Full text of Federal Reserve Bulletin : September 1980

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V o l u m e 66 □ N

um ber

9 □

S e p t e m b e r 1980

FEDERAL RESERVE

BULLETIN
B o a rd o f G o v e rn o rs o f th e F e d e ra l R e s e rv e S y s te m
W a s h in g to n , D .C .

P

u b l ic a t io n s

C

o m m it t e e

Joseph R. Coyne, Chairman □ Stephen H. Axilrod □ John M. Denkler
Janet O. Hart □ James L. Kichline □ Neal L. Petersen □ Edwin M. Truman
Naomi P. Salus, Coordinator □ Sandra Pianalto, Staff Assistant

The F ederal Reserve B ulletin 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. The artwork is provided by the Graphic Communications Section under the
direction of Peter G. Thomas. Editorial support is furnished by the Economic Editing Unit headed by Mendelle T. Berenson.




Table o f Contents
683 R e c e n t C o r p o r a t e F i n a n c i n g
P a tte r n s

Nonfinancial corporations borrowed heavi­
ly in financial markets recently and the gap
between nominal capital spending and the
flow of internal funds was the largest in sev­
eral years.
691 P r o f i t a b i l i t y o f I n s u r e d
C o m m e r c i a l B a n k s , 1979

The profitability of insured commercial
banks increased for the third consecutive
year.
707 TREASUR Y AND FEDERAL RESERVE
F o r e ig n Ex c h a n g e O p e r a t io n s

Dollar rates in the exchange market fluc­
tuated widely over the six-month period but
had firmed by late July.
727 S e l e c t i o n a n d D i s c l o s u r e o f
R e a s o n s f o r A d v e r s e A c tio n in
C r e d it- G r a n tin g S y s te m s

Discussion of Board proposal for requiring
creditors to disclose their reasons for ad­
verse action on credit applications under
Regulation B.
737 I n d u s t r i a l P r o d u c t i o n
Output increased about 0.5 percent in Au­
gust.

743 A n n o u n c e m e n t s
Revision of Regulation D to carry out pro­
visions of the Monetary Control Act of 1980
and announcement of rules to satisfy re­
serve requirements fixed by the Federal Re­
serve on transaction accounts and nonper­
sonal time deposits of nonmember deposi­
tory institutions. (See Legal Developments.)
Revision of Regulation A pertaining to the
use of the discount window for extensions
of credit by the Federal Reserve to deposi­
tory institutions. (See Legal Developments.)
Revision of rules for use of “ineligible pa­
per” as collateral at the discount window.
Deferral of mandatory date for new meth­
ods of calculating and disclosing the annual
percentage rate on consumer loans.
Proposed interpretations of Regulation B
concerning consideration of income and
disclosure of reasons for adverse actions
(see article on this subject, this issue); pro­
posed schedule of fees for Federal Reserve
services to financial institutions.
Availability of film “ EFT at your service.”
Expansion of hours for tours of the Federal
Reserve Building.
Annual revision of the index of industrial
production and of capacity utilization rates.
Admission of two state banks to member­
ship in the Federal Reserve System.

739 S t a t e m e n t t o C o n g r e s s
Chairman Paul A. Volcker stresses the need
to place immediate policy actions in the
context of a coherent longer-run program,
including firm discipline over the growth of
money and credit and control over spend­
ing and the federal deficit, before the House
Committee on the Budget, September 10,
1980.



747 R e c o r d o f P o l i c y A c t i o n s o f t h e
F e d e r a l O p e n M a r k e t C o m m itte e

At its meeting on July 9, 1980, in accord­
ance with the Full Employment and Bal­
anced Growth Act of 1978 (the HumphreyHawkins Act), the Committee reviewed the
ranges for growth of the monetary and
credit aggregates for the period from the

fourth quarter of 1979 to the fourth quarter
of 1980 that it had established at its meeting
in February and gave preliminary consid­
eration to objectives for monetary growth
that might be appropriate for 1981. In
doing so, the Committee continued to face
unusual uncertainties concerning the forces
affecting monetary growth. Expansion of
both M-l A and M-1B from the fourth quar­
ter of 1979 to the second quarter of 1980 fell
considerably below the growth paths con­
sistent with the Committee’s ranges for the
year. However, growth of M-2 and M-3 was
considerably stronger: over the two quar­
ters both of these aggregates grew at rates
just above the lower bounds of their ranges.
By midyear, growth of M-2 was near the
midpoint of its range, and it appeared to be
moving higher.
The Committee decided to retain the
ranges for 1980 that it had established in
February: for the period from the fourth
quarter of 1979 to the fourth quarter of
1980, V h to 6 percent for M-l A, 4 to 6V2
percent for M -lB, 6 to 9 percent for M-2,
and 6V2 to 9V2 percent for M-3. The asso­
ciated range for commercial bank credit re­
mained 6 to 9 percent. As in the past, it was
understood that the longer-run ranges, as
well as the particular aggregates for which
ranges were specified, would be reconsid­
ered at any time that conditions might war­
rant, and that short-run factors might cause
considerable variation in annual rates of




growth from one month to the next and
from one quarter to the next.
755

L egal D evelopm ents

Revisions of Regulations A and D; amend­
ments to Regulations D and T; interpre­
tation of Regulation Y; various rules and
bank holding company and bank merger or­
ders; and pending cases.
Al

F in a n c ia l a n d B u s in e s s S t a t i s t i c s

A3 Domestic Financial Statistics
A46 Domestic Nonfinancial Statistics
A54 International Statistics
A69 G u i d e t o T a b u l a r P r e s e n t a t i o n
a n d S ta tis tic a l R e le a s e s

A70 B o a r d o f G o v e r n o r s a n d
S ta ff
A l l F e d e r a l O p e n M a r k e t C o m m it t e e
a n d S taff; A d v is o r y C o u n c il s

A73 F e d e r a l R e s e r v e B a n k s ,
B r a n c h e s , a n d O ffic e s

A74 F e d e r a l R e s e r v e B o a r d
P u b lic a tio n s

A76 I n d e x t o S t a t i s t i c a l T a b l e s
A78 M a p o f F e d e r a l R e s e r v e S y s t e m

Recent Corporate Financing Patterns
This article was prepared by Norman E. Mains o f
the Board's Capital Markets Section , Division o f
Research and Statistics.

Nonfinancial corporations borrowed heavily in
financial markets in 1979 and early 1980, as the
economy moved through the late stages of the
expansion. Capital expenditures, buoyed in part
by the continued strong advance in prices, in­
creased more rapidly than the flow of internal
funds, and the financing gap was the widest since
1974 (chart 1). To meet financing needs, non­
financial firms borrowed substantial amounts
from short- and intermediate-term sources of
funds. Short-term borrowing was especially
heavy early in 1980 when many firms borrowed
apparently in anticipation of rumored credit con­
trols and used the proceeds to acquire liquid
assets. Note and bond financing remained rela­
tively light by historical standards in 1979 and
into 1980, as many nonfinancial corporations
avoided issuing longer-term obligations at the rel­
atively high level of interest rates that prevailed
throughout the period. Meanwhile, the volume of
commercial mortgage financing continued to be
sizable, reflecting the quickened pace of con1. Financing gap of nonfinancial corporations
Billions o f dollars

struction in previous quarters. Nevertheless, the
increased dependence on shorter-term sources of
funds reinforced the rise in the ratio of shortto long-term debt raised in markets and pushed
it to a historic high in the first quarter of 1980.
In the second quarter of 1980, aggregate credit
flows contracted in association with the fall in
economic activity and the credit restraint pro­
gram and other measures taken in mid-March
to stem inflation (table 1). Short-term interest
rates declined by an unprecedented amount,
and most long-term interest rates retraced the
increases recorded earlier in the year. Although
the financing gap narrowed only moderately,
borrowing by nonfinancial corporations was
reduced because many firms used liquid assets
accumulated earlier in the year to help meet
their requirements. Taking advantage of the
decline in longer-term yields, manufacturing
and other industrial corporations issued an
enormous amount of long-term debt and used
some of the proceeds to reduce their reliance
on loans from commercial banks. This restruc­
turing of balance sheets decreased the ratio of
short- to long-term debt somewhat, but the draw­
down in liquid assets together with the record in­
crease in nonfinancial commercial paper out­
standing further depressed corporate liquidity, as
measured by the ratio of liquid assets to current
liabilities, to its lowest level since 1974.

Ca p it a l E x p e n d it u r e s

1972

1974

1976

1978

1980

Financing gap is capital expenditures less gross internal funds. Flow
of funds quarterly data, seasonally adjusted at annual rates.




Capital expenditures by nonfinancial corpora­
tions, which had trended higher since the busi­
ness cycle trough in 1975, apparently reached a
peak in mid-1979 (chart 2). Inventory accumula­
tion was reduced in the second half of the year,
and near the end of the year growth of fixed in­
vestment decelerated. Expenditures for fixed in­
vestment were held down last year by declining
purchases of motor vehicles, as businesses react­
ed to the temporary shortage of gasoline in the

684

Federal Reserve Bulletin □ September 1980

1. Flow of funds for nonfinancial corporations
Billions of dollars; quarterly data are seasonally adjusted annual rates.
1980
Category

1977

1976

1978

1979
Ql

Q2

Sources of fu n d s.............................................

209.8

242.3

295.7

341.3

323.9

256.8

Internal funds ............................................
Retained earnings1 ...............................
Capital consumption allowances .......

125.3
20.0
105.3

139.9
25.6
114.3

148.8
23.7
125.1

158.3
19.5
138.8

153.7
3.7
150.0

162.2
8.2
154.0

External financing ....................................

60.7

79.9

94.7

114.3

119.4

70.7

Trade debt .................................................
Other sources2 .........................................

13.6
10.2

21.7
0.8

44.8
7.4

60.7
8.0

36.4
14.4

27.7
-3 .8

Uses of fu n d s...................................................

183.4

216.8

274.3

319.4

305.4

233.5

Capital expenditures..................................
Fixed investment3 ..................................
Inventories ............................................
Other4 ....................................................

139.0
124.2
10.8
4.0

169.9
148.2
19.2
2.5

195.9
174.2
19.7
2.0

221.3
199.4
17.1
4.7

224.5
212.0
7.1
5.4

222.2
204.0
16.6
1.6

Increases in liquid a sse ts .........................

13.9

1.9

10.3

18.8

39.2

-1 9 .4

Trade credit ...............................................
Other uses5.................................................

19.5
10.9

31.6
13.4

54.9
13.1

66.1
13.3

35.2
6.5

28.8
1.9

Discrepancy6 ............................................

26.4

25.5

21.4

21.9

18.5

23.3

1. Includes foreign branch profits and inventory valuation and capi­
tal consumption adjustments.
2. Includes changes in profit taxes payable and foreign direct in­
vestment in the United States.
3. Includes plant and equipment expenditures and investment in
residential structures.

4. Purchases of mineral rights from U.S. government.
5. Includes changes in miscellaneous financial assets and in con­
sumer credit.
6. Total sources of funds less total uses of funds.

spring and higher prices of fuel. The expansion
of investment outlays for capital goods other
than autos, which includes machinery, other
equipment, and plant and other structures,
slowed substantially around the turn of the year
and declined in the second quarter of 1980.

Total inventory investment increased some­
what in the first half of 1979, in part because of
the emergence of excess inventories of less-fuelefficient automobiles and trucks at dealers and
manufacturers. After midyear, however, motor
vehicle manufacturers cut production and under­
took policies to stimulate sales in efforts to
achieve more comfortable stock-sales positions.
Outside the motor vehicle sector, ratios of inven­
tories to sales remained generally within their
normal ranges through most of last year, except
at retail department stores where lackluster sales
kept the ratio at a high level. Although inventory
investment remained moderate in early 1980,
sales dropped off in the second quarter and ag­
gregate inventory-sales ratios climbed sharply.
As the quarter progressed, companies ran down
inventory stocks, valued in constant dollars.

2. Capital expenditures of nonfinancial corporations
Billions of dollars

I

I I

I

1976_______1978
Fixed investment includes plant and equipment expenditures and
investment in residential construction. Total capital expenditures in­
clude fixed investment, change in inventories, and purchases of
mineral rights from the U.S. government. Flow of funds quarterly
data, seasonally adjusted at annual rates.




Source. Federal Reserve flow of funds accounts.

C o r p o r a t e P r o f it s a n d
In tern al S o u rces of F u n d s

Although total capital expenditures of non­
financial corporations moderated over the past
year, corporate financing needs remained quite

R ecent Corporate Financing Patterns

685

and enlarged borrowing. The ratio of adjusted
profits before tax to gross domestic product of
nonfinancial corporations, an approximate mea­
sure of the aggregate profit margin for such firms,
fell from its peak of near 11 percent in the final
quarter of 1978 to below VU percent in the sec­
ond quarter of 1980. Historically, the profit share
has peaked 4 to 14 quarters before the peak in
economic activity, when higher resource utiliza­
tion causes productivity gains to slow and unit
costs to accelerate.
During periods of accelerating inflation, the ef­
fective tax rate on current operating profits rises
because taxes are levied on book profits that are
bloated by inflation-related gains. Reflecting this,
after-tax operating profits increased much less
than before-tax earnings during the past expan­
sion and contracted more sharply in 1979 and the
first quarter of 1980 (table 2). Despite the weak­
ness in after-tax operating profits, dividend pay­
ments of nonfinancial firms continued upward.
As a result, adjusted retained earnings declined
more than 17 percent from their previous year’s
level to near $20 billion in 1979 and to less than
$6 billion in the first half of 1980.
Comparisons of profit movements among in­
dustries reveal diverse trends in 1979 and the
first quarter of 1980 (table 3). Within the non­
durable manufacturing sector, before-tax profits
from domestic operations with inventory valu­
ation adjustment (but without capital consump­
tion adjustment, which is not available by indus­
try) climbed more than 35 percent between the
first quarter of 1979 and the first quarter of 1980,
influenced by exceptionally large gains reported

3. Profits of nonfinancial corporations
Billions of dollars

Profits before tax include foreign branch profits. Adjusted profits
are profits plus the inventory valuation adjustment and the capital
consumption adjustment. Flow of funds quarterly data, seasonally ad­
justed at annual rates.

sizable owing to a falloff in profits. Book or re­
ported profits of U.S. nonfinancial corporations
rose strongly through the first quarter of 1980,
but all of the increase reflected inflation-related
gains associated with the understatement of the
costs of materials and of fixed capital used in pro­
duction. Before-tax profits adjusted to exclude
such inflation gains (current operating profits)
reached a peak in the final quarter of 1978 and
declined in subsequent quarters (chart 3). The
weakness in operating profits occurred despite
the continued rapid expansion of nominal sales
through early 1980. Profit margins narrowed as
declines in productivity contributed to accelerat­
ing unit labor costs and as net interest payments
increased in association with higher interest rates
2. Internal funds of nonfinancial corporations
Billions of dollars; quarterly data are seasonally adjusted annual rates.

1980
Item

1976

1977

1978

1979
Ql

Q2

Reported profits before tax1............................
Plus inventory valuation adjustment.........
Plus capital consumption adjustment .......

133.8
-14.6
-1 3 .9

148.5
-15.2
-11.3

171.1
-25.2
- 12.0

198.0
-41.8
-1 5 .0

220.0
-6 3 .2
- 20.0

171.7
-2 8 .2
- 22.2

Adjusted profits before tax ............................
Less profit tax accruals ...............................

105.3
52.4

122.0
59.4

133.9
68.6

141.2
74.8

136.8
82.7

121.3
60.3

Adjusted profits after tax ...............................
Less net dividends p a id ...............................

52.9
32.9

62.6
37.0

65.3
41.6

66.4
46.8

54.1
50.4

61.0
52.8

Adjusted retained earnings ............................
Plus depreciation allowances ....................

20.0
105.3

25.6
114.3

23.7
125.1

19.5
138.8

3.7
150.0

8.2
154.0

Gross internal funds.........................................

125.3

139.9

148.8

158.3

153.7

162.2

1. Includes foreign branch profits.




Source . Federal Reserve flow of funds accounts.

686

Federal Reserve Bulletin □ September 1980

3. Before-tax domestic profits of nonfinancial corporations with inventory valuation adjustment and without
capital consumption adjustm ent1
Billions of dollars; quarterly data are seasonally adjusted annual rates.
1980
Industry

1976

1977

1978

1979
Ql

Q2

T otal..............................................

115.3

128.3

140.9

148.5

146.5

132.6

Manufacturing..............................
Nondurable..............................
F o o d ......................................
Chemicals ............................
Petroleum..............................
Other......................................

65.7
37.5
7.3
8.0
11.7
10.6

73.5
39.3
6.2
7.6
12.2
13.4

81.7
41.4
5.7
7.9
13.0
14.7

88.8
51.5
6.9
7.7
21.5
15.5

93.0
65.5
8.3
8.9
32.6
15.7

73.4
58.1
8.1
7.0
30.4
12.6

Durable......................................
M etals....................................
Nonelectrical machinery ....
Electrical equipment............
Motor vehicles ....................
Other......................................

28.2
5.9
5.6
2.7
7.4
6.7

34.2
5.6
7.1
4.2
9.1
8.2

40.3
7.1
8.3
5.2
8.9
10.8

37.2
8.5
7.7
5.1
4.5
11.5

27.4
9.7
5.7
4.6
- 2 .8
10.2

15.3
5.4
6.4
4.3
-8 .8
8.1

Wholesale and retail trade .........

23.3

24.1

23.0

23.7

16.5

21.7

Public utilities, communication,
and transportation....................

13.8

16.8

20.3

18.9

18.0

18.2

Services and o th e r.......................

12.4

13.9

16.0

17.1

19.0

19.3

1. The capital consumption adjustment is not calculated on an in­
dustry basis.

by petroleum companies. The rapid increase in
world petroleum prices, the initiation of the
staged deregulation of natural gas in the United
States, and the sizable increase in prices for heat­
ing fuel and gasoline contributed to a substantial
increase in the profit margins of these firms. Dur­
ing the same period, profits of primary and fabri­
cated metals producers gained from the accelera­
tion in basic metals prices, but the operating
profits of other durable goods manufacturers de­
clined sharply. Firms associated with the motor
vehicle industry registered the most pronounced
falloff in profits, as gasoline shortages in the
spring encouraged consumers to shift away from
larger vehicles to lighter units with greater fuel
efficiency; such models were less readily avail­
able from domestic producers than from foreign
manufacturers. Outside the manufacturing sector,
surging fuel costs contributed to weaker profits
for utilities and transportation firms, which had
difficulty in passing through increased costs to
their customers. Within the trade sector, retail
trade profits declined when sales and profit mar­
gins were depressed by severe weather and the
shortage of gasoline.
The sharp contraction in aggregate economic
activity in the spring of 1980 caused the decline
in operating profits to worsen. As is usual in peri­
ods of rapidly falling demand, productivity de­



Source. Department of Commerce.

clined and rising costs further eroded profit
margins. In the manufacturing sector, operating
profits fell to their lowest level since 1977; the
earnings of almost all industry groups declined
from the previous quarter, and the motor vehicle
industry posted a record loss.

Ex t e r n a l F in a n c in g

Growing needs for external financing in 1979 and
early 1980 were met largely with short- and intermediate-term borrowing (table 4). This pattern
was especially pronounced in the first three quar­
ters of 1979 when growth in commercial and in­
dustrial loans at all commercial banks soared to
more than 20 percent at a seasonally adjusted an­
nual rate, one of the fastest increases on record.
In addition, nonfinancial corporations increased
their net issuance of commercial paper by a large
amount during this period. Business loans at fi­
nance companies also grew sharply in the first
half of last year, with the major share of this
growth representing extensions by captive sub­
sidiaries of motor vehicle manufacturing com­
panies to finance rising levels of inventories at
dealers. As these inventories began to be re­
duced in the third quarter, finance company lend­
ing slowed considerably.

R ecent Corporate Financing Patterns

687

4. Net funds raised in markets by nonfinancial corporations
Billions of dollars; quarterly data are seasonally adjusted annual rates.
1980

1979
Type of obligation

1976

1977

1979

1978

Ql

Q2

Q3

Q4

Ql

Q2

Total.........................................

60.7

79.9

94.7

114.3

113.4

123.9

126.7

93.0

119.4

70.7

Commercial paper.................
Acceptances............................
Finance company loans .......
Bank loans1 ............................
Notes and bonds2 ..................
Mortgages ...............................
Equity.......................................

1.4
1.3
5.2
4.0
25.3
12.9
10.5

1.6
0.6
10.3
21.3
24.5
18.9
2.7

2.7
1.2
8.3
33.3
23.3
23.3
2.6

8.8
1.0
7.0
45.1
24.8
24.2
3.5

7.0
3.7
10.6
43.3
24.3
21.8
2.9

9.9
-0 .2
11.7
47.2
27.1
25.3
2.8

12.1
2.1
3.7
52.6
24.6
28.3
3.2

6.0
-1 .4
2.0
37.3
22.6
21.5
5.0

25.8
5.4
-1 .4
33.8
23.4
24.1
8.2

20.2
1.5
- 4 .7
- 2 .8
46.7
5.9
3.9

1. Includes a small amount of U.S. government loans.
2. Includes tax-exempt revenue bonds to finance outlays for
industrial pollution control.

In longer-term markets, mortgage borrowing
continued to climb through the first three quar­
ters of 1979 to finance a growing volume of com­
mercial construction. Publicly offered note and
bond issues, however, remained close to the mod­
erate pace of the previous several years. Tradi­
tionally, publicly offered bonds protect the inves­
tor from call or refunding for five years in the
case of public utility issues and ten years for
issues of industrial corporations; these periods of
call protection encourage managements to post­
pone issuing such obligations if they think yields
may decline in the near future. Through the first
three quarters of 1979 yields on corporate bonds
climbed steadily, approaching the record levels
of 1974 and 1975, and corporations generally
sought to avoid incurring long-term obligations at
such rate levels (chart 4). To some extent, busi­
nesses turned to intermediate-term borrowing in
order to avoid even greater reliance on short­
term debt; early in the year, term loans—that is,
loans with maturities of more than one year—at
banks accounted for an increased share of busi­
ness borrowing from this source. In addition,
several multinational corporations raised cash
for U.S. operations in the Eurobond market in
the first half of 1979, attracted by the relatively
short period of call protection (three years) as
well as by a drop in intermediate-term Eurodollar
rates in the spring.
Private placements of corporate bonds, as well
as public offerings, failed to fill the growing need
for external financing in 1979. The volume of pri­
vate placement takedowns actually declined last
year, reflecting not only a reluctance by corpora­
tions to borrow in long-term markets but also
some constraints on the availability of funds at



Source. Federal Reserve flow of funds accounts.

life insurance companies, the principal suppliers
of funds for private placements. Insurance com­
panies were using an increased proportion of
their investable funds to meet the high level of
their outstanding commercial mortgage commit­
ments, associated in part with the rapid pace of
construction of industrial plant and other struc­
tures in previous quarters.
Nonfinancial corporations greatly reduced
their net borrowing in financial markets in the fi­
nal three months of 1979, largely in response to
developments early in the quarter. On October 6,
1979, the Federal Reserve announced a series of
policy actions designed to achieve a slowing in
the growth of money and bank credit and thereby
to help reduce inflationary pressures. Interest
rates rose sharply and financial markets became
unusually unsettled following the announcement,
although some of the interest rate increases were
partially retraced late in the year. As the cost to
banks of obtaining lendable funds climbed and
uncertainty about fund availability also in­
creased, the prime rate was raised 2 percentage
points in October and November, reaching a high
of 153A percent. In addition, nonprice lending
terms and standards of creditworthiness were
tightened, with banks becoming more reluctant
to lend to new customers and more strict about
compensating-balance requirements. As a result,
business loan growth at banks slowed markedly
in the fourth quarter. Intermediate- and longerterm interest rates rose between 1 and IV2 per­
centage points in October and November before
edging lower toward year-end, and longer-term
financing fell to its lowest level in almost two
years.
Further increases in intermediate- and long­

688

Federal Reserve Bulletin □ September 1980

term interest rates in the first few months of 1980
discouraged businesses from raising bond of­
ferings much above their depressed fourth-quarter pace. Moreover, issuing corporations struc­
tured their publicly offered note and bond issues
so that the proportion of intermediate-term
obligations rose to its highest level since 1974.
Private placements of notes and bonds rose some­
what in early 1980, although this increase largely
reflected takedowns of previous commitments.
Life insurance companies cut back their new
commitment activity in the face of large net ex­
tensions of policy loans, shortfalls in expected
contributions to pension and other retirement
plans, and the continuing heavy takedowns of
previously committed mortgage financings. De­
spite the rise in interest rates, stock prices
continued to climb early in the year and broadly
based stock price indexes reached record highs
in midquarter (chart 5). New equity financing
surged, with most of the increase attributable to
industrial concerns, especially firms associated
with the petroleum and natural gas business.

Money market interest rates also began rising
sharply in midquarter. Despite the high levels of
short-term interest rates and a somewhat nar­
rower gap between capital expenditures and
gross internal sources of funds, nonfinancial cor­
porations boosted their short- and intermediateterm borrowing in the early months of 1980, ap­
parently in anticipation of rumored credit con­
trols, and used the proceeds to expand their
holdings of liquid assets. Nonfinancial com­
mercial paper outstanding increased especially
sharply, acceptance financing rose, and loan
growth at banks accelerated early in the quarter.
Spurred in part by the rapid escalation of inter­
est rates, which seemed to indicate that investors
were becoming increasingly pessimistic about
the outlook for restraining price increases, Presi­
dent Carter, on March 14, 1980, announced a
broad program of fiscal, energy, credit, and other
measures designed to help curb inflationary
forces. The President also provided the Federal
Reserve with authority, under the terms of the
Credit Control Act of 1969, to exercise particular

4. Interest rates
Percent

SHORT-TERM CORPORATE DEBT

LONG-TERM CORPORATE BONDS

Bank prime loan

Moody’s Baa
M oody’s Aaa

Commercial paper

Short term: Monthly averages of business days. Dealer offering rate
on 91- to 119-day, highest quality commercial paper. Prime rate on
business loans charged by majority of commercial banks. Spread is




bank prime less commercial paper. Long-term: Moody’s Investors
Service, monthly average bond yields for seasoned Baa and Aaa cor­
porate issues. Rate spread is Moody’s Baa minus Aaa issues.

R ecent Corporate Financing Patterns

5. Corporate stock price movements

AMEX = American Stock Exchange; NASDAQ = National Asso­
ciation of Securities Dealers Quotations; NYSE = New York Stock
Exchange. The stock price composite indexes are monthly averages
normalized to equal 100 in December 1974.

restraint on certain types of credit. Banks and
other lenders cut back sharply on credit exten­
sions following the announcement, and interest
rates continued to move higher. Beginning in
April, however, rates began to fall rapidly, with
short-term interest rates dropping 7 to 10 per­
centage points by June to their lowest levels in
two years, and long-term bond and mortgage
yields generally retracing the increases recorded
in the first quarter of 1980.
The growth of aggregate measures of money
and credit declined abruptly in response to the
credit restraint actions and to a sharp contraction
in economic activity. Nonfinancial corporations
reduced their borrowing in credit markets to the
lowest level in three years, as many firms were
able to meet financing requirements by drawing
down their holdings of liquid assets. The compo­
sition of external financing also shifted markedly.
Manufacturing and other industrial corporations
issued an unprecedented amount of notes and
bonds as yields declined, with a much smaller
proportion in intermediate-term maturities. Pro­
ceeds from many of these financings were used
to reduce reliance on shorter-term sources of
funds—especially loans from commercial banks,
which registered a net decline for the quarter.
The weakness in bank business lending in part
reflected the lagging adjustment of the prime rate
to declines in other interest rates. A record
spread between the prime and commercial paper
rates opened up during the quarter, and borrow­
ing in the commercial paper market moderated



689

only a little from the unusually high first-quarter
total. Mortgage lenders became especially cau­
tious in the wake of the steeply downward slop­
ing yield curve that developed in March and the
uncertain outlook that followed the mid-March
announcement; commercial mortgage financing
fell to its lowest level since late 1976. Stock
prices retraced most of their March decline in re­
sponse to the large drop in interest rates, and by
the end of June, equity values were close to their
historic highs. The rapid improvement in stock
prices again elicited common and preferred stock
financings, with the result that new equity financ­
ings in the first half of 1980 were a record for a
six-month period.

C o r p o r a t e L iq u id it y a n d
Ca p it a l iz a t io n

The recent financing patterns of nonfinancial cor­
porations are summarized by movements in mea­
sures of balance sheet liquidity and capital­
ization. Immediately after the 1973-75 recession,
nonfinancial corporations rebuilt their depleted
liquid asset positions and aggressively reduced
their reliance on shorter-term sources of funds.
These firms continued to add to their liquid asset
positions through the second half of the 1970s,
but the increasing reliance on short- and intermediate-term borrowings in the late 1970s
caused the ratio of liquid assets to total cur­
rent liabilities—a measure of corporate liquidity
positions—to drop steadily; by the middle of
1980 it had fallen to levels near those of the
previous recession (chart 6).
The increased reliance of firms on short- and
intermediate-term financing also has produced a
steady rise in the ratio of short- to long-term debt
raised in markets (chart 6). Relatively heavy em­
phasis by nonfinancial firms on investment in
shorter-lived motor vehicles and inventories may
have prompted this rise in 1976 and 1977, but the
ratio continued to climb sharply even after the
composition of capital outlays shifted toward
longer-lived industrial plants and other structures
in 1978 and 1979. Many nonfinancial corporations
were reluctant to issue notes and bonds during
this period at the unprecedented high level of
interest rates, in part because expectations of a
recession were widespread. Indeed, publicly

690

Federal Reserve Bulletin □ September 1980

6. Liquidity measures for nonfinancial corporations

Short-term debt to long-term debt

Liquid assets to currrent liabilities

* = break in series
Liquid assets include currency, demand and time deposits, foreign
deposits, U.S. government securities, state and local obligations,
open market paper, and security repurchase agreements. Short-term
debt consists of short-term bank loans, commercial paper, bankers
acceptances, finance company loans, and U.S. government loans.
Total current liabilities include short-term debt plus trade debt and
profit taxes payable. Flow of funds quarterly data seasonally ad­
justed.

offered and privately placed note and bond
financing was well below the 1975 total in each of
the subsequent four years, although it is likely to
reach a new high in 1980 given the exceptional
amount of public offerings in the second quarter.
Net stock issuance by nonfinancial firms re­
mained relatively light in 1979—this form of
financing was unattractive to many firms that
faced historically low price-eamings ratios—and
total equity as a percent of total capitalization
edged down slightly from its average of the past
three years. By the end of 1979, the share of
equity was less than 58 percent, when tangible
assets (that is, reproducible assets such as
structures and equipment plus land) are valued at
replacement cost. Equity accounted for nearly




two-thirds of total capitalization in the 1950s,
but then declined steadily to only 53 percent in
1973, from which level it rebounded only a
modest amount in the most recent expansion.
The reduced level of equity in the balance sheets
of nonfinancial corporations in recent years
reflects both the general weakness in retained
earnings and more importantly the reliance on
financing externally with debt rather than equity
capital. Escalating inflation, the tax deductibility
of interest payments, and the generally low level
of both stock prices and price-earnings multiples
over most of the period encouraged the heavy
reliance on debt financing.
Traditionally, a deterioration in these financial
ratios, such as experienced in recent years, has
been interpreted as indicating an increased vul­
nerability on the part of some corporations to ad­
verse developments. For example, greater re­
liance on short-term debt implies a faster
response of interest costs to rising rates; more­
over, firms must refinance at more frequent inter­
vals, even when credit availability has been se­
verely curtailed. And, a relatively low share of
equity in total capitalization means that a rela­
tively high level of contractual interest payments
persists through downturns in sales and income.
The relevance of these traditional measures for
assessment of corporate financial soundness may
not be as clear today as it once was, since
innovations in financial markets have allowed
both corporations and their creditors to adopt
new techniques for managing assets and liabil­
ities. Nonetheless, corporate concern about
balance sheet positions is evident from the large
volume of bond and stock issues elicited this
year by downward movements in the costs of
these funds.
□

691

Profitability of Insured Commercial Banks, 1979
Barbara Negri Opper o f the Board's Division o f
Research and Statistics prepared this article . 1

1. Income and expense as percent of average assets,
all insured commercial banks, 1977-791
Item

In 1979 the profitability of insured commercial
banks increased for the third consecutive year
following the reductions resulting from the
1973-75 recession. The rate of return on assets
rose from 0.76 to 0.80 and the rate of return on
equity increased from 12.9 to 13.9 percent—both
highs for the decade. Dollar profits, at $12.8 bil­
lion, set a record.2
The gain in the pre-tax return on assets during
1979 was less than half that achieved a year
earlier. The 1978 gain reflected mainly an ex­
pansion of net interest margins, but in 1979 the
pronounced increase in market interest rates and
a greater reliance on liabilities that carry costs
tied to market rates resulted in an increase in in­
terest costs that nearly equaled the gain in inter­
est revenue. Moreover, a combination of greater
liquidity pressures and rising interest rates pro­
duced enlarged losses from the sale of securities
in 1979, especially in the fourth quarter. Loanloss provisions were reduced by the same
amount as in 1978. Table 1 summarizes the major
components of industry returns on average as­
sets.
Because of the sharp increases in interest rates
and because of the potential costs for large banks
associated with the Federal Reserve’s October 6
marginal reserves program, positioning of assets
and liabilities was an important determinant of
profitability during 1979. Commercial banks with
expanded net interest margins tended to hold
more assets than liabilities that carried interest
rates highly responsive to changes in market
yields. Conversely, the balance sheets of other­
wise similar banks with reduced margins were

1. The data b ase w as d evelop ed by N an cy Pittm an, and
research assista n ce w as provided by Mary M cL aughlin.
2. A ppendix tables A .l and A .2 present h istorical incom e
and ex p en se inform ation for all insured com m ercial banks
and for m em ber banks.




1977

1978

1979

Gross interest earned ...............................
Gross interest expense ............................
Net interest margin ...............................
Noninterest income ..................................
Loan-loss provision .................................
Other noninterest exp en se.......................
Income before ta x .................................
Taxes2 .................................................
Other3 .................................................
Net income ............................................
Cash dividends declared .................

6.47
3.54
2.93
.70
.26
2.45
.92
.23
.01
.71
.26

7.24
4.17
3.07
.74
.25
2.50
1.06
.29
-.0 2
.76
.26

8.62
5.50
3.12
.78
.24
2.54
1.12
.28
-.0 4
.80
.28

Net retained earnings ...............................

.45

.50

.52

Memo
Taxable equivalent net interest
margin4 ..............................................
Average assets (billions of dollars)1 .....

3.33
1,257

3.48
1,419

3.48
1,594

1. Average assets are fully consolidated and net of loan-loss re­
serves; averages are based on amounts outstanding at the beginning
and end of each year.
2. Includes all taxes estimated to be due on income, on extraordi­
nary gains, and on securities gains.
3. Includes securities and extraordinary gains or losses ( - ) before
taxes.
4. For each bank with profits before tax greater than zero, income
from state and local obligations was increased by [1/(1 - t) - 1]
times the lesser of profits before tax or interest earned on state and
local obligations (t is the federal income tax rate, which changed in
1979). This adjustment approximates the equivalent pre-tax return on
state and local obligations.

typified by fixed-rate longer-term assets funded
by short-term liabilities sensitive to market rates.
As in 1978, year-to-year changes in net interest
margins also varied by type of bank. Those with
less than $1 billion in assets, which as a class had
the highest proportion of liabilities covered by
fixed-rate ceilings on deposits, experienced an
improvement of 2 to 3 percent in net interest
margins. Margins at large non-money-center
banks were about unchanged. Money center
banks experienced a contraction of about 3 per­
cent in their consolidated net interest margins,
owing to a narrowing of margins at their impor­
tant and rapidly growing overseas offices.
All U.S. insured commercial banks with for­
eign offices showed increased profitability during
1979. Their domestic net interest margins ex­
panded, partially offsetting the reduction in foreign-office margins. Gains in noninterest income

692

Federal Reserve Bulletin □ September 1980

and reductions in loan-loss provisions contrib­
uted to growth in profits at those banks.

Interest In c o m e

Gross interest income as a percent of average as­
sets rose 138 basis points during 1979, about
double the increase a year earlier when market
yields had risen far more slowly. The rise in re­
turn on assets was associated primarily with the
pattern of market yields, but also reflected a shift
from securities to higher-yielding loans; another
5 basis points of the gain can be traced to a shift
out of tax-exempt securities into taxable in­
struments. Commercial banks with the largest
proportional holdings of short-term and floatingrate assets experienced gains substantially above
the average for all banks, whereas those with a
smaller proportion of rate-sensitive assets exhib­
ited below-average improvement.
The average return on loan portfolios rose 169
basis points in 1979 (table 2). Almost 90 percent
of loans at money center banks carried maturities
shorter than one year or had floating rates tied to
money market yields, and returns on loan portfo­
lios at these banks increased 270 basis points. By
contrast, yields at small banks increased only 60
basis points; these banks generally have larger
percentages of their portfolios in small business,
consumer, and real estate loans, which are char­
acterized by relatively slow turnover and rela­
tively stable yields, and in many cases by the
constraints of usury ceilings. Appendix table A.3
presents 1979 summary statistics on balance
sheet composition, effective interest returns and

2. Rates of return on fully consolidated portfolios,
all insured commercial banks, 1977-791
Percent
Item

1977

1978

1979

Securities, total.......................................
U.S. government ...............................
State and local government...............
Other....................................................
Loans, gross............................................
Net of loan-loss provision ...............
Taxable equivalent2
Total securities .................................
State and lo ca l....................................
Total securities and gross loans .......

6.22
6.98
5.08
8.92
9.15
8.63

6.47
7.37
5.24
8.80
10.32
9.82

7.05
8.25
5.58
9.24
12.01
11.55

8.43
10.18
9.96

8.89
10.62
9.95

9.31
10.44
11.37

1. Calculated as described in the “ Technical note,” B ulletin ,
vol. 65 (September 1979), p. 704.
2. See note 4 to table 1.




costs, and income and expenses scaled to aver­
age assets for major groups of banks.
Yields on investment securities portfolios in­
creased more slowly than those on loans. The av­
erage current yield on U.S. government holdings
increased 88 basis points, and taxable equivalent
yields on total investment securities portfolios
are estimated to have increased only 42 basis
points. With an average portfolio maturity of al­
most five years, only a small proportion of hold­
ings matured to provide opportunities for rein­
vestment; some banks realized the capital losses
associated in 1979 with sales of longer maturities
to reinvest in issues offering higher current re­
turns. Although banks added nearly $15 billion,
net, to their holdings of securities during 1979,
securities as a proportion of assets fell during the
year because of strong growth in loans (table 3).
Effective in 1979, changes in the structure of
federal taxes applicable to commercial bank in­
come introduced a larger number of incremental
tax brackets; this change had the overall effect of
lowering tax rates somewhat, particularly for
banks with taxable income between $25,000 and
$100,000. As a result, the value of the tax prefer­
ence from state and local obligations tended to be
reduced. Thus, despite an increase in the nomi­
nal yield on bank portfolios of state and local gov­
ernment securities, the taxable equivalent yield
is estimated to have declined during 1979.
Interest income, when scaled to average assets
and adjusted for approximate tax equivalence,
increased 133 basis points in 1979 for insured
banks as a group, and gains were experienced by
every class of bank (chart 1). Money center
banks had the sharpest increase: their gross in­
terest income per dollar of average assets ex­
panded 24 percent. By comparison, these banks
recorded a gain of 28 percent in 1974 when the
annual average of short-term market yields in­
creased much less than it did from 1978 to 1979.
Other large banks apparently have increased the
rate sensitivity of their asset returns, with inter­
est income growing faster in 1979 than in 1974, a
cyclically comparable year.3 By contrast, gross
interest income at small banks grew about the

3. Comparisons of 1974 and 1979 for large banks are
marred because only domestic-office operations were includ­
ed in earlier years; beginning in 1976, all income and expense
data were fully consolidated.

Profitability o f Insured Commercial Banks, 1979

693

3. Portfolio composition as percent of total assets including loan-loss reserves,
all insured commercial banks, 1976-791
Average during year
Fully consolidated

Domestic
Item
1976

1978

1977

1979

1976

1977

1978

1979

Interest-earning assets ............................................................
Loans......................................................................................
Securities ..............................................................................
U.S. Treasury...................................................................
U.S. government agencies..............................................
State and local governments...........................................
Other bonds and stock ....................................................
Gross federal funds sold and reverse R P s.........................
Interest-bearing deposits2 ....................................................

80.9
52.0
23.9
9.2
3.5
10.6
.6
4.0
1.0

80.3
52.1
23.2
9.2
3.3
10.2
.5
4.2
.8

79.2
53.3
21.3
7.7
3.2
9.8
.6
4.0
.6

80.4
56.0
20.0
6.6
3.4
9.5
.5
4.0
.4

83.4
53.1
20.8
7.9
3.0
9.1
.8
3.4
6.1

83.3
53.4
20.0
7.8
2.8
8.7
.8
3.6
6.3

82.4
54.6
18.4
6.5
2.7
8.3
.9
3.3
6.1

83.0
56.3
17.2
5.5
2.8
8.0
.8
3.4
6.2

Memo: Average gross assets (billions of dollars).................

958

1,056

1,198

1,329

1,116

1,244

1,406

1,593

1. Percentages are based on aggregate data and thus reflect the
heavier weighting of large banks. Data are based on averages for call
dates in December of the preceding year and March, June, September,
and December of the current year.
2. Interest-bearing deposits held by domestic offices first were re­

ported in 1976. Reporting of those balances on a fully consolidated
basis began in December 1978, and the number shown for 1978 is an
average based on the reported December amount and estimates for
earlier call report dates. Fully consolidated interest-bearing deposits
are estimated for 1976 and 1977.

same from 1978 to 1979 as in 1974, implying some
decline in the sensitivity of their asset returns to
open market yields.

nate “other deposits” in the table. Most of the
84-basis-point cost increase is attributable to the
growth of six-month money market certificates
(MMCs). MMCs grew from 5 percent to 22 per­
cent of “other deposits” as defined in the table,
and the average interest rate on MMCs issued
during 1979 increased 200 basis points. The only
changes in fixed-deposit-rate ceilings during 1979
were V4-percentage-point increases for pass­
book and 90-day time accounts, so only a
minor part of the interest cost increase in
“other deposits” is related to such regulatory
actions.
Even though funds from MMCs more than re­
plenished withdrawals from bank savings and
fixed-ceiling small-denomination time accounts,
the share of commercial bank assets funded by
savings and all small time balances diminished

In te r e st Ex p e n s e

With the rapid escalation of market yields during
1979 and the pronounced shift toward greater use
of rate-sensitive funding sources, interest ex­
penses per dollar of average assets increased
one-third over 1978. All classes of banks experi­
enced runoffs from their demand and savings ac­
counts and from small time deposits carrying
fixed interest-rate ceilings. Consequently they
had to expand their issuance of liabilities car­
rying short maturities and offering returns com­
petitive with money market yields. For all banks
taken together, however, the increase in interest
costs is attributable not so much to the shift in
sources of funds as to the rapid increase in in­
terest costs on claims that are not subject to
deposit rate ceilings. Those costs increased more
than 300 basis points on average during 1979
(table 4) and were nearly twice the level of 1977.
With two exceptions, all categories of interestbearing liabilities cost an average of at least 200
basis points more than in 1978. One exception is
subordinated notes and debentures, on which aver­
age interest costs tended to be stabilized by rela­
tively long maturities and fixed interest rates. The
other exception is savings and fixed-ceiling
small-denomination time deposits, which domi­




4. Rates paid for fully consolidated liabilities,
all insured commercial banks, 1977-791
Percent
Item

1977

1978

1979

Time and savings accounts...............................
Negotiable CDs2 ............................................
Deposits in foreign offices............................
Other deposits ...............................................
Subordinated notes and debentures ...............
Gross federal funds purchased and R P s.........
Other liabilities for borrowed money ............

5.72
5.58
5.94
5.67
7.38
6.10
7.56
5.79

6.76
7.85
8.04
5.81
7.77
8.68
7.00
6.81

8.69
10.52
11.38
6.65
8.41
12.95
9.17
9.13

Memo: Not covered by regulatory ceilings2 ..

5.92

8.02

11.20

1. Calculated as described in the “ Technical note,” B ulletin
(September 1979) p. 704.
2. Does not include nonnegotiable time deposits of $100,000 or
more.

694

Federal Reserve Bulletin □ September 1980

sensitivity of returns on their assets. Because of
the reliance of small banks on MMCs during
1979 and the more pronounced cost impact of
MMCs compared with that of the four-year cer­
tificates, which grew rapidly after their introduc­
tion in mid-1973, interest cost per dollar of as­
sets at small banks grew almost half again as
fast in 1979 as in 1974.

during 1979 (“ other domestic” in table 5). De­
mand deposits similarly grew less rapidly than
total assets, as high yields on close alternatives
continued to induce depositors to economize on
their non-interest-bearing balances. For all banks
together, consequently, growth in assets during
1979 was financed by managed liabilities, which
increased from 35.3 to 37.6 percent of banks’
consolidated assets. The pace at which large
banks issued managed liabilities slowed, as did
bank credit growth, after the Federal Reserve’s
October 6 policy actions.
Small banks, which generally do not issue
managed liabilities in volume, depended instead
on MMCs for their growth. Nevertheless, with
savings and small-denomination fixed-ceiling
time deposits continuing to dominate funding
sources, interest costs at small banks increased
far more slowly than the average for all banks
(chart 1 and appendix table A.3). Interest costs
at money center banks escalated; liabilities of
these banks were refunded numerous times on
average during the year at rapidly rising inter­
est costs.
In 1979, interest expenses per dollar of average
assets at money center banks increased 38 per­
cent, but as with asset returns, the increase dur­
ing 1974 had been faster. On the other hand, in­
terest expenses of other large banks increased
much faster in 1979 than in 1974, matching the

N e t In t e r e s t M a r g in s

Two factors were important in determining the
level and the pattern of change in net interest
margins during 1979. One, the type of business
that dominates a bank’s activity, influenced the
patterns shown in chart 1, since size correlates
with business mix. Second, with the rapid in­
crease in open market yields during 1979, net in­
terest margins depended on whether assets and
liabilities of banks were positioned to produce
faster growth in interest revenue than in costs.
Revenue gains were little larger than cost in­
creases for all banks together, and so the average
net interest margin adjusted for the shift out of
tax-exempt securities and scaled to average as­
sets is estimated to have been unchanged from
1978. However, the aggregate asset and liability
balance implied by the stable net interest margin
masks some substantial differences in experience

5. Composition of financial liabilities as percent of total assets including loan-loss reserves,
all insured commercial banks, 1976-791
Average during year
Domestic

Fully consolidated

Item

Financial claims ........................................................
Demand deposits ..................................................
Interest-bearing claims ........................................
Time and savings accounts ............................
Large time2 ....................................................
In foreign offices ...........................................
Other domestic .............................................
Subordinated notes and debentures .............
Other borrowings .............................................
Gross federal funds purchased and RPs .....
Memo
Managed liabilities3 ...................................................
Average gross assets (billions of dollars)................

1976

1977

1978

89.1
32.6
56.5
49.2
14.8

89.4
32.1
57.3
49.0
13.3

34.4
.5
.5
6.3
22.1
958

1979

1976

1977

1978

1979

89.1
31.9
57.2
48.3
15.0

88.0
30.3
57.7
47.3
15.2

35.7
.5
.6
7.2

33.3
.5
1.1
7.3

32.1
.4
2.0
7.9

90.1
28.0
62.1
55.5
13.8
13.2
28.5
.4
.8
5.4

90.4
27.2
63.2
55.6
11.4
14.1
30.1
.4
.9
6.2

90.2
26.9
63.3
55.2
12.7
14.5
28.1
.4
1.5
6.2

89.7
25.3
64.4
55.0
12.7
15.6
26.7
.4
2.4
6.6

21.6
1,056

23.9
1,198

25.6
1,329

33.6
1,116

33.1
1,244

35.3
1,406

37.6
1,593

1. Percentages are based on aggregate data and thus reflect the
heavier weighting of large banks. Data are based on averages of call
dates for December of the preceding year and March, June, Septemher, and December of the current year.




i

2. Deposits of $100,000 and over issued by domestic offices,
3. Large time deposits issued by domestic offices plus gross deposits at foreign offices, subordinated notes and debentures, RPs, gross
federal funds purchased, and other borrowings.

Profitability o f Insured Commercial B anks, 1979

1. Components of interest margins
Percent of average assets

GROSS INTEREST INCOME

Size categories are based on year-end consolidated assets.
Gross interest income is adjusted for taxable equivalence. Net inter­
est margins are gross interest income adjusted for taxable equivalence
minus gross interest expense.
Data are for domestic operations until 1976, when foreign office op­
erations of U.S. banks were consolidated into the totals.

during 1979 both within and among classes of
banks.
Margins of money center banks contracted, re­
flecting large declines at foreign offices that were
only partially offset by gains at domestic offices.
Margins were unchanged at other large banks, at
which corporate and foreign-office business car­
ries less weight than at money center banks.
Margins at smaller banks increased slightly; the
cost advantages of the large volume of deposits
with fixed ceilings outweighed the incremental
narrowing effects of the high-cost MMCs issued



695

to fund rate-insensitive assets as the year pro­
gressed.
Even within class of bank, rapid changes in
market interest rates affect profitability in rela­
tion to the degree of balance of interest-ratesensitive assets and liabilities. At one extreme, for
instance, the margin of a bank that does nothing
but finance three-month fixed-rate loans with
three-month time deposits will show little re­
sponse to fluctuations in market interest rates;
the upper bound of the bank’s profit—ignoring
noninterest factors and assuming borrowers
repay on time—equals the weighted average of
the differences between each loan return and its
deposit-funding costs. Sharp changes in market
yields after takedown but before maturity of the
transactions are unlikely to bring additional gain
or loss to the bank. At the other extreme would
be a bank that does not match the rate sensitivi­
ties of its assets and liabilities, such as one that
finances longer-term fixed-rate loans with funds
purchased short-term. To the extent that the
market expectations embodied in the term struc­
ture of interest rates proved to be accurate fore­
casts of the actual course of interest rates, the
bank would be able to forecast its ultimate gain
from the transaction and would be no better off
or worse off in the end than it expected to be at
the outset. To the extent that market expecta­
tions are not fulfilled, however, the bank’s actual
final return will differ from that expected. More­
over, such mismatching creates the possibility of
wide fluctuations in interim returns.
One important indicator of a bank’s exposure
to such interest rate risk is the difference be­
tween the percentage of assets invested in ratesensitive instruments and the percentage of as­
sets funded by rate-sensitive liabilities. That dif­
ference—the proportion of the bank’s total as­
sets represented by transactions for which
interest rates on only one side of the balance
sheet, not both sides, are linked to short-term
market yields—is indicative of the extent to
which gains or losses might arise from unexpect­
ed changes in market interest rates.
Chart 2 shows measures of the relationship of
rate-sensitive assets and liabilities to total assets
for five groups of banks. The measures, defined
in the notes to the chart, could have been refined
if maturity detail within one year had been avail­

696

Federal Reserve Bulletin □ September 1980

able, if it had been possible to include short-term
and uncapped floating-rate loans of small banks
and floating-rate notes and debentures issued by
all banks, and if off-balance-sheet transactions
representing hedging activities had been avail­
able. Across classes of banks, moreover, the
changes in net interest margins depended upon
the interaction of this rate-sensitive balance with
the rate sensitivity of other assets and liabilities
and the relative weight of usury ceilings or de­
posit ceilings. But within each class, banks hold­
ing more rate-sensitive assets than liabilities
were able to benefit, on average, from the in­
creases in market yields during 1979. Thus, ex­
cept for the money center institutions, banks
with increased interest margins from 1978 were
better positioned than their counterparts (table
6).4 In addition, the differences among groups
in the levels of rate-sensitive assets and liabilities,
as shown in chart 2, roughly correspond with the
differences among them in the rates of change in
gross interest returns on assets and costs of
liabilities (chart 1).
The sharp rise in the sensitivity of liabilities of
small banks to interest rates during 1979,
4. Regressions using the difference—rate-sensitive assets
minus rate-sensitive liabilities all as a percent of assets—as
an explanation of the percent change in 1979 in net interest
margins yielded R2s of 8 to 12 percent for the three groups of
banks with less than $1 billion in assets, and 22 percent for
the two classes of larger banks. The coefficients for the dif­
ference variable were 0.45, 0.40 and 0.25 respectively for
banks with assets below $25 million, of $25 million to $100
million, and of $100 million to $1 billion; they were 0.64 and
0.62 for money center and other large banks respectively.
The size classes tend to be good proxies for type of business
and thus tend to hold constant differences in net interest mar­
gin behavior associated with types of borrowers, standard
loan terms, predominant funding sources, and so forth.

suggested by chart 2, reflects increased depen­
dence upon MMCs, the only rate-sensitive fund­
ing source not normally thought of as a managed
liability. In earlier periods of rising market
yields, only large banks tended to shift toward
rate-sensitive liabilities, as they funded increases
in loans by issuing money market instruments;
small banks had few alternative sources of funds
that might compensate for any shortfalls in
growth of their core deposits. The importance of
the change in the portfolio behavior of small
banks in 1979 was that the greater dependence on
MMCs was not accompanied by a commensurate
shift toward rate-sensitive assets. As 1979 pro­
gressed, therefore, small banks as a group be­
came increasingly exposed to interest rate risk.
A cross-sectional analysis of the effect of
MMCs on small banks is presented in table 7.
Two groups of small banks are compared—those
in the highest and in the lowest quartiles of
MMCs as a percentage of total financial claims.
In the second half of 1978, small banks relying
most heavily on MMCs had average taxable
equivalent interest margins 17 basis points lower
than those in the lowest quartile. In 1979, the dif­
ference between the two quartiles rose to 54
basis points. Of that, only 10 basis points flowed
through to profits before tax, however, largely
because the noninterest expenses of banks in the
highest quartile during 1979 were not only lower
than those in the lowest quartile but also lower
than for that size group as a whole. Some of the
unusually low operating costs for banks in the
high quartile may be a result of dividing fixed as
well as variable costs by average assets because
those banks experienced exceptionally rapid
growth in assets during 1979.

2. Percentage of assets funded and invested in rate-sensitive instruments, by year-end assets




Percent

Percent
$25 MILLION—$100 MILLION

Percent
$100 MILLION-$l BILLION
Invested

Invested
Funded
Funded

Profitability o f Insured Commercial Banks, 1979

697

6. Impact of asset and liability positioning on the 1978-79 change in net interest margins,
all insured commercial banks1
Rate-sensitive
Assets,
year-end 1979

Average interest margin4

Number
Assets2

Liabilities2

Difference3

1979

1978

Percent
change

5,220
2,101

14.4
11.9

12.9
18.0

1.5
- 6.0

5.02
4.48

4.45
4.83

12.8
- 7 .2

3,058
2,030

12.4
10.7

17.2
21.3

-4 .8
- 10.6

4.92
4.37

4.55
4.65

8.1
- 6.1

700
635

17.7
15.5

23.3
27.0

- 5 .6
-1 1 .5

4.71
4.09

4.38
4.34

7.5
- 5 .8

3
10

60.3t
57.1

59.2t
61.6

1.1
- 4 .5

2.48*
2.05

2.41
2.20

3.0
- 6 .7

74
81

40.0
39.8

36.1
42.3

3.9
- 2 .4

3.99
3.32

3.74
3.56

6.7
- 6.8

Less than $25 million
Increased margins ...................
Others ........................................

$25 million to $100 million
Increased margins ...................
Others ........................................

$100 million to $1 billion
Increased margins ...................
Others ........................................

13 money center
Increased margins ...................
Others ........................................

Others $1 billion or more
Increased margins....................
Others.........................................

1. Differences between means are statistically significant at the .01
level except when noted by an asterisk (*), which are significant at the
.05 level, and a dagger (t), which are not statistically significant.
2. Average, as a percent of total assets, on the following call dates:
December 1978 and March, June, September, and December 1979.

L o a n L o sse s a n d O ther N
I n c o m e a n d Ex p e n s e

o n in t e r e s t

Loan-loss provisions declined again relative to
average assets, continuing in 1979 the reversal of
the buildup associated with the 1973-75 reces­
sion. Cash losses net of recoveries fell in relation
to average loans at all four classes of banks (table
8). Relative to average assets, loan losses also
fell at all except the large non-money-center
banks (chart 3). Money center banks, for which
loan losses had increased quite rapidly in 1975
and 1976, experienced particular improvement;
in 1979, net loan losses as a percent of their as­
sets almost matched the previous low for the




3. Rate-sensitive assets minus rate-sensitive liabilities, as defined
above and in the note to chart 2.
4. Taxable equivalent, as a percent of average assets.

decade. Despite an increase in loan portfolios,
the major improvement for money center banks
came in the form of reduced chargeoffs during
1979.
Increases in noninterest revenue and in nonin­
terest expenses other than loan-loss provisions
outpaced growth in assets and, as in 1978, the
revenue gains were about offset by the increased
costs. Service charges on deposits and revenue
from commissions and fees expanded relative to
assets. An expansion in service charges probably
was related to the growth of interest-bearing
transactions balances, which have been associat­
ed with a move toward explicit pricing of bank
services; growth in commissions and fees is

Percent

Percent
OTHERS OVER $1 BILLION

Invested

Funded

Rate-sensitive assets: interest-bearing de­
posits, federal funds sold, reverse RPs, loans
and government debt maturing in one year or
less, and other loans with floating rates. Small
banks do not report the loan detail, so their
holdings of loans to financial institutions, con­
struction loans, and purpose loans are included.
Rate-sensitive liabilities: large time deposits
and foreign office deposits due in one year or
less, federal funds, RPs, MMCs, and other
short-term borrowings.

698

Federal Reserve Bulletin □ September 1980

probably a result of the rapid buildup of loans
and in particular the increased loan-to-asset ra­
tio. Salaries and related employee compensa­

P r o f it a b il it y a n d D iv id e n d s

Comparison of operating results in 1979,
small insured commercial banks
with greatest and least reliance on MMCs1

Returns on assets for all insured banks improved
5 percent during 1979, and reflecting a minor ad­
dition to leverage, returns on equity increased
somewhat faster. Those gains, after the larger in­
creases during 1978, raised earnings rates in 1979
for all insured banks as a group to record highs
for this decade. Returns on equity were narrowly

Means in percent
Quartile
Item
Highest

Lowest

17.9
21.7

10.4

Growth
Total domestic assets .
Domestic liabilities

10.0

Income and expense scaled to
average consolidated assets
Interest incom e..............................
Interest expense ...........................
Net interest margin ..................
Taxable equivalent ...............
Noninterest income ......................
Loan-loss provision ......................
Other noninterest expense .........
Profit before t a x ........................
Net income ................................
Dividends ...................................

tion expenses caused the increase in noninterest
operating costs relative to average assets.

3. Net loan losses charged1
8.52
4.37
4.15
4.58
.50
.25

2.88
1.52
1.17
.25

8.35
3.61
4.73
5.12
.67
.27
3.51
1.62

Percent of average assets

13 money center
Non-money center
$1 billion or more I

1.22
.28

MMCs as percent of total financial claims
Top of quartile ...............................................
Bottom of quartile .........................................

52.5
18.4

10.3

0

Below $100 million

1. Top and bottom quartiles, as determined by MMCs as a percent
of total financial claims at the end of 1979, of all banks with yearend assets below $100 million.
The differences between means of the two groups are all statistically
significant at the 1 percent level.

1. As a percent of average consolidated assets net of loan-loss re­
serves, all insured commercial banks.

8. Loan portfolio losses and recoveries, all insured commercial banks, 1977-79
Millions of dollars, except as noted
Net losses
Year, and size of bank1

Losses
charged

1977
All banks............................
Less than $100 million ....
$100 million to $1 billion ..
$1 billion or more
Money center ...............
Others ............................
1978
All banks............................
Less than $100 million ....
$100 million to $1 billion
$1 billion or more
Money center ..............
O thers............................
1979
All banks............................
Less than $100 million ....
$100 million to $1 billion .
$1 billion or more
Money center ...............
Others ............................
1. Size categories are based on year-end fully consolidated assets.




Recoveries

Dollar
amount

Percent of
loans2

Loan-loss
provision

3,549
720
674

809
210
177

2,740
510
497

.41
.33
.37

3,244
632
609

1,147
1,009

218
204

929
804

.45
.46

1,025
978

3,537
782
689

1,073
240
194

2,464
542
495

.32
.32
.32

3,499
748
667

995
1,068

335
303

660
765

.28
.36

972
1,112

3,731
823
758

1,197
256
218

2,534
567
540

.28
.30
.30

3,764
783
745

860
1,290

329
394

531
897

.20
.34

895
1,341

2. Average of beginning- and end-of-year loan balances.

Profitability o f Insured Commercial B anks, 1979

dispersed among size classes of banks in 1979,
ranging from 13.5 percent for the large non­
money-center banks to 14.1 percent for small
banks (table 9). In contrast, from 1974 through
1976, returns on equity at money center banks
averaged one-fifth higher than at other large com­
mercial banks.
Cash dividends declared during 1979 increased
faster than average assets for the first time since
1975. Unlike 1978, when all of the increased
earnings on assets were retained, banks in their
second year of substantial profit growth divided
the gain about equally between increases in cash
dividends declared and additions to retained
earnings. Large banks, nearly all of which are
affiliated with holding companies, maintained
about the same dividend payout ratio—40 per­
cent—as in 1978. Equity capital increased nearly

699

$10 billion during 1979, not quite enough to keep
pace with asset growth. As in the year earlier, re­
tained earnings contributed more than fourfifths of the gain in equity (table 10).

