Full text of Federal Reserve Bulletin : February 1987
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VOLUME 7 3 • NUMBER 2 • FEBRUARY 1987 FEDERAL RESERVE I BULLETIN BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D . C . PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • Michael Bradfield • S. David Frost • Griffith L. Garwood • James L. Kichline • 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 79 INTERSTATE BANKING DEVELOPMENTS This article offers data on interstate banking and discusses the continuing deregulation of geographic expansion by banking organizations. 93 STRUCTURE AND USES OF THE MPS QUARTERLY ECONOMETRIC MODEL OF THE UNITED STATES This article describes the components of a quarterly model of the U.S. economy and presents simulations to demonstrate the model's properties, particularly in the short run. It also discusses the model as a forecasting and an analytic tool. 110 INDUSTRIAL PRODUCTION Industrial production increased an estimated 0.6 percent in November. 112 ANNOUNCEMENTS Resignation of Governor Henry C. Wallich as a member of the Board of Governors. New members appointed to Consumer Advisory Council. Change in Regulation Z. Proposals to reduce and control the payments system risk involved in large-dollar wire transfer networks, book-entry transfer systems, and automated clearinghouses; issuance of a series of questions and answers relating to an earlier proposal involving automated clearinghouse transactions; proposed rulemaking to permit bank holding companies to engage in certain real estate investment activities. Changes in Board staff. Admission of one state bank to membership in the Federal Reserve System. 117 RECORD OF POLICY ACTIONS OF THE FEDERAL OPEN MARKET COMMITTEE At its meeting on November 5, 1986, all of the members of the Committee indicated that they favored a directive that called for no change in the current degree of pressure on reserve positions. The members expected this approach to policy implementation to be consistent with growth of M2 and M3 at annual rates of 7 to 9 percent over the fourth quarter from a September base. Over the same period, growth in Ml was expected to moderate from its exceptional pace during most of the period since early spring. Because the behavior of Ml remained subject to unusual uncertainty, the Committee decided to continue its recent practice of not specifying a rate of expected growth for purposes of short-run policy implementation but to evaluate this aggregate in the light of the performance of the broader monetary aggregates and other factors. The members indicated that slightly greater or slightly lesser reserve pressures might be acceptable over the intermeeting period depending on the behavior of the monetary aggregates, taking into account the strength of the business expansion, the performance of the dollar in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. The members agreed that the intermeeting range for the federal funds rate, which provides a mechanism for initiating consultation of the Committee when its boundaries are persistently exceeded, should be left unchanged at 4 to 8 percent. 123 LEGAL DEVELOPMENTS Various bank holding company, bank service corporation, and bank merger orders; and pending cases. 177 MEMBERSHIP OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, 1913-87 L i s t of a p p o i n t i v e a n d ex officio A i FINANCIAL AND BUSINESS members. STATISTICS A3 Domestic Financial Statistics A44 D o m e s t i c Nonfinancial Statistics A53 International Statistics A 6 9 GUIDE TO TABULAR PRESENTATION, STATISTICAL RELEASES, AND SPECIAL TABLES A 7 6 BOARD OF GOVERNORS AND STAFF A 7 8 FEDERAL OPEN MARKET COMMITTEE AND STAFF, ADVISORY COUNCILS A 8 0 FEDERAL RESERVE PUBLICATIONS A 8 3 INDEX BOARD TO STATISTICAL A 8 5 FEDERAL RESERVE AND OFFICES A 8 6 MAP OF FEDERAL TABLES BANKS, RESERVE BRANCHES, SYSTEM Interstate Banking Developments Donald T. Savage of the Board's Division of Research and Statistics prepared this article. Elaine J. Peterson provided research assistance. After years of confinement to a single state, and in many cases to a single location within that state, banking organizations are now being permitted to expand their deposit-taking operations over wider geographic areas. Federal laws have not been changed, but the states are lowering the barriers to interstate bank expansion by exercising an option provided by the Bank Holding Company Act of 1956. This article offers data on interstate banking and discusses the continuing deregulation of geographic expansion by banking organizations. A BRIEF HISTORY The first and second Bank of the United States, which combined commercial banking with some central banking functions, operated branch offices throughout the country. After the 1836 decision not to recharter the second Bank, however, commercial banking came under the regulatory control of the individual states. Each state chartered its own banks, and no state provided a general method for the entry of banks chartered in other states. Banking became an industry characterized by relatively small, locally oriented firms. The national banking system, following the pattern of state banking laws, made no provision for a bank to expand beyond the borders of its home state. Indeed, the general interpretation of the National Banking Act of 1863 was that a national bank could not operate branches even in its home state. This interpretation created a competitive disadvantage for those national banks operating in states that allowed statechartered banks to operate branch offices. Therefore, many national banks in the branch banking states converted from national to state charters; the pressure of these conversions contributed to the passage of federal branching legislation in 1927 (McFadden Act) and 1933 (GlassSteagall Act). These relaxations of federal law gave the national banks in each state the same branching powers enjoyed by the state-chartered banks in that state. Early in the twentieth century, the bank holding company became a second vehicle for banking organizations to expand the geographic scope of their operations. A bank holding company could own and operate subsidiary banks in any number of states. The formation of a few large, multistate, multibank holding companies, especially in the upper midwest, led to numerous attempts to regulate the corporate ownership of more than one bank. The Glass-Steagall Act of 1933, better known for the separation of commercial and investment banking, also called for limited regulation of bank holding companies by the Federal Reserve System but did not prohibit their interstate expansion. Although there were many subsequent proposals for more comprehensive regulation of multibank holding companies, further legislation was not forthcoming until the passage of the Bank Holding Company Act of 1956. The act increased Federal Reserve Board regulation of multibank holding companies and established standards for regulatory approval of future bank and nonbank acquisitions by bank holding companies. An amendment to the draft act, which came to be known as the Douglas Amendment, prohibited bank holding companies from acquiring banks in more than one state unless acquisitions were specifically permitted by the statutes of the state in which the bank to be acquired was located. The 1956 legislation permitted the continued operation of the small number of multistate bank holding companies that existed when the law was passed. Most of the smaller multistate companies 80 Federal Reserve Bulletin • February 1987 restructured or divested themselves of one or more of their banks in order to avoid regulation as multibank holding companies. Seven major domestic interstate bank holding companies remained in operation; the largest of these organizations now operates in 12 states. With the Bank Holding Company Act of 1956 regulating multibank holding companies, subsequent federal legislative proposals focused on the extension of bank holding company regulation to one-bank holding companies and the nonbank activities of all bank holding companies. The 1970 Amendments to the Bank Holding Company Act of 1956 extended regulation to one-bank holding companies and established standards for the approval of proposed nonbank activities of holding companies. State legislation focused on branch banking laws and regulation of intrastate multibank holding companies. Most discussions of interstate banking were on an academic level, and the limited efforts to change the federal law were unsuccessful. Except for some minor state provisions allowing additional bank acquisitions by the grandparented interstate bank holding companies, no state took advantage of its right to allow acquisitions by out-of-state bank holding companies until 1975. In that year, Maine passed the first state law providing for general entry by out-ofstate bank holding companies under the provisions of the Douglas Amendment to the Bank Holding Company Act of 1956. No more state laws were enacted until 1982, when Massachusetts adopted a New England regional reciprocal law and New York enacted a nationwide reciprocal law. The New England regional laws were challenged in the courts because they did not provide equal entry rights for banks headquartered in all states. The United States Supreme Court ruled in favor of the regional laws in June 1985 in Northeast Bancorp, Inc. v. Board of Governors of the Federal Reserve System. Knowing that they could allow entry by bank holding companies from selected states without having to open their borders to the states containing the money center banks, more states revised their laws. By the end of 1986, 36 states and the District of Columbia had enacted some provisions allowing entry by out-of-state bank holding companies. Other states had adopted laws permitting entry to ac quire a failing bank or entry by limited-purpose banks, such as those only issuing credit cards. THE CAUSES OF CHANGE After the protracted legislative battles that usually have accompanied even relatively minor changes in state branch banking and bank holding company laws, the speed with which the states have adopted interstate banking laws is surprising. There may be no one explanation for the speed of change, but several factors have played a role in various states. Maine's motivation in enacting the first interstate banking law was to attract new capital into the state. It was thought that the ownership of Maine financial institutions by out-of-state firms might expand the supply of economic development funds. Some also believed that the purchase of Maine institutions by out-of-state firms would free Maine funds for other uses, and that new banks organized by out-of-state firms would augment the supply of capital. A second factor, also related to economic development, has contributed to the spread of regional interstate banking laws. Especially in the southeast, those advocating regional interstate banking laws argue that the development of large regional banks promotes the area's economic growth. The theory is that such banks, by understanding and supporting regional industries, will do more for economic growth than the money center banks would if they were permitted to acquire the major regional banks under a national interstate banking law. Third, the reduction of barriers to entry affords bank holding companies expansion opportunities more nearly equal to those of other financial service firms. Nondepository financial institutions are not subject to expansion restrictions, and some thrift institutions have been able to expand interstate by acquiring troubled thrifts in other states. Banking organizations, however, were able to supply only limited financial services on an interstate basis. Loan production offices, nonbank subsidiaries of the bank holding company, and Edge act offices provided a way to offer some services across state lines, but fullservice deposit-taking offices could not be operated outside the home state. In addition, regional interstate deposit-taking Interstate Banking Developments constitutes a recognition of the fact that some banks have always offered nearly all their other services throughout a particular region. For example, the large Boston and Hartford banks had supplied certain services, usually to business firms, throughout the region long before they were permitted to take retail deposits in other New England states. Fourth, in some states, the desire to maximize the number of potential acquirors of troubled institutions was a motivating factor in the passage of interstate banking laws. Some states have limited interstate acquisitions to the purchase of failed or failing banks; others, though motivated by the same fear of failures, have made all banks eligible for interstate acquisition. Finally, an imitation effect has been at work in the spread of interstate banking laws. This effect is reminiscent of the rapid spread of the bank holding company form of organization in the 1970s. Seeing their colleagues in other states receiving new powers, bankers have desired equal expansion rights and have pressed for legislation. Moreover, many of the larger banks have feared being left out of a new alignment of the banking industry. The imitation effect has been strengthened by the perceived effect of the interstate banking laws on the price of the stock of those banks regarded as possible acquisition targets. The likely positive effect of interstate banking on bank stock prices is strengthened by the prohibition in many states of de novo entry by out-of-state bank holding companies. Thus entry can be gained only by acquiring the stock of banks already operating in the state. Given these factors, most of which have been present to some degree throughout the country, many state laws have been liberalized to lower the barriers to out-of-state entry. But despite the rapid change in the laws, actual change in the geographic structure of the banking industry has only begun. Part of the framework of an interstate banking system has been erected, but its utilization to build interstate banking organizations will take time. INTERSTATE BANKING NOW The details of the laws of those states that have passed statutes providing for interstate banking 81 are presented in table 1. This and subsequent tables exclude state laws that provide for entry only by limited-service banks. Of the 37 state laws listed in table 1, 7 have not yet become effective, and not many acquisitions have taken place under the laws that are already in effect. Eighteen of the interstate banking laws provide for eventual entry from all other states, although in some states the move to nationwide entry is preceded by a period of entry from a limited number of states. Only one major banking state, Texas, and a few smaller states— Arizona, Alaska, Maine, Oklahoma, Nevada, and Utah—do not require reciprocal entry rights for their banks as a condition for out-of-state entry. Those states are not the home of large numbers of major banks that would be expected to make numerous interstate acquisitions. In geographic terms, regional interstate banking has proven to be most popular in the southeast. All of the states along the coast from Maryland through Louisiana have adopted the regional approach, although not all have defined their region in the same way. An upper mid western region has also been formed, but it involves fewer states and its definition is even less uniform. The New England region, which began developing the earliest, does not yet embrace all six states because New Hampshire and Vermont have yet to enact interstate banking laws. Approximately 77 percent of all federally insured U.S. commercial banks are located in states that have enacted interstate banking laws; they hold more than 91 percent of all U.S. domestic banking assets. Although most banks now have some opportunity for interstate expansion, few organizations have been able to achieve a full banking operation in a large number of states because of the limited time that most laws have been in effect. Table 2 presents another view of the state laws, taking into account interactions between the state laws, the effects of reciprocity requirements, and delays in the effectiveness of some of the laws. This table, which includes laws in effect or enacted as of January 1, 1987, indicates the opportunities for expansion available to bank holding companies in each state. It tells when a banking organization in a given state can enter each other state (the columns), and by the same 82 Federal Reserve Bulletin • February 1987 1. Interstate banking legislation, by state, January 1, 1987 State Effective date Alabama July 1, 1987 Alaska... Currently Arizona.. Currently California July 1, 1987 January 1, 1991 Connecticut District of Columbia Florida. Currently Currently Currently Georgia . . Currently Idaho Currently Illinois . . . Currently Indiana . . Currently Kentucky Louisiana Currently July 1, 1987 January 1, 1989 Maine Currently Maryland. Currently Area covered by interstate legislation1 Reciprocal, 12 states (AR, FL, GA, KY, LA, MD, MS, NC, SC, TN, VA, WV) and DC National, no reciprocity National, no reciprocity Reciprocal, 11 states (AK, AZ, CO, HI, ID, NV, NM, OR, TX, UT, WA) National, reciprocal Reciprocal, 5 states (MA, ME, NH, RI, VT) Reciprocal, 11 states (AL, FL, GA, LA, MD, MS, NC, SC, TN, VA, WV) Reciprocal, 11 states (AL, AR, GA, LA, MD, MS, NC, SC. TN, VA, WV) and DC Reciprocal, 9 states (AL, FL, KY, LA, MS, NC, SC, TN, VA) Reciprocal, 6 states (MT, NV, OR, UT, WA, WY) Reciprocal, 6 states (IA, IN, KY, MI, MO, WI) Reciprocal, 4 states (IL, KY. MI, OH) National, reciprocal Reciprocal, 14 states (AL, AR, FL, GA, KY, MD, MS, NC, OK, SC, TN, TX, VA, WV) and DC National, reciprocal National, no reciprocity Reciprocal, 3 states (DE, VA, WV, and DC) Reciprocal, 14 states (AL, AR, DE, FL, GA, KY, LA, MS. NC, PA, SC, TN, VA, WV) and DC State Nevada Effective date Currently January 1, 1989 New Jersey. Currently Trigger of 13 states with reciprocity for NJ. 4 of 13 must be among 10 states with largest bank deposits. New York North Carolina. Currently Currently Ohio. Currently October 17, 1988 Oklahoma. July 1, 1987 Oregon Currently Pennsylvania Currently March 4, 1990 Rhode Island Currently July 1, 1988 Massachusetts Currently Michigan Currently October 10, 1988 Minnesota. Currently Mississippi July 1, 1988 July 1, 1990 Missouri Currently Reciprocal, 5 states (CT, ME, NH, RI, VT) Reciprocal, 5 states (IL, IN, MN, OH, WI) National, reciprocal Reciprocal, 4 states (IA, ND, SD, WI) Reciprocal, 4 states (AL, AR, LA. TN) Reciprocal, 13 states (AL, AR, FL, GA, KY, LA, MO, NC, SC, TN, TX, VA, WV) Reciprocal, 8 states (AR, IA, IL, KS, KY, NE, OK, TN) 1. Several states prohibit acquisition of banks in operation for less South Carolina. Currently Tennessee. July 1, 1987 Currently Texas. Utah.. Currently Currently December 31, 1987 Virginia. Currently Washington.. West Virginia Wisconsin... July 1, 1987 January 1, 1988 Currently Area covered by interstate legislation1 Reciprocal, 11 states (AK, AZ, CO, HI, ID, MT, NM, OR, UT, WA, WY) National, no reciprocity Reciprocal, 13 states (DE, IL, IN, KY, MD, MI, MO, OH, PA, VA, TN, WI, WV) and DC National, reciprocal National, reciprocal Reciprocal, 12 states (AL, AR, FL, GA, KY, LA, MD, MS, SC, TN, VA. WV) and DC Reciprocal, 13 states (DE, IL, IN, KY, MD, MI, MO, NJ, PA, TN, VA, WV, WI) and DC National, reciprocal National. After initial entry, BHC must be from state offering reciprocity or wait 4 years to expand. 8 states, no reciprocity (AK, AZ, CA, HI, ID, NV, UT, WA) Reciprocal, 7 states (DE, KY, MD, NJ, OH, VA, WV) and DC National, reciprocal Reciprocal, 5 states (CT, MA, ME, NH, VT) National, reciprocal Reciprocal. 12 states (AL, AR, FL, GA, KY, LA, MD, MS, NC, TN, VA, WV) and DC Reciprocal, 13 states (AL, AR, FL, GA, IN, KY, LA, MO, MS, NC, SC, VA, WV) National, no reciprocity Reciprocal, 11 states (AK, AZ, CO, HI, ID, MT, NM, NV, OR, WA, WY) National, no reciprocity Reciprocal, 12 states (AL, AR, FL, GA, KY, LA, MD, MS, NC, SC, TN, WV) and DC National, reciprocal National, reciprocal Reciprocal, 8 states (IA, IL, IN, KY, MI, MN, MO, OH) than a specified number of years. Some allow out-of-state firms to acquire problem institutions. Interstate Banking Developments token, when banks in other states can enter that state (the rows). Because of unmet reciprocity requirements and the distant effective dates of some statutes, banks have fewer opportunities for expansion than expected given the number of laws. In only 334 (13 percent) of the 2,550 possible combinations (indicated by " n o w " ) is entry currently permitted. Even if all of the laws that have been enacted were fully in effect at the moment, that percentage would rise to only 28 percent. Fifty-one banking organizations have subsidiary banks in one or more states besides their home state. On average, these bank holding companies have bank subsidiaries in only two other states; only 11 own banks in three or more additional states, and 4 of these are grandparented organizations that predate the current move to interstate banking. Banking assets held by bank holding companies outside their home states total $148.4 billion, or approximately 6 percent of total U.S. domestic commercial banking assets (see table 2A). The table does not include other means by which banking organizations have been able to attain an interstate presence, such as nonbank subsidiaries of bank holding companies, limited-purpose banks, nondeposit trust companies, Edge act subsidiaries, or thrift institutions owned by bank holding companies. Again reflecting the early stage of interstate banking and the relative importance of their grandparented bank holding companies, California and Minnesota bank holding companies hold a relatively large percentage of the interstate banking assets, as table 2A suggests. The collective interstate banking assets of grandparented interstate organizations account for 35.5 percent of the interstate banking assets, a percentage that reveals the early stage of the current interstate banking movement. While the assets of the grandparented banks remain important, acquisitions under the new state interstate banking laws account for 55.8 percent of the interstate banking assets reported in table 2A. In only a few years, such assets have come to exceed those held under the grandparent provisions of the federal law. Given the short time that these laws have been in effect, the volume of assets that has been acquired is impressive. 83 A variety of state and federal statutes are responsible for the remaining 8.7 percent of interstate assets. The provisions for emergency interstate acquisitions of large failed banks resulted in entry into Florida and Oklahoma. A state emergency acquisition law allowed one large interstate bank acquisition. In a few instances, bank holding companies were permitted by the states and by the Federal Reserve System to acquire failed state-insured thrift institutions and convert them to commercial banks. These commercial banks are included in table 2A, which excludes several thrift institutions acquired by bank holding companies and maintained as such. EARLY TRENDS Interstate banking is still in its initial stages. But, in light of its significance for the structure of the banking system, the early trends are important. At this point, any perceived problems can still be addressed by state or federal legislation. The first clear trend is the attempt by banking organizations to enter states whose volume or growth of deposits makes them especially attractive. Thus substantial interstate activity has involved the acquisition of Florida banks, particularly by Georgia and North Carolina organizations under the regional interstate banking laws. Florida banking organizations, on the other hand, have not yet completed any out-of-state acquisitions, contrary to the expectation that Florida would become the region's banking center. Florida banks, already in an attractive market, had less incentive to enter other markets than other banks had to enter Florida. In a second trend, nearly all interstate expansion has been via acquisition rather than de novo entry. Thus, although interstate banking has not reduced the number of firms competing in local banking markets, it has not yet increased that number. Therefore, interstate banking has neither increased nor decreased local banking market concentration. Banking organizations generally prefer to enter new markets by acquisition; moreover, de novo entry in the context of interstate banking is prohibited by many interstate banking laws. The usual means of preventing de novo entry is 84 Federal Reserve Bulletin • February 1987 2. Interstate banking laws, January 1, 19871—Continued Date of permitted entry State whose banks are permitted entry State permitting entry Alabama2 Alaska Arizona Arkansas California Alaska Arizona Arkansas now Alabama now now California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho now now now now now now now now JL 87 now now JL 87 now now JL 87 now now now now now now <31 (3) (31 (3) (3) (3) (3) O) (5) <3) (5) (3) now now (3) (3) (3) now now now JL 87 (3) Colorado Connecticut 2 Delaware District of Columbia2 Florida2 JL 87 JL 874 JL 87" (3) now now (5) JL 874 Georgia2 Hawaii Idaho2 Illinois2 Indiana2 Iowa Kansas JL 874 JL 87 now 2 Maryland Massachusetts 2 Minnesota2 Mississippi2 now now JA 89 now now JA 89 now (5) <3) now JL91 4 JL 916 now (3) (3) (5) (3) now now now OC 88 OC 88 (3) <5> (5) JL 87 now JL 87 now now JL 87 now JL 87 (3) (3) (3) JL 90 (5) (3) JL % (51 (3) JL 87 01 (5) now JL 916 now (3> (3) now (3) (3) (3) JL 88 2 (51 Missouri Montana Nebraska JA 89 JA 89 JA 895 JA 89 JA 89 JA 89 JA 89 JA 89 JA 895 now (8) (8) (8) (8) (81 (5) «} (8) (8) (8) (8) now <5) 15) JL91 4 (5) (51 (5) (5) (5) (5) (3) JL 916 JL87" now JL 916 JL 916 JA 89 now now (8) m (5) now New Hampshire . . . New Jersey 2 New Mexico New York2 North Carolina2 North Dakota Ohio2 JL 874 0) JL 879 h) m OC 88 OC 889 JL 87» JL87 now now MR 90 MR 90 JL 88 JL 88 JL 87* (3) (31 JL 874 now now now now JL 87 JA 88 JL 87 JA 88 JL 874 (3) 2 West Virginia . . . . JA 88 now Iffir' (3) (5) (5) (3) (3) (3) (3) JL 879 JL 8 P JL 879 JL87 9 JL879 JL 879 JL87 9 now JL 879 now (3) (31 <3) now (5) 13) (5) (3) (3) (3) (3) (3) (3) (3) (3) 0) now now now now now DE 87 now now DE 87 (5) JL 87 now DE 87 Utah10 (5) now (3) (5) 4 South Carolina 2 .... (5) now now DE 87 now DE 87 now DE 875 now DE 87 now DE 87 now DE 87 (5) (3) (31 JL 916 JL 916 now (3) (3) (3) (3) (3) (3) JA 88 JA 88 (3) (3) now now now (3) (3) * now now DE 875 (3) (3) JL 87 (3) Wyoming Notes appear on page 87. to require that banks that are the object of out-ofstate acquisition must have been in existence for some minimum number of years before their acquisition. Many states adopted prohibitions against de novo entry to answer concerns that allowing large banks to enter de novo would destroy the franchise value of existing bank charters. Third, a trend has developed toward control by out-of-state organizations of banking in states with relatively low deposits and relatively small banking organizations. Maine illustrates this development. Banks that have entered that state own its five largest commercial banking organizations and control 83 percent of its commercial banking assets. Interstate Banking Developments 85 2. Continued State whose banks are permitted entry State permitting entry Alabama2 Alaska Arizona Arkansas California Illinois Indiana Iowa now now now now now now (3) (3) (31 Kentucky Louisiana Maine Maryland Massachusetts Michigan now now JL 87 now now JL 87 now now now now JL 87 now now now now now now (3) JA 91 JA 91 JA 91 Kansas Iowa Kansas Kentucky 2 Louisiana 2 Maine Maryland2 Massachusetts 2 Michigan2 Minnesota2 Mississippi2 Missouri2 Montana Nebraska Nevada 7 New Hampshire . . . now Vermont Virginia2 Washington2 West Virginia Wisconsin2 Wyoming (3) JL 886 now now (31 Missouri now now Illllpll (31 (5} now (3> (5) (3) (51 (3) now now now JL 874 J L 87 now now (3) (5) (3) (51 now (5) JA 89 JA 89 JA 89 JA 89 (51 (5) (8) (8) (51 (51 <s> (5) now JA 89 now OC 88 JA S9 now OC 88 JA 89 now now now JA 89 JA 89 (8) (81 (51 (81 OC 884 (81 (81 (5) 4 (51 4 JA 89 JL 874 now (3) (3) <3> (3) (3) (31 now JL 88 MR 90 MR 90 now JA 89* now (3) (3) now JL 874 now (3) now (31 now now DE 87 JL87 now DE 87 now DE 87 now JL 87 JA 88 now JL 87" JA 89* JA 88 JL 87 JA 88 (5) JL 874 (5> <3> JL 879 JL87 9 JL 874 (3) (3) now OC88 JA 88 (51 (51 now JL 879 (31 (3> (51 JL 879 JL 879 JL 879 MR 906 OC 88 (31 (31 (31 (31 (31 <31 JL 904 now DE 87 now DE 87 now DE 87 (31 (3> OC 88" OC 886 now (31 (3) JL 88" now DE 87 now now DE 87 JL 904 now (31 (51 JL90 4 JL 874 now DE 87 JA 89 flBMB mml^ 4 Fourth, the Maine experience also indicates the greater possibilities offered by nationwide rather than regional interstate entry. Entry into Maine came from Boston, Hartford, and Providence, as expected, but bank holding companies from outside New England also have been important participants. One money center bank from outside New England established a de novo bank, and two upstate New York bank holding <3> JA 89 <3( <31 (3) <3> (5) 151 JA 89 JA 89* OC 88 JL 879 JL 879 (31 (31 (5) (3) JA 89 now JL 87* ij) (31 (31 JA 89 (31 now DE 87 now JA 89 JL 879 now DE 87 now JL 904 JL 886 now now (31 (5j (51 (3) (3) JL 879 now DE 87 OC 88" JA 89 now JL 88 now JL 879 now DE 87 (5) (3) (3) 6 JL87* <51 JL87 4 JL 87 now now JL 87 JL 90 now JL 904 now now JL 87 now (51 JL 904 now now now now now now JL 874 now Pennsylvania 2 Rhode IslandSouth Carolina 2 .... South Dakota Tennessee 2 Texas Utah10 JA 91 now JL 874 JL87* JL 874 New Jersey 2 New Mexico New York2 North Carolina 2 .... North Dakota Ohio2 Oklahoma (31 now now Mississippi * Colorado Connecticut 2 Delaware District of Columbia2 Florida2 Georgia2 Hawaii Idaho 2 Illinois2 Indiana2 (31 Minnesota now (3) JL 90" (31 (31 (5) companies acquired major Maine organizations. These entrants would have been excluded had Maine chosen a New England regional banking policy. A fifth trend is the development of "superregional" banking organizations formed by the merger of major banking organizations from two or more of a region's states. The regional banking laws have prevented the acquisition of a 86 Federal Reserve Bulletin • February 1987 2. Interstate banking laws, January 1, 1987'—Continued Date of permitted entry State whose banks are permitted entry State permitting entry Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania now now now now now now now now now now now now now now JL 87 now now now now now now now now now now now now (3) Alabama2 Alaska Arizona Arkansas California 2 Montana (3) (31 (81 (3) JA 91 JA 91 JL 87 JA 91 JA 89* Colorado Connecticut 2 Delaware District of Columbia2 Florida2 JA 91 (3) (3) (5) now now Georgia2 Hawaii Idaho2 Illinois2 Indiana2 (J> Iowa Kansas Kentucky 2 Louisiana 2 Maine (5) (3) now now now now now Maryland 2 Massachusetts 2 Michigan2 Minnesota 2 Mississippi2 (51 (31 now JA 89* JA 89 now (51 (31 now now (8) (5) (31 now now now JA 89 now now JL 87 now (5) (3) now now JA 89 now JL 874 JL 87 now (5) (3) now JL 87 (3) n i • .. JA 89" (5) (31 OC 88 (31 OC 88 (3) now MR 906 now JL 87 «) now (31 OC 88 MR 90* (5) JL 90 Missouri2 Montana Nebraska Nevada 7 New Hampshire . . . New Jersey 2 New Mexico New York 2 North Carolina 2 .... North Dakota Ohio2 Oklahoma Oregon Pennsylvania 2 Rhode Island2 (51 JL 87" JA 895 JA 89 (8) (81 (Si (51 JA 89 JA 89* JL 879 now MR 90 JA 89" (3) (3) JL 879 JL 879 (31 (31 (3! 01 JA 89 JK 89 4 JA 89 JA 89 (8) (81 (8l (Hi (8) (8) ($) (5) (5) (5) (5) (31 now JL 879 JL 87" OC 88 JL 879 (31 13) MR 90 JL 88 JL 879 <31 (51 now (8l (31 2 South Carolina .... South Dakota Tennessee 2 Texas Utah10 Vermont Virginia2 Washington2 West Virginia2 Wisconsin2 Wyoming (3) JL 879 (!) (3) (3) now OC 88" (31 JL87 9 JA 89 (3) J L 87s JA 89 (81 now (8) 4 now MR 90 OC 88* JL 88 now MR 904 JL 87 OC 88 JA 89 JL 879 now JL 879 (3) (3) MR 90* (31 now now DE 875 (3) (3) now DE 87 •S, now now now DE 87 now DE 87 now DE 875 now DE 87 JL 87 JA 89* (31 (31 (81 (3) (31 JL 87 JA 88 now now DE 87 now DE 87 now DE 87 now DE 87 now now now DE 87 BS OC 88* JA 88 now JL 87 JA 88 JL 87 MR 90* JA 88 now (3) (3) JA 88 region's major banks by money center banks. Thus banks with a strong regional orientation have grown through mergers to a size that now limits the number of potential acquirors. Finally, interstate banking appears likely to increase the concentration of banking assets in the nation over the long run because most geo JA 89 JA 89< (3) JA 88 (3) (3) graphic expansion is attributable to large banks and is conducted through mergers and acquisitions. In the case of interstate banking, many of the organizations resulted from mergers between relatively large banks. Of the 51 interstate organizations noted in table 2A, all but 6 rank among the country's top 200 banking firms. Interstate Banking Developments 87 2. Continued State whose banks are permitted entry State permitting entry South Carolina now now Alabama 2 Alaska Arizona Arkansas California Rhode Island JL 87 now now JA 91 Colorado Connecticut 2 Delaware District of Columbia2 Florida 2 (3> South Dakota now now (3) Tennessee Texas Utah Vermont Virginia Washington West Virginia JL 87 now now now now now now now now JL 87 now now now now JL 87 DE 87s JL 87 (3) (3) Wyoming JA 886 now now now now now now JA 91 (3) (31 (5) now 0) now now JA 884 JA 884 now now now now Georgia2 Hawaii Idaho2 Illinois2 Indiana 2 (3) Wisconsin now now JL 874 now (5) now Iowa Kansas Kentucky 2 Louisiana 2 Maine JL 884 JA 89 now 2 Maryland Massachusetts 2 Michigan2 Minnesota 2 Mississippi2 Missouri 2 Montana Nebraska Nevada 7 New Hampshire New Jersey 2 New Mexico New York 2 North Carolina 2 North Dakota Ohio2 Oklahoma Oregon Pennsylvania 2 Rhode Island 2 South Carolina South Dakota Tennessee 2 Texas Utah1® now JL 87 now (3) (31 now o> (3) (5) (5) (3) now now JL 87 now JL87 4 JA 89 now OC 88 (5) (3) JL 90 OC 88 (3) JA 88" JA 886 now JA88 OC 88 JL 90 now (3) (5) (3) now now now now (3) 4 OC 88 JL 90 now JA 89 JA 89 JA 89 JA 89 JA 89 (8) (8) (8) (J) (8) 4 JL 88 (5) (5) now MR 90 (5) now JA 89 <8) 4 DE 87 JA 89 JL 874 JA 89 JA 89 JA 895 (8) now (5) (8) JA88 4 (5) (8) 4 (5) now (5) (3) (3) (5) JL 879 JL879 OC 88 JL87 9 (3) (3) (3) (3) (3) (3) MR 90 JL 88 OC 88 JL 879 now MR 90 JL 88 (3) (5) JL87 9 JL 879 (3) (5) <5) (3) now now DE 87 JL 886 JL 886 now now DE 87 now DE 87 JA 88 JA 88 JA 884 (5) (5) OC 88 JL87 9 now MR 90 JL 88 JA 884 JL 87* now JL 87s JL87 9 JA 884 JL 88 (3) <3) (3) now DE 87 now DE87 5 (3) (3) (3) (3) JL87 now now DE 87 now now DE 87 now DE 87 now DE 87 (3) (3) (3) JA 88 1. Laws already in effect or with established effective dates. 2. Reciprocity required. 3. Entry would be allowed at a future date, but the state in the column has not enacted a law granting reciprocity to the state in the row. 4. Entry would be allowed now, but the reciprocity requirement is not met. The state in the column has enacted a law providing for entry from the state in the row, but the law does not become effective until the date given. 5. Entry would be allowed now. but the reciprocity requirement is not met. The state in the column has not enacted a law permitting JL 87 JA 88 JL 87 JA 88 (3) (3) (3) JA 88 now JL 874 JA88 4 now DE 87 JA 884 JA 886 (3) JA 88 (3) 4 now now (3) 4 now JL 87s 2 DE 874 JA 89 now now (3) JL 88 JL 90 OC 88 JL 879 Vermont Virginia2 Washington 2 West Virginia2 Wisconsin2 Wyoming now JL 87 now (3) JL 87 now OC 88 now JL 87 now JA 88 entry from the state in the row. 6. Entry would be allowed at an earlier date, but the law of the state in the column granting reciprocity will not be effective until this later date. 7. Reciprocity is required until January 1989. 8. Future reciprocity is provided for, but the trigger date is indeterminate because it depends on the action of other states. 9. Entry is permitted but subsequent expansion depends on reciprocity. 10. Reciprocity is required until December 1987. 88 Federal Reserve Bulletin • February 1987 Since the days of the first and second Bank of the United States, concentration has been a concern in the regulation of American banking. Unlike other countries, where a relatively small number of banks hold the vast bulk of banking assets, the United States has designed a policy that avoids concentration of control over the allocation of credit. Whether the nation would be better served by a small number of large banks or a large number of small banks is a central question in all discussions of branch banking and bank holding company expansion policy. The issue of aggregate concentration embodies both economic and sociopolitical questions. On the economic side, higher concentration means fewer, but larger, banks. In face of the difficulties arising from the failure of a large bank and the limited number of firms able to acquire a large failed bank, should economic policy foster even larger banks? On the sociopolitical side, how dispersed should power over the allocation of credit be in a free enterprise society? Credit is a key input in the production and distribution of all other goods, and the access to credit on fair and competitive terms has always been important to policymakers. Therefore, heavy emphasis has been placed on ensuring that no firm or group of firms gains monopoly control over the allocation of credit. While traditional policy is oriented toward preventing an increase in the aggregate concentration of banking, other views suggest that ag- 2A. Interstate banking assets1 Millions of dollars State whose banks are permitted entry State permitting entry Alaska Arizona Colorado Connecticut District of Columbia Florida Georgia Idaho Illinois Indiana California New Mexico New York North Dakota Ohio Oklahoma Oregon Rhode Island South Carolina South Dakota Tennessee District of Columbia Georgia Idaho Illinois Indiana Kentucky Massachusetts Michigan Minnesota 9,542 15,347 347 789 910 339 603 2,130 117 1,928 845 2,594 88 301 2,873 1,424 2,844 931 956 2,467 1,754 BS I (•§(§• 272 5,418 3 3,555 446 3,167 2,915 397 Utah Virginia Washington Wisconsin Wyoming 12,184 Total 38,489 Missouri 10,281 2.568 Iowa Kentucky Maine Maryland Massachusetts Michigan Montana Nebraska Nevada New Jersev Connecticut 943 352 2,601 1,303 476 2,597 4,799 18,513 624 347 204 339 15,025 603 13,111 :: : 1,355 Interstate Banking Developments gregate concentration poses less threat than it did in the past. Such views stress the larger number of credit-granting organizations in the economy. These include U.S. agencies and branches of foreign banks and thrift institutions that have only recently gained the power to make commercial and industrial loans and all types of consumer loans. In addition, the wide variety of nondepository institutions would offer competition if large banks were not allocating credit to its most efficient uses. The ease of entry into the banking industry would permit the formation of new banks to seek profits by meeting those credit needs. According to this view, aggregate concentration would be a problem only if there were 89 substantial barriers both to the formation of new banking organizations and to the expanded lending activity of entities other than domestic commercial banks. For a long time, the barriers to interstate banking have maintained a relatively deconcentrated banking industry because the inability to acquire banks in other states has limited the share of national banking assets that any one firm could acquire. The shares of total domestic banking assets held by the 5, 10, 25, 50, and 100 largest insured banking organizations are indicated in table 3. In recent years, the shares of banking assets held by the 50 and 100 largest banking organizations have increased. With in- 2A. Continued State whose banks are permitted entry State permitting entry Nebraska New York 19 North Carolina Pennsylvania 558 1,127 Alaska Arizona Colorado Connecticut District of Columbia Utah Vermont Virgin- Washington Wisconsin 243 1,753 2,163 987 4,721 7,923 2,599 168 703 779 1,975 484 39 235 6,357 5 446 3,174 1,424 3,055 2,070 359 211 2,070 931 956 2,467 394 1,754 394 Oregon Rhode Island South Carolina South Dakota Tennessee 128 5,818 3,558 6,887 2,915 842 3,721 Utah Virginia Washington Wisconsin Wyoming 1,335 2,601 12,184 1,303 543 41 68 53 5,287 11,695 2,568 11,042 1,854 30,253 9.988 2,543 910 3,839 13,979 9,988 33 Total2 130 1,854 580 New Mexico New York North Dakota Ohio Oklahoma 27,688 3,959 2,305 1. All the data on assets are as of June 30, 1986, except for California banks in Oklahoma, for which data are as of March 31, Tennessee 26 Michigan Montana Nebraska Nevada New Jersey Total Rhode Island 1,501 Florida Georgia Idaho Illinois Indiana Iowa Kentucky Maine Maryland Massachusetts Ohio 2,285 168 2,058 39 8,212 130 243 148,432 1986. The table reflects acquisitions and mergers reported in the FEDERAL RESERVE BULLETIN t h r o u g h t h e i s s u e f o r N o v e m b e r 1 9 8 6 . 2. Details may not add to totals because of rounding. 90 Federal Reserve Bulletin • February 1987 3. Shares of domestic commercial banking assets held by largest banking organizations1 FEDERAL RESERVE POLICY INTERSTATE BANKING TOWARD Percent Year Top 5 Top 10 Top 25 Top 50 Top 100 1970.. 1971.. 1972.. 1973.. 1974.. 14.0 13.4 13.5 13.3 14.2 21.4 20.5 20.7 20.9 22.2 32.8 31.7 31.8 32.4 33.9 41.1 40.1 40.3 41.1 42.3 50.4 49.5 50.3 51.2 52.3 1975.. 1976.. 1977.. 1978.. 1979.. 13.7 13.4 13.5 13.4 13.4 21.3 20.8 21.0 21.1 21.3 32.6 31.7 32.0 32.4 32.6 41.1 40.2 40.5 41.1 41.5 50.8 49.9 50.2 50.8 51.2 1980.. 1981.. 1982.. 1983.. 1984.. 1985.. 13.5 13.2 13.4 13.1 13.0 12.8 21.6 21.1 21.8 21.0 20.3 20.3 33.1 33.1 34.2 33.8 33.1 33.1 41.6 41.6 43.0 43.2 43.5 45.7 51.4 51.7 53.6 54.3 55.0 57.7 1. Banks are ranked by domestic banking assets. Only insured commercial banks are included; nondeposit trust companies are excluded. terstate banking expected to result in higher concentration, the choice is either to develop new methods to maintain deconcentration or to accept the greater banking concentration on the hypothesis that it does not necessarily mean greater control over the allocation of credit. Various proposals have been advanced for the prevention of a substantially higher level of nationwide banking concentration under a system of interstate banking. One relatively simple alternative would be to bar mergers among the 10, 25, or 50 largest banking organizations. These large organizations, which are the most likely to become regional or nationwide organizations, would be forced to expand either on a de novo basis or by acquiring organizations outside the top tier. Any bank ranked below the top 50 nationwide holds less than V percent of nation2 wide banking assets. Therefore, expansion of the major banks by acquisitions outside the top 50 would have no real effect on the level of banking concentration in the short term, although it might in the long run. An alternative way of controlling aggregate concentration would be to establish a limit on the percentage of total nationwide banking assets that any one banking organization could hold. Once a firm reached this limit, it could not expand by merger, although it would still be free to increase its national share by internal growth or de novo entry into new markets. The Federal Reserve Board has supported the concept of interstate banking. In 1956, the Board supported the original draft of proposed bank holding company legislation that did not yet contain the Douglas Amendment barrier to interstate banking. Then-Chairman William McC. Martin, Jr., added the Board's support to a proposal advanced in 1969 that would have permitted interstate banking within the Washington, D.C., area. Hearings were held by the Senate Committee on Banking and Currency, but the bill did not advance. One interstate banking measure the Board suggested was the provision for emergency interstate acquisitions, which was ultimately included in the Garn-St Germain Act of 1982. This technique for dealing with the failure of a large banking organization was proposed annually by the Board after the difficulties in arranging an acquisition of Franklin National Bank in 1974. The most recent Board statement on interstate banking is the testimony by Chairman Paul A. Volcker before a subcommittee of the House Committee on Banking, Finance and Urban Affairs on April 24, 1985. In his testimony, the chairman focused on the survival of small banks, aggregate concentration, states' rights, and the potential "Balkanization" of the banking industry. He stressed that small banks continue to operate profitably in all varieties of banking markets. Probably because substantial economies of scale are not available in banking, no evidence suggests that small banks cannot compete with much larger organizations. Indeed, even in large metropolitan markets, small banks can compete with larger ones and frequently earn higher rates of return on assets. Chairman Volcker described a variety of approaches to limiting aggregate concentration in banking. The plan he suggested would prohibit mergers among banks ranked in the top 25 nationwide. In addition, no organization could acquire, through large acquisitions, more than 2.5 percent of total domestic deposits in depository institutions. While recognizing the value of the dual banking system and the right of the states to enact Interstate Banking Developments their own legislation, Chairman Volcker expressed the Board's concern over the regionalization of the banking industry resulting from the new state laws. To reconcile the desire for a uniform national policy with the desire to maintain a dual system of bank regulation, Chairman Volcker recommended a federally legislated limit on the number of years that states could maintain a system of regional interstate banking. After a suggested interval of three years, the state would have to allow entry from any state that was open to its banking organizations. A draft interstate banking bill incorporating most of the Board's recommendations was adopted by the House Banking Committee, but was not acted upon by the full House of Representatives. LIKELY FUTURE DEVELOPMENTS If the experience of the last few years persists, most of the states that have not already done so will pass some form of interstate banking legislation. Because the major banking states already have enacted laws, however, the initial legislative phase of interstate banking is already over. The next phase will focus on attempts to expand the limited regions that have been selected by many states. If the process depends on a gradual state-by-state expansion of interstate banking rights, however, full nationwide banking is likely to be achieved only in the distant future, and the expansion opportunities of the money center banks will remain limited. The current high level of interstate mergers, as well as intrastate mergers, gives every sign of persisting. A few bank holding companies will acquire more banks as they attempt to develop nationwide banking organizations, and a larger number will form regional organizations. These organizations will be seeking added diversification of their deposit bases and loan portfolios. They may also expect their growth to yield lower costs, although the empirical evidence does not support this view. Over the longer run, the merger activity may involve more relatively small banks. For the short term, however, the development of interstate banking will continue to involve mainly 91 large banking organizations. The development of the superregional banks is likely to continue; their growth and expansion into new states and markets will result from the acquisition of relatively large banking organizations. Thus far interstate banking has not increased concentration in local banking markets because the interstate banks are acquiring banks in markets in which they were not previously allowed to operate a full-service bank. Their entry into a new market via the acquisition of a firm already in that market has merely replaced one competitor with another without changing market concentration. As noted, the expansion of interstate banking does not appear to threaten the small banks. In the long run, as interstate organizations expand beyond major banking markets into smaller cities and towns, fewer small banks will be isolated from large bank competitors. Yet, just as the small banks have survived decades of competition from major branch banks in the relatively concentrated statewide banking states, they will survive competition from the nationwide banking organizations. Nevertheless, the issue of the aggregate concentration of the banking industry will continue to be important as the expansion of interstate banking intensifies nationwide concentration of assets beyond the degree attainable before interstate banking. Taking a long view and assuming no restrictions on mergers among large banks, one can argue that the banking system will comprise thousands of small banks, and a few very large banking organizations operating in most major banking markets and collectively holding a large share of the nation's banking assets. These large banks will be competing against both the small banks and many other depository and nondepository financial institutions. Finally, at some point in the development of interstate banking, efforts will be made to change the state laws to allow interstate branch banking as well as interstate bank holding companies. Generally, after the liberalization of state branching laws, banking organizations have sought to reduce costs by consolidating many subsidiary banks into one bank with many branch offices. 92 Federal Reserve Bulletin • February 1987 SUMMARY After being prohibited for most of the nation's history, interstate banking is now being permitted by state statutes. Although the laws have been changed only recently in most states, many interstate acquisitions have already taken place as firms have attempted to build regional or national bank holding companies. Interstate banking will continue to develop in the next several years and will significantly affect the structure of the American banking system. While the aggregate concentration of banking is the issue that has raised the most concern, it could be addressed by appropriate policies. In the long run, geographic deregulation could be as important to the banking system as the deregulation of interest rates and the provision of new bank products and services. 93 Structure and Uses of the MPS Quarterly Econometric Model of the United States Flint Brayton and Eileen Mauskopf of the Board's Division of Research and Statistics prepared this article. In the late 1960s, staff members of the Board of Governors of the Federal Reserve System, along with several university economists, undertook to build a quarterly model of the U.S. economy. Their goal was to develop a model that focused more intensively than did existing models on the channels through which monetary policy affected the real sectors of the economy. The model has generally become known by the abbreviation MPS, which reflects the academic affiliations of two of its key developers, Franco Modigliani (Massachusetts Institute of Technology) and Albert Ando (University of Pennsylvania), and the organization (Social Science Research Council) through which Federal Reserve support for the project was channeled. 1 1. Papers describing early versions of the model and citing contributors to the development of the model include Frank de Leeuw and Edward Gramlich, "The Federal ReserveMIT Econometric Model," F E D E R A L R E S E R V E B U L L E T I N , vol. 54 (January 1968), pp. 11-40; Frank de Leeuw and Edward Gramlich, "The Channels of Monetary Policy: A Further Report on the Federal Reserve-MIT Econometric Model," F E D E R A L R E S E R V E B U L L E T I N , vol. 55 (June 1969), pp. 472-91; Robert H. Rasche and Harold T. Shapiro, "The F.R.B.-M.I.T. Econometric Model: Its Special Features," American Economic Review, vol. 58 (May 1968, Papers and Proceedings, 1967), pp. 123-49; and Albert Ando and Franco Modigliani, "Econometric Evaluation of Stabilization Policies," American Economic Review, vol. 59 (May 1969, Papers and Proceedings, 1968), pp. 296-314. Jared Enzler. Associate Director of the Division of Research and Statistics, was involved in the model development work, managed the model through much of its first decade of operation, and continues to maintain an active interest in and oversight of model developments. Other current and former Board staff who have worked with the model in its operational phase include Robert Anderson, Douglas Battenberg, Richard Berner, Flint Brayton, Tim Grunwald, William Lee, Eileen Mauskopf, Stephan Thurman, David Wilcox, Anne Williams, and David Wyss. Since 1970, when the first working version was completed, the Board's Division of Research and Statistics has used the model for forecasting, for analyzing the consequences of exogenous economic shocks and alternative monetary or fiscal policies, and for various research projects. Although many key elements of the original model remain intact, considerable effort has been devoted over the years to maintaining and improving the model. These efforts stem from new insights provided by theoretical and applied economic research, from revisions in data, and from institutional and technological developments that have caused the performance of some equations to deteriorate. This article provides a general description of the current structure and uses of the model. 2 SUMMARY OF MODEL STRUCTURE As of late 1986, the MPS model consists of 334 equations, of which 128 are stochastic and 206 are identities. In addition, it has 188 exogenous variables. The theoretical core of the model is based on the behavior of cost-minimizing producers and utility-maximizing consumers. In the long run, when markets clear and expectations are fulfilled, the model behaves like a neoclassical growth model. The long-run growth rate of the economy is determined by the rate of population growth and the rate of technological progress, both of which are exogenous to this model. The level of per capita output depends on the capital-output ratio and the characteristics of 2. A more detailed description of the model, containing a complete list of the equations (as of 1985), is presented in Flint Brayton and Eileen Mauskopf, "The Federal Reserve Board MPS Quarterly Econometric Model of the U . S . Economy, "Economic Modelling, vol. 2 (July 1985), pp. 170-292. 94 Federal Reserve Bulletin • February 1987 the production function. 3 Although an optimal capital-output ratio exists at which the sustainable level of per capita consumption is highest, there is no guarantee that the actual path to which the model converges is this "golden rule" path. The capital-output ratio that prevails in the long run will be affected by fiscal policy, among other things. The long-run unemployment rate will be consistent with nonaccelerating inflation—which, in the model, depends both on the pace of productivity growth and the ratio of unemployment benefits to take-home pay. In the long run, the rate of inflation will equal the excess of the rate of growth of money over that needed to support the growth rate of real activity; inflation also will depend on any exogenous trend in the ratio of income to money. Money is neutral in the long run in the sense that a permanent change in the amount of money in the economy will cause a proportionate change in the price level, leaving all real magnitudes unchanged. A permanent change in the rate of growth of money, however, will not be neutral in the long run. The consequent changes in the rate of inflation and the nominal rate of interest will have real effects because the demand for money depends on the nominal rate of interest and because some provisions of the tax code are defined with respect to nominal, rather than real, magnitudes. In the short run, the properties of the model are quite different. Because wages and prices are estimated to adjust slowly, neither labor nor goods markets are continuously in equilibrium. This disequilibrium reflects the presence of adjustment costs and the assumption that expectations are formed autoregressively (for example, expected inflation depends on past inflation). Thus, in the short run, the model has properties that may be characterized as Keynesian: aggregate demand largely determines the level of output, and the unemployment rate of labor (and the utilization rate of capital) may be either below or above the natural rate; fiscal policy 3. The level of per capita output also depends upon the level of technology embodied in the existing capital stock and on the relative price of energy. The latter determines the energy intensity of production. Energy prices are exogenous in the model. affects real output directly through the contribution of government spending to aggregate demand and less directly through the impact of tax policy on disposable income and investment incentives; changes in the supply of money affect both nominal and real interest rates, and the latter influence investment and consumption. The transition from the short-run responses of the model to the long-run state after either a change in policy or some other disturbance is often lengthy. As shown in simulation results described below, however, after about one year wages and prices are sufficiently flexible that the short-run effects of fiscal and monetary policy on demand begin to be offset by supply responses reflected in movements in wages, prices, and interest rates. A crucial issue in building economic models is the appropriate way to model expectations. The use in the MPS model of autoregressive (AR) expectations contrasts to the approach using rational expectations (RE) that has prevailed in theoretical macroeconomic analysis during the past decade. The rational expectations hypothesis is based on the assumption that economic agents use all available information in forming expectations. In its strong form (SRE), this hypothesis requires that expectations appearing in a model be consistent with the forecasts of that model. 4 For several reasons, the MPS model has not adopted this constraint on modeling expectations. One is practical: the computational difficulties in estimating and simulating a large-scale model incorporating SRE are formidable; consequently, most of the empirical models that have incorporated this approach have been small. Another reason is our belief that the SRE approach is extreme. The economy is sufficiently complex that economic agents are likely to un4. A weaker definition of rational expectations postulates that expectations are optimal forecasts based on available information. Costs of acquiring and evaluating information could cause economic agents to make use solely of past observations of a variable in forming their expectations of its future values. In this restricted case, the AR model would be rational, but its parameters need not be constant over time: they could vary with changes in policy rules. The distinction between strong and weak rational expectations is made by P. A. V. B. Swamy, J. R. Barth, and P. A. Tinsley, "The Rational Expectations Approach to Economic Modelling," Journal of Economic Dynamics and Control, vol. 4 (May 1982), pp. 125-47. Structure and Uses of the MPS Quarterly Econometric derstand it only imperfectly. Moreover, once sluggish adjustments owing to sources other than expectational lags (such as long-term contracts) are introduced into economic behavior, SRE models show characteristics similar to those of models with AR expectations: both types of models generate business cycles and permit (expected) policy actions to affect real outcomes. 5 Nevertheless, the AR expectations approach does have some limitations, and it may not be well suited for the analysis of issues such as the consequences of large, well-understood shifts in policy, policy changes that are widely anticipated before they occur, or policies that would continuously surprise economic agents who were assumed to be using AR expectations. In these cases, we accept Lucas's critique that macroeconomic models not based on rational expectations may fail to predict correctly the response to a policy action. 6 In general, however, the practical importance of the Lucas critique may not be that substantial. Sims argues that policymaking should be viewed as a gradually evolving random process (and that it is viewed as such by the public), not as discrete shifts in policy regimes. 7 Blanchard and Blinder present evidence that, even after the major policy changes of the past decade, key macroeconomic equations with AR expectations do not show the signs of instability that should have emerged if the Lucas critique were important. 8 5. One area of research on sources of adjustment lags unrelated to the formation of expectations is that on nominal contracts. See, for example, Stanley Fisher, "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, vol. 85 (February 1977), pp. 191-205, and John B. Taylor, "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, vol. 88 (February 1980), pp. 1-23. 6. Robert E. Lucas, Jr., "Econometric Policy Evaluation: A Critique," in Karl Brunner and Allan H. Meltzer, eds., The Phillips Curve and Labor Markets, Carnegie-Rochester Conference Series on Public Policy, vol. 1 (Amsterdam: North Holland, 1976), pp. 19-46. 7. Christopher A. Sims, "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, 1:1982, pp. 107-52. 8. Olivier J. Blanchard, "The Lucas Critique and the Volcker Deflation," American Economic Review, vol. 74 (May 1984, Papers and Proceedings, 1983), pp. 211-15; Alan S. Blinder, "Reaganomics and Growth: The Message in the Models," in Charles R. Hulten and Isabel V. Sawhill, eds., The Legacy of Reaganomics (Urban Institute, 1984), pp. 199-228. Model of the United States 95 To describe the structure of the model in more detail, we split it into aggregate demand, aggregate supply, and financial components, although a precise division between the demand and supply components of the model does not exist. Aggregate Demand The categories of aggregate demand specified in the model follow the National Income and Product Account (NIPA) disaggregation of gross national product into consumption, investment, government purchases, and exports and imports. Within each category, further disaggregation has been made to ensure that the components modeled are reasonably homogeneous. Consumption. The key variable in the consumption sector (CON) consists of spending on nondurable goods and services plus the imputed value of services from the stock of consumer durables. CON measures consumption of durables and thus differs from the NIPA measure of personal consumption because the latter includes the purchase of durables rather than their use. The modeling of the behavior of CON is based on the life-cycle theory, which maintains that consumers maximize utility over their lifetimes, subject to the initial value of their wealth and their expectations regarding nonproperty income and the rate of interest. The rate of interest measures the return to postponing consumption to a later period. In the equation, nonproperty income is disaggregated into labor and transfer components because of the different life-cycle characteristics of the two—labor income ceases with retirement whereas transfer income may continue for the remainder of an individual's lifetime. The estimated long-run marginal propensities to consume (MPC) out of labor and transfer income are 0.52 and 0.93 respectively. Wealth also is disaggregated into two components—corporate equities and all other types of wealth—with estimated MPCs of 0.05 and 0.09 respectively. In theory, the nonproperty income and wealth MPCs are not simply constants but are functions of the rate of interest. Only in the case of the wealth MPCs, however, is this dependence recognized in the estimated equation, and 96 Federal Reserve Bulletin • February 1987 it is recognized indirectly through the inclusion of property income—the product of the rate of interest and wealth—as an additional explanatory variable. 9 The estimated long-run MPC out of property income is 0.40. Because both property income and the market value of wealth depend on the rate of interest, the model has two channels through which interest rates alfect consumption. The latter channel—variations in the market value of wealth—is estimated to be by far the stronger one, except over very long periods. An increase in the rate of interest, for example, quickly reduces the market value of wealth, lowering consumption and raising saving. But the higher level of saving then causes wealth to grow more rapidly, and thus the effect of wealth gradually diminishes over time. 10 The effects of interest rates on consumption through the former channel—variations in property income—occur more gradually because property income reflects the average returns on existing assets and thus responds slowly to changes in interest rates. The estimated MPC out of property income is positive but less than one, and therefore an increase in the rate of interest raises both consumption and saving through this channel. However, because the proportion of the increase in property income that is consumed is less than the propen- 9. This formulation is based on the simplifying assumption that the wealth MPCs are linear functions of the rate of interest. Property income is measured as the sum of rental, interest, dividend, and proprietors' income, corporate retained earnings, and imputed income on consumer durables, less an adjustment for losses due to inflation on fixed interest assets. 10. In the life-cycle model, the gradual lessening of the wealth effect reflects the fact that only those cohorts of consumers subject to unexpected gains or losses on their assets change their consumption plans. As time passes, these cohorts form a smaller and smaller fraction, weighted by wealth, of the aggregate population of consumers. From this perspective, the rate at which the wealth effect diminishes should be gradual, and the parameter estimates in the CON equation support this conclusion. Assuming that saving flows into (or out of) the same wealth category that is subject to the shock to its market value, the rate at which the initial wealth effect dies out over time equals the corresponding wealth MPC. Thus the induced changes in saving reduce the effect of wealth on consumption about 5 percent per year in the case of a change in the market value of corporate equities and about 9 percent per year for changes in the value of other forms of wealth. sity to consume out of nonproperty income, the ratio of consumption to total income (property and nonproperty income) falls, and the ratio of saving to income rises. The effect on the saving ratio is very small given the estimated MPCs: in the long run each percentage point change in the real after-tax rate of interest moves the private saving ratio in the same direction 0.1 to 0.2 percentage point. 11 The consumption sector of the model also includes equations for the purchase of consumer durables; these purchases are treated as investment decisions. Consumer durables are disaggregated into two components—new automobiles and other consumer durables—and the equations for both are specified in stock-adjustment form with the desired stocks depending on income, the real rate of interest, relative prices, and the rate of depreciation. The desired stock of cars is also a function of the price of gasoline and the fuel efficiency of cars. Investment. Fixed investment is divided into four categories: residential structures, producers' durable equipment, producers' structures excluding public utility structures and those used in petroleum drilling and mining, and other nonresidential structures. The last category is exogenous. Equations for the other three are based on 11. The exact relation between the saving ratio and the rate of interest is derived in Brayton and Mauskopf, "Federal Reserve Board MPS Quarterly Econometric Model," p. 184. The private saving measure determined by the equation for CON differs from NIPA private saving in the definitions of both the consumption and the income measures upon which the measure is based. The definition of consumption for the model includes the service flow of the durable stock, measured by the sum of the real interest rate and the depreciation rate times the durable stock. By contrast, the NIPA consumption measure includes the purchase of durables. On average, this difference is likely to be small and would, in fact, be zero if the real rate of interest equaled the real growth rate of the stock of consumer durables. The income measure in the CON equation differs from aggregate business and household income in the NIPA accounts by including the imputed income on the stock of consumer durables and by excluding the inflation premium in the return on private holdings of government- and foreign-issued debt. The difference in the income measure is more important than the difference in the consumption measure in accounting for the divergence of the two saving measures. Note that NIPA private saving equals the sum of personal and business saving, and that the saving concept in the model includes business saving because retained earnings are part of the household income measure. Structure and Uses of the MPS Quarterly Econometric the neoclassical approach, in which producers add to the capital stock until its marginal product equals its implicit rental price. The implicit rental price, which is often called the cost of capital, is calculated from the purchase price of capital, the after-tax costs of debt and equity finance, economic depreciation, tax depreciation allowances, and other tax parameters. For producers' durable equipment and the endogenous component of producers' structures, it is assumed that the production technologies in which each is used are of the constant-elasticityof-substitution class. This assumption implies that the long-run response of each capital-output ratio has a constant elasticity with respect to changes in the cost of capital. For producers' structures, the estimated elasticity is about 0.5 (in absolute value); therefore, the percentage change in the long-run ratio of structures to output is one-half the percentage change in the inverse of its cost of capital. In the case of equipment, the estimated elasticity is not significantly different from one (in absolute value); and, to simplify elements of the supply side of the model, an elasticity of one is imposed. The long-run ratio of equipment to output thus moves proportionately to the inverse of its cost of capital. The equations for these two categories of business fixed investment also indicate differences in the paths of adjustment of the types of capital to their new, desired levels following a change in the cost of capital. Investment in producers' durable equipment adjusts only gradually to the cost of capital, with the maximum response achieved in the long run. By contrast, the short-run response of investment in producers' structures to its cost of capital exceeds the long-run effect. These dynamic response patterns suggest that the two types of capital differ in the degree to which existing units of capital can be modified for use with new quantities of other inputs (labor and energy). On the one hand, when the factor proportions embodied in the initial design cannot be changed subsequently (putty-clay capital), investment occurs only to replace existing production capacity as it wears out, assuming output is constant. A change in the cost of capital thus modifies only the amount of investment associated with this stream of re- Model of the United States 97 placement capacity. On the other hand, investment in capital whose existing units can be freely modified {putty-putty capital) responds more in the short run than in the long run to a change in the cost of capital. The short-run response is greater because it includes the one-time alteration of existing capital as well as the replacement of depreciating capital. The estimated paths of adjustment indicate that producers' durable equipment is more likely to be putty-clay and producers' structures to be putty-putty. 1 2 The principal housing equation explains real per capita expenditures on nonsubsidized housing exclusive of brokers' commissions. The desired stock depends on consumption (serving as a proxy for permanent income) and on the ratio of the rental price to the consumption deflator. The rental price is a function of the real after-tax mortgage rate, of tax parameters, and of the price of new residential construction. The desired housing stock also depends on the nominal mortgage rate, which is a proxy for qualification standards imposed by mortgage lenders based on the level of monthly mortgage payments. The elasticity of the housing stock with respect to the rental price is not constant, and the adjustment pattern of expenditures is consistent with a putty-putty response. Brokers' commissions, which are a significant fraction of NIPA housing expenditures, are a function of the value of expenditures on new single-family housing and of capital gains on existing homes. The latter is a proxy for sales of existing houses. Real inventory investment is divided into four categories: nondurable, retail durable, nonretail durable, and farm. The first three are modeled using a stock-adjustment specification in which the desired inventory-sales ratios are functions of the real rate of interest and tax parameters. In addition, short-run movements in inventories are influenced by the degree to which sales are higher or lower than the level anticipated by firms. The unexpected component of sales is likely to cause unintended changes in inventory stocks because of time lags in the process of producing and distribut- 12. The pattern of estimated response to the cost of capital is not a precise indication of whether or not capital is ex post malleable because the response may also reflect adjustment, expectational, and decisionmaking lags. 98 Federal Reserve Bulletin • February 1987 ing most goods. This buffer-stock element of inventory behavior is captured by including the change in sales in the inventory equations. Farm inventories are exogenous. Government Purchases. Federal, state, and local government purchases are each divided into three components: employee compensation, construction spending, and other purchases. The federal components are exogenous. Behavioral equations explain the three categories of state and local purchases. The principal explanatory variables are the level and growth rate of disposable income, the fraction of the population that is of school age, the unemployment rate, and the amount of federal grants-in-aid. Exports and Imports. Exports and imports are each divided into three general groups: merchandise trade, service receipts and payments, and factor income flows. The principal behavioral equations in the merchandise trade group are for nonagricultural exports and nonpetroleum imports. In each case the key explanatory variables are the level of GNP—domestic GNP for imports and foreign GNP for exports—and the relative prices of goods produced domestically and abroad. Agricultural exports are exogenous, and petroleum imports depend on the difference between domestic petroleum demand and supply. Service exports and imports depend on the appropriate GNP measure, the relative prices for foreign and domestic goods, and the magnitude of trade flows. Factor-income flows are modeled as the product of interest rates and stocks of assets. In the model, the U.S. exchange rate (defined as a weighted average of 10 bilateral exchange rates) is determined endogenously by the requirement that the net capital inflow (outflow) equal the current account deficit (surplus). The specification of the capital account includes equations for domestic investors' holdings of foreign assets and foreign investors' holdings of domestic assets. The demand for these assets depends mainly on the differential between the short-term interest rate on domestic assets and that on foreign assets, adjusted for the expected rate of change of the exchange rate. This expected rate of change is represented by several proxies: the exchange rate forward premium, past changes in the exchange rate, and the deviation of the real exchange rate from a level that was consistent historically with balance of the current account. Equation estimates indicate that expectations of the level of the exchange rate are regressive: a movement of the exchange rate in one direction generates the expectation that the exchange rate will move in the opposite direction. Aggregate Supply The supply side of the model includes the production technology, the specification of firms' production and pricing behavior, and the demand for inputs into the production process—labor, capital, and energy. Besides treating these facets of the model, this section describes wage dynamics and briefly discusses how the model's structure relates to several supply-side issues. These issues include the interest elasticity of private saving, the response of consumption to debtfinanced tax cuts, and the response of labor supply to changes in marginal tax rates. The Behavior of Producers: Factor Demands and Prices. The cornerstone of the supply side of the model is the production function. Output of the principal sector of the economy—nonfarm business exclusive of services of the housing stock—is assumed to be produced using labor, capital, and energy inputs with a Cobb-Douglas production function. Thus, for a given level of production, the minimizing of costs by firms causes the demand for each input to be inversely proportional to its own price relative to the price of output. This relation between factor demands and factor prices is based on the estimated parameters in the equation for producers' durable equipment, which is the only type of capital included in the production function for this sector. 13 As described below, however, the demand for energy does not appear to be based on the 13. The role of the stock of producers' structures in the production process is much less clear than the role of equipment. Clearly, structures are required for most forms of production to occur, but the degree to which structures contribute to output and can be substituted for other input Structure and Uses of the MPS Quarterly Econometric simple Cobb-Douglas technology, and research is planned to resolve this inconsistency in the structure of the model. The specification of the supply side is complicated by the empirical observation that producers' durable equipment is putty-clay. In designing this type of capital, producers choose particular amounts of labor and energy to be used with the capital from the possibilities offered by the ex ante Cobb-Douglas production function. Once designed and installed, however, that unit of capital is operable only with those amounts of labor and energy. Because of this characteristic, it is important to distinguish between the determination of the optimal factor intensities on a particular vintage of capital and the specification of the aggregate demands for capital, labor, and energy. In general, only the demands for these inputs associated with new vintages of capital will be responsive to changes in factor prices; consequently, the aggregate input demands will be relatively insensitive to factor prices in the short run. 14 Only in the longer run, when the capital stock has been totally replaced, will the full (inverse) proportionality between factor prices and aggregate factor demands hold. These characteristics were described above for investment in producers' durable equipment. The aggregate demand for energy is the sum of energy required on each vintage of capital in use. factors (particularly labor and equipment) is difficult to define. For this reason, they are not included in the production function. This specification of production technology and firm behavior is for the nonfarm business sector exclusive of the services of the housing stock (the implicit rental value). The other sectors of the economy have much simpler production relationships: output is proportional to labor input (government, household, and institution sectors) and to capital input (housing output) and is exogenous (farm) or equal to net factor income (the rest of the economy). The discussion in the remainder of this section applies only to the nonfarm business sector exclusive of housing output. 14. On the one hand, the factor intensities on the current vintage of capital depend, in principle, not only on current real factor prices but also on their expected values over the lifetime of the vintage because of the putty-clay characteristic. On the other hand, lags in decisionmaking and delivery cause the factor proportions on the current vintage to depend on lagged real factor prices. The use of lagged factor prices in the model equations should thus be interpreted as reflecting both autoregressive expectations and these other sources of lagged adjustment. Model of the United States 99 It may be expressed as the product of output and a weighted average of the energy-output ratios on the various vintages in use, where the weights represent the share of output produced by each vintage. The energy-output ratios for each vintage depend on the real price of energy at the time the capital was installed. In the estimated equation, no attempt is made to use specific vintage weights. Rather, the aggregate energyoutput ratio is made a function of a long distributed lag on the relative price of energy, and the slow estimated response of the aggregate ratio to the relative price is consistent with the puttyclay characteristic. However, the estimated long-run real price elasticity of - 0 . 3 3 is lower than expected and casts doubt on the appropriateness of the Cobb-Douglas production function. Analogous to the aggregate demand for energy, the aggregate demand for labor (measured in hours) is the sum of labor required across the different vintages of capital in use. Because the optimal labor intensity of each vintage is modeled as a function of the optimal intensities of capital and energy and the parameters of the ex ante production function, aggregate labor demand depends on actual output and the average capital-output and energy-output ratios in use. In addition, the ex ante production function assumes a constant rate of labor-augmenting technological change; and, therefore, the intensity of the labor input in production falls over time, ceteris paribus. Hours per unit of output also depend on the level of capacity utilization: an increase in utilization rates increases labor productivity as overhead labor is used more efficiently, but it reduces productivity as machines with higher operating costs (due primarily to higher labor requirements) must be brought into production. The latter relation between capacity utilization and productivity attempts to capture indirectly variations over time in the vintages actually used. Prices are set as a markup over unit labor costs. 15 The existence of the markup stems from 15. An alternative but equivalent way of specifying prices is as a markup over unit factor costs. In this case, prices move proportionately with all factor costs (with the sum of the elasticities of factor costs equal to unity) and inversely with the rate of technological progress. 100 Federal Reserve Bulletin • February 1987 the assumption that firms generally operate as oligopolists, setting prices above the level that would obtain under perfect competition, but not so high as to induce additional firms to enter the market. As specified in the equation, the actual markup varies positively with the degree of utilization of capital and labor and inversely with the degree of price competition from foreign goods. In principle, the putty-clay nature of capital also complicates the specification of price behavior. Prices should be set such that the revenue stream of the newest vintage of capital equals the markup times the cost stream, both discounted over the lifetime of the capital. A consequence of this rule for setting prices is that labor productivity of only the most recent vintage of capital rather than labor productivity averaged across all vintages of capital should affect the price. The model's price equation, by contrast, uses average labor productivity, a use that may be justified in part on the basis of short-run adjustment costs for investment in new capital. Wage Determination and the Natural Unemployment Rate. The rate of change in compensation per hour is explained by an expectationsaugmented Phillips curve. Each percentage point decrease in the unemployment rate is estimated to raise the rate of change in hourly compensation in the same quarter by 0.85 percentage point at an annual rate. The behavior of compensation per hour also depends on the rate of inflation in the prices of consumer goods, the change in the minimum wage, the ratio of unemployment benefits to wages, the change in female representation in the labor force, and changes in employer contributions to social security and unemployment insurance. 16 As is well known, when the wage equation is of the Phillips-curve variety, the coefficient on price change determines the existence of a longrun tradeoff between inflation and unemployment. If the coefficient is less than unity, there is such a long-run tradeoff. If the coefficient is unity, as it is estimated to be in the model's equation, the long-run Phillips curve is vertical, 16. Compensation is inclusive of employee and employer social security insurance contributions and of other fringe benefits. and a natural rate of unemployment exists. 17 This rate is consistent with the maintenance of a constant rate of inflation but is independent of the actual inflation rate. The economy cannot deviate permanently from the natural rate without causing an unbounded acceleration or deceleration of prices. In the model, the natural rate moves positively with the ratio of unemployment benefits to wages and negatively with the rate of growth of productivity. With trend productivity growth of 1.0 percent and unemployment benefits at their current level, the natural rate of unemployment is 6.4 percent. Labor Supply. The specification of labor supply depends largely on demographic factors, with some cyclical influence by the employment rate. Although the responsiveness of the labor supply to the real after-tax wage rate is a critical element in the revival of classical economics, the equation for aggregate labor supply does not contain such a term. The failure to find empirical support for this hypothesis may stem from (1) offsetting income and substitution effects generated by a change in the real wage of primary workers, and (2) the behavior of nonprimary workers, who respond positively to their own real wage but negatively to the real wage of primary workers. Private Saving. Another tenet of supply-side theory that our empirical work fails to substantiate is a large positive response of the saving rate to the real after-tax rate of interest. As described above, the consumption equation indicates that, although the response of the saving rate to the real after-tax rate of interest is positive, the effect in the long run is weak. In addition, net foreign saving is estimated to be relatively insensitive to the differential between interest rates on U.S. assets and those on foreign assets. One consequence of the relative insensitivity to the real interest rate of both private and net foreign saving is that persistent government budget deficits—which are a form of dissaving—reduce the 17. The equation imposes a unitary price response, but the coefficient value when freely estimated is not significantly different from this value. The existence of a natural unemployment rate also requires that the elasticities of the output price with respect to factor prices sum to one. The model's price equation implicitly has this characteristic. Structure and Uses of the MPS Quarterly Econometric amount of wealth in individuals' portfolios allocated to the private capital stock. Thus, in the long run, per capita output is smaller than it would otherwise be. 18 The relation between government debt policy and private saving also hinges on the extent to which individuals' consumption decisions are sensitive to expected future tax liabilities. Under what has become known as the Ricardian equivalence proposition, a shift between tax and deficit (bond) finance of government expenditures has no effect on consumption. 19 This conclusion is based on the intertemporal budget constraint faced by the government, which ensures that short-run changes in the financing mix change only the time profile of tax liabilities, not their present value. This view also requires that consumers are forward-looking and see that changes in the short-run financing mix do not affect their own intertemporal budget constraints. For both empirical and theoretical reasons, the specification of the model's consumption equation is not based on the Ricardian equivalence approach. The specification used has explained past consumption well, even over recent years, when there has been a marked shift toward deficit finance. In the Ricardian view, the resulting increase in aftertax income should have been saved. Instead, consumption has increased and private saving has remained low, as predicted by the model's consumption equation. From a theoretical perspective, the Ricardian equivalence proposition is not valid if such factors as liquidity constraints, finite planning horizons, or uncertainty significantly influence consumer behavior. 20 18. In the long run, government deficits always crowd out gross output; and, unless the capital-output ratio exceeds that consistent with maximum sustainable net output, deficits crowd out net output also. 19. Robert J. Barro, "Are Government Bonds Net Wealth?" Journal of Political Economy, vol. 82 (November/ December 1974), pp. 1095-117. 