run price level will
current holdings of M2 support? The long-run
equilibrium price level, P*, is defined as being
consistent with the current value of M2 when V2
is at its long-run level, V*, and when real GNP is
at its long-run potential level, Q*. Algebraically,
»« _ M 2 * V*
Q*
'
Thus, P* is proportional to M2 per unit of
potential output. Operationally, the mean of V2
since 1955:1 is used as the estimate of V*.
Discrepancies between the long-run equilibrium price level, P*, and the actual price level, P,
drive the inflation process. The relationship is
best modeled as an equation in which, with a lag,
P - P* determines the change in the inflation rate
(the acceleration or deceleration of the price
level). If P* is greater than P, then the current
level of M2, if maintained, will eventually yield
an acceleration of prices. If P* is below P, then
maintaining the current level of M2 will eventually yield a deceleration.
This approach to forecasting inflation allows
one to disregard forecasts of interest rates, ex-
264
Federal Reserve Bulletin • April 1989
change rates, fiscal policy, real output, and the
like. It requires estimates of the future courses of
only M2, potential real GNP, and long-run velocity and thus provides a framework in which the
future price level is determined by the level of
M2.
The model forecasts well over periods of one
year or longer, even outside various periods over
which it has been estimated. In particular, the
model outperforms a simple version of the more
traditional approach that relates changes in inflation to the "output gap." Moreover, the model's
coefficients are stable over a 33-year period.
Over periods of less than one year, factors
outside the model—wage trends, interest rates,
foreign exchange movements, and the gap between real and potential output—are of great
importance in the inflation process and remain
essential to the assessment of short-run inflationary developments. Another limitation of the
approach concerns the future long-run value of
V2; permanent shifts in V2 are always a possibility, especially if significant progress is made
toward price stability and, correspondingly,
nominal interest rates decline markedly.
But the potential shortcomings of M2 should
not deflect attention from the need for an analytic
framework within which to formulate a long-term
policy strategy and evaluate progress toward
long-run price stability. In this regard, P* appears to be a simple empirical guidepost that can
help the monetary authorities track the implications of short- and intermediate-term policies for
achieving the long-term objective of stable
prices.
•
265
Industrial Production
Released for publication February 15
sumer goods, construction supplies, and durable
materials. In contrast, output of motor vehicles
fell sharply in January, retracing some of the
large increases registered in December. At 141.1
percent of the 1977 average, the total index in
January was 5.0 percent higher than it was a year
earlier.
In market groups, the output of consumer
goods rose in January, primarily reflecting wide-
Industrial production increased 0.3 percent in
January, after having risen a revised 0.5 percent
in December. Total manufacturing output posted
another gain of 0.5 percent in January, while
production at mines and utilities declined.
Among market groups, the most significant increases in January occurred in nondurable con-
Ratio scale, 1977=100
160
Total Index
Products
140
120
Materials
100
Materials
Nondurable^ Durable
Energy
Business
supplies
Intermediate
Products
—
— -—^
Construction
supplies
Final Products
Motor Vehicles and Parts
Defense and
space
150
200
180
135
120
—
Business
equipment
160
-
140
90
120
Consumer goods
100
75
60
80
1983
1985
1987
All series are seasonally adjusted. Latest series: January.
1989
1983
1985
1987
1989
266 Federal Reserve Bulletin • April 1989
1977 = 100
Percentage change from preceding month
Sept.
Jan.
Dec.
1989
1988
1989
Group
Oct.
Nov.
Dec.
Jan.
Percentage
change,
Jan. 1988
to Jan.
1989
Major market groups
Total industrial production
140.6
141.1
.1
.6
.3
.5
.3
5.0
Products, total
Final products
Consumer goods
Durable
Nondurable
Business equipment..
Defense and space
Intermediate products..
Construction supplies
Materials
149.4
147.6
138.0
132.1
140.2
162.0
182.3
155.4
141.4
128.7
150.1
148.2
138.9
132.2
141.3
162.5
181.9
156.8
143.4
128.7
.1
.0
-.1
.5
-.3
.4
-.2
.4
.2
.0
.5
.4
1.2
2.4
.7
-.4
-.3
.7
1.2
.8
.2
.2
.2
-.1
.3
.6
-.8
.1
.7
.6
.7
.6
1.0
2.2
.6
.5
-.1
.8
.3
.3
.5
.4
.6
.1
.8
.3
-.2
.9
1.4
.0
5.2
5.0
5.8
8.6
4.9
7.5
-4.6
5.8
4.8
4.7
.5
.5
.6
.1
.9
.5
.3
.7
-1.2
-.8
5.7
6.2
5.1
.0
1.7
Major industry groups
146.6
146.0
147.6
104.5
114.1
Manufacturing
Durable
Nondurable
Mining
Utilities
.3
.4
.1
.0
-4.0
147.4
146.5
148.6
103.3
113.2
.6
.6
.7
-.6
.8
.4
.5
.3
1.3
-.7
NOTE. Indexes are seasonally adjusted.
spread gains in nondurable consumer goods.
Automobile assemblies decreased to an annual
rate of 7.5 million units from a rate of 7.9 million
units in December; however, the output of trucks
for consumer use continued to rise. The output of
total business equipment, which decelerated noticeably in the fourth quarter of 1988, rose 0.3
percent in January. The composition of the gain
in production in January differed significantly
from that of recent months. Transit equipment,
which posted a huge increase in the fourth quarter of last year, fell sharply in January as the
output of motor vehicles for business use
Total industrial production—Revisions
Estimates as shown last month and current estimates
Index (1977=100)
Month
Oct
Nov
Dec
Jan
Percentage change
from previous
months
Previous
Current
Previous
Current
139.3
139.8
140.2
139.4
139.9
140.6
141.1
.5
.4
.3
.6
.3
.5
.3
dropped. However, a pickup in the production of
both manufacturing and commercial equipment
more than offset the decline in transit equipment.
The output of materials was unchanged, on balance, in January. Both durable and nondurable
materials posted gains, as steel and chemicals
advanced. But output of energy materials decreased nearly 2 percent, reflecting declines in
coal mining, crude oil extraction, and electricity
generation.
In industry groups, within manufacturing, production of all major industries, except transportation equipment and paper, rose in January.
Production at utilities was down 0.8 percent,
mainly reflecting the unusually mild weather in
January, and mining output declined 1.2 percent.
Capacity utilization in total industry for January was estimated at 84.4 percent, the same as in
December. In manufacturing, capacity utilization
for January was 84.8 percent, 0.2 percentage
point higher than it was in December, and 2.1
percentage points higher than it was a year
earlier. Detailed data for capacity utilization are
shown separately in "Capacity Utilization,"
Federal Reserve monthly statistical release, G3.
267
Statements to Congress
Statement by Alan Greenspan, Chairman, Board
of Governors of the Federal Reserve System,
before the Committee on Ways and Means, U.S.
House of Representatives, February 2, 1989.
I am pleased to be here today to discuss corporate restructuring and the need for reducing the
federal budget deficit, issues raised in your letter
of invitation.
CORPORATE RESTRUCTURING
LEVERAGING
AND
The spate of mergers, acquisitions, leveraged
buyouts (LBOs), share repurchases, and divestitures in recent years has major implications for
the American economy. While the evidence suggests that the restructurings of the 1980s probably are improving, on balance, the efficiency of
our economy, the worrisome and possibly excessive degree of leveraging associated with this
process could create a set of new problems for
the financial system.
Corporate restructuring is not new to American
business. It has long been a feature of our enterprise
system, a means by which firms adjust to everchanging product and resource markets and to perceived opportunities for gains from changes in management and management strategies.
However, the 1980s have been characterized
by features not present in previous episodes. The
recent period has been marked not only by
acquisitions and mergers but also by significant
increases in leveraged buyouts, divestitures, asset sales, and share repurchase programs. In
many cases, recent activity reflects the breakup
of the big conglomerate deals packaged in the
1960s and 1970s. Also, the recent period has been
characterized by the retirement of substantial
amounts of equity (more than $500 billion since
1983) mostly financed by borrowing in the credit
markets.
The accompanying increase in debt has resulted in an appreciable rise in leverage ratios for
many of our large corporations. Aggregate book
value debt-equity ratios, based on balance sheet
data for nonfinancial firms, have increased
sharply in the 1980s, moving outside their range
in recent decades, although measures based on
market values have risen more modestly.
Along with this debt expansion, the ability of
firms in the aggregate to cover interest payments
has deteriorated. The ratio of gross interest payments to corporate cash flow before interest
provision is currently about 35 percent, close to
the 1982 peak when interest rates were much
higher and profits were weak owing to the recession. Lately, profits have been fairly buoyant;
the current deterioration has been due to heavier
debt burdens.
A measure of credit quality erosion is suggested by an unusually large number of downgradings of corporate bonds in recent years. The
average bond rating of a large sample of firms has
declined fairly significantly since the late 1970s,
from A+ to A - .
To fashion an appropriate policy response, if
any, to this extraordinary restructuring-LBO
phenomenon, there are some key questions that
must be answered: What is behind the corporate
restructuring movement? Why is it occurring
now, in the middle and late 1980s, rather than in
some earlier time? Why has it involved such a
broad leveraging of corporate balance sheets?
And finally, has it been good or bad for the
American economy?
The 1980s has been a period of dramatic economic changes: large swings in the exchange
value of the dollar, with substantial consequences for trade-dependent industries; rapid
technological progress, especially in automation
and telecommunications; rapid growth in the
service sector; and large movements in real interest rates and relative prices. Clearly, such
changes in the economic environment imply ma-
268 Federal Reserve Bulletin • April 1989
jor, perhaps unprecedented, shifts in the optimal
mix of assets at firms—owing to corresponding
shifts in synergies—and new opportunities for
improving efficiency. Some activities need to be
shed or curtailed, and others added or beefed up.
Moreover, the long period of slow productivity
growth in the 1970s may have partly exacerbated
the buildup of a backlog of inefficient corporate
practices.
When assets become misaligned or less than
optimally managed, there is clearly an increasing
opportunity to create economic value by restructuring companies, restoring what markets perceive as a more optimal mix of assets. But
restructuring requires corporate control. And
managers, unfortunately, often have been slow in
reacting to changes in their external environment, some more so than others. Hence, it
shouldn't be a surprise that, in recent years,
unaffiliated corporate restructurers, some call
them corporate raiders, have significantly bid up
the control premiums over the passive investment value of companies that are perceived to
have suboptimal asset allocations. If a company
has an optimal mix and is appropriately managed, there is no economic value to be gained
from restructuring and, hence, no advantage in
obtaining control of a company for such purposes. In that case, there is no incentive to bid up
the stock price above the passive investment
value based on its existing, presumed optimal,
mix of assets. But in an economy knocked partially off kilter by real interest rate increases and
gyrations in foreign exchange and commodity
prices, there emerge significant opportunities
for value-creating restructuring at many companies.
This presumably explains why common stock
tender offer prices of potential candidates for
restructuring have risen significantly during the
past decade. Observed stock prices generally
(though not always) reflect values of shares as
passive investments. But there can be, for any
individual company, two or more prices for its
shares, reflecting the degree of control over a
company's mix of assets.
Tender-offer premiums—which represent the
price that active investors are willing to pay for
corporate control—ranged from 13 percent to 25
percent in the 1960s, but have moved to 45
percent and higher during the past decade, underscoring the evident increase in the perceived
profit to be gained from corporate control and
restructuring.
Interest in restructuring also has been spurred
by the apparent increased willingness and ability
of corporate managers and owners to leverage
balance sheets. The gradual replacement of managers who grew up in the Depression and developed a strong aversion to bankruptcy risk probably accounts for some of the increased
proclivity to issue debt now.
Moreover, innovations in capital markets have
made the increased propensity to leverage feasible. It is now much easier than it used to be to
mobilize tremendous sums of debt capital for
leveraged purchases of firms. Improvements in
the loan-sale market among banks and the
greater presence of foreign banks in U.S. markets have greatly increased the ability of the
banking sector to participate in merger and acquisition transactions. The phenomenal development of the market for low-grade corporate debt,
so-called junk bonds, also has enhanced the
availability of credit for a wide variety of corporate transactions. The increased liquidity of this
market has made it possible for investors to
diversify away firm-specific risks by building
portfolios of such debt.
The tax benefits of restructuring activities are,
of course, undeniable, but this is not a particularly new phenomenon. Our tax system has long
favored debt finance by taxing the earnings of
corporate debt capital only at the investor level,
while earnings on equity capital are taxed at both
the investor and corporate levels. There have
been other sources of tax savings in mergers that
do not depend on debt finance, involving such
items as the tax basis for depreciation and foreign
tax credits. And taxable owners benefit when
firms repurchase their own shares, using what is,
in effect, a tax-favored method of paying cash
dividends. In any event, the recent rise in restructuring activity is not easily tied to any
change in tax law.
Evidence about the economic consequences of
restructuring is beginning to take shape, but
much remains conjectural. It is clear that the
markets believe that the recent restructurings are
potentially advantageous. Estimates range from
Statements to Congress
$200 billion to $500 billion or more in paper gains
to shareholders since 1982. Apparently, only a
small portion of that has come at the expense of
bondholders. These gains are reflections of the
expectations of market participants that the restructuring will, in fact, lead to a better mix of
assets within companies and greater efficiencies
in their use. This, in turn, is expected to produce
marked increases in future productivity and,
hence, in the value of American corporate business. Many of the internal adjustments brought
about by changes in management or managerial
policies are still being implemented, and it will
take time before they show up for good or ill in
measures of performance.
So far, various pieces of evidence indicate that
the trend toward more ownership by managers
and tighter control by other owners and creditors
has generally enhanced operational efficiency. In
the process, both jobs and capital spending in
many firms have contracted as unprofitable
projects are scrapped. But no clear trends in
these variables are yet evident in restructured
firms as a group. For the business sector, generally, growth of both employment and investment
has been strong.
If what I have outlined earlier is a generally
accurate description of the causes of the surge in
restructurings of the past decade, one would
assume that a stabilization of interest rates, exchange rates, and product prices would slow the
emergence of newly misaligned companies and
opportunities for further restructuring. Such a
development would presumably lower control
premiums and reduce the pace of merger, acquisition, and LBO activity.
This suggests that the most potent policies for
defusing the restructuring-LBO boom over the
long haul are essentially the same macroeconomic policies toward budget deficit reduction and
price stability that have been the principal policy
concerns of recent years.
Whatever the trends in restructuring, we cannot ignore the implications of the associated
heavy leveraging for broad-based risk in the
economy. Other things equal, greater use of debt
makes the corporate sector more vulnerable to
an economic downturn or a rise in interest rates.
The financial stability of lenders, in turn, also
may be affected. How much is another question.
269
The answer depends greatly on which firms are
leveraging, which financial institutions are lending, and how the financings are structured.
Most of the restructured firms appear to be in
mature, stable, noncyclical industries. Restructuring activity has been especially prevalent in
the trade, services, and, more recently, the food
and tobacco industries. For such businesses, a
substantial increase in debt may raise the probability of insolvency by only a relatively small
amount. However, roughly two-fifths of merger
and aquisition activity, as well as LBOs, have
involved companies in cyclically sensitive industries that are more likely to run into trouble in the
event of a severe economic downturn.
Lenders to leveraged enterprises have been, in
large part, those that can most easily absorb
losses without major systemic consequences.
They include mutual funds, pension funds, and
insurance companies, which generally have diversified portfolios and have traditionally invested in securities involving some risk, such as
equities. To the extent that such debt is held by
individual institutions that are not well diversified, there is some concern. At the Federal
Reserve, we are particularly concerned about the
increasing share of restructuring loans made by
banks. Massive failures of these loans could have
broad ramifications.
Generally, we must recognize that the line
between equity and debt has become increasingly fuzzy in recent years. Convertible debt has
always had an intermediate character, but now
there is almost a continuum of securities varying
in their relative proportions of debt and equity
flavoring. Once there was a fairly sharp distinction between being unable to make interest payments on a bond, which frequently led to liquidation proceedings, and merely missing a
dividend. Now the distinction is smaller. Outright defaults on original issue high-yield bonds
have been infrequent to date, but payment difficulties have led to more frequent exchanges of
debt that reduce the immediate cash needs of
troubled firms. Investors know when they purchase such issues that the stream of payments
received may well differ from the stream promised, and prices tend to move in response to
changes in both debt and equity markets. In
effect, the yields on debt capital rise toward that
270 Federal Reserve Bulletin • April 1989
of equity capital when scheduled repayments are
less secure.
In view of these considerations, and the very
limited evidence on the effects of restructuring at
the present time, it would be unwise to restrict
arbitrarily corporate restructuring. We must resist the temptation to seek to allocate credit to
specific uses through the tax system or through
the regulation of financial institutions. Restrictions on the deductibility of interest unavoidably
involve an important element of arbitrariness,
one that will affect not only those types of
lending intended but other types as well. Moreover, foreign acquirers could be given an artificial edge to the extent that they could avoid these
restrictions. Also, the historical experience with
various types of selective credit controls clearly
indicates that, in time, borrowers and lenders
find ways around them.
All that does not mean that we should do
nothing. The contribution of our tax structure to
corporate leveraging warrants attention. The
double taxation of earnings from corporate equity capital has added to leveraging, and thus
debt levels are higher than they need, or should,
be. Our options for dealing with this distortion
are, unfortunately, constrained severely by the
federal government's still serious budget deficit
problems, a matter that I will turn to in a moment. One straightforward approach to this distortion, of course, would be to substantially
reduce the corporate income tax. Alternatively,
partial integration of corporate and individual
income taxes could be achieved by allowing
corporations a deduction for dividends paid or by
giving individuals credit for taxes paid at the
corporate level. But these changes taken alone
would result in substantial revenue losses; a
rough estimate of IRS collections from taxing
dividends is in the range of $20 billion to $25
billion annually.
Dangers of risk to the banking system associated with high debt levels also warrant attention.
As I have noted, the Federal Reserve, in its role
as a supervisor of banks, has particular concerns
in this regard. In 1984, the Board issued supervisory guidelines for assessing LBO-related
loans, which are set forth in an attachment to my
text. 1 These guidelines emphasized that the circumstances associated with highly leveraged
deals require that creditors exercise credit judgment with special care, assessing those risks that
are firm-specific as well as those common to all
highly leveraged firms. The Federal Reserve is
currently in the process of reviewing guidelines
regarding the evaluation of bank participation in
highly leveraged financing transactions; we anticipate that this review will be completed
shortly.
THE BUDGET DEFICIT AND THE ECONOMY
The remainder of my prepared remarks will
concentrate on the budget deficit and the corrosive impact it is having on the economy.
It is beguiling to contemplate the strong economy of recent years in the context of very large
deficits and to conclude that the concerns about
the adverse effects of the deficit on the economy
have been misplaced. But this argument is fanciful. The deficit already has begun to eat away at
the foundations of our economic strength. And
the need to deal with it is becoming ever more
urgent. To the extent that some of the negative
effects of deficits have not as yet been felt, they
have been merely postponed, not avoided. Moreover, the scope for further such avoidance is
shrinking.
To some degree, the effects of the federal
budget deficits over the past several years have
been muted by two circumstances, both of which
are currently changing rapidly. One was the
rather large degree of slack in the economy in the
early years of the current expansion. This slack
meant that the economy could accommodate
growing demands from both the private and
public sectors. In addition, to the extent that
these demands could not be accommodated from
U.S. resources, we went abroad and imported
them. This can be seen in our large trade and
current account deficits. By now, however, the
slack in the U.S. economy has diminished substantially. And as inflows of foreign saving are
reduced along with our trade deficit, other
sources of saving must be found, or demands for
1. The attachments to this statement are available on
request from publications Services, Board of Governors of
the Federal Reserve System, Washington, D.C. 20551.
Statements to Congress
saving curtailed. The choices are limited; as will
become clear, the best option for the American
people is a further reduction in the federal budget
deficit, and the need for such reduction is becoming more pressing.
Owing to significant efforts by the executive
branch and the Congress, coupled with strong
economic growth, the deficit has shrunk from 5
percent to 6 percent of gross national product a
few years earlier to about 3 percent of GNP
today. Such a deficit, nevertheless, is still very
large by historical standards. Since World War
II, the actual budget deficit has exceeded 3
percent of GNP only in the 1975 recession period
and in the recent deficit experience beginning in
1982. On a cyclically adjusted or structural basis,
the deficit has exceeded 3 percent of potential
GNP only in the period since 1983.
Government deficits, however, place pressure
on resources and credit markets, only if they are
not offset by saving elsewhere in the economy.
If the pool of private saving is small, federal
deficits and private investment will be in keen
competition for funds, and private investment
will lose.
The U.S. deficits of recent years are threatening precisely because they have been occurring
in the context of private saving that is low by
both historical and international standards. In the
1980s, net personal plus business saving in the
United States has been about 3 percentage points
lower relative to GNP than its average in the
preceding three decades. Internationally, government deficits have been quite common among
the major industrial countries in the 1980s, but
private saving rates in most of these countries
have exceeded the deficits by very comfortable
margins. In Japan, for example, less than 20
percent of its private saving has been absorbed
by government deficits, even though the Japanese general government has been borrowing
almost 3 percent of its gross domestic product in
the 1980s. In contrast, more than half of private
U.S. saving in the 1980s has been absorbed by
the combined deficits of the federal and state and
local sectors.
Under these circumstances, such large and
persistent deficits are slowly but inexorably damaging the economy. The damage occurs because
deficits tend to pull resources away from net
271
private investment, which damps the growth of
the nation's capital stock. This, in turn, has
meant less capital per worker than would otherwise have been the case, and this will surely
engender a shortfall in labor productivity growth
and, with it, a shortfall in growth of the standard
of living.
All else equal, the higher real interest rates
associated with increased borrowing by the Treasury in the 1980s have reduced private investment in the aggregate. Moreover, the higher real
interest rates have shifted the composition of
investment away from long-lived assets, such as
factories, toward computers and other shorterlived equipment. The data also underscore a
recent decline in the average service life of
consumption as well as investment goods and a
systematic tendency for this average to move
inversely with real rates of interest. That is, the
higher are real interest rates, the heavier is the
concentration on short-lived assets.
Not surprisingly, we have already experienced
a disturbing decline in the level of net investment
as a share of GNP. Net investment has fallen to
4.7 percent of GNP in the 1980s from an average
level of 6.7 percent in the 1970s and even higher
in the 1960s. Moreover, it is low, not only by our
own historical standards, but by international
standards as well.
International comparisons of net investment
should be viewed with some caution because of
differences in the measurement of depreciation
and in other technical details. Nevertheless, the
existing data do indicate that total net private and
public investment as a share of gross domestic
product over the period between 1980 and 1986
was lower in the United States than in any of the
other major industrial countries except the
United Kingdom.
It is important to recognize, as I indicated
earlier, that the negative effects of federal deficits
on growth in the capital stock may be attenuated
for a while by several forces in the private sector.
One is a significant period of output growth in
excess of potential GNP growth—such as occurred over much of the past six years—which
undoubtedly boosts sales and profit expectations
and, hence, business investment. Such rates of
output growth, of course, cannot persist, making
this factor inherently temporary in nature.
272 Federal Reserve Bulletin • April 1989
Another factor tending to limit the decline in
investment spending would be any tendency for
saving to respond positively to the higher interest
rates that deficits would bring. The supply of
domestic private saving has some interest elasticity, as people put off spending when borrowing
costs are high and returns from their financial
assets are favorable. But most analysts find that
this elasticity is not sufficiently large to matter
much.
Finally, net inflows of foreign saving can be, as
recent years have demonstrated, an important
addition to saving. In the 1980s, our ability to tap
foreign saving has kept the decline in the gross
investment-GNP ratio, on average, to only moderate dimensions (slightly more than Vi percentage point) compared with the 1970s, while the
federal deficit rose about 2Vi percentage points
relative to GNP. Net inflows of foreign saving
have amounted, on average, to almost 2 percent
of GNP, an unprecedented level.
Looking ahead, the continuation of inflows of
foreign saving at current levels is questionable.
Evidence for the United States and for most
other major industrial nations over the past 100
years indicates that such sizable foreign net
capital inflows have not persisted and, hence,
may not be a reliable substitute for domestic
saving on a long-term basis. In other words,
domestic investment tends to be supported by
domestic saving alone in the long run.
Let me conclude by reiterating that the budget
deficit must be brought down. I do not underestimate the difficult decisions that you must make
if we are to achieve the necessary reduction in
the deficit. But allowing deficits to persist courts
a dangerous corrosion of our economy and risks
potentially significant reductions over time in our
standard of living.
•
Statement by Alan Greenspan, Chairman, Board
of Governors of the Federal Reserve System,
before the Committee on Banking, Housing,and
Urban Affairs, U.S. Senate, February 21, 1989.
reserves slightly further, adding to the easing put
in place immediately after October 19; at the
same time we monitored financial and economic
indicators closely for any signs that the economic
expansion was faltering.
Gradually, however, it became clear that the
economic expansion remained well on track and
that market confidence was on the mend. Spending was robust, and dwindling margins of unused
resources as employment and output registered
sizable gains indicated that the balance of risks
was shifting in the direction of higher inflation.
Consequently, the Federal Open Market Committee applied increased restraint to reserve positions in a series of steps beginning in the spring
of 1988 and extending to the current period. In
addition, the discount rate was raised from 6
percent to 6V2 percent in August.
The policy restraint led to an appreciable rise
in short-term market interest rates beginning in
spring 1988. Growth of money moderated over
the year as rates on deposits lagged the rise in
market interest rates. M2 and M3, which were
near the upper ends of their target ranges early in
the year, slowed considerably in subsequent
months and finished the year around the middle
of their annual target ranges of 4 percent to 8
I appreciate this opportunity to discuss with you
recent monetary policy and our plans for the
future. You have received our formal report to
the Congress. 1 This morning, I would like to
summarize the important points of that report
and to place monetary policy in the context of the
overall economic and financial situation.
ECONOMIC AND MONETARY
DEVELOPMENTS IN 1988
Last year was a challenging one for monetary
policy. Early in the year, uncertainties remained
about the impact of the October 1987 worldwide
stock market break on the economic expansion
and financial system. Given these risks, the Federal Reserve increased the availability of bank
1. See "Monetary Policy Report to the Congress," FEDERAL RESERVE BULLETIN, v o l . 75 ( M a r c h 1989), p p . 1 0 7 - 1 9 .
Statements to Congress
percent. Growth of Ml also was restrained by
higher interest rates, slowing to about 4 percent,
while the monetary base grew only a bit less
rapidly than in 1987, as currency continued to
expand at a strong pace. Thus, in both 1987 and
1988, most money measures grew appreciably
more slowly than they had in many years. This
more moderate pace of monetary expansion has
been a necessary aspect of a monetary policy
designed to contain inflation and to promote
price stability and economic growth over time.
Despite tightening money markets, longerterm interest rates have been remarkably stable.
Yields on Treasury bonds, for example, remained in a fairly narrow range around 9 percent
for most of the year and have continued in that
range so far in 1989. Moreover, the stock market
recovered relatively steadily over the year and
into 1989. The performance of the bond and
stock markets in the face of rising short-term
rates seemed to stem from expectations of continued relatively balanced economic expansion in
the United States with inflation pressures not
likely to intensify. U.S. investments looked attractive under these circumstances, and the dollar's average value against major foreign currencies recovered from the late 1987 plunge and was
relatively stable over the course of the year.
The optimism of domestic and foreign investors evident in financial markets reflected the
solid performance of the economy and prospects
for its continuation. Our gross national product
expanded around 3lA percent in 1988, adjusted
for crop losses caused by the drought. Over the
year, payroll employment rose 3.7 million. Since
the economic expansion began in late 1982, employment in the United States has increased
more than 17 million, pushing the unemployment
rate below 5Vz percent, its lowest level since the
mid-1970s. Employment gains in 1987 and 1988
were strong in nearly every major sector of the
American economy, including manufacturing,
construction, trade, and services. Although in
1988 farmers suffered one of their worst crop
losses in this century, the situation in agriculture
remains fundamentally much improved from that
earlier in the 1980s. Industrial production in
manufacturing rose 5V2 percent, bringing average
capacity utilization to the highest level since the
late 1970s. Some industries that had been hit
273
especially hard by the recession of 1981-82 and
by the erosion of international competitiveness
owing to the rise in the value of the dollar now
are considerably improved. Quite a few firms in
those industries are operating essentially flat out
and experiencing notable profit improvement.
However, last year's economic performance
had some disappointing features. The federal
budget deficit remained high and our national
saving low. This contributed to continued large
current account and trade deficits. By keeping
pressure on interest rates, the low rate of saving
also was a factor behind the performance of
business fixed investment last year. Investment
slowed from 1987, especially in the second half of
the year, even in the face of relatively rapid
expansion of production and high levels of capacity utilization.
In addition, overall inflation, in the area of 4
percent to 4Vi percent, during 1988 was a little
above the general range in which it had fluctuated
in the mid-1980s. The drought boosted food
prices, adding somewhat to inflation last year,
but this was largely offset by a leveling-off of
energy prices. Prices of other consumer goods
and services accelerated a bit. This acceleration
is troubling, especially with inflation already at a
level that would be unsatisfactory if it persisted.
Although the step-up in consumer inflation to
date has been rather small, some signs have
emerged of greater acceleration in broad measures of costs of production. Wage gains accelerated toward the end of last year. Moreover,
benefits took an unusually large jump in 1988,
boosted in part by a sharp rise in health insurance
costs and a hike in social security taxes—both of
which add to business costs as directly as do
wages. Overall, the employment cost index, a
comprehensive measure of hourly wage and benefit rates, rose 5 percent in 1988, up significantly
from 1987. Materials inputs also were adding to
costs; the producer price index for intermediate
materials and supplies excluding food and energy
rose about 7 percent over the past year.
ECONOMIC PROSPECTS AND
MONETARY POLICY FOR 1989
On the whole, the economic expansion remains
vigorous and unusually well balanced after more
274 Federal Reserve Bulletin • April 1989
than six years. There are few of the telltale
distortions, such as widespread inventory overhangs or constricted profit margins, that typically
have signaled the last phases of expansions. But
with the economy running close to its potential,
the risks seem to be on the side of a further
strengthening of price pressures. In these circumstances, the Federal Reserve remains more
inclined to act in the direction of restraint than
toward stimulus.
The determination to resist any pickup in inflation in 1989 and especially to move over time
toward price stability shaped the Committee's
decisions with respect to monetary and credit
ranges for 1989. The Committee agreed that,
particularly in this environment, progress toward
these objectives likely will require continuing
restraint on growth in money and credit.
To this end, the Committee lowered the range
for M2 a full percentage point to 3 percent to 7
percent and reduced the range for M3 Vi percentage point to V/i percent to IVi percent. The
Committee also lowered the monitoring range for
domestic nonfinancial sector debt Vi percentage
point to 6Y2 percentage points to IOV2 percentage
points. These were the ranges adopted on a
tentative basis last June.
We decided to retain the wider, 4-percentagepoint ranges that were adopted in 1988. The
relationship of the monetary aggregates to economic performance has been quite variable in the
1980s. The relatively high interest elasticity of
the aggregates, even after deregulation, makes
them very sensitive to changes in money market
conditions, which in turn can respond to developments in the real economy or prices. The
resulting potential for sizable movements in velocity requires broader ranges to have reasonable
assurance that the targets are consistent with
satisfactory economic performance. Considerable uncertainties regarding the effects on the
monetary aggregates of the resolution of difficulties in thrift institutions also argue for relatively wide ranges this year. Depending on the
pace of asset growth of thrift institutions and
changes in their deposit-pricing policies, the
composition and growth of their liabilities could
vary substantially from past patterns.
For the same reasons, the Committee agreed
to continue its current approach to the implemen-
tation of policy, which involves monitoring a
variety of economic and financial indicators,
including growth of money and debt. In this
regard, appropriate growth of M2 and M3 relative to their ranges will be determined in part by
developments during the year. At present, it
appears that the velocities of M2 and M3 are
likely to rise this year, in response to the market
interest rate increases to date and unusually
sluggish adjustment of deposit rates.
The Federal Reserve expects its policy in 1989
to support continued economic expansion while
putting in place conditions for a gradual easing in
the rate of inflation over time. However, the
wage and price process may have developed
some momentum. The central tendency of forecasts made by members of the Federal Reserve
Board and presidents of Federal Reserve Banks
is for inflation to rise slightly in 1989. But let me
stress that the current rate of inflation, let alone
an increase, is not acceptable, and our policies
are designed to reduce inflation in coming years.
This restraint will involve containing pressures
on our productive resources, and, thus, some
slowing in the underlying rate of growth of real
GNP is likely in 1989. The central tendency of
GNP forecasts for this year of Board members
and Reserve Bank presidents is 2V2 percent to 3
percent; abstracting from the expected rebound
from last year's drought losses, real GNP is
projected to grow at closer to a 2 percent rate.
Net exports are expected to continue to improve
in 1989 as we make further progress in reducing
our external imbalances, but this implies the
need for restraint on domestic demand to contain
pressures on our productive resources. With
demands for labor growing more in line with
expansion of the labor force, the unemployment
rate is expected to remain near its recent level
over 1989.
MONETARY POLICY AND
LONG-RUN ECONOMIC GROWTH
Maximum sustainable economic growth over
time is the Federal Reserve's ultimate objective.
The primary role of monetary policy in the
pursuit of this goal is to foster price stability. For
all practical purposes, price stability means that
Statements to Congress
expected changes in the average price level are
small enough and gradual enough that they do
not materially enter business and household financial decisions. Price stability contributes to
economic efficiency in part by reducing the uncertainties that tend to inhibit investment. Also,
it directs resources to productive economic activity that otherwise would tend to be diverted to
mitigating the financial effects of inflation.
Price stability—indeed, even preventing inflation from accelerating—requires that aggregate
demand be in line with potential aggregate supply. In the long run, that balance depends crucially on monetary policy. Inflation cannot persist without a supporting expansion in money and
credit; conversely, price stability requires moderate growth in money—at rates below those
prevailing in recent years.
In the short run, demands can fall short of, or
run ahead of, available resources, with implications for wage and price pressures and the appropriate stance of monetary policy. By altering
reserve conditions and the money supply, and
thus interest and exchange rates and wealth
positions, monetary policy can assist in bringing
about a better match between demand and potential supply and thereby contribute to aggregate price stability.
When the economy is operating below capacity, bringing demand in line with supply can
involve real GNP growth that is faster for a time
than its long-run potential. For example, in the
mid-1980s, the U.S. economy was recovering
from a deep recession; with utilization of labor
and capital not nearly complete, we were able to
bring these resources back into the production
process at a pace that substantially exceeded
their underlying growth rates. In those circumstances, it is not surprising that growth of real
GNP was relatively rapid while inflation performance was reasonably good.
But when the economy is operating essentially
at capacity, monetary policy cannot force demand to expand more rapidly than potential
supply without adverse consequences. Such an
attempt will result in accelerating prices and
wages, as producers bid for scarcer, and at the
margin less productive, labor and capital. Over
time it would result in little if any additional
output.
275
As a result of robust expansion in the last few
years, the U.S. economy has absorbed much of
its unused labor and capital resources. No one
can say precisely which level of resource utilization marks the dividing line between accelerating
and decelerating prices. However, the evidence—in the form of direct measures of prices
and wages—is clear that we are now in the
vicinity of that line.
Thus, policies that foster more economic
growth, if such growth is to be sustainable over
the long run, should focus on aggregate supply.
Aggregate supply depends on the size of the
labor force and its productivity. Growth of the
labor force basically is a function of increases in
population and of individuals' decisions with
regard to participation in the labor force. Labor
productivity depends partly on the quantity and
quality of capital and the overall efficiency in
combining labor and capital in the production
process. Given projections of likely expansion in
the labor force and capital accumulation, most
estimates of growth in long-run potential real
GNP fall in a range below the average growth
rates of real nonfarm GNP experienced over the
last couple of years.
Faster growth in real GNP would be possible
for a time if we could use more of our labor and
plant capacity without putting pressure on wages
and prices. Monetary policy is not a useful tool to
accomplish this. But microeconomic policies
may well be, such as policies designed to improve the match between labor demands and
supplies. Conversely, we must be careful to
avoid approaches to our national needs that
would add unduly to business costs or increase
rigidities in labor and product markets. Perhaps
most important over the long run, as the composition of production in the U.S. economy continues to evolve, we must intensify our efforts to
educate our labor force to be productive in the
increasingly high-technology world marketplace.
In addition, the United States could improve
its longer-run growth prospects by stepping up
the pace of capital accumulation. Government
policies can contribute to a higher rate of investment. Tax policies can help by ensuring that
returns from capital are not taxed excessively or
unpredictably. And fiscal policy can help boost
the national saving rate.
276 Federal Reserve Bulletin • April 1989
Ideally, increased national saving would involve some improvement in the private saving
rate. Household saving is abysmally low in the
United States, and business saving has not risen
enough to offset that. However, it is not clear
that past government policies have been very
effective in boosting private saving. Probably the
most direct and sure way of increasing saving is
by a reduction in government dissaving.
The Congress should follow the Gramm-Rudman-Hollings timetable and then seek a budgetary surplus by the mid-1990s.
An improving federal budget position should
have a variety of favorable effects. It can pave
the way for a reduction in our external imbalance
by freeing resources currently absorbed by domestic demand. By putting downward pressure
on real interest rates, it can encourage domestic
business capital formation and make housing
more affordable. It can encourage households
and businesses to focus more on the long run in
economic planning.
Monetary policy also has a role to play in
encouraging capital formation and economic
growth over time, by providing a stable price
environment. Although the relationship between
growth of money and the economy can vary from
year to year, over the long haul there is a close
relationship between money and prices. Recently, the Board's staff has done some interesting research on this subject. This work indicates
that future changes in the rate of inflation have
been fairly reliably linked to the difference between the prevailing price level and its equilibrium level. That equilibrium level is calculated at
the current level of M2, assuming that real GNP
is at its potential and velocity is at its long-run
average. As you can see from the chart, inflation
apparently tends to accelerate with a lag when
actual prices are below the equilibrium value
associated with current M2, and to decelerate
when above it. This research suggests that despite relatively moderate expansion of M2 in
recent years, the equilibrium value still is a little
above the current price level, reinforcing the
notion that the present risks are on the side of a
pickup of inflation. This work also confirms that
price stability ultimately will require somewhat
slower M2 growth than we have experienced in
recent years.
Inflation indicator based on M2
Ratio scale
Current price level (P)
Long-run equilibrium
price level given
current M2(P*)
1960
1970
1980
1988
The current price level (P, the solid line in the top panel) is the
implicit GNP deflator, which is set at 100 in 1982.
The long-run equilibrium price level given current M2 (P*, the
dashed line in the top panel), is calculated as P* = (M2 x V*)/Q*,
where V* is an estimate of the long-run value of the GNP velocity of
M2—the mean of V2 from 1955:1 to 1988:4—and Q* is a Federal
Reserve Board staff measure of potential real GNP.
The vertical lines mark the quarters when the difference between
the current price level {P) and the long-run equilibrium price level CP*)
switches sign, and thus when inflation, with a lag, tends to begin
accelerating or decelerating.
Inflation (bottom panel) is the percentage change in the implicit
GNP deflator from four quarters earlier.
For more details, see Jeffrey Hallman, Richard D. Porter, and David
H. Small, M2 Per Unit of Potential GNP as an Anchor for the Price
Level, Staff Studies 157 (Board of Governors of the Federal Reserve
System, April 1989).
FINANCIAL DEVELOPMENTS
MONETARY
POLICY
AND
The Federal Reserve recognizes that monetary
policy over the coming year will be carried out
against the backdrop of a financial system facing
certain difficulties. The thrift and Federal Savings and Loan Insurance Corporation situation is
perhaps most pressing. The administration has
proposed an extensive, workable plan for closing
insolvent institutions, improving the regulation
and supervision of savings and loan associations,
and strengthening the deposit insurance funds. I
will be presenting more detailed testimony on
this topic before this committee. For now, let me
simply encourage you and your colleagues to
take the necessary legislative steps to resolve
Statements to Congress
this situation promptly. There appears to have
been little, if any, effect of the savings and loan
problem on mortgage availability and housing—
thanks in part to financial innovation in the form
of the mortgage-backed securities market. However, without quick and effective action the situation could deteriorate.
Developments in the corporate sector warrant
close scrutiny as well. The stock market has been
recovering over the past 15 months, with few
signs as yet of speculative excesses. However, as
you know, corporate equity continues to be
retired at a startling rate in conjunction with
leveraged buyouts and other mergers and restructurings and has involved issuance of a correspondingly large amount of debt. As I have
noted in recent congressional testimony, this
phenomenon is complex, having both positive
and negative dimensions. These restructurings
often have added economic value through improved efficiency—an important consideration
given the increasingly competitive nature of
world markets. But the higher leverage leaves
these firms, and potentially their creditors, more
vulnerable to financial difficulties in event of a
downturn. The Federal Reserve and other federal regulators are instructing bank examiners to
review especially carefully loans to highly leveraged firms to maintain a safe and sound banking
system.
The international economy also will command
the continuing attention of policymakers around
the world. Among the industrial countries,
greater concern about rising inflation followed
the substantial economic growth recorded last
year. Meanwhile, the process of adjustment of
international imbalances appeared to have
slowed somewhat in the second half of last year,
and many developing countries continued to face
serious problems of achieving sustained economic growth, fostering development, and servicing large external debts.
Some have argued that these financial stresses,
taken together, could hamstring the Federal Reserve's anti-inflationary policy. Certainly we
have to take account of the effects of our actions
on all sectors of the domestic and international
economy and on financial markets; at the same
time we recognize that monetary policy is not the
277
instrument to deal with structural financial
stresses and imbalances here and abroad—and
that attempts to do so may even worsen these
problems. Backing away from policy adjustments needed to contain inflation will not solve
the thrift problem, make the debt burden of
heavily leveraged firms lighter, speed the process
of international adjustment, or contribute to a
fundamental solution of the economic problems
of the developing countries. In fact, the thrift
industry's problems, as well as the external debt
problems of the developing countries, were exacerbated by the inflation of the 1970s. Attempting to lower interest rates in the short run
through more rapid money growth against countervailing market pressures would quickly raise
inflationary expectations, leading soon to higher,
not lower, interest rates. Instead, the structural
financial problems require the prompt application
of microeconomically oriented solutions within
the supervisory, regulatory, and legal framework. Imbalances in the world economy require
the continued, patient application of responsible
macroeconomic policies in the United States and
in other industrial countries, as well as further
progress in economic reforms by the developing
countries.
CONCLUSION
For its part, the Federal Reserve will continue to
seek monetary conditions that will reduce inflation. Our major trading partners are following
consistent policies in their own economies. Together, these policies should bring about a more
stable financial environment and promote longrun worldwide economic growth. Relatively stable long-term nominal interest rates and flattening yield curves around the industrial world
are strong evidence that savers and investors are
in accord with this view. Monetary policy, at
least for the moment, appears on track in the
United States. The task is to keep it on track
while making necessary adjustments to fiscal
policy and reforms to the regulation of financial
institutions. In this way we can ensure vigorous
and balanced economic conditions over the long
run.
•
278 Federal Reserve Bulletin • April 1989
Chairman Greenspan presented identical testimony before the House Committee on Banking,
Finance and Urban Affairs, February 22, 1989.
Statement by Alan Greenspan, Chairman, Board
of Governors of the Federal Reserve System,
before the Committee on Banking, Housing, and
Urban Affairs, U.S. Senate, February 23, 1989.
I am pleased to appear today before this committee to outline the views of the Board of Governors of the Federal Reserve System on the
legislation proposed by President Bush for the
reform and recovery of the thrift industry. The
Board supports this comprehensive package of
proposals to strengthen the thrift industry, and
depository institutions generally, as well as to
prevent the serious problems of the thrift industry from recurring.
The proposals in the bill include the following:
(1) greatly enhanced supervisory, regulatory, and
enforcement authority; (2) a new framework for
resolving insolvent thrift institutions; (3) a separate insurance fund for thrift institutions under
the administration of the Federal Deposit Insurance Corporation (FDIC), and (4) a strengthening
of this new thrift fund, as well as the FDIC fund,
through higher premiums.
Besides this legislative program, a number of
administrative measures have been taken, or are
planned. As a first step to limit losses in insolvent
institutions, more than 200 of them will be
brought under federal control in the next few
weeks. As part of this effort, we are contributing
150 Federal Reserve examiners to the overall
task force.
Moreover, to help attract responsible buyers
for troubled thrift institutions, and as a result of
the important changes in the environment for
interstate banking, the Federal Reserve Board
intends to reconsider the tandem operations restrictions on applications brought to the Board
for acquisitions of failed or failing savings and
loan associations. In addition, we have made
arrangements with the Federal Home Loan
Banks and the Federal Savings and Loan Insurance Corporation (FSLIC) to support these basic
sources of liquidity for the thrift industry.
I would like to focus my remarks today on the
two major elements of the President's program:
(1) the restructuring and reform proposals, and
(2) the procedures for dealing with failed savings
and loan corporations as well as the funding
required to cover losses incurred by these institutions. Before turning to this task, I believe it
would be useful to recall why we are facing a
thrift problem and to draw some lessons from its
causes.
Today's thrift industry losses grew partly out
of the vulnerability of a fixed rate, long-term,
lender with relatively short-term liabilities, to
changes in interest rates. As inflation, and interest rates, rose in the late 1970s and early 1980s
and as deposit rate ceilings were phased out, the
resulting mismatch on the rising cost of deposit
liabilities and the fixed return on mortgage assets
produced substantial losses and a serious erosion
of industry capital. Into this situation other elements were added. Expanded powers were
mixed with inexperienced or dishonest management, brokered deposits that fed unchecked
growth, lax accounting standards, and seriously
inadequate supervision, all within the context of
adverse economic conditions. It is sobering how
these factors led so quickly to insolvencies. In a
short period, the serious, but manageable, maturity-mismatch problem became the disastrous
asset-quality problem that we face today.
In evaluating this situation, I would not limit
my emphasis, as some have done, to focusing
only on the decline in regional economies and, in
particular, on the drop in oil prices. The regional
economic problems were real, but in assessing
responsibility it is important to recognize that the
oversupply in the real estate market in certain
areas was at least partially a result of the lending
by the savings and loan associations themselves.
During the period 1982 to 1985, in the face of
declining oil prices, commercial real estate loans
of savings and loan associations increased more
than $57 billion (129 percent). In many cases
these loans were made with an eye principally
Statements to Congress
focused on front-end fees, and without any reasonable assurance of repayment.
A comparison with the banking industry is
instructive. While the banks do not have real
estate equity investment powers, nonrecourse
lending by banks for commercial real estate
development projects with thin borrower equity
positions often puts the bank lenders in a position
in which they are very close to equity investors.
Taking this into account, it is all the more surprising that the estimated cost of resolving the
thrift problems in Texas will run about $40 billion. In that state, where the economic environment for banks and thrift institutions is identical,
the costs for resolving the problems of the banking industry, with assets that are much larger
than those of the thrift institutions, should
amount to considerably less than $10 billion.
Clearly, the large absolute difference in costs,
and the even larger difference in costs relative to
assets, is evidence that the thrift industry experienced a systems failure, that is, a major lapse in
public and private prudential standards.
To deal with these problems, the new program
focuses on the supervisory and regulatory reforms designed to ensure that the mistakes that
have so adversely affected the thrift industry, its
deposit insurance fund, and the taxpayers will
not be repeated. A number of important steps
have been proposed.
A new insurance fund for thrift institutions will
be established to be administered by the FDIC,
separately from the insurance fund for banks, but
with special powers for the FDIC to approve
applications by thrift institutions for insurance,
to make examinations, to initiate enforcement
actions, to terminate insurance on an expedited
basis, and to prohibit thrift institutions from
exercising powers that could cause undue risk to
the FSLIC insurance fund.
Moreover, the proposal puts a new emphasis
on adequate capital for the thrift industry as a
cushion against losses and as a restraint on
excessive risktaking. Accordingly, thrift institutions will be required to meet bank capital standards by June 1991, with the exception that they
will be given 10 years to write off goodwill. For
those institutions that do not meet this standard,
growth can be restricted before the 1991 deadline
and must be prohibited after this time.
279
Our estimates indicate that more than a majority of the thrift institutions with positive tangible
capital under generally accepted accounting principles (GAAP) standards could meet the existing
bank primary capital requirements; on a riskadjusted basis, we estimate that nearly twothirds would meet bank standards due largely to
the favorable risk-weight given to 1- to 4- family
residential mortgages under the risk-based measure of capital.
If goodwill were to be immediately excluded
from capital, the institutions falling below the
standard would have to raise about $15 billion to
$20 billion in capital to meet bank minimums.
However, the proposed legislation, as noted,
gives thrift institutions a 10-year period to write
off the goodwill; thus, this major capital-raising
effort can be spread over several years.
It should be emphasized that if losses continue
or accelerate due to further credit deterioration
or interest rate exposure, the industry's need for
capital could be substantial. Those institutions
that cannot meet bank capital standards as set
forth in the proposed legislation would necessarily have their growth restricted or may be required to shrink their assets.
The administration's program also takes major
steps toward restructuring the thrift supervisory
and regulatory framework. Besides separating
the insurance and regulatory functions, the proposal would create a new federal thrift regulator.
The new regulator—the Chairman of the Federal
Home Loan Bank System (FHLBS), who would
be under the Secretary of the Treasury in the
same relationship as the Comptroller of the Currency—should be more independent from the
industry. Importantly, the FHLBS would be
required to apply bank supervisory and accounting standards to the savings and loan associations.
Moreover, the boards of directors of the Federal Home Loan Banks will be reconstituted
along the lines of Federal Reserve Bank boards.
This should make them more responsive to the
broader public interest. In contrast to present
arrangements, most of the membership of the
boards will be drawn from outside the industry,
including the chairman and vice chairman of the
boards, who will be chosen by the new chief of
the Federal Home Loan Bank System. Finally,
280 Federal Reserve Bulletin • April 1989
the Chairman of the FHLBS, as the new regulator and supervisor, would carry a mandate emphasizing safety and soundness, and would appoint the head supervisory agent at the Home
Loan Banks who would be directly responsible
to the FHLBS in Washington. These are both
necessary and important reforms.
Another step recommended by the President,
to which we attach great importance, is the
requirement that savings and loan associations
that do not meet the qualified thrift lender (QTL)
test (60 percent of assets in residential-related
lending) in the Competitive Equality Banking Act
of 1987 must, after an appropriate transition
period, become banks and be subject to the
entire regulatory and supervisory regime applicable to banks and their holding companies. We
believe it is fully appropriate to confine the
benefits of thrift status, involving both access to
subsidized long-term borrowing from Federal
Home Loan Banks and tax benefits, to only those
institutions that devote a major part of their
assets to promoting homeowner ship.
Another important part of the reform package
is the increase in insurance premiums for both
thrift institutions and banks, as well as the authority for the FDIC to raise premiums for both
types of institutions in the light of experience.
For thrift institutions, for which the fund is now
insolvent and in need of rebuilding, premiums
under the proposal will rise in 1990 from their
present level of 20.8 basis points to 23 basis
points in 1991, remain at that level for three
years, and then fall to 18 basis points in 1994. For
banks the current premium of 8 basis points
would increase 4 basis points in 1990, and another 3 points in 1991; and then would be held at
that level. However, when the insurance funds
reach the target for reserves of 1.25 percent of
insured deposits, rebates would again be possible.
The level of FDIC insurance reserves as a
percentage of insured deposits has dropped in
recent years to the present ratio of 0.83 percent,
and it is important that this trend be reversed.
The proposed premium increase for banks thus
stands on its own merits, quite apart from anything that might be done about thrift institutions,
as a necessary step to maintain the integrity of
the FDIC fund against future contingencies.
Another element of the President's program is
a funding package designed to provide sufficient
financial resources to resolve current and prospective insolvencies among FSLIC-insured institutions. This function would be assigned to a
newly created Resolution Trust Corporation
(RTC), which would be managed by the FDIC
and operate under the direction of the Oversight
Board composed of the Secretary of the Treasury, the Chairman of the Federal Reserve
Board, and the Attorney General. To accomplish
its task, the RTC would be provided with $50
billion of funding—the proceeds of bonds issued
by an RTC Funding Corporation. These funds
would be used to resolve insolvent thrift institutions that have not received assistance from
FSLIC or that will become insolvent over the
next three years. Principal would be repaid with
the proceeds of zero coupon bonds purchased
from thrift industry resources, and the interest on
the bonds would be paid with thrift industry and,
if necessary, Treasury funds.
The most recent data available (for September
30, 1988) indicate that about 470 thrift institutions, with assets of about $250 billion, are
tangible capital insolvent. It seems prudent to
assume that all of these institutions will require
RTC assistance. We cannot know exactly what
the resolution costs will be for these institutions,
but based on FSLIC's estimates of the costs of
its 1988 resolutions we estimate that it will cost
around $40 billion to take care of these 470
institutions. Of course, many other FSLICinsured institutions are at present thinly capitalized, and some of these could well become insolvent during the three-year period for
which RTC would be responsible for new insolvencies.
We have looked at the cost of resolving new
and existing insolvencies under different scenarios, and under some, unlikely, circumstances the
resolution costs could exceed $50 billion. However, in our judgment, all things considered, the
$50 billion should be adequate. There is, of
course, much that is unknown, and that is now
unknowable, that will affect this judgment. Marginal adjustments may be necessary as experience is gained to take account of, for example,
additional costs or recoveries. The critical point
is that the fundamental approach is sound and
Statements to Congress
has the necessary flexibility to adapt to changes
in circumstances.
Key to the RTC's ability to minimize costs is
flexibility to pursue various resolution options.
Such flexibility would permit the separate marketing of franchises and troubled real estate
portfolios, which might broaden the market and
thereby increase the values of both. In particular,
in cases in which no franchise value remains in
an organization, the least-cost option would
likely be liquidation rather than purchase and
assumption. To reduce overall costs, the RTC
must have the resources necessary to pursue this
course.
When so much money is needed to make up for
such large losses, partly from mismanagement,
and in no small part due to fraud, is it reasonable
to ask the taxpayers to pay any part of these
costs?
It is. The basis for my answer goes far beyond
the congressional pledge of the full faith and
credit of the United States behind insured deposits. The reason for public expenditure to support
deposit insurance is the basic benefits to the
economy as a whole that we derive from deposit
insurance. The certainty and stability provided
by deposit insurance benefit the nation as a
whole, while they protect the individual from
catastrophic loss. By giving the public confidence in the safety of its funds we avoid the
deposit withdrawal and losses that disrupted the
payments system and the savings and investment
process in the 1930s. Losses of the kind that we
face today should not happen, but with the gains
to society as a whole that come with deposit
insurance we must accept both the possibility
and the reality that there will be losses to be
borne by society as a whole.
Our job now is not to see to it that there are
never any losses as a result of deposit insurance;
to do so would require limitations and rules that
would put depository institutions lenders, and
the economy they serve, in a straitjacket. Such a
course would be costly to growth and efficiency.
Our task is to see to it that the potential for losses
is minimized to the extent possible and that steps
are taken to ensure that the preventable governmental, regulatory, supervisory, and human failures that were the cause of the thrift industry
losses do not happen again.
281
The Board attaches considerable importance
to the provision of the proposed legislation that
calls for the Secretary of the Treasury, in conjunction with the federal financial regulators, to
undertake a study of the nation's deposit insurance system. There are major areas of concern
about the system, focusing on its apparent bias
toward excessive risktaking, its tendency in the
direction of differential treatment of small and
large institutions, and the unintended expansion
of insurance coverage through such techniques
as brokering deposits that have been disaggregated into $100,000 segments.
A review, at both a conceptual and practical
level, is needed of the consistency of an insurance system that evolved out of the Great Depression, on the one hand, with today's depositgathering industry of both small banks and giant
modern financial services organizations that operate across markets and national boundaries, on
the other. It will be no easy task. It must be done
carefully and the recommendations implemented
gradually to ensure a smooth transition to modified insurance arrangements.
Without in any way meaning to prejudge the
conclusions of the study, I would like to discuss
several matters that should receive attention.
First, I would note that all analyses of which I
am aware have suggested that depositors are not
effective at restraining imprudence or risktaking
at banks and thrift institutions. They cannot be
expected to have sufficient information and tend,
in any event, to be either unresponsive or to run
when faced with bad news. If the study confirms
that view, the policy options that then must be
seriously considered surely will include other
ways to limit risktaking, such as enhanced supervision, different insurance assessment techniques, or use of subordinated capital that would
not be protected in case of failure. The large cost
to the public of the legislation before you suggests that we must consider the potential benefits
of requiring prompt recapitalization, merger, or
closure of troubled insured entities whose capital
is declining, but still positive.
Second, attention should be given to determining whether specialized fixed-rate residential
lending institutions are needed today. This question is raised because of the costs and competitive distortions involved in subsidized borrowing
282 Federal Reserve Bulletin • April 1989
from Home Loan Banks, the dangers inherent in
special regulatory and supervisory regimes for
subsidized depository institutions, and the continued vulnerability of a large element of the
thrift industry to increased interest rates.
This question should also be considered because of the important changes in the mortgage
market. In the past, home mortgages were a
uniquely local product, almost always held to
maturity by the original lender. Now, computers,
modern telecommunications, and financial engineering have vastly changed this market. In
today's market, mortgages frequently are originated by a wide variety of intermediaries, bundled into securitized products, and sold to institutional investors in all parts of the country—
more than one-third of outstanding home mortgages are held in securitized form. This new
environment may make it unnecessary to provide
special government-subsidized facilities for
mortgage lending and may make it possible to
eventually bring all depository institutions under
one regulatory and supervisory system. This
issue should be given priority attention as part of
the study of deposit insurance reform.
Third, in considering the reforms that should
be developed, considerable attention has been
focused on the expanded investment and lending
powers that have been granted to state-chartered
thrift institutions. The study must examine the
safeguards that should be developed for the
future. These safeguards should not require rigid
prohibitions on types of activities that may be
engaged in by depository institutions. Rather, as
a first step, consideration should be given to
requiring that nonbanking activities of banks and
thrift institutions take place in subsidiaries of
holding companies to ensure that these activities
are not subsidized by the federal safety net and
that this safety net will not be responsible for
covering any losses that may arise from these
nonbanking activities. We have such a proposal
under review at the Board. In addition, consideration should be given to amending and expanding existing law to limit risky nonbanking activities in banks and thrift institutions.
I would like to close my testimony by stressing
that it is vitally important for the Congress to
move very promptly to consider and enact the
President's proposals. We must make available
the resources the regulators need to close insolvent thrift institutions. We must stop the continuing daily losses due to operating expenses that
greatly exceed income as well as to the higherthan-normal rates that they must offer to attract
deposits. In operating in this way, they not only
hurt themselves and the insurance funds, but, as
they drive up rates, they also injure their competitors and the economy as a whole. Prompt
action is essential to maintaining public confidence in thrift institutions and their insurance
fund.
•
Statement by Alan Greenspan, Chairman, Board
of Governors of the Federal Reserve System,
before the Committee on the Budget, U.S. Senate, February 28, 1989.
believe that it would be useful, however, if I were
to review briefly where the economy has been
over the past year and where it appears to us to
be going. This may help to bring into focus the
challenges that face monetary and fiscal policymakers. Principal among those challenges, in the
view of the Federal Reserve, is setting the stage
for sustainable, balanced growth, in part by
preventing a corrosive inflationary psychology
from taking hold. Fiscal, as well as monetary,
policy has a role to play in achieving that objective and proceeding expeditiously is much more
likely to get the job done.
Overall, the past year has been a good one for
the economy. In 1988, real GNP grew about 3LA
percent, adjusted for crop losses caused by the
It is a pleasure to appear before you this morning
to discuss economic policy in the context of the
broad objectives that are relevant to us in our
respective spheres of policymaking. I have provided our recent Monetary Policy Report, and I
shall avoid consuming a lot of your time discussing the details presented in that document. 1 I
1. See "Monetary Policy Report to the Congress," FEDERAL RESERVE BULLETIN, v o l . 75 ( M a r c h 1989), pp. 1 0 7 - 1 9 .
Statements to Congress
drought, and payroll employment rose more than
3Vi million. Prospects had been uncertain as the
year began, given the worldwide stock market
break in October 1987, but gradually, it became
clear that the economic expansion remained well
on track and that market confidence was on the
mend. Demand for goods and services was robust, and sizable gains in employment and output
pushed levels of resource utilization still higher.
The unemployment rate fell to, and then below,
51/2 percent, the lowest level since the mid-1970s,
and the average manufacturing capacity utilization rate rose to the highest level since the late
1970s. As these developments unfolded, it became clear that the balance of risks was shifting
in the direction of higher inflation. Consequently,
the Federal Open Market Committee has applied
increased pressures on bank reserve positions, in
a series of steps beginning in the spring of 1988
and extending into this year. In addition, the
discount rate was raised from 6 percent to 6V1
percent in August, and again last week to 7
percent.
The policy restraint has led to an appreciable
rise in short-term market interest rates. Also,
growth of money has moderated, as rates on
deposits lagged the rise in market rates. M2 and
M3 finished the past year around the middle of
their annual target ranges of 4 percent to 8
percent, and they have grown relatively slowly in
recent months.
Despite tightening money markets, longerterm interest rates have been relatively stable.
Yields on Treasury bonds, for example, remained in a fairly narrow range around 9 percent
for most of last year and, although rising most
recently, are still not much above 9 percent. With
inflation expectations apparently fairly stable and
the expansion sustained, investments in the
United States have looked attractive; the dollar's
average value against major foreign currencies
recovered from the late-1987 plunge and has been
relatively stable for many months.
Some of the developments of the past year
suggest, however, that we still have work to do if
we are to succeed in our task of achieving the
goals of balanced expansion and the reduced
inflation needed to sustain it. In the area of your
direct interest, the federal budget, the deficit
remains large. Meanwhile, private saving re-
283
mains low. The continued imbalance of domestic
saving and investment is mirrored in the persistent large trade and current account deficits.
In addition, although overall inflation last
year—in the area of 4 percent to 4V2 percent—
was only a little above the general range in which
it had fluctuated in the mid-1980s, underlying
trends were troubling. At the consumer level, the
drought boosted food price inflation in 1988, but
this was more than offset in the aggregate figures
by a leveling-off of energy prices. Now energy
prices are turning up. More fundamentally,
prices of consumer goods and services other than
food and energy accelerated last year and this
faster pace extended into January.
Furthermore, some signs have emerged of
greater pressures in production costs. Wage increases accelerated toward the end of last year.
Moreover, benefits took an unusually large jump
in 1988, boosted in part by a sharp rise in health
insurance costs and a hike in social security
taxes—both of which add to business costs as
directly as do wages. Overall, the employment
cost index, a comprehensive measure of hourly
wage and benefit rates, rose 5 percent in 1988, up
significantly from 1987. Materials inputs also
were adding to costs; the producer price index
for intermediate materials and supplies excluding
food and energy has been rising at an annual pace
of about 7 percent for some time. The large
increases in the producer finished goods and
consumer price indexes in January could be early
warnings that the cost-price process is gathering
force.
At the same time, the economy generally remains vigorous. The available data for January
suggest that we moved into 1989 with considerable upward momentum. Moreover, widespread
inventory overhangs or constricted profit margins, which typically have signaled the last
phases of expansions, are not apparent. With the
economy already operating at high levels of labor
and plant utilization, and given the disturbing
signs of strengthening price and cost pressures,
the momentum of expansion implies risks that
clearly remain on the side of accelerating inflation. It is just such an acceleration that could
feed the kind of imbalances that ultimately bring
expansions to an end. The Federal Reserve's
earlier money market tightening and the discount
284
Federal Reserve Bulletin • April 1989
rate action last week were taken to forestall such
imbalances to keep the economy on a more
sustainable path toward price stability.
The same determination to resist any pickup in
inflation and especially to move over time toward
price stability shaped the Committee's recent
decisions with respect to target or monitoring
ranges for money and credit in 1989. To this end,
the Committee lowered the range for M2 by a full
percentage point to 3 percent to 7 percent and
reduced the range for M3 Vi percentage point to
V/i percent to IVi percent. The Committee also
lowered the monitoring range for domestic nonfinancial sector debt Vz percentage point to 6V2
percent to \QVi percent.
The Federal Reserve expects its policy in 1989
to support continued economic expansion, even
while putting in place conditions for a gradual
easing in the rate of inflation over time. However, in light of present conditions, the central
tendency of forecasts made by members of the
Federal Reserve Board and presidents of Federal
Reserve Banks is for inflation to rise slightly in
1989, with the consumer price index edging up to
the range of 4V2 percent to 5 percent.
With restraint on inflation requiring that we
limit pressures on our productive resources,
some slowing in the underlying rate of growth of
real GNP is expected in 1989. The central tendency of GNP forecasts of Board members and
Reserve Bank presidents for this year is 2Vi
percent to 3 percent from the fourth quarter of
1988 to the fourth quarter of 1989; abstracting
from the expected rebound from last year's
drought losses, real GNP is projected to grow at
closer to a 2 percent rate. Net exports are likely
to continue to improve as we make further progress in reducing our external imbalances, but this
implies the need for counterbalancing restraint
on domestic demand. With demands for labor
growing more in line with expansion of the labor
force, the unemployment rate is expected to
remain near its recent level during the course of
the year.
Looking beyond a one-year horizon, the primary role of monetary policy in the pursuit of the
goal of maximum sustainable growth is to foster
price stability. By this we mean establishing an
environment in which expected changes in the
average price level are small enough and gradual
enough that they do not materially enter business
and household financial decisions. Price stability—indeed, even preventing inflation from accelerating—requires that aggregate demand be in
line with potential aggregate supply. Inflation in
the longer term is essentially a monetary phenomenon. But large budget deficits contribute to
the problem; they tend to put inordinate strains
on financial markets and they directly fuel excess
demand on resources. Thus, in the present circumstances, fiscal policy can help to smooth our
progress over the next few years toward better
price performance. Prompt and sustained action
is becoming increasingly urgent.
The situation today differs markedly from that
of the mid-1980s, when the U.S. economy was
recovering from a deep recession. Then, with
utilization of labor and capital still quite low, we
were able to bring these resources back into the
production process at a pace that substantially
exceeded their underlying growth rates. And in
those circumstances, the growth of real GNP
could be relatively rapid while the inflation performance was reasonably good.
But as a result of the robust expansion, the
U.S. economy has absorbed much of its unused
labor and capital resources. No one can say
precisely which level of resource utilization
marks the dividing line between accelerating and
decelerating prices. However, the evidence—in
the form of direct measures of prices and wages—clearly suggests that we are now in the
vicinity of that line.
Thus, the thrust of both monetary and fiscal
policies in the short run appropriately is more
toward restraint than stimulus. The extent and
duration of the financial market pressures that
are likely, until overall demand moderation is
achieved, will depend on the size and credibility
of deficit-reducing measures. In this context,
credibility will be much enhanced by a multiyear
approach to budget action.
I am mindful that, owing to significant efforts
by the executive branch and the Congress, coupled with strong economic growth, the deficit has
shrunk from 5 percent to 6 percent of GNP a few
years earlier to a bit over 3 percent today. And
abstracting from the effects of economic expansion, the cyclically adjusted, or structural, deficit
as a share of potential GNP has fallen VA per-
Statements to Congress
centage points from its 1986 peak. Nonetheless,
at about 3 percent, this share is still very large.
Since the end of World War II, the structural
deficit has exceeded 3 percent of potential GNP
only since 1983.
I am also mindful that the progress that has
been made in narrowing the structural deficit in
the past two years is even greater when we look
only at the so-called primary portion of the
deficit, that is when interest costs are removed.
Interest outlays, of course, are now very large
and their level will remain high as long as our
stock of Treasury debt remains large. Nevertheless, growth in the interest component of the
budget is volatile. It is spurred by large deficits,
but it also picks up when interest rates are rising
and then subsides when interest rates come
down. For example, annual growth in interest
costs averaged about $13 billion from 1980 to
1985, but since then has slowed to an average of
about $7 billion per year.
The most effective way to keep interest costs
down is to forestall another virulent burst of
inflation expectations such as we experienced a
decade ago. Simple arithmetic tells us that an
increase of 1 percentage point in actual inflation
raises the cost of indexed programs 1 percent.
But if the faster rate of inflation were to become
embedded in expectations throughout the financial structure, interest rates, and ultimately federal debt service costs, would rise more than 10
percent from their current levels. We are fortunate that inflation expectations so far seem not to
have worsened, and long-term interest rates have
risen little in the past year despite a tightening in
money markets. Both fiscal and monetary policies have a role to play in maintaining this
situation.
For the longer term, fiscal policy also has a
special contribution to make in promoting growth
in our production or supply capabilities. Reducing the deficit is the surest way to raise national
saving, thereby lowering the average level of real
interest rates, boosting domestic investment, and
reducing our reliance on foreign capital. The
federal deficits of recent years are threatening
precisely because they have been occurring in
the context of private saving that is low by both
historical and international standards. In the
1980s, net personal plus business saving in the
285
United States has been about 2 percentage points
lower relative to GNP than its average in the
preceding three decades. Internationally, government deficits have been quite common among
the major industrial countries in the 1980s, but
private saving rates in most of these countries
have exceeded the deficits by very comfortable
margins. In Japan, for example, about 15 percent
of its private saving is estimated to have been
absorbed by government deficits, even though
the Japanese general government has been borrowing more than 2Vi percent of its gross domestic product in the 1980s. In contrast, about half of
private U.S. saving in the 1980s has been absorbed by the combined deficits of the federal
and state and local sectors.
Under these circumstances, such large and
persistent deficits are slowly but inexorably damaging the economy. The damage occurs because
deficits, which must be financed regardless of the
level of interest rates, tend to pull resources
away from interest-elastic private investment.
When the pool of private saving is small, federal
deficits and private investment tend to be forced
into competition and private investment loses.
To the extent that more resources are demanded
than are available to be financed, interest rates
will rise until sufficient excess demand is
crowded out of the private sector.
In the short run, the Federal Reserve can hold
down nominal interest rates, but the result
largely would be more inflation, with little or no
lasting effect on real interest rates and the allocation of real resources. All else equal, any
crowding out of productive investment damps
the growth of the nation's capital stock, and the
result is less capital per worker than would
otherwise have been the case. This will surely
engender a shortfall in labor productivity growth
and, with it, a shortfall in growth of the standard
of living.
Moreover, the higher real interest rates associated with increased borrowing by the Treasury
in the 1980s have been associated with a shift in
the composition of investment away from longlived assets, such as factories, and toward computers and other shorter-lived equipment. Evidence points to a recent decline in the average
service life of measured consumption spending
as well, and suggests a systematic tendency for
286 Federal Reserve Bulletin • April 1989
the average service life of all spending to move
inversely with real rates of interest. That is, the
higher are real interest rates, the heavier is the
concentration on spending that satisfies immediate desires or yields its returns quickly.
Not surprisingly, we have already experienced
a disturbing decline in the level of net investment
relative to GNP, as depreciation has speeded up,
reflecting shorter investment horizons. Net investment has fallen to 4.7 percent of GNP in the
1980s from an average level of 6.7 percent in the
1970s and even higher in the 1960s. The effects of
this decline in the net investment share has been
offset, to some extent, by increased productivity
of certain short-lived capital such as computers,
but nonetheless, slower investment has been
associated with weak productivity performance.
The U.S. net investment ratio is low, not only
by our own historical standards, but by international standards as well. International comparisons of net investment should be viewed with
some caution because of differences in the measurement of depreciation and in other technical
details. Nevertheless, the existing data indicate
that total net private and public investment as a
share of gross domestic product over the period
between 1980 and 1986 was lower in the United
States than in any of the other major industrial
countries except the United Kingdom.
Even this U.S. investment performance may
not be sustainable. The negative effects of federal
deficits on growth in the capital stock in the 1980s
may have been attenuated for a while by the
strength of aggregate output growth over much of
the past six years. Such rates of output growth
undoubtedly boosted sales and profit expectations and, hence, business investment, but they
cannot be maintained.
Furthermore, net inflows of foreign saving in
recent years have been an important addition to
aggregate saving. In the 1980s, our ability to tap
foreign saving has moderated the decline in the
investment-GNP ratio. While the federal deficit
rose about 2Vi percentage points relative to GNP
between the 1970s and the 1980s, net inflows of
foreign saving have mounted, on average, to
almost 2 percent of GNP—an unprecedented
level—from close to zero before.
We welcome the discipline and efficiency gains
of an open economy, but the continuation of
inflows of foreign saving at current levels may be
neither desirable nor possible. Evidence for the
United States and for other major industrial
nations over the past 100 years indicates that, for
most countries, such sizable foreign net capital
inflows have not persisted; hence, they may not
be a reliable substitute for domestic saving on a
long-term basis. In other words, domestic investment tends to be supported by domestic saving
alone in the long run.
Let me conclude by reiterating that the budget
deficit must be brought down. While it is beguiling to contemplate the healthy growth of recent
years in the context of large budget deficits, it is
fanciful to conclude that these deficits have no
adverse consequences. The prospect of a continuing imbalance between domestic saving and
investment—with the accompanying constraints
on growth and modernization of capital and the
substantial reliance on foreign saving—poses
risks for the future. Forward looking investors
may react to those risks today in financial markets. I do not underestimate the difficult decisions that you must make if we are to achieve the
necessary reduction in the deficit. But allowing
deficits to persist courts instability in the near
term and threatens potentially significant reductions over time in the U.S. standard of living.
Chairman Greenspan presented identical testimony before the House Committee on the Budget,
March 2, 1989.
287
Announcements
CHANGE IN THE
DISCOUNT RATE
In the light of inflationary pressures in the economy, the Federal Reserve Board announced on
February 24, 1989, an increase in the discount
rate from 6V2 percent to 7 percent, effective
immediately.
In taking the action, the Board voted on requests submitted by the Boards of Directors of
the Federal Reserve Banks of Boston, New
York, Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and
San Francisco. The Board subsequently approved similar requests by the Federal Reserve
Bank of Cleveland, also effective February 24;
and by the Federal Reserve Bank of Dallas,
effective February 27. The discount rate is the
interest rate that is charged depository institutions when they borrow from their District Federal Reserve Banks.
EXPRESSION OF SUPPORT
FOR REFORM AND RECOVERY
PROGRAM
The Federal Reserve Board expressed its support for the reform and recovery program announced on February 6, 1989, by President Bush.
Federal Reserve Chairman Alan Greenspan
said, "This comprehensive package of measures
to strengthen the thrift industry, and depository
institutions generally, should assure that the
problems that occurred in the savings and loans
will not happen again."
Chairman Greenspan urged prompt congressional consideration of the President's program.
AMENDMENT
TO REGULATION
H
The Federal Reserve Board approved on February 3, 1989, an amendment to Regulation H
(Membership of State Banking Institutions in the
Federal Reserve System) to facilitate public ac
cess to financial information regarding state
member banks and U.S. branches and agencies
of foreign banks.
The amendment to Regulation H requires that
banks make available to shareholders and the
public, upon request, one free copy of the full
year-end Reports of Condition and Income
("Call Reports") for the preceding two years or,
as a substitute, other specified financial reports,
which are routinely prepared by banks and that
contain information equivalent to that presented
in Call Reports.
The amendment requires state-licensed agencies of foreign banks and state-licensed branches
of foreign banks that are not insured by the
Federal Deposit Insurance Corporation to make
available, upon request, one free copy of the
three specified schedules from the two most
recent year-end Reports of Assets and Liabilities
of U.S. Branches and Agencies of Foreign
Banks.
Covered institutions must provide the information as soon as is reasonably possible, but not
later than April 1 of the year immediately following the end of the year to which the most recently
available information pertains. Covered institutions must notify shareholders and the public of
the availability of the information. The amendment takes effect April 1, 1989.
INTERPRETATION
TO REGULATION
H
The Federal Reserve Board announced on February 14, 1989, approval of an interpretation to
its regulations authorizing state member banks to
buy stock in some types of investment companies. The action provides state member banks
with parallel authority to that of national banks.
Under the interpretation to Regulation H, a
state member bank could buy stock in an investment company that invests solely in U.S. Treasury and agency obligations, state and municipal
obligations, corporate debt instruments, or other
288 Federal Reserve Bulletin • April 1989
securities that a member bank may purchase
directly. The interpretation also includes a prior
authorization to invest in the stock of money
market mutual funds.
PROPOSED
ACTION
The Federal Reserve Board announced for comment on February 24, 1989, a series of revised
proposals regarding the finality accorded automated clearinghouse (ACH) credit and debit
transactions processed by Federal Reserve
Banks. Comment was requested by March 31,
1989.
CHANGES IN BOARD
STAFF
The Federal Reserve Board announced on February 27, 1989, the appointment of J. Virgil
Mattingly, Jr. as its General Counsel to succeed
Michael Bradfield, who resigned, effective February 28. Mr. Mattingly had been Deputy General Counsel since 1985.
Alan Greenspan, Chairman, Board of Governors, noted that Mr. Bradfield played a vital role,
as a legal and policy advisor, in helping the Board
manage its way through a particularly difficult
period. "Mr. Bradfield's performance over the
turbulent years of the 1980s has been outstanding," Dr. Greenspan said.
The Board also announced on February 27,
1989, the appointment of Barry R. Snyder as
Assistant Inspector General in the Office of Inspector General.
Mr. Snyder has been a senior auditor since
1987. He holds certificates in information systems auditing and internal auditing, a bachelors
degree from West Virginia University, and a
masters degree from the University of Maryland.
AVAILABILITY
OF FEDERAL
RESERVE
STATISTICAL RELEASES THROUGH
COMPUTERIZED BULLETIN
BOARD
The Federal Reserve Board and the Department
of Commerce announced on February 27, 1989,
the availability of six of the Board's statistical
releases through Commerce's economic bulletin
board.
Commerce's computerized bulletin board,
which can be accessed by the public on a fee
basis, initially will provide four weekly and two
monthly Board releases. Weekly releases now
available are the following: H3 (Aggregate
Reserves), H6 (Money Supply), H8 (Bank
Credit), and H15 (Selected Interest Rates).
Monthly releases now available are G12.3 (Industrial Production) and G3 (Capacity Utilization).
Later this year, two other releases will be
available in this form: the monthly G19 (Consumer Installment Credit) and the weekly H4.1
(Factors Affecting Reserve Balances).
The annual subscription to access the Commerce Department's bulletin board is $25, which
includes two hours of free access time with
additional usage at $.10 a minute. The bulletin
board also carries major economic releases from
the Commerce Department and the Labor Department.
The historical data for the six releases now
available may be ordered in machine-readable
form through the National Technical Information
Service (NTIS), an agency of the Department of
Commerce. For a free Catalog of Data Files
produced by the Board of Governors of the
Federal Reserve System, write to the National
Technical Information Service, 5285 Port Royal
Road, Springfield, Virginia 22161 or telephone
(202) 487-4808 requesting PR790.
For further information about these releases,
contact either the Federal Reserve Board at (202)
452-3240 or the Commerce Department at (202)
377-1986.
CHANGE IN DATABASE USED FOR
COMPILING THE STATISTICAL
APPENDIX
TO THE BULLETIN
Starting with the March 1989 issue of the BULLETIN, some of the series in the statistical appendix, "Financial and Business Statistics" beginning on page Al, have been converted to a new
database that uses a different software package.
The new software will facilitate more precise
computation of weekly, monthly, quarterly, and
yearly averages. Because of the changes in averaging techniques, some small discontinuities will
Announcements
occur between current data that are stored in the
new system and previously published data that
were produced by the old system. The following
tables have been converted to the new system:
1.10, 1.17, 1.20, 1.22, 1.23, 1.24, 1.25, 1.26, 1.28,
1.30, 1.31, 1.32, 1.35, 1.37, 1.39, 1.40, 1.41, 1.42,
289
1.43, 1.45, 1.46, 1.47, 1.48, 1.50, 1.53, 1.54, 1.55,
1.56, 2.11, 2.15, 2.16, 2.17, 3.14, and 3.21. Over
the next year, the rest of the tables in the
statistical appendix will be converted, and announcements will be made from time to time of
tables that have been added to the new system.
290
Record of Policy Actions
of the Federal Open Market Committee
MEETING
HELD ON DECEMBER
Domestic
Policy
13-14,
1988
Directive
Information on employment and production reviewed at this meeting suggested that, apart from
the direct effects of the drought, economic activity had continued to expand at a vigorous pace
although some measures of demand, available on
a less current basis, still indicated more moderate
growth. Recent price data showed a fairly stable
inflation rate, partly because of the favorable
effects of earlier oil price declines, while labor
cost measures continued to indicate some acceleration from a year earlier.
Total nonfarm payroll employment rose
sharply in October and November. Following
declines in late summer, gains in manufacturing
employment were large in both months, with
particularly sizable increases recorded in the
machinery, electrical equipment, and lumber industries. Employment in service industries
picked up significantly in November from the
reduced pace of expansion in previous months.
The civilian unemployment rate edged up to 5.4
percent in November but remained in the lower
part of the narrow range that had prevailed since
early spring.