I n s u r e d U .S . C o m m e r c ia l B a n k s
F o r e ig n O f f ic e s

w ith

At the end of 1979, 164 U.S. insured commercial
banks had foreign offices or Edge Act or Agree­
ment corporation subsidiaries. Those 164 banks
held $979 billion in consolidated assets at yearend or almost three-fifths of industry assets. Dur­
ing 1979, funding patterns shifted so that foreign
offices became a net source of funds to domestic
offices. With that shift and with a change in lend­
ing patterns from loans toward lower-yielding in-

9. Profit rates, all insured commercial banks, 1973-79
Percent
Type of return, and size of bank1

1973

1974

1975

1976

1977

1978

1979

.76
1.00
.84

.72
.97
.79

.69
.89
.75

.70
.94
.78

.71
.98
.82

.76
1.04
.90

.80
1.15
.96

.60
.62

.56
.58

.56
.59

.54
.60

.50
.62

.53
.68

.56
.72

Return on assets2
All banks ........................................................................................
Less than $100 m illion.................................................................
$100 million to $1 billion .............................................................
$1 billion or more
Money center ............................................................................
Others .........................................................................................

Return on equity3
All banks ........................................................................................
Less than $100 million .................................................................
$100 million to $1 billion .............................................................
$1 billion or more .........................................................................
Money center ............................................................................
Others .........................................................................................

12.9
13.5
12.6

12.6
12.7
11.9

11.8
11.5
11.1

11.5
11.8
11.1

11.8
12.4
12.0

12.9
13.2
13.2

13.9
14.1
13.9

13.2
12.0

14.1
11.7

13.8
11.2

12.3
10.6

11.4
11.2

12.8
12.5

14.0
13.5

1. Size categories are based on year-end fully consolidated assets.
2. Net income as a percent of the average of beginning- and endof-year fully consolidated assets net of loan-loss reserves.

3. Net income as a percent of the average of beginning- and endof-year equity capital,

10. Sources of increase in total equity capital, all insured commercial banks, 1973-791
Millions of dollars, except as noted

Net retained income2

Net increase
in equity capital

Increase in equity capital
from retained income (percent)

Year

1973
1974
1975
1976
1977
1978
1979

..............................................................................
..............................................................................
..............................................................................
..............................................................................
..............................................................................
..............................................................................
..............................................................................

Total

Large
banks3

Total

Large
banks3

(1)
4,131
4,307
4,224
4,834
5,599
7,019
8,350

(2)
1,491
1,666
1,690
1,909
2,157
2,947
3,616

(3)
5,455
5,631
5,526
7,254
7,094
7,961
9,952

(4)
1,849
1,977
2,396
3,371
2,939
3,304
4,291

1. In 1976, equity capital was affected by one-time accounting
changes in the treatment of loan-loss and valuation reserves. Data
for 1976 have been adjusted to correct for that definitional change.




Column 1/
column 3
(5)
76
76
76
67
79
88
84

Column 2/
column 4
(6)
81
84
71
57
73
89
84

2. Net income less cash dividends declared on preferred and common stock.
3. Banks with fully consolidated assets of $1 billion or more.

700

Federal Reserve Bulletin □ September 1980

terbank placements, foreign-office net interest
earnings narrowed. Despite unprecedented vol­
atility in interest rates and some additional costs
of managed liabilities associated with the Octo­
ber 6 marginal reserve program instituted by the
Federal Reserve, domestic-office net interest in­
come for these banks expanded during 1979. Con­
solidated net interest margins narrowed slightly,
but the overall net income of banks with foreign
offices was increased by growth in noninterest
income and by reductions in provisions for loan
losses. All of the improvement in consolidated
net earnings was attributed to domestic business;
the net return on consolidated assets attributed
to international business was unchanged from
1978.

During 1979, commercial banks with foreign
offices were able to take advantage of a change in
the traditional cost differentials between certifi­
cates of deposit (CDs) issued domestically and
those issued in the Eurodollar market. That shift
meant that, adjusted for required reserves, the
interest cost to fund domestic-office operations
with Eurodollar CDs was lower than with domes­
tic CDs. For several years before that change,
those reserve-adjusted interest costs had tended
to be about equal. The intraoffice shifting of
funds amounted to almost $15 billion, net, during
the year; funds advanced by foreign offices to
their domestic affiliates increased nearly $6 bil­
lion, and outstanding balances of domestic-office
advances to their foreign affiliates fell nearly $9

11. Assets and liabilities, all U.S. insured commercial banks with foreign offices, December 31, 1979
Domestic offices
Item

Foreign offices

Billions of
dollars

Percent of
total

Billions of
dollars

Percent of
total

Total assets .......................................................................................................................
Cash and due from banks ................................................................................................
Federal funds sold and reverse RPs...............................................................................
Securities ..........................................................................................................................
Loans..................................................................................................................................
Other1 ...............................................................................................................................

688
115
25
96
371
81

100
17
4
14
54
12

313
115
*
9
160
29

100
37
*
3
51
9

Total liabilities ..................................................................................................................
D eposits............................................................................................................................
Noninterest-bearing2 ..................................................................................................
Interest-bearing.............................................................................................................
Savings and small tim e.............................................................................................
Time over $100,000 ..................................................................................................
Nondeposit financial claims ..........................................................................................
Federal funds purchased and RPs .............................................................................
Subordinated notes and debentures ..........................................................................
Other liabilities for borrowed money .......................................................................

644
475
221
254
129
125
113
87
3
22
56

100
74
34
39
20
19
18
14
*
3
9

313
272
17
255
n.a.
n.a.
12
*
*
12
29

100
87
5
81
n.a.
n.a.
4
*
*
4
9

Memo: Remaining maturities
Total assets .......................................................................................................................
Selected assets3 ...............................................................................................................
One year or less............................................................................................................
One to five years ..........................................................................................................
Over five years ............................................................................................................

688
451
262
108
81

100
66
38
16
12

313
270
192
55
23

100
86
61
18
7

Total liabilities ..................................................................................................................
Selected liabilities4 ..........................................................................................................
Subject to c a ll...............................................................................................................
Other three months or le s s ..........................................................................................
Over three months.......................................................................................................

644
553
229
243
81

100
86
36
38
13

313
255
26
169
61

100
81
8
54
19

1. Of this amount, $12 billion represents net funds advanced by do­
mestic offices to their own foreign offices and $9 billion represents net
funds advanced to domestic offices by their own foreign offices.
2. Demand deposits in domestic offices, non-interest-bearing de­
posits in foreign offices.
3. For foreign offices, maturity detail is provided for all loans and
interest-bearing balances due from banks; included also are $7 billion
in cash items in process of collection (CIPC), demand deposits issued
by other banks, and currency. Maturity detail is not reported for do­
mestic-office holdings of consumer loans and single-family home mort­
gages, which amounted to $66 billion and $53 billion respectively and
which tend to have relatively long original maturities. Maturities rep­
resent all other loans and all securities at domestic offices; included in
the shortest category also are federal funds sold and reverse RPs as




well as $91 billion in domestic offices in CIPC, demand deposits issued
by other banks, and currency.
4.
For foreign offices, maturity detail is provided for all interestbearing deposits. For domestic offices, liabilities subject to call are
demand deposits and TT and L balances. Other domestic-office liabili­
ties maturing within three months include all large negotiable CDs
with that remaining maturity, savings, RPs and federal funds pur­
chased, half of MMCs, and 4 percent of other small time deposits.
Over three months includes subordinated notes and debentures, half
of MMCs, all other large negotiable CDs, and 96 percent of small time
deposits.
* Less than $500,000 or 0.5 percent.
n.a. Not available.

Profitability o f Insured Commercial B anks, 1979

billion. Most of this shift occurred during the first
half. Based upon average yields during 1979, an
estimated 25 to 40 basis points in interest costs
were saved by financing domestic-office business
with CDs issued by affiliates in the Eurodollar
market instead of CDs issued directly by domes­
tic offices. With that shift in funding and with the
incentives to restrict growth stemming from the
marginal reserve program, managed liabilities
issued to nonaffiliates by domestic offices re­
mained unchanged in proportion to assets. The
predominant funding sources for domestic of­
fices carried maturities of three months or less
(table 11). During 1979 foreign offices increased
their reliance on liabilities maturing beyond three
months, but claims maturing within three months
continued to predominate.
Consistent with their role as a source of funds
for domestic affiliates, foreign offices increased
their deposits substantially more than their
loans; their loans dropped from 56 percent to 51
percent of total assets during the year. Accom­
panying this shift in intrabank relationships,
loans at domestic offices grew in relation to as­
sets during 1979, and deposits financed a smaller
proportion of assets than at the end of 1978. Do12. Customers, U.S. insured commercial banks with
foreign offices, December 31, 1979
Billions of dollars
Item
Total loans, gross .......................................
Real estate .................................................
To financial institutions ............................
In the United States ...............................
Outside the United States ....................
Not specified .........................................
Commercial and industrial .......................
To U.S. addressees ...............................
To non-U.S. addressees .......................
To individuals ............................................
To foreign governments ............................
Other ............................................................
Memo
To U.S. addressees....................................
To nori-U.S. addressees............................
Not specified...............................................
Total deposits...............................................
Individuals, partnerships, and
corporations .......................................
U.S. federal, state, and local
governments .......................................
Foreign governments and official
institutions .........................................
Commercial banks in the
United States.......................................
Banks in foreign countries .......................
Certified and officers’ checks....................




Domestic
offices

Foreign
offices

383

162

94
38
19
8
11
157
149
8
66
2
26

5
28
1
20
7
94
5
89
6
24
5

168
16
199

6
133
23

475

272

376

88

701

mestic offices continued to lend far more to cus­
tomers located in the United States than else­
where, and foreign offices overwhelmingly held
loans of non-U.S. borrowers (table 12).
Effective interest costs and returns at both do­
mestic and foreign offices of these banks in­
creased rapidly, along with market yields, re­
flecting the predominance of short-term liabilities
and assets carrying short maturities or floating
rates (table 13). Loan portfolio yields increased
237 basis points at domestic offices and 262 basis
points at foreign offices. The average effective in­
terest cost for interest-bearing liabilities in­
creased far more rapidly at foreign offices than at
domestic offices; the relative stability at the latter
reflects the small change in average interest costs
of savings and small-denomination time deposits,
which accounted for 20 percent of total domestic-office liabilities of these banks.
Gross interest income as a percent of average
assets increased at domestic offices during 1979,
largely because of the rise in market yields but
partly because “ noninterest-bearing” amounts
due from foreign affiliates, which had been in­
cluded in assets at the end of 1978, were reduced
and invested in interest-bearing transactions with
nonaffiliates during 1979 (table 14). The increase
in gross interest income at foreign offices was
held down by the growth in similarly “ noninter­
est-bearing” balances advanced to domestic af­
filiates. Such advances added to foreign-office as­
sets, but no interest income was recorded by
foreign offices. The increase in gross interest ex­
pense per dollar of assets at domestic offices was
held down by this same accounting treatment of
13. Rates of return and rates paid for funds,
U.S. insured commercial banks
with foreign offices, 1978 and 19791
Percent

28

1

7

36

45
10
9

18
126
3

Domestic offices

Foreign offices

1978

1979

1978

1979

9.93
9.67
6.54

12.30
11.92
8.36

10.59
9.38
7.95

13.21
12.35
11.38

6.97

9.31

8.01

11.32

Item

Loans ....................................
Interest-earning assets2......
Interest-bearing deposits....
Interest-bearing
liabilities ......................

1. Calculated as described in the “Technical note,” B ulletin
(September 1979), p. 704.
2. Approximated for domestic offices according to the method de­
scribed in table 1, note 4.

702

Federal Reserve Bulletin □ September 1980

14. Interest income and expense as percent of average
assets, U.S. insured commercial banks with
foreign offices, 1978 and 1979
Domestic offices

Foreign offices

1978

1979

1978

1979

6.50
3.78
2.72
3.10

7.38
4.57
2.82
3.13

8.34
6.33
2.00
2.00

9.46
8.19
1.26
1.26

Item

Gross interest income.........
Gross interest expense .
Net interest margin.........
Taxable equivalent1 ....

1. Approximated for domestic offices according to the method de­
scribed in table 1, note 4.

intraoffice transactions. Thus, some of the in­
crease in interest margins at domestic offices and
the decrease in those at foreign offices reflects
distortions related to intracompany transfers.
Viewed as consolidated entities, U.S.-insured
commercial banks with foreign offices experi­
enced a small attrition in net interest margins
during 1979 (table 15). Interest income increased
rapidly, but not quite so fast as interest ex­
penses. Gains in noninterest income and further
shrinkage of loan-loss provisions during 1979
more than offset the expansion in noninterest ex­
penses and the reduction in net interest earnings;
income before taxes on a consolidated basis con-




15. Consolidated income and expenses, U.S. insured
commercial banks with foreign offices, 1978-79
Percent of average assets
Item

1978

1979

Gross interest incom e................................................
Gross interest expense .............................................
Net interest margin .............................................
Taxable equivalent1 .........................................

7.09
4.58
2.51
2.77

8.75
6.25
2.50
2.74

Noninterest income ...................................................
Loan-loss provisions ................................................
Other noninterest expense........................................
Income before tax...................................................
Foreign offices2 ...................................................
Domestic offices2................................................

.82
.25
2.14
.93
.25
.68

.84
.22
2.17
.95
.22
.73

International business2 ........................................
Domestic business2 ................................................

.59
.16
.43

.63
.16
.47

1. Approximated for domestic offices according to the method de­
scribed in table 1, note 4.
2. See table A.4. Reflects amounts attributed, giving full allocation
of income and expense.

sequently increased during 1979. After taxes, the
consolidated rate of return on assets of banks
with foreign offices increased 7 percent, and after
full allocation of costs and revenues, all of the
improvement was attributed to domestic busi­
ness (table 15). International business provided
net earnings of 0.16 percent of average consoli­
dated assets in 1979 as in 1978.
□

Profitability o f Insured Commercial B anks, 1979

703

A .l Report of income, all insured commercial banks
Amounts shown in millions of dollars
Item

1971

1972

1973

1974

1975

1976

1977

1978

1979

Operating income—Total..............................................
Interest
Loans............................................................................
Balances with banks .................................................
Federal funds sold and securities purchased under
resale agreement.................................................
Securities (excluding trading accounts)
Total interest income ............................................
U.S. Treasury securities....................................
U.S. government agencies and corporations ..
States and political subdivisions.......................
Other bonds, notes, and debentures ...............
Dividends on stock ............................................
Trust department............................................................
Direct lease financing ....................................................
Service charges on dep osits.........................................
Other charges, fees, etc..................................................
Other operating income.................................................
On trading account (net)............................................
Other............................................................................
Equity in return of unconsolidated subsidiaries ....

36,204

40,065

52,794

67,872

66,285

80,388

90,069

113,170

149,795

22,954
n.a.

25,498
n.a.

35,213
n.a.

46,942
n.a.

43,197
n.a.

51,471
4,459

58,881
4,860

75,948
6,662

101,942
10,561

870

1,023

2,474

3,695

2,283

1,979

2,471

3,664

6,106

7,660
3,384
914
3,124
238
(*)
1,258
n.a.
1,226
981
1,256
344
912
n.a.

8,329
3,376
1.144
3,490
319
(’)
1,366
n.a.
1,256
1,079
1,512
257
1,255
n.a.

9,138
3,436
1,469
3,861
372
(J)
1,460
n.a.
1,320
1,247
1,942
341
1,601
n.a.

10,344
3,414
2,014
4,449
467

14,333
5,952
2,410
5,116
750
105
1,795
534
1,629
2,175
2,011
717
1,205
89

15,140
6,369
2,466
5,338
858
109
1,980
699
1,797
2,404
1,903
420
1,350
133

16,432

18,755

9,335
6,003

10,630
6,928

1,506
n.a.
1,450
1,405
2,530
430
2,100
n.a.

12,201
4,415
2,343
4,911
532
(*)
1,600
n.a.
1,547
1,647
3,811
508
3,303
n.a.

Operating expenses—Total............................................
Interest
Time and savings deposits ......................................
Time CD’s of $100,000 or more issued by
domestic offices..............................................
Deposits in foreign offices ....................................
Other deposits.........................................................
Federal funds purchased and securities sold under
repurchase agreements ....................................
Other borrowed money3 ............................................
Capital notes and debentures....................................
Salaries, wages, and employee benefits......................
Occupancy ex p en se......................................................
Less rental income ....................................................
Net ..............................................................................
Furniture and equipment..............................................
Provision for loan losses ...............................................
Other operating expenses ............................................
Minority interest in consolidated subsidiaries .......
O ther............................................................................

29,511

32,836

44,113

58,645

57,313

70,466

12,168

13,781

19,747

27,777

26,147

34,894

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

1,093
139
142
8,355
1,721
318
1,403
1,014
860
4,337

3,883
499
253
10,076
2,141
367
1,774
1,196
1,253
5,432
1
5,431

5,970
912
280
11,526
2,424
383
2,041
1,355
2,271
6,514

3,313
374
292
12,624
2,739
427
2,312
1,525
3,578
7,149

4,337

1,425
115
212
9,040
1,915
340
1,575
1,083
964
4,640
1
4,639

6,514

Income before taxes and securities gains or losses....
Applicable income taxes............................................
Income before securities gains or losses.................
Net securities gains or losses ( - ) after ta x e s.........
Extraordinary charges ( - ) or credits after taxes ..
Net income......................................................................

6,693
1,688
5,005
210
-1
5,213

7,229
1,708
5,522
90
18
5,630

8,681
2,120
6,560
-2 7
22
6,555

Cash dividends declared ...............................................

2,227

2,191

Memo
Number of banks............................................................
Average fully consolidated assets (billions of
dollars) ....................................................................

13,602
646

l
i
J

1,094

1,197

2,138
862
2,039
2,930
2,495
n.a.2
n.a.2
n.a.2

2,375
1,073
2,517
3,635
2,831
n.a.2
n.a.2
n.a.2

78,484

98,104

131,950

38,701

50,054

71,693

7,083
8,745
19,066

6,732
10,216
21,753

11,693
14,559
23,802

18,105
24,523
29,065

4,536
816
391
16,276
3,587
551
3,036
1,923
3,244
9,561
24
9,537

7,247
1,452
445
18,654

12,218
3,162
497
21,465

5,559

6,255

7,149

3,305
665
343
14,686
3,247
494
2,752
1,712
3,650
8,456
29
8,427

3,499
11,194
n.a.2
n.a.2

3,764
12,7%
n.a.2
n.a.2

9,227
2,084
7,143
-8 7
12
7,068

8,973
1,790
7,182
35
32
7,249

9,922
2,287
7,635
190
24
7,849

11,585
2,829
8,756
95
47
8,898

15,067
4,155
10,911
-225
45
10,731

17,843
4,736
13,109
-3 5 0
39
12,797

2,423

2,760

3,025

3,029

3,299

3,714

4,449

13,721

13,964

14,216

14,372

14,397

14,397

14,380

14,352

738

857

987

1,052

1,123

1,257

1,418

1,593

1. Included in income from other bonds, notes, and debentures.
2. Because of an abbreviation in the income report filed by small
banks, these items are not available on an aggregated basis after
1977. Bracketed items similarly indicate combinations made for small
bank reporting.




]
J

0)

3.
Includes interest paid on U.S. Treasury tax and loan account
balances, which were begun in November 1978.
n.a. not available.
N ote. For “Notes on comparability of commercial bank income
data before 1976,” see B ulletin , vol. 64 (June 1978), p. 446.

704

Federal Reserve Bulletin □ September 1980

A.2 Report of income, member commercial banks
Amounts shown in millions of dollars
Item

1971

1972

1973

1974

1975

Operating income—Total .........................................................
Interest
Loans ......................................................................................
Balances with banks...............................................................
Federal funds sold and securities purchased under
resale agreement............................................................
Securities (excluding trading accounts)
Total interest income.........................................................
U.S. Treasury securities..............................................
U.S. Government agencies and corporations............
States and political subdivisions.................................
Other bonds, notes, and debentures............................
Dividends on stock ......................................................
Trust department ......................................................................
Direct lease financing ..............................................................
Service charges on deposits ....................................................
Other charges, fees, etc.............................................................
Other operating income ............................................................
On trading account (net) ......................................................
Other ......................................................................................
Equity in return of unconsolidated subsidiaries ...............

28,665

31,344

41,616

53,837

51,368

18,315
n.a.

20,053
n.a.

28,266
n.a.

38,063
n.a.

33,749
n.a.

676

794

1,847

2,724

1,716

1,511

1,918

2,808

4,551

5,661
2,434
578
2,467
182
(>)
1,180
n.a.
895
796
1,130
340
800
n.a.

6,087
2,412
731
2,710
234
0)
1,269
n.a.
905
864
1,372
254
1,118
n.a.

6,532
2,393
943
2,928
268
C1)
1,344
n.a.
940
998
1,789
338
1,451
n.a.

7,237
2,343
1,268
3,300
326
(J)
1,379
n.a.
1,023
1,152
2,261
425
1,836
n.a.

8,559
3,166
1,463
3,576
354
(')
1,457
n.a.
1,086
1,359
3,442
497
2,945
n.a.

10,111
4,248
1,475
3,686
612
90
1,625
508
1,122
1,808
1,789
6%
1,009
86

10,584
4,478
1,509
3,794
712
91
1,776
664
1,206
1,967
1,662
407
1,124
131

11,328

12,850

6,179
4,255

6,944
4,903

894
1,912
806
1,334
2,400
2,230
n.a.2
n.a.2
n.a.2

1,003
2,109
986
1,609
3,011
2,498
n.a.2
n.a.2
n.a.2

Operating expenses—Total ......................................................
Interest
Time and savings deposits....................................................
Time CD’s of $100,000 or more issued by
domestic offices.........................................................
Deposits in foreign offices.................................................
Other deposits....................................................................
Federal funds purchased and securities sold under
repurchase agreements.................................................
Other borrowed money3 ......................................................
Capital notes and debentures..............................................
Salaries, wages, and employee benefits.................................
Occupancy expense .................................................................
Less rental income.................................................................
N et...........................................................................................
Furniture and equipment .........................................................
Provisions for loan lo sse s.........................................................
Other operating expenses.........................................................
Minority interest in consolidated subsidiaries.................
Other ......................................................................................
Income before taxes and securities gains or lo ss e s...............
Applicable income ta x e s......................................................
Income before securities gains or lo s s e s ............................
Net securities gains or losses ( - ) after taxes ....................
Extraordinary charges ( - ) or credits after taxes...............
Net incom e.................................................................................

23,342

25,648

35,037

46,815

44,410

55,924

61,706

77,783

105,890

9,426

10,518

15,382

21,812

19,800

27,745

30,363

39,808

57,792

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

5,895
8,672
13,178

5,461
10,124
14,778

9,586
14,401
15,821

14,333
24,254
19,205

1,073
127
123
6,638
1,408
278
1,130
797
682
3,346

1,387
103
184
7,096
1,556
2%
1,260
848
768
3,484

3,765
473
204
7,808
1,724
316
1,408
924
994
4,079

5,714
871
217
8,834
1,929
325
1,603
1,037
1,858
4,870

3,151
336
228
9,624
2,155
363
1,792
1,154
3,050
5,275

11,551
2,928
366
16,131

4,224

4,711

5,696
1,356
4,340
47
14
4,401

6,679
1,653
5,025
-3 0
15
5,011

7,022
1,591
5,431
-6 9
3
5,365

6,958
1,453
5,505
17
23
5,546

4,322
790
303
12,395
2,804
459
2,345
1,456 2,633
7,100
22
7,078
8,807
2,311
6,496
40
38
6,576

6,803
1,403
334
14,116

5,322
1,348
3,974
144
-3
4,116

3,150
638
273
11,301
2,564
418
2,146
1,305
3,042
6,323
28
6,295
7,715
1,929
5,786
111
17
5,914

2,771
8,324
n.a.2
n.a.2
11,347
3,327
8,020
-185
27
7,863

2,932
9,429
n.a.2
n.a.2
13,104
3,644
9,460
-251
25
9,234

Cash dividends declared .........................................................

1,907

1,804

2,019

2,271

2,476

2,451

2,640

2,928

3,480

5,727

5,704

5,735

5,780

5,787

5,758

5,668

5,565

5,427

530

606

705

788

857

907

1,003

1,128

1,267

Memo
Number of banks ......................................................................
Average fully consolidated assets (billions of
dollars).................................................................................

1. Included in income from other bonds, notes, and debentures.
2. Because of an abbreviation in the income report filed by small
banks, these items are not available on an aggregated basis after
1977. Bracketed items similarly indicate combinations made for small
bank reporting.




1976

1977

1978

1979

63,639

70,514

89,130

118,994

40,901
4,263

46,060
4,671

59,925
6,387

81,303
10,077

)

3.
Includes interest paid on U.S. Treasury tax and loan account
balances, which began in November 1978.
n.a. not available.
N ote. For “Notes on comparability of commercial bank income
data before 1976,” see B ulletin (June 1978), p. 446.

Profitability o f Insured Commercial B anks, 1979

705

A.3 Earnings, portfolio composition, and interest rates, all insured commercial banks, 19791
Assets
Item

All

$1 billion or more
Less than
$100 million

$100 million
to $1 billion

Money center

Others

Balance sheet (as percent of average consolidated assets)
Interest-earning assets ......................................................................
Loans.................................................................................................
Securities .........................................................................................
U.S. Treasury..............................................................................
U.S. government agencies.........................................................
State and local governments.....................................................
Other bonds and stock ..............................................................
Gross federal funds sold and reverse RPs .................................
Interest-bearing deposits ..............................................................

83.0
56.3
17.2
5.5
2.8
8.0
.8
3.4
6.2

89.8
58.5
27.1
9.1
5.5
12.0
.5
4.0
.1

87.2
56.8
25.0
8.0
4.0
12.3
.7
4.3
1.0

77.8
54.8
7.4
2.1
.8
3.0
1.4
2.0
13.7

81.1
56.1
15.2
4.9
2.3
7.5
.5
3.8
6.0

Financial claims....................................................................................
Demand deposits ...........................................................................
Interest-bearing claims....................................................................
Time and savings deposits .........................................................
Large tim e.................................................................................
In foreign offices......................................................................
Other domestic ........................................................................
MMCs ..................................................................................
Subordinated notes and debentures ........................................
Other borrowings ........................................................................
Gross RPs and federal funds purchased ................................
Memo: Managed liabilities .........................................................

89.7
25.3
64.4
55.0
12.7
15.6
26.7
3.9
.4
2.4
6.6
37.6

90.2
28.9
61.3
59.6
9.1
0.0
50.6
7.8
.2
.4
1.0
10.8

91.0
30.1
60.8
54.2
14.1
.5
39.5
5.7
.5
1.2
5.0
21.3

88.4
17.9
70.5
57.9
11.2
40.1
6.6
.8
.3
4.2
8.1
63.9

89.7
27.3
62.4
49.3
15.8
10.8
22.7
3.2
.6
2.6
10.0
39.7

On securities.........................................................................................
State and local governments ........................................................
On loans, gross ....................................................................................
Net of loan-loss provision...............................................................
Taxable equivalent
Securities .........................................................................................
Securities and gross loan s..............................................................
For time and savings deposits
Negotiable CDs ..............................................................................
In foreign offices..............................................................................
Other deposits .................................................................................
For managed liabilities ......................................................................

7.05
5.58
12.01
11.55

7.02
5.42
10.88
10.42

6.82
5.40
11.56
11.09

7.67
6.35
12.76
12.39

7.04
5.65
12.38
11.80

9.31
11.37

9.09
10.31

9.12
10.80

9.94
12.42

9.48
11.75

10.52
11.38
6.65
11.20

9.79

10.82
11.64
6.53
11.02

9.90
11.27
7.40
11.13

11.10
11.78
6.40
11.58

Gross interest incom e.........................................................................
Gross interest expense ......................................................................
Net interest margin .........................................................................
Noninterest income ............................................................................
Loan-loss provision ..........................................................................
Other noninterest expense .................................................................
Profits before tax..............................................................................
Taxes ............................................................................................
Other ...........................................................................................
Net income ......................................................................................
Dividends......................................................................................
Retained income .........................................................................

8.62
5.50
3.12
.78
.24
2.54
1.12
.28
-.0 4
.80
.28
.52

8.44
4.27
4.18
.60
.24
3.02
1.52
.33
-.0 4
1.15
.29
.86

8.44
4.66
3.78
.75
.23
3.07
1.23
.23
-.0 3
.96
.34
.62

8.85
6.78
2.07
.79
.18
1.77
.91
.33
-.0 2
.56
.22
.34

8.63
5.59
3.04
.92
.29
2.67
1.00
.22
-.0 6
.72
.29
.42

Memo: Taxable equivalent net interest margin ...........................

3.48

4.70

4.31

2.23

3.38

Effective interest rates (percent)

6.71
10.00

Earnings and expenses (as percent of average assets)

1. See notes to tables in the text.




706

A.4

Federal Reserve Bulletin □ September 1980

Income attributable to international business of U.S. commercial banks with foreign offices, 1979
Millions o f dollars
Item

Amount

Pre-tax income attributable to foreign offices1.................................................................................................................................................
Plus: Pre-tax income attributable to international business conducted in domestic offices .................................................................
Less: adjustment amount2..............................................................................................................................................................................
Pre-tax income attributable to international business...................................................................................................................................
Less: All income taxes attributable to international business .................................................................................................................
Net income attributable to international business .........................................................................................................................................
Memo
Provision for possible loan losses attributable to international business ....................................................................................................
Noninterest income attributable to foreign offices1 ......................................................................................................................................
Noninterest income attributable to international business...........................................................................................................................
Noninterest expense attributable to foreign offices1 ...................................................................................................................................
Noninterest expense attributable to international business........................................................................................................................
Intracompany interest income attributable to international business......................................................................................................
Intracompany interest expense attributable to international business.....................................................................................................
Interest income of domestic offices from foreign-domiciled customers......................................................................................................
Fully consolidated
Pre-tax incom e................................................................................................................................................................................................
Total applicable taxes ...................................................................................................................................................................................
Net income3......................................................... 4..........................................................................................................................................
Average total assets........................................................................................................................................................................................

2.
Reflects the amount necessary to reconcile the preceding two
amounts with pre-tax income attributable to international business.




2,057
903
171
2,789
1,285
1,504
351
1,245
1,517
2,998
3,681
3,172
4,154
2,321
8,751
2,803
5,788
919,953

from business with U .S.-dom iciled customers,
3. After gains and losses from securities transactions and extraordi­
nary items.

707

Treasury and Federal Reserve
Foreign Exchange Operations
This 37th join t report reflects the Treasury-Fed­
eral Reserve policy o f making available addition­
al information on foreign exchange operations
from time to time. The Federal R eserve Bank o f
N ew York acts as agent fo r both the Treasury
and the Federal Open M arket Com m ittee o f the
Federal R eserve System in the conduct o f fo r ­
eign exchange operations.
This report was prepared by S cott E. Pardee,
M anager o f Foreign Operations o f the System
Open M arket A ccount and Senior Vice President
in the Foreign Function o f the Federal Reserve
Bank o f N ew York. It covers the period February
through July 1980. Previous reports have been
published in the March and Septem ber BULLE­
TINS o f each year beginning with Septem ber
1962.

Dollar exchange rates fluctuated widely over the
six-month period under review. Numerous politi­
cal and economic crosscurrents tended to impart
volatility to the exchange markets. These includ­
ed the profusion of uncertainties surrounding po­
litical developments in Iran and Afghanistan and
the shifting prospects for major industrial econo­
mies in dealing with the ill effects on their infla­
tion rates and current-account positions caused
by the further rise in prices for oil. Market partic­
ipants were also concerned about the possi­
bilities of unsettling capital flows as the Organi­
zation of Petroleum Exporting Countries (OPEC)
sought to invest the excess funds generated by
their massive current-account surpluses.
Nevertheless, the broad movements in ex­
change rates during the period resulted largely
from the relative pressures of the demand for
money and credit in the United States, compared
with other industrial countries and as reflected in
sharp swings in interest differentials between in­
vestments in dollars and other major currencies.
On balance, the dollar advanced sharply through



early April during the time in which there was an
intense scramble for funds and soaring interest
rates in the United States. Once that scramble
subsided and U.S. interest rates fell back
through mid-June, the dollar also declined.
Thereafter, the dollar remained vulnerable to
bouts of selling pressure each time domestic in­
terest rates tended to soften. But the selling pres­
sures did not cumulate. By late July, with money
demand in the United States picking up once
again, interest rates here turned firmer and dollar
rates in the exchange market also firmed. By this
time also, the dollar was bolstered by the under­
lying improvement in the U.S. trade and currentaccount positions and by indications of some re­
duction of our inflation rate.
For its part, throughout the period the Federal
Reserve continued to adhere to the approach
adopted last October 6, emphasizing bank re1.

Federal Reserve reciprocal currency
arrangements
Millions o f dollars
Amount o f facility
Institution
Jan. 1, 1980

July 31, 1980

Austrian National Bank ............................
National Bank o f B elg iu m .........................
Bank of Canada ...........................................
National Bank of Denmark ......................
Bank o f E ngland..........................................
Bank o f F rance.............................................
German Federal Bank ...............................

250
1,000
2,000
250
3,000
2,000
6,000

250
1,000
2,000
250
3,000
2,000
6,000

Bank o f Italy ................................................
Bank o f Japan................................................
Bank o f M exico ..........................................
Netherlands B a n k ........................................
Bank o f N o r w a y ..........................................
Bank o f Sweden ..........................................
Swiss National Bank ..................................

3,000
5,000
700
500
250
300
4,000

3,000
5,000
700
500
250
5001
4,000

Bank for International Settlem ents
Swiss francs/dollars ...............................
Other authorized European
currencies/dollars .........................

600

600

1,250

1,250

Total .........................................................

30,100

30,300

1. Increased by $200 million effective May 23, 1980.

708

Federal Reserve Bulletin □ September 1980

Foreign exchange operations under reciprocal currency arrangements, January 1-July 31, 1980
Millions o f dollars equivalent; drawings, or repayments ( - )
Federal Reserve System activity1

Transactions with

Bank of France .........
German Federal Bank

1980

Commitments,
Jan. 1, 1980

Ql

Swiss National B a n k .
Total .............................

3,150.4

Commitments,
July 31, 1980

July

0

100.2

316.0
-3 ,4 8 9 .2
22.7
- 2 2 .7

996.1
- 132.4

60.6
265.7
-2 6 3 .4

338.7
-3 ,5 1 1 .9

1,096.2
- 132.4

337.5
-2 7 4 .7

0
3,150.4

Q2

166.32
879.73

11.2
-11.2

0
0

1,046.0

Activity by the BIS4

Bank drawing on System

1980

Outstanding,
Jan. 1, 1980

Ql
Bank for International Settlements
(against German marks)5 ...................

192.0
-9 7 .0

1

Q2
50.0
-1 4 5 .0

Outstanding,
July 31, 1980

July

0
)

0

1. Because o f rounding, details may not add to totals. Data are on a
value-date basis except for the last two columns, which include trans­
actions executed in late July for value after the reporting period.
2. Includes revaluation adjustments from swap renewals, which to­
taled $5.5 million for drawings on the Bank of France renewed during
July.

3. Includes revaluation adjustments from swap renewals, which to­
taled $36.6 million for drawings on the German Federal Bank renewed
during the first quarter and July.
4. Data are on a value-date basis.
5. BIS drawings and repayments o f dollars against European cur­
rencies other than Sw iss francs to meet temporary cash requirements.

serves rather than the federal funds rate as the
primary operating variable in seeking to limit the
growth of the monetary aggregates. When the de­
mand for money and credit became extremely
heavy in February and March, largely on the
buildup of inflationary expectations at the time,
the Federal Reserve’s approach meant that not
all of the demand was met by increases in bank
reserves. This effort was reinforced by the
broader anti-inflation program announced by
President Carter on March 14, which featured a
tightening of fiscal policy but also included a pro­
gram of special credit restraint by the Federal
Reserve.
Subsequently, when the demand for money
and credit fell slack, and indeed the economy be­
gan to contract sharply, interest rates declined.
Consistent with its approach, the Federal Re­
serve provided bank reserves at about the same
pace as before. In late May and early July the
special credit restraints were eliminated in two
steps. Many market participants expressed con­
cern that, by allowing interest rates to decrease
so sharply and by eliminating the special credit
restraints, the Federal Reserve was giving up on
its anti-inflation efforts. This was hardly the case

as reiterated by Chairman Volcker in testimony
to the Senate Banking Committee in late July.
Moreover, as the demand for money and credit
regained strength in the United States toward the
end of the period, the Federal Reserve’s ap­
proach again meant that these demands were not
fully accommodated.
In the context of unsettled exchange market
conditions and volatility of exchange rates, the
U.S. authorities intervened frequently during the
six-month period operating on both sides of the
market. In the phase through early April when
the dollar was in demand, the U.S. authorities




3.

U .S. Treasury securities, foreign currency
denominated1
Millions of dollars equivalent; issues, or redemptions ( - )

Issues

Commitments,
Jan. 1, 1980

1980

Ql

Q2

July

Commitments,
July 31,1980

Public series
Germany .............
Switzerland .......

4,065.7
1,203.0

1,168.0
0

0
0

0
0

5,233.6
1,203.0

T otal....................

5,268.6

1,168.0

0

0

6,436.6

1. Data are on a value-date basis. Because of rounding, details may
not add to totals.

Foreign Exchange Operations

4.

U.S. Treasury and Federal Reserve foreign
exchange operations1
N et profits, or losses ( - ) in millions o f dollars
U .S . Treasury
Period

1980—Q l .......................................
Q 2 .......................................
1 9 8 0 - J u ly .....................................
Valuation profits and
losses on outstanding
assets and liabilities
as o f July 31, 1980 .............

Federal
Reserve

Exchange
Stabilization
Fund

General
Account

14.1
7.7
- 7 .3

0
42.0
3.8

64.9
0
6.3

19.2

-3 2 5 .8

-1 6 3 .0

709

shows that the System realized $14.5 million, the
Exchange Stabilization Fund realized $45.8 mil­
lion, and the Treasury’s General Account real­
ized $71.2 million in profits. On a valuation basis,
as of July 31 the System showed $19.2 million in
gains on outstanding foreign exchange assets and
liabilities. However, the Exchange Stabilization
Fund and the Treasury’s General Account
showed $325.8 million and $163.0 million in loss­
es respectively on outstanding foreign exchange
holdings and on commitments.

1. Data are on a value-date basis.

Ger m a n M a r k

were able to acquire sufficient currencies in the
market and from correspondents to repay earlier
debt and to build up balances, buying German
marks, Swiss francs, and Japanese yen. By late
March to early April, the Federal Reserve inter­
vened on several occasions openly as a buyer of
currencies to counter disorderly conditions in the
market. Subsequently, when the dollar came un­
der bursts of heavy selling pressure, the U.S. au­
thorities intervened in size, selling German
marks, Swiss francs, and French francs. By the
end of July, the U.S. authorities were again accu­
mulating currencies to repay swap debt and
rebuild balances.
For the period as a whole, total intervention
sales of currencies amounted to $3,982.7 million
equivalent, of which $3,530.6 million was in Ger­
man marks, $291.4 million in Swiss francs, and
$160.7 million in French francs. Total acquisition
of currencies amounted to $6,266.9 million, of
which $1,476.2 million was in the market and
$4,790.7 million was from correspondents; by
currency, the acquisitions were $5,691.1 million
of German marks, $357.8 million of Swiss francs,
$216.8 million of Japanese yen, and $1.2 million
of French francs. As indicated in table 2, as of
July 31, the Federal Reserve’s swap debt to the
German Federal Bank was $879.7 million equiva­
lent and to the Bank of France was $166.3 million
equivalent. Also during the period, as shown in
table 1, the Federal Reserve’s reciprocal swap
arrangement with the Bank of Sweden was in­
creased $200 million, to $500 million.
Through the first seven months of the year, the
Federal Reserve and the Treasury both realized
profits on foreign exchange operations. Table 4



During the winter of 1979-80, as the exchange
markets focused on the uncertainties surround­
ing the U.S. strategic and financial position in the
Middle East and on the dollar’s role as a reserve
asset, the German mark had been bid up in the
exchanges to a record high against the dollar. But
before long the prospects for the continued ap­
preciation of the mark became clouded. The
massive increase in world oil prices and the ex­
pansion of the German economy had generated a
far more rapid increase in import expenditures
than in export revenues, leading to a dramatic
turnaround in Germany’s current-account posi­
tion. The current account had already swung
from surplus into a DM 10 billion deficit in 1979,
and an even larger deficit of as much as DM 20
billion was expected this year.
Inflation also accelerated rapidly under the
pressures of an economy running close to pro­
ductive capacity and the persistent buildup of en­
ergy costs. Moreover, events in the international
arena added to the market’s sense of caution. Al­
though political tensions in the Middle East still
raised the possibility that holders of dollars from
that region might switch into marks, the deterio­
ration in great power relations following the So­
viet invasion of Afghanistan also raised concern
about Germany’s exposure in Western Europe.
As a result, capital began to flow out of the mark
in search of other havens.
In these circumstances the mark had already
slipped back from its highs early in the year to
DM 1.7414 by the end of January, and sub­
sequent bouts of buying pressure did not readily
cumulate. Thus, on two occasions in early Feb­

710

Federal Reserve Bulletin □ September 1980

ruary when concern about the dollar brought the
mark into bursts of demand, the U.S. authorities
quickly restored balance to the market with sales
of $240.8 million equivalent of marks. These
sales were financed out of balances of the Trea­
sury and the Federal Reserve and by drawings of
the Federal Reserve in the amount of $115.4 mil­
lion under the swap line with the German Federal
Bank. These operations raised the System’s total
mark swap debt with the Federal Bank to a peak
of $2,746.3 million equivalent for the six-month
review period and steadied the mark around DM
1.7375.
In view of the deterioration in Germany’s in­
flation and balance of payments performance,
German economic policy moved toward greater
restraint. The authorities feared that rising ener­
gy prices would unleash a cycle of wage-price in­
creases. Already there was some evidence of ac­
celerating purchases by consumers and a buildup
of business inventories, partly on the expectation
of more inflation to come. Also, the uncertain
outlook for capital inflows raised concerns about
the prospects for financing the large current-ac­
count deficit. Accordingly, the pace of govern­
ment expenditures had already been reduced. On
February 28 the Federal Bank raised the dis­
count rate 1 percentage point to 7 percent and the
Lombard rate IV2 percentage points to 8V2 per­
cent. But, to prevent liquidity from tightening
too far in the face of a seasonal increase in mon­
ey demand, the Federal Bank also increased
commercial banks’ rediscount quotas by DM 4
billion and removed borrowing limits under the
Lombard facility. These actions brought official
rates in line with German money market rates,
which were rising as the authorities, in the face
of mounting credit demands, kept the growth of
central bank money within the annual growth
range of 5 to 8 percent.
Meanwhile, short-term dollar interest rates
were rising even more sharply as the Federal Re­
serve, adhering to the monetary policy adopted
last October 6, restrained the growth of bank re­
serves in the face of a sudden resurgence in the
demand for money and credit in the United
States. As reports began to circulate that the
U.S. authorities might impose credit controls to
help stem the rise in inflationary expectations, a
surge of precautionary borrowing ensued, which



pushed U.S. domestic and Eurodollar rates to
new highs. With interest differentials adverse to
the mark widening progressively to reach 8V2
percentage points in the early weeks of March,
capital flowed heavily out of Germany and the
mark declined rapidly in the exchanges. These
outflows took the form of adverse commercial
leads and lags, portfolio shifts by foreign inves­
tors, and a buildup of dollar balances by German
residents. In addition, some professional and
corporate borrowers around the world began
meeting their financing needs in other currencies
by borrowing marks and converting the proceeds
in the exchanges.
The German authorities were concerned that
the sharp depreciation of the mark would further
aggravate domestic inflationary pressures
through higher prices for oil and other imports.
The Federal Bank intervened heavily to blunt the
mark’s decline, entering the Frankfurt market,
where the pressures tended to concentrate, al­
most daily as a heavy seller of dollars both spot
and forward. The authorities also took measures
to induce sufficient capital inflows to help finance
the current-account deficit and to help offset the
outflows of capital. In part, these entailed the re­
laxation of restrictions on capital inflows by per­
mitting foreigners to purchase government secu­
rities, domestic bonds, and other markdenominated promissory notes with maturities of
more than two years (as opposed to four years
previously). In addition, the government negoti­
ated directly with foreign official institutions, no­
tably those from OPEC, to obtain investments in
mark assets.
Meanwhile, through mid-March the U.S. au­
thorities acquired $2,751.7 million equivalent of
marks from correspondents, mainly from the
Federal Bank. Also, the Trading Desk inter­
vened in New York, purchasing $115 million
equivalent of marks in the market. These marks
were used to liquidate in full the Federal Re­
serve’s outstanding swap debt with the Federal
Bank and to make interest payments on the
Treasury’s securities issued in the German capi­
tal market. On balance, by mid-March the mark
had declined 5 percent from levels in early Feb­
ruary to DM 1.8265.
On March 14, President Carter announced a
broad anti-inflation program that included ac­

Foreign Exchange Operations

tions aimed at balancing the fiscal 1981 budget, a
surcharge on imported oil, and authorization for
the Federal Reserve under the terms of the Cred­
it Control Act of 1969 to impose special restraints
on credit expansion. Accordingly, the Federal
Reserve asked the commercial banks to hold
their growth of lending to U.S. residents to 6 to 9
percent during 1980, required special deposits
from nonmember banks and other lending insti­
tutions, and raised the marginal reserve require­
ment on managed liabilities from 8 to 10 percent
for large member banks and U.S. agencies and
branches of foreign banks. In addition, the Fed­
eral Reserve imposed a 3-percentage-point sur­
charge on discount window borrowings by large
member banks. The exchange market reacted
positively to the package of special credit re­
straints as a sign of the U.S. authorities’ determi­
nation to curb persistent and accelerating infla­
tionary pressures.
Following these measures, the interest dis­
incentive against the mark widened to some 10
percentage points as short-term dollar interest
rates climbed further in late March and into early
April, reaching peaks of 20 percent. As a result,
interest-sensitive capital flowed even more heav­
ily from Germany at a time when the continued
deterioration of the current-account deficit left
the mark spot rate particularly vulnerable to
downward pressure. Vigorous intervention to
support the mark in these circumstances threat­
ened a drain on Germany’s foreign exchange re­
serves, which the authorities feared would un­
dermine confidence in the mark all the more.
Therefore, the Federal Bank intervened some­
what less forcefully than in previous weeks and
also supported the mark through sales of markdenominated bonds to foreign official holders.
By April 8 the mark declined another 8V2 per­
cent, reaching a low of DM 1.9810 in Far Eastern
trading while also dropping to the bottom of the
European Monetary System (EMS). As the sale
of marks against dollars gathered momentum be­
tween mid-March and early April, the U.S. au­
thorities intervened forcefully to counter dis­
orderly trading conditions, operating frequently
in the New York market and, on one occasion,
overnight in the Far East. The authorities pur­
chased an additional $741.5 million equivalent of
marks in the market and another $654.7 million



711

equivalent from correspondents, which were
added to System and Treasury balances. Mean­
while, the Federal Bank’s heavy dollar sales
were reflected in a $5.1 billion decline in Germa­
ny’s foreign exchange reserves from the end of
January to $41.2 billion by the end of March.
By this time, however, the German money
market had tightened considerably and, even
though the Federal Bank had begun to offset the
drain on liquidity of its dollar sales by entering
into foreign exchange swaps, market participants
expected a further rise in German official interest
rates. By contrast, with the scramble for funds in
the United States tapering off and with economic
indicators suggesting a sharp slowing in the U.S.
economy, market participants sensed that dollar
interest rates would soon turn down.
Under these circumstances, the mark came in­
to immediate and heavy demand once interest
rates in the United States showed unmistakable
signs of declining in early April. Moreover, di­
minished prospects for a resolution of the hos­
tage situation in Iran renewed concerns that offi­
cial dollar holders in the Middle East would
switch more of their surplus funds into European
currencies—the mark in particular—as an alter­
native to dollar assets. On April 8-10 as dollar
exchange rates declined across the board, the
mark soared 5V2 percent to DM 1.8730 in ex­
tremely disorderly conditions. In response, the
Trading Desk intervened as a seller of marks and
Swiss francs and, to avoid aggravating the weak­
ness of the mark relative to the French franc
within the EMS, also intervened as a seller of
French francs. The Federal Bank also sold
French francs to support the mark within the
EMS.
In the weeks that followed, U.S. interest rates
continued to drop precipitously, at times falling
by as much as 1 or 2 percentage points a day.
Traders generally recognized that the Federal
Reserve’s policy of restraint on money supply
growth was consistent with some easing in finan­
cial market conditions, as demands for money
and credit weakened and as evidence of reces­
sion mounted. But the abruptness of the change
in market conditions generated uncertainty about
the policies of the U.S. authorities. At the same
time, German interest rates remained firm, so
that interest differentials adverse to the mark

712

Federal Reserve Bulletin □ September 1980

were rapidly narrowing. As commercial and pro­
fessional participants continued to unwind their
short mark positions, the mark advanced another
4 lU percent to as high as DM 1.7940 by late
April. However, the U.S. and German authori­
ties were quick to enter the market to moderate
the mark’s rise, and their coordinated inter­
vention helped bring the market into better bal­
ance around the month-end.
Meanwhile, in Germany, inflationary pres­
sures remained strong by recent standards and
the continued growth of credit demands was
boosting borrowings from the central bank. On
April 30, the Federal Bank hiked its discount rate
xh percentage point to l xli percent and the Lom­
bard rate 1 percentage point to 9lh percent. At
the same time the Federal Bank moved to curtail
excessive reliance on the Lombard facility by re­
ducing reserve requirements 8 percent and rais­
ing commercial banks’ quotas under the
rediscount facility, thereby providing about DM
8 billion in domestic liquidity. The effect of these
actions was to leave the restrictive stance of
monetary policy unchanged while keeping short­
term liquidity tight. But market participants ini­
tially found it hard to assess the impact of these
measures and focused instead on broader eco­
nomic developments in the United States.
Monthly data showed that the U.S. trade posi­
tion was improving, while some evidence sug­
gested that price increases were slowing from the
rapid pace early in the year. As a result, the mark
fluctuated only narrowly higher as the dollar
gained some resiliency in the exchanges, to trade
around DM 1.78-DM 1.79 through mid-May.
On those occasions when upward pressures on
the mark threatened to cumulate, the U.S. and
German authorities intervened to restore balance
to the market. Total intervention sales by the
U.S. authorities between early April and midMay amounted to $1,370.2 million equivalent of
marks, including $732.4 million equivalent for
the System, financed out of balances and by
drawings on the swap line with the Federal Bank,
and $637.8 million equivalent for the Treasury fi­
nanced from balances. At times when the mark
eased back, the Federal Reserve took the oppor­
tunity to acquire $60.4 million equivalent of
marks in the market and $169.6 million equiva­
lent from correspondents in order to finance in­



tervention and to repay part of the newly ac­
quired swap debt with the Federal Bank. On
balance, by mid-May the System’s swap in­
debtedness with the Federal Bank stood at
$331.4 million equivalent of marks. For its part
the Treasury bought $29.8 million equivalent of
marks on a spot basis and received delivery of
$400 million equivalent of marks on a forward
basis from correspondents.
Nevertheless, market participants remained
extremely sensitive to monetary policy develop­
ments in Germany and in other industrial coun­
tries. Coming into the summer, Federal Bank of­
ficials were stressing the need to rein in further
central bank money growth to the lower end of
the 5 to 8 percent target range. In the United
States, meanwhile, interest rates continued to
decline. Participants questioned whether the
sharp drop in rates was more a response to the
falloff in credit demand or to the provision of
bank reserves by the U.S. authorities. Traders
closely scrutinized the actions of the domestic
Trading Desk, and the mark frequently came into
demand when declines in the federal funds rate
were interpreted as a sign of monetary ease.
Moreover, in view of the exceptional weakness
of the U.S. economy and increasing public dis­
cussion about the need for stimulus, the ex­
change market was alert to any evidence of a
weakening in the priority of the U.S. fight against
inflation. Consequently, bidding for the mark
gathered force in late May and again in early
July, when the U.S. authorities first relaxed and
then phased out completely the special credit re­
straint program adopted early in the spring.
Demand for the mark propelled the spot rate to
as high as DM 1.7335 by early July. But against
the major European currencies the mark re­
mained weak. Germany’s current-account defi­
cit, already larger than that of any of its trading
partners, continued to widen, and a number of
private and official organizations were predicting
a deterioration of up to as much as DM 25 billion
to DM 30 billion for the year as a whole. Al­
though capital continued to flow back into Ger­
many, a number of other EMS countries with
higher interest rates than those prevailing in the
German money and capital markets were also at­
tracting substantial inflows of funds. In these cir­
cumstances, the Trading Desk again countered

Foreign Exchange Operations

the outbreak of disorder in the market by supple­
menting its mark intervention with sales of
French francs so as to avoid aggravating the
strains on the mark within the EMS.
By mid-July the mark began to lose some of its
buoyancy as traders grew more cautious in the
face of changing economic conditions in Germa­
ny. Evidence mounted that domestic economic
growth was tapering off, as industrial production
and construction activity posted declines. Infla­
tion on the wholesale and consumer levels also
abated somewhat, reflecting some relief in the
food and energy sectors, the slowing in demand
pressures, and moderate wage settlements nego­
tiated over the spring. Moreover, several EMS
countries had begun to allow monetary condi­
tions to ease. Accordingly, domestic pressures
built up for a relaxation of policy in Germany.
The authorities were nevertheless concerned
that a reduction of official interest rates would
undercut the progress under way in bringing in­
flation under control and in financing the currentaccount deficit. Instead, the Federal Bank an­
nounced that it would provide a new repurchase
facility in the amount of DM 5.4 billion. Federal
Bank President Poehl described this action as a
cautious easing in monetary policy.
At the same time the outlook for the dollar was
improving. The dollar was benefiting from new
data on production and employment that sug­
gested that the U.S. economy was no longer con­
tracting as rapidly as before. As the demand for
credit picked up and the monetary aggregates re­
corded large increases, short-term U.S. interest
rates rebounded. In this light, Chairman Volcker’s congressional testimony, reaffirming the
Federal Reserve’s commitment to a policy of
monetary restraint, was particularly well re­
ceived. As a result, the mark dropped lower to
close the period at DM 1.7860, for a net decline
of 272 percent over the period under review.
After mid-May, the U.S. authorities inter­
vened to sell $1,919.4 million equivalent of marks
including $1,096.0 million equivalent for the Sys­
tem and $823.4 million equivalent for the Trea­
sury. The System’s sales were financed from bal­
ances and by drawings on the swap line with the
Federal Bank. However, the authorities were al­
so able to purchase $160.0 million equivalent of
marks in the market and $608.2 million equiva­



713

lent from correspondents. As a result, the Sys­
tem was able to reduce its outstanding in­
debtedness to the Federal Bank from as high as
$1,080.9 million equivalent to $879.7 million
equivalent by the end of July (including revalua­
tion adjustments to swap renewals), while the
Treasury was able to begin replenishing its mark
balances. Meanwhile, Germany’s foreign ex­
change reserves rose $4.5 billion in the four
months through the end of July, largely reflecting
revaluation gains of its gold and foreign currency
holdings with the European Monetary Fund. The
Federal Bank’s purchases of dollars also contrib­
uted to the rise in foreign exchange reserves,
which stood at $45.7 billion at the end of July,
little changed on balance.1

Sw iss F r a n c
By early 1980, the upsurge in prices of oil and
other international raw materials was being
quickly transmitted to the Swiss economy. In­
deed, inflation in Switzerland, at 5 percent per
year, remained low by comparison with that in
other countries but was accelerating at a worri­
some pace. At the same time, the sharp rise in
imports of oil and other goods cut deeply into
Switzerland’s traditional current-account sur­
plus. The Swiss authorities, like those in most
other industrial countries, were pursuing a policy
of monetary restraint in an effort to combat infla­
tionary pressures, and Swiss interest rates
moved higher. But economic activity in Switzer­
land was expanding more slowly than in other
countries. Consequently, the demand for funds
was not so intense, and Swiss interest rates—
while rising sharply by historical standards—did
not begin to keep pace with those abroad.
The shrinking current-account surplus, accel­
erating inflation, and adverse interest dif­
ferentials exerted a drag on the Swiss franc dur­
ing February and March. At times when the
1. Foreign exchange reserves for Germany and other
members of the EMS, including the United Kingdom, incor­
porate adjustments for gold and foreign exchange swaps
against European currency units (ECUs) done with the Euro­
pean Monetary Fund. Foreign exchange reserve numbers
used in the report are drawn from International Monetary
Fund data published in International Financial Statistics.

714

Federal Reserve Bulletin □ September 1980

dollar came on offer in early February the Swiss
franc was bid up. On such occasions, the Swiss
National Bank intervened to counter a disorderly
rise in the franc. At one point, the Federal Re­
serve joined in the intervention by selling $22.5
million equivalent of Swiss francs out of balanc­
es. But otherwise the Swiss franc tended to ease.
By late February, investors began liquidating
assets denominated in Swiss francs, switching into
higher-yielding mark and sterling assets and,
when U.S. interest rates began their upward
climb, moving into dollar-denominated invest­
ments as well. In fact, the franc fell more sharply
than the mark against the dollar, declining to SF
1.7111 in late February, some 43U percent below
the opening level of SF 1.6325.
In response to these pressures on the franc,
the Swiss authorities acted in late February and
early March to liberalize restrictions on capital
inflows by lifting the ban on interest payments on
nonresident savings deposits and on foreign cen­
tral bank deposits with maturities of six months
or more. The authorities also eased restrictions
on foreigners’ purchases of forward Swiss
francs. On February 28, the Swiss National Bank
raised the discount and Lombard rates 1 percent­
age point each, to 3 and 4 percent respectively.
But these measures were not sufficient either to
satisfy market expectations of more comprehen­
sive action to dismantle barriers to inflows or to
bring official rates in line with interest rates pre­
vailing in the domestic or Eurofranc money mar­
kets.
Meanwhile, domestic economic activity was
picking up after two years of sluggish growth.
With the economy now operating close to full
employment, consumers and businesses acceler­
ated their purchases of imported goods at a time
when import prices were still rising rapidly. As a
result, the trade deficit deteriorated further. Dur­
ing March selling pressures intensified. Com­
mercial leads and lags swung against the franc,
and investors kept shifting funds out of Switzer­
land. Moreover, higher interest rates abroad
prompted professional and commercial borrow­
ers to turn to Switzerland’s money and capital
markets where interest rates remained com­
paratively low.
In response, the Swiss National Bank began
intervening more openly and heavily as a seller



of dollars, thereby absorbing Swiss francs. The
authorities also lifted completely restrictions on
forward franc sales to foreigners and removed
the interest payment ban on nonresident bank
deposits of three months or longer. As a further
stimulus to capital inflows, foreign central banks
were allowed to subscribe to a second bond de­
nominated in Swiss francs issued by the World
Bank and to short-term certificates of the Swiss
government. Even so, with interest differentials
remaining highly adverse to franc-denominated
assets, the franc spot rate continued to weaken,
dropping through the psychologically important
SF 0.95 level against the mark.
On March 27, Swiss National Bank General
Manager Languetin stated that the Swiss central
bank would intervene as forcefully as required to
prevent a further weakening of the franc. At the
same time the authorities were alert to the do­
mestic liquidity situation. The heavy volume of
capital outflows and official dollar sales had led
to a decline in the monetary base below desired
levels, and a further contraction threatened to
dampen economic activity. To support the franc
without generating further liquidity strains, the
Swiss National Bank supplemented its spot inter­
vention with forward dollar sales and provided
commercial banks with a substantial amount of
franc liquidity through short-dated foreign ex­
change swaps. The Federal Reserve also took
advantage of the opportunity to buy Swiss francs
in New York to add to balances, buying $185.1
million equivalent of Swiss francs, including
$140.4 million equivalent in the market between
February and early April. Whereas the franc
soon steadied against the mark, the spot rate
continued to decline against the dollar, bot­
toming out at nearly SF 1.88 on April 8 in the Far
East.
The abrupt decline of dollar exchange rates be­
ginning early in April had its counterpart in a
surge of heavy bidding for the Swiss franc. Pro­
fessional and commercial interests rushed to
cover short franc positions in response to the de­
cline in U.S. interest rates that happened to coin­
cide with reports that the Swiss National Bank
might raise its interest rates in line with an ex­
pected hike of official interest rates in Germany.
On April 8-10 the franc soared VU percent to SF
1.7330, outpacing the rise in the mark. To coun­

Foreign Exchange Operations

ter the disorderly market conditions, the Federal
Reserve sold $35 million equivalent of francs,
while operating in other currencies as well. Al­
though the Swiss authorities left official rates un­
changed, the franc frequently led the rise in the
European currencies against the dollar in the
weeks that followed. Many participants bid for
the franc on the view that the Swiss authorities
welcomed a rise in the franc. Investors, having
ready access to franc investments as a result of
the virtual elimination of exchange controls, re­
acted to the reduction of adverse interest dif­
ferentials by purchasing a broad range of francdenominated assets. Moreover, commercial and
professional interests increasingly covered Swiss
franc liabilities incurred over the winter months.
As the demand for Swiss securities increased,
long-term yields in Switzerland declined. But the
Swiss National Bank signaled its resistance to
the rapid fall in interest rates by selling secu­
rities. Also, Swiss National Bank President
Leutwiler reaffirmed the authorities’ com­
mitment to a restrictive monetary policy course.
Traders were also heartened by new statistics,
suggesting that Switzerland’s inflation rate was
leveling off.
By contrast, the market remained concerned
over the sharp decline in U.S. interest rates.
Many traders questioned the priority of the anti­
inflation fight in the United States, particularly
when in late May and again in early July the Fed­
eral Reserve successively dismantled the special
credit restraint program. On both those occa­
sions, the Swiss franc came into demand, rising
to a high of SF 1.5840 by early July. To avoid an
exaggerated movement in the spot rate, the
Swiss National Bank intervened as a buyer of
dollars in Zurich and through the agency of the
Federal Reserve in the New York market. For
their part, the U.S. authorities sold $233.9 mil­
lion equivalent of Swiss francs in the 11 weeks
from mid-April, with the bulk financed from bal­
ances and $ 11.2 million equivalent drawn on the
System’s swap line with the Swiss National
Bank.
In the final weeks of July when market senti­
ment toward the dollar improved, the franc lost
its upward momentum. Signs that the U.S. econ­
omy was no longer contracting as rapidly as be­
fore, and that interest rates were backing up,



715

contrasted with evidence of some slowing of eco­
nomic growth and easing in financial conditions
in Western Europe. With market participants
sensitive to the possibility that Swiss interest
rates might also ease, the Swiss franc fell back in
the exchanges to SF 1.6570 by the end of July. In
fact, however, Swiss interest rates held firm.
When the franc came on offer after mid-July, the
U.S. authorities took the opportunity to pur­
chase $42.0 million equivalent of francs in the
market and $130.5 million equivalent from corre­
spondents. These francs were used to liquidate
the System’s outstanding swap debt with the
Swiss National Bank and to rebuild System and
Treasury balances.
For the period as a whole, the Swiss franc de­
clined IV2 percent from levels at the end of Janu­
ary, while rising VU percent against the German
mark. Meanwhile, Switzerland’s foreign cur­
rency reserves fluctuated from month to month
in response not only to the central bank’s inter­
vention, but also to foreign exchange swap oper­
ations undertaken for domestic monetary pur­
poses. On balance, Switzerland’s foreign
exchange reserves declined $850 million over the
six months under review to stand at $12.3 billion
as of July 31.