20. See Robert B. Barsky, N. Gregory Mankiw, and Stephen R. Zeldes, "Ricardian Consumers with Keynesian Propensities," American Economic Review, vol. 76 (September 1986), pp. 676-91, and the references cited therein. To the extent that these potential factors affect the sensitivity of consumption to contemporaneous aftertax income, they are consistent with the general specification of the model's consumption equation, which freely estimates this parameter. Financial Model of the United States 101 Sectors The financial sector includes equations for the components of the money stock measures Ml and M2 and for the behavior of bank reserves. A term-structure equation links the long-term rate of interest to the current and past values of a short-term interest rate and the rate of inflation. Another equation equates the expected rate of return on equity (net of a risk premium) to the expected rate of return on bonds. Ml andM2 Components. Ml is modeled as the sum of four components: currency plus travelers checks, demand deposits, Super NOWs, and other checking deposits excluding Super NOWs. The specification of each equation is based on the inventory-theoretic transactions model. The principal explanatory variables are the opportunity cost (market rate of interest less any explicit return on the deposit), the price level (with homogeneity of degree one imposed), and real output or consumption. Except in the case of currency, the elasticity of deposits with respect to the opportunity cost increases as the opportunity cost rises, and it approaches zero as the opportunity cost approaches zero. The demand for currency has a constant elasticity with respect to the opportunity cost. At the M2 level, all deposit categories in M2 but not in Ml,except overnight RPs and Eurodollars, are aggregated for modeling purposes. The share of household wealth allocated to this aggregate depends on measures of the opportunity cost as well as on the change in wealth due to personal saving (to reflect a temporary rise in the share of wealth allocated to these more liquid deposits when saving increases). The Yields on Bonds and Equity. The termstructure equation relates the yield on corporate bonds to current and lagged values of the commercial paper rate and the rate of inflation. Because the effective duration or maturity of a coupon bond shortens as interest rates rise, the length of the distributed lags on both the commercial paper and inflation rates is allowed to vary with the recent level of the commercial paper rate. 21 The lag length is estimated to be 21. The duration shortens as the interest rate rises because a larger fraction of the present value of all payments on a bond— 102 Federal Reserve Bulletin • February 1987 shorter the higher are recent values of the shortterm rate. The real return on equity is calculated as a weighted average of dividends and cash flow, divided by the market value of equity; most of the weight is on dividends. This real rate is equated to the real return on bonds—the corporate bond rate less a long distributed lag on the rate of inflation—plus a constant to reflect a risk premium. MODEL PROPERTIES The previous sections have described key components of the structure of the model. This part presents simulations to demonstrate more concretely the properties of the model, particularly in the short run. Each case has a base simulation in which the model is adjusted to replicate the historical path of the economy. Then a second simulation, in which the time path of an exogenous variable is altered, is performed. The results presented below are differences between the second simulation and the base simulation. 22 Response to a Fiscal Shock In this simulation, real federal purchases are permanently increased by 1 percent of real GNP. All tax rates are held constant. The simulation is performed four different ways to show the relative importance of demand and supply responses and the dependence of the outcome on the stance of monetary policy. In the first case, the supply side of the model is suppressed by holding wages, prices, and relative factor proportions at their base values to highlight the demand effects of the fiscal change; thus the supply of output is assumed to move one for one with changes in demand at an unchanged price. Monetary policy is characterized by holding the federal funds rate at its base value. From the perspective of the loanable funds market, fixing the federal funds rate requires the monetary authority to increase both the coupon and the repayment of principal—is then due to the nearer-term payments. 22. Because the model is nonlinear, the size of the multiplier depends on the characteristics of the base simulation. Experiments have shown that this dependence on initial conditions can be significant. Ml by purchasing through open market operations the fraction of the increase in government debt that the nongovernment sectors do not wish to hold at the base value of the short-term interest rate. As shown in entry 1 in table 1, these assumptions result in a response of the level of real GNP that peaks at 3.8 percent after four years and subsides a bit thereafter. This is a typical multiplier-accelerator pattern: the adjustment dynamics of most of the investment equations cause the short-run response to exceed the long-run response. The size of the long-run response depends inversely on the degree to which increases in income escape from the domestic spending chain in the form of increases in saving, a rise in taxes, and purchases of foreign goods. The second entry shows the consequence of altering the monetary policy assumption to one in which Ml is held at its base path. The higher level of activity generated by the change in fiscal policy requires an increase in interest rates to hold money demand equal to the fixed supply. (In the loanable funds market, the rise in interest rates is necessary to induce the nongovernment sectors to hold all of the increase in government debt.) Under this monetary policy assumption, the boost to real GNP is considerably damped as the higher level of the interest rate crowds out some interest-sensitive private spending. The peak response is 1.4 percent after two to four quarters. In entry 3, prices are endogenized, but wages are still exogenous. 23 Monetary policy is again characterized by fixed M l . In this case, producers are permitted to choose the price at which to supply output although labor is still available at the fixed wage rate. Given these assumptions, the real GNP response is further damped after the first two years, but only by a little. After the first two quarters, prices rise slightly, reflecting some upward slope to the supply curve for output. The higher price level retards aggregate demand through a shift in the distribution of income toward profits and away from real disposable income (such a shift reduces demand in the short run but not in the long run when households recognize their gains as shareholders). It retards 23. The mix of inputs in the production process also is allowed to change, but this change is of only small quantitative importance over the period being simulated. Structure and Uses of the MPS Quarterly Econometric Model of the United States 103 1. Simulated responses to an increase in purchases by the federal government1 Percent, except where noted Quarter following shock Type of simulation 1 2 4 8 12 16 20 1.3 1.7 2.3 3.1 3.7 3.8 3.1 2. Exogenous supply side: Ml fixed Real GNP Federal funds rate (percentage points) 1.2 1.02 1.4 1.24 1.4 1.12 1.2 .80 1.1 .89 .8 .68 .4 .32 3. Exogenous wages: MI fixed Real GNP GNP deflator Federal funds rate (percentage points) 1.3 0 .98 1.5 0 1.36 1.4 .1 1.30 1.2 .3 1.05 1.0 .4 1.18 .5 .5 .98 .1 .5 .48 4. Full model: Ml fixed Real GNP GNP deflator Federal funds rate (percentage points) 1.3 0 1.00 1.4 .1 1.42 1.3 .3 1.49 1.0 .9 1.67 .2 1.8 2.20 -.9 2.7 2.15 -2.0 3.0 1.31 1. Exogenous supply side: federal funds rate Real GNP fixed 1. Real federal purchases are increased by 1 percent of the base value of real gross national product. The responses were calculated over the period 1981-85, with the base simulation constructed to replicate historical values. aggregate demand also by further raising interest rates, given the fixed Ml policy. In each of these three cases, the more expansionary fiscal policy leads to a permanent increase in output because of the suppression of one or more elements of the supply side of the model. In a fourth case, when wages are endogenized and the full model is simulated (with fixed Ml), the picture changes dramatically. The stimulative fiscal policy now has only a transitory positive effect on real activity. No longer can firms boost employment at a fixed wage rate; rather, the increase in employment required to produce the initially higher level of output leads to higher wages. Higher wages boost prices, which in turn put further upward pressure on wages. The wage-price acceleration (relative to the values of wages and prices in the base simulation) stops as higher prices push up interest rates and crowd out private spending. Private spending is fully displaced by the higher level of 1 government purchases after about 3 /2 years. The response of output then turns negative because the higher price level is inconsistent with the unchanged supply of money. In general, the dynamic path to the long-run equilibrium will be characterized by gradually damped oscillations. 24 The expansive fiscal policy also sets off a supply-side response that will cause the long-run real output multiplier to be negative: the crowding out of private investment lowers the private capital stock. This is a very gradual process, however, and is not apparent over the five-year period shown in the table. Comparing entries 2 and 4 indicates the relative importance of the supply side of the model over short periods. Both of these multipliers are based on the same monetary policy assumption, but entry 2 suppresses the supply side of the model whereas entry 4 includes it. The results for real GNP are virtually the same for the first quarter and are fairly close after one year, but then diverge significantly. For the period simulated, supply-side influences work primarily through the wage-price sectors; however, in the long run, the effect on potential output of changes in the private capital stock becomes the dominant factor. The response of the model to other exogenous shifts in aggregate demand, such as a shift in the investment function, is similar over a five-year period to that from a change in government purchases. Over longer periods, however, the responses will not be the same to the extent that 24. The model tends to oscillate after a shock, especially if monetary policy takes the form of holding a monetary aggregate unchanged. There are two basic reasons for the cycling. One is the longer lag between interest rates and real activity compared with the lag between interest rates and money demand. With a fixed supply of money, an increase in real activity requires that interest rates rise to hold money demand equal to the unchanged supply. The higher interest rates eventually lower activity. The scenario is then repeated in reverse. The other, and more important, source of cycling is the specification of the wage equation in growth-rate form. As a result, the real wage oscillates in response to a shock. 104 Federal Reserve Bulletin • February 1987 they have different implications for the private capital stock and potential output. Response to a Shock in the Level of Money Because a principal reason for building the model was to focus on monetary and financial forces, much attention has been paid over the years to exploring the channels through which monetary factors affect the real economy. This issue has long been a subject of controversy at both the theoretical and the empirical levels. The role of money in the model lies well between the extremes of the monetarist school, on the one hand, and the view that money is a relatively unimportant factor in business cycles, on the other. There is, however, a fundamental difference between the short- and the long-run effects of money in the model. Over the short run, an autonomous change in the money supply significantly affects aggregate demand because of the estimated importance of the real interest rate and of wealth in influencing demand. Nevertheless, the effect on demand occurs solely through changes in the interest rate—neither the level nor the rate of growth of money enters the behavioral equations (except, of course, the money demand equations). In the long run, an autonomous change in the level of money has no effect on the real economy and, instead, will determine only the level of prices. To isolate some of the factors influencing the full model response to a permanent change in the level of money, the simulations were decomposed into several steps. The results are presented in table 2. In the first stage, the level of Ml is permanently increased by 1 percent relative to the baseline value of M l . Only interest rates and the interestsensitive components of wealth are endogenized. 25 Because prices and output are held fixed, changes in the rest of the economy do not feed back to the financial sectors, so we can measure 25. Although market values of housing, consumer durables, and bonds (with a maturity in excess of one period) would also change with interest rates, the model captures changes only in the capitalized values of the stock market and of land. the direct effect of monetary policy on financial markets. The effects on selected financial variables are presented in the top third of the table. An increase in Ml initially depresses the shortterm interest rate by a disproportionately large amount. The "overshooting" of interest rates stems from the small contemporaneous elasticity of Ml (relative to its long-run elasticity) with respect to the short-term interest rate. Because the corporate bond rate is modeled by a distributed lag on the commercial paper rate—and the dividend-price ratio by a distributed lag on the bond rate—these rates can also overshoot initially. By the end of the fifth year, the effect on the commercial paper rate is close to 1 percentage point; the effect on the bond rate is slightly smaller; and the change in the dividend-price ratio is about half the change in the bond rate, reflecting the historical average of the dividendearnings payout ratio. The percentage increase in stock market wealth equals the percentage decline in the dividend-price ratio, and the change in land prices moves inversely but slowly with the decline in the bond rate. By quarter 20, the percentage increase in land prices is about 70 percent of the long-run change consistent with the decline in the bond rate. 26 In panel 2, the changes in interest rates and wealth after 20 quarters, as reported in the last column of panel 1, are fed through to the equations for the components of demand. By using the long-run changes in interest rates and wealth (that is, those that appear after 20 quarters) rather than the complete path as reported in panel 1, the simulation compresses the period over which these demand responses would appear. Each component of demand is treated separately from all other components, and aggregate output and income are held fixed to abstract from multiplier-accelerator effects on spending. Thus the direct effects of changes in interest rates and wealth on individual components of demand are isolated. 27 26. The estimated long-run elasticities of land values with respect to the bond rate are (in absolute value) 0.81 for farmland, 0.73 for household ownership of land, and 1.02 for other noncorporate land. 27. The percentage change in land prices that is used for the simulations reported in panel 2 is the change in land prices in evidence when land prices have fully adjusted to the changes in the bond rate. Structure and Uses of the MPS Quarterly Econometric Model of the United States 105 level of output. The modeling of consumer durables, business fixed investment, housing, and inventory investment explicitly recognizes this link between the cost of capital and investment spending. Panel 2 reveals considerable variation in the way various kinds of investment respond to a decline in the interest rate. Several factors account for this variation. A change in the interest rate has a bigger impact on the cost of capital the In the model, the principal channel through which money and interest rates affect spending is the cost of capital, which is the gross return on capital given the rate of return on investor equity, the rate at which capital depreciates, the tax rate, the cost of debt, and the rate of inflation. A reduction in the rate of return on equity or debt— holding fixed the rate of inflation—lowers the cost of capital and raises the optimal capitaloutput ratio and the rate of spending at a given 2. Simulated responses to an increase in money1 Quarter following shock 1 4 8 12 16 20 1. Ml increased: only interest rates endogenous Commercial paper rate (basis points) Corporate bond rate (basis points) Dividend-price ratio (basis points) Corporate equity Billions of dollars Percent Noncorporate land Billions of dollars Percent -252 -81 -47 -111 -76 -51 -83 -51 -30 -89 -59 -25 -99 -88 -42 -97 -94 -44 149 141 103 130 203 293 12.2 9 28 47 68 86 104 4.1 2. Interest rate and wealth changed by long-run effect (as reported in quarter 20 of panel one); aggregate output, income, and prices exogenous Producers' durable equipment Billions of 1982 dollars Percent Producers' structures Billions of 1982 dollars Percent Housing investment Billions of 1982 dollars Percent Inventory investment Billions of 1982 dollars Consumer purchases of new autos Billions of 1982 dollars Percent Consumer durables other than autos Billions of 1982 dollars Percent Consumption 2 Without consumption price change Billions of 1982 dollars Percent With consumption price change Billions of 1982 dollars Percent .7 .3 2.4 1.0 4.2 2.0 8.4 3.2 10.7 3.6 13.2 4.1 3.7 2.4 5.3 3.9 7.4 5.6 7.5 5.1 6.9 4.5 2.6 1.9 10.0 9.1 8.6 7.4 9.6 6.0 7.8 4.6 6.3 3.5 .5 1.7 1.7 1.1 .8 .7 .8 1.9 1.0 1.7 1.0 1.4 .9 1.2 .8 1.1 .2 .1 1.7 .8 2.9 1.4 3.2 1.4 3.1 1.2 3.1 1.2 2.2 .1 8.7 .4 13.1 .6 21.0 1.0 25.2 1.1 27.9 1.2 4.7 .2 14.6 .7 20.0 .9 29.0 1.3 33.2 1.5 35.8 1.5 0 0 0 0 3. Full-model responses for Ml increase Real GNP Billions of 1982 dollars Percent GNP deflator (percent) Commercial paper rate (basis points) Corporate bond rate (basis points) Unemployment rate (percentage points) Exchange rate (percent) 1. The level of Ml is permanently increased by 1 percent. The responses were calculated over the period 1981-85 with the base simulation constructed to replicate historical values. 11 .3 0 -229 -82 -.1 -2.9 38 1.2 .1 -15 -20 -.4 -2.4 36 1.1 .6 53 34 -.5 -2.8 17 .5 1.4 89 34 -.4 -.3 -24 -.7 2.1 56 49 0 .1 -61 -1.7 2.4 1 41 .6 2.8 2. Includes the service flow from the stock of consumer durables but not expenditure on new durables, 106 Federal Reserve Bulletin • February 1987 longer the life of the capital. 28 Therefore, housing and nonresidential structures are more sensitive to interest rate changes than are consumer and producers' durables, ceteris paribus. Differences in the estimated elasticity of each type of capital to the cost of capital also matter. The larger response of producers' durable equipment to the cost of capital, compared with that of structures, offsets some of the greater sensitivity of the cost of capital to interest rates that longer-lived structures have. In addition, because the figures in panel 2 represent the dynamic paths of spending rather than the steady-state effects, the responses reflect differences among the markets for the various capital goods in the time between placing an order and receiving the capital and in the speed with which actual changes in interest rates lead to expected changes. Equally important for the dynamic paths is the ex post possibility for factor substitution. Because of its puttyclay nature, producers' durable equipment adjusts relatively slowly to the change in interest rates, and the short-run response of investment in this type of capital never exceeds the long-run response. By contrast, all other categories of capital show a tendency to overshoot in the short run. Another way financial variables affect the real economy is by inducing short-run variations in household net worth. In the model, the market value of corporate equity is determined by capitalizing the dividend stream by the dividendprice ratio, and the market value of land is determined by capitalizing the expected real output of land by the real rate of interest on bonds. A dollar increase in the value of the stock market and the value of land is estimated to increase consumption by five cents and nine cents respectively. The first consumption row in panel 2 shows the dynamic response of consumption to changes in wealth (consistent with a decline in the bond rate of a little less than 1 percentage point), assuming no change in property income. By quarter 20, the effects of wealth on consumption approximately equal the sum of the effects of the cost of capital on the other categories of demand. 28. This effect occurs because for longer-lived assets the rate of interest is a larger fraction and the depreciation rate a smaller fraction of the cost of capital. The second consumption row in panel 2 allows for an additional influence of interest rate changes on consumption spending. The model definition of consumption includes the imputed flow of services from the stock of consumer durables. Because an element of the price of these services is the (real) interest expense on a unit of consumer durables, a decline in the interest rate directly lowers the price of consumption, thus stimulating consumption for a given level of nominal income. 29 As shown in the last row, including this effect boosts the consumption response about 50 percent. Another channel that at one time was important in linking the financial and real sectors of the model was nonprice credit rationing in the mortgage market. However, the causes of credit rationing—deposit rate ceilings, usury constraints on mortgage rates, and the lack of integration of the mortgage and general capital markets—have diminished considerably over the past decade with the deregulation of both the deposit and the mortgage markets. The structure of the model's housing sector thus assumes that the influence of credit rationing has been negligible since the mid-1970s. The full-model response to a permanent increase in the level of M l , reported in panel 3, allows for the feedback from output to prices and interest rates and for multiplier-accelerator effects on output. Initially, interest rates are lowered and output is stimulated by the factors described in the first two panels of the table. The higher level of output then leads to increases in prices, and the higher output and higher prices together subsequently raise interest rates—despite the increase in M l . Higher interest rates then depress spending relative to the base path, and prices and interest rates will eventually reverse direction. By quarter 20, the model solution remains far from its steady-state response: the increase in the price level (2.4 percent) is well above the 1 percent that in the long run is 29. One component of the model's measure of nominal property income is not held constant in this case. A decline in consumption prices—given past prices—initially reduces the capital gains households earn on their holdings of government and foreign debt. Because this change in the price level is permanent, the rate of inflation is ultimately unchanged, so this effect does die out. Structure and Uses of the MPS Quarterly Econometric consistent with the change in money, and the level of output is 1.7 percent below its long-run response of no change. MODEL Forecasting The staff of the Federal Reserve Board regularly prepares forecasts of the economy, and one element in the forecasts is a projection derived from the quarterly model. The model forecast is not a purely mechanical projection; rather, it typically depends on constant adjustments (add factors) applied to many of the behavioral equations. Add factors are introduced for three reasons: (1) to adjust equations whose post-sample errors have deviated from the estimated error characteristics and for which there has been either insufficient time to reestimate the equation or lack of success at respecifying the equation; (2) to reflect shocks to behavior that can be identified with events not captured by the structure of an equation and whose magnitude and persistence can be roughly predicted; and (3) to incorporate an estimate of an equation's nearterm error based on high-frequency data observations. In the last case, a pooled forecast from the quarterly model and a monthly short-term forecasting model are used as aids in generating add factors. 30 The monthly model combines direct observations on high-frequency data with a mix of behavioral and autoregressive equations. 31 As part of the forecasting process, a stochastic simulation technique is used to generate confidence ranges or probability distributions for the model projection. The approach involves repeatedly simulating the model, subjecting each behavioral equation and most exogenous variables to random shocks based on their historical error characteristics. The errors for exogenous varia30. Carol Corrado and Mark Greene, "Reducing Uncertainty in Short-Term Projections: The Linkage of Monthly and Quarterly Models" (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Studies Section, December 1983). 31. Carol Corrado and David Reifschneider, "A Monthly Forecasting Model of the U.S. Economy" (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Studies Section, September 1986). 107 bles are derived as residuals from autoregressive equations 32 Policy USES OF THE Model of the United States Alternatives The model offers a convenient framework for analyzing the effects of alternative monetary and fiscal policies or of changes in other exogenous variables. Despite the complexity of the model, such simulations often require judgmental adjustments or adaptations of model equations to capture fully the important aspects of the issue being analyzed. For instance, in simulating the effect of lower energy prices, a judgmental adjustment has to be made both to the projection of domestic production of petroleum and to investment in petroleum drilling rigs because those variables are exogenous to the current structure of the model. Special Uses of the Model In addition to its use for forecasting and shortrun multiplier analysis, the model has served other purposes over the years. Often it has been simulated to determine the long-run implications of policy changes. A study by Anderson, Ando, and Enzler, for example, examined the effect of various fiscal policies on the steady-state values of output and the real rate of interest. 33 In one set of simulations reported, the long-term ratio of net federal debt to nominal GNP was increased from 0 to 100 percent with the consequence that the new steady state had a real rate of interest that was higher by 5 percentage points and a level of real GNP that was 5 percent lower. In another study of fiscal policy, Brayton and Clark used the model to investigate the longer-run consequences of the 1981 Economic Recovery Tax Act (ERTA). 34 In this case, rather than 32. The stochastic simulation methodology was developed and implemented by Peter Tinsley, James Berry, Gerhard Fries, Doug Handler, and Arthur Kennickell. It has also been extensively used for the analysis of policy strategies as described in the text. 33. Robert Anderson, Albert Ando, and Jared Enzler, "Interaction between Fiscal and Monetary Policy and the Real Rate of Interest," American Economic Review, vol. 74 (May 1984, Papers and Proceedings, 1983), pp. 55-60. 34. Flint Brayton and Peter B. Clark, The Macroeconomic and Sectoral Effects of the Economic Recovery Tax Act: Some Simulation Results, Staff Studies 148 (Board of Governors of the Federal Reserve System, 1985). 108 Federal Reserve Bulletin • February 1987 simulating the model until it reached an equilibrium growth path, they adjusted monetary policy to offset the impact of ERTA on real output. Several results emerged from the study: real interest rates were significantly higher as a result of ERTA; investment was depressed as the increase in real interest rates more than offset the stimulus to investment from the acceleration of depreciation allowances; and the shift from tax to bond finance of federal expenditures, implicit in ERTA, would have led eventually to an unstable budgetary position in which government debt grew explosively. Some other special uses of the model have centered on the analysis of alternative strategies for conducting monetary policy. Two papers by Kalchbrenner and Tinsley in the mid-1970s applied optimal control techniques to this topic. 35 Subsequent studies have used the stochastic simulation methodology, described above, to analyze a wider range of policy design issues than can be studied using deterministic simulations (for example, policies that react to shocks) and to evaluate policies on the basis of the degree of control achieved over ultimate targets such as inflation and unemployment. A series of papers by Tinsley and von zur Muehlen used stochastic model simulations for three purposes: (1) to rank strategies that focused directly on the ultimate targets with those based on intermediate targets (Ml, M2, nominal GNP, the federal funds rate, and the monetary base); (2) to determine whether the choice of an intermediate target more closely related to the ultimate targets was superior to targeting on variables causally further removed; and (3) to evaluate conditional intermediate targeting in which policy settings were revised in light of events affecting the ultimate targets. 36 35. J. H. Kalchbrenner and P. A. Tinsley, "On the Use of Optimal Control in the Design of Monetary Policy," Special Studies Papers 76 (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Studies Section, July 1975), and J. H. Kalchbrenner and P. A. Tinsley, "On the Use of Feedback Control in the Design of Aggregate Monetary Policy,"American Economic Review, vol. 66 (May 1976, Papers and Proceedings, 1975), pp. 349-55. 36. P. Tinsley, and P. von zur Muehlen, "A Maximum Probability Approach to Short-Run Policy, "Journal of Econometrics, vol. 15 (January 1981), pp. 31—48; P. Tinsley and P. von zur Muehlen, "The Reliability of Alternative Intermediate Targets (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Most recently, Anderson and Enzler extended this approach to develop a hierarchical policy reaction function and used stochastic simulation to contrast it to the case of Ml targeting. 37 This study also investigated these types of policies in a forward-looking framework that permits the policy setting in each period to depend on the consequences of the policy as given by deterministic simulations of the model. CHANGES TO THE OF THE MODEL STRUCTURE All macroeconomic models are at best approximations to the true structure of the economy. Exact models cannot be created because of the complexity of the economy. Moreover, empirical methods are limited to estimating behavioral relations based on available data, however imperfect. Although one hopes to model the important features of the economy accurately, the passage of time inevitably reveals the failure of parts of a model's structure to explain adequately economic events. Thus a need to reexamine the structure of a model persists. The process of reexamination has led over time to many modifications of the quarterly model structure. Among the most important changes was the replacement of the original wage equation—which implied a long-run tradeoff between inflation and unemployment—with one in which no such tradeoff existed. 38 The long-run characteristics of the model's supply side also were altered with the inclusion of the average capital-output ratio (and, at a later time, the energy-output ratio) in the productivity equa- Studies Section, November 1983); and P. A. Tinsley and P. von zur Muehlen, "Conditional Intermediate Targetting" (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Studies Section, October 1983). 37. Robert Anderson and Jared Enzler, "Policy Design: Policy Rules That Use Forecasts," in R. Dornbush and S. Fisher, eds., Macroeconomics and Finance: Essays in Honor of Franco Modigliani (Cambridge, Mass., and London: M.I.T. Press, forthcoming). 38. The original wage equation embodying the long-run tradeoff is described in George de Menil and Jared Enzler, "Prices and Wages in the FR-MIT-Penn Econometric Model," in O. Eckstein, ed., The Econometrics of Price Determination (Board of Governors of the Federal Reserve System, 1972), pp. 277-308. Structure and Uses of the MPS Quarterly Econometric tion. The foreign sector of the model was elaborated considerably in the mid-1970s in response to the shift from fixed to floating exchange rates and to the expansion of international trade. As mentioned above, the structure of the model's housing sector has changed from one in which credit rationing and the supply of mortgage funds played an important role to one in which interest rates capture all supply factors. Work is now planned in several areas to improve the current structure of the model. Recently, considerable effort has been devoted to explaining the surprisingly strong growth of Ml since 1985. New equations are anticipated for components of Ml and M2 as well as for the own rates of return on several components. 39 The 39. This research, which is being undertaken by Richard Porter, George Moore, David Small, Jong Park, and Dan Bagatell, is summarized in Richard D. Porter, Paul A. Spindt, and David E. Lindsey, "Econometric Modeling of the Demands for the U.S. Monetary Aggregates: Conventional and Experimental Approaches" (paper presented at the Pacific Basin Central Bank Conference on Economic Modeling, Sydney, Australia, December 1986). Over the years, money demand has proved to be a difficult area to model, and it has been the subject of considerable research by members of the Division of Research and Statistics as well as by other researchers. Previous studies of money demand by division economists include Jared Enzler, Lewis Johnson, and John Model of the United States 109 portfolio equations that determine international capital flows have been another source of problems. These equations do not adequately capture the portfolio shifts and exchange rate movements that have taken place since the early 1980s. Finally, the role of energy in the production technology will be reexamined, given the inconsistency between the estimated price elasticity of the demand for energy and the use of a CobbDouglas production function. Work in this area is likely to affect the labor demand equation, and it may have implications for the specification of the investment equations. • Paulus, "Some Problems of Money Demand," Brookings Papers on Economic Activity, 1:1976, pp. 261-80; Richard D. Porter, Thomas D. Simpson, and Eileen Mauskopf, "Financial Innovation and the Monetary Aggregates,"Brookings Papers on Economic Activity, 1:1979, pp. 213-29; P. A. Tinsley and B. Garrett, with M. E. Friar, "The Measurement of Money Demand," Special Studies Papers 133 (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Special Studies Section, October 1978); Thomas D. Simpson and Richard D. Porter, "Some Issues Involving the Definition and Interpretation of the Monetary Aggregates," in Federal Reserve Bank of Boston, Controlling the Monetary Aggregates III, Conference Series 23 (FRBB, October 1980), pp. 161-234; and Flint Brayton, Terry Farr, and Richard Porter, "Alternative Money Demand Specifications and Recent Growth in M l " (Board of Governors of the Federal Reserve System, Division of Research and Statistics, Econometric and Computer Applications Section, May 1983). 110 Industrial Production Released for publication December 15 125.9 percent of the 1977 average, industrial output in November was less than 1 percent higher than it was a year earlier. In market groups, output of total consumer goods rose 0.7 percent in November—the first gain since July. Autos were assembled at an annual rate of 7.3 million units—the same as October; schedules for output were not met in part because of a strike at a parts manufacturing Industrial production increased an estimated 0.6 percent in November following three months of virtually no change. Gains prevailed in all major market groups except energy materials, which edged down further. Nondurable materials, home goods, defense equipment, and construction supplies continued to show strength. At Ratio scale, 1977 = 100 140 TOTAL INDEX 170 - - _ Products „ — 100 v . Materials I 80 —— ——. SM. •-•.— . / ^ / i i i i MATERIALS i Durable Nondurable 160 I CONSUMER GOODS 140 _ INTERMEDIATE PRODUCTS Business supplies 120 J 100 Construction supplies j 140 i i 240 FINAL PRODUCTS MOTOR VEHICLES AND PARTS 200 120 Defense and space 160 100 Business equipment 140 120 100 60 C o n s u m e r goods 1980 1982 1984 1986 All series are seasonally adjusted. Latest figures: November. 1980 1982 1984 1986 Ill 1977 = 100 1986 Group Oct. Percentage change from preceding month 1986 Nov. Dec. Aug. Sept. Oct. Nov. Percentage change, Nov. 1985 to Nov. 1986 Major market groups Total industrial production Products, total Final products Consumer goods Durable Nondurable Business equipment.. Defense and space Intermediate products.. Construction supplies Materials 125.2 133.8 132.7 124.7 115.9 127.9 139.4 183.6 137.8 125.0 113.3 125.9 .5 .1 .0 .1 .6 .8 134.6 133.5 125.6 116.8 128.8 140.1 184.4 138.4 125.7 113.9 .6 .7 .6 1.7 .3 1.0 .7 .2 -.1 .4 .4 .4 .0 -.5 .1 1.0 .8 .4 -.2 -.1 -.3 1.5 -.9 .1 .6 -.5 -.6 .2 .2 .1 .0 -1.3 .4 .0 .9 .4 .3 -.1 .6 .6 .7 .7 .7 .5 .4 .5 .5 .5 1.3 .3 2.4 1.2 2.8 -.5 4.1 5.0 4.3 .0 .1 -.1 .3 -.7 1.0 .7 .6 .8 -.7 .4 2.1 .3 4.6 -11.9 -.5 -J Major industry groups Manufacturing. Durable Nondurable . Mining Utilities 129.6 127.9 132.0 94.9 110.9 130.5 128.6 133.1 94.2 111.3 .7 1.0 .4 -1.8 1.0 .2 .1 .4 -.7 -1.2 .0 .4 -.5 -1.0 1.3 NOTE. Indexes are seasonally adjusted. plant. Besides another strong increase in production of home goods, output increased in nondurable consumer goods—in particular clothing, food, and other staples. Production of equipment strengthened 0.5 percent in November, with gains in most types of equipment. Nevertheless, production of equipment is below year-earlier levels as a result of weakness earlier this year in output of business equipment and in oil and gas well drilling. In particular, although activity in oil and gas well drilling has improved somewhat in recent months, it is still almost 50 percent lower than it was in November 1985. Production of construction and business supplies expanded further in November, about in line with the pace of the past year. Output of materials also posted a gain in November follow- ing a lackluster performance throughout most of 1986. Sizable increases occurred in both durable and nondurable components, with gains especially strong for nondurable groups such as textile, paper, and chemicals. In industry groups, manufacturing output advanced 0.7 percent in November after little change in recent months. Most durable goods industries, including metals, appliances, lumber, and furniture, increased during November, but total durable manufacturing remained about the same as a year earlier. In contrast, nondurable manufacturing, which also increased in November, is almost 5 percent higher than it was in the same month last year. Utility output rose 0.4 percent in November, but mining activity was reduced further. 112 Announcements HENRY C. WALLICH: RESIGNATION AS A MEMBER OF THE BOARD OF GOVERNORS Henry C. Wallich resigned as a member of the Board of Governors, effective December 15. The text of Governor Wallich's letter of resignation to President Reagan and a Board announcement follow: December 15, 1986 The President The White House Washington, D.C. My dear Mr. President: It is with great sadness that, because of poor health, I submit my resignation as a Member of the Board of Governors of the Federal Reserve System. The resignation is to be effective as of the date of this letter. My association with the Federal Reserve System began over forty years ago when, in 1941,1 joined the staff of the Federal Reserve Bank of New York. After many years at Yale University, I resumed this association when I was appointed a Member of the Board of Governors of the Reserve System. It is an office to which I was proud to be called and in which I have been honored to have served for the past twelve years. Throughout these four decades, the Federal Reserve System has been the cornerstone of our monetary system. I have every confidence that its strength and soundness will continue and I wish it well in the future. Very sincerely yours, Henry C. Wallich On December 15, Henry C. Wallich resigned, after long service as a member of the Board of Governors, due to poor health. Governor Wallich has been the senior member of the Board in terms of service, having joined the Board on March 8, 1974. He was appointed by President Richard Nixon. That appointment came after an already distinguished career as an economist engaged in central banking, teaching, and writing. Educated in Germany, at Oxford University in England, and at Harvard University, Governor Wallich was Professor of Economics at Yale University for 23 years immediately before joining the Board in 1974. He began his career with the Federal Reserve 45 years ago at the Federal Reserve Bank of New York and served as chief of that bank's Foreign Research Division from 1946 to 1951. He took leave from Yale on two occasions, first when he served as Assistant to the Secretary of the Treasury in 1958-59 and later from 1959-61 when he was appointed by President Eisenhower as a member of the President's Council of Economic Advisers. Governor Wallich also served as chief economic consultant to the Treasury Department for a number of years before his appointment to the Federal Reserve Board. Paul A. Volcker, Chairman of the Federal Reserve Board, paid special tribute to Governor Wallich's long service to the Board, to the profession of economics, and to his country. His statement follows: Henry brought unique talents to the Board. He has been widely known throughout his career as a prolific writer, bringing to a large public audience incisive analysis of a variety of economic issues, large and small, in highly readable form. He has a lot to say, and said it exceptionally well in books, in speeches, in magazine columns, and informal commentary. Many fewer were privileged to work with him at the Board table and within the Federal Open Market Committee. Henry is, first of all, an inflation fighter, deeply committed to the need for currency and financial stability. That belief motivated his service on the Board, and he brought to that effort a combination of theoretical insight and practical experience rare in any individual. And all his colleagues came to know him as a man to combine incisiveness and persistence with wit, goodwill, and unfailing courtesy. Throughout his time at the Board, Henry also car- 113 ried particular responsibilities for maintaining and enlarging the international work of the Federal Reserve. It was an area for which he was exceptionally well fitted by training and personal interest. To many abroad, he came to be the personification of the Federal Reserve, and his financial diplomacy stands as a lasting contribution to international monetary cooperation. To all of us at the Board, he has been not only a colleague but a friend. We wish him well in official retirement, while looking forward to further contributions from his vast experience. NEW MEMBERS APPOINTED TO CONSUMER ADVISORY COUNCIL The Federal Reserve Board on December 18, 1986, named seven new members to its Consumer Advisory Council to replace those members whose terms are expiring and designated a new Chairman and Vice Chairman of the Council for 1987. The Consumer Advisory Council was established by the Board in 1976, at the direction of the Congress, to represent the interests of the financial industry and consumers. The Council advises and consults with the Board in the exercise of the Board's functions under the Consumer Credit Protection Act and with regard to other consumer-related matters of interest to the Board. The Council consists of 30 members whose three-year terms are staggered. Mr. Edward N. Lange was designated as Chairman to succeed Ms. Margaret M. Murphy. Mr. Lange is a partner with the law firm of Davis, Wright, Todd, Riese, and Jones in Seattle, Washington. His term on the Council runs through December 1987. Mr. Steven W. Hamm was named to a oneyear term as Vice Chairman to succeed Mr. Lawrence S. Okinaga. Mr. Hamm is the Administrator for the South Carolina Department of Consumer Affairs. He will serve on the Council through December 1988. The seven new members, named for threeyear terms beginning January 1, 1987, are the following: Judith N. Brown, Edina, Minnesota, serves as the National Treasurer of the American Association of Retired Persons (AARP), an organization representing the interests of 24 million older Americans. She is a member of the Ad Hoc Advisory Committee on the Women's Initiative, an advisory group to the National Board of Directors of AARP. She is a licensed investment adviser, and since 1980 has headed her own financial planning firm. Ms. Brown recently co-authored A Second Start: A Widow's Guide to Financial Survival at a Time of Emotional Crisis, published by Simon and Schuster. She currently is on the Board of the Minnesota Women's Network, is a member of the National Business and Professional Women's Council, and serves on the Governor's Appointments Commission. She also is a member of the Board of Governors at Mt. Sinai Hospital. Ms. Brown previously served on the Board of the National Women's Alliance for Professional and Executive Women. Richard B. Doby, Denver, Colorado, is the Bank Commissioner for the state of Colorado and chairs the State Banking Board. He previously spent 12 years as a commercial banker with the United Bank of Denver. Mr. Doby is a member of the Board of Directors of the Conference of State Bank Supervisors. He also serves on the Advisory Board of the Salvation Army. He is a past president of the Colorado Consumer Credit Counseling Service, past chairman of the Colorado Urban League's membership committee, past member of the Board of Directors of the Mile High United Way, and past chairman (appointed by the Governor) of the Colorado Health Facilities Authority. Mr. Doby has been a guest lecturer on banking and economic financial issues at the University of Denver and Colorado University. He has an undergraduate degree in banking and finance and holds a degree from the Graduate School of Banking at the University of Wisconsin. In 1983, Mr. Doby led a delegation of Colorado bankers to Russia and China to study their monetary systems. Richard H. Fink, Washington, D.C., is founder and President of Citizens for a Sound Economy, a 250,000member citizens organization. He also founded and is Chairman of the Center for the Study of Market Processes at George Mason University and is on the Board of Trustees of the Center for the Study of Public Choice, also at George Mason University. Mr. Fink is editor of Supply-Side Economics: A Critical Appraisal and A Nation in Debt: Economists Debate the Federal Budget Deficit. His articles have appeared in numerous newspapers, magazines, and journals, including the American Economic Review. He holds a Master's degree in economics from the University of California, Los Angeles, and is a magna cum laude graduate of Rutgers University. Stephen Gardner, Dallas, Texas, is an Assistant Attorney General of the state of Texas for the Dallas regional office. He is a member of the Council of the Consumer Law Section of the State Bar of Texas and of a Texas State Bar Committee. Mr. Gardner has been active in conducting training conferences for lawyers and non-lawyers in consumer law and trial tactics, and has authored numerous publications on 114 Federal Reserve Bulletin • February 1987 consumer law. He was formerly with the New York State Bureau of Consumer Frauds and Protection and the Legal Aid Society of Central Texas. He also served as the Students' Attorney at the University of Texas at Austin and was a Consumer Law Fellow at the National Consumer Law Center in Boston during 1980. Elena G. Hanggi, Little Rock, Arkansas, is National President of the Association of Community Organizations for Reform Now (ACORN), a community-based organization in 26 states with a membership that exceeds 60,000 low- and moderate-income families. She has been an active participant in local and national discussions pertaining to the credit needs of low- and moderate-income communities. Ms. Hanggi has worked with ACORN chapters around the country regarding efforts to bring about basic banking offerings by financial institutions. She has also consulted with these groups in negotiations with financial institutions concerning compliance with the federal Community Reinvestment Act. Ms. Hanggi is a member of the Coalition of Women's Economic Needs in Arkansas and is on the Board of the Arkansas Peace Center. She also serves on the Board of Directors of a community radio station, KABF, in Little Rock. She holds a B.A. from the University of Arkansas, Little Rock, with a major in English and Sociology and a minor in Urban Affairs, and will graduate in January 1987 from the University of Arkansas Law School. Ramon E. Johnson, Salt Lake City, Utah, is Professor of Finance in the Graduate School of Business at the University of Utah. He also conducts research on a variety of matters concerning finance and business management, including the structure of interest rates. Dr. Johnson has been an administrator at the university, serving six years as Chairman of the Department of Finance and four years as Associate Dean of the Graduate School of Business. He has also served as President of the University of Utah Credit Union. As a Chartered Financial Analyst, Dr. Johnson has consulted with the U.S. Federal Home Loan Bank Board, as well as numerous savings and loan associations, commercial banks, and other corporate organizations in Salt Lake City. In 1981 and 1982, he served on the Mayor's blue ribbon panel to evaluate the financial status of Salt Lake City. Richard L.D. Morse, Manhattan, Kansas, is a Professor of Family Economics at Kansas State University, actively involved in research on consumer credit and consumer savings. He has testified before committees of the U.S. Senate and House of Representatives, and drafted the U.S. Department of Defense's Directive on Consumer Credit. As a member of President Kennedy's Consumer Advisory Council, he developed the concepts of APR (annual percentage rate) and PPR (periodic percentage rate). Dr. Morse has been a consultant to the New York State Banking Department for drafting Truth in Savings regulations, and is frequently quoted in consumer finance articles appearing in national publications. He has written several textbooks and is the author of more than 100 professional articles and publications including Check Your Interest and Cents-ible Interest. The other members of the Council are the following (the date each term expires appears in parentheses): Edwin B. Brooks President Security Federal Savings & Loan Association Richmond, Virginia (December 31, 1988) Jonathan A. Brown Director, BankWatch Washington, D.C. (December 31, 1987) Michael S. Cassidy Senior Vice President, Chase Manhattan Bank New York, New York (December 31, 1988) Theresa Faith Cummings Social Services Consultant Springfield, Illinois (December 31, 1987) Neil J. Fogarty Senior Attorney, Hudson County Legal Services Jersey City, New Jersey (December 31, 1988) Kenneth A. Hall President, Great Southern National Bank Jackson, Mississippi (December 31, 1988) Robert J. Hobbs Senior Attorney, National Consumer Law Center Boston, Massachusetts (December 31, 1988) Robert W. Johnson Professor of Management and Director Credit Research Center, Purdue University West Lafayette, Indiana (December 31, 1988) John M. Kolesar President, Ameritrust Development Bank Cleveland, Ohio (December 31, 1988) Alan B. Lerner Senior Executive Vice President Associates Corporation of North America Dallas, Texas (December 31, 1988) Fred S. McChesney Visiting Fellow of Law and Economics University of Chicago Law School Chicago, Illinois (December 31, 1987) Helen E. Nelson President, Consumer Research Foundation Mill Valley, California (December 31, 1987) Announcements Sandra R. Parker Chairman, Banking Committee Richmond United Neighborhoods Richmond, Virginia (December 31, 1988) Joseph L. Perkowski Chief Executive Officer Minneapolis Federal Employees Credit Union Centerville, Minnesota (December 31, 1987) Brenda L. Schneider Director of Community Relations Manufacturers National Bank Detroit, Michigan (December 31, 1987) 115 At the same time, the Board withdrew its proposal, issued on August 6, to exempt refinancings secured by the consumer's principal dwelling by other than the original creditor. The proposal would have excluded refinancings when (1) no new advances of money are made to the consumer, (2) the annual percentage rate on the new obligation is not subject to increase after consummation and is the same as or lower than the annual percentage rate on the obligation being replaced, and (3) the new transaction does not have a balloon payment feature. Jane Shull Director, Institute for the Study of Civic Values Philadelphia, Pennsylvania (December 31, 1988) Ted L. Spurlock Vice President and Director of Credit and Consumer Banking Services J.C. Penney Company, Inc. Dallas, Texas (December 31, 1987) Mel R. Stiller Executive Director Consumer Credit Counseling Service of Eastern Massachusetts Boston, Massachusetts (December 31, 1987) Christopher J. Sumner President and CEO Western Savings & Loan Company Salt Lake City, Utah (December 31, 1987) Edward J. Williams Senior Vice President, Consumer Banking Group Harris Trust and Savings Bank Chicago, Illinois (December 31, 1988) Michael Zoroya Retail Services Consultant The May Department Stores St. Louis, Missouri (December 31, 1987) CHANGE IN REGULATION Z The Federal Reserve Board issued on December 18, 1986, a final rule that modifies a provision of Regulation Z (Truth in Lending), exempting refinancings by original creditors from the right of rescission. The rule states that if the original creditor finances nonfinance charges such as attorney's fees, title examination fees, and insurance premiums, the right of rescission will not apply. This final rule is effective immediately. PROPOSED ACTIONS The Federal Reserve Board on December 10, 1986, issued for comment a series of proposals to reduce and control the payments system risk faced by the Federal Reserve and individual depository institutions participating in large-dollar wire transfer networks, book-entry transfer systems, and automated clearinghouses (ACHs). These proposals supplement the payment system risk policy announced by the Board on May 17, 1985. The Board also issued for public comment a revised interpretation to its official staff commentary on Regulation Z. The proposed revision to the commentary describes what constitutes a new advance of money in a refinancing that is exempt from the rescission provision. Comment is requested by January 30. The Federal Reserve Board on December 8, 1986, issued a series of questions and answers relating to its ACH proposal that was issued on September 17. The proposal relates to the cost of float generated by ACH transactions processed during the night cycle and a corresponding reduction in the current per-item surcharge assessed on night-cycle ACH transactions. These questions and answers have been developed to aid the public with its comments on the proposal. Comment is requested by December 22. The Federal Reserve Board also requested comment by February 23, 1987, on proposed rulemaking to permit bank holding companies to engage in real estate investment activity within certain limits. 116 Federal Reserve Bulletin • February 1987 CHANGES IN BOARD STAFF The Board of Governors has announced the temporary appointment of Franklin D. Dreyer as Deputy Director in the Division of Banking Supervision and Regulation. The Board announced the retirement of Frederick R. Dahl, Associate Director, Division of Banking Supervision and Regulation, effective December 31, 1986. The Board also announced the retirement of Walter W. Kreimann, Associate Director, Division of Support Services, effective January 2, 1987. Mr. Dreyer is currently Vice President for Supervision and Regulation at the Federal Reserve Bank of Chicago and will be on loan to the Board for one year. Mr. Dreyer began his assignment with the Board on January 5, 1987. SYSTEM MEMBERSHIP: ADMISSION OF STATE BANKS The following bank was admitted to membership in the Federal Reserve System during the period December 1 through December 31, 1986: Illinois Bartonville Bartonville Bank 117 Record of Policy Actions of the Federal Open Market Committee MEETING 1. Domestic HELD ON NOVEMBER Policy 5, 1986 Directive The information reviewed at this meeting suggested that economic activity grew at a moderate rate in the third quarter, after rising only slightly in the previous quarter. Payroll employment expanded somewhat further in September, although manufacturing jobs declined following little change in August. Consumer spending, which had been quite robust in the first half of the year, strengthened further in the third quarter. Business capital spending, however, remained sluggish, reflecting declines in outlays for nonresidential construction; new orders rose in September and equipment spending picked up. Residential construction expenditures advanced further in the third quarter, but housing starts fell in September. Wage increases have continued to moderate, while prices have increased a bit because of developments in food and energy markets. Industrial production rose another 0.1 percent in September. The gain partly reflected a surge in the production of cars and light trucks. Other production was unchanged on balance; production of defense equipment rose, but output of nondefense goods edged down and materials production remained sluggish. Domestic automakers apparently cut back assemblies during October, but still were planning relatively large production for the fourth quarter as a whole. Capacity utilization in manufacturing, mining, and utilities was unchanged in September at 79.2 percent. The utilization rate in mining continued to decline, while the rate in manufacturing edged up, reflecting the pickup in motor vehicle production. Total nonfarm payroll employment grew somewhat further in September. The sluggish pace of industrial production was reflected in a decline in manufacturing jobs that more than offset the increase reported for August. Employment in trade, finance, and services advanced further in September, but at a less rapid rate than in earlier months of the year. The civilian unemployment rate moved back up to 7 percent in September, close to its average level earlier in the year. Total retail sales increased 4.6 percent in September because of a substantial jump in auto sales following the expansion of sales incentive programs by domestic automakers in late August. During September, domestic cars sold at a record 113A million unit annual rate, compared with an average 8 m i l l i o n unit pace in the preceding five months. Light trucks and foreign cars also sold at record monthly rates in September. Outside of the auto group, sales were virtually unchanged from August levels. In the business sector, spending has remained sluggish. Business purchases of motor vehicles were up sharply in the third quarter, but spending for other equipment declined, and outlays for nonresidential structures dropped substantially further. However, new orders for nondefense capital goods rose sharply in September; although aircraft orders accounted for half of the increase, bookings for many other types of equipment also posted sizable gains. For structures, data on new commitments have continued to point to further declines in office building, but the drop in oil- and gas-well drilling appears to have ended. Housing starts have declined since earlier in the year, but residential construction expenditures rose through the summer. Total private housing starts dropped in September to an annual rate of 1.68 million units from a rate of about 1.8 million units during July and August. Single family starts fell somewhat in September, regis- 118 Federal Reserve Bulletin • February 1987 tering the lowest monthly reading since December, but sales of new and existing homes increased during the month. Multifamily housing starts declined further, apparently reflecting in part record high vacancy rates and prospectively diminished rates of return on rental properties as a result of tax reform. Labor cost increases have moderated further over the past year, but price increases have been a bit higher in recent months than earlier in the year due mainly to developments in food and energy markets. Consumer food prices rose sharply during the summer, reflecting in part weather-related disruptions in some supplies. By September conditions had improved, and increases in retail food prices slowed noticeably. In the energy sector, petroleum prices moved up at the wellhead and refinery levels in the September PPI, reflecting the OPEC agreement in early August to curtail production. This increase in crude oil costs apparently has already reached the retail level as gasoline and heating oil prices turned up in the September CPI, after steep declines throughout much of the year. Excluding food and energy, consumer prices have risen recently at about the same pace as earlier in the year. The trade-weighted value of the dollar against major foreign currencies continued to decline for several weeks after the September 23 FOMC meeting, but it subsequently recovered and has risen somewhat on balance. Short-term and longterm interest rate differentials increased a bit during the intermeeting period; foreign rates moved up, particularly at the short end, while rates in the United States eased slightly. Real net exports of goods and services dropped further in the third quarter, mainly reflecting a surge in the volume of oil imports. After the recovery in real economic activity in most major foreign industrial countries in the second quarter, available data for the third quarter indicate further moderate expansion in Germany, France, the United Kingdom, and to a lesser extent in Japan. to 9 percent. Growth in M l over the same period was expected to moderate from the exceptionally large increase during the previous several months. The Committee agreed that the growth in Ml would continue to be evaluated in view of the behavior of the broader aggregates and other factors. The members also decided that slightly greater reserve restraint would, or slightly lesser reserve restraint might, be acceptable depending on the behavior of the monetary aggregates, taking into account the strength of the business expansion, developments in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. The intermeeting range for the federal funds rate was maintained at 4 to 8 percent. M2 and M3 increased at annual rates of 83/4 and V/2 percent respectively, on average over September and October, well below their rates of growth since early spring. Through October, both aggregates were very close to the upper ends of their 6 to 9 percent annual growth ranges established by the Committee for 1986. Growth in Ml still was quite strong over September and October, but down substantially from its average over the previous several months. Adjustment plus seasonal borrowing at the discount window averaged about $325 million in the two complete maintenance periods after the September meeting. Federal funds generally continued to trade close to 57/s percent over the intermeeting period. Most other interest rates eased somewhat on balance, with short-term rates about unchanged to down 15 basis points and long-term rates off as much as 35 basis points. Bond prices increased in the days just before the meeting in part reflecting perceptions of stronger foreign demand for dollar assets, prompted to some extent by the cut in the Japanese discount rate on October 31. In addition, market participants reportedly interpreted the cut in the Japanese rate as giving the Federal Reserve more leeway to ease domestic monetary policy. At its meeting in September, the Committee adopted a directive that called for maintaining the existing degree of pressure on reserve positions. The members expected such an approach to policy to be consistent with growth in M2 and M3 from August to December at annual rates of 7 The staff projections presented at this meeting suggested that real GNP would continue to grow at a moderate rate through the end of 1987. Anticipations of sustained growth in real exports, reflecting the improvement in the price competitiveness of U.S. goods, continued to be a Record of Policy Actions of the FOMC key element supporting the expected expansion in domestic production. Growth in domestic spending was projected to be relatively sluggish over the forecast horizon. The s t a f f s projection for inflation continued to show some step-up early next year associated with the effects of rapidly rising import prices on the prices of U.S. goods and with the turnaround in energy prices. In the Committee's discussion of the economic situation and outlook, the members agreed that incoming data on business activity and reports on specific conditions in many industries were broadly consistent with the staff forecast of continuing expansion at a moderate pace. There were uncertainties nonetheless about the prospective performance of individual sectors of the economy and thus of the economy generally. In the view of most members the risks of a deviation from the staff projection appeared to be evenly balanced, but a few felt the risks were greater in the direction of less growth. As they had at several previous meetings, the members focused on the performance of net exports as a key factor in the outlook for economic activity. The most recent data could be interpreted as suggesting that the trade balance was no longer worsening. However, clear evidence of an actual turnaround in the trade balance had not yet emerged and it was far from certain that there would be significant improvement during the months ahead. Some members reported that a growing number of firms were experiencing increases in orders from abroad, a development that lent support to expectations of a significant pickup in export sales over the next few quarters. To an important degree, the outlook for U.S. exports remained contingent on growing demands from major industrial nations. In that regard it was noted that the evidence was mixed. Domestic expansion—and also the demand for foreign goods—appeared to be strengthening in some major countries, but the outlook was less promising in others. On the import side, members observed that foreign competition remained intense, notably from countries whose exchange rates had not appreciated against the dollar. Nonetheless, there were reports that rising import prices were improving the competitive position of at least some domestic producers. 119 In the Committee's review of the outlook for spending by domestic sectors of the economy, the members generally expected demand to continue to increase, but at a slower pace than in recent quarters. Individual members again highlighted the uneven conditions in different industries and parts of the country. One member commented that the complex tax reform legislation constituted a major source of uncertainty. The members agreed that total consumer spending would tend to be held down in the current quarter by reduced purchases of automobiles following the bulge associated with attractive incentive programs. One member observed, however, that some offsetting expenditures on high-priced items might be induced before yearend because the deductibility of sales taxes in computing personal income taxes would be terminated starting in 1987. On the negative side, one member suggested that the adjustment in automobile sales might take longer than many observers currently expected and also stressed that consumer debt burdens were an important inhibiting factor on spending. In the area of business investment, members noted that construction activity would probably be held down by relatively high vacancy rates in office buildings, multifamily housing, and other commercial facilities such as hotels, especially in the context of the reportedly adverse impact of the tax reform legislation on such investments. Members also referred to a number of plant closings in the manufacturing sector. On the other hand, some current economic indicators pointed to a strengthening in the demand for business equipment. One member also commented that the prospects for improvement in the nation's balance of trade, if realized, would require more investment in domestic productive facilities over time. In regard to agriculture current conditions were mixed, but one member indicated that the overall situation in that industry and also in energy no longer appeared to be worsening and accordingly those key sectors of the economy had probably ceased to exert a negative influence on general economic activity. Likewise, the outlook for reduced government deficits, including surpluses for state and local governments, and the apparently favorable prospects for foreign trade implied a reduction in major structural 120 Federal Reserve Bulletin • February 1987 imbalances and an improved basis for sustained economic expansion. With regard to the outlook for inflation, the members agreed that the lagged impacts of the dollar's depreciation along with developments in energy markets were likely to contribute to somewhat faster price increases during the year ahead. Many domestic businesses reportedly continued to look for competitive opportunities to raise prices and widen profit margins. One member observed that a potential inflation risk, and one for business activity generally, would be the emergence of new protectionist measures in response to unsatisfactory progress in reducing the nation's trade deficit. On the favorable side, wages generally appeared to be continuing to rise more slowly than earlier and businesses were continuing to devote considerable attention to paring costs and improving their productivity. Some food prices might also tend to decline following increases in recent months. More generally, the prospect that capacity utilization rates were likely to remain relatively low in most industries over the year ahead implied that inflationary pressures would be muted during that period. At its meeting in July the Committee reviewed the basic policy objectives that it had established in February for growth of the monetary and credit aggregates in 1986 and it set tentative objectives for expansion in 1987. For the period from the fourth quarter of 1985 to the fourth quarter of 1986, the Committee reaffirmed the ranges established in February for growth of 6 to 9 percent for both M2 and M3. The associated range for expansion in total domestic nonfinancial debt also was reaffirmed at 8 to 11 percent for the current year. With respect to M l , the Committee decided that growth in excess of the 3 to 8 percent range set in February would be acceptable and that such growth would be evaluated in relation to the velocity of M l , the expansion of the broader aggregates, developments in the economy and financial markets, and price pressures. For 1987 the Committee agreed on tentative monetary growth objectives that included reductions of Vi percentage point to ranges of 5Yi to 8V2 percent for both M2 and M3. In the case of M l the Committee expressed the preliminary view that retaining the 1986 range of 3 to 8 percent, which implied a considerable reduction from the likely rate of growth in 1986, appeared appropriate for 1987 in the light of most historical experience. The Committee also retained the range of 8 to 11 percent for growth of total domestic nonfinancial debt in 1987. It was understood that all the ranges were provisional and that, notably in the case of M l , they would be reviewed in early 1987 against the background of intervening developments. The Committee's discussion of policy implementation for the weeks immediately ahead reflected the sense that the economy was continuing to expand at a moderate rate and that, while price pressures could be strengthening somewhat in response to higher import prices, those price increases should be well contained. Externally, some signs of greater stability seemed to be emerging in exchange markets. In those circumstances, all of the members indicated that they were in favor of continuing to direct open market operations toward maintaining unchanged conditions of reserve availability. That conclusion was also warranted by indications that monetary growth had moderated somewhat over September and October, and an expectation that the broad aggregates might stay close to the Committee's earlier expectations for growth near the upper ends of their long-term ranges in the closing months of the year, assuming no significant changes in reserve conditions and in shortterm interest rates. In the Committee's discussion of possible intermeeting adjustments in the degree of reserve pressure, the members suggested that developments calling for more than a slight change in reserve conditions would be unlikely during the weeks ahead. Although a few members felt that policy implementation should remain especially alert to the potential need for some easing of reserve conditions, notably the need to respond to emerging indications, if any, of relatively weak business activity, most felt that there should be no presumptions about the likely direction of any small intermeeting adjustments, should they be desirable. With respect to the monetary aggregates, some members commented that a shortfall from current expectations would be a welcome development, given the rapid growth earlier in the year, and within limits Record of Policy Actions of the FOMC a shortfall should be tolerated provided it occurred in the context of satisfactory economic performance and did not appear to be associated with upward pressures on market interest rates. One member commented, however, that a sharp and abrupt slowdown in M l growth might well signal a weaker economy and, depending on the circumstances, might require more than a slight adjustment in policy implementation. At the conclusion of the Committee's discussion, all of the members indicated that they favored a directive that called for no change in the current degree of pressure on reserve positions. The members expected this approach to policy implementation to be consistent with growth of M2 and M3 at annual rates of 7 to 9 percent over the fourth quarter from a September base. Over the same period, growth in Ml was expected to moderate from its exceptional pace during most of the period since early spring. Because the behavior of Ml remained subject to unusual uncertainty, the Committee decided to continue its recent practice of not specifying a rate of expected growth for purposes of short-run policy implementation but to evaluate this aggregate in the light of the performance of the broader monetary aggregates and other factors. The members indicated that slightly greater or slightly lesser reserve pressures might be acceptable over the intermeeting period depending on the behavior of the monetary aggregates, taking into account the strength of the business expansion, the performance of the dollar in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. The members agreed that the intermeeting range for the federal funds rate, which provides a mechanism for initiating consultation of the Committee when its boundaries are persistently exceeded, should be left unchanged at 4 to 8 percent. 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 indicates that economic activity grew at a moderate pace in the third quarter. In September total nonfarm payroll employment grew somewhat further, although employment in manufacturing fell after changing little in August. The civilian unemployment rate moved back 121 up to 7.0 percent in September, close to its average level earlier in the year. Industrial production rose slightly further in September and posted a moderate gain over the third quarter. Consumer spending has remained strong in recent months, with gains in retail sales in August and especially in September paced by a sharp rise in auto sales. Housing starts fell in September, but residential investment increased further in the third quarter as a whole. Business capital spending appears to have remained sluggish; equipment spending picked up in the third quarter and new orders were strong in September, but outlays for nonresidential construction continued to decline. Real net exports of goods and services dropped further in the third quarter, reflecting in large part a surge in the volume of oil imports. Increases in labor compensation have slowed over the course of the year, while broad measures of prices have firmed somewhat recently due to developments in food and energy markets. Growth of M2 moderated further in September, but appears to have picked up in October, while growth of M3 has tended to slow. Expansion of these two aggregates for the year through September has been at the upper end of their respective ranges established by the Committee for 1986. Growth of Ml slowed in the September-October period from the very rapid pace experienced since early spring. Expansion in total domestic nonfinancial debt remains appreciably above the Committee's monitoring range for 1986. Most interest rates have declined somewhat since the September 23 meeting of the Committee. Although the trade-weighted value of the dollar against major foreign currencies continued to decline for several weeks after the September meeting, it subsequently recovered and has risen somewhat on balance. The Federal Open Market Committee seeks monetary and financial conditions that will foster reasonable 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 agreed at the July meeting to reaffirm the ranges established in February for growth of 6 to 9 percent for both M2 and M3, measured from the fourth quarter of 1985 to the fourth quarter of 1986. With respect to Ml, the Committee recognized that, based on the experience of recent years, the behavior of that aggregate is subject to substantial uncertainties in relation to economic activity and prices, depending among other things on the responsiveness of Ml growth to changes in interest rates. In light of these uncertainties and of the substantial decline in velocity in the first half of the year, the Committee decided that growth of Ml in excess of the previously established 3 to 8 percent range for 1986 would be acceptable. Acceptable growth of Ml over the remainder of the year will depend on the behavior of velocity, growth in the other monetary aggregates, developments in the economy and financial markets, and price pressures. Given its rapid growth in the early part of the year, the Committee recognized that the 122 Federal Reserve Bulletin • February 1987 increase in total domestic nonfinancial debt in 1986 may exceed its monitoring range of 8 to 11 percent, but felt an increase in that range would provide an inappropriate benchmark for evaluating longer-term trends in that aggregate. For 1987 the Committee agreed on tentative ranges of monetary growth, measured from the fourth quarter of 1986 to the fourth quarter of 1987, of 5>/2 to 8!/2 percent for M2 and M3. While a range of 3 to 8 percent for Ml in 1987 would appear appropriate in the light of most historical experience, the Committee recognized that the exceptional uncertainties surrounding the behavior of Ml velocity over the more recent period would require careful appraisal of the target range at the beginning of 1987. The associated range for growth in total domestic nonfinancial debt was provisionally set at 8 to 11 percent for 1987. In the implementation of policy for the immediate future, the Committee seeks to maintain the existing degree of pressure on reserve positions. This action is expected to be consistent with growth in M2 and M3 over the period from September to December at annual rates of 7 to 9 percent. While growth in Ml over the same period is expected to moderate from its exceptional pace during the previous several months, growth in this aggregate will continue to be judged in the light of the behavior of M2 and M3 and other factors. Slightly greater reserve restraint or slightly lesser reserve restraint might be acceptable depending on the behavior of the aggregates, taking into account the strength of the business expansion, developments in foreign exchange markets, progress against inflation, and conditions in domestic and international credit markets. 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 4 to 8 percent. Votes for this action: Messrs. Volcker, Corrigan, Angell, Guffey, Heller, Mrs. Horn, Messrs. Johnson, Melzer, Morris, Rice, and Ms. Seger. Votes against this action: None. Absent and not voting: Mr. Wallich. 2. Authorization Operations for Domestic Open Market Effective December 3, 1986, the Committee approved a temporary increase of $1 billion, to $7 billion, in the limit between Committee meetings on changes in System Account holdings of U.S. government and federal agency securities specified in paragraph 1(a) of the authorization for domestic open market operations. The increase was effective for the intermeeting period ending with the close of business on December 16, 1986. Votes for this action: Messrs. Volcker, Corrigan, Angell, Guffey, Heller, Mrs. Horn, Messrs. Johnson, Melzer, Morris, Rice, and Ms. Seger. Votes against this action: None. Absent and not voting: Mr. Wallich. This action was taken on the recommendation of the Manager for Domestic Operations. The Manager had advised that outright purchases of securities in the intermeeting interval through December 1, 1986, had reduced the leeway under the usual $6 billion limit to about $3.5 billion. Additional purchases of securities in excess of that leeway likely would be necessary over the remainder of the intermeeting period, chiefly reflecting seasonal increases in currency in circulation and required reserves. 123 Legal Developments AMENDMENT TO REGULATION Z The Board of Governors is amending 12 C.F.R. Part 226, its Regulation Z, by issuing a final rule modifying the existing provision that exempts original creditors from providing the right of rescission in certain refinancings secured by the consumer's principal dwelling. The regulation provides that the right of rescission will not apply if the original creditor finances nonfinance charges such as attorney's fees, title examination fees, and insurance premiums. Effective December 16, 1986, but reliance optional until October 1, 1987, the Board amends 12 C.F.R. Part 226 as follows: Part 226—Truth In Lending 1. The authority citation for 12 C.F.R. Part 226 continues to read as follows: Authority: 15 U.S.C. § 1601 et seq. 2. Part 226 is amended by revising section 226.23(f)(2) to read as follows: Supervision and Regulation with the concurrence of the Board's General Counsel, and to the Reserve Banks with the concurrence of the Director of the Division of Banking Supervision and Regulation and the Board's General Counsel, authority to waive the publication and solicitation of public comment requirements of the Change in Bank Control Act, 12 U.S.C. § 1817(j), as amended by the Anti-Drug Abuse Act of 1986, No. 99-750 (October 27, 1986), where it is determined in writing that such disclosure or solicitation would seriously threaten the safety or soundness of a bank. The Board has delegated similar authority to waive, dispense with or modify the procedural requirements, including publication requirements, of the Bank Holding Company Act, 12 U.S.C. § 1841 etseq., where expeditious action is required. 12 C.F.R. §§ 262.3(k)(l) and 265.2(c)(30). Effective December 15, 1986, the Board amends 12 C.F.R. Part 265 as follows: Part 265—Rules Regarding Authority Delegation of 1. The authority citation for 12 C.F.R. Part 265 continues to read as follows: Section 226.23—Right of Rescission Authority: Sec. 11, 38 Stat. 261 and 80 Stat. 1314; 12 U.S.C. 248. (f) Exempt transactions. 2. Part 265 is amended by adding new paragraphs 265.2(c)(35) and 265.2(f)(48) to read as follows: (2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation. AMENDMENT TO RULES REGARDING DELEGATION OF AUTHORITY The Board of Governors is amending 12 C.F.R. Part 265, its Rules Regarding Delegation of Authority, to delegate to the Director of the Division of Banking Section 265.2—Specific Functions Delegated to Board Employees and to Federal Reserve Banks (c)(35) Under section 1817(j)(2) of the Change in Bank Control Act (12 U.S.C. 18170)), and with the concurrence of the Board's General Counsel, to waive, dispense with, modify, or excuse the failure to comply with the requirement for publication and solicitation of public comment regarding a notice filed under the Change in Bank Control Act provided that a written finding is made that such disclosure or solicitation would seriously threaten the safety or soundness of a bank holding company or bank. 124 Federal Reserve Bulletin • February 1987 j|c sjc % * (f)(48) Under section 18170X2) of the Change in Bank Control Act (12 U.S.C. 1817(j)) and with the concurrence of the Board's Director of Banking Supervision and Regulation and the Board's General Counsel or their designees, to waive, dispense with, modify, or excuse the failure to comply with the requirement for publication and solicitation of public comment regarding a notice filed under the Change in Bank Control Act provided that a written finding is made that such disclosure or solicitation would seriously threaten the safety or soundness of a bank holding company or bank. ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT, BANK MERGER ACT, BANK SERVICE CORPORATION ACT, AND FEDERAL RESERVE ACT Orders Issued Under Section 3 of the Bank Holding Company Act Banc One Corporation Columbus, Ohio American Fletcher Corporation Indianapolis, Indiana Order Approving Acquisition of a Bank Holding Company Banc One Corporation, Columbus, Ohio, a bank holding company within the meaning of the Bank Holding Company Act (12 U.S.C. § 1841 et seq.) ("Act" or "BHC Act"), has applied for the Board's approval under sections 3 and 4 of the Act (12 U.S.C. §§ 1842 and 1843) to acquire American Fletcher Corporation, Indianapolis, Indiana ("AFC"), also a bank holding company. As a result of this acquisition, Applicant would acquire indirectly AFC's five banking and four nonbanking subsidiaries.1 On the basis of the record, the application under section 3 of the Act is approved for the reasons set forth in the Board's Statement, which will be released at a later date. 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 1. Applicant's proposed acquisition of AFC's nonbanking subsidiaries under section 4 of the Act will be considered separately by the Board. the Federal Reserve Bank of Cleveland, acting pursuant to delegated authority. By order of the Board of Governors, effective December 23, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governor Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board STATEMENT BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM REGARDING THE APPLICATION OF BANC ONE CORPORATION TO ACQUIRE AMERICAN FLETCHER CORPORATION By Order dated December 23, 1986, the Board approved the application of Banc One Corporation, Columbus, Ohio, to acquire American Fletcher Corporation, Indianapolis, Indiana ("AFC"), pursuant to section 3(a)(3) of the Bank Holding Company Act ("BHC Act" or "Act"). 12 U.S.C. § 1842(a)(3). In this Statement, the Board sets forth its reasons for approving the application. Applicant, with assets of $11.2 billion, is the largest commercial banking organization in Ohio. Its 22 Ohio subsidiary banks control deposits of approximately $8.8 billion, representing 13.4 percent of the total deposits in commercial banks in Ohio.1 AFC (assets of $4.4 billion) is the second largest commercial banking organization in Indiana. Its five subsidiary banks control deposits of approximately $3.0 billion, representing 7.4 percent of the total deposits in commercial banks in Indiana. AFC controls nonbank subsidiaries engaged in mortgage banking, consumer finance and reinsurance activities and also engages in certain insurance agency activities.2 Section 3(d) of the Act (12 U.S.C. § 1843(d)) 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 such bank is located, by language to that effect and not merely by implication." 1. Banking data are as of June 30, 1986. Applicant also controls banking subsidiaries in Indiana, Michigan and Kentucky. 2. Applicant's proposed acquisition of AFC's nonbanking subsidiaries under section 4 of the Act will be considered separately by the Board. 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 on the date on which the company became a bank holding company, whichever is later. Applicant's home state is Ohio. Legal Developments The Board previously has concluded that Indiana has by statute expressly authorized an Ohio bank holding company, such as Applicant, to acquire an Indiana bank or bank holding company, such as AFC, subject to approval from the Indiana state banking commissioner. Banc One Corporation, 7 2 F E D E R A L R E S E R V E B U L L E T I N 4 2 2 ( 1 9 8 6 ) . By letter dated December 4, 1986, the Director of the Indiana Department of Financial Institutions stated, pursuant to section 2 8 - 2 - 1 5 - 1 7 of the Indiana Code, that the statute laws of Indiana and Ohio are reciprocal and specifically authorize this interstate acquisition. Accordingly, the Board concludes that approval of Applicant's proposal to acquire indirectly AFC's banks in Indiana is not barred by the Douglas Amendment. AFC's bank subsidiaries operate in four Indiana banking markets.4 Applicant operates five subsidiary banks in Indiana and is the seventh largest commercial banking organization in the state, controlling approximately 2.2 percent of statewide commercial bank deposits. None of Applicant's Indiana banks operates in those banking markets in which AFC competes. Accordingly, consummation of the proposed acquisition would have no adverse effects on existing competition in any relevant market. The Board also has considered the effects of the proposed acquisition on probable future competition in Ohio, Indiana, Michigan and Kentucky. In view of the existence of numerous other potential entrants from states within the interstate banking regions into each of the markets served by AFC or Applicant, the Board has concluded that consummation of the proposed transaction would not have any significant adverse effects on probable future competition in any relevant market. The financial and managerial resources of Applicant, AFC, and their subsidiary banks are considered satisfactory and consistent with approval. In considering the convenience and needs of the communities to be served, the Board also has taken into account the records of Applicant and AFC under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). 