Industrial production advanced considerably
further in October and November after a strong
third quarter. Output of consumer goods continued to increase, on balance, at a fairly vigorous
pace, and production of materials posted another
solid gain in November. Output of business
equipment also increased in November, but revised data indicated that such growth had moderated appreciably in recent months. Total industrial capacity utilization edged up further in
November, and the operating rate in manufacturing reached its highest level since July 1979.
Growth of overall consumer spending had
moderated somewhat in recent months. Spending for nondurables had been sluggish in September and October, while outlays for durable goods
had declined, mainly because of reduced purchases of cars. On the other hand, preliminary
data for total retail sales in November indicated a
strong advance following a large, upward-revised
increase in October.
Indicators of business capital spending suggested a substantially slower rate of expansion in
October than earlier in the year. Shipments of
nondefense capital goods were little changed,
reflecting a fairly broad-based deceleration. Nonresidential construction edged down a little further, as petroleum drilling fell again and expenditures on commercial structures other than
office buildings declined. Inventory investment
in the manufacturing and wholesale sectors in the
third quarter remained about in line with the
growth of sales. In the retail sector, a buildup in
inventories in the third quarter largely reflected
additions to stocks by auto dealers; the expansion of nonauto stocks remained broadly in line
with sales. Housing starts strengthened in October after changing little on balance over the
previous several months.
Excluding food and energy, producer prices of
finished goods were unchanged in October after a
sizable increase in September. At the consumer
level, retail food prices eased in October and
energy prices were little changed, but prices of
other goods and services increased faster on
balance than in preceding months. On a yearover-year basis, consumer prices continued to
rise at about the 4Vi percent annual rate evident
since late 1987. The limited data available for
labor costs in the fourth quarter suggested that
increases in these costs continued to exceed
those of a year earlier.
Preliminary data for the nominal U.S. mer-
291
chandise trade deficit in October showed a
slightly smaller deficit than in September. The
value of total imports fell, with declines recorded
in capital goods, consumer goods, and oil. Exports also declined in October owing to lower
agricultural sales abroad. Boosted by higher aircraft shipments, nonagricultural exports were
unchanged from their September level. Economic activity accelerated or remained strong in
most of the major foreign industrial countries in
the third quarter but appeared to have slowed
somewhat in the fourth quarter.
In the foreign exchange markets, the tradeweighted value of the dollar in terms of the other
G-10 currencies had declined about 2Vi percent
on balance over the period since the Committee
meeting on November 1, bringing it to a level 8
percent below its peak of last August. Following
a brief respite in the week before the U.S.
elections, the dollar was under downward pressure over most of the intermeeting period. However, the dollar firmed somewhat near the end of
the period, as prospects were seen to be increasing for further reductions in the federal deficit
and a tightening of monetary policy.
At its meeting on November 1, the Committee
adopted a directive calling for no immediate
change in the degree of pressure on reserve
positions. These reserve conditions were expected to be consistent with growth of M2 and
M3 at annual rates of about 2Vi and 6 percent
respectively over the period from September to
December. The members agreed that somewhat
greater reserve restraint would, or slightly lesser
reserve restraint might, be acceptable depending
on indications of inflationary pressures, the
strength of the business expansion, the behavior
of the monetary aggregates, and developments in
foreign exchange and domestic financial markets.
In the course of implementing policy following
the November meeting, it became increasingly
evident that a slightly higher federal funds rate
than that anticipated at the time of the meeting
was associated with a substantially lower volume
of adjustment plus seasonal borrowing; for reasons that remained unclear, depository institutions exhibited a reduced willingness to come to
the discount window. To take account of this
change in borrowing behavior, and against a
backdrop of recent information suggesting that
the economic expansion retained considerable
vigor and potential for price pressures, the Manager for Domestic Operations adjusted the reserve paths on November 22 to incorporate a
lower level of borrowings, with the expectation
that federal funds would continue trading in the
slightly higher range that had prevailed recently.
Over the intermeeting period, the federal funds
rate rose nearly VA percentage point to around 8V2
percent.
Other short-term market interest rates generally advanced by more than the federal funds rate
over the intermeeting period, as expectations of a
tighter monetary policy were stimulated by
higher world oil prices, renewed weakness of the
dollar, and the release of strong domestic economic data. The prime rate was increased 50
basis points. Rates in long-term debt markets
also rose on balance, although by appreciably
less than short-term rates. Stock prices fell over
the first half of the intermeeting period, but most
indexes rebounded subsequently to nearly their
values at the time of the November 1 meeting.
Growth of the broader monetary aggregates
strengthened in November from the relatively
sluggish rates of expansion recorded in previous
months, especially for M2. The acceleration in
M2 reflected strong expansion in its liquid retail
components. M3 growth picked up somewhat
less, as bank credit growth and associated funding needs remained moderate. On average in
October and November, growth of M2 had been
somewhat faster, and that of M3 slightly faster,
than the Committee expected at the time of the
previous meeting. With demand deposits running off again, Ml, which had increased only
slightly on balance since midsummer, was virtually unchanged in November.
The staff projection prepared for this meeting
suggested that, after adjustment for the effects of
the drought, economic growth in the current
quarter might be near the vigorous pace of the
third quarter but that expansion in 1989 was
likely to moderate on balance. However, to the
extent that expansion of final demand at a pace
that could foster higher inflation was not accommodated by monetary policy, pressures would be
generated in financial markets that would tend to
restrain domestic spending. The staff continued
to project some slowing in the growth of con-
292 Federal Reserve Bulletin • April 1989
sumer spending, sharply reduced expansion of
business fixed investment, and sluggish housing
activity. Foreign trade was expected to make an
important contribution to growth in domestic
output, despite some damping effects from the
dollar appreciation that had occurred earlier in
1988 and somewhat slower growth abroad. The
staff also anticipated some continuing cost pressures over the next several quarters, especially
owing to reduced margins of unutilized labor and
other production resources.
In the Committee's discussion of the economic
situation and outlook, the members focused on
indications of continuing strength in the economic expansion. While some signs of prospective slowing in the expansion remained in evidence, recent data on employment and
production suggested that the economy retained
considerable momentum. A number of members
commented that business activity had remained
more robust than had seemed likely earlier, and
many expressed concern that continued expansion at a relatively rapid pace raised the risk that
inflation would intensify, given already high rates
of capacity utilization in many industries and
tight labor markets in many parts of the country.
On balance, while somewhat more moderate
growth continued to be viewed as a reasonable
expectation for 1989, most members interpreted
recent developments as suggesting that, in the
absence of some added policy restraint, any
moderation in the expansion might well prove to
be insufficient to forestall a pickup in inflation,
much less to permit progress to be made in
reducing inflation over time. At the same time,
some members cautioned that the risk of a recession stemming from a substantial tightening of
policy should not be overlooked; in addition to
job and output losses, a recession could impede
progress in bringing the federal budget into balance and could have severe repercussions on the
viability of highly leveraged borrowers and many
depository institutions.
In their review of developments bearing on the
economic outlook, members took account of
indications that overall domestic demands were
being well maintained, including some recent
strength in retail sales, and that exports remained
on a clear uptrend. High levels of activity continued to characterize business conditions in
many areas. Manufacturing was benefiting from
growing export markets and the substitution of
domestic products for higher-priced imports;
moreover, many domestic producers had not yet
exploited potential markets abroad. There were
indications of some softening in business fixed
investment, including a moderation of growth in
outlays for equipment and reduced construction
activity in a number of areas, notably those most
affected by weak energy markets and previous
overbuilding. Nonetheless, business contacts
suggested that overall investment spending
would continue to benefit from ongoing efforts in
many industries to modernize or expand production facilities. With regard to housing construction, members reported somewhat depressed
conditions in a number of areas, but the latest
statistics for the nation as a whole were on the
firm side of recent trends.
In the course of the Committee's discussion,
members gave a good deal of attention to the
outlook for inflation. On the positive side, inflationary expectations did not appear to be worsening, as evidenced for example by the stability
of long-term bond markets, and strong competitive pressures were encouraging business firms
to persist in their efforts to hold down costs.
Such competition continued to make it difficult
for many businesses to pass on increasing costs
through higher prices and tended to harden business resistance to demands for higher wages.
With regard to labor costs, reports from local
areas suggested that nonwage components were
rising at a faster rate than wages but that large
increases in the latter still were infrequent despite some shortages of labor.
While the members saw no clear evidence in
current aggregate measures of prices that the
overall rate of inflation was worsening, key indicators of labor compensation suggested some
uptrend and many members commented that the
risks were in the direction of greater inflation,
given the apparent growth of the economy at a
pace above its long-run potential together with
the relatively full employment of production resources. These risks would be heightened if the
dollar were to decline significantly from current
levels. Commodity prices appeared to have leveled off, but they showed little sign of reversing
earlier increases, which themselves might not yet
Record of Policy Actions of the Federal Open Market Committee
have been passed through fully to consumer
prices. Of particular concern was the prospect
that, in the absence of a timely move to restraint,
greater inflation would become embedded in the
economy, especially in the labor-cost structure.
A new wage-price spiral would then be very
difficult to avoid and the critical task of bringing
inflation under control would be prolonged and
much more disruptive. A worsening of inflationary pressures and inflation expectations, if
unchecked, eventually would foster higher interest rates and would lead to growing imbalances
and distortions in the economy and almost certainly to a downturn at some point in overall
economic activity.
At its meeting in late June, the Committee
reviewed its basic policy objectives for growth of
the monetary and debt aggregates in 1988 and
established tentative objectives for expansion of
those aggregates in 1989. For the period from the
fourth quarter of 1987 to the fourth quarter of
1988, the Committee reaffirmed the ranges of 4 to
8 percent that it had set in February for growth of
both M2 and M3. The monitoring range for
expansion of total domestic nonfinancial debt in
1988 was left unchanged from its February specification of 7 to 11 percent. For the year through
November, M2 grew at an annual rate a little
below, and M3 at a rate a little above, the
midpoint of their annual ranges. Expansion of
total domestic nonfinancial debt appeared to
have moderated to a pace somewhat below the
midpoint of its range. For 1989 the Committee
agreed in June on tentative reductions to ranges
of 3 to 7 percent for M2 and 3'/2 to IVi percent for
M3. The monitoring range for growth of total
domestic nonfinancial debt was lowered to 6Vi to
101/2 percent for 1989. It was understood that all
the ranges for next year were provisional and
that they would be reviewed in February 1989 in
the light of intervening developments. With respect to Ml, the Committee reaffirmed in June its
earlier decision not to set a specific target for
growth in 1988, and it also decided not to establish a tentative range for 1989.
In the Committee's discussion of policy for the
near term, nearly all the members supported a
proposal that called for an immediate increase in
the degree of reserve pressure to be followed by
some further tightening at the start of 1989 unless
293
incoming evidence on the behavior of prices, the
performance of the economy, or conditions in
financial markets differed greatly from current
expectations. The appropriate degree of reserve
restraint also would be reevaluated in the event
of an increase in the discount rate. While the
members recognized that the degree of monetary
restraint could be overdone, they generally felt
that the risks of a downturn stemming from the
limited tightening under consideration were extremely small and needed to be accepted in light
of what they perceived as the much greater threat
of a recession if inflation were allowed to intensify. Expressing a differing view, one member
commented that further restraint was undesirable
in light of that member's expectation that economic growth over the next several quarters was
likely to be at a pace consistent with progress
against inflation.
While all but one member agreed on the need
for some further monetary restraint, views differed to some extent with regard to the appropriate degree and timing of such restraint. A number
of members indicated a preference for a stronger
immediate move to greater restraint, given their
perception of the urgency of countering inflation
expectations and inflationary pressures in the
economy. Other members did not disagree that
inflation was a serious problem, but they preferred a more gradual approach to further restraint in order to minimize potential market
disturbances, especially around the year-end,
and to facilitate adjustments to rising interest
rates. It also was suggested that more marked
tightening at this time could have the unintended
effect of fostering an escalation of interest rates
in world markets, with especially undesirable
effects on many less developed debtor nations.
In the discussion of adjustments in the provision of reserves through open market operations,
many members commented on how a possible
increase in the discount rate might interact with
such operations. Several favored the implementation of a tighter policy through the discount
rate in order to signal more clearly than through
a gradual tightening of reserve conditions the
System's ongoing commitment to an anti-inflationary policy. Other members expressed concern that, under immediately prevailing circumstances, an increase in the discount rate might
294 Federal Reserve Bulletin • April 1989
have exaggerated repercussions on domestic and
international financial markets. The Committee
concluded that in the event of an increase in the
discount rate during the intermeeting period the
members would need to consult regarding the
implications for the conduct of open market
operations.
In the course of the Committee's discussion,
the members took account of a staff analysis
which suggested that monetary growth was likely
to remain relatively restrained in the months
immediately ahead, especially if reserve conditions were tightened. An increase in the degree of
reserve restraint in line with that contemplated
by the Committee would reduce growth of M2
somewhat from its recent pace, assuming a typically delayed adjustment in deposit rates to
rising short-term market interest rates, while
growth of M3 would continue at a somewhat
higher rate than that of M2. Several members
observed that restrained monetary growth would
continue to be desirable, and some expressed
concern that in the absence of some tightening of
reserve conditions such growth might accelerate,
with inflationary implications under foreseeable
economic conditions. On the other hand, in light
of the limited growth in the monetary base and
reserves in the past several months, some other
members cautioned that sharp additional restraint on reserve provision could have an undesirably restraining effect on monetary growth and
the economy.
With regard to the proposed move toward
further monetary restraint shortly after the yearend, it was understood that such firming would
be implemented unless emerging economic and
financial conditions were to differ markedly from
current expectations. Should unanticipated developments of that kind occur or should the
Board of Governors approve an increase in the
discount rate during the intermeeting period, the
Chairman would call for a special consultation of
the Committee. On the question of any additional
adjustment in policy, the members generally
agreed that policy implementation should remain
especially alert to incoming information that
might call for further firming beyond that already
contemplated. In light of the tightening of reserve
conditions after today's meeting and the presumption that some further monetary restraint
would be implemented later during the intermeeting period, the members decided to raise the
intermeeting range for the federal funds rate by 1
percentage point to 7 to 11 percent. With such an
increase, federal funds would be expected to
trade at rates averaging closer to the middle of
the range. That range provides one mechanism
for initiating consultation of the Committee when
its boundaries are persistently exceeded.
At the conclusion of the Committee's discussion, all but one of the members indicated that
they favored or could accept a directive that
called for some immediate firming of reserve
conditions, with some further tightening to be
implemented at the start of 1989, assuming that
economic and financial conditions remained reasonably consistent with current expectations. In
keeping with the Committee's usual approach to
policy, the conduct of open market operations
would be subject to further adjustment during the
intermeeting period based on indications of inflationary pressures, the strength of the business
expansion, the behavior of the monetary aggregates, and developments in foreign exchange and
domestic financial markets. Depending on such
developments, some added reserve restraint
would be acceptable, or some slight lessening of
reserve pressure might be acceptable. The reserve conditions contemplated at this meeting
were expected to be consistent with growth of
M2 and M3 at annual rates of around 3 percent
and 6V2 percent respectively over the four-month
period from November 1988 to March 1989.
At the conclusion of the meeting, the following
domestic policy directive was issued to the Federal Reserve Bank of New York:
The information reviewed at this meeting suggests
that, apart from the direct effects of the drought,
economic activity has continued to expand at a vigorous pace. Total nonfarm payroll employment rose
sharply in October and November, with sizable increases indicated in manufacturing after declines in
late summer. The civilian unemployment rate, at 5.4
percent in November, remained in the lower part of
the range that has prevailed since early spring. Industrial production advanced considerably in October and
November. Housing starts turned up in October after
changing little on balance over the previous several
months. Growth in consumer spending has been somewhat more moderate in recent months, and indicators
of business capital spending suggest a substantially
Record of Policy Actions of the Federal Open Market Committee
slower rate of expansion than earlier in the year. The
nominal U.S. merchandise trade deficit narrowed further in the third quarter. Preliminary data for October
indicate a small decline from the revised deficit for
September. The latest information on prices and
wages suggests little if any change from recent trends.
Interest rates have risen since the Committee meeting on November 1, with appreciable increases occurring in short-term markets. In foreign exchange markets, the trade-weighted value of the dollar in terms of
the other G-10 currencies declined significantly further
on balance over the intermeeting period.
Expansion of M2 and M3 strengthened in November
from relatively slow rates of growth in previous
months, especially in the case of M2. Thus far this
year, M2 has grown at a rate a little below, and M3 at
a rate a little above, the midpoint of the ranges
established by the Committee for 1988. Ml has increased only slightly on balance over the past several
months, bringing growth so far this year to 4 percent.
Expansion of total domestic nonfinancial debt for the
year thus far appears to be at a pace somewhat below
that in 1987 and around the midpoint of the Committee's monitoring range for 1988.
The Federal Open Market Committee seeks monetary and financial conditions that will foster price
stability over time, promote growth in output on a
sustainable basis, and contribute to an improved pattern of international transactions. In furtherance of
these objectives, the Committee at its meeting in late
June reaffirmed the ranges it had established in February for growth of 4 to 8 percent for both M2 and M3,
measured from the fourth quarter of 1987 to the fourth
quarter of 1988. The monitoring range for growth of
total domestic nonfinancial debt was also maintained
at 7 to 11 percent for the year.
For 1989, the Committee agreed on tentative ranges
for monetary growth, measured from the fourth quarter of 1988 to the fourth quarter of 1989, of 3 to 7
percent for M2 and 3 V2 to IV2. percent for M3. The
Committee set the associated monitoring range for
growth of total domestic nonfinancial debt at 6V2 to
IOV2 percent. It was understood that all these ranges
were provisional and that they would be reviewed in
early 1989 in the light of intervening developments.
With respect to Ml, the Committee reaffirmed its
decision in February not to establish a specific target
for 1988 and also decided not to set a tentative range
for 1989. The behavior of this aggregate will continue
to be evaluated in the light of movements in its
velocity, developments in the economy and financial
markets, and the nature of emerging price pressures.
In the implementation of policy for the immediate
future, the Committee seeks to increase somewhat the
existing degree of pressure on reserve positions. Taking account of indications of inflationary pressures, the
strength of the business expansion, the behavior of the
monetary aggregates, and developments in foreign
exchange and domestic financial markets, somewhat
295
greater reserve restraint would, or slightly lesser reserve restraint might, be acceptable in the intermeeting period. The contemplated reserve conditions are
expected to be consistent with growth of M2 and M3
over the period from November through March at
annual rates of about 3 and 6V2 percent, respectively.
The Chairman may call for Committee consultation if
it appears to the Manager for Domestic Operations
that reserve conditions during the period before the
next meeting are likely to be associated with a federal
funds rate persistently outside a range of 7 to 11
percent.
Votes for this action: Messrs. Greenspan, Corrigan, Angell, Black, Forrestal, Heller, Hoskins,
Johnson, Kelley, LaWare, and Parry.Vote against
this action: Ms. Seger.
Ms. Seger dissented because she viewed current business indicators as already pointing on
balance to slower economic expansion, and in
the circumstances she did not feel that any added
monetary restraint was needed to foster economic conditions consistent with progress in
reducing inflationary pressures. In the context of
already restrained monetary growth, she was
concerned that a further increase in the degree of
reserve pressure would pose unnecessary risks
to interest-sensitive sectors of the economy and
ultimately to the sustainability of the expansion
itself. She expressed particular concern that the
higher interest rates implied by greater monetary
restraint would aggravate the condition of financially troubled thrift institutions.
At this meeting the Committee reviewed its
current procedure for implementing open market
operations against the background of a marked
change over recent months in the relationship
between the level of adjustment plus seasonal
borrowing and the federal funds rate. The current
procedure of focusing on the degree of reserve
restraint, as indexed by borrowed reserves, had
been implemented with some flexibility in recent
weeks in light of the substantial shortfall of
borrowing in relation to expectations. The policy
results had been satisfactory, but some members
proposed that consideration be given to focusing
more directly on the federal funds rate in carrying out open market operations, particularly if
uncertainty about the borrowing-federal funds
relationship were to persist. Others felt that
despite its drawbacks, the current procedure had
296 Federal Reserve Bulletin • April 1989
a number of advantages, including that of allowing greater scope for market forces to determine
short-term interest rates. The Committee concluded that no changes in the current procedure
were needed at this time, but that flexibility
would remain important in accomplishing Committee objectives under changing circumstances.
297
Legal Developments
INTERPRETATION
OF REGULATION
H
The Board of Governors has issued an interpretation
of Regulation H, Membership of State Banking Institutions in the Federal Reserve System, 12 C.F.R. Part
208, authorizing state member banks to purchase and
hold for their own accounts stock of investment companies that are authorized to invest in certain securities that the banks may purchase directly and no
others, but that may also enter into futures, forwards,
options, repurchase agreements, and securities lending contracts relating to assets the banks may purchase
directly. This action will expand the investment authority of state member banks, and will provide those
institutions an opportunity to increase the diversity of
their investments. Because this authority includes
authority for state member banks to invest in stock of
money market mutual funds (MMMFs), the Board has
also rescinded 12 C.F.R. 208.123. That interpretation
authorized state member banks to invest in stock of
MMMFs.
Effective February 17, 1989, pursuant to authority
under section 9 of the Federal Reserve Act, 12 U.S.C.
§§ 321 et seq., the Board is amending 12 C.F.R. Part
208 as follows:
Part 208—Membership
of State
Banking
Institutions in the Federal Reserve System
1. The authority citation for Part 208 continues to read
as follows:
Authority: Sections 9, 11, and 21 of the Federal
Reserve Act (12 U.S.C. §§ 321-338, 248, and 486,
respectively); sections 4 and 13(j) of the Federal Deposit Insurance Act (12 U.S.C. § 814 and 1823(j),
respectively); section 7(a) of the International Banking
Act of 1978 (12 U.S.C. § 3105); sections 907 - 910 of
the International Lending Supervision Act of 1983
(12 U.S.C. § 3906 - 3909); sections 2, 12(b), 12(g),
12(i), 15B(c)(5), 17, 17A, and 23 of the Securities
Exchange Act of 1934 (15 U.S.C. § 78b, 78/(b), 78/(g),
78/(i), 78o-4(c)(5), 78q, 78q-l, and 78w, respectively);
and section 5155 of the Revised Statutes (12 U.S.C.
§ 36) as amended by the McFadden Act of 1927.
2. Section 208.123 is removed.
3. Part 208 is amended by adding Section 208.124 to
read as follows:
Section 208.124—Purchase of investment
company stock by a state member bank
(a) Scope. The Board of Governors has been asked
whether a state member bank may purchase and hold
for its own account stock of investment companies
(mutual funds) whose portfolios consist entirely of
securities that state member banks may purchase
directly, and futures, forwards, options, repurchase
agreements and securities lending contracts relating to
those securities.
(b) Investment authority. The National Bank Act,
12 U.S.C. § 24(7), provides that a national bank may
purchase for its own account investment securities
under such limits and restrictions as the Comptroller
of the Currency may prescribe. The statute defines
"investment securities" to mean marketable obligations evidencing indebtedness of any person, partnership, association, or corporation in the form of bonds,
notes, and debentures. The Act further limits the
holdings of securities of any one issuer to an amount
equal to ten percent of the capital stock and surplus of
the bank. These limits, however, do not apply to
obligations issued by the United States, general obligations of any state or any political subdivision of any
state, and to certain obligations of federal agencies.
The restrictions of 12 U.S.C. 24(7) also apply to state
member banks under 12 U.S.C. § 335.
(c) Authorization. The Board has determined that a
state member bank may purchase and hold for its own
account stock of any investment company (including a
money market mutual fund), subject to the following
conditions:
(1) Investment authority of the investment company. The investment company may have authority,
as stated in the investment objectives of its current
prospectus, to invest in the following securities and
no others: United States Treasury and agency obligations, general obligations of states and municipalities, corporate debt securities, and any other securities designated in 12 U.S.C. § 24(7) as eligible for
purchase by national banks that state member banks
298
Federal Reserve Bulletin • April 1989
are authorized to purchase directly. The investment
company may have authority, as stated in the investment objectives of its current prospectus, to enter into
futures, forwards and option contracts relating to the
above securities when those futures, forwards and
option contracts are to be used solely to reduce interest
rate risk and not for speculation. The investment company may also have authority, as stated in the investment objectives of its current prospectus, to enter into
repurchase agreements and securities lending contracts
relating to the securities designated above if those
contracts comply with policy statements adopted by
the Federal Financial Institutions Examination Council. See 45 Federal Register 18,120 (March 20, 1980)
and Federal Reserve Regulatory Service 3-1535, 3 1579.1, and 3-1579.5.
(2) Limits on investment.
(i) If the portfolio of the investment company in
which a state member bank may invest consists
solely of obligations that the bank could purchase
without restriction as to amount, or solely of
those obligations and futures, forwards, options,
repurchase agreements and securities lending
contracts relating solely to those obligations, no
express limit is placed on investment.
(ii) If the portfolio of the investment company in
which a state member bank may invest includes
any securities that the bank could purchase subject to a restriction as to amount, the pro-rata
share of holdings of such securities of an issuer
indirectly held by a state member bank through its
holdings of investment company stock (including
money market mutual funds), when aggregated
with the direct investment in securities of that
issuer by the bank, must not exceed the investment limit.
(3) Registration of publicly offered investment company stock. Except as provided in section (c)(4),
investment company stock purchased by a state
member bank must be of an investment company
registered with the Securities and Exchange Commission under the Investment Company Act of 1940
and the Securities Act of 1933.
(4) Privately offered fund. The stock purchased may
be of a privately offered fund if the sponsor of the
fund is a subsidiary of a bank holding company, and
if the stock of the fund is held solely by subsidiaries
of the bank holding company.
(5) Proportionate and undivided interest. The stock
purchased must represent an equitable, equal, and
proportionate undivided interest in the underlying
assets of the investment company.
(6) Stockholders shielded from liability. The stockholders must be shielded from personal liability for acts and
obligations of the investment company.
(7) Bank investment policy and procedures.
(i) The investment policy of the bank, as formally
approved by its board of directors, must specifically provide for investment in investment company stock. The investment policy must establish
procedures, standards, and controls that relate
specifically to investments in investment company stock.
(ii) Prior approval of the board of directors of the
bank must be obtained for investment in a specific
investment company and recorded in the official
board minutes.
(iii) Unless the investment objectives of the investment companies, as stated in their current
prospectuses, restrict investments to those obligations that the state member bank could purchase without restrictions to amount, the bank
must review its holdings of investment company
stock at least quarterly to ensure that investments
have been made in accordance with established
bank policies and legal requirements.
(8) Reporting and accounting. Reporting of holdings
of investment company stock must be consistent
with established standards for "marketable equity
securities." Accordingly, the instructions for the
quarterly Reports of Condition and Income and the
requirements of the Financial Accounting Standards
Board Statement No. 12 must be followed.
(i) Holdings of investment company stock must be
reported as "All other" securities on Schedule
RC-B, Item 4(b) on the quarterly Reports of
Condition, unless otherwise directed.
(ii) In no case may the carrying value of investment company stock be increased above aggregate cost as a result of net unrealized gains.
Holdings of investment company stock must be
reported in the Reports of Condition at the lower
of their aggregate cost or aggregate market value,
determined as of the report date.
(iii) Sales fees, both "front end load" and "deferred contingency," must be deducted in calculating market value.
(iv) Any net unrealized loss or increase in a
previously recorded net unrealized loss must be
charged directly against "undivided profits and
capital reserves." Subsequent reductions of any
net unrealized loss must be credited directly to
"undivided profits and capital reserves."
(v) A loss on an individual investment that is other
than temporary, as that term is used for purposes
of FASB Statement No. 12, must be charged to
"noninterest expense" on Schedule RI of the
Income Statement.
(d) Evaluation of investment risk. Investments in stock
of investment companies and direct investments in
Legal Developments
debt securities are not treated the same for accounting,
tax, and other purposes. Consequently, state member
banks should evaluate investments in investment company stock in light of these differences and give special
attention to the risks these differences impose. 1
(e) No effect on state law. This interpretation shall not
be construed as exempting a state member bank from
any provision of state law.
AMENDMENT
TO REGULATION
H
The Board of Governors is adopting three technical
amendments to 12 C.F.R. Part 208, its Regulation H.
The first change makes it clear that, if a state member
bank has filed its Report of Condition and Income
("Call Report") electronically, the signatures on the
published copy of the Call Report must be the same as
the signatures on the hard copy retained in the bank's
files. The second change replaces the current requirement that a state member bank submit a certification of
publication to its Reserve Bank with a requirement
that it retain a copy of its published Call Report in its
files and make it available to examiners upon request.
The last change deletes outdated references in Regulation H to a report form concerning state member
bank affiliates.
Effective March 1, 1989, pursuant to the Board's
authority under section 9 of the Federal Reserve Act,
12 U.S.C. §§321 et seq., the Board is amending
12 C.F.R. Part 208 as follows:
Part 208—Membership of State Banking
Institutions in the Federal Reserve System
299
Securities Exchange Act of 1934 (15 U.S.C. §§ 78b,
78/(b), 78/(g), 78/(i), 78o-4(c)(5), 78q, 78q-l, and 78w,
respectively) ; and section 5155 of the Revised Statutes
(12 U.S.C. § 36) as amended by the McFadden Act of
1927.
2. Section 208.10(a)(3) is amended by changing the
words "(Form F.R. 105a)" to read "(Forms FFIEC
031-034)" and by revising the last sentence to read as
follows:
Section 208.10—[Amended]
(a)
^ H4 ^
QJ ***
All signatures shall be the same in the published
statement (although they may be typed or otherwise
copied on the report for publication):
(i) as in the original report submitted to the
Federal Reserve Bank if the bank does not submit
its report of condition electronically, or
(ii) as retained in the bank's files in hard copy if
the bank has filed its report of condition electronically. The hard copy retained in the bank's file
must be made available to examiners upon request.
3. Section 208.10(a)(4) is revised to read as follows:
^ ***
A copy of the printed report shall be retained in the
bank's files and made available to examiners upon
request.
1. The authority citation for 12 C.F.R. Part 208 continues to read as follows:
Authority: Sections 9,11(a), 11(c), 19, 21, 25, and 25(a)
of the Federal Reserve Act, as amended (12 U.S.C.
§§ 321-338, 248(a), 248(c), 461, 481-486, 601, and 611,
respectively); sections 4 and 13(j) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1814
and 1823(j), respectively); section 7(a) of the International Banking Act of 1978 (12 U.S.C. § 3105); sections 907-910 of the International Lending Supervision
Act of 1983 (12 U.S.C. §§ 3906-3909); sections 2,
12(b), 12(g), 12(i), 15B(c)(5), 17, 17A, and 23 of the
1. The Board has issued a cautionary letter in conjunction with this
interpretation. This letter recommends that a state member bank
avoid undue concentration of investments in the stock of any fund or
family of funds and apprises state member banks of the accounting and
tax treatment of holding investment company stock. See Federal
Reserve Regulatory Service 3-416.16.
4. Section 208.10(b) is amended by deleting the first
sentence in paragraph (2) and removing the words
"attached to the certificate on Form F.R. 220a" at the
end of paragraph (3).
AMENDMENT TO REGULATION
H
The Board of Governors is amending 12 C.F.R. Part
208, its Regulation H. The purpose of the amendment
is to make available to the public information regarding the financial condition of state member banks and
U.S. branches and agencies of foreign banks. The
amendment requires state member banks to make
banks to make available to shareholders and any
member of the public, upon request, information re-
300 Federal Reserve Bulletin • April 1989
garding each such bank's financial condition in the
form of the bank's two most recent year-end Reports
of Condition and Income ("Call Reports") (OMB No.
7100-0036). As alternatives to furnishing the Call Reports, at each bank's option, persons requesting such
information may be given one of the following:
(1) specified schedules from the two most recent
year-end Call Reports;
(2) in the case of a bank required to file statements
and reports pursuant to Regulation H, a copy of the
bank's annual report to shareholders for meetings at
which directors are elected;
(3) copies of independently audited financial statements (accompanied by a company of the certificate
or report of the independent accountant) if they
contain information comparable to that presented in
the two most recent year-end Call Report schedules
specified for alternative (1) above; or
(4) in the case of a state member bank that is the
only bank subsidiary of a bank holding company,
that is majority owned by that bank company, and
that has assets equal to 95 percent or more of the
bank holding company's consolidated total assets:
(A) a copy of the annual report of the one-bank
holding company prepared in conformity with
the regulations of the Securities and Exchange
Commission ("SEC"); or
(B) if the holding company has assets of $150
million or more, copies of those portions of the
bank holding company's two most recent yearend Form FR-Y-9C, "Consolidated Financial
Statements for Bank Holding Companies With
Total Consolidated Assets of $150 Million or
More, or With More Than One Subsidiary
Bank" (OMB No. 7100-0128), that are comparable to the Call Report schedules specified for
alternative (1) above.
The amendment also requires state licensed agencies
of foreign banks and state licensed branches of such
banks that are not insured by the Federal Deposit
Insurance Corporation to make available, upon request, the following schedules from the two most
recent year-end Reports of Assets and Liabilities of
U.S. Branches and Agencies of Foreign Banks
("Foreign Branch and Agency Call Reports") (OMB
No. 7100-0032): Schedules RAL (Assets and Liabilities), E (Deposit Liabilities and Credit Balances), and
P (Other Borrowed Money).
Effective April 1, 1989, pursuant to the Board's
authority under section 11 of the Federal Reserve Act
of 1913, as amended (12 U.S.C. § 248), and section 7
of the International Banking Act of 1978 (12 U.S.C.
§ 3105(b)), the Board amends 12 C.F.R. Part 208 as
follows:
Part 208—Membership of State Banking
Institutions in the Federal Reserve System
1. The authority citation for Part 208 continues to read
as follows:
Authority: Sections 9, 11, and 21 of the Federal
Reserve Act (12 U.S.C. §§ 321-338, 248, and 486,
respectively); sections 4 and 13(j) of the Federal Deposit Insurance Act (12 U.S.C. §§ 1814 and 1823(j),
respectively); section 7(a) of the International Banking
Act of 1978 (12 U.S.C. § 3105); sections 907 - 910 of
the International Lending Supervision Act of 1983
(12 U.S.C. §§ 3906 - 3909); sections 2, 12(b), 12(g),
12(i), 15B(c)(5), 17, 17A, and 23 of the Securities
Exchange Act of 1934 (15 U.S.C. §§ 78b, 78/(b), 78/
(g), 78/(i), 78o-4(c)(5), 78q, 78q-l, and 78w, respectively); and section 5155 of the Revised Statutes
(12 U.S.C. § 36) as amended by the McFadden Act of
1927.
2. Section 208.17 is added to read as follows:
Section 208.17—Disclosure of financial
information by state member banks
(a) Purpose and scope. The purpose of this section is
to facilitate the dissemination of publicly available
information regarding the financial condition of state
member banks, state licensed agencies of foreign
banks, and state licensed branches of foreign banks
that are not insured by the Federal Deposit Insurance
Corporation. This section requires all state-chartered
banks that are members of the Federal Reserve System and all other covered institutions:
(1) to make year-end Call Reports or Reports of
Assets and Liabilities of U. S. Branches and Agencies of Foreign Banks or, in the case of state
member banks, other alternative financial information, available to shareholders, customers, and the
general public upon request; and
(2) to advise shareholders and the public of the
availability of this information. This section does
not amend or modify the publication requirements
of section 208.10, or any other section of this
regulation.
(b) Definitions.
For purposes of this section, the following definitions
apply:
(1) "Call Report" means the Consolidated Reports
of Condition and Income (OMB No. 7100-0036) filed
pursuant to 12 U.S.C. § 324 and section 208.10 of
this regulation (12 C.F.R. § 208.10).
Legal Developments
(2) "State member bank" means a bank that is
chartered by a State and is a member of the Federal
Reserve System.
(3) "Other covered institutions" means state licensed agencies of foreign banks, or state licensed
branches of foreign banks that are not insured by the Federal Deposit Insurance Corporation.
(c) Availability of financial information.
(1) Shareholders. Each state member bank shall
advise its shareholders, by a written announcement,
which may be included in the notice of the annual
shareholders' meeting, that one copy of certain
financial information is available free of charge upon
request. The announcement shall include, at a minimum, an address or telephone number to which
requests may be directed.
(2) General public. State member banks and other
covered institutions shall use reasonable means at
their disposal to advise the public of the availability
of information pursuant to this section. Bankers'
banks, as defined by the Federal Reserve Act, as
amended by the Monetary Control Act of 1980 (Title
I of Pub. L. 96-221), and 12 C.F.R. 204.121, are
exempt from this requirement. The notification to
the public shall state that one copy of the information is available free of charge upon request and
state an address or telephone number to which
requests may be directed.
(d) Financial information to be provided by state
member banks. The bank shall have discretion to
determine which type of information, identified in this
subsection, to release. The bank shall make the information it chooses to release available as soon as is
reasonably possible but not later than April 1 of the
year immediately following the end of the year to
which the most recently available information pertains. State member banks shall fulfill the requirements of this section by providing, upon request, at
least one free copy to each requestor of the following
information:
(1) copies of their entire Call Report for the most
recent year end and the prior year end, excluding
any information for which confidential treatment is
permitted pursuant to the Call Report instructions;
or
(2) copies of only the following schedules from their
Call Reports for the most recent year end and the
prior year end, excluding any information for which
confidential treatment is permitted pursuant to the
Call Report instructions:
(i) Schedule RC (Balance Sheet);
(ii) Schedule RC-N (Past Due and Nonaccrual
Loans and Leases);
(iii) Schedule RI (Income Statement);
301
(iv) Schedule RI-A (Changes in Equity Capital);
and
(v) Schedule RI-B (Charge-offs and Recoveries
and Changes in Allowance for Loan and Lease
Losses)—Part I may be omitted; or
(3) in the case of a bank required to file statements
and reports pursuant to the Board's Regulation H a
copy of the bank's annual report to shareholders for
meetings at which directors are to be elected or the
bank's annual report; or
(4) in the case of a bank with independently audited
financial statements, copies of the audited financial
statements and the certificate or report of the
independent accountant if such statements contain
information for the two most recent year ends
comparable to that specified in subsection (d)(2);
or
(5) in the case of a bank that is the only bank
subsidiary of a bank holding company, that is majority owned by that bank holding company, and
that has assets equal to 95 percent or more of the
bank holding company's consolidated total assets, a
copy of either:
(i) the annual report of the bank holding company
prepared in conformity with the regulations of the
Securities and Exchange Commission; or
(ii) if the holding company as consolidated assets
of $150 million or more, the sections in the bank
holding company's consolidated financial statements for the most recent year end and the prior
year end on Form FR-Y-9C ("Consolidated Financial Statements for Bank Holding Companies
With Total Consolidated Assets of $150 Million or
More, or With More Than One Subsidiary Bank"
(OMB No. 7100-0128)) prepared pursuant to the
Board's Regulation Y, and comparable to the Call
Report schedules enumerated in paragraph (d)(2)
of this section.
(e) Financial information to be provided by other
covered institutions. Other covered institutions shall
fulfill the requirements of this section by providing,
upon request, at least one free copy to each requestor
of the following schedules from the Report of Assets
and Liabilities of U. S. Branches and Agencies of
Foreign Banks (OMB No. 7100-0032) for the most
recent year end and the prior year end:
(1) Schedule RAL (Assets and Liabilities);
(2) Schedule E (Deposit Liabilities and Credit Balances);
(3) Schedule P (Other Borrowed Money).
The institution shall make the information available
as soon as is reasonably possible but not later than
April 1 of the year immediately following the end of
the year to which the most recently available information pertains.
302
Federal Reserve Bulletin • April 1989
(f) Disclaimer. The following legend shall be included
with any financial information provided pursuant to
this section: "This financial information has not been
reviewed, or confirmed for accuracy or relevance, by
the Federal Reserve System."
(g) This section is not intended to create a private right
of faction against any institution disclosing documents
pursuant to this section.
ORDERS ISSUED UNDER THE BANK
COMPANY ACT
HOLDING
Orders Issued Under Section 3 of the Bank
Holding Company Act
China Trust Holdings Corp.
New York, New York
China Trust Capital B.V.
The Netherlands
China Trust Holdings N.V.
Curacao, Netherlands Antilles
Order Approving the Formation of Bank
Holding Companies
China Trust Holdings N.V., Curacao, Netherlands
Antilles ("Holdings N.V."); China Trust Capital
B.V., The Netherlands ("Capital"); and China Trust
Holdings Corp., New York, New York ("Holdings
Corp.") (collectively referred to as "Applicants"),
have applied for the Board's approval under section
3(a)(1) of the Bank Holding Company Act, as amended
("BHC Act") (12 U.S.C. § 1842(a)(1)), to become
bank holding companies through the acquisition by
Holdings Corp. of all (100 percent) of the voting shares
of China Trust Bank, New York, New York
("Bank").
Notice of the applications, affording an opportunity
for interested persons to submit comments, has been
given in accordance with section 3(b) of the BHC Act
(12 U.S.C. § 1842(b)) (53 Federal Register 46,661
(1988)). The time for filing comments has expired, and
the Board has considered the applications and all
comments received in light of the factors set forth in
section 3(c) of the BHC Act (12 U.S.C. § 1842(c)).
Applicants, all non-operating corporations, were
organized for the purpose of becoming bank holding
companies by acquiring Bank, a de novo bank.1 Bank
1. Holdings N.V. will own 100 percent of the voting shares of
Capital; Capital will own 100 percent of the voting shares of Holdings
will operate in the Metropolitan New York—New
Jersey market.2 The principals of Applicants are not
affiliated with any other depository institutions in this
market. Based on all the facts of record, the Board
believes that consummation of the proposal would not
result in any adverse effects upon competition or
increase in the concentration of banking resources in
any relevant area. Accordingly, the Board concludes
that competitive considerations under the BHC Act
are consistent with approval.
Based upon the facts of record, including certain
commitments made by Applicants' principals, the financial and managerial resources of Applicants and
Bank are consistent with approval. Considerations
relating to the convenience and needs of the communities to be served are also consistent with approval.
Based on the foregoing and all the facts of record
and the commitments offered in this case, the Board
has determined that the applications should be, and
hereby are, approved. The transaction shall not be
consummated before the thirtieth calendar day following the effective date of this Order, or later than three
months after the effective date of this Order, unless
such period is extended for good cause by the Board or
the Federal Reserve Bank of New York, acting pursuant to delegated authority.
By order of the Board of Governors, effective
February 10, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, and LaWare. Absent and not
voting: Governor Kelley.
JENNIFER J. JOHNSON
Associate Secretary of the Board
Credit and Commerce American
Holdings, N.V.
Curacao, Netherlands Antilles
Order Approving Acquisition of a Bank
Credit and Commerce American Holdings, N.V., Curacao, Netherlands Antilles ("CCAH"); Credit and
Commerce American Investment, B.V., Amsterdam,
The Netherlands ("Credit and Commerce"); First
American Corporation, Washington, D.C. ("First
Corp.; and Holdings Corp. will own 100 percent of the voting shares
of Bank.
2. The Metropolitan New York - New Jersey market includes New
York City ; Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, and
Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset,
Sussex, Union, and Warren Counties in New Jersey; and parts of
Fairfield County in Connecticut.
Legal Developments
American"); First American Bankshares, Inc., Washington, D.C., Georgia Bankshares, Inc., Atlanta,
Georgia; and National Bank of Georgia Corporation,
Atlanta, Georgia (collectively, "Applicants"), bank
holding companies within the meaning of the Bank
Holding Company Act (the "BHC Act") (12 U.S.C.
§ 1842(a)(3)), have applied for the Board's approval
under section 3(a)(3) of the BHC Act to retain 100
percent of the outstanding voting shares of Bank of
Escambia, N.A., Pensacola, Florida ("Bank").1
Notice of the applications, affording interested persons an opportunity to submit comments, has been
published (53 Federal Register 30,467 (1988)). The
time for filing comments has expired, and the Board
has considered the applications and all comments
received in light of the factors set forth in section 3(c)
of the BHC Act.
The Douglas Amendment to the BHC Act prohibits
the Board from approving an application by a bank
holding company to acquire a bank located outside the
bank holding company's home state, unless such acquisition is "specifically authorized by the statute laws
of the state in which such bank is located, by language
to that effect and not merely by implication."2
The statute laws of Florida expressly authorize the
acquisition of a banking institution in Florida by a
bank holding company located in a state in a defined
region, which includes Virginia, if that other state
authorizes the acquisition of a financial institution in
that state on a reciprocal basis by a Florida bank
holding company.3 Virginia law expressly authorizes
the acquisition of a banking organization in Virginia by
a Florida bank holding company on a reciprocal basis.4
The Florida State Comptroller has approved Applicants' proposal pursuant to the Florida statute. In light
of the foregoing, the Board has determined that its
approval of the proposal is not prohibited by the
Douglas Amendment.
Applicants operate seven banking subsidiaries located in the District of Columbia, Georgia, Maryland,
New York, Tennessee, and Virginia. CCAH is the
seventh largest banking organization in Virginia, controlling deposits of $2.64 billion, representing 5.9 per-
1. The shares of Bank were acquired by National Bank of Georgia
Corporation, Atlanta, Georgia, a subsidiary of Credit and Commerce,
in satisfaction of a debt previously contracted.
2. 12 U.S.C. § 1842(d). A bank holding company's home state for
purposes of the Douglas Amendment is that state in which the total
deposits of its banking subsidiaries were largest on July 1, 1966, or on
the date it became a bank holding company, whichever date is later.
Applicants' home state is Virginia.
3. Fla. Stat. Ann. § 658.295 (West 1984). Florida law also requires
that the applicant must have in excess of 80 percent of its total
deposits in its bank subsidiaries in the Southern region. Applicants
satisfy this requirement.
4. Va. Code § 6.1-399 (1988).
303
cent of the total deposits in commercial banks in
Virginia.5 Bank is one of the smaller commercial
banking organizations in Florida, controlling deposits
of $27.0 million, representing less than one percent of
total deposits in commercial banks in the state.6 Consummation of the proposal would not have any significant adverse effect upon the concentration of banking
resources in Virginia or Florida.
Applicants and Bank do not compete directly in any
banking market. Accordingly, consummation of the
proposal would not eliminate any significant existing
competition in any relevant banking market. Consummation also would not have any significant adverse
effect on probable future competition in any relevant
banking market.
The financial and managerial resources of Applicants and their subsidiaries as well as Bank are consistent with approval.
In considering the convenience and needs of the
communities to be served, the Board concludes that
Applicants' records under the Community Reinvestment Act ("CRA") are consistent with approval,
especially in light of First American's commitment to
strengthen its record with regard to the CRA activities
of one of its subsidiary banks. The bank has developed
a report to monitor its CRA activities, including the
ascertainment of community credit needs, an effort
which will be aided by the bank's board of directors
and CRA committee. The bank has also increased its
community outreach activities, including a commitment to a marketing program that informs the public of
its product offerings and is targeted to include minority
areas of its community.
Based on the foregoing and other facts of record, the
Board has determined that the applications should be,
and hereby are, approved. The transaction shall not be
consummated before the thirtieth calendar day following the effective date of this Order, or later than three
months after the effective date of this Order, unless
such period is extended for good cause by the Board or
by the Federal Reserve Bank of Richmond, acting
pursuant to delegated authority.
By order of the Board of Governors, effective
February 16, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Angell, Heller. Absent and not voting: Governors
Seger, Kelley, and LaWare.
JENNIFER J. JOHNSON
Associate Secretary of the Board
5. Data are as of December 31, 1987.
6. Data are as of June 30, 1988.
304
Federal Reserve Bulletin • April 1989
Continental Bank Corporation
Chicago, Illinois
Continental Illinois Bancorp, Inc.
Chicago, Illinois
Order Denying Acquisition of a Bank
Continental Bank Corporation, Chicago, Illinois, and
Continental Illinois Bancorp, Inc., Chicago, Illinois
(together, "Continental"), both bank holding companies within the meaning of the Bank Holding Company
Act ("BHC Act"), have applied for the Board's approval under section 3 of the BHC Act (12 U.S.C.
§ 1842) to acquire 100 percent of the voting shares of
Grand Canyon State Bank, Scottsdale, Arizona
("Grand Canyon").
Notice of the application, affording interested persons an opportunity to submit comments, has been
published (53 Federal Register 2,092 (1988)). The time
for filing comments has expired, and the Board has
considered the application and all comments received
in light of the factors set forth in section 3(c) of the
BHC Act.
Continental is the second largest commercial banking organization in Illinois, controlling deposits of
approximately $8.3 billion, representing approximately 7.8 percent of total deposits in commercial
banking organizations ("total bank deposits") in
Illinois.1 Grand Canyon is one of the smaller commercial banking organizations in Arizona, controlling deposits of approximately $14.6 million.2
In its evaluation of the convenience and needs of the
communities to be served, the Board has taken into
account the record of Continental's subsidiary bank,
Continental Bank, N.A. ("Bank"), in fulfilling its
responsibilities under the Community Reinvestment
Act ("CRA") to help meet the credit needs of its entire
community. The CRA requires the federal bank supervisory agencies to encourage financial institutions to
help meet the credit needs of the local communities in
which they are chartered consistent with the safe and
sound operation of such institutions. To accomplish
this end, the CRA requires the appropriate federal
supervisory authority, in connection with its examination of an institution, to "assess the institution's
record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution." 12 U.S.C. § 2903. The Board
is required to "take such record into account in its
1. Data are as of June 30, 1987.
2. Data are as of September 30, 1988.
evaluation" of applications by bank holding companies under section 3 of the BHC Act to acquire
additional banks. See 12 C.F.R. 225.13(b)(3).
The Board's experience over the years in examining
bank performance under the CRA has indicated that
institutions with effective programs to help meet community credit needs share a number of elements.
These institutions maintain outreach programs that
include procedures to permit effective communication
between the bank and various segments of the community, and formalized methods for incorporating
findings regarding community credit needs into the
development and delivery of products and services.
The bank monitors institutional performance at senior
management levels and periodically evaluates new
opportunities for innovative lending programs, such as
home mortgage and neighborhood residential rehabilitation lending and similar programs, designed to meet
the credit needs of its designated community, including those of low- and moderate-income persons. An
effective program also includes the use of specifically
designed marketing and advertising plans to stimulate
public-awareness of the bank's services throughout
the community, including low- and moderate-income
neighborhoods, as well as support of community development projects and programs.
The Board has stated that the CRA "provisions
were intended to cover all banks that are in the
business of extending credit to the public, including
both 'wholesale' and 'retail' banks," because "[the]
lending activities of these banks affect the economic
health of the communities in which they are
chartered."3 Although the CRA was not intended to
limit an institution's discretion to develop the types of
products and services it believes are best suited to its
expertise and business objectives and to the needs of
its community, the institution's program must meet
the objectives of the CRA. The Board expects all
banks to ascertain the needs of the community and to
undertake to accommodate those needs, including the
needs of the low- and moderate-income areas of the
community.
With regard to wholesale banks that generally are
not active providers of consumer credit and services
on a retail basis, these activities may, for example,
include lending to inner-city revitalization efforts, supporting state and local governmental financing efforts,
lending to small or minority-owned businesses, lending support for low-income multi-family rehabilitation
and new construction projects, lending to or otherwise
financing non-profit developers of low-income housing
and small business development, or financing major
3. 12 C.F.R. 228.100.
Legal Developments
upgrades and/or expansion of industrial plants that
would otherwise relocate outside of the city served by
the bank.
In the Board's opinion, financial institutions that
make meeting their responsibilities under the CRA a
part of their management and operational structure are
best able to accomplish the goals of the statute. In that
light, the Board expects banking organizations to have
addressed their CRA responsibilities before the submission of applications to the Board. This is in accord
with the requirements of the CRA, under which an
institution's record of performance in helping to meet
the credit needs of its entire community is a critical
factor in determining whether the institution has lived
up to its responsibilities under the statute.
In this case, the Board has noted important deficiencies in Bank's CRA performance, including the absence until quite recently of a program containing the
elements outlined above and in applicable agency
regulations. In response to issues raised by a public
commenter regarding Bank's record in meeting the
credit needs of its community, the Federal Reserve
Bank of Chicago, in early 1988, performed an evaluation of Bank's CRA activities to resolve these issues.
That evaluation indicated a number of areas of concern with Bank's CRA performance, including a misunderstanding on the part of Bank staff and management of the requirements of the CRA.
For example, it appeared to be Bank's view that it
could meet its CRA responsibilities in the normal
course of its commercial lending business and it did
not monitor or promote specific CRA activities. Continental did not have a plan as to how the Bank was to
meet its responsibilities under the CRA. Bank's CRA
officer did not interact substantially with other staff,
and Bank's board of directors confined CRA compliance discussions to approval of a formal annual CRA
statement. These CRA statements were substantially
inaccurate for a number of years, listing products
which were not routinely offered by the Bank. The
Bank made no significant effort to ascertain the credit
needs of its communities or to advertise its products to
the community. Finally, given Continental's size, as
well as the opportunities available in the Chicago area,
Bank's participation in community development and
redevelopment efforts was unsatisfactory.
In response to these concerns, Continental submitted a plan to promote Bank's compliance with its
responsibilities under the CRA, particularly with respect to the ascertainment of community credit needs,
outreach efforts to its community, awareness of CRA
responsibilities, and internal monitoring of CRA compliance. As part of its proposal, Bank intends to
provide additional training to its managers regarding
Bank's CRA policies and programs and to require its
305
CRA officers and branch managers to meet with representatives of local community organizations to discuss the credit needs of the community. Several training sessions have been held, and representatives of
Continental have begun meeting with neighborhood
organizations, governmental entities, and community
groups to discuss Continental's new CRA plan and
CRA activities.
Furthermore, each of Continental's business units
has appointed CRA liaisons who will be responsible
for identifying credit needs in the local community,
channeling information between the community, other
lenders within the unit, and the CRA officer, and
designing, implementing and marketing CRA-related
products and services. Continental's board of directors will also hold semi-annual meetings to discuss the
bank's progress in meeting its CRA responsibilities.
Continental proposes an increase in its CRA-related
loans and has committed to pursue actively the financial needs of privately held small businesses, with
strong attention to those businesses and financial
institutions owned by minorities and women, and
those servicing low- and moderate-income neighborhoods. Continental has stated that it will seek referrals
about such businesses from existing borrowers who
are operating similar businesses, and will examine the
possibility of participations with a minority-owned or
community bank in a low- or moderate-income neighborhood. Bank expects to complete a comprehensive
community credit needs ascertainment study by
June 30, 1989.
The Board believes that Continental's CRA plan,
when implemented, should make a substantial contribution to correcting the past deficiencies in Bank's
CRA performance. The plan and Bank's progress in
implementing that plan indicates an improved awareness by Bank of its responsibilities under the CRA and
that Bank has adopted as an affirmative management
objective a program to work toward achieving compliance with those responsibilities.
The Board has, in the past, taken CRA improvement
commitments from bank holding companies into account in considering the performance of subsidiary
banks under CRA. The Board believes this is only
appropriate, however, when there has been a basic
level of compliance on which the commitments can be
evaluated. As noted above, that is not the situation in
the case now before the Board. Moreover, the Board
wishes to stress that banking organizations should
address their CRA responsibilities and implement the
necessary policies before they file an application with
the Board. The Board does not believe that commitments by themselves can serve as a substitute for the
established record of CRA performance required by
the statute. Accordingly, while the Board believes that
306 Federal Reserve Bulletin • April 1989
Bank has evidenced an improved understanding of its
CRA responsibilities, its record of performance in the
past has been inadequate and, until corrected, weighs
against approval of this application.
In the course of reviewing this application, the
Board has also considered the public policy concerns
raised by the Federal Deposit Insurance Corporation's
("FDIC") ongoing assistance agreement with Continental, particularly with regard to the propriety of
Continental's proposed expansion plans while the institution is still funded in part by the FDIC and subject
to FDIC control.
The Board believes this situation raises important
public policy concerns with regard to the potential for
distortion of competition due to continued use of
government provided capital in competition with private capital. In this situation, careful consideration
must be given to expansion of activities where the
growth is in effect being financed with public funds. In
this case, the proposed acquisition would represent an
interstate expansion which would not, in the Board's
opinion, so substantially further the goals of the Federal Deposit Insurance Act aimed at stabilizing troubled institutions as to outweigh the significant public
policy concerns noted above.
Based upon Bank's inadequate CRA performance as
well as the adverse effects on competition resulting
from the continued government ownership of Bank,
the Board finds that the approval of this application
would not serve the convenience and needs of the
community.
Based on the foregoing and other facts of record, the
Board has determined that the application should be,
and hereby is, denied.
By order of the Board of Governors, effective
February 15, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, and Angell. Voting against this action:
Governors Heller and LaWare. Absent and not voting:
Governor Kelley.
JENNIFER J. JOHNSON
Associate Secretary of the Board
Dissenting Statement of Governors Heller and
LaWare
We believe that the record in this case on balance
supports approval of this application.
As the majority recognizes, Continental has taken
substantial steps to address its responsibilities under
the Community Reinvestment Act and to improve its
performance in the areas noted by the supervisory
authorities. In our view, Continental's plan, and the
progress Continental has made in implementing the
plan, should be given substantial positive weight in the
evaluation of this application, consistent with the
Board's practice.
We recognize the public policy concerns raised by
the majority regarding the continued FDIC ownership
of Continental. We note, however, that the FDIC has
made substantial progress in returning the Bank to
private ownership and is continuing its efforts to
achieve this goal. Furthermore, we believe that this
acquisition would be consistent with prior Board precedent regarding the expansion of Continental's operations and the maintenance of the organization's competitive position.
Accordingly, we dissent from the Board's decision
denying the application.
February 15, 1989
Public Bank Holding Company, Inc.
Wilmington, Delaware
Order Approving Formation of a Bank
Holding Company
Public Bank Holding Company, Inc., Wilmington,
Delaware ("Public"), has applied for the Board's
approval pursuant to section 3(a)(1) of the Bank Holding Company Act ("Act"), (12 U.S.C. § 1841 et seq.),
to become a bank holding company by acquiring 100
percent of the voting shares of The First Women's
Bank, New York, New York ("Bank").
Notice of the application, affording interested persons an opportunity to submit comments, has been
duly published (53 Federal Register 26,117 (1988)).
The time for filing comments has expired, and the
Board has considered the application and all comments received in light of the factors set forth in
section 3(c) of the Act.
Public is a non-operating company formed for the
purpose of acquiring Bank. Bank is the 34th largest
commercial banking organization in New York, controlling deposits of $415.9 million, representing less
than one percent of the total deposits in commercial
banking organizations in the state.1 This proposal
represents a restructuring of existing ownership interests. Consummation of this proposal would not result
in any significant adverse effect on the concentration
of banking resources in New York.
1. State banking data are as of June 30, 1988. Market data are as of
June 30, 1987.
Legal Developments
Bank competes in the Metropolitan New York-New
Jersey banking market, and its deposits represent less
than one percent of the total deposits in commercial
banking organizations in the market.2 Principals of
Public and Bank are not associated with any other
banking organization in the market. Based on the facts
of record, consummation of this proposal would not
result in any adverse effects upon competition or
increase the concentration of banking resources in any
relevant market. Accordingly, the Board concludes
that competitive considerations are consistent with
approval of this application.
The Board also has considered Public's and Bank's
managerial resources, particularly with regard to
Bank's previous violations of the Currency and Foreign Transactions Reporting Act (31 U.S.C. § 5311
et seq.) ("CFTRA") uncovered in an examination of
Bank in 1985. Since the reporting violations were
discovered, Bank's management and ownership have
changed, and Bank has undertaken comprehensive
remedial and preventative actions with regard to its
reporting program.3 In addition, a recent examination
of Bank indicates that its CFTRA compliance program
and reporting record since the management change is
satisfactory. Based on these considerations, and all
other facts of record, the Board concludes that Public's and Bank's overall compliance with CFTRA is
satisfactory and that Public's and Bank's managerial
resources therefore are consistent with approval of
this proposal.
The financial resources of Public and Bank are
consistent with approval of this application. In addition, considerations relating to the convenience and
needs of the communities to be served by Public and
Bank also are consistent with approval.
Based on the foregoing and other facts of record, the
Board has determined that the application should be,
and hereby is, approved. The proposal shall not be
consummated before the thirtieth calendar day following the effective date of this Order, or later than three
months after the effective date of this Order, unless
such period is extended for good cause by the Board or
the Federal Reserve Bank of New York, acting pursuant to delegated authority.
By order of the Board of Governors, effective
February 28, 1989.
2. The Metropolitan New York-New Jersey banking market is
approximated by New York City; Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, and Westchester Counties in New York;
Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris,
Ocean, Passaic, Somerset, Sussex, Union, and Warren Counties in
New Jersey; and parts of Fairfield County in Connecticut.
3. Based on a report of this examination, the Department of
Treasury has assessed $80,000 in civil money penalties against Bank.
307
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, Kelley, and LaWare.
JENNIFER J. JOHNSON
Associate Secretary of the Board
United Community Corporation
BancFirst and Trust Company
Oklahoma City, Oklahoma
Order Approving Acquisition of Bank and Merger
of Banking Subsidiaries
United Community Corporation, Oklahoma City,
Oklahoma ("UCC"), a bank holding company within
the meaning of the Bank Holding Company Act
(12 U.S.C. § 1841 et seq.), ("BHC Act"), has applied
for the Board's approval under section 3(a)(3) of the
BHC Act to acquire 98.1 percent of the voting shares
of BancFirst and Trust Company, Oklahoma City,
Oklahoma ("BancFirst"), a de novo bank. In addition,
BancFirst has applied for the Board's approval under
the Bank Merger Act (12 U.S.C. § 1828(c)) to merge
with the twelve subsidiary banks of UCC listed in
Appendix A under the charter and title of BancFirst.
After the proposed merger, the existing offices of the
twelve subsidiary banks of UCC would become
branch offices of BancFirst.
In connection with this proposal, BancFirst has
applied to the Board under section 9 of the Federal
Reserve Act (12 U.S.C. § 321) to become a member of
the Federal Reserve System. BancFirst has also applied for the Board's approval under section 5(b) of the
Bank Service Corporation Act, as amended
(12 U.S.C. § 1861 et seq.), to acquire approximately
70 percent of the shares of United Community Mortgage
Company,
Oklahoma
City,
Oklahoma
("UCMC"), a bank service corporation engaged in
mortgage banking activities and owned jointly by the
twelve banks to be merged.1
Notice of the applications, affording interested persons the opportunity to submit comments, has been
published (53 Federal Register 43,771 (1988)). The
time for filing comments has expired, and the Board
has considered the applications and all comments
received in light of the factors and considerations set
forth in the foregoing statutes.2
1. The Board has previously authorized UCMC, pursuant to the
Bank Service Corporation Act, to engage directly and through its
subsidiary, Citizen's Mortgage Corporation, in the activity of providing mortgage banking services. American Bank of Commerce/United
Community
Mortgage
Company,
7 0 F E D E R A L RESERVE
BULLETIN
535 (1984). Upon consummation of the proposed merger, the name of
UCMC would be changed to BancFirst Service Corporation.
2. The Board received two comments in opposition to this proposal,
relating to a credit application of an individual customer and to the
308 Federal Reserve Bulletin • April 1989
UCC is the fourth largest banking organization in
Oklahoma, controlling deposits of $660 million, representing approximately three percent of the total deposits in commercial banking organizations in the state.3
The proposal by UCC represents a corporate reorganization under which UCC's existing banking subsidiaries would be merged into BancFirst, a de novo
bank. Accordingly, the acquisition by UCC of BancFirst would have no adverse effects on the concentration of banking resources in Oklahoma or on competition in any relevant banking market.
Where the principal of an applicant controls other
banking organizations, the Board considers the financial and managerial resources and future prospects of
all the institutions comprising the chain. UCC's principal controls a number of other commercial banking
organizations in Oklahoma.4 Accordingly, the banks
involved and the affiliated banking organizations have
been reviewed in light of the Board's Capital Adequacy Guidelines,5 which are generally applicable to
bank holding companies and chain banking organizations with total assets of over $150 million.6 Based
upon the record, the financial and managerial resources of UCC and the affiliated banks are consistent
with approval. No additional debt will be incurred in
connection with the acquisition by BancFirst. Considerations relating to the convenience and needs of the
communities to be served also are consistent with
approval.
The Board has also considered the factors it is
required to consider when approving applications for
membership in the Federal Reserve System pursuant
to section 9 of the Federal Reserve Act and finds those
factors to be consistent with approval. In addition, the
Board has considered the factors it is required to
consider when acting on applications under the Bank
Service Corporation Act and finds those factors to be
consistent with approval. Based on the foregoing and
other facts of record, and subject to resolutions of
UCC and BancFirst, the Board has determined that
the applications should be and hereby are approved.
The acquisition by UCC of BancFirst and the
merger of UCC's twelve subsidiary banks into BancFirst shall not be consummated before the thirtieth
effect of the proposal on competition in Oklahoma. In light of the facts
of record of this case, the Board has determined that these comments
do not warrant denial of the applications.
3. Banking data are as of December 31, 1987.
4. See United Community Corporation, 71 FEDERAL RESERVE
BULLETIN 589 (1985). The Board considered the competitive effects of
the transactions whereby common control of the organizations was
established in that case and determined the affiliations did not substantially lessen competition in any relevant market.
5. 12 C.F.R. Parts 208, 225, 263.
6. The combined banking assets of the chain were $1.04 billion as of
June 30, 1988.
calendar day following the effective date of this Order
or later than three months after the effective date of
this Order, and BancFirst shall be opened for business
not later than six months after the effective date of this
Order. These time periods may be extended for good
cause by the Board or by the Federal Reserve Bank of
Kansas City, pursuant to delegated authority.
By order of the Board of Governors, effective
February 10, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, and La Ware. Absent and not
voting: Governor Kelley.
JENNIFER J. JOHNSON
Associate Secretary of the Board
Orders Issued Under Section 4 of
the Bank Holding Company Act
The Nippon Credit Bank, Ltd.
Tokyo,Japan
Order Approving Application to Acquire
a Company Engaged in Certain Securities, Foreign
Exchange and Financial Advisory Activities
The Nippon Credit Bank, Ltd., Tokyo, Japan
("Nippon Credit Bank"), a foreign bank subject to the
Bank Holding Company Act ("BHC Act"), has applied for the Board's approval under section 4(c)(8) of
the BHC Act (12 U.S.C. § 1843(c)(8)) and section
225.23 of the Board's Regulation Y (12 C.F.R.
225.23), to acquire Eastbridge Capital Inc., New York,
New York ("Eastbridge"), which will engage in the
following activities that the Board has determined by
regulation or order to be closely related to banking and
generally permissible for bank holding companies:
(1) underwriting and dealing in obligations of the
United States, general obligations of states and their
political subdivisions, and other obligations that a
state member bank of the Federal Reserve System
may underwrite and deal in ("bank-eligible securities") pursuant to 12 C.F.R. 225.25(b)(16);'
(2) providing transactional services with respect to
foreign exchange by arranging for "swaps" among
customers with complementary foreign exchange
1. Eastbridge will also engage in the following incidental activities:
engaging in repurchase and reverse repurchase transactions on such
securities, collateralized borrowing and lending of such securities, and
providing clearing, settling, accounting, record keeping and other
ancillary services to those counterparties with which it deals that do
not maintain accounts with clearing agencies. The Long-Term Credit
Bank
Sanwa
of Japan,
7 4 FEDERAL RESERVE BULLETIN 5 7 3 ( 1 9 8 8 ) ;
Bank, Limited,
The
74 FEDERAL RESERVE BULLETIN 578 (1988).
Legal Developments
exposures and for the execution of foreign exchange
transactions pursuant to 12 C.F.R. 225.25(b)(17);
(3) providing portfolio investment advice and research and furnishing general economic information
and advice, general economic statistical forecasting
services and industry studies with respect to a
customer's entire portfolio of bank-eligible securities in connection with and as an incident to the
proposed bank-eligible securities activities, but not
in connection with any of its brokerage activities,
pursuant to 12 C.F.R. 225.25(b)(4)(iii) and (iv);2
(4) providing financial advice to state and local
governments pursuant to 12 C.F.R. 225.25(b)(4)(v);
(5) purchasing and selling as agent municipal revenue bonds under limited circumstances pursuant to
12 C.F.R. 225.25(b)(15);3
(6) providing, on an explicit-fee basis, discretionary
management of short-term monies for a small number of institutional customers;4
(7) providing advice in connection with merger,
acquisition/divestiture and financing transactions,
valuations and fairness opinions in connection with
merger, acquisition and similar transactions, all for
unaffiliated financial and nonfinancial institutional
customers;5
(8) dealing in foreign exchange spot contracts for
Eastbridge's own account;6
(9) purchasing and selling futures, forward and options contracts for foreign exchange for Eastbridge's
own account for hedging purposes only in accordance with 12 C.F.R. 225.142 and providing transactional services for such activities;7
2. Eastbridge will disclose its interest as principal, or that of Nippon
Credit Bank, whenever Eastbridge provides advice regarding a bankeligible security that is held by it, Nippon Credit Bank, or any affiliate
of Nippon Credit Bank for its own account. In conducting this
activity, Eastbridge may occasionally give advice with respect to
bank-ineligible securities, at times for a separate fee.
3. These circumstances would involve an institutional customer's
request to Eastbridge to locate other dealers in municipal securities or
other institutional customers who may wish to purchase or to sell
municipal revenue bonds. Eastbridge will not purchase such securities
for its own account, will not privately place such securities for issuers
either as principal or agent, and will broker municipal revenue bonds
only in connection with secondary trades.
4. This activity will be conducted in accordance with the limitations
set forth in Sovran Financial Corporation, 73 FEDERAL RESERVE
BULLETIN 7 4 4 ( 1 9 8 7 ) .
5. This activity will be conducted in accordance with the limitations
on financial feasibility studies set forth in Signet Banking Corporation,
7 3 FEDERAL RESERVE BULLETIN 5 9 ( 1 9 8 7 ) .
6. The Long-Term Credit Bank of Japan, supra. See also The
Hongkong and Shanghai Banking Corporation, 75 FEDERAL RESERVE
BULLETIN 217 (1989); and Standard and Chartered Group, Ltd., 38
Federal Register 27,552 (1973).
7. See The Hongkong and Shanghai Banking Corporation, supra.
See
also
Midland
Bank,
PLC,
7 4 FEDERAL RESERVE BULLETIN 5 7 7
(1988). Nippon Credit Bank has represented that this activity will not
constitute a substantial part of its foreign exchange dealing and will be
an incidental activity to support positions it takes in the spot foreign
exchange market.
309
(10) purchasing and selling futures, forward and
options contracts for bank-eligible securities for
hedging purposes only in accordance with 12 C.F.R.
225.142;8 and
(11) acting as an "introducing broker" only with
respect to transactions in exchange-traded futures
and options contracts on bank-eligible securities and
foreign exchange. 9 Eastbridge also proposes to engage in the following activity that has not been
expressly approved by Board regulation or Order:
providing advice in connection with the structuring
of and arranging for interest rate and currency
"swaps", interest rate "caps" and similar transactions.
Notice of the application, affording interested persons an opportunity to submit comments, has been
duly published (54 Federal Register 1,236 (1989)). The
time for filing comments has expired, and the Board
has considered the application and all comments received in light of the public interest factors set forth in
section 4(c)(8) of the BHC Act.
Nippon Credit Bank, with total assets equivalent to
approximately $110.7 billion, is the 37th largest banking organization in the world.10 It is subject to the
BHC Act by virtue of owning a New York Statelicensed branch in New York and a California Statelicensed agency in Los Angeles.
The Board has previously determined that all of the
proposed activities, except providing advice relating
to the structuring of and arranging for currency
"swaps", are closely related to banking and the Board
reaffirms its determinations on these activities.11 Regarding advice on currency "swaps", most banks that
provide advice relating to interest rate "swaps" also
provide advice relating to currency "swaps." Additionally, providing advice relating to currency
"swaps" is functionally and operationally similar to
providing advice relating to the structuring of and
8. The Long-Term Credit Bank of Japan, supra.
9. As an "introducing broker", Eastbridge would receive customer
orders to purchase and to sell these contracts and pass them on to an
unaffiliated futures commission merchant ("FCM") for execution,
clearing and settlement. Eastbridge will not take a position as principal
in such contracts and will conduct this activity in accordance with
section 225.25(b)(18) of the Board's Regulation Y (12 C.F.R.
225.25(b)(18)). The Board has previously approved "introducing broker" activities as a preliminary step before engaging in FCM activities. The Sanwa Bank, Limited, supra.
10. Asset and banking data are as of September 30,1988. Ranking is
as of March 31, 1988.
11. Advice on interest rate "swaps" and "caps" and "similar
transactions" has been previously approved by the Board in Signet
Banking Corporation, supra. A currency "swap" is a transaction
between two parties in which they agree to exchange streams of
payments denominated in different currencies on one or more future
dates, most commonly on the basis of predetermined fixed sums or the
product of a principal multiplied by a fixed or floating interest rate.
310
Federal Reserve Bulletin • April 1989
arranging for interest rate "swaps" and interest rate
"caps." 12 Both transactions have the common objectives of securing low cost funds and converting one
type of risk to another, and both transactions require
similar documentation. Accordingly, the Board concludes that the proposed activity is closely related to
banking and similar to transactions previously approved by Board Order.
In order to approve this application, the Board must
also find that performance of the proposed activities
"can reasonably be expected to produce benefits to
the public . . . that outweigh possible adverse effects,
such as undue concentration of resources, decreased
or unfair competition, conflicts of interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8).
In regard to conflicts of interests, the application
raises a potential conflict between Eastbridge's proposal to take positions and execute trades in foreign
exchange, and section 225.25(b)(17) of the Board's
Regulation Y, which prohibits a company that arranges for foreign exchange transactional services
from either taking positions for its own account or
executing its own trades.13 These prohibitions are
based on a potential conflict of interest in performing
the combined activities of giving foreign exchange
advice, taking positions in foreign exchange and executing trades.14 Eastbridge will not, however, provide
advice to customers on foreign exchange exposures or
on investment in foreign currency. Furthermore, the
limited extent of Eastbridge's foreign exchange dealing and execution activities, and the sophistication of
its customers, who can turn to many other banks or
nonbanking firms for services, minimize the potential
for a conflict in the proposed combined activities.15
12. In National Courier Association v. Board of Governors, 516
F.2d 1229 (D.C. Cir. 1975), the court concluded that an activity would
be closely related to banking if it is demonstrated that, among other
factors, banks generally have, in fact, provided the proposed services
or that banks generally provide services that are operationally or
functionally so similar to the proposed services as to equip them
particularly well to provide the proposed services.
13. The Board has previously approved the provision of exchange
rate information with trading activities in the same subsidiary. See
Midland Bank, PLC, supra. The Board also notes that it has approved
prior applications by bank holding companies to conduct combined
activities of securities and other nonbanking activities in addition to
FCM and investment advice activities in the same subsidiary. See e.g.
The Sanwa Bank, Limited, supra (Order approving underwriting and
dealing in bank-eligible securities, hedging bank-eligible securities,
providing investment advice and research but not in connection with
brokerage activities, providing discount brokerage services and acting
as an FCM).
14. The Hongkong and Shanghai Banking Corporation, 69 FEDERAL RESERVE BULLETIN 2 2 1 ( 1 9 8 3 ) .
15. The Board has previously noted that in appropriate circumstances the sophistication of institutional customers serves to minimize concerns over conflicts of interests involved when a firm
provides both advice and execution services. The Hongkong and
Shanghai Banking Corporation, supra. See also National Westminister
Bank
PLC,
7 2 FEDERAL RESERVE BULLETIN 5 8 4
(1986)
In every case involving a nonbanking acquisition by
a bank holding company under section 4 of the BHC
Act, the Board considers the financial condition and
resources of the applicant and its subsidiaries and the
effect of the transaction on these resources. 16 In accordance with the principles of national treatment and
competitive equity, the Board has stated it expects a
foreign bank to meet the same general standards of
financial strength as domestic bank holding companies
and to be able to serve as a source of strength to its
United States banking operations.17 In considering
applications of foreign banking organizations, the
Board has noted that foreign banks operate outside the
United States in accordance with different regulatory
and supervisory requirements, accounting principles,
asset-quality standards, and banking practices and
traditions, and that these differences make it difficult
to compare the capital positions of domestic and
foreign banks. In the past, the Board has addressed the
complex issues involved in balancing these concerns
in the context of individual applications on a caseby-case basis, making adjustments as appropriate to
an applicant's capital to reflect differences in accounting treatment and regulatory practices.
The Board recently has adopted a proposal to supplement its consideration of capital adequacy with a riskbased system that is simultaneously being proposed by
the member countries of the Basle Committee on Banking
Regulations and Supervisory Practices and the other
domestic federal banking agencies.18 The Japanese Ministry of Finance in April of last year acted to implement
for Japanese banking organizations the risk-based capital
framework developed by the Basle Committee. The
Board considers the Basle Committee proposal an important step toward a more consistent and equitable international norm for assessing capital adequacy. Until that
framework becomes effective, however, the Board will
continue to evaluate applications involving foreign banking organizations on a case-by-case basis consistent with
its prior precedent.
In this case, the primary capital ratio of Nippon
Credit Bank, as publicly reported, is well below the 5.5
(Order approving the combination of investment advice and execution
services activities).
16. 12 C.F.R. 225.24; Bayerische Vereinsbank AG, 73 FEDERAL
RESERVE BULLETIN 155, 156 ( 1 9 8 7 ) .
17. The Long-Term Credit Bank, supra; Sumitomo Trust & Banking
Co., Ltd., 73 FEDERAL RESERVE BULLETIN 749 (1987);
Ljubljanska
Banka-AssociatedBank,
72 FEDERAL RESERVE BULLETIN 489 (1986);
The Mitsubishi Trust and Banking Corporation, 72 FEDERAL RESERVE
BULLETIN 256 (1986); The Industrial Bank of Japan, Ltd., 72 FEDERAL
RESERVE BULLETIN 71 (1986); The Mitsubishi Bank, Limited, 70
FEDERAL RESERVE BULLETIN 518 (1984). See also Policy Statement
on Supervision and Regulation of Foreign-Based Bank Holding Companies, Federal Reserve Regulatory Service 4-835 (1979).
18. 54 Federal Register 4,186 (1989).
Legal Developments
percent minimum level specified in the Board's Capital
Adequacy Guidelines. After making adjustments to
reflect Japanese banking and accounting practices,
however, including consideration of a portion of the
unrealized appreciation in Nippon Credit Bank's portfolio of equity securities consistent with the principles
in the Basle capital framework, Nippon Credit Bank's
capital ratio meets United States standards.
The Board also considered several additional factors
that mitigate its concern in this case. The Board notes
that the application involves nonbanking activities that
require a small commitment of capital. The Board
notes further that Nippon Credit Bank is in compliance
with the capital and other financial requirements of
Japanese banking organizations. In this regard, the
Board has considered as favorable factors that, in
anticipation of implementation of the Basle Committee
risk-based capital framework, Nippon Credit Bank
has, through the issuance of common stock, increased
its equity capital by the equivalent of almost $446.5
million in its latest fiscal year and that Nippon Credit
Bank's capital improvement program is consistent
with meeting the standards in the Basle Committee
capital framework for 1990 and 1992.
Based on these and other facts of record, the Board
concludes that financial considerations are consistent
with approval of the application.
Consummation of the proposal would provide increased convenience to customers and gains in efficiency. In addition, the Board expects that the de novo
entry of Eastbridge into the market for these services
would increase the level of competition among providers of these services. Accordingly, the Board has
determined that the performance of the proposed
activities by Eastbridge can reasonably be expected to
produce benefits to the public.
The Board believes that the proposal is not likely to
result in decreased or unfair competition, conflicts of
interests, unsound banking practices, concentration of
resources, or other adverse effects. Based on the
foregoing and other facts of record, the Board has
determined that the balance of public interest factors
that must it consider under section 4(c)(8) of the BHC
Act is favorable. Accordingly, the Board has determined that the application should be, and hereby is,
approved. This determination is further subject to all
of the conditions set forth in the Board's Regulation Y,
including sections 225.4(d) and 225.23(b) (12 C.F.R
225.4(d) and 225.23(b)), and to the Board's authority to
require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with the provisions and purposes of the BHC Act
and the Board's regulations and orders issued thereunder, or to prevent evasion thereof.
311
This transaction shall not be consummated later
than three months after the effective date of this
Order, unless such period is extended for good cause
by the Board or by the Federal Reserve Bank of New
York, pursuant to delegated authority.
By order of the Board of Governors, effective
February 13, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, and LaWare. Absent and not
voting: Governor Kelley.
JENNIFER J. JOHNSON
Associate Secretary of the Board
Scandinavian Bank Group pic
London, United Kingdom
Order Approving Application to Engage in
Financial Advisory Activities
Scandinavian Bank Group pic, London, United Kingdom ("Scandinavian"), has applied pursuant to section 4(c)(8) of the Bank Holding Company Act
(12 U.S.C. § 1843(c)(8)) ("BHC Act") for approval to
establish de novo a subsidiary, Cambridge International Partners L.P., New York, New York
("Cambridge"),1 to act as a financial adviser in providing corporate finance advisory services, including
advice concerning domestic and international mergers,
acquisitions, joint ventures and divestitures, financings, and the structuring of leveraged buyouts and
capital-raising vehicles.