J a p a n e s e Ye n

Last year, the Japanese economy had made good
progress in adjusting to earlier imbalances. Ef­
forts to boost domestic demand had generated
solid growth while also helping reduce Japan’s
previously excessive current-account surplus.
Export and import volumes had responded to the
previous appreciation of the yen, with the effect
of reducing the current-account surplus. The yen
rate had moved back up to around ¥220 to the
dollar. But the sharp new rise in international oil
prices in 1979 and early 1980, coupled with the
risk of major disruptions to oil supplies, was a
serious blow to Japan, which depends on import­
ed oil for three-fourths of its energy needs.
Consequently, the authorities found that they
had to reverse gears and adjust to a new set of
problems, as inflationary pressures at the whole­
sale level built up drastically, as the current ac­
count was pushed into deep deficit under the

716

Federal Reserve Bulletin □ September 1980

weight of a sharply higher import bill, and as the
yen came heavily on offer and depreciated sharp­
ly in the exchange market. In response, the Japa­
nese authorities progressively tightened mone­
tary and fiscal policies, primarily to contain
inflationary pressures. The authorities also
sought to correct the current-account deficit
gradually by adjustment of the real economy
and, in the meantime, to finance the deficit by
capital inflows. The government’s budget for the
1980-81 fiscal year called for a cutback in spend­
ing for public works that would permit a reduc­
tion of deficit financing. The Bank of Japan raised
interest rates including a 1 percentage point in­
crease of 1 XU percent in its discount rate on Feb­
ruary 19. It also raised reserve requirements and
kept tight reins on bank credit expansion.
Nevertheless, by February, short-term inter­
est rates abroad, especially on dollar in­
struments, were rising even more sharply than
the advance of Japanese money market rates.
Consequently, the yen continued on offer. With
the exchange rate declining, market sentiment
toward the yen turned increasingly bearish so
that commercial leads and lags as well as specu­
lative outflows of funds added to the downward
pressure on the yen vis-a-vis the dollar and other
major currencies. By the month-end the yen had
plummeted to ¥251.75, a decline of 572 percent
from levels in late January and fully 43 percent
from the high recorded in October 1978. As be­
fore, the Bank of Japan intervened to moderate
the decline of the yen, supplementing its inter­
vention in Tokyo with operations in New York
through the Federal Reserve Bank of New York.
The sharp decline of the yen complicated the
authorities’ efforts to contain inflation. The rising
cost of imports had already helped push whole­
sale prices up over 20 percent on a year-overyear basis. This sharp increase was feeding into
the consumer price index, which by then was ris­
ing at a rate of about 8 percent. The key spring
wage negotiations were about to start. In these
circumstances, a further weakening of the yen
threatened to reinforce inflationary expectations.
The Japanese authorities therefore undertook
several initiatives to support the yen in the ex­
changes. Following intensive discussions, on
March 2 the Bank of Japan announced that the
Federal Reserve, the German Federal Bank, and



the Swiss National Bank would cooperate to
avoid an excessive decline of the yen. The Fed­
eral Reserve, for its part, indicated its willing­
ness to purchase yen in the New York market for
its own account and to provide resources to the
Bank of Japan if needed under the existing $5 bil­
lion swap arrangement. The German and Swiss
central banks also pledged their support and sub­
sequently concluded swap agreements with the
Bank of Japan. Also, on March 2 the Japanese
authorities adopted a number of measures to en­
courage inflows so as to help finance the currentaccount deficit. Banks were allowed to bring in
Euroyen deposits from their foreign offices, and
Japanese banks were permitted to make mediumand long-term foreign currency loans (so-called
impact loans) to domestic customers. Controls
on private placements abroad of yen-denomina­
ted bonds by Japanese residents were relaxed.
And free-yen deposits held by foreign official in­
stitutions were exempted from interest rate ceil­
ings. Later during the month, the Bank of Japan
abolished its 1970 arrangement with commercial
banks providing for yen-dollar swap facilities to
finance imports, thereby rescinding the last of
the major import promotion schemes. The autho­
rization of increased ceilings for the issuance of
yen-denominated certificates of deposit (CDs) by
banks operating in Japan also provided more
scope for short-term capital inflows from abroad.
These measures were reinforced by a broad
anti-inflation program, introduced on March 19,
that was keyed to the domestic economy. The
Bank of Japan raised its discount rate another
13/4 percentage points to 9 percent and sub­
sequently increased both reserve requirements
and “window guidance” limits on bank lending.
Public works expenditures, already trimmed
back, were postponed. In addition, the govern­
ment announced that henceforth it would mon­
itor price developments more closely, would sell
commodities out of stockpiles if needed to pre­
vent shortages from developing, and would ac­
celerate energy conservation efforts. The author­
ities reaffirmed their commitment to a disciplined
monetary policy and to the priority of the fight on
inflation.
These measures helped relieve some of the im­
mediate selling pressures, and the yen strength­
ened against most of the major European cur­

Foreign Exchange Operations

rencies over the course of March. But reflows
back into yen were slow to materialize, particu­
larly since the pull of U.S. interest rates was so
strong in late March and early April. Along with
other major foreign currencies, the yen contin­
ued to decline against the dollar through early
April. By April 8, the yen had fallen a further 5
percent to as low as ¥264 against the dollar in
Far Eastern trading. The Bank of Japan contin­
ued to intervene forcefully to moderate the de­
cline of the yen rate, and its dollar sales were
reflected in the $2.2 billion decline of foreign ex­
change reserves during February and March.
Meanwhile, as part of the March 2 agreement,
the Federal Reserve bought $216.8 million equiv­
alent of yen in the New York market in coordi­
nated operations with the Bank of Japan. These
purchases were added to System balances.
By mid-April, with interest rates turning
down, the yen began to recover along with other
major currencies. At first the yen’s recovery was
tentative. Wholesale prices were still rising
sharply in Japan, and concerns about oil supplies
resurfaced amid discussions of economic sanc­
tions against Iran. Nevertheless, the spring wage
negotiations resulted in moderate wage increas­
es, while evidence continued to point to sub­
stantial gains in labor productivity. The market
increasingly came to the view that declining unit
labor costs would mitigate domestic inflationary
pressures and would provide the basis for Japa­
nese exporters to take advantage of the now sub­
stantial depreciation of the yen to increase sales
abroad. A sharp improvement in exports was al­
ready showing through in Japan’s trade figures,
and the overall trade and current-account deficits
were beginning to level off.
In response, market sentiment toward the yen
improved, and the spot rate began to rise more
rapidly at the end of April. Speculative short po­
sitions were covered, while commercial leads
and lags shifted back in favor of the yen. With
U.S. interest rates continuing to decline and in­
terest rates in Japan holding steady, the dif­
ferential in rates swung back to favor the yen in
early May and the pace of capital inflows quick­
ened. By that time, funds were moving into yendenominated assets of all maturities amid reports
of large placements by OPEC central banks and
other foreign authorities in the Japanese market.



111

As the flow of funds gathered force, the yen be­
gan to outpace the rise in the European cur­
rencies against the dollar, soaring by mid-June to
as high as ¥214.95, some I8V2 percent above its
lows in early April. As the rate rose, the Bank of
Japan intervened in size to counter disorderly
conditions, on balance buying back about half of
the dollars it had sold earlier during the sixmonth period.
By that time, the reflux of funds had about run
its course. Moreover, traders had become cau­
tious in light of the upcoming parliamentary elec­
tion on June 22, especially since the sudden
death of Prime Minister Ohira had inserted an
added element of uncertainty into the campaign.
The outcome—-a victory by the ruling LiberalDemocratic Party with sufficient margin to pro­
vide for continuity in Japan’s leadership—reas­
sured the market. The yen rate settled in a trad­
ing range of ¥215-¥219 through early July.
Coming into summer, however, the debate
over economic policy heated up, as the pace of
economic expansion began to slow and industrial
production registered a decline. With slower eco­
nomic growth abroad, the authorities in several
other industrial countries were beginning to al­
low monetary conditions to ease somewhat.
Meanwhile, large inflows of interest-sensitive
funds had generated an easing in the Tokyo mon­
ey market. As a result, the authorities were
urged to ease up on monetary policy, particularly
by allowing interest rates to decline. In response
to this pressure, some commercial and profes­
sional selling of yen emerged and the yen de­
clined in mid-July.
The Japanese authorities nevertheless re­
mained concerned about the need for further ad­
justment of the economy. Governor Mayekawa
of the Bank of Japan stressed that an easing of
monetary policy was premature in light of the
continuing inflationary pressures. Moreover, the
new government under Prime Minister Suzuki
quickly affirmed its support for a firm anti-inflationary effort. Consequently, the yen rate soon
steadied and closed the period at ¥227.80 for a
net advance of 43U percent over the six-month
period under review. Meanwhile, the Bank of Ja­
pan’s dollar gains after March were partially re­
flected in an increase in Japan’s foreign exchange
reserves of $4.2 billion. At the end of July, re­

718

Federal Reserve Bulletin □ September 1980

serves stood at $18.8 billion, up $2.0 billion on
balance.

S t e r l in g

Last year the government under Prime Minister
Margaret Thatcher came into office, pledging to
reduce the role of the public sector in the British
economy and to restore private incentives. To
achieve this objective, the government com­
mitted itself to alleviate the burden of taxation by
reducing government spending over the long
term while in the meantime shifting the tax struc­
ture away from direct toward indirect taxation.
Meanwhile, the United Kingdom’s inflationary
spiral was being given another twist by an up­
surge in wage demands after the abandonment of
formal wage restraints a year earlier, rising ener­
gy prices, and an increase of 4 percent in the val­
ue-added tax to finance reductions of income tax.
To contain these pressures the British authorities
had imposed an increasingly restrictive monetary
policy, raising domestic interest rates to record
highs to bring the expansion of sterling M-3, the
targeted monetary aggregate, back within the an­
nual growth range of 7 to 11 percent.
By late 1979 the economy was slipping into re­
cession. The combined impact of rising labor
costs and high interest rates was imposing in­
creasingly severe financial strains on British in­
dustry. Companies were cutting back on their in­
ventories and scaling down their investment
plans. Even so, monetary expansion was proving
difficult to control, since companies were bor­
rowing heavily from banks to meet their financ­
ing needs while waiting for interest rates to come
down. Moreover, despite the government’s best
efforts, public spending was proving difficult to
contain, and the public-sector borrowing require­
ment for fiscal 1979-80 was running nearly £ l lh
billion above target at just under £10 billion per
year.
In the exchange market, sterling had strength­
ened. British interest rates were high relative to
those in most other countries. Moreover, the
United Kingdom’s approaching self-sufficiency
in oil was seen as leaving the current account
well protected against possible cutoffs in oil sup­
plies and further increases in energy prices. The



breadth and depth of British capital markets also
provided attractive investment opportunities for
international investors, especially OPEC mem­
bers that were seeking outlets for their bur­
geoning surpluses. As a result, foreign capital
flowed heavily into sterling-denominated assets,
enabling the United Kingdom to finance in 1979 a
current-account deficit of $5 billion, official debt
repayments of $2 billion, and outflows of more
than $4 billion stemming from the abolition of ex­
change controls. Even after these outflows, ster­
ling traded around 2.27 by the end of January
1980 and around 71.7 on a trade-weighted basis
as a percentage of the Smithsonian parities.
Meanwhile, Britain’s foreign exchange reserves,
after increasing more than $2 billion in 1979,
stood at $18.8 billion on January 31 of this year.
In the late winter and early spring, evidence
cumulated of declining industrial output and em­
ployment. Monetary growth was also showing
signs of declining. Public-sector borrowing needs
were temporarily reduced by the tax-gathering
season. The authorities were able to sell a large
amount of government debt in the wake of the
earlier measures, and external factors continued
to have a contractionary influence on the money
supply. At the same time, however, private-sector loan demand continued to grow strongly,
with the result that the banking system was faced
with a reduced supply of public-sector debt and
hence of reserve assets. The authorities were
thus obliged to provide temporary assistance to
the money market so as to counter the upward
pressures on short-term interest rates created by
this drain on banking liquidity. These initiatives
helped stabilize British short-term interest rates
at around 17 percent per year.
Meanwhile, however, dollar interest rates
were rising sharply in response to rising credit
demand in the United States, with the result that
in late March interest differentials moved against
sterling and in favor of the dollar. As multi­
national corporations and international portfolio
managers switched funds out of sterling into dollar-denominated assets, the pound came on offer
against the dollar and the spot rate fell to as low
as $2.1285 on April 7. But, since British interest
rates remained substantially above those on the
European continent, sterling fell less against the
dollar than the other European currencies. The

Foreign Exchange Operations

turnaround in the dollar on April 8 brought ster­
ling into renewed demand. As U.S. interest rates
fell sharply, interest differentials moved back in­
to sterling’s favor. Therefore, the pound
bounced back to $2.2275 by mid-April.
Meanwhile, with the domestic economy clear­
ly headed into a recession, pressures were build­
ing up within British industry for relaxation of
fiscal and monetary policy. But, in a consultative
paper on monetary control issued jointly by the
British Treasury and the Bank of England, the
authorities reaffirmed sterling M-3 as the appro­
priate target variable for monetary policy, em­
phasized that lowering the government deficit
played a major role in reducing that aggregate’s
growth rate, and asserted that quantitative con­
trols were not an alternative to high interest rates
as a means of reducing monetary expansion. In
the annual budget message, Chancellor Howe
followed up by announcing that the government
still intended to reduce the public-sector borrow­
ing requirement to £8.5 billion and the growth of
sterling M-3 to an annual target range of 7 to 11
percent. Thereafter, both the Prime Minister and
the Chancellor repeatedly affirmed the govern­
ment’s commitment to reduce inflation by con­
taining monetary growth. In this context, British
interest rates remained high even after the end of
the tax-payment season, while U.S. interest
rates continued to fall. Moreover, the recession
was leading to a rapid elimination of the currentaccount deficit. As a result, sterling led the ad­
vance of other European currencies against the
dollar, soaring to as high as $2.3770 in late May.
By early June, after prolonged negotiations,
agreement had been reached to reduce by £750
million Britain’s contribution to the European
Community (EC). These developments gener­
ated expectations in the exchange markets of
near-term reductions of British interest rates.
Fearing heavy outflows of interest-sensitive
funds, traders reacted initially by selling sterling.
As a result, the pound came on offer during June,
falling as much as V h percent below its highs in
late May.
For their part, however, the authorities re­
mained reluctant to cut interest rates until firmer
evidence of a sustained reduction of monetary
growth. Unfortunately, interpreting the data was
being made increasingly difficult at this time by



719

the imminent removal of the supplementary spe­
cial deposit scheme—the “corset.” Inevitably,
the mid-June termination of this scheme was fol­
lowed by a statistical explosion in sterling M-3,
as banks restored direct lending to all their cus­
tomers, which had been temporarily replaced by
bankers acceptances arranged to avoid hitting
the limits on the expansion of interest-bearing
eligible liabilities imposed earlier by the corset.
Nevertheless, credit demand was still thought to
be relatively strong. Moreover, despite rising
unemployment, wages were still increasing at
just under 20 percent per year as the trade unions
sought full compensation for price increases due
to rising energy costs and higher indirect tax­
ation. Therefore, the authorities felt unable to
cut interest rates during June and, in fact, al­
lowed a repurchase facility—introduced earlier
in the year to provide liquidity—to run off. As a
result, sterling moved back up to fluctuate
around $2.34 in late June.
In early July the authorities provided some in­
terest rate relief by cutting the minimum lending
rate 1 percentage point below its all-time high to
16 percent. The pound came on immediate offer
but then steadied. During the rest of the month,
some professionals in the market continued to
look for further reductions of British interest
rates. But the authorities remained cautious in
light of continued strong inflationary pressures,
and no further action was taken. As a result, ster­
ling continued to be buoyed by capital inflows
coming from OPEC and other international in­
vestors seeking to diversify their portfolios and
to lock in high yields on British government
securities. Expectations of a near-term cut in
British interest rates receded, and the pound was
propelled to a five-year high of $2.3992 against
the dollar on July 24. Subsequently, the rebound
in U.S. interest rates produced a steep decline to
$2.3305 at the month-end, for a net increase of
2lh percent over the six-month period. However,
the pound continued to trade firmly against the
other major currencies, so that it closed at 74.4
on a trade-weighted effective basis on July 31.
During the six-month period, the Bank of En­
gland intervened to smooth fluctuations in the
sterling rate. These operations had a negligible
impact on Britain’s foreign exchange reserves.
Instead, the $1.6 billion increase over the period

720

Federal Reserve Bulletin □ September 1980

to $20.4 billion mostly reflected further revalua­
tion gains from periodic renewals of gold and dol­
lar swaps against ECUs done with the European
Monetary Fund.

Fren ch Fra n c

The French economy was embarked on a sus­
tained recovery late in 1979 when the sharp hike
in imported oil costs threatened to aggravate do­
mestic inflationary pressures, lower real in­
comes, and impose a sharp reversal in France’s
current-account position. The authorities faced
the prospect that the significant improvements
achieved in curbing inflation, restoring the bal­
ance of payments to a surplus position, and im­
proving the competitiveness of French industry,
after years of stabilization policies, would now
be seriously undercut. By early 1980, consumer
prices were rising at an annual rate of more than
13 percent. Last year’s current-account surplus
of $1.2 billion had just about disappeared. And
the huge increase in France’s oil import bill was
expected to lead to a deficit of $4 billion to $5
billion in the current account this year. Mean­
while, a shakeout of noncompetitive French in­
dustries, together with a bulge in young entrants
to the work force, had generated a rise in
unemployment even as the economic recovery
continued.
In response, the government had provided
some fiscal stimulus on a selective basis (ex­
panding programs to create jobs, providing addi­
tional low-cost financing to industry, and in­
creasing low-income subsidies to offset increases
in public-sector energy prices) while keeping the
government’s borrowing requirement at a rela­
tively low 1.3 percent of GDP (gross domestic
product). Meanwhile, France’s already restric­
tive monetary policy was reinforced in order not
to accommodate the accelerating rate of domes­
tic inflation. The 11 percent target for monetary
expansion set for 1979 was carried forward into
1980, and the system of credit ceilings was tight­
ened. Inasmuch as a strong demand for credit
was fueling a growth of the money supply well
above the target rate, the Bank of France’s ef­
forts to curb this expansion generated a progres­



sive rise in both short- and long-term interest
rates.
In the exchange markets, the French franc
benefited from this rise in interest rates. More­
over, France’s current-account deficit, though a
source of concern, was expected to be sub­
stantially smaller than the current payments im­
balance of Germany, its principal trading part­
ner. Also, in the context of the Iranian crisis, the
traditionally good relations between France and
the Middle East were expected to favor the franc
in two respects. Part of the anticipated increase
in OPEC’s surplus would gravitate into the franc.
Also, the impact of any further oil supply dis­
ruptions would be less severe for France than for
most other major countries. In this atmosphere,
commercial leads and lags remained favorable to
the franc, and international investors steadily
moved some of their funds into domestic and Eu­
ro-French franc assets.
These inflows enabled the French franc to stay
at the top of the EMS band throughout the early
spring. Indeed, the Bank of France regularly had
to intervene in European currencies to keep the
franc within the obligatory EMS margins, and
often it purchased dollars as well. These opera­
tions were, for the most part, reflected in the
increase of $1.5 billion in France’s foreign ex­
change reserves over the months January through
March.
When the scramble for dollars developed be­
tween late February and early April, the franc
fell along with the other European currencies.
But the franc declined less than the mark against
the dollar. Even so, it dropped some 12 percent
from its opening level of FF 4.0725 to as low as
FF 4.5550 on April 7. When the dollar turned
around after the Easter holiday, the franc came
back into heavy demand. Amid reports of large
Middle Eastern demand for French francs, the
rate was bid up sharply, prompting the Bank of
France to intervene vigorously both in EMS cur­
rencies and in dollars. With the franc remaining
at the top of an almost fully stretched EMS and
the mark at the bottom, the Federal Reserve sup­
plemented its intervention operations in New
York by selling on three occasions between April
9 and 16 $73.9 million equivalent of French
francs. These sales were financed by drawings on
the swap line with the Bank of France.

Foreign Exchange Operations

During the late spring the French economy
showed signs of turning down. Domestic demand
weakened, industrial output declined, and the
continuing rise in unemployment was generating
some pressures for more stimulative measures.
Nevertheless, the money supply was still ex­
panding slightly above the targeted rate, the cur­
rent-account deficit was widening, and inflation
continued at a troubling double-digit pace. In late
June, the French government announced it
would provide some additional funds for invest­
ment by the nationalized industries in the hous­
ing sector. But the authorities were unwilling to
ease their restrictive monetary stance. Instead,
restrictions on the expansion of bank lending
were maintained and the limits were tightened
for the second half of the year. As a result,
French interest rates stayed relatively high dur­
ing May and June.
Thus the franc continued to benefit from vari­
ous types of capital inflows. It also was bolstered
by unusually large repatriations of investment in­
come and favorable tourism receipts. The franc
therefore joined in the continued, albeit more
gradual, rise of the European currencies against
the dollar, moving up some IIV2 percent from
the low in early April to FF 4.0235 by July 8. The
Bank of France continued buying modest
amounts of dollars and EMS currencies. The
Federal Reserve again included the French franc
in its intervention operations, selling $86.8 mil­
lion equivalent on four occasions between midJune and the end of July. This intervention was
financed by further drawings on the swap line
with the Bank of France, raising the System’s
swap indebtedness with the French central bank
to $166.3 million equivalent including revaluation
adjustments from renewals of earlier drawings.
During July, French interest rates eased some­
what. Nonetheless, the franc fell less than the
mark when the dollar rose in late July. At this
time the Federal Reserve was able to buy $1.2
million equivalent of French francs from a corre­
spondent to begin covering its outstanding swap
debt. On July 31 the franc was trading at FF
4.1350, for a net decline of IV2 percent over the
six-month period.
Meanwhile, France’s foreign currency re­
serves continued to increase during April
through July. The large rise in April and July re­



721

sulted in part from the revaluation gains stem­
ming from quarterly renewals of its swaps with
the European Monetary Fund. But, in addition,
the continuing purchases of dollars and EMS
currencies also contributed to a rise in foreign
currency reserves, which stood at $25.3 billion at
the end of July.

I t a l ia n L ir a

Throughout 1979 the Italian lira had been bol­
stered in the exchange markets by a substantial
current-account surplus, together with relatively
high interest rates and restrictions on domestic
credit expansion that had drawn in large move­
ments of capital from abroad. As a result, the lira
had risen during the second half of the year to
trade at LIT 807.50 against the dollar by the end
of January 1980, while also remaining in the up­
per half of its 6 percent band within the EMS.
Meanwhile, the favorable balance of payments
position and valuation adjustments stemming
from quarterly renewals of Italy’s swaps with the
European Monetary Fund had generated an in­
crease in Italy’s foreign exchange reserves to
$18.5 billion even after repayment of some offi­
cial debt. By February, however, Italy’s sub­
stantial current-account surplus was rapidly dis­
appearing. The impact of sharply higher oil
prices, estimated to add $8 billion to the overall
import bill, was already beginning to weaken
Italy’s trade position. And the prospect that Italy
could avoid a return to current-account deficit
with a further upsurge in its exports looked
dubious, in view of the deteriorating economic
outlook for Italy’s principal trading partners.
Moreover, the domestic economy was expanding
at a brisk pace, several sectors were encounter­
ing capacity constraints, and inflationary pres­
sures were again building up.
In response, over the course of the winter
months, the Italian authorities had begun to turn
to a more restrictive posture. The government
raised fuel prices in line with worldwide increas­
es in the price of oil, thereby absorbing purchas­
ing power. But, with the 1980 fiscal budget still
moderately expansive and expected to generate a
LIT 40 trillion public-sector deficit, much of the
burden of containing inflationary pressures con­

722

Federal Reserve Bulletin □ September 1980

tinued to fall on monetary policy. Accordingly,
the Bank of Italy had raised interest rates,
drained domestic liquidity, and tightened the en­
forcement of domestic credit ceilings by requir­
ing that banks lending above those limits main­
tain non-interest-bearing deposits at the central
bank. With these actions producing steadily ris­
ing money market rates, Italian companies con­
tinued to satisfy their financing needs by borrow­
ing abroad. Thus, the Italian lira held within the
top half of the EMS joint float throughout the
early spring.
Against the dollar, however, the lira weakened
along with other currencies after mid-February.
The sharp rise in U.S. interest rates soon elimi­
nated the interest differentials that had pre­
viously favored the lira. To the extent that Italian
companies repaid their Eurodollar borrowings
with domestic funds, they came into the market
to sell lira, thereby contributing to the drop in the
rate, which fell as much as 13 percent to LIT
912.10 by early April. But, with Italian interest
rates significantly higher than those prevailing in
other EMS countries, the lira maintained its gen­
erally favorable position within the EMS. Con­
sequently, the Bank of Italy provided little sup­
port for the lira through intervention. Indeed,
Italy’s foreign exchange reserves rose through
the end of April to $21.5 billion, reflecting valu­
ation adjustments in its EMS holdings.
Around mid-April the lira began to recover
against the dollar as U.S. interest rates retreated.
The lira’s rise, however, lagged behind that of
other EMS currencies so that, while just below
the center of its 6 percent EMS band, the lira
emerged as the weakest currency within that ar­
rangement by May. Italy’s current account had
now fallen into clear deficit, exerting a drag on
the currency’s performance in the exchange mar­
ket. Italy’s prices and wages had continued to
rise at more than 20 percent per year without a
corresponding adjustment in the exchange rate,
so the competitiveness of Italian goods was being
eroded. Also, poor weather had cut into tourist
revenues. Moreover, a government crisis late in
March had generated some questions as to
whether the authorities’ anti-inflation efforts
would be sustained. A new center-left coalition
cabinet was soon put in place, committed to de­
fend the lira’s position in the EMS and to check



inflation. But during the spring, as the cabinet
sought to reach an understanding with the trade
unions on ways to limit the rise in labor costs and
to get the agreement of other political groups on
an industrial policy that might help maintain em­
ployment, the exchange market for the lira re­
mained nervous.
Against this background, pressures began to
mount for a devaluation of the lira within the
EMS to restore the competitiveness of Italian in­
dustry in world markets so as to bolster export­
ers’ profit margins and to sustain economic
growth in the face of a spreading slowdown
abroad. Although government officials in their
public statements stressed the argument that de­
valuation was not a viable alternative in a highly
indexed economy, the lira came on offer as mar­
ket participants continued to anticipate that a
new economic package from the government
might include a devaluation. In this environment,
short-term capital outflows quickly materialized.
As the outflows persisted during June, the Bank
of Italy entered the market in force, selling large
amounts of dollars to prevent the lira from weak­
ening further within the EMS.
In early July, the government announced new
measures to bring both the economy and the ex­
change market into better balance. The measures
included higher indirect taxes to finance a reduc­
tion of employer social security contributions,
more export credits, and a reduction of the pub­
lic-sector deficit. Also, the government proposed
a V2 percent withholding scheme for wages and
salaries, in which the proceeds would be invest­
ed in bonds redeemable in five years to finance
economic development. In addition, the Bank of
Italy announced a further restriction of domestic
credit expansion to 13 percent per annum.
The exchange market reacted favorably to the
package. With devaluation fears dissipating,
funds flowed back into the lira during the balance
of July, as commercial and professional partici­
pants covered short positions. The lira, there­
fore, traded more comfortably at the bottom of
the joint float through the month-end. On July 31,
the lira traded at LIT 838.80 for a net decline of
33/4 percent over the six-month period. In addi­
tion, the flows of funds back into the lira, togeth­
er with further valuation adjustments of EMS
gold holdings, produced a $500 million increase

Foreign Exchange O perations

in foreign exchange holdings, to $22.0 billion, for a
net rise of $3.5 billion over the six-month period.

E u r o p e a n M o n e t a r y S ystem

By the period under review the countries whose
currencies were members of the European Mon­
etary System’s joint float were faced with the
problem of having to adjust their economies to
large increases in the price of oil. Most of the
economies were already expanding fairly briskly,
generating upward pressure on prices and wages.
Consequently, for the authorities in each country
the greatest concern was to prevent higher ener­
gy prices from setting off an inflationary spiral.
Each country thus adopted restrictive policies
both to restore external and internal balance to
their economies and to fund their current-ac­
count deficits. Monetary policy was the major in­
strument for achieving restrictiveness, and inter­
est rates remained high in the EMS countries.
Within the joint float the configuration of cur­
rencies remained relatively stable, even as the
entire EMS fluctuated widely against the dollar.
For the most part the French franc stayed at the
top of the band, while the German mark re­
mained near the bottom. The Netherlands guil­
der traded firmly near the top of the band. By
contrast, the Belgian franc came under persistent
selling pressure between February and early
April, reflecting the market’s concerns over Bel­
gium’s fiscal and current-account deficits and the
political difficulties facing the coalition govern­
ment. The National Bank of Belgium intervened
forcefully to keep the franc within its 2 XU percent
band. Domestic interest rates were also raised.
These actions stemmed the outflows, and during
the last three months of the period the franc trad­
ed comfortably within the limits of the band.
The Danish krone also came under selling
pressure early in the period and required some
official support through intervention. However,
the krone gradually came into better balance in
the early spring. Thereafter, it traded steadily in
the lower half of the EMS through the end of
July.
The remaining two currencies fluctuated more
widely. The Italian lira fell from the top to the
bottom of the joint float and required substantial



723

official support in June before stabilizing in July.
By contrast, after trading near the bottom
through mid-March, the Irish punt rose into the
upper half of the EMS band during the spring and
remained there through the end of July.

Ca n a d ia n D o l l a r

The sharp jump in international oil prices during
1979 had somewhat different consequences for
Canada than for most other industrialized coun­
tries. Its untapped reserves of oil, natural gas,
and other energy resources gave Canada consid­
erable potential for increasing energy production
in the future, both for use at home and for ex­
port. In the meantime, the oil price hike had little
direct effect on Canada’s trade account, since the
country is self-sufficient in oil and gas. It did
have implications, however, for the distribution
of income between the oil-producing provinces
of the west and the oil-consuming provinces of
the east. Moreover, if oil prices in Canada were
allowed to adjust more rapidly to international
price levels, the escalation of energy prices
would add to inflationary pressures. A proposal
to that effect in the budget, which had brought
about the government’s defeat in December, was
still under debate pending a general election in
mid-February.
Canada’s current account had begun to show
signs of improvement. As a net exporter of raw
materials, Canada benefited in 1979 from the fa­
vorable shift in terms of trade that reflected pres­
sures in world commodity markets generally. In
addition, the sharp depreciation in the Canadian
dollar of previous years and the sustained efforts
to curb cost and price pressures at home had
substantially enhanced the international competi­
tiveness of domestic industry. But, with much
of the manufacturing sector up against capaci­
ty constraints, Canada was all the more vulner­
able to the demand and price pressures in the
United States, Canada’s principal trading part­
ner. In these circumstances, economic policies
continued to focus on the need to counter infla­
tionary tendencies. Fiscal policy had been tight­
ened in an effort to reduce the sizable budget
deficit. Monetary policy was aimed at restraining
the growth of the money supply while seeking an

724

Federal Reserve Bulletin □ September 1980

interest rate relationship between Canada and
the United States that did not contribute to an
acceleration of inflation through a further sub­
stantial decline in the Canadian dollar. As U.S.
interest rates rose, interest rates in Canada
moved up and the Bank of Canada raised its dis­
count rate in several steps to 14 percent.
By early February, Canada’s rich energy re­
sources and its improving current-account per­
formance had contributed to a generally positive
sentiment toward the Canadian dollar. Also, its
relatively high interest rates and North American
location made Canada an attractive investment
opportunity, especially at a time of growing polit­
ical uncertainty and security concerns. The Ca­
nadian dollar had strengthened considerably
over the preceding 2xh months to trade at Can.
$1.1574 by the beginning of the month. Then,
when it was clear that the general election had
provided for a majority government, the Cana­
dian dollar came into stronger demand. Capital
inflows intensified as repeated reports of new oil
discoveries off the Newfoundland coast attracted
foreign funds into a rising Canadian stock mar­
ket. The Canadian dollar was thus propelled to
Can.$1.1419 on March 3, its highest level in near­
ly a year. Meanwhile, the Bank of Canada, oper­
ating to moderate the fluctuations in its currency,
had purchased dollars in the exchange market.
These acquisitions were reflected in the $433 mil­
lion increase in official foreign currency reserves
during the month from its level at the end of Jan­
uary of $1.9 billion.
Nevertheless, the Canadian dollar remained
vulnerable to actual or anticipated shifts in capi­
tal flows. When the intense demand for credit in
the United States pushed up interest rates so
sharply as to raise doubts in the market whether
Canadian interest rates would keep pace, the
spot rate began to ease early in March. Already
interest rates in the United States had risen
above comparable levels in Canada, and market
participants were unsure how long this unusual
pattern would continue without siphoning off the
inflows needed to offset Canada’s current-ac­
count deficit. Monetary growth in Canada had
slowed considerably. Indeed, the monetary ag­
gregates were now just within the lower end of
the Bank of Canada’s 5 percent to 9 percent tar­
get range. But inflation was still running at 9.5



percent per annum, and the authorities were con­
cerned to avoid a substantial depreciation that
might set off more cost-price pressures at home.
Therefore, to provide itself with more flexibility
to react to rapidly changing external conditions
and to avoid increases in short-term interest
rates beyond those necessary to contain infla­
tion, the Bank of Canada announced on March
10 it would set its official discount rate each week
at XU percentage point above the average rate on
the weekly tender of three-month Treasury bills.
Following this announcement, Canadian mon­
ey market rates continued moving up, while
longer rates remained close to their peaks during
March. At the same time, congestion had devel­
oped in the U.S. bond market, leading to the
postponement of several Canadian borrowings
while Canadian companies were repaying dollardenominated loans as U.S. interest rates contin­
ued to rise. The Canadian dollar thus came on
offer. Against the U.S. dollar, it declined nearly 5
percent from its earlier high to Can.$1.1983 on
April 1. The Bank of Canada intervened heavily
at times to cushion the decline; foreign currency
reserves decreased $728 million during March.
Even so, the decline in the Canadian dollar from
levels in early February was modest relative to
the much larger drops of other major currencies.
After early April, interest differentials moved
back into Canada’s favor as Canadian interest
rates eased more slowly than those in the United
States. Although Canadian entities still did little
borrowing in the United States, this traditional
source of finance for Canada’s current-account
deficit was being replaced by investment funds
flowing into Canadian dollar and Euro-Canadian
dollar assets. Moreover, the Canadian trade ac­
count remained in larger surplus than had been
anticipated earlier in the year.
The Canadian dollar, therefore, traded more
steadily during the early spring. For a time, un­
certainty over the outcome of a May 20 referen­
dum in Quebec, in which the governing Separat­
ist Party sought authorization to negotiate with
the federal government on the sovereignty issue,
gave pause to the market and tempered the cur­
rency’s previous buoyancy. But, once the mar­
ket sensed that the referendum would be de­
feated, the Canadian dollar began to rise again.
News of further increases in the price of oil, fears

Foreign Exchange Operations

of more price increases to come out of the OPEC
meeting in Algiers, and reports of new energy
discoveries in Canada added to the upward mo­
mentum of the rate. Also, announcements by
some Canadian provinces of plans to float new
issues in the New York bond market generated
some professional bidding. Consequently, the
Canadian dollar was bid up in steps to Can.
$1.1407 by July 7. The Bank of Canada again
bought dollars to moderate the rise, thereby re­
couping much of the reserves it had lost during
March.
During the rest of July, the Canadian dollar
lost its upward momentum in the face of political
tensions over the question of pricing Alberta oil
and natural gas, growing uncertainties over the
outlook for U.S. interest rates, and concern in




725

the market that Canadian interest rates would
ease further. As interest rates in the United
States backed up and a heavy supply of new is­
sues in the U.S. bond market led some of the
planned Canadian issues to be postponed, the
Canadian dollar dropped off along with most oth­
er currencies late in the month.
At the end of July, therefore, the Canadian
dollar, at Can.$1.1594, was down a net lU per­
cent over the six-month period. During the peri­
od under review, the Bank of Canada intervened,
heavily at times, on both sides of the market. In
addition, the government sold small quantities of
its gold holdings at market prices well above
book value. Over the six-month period, total offi­
cial foreign currency reserves were unchanged at
$1.9 billion.
□

727

Selection and Disclosure of Reasons for
Adverse Action in Credit-Granting Systems
R obert A. Eisenbeis o f the Board's Division o f
Research and Statistics prepared this article.

The Board of Governors of the Federal Reserve
System has recently requested public comment
on the applicability of Regulation B to several
practices of creditors using credit-scoring sys­
tems. These practices relate to methods for con­
sidering number of jobs and of income sources;
to the discounting of income from part-time em­
ployment, pensions, or alimony; and to the selec­
tion and disclosure of the reasons for adverse ac­
tion. The purpose of this article is to highlight the
analysis behind the Board’s proposed rules on
the selection and disclosure of reasons for ad­
verse action in order to stimulate and focus pub­
lic comment on the issues. A discussion of spe­
cific questions and interpretations, however, calls
first for some general observations about the na­
ture of statistical credit-scoring systems, their re­
lation to judgmental systems, and the objectives
for requiring disclosures of reasons for adverse
action.

S t a t is t ic a l a n d J u d g m e n t a l
C r e d i t -E v a l u a t i o n S y s t e m s

It is often argued that judgmental credit evalua­
tion is preferable to statistical, or numerical,
credit scoring because in a judgmental system
each loan application is personally reviewed by a
loan officer. This individual treatment is con­
trasted to the apparently impersonal, mecha­
nistic, and complex nature of numerical systems.
More important, numerical systems are also
viewed as being inherently more discriminatory
because they seem to saddle an applicant with
the attributes of similar prior applicants rather
than considering each on his or her own merits.
Both of these characterizations, however, are
inappropriate representations of how judgmental



and numerical systems operate. In actuality, the
two types of systems function in similar fashions.
Moreover, many of the criticisms of numerical
systems apply equally to judgmental systems,
while some of the supposed desirable features of
judgmental systems are illusory.
All credit analysis, whether performed sub­
jectively by loan officers or statistically by creditscoring systems, is rooted in the principle that
past credit experience can be used as a guide in
predicting future credit performance. That is,
past and future creditworthy borrowers will
share certain attributes and will tend to resemble
each other more closely than noncreditworthy
applicants, and these attributes can be reliable
indicators of creditworthiness. Of course, if such
similarities did not exist, there would be no sys­
tematic differences between those who are cred­
itworthy and those who are not. It would be im­
possible to distinguish between the two groups
either statistically or judgmentally, and credit
would have to be granted randomly rather than
on the basis of risk.
Judgmental systems rely upon the experience
of individual credit officers to delineate the char­
acteristics that have proven to be reliable in­
dicators of creditworthiness and to identify the
relevant tradeoffs among them. These determina­
tions provide the reference points against which
the information in each application is evaluated
and weighed simultaneously in deciding whether
to grant a loan. Because each loan officer’s ex­
perience is both different and relatively limited,
nothing assures that loan officers, even those
working for the same lender, will emphasize the
same factors, give them the same weight, or ap­
ply the same tradeoffs among factors.1
1.
One way around this problem has been the evolution of
certain “rules of thumb.” Such rules merely represent at­
tempts to formalize in a summary and simplified way the ex­
perience of successful loan officers so that it can be employed
by others.

728

Federal Reserve Bulletin □ September 1980

Statistical credit-scoring systems operate in
much the same fashion as judgmental systems.
However, they rely upon statistical methods, as
opposed to the experience and judgment of credit
officers, in evaluating and comparing borrowers.
The statistical procedures used in devising the
system consider many attributes simultaneously,
identify the relevant tradeoffs among them, and
assign the statistically derived weights used in
evaluating individual applications.2 As distinct
from most judgmental systems, which may in­
volve selective appraisal of all the material in an
applicant’s file before a decision is made, numer­
ical systems usually rely on those few attributes
that previous statistical analysis suggests are pre­
dictive of creditworthiness.
Statistical credit-evaluation systems are still in
their infancy. Many systems, for example, are
not rooted in formal behavioral models of credit
risk.3 Rather, they often rely on numerical
search techniques that select variables solely on
the basis of the statistical correlations between
borrower characteristics and creditworthiness
without regard for the causal links between the
factors selected and the credit risk. Interestingly,
some of the information included in these numer­
ical systems is deemed offensive when scored ex­
plicitly because there may not be an intuitive or
obvious causal connection between the factors
and creditworthiness. Yet this is often the very
same information that has been used, and toler­
ated, for years in judgmental systems.
There are other obvious differences between
judgmental and properly constructed numerical
systems. First, since credit officers may recall
past experiences imperfectly, or may weigh in­
formation improperly, judgmental systems prob­
ably tend to be less accurate than numerical sys­
tems. Second, numerical systems tend to ensure
more even treatment than do judgmental sys­
tems, in which decisions on the same application
may vary from credit officer to credit officer and
from day to day. Third, judgmental systems offer
more opportunity for personal prejudices to in­
2. It should be noted that no one statistical method is
“best.”
3. See, for example, the review of these systems by Robert
A. Eisenbeis, Problems in Applying Discriminant Analysis in
Credit Scoring Models, Staff Economic Studies 94 (Board of
Governors of the Federal Reserve Systems, 1978); reprinted
in Journal of Banking and Finance, vol. 2 (October 1978), pp.
205-19.



fluence credit decisions. Finally, from the per­
spective of enforcing the Equal Credit Opportu­
nity Act, numerical systems permit examination
of the characteristics scored and the way the
analysis considered them. In contrast, in a judg­
mental system each credit officer balances the
available information against his or her experi­
ence in a way that a person affected by an ad­
verse action or a regulatory agency cannot repli­
cate. As a result, the evaluation of judgmental
systems is much more difficult, and review must
be limited to the consequences of the loan-grant­
ing process.
Several aspects of the problem of assessing
credit risk have important implications for the
structure of disclosure policies for credit-evaluation systems. The first is that credit risk is a con­
tinuum. Potential borrowers do not fall into one
of two classes—those who are creditworthy and
those who are not; rather, they have different
probabilities of defaulting, of becoming a slow
pay, or of otherwise providing a less profitable
transaction, which range all the way from 0 to
100 percent. Thus applicants are arranged along
a spectrum of risk and differ from each other in
degree rather than falling into two discrete
classes. The goal of credit analysis is to deter­
mine where an individual applicant lies on that
continuum relative to the critical threshold estab­
lished by a lender to separate acceptable and un­
acceptable credit risks. This threshold of accept­
ability is not absolute, but may vary, both over
the business cycle and from creditor to creditor,
depending upon the creditor’s objectives, risk
preferences, and costs.
The second aspect of risk assessment is that it
is a multidimensional concern, and more than
one type of risk may be relevant to a lender’s
decision. For example, one type of risk is the
likelihood that a borrower will default, while an­
other is related to the probability that a borrower
will become a slow pay or will miss payments.
An applicant may never miss a payment until
default actually occurs, or a loan that is even­
tually paid in full may involve many late pay­
ments and extra collection efforts along the way.
Each type of risk implies different expected re­
turns, costs, and collection efforts. All of these
factors affect the ultimate value of the loan to the
creditor. Of course, some loans may involve a
combination of late payments and default. As a

Selection and Disclosure o f Reasons fo r Adverse Action

consequence, the creditor may face many equal­
ly acceptable tradeoffs on the margin among
these different kinds of risks, and many borrow­
ers with different combinations of risk (and pre­
sumably different characteristics) and expected
returns may all lie on the same threshold that a
creditor has established between acceptable and
unacceptable risks.
The third aspect of risk assessment is that the
attributes used to capture or serve as proxies for
the various dimensions of credit risk tend to be
correlated with each other and tend to move to­
gether. This association can result because the
underlying aspects of risk may not be indepen­
dent of each other (such as the case involving
both missed payments and default) and because
two or more measures may be used to assess the
same dimension of risk.
Both the nature of the credit-granting process
and the way in which an applicant’s character­
istics are considered simultaneously help to ex­
plain the extreme difficulty, in a judgmental or a
numerical system, of isolating the “ specific” rea­
sons for an adverse action on an application.
First, as indicated above, theory as well as ex­
perience indicates that the various aspects of
risk, and most of the factors used to describe and
serve as proxies for these risks, tend to be corre­
lated. For example, a young person is more
likely to have less time on the job, a lower in­
come, less discretionary income, and less wealth
than an older person. All of these factors could
be used in the credit-evaluation process. But be­
cause they tend to move together, an improve­
ment or change in one is usually accompanied by
changes in others. For example, a somewhat old­
er person usually has more time on the job, a
somewhat higher income, more discretionary in­
come, and somewhat more wealth than a young­
er one. In such instances it may be difficult, even
with sophisticated statistical procedures, to iso­
late the independent contributions of these fac­
tors to the overall level of risk. Thus, when fac­
tors are correlated and are considered
simultaneously, it often becomes impossible to
assert either that one factor or even a set of fac­
tors is more important than others, or that, be­
cause of a certain factor, an otherwise approvable application fell below a creditor’s critical
threshold and caused an adverse action.
Second, assessment of the role of individual



729

Diagram 1

variables is complicated by compensating
tradeoffs. For example, a higher level of income
can offset a lower level of wealth. Thus a large
number of potential applicants may be equally
acceptable to the lender because their various
combinations of characteristics place them all on
the lender’s approval-denial threshold. This situ­
ation is illustrated in diagram 1, which depicts a
scatter of good and bad loans described by two
factors, X and Y. The heavy line represents a
creditor’s approval-denial threshold. The credi­
tor will be indifferent among all applicants whose
combination of characteristics places them on
that line; all such applicants will be marginally
approvable.4
Finally, the tradeoffs among factors may often
be such that a change in one factor, considered in
conjunction with the values of the others in the
profile, may reverse an adverse action. Yet that
same change, in combination with a different set
of values on the others, would still lead to rejec­
tion. For example, in diagram 1, for an applicant
at A to move to A ' on the approval-denial thresh­
4. The threshold line in this example is nonlinear and was
derived as a quadratic discriminant function. It is assumed in
this example that the creditor has previously divided the con­
tinuum of risky loans into only two classes, defined as
“good” and “bad.” This is not to imply that all credit-scoring
models would look like diagram 1; rather, the diagram is used
as a heuristic example of one common type of system.

730

Federal Reserve Bulletin □ September 1980

old, requires a 10-point increase in X , if there is
no change in Y. The same increase in X for an
applicant at B , however, will not change the
creditor’s judgment that the application was too
risky to warrant approval. Thus the role of a giv­
en factor or set of factors in the decision is usual­
ly conditioned both on the values of other factors
considered in the credit-granting process and on
the way the applicant’s combined profile com­
pares to the critical threshold.
The problems of isolating the role of individual
factors, or sets of factors, in the approval-denial
process apply equally to judgmental and numeri­
cal systems. If these problems appear to be less
troublesome in judgmental systems it is because
loan officers, in selecting the reasons for an ad­
verse action, may simply choose to ignore the
complications introduced by the correlations
among factors in a borrower’s profile.5 The loan
officer still must decide whether an adverse ac­
tion was taken because a particular attribute was
weak (such as X for an applicant at A in diagram
1) or whether there simply were not enough off­
setting attributes (because Y was not high
enough).
Because judgmental and numerical credit sys­
tems function in parallel fashions, it seems rea­
sonable to apply essentially the same standards
and rules under Regulation B uniformly to the
two types of systems. This principle is especially
relevant with respect to disclosure of reasons for
adverse action. In addition, the fact that judg­
mental systems tend to mask the credit-granting
process, and make it hard to describe, should not
provide a rationale for making the disclosure
standards under Regulation B less stringent for
judgmental systems than for numerical systems.
Any such difference in regulatory restrictions
might have the unintended effect of encouraging
the use of what might be less profitable and less
socially desirable procedures. Both of these con­
siderations have been explicitly incorporated in­
to the Board’s proposed rules.
Given the practical difficulties of isolating the
reasons for adverse action, the problem for the
Board was to devise a reasonable set of guide­
lines for creditors to follow in giving the more
likely reasons for adverse action. These rules de5.
Cynical observers might suggest that an applicant is told
a reason that the creditor believes that applicant will find ac­
ceptable.



pend to some extent on the purposes of dis­
closure. The legislative history of disclosure is
discussed in the next section, and principles for
disclosure procedures are then set out.

P u r p o s e s a n d P r in c ip l e s
o f D is c l o s u r e

The legislative history of the 1976 Amendments
to the Equal Credit Opportunity Act reveals sev­
eral objectives for the requirement that a creditor
disclose the reasons for adverse action on a cred­
it application. These provide guidance in estab­
lishing the scope of the rules for specific dis­
closures.
Generally, it was argued that disclosure of the
reasons for adverse action would deter discrim­
ination while improving the efficiency and com­
petitiveness of consumer loan markets. Specifi­
cally, it was felt that a creditor who knew that the
reasons for an adverse action had to be explained
would be less likely to make decisions on a dis­
criminatory basis. Furthermore, documentation
would serve as a useful enforcement device for
the regulators, who would be able to analyze ad­
verse actions to detect patterns of illegal discrim­
ination. Disclosure was also thought to be espe­
cially important in cases of an adverse action for
incorrect or incomplete applications. It would
permit the applicant to correct or supplement the
application so as to ensure the granting of a prof­
itable loan that otherwise might never have been
made. For rejected applicants, adequate dis­
closure might serve an important educational
function, showing them how to improve their fi­
nancial position to become more creditworthy.
With respect to the specificity of the required
disclosures, the Senate report indicated that
long, detailed personal letters were not con­
templated; rather a “ concise indication of the
applicant’s deficiencies, and a short check list
statement,” would be sufficient so long as it
“ reasonably” indicated the reasons for the ac­
tion. Some examples of such letters were pro­
vided.6 The bill was subsequently modified in
conference and the requirement in the Senate bill
6.
Equal Credit Opportunity Act Amendments o f 1976, S.
Rept. 94-589, 94 Cong. 2 Sess. (Government Printing Office,
1976), p. 8.

Selection and Disclosure o f Reasons fo r Adverse Action

that a “ statement of reasons” be given was
changed to a requirement that “the specific rea­
sons” be given for the action taken. Although the
Conference Report gave no indication of the ra­
tionale for the change, the Congress presumably
wanted the consumer to receive more than a per­
functory explanation of the adverse action.7 The
consumer was entitled to know with some speci­
ficity the reasons for the action taken.

P o l ic ie s

for

D is c l o s u r e

The objectives that appear in the legislative his­
tory have important implications for disclosure
policies. These relate to the delineation of the
pool of factors subject to disclosure and to the
procedures used to select the reasons for adverse
action.

The P o o l o f F a c to rs S u b je c t to D isclo su re

In disclosures about adverse actions on appli­
cations, it seems logical that the reasons should
be directly related to the factors actually consid­
ered in the decision to grant the loan. In the case
of a numerical credit-scoring system, under
which an application has been acted on adversely
because it did not meet the minimum standards
in the system, the disclosed reasons should be
based only on factors actually scored or weight­
ed in the system. It might be argued that, be­
cause of the correlations among variables and be­
cause most of the attributes used in models serve
as proxies for risk and other factors, a creditor
should be permitted to review judgmentally an
applicant’s entire record and to indicate the
weaknesses whether or not they relate directly to
the specific items scored.8 The problem with
such flexibility is that it removes any incentive
for creditors either to model credit risk more pre­
cisely or to understand better the methods they
use.

7. Equal Credit Opportunity Act (Conference Report), H.
Rept. 94-873 , 94 Cong. 2 Sess. (GPO, 1976), p. 8.
8. If the factors in the model were proxies for other basic
characteristics contained in the application or applicant file,
presumably a better specification of the scoring system would
include the omitted variables or factors.



731

Defining the pool of factors subject to potential
disclosure for judgmental systems is more diffi­
cult because the information the loan officer con­
siders in making a decision is not always appar­
ent. Absent procedures or formal policies that
delineate the items considered from the appli­
cation and supplemental information, it seems
reasonable to presume that, as a minimum, the
pool of factors subject to potential disclosure
would consist of all the information that is in an
applicant’s file or that is available to the loan offi­
cer when the decision is made.

P rin c ip le s f o r S e le c tin g R e a so n s f o r A d v e rs e
A ctio n

The problem of specifying standards for selecting
the reasons for adverse action on a credit appli­
cation has two aspects. The first is straight­
forward; it involves situations in which credit is
automatically denied (or some other adverse ac­
tion is taken) because of a single negative factor.
The second is substantially more complicated be­
cause it deals with cases in which the applicant’s
combined profile is judged to be more risky than
is acceptable. These aspects are discussed in
turn.
Many credit-granting systems, both numerical
and judgmental, call for automatic rejection or
other adverse action on an application because a
single factor is so unsatisfactory that, in the cred­
itor’s judgment, it cannot be offset by other fac­
tors. Typical examples of such “black ball” cri­
teria are presented by applicants (1) who have
gone through personal bankruptcy, (2) who are
below the age of consent, or (3) who have not
lived in an area for the length of time required by
the creditor. Explanation of the adverse action
on such an application is simple and straight­
forward. Furthermore, if a creditor’s policies
contain either one or several possible absolute
criteria for adverse action, it would even be fea­
sible to construct a check list of these factors to
facilitate disclosures to applicants.
As the discussion in previous sections in­
dicates, substantial problems may arise in both
judgmental and numerical systems in selecting
and disclosing the reasons when an adverse ac­
tion is taken because a borrower’s profile looks
too risky or does not yield the minimally accept-

732

Federal Reserve Bulletin □ September 1980

Diagram 2

able score. In such a circumstance an adverse ac­
tion usually results from the combination of fac­
tors in an applicant’s profile rather than from any
single factor. An improvement in any one factor
might lead to a marginal approval. Because it is
the combination of factors, considered simulta­
neously , that leads to the adverse action, it is of­
ten difficult, and perhaps impossible, to infer that
any one factor, or set of factors, “ caused” the
action. In this sense, the statute establishes the
difficult, if not impossible, requirement that cred­
itors identify the “ specific reason or reasons” for
taking an adverse action and disclose these rea­
sons to the consumer.
When credit decisions are based on simultane­
ous consideration of a combination of factors,
the theoretically optimum disclosure for either a
judgmental or a numerical system that is most
consistent with the statutory objectives would in­
dicate to customers the minimum adjustments
necessary to make their profiles marginally approvable or to reverse the adverse action. Such a
disclosure would rest on full consideration of all
possible tradeoffs and interactions among factors
that might follow from any change in a borrow­
er’s characteristics. For example, in the case of
the numerical system shown in diagram 2, the
minimum adjustments that an applicant at A
would have to make would be increases in the
contribution of I by 8 points and of Y by 5



points, thus moving to the creditor’s threshold at
A '.9 This standard appears to be the appropriate
target for creditors in structuring disclosure poli­
cies. Unfortunately, many systems cannot easily
generate such information at reasonable cost;
this is especially the case with judgmental sys­
tems.10
Short of ensuring theoretically optimum dis­
closures, the problem is to define the range of
acceptable disclosures. Perhaps the next-best al­
ternative most consistent with the objectives of
disclosure would be to require that creditors
make a series of conditional statements to the ap­
plicant as follows: if a particular factor changes
in a prescribed way, and if the remainder of the
profile does not change, credit will be granted or
the adverse action will be reversed. Most sys­
tems, even judgmental ones, would permit a
creditor to indicate at least the direction (and
sometimes the degree) of change needed in a par­
ticular factor to reverse an adverse action.
In the context of the system shown in diagram
3, the disclosure to an applicant at A would run
as follows: if the profile changes in no other way
(that is, Y is held constant), the contribution of A"
must rise by 10 points (moving the applicant to
point A") to ensure approval.11 The benefit of
such a conditional disclosure is that the consumer would know unambiguously at least one
change in the profile that would make the appli­
cation marginally acceptable.12*13
9. The point A is on the line perpendicular to the line tan­
gent to the creditor’s indifference threshold at point A'. Also
the line A-A' is the shortest line (minimum Euclidean dis­
tance) that can be drawn from point A to the creditor’s mar­
ginal approval threshold.
Note, too, that this is a concept substantially different from
disclosure of the distance an applicant is from the mean or
median of the approval group. In diagram 2, such a disclosure
would indicate the position of point GL defined by the mean
of X and the mean of Y.
10. The example in diagram 2 also assumes that X and Y
are continuous, which clearly defines the point A'. When an
applicant’s attributes are not continuous, the location of point
A ' may not be clear.
11. For some applicants, more than one optimum point
may correspond to A This is clearly the case for an applicant
at B. It is also interesting that for an applicant at B, a conditional
disclosure would indicate that approval would be warranted if
X were increased to generate 6 points or decreased to gener­
ate 16 points. This would correspond to systems that give
more points to applicants who live in their houses for a short
or long period of time than are given to applicants who are at
their present addresses for an intermediate period.
12. In multistage systems in which an applicant failed an
initial screen, the customer would be told what was necessary

Selection and Disclosure o f Reasons fo r Adverse Action

733

change in X should be disclosed before the
change in Y. A remaining problem is that the
units o fZ and Y may not always be comparable.
For example, X might measure months of resi­
dence, while Y defines thousands of dollars of in­
come. The change in the number of months of
residence necessary to generate 10 points may be
more difficult for the customer to accomplish
than the change in income necessary to generate
18 points.14 Nevertheless, if creditors are en­
couraged to make as many conditional dis­
closures as possible, or otherwise to exploit the
disclosure potential of their systems, the objec­
tive of the statute will be achieved. Furthermore,
this concept of conditional disclosures is equally
applicable to judgmental systems.
It is not possible to specify criteria for the
number of conditional disclosures. Currently,
Regulation B permits creditors using judgmental
systems to select subjectively the “principal rea­
son or reasons” for an adverse action. There are
no
restrictions on the number of items to be dis­
The problem remains to prescribe general pro­
closed;
only one need be given. Moreover, the
cedures to determine how many conditional dis­
disclosures
may be made in general terms by us­
closure statements should be made, and in what
ing a model form of the types suggested in Regu­
order. For those systems that permit conversion
lation B. These procedures seem to have been
of changes in factors into contributions to an
generally
acceptable to the public—applicants
overall point score, disclosures should be made
and creditors alike—and no modifications have
in ascending order of the size of the change nec­
been suggested to them. Therefore, in the ab­
essary for favorable action on an application. In
diagram 3, for example, the change \n X (given Y)
sence of the ability to specify more objective
standards and because of the fundamental simi­
requires only 10 points to move A' to A", where­
larities between judgmental and numerical credit
as the change in Y (given X ) requires 18 points to
systems, it seems reasonable to permit flexibility
move the applicant to A"'. Therefore, the
in the number of reasons for adverse action dis­
closed, regardless of the type of system em­
to reverse an adverse action or to pass on to the next phase of
ployed.15
analysis, and not what was required to become marginally
acceptable.
The key reorientation of this aspect of the
13. This proposal is different from those contained in pre­
Regulation
B disclosure policy involves setting a
vious Federal Trade Commission consent agreements. Each
positive minimum standard that requires at least
case has tailored the required disclosures to the system of the
particular creditor. What has evolved, however, is a mechan­
one conditional disclosure to be made. This dis­
ical rule that requires the creditor to disclose at least four
closure
would indicate the general step or steps
reasons. The creditor discloses those factors that deviate the
one might take to modify a risk profile to make
most from the mean values of the factors of those applicants
who were marginal approvals. These mean values cannot be
the application marginally approvable (or to
Diagram 3

precisely placed on the diagrams for easy reference. In gener­
al, however, the underlying concept focuses on the maximum
deviations, rather than minimum deviations, from marginalapproval applicants. In this sense, the procedures do not pro­
vide the consumer with as useful information as the proposed
conditional disclosures would. The reason for this is that the
implicit assumption underlying the staff proposal is that it is
easier for an applicant to modify slightly a characteristic that
is already close to a marginally acceptable level than to modi­
fy substantially a factor that deviates a lot from a marginally
acceptable level.




14. An alternative is to require that the creditor disclose
only mutable factors. The problem is that, given a sufficient
length of time, nearly all factors are mutable. Moreover, mu­
tability is a subjective concept that may vary even among ap­
plicants with identical profiles.
15. For numerical systems, the pool of potential factors to
be disclosed would be limited to those actually scored.

734

Federal Reserve Bulletin □ September 1980

move to the next phase of the evaluation pro­
cess). In terms of diagram 3, conditional dis­
closure of a single factor would involve, at the
minimum, a qualitative indication of how one
might modify X to move ftom A to A". Disclosure
of combinations of factors would indicate what
the applicant might do to move to a point be­
tween A'" and A", such as A'. Furthermore, the
reoriented policy implicitly places the additional
burden on the creditor to reverse a negative deci­
sion or to demonstrate how credit policies or ec­
onomic conditions had changed if the applicant
still did not qualify for credit after he or she had
taken the steps indicated by the creditor in the
original disclosure.