5 The Board has received comments from five organizations (collectively, "Protestants") 6 regarding the performance of two of Applicant's subsidiary banks, Bank One, Columbus, N.A., Columbus, 4. These markets are the Indianapolis, Elkhart-Niles-South Bend, and the Bluffton and Jay Counties, Indiana, banking markets. 5. The CRA requires the Board, in its evaluation of a bank holding company application, to assess the record of an applicant in meeting the credit needs of the entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation. 6. The commenting organizations are: The Main Street Business Association ("MSBA"); The Committee for Economic Justice ("CFEJ"); and The CRA Task Force ("CRA Task Force"), all of Columbus, Ohio; The Indianapolis Reinvestment Alliance, Indianapolis, Indiana ("IRA"); and The Northwest Indiana Open Housing Center, Gary, Indiana ("NWIOHC"). 125 Ohio ("Columbus Bank") and Bank One, Merriville, N.A., Merriville, Indiana ("Merriville Bank") and of AFC's lead bank subsidiary, American Fletcher National Bank & Trust Company, Indianapolis, Indiana ("Indianapolis Bank"). The Protestants have alleged that Columbus Bank, Merriville Bank, and Indianapolis Bank failed to adequately meet the credit needs of their respective communities, particularly with respect to individuals residing in low-income and minority neighborhoods.7 In an attempt to resolve differences among the individual parties, Applicant met privately with individual protestants on various occasions and also participated in joint meetings with representatives of the Federal Reserve Bank of Cleveland, the Financial Institutions Department, State of Indiana, and the individual community groups. Applicant reached agreement with two of the five organizations and has narrowed, but not entirely resolved, its differences with the remaining community groups. The Board has carefully reviewed the records of Applicant and AFC in meeting the convenience and needs of all segments of their communities. Initially, the Board notes that Applicant's and AFC's subsidiary banks have achieved a satisfactory overall CRA rating based upon the most recent compliance examinations conducted by the Office of the Comptroller of the Currency.8 In addition, the Board has considered that Applicant has adopted the following corporate policies on behalf of its existing and future bank subsidiaries in order to enhance the provision of services to their local communities. Applicant has committed to: (1) Adopt expanded guidelines for CRA programs at subsidiary banks, including ascertainment of community credit needs and the use of such information by Applicant product development personnel; (2) Develop marketing plans designed to increase loan penetration in low- and moderate-income neighborhoods; (3) Develop a regularly scheduled program designed to assure the adequate provision of information to subsidiary bank personnel regarding CRA require- 7. The Protestants generally allege that Applicant and AFC bank subsidiaries have had inadequate real estate lending records in minority/low-income neighborhoods, particularly in the Columbus community; that Applicant's efforts to ascertain community credit needs have been inadequate; that Applicant's credit practices have been discriminatory with respect to individuals residing in and/or companies located in low-income neighborhoods; and that Applicant's marketing effort to make members of the community aware of the credit services offered and provided by Applicant has been ineffective. 8. While Columbus Bank's record of mortgage lending to its community declined during 1985, Applicant attributes this trend to a decrease in mortgage lending generally, and not only with respect to minority and low-income areas. Applicant also states that it is now committed to undertake an active mortgage lending program generally within these sectors of the Columbus community. 126 Federal Reserve Bulletin • February 1987 ments and the 12 assessment factors of the Board's Regulation BB; (4) Develop programs to train personnel to utilize more effectively programs for community and economic development; and (5) Establish and maintain an officer-level CRA committee reporting directly to Applicant's Board of Directors, in order to monitor and evaluate subsidiary bank CRA compliance. In order to increase its service to low- and moderate-income sectors of the Columbus community, Applicant has established goals, consistent with prudent banking practices, for residential, small business and home improvement lending totaling $50 million over five years. Applicant further has pledged to increase market penetration in low- and moderate-income neighborhoods through targeted advertising in neighborhood newspapers, creation of a neighborhood services guide, and development of a marketing plan directed to such neighborhoods. Applicant also has agreed to provide written reports to the community groups regarding Columbus Bank's home mortgage and small business lending activity in minority and low-income areas.9 Applicant has agreed to assist in the capitalization and funding of a community development corporation ("CDC") in Columbus to purchase, rehabilitate and sell homes and businesses in designated low- and moderate-income areas, at lower effective interest rates, and to participate in other local community economic revitalization programs. Applicant further has agreed to establish a loan review board, comprised of local small business representatives, representatives of community groups, and Columbus Bank loan officers, in order to investigate and review denied loan applications. As a result of these commitments and programs, Applicant has reached an agreement with the MSBA in Columbus, which has withdrawn its protest to the acquisition. Another protest group in Columbus, the CRA Task Force, indicates its general acceptance of Applicant's CRA pledges and commitments, but claims that Applicant can only achieve such goals by providing interest rate incentives to credit recipients. Applicant states that its revised CRA programs and 9. Applicant also has pledged to adopt more flexible lending criteria, including the financing of loan points and closing costs (consistent with prudent lending practices), the consideration of all sources of family income, and allowing lower down payments and long term financing. Applicant also has agreed to participate in public/ private consortia designed to stimulate rehabilitation of homes and businesses and to lower effective interest rates in residential and commercial areas. commitments outlined above as well as its enhanced relationship with neighborhood groups will enable Applicant to meet its improved lending objectives without the provision of below-market rates of interest. The Board previously has determined that neither the CRA nor the BHC Act requires it to establish the terms and conditions upon which lending activities must be conducted to meet community needs.10 Accordingly, the Board declines to require Applicant to provide extensions of credit at below-market rates of interest, as urged by the CRA Task Force. With respect to Merriville Bank's service to the Gary community, Applicant has committed to adopt programs substantially similar to those proposed in Columbus, including specific monetary goals over the next five years for residential, home improvement and small business lending in low-income and minority census tracts. In reliance on this commitment, the NWIOHC also has withdrawn its protest. Upon acquisition of the Indianapolis Bank, Applicant has committed to implement in Indianapolis the general CRA programs outlined above for the Columbus and Gary communities, including targeted advertising, increased financing flexibility, and active cooperation with local CDCs. Applicant also will conduct an immediate inquiry to ascertain the credit needs of the low-income and minority neighborhoods served by the Indianapolis Bank. Where appropriate, Applicant has agreed to establish in Indianapolis programs substantially identical to those proposed in Columbus, including targeted monetary goals for residential, home improvement and small business lending. Applicant further has committed to implement its own branch closing procedures by providing advance notice to customers of a proposed closing, by consulting with the community regarding the restoration of a branch to efficient operation, and by offering assistance to customers in finding alternative sources of credit.11 Finally, Applicant will provide the Federal Reserve Bank of Cleveland with regular written reports detailing the progress of Applicant's subsidiary banks in implementing the proposed programs to assess and serve the credit needs of their respective communities and in fulfilling the commitments made in connection with this application. Accordingly, based upon all of the evidence, including the programs and measures that Applicant has 10. Hibernia Corporation, 72 FEDERAL RESERVE BULLETIN 656, 658 (1986); Commerce Bancshares, Inc., 64 FEDERAL RESERVE BULLETIN 5 7 6 , 5 7 9 ( 1 9 7 8 ) . 11. In addition, after Applicant gains control of AFC's mortgage banking subsidiary, it will gather and report loan origination data by census tract as if the mortgage company were a bank. Legal Developments proposed in order to enhance its service to the convenience and needs of its communities, including lowand moderate-income segments of the communities, and the additional monitoring of Applicant's programs by the Federal Reserve Bank of Cleveland, the Board concludes that convenience and needs considerations are consistent with approval of this application.12 Based on the foregoing and other facts of record, the Board has determined that consummation of the proposed acquisition would be in the public interest and that the application should be approved.13 Accordingly, the application is approved for the reasons summarized above. December 31, 1986. JAMES M C A F E E [SEAL] Associate Secretary of the Board First Bancshares of Valley City, Inc. Valley City, North Dakota Order Approving the Acquisition of a Bank First Bancshares of Valley City, Inc., Valley City, North Dakota, has applied for Board approval under 12. Certain Protestants also have requested that the Board order a public meeting or hearing to receive public testimony on the issues presented by these applications. Although section 3(b) of the Act does not require a formal hearing in this instance, the Board may, in any case, order a formal or informal hearing. 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. In light of these facts, the proposals by Applicant to expand its services, and other facts of record, the Board has determined that a hearing would serve no useful purpose. Accordingly, the Protestants' request for a public hearing is hereby denied. The Protestants' request for a public meeting is denied for the same reason. 13. The American Council of Life Insurance, the American Insurance Association, the National Association of Independent Insurers, and the Alliance of American Insurers submitted comments protesting Board approval of this application on the grounds that the general insurance agency activities conducted by a department of AFC's subsidiary bank, Union Bank and Trust Company, Franklin, Indiana ("Franklin Bank"), are prohibited under the amendments to section 4 of the BHC Act contained in the 1982 Garn-St Germain Depository Institutions Act. The Independent Insurance Agents of America Inc., the National Association of Casualty and Surety Agents, and the National Association of Surety Bond Producers filed additional comments raising substantially the same arguments. In response to these protests, Applicant has agreed that Franklin Bank will divest or terminate its general insurance agency activities within two years of consummation of the acquisition, unless during such period Applicant receives approval pursuant to an application under section 4(c)(8) of the BHC Act to retain such activities. During this two-year period or unless authorization is granted pursuant to the BHC Act for broader activities, Applicant will limit the insurance agency activities of Franklin Bank to the renewal of existing policies and those creditrelated insurance agency activities permitted under section 4(c)(8)(A) of the BHC Act. The Board believes that Applicant's divestiture commitments adequately address the issues raised by these protestants. 127 section 3 of the Bank Holding Company Act of 1956, as amended ("Act") (12 U.S.C. §§ 1841 et seq.), to acquire voting shares of First National Bank of Valley City, Valley City, North Dakota ("Bank"), and thereby become a bank holding company. Notice of the application, affording an opportunity for interested persons to submit comments, has been given in accordance with section 3(b) of the Act. 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 (12 U.S.C. § 1842(c)). Applicant is a non-operating corporation formed for the purpose of acquiring Bank. Bank is the 20th largest banking organization in the state,1 with total domestic deposits of $45.8 million, representing 0.8 percent of total deposits in commercial banking organizations in the state. Consummation of this proposal would not result in the concentration of banking resources or in any significant adverse competitive effects in the state. Bank operates in the Jamestown market,2 where it is the fourth largest commercial banking organization, controlling 8.2 percent of total deposits in commercial banking organizations in the state. None of the principals of Applicant or Bank is associated with any other financial institutions located within the relevant banking market. Accordingly, consummation of this transaction would not result in the concentration of banking resources or in any significant adverse competitive effects in the relevant geographic area. Thus, competitive factors are consistent with approval. The Board has indicated on previous occasions that a bank holding company should serve as a source of financial and managerial strength to its subsidiary banks, and that the Board would closely examine the condition of an applicant in each case with this consideration in mind.3 This application represents the first of a number of proposals involving the divestiture by First Bank System, Inc., a large regional bank holding company, of small, rural banks to individuals or small bank holding companies. Under these circumstances, the Board is particularly concerned with the financial 1. Deposit data are as of June 30, 1985. 2. The Jamestown market is comprised of the counties of Eddy, Foster, Stutsman, Lamoure, and Barnes, and parts of Steel and Griggs counties, North Dakota. 3. The Bank Holding Company Act requires that before an organization is permitted to become a bank holding company and thus obtain the benefits associated with the holding company structure, it must secure the Board's approval. Section 3(c) of the Act provides that the Board must, in every case, consider, among other things, the financial and managerial resources of both the applicant company and the bank to be acquired. The Board's action in this case is based on a consideration of such factors. 128 Federal Reserve Bulletin • February 1987 strength and future prospects of the banks to be divested, in part because of the uncertainty associated with a change in ownership from a large regional banking organization to individuals or bank holding companies with substantially fewer resources to support the banks. These concerns are mitigated in this case by several factors. First, the proposal has been strengthened by the contribution of additional equity capital to Applicant by Applicant's principals. Second, First Bank System, Inc. has improved Bank's overall asset quality by purchasing a large portion of Bank's nonperforming and classified loans. Third, First Bank System, Inc. has agreed to retain an investment, in the form of a capital note, in Applicant until Applicant's initial leverage is reduced. This investment will not entail any debt service burden on Applicant or Bank and will be available to support Applicant's capital structure. Fourth, although Applicant will incur a certain amount of debt in connection with the proposed transaction, it appears that Applicant will have sufficient flexibility to retire the debt without adversely affecting the capital position of Bank, particularly in light of the foregoing considerations. All of these factors are designed to strengthen the acquiring organization and to facilitate the transfer of Bank to new ownership, thus ensuring that Bank will be financially protected following divestiture. In light of these and other facts of record, the Board concludes that the financial and managerial resources and future prospects of Applicant and Bank are consistent with approval of the application. Although Applicant does not anticipate any immediate changes in the services offered by Bank, considerations relating to the convenience and needs of the community to be served are also consistent with approval of the application. Based on the foregoing and other facts of record, the Board has determined that the application should be, and hereby is, approved. The acquisition 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 Minneapolis, acting pursuant to delegated authority. By order of the Board of Governors, effective December 8, 1986. First Chicago Corporation Chicago, Illinois American National Corporation Chicago, Illinois Order Approving Acquisition of a Bank First Chicago Corporation, Chicago, Illinois, and its wholly owned subsidiary, American National Corporation, Chicago, Illinois (together "Applicants"), both bank holding companies within the meaning of the Bank Holding Company Act of 1956, as amended (the "BHC Act") (12 U.S.C. § 1841 et seq.), have each applied for the Board's prior approval under section 3(a)(3) of the BHC Act (12 U.S.C. § 1842(a)(3)) to acquire all of the outstanding voting shares of Bank of Lansing, Lansing, Illinois ("Lansing Bank"). Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with section 3(b) of the BHC Act. 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 comprise the largest commercial banking organization in Illinois, with five banks holding total deposits of $14.4 billion, representing 14 percent of the total deposits in commercial banks in the state.1 Lansing Bank is the 150th largest commercial banking organization in Illinois, with total deposits of $102 million, representing 0.1 percent of the total deposits in commercial banks in the state. Upon consummation of the proposal, Applicants would remain the largest commercial banking organization in Illinois, with total deposits of $14.5 billion, representing 14.1 percent of the total deposits in commercial banks in the state. Consummation of the proposal would not result in a significant increase in the concentration of banking resources in Illinois. Applicants are the largest of 234 commercial banking organizations in the Chicago banking market,2 controlling 21.6 percent of the total deposits in commercial banks therein. Lansing Bank also competes in the Chicago banking market, where it is the 97th largest commercial banking organization, controlling 0.2 percent of the total deposits in commercial banks. Upon consummation of the proposal, Applicants would remain the largest commercial banking organi- Voting for this action: Chairman Volcker and Governors Seger, Angell, and Heller. Absent and not voting: Governors Johnson, Wallich, and Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. All banking data are as of December 31, 1985. 2. The Chicago banking market is approximated by Cook, DuPage and Lake Counties, all in Illinois. Legal Developments zation in the market, controlling 21.8 percent of the total deposits in commercial banks. The Chicago banking market is not highly concentrated, with the four largest commercial banking organizations holding 51.7 percent of the total deposits in commercial banks and a Herfindahl-Hirschman Index ("HHI") of 818 points. Upon consummation of the proposal, the four-firm concentration ratio would increase by 0.2 percent to 51.9 percent and the HHI would increase by 9 points to 827 points. Based upon these facts, the Board has determined that consummation of the proposal would not have any significant adverse competitive effects in any relevant banking market. In its evaluation of Applicants' managerial resources, the Board has considered certain violations by Applicants' subsidiary banks, First National Bank of Chicago, Chicago, Illinois ("First Bank"), and American National Bank and Trust Company of Chicago, Chicago, Illinois ("American Bank"), of the Currency and Foreign Transactions Reporting Act ("CFTRA") and the regulations thereunder.3 The Board notes that First Bank and American Bank have consulted with and cooperated with the appropriate supervisory authorities and law enforcement agencies following discovery of the violations. In addition, First Bank and American Bank have filed corrective currency transaction reports and implemented comprehensive remedial programs to prevent further violations of the CFTRA, including: 1. Appointment of senior officials as compliance officers responsible for compliance by the banks with the CFTRA; 2. Institution of intensive training and periodic retraining for bank personnel in the requirements of the CFTRA; 3. Preparation of extensive and comprehensive manuals and policy statements so that bank personnel are aware of the requirements of the CFTRA and the procedures implemented by the banks to insure that all covered transactions are reported and that all currency transaction forms are properly completed; 4. Institution of review procedures, including review by senior bank officials, to insure that exemptions are properly granted, that exemption limits on currency transactions are appropriate, and that the exempt status of customers and exemption limits are periodically reviewed regarding whether such status and limits continue to be appropriate; 5. Institution of review procedures, including review by computer programs, to insure that all covered transactions are captured and reported; and 3. 31 U.S.C. § 5311 et seq.; 31 U . S . C . § 103. 129 6. Expanded internal audits of their CFTRA programs to insure compliance with the CFTRA. The sufficiency of the remedial programs has been reviewed by the Office of the Comptroller of the Currency. The Board has also consulted with appropriate enforcement agencies and has considered Applicants' past record of compliance with the law. For the foregoing reasons and based on all of the facts of record, the Board has determined that the managerial resources of Applicants are consistent with approval of the proposal. The financial resources and future prospects of Applicants and Lansing Bank are consistent with approval of the proposal. Considerations relating to the convenience and needs of the communities to be served are also consistent with approval of the proposal. Based on the foregoing and all of the facts of record, the Board has determined that approval of the transaction is consistent with the public interest, and 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 the latter period is extended for good cause by the Board, or by the Federal Reserve Bank of Chicago, acting pursuant to delegated authority. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES M C A F E E [SEAL] Associate Secretary of the Board James Madison Limited Washington, D.C. Order Approving Acquisition of a Bank James Madison Limited, Washington, D. C., a bank holding company within the meaning of the Bank Holding Company Act (12 U.S.C § 1841 et seq.) ("Act"), has applied for the Board's approval under section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to acquire the successor by merger to First Continental Bank of Maryland, Silver Spring, Maryland ("Bank"). Notice of the application, affording an opportunity for interested persons to submit comments, has been given in accordance with section 3 of the Act. The time 130 Federal Reserve Bulletin • February 1987 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. Applicant, a one-bank holding company, is the seventh largest commercial banking organization in the District of Columbia ("District"). Applicant controls total domestic deposits of $475.2 million, representing 3.5 percent of the total deposits in commercial banks in the District. Bank is the 52nd largest commercial banking organization in Maryland, controlling total domestic deposits of $28.5 million, representing 0.1 percent of the total deposits in commercial banks in Maryland.1 Section 3(d) of the Act (12 U.S.C. § 1842(d)), 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,2 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." The statute laws of Maryland authorize the acquisition of a bank or bank holding company in Maryland by a bank holding company located in another state in a defined southeastern region, including the District, if the laws of that state permit Maryland bank holding companies to acquire banks and bank holding companies in that state.3 The District has enacted a similar regional interstate banking statute, which permits the acquisition of a District bank holding company or bank by a bank holding company located in Maryland.4 The District statute appears to satisfy the requirements of Maryland Fin. Inst. Code § 5-1003. Based on the foregoing, the Board has determined that the proposed acquisition is specifically authorized by the statute laws of Maryland and is thus permissible under 1. Deposit data are as of December 31, 1985, and include Applicant's recent acquisition of UNB Bancshares, Washington, D.C., and Applicant's proposed acquisition of the successor by merger to The McLean Bank, McLean, Virginia, approved by the Board on November 3, 1986. 2. 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. Applicant's home state is the District of Columbia. 3. Md. Fin. Inst. Code Ann. § 5-1001 et seq. (Supp. 1985). The states in the region defined by Maryland law include, through June 30, 1987, Maryland, Delaware, Virginia, West Virginia, and the District of Columbia; and, on or after July 1, 1987, Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and the District of Columbia. 4. D.C. Code Ann. § 26-801 et seq. (Supp. 1986), as amended by the District of Columbia Regional Interstate Banking Act of 1985 Amendments Act of 1985, D. C. Law 6-276. the Douglas Amendment, subject to Applicant's receipt of the approval of the Maryland Commissioner of Banking pursuant to Maryland Fin. Inst. Code § 5-1003. The Board's Order is specifically conditioned upon satisfaction of the state regulatory approval requirement. Applicant's subsidiary bank competes with Bank in the Washington, D.C., banking market.5 Applicant is the 14th largest of 70 commercial banking organizations in the Washington, D.C., market, and controls deposits of $417.6 million, representing 1.9 percent of the total deposits in commercial banks therein.6 Bank is the 54th largest commercial banking organization in the market, controlling domestic deposits of $19.5 million, representing less than 0.1 percent of the total deposits in commercial banks in the market. Upon acquisition of Bank, Applicant would become the 11th largest commercial banking organization in the Washington, D.C., market and would control 2.0 percent of the total deposits in commercial banks in the market. The Washington, D.C., banking market is unconcentrated, and would remain unconcentrated after consummation of the proposed acquisition. The share of deposits held by the four largest commercial banking organizations in the market is 50.4 percent and the Herfindahl-Hirschman Index ("HHI") for the market is 817.7 Moreover, a large number of commercial banking organizations would remain in the Washington, D.C., market after the proposed acquisition. On the basis of these and all other facts of record, the Board concludes that consummation of the acquisition would not have a significant adverse effect on existing competition in the Washington, D.C., market. In view of the existence of numerous other potential entrants into the relevant banking market, the Board has concluded that consummation of the proposed transaction would not have any significant adverse effects on probable future competition in any relevant market. The financial and managerial resources and future prospects of Applicant, Bank, and their respective subsidiaries are consistent with approval of the application. Considerations relating to the convenience and needs of the communities to be served are also consistent with approval. 5. The Washington, D. C., banking market is defined as the Washington, D. C., Ranally Metropolitan Area, which comprises the District of Columbia and the surrounding suburban areas of Maryland and Virginia. 6. Market data are as of June 30, 1985. 7. Consummation of the proposed transaction would increase the market's HHI by 0.4 points. Thus, the transaction is not likely to be challenged by the Department of Justice under its merger guidelines, 49 Federal Register 26,823 (1984). Legal Developments Based on the foregoing and other facts of record, the Board has determined that this application should be, and hereby is, approved, subject to the express condition that Applicant obtain the approval of the Maryland Commissioner of Banking pursuant to section 5-1003 of the Maryland Financial Institutions Code. The acquisition of Bank shall not be consummated before the thirtieth calendar day following the effective date of the Order, or later than three months after the effective date of the 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 December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES MCAFEE [SEAL] Associate Secretary of the Board Mid AmeriBancorp, Inc. Chicago, Illinois Order Denying Formation of a Bank Holding Company Mid AmeriBancorp, Inc., Chicago, Illinois, has applied for the Board's approval pursuant to section 3(a)(1) of the Bank Holding Company Act (12 U.S.C. § 1842(a)(1)) ("Act") to become a bank holding company by acquiring 42.6 percent of the voting shares of Mid-America National Bank of Chicago, Chicago, Illinois ("Bank"). Notice of the application, affording interested persons an opportunity to submit comments, has been given in accordance with section 3(b) of the Act. 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. Applicant is a nonoperating corporation formed for the purpose of becoming a bank holding company by acquiring Bank. Bank is the 541st largest commercial banking organization in Illinois, controlling deposits of $39.2 million representing less than 0.1 percent of the total deposits in commercial banking organizations in the state.1 Consummation of this acquisition would not 131 result in a significant increase in the concentration of banking resources in Illinois. Bank operates in the Chicago metropolitan banking market,2 where it is the 265th largest commercial banking organization, controlling 0.1 percent of the total deposits in commercial banks therein. Applicant's principal is also a principal of three banks and/ or their respective bank holding companies in the Chicago metropolitan banking market. Together these institutions would rank as the 59th largest commercial banking organization in the Chicago metropolitan banking market and would control 0.3 percent of the deposits in commercial banking organizations in the Chicago metropolitan banking market. Consummation of this proposal is not likely to have a significant adverse effect upon competition in the Chicago banking market. The Board has indicated on previous occasions that a bank holding company should serve as a source of financial and managerial strength to its subsidiary bank, and that the Board would closely examine the condition of an applicant in each case with this consideration in mind. In this regard, the Board has cautioned against the assumption of substantial amounts of debt by a bank holding company because the Board was concerned that the bank holding company would no longer have the financial flexibility to meet unexpected problems of its subsidiary bank or would be forced to place substantial demands on its subsidiary bank to meet its debt servicing requirements. In connection with this proposal, Applicant would incur a sizeable amount of debt and would be dependent upon the earnings of Bank to service the debt. Bank has experienced declining earnings in recent years and, using projections based on Bank's past performance, it does not appear that Applicant would have sufficient financial flexibility to service its debt while maintaining adequate capital levels at Bank. In addition, Applicant would be an owner of less than a majority interest in Bank and would not be in a position to control the operations of bank and therefore improve its earnings prospects.3 Accordingly, based on these and other facts of record, the Board concludes that considerations relating to Applicant's financial resources and future prospects are adverse and weigh against approval of this application. Applicant has proposed no new services for Bank upon consummation of this proposal. Thus, considerations relating to the convenience and needs of the 2. The Chicago banking market is approximated by Cook, Lake and DuPage Counties, Illinois. 3 . See 1. All banking data are as of December 31, 1985. Lloyds ( 1 9 8 6 ) a n d NBC Bank Co., Pic, 7 2 F E D E R A L RESERVE B U L L E T I N 841 6 0 F E D E R A L RESERVE B U L L E T I N 7 8 2 ( 1 9 7 4 ) . 132 Federal Reserve Bulletin • February 1987 community to be served are consistent with, but lend no weight toward, approval of this application. On the basis of all the facts of record, the Board concludes that the banking considerations involved in this proposal are adverse and are not outweighed by any relevant competitive or convenience and needs considerations. Accordingly, it is the Board's judgment that approval of the application would not be in the public interest and that the application should be, and hereby is, denied for the reasons summarized above. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES MCAFEE [SEAL] Associate Secretary of the Board Minnwest, Inc. Minnetonka, Minnesota Order Approving Formation of Bank Holding Company Minnwest, Inc., Minnetonka, Minnesota, has applied for the Board's approval under section 3(a)(1) of the Bank Holding Company Act of 1956, as amended ("BHC Act") (12 U.S.C. § 1842(a)(1)), to become a bank holding company by acquiring 100 percent of the voting shares of each of the following de novo Minnesota banks: Minnwest Bank Dawson, Dawson; Minnwest Bank Luverne, Luverne; Minnwest Bank Montevideo, Montevideo; and Minnwest Bank Ortonville, Ortonville (collectively, "Banks"). Each of these banks is being formed to purchase certain assets and assume certain liabilities of each of the following existing Minnesota banks, respectively: Norwest Bank Dawson, Dawson; Norwest Bank Luverne, Luverne; Norwest Bank Montevideo, Montevideo; and Norwest Bank Ortonville, Ortonville. Notice of the application, affording opportunity for interested persons to submit comments, has been given in accordance with section 3(b) of the BHC Act (51 Federal Register 31,370 (1986)). 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 (12 U.S.C. § 1842(c)). Applicant is a non-operating corporation formed for the purpose of acquiring Banks. Norwest Bank Dawson is the 162nd largest commercial banking organiza tion in Minnesota, with total deposits of $28.8 million, representing .08 percent of total deposits in commercial banks in the state.1 Norwest Bank Luverne is the 140th largest commercial banking organization in Minnesota, with total deposits of $31.4 million, representing .09 percent of total deposits in commercial banks in the state. Norwest Bank Montevideo is the 95th largest commercial banking organization in Minnesota, with total deposits of $38.4 million, representing .11 percent of total deposits in commercial banks in the state. Norwest Bank Ortonville is the 190th largest commercial banking organization in Minnesota, with total deposits of $25.5 million, representing .07 percent of total deposits in commercial banks in the state. Upon consummation, Applicant would become the 16th largest bank holding company in Minnesota, and would control approximately .35 percent of deposits in commercial banks in the state. Consummation of this proposal would not result in the concentration of banking resources or in any significant adverse competitive effects in Minnesota. Further, since Applicant does not have a presence in any of the relevant banking markets, consummation of this transaction would not result in the concentration of banking resources or in any significant adverse competitive effects in any relevant geographic area. Thus, competitive factors are consistent with approval. The Board has indicated on previous occasions that a bank holding company should serve as a source of financial and managerial strength to its subsidiary banks, and that the Board would closely examine the condition of an applicant in each case with this consideration in mind.2 This application represents the divestiture by Norwest Corporation, a large regional bank holding company, of small, rural banks to individuals or small bank holding companies. Under these circumstances, the Board is particularly concerned with the financial strength and future prospects of the banks to be divested, in part because of the uncertainty associated with a change in ownership from a large regional banking organization to individuals or bank holding companies with substantially fewer resources to support the banks. These concerns are mitigated in this case by several factors. First, a significant portion of the purchase 1. Banking data are as of June 30, 1985. 2. The Bank Holding Company Act requires that before an organization is permitted to become a bank holding company and thus obtain the benefits associated with the holding company structure, it must secure the Board's approval. Section 3(c) of the Act provides that the Board must, in every case, consider, among other things, the financial and managerial resources of both the applicant company and the bank to be acquired. The Board's action in this case is based on a consideration of such factors. Legal Developments price will be funded by capital provided by the principals of Applicant, and consequently, Applicant will not be highly leveraged. Second, Norwest has agreed to retain an investment, in the form of a capital note, in Applicant and Banks until Applicant's initial leverage is reduced. This investment will not entail any debt service burden on Applicant or Banks, will be available to support Applicant's capital structure, and will convert into common stock under certain circumstances. Third, although Applicant will incur a certain amount of debt in connection with the proposed transaction, it appears that Applicant will have sufficient flexibility to retire the debt without adversely affecting the capital position of Banks, particularly in light of the foregoing considerations. In addition, in contemplation of this transaction, Norwest has significantly strengthened the loan-loss reserves at each of the Banks. All of these factors are designed to strengthen the acquiring organization and to facilitate the transfer of Banks to new ownership, thus ensuring that Banks will be financially protected following divestiture. In light of these and other facts of record, the financial and managerial resources and future prospects of Applicant and Banks are consistent with approval of the proposal. Considerations relating to the convenience and needs of the community to be served are also consistent with approval of the proposal. Based on the foregoing and all the facts of record, the Board has determined that the application should be and hereby is 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 by the Board or by the Federal Reserve Bank of Minneapolis acting pursuant to delegated authority. By order of the Board of Governors, effective December 18, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governor Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board Northern Trust Corporation Chicago, Illinois Order Approving Acquisition of a Bank Holding Company and a Bank Northern Trust Corporation, Chicago, Illinois, a bank holding company within the meaning of the Bank 133 Holding Company Act (12 U.S.C. § 1841 et seq. ("BHC Act")), has applied for the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire First Lake Forest Corporation, Lake Forest, Illinois ("FLFC"), and thereby indirectly acquire The First National Bank of Lake Bluff, Lake Bluff, Illinois; The First National Bank of Lake Forest, Lake Forest, Illinois; and Lake Forest National Bank, Lake Forest, Illinois (collectively, "Illinois Banks"). Applicant has also filed an application under section 3 of the BHC Act to acquire Northern Trust Bank of Arizona, N.A., Phoenix, Arizona ("Arizona Bank"), 1 the successor by merger of The Northern Trust Company of Arizona and Phoenix National Bank, both of Phoenix, Arizona. Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with section 3(b) of the BHC Act. 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)). Applicant, the fourth largest commercial banking organization in Illinois, controls five subsidiary banks in Illinois with total deposits of $3.6 billion, representing 3.5 percent of total deposits in commercial banks in the state.2 FLFC is the fortieth largest commercial banking organization in the state, controlling three subsidiary banks with total deposits of $336.7 million, representing 0.3 percent of total deposits in commercial banking organizations in the state. Upon consummation of the proposed transaction, Applicant would remain the fourth largest commercial banking organization in the state, with total deposits of $3.9 billion, representing 3.8 percent of total deposits in commercial banking organizations in the state. Consummation of this proposal would not have a significant effect upon the concentration of banking resources in Illinois. Applicant and FLFC both compete in the Chicago banking market.3 Applicant is the fourth largest of 387 commercial banking organizations in the market, with five bank subsidiaries controlling 5.4 percent of total deposits in commercial banking organizations in the market. FLFC is the 29th largest commercial banking 1. In a related application, Nortrust of Arizona Holding Corporation ("NAHC"), Applicant's wholly owned subsidiary, has applied under section 3(a)(1) of the BHC Act (12 U.S.C. § 1842(a)(1), for approval to become a bank holding company through its acquisition of Arizona Bank. NAHC has no significance except as a means to facilitate Applicant's acquisition of Arizona Bank. 2. All banking data are as of December 31, 1985. In addition, Applicant controls four subsidiary banks in Florida. 3. The Chicago banking market is approximated by Cook, Lake and DuPage Counties, all in Illinois. 134 Federal Reserve Bulletin • February 1987 organization in the market with three bank subsidiaries controlling 0.5 percent of total deposits in commercial banking organizations in the market. Upon consummation of this proposal, Applicant would remain the fourth largest commercial banking organization in the market, controlling 5.9 percent of total deposits in commercial banking organizations in the market. The Chicago banking market is considered unconcentrated, with the four largest commercial banking organizations controlling 46.7 percent of the deposits in commercial banking organizations in the market. The Herfindahl-Hirschman Index ("HHI") for the market is 711 and would increase by only 5 points to 716 upon consummation of the proposal.4 Although consummation of the proposal would eliminate some existing competition between Applicant and FLFC in the Chicago banking market, numerous other commercial banking organizations would remain as competitors in the market upon consummation. Based upon the above considerations, the Board concludes that consummation of the proposal is not likely to substantially lessen competition in the Chicago banking market. Regarding Applicant's proposed acquisition of Arizona Bank, section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), the Douglas Amendment, prohibits the Board from approving an application by a bank holding company to acquire a bank located outside the 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." The statute laws of Arizona authorize an out-of-state bank holding company, with the approval of the Arizona Superintendent of Banks, to acquire an Arizona bank that had applied to operate in Arizona before May 31, 1984.5 The Arizona Superintendent of Banks has informed the Board that the proposal does not present any of the grounds for denial of the application under Arizona Revised Statutes § 6-326 and that the Superintendent anticipates approving the proposal. Based on the foregoing, the Board has determined that the proposed acquisition is specifically authorized by the statute laws of Arizona and is thus permissible under the Douglas Amendment, subject to Applicant's obtaining the approval of the Superintendent pursuant to section 4. Consummation of the proposed transaction would increase the market's HHI by only a slight amount. The market is considered unconcentrated under the Department of Justice Merger Guidelines, 49 Federal Register 26,823 (1984), and the increase in the HHI resulting from the transaction is not within the parameters the Department of Justice has stated are likely to result in its challenging the transaction. 5. Arizona Revised Statutes §§ 6-322 and 6-323 (effective October 1, 1986). 6-322 of Arizona Revised Statutes. The Board's Order is specifically conditioned upon satisfaction of the state regulatory approval requirement. Applicant does not provide banking services in the Phoenix banking market, where Phoenix National Bank now competes, or elsewhere in Arizona.6 Applicant's indirect Arizona subsidiary, Northern Trust Company of Arizona, Phoenix, Arizona, has operated only as a trust company.7 The Arizona interstate banking statute permits banking organizations from any state to enter Arizona, and, accordingly, there are numerous potential entrants into the state and into the Phoenix market in which Phoenix National Bank now competes. Based on the foregoing, the Board concludes that the proposal would not have any adverse effects on the concentration of banking resources in any relevant area, and that the proposal would not result in the elimination of substantial existing or probable future competition in any relevant market. Thus, the competitive effects of the proposal are consistent with approval. In its evaluation of Applicant's managerial resources, the Board has considered certain violations by two of Applicant's subsidiary banks, one of FLFC's subsidiary banks, and Phoenix National Bank of the Currency and Foreign Transactions Reporting Act ("CFTRA") and the regulations thereunder.8 With regard to the CFTRA violations, the Board notes that Applicant brought violations of its lead bank to the attention of the appropriate supervisory authorities after the violations were discovered through its internal audit and has cooperated with law enforcement agencies. Applicant has undertaken a comprehensive corporate-wide remedial program to correct the violations at both banks and to prevent violations from occurring in the future in any of its subsidiary banks. Applicant has advised the Board that it has filed corrective currency transaction reports and established a central control unit which has day-to-day responsibility for monitoring all reportable transactions and ensuring that reports are properly filed. Applicant has increased the scope and frequency of its audits of the compliance of its subsidiary banks with the CFTRA. Applicant has also instituted an intensive internal training program for bank personnel regarding compliance with the CFTRA. The sufficiency of the compliance procedures adopted to address Applicant's subsidiary banks' CFTRA 6. The Phoenix banking market is approximated by the Phoenix, Arizona RMA. 7. As of June 30, 1986, Northern Trust Company of Arizona, Phoenix, Arizona, administered $1.1 billion in trust assets. 8. 31 U.S.C. § 5311, et seq.\31 C.F.R. § 103. Legal Developments violations has been reviewed by examiners from the Office of the Comptroller of the Currency and the Federal Reserve System. The Board also has consulted with appropriate enforcement agencies, and has considered Applicant's past record of compliance with the law. In addition, Applicant has committed to implement its compliance program at the subsidiary banks of FLFC and NAHC within 30 days of consummation and to undertake a compliance review at those banks within 120 days of consummation. Based upon a review of all of the facts of record, the Board concludes that the financial and managerial resources and future prospects of Applicant, FLFC, NAHC, and their respective subsidiary banks and Arizona Bank are consistent with approval of these transactions. Considerations relating to the convenience and needs of the communities to be served also are consistent with approval of these transactions. Based on the foregoing and other facts of record, the Board has determined that the applications should be, and hereby are, approved, subject to the express condition that with regard to the Arizona acquisition, Applicant obtain the approval of the Arizona Superintendent of Banks pursuant to section 6-322 of the Arizona Revised Statutes. The transactions 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 Chicago, acting pursuant to delegated authority. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. 135 Bank is a state-chartered mutual savings and loan association, the accounts of which are insured by the Federal Savings and Loan Insurance Corporation ("FSLIC"). Bank has adopted a conversion plan by which it will convert to a state-chartered mutual savings bank insured by the Federal Deposit Insurance Corporation ("FDIC"), and will then convert to a state-chartered stock savings bank.1 The Board has previously determined that a statechartered savings bank is a "bank" under section 2(c) of the Act if it accepts demand deposits, engages in the business of making commercial loans, and is not covered by the exemption created by the Garn-St Germain Depository Institutions Act of 1982 ("GarnSt Germain Act") for thrift institutions insured by the FSLIC.2 Bank accepts demand deposits and engages in the business of making commercial loans, and its deposits will not be insured by the FSLIC. Accordingly, Bank is a "bank" for purposes of the Act, and Applicant has applied to acquire Bank under section 3 of the Act, which governs the acquisition of banks by bank holding companies. Section 3(d) of the Act (12 U.S.C. § 1842(d)), the Douglas Amendment, prohibits the Board from approving the 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 such bank is located, by language to that effect and not merely by implication." The statute laws of Connecticut authorize the acquisition of a Connecticut bank by a bank holding company located in a state in the New England region,4 if that state has enacted legislation that permits the acquisition of a bank located in that state by a Connecticut bank holding company.5 Maine has enacted a statute that permits the acquisition of a Maine bank by JAMES MCAFEE Associate Secretary of the Board [SEAL] STATEMENT FEDERAL RESERVE APPLICATION BANK OF BY BOARD OF GOVERNORS SYSTEM OF THE REGARDING OF THE ONE BANCORP TO THE ACQUIRE HARTFORD 1. In connection with the proposed acquisition, a newly chartered Connecticut stock savings bank, all of the shares of which are owned by Applicant and which has been formed solely to facilitate the acquisition, will be merged with and into Bank subsequent to Bank's conversion to a state-chartered stock savings bank and all of the shares of the interim bank will be automatically converted into the shares of Bank. 2 . The By Order dated November 7, 1986, the Board approved the application of The One Bancorp, Portland, Maine, under section 3(a)(3) of the Bank Holding Company Act ("Act"), to acquire the successor by merger to Bank of Hartford, Inc., Hartford, Connecticut ("Bank"). In this Statement, the Board sets forth its reasons for approving this application. First NH One Banks, Bancorp, Inc., 7 0 F E D E R A L RESERVE B U L L E T I N 3 5 9 ( 1 9 8 4 ) ; 6 9 F E D E R A L RESERVE B U L L E T I N 8 7 4 ( 1 9 8 3 ) . 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. Applicant's home state is Maine. 4. Connecticut's regional interstate banking statute defines states in the New England region to include Maine, Massachusetts, New Hampshire, Rhode Island and Vermont, in addition to Connecticut. Conn. G ,n. Stat. Ann. § 36-552 (West 1986). 5. Conn. Gen. Stat. Ann. § 36-553 (West 1986). 136 Federal Reserve Bulletin • February 1987 a bank holding company located in any state.6 In this regard, the Connecticut Banking Commissioner has informed the Board that the proposed transaction appears to satisfy the requirements of Connecticut law regarding regional interstate banking acquisitions in Connecticut. Based on the foregoing, the Board has determined that the proposed acquisition is specifically authorized by the statute laws of Connecticut and is thus permissible under the Douglas Amendment, subject to Applicant's obtaining the approval of the Connecticut Banking Commissioner pursuant to Conn. Gen. Stat. Ann. § 36-553. The Board's Order is specifically conditioned upon satisfaction of the state regulatory approval requirement. Applicant is the second largest depository institution among commercial banks and thrift institutions in Maine, with deposits of approximately $935 million, representing 10.7 percent of the total deposits in commercial banks and thrift institutions in the state. Bank is the 42d largest depository institution among commercial banks and thrift institutions in Connecticut, with deposits of approximately $209 million, representing 0.4 percent of the total deposits in commercial banks and thrift institutions in the state.7 Since Applicant's subsidiary bank does not operate in Connecticut, and Bank does not operate in Maine, consummation of the proposed acquisition would have no effect on existing competition in any Connecticut or Maine market. In view of the existence of numerous other potential entrants into each of the markets served by Batnk or Applicant, the Board has concluded that consummation of the proposed transaction would not have any significant adverse effects on probable future competition in any relevant market. The financial and managerial resources and future prospects of Applicant and its subsidiaries and Bank are consistent with approval of the application. Considerations relating to the convenience and needs of the communities to be served are also consistent with approval. The Board notes that this application involves the acquisition of a bank that results from a conversion of a nonfailing FSLIC-insured savings and loan association. The acquisition proposed here, however, does not fall within the scope of the Board's policy and rulings regarding acquisitions of thrift institutions under section 4 of the Act8 or the provisions of the GarnSt Germain Act regarding acquisitions of thrift institutions. The Garn-St Germain Act does not treat savings 6. Me. Rev. Stat. Ann. tit. 9-B, § 1013 sub. 2 (as amended, February 7, 1984). 7. Banking data are as of December 31, 1985. 8 . D.H. Baldwin Company, (1977). 6 3 F E D E R A L RESERVE B U L L E T I N 2 8 0 banks like Bank as "thrift institutions" subject to the detailed provisions of that Act relating to acquisitions of thrift institutions, but rather treats them as "banks" under the Act, provided that they accept demand deposits and engage in commercial lending, as Bank does. Under this proposal, Applicant will acquire and operate Bank as a "bank" subject to all the banking standards of the Bank Holding Company Act, including the Douglas Amendment. As noted above, the proposal is consistent with those banking standards. The Board notes that the Federal Home Loan Bank Board ("FHLBB") has promulgated a regulation that requires prior FHLBB approval for transfers of assets by insured institutions, whether by statutory conversion, merger, or consolidation.9 In addition, the FHLBB has issued a letter to Bank stating that institutions, like Bank, that voluntarily terminate FSLIC insurance of accounts must pay a final insurance premium in an amount twice that of its last annual premium pursuant to the National Housing Act, 12 U.S.C. § 1730.10 The Board expects that Applicant will comply with all state and federal requirements necessary for consummation of the acquisition, and the Board's approval of this application under the Act is not intended to preempt any such requirements.11 The Board has previously stated that its approval of transactions under section 3 of the Act does not relieve an applicant or the bank involved of the responsibility to obtain approval under other federal or state laws and regulations and does not shield an applicant from the consequences of violations of other laws.12 Based on the foregoing and other facts of record, the Board has determined that the application should be approved. Accordingly, the application is approved for the reasons summarized above. December 31, 1986 JAMES M C A F E E Associate Secretary of the Board [SEAL] 9. 12 C.F.R. § 563.22(b). The Board notes that the promulgation of this FHLBB regulation has been challenged in litigation brought by Barnett Banks of Florida against the FHLBB. United First Federal Savings and Loan Association, et al., v. Federal Home Loan Bank Board, No. 86-661-Civ-J-16 (Order denying Defendant's motion to dismiss Plaintiff's complaint and granting Plaintiff's motion for preliminary injunction, M.D. Florida, Jacksonville Div., December 19, 1986). The FHLBB has appealed from the district court decision and moved to expedite the appeal. 10. See Letter of September 22, 1986, from Julie L. Williams, Deputy General Counsel, Federal Home Loan Bank Board, to H. Langedon Bell, Jr., Chairman and President, The Bank of Hartford, Inc. 11. The Board may not approve an application that would result in a violation of federal or state law. Whitney National Bank v. Bank of New Orleans, 379 U.S. 411 (1964). 12. Crocker National Corporation, TIN 66 (1979); Royal Trust Company, 18,415 (1972). 6 6 F E D E R A L RESERVE B U L L E - 37 Federal Register 18,414, Legal Developments SafraCorp Miami, Florida Order Approving Acquisition of a Bank SafraCorp, Miami, Florida, a bank holding company within the meaning of the Bank Holding Company Act (12 U.S.C. § 1841 et seq.) ("Act") has applied for the Board's approval under section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to acquire all of the voting shares of Colonial Savings Bank, N.A., Ocala, Florida ("Bank"). Notice of the application, affording opportunity for interested persons to submit comments, has been given in accordance with section 3(b) of the Act (51 Federal Register 37,237 (1986)). 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 (12 U.S.C. § 1842(c)). Applicant is the 18th largest commercial banking organization in Florida, with total deposits of $169 million, representing less than one percent of the total deposits in commercial banking organizations in the state.1 Bank is among the smaller commercial banking organizations in Florida, with total deposits of $14 million, also representing less than one percent of the total deposits in commercial banking organizations in the state. Consummation of this proposal would not result in a significant increase in the concentration of banking resources in Florida. Bank operates in the Marion County banking market,2 a market where Applicant does not operate. Based on all the facts of record, consummation of the proposed transaction would not result in any significant adverse effects on existing or potential competition or increase the concentration of banking resources in any relevant area. The financial and managerial resources and future prospects of Applicant and its subsidiary banks and of Bank are considered satisfactory and consistent with approval. Considerations related to the convenience and needs of the communities to be served 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. This approval is subject to Applicant's compliance with all state and federal requirements necessary for consummation of the acquisition. The transaction shall not be consummated 1. Banking data are as of December 31, 1985. 2. The Marion County banking market is approximated by Marion County, Florida. 137 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 Atlanta, acting pursuant to delegated authority. By order of the Board of Governors, effective December 23, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governor Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board Orders Issued Under Section 4 of the Bank Holding Company Act BankEast Corporation Manchester, New Hampshire Order Approving the Acquisition of a Discount Broker BankEast Corporation, Manchester, New Hampshire, a bank holding company within the meaning of the Bank Holding Company Act ("Act"), 12 U.S.C. §§ 1841-48, has applied for the Board's approval under section 4(c)(8) of the 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 all of the voting shares of Royal/Grimm & Davis, Inc., New York, New York ("Company"), a discount broker. The Board has previously determined that discount brokerage is closely related to banking and permissible for bank holding companies. 12 C.F.R. § 225.25(b)(15). Notice of the application, affording interested persons an opportunity to submit comments, has been duly published. 51 Federal Register 26,058 (1986). 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 Act. Applicant, with consolidated assets of $953 million,1 is the fourth largest commercial banking organization in New Hampshire. Applicant's subsidiary banks have deposits of $737 million, representing 9.1 percent of all deposits in commercial banks in the state. In addition, Applicant engages in mortgage lending, trust, and other activities through nonbank subsidiaries. 1. All data are as of June 30, 1986. 138 Federal Reserve Bulletin • February 1987 Company, with assets of $399,070, provides discount brokerage services from a single office in New York City. Under Applicant's proposal, Company's brokerage activities would be limited to buying and selling securities solely upon the order and for the account of its customers, and would not include underwriting, dealing, investment advice, or research services. The market for discount brokerage services is nationwide and unconcentrated. Because Applicant does not currently provide such services, the proposed acquisition would not eliminate any existing competition. The acquisition could make Company a stronger competitor by enabling it to raise capital at a lower cost and by giving it access to Applicant's marketing, managerial, financial, and technical resources. In view of the large number of prospective providers of discount brokerage services, the acquisition would have no significant adverse effect on probable future competition. The Board accordingly concludes that competitive factors lend weight toward approval of the application. Company's president and chief executive officer, Mr. Jay V. Grimm ("Protestant"), has protested the proposed acquisition, asserting that it would violate his contractual rights to manage Company and thus expose Applicant to litigation and possible liability; would cause Company to lose money and could result in the loss of valuable employees and customers; and would yield no offsetting public benefits. He also asserts that Applicant has exercised control over Company without the prior approval required under section 4(c)(8) of the Act. Having reviewed Protestant's arguments, the Board concludes that they do not warrant denial of the application. In light of the entire record, the Board concludes that Applicant has the financial and managerial resources to handle any foreseeable problems associated with the proposed acquisition or with Protestant's contractual claims. The Board also finds that Applicant has not exercised control over Company. Accordingly, the Board concludes that financial and managerial considerations are consistent with approval of the application.2 There is no evidence of record indicating that the proposed acquisition would result in conflicts of interest, undue concentration of resources, unsound banking practices, or other adverse effects. 2. Protestant's request for a formal hearing was untimely, having been submitted more than two months after the close of the comment period. See 12 C.F.R. § 262.3(e). Moreover, the parties have had ample opportunity to present evidence and arguments in writing, and to respond to one another's submissions. The Board has accordingly denied Protestant's request for a formal hearing. Based on the foregoing and other facts of record, the Board concludes that the balance of the public interest factors it is required to consider under section 4(c)(8) favors approval of the application. Accordingly, the application is hereby approved. This approval is subject to all of the conditions set forth in Regulation Y, including those in sections 225.4(d) and 225.23(b), 12 C.F.R. §§ 225.4(d), 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, and to prevent evasions of, the provisions and purposes of the Act and the Board's regulations and orders issued thereunder. The proposed acquisition shall not be consummated later than three months after the effective date of this Order unless that period is extended for good cause by the Federal Reserve Bank of Boston, pursuant to delegated authority, or by the Board. By order of the Board of Governors, effective December 23, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger and Heller. Abstaining from this action: Governor Angell. Absent and not voting: Governor Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board Bankers Trust New York Corporation New York, New York Order Approving Application to Engage in Commercial Paper Placement to a Limited Extent Bankers Trust New York Corporation, New York, New York, a bank holding company within the meaning of the Bank Holding Company Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), has applied pursuant to section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.21(a) of the Board's Regulation Y (12 C.F.R. 225.21(a)) to act as agent and adviser to issuers of commercial paper in connection with the placement of such commercial paper with institutional purchasers. The activity will be conducted through BT Commercial Corporation, Chicago, Illinois ("Company"), a wholly owned commercial finance subsidiary of Applicant's direct subsidiary, B.T. Leasing Services, Inc., New York, New York. Pursuant to prior Board approval under section 4(c)(8) of the BHC Act, Company engages in making and servicing loans and leasing, activities that are permissible for bank holding companies under sections 225.25(b)(1) and 225.25(b)(5) of Regulation Y Legal Developments (12 C.F.R. 225.25(b)(1) and (5)). Company would provide the proposed commercial paper placement activity in addition to the previously approved commercial finance activities, with Company serving customers through offices in New York, Chicago and Los Angeles. Applicant, with consolidated assets of $50.7 billion,1 is the sixth largest banking organization in New York. It operates two subsidiary banks and engages in a broad range of permissible nonbanking activities in the United States and abroad. Notice of the application, affording interested persons an opportunity to submit comments on the proposal, has been duly published, 50 Federal Register 25,465 (1985). The majority of the written comments were in favor of the proposals. The Board received three written comments opposing the application from the Securities Industry Association ("SIA"), a trade association of the investment banking industry, the Investment Company Institute ("ICI"), a trade association of the mutual fund industry, and Merrill Lynch Money Markets, Inc., a dealer in commercial paper, who contended that the activity would violate the Glass-Steagall Act. Under this proposal, Company would assume the commercial paper placement activity currently conducted by Applicant's subsidiary, Bankers Trust Company ("Bankers Trust"), a state member bank. Thus, Company would enter into agreements with corporate issuers of commercial paper to act as the issuer's agent in facilitating the placement of the issuer's commercial paper in minimum denominations of $250,000 with a limited number of institutions, such as banks, insurance companies, mutual funds, and nonfinancial businesses.2 Company may also advise the issuers of commercial paper with respect to the rates and maturities of the proposed issue that are likely to be accepted in the market. Because Company would be affiliated through common ownership with a member bank,3 the Board must determine whether, upon consummation of the proposal, Company would be "engaged principally" in the "issue, flotation, underwriting, public sale, or 1. Asset data are as of September 30, 1986. 2. Commercial paper refers to prime quality, short-term promissory notes (maturities not exceeding nine months) issued or backed by large financial, industrial, and commercial companies to finance seasonal or other current needs. Commercial paper is placed with a limited number of large institutions and is not offered to the general public. Issuers placing commercial paper in the recognized market do not register the paper pursuant to the Securities Act of 1933, relying on the exemption in section 3(a)(3) of that Act. 15 U.S.C. 377c(a)(3). 3. Under the Glass-Steagall Act, companies are affiliated if, as relevant here, more than 50 percent of their voting shares is held by the same shareholder. 12 U.S.C. § 221a(b). 139 distribution" of securities within the meaning of section 20 of the Banking Act of 1933 (the "Glass-Steagall Act"). 4 If so, the Board may not approve the proposal.5 In addition, the Board must determine whether the proposed activity is so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act and is, on this basis, a permissible activity for bank holding companies. Part I. Glass-Steagall Act Analysis A. Commercial Paper Placement Covered By Section 20 Is Not Applicant contends that Company would not be engaged in underwriting, distributing or any other activity covered by section 20 of the Glass-Steagall Act on the basis of the Board's conclusions in its 1985 ruling with respect to the commercial paper placement activities of Bankers Trust. Statement Concerning Applicability of the Glass-Steagall Act to the Commercial Paper Placement Activities of Bankers Trust Company (June 4, 1985) ("Statement"). In the Statement, the Board ruled that the commercial paper placement activity as conducted by the bank as an agent for customers is a permissible securities activity and does not constitute the "underwriting," "distribution" or impermissible "selling" of such securities for purposes of section 16 or 21 of the Glass-Steagall Act (12 U.S.C. §§ 24 Seventh and 378(a)(1)), the provisions of the Act applying directly to banks.6 In the Board's view, Company would not be engaged in underwriting, distributing or the public sale of 4. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) provides that . . . no member bank shall be affiliated . . . with any . . . organization engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities. . . . In Securities Industry Ass'n. v. Board of Governors of the Federal Reserve System, 468 U.S. 137 (1984) (hereinafter "Bankers Trust"), the Court held that commercial paper is a security for purposes of sections 16 and 21 of the Glass-Steagall Act (12 U.S.C. §§ 24 Seventh and 378), which taken together prohibit banks, such as Bankers Trust, from underwriting any issue of securities or stock, subject to certain exceptions for U.S. government and agency securities, state and municipal general obligations, and other specified securities. On the basis of this decision, the Board concludes that commercial paper is a security for purposes of section 20. 5. See Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 468 U.S. 207, 216 (1984) (hereinafter "Schwab"). 6. In its Statement, the Board concluded that so long as the bank acted only as agent for the issuer and did not assume the risk of a principal by making commercial paper-related loans, letters of credit or other credit facilities, it would be engaged in selling activity as agent, which does not violate sections 16 and 21 of the Glass-Steagall Act and is authorized for member banks. In addition, the Board concluded that the bank would not be "underwriting" or "distributing" securities because there would be no public ofiFering of commercial paper. 140 Federal Reserve Bulletin • February 1987 securities for purposes of section 20 for the same reasons the Board concluded in its Statement that Bankers Trust would not be engaged in these types of activities under sections 16 and 21, so long as Company's activity conforms to that approved for Bankers Trust under the Board's Statement. As the Supreme Court's opinions interpreting the Glass-Steagall Act indicate, where a particular activity is found not to be the type of activity prohibited to banks by sections 16 and 21, it should not be viewed as the kind of activity described in section 20.7 The protestants have disputed the Board's conclusions concerning the permissibility of this activity for a member bank under the Glass-Steagall Act, and the SI A has also challenged the Board's Statement in court. On December 23, 1986, the United States Court of Appeals for the District of Columbia Circuit upheld the Board's determination that Bankers Trust's commercial paper placement activity does not constitute "underwriting" or the impermissible "selling" of commercial paper under sections 16 and 21 of the Glass-Steagall Act. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, Nos. 865089 et al. ("Bankers Trust I f ) . Applicant argues, however, that even if the proposed commercial paper placement activity is viewed as "underwriting" or similar activity covered by section 20 of the Glass-Steagall Act, the proposal would nevertheless comply with section 20 because Company would not be "engaged principally" in such activity. The Board believes it should respond to this alternative basis for approval of the proposal advanced by Applicant. The Board also believes it is appropriate to act on this application at this time because it does not involve the same complex factual and legal issues that arise from the separate applications of Applicant, Citicorp, and J.P. Morgan & Co. Incorporated to underwrite commercial paper, mortgage-backed securities, municipal revenue bonds and consumer-related receivables in an affiliate that also underwrites U.S. government securities. These applications are substantially different from the Applicant's commercial lending affiliate proposal because the proposed underwriting would be conducted in an affiliate predominantly engaged in underwriting U.S. government securities and because of issues concerning the effectiveness of the sales volume limitations proposed in these applications. 7. Board of Governors of the Federal Reserve System v. Investment Company Institute, 450 U.S. 46, 60-61 n.26 (1981) ( " 7 C 7 I I " ) . See also Schwab, 468 U.S. at 219. The Board has ordered a hearing on these applications and the legal and factual issues that prompted this decision are explained in a statement issued by the Board today. Press Release, dated December 24, 1986. This Order, therefore, examines the question of whether Applicant's commercial paper placement proposal is consistent with the "engaged principally" provisions of section 20 and the Bank Holding Company Act. B. The Term "Engaged Principally" 20 Denotes Substantial Activity in Section Applicant's Contentions Applicant contends that, even if Company's commercial paper placement activities were deemed to constitute underwriting under section 20, Company would not be "engaged principally" in underwriting securities under section 20 because its placement activity would represent only a minor aspect of Company's overall business activity. To assure that the activity will be relatively insubstantial, Applicant has committed that Company will limit its commercial paper placement activity so that its gross revenue (fee and similar income) from the activity will not in any year exceed 5 percent of Company's gross revenues. The Applicant and other commenters supporting approval of the application contend that under the "engaged principally" test in section 20, Company may underwrite commercial paper so long as this activity does not constitute more than 50 percent of its total business activity or represent its single largest business activity.8 On this basis and subject to the proposed limitation on its commercial paper activity, Applicant contends Company would be "engaged principally" in commercial lending activities and, therefore, Company could not by definition be engaged principally in underwriting securities in violation of section 20 of the Glass-Steagall Act. Applicant further claims that, even under the narrowest reading of "principally" as denoting any substantial activity, Company would not be engaged principally in underwriting securities under the 5 percent gross revenue limitation proposed in its application. 8. Applicant and some of the commenters rely on a dictionary definition of the term "principally" to mean the single largest activity and statements in the U.S. Supreme Court decision in Board of Governors of the Federal Reserve System v. Agnew, 329 U.S. 441, 446, 448 (1947), concerning section 32 of the Glass-Steagall Act, which prohibits member banks and companies "primarily engaged" in the underwriting or public sale of securities from having a common officer, director or employee. 12 U.S.C. § 78. Legal Developments Protestants' Comments The protestants claim that Applicant's view of the term "principally" would vitiate the central purpose of the Glass-Steagall Act by allowing member banks to reestablish "security affiliates" that could rival the largest investment banking firms. For this reason, the protestants contend that the term "principally" must be interpreted consistent with Congressional intent to denote any substantial, significant, regular or nonincidental activity, whether or not it is the largest activity of the affiliate. Protestants also contend that the proposed activity is not closely related to banking under the BHC Act and would result in substantial risk and conflicts of interest not outweighed by public benefits. Literal Terms and Structure of the Glass-Steagall Act In interpreting a statute, the Board must be guided by the ordinary meaning of the words Congress chose to express its intention and the underlying purpose of the statute as evident in its structure and legislative history.9 In interpreting the term "engaged principally" in section 20, the Board believes it important to note at the outset that, while the overall objective of the Glass-Steagall Act is to separate commercial and investment banking,10 section 20 by its terms does not require that this separation be complete. In contrast to the flat prohibitions of sections 16 and 21 on securities underwriting and dealing by banks (other than as specifically authorized),11 section 20 prohibits underwriting and dealing activity by a member bank affiliate only where the affiliate would be "engaged principally" in such activity. In other words, Congress has not 9. See, e.g., Steadman v. S.E.C., 450 U . S . 91, 97 (1981); Southeastern Community College v. Davis, 442 U . S . 397, 405 (1979). See also e.g., Bankers Trust 468 U . S . at 149; Schwab, 468 U . S . at 217; Agnew, 329 U . S . at 447. 10. See Bankers Trust, 468 U . S . at 147; ICIII, 450 U . S . at 6 1 - 6 2 , 70, citing S. R e p . N o . 77, 73d C o n g . , 1st S e s s . 10 (1933); Investment Company Institute v. Camp, 401 U . S . 617, 629 (1971) ( ' 7 C / / " ) . 11. S e c t i o n 16 p r o v i d e s : The business of dealing in securities and stock by [a member bank] shall be limited to purchasing and selling such securities and stock without recourse, solely upon the order, and for the account of, customers, and in no case for its own account, and [a member bank] shall not underwrite any issue of securities or stock . . . The limitations and restrictions herein contained as to dealing in, underwriting and purchasing for its own account, investments securities shall not apply to obligations of the United States, or general obligations of any State or any political subdivision thereof, or [other specified obligations]. 141 abolished underwriting affiliates of member banks, but has allowed such affiliates where their conduct of underwriting activity would not represent a principal line of business for the affiliate. S. Rep. No. 77, 73d Cong., 1st Sess. 10 (1933). As the Supreme Court has recognized, it is evident in the terms and structure of the Glass-Steagall Act that Congress intended to "treat banks separately from their affiliates"12 and to apply a "significantly less stringent" standard to affiliates than to banks under the Act.13 Indeed, the Court has stated that under the Glass-Steagall Act "a bank affiliate may engage in activities that would be impermissible for the bank itself."14 Thus, the Board's decision in this case does not turn upon whether a member bank affiliate may engage in section 20 activity. The statute by its terms plainly authorizes such activity by member bank affiliates where the affiliate is not "engaged principally" in the activity. Rather, the Board must determine at what level and by what measurement a member bank affiliate would be "engaged principally" in this activity. Given the fact that section 20 plainly permits some amount of otherwise impermissible securities underwriting activity, but that a fundamental purpose of the Act as a whole is to separate securities affiliates as far as possible from member banks, the Board believes, for the reasons set out below, that the term "engaged principally" in section 20 denotes an activity of the affiliate that is substantial, even if the activity does not represent more than 50 percent of the affiliate's total business activity or its single largest or most important activity. While the term "engaged principally" may, as Applicant and others contend, mean that activity accounting for more than 50 percent of the firm's business or its single largest activity, the term may also mean engaged "primarily" or "in a principal manner" and refer to a number of different activities that are 12 U . S . C . § 24 S e v e n t h . S e c t i o n 21 m a k e s it u n l a w f u l — For any person . . . engaged in the business of issuing, underwriting, selling, or distributing . . . stocks, bonds, debentures, notes, or other securities, to engage at the same time to any extent whatever in the business of receiving deposits . . . Provided, That the provisions of this paragraph shall not prohibit . . . banks . . . or other financial institutions . . . from dealing in, underwriting, purchasing and selling investment securities, or issuing securities, to the extent permitted to [member banks under section 16]. 12 U . S . C . § 378(a)(1). 12. ICI II, 450 U . S . at 58 n.24. 13. Id. at 71 n.46 a n d 60 n.26. 14. Id. at 64. In t h e Agnew c a s e , t h e C o u r t a l s o r e c o g n i z e d t h a t t h e Glass-Steagall Act does not mandate a complete separation between m e m b e r b a n k s a n d u n d e r w r i t i n g firms. 329 U . S . at 447, 449. 142 Federal Reserve Bulletin • February 1987 "main," "leading," "important" or "outstanding."15 For example, Webster's 1933 dictionary—the version available at the time the Glass-Steagall Act was enacted—states that the term "principal" may refer to a number of the most considerable or important objects, as in "the principal officers; the principal men; the principal productions; the principal arguments." The Board also notes that courts often use the term "principal" to denote a number of important or leading objects, as in the "principal cities" of a nation.16 Moreover, the Supreme Court has held in the context of section 32 of the Glass-Steagall Act that the term "primarily," which as noted can be a synonym for "principally," denotes any substantial activity even if not the most important activity. Agnew, 329 U.S. at 446. In light of the two alternative meanings for the term "principally," the decision as to the proper meaning of that term in section 20 must, in the Board's judgment, be made on the basis of legislative intent. This was the rationale adopted by the Supreme Court in the Agnew case in upholding, as "more consonant with the legislative purpose" of the Glass-Steagall Act, the Board's decision that the term "primarily engaged" in section 32 of the Glass-Steagall Act must be given its alternative meaning as denoting a substantial, even if not the largest, activity. 329 U.S. at 446-447. Given the similarity in language of sections 20 and 32 and the fact that they were enacted at the same time for the same purpose and that "principally" and "primarily" can be synonyms, the Board believes that these sections 15. Webster's New International Dictionary of the English Language 1706 (1933); Webster's New International Dictionary of the English Language 1966 (2d ed. 1934), 1802; Webster's Third New International Dictionary of the English Language 1802-03 (1981). The Board finds no support in the accepted definition of the term "principally" or, as discussed below, in prior Board rulings for protestants' assertion that the term also denotes activity that is regular or non-incidental, even if not substantial or important. See note 28, below. 16. E.g., Marquette National Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299, 315 n.29 (1978) ("the principal cities along the Atlantic coast"); B. & O. R. Co. v. United States, 386 U.S. 372, 380 (1967) ("the principal cities [served by a railroad system]"); Chicago & N.W. Ry. Co. v. Atchison, T. <& S. F. Ry. Co., 387 U.S. 326, 340 (1967) ("eight principal Midwestern roads"); National Labor Relations Board v. Fruehauf Trailer Co., 301 U.S. 49, 53 (1937) ("principal cities of the country"). The fact that "principally" is used in other statutory or regulatory contexts to denote the single largest activity {e.g., 12 U.S.C. § 1861(b)(7) and 12 C.F.R. 211.23(b) and 211.32 implementing 12 U.S.C. §§ 1841(h) and 1843(c)(14)(F)) is not dispositive under section 20. For example, the term is used in other regulatory contexts to denote a number of main or important objects: e.g., 12 C.F.R. 347.4(d) ("principal locations"); 12 C.F.R. 335.312, Item 1(b)(3) ("principal services" and "principal markets"). In any event, these interpretations pertain to statutes that were enacted for different purposes than section 20 and the use of the alternative definition of "principally" was determined to be appropriate in the context of those statutes to carry out their different legislative purposes. should be construed together and that the term "principally" in section 20 must, like the term "primarily" in section 32, denote any substantial activity.17 In the Schwab case, the Supreme Court also observed that, because of the parallels between sections 20 and 32, a long accepted interpretation of section 32 should apply equally to section 20. 468 U.S. at 219. Legislative History of Section 20 The Board believes that a construction of the term "engaged principally" to denote any substantial line of business activity is the only reasonable construction that would carry out the legislative intent of the GlassSteagall Act to separate commercial and investment banking in the country as far as possible18 and of section 20 in particular "to provide for the divorce of security affiliates from member banks." 19 In this regard, the Board is concerned that Applicant's interpretation would substantially negate the purpose of section 20 by allowing affiliations between large member banks and the largest investment banks in the country, the precise situation at which the Glass-Steagall Act was directed.20 As the Supreme Court noted in the Agnew case, because investment banking concerns engage in numerous activities other than underwriting, an interpretation of "primarily en- 17. In prior rulings under the Glass-Steagall Act, the Board has applied the terms "principally" and "primarily" to the same levels of activity and treated the sections in a parallel fashion. See, e.g., 20 FEDERAL RESERVE BULLETIN 485-86 (1934); letter from the Board to the Federal Reserve Bank of Kansas City (August 8, 1935) (concerning First Trust Company of Lincoln, Lincoln, Nebraska); 12 C.F.R. 218.104. 18. ICIII, 450 U.S. at 61-62; ICII 401 U.S. at 629-633; S. Rep. No. 77, 73rd Cong., 1st Sess. 10 (1933). Accord: 75 Cong. Rec. 98889889 (1932) (statement of Sen. Glass); 15 Cong. Rec. 9905 (1932) (statement of Sen. Walcott); 77 Cong. Rec. 3835 (1933) (statement of Rep. Steagall); and 77 Cong. Rec. 3907 (1933) (statement of Rep. Koppleman). 19. Operation of the National and Federal Reserve Banking Systems, 1932: Hearings on S. 4115 before the Senate Comm. on Banking and Currency, 72d Cong., 1st Sess. 388 (1932) (statement of Governor Eugene Meyer delivering Federal Reserve Board's Comments and Recommendations on the Glass Bill (S. 4115)) (hereinafter "1932 Hearings"). 