Scandinavian is a foreign bank that is subject to
section 4(c)(8) of the BHC Act pursuant to section 8(a)
of the International Banking Act of 1978 (12 U.S.C.
§ 3106(a)) ("IBA") by virtue of its control of an
agency and a branch office in the United States.
Notice of the application, affording interested persons an opportunity to submit comments on the relation of the proposed activities to banking and on the
balance of public interest factors, has been duly published (53 Federal Register 45,821 (1988)). The time for
filing comments has expired, and the Board has considered the application and all comments received in
light of the public interest factors set forth in section
4(c)(8) of the BHC Act.
1. Cambridge will be established as a limited partnership. Cambridge will be owned as follows: Scandinavian will have a 50.5 percent
ownership interest as a limited partner, three professional corporations formed by three members of Cambridge's management will have
a 48.5 percent ownership interest as limited partners, and Cambridge
International Partners, Inc. ("CIP") will have a one percent ownership interest as a general partner. Fifty-one percent of the voting
shares of CIP are held by Scandinavian, and the remaining 49 percent
are held by the three above-mentioned professional corporations.
312 Federal Reserve Bulletin • April 1989
Scandinavian, with total consolidated assets of $5.1
billion, is the eleventh largest international bank in
London.2 Scandinavian operates 17 offices in 14 countries and maintains a commercial paper funding subsidiary in Delaware, a branch in New York, and an
agency in Los Angeles.
The Board has previously determined by Order that
the proposed activities are closely related to banking
and permissible for bank holding companies.3
Under section 4 of the BHC Act, the Board is also
required to determine that the performance of the
proposed activities by applicant "can reasonably be
expected to produce benefits to the public . . . that
outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking
practices." 12 U.S.C. § 1843(c)(8).
The Board has expressed its concerns regarding
conflicts of interest and related adverse effects that,
absent certain limitations, may be associated with
financial advisory activities. In order to address these
potential adverse effects, Scandinavian has committed
that:
(1) Cambridge's financial advisory activities shall
not encompass the performance of routine tasks or
operations for a customer on a daily or continuous
basis;
(2) Disclosure will be made to each potential customer of Cambridge that Cambridge is an affiliate of
Scandinavian;
(3) Advice rendered by Cambridge on an explicit fee
basis will be without regard to correspondent balances maintained by a customer of Cambridge at
Scandinavian or any of its depository subsidiaries;
and
(4) Cambridge will not make available to Scandinavian or any of its subsidiaries confidential information received from Cambridge's clients, except with
the client's consent.
the performance of the proposed activities by Scandinavian can reasonably be expected to provide benefits
to the public.
The financial and managerial resources and future
prospects of Scandinavian are considered consistent
with approval. Moreover, there is no evidence in the
record that consummation of the proposed financial
advisory activities would result in any other adverse
effects such as undue concentration of resources,
decreased or unfair competition, conflicts of interests,
or unsound banking practices.
After consideration of all the relevant facts, the
Board concludes that the balance of the public interest
factors that it is required to consider under section
4(c)(8) is favorable. Accordingly, based on all the facts
of record and the commitments made by Scandinavian, the Board has determined that the proposed
application should be, and hereby is, approved. This
determination is subject to all of the conditions set
forth in Regulation Y, including sections 225.4(d) and
225.23(b)(3) (12 C.F.R. 225.4(d) and 225.23(b)(3)), and
to the Board's authority to require such modification
or termination of the activities of a bank holding
company or any of its subsidiaries as the Board finds
necessary to assure compliance with, or to prevent
evasion of, the provisions and purposes of the BHC
Act and the Board's regulations and orders issued
thereunder.
Under these conditions, Scandinavian's performance of these activities is unlikely to result in conflicts of interest or other potential adverse effects.
Consummation of Scandinavian's proposal would
provide added convenience to its clients. The Board
expects that the de novo entry of Scandinavian into the
market for these services would increase the level of
competition among providers of these services already
in operation. Accordingly, the Board concludes that
Associate Secretary of the Board
The transaction shall be made not later than three
months after the effective date of this Order, unless
such period is extended for good cause by the Board or
by the Federal Reserve Bank of San Francisco, pursuant to delegated authority.
By order of the Board of Governors, effective
February 6, 1989.
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, Kelley, and LaWare.
JENNIFER J. JOHNSON
2. All financial data are as of September 30, 1988.
3. See The Bank of Nova Scotia,
74 FEDERAL RESERVE BULLETIN
249 (1988); Sovran Financial Corporation, 73 FEDERAL RESERVE
BULLETIN 744 (1987); Signet Banking Corporation, 73 FEDERAL
RESERVE B U L L E T I N 5 9 ( 1 9 8 7 ) .
Order Issued Under Sections 3 and 4 of
the Bank Holding Company Act
PNC Financial Corp.
Pittsburgh, Pennsylvania
Order Approving Acquisition of a Bank Holding
Company, Bank, and Nonbanking Subsidiaries
PNC Financial Corp., Pittsburgh, Pennsylvania ("Applicant"), a bank holding company within the meaning
of the Bank Holding Company Act ("Act"), has
applied for the Board's approval under section 3 of the
Legal Developments
313
Act to acquire all of the voting shares of Bank of
Delaware Corporation, Wilmington, Delaware ("Corporation"), and thereby to acquire indirectly Corporation's subsidiary bank, Bank of Delaware, Wilmington, Delaware.1 Applicant also has applied for the
Board's approval under section 4(c)(8) of the Act to
acquire
indirectly
Corporation's
nonbanking
subsidiaries.2
Notice of the applications, affording opportunity for
interested persons to submit comments, has been
published (53 Federal Register 51,320 (1988)). The
time for filing comments has expired, and the Board
has considered the applications and all comments
received in light of the factors set forth in sections 3(c)
and 4(c)(8) of the Act.
Section 3(d) of the Act, the Douglas Amendment,
prohibits the Board from approving an application by a
bank holding company to acquire control of any bank
located outside of the holding company's home state,3
unless such acquisition is "specifically authorized by
the statute laws of the State in which [the] bank is
located, by language to that effect and not merely by
implication." 12 U.S.C. § 1842(d). The Board has
previously determined that the acquisition of a Delaware bank by a Pennsylvania bank holding company is
specifically authorized by the statute laws of Delaware, subject to the applicant's obtaining the approval
required pursuant to Delaware law.4 Based on the
foregoing, the Board has determined that the proposed
acquisition is specifically authorized by the statute
laws of Delaware and that Board approval of the
proposal is not barred by the Douglas Amendment,
subject to Applicant's obtaining the required approval
pursuant to section 843(a) of Title 5 of the Delaware
Code.5
Applicant, with approximately $24.3 billion in domestic deposits, is the twelfth largest commercial
banking organization in the United States, with fullservice banks in Delaware, Indiana, Kentucky, New
Jersey, Ohio, and Pennsylvania. Applicant ranks second in deposit size in Pennsylvania, controlling 14.5
percent of total deposits in commercial banks in the
state.6 Corporation is the second largest commercial
banking organization in Delaware, with domestic deposits of approximately $1.5 billion, representing approximately 24.2 percent of the total deposits in commercial banks in Delaware.
Applicant competes with Corporation in the Kent
County, Delaware, banking market.7 Applicant is the
eighth largest of 10 commercial banking organizations
in the market, controlling deposits of approximately
$16.8 million, representing approximately 3.1 percent
of total deposits in commercial banking organizations
in the market ("market deposits"). 8 Corporation is the
second largest commercial banking organization in the
market, controlling deposits of approximately $103.6
million, representing approximately 18.8 percent of
market deposits. Upon consummation, Applicant
would become the second largest commercial banking
organization in the market, controlling deposits of
approximately $120.4 million, representing approximately 21.9 percent of total market deposits. The Kent
County market is considered moderately concentrated, with a Herfindahl-Hirschman Index ("HHI")
of 1532, which would increase by 117 points to 1649
upon consummation of the proposal.9 Based on the
facts of record, the Board concludes that consummation of the proposal would not have a significant
adverse effect on competition in the Kent County
market or in any other relevant market. The Board
also does not believe that the consummation of the
proposal would have a significant adverse effect on
probable future competitors in any relevant market.
1. Applicant will acquire Corporation through the merger of Applicant's wholly owned subsidiary, New Financial Corp., Wilmington,
Delaware, with and into Corporation. In connection with these
applications, New Financial Corp. also has applied to acquire Corporation's banking and nonbanking subsidiaries.
2. Applicant has applied for approval to acquire indirectly the
following nonbanking subsidiaries of Corporation, located in Wilmington, Delaware: Del Vest, Inc., and thereby engage in providing
portfolio investment advisory services for institutional and individual
customers pursuant to section 225.25(b)(4) of the Board's Regulation
Y; and Christina Life Insurance Company, and thereby engage in
underwriting, as reinsurer, credit life, disability, accident, and health
insurance policies written in conjunction with loans made by Bank of
Delaware, pursuant to section 225.25(b)(8).
3. A Bank holding company's home state is that state in which the
operations of the bank holding company's banking subsidiaries were
principally conducted on July 1, 1966, or the date on which the
company became a bank holding company, whichever is later.
The financial and managerial resources of Applicant
and Corporation are consistent with approval. The
4. Meridian
(1988).
Bancorp,
Inc.,
7 4 FEDERAL RESERVE BULLETIN 51
5. In addition to obtaining approval from the Delaware State Bank
Commissioner, Applicant must obtain approval from the Pennsylvania
Department of Banking, 7 P.S. § 116(h).
6. State banking data are as of June 30, 1988.
7. The Kent County market is comprised of Kent County, Delaware.
8. Market data are as of June 30, 1987.
9. Under the revised Department of Justice Merger Guidelines (49
Federal Register 26,823 (June 29, 1984)), a market in which the
post-merger HHI is between 1000 and 1800 is considered moderately
concentrated. In such markets, the Department of Justice is unlikely
to challenge a merger or acquisition resulting in an HHI between 1000
and 1800 if the increase in the HHI is less than 100 points. The
Department of Justice has informed the Board that a bank merger or
acquisition generally will not be challenged (in the absence of other
factors indicating anticompetitive effects) unless the post-merger HHI
is at least 1800 and the merger increases the HHI by at least 200
points. The Department of Justice has stated that the higher than
normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognizes the competitive effect of limited
purpose lenders and other non-depository financial entities.
314
Federal Reserve Bulletin • April 1989
Board notes that the transaction would be accomplished through an exchange of shares without any
significant impact on Applicant's capital position.
In considering the convenience and needs of the
communities to be served, the Board has taken into
account the record of Applicant under the Community
Reinvestment Act ("CRA") (12 U.S.C. § 2901
et seq.). The CRA requires the federal bank supervisory agencies to encourage financial institutions to
help meet the credit needs of the local communities in
which they are chartered consistent with the safe and
sound operation of such institutions. To accomplish
this end, the CRA requires the appropriate federal
supervisory authority, in connection with its examination of an institution, to "assess the institution's
record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution." 12 U.S.C. § 2903. The Board
is required to "take such record into account in its
evaluation" of applications by bank holding companies under section 3 of the Act to acquire additional
banks. See 12 C.F.R. 225.13(b)(3).
The Board's experience over the years in examining
bank performance under the CRA has indicated that
institutions with effective programs to help meet community credit needs share a number of elements.
These institutions maintain outreach programs that
include procedures to permit effective communication
between the bank and various segments of the community and formalized methods for incorporating findings regarding community credit needs into the development and delivery of products and services. They
monitor institutional performance at the senior management or board of director level and periodically
evaluate new opportunities for innovative lending programs, such as home mortgage and neighborhood
residential rehabilitation lending and similar programs,
designed to meet the credit needs of their designated
community, including those of low- and moderateincome persons. An effective program also includes
the use of specifically designed marketing and advertising plans to stimulate public awareness of the bank's
services throughout the community, including lowand moderate-income neighborhoods, as well as support of community development projects and programs.
In the Board's opinion, financial institutions that
make meeting their responsibilities under the CRA a
part of their management and operational structure are
best able to accomplish the goals of the statute. In that
light, the Board expects banking organizations to have
addressed their CRA responsibilities before the submission of applications to the Board. This is in accord
with the requirements of the CRA, under which an
institution's record of performance in helping to meet
the credit needs of its entire community is a critical
factor in determining whether the institution has lived
up to its responsibilities under the statute.
The Board has received a protest from the Philadelphia Association of Community Organizations for Reform Now ("ACORN") regarding the CRA performance of Provident National Bank, Philadelphia,
Pennsylvania ("Provident"), one of Applicant's subsidiary banks. Specifically, ACORN alleges that, since
Applicant's 1983 acquisition of Provident, Provident
has:
(i) decreased its level of real estate lending to lowand moderate-income and minority communities;
(ii) abandoned its participation in government
housing programs; and
(iii) located its Philadelphia branches in a manner
that shows a lack of interest in minority and
low-income communities. As a result, ACORN
alleges, Provident has failed to meet local credit
needs with respect to low- and moderate-income
and minority neighborhoods in its community.10
Applicant has submitted a detailed response to the
comments made by ACORN. In this regard, Applicant
and ACORN have met privately on several occasions
in an attempt to clarify and resolve the concerns raised
by ACORN. These meetings, however, did not produce a resolution of all of the differences between
Applicant and ACORN.11
The Board has carefully considered the record of
this application, including the comments of ACORN
(including comments submitted on February 22 and
23, 1989) and Applicant's response, in light of the
requirements of the CRA and the implementing regulations of the federal banking agencies. Based upon
this record, the Board believes that Applicant has a
satisfactory program in place to ensure that its subsidiary banks, including Provident, carry out their re-
10. In addition, ACORN alleges that Applicant's application does
not take into account the lending needs of low- and moderate-income
residents of Delaware. The Board believes, however, that Applicant's
CRA record evidences Applicant's commitment to meet its responsibilities under the CRA to help meet the credit needs of the low- and
moderate-income residents of all of its subsidiary banks' communities. The Board expects Applicant to ensure that its CRA policies and
programs are fully implemented at the Bank of Delaware.
11. ACORN has also requested that the Board order a public
meeting and public hearing. Although section 3(b) of the Act does not
require a public meeting or hearing in this instance, the Board may, in
any case, order such proceedings. In the Board's view, the parties
have had ample opportunity to present their arguments in writing and
to respond to one another's submissions. Moreover, Applicant and
ACORN have had private meetings to discuss these issues. In light of
these facts, the Board has determined that the record has been
developed through these proceedings and that a public meeting or
hearing would serve no useful purpose in this case. Accordingly,
ACORN's request for a public meeting and hearing is hereby denied.
Legal Developments
sponsibilities under the CRA to serve the convenience
and needs of their communities, including low- and
moderate-income and minority neighborhoods, and
that its subsidiary banks' CRA performance is consistent with approval of the application. The Board notes
that, with one exception, Applicant's 23 subsidiary
banks (including Provident) have each received satisfactory ratings from their primary regulators in examinations of their CRA performance.12
In light of ACORN's protest, the Board has given
careful attention to the CRA record of Provident.
Provident was examined by the Office of the Comptroller of the Currency in January 1988 and received a
satisfactory rating for its CRA performance. In addition, the record of this application shows that Applicant has developed a comprehensive program that
establishes standards for its subsidiary banks to ascertain community credit needs, to respond to those
needs through products and services, and to properly
evaluate its success in meeting those needs. In accordance with that policy, Provident personnel establish
personal contacts, visit neighborhoods, and hold meetings with community leaders and government officials
in order to ascertain the credit needs of their communities and to communicate with members of their
communities regarding the credit services they provide. In addition, officers serve as board or committee
members for community organizations and attend
community educational programs.
Provident's Board of Directors and senior management officials participated in formulating Provident's
CRA policies and regularly review Provident's CRA
performance. Provident has a CRA Management Committee, headed by the CRA Compliance Officer, which
monitors and assesses Provident's CRA performance,
develops and recommends policy on key CRA issues,
assures implementation of policy decisions, formulates Provident's responses to CRA needs and opportunities, and encourages and enhances Provident's
position in the communities in which it operates. The
Committee studies quarterly reviews of community
credit program activity, regular small business lending
updates, and real estate development loans in relation
to low- and moderate-income areas of the delineated
community. In addition, the Board of Directors receives periodic reports on Provident's CRA activities
12. The Board notes that the most recent examination of a recently
acquired subsidiary bank of Applicant in Ohio identified certain
deficiencies in the bank's CRA performance. Although a formal
response to the examination is not yet due, Applicant already has
initiated steps to correct the noted deficiencies. The Federal Reserve
Bank of Cleveland will, as part of the supervisory process, carefully
monitor the bank's response to the examination report to ensure that
the bank addresses the weaknesses noted and improves its CRA
performance.
315
from the Committee and reviews all proposals for
branch closings or relocations to determine that they
do not conflict with Provident's CRA goals.
Provident makes use of a variety of marketing
strategies to communicate the availability of credit and
other bank products. For example, Provident regularly
uses eight city-wide newspapers, including ethnic publications, and two suburban newspapers to reach all
segments of the community. In addition, Provident has
actively participated and invested in local community
development and redevelopment projects and programs.
The record also shows that Provident has made
loans in all segments of its community, including lowand moderate-income and minority neighborhoods.
An analysis of Provident's Home Mortgage Disclosure
Act ("HMDA") data indicates that a substantial percentage of its residential real estate loans were made in
low- and moderate-income and minority communities.
While the number of loans made in these communities
has dropped somewhat since 1983, the decline is less
than that exhibited by other HMDA reporters.13 The
Board also notes that the proportion of Provident's
residential real estate loans extended in these areas
closely parallels the actual percentage of low- and
moderate-income and minority census tracts in Provident's delineated community.14 Accordingly, the
Board finds that Provident's record of residential real
estate lending in low- to moderate-income neighborhoods is consistent with its responsibilities under the
CRA.
In response to ACORN's comment with respect to
Provident's participation in government housing programs, Provident has agreed to provide FHA/VA
mortgages either directly or through an affiliate and to
participate in Pennsylvania Housing Finance Agency
13. In addition, the Office of the Comptroller of the Currency found
no evidence of discrimination in Provident's lending practices at its
January 1988 examination.
14. ACORN alleges that Applicant's sale in 1986 of its mortgage
subsidiary, The Kissell Company, is further evidence of its lending
shift away from originating residential mortgage credit. ACORN
contends that this divestiture has adversely affected the number of
real estate loans made by Provident. Applicant argues that it chose to
sell Kissell at a premium price rather than invest a substantial amount
to develop the data processing required to upgrade its servicing and
compete with major nonbank entrants into the mortgage servicing
market. In addition, Kissell had suffered key management losses,
rendering it necessary to rebuild Kissell's management structure. In
light of these considerations and Provident's satisfactory real estate
lending record, the Board does not find that the sale of Kissel has had
a serious adverse effect on Provident's service to the convenience and
needs of its community.
ACORN also alleges that patterns of home mortgage lending by
Provident since 1985 show a tendency to exclude lending from
neighborhoods where property values had not risen between 1981 and
1985. ACORN provides no data to support this allegation, however,
and the Board finds nothing in the record to indicate that Provident has
excluded lending from such neighborhoods.
316
Federal Reserve Bulletin • April 1989
loans. Provident has also set several specific objectives with respect to Provident's lending in low- and
moderate-income and minority neighborhoods in response to comments by ACORN.15
Provident maintains nine branches in low- and moderate-income tracts within the Philadelphia PMSA,
two of which have been opened since 1986. In addition, Provident is presently renovating existing branch
offices in those areas to update their facilities. Provident has closed no branches in low- or moderateincome or minority neighborhoods to date, although a
branch located in Coatesville, Pennsylvania, has been
scheduled to close effective March 17, 1989. The
Board notes that Provident has in place a written
corporate policy concerning branch closings that requires management to notify the public in advance of
any proposed closing and to conduct an analysis of the
impact of the branch closing on the local community,
alternative branch service options, and the profitability of the branch. The decision to close the Coatesville branch was made in accordance with this policy.
The Coatesville branch's customers have been notified
of the effective date of the closing and informed that
continuation of services will be provided by another
Coatesville branch less than a mile away.
Based upon the record, the Board concludes that
Provident's CRA program contains all of the elements
15. Provident has undertaken to implement the following policies:
• Effective February 1, 1989, Provident will increase its maximum
loan-to-value ratio to 95 percent.
• Provident will begin to include food stamps and LIHEAP funds as
sources of income in evaluating an applicant's ability to repay a
loan.
• Provident will continue to develop other means of facilitating
residential support in low- and moderate-income communities
through such means as land trusts, swing financing, donating vacant
properties, use of sweat equity, and other types of purchase/
rehabilitation financing.
• Provident will afford applicants an opportunity to provide an
explanation accompanying an application. In cases where a creditor
has refused to accept payment, or a bill is in dispute, an applicant
may deposit in an escrow account all funds that would have been
paid, and the applicant will be considered to have an acceptable
payment record. In any event, the emphasis will be on the applicant's credit experience in the 12 months prior to application. The
absence of a credit history will not be an obstacle to borrowing;
such applicants may be asked to supply substitute records of
payment.
• Provident will implement a procedure whereby mortgage loan
denials will be reviewed by a senior officer of the bank and an
analysis will be prepared and reviewed by Provident's CRA Management Committee on a quarterly basis.
• Provident will make a limited quantity of uninsured mortgage loans
for specified purposes.
• Provident will aim to increase its residential mortgage volume in
low- and moderate-income communities for 1989 by 100 percent
over its 1987 performance to a level of approximately $6.3 million
and minimally maintain that level for the next five years.
ACORN has suggested that Provident offer conventional loans at
two percent, rather than one percent, below market rates and that
Applicant provide ACORN with a direct grant of $50,000 to operate its
programs. Provident has declined to incorporate ACORN's suggestions in its CRA program.
that the Board has identified in the past as demonstrating an affirmative, ongoing commitment on the part of
an institution to meet its responsibilities under the
CRA to help meet the credit needs of its entire
community. Provident's program has been in place for
a number of years, and the record shows that Provident has an established record of satisfactory performance under the program, including service to the
credit needs of low- and moderate-income neighborhoods of its community. Based on the foregoing and
other facts of record, the Board has determined that
convenience and needs considerations, including
those related to Applicant's and Provident's record of
service to their entire communities, are consistent
with approval.
Applicant competes with Corporation in the provision of investment advisory services. The market for
this activity has numerous competitors and is regional
to national in scope. In addition, neither Applicant nor
Corporation is a dominant participant in the market for
investment advisory services. Accordingly, the Board
concludes that this proposal will not have any significant adverse effect upon existing or probable future
competition in any relevant market for these services.
Furthermore, there is no evidence in the record to
indicate that approval of this proposal would result in
undue concentration of resources, decreased or unfair
competition, conflicts of interests, unsound banking
practices, or other adverse effects on the public interest. Accordingly, the Board has determined that the
balance of public interest factors it must consider
under section 4(c)(8) of the Act is favorable and
consistent with approval of the applications to acquire
the nonbanking subsidiaries of Corporation.
Based on the foregoing and other facts of record, the
Board has determined that consummation of the transaction would be in the public interest and that the
applications under sections 3 and 4 of the Act should
be, and hereby are, approved, subject to Applicant's
obtaining the approval of the Delaware State Bank
Commissioner and the Pennsylvania Department of
Banking. The acquisition of Corporation shall not be
consummated before the thirtieth calendar day following the effective date of this Order, or later than three
months after the effective date of this Order, unless
such period is extended for good cause by the Board or
by the Federal Reserve Bank of Cleveland, acting
pursuant to delegated authority. The determinations as
to Applicant's nonbanking activities are subject to all
of the conditions contained in Regulation Y, including
those in sections 225.4(d) and 225.23(b)(3) (12 C.F.R.
225.4(d) and 225.23(b)(3)), and to the Board's authority to require such modification or termination of the
activities of a holding company or any of its subsidiaries as the Board finds necessary to assure compliance
Legal Developments
with the provisions and purposes of the Act and the
Board's regulations and orders issued thereunder, or
to prevent evasion thereof.
By order of the Board of Governors, effective
February 27, 1989.
317
Voting for this action: Chairman Greenspan and Governors
Johnson, Seger, Angell, Heller, Kelley, and LaWare.
JENNIFER J. JOHNSON
Associate Secretary of the Board
APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT
By Federal Reserve Banks
Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon
request to the Reserve Banks.
Section 3
Applicant
Baldwin Bancshares, Inc.,
Milledgeville, Georgia
Chandlerville Bancshares, Inc.,
Chandlerville, Illinois
CitNat Bancorp, Inc.,
Urbana, Ohio
Citizens Investment Co., Inc.,
Glenville, Minnesota
CNB Bancshares, Inc.,
Evansville, Indiana
Adam Bank Group, Inc.,
Bryan, Texas
First Commerce Bancshares,
Inc.,
Lincoln, Nebraska
Stuart Family Partnership,
Lincoln, Nebraska
Catherine Stuart Schmoker
Family Partnership,
Lincoln, Nebraska
James Stuart, Jr. Family
Partnership,
Lincoln, Nebraska
Scott Stuart Family Partnership,
Lincoln, Nebraska
First Community Bank,
Inverness, Florida
First of America Bank
Corporation,
Kalamazoo, Michigan
Bank(s)
First National Bank of Baldwin
County,
Milledgeville, Georgia
Peoples State Bank of
Chandlerville,
Chandlerville, Illinois
The Citizens National Bank
of Urbana,
Urbana, Ohio
Frost State Bank,
Frost, Minnesota
Bank of St. Helens,
Shively, Kentucky
First American Bank,
Bryan, Texas
Lincoln Bank South,
Lincoln, Nebraska
First Community Bank,
Inverness, Florida
Antrim Financial Corporation,
Mancelona, Michigan
Reserve
Bank
Effective
date
Atlanta
February 6, 1989
Chicago
February 6, 1989
Cleveland
February 6, 1989
Minneapolis
January 31, 1989
St. Louis
January 31, 1989
Dallas
February 9, 1989
Kansas City
February 22, 1989
Atlanta
February 10, 1989
Chicago
February 16, 1989
318
Federal Reserve Bulletin • April 1989
Section 3—Continued
Applicant
First of America Bank
Corporation,
Kalamazoo, Michigan
First of America
Bancorporation-Illinois, Inc.,
Libertyville, Illinois
First of Searcy, Inc.,
Searcy, Arkansas
First National Bancshares of
Winfield, Inc.,
Winfield, Kansas
First Tuttle Bancorp, Inc.,
Tuttle, Oklahoma
First Wisconsin Corporation,
Milwaukee, Wisconsin
Four County Bancshares, Inc.,
Allentown, Georgia
The George Washington Banking
Corporation,
Alexandria, Virginia
Jason Bankshares, Inc.,
Offerle, Kansas
Johnson Heritage Bancorp, Ltd.,
Racine, Wisconsin
Jorgenson Holding Company,
Kenmare, North Dakota
JTNB Bancorp, Inc.,
Jim Thorpe, Pennsylvania
Lower Rio Grande Valley
Bancshares, Inc., Employee
Stock Option Plan,
La Feria, Texas
Magna Group, Inc.,
Belleville, Illinois
MCB Acquisition Company,
Belleville, Illinois
Marshall & Ilsley Corporation,
Milwaukee, Wisconsin
MidConn Bancorp, Inc.,
Kensington, Connecticut
Mineral King Bancorp, Inc.,
Visalia, California
Old National Bancorp,
Evansville, Indiana
Old National Bancorp,
Evansville, Indiana
Bank(s)
Reserve
Bank
Effective
date
Whiteside County Bank,
Morrison, Illinois
Chicago
February 1, 1989
Baxter County Bancshares, Inc.,
Mountain Home, Arkansas
Butler Financial Corp., Inc.,
Douglass, Kansas
St. Louis
February 9, 1989
Kansas City
February 10, 1989
First National Bank of Tuttle,
Tuttle, Oklahoma
Stillwater Holding Company,
Stillwater, Minnesota
The Four County Bank,
Allentown, Georgia
The George Washington National
Bank (in organization),
Alexandria, Virginia
The Bucklin State Bank,
Bucklin, Kansas
Rock County Bancorp,
Janesville, Wisconsin
The Citizens State Bank at
Mohall,
Mohall, North Dakota
Jim Thorpe National Bank,
Jim Thorpe, Pennsylvania
Lower Rio Grande Valley
Bancshares, Inc., La Feria,
Texas
Kansas City
February 22, 1989
Chicago
January 30, 1989
Atlanta
February 14, 1989
Richmond
February 10, 1989
Kansas City
January 27, 1989
Chicago
February 10, 1989
Minneapolis
February 2, 1989
Philadelphia
February 7, 1989
Dallas
February 16, 1989
New Holland Farmers Bank,
New Holland, Illinois
Magna Bank of Lincoln, N.A.,
Lincoln, Illinois
M&I Greater Waukesha Bank,
Pewaukee, Wisconsin
MidConn Bank,
Kensington, Connecticut
Mineral King National Bank,
Visalia, California
Morganfield National Service
Corp.,
Morganfield, Kentucky
The First National Bank of
Harrisburg,
Harrisburg, Illinois
St. Louis
February 6, 1989
Chicago
February 17, 1989
Boston
February 6, 1989
San Francisco
February 13, 1989
St. Louis
February 17, 1989
St. Louis
February 17, 1989
Legal Developments
319
Section 3—Continued
Applicant
Panhandle Aviation, Inc.,
Clarinda, Iowa
Peoples Investment Corporation,
Cuba, Missouri
Sweet Water State Bancshares,
Inc.,
Sweet Water, Alabama
Union Bancorporation,
Defiance, Iowa
Union Planters Corporation,
Memphis, Tennessee
Wellington Bancorp, Inc.,
Springfield, Illinois
Western Bancshares, Inc.,
Coos Bay, Oregon
Bank(s)
Reserve
Bank
Effective
date
Humboldt Investment, Inc.,
Humboldt, Iowa
Peoples Bank of Steelville,
Steelville, Missouri
Sweet Water State Bank,
Sweet Water, Alabama
Chicago
February 7, 1989
St. Louis
February 7, 1989
Atlanta
February 6, 1989
Defiance State Bank, Defiance,
Iowa
Cumberland City Bank,
Cumberland City, Tennessee
Community Bank,
Hoopeston, Illinois
Western Bank, Coos Bay,
Oregon
Chicago
February 15, 1989
St. Louis
February 17, 1989
Chicago
February 6, 1989
San Francisco
February 15, 1989
Section 4
Applicant
Barnett Banks, Inc.,
Jacksonville, Florida
CB&T Bancshares, Inc.,
Columbus, Georgia
Chesapeake Bank Corporation,
Chesapeake, Virginia
United Bancshares of Nebraska,
Inc.,
Omaha, Nebraska
Wood Lake Bancorporation,
Inc.,
Wood Lake, Minnesota
Nonbanking
Activity/Company
Barnett Bond Service, Inc.,
Jacksonville, Florida
Calumet Financial Associates,
Inc.,
Columbus, Georgia
South Norfolk Loan Corporation,
Chesapeake, Virginia
Fremont Computer Services,
Inc.,
Omaha, Nebraska
Simonson Insurance Agency,
Hanley Falls, Minnesota
Reserve
Bank
Effective
date
Atlanta
February 3, 1989
Atlanta
February 8, 1989
Richmond
February 16, 1989
Kansas City
February 17, 1989
Minneapolis
February 17, 1989
Sections 3 and 4
Applicant
Eastern Savings Bancorp, Inc.
Lynn, Massachusetts
Eastern Bank,
Lynn, Massachusetts
Family Bancorp,
Haverhill, Massachusetts
Nonbanking
Activity/Company
Eastern Bank & Trust Company,
Salem, Massachusetts
Reserve
Bank
Boston
Effective
date
February 17, 1989
320 Federal Reserve Bulletin • April 1989
APPLICATIONS APPROVED UNDER BANK MERGER
ACT
By Federal Reserve Banks
Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon
request to the Reserve Banks.
.
Applicant
Sovran Bank/Memphis,
Memphis, Tennessee
PENDING CASES INVOLVING
-pv i / \
Bank(s)
First National Bank of
Collierville,
Collierville, Tennessee
Reserve
Effective
Bank
date
St. Louis
February 16, 1989
THE BOARD OF GOVERNORS
This list of pending cases does not include suits against the Federal Reserve Banks in which the Board of
Governors is not named a party.
Securities Industry Association v. Board of Governors, No. 89-1127 (D.C. Cir. filed February 16,
1989).
American Land Title Association v. Board of Governors, No. 88-1872 (D.C. Cir., filed December 16,
1988).
MCorp v. Board of Governors, No. CA3-88-2693-F
(N.D. Tex., filed October 28, 1988).
White v. Board of Governors, No. CU-S-88-623-RDF
(D. Nev., filed July 29, 1988).
VanDyke v. Board of Governors, No. 88-5280 (8th
Cir., filed July 13, 1988).
Whitney v. United States, etal., No. CA3-88-1596-H
(N.D. Tex., filed July 7, 1988).
Baugh v. Board of Governors, No. C88-3037 (N.D.
Iowa, filed April 8, 1988).
Bonilla v. Board of Governors, No. 88-1464 (7th Cir.,
filed March 11, 1988).
Cohen v. Board of Governors, No. 88-1061 (D.N-J-,
filed March 7, 1988).
Stoddard v. Board of Governors, No. 88-1148 (D.C.
Cir., filed February 25, 1988).
Independent Insurance Agents of America, Inc. v.
Board of Governors, No. 87-1686 (D.C. Cir., filed
November 19, 1987).
National Association of Casualty & Surety Agents,
et al., v. Board of Governors, Nos. 87-1644, 871801, 88-1001 88-1206, 88-1245, 88-1270 (D.C.
Cir., filed Nov. 4, Dec. 21, 1987, Jan. 4, March 18,
March 30, April 7, 1988).
Teichgraeber v. Board of Governors, No. 87-2505-0
(D. Kan., filed Oct. 16, 1987).
National Association of Casualty & Insurance Agents
v. Board of Governors, Nos. 87-1354, 87-1355 (D.C.
Cir., filed July 29, 1987).
The Chase Manhattan Corporation v. Board of Governors, No. 87-1333 (D.C. Cir., filed July 20, 1987).
Lewis v. Board of Governors, Nos. 87-3455, 87-3545
(11th Cir., filed June 25, Aug. 3, 1987).
CBC, Inc. v. Board of Governors, No. 86-1001 (10th
Cir., filed Jan. 2, 1986).
1
Financial and Business Statistics
N O T E . The following tables may have some discontinuities in historical data for some series beginning
with the March 1989 issue: 1.10,1.17, 1.20, 1.21,1.22,
1.23,1.24,1.25,1.26,1.28,1.30,1.31,1.32,1.35,1.36,
1.37,1.39,1.40,1.41,
1.42,1.43,1.45,1.46,1.47,1.48,
WEEKLY REPORTING COMMERCIAL
CONTENTS
Domestic
Financial
Statistics
MONEY STOCK AND BANK
CREDIT
A3 Reserves, money stock, liquid assets, and debt
measures
A4 Reserves of depository institutions, Reserve
Bank credit
A5 Reserves and borrowings—Depository
institutions
A6 Selected borrowings in immediately available
funds—Large member banks
POLICY
1.50,1.53, 1.54, 1.55,1.56, 2.11, 2.14, 2.15, 2.16, 2.17,
3.14, and 3.21. For a more detailed explanation of the
changes, see the announcement on pages 288-89 of
this BULLETIN.
INSTRUMENTS
A7 Federal Reserve Bank interest rates
A8 Reserve requirements of depository institutions
A9 Federal Reserve open market transactions
A19
A20
A21
All
Assets and liabilities
All reporting banks
Banks in New York City
Branches and agencies of foreign banks
Gross demand deposits—individuals,
partnerships, and corporations
FINANCIAL
BANKS
A10 Condition and Federal Reserve note statements
A l l Maturity distribution of loan and security
holdings
MONETARY
AND CREDIT
AGGREGATES
A12 Aggregate reserves of depository institutions
and monetary base
A13 Money stock, liquid assets, and debt measures
A15 Bank debits and deposit turnover
A16 Loans and securities—All commercial banks
COMMERCIAL BANKING
INSTITUTIONS
A17 Major nondeposit funds
A18 Assets and liabilities, last-Wednesday-of-month
series
MARKETS
A23 Commercial paper and bankers dollar
acceptances outstanding
A23 Prime rate charged by banks on short-term
business loans
A24 Interest rates—money and capital markets
A25 Stock market—Selected statistics
A26 Selected financial institutions—Selected assets
and liabilities
FEDERAL
FEDERAL RESERVE
BANKS
FINANCE
A28
A29
A30
A30
Federal fiscal and financing operations
U.S. budget receipts and outlays
Federal debt subject to statutory limitation
Gross public debt of U.S. Treasury—Types
and ownership
A31 U.S. government securities dealers—
Transactions
A32 U.S. government securities dealers—Positions
and financing
A33 Federal and federally sponsored credit
agencies—Debt outstanding
SECURITIES MARKETS AND
CORPORATE FINANCE
A34 New security issues—State and local
governments and corporations
A35 Open-end investment companies—Net sales
and asset position
2
Federal Reserve Bulletin • April 1989
A35 Corporate profits and their distribution
A35 Total nonfarm business expenditures on new
plant and equipment
A36 Domestic finance companies—Assets and
liabilities and business credit
REAL
A56 U.S. reserve assets
A56 Foreign official assets held at Federal Reserve
Banks
A57 Foreign branches of U.S. banks—Balance
sheet data
A59 Selected U.S. liabilities to foreign official
institutions
ESTATE
A37 Mortgage markets
A38 Mortgage debt outstanding
CONSUMER INSTALLMENT
CREDIT
A39 Total outstanding and net change
A40 Terms
REPORTED BY BANKS IN THE UNITED
STATES
A59
A60
A62
A63
Liabilities to and claims on foreigners
Liabilities to foreigners
Banks' own claims on foreigners
Banks' own and domestic customers' claims on
foreigners
A63 Banks' own claims on unaffiliated foreigners
A64 Claims on foreign countries—Combined
domestic offices and foreign branches
FLOW OF FUNDS
A41 Funds raised in U.S. credit markets
A43 Direct and indirect sources of funds to credit
markets
A44 Summary of credit market debt outstanding
A45 Summary of credit market claims, by holder
Domestic
Nonfinancial
REPORTED BY NONBANKING
BUSINESS
ENTERPRISES IN THE UNITED STATES
A65 Liabilities to unaffiliated foreigners
A66 Claims on unaffiliated foreigners
Statistics
SECURITIES HOLDINGS AND
SELECTED
MEASURES
A46 Nonfinancial business activity—Selected
measures
A47 Labor force, employment, and unemployment
A48 Output, capacity, and capacity utilization
A49 Industrial production—Indexes and gross value
A51 Housing and construction
A52 Consumer and producer prices
A53 Gross national product and income
A54 Personal income and saving
International
SUMMARY
Statistics
STATISTICS
A55 U.S. international transactions—Summary
A56 U.S. foreign trade
TRANSACTIONS
A67 Foreign transactions in securities
A68 Marketable U.S. Treasury bonds and notes—
Foreign transactions
INTEREST AND EXCHANGE
RATES
A69 Discount rates of foreign central banks
A69 Foreign short-term interest rates
A70 Foreign exchange rates
A71 Guide to Tabular
Presentation,
Statistical Releases, and Special
Tables
SPECIAL
TABLES
A72 Terms of lending at commercial
banks, November 1988
Money Stock and Bank Credit
A3
1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES
Annual rates of change, seasonally adjusted in percent1
1988r
1988'
1989
Monetary and credit aggregates
Q2
Q3
Q4
Sept.
Oct.
Nov.
Dec.
Jan.
3.5
2.9
1.5
8.1
5.8
7.2
-6.5
7.4
4.3
4.0
2.5
6.7
-.7
-1.4
5.3
5.0
-1.9
-2.3
6.4
5.9
-.8
-2.6
10.3
5.7
2.0
.8
-9.5
3.9
-1.5
.1
22.1
5.0
-8.4
-10.7
-7.6
4.1
3.2
6.1
6.8
6.6
8.2
6.4
6.9
7.2
8.5
8.7
5.2
3.8
5.6
7.2
8.6
2.3
3.7
5.0
6.1
8.2
1.9
2.1
2.7
2.0
8.9
2.7
2.8
5.4
5.9
7.5
1.8
6.7
6.9
8.5
8.2
5.5
5.0
5.7
10.5
7.5
-6.0
-1.1
1.5
n.a.
n.a.
7.2
9.1
7.1
8.3
3.3
12.2
4.2
9.8
2.1
4.8
2.9
14.8
8.4
7.8
4.8
8.2
.6
10.7
7.1
13.4
6.3
10.4
12.9
9.1
7.9
11.6
18.2
4.0
18.0
13.1
.7
17.8
14.4
-2.2
20.6
14.3
18.9
15.3
6.7
-1.9
18.3
13.0
-10.4
21.8
17.4
-1.3
20.5
13.0
2.6
12.5
9.2
2.1
5.4
3.9
-2.5
6.6
7.9
-2.7
8.8
22.1
-4.7
7.7
7.7
-1.7
5.4
2.7
-1.2
1.8
-2.4
-9.2
4.4
6.3
8.0
8.2
5.3
8.2
8.9
11.0
7.3
9.0
7.3
7.9
8.3
4.4
12.2
7.8
-.7
5.1
8.2
7.1
6.7
8.7
6.0
7.6
7.4
.1
Q1
1
2
i
4
Reserves of depository
Total
Required
Nonborrowed
Monetary base
5
b
1
8
y
Concepts
Ml
M2
M3
L
Debt
institutions
of money, liquid assets,
Nontrqnsaction
10 In M2
u In M3 only 6
and
debt4
components
Time and savings
deposits
Commercial banks
Savings
Small-denomination time
Large-denomination time 9 , 1 0
Thrift institutions
15
Savings
16
Small-denomination time
17
Large-denomination time
12
u
14
Debt
components4
18 Federal
iy Nonfederal
20 Total loans and securities at commercial banks"
1. Unless otherwise noted, rates of change are calculated from average
amounts outstanding in preceding month or quarter.
2. Figures incorporate adjustments for discontinuities associated with the
implementation of the Monetary Control Act and other regulatory changes to
reserve requirements. To adjust for discontinuities due to changes in reserve
requirements on reservable nondeposit liabilities, the sum of such required
reserves is subtracted from the actual series. Similarly, in adjusting for discontinuities in the monetary base, required clearing balances and adjustments to
compensate for float also are subtracted from the actual series.
3. The monetary base not adjusted for discontinuities consists of total
reserves plus required clearing balances and adjustments to compensate for float
at Federal Reserve Banks plus the currency component of the money stock less
the amount of vault cash holdings of thrift institutions that is included in the
currency component of the money stock plus, for institutions not having required
reserve balances, the excess of current vault cash over the amount applied to
satisfy current reserve requirements. After the introduction of contemporaneous
reserve requirements (CRR), currency and vault cash figures are measured over
the weekly computation period ending Monday.
Before CRR, all components of the monetary base other than excess reserves
are seasonally adjusted as a whole, rather than by component, and excess
reserves are added on a not seasonally adjusted basis. After CRR, the seasonally
adjusted series consists of seasonally adjusted total reserves, which include
excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted
currency component of the money stock plus the remaining items seasonally
adjusted as a whole.
4. Composition of the money stock measures and debt is as follows:
M l : (1) currency outside the Treasury, Federal Reserve Banks, and the vaults
of depository institutions; (2) travelers checks of nonbank issuers; (3) demand
deposits at all commercial banks other than those due to depository institutions,
the U.S. government, and foreign banks and official institutions less cash items in
the process of collection and Federal Reserve float; and (4) other checkable
deposits (OCD) consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union
share draft accounts, and demand deposits at thrift institutions.
M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs)
issued by all commercial banks and overnight Eurodollars issued to U.S. residents
by foreign branches of U . S . banks worldwide, Money Market Deposit Accounts
(MMDAs), savings and small-denomination time deposits (time deposits—including retail RPs—in amounts of less than $100,000), and balances in both taxable and
tax-exempt general purpose and broker-dealer money market mutual funds.
Excludes individual retirement accounts (IRA) and Keogh balances at depository
n.a.
2.5
institutions and money market funds. Also excludes all balances held by U.S.
commercial banks, money market funds (general purpose and broker-dealer),
foreign governments and commercial banks, and the U . S . government.
M3: M2 plus large-denomination time deposits and term RP liabilities (in
amounts of $100,000 or more) issued by commercial banks and thrift institutions,
term Eurodollars held by U . S . residents at foreign branches of U . S . banks
worldwide and at all banking offices in the United Kingdom and Canada, and
balances in both taxable and tax-exempt, institution-only money market mutual
funds. Excludes amounts held by depository institutions, the U . S . government,
money market funds, and foreign banks and official institutions. Also subtracted
is the estimated amount of overnight RPs and Eurodollars held by institution-only
money market mutual funds.
L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term
Treasury securities, commercial paper and bankers acceptances, net of money
market mutual fund holdings of these assets.
Debt: Debt of domestic nonfinancial sectors consists of outstanding credit
market debt of the U . S . government, state and local governments, and private
nonfinancial sectors. Private debt consists of corporate bonds, mortgages, consumer credit (including bank loans), other bank loans, commercial paper, bankers
acceptances, and other debt instruments. The source of data on domestic
nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt
data are based on monthly averages. Growth rates for debt reflect adjustments for
discontinuities over time in the levels of debt presented in other tables.
5. Sum of overnight RPs and Eurodollars, money market fund balances
(general purpose and broker-dealer), MMDAs, and savings and small time
deposits less the estimated amount of demand deposits and vault cash held by
thrift institutions to service their time and savings deposit liabilities.
6. Sum of large time deposits, term RPs, and Eurodollars of U.S. residents,
money market fund balances (institution-only), less a consolidation adjustment
that represents the estimated amount of overnight RPs and Eurodollars held by
institution-only money market mutual funds.
7. Excludes MMDAs.
8. Small-denomination time deposits—including retail RPs—are those issued
in amounts of less than $100,000. All IRA and Keogh accounts at commercial
banks and thrifts are subtracted from small time deposits.
9. Large-denomination time deposits are those issued in amounts of $100,000
or more, excluding those booked at international banking facilities.
10. Large-denomination time deposits at commercial banks less those held by
money market mutual funds, depository institutions, and foreign banks and
official institutions.
11. Changes calculated from figures shown in table 1.23.
A46 DomesticNonfinancialStatistics • April 1989
1.11
RESERVES OF DEPOSITORY INSTITUTIONS A N D RESERVE BANK CREDIT
Millions of dollars
Monthly averages of
daily figures
Factors
1988
Weekly averages of daily figures for week ending
1989
1988
1989
Nov.
Dec.
Jan.
Dec. 14
Dec. 21
Dec. 28
Jan. 4
Jan. 11
Jan. 18
Jan. 25
258,858
263,823
264,482
262,357
263,885
264,494
270,106
268,011
262,812
261,033
229,131
228,390
741
7,332
7,106
226
0
2,883
1,186
18,327
11,061
5,018
18,718
234,567
233,606
961
7,565
7,041
524
0
1,749
1,436
18,507
11,061
5,018
18,769
235,128
233,851
1,277
7,702
6,923
779
0
1,570
877
19,205
11,057
5,018
18,831
233,266
232,906
360
7,414
7,066
348
0
2,012
1,342
18,323
11,062
5,018
18,759
234,972
234,480
492
7,117
7,018
99
0
1,332
1,760
18,704
11,061
5,018
18,773
234,552
232,881
1,671
7,918
7,010
908
0
1,362
1,771
18,891
11,060
5,018
18,787
238,002
233,504
4,498
9,431
6,966
2,465
0
2,280
1,323
19,071
11,060
5,018
18,801
236,983
234,526
2,457
8,736
6,966
1,770
0
1,816
1,816
18,659
11,057
5,018
18,815
233,808
233,808
0
6,966
6,966
0
0
1,879
933
19,225
11,057
5,018
18,829
233,420
232,989
431
7,084
6,903
181
0
1,174
68
19,286
11,056
5,018
18,843
240,343
401
244,540
399
243,398
406
243,390
404
244,312
398
246,598
397
247,768
395
245,887
400
243,652
408
241,475
409
5,268
246
5,364
248
8,303
257
4,807
237
6,462
270
4,500
183
8,459
299
6,242
251
4,368
247
9,360
281
1,746
380
2,014
369
1,999
402
2,073
310
1,789
371
1,849
412
1,979
491
2,183
332
1,884
330
1,950
381
SUPPLYING RESERVE F U N D S
1 Reserve Bank credit
2
U.S. government securities 1
3
Bought outright
4
Held under repurchase agreements
5
Federal agency obligations
6
Bought outright
7
Held under repurchase agreements
8
Acceptances
9
Loans
10
Float
11
Other Federal Reserve assets
12 Gold stock 2
13 Special drawing rights certificate a c c o u n t . . .
14 Treasury currency outstanding
ABSORBING RESERVE FUNDS
15 Currency in circulation
16 Treasury cash holdings 2
Deposits, other than reserve balances, with
Federal Reserve Banks
17
Treasury
18
Foreign
19
Service-related balances and
adjustments
20
Other
21 Other Federal Reserve liabilities and
capital
22 Reserve balances with Federal
Reserve Banks 3
7,955
8,040
7,913
7,930
8,130
8,120
7,777
7,975
7,847
8,025
37,316
37,697
36,710
38,044
37,004
37,299
37,816
39,632
38,981
34,068
Jan. 18
Jan. 25
End-of-month figures
1988
Wednesday figures
1989
1988
1989
Nov.
Dec.
Jan.
Dec. 14
Dec. 21
Dec. 28
Jan. 4
Jan. 11
23 Reserve Bank credit
261,971
269,748
261,056
261,481
263,705
269,055
273,893
269,463
262,485
266,298
24
U . S . government securities 1
25
Bought outright
26
Held under repurchase agreements
27
Federal agency obligations
28
Bought outright
29
Held under repurchase agreements
30
Acceptances
31
Loans
32
Float
33
Other Federal Reserve assets
34 Gold stock 2
35 Special drawing rights certificate a c c o u n t . . .
36 Treasury currency outstanding
232,702
228,701
4,001
8,384
7,102
1,282
0
2,328
389
18,168
11,059
5,018
18,743
238,422
233,662
4,760
9,067
6,966
2,101
0
2,170
1,286
18,803
11,060
5,018
18,799
232,933
232,933
0
6,819
6,819
0
0
863
798
19,643
11,056
5,018
18,855
231,552
231,313
239
7,092
7,018
74
0
2,197
2,058
18,582
11,061
5,018
18,771
235,293
234,839
454
7,052
7.017
35
0
961
1,695
18,704
11,060
5.018
18,785
237,268
233,562
3,706
8,402
6,967
1,435
0
1,603
2,691
19,091
11,060
5,018
18,799
240,122
233,025
7,097
10,530
6,966
3,564
0
1,994
2,576
18,671
11,060
5,018
18,813
237,875
234,916
2,959
8,637
6,966
1,671
0
1,814
1,955
19,182
11,057
5,018
18,827
233,131
233,131
0
6,966
6,966
0
0
1,314
1,914
19,160
11,056
5,018
18,841
235,988
232,974
3,014
8,087
6,819
1,268
0
2,018
569
19,636
11,056
5,018
18,855
242,472
402
247,649
395
239,581
412
243,951
398
245,411
398
247,745
390
247,647
3%
244,862
408
243,191
408
240,425
412
5,198
251
8,656
347
11,766
279
4,638
233
10,156
201
5,822
216
8,814
189
4,806
177
3,650
245
13,769
204
1,613
398
1,605
548
1,589
390
1,612
300
1,594
318
1,594
556
1,605
330
1,606
578
1,591
365
1,594
749
8,058
7,683
7,746
7,695
7,674
8,070
7,860
7,828
7,634
7,961
38,399
37,742
34,221
37,504
32,816
39,539
41,943
44,101
40,316
36,113
SUPPLYING RESERVE F U N D S
ABSORBING RESERVE F U N D S
37 Currency in circulation
38 Treasury cash holdings 2
Deposits, other than reserve balances, with
Federal Reserve Banks
39
Treasury
40
Foreign
41
Service-related balances and
adjustments
42
Other
43 Other Federal Reserve liabilities and
capital
44 Reserve balances with Federal
Reserve Banks 3
1. Includes securities loaned—fully guaranteed by U.S. government securities
pledged with Federal Reserve Banks—and excludes any securities sold and
scheduled to be bought back under matched sale-purchase transactions.
2. Revised for periods between October 1986 and April 1987. At times during
this interval, outstanding gold certificates were inadvertently in excess of the gold
stock. Revised data not included in this table are available from the Division of
Research and Statistics, Banking Section.
3. Excludes required clearing balances and adjustments to compensate for
float.
NOTE. For amounts of currency and coin held as reserves, see table 1.12.
Money Stock and Bank Credit
1.12 RESERVES AND BORROWINGS
A5
Depository Institutions'
Millions of dollars
Monthly averages 9
Reserve classification
1
2
3
4
5
6
7
8
9
10
Reserve balances with Reserve Banks 2
Total vault cash
Vault . i
Surplus
Total reserves
Required reserves
Excess reserve balances at Reserve Banks
Total borrowings at Reserve Banks
Seasonal borrowings at Reserve Banks
Extended credit at Reserve Banks 8
1989
1985
1986
1987
1988
Dec.
Dec.
Dec.
July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
27,620
22,953
20,522
2,431
48,142
47,085
1,058
1,318
56
499
37,360
24,079
22,199
1,879
59,560
58,191
1,369
827
38
303
37,673
26,155
24,449
1,706
62,123
61,094
1,029
777
93
483
37,992
26,479
24,763
1,715
62,756
61,749
1,007
3,440
376
2,538
36,911
26,895
25,054
1,841
61,965
61,012
953
3,241
423
2,653
37,213
26,726
24,940
1,786
62,153
61,181
972
2,839
421
2,059
36,421
27,1%
25,494
1,702
61,915
60,853
1,062
2,299
332
1,781
36,997
26,746
25,410
1,335
62,407
61,287
1,119
2,861
186
2,322
37,830
27,197
25,909
1,291
63,736
62,696
1,040
1,716
130
1,244
36,475
28,376
26,993
1,383
63,468
62,323
1,145
1,662
76
1,046
Biweekly averages of daily figures for weeks ending
1989
1988
11
12
n
14
15
16
17
18
19
20
Reserve balances with Reserve Banks 2
Total vault cash
Vault4
Surplus
Total reserves
Required reserves
Excess reserve balances at Reserve Banks
Total borrowings at Reserve Banks
Seasonal borrowings at Reserve Banks
Extended credit at Reserve Banks
Oct. 5
Oct. 19
Nov. 2
Nov. 16
N o v . 30
Dec. 14
Dec. 28
Jan. 11
Jan. 25
Feb. 8
36,527
26,924
25,063
1,861
61,590
60,442
1,148
2,438
433
1,704
36,678
27,612
25,806
1,806
62,484
61,509
975
2,204
337
1,681
36,078
26,825
25,309
1,516
61,387
60,260
1,128
2,353
285
1,931
38,143
26,221
25,022
1,200
63,165
61,562
1,603
3,233
180
2,838
35,981
27,259
25,814
1,446
61,795
61,160
635
2,562
178
1,863
38,363
26,316
25,128
1,188
63,491
62,515
976
2,014
131
1,529
37,106
27,927
26,525
1,403
63,631
62,550
1,081
1,347
137
968
38,724
27,904
26,679
1,225
65,403
64,256
1,147
2,048
94
1,208
36,514
27,414
26,243
1,171
62,757
61,786
972
1,527
61
1,028
32,260
31,488
29,318
2,170
61,578
60,035
1,543
1,270
78
792
1. These data also appear in the Board's H.3 (502) release. For address, see inside front cover.
2. Excludes required clearing balances and adjustments to compensate for
float.
3. Dates refer to the maintenance periods in which the vault cash can be used
to satisfy reserve requirements. Under contemporaneous reserve requirements,
maintenance periods end 30 days after the lagged computation periods in which
the balances are held.
4. Equal to all vault cash held during the lagged computation period by
institutions having required reserve balances at Federal Reserve Banks plus the
amount of vault cash equal to required reserves during the maintenance period at
institutions having no required reserve balances.
5. Total vault cash at institutions having no required reserve balances less the
amount of vault cash equal to their required reserves during the maintenance
period.
6. Total reserves not adjusted for discontinuities consist of reserve balances
with Federal Reserve Banks, which exclude required clearing balances and
adjustments to compensate for float, plus vault cash used to satisfy reserve
requirements. Such vault cash consists of all vault cash held during the lagged
computation period by institutions having required reserve balances at Federal
Reserve Banks plus the amount of vault cash equal to required reserves during the
maintenance period at institutions having no required reserve balances.
7. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy
reserve requirements less required reserves.
8. Extended credit consists of borrowing at the discount window under the
terms and conditions established for the extended credit program to help
depository institutions deal with sustained liquidity pressures. Because there is
not the same need to repay such borrowing promptly as there is with traditional
short-term adjustment credit, the money market impact of extended credit is
similar to that of nonborrowed reserves.
9. Data are prorated monthly averages of biweekly averages.
A46 DomesticNonfinancialStatistics • April 1989
1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS
Large Member Banks1
Averages of daily figures, in millions of dollars
1988 w e e k ending M o n d a y
Maturity and source
1
2
3
4
Federal funds purchased,
repurchase agreements,
and
other selected borrowing in immediately
available
funds
F r o m commercial banks in the United States
For o n e day or under continuing contract
For all other maturities
From other depository institutions, foreign banks and
foreign official institutions, and U . S . government
agencies
For o n e day or under continuing contract
For all other maturities
Apr. 18
Apr. 25
May 2
May 9
May 16
May 23
M a y 30
72,737
10,492
67,632
10,738
64,874
10,683
66,700
10,857
63,447
11,208
63,088
9,894
64,248
10,388
71,726
36,509
7,543
31,334
8,080
28,596
9,081
32,399
8,146
33,207
8,205
34,265
7,486
32,706
7,534
33,220
7,130
10,816
Repurchase
agreements
on U.S. government
and federal
agency securities in immediately
available
funds
Brokers and nonbank dealers in securities
For o n e day or under continuing contract
For all other maturities
All other customers
For o n e day or under continuing contract
For all other maturities
13,659
14,777
13,648
16,544
13,705
17,892
15,256
17,652
16,394
17,513
16,467
15,092
17,941
15,342
17,697
14,767
25,461
10,279
24,743
9,705
25,708
9,324
24,271
9,238
25,333
9,444
25,536
9,348
25,573
10,648
25,070
10,049
MEMO: Federal funds loans and resale agreements in
immediately available funds in maturities of one day
or under continuing contract
9 T o commercial banks in the United States
10 T o all other specified customers
34,565
13,321
34,092
13,252
34,774
14,708
34,480
14,540
32,915
13,607
31,181
13,154
33,269
13,410
37,361
15,880
5
6
7
8
1. B a n k s with assets of $1 billion or more as of D e c . 31, 1977.
T h e s e data also appear in the Board's H . 5 (507) release. For address, s e e inside
front c o v e r .
2. Brokers and nonbank dealers in securities; other depository institutions;
foreign banks and official institutions; and United States government agencies,
Policy Instruments
A7
1.14 FEDERAL RESERVE BANK INTEREST RATES
Percent per year
Current and previous levels
Extended credit 2
Adjustment credit
and
Seasonal credit 1
Federal Reserve
Bank
On
2/28/89
Effective
date
7
2/24/89
2/24/89
2/24/89
2/24/89
2/24/89
2/24/89
Boston
N e w York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco . . .
7
After 30 days of borrowing 3
First 30 days of borrowing
Previous
rate
6
2/24/89
2/24/89
2/24/89
2/24/89
2/27/89
2/24/89
On
2/28/89
Effective
date
Vi
2/24/89
2/24/89
2/24/89
2/24/89
2/24/89
2/24/89
6Vi
2/24/89
2/24/89
2/24/89
2/24/89
2/27/89
2/24/89
7
Previous
rate
On
2/28/89
Effective
date
Previous
rate
9.90
2/23/89
2/23/89
2/23/89
2/23/89
2/23/89
2/23/89
9.70
6V1
6
Vl
9.90
2/23/89
2/23/89
2/23/89
2/23/89
2/23/89
2/23/89
Effective date
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
2/9/89
9.70
Range of rates for adjustment credit in recent years 4
Effective date
In effect Dec. 31, 1977.
1978—Jan.
9
20
May 11
12
July
3
10
Aug. 21
Sept. 22
Oct. 16
20
Nov. 1
3
1979—July 20
Aug. 17
20
Sept. 19
21
Oct.
8
10
1980—Feb.
15
19
May 29
30
June 13
16
Range (or
level)—
All F.R.
Banks
6
6-6
F.R.
Bank
of
N.Y.
6
Vi 6 Vi
6Vi
6 Vl
6V1-I 7
1
7
I-lVi 7^4
IV* 7!/4
73/4
8
8-8W
8
»Vi-9Vi
9 Vi
Vi
10
10-10W
lOVi
10W-11
11
II-12
12
12-13
13
12-13
12
11-12
11
7V4
8
svi
8W
9Vl
9Vi
10
10
10W
11
11
12
12
Vi
13
13
13
12
11
11
Effective date
1980—July
28
29
Sept. 26
Nov. 17
Dec. 5
1981—May
Nov.
Dec.
5
8
2
6
4
1982—July
20
23
2
3
16
27
30
Oct. 12
13
Nov. 22
26
Dec. 14
15
17
Aug.
1. Adjustment credit is available on a short-term basis to help depository
institutions meet temporary needs for funds that cannot be met through reasonable alternative sources. After May 19,1986, the highest rate established for loans
to depository institutions may be charged on adjustment credit loans of unusual
size that result from a major operating problem at the borrower's facility.
Seasonal credit is available to help smaller depository institutions meet regular,
seasonal needs for funds that cannot be met through special industry lenders and
that arise from a combination of expected patterns of movement in their deposits
and loans. A temporary simplified seasonal program was established on Mar. 8,
1985, and the interest rate was a fixed rate Vl percent above the rate on adjustment
credit. The program was reestablished for 1986 and 1987; but was not renewed for
1988.
2. Extended credit is available to depository institutions, when similar assistance is not reasonably available from other sources, when exceptional circumstances or practices involve only a particular institution or when an institution is
experiencing difficulties adjusting to changing market conditions over a longer
period of time.
3. For extended-credit loans outstanding more than 30 days, a flexible rate
somewhat above rates on market sources of funds ordinarily will be charged, but
Range (or
level)—
All F.R.
Banks
F.R.
Bank
of
N.Y.
Effective date
Range (or
level)—
All F.R.
Banks
F.R.
Bank
of
N.Y.
10-11
10
11
12
12-13
10
10
11
12
13
1984—Apr.
9
13
N o v . 21
26
Dec. 24
8W-9
9
8W-9
8 Vi
8
9
9
8 Vi
8 Vi
8
13-14
14
13-14
13
12
14
14
13
13
12
1985—May 20
24
lVl-%
IVi
IVi
IVi
7
10
Apr. 21
July 11
Aug. 21
22
1-1 Vi
7
6W-7
6
5W-6
5W
1
1
6 Vi
6
5 Vi
SVi
1987—Sept.
4
11
5Vi-6
6
6
6
1988—Aug.
9
11
6 - 6 Vl
6 Vl
6 Vi
6 Vi
1989—Feb. 24
27
(M.-1
7
1
7
7
7
im-12
11 Vi
11-11V4
11
10W
10-10W
10
9VS-10
9 Vi
9 - 9 Vi
9
8Vl-9
»V2-9
m
11 Vi
1 IVi
11
11
10W
10
10
9 Vl
9 Vi
9
9
9
8 Vi
8 Vi
1986—Mar.
In effect February 28, 1989
in no case will the rate charged be less than the basic discount rate plus 50 basis
points. The flexible rate is reestablished on the first business day of each
two-week reserve maintenance period. At the discretion of the Federal Reserve
Bank, the time period for which the basic discount rate is applied may be
shortened.
4. For earlier data, see the following publications of the Board of Governors:
Banking and Monetary Statistics, 1914-1941, and 1941-1970; Annual
Statistical
Digest,
1970-1979.
In 1980 and 1981, the Federal Reserve applied a surcharge to short-term
adjustment credit borrowings by institutions with deposits of $500 million or more
that had borrowed in successive weeks or in more than four weeks in a calendar
quarter. A 3 percent surcharge was in effect from Mar. 17, 1980 through May 7,
1980. There was no surcharge until N o v . 17,1980, when a 2 percent surcharge was
adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and
to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective
Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981 the
formula for applying the surcharge was changed from a calendar quarter to a
moving 13-week period. The surcharge was eliminated on N o v . 17, 1981.
A46 DomesticNonfinancialStatistics • April 1989
1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1
Percent of deposits
Type of deposit, ai
deposit interval
Deposiitoiy institution requirements
aftter implementation of the
Monetary Control A c t
Percen
depos
Net transaction
accounts
$0 million-$41.5 million
More than $41.5 million
Effective date
'
12/20/88
12/20/88
Nonpersonal
time
deposits
B y original maturity
L e s s than 1 Vi years
1 Vz years or more
3
0
10/6/83
10/6/83
Eurocurrency
All types
3
11/13/80
liabilities
1. R e s e r v e requirements in effect o n D e c . 31, 1988. Required reserves must be
held in the form of deposits with Federal R e s e r v e Banks or vault cash. N o n m e m bers may maintain reserve balances with a Federal Reserve Bank indirectly on a
pass-through basis with certain approved institutions. For previous reserve
requirements, s e e earlier editions of the Annual Report and of the FEDERAL
RESERVE BULLETIN. U n d e r provisions of the Monetary Control Act, depository
institutions include commercial banks, mutual savings banks, savings and loan
associations, credit unions, agencies and branches of foreign banks, and Edge
corporations.
2. T h e Garn-St Germain Depository Institutions A c t of 1982 (Public L a w
97-320) requires that $2 million of reservable liabilities (transaction accounts,
nonpersonal time deposits, and Eurocurrency liabilities) of e a c h depository
institution b e subject t o a zero percent reserve requirement. T h e Board is t o adjust
the amount of reservable liabilities subject to this zero percent reserve requirement e a c h year for the succeeding calendar year by 80 percent of the percentage
increase in the total reservable liabilities of all depository institutions, measured
o n an annual basis as of June 30. N o corresponding adjustment is to be made in
the event of a decrease. On D e c . 20, 1988, the exemption w a s raised from $3.2
million to $3.4 million. In determining the reserve requirements of depository
institutions, the e x e m p t i o n shall apply in the following order: (1) net N O W
accounts ( N O W accounts l e s s allowable deductions); (2) net other transaction
accounts; and (3) nonpersonal time deposits or Eurocurrency liabilities starting
with those with the highest reserve ratio. With respect to N O W accounts and
other transaction accounts, the e x e m p t i o n applies only t o such a c c o u n t s that
would be subject to a 3 percent reserve requirement.
3. Transaction accounts include all deposits o n w h i c h the account holder is
permitted to make withdrawals by negotiable or transferable instruments, payment orders of withdrawal, and telephone and preauthorized transfers in e x c e s s of
three per month for the purpose of making p a y m e n t s to third persons or others.
H o w e v e r , M M D A s and similar a c c o u n t s subject to the rules that permit n o more
than six preauthorized, automatic, or other transfers per month, of which no more
than three can be c h e c k s , are not transaction a c c o u n t s ( s u c h a c c o u n t s are savings
deposits subject to time deposit reserve requirements).
4. The Monetary Control A c t of 1980 requires that the amount o f transaction
accounts against which the 3 percent reserve requirement applies be modified
annually by 8 0 percent of the percentage increase in transaction accounts held by
all depository institutions, determined as of June 30 e a c h year. Effective D e c . 20,
1988 for institutions reporting quarterly and D e c . 27, 1988 for institutions
reporting w e e k l y , the amount w a s increased f r o m $40.5 million t o $41.5 million.
5. In general, nonpersonal time deposits are time deposits, including savings
deposits, that are not transaction a c c o u n t s and in w h i c h a beneficial interest is
held by a depositor that is not a natural person. A l s o included are certain
transferable time deposits held b y natural persons and certain obligations issued
to depository institution offices located outside the United States. For details, s e e
section 204.2 of Regulation D .
Policy Instruments
A9
1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1
Millions of dollars
1988
1986
Type of transaction
1987
1988
July
June
Aug.
Oct.
Sept.
Nov.
Dec.
U . S . TREASURY SECURITIES
Outright transactions (excluding
transactions)
1
2
3
4
Treasury bills
Gross purchases
Gross sales
Exchange
Redemptions
5
6
7
8
9
matched
22,604
2,502
0
1,000
18,983
6,051
0
9,029
8,223
587
0
2,200
0
0
0
0
515
0
0
0
0
0
0
0
1,280
0
0
0
375
0
0
0
3,599
0
0
0
1,125
0
0
0
Others within 1 year
Gross purchases
Gross sales
Maturity shift
Exchange
Redemptions
190
0
18,674
-20,180
0
3,659
300
21,504
-20,388
70
2,176
0
23,854
-24,588
0
0
0
1,384
-1,826
0
0
0
1,033
-87
0
0
0
3,932
-4,2%
0
0
0
1,368
-1,646
0
0
0
1,669
-916
0
0
0
5,264
-2,391
0
1,084
0
1,750
-1,703
0
10
11
12
13
1 to 5 years
Gross purchases
Gross sales
Maturity shift
Exchange
893
0
-17,058
16,985
10,231
452
-17,975
18,938
5,485
800
-17,720
22,515
0
0
-1,384
1,826
0
0
-997
0
0
0
-1,821
3,971
0
0
-1,368
1,646
0
0
-1,544
639
0
0
-3,088
2,091
1,824
0
-1,750
1,703
14
15
16
17
5 to 10 years
Gross purchases
Gross sales
Maturity shift
Exchange
236
0
-1,620
2,050
2,441
0
-3,529
950
1,579
175
-5,946
1,797
0
0
0
0
0
0
-36
87
0
0
-2,111
325
0
0
0
0
0
0
-125
276
0
0
-2,145
300
562
0
0
0
18
19
20
21
Over 10 years
Gross purchases
Gross sales
Maturity shift
Exchange
158
0
0
1,150
1,858
0
0
500
1,398
0
-188
275
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-31
0
432
0
0
0
24,081
2,502
1,000
37,170
6,803
9,099
18,863
1,562
2,200
0
0
0
515
0
0
0
0
0
1,280
0
0
375
0
0
3,599
0
0
5,028
0
0
927,999
927,247
950,923
950,935
1,168,484
1,168,142
73,708
72,966
81,979
83,464
124,875
123,220
113,886
113,384
98,804
97,897
98,618
100,680
93,650
93,584
170,431
160,268
314,621
324,666
152,613
151,497
10,520
5,334
22,978
28,164
0
0
35,800
30,191
4,715
7,727
17,867
16,463
15,575
14,815
29,988
11,234
15,872
4,444
-3,186
-1,655
6,386
-3,544
7,064
5,721
0
0
398
0
0
276
0
0
587
0
0
0
0
0
67
0
0
10
0
0
0
0
75
0
0
14
0
0
135
31,142
30,521
80,353
81,350
57,259
56,471
5,083
2,843
12,355
14,594
0
0
12,107
8,225
2,223
4,454
4,763
5,132
7,672
6,853
35 N e t change in federal agency obligations
222
-1,274
198
2,239
-2,306
-10
3,882
-2,306
-383
683
36 Total net change in System Open Market
Account
30,212
9,961
16,070
6,683
-5,492
-1,665
10,268
-5,850
6,681
6,404
All maturities
22 Gross purchases
23 Gross sales
24 Redemptions
Matched
transactions
25 Gross sales
26 Gross purchases
2
Repurchase
agreements
27 Gross purchases
28 Gross sales
29 Net change in U.S. government securities
FEDERAL A G E N C Y OBLIGATIONS
Outright
transactions
30 Gross purchases
31 Gross sales
32 Redemptions
Repurchase
agreements1
33 Gross purchases
34 Gross sales
1. Sales, redemptions, and negative figures reduce holdings of the System Open
Market Account; all other figures increase such holdings. Details may not add to
totals because of rounding.
0
2. In July 1984 the Open Market Trading Desk discontinued accepting bankers
acceptances in repurchase agreements,
A46
DomesticNonfinancialStatistics • April 1989
1.18 FEDERAL RESERVE BANKS
Condition and Federal Reserve Note Statements1
Millions of dollars
Wednesday
Account
1988
Dec. 28
End of month
Jan. 4
Jan. 18
Jan. 11
1989
1988
1989
Jan. 25
Nov.
Dec.
Jan.
Consolidated condition statement
ASSETS
1 Gold certificate account
2 Special drawing rights certificate account
4
5
6
7
8
9
10
11
1?,
13
14
Loans
T o depository institutions
Other
Acceptances held under repurchase agreements
Federal agency obligations
Bought outright
Held under repurchase agreements
U.S. Treasury securities
Bought outright
Bills
Notes
Bonds
Total bought outright 2
Held under repurchase agreements
Total U . S . Treasury securities
15 Total loans and securities
16 Items in process of collection
17 Bank premises
Other assets
Denominated in foreign currencies
18
All other 4
19
20 Total assets
11,060
5,018
408
11,060
5,018
382
11,057
5,018
399
11,056
5,018
425
11,056
5,018
457
11,059
5,018
404
11,060
5,018
395
11,057
5,018
480
1,603
0
0
1,994
0
0
1,814
0
0
1,314
0
0
2,018
0
0
2,328
0
0
2,170
0
0
863
0
0
6,967
1,435
6,966
3,564
6,966
1,671
6,966
0
6,819
1,268
7,102
1,282
6,966
2,101
6,819
0
112,782
90,850
29,930
233,562
3,706
237,268
112,145
90,950
29,930
233,025
7,097
240,122
114,036
90,950
29,930
234,916
2,959
237,875
112,251
90,950
29,930
233,131
0
233,131
112,094
90,950
29,930
232,974
3,014
235,988
111,724
87,484
29,493
228,701
4,001
232,702
112,782
90,950
29,930
233,662
4,760
238,422
112,076
90,928
29,929
232,933
0
232,933
247,273
252,646
248,326
241,411
246,093
243,414
249,659
240,615
11,136
746
13,015
750
8,532
751
13,745
751
6,605
752
6,121
743
8,739
750
9,959
754
9,455
8,890
9,130
8,791
9,236
9,195
9,551
8,858
9,860
9,024
9,565
8,0%
9,129
8,924
9,824
9,065
293,986
300,792
292,514
290,815
288,865
284,420
293,674
286,771
229,744
229,612
226,841
225,183
222,439
224,535
229,640
221,619
41,133
5,822
216
556
43,548
8,814
189
330
45,707
4,806
177
578
41,907
3,650
245
365
37,707
13,769
204
749
40,012
5,198
251
398
39,347
8,656
347
548
35,810
11,766
279
390
47,727
52,881
51,268
46,167
52,429
45,859
48,898
48,245
6,036
3,349
6,020
3,221
7,453
3,457
9,161
3,079
LIABILITIES
21 Federal Reserve notes
Deposits
To depository institutions
23
U.S. Treasury—General account
24
Foreign—Official accounts
25
Other
26 Total deposits
8,445
3,487
10,439
3,421
6,577
3,206
11,831
3,007
289,403
296,353
287,892
286,188
284,253
279,635
289,448
282,104
2,113
2,047
423
2,114
2,113
212
2,114
2,113
395
2,115
2,113
399
2,117
2,113
382
2,106
2,047
632
2,113
2,113
0
2,117
2,112
438
33 Total liabilities and capital accounts
293,986
300,792
292,514
290,815
288,865
284,420
293,674
286,771
34 MEMO: Marketable U . S . Treasury securities held in
custody for foreign and international accounts
232,926
233,779
230,643
230,210
228,413
235,131
234,733
229,817
77 Deferred credit items
28 Other liabilities and accrued dividends
29 Total liabilities
CAPITAL ACCOUNTS
30 Capital paid in
31 Surplus
32 Other capital accounts
Federal Reserve note statement
35 Federal Reserve notes outstanding issued to bank
36
LESS: Held by bank
37
Federal Reserve notes, net
Collateral held against notes net:
38
Gold certificate account
39
Special drawing rights certificate account
40
Other eligible assets
41
U . S . Treasury and agency securities
271,942
42,198
229,744
271,326
41,714
229,612
270,803
43,962
226,841
270,765
45,582
225,183
270,349
47,910
222,439
270,577
46,042
224,535
271,492
41,852
228,640
269,942
48,323
221,619
11,060
5,018
0
213,666
11,060
5,018
0
213,534
11,056
5,018
0
210,767
11,056
5,018
0
209,109
11,056
5,018
0
206,365
11,059
5,018
0
208,458
11,060
5,018
0
213,562
11,057
5,018
0
205,544
42 Total collateral
229,744
229,612
226,841
225,183
222,439
224,535
229,640
221,619
1. Some of these data also appear in the Board's H.4.1 (503) release. For
address, see inside front cover.
2. Includes securities loaned—fully guaranteed by U.S. Treasury securities
pledged with Federal Reserve Banks—and excludes securities sold and scheduled
to be bought back under matched sale-purchase transactions.
3. Valued monthly at market exchange rates.
4. Includes special investment account at the Federal Reserve Bank of Chicago
in Treasury bills maturing within 90 days.
5. Includes exchange-translation account reflecting the monthly revaluation at
market exchange rates of foreign-exchange commitments.
Federal Reserve Banks
1.19 FEDERAL RESERVE BANKS
All
Maturity Distribution of Loan and Security Holdings
Millions of dollars
End of month
Wednesday
Type and maturity groupings
1988
Dec. 28
1 Loans—Total
2
Within 15 days
3
16 days to 90 days
4
91 days to 1 year
6
7
8
Within 15 days
16 days to 90 days
91 days to 1 year
9 U . S . Treasury securities—Total
10
Within 15 days'
11
16 days to 90 days
12
91 days to 1 year
13
Over 1 year to 5 years
14
Over 5 years to 10 years
15
Over 10 years
16 Federal agency obligations—Total
17
Within 15 days'
18
16 days to 90 days
19
91 days to 1 year
20
Over 1 year to 5 years
21
Over 5 years to 10 years
22
Over 10 years
Jan. 4
1989
1988
1989
Jan. 11
Jan. 18
Jan. 25
N o v . 30
Dec. 30
Jan. 31
1,602
1,592
10
0
1,994
1,981
13
0
1,814
1,799
15
0
1,314
1,307
7
0
2,018
2,017
1
0
2,328
2,289
39
0
2,170
2,152
18
0
863
854
9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
237,268
12,562
54,917
74,986
55,326
12,568
26,909
240,122
16,446
54,256
74,664
55,279
12,568
26,909
237,875
13,200
55,234
74,684
55,279
12,569
26,909
233,131
9,162
57,032
72,050
55,277
12,701
26,909
235,988
10,213
56,994
73,894
55,277
12,701
26,909
232,702
12,583
53,659
74,475
53,501
12,007
26,477
238,422
9,935
58,448
75,236
55,326
12,568
26,909
232,933
5,457
58,957
73,405
55,524
12,681
26,909
8,402
1,605
697
1,492
3,419
1,000
189
10,530
3,564
837
1,522
3,418
1,000
189
8,637
1,865
742
1,435
3,406
1,000
189
6,966
195
742
1,435
3,405
1,000
189
8,087
1,364
825
1,353
3,359
997
189
8,384
1,557
675
1,457
3,413
1,093
189
9,067
2,271
697
1,492
3,418
1,000
189
6,819
136
835
1,303
3,359
997
189
1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements.
A46
DomesticNonfinancialStatistics • April 1989
1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE 1
Billions of dollars, averages of daily figures
1988
Item
1985
Dec.
1986
Dec.
1987
Dec.
1989
1988
Dec.