Diagram 4

C o n c l u s io n s

Reorientation of disclosure policy away from
negative aspects—the reasons for an adverse ac­
tion—toward positive aspects—the things an ap­
plicant might do to become marginally approvable—offers several advantages to consumers
and creditors alike. First, telling an applicant
what must be done to secure favorable action is
most consistent with the educational objective
cited in the legislative history. It also provides a
more meaningful statement and reference point
than, for example, disclosing how similar an ap­
plicant is to the average “good” applicant. In
terms of diagram 4, an applicant at C would cer­
tainly find it more useful to know that only a
slight increase in either X or Y (to generate 3
points) would be sufficient to result in approval
than to know the distance he or she was from the
mean of X or Y (represented by the point GL).
The applicant might interpret this latter dis­
closure as indicating a substantial hurdle to be
overcome, when in fact he or she was close to
approval.
Second, creditors argue that they want to grant
loans rather than turn applicants away. Positive
disclosures would create less ill will on the part
of applicants subject to adverse action—indeed,
would help them become acceptable risks. Fur­
thermore, the long-run effect would be an im­
provement in the quality of applicant pools.
Third, the implicit burden on creditors to act
favorably if the applicant makes the indicated im


provement provides incentives to offer meaning­
ful disclosures and to exploit fully the disclosure
potential of their systems. For example, the
more innovative a creditor was in approaching
the “ optimum” disclosures, or the more explicit
the disclosures are, the more the creditor should
be able to protect itself from claims by the appli­
cant that the necessary improvements had been
made when in fact they had not. Thus the credi­
tor could protect itself against being forced to
make loans that are too risky by its standards. At
the same time, the more explicit the disclosures
are, the less uncertainty the applicant faces
about whether he or she has made the required
improvements. Clearly, users of numerical sys­
tems potentially have the capability to make
more explicit conditional or other disclosures
than do judgmental creditors. Equally important,
they can demonstrate more easily (and thus will
be less vulnerable to challenge) the way changes
in economic conditions or credit standards may
alter the improvements that a particular appli­
cant must make. All of these incentives promise
to benefit both applicants and creditors.
Fourth, the creditor who is permitted some
flexibility (given the impossibility of specifying
more precise and objective general standards) in
setting the number of disclosures can balance the
business necessity of protecting the integrity of a

Selection and Disclosure o f Reasons fo r A dverse Action

credit system against the risk of being forced to
grant undesirably risky loans or of being chal­
lenged in the courts.
Fifth, requiring disclosure of the steps an ap­
plicant must take to gain favorable action should
induce creditors to explore the underlying behav­
ioral and causal links between the factors cited
and creditworthiness. To disclose factors that do
not seem obviously or intuitively related to cred­
itworthiness would tend only to invite further ap­
plicant questions and court challenges of a cred­




735

it-scoring system, all of which would raise
creditor costs and incur adverse publicity.
Last, specifying the order in which conditional
disclosures should be made prevents the creditor
from arbitrarily eliminating controversial items
from the potential list of disclosed factors be­
cause the order in which factors are to be dis­
closed potentially varies for each applicant. This
feature is especially important in its implication
for achieving the enforcement objectives con­
tained in the statute.
□

737

Industrial Production
R e le a se d fo r pu blication S ep tem b er 16

Industrial production increased an estimated 0.5
percent in August after six months of decline that
totaled about 8.5 percent. The increase in August
reflected a large rise in the output of construction
supplies and consumer home goods. More mod­
erate increases occurred in nondurable consumer
goods and in most durable and nondurable mate­
rials industries. The index for July now shows a
revised decline of 1.1 percent from June com­
pared with the decrease of 1.6 percent estimated
previously. At 140.5 percent of the 1967 average,
the index in August was 7.6 percent lower than
that of a year earlier.
Output of consumer goods edged up 0.1 per­
cent in August. Auto assemblies, at an annual
rate of 5.6 million units, were down more than 12
percent from their July level, reflecting to some
extent shortages of parts for certain models. The
large decline in the output of automotive prod­
ucts almost offset the large rise in the production
of home goods and the moderate gain in non­
durables—such as food and clothing. Output of
construction supplies rose more than 2 percent in
August after a six-month reduction that totaled
almost 19 percent. The production of business
equipment declined further in August.
Output of materials increased 1.0 percent, re­

p Preliminary.

e Estimated.




Seasonally adjusted, ratio scale, 1967 = 100

Federal Reserve indexes, seasonally adjusted. Latest figures: August.
Auto sales and stocks include imports.

1967 = 100

Percentage change from preceding month

1980

1980

Grouping

Total industrial production .........
Products, total ..........................
Final products........................
Consumer goods..................
Durable ..........................
Nondurable ....................
Business equipment.............
Intermediate products.............
Construction supplies .........
Materials..................................

flecting gains in both durable and nondurable ma­
terials industries. The production of basic metals
and parts for consumer durable goods increased
sharply, but the output of parts for equipment
edged down slightly. Production of energy mate­
rials was about unchanged.

JulyP

Aug.e

Mar.

Apr.

May

June

July

Aug.

139.8
141.8
141.7
141.6
127.8
147.1
168.1
142.4
127.2
136.5

140.5
142.3
141.7
141.7
126.6
147.8
167.3
144.4
130.3
137.8

-.1
.0
.1
-.3
.2
.1
-.6
-1.0
-.8

-.3

-2.5
-2.3
-1.6
-2.2
-5.4
-1.0
-1.1
-4.7
-8.5
-2.8

-2.9
-2.0
-1.6
-2.0
-5.5
-.7
-1.3
-3.1
-4.6
-4.4

-1.8

-1.1
-.5
-.3
-.4
-.3
-.4
-.5

.5
.4

N ote . Indexes are seasonally adjusted.

-.8
-.7
-.1
-.5
.0

-1.7
-1.8
-3.4
-3.1

-.8

-1.0
-2.4

.0
.1

-.9
.5
-.5
1.4
2.4

1.0

Percentage
change
Aug. 1979
to
Aug. 1980
-7.6
-4.6
-2.8
-4.7
-14.5

-.8

-2.5
-10.5
-17.9
-12.0

739

Statem ent to Congress
S ta tem en t by P a u l A . V olcker, C hairm an, B oard
o f G overnors o f the F ederal R e serve S ystem , b e­
fo r e the C o m m ittee on the B u d g e t, U .S . H ou se
o f R e p re se n ta tiv e s, S ep tem b er 10, 1980.

I am pleased to respond to your invitation to par­
ticipate in this hearing to help clarify, as best I
can, the issues before you and the Congress in
setting budgetary priorities during a period of
economic uncertainty.
As you are well aware, the current recession
developed much later than the great majority of
economic forecasts had suggested and then
broke with more force than had been generally
anticipated. Indeed, the abrupt fall in output this
past spring about matched the record postwar
decline that occurred in the first quarter of 1975
and was about as large—in percentage terms—as
we have typically had over the course of an en­
tire recession. More recently, the rate of decline
in economic activity has moderated. Some in­
dicators can even be interpreted as suggesting
the recession could be relatively short-lived.
However, the recent record of economic fore­
casting is warning enough of the uncertainties in­
herent in judging with precision fluctuations in
economic activity. We do know that, despite
whatever encouragement we can draw from
some of the most recent data on the near-term
outlook, the fundamental forces accounting for
some of the persistent problems of the economy
remain—poor productivity and low savings, ad­
justments to sharply higher costs of energy, and
most importantly, the uncertainties and dis­
tortions associated with strong underlying price
pressures. It is the strength of those forces that
seems to me to dictate the main outlines of eco­
nomic policy.
I understand and share the immediate concern
about recession. But I am even more concerned
that we shape policies that also look toward the
medium- and longer-term needs of the economy,
lest we inadvertently extend and repeat the pat­



tern of low productivity, rising inflation, and eco­
nomic instability.
In that connection, I am convinced that the
stability and vigor of our economy will not be re­
stored over time unless the ominous cycle of ris­
ing levels of inflation in successive periods of ex­
pansion can be brought to a halt. We would
neglect that prime objective of economic policy
at our peril. For that reason, the Federal Reserve
has been, and will continue to be, guided by the
need to maintain financial discipline—a dis­
cipline reflected in reduced growth over time of
the monetary and credit aggregates.
As recently as July the Federal Reserve reaf­
firmed its ranges for the monetary aggregates
that call for a deceleration of money growth in
1980 from the pace during the preceding year.
The tentative monetary ranges established for
next year specify slightly lower growth. I am glad
to say that this approach was supported by the
relevant congressional committees.
In general terms, the targets for growth of the
monetary aggregates are designed to encourage
progress toward price stability. At the same time
we would, of course, like to see resumption of
sustainable economic growth. In the short run,
monetary policy alone cannot guarantee that
happy combination of events. Technically, the
supply of money tends to be related to nominal
gross national product, and our targets are con­
sistent with a number of possible combinations
of real growth and inflation. If inflation tends to
decline, the prospects for satisfactory growth
consistent with the targets will be greatly im­
proved. Conversely, to the extent other policies
and behavior—public or private—are tending to
reinforce inflationary pressures and credit de­
mands, more of the available money supply will
be absorbed in financing price increases rather
than in real activity. Inflationary expectations
will tend to keep interest rates higher than other­
wise.
We cannot escape that problem by simply in­

740

F ed eral R ese rv e B u lletin □ S ep tem b er 1980

creasing the money supply to accommodate a
higher rate of inflation. The result could only be
to prolong and intensify the inflationary process,
in turn undermining the recovery and setting the
stage for intensification, rather than resolution,
of our economic problems. That is why I believe
it so important that all our policies take account
of the need to break the insidious pattern of ris­
ing rates of inflation in successive cycles—a pat­
tern that, I would remind you, has been accom­
panied by higher levels of unemployment rather
than lower.
During the spring and early summer we began
to see some slowing of price increases from the
exceptional pace earlier this year, and a zero in­
flation rate was reported for July in the consumer
price index. The concerns over a virtual explo­
sion of inflation that were rife last winter have
rightly receded, an important factor in the sharp
declines in interest rates in the spring. Neverthe­
less, we have to recognize that the improvement
so far has been related largely to transitory or
short-term factors—a softening in markets for
energy and some industrial commodities, favor­
able supply conditions for food in the spring, and
the easing of mortgage interest rates. As you
know, food prices have more recently turned up
again, and the producer price indexes as last re­
ported make less happy reading.
More important than these short-term fluctua­
tions, which are part of the normal dynamics of
our complicated economy and reflect in part
weather and external developments, the “under­
lying” or “ core” rate of inflation—which is
roughly determined by trends in compensation
and productivity—has tended to rise in recent
years. With no productivity gains to offset wage
increases, that core rate appears to be in a range
of 9 percent to 10 percent; if anything, the growth
rate of labor costs appears to have drifted higher
in the first half of this year. There is no doubt that
concern about this inflationary performance, and
fears of the future, are a powerful force holding
interest rates up at present.
One important means of dealing with these
wage and cost pressures is to improve productiv­
ity. Gains in productivity can directly offset cost
pressures; over time, moreover, productivity
gains are the only lasting source of increases in
real income per worker, and rising real income



should in turn reduce the pressure for “ catch
up” wage gains or anticipatory pricing. In that
connection, a strong case can be made for tax
reduction as a means of increasing investment
and productivity. Federal taxes already account
for a historically large proportion of income, and
in 1981 this ratio could be pushed sharply higher
as a result of sizable increases in taxes for social
security, the windfall oil profits tax, and the infla­
tion-induced bracket creep in the individual in­
come tax. In my view, the size and the composi­
tion of the tax burden do have adverse
implications for business investment, for costs,
and possibly for incentives to work and save.
For those reasons I welcome the emphasis in
recent tax proposals to deal as a matter of prior­
ity with taxes on investment. But at the same
time, tax reduction—whether to assist productiv­
ity or to support purchasing power—has effects
on revenues and the budgetary position that we
cannot ignore. If we try to do so, the adverse ef­
fects may more than offset the good. For that
reason, I believe tax reduction must be condi­
tional on progress in restraining expenditure
growth.
As you know, I fully supported the strong ef­
fort by the Budget Committees in the House and
Senate to restrain expenditures last winter and to
aim for a balanced budget. With the economy
slumping, a budgetary balance is obviously
beyond reach today. But government spending
will probably be smaller as a result of the con­
gressional and administration effort, and the cen­
tral point is that restraint must be maintained if
we are to have a credible opportunity to achieve
budget balance in a more fully employed econo­
my.
I am frankly concerned about the size of the
expenditure increases projected in the latest offi­
cial estimates. I recognize a sizable part of those
increases represents a normal, and potentially re­
versible, response to cyclical developments in
the economy. Nonetheless, the trend of our
spending, taking account of national security and
other needs, plainly limits the amount of tax re­
duction that would be prudent. To the extent that
budgetary discipline is suspended in the face of
economic slack, the room for tax reduction could
shrink, even to the vanishing point. Indeed, pro­
grams and policies interpreted as exacerbating

Statem ents to Congress

and prolonging the inflationary process can be
counterproductive even in terms of economic
stimulus, in part through the expectational ef­
fects on financial and other markets.
Consequently, I cannot emphasize too strong­
ly, if we are to plan on tax reduction, the need to
exercise strong restraint over spending and to
contain the stresses and strains that a huge deficit
could place on the economy—especially on fi­
nancial markets. These markets—both domestic
and international— have become so sensitized to
inflation and so wary of deficits that the anticipa­
tion of excessive spending and more inflation can
be as damaging as the reality in driving interest
rates higher at home and the dollar lower abroad.
The desirability of tax cuts—particularly those
without clear rationale in terms of investment
and productivity—also is contingent on the gen­
eral performance of the economy. Our inability
to predict the economic future accurately has
been demonstrated often enough. Experience in­
dicates that numerous well-intentioned programs
of economic stimulus have been ill-timed and ex­
cessive. Currently, we are arguably near a turn­
ing point. One of the questions in that respect is
whether the pressures of government financing—
or the inflationary outlook generally—may
dampen the recovery of significant sectors of the
economy, such as housing or automobiles. It
would be ironic, indeed, if overexuberant plan­
ning for tax reduction—designed for stim ulushad adverse effects in terms of inflationary ex­
pectations and financial markets, interfering with
the natural recuperative powers of the economy.
I have made the point in earlier testimony that
I would want to defer any decision about the ap­
propriate scope of the tax reduction at least until
after the election, when, among other things, we
can have a clearer view of the spending priorities
of an administration and a congress for a period
of time ahead, a matter that inevitably can only
be clarified after November. I realize you do not
have the luxury of foregoing a budgetary resolu­
tion. What seems to me important is that the res­
olution sustain spending restraint. Conceivably,
sufficient restraint could be achieved to make it
prudent to provide room for limited tax measures
aimed at the priority need to stimulate business
investment, reduce costs, and enhance produc­
tivity growth. However, I am doubtful at best



741

that such restraint could be carried to the point of
justifying general tax reduction programs at this
time, pending reassessment of the budgetary and
business situation around the turn of the year.
As crucial as monetary and fiscal policies are,
many other elements of public and private policy
are directly relevant to the prospects for moving
toward lower levels of inflation as the economy
recovers. With productivity actually declining
recently and with higher energy prices, the hard
fact is that the real income of the average worker
will decline. The fact cannot be changed by push­
ing up nominal wages and prices; the result is
more inflation—not more real income. The gains
and losses may be reshuffled, but the real per­
formance of the economy will probably be ad­
versely affected in the process. In the context
of any given set of monetary and fiscal policies,
the end result will be fewer jobs, not more.
Of course, it is much easier to analyze the
problem than to find practical means of slowing
the wage-price treadmill rapidly and effectively
when fears of inflation are so deeply embedded. I
believe it is clear from what I have already said
that the answer cannot simply lie in passively ac­
cepting whatever increase in the money supply
would be necessary to accommodate the infla­
tionary process. To the contrary, I hope and ex­
pect that firm financial discipline—monetary and
fiscal—can be one factor encouraging moder­
ation in business and labor behavior. The possi­
bility of relating tax reduction to wage restraint
has occasionally been raised, but it seems to me
to have received less attention than the question
may deserve. I have not been convinced that a
formal, detailed program for linking income re­
straint to tax reduction, as some have proposed,
is practical. Nevertheless, before sizable reduc­
tions in personal taxes are considered by the
Senate and the House, I believe an opportunity
presents itself to explore carefully, with business
and labor, the need for a commitment to restraint
in wages and pricing during this crucial period in
the interests both of the economy as a whole
and of business and labor’s own economic well­
being.
I have spoken many times of the need to devel­
op concerted policies in other areas to help us to
achieve and reconcile our economic goals. We
need to reduce our dependence on foreign oil—a

742

F ed eral R ese rv e B u lletin □ S ep tem b er 1980

matter not unrelated to tax policy. We need to
attack those elements in the burgeoning regula­
tory structure that impede competition or add
unnecessarily to costs. And, I believe, it would
be a serious mistake to seek relief from our prob­
lems by a retreat to protectionism, which would
risk weakening the forces of competition, would
reduce the pressures on American industry to in­
novate, and would undermine the attack on infla­
tion.
We are now at the critical point in our efforts
to reduce inflation while returning the economy




to a path of healthy and sustainable growth in the
1980s. We must not sacrifice that opportunity by
neglecting the need to place our immediate ac­
tions in the context of a coherent longer-run pro­
gram. One essential part of that program requires
firm discipline over the growth of money and
credit. Control over spending and the federal
deficit is another. Any tax reduction that can be
fitted into that context should be responsive to
the fundamental needs of our economy to im­
prove productivity and investment, to contain
costs, and to improve incentives.
□

743

A nnouncem ents
R e g u l a t io n D
R e v is io n

The Federal Reserve Board has revised its Regu­
lation D (Reserve Requirements of Depository
Institutions) to carry out provisions of the Mone­
tary Control Act of 1980.
The first period for reporting deposits under
the new regulation begins October 30, 1980, for
all institutions whose requirements have not
been deferred. The amount of initial reserves re­
quired beginning November 13 under the act’s
new reserve ratios will be calculated from these
reports.
The Board amended Regulation D to conform
to the act after consideration of comment on pro­
posed new reserve requirement rules published
in June.
The Monetary Control Act, which became law
March 31, is designed to improve the ef­
fectiveness of monetary policy by applying new
uniform reserve requirements, set by the Federal
Reserve, to member and nonmember commer­
cial banks, savings banks, savings and loan asso­
ciations, and credit unions that offer transaction
accounts or nonpersonal time deposits.
By the terms of the act, the reserve require­
ment on the first $25 million of an institution’s
transaction accounts will be 3 percent. The initial
requirement on remaining transaction accounts
will be 12 percent. The reserve requirement on
nonpersonal time deposits with original matu­
rities of less than four years will be 3 percent.
Nonpersonal time deposits with original matu­
rities of four years or more will be 0 percent. Eu­
rocurrency liabilities will have reserve require­
ments of 3 percent. The new requirements are,
by law, to be phased in gradually in order to pro­
vide an orderly transition. The new regulation in­
cludes phase-in schedules, with requirements
varying according to the status of the institution
and other factors.
Reporting requirements, and further details,



are set forth in the Board’s official notice of these
actions, which is available upon request from the
Federal Reserve Board and from the Federal Re­
serve Banks. The Reserve Banks will send the
notice to all affected depository institutions.
For major provisions of the new regulation,
see “ Legal Developments.”

A m endm ent

The Federal Reserve Board has announced rules
for nonmember depository institutions to follow
if they pass required reserve balances through
another institution to the Federal Reserve, and
rules for these intermediaries to follow in han­
dling the reserve balances of others. The new
rules, which are effective November 13, 1980,
amend the Board’s Regulation D (Reserve Re­
quirements of Depository Institutions).
Under the Monetary Control Act of 1980, de­
pository institutions are required to satisfy re­
serve requirements fixed by the Federal Reserve
on their transaction accounts and nonpersonal
time deposits. These reserves may be held in
vault cash, or if vault cash is not large enough to
satisfy reserve requirements, balances must be
held with Federal Reserve Banks.
Depository institutions that are members of
the Federal Reserve System will continue to hold
their reserves directly with the Federal Reserve
Bank in their Federal Reserve District. Non­
members may hold their reserves directly with
the Federal Reserve, or indirectly by passing the
reserves through another institution (pass­
through correspondent).
Some highlights of the Board’s passthrough
rules are as follows:
1.
Correspondent institutions that may re­
ceive and pass through the reserve balances of
nonmember depositories are the Federal Home
Loan Bank, the Central Liquidity Facility of the
National Credit Union Administration, or a de­
pository institution (member or nonmember) that

744

F ed eral R ese rv e B u lletin □ S ep tem b er 1980

holds a required reserve balance directly at a Re­
serve Bank. The Board reserves the right to per­
mit other institutions, on a case-by-case basis, to
be passthrough correspondents. U.S. branches
and agencies of foreign banks and Edge and
Agreement corporations may pass their required
reserves through other institutions or may them­
selves act as passthrough correspondents.
2. A respondent will be able to choose one
passthrough correspondent, and that correspon­
dent must pass the reserve balances through di­
rectly to the Federal Reserve. Such arrange­
ments may be initiated, terminated, or changed
upon notification satisfactory to the Reserve
Bank involved.
3. In passthrough arrangements, the corre­
spondent has the responsibility to assure the
maintenance of the correct level of its respond­
ent’s reserve balances. The passthrough rules
approved by the Board clarify the precise re­
sponsibilities of the parties to a passthrough ar­
rangement. Reserve Banks will compare only the
aggregate required reserve balance with the total
actual balance held in each reserve account
maintained by the correspondent for determina­
tion of reserve deficiencies, penalty liability, and
other reserve maintenance purposes.
4. The correspondent institution passing bal­
ances through will maintain the reserve balances
it receives, dollar for dollar, with the Federal Re­
serve Bank in whose territory (the service area of
a Federal Reserve office) the main office of the
respondent is located.
5. Under the rules adopted by the Board, a
correspondent may choose one of the two fol­
lowing options with respect to handling its own
required reserves and those of its respondents in
the same Federal Reserve territory:
The correspondent may maintain its own required re­
serve balances, as well as those of its respondents
whose head office is located in the same territory as
the correspondent’s head office, in a single, com ­
mingled reserve account at the Federal Reserve Bank
or Branch serving the territory; or the correspondent
may maintain its own reserve balance in the Federal
Reserve Bank or Branch serving its territory and, in
addition, maintain a separate commingled reserve ac­
count for its respondents located in the same Federal
Reserve territory.
6 . A depository institution maintaining a re­
serve balance on a passthrough basis is eligible



for Federal Reserve System services provided
separately from its local Federal Reserve office
(but when reserve balances of nonmember insti­
tutions are zero or small, it may be necessary for
the institution also to maintain an adequate clear­
ing balance).

R e g u l a t io n A : R e v is io n

The Federal Reserve Board has announced
adoption of major revisions of its rules governing
the use of its discount window for extensions of
credit by the Federal Reserve to depository insti­
tutions, effective September 1, 1980.
The revision of the Board’s Regulation A (Ex­
tensions of Credit by Federal Reserve Banks)
was made to carry out the provisions of the Mon­
etary Control Act of 1980. The Board acted after
consideration of comment received on revision
of the regulation proposed in June.
The Monetary Control Act provides that any
depository institution offering transaction ac­
counts or nonpersonal time deposits that are sub­
ject to reserve requirements shall have access to
the Federal Reserve’s discount and borrowing
facilities on the same basis as member banks.
Regulation A, as revised to implement the act,
provides that Federal Reserve credit will be of­
fered under two major programs: adjustment
credit and extended credit. Adjustment credit ac­
counts for most Federal Reserve lending. It is
made on a very short-term basis to help deposi­
tory institutions adjust to sudden changes in their
need for funds. Extended credit is designed to
help institutions cope with such needs over
somewhat longer periods. It includes seasonal
credit to accommodate the needs of smaller insti­
tutions and other extended credit for institutions
facing particular problems. Problems of the latter
type may arise from the particular circumstances
of a given institution or from general difficulties
affecting a broader range of institutions.
In adopting revised Regulation A, the Board
modified its June proposal slightly with respect
to nonmember institutions that have access to
special industry lenders such as the Federal
Home Loan Banks, credit union centrals, and
the Central Liquidity Facility of the National
Credit Union Administration.
The amendment as adopted provides for tem­

Announcements

porary adjustment credit to such institutions
when they are unable to gain timely access to
their special lender and for consultation and
coordination with the special industry lender, as
follows:
Nonmember depository institutions . . . like member
banks generally are expected to rely on other reason­
ably available sources of funds before turning to the
discount window for assistance. . . . In instances
where depository institutions require funds on short
notice to cover immediate cash or reserve needs and
are unable to gain timely access to their special indus­
try lenders, the Federal Reserve is prepared to ad­
vance funds through its discount window. On these
occasions the Federal Reserve will consult and coordi­
nate with the special industry lender as soon as pos­
sible. Any such advances . . . will be expected to be
repaid when access to the usual sources o f funds is
secured, usually the next business day.

The Board also set forth the conditions under
which the Federal Reserve will assist nonmem­
ber institutions needing help over longer peri­
ods—including periods of deposit disinter­
mediation. In these instances the Federal
Reserve will consult with the institution’s super­
visor to determine, among other things, why
funds are not available from sources other than
the Federal Reserve.
The Board, as it had proposed, made the pos­
sible use of a discount rate surcharge a per­
manent addition to the System’s discount lending
rules that are applicable, according to circum­
stances, to both adjustment and extended credit.

R e v is io n o f D is c o u n t L e n d in g R u le s

The Federal Reserve Board on August 22, 1980,
revised its rules for the use of “ ineligible paper”
as collateral at the discount window, in accord­
ance with the Monetary Control Act of 1980.
Ineligible paper is collateral not included
among collateral eligible for purposes of a dis­
count loan under Section 13 of the Federal Re­
serve Act.
Section 10(b) of the Federal Reserve Act au­
thorizes the Reserve Banks to make loans on the
basis of such collateral, but has required that the
interest rate charged be V2 of a percentage point
higher than the basic discount rate.
The Monetary Control Act authorized the Fed­



745

eral Reserve to eliminate this penalty rate on
such loans, and the Board, which has requested
this authority for many years, revised its dis­
count lending rules accordingly. Pursuant to the
act, adjustment and seasonal credit loans so col­
lateralized will be made, effective September 2,
at the basic discount rate, currently 10 percent.

R e g u l a t io n Z .
D e f e r r a l o f E f f e c t iv e D a t e f o r A P R s

The Federal Reserve Board has deferred the date
on which new methods of calculating and dis­
closing the annual percentage rate on consumer
loans under Regulation Z (Truth in Lending) be­
come mandatory.
The Board acted to avoid an increased regula­
tory burden that would otherwise be brought
about by differing mandatory effective dates for
amendments to Regulation Z adopted by the
Board in January, and regulatory revisions re­
sulting from the Truth in Lending Simplification
and Reform Act enacted since then.
The annual percentage rate (APR) amend­
ments to Regulation Z adopted by the Board in
January provide greater flexibility and protection
to creditors in calculating and disclosing the
APR. These would have become mandatory Oc­
tober 1, 1980.
The Truth in Lending Simplification and Re­
form Act, and the new Regulation Z proposed by
the Board to conform to the act, contain APR
calculation and disclosure rules very similar to
those adopted by the Board in January. These
will become effective April 1 , 1981, and will be­
come mandatory April 1 , 1982.
To avoid requiring creditors to conform their
practices to two sets of regulations in a short
time, the Board deferred the mandatory date of
the January revisions of APR calculation and dis­
closure to April 1 , 1982.
The deferral has the effect of preserving the
status quo. It is expected that the action will
have no adverse impact on consumers. Creditors
may begin to comply with the APR changes
when the new act and the new regulation under
the act take effect April 1, 1981, or earlier, but
creditors are not required to do so until a year
later. This provides time for retraining personnel
and for other changes that creditors must make

746

F ed eral R e se r v e B u lletin □ S ep tem b er 1980

to conform to the new requirement. The Board’s
action does not affect creditors that have already
made APR changes in conformity to the amend­
ments adopted by the Board in January.

P r o p o s e d A c t io n s

The Federal Reserve Board has proposed for
comment two interpretations of its Regulation B
(Equal Credit Opportunity) concerning consid­
eration of income and disclosure of reasons for
adverse action. The Board asked for comment by
October 20, 1980.
The Federal Reserve Board on August 28,
1980, made public a proposed schedule of fees
for its services to financial institutions, and the
principles underlying the proposed system of
charges. The Board also proposed ( 1 ) procedures
for a depository institution to follow if it main­
tains low or zero required reserve balances with
the Federal Reserve and it wishes to obtain serv­
ices directly from the Federal Reserve; and (2) a
series of steps designed to reduce Federal Re­
serve float and a preliminary plan to price re­
maining float beginning in mid-1982. The Board
asked for comment by October 31, 1980.

“ E F T a t Yo u r S e r v i c e ”

The Federal Reserve Board has announced the
release of “EFT at your Service,” an educational
film produced by the Federal Reserve Bank of
Philadelphia. The film shows how electronic fund
transfers (EFTs) are changing the way many
Americans conduct their financial affairs. EFT
offers an alternative to cash and checks for many
financial transactions.
As directed by the Congress, the Federal Re­
serve has issued regulations to carry out provi­
sions of the Electronic Fund Transfer Act of 1978
protecting consumers in the use of EFT services.
The regulations establish procedures for cor­
recting errors and specify limits of liabilities for
lost or stolen EFT cards.
The 14-minute, 16mm color film is available on
a free-loan basis from Association Films, 866
Third Avenue, New York, N.Y. 10022. It also
may be obtained from the Board of Governors
or the 12 District Federal Reserve Banks.



To u r s o f B o a r d B u il d in g

The Federal Reserve Board has announced ex­
panded hours for its tour program. The Board
Building is now open daily from 9:30 a.m. to 3:30
p.m. Visitors may explore the public areas of the
building, including its rotating art exhibit, and
see a slide show on the work of the central bank.

A n n u a l R e v is io n o f D a t a S e r ie s
I n d e x o f in d u s tr ia l p r o d u c t i o n

With the publication of the August 1980 produc­
tion index in mid-September, the results of the
1979 data revision were also released. This annu­
al revision incorporates 1979 data that became
available after the four-month period in which
monthly estimates are currently adjusted as well
as data revised by the source for 1979. The sea­
sonal factors were also reviewed and changed,
but only slight adjustments were necessary.

C a p a c i t y u tiliza tio n r a t e s

The capacity utilization rates have been revised
beginning with January 1979 as a result of the an­
nual revision of the production index. Minor ad­
justments were also made to some capacity in­
dexes.
Both the industrial production and capacity
utilization releases may be obtained from Pub­
lications Services, Board of Governors of the
Federal Reserve System, Washington, D.C.
20551.

S y ste m M e m b e r s h ip :
A d m is s io n o f S tate B a n k s

The following banks were admitted to member­
ship in the Federal Reserve System during the
period August 11 through September 10, 1980:
O regon

Cave Junction .................... Home Valley Bank
Virginia

Chesterfield ..... Peoples Bank of Chesterfield

747

R ecord o f P olicy A ctions o f the
Federal O pen M arket C om m ittee
Meeting Held on July 9, 1980

1. D om estic Policy Directive
The information reviewed at this
meeting indicated that real output of
goods and services had declined
markedly in the second quarter after
having expanded at an annual rate of
1.2 percent in the first quarter. Aver­
age prices, as measured by the fixedweight price index for gross domes­
tic business product, continued to
rise at a rapid pace, but not so rapid­
ly as in the first quarter.
The dollar value of total retail
sales declined substantially in May
for the fourth consecutive month; in
real terms such sales had fallen 10
percent below their peak in January,
the sharpest four-month drop on rec­
ord. Unit sales of new automobiles
slowed considerably further in May
and remained weak in June.
The index of industrial production
fell 2.1 percent in May, following a
similar reduction in April. The de­
cline was broadly based, reflecting
reductions in output for all major
product groupings. The rate of ca­
pacity utilization in manufacturing
fell 2 percentage points further to 79
percent, 8 percentage points below
its recent high in March 1979.
Nonfarm payroll employment de­
clined in May and fell sharply further
in June. Employment decreases
were concentrated in manufacturing
and construction in both months,
and in June the service-producing
sector registered its first decline
since the previous recession. The
unemployment rate, however, edged
down from 7.8 to 7.7 percent in
June, following large increases in the
preceding two months.
The Department of Commerce




survey of business spending plans
taken in late April and May indicated
that expenditures for plant and
equipment would be about 10 per­
cent higher in 1980 than in 1979. The
survey also suggested, however,
little real growth in such ex­
penditures over the year after allow­
ance for expected increases in
prices.
Private housing starts fell consid­
erably further in May to an annual
rate of 920,000 units, one of the low­
est monthly rates in the postwar pe­
riod, while residential building per­
mits edged up. There were some
indications of improvement in newhome sales in May.
The rise in producer prices of fin­
ished goods and of materials moder­
ated substantially in the second
quarter following exceptionally rap­
id advances in other recent quarters.
The rate of increase in consumer
prices slowed appreciably in April
and May from the accelerated pace
in the first quarter. The recent mod­
eration in both producer and con­
sumer prices was due largely to a
lessening of the rapid rise in prices of
energy-related items. The index of
average hourly earnings of private
nonfarm production workers rose at
an annual rate of about 9lh percent
over the first half of 1980, compared
with an increase of 8 V2 percent dur­
ing 1979.
In foreign exchange markets the
downward pressure on the dollar
that had developed in early April
abated in mid-June but reemerged in
early July. The renewed pressure ap­
parently reflected concern about the
possibility of further declines in U.S.
interest rates. The trade-weighted
value of the dollar against major for­

748

F ed eral R e se r v e B u lletin □ S ep tem b er 1980

eign currencies, which had fallen
about V h percent since the Com­
mittee’s meeting on May 20 and
about 11 percent since early April,
was close to its level in early 1980.
The U.S. foreign trade deficit for
April and May was well below the
average for the first quarter, reflect­
ing a reduction in both oil and non­
oil imports. Nonagricultural exports
increased slightly after exhibiting
considerable strength in 1979 and in
the first quarter of 1980.
At its meeting on May 20, the
Committee had agreed that open
market operations in the period until
this meeting should be directed to­
ward expansion of reserve aggre­
gates consistent with growth of
M-l A, M-1B, and M-2 at rates high
enough to promote achievement of
the Committee’s objectives for
growth over the year, provided that
in the intermeeting period the week­
ly average federal funds rate re­
mained within a range of 8 V2 to 14
percent. Specifically, the Committee
had agreed that operations should be
directed toward encouraging growth
of M-l A, M-1B, and M-2 over May
and June at annual rates of 7 to l xh
percent, l xh to 8 percent, and about
8 percent respectively. The Com­
mittee also had agreed that, in light
of the earlier shortfall, moderately
faster growth would be acceptable if
that developed in response to a
strengthening of the demand for
money.
In pursuit of the Committee’s ob­
jective of encouraging growth in the
monetary aggregates, System open
market operations were directed
during the intermeeting period at
fostering an ample availability of
nonborrowed reserves, and condi­
tions in the money market eased fur­
ther. The federal funds rate declined
from an average of about 10 7/s per­
cent in the statement week ending
May 14 to around 93/s percent in the
statement week ending July 2. In
recognition of the easier conditions
in money markets, reductions in
Federal Reserve discount rates from
13 percent to 11 percent in two equal



steps were announced on May 28
and June 12.
Growth in M-l A and M- 1 B accel­
erated in June to annual rates of W U
percent and 163/4 percent respective­
ly, following little change in May and
sharp contraction in April. Growth
in M-2 also accelerated in June to an
annual rate of about 17V4 percent,
up from a rate of 83/4 percent in May
and a small decline in April; the fast­
er growth in M-2 partly reflected
rapid expansion in money market
mutual funds. From the fourth quar­
ter of 1979 to the second quarter of
1980, M-l A and M-1B grew at annu­
al rates of about V2 and l 3/4 percent
respectively, considerably below the
growth paths consistent with the
Committee’s ranges for the year
ending in the fourth quarter of 1980;
M-2 and M-3 grew at rates just above
the lower bounds of their ranges.
Following rapid expansion in the
first quarter, total credit outstanding
at U.S. commercial banks con­
tracted in June for the third con­
secutive month. The June decline re­
flected continuing weakness in
loans, including business loans.
However, short-term business bor­
rowing was sustained by rapid
growth in net issuance of com­
mercial paper by nonfinancial cor­
porations following a surge of such
issuance to a record rate in May.
Over the first half of 1980, total com­
mercial bank credit grew at an annu­
al rate of about Axh percent, some­
what below the lower bound of the
Committee’s range for the year.
Market interest rates declined
considerably further in late May and
the first half of June but since then
most rates have retraced part of the
decline. On balance, private short­
term rates declined 100 to 125 basis
points over the intermeeting period
while most long-term rates fell 10 to
50 basis points; municipal bond
yields, however, rose somewhat.
Over the interval, commercial banks
reduced their loan rate to prime busi­
ness borrowers from I6 V2 percent to
IIV2 percent. In primary markets for
home mortgages, average rates on

R ecord o f Policy Actions o f the FOM C

new commitments at savings and
loan associations declined to about
12 Vs percent.
On May 22 the Board of Gover­
nors announced a partial phaseout
of the special measures of credit
restraint that had been put in place,
or reinforced, on March 14. Sub­
sequently, on July 3, the Board
announced plans to complete the
phaseout of the special credit re­
straint program. The Board noted
that recent banking and other data
clearly indicated that credit expan­
sion was running at a moderate pace,
and accordingly the special condi­
tions necessitating the extraordinary
credit restraint measures were no
longer present.
According to staff estimates pre­
sented at this meeting, the decline in
real GNP during the second quarter
was larger than had been anticipated
at the time of the meeting in May.
The staffs projections suggested
that real GNP would continue to de­
cline in the remaining quarters of
1980, although at a progressively
less rapid pace, and that the
unemployment rate would increase
substantially further. A modest re­
covery in real GNP appeared likely
to begin around the turn of the year.
The rise in prices, as measured by
the fixed-weight index for gross do­
mestic business product, was ex­
pected to remain rapid, but some­
what less rapid during 1981 than
1980.
Although members of the Com­
mittee differed somewhat in their ap­
praisals of the depth of the overall
decline and of the pace of the recov­
ery, they generally agreed that the
contraction in real GNP would con­
tinue well into the second half of
1980 and that a recovery in 1981 was
likely to be modest compared with
most earlier periods of recovery. All
members believed that the rise in
prices would remain rapid in 1981,
although a few anticipated a some­
what more significant slowing than
the staff projected; one or two mem­
bers expected little if any improve­
ment. However, it was suggested



that uncertainty about the forecasts
was especially great, partly because
of the difficulty of evaluating the im­
pact that persistent inflation might
have on expectations and thus on
various categories of expenditures.
At its meeting on February 4-5,
1980, the Committee had agreed that
from the fourth quarter of 1979 to the
fourth quarter of 1980 average rates
of growth in the monetary aggre­
gates within the following ranges ap­
peared to be consistent with broad
economic aims: M-l A, V h to 6 per­
cent; M-1 B, 4 to 6 V2 percent; M-2, 6
to 9 percent; and M-3, 6 V2 to 9lh
percent. The associated range for
the rate of growth in commercial
bank credit was 6 to 9 percent. In es­
tablishing the ranges then, the Com­
mittee had agreed that monetary
growth should slow further in 1980,
following some deceleration in 1979,
in line with the continuing objective
of curbing inflation and providing the
basis for restoration of economic
stability and sustainable growth in
output.
At this meeting, in accordance
with the Full Employment and Bal­
anced Growth Act of 1978 (the Humphrey-Hawkins Act), the Committee
reviewed the ranges for growth of
the monetary and credit aggregates
for the period from the fourth quar­
ter of 1979 to the fourth quarter of
1980 that it had established at its
meeting in February and gave pre­
liminary consideration to objectives
for monetary growth that might be
appropriate for 1981.1 In doing so,
the Committee continued to face un­
usual uncertainties concerning the
forces affecting monetary growth.
As noted earlier, expansion of both
M-l A and M-1B from the fourth
quarter of 1979 to the second quarter
of 1980 fell considerably below the
growth paths consistent with the
Committee’s ranges for the year.
However, growth of M-2 and M-3
was considerably stronger: over the
1 The Board’s midyear report under the act
was transmitted to the Congress on July 21,
1980.

749

750

F ed eral R e se r v e B ulletin □ S ep tem b er 1980

two quarters both of these aggre­
gates grew at rates just above the
lower bounds of their ranges. By
midyear, growth of M-2 was near the
midpoint of its range, and it ap­
peared to be moving higher.
The weakness in the narrower
measures of money that developed
in the second quarter was unusual. It
raised the question of whether the
demand for money in relation to in­
come and interest rates had shifted
downward once again, perhaps as a
response to the unusually high level
of interest rates of the preceding
quarter. It was also possible that
part of the second-quarter decline in
money balances was a temporary
phenomenon associated with the
substantial repayments of short-term
debt that followed the special mea­
sures of credit restraint announced
on March 14. In the latter case, the
public would probably make some
effort to rebuild balances in the sec­
ond half of the year, which would
strengthen the demand for both
M-l A and M-1B. In any event, in view
of recent evidence of a preference
for interest-bearing transactions ac­
counts over demand deposits that
was greater than anticipated, it ap­
peared likely that M-1B would grow
somewhat faster relative to M-l A
than had been projected earlier in
the year.
The stronger performance of the
broader aggregates over the first half
of the year in relation to their ranges
for the year reflected rapid growth in
instruments yielding market rates of
interest, including shares in money
market mutual funds. As short-term
market interest rates declined sharp­
ly toward the end of the period, con­
traction in savings deposits in banks
and other depository institutions
slowed and then gave way to a rise.
For part of the period, growth of M-3
was also promoted by issuance of
large-denomination time deposits by
commercial banks and thrift institu­
tions, but the outstanding volume of
such deposits began to contract in
late spring as credit demands weak­
ened.



For 1981, the prospective relation­
ships among the various monetary
aggregates were subject to even
greater uncertainty because of,
among other things, certain institu­
tional changes expected to result
from the Monetary Control Act of
1980. In particular, relationships
among the aggregates will be af­
fected by introduction of NOW ac­
counts on a nationwide basis as of
December 31, 1980, as authorized by
that act. During 1981, shifts of funds
from demand deposits to NOW ac­
counts are likely to be substantial,
and will retard the growth of M-l A.
At the same time, transfers from
savings deposits and other interestbearing assets to NOW accounts will
enhance the growth of M-1 B. To the
extent that funds are shifted into
NOW accounts from other deposit
components of M-2 and M-3, growth
of these aggregates will be unaf­
fected. The behavior of these aggre­
gates, however, will also be influ­
enced by the further development of
money market mutual funds, which
are included in M-2. The possibility
that the apparent downward shift in
the demand for narrow money will
persist into next year was an addi­
tional element of uncertainty.
In the Committee’s discussion, all
but one member favored retention of
the ranges for 1980 that had been
adopted at the meeting in February.
The likely shift in relative growth of
M-l A and M-1 B was not considered
large enough to justify “ fine-tuning”
the growth ranges at the expense of
causing public confusion about the
meaning of the adjustments. One
member advocated a reduction in
the ranges for both M-l A and M-1B.
In reaffirming the existing ranges
for 1980, Committee members in
general recognized that growth of
the narrow aggregates over the year
as a whole might reasonably fall be­
low the midpoints of their ranges and
possibly near the lower bounds. On
the other hand, the recent behavior
of the interest-bearing nontrans­
actions components of M-2 and M-3,
along with a possible pickup in de­

R ecord o f Policy Actions o f the FOM C

mands for transactions balances, sug­
gested that growth of the broader ag­
gregates over the year as a whole
might rise to about the midpoints of
their ranges or, in the case of M-2,
well into the upper part of the range.
Committee members also recog­
nized that the sharp contraction in
commercial bank credit during the
second quarter raised the possibility
that growth over the year would fall
short of its range, even if the antici­
pated resumption of expansion in
bank credit occurred. It was noted,
however, that a substantial portion
of business credit needs was being
met through other sources of funds,
particularly the issuance of com­
mercial paper and the flotation of
corporate bonds.
Thus the Committee decided to re­
tain the ranges for 1980 that it had
established in February: for the peri­
od from the fourth quarter of 1979 to
the fourth quarter of 1980, V h to 6
percent for M-l A, 4 to 6 V2 percent
for M -lB, 6 to 9 percent for M-2, and
6 V2 to 9 V2 percent for M-3. The as­
sociated range for commercial bank
credit remained 6 to 9 percent. As in
the past, it was understood that the
longer-run ranges, as well as the par­
ticular aggregates for which ranges
were specified, would be reconsid­
ered at any time that conditions
might warrant, and that short-run
factors might cause considerable
variation in annual rates of growth
from one month to the next and from
one quarter to the next.
With respect to objectives for
monetary growth in 1981, most
Committee members expressed
strong reservations about attempting
to be numerically precise at this
time, owing to the unusual uncer­
tainties about the relationships
among the monetary aggregates and
about their relationship to economic
activity; they felt that a more general
statement, consistent with the letter
and intent of the law as they under­
stood it, would be more meaningful
and less confusing. The members
generally wished to reaffirm the
Committee’s long-standing objective



of moving gradually toward rates of
monetary expansion consistent with
general price stability. Some mem­
bers emphasized a possible inconsis­
tency between reduced monetary
growth and satisfactory recovery in
activity should strong price pres­
sures persist, as assumed in the ad­
ministration’s forecast. A few were
unwilling to assume, pending further
appraisal of price and other develop­
ments in coming months, that prog­
ress could be made in 1981 toward
the longer-term goal of reduced
monetary growth. However, most
members believed that the Com­
mittee should indicate firmly its in­
tent to make more progress in 1981
toward its objective of reduction in
monetary growth over time. One
view was that the reduction in mone­
tary growth should be stated only
with respect to the narrowly defined
monetary aggregates, even if it were
not feasible to do so in specific quan­
titative terms. Another was that the
objective should be stated only in
terms of a small reduction in the
ranges for the broader aggregates, in
light of the distorted behavior of
M-l A and M-1B anticipated because
of the prospective growth of NOW
accounts on a nationwide basis.
At the conclusion of the dis­
cussion, there was rather general
agreement among members of the
Committee that it would be appro­
priate to plan for some further prog­
ress in 1981 toward reduction in the
targeted ranges, but that it would be
premature at this time to set forth
precise ranges for each monetary ag­
gregate for next year, especially giv­
en the uncertainty generated by the
institutional changes affecting the
relationships among the aggregates.
Moreover, the appropriate monetary
growth in 1981 relative to 1980
would depend to some extent on ac­
tual growth this year—that is, on ex­
actly where in the present ranges the
various aggregates fall at year-end.
The Committee adopted the following
ranges for rates o f growth in monetary
aggregates for the period from the fourth
quarter o f 1979 to the fourth quarter of

751

752

Federal R ese rv e B ulletin □ S ep tem b er 1980

1980: M-l A, V h to 6 percent; M-1B, 4 to
6 V2 percent; M-2, 6 to 9 percent; and
M-3, 6 V2 to 9 V2 percent. The associated
range for bank credit is 6 to 9 percent.
Votes for this action: Messrs. Volck­
er, Gramley, Morris, Partee, Rice,
Roos, Schultz, Solomon, Mrs. Tee­
ters, Messrs. Winn, and Balles. Vote
against this action: Mr. Wallich. (Mr.
Balles voted as alternate for Mr. Guf­
fey.)

Mr. Wallich dissented from this
action because he believed that the
ranges for growth of M-l A and M-1B
over the year ending in the fourth
quarter of 1980 should be reduced by
V2 percentage point. In his opinion,
efforts to bring these aggregates up
into the ranges adopted in February
implied excessively rapid monetary
growth over the months ahead.
In the Committee’s discussion of
policy for the short run, the mem­
bers agreed that operations in the pe­
riod before the next meeting should
be directed toward expansion of
monetary aggregates over the third
quarter at rates that would promote
achievement of its monetary objec­
tives for the year. In doing so, the
members recognized that a number
of months might be required in the
process and that, in any case,
growth of the narrower aggregates
over the year as a whole might well
fall near the lower bounds of their
ranges.
Specifically, the Committee agreed
that open market operations in the
period until the next meeting should
be directed toward expansion of re­
serve aggregates consistent with
growth of M-l A, M-1B, and M-2
over the third quarter of 1980 at an­
nual rates of about 7 percent, 8 per­
cent, and 8 percent respectively,
provided that in the period before
the next regular meeting the weekly
average federal funds rate remained
within a range of 8 V2 to 14 percent.
The Committee also agreed that in
light of the shortfall in monetary
growth over the first half of the year,
moderately faster growth would be
acceptable if it developed in re­
sponse to a strengthening in the pub­



lic’s demand for money balances as
narrowly defined. In assessing the
behavior of M-l A and M-1B, it was
also understood that the rate of
growth in M-2 would be taken into
account. If it appeared during the pe­
riod before the next regular meeting
that the constraint on the federal
funds rate was inconsistent with the
objective for the expansion of re­
serves, the Manager for Domestic
Operations was promptly to notify
the Chairman who would then de­
cide whether the situation called for
supplementary instructions from the
Committee.
The following domestic policy di­
rective was issued to the Federal Re­
serve Bank of New York:
The information reviewed at this
meeting indicates a marked contraction
in real GNP in the second quarter. In
May total retail sales declined sub­
stantially for the fourth consecutive
month, and housing starts, industrial
production, and nonfarm payroll em­
ployment continued to decline. Employ­
ment fell sharply further in June; how­
ever, the unemployment rate edged
down from 7.8 to 7.7 percent, following
large increases in April and May. The
overall rise in prices of goods and ser­
vices has moderated in recent months, in
large part owing to a lessening o f the rap­
id rise in energy items. Over the first six
months o f the year, the rise in the index
o f average hourly earnings was moder­
ately faster than the pace recorded in
1979.
The downward pressure on the dollar
in exchange markets that emerged in
early April abated in mid-June, and then
was resumed in early July. The average
U .S. foreign trade deficit for April and
May was well below the average for the
first quarter, reflecting reduced oil and
non-oil imports.
Monetary expansion was rapid in
June, following weakness earlier in the
spring. Over the first half o f the year
growth o f M-l A and M - 1B fell short of
the rates consistent with the Com­
mittee’s ranges for the year from the
fourth quarter of 1979 to the fourth quar­
ter o f 1980; the rate o f growth for M-2
was just above the lower bound of its
range. Outstanding bank loans to busi­
ness declined substantially during the
second quarter following a large increase
in the first quarter. Market interest rates
declined considerably further in late May
and the first half o f June, but since then
most rates have retraced part o f the de­

R ecord o f Policy A ctions o f the FOMC

cline. Reductions in Federal Reserve
discount rates from 13 to 11 percent in
equal steps were announced on May 28
and June 12.
Taking account of past and prospec­
tive econom ic developments, the Feder­
al Open Market Committee seeks to fos­
ter monetary and financial conditions
that will resist inflationary pressures
while encouraging moderate economic
expansion and contributing to a sustain­
able pattern of international transac­
tions. The Committee agrees that these
objectives would be furthered by growth
of M - 1A, M-1B, M-2, and M-3 from the
fourth quarter of 1979 to the fourth quar­
ter of 1980 within ranges of 3 lh to 6 per­
cent, 4 to 6 V2 percent, 6 to 9 percent, and
6 V2 to 9 V2 percent respectively. The as­
sociated range for bank credit is 6 to 9
percent.
In the short run, the Committee seeks
expansion of reserve aggregates consis­
tent with growth of M -l A, M-1B, and
M-2 over the third quarter of 1980 at an­
nual rates of about 7 percent, 8 percent,
and 8 percent respectively, provided that
in the period before the next regular meet­
ing the weekly average federal funds rate
remains within a range of 8 V2 to 14 per­
cent.
If it appears during the period before
the next meeting that the constraint on
the federal funds rate is inconsistent with
the objective for the expansion of re­
serves, the Manager for Domestic Oper­
ations is promptly to notify the Chairman
who will then decide whether the situa­
tion calls for supplementary instructions
from the Committee.
Votes for this action: Messrs. Volck­
er, Gramley, Morris, Partee, Rice,
Roos, Schultz, Solomon, Mrs. Teeters,
Messrs. Wallich, Winn, and Balles.
Votes against this action: None. (Mr.
Balles voted as alternate for Mr. Guf­
fey.)

Subsequent to the meeting, Chair­
man Volcker advised the Committee
that its attempt to cut through the in­
stitutional uncertainty affecting the
behavior of and relationships among
the various monetary aggregates and
to describe the broad substance of
its intent with respect to monetary
growth ranges for 1981 apparently
had led to some misunderstanding at
the monetary oversight hearings be­
fore the Senate and House banking
committees on July 22-23. In an at­
tempt to clear up that misunder­
standing, the Chairman recommend­
ed that the Committee indicate its



general intent of looking toward a re­
duction in ranges of growth for
M-1A, M-1B, and M-2 for 1981 on
the order of V 2 percentage point, ab­
stracting from the institutional influ­
ences affecting the behavior of the
aggregates. The Committee voted to
approve the Chairman’s recommen­
dation. It was understood that all of
the ranges would be reassessed in
February 1981, or before, in accord­
ance with usual procedures.
On July 29, 1980, the Committee
agreed that for the period from the fourth
quarter of 1980 to the fourth quarter of
1981, it looked toward a reduction in the
ranges for growth o f M-l A, M - 1B, and
M-2 on the order of V2 percentage point
from the ranges adopted for 1980, ab­
stracting from institutional influences af­
fecting the behavior o f the aggregates.
Votes for this action: Messrs.
Volcker, Gramley, Guffey, Partee,
Rice, Roos, Schultz, Solomon, Wal­
lich, Winn, and Eastburn. Vote
against this action: Mrs. Teeters. (Mr.
Eastburn voted as alternate for Mr.
Morris.)

Mrs. Teeters dissented from this
action because she believed that it
was undesirable to specify precise
numerical ranges for monetary
growth in 1981 so far in advance
while economic activity was still
contracting. In her opinion, mone­
tary goals for 1981 specified at this
time could prove to be inconsistent
with other, as yet undetermined, eco­
nomic policies and with the objec­
tive of reducing inflation while en­
couraging a sustainable recovery in
economic activity. She was espe­
cially concerned about a possible in­
consistency in view of the unusually
great uncertainties generated by the
introduction of NOW accounts na­
tionally and by shifts in the relation­
ship among money, interest rates,
and nominal GNP.

2. Authorization for Dom estic
Open Market Operations
At this meeting the Committee voted
to increase from $3 billion to $4 bil­
lion the limit on changes between

753

754

Federal R ese rv e B ulletin □ S ep tem b er 1980

Committee meetings in System Ac­
count holdings of U.S. government
and federal agency securities speci­
fied in paragraph 1 (a) of the authori­
zation for domestic open market op­
erations, effective immediately, for
the period ending with the close of
business on August 12, 1980.
Votes for this action: Messrs. Volck­
er, Gramley, Morris, Partee, Rice,
Roos, Schultz, Solomon, Mrs. Teeters,
Messrs. Wallich, Winn, and Balles.

Votes against this action: None. (Mr.
Balles voted as alternate for Mr.
Guffey).

This action was taken in light of
projections indicating a need for sub­
stantial reserve-absorbing operations
over the coming intermeeting interval
to counter the effects of significant
reductions in required reserves asso­
ciated with the phaseout of the spe­
cial credit restraint program.

Records of policy actions taken by the Federal Open Market Committee at each meeting, in
the form in which they will appear in the Board’s Annual Report, are made available a few days
after the next regularly scheduled meeting and are later published in the B u l l e t in .



755

Legal D evelopm ents
R e v is io n

of

R e g u l a t io n A

The Board of Governors has revised its rules relating
to the provision of Federal Reserve credit presently
contained in Regulation A —Extensions of Credit by
Federal Reserve Banks. The revisions implement a
provision of The Monetary Control Act of 1980 which
provides that a depository institution that maintains
transaction accounts or nonpersonal time deposits is
entitled to the same discount and borrowing privileges
as banks that are members of the Federal Reserve
System.
Effective September 1 , 1980, Regulation A is revised
as follows:

P art 2 0 1 —E xtensions o f Credit by F ederal
R eserve Banks
Section

201.1
201.2
201.3
201.4
201.5
201.6

Authority, Scope and Purpose
Definitions
Availability and Terms
Advances and Discounts
General Requirements
Federal Intermediate Credit Banks

Section 201.1—Authority, Scope and Purpose.
(a) Authority and Scope. This Part is issued under the
authority of sections 10(a), 10(b), 13, 13a, and 19 o f the
Federal Reserve Act (12 U .S.C . §§ 347a, 347b, 343 et
seq., 347c, 348 et seq., 374, 374a and 461), other provi­
sions of the Federal Reserve Act, and section 7(b) of
the International Banking Act of 1978 (12 U.S.C .
§ 347d) and relates to extensions of credit by Reserve
Banks to depository institutions and others. Except as
may be otherwise provided, this Part shall be appli­
cable to United States branches and agencies of for­
eign banks subject to reserve requirements under Reg­
ulation D (12 CFR Part 204) in the same manner and to
the same extent as member banks.
(b) Purpose. This Part establishes rules under which
Federal Reserve Banks may extend credit to deposi­
tory institutions and others. Extending credit to de­
pository institutions to accommodate commerce, in­
dustry, and agriculture is a principal function of
Reserve Banks. While open market operations are the



primary means of affecting the overall supply of re­
serves, the lending function of the Reserve Banks is an
effective method of supplying reserves to meet the par­
ticular credit needs o f individual depository institu­
tions.
The lending functions of the Federal Reserve Sys­
tem are conducted with due regard to the basic objec­
tives of monetary policy and the maintenance of a
sound and orderly financial system. These basic objec­
tives are promoted by influencing the overall volume
and cost of credit through actions that affect the vol­
ume and cost o f reserves to depository institutions.
Borrowing by individual depository institutions, at a
rate of interest that is adjusted from time to time in
accordance with prevailing economic and money mar­
ket conditions, has a direct impact on the reserve posi­
tions of the borrowing institutions and thus on their
ability to meet the credit needs of their customers.
However, the effects of such borrowing do not remain
localized but have an important bearing on overall
monetary and credit conditions.

Section 201.2—Definitions
For purposes of this Part, the following definitions
shall apply:
(a)( 1) “D epository institution ’ means an institution
that maintains reservable transaction accounts or
nonpersonal time deposits and is:
(A) an insured bank as defined in section 3 of
the Federal Deposit Insurance Act (12 U .S.C .
§ 1813(h)) or a bank that is eligible to apply to be­
come an insured bank under section 5 of such Act
(12 U .S.C . § 1815);
(B) a savings bank or mutual savings bank as de­
fined in section 3 of the Federal Deposit Insurance
Act (12 U .S.C . § 1813(f), (g));
(C) an insured credit union as defined in section
101 of the Federal Credit Union Act (12 U .S.C .
§ 1752(7)) or a credit union that is eligible to apply
to become an insured credit union under section
201 of such Act (12 U .S.C . § 1781);
(D) a member as defined in section 2 of the Feder­
al Home Loan Bank Act (12 U .S.C . § 1422(4)); or
(E) an insured institution as defined in section 401

756

F ederal R eserv e B u lletin □ S ep tem b er 1980

of the National Housing Act (12 U .S.C . § 1724(a))
or an institution that is eligible to apply to become
an insured institution under section 403 of such
Act (12 U .S.C . § 1726).
(2) A financial institution that is not required to
maintain reserves under Part 204 of this Title (Regu­
lation D) because it is organized solely to do busi­
ness with other financial institutions, is owned pri­
marily by the financial institutions with which it
does business, and does not do business with the
general public is not a depository institution.
(b) “ Transaction a cco u n t a n d non person al tim e d e ­
p o s its ” have the meanings specified in Part 204 of this
Title (Regulation D).

Section 201.3—Availability and Terms
(a) Short-term a d ju stm en t credit. Federal Reserve
credit is available on a short-term basis to a depository
institution under such rules as may be prescribed to
assist the institution, to the extent appropriate, in
meeting temporary requirements for funds, or to cush­
ion more persistent outflows of funds pending an or­
derly adjustment of the institution’s assets and liabili­
ties. Such credit generally is available only after
reasonable alternative sources of funds, including
credit from special industry lenders, such as Federal
Home Loan Banks, the National Credit Union Admin­
istration’s Central Liquidity Facility, and corporate
central credit unions have been fully used. Under cer­
tain circumstances, a surcharge may be imposed
above the basic rate of interest normally charged by
Reserve Banks.
(b) E xtended credit.
(1) S eason al cred it. Federal Reserve credit is avail­
able for periods longer than those permitted under
adjustment credit to assist smaller depository insti­
tutions in meeting regular needs for funds arising
from a combination of expected patterns of move­
ment in their deposits and loans. Seasonal credit is
available only if similar assistance is not available
from other special industry lenders. Seasonal credit
will ordinarily be limited to the amount by which the
depository institution’s seasonal needs exceed cer­
tain percentages, established by the Board of Gover­
nors, of the institution’s average total deposits in the
preceding calendar year. Such credit will be avail­
able if the Reserve Bank is satisfied that the institu­
tion’s qualifying need for funds is seasonal and will
persist for at least four weeks. Need for credit at
depository institutions will also be given consid­
eration when institutions are experiencing unusual



seasonal demands for credit in a period of liquidity
strain. To the extent practicable, a depository insti­
tution should arrange in advance for seasonal credit
for the full period during which such credit is ex­
pected to be required. Under certain circumstances,
a surcharge may be imposed above the basic rate of
interest normally charged by Reserve Banks.
(2) O ther ex ten d e d credit. Federal Reserve credit is
available to depository institutions under extended
credit arrangements where similar assistance is not
reasonably available from other sources, including
special industry lenders. Such credit may be pro­
vided where there are exceptional circumstances or
practices involving only a particular depository in­
stitution. Exceptional circumstances would include
situations where an individual depository institution
is experiencing financial strains arising from particu­
lar circumstances or practices affecting that institu­
tion-including sustained deposit drains, impaired
access to money market funds, or sudden deteriora­
tion in loan repayment performance. Extended cred­
it may also be provided to accommodate the needs
of depository institutions, including those with long­
er term asset portfolios, that may be experiencing
difficulties adjusting to changing money market con­
ditions over a longer period, particularly at times of
deposit disintermediation. A special rate or rates
above the basic discount rate established by the Re­
serve Banks, subject to review and determination by
the Board o f Governors, may be applied to other ex­
tended credit.
(c) E m ergen cy cred it f o r others. In unusual and ex­
igent circumstances, a Reserve Bank may, after con­
sultation with the Board, advance credit to individ­
uals, partnerships, and corporations that are not
depository institutions if, in the judgment of the Re­
serve Bank, credit is not available from other sources
and failure to obtain such credit would adversely affect
the economy. The rate applicable to such credit will be
above the highest rate for advances in effect for de­
pository institutions. Where the collateral used to se­
cure such credit consists of assets other than obliga­
tions of, or fully guaranteed as to principal and interest
by, the United States or an agency thereof, an affirma­
tive vote of five or more Board members is required
before credit may be extended.