20. On this basis, the Board in connection with the withdrawal of an earlier proposal by Citicorp to underwrite corporate debt, municipal revenue bonds, and mortgage-backed securities through a subsidiary engaged predominantly in underwriting U.S. government and other securities authorized under section 16 of the Glass-Steagall Act, stated its preliminary view that the proposal was inconsistent with the Glass-Steagall Act, where the proposal would have allowed the applicant to underwrite a volume of securities equal to or greater than that of the largest securities underwriters. Board Press Release, dated February 27, 1985. This conclusion is also supported by the court of appeals emphasis in Bankers Trust II on the fact that Congress intended, through the Glass-Steagall Act, to prevent member banks from establishing affiliates "having a far-flung retail network to distribute securities to the public." Slip op. at 27. Legal Developments gaged" as denoting the largest activity would mean that section 32 of the Glass-Steagall Act "would apply to no one." 2 ' This same reasoning applies to the "engaged principally" standard of section 20. The Board's interpretation of principally as denoting any substantial line of business activity also seems appropriate in light of the fact that the alternative interpretation advanced by Applicant and other commenters would produce the anomalous result that a member bank could be affiliated through common stock ownership with an investment banking concern that is "substantially" but not "predominantly" engaged in underwriting activities, but could not, under section 32 of the Glass-Steagall Act, have an officer, director or employee in common with the affiliate. In other words, in such a situation, the Act would prohibit management interlocks because of the potential for conflicts, unsound practices and other hazards that Congress found could arise when commercial banking and investment banking functions were combined, but would permit the member bank and the securities company to be commonly owned, share a common name and pursue common policies dictated by the corporate owner, a situation that raises a far greater potential for the types of adverse effects that lead Congress to enact section 20 of Glass-Steagall Act. The Board has considered the reliance by some commenters on the statement by Senator Bulkley in urging deletion of the term "principally" from the "engaged principally in the business" language in the proposed section 21 of the Glass-Steagall Act, that "at least some of the great investment houses are engaged in so many forms of business that there is some doubt as to whether the investment business is the principal one."22 The Board does not, however, believe that the phraseology of this remark should be given controlling weight in interpreting the provisions of section 20. Senator Bulkley was a major proponent of the GlassSteagall Act and was in accord with the other propo- 21. 329 U.S. at 447. The Board also notes that, under Applicant's interpretation, section 20 would have failed to accomplish its basic purpose of requiring the separation of member banks from their security affiliates, because, at least in certain cases, the most important activity of some security affiliates in the early 1930s was not underwriting and dealing, but operating as an investment trust or holding the stock of affiliated companies. See W. Peach, The Security Affiliates of Banks 85 (1941); Operation of the National and Federal Reserve Banking Systems: Hearings Pursuant to S. Res. 71 Before a Subcommittee of the Senate Comm. on Banking and Currency, 71st Cong., 3d Sess. 1057-61 (1931). However, there is little doubt that securities underwriting was a substantial activity of these security affiliates. 22. 77 Cong. Rec. 4180 (1933). Section 21 prohibits a firm "engaged in the business of issuing, underwriting, selling or distributing" securities from accepting deposits. 12 U.S.C. § 378(a)(1). As originally drafted, section 21 would have applied to firms "engaged principally in the business o f ' issuing or underwriting securities. S. 1631, 73d Cong., 1st Sess. (1933). 143 nents of the Act in believing that the legislation would require a separation between member banks and their security affiliates.23 As explained above, this objective would not be accomplished if the term "engaged principally" meant only the single largest activity of an affiliate. The implications of interpreting the word "principally" to mean the single largest activity would be that—insofar as the Glass-Steagall Act is concerned—major banks could affiliate with major investment banks and large investment banks could acquire commercial banks.24 Moreover, Senator Bulkley's amendment was to the proposed section 21, which as originally drafted, covered a company "engaged principally in the business" of underwriting or similar activity. Accordingly, his remark concerning the use of "principally" in section 21 is not necessarily applicable to section 20, which does not contain the words "engaged principally in the business . . . ." 25 The Agnew Decision As noted above, the Board believes the reasoning of the Agnew case supports the Board's conclusion that the term "principally" in section 20 means substantially because this interpretation is "more consonant with the legislative purpose" of the Glass-Steagall Act and section 20 in particular. 329 U.S. at 447. In this regard, the Board has considered Applicant's reliance on statements in the Agnew case suggesting that through the use of different terminology in section 32 ("primarily" engaged) and section 20 ("principally" engaged), Congress meant to describe different levels of underwriting activity in the two sections, and that "primarily" denoted any substantial activity, suggesting that "principally" meant the single most important activity. 329 U.S. at 448. The Board notes, however, that the meaning of the term "principally" in section 20 was not before the Court in the Agnew case because there was no affiliation through common 23. 75 Cong. Rec. 9909-13 (1932). 24. In any event, the statements of a single legislator are not dispositive as to the meaning of a statute. Consumer Product Safety Comm'n v. GTE Sylvania, 447 U.S. 102, 118 (1979). 25. For the same reasons, the statement by Senator Glass (77 Cong. Rec. 3730) that section 21 would prohibit large "private banks, whose chief business is an investment business, from receiving deposits," does not mean that the term principally in section 20 denotes the single largest activity. Certain commenters also note that Representative Bacon described section 20 as applying to companies "chiefly engaged in the flotation, underwriting, or sale of investment securities." 77 Cong. Rec. 3954 (1933). However, "chiefly" like "principally" may refer to more than one leading activity. There is no evidence that Representative Bacon intended chiefly to be limited to the single largest activity, since he, like Senator Bulkley, was a proponent of the separation of security affiliates from member banks. Id. 144 Federal Reserve Bulletin • February 1987 stock ownership between Eastman, Dillon & Co., the underwriter in that case, and the member bank involved. Thus, the Agnew case does not as a legal matter compel a finding that "principally" in section 20 means the single most important activity, particularly in view of the broad inconsistency of such an interpretation with the purpose of section 20 of the Glass-Steagall Act. Moreover, there is nothing in the legislative history of the Glass-Steagall Act suggesting that Congress meant to describe different levels of underwriting activity in sections 20 and 32. If anything, the legislative history of section 20 indicates that section 20 was intended to be more rigorous than section 32, which was described as "ineffective" in many cases to achieve the Congressional goal of separating commercial and investment banking and "capable of easy evasion."26 Further, as noted, common sense would suggest that a stricter standard for underwriting should be applied in the case of affiliations through common stock ownership than in the case of interlocking relationships between otherwise unaffiliated companies. Prior Board Interpretations The Board notes that the Applicant's interpretation of section 20 is also inconsistent with the Board's prior interpretations, in which the Board has viewed the engaged principally test as calling on it to weigh the substantiality of the securities activity even though the activity in question is not the single largest activity of the firm. On this basis, the Board has long permitted bank holding company subsidiaries affiliated with member banks to issue securities—an activity described in section 20—so long as the issuing activity did not become frequent and in substantial amounts27 or "necessary to permit maintenance of the holding company's activities without substantial contraction" or an "integral part of [the holding company's] operations."28 The Board has also allowed bank holding 26. 1932 Hearings at 387. 27. 12 C.F.R. 218.104(b). See also 12 C.F.R. 225.125(c). 28. 12 C.F.R. 250.221(d). Protestants' reliance on these Board rulings for the proposition that any frequent or recurring underwriting activity is covered by section 20 regardless of whether the activity is important or substantial is misplaced. In these cases, the Board held— consistent with its decision in this case—that the underwriting or issuing activity must not only be frequent but must also be substantial relative to the affiliate's total business activity. In the case of the Board's closed-end mutual fund interpretation (12 C.F.R. 225.125(c)), the Board noted that a closed-end fund does not, after the initial distribution, obtain a substantial or material portion of its capital structure from issuing securities, as opposed to an open-end fund which must continually issue securities to maintain its capital and prevent shrinkage of its assets. ICIII, 450 U.S. at 51, 60-61 n.26. If the fund, however, issued securities frequently, it would be obtaining a major portion of its capital and could be engaged principally within the context of prior Board interpretations of section 20. company consumer finance subsidiaries affiliated with member banks to issue thrift note securities that did not exceed 25 percent of the issuer's total consolidated assets on the basis that the activity would not be "a principal activity" of the company.29 Subtle Hazards Implicated by the Glass-Steagall Act Finally, the Board believes that constraining the level of otherwise impermissible securities activity to the point where it represents only an insubstantial line of activity for the affiliate would minimize the potential for conflicts of interest and the other so-called "subtle hazards" that Congress concluded are raised when investment and commercial banking functions are combined.30 This is consistent in the Board's view with the Congressional intent underlying section 20 that an insubstantial quantitative level of activity that is not conducted within a bank but by an affiliate of a bank is acceptable from the point of view of the safety and soundness of the bank and the interests of its depositors. On the other hand, the interpretation advanced by the Applicant and certain commenters permitting a substantial amount of possibly speculative and hazardous securities activity, so long as it is not the single largest activity, would not necessarily lead to a reduction in the potential for subtle hazards. For example, the potential for conflicts and damage to a bank's reputation would not appear to be reduced simply because the affiliate's underwriting activity constitutes 49 percent of its total activity rather than 51 percent. The fact that, under the Board's interpretation, the potential for "subtle hazards" may continue to exist, albeit at a minimized level, even where underwriting activity is not substantial does not, however, alter the clear Congressional decision to allow some limited level of underwriting by member bank affiliates. As the Supreme Court recognized in Agnew, even though the potential for conflicts and other hazards may exist 29. Letters from the Board to Philadelphia National Corporation, Centran Corporation and Virginia National Bankshares (September 9, 1974). See also Financial Services Corporation of the Midwest, 63 FEDERAL RESERVE BULLETIN 948 (1977); and letter f r o m the Board t o the SIA (December 27, 1977) (concerning a $25 million notes issue by Citicorp). The Board's determination to permit a member bank affiliate to obtain 25 percent of its funding through issuance of securities does not constitute a test that would allow a company to provide underwriting services to third parties up to 25 percent of total activity. In the thrift note cases, the companies issued their own notes as an activity incidental to their main consumer finance business and therefore a finding that they were not "engaged principally" in securities activity was consistent with the terms and purposes of section 20. Moreover, as a share of total business, thrift note issuance would have been considerably less than 25 percent. 30. See ICI I, 401 U.S. at 629-638; ICI II, 450 U.S. at 66-67; Schwab, 468 U.S. at 220-221; Bankers Trust, 468 U.S. at 145-148. Legal Developments whatever proportion of the firm's business derives from underwriting, the Glass-Steagall Act does not by its terms establish a complete barrier between banks and underwriting firms. 329 U.S. at 447. In any event, the potential for these subtle hazards and other conflicts of interest and unsound banking practices that Congress identified when commercial banking and investment banking are combined would not be present to any significant degree under the limitations described in Part II of this Order for the conduct of the activity under the proper incident to banking standard of section 4(c)(8) of the BHC Act. As the Board has previously noted, the Supreme Court in ICI II, 450 U.S. at 62, 67, explicitly recognized that where a particular activity is permissible under the terms of the Act, the Board may rely upon restrictions to insure that the activity is insulated from the subtle hazards associated with investment banking.31 The court of appeals in Bankers Trust II, also recognized that the Board may examine the realities of a particular situation, including representations by an applicant as to the manner in which an activity will be conducted, in determining whether the potential for conflicts of interest and other subtle hazards are present in a particular proposal. Slip op. at 30. C. Appropriate Principally" Measure of ' 'Engaged Having determined that the "engaged principally" standard of section 20 denotes any substantial activity by a member bank affiliate, the Board must determine whether under the limitations proposed by Applicant, Company's proposed commercial placement activity, assuming that it constitutes underwriting, would be substantial. Applicant has suggested that Company would not be "engaged principally" in underwriting activity based on a gross revenue test, i.e., the annual gross revenue from its commercial placement activity will not exceed 5 percent of its total gross revenues, which otherwise will be derived from commercial lending operations. Applicant also notes that the amount of Company's assets devoted to the commercial paper activity will be "virtually nil" and has projected that commercial paper activity would not be large, accounting for less 31. National Westminster Bank PLC, 72 FEDERAL RESERVE BULLETIN 584, 595 (1986). Moreover, reliance on these restrictions does not constitute the kind of regulatory approach the Supreme Court has disfavored in construction of the Glass-Steagall Act. Bankers Trust, 468 U.S. at 149-154. In that case, the Court indicated that an agency may not rely on regulatory limitations to overcome the explicit language of the Glass-Steagall Act. Here, as noted, the Glass-Steagall Act explicitly permits some level of otherwise impermissible underwriting activity for member bank affiliates. 145 than 5 percent of the average outstanding volume for all dealer-placed commercial paper. The Board believes that the gross revenue a member bank affiliate derives from commercial paper activity relative to its total gross revenue would be an appropriate measure of "engaged principally," when coupled with the affiliate's overall share of the market for the particular type of security underwritten. This is consistent with the Board's practice under the "primarily engaged" standard of section 32 of the GlassSteagall Act, which gives controlling weight to the revenues derived by the company from underwriting activity relative to its total business revenues and the significance of the organization's presence in the market for the particular activity.32 The Board believes that revenue is an appropriate test to determine whether a subsidiary is "principally engaged" because it is an objective and meaningful measure of the importance of the activity to the enterprise as a whole and often reflects the level of risk involved in the activity, a major consideration under the Glass-Steagall Act.33 In addition, a gross revenue test avoids the potential for manipulation present in a test based solely or predominantly on sales volume. The sales volume of an affiliate, particularly of a government securities subsidiary, could be increased through churning of the affiliate's dealing activity in U.S. government and other authorized securities in order to create a larger base against which the section 20 securities activity would not appear to be substantial. The Board has ordered a hearing to take evidence on these questions in connection with the underwriting applications by Applicant, Citicorp and J.P. Morgan & Co., which propose to use sales volume to measure "engaged principally" status under section 20.34 In addition, in the Board's judgment, the fact that an affiliate would be a relatively substantial force in a particular securities market would be a factor suggesting that the affiliate is "engaged principally" in underwriting securities. Thus, the Board has consistently taken into account a firm's market share in decisions under section 32 the Glass-Steagall Act. 32. Letter from the Board to the Federal Reserve Banks (August 11, 1958), reprinted in F.R.R.S. 1 3-895. 1 33. The Board notes that the protestant SI A is of the view that gross revenue (as well as assets devoted to the activity), not sales volume, is the appropriate measure of an affiliate's section 20 activities on the basis that revenue is a better indicator of the risk involved in securities activities. Protestant Merrill Lynch claims that to avoid manipulation, net, not gross, revenues are the appropriate standard. However, a test based on net revenues is itself subject to manipulation, since by allowing its costs to rise, an affiliate could reduce its net revenue but the volume and gross revenues from its securities operations would not necessarily decrease and could even increase. 34. Board Press Release, dated December 24, 1986. 146 Federal Reserve Bulletin • February 1987 The Board also believes that a market share test could provide a useful and objective proxy for volume, which the Board believes is an important factor to be taken into account under the principally engaged test of section 20. Unlike the sales volume test, the market share test would not be subject to manipulation, but would provide for consideration of the volume of business activity of the affiliate. In the Board's view, where Company would not be engaged in a general securities or investment banking business and where its gross revenue from commercial paper activities in any one year would constitute less than 5 percent of its total gross revenue and the volume of commercial paper outstanding at any one time placed by Company represents less than 5 percent of the average amount of dealer-placed commercial paper outstanding during the previous four calendar quarters, Company would not be "engaged principally" in underwriting securities within the meaning of section 20. The conduct of the commercial paper placement activity at these less than 5 percent levels is consistent with the Board's past practice for many years under the "primarily engaged" standard of section 32,35 and would, in the Board's judgment, be within the Congressional intent underlying section 20 to allow member bank affiliates to engage in underwriting activities at levels that are not substantial and thus minimize problems of safety or soundness or risk for affiliated member banks. The Board recognizes that its past decisions have permitted somewhat higher levels of activity as consistent with the "primarily engaged" test under section 32. Accordingly, the Board does not determine definitively in this case at what quantitative level of activity a company would be "engaged principally" in section 20 activity or whether this level should be the same in all cases. In its evaluation of this case, the Board has carefully considered the fact that, in connection with the transfer of the commercial paper placement activity to Company, Applicant will also transfer to Company a portion of the commercial finance activity of Bankers Trust. As indicated, Company is currently engaged in commercial finance pursuant to approval by the Board under the BHC Act. Accordingly, although hardly a welcome result from some perspectives, Applicant's proposed transfer of a segment of its commercial finance activities to Company is necessary in order to meet the engaged principally test of section 20 and is authorized under both the BHC Act and Board regulations. While the transfer could result in the deliberate The National Courier guidelines are not the exclusive basis for finding a proposed activity closely related to banking (516 F.2d at 1237), and the Board may consider any other basis that may demonstrate that the activity has a reasonable or close relationship to banking. 49 Federal Register 806 (1984). The U.S. Supreme Court stated in Schwab that the use of these 35. See letter, dated December 14, 1981, reprinted in F.R.R.S. 1 3-939. 36. See ICI II, 450 U.S. at 57 n.22; National Courier Ass' n v. Board of Governors of the Federal Reserve System, 516 F.2d 1229, 1237 (D.C. Cir. 1975). creation of a large base of permissible non-section 20 activity, the size of the securities activity that may be conducted by the affiliate on this basis is limited by the "engaged principally" provisions of the Glass-Steagall Act as interpreted by the Board. As previously noted, these provisions involve the concept of a quantitative limitation on underwriting activity which is embodied in the revenue and market share criteria for establishing "substantiality" contained in this Order. The Board wishes to stress that the latter criterion, in particular, creates a limitation on underwriting activity which is independent of the size of the affiliate that might be established by purposeful transfer of activities from the bank to the holding company affiliate. Part II. Bank Holding Company Act Analysis In every application under section 4(c)(8) of the BHC Act, the Board must find that the proposed activity is "so closely related to banking . . . as to be a proper incident thereto." This statutory standard requires that two separate tests be met for an activity to be permissible for a bank holding company. First, the Board must determine that the activity is, as a general matter, "closely related to banking." Second, the Board must find in a particular case that the performance of the activity by the applicant bank holding company may reasonably be expected to produce public benefits that outweigh possible adverse effects.36 Based on guidelines established in the National Courier decision, a particular activity may be found to meet the "closely related to banking" test if it is demonstrated that: (1) banks generally have in fact provided the proposed activity; (2) banks generally provide services that are operationally or functionally so similar to the proposed activity so as to equip them particularly well to provide the proposed activity; or (3) banks generally provide services that are so integrally related to the proposed activity as to require their provision in a specialized form. Legal Developments factors by the Board in determining the closely-relatedness of an activity is reasonable and within the Board's discretion. 468 U.S. at 210 n. 5. A. Closely Related to Banking Analysis After carefully considering the facts of record, the Board concludes that placing commercial paper with institutional purchasers, as the agent of third party issuers, is closely related to banking, because banks provide services that are operationally and functionally so similar to the proposed services that banking organizations are particularly well equipped to provide the proposed services. As noted below, the proposed activity is a natural extension of commercial lending activities traditionally conducted by banks, involving little additional risk or new conflicts of interest, and potentially yielding significant public benefits in the form of increased competition and convenience.37 On this basis, the Board has urged the Congress to authorize bank holding companies to engage in a wider range of activities than that proposed here—underwriting and distributing commercial paper as principals, underwriting certain other types of securities that are very similar to obligations currently underwritten by banks, i.e., municipal revenue bonds and mortgage related securities, and sponsoring mutual funds. This view is not held by the Board alone. The other federal banking agencies as well as the U.S. Departments of Treasury and Justice support the conduct of these activities by bank holding companies.38 As noted above, the Board's June 1985 Statement concludes that the proposed activity is lawful for member banks and that determination has been upheld by the court of appeals. Applicant's subsidiary bank, Bankers Trust, and certain other banks have placed commercial paper, in some cases using procedures slightly different than those proposed here, since the 37. See, e.g., Statement of Chairman Volcker Before the SubComm. on Commerce, Consumer & Monetary Affairs of the House Comm. on Government Operations (June 11, 1986), reprinted in 72 FEDERAL RESERVE BULLETIN 541, 549 (1986); Financial late 1970's. Protestants argue that the lawfulness of this activity has been continuously under challenge and that there is little if any evidence that banks traditionally acted on behalf of issuers in the commercial paper market.39 However, even if it were assumed that banks historically have not and legally may not engage in the proposed placement activity, the Board nevertheless has the discretion to determine that this activity is closely related to banking.40 Placing commercial paper as the agent of the issuer is an activity that is similar in function to the traditional commercial banking function of arranging loan participations or syndications with other banks and institutional lenders. Although commercial paper technically is a security for purposes of the Glass-Steagall Act, this kind of instrument has many of the characteristics of a traditional commercial loan.41 A commercial loan in its traditional form represents a short-term extension of credit to a business to finance working capital needs. (E.g., United States v. Connecticut Nat'I Bank, 418 U.S. 656, 665 (1974)). Because of its short term, commercial paper is customarily held to maturity—like a commercial loan. There is virtually no secondary market. Because of its large denominations, commercial paper is generally purchased only by large, financially sophisticated institutions, such as trust departments of banks, money market mutual funds, insurance companies, and pension funds. As the activity is proposed by Applicant, Company will sell commercial paper only to these large institutions. Thus, Company's role will be, in effect, that of arranging short-term commercial loans from the institutional buyers of commercial paper to the issuers of the paper. In arranging a loan participation or syndication, a bank, serving as the lead bank, solicits other institutional lenders that may be interested in lending funds to a borrowing firm. The lead bank furnishes financial information concerning the borrower to the prospective lenders. In certain types of shared loan arrangements, i.e., syndications, the lead bank sells a note issued by the borrower to the participating lenders. The lead bank ordinarily receives a fee from the borrower for its services in arranging the participation or syndication, and this reimbursement is contingent Restructur- ing: The Road Ahead: Hearings on H.R. 5342, 4506 and 3537 Before the Subcomm. on Telecommunications, Consumer Protection, and Finance of the House Comm. on Energy and Commerce, 98th Cong., 2d Sess. 91 (1984) (statement by Paul A. Volcker, Chairman, Board of Governors of the Federal Reserve System), reprinted in 70 FEDERAL RESERVE BULLETIN 312, 316 (1984); S. Rep. No. 560, 98th Cong., 2d Sess. 15-16 (1984). 38. Competitive Equity in the Financial Services Industry: Hearings on S.2181 Before the Senate Comm. on Banking, Housing, and Urban Affairs, 98th Cong., 2d Sess. 1221, 1274, 1550, 1714 (1984) (Statements of C. Todd Conover, Comptroller of the Currency, William M. Isaac, Chairman, F.D.I.C., Douglas H. Ginsburg, Deputy Assistant Attorney General, U.S. Department of Justice, and Donald T. Regan, Secretary of the Treasury, respectively). 147 39. See Bankers Trust, 468 U.S. at 160. 40. ICIII, 450 U.S. at 64 ("In both the Glass-Steagall Act itself and in the [BHC] Act, Congress indicated that a bank affiliate may engage in activities that would be impermissible for the bank itself."). 41. In Bankers Trust, the Supreme Court found that commercial paper fell within the literal terminology of the Act ("notes, or other securities"), but did not directly dispute the Board's determination that commercial paper has the functional characteristics of a commercial loan. 468 U.S. at 150-59. 148 Federal Reserve Bulletin • February 1987 on the lead bank's successful completion of the arrangement function.42 Accordingly, the Board concludes that the proposed commercial paper placement activity is so functionally and operationally similar to the role of a bank that arranges a loan participation or syndication that banking organizations are particularly well suited to perform the commercial paper placement function.43 that market. Moreover, the establishment of this activity in a holding company subsidiary will allow applicant to provide greater convenience to customers of the service and to offer the service more efficiently on a nationwide scale. The Board considers these two factors—increased competition and more convenient service to investors and borrowers—to be substantial and important public benefits. B. Proper Incident to Banking Adverse Effects Analysis In order to approve an application to engage in a nonbanking activity under section 4(c)(8), the Board must also determine that a proposed activity is a "proper incident" to banking by determining whether the performance of the activity by the applicant bank holding company may reasonably be expected to produce public benefits, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. 12 U.S.C. § 1843(c)(8). Based upon the facts of record and for the reasons and subject to the limitations set out below, the Board finds that consummation of this proposal may reasonably be expected to result in public benefits that outweigh possible adverse effects. Public Benefits The Board believes that consummation of this proposal will produce significant benefits to the public in the form of increased competition and greater convenience and efficiency. Company will offer the proposed commercial paper placement service on a nationwide basis. In light of the fact that currently the commercial paper market is dominated by a small number of dealers, the expansion of Applicant's commercial paper activities can only foster competition in 42. E.g., Note, Loan Participation Agreements as Securities: Judicial Interpretations of the Securities Act of 1933 and the Securities Exchange Act of 1934, 24 Wm. & Mary L. Rev. 295, 296-297 (1983); Pollock, Notes Issued in Syndicated Loans—A New Test to Define Securities, 32 Bus. Law. 537, 538 (1977); Comment, International Loan Syndication, the Securities Acts, and the Duties of a Lead Bank, 64 Va. L. Rev. 897, 899-900 (1978). 43. For many years, banks have also acted as agents on behalf of issuers of long-term debt and equity securities in soliciting a limited number of institutions to purchase the securities in private placement transactions. See Federal Reserve Board Staff, Commercial Bank Private Placement Activities (1977); Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, Commercial Bank Private Placement Activities (1978). These private placement operations of banks regarding various other types of securities are clearly very close in function to the proposed commercial paper placement activities. After a review of the application and other facts of record the Board finds no evidence that Applicant's conduct of the activity through Company, acting solely as the agent for issuers, is likely to result in any significant adverse effects under the framework for conducting this activity proposed by Bankers Trust and approved in this Order. The Board's Statement concluded that placing commercial paper as the agent of the issuer within the terms of that Statement would not give rise to any significant conflicts of interest and other hazards the Glass-Steagall Act was enacted to eliminate. In its recent opinion the court of appeals affirmed this determination, with one exception that, as explained below, is not material to this application.44 In addition, the Board believes that the consideration of potential hazards that has been employed in analyzing the legality of a particular activity conducted directly by a bank is less controlling where, as here, the same activity would be performed by an affiliate of the bank. As explained above, section 20 of the GlassSteagall Act by its terms allows member bank affiliates to engage, to a limited extent, in general securities underwriting and distributing, activities that clearly involve the promotional incentive and subtle hazards Congress associated with investment banking activity. In any event, a proposal by a bank holding company to engage in securities activities that is consistent with section 20 must also comply with the public benefits test of section 4(c)(8); the expected benefits to the public from the proposal must outweigh likely adverse effects. Moreover, unlike the Glass-Steagall Act, the BHC Act authorizes the Board to impose conditions on a proposal to assure the specific adverse effects do not result. Insulation of Proposed Activities from Affiliated Banks. At the outset, the Board notes that a great many of the adverse effects it is charged with considering under the proper incident to banking test of section 4(c)(8), like unsound banking practices and conflicts of interest, relate to potential damage to the holding 44. Bankers Trust II, slip op. at 29-34. Legal Developments company's subsidiary bank that might result from the proposed nonbanking activity. The Board has previously indicated that although a bank cannot be completely insulated from the fortunes of an affiliated nonbanking subsidiary, the greater the extent to which the nonbanking activity of a nonbank subsidiary of a holding company is insulated, both structurally and operationally, from the holding company's subsidiary bank, the less likely it is that these kinds of adverse effects will result from the conduct of the nonbanking activity.45 While the Board has found that the proposed placement activity may be conducted directly by a bank without danger of significant conflicts of interest, unsound banking practices, or other abuses, the transfer of this activity to a separate subsidiary of Applicant will negate further any possibility of adverse effects. In particular, under the proposal made by Applicant, the activity would be separated from the activities of Applicant's subsidiary banks, both through separate incorporation and through financial and operational limitations specifically designed to ensure that the proposed placement activity is insulated from the subsidiary banks. For example, as explained below, under section 23A of the Federal Reserve Act (12 U.S.C. § 371c), transactions between the affiliated banks and Company will be strictly limited, and under Applicant's proposal Company will not have officers, directors, or employees in common with Applicant's subsidiary banks. Similarly, as explained in greater detail below, Company's lending affiliates will be restricted in extending credit to issuers of commercial paper placed by Company and, significantly, these affiliates will not purchase, as principal or fiduciary, or recommend to customers the purchase of, commercial paper placed by Company. The Board also requires that Company's access to customer records of the affiliated banks be limited. Finally, although to some extent the potential for conflicts of interest and other adverse effects exists in connection with permissible loan participation and private placement activities of member banks, there is no evidence in recent experience or in the past that these operations have produced conflicts of interest or other abuses.46 Unsound Banking Practices. The Board has considered the extent to which the proposal would result in unsound banking practices or excessive financial risk to Applicant, Company, or Applicant's other subsid- 45. National Westminster Bank, PLC, 72 FEDERAL RESERVE BULLETIN a t 5 8 8 . 46. See Federal Reserve Board Staff Study, Commercial Private Placement Activities 65 (1977). Bank 149 iaries through Company's activity or through imprudent financial transactions with Company or made for its benefit. In addition, the Board has considered whether the public association and corporate linkages between Company and Applicant's subsidiary banks could lead to a loss of public confidence in the banks if losses are sustained by Company or by persons dealing with Company. The Board is of the view that the proposal as structured will not produce any unsound banking practices, as discussed below. Protestants first allege that Company could lose its own funds as a result of the commercial paper placement activity. The Board finds, however, that the risk of loss to Applicant or to Company as a result of this proposal is not excessive or inconsistent with prudent banking standards. As the activity is proposed by Applicant, Company would not purchase or repurchase any commercial paper for its own account or inventory unsold portions of a commercial paper issue in connection with its proposed placement activity. Since Company would act solely as agent, it would not assume any credit or market risk with respect to the paper it places.47 The Board also has determined that, contrary to protestants' assertions, the proposed activities are not likely to damage public confidence in Applicant's subsidiary banks. First, damage to the reputation of affiliated banks is most likely to occur if Company or depositors of these banks suffer losses. As noted, Company will not purchase commercial paper for its own account. Moreover, Company would not advertise or offer commercial paper to the public generally, but would place the paper in private transactions with a limited number of institutions, only some of whom may be depositors of Applicant's subsidiary banks. In addition, under Applicant's proposal, its subsidiary banks will not purchase, for accounts managed or advised by their trust departments, commercial paper placed by Company or even recommend that a customer purchase such paper, and no affiliate of Company will purchase such commercial paper for an account for which the affiliate has investment discretion or acts as investment adviser.48 Moreover, under this proposal, commercial paper will be placed by Company, not by Applicant's subsidiary banks, so that commercial paper will be purchased not from the bank but from Company, which is not a bank, and has no depositors, and whose operations will be separated 47. Moreover, as explained below, neither Company nor its affiliates will make any loans that are the functional equivalent of purchasing the paper being placed. 48. Bankers Trust will execute orders for commercial paper placed by Company only when specifically directed by the purchaser. 150 Federal Reserve Bulletin • February 1987 from the functions of Applicant's subsidiary banks.49 Thus, there is no reasonable likelihood that the reputation of Applicant's subsidiary banks will be damaged by Company's activities or that the banks will be associated or identified by the public with the success or failure of specific obligations or issuers. Conflicts of Interest. In determining whether the proposed placement activities are a proper incident to banking, the Board also has considered whether the activities would result in conflicts of interest. Given that the proposed activities would not be a significant activity of Company, the fact that banks have engaged in substantially similar activities for a number of years without giving rise to significant conflicts, and the limitations on the activity as proposed by Applicant, the Board believes that any potential conflicts arising from the proposal would not be significant. In particular, the protestants allege that Company's "salesman's interest" in the success of its commercial paper placement activity may affect its affiliate banks' ability to function as an impartial source of credit and as a disinterested financial advisor to its corporate, trust, correspondent, and other customers.50 First, the protestants allege that Applicant's subsidiary banks may be encouraged to make imprudent loans to finance the purchase of commercial paper placed by the affiliate. However, because the yields on commercial paper are generally lower than the rates charged for loans by banks, purchase of commercial paper with borrowed funds is unprofitable. Thus, the potential for this kind of abuse as a result of this proposal is negligible. Protestants also assert that a related conflict might also arise because Applicant's subsidiary banks may not be objective in extending credit to issuers of the commercial paper placed by Company. In conducting this activity at present, Bankers Trust does not provide any letter of credit or other guarantee arrangement to support an issue of commercial paper placed by the bank. Nor does Bankers Trust make loans to issuers of commercial paper it places where the loans are the functional equivalent of purchasing the paper 49. The court of appeals decision in Bankers Trust II stated that the Supreme Court had rejected the argument that commercial paper placement would not damage the reputation of the bank because purchasers are financially sophisticated institutions. Slip op. at 32-33. However, the Supreme Court's finding was made where bank depositors could purchase commercial paper "through their bank." Id. at 32. In contrast, here the bank's affiliate, not the bank, is placing the paper. Moreover, as was the case in the court of appeals GlassSteagall analysis in Bankers Trust II, the existence of a potential unsound practice is not fatal to a proposal under section 4(c)(8), since the likelihood of that adverse effect can be outweighed by the benefits to the public expected from the proposal. 50. See generally 1CI 1 at 630-632; Bankers Trust, 468 U.S. at 145-47. for its own account, since any credit it extends to the issuer of paper being placed is under different terms, at different times and for different purposes than the terms and timing of the paper being placed. Moreover, to insure that in practice funds borrowed from Bankers Trust are not used to support commercial paper placed by the bank, the bank assures itself that any advances by the bank to an issuer of commercial paper under any line of credit are not used to repay paper placed by the bank or to cover any unsold portion of a commercial paper issue placed by the bank.51 Since under Applicant's proposal Company would conduct its placement activity in a manner identical to the procedures currently followed by Bankers Trust, Company's operations and the lending operations of Applicant's subsidiary banks and other lending subsidiaries will also be conducted within these limitations. The Board also finds that there is no significant potential for Applicant's subsidiary banks to make unsound loans to issuers of commercial paper placed by Company in an attempt to improve the issuer's financial condition. The potential loss to the bank if such loans are not repaid would greatly exceed the very small commissions Company would receive for its placement services, typically one-eighth of one percent of the amount of paper placed, so that it is unreasonable to expect the bank to make such loans. In sum, Applicant and its affiliates will not use their credit to support commercial paper placed by Company, and the danger of imprudent loans to commercial paper issuers as a result of the application is not significant. Protestants also assert that Applicant's subsidiary banks may be tempted to make imprudent extensions of credit or other investments to support Company if it encounters financial difficulties. This conflict is inherent in transactions between banks and their affiliates generally and is addressed by section 23A of the Federal Reserve Act. (12 U.S.C. § 371c). That provision limits extensions of credit by a bank to its nonbank affiliates, as well as asset purchases from an affiliate, to 10 percent of the bank's capital and requires that any extensions of credit be well collateralized (e.g., 110 percent of the extension of credit if the collateral is composed of revenue bonds). Section 23A also prohibits a bank from purchasing low quality assets from an affiliate or accepting them as collateral for loans to an affiliate. In addition, the likelihood that 51. It is clear that lines of credit are not for these purposes if there is documentary evidence, for example, of substantial participation in the credit by other lenders or that the loan is for a documented special purpose, such as equipment financing, plant expansion, or inventory or receivables. Legal Developments Company will encounter losses that might motivate Bankers Trust or other subsidiaries of Applicant to make unsound loans or investments to shore up Company is not significant, given that Company will not hold or maintain an inventory of any paper with its own funds, and that the placement operation will not constitute a significant activity of Company or involve any significant amount of its assets. An additional potential conflict cited by protestants is the possibility that commercial paper placed by Company might be "palmed off' on Applicant's subsidiary banks. Currently, none of Bankers Trust's affiliates purchases for its own account commercial paper placed by Bankers Trust. After the function is transferred to Company, none of Company's affiliates (including Bankers Trust) will purchase paper being placed by Company either for its own account or a customer's account, and accordingly, there is no significant possibility that this conflict of interest will occur. Protestants also raise concerns relating to whether the proposals will impair Applicant's obligation to provide unbiased investment advice to trust department customers and customers relying on Applicant's advice in seeking to raise funds.52 This conflict will not arise as a result of this proposal because Company's affiliates will not purchase commercial paper placed by Company for accounts they manage or advise or provide investment advice to customers concerning the purchase of commercial paper placed by Company. The Board understands this limitation to mean that affiliates of Company will not advertise or distribute sales literature relating to commercial paper placed by Company.53 The final category of potential conflicts of interest cited by protestants involves possible harm to the interests of those who purchase commercial paper placed by Company. For example, protestants contend that Company might encourage issuers to issue commercial paper the proceeds of which will be used to repay loans made by Applicant's subsidiary banks, especially where the issuer is having difficulty repay- 52. See Bankers Trust, 468 U.S. at 146-147; ICI I, 401 U.S. at 633. 53. Protestants have also raised the possibility that Applicant might not provide impartial advice to customers about the best method of obtaining funds. However, the potential financial benefit to Company from the placement service is so small in relation to other services offered by Applicant that it would not be reasonable for Company to provide this kind of biased advice. Moreover, commercial paper is issued only by a small number of the nation's largest and financially strongest corporations, which clearly have the resources and expertise to evaluate independently the best methods of obtaining shortterm financing. Indeed, Applicant states that this activity was developed in response to the decision of Bankers Trust's most creditworthy borrowers to seek short-term funds in the commercial paper market rather than through bank loans. 151 ing the loans. The Board notes that because of the existence of commercial paper rating services, it is extremely difficult for corporations experiencing financial difficulties to obtain the high rating necessary to raise funds in the commercial paper market. In addition, the disclosure requirements of the federal securities laws require disclosure of material facts concerning the issuer's financial condition and the intended use of the proceeds of the offering. In the Board's view, these requirements mean at a minimum that if Company or any of its affiliates has a lending relationship with a particular issuer of commercial paper being placed, Company would disclose the existence of that relationship to each purchaser of that issuer's paper. Accordingly, subject to the foregoing limitations as proposed by Bankers Trust, the Board believes that the proposal does not pose the potential for any significant conflicts of interest.54 Unfair Competition. The Board has also considered protestants' contention that Company would have unfair competitive advantages over nonbank-affiliated commercial paper dealers. In particular, the SI A alleges that Company would enjoy unfair advantages in, for example, the rates it would pay for funding and having access to the credit files of affiliate banks to obtain information useful in marketing its services to issuers. The Board finds that this limited proposal would not result in unfair competition for the following reasons. With respect to the unfair funding claim, the Board notes at the outset that since Company will act only as agent in placing commercial paper, it will not be required to finance holdings or inventory of commercial paper purchased with its own funds. In addition, funding for Company would be provided by its parent holding company, which is not a bank. Rates paid by Applicant and other bank holding companies on their commercial paper have generally been the same as those paid by corporations of similar size and credit ratings. Moreover, since Company would be a corporation legally separate and apart from Applicant's subsidiary banks, Company could not obtain funding directly through federally insured deposits or the Federal Reserve's discount window, which is ordinarily available only to depository institutions. Furthermore, the Board does not believe that funds from such sources could effectively be provided to Company in view of 54. In light of the fact that the placement activity would, as a result of the proposal, be conducted by an affiliate of Bankers Trust rather than by the bank itself, any disclosure should also describe the difference between Company and its affiliated banks. 152 Federal Reserve Bulletin • February 1987 the statutory lending limitations and collateral requirements of section 23 A of the Federal Reserve Act, and the fact that any such loans or investments would be subject to review in the supervision and examination process. In any event, as the Board noted in its BankAmerica/Schwab decision, the legislative history of section 4(c)(8) of the Act indicates that the term "unfair competition" was intended to refer to unfair or unethical business conduct under the law, and not to disparities established by existing federal regulation of providers of financial services.55 Accordingly, for the reasons set out in BankAmericalSchwab, even if Company might obtain some funding advantage by reason of its affiliation with Applicant, the Board finds that any such advantage is not unfair competition within the meaning of section 4(c)(8) of the Act. The Board has also considered the allegation that unfair competition would result from sharing of confidential information between Company and its affiliates, such as granting Company access to the credit files of its affiliates so that Company could identify potential issuers of commercial paper and thus have an advantage in offering its services to those prospective issuers. There is no evidence that in conducting the commercial paper placement activity Bankers Trust has obtained any unfair advantage as a result of its purported access to confidential financial information concerning prospective customers. In any event, to remove even the possibility that some unwarranted competitive advantage might occur, as a condition of the Board's approval of this application, no lending affiliate of Company may disclose to Company any non-public customer information concerning an evaluation of the financial condition of an issuer whose paper is placed by Company or of any other customer of Company, except as expressly required by securities law or regulation. The Board does not believe that unfair competition or conflicts could arise from the potential for disclosure of confidential information held by Company to its affiliates. The Board notes that trading on inside information about issuers would violate the federal securities laws. Moreover, Applicant would have little incentive to gain access to confidential information possessed by Company since, as discussed above, Applicant and Company's other affiliates may not purchase as principal or in a fiduciary capacity any commercial paper placed by Company. Undue Concentration of Resources or Decreased Competition. The Board has carefully considered the possibility that these proposals would result in an 5 5 . 6 9 FEDERAL RESERVE B U L L E T I N 1 0 5 , 111 ( 1 9 8 3 ) , a f f i r m e d b y the Supreme Court in Schwab. undue concentration of resources, in view of the size of Applicant and the concern expressed in the BHC Act regarding the concentration of control over credit resources.56 The Board finds that this proposal is not likely to lead to undue concentration of resources or decreased competition under the facts and circumstances of record. Applicant seeks to transfer an existing operation currently being conducted by Bankers Trust to Applicant's commercial finance subsidiary. Thus, the proposal does not involve any combination of existing competitors or elimination of any existing provider of these services, but would instead enable the existing service to be offered on a nationwide basis. Moreover, as explained above, Company's share of the commercial paper market as a result of this proposal would be relatively insubstantial. In sum, the Board finds that this proposal, as limited by Applicant, is consistent with section 20 of the Glass-Steagall Act, and may reasonably be expected to result in public benefits that outweigh possible adverse effects. Accordingly, the Board finds that Applicant may conduct the proposed activities to the extent and in the manner described in this Order consistent with section 20 of the Glass-Steagall Act and section 4(c)(8) of the BHC Act.57 The Board's approval of this application extends only to the activity conducted within the following limitations proposed by Applicant for Company and Applicant's subsidiary banks and other subsidiaries, and the placement of commercial paper in any manner other than as described below and in this Order is not within the scope of the Board's approval here and is not authorized for Company: 1. Company will place only commercial paper that is prime quality, short-term (with maturities not exceeding nine months), in minimum denominations of at least $250,000, and that is exempt from the registration and prospectus requirements of the Securities Act of 1933 pursuant to section 3(a)(3) of that Act. 2. Company will place only commercial paper with a limited number of financially sophisticated institutions, which normally purchase large amounts of 56. See Conf. Rep. No. 1747, 91st Cong., 2d Sess. 17 (1970) (Statement of the Managers on the Part of the House). 57. Merrill Lynch requested the Board to hold a hearing on the application. Since the proposal involves only the transfer to Company of the commercial paper placement activity currently being conducted by Bankers Trust, this application presents no disputed issue of material fact and raises only questions that are legal in nature. The Board notes that it has ordered a hearing with regard to certain similar applications by Applicant and other bank holding companies, where the proposals are structured differently than this application and do raise factual issues. Merrill Lynch may participate in this hearing. Accordingly, the Board denies the hearing request with respect to this application. See 12 C.F.R. 262.3(e) and 225.23(g). Legal Developments other short-term money market obligations, and will not place paper with individuals. Company will make no general solicitation or general advertising for commercial paper it places and such paper will not be purchased by the general public. 3. Company will not purchase or repurchase for its own account the commercial paper being placed or inventory unsold portions of the paper. 4. The gross revenues derived from Company's commercial paper placement service will not in any year exceed 5 percent of Company's gross revenues. 5. The amount of commercial paper outstanding at any one time placed by Company will be less than 5 percent of the average amount of all dealer-placed commercial paper outstanding during the last four calendar quarters. 6. Neither Company nor any of its affiliates will provide any letter of credit or other guarantee to support commercial paper placed by Company. 7. Neither Company nor any of its affiliates will make loans to issuers of commercial paper placed by Company that are the functional equivalent of purchasing the paper for the account of its affiliate. Thus, any credit extended by any of these companies to the issuer will be under different terms, at different times, and for different purposes than the paper being placed. It would be clear that any such credit is for different purposes if there is documentary evidence of, for example, substantial participation in the credit by other lenders or that the loan is for a documented special purpose, such as equipment financing, plant expansion, or inventory or receivables. 8. Company and its affiliates will assure themselves that any advances to an issuer of commercial paper placed by Company are not used to repay the paper or to cover any unsold portion of a commercial paper issue placed by Company. 9. Neither Applicant nor any of Company's affiliates will purchase for its own account commercial paper placed by Company. 10. Applicant's subsidiary banks will not purchase commercial paper placed by Company for accounts managed or advised by their trust departments and neither the banks nor any of their affiliates will purchase commercial paper placed by Company for any other accounts they advise or for which they have investment discretion. 11. No affiliate of Company will provide investment advice to the purchasers of commercial paper placed by Company and will not advertise or distribute sales literature concerning such commercial paper. Moreover, where Company or any of its affiliates has a lending relationship with an issuer of commercial paper being placed by Company, Company will 153 at a minimum disclose the existence of that relationship to each purchaser of that issuer's paper. Any disclosure made by Company will also describe the difference between Company and Applicant's subsidiary banks. 12. Company will not have officers, directors, or employees in common with Applicant's subsidiary banks.58 In addition, with respect to the following limited area, the Board has also required that no lending affiliate of Company will disclose to Company any non-public customer information concerning an evaluation of the financial condition of an issuer whose paper is placed by Company or of any other customer of Company, except as expressly required by securities law or regulation. The Board's determination is subject to all of the conditions set forth in the Board's Regulation Y, including those in sections 225.4(d) and 225.23(b), and to the Board's authority to require modification or termination of the activities of the holding company or any of its subsidiaries as the Board finds necessary to ensure that the commercial paper placement activity of Company is consistent with safety and soundness and conflict of interest considerations and to assure compliance with the provisions of the BHC Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof.59 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 December 24, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governor Rice. WILLIAM W . WILES [SEAL] Secretary of the Board 58. The fact that conditions and limitations are relied on by the Board here to assure that this proposal complies with the public benefits test of section 4(c)(8) does not indicate that the activity approved violates the Glass-Steagall Act. The public benefits standard in section 4(c)(8) establishes a test that is independent of the Glass-Steagall Act. It is clear, for example, that certain securities activities that are lawful under the Glass-Steagall Act, such as providing investment advice and portfolio management, may raise the potential for adverse effects under section 4(c)(8) which may be addressed through the types of limitations established in this Order. See 12 C.F.R. 225.25(b)(4) n.l; ICI II, 450 U.S. at 62, 67. 59. As provided in section 225.23(b)(1), no reorganization of Company, such as the establishment of a subsidiary of Company to conduct the approved activity, may be consummated without prior Board approval. 154 Federal Reserve Bulletin • February 1987 Concurring Statement by Chairman Volcker I join with the majority of the Board in giving approval for the Bankers Trust application to engage in commercial paper placement in a commercial lending affiliate. I also concur in the Board's decision to request additional information before proceeding to a final decision on the applications by Bankers Trust, Citicorp, and J.P. Morgan to engage in underwriting commercial paper, mortgage-backed securities, municipal revenue bonds and consumer related receivables in a government securities underwriting affiliate. As an administrative agency, we are bound to carry out the function assigned by Congress of applying existing law to applications submitted to us. Today's decision, applying the Glass-Steagall Act, makes as much good sense as is possible to draw from applying a statute, adopted a half century ago, to a banking marketplace that technology and other competitive forces have altered in a manner and to an extent never envisioned by the enacting Congress. The Glass-Steagall Act authorizes the affiliates of banks to engage in underwriting securities so long as they are not "engaged principally" in this activity. In the light of the intent of the Act, which has long been considered, in short hand, to require the divorce of investment and commercial banking, the Board's conclusion that the term "engaged principally" includes any substantial activity, even though that function is less than 50 percent of the total, seems to me to be correct. It gives effect to what I believe was Congressional intent to assure that even limited underwriting activities not passing the threshold of "engaged principally" would be separated from the bank itself in a distinct corporate entity and that any possible adverse impact on an affiliated bank would be minimized. I also agree that the tests of 5 percent of income and 5 percent of market share constitute a reasonable threshold, consistent with the legislative intent, for determining what is a relatively insubstantial activity. Among other things, it seems to me a company that has a relatively large share of an investment market would, in most circumstances, be substantially engaged in that line of activity even if it is a relatively small fraction of the activity of a large affiliate. Nevertheless, it seems to me evident that application of the plain language and legislative intent in the far different circumstances now prevailing produces some odd results that point to the need for review and change of the basic legislation. For instance, it seems to me that no useful public policy goal is served by the incentive created by the Glass-Steagall Act, as we must interpret it, to shift assets (such as commercial loans) out of a bank and into nonbank affiliates of a holding company so that the affiliates are large enough to permit significant amounts of underwriting without being "principally engaged" in that activity. A sensible financial framework would not encourage artificially such a transfer of ordinary banking assets out of an insured bank that is a beneficiary of the federal safety net and subject to banking regulations. Moreover, certain quantitative and other limitations on the scale of the proposed underwriting activity to fit it into the framework of Glass-Steagall may be unnecessary or undesirable to protect the public interest. The limited decision taken by the Board today only emphasizes the fact that authority for underwriting of securities by banking organizations urgently needs to be legislatively reviewed and updated. Our common objective is a framework reconciling the requirements for a safe and sound banking and financial system with effective competition and the need for efficiency. My sense is that this sensible and reasonable result cannot be achieved within the four corners of existing law. The Supreme Court has recently admonished us in the Dimension case that the law must be applied as written, even though it produces curious results. The Board has, in my judgment, conscientiously followed that precept. The Court also noted in that case that the cure for anomalies brought about by change and time is in the hands of Congress. It is to that body that we must turn for wise action. I believe legislation should be adopted promptly to give straightforward authority for bank holding companies to engage in certain underwriting activities— underwriting commercial paper, mortgage-backed securities, revenue bonds and mutual funds—with such protections against conflicts of interest and self-dealing as may be appropriate. In addition, while apparently not ripe for action immediately, I would suggest the time has come for Congress to undertake a study of the need for change in the current prohibitions on corporate underwriting, recognizing that today, unlike 1933, bank holding companies conduct such activities abroad in substantial volume, and technological and other changes increasingly encourage "securitization" of some bank loans. I fully realize that these are hotly contested issues, with large private economic interests at stake. Although the legislative process has hitherto been paralyzed by this conflict, a new Congress provides new opportunity for prompt action in the public interest. I join the entire Board in pressing for prompt constructive legislation. December 24, 1986 Legal Developments Bayerische Vereinsbank AG Munich, Federal Republic of Germany Order Approving Application to Provide Investment Advisory Services Bayerische Vereinsbank AG, Munich, Federal Republic of Germany, a foreign bank subject to certain provisions of the Bank Holding Company Act ("BHC Act"), 12 U.S.C. §§ 1841-48, 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 continue to provide investment advisory services through AE Capital Management, Inc., New York, New York ("AECM"), serving as investment adviser to registered investment companies and providing portfolio investment advice to existing customers and to institutional and large private accounts.1 The Board has previously determined that those activities are closely related to banking and permissible for bank holding companies. 12 C.F.R. § 225.25(b)(4)(ii)-(iii). Notice of the application, affording interested persons an opportunity to submit comments, has been duly published. 51 Federal Register 31,982 (1986). 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 Act. Applicant, with total assets of approximately $53 billion, is the forty-second largest bank in the world and the fourth largest in the Federal Republic of Germany.2 Applicant engages in a wide range of retail, wholesale, and investment banking activities in Germany and abroad. In the United States, Applicant has branches in New York and Chicago; has agencies in Atlanta, Los Angeles, and Miami; owns all of the voting shares of AECM, a registered investment adviser; and owns 95 percent of the voting shares of Associated European Capital Corporation, New York, New York ("AEC"), a registered broker/dealer.3 AEC operates pursuant to section 8(c) of the International Banking Act ("IBA"), which permits a foreign bank such as Applicant to engage in any nonbanking activity in which it was engaged on July 26, 1978. 1. Applicant commenced the activities in question through AECM in 1984 without obtaining the prior approval required under section 4(c)(8). Having reviewed the relevant facts, the Board concludes that the failure to obtain prior approval was inadvertent and does not reflect adversely on the management of Applicant or AECM. 2. As of December 31, 1985. 3. Although AECM is currently owned by AEC, it will become a direct subsidiary either of Applicant or of a holding company to be formed and owned by Applicant. 155 12 U.S.C. § 3106(c). That authority is subject to review by the Board, which may, after opportunity for a hearing, require termination of any grandfathered activity if necessary to prevent unfair competition, conflicts of interests, or other adverse effects. AECM currently serves as investment adviser to eight investment companies, of which one is closedend and seven are technically open-end, and it wishes to serve as investment adviser to additional investment companies of the same kind. The seven open-end investment companies (collectively the "Investment Companies") differ from the usual mutual fund, which continuously offers new shares to the public. See generally 12 C.F.R. § 225.125(c). None of the Investment Companies has made an offering of securities, continuous or otherwise, in the United States or abroad. Each Investment Company's shares have been privately placed in the Federal Republic of Germany, and are owned by four or fewer West German corporations. To maintain favorable tax treatment under the tax treaty between the United States and the Federal Republic of Germany,4 each shareholder has a strong interest in continuing to own at least 25 percent of the Investment Company's shares, and thus also has an interest in restricting the issuance of new shares.5 Since their initial capitalization, the Investment Companies have issued shares only infrequently. One company went from two shareholders to three shortly after its organization; another from one to two. Several of the companies issue new shares annually so that shareholders may reinvest their dividends. With those exceptions, none of the Investment Companies has issued shares since its initial capitalization. There have been no redemptions to date. As each Investment Company has a stable shareholder base of institutional investors, it is not under pressure to issue shares frequently so as to offset redemptions. The Board has long maintained that an investment company that is open-end for purposes of the Investment Company Act, see 15 U.S.C. § 80a-5(a), may be closed-end for purposes of section 225.25(b)(4)(ii) of 4. Convention for the Avoidance of Double Taxation with Respect to Taxes on Income, July 22, 1954, 5 U.S.T. 2768, T.I.A.S. No. 3133, as amended by Protocol Modifying the Convention of July 22, 1954, Sept. 17, 1965, 16 U.S.T. 1875, T.I.A.S. No. 5920. 5. Under the tax treaty, dividends paid to a West German corporation by a U.S. corporation are not immediately subject to West German taxation if the U.S. corporation is subject to U.S. taxation and the West German corporation holds at least 25 percent of the U.S. corporation's outstanding voting shares. Art. XV(l)(b)l.(aa), 16 U.S.T. at 1886. Although a regulated investment company (as defined in the Internal Revenue Code) is a U.S. corporation subject to U.S. taxation for purposes of the tax treaty, such a company pays no U.S. taxes at the corporate level so long as it distributes its earnings to its shareholders. 156 Federal Reserve Bulletin • February 1987 Regulation Y if it issues shares only infrequently.6 Based on the particular facts of record, the Board concludes that the Investment Companies should be treated as closed-end companies for purposes of section 225.25(b)(4)(ii). Accordingly, the activities in question are permissible under that section regardless of whether Applicant organized, sponsored, or controls the Investment Companies. In cases under section 4(c)(8) of the BHC Act, the Board evaluates the financial resources of the applicant, including its subsidiaries, and the effect of the proposed transaction on those resources. 12 C.F.R. § 225.24. In accordance with the principles of national treatment and competitive equity, the Board expects a foreign bank to meet the same general standards of financial strength as domestic bank holding companies. On the other hand, the Board is aware that outside the United States foreign banks operate under different regulatory and supervisory requirements, accounting principles, asset quality standards, and banking practices and traditions, and that these differences make it difficult to compare foreign banks' capital positions with those of domestic bank holding companies. The appropriate balancing of these concerns raises complex issues that require careful consideration and that the Board currently has under review. The Board is reexamining the capital standards applicable to domestic bank holding companies and considering revisions that might make those standards more readily comparable to those of foreign banks. The Board is also pursuing consultations with foreign banking authorities about appropriate capital standards for banks operating internationally. Pending the outcome of those deliberations and consultations, the Board is considering case-by-case the issues raised by foreign banks' applications to engage in activities in the United States. In this instance, Applicant's primary capital ratio, as publicly reported, is below the Board's Capital Adequacy Guidelines. However, after certain adjustments to take account of German banking and accounting practices (particularly the practice of carrying securities at or below historical cost, which in this case is substantially below their market value) as well as consideration of all available information relating to Applicant's overall financial condition, Applicant's capital ratio more nearly approximates U.S. standards. The Board notes that well over half of Applicant's assets are mortgage loans funded by mortgagebacked bonds, and that some 64 percent of those loans are to state and local governments in the Federal 6. See Letter dated March 8, 1974, to Mr. G. Duane Vieth. Republic of Germany. The Board also notes that the application involves nonbanking activities that generate fee income and that require only a minimal commitment of capital. In light of all the facts of record, the Board has determined that financial factors are consistent with approval of the application. To approve the application, the Board must find that Applicant's performance of the activities in question "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, 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 evaluating those factors, the Board considered that Applicant, through AEC, engages in securities activities in the United States that are not permissible for U.S. bank holding companies. As a result, Applicant could conceivably gain an unfair competitive advantage over domestic bank holding companies by combining grandfathered securities activities with activities permissible under section 4(c)(8). That could occur if the grandfathered activities were used to support or enhance the section 4(c)(8) activities, thus allowing Applicant to offer a wide array of services not permissible for domestic bank holding companies. Moreover, the combination of AEC's underwriting activities and AECM's investment advisory activities could give rise to conflicts of interests. Applicant has, however, made a series of commitments aimed at separating the operations of AEC and AECM and avoiding conflicts of interests: Apart from clerical and support staff, AEC and AECM will have separate officers, directors, and employees. AEC and AECM will not solicit customers for each other in the United States. No customer lists or confidential information about customers will be passed between AEC and AECM. AEC will not sell or purchase securities, either as a principal or as a broker, to, from, or for any investment company advised by AECM, or otherwise perform for such an investment company any service that AEC might have authority to provide under the IB A. No employee of AEC will serve as a portfolio manager of any investment company advised by AECM. AECM will not provide investment advice about the securities of Applicant or its subsidiaries or affiliates. AECM will not give investment advice about securities that are being underwritten by one of its affiliates, or in which an affiliate is making a market, unless AECM has independently analyzed those securities in the same manner and to the same extent as if they were not underwritten by an affiliate; discloses the affiliate's involvement with the securities and relationship to AECM; and obtains the customer's consent before any such securities are purchased for Legal Developments the customer's account. AECM will not engage in any promotional activities relating to any distribution of securities that are being underwritten by one of its affiliates. In light of these and other commitments, as well as applicable legal restrictions,7 the Board believes that Applicant would not have an unfair competitive advantage in conducting the activities in question under section 4(c)(8), and that those activities would not give rise to conflicts of interests. The Board notes, moreover, that Applicant will limit its investment advisory services to existing customers and to investment companies and institutional and large private accounts, and will not provide such services to the general public. There is no evidence of record indicating that the activities in question would result in undue concentration of resources, unsound banking practices, or other adverse effects. By commencing the activities de novo, Applicant increased the number of firms providing investment advisory services; thus competitive factors lend weight toward approval of the application. Managerial factors are consistent with approval. Based on the foregoing and other facts of record, the Board concludes that the balance of the public interest factors it is required to consider under section 4(c)(8) favors approval of the application. Accordingly, the application is hereby approved. This approval is subject to all of the conditions set forth in Regulation Y, including those in sections 225.4(d) and 225.23(b), 12 C.F.R. §§ 225.4(d), 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, and to prevent evasions of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES MCAFEE [SEALI Associate Secretary of the Board 7. The Securities Exchange Act, the Investment Company Act, and the Investment Advisers Act also tend to separate the operations of AEC and AECM and to reduce the risk of conflicts of interests. For example, the Investment Company Act generally prohibits an investment company advised by AECM from purchasing any securities of which AEC is a principal underwriter or from engaging in any principal transaction with AEC. 15 U.S.C. §§ 80a-10(f), -17(a). In keeping with the Investment Advisers Act, AECM will disclose its relationship with its affiliates to each of its customers, and will have no arrangement with any distributor of securities regarding the advice AECM gives concerning such securities. 157 Citicorp New York, New York Order Approving Application to Execute and Clear Futures Contracts on Stock Indexes Citicorp, New York, New York, a bank holding company within the meaning of the Bank Holding Company Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), has applied pursuant to section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(3) of the Board's Regulation Y (12 C.F.R. § 225.23(a)(3)) to engage de novo through its wholly owned subsidiary, Citicorp Futures Corporation ("CFC"), in the execution and clearance, on major commodity exchanges, of futures contracts on stock indexes and options on such futures contracts. CFC proposes to execute and clear the Standard and Poor's 100 Stock Price Index futures contract, the Standard & Poor's 500 Stock Price Index futures contract ("S&P 500") and options on the S&P 500, all of which are currently traded on the Index and Option Division of the Chicago Mercantile Exchange. Applicant proposes to offer these services to major corporations, financial institutions, and other sophisticated customers in the United States and abroad. 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 (50 Federal Register 27,684 (1985)). 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. Citicorp, with total consolidated assets of $186.0 billion,1 is the largest banking organization in the United States. It presently operates eight banking subsidiaries and engages, directly and through subsidiaries, in a variety of nonbanking activities. CFC is a futures commission merchant ("FCM") registered with the Commodity Futures Trading Commission ("CFTC") that engages in the execution and clearance of options contracts on bullion, foreign exchange, government securities and money market instruments, and options on futures contracts based on these commodities and instruments on major commodities exchanges for nonaffiliated persons. The Board has previously determined that the execution and clearance of futures contracts, and options on futures contracts, based on stock indexes is closely 1. As of September 30, 1986. 158 Federal Reserve Bulletin • February 1987 related to banking. J.P. Morgan & Co. Incorporated, 71 FEDERAL RESERVE BULLETIN 251 (1985). T h e p r o - posed activities of CFC are essentially identical to those activities previously approved by the Board. Thus, the Board concludes that Applicant's proposal to execute and clear futures contracts on stock indexes is closely related to banking. In order to approve this application, 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)). Consummation of Applicant's proposal would provide added convenience to those clients of Applicant and its subsidiaries that trade in the cash, forward and futures markets for these instruments. The Board expects that the de novo entry of Applicant 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 the performance of the proposed activities by Applicant can reasonably be expected to provide benefits to the public. The Board also has considered the potential for adverse effects that may be associated with this proposal. There is no evidence in the record that consummation of the proposed FCM activities would result in any adverse effects such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. In addition, the Board has taken into account and has relied on the regulatory framework established pursuant to law by the CFTC for the trading of futures, as well as the conditions set forth in section 225.25(b)(18) of Regulation Y with respect to executing and clearing futures contracts. Based upon a consideration of all the relevant facts, the Board concludes that the balance of the public interest factors that the Board is required to consider under section 4(c)(8) is favorable. This determination is also 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 the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof. 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 New York pursuant to delegated authority. By order of the Board of Governors, effective December 12, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. BARBARA R . LOWREY [SEAL] Associate Secretary of the Board Commonwealth Bancshares Corporation Williamsport, Pennsylvania Order Approving Provision of Employee Benefits Consulting Services Commonwealth Bancshares Corporation, Williamsport, Pennsylvania, a bank holding company within the meaning of the Bank Holding Company Act ("Act"), 12 U.S.C. § 1841 et seq., has applied for the Board's approval under section 4(c)(8) of the 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 all of the voting shares of Commonwealth Employer Services, Inc., Williamsport, Pennsylvania. Notice of the application, affording interested persons an opportunity to submit comments on the proposal, has been duly published (51 Federal Register 41,836 (1986)). 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 Act. Applicant, a bank holding company by virtue of its ownership of Commonwealth Bank and Trust Company, N.A., Williamsport, Pennsylvania, has total consolidated assets of $864 million.1 Applicant also engages in certain nonbanking activities, including community development and underwriting credit life, accident and health insurance for the subsidiaries of the bank holding company. Applicant proposes to acquire Company, which will be an employee benefits consulting firm that will provide services with regard to self-directed employee group health benefit programs. Company's activities can be divided into four basic categories: 1. Plan Design—designing employee health benefit plans, including determining funding levels and cost estimates; 1. Data are as of September 30, 1986. Legal Developments 2. Plan Implementation—providing assistance in implementing the health plans, including assistance in the preparation of plan documents and the implementation of employee benefit administration systems, and arranging for services from outside agencies; 3. Administrative Services—providing administrative services, including recordkeeping services and preparing periodic and other reports and government filings; 4. Employee Communications—developing employee communication programs, including participation in seminars, public programs and other forums relating to such developments. The Board has previously approved applications by bank holding companies to provide employee benefits consulting services with regard to defined benefit, defined contribution plans, and other employee benefit plans, including health care plans.2 In its orders, the Board has determined that the provision of services for these types of plans encompassed the type of services banks have traditionally performed and that the provision of employee benefits consulting services for these plans was operationally or functionally related to the trust services that banks traditionally provide to customers. The Board also stated that the activity essentially involved the provision of financial information and thus, was similar to a number of financial services, such as the provision of investment and general economic information, and financial data processing and transmission, all of which are activities that are permissible for bank holding companies.3 Thus, the Board concluded that the provision of employee benefits consulting services for employee benefit plans, including health care plans, is closely related to banking. In order to approve this application, the Board must also find that the performance of the proposed activity "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." With respect to the proposed employee benefits consulting activities of Applicant, it appears from the record that authorizing the activity would enhance competition and provide greater convenience and in- 2. Norstar Bancorp, Inc., 7 2 F E D E R A L RESERVE B U L L E T I N (1986); BankVermont Corporation, 72 FEDERAL RESERVE 337 (1986); Norstar Bancorp, Inc., 71 FEDERAL RESERVE 656 (1985). 3. 12 C.F.R. § 225.25(b)(4), (7), (20), & (21) (1986). 729 159 creased efficiencies, without resulting in any adverse consequences. Clients will have the option of obtaining a complete package of employee benefits consulting services from a single company, including those services that can be provided by other subsidiaries of Applicant, resulting in increased convenience to the customers for this service. In addition, the increase in the number of companies that can conduct a broad array of services with regard to employee benefits consulting is likely to enhance competition in the provision of this service. There is no evidence in the record to indicate that Applicant's performance of the proposed activity would lead to any undue concentration of resources, decreased or unfair competition, unsound banking practices, or other adverse effects. Clients will have the option to use any component of Applicant's employee benefits consulting services individually, or the entire package of services, and Applicant has committed to avoid tying any employee benefits consulting service to the purchase of the entire employee benefits package or to any other service offered by Applicant or its subsidiaries. In its evaluation of Applicant's managerial resources, the Board has considered certain violations by Applicant of the Currency and Foreign Transactions Reporting Act ("CFTRA") and the regulations thereunder.4 The Board notes that Applicant has cooperated with law enforcement agencies and has established comprehensive policies and procedures to ensure compliance with the CFTRA. Examiners of the Office of the Comptroller of the Currency have reviewed the sufficiency of the compliance procedures adopted and their efficacy in correcting the deficiencies. The Board also has consulted with appropriate enforcement agencies, and has considered Applicant's past record of compliance with law. The Board, therefore, concludes that the managerial resources of Applicant and Bank are consistent with approval. Based upon the foregoing and all the facts of record, including certain commitments made by Applicant, the Board has determined that the balance of public interest factors it is required to consider under section 4(c)(8) is favorable. Accordingly, the application is hereby approved. This determination is subject to the conditions set forth in sections 225.4(d) and 225.23(b)(3) of the Board's Regulation Y, 12 C.F.R. §§ 225.4(d) and 225.23(b)(3). The approval is also subject to the Board's authority to require modification or termination of the activities of the holding company or any of its subsidiaries as the Board finds necessary to assure compliance with the provisions BULLETIN BULLETIN 4. 