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Seasonally adjusted
A D J U S T E D FOR
C H A N G E S IN R E S E R V E REQUIREMENTS^
1 Total reserves 3
2
3
4
5
Nonborrowed reserves
Nonborrowed reserves plus extended credit 4
Required reserves
Monetary base
47.26
57.46
58.72
60.98
60.64
61.24
61.09
61.00
60.96
61.06
60.98
60.55
45.94
46.44
46.20
218.29'
56.63
56.93
56.09
240.82'
57.94
58.43
57.69
258.06 r
59.26
60.51'
59.94
275.81'
57.55
60.11
59.75
268.27'
57.80
60.34
60.23
270.50'
57.85
60.50
60.14
271.14'
58.16
60.21
60.02
272.47'
58.66
60.44
59.89
273.77'
58.19
60.52
59.94
274.66'
59.26
60.51'
59.94
275.81'
58.89
59.93
59.40
276.75
Not seasonally adjusted
6 Total reserves 3
7
8
9
10
Nonborrowed reserves
Nonborrowed reserves plus extended credit
Required reserves
Monetary base 5
48.27
58.70
60.02
62.43'
60.68
61.47
60.59
60.65
60.54
61.15
62.43'
62.28
46.95
47.45
47.21
221.49
57.87
58.18
57.33
244.55
59.25
59.73
58.99
262.05
60.71
61.96'
61.39'
279.89'
57.60
60.15
59.79
269.44
58.03
60.57
60.46
272.41
57.35
60.00
59.64
271.73
57.82
59.87
59.68
271.57
58.24
60.02
59.48
272.44
58.29
60.62
60.04
275.48
60.71
61.96'
61.39'
279.89
60.62
61.67
61.13
278.10
48.14
59.56
62.12
63.74
61.99
62.76
61.97
62.15
61.92
62.41
63.74
63.47
46.82
47.32
47.08
223.53
58.73
59.04
58.19
247.71
61.35
61.83
61.09
266.16
62.02
63.27'
62.70
283.18
58.91
61.46
61.10
272.65
59.32
61.85
61.75
275.59
58.72
61.38
61.01
275.03
59.31
61.37
61.18
274.87
59.62
61.40
60.85
275.78
59.55
61.87
61.29
278.65
62.02
63.27'
62.70
283.18
61.81
62.86
62.33
281.32
N O T A D J U S T E D FOR
,
C H A N G E S IN R E S E R V E R E Q U I R E M E N T S "
11 Total reserves 3
12
13
14
15
Nonborrowed reserves
Nonborrowed reserves plus extended credit 4
Required reserves
Monetary base
1. Latest monthly and biweekly figures are available from the Board's H.3(502)
statistical release. Historical data and estimates of the impact on required reserves
of changes in reserve requirements are available from the Monetary and Reserves
Projections Section. Division of Monetary Affairs. Board of Governors of the
Federal Reserve System, Washington, D.C. 20551.
2. Figures incorporate adjustments for discontinuities associated with the
implementation of the Monetary Control Act and other regulatory changes to
reserve requirements. To adjust for discontinuities due to changes in reserve
requirements on reservable nondeposit liabilities, the sum of such required
reserves is subtracted from the actual series. Similarly, in adjusting for discontinuities in the monetary base, required clearing balances and adjustments to
compensate for float also are subtracted from the actual series.
3. Total reserves not adjusted for discontinuities consist of reserve balances
with Federal Reserve Banks, which exclude required clearing balances and
adjustments to compensate for float, plus vault cash held during the lagged
computation period by institutions having required reserve balances at Federal
Reserve Banks plus the amount of vault cash equal to required reserves during the
maintenance period at institutions having no required reserve balances.
4. Extended credit consists of borrowing at the discount window under
the terms and conditions established for the extended credit program to help
depository institutions deal with sustained liquidity pressures. Because there is
not the same need to repay such borrowing promptly as there is with traditional
short-term adjustment credit, the money market impact of extended credit is
similar to that of nonborrowed reserves.
5. The monetary base not adjusted for discontinuities consists of total reserves
plus required clearing balances and adjustments to compensate for float at Federal
Reserve Banks and the currency component of the money stock plus, for institutions not having required reserve balances, the excess of current vault cash over
the amount applied to satisfy current reserve requirements. Currency and vault
cash figures are measured over the weekly computation period ending Monday.
The seasonally adjusted monetary base consists of seasonally adjusted total
reserves, which include excess reserves on a not seasonally adjusted basis, plus
the seasonally adjusted currency component of the money stock and the remaining items seasonally adjusted as a whole.
6. Reflects actual reserve requirements, including those on nondeposit liabilities, with no adjustments to eliminate the effects of discontinuities associated with
implementation of the Monetary Control Act or other regulatory changes to
reserve requirements.
Monetary and Credit Aggregates
A13
1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES 1
Billions of dollars, averages of daily figures
1988r
Item 2
1985
Dec/
1986
Dec/
1987
Dec/
1989
1988
Dec/
Oct.
Nov.
Dec.
Jan.
Seasonally adjusted
1
2
3
4
5
Ml
M2
M3
L
Debt
6
7
8
9
Ml components
Currency 3
Travelers checks*
Demand deposits
Other checkable deposits
620.5
2,567.4
3,201.7
3,830.6
6,719.9
725.9
2,811.2
3,494.9
4,137.1
7,576.8
752.3
2,909.5
3.677.1
4.340.2
8,282.2
790.2
3.071.8
3,917.3
4.688.9
8,992.5
785.4
3,042.2
3.876.5
4.615.6
8,876.2
786.6
3,059.1
3,898.9
4,648.1
8,937.0
790.2
3.071.8
3,917.3
4.688.9
8,992.5
786.3
3.069.0
3.922.1
n.a.
n.a.
167.8
5.9
267.3
179.5
180.5
6.5
303.2
235.8
196.4
7.1
288.3
260.4
211.8
7.6
288.6
282.3
209.7
7.4
288.9
279.4
210.5
7.5
287.7
280.9
211.8
7.6
288.6
282.3
213.4
7.6
284.0
281.3
1,946.9
634.3
2,085.3
683.7
2,157.2
767.6
2,281.5
845.6
2,256.7
834.4
2,272.5
839.8
2,281.5
845.6
2,282.7
853.1
10
11
Nontransactions components
In M2 . . . .„
In M3 only 8
12
13
Savings deposits 9
Commercial Banks
Thrift institutions
125.0
176.6
155.8
215.2
178.5
237.8
192.5
238.8
189.8
239.4
192.8
239.0
192.5
238.8
190.8
237.0
14
15
Small-denomination time deposits 1 0
Commercial Banks
Thrift institutions
383.3
499.2
364.6
489.3
385.3
528.8
443.0
582.2
430.9
578.8
436.4
581.4
443.0
582.2
451.1
584.4
16
17
Money market mutual funds
General purpose and broker-dealer.
Institution-only
176.5
64.5
208.0
84.4
221.1
89.6
239.6
87.6
231.3
84.6
237.4
87.4
239.6
87.6
242.0
89.3
18
19
Large-denomination time deposits"
Commercial Banks
Thrift institutions
285.1
151.5
288.8
150.1
325.4
162.0
365.1
172.9
359.2
172.8
361.2
173.2
365.1
172.9
370.4
173.8
20
21
Debt components
Federal debt
Nonfederal debt
1,585.3
5,134.6
1,805.8
5,771.1
1,956.1
6,326.0
2.113.7
6.878.8
2,088.7
6,787.4
2,100.4
6,836.6
2.113.7
6.878.8
n.a.
n.a.
Not seasonally adjusted
22
23
24
25
26
Ml
M2
M3
L
Debt
27
28
29
30
Ml components
Currency 3
Travelers checks*
Demand deposits 3
Other checkable deposits 6
31
32
Nontransactions components
M2 .
M3 only 8
33
34
633.5
2.576.2
3.213.3
3,843.7
6,710.2
740.4
2,821.1
3,507.4
4,152.0
7,561.0
766.4
2,918.3
3.688.1
4,354.5
8.264.2
804.3
3,079.5
3,927.1
4,702.7
8,968.3
782.1
3,038.3
3,874.2
4,611.5
8,842.1
788.3
3.057.7
3.904.0
4.656.1
8.894.8
804.3
3,079.5
3,927.1
4,702.7
8,968.3
793.0
3,079.3
3,929.6
n.a.
n.a.
170.2
5.5
276.9
180.9
183.0
6.0
314.0
237.4
199.3
6.5
298.6
262.0
214.9
6.9
298.8
283.7
209.0
7.5
288.8
276.9
211.3
7.1
290.0
279.8
214.9
6.9
298.8
283.7
211.8
7.0
290.5
283.7
1,942.7
637.1
2,080.7
686.3
2,151.9
769.8
2,275.1
847.7
2,256.2
835.9
2,269.4
846.4
2,275.1
847.7
2,286.3
850.3
Money market deposit accounts
Commercial Banks
Thrift institutions
332.8
180.7
379.6
192.9
358.8
167.5
352.4
150.3
353.0
154.5
354.1
152.6
352.4
150.3
348.3
146.8
35
36
Savings deposits 9
Commercial Banks
Thrift institutions
123.7
174.8
154.2
212.7
176.6
234.8
190.3
235.6
190.2
240.7
192.2
238.2
190.3
235.6
189.2
233.5
37
38
Small-denomination time deposits 1 0
Commercial Banks
Thrift institutions
384.0
499.9
365.3
489.8
386.1
529.1
444.1
582.4
431.3
579.3
437.7
581.8
444.1
582.4
453.1
588.2
39
40
Money market mutual funds
General purpose and broker-dealer.
Institution-only
176.5
64.5
208.0
84.4
221.1
89.6
239.6
87.6
231.3
84.6
237.4
87.4
239.6
87.6
242.0
89.3
41
42
Large-denomination time deposits 1 1
Commercial Banks 2
Thrift institutions
285.4
151.8
289.1
150.7
325.8
163.0
365.8
174.0
360.8
174.7
362.3
174.9
365.8
174.0
370.1
174.9
43
44
Debt components
Federal debt
Nonfederal debt
1,583.7
5,126.4
1,803.9
5,757.2
1,954.1
6,310.1
2,111.5
6,856.8
2,068.9
6,773.2
2,089.8
6,805.0
2,111.5
6,856.8
For notes see following page.
n.a.
n.a.
A46
DomesticNonfinancialStatistics • April 1989
NOTES TO T A B L E 1.21
1. Latest monthly and weekly figures are available from the Board's H.6 (508)
release. Historical data are available from the Monetary and Reserves Projection
section, Division of Monetary Affairs, Board of Governors of the Federal Reserve
System, Washington, D.C. 20551.
2. Composition of the money stock measures and debt is as follows:
M l : (1) currency outside the Treasury, Federal Reserve Banks, and the vaults
of depository institutions; (2) travelers checks of nonbank issuers; (3) demand
deposits at all commercial banks other than those due to depository institutions,
the U . S . government, and foreign banks and official institutions less cash items in
the process of collection and Federal Reserve float; and (4) other checkable
deposits (OCD) consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union
share draft accounts, and demand deposits at thrift institutions.
M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs)
issued by all commercial banks and overnight Eurodollars issued to U.S. residents
by foreign branches of U.S. banks worldwide, MMDAs, savings and smalldenomination time deposits (time deposits—including retail RPs—in amounts of
less than $100,000), and balances in both taxable and tax-exempt general purpose
and broker-dealer money market mutual funds. Excludes individual retirement
accounts (IRA) and Keogh balances at depository institutions and money market
funds. Also excludes all balances held by U.S. commercial banks, money market
funds (general purpose and broker-dealer), foreign governments and commercial
banks, and the U.S. government.
M3: M2 plus large-denomination time deposits and term RP liabilities (in
amounts of $100,000 or more) issued by commercial banks and thrift institutions,
term Eurodollars held by U . S . residents at foreign branches of U.S. banks
worldwide and at all banking offices in the United Kingdom and Canada, and
balances in both taxable and tax-exempt, institution-only money market mutual
funds. Excludes amounts held by depository institutions, the U . S . government,
money market funds, and foreign banks and official institutions. Also subtracted
is the estimated amount of overnight RPs and Eurodollars held by institution-only
money market mutual funds.
L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term
Treasury securities, commercial paper and bankers acceptances, net of money
market mutual fund holdings of these assets.
Debt: Debt of domestic nonfinancial sectors consists of outstanding credit
market debt of the U . S . government, state and local governments, and private
nonfinancial sectors. Private debt consists of corporate bonds, mortgages, consumer credit (including bank loans), other bank loans, commercial paper, bankers
acceptances, and other debt instruments. The source of data on domestic
nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt
data are based on monthly averages.
3. Currency outside the U . S . Treasury, Federal Reserve Banks, and vaults of
depository institutions.
4. Outstanding amount of U . S . dollar-denominated travelers checks of nonbank issuers. Travelers checks issued by depository institutions are included in
demand deposits.
5. Demand deposits at commercial banks and foreign-related institutions other
than those due to depository institutions, the U . S . government, and foreign banks
and official institutions less cash items in the process of collection and Federal
Reserve float.
6. Consists of N O W and ATS balances at all depository institutions, credit
union share draft balances, and demand deposits at thrift institutions.
7. Sum of overnight RPs and overnight Eurodollars, money market fund
balances (general purpose and broker-dealer), M M D A s , and savings and small
time deposits.
8. Sum of large time deposits, term RPs, and term Eurodollars of U.S.
residents, money market fund balances (institution-only), less the estimated
amount of overnight RPs and Eurodollars held by institution-only money market
funds.
9. Savings deposits exclude MMDAs.
10. Small-denomination time deposits—including retail RPs—are those issued
in amounts of less than $100,000. All individual retirement accounts (IRA) and
Keogh accounts at commercial banks and thrifts are subtracted from small time
deposits.
11. Large-denomination time deposits are those issued in amounts of $100,000
or more, excluding those booked at international banking facilities.
12. Large-denomination time deposits at commercial banks less those held by
money market mutual funds, depository institutions, and foreign banks and
official institutions.
Monetary and Credit Aggregates
1.22
A15
B A N K DEBITS A N D DEPOSIT TURNOVER1
Debits are shown in billions of dollars, turnover as ratio of debits to deposits. Monthly data are at annual rates.
Bank group, or type of customer
1985
1986
1987
July
Aug.
Sept.
Oct.
Seasonally adjusted
Demand deposits
1
All insured banks
2
Major N e w York City banks
3
Other banks
4 A T S - N O W accounts''
5 Savings deposits
156,091.8
70,585.8
85,506.0
1,823.5
384.9
188,346.0
91,397.3
96,948.8
2,182.5
403.5
217,116.2
104,496.3
112,619.8
2,402.7
526.5
230,198.8
111,402.1
118,796.6
2,786.0
597.1
224,512.7
107,336.7
117,176.0
2,570.4
583.3
228,898.2
110,150.0
118,748.2
2,963.6
609.6
227,617.3
108,741.8
118,875.5
2,871.2
578.6
235,980.5
114,876.4
121,104.1
2,820.2
521.3
238,497.5
112,071.8
126,425.7
2,897.2
574.9
500.3
2,196.9
305.7
15.8
3.2
556.5
2,498.2
321.2
15.6
3.0
612.1
2,670.6
357.0
13.8
3.1
649.8
2,911.0
376.0
14.8
3.2
622.7
2,789.6
363.8
13.5
2.9
645.8
2,939.3
374.6
15.6
3.2
651.0
3,102.4
377.9
15.1
3.1
659.7
3,086.1
377.9
14.8
2.8
676.6
3,034.6
400.6
15.1
3.1
DEPOSIT TURNOVER
6
7
8
9
10
Demand deposits 3
All insured banks
Major N e w York City banks
Other banks
A T S - N O W accounts 4
Savings deposits
Not seasonally adjusted
DEBITS TO
Demand deposits
11
All insured banks
12
Major N e w York City banks
13
Other banks
.1
14 A T S - N O W accounts 4
15 MMDA
16 Savings deposits
156,052.5
70,559.2
85,493.2
1,826.4
1,223.9
385.3
188,506.7
91,500.1
97,006.7
2,184.6
1,609.4
404.1
217,125.1
104,518.8
112,606.2
2,404.8
1,954.2
526.8
241,133.2
117,287.7
123,845.5
2,851.4
2,557.1
598.3
217,350.7
103,561.2
113,789.6
2,536.6
2,399.0
566.2
237,459.0
112,654.6
124,804.4
2,828.0
2,530.0
615.9
224,089.2
107,115.7
116,973.5
2,951.1
2,409.4
570.1
227,485.2
111,019.4
116,465.8
2,805.4
2,325.8
540.9
228,743.0
108,689.1
120,053.9
2,714.1
2,539.7
523.7
499.9
2,196.3
305.6
15.8
4.0
3.2
556.7
2,499.1
321.2
15.6
4.5
3.0
612.3
2,674.9
356.9
13.8
5.3
3.1
679.5
3,121.4
390.3
15.2
7.2
3.2
599.9
2,660.7
351.9
13.4
6.7
3.0
681.6
3,170.3
398.9
15.1
7.2
3.3
642.9
3,046.4
373.3
15.6
6.9
3.1
39.8
3,059.1
364.8
14.9
6.7
2.9
643.3
2,998.6
375.9
14.3
7.3
2.8
DEPOSIT TURNOVER
17
18
19
20
21
22
Demand deposits 3
All insured banks
Major N e w York City banks
Other banks
A T S - N O W accounts 4
MMDA6
Savings deposits 3
1. Historical tables containing revised data for earlier periods may be obtained
from the Monetary and Reserves Projections Section, Division of Monetary
Affairs, Board of Governors of the Federal Reserve System, Washington, D.C.
20551.
These data also appear on the Board's G.6 (406) release. For address, see inside
front cover.
2. Annual averages of monthly figures.
3. Represents accounts of individuals, partnerships, and corporations and
of states and political subdivisions.
4. Accounts authorized for negotiable orders of withdrawal (NOW) and accounts authorized for automatic transfer to demand deposits (ATS). ATS data are
available beginning December 1978.
5. Excludes ATS and N O W accounts, M M D A and special club accounts, such
as Christmas and vacation clubs.
6. Money market deposit accounts.
A46
DomesticNonfinancialStatistics • April 1989
1.23 LOANS AND SECURITIES
All Commercial Banks1
Billions of dollars; averages of Wednesday figures
1988
1989
Category
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec/
Jan.
Seasonally adjusted
1 Total loans and securities 2
2 U . S . government securities
3 Other securities
4 Total loans and leases 2
5
Commercial and industrial . . . . .
6
Bankers acceptances held . . .
7
Other commercial and
industrial
8
U . S . addressees 4
9
Non-U.S. addressees
10
Real estate
11
Individual
12
Security
13
Nonbank financial
institutions
14
Agricultural
15
State and political
subdivisions
16
Foreign banks
17
Foreign official institutions
18
Lease financing receivables . . . .
19
All other loans
2,264.1
2,281.3
2,304.7
2,328.5
2,348.4
2,360.8
2,374.9
2,373.6
2,387.5
2,398.1
2,398.3
2,403.3
336.4
193.7
1,734.0
569.3
4.3
340.2
195.7
1,745.4
568.6
4.7
343.8
196.6
1,764.3
578.1
4.6
346.5
196.1
1,786.0
586.3
4.4
350.5
196.5
1,801.5
592.4
4.4
348.0
196.8
1,815.9
598.3
4.4
350.5
196.4
1,827.9
599.4
4.6
352.5
194.2
1,826.8
597.1
4.5
355.1
195.4
1,836.9
600.9
4.2
356.8
194.8
1,846.5
599.2
4.2
360.9
190.9
1,846.5
599.9
3.9
360.8
186.2
1,856.3
605.4
4.2
564.9
556.3
8.7
599.2
333.0
42. C
564.0
555.8
8.2
604.9
337.0
41.2'
573.5
565.5
8.1
611.3
340.4
39.6'
582.0
575.1
6.9
618.6
342.8
40.0^
588.1
581.3
6.8
625.0
344.4
39.5'
593.9
587.4
6.5
631.4
345.3
38.7 r
594.7
588.4
6.3
638.7
347.0
40.0'
592.7
586.4
6.3
644.7
349.1
36.0'
596.7
590.6
6.1
652.0
349.6
37.8'
595.0
589.5
5.5
659.2
350.8
37.0'
596.0
589.6
6.4
663.2
353.6
36.3
601.2
594.8
6.4
668.2
355.4
36.4
31.8
29.5
31.2
29.3
30.4
29.4
30.9
29.6
30.6
29.6
31.0
29.6
30.8
29.5
29.8'
29.5
29.6'
29.7'
29.5'
30.3
29.6
30.8
30.5
31.3
51.0
7.4
5.1
25.3
40.4'
50.1
7.8
5.1
25.4
44.8''
49.6
8.3
5.1
25.7
46.3'
49.4
7.9
5.1
26.0
49.3 r
49.2
7.9
5.0
26.5
51.2'
48.9
8.2
5.0
27.2
52.2'
48.3
8.1
5.2
27.3
53.8'
48.1
7.3
5.2
27.7
52.2'
49.C
7.6'
5.2'
28.1
47.5'
48.3'
8.2'
5.4
28.1
50.6'
46.8
7.4
5.6
28.1
45.4
44.7
7.5
5.7
28.2
43.0
Not seasonally adjusted
20 Total loans and securities 2
21 U.S. government securities . . . .
22 Other securities
23 Total loans and leases 2
24
Commercial and industrial . . .
25
Bankers acceptances held .
26
Other commercial and
industrial
27
U . S . addressees 4
.
28
Non-U.S. addressees
29
Real estate
30
Individual
31
Security
32
Nonbank financial
institutions
33
Agricultural
34
State and political
subdivisions
35
Foreign banks
36
Foreign official institutions...
37
Lease financing receivables . . . .
38
All other loans
2,268.8
2,281.6
2,305.9
2,325.2
2,344.6
2,350.7
2,363.5
2,370.3
2,382.0
2,397.3
2,416.3
2,416.7
341.5
194.4
1,732.9
568.5
4.3
342.0
195.3
1,744.2
573.8
4.7
343.4
196.2
1,766.3
582.1
4.5
344.9
196.1
1,784.2
588.8
4.4
347.0
196.0
1,801.6
594.0
4.5
347.1
195.5
1,808.1
595.4
4.4
350.5
196.3
1,816.7
594.2
4.6
352.7
194.3
1,823.3
593.7
4.5
352.8
194.3
1,834.9
596.4
4.1
356.9
194.1
1,846.2
598.1
4.2
360.8
191.4
1,864.0
604.4
4.0
362.4
188.9
1,865.5
605.1
4.0
564.2
556.0
8.2
598.5
332.4
40.5'
569.1
561.2
7.9
604.1
333.9
40.6'
577.6
569.7
7.9
610.3
337.4
41.4'
584.4
577.3
7.1
618.1
339.9
40.5'
589.5
582.6
6.9
624.8
342.3
40.9'
591.0
584.0
7.0
631.5
343.8
38.3'
589.6
582.9
6.7
638.7
347.1
38.2'
589.1
582.5
6.6
645.5
350.7
35.0'
592.3
586.1'
6.2
652.7
351.3
36.6'
593.9
587.8'
6.2
659.7
352.7
37 . C
600.4
594.2
6.2
664.2
358.2
38.0
601.1
595.7
5.4
668.6
359.1
37.2
30.8
28.5
30.3
28.3
30.3
28.6
30.7
29.3
30.6
29.9
30.8
30.3
30.7
30.4
30.2
30.5
29.6'
30.6
29^
30.5
30.8
30.5
30.7
30.6
52.2
7.6
5.1
25.4
43.3'
51.0
7.7
5.1
25.6
43.9'
50.0
7.9
5.1
25.9
47.3'
49.3
7.7
5.1
26.1
48.7'
48.9
7.8
5.0
26.7
50.7'
48.2
8.2
5.0
27.2
49.4'
47.7
7.9
5.2
27.2
49.5'
47.4'
7.5
5.2
27.5
50.C
48.2'
7.8'
5.2'
27.6
48.9'
47.3
8.1
5.4
27.8
49.7'
46.9
7.7
5.6
28.1
49.7
46.2
7.7
5.7
28.4
46.2
1. These data also appear in the Board's G.7 (407) release. For address, see
inside front cover.
2. Excludes loans to commercial banks in the United States.
3. Includes nonfinancial commercial paper held.
4. United States includes the 50 states and the District of Columbia.
Commercial
Banking Institutions
A17
1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS 1
Monthly averages, billions of dollars
1989
1988
Source
Seasonally
adjusted
1 Total nondeposit funds
2 Net balances due to related foreign o f f i c e s 3 . . . .
3 Borrowings from other than commercial banks
in United States 4
4
Domestically chartered banks
5
Foreign-related banks
Not seasonally
adjusted
6 Total nondeposit funds
7 Net balances due to related foreign offices 3
8
Domestically chartered banks
9
Foreign-related banks
10 Borrowings from other than commercial banks
in United States 4
11
Domestically chartered banks
12
Federal funds and security RP
borrowings
13
Other 6
14
Foreign-related banks
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
195.0
2.7
189.8
-6.5
204.1
4.5
209.9
6.5
213.3
8.8
215.2
14.0
222.4
21.8
210.4
8.9
210.5
4.3
217.8
9.9
212.7
6.7
207.1
8.1
192.3
164.4
27.9
196.3
166.7
29.6
199.7
167.6
32.1
203.4
170.8
32.6
204.4
170.6
33.8
201.2
166.8
34.4
200.6
166.1
34.5
201.5
165.6
35.9
206.2
168.0
38.2
207.8
168.5
39.3
206.1
167.1
38.9
199.1
162.1
36.9
200.2
3.1
-20.2
23.3
199.2
-3.1
-25.3
22.1
206.4
2.0
-22.2
24.2
218.2
9.7
-16.5
26.2
215.8
8.7
-16.3
25.0
210.6
10.8
-14.0
24.8
218.5
18.6
-7.3
25.9
206.1
9.1
-15.7
24.7
205.4
4.9
-20.6
25.5
213.8
10.2
-19.2
29.4
207.2
9.1
-20.7
29.8
206.3
7.7
-20.3
28.1
197.1
168.2
202.4
171.5
204.4
171.6
208.4
175.4
207.1
171.9
199.8
164.9
199.9
165.6
197.1
161.8
200.5
163.7
203.6
167.2
198.0
161.1
198.5
160.5
166.2
2.0
28.8
168.1
3.4
30.8
166.8
4.8
32.8
170.8
4.6
33.0
167.1
4.8
35.2
159.5
5.4
34.9
160.6
5.0
34.2
157.4
4.4
35.3
159.6
4.1
36.8
162.6
4.6
36.3
157.6
3.5
36.9
157.1
3.4
38.1
395.9'
395.7
398.0'
399.5'
397.1'
395.4'
399.8'
398.9'
403.2'
401.8'
408.4'
405.9'
414.6'
415.1'
419.7
421.7'
423.2'
424.7'
424.5'
425.6'
429.1'
429.8'
434.9
434.5
22.2'
28.2
25.2'
22.3
22.4'
21.7
23.9'
30.4
22.0
21.0
21.3'
22.0
17.1'
11.9
23.5'
24.6
27.2'
27.7
23.0'
16.3
24^
22.9
20.4
25.1
MEMO
Gross large time deposits
Seasonally adjusted
Not seasonally adjusted
U . S . Treasury demand balances at commercial
banks 8
17
Seasonally adjusted
18
Not seasonally adjusted
15
16
1. The nondeposit funds series that is published regularly in this table has been
revised starting with this issue. For details see the Announcements section,
p. 151-152.
Commercial banks are those in the 50 states and the District of Columbia with
national or state charters plus agencies and branches of foreign banks, N e w York
investment companies majority owned by foreign banks, and Edge Act corporations owned by domestically chartered and foreign banks.
These data also appear in the Board's G.10 (411) release. For address, see
inside front cover.
2. Includes federal funds, RPs, and other borrowing from nonbanks and net
balances due to related foreign offices.
3. Reflects net positions of U.S. chartered banks, Edge Act corporations, and
U.S. branches and agencies of foreign banks with related foreign offices plus net
positions with own IBFs.
4. Other borrowings are borrowings through any instrument, such as a promissory note or due bill, given for the purpose of borrowing money for the banking
business. This includes borrowings from Federal Reserve Banks and from foreign
banks, term federal funds, loan RPs, and sales of participations in pooled loans.
5. Based on daily average data reported weekly by approximately 120 large
banks and quarterly or annual data reported by other banks.
6. Figures are partly daily averages and partly averages of Wednesday data.
7. Time deposits in denominations of $1(X),000 or more. Estimated averages of
daily data.
8. U.S. Treasury demand deposits and Treasury tax-and-loan notes at commercial banks. Averages of daily data.
A46
DomesticNonfinancialStatistics • April 1989
1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS
Last-Wednesday-of-Month Series1
Billions of dollars
1988
1989
Account
Mar.
Apr.
May
2,450.0
517.7
325.7
192.0
20.3
1,912.0
159.5
1.752.4
576.2
607.3
334.8
234.1
2.466.8
519.7
328.8
190.9
19.6
1,927.5
158.0
1.769.5
583.4
612.5
339.1
234.6
2.473.2
521.6
330.7
191.0
20.3
1.931.3
152.3
1.779.1
587.8
619.7
340.0
231.7
211.2
32.0
24.8
74.1
214.3
32.2
25.4
76.4
32.0
July
Aug.
Sept.
Oct.
Nov.
Dec/
Jan.
2,511.7
518.6
328.0
190.6
22.1
1,971.0
163.7
1,807.3
598.2
627.5
343.2
238.4
2,509.0
521.6
'331.6
190.0
23.9
1,963.5
158.7
1,804.8
592.4
633.1
344.1
235.2
2.523.3
525.4
334.6
190.8
22.8
1,975.1
154.7
1.820.4
592.8
641.8
349.2
236.6
2.522.7
525.9
336.5
189.4
21.3
1,975.5
151.2
1,824.3
593.8
647.8
351.5
231.2
2,537.9
523.6
334.4
189.2
24.9
1,989.4
158.5
1,830.9
593.8
654.1
351.9
231.1
2,575.6
529.6
340.4
189.2
24.8
167.7
1.853.5
600.0
661.6
354.1
237.8
2,586.0
529.7
343.9
185.8
19.2
2.037.0
163.7
1,873.3
608.4
666.6
360.4
237.9
2,571.0
531.0
347.7
183.3
21.5
2,018.5
158.1
1,860.4
603.0
669.8
359.2
228.4
200.3
26.0
25.4
71.5
221.4
34.4
26.5
77.2
217.0
30.7
25.9
75.7
221.8
33.0
26.5
79.9
215.9
31.1
26.2
76.4
208.5
31.6
26.3
72.6
235.4
33.7
28.7
89.5
245.6
34.5
30.3
92.0
215.1
31.5
27.5
76.1
30.3
49.9
29.2
31.6
51.8
31.3
53.5
31.5
50.9
29.4
52.8
29.2
48.8
32.1
51.4
34.2
54.5
27.8
190.9
186.6
194.3
188.4
187.5
191.8
201.2
201.3
198.5
2,927.5
2,914.4
2,932.6
2,930.3
2,947.6
3,012.2
3.030.1
2,042.5
603.3
544.5
894.7
487.4
209.7
187.8
2,050.2
598.4
545.4
906.4
470.7
208.2
185.3
2,072.9
609.5
542.2
921.2
452.4
218.5
188.7
2.058.8
588.3
536.9
933.6
470.8
213.1
187.6
2,067.3
586.9
538.4
941.9
481.3
210.0
189.0
2.120.6
627.1
542.2
951.2
476.8
222.6
192.2
2,140.9
641.2
537.1
962.7
470.7
227.3
191.2
2,982.2
2,091.9
585.0
530.3
976.6
492.3
204.0
194.0
A L L COMMERCIAL B A N K I N G
INSTITUTIONS^
1 Loans and securities
2
Investment securities
3
U.S. government securities
4
Other
5
Trading account assets
6
Total loans
7
Interbank loans
8
Loans excluding interbank
9
Commercial and industrial
10
Real estate
11
Individual
12
All other
13 Total cash assets
14
Reserves with Federal Reserve Banks
15
Cash in vault
16
Cash items in process of collection . .
17
Demand balances at U.S. depository
institutions
18
Other cash assets
19 Other assets
20 Total assets/total liabilities and capital
21
22
23
24
25
26
27
Deposits
Transaction deposits
Savings deposits
Time deposits
Borrowings
Other liabilities
Residual (assets less liabilities)
MEMO
28 U.S. government securities (including
trading account)
29 Other securities (including trading
account)
48.2
193.1
2,854.3
2.008.5
588.5
540.0
879.9
454.9
207.7
183.2
2.871.9
2.011.6
595.9
536.4
879.3
465.8
210.1
184.4
48.3
2.860.2
2,008.6
579.1
542.2
887.3
458.4
207.4
185.8
2,021.2
52.2
196.1
341.2
343.4
346.3
344.7
349.2
351.4
352.7
354.3
359.9
357.9
364.9
196.8
195.9
195.6
196.0
196.4
196.7
194.4
194.2
194.5
191.0
187.6
2,266.0
491.7
314.5
177.2
20.3
1,754.0
131.2
1,622.9
481.0
592.1
334.5
215.3
2,282.3
494.6
317.7
177.0
19.6
1,768.1
128.5
1,639.6
487.4
597.0
338.8
216.4
2,286.4
495.7
318.6
177.1
20.3
1,770.4
124.9
1.645.6
488.8
603.6
339.7
213.5
2,314.7
492.8
316.3
176.6
22.1
1.799.7
133.1
2.319.3
495.3
319.3
176.1
23.9
492.6
611.4
342.9
219.7
130.7
1.669.4
490.8
617.5
343.8
217.3
2,330.5
499.3
322.8
176.5
22.8
1,808.5
125.2
1.683.3
489.7
625.4
348.9
219.2
2,329.1
501.0
325.0
175.9
21.3
1,806.8
121.8
1,685.0
489.2
631.5
351.2
213.2
2,342.4
498.5
323.1
175.5
24.9
1,819.0
127.8
1,691.2
490.2
636.5
351.6
212.9
2,376.2
504.7
329.2
175.6
24.8
1,846.7
136.3
1,710.4
495.4
642.7
353.7
218.5
2,378.7
505.4
332.9
172.5
19.2
1,854.1
130.5
1,723.6
497.6
647.8
360.1
218.1
2,372.5
505.9
335.3
170.6
21.5
1,845.1
128.7
1.716.4
495.9
651.6
358.8
210.0
193.9
30.1
24.7
73.5
196.7
30.7
25.4
75.8
183.0
23.6
25.4
71.0
201.6
32.9
26.5
76.5
196.4
29.5
25.9
75.1
202.8
31.4
26.5
79.2
193.4
29.0
26.2
75.7
189.7
29.8
26.3
71.9
215.2
32.6
28.7
88.7
223.4
33.1
30.3
91.2
194.0
30.1
27.4
75.3
30.4
28.7
36.0
27.5
29.8
35.8
29.4
29.8
36.0
27.3
35.3
27.2
30.2
35.1
32.2
36.7
25.8
125.6
121.6
123.8
127.8
134.0
135.3
128.0
2,657.2
2,650.3
2,725.4
2,737.3
2.006.4
600.6
539.7
345.7
119.6
185.4
1,991.0
579.1
534.4
877.5
358.6
116.4
184.3
1.999.1
577.3
535.8
885.9
363.2
117.0
185.6
2,051.1
617.2
539.8
894.2
362.5
123.0
2,068.1
631.4
534.6
902.2
360.2
121.2
187.8
2,020.9
575.7
527.9
917.3
373.8
109.1
190.6
36.3
589.2
37.3
594.1
37.9
598.5
39.1
603.7
39.7
608.1
40.2
611.4
DOMESTICALLY CHARTERED
COMMERCIAL B A N K S 3
30 Loans and securities
31
Investment securities
32
U.S. Treasury securities
33
Other
34
Trading account assets
35
Total loans
36
Interbank loans
37
Loans excluding interbank
38
Commercial and industrial
39
Real estate
40
Individual
41
All other
42 Total cash assets
43
Reserves with Federal Reserve Banks
44
Cash in vault
45
Cash items in process of collection . .
46
Demand balances at U.S. depository
institutions
47
Other cash assets
48 Other assets
49 Total assets/liabilities and capital
50
51
52
53
54
55
56
Deposits
Transaction deposits
Savings deposits
Time deposits
Borrowings
Other liabilities
Residual (assets less liabilities)
35.2
123.1
2,583.0
121.3
2,600.3
1,944.5
580.0
537.6
826.9
350.1
108.6
179.9
1,948.1
587.2
533.9
827.0
358.4
112.7
181.1
32.1
560.0
33.0
564.0
35.6
118.3
2.587.7
1,944.7
570.7
539.8
834.2
351.7
108.8
182.4
1,666.6
2.641.8
1,800.1
36.5
1.976.9
594.5
541.8
840.6
369.4
111.0
184.5
2,637.4
1,984.4
589.6
542.9
851.9
358.5
112.5
182.0
34.8
576.6
35.3
582.2
866.1
34.4
132.9
2.665.0
35.4
2.694.5
MEMO4
57 Real estate loans, revolving
58 Real estate loans, other
33.7
569.9
1. Back data are available from the Banking and Monetary Statistics section,
Board of Governors of the Federal Reserve System, Washington, D.C., 20551.
These data also appear in the Board's weekly H.8 (510) release.
Data have been revised because of benchmarking to new Call reports beginning
January 1987.
Figures are partly estimated. They include all bank-premises subsidiaries and
other significant majority-owned domestic subsidiaries. Loan and securities data
for domestically chartered commercial banks are estimates for the last Wednesday of the month based on a sample of weekly reporting banks and quarter-end
condition report data. Data for other banking institutions are estimates made for
the last Wednesday of the month based on a weeldy reporting sample of
foreign-related institutions and quarter-end condition reports.
2. Commercial banking institutions include insured domestically chartered
commercial banks, branches and agencies of foreign banks, Edge Act and
Agreement corporations, and N e w York State foreign investment corporations.
3. Insured domestically chartered commercial banks include all member banks
and insured nonmember banks.
4. Memorandum items for real estate loans; revolving and other, are shown as
separate breakdowns for the first time.
Weekly Reporting Commercial Banks
A19
1.26 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS 1
Millions of dollars, Wednesday figures
1988
1989
Account
Nov. 30
Dec. 14
Dec. 21
Dec. 28
Jan. 4
Jan. 11
Jan. 18
Jan. 25
106,823
2,328
1,157,799 1,150,152 1,150,648 1,157,660 1,154,340 1,177,194 1,172,696 1,176,749 1,175,392
20,658
118,357
1 Cash and balances due from depository institutions
2 Total loans, leases, and securities, net
Dec. 7
Adjustment
bank
1988
108,707
112,772
107,318
125,023
140,505
115,869
130,199
3 U . S . Treasury and government agency
4
Trading account
5
Investment account
6
Mortgage-backed securities
All other maturing in
7
One year or less
8
Over one through five years
9
Over five years
10 Other securities
11
Trading account
Investment account
12
13
States and political subdivisions, by maturity
14
One year or less
Over one year
15
16
Other bonds, corporate stocks, and securities
17 Other trading account assets
135,859
19,817
116,042
46,164
135,819
19,009
116,810
46,407
133,576
16,908
116,668
46,275
132,944
16,532
116,412
46,188
128,584
14,371
114,214
46,306
131,352
14,619
116,733
47,211
132,175
15,367
116,808
47,154
134,266
17,292
116,974
47,338
135,361
17,121
118,240
47,766
2,108
-342
2,450
0
20,975
40,354
8,550
73,349
1,681
71,668
45,456
5,106
40,349
26,212
3,723
21,434
40,373
8,596
72,563
1,622
70,941
44,988
4,960
40,027
25,953
3,900
21,369
40,251
8,773
72,284
1,550
70,734
44,811
4,937
39,874
25,923
3,415
21,410
39,804
9,009
72,279
1,680
70,599
44,717
4,859
39,858
25,882
3,409
20,458
39,527
7,923
72,315
1,713
70,602
44,653
4,865
39,788
25,949
3,596
21,048
40,465
8,010
73,358
1,535
71,823
45,216
4,948
40,268
26,607
3,693
21,074
40,600
7,979
72,989
1,334
71,655
45,206
4,911
40,295
26,449
3,700
21,072
40,704
7,860
72,937
1,273
71,664
45,192
4,902
40,291
26,472
3,524
21,761
40,868
7,844
72,688
1,299
71,388
45,159
4,893
40,266
26,229
3,041
436
1,186
140
880
-85
%5
793
92
700
172
-8
18 Federal funds sold 4
19
To commercial banks
20
To nonbank brokers and dealers in securities
21
To others
72 Other loans and leases, gross
23
Other loans, gross
24
Commercial and industrial
25
Bankers acceptances and commercial paper
76
All other
27
U . S . addressees
28
Non-U.S. addressees
76,096
51,082
15,593
9,420
909,402
886,030
301,179
1,875
299,304
297,046
2,257
72,375
45,665
17,182
9,528
906,165
882,597
300,591
1,786
298,805
2%,575
2,230
73,388
47,158
17,008
9,222
908,550
884,900
299,880
1,802
298,077
295,835
2,242
75,911
49,233
17,242
9,435
913,634
889,939
301,558
1,756
299,802
297,543
2,258
74,401
49,135
16,707
8,558
915,695
891,942
301,992
1,780
300,213
297,854
2,359
77,259
52,820
16,343
8,096
931,160
907,061
306,444
1,930
304,513
302,262
2,252
76,387
50,946
16,616
8,825
926,724
902,576
304,239
1,733
302,506
300,318
2,188
74,237
49,351
16,734
8,152
930,980
906,762
304,269
1,693
302,577
300,686
1,890
75,321
50,565
16,934
7,822
928,366
904,068
305,192
1,626
303,567
301,628
1,938
1,167
1,162
0
5
17,318
17,182
3,709
15
3,694
3,693
1
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
295,937
295,937
295,937
165,852
49,134
22,689
4,679
21,765
15,271
5,477
28,914
2,042
22,224
23,372
4,845
35,785
868,772
131,083
296,152
2%, 152
296,152
166,414
48,813
22,990
4,108
21,714
12,780
5,458
28,714
2,180
21,495
23,568
4,851
35,819
865,495
132,283
297,531
297,531
297,531
167,605
47,837
22,114
3,963
21,760
14,219
5,463
28,685
2,051
21,628
23,650
4,864
35,702
867,985
132,861
298,565
298,565
298,565
168,206
48,150
21,951
4,065
22,134
14,313
5,487
28,694
2,104
22,860
23,694
4,872
35,644
873,117
135,240
299,604
299,604
299,604
169,179
48,728
22,185
3,685
22,858
13,926
5,508
28,648
1,964
22,390
23,753
4,889
35,362
875,444
132,941
308,449
308,449
308,449
173,078
47,404
21,044
3,890
22,470
12,237
5,809
28,374
1,910
23,356
24,098
4,990
34,638
891,531
134,681
309,320
309,320
309,320
172,6%
48,199
22,246
4,017
21,937
11,520
5,777
28,250
1,861
20,713
24,148
5,023
34,256
887,445
131,374
310,108
310,108
310,108
172,362
48,973
22,852
4,277
21,844
12,915
5,740
28,252
1,828
22,314
24,218
5,028
34,167
891,784
132,566
310,582
310,582
310,582
172,119
47,205
22,289
3,445
21,472
12,455
5,682
28,204
1,888
20,740
24,299
5,046
34,339
888,981
127,306
8,983
8,983
8,983
3,431
134
35
0
99
70
150
477
0
228
136
128
0
16,511
1,695
1,407,239 1,391,141 1,396,281 1,400,219 1,412,305 1,452,380 1,419,940 1,439,514 1,409,521
24,681
219,354
175,052
6,770
2,531
19,413
6,006
787
8,795
75,237
651,113
609,460
31,469
855
8,623
705
282,167
1,574
24,107
256,486
85,334
5,093
4,419
149
104
135
46
0
240
2,802
22,854
20,343
1,748
7
755
0
-8,043
0
0
-8,043
1,466
1,312,985 1,296,350 1,301,025 1,305,112 1,318,294 1,356,949 1,323,411 1,343,107 1,313,205
24,172
Real estate loans
Revolving, home equity
All other
To individuals for personal expenditures
To depository and financial institutions
Commercial banks in the United States
Banks in foreign countries
Nonbank depository and other financial institutions . .
For purchasing and carrying securities
To finance agricultural production
To states and political subdivisions
To foreign governments and official institutions
All other
Lease financing receivables
LESS: Unearned income
Loan and lease reserve
Other loans and leases, net
All other assets
47 Total assets
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
Demand deposits
Individuals, partnerships, and corporations
States and political subdivisions
U.S. government
Depository institutions in the United States
Banks in foreign countries
Foreign governments and official institutions
Certified and officers' checks
Transaction balances other than demand deposits
Nontransaction balances
Individuals, partnerships, and corporations
States and political subdivisions
U.S. government
Depository institutions in the United States
Foreign governments, official institutions, and banks . .
Liabilities for borrowed money
Borrowings from Federal Reserve Banks
Treasury tax-and-loan notes
All other liabilities for borrowed money 6
Other liabilities and subordinated notes and debentures . .
68 Total liabilities
69 Residual (total assets minus total liabilities) 7
240,653
191,638
6,455
2,949
22,067
7,239
832
9,474
73,637
622,745
583,097
30,025
965
7,829
829
278,942
1,872
12,852
264,218
97,009
94,253
230,811
182,951
5,864
2,878
21,951
7,013
878
9,277
75,258
625,000
585,622
30,036
945
7,5%
801
272,591
1,515
4,614
266,461
92,690
94,791
238,701
191,692
6,514
3,332
20,684
6,840
920
8,719
74,519
626,317
586,652
30,207
942
7,799
717
269,511
1,785
5,991
261,734
91,977
95,257
233,932
186,205
6,976
1,609
22,518
6,453
1,054
9,117
75,080
625,120
586,391
29,520
938
7,567
704
280,079
571
25,227
254,281
90,901
247,195
195,382
6,993
2,711
24,187
6,662
985
10,274
75,412
623,960
585,172
29,480
928
7,702
677
278,142
1,035
21,053
256,054
93,585
270,603
214,182
8,144
2,626
28,284
7,244
754
9,369
82,675
651,710
610,601
31,102
885
8,444
678
264,5%
1,655
3,155
259,785
87,365
235,299
187,645
6,207
3,484
22,032
6,127
959
8,844
79,506
652,082
610,725
31,439
858
8,350
710
270,184
1,462
9,825
258,897
86,340
248,581
194,618
6,385
3,172
27,294
7,076
869
9,167
78,750
652,718
611,569
31,345
845
8,254
705
277,733
1,015
20,625
256,094
85,324
96,316
508
1,121,942 1,126,992 1,123,271 1,142,958 1,138,784 1,143,741 1,141,924
912,666
934,555
930,834
918,360
918,776
929,920
933,013
195,955
195,915
204,475
206,773
196,083
206,249
206,332
20,195
20,001
18,560
18,503
18,965
19,531
18,835
1,330
1,370
1,380
1,555
1,461
1,521
1,520
956
1,012
1,029
1,115
1,195
1,240
1,176
374
315
358
350
346
345
325
253,440
251,994
250,402
259,084
253,433
256,923
256,479
20,269
17,288
8,186
0
0
0
0
5,5%
95,107
94,011
95,431
%,528
%,407
MEMO
70
71
72
73
74
75
76
77
Total loans and leases (gross) and investments adjusted
Total loans and leases (gross) adjusted 8
Time deposits in amounts of $100,000 or more
U . S . Treasury securities maturing in one year or less
Loans sold outright to affiliates—total 9
Commercial and industrial
Other
Nontransaction savings deposits (including MMDAs)
8
. 1,124,658 1,122,167
909,885
911,726
194,464
195,830
19,860
19,997
1,308
1,380
929
1,000
380
380
253,021
253,063
1. Beginning Jan. 6, 1988, the "Large bank" reporting group was revised
somewhat, eliminating some former reporters with less than $2 billion of assets
and adding some new reporters with assets greater than $3 billion.
2. These amounts represent accumulated adjustments originally made to offset
the cumulative effects of bank mergers during the calendar year. The adjustment
data for 1988 should be added to the reported data for 1988 to establish
comparability with data reported for 1989.
3. Includes U . S . government-issued or guaranteed certificates of participation
in pools of residential mortgages.
4. Includes securities purchased under agreements to resell.
5. Includes allocated transfer risk reserve.
6. Includes federal funds purchased and securities sold under agreements
torepurchase; for information on these liabilities at banks with assets of $1 billion
or more on Dec. 31, 1977, see table 1.13.
7. This is not a measure of equity capital for use in capital-adequacy analysis or
for other analytic uses.
8. Exclusive of loans and federal funds transactions with domestic commercial
banks.
9. Loans sold are those sold outright to a bank's own foreign branches,
nonconsolidated nonbank affiliates of the bank, the bank's holding company (if
not a bank), and nonconsolidated nonbank subsidiaries of the holding company.
A46
DomesticNonfinancialStatistics • April 1989
1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS
IN NEW YORK CITY1
Millions of dollars, Wednesday figures
1988
Nov. 30
1 Cash balances due from depository institutions
2 Total loans, leases and securities, net2
Securities
3 U.S. Treasury and government agency
4
Trading account
5
Investment account
6
Mortgage-backed securities 4
All other maturing in
7
One year or less
8
Over one through five years
9
Over five years
10 Other securities 3
11
Trading account 3
12
Investment account
13
States and political subdivisions, by maturity
14
One year or less
15
Over one year
16
Other bonds, corporate stocks, and securities
17 Other trading account assets
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Loans and leases
Federal funds sold
To commercial banks
To nonbank brokers and dealers in securities
To others
Other loans and leases, gross
Other loans, gross
Commercial and industrial
Bankers acceptances and commercial paper
All other
U.S. addressees
Non-U.S. addressees
Real estate loans
Revolving, home equity
All other
To individuals for personal expenditures
To depository and financial institutions
Commercial banks in the United States
Banks in foreign countries
Nonbank depository and other financial institutions
For purchasing and carrying securities
To finance agricultural production
To states and political subdivisions
To foreign governments and official institutions
All other
Lease financing receivables
LESS: Unearned income
Loan and lease reserve
Other loans and leases, net 6
All other assets
47 Total assets
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
Deposits
Demand deposits
Individuals, partnerships, and corporations
States and political subdivisions
U.S. government
Depository institutions in the United States
Banks in foreign countries
Foreign governments and official institutions
Certified and officers' checks
Transaction balances other than demand deposits
(ATS, NOW, Super NOW, telephone transfers)
Nontransaction balances
Individuals, partnerships, and corporations
States and political subdivisions
U.S. government
Depository institutions in the United States
Foreign governments, official institutions, and banks . . .
Liabilities for borrowed money
Borrowings from Federal Reserve Banks
Treasury tax-and-loan notes
All other liabilities for borrowed money 8
Other liabilities and subordinated notes and debentures . . .
68 Total liabilities
69 Residual (total assets minus total liabilities) 9
Dec. 7
Dec. 14
1989
Dec. 21
Dec. 28
Jan. 4
Jan. 11
Jan. 18
27,884
24,348
24,272
22,154
26,940
29,826
25,318
27,633
221,963
216,483
217,293
218,999
221,039
216,341
215,771
215,823
0
0
15,623
6,80^
0
0
15,559
6,701 r
0
0
15,558
6,717
0
0
15,702
6,770
0
0
15,689
6,782
0
0
15,800
6,913
0
0
15,595
6,910
0
0
16,069
6,977
2,068 r
4,835
1,911
0
0
17,718
12,482
1,092
11,390
5,236
0
2,177 r
4,695
1,986
0
0
17,694
12,359
979
11,380
5,334
0
2,176
4,612
2,053
0
0
17,539
12,269
960
11,308
5,270
0
2,225
4,641
2,066
0
0
17,514
12,263
978
11,284
5,251
0
2,225
4,617
2,066
0
0
17,468
12,205
969
11,236
5,262
0
2,276
4,563
2,048
0
0
17,834
12,198
1,033
11,165
5,636
0
2,268
4,509
1,908
0
0
17,761
12,198
1,038
11,160
5,563
0
2,672
4,510
1,911
0
0
17,817
12,198
1,049
11,149
5,618
0
29,736
14,717
8,394
6,625
173,781
168,182
56,290
483
55,807
55,372
436
49,292
3,222
46,069
20,709
21,789
11,748
2,964
7,077
6,294
197
6,397
592
6,622
5,600
1,611
13,284
158,886
61,130
26,803
10,946
9,563
6,294
171,331
165,647
55,368
416
54,952
54,524
427
49,360
3,246
46,114
20,740
22,169
12,700
2,482
6,987
4,761
200
6,378
709
5,963
5,684
1,616
13,288
156,427
62,323
27,708
12,719
8,944
6,045
171,370
165,687
54,907
400
54,507
54,109
398
49,645
3,248
46,397
20,897
21,179
12,002
2,276
6,901
6,216
164
6,369
591
5,717
5,683
1,620
13,261
156,488
59,462
27,442
12,527
8,771
6,144
173,228
167,551
55,441
363
55,078
54,647
430
50,170
3,262
46,908
20,779
21,480
12,030
2,317
7,133
6,129
161
6,377
680
6,333
5,677
1,630
13,258
158,341
61,242
29,229
14,683
8,970
5,576
173,521
167,825
55,398
389
55,009
54,487
522
50,600
3,271
47,328
20,923
21,851
12,310
2,061
7,479
5,874
159
6,362
517
6,142
5,6%
1,646
13,221
158,654
58,804
26,613
13,640
8,276
4,698
170,542
164,848
55,590
353
55,237
54,874
363
50,318
3,285
47,033
20,901
20,530
11,355
2,261
6,914
4,305
149
6,160
500
6,395
5,693
1,627
12,820
156,095
61,787
28,214
14,043
8,666
5,505
168,847
163,174
55,190
343
54,847
54,474
372
50,362
3,282
47,080
20,827
20,956
11,717
2,470
6,769
3,8%
172
6,142
455
5,173
5,673
1,642
13,003
154,201
59,831
25,878
11,882
8,871
5,125
170,705
165,016
54,878
301
54,577
54,166
412
50,500
3,288
47,213
20,809
21,086
11,855
2,553
6,678
4,855
164
6,132
427
6,163
5,689
1,651
12,995
156,059
63,838
310,977
303,154
301,027
302,395
306,783
307,954
300,920
307,294
57,536
40,412
661
596
5,542
5,922
666
3,736
55,393
37,702
625
542
6,050
5,798
730
3,946
58,192
42,218
627
531
5,015
5,679
761
3,361
55,789
39,407
633
176
5,931
5,168
913
3,562
59,274
41,640
593
458
5,848
5,481
831
4,423
62,132
45,280
909
287
6,303
6,018
582
2,755
53,603
38,046
650
630
5,340
4,976
788
3,172
57,492
39,950
641
436
6,578
5,784
672
3,430
8,608
110,972
100,625
8,140
32
1,894
282
68,091
0
3,451
64,640
38,718
8,735
111,317
101,202
8,020
30
1,788
278
66,294
0
886
65,408
33,810
8,718
111,046
101,024
7,985
31
1,742
265
61,958
0
1,175
60,783
33,038
8,909
111,688
101,664
7,997
33
1,737
257
65,583
0
6,243
59,340
32,668
9,110
110,517
100,417
8,014
33
1,797
257
65,301
0
5,392
59,909
35,359
9,540
113,046
103,166
7,7%
32
1,793
258
65,526
0
625
64,901
30,174
9,161
112,688
102,687
7,917
23
1,802
260
66,669
0
2,509
64,160
30,698
9,004
113,638
103,534
8,034
24
1,786
259
69,269
0
5,410
63,859
29,900
283,926
275,549
272,953
274,636
279,562
280,418
272,820
279,303
27,051
27,604
28,074
27,759
27,221
27,536
28,100
27,991
210,393
177,052
41,053
3,299
207,741
174,488
41,857
3,528
207,454
174,357
41,244
3,354
209,329
176,113
41,492
2,934
208,913
175,756
41,246
2,984
205,793
172,160
41,924
2,751
204,656
171,300
42,316
2,836
206,732
172,846
42,982
3,288
MEMO
70
71
72
73
Total loans and leases (gross) and investments adjusted
Total loans and leases (gross) adjusted1
Time deposits in amounts of $100,000 or more
U.S. Treasury securities maturing in one year or less
2,10
1. These data also appear in the Board's H.4.2 (504) release. For address, see
inside front cover.
2. Excludes trading account securities.
3. Not available due to confidentiality.
4. Includes U.S. government-issued or guaranteed certificates of participation
in pools of residential mortgages.
5. Includes securities purchased under agreements to resell.
FRASER
Digitized for
6. Includes allocated transfer risk reserve.
7. Includes trading account securities.
8. Includes federal funds purchased and securities sold under agreements to
repurchase.
9. Not a measure of equity capital for use in capital adequacy analysis or for
other analytic uses.
10. Exclusive of loans and federal funds transactions with domestic commercial banks.
Weekly Reporting Commercial Banks
1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS 1
Liabilities
A21
Assets and
Millions of dollars, Wednesday figures
1988
1989
Account
1 Cash and due from depository institutions . . .
2 Total loans and securities
3 U . S . Treasury and government agency
securities
4 Other securities.
5 Federal funds sold
6
To commercial banks in the United States.
7
To others
8 Other loans, gross
Commercial and industrial
9
10
Bankers acceptances and commercial
paper
11
All other
12
U . S . addressees
13
Non-U.S. addressees
14
Loans secured by real estate
15
To financial institutions
Commercial banks in the United States..
16
17
Banks in foreign countries
18
Nonbank financial institutions
19
To foreign governments and official
institutions
For purchasing and carrying securities
20
21
All other 3
22 Other assets (claims on nonrelated parties) . .
23 Net due from related institutions
24 Total assets
Deposits or credit balances due to other
25
than directly related institutions
26
Transaction accounts and credit balances .
27
Individuals, partnerships, and
corporations
Other
28
Nontransaction accounts
29
Individuals, partnerships, and
30
corporations
Other
31
32
Borrowings from other than directly
related institutions
Federal funds purchased
33
34
From commercial banks in the
United States
35
From others
Other liabilities for borrowed money
36
37
To commercial banks in the
United States
38
To others
39 Other liabilities to nonrelated parties
40 N e t due to related institutions
41 Total liabilities
Nov. 30
Dec. 7
Dec. 14
Dec. 21
Dec. 28
Jan. 4
Jan. 11
Jan. 18
Jan. 25
10,817
112,854
11,067
111,964
11,181
114,403
11,086
113,961
12,181
118,172
11,424
126,253
11,386
122,532
11,304
123,038
11,706
121,752
7,651
7,259
10,172
7,878
2,294
87,772
56,065
7,575
7,227
7,780
5,615
2,165
89,382
57,292
7,794
7,163
10,306
8,208
2,098
89,140
57,006
7,980
7,123
7,964
5,969
1,995
90,894
58,540
7,492
7,156
9,290
7,282
2,008
94,234
59,713
8,012
7,421
8,298
7,445
853
102,522
67,318
7,824
7,441
7,106
6,349
757
100,161
65,604
8,151
7,392
6,446
5,272
1,174
101,049
66,061
8,542
7,147
6,319
5,385
934
99,744
64,582
1,554
54,511
52,871
1,640
n.a.
16,308
12,018
1,220
3,070
1,618
55,674
53,941
1,733
n.a.
17,289
12,929
1,298
3,062
1,485
55,521
53,829
1,692
n.a.
17,291
12,931
1,194
3,166
1,532
57,008
55,355
1,653
n.a.
17,460
12,927
1,307
3,226
1,420
58,293
56,624
1,669
n.a.
18,666
14,098
1,269
3,299
1,651
65,667
64,215
1,452
13,108
18,206
13,517
1,225
3,464
1,648
63,956
62,474
1,482
13,285
17,581
13,020
1,126
3,435
1,786
64,275
62,771
1,504
13,458
17,410
12,715
1,198
3,497
1,703
62,879
61,340
1,539
13,630
17,929
13,188
1,214
3,527
830
1,761
12,808
33,025
15,233
171,928
830
1,535
12,436
32,537
17,869
173,439
906
1,514
12,423
33,007
14,524
173,117
864
1,780
12,250
33,288
15,202
173,540
857
2,317
12,861
32,511
13,002
175,865
756
1,772
1,362
32,727
14,573
184,976
811
1,664
1,216
32,206
16,154
182,280
754
2,053
1,313
31,341
14,452
180,134
746
1,642
1,215
31,401
16,286
181,146
44,179
3,954
44,843
3,965
44,601
4,010
45,246
4,179
46,626
4,183
43,635
3,747
42,897
3,516
43,351
3,463
43,276
3,451
2,451
1,503
40,225
2,323
1,642
40,878
2,520
1,490
40,591
2,581
1,598
41,067
2,453
1,730
42,443
2,436
1,311
39,888
2,316
1,200
39,381
2,325
1,138
39,888
2,140
1,311
39,825
33,713
6,512
34,417
6,461
34,340
6,251
35,061
6,006
36,436
6,007
33,186
6,702
32,630
6,751
33,148
6,740
33,408
6,417
68,197
31,021
69,676
31,238
68,404
29,087
70,772
30,677
66,140
27,492
78,632
36,769
80,060
37,577
74,284
32,285
76,952
34,756
16,454
14,567
37,176
15,670
15,568
38,438
15,553
13,534
39,317
14,778
15,899
40,095
14,188
13,304
38,648
21,548
15,221
41,863
23,006
14,571
42,483
15,838
16,447
41,999
18,974
15,782
42,196
25,744
11,432
34,168
25,383
171,928
26,714
11,724
33,981
24,937
173,439
27,267
12,050
34,556
25,556
173,117
26,577
13,518
34,255
23,266
173,540
25,716
12,932
34,088
29,011
175,865
28,034
13,829
33,697
29,013
184,976
28,491
13,992
33,189
26,134
182,280
28,220
13,779
32,446
30,051
180,134
28,025
14,171
32,546
28,373
181,146
92,958
78,048
93,420
78,618
93,264
78,307
95,065
79,962
96,792
82,144
105,291
89,858
103,163
87,898
105,051
89,508
103,179
87,490
MEMO
42 Total loans (gross) and securities adjusted
43 Total loans (gross) adjusted
..
1. Effective Jan. 4,1989, the reporting panel includes a new group of large U.S.
branches and agencies of foreign banks. Earlier data included 65 U.S. branches
and agencies of foreign banks that included those branches and agencies with
assets of $750 million or more on June 30, 1980, plus those branches and agencies
that had reached the $750 million asset level on Dec. 31, 1984. These data also
appear in the Board's H.4.2 (504) release. For address, see inside front cover.
2. Includes securities purchased under agreements to resell.
3. Effective Jan. 4, 1989, loans secured by real estate are being reported as a
separate component of Other loans, gross. Formerly, these loans were included in
"All other", line 21.
4. Includes credit balances, demand deposits, and other checkable deposits.
5. Includes savings deposits, money market deposit accounts, and time
deposits.
6. Includes securities sold under agreements to repurchase.
7. Exclusive of loans to and federal funds sold to commercial banks in the
United States.
A46
DomesticNonfinancialStatistics • April 1989
1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1
Billions of dollars, estimated daily-average balances, not seasonally adjusted
Commercial banks
1987
Type of holder
1984
Dec.
1985
Dec.
1986
Dec.
1988
1987
Dec.
Sept.
Dec.
Mar.
June
Sept.
Dec.
1 All holders—Individuals, partnerships, and
corporations
302.7
321.0
363.6
343.5
339.0
343.5
328.6
346.5
337.8
2
3
4
5
6
31.7
166.3
81.5
3.6
19.7
32.3
178.5
85.5
3.5
21.2
41.4
202.0
91.1
3.3
25.8
36.3
191.9
90.0
3.4
21.9
36.5
188.2
88.7
3.2
22.4
36.3
191.9
90.0
3.4
21.9
33.9
184.1
86.9
3.5
20.3
37.2
194.3
89.8
3.4
21.9
34.8
190.3
87.8
3.2
21.7
f
1
n.a.
I
1
T
Financial business
Nonfinancial business
Consumer
Foreign
Other
Weekly reporting banks
1987
1984
Dec.
7 All holders—Individuals, partnerships, and
corporations
8
9
10
11
12
Financial business
Nonfinancial business
Consumer
Foreign
Other
1985
Dec.
1988
1987
Dec.
Sept.
Dec.
Mar.
June
Sept.
Dec.
157.1
168.6
195.1
183.8
179.1
183.8
181.8
191.5
185.3
198.3
25.3
87.1
30.5
3.4
10.9
25.9
94.5
33.2
3.1
12.0
32.5
106.4
37.5
3.3
15.4
28.6
100.0
39.1
3.3
12.7
29.3
96.0
37.2
3.1
13.5
28.6
100.0
39.1
3.3
12.7
27.0
98.2
41.7
3.4
11.4
30.0
103.1
42.3
3.4
12.8
27.2
101.5
41.8
3.1
11.7
30.5
108.7
42.6
3.6
12.9
1. Figures include cash items in process of collection. Estimates of gross
deposits are based on reports supplied by a sample of commercial banks. Types
of depositors in each category are described in the June 1971 BULLETIN, p. 466.
Figures may not add to totals because of rounding.
2. Beginning in March 1984, these data reflect a change in the panel of weekly
reporting banks, and are not comparable to earlier data. Estimates in billions of
dollars for December 1983 based on the new weekly reporting panel are: financial
business, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; other
9.5.
3. Beginning March 1985, financial business deposits and, by implication, total
gross demand deposits have been redefined to exclude demand deposits due to
thrift institutions. Historical data have not been revised. The estimated volume of
such deposits for December 1984 is $5.0 billion at all insured commercial banks
and $3.0 billion at weekly reporting banks.
1986
Dec.
4. Historical data back to March 1985 have been revised to account for
corrections of bank reporting errors. Historical data before March 1985 have not
been revised, and may contain reporting errors. Data for all commercial banks for
March 1985 were revised as follows (in billions of dollars): all holders, - . 3 ;
financial business, - . 8 ; nonfinancial business, —.4; consumer, .9; foreign, .1;
other, —.1. Data for weekly reporting banks for March 1985 were revised as
follows (in billions of dollars): all holders, - . 1 ; financial business, - . 7 ; nonfinancial business, - . 5 ; consumer, 1.1; foreign, .1; other, —.2.
5. Beginning March 1988, these data reflect a change in the panel of weekly
reporting banks, and are not comparable to earlier data. Estimates in billions of
dollars for December 1987 based on the new weekly reporting panel are: financial
business, 29.4; nonfinancial business, 105.1; consumer, 41.1; foreign, 3.4; other,
13.1.
Financial
Markets
A23
1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING
Millions of dollars, end of period
1988
1984
Dec.
Instrument
1985
Dec.
1986
Dec.
1987
Dec.
1988
Dec.
July
Aug.
Oct.
Sept.
Nov.
Dec.
Commercial paper (seasonally adjusted unless noted otherwise)
1 All issuers
2
3
4
5
6
Financial companies'
Dealer-placed
paper
Total
Bank-related (not seasonally
adjusted)
Directly placed
paper
Total
Bank-related (not seasonally
adjusted)
Nonfinancial companies
237,586
298,779
329,991
357,129
455,017
423,054'
424,504'
421,383'
426,216'
443,531'
455,017
56,485
78,443
101,072
101,958
159,947
148,130r
146,592'
149,995'
149,845'
157,042'
159,947
2,035
1,602
2,265
1,428
1,248
i,3or
911'
110,543
135,320
151,820
173,939
192,442
184,514'
187,031'
180,905'
184,044'
192,22c
192,442
42,105
70,558
44,778
85,016
40,860
77,099
43,173
81,232
43,155
102,628
44,217'
90,411
46,224'
90,881'
43,887
90,483'
42,204
92,327'
43,729
94,269'
43,155
102,628
901
840
995
1,248
Bankers dollar acceptances (not seasonally adjusted) 5
7 Total
8
9
10
11
12
13
Holder
Accepting banks
Own bills
Bills bought
Federal Reserve Banks
Own account
Foreign correspondents
Others
Basis
14 Imports into United States
15 Exports from United States
16 All other
78,364
68,413
64,974
70,565
66,678
63,240
64,036
63,452
62,253
65,961
66,678
9,811
8,621
1,191
11,197
9,471
1,726
13,423
11,707
1,716
10,943
9,464
1,479
9,082
8,018
1,064
9,655
8,702
953
9,661
8,664
888
9,334
8,400
934
9,083
8,026
1,057
9,483
8,768
715
9,082
8,018
1,064
0
671
67,881
0
937
56,279
0
1,317
50,234
0
965
58,658
0
1,493
56,103
0
1,114
52,471
0
9,915
53,493
0
963
53,154
0
1,166
52,004
0
1,393
55,086
0
1,493
56,103
17,845
16,305
44,214
15,147
13,204
40,062
14,670
12,960
37,344
16,483
15,227
38,855
14,991
15,622
36,065
14,001
14,676
34,564
14,608
14,345
35,083
14,622
13,946
34,884
14,064
14,067
34,122
14,959
14,578
36,424
14,991
15,622
36,065
1. Institutions engaged primarily in activities such as, but not limited to,
commercial savings, and mortgage banking; sales, personal, and mortgage financing; factoring, finance leasing, and other business lending; insurance underwriting; and other investment activities.
2. Includes all financial company paper sold by dealers in the open market.
3. As reported by financial companies that place their paper directly with
investors.
4. Includes public utilities and firms engaged primarily in such activities as
communications, construction, manufacturing, mining, wholesale and retail trade,
transportation, and services.
5. Beginning January 1988, the number of respondents in the bankers acceptance survey were reduced from 155 to 111 institutions—those with $100 million
or more in total acceptances. The new reporting group accounts for over 90
percent of total acceptances activity.
1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans
Percent per year
Period
1986—Mar. 7
Apr. 21
July 11
Aug. 26
9.00
8.50
8.00
7.50
1
1
15
Sept. 4
Oct. 7
22
Nov. 5
7.75
8.00
8.25
8.75
9.25
9.00
8.75
2
11
14
11
28
8.50
9.00
9.50
10.00
10.50
1989—Feb. 10
24
11.00
11.50
1987—Apr.
May
1988—Feb.
May
July
Aug.
Nov.
Average
rate
1986
1987
1988
8.33
8.21
9.32
1986 —Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
9.50
9.50
9.10
8.83
8.50
8.50
8.16
7.90
7.50
7.50
7.50
7.50
NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases.
For address, see inside front cover.
Average
rate
1987 —Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
7.50
7.50
7.50
7.75
8.14
8.25
8.25
8.25
8.70
9.07
8.78
8.75
1988 —Jan
Feb
Mar
May
June
July
Aug
Sept
Oct
Nov
Dec
1989 —Jan
A24 Domestic Financial Statistics • April 1989
1.35
I N T E R E S T R A T E S M o n e y and Capital Markets
Averages, percent per year; weekly, monthly and annual figures are averages of business day data unless otherwise noted.
1988
Instrument
1986
1987
1989
1988 and 1989, week ending
1988
Oct.
Nov.
Dec.
Jan.
Dec. 30
Jan. 6
Jan. 13
Jan. 20
Jan. 27
MONEY MARKET RATES
1 Federal f u n d s 1 2
2 Discount window borrowing • '
Commercial paper '
3
1-month
4
3-month
5
6-month
Finance paper, directly placed 4 , 5
6
1-month
7
3-month
8
6-month
^
Bankers acceptances ' 6
9
3-month
10
6-month
y
Certificates of deposit, secondary market
1-month
11
12
3-month
13
6-month
14 Eurodollar deposits. 3-month
U . S . Treasury bills 5
Secondary market
15
3-month
16
6-month
17
1-year
Auction average
3-month
18
19
6-month
20
1-year
6.80
6.32
6.66
5.66
7.57
6.20
8.30
6.50
8.35
6.50
8.76
6.50
9.12
6.50
8.86
6.50
9.22
6.50
9.08
6.50
9.13
6.50
9.06
6.50
6.61
6.49
6.39
6.74
6.82
6.85
7.58
7.66
7.68
8.12
8.24
8.24
8.38
8.66
8.55
9.31
9.11
8.97
9.03
9.04
9.02
9.30
9.07
8.97
9.05
9.02
8.99
9.04
9.06
9.04
9.02
9.04
9.04
9.00
9.04
9.02
6.57
6.38
6.31
6.61
6.54
6.37
7.44
7.38
7.14
8.05
8.06
7.80
8.29
8.20
7.94
9.00
8.50
8.24
8.90
8.78
8.44
9.00
8.55
8.29
8.91
8.68
8.36
8.93
8.86
8.46
8.91
8.81
8.50
8.84
8.73
8.41
6.38
6.28
6.75
6.78
7.56
7.60
8.15
8.13
8.55
8.46
8.96
8.83
8.93
8.92
8.90
8.83
8.93
8.92
8.95
8.94
8.93
8.92
8.92
8.91
6.61
6.51
6.50
6.71'
6.75
6.87
7.01
7.06'
7.59
7.73
7.91
7.85'
8.15
8.36
8.48
8.51
8.43
8.78
8.81
8.91
9.37
9.25
9.28
9.30
9.06
9.20
9.36
9.28
9.36
9.20
9.26
9.31
9.08
9.20
9.35
9.20
9.08
9.23
9.41
9.31
9.06
9.21
9.36
9.30
9.02
9.17
9.34
9.26
5.97
6.02
6.07
5.78
6.03
6.33
6.67
6.91
7.13
7.35
7.50
7.54
7.76
7.86
7.87
8.07
8.22
8.32
8.27
8.36
8.37
8.16
8.28
8.38
8.24
8.41
8.47
8.26
8.41
8.43
8.24
8.30
8.28
8.29
8.32
8.30
5.98'
6.03'
6.18'
5.82'
6.05'
6.33
6.68
6.92
7.17
7.34'
7.5(r
7.57
7.68'
7.76'
7.92
8.09'
8.24'
8.49
8.29
8.38
8.45
8.22
8.33
n.a.
8.24
8.37
n.a.
8.36
8.48
n.a.
8.30
8.35
8.45
8.26
8.31
n.a.
6.45
6.86
7.06
7.30
7.54
7.67
7.84
7.78
6.77
7.42
7.68
7.94
8.23
8.39
n.a.
8.59
7.65
8.10
8.26
8.47
8.71
8.85
n.a.
8.96
8.11
8.35
8.43
8.51
8.69
8.80
n.a.
8.89
8.48
8.67
8.72
8.79
8.89
8.96
n.a.
9.02
8.99
9.09
9.11
9.09
9.13
9.11
n.a.
9.01
9.05
9.18
9.20
9.15
9.14
9.09
n.a.
8.93
9.07
9.18
9.20
9.18
9.22
9.17
n.a.
9.00
9.17
9.28
9.30
9.28
9.31
9.24
n.a.
9.08
9.11
9.23
9.27
9.23
9.25
9.18
n.a.
9.00
8.96
9.13
9.14
9.09
9.07
9.02
n.a.
8.87
8.97
9.10
9.11
9.04
9.02
8.97
n.a.
8.81
8.14
8.64
8.98
8.89
9.07
9.13
9.07
9.13
9.23
9.14
9.01
8.%
6.95
7.76
7.32
7.14
8.17
7.63
7.36
7.83
7.68
7.25
7.72
7.47
7.35
7.78
7.46
7.35
7.76
7.61
7.23
7.67
7.35
7.30
7.70
7.50
7.33
7.73
7.44
7.28
7.70
7.40
7.20
7.63
7.29
7.10
7.60
7.27
9.71
9.02
9.47
9.95
10.39
9.91
9.38
9.68
9.99
10.58
10.18'
9.71'
n.a.
10.24'
10.83'
9.90
9.51
9.71
9.99
10.41
9.91
9.45
9.72
9.99
10.48
10.03
9.57
9.81
10.11
10.65
10.05
9.62
9.81
10.10
10.65
10.06
9.60
9.84
10.14
10.67
10.11
9.66
9.88
10.18
10.73
10.10
9.69
9.86
10.15
10.70
10.03
9.61
9.79
10.08
10.62
9.99
9.56
9.75
10.04
10.61
9.61
9.95
n.a.
10.11
10.12
10.08
10.09
10.12
10.19
10.11
10.05
10.00
8.76
3.48
8.37
3.08
9.23
3.64
9.23
3.61
9.29
3.70
9.38
3.68
9.31
3.64
9.34
3.70
9.33
3.67
9.42
3.65
9.25
3.61
9.23
3.61
CAPITAL MARKET RATES
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
U . S . Treasury notes and bonds 11
Constant maturities
1-year
2-year
3-year
5-year
7-year
10-year
20-year
30-year
Composite 1 3
Over 10 years (long-term)
State and local notes and bonds
Moody's series 14
Aaa
Baa
Bond Buyer series
Corporate bonds
Seasoned issues
All industries
Aaa
Aa
A
Baa
A-rated, recently offered utility
bonds 1 '
MEMO: Dividend/price ratio 18
39
Preferred stocks
40
Common stocks
1. Weekly, monthly and annual figures are averages of all calendar days,
where the rate for a weekend or holiday is taken to be the rate prevailing on the
preceding business day. The daily rate is the average of the rates on a given day
weighted by the volume of transactions at these rates.
2. Weekly figures are averages for statement week ending Wednesday.
3. Rate for the Federal Reserve Bank of N e w York.
4. Unweighted average of offering rates quoted by at least five dealers (in the
case of commercial paper), or finance companies (in the case of finance paper).
Before November 1979, maturities for data shown are 30-59 days, 90-119 days,
and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and
150-179 days for finance paper.
5. Yields are quoted on a bank-discount basis, rather than in an investment
yield basis (which would give a higher figure).
6. Dealer closing offered rates for top-rated banks. Most representative rate
(which may be, but need not be, the average of the rates quoted by the dealers).
7. Unweighted average of offered rates quoted by at least five dealers early in
the day.
8. Calendar week average. For indication purposes only.
9. Unweighted average of closing bid rates quoted by at least five dealers.
10. Rates are recorded in the week in which bills are issued. Beginning with the
Treasury bill auction held on Apr. 18, 1983, bidders were required to state the
percentage yield (on a bank discount basis) that they would accept to two decimal
places. Thus, average issuing rates in bill auctions will be reported using two
rather than three decimal places.
11. Yields are based on closing bid prices quoted by at least five dealers.
12. Yields adjusted to constant maturities by the U . S . Treasury. That is, yields
are read from a yield curve at fixed maturities. Based on only recently issued,
actively traded securities.
13. Averages (to maturity or call) for all outstanding bonds neither due nor
callable in less than 10 years, including one very low yielding "flower" bond.
14. General obligations based on Thursday figures; Moody's Investors Service.
15. General obligations only, with 20 years to maturity, issued by 20 state and
local governmental units of mixed quality. Based on figures for Thursday.
16. Daily figures from Moody's Investors Service. Based on yields to maturity
on selected long-term bonds.
17. Compilation of the Federal Reserve. This series is an estimate of the yield
on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of
call protection. Weekly data are based on Friday quotations.
18. Standard and Poor's corporate series. Preferred stock ratio based on a
sample of ten issues: four public utilities, four industrials, one financial, and one
transportation. Common stock ratios on the 500 stocks in the price index.
NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases.
For address, see inside front cover.
Financial Markets
1.36 STOCK MARKET
A25
Selected Statistics
1988
Indicator
1987
1986
1989
1988
May
July
June
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Prices and trading (averages of daily figures)
Common stock prices
1 N e w York Stock Exchange
(Dec. 31, 1965 = 50)
2
Industrial
3
Transportation
4
Utility
5
Finance
6 Standard & Poor's Corporation
(1941-43 = 10)'
136.00
155.85
119.87
71.36
147.19
161.70
195.31
140.39
74.29
146.48
149.91
180.83
134.01
72.22
127.41
144.99
176.02
127.63
68.66
120.35
152.72
184.92
136.02
72.25
129.04
152.12
184.09
136.49
71.49
129.99
149.25
179.72
132.52
70.67
130.77
151.47
182.18
136.27
71.83
133.15
156.36
188.58
141.83
74.19
136.09
152.67
182.25
137.51
79.28
130.05
155.35
187.75
144.06
74.81
128.83
160.40
194.62
153.09
75.87
132.26
236.34
286.83
266.18
256.12
270.68
269.05
263.73
267.97
277.40
271.02
281.28
285.41
7 American Stock Exchange
(Aug. 31, 1973 = 5 0 ?
264.38
316.61
294.90
2%. 30
306.13
307.48
297.76
297.86
302.83
292.25
298.59
316.14
141,385
11,846
188,647
13,832
161,450
9,955
153,906
8,931
195,772
11,348
166,916
9,938
144,668
9,307
145,702
8,198
162,631
9,051
134,427
8,497
135,473
11,227
168,204
10,797
Volume of trading (thousands
8 N e w York Stock Exchange
9 American Stock Exchange
of shares)
Customer financing (end-of-period balances, in millions of dollars)
10 Margin credit at broker-dealers 3
Free credit balances
11 Margin-account
12 Cash-account
at
36,840
31,990
32,740
33,070
32,300
31,770
31,930
32,770
33,410
33,640
32,740
32,530
4,880
19,000
4,750
15,640
5,660
16,595
4,380
14,150
4,580
14,460
4,485
14,340
4,655
14,045
4,725
14,175
5,065
14,880
4,920
15,185
5,660
16,595
5,790
15,705
brokers4
Margin requirements (percent of market value and effective date) 6
13 Margin stocks
14 Convertible bonds
15 Short sales
Mar. 11, 1968
June 8, 1968
May 6, 1970
Dec. 6, 1971
N o v . 24, 1972
Jan. 3, 1974
70
50
70
80
60
80
65
50
65
55
50
55
65
50
65
50
50
50
1. Effective July 1976, includes a new financial group, banks and insurance
companies. With this change the index includes 400 industrial stocks (formerly
425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40
financial.
2. Beginning July 5, 1983, the American Stock Exchange rebased its index
effectively cutting previous readings in half.
3. Beginning July 1983, under the revised Regulation T, margin credit at
broker-dealers includes credit extended against stocks, convertible bonds, stocks
acquired through exercise of subscription rights, corporate bonds, and government securities. Separate reporting of data for margin stocks, convertible bonds,
and subscription issues was discontinued in April 1984.
4. Free credit balances are in accounts with no unfulfilled commitments to the
brokers and are subject to withdrawal by customers on demand.