Section 201.4—Advances and Discounts
(a) Reserve Banks may lend to depository institutions
either through advances secured by acceptable collat­
eral or through the discount of certain types of paper.
Credit extended by the Federal Reserve generally

Legal Developm ents

takes the form of an advance.
(b) Reserve Banks may make advances to any deposi­
tory institution if secured to the satisfaction of the Re­
serve Bank. Satisfactory collateral generally includes
United States government and Federal agency secu­
rities, and, if of acceptable quality, mortgage notes
covering 1-4 family residences, State and local gov­
ernment securities, and business, consumer and other
customer notes.
(c) If a Reserve Bank concludes that a depository in­
stitution will be better accommodated by the discount
of paper than by an advance, it may discount any pa­
per endorsed by the depository institution that meets
the requirements specified in the Federal Reserve Act.

Section 201.5—General Requirements
(a) C redit f o r c a p ita l p u rp o se s. Federal Reserve credit
is not a substitute for capital.

757

Any paper so discounted shall have a period remaining
to maturity at the time of discount of not more than
nine months.

A m endm ents

to

R e g u l a t io n D

The Board o f Governors has revised its Regulation D,
Reserves of Member Banks, to establish a reserve re­
quirement ratio of 12 per cent on savings accounts sub­
ject to negotiable order of withdrawal (NOW ac­
counts) maintained by member banks located outside
of N ew England, N ew York, and N ew Jersey. This is a
technical revision to Regulation D to implement the
Board’s revised Regulation D announced on August
15, 1980.
Effective August 28, 1980, section 204.5 o f Regula­
tion D is amended as follows:
1. Section 204.5(a)(l)(ii) is revised to read as follows:

(b) C om pliance with law an d regulation. All credit ex­
tended under this Part shall comply with applicable re­
quirements of law and of this Part. Each Reserve Bank
( 1) shall keep itself informed of the general character
and amount of the loans and investments of depository
institutions with a view to ascertaining whether undue
use is being made of credit for the speculative carrying
o f or trading in securities, real estate, or commodities,
or for any other purpose inconsistent with the mainte­
nance of sound credit conditions, and (2 ) shall consid­
er such information in determining whether to extend
credit.
(c) Inform ation. A Reserve Bank shall require such
information as it believes appropriate or desirable to
insure that paper tendered as collateral for advances or
for discount is acceptable and that Ihe credit provided
is used in a manner consistent with this Part.
(d) In direct credit f o r oth ers. Except with the per­
mission of the Board of Governors, no depository in­
stitution shall act as the medium or agent of another
depository institution in receiving Federal Reserve
credit.

Section 201.6—Federal Intermediate Credit
Banks

Section 204.5—Reserve Requirements
(a) Reserve percentages.***
(ii) 1 per cent o f its time deposits outstanding on
or issued after October 16, 1975, that have an ini­
tial maturity of four years or more; 2 1/2 per cent
of its time deposits outstanding on or issued after
December 25, 1975, that have an initial maturity
of 180 days or more but less than four years; 3 per
cent of its time deposits up to $5 million, out­
standing on or issued after October 16, 1975, that
have an initial maturity of less than 180 days, plus
6 per cent of such deposits in excess o f $5 million;
for a member bank located outside o f the States of
Massachusetts, N ew Hampshire, Connecticut,
Maine, N ew Jersey, N ew York, Rhode Island,
and Vermont, 12 per cent of its savings accounts
subject to negotiable orders o f withdrawal: P ro­
vided, h o w ever, that in no event shall the reserves
required on its aggregate amount o f time and sav­
ings deposits be less than 3 per cent or more than
10 per cent.
2. Section 204.5(a)(2)(ii) is revised to read as follows:

Section 204.5—Reserve Requirements
A Reserve Bank may discount for any Federal Inter­
mediate Credit bank (1) agricultural paper, or (2) notes
payable to and bearing the endorsement of the Federal
Intermediate Credit Bank that cover loans or advances
made under subsections (a) and (b) o f § 2.3 of the Farm
Credit Act of 1971 (12 U .S.C . § 2074) and that are se­
cured by paper eligible for discount by Reserve Banks.



(a) Reserve percentages.***
(ii) 1 per cent o f its time deposits outstanding on
or issued after October 16, 1975, that have an ini­
tial maturity of four years or more; 2 1/2 per cent
o f its time deposits outstanding on or issued after

758

F ederal R ese rv e B u lletin □ S ep tem b er 1980

December 25, 1975, that have an initial maturity
of 180 days or more but less than four years; 3 per
cent of its time deposits up to $5 million, out­
standing on or issued after October 16, 1975, that
have an initial maturity of less than 180 days, plus
6 per cent of such deposits in excess of $5 million;
for a member bank located outside of the States of
Massachusetts, N ew Hampshire, Connecticut,
Maine, N ew Jersey, N ew York, Rhode Island,
and Vermont, 12 per cent of its savings accounts
subject to negotiable orders of withdrawal: P ro ­
vided, h o w e v e r , that in no event shall the reserves
required on its aggregate amount of time and sav­
ings deposits be less than 3 per cent or more than
10 per cent.

R e v is io n o f R e g u l a t io n D

The Board of Governors has adopted a revised Regula­
tion D —Reserve Requirements of Depository Institu­
tions—to implement the reserve requirement provisions
of the Monetary Control Act of 1980. The revised re­
serve requirement regulation will also apply to Edge
Act and Agreement Corporations and United States
branches and agencies of foreign banks.
Effective Novem ber 13, 1980, Regulation D is re­
vised to read as follows:

P a rt 204—R eserve R equ irem ents o f D ep o sito ry
Institutions
Section

204.1
204.2
204.3
204.4
204.5
204.6
204.7
204.8

Authority, Purpose and Scope
Definitions
Computation and Maintenance
Transitional Adjustments
Emergency Reserve Requirement
Supplemental Reserve Requirement
Penalties
Reserve Ratios

Section 204.1—Authority, Purpose and Scope
(a) A u th ority. This Part is issued under the authority
o f section 19 (12 U .S.C . §§ 461 et seq.) and other pro­
visions of the Federal Reserve Act and of section 7 of
the International Banking Act of 1978 (12 U .S.C .
§3105).
(b) P u rpose. This Part relates to reserves that deposi­
tory institutions are required to maintain for the pur­
pose of facilitating the implementation of monetary
policy by the Federal Reserve System.



(c) S c o p e .
( 1) The following depository institutions are re­
quired to maintain reserves in accordance with this
Part:
(i) Any insured bank as defined in section 3 of
the Federal Deposit Insurance Act (12 U .S.C .
§ 1813(h)) or any bank that is eligible to apply to
become an insured bank under section 5 of such
Act (12 U .S.C . § 1815);
(ii) Any savings bank or mutual savings bank as
defined in section 3 of the Federal Deposit Insur­
ance Act (12 U .S.C . § 1813(f), (g));
(iii) Any insured credit union as defined in section
101 of the Federal Credit Union Act (12 U .S.C .
§ 1752(7)) or any credit union that is eligible to ap­
ply to become an insured credit union under sec­
tion 201 of such Act (12 U .S.C . § 1781);
(iv) Any member as defined in section 2 of the
Federal Home Loan Bank Act (12 U .S.C .
§ 1422(4)); and
(v) Any insured institution as defined in section
401 of the National Housing Act (12 U .S.C .
§ 1724(a)) or any institution which is eligible to ap­
ply to become an insured institution under section
403 of such Act (12 U .S.C . § 1726).
(2) Except as may be otherwise provided by the
Board, a foreign bank’s branch or agency located in
the United States is required to comply with the pro­
visions of this Part in the same manner and to the
same extent as if the branch or agency were a mem­
ber bank, if its parent foreign bank (i) has total
worldwide consolidated bank assets in excess of $1
billion; or (ii) is controlled by a foreign company or
by a group of foreign companies that own or control
foreign banks that in the aggregate have total world­
wide consolidated bank assets in excess of $1 bil­
lion. In addition, any other foreign bank’s branch
located in the United States that is eligible to apply
to become an insured bank under section 5 of the
Federal Deposit Insurance Act (12 U .S.C . § 1815) is
required to maintain reserves in accordance with
this Part as a nonmember depository institution.
(3) Except as may be otherwise provided by the
Board, an Edge Corporation (12 U .S.C . § 611 et
seq.) or an Agreement Corporation (1 2 U .S .C .§ 6 0 1
et seq.) is required to comply with the provisions of
this Part in the same manner and to the same extent
as a member bank.
(4) This Part does not apply to any financial institu­
tion that (i) is organized solely to do business with
other financial institutions; (ii) is owned primarily by
the financial institutions with which it does business;
and (iii) does not do business with the general pub­
lic.
(5) The provisions of this Part do not apply to any

Legal Developm ents

deposit that is payable only at an office located out­
side the United States.

Section 204.2—Definitions
For purposes of this Part, the following definitions ap­
ply unless otherwise specified:
(a)( 1) “D eposit” means:
(i) the unpaid balance of money or its equivalent
received or held by a depository institution in the
usual course of business and for which it has given
or is obligated to give credit, either conditionally
or unconditionally, to an account, including inter­
est credited, or which is evidenced by an in­
strument on which the depository institution is
primarily liable;
(ii) money received or held by a depository insti­
tution, or the credit given for money or its equiva­
lent received or held by the depository institution
in the usual course of business for a special or spe­
cific purpose, regardless of the legal relationships
established thereby, including escrow funds,
funds held as security for securities loaned by the
depository institution, funds deposited as advance
payment on subscriptions to United States gov­
ernment securities, and funds held to meet its ac­
ceptances;
(iii) an outstanding draft, cashier’s check, money
order, or officer’s check drawn on the depository
institution and issued in the usual course of busi­
ness for any purpose, including payment for serv­
ices, dividends, or purchases;
(iv) any due bill or other liability or undertaking
on the part of a depository institution to sell or
deliver securities to, or purchase securities for the
account of, any customer (including another de­
pository institution), involving either the receipt
of funds by the depository institution, regardless
o f the use of the proceeds, or a debit to an account
of the customer before the securities are deliv­
ered. A deposit arises thereafter, if after three
business days from the date of issuance of the ob­
ligation, the depository institution does not deliv­
er the securities purchased or does not fully col­
lateralize its obligation with securities similar to
the securities purchased. A security is similar if it
is o f the same type and if it is of comparable matu­
rity to that purchased by the customer;
(v) any liability o f a depository institution’s affili­
ate that is not a depository institution, on any
promissory note, acknowledgment of advance,
due bill, or similar obligation (written or oral),
with a maturity of less than four years, to the ex­
tent that the proceeds are used to supply or to



759

maintain the availability o f funds (other than capi­
tal) to the depository institution, except any such
obligation that, had it been issued directly by the
depository institution, would not constitute a de­
posit. If an obligation o f an affiliate o f a depository
institution is regarded as a deposit and is used to
purchase assets from the depository institution,
the maturity o f the deposit is determined by the
shorter of the maturity o f the obligation issued or
the remaining maturity o f the assets purchased. If
the proceeds from an affiliate’s obligation are
placed in the depository institution in the form o f
a reservable deposit, no reserves need be main­
tained against the obligation of the affiliate since
reserves are required to be maintained against the
deposit issued by the depository institution. H ow ­
ever, the maturity o f the deposit issued to the af­
filiate shall be the shorter of the maturity o f the
affiliate’s obligation or the maturity o f the deposit;
(vi) credit balances;
(vii) any liability o f a depository institution on
any promissory note, acknowledgment o f ad­
vance, bankers’ acceptance, or similar obligation
(written or oral), including mortgage-backed
bonds, that is issued or undertaken by a deposi­
tory institution as a means o f obtaining funds, ex ­
cept any such obligation that:
(A) is issued or undertaken and held for the ac­
count of:
( 1) an office located in the United States o f
another depository institution, foreign bank,
Edge or Agreement Corporation, or N ew
York Investment (Article XII) Company;
(2) the United States government or an agen­
cy thereof; or
(3) the Export-Import Bank o f the United
States, Minbanc Capital Corporation, the
Government Development Bank for Puerto
Rico, a Federal Reserve Bank, a Federal
Home Loan Bank, or the National Credit
Union Administration Central Liquidity Fa­
cility:
(B) arises from a transfer o f direct obligations
of, or obligations that are fully guaranteed as to
principal and interest by, the United States gov­
ernment or any agency thereof that the deposi­
tory institution is obligated to repurchase;
(C) is not insured by a Federal agency, is sub­
ordinated to the claims of depositors, has a
weighted average maturity o f seven years or
more, is not subject to Federal interest rate lim­
itations, and is issued by a depository institu­
tion with the approval of, or under the rules and
regulations of, its primary Federal supervisor;
(D) arises from a borrowing by a depository in­

760

F ederal R ese rv e B u lletin □ S ep tem b er 1980

stitution from a dealer in securities, for one
business day, of proceeds of a transfer of de­
posit credit in a Federal Reserve Bank or other
immediately available funds, (commonly re­
ferred to as “ Federal funds” ), received by such
dealer on the date o f the loan in connection with
clearance of securities transactions; or
(E) arises from the creation, discount and sub­
sequent sale by a depository institution o f its
bankers’ acceptance of the type described in
paragraph 7 of section 13 of the Federal Re­
serve Act (12 U .S.C . § 372).
(2) “ Deposit” does not include:
(i) trust funds received or held by the depository
institution that it keeps properly segregated as
trust funds and apart from its general assets or
which it deposits in another institution to the cred­
it of itself as trustee or other fiduciary. If trust
funds are deposited with the commercial depart­
ment of the depository institution or otherwise
mingled with its general assets, a deposit liability
of the institution is created;
(ii) an obligation that represents a conditional,
contingent or endorser’s liability;
(ii) obligations, the proceeds of which are not
used by the depository institution for purposes of
making loans, investments, or maintaining liquid
assets such as cash or “ due from” depository in­
stitutions or other similar purposes. An obligation
issued for the purpose of raising funds to purchase
business premises, equipment, supplies, or simi­
lar assets is not a deposit;
(iv) accounts payable;
(v) hypothecated “ deposits” created by pay­
ments on an installment loan where (A) the
amounts received are not used immediately to re­
duce the unpaid balance due on the loan until the
sum of the payments equals the entire amount of
loan principal and interest; (B) and where such
amounts are irrevocably assigned to the deposi­
tory institution and cannot be reached by the bor­
rower or creditors of the borrower;
(vi) dealer reserve and differential accounts that
arise from the financing of dealer installment ac­
counts receivable, and which provide that the
dealer may not have access to the funds in the ac­
count until the installment loans are repaid, as
long as the depository institution is not actually
(as distinguished from contingently) obligated to
make credit or funds available to the dealer;
(vii) a dividend declared by a depository institu­
tion for the period intervening between the date of
the declaration of the dividend and the date on
which it is paid;



(viii) an obligation representing a “ pass through
account,” as defined in this section;
(ix) an obligation arising from the retention by the
depository institution o f no more than a 10 per
cent interest in a pool o f conventional 1-4 family
mortgages that are sold to third parties;
(x) an obligation issued to a State or municipal
housing authority under a loan-to-lender program
involving the issuance o f tax exempt bonds and
the subsequent lending o f the proceeds to the de­
pository institution for housing finance purposes;
(xi) shares o f a credit union held by the National
Credit Union Administration or the National
Credit Union Administration Central Liquidity
Facility under a statutorily authorized assitance
program;
(xii) any liability o f a United States branch or
agency of a foreign bank to another United States
branch or agency o f the same foreign bank, or the
liability of the United States office o f an Edge Cor­
poration to another United States office o f the
same Edge Corporation.
(b)( 1) “ Demand d ep o sit’’ means a deposit that is pay­
able on demand, or a deposit issued with an original
maturity or required notice period of less than 14
days, or a deposit representing funds for which the
depository institution does not reserve the right to
require at least 14 days’ written notice o f an in­
tended withdrawal. The term includes all deposits
other than time and savings deposits. Demand de­
posits may be in the form o f (i) checking accounts;
(ii) certified, cashier’s and officer’s checks (includ­
ing checks issued by the depository institution in
payment of dividends); (iii) traveler’s checks and
money orders that are primary obligations o f the is­
suing institution; (iv) checks or drafts drawn by, or
on behalf of, a non-United States office o f a deposi­
tory institution on an account maintained at any o f
the institution’s United States offices; (v) letters o f
credit sold for cash or its equivalent; (vi) withheld
taxes, withheld insurance and other withheld funds;
(vii) time deposits that have matured or time depos­
its upon which the required notice o f withdrawal pe­
riod has expired and have not been renewed (either
by action of the depositor or automatically under the
terms o f the deposit agreement); and (viii) an obliga­
tion to pay on demand or within 14 days a check (or
other instrument, device, or arrangement for the
transfer of funds) drawn on the depository institu­
tion, where the account of the institution’s customer
already has been debited. The term does not include
an obligation that is a time deposit under section
204.2(c)(l)(ii).
(2) A “ demand deposit” does not include checks or

Legal Developm ents

drafts drawn by the depository institution on the
Federal Reserve or on another depository institution.
(c)( 1) “ Time d ep o sit” means (i) a deposit that the
depositor does not have a right to withdraw for a
period of 14 days or more after the date of deposit.
“ Time deposit” includes funds:
(A) payable on a specified date not less than 14
days after the date of deposit;
(B) payable at the expiration of a specified time
not less than 14 days after the date of deposit;
(C) payable upon written notice which actually
is required to be given by the depositor not less
than 14 days before the date of repayment;
(D) such as “ Christmas club” accounts and
“ vacation club” accounts, that are deposited
under written contracts providing that no with­
drawal shall be made until a certain number of
periodic deposits have been made during a peri­
od of not less than three months even though
some of the deposits may be made within 14
days from the end of the period; or
(E) that constitute a “ savings deposit” which
is not regarded as a “ transaction account.”
(ii) borrowings, regardless of maturity, represent­
ed by a promissory note, an acknowledgement o f
advance, or similar obligation described in section
204.2(a)(l)(vii) that is issued to any office located
outside the United States of another depository
institution or Edge or Agreement Corporation or­
ganized under the laws of the United States, to
any office located outside the United States o f a
foreign bank, or to institutions whose time depos­
its are exempt from interest rate limitations under
section 217.3(g) of Regulation Q (12 CFR Part
217.3(g)).
(2) A time deposit may be represented by a transfer­
able or nontransferable, or a negotiable or non­
negotiable, certificate, instrument, passbook, state­
ment, or otherwise. A “ time deposit” includes
share certificates and certificates of indebtedness is­
sued by credit unions, and certificate accounts and
notice accounts issued by savings and loan associa­
tions.

(d)( 1) “Savings d ep o sit” means a deposit or account
with respect to which the depositor is not required
by the deposit contract but may at any time be
required by the depository institution to give writ­
ten notice of an intended withdrawal not less than
14 days before withdrawal is made, and that is not
payable on a specified date or at the expiration of
a specified time after the date of deposit. A depos­
it may continue to be classified as a savings depos­



761

it even if the depository institution exercises its
right to require notice of withdrawal. A “ savings
deposit” includes a regular share account at a
credit union and a regular account at a savings and
loan association.
(2) For depository institutions subject to 12 CFR
Part 217 or 12 CFR Part 329, funds deposited to
the credit of, or in which any beneficial interest is
held by, a corporation, association, partnership or
other organization operated for profit may be clas­
sified as a savings deposit if such funds do not ex­
ceed $150,000 per depositor at the depository in­
stitution.
(3) “ Savings deposit” does not include funds de­
posited to the credit of the depository institution’s
own trust department where the funds involved are
utilized to cover checks or drafts. Such funds are
“ transaction accounts.”

(e) “ Transaction account” means a deposit or ac­
count on which the depositor or account holder is per­
mitted to make withdrawals by negotiable or transfer­
able instrument, payment orders o f withdrawal,
telephone transfers, or other similar device for the pur­
pose o f making payments or transfers to third persons
or others. “ Transaction account” includes:
( 1) demand deposits;
(2 ) deposits or accounts subject to check, draft, ne­
gotiable order of withdrawal, share draft, or other
similar item;
(3) savings deposits or accounts in which with­
drawals may be made automatically through pay­
ment to the depository institution itself or through
transfer of credit to a demand deposit or other ac­
count in order to cover checks or drafts drawn upon
the institution or to maintain a specified balance in,
or to make periodic transfers to, such accounts (au­
tomatic transfer accounts);
(4) deposits or accounts in which payments may be
made to third parties by means of an automated tell­
er machine, remote service unit or other electronic
device; and
(5) deposits or accounts in which payments may be
made to third parties by means of a debit card;
(6 ) deposits or accounts under the terms of which,
or which by practice of the depository institution,
the depositor is permitted or authorized to make
more than three withdrawals per month for purposes
of transferring funds to another account or for mak­
ing a payment to a third party by means o f pre­
authorized or telephone agreement, order or instruc­
tion. An account that permits or authorizes more
than three such withdrawals in a calendar month is a
“ transaction account” whether or not more than

762

F ederal R ese rv e B u lletin □ S ep tem b er 1980

three such withdrawals actually are made in a calen­
dar month. A “ preauthorized transfer” includes any
arrangement by the depository institution to pay a
third party from the account of a depositor upon
written or oral instruction (including an order re­
ceived through an automated clearing house
(ACH)), or any arrangement by a depository institu­
tion to pay a third party from the account of the de­
positor at a predetermined time or on a fixed sched­
ule. An account is not a “ transaction account” by
virtue o f an arrangement that permits withdrawals
for the purpose of repaying loans and associated ex ­
penses at the same depository institution (as origina­
tor or servicer).
(f)( 1) “ N on person al tim e d e p o sit" means:
(i) a time deposit, including a savings deposit,
that is not a transaction account, representing
funds in which any beneficial interest is held by a
depositor which is not a natural person;
(ii) a time deposit, including a savings deposit
that is not a transaction account, that represents
funds deposited to the credit of a depositor that is
not a natural person, other than a deposit to the
credit of a trustee or other fiduciary if the entire
beneficial interest in the deposit is held by one or
more natural persons;
(iii) a time deposit that is transferable, except a
time deposit originally issued before October 1,
1980, to and held by one or more natural persons,
including a deposit to the credit of a trustee or oth­
er fiduciary if the entire beneficial interest in the
deposit is held by one or more natural persons;
(iv) a time deposit that is transferable, issued on
or after October 1, 1980, to and held by one or
more natural persons, including a deposit to the
credit of a trustee or other fiduciary if the entire
beneficial interest is held by one or more natural
persons. A time deposit is transferable unless it
contains a specific statement on the certificate, in­
strument, passbook, statement or other form rep­
resenting the account that is not transferable. A
time deposit that contains a specific statement
that it is not transferable is not regarded as trans­
ferable even if the following transactions can be
effected: a pledge as collateral for a loan; a trans­
action that occurs due to circumstances arising
from death, incompetency, marriage, divorce, at­
tachment or otherwise by operation of law or a
transfer on the books or records of the institution;
and
(v) a time deposit represented by a promissory
note, an acknowledgment of advance, or a similar
obligation described in section 204.2(a)(l)(vii) that
is issued to any office located outside the United



States o f another depository institution or Edge or
Agreement Corporation organized under the laws
o f the United States, to any office located outside
the United States o f a foreign bank, or to institu­
tions whose time deposits are exempt from inter­
est rate limitations under section 217.3(g) o f Regu­
lation Q (12 CFR 217.3(g)).
(2) “ Nonpersonal time deposit” does not include
nontransferable time deposits to the credit o f or in
which the entire beneficial interest is held by an indi­
vidual pursuant to an Individual Retirement A c­
count or Keogh (H. R. 10) Plan under 26 U .S.C .
(I.R.C. 1954) §§ 408, 401.
(g) “ N a tu ra l p e r s o n ” means an individual or a sole
proprietorship. The term does not mean a corporation
owned by an individual, a partnership or other associa­
tion.
(h) “ E urocurrency lia b ilitie s ’* means the sum o f the
following:
(1) T ransactions with re la te d offices o u tsid e the
U n ited S ta te s.

(i) In the case o f a depository institution or an
Edge or Agreement Corporation organized under
the laws o f the United States,
(A) positive net balances due to its non-United
States offices from its United States offices, and
(B) assets (including participations) held by its
non-United States offices or by non-United
States offices of an affiliated Edge or Agreement
Corporation that were acquired from its United
States offices.
(ii) In the case of a United States branch and
agency o f a foreign bank,
(A) positive net balances due to its foreign
bank (including offices thereof located outside
the United States) after deducting an amount
equal to 8 per cent o f the following: the United
States branch’s or agency’s total assets less the
sum o f United States coin and currency, cash
items in the process o f collection and unposted
debits, balances due from domestic banks and
other foreign banks, balances due from foreign
central banks, and net balances due from its for­
eign bank and the foreign bank’s United States
and non-United States offices; however, the
amount that may be deducted may not exceed
net balances due to the foreign bank (including
offices thereof located outside the United
States), and
(B) assets (including participations) held by its
foreign bank (including offices thereof located
outside the United States) or by its parent hold­

Legal D evelopm ents

ing company that were acquired from the
United States branch or agency (other than as­
sets required to be sold by Federal or State su­
pervisory authorities) or from an affiliated Edge
or Agreement Corporation.
(2) Foreign branch credit extended to United S tates
residents. Credit outstanding from the non-United
States office o f a depository institution organized
under United States law to United States residents
(other than assets acquired and net balances due
from its United States offices), except credit extend­
ed (i) in the aggregate amount of $ 100,000 or less to
any United States resident, (ii) by a non-United
States office that at no time during the computation
period had credit outstanding to United States resi­
dents exceeding $1 million, or (iii) to an institution
that will be maintaining reserves on such credit pur­
suant to this Part. Credit extended to a foreign
branch, office, subsidiary, affiliate or other foreign
establishment (“ foreign affiliate” ) controlled by one
or more domestic corporations is regarded as credit
extended to a United States resident unless the pro­
ceeds will be used in its foreign business or that o f
other foreign affiliates of the controlling domestic
corporation(s). This subparagraph does not apply to
United States branches and agencies of foreign
banks.
(i)(l) “ Cash item in process o f collection’' means:
(i) checks in the process o f collection, drawn on a
bank or other depository institution that are pay­
able immediately upon presentation in the United
States, including checks forwarded to a Federal
Reserve Bank in process o f collection and checks
on hand that will be presented for payment or for­
warded for collection on the following business
day;
(ii) government checks drawn on the Treasury o f
the United States that are in the process of collec­
tion; and
(iii) such other items in the process of collection,
that are payable immediately upon presentation in
the United States and that are customarily cleared
or collected by depository institutions as cash
items, including:
(A) drafts payable through another depository
institution;
(B) redeemed bonds and coupons;
(C) food coupons and certificates;
(D) postal and other money orders, and travel­
er’s checks;
(E) amounts credited to deposit accounts in
connection with automated payment arrange­
ments where such credits are made one busi­
ness day prior to the scheduled payment date to



763

insure that funds are available on the payment
date;
(F) commodity or bill o f lading drafts payable
immediately upon presentation in the United
States;
(G) returned items and unposted debits; and
(H) broker security drafts.
(2) “ Cash item in process o f collection” does not
include items handled as noncash collections and
credit card sales slips and drafts.
(j) “N et transaction accoun ts” means the total
amount o f a depository institution’s transaction ac­
counts less the deductions allowed under the provi­
sions o f § 204.3.
(k)(l) “ Vault cash ” means United States currency
and coin owned and held by a depository institution
that may, at any time, be used to satisfy depositors’
claims.
(2) “ Vault cash” includes United States currency
and coin in transit to a Federal Reserve Bank or a
correspondent depository institution for which the
reporting depository institution has not yet received
credit, and United States currency and coin in tran­
sit from a Federal Reserve Bank or a correspondent
depository institution when the reporting depository
institution’s account at the Federal Reserve or cor­
respondent bank has been charged for such ship­
ment.
(3) Silver and gold coin and other currency and coin
whose numismatic or bullion value is substantially
in excess of face value is not vault cash for purposes
of this Part.
(1) “Pass through account,y means a balance main­
tained by a depository institution that is not a member
bank, by a U .S. branch or agency of a foreign bank,
or by an Edge or Agreement Corporation,
( 1) in an institution that maintains required reserve
balances at a Federal Reserve Bank,
(2) in a Federal Home Loan Bank,
(3) in the National Credit Union Administration
Central Liquidity Facility, or
(4) in an institution that has been authorized by the
Board to pass through required reserve balances if
the institution, Federal Home Loan Bank, or N a­
tional Credit Union Administration Central Liquidi­
ty Facility maintains the funds in the form of a bal­
ance in a Federal Reserve Bank o f which it is a
member or at which it maintains an account in ac­
cordance with rules and regulations o f the Board.
(m)(l) “ D epository institution” means:
(i) any insured bank as defined in section 3 of the
Federal Deposit Insurance Act (12 U .S.C .

764

F ederal R ese rv e B u lletin □ S ep tem b er 1980

§ 1813(h)) or any bank that is eligible to apply to
become an insured bank under section 5 of such
Act (12 U .S.C . § 1815);
(ii) any savings bank or mutual savings bank as
defined in section 3 of the Federal Deposit Insur­
ance Act (12 U .S.C . § 1813(f), (g));
(iii) any insured credit union as defined in section
101 of the Federal Credit Union Act (12 U .S.C .
§ 1752(7)) or any credit union that is eligible to ap­
ply to becom e an insured credit union under sec­
tion 201 of such Act (12 U .S.C . § 1781);
(iv) any member as defined in section 2 of the
Federal Home Loan Bank Act (12 U .S.C .
§ 1422(4)); and
(v) any insured institution as defined in section
401 of the National Housing Act (12 U .S.C .
§ 1724(a)) or any institution which is eligible to ap­
ply to becom e an insured institution under section
403 of such Act (12 U .S.C . § 1726).
(2) “ Depository institution” does not include inter­
national organizations such as the World Bank, the
Inter-American Development Bank, and the Asian
Development bank.
(n) “ M em ber b a n k ” means a depository institution
that is a member of the Federal Reserve System.
(o) “ F oreign b a n k ” means any bank or other similar
institution organized under the laws of any country
other than the United States or organized under the
laws of Puerto Rico, Guam, American Samoa, the Vir­
gin Islands, or other territory or possession of the
United States.
(p) “ D e novo d e p o sito ry in stitu tio n ” means a deposi­
tory institution that was not engaged in business on
July 1, 1979, and is not the successor by merger or
consolidation to a depository institution that was en­
gaged in business prior to the date of merger or consol­
idation.
(q )*'Affiliate” includes any corporation, association,
or other organization:
(1) Of which a depository institution, directly or in­
directly, owns or controls either a majority of the
voting shares or more than 50 per cent of the num­
bers of shares voted for the election of its directors,
trustees, or other persons exercising similar func­
tions at the preceding election, or controls in any
manner the election of a majority of its directors,
trustees, or other persons exercising similar func­
tions;
(2) Of which control is held, directly or indirectly,
through stock ownership or in any other manner, by
the shareholders of a depository institution who own



or control either a majority of the shares of such de­
pository institution or more than 50 per cent o f the
number of shares voted for the election of directors
o f such depository institution at the preceding elec­
tion, or by trustees for the benefit of the share­
holders of any such depository institution;
(3) Of which a majority of its directors, trustees, or
other persons exercising similar functions are direc­
tors of any one depository institution; or
(4) Which owns or controls, directly or indirectly,
either a majority of the shares of capital stock of a
depository institution or more than 50 per cent o f the
number of shares voted for the election of directors,
trustees or other persons exercising similar func­
tions of a depository institution at the preceding
election, or controls in any manner the election of a
majority of the directors, trustees, or other persons
exercising similar functions of a depository institu­
tion, or for the benefit of whose shareholders or
members all or substantially all the capital stock of a
depository institution is held by trustees.
(r) “ U n ited S ta te s ” means the States of the United
States and the District of Columbia.
(s) “ U n ited S ta te s re s id e n t” means
( 1) any individual residing (at the time of the transac­
tion) in the United States;
( 2 ) any corporation, partnership, association or oth­
er entity organized in the United States (“ domestic
corporation” ); and
(3) any branch or office located in the United States
o f any entity that is not organized in the United
States.

Section 2 0 4 .3 —C om putation and M aintenance
(a) M ain ten an ce o f requ ired re se rv e s. A depository
institution, a U. S. branch or agency of a foreign bank,
and an Edge or Agreement Corporation shall maintain
reserves against its deposits and Eurocurrency liabili­
ties in accordance with the procedures prescribed in
this section and section 204.4 and the ratios prescribed
in section 204.8. Penalties shall be assessed for defi­
ciencies in required reserves in accordance with the
provisions of section 204.7. Every institution holding
transaction accounts or nonpersonal time deposits
shall file a report of deposits each week with the Fed­
eral Reserve Band of its District (see section 204.3(d)
for the special rule for depository institutions with to­
tal deposits of less than $5 million) and any other re­
ports that the Board may require by rule, regulation or
order. For purposes of this Part, the obligations of a
majority owned (50% or more) U. S. subsidiary (ex­
cept an Edge or Agreement Corporation) of a deposi­

Legal D evelopm ents

tory institution shall be regarded as obligations of the
parent depository institution.
(1) United S tates branches and agencies fo r foreign
banks.
(i) A foreign bank’s United States branches and
agencies operating within the same State and
within the same Federal Reserve District shall
prepare and file a report of deposits on an aggre­
gated basis.
(ii) United States branches and agencies of the
same foreign bank shall, if possible, assign the low
reserve tranche on transaction accounts (§
204.8(a)) to only one office or to a group of offices
filing a single aggregated report of deposits. If the
low reserve tranche cannot be fully utilized by a
single office or by a group of offices filing a single
report of deposits, the unused portion of the
tranche may be assigned to other offices of the
same foreign bank until the amount the tranche or
net transaction accounts is exhausted. The foreign
bank shall determine this assignment subject to
the restriction that if a portion of the tranche is
assigned to an office in a particular State, any
unused portion must first be assigned to other of­
fices located within the same State and within the
same Federal Reserve District, that is, the other
offices included on the same aggregated report of
deposits. The designation of office(s) to which the
low reserve tranche is assigned may be changed at
the beginning of a calendar year.
(2) Edge and Agreem ent Corporations.
(i) An Edge or Agreement corporation’s offices
operating within the same State and within the
same Federal Reserve District shall prepare and
file a report of deposits on an aggregated basis.
(ii) An Edge or Agreement Corporation shall, if
possible, assign the low reserve tranche on trans­
action accounts (§ 204.8(a)) to only one office or to
a group of offices filing a single aggregated report
of deposits. If the low reserve tranche cannot be
fully utilized by a single office or by a group of
offices filing a single report of deposits, the unused
portion of the tranche may be assigned to other
offices of the same institution until the amount of
the tranche or net transaction amounts is exhaust­
ed. An Edge or Agreement Corporation shall de­
termine this assignment subject to the restriction
that if a portion of the tranche is assigned to an
office in a particular State, any unused portion
must first be assigned to other offices located
within the same State and within the same Federal
Reserve District, that is, to other offices included
on the same aggregated report of deposits. The



765

designation o f office(s) to which the low reserve
tranche is assigned may be changed at the begin­
ning of a calendar year.
(b) Form o f reserves. Reserves shall be held in the
form of
(i) vault cash,
(ii) a balance maintained directly with the Federal
Reserve Bank in the District in which it is located,
or
(iii) a pass through account. Reserves held in the
form of a pass through account shall be consid­
ered to be a balance maintained with the Federal
Reserve.
(c) Computation o f required reserves. Required re­
serves are computed on the basis of the daily average
deposit balances during a seven-day period ending
each Wednesday (the “ computation period” ). Re­
serve requirements are computed by applying the ra­
tios prescribed in section 204.8 to the classes of depos­
its and Eurocurrency liabilities of the institution. In
determining the reserve balance that is required to be
maintained with the Federal Reserve, the average dai­
ly vault cash held during the computation period is de­
ducted from the amount of the institution’s required
reserves. The reserve balance that is required to be
maintained with the Federal Reserve shall be main­
tained during a corresponding seven-day period (the
“ maintenance period” ) which begins on the second
Thursday following the end of a given computation pe­
riod.
(d) Special rule fo r depository institutions that have
total deposits o f less than $5 million.
(1) A depository institution with total deposits of
less than $5 million shall file a report o f deposits
once each calendar quarter for a seven-day compu­
tation period that begins on the third Thursday of a
given month during the calendar quarter. Each Re­
serve Bank shall divide the depository institutions in
its District that qualify under this paragraph into
three substantially equal groups and assign each
group a different month to report during each calen­
dar quarter.
(2) Required reserves are computed on the basis of
the depository institution’s daily average deposit
balances during the seven-day computation period.
In determining the reserve balance that a depository
institution is required to maintain with the Federal
Reserve, the average daily vault cash held during
the computation period is deducted from the amount
of the institution’s required reserves. The reserve
balance that is required to be maintained with the
Federal Reserve shall be maintained during a corre­

766

F ed eral R ese rv e B u lletin □ S ep tem b er 1980

sponding period that begins on the second Thursday
following the end of the institution’s computation
period and ends on the first Wednesday after the
close of the institution’s next computation period.
(3) A depository institution that has less than $5 mil­
lion in total deposits as of December 31, 1979, shall
qualify under this paragraph until it reports total de­
posits of $5 million or more for two consecutive cal­
endar quarters.
(4) A depository institution that qualifies under this
paragraph may elect at the beginning of a calendar
year to report deposits and maintain reserves on a
weekly basis.
(5) This paragraph shall not apply to an Edge or
Agreement Corporation or a United States branch
or agency of a foreign bank.
(e) C om putation o f tran saction a cco u n ts. Overdrafts
in demand deposit or other transaction accounts are
not to be treated as negative demand deposits or nega­
tive transaction accounts and shall not be netted since
overdrafts are properly reflected on an institution’s
books as assets. However, where a customer main­
tains multiple transaction accounts with a depository
institution, overdrafts in one account pursuant to a
bona fide cash management arrangement are permitted
to be netted against balances in other related transac­
tion accounts for reserve requirement purposes.
(f) D edu ction s a llo w ed in com pu tin g re se rve s.
(1) In determining the reserve balance required un­
der this Part, the amount of cash items in process of
collection and balances subject to immediate with­
drawal due from other depository institutions lo­
cated in the United States (including such amounts
due from United States branches and agencies of
foreign banks and Edge and Agreement Corpora­
tions) may be deducted from the amount of gross
transaction accounts. The amount that may be de­
ducted may not exceed the amount of gross transac­
tion accounts. However, if a depository institution
maintains any transaction accounts that are first au­
thorized under Federal law after April 1, 1980, it
may deduct from those balances cash items in pro­
cess of collection and balances subject to immediate
withdrawal due from other depository institutions
located in the United States only to the extent of the
proportion that such newly authorized transaction
accounts are of the institution’s total transaction ac­
counts. The remaining cash items in process of col­
lection and balances subject to immediate with­
drawal due from other depository institutions
located in the United States shall be deducted from
the institution’s remaining transaction accounts.
(2) United States branches and agencies of a foreign



bank may not deduct balances due from another
United States branch or agency of the same foreign
bank, and United States branch or agency of an
Edge or Agreement Corporation may not deduct
balances due from another United States office of
the same Edge Corporation.
(3) Balances “ due from other depository institu­
tions” do not include balances due from Federal Re­
serve Banks, pass through accounts, or balances
(payable in dollars or otherwise) due from banking
offices located outside the United States. An institu­
tion exercising fiduciary powers may not include in
“ balances due from other depository institutions”
amounts of trust funds deposited with other banks
and due to it as a trustee or other fiduciary.
(g) A va ila b ility o f cash item s as r e s e r v e s . Cash items
forwarded to a Federal Reserve Bank for collection
and credit shall not be counted as part of the reserve
balance to be carried with the Federal Reserve until
the expiration o f the time specified in the appropriate
time schedule established under Regulation J, “ Col­
lection o f Checks and Other Items and Transfers of
Funds” (12 CFR Part 210). If a depository institution
draws against items before that time, the charge will be
made to its reserve account if the balance is sufficient
to pay it; any resulting impairment of reserve balances
will be subject to penalties provided by law and by this
Part. However, the Federal Reserve Bank may, at its
discretion, refuse to permit the withdrawal or other
use o f credit given in a reserve account for any time for
which the Federal Reserve bank has not received pay­
ment in actually and finally collected funds.
(h) C arryover o f d e fic ie n c ie s . Any excess or defi­
ciency in a required reserve balance for any mainte­
nance period that does not exceed 2 per cent of institu­
tion’s required reserves shall be carried forward to the
next maintenance period. Any carryover not offset
during the next period may not be carried forward to
additional periods.
(i) P ass-th rou gh rules.
(1) P rocedu re
(i) A nonmember depository institution required
to maintain reserve balances (“ respondent” ) may
select only one institution to pass through its re­
quired reserves. Eligible institutions through
which respondent required reserve balances may
be passed (“ correspondents” ) are Federal Home
Loan Banks, the National Credit Union Adminis­
tration Central Liquidity Facility, and depository
institutions that maintain required reserve balanc­
es at a Federal Reserve office. In addition, the

Legal D evelopm ents

Board reserves the right to permit other institu­
tions, on a case-by-case basis, to serve as pass­
through correspondents. The correspondent cho­
sen must subsequently pass through the required
reserve balances of its respondents directly to the
appropriate Federal Reserve office. The corre­
spondent placing funds with the Federal Reserve
on behalf of respondents will be responsible for
reserve account maintenance as described in subparagraphs (3) and (4) below.
(ii) Respondent depository institutions or pass­
through correspondents may institute, terminate,
or change pass-through arrangements for the
maintenance of required reserve balances by pro­
viding all documentation required for the estab­
lishment of the new arrangement and/or termi­
nation of the existing arrangement to the Federal
Reserve Bank in whose territory the respondent is
located. The time period required for such a
change to be effected shall be specified by each
Reserve Bank in its operating circular.
(iii) U .S. branches and agencies of foreign banks
and Edge and Agreement Corporations may (a)
act as pass-through correspondents for any non­
member institution required to maintain reserves
or (b) pass their own required reserve balances
through correspondents. In accordance with the
provision set forth in subparagraph (3) below, the
U .S. branches and agencies of a foreign bank or
offices of an Edge and Agreement Corporation fil­
ing a single aggregated report of deposits may des­
ignate any one of the other U .S . offices of the
same institution to serve as a pass-through corre­
spondent for all the offices filing such a single ag­
gregated report of deposits.
(2) Reports
(i) Every depository institution that maintains
transaction accounts or nonpersonal time deposits
is required to file its report of deposits (or any oth­
er required form or statement) directly with the
Federal Reserve Bank of its District, regardless of
the manner in which it chooses to maintain
required reserve balances.
(ii) The Federal Reserve Bank receiving such re­
ports shall notify the reporting depository institu­
tion of its reserve requirements. Where a pass­
through arrangement exists, the Reserve Bank
will also notify the correspondent passing re­
spondent reserve balances through to the Federal
Reserve of its respondent’s required reserve
balances.
(iii) The Federal Reserve will not hold a corre­
spondent responsible for guaranteeing the accura­
cy of the reports of deposits submitted by its re­



767

spondents to their local Federal Reserve Banks.
(3) Account M aintenance
(i) A correspondent that passes through required
reserve balances of respondents whose main of­
fices are located in the same Federal Reserve ter­
ritory in which the main office o f the correspon­
dent is located shall have the option of
maintaining such required reserve balances in one
o f two ways: (a) A correspondent may maintain
such balances, along with the correspondent’s
own required reserve balances, in a single com­
mingled account at the Federal Reserve Bank of­
fice in whose territory the correspondent’s main
office is located, or (b) A correspondent may
maintain its own required reserve balance in an
account with the Federal Reserve Bank office in
whose territory its main office is located. The cor­
respondent, in addition, would maintain in a sepa­
rate commingled account the required reserve bal­
ances passed through for respondents whose main
offices are located in the same Federal Reserve
territory as that o f the main office o f the corre­
spondent.
(ii) A correspondent that passes through required
reserve balances of respondents whose main of­
fices are located outside the Federal Reserve terri­
tory in which the main office of the correspondent
is located shall maintain such required reserve
balances in a separate commingled account at
each Federal Reserve office in whose territory the
main offices o f such respondents are located.
(iii) A Reserve Bank may, at its discretion, re­
quire a pass-through correspondent to consolidate
in a single account the reserve balances of all o f its
respondents whose main offices are located in any
territory o f that Federal Reserve District.
(4) Responsibilities o f Parties
(i) Each individual depository institution is re­
sponsible for maintaining its required reserve
balance with the Federal Reserve Bank either di­
rectly or through a pass-through correspondent.
(ii) A pass-through correspondent shall be re­
sponsible for assuring the maintenance o f the ap­
propriate aggregate level of its respondents’ re­
quired reserve balances. A Reserve Bank will
compare the total reserve balance required to be
maintained in each reserve account with the total
actual reserve balance held in such reserve ac­
count for purposes of determining required re­
serve deficiencies, imposing or waiving penalties
for deficiencies in required reserves, and for other
reserve maintenance purposes. A penalty for a
deficiency in the aggregate level o f the required
reserve balance will be imposed by the Reserve

768

F ederal R ese rv e B u lletin □ S ep tem b er 1980

Bank on the correspondent maintaining the ac­
count.
(iii) Each correspondent is required to maintain
detailed records for each of its respondents in a
manner that permits Reserve Banks to determine
whether the respondent has provided a sufficient
required reserve balance to the correspondent. A
correspondent passing through a respondent’s re­
serve balance shall maintain records and make
such reports as the Federal Reserve System re­
quires in order to insure the correspondent’s com­
pliance with its responsibilities for the mainte­
nance of a respondent’s reserve balance. Such
records shall be available to the Federal Reserve
Banks as required.
(iv) The Federal Reserve Bank may terminate
any pass-through relationship in which the corre­
spondent is deficient in its recordkeeping or other
responsibilities.
(v) Interest paid on supplemental reserves (if such
reserves are required under section 204.6 of this
Part) held by respondent(s) will be credited to the
commingled reserve account(s) maintained by the
correspondent.
(5) Services
(i) A depository institution maintaining its re­
serve balances on a pass-through basis may obtain
available Federal Reserve System services direct­
ly from its local Federal Reserve office. For this
purpose, the pass-through account in which a re­
spondent’s required reserve balance is maintained
may be used by the respondent for the posting of
entries arising from transactions involving the use
of such Federal Reserve services, if the posting of
these types of transactions has been authorized by
the correspondent and the Federal Reserve. For
example, access to the wire transfer, securities
transfer, and settlement services that involve
charges to the commingled reserve account at the
Reserve Bank will require authorization from the
correspondent and the Reserve Bank for the type
of transaction that is occurring.
(ii) In addition, in obtaining Federal Reserve
services, respondents maintaining their required
reserves on a pass-through basis may choose to
have entries arising from the use of Federal Re­
serve services posted to: (a) with the prior autho­
rization of all parties concerned, the reserve ac­
count maintained by any institution at a Federal
Reserve Bank, or (b) an account maintained for
clearing purposes at a Federal Reserve Bank by
the respondent.
(iii) Accounts at Federal Reserve Banks con­
sisting only of respondents’ reserve balances that



are passed through by a correspondent to a Feder­
al Reserve Bank may be used only for transac­
tions of respondents. A correspondent will not be
permitted to use such pass-through accounts for
purposes other than serving its respondents’
needs.
(iv) A correspondent may not apply for Federal
Reserve credit on behalf of a respondent. Rather,
a respondent should apply directly to its Federal
Reserve Bank for credit. Any Federal Reserve
credit obtained by a respondent may be credited,
at the respondent’s option and with the approval
of the parties concerned, to the reserve account in
which its required reserves are maintained by a
correspondent, to a clearing account maintained
by the respondent, or to any account to which the
respondent is authorized to post entries arising
from the use o f Federal Reserve services.

Section 204.4 —Transitional A djustm ents
The following transitional adjustments for computing
Federal reserve requirements shall apply to all mem­
ber and nonmember depository institutions, except for
reserves imposed under sections 204.5 and 204.6.
(a) Nonm em bers. Except as provided below, the re­
quired reserves o f a depository institution that was en­
gaged in business on July 1, 1979, but was not a mem­
ber o f the the Federal Reserve System on or after that
date shall be determined by reducing the amount o f
required reserves computed under section 204.3 in ac­
cordance with the following schedule:

Reserve maintenance periods
occurring between
November 13, 1980 to September 2, 1981
September 3, 1981 to September 1, 1982
September 2, 1982 to August 31,1983
September 1, 1983 to September 5, 1984
September 6, 1984to September 4, 1985
September 5, 1985 to September 3, 1986
September 4, 1986 to September 2, 1987
September 3, 1987forward

Percentage that
computed reserves
will be reduced
87.5
75
62.5
50
37.5
25
12.5

0

However, an institution shall not reduce the amount of
required reserves on any category of deposits or ac­
counts that are first authorized under Federal law in
any State after April 1, 1980.
(b) Members and form er members. The required re­
serves o f any depository institution that is a member
bank on September 1, 1980, or was a member bank on
or after July 1, 1979 and withdrew from membership
before March 31, 1980, or withdraws from member­

Legal Developm ents

ship on or after March 31, 1980, shall be determined as
follows:
(1) A depository institution whose required re­
serves are higher using the reserve ratios in effect
during a given computation period (§ 204.8(a)) than
its required reserves using the reserve ratios in ef­
fect on August 31, 1980 (§ 204.8(b)) (without regard
to required reserves on any category of deposits or
accounts that are first authorized under Federal law
in any State after April 1, 1980):
(i) shall maintain the full amount of required re­
serves on any category o f deposits or accounts
that are first authorized under Federal law in any
State after April 1, 1980; and
(ii) shall reduce the amount of its required re­
serves on all other deposits computed under sec­
tion 204.3 by an amount determined by multi­
plying the amount by which required reserves
computed under section 204.3 exceeds the
amount of required reserves computed using the
reserve ratios that were in effect on August 31,
1980 (§ 204.8(b)), times the appropriate percent­
age specified below in accordance with the follow ­
ing schedule:

Reserve maintenance periods
occurring between
November 13, 1980 to September 2, 1981
September 3, 1981 to September 1, 1982
September 2, 1982 to August 31, 1983
September 1, 1983 forward

Percentage applied to
difference to compute
amount to be subtracted
75
50
25

November 13, 1980-September 2, 1981
September 3, 1981-March 3, 1982
March 4-September 1, 1982
September 2, 1982-March 2, 1983
March 3-August 31, 1983
September 1, 1983-February 29, 1984
March 1, 1984 forward

Percentage applied to
difference to compute
amount to be added
75
62.5
50
37.5
25
12.5

0

(c) Certain nonmembers and branches and
agencies offoreign banks. The required reserves o f
a nonmember depository institution that was not en­
gaged in business on or before July 1, 1979, but com ­
menced business between July 2, 1979, and Septem­
ber 1, 1980, and any United States branch or agency
o f a foreign bank with total worldwide consolidated
bank assets in excess o f $1 billion shall be deter­
mined by reducing the amount o f its required re­
serves computed under section 204.3 in accordance
with the following schedules:

Reserve maintenance periods
occurring between
November 13, 1980-February 11, 1981
February 12-May 13, 1981
May 14-August 12, 1981
August 13-November 11, 1981
November 12, 1981-February 10, 1982
February 11-May 12, 1982
May 13-August 11, 1982
August 12, 1982 forward

Percentage that computed
reserves will be reduced
87.5
75.0
62.5
50.0
37.5
25.0
12.5

0

0

(2) A depository institution whose required re­
serves are lower using the reserve ratios in effect
during a given computation period (§ 204.8(a)) than
its required reserves computed using the reserve ra­
tios in effect on August 31,1980 (§ 204.8(b)) (without
regard to required reserves on any category of de­
posits or accounts that are first authorized under
Federal law in any State after April 1, 1980):
(i) shall maintain the full amount o f required re­
serves on any cateogry of deposits or accounts
that are first authorized under Federal law in any
State after April 1, 1980; and
(ii) shall increase the amount of its required re­
serves on all other deposits computed under sec­
tion 204.3 by an amount determined by multi­
plying the amount by which required reserves
computed using the reserve ratios that were in ef­
fect on August 31, 1980 (§ 204.8(b)), exceeds the
amount of required reserves computed under sec­
tion 204.3, times the appropriate percentage spec­
ified below in accordance with the following
schedule:



Reserve maintenance periods
occurring between

769

However, an institution shall not reduce the amount of
required reserves on any category o f deposits or ac­
counts that are first authorized under Federal law in
any State after April 1, 1980. An additional United
States branch or agency of a foreign bank operating a
branch or agency in the United States as of September
1, 1980, shall be entitled only to the remaining phase-in
available to the existing U .S. branch or agency.
(d) N ew members. The required reserves of non­
member depository instituion that was engaged in
business but was not a member bank during the period
between July 1, 1979 and September 1, 1980, inclusive,
and which becomes a member o f the Federal Reserve
System after September 1, 1980, shall be determined
under paragraph (a) or (c), as applicable, as if it had
remained a nonmember and adding to this amount an
amount determined by multiplying the difference be­
tween its required reserves computed using the ratios
specified in § 204.8(a) and its required reserves com ­
puted as if it had remained a nonmember times the per­
centage specified below in accordance wit the follow ­
ing schedule:

770

F ederal R ese rv e B u lletin □ S ep tem b er 1980

Maintenance periods occurring
During successive quarters after
becoming a member bank

1
2

3
4
5

6
7
8and succeeding

Percentage applied to
difference to compute
amount to be added
12.5
25.0
37.5
50.0
62.5
75.0
87.5

100.0

(e) D e n ovo institutions. The required reserves o f any
depository institution that was not engaged in business
on September 1, 1980, shall be computed under sec­
tion 204.3 in accordance with the following schedule:

Maintenance periods occurring
during successive quarters after
entering into business

1
2
3
4
5

6
7
8 and succeeding

Percentage of reserve
requirement to be maintained
40
45
50
55
65
75
85

100

This paragraph shall also apply to a United States
branch or agency of a foreign bank if such branch or
agency is the foreign bank’s first office in the United
States. Additional branches or agencies of such a for­
eign bank shall be entitled only to the remaining phasein available to the initial office.
(f) C ertain non m em bers ch a rtere d under law s o f H a ­
waii. Any State-chartered depository institution that
was engaged in business on August 1, 1978, which was
not a member of the Federal Reserve System on that
date, and whose principal office was located in Hawaii
on and after that date shall not maintain reserves
against its deposits imposed under this Part until Janu­
ary 2, 1986. On or after January 2, 1986, the required
reserves of such a depository institution shall be deter­
mined by reducing the amount of required reserves
computed under section 204.3 in accordance with the
following schedule:

Maintenance periods
occurring between
January 2 to December 31, 1986
January 1, 1987 to January 6, 1988
January 7, 1988 to January 4, 1989
January 5, 1989 to January 3, 1990
January 4, 1990 to January 2, 1991
January 3, 1991 to January 1, 1992
January 2, 1992 to January 6, 1993
January 7, 1993 forward



Percentage that computed
reserves will be reduced
87.5
75
62.5
50
37.5
25
12.5

0

(g) M erg ers an d co n so lid a tio n s.
The following rules concerning transitional adjust­
ments apply to mergers and consolidations o f deposi­
tory institutions:
(1) N o n m em b ers. Where the surviving institution o f
a merger or consolidation between nonmember de­
pository institutions that were engaged in business
on July 1, 1979, and were not members o f the Feder­
al Reserve System on or after that date is a non­
member institution, it shall compute its transitional
adjustment o f required reserves under paragraph
(a), except that the amount o f required reserves
shall be reduced by an amount determined by multi­
plying the amount by which the required reserves
during the computation period immediately preced­
ing the date o f the merger (computed as if the institu­
tions had merged) exceeds the sum o f the actual re­
quired reserves o f each bank during the same
computation period times the appropriate percent­
age as specified in the following schedule:

Reserve maintenance periods
occurring during quarterly
periods following merger

2
3
4
5

6
8and succeeding

7

Percentage applied to
difference to compute
amount to be subtracted
87.5
75.0
62.5
50.0
37.5
25.0
12.5

0

(2) M em b er with su rvivin g nonm em ber. Where the
surviving institution o f a merger or consolidation be­
tween a nonmember bank and a bank that was a
member bank on or after July 1, 1979, is a non­
member bank, it shall apply the transitional rules for
member banks in paragraphs (b) or (d), as appli­
cable, on the proportion o f its deposits attributable
to the absorbed member bank. This proportion will
be the ratio that daily average deposits o f the ab­
sorbed member bank were to the daily average de­
posits o f the combined banks during the reserve
computation period immediately preceding the date
of the merger. The bank will compute and maintain
reserves against the remaining proportion of depos­
its applying the transitional rules applicable to non­
member depository institutions in paragraphs (a), (c)
or (e), as applicable. A ratio o f vault cash also will
be computed and applied.

(3) D e n ovo with su rvivin g nonm em ber. Where the
surviving institution o f a merger or consolidation be­
tween a depository institution that was engaged in

Legal D evelopm ents

business on July 1, 1979, and was not a member o f
the Federal Reserve System on or after that date,
and a de novo depository institution is a nonmember
depository institution, it shall compute and maintain
reserves applying the transitional rules for de novo
depository institutions in paragraphs (c) or (e), as
applicable, on a proportion o f its deposits attribut­
able to the absorbed de novo bank. This proportion
will be the ratio that daily average deposits o f the
absorbed de novo institution were to the daily aver­
age deposits o f the combined institutions during the
reserve computation period immediately preceding
the date of the merger. The institution will compute
and maintain reserves against the remaining propor­
tion o f its deposits by applying the transitional rules
applicable to nonmember depository institutions in
paragraph (a). A ratio of vault cash also will be com ­
puted and applied.
(4) N o n m em b er with su rvivin g m em ber. Where the
surviving institution of a merger or consolidation be­
tween a member bank and a nonmember bank is a
member bank, it shall apply the transitional rules un­
der paragraphs (a), (c) or (e), as applicable, only on
the amount of deposits of the nonmember bank out­
standing on a daily average basis during the compu­
tation period immediately preceding the date o f the
merger. Reserves will be computed and maintained
against the balance o f the deposits o f the surviving
member bank under paragraphs (b), (d) or (e), as ap­
plicable.
(5) M em bers. Where a merger or consolidation in­
volves member banks, required reserves shall be
computed and maintained applying the transitional
rules in paragraph (b), except that the amount of re­
serves which shall be maintained shall be reduced
by an amount determined by multiplying the amount
by which the required reserves during the computa­
tion period immediately preceding the date o f the
merger (computed as if the banks had merged) ex­
ceeds the sum of the actual required reserves o f
each bank during the same computation period
times the appropriate percentage as specified in the
following schedule:

Reserve maintenance periods
occurring during quarterly
periods following merger

1
2

3
4
5

6
7
8and succeeding



Percentage applied to
difference to compute
amount to be subtracted
87.5
75.0
62.5
50.0
37.5
25.0
12.5

0

111

(6 ) D e novo with su rvivin g m em ber. Where the sur­
viving institution o f a merger or consolidation be­
tween a bank that was a member bank at any time
between July 1, 1979, and September 1, 1980, or that
was engaged in business on July 1, 1979 and became
a member after September 1 , 1980, and a de novo
depository institution is a member bank, it shall
compute and maintain reserves by applying para­
graph (e) only to the amount o f deposits o f the de
novo institution outstanding on a daily average basis
during the computation period immediately preced­
ing the date of the merger. Reserves will be comput­
ed and maintained against the remaining deposits o f
the surviving member bank under paragraphs (b) or
(d), as applicable.
(7) D e n ovos. Where a merger involves de novo de­
pository institutions, required reserves shall be
computed and maintained in accordance with sec­
tion 204.3, except that the amount o f reserves which
shall be maintained shall be reduced by an amount
determined by multiplying the amount by which the
required reserves during the computation period im­
mediately preceding the date o f the merger (comput­
ed as if the depository institutions had merged) ex ­
ceeds the sum o f the actual required reserves of
each depository institution during the same compu­
tation period, times the appropriate percentage as
specified in the following schedule:

Maintenance periods occurring
during quarterly periods
following merger

Percentage applied
compute amount to
be subtracted

1
2

3
4
5

6
7
8and succeeding

87.5
75.0
62.5
50.0
37.5
25.0
12.5

0

Section 204.5—Emergency Reserve
Requirement
(a) Finding by B oard. The Board may impose, after
consulting with the appropriate committees of Con­
gress, additional reserve requirements on depository
institutions at any ratio on any liability upon a finding
by at least five members o f the Board that extraordi­
nary circumstances require such action.
(b) Term. Any action taken under this section shall be
valid for a period not exceeding 180 days, and may be
extended for further periods of up to 180 days each by

772

F ederal R e se r v e B ulletin □ S ep tem b er 1980

affirmative action of at least five members of the Board
for each extension.
(c) R eports to C on g ress. The Board shall transmit
promptly to Congress a report of any exercise of its
authority under this paragraph and the reasons for the
exercise of authority.
(d) Reserx’e requ irem en ts. At present, there are no
emergency reserve requirements imposed under this
section.