31 U.S.C. § 5311 et seq.\ 31 C.F.R. § 103. 160 Federal Reserve Bulletin • February 1987 and purposes of the Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof. This transaction shall not be commenced 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 Philadelphia, pursuant to delegated authority. By order of the Board of Governors, effective December 16, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governors Wallich and Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board Credit Suisse Zurich, Switzerland Order Approving Acquisition of Investment Advisor Credit Suisse, Zurich, Switzerland, a foreign bank subject to certain provisions of the Bank Holding Company Act ("Act"), 12 U.S.C. §§ 1841-1848, has applied for the Board's approval under section 4(c)(8) of the 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 through its indirect subsidiary, Financiere Credit Suisse-First Boston ("FCSFB"), Zug, Switzerland, substantially all of the assets of John M. Blewer, Inc. ("Company"), New York, New York, a registered investment advisor. FCSFB will acquire the assets of Company through a new subsidiary formed for that purpose and will thereby engage in providing portfolio advice and portfolio management services to institutions and individuals. Such activities have been determined by the Board to be closely related to banking and permissible for bank holding companies. 12 C.F.R. § 225.25(b)(4)(iii). Notice of the application, affording interested persons the opportunity to submit comments, has been duly published. 51 Federal Register 34,689 (1986). 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 Act. Applicant, with total assets of approximately U. S. $50.5 billion, is the 61st largest banking organization in the world and the third largest in Switzerland.1 In the 1. Data are as of June 30, 1986. United States, Applicant maintains branches in New York and Los Angeles and an agency in Miami. As a result, Applicant is subject to the nonbanking restrictions of section 4 of the Act as if it were a bank holding company. Applicant also engages in activities in the United States through subsidiaries, described below, that are grandfathered under section 8(c) of the International Banking Act of 1978 ("IBA") (12 U.S.C. § 3106(c)). Section 8(c) of the IBA permits a foreign bank such as Applicant to continue to engage in any nonbanking activities in which it was engaged on July 26, 1978. This authority is subject to review by the Board, which may, after opportunity for a hearing, require termination of any grandfathered activity if necessary to prevent adverse effects. Applicant controls two subsidiaries, Swiss American Asset Management International, Inc. ("SAAMI"), and Swiss American Securities, Inc. ("SASI"), that engage in certain securities activities, including investment advisory activities, in the United States pursuant to section 8(c) of the IBA. In addition, through FCSFB, Applicant holds approximately 35 percent of the shares of First Boston, Inc., New York, New York, a publicly held company that is a registered broker-dealer in the United States and also engages in investment banking activities outside the United States. Applicant's interest in First Boston, which is considered a domestically-controlled affiliate of Applicant under section 8(c) of the IBA, is also grandfathered under the IBA. Company is a registered investment advisor under the Investment Advisers Act of 1940 and provides investment advice and portfolio management services to individuals and institutions. The acquisition of Company will be made by FCSFB in order to establish an investment advisory presence in the United States independent of Applicant and its other affiliates. Section 8(c) generally does not authorize the expansion of a grandfathered nonbanking activity through the acquisition of a going concern. Therefore, Applicant has applied for the Board's approval of the acquisition under section 4(c)(8) and Regulation Y. In applications under section 4(c)(8) of the Act, the Board evaluates the financial resources of the applicant, including its subsidiaries, and the effects of the proposed transaction on those resources. The Board has considered the financial resources of Applicant and notes that the publicly reported primary capital ratio of Applicant is in conformance with the capital guidelines established by the Board for bank holding companies. The Board also notes that the application involves activities that generate fee income and do not require a substantial commitment of capital. In light of these and other facts of record, the Board has deter- Legal Developments mined that the financial resources of Applicant are satisfactory and consistent with approval of the application. As noted above, the activities of Company have been determined by the Board to be closely related to banking. In order to approve this application, the Board must also find that the performance of the proposed activity by Applicant "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts or interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8). In its evaluation of these factors, the Board considered the fact that Applicant indirectly engages in a wide range of securities activities in the United States that are not permissible either for United States bank holding companies or for other foreign banking organizations that do not have grandfathered securities affiliates. The Board has considered the potential for unfair competition through the combination of grandfathered securities activities with permissible activities under section 4(c)(8). This could arise if grandfathered securities affiliates were used to support and enhance the activities of a company operating under section 4(c)(8), thereby enabling the company to offer to customers a wide array of services not permitted for bank holding companies. In addition, the combination of permissible investment advisory activities and impermissible securities underwriting activities in the United States creates the potential for conflicts of interest. In this case, the facts of record indicate that Company is intended to establish for FCSFB an investment advisory presence in the United States and will operate independently of First Boston, SAAMI and SASI. There will be no director, officer or employee interlocks between Company and any of these affiliates. In addition, there will be no joint marketing efforts undertaken by Company and any of its grandfathered affiliates. Company will not share fees, profits or customer information, will not make customer referrals, and will not engage in cross-marketing involving these affiliates. In order to further the separation of the companies, thereby reducing the potential for competitive advantage, and in order to prevent conflicts of interest that may arise from the fact that Applicant will operate both grandfathered underwriting affiliates and an investment advisory company, Applicant has also made certain commitments. Company will not provide advice on any securities of Applicant, First Boston or any other affiliate, and Company will disclose to its clients its relationships with its affiliates. Company 161 will not provide investment advice to a client with respect to securities that are part of a distribution by an affiliate or in which an affiliate makes a market, unless Company has conducted an independent analysis of such securities in the same manner and to the same extent as if the securities were not underwritten or dealt in by an affiliate, discloses the fact of the affiliation to its client, and obtains the client's prior consent to the purchase of any such securities. Company will not engage in promotional activities with respect to any distribution of securities being underwritten by an affiliate. The Board notes that these commitments reduce the potential for conflicts of interest and enhance the separation of the companies, thereby reducing the potential for any competitive advantage to accrue to Applicant. The Board has also considered whether other adverse effects on competition may result from the proposal and notes that, although Company engages in activities that are also provided by Applicant's affiliates, Company is relatively small and its acquisition by FCSFB will not eliminate substantial competition in any relevant area. Moreover, acquisition of Company can be expected to result in some increase in competition due to the financial support provided by FCSFB, enabling Company to become a stronger competitor. In light of the facts of record and the commitments offered by Applicant to enhance the separation of Company from its grandfathered securities affiliates, the Board finds that the proposal would not result in conflicts of interest or decreased or unfair competition. There is also no evidence in the record that indicates that Applicant's proposal would result in any undue concentration of resources, unsound banking practices or other adverse effects. Based on the foregoing and other facts of record, the Board has determined that the balance of public interest factors it is required to consider under section (4)(8) of the BHC Act is favorable. Accordingly, the application is hereby approved. The Board's determination in this case is subject to all of the conditions set forth in Regulation Y, including those in 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, and prevent evasions of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The transaction shall not be consummated later than three months after the 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. 162 Federal Reserve Bulletin • February 1987 By order of the Board of Governors, effective December 2, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES MCAFEE [SEAL] Associate Secretary of the Board First United Bancshares, Inc. Ord, Nebraska Order Approving Acquisition of Insurance Agencies First United Bancshares, Inc., Ord, Nebraska, a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act") (12 U.S.C. § 1841 et seq.), has applied pursuant to section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) to engage in general insurance activities: (1) by acquiring all of the assets of Ord Insurance Agency, Ord, Nebraska, and Wolbach Insurance Agency, Wolbach, Nebraska; and (2) by acquiring indirect control of Grant Insurance Agency, Grant, Nebraska, through the acquisition of its parent company Grant Bancshares, Inc., Grant, Nebraska.1 Notice of the applications, affording interested persons an opportunity to submit comments on the proposal, has been duly published (51 Federal Register 37,650 (1986). The time for filing comments has expired, and the Board has considered the applications and all comments received, including those of various insurance associations,2 in light of the public interest factors set forth in section 4(c)(8) of the BHC Act. Applicant proposes to engage in general insurance activities, pursuant to exemption C of section 4(c)(8) of BHC Act, in Ord, Wolbach, and Grant, Nebraska, each a town with a population of fewer than 5000 residents, according to the 1980 census. In reviewing 1. These applications are part of a restructuring of a chain of three bank holding companies and five subsidiary banks under common ownership into a single multibank holding company. The Board approved this restructuring, including Applicant's acquisition of control of Grant Bancshares, Inc., by Order dated November 25, 1986, but it delayed consideration of the proposed restructuring of the three existing insurance agency subsidiaries to allow additional time for public comment. 2. The Board has considered the comments of the Association of Life Underwriters, National Association of Professional Insurance Agents, Independent Insurance Agents of America, Inc., National Association of Casualty and Surety Agents, and National Association of Surety Bond Producers. the applications, the Board has considered the comments of the insurance groups that the Board deny these applications because Applicant has its principal place of banking business in North Platte, Nebraska, a town with a population of more than 5000 inhabitants. In addition, the insurance groups argue the Board should consider the cumulative financial and economic impact of permitting a single banking organization to operate insurance agencies in several small towns. The insurance groups apparently would have the Board find that several small-town insurance agencies could jointly serve an area or "place" with a population in excess of 5000 inhabitants. The Board has previously decided that exemption C of section 4(c)(8) of the BHC Act does not require a bank holding company to have its principal place of banking business in a town with a population of fewer than 5000 residents. The Board discussed its findings and provided detailed reasons in support of this conclusion in its recently adopted amendment to Regulation Y governing permissible insurance activities for bank holding companies. See 51 Federal Register 36,201 (October 9, 1986). For reasons stated in the commentary accompanying the insurance regulation, the Board finds no merit to the argument of the insurance groups that a bank holding company engaged in general insurance agency activities in a town of fewer than 5000 inhabitants must have its principal place of banking business in such a small town. The Board also finds there is no merit to the insurance parties second argument, that the Board must consider the cumulative impact of permitting a single bank holding company to operate general insurance agency subsidiaries in more than one town. The insurance parties cannot point to statutory language in exemption C, the legislative history, or Board precedent, either under the new Board insurance regulation (12 C.F.R. § 225.25(b)(8)(iii)) or under its prior regulation (12 C.F.R. § 225.25(b)(8)(ii)( 1986)), that supports their position. For over 10 years, the Board has examined each insurance agency subsidiary proposed to be located in a small town to determine that that subsidiary properly served the limited geographic area of the small town and surrounding environs and to determine that the proposed agency would not solicit business from places having more than 5000 residents. At no time has the Board aggregated either the populations to be served or the service areas of bank holding companies with two or more small-town insurance agency subsidiaries in order to limit the total activities of all such small town agency subsidiaries. The Board finds nothing in exemption C and no policy considerations to compel a change in its longstanding practice and the imposition of a substantial additional restriction now proposed by the insurance parties. Legal Developments Applicant has provided a sufficient record that Ord, Wolbach and Grant are towns of fewer than 5000 residents. Applicant has described the proposed service area of each subsidiary and demonstrated that each will include fewer than 5000 inhabitants. There is some additional basis to rely on Applicant's figures, since the proposed subsidiaries have operated for some time as subsidiaries of Applicant's predecessor bank holding companies and were subject to Board supervision and regulation. Each proposed subsidiary is a separate company with a history of independent operation. Finally, since Applicant's three proposed subsidiaries are located 40 miles to more than 190 miles apart, it is implausible to believe that these entities might jointly serve a single large market area. Thus the Board not only rejects the criterion suggested by the insurance parties but also finds it is inapplicable in this case. Consummation of the proposal would not result in the elimination of any competition. 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 interest, unsound banking practices, or other adverse effects on the public interest. Accordingly, the Board has determined that the balance of the public interest factors it must consider under section 4(c)(8) of the Act is consistent with approval of the application. Based on the foregoing and other facts of record, the Board has determined that the applications should be and hereby are 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 the provisions and purposes of the Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof. These transactions 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 Kansas City, pursuant to delegated authority. By order of the Board of Governors, effective December 16, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governors Wallich and Rice. JAMES MCAFEE [SEAL] Associate Secretary of the Board 163 Orders Approved Under Sections 3 and 4 of the Bank Holding Company Act Fidelcor, Inc. Philadelphia, Pennsylvania Order Approving Acquisition of a Bank Holding Company and Underwriting Credit-Related Insurance Fidelcor, Inc., Philadelphia, Pennsylvania, a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended ("BHC Act" or "Act") (12 U.S.C. § 1841 et seq.), has applied for the Board's approval under section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)), to acquire Merchants Bancorp., Inc., Allentown, Pennsylvania ("Merchants"), and thereby indirectly to acquire Merchants Bank, N.A., Allentown, Pennsylvania ("Merchants Bank"), and Merchants Bank North, Wilkes-Barre, Pennsylvania ("Merchants North"). Applicant has also filed a section 4(c)(8) application (12 U.S.C. § 1843(c)(8)) to acquire Merchants' nonbanking subsidiary, Merchants Life Insurance Company, Phoenix, Arizona, and thereby to underwrite credit-related life and accident and health insurance. Notice of these applications, affording an opportunity for interested persons to submit comments, has been given in accordance with section 3(b) of the BHC Act (51 Federal Register 33,804 (1986)). The time for filing comments has expired, and the Board has considered these 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)) and the considerations in section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)). Applicant is the fourth largest commercial banking organization in Pennsylvania, holding deposits of $5.7 billion, representing 5.9 percent of total deposits in commercial banks in the state.1 Merchants is the 12th largest commercial banking organization in Pennsylvania, controlling deposits of $1.8 billion, representing 1.8 percent of total deposits in commercial banks in the state. Upon consummation of this proposal, Applicant would become the third largest banking organization in the state and would control approximately 7.7 percent of deposits in commercial banks in the state. Consummation of the proposal would not have a significant adverse effect on the concentration of banking resources in the state. 1. AH banking data are as of June 30, 1986, unless otherwise specified. 164 Federal Reserve Bulletin • February 1987 Applicant and Merchants compete in the Allentown/ Bethlehem market.2 Applicant is the sixth largest of 38 commercial banking organizations in the market, with total deposits of $154.2 million, representing 3.1 percent of total deposits in commercial banks.3 Merchants is the largest commercial banking organization in the market, with total deposits of $1.13 billion, representing 22.6 percent of total deposits in commercial banks in the market. After consummation of the proposal, Applicant's share of the deposits in commercial banks in the market would be 25.7 percent. The Allentown/Bethlehem market is considered moderately concentrated, with the four largest banks controlling 62.1 percent of the deposits in commercial banks. The Herfindahl-Hirschman Index ("HHI") will increase by 152 points to 1,377 and the four-firm concentration ratio will increase to 65.2 percent.4 Although consummation of the proposal would eliminate some existing competition between Applicant and Merchants in the Allentown/Bethlehem banking market, numerous other commercial banking organizations would remain as competitors in the market after consummation. In addition, the presence of 22 thrift institutions that control approximately 27 percent of the market's total deposits mitigates the anticompetitive effects of the transaction.5 Thrift institutions already exert a considerable competitive influence in the market as providers of NOW accounts and consumer loans. In addition, several of the thrift institutions make commercial loans and provide an alternative for such services in the Allentown/Bethlehem market. Based upon the above considerations, the Board concludes that consummation of the propos- 2. The Allentown/Bethlehem market is defined by the Allentown/ Bethlehem Metropolitan Statistical Area and includes Carbon, Lehigh, Northampton and Warren Counties in Pennsylvania. 3. Market structure data are as of June 30, 1985, and account for all acquisitions that have been consummated as of September 29, 1986. 4. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), any market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated, and the Department is likely to challenge a merger that increases the HHI by more than 100 points, unless other facts of record indicate that the merger is not likely substantially to lessen competition. The Department 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 postmerger HHI is at least 1800 and the merger increases the HHI by at least 200 points. 5. The Board has previously indicated that thrift institutions have become, or have the potential to become, major competitors of commercial banks. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE BULLETIN 2215 (1984); GeneralBancshares Corporation, 69 FEDERAL RESERVE BULLETIN 802 (1983); First Tennessee National Corporation, 69 FEDERAL RESERVE BULLETIN 298 (1983). al is not likely to substantially lessen competition in the Allentown/Bethlehem banking market.6 The Board has also considered the effects of this proposal on probable future competition in the markets in which either Applicant or Merchants, but not both, competes. In light of the number of probable future entrants into each of these markets and other facts of record, the Board concludes that consummation of this proposal would not have any significant adverse effect on probable future competition in any market. In its evaluation of Applicant's managerial resources, the Board has considered certain violations by Applicant and its subsidiary bank and Merchants and its subsidiary banks of the Currency and Foreign Transactions Reporting Act ("CFTRA") and the regulations thereunder.7 In this regard, the Board notes that Applicant brought these matters to the attention of the appropriate supervisory authorities after the violations were discovered through an internal audit. Applicant and its subsidiary bank and Merchants and its subsidiaries have also undertaken comprehensive remedial programs to correct these violations and to prevent violations from occurring in the future. Applicant has advised the Board that it has: completely restructured its compliance function and instituted a new compliance committee; designated a compliance officer with responsibility for compliance management; created a new unit to manage all aspects of CFTRA and provided this unit with the authority and capacity to examine every reportable transaction, including multiple deposits or withdrawals involving a single account on a given day, and to review all CTR reports for accuracy and completeness before filing; reviewed, revised, automated and centralized the exemption lists which are regularly distributed to all branches; prepared a handbook exclusively on the subject of CFTRA compliance and distributed the handbook throughout the branches and appropriate operations areas; developed a separate policies and procedures manual for CFTRA compliance; provided training for personnel in the branch system, the money center, bookkeeping, and other areas affected by the CFTRA regulations; and incorporated CFTRA training into all new branch staff training sessions. The sufficiency of the compliance procedures adopted by Applicant and their efficacy in correcting the 6. If 50 percent of deposits held by thrift institutions in the Allentown/Bethlehem banking market were included in the calculation of market concentration, the share of total deposits held by the four largest organizations would be 52.2 percent. Applicant would control 21.8 percent of the market's deposits upon consummation. The HHI would increase by 100 points to 995. 7. 31 U.S.C. § 5311 et seq.\ 31 C.F.R. § 103. Legal Developments deficiencies have been reviewed by examiners of the Office of the Comptroller of the Currency. The Board notes that Applicant has cooperated fully with law enforcement agencies. The Board has also consulted with appropriate enforcement agencies with respect to this matter, and has considered Applicant's past record of compliance with the law. The Board has also considered certain violations of CFTRA by Merchants' subsidiary banks. Merchants has taken remedial action as a result of the discovery of these violations, including the formation of a compliance unit and additional staff training. Applicant has stated that following the acquisition, it will extend its compliance system to Merchants' subsidiaries. For the foregoing reasons and based upon a review of all of the facts of record, the Board concludes that the managerial resources of Applicant and Merchants are consistent with approval. The Board also finds that the financial resources and future prospects of Applicant and Merchants are consistent with approval of the applications. Considerations relating to convenience and needs of the communities to be served also are consistent with approval. Applicant has also applied, pursuant to section 4(c)(8) of the Act, to acquire Merchants Life Insurance Company, Phoenix, Arizona ("Merchants Life"), the nonbanking subsidiary of Merchants, and thereby to engage in reinsuring credit-related life and accident and health insurance in conjunction with consumer lending. These activities are permissible for bank holding companies under section 225.25 (b)(8) of the Board's Regulation Y (12 C.F.R. § 225.25(b)(8)). Consummation of the proposal would not result in the elimination of any competition. 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 interest, unsound banking practices, or other adverse effects on the public interest. Accordingly, the Board has determined that the balance of the public interest factors it must consider under section 4(c)(8) of the Act is consistent with approval of the application. Based on the foregoing and other facts of record, the Board has determined that the applications under sections 3 and 4 of the Act should be and hereby are approved. The banking acquisition shall not be consummated before the thirtieth calendar day following the effective date of this Order, and neither the banking acquisition nor the nonbanking acquisition shall occur 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 Philadelphia, acting pursuant to delegated authority. The determination with respect to Applicant's non 165 banking activities is subject to all of the conditions set forth in 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 activities of the 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 Act and the Board's regulations and orders issued thereunder. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. JAMES MCAFEE [SEAL] Associate Secretary of the Board NBD Bancorp, Inc. Detroit, Michigan Order Approving Acquisition of a Bank Holding Company and a Nonbanking Company NBD Bancorp, Inc., Detroit, Michigan, a bank holding company within the meaning of the Bank Holding Company Act (12 U.S.C. § 1841 et seq.) ("Act"), has applied for the Board's approval under section 3 of the Act (12 U.S.C. § 1842) to acquire Omnibank Corp., Wyandotte, Michigan ("Omni"), and thereby indirectly to acquire Wyandotte Savings Bank, Wyandotte, Michigan ("Bank"). 1 Applicant has also applied for the Board's approval under section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) to acquire Computer Communications of America, Inc., Detroit, Michigan ("CCA"), which engages in providing loan servicing and data processing services to financial institutions. CCA is presently a subsidiary of Applicant's lead bank, National Bank of Detroit, Detroit, Michigan. Notice of the applications, affording interested persons an opportunity to submit comments, has been given in accordance with section 3(b) of the Act. The time for filing comments has expired, and the Board has considered the applications and all comments 1. Applicant has also applied under section 3(a)(1) of the Act (12 U.S.C. § 1842(a)(1)) for approval for its wholly owned subsidiary, NBD Southern Corporation ("NBDSC"), to become a bank holding company through acquisition of Omni. NBDSC has no significance except as a means to facilitate the acquisition of Omni. 166 Federal Reserve Bulletin • February 1987 received in light of the factors set forth in section 3(c) and the considerations specified in section 4(c)(8) of the Act. Applicant, the largest commercial banking organization in Michigan, controls 25 subsidiary banks with total deposits of $12.1 billion, representing 21 percent of total deposits in commercial banks in the state.2 Omni is the fifteenth largest commercial banking organization in the state, controlling one bank subsidiary with total deposits of $315 million, representing 0.5 percent of total deposits in commercial banking organizations in the state. Upon consummation of this acquisition, Applicant would remain the largest commercial banking organization in the state, controlling total deposits of $12.4 billion, representing 21.5 percent of total deposits in commercial banking organizations in the state. Consummation of this proposal would not significantly increase the concentration of banking resources in Michigan. Applicant and Omni compete in the Detroit banking market.3 Applicant is the largest commercial banking organization in the Detroit banking market, controlling 28.6 percent of the total deposits in commercial banking organizations in the market. Omni is the eighth largest commercial banking organization in the Detroit banking market, controlling 1.1 percent of the total deposits in commercial banking organizations in the market. Upon consummation of this proposal, Applicant would remain the largest commercial banking organization in the market, controlling 29.7 percent of the total deposits in commercial banking organizations in the market. After consummation of this proposal, the Detroit banking market would become highly concentrated, with the four largest commercial banking organizations controlling 77 percent of the deposits in commercial banking organizations in the market and the Herfindahl-Hirschman Index ("HHI") would increase by 64 points to 1806.4 Although consummation of the proposal would eliminate some existing competition between Applicant and Omni in the Detroit banking market, numerous other commercial banking organizations would remain as competitors in the market upon consummation. Based upon the above considerations, the Board concludes that consummation of the proposal is not likely 2. All banking data are as of December 31, 1985. 3. The Detroit banking market is approximated by the Detroit RMA. 4. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)) ("Guidelines"), a market in which the post-merger HHI is over 1800 is considered highly concentrated. In such markets, the Department is likely to challenge a merger that produces an increase in the HHI of more than 50 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. to substantially lessen competition in the Detroit banking market. In its evaluation of Applicant's managerial resources, the Board has considered certain violations by two of Applicant's subsidiary banks of the Currency and Foreign Transactions Reporting Act ("CFTRA") and the regulations thereunder. With regard to the CFTRA violations, the Board notes that Applicant has cooperated with law enforcement agencies, has subsequently reported previously unreported transactions to the Internal Revenue Service and has adopted measures designed to prevent recurrence of such violations. Applicant had incorrectly defined exempt customers, and it has clarified its procedures for identifying exempt customers. Applicant has also redesigned its exempt customer cards to insure that adequate information is provided, has redefined its procedures for the periodic review of currency transaction report forms, and has developed new training programs to familiarize all customer contact personnel with CFTRA requirements. An automated system has been implemented which produces a listing of the previous day's large cash transactions for each branch location, and Applicant will acquire software which permits aggregating transactions throughout its branch system. The sufficiency of the compliance procedures adopted to address Applicant's subsidiary banks' CFTRA violations has been reviewed by examiners from the Office of the Comptroller of the Currency. The Board also has consulted with appropriate enforcement agencies, and has considered Applicant's past record of cooperation with supervisory and enforcement agencies to comply with the law. For the foregoing reasons, and based upon a review of all of the facts of record, the Board concludes that the managerial resources of NBD, Omni and their respective subsidiary banks are consistent with approval. The Board also finds that the financial resources and future prospects of Applicant, Omni, and their subsidiary banks are satisfactory. Based upon a review of all of the facts of record, the Board concludes that the financial and managerial resources of Applicant, Omni and their respective subsidiary banks are consistent with approval of this transaction. Considerations related to the convenience and needs of the communities to be served also are consistent with approval of the transaction. Applicant has also applied, pursuant to section 4(c)(8) of the Act, to acquire CCA and thereby engage in the provision of loan servicing and data processing services to financial institutions. The Board has determined that the activity of loan servicing and data processing services are permissible for bank holding companies (12 C.F.R. §§ 225.25(b)(1) and (7)). CCA previously conducted these activities as a subsidiary Legal Developments of Applicant's lead bank, and 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 interest, unsound banking practices, or other adverse effects on the public interest. Accordingly, the Board has determined that the balance of the public interest factors it must consider under section 4(c)(8) of the Act is consistent with approval of the application. Based on the foregoing and other facts of record, the Board has determined that the applications under sections 3 and 4 of the Act should be, and hereby are, approved. The acquisition of Omni shall not be consummated before the thirtieth calendar day following the effective date of this Order, and neither the acquisition of Omni nor the acquisition of CCA shall be made 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 Chicago, pursuant to delegated authority. The determination with respect to Applicant's nonbanking activities is subject to all of the conditions set forth in 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 modifications or termination of activities of the 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 Act and the Board's regulations and orders issued thereunder. By order of the Board of Governors, effective December 1, 1986. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Governors Wallich, Rice, and Angell. 167 company subsidiaries, Standard Chartered Holdings, Inc., and Union Bancorp, both of Los Angeles, California, have applied for the prior approval of the Board under section 3 of the Bank Holding Company Act (12 U.S.C. § 1842) ("BHC Act") to acquire United Bancorp of Arizona, Phoenix, Arizona, and thereby to acquire indirectly United Bank of Arizona, Phoenix, Arizona ("Bank"). Applicant has also applied for the prior approval of the Board under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) to acquire H.S. Pickrell Company, Phoenix, Arizona, and thereby engage in mortgage banking. This activity is authorized for bank holding companies pursuant to the Board's Regulation Y, 12 C.F.R. § 225.25(b)(1). Further, Applicant has provided notice to the Board under section 4(c)(14) to acquire United Bancorp Export Trading Company, Phoenix, Arizona, and thereby engage in export trading. Notice of the applications, affording opportunity for interested persons to submit comments, has been published (51 Federal Register 36,757 (1986)). 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 of the BHC Act.1 Union Bancorp is the fifth largest commercial banking organization in California with domestic deposits of approximately $6.2 billion, representing 3.2 percent of the total deposits in commercial banks in California.2 Bank is the fourth largest commercial banking organization in Arizona with domestic deposits of approximately $1.9 billion, representing 8.6 percent of the total deposits in commercial banks in Arizona. Section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), the Douglas Amendment, prohibits the Board from JAMES MCAFEE [SEAL] Associate Secretary of the Board Standard Chartered PLC, Standard Chartered Bank, and Standard Chartered Overseas Holdings Ltd. London, England Standard Chartered Holdings, Inc., and Union Bancorp Los Angeles, California Order Approving Acquisition of a Bank Holding Company and Certain Nonbanking Subsidiaries Standard Chartered PLC, Standard Chartered Bank, and Standard Chartered Overseas Holdings Ltd., all of London, England, and their domestic bank holding 1. In connection with these applications, the American Council of Life Insurance, the American Insurance Association, the National Association of Independent Insurers, and the Alliance of American Insurers submitted comments protesting Board approval of these applications on the grounds that the general insurance agency activities conducted by a subsidiary of Bank are prohibited under the amendments to section 4 of the BHC Act contained in the Garn-St Germain Depository Institutions Act. The Board also received comments from the National Association of Life Underwriters, the National Association of Professional Insurance Agents, the Independent Insurance Agents of America Incorporated, the National Association of Casualty and Surety Agents, and the National Association of Surety Bond Producers, raising substantially the same arguments. In response to the protest, Applicant has agreed that, within two years of consummation of its acquisition of Bank, Bank will divest or terminate its general insurance agency activities, unless during such period Applicant receives approval pursuant to an application under section 4(c)(8) of the BHC Act to retain such activities. During this two-year period or unless authorization is granted pursuant to the BHC Act for broader activities, Applicant will limit the insurance agency activities of Bank and its subsidiaries to the renewal of existing policies and those credit-related insurance agency activities permitted under section 4(c)(8)(A) of the BHC Act. In the Board's view, these divestiture commitments address the issues raised by Protestants. 2. Banking data are as of June 30, 1986. 168 Federal Reserve Bulletin • February 1987 approving any 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." The Board has previously determined that the statute laws of Arizona authorize an out-of-state financial institution to acquire any Arizona financial institution that has applied to operate in Arizona before May 31, 1984, subject to approval by the State Banking Superintendent.4 The Arizona State Banking Superintendent has informed the Board that the proposal does not present any of the grounds for denial of the application under Ariz. Rev. Stat. § 6-326 and, accordingly, the Superintendent anticipates approving the application. Based on the foregoing, the Board has determined that the proposed acquisition is specifically authorized by the statute laws of Arizona and is thus permissible under the Douglas Amendment, subject to Applicant's obtaining the approval of the Superintendent pursuant to section 6-322 of the Arizona Revised Statutes. The Board's order is specifically conditioned upon satisfaction of the state regulatory approval requirement. Applicant does not operate a bank in any market in which Bank operates. Applicant does, however, operate a consumer lending subsidiary that competes with Bank and its subsidiaries in Arizona. Applicant's market share is small and consummation of the proposal would not result in any significant decrease in competition or increase in concentration in any relevant market. Accordingly, consummation of the proposal is not likely to result in the elimination of any significant existing competition. In view of the numerous entrants into the relevant markets, the Board concludes that the proposal would not have any significant adverse effect on probable future competition. Section 3(c) of the BHC Act requires in every case that the Board consider the financial resources of the applicant organization and the bank or bank holding company to be acquired. As the Board has previously stated, review of the financial resources of foreign banking organizations raises a number of complex issues that the Board believes requires careful consideration and that the Board continues to have under review.5 In this regard, the Board has initiated consul3. 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. 4. Ariz. Rev. Stat. § 6-321 et seq. (effective October 1, 1986). See Marshall & Ilsley, 72 FEDERAL RESERVE BULLETIN 720 (1986). 5. Bank of Montreal, 70 FEDERAL RESERVE BULLETIN 664 (1984); Mitsubishi Bank, Ltd., 70 FEDERAL RESERVE BULLETIN 518 (1984). See also Policy Statement on Supervision and Regulation of ForeignBased Bank Holding Companies, 1 Federal Reserve Regulatory Service 1 4-835 (1979). 1 tations with appropriate foreign bank supervisors and notes that work is currently in progress among foreign and domestic bank supervisory officials to develop more fully the concept of functional equivalency of capital ratios for banks of different countries. Pending the outcome of these consultations and deliberations, the Board has determined to consider the issues raised by applications by foreign banks to acquire domestic banks on a case-by-case basis. In this case, the Board notes that the capital ratio of Applicant, as publicly reported, is above the minimum level established by the Board for domestic bank holding companies. As in similar cases, the Board has considered appropriate adjustments to Applicant's capital ratio to reflect differences in accounting and regulatory requirements in the United States and abroad, including discounting for the practice of revaluation of certain assets and giving positive weight to the issuance by Applicant of a significant amount of undated loan capital, which is recognized by the Bank of England and the Board as primary capital. Based upon these considerations, the Board notes that the primary capital ratio of Applicant is currently, and will remain upon consummation, above the minimum capital guidelines established by the Board for U.S. bank holding companies. Further, Applicant is in compliance with the capital and other financial requirements of the appropriate supervisory authorities in England and Applicant's resources and prospects are viewed as satisfactory by those authorities. Finally, the Board notes that Applicant's current U.S. operations are satisfactory. The Board expects that Applicant will use its capacity to raise capital to increase the tangible primary capital level of Union Bancorp and United Bancorp and to maintain Union Bancorp, Union Bank, United Bancorp and Bank as among the more strongly capitalized banking organizations of comparable size in the United States. The Board notes as a positive factor that Applicants have raised additional capital equal to a significant portion of the purchase price in anticipation of the proposed acquisition. Based on these and all of the other facts of record, the Board concludes that the financial and managerial factors are consistent with approval of this application. Factors related to the convenience and needs of the communities to be served are also consistent with approval. 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 BHC Act is favorable and consistent with Legal Developments approval of the application to acquire Bank's nonbanking subsidiaries and activities. The Board has also considered the notice of Applicant's proposed investment in United Bancorp Export Trading Company under section 4(c)(14) of the BHC Act. Based on the facts of record, the Board has determined that disapproval of the proposed investment is not warranted. Based on the foregoing and other facts of record, and conditioned upon certain commitments made by Applicant, the Board has determined that the applications under sections 3 and 4 of the BHC Act should be and hereby are approved, subject to the express condition that Applicant obtain the approval of the Arizona Superintendent of Banks pursuant to section 6-322 of the Arizona Revised Statutes. The acquisition of Bank 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 ORDERS APPROVED By Federal Reserve UNDER BANK HOLDING 169 San Francisco, pursuant to delegated authority. The determinations as to the 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 with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. By order of the Board of Governors, effective December 9, 1986. Voting for this action: Chairman Volcker and Governors Seger, Angell, and Heller. Absent and not voting: Governors Johnson, Wallich, and Rice. JAMES M C A F E E [SEAL] COMPANY Associate Secretary of the Board ACT 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 Allied Bankshares, Inc., Thomson, Georgia AmTex Bancshares, Inc., Bridge City, Texas Ballard Kevil Bancorp, Inc., Kevil, Kentucky Bank Corporation of Georgia, Fort Valley, Georgia Bank South Corporation, Atlanta, Georgia Bankers' Bancorporation of Missouri, Inc., Jefferson City, Missouri Boynton Holding Company, Boynton, Oklahoma Brannen Banks of Florida, Inc. Inverness, Florida Broadway Bancshares, Inc., San Antonio, Texas Bank(s) Bank of Columbia County, Harlem, Georgia Pavillion National Bank, Dallas, Texas The Kevil Bank, Kevil, Kentucky Southern Bank and Trust Company, Savannah, Georgia Southern Bancorp, Inc., Way cross, Georgia Missouri Independent Bank, Jefferson City, Missouri First National Bank, Boynton, Oklahoma The Bank of Brooksville, Brooksville, Florida Heights National Bank, San Antonio, Texas Reserve Bank Effective date Atlanta November 26, 1986 Dallas December 12, 1986 St. Louis December 1, 1986 Atlanta November 19, 1986 Atlanta November 28, 1986 St. Louis December 1, 1986 Kansas City December 1, 1986 Atlanta December 3, 1986 Dallas November 21, 1986 170 Federal Reserve Bulletin • February 1987 Section 3—Continued ,• . A Applicant CB&T Financial Corp., Fairmont, West Virginia Central Bancshares, Inc., Louisville, Kentucky Central Illinois Community Bancorp, Inc., Peoria, Illinois Charter 17 Bancorp, Inc., Richmond, Indiana Cherry Valley Bancshares, Inc., Cherry Valley, Arkansas CNB Bancshares, Inc., Whitehouse, Texas Citizens Bancorp Investment, Inc., Lafayette, Tennessee Citizens Bancshares of Eldon, Inc., Eldon, Missouri Citizens Southern Bancshares, Inc., Vernon, Alabama Commercial Bancorporation of Colorado, Denver, Colorado Commercial Bank Investment Company, Denver, Colorado County Bancorporation, Inc., Jackson, Missouri Crockett County National Bancshares, Inc., Ozona, Texas DuPage Financial Corporation, Naperville, Illinois F & M Financial Services Corporation, Menomonee Falls, Wisconsin Faith Bank Holding Company, Pierre, South Dakota FCB Corporation, Manchester, Tennessee r> w \ Bank(s) The Union Bank of Harrisville, Harrisville, West Virginia The Central Bank of North Pleasure ville, Pleasure ville, Kentucky Northwest Community Bank of Peoria, Peoria, Illinois FIRST TAZEWELL BANCORP, INC., East Peoria, Illinois First National Bancorp, New Castle, Indiana Bank of Cherry Valley, Cherry Valley, Arkansas City National Bank, Whitehouse, Texas Dale Hollow Holding Company, Celina, Tennessee Reserve ^ Effective ^ Richmond November 28, 1986 St. Louis November 20, 1986 Chicago November 28, 1986 Chicago November 26, 1986 St. Louis December 1, 1986 Dallas December 10, 1986 Atlanta December 3, 1986 Citizens Bank of Eldon, Eldon, Missouri St. Louis December 9, 1986 Citizens State Bank, Vernon, Alabama Atlanta December 10, 1986 Rocky Mountain Bank & Trust Company, Fort Collins, Colorado Kansas City November 26, 1986 Delta Counties Bank, Sikeston, Missouri Crockett County National Bank, Ozona, Texas St. Louis December 15, 1986 Dallas December 2, 1986 ALLIED BANCSHARES OF ILLINOIS, INC., Joliet, Illinois Bank of Fond du Lac, Fond du Lac, Wisconsin Chicago November 24, 1986 Chicago November 28, 1986 Minneapolis November 21, 1986 Atlanta November 20, 1986 Farmers State Bank, Faith, South Dakota The Meltons Bank, Gassaway, Tennessee Legal Developments 171 Section 3—Continued Applicant Financial Bancshares, Inc., Topeka, Kansas First Bancorp of Russell County, Inc., Russell Springs, Kentucky First Columbus Financial Corporation, Columbus, Mississippi First Community Shares, Inc., Carmel, California First Interstate Corporation of Wisconsin, Sheboygan, Wisconsin First Michigan Bank Corporation, Zeeland, Michigan First Mid-Illinois Bancshares, Inc., Mattoon, Illinois FIRST NORTHBROOK BANCORP, INC., Northbrook, Illinois First Ohio Bancshares, Inc., Toledo, Ohio 1st State Corporation, Harwood Heights, Illinois Franklin Capital Corporation, Morton Grove, Illinois GreatBanc, Inc., Itasca, Illinois Hemet Bancorp, Hemet, California Hopedale Investment Company, Quincy, Illinois Hub Financial Corporation, Lubbock, Texas Illinois Marine Bancorp, Inc., Elmhurst, Illinois Jack Banshares, Inc., Commerce, Oklahoma Key Centurion Bancshares, Inc., Charleston, West Virginia Bank(s) Reserve Bank Effective date Financial Diversified Investment Corporation, Topeka, Kansas Citizens Bank and Trust Company, Campbellsville, Kentucky First Columbus National Bank, Columbus, Mississippi Kansas City December 4, 1986 St. Louis November 25, 1986 St. Louis November 17, 1986 Centennial Bank, Hay ward, California Mid-Continental Bancorporation, Inc., Milwaukee, Wisconsin State Savings Bank, Lowell, Michigan San Francisco November 19, 1986 Chicago December 1, 1986 Chicago November 25, 1986 Tuscola Bancorp, Inc., Springfield, Illinois Chicago November 28, 1986 First Cary-Grove Corp., Cary, Illinois Chicago November 24, 1986 The Home Banking Company, Gibsonburg, Ohio Parkway Bank and Trust Company, Harwood Heights, Illinois First State Bank & Trust Company of Franklin Park, Franklin Park, Illinois Burlington Capital Corporation, Wilmette, Illinois FNB Bancorp., Inc., Chicago Heights, Illinois The Bank of Hemet, Hemet, California Community Bank of Hopedale, Hopedale, Illinois City Bank, N.A., Lubbock, Texas Colonial Bancorporation, Inc., Peru, Illinois The First State Bank of Commerce, Commerce, Oklahoma Nicholas County Bank, Summersville, West Virginia Cleveland December 8, 1986 Chicago December 1, 1986 Chicago November 28, 1986 Chicago November 28, 1986 San Francisco November 28, 1986 Chicago December 1, 1986 Dallas December 5, 1986 Chicago November 21, 1986 Kansas City November 19, 1986 Richmond November 26, 1986 172 Federal Reserve Bulletin • February 1987 Section 3—Continued Applicant Lake Bank Shares, Inc., Albert Lea, Minnesota Lane Financial, Inc., Northbrook, Illinois Longview Capital Corporation, Longview, Illinois Lunenburg Community Bankshares, Inc., Kenbridge, Virginia Mercantile Bancorporation Inc., St. Louis, Missouri Merchants National Corporation, Indianapolis, Indiana Mid States Bancshares, Inc., Moline, Illinois Mid-Continental Holdings, Inc., Sheboygan, Wisconsin Middleburg Bancorp, Inc., Middleburg, Kentucky Midstate Bancorp, Hinton, Oklahoma Norstar Bancorp, Inc., Albany, New York Northern of Tennessee Corp., Clarksville, Tennessee Northwest Arkansas Bancshares, Inc., Bentonville, Arkansas PNB Financial Corporation, Warrenton, Virginia Premier Bankshares Corporation, Tazewell, Virginia Bank(s) Security State Bank of Albert Lea, Albert Lea, Minnesota Emmons Agency, Inc., Emmons, Minnesota Bank of Westmont, Westmont, Illinois The First National Bank of Ogden, Ogden, Illinois The Lunenburg County Bank, Kenbridge, Virginia First Bancshares Corporation of Illinois, Alton, Illinois The Citizens National Bank of Tipton, Tipton, Indiana NBG Financial Corporation, Greenwood, Indiana Mid-Southern Indiana Bancorp, Seymour, Indiana First National Bank of Moline, Moline, Illinois Continental Bank & Trust Co., Milwaukee, Wisconsin Farmers Deposit Bank, Middleburg, Kentucky First State Bank, Hinton, Oklahoma Peconic Bancshares, Inc., Riverhead, New York Central Bancorp, Inc., Murfreesboro, Tennessee Bedford County Bank, Shelbyville, Tennessee Bank of Pea Ridge, Pea Ridge, Arkansas Mcllroy Bank and Trust, Fayetteville, Arkansas Siloam Springs Bancshares, Inc., Bentonville, Arkansas The Peoples National Bank of Warrenton, Warrenton, Virginia Peoples Bank, Inc., Honaker, Virginia Reserve Bank Effective date Minneapolis December 8, 1986 Chicago November 21, 1986 Chicago November 28, 1986 Richmond December 1, 1986 St. Louis December 8, 1986 Chicago November 21, 1986 Chicago November 28, 1986 Chicago December 1, 1986 St. Louis November 24, 1986 Kansas City December 4, 1986 New York December 1, 1986 Atlanta November 24, 1986 St. Louis November 25, 1986 Richmond November 25, 1986 Richmond November 28, 1986 Legal Developments 173 Section 3—Continued ,. A Applicant R. Darryl Fisher, M.D., Inc. Pension Trust, Ada, Oklahoma Republic Bancorp Inc., Flint, Michigan Ridgeland Bancorp, Inc., Phillips, Wisconsin Rio Grande City Bancshares, Inc., Rio Grande City, Texas Security Bancorp, Inc., Southgate, Michigan Security Bancorporation, Inc., Newport, Minnesota Southeast Banking Corporation, Miami, Florida STAR Financial Group, Inc., Marion, Indiana Stark County Bancorp, Inc., Toulon, Illinois State National Bancorp, Inc.. Maysville, Kentucky Stigler Bancorporation, Inc., Stigler, Oklahoma Sturm Investment, Inc., Omaha, Nebraska Summcorp, Fort Wayne, Indiana i/ \ Bank(s) Reserve „ . Bank Effective , date Pontotoc County Bank, Roff, Oklahoma Kansas City December 9, 1986 Peoples State Bank, Williamston, Michigan Farmers State Bank, Ridgeland, Wisconsin Bank of Dallas, Dallas, Wisconsin Floresville Bancshares, Inc., Floresville, Texas Chicago November 24, 1986 Minneapolis November 28, 1986 Dallas November 25, 1986 Chicago November 25, 1986 Minneapolis November 26, 1986 Atlanta November 28, 1986 Chicago November 26, 1986 Chicago November 28, 1986 Cleveland November 24, 1986 Kansas City November 24, 1986 Chicago November 28, 1986 Chicago November 26, 1986 Trenton Bank and Trust Company, Trenton, Michigan The State Bank of Hudson, Hudson, Wisconsin Florida State Bank, Destin, Florida First National Bank of Madison County, Anderson, Indiana Citizens National Bank of Whitley County, Columbia City, Indiana Security Bank, Elwood, Indiana The Hamilton Bank, Hamilton, Indiana Citizens National Bank of Grant County, Marion, Indiana Central Bank and Trust, Muncie, Indiana Bank of Henry County, New Castle, Indiana State Bank of Toulon, Toulon, Illinois Peoples Bank of Morehead, Morehead, Kentucky First Oklahoma National Corporation, Stigler, Oklahoma First Holdings, Inc., Omaha, Nebraska American State Bancorp, Sheridan, Indiana Western State Bank, South Bend, Indiana 174 Federal Reserve Bulletin • February 1987 Section 3—Continued Applicant Tennessee State Bancshares, Inc., Gatlinburg, Tennessee Texas Commerce Bancshares, Inc., Houston, Texas Traders Bankshares, Inc., Spencer, West Virginia Tri-County Bancorp, Inc., Corbin, Kentucky Unibancorp, Inc., Chicago, Illinois United Bancorp, Inc., Martins Ferry, Ohio Valley Bancorporation, Appleton, Wisconsin Valley Holding Company, Ronan, Montana Warranty Bancorporation, Ottumwa, Iowa Wesbanco, Inc., Wheeling, West Virginia Wesbanco, Inc., Wheeling, West Virginia Western Bancshares of Clovis, Inc., Clovis, New Mexico Bank(s) Reserve Bank Effective date Tennessee State Bank, Gatlinburg, Tennessee Atlanta November 24, 1986 Texas Commerce Bank-San Antonio, Loop 410, San Antonio, Texas Texas Commerce BankRichardson, N.A., Richardson, Texas The Traders Bank, Spencer, West Virginia Tri-County National Bank, Corbin, Kentucky DuPage County Bank of Glendale Heights, Glendale Heights, Illinois The Citizens State Bank of Strasburg, Strasburg, Ohio Suburban State Bank, Hartland, Wisconsin Valley Bank of Ronan, Ronan, Montana South Ottumwa Savings Bank, Ottumwa, Iowa South Hills Bank, Charleston, West Virginia Wirt County Bank, Elizabeth, West Virginia Western Bank of Clovis, Clovis, New Mexico Dallas November 28, 1986 Richmond November 26, 1986 Cleveland November 24, 1986 Chicago November 19, 1986 Cleveland November 25, 1986 Chicago November 28, 1986 Minneapolis November 24, 1986 Chicago December 1, 1986 Cleveland December 1, 1986 Cleveland December 1, 1986 Dallas November 25, 1986 Section 4 Applicant Chemical New York Corporation, New York, New York Norwest Corporation, Minneapolis, Minnesota The Standard Life Assurance Company, Edinburgh, Scotland Bank of Scotland, Edinburgh, Scotland Nonbanking Company/Activity Reserve Bank Effective date Penmark Investments Inc., Chicago, Illinois New York November 20, 1986 acquire general insurance agency assets from Bayly, Martin, and Fay International, Inc., Fort Worth, Texas IF A, Incorporated, Palatine, Illinois Minneapolis November 26, 1986 New York November 21, 1986 Legal Developments 175 Sections 3 and 4 Bank(s)/Nonbanking Company Applicant Barnett Banks of Florida, Inc. Jacksonville, Florida BMR Bancorp, Inc., Decatur, Georgia First of America Bank Corporation, Kalamazoo, Michigan First of America Bancorporation—Illinois, Inc., Kalamazoo, Michigan Trustcorp, Inc., Toledo, Ohio First City Bancorp, Inc., Marietta, Georgia nonbanking activities The Citizens Bank of Swainsboro, Swainsboro, Georgia nonbanking activities Premier Bancorporation, Inc., Libertyville, Illinois Premier Life Insurance Company, Liberty ville, Illinois Premier Bancorporation, Inc., Liberty ville, Illinois Premier Life Insurance Company, Liberty ville, Illinois St. Joseph Bancorporation, South Bend, Indiana St. Joseph Mortgage Company, Inc., South Bend, Indiana Indiana Inc., Goshen, Indiana Reserve Bank Effective date Atlanta November 28, 1986 Atlanta November 28, 1986 Chicago November 20, 1986 Chicago November 20, 1986 Cleveland December 1, 1986 ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Applicant Community Bank of Lunenburg, Kenbridge, Virginia First Virginia Bank-Citizens, Clint wood, Virginia First Virginia BankCommonwealth, Grafton, Virginia New Lowell State Bank, Lowell, Michigan Security Bank of Richmond, Richmond, Michigan Shelby County State Bank, Shelbyville, Illinois The Traders Bank, Spencer, West Virginia Bank(s) Reserve Bank Effective date The Lunenburg County Bank, Kenbridge, Virginia Peoples Bank of Pound, Pound, Virginia First Virginia Bank-Surry, Surry, Virginia Richmond December 1, 1986 Richmond November 28, 1986 Richmond December 1, 1986 State Savings Bank, Lowell, Michigan Security Bank Imlay City, Imlay City, Michigan Windsor State Bank, Windsor, Illinois The Traders Interim Bank, Inc., Spencer, West Virginia Chicago November 25, 1986 Chicago November 25, 1986 Chicago November 24, 1986 Richmond November 26, 1986 176 Federal Reserve Bulletin • February 1987 PENDING CASES INVOLVING 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. Independent Insurance Agents of America, et al. v. Board of Governors, Nos. 86-1572, 1573, 1576 (D.C. Cir., filed Oct. 24, 1986). Securities Industry Association v. Board of Governors, No. 86-2768 (D.D.C., filed Oct. 7, 1986). Independent Community Bankers Association v. Board of Governors, No. 86-5373 (8th Cir., filed Oct. 3, 1986). Jenkins v. Board of Governors, No. 86-1419 (D.C. Cir., filed July 18, 1986). Securities Industry Association v. Board of Governors, No. 86-1412 (D.C. Cir., filed July 14, 1986). Adkins v. Board of Governors, No. 86-3853 (4th Cir., filed May 14, 1986). Optical Coating Laboratory, Inc. v. United States, No. 288-86C (U.S. Claims Ct., filed May 6, 1986). CBC, Inc. v. Board of Governors, No. 86-1001 (10th Cir., filed Jan. 2, 1986). Howe v. United States, et al., No. 86-1430 (1st Cir., filed Dec. 6, 1985). Myers, et al. v. Federal Reserve Board, No. 85-1427 (D. Idaho, filed Nov. 18, 1985). Souser, et al. v. Volcker, et al., No. 85-C-2370, et al. (D. Colo., filed Nov. 1, 1985). Podolak v. Volcker, No. C85-0456, et al. (D. Wyo., filed Oct. 28, 1985). Kolb v. Wilkinson, et al., No. C85-4184 (N.D. Iowa, filed Oct. 22, 1985). Farmer v. Wilkinson, et al., No. 4-85-CIVIL-1448 (D. Minn., filed Oct. 21, 1985). Kurkowski v. Wilkinson, et al., No. CV-85-0-916 (D. Neb., filed Oct. 16, 1985). Jensen v. Wilkinson, et al., No. 85-4436-S, et al. (D. Kan., filed Oct. 10, 1985). Alfson v. Wilkinson, et al., No. Al-85-267 (D. N.D., filed Oct. 8, 1985). First National Bank of Blue Island Employee Stock Ownership Plan v. Board of Governors, No. 852615 (7th Cir., filed Sept. 23, 1985). First National Bancshares II v. Board of Governors, No. 85-3702 (6th Cir., filed Sept. 4, 1985). McHuin v. Volcker, et al., No. 85-2170 WARB (W.D. Okl., filed Aug. 29, 1985). Independent Community Bankers Associaton of South Dakota v. Board of Governors, No. 84-1496 (D.C. Cir., filed Aug. 7, 1985). Urwyler, et al. v. Internal Revenue Service, et al., No. 85-2877 (9th Cir., filed July 18, 1985). Johnson v. Federal Reserve System, et al., No. 864536 (5th Cir., filed July 16, 1985). Wight, et al. v. Internal Revenue Service, et al., No. 85-2826 (9th Cir., filed July 12, 1985). Cook v. Spillman, et al., No. 86-1642 (9th Cir., filed July 10, 1985). Florida Bankers Association v. Board of Governors, No. 84-3883 and No. 84-3884 (11th Cir., filed Feb. 15, 1985). Florida Department of Banking v. Board of Governors, No. 84-3831 (11th Cir., filed Feb. 15, 1985), and No. 84-3832 (11th Cir., filed Feb. 15, 1985). Lewis v. Volcker, et al., No. 86-3210 (6th Cir., filed Jan. 14, 1985). Brown v. United States Congress, et al., No. 84-28876(IG) (S.D. Cal., filed Dec. 7, 1984). Melcher v. Federal Open Market Committee, No. 841335 (D.D.C., filed Apr. 30, 1984). Florida Bankers Association, et al. v. Board of Governors, Nos. 84-3269, 84-3270 (11th Cir., filed April 20, 1984). Securities Industry Association v. Board of Governors, No. 80-2614 (D.C. Cir., filed Oct. 24., 1980), and No. 80-2730 (D.C. Cir., filed Oct. 24, 1980). 177 Membership of the Board of Governors of the Federal Reserve System, 1913-87 Name Federal Reserve District Date of initial oath of office Other dates and information relating to membership 2 Aug. 10, 1914 Reappointed in 31916 and 1926. Served until Feb. 3, 1936. Term expired Aug. 9, 1918. Resigned July 21, 1918. Term expired Aug. 9, 1922. Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.3 Resigned Mar. 15, 1920. Term expired Aug. 9, 1920. Reappointed in 1928. Resigned Sept. 14, 1930. Term expired Mar. 4, 1921. Resigned May 12, 1923. Died Mar. 22, 1923. Resigned Sept. 15, 1927. Reappointed in 1931. Served until Feb. 3, 1936.4 Died Nov. 28, 1930. Resigned Aug. 31, 1930. Resigned May 10, 1933. Term expired Jan. 24, 1933. Resigned Aug. 15, 1934. Reappointed in 1936 and 1948. Resigned May 31, 1961. Served until Feb. 10, 1936.3 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951. Resigned Sept. 30, 1937. 3 Served until Apr. 4, 1946. Reappointed in 1942. Died Dec. 2, 1947. Resigned July 9, 1936. Reappointed in 1940. Resigned Apr. 15, 1941. Served until Sept. 1, 1950.33 Served until Aug. 13, 1954. Resigned Nov. 30, 1958. Died Dec. 4, 1949. Resigned Mar. 31, 1951. Resigned Jan. 31, 1952. Resigned June 30, 1952. Reappointed in 1956. Term expired Jan. 31, 1970. Reappointed in 1958. Resigned Feb. 28, 1965. Reappointed in 1964. Resigned Apr. 30, 1973. Served through Feb. 28, 1966. Died Oct. 21, 1954. Retired Apr. 30, 1967. Reappointed in 1960. Resigned Sept. 18, 1963. Reappointed in 1962. Served until Feb. 13, 1976.3 Charles S. Hamlin Boston Paul M. Warburg Frederic A. Delano W.P.G. Harding Adolph C. Miller New York Chicago Atlanta San Francisco Albert Strauss Henry A. Moehlenpah Edmund Piatt New York Chicago New York Oct. 26, 1918 Nov. 10, 1919 June 8, 1920 David C. Wills John R. Mitchell Milo D. Campbell Daniel R. Crissinger George R. James Cleveland Minneapolis Chicago Cleveland St. Louis Sept. 29, 1920 May 12, 1921 Mar. 14, 1923 May 1, 1923 May 14, 1923 Edward H. Cunningham...Chicago Roy A. Young Minneapolis Eugene Meyer New York Wayland W. Magee Kansas City Eugene R. Black Atlanta M.S. Szymczak Chicago do Oct. 4, 1927 Sept. 16, 1930 May 18, 1931 May 19, 1933 June 14, 1933 J.J. Thomas Marriner S. Eccles do Nov. 15, 1934 Kansas City San Francisco .do .do .do .do, Joseph A. Broderick New York John K. McKee Cleveland Ronald Ransom Atlanta Ralph W. Morrison Dallas Chester C. Davis Richmond Ernest G. Draper New York Rudolph M. Evans Richmond James K. Vardaman, Jr. ..St. Louis Lawrence Clayton Boston Thomas B. McCabe Philadelphia Edward L. Norton Atlanta Oliver S. Powell Minneapolis Wm. McC. Martin, Jr New York Feb. 3, 1936 do do Feb. 10, 1936 June 25, 1936 Mar. 30, 1938 Mar. 14, 1942 Apr. 4, 1946 Feb. 14, 1947 Apr. 15, 1948 Sept. 1, 1950 do April 2, 1951 A.L. Mills, Jr J.L. Robertson C. Canby Balderston Paul E. Miller Chas. N. Shepardson G.H. King, Jr San Francisco Kansas City Philadelphia Minneapolis Dallas Atlanta Feb. 18, 1952 do Aug. 12, 1954 Aug. 13, 1954 Mar. 17, 1955 Mar. 25, 1959 George W. Mitchell Chicago Aug. 31, 1961 178 MEMBERS1 APPOINTIVE Federal Reserve District Name Date of initial oath of office Other dates and information relating to membership 2 Served until Mar. 8, 1974.3 Served through May 31, 1972. Resigned Aug. 31, 1974. Reappointed in 1968. Resigned Nov. 15, 1971. Term began Feb. 1, 1970. Resigned Mar. 31, 1978. Resigned June 1, 1975. Resigned Jan. 2, 1976. Resigned May 15, 1976. Resigned Dec. 15, 1986. Served through Feb. 29, 1980. Resigned Nov. 17, 1978. 3 Served until Feb. 7, 1986. Died Nov. 19, 1978. Resigned Feb. 24, 1978. Resigned Aug. 6, 1979. Served through June 27, 1984. Resigned Dec. 31, 1986. Served through Feb. 11, 1982. J. Dewey Daane Sherman J. Maisel ... Andrew F. Brimmer. William W. Sherrill.. Arthur F. Burns Richmond San Francisco Philadelphia Dallas New York Nov. 29, 1963 Apr. 30, 1965 Mar. 9, 1966 May 1, 1967 Jan. 31, 1970 John E. Sheehan Jeffrey M. Bucher.... Robert C. Holland ... Henry C. Wallich Philip E. Cold well.... Philip C. Jackson, Jr. J. Charles Partee Stephen S. Gardner.. David M. Lilly G. William Miller Nancy H. Teeters.... Emmett J. Rice Frederick H. Schultz Paul A. Volcker Lyle E. Gramley Preston Martin Martha R. Seger Wayne D. Angell Manuel H. Johnson.. H. Robert Heller St. Louis San Francisco Kansas City Boston Dallas Atlanta Richmond Philadelphia Minneapolis San Francisco Chicago New York Atlanta Philadelphia Kansas City San Francisco Chicago Kansas City Richmond San Francisco Jan. 4, 1972 June 5, 1972 June 11, 1973 Mar. 8, 1974 Oct. 29, 1974 July 14, 1975 Jan. 5, 1976 Feb. 13, 1976 June 1, 1976 Mar. 8, 1978 Sept. 18, 1978 June 20, 1979 July 27, 1979 Aug. 6, 1979 May 28, 1980 Mar. 31, 1982 July 2, 1984 Feb. 7, 1986 Feb. 7, 1986 Aug. 19, 1986 Chairmen4 Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding Aug. 10, 1916-Aug. 9, 1922 Daniel R. Crissinger May 1, 1923-Sept. 15, 1927 Roy A. Young Oct. 4, 1927-Aug. 31, 1930 Eugene Meyer Sept. 16, 1930-May 10, 1933 Eugene R. Black May 19, 1933-Aug. 15, 1934 MarrinerS. Eccles Nov. 15, 1934-Jan. 31, 1948 Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951 Wm. McC. Martin, Jr. ...Apr. 2, 1951-Jan. 31, 1970 Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978 G. William Miller Mar. 8, 1978-Aug. 6, 1979 Paul A. Volcker Aug. 6, 1979- EX-OFFICIO Resigned Sept. 1, 1985. Resigned April 30, 1986. Vice Chairmen* Frederic A. Delano Paul M. Warburg Albert Strauss Edmund Piatt J.J. Thomas Ronald Ransom C. Canby Balderston J.L. Robertson George W. Mitchell Stephen S. Gardner Frederick H. Schultz Preston Martin Manuel H. Johnson Aug. 10, 1914-Aug. 9, 1916 Aug. 10, 1916-Aug. 9, 1918 Oct. 26, 1918-Mar. 15, 1920 July 23, 1920-Sept. 14, 1930 Aug. 21, 1934-Feb. 10, 1936 Aug. 6, 1936-Dec. 2, 1947 Mar. 11, 1955-Feb. 28, 1966 Mar. 1, 1966-Apr. 30, 1973 May 1, 1973-Feb. 13, 1976 Feb. 13, 1976-Nov. 19, 1978 July 27, 1979-Feb. 11, 1982 Mar. 31, 1982-Mar. 31, 1986 Aug. 22, 1986- MEMBERS1 Secretaries of the Treasury W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918 Carter Glass Dec. 16, 1918-Feb. 1, 1920 David F. Houston Feb. 2, 1920-Mar. 3, 1921 Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932 Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933 William H. Woodin Mar. 4, 1933-Dec. 31, 1933 Henry Morgenthau, Jr. ..Jan. 1, 1934-Feb. 1, 1936 Comptrollers of the Currency John Skelton Williams ...Feb. 2, 1914-Mar. 2, 1921 Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923 Henry M. Dawes May 1, 1923-Dec. 17, 1924 Joseph W. Mcintosh Dec. 20, 1924-Nov. 20, 1928 J.W. Pole Nov. 21, 1928-Sept. 20, 1932 J.F.T. O'Connor May 11, 1933-Feb. 1, 1936 1. Under the provisions of the original Federal Reserve Act, the Federal Reserve Board was composed of seven members, including five appointive members, the Secretary of the Treasury, who was exofficio chairman of the Board, and the Comptroller of the Currency. The original term of office was ten years, and the five original appointive members had terms of two, four, six, eight, and ten years respectively. In 1922 the number of appointive members was increased to six, and in 1933 the term of office was increased to twelve years. The Banking Act of 1935, approved Aug. 23, 1935, changed the name of the Federal Reserve Board to the Board of Governors of the Federal Reserve System and provided that the Board should be composed of seven appointive members; that the Secretary of the Treasury and the Comptroller of the Currency should continue to serve as members until Feb. 1, 1936, or until their successors were appointed and had qualified; and that thereafter the terms of members should be fourteen years and that the designation of Chairman and Vice Chairman of the Board should be for a term of four years. 2. Date after words "Resigned" and "Retired" denotes final day of service. 3. Successor took office on this date. 4. Chairman and Vice Chairman were designated Governor and Vice Governor before Aug. 23, 1935. 1 Financial and Business Statistics CONTENTS Domestic WEEKLY REPORTING COMMERCIAL BANKS 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 A5 Selected borrowings in immediately available funds—Large member banks POLICY INSTRUMENTS A6 Federal Reserve Bank interest rates A7 Reserve requirements of depository institutions A8 Maximum interest rates payable on time and savings deposits at federally insured institutions A9 Federal Reserve open market transactions FEDERAL RESERVE BANKS A10 Condition and Federal Reserve note statements All 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 A19 A20 A21 A22 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 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 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 A35 Corporate profits and their distribution 2 Federal Reserve Bulletin • February 1987 A36 Nonfinancial corporations—Assets and liabilities A36 Total nonfarm business expenditures on new plant and equipment A37 Domestic finance companies—Assets and liabilities and business credit A54 Foreign official assets held at Federal Reserve Banks A55 Foreign branches of U.S. banks—Balance sheet data A57 Selected U.S. liabilities to foreign official institutions REAL ESTATE REPORTED BY BANKS IN THE UNITED STATES A38 Mortgage markets A39 Mortgage debt outstanding A57 A58 A60 A61 CONSUMER INSTALLMENT CREDIT A40 Total outstanding and net change A41 Terms Liabilities to and claims on foreigners Liabilities to foreigners Banks' own claims on foreigners Banks' own and domestic customers' claims on foreigners A61 Banks' own claims on unaffiliated foreigners A62 Claims on foreign countries—Combined domestic offices and foreign branches REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES FLOW OF FUNDS A42 Funds raised in U.S. credit markets A43 Direct and indirect sources of funds to credit markets A63 Liabilities to unaffiliated foreigners A64 Claims on unaffiliated foreigners Domestic SECURITIES HOLDINGS AND TRANSACTIONS Nonfinancial Statistics SELECTED MEASURES A44 Nonfinancial business activity—Selected measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization A47 Industrial production—Indexes and gross value A49 Housing and construction A50 Consumer and producer prices A51 Gross national product and income A52 Personal income and saving International Statistics A65 Foreign transactions in securities A66 Marketable U.S. Treasury bonds and notes— Foreign transactions INTEREST AND EXCHANGE RATES A67 Discount rates of foreign central banks A67 Foreign short-term interest rates A68 Foreign exchange rates A69 Guide to Tabular Statistical Releases, Tables Presentation, and Special SUMMARY STATISTICS SPECIAL A53 U.S. international transactions—Summary A54 U.S. foreign trade A54 U.S. reserve assets A70 Terms of lending at commercial banks, November 1986 TABLES Money Stock and Bank Credit 1.10 A3 RESERVES, MONEY STOCK, LIQUID ASSETS, A N D DEBT MEASURES Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent) 1 Item 1985 Q4 institutions2 1 2 3 4 Reserves of depository Total Required Nonborrowed Monetary base 3 5 6 7 8 9 Concepts of money, liquid assets, and debt4 Ml M2 M3 L Debt Nontransaction 10 In M25 11 In M3 only 6 1986 1986 Q2 Q1 Q3 July Aug. Sept.' Oct. Nov. 12.5 11.5 10.4 8.2 13.1 12.3 19.1 8.6 17.8 19.8 17.6 8.8 22.9 23.9 23.2 9.9 25.3 26.3 27.3 8.8 19.7 24.2 16.8 12.0 11.5 12.0 8.4 5.4 13.7' 13.4 17.9 9.4' 32.8 27.7 35.4 12.8 10.7 6.1 6.6 9.5 13.6' 7.7 4.3 7.6 8.4 15.4' 15.8 10.5' 9.0 7.0 10.2' 17.3 11.1 10.2' 8.5' 12.(K 16.6 12.8 13.0 9.1 11.2' 20.6 11.2' 9.1' 8.3' \2.9r 9.6 7.3 8.8 8.6 11.8 14.0 10.&6.5' 6.5 8.7 20.9 6.7 5.6 n.a. n.a. 4.6 8.5 3.3 20.6 8.7 3.4 9.1 6.3 11.5' 13.8' S.W 6.4 14.7 9.6' -10.0' 1.9 1.2 3.2 -1.6 14.1 1.9 5.3 18.5 11.8 -3.1 -8.8 25.5 -9.0 -2.5 22.9 -5.3 -1.3' 30.6 -12.6 7.7 36.0 -10.9 -2.6 41.7 -15.8 -10.2' 37.9 -12.1 9.5 7.5 -2.9 5.2 3.1 6.6 10.0 20.9 2.6 11.0 23.6 -3.8 2.7 22.9 -.5 8.7 18.2 -6.0 2.2 16.1 -6.0 -2.2 26.5 -11.3' -13.0 28.3 -8.7 -16.1 13.7 13.5r 9.3 17.C 15.(K 12.7 11.^ 9.8' 4.1 14.5 11.3' 10.5' 14.7' 10.1' 13.0 8.8 14.1' 13.8 11.4 11.9 13.0 9.9 8.3 2.2 n.a. n.a. 8.9 components Time and savings deposits Commercial banks Savings7 Small-denomination time 8 Large-denomination time 9 1 0 Thrift institutions 15 Savings7 16 Small-denomination time 17 Large-denomination time9 12 13 14 Debt components4 18 Federal 19 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: Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults of commercial banks; (2) travelers checks of nonbank issuers; (3) demand deposits at all commercial banks other than those due to domestic banks, 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. The currency and demand deposit components exclude the estimated amount of vault cash and demand deposits respectively held by thrift institutions to service their OCD liabilities. 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 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. Also subtracted is a consolidation adjustment that represents the estimated amount of demand deposits and vault cash held by thrift institutions to service their time and savings deposits. 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 a consolidation adjustment that represents 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. A4 Domestic Financial Statistics • February 1987 1.11 R E S E R V E S OF DEPOSITORY INSTITUTIONS A N D R E S E R V E B A N K CREDIT Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for week ending 1986 1986 Factors Sept. Oct. Nov. 215,130 214,197 219,190 213,770 216,092 213,851 188,598 187,237 1,361 8,252 8,047 205 0 1,046 734 16,500 11,084 5,018 17.42CK 188,195 187,944 251 8,030 7,975 55 0 779 560 16,633 11,084 5,018 17,465 193,043 192,284 759 7,968 7,867 101 0 802 974 16,403 11,084 5,018 17,516 187,677 187,677 0 7,988 7,988 0 0 653 761 16,690 11,084 5,018 17.459 189,717 188,605 1,112 8,217 7,973 244 0 888 628 16,642 11,084 5,018 17,469 188,083 188,083 0 7,954 7,954 0 0 715 342 16,757 11,084 5,018 17,478 201,433 495 202,301 492 205,069 474 203,045 493 202,751 493 5,677 285 3,305 215 3,117 233 2,701 217 1,886 497 1,971 516 2,064 522 1,939 576 6,405 6,302 6,345 6,302 6,289 6,266 6,363 6,401 6,322 6,275 32,663 34,984 32,059 33,967 32,815 34,298 34,392 35,527 35,198 Nov. 12 Nov. 19 Nov. 26 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 216,206 218,842 220,660 218,971 189,770 189,770 0 7,954 7,954 0 0 1,082 572 16,827 11,084 5,018 17,489 192,168 192,168 0 7,900 7,900 0 0 518 1,164 17,092 11,084 5.018 17,503 193,626 192,005 1,621 7,961 7,829 132 0 1,103 1,416 16,555 11,084 5,018 17,517 194,251 193,459 792 7,928 7,829 99 0 639 587 15,566 11,084 5,018 17,531 201,937 492 202,793 484 204,686 483 205,566 475 205,493 468 3,552 210 3,332 231 2,919 255 3,730 239 3,696 204 2,474 224 1,926 475 1,907 453 2,042 643 1,970 545 1,980 510 2,044 428 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 2 U.S. government securities 1 3 Bought outright Held under repurchase a g r e e m e n t s . . . . 4 5 Federal agency obligations Bought outright 6 Held under repurchase agreements.... 7 8 Acceptances 9 Loans 10 Float 11 Other Federal Reserve assets 12 Gold stock 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 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 2 31,974 End-of-month figures Wednesday figures 1986 1986 Sept. Oct. Nov. 219,358 215,993 221,673 216,106 221,974 214,647 218,943 220,267 226,011 219,141 190,751 184,437 6,314 9,856 8,047 1,809 0 879 849 17,023 189,995 189.995 0 7,954 7,954 0 0 806 441 16,797 196,293 194,876 1,417 8,177 7,829 348 0 557 748 15,898 188,988 188,988 0 7,988 7,988 0 0 638 1.917 16.575 193,130 188,055 5,075 8,877 7,954 923 0 2,261 739 16,967 188,302 188,302 0 7,954 7,954 0 0 807 517 17,067 190,424 190,424 0 7,954 7,954 0 0 3,502 404 16,659 192,841 192,841 0 7,829 7,829 0 0 572 1,842 17,183 196,369 191,850 4,519 8,087 7,829 258 0 3,980 1,841 15,734 193,261 191,627 1,634 8,215 7,829 386 0 481 1,391 15,793 11,084 5,018 17,438r 11,084 5,018 17,488 11,084 5,018 17,543 11.084 5,018 17,467 11,084 5,018 17,477 11,084 5,018 17,487 11,084 5,018 17,501 11,084 5,018 17,515 11,084 5,018 17,529 11,084 5,018 17,543 200,630 492 202,517 485 206,904 459 203,417 493 202,404 492 202,242 491 203,296 483 205,528 476 205,415 469 206,786 459 7,514 342 2,491 303 2,529 225 3,105 240 3,349 206 3,594 238 3,746 272 3,327 234 2,850 174 2,591 337 1,681 663 1,744 479 1,744 425 1,717 625 1,717 439 1,743 455 1,744 526 1,726 524 1,727 486 1,802 430 Oct. 15 Oct. 22 Oct. 29 Nov. 5 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 24 25 26 27 28 29 30 31 32 33 U.S. government securities 1 Bought outright Held under repurchase a g r e e m e n t s . . . . Federal agency obligations Bought outright Held under repurchase a g r e e m e n t s . . . . Acceptances Loans Float Other Federal Reserve assets 34 Gold stock 35 Special drawing rights certificate account 36 Treasury currency outstanding ... ABSORBING RESERVE FUNDS 37 Currency in circulation 38 Treasury cash holdings 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 2 6,463 6,342 6,480 6,138 6,212 6,081 6,233 6,262 6,223 6,094 35,113 35,222 36,552 33,941 40,735 33,392 36,247 35,808 42,298 34,287 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. 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 R E S E R V E S A N D BORROWINGS A5 Depository Institutions Millions of dollars Monthly averages 8 Reserve classification Reserve balances with Reserve Banks 1 Total vault cash 2 Vault cash used to satisfy reserve requirements 3 . Surplus vault cash 4 Total reserves 5 Required reserves Excess reserve balances at Reserve Banks 6 Total borrowings at Reserve Banks Seasonal borrowings at Reserve Banks Extended credit at Reserve Banks 7 1984 1985 Dec. 1 2 3 4 5 6 7 8 9 10 1983 1986 Dec. Dec. Apr. May June July Aug. Sept. Oct. 21,138 20,755 17,908 2,847 38,894 38,333 561 774 96 2 21,738 22,316 18,958 3,358 40,696 39,843 853 3,186 113 2,604 27,620 22,956 20,522 2,434 48,142 47,085 1,058 1,318 56 499 28,892 22,231 19,990 2,241 48,882 48,081 801 893 73 634 28,279 22,474 20,140 2,334 48,419 47,581 838 876 94 584 29,499 22,805 20,439 2,366 49,938 49,007 931 803 108 531 30,313 23,098 20,716 2,381 51,029 50,118 910 741 116 378 30,165 23,451 21,112 2,339 51,277 50,538 740 872 144 465 31,922 23,384 21,267 2,117 53,189 52,463 726 1,008 137 570 32,947 23,753 21,676 2,078 54,623 53,877 746 841 99 497 Biweekly averages of daily figures for weeks ending 1986 Aug. 13 11 12 13 14 15 16 17 18 19 20 Reserve balances with Reserve Banks 1 Total vault cash 2 Vault cash used to satisfy reserve requirements 3 . Surplus vault cash 4 Total reserves 5 Required reserves Excess reserve balances at Reserve Banks 6 Total borrowings at Reserve Banks Seasonal borrowings at Reserve Banks Extended credit at Reserve Banks 7 Aug. 27 Sept. 10 Sept. 24 Oct. 8 Oct. 22 Nov. 5 Nov. 19' Dec. 3 Dec. 17 30,185 23,323 20,992 2,331 51,177 50,592 585 759 134 373 29,758r 23,792 21,388 2,404 51,146 50,279 867 910 152 515 31,527 22,671 20,534 2,137 52,061 51,268 793 1,111 149 592 32,103 23,623 21,567 2,056 53,670 52,964 706 981 135 569 32,156 24,015 21,790 2,225 53,946 53,287 660 902 125 538 33,007 23,955 21,914 2,041 54,921 54,170 751 771 88 488 33,557' 23,208 21,204 2,004 54,761' 53,947' 814' 899 93 476 34,945 23,405 21,570 1,835 56,515 55,599 916 811 68 437 35,215 23,871 21,809 2,062 57,024 55,867 1,157 610 63 368 36,511 23,458 21,725 1,733 58,235 57,510 725 514 34 310 1. Excludes required clearing balances and adjustments to compensate for float. 2. 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. 3. 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. 4. 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. 5. 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 1.13 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. 6. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve requirements less required reserves. 7. 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. 8. Before February 1984, data are prorated monthly averages of weekly averages; beginning February 1984, data are prorated monthly averages of biweekly averages. NOTE. These data also appear in the Board's H.3 (502) release. For address, see inside front cover. S E L E C T E D BORROWINGS IN IMMEDIATELY A V A I L A B L E F U N D S Large Member Banks 1 Averages of daily figures, in millions of dollars 1986 week ending Monday By maturity and source Oct. 20 1 2 3 4 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States For one day or under continuing contract For all other maturities From other depository institutions, foreign banks and foreign official institutions, and United States government agencies For one day or under continuing contract For all other maturities Oct. 27 Nov. 3 Nov. 10 Nov. 17 Nov. 24 Dec. 1 Dec. 8 Dec. 15 72,919' 9,966 68,940 9,403 72,150 9,465 78,023 9,448 75,888 9,135 75,244 8,448 80,123 9,088 84,359 7,728 81,851 7,418 40,503 6,142 38,472 5,824 36,804 5,698 40,272' 5,330 39,350 5,085 38,907 4,941 35,348 5,702 39,599 5,236 38,279 5,199 Repurchase agreements on United States government and federal agency securities in immediately available funds Brokers and nonbank dealers in securities For one day or under continuing contract For all other maturities All other customers For one day or under continuing contract For all other maturities 13,711 8,769 13,586 9,455 11,847 9,829 11,596 9,652 11,311 10,537 11,181 10,396 9,276 11,236 11,220 9,039 10,114 9,630 27,179 10,432 28,346 10,810 29,725 10,915 28,079' 11,048 28,156 10,824 29,541 10,711 28,018 14,211 29,046 10,426 29,165 10,374 MEMO; Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 10 To all other specified customers 2 29,987 10,917 26,244 10,568 29,120 10,261 28,968 10,482 28,506 10,245 27,235 10,070 30,473 10,631 26,230 9,916 26,266 10,064 5 6 7 8 with assets of $1 billion 1. Banks or more as of Dec. 31, 1977. 2. Brokers and nonbank dealers in securities; other depository institutions; foreign banks and official institutions; and United States government agencies. A6 Domestic Financial Statistics • February 1987 1.14 F E D E R A L R E S E R V E B A N K INTEREST RATES Percent per annum Current and previous levels Extended credit 2 Short-term adjustment credit and seasonal credit 1 Federal Reserve Bank First 60 days of borrowing Next 90 days of borrowing After 150 days Rate on 12/26/86 Effective date Previous rate Rate on 12/26/86 Previous rate Rate on 12/26/86 Previous rate Rate on 12/26/86 SVi 8/21/86 8/21/86 8/22/86 8/21/86 8/21/86 8/21/86 6 5Vi 6 6 Vi 7 Effective date for current rates 7Vi Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City . . . . Dallas San F r a n c i s c o . . . 5Vi 8/21/86 8/22/86 8/21/86 8/21/86 8/21/86 8/21/86 6 5 Vi 6 7 Previous rate 8/21/86 8/21/86 8/22/86 8/21/86 8/21/86 8/21/86 8/21/86 8/22/86 8/21/86 8/21/86 8/21/86 8/21/86 7V4 Range of rates in recent years 3 Effective date In effect Dec. 31, 1973 1974— Apr. 25 30 Dec. 9 16 Range (or levelsAll F.R. Banks 7Vi m-% 8 7V+-8 73/4 F.R. Bank of N.Y. IVi Effective Range (or level)— All F.R. Banks F.R. Bank of N.Y. 73/4 m 1978-— Aug. 21 Sept. 22 Oct. 16 20 Nov. 1 8>/2-9>/2 1979-- J u l y 20 Aug. 17 20 Sept. 19 21 Oct. 8 10 10 IO-IOV2 lOVi 10>/>-ll 11 11-12 12 6 Vi 1980-- Feb. 15 19 May 29 30 June 13 16 July 28 29 Sept. 26 Nov. 1/ Dec. 5 8 12-13 13 12-13 12 11-12 11 10-11 10 11 12 12-13 13 13 13 13 12 11 11 10 10 11 12 13 13 7 1981-— May 5 8 2 6 4 13-14 14 13-14 13 12 14 14 13 13 12 8 8 m 73/4 8 8 - 8 Vi 8Vi 9Vi 1975— Jan. 6 10 24 Feb. 5 7 Mar. 10 14 May 16 23 1976— Jan. 19 23 Nov. 22 26 1977— Aug. 30 31 Sept. 2 Oct. 26 1978— Jan. 9 20 May 11 12 July 3 July 10 7V4-73/4 7!/4-73/4 71/4 6V4-7V4 63/4 73/4 71/4 7V4 63/4 63/4 6'/4-6 /4 6V4 6-61/4 6 6V4 6V4 6 6 51/2-6 5'/> 3 SVi SVi 51/4-5 Vi 5V4 51/4 51/4 5V4-53/4 53/4 5>/4 53/4 53/4 6 6 5'/4-53/4 6-6/2 6/2 6Vi-7 7 1-1 Vi 71/4 6</2 7 7'/4 7</4 Nov. Dec. 1. After May 19, 1986, the highest rate within the structure of discount rates may be charged on adjustment credit loans of unusual size that result from a major operating problem at the borrower's facility. A temporary simplified seasonal program was established on Mar. 8, 1985, and the interest rate was a fixed rate Vi percent above the rate on adjustment credit. The program was re-established on Feb. 18, 1986; the rate may be either the same as that for adjustment credit or a fixed rate Vi percent higher. 2. Applicable to advances when exceptional circumstances or practices involve only a particular depository institution and to advances when an institution is under sustained liquidity pressures. As an alternative, for loans outstanding for more than 150 days, a Federal Reserve Bank may charge a flexible rate that takes into account rates on market sources of funds, but in no case will the rate charged be less than the basic rate plus one percentage point. Where credit provided to a particular depository institution is anticipated to be outstanding for an unusually prolonged period and in relatively large amounts, the time period in which each 8 8VS 81/! 91/2 9 Vi 10 10>/2 10V^ 11 11 12 12 Range(or level)— All F.R. Banks F.R. Bank of N.Y. llVi-12 llVi 11—11 Vi 11 lOVi 10-10'/! 10 9Vi-10 9Vi 9 - 9 Vi 9 8/2-9 8'/2-9 8'/> 11 Vi llVi 11 11 lOVi 10 10 9Vi 1984— Apr. 9 13 Nov. 21 26 Dec. 24 8Vi-9 9 8Vi-9 8Vi 8 9 9 8Vi 8V2 8 1985— May 20 24 7Vi-8 7Vi 7Vi 71/2 1986— Mar. 7 10 Apr. 21 23 July 11 Aug. 21 22 7-7 Vi 7 6'/i 6 5/2-6 5'/! 7 7 6Vi 6Vi 6 5</> 5Vi In effect Dec. 26, 1986 5Vi 5Vi Effective date 1982— July 20 23 2 3 16 27 30 Oct. 12 13 Nov. 22 26 Dec. 14 15 17 Aug. m-i 9Vi 9 9 9 8Vi 8Vi rate under this structure is applied may be shortened. See section 201.3(b)(2) of Regulation A. 3. Rates for short-term adjustment credit. For description and 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, 1980, 1981, and 1982. 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 4 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 Nov. 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. As of Oct. 1, the formula for applying the surcharge was changed from a calendar quarter to a moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. Policy Instruments 1.15 R E S E R V E R E Q U I R E M E N T S OF DEPOSITORY INSTITUTIONS' Percent of deposits Type of deposit, and deposit interval Member bank requirements before implementation of the Monetary Control Act Percent Net A7 Time and savings2^ Savings Time 4 $0 million-$5 million, by maturity 30-179 days 180 days to 4 years 4 years or more Over $5 million, by maturity 30-179 days 180 days to 4 years 4 years or more Effective date 3 12 12/31/85 12/31/85 Nonpersonal time deposits9 By original maturity Less than IV2 years 1V2 years or more 3 0 10/6/83 10/6/83 Eurocurrency All types 7 9 Vi 123/4 161/4 12/30/76 12/30/76 12/30/76 12/30/76 12/30/76 3 3 11/13/80 Net transaction accounts1 $0-$36.7 million 3/16/67 113/4 3 2!* 1 6 2l/2 1 liabilities 3/16/67 1/8/76 10/30/75 12/12/74 1/8/76 10/30/75 1. For changes in reserve requirements beginning 1963, see Board's Annual Statistical Digest, 1971-1975, and for prior changes, see Board's Annual Report for 1976, table 13. Under provisions of the Monetary Control Act, depository institutions include commercial banks, mutual savings banks, savings and loan associations, credit unions, agencies and branches offoreign banks, and Edge Act corporations. 