5. N e w series beginning June 1984.
6. These regulations, adopted by the Board of Governors pursuant to the
Securities Exchange Act of 1934, limit the amount of credit to purchase and carry
"margin securities" (as defined in the regulations) when such credit is collateralized by securities. Margin requirements on securities other than options are the
difference between the market value (100 percent) and the maximum loan value of
collateral as prescribed by the Board. Regulation T was adopted effective Oct. 15,
1934; Regulation U , effective May 1, 1936; Regulation G, effective Mar. 11, 1968;
and Regulation X, effective N o v . 1, 1971.
On Jan. 1, 1977, the Board of Governors for the first time established in
Regulation T the initial margin required for writing options on securities, setting
it at 30 percent of the current market-value of the stock underlying the option. On
Sept. 30, 1985, the Board changed the required initial margin, allowing it to be the
same as the option maintenance margin required by the appropriate exchange or
self-regulatory organization; such maintenance margin rules must be approved by
the Securities and Exchange Commission. Effective Jan. 31, 1986, the SEC
approved new maintenance margin rules, permitting margins to be the price of the
option plus 15 percent of the market value of the stock underlying the option.
A46
1.37
DomesticNonfinancialStatistics • April 1989
S E L E C T E D F I N A N C I A L INSTITUTIONS
Selected Assets and Liabilities
Millions of dollars, end of period
1988
Account
1986
1987
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.'
Nov.
FSLIC-insured institutions
1 Assets
L,285,338R
1,163,851
1,250,855
1,257,466
1,261,581
1,289,979'
1,299,408'
1,311,704'
1,323,954'
1,332,962'
1,332,995
2 Mortgages
3 Mortgage-backed
securities
4
Contra-assets to
mortgage assets' .
5 Commercial loans
6 Consumer loans
7 Contra-assets to nonmortgage loans2
8 Cash and investment
securities
9 Other 3
697,451
721,593
723,856
725,625
728,984
733,547
736,893'
743,128'
751,468'
754,470'
760,933'
763,122
158,193
201,828
197,811
197,889
202,767
205,053
207,744
208,532'
210,596'
211,180'
211,999'
212,503
41,799
23,683
51,622
42,344
23,163
57,902
40,836
23,340
58,687
41,268
24,004
58,390
39,358
24,243
59,121
39,764
24,201
60,250
40,308'
24,959'
61,568
39,113'
25,094'
62,412'
38,443'
24,883'
61,785'
38,279'
25,252'
61,308'
37,716
25,391
61,779
3,041
3,467
3,524
3,628
3,513
3,395
3,513'
3,389'
3,156'
3,078'
2,932'
2,961
164,844
112,898
169,717
122,462
174,106
124,025
176,386
124,184
177,955
124,284
179,506
125,939
177,533'
125,751'
178,446'
126,472'
176,099'
128,305'
183,163'
129,994'
184,652'
130,028'
180,015
130,862
10 Liabilities and net worth .
1,163,851
1,250,855
1,257,466
1,261,581
1,285,338'
1,289,979'
1,299,408'
1,311,704'
1,323,954'
1,332,962'
1,332,995
890,664
196.929
100,025
96,904
23,975
52,282
932,616
249,917
116,363
133,554
21,941
46,382
946,790
239,452
112,725
126,727
25,818
45,406
963,761
250,697
114,994
135,703
27,160'
43,720
966,75c
257,134'
117,287'
139,847'
24,563'
41,531'
968,213'
262,745'
118,213'
144,532'
27,111'
41,339'
968,293'
266,787'
120,677'
146,110'
28,905'
47,719'
973,743'
273,666'
123,436'
150,230'
26,014'
50,531'
976,164'
278,244'
124,368'
153,876'
27,544'
51,011'
971,492
281,027
127,547
153,480
29,163
51,313
11
12
13
14
15
16
Savings capital
Borrowed money
FHLBB
Other
Other
Net worth
958,471
237,663'
112,389
125,274'
22,555
42,892
1,274,482'
1,274,482'
962,304
244,990
113,029
131,961
24,618
42,570
40,251'
24,672'
61,151
FSLIC-insured federal savings banks
17 Assets
210,562
284,270'
295,951
307,756
311,434
323,028
329,736
333,610
357,860
367,974
369,698
374,891
18 Mortgages
19 Mortgage-backed
securities
20
Contra-assets to
mortgage assets 1
21 Commercial loans
22 Consumer loans
23 Contra-assets to nonmortgage loans . ..
24 Finance leases plus
interest
25 Cash and investment . .
26 Other
113,638
161,926'
169,340'
176,090'
178,394'
184,575
188,454
190,897
201,999
205,549
207,200
210,686
29,766
45,826
46,687
47,979
49,075
51,290
52,648
53,049
55,710
56,408
56,770
57,609
13,180
9,100
6,504
17,696
9,175
6,971
18,795
9,460
7,376'
19,141
9,347'
7,531
19,616
9,735
7,639
20,426
10,089
7,904
21,142
10,136
7,919
21,444
10,917
8,570
22,520
11,019
8,719
22,411
10,875
8,910
22,409
10,883
9,071
22,666
678
737
800
19,034
591
35,347
24,069'
584
35,718
25,517
611
38,224
26,424
27 Liabilities and net worth
210,562
284,270'
295,951
307,756
28
29
30
31
32
33
157,872
37,329
19,897
17,432
4,263
11,098
203,196
60,716
29,617
31,099
5,324
15,034'
214,169
59,704
29,169
30,535
6,602
15,477
224,169
61,552
30,456
31,0%
6,089
15,946
Savings capital . .
Borrowed money
FHLBB
Other
Other
Net worth
724
707
738
699
772
783
789
804
652
39,889
26,758
708
40,286
27,230
735
40,825
27,318
791
45,084
32,516
806
48,985
34,428
805
48,703
34,054
804
48,231
34,935
311,434
323,028
329,736
333,610
357,860
367,974
369,698
374,891
226,544
62,566
30,075
32,491
6,390
16,086'
232,656
66,816
31,682
35,134
7,118
16,589
236,759
69,356
32,177
37,179
6,639
16,886
239,591
70,015
31,941
38,074
7,061
16,847
256,224
75,807
35,357
40,450
8,061
17,665
261,865
80,688
37,245
43,443
7,376
17,913
262,926
80,782
37,510
43,272
7,680
18,217
263,924
83,622
39,628
43,994
8,321
18,907
615
38,259'
25,822
Savings banks
34 Assets
35
36
Loans
Mortgage
Other
Securities
U.S. government
Mortgage-backed
securities
State and local
government
Corporate and other .
Cash
Other assets
236,866
259,643
259,224
262,100
262,269
264,507
249,927
252,875
253,453
255,510
257,127
258,537
118,323
35,167
138,494
33,871
139,108
35,752
140,835
36,476
139,691
37,471
143,235
35,927
138,148
32,399
139,844
32,941
141,316
32,799
143,626
32,879
145,398
33,234
146,501
33,791
14,209
13,510
12,269
12,225
13,203
12,490
11,597
11,563
11,353
11,182
10,8%
10,804
25,836
32,772
32,423
32,272
31,072
31,861
29,735
30,064
30,006
29,190
29,893
29,372
2,185
20,459
6,894
13,793
2.003
18,772
5,864
14,357
2,053
18,271
5,002
14,346
2,033
18,336
4,881
15,042
2,013
18,549
5,237
15,033
1,933
18,298
5,383
15,380
1,849
17,492
4,831
13,876
1,840
17,527
5,186
13,910
1,901
17,301
4,950
13,827
1,878
17,234
5,463
14,058
1,872
16,886
4,825
14,123
1,887
16,773
5,093
14,316
43 Liabilities
236,866
259,643
259,224
262,100
262,269
264,507
249,927
252,875
253,453
255,510
257,127
258,537
44 Deposits
45
Regular 4
46
Ordinary savings
47
Time
48
Other
49 Other liabilities
50 General reserve
accounts
192,194
186,345
37,717
100,809
5,849
25,274
201,497
196,037
41,959
112,429
5,460
35,720
200,391
195,336
41,234
113,751
5,055
35,787
203,407
198,273
41,867
115,529
5,134
35,737
203,273
197,801
41,741
115,887
5,472
35,827
205,692
200,098
42,403
117,297
5,594
35,836
194,018
188,571
40,179
110,738
5,447
34,038
195,537
189,993
40,124
112,272
5,544
34,686
195,907
190,716
39,738
114,255
5,191
34,776
197,665
192,228
39,618
116,387
5,427
35,001
197,925
192,663
39,375
117,712
5,262
35,997
199,092
194,095
39,482
119,026
4,997
36,012
18,105
20,633
20,894
21,024
21,109
21,179
19,875
20,069
20,018
20,151
20,324
20,462
37
38
39
40
41
42
..
Financial Markets
All
1.37—Continued
1988
Account
1986
1987
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
173,276
173,044
174,649
174,722
174,406
113,717
61,135
112,452
73,100
39,352
159,021
103,223
55,798
Credit unions 5
51 Total assets/liabilities
and capital
52
53
Federal
State
54 Loans outstanding..
55
Federal
State
56
57 Savings
Federal
58
State
59
147,726
95,483
52,243
86,137
55,304
30,833
134,327
87,954
46,373
f
f
1
1
n.a.
n.a.
1
1
1
\
1
169,111
169,175
172,456
172,345
109,797
59,314
109,913
59,262
112,595
59,855
112,573
59,772
113,068
60,208
112,686
60,358
113,383
61,266
113,474
61,248
101,965
65,732
36,233
156,045
101,847
54,198
103,271
66,431
36,840
155,105
101,048
54,057
105,704
68,213
37,491
157,764
103,129
54,635
105,800
68,658
37,142
158,186
103,347
54,839
107,065
69,626
37,439
159,314
104,256
55,058
108,974
70,944
38,030
158,731
103,657
55,074
110,939
72,200
38,739
157,944
103,698
54,246
111,624
72,551
39,073
160,174
104,184
55,990
Life insurance companies
60 Assets
61
62
63
64
65
66
67
68
69
70
71
Securities
Government . . . . .
United States 6 ..
State and local .
Foreign
Business
Bonds
Stocks
Mortgages
Real estate
Policy loans
Other assets
937,551
1,044,459
1,052,645
1,065,549
1,075,541
1,094,827
1,105,546
1,113,547
1,121,337
1,131,179
1,139,490
84,640
59,033
11,659
13,948
492,807
401,943
90,864
193,842
31,615
54,055
80,592
84,426
57,078
10,681
16,667
569,199
472,684
96,515
203,545
34,172
53,626
89,586
92,497
65,534
11,859
15,104
571,070
476,448
94,622
213,182
34,503
52,720
88,673
92,408
65,218
12,033
15,157
580,392
484,403
95,989
214,815
34,845
52,604
90,499
93,946
66,749
11,976
15,221
587,846
490,285
97,561
215,383
34,964
52,568
90,834
86,711
58,988
11,016
16,707
606,445
503,728
102,717
219,012
35,484
53,013
94,162
87,160
59,351
11,114
16,695
614,052
509,105
104,947
220,870
35,545
53,107
94,812
88,218
60,244
11,102
16,872
618,742
514,926
103,816
221,990
35,737
53,142
95,718
88,362
60,407
11,190
16,765
624,917
520,796
104,121
233,438
35,920
53,194
95,505
87,588
59,874
11,054
16,660
630,086
525,336
104,750
225,627
35,892
53,149
98,837
88,883
60,621
11,069
17,193
633,390
527,419
105,971
227,342
36,892
53,157
99,826
1. Contra-assets are credit-balance accounts that must be subtracted from the
corresponding gross asset categories to yield net asset levels. Contra-assets to
mortgage loans, contracts, and pass-through securities include loans in process,
unearned discounts and deferred loan fees, valuation allowances for mortgages
"held for sale," and specific reserves and other valuation allowances.
2. Contra-assets are credit-balance accounts that must be subtracted from the
corresponding gross asset categories to yield net asset levels. Contra-assets to
nonmortgage loans include loans in process, unearned discounts and deferred loan
fees, and specific reserves and valuation allowances.
3. Holding of stock in Federal Home Loan Bank and Finance leases plus
interest are included in "Other" (line 9).
4. Excludes checking, club, and school accounts.
5. Data include all federally insured credit unions, both federal and state
chartered, serving natural persons.
6. Direct and guaranteed obligations. Excludes federal agency issues not
guaranteed, which are shown in the table under "Business" securities.
7. Issues of foreign governments and their subdivisions and bonds of the
International Bank for Reconstruction and Development.
n.a.
NOTE. FSLlC-insured institutions: Estimates by the F H L B B for all institutions
insured by the FSLIC and based on the F H L B B thrift Financial Report.
FSLIC-insured federal savings banks: Estimates by the F H L B B for federal
savings banks insured by the FSLIC and based on the F H L B B thrift Financial
Report.
Savings banks: Estimates by the National Council of Savings Institutions for all
savings banks in the United States and for FDIC-insured savings banks that have
converted to federal savings banks.
Credit unions: Estimates by the National Credit Union Administration for
federally chartered and federally insured state-chartered credit unions serving
natural persons.
Life insurance companies: Estimates of the American Council of Life Insurance
for all life insurance companies in the United States. Annual figures are annualstatement asset values, with bonds carried on an amortized basis and stocks at
year-end market value. Adjustments for interest due and accrued and for
differences between market and book values are not made on each item separately
but are included, in total, in "other assets."
A28 Domestic Financial Statistics • April 1989
1.38 FEDERAL FISCAL AND FINANCING OPERATIONS
Millions of dollars
Calendar year
Type of account or operation
Fiscal
year
1986
Fiscal
year
1987
Fiscal
year
1988
1988
Aug.
Sept.
1989
Oct.
Nov.
Dec.
Jan.
63,646
45,847
17,799
90,655
73,514
17,141
-27,009
-27,667
658
64,408
47,023
17,385
93,541'
75,542'
17,999
-29,133'
-28,518'
-614
93,795
74,682
19,114
105,241'
91,610'
13,632
-11,446'
-16,928'
5,482
89,369
65,250
24,119
86,563
68,999
17,564
2,806
-3,749
6,555
1
U.S. budget
1 Receipts, total
2
On-budget
3
Off-budget
4 Outlays, total
5
On-budget
6
Off-budget
7 Surplus, or deficit ( - ) , total
8
On-budget
9
Off-budget
Source of financing (total)
Borrowing from the public
Operating cash (decrease, or increase
(-)l
12
Other 2
10
11
MEMO
13 Treasury operating balance (level, end of
period)
14
Federal Reserve Banks
15
Tax and loan accounts
769,091
568,862
200,228
990,258
806,760
183,498
-221,167
-237,898
16,731
854,143
640,741
213,402
1,003,830
809,998
193,832
-149,687
-169,257
19,570
908,953
667,462
241,491
1,064,044
861,352
202,691
-155,090
-193,890
38,800
69,479
51,015
18,464
92,561
74,756
17,805
-23,082'
-23,741
659
236,187
150,070
162,062
23,370
14,665
10,716
31,520
12,036
-14,324
-696
-5,052
4,669
-7,963
991
10,954
-11,242
-31,444
6,564
13,748
2,545
9,218
-11,605'
-12,268
11,678'
-8,135
-2,030
31,384
7,514
23,870
36,436
9,120
27,316
44,398
13,024
31,375
12,954
4,390
8,564
44,398
13,024
31,375
30,650
6,151
24,499
21,432
5,198
16,234
33,700
8,657
25,044
41,835
11,766
30,069
1. In accordance with the Balanced Budget and Emergency Deficit Control Act
of 1985, all former off-budget entries are now presented on-budget. The Federal
Financing Bank (FFB) activities are now shown as separate accounts under the
agencies that use the F F B to finance their programs. The act has also moved two
social security trust funds (Federal old-age survivors insurance and Federal
disability insurance trust funds) off-budget.
2. Includes SDRs; reserve position on the U.S. quota in the IMF; loans to
97,803
75,586
22,217
87,588
70,071
17,518
10,214'
5,515
4,699
7,359
international monetary fund; other cash and monetary assets; accrued interest
payable to the public; allocations of special drawing rights; deposit funds;
miscellaneous liability (including checks outstanding) and asset accounts;
seigniorage; increment on gold; net gain/loss for U . S . currency valuation adjustment; net gain/loss for IMF valuation adjustment; and profit on the sale of gold.
SOURCE. Monthly Treasury Statement of Receipts and Outlays of the U.S.
Government and the Budget of the U.S.
Government.
Federal Finance
A29
1.39 U.S. BUDGET RECEIPTS AND OUTLAYS 1
Millions of dollars
Calendar year
Source or type
Fiscal
year
1987
Fiscal
year
1988
1987
1988
1988
1989
HI
H2
HI
H2
Nov.
Dec.
Jan.
RECEIPTS
1 All sources
2 Individual income taxes, net
3
Withheld
4
Presidential Election Campaign Fund
5
Nonwithheld
6
Refunds
Corporation income taxes
7
Gross receipts
8
Refunds
9 Social insurance taxes and contributions,
net
10
Employment taxes and
contributions 2
11
Self-employment taxes and
contributions
12
Unemployment insurance
13
Other net receipts
14
15
16
17
Excise taxes
Customs deposits
Estate and gift taxes
Miscellaneous receipts 5
854,143
908,954
447,282
421,712
476,115
449,821
64,408
93,795
89,369
392,557
322,463
33
142,957
72,896
401,181
341,435
33
132,199
72,487
205,157
156,760
30
112,421
64,052
192,575
170,203
4
31,223
8,853
207,659
169,300
28
101,614
63,283
200,299
179,600
4
29,880
9,187
29,822
30,092
0
1,367
1,638
39,673
37,578
0
3,034
939
48,627
28,049
0
20,993
415
102,859
18,933
109,683
15,487
52,3%
10,881
52,821
7,119
58,002
8,706
56,409
7,384
2,662
1,219
23,100
940
4,003
822
303,318
334,335
163,519
143,755
181,058
157,603
25,075
24,698
31,652
273,028
305,093
146,6%
130,388
164,412
144,983
22,051
24,100
30,351
13,987
25,575
4,715
17,691
24,584
4,659
12,020
14,514
2,310
1,889
10,977
2,390
14,839
14,363
2,284
3,032
10,359
2,262
326
2,641
382
0
189
410
1,181
949
351
32,457
15,085
7,493
19,307
35,540
16,198
7,594
19,909
15,845
7,494 r
3,818
10,299
17,680
7,993
3,610
10,399
16,440
7,913'"
3,863
9,950
19,434
8,535
4,054
10,873
3,247
1,403
753
2,666
3,155
1,391
673
2,046
2,597
1,316
687
1,309
1,004,586
1,064,054
503,267
532,839
513,210
553,221Y
93,541 r
105,241 r
86,563
281,999
11,649
9,216
4,115
13,363
26,606
290,349
10,469
10,876
2,342
14,538
17,210
142,886
4,374
4,324
2,335
6,175
11,824
146,995
4,487
5,469
1,468
7,590
14,640
143,080
7,150
5,361
555
6,776
7,872
150,4%
2,636
5,852
1,966
8,330
7,725
24,702
-2,055
1,116
539
1,465
3,243
28,934
805
1,007
406
1,480
1,712
19,916
938
946
234
932
2,141
6,156
26,221
5,051
19,064
27,196
5,577
4,893
12,113
3,108
3,852
14,0%
2,075
5,951
12,700
2,765
20,274
14,922
2,690
2,764
2,570
588
7,217
2,249
536
836
2,293
425
OUTLAYS
18 All types
19
20
21
22
23
24
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture
25
26
27
28
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and
social services
29,724
30,856
14,182
15,592
15,451
16,152
3,054
2,849
3,463
29 Health
30 Social security and medicare
31 Income security
39,968
282,472
123,255
44,482
297,828
130,174
20,318
142,864
62,248
20,750
158,469
61,201
22,643
135,322
65,555
23,360
149,017
64,978
3,%2
25,310
11,054
4,102
25,374
12,355
3,922
25,641
10,701
32
33
34
35
36
37
26,782
7,548
7,564
0
138,570
-36,455
29,248
9,205
9,506
0
151,711
-36,576
12,264
3,626
3,344
337
70,110
-19,102
14,956
4,291
3,560
1,175
71,933
-17,684
13,241
4,761
4,337
448
76,098
-17,766
15,797
4,778
5,137
0
78,317
-18,771
2,713
803
819
0
13,622
-2,844
3,539
765
1,600
0
12,972
-2,537
1,188
884
389
0
14,780
-3,068
Veterans benefits and services
Administration of justice
General government
General-purpose fiscal assistance
Net interest 6
Undistributed offsetting receipts
1. Functional details do not add to total outlays for calendar year data because
revisions to monthly totals have not been distributed among functions. Fiscal year
total for outlays does not correspond to calendar year data because revisions from
the Budget have not been fully distributed across months.
2. Old-age, disability, and hospital insurance, and railroad retirement accounts.
3. Old-age, disability, and hospital insurance.
4. Federal employee retirement contributions and civil service retirement and
disability fund.
5. Deposits of earnings by Federal Reserve Banks and other miscellaneous
receipts.
6. Net interest function includes interest received by trust funds.
7. Consists of rents and royalties on the outer continental shelf and U.S.
government contributions for employee retirement.
SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of
Receipts and Outlays of the U.S. Government, and the U . S . Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 1988.
A46
DomesticNonfinancialStatistics • April 1989
1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION
Billions of dollars
1986
1987
1988
Item
Sept. 30
Dec. 31
Mar. 31
June 30
Sept. 30
Dec. 31
Mar. 31
June 30
Sept. 30
1 Federal debt outstanding
2129.5
2218.9
2250.7
2313.1
2354.3
2435.2
2493.2
2555.1
2614.6
2 Public debt securities
i
Held by public
4
Held by agencies
2125.3
1742.4
382.9
2214.8
1811.7
403.1
2246.7
1839.3
407.5
2309.3
1871.1
438.1
2350.3
1893.1
457.2
2431.7
1954.1
477.6
2487.6
1996.7
490.8
2547.7
2013.4
534.2
2602.3
2051.7
550.4
4.2
3.2
1.1
4.0
3.0
1.1
4.0
2.9
1.1
3.8
2.8
1.0
4.0
3.0
1.0
3.5
2.7
.8
5.6
5.1
.6
7.4
7.0
.5
12.4
12.2
.2
5 Agency securities
6
Held by public
7
Held by agencies
8 Debt subject to statutory limit
2111.0
2200.5
2232.4
2295.0
2336.0
2417.4
2472.6
2532.2
2586.9
9 Public debt securities
10 Other debt 1
2109.7
1.3
2199.3
1.3
2231.1
1.3
2293.7
1.3
2334.7
1.3
2416.3
1.1
2472.1
.5
2532.1
.1
2586.7
.1
11 MEMO: Statutory debt limit
2111.0
2300.0
2300.0
2320.0
2800.0
2800.0
2800.0
2800.0
2800.0
1. Includes guaranteed debt of Treasury and other federal agencies, specified
participation certificates, notes to international lending organizations, and District
of Columbia stadium bonds.
1.41 GROSS PUBLIC DEBT OF U.S. TREASURY
SOURCES. Treasury Bulletin and Monthly Statement
United States.
of the Public Debt of the
Types and Ownership
Billions of dollars, end of period
1987
Type and holder
1 Total gross public debt
2
3
4
5
b
7
8
9
10
11
12
13
By type
Interest-bearing debt
Marketable
Bills
Notes
Bonds
Nonmarketable
State and local government series
Foreign issues
Government
Public
Savings bonds and notes.
Government account series
14 Non-interest-bearing debt
15
16
17
18
19
20
21
22
23
24
25
26
By holder4
U.S. government agencies and trust funds
Federal Reserve Banks
Private investors
Commercial banks
Money market funds
Insurance companies
Other companies
State and local Treasurys
Individuals
Savings bonds
Other securities
Foreign and international
Other miscellaneous investors
1984
1986
1988
1987
Q4
Ql
Q2
Q3
1663.0
1945.9
2214.8
2431.7
2431.7
2487.6
2547.7
2602.3
1660.6
1247.4
374.4
705.1
167.9
413.2
44.4
9.1
9.1
.0
73.1
286.2
1943.4
1437.7
399.9
812.5
211.1
505.7
87.5
7.5
7.5
.0
78.1
332.2
2212.0
1619.0
426.7
927.5
249.8
593.1
110.5
4.7
4.7
.0
90.6
386.9
2428.9
1724.7
389.5
1037.9
282.5
704.2
139.3
4.0
4.0
.0
99.2
461.3
2428.9
1724.7
389.5
1037.9
282.5
704.2
139.3
4.0
4.0
.0
99.2
461.3
2484.9
1758.7
392.6
1059.9
291.3
726.2
142.9
6.1
6.1
.0
102.3
474.4
2545.0
1769.9
382.3
1072.7
299.9
775.1
146.9
5.7
5.7
.0
104.5
517.5
2599.9
1802.9
398.5
1089.6
299.9
797.0
147.6
6.3
6.3
.0
106.2
536.5
2.3
2.5
2.8
2.8
2.8
2.6
2.7
2.5
289.6
160.9
1212.5
186.0
25.9
64.5
50.1
173.0
348.9
181.3
1417.2
198.2
25.1
78.5
59.0
226.7
403.1
211.3
1602.0
203.5
28.0
105.6
68.8
262.8
477.6
222.6
1745.2
201.2
14.3
120.6
84.6
282.6
477.6
222.6
1745.2
201.2
14.3
120.6
84.6
282.6
490.8
217.5
1778.2
201.0
14.9
125.5
83.0
285.8
534.2
227.6
1784.9
202.5
13.1
132.2
86.5
n.a.
550.4
229.2
1819.0
203.0
10.8
135.0
86.0
n.a.
74.5
69.3
192.9
376.3
79.8
75.0
212.5
462.4
92.3
70.5
251.6
518.9
101.1
72.3
287.3
581.2
101.1
72.3
287.3
581.2
104.0
69.8
321.0
573.2
106.2
71.7
333.8
n.a.
107.8
72.0
334.3
n.a.
1. Includes (not shown separately): Securities issued to the Rural Electrification Administration; depository bonds, retirement plan bonds, and individual
retirement bonds.
2. Nonmarketable dollar-denominated and foreign currency-denominated series held by foreigners.
3. Held almost entirely by U . S . Treasury agencies and trust funds.
4. Data for Federal Reserve Banks and U.S. Treasury agencies and trust funds
are actual holdings; data for other groups are Treasury estimates.
1985
5. Consists of investments of foreign and international accounts. Excludes
non-interest-bearing notes issued to the International Monetary Fund.
6. Includes savings and loan associations, nonprofit institutions, credit unions,
mutual savings banks, corporate pension trust funds, dealers and brokers, certain
U.S. Treasury deposit accounts, and federally-sponsored agencies.
SOURCES. Data by type of security, U . S . Treasury Department, Monthly
Statement of the Public Debt of the United States; data by holder. Treasury
Bulletin.
Federal Finance
1.42 U.S. GOVERNMENT SECURITIES DEALERS
A31
Transactions1
Par value; averages of daily figures, in millions of dollars
1988r
Item
1986
1987
1988r
1989
1989
1988r
Nov.
Dec.
Jan.
Dec. 21
Dec. 28
Jan. 4
Jan. 11
Jan. 18
Jan. 25
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Immediate delivery
U.S. Treasury securities
By maturity
Bills
Other within 1 year
1-5 years
5 - 1 0 years
Over 10 years
By type of customer
U.S. government securities
dealers
U.S. government securities
brokers
All others 3
Federal agency securities
Certificates of deposit
Bankers acceptances
Commercial paper
Futures contracts
Treasury bills
Treasury coupons
Federal agency securities
Forward transactions
U . S . Treasury securities
Federal agency securities
95,444
110,050
101,623
114,807
89,962
107,144
85,718
61,942
71,660
103,367
122,526
108,046
34,247
2,115
24,667
20,455
13,961
37,924
3,271
27,918
24,014
16,923
29,388
3,426
27,777
24,939
16,093
32,553
3,537
32,824
27,072
18,822
28,533
2,925
23,379
21,480
13,643
31,930
3,776
28,259
27,317
15,861
32,188
3,336
19,340
18,379
12,475
24,612
2,364
17,355
10,801
6,810
25,724
3,742
21,785
13,465
6,945
34,216
3,742
26,451
25,328
13,630
36,779
3,974
28,291
33,775
19,708
29,886
3,563
31,153
26,378
17,066
3,669
2,936
2,761
3,123
2,810
2,427
2,580
3,376
1,964
2,572
2,937
2,414
49,558
42,217
16,747
4,355
3,272
16,660
61,539
45,575
18,084
4,112
2,965
17,135
59,844
39,019
15,903
3,369
2,316
22,927
67,174
44,511
17,541
3,535
2,563
26,590
51,787
35,364
14,801
2,759
1,898
28,156
63,244
41,472
19,427
3,779
2,608
35,573
48,361
34,777
12,563
3,202
1,814
29,704
32,559
26,006
11,939
1,978
1,438
26,165
39,292
30,404
14,747
3,134
2,422
35,6%
59,209
41,586
21,030
3,662
2,813
35,970
71,840
47,748
20,376
4,167
2,943
36,787
65,400
40,233
18,507
3,745
2,338
34,323
3,311
7,175
16
3,233
8,963
5
2,627
9,695
1
2,466
11,015
0
2,643
9,490
0
2,924
9,837
0
2,717
9,077
0
1,112
4,833
0
1,997
5,297
0
2,508
7,743
0
2,968
12,481
0
2,814
10,116
0
1,876
7,830
2,029
9,290
2,095
8,008
3,112
8,188
1,747
9,217
1,662
8,211
1,311
10,799
1,891
3,636
1,239
4,702
2,272
10,407
1,208
9,723
1,618
6,921
1. Transactions are market purchases and sales of securities as reported to the
Federal Reserve Bank of N e w York by the U . S . government securities dealers on
its published list of primary dealers.
Averages for transactions are based on the number of trading days in the period.
The figures exclude allotments of, and exchanges for, new U.S. Treasury
securities, redemptions of called or matured securities, purchases or sales of
securities under repurchase agreement, reverse repurchase (resale), or similar
contracts.
2. Data for immediate transactions do not include forward transactions.
3. Includes, among others, all other dealers and brokers in commodities and
securities, nondealer departments of commercial banks, foreign banking agencies,
and the Federal Reserve System.
4. Futures contracts are standardized agreements arranged on an organized
exchange in which parties commit to purchase or sell securities for delivery at a
future date.
5. Forward transactions are agreements arranged in the over-the-counter
market in which securities are purchased (sold) for delivery after 5 business days
from the date of the transaction for Treasury securities (Treasury bills, notes, and
bonds) or after 30 days for mortgage-backed agency issues.
A46
DomesticNonfinancialStatistics • April 1989
1.43 U.S. GOVERNMENT SECURITIES DEALERS
Positions and Financing1
Averages of daily figures, in millions of dollars
1988
Item
1986
1987
1989
1988
Jan.
D e c . 28 r
Jan. 4
Jan. 11
Jan. 18
Jan. 25
1989
1988 r
Nov.
Dec/
Positions
1
N e t immediate 2
U.S. Treasury securities
12,912
-6,216
-22,754
-24,048
-32,980
-32,135
-36,617
-37,430
-38,789
-28,110
-29,390
2
3
4
5
6
Bills
Other within 1 year
1-5 years
5 - 1 0 years
Over 10 years
12,761
3,705
9,146
-9,505
-3,197
4,317
1,557
649
-6,564
-6,174
2,247
-2,233
-3,019
-9,666
-10,082
329
-3,587
-1,334
-7,697
-11,759
-1,524
-1,939
-10,021
-7,115
-12,380
-3,421
-1,831
-10,076
-8,492
-8,316
-3,395
-1,728
-12,340
-7,841
-11,313
-5,041
-1,983
-10,639
-9,479
-10,288
-6,051
-1,559
-10,330
-11,393
-9,457
-2,411
-1,424
-9,048
-7,264
-7,963
-1,484
-1,962
-11,176
-7,410
-7,358
7
8
9
10
Federal agency securities
Certificates of deposit
Bankers acceptances
Commercial paper
Futures positions
Treasury bills
Treasury coupons
Federal agency securities
Forward positions
U . S . Treasury securities
Federal agency securities
32,984
10,485
5,526
8,089
31,911
8,188
3,660
7,496
28,230
7,300
2,486
6,152
32,172
8,445
2,579
5,957
27,283
8,767
2,128
9,363
26,586
6,812
2,236
8,618
24,238
8,858
2,157
11,426
23,407
9,120
2,124
11,476
25,624
7,361
2,262
8,137
27,542
6,487
2,441
9,242
27,081
6,072
2,122
8,112
-18,059
3,473
-153
-3,373
5,988
-95
-2,210
6,224
0
-1,878
5,875
0
1,014
6,611
0
-1,582
3,325
0
804
5,390
0
-272
6,319
0
-1,994
5,864
0
-1,962
2,801
0
-2,804
1,788
0
-2,144
-11,840
-1,211
-18,817
345
-16,348
-770
-16,959
-451
-12,847
57
-12,783
6
-10,832
121
-10,169
-198
-13,326
-462
-14,555
357
-12,467
11
12
li
14
15
Financing 3
Reverse repurchase agreements 4
Overnight and continuing
Term
Repurchase agreements
18
Overnight and continuing
19
Term
16
iy
98,913
108,607
126,709
148,288
136,327
177,477
143,423
205,634
147,712
202,052
121,612
159,767
140,953
209,170
154,812
175,141
145,671
199,354
145,077
190,511
151,458
208,025
141,823
102,397
170,763
121,270
172,695
137,056
173,173
165,035
183,081
145,045
155,641
111,476
177,749
150,729
189,331
115,741
185,493
135,047
193,810
131,848
191,920
154,157
1. Data for dealer positions and sources of financing are obtained from reports
submitted to the Federal Reserve Bank of N e w York by the U . S . Treasury
securities dealers on its published list of primary dealers.
Data for positions are averages of daily figures, in terms of par value, based on
the number of trading days in the period. Positions are net amounts and are shown
on a commitment basis. Data for financing are in terms of actual amounts
borrowed or lent and are based on Wednesday figures.
2. Immediate positions are net amounts (in terms of par values) of securities
o w n e d by nonbank dealer firms and dealer departments of commercial banks on
a commitment, that is, trade-date basis, including any such securities that have
been sold under agreements to repurchase (RPs). The maturities of some
repurchase agreements are sufficiently long, however, to suggest that the securities involved are not available for trading purposes. Immediate positions include
reverses to maturity, which are securities that were sold after having been
obtained under reverse repurchase agreements that mature on the same day as the
securities. Data for immediate positions d o not include forward positions.
3. Figures cover financing involving U . S . Treasury and federal agency securities, negotiable C D s , bankers acceptances, and commercial paper.
4. Includes all reverse repurchase agreements, including those that have been
arranged to make delivery on short sales and those for which the securities
obtained have been used as collateral on borrowings, that is, matched agreements.
5. Includes both repurchase agreements undertaken to finance positions and
"matched b o o k " repurchase agreements.
NOTE. Data on positions for the period May 1 to Sept. 30, 1986, are partially
estimated.
Federal Finance
1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES
A33
Debt Outstanding
Millions of dollars, end of period
1988
1984
Agency
1 Federal and federally sponsored agencies
2 Federal agencies
Defense Department 1
3
Export-Import Bank 2,
4
Federal Housing Administration
5
Government National Mortgage Association participation
6
certificates
Postal Service
7
Tennessee Valley Authority
8
United States Railway Association
9
10 Federally sponsored agencies 7
Federal Home Loan Banks
11
Federal Home Loan Mortgage Corporation
12
Federal National Mortgage Association
13
Farm Credit Banks 8
14
15
Student Loan Marketing Association
Financing Corporation
16
Farm Credit Financial Assistance Corporation 11
17
1985
1986
1987
Aug.
Sept.
Oct.
Nov.
Dec.
n.a.
271,220
293,905
307,361
341,386
360,004
363,894
364,491
390,639
35,145
142
15,882
133
36,390
71
15,678
115
36,958
33
14,211
138
37,981
13
11,978
183
35,694
11
11,232
115
35,448
11
10,964
120
35,070
8
10,964
118
35,209
8
10,964
139
35,668
8
11,033
150
2,165
1,337
15,435
51
2,165
1,940
16,347
74
2,165
3,104
17,222
85
1,615
6,103
18,089
0
0
5,842
18,494
0
0
5,842
18,511
0
0
5,842
18,138
0
0
5,842
18,256
0
0
6,142
18,335
0
237,012
65,085
10,270
83,720
72,192
5,745
n.a.
n.a.
257,515
74,447
11,926
93,896
68,851
8,395
n.a.
n.a.
270,553
88,752
13,589
93,563
62,478
12,171
n.a.
n.a.
303,405
115,725
17,645
97,057
55,275
16,503
1,200
n.a.
324,310
121,266
19,652
105,730
53,582
19,880
3,750
450
328,446
126,011
18,368
105,986
53,764
20,117
3,750
450
329,421
127,113
17,384
105,698
53,923
21,112
3,750
450
355,430
130,630
19,500
53,420
105,337
21,403
4,450
690
n.a.
135,834
n.a.
53,420
105,452
22,073
5,850
690
145,217
153,373
157,510
152,417
149,809
146,151
145,529
143,321
142,850
15,852
1,087
5,000
13,710
51
15,670
1,690
5,000
14,622
74
14,205
2,854
4,970
15,797
85
11,972
5,853
4,940
16,709
0
11,226
5,592
4,940
17,114
0
10,958
5,592
4,910
17,131
0
10,958
5,592
4,910
16,758
0
10,958
5,592
4,910
16,876
0
11,027
5,892
4,910
16,955
0
58,971
20,693
29,853
64,234
20,654
31,429
65,374
21,680
32,545
59,674
21,191
32,078
59,464
19,225
32,248
58,496
19,205
29,859
58,496
19,222
29,593
58,496
19,220
27,269
58,496
19,246
26,324
MEMO
18 Federal Financing Bank debt
19
7,0
2.1
22
23
Lending to federal and federally sponsored
Export-Import Bank 3
Postal Service
Student Loan Marketing Association
Tennessee Valley Authority
United States Railway Association
Other Lending13
74 Farmers Home Administration
75 Rural Electrification Administration
26 Other
agencies
1. Consists of mortgages assumed by the Defense Department between 1957
and 1963 under family housing and homeowners assistance programs.
2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976.
3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter.
4. Consists of debentures issued in payment of Federal Housing Administration
insurance claims. Once issued, these securities may be sold privately on the
securities market.
5. Certificates of participation issued before fiscal 1969 by the Government
National Mortgage Association acting as trustee for the Farmers Home Administration; Department of Health, Education, and Welfare; Department of Housing
and Urban Development; Small Business Administration; and the Veterans
Administration.
6. Off-budget.
7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Some data are estimated.
8. Excludes borrowing by the Farm Credit Financial Assistance Corporation,
shown in line 17.
9. Before late 1981, the Association obtained financing through the Federal
Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is
shown on line 21.
10. The Financing Corporation, established in August 1987 to recapitalize the
Federal Savings and Loan Insurance Corporation, undertook its first borrowing in
October 1987.
11. The Farm Credit Financial Assistance Corporation (established in January
1988 to provide assistance to the Farm Credit System) undertook its first
borrowing in July 1988.
12. The FFB, which began operations in 1974, is authorized to purchase or sell
obligations issued, sold, or guaranteed by other federal agencies. Since F F B
incurs debt solely for the purpose of lending to other agencies, its debt is not
included in the main portion of the table in order to avoid double counting.
13. Includes F F B purchases of agency assets and guaranteed loans; the latter
contain loans guaranteed by numerous agencies with the guarantees of any
particular agency being generally small. The Farmers Home Administration item
consists exclusively of agency assets, while the Rural Electrification Administration entry contains both agency assets and guaranteed loans.
A46
1.45
DomesticNonfinancialStatistics • April 1989
NEW SECURITY ISSUES
Tax-Exempt State and Local Governments
Millions of dollars
1988
Type of issue or issuer,
or use
1 All issues, new and refunding
1986
1
1987
1989
1988
June
July
Aug.
Sept.
Oct.
Nov.
Dec/
Jan.
10,455
8,551
11,268
6,324
147,011
102,407
108,078
13,912
9,746
6,966
9,669
46,346
100,664
30,589
71,818
29,662
78,417
4,237
9,675
1,959
7,788
2,472
4,494
2,370
7,299
2,058
8,397 r
2,368
6,183
2,491
8,777
1,709
4,615
Type of issuer
4 State
5 Special district and statutory authority 2
6 Municipalities, counties, and townships
14,474
89,997
42,541
10,102
65,460
26,845
9,254
69,447
29,377
1,349
8,629
3,934
140
6,752
2,854
576
3,749
2,641
1,206
6,407
2,056
734
7,283
2,438
525
5,550
2,476
1,011
7,690
2,567
232
4,620
1,472
7 Issues for new capital, total
83,492
56,789
75,064
8,935
8,386
5,317
7,076
6,965
5,830
8,738
4,185
Use of proceeds
Education
Transportation
Utilities and conservation
Social welfare
Industrial aid
Other purposes
12,307
7,246
14,594
11,353
6,190
31,802
9,524
3,677
7,912
11,106
7,474
18,020
13,722
6,974
7,929
17,824
6,276
22,339
1,320
858
635
2,060
434
3,628
1,699
1,446
225
1,222
128
3,666
694
265
613
1,242
460
2,043
1,351
732
694
2,358
280
1,661
512
559
1,238
2,478
393
1,785
827
237
1,055
1,991
294
1,426
2,564
636
463
2,072
1,010
1,993
829
344
1,368
531
246
867
Type of issue
2 General obligation
i Revenue
8
9
10
11
12
13
1. Par amounts of long-term issues based on date of sale.
2. Includes school districts beginning 1986.
1.46
NEW SECURITY ISSUES
SOURCES. Securities Data/Bond Buyer Municipal Data Base beginning 1986.
Public Securities Association for earlier data.
U.S. Corporations
Millions of dollars
1988
Type of issue or issuer,
or use
1986
1987
1988
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
1 All issues'
423,726
392,156
264,881
23,413
30,043
18,037
19,305
23,933
21,667 r
24,489 r
12,251
2 Bonds 2
355,293
325,648
222,425
19,382
25,748
12,899
15,970
20,928
18,88c
21,054'
10,200
Type of offering
3 Public, domestic
4 Private placement, domestic 3
5. Sold abroad
231,936
80,760
42,596
209,279
92,070
24,299
199,182
90,000
23,243
17,496
n.a.
1,886
22,753
n.a.
2,995
10,905
n.a.
1,994
14,631r
n.a.
1,339
18,240 r
n.a.
2,688 r
17,368'
n.a.
1,512
16,756r
n.a.
4,298'
10,000
n.a.
200
91,548
40,124
9,971
31,426
16,659
165,564
61,666
49,327
11,974
23,004
7,340
172,343
40,958
18,614
3,771
13,775
4,044
141,262
4,206
1,446
184
1,929
69
11,546
5,305
2,281
580
1,707
925
14,949
2,205 r
1.53C
100
540
577
7,948
3,476
2,226 r
0
298
29
9,94C
3,750'
1,035
150
856
1,064
14,072'
3,552
764'
605'
1,346
10C
12,513'
2.89C
3,26C
45
672'
289
13,899'
1,446
722
0
138
158
7,736
12 Stocks 3
68,433
66,508
42,456
4,031
4,295
5,138
3,335
3,005
2,787
3,435
2,051
Type
13 Preferred
14 Common
15 Private placement
11,514
50,316
6,603
10,123
43,225
13,157
6,544
35,911
n.a.
285
3,746
n.a.
501
3,794
n.a.
407
4,731
n.a.
498
2,837
n.a.
385
2,620
n.a.
865
1,922
n.a.
478
2,957'
n.a.
495
1,556
n.a.
15,027
10,617
2,427
4,020
1,825
34,517
13,880
12,888
2,439
4,322
1,458
31,521
6,115
4,766
845
1,581
448
28,701
1,080
157
15
59
78
2,642
1,676
522
51
207
13
1,826
2%
2,073
0
20
20
2,729
538
347
72
135
3
2,240
244
525
5
215
23
1,993
288
222
25
282
0
1,970
43C
52'
20
70
20
2,843 r
425
89
0
20
59
1,459
6
7
8
9
10
11
16
17
18
19
20
21
Industry group
Manufacturing
Commercial and miscellaneous
Transportation
Public utility
Communication
Real estate and financial
Industry group
Manufacturing
Commercial and miscellaneous
Transportation
Public utility
Communication
Real estate and financial
1. Figures which represent gross proceeds of issues maturing in more than one
year, are principal amount or number of units multiplied by offering price.
Excludes secondary offerings, employee stock plans, investment companies other
than closed-end, intracorporate transactions, equities sold abroad, and Yankee
bonds. Stock data include ownership securities issued by limited partnerships.
2. Monthly data include only public offerings.
3. Data are not available on a monthly basis. Before 1987, annual totals include
underwritten issues only.
SOURCES. IDD Information Services, Inc., U . S . Securities and Exchange
Commission and the Board of Governors of the Federal Reserve System.
Securities
1.47 OPEN-END INVESTMENT COMPANIES
Market
and Corporate
Finance
A35
Net Sales and Asset Position
Millions of dollars
1988
1987
Item
1988
May
June
July
Aug.
Sept.
Oct.
Nov/
Dec.
INVESTMENT COMPANIES1
1 Sales of own shares 2
381,260
271,237
19,579
22,503
20,728
20,595
19,872
20,494
20,327
25,780
2 Redemptions of own shares 3
3 N e t sales
314,252
67,008
267,451
3,786
21,412
-1,833
23,168
-665
20,561
167
22,837 r
-2,242
21,330
-1,458
19,362
1,132
20,599
-272
25,976
-1%
4 Assets 4
453,842
472,297
468,735
481,120
477,076
465,822
474,662
481,571
470,660
472,297
38,006
415,836
45,090
427,207
45,003
423,732
43,229
437,891
44,015
433,061
45,229
420,595
46,706
427,956
45,976
435,595
43,488
427,172
45,090
427,207
5 Cash position
6 Other
5
4. Market value at end of period, less current liabilities.
5. Also includes all U . S . government securities and other short-term debt
securities.
1. Data on sales and redemptions exclude money market mutual funds but
include limited maturity municipal bond funds. Data on asset positions exclude
both money market mutual funds and limited maturity municipal bond funds.
2. Includes reinvestment of investment income dividends. Excludes reinvestment of capital gains distributions and share issue of conversions from one fund
to another in the same group.
3. Excludes share redemption resulting from conversions from one fund to
another in the same group.
NOTE. Investment Company Institute data based on reports of members, which
comprise substantially all open-end investment companies registered with the
Securities and Exchange Commission. Data reflect newly formed companies after
their initial offering of securities.
1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION
Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1987
Account
1986
1 Corporate profits with inventory valuation and
capital consumption adjustment
Profits before tax
Profits tax liability
Profits after tax
Dividends
Undistributed profits
2
3
4
5
6
7 Inventory valuation
8 Capital consumption adjustment
SOURCE. Survey of Current Business
1987
1988
1988
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
298.9
236.4
106.6
129.8
88.2
41.6
310.4
276.7
133.8
142.9
95.5
47.4
323.8
302.1
140.9
161.3
104.5
56.8
298.3
261.8
126.3
135.5
91.7
43.8
305.2
273.7
132.6
141.1
94.0
47.0
322.0
289.4
140.0
149.5
97.0
52.4
316.1
281.9
136.2
145.7
99.3
46.4
316.2
286.2
136.9
149.4
101.3
48.1
326.5
305.9
143.2
162.7
103.1
59.6
330.0
313.9
144.8
169.1
105.7
63.4
n.a.
n.a.
n.a.
n.a.
108.0
n.a.
8.3
54.2
-18.0
51.7
-23.9
45.6
-14.4
50.8
-20.0
51.5
-19.5
52.1
-18i2
52.4
-19.4
49.4
-27.4
48.0
-29.3
45.4
-19.6
39.7
(Department of Commerce).
1.50 TOTAL NONFARM BUSINESS EXPENDITURES on New Plant and Equipment •
Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1987
Industry
1 Total nonfarm business
Manufacturing
2 Durable goods industries
3 Nondurable goods industries
Nonmanufacturing
4 Mining
Transportation
5
Railroad
6
Air
7
Other
Public utilities
8
Electric
9
Gas and other
10 Commercial and o t h e r
1986
1987
1989
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
379.47
389.67
430.95
380.66
394.54
406.82
412.02
426.94
436.01
445.73
466.76
69.14
73.56
71.01
74.88
78.06
85.50
69.05
72.66
71.96
76.24
72.28
79.92
75.70
82.90
76.87
84.82
79.48
89.43
78.97
90.00
84.25
93.56
11.22
11.39
12.62
11.02
11.81
12.32
12.59
13.26
12.47
11.97
11.62
6.66
6.26
5.89
5.92
6.53
6.40
7.05
7.61
6.91
5.84
6.02
6.26
6.07
6.15
6.97
6.12
6.94
6.28
6.92
6.43
7.08
7.01
6.66
7.05
6.84
8.06
7.26
8.07
6.84
7.20
9.26
10.07
7.58
33.91
12.47
160.38
31.63
13.25
168.65
32.20
14.27
186.74
31.47
12.47
165.86
31.57
13.73
170.05
32.28
14.11
176.56
30.31
14.30
175.79
30.95
14.48
185.83
32.20
14.50
185.76
33.54
15.25
193.87
32.69
16.66
201.07
ATrade and services are no longer being reported separately. They are included
in Commercial and other, line 10.
1. Anticipated by business.
1988
1988
2. "Other" consists of construction; wholesale and retail trade; finance and
insurance; personal and business services; and communication.
SOURCE. Survey of Current Business (Department of Commerce).
A46
DomesticNonfinancialStatistics • April 1989
Assets and Liabilities1
1.51 DOMESTIC FINANCE COMPANIES
Billions of dollars, end of period
1986
Account
1983
1984
1987
1985
Q2
Q3
Q4
Ql
Q2
Q3
Q4
ASSETS
Accounts receivable, gross
1 Consumer
2 Business
Real estate
Total
4
83.3
113.4
20.5
217.3
89.9
137.8
23.8
251.5
111.9
157.5
28.0
297.4
123.4
166.8
29.8
320.0
135.3
159.7
31.0
326.0
134.7
173.4
32.6
340.6
131.1
181.4
34.7
347.2
134.7
188.1
36.5
359.3
141.6
188.3
38.0
367.9
141.1
207.6
39.5
388.2
30.3
3.7
33.8
4.2
39.2
4.9
40.7
5.1
42.4
5.4
41.5
5.8
40.4
5.9
41.2
6.2
42.5
6.5
45.3
6.8
7 Accounts receivable, net
8 All other
183.2
34.4
213.5
35.7
253.3
45.3
274.2
49.5
278.2
60.0
293.3
58.6
300.9
59.0
311.9
57.7
318.9
64.5
336.1
58.2
9 Total assets
217.6
249.2
298.6
323.7
338.2
351.9
359.9
369.6
383.4
394.3
18.3
60.5
20.0
73.1
18.0
99.2
16.3
108.4
16.8
112.8
18.6
117.8
17.2
119.1
17.3
120.4
15.9
124.2
16.4
128.4
11.1
67.7
31.2
28.9
12.9
77.2
34.5
31.5
12.7
94.4
41.5
32.8
15.8
106.9
40.9
35.4
16.4
111.7
45.0
35.6
17.5
117.5
44.1
36.4
21.8
118.7
46.5
36.6
24.8
121.8
49.1
36.3
26.9
128.2
48.6
39.5
28.0
137.1
52.8
31.5
217.6
249.2
298.6
323.7
338.2
351.9
359.9
369.6
383.4
394.3
Less:
5 Reserves for unearned income
6 Reserves for losses
LIABILITIES
10 Bank loans
11 Commercial paper
Debt
Other short-term
12
Long-term
13
All other liabilities
14
15 Capital, surplus, and undivided profits
16 Total liabilities and capital
1. NOTE. Components may not add to totals because of rounding.
1.52 DOMESTIC FINANCE COMPANIES
Business Credit Outstanding and Net Change1
Millions of dollars, seasonally adjusted
1988
Type
1 Total
2
3
4
5
6
7
8
9
10
Retail financing of installment sales
Automotive (commercial vehicles)
Business, industrial, and farm equipment
Wholesale financing
Automotive
Equipment
All other
Leasing
Automotive
Equipment
Loans on commercial accounts receivable and factored
commercial accounts receivable
All other business credit
1985
1986
1987
July
Aug.
Sept.
Oct.
Nov.
Dec.
156,297
171,966
205,869
223,706
223,958
230,474
231,807
234,059
234,808
20,660
22,483
25,952
22,950
35,674
24,987
37,682
27,428
37,519
27,603
37,120
27,569
37,359
27,841
36,984
28,160
37,067
27,919
23,988
4,568
6,809
23,419
5,423
7,079
31,059
5,693
8,408
28,449
5,654
8,458
27,721
5,803
8,531
32,732
5,949
8,738
32,523
5,888
8,867
32,523
6,045
9,025
33,879
6,083
9,278
16,275
34,768
19,783
37,833
21,943
43,002
24,400
52,803
24,370
53,671
23,861
55,400
24,186
55,786
24,623
56,294
24,639
58,147
15,765
10,981
15,959
13,568
18,024
17,079
19,095
19,736
19,132
19,609
19,386
19,719
19,239
20,117
19,616
20,790
18,133
19,664
Net change (during period)
11
12
13
14
15
16
17
18
19
20
Retail financing of installment sales
Automotive (commercial vehicles)
Business, industrial, and farm equipment
Wholesale financing
Automotive
Equipment
All other
Leasing
Automotive
Equipment
Loans on commercial accounts receivable and factored
commercial accounts receivable
All other business credit
19,607
15,669
3,040
1,573
252
6,515
1,333
2,252
749
5,067
-363
5,292
467
1,220
223
163
-120
-163
175
-399
-35
239
272
-375
319
83
-240
5,423
-867
1,069
-569
855
270
158
-101
257
-282
97
-23
-728
149
73
5,011
146
207
-208
-60
129
0
157
158
1,355
38
253
3,8%
2,685
3,508
3,065
-70
1,038
324
438
-30
867
-509
1,729
325
386
436
508
16
1,853
2,161
536
194
2,587
-477
792
500
476
37
-127
255
110
-148
398
377
673
-1,483
-1,126
1. These data also appear in the Board's G.20 (422) release. For address, see
inside front cover.
Real Estate
1.53
A37
MORTGAGE MARKETS
Millions of dollars; exceptions noted.
1988
Item
July
Aug.
Sept.
Oct.
Nov
Terms and yields in primary and secondary markets
PRIMARY MARKETS
1
2
3
4
5
6
Conventional mortgages on new homes
Terms1
Purchase price (thousands of dollars)
Amount of loan (thousands of dollars)
Loan/price ratio (percent)
Maturity (years)
Fees and charges (percent of loan amount) 2
Contract rate (percent per year)
Yield (percent per
7 F H L B B series 5
8 H U D series 4
118.1
86.2
75.2
26.6
2.48
9.82
137.0
100.5
75.2
27.8
2.26
8.94
150.0
110.5
75.5'
28.0
2.19
8.81
152.9
111.9
75.2
28.4
2.24
8.80
154.2
114.9
76.7
28.5
2.35
8.68
148.3
109.8
75.4
27.6
2.14
8.90
153.8
114.0
75.8
28.4
1.98
8.77
155.3
115.6
76.1
28.4
2.28
9.05
150.0'
110.8'
75.6'
28.3
2.08
9.04'
156.2
115.8
75.6
28.8
1.93
9.23
10.26
10.07
9.31
10.17
9.18
10.30'
9.17
10.47
9.06
10.55
9.26
10.39
9.10
10.21
9.43
10.37
9.39'
10.67
9.55
n.a.
9.91
9.30
10.16
9.43
10.49''
9.83
10.66
9.91
10.74
10.09
10.58
9.93
10.23
9.77
10.63
9.85
10.81
10.07
n.a.
10.02
year)
SECONDARY MARKETS
Yield (percent per year)
9 F H A mortgages ( H U D series) 3
10 G N M A securities 6
Activity in secondary markets
F E D E R A L N A T I O N A L MORTGAGE ASSOCIATION
Mortgage holdings (end of
11 Total
FHA/V A-insured
12
13
Conventional
Mortgage transactions
14 Purchases
period)
(during
98,048
29,683
68,365
95,030
21,660
73,370
101,329
19,762
81,567
102,540
19,677
82,864
102,540
19,586
82,954
102,453
19,526
82,927
102,493
19,464
83,032
102,6%
19,467
83,228
103,013
19,415
83,598
102,370
19,354
83,016
30,826
20,531
23,110
1,960
1,638
1,111
1,488
1,5%
1,726
1,037
32,987
3,386
25,415
4,886
23,435
2,148
1,108
4,277
1,041
3,135
1,439
3,257
1,740
3,165
1,289
2,740
1,350
2,148
1,087
2,081
13,517
746
12,771
12,802
686
12,116
n.a.
n.a.
n.a.
15,133
619
14,514
15,142
611
14,531
15,442
606
14,836
15,669
601
15,068
15,419
595
14,824
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
103,474
100,236
76,845
75,082
3,879
4,115
3,858
3,719
4,192
3,728
4,037
3,674
4,109
4,231'
n.a.
5,246
n.a.
n.a.
110,855
71,467
5,328
3,480
6,209
4,406
5,419
n.a.
n.a.
period)
7
Mortgage
commitments
15 Contracted (during period)
16 Outstanding (end of period)
F E D E R A L H O M E L O A N MORTGAGE CORPORATION
Mortgage
17
18
19
holdings (end of
periodf
FHA/VA
Conventional
Mortgage transactions
20 Purchases
21
(during
Mortgage
commitments9
22 Contracted (during period)
period)
1. Weighted averages based on sample surveys of mortgages originated by
major institutional lender groups; compiled by the Federal Home Loan Bank
Board in cooperation with the Federal Deposit Insurance Corporation.
2. Includes all fees, commissions, discounts, and "points" paid (by the
borrower or the seller) to obtain a loan.
3. Average effective interest rates on loans closed, assuming prepayment at the
end of 10 years.
4. Average contract rates on new commitments for conventional first mortgages; from Department of Housing and Urban Development.
5. Average gross yields on 30-year, minimum-downpayment, Federal Housing
Administration-insured first mortgages for immediate delivery in the private
secondary market. Based on transactions on first day of subsequent month. Large
monthly movements in average yields may reflect market adjustments to changes
in maximum permissable contract rates.
n.a.
39,516'
n.a.
6. Average net yields to investors on Government National Mortgage Association guaranteed, mortgage-backed, fully modified pass-through securities, assuming prepayment in 12 years on pools of 30-year F H A / V A mortgages carrying
the prevailing ceiling rate. Monthly figures are averages of Friday figures from the
Wall Street Journal.
7. Includes some multifamily and nonprofit hospital loan commitments in
addition to 1- to 4-family loan commitments accepted in F N M A ' s free market
auction system, and through the F N M A - G N M A tandem plans.
8. Includes participation as well as whole loans.
9. Includes conventional and government-underwritten loans. FHLMC's mortgage commitments and mortgage transactions include activity under mortgage/
securities swap programs, while the corresponding data for F N M A exclude swap
activity.
A46
DomesticNonfinancialStatistics • April 1989
1.54 MORTGAGE DEBT OUTSTANDING 1
Millions of dollars, end of period
1987
Type of holder, and type of property
1985
1986
1988
1987
Q3
Q4
Q1
Q2
Q3
1 AU holders
2,289,843
2,597,175
2,943,144
2,864,736
2,943,144
2,988,100
3,067,566
3,151,956
2
3
4
5
1,488,009
214,470
481,514
105,850
1,698,524
247,831
555,039
95,781
1,925,197
273,830
655,249
88,868
1,870,635
268,911
635,230
89,960
1,925,197
273,830
655,249
88,868
1,955,770
277,622
666,521
88,187
2,015,646
282,511
681,478
87,931
2,079,706
286,918
697,919
87,413
1,390,394
429,196
213,434
23,373
181,032
11,357
1,507,289
502,534
235,814
31,173
222,799
12,748
1,700,820
591,151
275,761
33,2%
267,663
14,431
1,648,328
567,000
263,762
32,114
256,981
14,143
1,700,820
591,151
275,761
33,296
267,663
14,431
1,723,737
604,403
280,439
33,640
275,535
14,789
1,773,444
628,132
291,767
34,672
286,366
15,327
1,827,383
653,288
304,029
35,936
297,880
15,443
760,499
554,301
89,739
115,771
688
171,797
12,381
19,894
127,670
11,852
28,902
777,312
558,412
97,059
121,236
605
193,842
12,827
20,952
149,111
10,952
33,601
856,945
598,886
106,359
150,943
838,737
583,432
104,609
149,938
856,945
598,886
106,359
150,943
863,110
603,532
107,687
151,136
881,924
622,863
109,108
149,201
905,372
644,676
109,800
150,144
212,375
13,226
22,524
166,722
9,903
40,349
204,263
12,742
21,968
159,464
10,089
38,328
212,375
13,226
22,524
166,722
9,903
40,349
214,815
13,653
22,723
168,774
9,665
41,409
220,870
14,172
23,021
174,086
9,591
42,518
225,245
14,892
23,100
178,012
9,241
43,478
166,928
1,473
539
934
733
183
113
159
278
203,800
889
47
842
48,421
21,625
7,608
8,446
10,742
192,721
444
25
419
43,051
18,169
8,044
6,603
10,235
191,520
458
25
433
42,978
18,111
7,903
6,592
10,372
192,721
444
25
419
43,051
18,169
8,044
6,603
10,235
196,909
434
25
409
43,076
18,185
8,115
6,640
10,136
199,474
42
24
18
42,767
18,248
8,213
6,288
10,018
197,885
43
24
19
41,836
18,268
8,349
5,300
9,919
Federal Housing and Veterans Administration
1- to 4-family
Multifamily
Federal National Mortgage Association
1- to 4-family
Multifamily
Federal Land Banks
1- to 4-family
Farm
Federal Home Loan Mortgage Corporation ..
1- to 4-family
Multifamily
4,920
2,254
2,666
98,282
91,966
6,316
47,498
2,798
44,700
14,022
11,881
2,141
5,047
2,386
2,661
97,895
90,718
7,177
39,984
2,353
37,631
11,564
10,010
1,554
5,574
2,557
3,017
96,649
89,666
6,983
34,131
2,008
32,123
12,872
11,430
1,442
5,330
2,452
2,878
94,884
87,901
6,983
34,930
2,055
32,875
12,940
11,570
1,370
5,574
2,557
3,017
96,649
89,666
6,983
34,131
2,008
32,123
12,872
11,430
1,442
5,660
2,608
3,052
99,787
92,828
6,959
33,566
1,975
31,591
14,386
12,749
1,637
5,673
2,564
3,109
102,368
95,404
6,964
33,048
1,945
31,103
15,576
13,631
1,945
5,545
2,445
3,100
102,453
95,417
7,036
32,566
1,917
30,649
15,442
13,589
1,853
44 Mortgage pools or trusts 6
45
Government National Mortgage Association..
46
1- to 4-family
47
Multifamily
48
Federal Home Loan Mortgage Corporation ..
49
1- to 4-family
50
Multifamily
51
Federal National Mortgage Association
52
1- to 4-family
53
Multifamily
54
Farmers Home Administration
55
1- to 4-family
56
Multifamily
57
Commercial
58
Farm
439,058
212,145
207,198
4,947
100,387
99,515
872
54,987
54,036
951
47,523
22,186
6,675
8,190
10,472
565,428
262,697
256,920
5,777
171,372
166,667
4,705
97,174
95,791
1,383
348
142
718,297
317,555
309,806
7,749
212,634
205,977
6,657
139,960
137,988
1,972
245
121
692,944
308,339
300,815
7,524
208,872
202,308
6,564
130,540
128,770
1,770
333
144
718,297
317,555
309,806
7,749
212,634
205,977
6,657
139,960
137,988
1,972
245
121
736,344
322,976
315,095
7,881
214,724
208,138
6,586
145,242
142,330
2,912
172
65
754,045
322,616
314,728
7,888
216,155
209,702
6,453
157,438
153,253
4,185
106
23
782,093
332,926
324,469
8,457
220,683
214,063
6,620
167,170
162,228
4,942
106
27
132
74
63
61
124
65
63
61
58
49
41
42
38
41
7
293,463
162,419
55,849
48,692
26,503
320,658
177,374
66,940
53,315
23,029
331,306
171,325
75,368
63,255
21,358
331,944
173,360
74,795
62,131
21,658
331,306
171,325
75,368
63,255
21,358
331,110
169,509
76,021
64,378
21,202
340,603
177,074
76,935
65,4%
21,098
344,595
178,976
77,706
66,545
21,368
1- to 4-family
Multifamily
Commercial
Farm
6 Selected financial institutions
7
Commercial banks 2
8
1- to 4-family
9
Multifamily
10
Commercial
11
Farm
12
13
14
15
16
17
18
19
20
21
22
Savings institutions 3
1- to 4-family
Multifamily
Commercial
Farm
Life insurance companies
1- to 4-family
Multifamily
Commercial
Farm
.
Finance companies
23 Federal and related agencies
24
Government National Mortgage Association..
25
1- to 4-family
26
Multifamily
27
Farmers Home Administration
28
1- to 4-family
29
Multifamily
30
Commercial
31
Farm
32
33
34
35
36
37
38
39
40
41
42
43
59 Individuals and others
60
1- to 4-family
61
Multifamily
62
Commercial
63
Farm
1. Based on data from various institutional and governmental sources, with
some quarters estimated in part by the Federal Reserve. Multifamily debt refers
to loans on structures of five or more units.
2. Includes loans held by nondeposit trust companies but not bank trust
departments.
3. Includes savings banks and savings and loan associations. Beginning 1987:1,
data reported by FSLIC-insured institutions include loans in process and other
contra assets (credit balance accounts that must be subtracted from the corresponding gross asset categories to yield net asset levels).
4. Assumed to be entirely 1- to 4-family loans.
5. FmHA-guaranteed securities sold to the Federal Financing Bank were
reallocated from FmHA mortgage pools to F m H A mortgage holdings in 1986:4,
because of accounting changes by the Farmers Home Administration.
6. Outstanding principal balances of mortgage pools backing securities insured
or guaranteed by the agency indicated.
7. Other holders include mortgage companies, real estate investment trusts,
state and local credit agencies, state and local retirement funds, noninsured
pension funds, credit unions, and other U . S . agencies.
Consumer Installment Credit
A39
1.55 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net Change, seasonally adjusted
Millions of dollars
1988
Holder, and type of credit
1987
1988
Apr.
May
June
July
Oct.
Nov/
Dec.
653,319
657,226
661,889
667,328
Sept.
Aug.
Amounts outstanding (end of period)
1
613,022
667,328
633,336
636,318
644,372
647,993
653,317
By major holder
Commercial banks
Finance companies
Credit unions
Retailers 3
Savings institutions
Gasoline companies
281,564
140,072
81,065
42,782
63,949
3,590
320,226
143,523
86,070
45,370
68,482
3,657
293,166
144,516
83,204
43,295
65,387
3,769
295,546
144,454
83,881
43,162
65,509
3,765
300,275
144,748
84,912
43,450
67,274
3,713
303,189
143,812
85,468
43,634
68,182
3,707
307,119
143,962
85,881
43,712
68,909
3,735
308,960
142,723
85,553
43,956
68,462
3,665
312,968
142,480
86,024
44,250
67,845
3,658
317,128
142,226
86,102
44,644
68,140
3,648
320,226
143,523
86,070
45,370
68,482
3,657
By major type of credit
S Automobile
9
Commercial banks
Credit unions
10
Finance companies
11
12
Savings institutions
267,180
108,438
43,474
98,026
17,242
290,434
126,693
48,243
96,368
19,130
278,567
114,868
45,293
100,564
17,841
279,418
115,951
45,831
99,708
17,928
282,254
117,322
46,565
99,900
18,465
283,359
118,650
47,043
98,896
18,770
285,560
120,380
47,444
98,711
19,026
284,782
121,450
47,436
96,939
18,958
286,107
122,995
47,870
96,400
18,842
287,474
124,583
48,088
95,825
18,979
290,434
126,693
48,243
96,368
19,130
13 Revolving
14
Commercial banks
15
Retailers
Gasoline companies
16
17
Savings institutions
Credit unions
18
159,307
98,808
36,959
3,590
13,279
6,671
185,870
117,137
39,095
3,657
16,516
9,465
167,356
104,250
37,414
3,769
14,309
7,614
169,154
105,742
37,259
3,765
14,518
7,870
172,809
108,309
37,526
3,713
15,098
8,162
174,927
109,645
37,671
3,707
15,492
8,413
177,568
111,623
37,708
3,735
15,850
8,652
178,675
112,341
37,914
3,665
15,938
8,816
181,277
114,404
38,169
3,658
15,984
9,063
184,467
116,824
38,481
3,648
16,244
9,270
185,870
117,137
39,095
3,657
16,516
9,465
19 Mobile home
Commercial banks
20
Finance companies
21
22
Savings institutions
25,957
9,101
7,771
9,085
25,610
8,825
7,210
9,574
25,764
9,047
7,575
9,142
25,703
8,966
7,578
9,159
25,852
8,933
7,513
9,406
25,882
8,913
7,436
9,533
25,915
8,893
7,387
9,634
25,746
8,833
7,341
9,572
25,776
9,048
7,243
9,485
25,830
9,079
7,224
9,527
25,610
8,825
7,210
9,574
23 Other
24
Commercial banks
25
Finance companies
26
Credit unions
27
Retailers
Savings institutions
28
160,578
65,217
34,275
30,920
5,823
24,343
165,415
67,572
39,945
28,362
6,275
23,261
161,649
65,001
36,376
30,297
5,880
24,095
162,043
64,887
37,168
30,180
5,903
23,904
163,456
65,710
37,335
30,184
5,923
24,305
163,825
65,981
37,480
30,012
5,964
24,388
164,274
66,222
37,863
29,785
6,004
24,399
164,116
66,335
38,443
29,302
6,041
23,995
164,066
66,522
38,837
29,091
6,081
23,534
164,117
66,642
39,177
28,745
6,163
23,390
165,415
67,572
39,945
28,362
6,275
23,261
1 Total
2
3
4
5
6
7
Net change (during period)
41,189
54,306
3,851
2,982
8,054
3,621
5,324
2
3,907
4,663
5,439
By major holder
Commercial banks
Finance companies
Credit unions
Retailers
Savings institutions
Gasoline companies
19,425
6,374
4,874
3,122
7,068
326
38,662
3,451
5,005
2,588
4,533
67
2,335
463
609
24
309
112
2,380
-62
677
-133
122
-4
4,729
294
1,031
288
1,765
-52
2,914
-936
556
184
908
-6
3,930
150
413
78
727
28
1,841
-1,239
-328
244
-447
-70
4,008
-243
471
294
-617
-7
4,160
-254
78
394
295
-10
3,098
1,297
-32
726
342
9
By major type of credit
36 Automobile
37
Commercial banks
Credit unions
38
39
Finance companies
Savings institutions
40
21,071
7,531
5,061
5,676
2,803
23,254
18,255
4,769
-1,658
1,888
1,805
1,275
498
-105
136
851
1,083
538
-856
87
2,836
1,371
734
192
537
1,105
1,328
478
-1,004
305
2,201
1,730
401
-185
256
-778
1,070
-8
-1,772
-68
1,325
1,545
434
-539
-116
1,367
1,588
218
-575
137
2,960
2,110
155
543
151
41 Revolving
42
Commercial banks
Retailers
43
44
Gasoline companies
Savings institutions
45
Credit unions
46
22,926
12,051
2,639
326
4,913
2,997
26,563
18,329
2,136
67
3,237
2,794
1,713
1,098
6
112
250
246
1,798
1,492
-155
-4
209
256
3,655
2,567
267
-52
580
292
2,118
1,336
145
-6
394
251
2,641
1,978
37
28
358
239
1,107
718
206
-70
88
164
2,602
2,063
255
-7
46
247
3,190
2,420
312
-10
260
207
1,403
313
614
9
272
195
47 Mobile home
48
Commercial banks
Finance companies
49
Savings institutions
50
-926
175
-1,051
-50
-347
-276
-561
489
32
54
-65
43
-61
-81
3
17
149
-33
-65
247
30
-20
-77
127
33
-20
-49
101
-169
-60
-46
-62
30
215
-98
-87
54
31
-19
42
-220
-254
-14
47
51 Other
52
Commercial banks
Finance companies
53
Credit unions
54
Retailers
55
Savings institutions
56
-1,882
-332
1,749
-3,184
483
-598
4,837
2,355
5,670
-2,558
452
-1,082
301
-93
632
-135
17
-121
394
-114
792
-117
23
-191
1,413
823
167
4
20
401
369
271
145
-172
41
83
449
241
383
-227
40
11
-158
113
580
-483
37
-404
-50
187
394
-211
40
-461
51
120
340
-346
82
-144
1,298
930
768
-383
112
-129
29 Total
30
31
32
33
34
35
1. The Board's series cover most short- and intermediate-term credit extended
to individuals that is scheduled to be repaid (or has the option of repayment) in
two or more installments.
These data also appear in the Board's G.19 (421) release. For address, see
inside front cover.
2. More detail for finance companies is available in the G. 20 statistical release.
3. Excludes 3 0 - d a y charge credit held by travel and entertainment companies.
A46
DomesticNonfinancialStatistics • April 1989
1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1
Percent unless noted otherwise
1988
Item
1986
1987
1988
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
INTEREST RATES
1
1
i
4
5
6
Commercial banks 2
48-month new car 3
24-month personal
120-month mobile home 3
Credit card
Auto finance companies
N e w car
Used car
11.33
14.83
13.99
18.26
10.45
14.23
13.38
17.92
10.86
14.68
13.54
17.78
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
10.93
14.81
13.62
17.79
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
11.22
15.06
13.61
17.77
n.a.
n.a.
n.a.
n.a.
9.44
15.95
10.73
14.60
12.60
15.11
12.32
14.83
12.44
14.99
12.64
15.16
12.93
15.46
13.10
15.67
13.20
15.75
13.25
15.80
50.0
42.6
53.5
45.2
56.2
46.7
56.3
46.9
56.4
46.8
56.5
46.8
56.3
46.5
56.3
46.3
56.2
46.2
56.3
46.0
91
97
93
98
94
98
94
99
94
99
94
98
94
98
94
99
94
98
94
98
10,665
6,555
11,203
7,420
11,663
7,824
11,626
7,899
11,663
7,947
11,593
7,918
11,530
7,903
11,845
7,944
11,975
7,991
12,068
8,022
OTHER TERMS4
7
8
9
10
11
12
Maturity (months)
N e w car
Used car
Loan-to-value ratio
N e w car
Used car
Amount financed (dollars)
N e w car
Used car
1. These data also appear in the Board's G.19 (421) release. For address, see
inside front cover.
2. Data for midmonth of quarter only.
3. Before 1983 the maturity for new car loans was 36 months, and for mobile
home loans was 84 months.
4. At auto finance companies.
Flow of Funds
1.57
A41
F U N D S RAISED IN U.S. CREDIT MARKETS
Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1987
Transaction category, sector
1983
1984
1985
1986
1988
1987
Ql
Q2
Q3
Q4
Ql
Q2
Q3
Nonfinancial sectors
1 Total net borrowing by domestic nonfinancial sectors
546.8
750.8
846.3
830.6
680.6
552.0
751.7
652.1
766.8
731.8
704.0
760.4
By sector and instrument
2 U . S . government
3
Treasury securities
4
Agency issues and mortgages
186.6
186.7
-.1
198.8
199.0
-.2
223.6
223.7
-.1
215.0
214.7
.4
143.8
142.3
1.5
161.6
157.7
3.9
145.2
147.1
-1.9
101.8
102.7
-.9
166.7
161.8
5.0
226.3
226.8
-.5
87.6
79.8
7.7
195.5
174.6
20.9
5 Private domestic nonfinancial sectors
6
Debt capital instruments
7
Tax-exempt obligations
8
Corporate bonds
9
Mortgages
10
Home mortgages
11
Multifamily residential
12
Commercial
Farm
13
360.2
257.6
53.7
16.0
187.9
120.4
14.1
51.0
2.4
552.0
319.3
50.4
46.1
222.8
136.7
25.2
62.2
-1.2
622.7
452.3
136.4
73.8
242.2
156.8
29.8
62.2
-6.6
615.6
460.7
30.8
121.3
308.6
210.9
33.5
73.6
-9.5
536.8
446.1
34.5
99.9
311.6
221.7
24.3
72.0
-6.4
390.3
473.3
38.7
128.9
305.7
224.2
27.4
66.5
-12.4
606.4
466.7
33.1
88.5
345.1
243.5
30.9
77.2
-6.6
550.3
428.1
32.7
100.7
294.7
212.1
23.1
64.1
-4.7
600.1
416.1
33.5
81.6
301.1
206.9
15.9
80.2
-1.9
505.6
363.3
24.8
101.3
237.1
177.9
21.4
43.2
-5.4
616.5
452.2
32.6
118.4
301.2
228.0
14.0
60.8
-1.6
564.9
457.1
44.4
90.8
322.0
210.1
33.5
72.7
5.7
14
15
16
17
18
Other debt instruments
Consumer credit
Bank loans n.e.c
Open market paper
Other
102.6
49.0
23.2
-.8
31.3
232.7
81.6
67.1
21.7
62.2
170.3
82.5
38.6
14.6
34.6
154.9
54.4
69.3
-9.3
40.5
90.7
40.7
8.8
2.3
38.9
-83.0
-.3
-107.8
-.5
25.5
139.7
52.4
36.6
4.7
46.1
122.2
61.4
21.0
1.0
38.7
184.0
49.4
85.3
3.9
45.5
142.3
34.8
40.4
-3.8
70.9
164.2
59.5
74.2
4.0
26.6
107.8
43.3
2.6
11.1
50.7
19
20
21
22
23
24
25
B y borrowing sector
State and local governments
Households
Nonfinancial business
Farm
Nonfarm noncorporate
Corporate
360.2
34.0
186.1
140.1
3.9
81.9
54.4
552.0
27.4
231.5
293.1
-.4
123.2
170.3
622.7
91.8
283.6
247.3
-14.5
129.3
132.4
615.6
44.3
286.1
285.1
-16.3
127.6
173.8
536.8
34.4
261.5
240.8
-11.2
115.8
136.3
390.3
37.0
197.3
156.0
-23.5
108.4
71.2
606.4
31.4
302.7
272.4
-12.7
125.7
159.4
550.3
34.8
281.2
234.2
-9.4
105.4
138.3
600.1
34.6
264.9
300.7
.8
123.8
176.1
505.6
22.3
220.0
263.3
-12.5
91.0
184.9
616.5
31.1
288.0
297.3
-3.6
87.1
213.9
564.9
41.3
250.9
272.7
1.3
120.3
151.1
17.3
3.1
3.6
6.5
4.1
8.4
3.8
-6.6
6.2
5.0
1.2
3.8
-2.8
6.2
-5.9
9.6
3.0
-1.0
11.5
-3.9
4.3
6.8
-3.6
2.1
-1.0
-8.7
3.0
-1.2
-4.2
-6.4
-.1
-4.1
-3.5
-6.4
13.9
12.3
6.7
-3.7
21.6
-12.3
13.9
21.6
-6.1
-2.5
.8
-1.0
16.8
.7
1.5
-19.9
4.9
-2.9
-3.5
6.4
4.9
9.7
7.4
.3
10.7
-8.8
564.1
759.2
847.5
840.2
685.0
543.3
751.6
664.3
780.7
730.9
709.0
770.1
26 Foreign net borrowing in United States
27
Bonds
28
Bank loans n.e.c
Open market paper
29
30
U . S . government loans
31 Total domestic plus foreign
Financial sectors
32 Total net borrowing by financial sectors
By instrument
33 U . S . government related
Sponsored credit agency securities
34
35
Mortgage pool securities
36
37 Private financial sectors
Corporate bonds
38
39
Mortgages
40
Bank loans n.e.c
41
Open market paper
42
Loans from Federal Home Loan Banks
By sector
43
44
45
46
47
48
49
50
51
52
Sponsored credit agencies
Mortgage pools
Private financial sectors
Commercial banks
Bank affiliates
Savings and loan associations
Finance companies
REITs
CMO Issuers
99.2
148.7
198.3
297.2
303.1
340.0
316.7
306.4
249.2
218.9
250.1
249.1
67.8
1.4
66.4
74.9
30.4
44.4
193.5
-4.4
200.7
-2.9
146.5
103.2
.4
-9.5
41.5
11.0
196.8
21.5
175.4
-.1
119.9
45.6
.1
.6
54.0
19.6
137.4
56.8
80.5
84.7
9.4
75.3
140.2
42.8
97.4
120.8
77.7
.2
6.3
14.3
22.2
81.7
41.8
.4
-10.7
5.4
44.9
81.6
74.7
.2
-26.8
28.0
5.4
165.4
67.9
108.9
65.9
-.1
21.3
-7.0
185.8
30.2
156.4
-.7
117.2
67.1
.3
-3.3
28.8
24.4
167.5
71.6
95.9
73.8
33.0
.4
.7
24.1
15.7
178.1
15.2
163.3
-.4
119.1
70.9
.1
4.0
24.2
19.8
185.5
32.0
153.5
31.4
17.3
101.5
20.6
79.9
1.1
96.7
47.9
.1
2.6
32.0
14.2
8.7
78.7
10.1
-4.9
21.3
26.6
99.2
148.7
198.3
297.2
303.1
340.0
316.7
306.4
249.2
218.9
250.1
249.1
1.4
66.4
31.4
5.0
12.1
-2.1
13.0
-.2
3.6
30.4
44.4
73.8
7.3
15.6
22.7
18.2
.8
9.3
21.7
79.9
96.7
-4.9
14.5
22.3
52.7
.5
11.5
14.9
163.3
119.1
-3.6
4.6
29.8
48.4
1.0
39.0
29.5
156.4
117.2
7.1
2.9
36.0
30.6
1.5
39.1
-7.2
200.7
146.5
6.4
25.6
28.0
18.1
1.7
66.8
21.4
175.4
119.9
20.0
-2.7
22.2
39.9
-.5
41.0
32.0
153.5
120.8
-13.1
11.3
41.9
36.3
1.7
42.7
71.6
95.9
81.7
15.0
-22.6
51.9
28.2
3.2
6.0
56.8
80.5
81.6
-22.4
-5.0
9.1
54.5
2.4
43.1
9.4
75.3
165.4
6.2
7.6
18.2
100.4
1.8
31.2
42.8
97.4
108.9
-12.9
5.2
52.9
40.6
1.9
21.3
*
*
*
A46
DomesticNonfinancialStatistics • April 1989
1.57—Continued
1987
Transaction category, sector
1983
1984
1986
1985
1988
1987
Ql
Q2
Q3
Q4
Ql
Q2
Q3
All sectors
53 Total net borrowing
663.4
907.9
1,045.7
1,137.4
988.0
970.7
1,029.9
949.8
959.1
1,019.2
54
55
56
57
58
59
60
61
254.4
53.7
36.4
187.8
49.0
26.7
26.9
28.4
273.8
50.4
83.0
223.1
81.6
61.1
52.0
82.9
324.2
136.4
125.4
242.2
82.5
38.3
52.8
44.0
393.5
30.8
195.2
308.6
54.4
72.3
26.4
56.1
330.4
34.5
173.8
311.9
40.7
1.9
33.2
61.6
358.0
38.7
235.2
306.0
-.3
-118.5
36.8
27.3
342.2
33.1
130.0
345.2
52.4
33.8
52.3
79.4
287.3
32.7
185.1
294.9
61.4
23.6
36.9
48.7
334.2
33.5
145.0
301.4
49.4
68.5
6.7
91.2
363.6
24.8
192.8
237.4
34.8
14.2
25.7
56.4
172.3
32.6
183.5
301.2
59.5
79.4
89.1
41.7
335.7
44.4
164.1
322.0
43.3
-2.0
43.1
68.6
62 MEMO: U . S . government, cash balance
-7.1
6.3
14.4
-7.9
-34.9
77.7
-19.6
-54.7
60.9
3.3
6.4
Totals net of changes in U.S. government cash balances
63
Net borrowing by domestic nonfinancial
64
N e t borrowing by U . S . government
553.9
193.7
744.5
192.5
831.9
209.3
688.5
151.7
586.9
196.6
674.0
67.6
671.7
121.4
821.5
221.4
670.9
165.4
700.8
84.3
754.0
189.1
U . S . government securities
State and local obligations
Corporate and foreign bonds
Mortgages
Consumer credit
Bank loans n.e.c
Open market paper
Other loans
*
830.6
215.0
883.3 1,068.3
External corporate equity funds raised in United States
65 Total net share issues
58.1
-36.0
20.1
93.9
13.3
170.1
13.9
-47.1
-83.6
-73.7
-141.0
-70.3
66
67
68
69
70
27.2
30.8
23.5
3.6
3.7
29.3
-65.3
-74.5
8.2
.9
84.4
-64.3
-81.5
13.5
3.7
161.8
-68.0
-80.7
11.5
1.3
72.3
-59.0
-76.5
19.9
-2.4
205.4
-35.3
-57.0
19.1
2.7
79.1
-65.2
-83.0
16.5
1.2
13.8
-60.9
-78.0
18.4
-1.3
-9.1
-74.6
-88.0
25.5
-12.0
5.0
-78.7
-95.0
17.0
-.7
-8.1
-132.9
-140.0
13.8
-6.7
6.0
-76.3
-92.0
13.6
2.1
Mutual funds
All other
Nonfinancial corporations
Financial corporations
Foreign shares purchased in United States
Flow of Funds
1.58
A43
D I R E C T A N D I N D I R E C T S O U R C E S O F F U N D S TO C R E D I T M A R K E T S
Billions of dollars, except as noted; quarterly data are at seasonally adjusted annual rates.