Section 204.6—Supplemental Reserve
Requirement
(a) Finding by B oard. Upon the affirmative vote of at
least five members of the Board and after consultation
with the Board of Directors of the Federal Deposit In­
surance Corporation, the Federal Home Loan Bank
Board, and the National Credit Union Administration
Board, the Board may impose a supplemental reserve
requirement on every depository institution of not
more than 4 per cent of its total transaction accounts.
A supplemental reserve requirement may be imposed
if:
( 1) the sole purpose of the requirement is to in­
crease the amount of reserves maintained to a level
essential for the conduct of monetary policy ;
(2 ) the requirement is not imposed for the purpose
of reducing the cost burdens resulting from the im­
position of basic reserve requirements;
(3) such requirement is not imposed for the purpose
of increasing the amount of balances needed for
clearing purposes; and
(4) on the date on which supplemental reserve re­
quirements are imposed, the total amount of basic
reserve requirements is not less than the amount of
reserves that would be required on transaction ac­
counts and nonpersonal time deposits under the ini­
tial reserve ratios established by the Monetary Con­
trol Act of 1980 (Pub. L. 96-221) in effect on
September 1, 1980.
(b) Term.
(1) If a supplemental reserve requirement has been
imposed on for a period of one year or more, the
Board shall review and determine the need for con­
tinued maintenance of supplemental reserves and
shall transmit annual reports to the Congress regard­
ing the need for continuing such requirement.
(2) Any supplemental reserve requirement shall ter­
minate at the close of the first 90-day period after the
requirement is imposed during which the average



amount of supplemental reserves required are less
than the amount of reserves which would be re­
quired if the ratios in effect on September 1 , 1980,
were applied.
(c) Earnings P a rticip a tio n A cco u n t. A depository in­
stitution’s supplemental reserve requirement shall be
maintained by the Federal Reserve Banks in an Earn­
ings Participation Account. Such balances shall re­
ceive earnings to be paid by the Federal Reserve
Banks during each calendar quarter at a rate not to
exceed the rate earned on the securities portfolio of
the Federal Reserve System during the previous calen­
dar quarter. Additional rules and regulations may be
prescribed by the Board concerning the payment of
earnings on Earnings Participation Accounts by Fed­
eral Reserve Banks.
(d) R ep o rt to C o n g ress. The Board shall transmit
promptly to the Congress a report stating the basis for
exercising its authority to require a supplemental re­
serve under this section.
(e) R e serve requ irem en ts. At present, there are no
supplemental reserve requirements imposed under this
section.

Section 204.7—Penalties
(a) P en a lties f o r D eficien cies.
(1) A sse ssm e n t o f P en a lties. Deficiencies in a de­
pository institution’s required reserve balance, after
application of the 2 per cent carryover provided in
section 204.3(f) are subject to penalties. Federal Re­
serve Banks are authorized to assess penalties for
deficiencies in required reserves at a rate of 2 per
cent per year above the lowest rate in effect for bor­
rowings from the Federal Reserve Bank on the first
day of the calendar month in which the deficiencies
occurred. Penalties shall be assessed on the basis of
daily average deficiencies during each computation
period. Reserve Banks may, as an alternative to
levying monetary penalties, after consideration of
the circumstances involved, permit a depository in­
stitution to eliminate deficiencies in its required re­
serve balance by maintaining additional reserves
during subsequent reserve maintenance periods.
(2) W aivers.
(i) Reserve Banks may waive the penalty for re­
serve deficiencies except when the deficiency
arises out of a depository institution’s gross negli­
gence or conduct that is inconsistent with the
principles and purposes of reserve requirements.

Legal Developm ents

Each Reserve Bank has adopted guidelines that
provide for waivers of small penalties. The guide­
lines also provide for waiving the penalty once
during a two-year period for any deficiency that
does not exceed a certain percentage of the de­
pository institution’s required reserves. Decisions
by Reserve Banks to waive penalties in other situ­
ations are based on an evaluation of the circum­
stances in each individual case and the depository
institution’s reserve maintenance record. If a de­
pository institution has demonstrated a lack of
due regard for the proper maintenance of required
reserves, the Reserve Bank may decline to exer­
cise the waiver privilege and assess all penalties
regardless of amount or reason for the deficiency,
(ii) In individual cases, where a Federal supervi­
sory authority waives a liquidity requirement, or
waives the penalty for failing to satisfy a liquidity
requirement, the Reserve Bank in the District
where the involved depository institution is lo­
cated shall waive the reserve requirement im­
posed under this Part for such depository institu­
tion when requested by the Federal supervisory
authority involved.
(b) P en alties f o r V iolation s. Violations of this Part
may be subject to assessm ent of civil money penalties
by the Board under authority of section 19(1) of the
Federal Reserve Act (12 U .S.C . § 505) as implemented
in 12 CFR Part 263. In addition, the Board and any
other Federal financial institution supervisory author­
ity may enforce this Part with respect to depository
institutions subject to their jurisdiction under authority
conferred by law to undertake cease and desist pro­
ceedings.

Section 204.8—Reserve Requirement Ratios
(a) R eserve p e rc e n ta g e s. The following reserve ratios
are prescribed for all depository institutions, Edge and
Agreement Corporations and United States branches
and agencies of foreign banks:

Category
N e t tra n sa c tio n a cc o u n ts

$0-$25 million
Over $25 million

Reserve requirement
3%of amount
$750,000 plus 12%of amount
over $25 million

N o n p e rso n a l tim e d e p o s its

By original maturity (or no­
tice period)
less than 4 years
4 years or more
Eurocurrency liabilities



3%

0%
3%

773

(b) R eserve ratios in effect during last com pu tation
p e rio d p rio r to S e p tem b e r 1, 1980.

Category

Reserve requirement
N et D e m a n d D epo sits

D e p o sit tra n ch e:

million
Over $2 million-$10 million

$0-$2

Over $10 million-$100 million
Over $100 million-$400 million
Over $400 million

7%
$140,000 + 9'/2%of amount
over $2 million
$900,000 + 1VU% of amount
over $10 million
$11,475,000 + 123/4%of
amount over $100 mil­
lion
$49,725,000 + 16*/4% of
amount over $400 mil­
lion

S avings d epo sits
Tim e d e p o s its
(subject to 3%

minimum speci­
fied by law)

3%

By initial maturity:
Less than 180days
$0-5 million
Over $5 million
180 days to 4 years
4 years or more
Accounts authorized pursuant
to Section 303 of Public
Law 9 6 -2 2 1 offered by
member banks located
in States outside Con­
necticut, Maine, Massa­
chusetts, New Hamp­
shire, New Jersey, New
York, Rhode Island and
Vermont
Club accounts

3%

6%
Vh%
1%

12%

3%

For purposes o f computing the reserves under this
Part, that would have been required using the reserve
ratios that were in effect on August 31, 1980, the re­
serve ratio on time deposits of a member bank shall be
the average time deposit ratio of the member bank dur­
ing the 14-day period ending August 6 , 1980, except
that the reserve ratio on time deposits o f a nonmember
bank that was a member bank on or after July 1, 1979,
but which became a nonmember bank before March
31, 1980, may be the average time deposit ratio of the
nonmember during the 14-day period ending August
27, 1980.

A m e n d m e n t s to R e g u l a t io n T

The Board of Governors has amended its Regulation
T, Credit by Brokers and Dealers. This amendment
will permit brokers and dealers to extend credit on
fully paid for mutual fund shares deposited in a general
account. The present rule permits broker-dealers to
extend and maintain credit only on securities regis­
tered on a national securities exchange, or included on
the Board’s List o f OTC Margin Stock and on certain

774

F ed eral R e se r v e B ulletin □ S ep tem b er 1980

non-convertible debt securities which are traded in the
over-the-counter market.
Effective Novem ber 3, 1980, section 220.2(f) of Reg­
ulation T is revised as follows:

but not deny or revoke, exemptions to states
from the requirements o f the act or regulation,
where state law imposes substantially similar
requirements and there is adequate provision for
enforcement.

Section 220.2—Definitions
%

jfc

jjC

I n t e r p r e t a t io n
(f) The term “ margin security” means any registered
security, OTC margin stock, OTC margin bond, or any
security issued by an open-end investment company
or unit investment trust registered under section 8 of
the Investment Company Act of 1940 (15 U .S.C . 80a8).

A m e n d m e n t s t o R u l e s R e g a r d in g
D e l e g a t io n o f A u t h o r it y
The Board of Governors has amended its Rules Re­
garding Delegation of Authority, to delegate to the Di­
rector of the Division of Consumer and Community
Affairs the authority to determine whether provisions
of the Electronic Fund Transfer Act and Regulation E
preempt provisions of state laws that are inconsistent
with federal law and are not more protective of the
consumer. In addition, the rule delegates to the Direc­
tor the authority to grant, but not to deny or revoke,
exemptions to states if their statutes contain provi­
sions substantially similar to the federal statute and
there is adequate provision for enforcement. Because
of the complex and time-consuming nature of these de­
cisions, the Board finds that this delegation of author­
ity is appropriate.
Effective August 8, 1980, section 265.2 is amended
to read as follows:

Section 265.2—Specific Functions Delegated to
Board Employees and to Federal Reserve
Banks.

(h) The Director of the Division of Consumer and
Community Affairs (or, in the Director’s absence, the
Acting Director) is authorized:

(4)(i) Pursuant to Section 919 of the Electronic
Fund Transfer Act (15 U .S.C . 1693, et seq.) and
the Board’s Regulation E, 12 CFR Part 205.12,
to determine whether the act and regulation
preempt state laws that are inconsistent with the
act and regulation.
(ii) Pursuant to Section 920 of the Electronic
Fund Transfer Act and Regulation E, to grant,



of

R e g u l a t io n Y

The Board of Governors has issued an interpretation
of its Regulation Y, Bank Holding Companies and
Change in Bank Control. This interpretation provides
that a bank holding company may form a subidiary to
perform services for its subsidiaries that the bank
holding company could perform directly through a di­
vision or department.
Effective August 11, 1980, Regulation Y is amended
by adding a new section 225.141 to read as follows:

Section 225.141—Operations Subsidiaries of a
Bank Holding Company
In orders approving the retention by a bank holding
company of a 4(c)(8) subsidiary, the Board has stated
that it would permit, without any specific regulatory
approval, the formation of a wholly-owned subsidiary
of an approved 4(c)(8) company to engage in activities
that such a company could itself engage in directly
through a division or department. (Northwestern Fi­
nancial Corporation, 65 F e d e r a l R e s e r v e B u l l e t i n
566 (1979).) Section 4(a)(2) of the Act provides gener­
ally that a bank holding company may engage directly
in the business of managing and controlling banks and
permissible nonbank activities, and in furnishing serv­
ices directly to its subsidiaries. Even though section 4
of the Act generally prohobits the acquisition of shares
of nonbanking organizations, the Board does not be­
lieve that such prohibition should apply to the forma­
tion by a holding company o f a wholly-owned subsidi­
ary to engage in activities that it could engage in
directly. Accordingly, as a general matter, the Board
will permit without any regulatory approval a bank
holding company to form a wholly-owned subsidiary
to perform servicing activities for subsidiaries that the
holding company itself could perform directly or
through a department or a division under section
4(a)(2) of the Act. The Board believes that permitting
this type of subsidiary is not inconsistent with the non­
banking prohibitions of section 4 of the Act, and is
consistent with the authority in section 4(c)(1)(C) of
the Act, which permits a bank holding company, with­
out regulatory approval, to form a subsidiary to per­
form services for its banking subsidiaries. The Board
notes, however, that a servicing subsidiary established
by a bank holding company in reliance on this inter­

L ega l D evelopm ents

pretation will be an affiliate of the subsidiary bank of
the holding company for the purposes of the lending
restrictions of section 23A of the Federal Reserve Act.
(12 U.S.C. 371c)
The Board has issued this interpretation pursuant to
its statutory authority under sections 4(a)(2) and 5(b)
of the Bank Holding Company Act, 12 U.S.C.
§§ 1843(a)(2) and 1844(b).

B a n k H o l d in g C o m p a n y a n d B a n k M e r g e r
O r d e r s I ssu e d b y th e B o a r d o f G o v e r n o r s

O rders U nder Section 3 o f Bank H olding
C om pany A ct

Capital Bancshares, Inc.,
Dallas, Texas
O rder D enying F orm ation o f a Bank H oldin g
C om pan y

Capital Bancshares, Inc., Dallas, Texas, has applied
for the Board’s approval under section 3(a) (1) of the
Bank Holding Company Act (12 U.S.C. § 1842(a) (1))
of formation of a bank holding company by acquiring
100 percent (less directors’ qualifying shares) of the
voting shares of the Capital Bank “ Bank” ), Dallas,
Texas.
Notice of the application, affording an opportunity
for interested persons to submit comments and views,
has been given in accordance with section 3(b) of the
Act. The time for filing comments and views has ex­
pired, 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, a nonoperating corporation with no sub­
sidiaries, was organized for the purpose of becoming a
bank holding company by acquiring Bank, which holds
deposits of $36.6 million.1 Upon acquisition of Bank,
Applicant would control the 238th largest bank in Tex­
as and would hold approximately 0.05 percent of the
total deposits of commercial banks in the state.
Bank is the 38th largest of 93 banking organizations
in the relevant market and holds 0.27 percent of the
total deposits in commercial banks in the market.2
Two principals of Bank and Applicant are principals of

1. All banking data are as of June 30, 1979 and reflect bank holding
company formations and acquisitions approved as of April 30, 1980.
2. The relevant banking market for this analysis is the Dallas bank­
ing market, which is approximated by the Dallas Rand McNally Met­
ropolitan Area.



115

a bank holding company, its subsidiary bank, and a
savings and loan association. However, these organi­
zations are located in Brownfield, Odessa and Mid­
land, Texas, respectively, and operate in separate
banking markets from Bank. It appears from the facts
of record that consummation of the proposal would
not result in any adverse effects upon competition or
increase the concentration of banking resources in any
relevant area. Accordingly, the Board concludes that
competitive considerations are consistent with ap­
proval of the application.
The Board has indicated on previous occasions that
a holding company should serve as a source of finan­
cial and managerial strength to its subsidiary banks,
and that the Board would closely examine the condi­
tion of an applicant in each case with this consid­
eration in mind. In this case, the Board concludes that
the record presents adverse considerations that war­
rant denial of the proposal to form a bank holding com­
pany.
With regard to financial considerations, the Board
notes that Applicant would incur a sizeable debt in
connection with this proposal. Applicant proposes to
service this debt over a 12-year period through divi­
dends to be declared by Bank and tax savings to be
derived from filing consolidated tax returns. Applicant
has also proposed a capital injection for Bank as a part
of its acquisition of Bank. Applicant anticipates that
this capital injection and projected improvements in
Bank’s assets and earnings will allow Applicant to
service its acquisition debt while maintaining an ade­
quate capital level in Bank. However, in light of
Bank’s historical performance, Bank’s earnings and
growth projections appear optimistic. It is the Board’s
view th at B ank is u n lik ely to h ave su fficien t actu al
earnings to enable Applicant to service its debt while
maintaining adequate capital in Bank as well as af­
fording Applicant the flexibility to meet any unfore­
seen problems that might arise at Bank. Accordingly,
the Board is of the opinion that the considerations re­
lating to financial and managerial resources and future
prospects lend weight toward denial of the application.
No significant changes in the services offered by
Bank are expected to follow from consummation of
the proposed transaction. Consequently, convenience
and needs factors, including the Community Reinvest­
ment Act considerations, are consistent with but lend
no weight towards approval of this application.
On the basis of the circumstances concerning this
application, the Board concludes that the banking con­
siderations involved in this proposal present adverse
factors bearing upon the financial and managerial re­
sources and future prospects of Applicant and Bank.
Such adverse factors are not outweighed by any procompetitive effects or by benefits that would result in

776

F ederal R ese rv e B ulletin □ S ep tem b er 1980

better serving the convenience and needs of the com­
munity. Accordingly, it is the Board’s judgment that
approval of the application would not be in the public
interest and the application should be denied.
On the basis of the facts of record, the application is
denied for the reasons summarized above.
By order of the Board of Governors, effective Au­
gust 5, 1980.
Voting for this action: Vice Chairman Schultz and Gover­
nors Wallich, Partee, Teeters, and Gramley. Absent and not
voting: Chairman Volcker and Governor Rice.

(Signed) T heodore E. A llison ,
[seal]

S ecreta ry o f the B oard.

Chemical Bank,
New York, New York
O rder A pprovin g E sta b lish m en t o f Branch

Chemical Bank, New York, New York, a state mem­
ber bank of the Federal Reserve System, has applied
for the Board’s approval under section 9 of the Federal
Reserve Act, 12 U.S.C. § 321, to establish a branch at
Rockefeller Center, New York, New York. Notice of
this application has been given, as the Board’s Rules
of Procedure require, 12 C.F.R. § 262.3(b), and the
time for the submission of comments has expired. The
Board has considered the application and all com­
ments received in light of section 9 of the Federal Re­
serve Act and the Community Reinvestment Act of
1977 (“ CRA”), 12 U.S.C. §§ 2901-2905.
Applicant, a subsidiary of Chemical New York Cor­
poration, has total assets of $23.9 billion and operates
276 domestic branches.1 Establishment of the pro­
posed office would not adversely affect competition.
Applicant’s financial and managerial resources and its
future prospects are considered generally satisfactory
as are the future prospects of the proposed branch.
The new office would provide a convenient source of
banking services to Applicant’s trust customers.
These considerations are consistent with approval of
this application.
The CRA also requires the Board, in connection
with its examination of Applicant, to assess Appli­
cant’s record of meeting the credit needs of its entire
community, including low and moderate income
neighborhoods, consistent with safe and sound opera­
tion, and to take that record into account in its evalua­

tion of this application. Applicant’s record has been
challenged by the Greenpoint-Williamsburg Com­
mittee Against Redlining (“ GWCAR” ), a group orga­
nized to monitor local bank investment in Community
Planning District Number 1 in Brooklyn and to devel­
op strategies for improving economic conditions
there.2 Specifically, GWCAR believes that Applicant
has not adequately tried to ascertain community credit
needs, that it has not aggressively marketed loans, and
that it has failed to meet mortgage loan demand and
has reinvested in one- to four-family mortgages only a
very small part of the deposits of its three branches
located within the planning district. GWCAR also
complains of Applicant’s failure to extend mortgage
credit on mixed-use property and multi-family residen­
tial property. GWCAR has submitted the results of the
group’s well-documented research regarding the distri­
bution of mortgage credit within the planning district.
Applicant’s record was also reviewed by the Federal
Reserve System in a recent consumer compliance ex­
amination. Based on that examination, Applicant’s
CRA record is viewed as lending weight toward ap­
proval of this application, and the Board believes the
information submitted by GWCAR does not warrant a
change in that conclusion. GWCAR has not contested
a finding that Applicant is in technical compliance with
all procedural requirements of the Board’s Regulation
BB, 12 C.F.R. Part 228, and that it has reasonably de­
lineated its local communities.3 There is no evidence
of discrimination or other illegal credit practices by
Applicant.
Overall, Applicant has a large retail presence in its
local communities. In 1978, Applicant was a leading
originator of one- to four-family mortgage loans in low,
moderate, and high income areas in New York City.
Consumer loans and residential credits account for
over 20 percent of its loan portfolio, and its propor­
tional holdings of multi-family residential credit is rela­
tively high. In important respects Applicant has as­
sumed a rule of leadership in affirmatively pursuing the
objectives toward which the CRA is directed, and in
the process it has achieved a distinctly positive record.
GWCAR has criticized Applicant for failing to as­
certain community credit needs and to market its cred­
it services aggressively, but the Board cannot con­
clude Applicant’s record is deficient in either of those

2. On July 11, 1980, GWCAR requested that the Board order a for­
mal hearing on this application. Section 262.3(d) of the Board’s Rules
of Procedure, 12 C.F.R. § 262.3(d), precludes Board consideration of
this request. Moreover, it does not appear that there is a controversy
between Applicant and GWCAR over material facts; only the con­
clusions to be drawn from available facts are in dispute. The Board
accordingly has declined to order a formal hearing.
1. Financial data are as of September 30, 1979, unless otherwise
3. Applicant’s delineation encompasses the five boroughs of New
noted.
York City, four suburban counties, and several upstate counties.




L e g a l D evelopm ents

111

respects. For several years Applicant has maintained
contact with a large number of community and civic
organizations and has provided support and advice for
nonprofit organizations in its community. It has pro­
moted its credit services through conferences, of a va­
riety of market factors. The evidence shows that Ap­
plicant has been relatively active in conventional oneto four-family mortgage loans in low and moderate in­
come as well as higher income areas, and it has pro­
vided other types of credit, such as installment loans,
revolving credit plans, and home improvement loans.
Applicant does offer credit on mixed-use property, but
its policy, uniformly applied throughout its commu­
nity, has been to treat such credit as commercial loans
if the owner will not reside on the property. It does not
appear that this policy arises from unreasonable or dis­
criminatory considerations, but Applicant, responsive
to concerns expressed by community groups and local
public officials, has joined other New York banks in
studying whether alterations in such policies are fea­
sible.
No state-chartered commercial bank in New York
extended multi-family mortgages in low and moderate
income neighborhoods in New York City in 1978. Usu­
ry and rent control laws appear to have operated sig­
nificantly to discourage activity in this area.5 Applicant
does offer small business credit on multi-family units,
however, and it has been active in supporting multi­
family housing in low income neighborhoods through
its participation in various housing and neighborhood
rehabilitation programs.
On balance, it is the Board’s judgment that the infor­
mation presented by GWCAR does not materially de­
tract from a conclusion that Applicant’s record of
meeting the credit needs of its entire community lends
weight toward approval of this application, and the
Board views considerations relating to the conve­
nience and needs of the community to be served as
consistent with approval.
On the basis of the record, the Board has deter­
mined that approval of this application would be in the
public interest, and it approves the application for the
reasons summarized above. The proposed branch
should be established not later than three months after
the effective date of this Order unless that period is
extended for good cause by the Board or the Federal
Reserve Bank of New York, under authority hereby
delegated.
By order of the Board of Governors, effective Au­
gust 19, 1980.

First National Bancshares in Newton, Inc., New­
ton, Illinois, has applied for the Board’s approval un­
der section 3(a) (1) of the Bank Holding Company Act
(12 U.S.C. § 1842(a) (1)) of formation of a bank holding
company by acquiring 80 percent or more of the voting
shares of First National Bank in Newton (“ Bank” ),
Newton, Illinois.
Notice of the application, affording opportunity for
interested persons to submit comments and views, has
been given in accordance with section 3(b) of the Act.
The time for filing comments and views has expired,
and the Board has considered the application and all
comments received, including those of Mr. James
Laugel (“ Protestant” ), Newton, Illinois, in light of the
factors set forth in section 3(c) of the Act (12 U.S.C.
§ 1842(c)).
Applicant, a nonoperating corporation with no sub­
sidiaries, was organized for the purpose of becoming a
bank holding company through the acquisition of
Bank, which holds deposits of $33.6 million.1 Bank is
the second largest of three banks in the relevant bank­
ing market 2 and controls 39 percent of commercial
bank deposits in that market. The proposed transac­
tion represents a reorganization whereby ownership of
Bank will be transferred from individuals to a corpora­
tion owned by the same individuals, and it appears that
consummation of this proposal would have no adverse
effect upon existing or potential competition, nor
would it increase the concentration of banking re­
sources in any relevant market. Accordingly, the
Board concludes that competitive considerations asso­
ciated with this proposal are consistent with approval
of the application.
The financial and managerial resources and future
prospects of Applicant and Bank are satisfactory. Al­
though Applicant will assume some debt in connection

5. Restrictive usury ceilings were in place during the periods studied.

1. All banking data are as of June 30, 1978.
2. The relevant banking market is approximated by Jasper County,
Illinois.




Voting for this action: Chairman Volcker and Governors
Wallich, Partee, Teeters, and Gramley. Absent and not vot­
ing: Governors Schultz and Rice.

(Signed) G riffith L. G arwood,
[seal]

D ep u ty S ecreta ry o f the B oard.

First National Bancshares in Newton, Inc.,
Newton, Illinois
O rder A pprovin g F orm ation o f Bank H olding
C om pan y

778

Federal R ese rv e B ulletin □ S ep tem b er 1980

with its acquisition of Bank’s shares, it appears that
Applicant’s proposal will provide it sufficient financial
flexibility to meet its debt-servicing requirements with­
out adversely affecting the financial condition of Bank.
Moreover, Bank’s principals, who are also Applicant’s
principals, gained control of Bank in September 1978.
Since acquiring control, Applicant’s principals have
made adjustments in Bank’s management, lending pol­
icies, and internal controls that have significantly im­
proved Bank’s condition. Accordingly, the Board con­
cludes that banking factors are consistent with
approval of the application.
In reaching this conclusion, the Board has consid­
ered comments concerning this application from a
shareholder and director of Bank, Mr. James Laugel,
who has also requested a hearing before members of
the Board. Mr. Laugel has voiced various objections
to this proposal. Setting to one side those objections
that are not relevant to the determinations the Board
must make under section 3(c) of the Act (such as griev­
ances against former management actions, uncon­
nected with Applicant), those that are not material,
and those challenging conclusions (such as forecasts of
Bank’s future prospects) the underlying facts of which
the Board has taken into account, there remains one
serious allegation against Applicant. Mr. Laugel be­
lieves that Applicant’s principal, by arrangement with
Bank’s former acting president, coerced minority
shareholders to sell their shares or deliver proxies,
through refusals to grant credit and other unspecified

gations, and no indication whatever that a hearing
might prove them to be accurate.
The Comptroller of the Currency has not recom­
mended denial of this application, and in those circum­
stances section 3 of the Act contemplates that objec­
tions to a proposed transaction will in the normal case
be explored, at least preliminarily, through written
submissions and informal discussions.5 Mr. Laugel has
refused to provide any written factual basis for his ob­
jections, however, and he has declined the offer of in­
formal discussions or an informal hearing, not on the
ground of inconvenience but because he is only willing
to confront Applicant with his evidence in the pres­
ence of Board members. The Protestant has not satis­
fied even a minimal burden of showing that a hearing
might be worthwhile, and his request for one is denied.
On the basis of the record, the Board concludes that
his charges are without merit.6
While no immediate changes in Bank’s operations or
in the service offered to its customers are anticipated
to follow consummation of the proposed acquisition,
convenience and needs considerations are consistent
with approval of this application. Based upon the fore­
going and other considerations reflected in the record,
the Board concludes that consummation of the pro­
posal would be consistent with the public interest and
that the application should be approved.
On the basis of the record, the application is ap­
proved for the reasons summarized above. The trans­
action shall not be made before the thirtieth calendar

but allegedly unethical m eans.3

day following the effective date o f this Order or later
than three months after the effective date of this Or­

Such charges, if true, would constitute a serious ad­
verse managerial consideration that could warrant or
demand denial of this application.4 However, in the
face of specific denials by those persons alleged to
have participated in this conduct, Mr. Laugel, who
claims to have no personal knowledge of these mat­
ters, has done nothing to substantiate his claims. This
is not a case where evidence is exclusively in the
hands of, or even more conveniently accessible to, an
adverse party. Mr. Laugel claims to have evidence; he
claims to have witnesses to the conduct he suggests
took place. But he has refused to provide that evi­
dence to the Board. As a consequence, although this
proceeding has been protracted, there is still before
the Board no factual foundation for Mr. Laugel’s alle-

3. Mr. Laugel has also entered a variety of procedural objections to
this proceeding, which the Board believes to be without merit. In any
event, no showing has been made that he has been prejudiced by any
of the procedures objected to, or that his opportunity to present views
and evidence has been impaired in any way. The Board has consid­
ered Mr. Laugel’s comments as if he had timely complied with section
262.3(d) of the Board’s Rules of Procedure. 12 C.F.R. § 262.3(d).
4. B en son B a n c sh a re s , In c ., 63 F e d e r a l R e s e rv e B u l l e t i n 1009
(1977).




der, unless such period is extended for good cause by
the Board of Governors or by the Federal Reserve
Bank of St. Louis pursuant to delegated authority.
By order of the Board of Governors, effective Au­
gust 12, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Wallich, Partee, Teeters, Rice, and Gramley.

(Signed) C athy L. Petryshyn ,
[seal]

A ssista n t S ecretary o f the B oard.

5. F a rm ers a n d M erch a n ts B ank o f L a s C ru ces, N e w M ex ic o v.
B o a rd o f G o vern o rs, 567 F.2d 1082 (D.C. Cir., 1977). Even in pro­
ceedings under a statute requiring opportunity for hearing, a person
requesting a hearing must first make some showing in support of his
allegations. C o n n ecticu t B a n k ers A sso c ia tio n v. B o a rd o f G o vern o rs,
F.2nd
(D.C. Cir. 1980).
6 . Similarly, no reasonable construction of information M
r. Laugel
has submitted supports any charge that persons associated with Appli­
cant have dealt dishonestly with the Board or the Reserve Bank. The
Board also notes that the Protestant has not clearly demonstrated a
substantial protected financial or economic interest that is distinct
fromthat of Bank and that would be directly and adversely affected by
the transaction for which approval is sought.

L e g a l D evelopm ents

Flagship Banks, Inc.
Miami, Florida
O rder A pprovin g A cqu isition o f Bank H olding
C om pan y an d M erger o f Bank H olding C om pan ies

Flagship Banks, Inc. (“ Flagship” ), Miami, Florida, a
bank holding company within the meaning of the Bank
Holding Company 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 100 per cent of the voting
shares of Florida Bankshares, Inc. (“ Florida Bank­
shares” ), Hollywood, Florida, also a bank holding
company, thereby indirectly acquiring voting shares of
First National Bank of Hollywood (“ Hollywood
Bank” ), Hollywood, Florida; First National Bank of
West Delray (“ West Delray Bank”), Delray Beach,
Florida; First National Bank of Moore Haven (“Moore
Haven Bank” ), Moore Haven, Florida; and First
National Bank of Sebring (“ Sebring Bank” ), Sebring,
Florida. Flagship has also applied for the Board’s
approval under section 3(a)(5) of the Act (12 U.S.C.
§ 1842(a)(5)) to merge with Florida Bankshares under
the name and charter of Flagship.
Notice of the application, affording opportunity for
interested persons to submit comments, has been giv­
en 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.
Flagship, the fifth largest banking organization in
Florida, controls 23 banks with aggregate deposits of
approximately $1.53 billion, representing 4.7 percent
of the total deposits in commercial banks in the state.1
Florida Bankshares, the 27th largest banking organiza­
tion in the state, controls three banks with aggregate
deposits of approximately $200 million, representing
0.6 percent of the total deposits in commercial banks
in the state. Upon consummation of the proposed ac­
quisition, Flagship would become the fourth largest
banking organization in the state with 5.3 percent of
total commercial bank deposits in Florida. On the
basis of all the facts of record, including the overall
structure of banking in Florida, the Board does not
view the proposal as having any significantly adverse
effects on the concentration of banking resources in
Florida.
Banking subsidiaries of Flagship currently compete
against banking subsidiaries of Florida Bankshares in
the Miami-Fort Lauderdale and the Eastern Palm

1. Banking data are as of June 30, 1979.




779

Beach banking markets.2 Florida Bankshares also
competes in the Sebring banking market and the
Moore Haven banking market.3 In view of Flagship’s
financial and managerial resources and its previous
geographic expansion, Flagship is viewed as a poten­
tial entrant into these two markets. Therefore, the
Board regards these two markets as also relevant for
analysis of the competitive effects of the proposal.
While Flagship competes in banking markets not cur­
rently served by Florida Bankshares, the Board does
not regard Florida Bankshares as a likely potential en­
trant into such markets in light of the financial and
managerial resources and previous history of expan­
sion of Florida Bankshares. Accordingly, the MiamiFort Lauderdale, Eastern Palm Beach, Sebring, and
Moore Haven banking markets are considered to be
the relevant geographic markets for considering the
competitive effects of this proposal.
Flagship, through its subsidiaries, Flagship First
National Bank of Boynton Beach, Boynton Beach,
Florida, and Flagship Bank of West Palm Beach, West
Palm Beach, Florida, ranks as the 12th largest of 24
banking organizations competing in the Eastern Palm
Beach banking market, with total market deposits of
$94,7 million, representing 4.3 percent of total market
deposits. Florida Bankshares, through its smallest
banking subsidiary, West Delray Bank, ranks as the
smallest banking organization in this market, with total
market deposits of $3.4 million, representing 0.2 per­
cent of total deposits in the market. Flagship’s closest
subsidiary bank is located ten miles from West Delray
Bank, and while there is some existing competition be­
tween Flagship and Florida Bankshares in the Eastern
Palm Beach market, the amount of such competition
that would be eliminated upon consummation does not
appear to be significant, and the market is relatively
unconcentrated, with the four largest banking organi­
zations controlling 43.5 percent of market deposits.
Flagship, through its largest banking subsidiary,
Flagship National Bank of Miami, Miami, Florida,
ranks as the third largest of 72 banking organizations
competing in the Miami-Fort Lauderdale banking mar­
ket, with total market deposits of $512 million, repre-

2. The Miami-Fort Lauderdale banking market is approximated by
Broward and Dade Counties, Florida. Until recently, this market en­
compassed two separate banking markets, but these two markets have
now merged as a result of both commercial and residential develop­
ment in the area that formerly separated them. The Eastern Palm
Beach banking market is approximated by the entire eastern coastal
portion of Palm Beach County, Florida, which includes all of the de­
veloped portions of Palm Beach County with the exception of the
Belle Glade area in the western portion of the county.
3. The Sebring banking market is approximated by all of Highlands
County plus the City of Frostproof in Polk County, Florida. The
Moore Haven banking market is approximated by all of Glades Coun­
ty plus the Clewiston area of Henry County, Florida.

780

F ederal R ese rv e B ulletin □ S ep tem b er 1980

senting 4.9 per cent of commercial bank deposits in the
market. Florida Bankshares, through its lead bank,
Hollywood Bank, ranks as the 23rd largest banking or­
ganization in this market, with total deposits of $148
million, representing 1.4 percent of market deposits.
Consummation of the acquisition would increase Flag­
ship’s share of deposits in the Miami-Fort Lauderdale
banking market to 6.3 percent, causing it to become
the second largest banking organization in the market.
In light of these and other facts of record, the Board
finds that consummation of the proposal will result in
an elimination of existing competition between Flag­
ship National Bank and Hollywood Bank, will remove
an independent competitor from the market, and will
increase the concentration of banking resources in the
market. Proposals involving the acquisition of an inde­
pendent banking organization by an organization al­
ready represented in the market must be analyzed
carefully, giving attention to all the facts presented in
each case, such as the structural characteristics of the
market as well as the quantitative factors associated
with the proposal.
The Board recently denied a proposed acquisition of
a bank holding company where the combined market
share that would have resulted from consummation
was not significantly different than the market share
that would result in the Miami-Fort Lauderdale bank­
ing market from consummation of the proposal.4 The
Board finds that there are several significant factors
that distinguish the competitive effects of this proposal
from that which the Board previously found warranted
denial. The Miami-Fort Lauderdale market is some­
what less concentrated than the banking market in
County National5 and Hollywood Bank is somewhat
smaller than the bank to be acquired in County Nation­
al. Furthermore, Hollywood Bank is located some 16
miles from Flagship’s subsidiary in an area into which
Flagship’s subsidiary is prohibited from branching un­
der state law.
On the basis of the facts of record, including the lev­
els of concentration of banking resources in the Mi­
ami-Fort Lauderdale and Eastern Palm Beach banking
markets and the number of potential market entrants
and vehicles for entry remaining in these markets after
consummation of this proposal, the Board does not re­
gard the effect of the proposal on competition in these
markets as significant.
Florida Bankshares’ second largest banking subsidi­
ary, Sebring Bank, competes in the Sebring banking
market; its third largest banking subsidiary, Moore
Haven Bank, competes in the Moore Haven banking
4. County National Bancorporation, 65 F e d e r a l R e s e rv e B u l l e ­
763 (1979) (hereinafter referred to as “County National").
5. In the Miami-Fort Lauderdale market the four largest banking
organizations hold 35.8 percent of market deposits, whereas the fourfirm concentration ratio in County National was 41.9.

market. None of Flagship’s banking subsidiaries is lo­
cated in either of these banking markets, and the
Board concludes that consummation of the proposal
would not eliminate any existing competition in these
markets. With respect to the effects on potential com­
petition in these markets, Sebring Bank and Moore
Haven Bank hold deposits of approximately $43 mil­
lion and $5 million, representing 19.0 and 16.5 percent
of total commercial bank deposits in their respective
banking markets. Applicant appears to be but one of
many potential entrants for these markets. In view of
all the facts of record, including the relative and abso­
lute size of Sebring Bank and Moore Haven Bank and
the structure of their banking markets, the Board con­
cludes that consummation of the proposal would have
no significant adverse effects upon potential com­
petition in these markets.
The financial and managerial resources of Flagship,
Florida Bankshares, and their subsidiaries are re­
garded as consistent with approval and the future pros­
pects of Flagship and its subsidiaries appear favorable.
Following consummation of the proposal, Flagship in­
tends to expand the services offered by Hollywood
Bank by installing automated teller machines, in­
troducing new deposit instruments, including money
market certificates of deposit and NOW accounts, of­
fering international banking services, and by more ag­
gressively promoting the lending activities of this
bank. Flagship also intends to establish additional
branches of other banking subsidiaries of Florida
Bankshares. Although these proposals are modest and
may be accomplished through means other than this
proposal, the Board regards them as sufficient to out­
weigh the slightly adverse effects on competition asso­
ciated with this proposal.
Based on the foregoing and other considerations re­
flected in the record, it is the Board’s judgement that
the proposed acquisition is in the public interest and
that the application should be approved.
On the basis of the record the application is ap­
proved for the reasons summarized above. The trans­
action shall not be made before the thirtieth calendar
day following the effective date of this Order or later
than three months after the effective date of this Or­
der, unless such period is extended for good cause by
the Board or by the Federal Reserve Bank of Atlanta
pursuant to delegated authority.
By order of the Board of Governors, effective Au­
gust 25, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Partee, and Gramley. Absent and not voting: Gover­
nors Wallich, Teeters, and Rice.

tin




(Signed)
[s e a l ]

G r if f it h

L.

Garw ood,

Deputy Secretary of the Board.

L ega l D evelopm ents

Key Banks, Inc.,
Albany, New York
O rder A pprovin g A cqu isitio n o f Bank

Key Banks, Inc., Albany, New York, a bank holding
company within the meaning of the Bank Holding
Company Act, has applied for Board’s approv­
al under section 3(a)(3) of the Act (12 U.S.C.
§ 1842(a)(3)) to acquire 100 percent of the voting
shares (less directors’ qualifying shares) of The Na­
tional Bank of Northern New York, Watertown, New
York (“ Bank” ).
Notice of the application, affording opportunity for
interested persons to submit comments and views, has
been given in accordance with section 3(b) of the Act.
The time for filing comments and views 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 fifteenth largest commercial bank­
ing organization in the state of New York, controlling
five subsidiary banks with aggregate deposits of $1.7
billion, representing 1.1 percent of total commercial
bank deposits in the state.1Acquisition of Bank, which
holds deposits of $200.6 million, would increase Appli­
cant’s share of statewide commercial bank deposits by
approximately 0.1 percent and would not alter Appli­
cant’s ranking among other commercial banking or­
ganizations in the state. Accordingly, consummation
of this proposal would not significantly increase the
concentration of commercial banking resources in
New York.
Bank operates 17 offices in four separate banking
markets in central New York state—the Syracuse mar­
ket,2 the Lewis market,3 the St. Lawrence County
market,4 and the Watertown market.5 Applicant cur­
rently competes with Bank only in the Syracuse bank­
ing market. Bank is the 10th largest of 17 commercial
banking organizations located in the Syracuse market
with $14.6 million in deposits, representing 0.9 percent
of total market deposits.6 Applicant is the largest
banking organization in the market with $424.3 million

1. All banking data are as of December 31, 1979, and reflect bank
holding company formations and acquisitions approved through July
31, 1980.
2. The Syracuse banking market is approximated by Oswego,
Onondaga, and part of Madison County in central New York State.
3. The Lewis banking market is approximated by Lewis County,
New York.
4. The St. Lawrence County banking market is approximated by
St. Lawrence County, New York.
5. The Watertown banking market is approximated by Jefferson
County, New York.
6 . As part of this proposal, Applicant has committed to divest one
office of Bank in the Syracuse market as a going concern. Following
divestiture. Bank will rank as the 12th largest banking organization in
the market controlling 0.7 percent of market deposits.




781

in deposits, representing 26.1 percent of market depos­
its. Acquisition of Bank would increase Applicant’s
share of market deposits to 27.0 percent. In evaluating
the competitive effects of the acquisition, the Board
notes that also competing in the market are seven of
the nation’s largest 25 banks including several large
New York City banks (Chase Manhattan, Chemical,
Citicorp and Manufacturers Hanover). As the Board
has indicated previously, the competitive influence of
such firms is not measurable solely by their market
shares, especially with respect to their ability to serve
commercial customers. In addition, the Board notes
that there are several large thrift institutions in the
market and, although the Board remains of the view
that thrift institutions do not yet compete with com­
mercial banks over a sufficiently broad range of prod­
ucts and services to include them in the same line of
commerce, the Board has on occasion noted that it
may be appropriate in particular cases to take into con­
sideration the competition afforded by thrifts in eval­
uating the competitive impact of horizontal acquisi­
tions.7 In view of all the facts of record in this case,
including the absolute and relative size of Bank, the
number and size of banking organizations in the mar­
ket, the sizeable thrift presence in the market, and the
fact that there will remain a number of organizations
that could serve as entry vehicles for organizations not
now represented in the market, the Board is of the
opinion that consummation of the proposal would
have only slightly adverse effects on existing com­
petition in the Syracuse market.
With respect to potential competition, the Board
notes that Bank operates in three markets in which
Applicant is not currently represented. Each of these
banking markets, Lewis, Watertown and St. Law­
rence County, is concentrated and Applicant, given its
size and managerial resources, may be regarded as a
potential entrant into each market. However, in view
of all the facts of record, the Board is of the view that
any elimination of potential competition that would re­
sult upon consummation of the proposal is not so seri­
ous as to warrant denial of the application.
Bank is the largest of five banking organizations in
the Lewis Banking market, and holds deposits of $36.9
million, representing 46.2 percent of total commercial
bank deposits in the market. The two largest banking
organizations in the market together hold 81.1 percent
of market deposits. The banking structure of the Lewis
market reflects its rural nature, its low population, and
its low per capita income. The record indicates the
7. F irst B a n co rp o f N e w H a m p sh ire, Inc. (Londonderry Bank &
Trust Co), 64 F e d e r a l R e s e rv e B u l l e t i n 967 (1978); U n ite d B ank
C o rp o ra tio n o f N e w York (Schenectady Trust Company), 66 F e d e r a l
R e s e rv e B u l l e t i n 61 (1980); F id e lity U nion B a n co rp o ra tio n (Gar­
den State National Bank) 66 F e d e r a l R e s e rv e B u l l e t i n 576(1980).
B ank o f N e w York. 66 F e d e r a l R e s e rv e B u l l e t i n (August 12, 1980.

782

Federal R ese rv e B ulletin □ S ep tem b er 1980

market is not attractive to de novo entry. With respect
to the Watertown banking market, there are seven
commercial banking organizations operating in the
market with 29 banking offices. Bank is the largest of
these organizations with deposits of $103.9 million,
representing 40.0 percent of total market deposits. The
two largest banking organizations control about 80.0
percent of market deposits. As with respect to the
Lewis banking market, the Watertown market is not
attractive to de novo entry. Moreover, thrift institu­
tions have a substantial presence in the Watertown
market, and compete to a significant degree with com­
mercial banks in the area of consumer services. In
light of all the facts of record, the Board finds that con­
summation of the proposal would have only slightly
adverse effects on potential competition in the Lewis
and Watertown banking markets.
The fourth market in which Bank operates is the St.
Lawrence County banking market. Bank is the third
largest of 11 commercial banking organizations, with
$45.6 million in deposits, representing 15.0 percent of
total market deposits. Bank’s share of market deposits
has declined from 20.6 percent in 1976 to its present
level of 15.0 percent. Also present in the market are
banking subsidiaries of Marine Midland, Bankers
Trust and Chase Manhattan. In view of the number of
potential entrants, the relative unattractiveness of the
market to de novo entry, and other facts of record, it
appears that potential competition in the St. Lawrence
County market would not be seriously affected by con­
summation of the proposal. Accordingly, the Board
finds that the effects on competition in any relevant
area are at most only slightly adverse.
The financial and managerial resources of Applicant
and its subsidiary banks are considered generally satis­
factory and their future prospects favorable. The fi­
nancial and managerial resources and future prospects
of Bank are considered satisfactory. Thus, banking
factors are consistent with approval of the application.
Consummation of the proposal will expand the
range and sophistication of services available at
Bank’s offices. Bank’s effective lending limit will in­
crease to reflect the aggregate lending limitation on
Applicant’s subsidiary banks, thereby allowing Bank
to compete more effectively in extending loans to large
corporate customers. Applicant has indicated it will
extend its electronic point-of-sale terminal system to
Bank’s service area and will make available to Bank its
computer, trust and investment services, enabling
Bank to make available to its customers more exten­
sive services. In light of the above, considerations re­
lating to the convenience and needs of the community
to be served lend weight toward approval and needs of
the community to be served lend weight toward ap­
proval as to outweigh any adverse effects on com­



petition that may result from consummation of the pro­
posal. Accordingly, it is the Board’s judgment that the
subject proposal is in the public interest and that the
application should be approved.
On the basis of the record, the application is ap­
proved for the reasons summarized above. The trans­
action shall not be made 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 New York
under delegated authority.
By order of the Board of Governors, effective Au­
gust 25, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Partee, and Gramley. Absent and not voting: Gover­
nors Wallich, Teeters, and Rice.

(Signed) Theodore E. A llison,
[seal]

S ecreta ry o f the B oard.

North Platte Corporation,
Torrington, Wyoming
O rder D en yin g A cq u isitio n o f A d d itio n a l S h ares o f
Bank H oldin g C om pan y

North Platte Corporation, Torrington, Wyoming, a
bank holding company within the meaning of the Bank
Holding Company Act (the “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 an additional 221,600
voting shares (approximately 8.6 percent of the out­
standing voting shares) or Wyoming Bancorporation
(“ Wybanco” ), Cheyenne, Wyoming, also a bank hold­
ing company within the meaning of the Act. Applicant
currently owns 4.6 percent of Wybanco. Upon con­
summation of the proposed acquisition, Applicant
would own about 13.2 percent of Wybanco and would
be the largest single shareholder of Wybanco.1
Notice of the application, affording opportunity for
interested persons to submit comments, has been giv­
en in accordance with section 3(b) of the Act. The time
for filing comments and views has expired, and the
Board has considered the application and all com­
ments received, including the objections of Wybanco’s

1. On July 11, 1980, Wybanco entered into a memorandum of un­
derstanding to sell to a group of investors $8 million of its subordi­
nated debentures. The debentures are convertible into 500,000 Wy­
banco shares, which would represent upon conversion about 16
percent of Wybanco’s then outstanding shares. Upon conversion of
the debentures, Applicant would own approximately 11 percent of
Wybanco.

Leg al D evelopm ents

783

management (“ Protestant” ), in light of the factors set
forth in section 3(c) of the Act (12 U.S.C. § 1842(c)).
Protestant has challenged the proposal on financial,
competitive, conflict of interest, and Community Rein­
vestment Act considerations, and a number of other
grounds. In addition to submitting numerous written
objections to this proposal, Protestant has requested
the Board to hold a formal hearing to resolve any dis­
putes as to material questions of fact unresolved by
written submissions.2 The Board’s disposition of the
application in this matter makes it unnecessary for the
Board to consider Protestant’s hearing request.
Section 3 of the Act requires a bank holding compa­
ny to apply for the Board’s prior approval to acquire
direct or indirect control of any voting shares of a
bank, if after such acquisition the company will direct­
ly or indirectly control more than 5 percent of the
bank’s voting shares. 12 U.S.C. § 1842(c)(1). In as­
sessing a bank holding company application under sec­
tion 3 of the Act, the Board is required “ in every
case” to consider the competitive effects of the pro­
posal, as well as financial, managerial, future pros­
pects and convenience and needs factors. 12 U.S.C.
§ 1842(c).3 Together, these sections demonstrate that
Congress contemplated that a bank holding company
acquisition resulting in direct or indirect control of
more than 5 percent of the shares of a bank might have
anticompetitive aspects or be adverse to the conve­
nience and needs of the community and that the
Board’s decision to approve or deny an application
should take into consideration the reasonable likeli­
hood of anticompetitive aspects notwithstanding the
fact that the holding company would not acquire con­
trol of 25 percent of the bank’s shares.4
A company need not acquire control of another
company in order to substantially lessen competition

or restrain trade.5 The antitrust laws and section 3(c)
of the Act are directed not only against the immediate
anticompetitive effects of a proposed acquisition, but
also are designed “ to arrest in its incipiency . . . the
substantial lessening of competition from the acquisi­
tion by one corporation of the whole or any part of the
stock of a competing corporation.6
In applying the competitive standards of the Bank
Holding Company Act where, as here, the principal of
an applicant controls another banking organization,
the Board considers the effects of the proposal on all
controlled organizations.7
It is in the context of the above described legal
framework that the Board has considered the subject
application.
Applicant, the 18th largest banking organization in
Wyoming, controls one bank, the Citizens National
Bank and Trust Company (“ Citizens Bank” ), Torrington, Wyoming, with deposits of $40.0 million, repre­
senting 1.7 per cent of the commercial bank deposits in
the state.8 Mr. Roy Dinsdale, Applicant’s chairman
and president, serves in similar capacities with another
Wyoming bank holding company, Green River Com­
pany, Green River, Wyoming, whose sole subsidiary
is the First National Bank of Green River (“ Green
River Bank”), holding deposits of $12.8 million repre­
senting 0.6 percent of deposits in the state.9 Mr. Dins­
dale and members of his family own in excess of 80
percent of the stock of each of these companies.10 In
addition, Mr. Dinsdale has acquired control of ten
banks in Nebraska, and one bank each in Kansas and
Colorado.
Wybanco, with eighteen subsidiary banks, is the
largest banking organization in Wyoming, holding ag­
gregate deposits of $388.3 million, representing 16.6
percent of total deposits in commercial banks in the

2. Applicant has not requested a hearing on the application and has
opposed Protestant’s request for a hearing.
3. In addition to the general standard in section 3 of the Act, section
3(c)(2) of the Act (12 U.S.C. § 1842(c)(2)) generally precludes Board
approval of a proposal that may substantially lessen competition or
restrain trade (the anticompetitive effects condemned by the antitrust
laws) unless the anticompetitive effects are clearly outweighed by the
convenience and needs of the community.
4. Under section 3 the Board might lawfully deny a bank holding
company’s application to acquire less than 25 percent of another bank
holding company, if after the acquisition the acquiring company would
have probably or apparent influence over the acquiree and com­
petitive considerations involved in the relationship are significantly
adverse. Cf. F irst C ity B a n co rp o ra tio n o f T e x a s , 59 F e d e r a l R e­
s e r v e B u l l e t i n 105 (1973), where the Board approved a bank hold­
ing company’s acquisition of banks on the condition that it divest itself
of any direct or indirect control in excess of 5 percent of the voting
shares of two banks in the acquiree banks’ markets. Although the ap­
plicant there directly owned only 8.9 percent and 0.5 percent respec­
tively of the two banks to be divested, the Board concluded that reten­
tion of applicant’s influence over those two banks presented
competitive considerations adverse to approval of the application.

5. D en ver & R io G ra n d e W estern R a ilro a d v. U n ite d S ta te s , 387
U.S. 485, 501 (1967).
6 . See U n ited S ta te s v. E. 1. du P o n t d e N e m o u rs & C o ., 353 U.S.
586, 589 (1957).
7. In M a h a sk a I n v e s tm e n t C o m p a n y , 63 F e d e r a l R e s e rv e B u l ­
l e t i n 579 (1977), the Board stated that, where a proposed acquisition
involves the use of a holding company by an individual or a group of
individuals to acquire control of a bank that is a competitor of another
bank under the control of essentially the same individuals, the Board
will apply the section 3(c) competitive standards. In M id -N eb ra sk a
B a n csh a res v. B o a r d o f G o vern o rs, No. 78-1658 (D.C. Cir. Feburary
15, 1980), the Court of Appeals upheld the Board’s authority to con­
sider the competitive effects of bank holding company proposals in
such circumstances.
8 . All banking data are as of March 31, 1979, unless otherwise in­
dicated.
9. Applicant has a substantial investment in Green River Company
through non-voting common stock and subordinated debentures. Ap­
plicant’s investment accounts for a substantial portion of Green Riv­
er’s equity capital.
10. Mr. Dinsdale has supplied the Board with an affidavit stating
that he exercises effective control over each of the corporations
owned by the Dinsdale family.




784

F ederal R ese rv e B ulletin □ S ep tem b er 1980

state. Wybanco has an application pending with the
Board to acquire a newly-chartered bank in Worland,
Wyoming, and an application pending with the Comp­
troller of the Currency to charter a national bank in
Torrington, Wyoming.
The subject application represents the second at­
tempt by Mr. Dinsdale and his controlled companies to
acquire a substantial portion of Wybanco’s shares. In
1978, Mr. Dinsdale, acting as agent for five of his N e­
braska bank holding companies and Applicant, made a
tender offer for up to 24 percent of Wybanco’s out­
standing stock. As proposed, each of the holding com­
panies was to acquire up to 4.9 percent of Wybanco’s
shares. The tender offer was withdrawn after the
Board advised that the acquisition was precluded by
section 3(d) of the A ct.11
After considering all the evidence of record in this
matter, the Board has concluded that the effect of con­
summation of Applicant’s proposal may be to serious­
ly lessen present and potential competition in the rele­
vant geographic markets. Preliminary to making a
finding that such anticompetitive effects may result,
the Board has considered whether, upon consum­
mation of the proposal, Applicant and Mr. Dinsdale
may reasonably be expected to have a controlling in­
fluence over the management or policies of Wybanco.
The Act provides that a company has control over a
bank or company if “ the Board determines, after no­
tice and opportunity for hearing, that the company di­
rectly or indirectly exercises a controlling influence
over the management or policies of the bank or compa­
ny.” 12 The Board has previously recognized that a de­
termination with respect to the existence of a con­
trolling influence is necessarily a question of fact that
requires a careful appraisal of the past and prospective

11. Wybanco filed a lawsuit against Mr. Dinsdale in Federal district
court to block the tender offer. Wybanco alleged, among other things,
that consummation of the tender offer would violate the Bank Holding
Company Act. In response to an Order fromthe United States District
Court for the District of Wyoming, the Board advised the court that
the six companies, acting together as a single enterprise to achieve a
common purpose, constituted a bank holding company under the Act
with its principal place of business in Nebraska and that section 3(d) of
the Act (the prohibition against out-of-state bank acquisitions) pre­
cluded approval of the proposed acquisition in Wyoming.
Protestant contends that consummation of the transaction proposed
in the present application would likewise also violate section 3(d).
However, since this application is by a Wyoming bank holding compa­
ny to acquire shares in another Wyoming bank holding company, the
interstate prohibition of section 3(d) of the Act is inapplicable. Con­
trary to Protestant’s assertions, there is no evidence of record that any
of Mr. Dinsdale’s out-of-state holding companies are involved in this
application, and Applicant has specifically denied that they are pro­
viding financial support for the proposed acquisition.
12. The controlling influence test of control was added to the Act in
1970 in order to cover situations where a company has control of a
bank but does not own 25 percent of the bank’s shares or control the
election of a majority of its directors. S. Rep. No. 91-1084,91st Cong.,
2d Sess., 6 (1970). Congress recognized that “under modem condi­
tions, it is entirely possible to control the affairs of a company without
owning 25 percent or more of its outstanding voting shares.” Id.



relationships and circumstances present in a particular
case.13 The Board has indicated that a controlling in­
fluence embraces pressures and influences, at times
subtle, by which a company may be capable of influ­
encing or controlling the affairs of another company.14
Pursuant to the Congressional direction in the 1970
Amendments that the Board consider a controlling in­
fluence to be control, the Board delineated a number
of factual situations that, in the Board’s judgment,
raise a reasonable probability that a controlling influ­
ence might exist.15 One of those situations is relevant
to the application here. Under section 225.2(b)(1) of
Regulation Y, a company is presumed to control a
bank or other company if each of three conditions is
met: (1) the company owns or controls more than 5
percent of the outstanding voting shares of the bank or
other company, (2) one or more of the company’s di­
rectors or officers serves in a similar capacity with the
bank or other company, and (3) no other person owns
or controls more than 5 percent of the outstanding vot­
ing securities of the bank or company.
In this case, the record shows that the proposed ac­
quisition would give Applicant 13.2 percent of Wy­
banco’s outstanding shares and Applicant would be
the single largest shareholder of Wybanco with nearly
three times the shares held by any other person. No
other person owns more than 5 percent of Wybanco’s
shares. Applicant would have the power to elect at
least one and perhaps two of Wybanco’s twelve direc­
tors.16 The application states that Applicant will cast
its shares to elect Mr. Dinsdale as a Wybanco director.
The record also shows that the current management of
Wybanco, including its board of directors, as a.group
holds about 15.4 percent of Wybanco’s voting shares
and is vigorously opposing the purchase of Wybanco
shares by Mr. Dinsdale or companies he controls.17
After considering all the facts of record, including
Mr. Dinsdale’s banking experience, a majority of the
Board finds that it is reasonably likely that, upon con­
summation of the proposal, Applicant and its principal
shareholder may be capable of exercising such a signif­
icant influence over the management or policies of

13. Patagonia Corporation, (63 F e d e r a l R e s e rv e B u l l e t i n 288
(1977).
14. Id. at 291.
15. 36 Federal Register 18945 (1971); 12 C.F.R. 225.2(b) (1980).
16. Based upon the number of shares historically voted in Wybanco
elections (about 60 percent), and the fact that Wybanco has cumula­
tive voting, Applicant (with a 13.2 percent interest in Wybanco) would
be able to elect two of the twelve directors of Wybanco. Under the
most adverse conditions, with full shareholder turnout, Applicant
would be able to elect at least one of Wybanco’s directors.
17. At its recent shareholder meeting, Wybanco management was
able to secure over 50 percent of Wybanco’s outstanding shares in
favor of a proposal to prohibit any individual who owned 5 percent or
more of a Wyoming bank from serving as a director of Wybanco. The
proposal failed because it did not secure the necessary approval of
two-thirds of the outstanding voting shares.

L e g a l D evelopm ents

Wybanco as to constitute a controlling influence, with­
in the meaning of that concept in the A ct.18 On this
basis, the Board views the proposed acquisition as one
that may seriously lessen competition between Wy­
banco subsidiary banks and the subsidiary banks of
Applicant and the other Wyoming company controlled
by Mr. Dinsdale.
However, apart from any probable controlling influ­
ence by Applicant or Mr. Dinsdale over Wybanco, the
Board is concerned that consummation of the proposal
may nonetheless result in serious anticompetitive ef­
fects. With a 13.2 percent interest in Wybanco and at
least one seat on Wybanco’s board of directors, Appli­
cant would have access to and be in a position (and
indeed have a responsibility) to influence and partici­
pate in the formulation of the policies and strategies of
Wybanco, which competes, or is expected to compete,
with banks under Mr. Dinsdale’s control. The Board
finds that this situation raises potential conflicts of in­
terest in the operation of the competing or potentially
competing banks controlled by Mr. Dinsdale and Wy­
banco and is likely to seriously reduce competition.19
In view of the likelihood that Applicant may gain a
controlling influence over Wybanco and Applicant’s
proposed substantial stock ownership of Wybanco and
representation on its board of directors, the Board be­
lieves that consummation of the proposed acquisition
may have seriously adverse effects on existing com­
petition in the Sweetwater County banking market.20
Green River Bank, which is controlled by Mr. Dins­
dale, is the fifth largest of six banks in the market with
8.1 percent of market deposits. Wybanco also has a
subsidiary bank in the Sweetwater County banking
18. During the processing of the application, the Board advised Ap­
plicant that consummation of the proposal was likely to result in cov­
erage of Applicant by the rebuttable presumption in section
225.2(b)(1) of Regulation Y and that a serious question was raised as to
the competitive effect of the proposal. The Board requested Applicant
to supply any facts or argument relevant to the control and com­
petitive questions and the appropriateness of a hearing on these is­
sues.
In response Mr. Dinsdale advised the Board that no hearing was
necessary or appropriate. In July 1980, he advised the Board that he
would not, without the Board’s prior approval, exercise a controlling
influence over Wybanco. However, this assurance is unpersuasive in
light of Applicant’s proposed substantial stock ownership in Wybanco
and representation on Wybanco’s board of directors.
19. Congress’ concern about the potential for significant anti­
competitive effects in this type of situation was one of the reasons
underlying enactment of the Depository Institution Management In­
terlocks Act (12 U.S.C. §§ 3201 et seq.). Despite the fact that Green
River Bank and one of Wybanco’s subsidiary banks are located in the
same market, the distance between these banks makes it possible for
Mr. Dinsdale to serve on the boards of directors of the Green River
Bank and Wybanco. However, since the adverse consequences
sought to be prevented by the ban on interlocking management in
competing financial institutions appear to be associated with the pro­
posed acquisition, the Board finds added weight supporting its con­
clusion that the proposed acquisition would have a serious anti­
competitive impact.
20. The Sweetwater County market is approximated by Sweet­
water County, Wyoming.