2. Requirement schedules are graduated, and each deposit interval applies to that part of the deposits of each bank. Demand deposits subject to reserve requirements were gross demand deposits minus cash items in process of collection and demand balances due from domestic banks. The Federal Reserve Act as amended through 1978 specified different ranges of requirements for reserve city banks and for other banks. Reserve cities were designated under a criterion adopted effective Nov. 9, 1972, by which a bank having net demand deposits of more than $400 million was considered to have the character of business of a reserve city bank. The presence of the head office of such a bank constituted designation of that place as a reserve city. Cities in which there were Federal Reserve Banks or branches were also reserve cities. Any banks having net demand deposits of $400 million or less were considered to have the character of business of banks outside of reserve cities and were permitted to maintain reserves at ratios set for banks not in reserve cities. Effective Aug. 24, 1978, the Regulation M reserve requirements on net balances due from domestic banks to their foreign branches and on deposits that foreign branches lend to U.S. residents were reduced to zero from 4 percent and 1 percent respectively. The Regulation D reserve requirement of borrowings from unrelated banks abroad was also reduced to zero from 4 percent. Effective with the reserve computation period beginning Nov. 16, 1978, domestic deposits of Edge corporations were subject to the same reserve requirements as deposits of member banks. 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as Christmas and vacation club accounts were subject to the same requirements as savings deposits. The average reserve requirement on savings and other time deposits before implementation of the Monetary Control Act had to be at least 3 percent, the minimum specified by law. 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent was imposed on large time deposits of $100,000 or more, obligations of affiliates, and ineligible acceptances. This supplementary requirement was eliminated with the maintenance period beginning July 24, 1980. Effective with the reserve maintenance period beginning Oct. 25, 1979, a marginal reserve requirement of 8 percent was added to managed liabilities in excess of a base amount. This marginal requirement was increased to 10 percent beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and was eliminated beginning July 24, 1980. Managed liabilities are defined as large time deposits, Eurodollar borrowings, repurchase agreements against U.S. government and federal agency securities, federal funds borrowings from nonmember institutions, and certain other obligations. In general, the base for the marginal reserve requirement was originally the greater of (a) $100 million or (b) the average amount of the managed liabilities held by a member bank, Edge corporation, or family of U.S. branches and agencies of a foreign bank for the two reserve computation periods ending Sept. 26, 1979. For the computation period beginning Mar. 20, 1980, the base was lowered by (a) 7 percent or (b) the decrease in an institution's U.S. office gross loans to foreigners and gross balances due from foreign offices of other institutions between the base period (Sept. 13-26, 1979) and the week ending Mar. 12, 1980, whichever was greater. For the computation period beginning May 29, 1980, the base was increased by V/i percent above the base used to calculate the marginal reserve in the statement week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was reduced to the extent that foreign loans and balances declined. Depository institution requirements after implementation of the Monetary Control Act 6 Percent Effective date demand2 $2 million $10 million $10 million-$100 million $100 million-$400 million Over $400 million Type of deposit, and deposit interval 5 5. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97320) provides that $2 million of reservable liabilities (transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities) of each depository institution be subject to a zero percent reserve requirement. The Board is to adjust the amount of reservable liabilities subject to this zero percent reserve requirement each year for the next succeeding calendar year by 80 percent of the percentage increase in the total reservable liabilities of all depository institutions, measured on an annual basis as of June 30. No corresponding adjustment is to be made in the event of a decrease. Effective Dec. 9, 1982, the amount of the exemption was established at $2.1 million. Effective with the reserve maintenance period beginning Jan. 1, 1985, the amount of the exemption was established at $2.4 million. Effective with the reserve computation period beginning Dec. 31, 1985, the amount of the exemption was established at $2.6 million. Effective Dec. 30, 1986, the amount of the exemption is $2.5 million. In determining the reserve requirements of a depository institution, the exemption shall apply in the following order: (1) nonpersonal money market deposit accounts (MMDAs) described in 12 CFR section 204.2 (d)(2); (2) net NOW accounts (NOW accounts less allowable deductions); (3) net other transaction accounts; and (4) nonpersonal time deposits or Eurocurrency liabilities starting with those with the highest reserve ratio. With respect to NOW accounts and other transaction accounts, the exemption applies only to such accounts that would be subject to a 3 percent reserve requirement. 6. For nonmember banks and thrift institutions that were not members of the Federal Reserve System on or after July 1, 1979, a phase-in period ends Sept. 3, 1987. For banks that were members on or after July 1, 1979, but withdrew on or before Mar. 31, 1980, the phase-in period established by Public Law 97-320 ends on Oct. 24, 1985. For existing member banks the phase-in period of about three years was completed on Feb. 2, 1984. All new institutions will have a two-year phase-in beginning with the date that they open for business, except for those institutions that have total reservable liabilities of $50 million or more. 7. Transaction accounts include all deposits on which the account holder is permitted to make withdrawals by negotiable or transferable instruments, payment orders of withdrawal, and telephone and preauthorized transfers (in excess of three per month) for the purpose of making payments to third persons or others. However, MMDAs and similar accounts offered by institutions not subject to the rules that permit no more than six preauthorized, automatic, or other transfers per month of which no more than three can be checks—are not transaction accounts (such accounts are savings deposits subject to time deposit reserve requirements.) 8. The Monetary Control Act of 1980 requires that the amount of transaction accounts against which the 3 percent reserve requirement applies be modified annually by 80 percent of the percentage increase in transaction accounts held by all depository institutions determined as of June 30 each year. Effective Dec. 31, 1981, the amount was increased accordingly from $25 million to $26 million; effective Dec. 30, 1982, to $26.3 million; effective Dec. 29, 1983, to $28.9 million; effective Jan. 1, 1985, to $29.8 million; and effective Dec. 31, 1985, to $31.7 million. Effective Dec. 30, 1986, the amount was increased to $36.7 million. 9. In general, nonpersonal time deposits are time deposits, including savings deposits, that are not transaction accounts and in which a beneficial interest is held by a depositor that is not a natural person. Also included are certain transferable time deposits held by natural persons, and certain obligations issued to depository institution offices located outside the United States. For details, see section 204.2 of Regulation D. NOTE. Required reserves must be held in the form of deposits with Federal Reserve Banks or vault cash. Nonmembers may maintain reserve balances with a Federal Reserve Bank indirectly on a pass-through basis with certain approved institutions. A8 Domestic Financial Statistics • February 1987 1.16 M A X I M U M I N T E R E S T RATES P A Y A B L E on Time and Savings Deposits at Federally Insured Institutions' Percent per annum Commercial banks In effect Dec. 31, 1986 Type of deposit Savings and loan associations and mutual savings banks (thrift institutions) 1 In effect Dec. 31, 1986 Percent 1 Savings 2 Negotiable order of withdrawal accounts 3 Money market deposit account (2) (3) (4) Time accounts 4 7-31 days (5) 1. Effective Oct. 1, 1983, restrictions on the maximum rates of interest payable by commercial banks and thrift institutions on various categories of deposits were removed. For information regarding previous interest rate ceilings on all categories of accounts see earlier issues of the FEDERAL RESERVE BULLETIN, the Federal Home Loan Bank Board Journal, and the Annual Report of the Federal Deposit Insurance Corporation. 2. Effective Apr. 1, 1986, the interest rate ceiling on savings deposits was removed. Before Apr. 1, 1986, savings deposits were subject to an interest rate ceiling of 5V2 percent. 3. Before Jan. 1, 1986, NOW accounts with minimum denomination requirements of less than $1,000 were subject to an interest rate ceiling of 5'/4 percent. NOW accounts with minimum required denominations of $1,000 or more and IRA/Keough (HR10) Plan accounts were not subject to interest rate ceilings. Effective Jan. 1, 1986, the minimum denomination requirement was removed. Effective date 4/1/86 1/1/86 12/14/82 1/1/86 10/1/83 Percent 2 (3) (4) () (5) Effective date 4/1/86 1/1/86 12/14/82 9/1/86 10/1/83 4. Effective Dec. 14, 1982, depository institutions are authorized to offer a new account with a required initial balance of $2,500 and an average maintenance balance of $2,500 not subject to interest rate restrictions. Effective Jan. 1, 1985, the minimum denomination and average balance maintenance requirements was lowered to $1,000. Effective Jan. 1,1986, the minimum denomination and average balance maintenance requirements were removed. No minimum maturity period is required for this account, but depository institutions must reserve the right to require seven days, notice before withdrawals. 5. Before Jan. 1, 1986, deposits of less than $1,000 were subject to an interest rate ceiling of 5 Vi percent. Deposits of less than $1,000 issued to governmental units were subject to an interest rate ceiling of 8 percent. Effective Jan. 1, 1986, the minimum denomination requirement was removed. Policy Instruments 1.17 A9 F E D E R A L R E S E R V E OPEN M A R K E T T R A N S A C T I O N S Millions of dollars 1986 Type of transaction 1983 1984 1985 Apr. June May July Aug. Oct. Sept. U . S . GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) 1 2 3 4 Treasury bills Gross purchases Gross sales Exchange Redemptions 5 6 7 8 9 18,888 3,420 0 2,400 20,036 8,557 0 7,700 22,214 4,118 0 3,500 2,988 0 0 0 3,196 0 0 0 1,402 0 0 0 867 0 0 0 2,940 0 0 0 861 0 0 0 928 0 0 0 Others within 1 year Gross purchases Gross sales Maturity shift Exchange Redemptions 484 0 18,887 -16,553 87 1,126 0 16,354 -20,840 0 1,349 0 19,763 -17,717 0 0 0 447 -1,129 0 0 0 1,847 -1,819 0 0 0 1,152 -1,957 0 0 0 579 -1,253 0 0 0 1,715 -4,087 0 0 0 1,053 -1,892 0 0 0 974 -529 0 10 11 12 13 1 to 5 years Gross purchases Gross sales Maturity shift Exchange 1,896 0 -15,533 11,641 1,638 0 -13,709 16,039 2,185 0 -17,459 13,853 0 0 -447 1,134 0 0 -1,532 1,019 0 0 -1,152 1,957 0 0 -386 1,253 0 0 -1,194 2,587 0 0 -1,053 1,892 0 0 -969 529 14 15 16 17 5 to 10 years Gross purchases Gross sales Maturity shift Exchange 890 0 -2,450 2,950 536 300 -2,371 2,750 458 100 -1,857 2,184 0 0 -5 0 0 0 -315 500 0 0 0 0 0 0 -193 0 0 0 -520 1,000 0 0 0 0 0 0 -5 0 18 19 20 21 Over 10 years Gross purchases Gross sales Maturity shift Exchange 383 0 -904 1,962 441 0 -275 2,052 293 0 -447 1,679 0 0 0 0 0 0 0 300 0 0 0 0 0 0 0 0 0 0 0 500 0 0 0 0 0 0 0 0 22 23 24 All maturities Gross purchases Gross sales Redemptions 22,540 3,420 2,487 23,776 8,857 7,700 26,499 4,218 3,500 2,988 0 0 3,1% 0 0 1,402 0 0 867 0 0 2,940 0 0 861 0 0 928 0 0 25 26 Matched transactions Gross sales Gross purchases 578,591 576,908 808,986 810,432 866,175 865.968 109,253 103,957 62,663 67,147 80,219 80,674 70,928 69,659 60,460 60,011 73,179 70,817 77,262 81,892 27 28 Repurchase agreements Gross purchases Gross sales 105,971 108,291 127,933 127,690 134,253 132,351 21,156 13,634 12,395 19,917 5,640 5,640 18,657 18,657 0 0 14,717 8,403 5,670 11,984 12,631 8,908 20,477 5,214 158 1,857 -403 2,491 4,814 -756 0 0 292 0 0 256 0 0 162 0 0 0 0 0 50 0 0 0 0 0 0 0 90 0 0 * 0 0 93 8,833 9,213 11,509 11,328 22,183 20,877 3,369 1,955 3,135 4,567 1,691 1,691 4,984 4,984 0 0 2,678 869 952 2,761 -672 -76 1,144 1,432 -1,482 0 # -90 1,809 -1,902 -1,062 -418 0 0 0 0 0 0 0 0 10,897 8,414 21,621 6,647 -1,324 1,857 -403 2,401 6,623 -2,658 29 Net change in U.S. government securities FEDERAL AGENCY OBLIGATIONS 30 31 32 Outright transactions Gross purchases Gross sales Redemptions 33 34 Repurchase agreements Gross purchases Gross sales 35 Net change in federal agency obligations * BANKERS ACCEPTANCES 36 Repurchase agreements, net 37 Total net change in System Open Market Account NOTE. 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. A10 1.18 Domestic Financial Statistics • February 1987 FEDERAL RESERVE BANKS Millions of dollars Condition and Federal Reserve Note Statements Wednesday 1986 Account 1986 Nov. 12 Nov. 5 Oct. 29 End of month Nov. 19 Nov. 26 Oct. Sept. Nov. Consolidated condition statement ASSETS 11,084 5,018 507 11,084 5,018 525 11,084 5,018 506 11,084 5,018 510 11,084 5,018 508 11,084 5,018 507 11,084 5,018 508 11,084 5,018 507 807 0 3,502 0 572 0 3,980 0 481 0 879 0 806 0 557 0 1 Gold certificate account 2 Special drawing rights certificate account 3 Coin Loans 4 To depository institutions 5 Other Acceptances—Bought outright 6 Held under repurchase agreements Federal agency obligations 7 Bought outright 8 Held under repurchase agreements U.S. government securities Bought outright 9 Bills 10 Notes 11 Bonds 12 Total bought outright 1 13 Held under repurchase agreements 14 Total U.S. government securities 0 0 0 0 0 0 0 0 7,954 0 7,954 0 7,829 0 7,829 258 7,829 386 8,047 1,809 7,954 0 7,829 348 95,929 66,597 25,776 188,302 0 188,302 98,051 66,597 25,776 190,424 0 190,424 100,468 66,597 25,776 192,841 0 192,841 98,000 68,126 25,724 191,850 4,519 196,369 97,777 68,126 25,724 191,627 1,634 193,261 92,064 66,597 25,776 184,437 6,314 190,751 97,622 66,597 25,776 189,995 0 189,995 101,026 68,126 25,724 194,876 1,417 196,293 15 Total loans and securities 197,063 201,880 201,242 208,436 201,957 201,486 198,755 205,027 6,091 649 6,812 649 7,127 648 9,381 651 7,818 654 9,125 647 6,104 649 4,721 654 9,156 7,262 9,134 6,876 9,140 7,395 9,145 5,938 9,095 6,044 9,126 7,250 9,133 7,015 9,179 6,065 236,830 241,978 242,160 250,163 242,178 244,243 238,266 242,255 16 Items in process of collection 17 Bank premises Other assets 18 Denominated in foreign currencies 2 19 All other 3 20 Total assets LIABILITIES 185,753 186,802 188,994 188,865 190,210 184,191 186,022 190,327 22 23 24 25 35,135 3,594 238 455 37,991 3,746 272 526 37,534 3,327 234 524 44,025 2,850 174 486 36,089 2,591 337 430 36,794 7,514 342 663 36,966 2,491 303 479 38,296 2,529 225 425 26 Total deposits 39,422 42,535 41,619 47,535 39,447 45,313 40,239 41,475 5,574 2,067 6,408 2,258 5,285 2,245 7,540 2,110 6,427 2,074 8,276 2,193 5,663 2,275 3,973 2,242 232,816 238,003 238,143 246,050 238,158 239,973 234,199 238,017 1,853 1,781 380 1,858 1,781 336 1,860 1,781 376 1,859 1,781 473 1,860 1,781 379 1,849 1,780 641 1,854 1,781 432 1,860 1,781 597 33 Total liabilities and capital accounts 236,830 241,978 242,160 250,163 242,178 244,243 238,266 242,255 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 166,086 164,174 164,654 164,518 164,567 163,236 164,020 164,411 21 Federal Reserve notes Deposits To depository institutions U.S. Treasury—General account Foreign—Official accounts Other 27 Deferred credit items 28 Other liabilities and accrued dividends 4 29 Total liabilities CAPITAL ACCOUNTS 30 Capital paid in 31 Surplus 32 Other capital accounts Federal Reserve note statement 35 Federal Reserve notes outstanding 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. government and agency securities 227,605 41,852 185,753 227,859 41,057 186,802 228,750 39,756 188,994 229,916 41,051 188,865 231,208 40,998 190,210 223,928 39,737 184,191 227,605 41,583 186,022 231,281 40,954 190,327 11,084 5,018 0 169,651 11,084 5,018 0 170,700 11,084 5,018 0 172,892 11,084 5,018 0 172,763 11,084 5,018 0 174,108 11,084 5,018 0 168,089 11,084 5,018 0 169,920 11,084 5,018 0 174,225 42 Total collateral 185,753 186,802 188,994 188,865 190,210 184,191 186,022 190,327 1. Includes securities loaned—fully guaranteed by U.S. government securities pledged with Federal Reserve Banks—and excludes (if any) securities sold and scheduled to be bought back under matched sale-purchase transactions. 2. Assets shown in this line are revalued monthly at market exchange rates. 3. Includes special investment account at Chicago of Treasury bills maturing within 90 days. 4. Includes exchange-translation account reflecting the monthly revaluation at market exchange rates of foreign-exchange commitments. NOTE: Some of these data also appear in the Board's H.4.1 (503) release. For address, see inside front cover. Federal Reserve Banks 1.19 FEDERAL RESERVE BANKS Millions of dollars All Maturity Distribution of Loan and Security Holdings Wednesday 1986 Type and maturity groupings End of month 1986 Oct. 29 Nov. 5 Nov. 12 Nov. 19 1 Loans—Total 2 Within 15 days 3 16 days to 90 days 4 91 days to 1 year 807 802 5 0 3,502 3,470 32 0 572 539 33 0 3,980 3,976 4 0 481 471 10 0 879 855 24 0 806 783 23 0 557 545 12 0 5 Acceptances—Total 6 Within 15 days 7 16 days to 90 days 8 91 days to 1 year 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 9 U.S. government securities—Toted 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 188,302 9,673 46,627 56,915 36,703 15,575 22,809 190,424 11,371 45,279 59,131 36,259 15,575 22,809 192,841 7,567 50,035 60,596 36,259 15,575 22,809 196,369 14,6% 47,200 58,950 37,006 15,451 23,066 193,261 11,263 49,947 56,528 37,006 15,451 23,066 190,751 11,681 46,290 57,693 36,698 15,580 22,809 189,995 6,964 48,533 59,855 36,259 15,575 22,809 196,293 7,625 54,077 59,068 37,006 15,451 23,066 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 7,954 279 940 1,360 3,808 1,193 374 7,954 125 1,064 1,390 3,808 1,193 374 7,829 30 1,094 1,330 3,808 1,193 374 8,087 506 876 1,330 3,808 1,193 374 8,215 691 789 1,438 3,730 1,193 374 9,856 2,118 755 1,502 3,905 1,152 424 7,954 279 940 1,360 3,808 1,193 374 8,177 653 851 1,376 3,730 1,193 374 Nov. 26 Sept. 30 Oct. 31 1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements. Nov. 28 A12 1.20 Domestic Financial Statistics • February 1987 AGGREGATE R E S E R V E S OF DEPOSITORY INSTITUTIONS A N D M O N E T A R Y B A S E Billions of dollars, averages of daily figures Item 1982 Dec. 1983 Dec. 1984 Dec. 1986 1985 Dec. Apr. 1 Total reserves2 Nonborrowed reserves Nonborrowed reserves plus extended credit 3 Required reserves Monetary base 4 June July Aug. Sept. Oct. Nov. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS 1 2 3 4 5 May 34.28 36.14 39.51 45.61 47.28 48.58 49.45 50.49 51.32 51.81 52.40 53.84 33.65 33.83 33.78 170.04 35.36 35.37 35.58 185.39 36.32 38.93 38.66 199.17 44.29 44.79 44.55 216.72 46.38 47.02 46.47 222.36 47.70 48.29 47.74 224.90 48.64 49.17 48.51 226.63 49.75 50.13 49.58 228.30 50.45 50.91 50.58 230.59 50.80 51.37 51.08 231.63 51.56 52.06' 51.66' 233.44 53.09 53.50 52.84 235.93 Not seasonally adjusted 6 Total reserves2 7 8 9 10 Nonborrowed reserves Nonborrowed reserves plus extended credit 3 Required reserves Monetary base 4 35.01 36.86 40.57 46.84 47.94 47.71 49.20 50.32 50.62 51.55 52.34 54.12 34.37 34.56 34.51 173.07 36.09 36.09 36.30 188.66 37.38 39.98 39.71 202.34 45.52 46.02 45.78 220.36 47.04 47.68 47.14 222.13 46.84 47.42 46.87 223.61 48.40 48.93 48.27 227.04 49.58 49.96 49.41 230.02 49.75 50.22 49.88 230.76 50.54 51.11 50.82 231.51 51.50 52.00 51.60' 233.04 53.37 53.79 53.12 236.92 41.85 38.89 40.70 48.14 48.88 48.42 49.94 51.03 51.28 53.19 54.62 56.41 41.22 41.41 41.35 180.42 38.12 38.12 38.33 192.26 37.51 40.09 39.84 204.18 46.82 47.41 47.09 223.53 47.99 48.22 48.08 224.88 47.54 48.24 47.58 226.12 49.14 49.81 49.01 229.68 50.29 50.68 50.12 232.55 50.41 50.90 50.54 233.32 52.18 52.76 52.46 235.07 53.78 54.15 53.88' 237.26 55.66 56.16 55.41 241.28 N O T ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS 5 11 Total reserves2 12 13 14 15 Nonborrowed reserves Nonborrowed reserves plus extended credit 3 Required reserves Monetary base 4 1. 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. 2. 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. 3. 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. 4. 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 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 and the remaining items seasonally adjusted as a whole. 5. 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. NOTE. 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 Banking Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Monetary and Credit Aggregates 1.21 A13 M O N E Y STOCK, LIQUID A S S E T S , A N D D E B T M E A S U R E S Billions of dollars, averages of daily figures 1986 1982 Dec. 1983 Dec. 1984 Dec. 1985 Dec. Aug. Sept. Oct. Nov. Seasonally adjusted 1 Ml ? M2 M3 4 L 5 Debt 6 7 8 9 Ml components Currency 2 Travelers checks 3 Demand deposits 4 Other checkable deposits 5 10 11 Nontransactions components In M26 In M3 only 7 Savings deposits 9 Commercial Banks 13 Thrift institutions \? 479.9 1,952.6 2,443.5 2,850.1 4,661.7' 527.1 2,186.0 2,697.3 3,162.7 5,210.1' 558.5 2,373.8 2,986.5 3,532.4 5,950.0r 626.6 2,566.5 3,201.2 3,839.5 6,771.8' 687.6 2,724.3' 3,400.7' 4,030.7' 7,306.2' 693.1 2,740.8' 3,425.5' 4,059.6' 7,375.8' 701.2 2,764.9' 3,444.5' 4,082.2 7,427.9 134.3 4.3 237.9 103.4 148.3 4.9 242.7 131.3 158.5 5.2 248.4 146.3 170.6 5.9 271.5 178.6 179.0 6.5 291.8 210.4 179.7 6.5 292.2 214.8 181.2 6.4 293.2 220.4 182.2 6.4 298.4 226.4 1,472.7 490.9 1,658.9 511.3 1,815.4 612.7 1,939.9 634.6 2,036.7' 676.4' 2,047.6' 684.7' 2.063.7' 679.5' 2,066.7 680.5 163.7 194.2 133.4 173.2 122.3 167.3 124.5 179.1 136.8 200.8 140.9 203.5 145.8 208.0 150.4 212.8 713.4 2,780.1 3,460.6 n.a. n.a. 14 15 Small denomination time deposits 9 Commercial Banks Thrift institutions 380.4 472.4 351.1 434.1 387.2 500.3 384.1 496.2 376.0 501.2 372.6 498.7 367.7 494.0' 363.9 490.4 16 17 Money market mutual funds General purpose and broker/dealer Institution-only 185.2 51.1 138.2 43.2 167.5 62.7 176.5 64.6 200.5 80.8 202.2 84.4 206.7 84.5 206.6 84.4 18 19 Large denomination time deposits 10 Commercial Banks 11 Thrift institutions 262.1 65.8 228.7 101.1 263.7 150.2 279.2 157.3 282.C 166.1 281.4' 165.8 279.2' 164.0 281.6 161.8 70 21 Debt components Federal debt Non-federal debt 979.7 3,682.1 1,172.8 4,037.3' 1,367.6^ 4,582.4' 1,587.0 5,184.8' 1,725.1' 5,581.8' 1,741.6' 5,634.2' 1,755.9 5,672.1 n.a. n.a. Not seasonally adjusted ?? Ml ?3 M2 74 M3 L 26 Debt 490.9 1,958.6 2,453.3 2,856.4 4,655.8 538.8 2,192.8 2,707.9 3,169.3 5,204.5' 570.5 2,380.8 2,997.8 3,537.6 5,944.2' 639.9 2,574.7 3,213.9 3,845.7 6,765.2' 684.6 2,719.2' 3,395.4' 4,027.0' 7,276.0' 690.7 2,731.5' 3,418.2' 4,054.5' 7,354.0' 698.4 2,758.9' 3,440.4' 4,078.1 7,410.4 714.9 2,778.0 3,464.2 n.a. n.a. 136.5 4.1 246.2 104.1 150.5 4.6 251.3 132.4 160.9 4.9 257.3 147.5 173.1 5.5 281.3 180.1 179.9 7.3 289.0 208.5 179.6 6.9 290.8 213.5 180.9 6.5 292.5 218.5 183.2 6.1 299.6 226.0 1,467.7 494.7 1,654.0 515.1 1,810.3 617.0 1.934.7 639.2 2,034.6' 676.3 2,040.7' 686.7' 2,060.5' 681.5' 2,063.0 686.2 26.3 16.9 230.5 148.7 267.2 149.7 332.4 179.6 363.5' 189.5 368.1 190.2 371.7' 192.1 375.1 193.0 27 28 79 30 Ml components Currency 2 Travelers checks 3 Demand deposits 4 Other checkable deposits 5 31 32 Nontransactions components M26 M3 only 7 33 34 Money market deposit accounts Commercial banks Thrift institutions 35 36 Savings deposits 8 Commercial Banks Thrift institutions 162.1 193.1 132.2 172.3 121.4 166.5 123.5 178.3 137.3 199.7 140.7 202.5 146.1 208.7 149.9 212.9 37 38 Small denomination time deposits 9 Commercial Banks Thrift institutions 380.1 471.7 351.1 434.2 387.6 501.2 384.8 497.6 377.9 500.5 375.2' 498.4 370.4 496.9' 365.9 493.2 39 40 Money market mutual funds General purpose and broker/dealer Institution-only 185.2 51.1 138.2 43.2 167.5 62.7 176.5 64.6 200.5 80.8 202.2 84.4 206.7 84.5 206.6 84.4 41 42 Large denomination time deposits 10 Commercial Banks 11 Thrift institutions 265.2 65.8 230.8 101.4 265.4 150.6 280.9 157.8 282.3 166.0 283.5' 165.7 281.9' 164.4' 283.3 162.5 43 44 Debt components Federal debt Non-federal debt 1,170.2 4,034.3' 1,364.7 4,579.5' 1,583.7 5,181.5' 1,713.3 5,562.7' 1,734.5' 5,619.5' 1,748.6 5,661.8 For notes see following page. 976.4 3,679.3 n.a. n.a. A14 Domestic Financial Statistics • February 1987 NOTES TO TABLE 1.21 1. Composition of the money stock measures and debt is as follows: Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults of commercial banks; (2) travelers checks of nonbank issuers; (3) demand deposits at all commercial banks other than those due to domestic banks, 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. The currency and demand deposit components exclude the estimated amount of vault cash and demand deposits respectively held by thrift institutions to service their OCD liabilities. 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. Also subtracted is a consolidation adjustment that represents the estimated amount of demand deposits and vault cash held by thrift institutions to service their time and savings deposits. 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 a consolidation adjustment that represents 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. 2. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of commercial banks. Excludes the estimated amount of vault cash held by thrift institutions to service their OCD liabilities. 3. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. Travelers checks issued by depository institutions are included in demand deposits. 4. Demand deposits at commercial banks and foreign-related institutions other than those due to domestic banks, the U.S. government, and foreign banks and official institutions less cash items in the process of collection and Federal Reserve float. Excludes the estimated amount of demand deposits held at commercial banks by thrift institutions to service their OCD liabilities. 5. Consists of NOW and ATS balances at all depository institutions, credit union share draft balances, and demand deposits at thrift institutions. Other checkable deposits seasonally adjusted equals the difference between the seasonally adjusted sum of demand deposits plus OCD and seasonally adjusted demand deposits. Included are all ceiling free "Super NOWs," authorized by the Depository Institutions Deregulation committee to be offered beginning Jan. 5, 1983. 6. Sum of overnight RPs and overnight Eurodollars, money market fund balances (general purpose and broker/dealer), MMDAs, and savings and small time deposits, less the consolidation adjustment that represents the estimated amount of demand deposits and vault cash held by thrift institutions to service their time and savings deposits liabilities. 7. Sum of large time deposits, term RPs and term 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 funds. 8. Savings deposits exclude MMDAs. 9. 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. 10. Large-denomination time deposits are those issued in amounts of $100,000 or more, excluding those booked at international banking facilities. 11. Large-denomination time deposits at commercial banks less those held by money market mutual funds, depository institutions, and foreign banks and official institutions. NOTE: Latest monthly and weekly figures are available from the Board's H.6 (508) release. Historical data are available from the Banking Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Monetary and Credit Aggregates 1.22 A15 B A N K DEBITS A N D DEPOSIT T U R N O V E R Debits are shown in billions of dollars, turnover as ratio of debits to deposits. Monthly data are at annual rates. 1986 IVOJ iy©4 May 1 2 3 4 5 6 7 8 9 10 Demand deposits 2 All insured banks Major New York City banks Other banks ATS-NOW accounts 3 Savings deposits 4 Aug. Sept. Oct. Seasonally adjusted DEBITS TO Demand deposits 2 All insured banks Major New York City banks Other banks ATS-NOW accounts 3 Savings deposits 4 July June 109,642.3 47,769.4 61,873.1 1,405.5 741.4 128,440.8 57,392.7 71,048.1 1,588.7 633.1 154,556.0 70,445.1 84,110.9 1,920.8 539.0 189,819.7 87,846.7 101,973.0 2,255.6 389.7 187,035.1 89,201.2 97,833.9 2,188.0 382.6 188,874.2 91,040.8 97,833.4 2,320.1 417.4 194,457.3 92,961.7 101,495.6 2,414.8 421.0 197,997.9 95,252.0 102,745.9 2,704.8 428.4 197,222.5 95,919.7 101,302.9 2,292.5 456.5 379.7 1,528.0 240.9 15.6 5.4 434.4 1,843.0 268.6 15.8 5.0 496.5 2,168.9 301.8 16.7 4.5 569.7 2,457.8 342.8 17.0 3.1 553.3 2,504.5 323.5 16.2 3.0 556.4 2,417.2 324.2 16.8 3.2 567.6 2,437.0 333.4 16.9 3.2 573.9 2,519.8 334.5 18.4 3.1 569.6 2,493.4 329.2 15.2 3.2 DEPOSIT TURNOVER Not seasonally adjusted DEBITS TO 2 Demand deposits 11 All insured banks 12 Major New York City banks 13 Other banks 14 ATS-NOW accounts 3 15 MMDA 5 16 Savings deposits 4 109,517.6 47,707.4 64,310.2 1,397.0 567.4 742.0 128,059.1 57,282.4 70,776.9 1,579.5 848.8 632.9 154,108.4 70,400.9 83,707.8 1,903.4 1,179.0 538.7 184,827.4 85,189.6 99,637.8 2,256.6 1,557.9 377.8 188,924.1 91,315.2 97,608.9 2,356.3 1,697.2 385.9 198,657.9 96,686.1 101,971.8 2,240.4 1,575.9 419.9 186,892.9 88,807.6 98,085.3 2,140.8 1,530.6 413.7 198,433.5 96,489.1 101,944.4 2,524.1 1,612.9 414.2 204,618.4 98,837.9 105,780.4 2,231.9 1,607.4 449.2 379.9 1,510.0 240.5 15.5 2.8 5.4 433.5 1,838.6 267.9 15.7 3.5 5.0 497.4 2,191.1 301.6 16.6 3.8 4.5 569.4 2,487.0 343.2 17.1 4.5 3.0 564.1 2,570.0 326.0 17.4 4.8 3.0 587.8 2,620.6 338.7 16.3 4.4 3.2 554.7 2,421.9 326.6 15.1 4.2 3.1 577.6 2,603.6 332.6 17.3 4.4 3.0 593.5 2,656.9 343.9 14.9 4.3 3.2 DEPOSIT TURNOVER 17 18 19 20 21 22 Demand deposits 2 All insured banks Major New York City banks Other banks ATS-NOW accounts 3 MMDA 5 Savings deposits 4 1. Annual averages of monthly figures. 2. Represents accounts of individuals, partnerships, and corporations and of states and political subdivisions. 3. Accounts authorized for negotiable orders of withdrawal (NOW) and accounts authorized for automatic transfer to demand deposits (ATS). ATS data availability starts with December 1978. 4. Excludes ATS and NOW accounts, MMDA and special club accounts, such as Christmas and vacation clubs. 5. Money market deposit accounts. NOTE. Historical data for demand deposits are available back to 1970 estimated in part from the debits series for 233 SMSAs that were available through June 1977. Historical data for ATS-NOW and savings deposits are available back to July 1977. Back data are available on request from the Banking Section, Division of Research and Statistics, 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. A16 1.23 Domestic Financial Statistics • February 1987 L O A N S A N D SECURITIES All Commercial Banks 1 Billions of dollars; averages of Wednesday figures 1985 Dec. 1986 Jan. Feb. Mar. Apr. May June July Aug. Sept/ Oct/ Nov. Seasonally adjusted 1 Total loans and securities2 2 U.S. government securities 3 Other securities 4 Total loans and leases 2 5 Commercial and industrial 6 Bankers acceptances held 3 .. 7 Other commercial and industrial 8 U.S. addressees 4 9 Non-U.S. addressees 4 10 Real estate 11 Individual 12 Security 13 Nonbank financial institutions 14 Agricultural 15 State and political subdivisions 16 Foreign banks 1/ Foreign official institutions . . . 18 Lease financing receivables... 19 All other loans 1,900.4 1,930.0 1,935.5 1,944.6 1,947.9 1,957.5 1,963.7 1,985.0 2,007.7 2,029.6 2,034.0 2,049.0 273.1 177.6 1,449.7 499.5 4.9 268.2 192.5 1,469.3 502.1 4.9 273.6 188.1 1,473.7 502.4 4.8 269.5 183.3 1,491.8 506.1 4.9 270.0 182.1 1,495.8 507.8 5.2 274.1 181.9 1,501.5 506.7 5.6 274.8 183.6 1,505.3 508.7 6.1 285.4 186.1 1,513.4 508.7 5.8 290.9 192.3 1,524.5 510.4 5.9 294.3 200.7 1,534.7 512.1 6.3 299.6 196.7 1,537.7 514.1 6.4 304.8 194.8 1,549.5 520.3 6.1 494.7 486.0 8.7 422.4 291.5 40.1 497.2 488.0 9.3 427.1 294.6 44.1 497.6 488.4 9.2 431.4 297.4 43.4 501.2 491.3 9.9 436.1 299.5 50.4 502.6 492.7 9.8 440.7 301.1 48.0 501.0 490.6 10.5 446.4 303.0 46.4 502.6 493.1 9.5 450.7 304.5 42.5 502.8 493.8 9.0 455.9 305.6 44.8 504.4 495.4 9.1 461.4 306.9 44.2 505.8 496.9 8.9 465.9 308.8 44.4 507.8 499.0 8.8 470.8 309.8 39.5 514.1 505.4 8.7 476.5 311.1 40.1 32.6 36.3 32.6 35.9 31.8 35.4 32.2 34.9 32.3 34.6 33.3 34.1 34.7 33.7 34.2 33.3 34.4 33.3 35.1 33.2 35.6 33.3 35.3 33.6 52.8 9.1 6.9 18.8 39.6 60.5 9.1 7.0 19.4 36.9 60.3 9.2 7.0 19.6 35.8 60.2 9.2 6.8 19.8 36.6 59.8 9.2 5.3 19.9 37.3 59.5 9.3 5.1 19.8 37.9 59.4 9.5 6.4 20.0 35.4 59.0 9.5 6.5 20.0 35.9 59.4 9.3 6.5 20.2 38.5 59.4 9.4 6.4 20.4 39.7 58.5 9.2 6.4 20.4 40.1 57.8 9.0 6.2 21.0 38.5 Not seasonally adjusted 20 Total loans and securities2 1,912.6 1,934.8 1,932.4 1,944.1 1,950.5 1,956.7 1,965.4 1,981.4 1,999.8 2,027.3 2,029.2 2,048.6 21 U.S. government securities 11 Other securities li Total loans and leases 2 14 Commercial and industrial 25 Bankers acceptances held 3 .. 26 Other commercial and industrial 27 U.S. addressees 4 28 Non-U.S. addressees 4 .... 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 . . . 3/ Lease financing receivables... 38 All other loans 271.0 178.7 1,462.9 501.5 5.2 267.7 193.8 1,473.3 501.4 4.9 275.0 188.9 1,468.5 500.1 4.7 273.2 183.9 1,487.1 506.9 5.0 274.0 181.8 1,494.7 510.0 5.2 275.4 182.2 1,499.0 508.5 5.5 276.2 182.5 1,506.7 509.4 6.0 285.3 183.9 1,512.1 508.6 6.0 289.1 192.1 1,518.7 508.3 5.9 292.6 200.7 1,534.0 511.2 6.1 295.2 196.3 1,537.7 513.1 6.2 302.5 194.8 1,551.3 519.3 6.2 496.4 487.3 9.0 423.3 294.8 45.4 496.5 487.3 9.2 427.3 297.0 46.8 495.4 486.3 9.1 430.6 296.3 42.6 501.9 492.7 9.2 434.9 296.8 49.5 504.9 495.4 9.5 439.5 298.6 48.5 503.0 493.3 9.7 445.2 301.1 45.6 503.4 494.0 9.4 450.2 303.1 42.5 502.6 493.3 9.3 455.8 304.9 43.0 502.4 493.1 9.4 461.7 307.2 41.3 505.2 495.9 9.3 466.9 310.2 41.8 506.9 497.7 9.2 472.2 311.4 38.7 513.0 503.8 9.2 478.0 312.4 41.3 33.4 36.0 32.8 35.2 31.2 34.5 31.6 34.0 32.2 33.9 33.1 34.1 34.6 34.2 34.3 34.1 34.6 34.1 35.3 34.0 35.4 33.8 35.4 33.7 52.8 9.5 6.9 18.8 40.5 60.5 9.3 7.0 19.6 36.4 60.3 9.3 7.0 19.8 36.6 60.2 9.1 6.8 19.8 37.5 59.8 9.0 5.3 19.9 38.1 59.5 9.1 5.1 19.9 37.9 59.4 9.2 6.4 20.0 37.7 59.0 9.4 6.5 20.0 36.5 59.4 9.1 6.5 20.1 36.3 59.4 9.4 6.4 20.3 39.0 58.5 9.3 6.4 20.3 38.6 57.8 9.3 62 20.9 37.0 1. Data are prorated averages of Wednesday estimates for domestically chartered insured banks, based on weekly sample reports and quarterly universe reports. For foreign-related institutions, data are averages of month-end estimates based on weekly reports from large U.S. agencies and branches and quarterly reports from all U.S. agencies and branches, New York investment companies majority owned by foreign banks, and Edge Act corporations owned by domestically chartered and foreign banks. 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. NOTE. These data also appear in the Board's G.7 (407) release. For address, see inside front cover. Commercial 1.24 Banking Institutions All MAJOR N O N D E P O S I T F U N D S OF COMMERCIAL B A N K S 1 Monthly averages, billions of dollars 1986 1985 Source Dec. Total nondeposit funds Seasonally adjusted 2 Not seasonally adjusted Federal funds, RPs, and other borrowings from nonbanks 3 3 Seasonally adjusted 4 Not seasonally adjusted 5 Net balances due to foreign-related institutions, not seasonally adjusted 1 2 Jan. Feb. Mar. Apr. May June July' Aug.' Sept. Oct. Nov. 128.2 127.9 131.7 131.8 131.7 134.4 141.2 143.7 134.1 135.0 135.7 137.9' 132.6 131.3 136.1 132.2 138.1 137.1 143.cc 141.3' 140.5' 138.7' 143.2 144.4 154.1 153.7 151.6 151.6 152.7 155.3 160.6 163.1 160.4 161.3 157.9 160.0 157.1 155.8 166.4 162.5 168.4 167.3 166.3' 168.4' 166.7' 165.7 166.8 -25.9 -19.9 -21.0 -19.4 -26.3 -22.2 -24.5 -30.3 -30.3 -25.0 -28^ -22.5 -31.6 76.3 44.7 -28.0 74.3 46.4 -25.8 69.4 43.6 -26.5 71.7 45.2 -30.2 75.2 45.1 -29.3 72.9 43.6 -30.5 72.2 41.7 -33.8 73.9 40.1 -31.2 75.2 44.0 -29.2 74.0 44.8 -31.9 73.5 41.6 -28.7 70.8 42.1 5.7 56.7 62.5 8.1 57.6 65.7 4.8 60.0 64.8 7.1 3.9 62.5 66.4 60.0 67.1 6.0 62.8 68.7' 3.5 64.1 67.7 66.2 67.1 4.2 67.9 72.0' 4.0 60.7 67.8 68.3 72.2' 6.2 68.8 75.0 89.4 87.6 89.5 92.2 89.7 90.6 89.0 91.2 89.3' 88.0 95.9 92.0 96.8 95.7 96.7' 95^ 96.3 87.7 89.7 92.2 97.4' 89.0 95.6' 97.4 18.5 16.1 14.7 16.8 13.1 13.2 11.0 16.0 18.2 15.3 26.5 15.2 339.8 338.1 338.5 337.5 342.9 343.2 342.5 344.6 340.1 342.8 341.1 342.9 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted 4 7 Gross due from balances 8 Gross due to balances 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted 5 10 Gross due from balances 11 Gross due to balances Security RP borrowings 12 Seasonally adjusted 6 Not seasonally adjusted 13 U.S. Treasury demand balances 7 Seasonally adjusted 14 15 Not seasonally adjusted Time deposits, $100,000 or more 8 16 Seasonally adjusted 17 Not seasonally adjusted 14.6 19.0 24.0 21.1 24.2 15.7 15.7 17.4 17.8 21.3 21.8 337.6 339.4 349.4 348.3 351.9 350.7 347.7 348.3 346.9 343.5 340.4 339.7 17.5 1. 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, New York investment companies majority owned by foreign banks, and Edge Act corporations owned by domestically chartered and foreign banks. Data for lines 1-4 and 12-17 have been revised in light of benchmarking and revised seasonal adjustment. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from nonbanks and not seasonally adjusted net Eurodollars. Includes averages of Wednesday data for domestically chartered banks and averages of current and previous month-end data for foreign-related institutions. 7.1 .9 3. Other borrowings are borrowings on 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, overdrawn due from bank balances, loan RPs, and participations in pooled loans. 4. Averages of daily figures for member and nonmember banks. 5. Averages of daily data. 6. Based on daily average data reported by 122 large banks. 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at commercial banks. Averages of daily data. 8. Averages of Wednesday figures. A18 1.25 Domestic Financial Statistics • February 1987 A S S E T S A N D LIABILITIES OF COMMERCIAL B A N K I N G INSTITUTIONS Billions of dollars Last-Wednesday-of-Month Series 1986 Jan. Feb. Mar. Apr. May June July Aug. Sept. 2,065.2 432.5 251.9 180.6 30.1 1,602.6 140.4 1,462.2 496.7 428.7 297.4 239.4 2,078.8 432.8 255.1 177.7 34.0 1,612.0 143.5 1,468.5 501.8 431.5 296.4 238.7 2,091.4 427.2 253.7 173.5 30.1 1,634.2 146.0 1,488.1 508.5 435.9 296.9 246.9 2,113.4 429.5 255.8 173.6 27.8 1,656.1 155.7 1,500.4 510.5 441.7 300.4 247.8 2,101.3 430.9 257.7 173.2 27.0 1,643.5 146.2 1,497.2 506.2 446.4 301.1 243.6 2,105.5 432.6 259.6 173.0 27.4 1,645.5 139.2 1,506.3 512.3 451.4 304.0 238.7 2,134.0 445.7 269.6 176.1 28.7 1,659.6 148.6 1,511.0 507.3 457.6 305.6 240.5 2,154.4 455.1 272.2 183.0 29.3 1,670.0 149.4 1,520.6 510.1 463.2 308.4 238.8 2,171.1 464.6 275.9 188.7 27.9 1,678.5 145.3 1,533.2 512.1 467.7 310.5 242.9 2,173.2 467.4 281.8 185.6 26.0 1,679.9' 146.8' 1,533.1 512.6 473.5 311.8 235.2 2,218.1 470.4 286.2 184.3 28.1 1,719.5 161.0 1,558.6 520.2 479.3 312.8 246.3 187.3 21.9 23.0 64.2 193.7 26.2 22.7 66.9 198.1 29.1 21.8 68.8 209.9 25.5 22.3 80.7 221.0 30.2 23.9 84.6 196.0 27.9 23.0 67.3 206.2 28.2 23.3 72.1 205.8 27.9 23.7 73.5 196.6 27.8 22.9 66.3 200.4 31.2 23.5 66.2' 223.9 31.7 22.2 86.5 31.3 47.0 31.8 46.1 31.1 47.4 34.7 46.7 36.8 45.5 32.0 45.8 33.8 48.7 33.6 47.1 32.3 47.4 32.6 46^ 37.7 45.8 Oct. Nov. ALL COMMERCIAL BANKING INSTITUTIONS 1 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 187.0 186.5 195.3 207.0 195.9 196.6 196.6 196.2 200.8 198.2' 201.9 20 Total assets/total liabilities and capital . . . 19 Other assets 2,439.6 2,458.9 2,484.8 2,530.3 2,518.3 2,498.1 2,536.7 2,556.4 2,568.4 2,571.8' 2,643.9 21 22 23 24 25 26 27 1,739.5 488.8 454.2 796.5 364.4 167.6 168.2 1,746.4 492.1 457.2 797.1 374.7 169.1 168.8 1,762.8 502.5 462.0 798.3 373.1 179.3 169.7 1,798.4 540.7 467.8 789.9 390.7 170.4 170.8 1,807.4 542.7 477.3 787.5 367.4 173.1 170.3 1,791.9 523.3 482.4 786.3 366.8 168.5 170.9 1,819.5 540.0 490.8 788.7 379.2 168.6 169.4 1,833.6 544.2 497.7 791.7 377.3 174.7 170.8 1,830.8 537.4 504.4 789.0 388.1 177.5 172.1 1,843.7' 547.5 514.8 781.4' 380.0 175.1 173.1' 1,896.8 594.8 521.7 780.3 394.1 180.2 172.8 269.8 278.4 273.7 274.0 275.1 276.5 288.8 289.8 292.5 298.5' 303.6 192.8 188.4 183.6 183.3 182.8 183.5 185.6 194.6 200.0 194.8 195.0 1,954.3 421.1 247.0 174.1 30.1 1,503.1 115.8 1,387.3 442.5 423.6 297.1 224.1 1,964.0 420.8 249.6 171.2 34.0 1,509.2 115.8 1,393.5 446.2 426.4 296.2 224.7 1,972.4 416.0 248.5 167.5 30.1 1,526.3 120.2 1,406.1 448.2 430.7 296.6 230.7 1,993.3 416.1 248.8 167.2 27.8 1,549.4 129.3 1,420.1 452.3 436.3 300.1 231.4 1,985.3 417.1 250.2 166.9 27.0 1,541.3 123.3 1,418.0 449.8 440.7 300.8 226.7 1,990.0 419.6 253.1 166.5 27.4 1,543.0 117.3 1,425.8 452.5 445.8 303.6 223.9 2,014.0 432.5 263.2 169.4 28.7 1,552.8 122.7 1,430.1 448.4 451.9 305.3 224.6 2,029.4 440.2 264.5 175.7 29.3 1,559.8 123.1 1,436.7 448.4 457.3 308.1 222.9 2,039.8 448.0 267.5 180.5 27.9 1,564.0 118.9 1,445.1 447.2 461.7 310.1 226.1 171.1 21.0 23.0 63.8 179.1 25.5 22.6 66.5 182.7 28.4 21.7 68.4 194.3 24.4 22.2 80.3 205.8 28.7 23.8 84.2 180.1 26.3 22.9 66.7 187.8 27.2 23.2 71.7 189.3 26.6 23.7 73.1 180.4 26.9 22.8 65.9 183.1 29.7 23.4 65.5 207.6 29.8 22.2 86.1 29.4 34.0 30.1 34.3 29.4 34.7 33.0 34.3 35.1 34.0 30.2 34.0 32.0 33.6 31.9 34.1 30.5 34.4 30.9' 33.6' 35.8 33.7 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) DOMESTICALLY CHARTERED COMMERCIAL BANKS 2 30 Loans and securities 31 Investment securities 32 U.S. government 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 2,046.2 450.6' 272.9 177.8 26.0 1,569.6' 122.5' 1,447.1' 447.2 467.6' 311.5 220.8 2,090.2 454.4 278.1 176.4 28.1 1,607.6 137.8 1,469.9 453.9 472.7 312.4 230.8 137.8 134.6 144.0 150.3 142.8 144.1 143.2 141.7 145.5 49 Total assets/total liabilities and capital . . . 2,263.1 2,277.8 2,299.1 2,337.9 2,334.0 2,314.1 2,345.0 2,360.3 2,365.7 2,372.1 2,440.8 50 51 52 53 54 55 56 1,689.6 481.6 452.4 755.7 298.0 110.5 165.0 1,698.2 484.8 455.3 758.1 304.9 109.0 165.6 1,713.1 495.0 460.1 758.1 304.8 114.6 166.5 1,749.1 533.1 465.8 750.1 309.1 112.0 167.7 1,758.7 535.3 475.2 748.1 294.2 113.9 167.2 1,741.4 515.5 480.3 745.6 293.5 111.5 167.8 1,768.0 532.1 488.7 747.2 300.5 110.3 166.2 1,779.9 536.1 495.5 748.2 295.5 117.3 167.7 1,775.2 529.3 502.1 743.8 305.2 116.4 168.9 1,788.6 539.7 512.5 736.5 299.3 114.2' 169.9' 1,840.5 586.8 519.2 734.5 312.6 118.0 169.6 48 Other assets Deposits Transaction deposits Savings deposits Time deposits Borrowings Other liabilities Residual (assets less liabilities) 1. Commercial banking institutions include insured domestically chartered commercial banks, branches and agencies of foreign banks, Edge Act and Agreement corporations, and New York State foreign investment corporations. 2. Insured domestically chartered commercial banks include all member banks and insured nonmember banks. 142.7' 143.0 NOTE. 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 weekly reporting sample of foreign-related institutions and quarter-end condition reports. Weekly Reporting Commercial Banks 1.26 A L L L A R G E W E E K L Y REPORTING COMMERCIAL B A N K S with Domestic Assets of $1.4 Billion or More on December 31, 1982, Assets and Liabilities Millions of dollars, Wednesday figures Oct. 1 1 Cash and balances due from depository institutions Total loans, leases and securities, net U.S. Treasury and government agency Trading account Investment account, by maturity One year or less Over one through five years Over five years Other securities Trading account Investment account States and political subdivisions, by maturity One year or less Over one year Other bonds, corporate stocks, and securities Other trading account assets Federal funds sold 1 To commercial banks To nonbank brokers and dealers in securities To others Other loans and leases, gross 2 Other loans, gross 2 Commercial and industrial 2 Bankers acceptances and commercial paper All other U.S. addressees Non-U.S. addressees Real estate loans 2 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 2 Other loans and leases, net 2 All other assets Total assets 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 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 Demand deposits 46 Individuals, partnerships, and corporations 47 States and political subdivisions 48 U.S. government 49 Depository institutions in United States 50 Banks in foreign countries 51 Foreign governments and official institutions 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Certified and officers' c h e c k s 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 3 Other liabilities and subordinated note and debentures. Total liabilities Residual (total assets minus total liabilities)4 MEMO 67 68 69 70 71 72 73 A19 Total loans and leases (gross) and investments adjusted 5 . Total loans and leases (gross) adjusted 2 - 5 Time deposits in amounts of $100,000 or more Loans sold outright to affiliates—total 6 Commercial and industrial Other Nontransaction savings deposits (including MMDAs) Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 107,770 92,984 117,960' 100,525' 92,889' 100,823 117,402 106,498 106,729 973,244 965,268 967,647' 961,594' 957,305' 974,218 975,304 983,395 988,788 104,097 20,348 83,749 17,274 38,932 27,544 75,762 5,821 69,941 60,448 11,007 49,441 9,492 5,346 64,656 39,054 17,219 8,383 744,423 727,987 259,659 2,257 257,402 253,510 3,892 198,294 140,101 49,250 16,644 5,260 27,347 16,791 5,997 36,080 3,194 18,620 16,436 4,877 16,163 723,382 133,767 105,279 20,742 84,536 17,310 39,826 27,400 74,484 4,901 69,584 60,126 11,107 49,020 9,457 5,375 62,627 39,012 13,939 9,677 738,664 722,193 258,542 2,286 256,255 252,398 3,857 104,505' 19,31C 85,196' 17,257 40,307' 27,631 73,875 4,866 69,009 59,466 10,916 48,550 9,543 5,399 63,450 38,846 15,636 8,967 741,602' 725,315' 259,145 2,484 256,660 252,757 3,903 199,568' 140,460 48,757' 15,631' 5,858 27,268' 14,855 5,922 35,724 3,224 17,660 16,287 4,933 16,251 720,418' 127,797' 104,229' 18,823 85,406' 17,141 40,103 28,162' 73,575 5,074 68,501 59,024 10,805' 48,2^ 9,477 4,580 60,516 35,750 14,772 9,994 739,912' 723,62C 258,701 2,390 256,311 252,469 3,842 107,780 20,023 87,757 17,087 39,946 30,724 72,350 4,535 67,816 58,287 10,245' 48,041' 9,529 5,0% 110,485 22,113 88,372 16,749 40,168 31,455 72,412 4,767 67,645 57,548 9,669 47,879 10,097 5,364 64,195 40,841 15,862 7,492 743,303 726,773 261,735 2,492 259,244 255,078 4,166 200,575 141,110 48,025 16,435 4,706 26,883 13,572 5,791 35,300 3,213 17,450 16,529 4,925 16,617 721,761 133,054 110,478 20,750 89,727 16,549 40,336 32,842 72,926 5,183 67,743 57,769 9,616 48,153 9,974 4,780 61,757 37,930 15,893 7,934 746,914 730,368 262,730 2,442 260,288 256,126 4,162 201,464 141,369 48,419 16,456 4,770 27,193 14,270 5,723 35,247 3,124 18,023 16,546 4,946 16,606 725,363 128,208 111,961 21,321 90,640 16,924 41,762 31,953 71,947 4,792 67,155 57,510 9,672 47,838 9,645 4,910 65,465 40,749 16,198 8,518 750,758 734,140 263,512 2,638 260,874 256,796 4,077 202,709 141,800 49,270 16,848 5,222 27,200 15,032 5,707 35,304 3,247 17,557 16,619 4,998 16,647 729,113 122,057 113,889 21,462 92,427 17,209 41,992 33,226 72,061 5,488 66,574 56,836 9,319 47,517 9,737 5,728 61,012 36,426 16,643 7,943 757,894 740,397 263,460 2,496 260,964 257,074 3,890 202,835 142,208 50,831 17,974 6,366 26,491 18,602 5,684 35,230 3,342 18,205 17,497 5,033 16,763 736,098 123,916 1,187,996' 1,213,405' 1,186,584' 1,174,966' 1,208,095 1,220,914 1,211,950 1,219,433 229,330 174,349 5,576 4,464 25,514 6,134 954 12,339 53,125 499,928 461,367 26,084 916 10,389 1,172 255,334 2,831 2,598 249,905 85,832 244,445 189,342 5,224 1,921 27,726 6,485 1,252 12,493 53,128 500,135 461,972 25,955 807 10,240 1,160 257,890 110 5,756 252,024 80,522 224,562 169,926 5,209 4,004 25,911 6,828 838 11,847 52,698 500,418 462,351 26,132 804 9,980 1,152 263,653 3,319 8,891 251,442 85,943 238,550 181,634 5,694 2,749 27,887 6,866 1,004 12,718 53,313 500,632 462,729 26,053 781 9,935 1,133 255,894 25 10,450 245,419 86,706 1,104,135' 1,129,642' 1,102,698' 1,091,002' 1,123,549 1,214,781 241,097 185,025 6,103 1,490 29,18(X 7,063' 927 11,310 50,510 501,642 463,27C 25,653 860 10,605' 1,254 255,179 230 18,470 236,479 82,911 198,712 140,135 48,738 15,581 6,035 27,122 14,473 6,008 35,908 3,153 16,524 16,472 4,910 16,252 717,503 129,743' 215,89c 167,357 4,828 2,785 23,733' 6,846' 794 9,547 51,391 500,976' 462,28C 25,926 870 10,617' 1,283 256,123' 1,680 6,362 248,081' 79,754' 246,526' 186,941' 6,030 3,238 31,249 7,598' 874 10,595 51,361' 501,354' 463,037' 25,875' 878 10,345' 1,218 249,974' 100 2,267 247,607' 80,427' 200,696 140,712 48,150' 15,675' 4,810 27,664 13,816 5,909 35,531 3,248 16,856 16,292 4,944 16,273 718,695' 124,464' 212,827' 163,278' 5,458 2,495 24,214 6,476' 911 9,995 50,927 499,49c 461,168' 25,926 893 10,286' 1,218 254,958 1,688 6,514 246,755 84,496' 55,978 33,418 14,327 8,233 737,312' 721,010' 257,394' 2,387 255,008' 251,161' 3,846 200,268 141,026 47,249' 15,689' 4,575 26,984 12,962 5,776 35,472 3,246 17,614 16,302 4,950 16,261 716,100' 124,772' 212,303' 163,712' 4,912' 2,582' 24,294' 6,103' 828 9,872 50,502 498,868' 460,388' 25,868 910 10,489 1,213 244,891 195 6,846 237,850 84,438 1,136,121 1,127,275 1,135,095 83,441 83,861 83,762 83,885 83,964 84,546 84,794 84,675 84,338 938,586 753,381 153,604 1,744 1,047 698 218,645' 931,837 746,699 153,593' 1,729 1,027 702 218,107 934,354' 750,575 152,532 1,705 1,007 698 220,231' 931,386' 749,002 152,852 1,736 1,039 697 218,505' 929,409' 744,182' 152,051' 1,703 1,006 697 218,458' 938,483 750,221 152,477 1,750 1,055 695 220,198 942,470 754,286 152,551 1,746 1,029 717 220,478 947,444 758,626 152,556 1,688 975 712 221,016 956,184 764,506 151,812 1,651 971 680 221,745 1,131,340 1. Includes securities purchased under agreements to resell. 2. Levels of major loan items were affected by the Sept. 26, 1984, transaction between Continental Illinois National Bank and the Federal Deposit Insurance Corporation. For details see the H.4.2 statistical release dated Oct. 5, 1984. 3. Includes federal funds purchased and securities sold under agreements to repurchase; for information on these liabilities at banks with assets of $1 billion or more on Dec. 31, 1977, see table 1.13. Oct. 8 4. This is not a measure of equity capital for use in capital adequacy analysis or for other analytic uses. 5. Exclusive of loans and federal funds transactions with domestic commercial banks. 6. 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. A20 1.28 Domestic Financial Statistics • February 1987 L A R G E W E E K L Y REPORTING COMMERCIAL B A N K S IN N E W YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures except as noted 1986 Account Oct. 1 1 Cash and balances due from depository institutions 2 Total loans, leases and securities, net1 Securities 3 U.S. Treasury and government agency 2 4 Trading account 2 5 Investment account, by maturity 6 One year or less Over one through five years 7 8 Over five years 9 Other securities 2 10 Trading account 2 11 Investment account 12 States and political subdivisions, by maturity 13 One year or less 14 Over one year 15 Other bonds, corporate stocks and securities 16 Other trading account assets 2 17 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 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 Loans and leases Federal funds sold 3 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 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 4 Total assets 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 5 Other liabilities and subordinated note and debentures 65 Total liabilities 66 Residual (total assets minus total liabilities)6 Oct. 8 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 30,803 21,423 28,967 28,537 22,071' 26,292 30,864 28,990 28,236 207,604 205,670 207,479 205,107 203,001' 207,485 211,404 216,149 216,398 0 0 11,159 1,311 5,290 4,557 0 0 16,933 14,859 2,423 12,436 2,073 0 0 0 11,404 1,322 5,490 4,592 0 0 16,722 14,702 2,374 12,328 2,020 0 0 0 11,346 1,342 5,594 4,410 0 0 16,510 14,492 2,333 12,160 2,017 0 0 0 11,437 1,348 5,690 4,400 0 0 16,343 14,325 2,354 11,970 2,018 0 0 0 13,582 1,398 5,659 6,525 0 0 16,188 14,112 2,099 12,012 2,076 0 0 0 13,524 1,221 5,360 6,943 0 0 16,178 13,969 1,924 12,045 2,209 0 0 0 13,826 1,234 5,566 7,027 0 0 16,407 14,381 1,885 12,497 2,025 0 0 0 13,701 1,234 5,521 6,945 0 0 16,318 14,301 1,902 12,400 2,017 0 0 0 14,108 1,233 5,874 7,001 0 0 16,261 14,237 1,833 12,404 2,024 0 28,340 12,364 9,119 6,858 157,044 153,786 58,221 457 57.764 57,337 427 33,553 19,575 18,076 8,432 2,526 7,118 8,654 362 8,830 868 5,646 3,259 1,477 4,396 151,172 72,822 28,823 13,994 6,703 8,126 154,724 151,445 58,338 454 57,884 57,490 394 33,616 19,596 18,069 7,857 3,064 7,149 7,355 353 8,787 845 4,486 3,279 1,510 4,492 148,722 70,463 30,596 15,647 7,585 7,363 155,029 151,745 58,801 558 58,243 57,843 400 33,563 19,701 17,607 7,599 2,926 7,082 7.018 300 8,710 916 5,129 3,284 1,512 4,489 149,028 69,516 28,731 12,971 7,711 8,049 154.608 151,305 58,647 622 58,025 57,628 397 33,943 19,740 17,358 7,707 2,437 7,215 7,159 309 8,669 918 4,561 3,304 1,516 4,497 148,595 66,785' 24,443 10,704 6,958 6,780 154,837' 151,519' 58,148 629 57,519 57,154 366 34,190 19,702 16,996' 7,679' 2,015 7,302 6,784 282 8,676 899 5,842 3,317 1,518 4,530 148,789' 68,856 27,294 13,213 7,974 6,107 156,658 153,264 60,479 637 59,841 59,450 392 34,266 19,717 16,803 7,762 2,120 6,921 6,950 282 8,632 948 5,188 3,393 1,495 4,675 150,488 73,288 28,474 14,290 7,871 6,312 158,903 155,517 60,893 739 60,154 59,751 404 34,498 19,799 17,116 7,661 2,176 7,278 7,511 260 8,652 884 5,902 3,386 1,494 4,712 152,697 69,237 31,204 16,303 8,419 6,482 161,179 157,738 61,192 806 60,386 59,954 432 34,914 19,841 18,028 8,274 2,534 7,221 8,241 284 8,706 892 5,638 3,441 1,535 4,718 154,926 65,100 24,826 10,167 8,374 6,285 167,565 163,284 61,422 740 60,682 60,275 407 35,165 19,918 19,908 9,417 3,455 7,035 10,772 310 8,674 1,005 6,110 4,281 1,575 4,787 161,203 67,094 311,228 297,556 305,963 300,429' 293,928' 307,064 311,505 310,239 311,728 66,457 45,477 1,115 213 8,276 5,772 776 4,830 55,279 38,034 654 592 5,594 5,490 659 4,255 65,283 43,773 1,200 565 7,707 6,410 731 4,896 54,491' 36,234' 792 514 6,035 5,276 758 4,882 54,354' 37,350' 544 495 6,089 4,948 672 4,255 59,369 40,140 698 834 5,775 4,895 780 6,246 62,932 42,515 572 257 6,411 5,176 1,093 6,908 59,115 38,844 640 747 6,387 5,638 665 6,194 62,274 42,064 590 524 6,524 5,527 843 6,201 6,064 94,969 85,871 5,779 68 2,603 648 80,615 0 3,748 76,867 35,804 6,190 93,852 84,554 5,941 73 2,632 651 81,933 1,450 1,207 79,275 32,878 6,171 95,261 86,182 5,821 78 2,554 626 77,863 0 501 77,361 33,929 6,126 94,472 85,255 5,953 80 2,549 634 81,937 1,380 2,005 78,552 35,974 6,113 93,896 84,846 5,947 79 2,399 626 76,552 0 1,751 74,801 35,799 6,379 94,828 85,535 6,229 82 2,387 595 81,982 1,245 632 80,105 36,973 6,579 94,633 85,416 6,175 80 2,355 606 86,430 0 1,742 84,688 33,350 6,509 94,943 85,759 6,164 74 2,337 607 84,697 750 2,154 81,793 37,414 6,595 95,344 86,022 6,244 63 2,413 602 82,484 0 2,390 80,093 37,784 283,910 270,131 278,507 273,000' 266,714' 279,530 283,924 282,678 284,481 27,318 27,424 27,456 27,428 27,214 27,534 27,580 27,561 27,247 192,680 164,588 33,560 189,822 161,696 33,429 190,234 162,378 33,607 190,442 162,661 33,669 190,666 160,896 33,418 192,680 162,977 33,851 195,658 165,425 34,022 197,826 167,806 34,215 203,176 172,806 34,127 MEMO 67 Total loans and leases (gross) and investments adjusted 1 ' 7 68 Total loans and leases (gross) adjusted 7 69 Time deposits in amounts of $100,000 or more 1. Excludes trading account securities. 2. Not available due to confidentiality. 3. Includes securities purchased under agreements to resell. 4. Includes trading account securities. 5. Includes federal funds purchased and securities sold under agreements to repurchase. 6. Not a measure of equity capital for use in capital adequacy analysis or for other analytic uses. 7. Exclusive of loans and federal funds transactions with domestic commercial banks. NOTE. These data also appear in the Board's H.4.2 (504) release. For address, see inside front cover. Weekly Reporting Commercial Banks 1.30 L A R G E W E E K L Y REPORTING U . S . B R A N C H E S A N D A G E N C I E S OF FOREIGN B A N K S 1 Liabilities Millions of dollars, Wednesday figures A21 Assets and 1986 Account Oct. 37 38 39 40 Cash and due from depository institutions. Total loans and securities U.S. Treasury and govt, agency securities Other securities Federal funds sold 2 To commercial banks in the United States To others Other loans, gross Commercial and industrial Bankers acceptances and commercial paper All other U.S. addressees Non-U.S. addressees To financial institutions Commercial banks in the United States . Banks in foreign countries Nonbank financial institutions To foreign govts, and official institutions .. For purchasing and carrying securities .. All other Other assets (claims on nonrelated parties).. Net due from related institutions Total assets Deposits or credit balances due to other than directly related institutions.... Transaction accounts and credit balances3 Individuals, partnerships, and corporations Other Nontransaction accounts 4 Individuals, partnerships, and corporations Other Borrowings from other than directly related institutions Federal funds purchased 5 From commercial banks in the United States From others Other liabilities for borrowed m o n e y . . . . To commercial banks in the United States To others Other liabilities to nonrelated parties Net due to related institutions Total liabilities 41 42 Total loans (gross) and securities adjusted 6 Total loans (gross) adjusted 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1 Oct. 8 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 9,352 76,737 5,931 5,712 4,093 3,089 1,004 61,000 36,724 10,380 75,876 6,011 5,712 5,377 4,352 1,026 58,776 35,588 10,020 75,644 5,768 5,788 5,773 4,594 1,178 58,316 35,503 10,245 73,183 5,750 5,374 5,480 4,174 1,306 56,580 35,678 10,592 74,011 6,230 5,371 4,682 3,902 780 57,728 36,307 10,092 73,508 5,239 5,511 4,045 3,096 948 58,713 36,840 10,131 75,640 5,376 5,424 5,639 4,823 816 59,200 37,052 10,467 75,329 5,592 5,408 6,285 5,437 848 58,044 36,515 9,879 74,922 5,757 5,477 3,823 3,110 713 59,865 36,937 3,305 33,419 31,156 2,263 15,877 12,535 1,291 2,051 561 3,257 4,581 23,087 15,675 124,850 3,064 32,524 30,294 2,229 15,350 12,196 1,064 2,089 567 2,802 4,468 23,221 15,791 125,268 2,977 32,526 30,183 2,343 14,776 11,458 1,109 2,209 702 2,841 4,492 22,958 15,050 123,673 3,058 32,620 30,240 2,381 13,922 10,786 986 2,150 541 2,022 4,417 23,303 13,708 120,438 3,036 33,271 30,955 2,316 14,174 11,022 1,038 2,114 532 2,249 4,465 23,280 12,934 120,817 2,969 33,870 31,546 2,325 14,187 11,037 1,066 2,083 527 2,588 4,572 23,292 14,043 120,936 2,980 34,071 31,810 2,261 14,196 10,791 1,116 2,290 536 2,514 4,902 23,022 13,582 122,376 2,919 33,596 31,397 2,199 14,211 10,721 1,149 2,341 521 1,975 4,821 23,360 14,287 123,444 2,990 33,947 31,742 2,206 14,453 11,113 1,077 2,263 545 2,925 5,005 23,226 14,627 122,654 36,775 3,097 36,344 3,312 36,446 3,574 35,342 3,050 36,608 3,284 36,034 3,124 36,986 3,333 36,744 3,229 37,279 3,260 1,721 1,376 33,677 1,994 1,318 33,032 1,882 1,692 32,872 1,825 1,224 32,292 1,811 1,473 33,324 1,924 1,200 32,909 1,821 1,513 33,653 1,973 1,255 33,515 1,827 1,432 34,019 27,646 6,031 26,748 6,284 26,642 6,230 26,014 6,278 27,129 6,195 26,738 6,171 27,252 6,400 27,082 6,434 27,160 6,859 50,875 27,680 52,898 31,046 50,873 28,947 46,956 25,278 46,772 24,966 50,393 29,328 47,412 25,862 48,359 25,375 46,948 21,466 19,103 8,577 23,195 21,302 9,744 21,852 19,317 9,630 21,926 15,266 10,012 21,678 16,527 8,439 21,805 19,534 9,793 21,065 17,523 8,340 21,550 16,519 8,856 22,984 13,807 7,658 25,482 20,811' 2,384' 24,750 12,450 124,850 19,651 2,201 24,931 11,095 125,268 19,841 2,085 24,570 11,784 123,673 19,303 2,374 24,805 13,335 120,438 19,741 2,065 24,833 12,605 120,817 18,932 2,134 24,885 9,624 120,936 19,146 2,404 24,708 13,270 122,376 20,397 2,587 25,095 13,246 123,444 22,738 2,745 25,113 13,313 122,654 61,113 49,469 59,328 47,605 59,591 48,035 58,224 47,100 59,086 47,486 59,374 48,624 60,026 49,226 59,171 48,171 60,699 49,465 MEMO 1. Effective Jan. 1, 1986, the reporting panel includes 65 U.S. branches and agencies of foreign banks that include 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. 2. Includes securities purchased under agreements to resell. 3. Includes credit balances, demand deposits, and other checkable deposits. 4. Includes savings deposits, money market deposit accounts, and time deposits. 5. Includes securities sold under agreements to repurchase. 6. Exclusive of loans to and federal funds sold to commercial banks in the United States. A22 1.31 DomesticNonfinancialStatistics • February 1987 GROSS D E M A N D DEPOSITS Individuals, Partnerships, and Corporations' Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks Type of holder 1981 Dec. 1982 Dec. 1985 1984 Dec. 1983 Dec. Mar. 3 4 1986 Sept. June Dec. Mar. June 1 All holders—Individuals, partnerships, and corporations 288.9 291.8 293.5 302.7 286.3 298.4 299.3 321.0 307.4 322.4 2 3 4 5 6 28.0 154.8 86.6 2.9 16.7 35.4 150.5 85.9 3.0 17.0 32.8 161.1 78.5 3.3 17.8 31.7 166.3 81.5 3.6 19.7 27.3 157.9 78.9 3.6 18.7 27.9 164.5 82.8 3.7 19.5 28.1 167.2 82.0 3.5 18.5 32.3 178.5 85.5 3.5 21.2 31.8 166.6 84.0 3.4 21.6 32.3 180.0 86.4 3.0 20.6 Financial business Nonfinancial business Consumer Foreign Other Weekly reporting banks 1981 Dec. 7 All holders—Individuals, partnerships, and corporations 8 9 10 11 12 Financial business Nonfinancial business Consumer Foreign Other 1982 Dec. 1985 1984 Dec. 2 Mar. 3 ' 4 June 1986 Sept. Dec. Mar. June 137.5 144.2 146.2 157.1 147.7 151.2 153.6 168.6 159.7 168.5 21.0 75.2 30.4 2.8 8.0 26.7 74.3 31.9 2.9 8.4 24.2 79.8 29.7 3.1 9.3 25.3 87.1 30.5 3.4 10.9 21.9 82.3 30.2 3.4 9.8 22.1 83.7 31.0 3.5 10.9 22.7 85.5 31.6 3.3 10.5 25.9 94.5 33.2 3.1 12.0 25.5 86.8 32.6 3.3 11.5 25.7 93.1 34.9 2.9 11.9 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 1983 Dec. 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. 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 . Financial Markets 1.32 A23 COMMERCIAL PAPER A N D BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period 1986 Instrument Dec. Dec. Dec. Dec. Dec. May June July Aug. Sept. Oct. Commercial paper (seasonally adjusted unless noted otherwise) 165,829 1 AH issuers 2 3 4 5 6 Financial companies 3 Dealer-placed paper4 Total Bank-related (not seasonally adjusted) Directly placed paper5 Total Bank-related (not seasonally adjusted) Nonfinancial companies 6 166,436 187,658 237,586 300,899 309,843 310,711 311,435 326,601 326,567 329,516 30,333 34,605 44,455 56,485 78,443 87,423 89,757 90,038 94,084 97,994 99,688 6,045 2,516 2,441 2,035 1,602 1,575 1,568 1,772 1,799 1,980 2,172 81,660 84,393 97,042 110,543 135,504 142,252 142,933 142,121 149,200 147,497 147,163 26,914 53,836 32,034 47,437 35,566 46,161 42,105 70,558 44,778 86,952 39.009 80,168 40,147 78,021 39,067 79,276 40,415 83,317 37,455 81,076 38,957 82,665 Bankers dollar acceptances (not seasonally adjusted) 7 69,226 11 12 13 77,121 68,115 66,759 67,080 66,437 64,480 67,009 65,920 10,910 9,471 1,439 9,355 8,125 1,230 9,811 8,621 1,191 11,174 9,448 1,726 12,216 10,254 1,962 12,789 10,641 2,147 11,577 9,257 2,320 12,127 9,794 2,333 13,101 11,001 2,101 12,569 10,178 2,391 1,480 949 66,204 418 729 67,807 0 671 66,639 0 937 56,004 0 664 53,880 0 896 53,396 0 931 53,929 0 897 51,456 0 924 52,984 0 1,131 52,220 14,765 15,400 39,060 Basis 14 Imports into United States 15 Exports from United States 16 All other 8 9 10 78,309 195 1,442 56,731 Holder Accepting banks Own bills Bills bought Federal Reserve Banks Own account Foreign correspondents Others 79,543 10,857 9,743 1,115 7 Total 17,683 16,328 45,531 15,649 16,880 45,781 17,560 15,859 43,702 15,147 13,204 39,765 15,094 13,574 38,091 15,106 13,721 38,254 15,601 13,781 37,056 15,796 12,948 35,736 16,612 12,693 37,704 15,980 12,612 37,328 1. Effective Dec. 1, 1982, there was a break in the commercial paper series. The key changes in the content of the data involved additions to the reporting panel, the exclusion of broker or dealer placed borrowings under any master note agreements from the reported data, and the reclassification of a large portion of bank-related paper from dealer-placed to directly placed. 2. Correction of a previous misclassification of paper by a reporter has created a break in the series beginning December 1983. The correction adds some paper to nonfinancial and to dealer-placed financial paper. 3. 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. 1.33 4. Includes all financial company paper sold by dealers in the open market. 5. As reported by financial companies that place their paper directly with investors. 6. Includes public utilities and firms engaged primarily in such activities as communications, construction, manufacturing, mining, wholesale and retail trade, transportation, and services. 7. Beginning October 1984, the number of respondents in the bankers acceptance survey were reduced from 340 to 160 institutions—those with $50 million or more in total acceptances. The new reporting group accounts for over 95 percent of total acceptances activity. PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Average rate Effective Date 1985-- J a n . 15 May 20 June 18 10.50 10.00 9.50 1986-- M a r . 7 Apr. 21 July 11 Aug. 26 9.00 8.50 8.00 7.50 NOTE. These data also appear in the Board's H.15 (519) release. For address, see inside front cover. 1984—Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 11.00 11.00 11.21 11.93 12.39 12.60 13.00 13.00 12.97 12.58 11.77 11.06 1985—Jan Feb Mar Apr May June 11.50 12.00 12.50 13.00 12.75 12.50 12.00 11.75 11.25 10.75 10.61 10.50 10.50 10.50 10.31 9.78 Month 1985—July Aug Sept Oct Nov Dec 1986—Jan Feb Mar Apr May June July Aug Sept Oct Nov A24 1.35 DomesticNonfinancialStatistics • February 1987 I N T E R E S T RATES Money and Capital Markets Averages, percent per annum; weekly and monthly figures are averages of business day data unless otherwise noted. 1986 Instrument 1983 1984 1986, week ending 1985 Aug. Sept. Oct. Nov. Oct. 31 Nov. 7 Nov. 14 Nov. 21 Nov. 28 MONEY MARKET RATES 1 Federal funds 1 - 2 2 Discount window borrowing 1 - 2 ' 3 Commercial paper 4 - 5 1-month 3 4 3-month 5 6-month Finance paper, directly placed 4 5 1-month 6 7 3-month 8 6-month Bankers acceptances 5 - 6 9 3-month 10 6-month Certificates of deposit, secondary market7 11 1-month 12 3-month 13 6-month 14 Eurodollar deposits, 3-month 8 U.S. Treasury bills5 Secondary market 9 15 3-month 6-month 16 1-year 17 Auction average 10 3-month 18 19 6-month 1-year 20 9.09 8.50 10.22 8.80 8.10 7.69 6.17 5.82 5.89 5.50 5.85 5.50 6.04 5.50 5.86 5.50 6.02 5.50 5.98 5.50 6.13 5.50 6.00 5.50 8.87 8.88 8.89 10.05 10.10 10.16 7.94 7.95 8.01 6.02 5.92 5.83 5.74 5.68 5.61 5.74 5.68 5.61 5.84 5.76 5.69 5.74 5.69 5.61 5.77 5.69 5.62 5.83 5.77 5.71 5.87 5.78 5.72 5.88 5.81 5.72 8.80 8.70 8.69 9.97 9.73 9.65 7.91 7.77 7.75 5.98 5.94 5.90 5.76 5.61 5.54 5.74 5.56 5.50 5.79 5.67 5.58 5.69 5.55 5.46 5.75 5.57 5.49 5.77 5.68 5.62 5.81 5.70 5.63 5.84 5.73 5.60 8.90 8.91 10.14 10.19 7.92 7.96 5.80 5.71 5.60 5.56 5.58 5.52 5.67 5.59 5.59 5.53 5.60 5.54 5.71 5.66 5.69 5.61 5.71 5.58 8.96 9.07 9.27 9.56 10.17 10.37 10.68 10.73 7.97 8.05 8.25 8.28 5.97 5.92 5.92 6.06 5.73 5.71 5.71 5.88 5.71 5.69 5.70 5.88 5.80 5.76 5.76 5.96 5.69 5.68 5.69 5.94 5.70 5.69 5.69 5.84 5.82 5.81 5.81 5.96 5.83 5.80 5.79 5.98 5.84 5.76 5.76 5.99 8.61 8.73 8.80 9.52 9.76 9.92 7.48 7.65 7.81 5.53 5.58 5.60 5.21 5.35 5.45 5.18 5.26 5.41 5.35 5.41 5.48 5.19 5.27 5.43 5.26 5.35 5.45 5.41 5.49 5.56 5.36 5.41 5.47 5.39 5.42 5.45 8.52 8.76 8.86 9.57 9.80 9.91 7.47 7.64 7.76 5.57 5.58 5.82 5.19 5.31 5.33 5.18 5.26 5.44 5.35 5.42 5.45 5.18 5.21 5.44 5.23 5.30 n.a. 5.41 5.54 n.a. 5.39 5.44 n.a. 5.35 5.39 5.45 9.57 10.21 10.45 10.80 11.02 11.10 11.34 11.18 10.89 11.65 11.89 12.24 12.40 12.44 12.48 12.39 8.43 9.27 9.64 10.13 10.51 10.62 10.97 10.79 5.93 6.33 6.49 6.80 7.01 7.17 7.28 7.33 5.77 6.35 6.62 6.92 7.28 7.45 7.56 7.62 5.72 6.28 6.56 6.83 7.24 7.43 7.61 7.70 5.80 6.28 6.46 6.76 7.08 7.25 7.42 7.52 5.74 6.30 6.57 6.80 7.17 7.39 7.59 7.68 5.76 6.27 6.48 6.76 7.12 7.31 7.49 7.58 5.89 6.37 6.55 6.85 7.18 7.34 7.49 7.59 5.79 6.26 6.44 6.75 7.04 7.21 7.38 7.47 5.77 6.21 6.39 6.66 6.99 7.14 7.31 7.42 10.84 11.99 10.75 7.72 8.08 8.04 7.81 7.96 7.87 7.95 7.74 7.71 8.80 10.17 9.51 9.61 10.38 10.10 8.60 9.58 9.11 7.11 7.81 7.21 6.91 7.59 7.11 6.44 7.23 7.08 6.19 7.13 6.85 6.10 6.95 6.94 6.10 6.95 6.94 6.30 7.20 6.92 6.20 7.15 6.78 6.15 7.20 6.74 12.78 12.04 12.42 13.10 13.55 13.49 12.71 13.31 13.74 14.19 12.05 11.37 11.82 12.28 12.72 9.44 8.72 9.22 9.64 10.18 9.55 8.89 9.36 9.73 10.20 9.54 8.86 9.33 9.72 10.24 9.37 8.68 9.20 9.51 10.07 9.49 8.80 9.30 9.65 10.19 9.41 8.73 9.26 9.56 10.09 9.42 8.77 9.25 9.54 10.12 9.34 8.65 9.16 9.48 10.04 9.28 8.55 9.11 9.43 9.99 12.73 13.81 12.06 9.51 9.56 9.48 9.31 9.32 9.42 9.37 9.22 9.16 11.02 4.40 11.59 4.64 10.49 4.25 8.42 3.36 8.10 3.43 8.17 3.49 8.07 3.40 8.09 3.44 8.10 3.36 8.01 3.37 8.03 3.50 8.13 3.35 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 12 1-year 2-year 3-year 5-year 7-year 10-year 20-year 30-year Composite 13 Over 10 years (long-term) State and local notes and bonds Moody's series 14 Aaa Baa Bond Buyer series 15 Corporate bonds Seasoned issues 16 All industries Aaa Aa A Baa A-rated, recently-offered utility bonds 17 MEMO: Dividend/price ratio 18 39 Preferred stocks 40 Common stocks 1. Weekly and monthly 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 New 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 150179 days for finance paper. 5. Yields are quoted on a bank-discount basis, rather than 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 ar? based on Friday quotations. 18. Standard and Poor's corporate series. Preferred stock ratio based on a sample o f t e n 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 1986 Indicator 1983 1984 1985 Mar. May Apr. July June Aug. Sept. Nov. Oct. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) Industrial 2 3 Transportation Utility 4 5 Finance 6 Standard & Poor's Corporation (1941-43 = 10)1 . . . 7 American Stock Exchange 2 (Aug. 31, 1973 = 50) 92.63 107.45 89.36 47.00 95.34 160.41 92.46 108.01 85.63 46.44 89.28 160.50 108.09 123.79 104.11 56.75 114.21 186.84 133.97 152.75 128.66 68.06 153.94 232.33 137.25 157.35 125.92 69.35 154.83 237.97 137.37 158.59 122.21 68.65 151.28 238.46 140.82 163.15 120.65 70.69 151.73 245.30 138.32 158.06 112.03 74.20 150.23 240.18 140.91 160.10 111.24 77.84 152.90 245.00 137.06 156.52 114.06 74.56 145.56 238.27 136.74 156.56 120.04 73.38 143.89 237.36 140.84 162.10 122.27 75.77 142.97 245.09 216.48 207.96 229.10 264.91 270.59 274.22 281.18 269.93 268.55 264.30 257.82 265.14 Volume of trading (thousands of shares) X New York Stock Exchange American Stock Exchange 9 85,418 8,215 91,084 109,191 6,107 8,355 160,755 146,330 127,624 126,151 137,709 15,902 13,503 11,870 12,795 10,320 128,661 9,885 150,831 10,853 131,155 8,930 154,770 10,513 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 23,000 22,470 28,390 29,090 30,760 32,370 32,480 33,170 34,550 34,580 36,310 Free credit balances at brokers4 11 Margin-account 5 12 Cash-account 8,430 1,755 10,215 2,715 12,840 2,715 13,920 3,065 14,340 2,405 12,970 2,585 13,570 2,570 14,600 3,035 14,210 3,395 14,060 3,805 14,445 Margin-account debt at brokers (percentage distribution, end of period) 6 100.0 14 15 16 17 18 19 By equity class (in percentf Under 40 40-49 50-59 60-69 70-79 80 or more 100.0 100.0 100.0 100.0 100.0 100.0 22.0 22.0 16.0 9.0 6.0 6.0 13 Total 18.0 18.0 16.0 9.0 5.0 6.0 34.0 20.0 19.0 11.0 8.0 8.0 29.0 19.0 22.0 13.0 8.0 9.0 29.0 20.0 20.0 13.0 9.0 9.0 30.0 19.0 22.0 12.0 8.0 9.0 31.0 20.0 20.0 13.0 8.0 8.0 n.a. n.a. n a. n a. n a. Special miscellaneous-account balances at brokers (end of period) 6 20 Total balances (millions of dollars)8 . . . Distribution by equity status 21 Net credit status Debt status, equity of 22 60 percent or more 23 Less than 60 percent 58,329 75,840 99,310 103,450 105,790 109,620 112,401 28.0 29.0 31.0 31.0 33.0 8.0 8.0 33.0 9.0 32.0 9.0 (percent) 9.0 11.0 11.0 Margin requirements (percent of market value and effective date) 9 Mar. 11, 1968 24 Margin stocks 25 Convertible bonds 26 Short sales June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 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, and margin credit at broker-dealers became the total that is distributed by equity class and shown on lines 17-22. 4. Free credit balances are in accounts with no unfulfilled commitments to the brokers and are subject to withdrawal by customers on demand. 5. New series beginning June 1984. 6. In July 1986, the New York Stock Exchange stopped reporting certain data items that were previously obtained in a monthly survey of a sample of brokers and dealers. Data items that are no longer reported include distributions of margin debt by equity status of the account and special miscellaneous-account balances. 7. Each customer's equity in his collateral (market value of collateral less net debit balance) is expressed as a percentage of current collateral values. 8. Balances that may be used by customers as the margin deposit required for additional purchases. Balances may arise as transfers based on loan values of other collateral in the customer's margin account or deposits of cash (usually sales proceeds) occur. 9. Regulations G, T, and U of the Federal Reserve Board of Governors, prescribed in accordance with the Securities Exchange Act of 1934, limit the amount of credit to purchase and carry margin stocks that may be extended on securities as collateral by prescribing a maximum loan value, which is a specified percentage of the market value of the collateral at the time the credit is extended. Margin requirements are the difference between the market value (100 percent) and the maximum loan value. The term "margin stocks" is defined in the corresponding regulation. A26 1.37 DomesticNonfinancialStatistics • February 1987 S E L E C T E D F I N A N C I A L INSTITUTIONS Millions of dollars, end of period Selected Assets and Liabilities 1986 Account 1983 1984 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Savings and loan associations 1 Assets. 773,417 903,488 938,467 943,029 947,302 954,089' 962,484' 2 3 4 5 494,789 555,277 104,274 174,354 124,801 223,396 578,472 96,891 123,415 236,850 576,608 98,482 127,028 239,394 574,732 99,332 131,464 241,104 575,288 102,398' 132,347 246,454' Mortgages Mortgage-backed securities... Cash and investment securities' Other 6 Liabilities and net worth. 7 Savings capital... 8 Borrowed money 9 FHLBB 10 Other 11 Other 12 Net worth 2 . 575,097 107,308' 134,868' 252,578' 953,527' 958,049' 965,071' 957,503' 961,305 565,148 112,154' 130,960' 257,417' 565,376 113,095' 132,801' 259,870' 566,506 113.62C 138,858' 259,706' 557,429 117,64C 138,357' 261,715' 557,521 120,304 137,988 265,794 773,417 903,488 938,467 943,029 947,302 954,089' 962,484' 953,527' 958,049' 965,071' 957,503' 961,305 634,455 92,127 52,626 39,501 15,968 725,045 125,666 64,207 61,459 17,944 745,218 131,521 71,488 60,033 21,024 747,016 131,671 71,214 60,457 23,125 752,056 133,407 70,464 62,943 20,078 750,299 139,574 73,815 65,759 22,046' 751,138 144,179 73,520 70,659 24,783' 744,021' 147,205' 73,555 73,650' 20,907' 747,020' 749,023' 743,496' 742,192 146,589' 148,525' 155,484' 152,098 80,36C 75,279 75,058' 75,594 71,531' 72,931' 75,124' 76,819 15,423' 23,277 22,856' 24,709' 30,867 34,833 40,704 41,217r 41,760 42,17c 42,384' 41,393' 41,583' 42,815' 43,099' 43,738 54,113 61,305 51,130 52,542 54,366 55,818 57,997 57,183 55,687 53,164 51,531 49,927 n a. MEMO 13 Mortgage loan commitments outstanding 3 FSLIC-insured federal savings banks 14 Assets 64,969 98,559 142,136 146,508 152,823 155,684 164,129 180,129' 183,309' 186,763' 196,279' 201,759 15 Mortgages 16 Mortgage-backed securities.... 17 Other 38,698 7,172 6,595 57,429 9,949 10,971 78,984 16,620 13,274 81,641 16,367 13,759 85,028 17,851 13,923 865,598' 18,661 14,590 89,108 19,829 15,083 99,636' 21,61C 16,784' 101,797' 103,040' 108,207' 110,251 23,249' 24,098' 26,445' 27,507 18,641 17,01C 17,036' 18.37C 18 Liabilities and net worth 64,969 98,559 142,136 146,508 152,823 155,684 164,129 180,129' 183,309' 186,763' 196,279' 201,759 19 20 21 22 23 24 53,227 7,477 4,640 2,837 1,157 3,108 79,572 12,798 7,515 5,283 1,903 4,286 111,879 20,419 11,151 9,268 2,983 6,855 114,743 21,254 11,283 9,971 3,397 7,114 119,434 22,747 12,064 10,683 3,291 7,349 121,133 23,196 12,476 10,720 3,758' 7,599 126,123 25,686 12,830 12,856 4,338 7,982 138,168 28,502 15,301 13,201 4,279 9,179' 140,610 142,808' 149,071' 152,481 28,722' 29,39C 32,32C 33,432 16,157 16,845 17, 388 15,866 12,856' 13,233' 15,475' 16,044 4,555' 4,918' 4,6%' 5,325 9,424' 9,647' 10,191' 10,520 2,151 3,234 6,707 7,718 8,330 8,762 9,410' 10,134 Savings capital Borrowed money FHLBB Other Other Net worth n a. MEMO 25 Mortgage loan commitments outstanding 3 8,287 9,770' 10.22C 9,371 Savings banks 193,535 203,898 216,673 218,119 221,256 222,542 226,495 223,367 224,569 227,011 228,854 97,356 19,129 102,895 24,954 108,973 31,752 109,702 32,501 110,271 34,873 111,813' 34,591 112,417 35,500 110,958 36,692 111,971 36,421 113,265 37,350 114,188 37,298 15,360 18,205 2,177 25,375 6,263 9,670 14,643 19,215 2,077 23,747 4,954 11,413 12,568 21,372 2,298 20,828 5,645 13,237 12,474 21,525 2,297 20,707 5,646 13,267 12,313 21,593 2,306 20,403 5,845 13,652 12,013 21,885 2,372 20,439 5,570 13,859 13,210 22,546 2,343 20,260 6,225 13,994 12,115 22,413 2,281 2,036 5,301 13,244 12,297 22,954 2,309 20,862 4,651 13,104 12,043 21,161 2,400 20,602 5,018 13,172 12,357 23,216 2,407 20,902 4,811 13,675 35 Liabilities 193,535 203,898 216,673 218,119 221,256 222,542 226,495 223,367 224,569 227,011 228,854 36 Deposits 37 Regular 4 38 Ordinary savings 39 Time 40 Other 41 Other liabilities 42 General reserve accounts 172,665 170,135 38,554 95,129 2,530 10,154 10,368 180,616 177,418 33,739 104,732 3,198 12,504 10,510 186,321 182,399 32,365 104,436 3,922 17,086 12,925 186,777 182,890 32,693 104,588 3,887 17,793 13,211 188,960 184,704 33,021 105,562 4,256 18,412 13,548 189,025 184,580 33,057 105,550 4,445 19,074 14,114 190,310 185,716 33,577 105,146 4,594 21,384 14,519 189,109 183,970 34,008 103,083 5,139 19,226 14,731 188,615 183,433 34,166 102,374 5,182 20,641 15,084 189,937 184,764 34,530 102,668 5,173 21,360 15,427 190,210 185,002 35,227 102,191 5,208 21,947 16,319 26 Assets 27 28 29 30 31 32 33 34 Loans Mortgage Other Securities U.S. government Mortgage-backed securities . . . State and local government... Corporate and other Cash Other assets n a. n a. Financial Markets All 1.37—Continued 1986 Account 1983 1984 Jan. Feb. Mar. Apr. May June Credit unions July Aug. Sept. Oct. Nov. 5 43 Total assets/liabilities and capital . 81,961 93,036 118,933 122,623 126,653 128,229 132,415 134,703 137,901 139,233 140,496 44 45 54,482 27,479 63,205 29,831 78,619 40,314 80,024 42,599 82,275 44,378 83,543 44,686 86,289 46,126 87,579 47,124 89,539 48,362 90,367 48,866 91,981 48,515 50,083 32,930 17,153 74,739 49,889 24,850 62,561 42,337 20,224 84,348 57,539 26,809 73,513 48,055 25,458 107,238 72,166 35,072 74,207 48,059 26,148 110,541 73,227 37,314 75,300 48,633 26,667 114,579 75,698 38,881 76,385 49,756 26,629 116,703 77,112 39,591 76,774 49,950 26,824 120,331 79,479 40,852 77,847 50,613 27,234 122,952 80,975 41,977 79,647 51,331 28,316 125,331 82,596 42,735 80,656 52,007 28,649 126,268 83,132 43,136 81,820 53,042 28,778 128,125 84,607 43,518 Federal State 46 Loans outstanding 47 Federal 48 State 49 Savings 50 Federal State 51 n a. n a. n.a. n a. Life insurance companies 52 Assets 53 54 55 56 57 58 59 60 61 62 63 Securities Government United States 6 State and local Foreign 7 Business Bonds Stocks Mortgages Real estate Policy loans Other assets 654,948 722,979 831,716 839,856 848,535 855,605 863,610 872,359 877,919 887,255 892,304 50,752 63,899 28,636 42,204 9,986 8,713 12,130 12,982 322,854 359,333 257,986 295,998 64,868 63,335 150,999 156,699 22,234 25,767 54,063 54,505 54,046 63,776 75,937 52,243 9,869 13,825 428,979 351,402 77,577 172,324 29,035 54,264 57,090 76,761 53,264 9,588 13,909 435,758 354,911 80,847 172,997 29,356 54,267 57,351 77,965 54,289 9,674 14,002 440,963 357,196 83,767 174,823 29,804 54,273 57,753 78,494 54,705 9,869 13,920 445,573 361,306 84,267 175,951 30,059 54,272 57,492 79,051 55,120 9,930 14,001 450,279 364,122 86,157 177,554 30,025 54,351 57,802 78,284 54,197 10,114 13,973 455,119 367,966 87,153 180,041 30,350 57,342 58,290 78,722 54,321 10,350 14,051 455,013 369,704 85,309 182,542 31,151 54,249 58,792 79,188 54,487 10,472 14,229 463,135 374,670 88,465 183,943 31,844 54,247 57,905 81,636 56,698 10,606 14,332 462,540 378,267 84,273 185,268 31,725 54,273 58,086 1. Holdings of stock of the Federal Home Loan Banks are in "other assets." 2. Includes net undistributed income accrued by most associations. 3. As of July 1985, data include loans in process. 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. NOTE. Savings and loan associations: Estimates by the FHLBB for all associations in the United States based on annual benchmarks for non-FSLICinsured associations and the experience of FSLIC-insured associations. FSLIC-insured federal savings banks: Estimates by the FHLBB for federal savings banks insured by the FSLIC and based on monthly reports of federally insured institutions. 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 1.38 DomesticNonfinancialStatistics • February 1987 FEDERAL FISCAL A N D FINANCING OPERATIONS Millions of dollars Calendar year Type of account or operation Fiscal year 1984 Fiscal year 1985 Fiscal year 1986 1986 June July Aug. 77,024 58,400 18,624 78,034 60,982 17,052 -1,011 -2,583 1,572 62,974 47,571 15,402 85,203 69,604 15,599 -22,229 -22,033 -1% 56,523 41,404 15,119 84,434 68,112 16,322 -27,911 -26,708 -1,203 Sept. Oct. Nov. 59,012 43,865 15,147 84,267 68,780 15,486 -25,255 -24,915 -340 52,%7 38,158 14,809 79,973 63,639 16,334 -27,006 -25,481 -1,524 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 Cash and monetary assets (decrease, or increase ( - ) ) 2 12 Other 3 10 11 666,457 n.a. n.a. 851,7% n.a. n.a. -185,339 n.a. n.a. 734,057 547,886 186,170 945,987 769,180 176,807 -211,931 -221,294 9,363 170,817 197,269 235,745 18,500 14,980 20,278 22,188 5,936 40,352 5,636 8,885 10,673 3,989 -18,044 2,997 -13,065 -4,424 3,972 3,277 10,298 -2,665 -21,313 2,862 18,131 1,188 -2,721 -10,625 22,345 3,791 18,553 17,060 4,174 12,886 31,384 7,514 23,870 24,641 3,143 21,498 20,810 3,983 16,827 10,428 1,106 9,322 31,384 7,514 23,870 13,616 2,491 11,126 17,007 2,529 14,478 769,091 568,862 200,228 989,789 806,291 183,498 -220,698 -237,428 16,371 78,013 59,978 18,035 81,750 65,614 16,136 -3,737 -5,636 1,898 MEMO 13 Treasury operating balance (level, end of period) 14 Federal Reserve Banks 15 Tax and loan accounts 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 FFB 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 U.S. Treasury operating cash accounts; SDRs; reserve position on the U.S. quota in the IMF; loans to International Monetary Fund; and other cash and monetary assets. 3. Includes 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 "Daily Treasury Statement." Federal Finance 1.39 A29 U.S. B U D G E T RECEIPTS A N D O U T L A Y S Millions of dollars Calendar year Source or type Fiscal year 1985 Fiscal year 1986 1986 1986 1985 HI Nov. Sept. RECEIPTS 734,057 1 AU 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 1 11 Self-employment taxes and contributions 2 12 Unemployment insurance 13 Other net receipts 3 14 15 16 17 Excise taxes Customs deposits Estate and gift taxes Miscellaneous receipts 4 769,091 341,392 380,618 364,790 394,345 78,013 59,012 52, % 7 334,560 298,941 35 101,328 65,743 348,959 314,803 36 105,994 71,873 157,229 145,210 5 19,403 7,387 166,783 149,288 29 76,155 58,684 169,987 155,725 6 22,295 8,038 169,444 153,919 31 78,981 63,488 37,125 24,707 31,123 29,556 24,122 24,242 0 0 14,199 1,782 3,122 1,554 1,143 1,263 77,413 16,082 80,442 17,298 35,190 6,847 42,193 8,370 36,528 7,751 41,946 9,557 13,162 1,713 3,219 2,679 2,716 %8 265,163 283,901 128,017 156,714 23,507 21,179 21,751 234,646 255,062 105,624 126,038 116,276 139,706 22,819 19,583 19,015 10,468 25,758 4,759 11,840 24,098 4,741 1,086 10,706 2,360 9,482 16,213 2,350 985 9,281 2,458 10,581 14,674 2,333 1,379 314 374 0 223 2,377 360 35,992 12,079 6,422 18,510 32,919 13,323 6,958 19,887 18,961 6,329 3,029 18,470 6,354 3,323 9,861 15,944 6,369 3,487 10,002 2,653 1,236 599 1,445 2,708 8,812 17,259 5,807 3,204 9,144 647 1,534 ,090 488 ,279 946,223 989,789 446,944 463,842 487,188 486,037 81,750 84,267 79,973 23,177 1,259 794 405 1,200 3,573 20,907 1,986 708 553 973 3,162 182 2,399 478 1 1,135 459 1,281 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 252,748 16,176 8,627 5,685 13,357 25,565 273,369 14,471 9,017 4,792 13,508 31,169 118,286 8,550 4,473 1,423 7,370 8,524 124,186 6,675 4,230 680 5,892 11,705 134,675 8,367 4,727 3,305 7,553 15,412 135,367 5,384 12,519 2,484 6,245 14,482 23,964 2,603 876 228 1,227 2,801 25 26 27 28 Commerce and housing credit Transportation Community and regional development . . Education, training, employment, social services 4,229 25,838 7,680 4,258 28,058 7,510 2,663 13,673 4,836 -260 11,440 3,408 644 15,360 3,901 860 12,658 3,169 1,884 2,969 516 593 2,107 735 13,737 14,149 14,481 14,712 2,507 2,332 29 Health 30 Social security and medicare 31 Income security 33,542 254,446 128,200 35,936 190,850 120,686 15,692 119,613 61,558 16,945 128,351 65,246 17,237 129,037 59,457 17,872 135,214 60,786 2,997 22,756 8,574 4,266 23,700 9,367 32 33 34 35 36 37 26,352 6,277 5,228 6,353 129,436 -32,759 26,614 6,555 6,796 6,430 135,284 -33,244 13,317 2,992 2,552 3,458 61,293 -17,061 11,956 3,016 2,857 2,659 65,143 -14,436 14,527 3,212 3,634 3,391 67,448 -17,953 12,193 3,352 3,566 2,179 68,054 -17,193 829 513 525 1,139 8,640 -3,7% 3,491 539 209 284 9,951 -3,719 Veterans benefits and services Administration of justice General government General-purpose fiscal assistance Net interest' Undistributed offsetting receipts 6 29,342 1. Old-age, disability, and hospital insurance, and railroad retirement accounts. 2. Old-age, disability, and hospital insurance. 3. Federal employee retirement contributions and civil service retirement and disability fund. 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. 3,153 22,182 9,130 797 505 371 - 2 12,441 -2,455 5. Net interest function includes interest received by trust funds. 6. Consists of rents and royalties on the outer continental shelf and U.S. government contributions for employee retirement. SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. Government," and the Budget of the U.S. Government, Fiscal Year 1987. A30 1.40 DomesticNonfinancialStatistics • February 1987 F E D E R A L D E B T S U B J E C T TO STATUTORY LIMITATION Billions of dollars 1984 1985 1986 Item Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 1,576.7 1,667.4 1,715.1 1,779.0 1,827.5 1,950.3 1,991.1 2,063.6 2,129.5 2 Public debt securities 3 Held by public 4 Held by agencies 1,572.3 1,309.2 263.1 1,663.0 1,373.4 289.6 1,710.7 1,415.2 295.5 1,774.6 1,460.5 314.2 1,823.1 1,506.6 316.5 1,945.9 1,597.1 348.9 1,986.8 1,634.3 352.6 2,059.3 1,684.9 374.4 2,125.3 1,742.4 382.9 4.5 3.4 1.1 4.5 3.4 1.1 4.4 3.3 1.1 4.4 3.3 1.1 4.4 3.3 1.1 4.4 3.3 1.1 4.3 3.2 1.1 4.3 3.2 1.1 4.2 3.2 1.1 5 Agency securities 6 Held by public Held by agencies 7 1,573.0 1,663.7 1,711.4 1,775.3 1,823.8 1,932.4 1,973.3 2,060.0 2,111.0 9 Public debt securities 10 Other debt 1 1,571.7 1.3 1,662.4 1.3 1,710.1 1.3 1,774.0 1.3 1,822.5 1.3 1,931.1 1.3 1,972.0 1.3 2,058.7 1.3 2,109.7 1.3 11 MEMO: Statutory debt limit 1,573.0 1,823.8 1,823.8 1,823.8 1,823.8 2,078.7 2,078.7 2,078.7 2,111.0 8 Debt subject to statutory limit 1. Includes guaranteed debt of government agencies, specified participation certificates, notes to international lending organizations, and District of Columbia stadium bonds. 1.41 GROSS P U B L I C D E B T OF U . S . T R E A S U R Y Billions of dollars, end of period NOTE. Data from Treasury Bulletin and Daily Treasury Statement Treasury Department), Types and Ownership 1985 Type and holder 1982 1981 1986 1983 Q4 1 Total gross public debt 2 3 4 5 6 7 8 9 10 11 12 13 By type Interest-bearing debt Marketable Bills Notes Bonds Nonmarketable 1 State and local government series Foreign issues 2 Government Public Savings bonds and notes Government account series 3 14 Non-interest-bearing debt 15 16 17 18 19 20 21 22 23 74 25 26 By holder* U.S. government agencies and trust funds Federal Reserve Banks Private investors Commercial banks Money market funds Insurance companies Other companies State and local governments Individuals Savings bonds Other securities Foreign and international 5 Other miscellaneous investors 6 Q2 Ql Q3 1,028.7 1,197.1 1,410.7 1,663.0 1,945.9 1,986.8 2,059.3 2,125.3 1,027.3 720.3 245.0 375.3 99.9 307.0 23.0 19.0 14.9 4.1 68.1 196.7 1,195.5 881.5 311.8 465.0 104.6 314.0 25.7 14.7 13.0 1.7 68.0 205.4 1,400.9 1,050.9 343.8 573.4 133.7 350.0 36.7 10.4 10.4 .0 70.7 231.9 1,660.6 1,247.4 374.4 705.1 167.9 413.2 44.4 9.1 9.1 .0 73.1 286.2 1,943.4 1,437.7 399.9 812.5 211.1 505.7 87.5 7.5 7.5 .0 78.1 332.2 1,984.2 1,472.8 393.2 842.5 223.0 511.4 88.5 6.7 6.7 .0 79.8 336.0 2,056.7 1,498.2 396.9 869.3 232.3 558.5 98.2 5.3 5.3 .0 82.3 372.3 2,122.7 1,564.3 410.7 896.9 241.7 558.4 102.4 4.1 4.1 .0 85.6 365.9 1.4 1.6 9.8 2.3 2.5 2.6 2.6 .4 203.3 131.0 694.5 111.4 21.5 29.0 17.9 104.3 209.4 139.3 848.4 131.4 42.6 39.1 24.5 127.8 236.3 151.9 1,022.6 188.8 22.8 56.7 39.7 155.1 289.6 160.9 1,212.5 183.4 25.9 76.4 50.1 179.4 348.9 181.3 1,417.2 192.2 25.1 93.2 59.0 n.a. 352.6 184.8 1,473.1 195.1 29.9 95.8 59.6 n.a. 374.4 183.8 1,502.7 197.2 22.8 n.a. 59.8 n.a. 382.9 190.8 1,553.3 212.5 24.9 n.a. 67.0 n.a. 68.1 42.7 136.6 163.0 68.3 48.2 149.5 217.0 71.5 61.9 166.3 259.8 74.5 69.3 192.9 360.6 79.8 75.0 214.6 n.a. 81.4 76.2r 225.4 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. government agencies and trust funds. 4. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual holdings; data for other groups are Treasury estimates. (U.S. 83.8 73.9' 239.8' n.a. 87.1 69.0 256.3 n.a. 5. Consists of investments of foreign and international accounts. Excludes noninterest-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. government deposit accounts, and U.S. government-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 . G O V E R N M E N T SECURITIES D E A L E R S Par value; averages of daily figures, in millions of dollars Transactions' 1986 week ending Wednesday 1986 Item 1983 1984 A31 1985 Sept. Oct. Nov. Oct. 22' Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 1 Immediate delivery 2 U.S. government securities 42,135 52,778 75,331 102,015 93,308' 96,844 85,855 100,241 99,483 100,720 104,395 100,142 2 3 4 5 6 By maturity Bills Other within 1 year 1-5 years 5-10 years Over 10 years 22,393 708 8,758 5,279 4,997 26,035 1,305 11,733 7,606 6,099 32,900 1,811 18,361 12,703 9,556 35,526 2,263 29,743 21,718 12,766 32,634' 2,221 25,480' 21,186' 11,787' 32,218 2,122 25,954 20,976 15,574 30,595 1,536 24,953 17,533 11,238 33,796 2,411 25,672' 25,502' 12,861 32,487 2,452 26,187 23,593 14,765 33,707 2,496 25,197 20,784 18,536 36,723 2,430 28,717 19,678 16,847 30,424 2,112 27,730 24,941 14,935 7 8 9 10 11 17 13 14 15 16 17 18 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 transactions 4 Treasury bills Treasury coupons Federal agency securities Forward transactions 5 U.S. government securities Federal agency securities 2,257 2,919 3,336 4,232 3,905 3,902 2,747 3,637 4,972 4,396 3,552 3,346 21,045 18,833 5,576 4,333 2,642 8,036 25,580 24,278 7,846 4,947 3,243 10,018 36,222 35,773 11,640 4,016 3,242 12,717 54,585 43,199 17,693 4,724 3,452 16,058 49,366 40,037' 18,302 4,372' 3,348 17,078 50,707 42,235 20,111 3,861 2,859 16,705 45,456 37,651 23,729 3,993 3,549 17,401 53,876 42,728' 20,221' 4,221' 2,534 17,014 51,373 43,138 17,050 3,759 3,160 17,558 54,249 42,076 15,095 3,558 3,335 17,108 56,416 44,429 26,247 3,641 2,849 17,074 51,757 45,040 23,840 4,990 2,873 17,997 6,655 2,501 265 6,947 4,503 262 5,561 6,069 240 3,056 7,784 4 1,754 5,416 0 2,801 6,387 11 2,728 5,307 * 1,361 5,430 2 2,084 6,247 1 3,172 6,568 1 3,361 7,016 23 2,682 6,570 36 1,493 1,646 1,364 2,843 1,283 3,857 1,838 8,685' 1,731' 8,450 2,403 10,258 3,082 10,913 1,968 7,581 2,254 7,055 3,063 8,151 3,243 14,356 1,367 11,579 1. Transactions are market purchases and sales of securities as reported to the Federal Reserve Bank of New 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. government 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 government securities (Treasury bills, notes, and bonds) or after 30 days for mortgage-backed agency issues. NOTE. Data for the period May 1 to Sept. 30, 1986, are partially estimated. A32 1.43 DomesticNonfinancialStatistics • February 1987 U . S . G O V E R N M E N T SECURITIES D E A L E R S Averages of daily figures, in millions of dollars Positions and Financing 1 1986 Sept. Oct. 1986 week ending Wednesday Nov. Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 Positions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Net immediate 2 U.S. government securities Bills Other within 1 year 1-5 years 5-10 years Over 10 years Federal agency securities Certificates of deposit Bankers acceptances Commercial paper Futures positions Treasury bills Treasury coupons Federal agency securities Forward positions U.S. government securities Federal agency securities 14,082 10,800 921 1,912 -78 528 7,313 5,838 3,332 3,159 5,429 5,500 63 2,159 -1,119 -1,174 15,294 7,369 3,874 3,788 7,391 10,075 1,050 5,154 -6,202 -2,686 22,860 9,192 4,586 5,570 11,302 8,676 2,847 11,917 -9,181 -2,957 30,165 11,289 5,665 8,991 8,297' 11,060' 2,704 9,676' -11,127 -4,017 29,066' 9,511 5,897 8,302 14,368' 14,967 2,030 8,419 -8,131 -2,916 30,257 9,956 5,244 9,630 10,039' 11,633 2,150 10,946 -11,098 -3,593 28,155 8,944 5,074 7,250 12,512 15,008 1,611 11,493 -11,680 -3,921 28,593 9,933 5,445 9,710 14,083 12,667 1,790 11,612 -9,584 -2,403 29,313 9,841 5,718 10,862 11,611 13,083 2,053 5,870 -6,954 -2,440 31,296 9,307 5,290 9,554 17,618 18,338 2,299 6,663 -6,554 -3,128 30,922 10,353 4,654 8,380 -4,125 -1,033 171 -4,525 1,794 233 -7,322 4,465 -722 -15,996 4,234 -64 -15,845 3,424 -70 -15,972 4,022 -82 -13,900 3,132 -75 -14,595 2,917 -80 -14,857 3,801 -80 -15,981 4,216 -82 -17,360 4,360 -83 -1,936 -3,561 -1,643 -9,205 -911 -9,420 -3,769 -10,224 -122' -11,322' -781 -14,622 410 -11,378 190 -11,323 -1,294 -13,815 -1,262 -15,408 -629 -15,661 Financing 3 Reverse repurchase agreements 4 Overnight and continuing Term agreements Repurchase agreements 5 18 Overnight and continuing 19 Term agreements 16 17 29,099 52,493 44,078 68,357 68,035 80,509 112,717' 106,049' 115,847 110,294 n.a. n.a. 112,095' 111,118' 106,699 117,147 112,752 113,195 114,482 114,179 n.a. n.a. 57,946 44,410 75,717 57,047 101,410 77,748 148,687' 104,168' 150,662 108,375 n.a. n.a. 141,865' 110,059' 147,499 114,015 155,517 105,989 154,786 109,099 n.a. n.a. 1. Data for dealer positions and sources of financing are obtained from reports submitted to the Federal Reserve Bank of New York by the U.S. government 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 owned 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 do not include forward positions. 3. Figures cover financing involving U.S. government and federal agency securities, negotiable CDs, 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 book" repurchase agreements. NOTE. Data on positions for the period May 1 to Sept. 30, 1986, are partially estimated. Federal Finance 1.44 F E D E R A L A N D F E D E R A L L Y S P O N S O R E D CREDIT A G E N C I E S Millions of dollars, end of period A33 Debt Outstanding 1986 1983 Agency 1984 1985 May 10 Federally sponsored agencies 1 11 Federal Home Loan Banks 12 Federal Home Loan Mortgage Corporation 13 Federal National Mortgage Association 14 Farm Credit Banks 15 Student Loan Marketing Association 8 Sept. Oct. 271,220 293,905 294,961 296,226 298,361 n.a. n.a. n.a. 33,940 243 14,853 194 35,145 142 15,882 133 36,390 71 15,678 115 36,110 52 15,256 118 35,826 48 14,953 115 35,768 45 14,953 115 36,132 40 14,953 115 36,473 37 14,274 117 36,716 36 14,274 123 2,165 1,404 14,970 111 2,165 1,337 15,435 51 2,165 1,940 16,347 74 2,165 1,940 16,505 74 2,165 1,854 16,617 74 2,165 1,854 16,562 74 2,165 1,854 16,931 74 2,165 3,104 16,702 74 2,165 3,104 16,940 74 206,128 48,930 6,793 74,594 72,816 3,402 236,075 65,085 10,270 83,720 71,193 5,745 257,515 74,447 11,926 93,896 68,851 8,395 258,851 78,718 12,475 92,629 64,629 10,400 260,400 81,558 12,276 92,562 63,585 10,419 262,593 83,081 12,818 93,417 62,857 10,420 n.a. 85,997 n.a. 92,286 61,575 10,420 n.a. 87,133 n.a. 91,629 63,073 10,555 n.a. 87,146 n.a. 93,272 63,079 10,791 145,217 153,373 155,076 155,222 155,526 156,132 156,873' 157,371 14,789 1,154 5,000 13,245 111 15,852 1,087 5,000 13,710 51 15,670 1,690 5,000 14,622 74 15,250 1,690 5,000 14,830 74 14,947 1,604 5,000 14,942 74 14,947 1,604 5,000 14,937 74 14,947 1,604 5,000 15,306 74 14,268 2,854 4,970' 15,077 74 14,268 2,854 4,970 15,515 74 55,266 19,766 26,460 58,971 20,693 29,853 64,234 20,654 31,429 64,544 21,154 32,534 64,924 21,255 32,476 65,174 21,321 32,469 65,274 21,398 32,529 65,374 21,460 32,796' 65,374 21,506 32,810 sponsored Export-Import Bank 3 Postal Service 6 Student Loan Marketing Association Tennessee Valley Authority United States Railway Association 6 Other Lending10 22 Farmers Home Administration 23 Rural Electrification Administration 24 Other 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. Aug. 240,068 MEMO 16 Federal Financing Bank debt 17 18 19 20 21 July 135,791 1 Federal and federally sponsored agencies 2 Federal agencies 3 Defense Department 1 Export-Import Bank 2 ' 3 4 5 Federal Housing Administration 4 6 Government National Mortgage Association participation certificates 5 7 Postal Service 6 8 Tennessee Valley Authority 9 United States Railway Association 6 Lending to federal and federally June 7. Includes outstanding noncontingent liabilities: Notes, bonds, and debentures. Some data are estimated. 8. Before late 1981, the Association obtained financing through the Federal Financing Bank. 9. The FFB, which began operations in 1974, is authorized to purchase or sell obligations issued, sold, or guaranteed by other federal agencies. Since FFB 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. 10. Includes FFB 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. A34 1.45 DomesticNonfinancialStatistics • February 1987 N E W SECURITY I S S U E S Tax-Exempt State and Local Governments Millions of dollars 1986 Type of issue or issuer, or use 1983 1984 1985 Mar. 1 All issues, new and refunding 1 Apr. May June July Aug. Sept. Oct. 86,421 106,641 214,189 8,008 12,578 13,215 12,611 19,833 25,965 4,532 8,825 Type of issue 2 General obligation 3 Revenue 21,566 64,855 26,485 80,156 52,622 161,567 2,720 5,288 5,459 7,120 7,115 6,100 6,326 6,285 6,531 13,302 5,931 20,034 1,267 3,265 2,104 6,721 Type of issuer 4 5 Special district and statutory authority 2 6 Municipalities, counties, townships 7,140 51,297 27,984 9,129 63,550 33,962 13,004 134,363 66,822 1,088 4,383 2,537 1,956 7,350 3,273 2,825 6,427 3,962 1,705 6,351 4,554 2,879 10,589 6,365 2,121 15,714 8,125 9 3,275 1,248 697 5,757 2,371 7 Issues for new capital, total 72,441 94,050 156,050 3,314 6,938 7,155 8,178 13,165 17,810 2,558 3,789 Use of proceeds Education Transportation Utilities and conservation Social welfare Industrial aid Other purposes 8,099 4,387 13,588 26,910 7,821 11,637 7,553 7,552 17,844 29,928 15,415 15,758 16,658 12,070 26,852 63,181 12,892 24,398 624 795 4,082 337 37 2,132 1,706 815 4,554 579 313 4,610 1,827 273 3,450 1,424 264 5,978 1,694 947 1,583 1,518 255 6,614 2,800 3,164 4,425 1,186 975 7,281 2,926 1,460 6,292 2,554 489 12,245 558 827 1,365 812 138 832 928 1,195 2,396 2,098 499 1,708 8 9 10 11 12 13 1. Par amounts of long-term issues based on date of sale. 2. Includes school districts beginning April 1986. SOURCES. Securities Data Company beginning April 1986. Public Securities Association for earlier data. This new data source began with the November BULLETIN. 1.46 N E W SECURITY I S S U E S Corporations Millions of dollars Type of issue or issuer, or use 1986 1983 1984 1985 Mar. 1 All issues1 Apr. May June July Aug. Sept/ Oct. 119,949 132,531 201,269 30,444 33,489 19,564 25,776 21,093 24,245 16,093 28,230 2 Bonds2 68,370 109,903 165,754 24,923 27,883 13,050 20,756 16,766 18,481 12,830 23,295 Type of offering 3 Public 4 Private placement 47,244 21,126 73,579 36,324 119,559 46,195 24,923 n.a. 27,883 n.a. 13,050 n.a. 20,756 n.a. 16,766 n.a. 18,481 n.a. 12,830 n.a. 23,295 n.a. 17,001 7,540 3,833 9,125 3,642 27,227 24,607 13,726 4,694 10,679 2,997 53,199 52,228 15,215 5,743 12,957 10,456 69,157 8,895 790 303 2,133 1,907 10,895 7,975 2,640 614 3,330 3,115 10,210 3,939 1,776 427 1,709 712 4,487 5,368 2,206 250 1,948 810 10,174 2,535 3,410 497 1,470 465 8,389 4,536 1,045 550 2,098 1,615 8,638 2,345 1,405 375 1,915 417 6,373 2,055 1,092 170 2,537 1,255 16,185 11 Stocks3 51,579 22,628 35,515 5,521 5,606 6,514 5,020 4,327 5,764 3,263 4,935 Type 12 Preferred 13 Common 7,213 44,366 4,118 18,510 6,505 29,010 1,160 4,361 751 4,855 856 5,658 1,284 3,736 726 3,601 1,290 4,474 402 2,861 727 4,208 14,135 13,112 2,729 5,001 1,822 14,780 4,054 6,277 589 1,624 419 9,665 5,700 9,149 1,544 1,966 978 16,178 851 607 355 357 0 3,351 1,434 910 158 165 27 2,912 1,827 953 372 346 74 2,942 1,132 421 154 406 140 2,767 746 917 179 305 107 2,073 982 803 57 208 379 3,335 250 1,009 28 174 0 1,802 701 1,217 511 410 59 2,037 5 6 7 8 9 10 14 15 16 17 18 19 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, sold for cash in the United States, are principal amount or number of units multiplied by offering price. Excludes offerings of less than $100,000, secondary offerings, undefined or exempted issues as defined in the Securities Act of 1933, employee stock plans, investment companies other than closed-end, intracorporate transactions, and sales to foreigners. 2. Monthly data include only public offerings. 3. Beginning in August 1981, gross stock offerings include new equity volume from swaps of debt for equity. SOURCES. IDD Information Services, Inc., Securities and Exchange Commission and the Board of Governors of the Federal Reserve System. Securities Market and Corporate Finance 1.47 O P E N - E N D I N V E S T M E N T COMPANIES A35 Net Sales and Asset Position Millions of dollars 1986 Item 1984 1985 Mar. Apr. May June July Aug. Sept/ Oct. INVESTMENT COMPANIES 1 1 Sales of own shares 2 2 Redemptions of own shares 3 3 Net sales 107,480 77,032 30,448 222,670 132,440 90,230 33,764 15,085 18,679 37,656 21,699 15,957 31,251 16,706 14,545 30,619 18,921 11,698 35,684 21,508 14,176 32,636 20,102 12,534 34,690 21,338 13,352 37,095 20,808 16,287 4 Assets 4 5 Cash position 5 Other 6 137,126 12,181 124,945 251,695 20,607 231,088 315,245 27,639 287,606 329,684 29,599 300,085 343,926 28,184 315,742 356,040 28,083 327,957 360,050 28,080 331,970 387,547 28,682 358,865 381,872 29,540 352,332 402,516 30,954 371,562 5. Also includes all U.S. government securities and other short-term debt securities. 1. Excluding money market 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. 4. Market value at end of period, less current liabilities. 1.48 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. CORPORATE PROFITS A N D THEIR DISTRIBUTION Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1984 Account 1983 1984 1985 1986' 1985 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 2 3 4 5 6 1 Corporate profits with inventory valuation and capital consumption adjustment Profits before tax Profits tax liability Profits after tax Dividends Undistributed profits 213.7 207.6 77.2 130.4 71.5 58.8 264.7 235.7 95.4 140.3 78.3 62.0 280.6 223.1 91.8 131.4 81.6 49.8 265.0 221.9 87.8 134.1 80.1 54.0 266.4 213.8 87.8 126.0 80.9 45.1 274.3 213.8 87.1 126.7 81.4 45.3 296.3 229.2 95.8 133.4 81.6 51.8 285.6 235.8 96.4 139.4 82.5 57.0 296.4 222.5 95.7 126.9 85.2 41.7 293.1 227.7 99.0 128.8 87.5 41.2 302.0 240.4 104.4 135.9 88.8 47.2 7 Inventory valuation 8 Capital consumption adjustment -10.9 17.0 -5.5 34.5 -.6 58.1 -1.6 44.7 -.5 53.2 1.6 58.9 6.1 61.0 -9.4 59.2 16.5 57.3 10.6 54.8 6.1 55.5 SOURCE. Survey of Current Business (Department of Commerce). A36 1.49 DomesticNonfinancialStatistics • February 1987 N O N F I N A N C I A L CORPORATIONS Billions of dollars, except for ratio Assets and Liabilities 1986 1985 Account 1980 1981 1983 1982 1984 Q1 1 Current assets Q2 Q3 Q4 Ql 1,328.3 1,419.6 1,437.1 1,575.9 1,703.0 1,722.7 1,734.6 1,763.0 1,784.6 1,795.7 127.0 18.7 507.5 543.0 132.1 135.6 17.7 532.5 584.0 149.7 147.8 23.0 517.4 579.0 169.8 171.8 31.0 583.0 603.4 186.7 173.6 36.2 633.1 656.9 203.2 167.5 35.7 650.3 665.7 203.5 167.1 35.4 654.1 666.7 211.2 176.3 32.6 661.0 675.0 218.0 189.2 33.0 671.5 666.0 224.9 195.3 31.0 663.4 679.6 226.3 7 Current liabilities 890.6 971.3 986.0 1,059.6 1,163.6 1,174.1 1,182.9 1,211.9 1,233.6 1,222.3 8 Notes and accounts payable 9 Other 514.4 376.2 547.1 424.1 550.7 435.3 595.7 463.9 647.8 515.8 636.9 537.1 651.7 531.2 670.4 541.5 682.7 550.9 668.4 553.9 10 Net working capital 437.8 448.3 451.1 516.3 539.5 548.6 551.7 551.1 551.0 573.4 11 MEMO; Current ratio 1 1.492 1.462 1.458 1.487 1.464 1.467 1.466 1.455 1.447 1.469 2 3 4 5 6 Cash U.S. government securities Notes and accounts receivable Inventories Other Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. SOURCE. Federal Trade Commission and Bureau of the Census. 1. Ratio of total current assets to total current liabilities. NOTE. For a description of this series, see "Working Capital of Nonfinancial C o r p o r a t i o n s " in t h e J u l y 1978 BULLETIN, p p . 5 3 3 - 3 7 . All data in this table reflect the most current benchmarks. Complete data are available upon request from the Flow of Funds Section, Division of Research and 1.50 TOTAL N O N F A R M B U S I N E S S E X P E N D I T U R E S on N e w Plant and Equipment A Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1985 Industry 1984 1985 Q2 1 Total nonfarm business Manufacturing 2 Durable goods industries 3 Nondurable goods industries Nonmanufacturing 4 Mining Transportation 5 Railroad Air 6 7 Other Public utilities 8 Electric 9 Gas and other 10 Commercial and other 2 Q3 Q4 Ql Q2 Q31 Q4 Ql' 354.44 387.13 380.69 387.86 389.23 397.88 377.94 375.92 374.55 394.34 386.82 66.24 72.58 73.27 80.21 69.96 74.81 74.34 79.91 72.99 81.48 75.47 82.79 68.01 76.02 68.33 73.35 69.31 69.89 74.17 80.00 67.86 73.36 16.86 15.88 11.24 16.56 15.89 15.25 12.99 11.22 10.15 10.62 10.36 6.79 3.56 6.17 7.08 4.79 6.15 6.72 6.04 5.87 7.38 3.71 6.35 7.79 5.17 5.85 6.74 6.07 6.34 6.22 6.58 5.42 6.77 5.77 5.74 7.31 5.69 6.03 6.60 6.12 6.30 6.37 7.22 6.26 37.03 10.44 134.75 36.11 12.71 150.93 33.96 12.57 159.50 36.00 12.61 150.99 35.58 12.86 151.62 36.38 13.41 155.42 34.21 12.82 155.67 33.81 12.74 158.18 33.91 11.99 160.25 33.91 12.72 163.91 33.34 12.97 169.08 ATrade and services are no longer being reported separately. They are included in Commercial and other, line 10. 1. Anticipated by business. 1987 1986 1986 lr 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). Securities Markets and Corporate Finance 1.51 DOMESTIC F I N A N C E COMPANIES Billions of dollars, end of period Assets and Liabilities 1985 Account A37 1982 1983 1986 1984 Ql Q2 Q4 Q3 Q2 Ql Q3 ASSETS Accounts receivable, gross Consumer Business Real estate Total 78.1 101.4 20.2 199.7 87.4 113.4 22.5 223.4 96.7 135.2 26.3 258.3 99.1 142.1 27.2 268.5 106.0 144.6 28.4 279.0 116.4 141.4 29.0 286.5 120.8 152.8 30.4 304.0 125.5 159.7 31.5 316.7 134.7 160.3 32.4 327.5 146.7 152.7 33.8 333.2 Less: 5 Reserves for unearned income 6 Reserves for losses 31.9 3.5 33.0 4.0 36.5 4.4 36.6 4.9 38.6 4.8 41.0 4.9 40.9 5.0 41.3 5.1 41.8 5.2 43.6 5.5 7 Accounts receivable, net 8 All other 164.3 30.7 186.4 34.0 217.3 35.4 227.0 35.9 235.6 39.5 240.6 46.3 258.1 46.8 270.3 50.6 280.4 52.1 284.1 63.1 9 Total assets 195.0 220.4 252.7 262.9 275.2 286.9 304.9 321.0 332.5 347.2 18.3 51.1 18.7 59.7 21.3 72.5 19.8 79.1 18.5 82.6 18.2 93.6 21.0 96.9 20.4 102.0 22.9 106.4 25.3 110.6 12.7 64.4 21.2 27.4 13.9 68.1 30.1 29.8 16.2 77.2 33.1 32.3 16.8 78.3 35.4 33.5 16.6 85.7 36.9 34.8 16.6 86.4 36.6 35.7 17.2 93.0 39.6 37.1 18.5 100.0 41.4 38.8 20.9 101.8 40.4 40.2 21.6 105.3 43.2 41.3 195.0 220.4 252.7 262.9 275.2 286.9 304.9 321.0 332.5 347.2 1 2 3 4 LIABILITIES 10 Bank loans 11 Commercial paper Debt 12 Other short-term 13 Long-term 14 All other liabilities 15 Capital, surplus, and undivided profits 16 Total liabilities and capital NOTE. Components may not add to totals due to rounding. These data also appear in the Board's G.20 (422) release. For address, see inside front cover. 1.52 DOMESTIC F I N A N C E COMPANIES Business Credit Millions of dollars, seasonally adjusted except as noted Changes in accounts receivable Type Extensions Repayments 1986 1986 1986 Accounts receivable outstanding Oct. 31, 1986' Aug. 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 1. Not seasonally adjusted. Sept. Oct. Aug. Sept. Oct. Aug. Sept. Oct. 158,739 190 -6,552 5,751 28,014 26,662 32,469 27,824 33,214 26,718 18,350 20,113 291 -91 1,290 -212 281 11 1,302 786 2,299 986 1,359 965 1,011 876 1,009 1,197 1,078 954 20,727 4,781 7,709 127 -44 33 -9,172 36 113 4,592 134 149 10,220 845 1,703 7,536 829 1,881 13,818 715 2,043 10,093 889 1,669 16,708 793 1,768 9,226 581 1,893 16,610 40,606 185 22 549 286 248 -10 892 1,540 1,075 1,574 1,018 1,770 707 1,518 526 1,289 770 1,780 16,850 12,993 -307 -27 539 19 -267 613 9,429 1,298 9,298 1,183 9,201 1,580 9,735 1,325 8,760 1,164 9,468 966 NOTE. These data also appear in the Board's G.20 (422) release. For address, see inside front cover. A38 1.53 Domestic Financial Statistics • February 1987 MORTGAGE M A R K E T S Millions of dollars; exceptions noted. 1986 item May June 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 annum) Yield (percent per annum) 7 FHLBB series 5 8 HUD series 4 92.8 69.5 77.1 26.7 2.40 12.20 96.8 73.7 78.7 27.8 2.64 11.87 104.1 77.4 77.1 26.9 2.53 11.12 114.7 83.0 74.7 25.8 2.19 9.84 122.1 88.0 74.9 26.6 2.40 9.74 115.7 83.4 73.9 26.2 2.35 9.89 117.9 84.8 74.5 26.5 2.40 9.84 124.0 90.4 75.2 27.1 2.49 9.74 127.5'' 93.9' 75.6 2.66' 9.57' 122.6 91.9 76.5 27.4 2.69 9.46 12.66 13.43 12.37 13.80 11.58 12.28 10.22 10.32 10.15 10.38 10.30 10.28 10.26 9.88 10.17 9.96 10.02' 9.89 9.93 n.a. 13.11 12.25 13.81 13.13 12.24 11.61 10.07 9.23 9.98 9.57 10.01 9.31 9.80 9.11 9.90 9.17 9.80 9.06 n.a. 8.83 27.Y SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series) 5 10 GNMA securities 6 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 12 FHA/VA-insured 13 Conventional 74,847 37,393 37,454 83,339 35,148 48,191 94,574 34,244 60,331 98,096 32,558 65,538 97,295 31,241 66,054 97,255 30,766 66,489 %,675 28,451 68,224 97,717 26,658 71,059 98,402 25,435 72,%7 98,210 24,300 73,910 Mortgage transactions (during period) 14 Purchases 15 17,554 3,528 16,721 978 21,510 1,301 1,978 n.a. 3,000 n.a. 3,343 n.a. 3,800 n.a. 4,649 n.a. 3,784 n a. 2,549 n.a. Mortgage commitments1 16 Contracted (during period) 17 Outstanding (end of period) 18,607 5,461 21,007 6,384 20,155 3,402 3,538 8,444 3,049 7,862 3,270 7,706 3,840 7,671 4,248 7,252 2,375 5,740 1,811 4,625 5,9% 974 5,022 9,283 910 8,373 12,399 841 11,558 14,302 769 13,533 14,194 742 13,452 13,795 692 13,103 14,010 688 13,322 23,089 19,686 21,886 18,506 44,012 38,905 8,947 7,354 10,505 9,588 8,518 8,113 10,458 10,132 n.a. n.a. n.a. 32,852 16,964 32,603 13,318 48,989 16,613 10,612 n.a. 10,338 n.a. 7,863 n.a. 13,707 n.a. FEDERAL H O M E LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 18 Total 19 FHA/VA 20 Conventional Mortgage transactions (during period) 21 Purchases 22 9 Mortgage commitments 23 Contracted (during period) 24 Outstanding (end of 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. 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 FHA/VA 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 FNMA's free market auction system, and through the FNMA-GNMA 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 FNMA exclude swap activity. Real Estate 1.54 A39 MORTGAGE D E B T O U T S T A N D I N G Millions of dollars, end of period 1986 1985 Type of holder, and type of property 1983 1984 1985 Q3 Q4 Q1 Q2 Q3 1 All holders 1,813,856 2,034,602 2,266,267 2,200,561 2,266,267 2,315,038 2,381,232 2,456,496' 2 3 4 5 1,189,822 160,805 350,389 112,840 1,318,888 185,414 418,300 112,000 1,466,117 213,817 480,718 105,615 1,425,357 203,626 463,272 108,306 1,466,117 213,817 480,718 105,615 1,493,772 221,508 495,865 103,893 1,541,478 228,255 509,873 101,626 1,595,308' 236,094' 524,947' 100,147' 1,130,781 330,521 182,514 18,410 120,210 9,387 131,940 93,649 17,247 21,016 28 1,272,206 379,498 196,163 20,264 152,894 10,177 154,441 107,302 19,817 27,291 31 1,392,084 429,386 213,624 23,374 181,031 11,357 177,263 121,879 23,329 31,973 82 1,357,483 415,599 209,119 22,254 173,190 11,036 174,427 119,952 22,604 31,757 114 1,392,084 429,386 213,624 23,374 181,031 11,357 177,263 121,879 23,329 31,973 82 1,410,541 441,293 216,580 25,310 187,606 11,797 188,154 131,381 23,980 32,707 86 1,437,054 456,146 222,144 26,306 195,459 12,237 203,238 142,215 26,549 34,370 104 1,463,625' 472,048 228,471 27,709 203,217 12,651 214,156' 148,010' 28,467' 37,59c 89' 494,789 387,924 44,333 62,403 129 150,999 15,319 19,107 103,831 12,742 22,532 555,277 421,489 55,750 77,605 433 156,699 14,120 18,938 111,175 12,466 26,291 583,236 432,422 66,410 83,798 606 171,797 12,381 19,894 127,670 11,852 30,402 573,682 425,596 62,390 85,061 635 164,760 13,454 19,074 120,183 12,049 29,015 583,236 432,422 66,410 83,798 606 171,797 12,381 19,894 127,670 11,852 30,402 574,732 420,073 67,140 86,860 659 174,823 12,605 20,009 130,569 11,640 31,539 565,205 413,952 65,966 84,755 532 180,041 12,608 20,181 135,924 11,328 32,424 558,409 408,584 65,902 83,409 514 185,241 12,958 20,981 140,124 11,178 33,771 148,328 3,395 630 2,765 2,141 1,159 173 409 400 158,993 2,301 585 1,716 1,276 213 119 497 447 166,928 1,473 539 934 733 183 113 159 278 166,248 1,640 552 1,088 577 185 139 72 181 166,928 1,473 539 934 733 183 113 159 278 165,041 1,533 527 1,006 704 217 33 217 237 161,398 876 49 827 570 146 66 111 247 159,879' 826 44 782 457 132 57 115 153 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 4,894 1,893 3,001 78,256 73,045 5,211 52,010 3,081 48,929 7,632 7,559 73 4,816 2,048 2,768 87,940 82,175 5,765 52,261 3,074 49,187 10,399 9,654 745 4,920 2,254 2,666 98,282 91,966 6,316 47,498 2,798 44,700 14,022 11,881 2,141 4,918 2,251 2,667 96,769 90,590 6,179 49,255 2,895 46,360 13,089 11,457 1,632 4,920 2,254 2,666 98,282 91,966 6,316 47,498 2,798 44,700 14,022 11,881 2,141 4,964 2,309 2,655 98,795 92,315 6,480 45,422 2,673 42,749 13,623 12,231 1,392 5,094 2,449 2,645 97,295 90,460 6,835 43,369 2,552 40,817 14,194 11,890 2,304 4,966 2,331 2,635 97,717 90,508 7,209 42,119' 2,478' 39,641' 13,794 10,890 2,904 49 Mortgage pools or trusts 3 50 Government National Mortgage Association 51 1- to 4-family 52 Multifamily 53 Federal Home Loan Mortgage Corporation. 54 1- to 4-family 55 Multifamily 56 Federal National Mortgage Association 57 1- to 4-family 58 Multifamily 59 Farmers Home Administration 60 1- to 4-family 61 Multifamily 62 Commercial 63 Farm 285,073 159,850 155,950 3,900 57,895 57,273 622 25,121 25,121 n.a. 42,207 20,404 5,090 7,351 9,362 332,057 179,981 175,589 4,392 70,822 70,253 569 36,215 35,965 250 45,039 21,813 5,841 7,559 9,826 415,042 212,145 207,198 4,947 100,387 99,515 872 54,987 54,036 951 47,523 22,186 6,675 8,190 10,472 388,948 201,026 196,198 4,828 91,915 90,997 918 48,769 47,857 912 47,238 22,090 6,415 8,192 10,541 415,042 212,145 207,198 4,947 100,387 99,515 872 54,987 54,036 951 47,523 22,186 6,675 8,190 10,472 440,701 220,348 215,148 5,200 110,337 108,020 2,317 62,310 61,117 1,193 47,706 22,082 6,943 8,150 10,531 475,615 229,204 223,838 5,366 125,903 123,676 2,227 72,377 71,153 1,224 48,131 21,987 7,170 8,347 10,627 520,675 241,230 235,582 5,648 144,825 142,638 2,187 86,359 85,171 1,188 48,261 21,782 7,353 8,409 10,717 64 Individuals and others 4 65 1- to 4-family 66 Multifamily 67 Commercial 68 Farm 249,674 141,769 40,873 35,169 31,863 271,346 152,154 48,480 41,279 29,433 292,213 162,853 55,195 47,897 26,268 287,882 163,149 52,526 44,817 27,390 292,213 162,853 55,195 47,897 26,268 298,755 164,955 57,850 49,756 26,194 307,165 169,935 60,589 50,907 25,734 312,317' 171,958 63,072 52,083 25,204' 1- to 4-family Multifamily Commercial Farm 6 Selected financial institutions Commercial banks' 7 8 1- to 4-family 9 Multifamily 10 Commercial 11 Farm 12 Savings banks 13 1- to 4-family 14 Multifamily 15 Commercial 16 Farm 17 18 19 20 21 22 23 24 25 26 27 Savings and loan associations 1- to 4-family Multifamily Commercial Farm Life insurance companies 1- to 4-family Multifamily Commercial Farm Finance companies 2 28 Federal and related agencies 29 Government National Mortgage Association 30 1- to 4-family 31 Multifamily 32 Farmers Home Administration 33 1- to 4-family 34 Multifamily 35 Commercial 36 Farm 37 38 39 40 41 42 43 44 45 46 47 48 1. Includes loans held by nondeposit trust companies but not bank trust departments. 2. Assumed to be entirely 1- to 4-family loans. 3. Outstanding principal balances of mortgage pools backing securities insured or guaranteed by the agency indicated. 4. 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. NOTE. 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. A40 1.55 DomesticNonfinancialStatistics • February 1987 C O N S U M E R I N S T A L L M E N T C R E D I T 1 4 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1986 noiuer, anu lype oi creuii 1984 1985 Feb. Mar. Apr. May June July Aug. Sept/ Oct. Amounts outstanding (end of period) 1 Total 453,580 535,098 547,852 550,939 555,810 562,267 567,653 573,216 576,609 584,334 591,117 By major holder 2 Commercial banks 3 Finance companies 2 4 Credit unions 5 Retailers 3 6 Savings institutions V Gasoline companies 209,158 96,126 66,544 37,061 40,330 4,361 240,796 120,095 75,127 39,187 55,555 4,337 244,761 126,001 76,431 39,497 57,048 4,114 245,172 127,422 76,953 39,844 57,573 3,975 247,498 128,728 77,957 39,826 58,024 3,777 248,681 131,172 78,474 40,139 60,247 3,554 249,753 134,933 79,095 40,076 60,352 3,445 251,197 137,197 80,130 40,251 61,051 3,389 251,908 138,938 80,622 40,351 61,421 3,368 253,329 144,559 81,374 40,445 61,331 3,295 255,766 146,862 82,448 40,641 62,079 3,320 By major type of credit 8 Automobile y Commercial banks 10 Credit unions n Finance companies 12 Savings institutions 173,122 83,900 28,614 54,663 5,945 206,482 92,764 30,577 73,391 9,750 213,342 93,828 31,107 78,310 10,097 214,361 93,377 31,320 79,416 10,248 215,814 93,013 31,728 80,685 10,386 218,965 93,157 31,939 83,221 10,648 222,606 93,261 32,191 86,520 10,634 226,234 94,014 32,613 88,862 10,745 228,814 94,686 32,813 90,578 10,736 236,280 95,842 33,119 96,598 10,721 240,327 97,218 33,556 98,695 10,858 13 Revolving 14 Commercial banks 15 Retailers 16 Gasoline companies 17 Savings institutions 98,514 58,145 33,064 4,361 2,944 118,296 73,893 34,560 4,337 5,506 120,724 75,953 34,843 4,114 5,813 122,131 77,021 35,188 3,975 5,947 123,442 78,421 35,170 3,777 6,075 124,545 79,151 35,449 3,554 6,392 124,720 79,397 35,390 3,445 6,488 125,577 79,998 35,542 3,389 6,649 125,915 80,133 35,639 3,368 6,775 126,012 80,160 35,688 3,295 6,869 126,609 80,406 35,861 3,320 7,021 18 Mobile home 19 Commercial banks 20 Finance companies 21 Savings institutions 24,184 9,623 9,161 5,400 25,461 9,578 9,116 6,767 25,573 9,566 9,161 6,846 25,584 9,348 9,327 6,909 25,513 9,264 9,286 6,963 25,560 9,215 9,115 7,230 25,479 9,196 9,077 7,206 25,398 9,156 8,989 7,253 25,215 9,086 8,882 7,248 24,958 9,071 8,681 7,206 24,954 9,074 8,611 7,269 22 Other 23 Commercial banks 24 Finance companies 25 Credit unions 26 Retailers 27 Savings institutions 157,760 57,490 32,302 37,930 3,997 26,041 184,859 64,561 37,588 44,550 4,627 33,533 188,212 65,414 38,530 45,323 4,653 34,291 188,863 65,427 38,678 45,633 4,656 34,469 191,041 66,800 38,757 46,228 4,656 34,600 193,197 67,158 38,836 46,535 4,690 35,977 194,847 67,898 39,336 46,903 4,686 36,024 196,007 68,030 39,345 47,517 4,710 36,405 196,665 68,003 39,479 47,809 4,712 36,662 197,084 68,256 39,281 48,255 4,758 36,535 199,226 69,068 39,556 48,892 4,780 36,931 Net change (during period) 28 Total 77,341 81,518 5,099 3,087 4,871 6,457 5,386 5,563 3,393 7,725 6,783 By major holder Commercial banks Finance companies 2 Credit unions Retailers 3 Savings institutions Gasoline companies 39,819 9,961 13,456 2,900 11,038 167 31,638 23,969 8,583 2,126 15,225 -24 1,505 2,284 621 81 758 -150 411 1,421 522 347 525 -139 2,326 1,306 1,004 -18 451 -198 1,183 2,444 517 313 2,223 -223 1,072 3,761 621 -63 105 -109 1,444 2,264 1,035 175 699 -56 711 1,741 492 100 370 -21 1,421 5,621 752 94 -90 -73 2,437 2,303 1,074 196 748 25 By major type of credit 35 Automobile 36 Commercial banks 37 Credit unions 38 Finance companies 39 Savings institutions 27,214 16,352 3,223 4,576 3,063 33,360 8,864 1,963 18,728 3,805 2,681 339 252 1,900 190 1,019 -451 213 1,106 151 1,453 -364 408 1,269 138 3,151 144 211 2,536 262 3,641 104 252 3,299 -14 3,628 753 422 2,342 111 2,580 672 200 1,716 -9 7,466 1,156 306 6,020 -15 4,047 1,376 437 2,097 137 40 Revolving 41 Commercial banks 42 Retailers 43 Gasoline companies 44 Savings institutions 20,145 15,949 2,512 167 1,517 19,782 15,748 1,496 -24 2,562 1,042 962 73 -150 156 1,407 1,068 345 -139 134 1,311 1,400 -18 -198 128 1,103 730 279 -223 317 175 246 -59 -109 96 857 601 152 -56 161 338 135 97 -21 126 97 27 49 -73 94 597 246 173 25 152 45 Mobile home 46 Commercial banks 47 Finance companies 48 Savings institutions 1,990 -199 544 1,645 1,277 -45 -45 1,367 202 109 36 57 11 -218 166 63 -71 -84 -41 54 47 -49 -171 267 -81 -19 -38 -24 -81 -40 -88 47 -183 -70 -107 -5 -257 -15 -201 -42 -4 3 -70 63 49 Other 50 Commercial banks 51 Finance companies 52 Credit unions 53 Retailers 54 Savings institutions 27,992 7,717 4,841 10,233 388 4,813 27,099 7,071 5,286 6,620 630 7,492 1,173 95 348 368 7 354 651 13 148 310 3 178 2,178 1,373 79 595 0 131 2,156 358 79 307 34 1,377 1,650 740 500 368 -4 47 1,160 132 9 614 24 381 658 -27 134 292 2 257 419 253 -198 446 46 -127 2,142 812 275 637 22 396 29 30 31 32 33 34 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. 2. More detail for finance companies is available in the G.20 statistical release, 3. Excludes 30-day charge credit held by travel and entertainment companies, 4. All data have been revised. Consumer Installment Credit 1.56 A41 TERMS OF C O N S U M E R I N S T A L L M E N T CREDIT Percent unless noted otherwise 1986 Item 1983 1984 1985 Apr. May June July Aug. Sept. Oct. INTEREST RATES 1 2 3 4 5 6 Commercial banks' 48-month new car 2 24-month personal 120-month mobile home 2 Credit card Auto finance companies New car Used car 13.92 16.68 16.08 18.78 13.71 16.47 15.58 18.77 12.91 15.94 14.96 18.69 n.a. n.a. n.a. n.a. 11.45 14.89 13.97 18.32 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11.00 14.70 13.95 18.15 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12.58 18.74 14.62 17.85 11.98 17.59 10.55 16.67 9.49 16.56 9.35 16.06 9.31 15.83 9.29 15.56 5.40 15.23 6.12 15.17 45.9 37.9 48.3 39.7 51.5 41.4 50.6 42.5 49.4 42.5 49.5 42.7 49.9 42.8 50.4 42.9 44.5 42.5 45.3 42.2 86 92 88 92 91 94 89 96 89 97 89 97 89 97 90 97 92 98 92 97 8,787 5,033 9,333 5,691 9,915 6,089 10,402 6,281 10,521 6,393 10,608 6,611 10,748 6,614 10,756 6,569 11,162 6,763 11,340 6,746 OTHER TERMS 3 / 8 9 10 11 12 Maturity (months) New car Used car Loan-to-value ratio New car Used car Amount financed (dollars) New car Used car 1. Data for midmonth of quarter only. 2. Before 1983 the maturity for new car loans was 36 months, and for mobile home loans was 84 months. 3. At auto finance companies. NOTE. These data also appear in the Board's G.19 (421) release. For address, see inside front cover. A42 1.57 DomesticNonfinancialStatistics • February 1987 F U N D S R A I S E D IN U . S . CREDIT M A R K E T S Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1980 1981 1982 1985r 1984r 1983r Transaction category, sector 1986 1984 1983 HI H2 H2 HI H2 HI' Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors . . . . By sector and instrument ? U.S. government 3 Treasury securities 4 Agency issues and mortgages 5 Private domestic nonfinancial sectors 6 Debt capital instruments Tax-exempt obligations 7 8 9 in Home mortgages Multifamily residential n Commercial i? 13 Farm 14 n 16 17 18 Other debt instruments Consumer credit Bank loans n.e.c Open market paper Other 19 ?0 ?1 ?? r\ 24 By borrowing sector State and local governments Nonfarm noncorporate Corporate 25 Foreign net borrowing in United States 76 ?7 Bank loans n.e.c 28 Open market paper 29 U.S. government loans 30 Total domestic plus foreign 344.9 375.8 387.4 548.8 756.3 869.3 592.2 727.8 784.8 732.6 1,006.1 705.4 79.2 79.8 -.6 87.4 87.8 -.5 161.3 162.1 -.9 186.6 186.7 -.1 198.8 199.0 -.2 223.6 223.7 -.1 156.1 156.3 -.1 181.3 181.5 -.2 216.3 216.4 -.1 201.8 201.9 -.1 245.5 245.5 -.1 211.3 211.4 -.1 265.7 189.1 30.3 27.7 131.2 94.2 7.6 19.2 10.2 288.5 155.5 23.4 22.8 109.3 72.2 4.8 22.2 10.0 226.2 148.3 44.2 18.7 85.4 50.5 5.4 25.2 4.2 362.2 252.8 53.7 16.0 183.0 117.1 14.1 49.0 2.8 557.5 314.0 50.4 46.1 217.5 129.9 25.1 63.3 -.8 645.7 461.7 152.4 73.9 235.4 150.3 29.2 62.4 -6.4 436.0 278.0 51.8 11.5 214.7 135.1 20.4 55.3 3.9 546.5 298.4 42.8 31.2 224.5 135.2 27.5 62.9 -1.1 568.5 329.6 58.0 61.1 210.5 124.7 22.7 63.7 -.5 530.8 355.4 67.5 72.7 215.2 133.1 24.6 60.3 -2.8 760.6 568.0 237.3 75.1 255.7 167.5 33.7 64.4 -10.0 494.1 384.5 19.9 129.1 235.4 153.1 29.0 60.6 -7.3 76.6 4.5 37.8 4.0 30.3 133.0 22.6 57.0 14.7 38.7 77.9 17.7 52.9 -6.1 13.4 109.5 56.8 25.8 -.8 27.7 243.5 95.0 80.1 21.7 46.6 184.0 96.6 41.3 14.6 31.4 158.0 75.1 42.1 4.3 36.5 248.1 98.7 91.9 24.8 32.7 238.9 91.3 68.4 18.7 60.5 175.4 97.3 24.9 12.3 40.9 192.6 95.9 57.7 16.9 22.0 109.7 75.3 22.1 -15.7 28.1 265.7 17.2 120.0 15.2 31.8 81.5 288.5 6.8 121.4 16.6 38.5 105.2 226.2 21.5 88.4 6.8 40.2 69.2 362.2 34.0 188.0 4.3 76.6 59.3 557.5 27.4 239.5 .1 97.1 193.4 645.7 107.8 295.0 -13.6 92.8 163.7 436.0 33.7 223.4 6.7 91.7 80.6 546.5 25.2 232.8 -.4 101.4 187.4 568.5 29.6 246.2 .5 92.7 199.5 530.8 56.8 253.6 -5.9 85.6 140.7 760.6 158.7 336.4 -21.3 99.9 186.8 494.1 40.7 228.5 -15.' 95.2 144.8 23.8 .8 11.8 2.4 8.8 23.5 5.4 3.0 3.9 11.1 16.0 6.7 -5.5 1.9 13.0 17.4 3.1 3.6 6.5 4.1 6.1 1.3 -6.6 6.2 5.3 1.7 4.0 -2.8 6.2 -5.7 15.5 2.3 -3.4 6.0 10.7 35.5 1.1 -2.2 18.0 18.7 -23.3 1.5 -11.1 -5.6 -8.1 -4.1 5.5 -6.1 4.2 -7.8 7.5 2.6 .4 8.2 -3.6 24.3 7.1 1.4 20.6 -4.8 368.7 399.3 403.4 566.2 762.4 871.0 607.7 763.3 761.5 728.4 1,013.5 729.7 Financial sectors 31 Total net borrowing by financial sectors By instrument 37 U.S. government related 31 Sponsored credit agency securities 34 Mortgage pool securities 36 Private financial sectors 37 Corporate bonds 38 Mortgages 19 Bank loans n.e.c 40 Open market paper 41 Loans from Federal Home Loan Banks By sector 4? Sponsored credit agencies 43 44 Private financial sectors Commercial banks 45 46 Bank affiliates 47 Savings and loan associations 48 Finance companies 49 REITs 65.4 101.9 90.1 94.0 139.0 186.9 123.2 134.2 143.8 154.8 218.9 189.0 44.8 24.4 19.2 1.2 20.6 1.6 47.4 30.5 15.0 1.9 54.5 4.4 64.9 14.9 49.5 .4 25.2 12.5 .1 1.9 9.9 .8 67.8 1.4 66.4 74.9 30.4 44.4 68.8 8.1 60.7 69.8 29.1 40.7 80.0 31.8 48.2 92.9 25.3 67.6 26.2 12.1 54.3 13.1 2.2 40.9 -1.8 64.4 17.3 .4 -.1 31.1 15.7 63.8 29.3 .4 1.4 17.0 15.7 61.9 35.3 -.1 21.3 -7.0 64.1 23.3 .4 .7 24.1 15.7 101.5 20.6 79.9 1.1 85.3 36.5 .1 2.6 32.0 14.2 .9 13.9 11.7 110.2 15.9 92.1 2.2 108.8 37.7 .1 4.2 50.1 16.7 129.5 4.4 124.3 .8 59.6 28.7 .6 2.4 14.4 13.5 1.4 66.4 26.2 5.0 12.1 -2.1 11.4 -.2 30.4 44.4 64.1 7.3 15.6 22.7 17.8 .8 21.7 79.9 85.3 -4.9 14.5 22.3 52.8 .5 8.1 60.7 54.3 17.1 14.9 4.6 18.0 -.3 29.1 40.7 64.4 15.4 23.7 20.2 4.3 .8 31.8 48.2 63.8 -.9 7.5 25.1 31.3 .8 25.3 67.6 61.9 -9.2 13.7 12.1 44.8 .5 18.1 92.1 108.8 -.6 15.3 32.6 60.9 .5 5.2 124.3 59.6 -6.7 1.7 21.3 42.4 .9 * * -1.0 12.9 7.1 1.2 32.7 16.2 25.6 19.2 20.6 8.3 6.7 7.4 -1.3 -.5 32.4 15.0 54.5 11.6 9.2 15.5 18.5 -.2 * 15.3 49.5 25.2 11.7 6.8 2.5 4.3 * * * All se :tors 50 Total net borrowing 434.1 501.3 493.5 660.2 901.4 1057.8 730.8 897.5 905.3 833.3 1,232.4 918.7 51 52 53 54 55 56 57 58 122.9 30.3 30.1 131.1 4.5 48.5 19.3 47.5 133.0 23.4 32.6 109.2 22.6 61.2 51.3 68.0 225.9 44.2 37.8 85.4 17.7 49.3 5.7 27.6 254.4 53.7 31.2 183.0 56.8 29.3 26.9 24.8 273.8 50.4 70.7 217.8 95.0 74.2 52.0 67.6 324.2 152.4 114.4 235.4 96.6 41.0 52.8 41.0 225.0 51.8 26.8 214.6 75.1 40.8 51.2 45.4 251.2 42.8 49.6 224.8 98.7 89.6 73.8 67.1 296.4 58.0 91.9 210.8 91.3 58.8 30.1 68.1 294.8 67.5 113.5 215.2 97.3 19.8 30.4 44.8 353.5 237.3 115.3 255.7 95.9 62.3 75.2 37.3 340.0 19.9 164.9 236.0 75.3 25.9 19.3 37.5 U.S. government securities State and local obligations Corporate and foreign bonds Consumer credit Open market paper Other loans External corporate equity funds raised in United States 59 Total new share issues 21.2 -3.3 33.6 67.0 -31.1 37.5 52.1 -40.1 -22.2 33.3 41.6 153.4 60 61 62 63 64 4.5 16.8 12.9 1.8 2.1 6.0 -9.3 -11.5 1.9 .3 16.8 16.8 11.4 4.0 1.5 32.1 34.9 28.3 2.7 3.9 38.0 -69.1 -77.0 6.7 1.2 103.4 -65.9 -81.6 11.7 4.0 28.7 23.4 18.4 2.9 2.1 39.3 -79.4 -84.5 5.9 -.7 36.6 -58.8 -69.4 7.6 3.0 93.6 -60.4 -75.7 11.0 4.3 113.1 -71.5 -87.5 12.4 3.6 203.9 -50.4 -67.5 8.6 8.5 Mutual funds All other Nonfinancial corporations Financial corporations Foreign shares purchased in United States Flow of Funds 1.58 A43 DIRECT A N D INDIRECT S O U R C E S OF F U N D S TO CREDIT MARKETS Billions of dollars, except as noted; half-yearly data are at seasonally adjusted annual rates. 1983' Transaction category, or sector 1980 1981 1982 1983 1984 H2 I Total funds advanced in credit markets to domestic nonfinancial sectors 1984' 1985' 1986 1985r HI H2 HI H2 HI' 344.9 375.8 387.4 548.8 756.3 869.3 592.2 727.8 784.8 732.6 1,006.1 705.4 By public agencies and foreign Total net advances U.S. government securities Residential mortgages FHLB advances to savings and loans Other loans and securities 94.9 15.8 31.7 7.1 40.2 104.4 17.1 23.5 16.2 47.7 115.4 22.7 61.0 .8 30.8 115.3 27.6 76.1 -7.0 18.6 154.6 36.0 56.5 15.7 46.5 203.3 47.2 94.6 14.2 47.3 107.9 20.0 71.5 -1.8 18.2 132.5 26.8 52.7 15.7 37.5 176.6 45.2 60.2 15.7 55.5 201.8 53.1 85.6 11.7 51.4 204.9 41.3 103.7 16.7 43.2 269.9 81.5 121.0 13.5 53.9 7 8 9 10 Total advanced, by sector U.S. government Sponsored credit agencies Monetary authorities Foreign 23.7 45.6 4.5 21.1 24.0 48.2 9.2 23.0 15.9 65.5 9.8 24.1 9.7 69.8 10.9 24.9 17.4 73.3 8.4 55.5 17.8 101.5 21.6 62.4 9.7 70.5 12.4 15.3 9.0 74.0 8.8 40.7 25.7 72.5 8.0 70.4 28.8 98.2 23.7 51.0 6.7 104.9 19.5 73.8 14.6 127.3 9.8 118.2 11 12 Agency and foreign borrowing not in line 1 Sponsored credit agencies and mortgage pools Foreign 44.8 23.8 47.4 23.5 64.9 16.0 67.8 17.4 74.9 6.1 101.5 1.7 68.8 15.5 69.8 35.5 80.0 -23.3 92.9 -4.1 110.2 7.5 129.5 24.3 Private domestic funds advanced 13 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 318.7 107.1 30.3 20.3 70.0 98.1 7.1 342.3 115.9 23.4 19.8 53.5 145.9 16.2 352.9 203.1 44.2 14.8 -5.3 96.9 .8 518.7 226.9 53.7 14.6 55.0 161.5 -7.0 682.7 237.8 50.4 32.6 98.5 279.1 15.7 769.2 277.0 152.4 41.2 84.8 228.1 14.2 568.6 205.0 51.8 9.1 84.0 217.0 -1.8 700.5 224.4 42.8 25.6 109.9 313.6 15.7 664.9 251.2 58.0 39.6 87.0 244.7 15.7 619.6 241.7 67.5 49.7 72.0 200.4 11.7 918.8 312.2 237.3 32.7 97.5 255.9 16.7 589.3 258.5 19.9 93.5 61.1 169.8 13.5 Private financial intermediation 20 Credit market funds advanced by private financial institutions 71 Commercial banking ??. Savings institutions 23 Insurance and pension funds 24 Other finance 286.2 107.6 51.3 93.2 34.0 320.2 106.5 26.2 93.5 94.0 261.9 110.2 21.8 86.2 43.7 391.9 144.3 135.6 97.8 14.1 550.5 168.9 149.2 124.0 108.3 554.4 186.3 83.4 141.0 143.6 449.3 168.8 143.9 105.7 30.9 581.8 184.2 173.5 144.5 79.5 519.1 153.5 124.9 103.5 137.2 471.3 133.8 63.0 121.8 152.7 637.4 238.8 103.9 160.1 134.5 573.0 106.9 102.0 130.9 233.2 2 3 4 5 6 2.6 27 Sources of funds Private domestic deposits and RPs Credit market borrowing 286.2 170.8 20.6 320.2 214.5 54.5 261.9 195.2 25.2 391.9 212.2 26.2 550.5 317.6 64.1 554.4 204.8 85.3 449.3 235.5 54.3 581.8 300.2 64.4 519.1 334.9 63.8 471.3 203.0 61.9 637.4 206.6 108.8 573.0 222.9 59.6 2.8 29 30 31 32 Other sources Foreign funds Treasury balances Insurance and pension reserves Other, net 94.8 -25.1 -2.6 88.9 33.6 51.2 -23.7 -1.1 89.6 -13.6 41.5 -31.4 6.1 92.5 -25.7 153.4 16.3 -5.3 110.6 31.8 168.8 5.4 4.0 112.5 46.8 264.2 17.7 10.3 107.0 129.2 159.5 46.2 -22.4 122.4 13.3 217.2 3.0 -.1 146.5 67.8 120.4 7.8 8.2 78.5 25.9 206.5 11.2 14.4 97.4 83.5 322.0 24.3 6.1 116.6 175.0 290.6 .2 -5.5 109.2 186.7 53.1 34.2 7.0 -11.7 -4.6 28.2 76.6 37.1 11.1 -4.0 1.4 31.0 116.3 69.9 25.0 2.0 -1.3 20.6 153.0 95.5 39.0 -12.7 15.1 16.2 196.4 132.9 29.6 -3.4 8.9 28.3 300.2 150.9 59.2 13.2 51.8 25.1 173.6 87.3 37.7 -4.5 31.9 21.2 183.1 142.2 25.0 -26.8 15.7 26.9 209.6 123.6 34.3 19.9 2.2 29.7 210.2 130.8 20.5 25.4 7.3 26.3 390.2 171.0 98.0 1.0 96.3 24.0 75.9 50.5 -19.4 34.9 -14.7 24.6 39 Deposits and currency 40 Currency 41 Checkable deposits 42 Small time and savings accounts Money market fund shares 43 44 Large time deposits 45 Security RPs 46 Deposits in foreign countries 183.9 10.3 6.5 82.3 29.2 45.9 6.8 2.8 222.4 9.5 18.5 47.3 107.5 36.0 5.2 -1.7 204.5 9.7 18.6 135.7 24.7 5.2 11.1 -.4 229.7 14.3 28.8 215.3 -44.1 -6.3 18.5 3.1 321.1 8.6 27.8 150.7 47.2 84.9 7.0 -5.1 215.1 12.4 42.0 137.5 -2.2 14.0 13.4 -2.1 248.7 17.5 16.9 147.8 -4.2 53.2 21.8 -4.3 311.3 13.1 29.4 136.4 30.2 93.4 10.8 -2.0 330.9 4.1 26.3 164.9 64.2 76.5 3.1 -8.2 215.9 15.8 18.2 167.1 4.2 -.8 14.3 -2.9 214.3 9.0 65.8 108.0 -8.6 28.9 12.5 -1.3 240.0 10.9 84.9 117.5 29.0 3.5 -11.9 6.2 47 Total of credit market instruments, deposits and currency 237.0 299.0 320.7 382.7 517.4 515.3 422.3 494.4 540.5 426.0 604.5 315.9 48 49 50 Public holdings as percent of total Private financial intermediation (in percent) Total foreign funds 25.7 89.8 -4.0 26.2 93.6 -.7 28.6 74.2 -7.3 20.4 75.5 41.3 20.3 80.6 60.9 23.3 72.1 80.1 17.8 79.0 61.4 17.4 83.1 43.7 23.2 78.1 78.2 27.7 76.1 62.2 20.2 69.4 98.1 37.0 97.2 118.4 MEMO: Corporate equities not included above 51 Total net issues 57 Mutual fund shares 53 Other equities 54 Acquisitions by financial institutions 55 Other net purchases 21.2 4.5 16.8 22.2 -1.0 -3.3 6.0 -9.3 19.9 -23.2 33.6 16.8 16.8 27.6 6.0 67.0 32.1 34.9 46.8 20.2 -31.1 38.0 -69.1 8.2 -39.4 37.5 103.4 -65.9 33.3 4.1 52.1 28.7 23.4 35.6 16.5 -40.1 39.3 -79.4 -4.1 -36.0 -22.2 36.6 -58.8 20.6 -42.7 33.3 93.6 -60.4 54.0 -20.7 41.6 113.1 -71.5 12.6 29.0 153.4 203.9 -50.4 34.8 118.7 75 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 38 Other NOTES BY LINE NUMBER. 1. 2. 6. 11. 13. 18. 26. 27. 29. 30. Line 1 of table 1.57. Sum of lines 3-6 or 7-10. Includes farm and commercial mortgages. Credit market funds raised by federally sponsored credit agencies, and net issues of federally related mortgage pool securities. 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. Includes farm and commercial mortgages. Line 39 less lines 40 and 46. Excludes equity issues and investment company shares. Includes line 19. 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. 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. A44 2.10 Domestic Nonfinancial Statistics • February 1987 N O N F I N A N C I A L B U S I N E S S ACTIVITY Selected Measures' 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1986 Measure 1983 1984 1985 Mar. Apr. May June July Aug. Sept/ Oct/ Nov. 1 Industrial production 109.2 121.8 124.5 123.6 124.7 124.2 124.2 124.9 125.1 125.1 125.2 125.9 Market groupings Products, total Final, total Consumer goods Equipment Intermediate Materials 113.9 114.7 109.3 121.7 111.2 102.8 127.1 127.8 118.2 140.5 124.9 114.6 131.7 132.0 120.7 147.1 130.6 114.7 131.2 130.6 121.8 142.3 133.3 113.3 132.7 132.1 124.5 142.3 134.5 113.8 132.4 131.6 124.3 141.2 135.1 113.0 132.4 131.1 124.4 140.0 137.0 113.1 133.2 132.0 125.2 141.0 137.3 113.6 133.8' 132.6r 125.1 142.5r 137.8 113.2 133.6 132.5 125.7 142.8 137.2 113.5 133.8 132.7 124.7 143.3 137.8 113.3 134.6 133.5 125.6 144.1 138.4 113.9 110.2 123.9 127.1 127.2 128.7 128.2 128.3 129.2 129.5 129.5 129.6 130.5 79.9 78.2 2 3 4 5 6 7 Industry groupings 8 Manufacturing Capacity utilization (percent) 2 9 Manufacturing 10 Industrial materials industries 11 Construction contracts (1977 = 100)3 r 74.0 75.3 80.8 82.3 80.3 80.2 79.1 78.5 79.9 78.7 79.4 78.1 79.3 78.0 79.7 78.3 79.7 77.9r 79.6 78.0 79.5 77.8 138.0 150.0 161.0 149.0 176.0 160.0 161.0 163.0 168.0 158.0 170.0 171.0 12 13 14 15 16 17 18 19 20 21 Nonagricultural employment, total 4 Goods-producing, total Manufacturing, total Manufacturing, production-worker . . . Service-producing Personal income, total Wages and salary disbursements Manufacturing Disposable personal income 5 Retail sales (1977 = 100)6 109.4 95.9 93.6 88.6 115.0 176.6 168.7 149.0 176.0 162.0 114.5 101.6 98.6 94.1 120.0 193.5 184.8 164.6 193.6 179.0 118.5 102.9 98.7 93.5 125.0 206.2 197.8 172.5 205.0 190.6 120.6 102.5 97.8 92.4 128.2 214.3 206.4 176.4 213.7 193.7 121.0 102.9 97.8 92.4 128.6 216.9 206.8 175.8 216.5 195.4 121.2 102.6 97.5 92.1 129.0 216.6 207.1 176.1 215.9 197.0 121.1 102.1 97.2 91.8 129.0 216.6 207.6 175.4 215.5 197.5 121.4 102.2 97.1 91.7 129.4 217.2' 208.5 175.5 215.8r 198.9 121.6 102.2 97.1 91.7 129.7 217.6'' 209.6 176.6 215.9' 201.7 121.9 102.1 97.0 91.7 130.2 218.2 210.1 176.5 216.4 213.0 122.3 102.2 97.2 91.8 130.7 219.0 211.5 179.0 216.9 201.9 122.6 102.3 97.3 92.2 131.0 219.7 212.6 178.0 217.2 202.9 22 23 Prices 7 Consumer Producer finished goods 298.4 285.2 311.1 291.1 322.2 293.7 326.0 288.0 325.3 287.2 326.3 288.9 327.9 289.3 328.0 287.6r 328.6 288.3 330.2 287.5 330.5 290.5 330.8 290.7 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 1984 in t h e FEDERAL RESERVE BULLETIN, 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 A45 LABOR FORCE, E M P L O Y M E N T , 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. 1986 Category 1983 1984 1985 Apr. May June July Aug. Sept. Oct.' Nov. HOUSEHOLD SURVEY DATA 1 Noninstitutiona! population1 176,414 178,602 180,440 182,387 182,545 182,732 182,906 183,074 183,261 183,450 183,628 2 Labor force (including Armed Forces) 1 3 Civilian labor force Employment Nonagricultural industries 2 4 5 Agriculture Unemployment 6 Number 7 Rate (percent of civilian labor force) . . . 8 Not in labor force 113,749 111,550 115,763 113,544 117,695 115,461 119,473 117,234 119,898 117,664 120,345 118,116 120,296 118,072 120,428 118,182 120,484 118,220 120,746 118,482 120,919 118,654 97,450 3,383 101,685 3,321 103,971 3,179 105,670 3,222 105,950 3,160 106,508 3,165 106,769 3,112 107,107 3,048 106,770 3,121 107,091 3,149 107,146 3,225 10,717 9.6 62,665 8,539 7.5 62,839 8,312 7.2 62,745 8,342 7.1 62,914 8,554 7.3 62,647 8,443 7.1 62,387 8,190 6.9 62,610 8,027 6.8 62,646 8,329 7.0 62,777 8,242 7.0 62,704 8,283 7.0 62,709 90,196 94,461 97,698 99,783 99,918 99,843 100,105 100,283 100,560" 100,820 101,069 18,434 952 3,948 4,954 20,881 5,468 19,694 15,869 19,412 974 4,345 5,171 22,134 5,682 20,761 15,984 19,426 969 4,661 5,300 23,195 5,924 21,929 16,295 19,245 821 4,972 5,266 23,715 6,228 22,825 16,711 19,201 790 4,974 5,265 23,783 6,261 22,924 16,720 19,135 772 4,947 5,167 23,773 6,295 23,072 16,682 19,121 768 4,980 5,288 23,841 6,334 23,176 16,597 19,123 753 5,012 5,255 23,893 6,364 23,255 16,628 19,105' 743' 5,010' 5,316' 23,924' 6,388' 23,300' 16,774' 19,128 747 4,997 5,318 24,003 6,407 23,361 16,859 19,163 741 5,008 5,346 24,022 6,436 23,481 16,872 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 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). A46 2.12 Domestic Nonfinancial Statistics • February 1987 OUTPUT, CAPACITY, A N D CAPACITY UTILIZATION Seasonally adjusted 1985 1985 1986 Series Q4 Q1 Q2 Q3 Output (1977 = 100) 1 Total industry 124.7 125.0 124.3 107.1 112.8 105.4 110.5 100.1 109.5 127.4 128.4 128.3 5 Primary processing 110.3 137.8 111.5 138.5 111.1 138.8 111.9 140.1 6 Advanced processing 114.3 114.5 113.4 7 Materials 121.1 82.6 113.9 114.0 124.8 113.4 120.9 79.0 115.7 116.2 128.8 115.3 118.8 75.2 116.8 117.0 130.2 115.4 102.6 102.2 100.8 3 Utilities 8 Durable goods 9 Metal materials 10 Nondurable goods 11 Textile, paper, and chemical 12 Paper 13 Energy materials Chemical 14 Previous cycle 1 Latest cycle 2 High Q2 Q3 Q1 Q4 Q2 Q3' Utilization rate (percent) 155.4 156.3 157.1 157.9 80.2 80.0 79.2 79.2 132.5 135.7 132.1 136.3 132.1 136.9 137.5 149.0 80.9 83.2 79.6 81.1 75.6 79.5 73.0 79.4 159.5 160.5 161.4 162.3 79.9 80.0 79.5 79.7 133.1 175.3 133.6 176.7 134.0 177.9 134.5 179.2 82.8 78.6 83.5 78.4 82.9 78.0 83.2 78.0 113.4 143.6 144.2 144.7 145.3 79.6 79.4 78.3 78.1 118.7 72.6 118.9 119.6 159.0 115.5 138.6 138.0 136.5 143.6 159.9 115.0 139.0 138.4 137.3 144.0 160.7 114.5 139.5 138.8 138.1 144.3 161.5 114.0 139.9 139.2 76.2 71.5 82.2 82.7 91.4 79.0 75.6 68.7 83.2 83.9 93.8 80.1 73.9 65.6 r 83.8 84.3 94.2r 80.CK 73.6 64.1 85.6 86.5 97.3 81.3 99.4 120.9 121.1 121.3 121.4 84.9 84.4 82.9 81.2 Apr. May 96.6 110.6 1985 High Q1 Capacity (percent of 1977 output) 2 Mining 4 Manufacturing Q4 Aug. Low Low June July Aug/ Sept. Oct.' Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 80.6 79.0 79.5 79.1 79.0 77.2 79.2 79.0 79.0 79.3 16 Mining 92.8 95.6 87.8 82.9 95.2 88.5 76.9 78.0 81.6 81.5 77.9 80.1 76.4 80.0 75.5 79.3 74.9 79.2 73.5 79.9 73.1 78.8 72.4 79.7 72.0 80.4 71.5 80.6 17 Utilities 18 Manufacturing 19 Primary processing . . . 87.7 69.9 86.5 68.0 80.3 79.1 79.9 79.4 79.3 79.7 79.8 79.6 79.5 79.9 91.9 86.0 68.3 71.1 89.1 85.1 65.1 69.5 82.5 79.3 82.4 77.4 83.2 78.5 82.9 78.0 82.7 77.7 82.9 78.4 83.2 78.0 83.6 77.7 83.5 77.7 83.9 78.1 20 Advanced processing . 92.0 70.5 89.1 68.4 79.8 78.5 78.7 78.1 78.0 78.3 77.9 78.0 77.8 78.2 21 Materials 91.8 99.2 64.4 67.1 89.8 93.6 60.9 45.7 76.8 70.2 74.5 66.0 74.9 68.3 73.7 65.2 73.2 63.2 73.7 63.8 73.5 63.8 73.5 64.7 73.5 65.1 74.0 65.9 22 Durable goods 23 Metal materials 24 Nondurable goods . . . . 25 Textile, paper, and chemical 26 Paper 27 Chemical 28 Energy materials 91.1 66.7 88.1 70.6 81.6 82.5 83.6 83.5 84.3 85.0 85.5 86.1 85.9 86.3 92.8 98.4 92.5 64.8 70.6 64.4 89.4 97.3 87.9 68.6 79.9 63.3 81.7 89.7 78.7 83.4 93.0 79.4 83.6 93.6 79.4 84.2 93.1 80.2 85.1 95.9 80.4 85.6 97.8 80.2 86.5 97.9 81.2 87.4 96.1 82.6 86.9 95.9 82.0 87.4 94.6 86.9 94.0 82.2 84.8 83.7 82.8 82.9 83.1 82.3 80.6 80.6 79.8 79.8 1. Monthly high 1973; monthly low 1975. 2. Monthly highs 1978 through 1980; monthly lows 1982. NOTE. These data also appear in the Board's G.3 (402) release. For address, see inside front cover. Selected Measures 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value A47 • Monthly data are seasonally adjusted Grouping 1977 proportion 1985 avg. 1985 Nov. 1986 Dec. Jan. Feb. Mar. Apr. May June July Aug/ Sept. Oct.'' Nov/ Index (1977 = 100) MAJOR MARKET 100.00 123.8 124.8 125.6 126.2 125.3 123.6 124.7 124.2 124.2 124.9 125.1 125.1 125.2 125.9 2 Products 3 Final products Consumer goods 4 5 Equipment 57.72 44.77 25.52 19.25 130.8 131.1 120.2 145.4 132.8 133.1 122.7 147.0 133.0 133.2 123.3 146.4 134.0 133.9 123.8 147.5 132.9 132.8 123.3 145.4 131.2 130.6 121.8 142.3 132.7 132.1 124.5 142.3 132.4 131.6 124.3 141.2 132.4 131.1 124.4 140.0 133.2 132.0 125.2 141.0 133.8 132.6 125.1 142.5 133.6 132.5 124.7 142.8 133.8 132.7 124.7 143.3 134.6 133.5 125.6 144.1 Intermediate products 6 7 Materials 12.94 42.28 130.0 114.2 131.8 113.9 132.0 115.4 134.2 115.5 133.4 114.8 133.3 113.3 134.5 113.8 135.1 113.0 137.0 113.1 137.3 113.6 137.8 113.2 137.2 113.5 137.8 113.3 138.4 113.9 6.89 2.98 1.79 1.16 .63 1.19 3.91 1.24 1.19 .96 1.71 112.9 114.0 112.0 98.9 136.3 116.9 112.2 131.0 131.8 119.8 94.3 115.4 115.6 114.1 95.6 148.6 117.7 115.3 138.8 141.3 124.6 93.1 115.3 113.9 110.4 94.6 139.8 119.0 116.4 140.4 143.2 123.3 95.1 116.0 116.2 118.2 105.5 141.7 113.3 115.8 133.2 135.7 125.1 98.0 116.6 117.6 119.4 107.1 142.1 114.9 115.8 135.1 137.6 124.4 97.0 112.4 110.4 106.3 93.7 129.6 116.6 113.9 133.7 136.0 121.2 95.5 115.9 116.4 115.1 100.8 141.5 118.4 115.5 138.8 140.6 121.8 95.0 113.8 113.2 110.3 94.8 139.1 117.4 114.3 133.9 135.8 123.3 95.0 114.3 113.7 112.2 99.3 136.1 116.1 114.8 137.5 139.1 122.5 94.1 116.3 116.4 114.5 95.3 150.3 119.1 116.3 138.9 141.6 126.6 94.1 115.7 114.5 110.4 87.8 152.4 120.7 116.7 139.4 142.5 125.8 95.1 117.4 117.0 116.8 96.2 155.1 117.4 117.7 141.2 143.5 126.2 96.0 115.9 112.1 107.7 91.9 137.1 118.6 118.9 141.9 143.5 128.1 97.1 116.8 112.4 107.5 92.3 19 Nondurable consumer goods 20 Consumer staples 21 Consumer foods and tobacco 22 Nonfood staples 23 Consumer chemical products .. 24 Consumer paper products 25 Consumer energy 26 Consumer fuel 27 Residential utilities 18.63 15.29 7.80 7.49 2.75 1.88 2.86 1.44 1.42 122.9 129.0 128.8 129.2 149.1 141.9 101.8 88.6 115.3 125.3 131.3 130.5 132.1 154.8 143.2 103.1 89.8 116.6 126.3 132.5 131.6 133.4 153.6 146.5 105.4 91.7 119.4 126.6 132.8 130.1 135.6 156.3 148.9 107.0 94.1 120.1 125.8 132.3 131.1 133.5 158.3 143.4 103.2 92.0 114.5 125.3 131.6 130.3 133.0 156.4 143.1 104.0 92.2 116.1 127.7 134.3 131.9 136.7 163.1 145.1 106.0 93.7 118.4 128.1 135.0 132.4 137.7 162.4 148.6 106.8 96.4 117.5 128.1 135.1 133.3 137.0 163.6 147.1 104.8 91.8 118.1 128.4 135.3 132.2 138.5 166.4 146.4 106.6 91.2 122.3 128.6 135.5 133.2 137.9 163.4 147.7 107.1 94.9 119.6 127.4 134.3 132.2 136.4 161.1 145.7 106.7 92.5 121.2 127.9 134.7 131.9 137.7 161.7 149.3 106.9 92.2 128.8 135.6 Equipment 28 Business and defense equipment 29 Business equipment 30 Construction, mining, and farm .. 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 3.67 146.0 139.6 64.3 110.7 83.5 217.9 105.4 170.6 148.2 140.8 65.1 110.5 84.1 218.6 109.7 177.2 147.8 140.0 66.3 111.6 85.4 217.0 105.5 178.5 149.1 141.5 65.3 113.0 82.9 217.8 112.7 178.7 147.8 140.5 63.0 112.9 82.3 216.8 111.7 176.3 145.5 137.7 59.5 112.4 82.0 214.3 104.3 176.2 146.6 138.6 58.6 111.9 83.0 213.4 112.1 178.0 146.0 137.9 60.9 111.9 82.9 212.9 107.3 178.0 145.1 136.6 61.9 111.7 83.5 208.2 108.8 178.4 146.4 137.9 60.6 112.6 81.7 214.5 103.9 179.5 147.8 139.3 58.3 113.3 81.7 217.5 106.9 181.0 148.1 139.4 58.1 113.0 80.3 215.1 113.8 182.0 148.4 139.4 57.8 113.2 80.4 215.7 112.4 183.6 149.1 140.1 5.95 6.99 5.67 1.31 118.3 140.0 143.9 122.9 120.5 141.5 145.3 125.4 119.8 142.4 146.2 126.2 124.0 142.9 147.2 124.4 122.6 142.6 146.7 124.9 122.6 142.5 146.4 125.6 123.6 143.8 148.0 125.8 123.5 145.0 148.3 130.7 124.1 147.9 151.6 131.9 124.0 148.6 153.3 128.3 125.4 148.4 152.5 130.6 124.6 147.8 152.2 129.0 125.0 148.6 152.7 131.1 125.7 20.50 4.92 5.94 9.64 4.64 121.4 100.3 158.0 109.7 84.8 121.2 100.7 154.0 111.4 87.8 121.9 101.1 154.1 112.8 87.9 122.2 103.5 153.8 112.2 85.2 121.3 103.2 153.0 111.0 83.0 119.3 99.9 153.7 108.0 79.6 120.2 99.3 154.8 109.4 82.9 118.4 96.4 152.3 108.8 78.9 117.8 96.3 151.8 107.9 76.7 118.8 96.7 154.3 108.2 77.4 118.8 95.2 155.6 108.1 76.9 118.8 95.2 154.8 108.7 78.2 119.1 96.0 154.3 109.3 78.7 120.0 97.3 155.1 110.0 1 Total index 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 15 Appliances, A/C and TV 16 Appliances and TV 17 Carpeting and furniture 18 Miscellaneous home goods Intermediate products 36 Construction supplies 37 Business supplies 38 General business supplies 39 Commercial energy products Materials 40 Durable goods materials 41 Durable consumer parts 42 Equipment parts 43 Durable materials n.e.c 44 Basic metal materials 119.8 120.2 143.8 138.3 113.5 81.0 216.8 113.1 184.4 45 Nondurable goods materials 46 Textile, paper, and chemical materials 47 Textile materials 48 Pulp and paper materials 49 Chemical materials 50 Miscellaneous nondurable materials 10.09 112.2 113.3 114.9 116.2 116.1 114.8 116.5 116.5 117.7 118.9 119.7 120.6 120.4 121.2 7.53 1.52 1.55 4.46 2.57 112.2 98.7 124.1 112.7 112.1 113.4 106.1 123.6 112.4 112.8 115.0 103.8 129.0 114.0 114.4 116.5 104.1 129.7 116.2 115.4 116.5 107.5 128.8 115.4 115.0 115.5 105.7 128.0 114.5 112.8 115.9 106.7 129.0 114.5 118.2 116.9 108.4 128.6 115.7 115.3 118.2 109.5 132.7 116.1 116.4 119.0 111.2 135.6 115.9 118.3 120.5 113.4 136.0 117.5 117.2 121.8 116.4 133.7 119.6 117.1 121.3 116.0 133.7 118.8 117.7 122.1 51 Energy materials 52 Primary energy 53 Converted fuel materials 11.69 7.57 4.12 103.4 107.2 96.4 101.8 106.5 93.3 104.5 108.1 97.9 103.0 106.9 95.8 102.1 106.7 93.6 101.4 107.4 90.5 100.4 106.2 89.7 100.5 106.7 89.2 100.8 106.5 90.4 99.9 104.8 90.9 97.9 103.7 87.3 97.9 103.1 88.3 97.0 101.6 88.6 97.0 A48 2.13 Domestic Nonfinancial Statistics • February 1987 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued Grouping SIC code 1977 proportion 1986 1985 avg. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug/ Sept. Oct.? Nov. Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities Mining 2 3 Utilities 4 Manufacturing Nondurable 5 6 Durable 15.79 9.83 5.96 84.21 35.11 49.10 110.0 108.8 111.9 126.4 125.1 127.3 108.8 106.9 111.9 127.8 127.2 128.2 110.2 107.4 114.8 128.2 127.5 128.7 109.8 108.1 112.5 129.4 129.3 129.5 106.8 105.1 109.7 128.7 128.7 128.7 105.4 103.0 109.3 127.2 127.7 126.8 104.2 101.0 109.4 128.7 129.6 128.1 103.1 99.8 108.5 128.2 129.9 127.0 102.6 98.9 108.6 128.3 131.2 126.2 101.8 97.1 109.7 129.2 131.7 127.4 100.9 96.4 108.3 129.5 132.2 127.5 100.9 95.5 109.7 129.5 131.6 128.0 100.9 94.9 110.9 129.6 132.0 127.9 100.7 94.2 111.3 130.5 133.1 128.6 10 11.12 13 14 .50 1.60 7.07 .66 75.0 126.8 106.2 118.3 78.3 125.8 103.6 118.0 77.3 128.4 104.2 114.6 73.5 130.8 104.9 113.5 77.2 126.5 101.1 116.8 75.9 124.7 99.2 111.6 76.0 124.4 96.2 115.0 72.0 124.0 95.1 112.4 65.9 127.3 93.3 114.5 69.2 120.2 92.4 111.8 70.9 122.2 90.7 114.8 120.8 90.2 110.7 116.1 90.0 112.8 88.2 7 8 9 10 Mining Metal Coal Oil and gas extraction Stone and earth minerals 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 3.15 130.2 100.2 103.2 100.9 127.6 131.5 102.8 110.0 103.8 128.9 132.1 100.3 107.7 104.5 131.3 132.0 93.8 107.9 105.5 133.6 132.9 97.0 109.9 102.8 132.6 132.2 93.6 108.0 102.8 132.4 133.1 100.3 111.4 103.1 134.1 133.7 101.6 111.3 102.6 133.2 134.6 97.6 112.6 101.7 137.2 134.3 97.9 113.4 102.5 138.1 135.1 97.1 114.7 102.5 138.6 134.4 97.2 116.0 102.7 137.2 133.3 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 .53 153.9 127.1 86.8 146.9 68.5 156.8 128.2 87.6 150.1 68.7 157.6 128.1 88.9 149.4 66.4 160.9 131.7 94.7 150.2 65.4 156.7 132.0 90.1 151.1 64.8 157.8 130.2 88.6 147.8 62.7 161.6 132.8 91.3 146.8 61.5 161.9 131.5 95.7 150.1 59.5 164.0 134.2 91.8 152.2 57.9 165.4 134.1 90.6 155.5 61.9 164.6 134.4 94.0 155.5 62.0 162.9 133.9 93.3 155.1 60.9 167.0 133.5 92.0 156.4 59.8 Durable manufactures 21 Lumber and products 22 Furniture and fixtures 23 Clay, glass, stone p r o d u c t s . . . . 24 25 32 2.30 1.27 2.72 113.4 139.7 115.5 115.0 142.2 116.7 116.1 140.5 118.2 120.5 141.2 120.0 120.3 143.2 119.3 120.7 142.9 120.0 121.3 145.9 121.6 121.6 146.2 120.2 120.9 147.1 120.8 120.8 149.5 119.6 122.5 148.3 119.7 121.8 147.9 121.6 148.0 119.0 Primary metals Iron and steel Fabricated metal products . . . . Nonelectrical machinery Electrical machinery 33 331.2 34 35 36 5.33 3.49 6.46 9.54 7.15 80.5 70.4 107.3 145.3 168.4 82.9 73.9 107.6 144.8 166.9 81.7 71.6 108.2 146.2 168.7 82.4 72.2 109.2 144.9 166.1 80.3 69.5 108.5 143.9 164.8 76.3 64.3 107.6 141.7 165.2 78.1 65.6 108.2 140.8 166.8 74.8 60.2 106.5 141.3 166.0 71.4 58.3 106.6 140.4 163.2 73.6 61.7 105.7 142.6 166.8 73.4 60.8 105.9 142.6 167.2 74.0 61.0 107.2 140.9 167.2 73.8 61.3 107.9 142.0 167.6 108.0 142.8 168.9 29 Transportation equipment 30 Motor vehicles and p a r t s . . . . 31 Aerospace and miscellaneous transportation equipment 32 Instruments 33 Miscellaneous manufactures... 37 371 9.13 5.25 121.4 111.5 124.8 112.6 124.0 111.4 128.2 116.5 127.5 116.4 122.6 108.1 126.2 112.6 124.1 108.7 125.1 110.6 125.6 111.2 125.1 108.2 127.7 112.2 125.1 107.0 125.6 107.8 372-6.9 38 39 3.87 2.66 1.46 134.9 139.1 96.1 141.3 139.9 94.8 141.0 140.4 96.6 143.9 141.5 100.9 142.6 141.9 100.9 142.4 142.0 99.0 144.8 142.4 99.2 145.0 140.3 101.0 144.7 139.9 98.3 145.2 141.7 97.5 148.0 142.0 98.3 148.8 141.7 98.1 149.6 140.8 99.9 149.9 140.8 4.17 119.7 120.1 122.4 119.7 119.5 119.8 121.6 121.7 123.1 125.4 122.4 123.8 125.3 24 25 26 27 28 Utilities 34 Electric 116.9 103.5 137.5 167.8 91.3 75.0 Gross value (billions of 1978 dollars, annual rates) MAJOR MARKET 35 Products, total 517.5 1,650.9 1,680.6 1,676.6 1,702.1 1,686.5 1,660.8 1,686.3 1,687.6 1,676.7 1,669.9 1,681.3 1,682.2 1,685.9 1,694.5 36 Final 37 Consumer goods . 38 Equipment 39 Intermediate 405.7 1,282.3 1,304.9 1,302.5 1,321.2 1,310.3 1,282.5 1,307.0 1,301.1 1,289.5 1,282.7 1,292.6 1,296.5 1,295.2 1,303.2 272.7 820.7 838.1 841.7 850.7 845.3 832.0 852.3 852.4 843.8 842.3 846.9 843.6 841.6 848.6 133.0 461.7 466.8 460.8 470.5 465.1 450.4 454.7 448.7 445.7 440.4 445.7 452.9 453.7 454.6 111.9 368.6 375.7 374.1 380.8 376.2 378.3 379.3 386.4 387.2 387.1 388.7 385.7 390.7 391.2 • 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 1984 in t h e FEDERAL RESERVE BULLETIN, v o l . 71 (July 1985), pp. 487-501. The revised indexes for January through June 1985 were shown in the September BULLETIN. NOTE. These data also appear in the Board's G. 12.3 (414) release. For address, see inside front cover. Selected Measures 2.14 A49 HOUSING A N D CONSTRUCTION M o n t h l y figures are at s e a s o n a l l y adjusted annual rates e x c e p t as noted. 1986 Item Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Private residential real estate activity (thousands of units) N E W UNITS 1 Permits authorized 2 1-family 3 2-or-more-family 1,605 902 703 1,682 922 759 1,733 957 777 1,861 1,060 801 1,808 1,033 775 1,834 1,043 791 1,885 1,139 746 1,788 1,092 696 1,792 1,121 671 1,759 1,093 666 1,673 1,039 634 1,603 1,047 556 1,565 1,006 559 4 Started 5 1-family 6 2-or-more-family 1,703 1,067 635 1,749 1,084 665 1,742 1,072 669 2,034 1,335 699 2,001 1,202 799 1,960 1,221 739 2,019 1,242 777 1,853 1,241 612 1,852 1,230 622 1,782 1,137 645 1,795 1,186 609 1,664 1,102 562 1,628 1,090 538 7 Under construction, end of period 1 8 1-family 9 2-or-more-family 1,003 524 479 1,051 556 494 1,063 539 524 1,094 571 522 1,110 581 529 1,099 574 526 1,135 586 549 1,132 597 534 1,151 612 539 1,157 623 533 1,164 630 533 1,154 626 528 1,145 626 519 1,390 924 466 1,652 1,025 627 1,703 1,072 631 1,778 1,075 703 1,725 1,038 687 1,806 1,153 653 1,693 1,127 566 1,829 1,140 689 1,620 1,060 560 1,761 1,067 694 1,763 1,128 635 1,733 1,109 624 1,736 1,170 566 13 Mobile homes shipped 296 296 284 280 266 240 249 239 226 236 232 244 244 Merchant builder activity in 1-family units 14 Number sold 15 Number for sale, end of period 1 622 304 639 358 688 350 735 352 741 352 924 338 880 336 787 336 722 340 698' 349 618 353 732 356 662 359 10 Completed 11 1-family 12 2-or-more-family Price (thousands of dollars)2 Median 16 Units sold 75.5 80.0 84.3 86.6 89.7 88.7 92.5 92.1 91.2 94.1' 91.1 91.7 93.6 17 89.9 97.5 101.0 104.1 106.6 108.0 110.3 114.6 110.9 116.8' 114.6 112.4 111.6 2,719 2,868 3,217 3,300 3,270 3,200 3,570 3,450 3,390 3,470 3,610 3,770 3,810 69.8 82.5 72.3 85.9 75.4 90.6 77.1 93.0 77.4 93.1 79.8 96.8 80.2 98.1 83.2 101.7 82.6 102.1 79.9 99.2 82.0 100.3 79.4 96.8 79.4 97.3 Units sold EXISTING UNITS ( 1 - f a m i l y ) 18 Number sold 2 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 279,240 327,209 355,570 373,378 373,947 368,027 373,904 374,483 375,397 380,722' 382,603' 382,581' 379,676' 22 Private 23 Residential 24 Nonresidential, total Buildings 25 Industrial 26 Commercial 27 Other 28 Public utilities and other 228,527 271,973 292,792 305,366 305,682 298,868 303,320 302,573 304,567 309,003' 310,155' 308,617' 307,736' 126,553 155,148 158,818 163,413 164,713 165,645 170,520 172,491 174,478 178,821' 178,761' 178,480' 178,642' 101,974 116,825 133,974 141,953 140,969 133,223 132,800 130,082 130,089 130,182' 131,394' 130,137' 129,094' 29 Public 30 Military 31 Highway 32 Conservation and development 33 Other 12,863 35,789 11,838 41,484 13,746 48,100 12,547 42,432 15,769 59,626 12,619 45,960 15,783 65,222 12,781 48,167 16,381 63,494 13,065 48,029 13,354 60,716 13,131 46,022 14,557 59,763 13,006 45,474 13,658 57,368 13,131 45,925 13,027 57,443 13,263 46,356 12,866' 58,132' 13,277' 45,907' 12,543' 13,18c 60,054' 58,001' 13,315' 14,001' 45,482' 44,955' 12,913' 56,430' 14,435' 45,316' 50,715 2,544 14,143 4,820 29,208 55,232 2,839 16,343 4,654 31,396 62,777 3,283 19,998 4,952 34,544 68,013 3,407 22,129 5,614 36,863 68,264 3,974 22,273 4,372 37,645 69,150 3,673 22,673 4,598 38,215 70,583 3,725 23,240 4,947 38,756 71,910 3,637 22,001 4,729 40,304 70,830 3,761 21,771 4,657 40,411 71,719' 3,553' 21,603' 4,415' 42,148' 72,448' 73,964' 4,132' 5,050' 21,607' 20,552' 4,294' 4,841' 42,415' 43,521' 71,940' 3,695' 20,274' 4,843' 43,128' 1. Not at annual rates. 2. Not seasonally adjusted. 3. Value of new construction data in recent periods may not be strictly comparable with data in prior 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 (a) mobile homes, which are private, domestic shipments as reported by the Manufactured Housing Institute and seasonally adjusted by the Census Bureau, and (b) sales and prices of existing units, which are published by the National Association of Realtors. All back and current figures are available from originating agency. Permit authorizations are those reported to the Census Bureau from 16,000 jurisdictions beginning with 1978. A50 2.15 Domestic Nonfinancial Statistics • February 1987 CONSUMER A N D PRODUCER PRICES Percentage changes based o n seasonally adjusted data, e x c e p t as noted Change from 12 months earlier Item Change from 3 months earlier (at annual rate) 1985 1985 Nov. Change from 1 month earlier 1986 Index level Nov. 1986 (1967 = 100)' 1986 1986 Nov. Dec. Mar. June Sept. July Aug.' Sept. Oct. Nov. CONSUMER PRICES 2 1 All items 3.6 1.3 5.3 -1.9 1.5 2.2 .0 .2 .3 .2 .3 330.8 2 Food 3 Energy items 4 All items less food and energy 5 Commodities 6 Services 2.3 .8 4.4 2.2 5.7 4.4 -19.6 3.8 1.3 5.2 5.9 3.3 5.4 3.6 6.5 -1.4 -34.2 4.1 .3 6.5 3.4 -12.5 3.1 -.5 5.2 9.4 -19.5 3.7 3.1 4.1 .9 -4.1 .4 .2 .4 .9 -1.9 .3 .3 .3 .4 .7 .3 .2 .3 .3 -2.2 .4 .2 .5 .5 -.7 .3 .2 .4 324.6 341.7 332.5 266.1 405.0 1.4 -.1 -2.4 2.8 2.5 -1.9 4.1 -37.9 3.0 2.2 9.2 16.0 20.7 4.4 5.6 -12.5 -8.1 -66.9 2.5 .7 .4 5.9 -22.3 2.0 2.3 .7 13.0 -36.9 2.2 2.2 -.6' 1.8' -13.9' .2 .1 .4 1.4 -.2 .1 .1 .4 -.2 3.7 .2 .4 .3 .9 -4.3 .8 .5 .2 -.1 .0 .3 .3 290.7 283.0 452.9 262.7 310.5 -.5 -.2 -4.3 .3 2.9 .0 -11.8 -1.0 -5.3 -1.3 -.8 2.0 -.6 .2 -.1 .1 .5 .3 -.3 .1 .2 .2 310.4 305.1 -6.4 -5.3 -4.3 -.3 -27.4 .0 47.0 -4.0 1.5 -24.7 -51.3 -.2 1.6 -29.1 7.0 20.1 -13.3 -18.1 3.3' -6.2' .3' 2.1 -.8 -5.6 -.8 3.7 .5 2.6 -.9 1.7 -.2 -.7 1.6 235.9 535.3 244.5 PRODUCER PRICES 7 Finished goods 8 Consumer foods 9 Consumer energy 10 Other consumer goods 11 Capital equipment 12 Intermediate materials 3 13 Excluding energy 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 A51 GROSS NATIONAL PRODUCT A N D INCOME Billions of current dollars e x c e p t as noted; quarterly data are at seasonally adjusted annual rates. 1986 1985 Account 1983 1984 1985 Q4 Q3 Ql Q2 Q3' GROSS NATIONAL PRODUCT 1 Total 3,405.7 3,765.0 3,998.1 4,030.5 4,087.7 4,149.2 4,175.6 4,240.7 2,234.5 289.1 816.7 1,128.7 2,428.2 331.2 870.1 1,227.0 2,600.5 359.3 905.1 1,336.1 2,627.1 373.3 907.4 1,346.4 2,667.9 362.0 922.6 1,383.2 2,697.9 360.8 929.7 1,407.4 2,732.0 373.9 928.4 1,429.8 2,799.8 414.5 932.8 1,452.4 6 Gross private domestic investment Fixed investment 7 8 Nonresidential 9 Structures 10 Producers' durable equipment 11 Residential structures 502.3 509.4 356.9 124.0 232.8 152.5 662.1 598.0 416.5 139.3 277.3 181.4 661.1 650.0 458.2 154.8 303.4 191.8 657.4 654.3 459.8 155.0 304.7 194.5 669.5 672.6 474.0 157.2 316.8 198.6 708.3 664.4 459.2 154.6 304.6 205.3 687.3 672.8 457.5 141.5 316.0 215.3 675.8 680.3 459.0 139.5 319.5 221.3 12 13 -7.1 .4 64.1 56.6 11.1 12.2 3.1 3.2 -3.1 16.7 43.8 41.2 14.5 10.5 -4.5 -10.3 14 Net exports of goods and services 15 Exports 16 Imports -6.1 352.5 358.7 -58.7 382.7 441.4 -78.9 369.8 448.6 -83.7 362.3 446.0 -105.3 368.2 473.6 -93.7 374.8 468.5 -104.5 363.0 467.5 -108.9 370.8 479.7 17 Government purchases of goods and services 18 Federal 19 State and local 675.0 283.5 391.5 733.4 311.3 422.2 815.4 354.1 461.3 829.7 360.9 468.8 855.6 380.9 474.7 836.7 355.7 480.9 860.8 367.6 493.3 874.0 369.3 504.7 3,412.8 1,396.1 573.3 822.7 1,682.5 327.1 3,700.9 1,576.7 675.0 901.7 1,813.1 375.1 3,987.0 1,630.2 700.2 930.0 1,959.8 408.1 4,027.4 1,642.8 710.3 932.5 1,971.9 415.9 4,090.8 1,644.1 709.1 935.0 2,025.5 418.1 4,105.4 1,669.0 710.6 958.4 2,057.7 422.6 4,161.2 1,661.6 703.1 958.5 2,087.4 426.7 4,245.2 1,680.2 730.1 950.1 2,125.2 435.3 -7.1 -1.0 -6.1 64.1 39.2 24.9 11.1 6.6 4.5 3.1 -2.7 5.8 -3.1 9.5 -12.7 43.8 28.6 15.3 14.5 -.1 14.6 -4.5 -15.6 11.1 3,279.1 3,489.9 3,585.2 3,603.8 3,622.3 3,655.9 3,661.4 3,686.4 30 Total 2,719.5 3,032.0 3,222.3 3,243.4 3,287.3 3,340.7 3,376.4 3,396.1 31 Compensation of employees 32 Wages and salaries Government and government enterprises 33 34 Other 35 Supplement to wages and salaries 36 Employer contributions for social insurance Other labor income 37 2,020.7 1,676.2 324.3 1,352.3 344.5 170.9 173.6 2,214.7 1,837.0 346.2 1,490.6 377.7 193.1 184.5 2,368.2 1,965.8 372.2 1,593.9 402.4 205.5 196.9 2,380.9 1,976.0 374.2 1,601.8 404.9 206.1 198.8 2,423.6 2,012.8 381.6 1,631.1 410.9 209.1 201.7 2,461.5 2,044.1 387.2 1,656.8 417.4 212.9 204.5 2,480.2 2,058.8 392.5 1,666.3 421.3 214.1 207.3 2,507.4 2,081.1 398.4 1,682.7 426.3 215.9 210.4 190.9 178.4 12.4 236.9 205.3 31.5 254.4 225.2 29.2 249.3 227.7 21.6 262.1 232.7 29.4 265.3 240.9 24.4 289.1 249.6 39.5 277.5 258.0 19.6 2 3 4 5 By source Personal consumption expenditures Durable goods Nondurable goods Services Change in business inventories Nonfarm By major type of product 20 Final sales, total 21 Goods Durable 22 Nondurable 23 24 Services 25 Structures 26 Change in business inventories 27 Durable goods 28 Nondurable goods 29 MEMO: 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 13.2 8.3 7.6 7.3 8.3 12.8 16.3 16.2 42 Corporate profits 1 Profits before tax 3 43 44 Inventory valuation adjustment 45 Capital consumption adjustment 213.7 207.6 -10.9 17.0 264.7 235.7 -5.5 34.5 280.7 223.2 -.6 58.1 296.3 229.2 6.1 61.0 285.6 235.8 -9.4 59.2 296.4 222.5r 16.5 57. y 293.1 221.1' 10.6 54.8' 302.0 240.4 6.1 55.5 46 Net interest 281.0 307.4 311.4 309.7 307.6 304.9 297.7 292.9 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). A52 2.17 Domestic Nonfinancial Statistics • February 1987 PERSONAL INCOME A N D SAVING B i l l i o n s o f current dollars; quarterly data are at s e a s o n a l l y a d j u s t e d annual rates. E x c e p t i o n s n o t e d . 1985 1984 Account Ql Q4 Q3 Q2 PERSONAL INCOME AND SAVING 2,838.6 1 Total personal income 2 Wage and salary disbursements 3 Commodity-producing industries 4 Manufacturing 5 Distributive industries 6 Service industries 7 Government and government enterprises. 8 9 10 11 12 13 14 15 16 17 Other labor income Proprietors' income 1 Business and professional 1 Farm 1 Rental income of persons 2 Dividends Personal interest income Transfer payments O l d - a g e survivors, disability, and health insurance benefits. LESS: Personal contributions for social insurance 18 EQUALS: Personal income 3,110.2 3,314.5 3,323.2 3,382.9 3,432.6 3,483.3 2,012.8 2,044.1 622.0 2,058.8 617.7 467.5 478.9 534.6 381.6 470.5 485.2 549.6 387.2 468.8 484.3 561.3 392.5 201.7 204.5 265.3 240.9 24.4 12.8 79.1 480.8 504.7 263.2 207.3 289.1 249.6 39.5 16.3 1,676.6 523.1 397.4 404.2 425.1 324.3 1.836.8 577.8 439.1 442.2 470.6 346.2 1,966.1 607.7 460.1 469.8 516.4 372.2 1,976.0 608.3 460.7 472.4 521.1 374.2 173.6 190.9 178.4 12.4 13.2 68.7 393.1 442.6 221.7 184.5 236.9 205.3 31.5 8.3 74.7 446.9 455.6 235.7 196.9 254.4 225.2 29.2 7.6 76.4 476.2 487.1 253.4 198.8 249.3 227.7 21.6 7.3 76.3 475.2 491.1 256.5 262.1 232.7 29.4 8.3 76.7 480.6 493.6 256.8 620.8 81.1 480.1 510.1 264.1 120.1 133.5 150.2 150.7 152.9 158.6 159.5 2,838.6 3,110.2 3,314.5 3,323.2 3,382.9 3,432.6 3,483.3 410.5 439.6 486.5 491.2 500.7 497.5 504.8 20 EQUALS: Disposable personal income 2,428.1 2,670.6 2,828.0 2,832.0 2,882.2 2,935.1 2,978.5 21 LESS: Personal outlays 2,297.4 2.501.9 2,684.7 2,712.4 2,756.4 2,789.4 2,825.5 22 EQUALS: Personal saving 130.6 168.7 143.3 119.6 125.8 145.6 153.1 13,963.7 9,138.5 9,930.0 5.4 14,721.1 9,475.4 10,421.0 6.3 14,980.9 9,713.0 10,563.0 5.1 15,040.5 9,774.4 10,537.0 4.2 15,080.3' 9,790.6' 10,577.0 4.4 15,188.6' 9,857.5' 10,723.0 5.0 15,179.9 9,985.0 10,886.0 5.1 27 Gross saving. 463.6 573.3 551.5 541.7 524.1 583.2 539.7 28 29 30 31 592.2 130.6 65.0 -10.9 674.8 168.7 91.0 -5.5 687.8 143.3 107.3 -.6 679.6 119.6 118.8 679.2 125.8 713.0' 153.1 106.6' -9.4 708.3' 145.6 115.5' 16.5 242.7 153.9 253.9 268.2 161.2 270.1 171.2 273.3 173.4 .0 275.3 171.8 .0 278.9 174.4 .0 -138.0 -197.5 59.5 -155.1 -217.6 62.5 -125.1' -195.C 69.9' -173.3' -232.2' 58.9' 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 Gross private saving Personal saving Undistributed corporate profits 1 Corporate inventory valuation adjustment. Capital consumption allowances 32 Corporate 33 Noncorporate 34 Wage accruals less disbursements 35 Government surplus, or deficit ( - ) , national income and product accounts 36 Federal 37 State and local .0 .0 169.0 .0 -128.6 -176.0 47.5 -101.5 -170.0 68.5 -136.3 -198.0 61.7 106.8 6.1 10.6 .0 .0 .0 .0 .0 .0 .0 .0 39 Gross investment 468.8 571.4 545.9 536.2 525.7 579.6 544.3 40 Gross private domestic 41 Net foreign 502.3 -33.5 662.1 661.1 657.4 -90.7 -115.2 -121.2 669.5 -143.8 708.3 -128.6 687.3 -143.0 -3.6 4.6 38 Capital grants received by the United States, net 42 Statistical discrepancy. 1. With inventory valuation and capital consumption adjustments. 2. With capital consumption adjustment. 5.2 -5.5 SOURCE. Survey of Current Business (Department of Commerce). Summary Statistics 3.10 U.S. INTERNATIONAL TRANSACTIONS A53 Summary Millions o f dollars; quarterly data are s e a s o n a l l y adjusted e x c e p t as n o t e d . 1 1985 Item credits or debits 1983 1984 9 10 Q2 Q3" -46,605 Remittances, pensions, and other transfers U.S. government grants (excluding military) -117,677 -28,455' -32,275 -33,695' -31,510 -34,038 -31,020 -34,413 -35,458 -36,280 -40,206 -112,522 219,900 -332,422 -1,827 18,751 1,288 -124,439 214,424 -338,863 -2,917 25,188 -525 -31,675 52,498 -84,173 -619 8,262 -422' -37,352 52,727 -90,079 -1,322 9,255 -32' -36,459 53,661 -90,120 -1,066 6,517 -7 -35,669 55,149 -90,818 -695 5,325 705 -37,669 55,318 -92,987 -624 5,509 681 -3,194 -6,286 Merchandise trade balance 2 Merchandise exports Merchandise imports Military transactions, net Investment income, net 3 Other service transactions, net -106,466 -67,080 201,820 -268,900 -370 24,841 5,484 1 Balance on current account 6 7 8 Ql Q4 Q3 3 4 1986 1985 -3,621 -8,536 -3,787 -11,196 -914 -3,087 -937 -3,307 -954 -2,069 -834 -3,245 -789 -3,388 11 Change in U.S. government assets, other than official -5,005 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 3 3 -5,523 -2,824 -422 -540 -250 -209 -1,346 -1,196 0 -66 -4,434 3,304 -3,130 0 -979 -995 -1,156 -3,858 0 -897 908 -3,869 -121 0 -264 388 -245 -3,148 0 -189 168 -3,126 -115 0 -274 344 -185 16 0 -104 366 -246 280 0 163 508 -391 -43,821 -29,928 -6,513 -7,007 -373 -14,987 -11,127 5,081 -5,082 -3,859 -25,754 -691 1,665 -7,977 -18,752 -5,324 4,009 -1,517 -1,664 -6,152 -19,579 -8,485 418 -1,411 -10,101 -12,533 6,333 -2,842 -6,133 -9,891 -25,357 -14,387 -28,016 -20,507 5,968 6,972 -476 725 545 -1,798 3,037 4,690 13 436 555 -2,657 -1,324 -546 -295 483 522 -1,488 2,577 -81 46 58 2,932 -378 -1,322 -1,976 -171 263 722 -160 79,528 50,342 -118 8,721 8,636 11,947 99,730 33,849 4,704 23,059 12,759 25,359 128,430 40,387 -1,172 20,500 50,859 17,856 33,088 7,276 589 7,484 53,158 20,427 2,232 5,676 22,441 2,382 0 11,130 reserve assets, net (increase, - ) 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 0 27,338 0 23,006 0 -1,343' -3,687' 11,130 27,338 23,006 -1,196 -3,130 5,243 2,601 -8,283 194 -1,220 n.a. -1,664 -8,806 163 -7,672 2,469 3,256 -177 288 -1,261 363 14,704 14,538 -644 679 662 -531 15,839 12,262 -276 954 3,201 -302 34,151 8,434 -2,057 7,666 18,686 1,422 32,822 3,553 -1,644 3,807 23,018 4,088 53,294 32,187 0 5,125' 3,771' 0 10,316 1,216 0 12,437 -1,505 0 -3,771 -3,993 2,344 1,354 9,100 13,942 222 -3,858 -121 -3,148 -115 16 280 -1,807 2,519 -1,585 2,181 14,025 14,885 -4,304 -6,599 -1,831 -1,002 1,421 -1,938 -2,828 190 64 15 28 22 12 15 22 Change in foreign official assets in the United States 23 24 25 26 27 (increase, +) U.S. Treasury securities Other U.S. government obligations Other U.S. government liabilities 4 Other U.S. liabilities reported by U.S. banks Other foreign official assets 5 28 Change in foreign private assets in the United States 29 30 31 3? 33 (increase, +) 3 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 the United States, net 3 34 Allocation of SDRs 35 Discrepancy 36 37 Statistical discrepancy in recorded data before seasonal adjustment 11,628 6,111 n.a. 597 17,078 3,432 MEMO Changes in official assets U.S. official reserve assets (increase, - ) Foreign official assets in the United States (increase, +) 4 0 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 38 39 1. Seasonal factors are not calculated for lines 38-41. 2. Data are on an international accounts (IA) basis data, shown in table 3.11, for reasons of exports are excluded from merchandise data and 3. Includes reinvested earnings. 6, 10, 12-16, 18-20, 22-34, and basis. Differs from the Census coverage and timing; military are included in line 6. 4. Primarily associated with military sales contracts and other transactions arranged with or through foreign officii 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). A54 International Statistics • February 1987 3.11 U . S . FOREIGN T R A D E Millions of dollars; monthly data are not seasonally adjusted. 1986 Item 1984 1983 1985 Apr. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments Aug. July 217,865 258,048 325,726 345,276 28,762 30,272 31,764 34,121 29,476 28,695 30,018 3 -57,562 107,861 -132,129 -10,797 -12,842 -12,694 -16,414 -11,871 -11,177 -10,688 NOTE. The data through 1981 in this table are reported by the Bureau of Census data of a free-alongside-ship (f.a.s.) value basis—that is, value at the port of export. Beginning in 1981, foreign trade of the U.S. Virgin Islands is included in the Census basis trade data; this adjustment has been made for all data shown in the table. Beginning with 1982 data, the value of imports are on a customs valuation basis. The Census basis data differ from merchandise trade data shown in table 3.10, U.S. International Transactions Summary, for reasons of coverage and timing. On 3.12 17,431 19,070 17,604 Oct. 200,486 17,965 17,707 Sept. 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses Trade balance 213,146 June May 17,518 193,300 the export side, the largest adjustments are: (1) the addition of exports to Canada not covered in Census statistics, and (2) the exclusion of military sales (which are combined with other military transactions and reported separately in the "service account" in table 3.10, line 6). On the import side, additions are made for gold, ship purchases, imports of electricity from Canada, and other transactions; military payments are excluded and shown separately as indicated above. SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" (Department of Commerce, Bureau of the Census). U.S. RESERVE ASSETS Millions of dollars, end of period 1986 Type 1984 1983 1985 May Aug. Sept. Oct. Nov.? 33,747 1 Total 2 Gold stock, including Exchange Stabilization Fund 1 3 Special drawing rights2-3 4 Reserve position in International Monetary Fund 2 5 Foreign currencies 4 34,934 43,191 45,260 46,635 47,430 48,161 48,086 47,166 48,054 11,121 11,096 11,090 11,085 11,084 11,084 11,084 11,084 11,143 11,300 5,025 5,641 7,293 8,066 8,213 8,085 8,250 8,295 8,090 8,310 11,312 11,541 11,952 11,789 12,109 12,114 12,017 11,922 11,575 11,659 6,289 6,656 12,856 14,320 15,229 16,147 16,810 16,785 16,358 16,785 1. Gold held under earmark at Federal Reserve Banks for foreign and international accounts is not included in the gold stock of the United States; see table 3.13. Gold stock is valued at $42.22 per fine troy ounce. 2. Beginning July 1974, the IMF adopted a technique for valuing the SDR based on a weighted average of exchange rates for the currencies of member countries. From July 1974 through December 1980, 16 currencies were used; from January 1981, 5 currencies have been used. The U.S. SDR holdings and reserve position in the IMF also are valued on this basis beginning July 1974. 3.13 July June 3. Includes allocations by the International Monetary Fund of SDRs as follows: $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 million on Jan. 1, 1972; $1,139 million on Jan. 1, 1979; $1,152 million on Jan. 1, 1980; and $1,093 million on Jan. 1, 1981; plus transactions in SDRs. 4. Valued at current market exchange rates. FOREIGN OFFICIAL A S S E T S H E L D AT F E D E R A L R E S E R V E B A N K S Millions of dollars, end of period 1986 Assets 1984 1983 1985 May 1 Deposits Assets held in custody 2 U.S. Treasury securities' 3 Earmarked gold2 July Aug. Sept. Oct. Nov. 190 267 480 253 354 233 227 342 303 224 117,670 14,414 118,000 14,242 121,004 14,245 136,762 14,145 137,820 14,128 144,527 14,131 148,263 14,120 152,275 14,115 156,076 14,110 156,919 14,057 1. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable U.S. Treasury securities payable in dollars and in foreign currencies. 2. Earmarked gold is valued at $42.22 per fine troy ounce. June NOTE. Excludes deposits and U.S. Treasury securities held for international and regional organizations. Earmarked gold is gold held for foreign and international accounts and is not included in the gold stock of the United States. Summary Statistics 3.14 FOREIGN BRANCHES OF U.S. B A N K S A55 Balance Sheet Data 1 Millions of dollars, end of period 1986 1983 Asset account Apr. May June July Aug. Sept. Oct.'' All foreign countries 477,090 453,656 458,012 475,158 459,587 467,565 454,886 461,404 474,567 446,581 115,542 82,026 1 Total, all currencies ? Claims on United States Parent bank 4 Other banks in United States 2 5 Nonbanks 2 6 Claims on foreigners 7 Other branches of parent bank 8 Banks 9 Public borrowers 10 Nonbank foreigners 113,393 78,109 13,664 21,620 320,162 95,184 100,397 23,343 101,238 119,713 87,201 13,057 19,455 315,680^ 91,399 102,960 23,478 97,843r 122,593' 88,975 12,823' 20,795' 326,185' 95,238 107,212' 23,676' 100,059' 117,724' 83,404 13,206' 21,114' 316,337' 90,447 103,958' 23,846' 98,086' 117,812' 82,565' 14,039" 21,208' 324,216' 98,406" 105,648' 23,279" 96,883' 113,474' 79,387 13,527' 20,56c 314,354' 92,641 103,095' 23,578' 95,040' 117,661 83,779 13,072' 20,810" 315,583 93,435 102,849 23,720 95,579 116,382 82,302 13,624 20,456 328,563 103,278 107,503 23,505 94,277 112,068 79,999 11,659 20,410 305,647 90,412 100,707 24,091 90,437 342,689 96,004 117.668 24,517 107,785 20,101 28,160 29,622 28,866 371,508 350,636 336,288 331,511 322,837 327,639 313,703 318,357 330,597 309,087 n Claims on United States 14 Parent bank 15 Other banks in United States 2 16 Nonbanks 2 17 Claims on foreigners 18 Other branches of parent bank 19 Banks 70 Public borrowers 21 Nonbank foreigners 113,436 80,909 247,406 78,431 93,332 17,890 60,977 111,426 77,229 13,500 20,697 228,600 78,746 76,940 17,626 55,288 116,645 85,971 12,454 18,220 209,905' 72,689 71,748 17,252 48,216" 118,735' 87,597 11,922' 19,216' 202,670' 73,109 66,077' 16,783' 46,701' 113,864' 82,110 12,293' 19,461' 198,358' 69,684 65,160" 17,203' 46,311' 113,519" 81,073" 12,907' 19,539' 203,934' 75,883' 66,751' 16,498' 44,802' 109,263' 78,025 12,373' 18,865" 194,102" 69,135 65,033" 16,684' 43,250' 113,636 82,261 12,180" 19,195' 194,643 68,604 64,940 16,788 44,311 112,133 80,753 12,802 18,578 207,701 78,400 68,596 16,521 44,184 107,612 78,335 10,544 18,733 190,086 67,835 62,836 17,355 42,060 10,666 10,610 9,738' 10,106' 10,615' 10,186' 10,338' 10,078 10,763 11,389 11 Other assets 22 Other assets 22,619' 26,380' 25,537" 18,859 12 Total payable in U.S. dollars 25,526" 27,058' United Kingdom 158,732 74 Claims on United States ?5 Parent bank 2 ?fi Other banks in United States 77 Nonbanks 2 78 Claims on foreigners ?9 Other branches of parent bank 30 Banks 31 Public borrowers Nonbank foreigners 32 155,867 152,075 151,593 145,448 145,619 151,596 142,398 33,157 26,970 1,106 5,081 110,217 31,576 39,250 5,644 33,747 34,234 28,058 1,386 4,790 115,485 32,516 41,593 5,642 35,734 34,231 28,001 1,312 4,918 111,823 31,984 39,222 5,427 35,190 31,364 25,106 1,365 4,893 113,739 34,670 39,430 5,236 34,403 30,223 24,252 1,369 4,602 108,156 31,613 38,393 5,229 32,921 29,839 23,466 1,448 4,925 109,024 31,828 38,048 5,336 33,812 30,879 24,291 2,092 4,4% 113,368 34,678 40,204 5,086 33,400 30,747 24,800 1,314 4,633 105,609 31,268 37,836 5,033 31,472 119,280 36,565 43,352 5,898 33,465 5,019 1 4,882 5,225 6,148 6,021 6,490 7,069 6,756 7,349 6,042 126,012 34 Total payable in U.S. dollars 44 Other assets 148,599 27,675 21,862 1,429 4,384 111,828 37,953 37,443 5,334 31,098 " 1 33 Other assets 35 Claims on United States 36 Parent bank 37 Other banks in United States 2 38 Nonbanks 2 39 Claims on foreigners Other branches of parent bank 40 Banks 41 Public borrowers 4? Nonbank foreigners 43 144,385 34,433 29,111 23 Total, all currencies 112,809 108,626 107,364 106,716 104,013 97,641 97,771 103,228 97,295 33,756 28,756 ~ 88,917 31,838 32,188 4,194 20,697 26,868 21,495 1,363 4,010 82,945 33,607 26,805 4,030 18,503 32,092 26,568 1,005 4,519 73,475 26,011 26,139 3,999 17,326 32,959 27,629 1,225 4,105 71,058 26,224 23,310 4,012 17,512 32,872 27,584 1,152 4,136 70,406 26,265 23,134 3,937 17,070 29,944 24,693 1,102 4,149 70,697 27,559 22,825 3,777 16,536 28,848 23,888 1,131 3,829 65,472 24,258 21,938 3,793 15,483 28,446 22,972 1,194 4,280 66,465 24,657 21,636 3,838 16,334 29,512 23,826 1,848 3,838 70,325 27,151 22,917 3,778 16,479 29,312 24,323 1,110 3,879 64,929 24,632 21,011 3,759 15,527 3,339 2,9% 3,059 3,347 3,438 3,372 3,321 2,860 3,391 3,054 134,238 137,526 143,082 134,060 71,918 46,635 10,641 14,642 66,620 22,763 27,779 6,434 9,644 68,614 44,476 9,557 14,581 59,622 16,985 26,205 7,263 9,169 Bahamas and Caymans 45 Total, all currencies 46 Claims on United States 47 48 Other banks in United States 2 49 Nonbanks 2 50 Claims on foreigners 51 Other branches of parent bank 5? Banks 53 Public borrowers 54 Nonbank foreigners 55 Other assets 56 Total payable in U.S. dollars 152,083 146,811 75,309 48,720 77,296 49,449 11,544 16,303 65,598 17,661 30,246 6,089 11,602 72,868 20,626 36,842 6,093 12,592 142,055 74,864 50,553 11,204 13,107 63,882' 19,042 28,192 6,458 10,19c 72,861' 47,613 10,476' 14,772' 60,473' 18,286 25,880' 6,357' 9,950" 3,906 3,917 3,309' 3,938' 145,641 141,562 136,794 130,530 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 from $50 million to $150 million equivalent in total assets, the threshold now applicable to all reporting branches. 