1988
1987
Transaction category, or sector
1983
1984
1985
1986
1987
Q1
Q2
Q3
Q4
Ql
Q2
Q3
1 Total funds advanced in credit markets to domestic
nonfinancial sectors
546.8
750.8
846.3
830.6
680.6
552.0
751.7
652.1
766.8
731.8
704.0
760.4
By public agencies and foreign
2 Total net advances
3
U . S . government securities
4
Residential mortgages
5
F H L B advances to savings and loans
6
Other loans and securities
117.8
29.0
76.1
-7.0
19.7
157.6
38.9
56.5
15.7
46.6
193.1
37.9
94.6
14.2
46.3
304.2
69.4
160.3
19.8
54.6
256.3
68.2
153.2
24.4
10.5
270.9
59.0
194.8
11.0
6.1
279.3
55.3
169.4
19.6
35.1
211.1
35.1
146.0
22.2
7.8
264.0
123.3
102.7
44.9
-6.8
281.7
148.6
100.7
5.4
27.0
162.5
38.2
89.7
10.1
24.5
196.6
17.3
97.5
26.6
55.3
9.7
69.8
14.7
23.7
17.1
74.3
8.4
57.9
16.8
95.5
18.4
62.3
9.7
177.3
19.4
97.8
-11.5
180.6
24.7
62.5
-8.5
204.9
9.4
65.1
-12.3
177.0
29.8
84.8
-24.1
187.0
29.0
19.1
-.9
153.6
30.4
81.0
-8.9
123.3
-5.5
172.9
-10.1
86.3
4.1
82.2
1.5
119.9
17.1
58.2
67.8
17.3
74.9
8.4
101.5
1.2
178.1
9.6
185.8
4.3
193.5
-8.7
196.8
-.1
185.5
12.3
167.5
13.9
137.4
-1.0
84.7
4.9
140.2
9.7
Private domestic funds
advanced
n Total net advances
14
U . S . government securities
15
State and local obligations
16
Corporate and foreign bonds
17
Residential mortgages
18
Other mortgages and loans
19
LESS: Federal Home Loan Bank advances
514.2
225.4
53.7
14.5
58.3
155.1
-7.0
676.4
234.9
50.4
35.1
105.3
266.3
15.7
756.0
286.2
136.4
40.8
91.8
214.9
14.2
714.1
324.1
30.8
84.1
84.1
210.8
19.8
614.5
262.2
34.5
86.5
92.8
162.9
24.4
465.9
299.0
38.7
100.4
56.7
-18.0
11.0
669.1
286.9
33.1
58.8
105.0
204.8
19.6
638.7
252.2
32.7
83.7
89.3
203.0
22.2
684.2
210.9
33.5
102.9
120.0
261.7
44.9
586.5
215.0
24.8
115.7
98.7
137.7
5.4
631.2
134.1
32.6
88.1
152.4
234.1
10.1
713.7
318.4
44.4
68.6
146.1
162.8
26.6
Private financial intermediation
20 Credit market funds advanced by private financial
institutions
71
Commercial banking
22
Savings institutions
23
Insurance and pension funds
24
Other finance
394.7
144.3
135.6
100.1
14.7
581.0
168.9
150.2
121.8
140.1
569.8
186.3
83.0
148.9
151.6
746.3
194.8
105.5
181.9
264.3
564.9
136.3
140.4
210.8
77.3
521.5
-56.2
89.9
266.3
221.6
549.7
198.0
132.0
178.0
41.7
639.7
150.9
188.7
246.2
54.0
548.5
252.6
151.0
152.8
-7.9
674.9
56.0
87.9
282.4
248.6
615.7
213.3
120.7
235.3
46.5
606.4
132.3
166.4
217.6
90.1
75 Sources of funds
26
Private domestic deposits and RPs
27
Credit market borrowing
7,8
Other sources
79
Foreign funds
30
Treasury balances
31
Insurance and pension reserves
Other, net
32
394.7
210.4
31.4
152.9
14.6
-5.3
115.0
28.7
581.0
321.9
73.8
185.3
8.8
4.0
124.0
48.5
569.8
210.6
96.7
262.5
19.7
10.3
131.9
100.7
746.5
264.7
119.1
362.7
12.9
1.7
144.3
203.8
564.9
146.2
117.2
301.4
43.7
-5.8
175.0
88.6
521.5
-17.1
146.5
392.1
14.9
-36.9
195.1
219.0
549.7
141.1
119.9
288.6
35.1
43.6
191.1
18.9
639.7
193.9
120.8
325.0
99.5
6.1
194.8
24.6
548.5
266.8
81.7
200.0
25.2
-36.1
118.9
91.9
674.9
287.7
81.6
305.6
-80.1
53.3
247.6
84.8
615.7
127.3
165.4
323.0
106.6
-17.5
207.8
26.1
606.4
206.1
108.9
291.3
-39.2
-1.9
173.7
158.6
Private domestic nonfinancial
investors
33 Direct lending in credit markets
34
U . S . government securities
35
State and local obligations
36
Corporate and foreign bonds
37
Open market paper
Other
38
150.9
91.0
38.8
-8.3
12.4
17.0
169.2
115.4
26.5
-.8
4.0
24.2
282.9
175.7
39.6
2.4
45.6
19.6
86.7
50.1
-13.6
32.6
-3.0
20.7
166.8
103.2
46.1
5.1
7.9
4.6
90.9
52.1
27.8
9.3
-1.9
3.6
239.3
170.1
58.1
-58.6
64.2
5.6
119.8
70.9
42.4
28.3
-23.3
1.6
217.3
119.6
56.0
41.5
-7.5
7.7
-6.9
117.6
1.5
-40.6
-65.6
-19.7
180.9
23.8
29.7
52.7
77.7
-3.0
216.2
160.0
39.1
-25.9
40.5
2.5
39 Deposits and currency
40
Currency
41
Checkable deposits
42
Small time and savings accounts
43
Money market fund shares
44
Large time deposits
45
Security RPs
46
Deposits in foreign countries
227.8
14.3
28.8
215.4
-39.0
-8.3
13.5
3.1
325.4
8.6
28.0
150.7
49.0
84.3
10.0
-5.1
220.9
12.4
40.9
138.4
8.9
7.7
14.6
-2.1
285.0
14.4
93.2
120.6
41.5
-11.5
20.8
5.9
162.4
19.0
-2.4
75.9
28.2
27.6
16.9
-2.8
-46.6
9.4
-98.7
31.3
14.4
13.7
22.1
-38.9
149.2
12.5
40.3
69.3
2.4
4.8
24.3
-4.4
229.3
17.3
34.5
79.9
32.7
.2
46.6
18.1
317.6
36.8
14.4
123.1
63.3
91.6
-25.6
13.9
282.7
8.2
4.2
195.1
59.1
12.0
17.3
-13.3
134.9
11.9
21.5
125.5
-34.8
-7.6
22.7
-4.3
256.7
17.5
-.6
102.1
13.0
92.0
-.4
33.1
47 Total of credit market instruments, deposits, and
currency
378.7
494.6
503.7
371.8
329.2
44.3
388.5
349.1
534.9
275.8
315.8
472.9
20.9
76.8
38.2
20.8
85.9
66.7
22.8
75.4
82.0
36.2
104.5
110.7
37.4
91.9
106.2
49.9
112.0
80.0
37.2
82.2
119.9
31.8
100.2
118.7
33.8
80.2
106.2
38.5
115.1
92.8
22.9
97.6
188.9
25.5
85.0
19.0
MEMO: Corporate equities not included above
51 Total net issues
58.1
-36.0
20.1
93.9
13.3
170.1
13.9
-47.1
-83.6
-73.7
-141.0
-70.3
57.
Mutual fund shares
53
Other equities
54 Acquisitions by financial institutions
55 Other net purchases
27.2
30.8
50.4
7.7
29.3
-65.3
15.8
-51.8
84.4
-64.3
45.6
-25.5
161.8
-68.0
48.5
45.4
72.3
-59.0
22.6
-9.3
205.4
-35.3
29.2
140.9
79.1
-65.2
72.6
-58.7
13.8
-60.9
5.2
-52.4
-9.1
-74.6
-16.5
-67.1
5.0
-78.7
-33.0
-40.7
-8.1
-132.9
-10.1
-131.0
6.0
-76.3
-9.4
-61.0
Total advanced, by sector
U . S . government
Sponsored credit agencies
Monetary authorities
Foreign
Agency and foreign borrowing not in line 1
11
Sponsored credit agencies and mortgage pools
12
Foreign
7
8
9
10
48
49
50
Public holdings as percent of total
Private financial intermediation (in percent)
Total foreign funds
NOTES BY LINE NUMBER.
1. Line 1 of table 1.57.
2. Sum of lines 3 - 6 or 7-10.
6. Includes farm and commercial mortgages.
11. Credit market funds raised by federally sponsored credit agencies, and net
issues of federally related mortgage pool securities.
13. Line 1 less line 2 plus line 11 and 12. Also line 20 less line 27 plus line 33.
Also sum of lines 28 and 47 less lines 40 and 46.
18. Includes farm and commercial mortgages.
26, Line 39 less lines 40 and 46.
27. Excludes equity issues and investment company shares. Includes line 19.
29. Foreign deposits at commercial banks, bank borrowings from foreign
branches, and liabilities of foreign banking agencies to foreign affiliates, less
claims on foreign affiliates and deposits by banking in foreign banks.
30. Demand deposits and note balances at commercial banks.
31. Excludes net investment of these reserves in corporate equities.
32. Mainly retained earnings and net miscellaneous liabilities.
33. Line 13 less line 20 plus line 27.
34-38. Lines 14-18 less amounts acquired by private finance plus amounts
borrowed by private finance. Line 38 includes mortgages.
40. Mainly an offset to line 9.
47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46.
48. Line 2/line 1.
49. Line 20/line 13.
50. Sum of lines 10 and 29.
51. 53. Includes issues by financial institutions.
NOTE. Full statements for sectors and transaction types in flows and in amounts
outstanding may be obtained from Flow of Funds Section, Division of Research
and Statistics, Board of Governors of the Federal Reserve System, Washington,
D.C. 20551.
A46
1.59
DomesticNonfinancialStatistics • April 1989
SUMMARY OF CREDIT MARKET DEBT OUTSTANDING
Billions of dollars; period-end levels.
1987
1988
Q3
Q2
Ql
Q4
Ql
Q2
Q3
Nonfinancial sectors
1 Total credit market debt owed by
domestic nonfinancial sectors
5,204.3
5,953.7
6,797.0
7,618.1
7,725.8
7,917.4
8,074.1
8,301.3
8,444.3
8,629.8
8,817.3
By sector and instrument
2 U.S. government
Treasury securities
J
4
Agency issues and mortgages
1,177.9
1,174.4
3.6
1,376.8
1,373.4
3.4
1,600.4
1,597.1
3.3
1,815.4
1,811.7
3.6
1,843.9
1,839.3
4.6
1,875.3
1,871.2
4.2
1,897.0
1,893.1
3.9
1,959.2
1,954.1
5.2
2,001.8
1,996.7
5.0
2,020.4
2,013.5
7.0
2,063.8
2,051.6
12.2
4,026.4
2,717.8
471.7
423.0
1,823.1
1,200.2
158.8
350.4
113.7
4,577.0
3,040.0
522.1
469.2
2,048.8
1,336.2
183.6
416.5
112.4
5,196.6
3,488.4
658.4
542.9
2,287.1
1,490.2
213.0
478.1
105.9
5,802.7
3,946.4
689.2
664.2
2,593.0
1,699.6
246.3
551.4
95.8
5,881.9
4,065.6
696.9
696.4
2,672.2
1,730.4
254.2
594.8
92.8
6,042.1
4,189.4
705.2
718.5
2,765.7
1,800.7
259.9
613.8
91.3
6,177.1
4,296.9
715.5
743.7
2,837.7
1,853.8
264.9
629.0
90.0
6,342.1
4,404.5
723.7
764.1
2,916.6
1,908.7
269.9
649.2
88.9
6,442.6
4,479.3
728.0
789.4
2,961.8
1,939.7
273.8
660.2
88.2
6,609.4
4,596.7
735.8
819.1
3,041.9
2,000.4
278.1
675.5
87.9
6,753.5
4,715.0
749.4
841.7
3,123.8
2,056.6
285.6
692.5
89.2
5 Private domestic nonfinancial sectors
6
Debt capital instruments
7
Tax-exempt obligations
8
Corporate bonds
9
Mortgages
10
Home mortgages
11
Multifamily residential
12
Commercial
13
Farm
14
15
16
17
18
Other debt instruments
Consumer credit
Bank loans n.e.c
Open market paper
Other
1,308.6
437.7
490.2
36.8
344.0
1,536.9
519.3
552.9
58.5
406.2
1,708.2
601.8
592.6
72.2
441.6
1,856.3
656.2
658.6
62.9
478.6
1,816.4
643.3
627.7
63.6
481.7
1,852.7
658.7
636.3
67.9
489.9
1,880.2
680.9
637.5
68.1
493.7
1,937.6
696.9
656.7
73.8
510.1
1,963.3
692.2
669.4
73.5
528.1
2,012.6
709.6
689.9
77.8
535.3
2,038.5
727.8
688.7
80.3
541.6
19
20
21
22
23
24
25
By borrowing sector
State and local governments
Households
Nonfinancial business
Farm
Nonfarm noncorporate
Corporate
4,026.4
357.7
1,811.6
1,857.1
188.4
645.8
1,022.9
4,577.0
385.1
2,038.2
2,153.7
187.9
769.0
1,196.8
5,196.6
476.9
2,314.5
2,405.2
173.4
898.3
1,333.5
5,802.7
520.2
2,594.2
2,688.3
156.6
1,025.9
1,505.8
5,881.9
527.5
2,605.4
2,749.0
149.9
1,053.8
1,545.3
6,042.1
535.3
2,691.2
2,815.7
150.2
1,084.3
1,581.2
6,177.1
546.2
2,762.8
2,868.1
148.5
1,106.7
1,612.9
6,342.1
554.7
2,836.6
2,950.9
144.9
1,141.7
1,664.3
6,442.6
558.3
2,866.2
3,018.1
141.5
1,165.2
1,711.5
6,609.4
565.7
2,945.7
3,097.9
144.0
1,186.0
1,767.8
6,753.5
578.5
3,016.4
3,158.5
145.0
1,211.9
1,801.6
227.3
64.2
37.4
21.5
104.1
235.1
68.0
30.8
27.7
108.6
236.7
71.8
27.9
33.9
103.0
238.2
74.8
26.9
37.4
99.1
236.7
75.1
26.0
37.3
98.3
236.8
74.6
25.4
35.6
101.2
238.9
75.9
24.2
40.6
98.2
244.3
81.6
23.3
41.2
98.1
245.1
85.4
22.8
42.5
94.4
246.3
85.2
22.4
44.0
94.7
247.8
86.7
22.0
46.3
92.8
5,431.6
6,188.8
7,033.7
7,856.3
7,962.5
8,154.2
8,313.1
8,545.6
8,689.4
8,876.1
9,065.1
26 Foreign credit market debt held in
United States
Bonds
Bank loans n.e.c
Open market paper
U.S. government loans
27
28
29
30
31 Total domestic plus foreign
Financial sectors
32 Total credit market debt owed by
financial sectors
857.9
1,006.2
1,206.2
1,510.8
1,621.8
1,710.0
1,783.8
1,862.6
1,903.8
1,972.6
2,035.7
456.7
206.8
244.9
5.0
401.2
115.8
2.1
28.9
195.5
59.0
531.2
237.2
289.0
5.0
475.0
148.9
2.5
29.5
219.5
74.6
632.7
257.8
368.9
6.1
573.4
197.5
2.7
32.1
252.4
88.8
810.3
273.0
531.6
5.7
700.5
268.4
2.7
36.1
284.6
108.6
887.1
268.4
613.7
5.0
734.8
293.4
2.8
36.5
295.2
106.8
937.1
275.8
656.4
5.0
772.9
304.6
2.9
40.1
311.1
114.3
981.6
283.7
692.9
5.0
802.1
324.2
2.9
42.2
312.7
120.1
1,026.5
303.2
718.3
5.0
836.1
335.5
3.0
40.8
323.8
133.1
1,054.8
313.5
736.3
5.0
849.0
353.2
3.1
31.7
331.5
129.5
1,076.9
317.9
754.0
5.0
895.7
370.0
3.1
34.3
353.4
134.8
1,113.7
328.5
780.2
5.0
922.0
386.8
3.1
33.9
356.8
141.6
43 Total, by sector
857.9
1,006.2
1,206.2
1,510.8
1,621.8
1,710.0
1,783.8
1,862.6
1,903.8
1,972.6
2,035.7
44
45
46
47
48
49
50
51
52
211.8
244.9
401.2
76.8
71.0
73.9
171.7
3.5
4.2
242.2
289.0
475.0
84.1
86.6
93.2
193.2
4.3
13.5
263.9
368.9
573.4
79.2
101.2
115.5
246.9
5.6
25.0
278.7
531.6
700.5
75.6
101.3
145.1
308.1
6.5
64.0
273.4
613.7
734.8
76.1
109.0
146.6
315.4
7.0
80.7
280.7
656.4
772.9
80.7
108.7
157.0
328.8
6.8
90.9
288.7
692.9
802.1
78.6
109.5
165.4
339.9
7.3
101.6
308.2
718.3
836.1
82.7
104.2
181.1
357.0
8.1
103.1
318.5
736.3
849.0
76.4
104.4
177.4
368.3
8.7
113.9
322.9
754.0
895.7
77.2
106.5
187.3
393.8
9.1
121.7
333.5
780.2
922.0
75.4
105.8
198.0
406.3
9.6
127.0
33
34
35
36
37
38
39
40
41
42
By instrument
U.S. government related
Sponsored credit agency securities
Mortgage pool securities
Loans from U.S. government
Private financial sectors
Corporate bonds
Mortgages
Bank loans n.e.c
Open market paper
Loans from Federal Home Loan B a n k s . . .
Sponsored credit agencies
Mortgage pools
Private financial sectors
Commercial banks
Bank affiliates
Savings and loan associations
Finance companies
REITs
CMO issuers
All sectors
53 Total credit market debt
6,289.5
7,195.0
8,239.8
9,367.2
9,584.3
9,864.2
10,096.9
10,408.1
10,593.3
10,848.6
11,100.8
54
55
56
57
58
59
60
61
1,629.4
471.7
603.0
1,825.4
437.7
556.5
253.8
512.1
1,902.8
522.1
686.0
2,051.4
519.3
613.2
305.7
594.4
2,227.0
658.4
812.1
2,289.8
601.8
652.6
358.5
639.5
2,620.0
689.2
1,007.4
2,595.8
656.2
721.6
384.9
692.0
2,726.0
696.9
1,064.9
2,675.1
643.3
690.3
396.1
691.8
2,807.4
705.2
1,097.7
2,768.6
658.7
701.7
414.6
710.4
2,873.7
715.5
1,143.9
2,840.6
680.9
703.8
421.4
717.0
2,980.7
723.7
1,181.2
2,919.7
696.9
720.8
438.8
746.3
3,051.6
728.0
1,228.1
2,964.9
692.2
723.9
447.5
757.0
3,092.3
735.8
1,274.2
3,045.0
709.6
746.6
475.3
769.8
3,172.5
749.4
1,315.2
3,127.0
727.8
744.6
483.4
780.9
U.S. government securities
State and local obligations
Corporate and foreign bonds
Mortgages
Consumer credit
Bank loans n.e.c
Open market paper
Other loans
Flow of Funds
1.60
A45
SUMMARY OF CREDIT MARKET CLAIMS, BY HOLDER
Billions of dollars, except as noted; period-end levels.
1988
1987
Transaction category, or sector
I Total funds advanced in credit markets to domestic
nonfinancial sectors
1983
1984
1985
1986
Ql
Q2
Q3
Q4
Ql
Q2
Q3
5,204.3
5,953.7
6,797.0
7,618.1
7,725.8
7,917.4
8,074.1
8,301.3
8,444.3
8,629.8
8,817.3
1,101.7
339.0
367.0
59.0
336.8
1,259.2
377.9
423.5
74.6
383.1
1,459.4
421.8
518.2
88.8
430.6
1,759.3
491.2
678.5
108.6
481.0
1,847.6
502.3
758.9
106.8
479.6
1,918.0
519.5
800.0
114.3
484.3
1,967.0
525.6
834.6
120.1
486.8
2,037.8
559.4
862.0
133.1
483.4
2,098.6
592.7
884.8
129.5
491.5
2,144.4
606.1
906.1
134.8
497.4
2,192.8
607.1
932.2
141.6
511.9
7 Total held, by type of lender
8
U . S . government
9
Sponsored credit agencies and mortgage pools . . .
Monetary authority
10
11
Foreign
1,101.7
212.8
482.0
159.2
247.7
1,259.2
229.7
556.3
167.6
305.6
1,459.4
247.6
657.8
186.0
367.9
1,759.3
254.3
833.9
205.5
465.7
1,847.6
249.2
912.0
204.1
482.3
1,918.0
242.9
957.9
214.9
502.3
1,967.0
237.1
1,003.7
219.6
506.7
2,037.8
235.4
1,044.1
230.1
528.2
2,098.6
233.7
1,068.2
224.9
571.8
2,144.4
232.0
1,091.6
229.7
591.1
2,192.8
232.6
1,124.2
230.8
605.3
Agency and foreign debt not in line 1
Sponsored credit agencies and mortgage pools . . .
Foreign
456.7
227.3
531.2
235.1
632.7
236.7
810.3
238.2
887.1
236.7
937.1
236.8
981.6
238.9
1,026.5
244.3
1,054.8
245.1
1,076.9
246.3
1,113.7
247.8
Private domestic
holdings
14 Total private holdings
15
U.S. government securities
16
State and local obligations
17
Corporate and foreign bonds
18
Residential mortgages
19
Other mortgages and loans
LESS: Federal Home Loan Bank advances
20
4,786.6
1,290.4
471.7
441.7
992.2
1,649.6
59.0
5,460.8
1,524.9
522.1
476.8
1,096.5
1,915.2
74.6
6,207.0
1,805.2
658.4
517.6
1,185.1
2,129.5
88.8
6,907.3
2,128.7
689.2
601.7
1,267.4
2,328.9
108.6
7,002.0
2,223.7
696.9
626.0
1,225.8
2,336.4
106.8
7,173.2
2,287.9
705.2
642.4
1,260.6
2,391.5
114.3
7,327.7
2,348.1
715.5
663.4
1,284.2
2,436.6
120.1
7,534.2
2,421.3
723.7
688.1
1,316.7
2,517.4
133.1
7,645.7
2,458.9
728.0
716.3
1,328.7
2,543.3
129.5
7,808.6
2,486.3
735.8
740.1
1,372.4
2,608.9
134.8
7,985.9
2,565.3
749.4
757.3
1,410.0
2,645.5
141.6
Private financial intermediation
21 Credit market claims held by private financial
institutions
Commercial banking
22
Savings institutions
23
24
Insurance and pension funds
25
Other finance
4,111.2
1,622.1
944.0
1,093.5
451.6
4,691.0
1,791.1
1,092.8
1,215.3
591.7
5,264.4
1,978.5
1,178.4
1,364.2
743.4
6,009.5
2,173.2
1,283.0
1,546.0
1,007.3
6,126.1
2,155.9
1,308.4
1,608.7
1,053.1
6,277.5
2,207.9
1,355.4
1,652.6
1,061.5
6,433.5
2,248.7
1,396.5
1,715.3
1,073.0
6,585.2
2,309.6
1,434.2
1,756.9
1,084.6
6,723.0
2,322.1
1,440.3
1,823.0
1,137.6
6,892.6
2,377.5
1,486.8
1,880.9
1,147.5
7,042.6
2,414.3
1,523.4
1,937.2
1,167.7
26 Sources of funds
Private domestic deposits and RPs
27
Credit market debt
28
4,111.2
2,389.8
401.2
4,691.0
2,711.5
475.0
5,264.4
2,922.1
573.4
6,009.5
3,182.6
700.5
6,126.1
3,165.0
734.8
6,277.5
3,198.6
772.9
6,433.5
3,234.4
802.1
6,585.2
3,328.8
836.1
6,723.0
3,385.7
849.0
6,892.6
3,417.0
895.7
7,042.6
3,455.1
922.0
29
30
31
32
33
1,320.2
-23.0
11.5
1,036.1
295.6
1,504.5
-14.1
15.5
1,160.8
342.2
1,768.9
5.6
25.8
1,289.5
448.0
2,126.4
18.6
27.5
1,427.9
652.5
2,226.3
26.7
8.6
1,461.8
729.2
2,305.9
26.1
30.9
1,507.5
741.4
2,397.0
52.7
33.0
1,552.8
758.5
2,420.4
62.2
21.6
1,592.2
744.3
2,488.4
45.9
23.5
1,656.3
762.8
2,579.9
62.3
32.6
1,706.7
778.3
2,665.6
54.8
31.5
1,751.9
827.4
Private domestic nonfinancial
investors
34 Credit market claims
35
U . S . government securities
Tax-exempt obligations
36
37
Corporate and foreign bonds
38
Open market paper
Other
39
1,076.6
548.6
170.0
45.4
68.4
244.3
1,244.8
663.6
196.3
44.5
72.4
268.0
1,516.0
830.7
235.9
47.6
118.0
283.8
1,598.3
881.2
222.3
80.1
115.0
299.7
1,610.7
912.0
226.2
88.8
115.5
268.1
1,668.7
950.4
243.1
71.4
132.6
271.2
1,696.3
969.4
255.9
80.6
118.7
271.9
1,785.0
1,014.7
268.4
85.3
143.5
273.2
1,771.6
1,025.7
265.6
82.7
127.8
269.9
1,811.6
1,027.0
275.3
93.0
148.5
267.9
1,865.3
1,071.4
287.3
88.4
149.6
268.5
40 Deposits and currency
41
Currency
42
Checkable deposits
43
Small time and savings accounts
44
Money market fund shares
Large time deposits
45
Security RPs
46
47
Deposits in foreign countries
2,566.4
150.9
350.9
1,542.9
169.5
247.7
78.8
25.7
2,891.7
159.6
378.8
1,693.5
218.5
332.1
88.7
20.6
3,112.5
171.9
419.7
1,831.9
227.3
339.8
103.3
18.5
3,393.4
186.3
512.9
1,948.3
268.9
328.4
124.1
24.5
3,364.7
185.3
468.5
1,965.2
281.3
323.4
126.6
14.4
3,405.6
191.3
488.0
1,977.7
279.5
322.5
130.9
15.7
3,444.5
192.4
487.2
1,990.8
286.4
326.3
143.6
17.8
3,555.7
205.4
510.5
2,024.2
297.1
356.0
141.0
21.6
3,607.4
204.0
491.1
2,079.4
322.1
351.0
142.1
17.8
3,646.4
209.9
506.8
2,107.9
310.4
346.1
145.9
19.4
3,690.7
210.7
497.3
2,126.8
311.1
372.4
147.4
25.0
48 Total of credit market instruments, deposits, and
currency
3,643.0
4,136.5
4,628.5
4,991.7
4,975.4
5,074.2
5,140.8
5,340.8
5,379.0
5,458.0
5,556.1
20.3
85.9
224.7
20.3
85.9
291.5
20.7
84.8
373.5
22.4
87.0
484.2
23.2
87.5
509.0
23.5
87.5
528.4
23.7
87.8
559.4
23.8
87.4
590.5
24.2
87.9
617.6
24.2
88.3
653.4
24.2
88.2
660.0
2
3
4
5
6
12
13
49
50
51
By public agencies and foreign
Total held
U . S . government securities
Residential mortgages
FHLB advances to savings and loans
Other loans and securities
Other sources
Foreign funds
Treasury balances
Insurance and pension reserves
Other, net
Public holdings as percent of total
Private financial intermediation (in percent)
Total foreign funds
MEMO: Corporate equities not included above
52 Total market value
2,134.0
2,158.2
2,824.5
3,362.0
3,990.2
4,110.0
4,300.8
3,313.4
3,494.8
3,612.6
3,577.5
53
54
Mutual fund shares
Other equities
112.1
2,021.9
136.7
2,021.5
240.2
2,584.3
413.5
2,948.5
485.2
3,505.0
520.7
3,589.3
525.1
3,775.7
460.1
2,853.2
479.2
3,015.7
486.8
3,125.9
483.9
3,093.6
55
56
Holdings by financial institutions
Other holdings
612.0
1,522.0
615.6
1,542.6
800.0
2,024.5
972.2
2,389.8
1,175.7
2,814.5
1,238.9
2,871.1
1,312.5
2,988.4
1,021.7
2,291.7
1,087.1
2,407.7
1,133.8
2,478.9
1,133.0
2,444.4
N O T E S BY LINE N U M B E R .
1. Line 1 of table 1.59.
2. Sum of lines 3 - 6 or 7-10.
6. Includes farm and commercial mortgages.
12. Credit market debt of federally sponsored agencies, and net issues of
federally related mortgage pool securities.
14. Line 1 less line 2 plus line 12 and 13. Also line 21 less line 28 plus line 34.
Also sum of lines 29 and 48 less lines 41 and 47.
19. Includes farm and commercial mortgages.
27. Line 40 less lines 41 and 47.
28. Excludes equity issues and investment company shares. Includes line 20.
30. Foreign deposits at commercial banks plus bank borrowings from foreign
affiliates, less claims on foreign affiliates and deposits by banking in foreign banks.
31. Demand deposits and note balances at commercial banks.
32. Excludes net investment of these reserves in corporate equities.
33. Mainly retained earnings and net miscellaneous liabilities.
34. Line 14 less line 21 plus line 28.
35-39. Lines 15-19 less amounts acquired by private finance plus amounts
borrowed by private finance. Line 39 includes mortgages.
41. Mainly an offset to line 10.
48. Lines 34 plus 40, or line 14 less line 29 plus 41 and 47.
49. Line 2/line 1 and 13.
50. Line 21/line 14.
51. Sum of lines 11 and 30.
52-54. Includes issues by financial institutions.
NOTE. Full statements for sectors and transaction types in flows and in amounts
outstanding may be obtained from Flow of Funds Section, Stop 95, Division of
Research and Statistics, Board of Governors of the Federal Reserve System,
Washington, D.C. 20551.
A46
Domestic Nonfinancial Statistics • April 1989
2.10 NONFINANCIAL BUSINESS ACTIVITY
Selected Measures1
1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted.
1988
Measure
1986
1987
1989
1988
May
June
July
Aug.
Sept.
Oct.'
Nov.'
Dec.'
Jan.
1 Industrial production
125.1
129.8
137.2
136.1
136.5
138.0
138.5
138.6
139.4
139.9
140.6
141.1
Market groupings
Products, total
Final, total
Consumer goods
Equipment
Intermediate
Materials
133.3
132.5
124.0
143.6
136.2
113.8
138.3
136.8
127.7
148.8
143.5
118.2
145.9
144.3
133.9
158.2
151.5
125.3
145.0
143.5
132.7
157.7
150.4
123.9
145.3
144.0
133.0
158.5
150.0
124.5
146.5
145.0
134.2
159.4
151.6
126.4
147.3
145.8
135.0
160.1
152.3
126.5
147.4
145.8
134.8
160.4
152.9
126.5
148.1
146.4
136.4
159.7
154.0
127.5
148.3
146.7
136.7
159.9
154.2
128.3
149.4
147.6
138.0
160.3
155.4
128.7
150.1
148.2
138.9
160.5
156.8
128.7
129.1
134.6
142.8
141.8
142.1
143.6
144.0
144.4
145.3
145.9
146.6
147.4
79.7
78.6
81.1
80.5
83.5
83.7
83.3
83.0
83.3
83.2
84.0
84.4
84.0
84.3
84.0
84.1
84.3
84.7
84.4
85.0
84.6
85.2
84.8
85.0
158.0
164.0"
161.0"
i66.o"
169.0r
2
3
4
5
6
7
Industry groupings
8 Manufacturing
Capacity utilization (percent) 2
9
Manufacturing
Industrial materials industries
10
11 Construction contracts (1982 = 100)3
160.0"
162.0'
157.0"
164.0
158.0
163.0
155.0
12
13
14
15
16
17
18
19
20
21
Nonagricultural employment, total
Goods-producing, total
Manufacturing, total
Manufacturing, production-worker
Service-producing
Personal income, total
Wages and salary disbursements
Manufacturing
Disposable personal income
Retail sales
120.7
100.9
96.3
91.2
129.0
219.7
210.7
177.4
218.9
199.5
124.1
101.8
96.8
92.1
133.4
235.1
226.2
183.8
232.7
209.3
128.6
105.0
99.2
94.3
138.5
252.8
245.2
196.0
251.8
222.9"
127.9
104.6
99.0
94.1
137.7
250.2
242.3
193.8
249.5
221.2
128.6
105.1
99.3
94.4
138.4
251.6
244.2
195.4
251.2
222.5
128.9
105.4
99.5
94.6
138.7
253.5'
246.7
196.6
253.1
223.7
129.1
105.3
99.4
94.4
139.0
254.5
247.4
196.8
254.2
224.4
129.4
105.4
99.3
94.3
139.5
256.0
249.0
198.1
255.6
223.7
129.7
105.8
99.8
94.9
139.8
259.9
252.3
202.3
259.7
227.4
130.3
106.2
100.1
95.2
140.3
259.4
253.2
201.3
259.0
230.3
130.5
106.4
100.3
95.3
140.6
261.8
254.8
201.2
261.5
230.1
131.0
107.0
100.5
95.7
141.1
266.4
257.8
202.8
265.9
231.4
22
23
Prices 7
Consumer (1982-84 = 100)
Producer finished goods (1982 = 100) . . .
109.6
103.2
113.6
105.4
118.3
108.0
117.5
107.5
118.0
107.7'
118.5
108.6'
119.0
108.7'
119.8
108.6
120.2
109.3
120.3
109.7
120.5
110.0
121.1
111.0
4
1. A major revision of the industrial production index and the capacity
utilization rates was released in July 1985. See "A Revision of the Index of
Industrial Production" and accompanying tables that contain revised indexes
( 1 9 7 7 = 1 0 0 ) t h r o u g h D e c e m b e r 1 9 8 4 i n t h e F E D E R A L R E S E R V E B U L L E T I N , v o l . 71
(July 1985), pp. 487-501. The revised indexes for January through June 1985 were
shown in the September BULLETIN.
2. Ratios of indexes of production to indexes of capacity. Based on data from
Federal Reserve, McGraw-Hill Economics Department, Department of Commerce, and other sources.
3. Index of dollar value of total construction contracts, including residential,
nonresidential and heavy engineering, from McGraw-Hill Information Systems
Company, F. W. Dodge Division.
4. Based on data in Employment and Earnings (U.S. Department of Labor).
Series covers employees only, excluding personnel in the Armed Forces.
5. Based on data in Survey of Current Business (U.S. Department of Commerce).
6. Based on Bureau of Census data published in Survey of Current Business.
7. Data without seasonal adjustment, as published in Monthly Labor Review.
Seasonally adjusted data for changes in the price indexes may be obtained from
the Bureau of Labor Statistics, U.S. Department of Labor.
NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5,and 6,
and indexes for series mentioned in notes 3 and 7 may also be found in the Survey
of Current Business.
Figures for industrial production for the last two months are preliminary and
estimated, respectively.
Selected Measures
2.11
A47
LABOR FORCE, EMPLOYMENT, A N D U N E M P L O Y M E N T
Thousands of persons; monthly data are seasonally adjusted. Exceptions noted.
1988
Category
1986
1987
1989
1988
June
July
Aug.
Sept.
Oct.
Nov/
Dec/
Jan.
HOUSEHOLD SURVEY DATA
1 Noninstitutional population 1
2 Labor force (including Armed Forces) 1
3
Civilian labor force
Employment
4
Nonagricultural industries
3
Agriculture
Unemployment
Number
6
7
Rate (percent of civilian labor f o r c e ) . . . .
8 Not in labor force
182,822
185,010
186,837
186,755
186,911
187,033
187,178
187,333
187,471
187,618
187,859
120,078
117,834
122,122
119,865
123,893
121,669
123,717
121,524
123,840
121,658
124,203
122,000
124,200
121,984
124,310
122,091
124,737
122,510
124,779
122,563
125,643
123,428
106,434
3,163
109,232
3,208
111,800
3,169
111,880
3,121
111,974
3,060
112,061
3,142
112,194
3,176
112,335
3,238
112,709
3,238
112,816
3,193
113,411
3,300
8,237
7.0
62,744
7,425
6.2
62,888
6,701
5.5
62,944
6,523
5.4
63,038
6,624
5.4
63,071
6,797
5.6
62,830
6,614
5.4
62,978
6,518
5.3
63,023
6,563
5.4
62,734
6,554
5.3
62,839
6,716
5.4
62,216
99,525
102,310
106,039
106,057
106,271
106,425
106,737
106,973
107,419
107,640
108,048
18,965
777
4,816
5,255
23,683
6,283
23,053
16,693
19,065
721
4,998
5,385
24,381
6,549
24,1%
17,015
19,536
733
5,294
5,584
25,362
6,679
25,464
17,387
19,544
740
5,308
5,582
25,353
6,679
25,472
17,379
19,593
740
5,330
5,598
25,435
6,684
25,561
17,330
19,560
739
5,340
5,605
25,471
6,689
25,662
17,359
19,549
734
5,365
5,618
25,510
6,692
25,737
17,532
19,648
729
5,366
5,631
25,573
6,708
25,826
17,492
19,714
722
5,413
5,658
25,676
6,725
25,947
17,564
19,737
719
5,436
5,667
25,727
6,743
26,065
17,546
19,783
719
5,538
5,713
25,893
6,735
26,139
17,528
ESTABLISHMENT SURVEY DATA
9 Nonagricultural payroll employment 3
10
11
12
13
14
15
16
17
Manufacturing
Mining
Contract construction
Transportation and public utilities
Trade
Finance
Service
Government
1. Persons 16 years of age and over. Monthly figures, which are based on
sample data, relate to the calendar week that contains the 12th day; annual data
are averages of monthly figures. By definition, seasonality does not exist in
population figures. Based on data from Employment and Earnings (U.S. Department of Labor).
2. Includes self-employed, unpaid family, and domestic service workers.
3. Data include all full- and part-time employees who worked during, or
received pay for, the pay period that includes the 12th day of the month, and
exclude proprietors, self-employed persons, domestic servants, unpaid family
workers, and members of the Armed Forces. Data are adjusted to the March 1984
benchmark and only seasonally adjusted data are available at this time. Based on
data from Employment and Earnings (U.S. Department of Labor).
A48 Domestic Nonfinancial Statistics • April 1989
2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1
Seasonally adjusted
1988
1988
1988
Series
Ql
Q2
Q3
Q4
Output (1977 = 100)
Ql
Q2
Q4
Q3
Ql
Capacity (percent of 1977 output)
Q2
Q3
Q4r
Utilization rate (percent)
1 Total industry
134.5
136.0
138.2
139.8
163.1
164.2
165.2
166.2
82.4
82.8
83.8
84.2
2 Mining
102.5
114.7
103.3
111.7
104.8
103.9
127.7
127.0
114.6
139.8
140.1
125.5
140.7
80.3
82.0
81.5
79.9
82.3
114.9
126.2
140.4
82.8
80.8
139.6
141.6
143.7
145.7
168.9
170.2
171.5
172.7
82.7
83.2
5 Primary processing
123.0
149.7
123.9
152.3
125.7
154.5
127.9
156.4
141.6
185.6
142.7
186.7
143.9
188.1
145.1
189.4
86.9
80.7
86.8
81.5
87.5
82.4
88.2
82.7
6 Advanced processing
122.5
124.0
126.6
128.1
148.5
149.3
150.1
150.9
82.5
83.0
84.3
85.0
131.5
86.2
129.4
131.6
145.7
133.5
134.2
88.1
130.5
132.6
145.9
135.7
136.9
92.4
132.4
135.1
139.3
94.8
135.5
138.3
165.7
108.8
146.8
146.7
147.6
153.5
166.8
109.1
148.3
148.5
149.2
155.4
167.9
109.4
149.8
150.2
169.0
109.7
151.4
152.0
79.4
79.2
88.1
89.7
98.7
87.0
80.4
80.8
87.9
89.2
97.8
87.3
81.6
84.8
88.7
90.0
98.8
88.6
82.6
86.9
89.6
91.2
97.4
90.8
100.9
100.4
103.5
102.0
119.7
119.4
119.1
118.8
84.3
84.2
86.0
85.8
3 Utilities
4 Manufacturing
7 Materials
8 Durable goods
9
Metal materials
10 Nondurable goods
11
Textile, paper, and chemical
12
Paper
14 Energy materials
Previous c y c l e
High
Low
2
Latest cycle 3
1988
Low
Jan.
High
81.9
84.0
1988
May
June
July
Aug.
84.4
1989
Sept.
Oct/
Nov/
Dec/
Jan.
Capacity utilization rate (percent)
15 Total industry
88.6
72.1
86.9
69.5
82.5
82.9
83.0
83.7
83.8
83.7
84.0
84.1
84.4
84.4
16 Mining
92.8
95.6
87.8
82.9
95.2
88.5
76.9
78.0
80.7
82.4
80.8
79.7
81.2
80.8
82.5
81.5
82.2
83.9
82.3 r
80.4 R
81.9
81.0
83.1
80.4
83.3
81.0
82.5
80.4
17 Utilities
18 Manufacturing
19 Primary processing
20 Advanced p r o c e s s i n g . .
21 Materials
22 Durable goods
23
Metal materials
24 Nondurable g o o d s
25
Textile, paper, and
chemical
26
Paper
27 Energy
Chemical
28
materials
87.7
69.9
86.5
68.0
82.7
83.3
83.3
84.0
84.0
84.0
84.3
84.4
84.6
84.8
91.9
86.0
68.3
71.1
89.1
85.1
65.0
69.5
87.1
80.7
87.0
81.7
86.6
81.7
87.8
82.2
87.4
82.4
87.2
82.4
87.9
82.6
88.1
82.6
88.6
82.9
89.1
83.0
92.0
70.5
89.1
68.5
83.0
83.0
83.2
84.4
84.3
84.1
84.7
85.0
85.2
85.0
91.8
99.2
64.4
67.1
89.8
93.6
60.9
45.7
79.7
80.1
80.8
82.1
80.7
80.8
81.7
84.9
81.4
83.4
81.9
86.0
82.4
87.3
82.7
87.1
82.6
86.3
83.0
87.6
91.1
66.7
88.1
70.7
88.8
87.7
87.4
88.9
88.8
88.2
89.3
89.4
90.2
90.1
92.8
98.4
92.5
64.8
70.6
64.4
89.4
97.3
87.9
68.8
79.9
63.5
90.8
100.6
87.8
88.8
98.1
86.9
88.9
97.1
87.0
90.4
100.0
88.8
90.3
98.4
89.0
89.4
97.9
88.0
90.9
97.8
90.2
90.9
96.6
90.5
91.7
97.8
91.7
91.6
94.6
86.9
94.0
82.3
84.7
83.3
84.4
86.2
86.6
85.3
85.3
86.1
86.1
84.6
1. These data also appear in the Board's G.3 (402) release. For address, s e e
inside front cover.
2. Monthly high 1973; monthly l o w 1975.
3. Monthly highs 1978 through 1980; monthly lows 1982.
Selected Measures
2.13 INDUSTRIAL PRODUCTION
A49
Indexes and Gross Value1
Monthly data are seasonally adjusted
1977
Groups
portion
1988
1987
1989
1987
avg.
Dec.
Feb.
Mar.
Apr.
May
June
July
Sept.
Oct/
Nov.
Dec.p
Jan/
138.5
138.6
139.4
139.9
140.6
141.1
148.1
146.4
136.4
159.7
154.0
127.5
148.3
146.7
136.7
159.9
154.2
128.3
149.4
147.6
138.0
160.3
155.4
128.7
150.1
148.2
138.9
160.5
156.8
128.7
Aug.
Index (1977 = 100)
MAJOR M A R K E T
1 Total index
100.00
129.8
133.9
134.4
134.7
135.4
143.6
141.8
131.2
155.9
149.9
122.5
144.1
142.5
131.9
156.5
149.6
123.6
145.0
143.5
132.7
157.7
150.4
123.9
145.3
144.0
133.0
158.5
150.0
124.5
146.5
145.0
134.2
159.4
151.6
126.4
147.3
145.8
135.0
160.1
152.3
126.5
147.4
145.8
134.8
160.4
152.9
126.5
136.1
136.5
138.0
57.72
44.77
25.52
19.25
12.94
42.28
138.3
136.8
127.7
148.8
143.4
118.2
141.3
139.8
129.8
153.1
146.5
123.7
143.4
141.6
131.3
155.3
149.4
122.1
6.89
2.98
1.79
1.16
.63
1.19
3.91
1.24
1.19
.96
1.71
120.2
118.5
115.1
90.7
160.5
123.5
121.6
141.5
142.1
130.7
102.0
120.3
115.4
110.2
83.7
159.5
123.3
123.9
142.7
142.6
133.9
104.8
120.6
117.6
111.8
79.5
171.6
126.4
122.8
140.6
141.4
132.3
104.7
120.4
120.6
116.4
86.3
172.2
126.9
120.2
132.8
132.7
133.1
103.9
123.3
121.9
118.0
91.0
168.2
127.8
124.3
143.2
142.2
133.1
105.7
125.6
127.1
126.9
98.9
178.9
127.4
124.4
142.2
143.0
135.8
105.2
125.3
127.1
125.3
99.0
174.1
129.7
123.9
138.0
137.1
135.9
107.0
125.3
124.4
120.8
93.8
170.8
129.9
125.9
143.3
143.8
136.6
107.4
125.7
124.2
123.1
93.0
179.0
125.9
126.8
146.5
146.1
137.2
106.8
126.3
126.4
124.8
97.7
175.3
128.8
126.2
144.9
143.7
137.1
106.6
129.3
128.9
128.3
101.3
178.4
129.8
129.7
154.4
151.9
138.8
106.7
129.2
129.5
129.5
101.0
182.4
129.5
128.9
150.4
148.9
139.8
107.3
132.1
134.8
138.0
105.1
199.1
130.0
130.0
151.5
150.5
140.9
108.4
132.2
134.6
137.2
99.6
19 Nondurable consumer goods
20
Consumer staples
21
Consumer foods and tobacco
22
Nonfood staples
Consumer chemical products
23
24
Consumer paper products
Consumer energy
25
26
Consumer fuel
27
Residential utilities
18.63
15.29
7.80
7.49
2.75
1.88
2.86
1.44
1.42
130.5
137.3
136.2
138.5
162.9
151.8
106.3
93.1
119.8
133.3
140.7
139.2
142.2
167.7
157.0
108.0
95.4
120.7
135.3
142.9
140.8
145.0
171.7
157.5
111.3
97.0
125.8
135.1
142.5
139.4
145.7
172.7
159.1
111.0
97.9
124.5
135.1
142.5
138.3
146.8
175.6
161.4
109.6
98.9
120.5
135.4
143.1
139.2
147.0
177.9
162.4
107.3
94.3
120.6
135.8
143.5
139.3
147.9
179.5
162.8
107.7
93.0
122.6
137.5
145.3
141.1
149.6
181.8
164.0
109.3
94.6
124.4
138.5
146.6
141.3
152.1
183.8
165.3
113.0
95.5
130.9
138.0
145.8
141.1
150.7
185.0
166.3
107.6
92.7
122.8
139.0
147.0
142.4
151.8
186.1
167.1
108.9
95.3
122.7
139.5
147.6
143.6
151.8
185.2
167.8
109.2
94.1
124.5
140.2
148.6
144.4
152.9
186.1
168.3
110.9
96.3
141.3
149.6
Equipment
28 Business and defense equipment
29
Business equipment
Construction, mining, and farm
30
31
Manufacturing
32
Power
33
Commercial
34
Transit
35
Defense and space equipment
18.01
14.34
2.08
3.27
1.27
5.22
2.49
3.67
153.6
144.5
62.2
117.9
82.6
226.5
108.4
188.9
157.8
149.8
67.4
122.2
84.2
235.5
109.1
188.9
160.3
152.4
67.6
124.9
88.3
240.3
108.2
191.0
160.8
153.3
68.3
127.0
87.8
239.9
111.1
189.9
161.4
154.6
70.8
127.7
87.0
241.5
112.3
187.9
162.7
156.9
71.8
128.3
87.4
245.7
115.3
185.5
163.5
158.1
72.4
130.3
88.3
247.1
115.7
184.6
164.6
159.3
73.6
132.4
89.8
248.2
115.9
184.9
165.2
160.2
73.1
134.0
90.9
249.8
115.2
184.9
165.6
160.8
74.3
135.8
92.2
248.7
116.8
184.5
165.1
160.2
74.2
136.2
91.5
245.4
120.3
184.0
165.5
161.2
74.5
136.6
92.1
246.8
121.9
182.5
166.2
162.0
75.2
137.1
92.3
247.3
124.5
182.3
166.4
162.5
75.2
138.3
92.9
248.3
123.1
181.9
5.95
6.99
5.67
1.31
131.5
153.5
158.6
131.1
133.8
157.4
163.3
131.8
137.7
159.4
165.0
135.3
137.3
160.7
166.6
135.3
137.6
159.9
165.7
134.6
138.8
160.3
165.5
137.8
137.6
160.6
165.9
137.5
138.4
162.8
168.6
137.6
138.1
164.4
170.6
137.7
138.4
165.2
171.8
136.7
140.0
165.9
172.3
138.2
141.0
165.4
172.7
133.7
141.4
167.2
174.1
137.6
143.4
20.50
4.92
5.94
9.64
4.64
125.0
100.9
159.0
116.4
86.7
132.0
104.6
165.3
125.5
100.0
131.4
104.4
167.6
123.0
91.4
131.3
103.5
167.3
123.4
90.5
132.7
106.2
168.9
124.0
91.6
134.8
110.0
170.8
125.3
94.8
134.9
110.3
171.6
124.8
93.7
136.8
110.1
174.1
127.5
98.4
136.6
109.8
173.5
127.6
97.3
137.8
111.0
174.0
129.2
100.3
138.9
111.4
174.9
130.8
101.1
139.8
113.9
175.0
131.2
101.6
139.9
113.7
174.9
131.7
101.5
140.8
113.7
175.2
133.5
103.3
2 Products
3
Final products
4
Consumer goods
5
Equipment
6
Intermediate products
7 Materials
Consumer
goods
8 Durable consumer goods
9
Automotive products
10
Autos and trucks
11
Autos, consumer
12
Trucks, consumer
13
Auto parts and allied goods
14
Home goods
Appliances, A/C and TV
15
Appliances and TV
16
17
Carpeting and furniture
18
Miscellaneous home goods
Intermediate
products
36 Construction supplies
37 Business supplies
General business supplies
38
Commercial energy products
39
Materials
40 Durable goods materials
41
Durable consumer parts
42
Equipment parts
43
Durable materials n.e.c
44
Basic metal materials
130.7
130.4
149.9
154.1
45 Nondurable goods materials
46
Textile, paper, and chemical
materials
47
Textile materials
48
Pulp and paper materials
49
Chemical materials
Miscellaneous nondurable materials . . .
50
10.09
125.8
132.5
128.1
130.1
131.1
130.1
130.1
132.8
133.1
132.6
134.7
135.1
136.8
137.1
7.53
1.52
1.55
4.46
2.57
127.6
111.7
141.0
128.4
120.4
135.6
113.6
149.0
138.4
123.3
129.9
110.2
144.4
131.5
123.0
132.4
112.7
144.8
134.8
123.2
133.3
111.9
145.8
136.2
124.6
131.9
107.5
146.4
135.1
125.1
132.1
107.5
145.4
135.8
124.2
135.3
108.5
150.3
139.2
125.6
135.7
110.1
148.3
140.0
125.6
134.9
109.2
148.1
139.0
125.9
137.4
109.5
148.4
143.1
126.6
137.9
110.1
147.1
144.2
126.9
139.7
109.5
149.4
146.7
140.0
51 Energy materials
Primary energy
52
53
Converted fuel materials
11.69
7.57
4.12
99.8
105.0
90.3
101.7
107.7
90.7
100.6
104.8
93.0
100.6
105.0
92.6
101.0
106.7
90.5
99.5
104.0
91.2
101.3
105.6
93.5
102.7
106.8
95.3
103.2
106.2
97.7
101.5
106.8
91.8
101.3
106.0
92.6
102.2
108.6
90.5
102.1
108.3
90.6
100.2
A46
Domestic Nonfinancial Statistics • April 1989
2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued
Groups
SIC
code
1977
1987
1989
1988
1987
avg.
Dec.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.''
Jan.'
Index (1977 = 100)
MAJOR INDUSTRY
1 Mining and utilities.
2
Mining
3
Utilities
4 Manufacturing
5
Nondurable
6
Durable
15.79
9.83
5.96
84.21
35.11
49.10
104.3
100.7
110.3
134.6
136.7
133.1
107.3
104.6
111.7
138.9
141.3
137.3
106.8
101.5
115.6
139.5
141.1
138.4
106.7
102.7
113.3
140.0
141.7
138.8
107.1
104.7
111.0
140.8
142.3
139.7
106.0
102.6
111.6
141.8
142.1
141.5
106.8
103.0
113.2
142.1
142.6
141.7
108.1
104.3
114.4
143.6
144.6
142.9
109.0
103.8
117.8
144.0
145.1
143.2
107.2
103.7
113.0
144.4
145.3
143.8
107.2
103.1
113.9
145.3
146.3
144.6
107.7
104.5
113.1
145.9
146.7
145.2
108.2
104.5
114.1
146.6
147.6
146.0
107.1
103.3
113.2
147.4
148.6
146.5
155.1
89.4
144.7
148.1
7
8
9
10
Mining
Metal
Coal
Oil and gas extraction
Stone and earth minerals .
10
11.12
13
14
.50
1.60
7.07
.66
77.5
131.8
92.7
128.2
96.5
140.6
94.1
135.6
83.9
133.7
92.4
134.3
84.9
129.1
94.8
136.9
86.9
136.0
95.5
141.2
86.0
127.8
94.6
140.1
82.2
126.9
95.8
137.4
94.0
141.5
93.3
140.2
96.6
137.2
93.2
141.3
99.1
142.2
92.0
139.7
101.6
138.5
91.5
142.8
102.7
149.7
90.8
142.6
11
12
13
14
15
Nondurable
manufactures
Foods
Tobacco products
Textile mill products
Apparel products
Paper and products
20
21
22
23
26
7.96
.62
2.29
2.79
3.15
137.7
103.4
115.8
107.4
144.4
140.1
110.5
118.2
107.8
150.6
141.9
107.0
115.3
108.5
148.0
141.1
107.2
117.0
108.7
149.1
140.3
107.2
117.3
109.2
149.2
141.0
107.2
114.6
108.6
149.5
141.3
104.5
114.3
109.3
148.6
143.3
100.6
117.1
109.4
152.3
143.3
105.1
116.4
108.9
151.0
143.2
105.0
116.2
109.9
150.9
144.0
105.4
117.0
109.5
151.8
145.3
106.6
117.2
110.1
150.7
145.9
16
17
18
19
20
Printing and publishing
Chemicals and products
Petroleum products
Rubber and plastic products.
Leather and products
27
28
29
30
31
4.54
8.05
2.40
2.80
.53
172.0
140.1
93.5
163.6
60.0
176.9
147.9
96.1
170.6
57.5
178.7
145.4
95.9
172.3
59.7
180.4
146.4
98.4
172.2
59.5
181.8
148.9
98.5
172.3
58.0
180.7
149.1
95.2
173.4
57.1
182.3
150.5
94.1
174.4
58.9
184.9
153.4
95.0
175.4
59.1
186.7
154.8
96.0
175.3
59.4
188.0
155.3
93.7
175.3
59.9
188.1
156.7
96.3
176.9
61.0
188.8
157.3
95.0
177.5
61.9
189.5
158.1
98.1
179.0
62.5
Durable manufactures
21 Lumber and products
22 Furniture and fixtures
23 Clay, glass, and stone products.
24
25
32
2.30
1.27
2.72
130.3
152.8
119.1
133.6
159.4
120.1
139.0
158.3
121.6
137.8
159.4
122.5
138.0
159.2
121.4
139.8
160.5
121.5
136.4
161.2
123.4
136.6
162.9
122.2
133.8
164.9
122.6
133.5
164.9
122.6
137.5
164.5
123.3
139.6
165.4
124.7
141.7
166.6
125.1
33
331.2
34
35
36
5.33
3.49
6.46
9.54
7.15
111.0
81.5
70.8
152.7
172.3
90.6
81.9
115.8
161.0
175.9
86.4
77.4
117.6
163.6
177.8
85.1
74.2
118.8
164.6
176.6
85.3
74.5
118.8
167.2
178.7
89.2
78.6
119.8
170.3
179.1
87.5
74.2
120.4
171.2
179.5
91.5
80.2
121.7
173.1
181.5
90.8
78.9
122.1
174.1
182.2
93.1
81.4
122.5
174.8
181.8
94.2
83.1
122.6
173.8
183.0
93.2
81.3
124.6
175.3
182.2
92.0
79.8
125.3
176.4
182.7
125.6
176.8
182.6
37
371
9.13
5.25
129.2
111.8
128.1
110.2
128.4
109.3
130.0
113.0
130.4
114.8
133.1
119.6
132.8
119.1
131.9
116.6
131.8
117.5
132.7
118.5
134.8
121.7
135.1
122.9
137.0
126.6
136.4
125.2
372-6.9
38
39
3.87
2.66
1.46
152.8
143.9
102.6
152.4
145.5
105.6
154.5
149.2
104.4
153.0
149.7
105.1
151.5
150.5
105.9
151.5
151.3
106.0
151.4
153.0
107.6
152.7
156.4
107.8
151.3
156.8
108.3
151.9
157.8
108.5
152.7
159.9
107.7
151.7
160.0
109.0
151.1
159.5
109.7
151.6
160.2
4.17
126.6
125.6
130.7
129.0
127.6
129.7
132.1
134.6
138.8
132.2
132.8
131.5
132.6
24
25
26
27
28
Primary metals
Iron and steel
Fabricated metal products
Nonelectrical machinery..
Electrical machinery
29 Transportation equipment
30
Motor vehicles and parts
31
Aerospace and miscellaneous
transportation equipment
32 Instruments
33 Miscellaneous manufactures
Utilities
34 Electric.
117.2
152.6
191.5
99.8
94.2
Gross value (billions of 1982 dollars, annual rates)
MAJOR MARKET
1,812.2 1,820.1
1,828.6
35 Products, total.
517.5
1,735.8 1,778.8 1,797.5 1,807.5
36 Final
37
Consumer goods.
38
Equipment
39 Intermediate
405.7
272.7
133.0
111.9
1,333.8 1,359.4 1,381.1 1,385.9 1,393.9 1,397.1 1,394.3 1,398.9 1,404.2 1,404.3 1.423.5 1,424.4 1,440.2 1,450.6
866.0 881.2 893.7 893.2 899.1 898.9 893.6 895.6 900.4 897.2 915.0 916.7 932.7 941.5
467.8 478.2 487.3 492.7 494.7 498.3 500.7 503.2 503.8 507.1 508.4 507.7 507.6 509.1
402.0 419.4 416.5 421.6 418.4 423.0 419.6 423.4 424.3 424.5 430.0 429.2 433.7 437.3
1. These data also appear in the Board's G. 12.3 (414) release. For address, see
inside front cover.
A major revision of the industrial production index and the capacity
utilization rates was released in July 1985. See "A Revision of the Index of
1,813.9 1,822.3
1,828.9 1.853.4 1,853.5 1,874.0 1,887.8
Industrial Production" and accompanying tables that contain revised indexes
( 1 9 7 7 = 1 0 0 ) t h r o u g h D e c e m b e r 1 9 8 4 i n t h e F E D E R A L R E S E R V E B U L L E T I N , v o l . 71
(July 1985), pp. 487-501. The revised indexes for January through June 1985 were
shown in the September BULLETIN.
Selected Measures
2.14
A51
HOUSING A N D CONSTRUCTION
Monthly figures are at seasonally adjusted annual rates except as noted.
1988
Item
1986
1987
1988
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.'
Nov.'
Dec.
Private residential real estate activity (thousands of units)
NEW UNITS
1 Permits authorized
2
1-family
3
2-or-more-family
1,750
1,071
679
1,535
1,024
511
1,451
1,000
452
1,476
1,030
446
1,449
960
489
1,436
982
454
1,493
1,002
491
1,420
984
436
1,464
1,022
442
1,394
974
420
1,516
1,027
489
1,516
1,046
470
1,566
1,082
484
4 Started
5
1-family
6
2-or-more-family
1,805
1,179
626
1,621
1,146
474
1,488
1,080
408
l,528 r
1,169'
359 r
1,576'
1,087'
489'
1,392'
1,001'
391'
1,463'
1,088'
375'
1,478'
1,067'
411'
l ^
1,076'
383
1,463'
1,532
1,136
3%
1,567
1,138
429
1,568
1,123
445
7 Under construction, end of period 1 .
8
1-family
9
2-or-more-family
1,074
583
490
987
591
397
927
575
352
999
617
382
999
622
377
984
610
374
982
609
373
974
606
368
965
603
362
955
596
359
952
598
354
957
602
355
958
605
353
1,669
1,123
546
1,528
1,083
445
1,598
1,094
504
1,665
1,059
606
1,450
1,090
360
1,518
1,106
412
1,529
1,077
452
1,538
1,072
466
1,533
1,089
444
1,516
1,086
430
1,432
1,038
394
1,517
1,085
432
10 Completed
11
1-family
12
2-or-more-family
1,756
1,120
636'
424'
13 Mobile homes shipped
244
233
218
213'
215'
221'
227'
207'
223
224'
216
227
225
Merchant builder activity in
1-family units
14 Number sold
15 Number for sale, end of period
748
357
672
365
677
366
664
372
681
367
681
370
718
367
703
365
714
363
691'
361'
722
354
665
364
669
366
Price (thousands
Median
Units sold
Average
17
Units sold
of dollars f
16
92.2
104.7
113.3
108.9
111.0
110.0
111.5
118.0
110.0
116.6'
113.0
110.3
121.0
112.2
127.9
139.3
133.2
135.6
133.5
136.5
141.3
140.6
142.7'
136.8
137.0
152.2
3,566
3,530
3,624
3,330
3,520
3,590
3,820
3,630
3,710
3,670
3,670
3,670
3,920
80.3
98.3
85.6
106.2
88.7
111.9
87.9
110.7
87.3
108.7
88.8
111.9
90.2
115.4
90.7
114.8
91.4
115.1
88.2
112.3
88.1
110.9
88.0
111.8
88.7
112.0
EXISTING UNITS (1-family)
18 Number sold
Price of units sold
(thousands of dollars)
19 Median
20 Average
Value of new construction 3 (millions of dollars)
CONSTRUCTION
21 Total put in place
72 Private
73
Residential
Nonresidential, total
2,4
Buildings
Industrial
75
Commercial
76
Other
77
Public utilities and other
28
79 Public
Military
30
31
Highway
Conservation and d e v e l o p m e n t . , .
32
Other
33
386,093
398,848
403,371
403,555
396,238
398,473
395,714
404,164
403,172
406,906
408,184
412,436
422,695
314,651
187,147
127,504
323,819
194,772
129,047
325,103
195,180
129,923
324,257
195,554
128,703
318,515
192,026
126,489
320,194
190,374
129,820
317,708
188,071
129,637
324,658
194,215
130,443
326,763
195,393
131,370
327,164
196,945
130,219
330,291
199,567
130,724
331,900
200,269
131,631
335,929
200,922
135,007
13,747
56,762
13,216
43,779
13,707
55,448
15,464
44,428
14,256
55,739
16,789
43,139
14,546
54,843
17,301
42,013
13,849
56,169
16,382
40,089
13,907
57,447
16,847
41,619
13,676
56,585
16,757
42,619
13,928
56,687
16,166
43,662
14,006
56,404
16,613
44,347
13,546
55,815
16,600
44,258
15,234
54,706
17,132
43,652
16,032
53,881
16,7%
44,922
15,059
57,359
17,399
45,190
71,437
3,868
22,681
4,646
40,242
75,028
4,327
22,758
5,162
42,781
78,266
4,077
25,777
4,519
43,893
79,298
4,216
26,963
4,899
43,220
77,723
3,872
26,912
4,226
42,713
78,278
3,547
25,254
4,460
45,017
78,007
4,844
24,822
4,596
43,745
79,506
4,350
27,673
4,861
42,622
76,409
3,984
23,491
4,793
44,141
79,742
4,897
23,841
5,045
45,959
77,893
3,659
25,997
3,927
44,310
80,536
3,932
26,724
3,829
46,051
86,766
4,147
31,976
4,389
46,254
1. Not at annual rates.
2. N o t seasonally adjusted.
3. Value of new construction data in recent periods may not be strictly
comparable with data in previous periods because of changes by the Bureau of the
Census in its estimating techniques. For a description of these changes see
Construction Reports (C-30-76-5),
issued by the Bureau in July 1976.
NOTE. Census Bureau estimates for all series except (1) mobile homes, which
are private, domestic shipments as reported by the Manufactured Housing
Institute and seasonally adjusted by the Census Bureau, and (2) sales and prices
of existing units, which are published by the National Association of Realtors. All
back and current figures are available from the originating agency. Permit
authorizations are those reported to the Census Bureau from 16,000 jurisdictions
beginning with 1978.
A46
2.15
Domestic Nonfinancial Statistics • April 1989
C O N S U M E R A N D P R O D U C E R PRICES
Percentage changes based on seasonally adjusted data, except as noted
Change from 12
months earlier
Change from 3 months earlier
(at annual rate)
Item
Change from 1 month earlier
1988r
1988
Jan.
1988r
1989
1989
Jan.
Mar.
June
Sept.
Dec.
Sept.
Oct.
Nov.
Dec.
Jan.
Index
level
Jan.
19891
CONSUMER PRICES2
(1982-84=100)
1 All items
4.0
4.7
3.9
4.9
4.8
4.1
.4
.4
.3
.3
.6
121.1
2 Food
i Energy items
4 All items less food and energy
J
Commodities
6
Services
3.2
4.2
4.3
3.4
4.8
5.6
1.8
4.6
4.2
5.0
2.5
-4.0
5.4
4.7
5.6
6.4
3.7
4.3
3.9
4.5
8.8
2.7
4.3
3.1
4.8
3.0
-.4
4.9
4.2
5.4
.7
-.2
.5
.7
.3
.2
-.1
.5
.5
.5
.2
.3
.3
.3
.4
.3
-.3
.4
.3
.5
.7
.8
.5
.5
.5
122.2
89.0
126.4
117.9
131.4
PRODUCER PRICES
(1982=100)
7 Finished goods
8
Consumer foods
Consumer energy
9
10
Other consumer goods
11
Capital equipment
2.2
2.3
2.1
2.9
1.3
4.4
5.4
2.9
4.5
3.6
4.2
6.8
-7.0
5.3
3.6
3.0
5.5
-5.2
3.5
2.9
5.7
9.2
-2.7
5.9
6.1
3.0
2.1
2.1
4.4
1.4
.6
.9
-.8
.4
.9
.0
.2
.0
.0
-.3
.3
.3
.5
.3
.3
.5
.1
.0
.7
.3
1.0
1.1
4.9
.4
.6
111.0
116.5
60.9
121.8
117.0
12 Intermediate materials 3
13
Excluding energy
5.1
5.9
5.8
6.8
5.1
8.2
7.4
6.9
4.6
7.2
4.5
6.7
.4
.5
.1
.5
.6
.7
.5
.4
.9
.6
110.2
119.4
5.9
-1.8
22.9
15.6
.6
6.6
18.5
-24.1
17.3
21.3
7.8
-6.5
29.1
-27.0
8.5
-7.9
12.9
5.8
2.0
-2.1
-.5
-.1
-1.9
.1
-4.0
-1.4
.5
2.1
6.5
.7
2.2
6.7
2.2
112.4
71.2
137.7
14
15
16
Crude materials
Foods
Energy
Other
1. Not seasonally adjusted.
2. Figures for consumer prices are those for all urban consumers and reflect a
rental equivalence measure of homeownership after 1982.
3. Excludes intermediate materials for food manufacturing and manufactured
animal feeds.
SOURCE. Bureau of Labor Statistics.
Selected Measures
2.16
A53
GROSS N A T I O N A L PRODUCT A N D INCOME
Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates.
1988
1987
Account
1986
1987
1988r
Q4
Ql
Q2
Q3
Q4'
GROSS NATIONAL PRODUCT
4,240.3
4,526.7
4,863.1
4,662.8
4,724.5
4,823.8
4,909.0
4,995.2
2,807.5
406.5
943.6
1,457.3
3,012.1
421.9
997.9
1,592.3
3,227.2
451.1
1,047.4
1,728.7
3,076.3
422.0
1,012.4
1,641.9
3,128.1
437.8
1,016.2
1,674.1
3,194.6
449.8
1,036.6
1,708.2
3,261.2
452.9
1,060.8
1,747.5
3,325.1
464.0
1,076.1
1,785.0
665.9
650.4
433.9
138.5
295.4
216.6
712.9
673.7
446.8
139.5
307.3
226.9
766.1
717.5
487.8
142.9
344.8
229.8
764.9
692.9
464.1
147.7
316.3
228.8
763.4
698.1
471.5
140.1
331.3
226.6
758.1
714.4
487.8
142.3
345.5
226.5
772.5
722.8
493.7
143.8
349.9
229.1
770.4
734.8
498.0
145.3
352.6
236.8
15.5
17.4
39.2
40.7
48.6
42.4
72.0
72.8
65.3
49.4
43.7
33.1
49.7
41.9
35.6
45.2
-104.4
378.4
482.8
-123.0
428.0
551.1
-94.3
520.2
614.5
-125.7
459.7
585.4
-112.1
487.8
599.9
-90.4
507.1
597.5
-80.0
536.1
616.0
-94.8
549.7
644.5
871.2
366.2
505.0
924.7
382.0
542.8
964.1
380.5
583.6
947.3
391.4
555.9
945.2
377.7
567.5
961.6
382.2
579.4
955.3
367.7
587.6
994.5
394.4
600.1
4,224.7
1,697.9
725.3
972.6
2,118.3
424.0
4,487.5
1,792.5
776.3
1,016.3
2,295.7
438.4
4,814.6
1,939.3
858.0
1,081.3
2,476.4
447.5
4,590.7
1,849.3
808.7
1,040.7
2,363.9
449.5
4,659.2
1,879.5
819.3
1,060.1
2,405.2
439.9
4,780.1
1,928.0
849.5
1,078.5
2,451.5
444.3
4,859.3
1,960.1
881.6
1,078.5
2,501.6
447.3
4,959.6
1,989.5
881.6
1,107.9
2,547.2
458.5
15.5
4.3
11.3
39.2
26.6
12.6
48.6
31.1
17.5
72.0
50.5
21.6
65.3
26.6
38.6
43.7
17.8
25.9
49.7
45.1
4.6
35.6
34.7
0.9
3,721.7
3,847.0
3,995.1
3,923.0
3,956.1
3,985.2
4,009.4
4,029.7
30 Total
3,437.1
3,678.7
3,965.0
3,802.0
3,850.8
3,928.8
4,000.7
n.a.
31 Compensation of employees
32
Wages and salaries
Government and government enterprises
33
Other
34
35
Supplement to wages and salaries
Employer contributions for social insurance
36
37
Other labor income
2,507.1
2,094.0
393.7
1,700.3
413.1
217.0
196.1
2,683.4
2,248.4
420.1
1,828.3
435.0
227.1
207.9
2,905.2
2,437.3
446.1
1,991.2
467.8
249.6
218.3
2,769.9
2,324.8
429.2
1,895.6
445.1
232.7
212.4
2,816.4
2,358.7
437.1
1,921.6
457.7
243.1
214.6
2,874.0
2,410.0
442.9
1,967.1
464.0
247.5
216.5
2,933.2
2,462.0
449.1
2,012.9
471.1
251.7
219.5
2,997.2
2,518.7
455.4
2,063.3
478.5
256.0
222.5
286.7
250.3
36.4
312.9
270.0
43.0
324.7
288.5
36.3
326.0
279.0
47.0
323.9
279.2
44.7
328.8
285.3
43.4
321.6
290.7
30.9
324.7
298.6
26.1
1 Total
2
3
4
5
By source
Personal consumption expenditures
Durable goods
Nondurable goods
Services
6 Gross private domestic investment
7
Fixed investment
8
Nonresidential
9
Structures
10
Producers' durable equipment
Residential structures
11
12
13
Change in business inventories
Nonfarm
14 Net exports of goods and services
15
Exports
Imports
16
17 Government purchases of goods and services
18
Federal
19
State and local
By major type of
70 Final sales, total
21
Goods
Durable
73
Nondurable
74
Services
Structures
25
product
n
26 Change in business inventories
27
Durable goods
28
Nondurable goods
MEMO
29 Total GNP in 1982 dollars
NATIONAL INCOME
38 Proprietors' income 1
39
Business and professional 1
40
Farm 1
41 Rental income of persons 2
12.4
18.4
19.5
20.5
20.5
19.1
19.7
18.6
42 Corporate profits
43
Profits before tax 3
44
Inventory valuation adjustment
45
Capital consumption adjustment
298.9
236.4
8.3
54.2
310.4
276.7
-18.0
51.7
323.8
302.1
-23.9
45.6
316.1
281.9
-18.2
52.4
316.2
286.2
-19.4
49.4
326.5
305.9
-27.4
48.0
330.0
313.9
-29.3
45.4
n.a.
n.a.
-19.6
39.7
46 Net interest
331.9
353.6
391.9
369.5
373.9
380.6
396.2
416.7
1
1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustment.
3. For after-tax profits, dividends, and the like, see table 1.48.
SOURCE. Survey of Current Business (Department of Commerce).
A46
2.17
Domestic Nonfinancial Statistics • April 1989
PERSONAL INCOME A N D SAVING
Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted.
1988
1987
Account
1986
1987
Q4
Ql
Q2
Q3
Q4 r
PERSONAL INCOME AND SAVING
1 Total personal income
3,531.1
3,780.0
4,063.4
3,906.8
3,951.4
4,022.4
4,094.0
4,185.5
2 Wage and salary disbursements
3
Commodity-producing industries
4
Manufacturing
5
Distributive industries
6
Service industries
7
Government and government enterprises
2,094.0
625.5
473.1
498.9
575.9
393.7
2,248.4
649.8
490.3
531.7
646.8
420.1
2,437.3
695.6
522.6
578.9
716.8
446.1
2,325.1
665.5
501.3
547.3
682.8
429.5
2,358.7
676.0
509.6
558.2
687.4
437.1
2,410.0
689.1
517.4
572.1
705.9
442.9
2,462.0
701.3
525.9
585.8
725.8
449.1
2,518.7
716.1
537.7
599.4
747.8
455.4
196.1
286.7
250.3
36.4
12.4
82.8
499.1
521.1
269.3
207.9
312.9
270.0
43.0
18.4
88.6
527.0
548.8
282.9
218.3
324.7
288.5
36.3
19.5
96.3
576.3
586.0
301.8
212.4
326.0
279.0
47.0
20.5
91.9
550.0
556.8
286.5
214.6
323.9
279.2
44.7
20.5
93.5
554.2
576.3
298.1
216.5
328.8
285.3
43.4
19.1
95.0
563.7
582.8
300.4
219.5
321.6
290.7
30.9
19.7
97.3
581.9
588.6
303.1
222.5
324.7
298.6
26.1
18.6
99.4
605.5
596.3
305.7
8 Other labor income
9 Proprietors' income 1
10
Business and professional
11
Farm 1
12 Rental income of persons
14 Personal interest income
16
Old-age survivors, disability, and health insurance benefits . . .