785

market, the First Wyoming Bank of Rock Springs,
N.A., Rock Springs, Wyoming (total deposits of $10.8
million). This Wybanco subsidiary bank controls 6.8
percent of market deposits and is in direct competition
with Green River Bank.21
With respect to potential competition, the Board
finds that consummation of the proposal may eliminate
or reduce probable future competition in the Goshen
County banking market.22 Applicant’s subsidiary,
Citizens Bank, Torrington, Wyoming, is the largest of
three banks in the Goshen County market with total
deposits of $40 million, representing 63.1 percent of
market deposits. Wybanco has an application to char­
ter a de novo bank in Torrington, Wyoming, pending
before the Comptroller of the Currency. In the Board’s
judgment, approval of the subject proposal may sub­
stantially reduce the expected procompetitive effects
associated with Wybanco’s projected entry into the
Goshen County market and eliminate the prospects for
deconcentration of that market. Accordingly, the
Board concludes that the effect of the proposal may be
to seriously lessen potential competition in the Goshen
County market.
The Board recognizes that the state of Wyoming has
experienced rapid financial and population growth in
recent years. With Wyoming’s potential for develop­
ment from its energy resources, this growth is ex­
pected to continue causing the state’s major banking
markets to be attractive for entry by new banking or­
ganizations.23 In light of Mr. Dinsdale’s financial re­
sources, banking experience, his expressed interest in
banking expansion in Wyoming, his recent bank acqui­
sitions in Wyoming (and neighboring Nebraska), the
Board believes it reasonably probable that Applicant
will, absent Board approval of the instant proposal,
expand into one or more of the major Wyoming bank­
ing markets, in the most attractive of which Wybanco
operates subsidiary banks. Approval of this appli­

21. Protestant also alleges that the proposed acquisition should elim­
inate existing competition between Applicant’s subsidiary bank in
Goshen County, Wyoming, and two Wybanco banks located in coun­
ties adjacent to Goshen County. In making this allegation, Protestant
asserts that all three counties constitute a single banking market. The
Board believes that the relevant banking market should consist of the
localized area where the banks involved offer their services and where
local customers can practicably turn for alternatives. In the Board’s
view, this three-county area is not sufficiently economically integrated
to constitute a single banking market centered around the town of Tor­
rington, and each of the counties should be considered as a separate
banking market. Therefore, consummation of the proposal would not
eliminate any significant existing competition in any of these three
counties.
22. The Goshen county market is approximated by Goshen County,
Wyoming.
23. During 1979, commercial bank deposits in Wyoming increased
by 14 percent, the greatest yearly gain in the State’s history. In addi­
tion, six new commercial banks opened in 1979, and seven additional
charters were issued for new banks that had not opened by the end of
1979.

786

F ederal R ese rv e B ulletin □ S ep tem b er 1980

cation would eliminate or reduce the likelihood of the
procompetitive effects that may be expected to result
from such entry and would have adverse effects on
banking structure in Wyoming.24 On this basis, ap­
proval of the application would not serve the conve­
nience and needs of the public and would not be in the
public interest.
Accordingly, the Board finds, on the basis of the
foregoing and other facts of record, that the seriously
adverse effects on existing and potential competition,
concentration of resources in the relevant geographic
markets, and the state banking structure, that are
likely to result from consummation of this proposal are
so substantial as to warrant denial of this application.
The financial and managerial resources of Applicant
and Wybanco and their subsidiary banks, as well as
the other banks controlled by Mr. Dinsdale, are con­
sidered generally satisfactory and their future pros­
pects appear favorable.25 Thus, considerations relat­
ing to banking factors are consistent with approval.
With regard to convenience and needs considera­
tions, Applicant makes no explicit commitments to in­
crease services to the communities served by Wy­
banco. Applicant does state that it will use whatever
influence it has to encourage Wybanco to strengthen
its capital position and the earnings of its subsidiary
banks. In the Board’s view, Applicant has failed to
demonstrate that any benefits to the convenience and
needs of the communities that may result from the pro­
posed acquisition are adequate to outweigh the sub­
stantially adverse competitive effects that may reason­
ably be expected to result from Applicant’s acquisition
of Wybanco’s shares.
On the basis of all the relevant facts of record, it is
the Board’s judgment that consummation of the pro­
posal would not be in the public interest and that the
application should be denied. Accordingly, the appli­
cation is denied for the reasons summarized above.
By order of the Board of Governors, effective Au­
gust 13, 1980.

C oncurring S ta te m e n t o f C hairm an V olcker and
G overn or G ram ley

In our judgment, the facts of this case do not warrant
the conclusion that Applicant will have control of Wy­
banco upon completion of the proposed acquisition.
Nevertheless, we believe that Applicant’s acquisition
of over 13 percent of Wybanco’s outstanding shares
and the proposed interlocking director relationship are
likely to result in a serious lessening of present and
potential competition between Wybanco’s subsidiary
banks and those controlled by Applicant and its princi­
pal shareholder, and to have a seriously adverse effect
on the banking structure of the state of Wyoming.
The acquisition by an organization of a substantial
ownership interest in a competitor or potential com­
petitor, coupled with the establishment of an inter­
locking officer or director relationship between the two
organizations, raises a substantial likelihood that the
amount and effectiveness of present and potential
competition between the organizations will be les­
sened. This type of association weakens, and may
eliminate, the independence of action between organi­
zations previously acting competitively with one an­
other and increases the likelihood of cooperative oper­
ations between them, even if one organization does
not control the other within the concept of the Bank
Holding Company Act. Such anticompetitive effects
have been recognized by Congress in enacting the De­
pository Institutions Management Interlocks Act and
by the Board in its administration of the Bank Holding
Company Act.
In this case, we find the present and prospective
lessening of competition that is presented by the pro­
posed association of two strong and aggressive com­
petitors to be so serious and so adverse to the public
convenience and needs as to warrant denial of the ap­
plication. Accordingly, we concur in the majority’s de­
cision to deny approval to the proposed acquisition.
August 13, 1980

(Signed) T heodore E. A llison ,
[seal]

S ecreta ry o f the B oard.
D issen tin g S ta te m en t o f G o vern o r Wallich

24. As previously noted, Wybanco has 18 banking subsidiaries, two
applications pending for additional banks, and controls 16.6 percent of
the state’s total deposits. The second largest banking organization in
Wyoming, Western Bancorporation, Los Angeles, California, has
three subsidiary banks in the state, but is precluded by section 3(d) of
the Act from expanding its holdings through the acquisition of new or
existing banks, and by state law from branching from its three existing
banks. Therefore, only the third and fourth largest banking organiza­
tions, the only other multibank holding companies in the state, are in a
position to challenge Wybanco in markets throughout the state. They
each have three subsidiary banks and control 9.5 and 4.2 percent of
deposits in Wyoming.
25. Protestant has challenged this acquisition on a number of finan­
cial grounds. The Board’s decision to deny the acquisition on com­
petitive grounds obviates the necessity of treating the challenge of
Protestant to the acquisition on financial grounds.



In my opinion, this proposal will result in anti­
competitive effects serious enough to warrant denial
only if there is a preliminary finding that Applicant and
its principal shareholder, Mr. Dinsdale, would be able
to control Wybanco upon consummation of the pro­
posed acquisition. I am unable to find sufficient evi­
dence in the record to support such a finding.
In my opinion, the majority’s conclusion that con­
summation of the proposed acquisiton would give Ap­
plicant and Mr. Dinsdale a controlling influence over
the management and policies of Wybanco or otherwise

L ega l D evelopm ents

787

preliminary determination of control. 12 C.F.R.
§ 225.2(c). If, after comment and an opportunity for
hearing, the Board finds that control or a controlling
influence exists, Applicant would be required to termi­
nate the control relationship or promptly seek Board
approval to retain the control relationship. I believe
this procedure to be fully adequate to resolve the con­
trol question raised in this case.
Accordingly, on the basis of the record before the
Board and under current law, I would approve the pro­
posed acquisition.

result in serious anticompetitive effects rests on con­
jecture and remote possibility. The United States Su­
preme Court has repeatedly emphasized that com­
petitive issues under section 7 of the Clayton Antitrust
Act must be resolved on the basis of “ probabilities,”
not “ ephemeral possibilities.” *
I am concerned over the serious anticompetitive ef­
fects that might attend consummation of the proposal
if Applicant were to acquire control of Wybanco.
However, I would approve the application because of
the absence of persuasive evidence that Applicant and
its principal shareholder would be capable of ex­
ercising control or a controlling influence over the
management or policies of Wybanco or that any con­
flicts of interest or other anticompetitive effects may
reasonably be expected to result from consummation
of the proposal.
In this case, a majority of the Board has determined
that with a 13.2 percent ownership interest in Wy­
banco and the ability to elect at least one member to
Wybanco’s board of directors, Applicant would likely
acquire a significant or controlling influence over Wy­
banco that is expected to result in anticompetitive ef­
fects. This determination has been made notwithstand­
ing the fact that Wybanco’s current management,
which has an aggregate stock ownership in Wybanco
of 15 percent, has vigorously opposed this application
and has frustrated any attempt by Mr. Dinsdale or his
controlled companies to acquire more than five per­
cent of Wybanco’s outstanding shares. In my opinion,
the Board’s conclusions are based upon conjecture re­
garding possible future occurrences, and, as such, do
not constitute a sufficient basis upon which to deny the
application.
Notwithstanding the fact that Mr. Dinsdale has pro­
vided the Board with an assurance that he would not
exercise or attempt to exercise a controlling influence
over Wybanco, it is possible that Applicant and Mr.
Dinsdale might in the future succeed in gaining a con­
trolling influence over Wybanco, which might enable
them to reduce competition by cooperatively oper­
ating Wybanco and the Wyoming banks controlled by
Applicant and Mr. Dinsdale. If the Board were to ap­
prove the application based upon the absence of con­
trol and it later appeared to the Board that Applicant
and Mr. Dinsdale had, through ownership of Wy­
banco’s shares and representation on Wybanco’s
board of directors, obtained or exercised control or a
controlling influence over Wybanco’s management or
policies, the Board could under its regulations issue a

Republic of Texas Corporation, Dallas, Texas, a bank
holding company within the meaning of the Bank
Holding Company Act, has applied for the Board’s ap­
proval under section 3(a)(3) of the Act (12 U.S.C. §
1842(a)(3)) to acquire 100 percent, less directors’ quali­
fying shares, of the voting shares of Citizens National
Bank of Waco (“ Bank”), Waco, Texas.
Notice of the application, affording opportunity for
interested persons to submit comments and views, has
been given in accordance with section 3(b) of the Act.
The time for filing comments and views 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, the fourth largest banking organization in
Texas, controls 23 banks with aggregate deposits of
approximately $5.01 billion,1 representing 7.2 percent
of the total deposits in commercial banks in the state.
Bank, the 29th largest banking organization in Texas,
controls total deposits of $203.2 million, representing
0.3 percent of the total deposits in commercial banks
in Texas. Upon consummation of this proposal, Appli­
cant’s share of the total deposits in commercial banks
in Texas would increase to 7.5 percent, and Applicant
would continue to rank as the fourth largest banking
organization in the state.
Bank is the largest of 15 banking organizations in the
Waco banking market2 and controls 30.8 percent of the
total deposits in the market. None of Applicant’s sub­
sidiary banks has an office in the relevant market and

*Brown Shoe Co. v. United States, 370 U.S. 294, 323 (1962); United
States v. Falstaff Brewing Corp., 410 U.S. 526, 555 (1973) (separate
opinion of Justice Marshall) (“Remote possibilities are not sufficient
to satisfy the test set forth in § 7.“)

1. All banking data are as of June 30, 1979, and reflect bank holding
company formations and acquisitions approved as of April 30, 1980.
2. The Waco banking market is approximated by the Waco SMSA
which is represented by McClennan County, Texas.




August 13, 1980

Republic of Texas Corporation,
Dallas, Texas
O rder D enying A cqu isition o f Bank

788

Federal R ese rv e B ulletin □ S ep tem b er 1980

Applicant’s nearest subsidiary is located 87 miles from
Waco in Fort Worth. Thus, no existing competition
would be eliminated by this proposal. With regard to
probably future competition, however, the Board has
previously expressed its concern about the adverse
competitive effects resulting from the entry into small­
er metropolitan areas by one of the larger banking or­
ganizations in a state through acquisition of one of the
larger independent organizations in those areas. Such
adverse effects are exacerbated particularly in a situa­
tion where the banking organization to be acquired is
located in a concentrated market.3
The Waco banking market is a concentrated market,
with the four largest banking organizations controlling
72.4 percent of the total deposits in commercial banks
in the market. Several smaller foothold entry points
are available in the market and in view of Applicant’s
overall size, financial and managerial resources and
history of, and plans for, expansion, Applicant ap­
pears to be a likely entrant into the market in the rea­
sonably foreseeable future. Acquisition of Bank by
Applicant would eliminate the probability that these
two organizations would come into direct competition
in the future and the Board would view this com­
petition as desirable because of the present structure
of the market. Thus, it is the Board’s view that poten­
tial competition would be eliminated by permitting one
of the state’s largest banking organizations to enter a
concentrated market through the acquisition of the
market’s largest bank. Consummation of the proposal
would also eliminate the present procompetitive effect
Applicant exerts as a result of its position as a per­
ceived potential entrant into the market. Although this
proposed acquisition would ultimately result in the
separation of Bank from a group of smaller Waco
banks under the control of the same family, in the
Board’s view the possibility of separation does not
mitigate the effects of the proposal on competition in
the Waco market.
In evaluating the competitive effects of this pro­
posal, the Board has considered the impact of thrift
institutions on competition within the Waco market.
Although thrift institutions hold substantial deposits in
the Waco banking market, the Board in this instance is
unable to conclude from the evidence in the record
that these institutions compete actively with com­
mercial banks over a sufficient range of financial serv­
ices to mitigate significantly the anticompetitive ef­
fects of the proposal.
The competitive consequences associated with this
proposal must also be considered in light of their ef-

fects upon the structure of banking in Texas. The
Board has consistently expressed its concern regard­
ing acquisitions that have a significant impact on state­
wide structure and the concentration of resources
within a state, and has indicated that there are limits as
to what it regards as approvable under the standards of
the Bank Holding Company Act.4 The Board contin­
ues to monitor statewide banking structures in general
and, more particularly, the size disparity among the
large banking organizations. The Board is concerned
with the possibility that continued approval of acquisi­
tion or merger proposals involving large statewide
holding companies and relatively sizable banking or­
ganizations, such as is presented by this proposal, may
perpetuate this size disparity and increase concentra­
tion ratios. In reviewing the overall impact of consum­
mation of this proposal, the Board believes the acqui­
sition by Applicant of the largest bank in an already
concentrated market in Texas is not warranted.
In view of the facts of record, including the market
share held by Bank in the Waco banking market, the
level of concentration in the market and the presence
of a number of alternative means of entry, the Board
concludes that the effect of consummation of this pro­
posal may be to substantially lessen potential com­
petition in the relevant banking market and on this
basis requires denial of the proposal unless such anti­
competitive effects are clearly outweighed by consid­
erations relating to the convenience and needs of the
community to be served. Even if the anticompetitive
effects of this proposal were viewed as less than “ sub­
stantial,” the Board considers these effects to be so
seriously adverse as to warrant denial under the gener­
al mandate of section 3 of the Act.
The financial and managerial resources and future
prospects of Applicant, its subsidiaries, and Bank are
regarded as satisfactory. While Applicant has indi­
cated that it would cause Bank to place greater empha­
sis on real estate and business lending and government
sponsored lending programs, there is no evidence in
the record indicating that these banking needs are not
now being met in the community and Bank appears to
have the resources to develop these services inde­
pendent of affiliation with Applicant. Furthermore,
Applicant could furnish these services through foot­
hold entry into the Waco market and thereby provide
the banking customers with a new alternative source
of banking services. On the basis of the record, it is the
Board’s opinion that the convenience and needs of the
the community to be served are not sufficient to out-

3. M e rc a n tile Texas C o r p o ra tio n , 66 F e d e r a l R e s e rv e B u l l e t i n
423 (1980); F irst C ity B a n co rp o ra tio n o f T exas, In c., 65 F e d e r a l R e ­
s e r v e B u l l e t i n 862 (1979).

423 (1980) in which the Board denied an application by the 5th
largest banking organization in Texas to acquire the 2nd largest bank
in the Waco market.




4.
le tin

S e e M erca n tile T exas C o rp o ra tio n , 66 F e d e r a l R e s e rv e B u l ­

L ega l D evelopm ents

weigh the anticompetitive effects associated with this
proposal. Accordingly, it is the Board’s judgment that
consummation of the proposed transaction would not
be in the public interest and that the application should
be denied. Based on the foregoing and other facts of
record, the application is hereby denied.
By order of the Board of Governors, effective Au­
gust 20, 1980.
Voting for this action: Chairman Volcker and Governors
Wallich, and Teeters. Voting against this action: Governors
Partee, and Gramley. Absent and not voting: Governors
Schultz and Rice.

[seal]

(Signed) G r iffith L. G arw ood,
Deputy Secretary o f the Board.

Welch Bancshares, Inc.,
Welch, Oklahoma
Order Denying Formation o f Bank Holding Company
Welch Bancshares, Inc., Welch, Oklahoma, has ap­
plied for the Board’s approval under section 3(a)(1) of
the Bank Holding Company Act (12 U.S.C. §
1842(a)(1)) of formation of a bank holding company by
acquiring 100 percent, less directors’ qualifying
shares, of the voting shares of Welch State Bank of
Welch (“ Bank” ), Welch, Oklahoma.
Notice of the application, affording opportunity for
interested persons to submit comments, has been giv­
en 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 nonoperating company organized for
the purpose of becoming a bank holding company by
acquiring Bank ($9 million in deposits).1 Upon acquisi­
tion of Bank, Applicant would control the 333rd larg­
est of 489 commercial banking organizations in Okla­
homa and approximately 0.05 percent of total deposits
in commercial banks in the state. Bank is the third
largest of ten commercial banks located in the Miami,
Oklahoma, banking market, which is approximated by
northern Craig County and Ottawa County, and holds
approximately 5.0 percent of the market’s total depos­
its in commercial banks.
This proposal involves a restructuring of Bank’s
ownership from individuals to a corporation owned by
those same individuals. The facts of record indicate
that seven of Applicant’s principals, through common
1. Deposit data are as of December 31, 1979.




789

stock ownership and director interlocks, control the
operating policies of the largest bank in the market,
Security Bank & Trust Company, Miami, Oklahoma
(“ Security Bank” ), which holds total deposits of $76.4
million reprewenting 42.4 percent of market deposits.
Collectively, Applicant’s principals control 47.4 per­
cent of the market’s total deposits.
Applicant disputes the definition of the relevant
banking market in this case and contends that Bank
does not compete in the banking market where Secur­
ity Bank is located. The market definition suggested by
Applicant is all of Craig County, and southern Labette
County, Kansas, including the town of Chetopa. Alter­
natively, Applicant asserts Bank is the only bank in a
market consisting of northern Craig County, or that it
is in the Vinita banking market, which includes the
towns of Vinita and Ketchum in Craig County, and
Langley in Mayes County to the south of Craig Coun­
ty*
In support of its contentions, Applicant has sub­
mitted data concerning the respective service areas for
loans and deposits of the banks involved.2 Applicant
also makes allegations concerning the extent of com­
mercial interaction in the area surrounding Welch.
While the respective service areas of banks involved in
a proposed transaction are among the factors that the
Board considers in determining the relevant banking
market in which to analyze the competitive effects of a
proposal, the Board does not consider such service
areas to be dispositive.3 Based on facts of record dis­
cussed below, it appears that Bank and Security Bank
should in fact be regarded as reasonable alternatives to
one another.
Bank is the only financial institution in northern
Craig County. Due to Bank’s relatively small size and
the low population density of northeastern Oklahoma,
the Board does not believe that Bank is in an inde­
pendent market. Based on the results of a field survey
of the area that included interviews with local bankers
and business representatives and an analysis of market
information concerning economic activity and employ­
ment data in northeastern Oklahoma, the Board con­
cludes that northern Craig County and Ottawa County
comprise the appropriate relevant banking market.

2. In particular, Applicant cites the lack of substantial overlap of
the service areas of Bank and Security Bank. However, the Board
notes that in this case the lack of service area overlap may merely
reflect the lack of competition between the two banks as a result of
their common ownership and control by Applicant’s principals since
1956. For the same reason, the Board finds unpersuasive Applicant’s
observation that Bank does not advertise in the Ottawa County news­
paper and Security Bank does not advertise in the Craig County news­
paper.
3. See Ellis Banking Corporation, 64 F e d e r a l R e s e rv e B u l l e t i n
884 (1978).

790

Federal R ese rv e B ulletin □ S ep tem b er 1980

Miami, Oklahoma, located some 14 miles east of
Welch in Ottawa County, is substantially larger than
any other city within 20 miles of Welch. Its 1976 popu­
lation approximates 14,000, as opposed to 5,000 for Vinita, which is 17 miles to the south, and 2,000 for Chetopa, Kansas, located 13 miles to the north. Despite
Applicant’s assertions to the contrary, the road con­
necting Welch to Miami is not more difficult to tra­
verse than the road from Welch to Vinita. Welch, with
a population of 772, provides little in the way of em­
ployment opportunities or basic services to its resi­
dents. Miami, on the other hand, is a regional trade
center, with significantly more shopping and employ­
ment opportunities than Welch, Vinita, or Chetopa.
Miami also has a two year junior college with an en­
rollment of about 2,000. Moreover, Vinita’s popu­
lation has declined by 14.5 percent since 1970, and
four businesses in its downtown area recently ceased
operation. In contrast, Miami has experienced modest
population growth of 2.3 percent since 1970. Newspa­
per circulation figures and loan recording data supplied
by Applicant suggest that there is some interaction be­
tween Welch and Vinita. The loan recording data are
limited both with regard to the type of loan and the
period over which the data were gathered, however,
and on balance, the significant differences between Mi­
ami and Vinita persuade the Board that residents of
Welch look to Miami as the principal economic center
in the surrounding area. It therefore appears that Bank
and Security Bank are both located in the Miami bank­
ing market.4
Under section 3(c) of the Bank Holding Company
Act, the Board is precluded from approving any pro­
posed acquisition of a bank that in any part of the
country (1) would result in a monopoly, or would be in
furtherance of any combination or conspiracy to mo­
nopolize or attempt to monopolize the business of
banking; or (2) may substantially lessen competition or
tend to create a monopoly or be in restraint of trade in
any banking market, unless the Board finds that such

anticompetitive effects are clearly outweighed by the
convenience and needs of the community to be served.
As part of its analysis of the competitive effects of a
proposal involving the restructuring of a bank’s own­
ership into corporate form, the Board takes into con­
sideration the competitive effects of the transaction
whereby common share ownership and/or interlocking
director/officer relationships were established between
the subject bank and one or more of the other banks in
the same market.5
In this case, the Board has considered the com­
petitive effects of the original transaction by which
Bank and Security Bank came under common own­
ership. In 1956, when Bank came under common con­
trol with Security Bank, Bank was the fifth largest of
nine banks in the market and controlled 4.23 percent of
market deposits. Security Bank ranked second with 28
percent of market deposits, and the four-bank concen­
tration ratio in the market was 85.7 percent. The com­
bination of Bank and Security Bank created the sec­
ond largest organization in the market with a market
share of 32.3 percent, and raised the four-bank con­
centration ratio to 90 percent. The Board finds that the
effect of the acquisition of Bank by Applicant’s princi­
pals was to eliminate significant competition that exist­
ed at that time between Bank and Security Bank, in­
crease the concentration of banking resources within
the relevant market, and eliminate an independent
banking competitor in the market. Although this rela­
tionship is long standing in nature, approval of this ap­
plication would further solidify this anticompetitive
relationship, a relationship that now involves control
of more than 47 percent of market deposits. On the
basis of the foregoing and the facts of record, the
Board concludes that approval of the application
would have substantial adverse competitive effects.
Accordingly, under the standards set forth in section
3(c)(2) of the Bank Holding Company Act, the pro­
posal may not be approved unless the adverse com­
petitive factors are clearly outweighed by other public
interest considerations reflected in the record. In this
case, the Board finds that the adverse competitive as­
pects are not clearly outweighed.
When principals of an applicant are engaged in oper­
4. Applicant also has submitted affidavits from the presidents of ating a chain of banking organizations, the Board, in
each of the banks in Craig and Ottawa Counties to the effect that those
addition to analyzing the one-bank holding company
countries are in separate banking markets. Although these affidavits
proposal before it, also considers the total chain and
lend some support to applicant’s position, the Supreme Court has
stated that a market is not only the area in which the seller operates,
analyzes the financial and managerial resources and
but “to which the purchaser can practicably turn for supplies.”
future
prospects of the chain within the context of the
U n ited S ta te s v. P h ila d elp h ia N a tio n a l Bank, 314 U.S. 321, 359
Board’s multibank holding company standards. Based
(1963). On the basis of the above discussion and all the facts of record,
the Board believes that residents of Welch must regard Miami as a
upon such analysis in this case, the financial and manpracticable alternative for banking services.
In any event, in view of the discussion above, the only other plau­
sible market would be one encompassing both Miami and Vinita, and
the combination of Bank and Security Bank in such a market would
5. M id -N e b ra sk a B a n csh a res, In c. v. B o a rd o f G o vern o rs, No. 78also involve the elimination of a substantial amount of existing com­
1658 (D.C. Cir. February 15, 1980); M a h a sk a I n v e stm e n t C o ., 63 F e d ­
petition since the combined market share of those two banks would
e r a l R e s e rv e B u l l e t i n 579 (1977).
approximate 32.5 percent.




L e g a l D evelopm ents

agerial resources and future prospects of Applicant
and Bank appear to be generally satisfactory. There­
fore, considerations relating to banking factors are
consistent with, but lend no weight toward approval
of the application. No significant changes in the serv­
ices offered by Bank are expected to result from con­
summation of the proposed acquisition. Thus, public
interest factors lend no weight toward approval of the
proposal and therefore cannot clearly outweigh the
substantially adverse competitive effects associated
with it. In view of the substantially adverse com­
petitive effects associated with this proposal and the
absence of any outweighing factors, the Board also
concludes that, under the last sentence of section 3(c)
of the Act, the proposal would have a negative effect
on the convenience and needs of the community to be
served and that, on balance, the application should be
denied.
On the basis of the facts of record, and in light of the
factors set forth in section 3(c) of the Act, it is the
Board’s judgment that consummation of the proposal
to form a bank holding company would not be in the
public interest and that the application should be and
hereby is denied for the reasons summarized herein.
By order of the Board of Governors, effective Au­
gust 19, 1980.
Voting for this action: Governors Wallich, Partee, and Tee­
ters. Voting against this action: Chairman Volcker and Gov­
ernor Gramley. Absent and not voting: Governors Schultz
and Rice.

(Signed) Griffith L. Garwood,
[seal]

D ep u ty S ecreta ry o f the B oard.

D issen tin g S ta tem en t o f C hairm an V olcker and
G overnor G ram ley

We would approve this application in view of the long­
standing relationship between Bank and Security Bank
& Trust Company, a relationship that spans nearly a
quarter of a century. We do not believe that denial of
this application at this time will increase the probabili­
ty that common control of the two banks will be termi­
nated. The combined market share of the two banks is
certainly substantial, and we would join the majority
of the Board if there were some reasonable possibility
that denial might result in severance of this relation­
ship. The duration of this relationship is significantly
longer than in any application previously denied by the
Board solely on competitive grounds, however, and it
thus appears unlikely that denial would have any
meaningful effect.




A u g u st 19, 1980

791

Wyoming Bancorporation,
Cheyenne, Wyoming
O rder A pp ro vin g A cqu isition o f a Bank

Wyoming Bancorporation, Cheyenne, Wyoming, a
bank holding company within the meaning of the Bank
Holding Company Act, has applied for the Board’s ap­
proval under section 3(a)(3) of the Act (12 U.S.C.
§ 1842 (a)(3)) to acquire 100 per cent, less directors’
qualifying shares, of the voting shares of First Wyo­
ming Bank-Worland (“ Bank” ), Worland, Wyoming, a
proposed de novo bank.
Notice of the application, affording opportunity for
interested persons to submit comments and views, has
been given in accordance with section 3(b) of the Act.
The time for filing comments and views has expired,
and the Board has considered the application and all
comments received, including those submitted on be­
half of First National Bank and Stockgrowers State
Bank, both of Worland, Wyoming (collectively re­
ferred to as “Protestants”), in light of the factors set
forth in section 3(c) of the Act (12 U.S.C. § 1842(c)).
Applicant, the largest banking organization in Wyo­
ming, controls 18 banks with aggregate deposits of
$405.6 million, representing 19.3 percent of the total
commercial bank deposits in the state.1 Since this ap­
plication involves the acquisition of a proposed de
novo bank, consummation of the proposal would nei­
ther eliminate any existing competition nor immediate­
ly increase Applicant’s share of commercial bank de­
posits in Wyoming.
Applicant is seeking to make its initial entry into the
Washakie County banking market (the relevant mar­
ket).2 There are only two commercial banks presently
in the Washakie market, both of which are protesting
the subject application. Applicant’s nearest subsidiary
bank to Bank is located more than 50 miles from Bank
in a separate banking market. Since Applicant has no
other banking interests in the relevant market, it does
not appear that consummation of the proposal would
have any adverse competitive impact in the Washakie
County banking market. Moreover, since Bank is
being formed de novo, approval of the application
would permit the establishment of an additional com­
petitor in the Washakie County banking market. Ac­
cordingly, competitive considerations lend weight to­
ward approval of the application.
The financial and managerial resources and future
prospects of Applicant and its subsidiaries are re-

1 . All banking data are as of September 30, 1979, and do not include
Applicant’s subsidiary, First Wyoming Bank-Douglas, Douglas, Wyo­
ming, which opened for business on February 15, 1980.
2. The Washakie County banking market is approximated by
Washakie County, Wyoming.

792

F ed eral R ese rv e B ulletin □ S ep tem b er 1980

state Examiner issue Bank’s charter. Protestants sub­
sequently filed an appeal of the state Board’s decision
to the Supreme Court of Wyoming. The state Examin­
er reaffirmed its charter approval action upon notifica­
tion of the subject application by the Reserve Bank,
stating that such approval was granted based upon tes­
timony that Bank would be affiliated with Applicant.
In general, the Board views a bank holding compa­
ny’s de novo entry into a market where it is not yet
represented as a positive convenience and needs con­
sideration in view of the fact that it will provide an
added source of services, will add another competitor
to the market, and will serve to deconcentrate the rele­
vant market. Protestants contend that the public bene­
fits generally associated with de novo entry into a mar­
ket are not applicable in this case. This contention is
based upon the following factors: (1) that population
and deposit growth rates, as well as the median family
income, in the Washakie banking market were signifi­
cantly below state averages, thus evidencing economic
weakness in the area and the inability of the area to
support a new financial institution; (2) that market data
and a survey of residents and businesses in the market
indicate that existing banks are satisfying market loan
demands and providing satisfactory services for their
customers; and (3) that Bank would not serve the pub­
lic convenience and needs because of Bank’s close
proximity to the other two commercial banks in the
market and the fact that it proposes to provide the
same services as the two commercial bank com­
petitors in the market.
Contrary to Protestants’ assertions, the economic
data indicate that the Washakie banking market is at­
tractive for de novo entry and could support the for­
mation of a new bank. Population growth data indicate
that between 1970 and 1979 Washakie County’s popu­
lation increased approximately 28.2 percent, and Wor­
land’s population increased 36.5 percent. During that
same period census estimates indicate that Wyoming’s
population increased approximately 34.8 percent.4 Al­
though there have been no commercial bank entrants
in the market during the 1970-1979 period, two new
Worland savings and loan associations opened in 1976
3. In connection with this contention, Protestants have also alleged in response to the population increases and attendant
that Applicant does not have sufficient financial resources to support
increases in economic activity. These two depository
the establishment and maintain the capital requirements of Bank un­
institutions had accumulated $8.8 million in combined
der such circumstances. The Board has considered Applicant’s re­
deposits by March 1979.5 This evidence of successful
sources and finds, as earlier stated in this Order, that Applicant’s fi­
nancial resources are generally satisfactory and Bank's prospects as a
market penetration facts of record, including the rec­
subsidiary of Applicant are favorable. An additional objection by
ord of the state Board proceeding, that the Washakie
Protestants to this application is that Applicant acted in excess of the
law in taking action to obtain charter approval for Bank without the
Board’s prior approval. The Board does not require that an applicant
receive Board approval before chartering a de novo bank, and, in fact,
4. Population growth data relative to Worland and Washakie Coun­
has expressly instructed applicants in the FR Y-2 Application Form
ty were obtained from the Big Horn Regional Planning Office. State
(December 1979) that “if a proposed new operating bank is involved,
figures were obtained from the Bureau of Economic Analysis, Depart­
ment of Commerce, Regional Economic Information System, April
Applicant should have received at least preliminary approval of the
1980.
charter before filing [the FR Y-2] application." Therefore, Applicant’s
actions to charter Bank did not require prior Board approval and were
5. Source: Federal Home Loan Bank of Seattle, Seattle, Washing­
not in violation of law.
ton.

garded as generally satisfactory. Bank, as a proposed
de novo bank, has no financial or operating history;
however, its financial and managerial resources and
prospects as a subsidiary of Applicant appear favor­
able. Thus, considerations relating to banking factors
are consistent with approval. As a new institution in
the Washakie County banking market, which is cur­
rently being served by only two commercial banks,
Bank would serve as an additional source of a full
range of banking services in the market. Accordingly,
considerations relating to the convenience and needs
of the community to be served lend weight toward ap­
proval of the application.
In its review of the subject application, the Board
has given careful consideration to the comments sub­
mitted on behalf of Protestants. Protestants’ principal
contention is that the banking needs of the community
are being adequately met at the present time and there
is no need for the proposed new bank in the market,
particularly since Bank is to be located within one
block of the two existing commercial banks in Worland.3 Protestants participated in state proceedings be­
fore the Financial Institutions Board of the state of
Wyoming (“ state Board” ) concerning applications to
charter Bank and raised essentially the same objec­
tions in those proceedings as they have raised in pro­
testing the instant application.
In summary, on August 24, 1978, Applicant filed an
application with the state Board for Bank’s charter.
The state Board denied the application on November
17, 1978, whereupon Applicant submitted a new appli­
cation for Bank’s charter. A public hearing was held in
connection with the new application on April 18, 1979,
in which both Applicant and Protestants participated.
After considering all the evidence of record, including
feasibility studies submitted by each side that arrived
at opposite conclusions, the state Board concluded in
its Order of July 25, 1979, that the public needs and
convenience of Worland and Washakie County would
be promoted by the establishment of Bank and that
there was reasonable promise of successful operation
of Bank. Accordingly, the state Board ordered that the




L e g a l D evelopm ents

banking market is capable of supporting an additional
market entrant.
Protestants’ random market survey indicating public
satisfaction with existing banking services is not con­
clusive with respect to the need or feasibility of Bank.
The proposed location of Bank, despite its close prox­
imity to the two other commercial bank competitors,
appears to be quite convenient to the public since it is
a central location near most other retail and service
facilities in the area. In fact, the Board finds that the
proposed de novo bank would not only serve public
convenience as an additional full-service banking facil­
ity in the market, but would also benefit the public by
enhancing competition and deconcentrating a market
where there are only two commercial banking alterna­
tives.
In view of the foregoing discussion and having con­
sidered all the facts of record and all the comments of
Protestants in light of the statutory factors the Board
must consider under section 3(c) of the Act, it is the
Board’s judgment that consummation of the subject
proposal would be in the public interest and that the
application to acquire Bank should be approved.
On the basis of the record, the application is ap­
proved for the reasons summarized above. The trans­
action shall not be made (a) before the thirtieth calen­
dar day following the effective date of this Order, or
(b) later than three months after that date, and (c) First
Wyoming Bank, Worland, Wyoming, shall be opened
for business not later than six months after the ef­
fective date of this Order. Each of the periods de­
scribed in (b) and (c) may be extended for good cause
by the Board, or by the Federal Reserve Bank of Kan­
sas City pursuant to delegated authority.
By order of the Board of Governors, effective Au­
gust 19, 1980.
Voting for this action: Chairman Volcker and Governors
Wallich, Partee, Teeters, and Gramley. Absent and not vot­
ing: Governors Schultz and Rice.

(Signed) G riffith L. G arwood ,
[seal]

D ep u ty S ecreta ry o f the B oard.

O rders U nder S ection 4
o f Bank H olding C om pany A c t

The Bank of New York Company,
New York, New York
O rder A pprovin g A cqu isition o f N onhanking
C om pan ies

The Bank of New York Company (“ BNY Co.” ), New
York, New York, a bank holding company within the



793

meaning of the Bank Holding Company Act (“ Act” ),
has applied for the Board’s approval, under § 4(c)(8) of
the Act (12 U.S.C. § 1843(c)(8)), and 225.4(b)(2) of the
Board’s Regulation Y (12 C.F.R. § 225.4(b)(2)), to ac­
quire voting shares of ARCS Mortgage Corporation,
North Miami Beach, Florida (“ ARCS-Florida”) and
ARCS Mortgage Corporation, Encino, California
(“ ARCS-California” ) (“ Companies”), both of which
are engaged in mortgage lending activities and cur­
rently are subsidiaries of Empire National Bank (“ Em­
pire” ), Middletown, New York.
Companies are engaged in the business of originat­
ing and servicing first mortgage loans on one-to-four
family residential homes, selling these mortgages, and
servicing the loans for permanent investors. These ac­
tivities have been determined by the Board to be close­
ly related to banking (12 C.F.R. §§ 225.4(a)(1) and (3)).
Notice of the application, affording opportunity for
interested persons to submit comments on the public
interest factors, has been duly published. The time for
filing comments has expired, and the Board has con­
sidered the application and all comments received in
the light of the public interest factors set forth in sec­
tion 4(c)(8) of the Act.
Applicant, the ninth largest banking organization in
New York, controls one bank and a nonbank subsidi­
ary engaged in reinsurance activities, with consoli­
dated assets approximately $8.9 billion.1 Applicant
proposes to acquire companies in connection with
consummation of the merger of its lead bank, Bank of
New York (“ BNY” ), New York, New York with Em­
pire National Bank, Middletown, New York.2 ARCSCalifornia engages in mortgage banking activities from
offices in Cerritos, Covina, Encino, Clovis, Oxnard,
Paso Robles, Sacramento, San Diego, San Jose,
Stockton, Van Nuys, Hayward, and Pleasant Hill,
California, serving the counties of Fresno, Ventura,
San Luis Obispo, Sacramento, San Diego, Santa
Clara, San Joaquin, Alameda, and Contra Costa, Cali­
fornia, and East San Fernando Valley, Eagle Rock,
Highland Park, Simi Valley, and Los Angeles and the
surrounding area. ARCS-Florida engages in mortgage
banking activities from offices in West Palm Beach,
Lighthouse Point, and North Miami Beach, serving
the geographic areas of Dade, Broward, and Palm
Beach Counties, Florida.
In order to approve this application, the Board must
find that Applicant’s performance of the proposed ac­
tivities through Companies “ can reasonably be ex­
pected to produce benefits to the public, such as great­
er convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such

1. Data are as of December 31, 1979.
2. See the Board's Order of this date approving the merger.

794

F ed eral R ese rv e B ulletin □ S ep tem b er 1980

as undue concentration of resources, decreased or un­
fair competition, conflicts of interest, or unsound
banking practices.” The proposed acquisition of Com­
panies does not raise any significant competitive is­
sues. Companies (total combined assets of $14.7 mil­
lion and a servicing portfolio of $518 million) are
among the smaller participants in their respective
mortgage lending markets, ranking as the 112th and
130th largest mortgage companies in the United
States.3 Unlike their larger competitors, Companies
do not originate mortgages on a nationwide basis. No
direct competition between Companies and BNY Co.
would be eliminated by the proposed acquisition.
BNY Co. does not engage in the business of mortgage
banking and BNY at present does not extend mortgage
credit in any of the Florida and California markets
where Companies originate all of their mortgage loans.
It is unlikely that BNY would expand its mortgage
lending activity to Companies’ markets given the wide
geographic dispersion of Companies’ offices. Similar­
ly, Companies are of insufficient size to be considered
potential competitors in BN Y ’s markets. Affiliation
with Applicant will facilitate expansion of Companies’
capital base and their mortgage activities due to Appli­
cant’s access to the commercial paper market which
can be used to fund Companies and due to the ability
of Applicant to borrow funds for Companies in excess
of Empire’s lending limitations. Applicant also will
provide the managerial expertise necessary to insure
continuous, profitable operation of Companies.
There is no evidence in the record that consum­
mation of the proposal would result in undue concen­
tration of resources, decreased or unfair competition,
conflicts of interest, unsound banking practices, or
other adverse effects on the public interest. Accord­
ingly, the Board concludes that the balance of public
interest factors it must consider under section 4(c)(8)
of the Act favors approval of the applications filed un­
der that section, and that the application should be ap­
proved.
This determination is subject to the conditions set
forth in section 225.4(c) of Regulation Y and to the
Board’s authority to make examinations of bank hold­
ing companies and their subsidiaries, and 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
Orders and regulations issued thereunder, or to pre­
vent 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.
3. Data are as of June 30, 1979.




By order of the Board of Governors, effective Au­
gust 12, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Wallich, Partee, Teeters, Rice, and Gramly.

(Signed) T heodore E. A llison ,
[seal]

S ecreta ry o f the B oard.

First City Bancorporation o f Texas,
Houston, Texas
O rder A p p ro vin g A cqu isition o f F irst C ity Insurance
A g en cy

First City Bancorporation of Texas, Houston, Texas,
a bank holding company within the meaning of the
Bank Holding Company Act (“ Act”), has applied for
the Board’s approval under section 4(c)(8) of the Act
(12 U.S.C. § 1843(c)(8)) and section 225.4(b)(2) of the
Board’s Regulation Y (12 C.F.R. § 225.4(b)(2)), to ac­
quire a dormant Texas corporation in order to acquire
its license to act as a managing general agent as that
term is defined by the Insurance Code of Texas. The
company’s name would be changed from Central Tex­
as Insurance Agency, Inc., to First City Insurance
Agency, Houston, Texas (“ Agency”), and Applicant
would thereafter engage de novo in the activity of act­
ing as managing general agent with respect to (i) insur­
ance for Applicant’s banking subsidiaries, and (ii)
credit-related life, health, property and casualty insur­
ance. Such activities have been determined by the
Board to be closely related to banking (12 C.F.R.
§ 225.4(a)(9)(i) and (ii)).
Notice of the application, affording opportunity for
interested persons to submit comments on the public
interest factors, has been published (44 F ed era l R e g is­
ter 55654 (1979)).1 The time for filing comments has
expired, and the Board has considered the application
and all comments received, including the request for a
hearing submitted jointly by the Independent Insur­
ance Agents of America and the Independent Insur­
ance Agents of Texas (collectively, “ IIAA” or “ Prot­
estant” ), in light of the public interest factors set forth
in section 4(c)(8) of the Act.
Applicant is the largest banking organization in the
state of Texas with 44 domestic bank subsidiaries and
total assets of approximately $9.5 billion.2 Applicant
1. This application was initially processed under the procedures set
forth in section 225.4(b)(1) of the Board’s Regulation Y (12 C.F.R. §
225.4(b)(1)) as a proposal to engage de novo in activities determined
by the Board to be closely related to banking. Because of the nature of
the protests filed and request for hearing, it was determined that the
application should be processed at the Board.
2. All data are as of December 31, 1979.

L e g a l D evelopm ents

controls six nonbanking subsidiaries representing a
minimal portion of Applicant’s overall operations.
Agency is a dormant corporation not currently en­
gaged in any business. Agency’s only assets are $1,000
in capital and a license to act as a “ managing general
agent” under the laws of Texas.3 Upon consummation
of the proposal, Applicant through Agency would en­
ter into an agreement with one or more independent
insurance agents, known under Texas law as “ local
recording agents,” 4 to perform the managerial and ad­
ministrative functions associated with the selling of in­
surance by these agents for Applicant’s banking sub­
sidiaries and in connection with extensions of credit
made by the Applicant’s subsidiary banks. Applicant
would not act as “ local recording agent.”
Section 4(c)(8) of the Act provides that the Board
may approve a bank holding company’s application to
engage in a nonbanking activity only after the Board
has determined that the proposed activity is so closely
related to banking as to be a proper incident thereto.
The Board has determined by regulation that acting as
agent with respect to the sale of credit-related insur­
ance and insurance for the banking subsidiaries of a
bank holding company are permissible nonbank activi­
ties. This determination was affirmed in A la b a m a A s ­
sociation o f Insurance A g en ts v. B oard o f G o v e rn o rs.5
To approve an application under section 4(c)(8) of
the Act the Board must also determine that the per­
formance of the proposed activities by a nonbank sub­
sidiary of a bank holding company 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 un­
sound banking practices. Section 4(c)(8) of the Act al­
so provides that the Board may approve a bank hold­
ing company’s application to engage in, or to acquire,
voting shares of a company engaged in nonbanking ac­
tivities only after notice of the proposal and an oppor­
tunity for a hearing on the matter.
Both Applicant and Protestant have made numerous
written submissions to support their respective posi­
tions regarding this application. In reaching the con­
clusions set forth below, the Board has considered the
application, Applicant’s supplementary comments and
submissions, and all of the comments and submissions
made by Protestant.
Protestant’s assertions may be summarized as fol­
lows: the proposed activity is not “ closely related” to
banking within the meaning of section 4(c)(8) of the
Act; Applicant’s proposal lacks specificity, would not
3. Insurance Code of Texas, Article 21.07-3, section 2.
4. I b id ., Article 21.14, section 2.
5. 533 F.2d 224 (5th Cir. 1976), modified on rehearing, 558 F.2d 729
(1977), cert, denied, 435 U.S. 904 (1978).



795

result in any benefits to the public and would result in
adverse effects in the form of decreased competition;
and a formal hearing is needed to resolve all of the
issues raised above.
In response, Applicant contends that the con­
clusions reached by Protestant are incorrect. The
Board will address these issues in turn.
W hether the P ro p o se d A c tiv ity is “ C losely R e la te d ”
to B anking

Texas law separately authorizes two insurance agency
activities: acting as managing general agent and acting
as local recording agent.6 Generally, managing general
agents perform the administrative and supervisory
functions related to the sale of insurance contracts,
while local recording agents perform the solicitation
and negotiation functions related to the sale of such
contracts.
Applicant has applied pursuant to the Board’s insur­
ance agency regulation (i.e., 12 C.F.R. § 225.4(a)(9)) to
engage in the former of these two insurance agency
activities. The Protestant asserts that the proposed ac­
tivity is not included in the Board’s insurance regula­
tion, which it claims authorizes only sales functions
relating to certain types of insurance contracts. Ac­
cordingly, Protestant contends that the proposed ac­
tivity is not “closely related” to banking within the
meaning of section 4(c)(8) of the Act.
The Board’s insurance agency regulation authorizes
bank holding companies to act as “ agent or broker”
with respect to the sale of certain types of insurance
(12 C.F.R. § 225.4(a)(9)). The Board’s regulation does
not define the term “ agent or broker.” However, Tex­
as law specifically defines the term agent and autho­
rizes the activities proposed by this application. Fur­
thermore, Applicant has committed to engage in no
insurance underwriting activities in connection with
this application and has committed to conduct its pro­
posed activities in accordance with Texas law and the
Board’s regulations. The Board understands that in
some states other than Texas, the activities of a man­
aging general agent and a local recording agent may be
performed by the same insurance agent.7 In fact, the
Board in the past has approved applications by bank
holding companies to engage in the proposed activity
in Texas. Accordingly, in light of all these facts, the
Board believes there is no reason in this instance to
restrict the meaning of the term insurance agent as de­
fined by Texas statute and finds that the proposed ac-

6. S ee footnotes 3 and 4, supra.

7. For example, in F lorida A s so c ia tio n o f In su ra n c e A g e n ts v.
591 F.2d 334 (5th Cir. 1979), it was noted that
insurance agency activities included the “solicitation, negotiation, e f­
f e c tu a tin g or servicin g any policy or contract of insurance" (emphasis
supplied).
B o a rd o f G o vern o rs,

796

F ed eral R ese rv e B ulletin □ S ep tem b er 1980

tivity is “ closely related” to banking within the mean­
ing of the Act.
Public Benefits/Adverse Effects
Applicant has enumerated several public benefits that
it claims would result from approval of this appli­
cation. It asserts that Agency would have a better bar­
gaining position vis-a-vis the insurance underwriters
than the independent local recording agents hold. Such
a better position may mean that Applicant’s customers
could obtain insurance at a lower cost than they would
through independent agents. In fact, Applicant has
committed to obtain insurance for its customers at the
lowest practicable cost. Additionally, Applicant as­
serts that approval of this application would result in
increased public convenience, because Applicant’s
customers will be able to purchase credit-related insur­
ance at the same time credit is obtained; duplicative
forms and other information will be eliminated, and
customers will have the advantages of combined bill­
ing. Further, Applicant would be able to achieve in­
creased efficiency by using its existing facilities (there­
by realizing a savings in overhead expenses); and by
consolidating administrative handling of claims, pre­
miums and applications, achieving some economies of
scale. Finally, Applicant contends that consummation
of the proposal would result in increased competition
among the local recording agents and among the insur­
ance underwriters.
IIAA states that the proposal does not satisfy the
public benefits requirements of section 4(c)(8) of the
Act and challenges many of the alleged public benefits.
Protestant contends that Agency’s role as a managing
general agent adds another level of distribution be­
tween insurance underwriters and the local recording
agents, thereby reducing rather than increasing effi­
ciency in the sale of insurance. Finally, IIAA contends
that consummation of the proposal would have the ad­
verse effect of reducing competition among local re­
cording agents for insurance business related to exten­
sions of credit by Appplicant’s subsidiaries.
The Board has considered the assertions of Appli­
cant and Protestant and concludes that on balance Ap­
plicant’s proposal is not likely to result in significant
gains in convenience or efficiency. Some gains in con­
venience and efficiency might be associated with Ap­
plicant’s proposal, but Applicant has not provided suf­
ficient information for the Board to conclude that such
gains may reasonably be expected to occur. Thus, the
Board has accorded Applicant’s claims no weight in
acting on this application. Also, the Board has consid­
ered Applicant’s claim that consummation of this pro­
posal will increase competition among the local re­
cording agents to be appointed by Applicant and
between insurance underwriters competing for the



large volume of business Applicant would offer. IIAA
makes claims to the contrary. The Board is not per­
suaded by the Protestant’s claims that independent
recording agents would not compete for Applicant’s
insurance business as a result of the proposal. This
conclusion ignores the fact that such agents can freely
compete to sell insurance to Applicant’s customers,
may compete for appointment as local recording
agents by Applicant, and that section 106 of the Act
specifically prohibits Applicant from tying its insur­
ance business to its credit-granting activities.8 On the
other hand, the Board is not convinced that increased
competition in the form described by Applicant is
likely to result from Applicant’s proposal. Accord­
ingly, the Board attributes no weight to Applicant’s
contentions that the proposal is likely to result in pub­
lic benefits.
It is clear to the Board, however, that consum­
mation of the proposal will add an additional com­
petitor because Applicant essentially seeks to expand
its activities de novo. Thus a new alternative will be
offered to those members of the public wishing to pur­
chase their credit-related insurance from a system that
offers the services of a managing general agent and a
local recording agent. The Board considers this new
combination to be an alternative to, rather than a re­
placement for, independent local recording agents and
believes that insurance customers should be allowed
to choose between such alternatives. Thus the de novo
nature of this proposal represents a clear public bene­
fit.9 Moreover, Applicant has committed to secure in­
surance for its customers at the lowest practicable
cost. The Board regards this commitment as a material
representation relative to the public benefits to be ex­
pected from this proposal. Accordingly, the Board
concludes that lower costs to the public likely to result
from this proposal also constitute a public benefit.
Hearing Request10
IIAA asserts, however, that further examination of
Applicant’s proposal is necessary for the Board to
conclude that the benefits associated with the appli­
cation outweigh adverse effects, and that such exami­
nation can only be accomplished through a formal
hearing. Indeed, Protestant states that such a hearing
is necessary simply to ascertain that Applicant will not
engage in insurance activities (such as underwriting
and acting as agent for noncredit related insurance)
8 . Protestant has made speculative allegations as to the possibility
of tying but has offered no evidence of such a practice.
9. See, Virginia National Corporation, Order dated July 24, 1980,
pp. 12-13.
10. The Board has considered IIAA’s objections and request for a
hearing, although in this instance it has not concluded that IIAA
would be a “party in interest" with respect to this application.

L e g a l D evelopm ents

that the Board has not determined to be permissible
for bank holding companies.
In order to be entitled to a hearing under section
4(c)(8) of the Act, a protestant must present issues of
fact that are material to the Board’s decision and dis­
puted by the relevant parties.11 Moreover, although a
hearing request may not lightly be denied, “ . . . an
agency is not required to conduct an evidentiary hear­
ing when it can serve absolutely no purpose.” 12 Appli­
cant has committed to engage only in insurance activi­
ties permitted by the Board’s regulations, and
Protestant does not offer evidence that Applicant in
fact intends to underwrite or act as agent with respect
to any other insurance. Applicant’s proposal is suffi­
ciently specific to put competitors and the public on
notice regarding its intentions, and the Board’s contin­
uing supervisory authority over bank holding com­
panies enables it to prevent the commencement of im­
permissible insurance activities. Moreover, there is no
evidence that Applicant has engaged in any unauthor­
ized insurance activities in the past. Thus, the Board
concludes that material facts are not in issue regarding
the scope of Applicant’s proposal and that no purpose
would be served by ordering a hearing on this point.
Protestant asserts that there are a number of other
material issues in dispute that require a hearing. How­
ever, much of IIAA’s request for a hearing relates to
its claim that additional facts are needed, rather than
to explore differences in the facts presented. A hearing
is not required in such instances. The remainder of
IIAA’s request for a hearing relates to IIAA’s dis­
agreement with Applicant that consummation of this
proposal would result in greater convenience, in­
creased efficiency and certain types of increased com­
petition. The Board has resolved these issues in
IIAA’s favor and, as indicated above, has accorded no
weight to Applicant’s claims. Consequently a hearing
on these points would serve no purpose. It bears re­
peating, however, that IIA A has not controverted the
public benefits associated with the proposal in the
form of the creation of an additional insurance alterna­
tive for the consumer nor has IIAA offered any evi­
dence that Applicant would not keep its commitment
to secure insurance at the lowest practicable cost to its
customers. Therefore, the Board concludes that a
hearing on this application can serve no useful pur­
pose.
The Board finds that consummation of this proposal
cannot reasonable be expected to produce any undue

11. Connecticut Bankers Assn., supra at 12. The court stated that
"a protestant does not become entitled to an evidentiary hearing
merely on request, or on a bald or conclusory allegation that such a
dispute exists." Id.
12. Independent Bankers Assn. v. Board of Governors, 516 F.2d
1206, 1220 (D.C. Cir. 1975).




797

concentration of resources, decreased or unfair com­
petition, conflicts of interests, unsound banking prac­
tices or other adverse effects. Public benefits can rea­
sonably be expected to result from this proposal, and
they are easily sufficient to outweigh any possible ad­
verse effects which the Board has, in any event, found
to be unlikely to occur. Additionally, Protestant’s
claims regarding whether the activity is closely related
to banking and the propriety of bank holding company
involvement in the activity are, in the Board’s judg­
ment, without merit.
Based upon the foregoing and other considerations
reflected in the record, the Board has determined that
the balance of the public interest factors that the Board
is required to consider under section 4(c)(8) is favor­
able. Accordingly, the application is hereby approved.
This determination is subject to the conditions set
forth in section 225.4(c) of Regulation Y and to the
Board’s authority to require such modification or ter­
mination of the activities of a holding company or any
of its subsidiaries as the Board finds necessary to as­
sure compliance with the provisions and purposes of
the 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 Dallas, pursuant to
delegated authority.
By order of the Board of Governors, effective Au­
gust 22, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Partee and Gramley. Absent and not voting: Gover­
nors Wallich, Teeters, and Rice.

(Signed) G r i f f i t h L. G a r w o o d ,
[se a l]

D ep u ty S ecreta ry o f the B oard.

Liberty National Corporation,
Oklahoma City, Oklahoma
O rder A pprovin g R eten tion o f 50 p ercen t In terest in
L iberty-H eller F a cto rs, Inc.

Liberty National Corporation, Oklahoma City, Okla­
homa, a bank holding company within the meaning of
the Bank Holding Company Act (the “ Act” ) has ap­
plied for the approval of the Board under section
4(c)(8) of the Act, 12 U.S.C. § 1843(c)(8), and section
225.4(b)(2) of Regulation Y, 12 C.F.R. § 225.4(b)(2), to
retain 50 percent of the voting shares of Liberty-Heller
Factors, Inc., Oklahoma City, Oklahoma (“ Compa­
ny”). The remaining 50 percent of Company’s voting
shares are held by Heller Interstate, Inc., Chicago, Illi-

798

F ed eral R ese rv e B ulletin □ S ep tem b er 1980

nois, a wholly-owned subsidiary of Walter E. Heller
International Corporation, Chicago, Illinois (“ Hel­
ler” ), which is also a bank holding company within the
meaning of the Act. The Company engages in accounts
receivable and inventory financing activities. The
Board has previously determined that such activities
are closely related to banking. 12 C.F.R. § 225.4(a)(1).
Notice of the application, affording opportunity for
interested persons to submit comments and views, has
been duly published. The time for filing comments and
views has expired, and the Board has considered the
application and all comments received in light of the
factors set forth in section 4(c)(8) of the Act.
Applicant has one banking subsidiary, Liberty Na­
tional Bank and Trust Company of Oklahoma City,
holding deposits of $1.4 billion (as of December 1979),
and eight direct or indirect non-banking subsidiaries in
addition to Company. Applicant and Heller formed
Company as a joint venture in 1969 to engage in factor­
ing activities for oil and gas drilling companies in Okla­
homa. Due to a lack of demand for this kind of service,
the Company gradually began providing accounts re­
ceivable and inventory financing, terminating its factor­
ing activities completely by 1974. Because Applicant
became a bank holding company pursuant to the 1970
amendments to the Act, Applicant must divest or se­
cure the Board’s approval to retain its ownership of
Company by December 31, 1980.1
The Board regards the standards of section 4(c)(8)
for the retention of shares in a non-banking company
to be the same as the standards for a proposed acquisi­
tion. In addition, the Board has previously expressed
concern about the competitive effects of joint activities
by bank holding companies.2
The extent to which this joint venture eliminated
competition is determined by the facts that existed at
the time the co-venturers entered into the activity.3 It
appears that at the time Company was formed, neither
Applicant nor Heller was engaged in factoring activi­
ties for oil and gas drilling companies in the relevant
geographic market.4 Therefore, the Board finds that no
existing competition was eliminated by the estab­
lishment of Company.
The Board must also consider whether, at its in­
ception, the formation of the joint venture eliminated
any potential competition, i.e., whether, absent this

1. Heller’s participation in the joint venture was approved by the
Board’s Order approving Heller's application to become a bank hold­
ing company. W alter E. H e lle r In tern a tio n a l C o rp ., 59 F e d e r a l R e­
s e r v e B u l l e t i n 463 (1973).
2. E .g ., F ort W orth N a tio n a l C o rp o ra tio n , S haw mu t A sso c ia tio n ,
In c ., 60 F e d e r a l R e s e rv e B u l l e t i n 382, 384 (1974).
3. S ee U n ited S ta te s r. Penn -O lin C h em ica l C o ., 378 U.S. 158
(1964).
4. The geographic market for both factoring and commercial
financing services is regional or national in scope.



joint venture, either Applicant or Heller, on its own,
would have entered the market. With respect to Com­
pany’s original factoring activities for oil and gas drill­
ing companies, it appears that the likelihood of sepa­
rate entry into these activities by either of the co­
venturers was remote because the success of such op­
erations depended on the combination of expertise not
possessed by either bank holding company alone: Ap­
plicant was familiar with the area to be served and its
businesses, but had no experience in factoring activi­
ties; on the other hand, Heller had significant expertise
in factoring but little knowledge of the market area to
be served. With respect to Company’s more recent ac­
counts receivable and inventory lending operations,
the need for this mutually exclusive expertise is less
apparent. However, because numerous commercial
banks and commercial finance companies provide
commercial financing services in the relevant geo­
graphic market similar to those provided by Company,
the Board finds that the loss of either of the co-ventur­
ers as a potential competitor as a result of the forma­
tion of this joint venture was not significant. Accord­
ingly, in the Board’s view, retention of a 50 percent
interest in Company by Applicant will not have any
significantly adverse competitive effects. On the other
hand, continuation of the joint venture will result in
the continued existence of a viable competitor in the
market. Therefore, retention of Company will result in
public benefits.
There is no evidence in the record that would in­
dicate that Applicant’s continued retention of its inter­
est in Company would result in undue concentration of
resources, unfair competition, conflicts of interest, un­
sound banking practices, or other adverse effects.
Based upon the foregoing and other considerations
reflected in the record, the Board has determined that
the balance of the public interest factors the Board 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
section 225.4(c) of Regulation Y and to the Board’s
authority to require such modification or termination
of the activities of a holding company or any of its sub­
sidiaries as the Board finds necessary to assure com­
pliance with the provisions and purposes of the Act
and the Board’s regulations and orders issued there­
under, or to prevent evasion thereof.
By order of the Board of Governors, effective Au­
gust 4, 1980.
Voting for this action: Vice Chairman Schultz and Gover­
nor Wallich Partee, Teeters, and Gramley. Absent and not
voting: Chairman Volcker and Governor Rice.

(Signed)
[s e a l ]

T heodore

E.

A l l is o n ,

Secretary of the Board.

L e g a l D evelopm ents

Mercantile Bancorporation, Inc.,
St. Louis, Missouri
Order Approving Insurance Agency Activities
Mercantile Bancorporation, Inc. (“ Applicant” ), St.
Louis, Missouri, a bank holding company within the
meaning of the Bank Holding Company Act (“ Act” ),
has applied pursuant to section 4(c)(8) of the Act (12
U.S.C. § 1843(c)(8)) and section 225.4(b)(1) of the
Board’s Regulation Y (12 C.F.R. § 225.4(b)(1)), for
permission to engage de novo, through its subsidiary,
MBI Insurance Agency, Inc., St. Louis, Missouri
(“ Agency” ), in the sale of property and casualty insur­
ance directly related to extensions of credit or other
financial services by Applicant’s banking subsidiaries
in Missouri. Such nonbank activities have been deter­
mined by the Board to be closely related to banking
and therefore permissible for bank holding companies
(12 C.F.R. § 225.4(a)(9)).
Notice of the application, affording opportunity for
interested persons to submit comments on the public
interest factors has been duly published.1 The time for
filing comments has expired, and the Board has con­
sidered the application and all comments received, in­
cluding those received from the Independent Insur­
ance Agents of America, Inc., and the Independent
Insurance Agents of Missouri (collectively, “ Protes­
tant” ), in light of the considerations specified in sec­
tion 4(c)(8) of the Act.
Applicant controls the largest banking organization
in Missouri, with aggregate deposits of approximately
$2.2 billion.2 Applicant proposes to sell property and
casualty insurance at the location of each of its bank­
ing subsidiaries. It is anticipated that the area to be
served for such insurance sales will be the area sur­
rounding each such office.
Section 4(c)(8) of the Act provides that the Board
may approve a bank holding company’s application to
engage in a nonbanking activity only after the Board
has determined that the proposed activity is so closely
related to banking as to be a proper incident thereto.
The Board has determined by regulation that the sale
as agent of credit-related insurance and the sale of in­
surance related to the provision of other financial serv­
ices, such as mortgage servicing, are permissible non­
banking activities. This determination was affirmed in

1. This application initially was processed under the procedures set
forth in section 225.4(b)(1) of the Board’s Regulation Y (12 C.F.R. §
225.4(b)(1)) as a proposal to engage de novo in activities determined
by the Board to be closely related to banking. Because of the nature of
the protest filed and request for hearing, it was determined that the
application should be processed at the Board.
2. Banking data are as of June 30. 1978.