137,272 132,122 68,807' 42,868 10,916' 15,023' 59,292' 15,703 26,397' 6,717' 10,475' 4,023' 125,681 138,944 70,883' 44,183' 11,730' 14,970" 64,043' 20,585' 27,078' 6,405' 9,975' 69,812' 43,867 11,201' 14,744' 60,363' 16,682 27,160' 6,551' 9,970" 73,047 47,694 10,813' 14,540" 60,167 16,539 27,065 6,675 9,888 4,018' 4,063' 4,312 4,544 5,824 132,353 127,910 130,723 136,615 127,361 2. Data for assets vis-a-vis other banks in the United States and vis-a-vis nonbanks are combined for dates before June 1984. A56 3.14 International Statistics • February 1987 Continued 1986 Apr. May June July Aug. Sept. Oct.? All foreign countries 57 Total, all currencies 477,090 453,656 458,012 475,158 459,587 467,565 454,886 461,404 474,567 446,581 58 Negotiable CDs 3 59 To United States 60 Parent bank 61 Other banks in United States Nonbanks 62 n.a. 188,070 81,261 29,453 77,356 37,725 147,583 78,739 18,409 50,435 34,607 155,538 83,914 16,894 54,730 33,229 150,395' 81,594 14,270 54,531' 35,006 144,241 77,484 14,347 52,410 34,683 149,848 85,126 16,118 48,604 32,656 141,599 81,299 14,191 46,109 31,475 145,488 79,564' 15,151' 50,773 33,642 151,281 87,927 14,153 49,201 32,267 141,303 75,773 14,791 50,739 63 To foreigners 64 Other branches of parent bank 65 Banks 66 Official institutions 67 Nonbank foreigners 68 Other liabilities 269,685 90,615 92,889 18,896 68,845 19,335 247,907 93,909 78,203 20.281 55,514 20,441 245,942 89,529 76,814 19,523 60,076 21,925 269,809' 93,768 89,608 20,744 65,689' 21,725 258,700 90,228 83,251 20,792 64,429 21,640 262,329 97,717 81,008 20,480 63,124 20,705 259,133 91,144 82,854 20,608 64,527 21,498 262,978 91,307 85,239 20,637 65,795 21,463 269,322 102,245 81,953 20,109 65,015 20,322 253,316 87,883 80,709 19,436 65,288 19,695 69 Total payable in U.S. dollars 388,291 367,145 353,470 347,587 340,176 346,428 330,183 333,581 349,259 323,699 70 Negotiable CDs 3 71 To United States 72 Parent bank 73 Other banks in United States 74 Nonbanks n.a. 184,305 79,035 28.936 76,334 35,227 143,571 76,254 17,935 49,382 31,063 150,161 80,888 16,264 53,009 29,912 143,606' 78,061 13,477 52,068' 31,513 137,694 73,950 13,575 50,169 31,076 142,730 81,066 15,323 46,341 28,970 133,908 77,048 13,507 43,353 28,091 137,805 75,391' 14,364' 48,050 30,560 143,627 83,790 13,173 46,664 29,029 133,478 71,854 13,768 47.856 75 To foreigners 76 Other branches of parent bank 77 Banks Official institutions 78 79 Nonbank foreigners 80 Other liabilities 194,139 73,522 57,022 13,855 51,260 9,847 178,260 77,770 45,123 15,773 39,594 10,087 163,361 70,943 37,323 14,354 40,741 8,885 166,224' 71,841 37,240 14,746 42,397' 7,845 162,528 69,978 36,335 14,049 42,166 8,441 163,943 75,805 33,745 13,772 40,621 8,679 158,314 68,065 34,827 14,091 41,331 8,991 158,931 66,878 36,460 14,125 41,468 8,754 167,356 77,464 35,358 13,697 40,837 7,716 153,598 65,077 33,802 13,320 41,399 7,594 United Kingdom 81 Total, all currencies 158,732 144,385 148,599 155,867 152,075 151,593 145,448 145,619 151,596 142,398 82 Negotiable CDs 3 83 To United States 84 Parent bank 85 Other banks in United States 86 Nonbanks n.a. 55,799 14,021 11,328 30,450 34,413 25,250 14,651 3,125 7,474 31,260 29,422 19,330 2,974 7,118 29,898 28,450 17,231 1,966 9,253 31,734 27,505 16,624 2,175 8,706 31,396 26,270 15,892 1,997 8,381 29,295 22,671 13,300 1,999 7,372 28,279 22,831 14,188 2,148 6,495 30,352 26,540 17,399 2,062 7,079 28,847 24,610 14,014 2,382 8,214 87 To foreigners 88 Other branches of parent bank 89 Banks 90 Official institutions 91 Nonbank foreigners 92 Other liabilities 95,847 19,038 41,624 10,151 25,034 7,086 77,424 21,631 30,436 10,154 15,203 7,298 78,525 23,389 28,581 9,676 16,879 9,392 87,773 25,379 34,294 9,757 18,343 9,746 83,067 23,838 31,584 9,548 18,097 9,769 84,362 27,029 30,505 9,543 17,285 9,565 83,707 25,106 31,678 9,074 17,849 9,775 84,880 24,962 32,250 9,330 18,338 9,629 85,680 28,272 31,190 8,652 17,440 9,150 80,366 24,194 31,001 8,068 17,103 8,575 131,167 117,497 112,697 110,378 109,337 108,375 101,095 101,397 108,249 99,820 94 Negotiable CDs 3 95 To United States Parent bank 96 97 Other banks in United States Nonbanks 98 93 Total payable in U.S. dollars n.a. 54,691 13,839 11,044 29,808 33,070 24,105 14,339 2,980 6,786 29,337 27,756 18,956 2,826 5,974 27,978 26,411 16,867 1,774 7,770 29,542 25,490 16,233 1,944 7,313 29,135 24,214 15,331 1,817 7,066 27,015 20,065 12,648 1,738 5,679 26,114 20,403 13,707 1,879 4,817 28,490 24,039 16,984 1,735 5,320 26,927 21,960 13,591 2,108 6,261 99 To foreigners 100 Other branches of parent bank 101 Banks 102 Official institutions 103 Nonbank foreigners 104 Other liabilities 73,279 15,403 29,320 8,279 20,277 3,197 56,923 18,294 18,356 8,871 11,402 3,399 51,980 18,493 14,344 7,661 11,482 3,624 52,262 19,297 14,125 7,449 11,391 3,727 50,441 18,043 14,114 6,953 11,331 3,864 51,056 20,455 13,073 6,914 10,614 3,970 49,932 17,868 14,251 6,658 11,155 4,083 50,855 17,790 15,056 6,724 11,285 4,025 52,645 21,305 14,491 6,015 10,834 3,075 47,553 17,289 14,123 5,685 10,456 3,380 137,526 Bahamas and Caymans 105 Total, all currencies 152,083 146,811 142,055 137,272 132,122 138,944 134,238 143,082 134,060 106 Negotiable CDs 107 To United States 108 Parent bank 109 Other banks in United States 110 Nonbanks n.a. 111,299 50,980 16,057 44,262 615 102,955 47,162 13,938 41,855 610 103,813 44,811 12,778 46,224 629 98,621 43,662 11,014 43,945 634 94,128 40,757 10,738 42,633 567 98,897 47,014 12,868 39,015 565 96,636 47,862 11,131 37,643 470 99,585 44,417' 11,952' 43,216 527 102,012 49,981 10,986 41,045 506 96,017 43,466 11,144 41,407 111 To foreigners 112 Other branches of parent bank 113 Banks 114 Official institutions 115 Nonbank foreigners 116 Other liabilities 38,445 14,936 11,876 1,919 11,274 2,339 40,320 16,782 12,405 2,054 9,079 2,921 35,053 14,075 10,669 1,776 8,533 2,579 35,901 14,077 10,788 2,176 8,860 2,121 35,139 13,731 10,318 2,144 8,946 2,221 37,340 15,882 9,991 2,427 9,040 2,140 34,827 13,561 9,636 2,468 9,162 2,210 35,216 13,368 10,216 2,386 9,246 2,255 38,447 15,918 10,158 2,834 9,537 2,096 35,427 13,574 8,964 2,665 10,224 2,110 148,278 143,582 138,322 132,966 127,918 134,606 130,075 133,256 138,733 130,084 3 117 Total payable in U.S. dollars 3. Before June 1984. liabilities on negotiable CDs were included in liabilities to the United States or liabilities to foreigners, according to the address of the initial purchaser. Summary Statistics 3.15 A57 S E L E C T E D U . S . LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1986 Item 1984 1985 Apr. 1 Total1 2 3 4 5 6 7 8 9 10 11 12 June July Aug. Sept. Oct.? 180,552 By area Western Europe 1 Canada Latin America and Caribbean Asia Africa Other countries 6 178,356 188,914 190,159 194,562 198,784 203,364 209,823 210,306 26,089 59,976 26,734 53,252 27,028 59,547 24,911 63,614 26,142 65,790 25,143 70,721 25,482 74,766 29,342 75,095 26,248 75,457 69,019 5,800 19,668 77,108 3,550 17,712 82,345 2,300 17,694 82,501 1,800 17,333 84,113 1,800 16,717 85,561 1,300 16,059 85,622 1,300 16,194 87,945 1,300 16,140 91,220 1,300 16,081 69,776 1,528 8,561 93,954 1,264 5,469 By type Liabilities reported by banks in the United States 2 U.S. Treasury bills and certificates 3 U.S. Treasury bonds and notes Marketable Nonmarketable 4 U.S. securities other than U.S. Treasury securities 5 74,418 1,314 11,141 86,459 1,824 3,200 76,354 1,711 10,785 94,653 1,833 3,578 76,405 1,502 10,595 96,487 1,718 3,452 79,641 1,529 11,046 97,359 1,717 3,270 81,524 1,627 11,242 100,070 1,525 2,796 83,874 1,535 10,801 102,362 1,958 2,834 87,060 1,626 10,346 106,017 1,864 2,910 87,504 1,699 9,901 105,818 1,715 3,669 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. 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. 3.16 May LIABILITIES TO A N D CLAIMS O N FOREIGNERS Reported by Banks in the United States Payable in Foreign Currencies Millions of dollars, end of period 1985 Item 1982 1983 Dec. 1 Banks' own liabilities 2 Banks' own claims 3 Deposits 4 Other claims 5 Claims of banks' domestic customers' 1. 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 their domestic customers. 4,844 7,707 4,251 3,456 676 5,219 7,231 2,731 4,501 1,059 1986 1984 8,586 11,984 4,998 6,986 569 15,368 16,161 8,304 7,857 580 Mar. 21,364 19,736 11,318 8,418 1,426 June' 24,077 20,985 11,313 9,672 1,385 Sept. 29,227 24,516 13,818 10,698 1,660 NOTE. Data on claims exclude foreign currencies held by U.S. monetary authorities, A58 3.17 International Statistics • February 1987 LIABILITIES TO FOREIGNERS Payable in U.S. dollars Reported by Banks in the United States Millions of dollars, end of period 1986 Holder and type of liability 1983 1984 1985 Apr. May June July Aug. Sept. Oct.'' 1 AH foreigners 369,607 407,306 435,726 443,456 444,528 457,350 469,720 486,514' 505,328 459,673 2 Banks' own liabilities 3 Demand deposits 4 Time deposits 1 5 Other 2 Own foreign offices 3 6 279,087 17,470 90,632 25,874 145,111 306,898 19,571 110,413 26,268 150,646 341,070 21,107 117,278 29,305 173,381 346,469 19,751 114,209 33,220 179,289 342,074 19,651 114,055 31,686 176,683 345,663 21,332 115,246 31,712 177,373 342,267 19,607 117,010 30,650 174,999 355,003' 20,277' 122,322' 33,026 179,378 372,233 21,380 125,917 36,621 188,316 360,964 21,726 123,361 35,222 180,654 90,520 68,669 100,408 76,368 94,656 69,133 96,987 74,631 102,454 80,192 111,687 82,701 127,453 86,789 131,511 89,586 133,095 90,467 134,710 91,305 17,467 4,385 18,747 5,293 17,964 7,558 13,776 8,580 13,917 8,346 14,729 14,257 14,702' 25,%2' 14,507' 27,417' 14,430 28,198 14,991 28,413 11 Nonmonetary international and regional organizations7 5,957 4,454 5,821 3,495 4,519 3,441 3,974 5,253 3,038 3,882 12 Banks' own liabilities 13 Demand deposits 14 Time deposits 1 15 Other 2 4,632 297 3,584 750 2,014 254 1,267 493 2,621 85 2,067 469 1,749 138 681 931 2,388 99 1,109 1,179 891 79 551 262 1,857 156 1,209 492 4,090 165 3,233 691 1,721 180 1,243 299 2,406 175 1,919 312 16 Banks' custody liabilities4 U.S. Treasury bills and certificates 17 18 Other negotiable and readily transferable instruments 6 19 Other 1,325 463 2,440 916 3,200 1,736 1,746 768 2,131 1,282 2,550 1,619 2,118 991 1,163 129 1,317 218 1,476 308 862 0 1,524 0 1,464 0 970 7 849 0 918 13 1,126 0 1,033 1 1,099 0 1,162 6 7 Banks' custody liabilities4 U.S. Treasury bills and certificates 5 8 9 Other negotiable and readily transferable instruments 6 10 Other 20 Official institutions 8 79,876 86,065 79,985 86,576 88,526 91,932 95,863 100,247 104,439 101,705 21 Banks' own liabilities 22 Demand deposits Time deposits 1 23 Other 2 24 19,427 1,837 7,318 10,272 19,039 1,823 9,374 7,842 20,835 2,077 10,949 7,809 23,927 1,832 9,368 12,728 22,018 1,810 9,850 10,358 22,928 2,131 10,347 10,450 22,044 1,609 10,116 10,319 22,710 1,582 9,892 11,236 26,619 1,893 10,924 13,802 23,187 1,840 10,336 11,011 25 Banks' custody liabilities4 U.S. Treasury bills and certificates 5 26 27 Other negotiable and readily transferable instruments 6 Other 28 60,448 54,341 67,026 59,976 59,150 53,252 62,648 59,547 66,508 63,614 69,004 65,790 73,820 70,721 77,538 74,766 77,819 75,095 78,518 75,457 6,082 25 6,966 84 5,824 75 2,916 185 2,754 139 2,9% 218 2,892 207 2,624 148 2,524 199 2,857 204 29 Banks9 226,887 248,893 275,589 277,856 275,047 284,637 291,827' 301,549' 317,985 310,283 30 Banks' own liabilities 31 Unaffiliated foreign banks 32 Demand deposits Time deposits 1 33 34 Other 2 35 Own foreign offices 3 205,347 60,236 8,759 37,439 14,038 145,111 225,368 74,722 10,556 47,095 17,071 150,646 252,723 79,341 10,271 49,510 19,561 173,381 254,617 75,328 8,689 48,484 18,155 179,289 251,126 74,444 9,036 46,780 18,627 176,682 255,673 78,300 10,277 48,480 19,544 177,373 251,779 76,780 9,180 49,418 18,181 174,999 260,950' 81,573' 9,304' 52,811 19,458 179,378 276,542 88,226 9,302 58,043 20,881 188,316 268,343 87,690 9,714 55,916 20,059 180,654 21,540 10,178 23,525 11,448 22,866 9,832 23,239 9,914 23,922 10,841 28,964 10,688 40,048' 10,934 40,598' 10,543 41,443 10,635 41,940 10,601 7,485 3,877 7,236 4,841 6,040 6,994 5,423 7,901 5,451 7,629 5,448 12,828 5,585 23,529' 5,526 24,530' 5,538 25,270 5,501 25,838 36 Banks' custody liabilities4 U.S. Treasury bills and certificates 37 Other negotiable and readily transferable 38 instruments 6 Other 39 40 Other foreigners 56,887 67,894 74,331 75,530 76,436 77,339 78,055' 79,465' 79,867 79,803 41 Banks' own liabilities 42 Demand deposits 43 Time deposits Other 2 44 49,680 6,577 42,290 813 60,477 6,938 52,678 861 64,892 8,673 54,752 1,467 66,176 9,093 55,677 1,406 66,543 8,705 56,316 1,521 66,170 8,845 55,869 1,456 66,587 8,663 56,267 1,657 67,253' 9,227 56,386' 1,641 67,351 10,005 55,707 1,639 67,028 9,997 55,191 1,840 7,207 3,686 7,417 4,029 9,439 4,314 9,354 4,401 9,893 4,454 11,169 4,604 11,468' 4,143 12,212' 4,149 12,516 4,519 12,776 4,939 3,038 483 3,021 367 4,636 489 4,465 487 4,862 577 5,367 1,198 5,099' 2,226 5,325' 2,738 5,268 2,729 5,472 2,365 10,346 10,476 9,845 6,286 6,269 6,419 6,492 6,569 6,554 5,605 45 Banks' custody liabilities4 46 U.S. Treasury bills and certificates Other negotiable and readily transferable 47 instruments 6 Other 48 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 1. Excludes negotiable time certificates of deposit, which are included in "Other negotiable and readily transferable instruments." 2. Includes borrowing under repurchase agreements. 3. 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. 4. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks. 5. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official institutions of foreign countries. 6. Principally bankers acceptances, commercial paper, and negotiable time certificates of deposit. 7. Principally the International Bank for Reconstruction and Development, and the Inter-American and Asian Development Banks. 8. Foreign central banks and foreign central governments, and the Bank for International Settlements. 9. Excludes central banks, which are included in "Official institutions." Nonbank-Reported 3.17 Data Continued 1986 Area and country 1983 1984 1985 Apr. May June July Aug. Sept. Oct.? 1 Total 369,607 407,306 435,726 443,456 444,528 457,350 469,720 486,514' 505,328 495,673 2 Foreign countries 363,649 402,852 429,905 439,961 440,009 453,909 465,745 481,261' 502,290 491,791 138,072 585 2,709 466 531 9,441 3,599 520 8,462 4,290 1,673 373 1,603 1,799 32,246 467 60,683 562 7,403 65 596 153,145 615 4,114 438 418 12,701 3,358 699 10,762 4,731 1,548 597 2,082 1,676 31,740 584 68,671 602 7,192 79 537 164,114 693 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 9,635 105 523 165,193 931 5,737 752 619 19,322 6,718 559 6,553 4,320 731 674 1,919 1,313 27,247 363 81,983 547 4,233 38 634 165,795 897 5,425 523 514 19,423 4,964 552 7,875 4,183 850 796 1,879 1,299 26,848 434 83,885 556 4,165 34 693 166,382 1,013 5,224 519 484 19,862 4,639 657 8,918 4,224 710 795 2,069 1,118 27,812 586 82,314 661 3,997 89 690 163,016 988 5,343 560 449 20,129 5,646 604 8,828 4,682 497 711 1,894 1,267 28,455 310 78,193 542 3,366 48 506 166,145' 1,035 5,114 643 365 21,469' 5,290' 570 9,269 4,495 542 791 1,979 944 29,064' 285 79,947 482 3,277 32 553 173,730 1,106 6,132 483 407 21,338 5,360 623 8,819 4,952 575 758 2,083 1,295 29,207 448 86,209 562 2,729 84 562 172,324 1,020 5,837 478 606 21,243 5,800 645 8,757 4,817 664 737 2,293 1,032 29,832 459 83,908 515 2,938 25 719 3 Europe 4 Austria 5 Belgium-Luxembourg 6 Denmark Finland 7 8 France 9 Germany 10 Greece Italy 11 1? Netherlands 13 Norway 14 Portugal 15 Spain 16 Sweden 17 Switzerland 18 Turkey 19 United Kingdom 70 Yugoslavia Other Western Europe 1 21 U.S.S.R 77 2 23 Other Eastern Europe 16,026 16,059 17,427 20,450 21,257 22,926 22,359 23,933 24,150 24,339 140,088 4,038 55,818 2,266 3,168 34,545 1,842 1,689 8 1,047 788 109 10,392 3,879 5,924 1,166 1,244 8,632 3,535 153,381 4,394 56,897 2,370 5,275 36,773 2,001 2,514 10 1,092 896 183 12,303 4,220 6,951 1,266 1,394 10,545 4,297 167,856 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 4,668 164,801 5,627 57,865 2,270 5,788 41,354 2,147 3,101 7 1,199 1,128 173 13,126 4,859 6,960 1,116 1,646 11,727 4,708 161,405 6,075 53,680 2,016 5,542 42,116 2,223 3,053 7 1,166 1,097 201 13,153 4,798 7,042 1,132 1,703 11,712 4,689 169,650 6,229 60,081 2,513 5,185 43,278 2,270 3,419 8 1,262 1,108 185 13,633 4,358 6,686 1,254 1,664 11,734 4,783 181,737 6,336 60,764 2,201 5,134 55,552 2.227 3,334 7 1,196 1,123 184 12,985 4,382 6,639 1,158 1,687 12,058 4,770 187,780' 6,096 67,096 2,195 5,179 55,614 2,139 3,315 8 1,232 1,140 177 13,609' 4,383 6,390' 1,149 1,636 11,668 4,753' 196,765 6,069 69,119 2,199 5,359 61,557 2,426 3,373 75 1,260 1,129 187 13,137 4,765 6,415 1,253 1,589 11,708 5,144 187,819 5,819 64,022 1,930 5,358 58,576 2,400 3,773 6 1,216 1,126 151 13,201 4,646 6,521 1,167 1,608 11,446 4,852 58,570 71,187 72,280 81,682 83,817 86,977 91,669 96,021' 100,051 99,310 249 4,051 6,657 464 997 1,722 18,079 1,648 1,234 747 12,976 9,748 1,153 4,990 6,581 507 1,033 1,268 21,640 1,730 1,383 1,257 16,804 12,841 1,607 7,786 8,067 712 1,466 1,601 23,077 1,665 1,140 1,358 14,523 9,276 1,550 11,027 8,757 574 1,787 1,490 28,279 1,337 1,051 993 14,418 10,419 973 12,687 8,745 577 1,758 1,671 29,689 1,336 1,331 1,155 14,537 9,355 1,469 13,683 8,656 695 1,416 1,725 31,325 1,414 1,306 1,068 14,581 9,638 1,795 14,331 8,934 562 1,572 1,731 36,286 1,392 1,363 1,104 12,739 9,861 1,185 15,608 9,026 685 1,474 1,686 38,221 1,251 1,458 1,080 13,227 11,121 1,947 16,130 9,339 651 1,611 2,109 39,954 1,282 1,400 1,100 13,047 11,481 1,585 16,534 8,650 755 1,529 1,984 41,336 1,442 1,696 1,106 12,045 10,648 57 Africa 58 Egypt 59 Morocco South Africa 60 61 Zaire 67 Oil-exporting countries 4 Other Africa 63 2,827 671 84 449 87 620 917 3,396 647 118 328 153 1,189 961 4,883 1,363 163 388 163 1,494 1,312 4,173 960 85 386 90 1,442 1,210 4,227 910 92 414 105 1,490 1,216 4,291 1,079 87 414 92 1,463 1,156 4,041 820 93 609 65 1,368 1,086 4,227 1,088 82 438 60 1,371 1,189 4,168 843 91 328 80 1,584 1,244 3,973 640 86 347 79 1,623 1,199 64 Other countries 65 Australia 66 All other 8,067 7,857 210 5,684 5,300 384 3,347 2,779 568 3,662 3,058 604 3,507 2,744 763 3,682 2,943 739 2,924 2,173 751 3,155 2,459 696 3,425 2,785 640 4,026 2,943 1,083 67 Nonmonetary international and regional organizations International Latin American regional Other regional 5 5,957 5,273 419 265 4,454 3,747 587 120 5,821 4,806 894 121 3,495 2,512 823 160 4,519 3,669 748 102 3,441 2,471 845 126 3,974 2,714 922 338 5,253 4,147 916 190 3,038 1,759 972 307 3,882 2,728 957 197 24 Canada 75 Latin America and Caribbean 76 Argentina 77 Bahamas 78 Bermuda 29 Brazil British West Indies 30 31 Chile Colombia 37 33 Cuba Ecuador 34 35 Guatemala 36 Jamaica 37 Mexico 38 Netherlands Antilles 39 Panama 40 Peru Uruguay 41 47, Venezuela Other Latin America and Caribbean 43 44 45 46 47 48 49 50 51 5? 53 54 55 56 China Mainland Taiwan Hong Kong India Indonesia Israel Japan Korea Philippines Thailand Middle-East oil-exporting countries 3 Other Asia 68 69 70 1. Includes the Bank for International Settlements. Beginning April 1978, also includes Eastern European countries not listed in line 23. 2. Beginning April 1978 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. Asian. African, Middle Eastern, and European regional organizations, except the Bank for International Settlements, which is included in "Other Western Europe." A59 A60 3.18 International Statistics • February 1987 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end o f period 1986 Area and country 1983 1984 1985 Apr. May June July Aug. Sept. Oct.P 1 Total 391,312 400,162 401,608 401,109 394,667 403,843 403,494 403,729 416,645 406,569 2 Foreign countries 391,148 399,363 400,577 400,607 394,259 403,387 403,002 403,309 416,444 406,197 91,927 401 5,639 1,275 1,044 8,766 1,284 476 9,018 1,267 690 1,114 3,573 3,358 1,863 812 47,364 1,718 477 192 1,598 99,014 433 4,794 648 898 9,157 1,306 817 9,119 1,356 675 1,243 2,884 2,230 2,123 1,130 56,185 1,886 596 142 1,389 106,413 598 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 1,107 101,250 429 5,502 794 795 8,902 1,341 764 6,709 1,380 786 874 1,701 1,924 2,978 1,584 60,602 1,950 649 477 1,111 100,903 501 5,6% 882 866 8,861 1,176 723 6,806 1,384 746 850 1,986 2,239 3,134 1,649 59,332 1,928 491 489 1,164 104,441 609 7,243 750 983 9,455 1,095 629 7,474 1,407 905 776 2,001 2,478 3,553 1,856 58,224 2,005 1,253 568 1,176 100,321 619 6,113 856 1,041 9,583 1,426 622 7,266 1,427 614 789 1,863 2,906 2,617 1,709 56,249 1,902 1,102 504 1,112 100,323 694 6,990 783 %1 9,483 1,181 660 5,981 1,254 698 757 1,749 2,404 3,306 1,649 57,846 1,852 521 528 1,026 106,734 654 6,593 807 1,085 10,189 1,601 706 6,797 2,038 732 734 1,995 2,487 2,665 1,585 61,935 1,876 791 462 1,002 103,459 619 7,689 796 1,111 9,512 1,174 626 7,679 2,114 711 699 1,907 2,383 2,666 1,614 58,082 1,882 803 296 1,097 3 Europe 4 Austria 5 Belgium-Luxembourg 6 Denmark Finland 7 8 France 9 Germany 10 Greece 11 Italy 12 Netherlands 13 Norway 14 Portugal Spain 15 16 Sweden 17 Switzerland 18 Turkey 19 United Kingdom Yugoslavia 20 Other Western Europe 1 21 22 U.S.S.R Other Eastern Europe 2 23 24 Canada 16,341 16,109 16,482 18,814 17,910 18,270 18,303 19,401 18,112 19,502 205,491 11,749 59,633 566 24,667 35,527 6,072 3,745 0 2,307 129 215 34,802 1,154 7,848 2,536 977 11,287 2,277 207,862 11,050 58,009 592 26,315 38,205 6,839 3,499 0 2,420 158 252 34,885 1,350 7,707 2,384 1,088 11,017 2,091 202,674 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 2,067 199,032 11,803 55,260 275 25,363 38,932 6,540 2,861 0 2,388 124 216 32,367 839 6,133 1,767 953 11,295 1,917 193,625 11,921 52,537 238 25,271 37,072 6,537 2,820 0 2,382 112 218 31,493 1,075 5,919 1,757 951 11,326 1,997 200,733 12,079 57,075 274 24,855 40,043 6,507 2,789 0 2,397 136 244 31,399 1,086 5,860 1,738 931 11,304 2,015 202,204 12,282 56,250 432 24,915 41,923 6,514 2,776 0 2,366 113 209 31,168 996 6,280 1,703 927 11,364 1,985 197,866 12,009 55,453 373 24,762 39,836" 6,449 2,642 0 2,375 127 209 30,839 1,060 5,862 1,677 936 11,289 1,969" 205,575 12,119 61,702 320 24,856 40,357 6,488 2,634 0 2,387 135 224 31,037 1,133 6,377 1,600 1,051 11,175 1,979 196,914 12,243 53,565 452 24,728 40,040 6,514 2,674 2 2,418 122 247 31,024 972 6,094 1,625 930 11,180 2,086 67,837 66,316 66,212 73,421 73,965 72,033 74,253 77,792 78,082 78,652 292 1,908 8,489 330 805 1,832 30,354 9,943 2,107 1,219 4,954 5,603 710 1,849 7,293 425 724 2,088 29,066 9,285 2,555 1,125 5,044 6,152 639 1,535 6,7% 450 698 1,991 31,249 9,226 2,224 845 4,298 6,260 593 1,151 8,134 398 717 1,611 38,781 9,286 2,325 775 3,838 5,812 703 1,446 8,315 420 736 1,766 38,629 9,176 2,263 716 3,948 5,845 567 1,238 7,526 440 675 1,772 38,524 8,977 2,393 706 3,680 5,535 779 1,089 8,445 372 720 1,567 40,902 8,900 2,168 711 2,919 5,680 526 1,637 8,632 375 729 1,541 43,327 8,476 2,128 736 2,764 6,921 758 1,903 8,883 355 689 1,621 42,751 7,855 2,148 636 3,724 6,759 758 1,532 8,142 508 694 1,630 45,167 7,000 2,071 611 3,513 7,027 57 Africa 58 Egypt Morocco 59 South Africa 60 61 Zaire Oil-exporting countries 5 62 63 Other 6,654 747 440 2,634 33 1,073 1,727 6,615 728 583 2,795 18 842 1,649 5,407 721 575 1,942 20 630 1,520 5,007 639 662 1,716 17 465 1,508 4,890 619 640 1,743 17 417 1,455 4,971 740 642 1,705 17 415 1,452 4,817 701 615 1,661 17 413 1,410 4,693 633 617 1,683 21 445 1,294 4,660 593 636 1,607 42 511 1,271 4,411 577 617 1,428 35 545 1,207 64 Other countries Australia 65 66 All other 2,898 2,256 642 3,447 2,769 678 3,390 2,413 978 3,082 2,237 845 2,966 2,050 916 2,939 2,023 916 3,103 2,159 945 3,232 2,293 940 3,281 2,277 1,004 3,259 2,143 1,115 164 800 1,030 502 408 456 493 420 200 372 25 Latin America and Caribbean Argentina 26 27 Bahamas Bermuda 28 29 Brazil British West Indies 30 31 Chile 32 Colombia Cuba 33 Ecuador 34 Guatemala 3 35 36 Jamaica 3 37 Mexico Netherlands Antilles 38 39 Panama Peru 40 Uruguay 41 Venezuela 42 43 Other Latin America and Caribbean 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 4 Other Asia 67 Nonmonetary international and regional organizations 6 1. Includes the Bank for International Settlements. Beginning April 1978, also includes Eastern European countries not listed in line 23. 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German Democratic Republic, Hungary, Poland, and Romania. 3. Included in "Other Latin America and Caribbean" through March 1978. 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). 5. Comprises Algeria, Gabon, Libya, and Nigeria. 6. Excludes the Bank for International Settlements, which is included in "Other Western Europe." Nonbank-Reported 3.19 Data A61 BANKS' OWN A N D DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1986 Type of claim 1983 1984 1985 Apr. May 401,109 60,157 179,662 111,832 46,393 65,439 49,458 394,667 59,972 173,094 112,522 47,493 65,029 49,079 July Aug. 403,494 60,667 181,590 114,101 49,326 64,775 47,137 403,729 59,947r 182,151 115,922' 52,410 63,512' 45,708' June Sept. 1 Total 426,215 433,078 430,489 2 3 4 5 6 7 8 391,312 57,569 146.393 123,837 47,126 76,711 63.514 400,162 62,237 156,216 124,932 49,226 75,706 56,777 401,608 60,507 174,261 116,654 48,372 68,282 50,185 34,903 2,969 32,916 3,380 28,881 3,335 28,483 3,475 31,849 3,743 26,064 23,805 19,332 20,294 22,337 5,870 5,732 6,214 4,715 5,769 37,715 37,103 28,487 28,328 27,172 46,337 40,714 37,399 Oct .p Banks' own claims on foreigners Foreign public borrowers Own foreign offices 1 Unaffiliated foreign banks Deposits Other All other foreigners 9 Claims of banks' domestic customers2 .. 448,494 432,326 403,843 60,622 181,867 112,996 47,041 65,955 48,358 416,645 60,598 193,353 116,882 52,230 64,653 45,812 406,569 60,889 182,915 117,158 53,052 64,106 45,606 11 Negotiable and readily transferable 12 Outstanding collections and other 13 MEMO: Customer liability on acceptances Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 4 . . . . 1. 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, and foreign branches, agencies, or wholly owned subsidiaries of head office or parent foreign bank. 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 account of their domestic customers. 3.20 42,771 47,351 46,200 47,464 48,575' 44,515 n.a. 3. Principally negotiable time certificates of deposit and bankers acceptances. 4. 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. NOTE. Beginning April 1978, 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. BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1985 Maturity ; by borrower and area 1982 1983 1986 1984 Dec. 1 Total 2 3 4 5 6 7 8 9 10 11 12 13 By borrower Maturity of 1 year or less 1 Foreign public borrowers All other foreigners Maturity of over 1 year 1 Foreign public borrowers All other foreigners By area Maturity of 1 year or less 1 Europe Canada Latin America and Caribbean Africa All other 2 Maturity of over 1 year 1 14 Europe 15 Canada 16 Latin America and Caribbean 17 18 Africa 19 All other 2 1. Remaining time to maturity. Mar. June Sept.P 228,150 243,715 243,952 227,903 221,177 222,255' 224,317 173,917 21,256 152,661 54,233 23,137 31,095 176,158 24,039 152,120 67,557 32,521 35,036 167,858 23,912 143,947 76,094 38,695 37,399 160,824 26,302 134,522 67,078 34,512 32,567 152,696 23,845 128,851 68,481 36,681 31,800 152,247' 23,183 129,065' 70,008 37,177 32,830 154,731 22,392 132,339 69,586 38,115 31,471 50,500 7,642 73,291 37,578 3,680 1,226 56,117 6,211 73,660 34,403 4,199 1,569 58,498 6,028 62,791 33,504 4,442 2,593 56,585 6,401 63,328 27,966 3,753 2,791 53,462 5,899 59,538 28,034 3,331 2,433 57,929 6,043 57,134 25,772 3,297 2,073 59,331 5,968 57,814 26,713 3,038 1,866 11,636 1,931 35,247 3,185 1,494 740 13,576 1,857 43,888 4,850 2,286 1,101 9,605 1,882 56,144 5,323 2,033 1,107 7,634 1,805 50,674 4,502 1,538 926 7,783 1,925 52,165 4,251 1,634 722 7,934 2,256 53,572 4,034 1,497 714 7,285 1,861 54,147 3,990 1,479 824 2. Includes nonmonetary international and regional organizations. A62 International Statistics • February 1987 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks 1 2 3.21 Billions of dollars, end of period 1984 Area or country 1982 1985 1986 1983 Sept. 1 Total Dec. Mar. June Sept. Dec. Mar. June Sept.P 436.1 433.9 406.4 405.7 405.5 396.8 394.9 391.9 394.3' 390.9' 391.4 179.6 13.1 17.1 12.7 10.3 3.6 5.0 5.0 72.1 10.4 30.2 167.8 12.4 16.2 11.3 11.4 3.5 5.1 4.3 65.3 8.3 29.9 147.5 9.8 14.3 10.0 9.7 3.4 3.5 3.9 57.1 8.1 27.7 148.1 8.7 14.1 9.0 10.1 3.9 3.2 3.9 60.3 7.9 27.1 153.0 9.3 14.5 8.9 10.0 3.8 3.1 4.2 65.4 9.1 24.7 146.7 8.9 13.5 9.6 8.6 3.7 2.9 4.0 65.7 8.1 21.7 152.0 9.5 14.8 9.8 8.4 3.4 3.1 4.1 67.1 7.6 24.3 148.5 9.3 12.3 10.5 9.8 3.7 2.8 4.4 64.6 7.0 24.2 156.4' 8.3 13.8 11.2 8.5 3.5 2.9 5.4 68.5' 6.2' 28.1 159.8' 9.0 15.1' 11.5 9.3 3.4 2.9 5.6 68.9 6.8' 27.4 158.6 8.5 14.6 12.5 8.1 3.9 2.7 4.8 70.1 6.1 27.4 13 Other developed countries 14 Austria 15 Denmark 16 Finland 17 Greece 18 Norway 19 Portugal Spain 20 21 Turkey 22 Other Western Europe 23 South Africa 24 Australia 33.5 1.9 2.4 2.2 3.0 3.3 1.5 7.5 1.4 2.3 3.7 4.3 36.0 1.9 3.4 2.4 2.8 3.3 1.5 7.1 1.7 1.8 4.7 5.4 36.2 1.8 2.9 1.9 3.2 3.2 1.6 6.9 2.0 1.7 5.0 6.1 33.6 1.6 2.2 1.9 2.9 3.0 1.4 6.5 1.9 1.7 4.5 6.0 32.8 1.6 2.1 1.8 2.9 2.9 1.4 6.4 1.9 1.7 4.2 6.1 32.3 1.6 1.9 1.8 2.9 2.9 1.3 5.9 2.0 1.8 3.9 6.2 32.0 1.7 2.1 1.8 2.8 3.4 1.4 6.1 2.1 1.7 3.3 5.6 30.4 1.6 2.4 1.6 2.6 2.9 1.3 5.8 1.9 2.0 3.2 5.0 31.6' 1.6 2.5 1.9 2.5 2.7 1.1 6.4 2.3 2.4 3.2 4.9 30.6 1.7 2.4 1.6 2.6 3.0 1.0 6.4 2.5 2.1 3.1 4.2 29.4 1.7 2.3 1.7 2.3 2.7 1.0 6.7 2.1 1.6 3.1 4.2 25 OPEC countries 3 26 Ecuador 27 Venezuela 28 Indonesia 29 Middle East countries 30 African countries 26.9 2.2 10.5 2.9 8.5 2.8 28.4 2.2 9.9 3.4 9.8 3.0 24.4 2.1 9.2 3.2 7.3 2.5 24.9 2.2 9.3 3.3 7.9 2.3 24.5 2.2 9.3 3.3 7.4 2.3 22.8 2.2 9.3 3.1 6.1 2.2 22.7 2.2 9.0 3.1 6.2 2.3 21.6 2.1 8.9 3.0 5.5 2.0 20.7' 2.2 8.7 3.3 4.8 1.8 20.6 2.1 8.8 3.0 5.0 1.7 20.0 2.1 8.7 2.8 4.7 1.7 106.5 110.8 111.6 111.8 110.8 110.0 107.8 105. 1' 103.5' 101.4' 99.6 8.9 22.9 6.3 3.1 24.2 2.6 4.0 9.5 23.1 6.4 3.2 25.8 2.4 4.2 9.1 26.3 7.1 2.9 26.0 2.2 3.9 8.7 26.3 7.0 2.9 25.7 2.2 3.9 8.6 26.4 7.0 2.8 25.5 2.2 3.8 8.6 26.6 6.9 2.7 25.3 2.1 3.7 8.9 25.5 6.6 2.6 24.4 1.9 3.5 8.9 25.6 7.0 2.7 24.2' 1.8 3,4 8.9 25.7 7.0 2.3 24.(K 1.7 3.3 9.2 25.3 7.1 2.2 23.8' 1.6 3.3 9.3 25.2 7.1 2.0 23.8 1.5 3.4 Israel Korea (South) Malaysia Philippines Thailand Other Asia .2 5.3 .5 2.3 10.7 2.1 6.3 1.6 1.1 .3 5.2 .9 1.9 11.2 2.8 6.1 2.2 1.0 .5 5.1 1.0 1.7 10.3 2.9 5.9 1.8 .9 .7 5.1 .9 1.8 10.6 2.7 6.0 1.8 1.1 .7 5.3 .9 1.7 10.4 2.7 6.1 1.7 1.1 .3 5.5 .9 2.3 10.0 2.8 6.0 1.6 .9 1.1 5.1 1.1 1.5 10.4 2.7 6.0 1.6 .9 .5 4.5 1.2 1.6 9.4 2.4 5.7 1.4 1.0 .6 4.3 1.2 1.3 9.5 2.2 5.6 1.3 .9 .6 3.7' 1.3 1.6 8.6' 2.0 5.7 1.1 .8 .6 4.3 1.3 1.4 7.3 2.1 5.4 1.0 .7 Africa Egypt Morocco Zaire Other Africa 4 1.2 .7 .1 2.4 1.5 .8 .1 2.3 1.2 .8 .1 1.9 1.2 8 .1 2.1 1.1 .8 .1 2.2 1.0 .8 .1 2.0 1.0 .9 .1 2.0 1.0 .9 .1 1.9 .9 .9 .1 1.9 .9 .9 .1 1.7 .7 .9 .1 1.6 52 Eastern Europe 53 U.S.S.R 54 Yugoslavia 55 Other 6.2 .3 2.2 3.7 5.3 .2 2.4 2.8 4.5 .2 2.3 2.1 4.4 .1 2.3 2.0 4.3 .2 2.2 1.9 4.3 .3 2.2 1.8 4.6 .2 2.4 1.9 4.2 .1 2.2 1.8 4.0 .3 2.0 1.7 4.0 .3 2.0 1.7 3.3 .1 1.9 1.4 56 Offshore banking centers 57 Bahamas 58 Bermuda 59 Cayman Islands and other British West Indies 60 Netherlands Antilles 61 Panama 5 62 Lebanon 63 Hong Kong 64 Singapore 65 Others 6 66.0 19.0 .9 12.8 3.3 7.5 .1 13.3 9.1 .0 68.9 21.7 .9 12.2 4.2 5.8 .1 13.8 10.3 .0 65.1 23.3 1.0 11.1 3.1 5.6 .1 11.6 9.4 .0 65.6 21.5 .9 11.8 3.4 6.7 .1 11.4 9.8 .0 63.2 20.1 .7 12.3 3.3 5.5 .1 11.4 9.9 .0 63.9 21.1 .9 12.1 3.2 5.4 .1 11.4 9.7 .0 58.8 16.6 .8 12.3 2.3 6.1 .0 11.4 9.4 .0 65.4 21.4 .7 13.4 2.3 6.0 .1 11.5 9.9 .0 61.5 21.5 .7 11.3 2.3 5.9 .1 11.4 8.4 .0 57.2 17.3 .4 12.8 2.3 5.5 .1 9.4 9.3 .0 62.6 20.0 .5 13.2 1.9 6.8 .1 10.4 9.7 .0 66 Miscellaneous and unallocated 7 17.5 16.8 17.1 17.3 16.9 16.9 17.3 16.9 16.7' 17.2 17.8 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 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 Latin America Argentina Brazil Chile Colombia Mexico Peru Other Latin America Asia China Mainland Taiwan 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. Besides the Organization of Petroleum Exporting Countries shown individually, this group includes other members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates) as well as 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 3.22 Data A63 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States 1 Millions of dollars, end o f period 1986 1985 Type, and area or country 982 1984 1983 Sept. June Dec. JuneP Mar. 1 Total 27,512 25,346 29,357 24,574 25,256 27,230 25,635 24,222 2 Payable in dollars 3 Payable in foreign currencies 24,280 3,232 22,233 3,113 26,389 2,968 21,899 2,675 22,408 2,848 23,994 3,236 22,022 3,613 20,692 3,530 By type 4 Financial liabilities 5 Payable in dollars 6 Payable in foreign currencies 11,066 8,858 2,208 10,572 8,700 1,872 14,509 12,553 1,955 11,528 9,543 1,985 11,815 9,824 1,991 13,005 10,955 2,050 12,328 10,205 2,123 11,117 9,177 1,940 7 Commercial liabilities 8 Trade payables 9 Advance receipts and other liabilities... 16,446 9,438 7,008 14,774 7,765 7,009 14,849 7,005 7,843 13,046 5,797 7,249 13,441 5,694 7,747 14,225 6,685 7,540 13,307 5,598 7,710 13,105 5,503 7,602 15,423 1,023 13,533 1,241 13,836 1,013 12,356 690 12,584 857 13,039 1,186 11,817 1,490 11,516 1,590 6,501 505 783 467 711 792 3,102 5,742 302 843 502 621 486 2,839 6,728 471 995 489 590 569 3,297 5,944 351 865 474 604 566 2,835 6,568 367 849 493 624 593 3,351 7,270 329 857 419 745 676 3,924 6,971 338 851 371 630 702 3,736 6,705 288 701 262 651 561 3,960 746 764 863 850 826 760 753 287 10 11 12 13 14 15 16 17 18 Payable in dollars Payable in foreign currencies By area or country Financial liabilities Europe Belgium-Luxembourg France Germany Netherlands Switzerland United Kingdom 19 Canada 20 21 22 23 24 25 26 Latin America and Caribbean Bahamas Bermuda Brazil British West Indies Mexico Venezuela 2,751 904 14 28 1,027 121 114 2,596 751 13 32 1,041 213 124 5,086 1,926 13 35 2,103 367 137 3,106 1,107 10 27 1,734 32 3 2,619 1,145 4 23 1,234 28 3 3,152 1,120 4 29 1,814 15 3 2,788 954 13 26 1,610 20 4 2,404 859 14 27 1,362 30 3 27 28 29 Asia Japan Middle East oil-exporting countries 2 .. 1,039 715 169 1,424 991 170 1,777 1,209 155 1,584 994 147 1,767 1,136 82 1,790 1,173 82 1,799 1,192 78 1,660 1,189 43 30 Africa 17 0 19 0 14 0 14 0 14 0 12 0 12 0 12 0 12 27 41 30 22 21 4 49 3,831 52 598 468 346 367 1,027 3,245 62 437 427 268 241 732 4,001 48 438 622 245 257 1,095 3,461 53 423 428 284 349 730 3,897 56 431 601 386 289 858 4,074 62 453 607 364 379 976 3,915 66 382 546 545 251 957 3,761 58 357 512 587 283 861 31 32 33 34 35 36 37 38 39 40 Oil-exporting countries 3 All other 4 Commercial liabilities Europe Belgium-Luxembourg France Germany Netherlands Switzerland United Kingdom Canada 1,495 1,841 1,975 1,494 1,383 1,449 1,442 1,351 41 42 43 44 45 46 47 Latin America and Caribbean Bahamas Bermuda Brazil British West Indies Mexico Venezuela 1,570 16 117 60 32 436 642 1,473 1 67 44 6 585 432 1,871 7 114 124 32 586 636 1,225 12 77 90 1 492 309 1,262 2 105 120 15 415 311 1,088 12 77 58 44 430 212 1,097 26 210 64 7 256 364 1,304 10 294 107 35 235 488 48 49 50 Asia Japan Middle East oil-exporting countries 2 ' 5 , 8,144 1,226 5,503 6,741 1,247 4,178 5,285 1,256 2,372 5,246 1,219 2,396 5,353 1,567 2,109 6,046 1,799 2,829 5,384 2,039 2,171 5,068 2,095 1,731 51 52 Africa Oil-exporting countries 3 753 277 553 167 588 233 631 265 572 235 587 238 486 148 569 215 53 All other 4 651 921 1,128 988 975 982 983 1,053 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. 5. Revisions include a reclassification of transactions, which also affects the totals for Asia and the grand totals. A64 International Statistics • February 1987 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS United States' Reported by Nonbanking Business Enterprises in the Millions of dollars, end o f period 1985 Type, and area or country 1982 1983 1986 1984 June Sept. Dec. Mar. JuneP 1 Total 28,725 34,911 29,901 26,750 28,610 28,085 30,927 32,519 2 Payable in dollars 3 Payable in foreign currencies 26,085 2,640 31,815 3,0% 27,304 2,597 24,121 2,629 25,743 2,866 25,783 2,302 28,740 2,187 30,337 2,182 By type 4 Financial claims 5 Deposits 6 Payable in dollars 7 Payable in foreign currencies 8 Other financial claims 9 Payable in dollars 10 Payable in foreign currencies 17,684 13,058 12,628 430 4,626 2,979 1,647 23,780 18,4% 17,993 503 5,284 3,328 1,956 19,254 14,621 14,202 420 4,633 3,190 1,442 16,695 12,839 12,283 556 3,856 2,375 1,480 19,203 15,315 14,611 704 3,889 2,351 1,538 18,099 14,852 14,237 615 3,248 2,213 1,035 21,540 18,146 17,689 457 3,394 2,301 1,093 23,324 20,034 19,479 555 3,290 2,269 1,021 11 Commercial claims 12 Trade receivables 13 Advance payments and other claims 11,041 9,994 1,047 11,131 9,721 1,410 10,646 9,177 1,470 10,055 8,688 1,367 9,406 7,932 1,475 9,986 8,6% 1,290 9,387 8,086 1,301 9,195 7,858 1,337 14 15 10,478 563 10,494 637 9,912 735 9,463 592 8,782 624 9,333 652 8,750 637 8,589 606 4,873 15 134 178 97 107 4,064 6,488 37 150 163 71 38 5,817 5,762 15 126 224 66 66 4,864 5,477 15 51 175 46 16 4,900 6,463 12 132 158 127 53 5,736 6,327 10 184 223 61 74 5,522 6,859 10 217 172 61 166 5,986 8,877 11 257 148 17 177 8,051 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 4,377 5,989 3,988 3,756 4,037 3,256 4,024 4,464 24 25 26 27 28 29 30 Latin America and Caribbean Bahamas Bermuda Brazil British West Indies Mexico Venezuela 7,546 3,279 32 62 3,255 274 139 10,234 4,771 102 53 4,206 293 134 8,216 3,306 6 100 4,043 215 125 6,616 2,204 6 % 3,747 206 100 7,603 2,315 5 92 4,632 201 73 7,697 2,685 6 78 4,440 180 48 9,934 3,500 2 77 5,904 178 43 9,151 3,251 17 75 5,359 176 42 698 153 15 764 297 4 %1 353 13 640 281 6 969 725 6 696 475 4 621 350 2 723 499 2 158 48 147 55 210 85 111 25 104 31 103 29 87 27 89 25 31 159 117 95 26 21 14 20 3,826 151 474 357 350 360 811 3,670 135 459 349 334 317 809 3,801 165 440 374 335 271 1,063 3,680 212 408 375 301 376 950 3,235 158 360 336 286 208 779 3,533 175 426 346 284 284 898 3,387 148 384 396 221 248 793 3,304 131 390 414 237 221 668 31 32 33 34 35 36 37 38 39 40 41 42 43 Japan Middle East oil-exporting countries 2 Africa Oil-exporting countries 3 All other 4 Commercial claims Europe Belgium-Luxembourg France Germany Netherlands Switzerland United Kingdom 44 Canada 45 46 47 48 49 50 51 Latin America and Caribbean Bahamas Bermuda Brazil British West Indies Mexico Venezuela 52 53 54 55 56 57 633 Japan Middle East oil-exporting countries 2 Africa Oil-exporting countries 3 All other 4 829 1,021 1,065 1,100 1,023 1,060 970 2,526 21 261 258 12 775 351 2,695 8 190 493 7 884 272 2,052 8 115 214 7 583 206 1,803 11 65 193 29 468 181 1,660 18 62 211 7 416 149 1,753 13 93 206 6 510 157 1,599 27 82 231 7 388 172 1,590 24 148 194 24 320 180 3,050 1,047 751 3,063 1,114 737 3,073 1,191 668 2,707 954 593 2,712 884 541 2,982 1,016 638 2,606 801 630 2,649 846 691 588 140 588 139 470 134 464 137 434 131 437 130 491 167 447 171 417 286 229 336 264 257 244 235 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 3.24 and Transactions A65 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1986 Transactions, and area or country 1984 1986 1985 Jan.Oct. Apr. May June July Aug. Sept. Oct.? U.S. corporate securities STOCKS 1 2 Foreign purchases Foreign sales 3 Net purchases, or sales (—) 59,834 62,814 81,995 77,054 121,897 104,943 -2,980 4,941 16,954 15,414 11,468 13,244 10,388 11,176 10,832 3,947 2,856 2,814 12,260 10,948 10,948 12,281 13,268 11,258 12,045' 10,615' 344 2,010 1,430' 1,258 -1,333 1,470' 1,303 -1,189 Foreign countries -3,109 4,857 17,208 3,883 464 2,075 5 6 7 8 9 10 11 12 13 14 15 16 Europe France Germany Netherlands Switzerland United Kingdom Canada Latin America and Caribbean Middle East 1 Other Asia Africa Other countries -3,077 -405 -50 -357 -1,542 -677 1,691 495 -1,992 -378 -22 175 2,057 -438 730 -123 -75 1,665 356 1,718 238 296 24 168 9,493 418 320 972 1,748 4,579 643 2,437 801 3,334 258 241 2,066 36 47 123 569 733 52 880 339 399 48 100 1,571 99 99 236 376 563 44 489 117 472 43 78 192 219 -174 97 -134 38 131 60 -236 288 -3 32 576 182 -130 52 -198 481 214 269 181 830 30 -23 824' 105 -42 50 44 521' 97 108 78 376 -1 -13 587 30 9 36 70 462 93 145 58 346 -13 86 -1,126 -92 -104 -19 -405 -484 -125 154 -51 16 39 -97 17 Nonmonetary international and regional organizations 129 84 -254 63 42 -121 -65 -40 -45 -143 39,296 26,399 86,587 42,439 101,456 57,913 13,483 8,855 12,044 5,252 8,964 5,686 8,937 5,679 9,420 5,348 10,160 5,585 9,718 5,494 4 BONDS 2 18 19 Foreign purchases Foreign sales 20 Net purchases, or sales (—) 12,897 44,149 43,543 4,628 6,792 3,278 3,259 4,072 4,575 4,223 21 Foreign countries 12,600 44,244 42,926 4,438 6,696 2,798 3,197 4,077 4,871 4,481 22 23 24 25 26 27 28 29 30 31 32 33 Europe France Germany Netherlands Switzerland United Kingdom Canada Latin America and Caribbean Middle East 1 Other Asia Africa Other countries 11,697 207 1,724 100 643 8,429 -62 376 -1,230 1,817 1 0 40,047 210 2,001 222 3,987 32,762 190 498 -2,631 6,091 11 38 34,126 28 -125 222 4,442 29,705 240 1,301 -2,338 9,458 12 127 3,641 -22 -73 2 1,231 2,578 74 263 -396 840 3 13 6,221 83 205 89 456 5,631 54 142 -186 464 -2 3 2,763 -6 -3 -37 490 2,214 55 63 -632 480 3 66 2,395 6 -91 -39 180 2,213 85 250 -718 1,177 -3 11 2,484 20 -81 98 564 1,917 110 160 -40 1,329 5 29 3,386 -29 26 51 30 3,414 2 64 -169 1,586 6 -4 3,501 0 81 -55 265 3,203 86 101 -33 816 -1 11 34 Nonmonetary international and regional organizations 297 -95 617 190 96 480 61 -4 -296 -258 Foreign securities 35 36 37 Stocks, net purchases, or sales ( - ) Foreign purchases Foreign sales -1,101 14,816 15,917 -3,894 20,851 24,746 -1,960 41,033 42,993 -1,668 4,390 6,057 -221 3,454 3,675 -238 3,775 4,013 404 4,310 3,907 -83 4,610 4,694 676 5,091 4,415 1,207 6,233 5,026 38 39 40 Bonds, net purchases, or sales ( - ) Foreign purchases Foreign sales -3,930 56,017 59,948 -3,996 81,214 85,210 -2,029 136,854 138,883 -1,251 15,296 16,546 188 13,491 13,303 1,540 15,632 14,091 359 13,559 13,200 1,232 14,086 12,854 -2,231 15,182 17,412 2,150 16,239 14,089 41 Net purchases, or sales (—), of stocks and bonds . . . . -5,031 -7,891 -3,988 -2,918 -33 1,302 762 1,149 -1,555 3,357 42 Foreign countries -4,642 -8,954 -4,520 -2,788 -106 1,122 438 1,090 -1,492 3,173 43 44 45 46 47 48 Europe Canada Latin America and Caribbean -8,655 542 2,460 1,356 -108 -238 -9,887 -1,682 1,845 658 75 38 -15,153 -508 3,194 8,901 44 -997 -2,649 -286 176 -124 6 89 208 82 363 -746 3 -16 -1,332 16 742 1,639 3 55 -683 245 278 659 9 -70 -714 263 127 1,337 1 75 -3,379 111 351 1,852 3 -430 -504 88 449 3,201 -2 -59 49 Nonmonetary international and regional organizations -389 1,063 532 -130 73 180 324 59 -63 184 Africa Other countries 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- ties sold abroad by U.S. corporations organized to finance direct investments abroad. A66 3.25 International Statistics • February 1987 MARKETABLE U.S. TREASURY BONDS A N D NOTES Foreign Transactions Millions of dollars 1986 Country or area 1984 1986 1985 Jan.Oct. Apr. May June July Aug. Sept. Oct.? Transactions, net purchases or sales ( - ) during period 1 1 Estimated total2 21,501 29,047 25,686 8,658 -2,132 3,112 -254 752 5,480 2 Foreign countries 2 16,496 28,591 26,409 8,398 -252 2,230 2,705 2,215 4,485 2,678 11,014 287 2,929 449 40 656 5,188 1,466 0 1,586 4,145 476 1,917 269 976 760 -1,954 1,701 0 -188 16,501 321 7,295 1,303 447 1,161 3,955 2,019 0 559 1,625 29 139 81 113 163 -206 1,307 0 55 1,436 39 468 -31 236 365 698 -339 0 908 2,562 82 357 -64 16 349 698 1,125 0 -302 2,544 -46 818 1,756 42 -278 610 -358 0 67 2,442 180 1,050 -64 -25 52 1,207 43 0 105 -685 239 1,133 -313 85 -53 -1,970 195 0 -198 2,943 4 2,419 112 4 373 170 -139 0 -230 1,418 14 536 869 2,431 6,289 -67 114 4,312 238 2,343 1,731 19,899 17,920 112 311 725 -84 1,148 -339 8,093 5,816 -45 576 1,234 196 173 865 5,092 2,267 -1 394 -954 36 372 -1,363 -1,617 -1,148 -2 -22 -460 -170 -290 0 515 223 -5 -80 28 -72 96 5 -137 273 6 198 -37 -294 255 2 -133 683 -1 -160 220 266 32 -78 5,336 4,395 11 -200 -224 -55 -195 26 41 -453 -15 163 5,009 4,612 0 457 -420 18 -721 -929 157 260 198 30 -1,880 -1,889 0 882 899 5 -2,959 -2,804 0 -1,462 -1,511 0 995 890 39 239 290 -5 16,496 505 15,992 28,591 8,088 20,503 26,409 14,112 12,298 8,398 3,862 4,537 -252 157 -409 2,230 1,612 619 2,705 1,448 1,257 2,215 61 2,154 4,485 2,324 2,161 2,678 3,274 -596 -6,270 -101 -1,581 7 -465 4 1,334 1 -14 -290 0 14 2 -239 -205 2 -377 3 Europe 2 4 Belgium-Luxembourg 5 Germany 2 6 Netherlands 7 Sweden 8 Switzerland 2 9 United Kingdom 10 Other Western Europe 11 Eastern Europe 12 Canada 13 14 15 16 17 18 19 20 Latin America and Caribbean Venezuela Other Latin America and Caribbean Netherlands Antilles Asia Japan Africa All other 21 Nonmonetary international and regional organizations 22 International 23 Latin American regional 2,917 MEMO 24 Foreign countries 2 25 Official institutions 26 Other foreign 2 27 28 Oil-exporting countries Middle East 3 Africa 4 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. 1 -1 -1 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 3.26 A67 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per annum Rate on Nov. 30, 1986 Rate on Nov. 30, 1986 Country Percent Aug. 1985 May 1986 Mar. 1981 Nov. 1986 Oct. 1983 Country Month effective 4.0 8.0 49.0 8.47 7.0 Austria.. Belgium . Brazil... Canada.. Denmark Percent France 1 Germany, Fed. Rep. of Italy Japan Netherlands 1. As 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 3.27 Rate on Nov. 30, 1986 Country Month effective 7.0 3.5 12.0 3.0 4.5 June 1986 Mar. 1986 May 1986 Oct. 1986 Mar. 1986 Percent Month effective 8.0 Norway Switzerland United Kingdom 2 . Venezuela June 1983 Mar. 1983 4.0 Oct. 1985 or makes advances against eligible commercial paper and/or government commercial banks or brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood the central bank transacts the largest proportion of its credit operations. FOREIGN SHORT-TERM INTEREST RATES Percent per annum, averages of daily figures 1986 Country, or type 1983 1984 1985 May 1 2 3 4 5 6 7 8 9 10 June July Aug. Sept. Oct. Nov. Eurodollars United Kingdom Canada Germany Switzerland 9.57 10.06 9.48 5.73 4.11 10.75 9.91 11.29 5.96 4.35 8.27 12.16 9.64 5.40 4.92 6.86 10.16 8.60 4.58 4.32 6.95 9.70 8.72 4.59 4.96 6.54 9.91 8.45 4.61 4.80 6.06 9.79 8.50 4.56 4.30 5.88 10.05 8.38 4.48 4.13 5.88 11.08 8.45 4.56 3.96 5.96 11.12 8.39 4.67 3.88 Netherlands France Italy Belgium Japan 5.58 12.44 18.95 10.51 6.49 6.08 11.66 17.08 11.41 6.32 6.29 9.91 14.86 9.60 6.47 5.76 7.21 12.35 7.90 4.58 5.90 7.23 11.78 7.27 4.64 5.69 7.13 11.70 7.25 4.62 5.28 7.09 11.18 7.25 4.68 5.17 7.07 10.84 7.25 4.71 5.32 7.38 10.85 7.29 4.75 5.48 7.51 11.05 7.38 4.39 NOTE. Rates are for 3-month interbank loans except for Canada, finance company paper; Belgium, 3-month Treasury bills; and Japan, Gensaki rate. A68 3.28 International Statistics • February 1987 FOREIGN EXCHANGE RATES Currency units per dollar 1986 Country/currency 1983 1984 1985 June 1 2 3 4 5 6 7 1 July Aug. Sept. Oct. Nov. Australia/dollar Austria/schilling Belgium/franc Brazil/cruzeiro Canada/dollar China, P.R./yuan Denmark/krone 90.14 17.968 51.121 573.27 1.2325 1.9809 9.1483 87.937 20.005 57.749 1841.50 1.2953 2.3308 10.354 70.026 20.676 59.336 6205.10 1.3658 2.9434 10.598 68.89 15.699 45.633 13.84 1.3899 3.2115 8.2822 62.91 15.117 44.304 13.84 1.3808 3.6435 8.0635 61.23 14.502 42.701 13.84 1.3885 3.7129 7.7657 62.21 14.349 42.315 13.84 1.3872 3.7150 7.7278 63.83 14.111 41.635 13.98 1.3885 3.7257 7.5607 64.45 14.251 42.069 14.10 1.3863 3.7314 7.6444 8 9 10 11 12 13 14 Finland/markka France/franc Germany/deutsche mark Greece/drachma Hong Kong/dollar India/rupee Ireland/pound 1 5.5636 7.6203 2.5539 87.895 7.2569 10.1040 124.81 6.0007 8.7355 2.8454 112.73 7.8188 11.348 108.64 6.1971 8.9799 2.9419 138.40 7.7911 12.332 106.62 5.1954 7.1208 2.2337 140.98 7.8107 12.599 135.68 5.0744 6.9323 2.1517 138.40 7.8123 12.508 139.00 4.9377 6.7215 2.0621 134.68 7.8003 12.567 134.67 4.9190 6.6835 2.0415 135.07 7.8026 12.676 134.53 4.8684 6.5628 2.0054 135.44 7.7999 12.848 135.89 4.9576 6.6206 2.0243 139.12 7.7974 13.076 134.64 15 16 17 18 19 20 21 Italy/lira Japan/yen Malaysia/ringgit Netherlands/guilder New Zealand/dollar 1 Norway/krone Portugal/escudo 1519.30 237.55 2.3204 2.8543 66.790 7.3012 111.610 1756.10 237.45 2.3448 3.2083 57.837 8.1596 147.70 1908.90 238.47 2.4806 3.3184 49.752 8.5933 172.07 1533.10 167.54 2.6231 2.5154 54.585 7.6117 151.09 1478.31 158.61 2.6455 2.4236 53.176 7.4800 148.67 1420.33 154.18 2.6121 2.3242 50.068 7.3534 146.17 1410.23 154.73 2.6174 2.3050 47.950 7.3429 146.83 1387.67 156.47 2.6245 2.2663 50.392 7.3611 147.24 1401.08 162.85 2.6131 2.2870 51.382 7.5401 149.54 22 23 24 25 26 27 28 29 30 31 Singapore/dollar South Africa/rand 1 South Korea/won Spain/peseta Sri Lanka/rupee Sweden/krona Switzerland/franc Taiwan/dollar Thailand/baht United Kingdom/pound 1 2.1136 89.85 776.04 143.500 23.510 7.6717 2.1006 n.a. 22.991 151.59 2.1325 69.534 807.91 160.78 25.428 8.2706 2.3500 39.633 23.582 133.66 2.2008 45.57 861.89 169.98 27.187 8.6031 2.4551 39.889 27.193 129.74 2.2232 39.49 890.74 142.91 27.955 7.2124 1.8406 38.163 26.400 150.85 2.1861 39.04 888.59 137.58 28.065 7.0715 1.7445 38.119 26.204 150.71 2.1601 38.39 886.45 134.11 28.187 6.9365 1.6616 37.422 26.093 148.61 2.1680 43.36 883.06 134.10 28.297 6.9191 1.6537 36.885 26.120 146.98 2.1777 44.42 879.22 133.43 28.407 6.8901 1.6433 36.647 26.129 142.64 2.1922 44.37 873.54 136.10 28.471 6.9683 1.6858 36.438 26.278 142.38 125.34 138.19 143.01 113.77 110.38 107.50 107.15 106.58 107.90 MEMO 32 United States/dollar 2 1. Value in U.S. cents. 2. Index of weighted-average exchange value of U.S. dollar against currencies of other G-10 countries plus Switzerland. March 1973 = 100. Weights are 1972-76 global trade of each of the 10 countries. Series revised as of August 1978. For description and back data, see "Index of the Weighted-Average Exchange Value of the U.S. Dollar: Revision" on p. 700 of the August 1978 BULLETIN. 3. Currency reform. NOTE. Averages of certified noon buying rates in New York for cable transfers. Data in this table also appear in the Board's G.5 (405) release. For address, see inside front cover. A69 Guide to Tabular Presentation, Statistical Releases, and Special Tables GUIDE TO TABULAR Symbols and c e p r * 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 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. RELEASES List Published Semiannually, with Latest Bulletin Reference Issue December 1986 Anticipated schedule of release dates for periodic releases Page A87 SPECIAL TABLES Published Irregulary, with Latest Bulletin Reference Assets Assets Assets Assets Assets Assets Assets Assets Terms Terms Terms Terms and liabilities of commercial banks, March 31, 1983 and liabilities of commercial banks, June 30, 1983 and liabilities of commercial banks, September 30, 1983 and liabilities of commercial banks, December 31, 1985 and liabilities of U.S. branches and agencies of foreign banks, and liabilities of U.S. branches and agencies of foreign banks, and liabilities of U.S. branches and agencies of foreign banks, and liabilities of U.S. branches and agencies of foreign banks, of lending at commercial banks, February 1986 of lending at commercial banks, May 1986 of lending at commercial banks, August 1986 of lending at commercial banks, November 1986 Special tables begin on next page. September 30, 1985 December 31, 1985 March 31, 1986 June 30, 1986 August December March January May September November December May July December February 1983 1983 1984 1987 1986 1986 1986 1986 1986 1986 1986 1987 A70 A68 A68 A70 A74 A70 A70 A76 A70 A70 A70 A70 A70 4.23 Special Tables • February 1987 TERMS OF L E N D I N G AT COMMERCIAL B A N K S Survey of Loans Made, November 3-7, 19861 A. Commercial and Industrial Loans2 Characteristics 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) ALL BANKS 1 Overnight 8 2 One month and under 3 Fixed rate 4 Floating rate 5 Over one month and under a year 6 Fixed rate 7 Floating rate 8 Demand 9 9 Fixed rate 10 Floating rate 18,042,062 7,415 9,138,063 7,227.320 1,910,743 657 844 358 10,836,499 5,317,993 5,518,506 126 130 123 6,306,616 1,560,525 4,746,092 78.3 174 618 141 18 31,768,686 295,394 163,721 197,270 597,956 280,882 30,233,463 584 8 32 64 213 677 7,874 19 Floating rate (thousands of dollars). 20 1-24 21 25-49 22 50-99 23 100-499 24 500-999 25 1000 and over 12,554,554 407,448 455,089 765,387 2,464,770 1,178,220 7,283,639 149 9 34 66 196 640 3,978 26 Total long term 6,635,816 27 Fixed rate (thousands of dollars) 28 1-99 29 100-499 30 500-999 31 1000 and over 7.97 7.78 8.16 6.79-8.65 6.70-8.23 6.98-8.87 72.8 74.0 71.6 7.8 9.5 6.1 8.01 6.93 8.37 6.91-8.84 6.38-7.11 7.76-8.87 80.7 76.6 82.0 5.7 4.2 6.54-7.76 77.0 4.8 22 106 107 6.96 11.24 10.22 10.18 130 60 9.14 7.51 6.83 77.3 18.8 32.9 18.3 51.1 80.9 79.0 3.5 112 6.49-7.11 9.93-12.55 8.83-11.73 8.87-11.36 8.03-10.47 6.79-7.79 6.48-6.98 4.5 3.7 126 158 8.10 9.70 9.54 9.29 8.75 8.45 7.53 6.98-8.84 8.84-10.25 8.82-9.93 8.57-9.92 7.85-9.38 7.76-9.11 6.58-8.30 76.4 71.0 72.8 70.8 76.1 3.9 4.1 1.7 4.1 77.0 10.7 8.24 7.49-9.04 76.5 7.9 11.35 9.49 9.92 7.56 6.99-8.84 9.49-12.40 8.30-10.75 9.76-11.02 6.79-8.06 67.6 19.6 24.9 21.5 78.1 1.9 .0 17.7 7.71-9.04 8.57-9.96 8.03-9.38 7.76-8.84 7.64-8.84 79.8 56.8 65.8 76.2 84.3 10.1 1.1 11.3 78.2 78.2 76.7 76.8 1.3 7.6 12.8 3.4 195 696 8,109 4,836,150 273,875 563,406 450,929 3,547,940 135 96 171 179 32 Floating rate (thousands of dollars) 33 1-99 34 100-499 35 500-999 36 1000 and over 7.7 4.7 19.0 265 1,799,667 144,382 132,431 57,597 1,465,256 77.1 76.6 79.0 44,323,240 12 Fixed rate (thousands of dollars) . 13 1-24 14 25-49 15 50-99 16 100-499 17 500-999 18 1000 and over 6.51-7.43 6.47-7.19 6.66-8.33 7.28 11 Total short term 18 20 7.11 6.98 7.61 322 25 194 652 5,521 18 161 158 143 168 110 80.8 6.2 .1 .1 .9 1.1 8.0 6.2 Months 16 8.30 9.41 8.79 8.49 8.11 Loan rate (percent) Effective Nominal 6.3 11.1 Prime rate 11 Days 4 .0 10 LOANS MADE BELOW PRIME 1 2 Overnight 8 One month and under Over one month and under a year . Demand 9 17,572,718 7,413,630 4,828,488 2,060,771 9,467 4,110 907 2,561 41 Total short term 31,875,608 42 Fixed rate 43 Floating rate 27,957,590 3,918,017 4,042 1,365 6.66 3,256 37 38 39 40 6.45 6.53 6.64 16 101 6.48 7.50 7.51 7.60 7.51 6.70 17 126 6.50 7.52 77.9 4.7 6.70 6.71 6.50 6.51 7.51 7.56 77.8 78.3 10.2 7.75 89.5 14.6 6.73 6.87 6.60 6.67 7.70 7.80 86.2 2.3 26.2 6.74 6.81 6.62 3.9 Months 44 Total long term 1,927,756 1,184 45 Fixed rate . . . . 46 Floating rate . . 935,092 992,664 1,093 1,285 For notes see end of table. 47 92.7 Financial Markets 4.23 Continued A. Commercial and Industrial Loans Characteristics Amount of loans (thousands of dollars) Continued Average size (thousands of dollars) Loan rate (percent) Weighted average maturity 3 Days Weighted average effective 4 Standard Interquartile range 6 Loans made under commitment (percent) Participation loans (percent) LARGE BANKS 1 Overnight 8 6.45-6.88 12,542,083 9,774 2 One month and under 3 Fixed rate 4 Floating rate 6,537,372 5,695,923 841,449 2,953 4,798 820 18 17 21 6.95 6.88 7.40 6.53-7.21 6.47-7.19 6.76-7.78 79.7 78.6 87.3 4.3 3.5 9.1 5 Over one month and under a year 6 Fixed rate 7 Floating rate 6,518,756 3,643,926 2,874,830 831 2,269 461 123 82 175 7.49 7.40 7.61 6.70-8.23 6.70-8.23 6.65-8.33 81.6 88.5 73.0 5.6 5.4 5.8 8 Demand 9 9 Fixed rate 10 Floating rate 3,110,547 811,651 2,298,896 354 3,095 269 7.78 6.80 8.12 6.70-8.77 6.37-6.75 7.71-8.84 75.9 59.0 81.9 5.1 1.5 6.3 11 Total short term 28,708,758 1,425 7.07 6.51-7.49 79.9 12 Fixed rate (thousands of dollars) . 13 1-24 14 25-49 15 50-99 16 100-499 17 500-999 18 1000 and over 22,451,611 8,266 7,285 13,041 99,787 159,883 22,163,348 5,233 10 33 64 224 677 9,394 19 92 75 71 63 48 19 6.89 10.03 9.30 9.14 7.54 6.87 6.49-7.10 8.96-10.48 8.78-9.92 8.33-9.92 7.59-8.81 6.79-7.79 6.48-7.09 80.6 37.4 36.6 45.4 71.6 79.5 80.7 2.5 .9 .0 3.1 3.9 4.7 2.5 19 Floating rate (thousands of dollars). 20 1-24 21 25-49 22 50-99 23 100-499 24 500-999 25 1000 and over 6,257,146 61,632 78,033 161,312 774,947 418,935 4,762,288 395 132 129 136 139 140 141 130 7.73 9.36 9.21 9.02 8.63 8.33 7.44 6.72-8.51 8.77-9.% 8.57-9.92 8.30-9.65 7.79-9.11 7.76-8.87 6.57-8.24 77.5 77.1 73.8 74.5 6.2 34 67 206 653 4,668 82.6 76.6 .4 .7 .7 1.4 5.5 7.4 26 Total long term 4,471,849 1,011 8.09 7.06-8.77 83.3 4.4 27 Fixed rate (thousands of dollars) 28 1-99 29 100-499 30 500-999 31 1000 and over 1,229,545 6,918 15,600 12,550 1,194,478 2,779 29 217 702 10,122 7.90 10.93 9.46 9.12 7.85 6.99-8.06 9.17-11.57 8.47-10.47 7.25-12.13 6.99-8.06 78.3 23.3 42.4 67.3 79.2 5.0 .0 .9 32 Floating rate (thousands of dollars) 33 1-99 34 100-499 35 500-999 36 1000 and over 3,242,304 81,289 197,256 161,682 2,802,077 815 35 8.17 8.70 8.52 7.64-9.04 8.03-8.87 7.98-9.04 7.71-8.77 7.64-9.04 85.2 86.0 89.7 94.3 84.3 5.7 .7 7.2 11.6 5.4 1.3 4.3 7.1 1.0 11 8.18 81.2 Months 211 662 6,302 8.20 8.13 1.0 .0 Loan rate (percent) Days Prime r a t e " Effective 4 Nominal 10 LOANS M A D E BELOW P R I M E 1 2 37 38 39 40 Overnight 8 One month and under Over one month and under a year Demand 9 41 Total short term 42 Fixed rate 43 Floating rate 12,118,445 5,718,113 3,718,708 1,215,213 10,976 6,128 5,801 4,096 17 134 6.69 6.76 6.77 6.57 6.47 6.55 6.58 6.43 7.50 7.50 7.50 7.50 80.1 79.0 80.9 62.3 22,770,479 7,654 28 6.71 6.51 7.50 79.0 8,326 4,815 17 129 6.72 6.69 6.51 6.49 7.50 7.50 79.3 76.4 7.01 6.91 6.61 7.50 7.50 94.2 %.5 20,027,982 2,742,497 2.6 5.7 Months 44 Total long term 1,373,605 674,229 699,376 8,960 4,240 4.5 5,719 45 Fixed rate 46 Floating rate . . For notes see end of table. .0 6.80 8.9 A71 A70 4.23 Special Tables • February 1987 T E R M S O F L E N D I N G A T C O M M E R C I A L B A N K S S U R V E Y of L o a n s M a d e , N o v e m b e r 3 - 7 , 1 9 8 6 ' — C o n t i n u e d A. Commercial and Industrial Loans — Continued 2 Characteristics Amount of loans (thousands of dollars) Average size (thousands of dollars) Weighted average maturity 3 Days Loan rate (percent) Weighted average effective 4 Standard Interquartile range 6 Loans made under commitment (percent) Participation loans (percent) OTHER BANKS 1 Overnight 8 5,499,979 4,783 6.62 6.45-6.71 2 One month and under 3 Fixed rate 4 Floating rate 2,600,692 1,531,398 1,069,294 222 208 248 20 20 19 7.52 7.34 7.77 6.49-8.05 6.49-7.63 6.38-8.84 70.5 69.1 72.4 26.8 5 Over one month and under a year 6 Fixed rate Floating rate 7 4,317,742 1,674,066 2,643,676 55 43 152 128 167 8.69 8.59 8.75 7.71-9.42 6.94-10.35 7.76-9.38 59.5 42.6 70.2 18.4 6.5 8 Demand 9 9 Fixed rate 10 Floating rate 3,196,069 748,874 2,447,195 331 97 8.24 7.06 8.59 7.70-8.84 6.41-7.11 7.76-9.11 85.3 95.7 82.1 6.4 7.2 6.1 11 Total short term 7.67 6.56-8.57 71.8 7.13 69.4 18.3 32.8 16.4 47.0 6.0 10.26 10.25 9.33 7.49 6.71 6.50-7.11 9.93-12.56 8.84-11.73 8.87-11.58 8.27-10.47 6.82-7.76 6.45-6.85 82.8 4.3 74.3 6.8 8.48 9.77 9.61 9.35 8.80 8.51 7.70 7.76-9.32 8.84-10.47 8.84-9.95 8.57-9.92 8.03-9.38 7.76-9.11 6.58-8.33 75.4 69.9 72.6 69.9 73.8 79.9 77.7 9.7 4.6 4.8 1.9 5.3 16.8 15.0 116 15,614,483 132 12 Fixed rate (thousands of dollars) . 13 1-24 14 25-49 15 50-99 16 100-499 17 500-999 18 1000 and over 9,317,075 287,127 156,436 184,229 498,169 120,999 8,070,115 186 8 32 64 676 5,452 19 Floating rate (thousands of dollars). 20 1-24 21 25-49 22 50-99 23 100-499 24 500-999 25 1000 and over 6,297,408 345,816 377,056 604,075 1,689,824 759,286 2,521,351 92 9 34 65 192 632 3,110 211 29 107 109 115 144 76 16 120 161 164 161 144 181 72 11.28 16.3 9.0 11.1 .0 .6 6.6 Months 2,163,968 105 8.54 7.71-9.38 62.5 27 Fixed rate (thousands of dollars) 28 1-99 29 100-499 30 500-999 31 1000 and over 570,122 137,465 116,832 45,046 270,779 59 15 192 694 4,319 8.48 11.37 9.49 10.14 6.29 6.72-10.52 9.50-12.47 8.30-10.75 9.79-11.02 4.75-8.43 44.6 19.4 4.0 22.6 8.7 72.8 19.3 .0 .0 32 Floating rate (thousands of dollars) 33 1-99 34 100-499 35 500-999 36 1000 and over 1,593,846 192,586 366,150 289,247 745,862 144 23 185 647 3,766 8.56 9.71 8.94 8.66 8.04 7.76-9.31 8.84-10.47 8.30-9.42 7.79-9.38 7.45-8.77 68.9 44.5 52.9 66.2 84.1 19.0 1.3 5.8 10.8 33.3 74.1 75.4 26 Total long term .0 Loan rate (percent) Days Effective 4 Nominal 10 6.61 6.69 6.97 6.74 6.40 6.48 6.77 6.56 7.50 7.56 7.93 7.53 LOANS M A D E BELOW P R I M E 1 2 Overnight 8 One month and under Over one month and under a year Demand 9 5,454,273 1,695,517 1,109,780 845,559 7,251 1,947 237 1,665 97.7 1.4 18.7 32.1 6.9 41 Total short term 9,105,129 1,336 6.68 6.47 7.56 75.2 8.9 42 Fixed rate 43 Floating rate 7,929,609 1,175,520 1,757 511 6.67 6.75 6.46 6.54 7.54 7.71 74.1 82.6 7.1 20.6 44 Total long term 554,151 399 45 Fixed rate . . . . 46 Floating rate . . 260,864 293,287 334 483 8.23 8.50 65.5 83.5 37 38 39 40 17 101 62.8 Months For notes see end of table. 6.34 5.99 7.03 5.80 6.81 39.6 8.3 67.5 Financial Markets 4.23 A73 Continued B. Construction and Land Development Loans Loan rate (percent) 13 Characteristics Amount of loans (thousands of dollars) Average size (thousands of dollars) Weighted average maturity (months) 3 Weighted average effective 4 Standard error 5 Loans made under commitment (percent) Interquartile range 6 Participation loans (percent) A L L BANKS 1,824,092 1 Total 112 9 8.84 .26 7.90-9.38 78.6 17.2 .44 .48 .58 .37 .50 .22 7.90-9.11 11.57-12.40 11.03-12.40 10.43-13.49 9.65-11.58 7.86-8.17 83.3 71.1 71.5 16.1 83.5 90.2 24.9 .5 .0 .0 4.8 31.3 2 Fixed rate (thousands of dollars) . . . . 1-24 25-49 50-99 100-499 6 7 500 and over 866,332 58,913 37,502 53,150 33,614 683,153 115 11 37 71 184 6,270 5 7 13 19 11 4 8.79 12.29 11.91 11.61 10.44 8.02 8 Floating rate (thousands of dollars) .. 9 1-24 10 25-49 11 50-99 100-499 1? 13 500 and over 957,760 49,853 32,736 49,785 242,978 582,408 109 9 32 70 183 1,959 14 10 8 9 12 15 8.87 9.78 9.53 9.22 8.85 8.74 .16 .16 .28 .18 .17 .14 8.30-9.38 8.87-10.20 8.84-9.78 8.84-9.92 8.57-9.65 8.03-9.38 74.3 83.8 74.9 74.4 80.9 70.7 10.3 2.1 2.2 2.7 7.5 13.2 408,526 231,210 1,184,355 37 356 262 13 8 9 9.93 8.26 8.57 .32 .22 .19 8.84-11.03 7.72-8.57 7.90-9.06 76.2 64.6 82.1 2.2 2.2 25.3 1,052,717 838 7 8.25 .17 7.85-8.57 86.1 22.8 646,615 1,470 2,297 10 3 7 7.99 10.49 .47 .55 7.86-8.05 9.92-11.02 91.1 72.4 33.3 14.2 * * * * # * * * * * * * * * * * * * * * 4 By type of construction 14 Single family IS Multifamily 16 Nonresidential LARGE BANKS 1 4 1 Total 2 Fixed rate (thousands of dollars) . . . . 3 1-24 25-49 4 S 50-99 100-499 6 500 and over 7 * * * * 638,358 7,167 3 7.98 .02 7.86-8.05 91.4 33.5 8 Floating rate (thousands of dollars) .. 9 1-24 10 25-49 50-99 11 100-499 1? 13 500 and over 406,102 3,612 4,086 6,562 57,411 334,430 417 10 34 71 209 2,350 12 13 16 17 13 12 8.67 9.08 9.06 8.93 8.91 8.61 .17 .21 .12 .35 .14 .20 7.76-9.11 8.57-9.38 8.30-9.84 8.30-9.38 8.57-9.38 7.76-9.06 78.1 93.4 81.8 94.6 88.6 75.8 6.0 5.5 .0 4.4 11.3 5.2 By type of construction 14 Single family IS Multifamily 16 Nonresidential 52,643 206,224 793,850 123 940 1,305 13 7 6 9.08 8.15 8.23 .19 .20 .13 8.84-9.38 7.72-8.24 7.90-8.43 78.9 63.6 92.4 8.5 1.0 29.4 OTHER BANKS 1 4 1 Total 771,375 51 14 9.63 .38 8.84-9.96 68.4 9.6 2 Fixed rate (thousands of dollars) . . . . 3 1-24 25-49 4 50-99 6 100-499 7 500 and over 219,717 57,443 36,753 52,495 28,231 30 11 37 71 174 11 7 13 19 10 11.15 12.34 11.95 11.62 10.83 .53 .48 .78 .52 .79 9.84-12.13 11.58-12.57 11.03-12.40 10.47-13.49 10.47-11.58 60.5 71.1 71.4 15.8 87.0 .0 .1 .0 .0 .0 * * 8 Floating rate (thousands of dollars) .. 9 1-24 10 25-49 50-99 11 100-499 1? 13 500 and over 551,658 46,240 28,649 43,224 185,567 247,978 70 9 32 70 176 1,599 15 10 7 8 12 21 9.03 9.84 9.59 9.27 8.83 8.92 .25 .13 .44 .09 .32 .21 8.84-9.42 9.11-10.25 8.84-9.77 8.84-9.92 8.69-9.92 8.84-9.38 71.5 83.1 73.9 71.3 78.6 63.9 13.4 1.9 2.5 2.5 6.3 24.0 By type of construction 14 Single family IS Multifamily 16 Nonresidential 355,883 24,986 390,505 33 58 100 13 9 16 10.06 9.14 9.27 .58 .29 .26 8.84-11.58 8.30-9.84 8.84-9.42 75.8 73.1 61.3 1.2 11.6 17.1 For notes see end of table. * * * * * * A70 4.23 Special Tables • February 1987 TERMS OF L E N D I N G AT COMMERCIAL B A N K S S U R V E Y of Loans Made, November 3 - 7 , 1986'—Continued C. Loans to Farmers14 Size class of loans (thousands) Characteristics $10-24 $1-9 All sizes $250 and over $100-249 $50-99 $25-49 A L L BANKS 1 Amount of loans (thousands of tlQllars) 2 Number of loans 3 Weighted average maturity (mohths)? 4 Weighted average interest rate (percent) 4 5 Standard error 5 Interquartile range 6 6 By purpose of loan Feeder livestock Other livestock Other current operating expenses Farm machinery and equipment Farm real estate Other 7 8 9 10 11 12 Percentage of amount of loans 13 With floating rates 14 Made under commitment By purpose of loan Feeder livestock Other livestock Other current operating expenses Farm machinery and equipment Farm real estate Other 15 16 17 18 19 20 989,660 44,034 8.3 97,735 27,209 5.5 135,549 8,952 7.4 118,401 3,460 7.9 181,806 2,732 12.1 187,495 1,285 5.5 268,674 397 9.4 10.87 .49 9.65-12.01 11.87 .29 11.07-12.68 11.35 .41 10.52-12.10 11.34 .58 10.59-12.35 10.98 .66 10.20-12.10 10.90 .26 9.31-12.28 9.98 .39 8.30-11.35 10.77 10.65 11.10 11.93 9.86 10.20 11.78 11.81 11.77 12.80 10.72 12.11 11.14 11.64 11.40 11.83 10.98 10.75 11.70 11.40 11.11 10.97 10.20 11.28 11.08 9.76 10.92 10.71 10.97 10.87 10.77 54.5 51.6 43.4 32.7 39.4 29.3 43.4 32.0 41.2 38.4 57.1 55.3 78.3 84.7 31.4 6.8 46.5 2.7 1.1 11.4 15.2 8.2 59.5 7.0 .7 9.4 16.9 9.0 47.0 13.1 3.1 11.0 37.3 9.8 42.9 41.4 9.7 36.7 39.9 4.8 41.7 29.4 * * * * * * * * 8.6 11.3 13.0 * 248,210 4,206 6.6 7,495 1,848 6.7 13,919 907 6.7 16,951 500 5.8 25,512 392 5.8 57,607 394 6.5 126,726 164 7.0 8.88 .45 8.12-9.58 9.90 .25 9.00-10.38 9.67 .37 8.84-10.20 9.34 .56 8.78-9.93 9.19 .39 8.77-9.65 8.96 .14 8.30-9.58 8.58 .34 7.90-9.31 8.82 9.11 8.94 10.09 9.15 8.69 9.30 9.57 10.03 10.87 10.60 9.68 9.46 10.09 9.64 10.14 9.45 8.96 9.43 9.14 8.99 9.50 9.18 9.12 8.77 8.57 * * * * * * 9.66 9.07 9.13 8.90 83.1 80.9 84.2 71.4 83.2 69.6 92.7 80.4 98.6 90.2 96.8 92.0 72.3 75.9 31.0 9.0 32.7 1.2 2.9 23.1 18.7 3.6 53.5 4.5 5.6 14.0 11.5 5.0 56.2 4.8 19.2 9.7 47.8 22.7 16.7 22.7 30.4 11.5 40.5 37.4 * * * * * * * * 20.6 17.2 31.6 15.5 * 741,451 39,828 8.6 90,240 25,361 5.4 121,630 8,045 7.4 101,450 2,960 8.2 156,294 2,340 12.8 129,889 891 5.1 * 11.54 .18 11.04-12.22 12.04 .13 11.31-12.73 11.54 .15 11.04-12.23 11.67 .11 11.05-12.44 11.27 .53 10.52-12.13 11.75 .21 11.78-12.36 * 12.03 11.88 11.90 12.90 11.26 11.73 11.65 11.90 11.88 11.12 * * * * * * 9.48 * * * * 53.0 LARGE BANKS 1 4 1 Amount of loans (thousands of dollars) 2 Number of loans 3 Weighted average maturity (months) 3 4 Weighted average interest rate (percent) 4 Interquartile range 6 6 By purpose of loan Feeder livestock Other livestock Other current operating expenses Farm machinery and equipment Farm real estate Other 1 8 9 10 11 12 Percentage of amount of loans 13 With floating rates 14 Made under commitment By purpose of loan Feeder livestock Other livestock Other current operating expenses Farm machinery and equipment Farm real estate Other 15 16 17 18 19 20 * * 8.53 * * * * 25.4 OTHER BANKS 1 4 1 Amount of loans (thousands of dollars) 2 Number of loans 3 Weighted average maturity (months) 3 4 Weighted average interest rate (percent) 4 5 Standard error 5 6 Interquartile range 6 7 8 9 10 11 12 By purpose of loan Feeder livestock Other livestock Other current operating expenses Farm machinery and equipment Farm real estate Other For notes see end of table. 11.41 11.42 11.56 12.16 * 11.77 * 12.42 * 11.00 * 11.43 * * 11.74 * 11.45 * * * * * * * * * * * * * * Financial Markets 4.23 A75 Continued C. L o a n s to Farmers 1 4 —Continued Size class of loans (thousands) Characteristics All sizes 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 $1-9 $25-49 $50-99 $250 and over $100-249 45.0 41.8 40.0 29.5 34.4 24.7 35.2 24.0 31.8 29.9 39.4 39.0 * 31.6 6.1 51.1 3.3 14.9 8.5 60.0 7.2 17.5 9.4 46.0 14.0 40.3 44.5 * * * * * 42.1 39.0 * * * * * * 7.5 9.0 9.9 7.1 * * * * *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, 1985, assets of most of the large banks were at least $5.5 billion. For all insured banks total assets averaged $165 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. $10-24 * * * * * * * 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. 73.4 percent of construction and land development loans were priced relative to the prime rate. 14. Among banks reporting loans to farmers (Table 5), 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 farmers 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". A76 Federal Reserve Board of Governors P A U L A . V O L C K E R , Chairman M A R T H A R . SEGER M A N U E L H . J O H N S O N , Vice OFFICE OF BOARD Chairman OFFICE OF STAFF DIRECTOR MONETARY AND FINANCIAL MEMBERS JOSEPH R . C O Y N E , Assistant to the Board D O N A L D J. W I N N , Assistant to the Board STEVEN M . ROBERTS, Assistant to the Chairman BOB S. MOORE, Special Assistant WAYNE D . ANGELL DONALD L. KOHN, Deputy Staff Director NORMAND R.V. BERNARD, Special Assistant OF RESEARCH AND STATISTICS DIVISION MICHAEL B R A D F I E L D , General Counsel J. VIRGIL MATTINGLY, JR., Deputy General Counsel RICHARD M. ASHTON, Associate General Counsel OLIVER IRELAND, Associate General Counsel RICKI R. TIGERT, Assistant General Counsel MARYELLEN A. BROWN, Assistant to the General Counsel OFFICE to the Board to the Board DIVISION LEGAL FOR POLICY OF THE SECRETARY WILLIAM W . W I L E S , Secretary BARBARA R . L O W R E Y , Associate Secretary JAMES M C A F E E , Associate Secretary JAMES L . K I C H L I N E , Director E D W A R D C . E T T I N , Deputy Director Director MICHAEL J. PRELL, Deputy JARED J. E N Z L E R , Associate Director DAVID E. LINDSEY, Associate Director ELEANOR J. STOCKWELL, Associate Director MARTHA BETHEA, Deputy Associate Director THOMAS D. SIMPSON, Deputy Associate Director LAWRENCE SLIFMAN, Deputy Associate Director PETER A. TINSLEY, Deputy Associate Director S U S A N J. LEPPER, Assistant RICHARD D . PORTER, Assistant MARTHA S . S C A N L O N , Assistant Director Director Director JOYCE K. ZICKLER, Assistant Director LEVON H . G A R A B E D I A N , Assistant Director (Administration) DIVISION OF CONSUMER AND COMMUNITY AFFAIRS DIVISION GRIFFITH L . G A R W O O D , Director G L E N N E . L O N E Y , Assistant Director E L L E N M A L A N D , Assistant Director DOLORES S . S M I T H , Assistant Director EDWIN M . TRUMAN, ROBERT F . GEMMILL, Staff D O N A L D B . A D A M S , Assistant PETER HOOPER I I I , Assistant KAREN H. JOHNSON, Assistant Director' DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director RICHARD SPILLENKOTHEN, Deputy Associate Director HERBERT A . B I E R N , Assistant Director Director A N T H O N Y C O R N Y N , Assistant Director JAMES I. GARNER, Assistant Director JAMES D . GOETZINGER, Assistant Director MICHAEL G . M A R T I N S O N , Assistant ROBERT S . PLOTKIN, Assistant S I D N E Y M . S U S S A N , Assistant Director RALPH W . S M I T H , J R . , Assistant WILLIAM TAYLOR, Director FRANKLIN D . DREYER, Deputy FINANCE LARRY J. PROMISEL, Senior Associate Director CHARLES J. SIEGMAN, Senior Associate Director DAVID H. HOWARD, Deputy Associate Director DIVISION OF BANKING SUPERVISION AND REGULATION JOE M. CLEAVER, Assistant OF INTERNATIONAL Director Director Director LAURA M. HOMER, Securities Credit Officer 1. On loan from the Federal Reserve Bank of Chicago. Adviser Director Director Director Director All and Official Staff H . ROBERT H E L L E R OFFICE OF STAFF DIRECTOR FOR S. DAVID FROST, Staff OFFICE OF STAFF DIRECTOR FOR FEDERAL RESERVE BANK ACTIVITIES MANAGEMENT THEODORE E. ALLISON, Staff Director Director EDWARD T. MULRENIN, Assistant Staff Director CHARLES L. HAMPTON, Senior Technical Adviser PORTIA W. THOMPSON, Equal Employment Opportunity Programs Officer DIVISION OF FEDERAL BANK OPERATIONS DIVISION ELLIOTT C. MCENTEE, Associate RESERVE CLYDE H . FARNSWORTH, JR., OF PERSONNEL DAVID L. ROBINSON, Associate DAVID L. SHANNON, Director JOHN R. WEIS, Assistant OFFICE OF THE Director EARL G. HAMILTON, Assistant Director JOHN H. PARRISH, Assistant Director CONTROLLER FLORENCE M . Y O U N G , GEORGE E . LIVINGSTON, Controller BRENT L. BOWEN, Assistant DIVISION Controller OF SUPPORT ROBERT E . FRAZIER, SERVICES Director GEORGE M. LOPEZ, Assistant Director OFFICE OF THE EXECUTIVE INFORMATION RESOURCES DIRECTOR FOR MANAGEMENT ALLEN E. BEUTEL, Executive Director STEPHEN R. MALPHRUS, Assistant 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 PATRICIA A . WELCH, Assistant Director Director Director Director C. WILLIAM SCHLEICHER, JR., Associate Director CHARLES W. BENNETT, Assistant Director ANNE M. DEBEER, Assistant Director JACK DENNIS, JR., Assistant Director Director CHARLES W . WOOD, Assistant Director AND Adviser A78 Federal Reserve Bulletin • February 1987 Federal Open Market Committee FEDERAL OPEN MARKET P A U L A . VOLCKER, COMMITTEE E. GERALD CORRIGAN, Vice Chairman Chairman W A Y N E D . ANGELL ROGER G U F F E Y H . ROBERT HELLER KAREN N . HORN M A N U E L H . JOHNSON THOMAS C . MELZER NORMAND R . V . BERNARD, Assistant Secretary MICHAEL BRADFIELD, General Counsel JAMES H. OLTMAN, Deputy General Counsel JAMES L . KICHLINE, Economist EDWIN M . TRUMAN, Economist (International) ANATOL B. BALBACH, Associate Economist JOHN M. DAVIS, Associate Economist FRANK E . MORRIS MARTHA R . SEGER RICHARD G. DAVIS, Associate THOMAS E. DAVIS, Associate DONALD L. KOHN, Associate DAVID E. LINDSEY, Associate ALICIA H . MUNNELL, Associate MICHAEL J. PRELL, Associate CHARLES J. SIEGMAN, Associate Economist Economist Economist Economist Economist Economist 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 JOHN P. LA WARE, First District JOHN F. MCGILLICUDDY, Second District SAMUEL A. MCCULLOUGH, Third District JULIEN L. MCCALL, Fourth District JOHN G. MEDLIN, JR., Fifth District BENNETT A. BROWN, Sixth District CHARLES T. FISHER, III, Seventh District DONALD N. BRANDIN, Eighth District DEWALT H. ANKENY, JR., N i n t h District F. PHILLIPS GILTNER, Tenth District GERALD W. FRONTERHOUSE, Eleventh District JOHN D. MANGELS, Twelfth District HERBERT V . PROCHNOW, SECRETARY WILLIAM J. KORSVIK, ASSOCIATE SECRETARY A79 and Advisory Councils CONSUMER ADVISORY COUNCIL EDWARD N. LANGE, Seattle, Washington, Chairman STEVEN W. HAMM, COLUMBIA, South Carolina, Vice Chairman E D W I N B . BROOKS, JR., R i c h m o n d , V i r g i n i a JONATHAN A . B R O W N , W a s h i n g t o n , D . C . JUDITH N . B R O W N , E d i n a , M i n n e s o t a MICHAEL S . CASSIDY, N e w Y o r k , N e w Y o r k THERESA FAITH CUMMINGS, S p r i n g f i e l d , I l l i n o i s RICHARD B . D O B Y , D e n v e r , C o l o r a d o RICHARD H . F I N K , W a s h i n g t o n , D . C . NEIL J. FOG ARTY, Jersey City, New Jersey STEPHEN GARDNER, D a l l a s , T e x a s KENNETH A . HALL, J a c k s o n , M i s s i s s i p p i Massachusetts RAMON E. JOHNSON, Salt Lake City, Utah ROBERT W. JOHNSON, West Lafayette, Indiana THRIFT INSTITUTIONS ADVISORY HELEN E. NELSON, Mill Valley, California SANDRA R . PARKER, R i c h m o n d , V i r g i n i a JOSEPH L . PERKOWSKI, C e n t e r v i l l e , M i n n e s o t a BRENDA L . SCHNEIDER, D e t r o i t , M i c h i g a n JANE S H U L L , P h i l a d e l p h i a , P e n n s y l v a n i a TED L. SPURLOCK, Dallas, Texas MEL R. STILLER, Boston, Massachusetts CHRISTOPHER J. SUMNER, Salt Lake City, Utah ELENA G. HANGGI, Little Rock, Arkansas ROBERT J. HOBBS, B o s t o n , JOHN M . KOLESAR, C l e v e l a n d , O h i o A L A N B . LERNER, D a l l a s , T e x a s FRED S . M C C H E S N E Y , C h i c a g o , I l l i n o i s RICHARD L . D . MORSE, M a n h a t t a n , K a n s a s E D W A R D J. WILLIAMS, C h i c a g o , I l l i n o i s MICHAEL ZOROYA, S t . L o u i s , M i s s o u r i COUNCIL MICHAEL R. WISE, Denver, Colorado, President JOHN C . D I C U S , T o p e k a , K a n s a s JAMIE J. JACKSON, H o u s t o n , T e x a s D O N A L D F . MCCORMICK, L i v i n g s t o n , N e w J e r s e y HERSCHEL ROSENTHAL, M i a m i , F l o r i d a GARY L. SIRMON, Walla, Walla, Washington A80 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, Mail Stop 138, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. When a charge is indicated, remittance should accompany request and be made payable to the order of the Board of Governors of the Federal Reserve System. Remittance from foreign residents should be drawn on a U.S. bank. Stamps and coupons are not accepted. THE FEDERAL RESERVE SYSTEM—PURPOSES TIONS. 1 9 8 4 . 120 p p . A N N U A L REPORT. A N N U A L REPORT: BUDGET REVIEW, 1 9 8 5 - 8 6 . AND FUNC- FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or $2.00 each in the United States, its possessions, Canada, and Mexico; 10 or more of same issue to one address, $18.00 per year or $1.75 each. Elsewhere, $24.00 per year or $2.50 each. BANKING AND MONETARY STATISTICS. 1 9 1 4 - 1 9 4 1 . ( R e p r i n t of Part I only) 1976. 682 pp. $5.00. BANKING AND MONETARY STATISTICS. 1,168 pp. $15.00. A N N U A L STATISTICAL DIGEST 305 pp. 239 pp. 266 pp. 264 pp. 254 pp. $10.00 per $ 6.50 per $ 7.50 per $11.50 per $12.50 per 1941-1970. 1974-78. 1981. 1982. 1983. 1984. 1980. 1982. 1983. 1984. 1985. 1985. 1976. INTRODUCTION TO FLOW OF F U N D S . 1 9 8 0 . 6 8 p p . $ 1 . 5 0 e a c h ; 10 or more to one address, $1.25 each. PUBLIC POLICY A N D CAPITAL FORMATION. 1981. 326 pp. $13.50 each. FEDERAL RESERVE REGULATORY SERVICE. L o o s e l e a f ; u p d a t - ed at least monthly. (Requests must be prepaid.) Consumer and Community Affairs Handbook. $75.00 per year. Monetary Policy and Reserve Requirements Handbook. $75.00 per year. Securities Credit Transactions Handbook. $75.00 per year. Federal Reserve Regulatory Service. 3 vols. (Contains all three Handbooks plus substantial additional material.) $200.00 per year. 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Weekly. $21.00 per year or $.50 each in the United States, its possessions, Canada, and Mexico; 10 or more of same issue to one address, $19.50 per year or $.45 each. Elsewhere, $26.00 per year or $.60 each. THE FEDERAL RESERVE ACT, and other statutory provisions affecting the Federal Reserve System, as amended through April 20, 1983, with Supplements covering amendments through August 1986. 576 pp. $7.00. REGULATIONS OF THE BOARD OF GOVERNORS OF THE F E D ERAL RESERVE SYSTEM. A N N U A L PERCENTAGE RATE TABLES ( T r u t h i n L e n d i n g — Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each volume $2.25; 10 or more of same volume to one address, $2.00 each. FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one address, $1.50 each. THE BANK HOLDING COMPANY MOVEMENT TO 1978: A COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to one address, $2.25 each. 1986. 440 pp. $9.00 each. CONSUMER EDUCATION PAMPHLETS Short pamphlets suitable for classroom use. Multiple are available without charge. copies Alice in Debitland Consumer Handbook on Adjustable Rate Mortgages Consumer Handbook to Credit Protection Laws Fair Credit Billing Federal Reserve Glossary A Guide to Business Credit and the Equal Credit Opportunity Act Guide to Federal Reserve Regulations How to File A Consumer Credit Complaint If You Borrow To Buy Stock 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 What Truth in Lending Means to You A81 PAMPHLETS FOR FINANCIAL INSTITUTIONS Short pamphlets on regulatory compliance, primarily suitable for banks, bank holding companies and creditors. REVIEW OF THE TECHNIQUES A N D LITERATURE, by Kenneth Rogoff. October 1983. 15 pp. 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTERVENTION, A N D INTEREST RATES: A N EMPIRICAL IN- VESTIGATION, by Bonnie E. Loopesko. November 1983. Out of print. Limit of 50 copies 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: A REVIEW OF THE LITERATURE, b y 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 Ralph W. Tryon. October 1983. 14 pp. Out of print. 135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: APPLICATIONS TO C A N A D A , GERMA- NY, 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. T H E EFFECTS OF FISCAL POLICY ON THE U . S . ECONO- MY, by Darrell Cohen and Peter B. Clark. January 1984. 16 pp. Out of print. 137. THE IMPLICATIONS FOR B A N K MERGER POLICY OF FINANCIAL DEREGULATION, INTERSTATE B A N K I N G , A N D FINANCIAL SUPERMARKETS, b y S t e p h e n A . Rhoades. February 1984. Out of print. 138. ANTITRUST L A W S , JUSTICE DEPARTMENT G U I D E LINES, A N D THE LIMITS OF CONCENTRATION IN L O - CAL 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 STAFF STUDIES: Summaries Bulletin Only Printed in the 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. THE LITERATURE, by John D. Wolken. November 1984. 38 pp. Out of print. 141. A COMPARISON OF DIRECT DEPOSIT A N D 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. Staff Studies 115-125 are out of print. 114. MULTIBANK HOLDING COMPANIES: RECENT E V I DENCE ON COMPETITION A N D PERFORMANCE IN BANKING MARKETS, by Timothy J. Curry and John T. Rose. Jan. 1982. 9 pp. 126. DEFINITION A N D 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: J A N U A R Y - M A R C H 1 9 7 5 , b y M a r g a r e t L . Greene. August 1984. 16 pp. Out of print. 128. U . S . EXPERIENCE WITH EXCHANGE MARKET INTERVENTION: SEPTEMBER 1 9 7 7 - D E C E M B E R 1 9 7 9 , b y M a r - garet L. Greene. October 1984. 40 pp. Out of print. 129. U . S . EXPERIENCE WITH EXCHANGE MARKET INTERVENTION: OCTOBER I98O-OCTOBER 1 9 8 1 , b y M a r g a r e t L. Greene. August 1984. 36 pp. 130. EFFECTS OF EXCHANGE R A T E VARIABILITY ON INTERNATIONAL TRADE A N D OTHER ECONOMIC VARIABLES: A REVIEW OF THE LITERATURE, b y V i c t o r i a S . Farrell with Dean A. DeRosa and T. Ashby McCown. January 1984. Out of print. 131. CALCULATIONS OF PROFITABILITY FOR U . S . D O L L A R DEUTSCHE MARK INTERVENTION, b y L a u r e n c e R . Jacobson. October 1983. 8 pp. 1 3 2 . TIME-SERIES STUDIES OF THE RELATIONSHIP BETWEEN EXCHANGE RATES AND INTERVENTION: A 143. COMPLIANCE COSTS A N D CONSUMER BENEFITS OF THE ELECTRONIC F U N D TRANSFER A C T : RECENT SURVEY EVIDENCE, by Frederick J. Schroeder. April 1985. 23 pp. Out of print. 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR C O N SUMER CREDIT REGULATIONS: T H E TRUTH IN L E N D ING A N D E Q U A L CREDIT OPPORTUNITY L A W S , b y Gregory E. Elliehausen and Robert D. Kurtz. May 1985. 10 pp. 145. SERVICE CHARGES AS A SOURCE OF B A N K INCOME A N D 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. T H E ROLE OF THE PRIME RATE IN THE PRICING OF BUSINESS LOANS BY COMMERCIAL B A N K S , 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 1985. 42 pp. 148. THE MACROECONOMIC A N D SECTORAL EFFECTS OF THE ECONOMIC RECOVERY TAX A C T : 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 A N D AFTER ACQUISITION, b y Stephen A. Rhoades. April 1986. 32 pp. 150. STATISTICAL COST ACCOUNTING MODELS IN B A N K ING: A REEXAMINATION A N D AN APPLICATION, b y John T. Rose and John D. Wolken. May 1986. 13 pp. A82 1 5 1 . RESPONSES TO DEREGULATION: RETAIL DEPOSIT PRICING FROM 1 9 8 3 THROUGH 1 9 8 5 , b y P a t r i c k I. Mahoney, Alice P. White, Paul F. O'Brien, and Mary M. McLaughlin. January 1987. 30 pp. REPRINTS OF BULLETIN ARTICLES Most of the articles reprinted do not exceed 12 pages. 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. 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. The Use of Cash and Transaction Accounts by American Families. 2/86. Financial Characteristics of High-Income Families. 3/86. U. S. International Transactions in 1985. 5/86. 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. A83 Index to Statistical Tables References are to pages A3-A75 although the prefix 'A" ACCEPTANCES, bankers (See Bankers acceptances) Agricultural loans, commercial banks, 19, 20, 74 Assets and liabilities (See also Foreigners) Banks, by classes, 18-20 Domestic finance companies, 37 Federal Reserve Banks, 10 Financial institutions, 26 Foreign banks, U.S. branches and agencies, 21 Nonfinancial corporations, 36 Automobiles Consumer installment credit, 40, 41 Production, 47, 48 BANKERS acceptances, 9, 23, 24 Bankers balances, 18-20, 70, 72, 74 (See also Foreigners) Bonds (See also U.S. government securities) New issues, 34 Rates, 24 Branch banks, 21, 55 Business activity, nonfinancial, 44 Business expenditures on new plant and equipment, 36 Business loans (See Commercial and industrial loans) CAPACITY utilization, 46 Capital accounts Banks, by classes, 18 Federal Reserve Banks, 10 Central banks, discount rates, 67 Certificates of deposit, 24 Commercial and industrial loans Commercial banks, 16, 19, 70-72 Weekly reporting banks, 19-21 Commercial banks Assets and liabilities, 18-20 Commercial and industrial loans, 16, 18, 19, 20, 21, 70-72 Consumer loans held, by type, and terms, 40, 41 Loans sold outright, 19 Nondeposit funds, 17 Real estate mortgages held, by holder and property, 39 Terms of Lending, 70-75 Time and savings deposits, 3 Commercial paper, 23, 24, 37 Condition statements (See Assets and liabilities) Construction, 44, 49, 73 Consumer installment credit, 40, 41 Consumer prices, 44, 50 Consumption expenditures, 51, 52 Corporations Nonfinancial, assets and liabilities, 36 Profits and their distribution, 35 Security issues, 34, 65 Cost of living (See Consumer prices) Credit unions, 26, 40 (See also Thrift institutions) Currency and coin, 18, 70, 72, 74 Currency in circulation, 4, 13 Customer credit, stock market, 25 DEBITS to deposit accounts, 15 Debt (See specific types of debt or Demand deposits Banks, by classes, 18-21 securities) is omitted in this index Demand deposits—Continued Ownership by individuals, partnerships, and corporations, 22 Turnover, 15 Depository institutions Reserve requirements, 7 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 EMPLOYMENT, 45 Eurodollars, 24 FARM mortgage loans, 39 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, 5, 17, 19, 20, 21, 24, 28 Federal Home Loan Banks, 33 Federal Home Loan Mortgage Corporation, 33, 38, 39 Federal Housing Administration, 33, 38, 39 Federal Land Banks, 39 Federal National Mortgage Association, 33, 38, 39 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, 37 Business credit, 37 Loans, 40, 41 Paper, 23, 24 Financial institutions Loans to, 19, 20, 21 Selected assets and liabilities, 26 Float, 4 Flow of funds, 42, 43 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, 68 Foreign trade, 54 Foreigners Claims on, 55, 57, 60, 61, 62, 64 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 A84 GOLD Certificate account, 10 Stock, 4, 54 Government National Mortgage Association, 33, 38, 39 Gross national product, 51 HOUSING, new and existing units, 49 INCOME, personal and national, 44, 51, 52 Industrial production, 44, 47 Installment loans, 40, 41 Insurance companies, 26, 30, 39 Interest rates Bonds, 24 Commercial banks, 70-75 Consumer installment credit, 41 Federal Reserve Banks, 6 Foreign central banks and foreign countries, 67 Money and capital markets, 24 Mortgages, 38 Prime rate, 23 Time and savings deposits, 8 International capital transactions of United States, 53-67 International organizations, 57, 58, 60, 63, 64 Inventories, 51 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, 39 Federal Reserve Banks, 10, 11 Financial institutions, 26, 39 LABOR force, 45 Life insurance companies (See Insurance companies) Loans (See also specific types) Banks, by classes, 18—20 Commercial banks, 3, 16, 18-20, 70-75 Federal Reserve Banks, 4, 5, 6, 10, 11 Financial institutions, 26, 39 Insured or guaranteed by United States, 38, 39 MANUFACTURING Capacity utilization, 46 Production, 46, 48 Margin requirements, 25 Member banks (See also Depository institutions) Federal funds and repurchase agreements, 5 Reserve requirements, 7 Mining production, 48 Mobile homes shipped, 49 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, 8 (See also Thrift institutions) NATIONAL defense outlays, 29 National income, 51 OPEN market transactions, 9 PERSONAL income, 52 Prices Consumer and producer, 44, 50 Stock market, 25 Prime rate, 23 Producer prices, 44, 50 Production, 44, 47 Profits, corporate, 35 REAL estate loans Banks, by classes, 16, 19, 20, 39 Financial institutions, 26 Terms, yields, and activity, 38 Type of holder and property mortgaged, 39 Repurchase agreements, 5, 17, 19, 20, 21 Reserve requirements, 7 Reserves Commercial banks, 18 Depository institutions, 3, 4, 5, 12 Federal Reserve Banks, 10 U.S. reserve assets, 54 Residential mortgage loans, 38 Retail credit and retail sales, 40, 41, 44 SAVING Flow of funds, 42, 43 National income accounts, 51 Savings and loan associations, 8, 26, 39, 40, 42 (See also Thrift institutions) Savings banks, 26, 39, 40 Savings deposits (See Time and savings deposits) Securities (See specific types) Federal and federally sponsored credit agencies, 33 Foreign transactions, 65 New issues, 34 Prices, 25 Special drawing rights, 4, 10, 53, 54 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, Mutual savings banks, and Savings and loan associations) Time and savings deposits, 3, 8, 13, 17, 18, 19, 20, 21 Trade,foreign, 54 Treasury cash, Treasury currency, 4 Treasury deposits, 4, 10, 28 Treasury operating balance, 28 UNEMPLOYMENT, 45 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, 66 Open market transactions, 9 Outstanding, by type and holder, 26, 30 Rates, 24 U.S. international transactions, 53-67 Utilities, production, 48 VETERANS Administration, 38, 39 WEEKLY reporting banks, 19-21 Wholesale (producer) prices, 44, 50 YIELDS (See Interest rates) A85 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK, branch, or facility Zip Chairman Deputy Chairman President First Vice President BOSTON* 02106 Joseph A. Baute George N. Hatsopoulos Frank E. Morris Robert W. Eisenmenger N E W YORK* 10045 John R. Opel Virginia A. Dwyer Mary Ann Lambertsen E. Gerald Corrigan Thomas M. Timlen Buffalo 14240 Vice President in charge of branch John T. Keane PHILADELPHIA 19105 Nevius M. Curtis George E. Bartol III Edward G. Boehne Richard L. Smoot CLEVELAND* 44101 (to be announced) E. Mandell de Windt Owen B. Butler James E. Haas Karen N. Horn William H. Hendricks Leroy T. Canoles, Jr. Robert A. Georgine Gloria L. Johnson Wallace J. Jorgenson Robert P. Black Jimmie R. Monhollon Bradley Currey, Jr. Larry L. Prince Margaret E. M. Tolbert Andrew A. Robinson Robert D. Apelgren C. Warren Neel Caroline K. Theus Robert P. Forrestal Jack Guynn Robert J. Day Marcus Alexis Robert E. Brewer Silas Keehn Daniel M. Doyle W.L. Hadley Griffin Robert L. Virgil, Jr. (to be announced) (to be announced) (to be announced) Thomas C. Melzer Joseph P. Garbarini John B. Davis, Jr. Michael W. Wright Warren H. Ross Gary H. Stern Thomas E. Gainor Irvine O. Hockaday, Jr. Robert G. Lueder James E. Nielson Patience S. Latting Kenneth L. Morrison Roger Guffey Henry R. Czerwinski Bobby R. Inman Hugh G. Robinson (to be announced) (to be announced) (to be announced) Robert H. Boykin William H. Wallace 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 N e w Orleans 30303 35283 32231 33152 37203 70161 CHICAGO* 60690 Detroit 48231 ST. LOUIS 63166 Little Rock Louisville Memphis 72203 40232 38101 MINNEAPOLIS 55480 Helena K A N S A S CITY Denver Oklahoma City Omaha DALLAS El Paso Houston San Antonio S A N FRANCISCO 59601 64198 80217 73125 68102 75222 79999 77252 78295 94120 Los Angeles 90051 Fred W. Andrew Robert F. Erburu Richard C. Seaver Portland Salt Lake City Seattle 97208 84125 98124 Paul E. Bragdon Don M. Wheeler John W. Ellis Charles A. Cerino Harold J. Swart Robert D. McTeer, Jr. Albert D. Tinkelenberg John G. Stoides Delmar Harrison Fred R. Herr James D. Hawkins Patrick K. Barron Jeffrey J. Wells Henry H. Bourgaux Roby L. Sloan John F. Breen James E. Conrad Paul I. Black, Jr. Robert F. McNellis Wayne W. Martin William G. Evans Robert D. Hamilton James L. Stull Joel L. K o o n c e , Jr. J. Z. R o w e Thomas H. Robertson Thomas C. Warren (Acting) Angelo S. Carella E. Ronald Liggett Gerald R. Kelly *Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 060%; 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. A86 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories Por "**<, . ??c'sco Helena Denv i ige!es April 1984 i ii ii i i ALASKA © i y / / p 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