17
LESS: Personal contributions for social insurance
18 EQUALS: Personal income
161.1
172.0
195.1
175.9
190.2
193.5
196.7
200.1
3,531.1
3,780.0
4,063.4
3,906.8
3,951.4
4,022.4
4,094.0
4,185.5
511.4
570.3
590.4
591.0
575.8
601.0
586.5
598.2
20 EQUALS: Disposable personal income
3,019.6
3,209.7
3,473.0
3,315.8
3,375.6
3,421.5
3,507.5
3,587.4
21
LESS: Personal outlays
2,898.0
3,105.5
3,327.2
3,171.8
3,225.7
3,293.6
3,361.8
3,427.6
22 EQUALS: Personal saving
121.7
104.2
145.8
144.0
149.9
127.8
145.7
159.8
15,401.2
10,160.1
10,929.0
4.0
15,772.9
10,336.2
11,012.0
3.2
16,227.1
10,528.4
11,331.0
4.2
16,031.9
10,346.1
11,145.0
4.3
16,127.6
10,435.4
11,260.0
4.4
16,213.2
10,492.3
11,237.0
3.7
16,265.3
10,563.1
11,362.0
4.2
16,308.0
10,627.3
11,465.0
4.5
27 Gross saving
537.2
560.4
642.2
603.4
627.0
634.1
665.4
28 Gross private saving
681.6
121.7
104.1
8.3
665.3
104.2
81.1
-18.0
730.6
145.8
78.4
-23.9
714.1
144.0
80.5
-18.2
726.3
149.9
78.1
-19.4
711.2
127.8
80.1
-27.4
732.9
145.7
79.5
-29.3
n.a.
159.8
n.a.
-19.6
282.4
173.5
297.5
182.5
315.7
190.7
303.7
185.8
309.8
188.5
313.3
189.9
316.8
190.9
322.9
193.3
-144.4
-205.6
61.2
-104.9
-157.8
52.9
-88.4
-143.3
54.9
-110.7
-160.4
49.7
-99.2
-155.1
55.8
-77.1
-133.3
56.2
-67.5
-123.5
56.0
523.6
552.3
630.1
597.0
612.0
629.0
651.4
628.2
665.9
-142.4
712.9
-160.6
766.1
-135.9
764.9
-167.8
763.4
-151.3
758.1
-129.1
772.5
-121.1
770.4
-142.2
-13.6
-8.1
-12.0
-6.4
-15.0
-5.1
-14.0
-14.0
19
LESS: Personal tax and nontax payments
MEMO
Per capita (1982 dollars)
23
Gross national product
24
Personal consumption expenditures
25
Disposable personal income
26 Saving rate (percent)
GROSS SAVING
30 Undistributed corporate profits 1
31 Corporate inventory valuation adjustment
Capital consumption
34
allowances
Government surplus, or deficit ( - ) , national income and
38 Gross private domestic
39 Net foreign
40 Statistical discrepancy
1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustment.
SOURCE. Survey of Current Business
(Department of Commerce).
n.a.
n.a.
n.a.
n.a.
Summary Statistics
3.10
U.S. INTERNATIONAL TRANSACTIONS
A55
Summary
Millions of dollars; quarterly data are seasonally adjusted except as noted. 1
1987
Item credits or debits
1 Balance on current account
2
Not seasonally adjusted
3
Merchandise trade balance
4
Merchandise exports
5
Merchandise imports
6
Military transactions, net
7
Investment income, net
8
Other service transactions, net
9
Remittances, pensions, and other transfers
10
U.S. government grants (excluding military)
11 Change in U.S. government assets, other than official
reserve assets, net (increase, - )
Q3
Q4
Ql
Q2
Q3"
249,570
-409,850
-2,369
20,374
1,755
-3,434
-10,011
-41,%7
-47,330
-39,665
64,902
-104,567
-851
1,067
87
-855
-2,125
-33,523
-31,803
-41,192
68,013
-109,205
12,539
479
-828
-3,545
-36,938
-32,179
-35,184
75,300
-110,484
-1,033
1,159
1,241
-882
-2,239
-33,739
-34,606
-30,151
79,606
-109,757
-914
-1,940
2,017
-793
-1,958
-30,894
-37,029
-28,533
82,306
-110,839
-934
-337
2,028
-806
-2,312
-115,102
-138,827
-153,964
— i 22,148
215,935
-338,083
-3,431
25,936
-449
-3,786
-11,223
-i44,547
223,%9
-368,516
-4,372
23,143
2,257
-3,571
-11,738
-i60,280
-1,261
-2,829
-2,000
1,162
252
1,012
-814
-801
1,931
12 Change in U.S. official reserve assets (increase, - )
13
Gold
14
Special drawing rights (SDRs)
15
Reserve position in International Monetary Fund
16
Foreign currencies
-3,858
312
9,149
32
3,741
39
-7,380
0
0
0
0
0
1,503
0
-897
908
-3,869
-246
1,500
-942
-509
2,070
7,588
-210
407
-165
-205
722
3,225
155
446
901
0
180
69
-210
17 Change in U.S. private assets abroad (increase, - )
18
Bank-reported claims
19
Nonbank-reported claims
20
U.S. purchase of foreign securities, net
21
U.S. direct investments abroad, net
-25,949
-1,323
923
-7,481
-18,068
-%,303
-59,975
-4,220
-4,297
-27,811
-86,298
-40,531
3,145
-4,456
-44,456
-25,576
-16,519
-215
-972
-7,870
-43,645
-23,460
1,248
-1,757
-19,676
5,903
17,108
-315
-4,467
-6,423
-18,210
-13,274
-7,061
1,529
5%
-34,181
-27,023
-1,196
-838
-301
767
645
-1,469
35,507
34,364
-1,214
2,054
1,187
-884
44,968
43,361
1,570
-2,824
3,901
-1,040
611
842
714
-287
-34
-624
20,047
19,243
662
24,670
27,701
-121
-123
-1.954
-833
5,946
5,863
202
-570
-2,902
-3,706
572
-354
1,094
-508
131,0%
41,045
-366
20,433
50,%2
19,022
185,746
79,783
-2,906
3,809
70,%9
34,091
166,521
87,778
2,150
-7,5%
42,213
41,976
71,047
46,153
-116
-2,835
12,819
15,026
1,395
-17,233
2,015
6,887
2,379
7,347
59,549
31,121
113
5,457
9,797
13,061
0
-35
202
-7,547
-1,521
-5,637
22 Change in foreign official assets in United States (increase,
+)
23
24
25
26
27
U.S. Treasury securities
Other U.S. government obligations
Other U.S. government liabilities
Other U.S. liabilities reported by U.S. banks 3
Other foreign official assets 5
108
-223
257
868
-417
28 Change in foreign private assets in United States (increase,
+)
29
30
31
32
33
4
U.S. bank-reported liabilities*
U.S. nonbank-reported liabilities
Foreign private purchases of U.S. Treasury securities, net
Foreign purchases of other U.S. securities, net
Foreign direct investments in United States, net
34 Allocation of SDRs
35 Discrepancy
36
Owing to seasonal adjustments
37
Statistical discrepancy in recorded data before seasonal
adjustment
36,025
29,764
-1,000
4%
-4,977
11,742
50,928
30,434
''4,322
8,043
8,129
0
0
0
0
0
0
0
0
17,839
15,566
18,461
-4,399
-4,658
16,342
3,138
4,282
3,747
-12,784
-3,585
22,498
-5,205
17,839
15,566
18,461
-9,199
27,703
13,204
MEMO
Changes in official assets
U.S. official reserve assets (increase, —)
Foreign official assets in United States (increase, + )
excluding line 25
40 Change in Organization of Petroleum Exporting Countries
official assets in United States (part of line 22
above)
41 Transfers under military grant programs (excluded from
lines 4, 6, and 10 above)
38
39
-3,858
312
9,149
— 1,963
33,453
47,792
-6,709
-9,327
-9,956
46
101
58
1. Seasonal factors are not calculated for lines 6, 10, 12-16, 18-20, 22-34, and
38-41.
2. Data are on an international accounts (IA) basis. Differs from the Census
basis data, shown in table 3.11, for reasons of coverage and timing. Military
exports are excluded from merchandise data and are included in line 6.
3. Reporting banks include all kinds of depository institutions besides commercial banks, as well as some brokers and dealers.
3,741
1,503
39
-7,380
19,939
24,793
6,516
-2,548
-1,723
-2,750
-1,375
-1,783
-423
13
12
45
4
5
32
4. Primarily associated with military sales contracts and other transactions
arranged with or through foreign official agencies.
5. Consists of investments in U.S. corporate stocks and in debt securities of
private corporations and state and local governments.
NOTE. Data are from Bureau of Economic Analysis, Survey of Current
Business (Department of Commerce).
A56
3.11
International Statistics • April 1989
U.S. FOREIGN TRADE 1
Millions of dollars; monthly data are seasonally adjusted.
1988
Item
1986
1987
1988
June
July
Aug.
Sept.
Oct.
Nov/
Dec.
E X P O R T S of domestic and foreign
merchandise excluding grant-aid
shipments, f.a.s. value
227,159
254,122
322,225
26,283
26,516
27,493
27,989
27,816
27,542
29,192
2
3
G E N E R A L IMPORTS including
merchandise for immediate
consumption plus entries into
bonded w a r e h o u s e s
C . I . F . value
Customs value
382,295
365,438
424,442
406,241
459,565
440,940
39,499
37,948
35,989
34,533
39,763
38,140
38,662
37,178
38,078
36,600
39,760
38,200
41,086
39,419
4
5
Trade balance
C.I.F. value
Customs value
-155,137
-138,279
-170,320
-152,119
-137,340
-118,716
-13,216
-11,665
-9,473
-8,017
-12,270
-10,647
-10,673
-9,189
-10,262
-8,784
-12,218
-10,658
-11,894
-10,227
1
1. The C e n s u s basis data differ from merchandise trade data s h o w n in table
3.10, U . S . International Transactions Summary, for reasons of coverage and
timing. On the export side, the largest adjustment is the exclusion of military sales
(which are combined with other military transactions and reported separately in
the " s e r v i c e a c c o u n t " in table 3.10, line 6). On the import side, additions are made
for gold, ship purchases, imports of electricity from Canada, and other transac-
3.12
tions; military payments are e x c l u d e d and s h o w n separately as indicated a b o v e .
A s of Jan. 1, 1987 c e n s u s data are released 45 d a y s after the end o f the month; the
previous month is revised to reflect late d o c u m e n t s . Total e x p o r t s and the trade
balance reflect adjustments for u n d o c u m e n t e d e x p o r t s t o Canada.
SOURCE. FT900 "Summary of U . S . Export and Import Merchandise Trade"
(Department of C o m m e r c e , Bureau of the Census).
U.S. RESERVE ASSETS
Millions of dollars, end of period
1989
Type
July
Aug.
Sept.
Oct.
Nov.
Jan."
43,186
48,511
45,798
43,876
47,778
47,788
50,204
48,944
47,802
48,190
11,090
11,064
11,078
11,063
11,061
11,062
11,062
11,059
11,057
11,056
7,293
8,395
10,283
8,984
9,058
9,074
9,464
9,785
9,637
9,388
R e s e r v e position in International
Monetary Fund
11,947
11,730
11,349
9,773
9,642
9,637
10,075
10,103
9,745
9,422
Foreign currencies 4
12,856
17,322
13,088
14,056
18,017
18,015
19,603
17,997
17,363
18,324
2
Gold stock, including Exchange
Stabilization Fund 1
3
Special drawing rights2,3
4
5
1. Gold held under earmark at Federal Reserve Banks for foreign and international a c c o u n t s is not included in the gold stock of the United States; s e e table
3.13. Gold stock is valued at $42.22 per fine troy ounce.
2. Beginning July 1974, the I M F adopted a technique for valuing the S D R based
on a weighted average of exchange rates for the currencies of member countries.
From July 1974 through D e c e m b e r 1980, 16 currencies were used; from January
1981, 5 currencies have b e e n used. The U . S . SDR holdiings and reserve position
in the I M F also are valued o n this basis beginning July 1974.
3.13
3. Includes allocations by the International Monetary Fund of S D R s as follows:
$867 million o n Jan. 1, 1970; $717 million o n Jan. 1, 1971; $710 million o n Jan. 1,
1972; $1,139 million o n Jan. 1, 1979; $1,152 million o n Jan. 1, 1980; and $1,093
million o n Jan. 1, 1981; plus transactions in S D R s .
4. Valued at current market e x c h a n g e rates.
FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS 1
Millions of dollars, end of period
1988
Assets
1985
1986
July
1 Deposits
Assets held in custody
2 U . S . Treasury securities 2
3 Earmarked gold
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
p
480
287
244
269
230
338
301
251
347
279
121,004
14,245
155,835
14,048
195,126
13,919
223,296
13,666
221,715
13,658
221,119
13,653
226,533
13,637
229,926
13,640
232,547
13,636
228,399
13,635
1. E x c l u d e s deposits and U . S . Treasury securities held for international and
regional organizations.
2. Marketable U . S . Treasury bills, n o t e s , and bonds; and nonmarketable U . S .
Treasury securities payable in dollars and in foreign currencies.
1989
1987
3. Earmarked gold and the gold stock are valued at $42.22 per fine troy o u n c e ,
Earmarked gold is gold held for foreign and international accounts and is not
included in the gold stock of the U n i t e d States.
Summary Statistics
3.14
FOREIGN B R A N C H E S OF U . S . B A N K S
A57
Balance Sheet Data 1
Millions of dollars, end of period
1988
Asset account
1985
1986
1987
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
All foreign countries
1 Total, all currencies
2 Claims on United States
Parent bank
3
4
Other banks in United States
5
Nonbanks
6 Claims on foreigners
7
Other branches of parent bank
Banks
8
9
Public borrowers
10
Nonbank foreigners
11 Other assets
458,012
456,628
518,618
487,677
488,283
487,895
490,582
493,728
512,361'
505,271
119,706
87,201
13,057
19,448
315,676
91,399
102,960
23,478
97,839
114,563
83,492
13,685
17,386
312,955
96,281
105,237
23,706
87,731
138,034
105,845
16,416
15,773
342,520
122,155
108,859
21,832
89,674
140,932
104,405
14,424
22,103
311,308
106,722
100,669
20,438
83,479
147,662
109,929
15,954
21,779
305,556
103,646
99,660
19,276
82,974
157,021
117,525
16,176
23,320
295,270
98,299
98,982
18,709
79,280
155,386
115,286
16,121
23,979
298,466
102,355
98,563
18,444
79,104
155,432 r
115,954
14,744 r
24,734
300,954 r
100,609
102,057 r
18,205
80,083
169,458'
129,0%
16,075'
24,287
304,895'
105,121
100,608'
18,170
80,996
168,483
130,063
15,046
23,374
300,253
107,461
97,279
17,077
78,436
22,630
29,110
38,064
35,437
35,065
35,604
36,730
37,342
38,008'
36,535
12 Total payable in U.S. dollars
336,520
317,487
350,107
334,990
336,233
342,906
340,901
337,346
351,654'
357,653
13 Claims on United States
14
Parent bank
15
Other banks in United States
Nonbanks
16
17 Claims on foreigners
18
Other branches of parent bank
19
Banks
20
Public borrowers
21
Nonbank foreigners
116,638
85,971
12,454
18,213
210,129
72,727
71,868
17,260
48,274
110,620
82,082
12,830
15,708
195,063
72,197
66,421
16,708
39,737
132,023
103,251
14,657
14,115
202,428
88,284
63,707
14,730
35,707
135,348
101,422
13,661
20,265
183,568
79,774
55,234
13,851
34,709
141,415
106,792
14,434
20,189
179,076
78,071
54,189
13,247
33,569
151,581
114,943
14,901
21,737
174,433
73,792
54,839
12,933
32,869
149,764
112,621
14,687
22,456
174,271
76,506
52,503
12,770
32,492
149,713'
113,569
13,265 r
22,879
171,566'
73,508
54,642'
12,616
30,800
162,988'
125,954
14,771'
22,263
171,862'
75,866
53,483'
12,234
30,279
162,827
127,136
14,288
21,403
178,428
81,023
55,285
11,959
30,161
9,753
11,804
15,656
16,074
15,742
16,892
16,866
16,067
16,804'
16,398
22 Other assets
United Kingdom
23 Total, all currencies
148,599
140,917
158,695
151,835
151,017
149,646
147,329
155,580
159,556
155,981
24 Claims on United States
25
Parent bank
Other banks in United States
26
Nonbanks
27
28 Claims on foreigners
Other branches of parent bank
29
30
Banks
Public borrowers
31
Nonbank foreigners
32
33,157
26,970
1,106
5,081
110,217
31,576
39,250
5,644
33,747
24,599
19,085
1,612
3,902
109,508
33,422
39,468
4,990
31,628
32,518
27,350
1,259
3,909
115,700
39,903
36,735
4,752
34,310
33,852
28,535
1,322
3,995
107,856
32,446
37,108
4,742
33,560
35,708
30,615
1,064
4,029
105,594
30,228
37,805
4,665
32,8%
36,307
30,767
1,197
4,343
103,527
29,656
38,259
4,543
31,069
32,048
26,661
1,238
4,149
105,824
31,758
38,848
4,250
30,968
36,210
30,569
994
4,647
109,793
33,103
40,236
4,190
32,264
39,222
33,138
1,343
4,741
110,356
33,243
40,875
4,276
31,962
40,030
34,190
1,117
4,723
106,307
35,404
36,870
3,963
30,070
33 Other assets
34 Total payable in U.S. dollars
35 Claims on United States
Parent bank
36
Other banks in United States
37
Nonbanks
38
39 Claims on foreigners
Other branches of parent bank
40
Banks
41
42
Public borrowers
Nonbank foreigners
43
44 Other assets
5,225
6,810
10,477
10,127
9,715
9,812
9,457
9,577
9,978
9,644
KM,626
95,028
100,574
95,326
94,492
96,767
93,790
99,868
101,341
102,790
32,092
26,568
1,005
4,519
73,475
26,011
26,139
3,999
17,326
23,193
18,526
1,475
3,192
68,138
26,361
23,251
3,677
14,849
30,439
26,304
1,044
3,091
64,560
28,635
19,188
3,313
13,424
31,855
27,672
1,069
3,114
57,%9
23,843
17,477
3,188
13,461
33,795
29,706
870
3,219
55,832
22,549
18,025
3,133
12,125
34,535
29,837
1,039
3,659
57,037
22,465
19,165
3,105
12,302
30,116
25,692
910
3,514
58,474
24,472
19,066
3,022
11,914
34,134
29,667
606
3,861
61,034
25,703
20,488
2,984
11,859
36,881
32,115
849
3,917
59,405
25,574
19,452
2,898
11,481
37,952
33,199
958
3,795
60,397
28,253
18,587
2,840
10,717
3,059
3,697
5,575
5,502
4,865
5,195
5,200
4,700
5,055
4,441
155,265
164,942'
170,977
104,211'
71,916
13,774'
18,521
54,070'
17,016
25,306'
5,862
5,886
104,751
73,669
13,272
17,810
59,223
18,460
28,576
5,825
6,362
Bahamas and Caymans
45 Total, all currencies
46 Claims on United States
Parent bank
47
Other banks in United States
48
Nonbanks
49
50 Claims on foreigners
Other branches of parent bank
51
52
Banks
53
Public borrowers
Nonbank foreigners
54
55 Other assets
56 Total payable in U.S. dollars
142,055
142,592
160,321
159,718
160,516
165,771
164,313
74,864
50,553
11,204
13,107
63,882
19,042
28,192
6,458
10,190
78,048
54,575
11,156
12,317
60,005
17,2%
27,476
7,051
8,182
85,318
60,048
14,277
10,993
70,162
21,277
33,751
7,428
7,706
88,116
58,579
12,236
17,301
65,855
24,745
27,650
6,835
6,625
92,308
61,397
13,863
17,048
62,508
22,797
26,120
6,457
7,134
99,090
67,034
13,907
18,149
60,822
20,789
26,866
6,185
6,982
99,541
66,607
13,878
19,056
57,887
20,320
24,545
6,219
6,803
3,309
4,539
4,841
5,747
5,700
5,859
6,885
6,334
6,661'
7,003
136,794
136,813
151,434
152,219
152,685
157,975
156,409
147,481
157,147'
163,857
1. Beginning with June 1984 data, reported claims held by foreign branches
have been reduced by an increase in the reporting threshold for "shell" branches
94,452'
62,709
12,504'
19,239
54,479'
17,331
25,312'
6,045
5,791
from $50 million to $150 million equivalent in total assets, the threshold now
applicable to all reporting branches.
A58
International Statistics • April 1989
3.14—Continued
1988
Liability account
1986
1987
July
Aug,
Sept.
Oct.
Nov.
All foreign countries
57 Total, all currencies
458,012
456,628
518,618
487,677
488,283
487,895
490,582
493,728
512,361 r
505,271
58 Negotiable CDs
59 To United States
60
Parent bank
61
Other banks in United States ,
62
Nonbanks
34,607
156,281
84,657
16,894
54,730
31,629
152,465
83,394
15,646
53,425
30,929
161,390
87,606
20,559
53,225
29,485
156,294
87,260
14,680
54,354
30,159
159,009
84,196
15,310
59,503
31,203
164,401
88,819
16,356
59,226
28,953
165,492
94,953
14,272
56,267
27,%9
161,783
95,427
14,029
52,327
30,734
172,644''
104,555'
13,567'
54,522'
28,511
185,986
114,903
14,854
56,229
63 To foreigners
64
Other branches of parent bank
65
Banks
66
Official institutions
67
Nonbank foreigners
68 Other liabilities
245,939
89,529
76,814
19,520
60,076
21,185
253,775
95,146
77,809
17,835
62,985
18,759
304,803
124,601
87,274
19,564
73,364
21,496
280,939
110,429
82,380
17,159
70,971
20,959
277,776
107,084
83,086
16,628
70,978
21,339
270,678
100,538
80,606
17,232
72,302
21,613
274,822
106,284
80,382
16,911
71,245
21,315
281,143
106,010
81,946
18,786
74,401
22,833
285,460'
110,637'
82,308'
17,743
74,772
23,523'
270,364
110,762
72,792
15,182
71,628
20,410
69 Total payable in U.S. dollars
353,712
336,406
361,438
341,411
341,539
346,185
348,248
343,233
359,426'
366,796
70 Negotiable CDs
71 To United States
72
Parent bank
73
Other banks in United States ,
74
Nonbanks
31,063
150,905
81,631
16,264
53,010
28,466
144,483
79,305
14,609
50,569
26,768
148,442
81,783
19,155
47,504
25,015
144,464
80,752
13,256
50,456
24,870
147,551
77,503
14,011
56,037
26,128
152,745
81,710
15,153
55,882
24,353
154,647
88,413
13,153
53,081
23,218
150,497
88,447
12,868
49,182
26,130
159,287'
%,229'
12.23C
50,828'
24,045
173,558
107,353
13,523
52,682
75 To foreigners
76
Other branches of parent bank
77
Banks
78
Official institutions
79
Nonbank foreigners
80 Other liabilities
163,583
71,078
37,365
14,359
40,781
8,161
156,806
71,181
33,850
12,371
39,404
6,651
177,711
90,469
35,065
12,409
39,768
8,517
162,056
83,493
28,909
9,571
40,083
9,876
158,901
81,144
28,495
9,354
39,908
10,217
156,358
75,014
30,041
9,938
41,365
10,954
158,325
79,450
29,341
9,207
40,327
10,923
158,514
78,423
28,831
10,624
40,636
11,004
162,518'
81,137'
30,805'
9,121
41,455
11,491'
160,165
83,523
28,765
8,222
39,655
9,028
159,556
155,981
United Kingdom
81 Total, all currencies
148,599
140,917
158,695
151,835
151,017
149,646
147,329
155,580
82 Negotiable CDs
83 To United States
84
Parent bank
85
Other banks in United States ,
86
Nonbanks
31,260
29,422
19,330
2,974
7,118
27,781
24,657
14,469
2,649
7,539
26,988
23,470
13,223
1,740
8,507
25,390
25,120
15,996
1,791
7,333
25,750
26,859
16,844
2,051
7,964
26,998
25,013
15,100
1,878
8,035
24,311
25,657
17,115
2,021
6,521
23,345
31,575
22,800
2,192
6,583
26,013
32,420
23,226'
1,768
7,426'
24,528
36,726
27,758
2,228
6,740
87 To foreigners
88
Other branches of parent bank
89
Banks
90
Official institutions
91
Nonbank foreigners
92 Other liabilities
78,525
23,389
28,581
9,676
16,879
9,392
79,498
25,036
30,877
6,836
16,749
8,981
98,689
33,078
34,290
11,015
20,306
9,548
91,691
28,967
33,125
8,893
20,706
9,634
88,489
26,948
32,763
9,034
19,744
9,919
87,504
25,570
31,829
9,982
20,123
10,131
87,212
26,837
31,701
8,570
20,104
10,149
89,934
25,743
32,385
10,656
21,150
10,726
90,404
26,268
33,029
9,542
21,565
10,719
85,935
26,827
30,482
7,872
20,754
8,792
112,697
99,707
102,550
97,555
96,908
97,926
96,970
101,689
102,933
104,900
29,337
27,756
18,956
2,826
5,974
26,169
22,075
14,021
2,325
5,729
24,926
17,752
12,026
1,512
4,214
22,960
20,889
14,712
1,512
4,665
22,846
23,105
15,729
1,817
5,559
24,229
20,993
13,745
1,655
5,593
22,043
22,177
16,031
1,819
4,327
20,864
28,063
21,665
1,978
4,420
23,543
27,123
21,003'
1,366
4,754'
22,063
32,529
26,313
1,943
4,273
51,980
18,493
14,344
7,661
11,482
3,624
48,138
17,951
15,203
4,934
10,050
3,325
55,919
22,334
15,580
7,530
10,475
3,953
48,777
20,303
12,957
4,700
10,817
4,929
46,083
18,539
12,240
5,036
10,268
4,874
47,227
17,550
13,501
5,781
10,395
5,477
47,149
18,6%
13,417
4,519
10,517
5,601
47,278
17,384
13,436
6,186
10,272
5,484
46,843
17,443
14,029
4,713
10,658
5,424
46,656
18,578
13,334
4,346
10,398
3,652
93 Total payable in U.S. dollars
94 Negotiable CDs
95 To United States
%
Parent bank
97
Other banks in United States .
98
Nonbanks
99 To foreigners
100
Other branches of parent bank
101
Banks
102
Official institutions
103
Nonbank foreigners
104 Other liabilities
Bahamas and Caymans
105 Total, all currencies
142,055
142,592
160,321
159,718
160,516
165,771
164,313
155,265
164,942'
170,977
106 Negotiable CDs
107 To United States
108
Parent bank
109
Other banks in United States .
110
Nonbanks
610
104,556
45,554
12,778
46,224
847
106,081
49,481
11,715
44,885
885
113,950
53,239
17,224
43,487
941
109,424
52,221
11,451
45,752
940
112,540
49,896
12,069
50,575
731
117,765
54,174
13,412
50,179
924
116,687
56,818
11,106
48,763
1,092
107,115
51,522
10,824
44,769
1,361
115,159'
58,214'
10,823'
46,122'
953
122,821
63,188
11,419
48,214
111 To foreigners
112
Other branches of parent bank
113
Banks
114
Official institutions
115
Nonbank foreigners
116 Other liabilities
35,053
14,075
10,669
1,776
8,533
1,836
34,400
12,631
8,617
2,719
10,433
1,264
43,815
19,185
10,769
1,504
12,357
1,671
47,361
24,755
9,779
1,850
10,977
1,992
44,993
22,288
10,155
1,015
11,535
2,043
45,062
21,221
9,607
1,099
13,135
2,213
44,478
22,872
8,405
1,067
12,134
2,224
44,636
23,283
8,154
972
12,227
2,422
45,814'
22,835'
9,707'
1,060
12,212
2,608'
44,940
23,171
8,632
1,074
12,063
2,263
138,322
138,774
152,927
151,684
152,235
157,512
156,215
147,718
156,694'
163,288
117 Total payable in U.S. dollars
....
Summary Statistics
A59
3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS
Millions of dollars, end of period
1988
Item
1 Total 1
2
3
4
5
6
7
8
9
10
11
12
By type
Liabilities reported by banks in the United States
U.S. Treasury bills and certificates
U . S . Treasury bonds and notes
Marketable
Nonmarketable
U.S. securities other than U.S. Treasury securities
By area
Western Europe 1
Canada
Latin America and Caribbean
Other countries 6
1987
1986
June
July
Aug.
Sept.
Oct.'
Nov.
Dec."
211,834
259,556'
290,842
290,944
290,263
288,601
295,017'
300,588
299,821
27,920
75,650
31,838
88,829
30,761
95,299
32,070
96,715
32,813
96,698
32,224
96,812
34,594'
100,814
34,719
103,843
31,577
103,724
91,368
1,300
15,596
122,432
300
16,157'
149,333
502
14,947
146,971
506
14,682
145,521
509
14,722
144,040
513
15,012
144,617'
516
14,476
146,813
520
14,693
149,025
523
14,972
88,629
2,004
8,417
105,868
1,503
5,412
124,620
4,961
8,328
116,098
1,402
4,147
126,772
10,773
9,407
134,285
1,266
7,837
125,195
10,725
9,888
135,657
1,179
7,793
123,428
9,981
11,336
136,165
1,196
7,646
121,206
10,054
10,136
137,513
1,130
8,049
125,204'
11,014
9,840
139,447'
1,094
7,903'
128,297
10,066
10,501
142,792
993
7,418
125,092
9,584
10,052
145,722
1,369
7,479
1. Includes the Bank for International Settlements.
2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, negotiable time certificates of deposit, and borrowings under repurchase agreements.
3. Includes nonmarketable certificates of indebtedness (including those payable
in foreign currencies through 1974) and Treasury bills issued to official institutions
of foreign countries.
4. Excludes notes issued to foreign official nonreserve agencies. Includes
bonds and notes payable in foreign currencies.
5. Debt securities of U . S . government corporations and federally sponsored
agencies, and U.S. corporate stocks and bonds.
6. Includes countries in Oceania and Eastern Europe.
NOTE. Based on Treasury Department data and on data reported to the
Treasury Department by banks (including Federal Reserve Banks) and securities
dealers in the United States.
3.16 LIABILITIES TO AND CLAIMS ON FOREIGNERS Reported by Banks in the United States
Payable in Foreign Currencies1
Millions of dollars, end of period
1987
Item
1 Banks' own liabilities
2 Banks' own claims
3
Deposits
4
Other claims
5 Claims of banks' domestic customers 2
1. Data on claims exclude foreign currencies held by U.S.
ities.
1984
8,586
11,984
4,998
6,986
569
monetary author-
1985
15,368
16,294
8,437
7,857
580
1988
1986
29,702
26,180
14,129
12,052
2,507
Dec.
Mar.
June
Sept.'
55,438
51,271
18,861
32,410
551
55,818
52,221
18,407
33,814
810
55,110
51,183
17,785
33,398
1,004
61,243
60,957
22,139
38,818
392
2. Assets owned by customers of the reporting bank located in the United
States that represent claims on foreigners held by reporting banks for the accounts
of the domestic customers.
A60
3.17
International Statistics • April 1989
LIABILITIES TO FOREIGNERS
Payable in U.S. dollars
Reported by Banks in the United States1
Millions of dollars, end of period
1988
Holder and type of liability
1985
1986
June
July
Aug.
Sept.
Oct/
Nov.
Dec.p
1 All foreigners
435,726
540,996
618,874
637,694
654,809
658,039
657,404
651,776
678,002
684,564
7 Banks' own liabilities
3
Demand deposits
Time deposits
4
5
Other 3
6
Own foreign offices 4
341,070
21,107
117,278
29,305
173,381
406,485
23,789
130,891
42,705
209,100
470,070
22,383
148,374
51,677
247,635
476,484
22,991
141,145
47,418
264,931
490,856
21,983
142,551
50,747
275,575
493,988
20,314
145,123
52,630
275,920
491,108
21,375
148,747
53,840
267,145
482,560
21,830
141,948
57,199
261,583
503,465
22,049
149,229
53,896
278,290
512,644
21,817
150,970
51,884
287,973
94,656
69,133
134,511
90,398
148,804
101,743
161,209
108,614
163,953
109,555
164,050
109,106
166,2%
109,768
169,215
112,267
174,537
116,860
171,919
114,976
17,964
7,558
15,417
28,696
16,776
30,285
16,626
35,%9
16,231
38,167
15,971
38,973
15,555
40,973
16,397
40,551
16,614
41,063
16,332
40,612
11 Nonmonetary international and regional
organizations 8
5,821
5,807
4,464
7,879
7,061
4,749
7,764
5,879
4,752
3,102
17 Banks' own liabilities
Demand deposits
13
14
Time deposits
Other 3
15
2,621
85
2,067
469
3,958
199
2,065
1,693
2,702
124
1,538
1,040
5,142
84
1,873
3,185
4,882
92
1,857
2,933
2,925
85
966
1,874
5,104
104
1,688
3,311
4,067
143
1,101
2,823
3,4%
76
1,384
2,036
2,405
71
1,183
1,150
16 Banks' custody liabilities 5
U . S . Treasury bills and certificates 6
17
Other negotiable and readily transferable
18
instruments 7
19
Other
3,200
1,736
1,849
259
1,761
265
2,737
745
2,179
286
1,824
43
2,660
755
1,812
62
1,256
83
698
57
1,464
0
1,590
0
1,497
0
1,989
3
1,861
32
1,769
12
1,899
5
1,750
0
1,163
10
641
0
20 Official institutions 4
79,985
103,569
120,667
126,060
128,786
129,511
129,036
135,408
138,562
135,300
21 Banks' own liabilities
Demand deposits
?.?.
73
Time deposits
24
Other 3
20,835
2,077
10,949
7,809
25,427
2,267
10,497
12,663
28,703
1,757
12,843
14,103
27,882
1,834
11,865
14,183
28,486
1,6%
11,520
15,270
29,079
1,405
12,289
15,385
28,725
1,756
11,573
15,3%
30,820
1,781
11,209
17,830
30,740
1,584
11,809
17,348
27,170
1,929
9,839
15,402
25 Banks' custody liabilities 5
26
U.S. Treasury bills and certificates 6
27
Other negotiable and readily transferable
instruments
28
Other
59,150
53,252
78,142
75,650
91,%5
88,829
98,178
95,299
100,300
96,715
100,432
%,698
100,311
96,812
104,589
100,814
107,822
103,843
108,130
103,724
5,824
75
2,347
145
2,990
146
2,672
207
3,368
217
3,450
284
3,221
279
3,612
163
3,758
221
4,121
286
29 Banks 10
275,589
351,745
414,280
423,854
436,443
439,532
436,310
425,242
447,584
459,525
30 Banks' own liabilities
31
Unaffiliated foreign banks
32
Demand deposits
33
Time deposits
Other 3
35
Own foreign offices 4
252,723
79,341
10,271
49,510
19,561
173,381
310,166
101,066
10,303
64,232
26,531
209,100
371,665
124,030
10,898
79,717
33,415
247,635
375,461
110,529
10,899
72,187
27,444
264,931
387,578
112,003
10,217
73,000
28,787
275,575
390,416
114,495
9,258
73,826
31,412
275,920
385,217
118,072
9,349
77,713
31,010
267,145
374,639
113,056
10,228
71,096
31,733
261,583
395,766
117,475
10,398
76,650
30,427
278,290
408,198
120,225
9,%5
80,386
29,875
287,973
36 Banks' custody liabilities 5
U . S . Treasury bills and certificates 6
37
Other negotiable and readily transferable
38
instruments
39
Other
22,866
9,832
41,579
9,984
42,615
9,134
48,394
9,212
48,865
9,324
49,116
9,299
51,093
8,%9
50,603
7,976
51,819
8,087
51,327
7,602
6,040
6,994
5,165
26,431
5,392
28,089
4,725
34,457
4,625
34,916
4,090
35,727
4,230
37,893
5,265
37,362
5,686
38,046
5,682
38,043
40 Other foreigners
74,331
79,875
79,463
79,900
82,520
84,247
84,294
85,247
87,104
86,636
41 Banks' own liabilities
47
Demand deposits
43
Time deposits
44
Other
64,892
8,673
54,752
1,467
66,934
11,019
54,097
1,818
67,000
9,604
54,277
3,119
67,999
10,173
55,220
2,606
69,910
9,979
56,174
3,757
71,568
9,566
58,042
3,960
72,061
10,166
57,772
4,123
73,035
9,678
58,542
4,814
73,463
9,991
59,386
4,085
74,871
9,852
59,562
5,456
9,439
4,314
12,941
4,506
12,463
3,515
11,901
3,358
12,610
3,231
12,678
3,066
12,233
3,231
12,212
3,415
13,641
4,848
11,765
3,593
4,636
489
6,315
2,120
6,898
2,050
7,241
1,303
6,378
3,002
6,663
2,950
6,205
2,797
5,771
3,026
6,007
2,786
5,889
2,283
9,845
7,4%
7,314
7,711
6,975
6,792
6,121
6,123
6,137
6,344
7 Banks' custody liabilities 5
U .S. Treasury bills and certificates 6
8
9
Other negotiable and readily transferable
instruments 7
10
Other
M
45 Banks' custody liabilities 5
46
U.S. Treasury bills and certificates 6
47
Other negotiable and readily transferable
instruments 7
Other
48
49 MEMO: Negotiable time certificates of deposit in
custody for foreigners
1. Reporting banks include all kinds of depository institutions besides commercial banks, as well as some brokers and dealers.
2. Excludes negotiable time certificates of deposit, which are included in
"Other negotiable and readily transferable instruments."
3. Includes borrowing under repurchase agreements.
4. U.S. banks: includes amounts due to own foreign branches and foreign
subsidiaries consolidated in "Consolidated Report of Condition" filed with bank
regulatory agencies. Agencies, branches, and majority-owned subsidiaries of
foreign banks: principally amounts due to head office or parent foreign bank, and
foreign branches, agencies, or wholly owned subsidiaries of head office or parent
foreign bank.
5. Financial claims on residents of the United States, other than long-term
securities, held by or through reporting banks.
6. Includes nonmarketable certificates of indebtedness and Treasury bills
issued to official institutions of foreign countries.
7. Principally bankers acceptances, commercial paper, and negotiable time
certificates of deposit.
8. Principally the International Bank for Reconstruction and Development, and
the Inter-American and Asian Development Banks. Data exclude "holdings of
dollars" of the International Monetary Fund.
9. Foreign central banks, foreign central governments, and the Bank for
International Settlements.
10. Excludes central banks, which are included in "Official institutions."
Nonbank-Reported
Data
3.17—Continued
1988
Area and country
1985
1986
1987
June
July
Aug.
Sept.
Oct.
Nov.
Dec.p
1 Total
435,726
540,996
618,874
637,694
654,809
658,039
657,404
651,776'
678,002
684,564
2 Foreign countries
429,905
535,189
614,411
629,815
647,749
653,289
649,640
645,896'
673,250
681,462
164,114
693
5,243
513
496
15,541
4,835
666
9,667
4,212
948
652
2,114
1,422
29,020
429
76,728
673
9,635
105
523
180,556
1,181
6,729
482
580
22,862
5,762
700
10,875
5,600
735
699
2,407
884
30,534
454
85,334
630
3,326
80
702
234,641
920
9,347
760
377
29,835
7,022
689
12,073
5,014
1,362
801
2,621
1,379
33,766
703
116,852
710
9,798
32
582
227,661
941
10,363
1,364
426
26,980
5,110
653
10,705
5,351
1,078
897
4,173
1,522
31,197
570
115,531
690
9,259
239
611
231,218
1,425
9,531
1,474
549
26,005
5,211
620
9,921
5,007
1,322
859
5,011
1,926
30,416
537
121,895
614
8,215
80
598
232,797
1,245
10,051
2,078
417
24,237
6,226
694
9,766
5,647
900
848
5,570
2,011
29,043
709
122,620
629
9,463
99
544
224,663
1,072
9,937
1,402
447
24,295
5,085
633
8,550
6,167
1,060
858
6,248
2,1%
31,330
706
113,287
579
10,207
45
558
227,308'
1,271
10,247
2,362'
339
23,285
5,898
675'
12,512
6,377
1,143
915
6,838
1,579
31,333'
878
109,9%
655
10,240'
100
667'
233,943
1,607
11,108
3,089
339
24,564
7,981
683
13,337
5,939
1,342
738
5,976
1,819
32,286
793
111,733
569
9,255
74
711
236,367
1,198
10,001
2,180
284
24,736
6,727
720
14,614
5,306
1,558
903
5,507
1,276
34,320
1,014
116,231
529
8,534
138
591
17,427
26,345
30,095
30,037
29,944
28,128
28,247
26,697
26,188
21,034
167,856
6,032
57,657
2,765
5,373
42,674
2,049
3,104
11
1,239
1,071
122
14,060
4,875
7,514
1,167
1,552
11,922
4,668
210,318
4,757
73,619
2,922
4,325
72,263
2,054
4,285
7
1,236
1,123
136
13,745
4,970
6,886
1,163
1,537
10,171
5,119
220,372
5,006
74,767
2,344
4,005
81,494
2,210
4,204
12
1,082
1,082
160
14,480
4,975
7,414
1,275
1,582
9,048
5,234
233,041
5,876
74,282
2,077
4,205
94,347
2,378
4,502
10
1,212
1,209
156
15,801
5,338
4,171
1,438
1,882
8,950
5,207
242,719
5,975
76,002
2,413
4,489
101,332
2,323
4,441
9
1,216
1,183
154
16,334
4,798
4,251
1,514
1,828
9,116
5,343
246,723
6,775
78,889
2,394
4,524
99,907
2,463
4,403
8
1,224
1,182
149
17,260
5,011
4,262
1,539
1,898
9,330
5,504
246,743
7,106
77,921
2,389
4,475
101,711
2,467
4,171
9
1,244
1,177
166
15,842
5,252
4,128
1,584
1,884
9,752
5,462
240,074'
7,065
76,805
2,577
4,726
95,828
2,727
4,136
12
1,265
1,150
177
15,636'
5,354
4,114
1,605
1,788
9,547
5,560
257,303
7,307
83,613
2,821
5,135
104,906
2,653
4,221
9
1,360
1,178
164
15,457
5,907
4,046
1,650
1,885
9,301
5,690
266,851
7,751
86,499
2,622
5,148
110,471
2,919
4,314
10
1,360
1,186
186
15,122
6,675
4,230
1,612
1,878
9,129
5,740
72,280
108,831
121,288
128,0%
133,933
135,851
139,845
142,062'
145,891
147,094
1,607
7,786
8,067
712
1,466
1,601
23,077
1,665
1,140
1,358
14,523
9,276
1,476
18,902
9,393
674
1,547
1,892
47,410
1,141
1,866
1,119
12,352
11,058
1,162
21,503
10,180
582
1,404
1,292
54,322
1,637
1,085
1,345
13,988
12,788
1,725
23,072
9,321
942
1,075
1,334
60,846
1,572
954
1,099
12,089
14,066
1,564
24,023
9,951
858
1,036
1,244
63,460
1,459
1,085
1,650
14,298
13,306
1,757
23,422
10,417
845
1,254
1,194
64,559
1,720
1,001
1,422
12,787
15,472
1,608
22,334
10,875
1,013
1,121
1,130
70,188
2,091
971
1,369
14,091
13,053
1,479
23,377
11,532
793
1,286
2,323
70,594
2,440
1,140
1,363
13,232'
12,503
1,401
24,791
12,386
761
995
1,063
73,103
2,813
1,150
1,205
12,871
13,352
1,892
26,039
11,724
710
1,189
1,498
73,770
2,546
1,143
1,235
12,053
13,296
57 Africa
58
Egypt
59
Morocco
60
South Africa
61
Zaire
62
Oil-exporting countries 4
63
Other
4,883
1,363
163
388
163
1,494
1,312
4,021
706
92
270
74
1,519
1,360
3,945
1,151
194
202
67
1,014
1,316
4,023
1,187
73
245
60
1,108
1,351
3,837
1,039
80
200
63
1,052
1,403
3,846
%9
70
204
67
1,039
1,498
3,659
813
111
247
71
1,015
1,402
3,702
850
66
245
71
993
1,477
3,530
757
64
267
72
952
1,418
3,968
911
67
437
71
1,016
1,465
64 Other countries
65
Australia
66
All other
3,347
2,779
568
5,118
4,196
922
4,070
3,327
744
6,957
6,017
939
6,098
5,329
769
5,945
5,170
775
6,484
5,639
845
6,054
5,199
854
6,3%
5,426
970
6,148
5,279
869
67 Nonmonetary international and regional
organizations
68
International 5
69
Latin American regional
70
Other regional 6
5,821
4,806
894
121
5,807
4,620
1,033
154
4,464
2,830
1,272
362
7,879
5,925
1,769
185
7,061
5,130
1,651
279
4,749
2,979
1,614
156
7,764
5,721
1,762
281
5,879
3,912
1,662
306
4,752
3,265
1,276
211
3,102
2,381
589
133
3 Europe
4
Austria
5
Belgium-Luxembourg
6
Denmark
7
Finland
8
France
9
Germany
10
Greece
11
Italy
12
Netherlands
Norway
13
14
Portugal
15
Spain
16
Sweden
17
Switzerland
18
Turkey
19
United Kingdom
20
Yugoslavia
21
Other Western Europe 1
22
U.S.S.R
23
Other Eastern Europe 2
24 Canada
25 Latin America and Caribbean
26
Argentina
27
Bahamas
28
Bermuda
29
Brazil
30
British West Indies
31
Chile
32
Colombia
33
Cuba
34
Ecuador
35
Guatemala
36
Jamaica
37
Mexico
38
Netherlands Antilles
39
Panama
40
Peru
41
Uruguay
42
Venezuela
43
Other
44
45
46
47
48
49
50
51
52
53
54
55
56
China
Mainland
Taiwan
Hong Kong
India
Indonesia
Israel
Japan
Korea
Philippines
Thailand
Middle-East oil-exporting countries 3
Other
1. Includes the Bank for International Settlements and Eastern European
countries that are not listed in line 23.
2. Comprises Bulgaria, Czechoslovakia, the German Democratic Republic,
Hungary, Poland, and Romania.
3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
4. Comprises Algeria, Gabon, Libya, and Nigeria.
5. Excludes "holdings of dollars" of the International Monetary Fund.
6. Asian, African, Middle Eastern, and European regional organizations,
except the Bank for International Settlements, which is included in "Other
Western Europe."
A61
A62
International Statistics • April 1989
3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1
Payable in U.S. Dollars
Millions of dollars, end of period
1988
Area and country
1985
1986
1987
June
July
Aug.
Sept.
Oct/
Nov.
Dec."
1 Total
401,608
444,745
459,877
458,967
470,241
469,243
477,149
465,916
485,566
489,260
2 Foreign countries
400,577
441,724
456,472
456,372
467,427
466,799
471,566
462,814
481,244
487,571
106,413
598
5,772
706
823
9,124
1,267
991
8,848
1,258
706
1,058
1,908
2,219
3,171
1,200
62,566
1,964
998
130
1,107
107,823
728
7,498
688
987
11,356
1,816
648
9,043
3,296
672
739
1,492
1,964
3,352
1,543
58,335
1,835
539
345
948
102,348
793
9,397
717
1,010
13,548
2,039
462
7,460
2,619
934
477
1,853
2,254
2,718
1,680
50,823
1,700
619
389
852
100,909
806
7,863
640
954
12,186
2,862
589
7,072
2,656
589
358
1,862
2,087
3,291
1,495
52,033
1,624
647
506
787
99,751
888
8,530
742
1,325
11,861
2,169
562
6,607
3,017
484
333
1,973
1,958
2,491
1,432
51,918
1,559
671
431
800
99,284
743
8,419
608
1,231
11,965
2,000
523
6,626
2,933
534
321
2,011
2,256
2,569
1,397
51,789
1,537
524
466
831
102,409
808
8,786
582
1,195
12,164
1,728
506
6,118
3,202
510
333
1,969
1,983
2,559
1,396
54,669
1,476
889
473
1,065
105,855
812
8,902
631
912
12,327
2,315
493
6,027
2,666
534
266
1,800
1,852
2,918
1,344
57,906
1,472
1,125
754
800
108,157
721
8,951
599
1,157
12,478
2,305
601
7,092
2,763
478
253
2,054
2,086
2,983
1,265
57,988
1,450
926
1,207
801
116,780
490
8,468
480
1,065
13,085
2,323
431
7,942
2,548
453
257
1,823
1,976
4,069
1,222
65,597
1,390
1,152
1,245
764
3 Europe
4
Austria
5
Belgium-Luxembourg
6
Denmark
7
Finland
8
France
9
Germany
10
Greece
11
Italy
12
Netherlands
13
Norway
14
Portugal
15
Spain
16
Sweden
Switzerland
17
18
Turkey
19
United Kingdom
20
Yugoslavia
21
Other Western Europe 2
22
U.S.S.R
23
Other Eastern Europe
24 Canada
16,482
21,006
25,368
24,634
23,937
24,137
23,804
22,482
23,274
18,865
202,674
11,462
58,258
499
25,283
38,881
6,603
3,249
0
2,390
194
224
31,799
1,340
6,645
1,947
960
10,871
2,067
208,825
12,091
59,342
418
25,716
46,284
6,558
2,821
0
2,439
140
198
30,698
1,041
5,436
1,661
940
11,108
1,936
214,789
11,996
64,587
471
25,897
50,042
6,308
2,740
1
2,286
144
188
29,532
980
4,744
1,329
963
10,843
1,738
202,663
12,365
55,554
818
26,230
51,763
5,881
3,095
0
2,142
144
187
26,177
1,238
2,492
1,149
885
10,912
1,631
205,268
12,342
60,350
460
26,023
50,483
5,771
3,127
0
2,143
157
214
26,022
1,055
2,400
1,137
878
11,021
1,684
206,798
12,238
63,305
430
25,909
49,641
5,677
3,029
0
2,156
148
184
25,885
1,269
2,370
1,192
889
10,862
1,612
212,897
12,235
64,253
688
25,610
55,262
5,656
3,023
0
2,185
150
185
25,971
1,079
2,238
1,080
891
10,754
1,636
201,049
12,077
59,322
596
25,461
48,881
5,459
3,016
0
2,168
175
201
25,645
1,491
2,214
1,065
850
10,803
1,626
211,334
12,023
67,525
511
26,399
50,637
5,332
2,964
0
2,162
167
205
25,366
1,427
2,350
1,012
888
10,735
1,628
212,922
11,825
67,003
483
25,729
54,395
5,401
2,839
100
2,075
190
268
24,562
1,309
2,486
1,012
910
10,755
1,580
66,212
96,126
106,096
120,202
130,573
128,787
124,835
125,067
130,224
130,801
639
1,535
6,797
450
698
1,991
31,249
9,226
2,224
845
4,298
6,260
787
2,681
8,307
321
723
1,634
59,674
7,182
2,217
578
4,122
7,901
968
4,592
8,218
510
580
1,363
68,658
5,148
2,071
496
4,858
8,635
1,065
3,957
9,632
499
772
1,213
82,350
5,003
2,055
641
4,574
8,441
1,033
3,562
8,342
508
765
1,206
93,140
4,889
2,029
668
6,400
8,031
1,017
3,241
7,451
548
786
1,174
92,840
4,909
2,030
683
6,216
7,891
888
3,121
8,389
540
778
1,180
87,246
5,137
2,009
759
6,401
8,389
756
3,040
9,495
634
808
1,174
87,626
5,192
1,912
766
5,412
8,253
777
3,845
10,826
568
767
1,230
89,464
5,395
1,900
778
6,657
8,018
762
4,184
9,8%
560
730
1,147
90,420
5,155
1,875
850
6,137
9,085
57 Africa
58
Egypt
59
Morocco
60
South Africa
61
Zaire
62
Oil-exporting countries
63
Other
5,407
721
575
1,942
20
630
1,520
4,650
567
598
1,550
28
694
1,213
4,742
521
542
1,507
15
1,003
1,153
5,423
605
484
1,693
41
1,275
1,325
5,493
539
481
1,726
38
1,340
1,369
5,462
530
478
1,711
36
1,359
1,348
5,454
535
478
1,693
16
1,388
1,343
5,633
540
476
1,707
17
1,483
1,410
5,629
532
488
1,698
18
1,491
1,402
5,706
509
511
1,676
17
1,525
1,469
64 Other countries
65
Australia
66
Mother
3,390
2,413
978
3,294
1,949
1,345
3,129
2,100
1,029
2,541
1,678
863
2,404
1,554
850
2,331
1,499
832
2,167
1,392
775
2,728
1,879
849
2,625
1,566
1,059
2,497
1,624
874
67 Nonmonetary international and regional
organizations
1,030
3,021
3,404
2,595
2,814
2,445
5,583
3,101
4,322
1,688
25 Latin America and Caribbean
26
Argentina
27
Bahamas
28
Bermuda
29
Brazil
30
British West Indies
31
Chile
32
Colombia
33
Cuba
34
Ecuador
35
Guatemala 4
36
Jamaica
37
Mexico
38
Netherlands Antilles
39
Panama
40
Peru
41
Uruguay
42
Venezuela
43
Other Latin America and Caribbean
44
46
47
48
49
50
51
52
>3
54
55
56
China
Mainland
Taiwan
Hong Kong
India
Indonesia
Israel
Japan
Korea
Philippines
Thailand
Middle East oil-exporting countries
Other Asia
1. Reporting banks include all kinds of depository institutions besides commercial banks, as well as some brokers and dealers.
2. Includes the Bank for International Settlements. Beginning April 1978, also
includes Eastern European countries not listed in line 23.
3. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German
Democratic Republic, Hungary, Poland, and Romania.
4. Included in "Other Latin America and Caribbean" through March 1978.
5. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Tracial States).
6. Comprises Algeria, Gabon, Libya, and Nigeria.
7. Excludes the Bank for International Settlements, which is included in
"Other Western Europe."
Nonbank-Reported
Data
3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the
United States1
Payable in U.S. Dollars
Millions of dollars, end of period
1988
Type of claim
1985
1986
1987
June
July
Aug.
470,241
62,825
239,112
127,298
60,184
67,114
41,006
469,243
61,696
237,012
128,447
60,558
67,889
42,089
Sept.
1 Total
430,489
478,650
497,635
494,280
2 Banks' own claims on foreigners
3
Foreign public borrowers
4
Own foreign offices
5
Unaffiliated foreign banks
6
Deposits
7
Other
All other foreigners
8
401,608
60,507
174,261
116,654
48,372
68,282
50,185
444,745
64,095
211,533
122,946
57,484
65,462
46,171
459,877
64,605
224,727
127,609
60,687
66,922
42,936
458,967
62,758
229,972
123,498
59,043
64,455
42,738
28,881
3,335
33,905
4,413
37,758
3,692
35,314
4,843
35,801
5,391
19,332
24,044
26,696
24,002
20,916
6,214
5,448
7,370
6,468
9,494
28,487
25,706
23,107
19,618
18,730
38,102
43,984
40,087
42,763
9 Claims of banks' domestic c u s t o m e r s 3 . . .
11
Oct/
Nov.
465,916
60,649
237,414
121,950
54,180
67,771
45,902
485,566
64,475
255,023
123,204
56,042
67,161
42,864
489,260
61,312
256,214
129,254
66,091
63,163
42,481
41,869
48,676
n.a.
489,260
512,950
477,149
63,736
245,397
124,852
61,521
63,330
43,164
Dec."
Negotiable and readily transferable
12 Outstanding collections and other
13 MEMO: Customer liability on
Dollar deposits in banks abroad,
reported by nonbanking business
enterprises in the United States
46,837
49,732
42,720
and foreign branches, agencies, or wholly owned subsidiaries of head office or
parent foreign bank.
3. Assets owned by customers of the reporting bank located in the United
States that represent claims on foreigners held by reporting banks for the account
of their domestic customers.
4. Principally negotiable time certificates of deposit and bankers acceptances.
5. Includes demand and time deposits and negotiable and nonnegotiable
certificates of deposit denominated in U . S . dollars issued by banks abroad. For
description of changes in data reported by nonbanks, see July 1979 BULLETIN,
p. 550.
1. Data for banks' own claims are given on a monthly basis, but the data for
claims of banks' own domestic customers are available on a quarterly basis only.
Reporting banks include all kinds of depository institutions besides commercial
banks, as well as some brokers and dealers.
2. U.S. banks: includes amounts due from own foreign branches and foreign
subsidiaries consolidated in "Consolidated Report of Condition" filed with bank
regulatory agencies. Agencies,
branches, and majority-owned
subsidiaries
of
foreign banks: principally amounts due from head office or parent foreign bank,
3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States1
Payable in U.S. Dollars
Millions of dollars, end of period
1987
Maturity; by borrower and area
1984
1985
1988
1986
Dec.
Mar.
June
Sept/
1 Total
243,952
227,903
232,295
235,130
219,323
227,589
228,887
By borrower
2 Maturity of 1 year or less 2
3
Foreign public borrowers
4
All other foreigners
5 Maturity over 1 y e a r
6
Foreign public borrowers
7
All other foreigners
167,858
23,912
143,947
76,094
38,695
37,399
160,824
26,302
134,522
67,078
34,512
32,567
160,555
24,842
135,714
71,740
39,103
32,637
163,997
25,889
138,108
71,133
38,625
32,507
152,658
24,488
128,171
66,664
35,879
30,785
162,912
25,608
137,304
64,677
35,613
29,064
166,342
27,721
138,622
62,545
35,101
27,445
58,498
6,028
62,791
33,504
4,442
2,593
56,585
6,401
63,328
27,966
3,753
2,791
61,784
5,895
56,271
29,457
2,882
4,267
59,027
5,680
56,535
35,919
2,833
4,003
51,552
4,978
55,544
35,579
2,596
2,410
55,242
6,426
56,333
38,893
2,914
3,103
53,859
5,913
55,661
41,909
3,112
5,888
9,605
1,882
56,144
5,323
2,033
1,107
7,634
1,805
50,674
4,502
1,538
926
6,737
1,925
56,719
4,043
1,539
777
6,696
2,661
53,817
3,830
1,747
2,381
5,914
2,213
51,541
3,680
2,201
1,114
5,420
2,337
49,775
3,711
2,429
1,006
5,323
2,075
48,293
3,954
2,265
635
8
9
10
11
12
n
14
15
16
17
18
19
By area
Maturity of 1 year or less
Europe
Canada
Latin America and Caribbean
Asia
Africa
All other 3
Maturity of over 1 year 2
Europe
Canada
Latin America and Caribbean
Asia
Africa
All other 3
1. Reporting banks include all kinds of depository institutions besides commerrial banks, as well as some brokers and dealers.
2. Remaining time to maturity,
3. Includes nonmonetary international and regional organizations.
A63
A64
International Statistics • April 1989
3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1-2
Billions of dollars, end of period
1986
Area or country
1 Total
iyo4
1987
1988
l70J
Sept.
Dec.
Mar.
June
Sept.
Dec.
Mar.
June
Sept.
405.7
385.4
381.6
385.1
395.4
384.6
387.7
381.4
373.1
352.6
356.9
148.1
8.7
14.1
9.0
10.1
3.9
3.2
3.9
60.3
7.9
27.1
146.0
9.2
12.1
10.5
9.6
3.7
2.7
4.4
63.0
6.8
23.9
154.8
8.3
14.5
12.4
7.8
3.9
2.7
4.7
68.8
5.9
25.8
156.6
8.3
13.7
11.6
9.0
4.6
2.4
5.8
71.0
5.3
24.9
162.7
9.1
13.3
12.7
8.7
4.4
3.0
5.8
73.7
5.3
26.9
158.1
8.3
12.5
11.2
7.5
7.3
2.4
5.7
72.0
4.7
26.3
155.2
8.2
13.7
10.5
6.6
4.8
2.6
5.4
72.1
4.7
26.5
160.0
10.1
13.8
12.6
7.3
4.0
2.1
5.6
69.1
5.6
29.8
156.7
9.3
11.5
11.8
7.4
3.3
2.1
5.1
71.4
4.9
29.9
150.5
9.2
10.8
10.6
6.1
3.3
1.9
5.6
69.8
5.4
27.9
149.5'
9.5
10.0
8.9
5.9
3.0
2.0
5.2
68.0 r
5.2
31.7
13 Other developed countries
14
Austria
15
Denmark
16
Finland
17
Greece
18
Norway
19
Portugal
20
Spain
21
Turkey
22
Other Western Europe
23
South Africa
24
Australia
33.6
1.6
2.2
1.9
2.9
3.0
1.4
6.5
1.9
1.7
4.5
6.0
29.9
1.5
2.3
1.6
2.6
2.9
1.2
5.8
1.8
2.0
3.2
5.0
28.9
1.7
2.2
1.6
2.3
2.7
1.0
6.7
1.9
1.6
3.0
4.2
25.7
1.7
1.7
1.4
2.3
2.4
.8
5.8
1.8
1.4
3.0
3.5
25.7
1.9
1.7
1.4
2.1
2.2
.9
6.3
1.7
1.4
3.0
3.2
25.2
1.8
1.5
1.4
2.0
2.1
.8
6.1
1.7
1.5
3.0
3.1
25.9
1.9
1.6
1.4
1.9
2.0
.8
7.4
1.5
1.6
2.9
2.9
26.2
1.9
1.7
1.3
2.0
2.3
.5
8.0
1.6
1.6
2.9
2.4
26.2
1.6
1.4
1.0
2.3
2.0
.4
9.0
1.6
1.9
2.8
2.1
23.7
1.6
1.0
1.2
2.2
2.0
.4
7.2
1.5
1.6
2.8
2.2
22.7
1.6
1.1
1.3
2.1
2.0
.4
6.3
1.3
1.9
2.7
1.8
25 OPEC countries 3
26
Ecuador
27
Venezuela
28
Indonesia
29
Middle East countries
30
African countries
24.9
2.2
9.3
3.3
7.9
2.3
21.3
2.1
8.9
3.0
5.3
2.0
19.7
2.2
8.7
2.8
4.4
1.7
19.3
2.2
8.6
2.5
4.3
1.7
20.0
2.1
8.5
2.4
5.4
1.6
18.8
2.1
8.4
2.2
4.4
1.7
19.0
2.1
8.3
2.0
5.0
1.7
17.1
1.9
8.1
1.9
3.6
1.7
17.2
1.9
8.1
1.9
3.6
1.7
16.4
1.8
8.0
1.9
3.1
1.7
17.6
1.8
7.9
1.9
4.3
1.7
2 G-10 countries and Switzerland
3
Belgium-Luxembourg
4
France
5 Germany
6
Italy
7
Netherlands
8
Sweden
9
Switzerland
10
United Kingdom
11
Canada
12
Japan
31 Non-OPEC developing countries
111.8
104.2
99.1
99.1
100.7
100.4
97.7
97.7
94.0
91.3
87.0
32
33
34
35
36
37
38
Latin America
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Other Latin America
8.7
26.3
7.0
2.9
25.7
2.2
3.9
8.8
25.4
6.9
2.6
23.9
1.8
3.4
9.2
25.2
7.1
1.9
23.9
1.5
3.3
9.5
25.2
7.1
2.1
23.8
1.4
3.1
9.5
26.2
7.3
2.0
24.1
1.4
3.0
9.5
25.1
7.2
1.9
25.3
1.3
2.9
9.3
25.1
7.0
1.9
24.8
1.2
2.8
9.4
24.7
6.9
2.0
23.7
1.1
2.7
9.5
23.9
6.6
1.9
22.5
1.1
2.8
9.4
23.7
6.4
2.1
21.1
.9
2.6
9.2
22.4
6.2
2.1
20.6
.8
2.5
39
40
41
42
43
44
45
46
47
Asia
China
Mainland
Taiwan
India
Israel
Korea (South)
Malaysia
Philippines
Thailand
Other Asia
.7
5.1
.9
1.8
10.6
2.7
6.0
1.8
1.1
.5
4.5
1.2
1.6
9.2
2.4
5.7
1.4
1.0
.6
4.3
1.3
1.4
7.1
2.1
5.4
1.0
.6
.4
4.9
1.2
1.5
6.6
2.1
5.4
.9
.7
.9
5.5
1.8
1.4
6.2
1.9
5.4
.9
.6
.6
6.6
1.7
1.3
5.6
1.7
5.4
.8
.7
.3
6.0
1.9
1.3
4.9
1.6
5.4
.7
.7
.3
8.2
1.9
1.0
5.0
1.5
5.1
.7
.7
.4
6.1
2.1
1.0
5.7
1.5
5.1
1.0
.7
.3
4.9
2.3
1.0
5.9
1.5
4.9
1.1
.8
.2'
3.2'
2.0
1.0
6.0
1.6
4.5
1.2
.8
48
49
50
51
Africa
Egypt
Morocco
Zaire
Other Africa 4
1.2
.8
.1
2.1
1.0
.9
.1
1.9
.7
.9
.1
1.6
.7
.9
.1
1.6
.6
.9
.1
1.4
.6
.9
.1
1.3
.6
.8
.1
1.3
.5
.9
.0
1.3
.5
.9
.1
1.0
.6
.9
.1
1.2
.5
.8
.0
1.2
52 Eastern Europe
53
U.S.S.R
54
Yugoslavia
55
Other
4.4
.1
2.3
2.0
4.1
.1
2.2
1.8
3.3
.1
1.9
1.4
3.2
.1
1.7
1.4
3.0
.1
1.6
1.3
3.3
.3
1.7
1.3
3.3
.5
1.7
1.2
3.0
.4
1.6
1.0
2.9
.3
1.7
.9
3.1
.4
1.7
1.0
3.0'
.4
1.7
1.0'
56 Offshore banking centers
57
Bahamas
58
Bermuda
59
Cayman Islands and other British West Indies
60
Netherlands Antilles
61
Panama
62
Lebanon
63
Hong Kong
64
Singapore
65
Others 6
65.6
21.5
.9
11.8
3.4
6.7]
62.9
21.2
.7
11.6
2.2
6.0]
58.3
19.6
.4
11.3
1.8
5.1j
61.3
22.0
.7
12.4
1.8
4.0j
63.1
23.9
.8
12.2
1.7
4.3|
60.7
19.9
.6
14.0
1.3
3.9j
64.3
25.5
.6
12.8
1.2
3.7
54.3
17.1
.6
13.3
1.2
3.7
54.6
18.3
.8
12.2
1.3
3.2
45.3
11.0
1.0
10.6
1.2
3.0
49.8'
15.8
.9
11.5'
1.2
2.7
1L4
9.8
.0
1L4
9.8
.0
io!s
9.7
.0
11.1
9.2
.0
1L4
8.6
.0
12.5
8.3
.0
12.3
8.1
.0
11.3
7.0
.0
113
7.4
.0
11.7
6.8
.0
10.6
7.0
.0
66 Miscellaneous and unallocated 7
17.3
16.9
17.3
19.8
20.1
18.1
22.3
23.2
21.5
22.2
27.0
1. The banking offices covered by these data are the U.S. offices and foreign
branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks.
Offices not covered include (1) U.S. agencies and branches of foreign banks, and
(2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are
adjusted to exclude the claims on foreign branches held by a U.S. office or another
foreign branch of the same banking institution. The data in this table combine
foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims
of U.S. offices in table 3.18 (excluding those held by agencies and branches of
foreign banks and those constituting claims on own foreign branches).
2. Beginning with June 1984 data, reported claims held by foreign branches
have been reduced by an increase in the reporting threshold for "shell" branches
from $50 million to $150 million equivalent in total assets, the threshold now
applicable to all reporting branches.
3. This group comprises the Organization of Petroleum Exporting Countries
shown individually, other members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates), and Bahrain and
Oman (not formally members of OPEC).
4. Excludes Liberia.
5. Includes Canal Zone beginning December 1979.
6. Foreign branch claims only.
7. Includes New Zealand, Liberia, and international and regional organizations.
Nonbank-Reported
Data
A65
3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the
United States1
Millions of dollars, end of period
1988
1987
Type, and area or country
1984
1985
1986
Sept.
Dec.
Mar.
June
Sept.
1 Total
29,357
27,825
25,587
28,571
27,852
28,877
29,387
30,989
2 Payable in dollars
3 Payable in foreign currencies
26,389
2,968
24,296
3,529
21,749
3,838
24,006
4,565
22,468
5,384
23,293
5,584
24,136
5,251
25,758
5,231
By type
4 Financial liabilities
5
Payable in dollars
6
Payable in foreign currencies
14,509
12,553
1,955
13,600
11,257
2,343
12,133
9,609
2,524
12,936
9,945
2,991
11,828
8,303
3,525
13,134
9,459
3,675
13,112
9,607
3,505
13,512
10,090
3,422
14,849
7,005
7,843
13,836
1,013
14,225
6,685
7,540
13,039
1,186
13,454
6,450
7,004
12,140
1,314
15,635
7,548
8,086
14,061
1,574
16,025
7,425
8,600
14,165
1,859
15,743
6,560
9,183
13,834
1,909
16,275
6,867
9,409
14,529
1,746
17,477
6,586
10,891
15,668
1,809
6,728
471
995
489
590
569
3,297
7,700
349
857
376
861
610
4,305
7,917
270
661
368
542
646
5,140
9,162
230
615
505
505
685
6,357
8,065
202
364
583
884
493
5,346
8,983
241
365
586
883
652
6,074
8,758
269
332
626
880
707
5,772
9,450
326
329
709
893
697
6,326
7 Commercial liabilities
8
Trade payables
9
Advance receipts and other liabilities
10
Payable in dollars
11
Payable in foreign currencies
12
13
14
15
16
17
18
By area or country
Financial liabilities
Europe
Belgium-Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
19
Canada
863
839
399
397
400
467
461
439
20
21
22
23
24
25
26
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
5,086
1,926
13
35
2,103
367
137
3,184
1,123
4
29
1,843
15
3
1,944
614
4
32
1,146
22
0
998
280
0
22
618
17
3
829
278
0
25
459
13
0
1,178
249
0
23
807
15
2
1,175
211
0
20
878
26
0
894
233
0
35
581
2
0
27
28
29
Asia
Japan
Middle East oil-exporting countries
1,777
1,209
155
1,815
1,198
82
1,805
1,398
8
2,300
1,830
7
2,429
2,042
8
2,426
1,987
11
2,641
2.066
11
2,672
2,076
11
30
31
Africa
Oil-exporting countries
14
0
12
0
1
1
2
0
4
1
5
3
2
1
3
1
32
Mother4
41
50
67
76
100
75
74
55
4,001
48
438
622
245
257
1,095
4,074
62
453
607
364
379
976
4,446
101
352
715
424
385
1,341
4,951
59
437
674
336
556
1,473
5,635
134
451
916
428
559
1,668
5,738
156
441
818
463
527
1,798
5,836
150
433
798
535
482
1,848
6,855
203
470
1,203
653
510
2,186
33
34
35
36
37
38
39
Commercial liabilities
Europe
Belgium-Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
40
Canada
1,975
1,449
1,405
1,399
1,301
1,392
1,168
1,106
41
42
43
44
45
46
47
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
1,871
7
114
124
32
586
636
1,088
12
77
58
44
430
212
924
32
156
61
49
217
216
1,082
22
252
40
47
231
176
865
19
168
46
19
189
162
938
15
325
59
14
164
85
996
58
272
53
28
233
111
995
20
222
58
30
178
204
48
49
50
Asia
Japan
Middle East oil-exporting countries '
5,285
1,256
2,372
6,046
1,799
2,829
5,080
2,042
1,679
6,511
2,422
2,104
6,573
2,580
1,964
5,888
2,510
1,062
6,262
2,659
1,318
6,644
2,767
1,312
51
52
Africa
Oil-exporting countries
588
233
587
238
619
197
572
151
574
135
575
139
624
115
462
106
53
All other 4
1,128
982
980
1,119
1,078
1,211
1,390
1,414
1. For a description of the changes in the Internationa) Statistics tables, see
July 1979 BULLETIN, p. 550.
2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
3. Comprises Algeria, Gabon, Libya, and Nigeria.
4. Includes nonmonetary international and regional organizations.
5. Revisions include a reclassification of transactions, which also affects the
totals for Asia and the grand totals.
A66
International Statistics • April 1989
3.23 CLAIMS ON UNAFFILIATED FOREIGNERS
United States1
Reported by Nonbanking Business Enterprises in the
Millions of dollars, end of period
1987
Type, and area or country
1984
1985
1988
1986
Sept.
Dec.
Mar.
June
Sept.
1 Total
29,901
28,876
36,265
33,265
31,967
31,445
38,716
37,497
2 Payable in dollars
i Payable in foreign currencies
27,304
2,597
26,574
2,302
33,867
2,399
30,705
2,561
29,114
2,854
29,368
2,077
36,637
2,078
34,899
2,597
By type
4 Financial claims
5
Deposits
6
Payable in dollars
/
Payable in foreign currencies
8
Other financial claims
9
Payable in dollars
10
Payable in foreign currencies
19,254
14,621
14,202
420
4,633
3,190
1,442
18,891
15,526
14,911
615
3,364
2,330
1,035
26,273
19,916
19,331
585
6,357
5,005
1,352
22,847
17,274
16,366
908
5,572
4,448
1,124
21,338
15,214
13,997
1,217
6,124
5,020
1,104
20,612
13,257
12,604
654
7,355
6,301
1,054
27,102
20,037
19,195
842
7,064
6,238
826
26,508
19,866
18,666
1,200
6,642
5,814
828
11 Commercial claims
12
Trade receivables
13
Advance payments and other claims
10,646
9,177
1,470
9,986
8,696
1,290
9,992
8,783
1,209
10,419
9,420
999
10,630
9,565
1,065
10,832
9,719
1,113
11,614
10,558
1,056
10,989
10,004
985
9,912
735
9,333
652
9,530
462
9,891
528
10,097
533
10,464
369
11,204
410
10,419
570
5,762
15
126
224
66
66
4,864
6,929
10
184
223
161
74
6,007
10,744
41
138
116
151
185
9,855
10,785
26
171
103
157
44
10,074
10,182
7
360
122
351
84
9,008
10,314
15
335
112
336
57
9,210
12,577
16
185
181
337
82
11,407
11,126
49
212
119
364
84
9,675
14
15
16
17
18
19
20
21
22
Payable in dollars
Payable in foreign currencies
By area or country
Financial claims
Europe
Belgium-Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
23
Canada
3,988
3,260
4,808
3,295
3,293
2,777
3,074
3,473
24
25
26
27
28
29
30
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
8,216
3,306
6
100
4,043
215
125
7,846
2,698
6
78
4,571
180
48
9,291
2,628
6
86
6,078
174
21
7,568
3,299
2
113
3,705
174
18
6,817
1,804
7
63
4,427
172
19
6,572
2,349
43
86
3,561
154
35
10,898
4,145
126
46
6,077
147
28
11,177
4,088
138
65
6,421
133
27
31
32
33
Asia
Japan
Middle East oil-exporting countries 2
961
353
13
731
475
4
1,317
999
7
1,105
737
10
908
628
10
874
708
7
446
211
6
610
425
6
34
35
Africa
Oil-exporting countries
210
85
103
29
85
28
71
14
65
7
53
7
60
10
%
36
All other 4
117
21
28
24
72
23
47
26
3,801
165
440
374
335
271
1,063
3,533
175
426
346
284
284
898
3,725
133
431
444
164
217
999
4,166
169
462
551
190
206
1,228
4,190
179
652
562
135
185
1,086
4,201
192
554
637
151
172
1,084
4,901
159
686
770
173
262
1,300
4,261
171
535
604
146
182
1,187
37
38
39
40
41
42
43
Commercial claims
Europe
Belgium-Luxembourg
France
Germany
Netherlands
Switzerland
United Kingdom
9
44
Canada
1,021
1,023
934
1,051
931
1,155
946
933
45
46
47
48
49
50
51
Latin America and Caribbean
Bahamas
Bermuda
Brazil
British West Indies
Mexico
Venezuela
2,052
8
115
214
7
583
206
1,753
13
93
206
6
510
157
1,857
28
193
234
39
412
237
1,732
12
143
231
20
369
192
1,947
19
170
227
26
368
298
1,973
14
171
214
24
374
314
2,090
13
174
234
25
399
343
2,122
12
161
236
22
462
293
52
53
54
Asia
Japan
Middle East oil-exporting countries 2
3,073
1,191
668
2,982
1,016
638
2,755
881
563
2,800
1,027
434
2,919
1,160
450
2,857
1,109
408
3,002
1,169
445
2,981
956
407
55
56
Africa
Oil-exporting countries
470
134
437
130
500
139
407
124
401
144
419
126
422
136
419
136
57
All other 4
229
257
222
262
241
227
253
272
1. For a description of the changes in the International Statistics tables, see
July 1979 BULLETIN, p. 550.
2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
3. Comprises Algeria, Gabon, Libya, and Nigeria.
4. Includes nonmonetary international and regional organizations.
Securities
Holdings
and
Transactions
A67
3.24 FOREIGN TRANSACTIONS IN SECURITIES
Millions of dollars
1988
1988
Transactions, and area or country
1987
1986
Jan.Dec.
July
June
Aug.
Sept.
Oct.
Nov.
Dec/
11,971
12,552
13,232
14,852
11,973
11,861
11,215
12,464
U . S . corporate securities
STOCKS
1
2
Foreign purchases
Foreign sales
3
4
5
6
7
8
9
10
11
1?
13
14
15
16
17
18
148,114
129,395
249,122
232,849
180,951
183,014
20,007
19,678
19,207
18,383
17,275
16,704
Net purchases, or sales (—)
18,719
16,272
-2,062
329
824
572
-581
-1,620
112
-1,249
Foreign countries
18,927
16,321
-1,887
287
793
548
-554
-1,507
89
-1,204
Europe
France
Germany
Netherlands
Switzerland
United Kingdom
Canada
Latin America and Caribbean
Middle East'
Other Asia
Japan
Africa
Other countries
9,559
459
341
936
1,560
4,826
816
3,031
976
3,876
3,305
297
373
1,932
905
-70
892
-1,123
631
1,048
1,318
-1,360
12,8%
11,365
123
365
-3,428
-281
223
-535
-2,242
-1,034
1,088
1,248
-2,466
1,362
1,923
188
121
33
121
-36
-56
-204
146
-172
-116
-549
1,039
1,187
3
51
227
-34
-3
20
-90
253
58
58
-159
518
475
78
13
287
-21
9
- 5
-37
234
162
159
91
-228
-282
41
36
-616
-37
-14
-56
-506
245
44
310
-188
-127
24
5
19
-128
89
107
17
-217
-41
-116
374
-846
-693
-626
5
-102
-901
-49
-20
-30
-268
-579
576
98
151
138
133
21
6
-776
-64
-59
- 1
-273
-423
275
-23
-132
-567
-407
-1
19
Nonmonetary international and
regional organizations
-208
-48
-175
42
31
23
-28
-112
23
-45
BONDS
2
19
Foreign purchases
123,169
105,856
86,362
8,341
8,277
5,966
7,450
7,552
7,650
8,423
20
Foreign sales
72,520
78,312
57,721
4,590
5,064
4,144
5,048
4,674'
4,794
4,447
21
Net purchases, or sales (—)
50,648
27,544
28,641
3,751
3,213
1,822
2,401
2,878 r
2,856
3,976
22
Foreign countries
49,801
26,804
29,188
3,569
3,190
1,837
2,337
3,002 r
2,825
3,973
23
Europe
France
Germany
Netherlands
Switzerland
United Kingdom
Canada
Latin America and Caribbean
Middle East'
Other Asia
Japan
Africa
Other countries
39,313
389
-251
387
4,529
33,900
548
1,552
-3,113
11,346
9,611
21,989
194
33
269
1,587
19,770
1,2%
2,857
-1,314
2,021
1,622
17,886
143
1,344
1,514
513
13,642
711
1,930
-174
8,900
1,744
- 7
8
17
-139
1,685
130
254
-101
1,152
1,035
1,482
5
166
41
84
1,188
27
193
-87
1,611
90
160
415
97
793
-155
45
-14
916
2,341
45
34
545
175
1,339
20
198
1,240
13
-122
171
-13
1,141
5
58
2,554
-130
75
17
273
2,468
178
240
159
16
139
16
-61
7,686
-8
-58
2,203
15
226
55
-71
1,738
216
174
-124
1,091
1,049
4
5
0
10
1
-33
-67
847
740
-547
182
23
-14
64
24
25
26
77
28
29
30
31
37
33
34
35
36 Nonmonetary international and
regional organizations
254
178
575
1
-45
485 r
381'
4
-1
-124
143
1,353
1,210
-1
26
840
746
31
3
0
2
Foreign securities
37 Stocks, net purchases, or sales ( - )
38
39
Foreign purchases
Foreign sales
40 Bonds, net purchases, or sales ( - )
Foreign purchases
Foreign sales
41
42
-1,853
1,081
-1,685
-160
-126
-257
-57
-126'
-186
-1,046
49,149
95,458
94,377
74,720
76,405
6,413
6,573
7,052
7,178
5,904
6,161
5,054
5,111
6,070'
6,1%
7,625
7,810
7,414
8,460
-9,999
-699
-363
17,038
17,401
25,271
25,780
-3,407'
20,525
431
17,033
17,732
-659
19,224
19,882
-509
217,576
227,575
20,873
20,443
-1,550
21,627
23,177
51,002
-3,685
166,992
-7,946
199,089
170,677
207,035
23,932'
43 Net purchases, or sales ( - ) , of stocks and bonds
-5,538
-6,865
-11,684
-858
-785
-620
-566
-3,533'
245
-2,595
44 Foreign countries
-6,493
-6,757
-12,160
-770
-759
-650
-547
-3,582'
209
-2,690
-18,026
-876
3,476
10,858
52
-12,101
-4,072
828
-10,315
-1,185
-488
-897
-3,799
-190
-319
-479
392
59
-1,545
-658
-33
9,299
89
1,097
-800
-54
-566
-48
237
11
-153
-2,881
-273
-120
112'
-1,977
301
552
1
-248
216
-34
-114
37
143
-446
-730
955
-108
476
-89
-26
30
Europe
46 Canada
4 7 Latin America and Caribbean
48
4 9 Africa
50 Other countries
45
51 Nonmonetary international and
regional organizations
1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait,
Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States).
2. Includes state and local government securities, and securities of U . S .
government agencies and corporations. Also includes issues of new debt securi-
1,477
290
189
28
121
-189
-230
166
18
52
-33
-461
-19
49
36
95
39
ties sold abroad by U . S . corporations organized to finance direct investments
abroad.
A68
International Statistics • April 1989
3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES
Foreign Transactions
Millions of dollars
1988
Country or area
1988
1987
1986
Jan.Dec.
June
July
Aug.
Sept.
Oct.
Nov.
Dec."
Transactions, net purchases or sales ( - ) during period 1
1 Estimated total 2
19,388
25,587
48,529
-2,161
905
-383
-1,937
2,193"
8,582
133
2 Foreign countries 2
20,491
30,889
47,842
-3,336
2,156
-149
-2,259
-244'
8,247
2,144
16,326
-245
7,670
1,283
132
329
4,546
2,613
0
881
23,716
653
13,330
-913
210
1,917
3,975
4,563
-19
4,526
14,255
923
-5,348
-356
-323
-1,074
9,667
10,776
-10
3,761
-3,226
-68
-4,241
-796
-232
654
47
1,420
-10
669
-1,460
122
-4,240
312
-187
-51
837
1,755
-9
-314
-836
-209
-2,020
-346
175
344
416
803
0
-315
-1,233
-333
-720
-58
-121
-1,355
2,023
-663
-7
-167
-175
-3
277
41
-162
87
-1,019
615
-10
633
1,719
133
-1,015
135
355
-411
1,945
577
-2
-368
299
-90
-406
-114
118
-18
-231
1,054
-15
788
926
-96
1,130
-108
1,345
-22
-54
1,067
-2,192
150
-1,142
-1,200
4,488
868
-56
407
695
-109
1,112
-308
27,357
21,753
-13
1,786
-580
2
63
-645
-381
-52
-1
183
0
-2
57
-55
3,246
3,006
-10
694
-312
-128
-292
108
919
1,540
5
391
269
-17
285
1
-1,351
-2,841
31
193
582
0
506
77
6,870
4,224
-8
-548
-105
0
139
-244
812
-157
-7
358
21 Nonmonetary international and regional organizations
22
International
Latin America regional
23
-1,104
-1,430
157
-5,300
-4,387
3
689
1,142
-31
1,174
1,546
-38
-1,251
-1,137
-14
-234
-282
-8
323
294
0
2,438
2,365
0
335
489
10
-2,011
-2,019
10
Memo
24 Foreign countries 2
25
Official institutions
Other foreign
26
20,491
14,214
6,283
30,889
31,064
-181
47,842
26,593
21,246
-3,336
-1,658
-1,678
2,156
-2,362
4,518
-149
-1,450
1,301
-2,259
-1,481
-779
-244r
-821'
8,247
2,196
6,050
2,144
2,212
-68
-1,529
5
-3,142
16
1,715
1
-201
0
295
0
449
0
-182
0
-1,023
0
2,121
0
881
0
3 Europe 2
4
Belgium-Luxembourg
5
Germany
6
Netherlands
7
Sweden
8
Switzerland
9
United Kingdom
10
Other Western Europe
Eastern Europe
11
12 Canada
13
14
15
16
17
18
19
20
27
28
Latin America and Caribbean
Venezuela
Other Latin America and Caribbean
Netherlands Antilles
Asia
Japan
Africa
All other
Oil-exporting countries
Middle East 3
Africa
1. Estimated official and private transactions in marketable U.S. Treasury
securities with an original maturity of more than 1 year. Data are based on
monthly transactions reports. Excludes nonmarketable U.S. Treasury bonds and
notes held by official institutions of foreign countries.
2. Includes U.S. Treasury notes publicly issued to private foreign residents
denominated in foreign currencies.
-574
1
-331
-244
-107"
220"
0
-21
sir
3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
4. Comprises Algeria, Gabon, Libya, and Nigeria.
Interest and Exchange Rates
A69
3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS
Percent per year
Rate on Feb. 28, 1989
Rate on Feb. 28, 1989
Country
Month
effective
Austria..
Belgium .
Brazil . . .
Canada..
Denmark
Rate on Feb. 28, 1989
Country
Country
4.5
8.25
49.0
11.86
7.0
Jan.
Jan.
Mar.
Feb.
Oct.
1989
1989
1981
1989
1983
Percent
France
Germany, Fed. Rep. o f .
Italy
Japan
Netherlands
1. A s of the end of February 1981, the rate is that at which the Bank of France
discounts Treasury bills for 7 to 10 days.
2. Minimum lending rate suspended as of Aug. 20, 1981.
NOTE. Rates shown are mainly those at which the central bank either discounts
8.25
4.0
12.5
2.5
5.0
Month
effective
Jan.
Jan.
Aug.
Feb.
Jan.
1989
1989
1988
1987
1989
Norway
Switzerland
United Kingdom 2
Venezuela
Percent
Month
effective
8.0
4.0
June 1983
Jan. 1989
Oct. 1985
or makes advances against eligible commercial paper and/or government commercial banks or brokers. For countries with more than o n e rate applicable to
such discounts or advances, the rate s h o w n is the one at which it is understood the
central bank transacts the largest proportion of its credit operations.
3.27 FOREIGN SHORT-TERM INTEREST RATES
Percent per year, averages of daily figures
1989
1988
Country, or type
1
2
3
4
5
6
7
8
9
10
1986
1987
1988
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Eurodollars
United Kingdom
Canada
Germany
Switzerland
6.70
10.87
9.18
4.58
4.19
7.07
9.65
8.38
3.97
3.67
7.86
10.28
9.63
4.28
2.94
8.47
11.29
9.92
5.28
3.57
8.31
12.09
10.48
4.93
3.34
8.51
11.94
10.48
5.03
3.62
8.91
12.23
10.86
4.91
4.10
9.30
13.07
11.15
5.32
4.77
9.28
13.06
11.34
5.63
5.31
9.61
12.97
11.69
6.36
5.69
Netherlands
France
Italy
Belgium
Japan
5.56
7.68
12.60
8.04
4.96
5.24
8.14
11.15
7.01
3.87
4.72
7.80
11.04
6.69
3.96
4.50
7.58
11.02
7.25
3.98
5.51
7.86
11.27
7.39
4.15
5.35
7.87
11.30
7.24
4.26
5.30
8.03
11.48
7.18
4.22
5.60
8.36
11.96
7.38
4.16
5.99
8.55
11.84
7.59
4.24
6.75
9.11
12.26
8.04
4.21
NOTE. Rates are for 3-month interbank loans except for Canada, finance company paper; Belgium, 3-month Treasury bills; and Japan, Gensaki rate.
A70
International Statistics • April 1989
3.28 FOREIGN EXCHANGE RATES1
Currency units per dollar
1988
Country/currency
1
2
3
4
5
6
Australia/dollar^
Austria/schilling
Belgium/franc
Canada/dollar
China, P.R./yuan
Denmark/krone
1986
1987
1989
1988
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
67.093
15.260
44.662
1.3896
3.4615
8.0954
70.136
12.649
37.357
1.3259
3.7314
6.8477
78.408
12.357
36.783
1.2306
3.7314
6.7411
79.15
13.135
39.149
1.2267
3.7314
7.1764
80.96
12.777
38.077
1.2055
3.7314
7.0055
85.07
12.307
36.670
1.2186
3.7314
6.7547
85.73
12.359
36.815
1.1962
3.7314
6.7891
87.05
12.904
38.441
1.1913
3.7314
7.1143
85.64
13.022
38.792
1.1891
3.7314
7.2094
7
8
9
10
11
12
13
Finland/markka
France/franc
Germany/deutsche mark
Greece/drachma
H o n g Kong/dollar
India/rupee..
Ireland/punt 2
5.0721
6.9256
2.1704
139.93
7.8037
12.597
134.14
4.4036
6.0121
1.7981
135.47
7.7985
12.943
148.79
4.1933
5.9594
1.7569
142.00
7.8071
13.899
152.49
4.4282
6.3515
1.8668
151.47
7.8106
14.490
143.60
4.3041
6.1975
1.8165
148.71
7.8133
14.720
147.30
4.1522
5.9746
1.7491
145.22
7.8095
14.966
152.70
4.1408
5.9994
1.7563
146.10
7.8062
15.019
152.29
4.2553
6.2538
1.8356
152.25
7.8047
15.092
145.82
4.3006
6.3004
1.8505
154.72
7.8009
15.240
144.10
14
15
16
17
18
19
20
Italy/lira
Japan/yen
Malaysia/ringgit
Netherlands/guilder
N e w Zealand/dollar 2 . . .
Norway/krone
Portugal/escudo
1491.16
168.35
2.5830
2.4484
52.456
7.3984
149.80
1297.03
144.60
2.5185
2.0263
59.327
6.7408
141.20
1302.39
128.17
2.6189
1.9778
65.558
6.5242
144.26
1393.15
134.32
2.6643
2.1063
61.480
6.9150
154.18
1353.36
128.68
2.6785
2.0486
62.113
6.7400
150.13
1300.22
123.20
2.6779
1.9729
64.067
6.5796
145.57
1295.61
123.61
2.6935
1.9824
63.621
6.5234
145.56
1345.12
127.36
2.7221
2.0723
62.412
6.6808
150.74
1355.28
127.74
2.7307
2.0895
61.629
6.7254
152.10
21
22
23
24
25
26
27
28
29
30
Singapore/dollar
South Africa/rand
South K o r e a / w o n
Spain/peseta
Sri Lanka/rupee
Sweden/krona
Switzerland/franc
Taiwan/dollar
Thailand/baht
United Kingdom/pound
2.1782
2.2918
884.61
140.04
27.933
7.1272
1.7979
37.837
26.314
146.77
2.1059
2.0385
825.93
123.54
29.471
6.3468
1.4918
31.756
25.774
163.98
2.0132
2.1900
734.51
116.52
31.847
6.1369
1.4642
28.636
25.312
178.13
2.0409
2.4575
723.00
124.36
32.953
6.4448
1.5763
28.914
25.548
168.40
2.0202
2.4662
712.72
120.02
32.989
6.2694
1.5372
28.880
25.365
173.87
1.9616
2.3943
696.08
115.17
32.989
6.0968
1.4675
28.170
25.146
180.85
1.9442
2.3487
687.89
113.73
33.016
6.0888
1.4799
28.199
25.146
182.58
1.9404
2.3847
685.28
114.78
33.132
6.2725
1.5619
27.821
25.322
177.37
1.9285
2.4570
680.28
115.67
33.115
6.3238
1.5740
27.716
25.386
175.34
96.94
92.72
95.12
95.77
MEMO
31 United States/dollar 3 . . .
112.22
1. Averages of certified n o o n buying rates in N e w York for cable transfers.
Data in this table also appear in the Board's G.5 (405) release. For address, s e e
inside front cover.
2. Value in U . S . cents.
3. Index of weighted-average e x c h a n g e value of U . S . dollar against the
97.91
95.10
91.91
91.88
currencies of 10 industrial countries. The weight for e a c h of the 10 countries is the
1972-76 average world trade o f that country divided by the average world trade of
all 10 countries combined. Series revised as of August 1978 ( s e e FEDERAL
RESERVE BULLETIN, vol. 64, August 1978, p. 700).
71
Guide to Tabular Presentation, Statistical
Releases, and Special Tables
GUIDE TO TABULAR
Symbols
c
e
p
r
*
and
PRESENTATION
Abbreviations
Corrected
Estimated
Preliminary
Revised (Notation appears on column heading when
about half of the figures in that column are changed.)
Amounts insignificant in terms of the last decimal place
shown in the table (for example, less than 500,000
when the smallest unit given is millions)
General
0
n.a.
n.e.c.
IPCs
REITs
RPs
SMSAs
. ..
Calculated to be zero
Not available
Not elsewhere classified
Individuals, partnerships, and corporations
Real estate investment trusts
Repurchase agreements
Standard metropolitan statistical areas
Cell not applicable
Information
Minus signs are used to indicate (1) a decrease, (2) a negative
figure, or (3) an outflow.
"U.S. government securities" may include guaranteed
issues of U.S. government agencies (the flow of funds figures
also include not fully guaranteed issues) as well as direct
STATISTICAL
RELEASES
List Published
Semiannually,
with Latest Bulletin
obligations of the Treasury. "State and local government"
also includes municipalities, special districts, and other political subdivisions.
In some of the tables, details do not add to totals because
of rounding.
Reference
Anticipated schedule of release dates for periodic releases
SPECIAL
TABLES
Published
Irregularly,
with Latest Bulletin
page.
Page
A77
October
February
April
June
February
June
September
January
May
September
January
April
November
February
August
A70
A70
A70
A70
A76
A76
A82
A78
A70
A70
A72
A72
A74
A80
A70
Reference
Assets and liabilities of commercial banks, March 31, 1987
Assets and liabilities of commercial banks, June 30, 1987
Assets and liabilities of commercial banks, September 30, 1987
Assets and liabilities of commercial banks, December 31, 1987
Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1987
Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1987
Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1988
Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1988
Terms of lending at commercial banks, February 1988
Terms of lending at commercial banks, May 1988
Terms of lending at commercial banks, August 1988
Terms of lending at commercial banks, November 1988
Pro forma balance sheet and income statements for priced service operations, June 30, 1987
Pro forma balance sheet and income statements for priced service operations, September 30, 1987
Pro forma balance sheet and income statements for priced service operations, March 31, 1988 . . .
Digitized for Special
FRASER tables begin on next
Issue
December 1988
1987
1988
1988
1988
1988
1988
1988
1989
1988
1988
1989
1989
1987
1988
1988
A72
Special Tables • April 1989
4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 19881
A. Commercial and Industrial Loans2
Characteristic
Amount of
loans
(thousands
of dollars)
Average
size
(thousands
of dollars)
Weighted
average
maturity 3
Days
L o a n rate (percent)
Weighted
average
effective 4
Standard
Interquartile
range 6
Loans
made
under
commitment
(percent)
Participation
loans
(percent)
Most
common
pricing
rate 7
ALL BANKS
1 Overnight 8
*
10,032,481
4,728
9.27
.10
8.94-9.35
58.9
10.7
Fed funds
2 One month and under
3
Fixed rate
4
Floating rate
5,792,879
4,782,599
1,010,280
776
1,044
374
18
17
20
9.51
9.39
10.11
.19
.24
.16
9.11-9.95
9.11-9.70
9.36-10.49
77.9
76.6
84.2
12.2
13.5
6.1
Other
Other
Other
5 Over o n e month and under a year .
6
Fixed rate
7
Floating rate
6,938,988
4,276,464
2,662,525
129
154
102
141
105
199
10.51
10.15
11.10
.17
.20
.16
9.58-11.34
9.35-11.07
10.38-11.63
81.4
84.4
76.5
11.8
11.6
12.1
Prime
Domestic
Prime
8 Demand9
9
F i x e d rate
10
Floating rate
13,378,620
1,714,414
11,664,206
267
666
245
*
*
*
10.80
9.66
10.96
.20
.14
.20
9.25-12.01
9.00-10.22
9.57-12.13
83.4
92.4
82.1
8.4
15.7
7.3
Prime
Domestic
Prime
11 Total short term
36,142,969
318
48
10.11
.15
9.09-11.02
75.3
10.3
Prime
12 Fixed rate (thousands of dollars) . .
13
1-24
14
25-49
15
50-99
16
100-499
17
500-999
18
1000 and o v e r
20,378,076
199,044
124,207
147,692
377,087
334,234
19,195,807
547
8
33
64
184
671
7,885
29
106
99
98
89
47
26
9.51
12.19
11.52
12.10
10.86
10.03
9.42
.14
.16
.15
.30
.12
.11
.11
8.97-9.76
11.46-13.00
10.71-12.19
11.22-12.72
10.05-11.57
9.20-10.71
8.94-9.67
70.4
20.0
26.1
24.0
47.9
72.5
71.9
12.2
.1
3.6
.9
2.8
10.3
12.7
F e d funds
Other
Prime
Prime
Prime
Domestic
Fed funds
19 Floating rate (thousands of dollars)
20
1-24
21
25-49
22
50-99
23
100-499
24
500-999
25
1000 and o v e r
15,764,899
355,261
413,527
677,716
2,651,834
1,210,272
10,456,288
207
10
34
66
198
653
5,212
134
149
169
163
182
157
110
10.89
12.12
11.92
11.65
11.38
11.20
10.59
.19
.09
.08
.08
.06
.07
.23
9.62-11.91
11.55-12.68
11.30-12.68
11.02-12.13
10.52-11.91
10.47-11.85
9.20-11.63
81.8
69.3
77.6
79.5
86.0
86.0
80.9
7.8
.9
3.3
2.8
10.0
7.7
8.0
Prime
Prime
Prime
Prime
Prime
Prime
Prime
Months
26 Total long term
2,576,575
173
47
10.79
.25
9.54-11.63
70.8
9.1
Prime
27 Fixed rate (thousands of dollars) . .
28
1-99
29
100-499
30
500-999
31
1000 and over
1,074,644
126,456
48,232
32,073
867,884
147
19
172
635
5,393
46
74
59
56
40
10.48
12.65
11.53
10.60
10.11
.43
.31
.27
.41
.22
9.12-11.29
11.57-12.68
11.00-12.40
9.64-11.49
8.88-11.07
79.7
26.4
35.3
85.6
89.7
3.1
.2
2.9
.0
3.7
Domestic
Other
Prime
Other
Domestic
32 Floating rate (thousands of dollars)
33
1-99
34
100-499
35
500-999
36
1000 and o v e r
1,501,931
152,876
362,589
137,278
849,187
196
27
220
657
3,942
49
63
48
53
46
11.00
12.05
11.69
11.30
10.47
.22
.17
.20
.21
.19
9.96-11.74
11.57-12.68
10.52-12.13
10.52-11.91
9.29-11.57
64.4
25.8
48.5
50.1
80.5
13.3
1.7
16.1
5.8
15.5
Prime
Prime
Prime
Prime
Prime
56.7
78.3
93.4
65.4
12.5
13.5
12.1
8.6
Loan rate (percent)
Days
Prime rate
Effective 4
Nominal 10
9.13
9.19
9.54
9.21
8.74
8.80
9.18
8.84
10.00
10.00
10.07
10.01
L O A N S M A D E BELOW P R I M E 1 2
Overnight 8
One month and under
Over o n e month and under a year .
Demand9
*
9,456,175
4,962,395
3,344,030
4,636,975
9,008
3,056
628
1,728
16
128
41 Total short term
22,399,574
2,096
30
9.22
8.84
10.01
68.8
11.9
42 F i x e d rate
43 Floating rate
17,441,987
4,957,587
2,500
1,337
23
94
9.19
9.33
8.81
8.96
10.01
10.04
69.0
68.1
13.9
4.9
37
38
39
40
*
Months
44 Total long term
1,015,037
750
31
9.43
9.11
10.11
94.0
9.8
45 Fixed rate
46 Floating rate . .
512,241
502,796
813
695
26
37
9.20
9.66
8.94
9.27
10.02
10.19
91.7
96.3
0.0
19.7
For notes s e e end of table.
Financial Markets
A73
4.23—Continued
A. Commercial and Industrial Loans2—Continued
Loan rate (percent)
Weighted
Characteristic
Amount of
loans
(thousands
of dollars)
Average
size
(thousands
of dollars)
maturity 3
Days
Weighted
average
effective 4
Standard
error 5
Interquartile
range 6
Loans
made
under
commitment
(percent)
Participation
loans
(percent)
Most
common
pricing
LARGE B A N K S
1 Overnight 8
7,580,092
7,985
9.36
.16
8.94-9.42
66.1
13.9
Fed funds
2 One month and under
Fixed rate
3
4
Floating rate
4,379,053
3,729,185
649,869
3,029
3,951
1,295
18
17
21
9.38
9.29
9.90
.29
.42
.18
9.11-9.89
9.04-9.70
9.30-10.47
76.8
75.2
85.9
12.4
13.8
4.6
Other
Other
Domestic
5 Over o n e month and under a year
6
Fixed rate
Floating rate
7
4,458,520
3,313,942
1,144,578
903
2,006
349
125
99
202
10.18
10.03
10.62
.14
.15
.27
9.44-11.07
9.35-10.94
9.88-11.48
91.7
93.9
85.5
11.9
14.4
4.6
Domestic
Domestic
Prime
8 Demand9
Fixed rate
9
10
Floating rate
8,766,153
976,243
7,789,910
634
2,411
580
*
*
*
10.78
9.89
10.90
.39
.17
.40
9.20-12.01
9.18-10.47
9.20-12.19
80.5
90.0
79.3
6.3
1.4
6.9
Prime
Domestic
Prime
11 Total short term
25,183,818
1,190
39
10.00
.13
9.09-10.61
77.5
10.6
Prime
12 Fixed rate (thousands of dollars)
13
1-24
14
25-49
15
50-99
16
100-499
17
500-999
18
1000 and o v e r
15,177,755
7,762
10,019
20,468
118,503
169,961
14,851,042
3,877
10
33
67
217
693
8,547
28
81
73
60
55
34
28
9.52
11.78
11.38
11.42
10.76
10.27
9.50
.18
.22
.26
.32
.14
.08
.18
9.02-9.80
11.35-12.57
10.51-12.05
10.94-12.09
10.09-11.50
9.55-11.03
9.01-9.80
75.0
21.7
41.3
46.7
69.7
78.3
75.1
13.6
.0
.0
.4
3.4
13.9
13.7
Fed funds
Prime
Prime
Prime
Prime
Domestic
Fed funds
19 Floating rate (thousands of d o l l a r s ) . . .
20
1-24
21
25-49
22
50-99
23
100-499
24
500-999
25
1000 and o v e r
10,006,063
61,274
92,129
178,726
898,907
595,723
8,179,305
580
11
34
67
209
658
6,774
112
133
154
157
148
150
104
10.73
11.88
11.75
11.53
11.24
11.07
10.61
.36
.15
.13
.13
.09
.07
.45
9.25-12.01
11.02-12.68
11.02-12.40
10.75-12.13
10.47-11.71
10.47-11.63
9.18-12.01
81.3
83.1
85.8
88.4
89.3
92.1
79.4
6.2
.4
1.0
2.1
5.2
8.2
6.4
Prime
Prime
Prime
Prime
Prime
Prime
Prime
Months
1,538,426
972
42
10.22
.29
9.19-11.07
93.3
9.5
Domestic
27 Fixed rate (thousands of dollars) . .
28
1-99
29
100-499
30
500-999
31
1000 and o v e r
815,479
5,155
9,015
12,287
789,021
2,081
25
244
648
6,179
39
46
61
43
39
10.06
12.46
10.68
10.09
10.04
.61
.44
.50
.72
.26
8.88-11.07
11.07-13.24
10.47-12.01
9.59-10.47
8.88-11.07
95.6
34.9
54.6
94.5
96.5
3.9
.0
.0
.0
4.1
Domestic
Other
Other
Other
Domestic
32 Floating rate (thousands of dollars)
33
1-99
34
100-499
35
500-999
36
1000 and o v e r
722,947
20,573
77,293
59,726
565,355
607
34
211
633
4,841
45
35
45
40
46
10.40
12.15
11.33
10.97
10.15
.29
.35
.25
.23
.31
9.28-11.57
11.02-12.75
10.52-11.73
10.38-11.71
9.23-11.07
90.6
65.2
77.7
81.4
94.3
15.8
.5
5.5
8.7
18.6
Prime
Prime
Prime
Prime
Domestic
26 Total long term
Loan rate (percent)
Days
Prime rate
Effective 4
Nominal10
LOANS MADE BELOW PRIME12
Overnight 8
One month and under
Over o n e month and under a year
Demand9
7,039,554
3,867,427
2,708,342
3,317,365
10,028
5,576
5,569
5,428
17
121
9.20
9.15
9.54
9.18
8.80
8.77
9.19
8.81
10.00
10.00
9.99
10.00
63.7
76.0
96.1
56.0
14.9
13.2
12.0
.5
41 Total short term
16,932,688
6,792
29
9.24
8.86
10.00
70.2
11.3
42 Fixed rate
43 Floating rate
13,004,772
3,927,916
7,002
6,180
22
96
9.23
9.25
8.85
8.88
10.00
10.00
72.2
63.5
14.5
.5
37
38
39
40
*
Months
44 Total long term
819,308
4,031
32
9.22
8.94
9.99
96.9
6.2
45 Fixed rate
46 Floating rate . .
478,578
340,730
4,613
3,425
26
40
9.14
9.34
8.90
8.99
10.00
9.98
95.4
98.9
.0
15.0
For notes see end of table.
A74
Special Tables • April 1989
4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 1988'—Continued
A. Commercial and Industrial Loans—Continued 2
Characteristic
Amount of
loans
(thousands
of dollars)
Average
size
(thousands
of dollars)
Weighted
average
maturity 3
Days
Loan rate (percent)
Weighted
average
effective 4
Standard
error 5
Interquartile
range 6
Loans
made
under
commitment
(percent)
Participation
loans
(percent)
OTHER B A N K S
1 Overnight 8
2,452,389
2,092
2 One month and under
F i x e d rate
3
4
Floating rate
1,413,826
1,053,415
360,411
235
276
164
17
17
18
9.92
9.72
10.49
9.15-10.15
9.15-9.74
9.83-11.57
81.4
81.5
81.2
11.5
12.4
8.6
5 Over o n e month and under a year .
6
Fixed rate
Floating rate
7
2,480,468
962,522
1,517,947
51
37
67
170
129
196
11.11
10.57
11.46
10.38-11.85
9.23-11.96
10.92-11.85
62.8
51.9
69.8
11.7
2.1
17.7
4,612,468
738,171
3,874,297
127
340
114
10.82
9.36
11.10
10.22-11.57
9.00-9.54
10.47-11.85
88.9
95.5
87.7
12.3
34.7
8.1
8 Demand9
9
F i x e d rate
10
Floating rate
11 Total short term
8.73-9.14
10,959,151
119
10.36
9.05-11.57
70.4
9.5
12 F i x e d rate (thousands of dollars) . .
13
1-24
14
25-49
15
50-99
16
100-499
17
500-999
18
1000 and o v e r
5,200,315
191,282
114,188
127,224
258,583
164,273
4,344,766
156
8
33
63
171
650
6,236
33
107
101
104
104
61
19
9.48
12.21
11.53
12.21
10.90
9.79
9.13
8.83-9.52
11.46-13.10
10.92-12.19
11.46-12.83
10.05-11.63
9.00-10.38
8.79-9.27
56.9
19.9
24.8
20.4
37.9
66.5
61.2
8.1
3.9
1.0
2.5
6.5
9.2
19 Floating rate (thousands of dollars)
20
1-24
21
25-49
22
50-99
23
100-499
24
500-999
25
1000 and o v e r
5,758,836
293,988
321,398
498,989
1,752,928
614,549
2,276,984
98
9
33
66
193
648
2,851
161
151
171
164
191
162
128
11.15
12.17
11.97
11.69
11.45
11.32
10.52
10.47-11.85
11.57-12.71
11.35-12.68
11.02-12.19
10.75-12.13
10.47-12.13
9.50-11.19
82.6
66.4
75.3
76.3
84.3
80.1
86.4
10.6
1.0
3.9
3.0
12.4
7.2
14.1
.1
Months
26 Total long term
1,038,149
78
11.62
10.75-12.13
37.4
8.4
27 F i x e d rate (thousands of dollars) . .
28
1-99
29
100-499
30
500-999
31
1000 and o v e r
259,165
121,301
39,217
19,786
78,862
38
18
161
628
2,374
11.82
12.66
11.72
10.92
10.82
10.86-12.40
11.57-12.68
11.02-12.40
9.66-11.85
10.76-10.86
29.4
26.1
30.8
80.0
21.2
.6
.2
3.6
.0
.0
32 Floating rate (thousands of dollars)
33
1-99
34
100-499
35
500-999
36
1000 and o v e r
778,983
132,303
285,296
77,552
283,832
27
223
677
2,877
11.56
12.04
11.78
11.55
11.10
10.47-12.13
11.57-12.68
10.52-12.68
11.57-11.91
10.42-11.63
40.1
19.6
40.6
26.0
53.0
11.0
1.9
19.0
3.5
9.3
121
Loan rate (percent)
Days
Prime rate
Effective 4
Nominal
L O A N S M A D E BELOW PRIME 1 2
37
38
39
40
Overnight 8
One month and under
Over o n e month and under a year
Demand9
8.93
9.33
9.50
9.28
8.56
8.93
9.14
8.92
10.00
10.39
10.04
36.3
86.4
81.8
89.2
5.6
14.2
12.4
28.9
667
9.16
8.79
10.06
64.4
13.8
867
335
9.06
9.62
8.68
9.24
10.03
10.19
59.4
86.0
12.0
21.4
39.3
90.7
0.4
29.7
2,416,621
1,094,967
635,688
1,319,610
6,950
1,177
131
637
41 Total short term
5,466,886
42 F i x e d rate
43 Floating rate
4,437,215
1,029,671
15
159
10.01
Months
44 Total long term
45 Fixed rate
46 Floating rate
For notes s e e end of table.
30
195,729
33,663
162,066
64
260
10.28
10.03
10.34
10.59
9.57
9.86
10.41
10.63
Financial Markets
A75
4.23—Continued
B. Construction and Land Development Loans1
L o a n rate (percent)
Characteristic
Amount of
loans
(thousands
of dollars)
Average
size
(thousands
of dollars)
Weighted
average
maturity
(months) 3
Weighted
average
effective 4
Standard
error 5
Interquartile
range 6
L o a n s made
under
commitment
(percent)
Participation
loans
(percent)
ALL BANKS
2,404,957
196
15
11.04
.14
10.62-11.57
84.9
17.2
718,378
19,298
13,750
6,219
27,971
651,141
170
6
34
76
214
3,076
7
5
10
10
18
6
10.41
11.59
11.64
11.44
11.27
10.31
.20
.25
.19
.27
.32
.21
9.92-10.64
11.05-12.13
11.02-12.13
11.26-11.57
10.61-12.13
9.92-10.64
81.6
75.9
63.4
68.4
74.8
82.5
7.4
.0
.0
.0
30.4
6.8
8 Floating rate (thousands of dollars) . . .
1-24
9
10
25-49
11
50-99
12
100-499
13
500 and o v e r
1,686,579
42,052
45,693
76,861
251,029
1,270,943
209
10
36
67
228
2,765
20
11
8
9
16
22
11.30
12.12
11.83
12.18
11.57
11.15
.10
.11
.10
.12
.05
.15
11.02-11.57
11.57-12.68
11.57-12.19
11.57-13.31
11.03-11.85
11.02-11.57
86.4
83.8
85.9
89.1
88.4
85.9
21.3
3.4
4.6
2.6
3.1
27.3
By type of
construction
14 Single family
15 Multifamily
16 Nonresidential
304,238
235,929
1,864,790
40
304
470
13
23
14
11.44
10.98
10.98
.12
.16
.16
11.02-12.13
9.92-11.57
10.61-11.57
82.1
49.4
89.9
1.1
1.7
21.8
1,418,010
897
14
11.02
.21
10.64-11.30
88.6
27.2
484,890
669
665
2,888
11
33
2
7
9
10.46
11.45
11.43
.23
.45
.34
10.34-10.64
10.94-11.57
11.31-11.57
95.1
79.2
80.1
9.5
.0
.0
1 Total
2 F i x e d rate (thousands of dollars)
3
1-24
4
25 49
5
50-99
6
100-499
500 and o v e r
7
LARGE B A N K S 1 3
1 Total
2 F i x e d rate (thousands of dollars)
3
1 24
25-49
4
5
50-99
6
100-499
7
500 and o v e r
*
*
*
#
*
*
*
*
9,566
2
10.46
.24
10.34-10.64
95.2
9.3
933,121
4,701
5,965
12,357
99,219
810,879
660
10
36
71
253
3,587
21
10
14
15
16
21
11.31
12.15
11.63
11.74
11.54
11.27
.12
.18
.16
.11
.07
.15
11.02-11.57
11.57-12.75
11.30-12.13
11.30-12.13
11.30-11.85
11.02-11.57
85.2
88.7
92.6
97.8
95.3
83.7
36.4
1.1
.8
7.3
1.7
41.6
91,849
143,194
1,182,967
152
911
1,443
15
25
13
11.60
11.31
10.94
.14
.12
.21
11.30—12.01
11.02-11.57
10.64-11.30
92.6
63.3
91.3
.0
1.4
32.5
1 Total
986,946
92
17
11.06
.22
10.47-11.57
79.7
2.7
2 Fixed rate (thousands of dollars)
1-24
3
4
25-49
5
50-99
6
100-499
7
500 and o v e r
233,488
18,629
13,085
5,311
24,289
58
6
34
77
223
16
5
10
8
19
10.31
11.59
11.65
11.52
11.32
.35
.21
.24
.48
.43
9.42-11.02
11.06-12.13
11.02-12.13
11.35-11.57
10.67-12.13
53.4
75.8
62.5
65.0
72.2
2.9
.0
.0
.0
27.6
*
*
*
8 Floating rate (thousands of dollars) . . .
9
1 24
10
25-49
11
50-99
12
100-499
13
500 and over
By type of
construction
14 Single family
15 Multifamily
16 Nonresidential
*
*
*
478,966
#
*
*
OTHER B A N K S 1 3
*
*
*
*
*
8 Floating rate (thousands of dollars) . . .
9
1 24
10
25-49
11
50 99
12
100-499
13
500 and o v e r
753,458
37,351
39,727
64,504
151,811
460,064
113
10
36
67
213
1,970
18
11
7
9
16
23
11.30
12.12
11.86
12.27
11.59
10.95
.17
.14
.11
.19
.06
.24
10.75-11.63
11.57-12.68
11.57-12.19
11.57-13.31
11.02-12.13
10.47-11.57
87.8
83.1
84.9
87.5
83.9
89.8
2.6
3.6
5.2
1.7
4.0
2.0
By type of
construction
14 Single family
15 Multifamily
16 Nonresidential
212,389
92,735
681,823
31
150
216
13
22
18
11.37
10.47
11.05
.21
.31
.27
11.02-12.17
9.92-11.02
10.47-11.57
77.6
27.9
87.4
1.5
2.0
3.2
For notes s e e end of table.
A76
Special Tables • April 1989
4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 7-11, 1988'—Continued
C. Loans to Farmers14
Size class of loans (thousands)
Characteristic
All sizes
$10-24
$1-9
$50-99
$25-49
$100-249
$250
and o v e r
ALL BANKS
1 A m o u n t of loans (thousands of dollars)
2 N u m b e r of loans
3 Weighted average maturity (months)
4 Weighted average interest rate (percent) 4
5
Standard e r r o r
Interquartile range
6
1
8
9
10
11
12
By purpose of loan
Feeder livestock
Other livestock
Other current operating e x p e n s e s
Farm machinery and equipment
Farm real estate
Other
Percentage
of amount of
13 With floating rates
14 Made under commitment
15
16
17
18
19
20
By purpose of loan
Feeder livestock
Other livestock
Other current operating e x p e n s e s
Farm machinery and equipment
Farm real estate
Other
LARGE BANKS
15
16
17
18
19
20
By purpose of loan
Feeder livestock
Other livestock
Other current operating e x p e n s e s
Farm machinery and equipment
Farm real estate
Other
By purpose of loan
Feeder livestock
Other livestock
Other current operating e x p e n s e s
Farm machinery and equipment
Farm real estate
Other
OTHER BANKS
By purpose of loan
F e e d e r livestock
Other livestock
Other current operating e x p e n s e s
Farm machinery and equipment
Farm real estate
Other
$126,989
1,947
10.2
$166,393
1,077
7.2
$199,874
216
4.6
11.59
.60
10.74-12.13
12.10
.52
11.57-12.55
11.91
.45
11.42-12.40
12.01
.89
11.40-12.68
12.03
.55
11.63-12.47
11.49
.97
10.56-12.01
10.84
.22
10.38-11.57
11.57
11.72
11.57
12.22
11.53
11.35
12.25
13.31
12.06
11.89
11.54
11.58
11.53
12.75
11.93
12.33
12.14
12.40
12.19
11.62
11.87
11.76
11.98
12.17
62.6
61.6
51.7
43.2
28.6
13.8
38.0
3.5
3.1
13.1
*
11.34
*
10.73
*
*
*
*
*
11.02
*
11.06
12.00
12.15
11.71
11.03
53.7
48.5
65.8
58.0
52.7
38.5
71.1
56.9
68.4
94.7
14.4
4.2
68.6
5.4
1.2
6.2
31.1
6.8
46.5
6.2
4.6
4.7
39.2
6.3
41.1
27.7
17.3
32.7
42.0
$273,529
3,480
5.6
$6,442
1,555
7.0
11.10
.56
10.47-11.63
11.08
10.73
11.22
11.99
11.98
11.17
*
*
*
*
16.9
*
*
27.4
34.8
*
*
*
3.7
9.5
6.0
32.4
$10,980
706
5.7
$17,162
479
9.7
$22,379
332
9.6
$35,282
242
12.3
$181,285
165
4.0
12.37
.49
11.81-12.83
12.09
.43
11.57-12.68
11.89
.85
11.46-12.40
11.76
.51
11.30-12.28
11.58
.68
11.02-12.02
10.75
.18
10.38-11.07
11.86
12.46
12.41
12.71
11.71
12.14
12.14
11.67
12.04
11.87
*
*
*
*
11.62
*
12.07
12.29
12.00
11.95
74.9
91.4
86.8
78.5
94.4
89.7
96:4
87.8
91.2
81.2
16.5
19.0
35.4
.8
.9
27.4
8.7
5.8
68.2
4.2
13.7
6.0
61.4
19.1
7.5
52.3
*
*
*
*
*
10.71
11.69
10.73
*
*
*
*
*
11.35
*
11.60
23.3
*
11.71
10.93
95.9
88.3
65.1
94.1
13.5
28.5
*
41.2
*
30.2
35.7
*
*
*
*
*
#
*
30.5
9.6
13.2
17.1
21.3
28.2
$480,431
28,822
8.2
$66,248
18,381
6.0
$83,628
5,808
8.2
$76,244
2,132
9.2
$104,611
1,616
10.3
$131,111
835
6.7
*
11.86
.20
11.30-12.47
12.07
.16
11.57-12.50
11.89
.12
11.41-12.36
12.04
.27
11.40-12.68
12.09
.19
11.63-12.47
11.46
.68
10.56-11.91
*
14
4 Weighted average interest rate (percent) 4
5
Standard error 5
6
Interquartile range
For n o t e s s e e end of table.
$93,406
2,611
9.3
loans
1 Amount of loans (thousands of dollars)
2 N u m b e r of loans
3 Weighted average maturity (months)
7
8
9
10
11
12
$94,609
6,515
8.0
14
4 Weighted average interest rate (percent) 4
5
Standard e r r o r
Interquartile range
6
Percentage
of amount of
13 With floating rates
14 Made under commitment
$72,689
19,936
6.1
loans
1 Amount of loans (thousands of dollars)
2 N u m b e r of loans
3 Weighted average maturity (months)
7
8
9
10
11
12
$753,960
32,302
7.4
11.70
12.72
11.75
12.24
11.48
11.91
12.27
13.43
12.03
11.83
*
11.50
11.52
12.24
11.89
11.88
*
*
*
*
*
11.79
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Financial Markets
All
4.23—Continued
C. Loans to Farmers14—Continued
Size class of loans (thousands)
Characteristic
Percentage of amount of loans
13 With floating rates
14 Made under commitment
15
16
17
18
19
20
By purpose of loan
Feeder livestock
Other livestock
Other current operating expenses
Farm machinery and equipment
Farm real estate
Other
All sizes
$1-9
$10-24
$25-49
$50-99
$100-249
$250
and over
55.6
44.6
48.3
39.8
48.4
43.1
58.9
51.3
44.5
29.4
64.5
48.4
*
*
35.4
10.8
39.5
5.0
4.4
5.0
15.0
4.0
68.6
5.5
*Fewer than 10 sample loans.
1. The survey of terms of bank lending to business collects data on gross loan
extensions made during the first full business week in the mid-month of each
quarter by a sample of 340 commercial banks of all sizes. A subsample of 250
banks also report loans to farmers. The sample data are blown up to estimate the
lending terms at all insured commercial banks during that week. The estimated
terms of bank lending are not intended for use in collecting the terms of loans
extended over the entire quarter or residing in the portfolios of those banks.
Construction and land development loans include both unsecured loans and loans
secured by real estate. Thus, some of the construction and land development
loans would be reported on the statement of condition as real estate loans and the
remainder as business loans. Mortgage loans, purchased loans, foreign loans, and
loans of less than $1,000 are excluded from the survey.
As of Dec. 31, 1987, assets of most of the large banks were at least $6.0 billion.
For all insured banks total assets averaged $220 million.
2. Beginning with the August 1986 survey respondent banks provide information on the type of base rate used to price each commercial and industrial loan
made during the survey week. This reporting change is reflected in the new
column on the most common base pricing rate in table A and footnote 13 from
table B.
3. Average maturities are weighted by loan size and exclude demand loans.
4. Effective (compounded) annual interest rates are calculated from the stated
rate and other terms of the loan and weighted by loan size.
5. The chances are about two out of three that the average rate shown would
differ by less than this amount from the average rate that would be found by a
complete survey of lending at all banks.
33.4
43.7
28.7
44.6
38.6
*
*
*
*
*
*
*
5.8
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
6. The interquartile range shows the interest rate range that encompasses the
middle 50 percent of the total dollar amount of loans made.
7. The most common base rate is that rate used to price the largest dollar
volume of loans. Base pricing rates include the prime rate (sometimes referred to
as a bank's "basic" or "reference" rate); the federal funds rate; domestic money
market rates other than the federal funds rate; foreign money market rates; and
other base rates not included in the foregoing classifications.
8. Overnight loans are loans that mature on the following business day.
9. Demand loans have no stated date of maturity.
10. Nominal (not compounded) annual interest rates are calculated from survey
data on the stated rate and other terms of the loan and weighted by loan size.
11. The prime rate reported by each bank is weighted by the volume of loans
extended and then averaged.
12. The proportion of loans made at rates below prime may vary substantially
from the proportion of such loans outstanding in banks' portfolios.
13. 58.5 percent of construction and land development loans were priced
relative to the prime rate.
14. Among banks reporting loans to farmers (Table C), most "large banks"
(survey strata 1 to 3) had over $600 million in total assets, and most "other banks"
(survey strata 4 to 6) had total assets below $600 million.
The survey of terms of bank lending to fanners now includes loans secured by
farm real estate. In addition, the categories describing the purpose of farm loans
have now been expanded to include "purchase or improve farm real estate." In
previous surveys, the purpose of such loans was reported as "other."
78
Federal Reserve Board of Governors
ALAN GREENSPAN, Chairman
M A N U E L H . JOHNSON, Vice Chairman
MARTHA R . SEGER
WAYNE D . A N G E L L
OFFICE OF BOARD
DIVISION
MEMBERS
JOSEPH R. COYNE, Assistant
DONALD J. WLNN, Assistant
to the Board
to the Board
BOB STAHLY MOORE, Special Assistant to the Board
LEGAL
DIVISION
J. VIRGIL MATTINGLY, JR., General
Counsel
RICHARD M. ASHTON, Associate General Counsel
OLIVER IRELAND, Associate General Counsel
RICKI R. TLGERT, Associate General Counsel
SCOTT G. ALVAREZ, Assistant General Counsel
MARYELLEN A. BROWN, Assistant to the General Counsel
OFFICE OF THE
Secretary
Secretary
DIVISION OF CONSUMER
AND COMMUNITY
AFFAIRS
ROBERT F. GEMMILL, Staff Adviser
DONALD B. ADAMS, Assistant
Director
PETER HOOPER III, Assistant
Director
KAREN H. JOHNSON, Assistant
Director
RALPH W. SMITH, JR., Assistant
Director
DIVISION
OF RESEARCH
MICHAEL J. PRELL,
Director
Director
DIVISION OF BANKING
SUPERVISION AND
REGULATION
DIVISION
OF MONETARY
AFFAIRS
Director
DAVID E. LINDSEY, Deputy
Director
BRIAN F. MADIGAN, Assistant
Director
RICHARD D. PORTER, Assistant
Director
NORMAND R.V. BERNARD, Special Assistant to the Board
Director
DON E. KLINE, Associate Director
FREDERICK M. STRUBLE, Associate
OFFICE OF THE INSPECTOR
HERBERT A. BLERN, Assistant
GENERAL
Director
WILLIAM A. RYBACK, Deputy Associate Director
STEPHEN C. SCHEMERING, Deputy Associate Director
RICHARD SPILLENKOTHEN, Deputy Associate Director
Director
JOE M. CLEAVER, Assistant Director
ROGER T. COLE, Assistant
Director
JAMES I. GARNER, Assistant
Director
JAMES D. GOETZINGER, Assistant
Director
MICHAEL G. MARTINSON, Assistant
Director
ROBERT S. PLOTKIN, Assistant
Director
Suss AN, Assistant Director
LAURA M. HOMER, Securities Credit Officer
STATISTICS
MYRON L. KWAST, Assistant
Director
SUSAN J. LEPPER, Assistant
Director
MARTHA S. SCANLON, Assistant
Director
DAVID J. STOCKTON, Assistant
Director
JOYCE K. ZLCKLER, Assistant
Director
LEVON H. GARABEDIAN, Assistant
Director
DONALD L. KOHN,
SIDNEY M .
AND
(Administration)
GLENN E. LONEY, Assistant
Director
ELLEN MALAND, Assistant
Director
DOLORES S. SMITH, Assistant
Director
WILLIAM TAYLOR, Staff
Director
LARRY J. PROMISEL, Senior Associate Director
CHARLES J. SLEGMAN, Senior Associate Director
DAVID H. HOWARD, Deputy Associate Director
MARTHA BETHEA, Deputy Associate Director
PETER A. TINSLEY, Deputy Associate Director
Secretary
JENNIFER J. JOHNSON, Associate
BARBARA R. LOWREY, Associate
GRIFFITH L . GARWOOD,
EDWIN M. TRUMAN, Staff
FINANCE
EDWARD C. ETTIN, Deputy
Director
THOMAS D. SIMPSON, Associate
Director
LAWRENCE SLIFMAN, Associate
Director
SECRETARY
WILLIAM W . WILES,
OF INTERNATIONAL
BRENT L. BOWEN, Inspector
General
BARRY R. SNYDER, Assistant Inspector General
79
and Official Staff
H . ROBERT HELLER
EDWARD W . K E L L E Y , JR.
JOHN P. L A W A R E
OFFICE OF
STAFF DIRECTOR
OFFICE OF STAFF DIRECTOR FOR
FEDERAL RESERVE BANK
ACTIVITIES
FOR
S. DAVID FROST, Staff
MANAGEMENT
THEODORE E. ALLISON, Staff
Director
EDWARD T. MULRENIN, Assistant Staff Director
PORTIA W. THOMPSON, Equal Employment Opportunity
Programs Officer
DIVISION OF HUMAN
MANAGEMENT
DAVID L . SHANNON,
RESOURCES
DIVISION OF FEDERAL
BANK
OPERATIONS
FLORENCE M . YOUNG,
CONTROLLER
Controller
STEPHEN J. CLARK, Assistant Controller (Programs and
Budgets)
DARRELL R. PAULEY, Assistant Controller (Finance)
DIVISION
OF SUPPORT
ROBERT E . FRAZIER,
SERVICES
Director
GEORGE M. LOPEZ, Assistant
DAVID L. WILLIAMS, Assistant
Director
Director
OFFICE OF THE EXECUTIVE
INFORMATION RESOURCES
ALLEN E. BEUTEL, Executive
DIRECTOR FOR
MANAGEMENT
Director
STEPHEN R. MALPHRUS, Deputy Executive Director
DIVISION
SYSTEMS
OF HARDWARE
BRUCE M . BEARDSLEY,
AND
SOFTWARE
Director
THOMAS C. JUDD, Assistant
Director
ELIZABETH B. RIGGS, Assistant
Director
ROBERT J. ZEMEL, Assistant
Director
DIVISION OF APPLICATIONS
STATISTICAL
SERVICES
WILLIAM R . JONES,
DEVELOPMENT
Director
DAY W. RADEBAUGH, Assistant Director
RICHARD C. STEVENS, Assistant
Digitized for PATRICIA
FRASER A. WELCH, Assistant
Director
Director
Director
DAVID L. ROBINSON, Associate
Director
C. WILLIAM SCHLEICHER, JR., Associate
Director
BRUCE J. SUMMERS, Associate
Director
CHARLES W. BENNETT, Assistant
Director
JACK DENNIS, JR., Assistant
Director
EARL G. HAMILTON, Assistant
Director
JOHN H. PARRISH, Assistant
Director
LOUISE L. ROSEMAN, Assistant
Director
Director
GEORGE E . LIVINGSTON,
RESERVE
CLYDE H . FARNSWORTH, JR.,
JOHN R. WEIS, Associate
Director
ANTHONY V. DLGLOIA, Assistant
Director
JOSEPH H. HAYES, JR., Assistant
Director
FRED HOROWITZ, Assistant
Director
OFFICE OF THE
Director
AND
Adviser
80
Federal Reserve Bulletin • April 1989
Federal Open Market Committee
FEDERAL
OPEN MARKET
COMMITTEE
MEMBERS
ALAN GREENSPAN, Chairman
WAYNE D . ANGELL
ROGER GUFFEY
H . ROBERT HELLER
E . GERALD CORRIGAN, Vice
MANUEL H . JOHNSON
SILAS KEEHN
EDWARD W . KELLEY, JR.
ALTERNATE
EDWARD G . BOEHNE
ROBERT H . BOYKIN
Chairman
JOHN P . L A W A R E
THOMAS C . MELZER
MARTHA R . SEGER
RICHARD F . SYRON
MEMBERS
W . LEE HOSKINS
JAMES H . OLTMAN
GARY H . STERN
STAFF
DONALD L . KOHN, Secretary
and
NORMAND R . V . BERNARD, Assistant
Economist
Secretary
ERNEST T. PATRIKIS, Deputy General Counsel
MICHAEL J. PRELL,
Economist
EDWIN M . TRUMAN,
Economist
JOHN H . BEEBE, Associate
Economist
J. ALFRED BROADDUS, JR., Associate
Economist
JOHN M . DAVIS, Associate
Economist
RICHARD G . DAVIS, Associate
Economist
DAVID E . LLNDSEY, Associate
Economist
CHARLES J. SLEGMAN, Associate
Economist
THOMAS D . SIMPSON, Associate
Economist
LAWRENCE SLIFMAN, Associate
Economist
SHEILA L . TSCHINKEL, Associate
Economist
PETER D. STERNLIGHT, Manager for Domestic Operations, System Open Market Account
SAM Y. CROSS, Manager for Foreign Operations, System Open Market Account
FEDERAL
ADVISORY
COUNCIL
DONALD N . BRANDIN,
President
SAMUEL A. McCULLOUGH, Vice President
THOMAS H. O'BRIEN, Fourth District
B. KENNETH WEST, Seventh District
DONALD N. BRANDIN, Eighth District
LLOYD P. JOHNSON, Ninth District
JORDAN L. HAINES, Tenth District
FREDERICK DEANE, JR., F i f t h District
JAMES E . BURT III, E l e v e n t h D i s t r i c t
KENNETH L. ROBERTS, Sixth District
PAUL HAZEN, Twelfth District
J. TERRENCE MURRAY, First District
WILLARD C. BUTCHER, Second District
SAMUEL A . MCCULLOUGH, Third District
HERBERT V . PROCHNOW,
WILLIAM J. KORSVIK, Associate
Secretary
Secretary
81
and Advisory Councils
CONSUMER
ADVISORY
COUNCIL
JUDITH N. BROWN, Edina, Minnesota, Chairman
WILLIAM E. ODOM, Dearborn, Michigan, Vice Chairman
NAOMI G. ALBANESE, Greensboro, North Carolina
GEORGE H. BRAASCH, Chicago, Illinois
BETTY TOM CHU, Arcadia, California
CLIFF E. COOK, Tacoma, Washington
JERRY D. CRAFT, Atlanta, Georgia
DONALD C. DAY, Boston, Massachusetts
R.B.(JOE) DEAN, JR., Columbia, South Carolina
RICHARD B. DOBY, Denver, Colorado
ROBERT A . HESS, W a s h i n g t o n , D . C .
WILLIAM C . DUNKELBERG, P h i l a d e l p h i a , P e n n s y l v a n i a
RICHARD H . FINK, W a s h i n g t o n , D . C .
JAMES FLETCHER, C h i c a g o , Illinois
STEPHEN GARDNER, D a l l a s , T e x a s
VINCENT P. QUAYLE, Baltimore, Maryland
ELENA G. HANGGI, Little Rock, Arkansas
JAMES HEAD, Berkeley, California
THRIFT INSTITUTIONS
ADVISORY
RAMON E. JOHNSON, Salt Lake City, Utah
BARBARA KAUFMAN, San Francisco, California
A. J. (JACK) KING, Kalispell, Montana
MICHELLE S . MEIER, W a s h i n g t o n , D . C .
RICHARD L. D. MORSE, Manhattan, Kansas
LINDA K. PAGE, Columbus, Ohio
SANDRA PHILLIPS, P i t t s b u r g h , P e n n s y l v a n i a
CLIFFORD N . ROSENTHAL, N e w Y o r k , N e w Y o r k
ALAN M. SPURGIN, New York, New York
RALPH E. SPURGIN, Columbus, Ohio
DAVID P. WARD, Peapack, New Jersey
LAWRENCE WINTHROP, P o r t l a n d , O r e g o n
COUNCIL
GERALD M. CZARNECKI, Honolulu, Hawaii, President
DONALD B. SHACKELFORD, Columbus, Ohio, Vice President
CHARLOTTE CHAMBERLAIN, G l e n d a l e , California
JOE C. MORRIS, Overland Park, Kansas
ROBERT S. DUNCAN, Hattiesburg, Mississippi
ADAM A. JAHNS, Chicago, Illinois
H. C. KLEIN, Jacksonville, Arkansas
PHILIP E. LAMB, Springfield, Massachusetts
JOSEPH W . MOSMILLER, B a l t i m o r e , M a r y l a n d
Louis H. PEPPER, Seattle, Washington
MARION O. SANDLER, Oakland, California
CHARLES B. STUZIN, Miami, Florida
82
Federal Reserve Board Publications
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System, Washington, D.C. 20551 or telephone (202) 4523244. When a charge is indicated, payment should accompany request and be made payable to the Board of Governors
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THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. 1984. 120 pp.
ANNUAL REPORT.
ANNUAL REPORT: BUDGET REVIEW, 1 9 8 8 - 8 9 .
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BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint
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ANNUAL STATISTICAL DIGEST
1974-78. 1980. 305 pp. $10.00 per copy.
1981.
1982. 239 pp. $ 6.50 per copy.
1982.
1983. 266 pp. $ 7.50 per copy.
1983.
1984. 264 pp. $11.50 per copy.
1984.
1985. 254 pp. $12.50 per copy.
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1986. 231 pp. $15.00 per copy.
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HISTORICAL CHART BOOK. Issued annually in Sept. $1.25
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THE FEDERAL RESERVE ACT, and other statutory provisions
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REGULATIONS OF THE BOARD OF GOVERNORS OF THE
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THE U . S . ECONOMY IN AN INTERDEPENDENT WORLD: A
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FINANCIAL FUTURES AND OPTIONS IN THE U . S . ECONOMY.
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CONSUMER EDUCATION
PAMPHLETS
Short pamphlets suitable for classroom use. Multiple copies
are available without charge.
Consumer Handbook on Adjustable Rate Mortgages
Consumer Handbook to Credit Protection Laws
Federal Reserve Glossary
A Guide to Business Credit and the Equal Credit Opportunity
Act
A Guide to Federal Reserve Regulations
How to File A Consumer Credit Complaint
If You Use A Credit Card
Series on the Structure of the Federal Reserve System
The Board of Governors of the Federal Reserve System
The Federal Open Market Committee
Federal Reserve Bank Board of Directors
Federal Reserve Banks
Organization and Advisory Committees
A Consumer's Guide to Mortgage Lock-Ins
A Consumer's Guide to Mortgage Closings
A Consumer's Guide to Mortgage Refinancing
Making Deposits: When Will Your Money Be Available?
83
PAMPHLETS FOR FINANCIAL
INSTITUTIONS
Short pamphlets on regulatory compliance, primarily suitable for banks, bank holding companies and creditors.
134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET
INTERVENTION: A REVIEW OF THE LITERATURE, b y
Limit of 50 copies
135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET
INTERVENTION: APPLICATIONS TO CANADA, GER-
The Board of Directors' Opportunities in Community Reinvestment
The Board of Directors' Role in Consumer Law Compliance
Combined Construction/Permanent Loan Disclosure and
Regulation Z
Community Development Corporations and the Federal Reserve
Construction Loan Disclosures and Regulation Z
Finance Charges Under Regulation Z
How to Determine the Credit Needs of Your Community
Regulation Z: The Right of Rescission
The Right to Financial Privacy Act
Signature Rules in Community Property States: Regulation B
Signature Rules: Regulation B
Timing Requirements for Adverse Action Notices: Regulation B
What An Adverse Action Notice Must Contain: Regulation B
Understanding Prepaid Finance Charges: Regulation Z
STAFF STUDIES:
Summaries Only Printed in the
Bulletin
Studies and papers on economic and financial subjects that
are of general interest. Requests to obtain single copies of
the full text or to be added to the mailing list for the series
may be sent to Publications Services.
Staff Studies 115-125 are out of print.
114. MULTIBANK HOLDING COMPANIES: RECENT EVIDENCE ON COMPETITION AND PERFORMANCE IN
BANKING MARKETS, by Timothy J. Curry and John T.
Rose. Jan. 1982. 9 pp.
126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR-
KET INTERVENTION, by Donald B. Adams and Dale W.
Henderson. August 1983. 5 pp. Out of print.
127. U . S . EXPERIENCE WITH EXCHANGE MARKET INTERVENTION: JANUARY-MARCH 1975, b y Margaret L .
Greene. August 1984. 16 pp. Out of print.
128. U . S . EXPERIENCE WITH EXCHANGE MARKET INTERVENTION: SEPTEMBER 1977-DECEMBER 1979, b y Mar-
garet L. Greene. October 1984. 40 pp. Out of print.
129. U . S . EXPERIENCE WITH EXCHANGE MARKET INTERVENTION: OCTOBER 1980-OCTOBER 1981, b y Margaret
L. Greene. August 1984. 36 pp.
130. EFFECTS OF EXCHANGE RATE VARIABILITY ON INTERNATIONAL TRADE AND OTHER ECONOMIC VARIABLES:
A REVIEW OF THE LITERATURE, by Victoria S. Farrell
with Dean A. DeRosa and T. Ashby McCown. January
1984. Out of print.
131. CALCULATIONS OF PROFITABILITY FOR U . S . DOLLARDEUTSCHE MARK INTERVENTION, b y L a u r e n c e R. Ja-
cobson. October 1983. 8 pp.
132. TIME-SERIES STUDIES OF THE RELATIONSHIP BETWEEN EXCHANGE RATES AND INTERVENTION: A REVIEW OF THE TECHNIQUES AND LITERATURE, b y K e n -
neth Rogoff. October 1983. 15 pp.
133. RELATIONSHIPS AMONG EXCHANGE RATES, INTERVENTION, AND INTEREST RATES: A N EMPIRICAL IN-
VESTIGATION, by Bonnie E. Loopesko. November
1983. Out of print.
Ralph W. Tryon. October 1983. 14 pp. Out of
print.
MANY, AND JAPAN, by Deborah J. Danker, Richard A.
Haas, Dale W. Henderson, Steven A. Symansky, and
Ralph W. Tryon. April 1985. 27 pp. Out of print.
136. THE EFFECTS OF FISCAL POLICY ON THE U . S . ECON-
OMY, by Darrell Cohen and Peter B. Clark. January
1984. 16 pp. Out of print.
137. THE IMPLICATIONS FOR BANK MERGER POLICY OF
FINANCIAL DEREGULATION, INTERSTATE BANKING,
AND FINANCIAL SUPERMARKETS, b y S t e p h e n A .
Rhoades. February 1984. Out of print.
138. ANTITRUST LAWS, JUSTICE DEPARTMENT GUIDELINES, AND THE LIMITS OF CONCENTRATION IN LOCAL
BANKING MARKETS, by James Burke. June 1984.14 pp.
Out of print.
139. SOME IMPLICATIONS OF FINANCIAL INNOVATIONS IN
THE UNITED STATES, by Thomas D. Simpson and
Patrick M. Parkinson. August 1984. 20 pp.
140. GEOGRAPHIC MARKET DELINEATION: A REVIEW OF
THE LITERATURE, by John D. Wolken. November 1984.
38 pp. Out of print.
141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY-
MENT COSTS, by William Dudley. November 1984.
15 pp. Out of print.
142. MERGERS
AND
ACQUISITIONS
BY
COMMERCIAL
BANKS, 1960-83, by Stephen A. Rhoades. December
1984. 30 pp. Out of print.
143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF
THE ELECTRONIC F U N D TRANSFER ACT: RECENT SUR-
VEY EVIDENCE, by Frederick J. Schroeder. April 1985.
23 pp. Out of print.
144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CONSUMER CREDIT REGULATIONS: THE TRUTH IN LENDING AND EQUAL CREDIT OPPORTUNITY LAWS, b y
Gregory E. Elliehausen and Robert D. Kurtz. May
1985. 10 pp.
145. SERVICE CHARGES AS A SOURCE OF BANK INCOME
AND THEIR IMPACT ON CONSUMERS, b y G l e n n B .
Canner and Robert D. Kurtz. August 1985. 31 pp. Out of
print.
146. THE ROLE OF THE PRIME RATE IN THE PRICING OF
BUSINESS LOANS BY COMMERCIAL BANKS, 1 9 7 7 - 8 4 ,
by Thomas F. Brady. November 1985. 25 pp.
147. REVISIONS IN THE MONETARY SERVICES (DIVISIA)
INDEXES OF THE MONETARY AGGREGATES, b y H e l e n
T. Farr and Deborah Johnson. December
42 pp.
1985.
148. THE MACROECONOMIC AND SECTORAL EFFECTS OF
THE ECONOMIC RECOVERY TAX ACT: SOME SIMULA-
TION RESULTS, by Flint Brayton and Peter B. Clark.
December 1985. 17 pp.
149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS
IN BANKING BEFORE AND AFTER ACQUISITION, b y
Stephen A. Rhoades. April 1986. 32 pp.
150. STATISTICAL COST ACCOUNTING MODELS IN BANKING: A REEXAMINATION AND AN APPLICATION, b y
John T. Rose and John D. Wolken. May 1986. 13 pp.
151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT
PRICING FROM 1983 THROUGH 1985, b y Patrick I. M a -
honey, Alice P. White, Paul F. O'Brien, and Mary M.
McLaughlin. January 1987. 30 pp.
84
152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A
REVIEW OF THE LITERATURE, by Mark J. Warshawsky.
April 1987. 18 pp.
153. STOCK MARKET VOLATILITY, b y C a r o l y n D . D a v i s a n d
Alice P. White. September 1987. 14 pp.
154. THE EFFECTS ON CONSUMERS AND CREDITORS OF
PROPOSED CEILINGS ON CREDIT CARD INTEREST
RATES, by Glenn B. Canner and James T. Fergus.
October 1987. 26 pp.
155. THE FUNDING OF PRIVATE PENSION PLANS, b y Mark J.
Warshawsky. November 1987. 25 pp.
156. INTERNATIONAL TRENDS FOR U . S . BANKS AND BANK-
ING MARKETS, by James V. Houpt. May 1988. 47 pp.
REPRINTS
OF BULLETIN
ARTICLES
Most of the articles reprinted do not exceed 12 pages.
Limit of 10 copies
Foreign Experience with Targets for Money Growth. 10/83.
Intervention in Foreign Exchange Markets: A Summary of
Ten Staff Studies. 11/83.
A Financial Perspective on Agriculture. 1/84.
Survey of Consumer Finances, 1983. 9/84.
Bank Lending to Developing Countries. 10/84.
Survey of Consumer Finances, 1983: A Second Report.
12/84.
Union Settlements and Aggregate Wage Behavior in the
1980s. 12/84.
The Thrift Industry in Transition. 3/85.
A Revision of the Index of Industrial Production. 7/85.
Financial Innovation and Deregulation in Foreign Industrial
Countries. 10/85.
Recent Developments in the Bankers Acceptance Market.
1/86.
The Use of Cash and Transaction Accounts by American
Families. 2/86.
Financial Characteristics of High-Income Families. 3/86.
Prices, Profit Margins, and Exchange Rates. 6/86.
Agricultural Banks under Stress. 7/86.
Foreign Lending by Banks: A Guide to International and
U.S. Statistics. 10/86.
Recent Developments in Corporate Finance. 11/86.
Measuring the Foreign-Exchange Value of the Dollar. 6/87.
Changes in Consumer Installment Debt: Evidence from the
1983 and 1986 Surveys of Consumer Finances. 10/87.
U.S. International Transactions in 1987. 5/88.
Home Equity Lines of Credit. 6/88.
85
Index to Statistical Tables
References
are to pages A3-A77
although
the prefix "A" is omitted
in this
index
ACCEPTANCES, bankers (See Bankers acceptances)
Agricultural loans, commercial banks, 19, 20, 76
Assets and liabilities (See also Foreigners)
Banks, by classes, 18-20
Domestic finance companies, 36
Federal Reserve Banks, 10
Financial institutions, 26
Foreign banks, U.S. branches and agencies, 21
Automobiles
Consumer installment credit, 39, 40
Production, 49, 50
Depository institutions
Reserve requirements, 8
Reserves and related items, 3, 4, 5, 12
Deposits (See also specific types)
Banks, by classes, 3, 18-20, 21
Federal Reserve Banks, 4, 10
Turnover, 15
Discount rates at Reserve Banks and at foreign central
banks and foreign countries (See Interest rates)
Discounts and advances by Reserve Banks (See Loans)
Dividends, corporate, 35
BANKERS acceptances, 9, 23, 24
Bankers balances, 18-20. (See also Foreigners)
Bonds (See also U.S. government securities)
New issues, 34
Rates, 24
Branch banks, 21, 57
Business activity, nonfinancial, 46
Business expenditures on new plant and equipment, 35
Business loans (See Commercial and industrial loans)
EMPLOYMENT, 47
Eurodollars, 24
CAPACITY utilization, 48
Capital accounts
Banks, by classes, 18
Federal Reserve Banks, 10
Central banks, discount rates, 69
Certificates of deposit, 24
Commercial and industrial loans
Commercial banks, 16, 19, 72-74
Weekly reporting banks, 19-21
Commercial banks
Assets and liabilities, 18-20
Commercial and industrial loans, 16, 18, 19, 20, 21, 72-74
Consumer loans held, by type, and terms, 39, 40
Loans sold outright, 19
Nondeposit funds, 17
Real estate mortgages held, by holder and property, 38
Terms of lending, 72-77
Time and savings deposits, 3
Commercial paper, 23, 24, 36
Condition statements (See Assets and liabilities)
Construction, 46, 51, 73
Consumer installment credit, 39, 40
Consumer prices, 46, 48
Consumption expenditures, 53, 54
Corporations
Nonfinancial, assets and liabilities, 35
Profits and their distribution, 35
Security issues, 34, 67
Cost of living (See Consumer prices)
Credit unions, 26, 39. (See also Thrift institutions)
Currency and coin, 18
Currency in circulation, 4, 13
Customer credit, stock market, 25
DEBITS to deposit accounts, 15
Debt (See specific types of debt or securities)
Demand deposits
Banks, by classes, 18-21
Ownership by individuals, partnerships, and
corporations, 22
Turnover, 15
FARM mortgage loans, 38
Federal agency obligations, 4, 9, 10, 11, 31, 32
Federal credit agencies, 33
Federal finance
Debt subject to statutory limitation, and types and ownership of gross debt, 30
Receipts and outlays, 28, 29
Treasury financing of surplus, or deficit, 28
Treasury operating balance, 28
Federal Financing Bank, 28, 33
Federal funds, 6, 17, 19, 20, 21, 24, 28
Federal Home Loan Banks, 33
Federal Home Loan Mortgage Corporation, 33, 37, 38
Federal Housing Administration, 33, 37, 38
Federal Land Banks, 38
Federal National Mortgage Association, 33, 37, 38
Federal Reserve Banks
Condition statement, 10
Discount rates (See Interest rates)
U.S. government securities held, 4, 10, 11, 30
Federal Reserve credit, 4, 5, 10, 11
Federal Reserve notes, 10
Federal Savings and Loan Insurance Corporation insured
institutions, 26
Federally sponsored credit agencies, 33
Finance companies
Assets and liabilities, 36
Business credit, 36
Loans, 39, 40
Paper, 23, 24
Financial institutions
Loans to, 19, 20, 21
Selected assets and liabilities, 26
Float, 4
Flow of funds, 41, 43, 44, 45
Foreign banks, assets and liabilities of U.S. branches and
agencies, 21
Foreign currency operations, 10
Foreign deposits in U.S. banks, 4, 10, 19, 20
Foreign exchange rates, 70
Foreign trade, 56
Foreigners
Claims on, 57, 59, 62, 63, 64, 66
Liabilities to, 20, 56, 57, 59, 60, 65, 67, 68
GOLD
Certificate account, 10
Stock, 4, 56
86
Government National Mortgage Association, 33, 37, 38
Gross national product, 53
HOUSING, new and existing units, 51
INCOME, personal and national, 46, 53, 54
Industrial production, 46, 49
Installment loans, 39, 40
Insurance companies, 26, 30, 38
Interest rates
Bonds, 24
Commercial banks, 72-77
Consumer installment credit, 40
Federal Reserve Banks, 7
Foreign central banks and foreign countries, 69
Money and capital markets, 24
Mortgages, 37
Prime rate, 23
International capital transactions of United States, 55-69
International organizations, 59, 60, 62, 65, 66
Inventories, 53
Investment companies, issues and assets, 35
Investments (See also specific types)
Banks, by classes, 18, 19, 20, 21, 26
Commercial banks, 3, 16, 18-20, 38
Federal Reserve Banks, 10, 11
Financial institutions, 26, 38
LABOR force, 47
Life insurance companies (See Insurance companies)
Loans (See also specific types)
Banks, by classes, 18-20
Commercial banks, 3, 16, 18-20, 72-77
Federal Reserve Banks, 4, 5, 7, 10, 11
Financial institutions, 26, 38
Insured or guaranteed by United States, 37, 38
MANUFACTURING
Capacity utilization, 48
Production, 48, 50
Margin requirements, 25
Member banks (See also Depository institutions)
Federal funds and repurchase agreements, 6
Reserve requirements, 8
Mining production, 50
Mobile homes shipped, 51
Monetary and credit aggregates, 3, 12
Money and capital market rates, 24
Money stock measures and components, 3, 13
Mortgages (See Real estate loans)
Mutual funds, 35
Mutual savings banks (See Thrift institutions)
NATIONAL defense outlays, 29
National income, 53
OPEN market transactions, 9
PERSONAL income, 54
Prices
Consumer and producer, 46, 52
Stock market, 25
Prime rate, 23
Producer prices, 46, 52
Production, 46, 49
Profits, corporate, 35
REAL estate loans
Banks, by classes, 16, 19, 20, 38
Financial institutions, 26
Real estate loans—Continued
Terms, yields, and activity, 37
Type of holder and property mortgaged, 38
Repurchase agreements, 6, 17, 19, 20, 21
Reserve requirements, 8
Reserves
Commercial banks, 18
Depository institutions, 3, 4, 5, 12
Federal Reserve Banks, 10
U.S. reserve assets, 56
Residential mortgage loans, 37
Retail credit and retail sales, 39, 40, 46
SAVING
Flow of funds, 41, 43, 44, 45
National income accounts, 53
Savings and loan associations, 26, 38, 39, 41. (See also
Thrift institutions)
Savings banks, 26, 38, 39
Savings deposits (See Time and savings deposits)
Securities (See also specific types)
Federal and federally sponsored credit agencies, 33
Foreign transactions, 67
New issues, 34
Prices, 25
Special drawing rights, 4, 10, 55, 56
State and local governments
Deposits, 19, 20
Holdings of U.S. government securities, 30
New security issues, 34
Ownership of securities issued by, 19, 20, 26
Rates on securities, 24
Stock market, selected statistics, 25
Stocks (See also Securities)
New issues, 34
Prices, 25
Student Loan Marketing Association, 33
TAX receipts, federal, 29
Thrift institutions, 3. (See also Credit unions and Savings
and loan associations)
Time and savings deposits, 3, 13, 17, 18, 19, 20, 21
Trade, foreign, 56
Treasury cash, Treasury currency, 4
Treasury deposits, 4, 10, 28
Treasury operating balance, 28
UNEMPLOYMENT, 47
U.S. government balances
Commercial bank holdings, 18, 19, 20
Treasury deposits at Reserve Banks, 4, 10, 28
U.S. government securities
Bank holdings, 18-20, 21, 30
Dealer transactions, positions, and financing, 32
Federal Reserve Bank holdings, 4, 10, 11, 30
Foreign and international holdings and transactions, 10,
30, 68
Open market transactions, 9
Outstanding, by type and holder, 26, 30
Rates, 24
U.S. international transactions, 55-69
Utilities, production, 50
VETERANS Administration, 37, 38
WEEKLY reporting banks, 19-21
Wholesale (producer) prices, 46, 52
YIELDS (See Interest rates)
87
Federal Reserve Banks, Branches, and Offices
FEDERAL RESERVE BANK
branch, or facility
Zip
Chairman
Deputy Chairman
President
First Vice President
BOSTON*
02106
George N. Hatsopoulos
Richard N. Cooper
Richard F. Syron
Robert W. Eisenmenger
NEW YORK*
10045
Cyrus R. Vance
Ellen V. Futter
Mary Ann Lambertsen
E. Gerald Corrigan
James H. Oltman
Buffalo
14240
John T. Keane
PHILADELPHIA
19105
Peter A. Benoliel
Gunnar E. Sarsten
Edward G. Boehne
William H. Stone, Jr.
CLEVELAND*
44101
Charles W. Parry
John R. Miller
Owen B. Butler
James E. Haas
W. Lee Hoskins
William H. Hendricks
Hanne Merriman
Leroy T. Canoles, Jr.
Thomas R. Shelton
William E. Masters
Robert P. Black
Jimmie R. Monhollon
Bradley Currey, Jr.
Larry L. Prince
Nelda P. Stephenson
Winnie F. Taylor
Jose L. Saumat
Patsy R. Williams
James A. Hefner
Robert P. Forrestal
Jack Guynn
Robert J. Day
Marcus Alexis
Richard T. Lindgren
Silas Keehn
Daniel M. Doyle
Robert L. Virgil, Jr.
H. Edwin Trusheim
L. Dickson Flake
Thomas A. Alvey
Seymour B. Johnson
Thomas C. Melzer
James R. Bowen
Michael W. Wright
John A. Rollwagen
Warren H. Ross
Gary H. Stern
Thomas E. Gainor
Fred W. Lyons, Jr.
Burton A. Dole, Jr.
James C. Wilson
Patience S. Latting
Kenneth L. Morrison
Roger Guffey
Henry R. Czerwinski
Bobby R. Inman
Hugh G. Robinson
Diana S. Natalicio
Andrew L. Jefferson, Jr.
Lawrence E. Jenkins
Robert H. Boykin
William H.Wallace
Robert F. Erburu
Carolyn S. Chambers
Yvonne B. Burke
Paul E. Bragdon
Don M. Wheeler
Carol A. Nygren
Robert T. Parry
Carl E. Powell
Cincinnati
Pittsburgh
45201
15230
RICHMOND*
23219
Baltimore
21203
Charlotte
28230
Culpeper Communications
and Records Center 22701
ATLANTA
Birmingham
Jacksonville
Miami
Nashville
New Orleans
30303
35283
32231
33152
37203
70161
CHICAGO*
60690
Detroit
48231
ST. LOUIS
63166
Little Rock
Louisville
Memphis
72203
40232
38101
MINNEAPOLIS
55480
Helena
KANSAS CITY
Denver
Oklahoma City
Omaha
DALLAS
El Paso
Houston
San Antonio
59601
64198
80217
73125
68102
75222
79999
77252
78295
SAN FRANCISCO
94120
Los Angeles
Portland
Salt Lake City
Seattle
90051
97208
84125
98124
Vice President
in charge of branch
Charles A. Cerino1
Harold J. Swart1
Robert D. McTeer, Jr.1
Albert D. Tinkelenberg1
John G. Stoides1
Delmar Harrison1
Fred R. Herr1
James D. Hawkins1
James Curry III
Donald E. Nelson
Robert J. Musso
Roby L. Sloan1
John F. Breen1
Howard Wells
Ray Laurence
Robert F. McNellis
Kent M. Scott
David J. France
Harold L. Shewmaker
Tony J. Salvaggio1
Sammie C. Clay
Robert Smith, III1
Thomas H. Robertson
John F. Hoover1
Thomas C. Warren2
Angelo S. Carella1
E. Ronald Liggett1
Gerald R. Kelly1
*Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; Cranford, New Jersey 07016;
Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West
Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202.
Digitized for 1.FRASER
Senior Vice President.
http://fraser.stlouisfed.org/
2. Executive Vice President.
Federal Reserve Bank of St. Louis
88
The Federal Reserve System
Boundaries of Federal Reserve Districts and Their Branch Territories
i^^fcp
(•••til
illlp
ISSNI
HAWAII
piI8SiS§iP
ftBllwMitlP
LEGEND
Boundaries of Federal Reserve Districts
®
Federal Reserve Bank Cities
Boundaries of Federal Reserve Branch
Territories
•
Federal Reserve Branch Cities
Federal Reserve Bank Facility
Q
Board of Governors of the Federal Reserve
System
Publications of Interest
NEW HANDBOOK AVAILABLE
REGULATORY SERVICE
FROM THE
The Federal Reserve Board has announced publication of The Payment System Handbook. The new
handbook, which is part of the Federal Reserve Regulatory Service, deals with expedited funds availability, check collection, wire transfers, and risk-reduction policy. It includes Regulation CC (Availability of
Funds and Collection of Checks), Regulation J (Collection of Checks and Other Items and Wire Transfers
of Funds by Federal Reserve Banks), the Expedited
Funds Availability Act and related statutes, official
Board commentary on Regulation CC, and policy
statements on risk reduction in the payment system. In
addition, it contains detailed subject and citation indexes. It is published in loose-leaf binder form and is
updated monthly.
To promote public understanding of its regulatory
functions, the Board publishes the Federal Reserve
Regulatory Service, a three-volume loose-leaf service
containing all Board regulations and related statutes,
interpretations, policy statements, rulings, and staff
opinions. For those with a more specialized interest in
the Board's r igulations, parts of this service are published separately as handbooks pertaining to monetary
policy, securities credit, consumer affairs, and, available for the first time in September 1988, The Payment
System Handbook.
For domestic subscribers, the annual rate for The
Payment System Handbook is $75. For subscribers
outside the United States, the price, including additional air mail costs, is $90. For the Federal Reserve
Regulatory Service, not including handbooks, the annual rate is $200 for domestic subscribers and $250 for
subscribers outside the United States. All subscription
requests must be accompanied by a check payable to
"Board of Governors of the Federal Reserve
System." Orders should be addressed to Publications
Services, Mail Stop 138, Board of Governors of the
Federal Reserve System, Washington, D.C. 20551.
Publications of Interest
FEDERAL RESERVE CONSUMER CREDIT
PUBLICATIONS
The Federal Reserve Board publishes a series of
pamphlets covering individual credit laws and topics,
as pictured below. The series includes such subjects as
how the Equal Credit Opportunity Act protects women against discrimination in their credit dealings, how
to use a credit card, and how to resolve a billing error.
The Board also publishes the Consumer Handbook
to Credit Protection Laws, a complete guide to consumer credit protections. This 44-page booklet explains how to use the credit laws to shop for credit,
apply for it, keep up credit ratings, and complain about
an unfair credit.
Three booklets on the mortgage process are also
available: A Consumer's Guide to Mortgage Refinancing, A Consumer's Guide to Mortgage Lock-Ins, and
A Consumer's Guide to Mortgage Closings. These
booklets were prepared in conjunction with the Federal Home Loan Bank Board and in consultation with
other federal agencies and trade and consumer
groups.
Copies of consumer publications are available free
of charge from Publications Services, Mail Stop 138,
Board of Governors of the Federal Reserve System,
Washington, D.C. 20551. Multiple copies for classroom use are also available free of charge.
@FedFRASER