199

Alabama Association o f Insurance Agents v. Board o f
Governors.3
To approve an application under section 4(c)(8) of
the Act the Board must also determine that the per­
formance of the proposed activities by a nonbank sub­
sidiary of a bank holding company 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 un­
sound banking practices. Section 4(c)(8) of the Act al­
so provides that the Board may approve a bank hold­
ing company’s application to engage in, or to acquire
voting shares of a company engaged in, nonbanking
activities only after notice of the proposal and an op­
portunity for a hearing on the matter.
Both Applicant and Protestant have made numerous
written submissions to support their respective posi­
tions regarding this application. In reaching the con­
clusions set forth below, the Board has considered the
application, Applicant’s supplementary comments and
submissions, and all of the comments and submissions
made by Protestant.
Protestant’s assertions may be summarized as fol­
lows: (1) It is unclear whether the proposed activity
falls within the category of insurance activities ap­
proved by the Board as “closely related to banking”
since the application does not state wjth “ absolute
clarity” what insurance coverages are contemplated
by its application. (2) The application raises the poten­
tial for coercive or voluntary tying of insurance sales
to extensions of credit and this potential is enhanced
by the fact that Applicant’s insurance agents will have
other duties and thus may have a conflict of interest.
(3) The application fails to demonstrate how Applicant
will compete with nonaffiliated insurance agents on the
basis of lower price and also fails to present facts re­
garding the rates at which Applicant intends to sell in­
surance. In this connection, the financing of premiums
to be offered by Applicant may increase costs for con­
sumers since most underwriters provide premium de­
ferral plans that effectively finance premiums at more
favorable rates than normal bank lending rates. (4) Be­
cause Applicant’s insurance agents will be engaged in
a combination of activities, Applicant’s customers will
not have available to them a full-time insurance profes­
sional.
The Board will address each of these issues in turn.
(1) Whether the proposed activity is 4'closely related
to b a n k i n g Protestant initially asserted that Appli­
cant is required to state with “ absolute clarity”
3. 533 F.2d 224 (5th Cir. 1976), modified on rehearing, 558 F.2d 729
(1977), cert, denied, 435 U.S. 904 (1978).

800

Federal R eserve Bulletin □ Septem ber 1980

what insurance coverages are contemplated by its
application so that the Board may determine that
Applicant does not propose to sell any types o f in­
surance that the Board has determined are not per­
missible for bank holding companies. Applicant has
committed not to sell any o f the types of insurance
that the Board has determined are not permissible
and Protestant does not assert that Applicant in fact
intends to sell any such insurance. Applicant’s pro­
posal is sufficiently specific to put competitors and
the public on notice regarding its intentions, and the
Board’s continuing supervisory authority over bank
holding companies enables it to prevent the com ­
mencement of impermissible insurance activities.
Moreover, there is no evidence that Applicant has
engaged in any unauthorized insurance activities in
the past.
Applicant has stated both in its application and in
correspondence to the Board that it will offer prop­
erty insurance on motor vehicles, recreational vehi­
cles, boats, mobile homes, and improved real estate.
It has stated that the insurance coverages it will of­
fer include dual and single interest physical damage
insurance for motor and recreational vehicles, phys­
ical damage insurance for boats, fire and/or mobile
home owner insurance for mobile homes, and fire
and/or home owners insurance for improved real
property. In addition, Applicant has stated that it
may offer flood insurance for mobile homes and im­
proved real estate. The Board has interpreted the
insurance provisions of its Regulation Y to authorize
the sale of these types of insurance. (12 C .F.R.
§ 225.128)
Protestant’s letter of July 3, 1980, to the Board
acknowledges that Applicant now has sufficiently
stated the lines of insurance covered by its appli­
cation, with the exception o f flood insurance on mo­
bile homes and improved real estate, which was not
originally proposed in the application as a type o f
insurance Applicant would offer. It is the Board’s
opinion that such insurance coverage falls generally
within the category of property and casualty insur­
ance permissible for bank holding companies and
that no additional notice o f this particular coverage
is required.
(2) Coercive or voluntary tying. Section 106 of the
Bank Holding Company Act prohibits a bank from
requiring its customers to purchase insurance from
it in order to receive credit. Although section 106
applies directly only to banks, the Board has ex ­
panded the prohibition of that section to encompass
bank holding companies through section 225.4(c) of
its Regulation Y (12 C .F.R. § 225.4(c)). Thus, any
action taken by Applicant to require the purchase of



insurance from it is unlawful. There is no evidence
that Applicant has engaged in any coercive tying in
the past with regard to any o f its activities.
Protestant asserts, however, that credit custom ­
ers may nevertheless believe that the likelihood that
credit will be granted may be enhanced by agreeing
to purchase insurance from Applicant, and that an
effective or voluntary tie will result. For the reasons
explained below, the Board finds this contention to
be without merit.
The possibility o f voluntary tying is significantly
reduced by the number o f credit alternatives in the
relevant markets. The Board notes that there are
five or more banking organizations in all but three o f
the 22 markets in which Applicant com petes, as well
as a number of other financial intermediaries, such
as savings and loan associations and credit unions.
Moreover, Applicant does not hold more than 15
percent of total commercial bank deposits in any of
M issouri’s five major urban areas, and Applicant
does not appear to be the dominant organization in
any o f these markets.
At the time the Board added the activity o f selling
credit related insurance to the list of permissible ac­
tivities for bank holding companies, it determined
that absent unusual circumstances associated with a
particular application, there are, as a general matter,
no significant adverse effects, such as voluntary ty­
ing, inherent in the performance of the activity by a
bank holding company on a de novo basis. The
Board continues to believe that this is the case with
regard to insurance agency activities, particularly in
view o f the court’s decision in Alabama Association
o f Insurance A g en ts, supra. Protestant’s general ob­
jection to this application on the basis that voluntary
tying might occur is in substance an attack on the
relevant regulation, a regulation that was upheld in
Alabam a A ssociation .
With regard to this particular application, it is the
Board’s judgment that the commitments provided
by Applicant sufficiently assure against any possi­
bility o f voluntary tying as an adverse effect. Specif­
ically, Applicant has expressly committed that the
provision o f other financial services by its banking
and nonbanking subsidiaries, including extensions
of credit, shall not be conditioned expressly or im­
pliedly on the purchase o f insurance through its in­
surance agency subsidiary and that Applicant’s em ­
ployees involved in insurance activities will be
continuously instructed in this policy. In addition,
Applicant has committed that in all instances where
property or casualty insurance will be offered to cus­
tomers o f its subsidiary banks, the loan documenta­
tion will include a statement that the customer may
obtain insurance through other persons. Applicant

L eg a l D evelopm en ts

801

has further indicated that it will not promote its
property and casualty insurance services to the pub­
lic through advertising or similar means. The Board
regards these commitments as significant, and has
relied on them in acting on this application.4

result in higher costs when compared to premium
deferral plans neither detracts from Applicant’s
commitment regarding cost nor represents an ad­
verse effect because such premium financing is op­
tional.

(3) Price com petition . Protestant argues that Appli­
cant should be required to demonstrate how it will
compete with nonaffiliated insurance agents on the
basis of lower price and to present facts regarding
the rates at which it intends to sell insurance, the
interest rates it would charge for premium financing,
and other pricing variables. The Board does not find
it necessary for Applicant to commit to specific
prices and interest rates in view of the procompetitive nature of this application and the com­
mitment Applicant has made regarding pricing, as
discussed below .5 Consummation of this proposal
will add an additional competitor since Applicant
seeks to expand its insurance activities de novo. Be­
cause de novo expansion provides an additional
source of competition, the Board views such expan­
sion as being precompetitive in the absence of evi­
dence to the contrary.6 With regard to applications
filed under section 4(c)(8) of the Act, Congress au­
thorized the Board to differentiate between activi­
ties commenced de novo and activities commenced
through the acquisition of a going concern because
Congress viewed de novo entry as having beneficial
effects on com petition.7 The Board concludes that
the de novo nature of this proposal represents a
clear public benefit. This conclusion is based on eco­
nomic theory, Congressional instruction, and the
Board’s experience in administering the Act.
Moreover, Applicant has committed to offer in­
surance at the lowest reasonable cost to the custom­
er. The Board regards this as a commitment to offer
insurance at the lowest practicable total cost, in­
cluding the costs of billing. The possibility that the
premium financing to be offered by Applicant could

(4) Presence o f full-tim e insurance professionals to
serve custom ers. Protestant asserts that, because
Mercantile’s insurance agents will be engaged in a
combination o f activities, Mercantile’s customers
will not have available to them a full-time insurance
professional. Protestant further asserts that custom­
ers will be inconvenienced since Applicant cannot
renew insurance coverage once the underlying ex­
tension of credit is repaid. While it is correct that
Applicant may not offer renewal insurance and in
some respects will not offer the services o f a full
service insurance agency, the Board does not con­
sider this to be an adverse effect. The fact that a
holding company either chooses not to offer certain
services, or is prevented by the Board’s regulations
from doing so, does not represent an adverse effect
within the meaning of section 4(c)(8).8 Some impor­
tant gains in convenience and efficiency might result
from Applicant’s proposal. Applicant has stated that
it will have a qualified licensed insurance agent at
the location o f each o f its banking subsidiaries and
has committed to provide an ongoing training pro­
gram for its insurance em ployees. On balance, how­
ever, the proposal may not result in significant over­
all gains in convenience or efficiency, and the Board
thus has not relied on Applicant’s contentions in this
regard in approving the application.
On the basis o f the preceding discussion, the
Board concludes that the precompetitive nature of
Applicant’s proposal can reasonably be expected to
produce benefits to the public. These clear public
benefits easily outweigh the speculative adverse ef­
fects alledged by Protestant with regard to unfair
competition, which adverse effects the Board has
concluded are not likely to occur.9 Indeed, the de
novo nature of this proposal alone is sufficient to
outweigh such speculative adverse effects. There is
no evidence that any other adverse effects may be
associated with this proposal, such as undue con­
centration of resources or unsound banking prac­
tices.

4. Applicant’s insurance agents will be compensated only through
their salaries. This fact, when coupled with the commitments de­
scribed above, eliminates any concern regarding a conflict of interest
on the part of the insurance agents.
5. The Board has required specific rate reductions with regard to
the underwriting of credit life, accident and health insurance, because
the manner in which the insurance underwriting industry is regulated
is more conducive to such a policy.
6. Virginia National Bankshares, Inc., 00 F f.df.ral R eserve Bul ­
letin 000 (July 24. 1980). BankAmerica Corporation (Decimus Cor­
poration, 66 F ederal R eserve Bulletin 511 (1980); Citicorp (Per­
son to Person). 65 F ederal R eserve B ulletin 507 (1979); U.N.
Bancshares, Inc.. 59 F ederal Reserve Bulletin 204 (1973). The
United States Court of Appeals for the District of Columbia Circuit
affirmed the Board's conclusions regarding the procompetitive nature
of de novo entry in Connecticut Bankers Association v. Board of Gov­
ernors,, No. 79-1554 (D.C. Cir. Feb. 7. 1980).
7. S. Rep. No. 91-1084. 91st Cong., 2nd Sess. 15. 16 (1970).




N eed fo r Hearing
Protestant asserts that examination o f Applicant’s pro­
posal in a formal hearing is necessary for the Board to
8. Virginia National Bankshares, Inc., supra.
9. Id.

802

Federal R eserve Bulletin □ Septem ber 1980

conclude that the benefits associated with the appli­
cation outweigh adverse effects. In order to be entitled
to a hearing under section 4(c)(8) of the Act, a protestant must present issues of fact that are material to the
Board’s decision and disputed by the relevant par­
ties.10 Moreover, although a hearing request may not
lightly be denied, “ . . . an agency is not required to
conduct an evidentiary hearing when it can serve abso­
lutely no purpose.11 For the reasons stated in this Or­
der and on previous occasions when it has denied a
hearing requested by the same protestants raising simi­
lar objections,12 the Board has determined that a hear­
ing in this case would serve no useful purpose.
Balance o f Public Benefits and A dverse Effects
The Board finds that consummation of this proposal as
approved herein cannot reasonably be expected to
produce any undue concentration of resources, de­
creased or unfair competition, conflicts of interests,
unsound banking practices or other adverse effects.
Public benefits can reasonably be expected to result
from this proposal, and they are easily sufficient to
outweigh any possible adverse effects which the Board
has, in any event, found to be unlikely to occur.
Based upon the foregoing and other considerations
reflected in the record, the Board has determined that
the balance of the public interest factors that the Board
is required to consider under section 4(c)(8) is favor­
able. Accordingly, the application is hereby approved.
This determination is subject to the conditions set
forth in section 225.4(c) of Regulation Y and to the
Board’s authority to require such modification or ter­
mination of the activities of a holding company or any
of its subsidiaries as the Board finds necessary to as­
sure compliance with the provisions and purposes of
the Act and the Board’s regulations and orders issued
thereunder or to prevent evasion thereof The Board
has also relied on the commitments made by Applicant
with regard to this proposal and is prepared to ensure
compliance with those commitments.
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 St. Louis, pursuant to
delegated authority.
By order of the Board of Governors, effective Au­
gust 22, 1980.

10. Connecticut Bankers Assn., supra at 12. The court stated that
“a protestant does not become entitled to an evidentiary hearing
merely on request, or on a bald or conclusory allegation that such a
dispute exists." Id.
11. Independent Bankers Association v. Board of Governors. 516
F.2d 1206, 1220 (D.C. Cir. 1975).
12. Virginia National Bankshares, Inc., supra.



Voting for this action: Chairman Volcker and Governors
Schultz, Partee and Gramley. Absent and not voting: Gover­
nors Wallich, Teeters, and Rice.

[se a l]

(Signed) G r if f it h L. G a r w o o d ,
D eputy Secretary o f the Board.

O rder U nder Section 2 o f Bank H olding
Com pany A c t

Kelwood Farms, Inc.,
Eureka, Kansas
Order Granting Determination
Under the Bank Holding Company A ct
Kelwood Farms, Inc. (“ Kelwood” ), Eureka, Kansas,
a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended, (12
U .S.C . § 1841 et seq.) (the “ A ct” ), has requested a
determination under section 2(g)(3) o f the Act (12
U .S.C . § 1841(g)(3)) that Kelwood is not in fact ca­
pable of controlling Mr. Elwood Marshall, although he
is indebted to Kelwood as a result of his purchase of
certain parcels of land from Kelwood.
Under the provisions of section 2(g)(3) o f the Act,
shares1 transferred after January 1, 1966, by any bank
holding company to a transferee that is indebted to the
transferor are deemed to be indirectly owned or con­
trolled by the transferor unless the Board, after oppor­
tunity for hearing, determines that the transferor is not
in fact capable o f controlling the transferee. N o
request for a hearing was made by Kelwood. Instead,
Kelwood has submitted evidence to the Board to sup­
port its contention that it is not in fact capable of con­
trolling Mr. Marshall, either directly or indirectly, and
the Board has received no contradictory evidence.
On the basis of the facts o f record, it is hereby deter­
mined that Kelwood is not in fact capable of con­
trolling Mr. Marshall or the subject parcels of land.
Kelwood is a small closely-held corporation of which
Mr. Marshall and members of his immediate family
control 81.23 percent o f the voting shares and Mr.
Marshall is its president. Kelwood divested certain
parcels of land, representing substantially all of its real
estate business, by selling them to Mr. Marshall for a
purchase price that included indebtedness from Mr.
Marshall to Kelwood. The transfer of real estate by
Kelwood to Mr. Marshall does not appear to be a
means of perpetuating Kelwood’s control over the

1. The Board deems the transfer of all or substantially all the assets
of a company to involve a transfer of shares of the company.

L eg a l D evelopm en ts

property, since Mr. Marshall is the dominant share­
holder of Kelwood. Furthermore, there is no in­
dication that the financial resources of Mr. Marshall
are not sufficient to repay the debt to Kelwood. Final­
ly, Kelwood has undertaken that it will not attempt to
exercise control over Mr. Marshall and Mr. Marshall
has committed not to allow Kelwood to exercise con­
trol over him or the parcels of land. On the basis of the
above and other factors of record, it is concluded that
Kelwood is not capable of controlling the real estate or
Mr. Marshall in his capacity as transferee o f the real
estate.
Accordingly, it is ordered that the request by Kel­
wood for a determination pursuant to section 2(g)(3) is
granted. This determination is based on representa­
tions made to the Board by Kelwood and Mr. Mar­
shall. In the event that the Board should hereafter de­
termine that facts material to this determination are
otherwise than as represented, or that Kelwood, or
Mr. Marshall have failed to disclose to the Board other
material facts and circumstances relied upon by the
Board in making this determination could result in the
Board reconsidering the determination made herein.
By order of the Board of Governors, acting through
its General Counsel, pursuant to delegated authority
(12 C.F.R. § 265.2(b)(1)) effective August 11, 1980.

[se a l]

(S ign ed )T h eod ore E. A llis o n ,
Secretary o f the Board.

C ertifications P ursu ant to the Bank H olding
C om pany Tax A c t o f 1976

American Financial Corporation,
Cincinnati, Ohio
Prior Certification Pursuant to the Bank Holding
Company Tax A ct o f 1976
American Financial Corporation (“ AFC” ), Cincin­
nati, Ohio, has requested a prior certification pursuant
to section 1101(b) and 1101(c)(3) of the Internal Reve­
nue Code (“ C ode” ) as amended by section 2(a) of the
Bank Holding Company Tax Act of 1976 (“ Tax A ct” ),
that its proposed divestiture of all the 5,107 shares of
The Provident Bank (“ Bank” ), Cincinnati, Ohio, pres­
ently held by AFC, through the pro rata distribution to
AFC's common stockholders of the stock of Provident
Holding Company (“ PHC ”), a corporation created
and availed of solely for the purpose of receiving
Bank's shares, is necessary or appropriate to ef­



803

fectuate the policies o f the Bank Holding Company
Act (12 U .S.C . § 1841 et seq (“ BHC A ct” ). AFC pro­
poses to exchange the 5,107 shares (approximating in
excess of 99 percent o f Bank’s outstanding shares) of
Bank that it presently owns for all the shares of PHC,
and immediately thereafter to distribute all o f PHC’s
shares pro rata to the holders of common stock of
A F C .1
In connection with this request, the following infor­
mation is deemed relevant, for purposes o f issuing the
requested certification:2
1. AFC is a corporation organized under the laws of
Ohio on Novem ber 15, 1955. AFC acquired own­
ership and control o f substantially all the shares of
Bank in a series o f transactions, such that on June
30, 1968, AFC had acquired ownership and control
o f 255,164 shares (5,103.28 shares as adjusted for the
one for fifty reverse stock split of May 1, 1972), rep­
resenting approximately 99 percent o f the out­

1. The Board has received numerous submissions from an individ­
ual (“Protestant”) challenging the effectiveness of the proposed di­
vestiture and the continuation of Bank’s current management. The
Tax Act contains no provision for participation in a tax certification
proceeding by a third party. Moreover, Protestant’s only alleged inter­
est in this divestiture is that of a concerned member of the general
public. It thus appears that Protestant has no standing to participate in
this matter. Protestant’s allegations have been considered in order to
ensure that AFC’s proposal will result in an adequate divestiture of
Bank, but this consideration in no way represents a waiver of the con­
clusion that Protestant has no standing.
Protestant’s primary concern is that the proposed spin-off will not
result in a true divestiture because the same stockholders that cur­
rently control AFC will control PHC and Bank after the spin-off. The
fact that, after a spin-off, shareholders of a divesting company and the
bank divested are identical and that such persons, acting as individ­
uals, may exercise influence over such bank, is a logical result of a
divestiture method clearly sanctioned by Congress. Section 1101(b)(2)
of the Code authorizes spin-offs to a bank holding company’s share­
holders without the surrender by such shareholders of stock in the
divesting company. Furthermore, under section 1101(a)(3) of the
Code, such spin-offs generally must be on a pro rata basis. On the
basis of all the information of record, including the allegations and
submissions of Protestent, and AFC’s affidavits disclaiming any abili­
ty or intent to control Bank and its commitments to terminate manage­
ment interlocks, it appears that there is insufficient evidence to sup­
port a finding that AFC will continue to control Bank at this time.
Since a spin-off is a permissible divestiture method, the proposed di­
vestiture appears to be adequate. See note 4 below for a further dis­
cussion of the adequacy of the proposed divestiture.
Protestant has also submitted information relative to Securities and
Exchange Commission (“SEC”) investigations of Bank and AFC’s
principals, which involved alleged violations of securities laws. These
investigations concluded with the issuance of consent decrees on Au­
gust 30, 1976, and July 2, 1979, signed by AFC and certain of its prin­
cipals, without those parties admitting or denying the allegations in the
SEC's complaint. The purpose of AFC’s proposal is to eliminate its
ability to control Bank, and none of the AFC principals that signed
these consent decrees will be an officer or director of bank or PHC.
Moreover, it appears that to the extent any violations of the securities
laws may have occurred, such violations have been remedied, and
there is no evidence of subsequent violations.
2. This information derives from AFC's communications with the
Board concerning its request for this certification, AFC's Registration
Statement filed with the Board pursuant to the BHC Act, and other
records of the Board.

804

Federal R eserve Bulletin □ Septem ber 1980

standing voting shares, of Bank. On July 7, 1970,
AFC held 255,214 shares (or 5,104 shares as adjust­
ed above) of the outstanding shares of Bank. AFC
presently owns 5,107 shares of Bank’s 5,116 out­
standing shares, reflecting the acquisition, between
July 7, 1970, and the present, of two director’s quali­
fying shares and one additional share.3
2. AFC became a bank holding company on Decem ­
ber 31, 1970, as a result of the 1970 Amendments to
the BHC Act, by virtue of its ownership and control
at that time of more than 25 percent of the out­
standing voting shares of Bank and registered as
such with the Board on October 15, 1971. AFC
would have been a bank holding company on July 7,
1970, if the BHC Act Amendments of 1970 had been
in effect on that date by virtue of its ownership and
control on that date of more than 25 percent of the
outstanding voting shares of Bank.
3. AFC has filed with the Board an irrevocable dec­
laration, pursuant to section 4(c)(12) of the BHC Act
and section 225.4(d) of the Board’s Regulation Y,
that it will cease to be a bank holding company by
January 1, 1981.
4. AFC holds property acquired by it prior to July 7,
1970, the disposition of which would be required by
section 4 of the BHC Act, if AFC were to continue
to be a bank holding company beyond December 31,
1980, and which property is “ prohibited property”
within the meaning of section 1103(c) of the Code.
5. AFC has committed to the Board that by Decem ­
ber 31, 1980, no person holding an office or position
(including an advisory or honorary position) with
AFC or any of its subsidiaries as an officer, director,
policy-making em ployee or management consultant,
or who performs (directly or through an agent, rep­
resentative or nominee) functions comparable to
those normally associated with such office or posi­
tion, will hold any such office or perform any such
function with PHC, Bank, or any of their sub­
sidiaries.4

3. Under subsection (c) of section 1101 of the Code, property ac­
quired after July 7, 1970, generally does not qualify for the tax benefits
of section 1101(b) when distributed by an otherwise qualified bank
holding company. The Board has, however, permitted directors’ qual­
ifying shares to be repurchased by a company after July 7, 1970, pur­
suant to a repurchase agreement, without losing their qualified status
under the Code. Therefore, the two repurchased shares do qualify for
tax benefits. The remaining single share of Bank’s stock was pur­
chased after July 7, 1970, does not qualify for any of the exceptions
under section 1101(c) of the Code, and was not acquired pursuant to a
repurchase agreement. That single share of the 5,107 shares of Bank
stock owned by AFC does not qualify for tax benefits.
4. AFC has owned approximately 99 percent of Bank's outstanding
shares and has controlled Bank's operations for more than 10 years.
Six members of AFC's management serve in similar positions with
Bank. Although one family, including all relations by blood and mar­
riage. owns approximately 50 percent of the shares of AFC. approxi­
mately the same number of shares are owned by unrelated individuals



On the basis of the foregoing information, it is here­
by certified that:
(A) AFC is a qualified bank holding corporation
within the meaning of subsection (b) o f section 1103
of the Code, and satisfies the requirements of that
subsection;
(B) the shares of Bank that AFC proposes to ex­
change for shares of PHC are all or part of the prop­
erty by reason of which AFC controls (within the
meaning of section 2(a) of the BHC Act) a bank or
bank holding company ; and
(C) the exchange of the shares of Bank for the
shares of PHC and the distribution to the share­
holders of AFC of the shares of PHC are necessary
or appropriate to effectuate the policies o f the BHC
Act.
This certification is based upon the representations
and commitments made to the Board by AFC and up­
on the facts set forth above. In the event the Board
should hereafter determine that facts material to this
certification are otherwise than as represented by
AFC, or that AFC has failed to disclose to the Board
other material facts or to fulfill any commitments made
to the Board in connection herewith, it may revoke
this certification.
By order of the Board of Governors, acting through
its General Counsel, pursuant to delegated authority
(12 C.F.R. § 265.2(b)(3)) effective August 29, 1980.

[se a l]

(Signed) G r if f it h L. G a r w o o d ,
D eputy Secretary o f the Board.

Atlantic Corporation,
Boston, Massachusetts
Prior Certification Pursuant to the Bank Holding
Company Tax A ct o f 1976
Atlantic Corporation, Boston, Massachusetts, (“ At­
lantic” ), has requested a prior certification pursuant to
section 6158(a) of the Internal Revenue Code

and AFC is a publicly held corporation. Furthermore, the largest num­
ber of shares that could be attributed to one person on the basis of the
‘‘immediate family” rule of Regulation Y (section 225.2(b)(2)) is ap­
proximately 25.6 percent. On the basis of these and other facts of rec­
ord, it does not appear that AFC is the alter ego of this person and his
immediate family. Since management interlocks between AFC and
Bank are one of the principal means by which AFC’s control might be
maintained over Bank, termination of the interlocking relationships
appears necessary to insure a complete divestiture of AFC's long­
standing control over Bank.

L eg a l D evelopm en ts

(“ Code” ), as amended by section 3(a) o f the Bank
Holding Company Tax Act of 1976 (“ Tax A ct” ), that
its proposed sale of 204,538 shares of common stock of
City Bank and Trust Company, Boston, Massachu­
setts, (“ Bank” ) to an unaffiliated bank is necessary or
appropriate to effectuate the policies of the Bank
Holding Company Act (12 U .S.C . § 1841 et seq.)
(“ BHC A ct” ).
In connection with this request the following infor­
mation is deemed relevant for the purposes of issuing
the certification:1
1. Atlantic is a corporation organized on November
26, 1937, under the laws of the State of Massachu­
setts. On January 28, 1957, Atlantic acquired own­
ership and control of 3,950 shares, representing 39.5
percent of the outstanding voting shares of Bank.
On April 15, 1971, Atlantic received 9,910 shares o f
common stock of Bank as a stock dividend.2
2. Atlantic became a bank holding company on D e­
cember 31, 1970, as a result of the 1970 Amend­
ments to the BHC Act by virtue of its ownership and
control that time of more than 25 percent of the out­
standing voting shares of Bank, and it registered as
such with the Board on January 12, 1972. Atlantic
would have been a bank holding company on July 7,
1970, if the BHC Act Amendments of 1970 had been
in effect on such date by virtue of its ownership and
control on that date of more than 25 percent of the
outstanding voting shares of Bank.
3. More than 85 percentum of the voting stock of
Atlantic was collectively owned on June 30, 1968,
and has been so owned continuously thereafter, di­
rectly or indirectly, by members of the same family,
or their spouses, who are lineal descendants of com­
mon ancestors. Accordingly, Atlantic has been ex­
empt from the prohibitions of § 4 of the BHC Act by
virtue of clause (ii) of § 4 of the BHC Act.
4. Atlantic holds property acquired by it on or be­
fore July 7, 1970, the disposition of which would,
but for the proviso of § 4(a)(2) and clause (ii) of § 4(c)
of the BHC Act, be necessary or appropriate to ef-

1. This information derives from Atlantic’s correspondence with
the Board concerning its request for this certification, Atlantic’s Reg­
istration Statement filed with the Board pursuant to the BHC Act, and
other records of the Board.
2. Under section 1101(c) of the Code, property acquired after July
7, 1970. generally, does not qualify for the tax benefits of section
6158(a) of the Code when acquired by an otherwise qualified bank
holding company. However, where such property was acquired by a
qualified bank holding company in a transaction in which gain was not
recognized under § 305(a) of the Code, then § 1101(b) is applicable.
Atlantic has indicated that it received 9,910 shares of Bank in a stock
dividend on April 15. 1971. Accordingly, even though 9,910 shares of
Bank's common stock were acquired by Atlantic after July 7, 1970.
those shares would nevertheless qualify property eligible for the tax
benefits provided in § 1101(b) of the Code, by virtue of § 1101(c). if the
Bank shares were in fact received in a transaction described in § 305(a)
of the Code in which no gain was recognized.




805

fectuate § 4 of the BHC Act if Atlantic were to re­
main a bank holding company beyond and Decem­
ber 31, 1980, and which property would, but for
such proviso and such clause, be “ prohibited prop­
erty” within the meaning of § 1103(c) of the Code.
Sections 1103(g) and 1103(h) of the Code provide
that any bank holding company may elect, for the
purposes of Part VIII of subchapter 0 of chapter 1 of
the Code, to have the determination whether prop­
erty is “ prohibited property” or is property eligible
to be distributed without recognition o f gain under §
1101(b)(1) of the Code, made under the BHC Act as
if such Act did not contain, respectively, the proviso
of § 4(a)(2) thereof and clause (ii) of § 4(c) thereof.
Atlantic has represented that it will make such an
election.3
5. Atlantic has committed to the Board that no per­
son holding an office or position (including and advi­
sory or honorary position) with Atlantic or any of its
subsidiaries as an officer director, policymaking em­
ployee, who performs (directly, through an agent
representative or nominee) functions comparable to
those normally associated with such office or posi­
tion, will hold any such office or position or perform
any such function with Bank or the acquiring bank,
or any of its subsidiaries. Atlantic has further com­
mitted that all such interlocking relationships pres­
ently existing between Atlantic and Bank and their
respective subsidiaries will be terminated.
On the basis of the foregoing information, it is here­
by certified that:
(A) Atlantic is a qualified bank holding corporation,
within the meaning of section 1103(b) of the Code,
and satisfies the requirements o f that subsection;
(B) The 204,538 shares of Bank that Atlantic pro­
poses to sell to an unaffiliated bank are all or part of
the property by reason o f which Atlantic controls
(within the meaning of § 2(a) o f the BHC Act a bank
or a bank holding company; and
(C) The sale o f such shares of Bank to an unaffi­
liated bank is necessary or appropriate to effectuate
the policies o f the BHC Act.
This certification is based upon the facts set forth
above. In the event the Board should hereafter deter­
mine that facts material to this certification are other­
wise than as represented by Atlantic or that Atlantic
has failed to disclose to the Board other material facts,
it may revoke this certification.
3. Sections 1103(g) and (h) require that an election thereunder be
made “at such time and in such manner as the Secretary [of the Trea­
sury] or his delegate may by regulations prescribe.” As of this date no
final regulations have been promulgated. However. Atlantic has com­
plied with the temporary regulations issued by the Secretary of the
Treasury. 26 C.F.R. 7570.

806

Federal R eserve Bulletin □ Septem ber 1980

By order of the Board of Governors, acting through
its General Counsel, pursuant to delegated authority
(12 C.F.R. § 265.2(b)(3)), effective August 29, 1980.

[se a l]

(Signed) T h e o d o r e E. A llis o n ,
Secretary o f the Board.

Kupka’s Inc.,
Traer, Iowa
Prior Certification Pursuant to the Bank Holding
Company Tax A ct o f 1976
[Docket No. TCR 76-193]
Kupka’s, Inc., Traer, Iowa (“ Kupka’s ” ) has re­
quested a prior certification pursuant to section
llQ l(a) of the Internal Revenue Code (“ Code” ), as
amended by the Bank Holding Company Tax Act of
1976 (“ Tax A ct” ), that its proposed divestiture of 160
acres of farmland, by means of a pro rata distribution
to its two shareholders, is necessary or appropriate to
effectuate section 4 of the Bank Holding Company Act
(12 U .S.C . § 1843) (“ BHC A ct” ).
In connection with this request, the following infor­
mation is deemed relevant for purposes of issuing the
requested certification:1
1. Kupka’s is a corporation organized and existing
under the laws of the State of Iowa. All of its out­
standing shares are owned and controlled by Melvin
M. Kupfca and his wife, Betty L. Kupka.
2. On August 29, 1969, Kupka’s acquired own­
ership and control of 250 shares, representing 50
percent of the outstanding voting shares, of Clutier
State Bank, Clutier, Iowa (“ Bank” ).
3. Kupka’s became a bank holding company on D e­
cember 31, 1970, as a result of the 1970 Amend­
ments to the BHC Act, by virtue of its ownership
and control at that time of more than 25 percent of
the outstanding voting shares of Bank, and it regis­
tered as such with the Board on October 28, 1971.
Kupka’s would have been a bank holding company
on July 7, 1970, if the BHC Act Amendments of 1970
had been in effect on such date, by virtue of own­
ership and control on that date of more than 25 per­
cent of the outstanding voting shares of Bank. Kup-

1. This information derives from Kupka’s communications with the
Board concerning its request for this certification, Kupka's Registra­
tion Statement filed with the Board pursuant to the BHC Act, and
other records of the Board.



ka’s currently owns and controls 1,244 shares,
representing 62.2 percent of the outstanding voting
shares, of Bank.
4. Kupka’s holds property acquired by it on or be­
fore July 7, 1970, the disposition of which would be
required under section 4 of the BHC Act if Kupka’s
is to remain a bank holding company beyond De­
cember 31, 1980, and which property is “ prohibited
property” within the meaning o f section 1103(c) of
the Code.
On the basis o f the foregoing, it is hereby certified
that:
(A) Kupka’s is a qualified bank holding corporation
within the meaning of section 1103(b) of the Code
and satisfies the requirements o f that section;
(B) the farmland that Kupka’s proposes to distrib­
ute to its shareholders is “ prohibited property”
within the meaning of section 1103(c) of the Code;
(C) the distribution o f such farmland is necessary or
appropriate to effectuate section 4 of the BHC Act.
This certification is based upon the representations
made to the Board by Kupka’s and upon the facts set
forth above. In the event that the Board should hereaf­
ter determine that the facts material to this certifica­
tion are otherwise than as represented by Kupka’s or
that Kupka’s has failed to disclose to the Board other
material facts, the Board may revoke this certification.
By order of the Board o f Governors, acting through
its General Counsel pursuant to delegated authority
(12 C.F.R. § 265.2(b)(3)), effective August 8, 1980.

[se a l]

(S ign ed )T h eod ore E. A llis o n ,
Secretary o f the Board.

Lee Wilson & Co.,
Wilson, Arkansas
Prior Certification Pursuant to the Bank Holding
Company Tax A ct o f 1976
Lee Wilson & Co., Wilson, Arkansas (“ Company” ),
has requested a prior certification pursuant to section
1101(b)(3) of the Internal Revenue Code (“ Code” ), as
amended by section 2(a) o f the Bank Holding Compa­
ny Tax Act of 1976, that its proposed divestiture o f all
of the 3,452 shares (86.3 percent) or Bank of Wilson,
Wilson, Arkansas (“ Bank” ), currently held by Com­
pany, through the pro rata distribution of the stock of
Bank to Company’s stockholders, is necessary or ap­
propriate to effectuate the policies of the Bank Holding
Company Act (12 U .S.C . § 1841 et seq.) (“ BHC
A ct” ).

L eg a l D evelopm en ts

In connection with this request, the following infor­
mation is deemed relevant, for purposes of issuing the
requested certification:1
1. Company is a corporation organized on January
24, 1958, under the laws of Delaware as a successor
to a business trust with its principle place of busi­
ness in Wilson, Arkansas. By virtue of the merger,
on that date Company acquired ownership and con­
trol of 3,452 shares, representing 86.3 percent of the
outstanding voting shares, of Bank, and held these
shares on July 7, 1970.
2. Company became a bank holding company on
December 31, 1970, as a result of the 1970 Amend­
ments to the BHC Act, by virtue of its ownership
and control at that time of more than 25 percent of
the outstanding voting shares of Bank, and it regis­
tered as such with the Board on August 5, 1971.
Company would have been a bank holding company
on July 7, 1970, if the BHC Act Amendments of 1970
had been in effect on that date by virtue of its own­
ership and control on that date of more than 25 per­
cent of the outstanding voting shares of Bank. Com­
pany currently owns and controls 3,452 shares,
representing 86.3 percent of the outstanding voting
shares, of Bank.
3. Company holds property acquired by it on or be­
fore July 7, 1970, the disposition of which but for
section 4(c)(ii) and the proviso of section 4(a)(2) of
the BHC Act would be necessary or appropriate to
effectuate section 4 of the BHC Act if Company
were to continue to be a bank holding company
beyond December 31, 1980, and which property, but
for such proviso, would be “ prohibited property”
within the meaning of section 1103(c) of the Code.
Section 1103(g) of the Code provides that any bank
holding company may elect, for the purposes of Part
VIII of subchapter O of Chapter 1 of the Code, to
have the determination of whether property is “ pro­
hibited property” or is property eligible to be dis­
tributed without recognition of gain under section
1101(b)(1) of the Code, made under the BHC Act as
if the Act did not contain the proviso of section
4(a)(2). Company has represented that it will waive
its permanent exemption under section 4(c)(ii) from
the prohibitions of section 4 and make an election
under the section 1103(g) of the Code prior to the
consummation of the proposed divestiture.
On the basis of the foregoing information, it is here­
by certified that:

1. This information derives from Company’s correspondence with
the Board concerning its request for this certification, Company’s
Registration Statement filed with the Board pursuant to the BHC Act,
and other records of the Board.



807

(A) Company is a qualified bank holding corpora­
tion within the meaning of subsection (b) of section
1103 of the Code, and satisfies the requirements of
that subsection;
(B) the shares of Bank that Company proposes to
distribute are all or part of the property by reason of
which Company controls (within the meaning of sec­
tion 2(a) of the BHC Act) a bank or bank holding
company, and
(C) distribution to the shareholders of Company of
the shares of Bank are necessary or appropriate to
effectuate the policies of the BHC Act.
This certification is based upon the representations
made to the Board by Company and upon the facts set
forth above. In the event the Board should hereafter
determine that facts material to this certification are
otherwise than as represented by Company, or that
Company has failed to disclose to the Board other ma­
terial facts, it may revoke this certification.
By order of the Board of Governors acting through
the General Counsel, pursuant to delegated authority
(12 C.F.R. § 265.2(b)(3)) effective August 7, 1980.

[se a l]

(Signed) T h e o d o r e E. A llis o n ,
Secretary o f the Board.

O rder A p p ro ve d U nder Bank M erger A c t

The Bank of New York,
New York, New York
Order Approving M erger o f Banks
The Bank of N ew York (“ B N Y ” ), N ew York, N ew
York, a subsidiary o f The Bank of N ew York Compa­
ny, Inc., (“ BNY C o .” ), N ew York, N ew York, a bank
holding company within the meaning o f the Bank
Holding Company Act (“ A ct” ), has applied for the
Board’s approval under the Bank Merger Act
(12 U .S.C . § 1828(c)), to merge with Empire National
Bank (“ Empire” ), Middletown, N ew York, under the
charter and title o f B N Y .1
As required by the Bank Merger Act, notice of the
proposed transaction has been published and reports
on competitive factors have been requested from the
Attorney General, the Comptroller of the Currency,
and the Federal Deposit Insurance Corporation. The
time for filing views and comments has expired and the
application and all comments received have been con­

1. See also the Board’s Order of this date approving BNY Co.'s
application to acquire voting shares of Empire’s mortgage lending sub­
sidiaries.

808

Federal R eserve Bulletin □ Septem ber 1980

sidered in light of the factors set forth in the Act.
BNY, with deposits of $4.7 billion, is the ninth larg­
est commercial banking organization in New York,
holding 3.1 percent of the total deposits in commercial
banks in the State.2 Empire, with deposits of $465.6
million, ranks 24th among commercial banks in New
York, with 0.3 percent of the total deposits in com­
mercial banks in the state. Upon consummation of the
proposed merger, BNY would remain the ninth largest
banking organization in the state.
Empire operates 41 offices in three separate market
areas—the Metropolitan N ew York market,3 the MidHudson market,4 and the Middletown market.5 The ef­
fect of the proposal on existing competition in the Met­
ropolitan N ew York market would be de minimus in
view of the unconcentrated nature of the market the
relatively small market share that BNY would hold fol­
lowing consummation of the proposal, and B N Y ’s
commitment to divest four offices in that market.
B N Y ’s rank in that market among commercial banking
organizations, currently eighth largest, would remain
unchanged. The effect of the proposal on existing com­
petition in the Mid-Hudson market would not be sig­
nificant and would be mitigated by the divestiture of
B N Y ’s two offices in that market.
The only market where competition is an issue in
this application is the Middletown market, where both
BNY and Empire currently compete. Empire, with to­
tal deposits of $164.7 in the Middletown market, ranks
first in the market with a 25.3 percent share of com­
mercial bank deposits. BN Y operates five offices in the
Middletown market and ranks fourth in the market
with deposits of $56.6 million. The Board normally
considers the elimination of existing competition
through such a combination of size and market shares
as having a substantially adverse competitive effect.
The competitive effects of this application, however,
are mitigated by a number of factors.
Although Empire is the leading competitor in the
Middletown market, its competitive influence has been
declining in recent years due to its financial and man­
agerial condition. Its market share has declined from
approximately 32 percent in 1973 to 25.3 percent in
1979. Moreover, in connection with this proposal,

2. All deposit data are as of June 30,1979, or December 31, 1979.
3. The Metropolitan New York market includes the five boroughs
of New York City; Nassau, Westchester, Putnam and Rockland
Counties and western Suffolk County in New York State; the northern
two-thirds of Bergen County and eastern Hudson County in New Jer­
sey; and southwestern Fairfield County in Connecticut.
4. The Mid-Hudson market includes all of Dutchess and Ulster
Counties and the northeastern portion of Orange County, New York.
5. The Middletown market includes Sullivan and Orange Counties,
except for the Orange County municipalities of the town of New­
burgh, Newburgh City, Montgomery, New Windsor, Cornwall, and
Highlands.



BNY has agreed to divest two of its offices in the Mid­
dletown market with deposits of $15.1 million, reduc­
ing its rank in the market from fourth to sixth largest.
The Middletown market is not highly concentrated and
has become even less so due to the relatively recent
entry of six of the nation’s largest 14 banks, including
five large N ew York City banks, (Bankers Trust,
Chase Manhattan, Citicorp, Chemical, and Manufac­
turers Hanover). As the Board has noted on previous
occasions, the competitive influence of firms such as
these cannot always be measured by their market
shares alone, especially with respect to their ability to
serve commercial customers.
The Board has also considered the presence of sav­
ings and loan associations and mutual savings banks in
the market. While the Board continues to view com­
mercial banking as the relevant line of commerce in
determining the competitive effects of a proposal,6 the
Board has stated that it may be appropriate in particu­
lar cases to take into consideration direct competition
from thrifts in specific areas in evaluating various com­
petitive influences.7 In view of the absolute size and
significant deposit-taking role of thrifts in the Mid­
dletown market, as well as their increasing powers, the
Board believes that the influence o f thrift institutions
further diminishes the adverse competitive effects of
the proposed merger. Accordingly, the Board con­
cludes that the competitive effects of the proposal are
seriously adverse, but that denial of the proposal is not
warranted in light of the outweighing considerations
discussed below.
Empire has experienced financial and managerial
problems in recent years that have reduced its ef­
fectiveness as a competitor in the market. The finan­
cial and managerial resources and future prospects of
the resulting organization in the Middletown market as
a result of the proposed merger would have a positive
impact on the operations of Empire without diminish­
ing the prospects of BNY. The financial and manage­
rial resources and future prospects of BNY are satis­
factory and, as a result of this proposal, Empire’s
customers will be served by a stronger banking organi­
zation. In terms o f convenience and needs, BNY pro­
poses to expand and improve the services offered at
Empire’s banking offices by increasing the effective in­
terest rate paid on passbook savings and offering addi6. In view of the uncertainty with respect to the extent to which
thrifts will exercise the new powers conferred upon them by the De­
pository Institutions Deregulation and Monetary Control Act (P.L. 96221), the Board believes that it would be premature to consider thrift
institutions as full competitors of banks until the effects of their new
powers can be meaningfully ascertained.
7. Fidelity Union Bancorporation, 66 F ederal R eserve Bulle ­
tin 576 (June 26, 1980); United Bank Corporation of New York (Sche­
nectady Trust Company), 66 F ederal R eserve B ulletin 61, 63
(January 1979).

L eg a l D evelopm en ts

tional services, including commercial and corporate
trust services, cash management, cash disbursement
and economic forecasting services. BNY also pro­
poses to offer lease financing, FHA construction cred­
it, and individual FHA and VA loans. In light of the
above, considerations relating to the convenience and
needs of the community to be served lend such weight
toward approval of the application as to outweigh the
serious adverse competitive effects associated with
this proposal. Based on the foregoing and other con­
siderations reflected in the record of this application, it
is the Board’s judgment that the subject proposal is in
the public interest and that the application should be
approved.
On the basis of the record, the application is ap­
proved for the reasons summarized above. The pro­




809

posed transaction shall not be made before the
thirtieth calendar day following the effective date of
this Order, or later than three months after the ef­
fective date of this Order unless such period is extend­
ed for good cause by the Board or by the Federal Re­
serve Bank of N ew York pursuant to delegated
authority.
By order of the Board of Governors, effective Au­
gust 12, 1980.
Voting for this action: Chairman Volcker and Governors
Schultz, Wallich, Partee, Teeters, Rice, and Gramley.

[sea l]

Legal Developments continued on next page.

(Signed) T h e o d o r e E. A llis o n ,
Secretary o f the Board.

810

Federal R eserve Bulletin □ Septem ber 1980

O rders A pproved U nd er B a n k H o l d in g C o m p a n y A ct

By the B oard o f G overnors
During August 1980 the Board of Governors approved the applications listed below. Copies are available upon
request to Publications Services, Division of Support Services, Board of Governors o f the Federal Reserve Sys­
tem, Washington, D.C. 20551.

Section 3
Board action
(effective
date)

Applicant

Bank(s)

American National Holding Company,
Kalamazoo, Michigan
Centran Corporation,
Cleveland, Ohio
Community Bancshares of Tulsa, Inc.,
Tulsa, Oklahoma
Drexel Holding Company,
Chicago, Illinois

Ludington Bank and Trust Company,
Ludington, Michigan
The Franklin Bank,
Columbus, Ohio
Community Bank and Trust Company,
Tulsa, Oklahoma
Drexel National Bank,
Chicago, Illinois

August 13, 1980
August 29, 1980
August 13, 1980
August 25, 1980

By F ederal R eserve Banks
Recent applications have been approved by the Federal Reserve Banks as listed below. Copies of the orders are
available upon request to the Reserve Banks.

Section 3
Reserve
Bank

Effective
date

Applicant

Bank(s)

Alabama Bancorporation,
Birmingham, Alabama
Amador Bancshares, Inc.,
Las Cruces, N ew Mexico
The American Bancorporation of
Merritt Island,
Merritt Island, Florida
American Independent Bancshares,
Inc.,
Alta Loma, Texas
Americana State Agency, Inc.,
Edina, Minnesota

Citizens Bank & Trust Co.,
Alabaster, Alabama
Citizens Bank of Las Cruces,
Las Cruces, New Mexico
The American Bank of Merritt
Island,
Merritt Island, Florida
Bank o f Santa Fe,
Alta Loma, Texas

Atlanta

August 1, 1980

Dallas

August 19, 1980

Atlanta

August 14,1980

Dallas

August 15,1980

The Americana State Bank of
Edina,
Edina, Minnesota
First State Bank,
Bandera, Texas
Union State Bank of Browns
Valley,
Browns Valley, Minnesota
Carteret Bank & Trust Company,
Carteret, New Jersey

Minneapolis

August 13,1980

Dallas

August 8,1980

Minneapolis

August 21, 1980

New York

August 21, 1980

Bandera Bancshares Inc.,
Bandera, Texas
Browns Valley Bancshares, Inc.,
Browns Valley, Minnesota
CBTcorp,
Carteret, N ew Jersey



L eg a l D evelopm en ts

811

Section 3—Continued

APP'icant

Bank(s)

Effective
date

Kansas City

August 18, 1980

Minneapolis

August 26, 1980

Kansas City

August 28, 1980

Dallas

August 18, 1980

Minneapolis

August 26, 1980

Dallas

August 22, 1980

Atlanta

August 8, 1980

Kansas City

August 7, 1980

First National Bank in Chicago
Heights,
Chicago Heights, Illinois

Chicago

August 11, 1980

First Alabama Bancshares, Inc.,
Montgomery, Alabama
First Alabama Bancshares, Inc.,
Montgomery, Alabama

The Talladega National Bank,
Talladega, Alabama
McMillan & Company, Bankers,
Inc.,
Livingston, Alabama

Atlanta

August 25, 1980

Atlanta

August 8, 1980

First Collinsville Corp.,
Collinsville, Illinois

The First National Bank o f Collins ville,
Collinsville, Illinois

St. Louis

August 25, 1980

The First Mineola Corporation,
Mineola, Texas

The First National Bank of Mineola,
Mineola, Texas

Dallas

July 30, 1980

First Mustang Corporation,
Mustang, Oklahoma
First National Bancorp, Inc.,
Shreveport, Louisiana

The First Mustang State Bank,
Mustang, Oklahoma
The First National Bank of
Shreveport,
Shreveport, Louisiana

Kansas City

July 10,1980

Dallas

August 19, 1980

The First National Company,
Storm Lake, Iowa

The National Bank o f Rockwell
City,
Rockwell City, Iowa

Iowa

August 19, 1980

First Schiller Bancorp, Inc.,
Schiller Park, Illinois

First National Bank of Schiller
Park,
Schiller Park, Illinois

Chicago

August 25,1980

Florida Bancorporation, Inc.,
Clearwater, Florida
Florida Park Banks, Inc.,
St. Petersburg, Florida

Florida Bank of Commerce,
Clearwater, Florida
Park Bank o f Florida,
St. Petersburg, Florida

Atlanta

August 4, 1980

Atlanta

August 14, 1980

Citizens Banco, Inc.,
Westminster, Colorado
Citizens, Incorporated,
Enderlin, North Dakota
Citizen’s National Corp.,
El Reno, Oklahoma
Continental Bancshares, Inc.,
Dallas, Texas
Darwin Bancshares, Inc.,
Darwin, Minnesota
Durant Bancorp, Inc.,
Durant, Oklahoma
Ellis Banking Corporation,
Bradenton, Florida
Equitable Bankshares of Colorado,
Inc.,
Denver, Colorado
FNB Bancorp.,
Chicago Heights, Illinois




Citizens Bank,
Westminster, Colorado
Citizens State Bank,
Enderlin, North Dakota
The Citizens National Bank and
Trust Company,
El Reno, Oklahoma
Bank o f Texas,
Dallas, Texas
Farmers State Bank o f Darwin,
Darwin, Minnesota
The Durant Bank & Trust Company,
Durant, Oklahoma
American Bank of Lakeland,
Lakeland, Florida
The W omen’s Bank, N .A .,
Denver, Colorado

Reserve
Bank

812

Federal R eserve Bulletin □ Septem ber 1980

Section 3—Continued
Applicant

Bank(s)

Reserve
Bank

Effective
date

Kansas City

August 11, 1980

Kansas City

August 18, 1980

Kansas City

August 15, 1980

Minneapolis

August 22, 1980

Kansas City

August 1, 1980

Chicago

July 31,1980

The Bank of Las Vegas,
Las Vegas, New Mexico
The Mission State Bank and
Trust Company
Mission, Kansas
Progress Bank,
Fenton, Missouri
Mount Pleasant Bank and Trust,
Mount Pleasant, Iowa
Farmers State Bank & Trust C o .,
Mt. Sterling, Illinois
Louisville Mountain Bank, N .A .,
Louisville, Colorado

Kansas City

July 31,1980

Kansas City

July 28,1980

St. Louis

August 21, 1980

Chicago

August 6, 1980

St. Louis

August 25, 1980

Kansas City

August 8, 1980

Jefferson Bank East,
Aurora, Colorado

Kansas City

August 8, 1980

NBA Bankshares,
Salina, Kansas

The National Bank o f America,
Salina, Kansas

Kansas City

July 28,1980

National Bancshares, Inc.,
Melrose Park, Illinois

Melrose Park National Bank,
Melrose Park, Illinois

Chicago

August 15, 1980

National Western Bancorporation,
Loveland, Colorado

Commerce Bank,
Fort Collins, Colorado

Kansas City

July 11,1980

Newton Bancshares, Inc.,
N ew ton, Kansas

The Kansas State Bank,
Newton, Kansas

Kansas City

August 1, 1980

Northern Kentucky Bancshares, Inc.,
Milford, Ohio

The Falmouth Deposit Bank,
Falmouth, Kentucky

Cleveland

August 1, 1980

Persons Banking Co., Inc.,
Forsyth, Georgia

The Peoples Bank,
Lithonia, Georgia

Atlanta

August 12, 1980

Security State Bank Shares,
Poison, Montana

Security State Bank,
Poison, Montana

Minneapolis

August 11, 1980

South Holland Bancorp., Inc.,
South Holland, Illinois

South Holland Trust & Savings
Bank,
South Holland, Illinois

Chicago

July 29, 1980

South Ridge Bancshares, Inc.,
Lincoln, Nebraska

South Ridge Bank, Inc.,
Lincoln, Nebraska

Kansas City

July 18, 1980

Hollis Bancshares, Inc.,
Hollis, Oklahoma
Jasper Bancshares, Inc.,
Jasper, Missouri
Jenks America, Inc.,
Jenks, Oklahoma
Kandiyohi Bancshares, Inc.,
Kandiyohi, Minnesota
KNB Bancshares, Inc.,
Prairie Village, Kansas
La Grange Park Banc Corpo­
ration,
Chicago, Illinois
Las Vegas Bancorporation,
Albuquerque, N ew Mexico
MSB Holding Company,
Mission, Kansas
Mark Twain Bancshares, In c.,
St. Louis, Missouri
Mt. Pleasant Company,
Mount Pleasant, Iowa
Mt. Sterling Bancshares Inc.,
Mt. Sterling, Illinois
Mountain Banks, Ltd.,
Denver, Colorado
Mountain Holding Inc.,
Aurora, Colorado




First State Bank and Trust C o .,
Hollis, Oklahoma
Bank o f Jasper,
Jasper, Missouri
Bank of Commerce,
Jenks, Oklahoma
Home State Bank of Kandiyohi,
Kandiyohi, Minnesota
Kansas National Bank and Trust
Co.,
Prairie Village, Kansas
Bank of La Grange Park,
La Grange Park, Illinois

L eg a l D evelopm en ts

813

Section 3—Continued
Bank(s)

Applicant

Bank of Sterling,
Sterling, Nebraska
Johnson County Bank,
Tecumseh, Nebraska
The Farmers and Merchants
State and Savings Bank,
Montpelier, Ohio
The City National Bank,
Atchison, Kansas
Bank of Williamsburg,
Williamsburg, Kentucky
Vidor State Bank,
Vidor, Texas
The Wilshire Bank, N .A .,
Los Angeles, California
Security State Bank,
Wishek, North Dakota

Sterling Bankshares, Inc.,
Tecumseh, Nebraska
Tecumseh Bankshares, Inc.,
Tecumseh, Nebraska
Toledo Trustcorp,
Toledo, Ohio
United Kansas Bancshares, Inc.,
Atchison, Kansas
United Whitley Corporation,
Williamsburg, Kentucky
Vidor Bancshares, Inc.,
Vidor, Texas
The Wilshire Bancorporation,
Los Angeles, California
Wishek Bancorporation, Inc.,
Wishek, North Dakota

Reserve
Bank

Effective
date

Kansas City

August 15, 1980

Kansas City

August 21, 1980

Chicago

August 11, 1980

Kansas City

July 25,1980

Cleveland

July 31,1980

Dallas

August 25, 1980

San Francisco

August 21, 1980

Minneapolis

August 4, 1980

S ectio n s 3 and 4

Applicant

Bank(s)

Nonbanking
company
(or activity)

Escrow Corporation of
America, Inc.,
Pennock, Minnesota

Pennock Agency,
Pennock, Minnesota

general insurance
activities

Reserve
Bank
Minneapolis

Effective
date
August 21, 1980

S ectio n 4

Applicant

Brainard Agency Company,
Brainard, Nebraska
Circle Management Company,
Kearney, Nebraska
Citicorp,
N ew York, N ew York
Crawfordsville Insurance Agency,
Inc., Crawfordsville, Iowa



Nonbanking
company
(or activity)
to continue to engage in general
insurance agency activities
Guaranty Trust Company,
Kearney, Nebraska
NAC Charge Plan New York
to continue to engage in the sale
of general insurance

Reserve
Bank

Effective
date

Kansas City

July 30,1980

Kansas City

July 25,1980

New York

August 1, 1980

Chicago

August 19, 1980

814

Federal R eserve Bulletin □ Septem ber 1980

Section 4—Continued

Applicant

Nonbanking
company
(or activity)

Reserve
Bank

Effective
date

Cross Financial Corporation,
Oberlin, Kansas

to continue to engage in general
insurance agency activities

Kansas City

July 18,1980

Ellingson Corporation,
Kenyon, Minnesota

to continue to sell insurance as a
general insurance agent

Minneapolis

August 22, 1980

First National Agency, Inc.,
Cimarron, Kansas

to continue to engage in general
insurance agency activities

Kansas City

July 25,1980

First Railroad & Banking Company of
Georgia,
Augusta, Georgia

CMC Group, Inc.,
Charlotte, North Carolina

Atlanta

July 17, 1980

GEM Agency, Inc.,
Amboy, Minnesota

to continue to sell insurance as a
general insurance agent

Minneapolis

August 4, 1980

Hawkeye Bancorporation,
b es Moines, Iowa

Central Hawkeye Life Insurance
Company,
Des Moines, Iowa

Chicago

August 7, 1980

Hector Securities and Investment
Company,
Minneapolis, Minnesota

Fidelity State Bank o f Hector,
Hector, Minnesota

Minneapolis

August 8, 1980

Madison Agency, Inc.,
Madison, Minnesota

to continue to sell insurance as a
general insurance agent

Minneapolis

August 18, 1980

The Marine Corporation,
Milwaukee, Wisconsin

The Marine Trust Company,
N .A .,
Madison, Wisconsin

Chicago

August 20, 1980

Mid America Bancshares, In c.,
Lebanon, Illinois

The Lincoln Trail Insurance
Agency Inc.,
Lebanon, Illinois

St. Louis

August 18, 1980

Monroe Agency, Inc.,
Monroe, Nebraska
North Central Banco, Inc.,
Hutchinson, Minnesota

to continue to engage in general
insurance agency activities
Citizens Bank and Trust
Company,
Hutchinson, Minnesota

Kansas City

July 25, 1980

Minneapolis

August 5, 1980

First Mississippi National Corporation,
Hattiesburg, Mississippi

Continental Leasing
Corporation,
Hattiesburg, Mississippi

Atlanta

August 11, 1980

Old Stone Corporation,
Providence, Rhode Island

to engage in underwriting
through reinsurance o f credit
life insurance and credit
accident and health insurance
in Ohio

Boston

July 30,1980

Spring Grove Investments, Inc.,
Spring Grove, Minnesota
Streeter Insurance Agency, Inc.,
Streeter, North Dakota
The Verdigre Agency, Inc.,
Verdigre, Nebraska

to continue to sell insurance as a
general insurance agent
to continue to sell insurance as a
general insurance agent
to continue to engage in general
insurance agency activities

Minneapolis

August 7,1980

Minneapolis

August 14, 1980

Kansas City

July 10, 1980

Long Island Trust Company,
Garden City, N ew York

Long Island Bank,
Hicks ville, New York

New York




August 1, 1980

L eg a l D evelopm en ts

815

O rd ers A p p r o v e d U n d er B a n k M e rg e r A c t
A
Appl,cant
Manufacturers Hanover Trust
Company,
New York, N ew York

n w x
Bank(s)

Reserve
Bank

Eight Branches o f Bankers
Trust Company,
N ew York, N ew York

Effective
date

New York August 5, 1980

P e n d in g Ca se s I n v o l v in g the B o a r d of G o v e r n o r s

This list o f pending cases does not include suits
against the Federal R eserve Banks in which the Board
o f Governors is not nam ed a party.
Consumers Union o f the United S ta tes, Inc., v. Board
o f Governors et al., filed August 1980, for the Dis­
trict of Columbia.
A. G. Becker Inc., v. Board o f Governors, et al., filed
August 1980, U .S .D .C . for the District o f Columbia.
Otero Savings and Loan Association v. Board o f Gov­
ernors, filed August 1980, U .S.D .C . for the District
o f Columbia.
J. L. Lewis v. the U nited States o f Am erica, filed July
1980, U .S .D .C . for the Central District of Califor­
nia.
Martin-Trigona v. Board o f Governors, filed July 1980,
U .S.C .A . for the District of Columbia.
U.S. League o f Savings Associations v. D epository
Institutions D eregulation Com mittee, et al., filed
June 1980, U .S .D .C . for the District of Columbia.
Edwin F. Gordon v. Board o f Governors, et al., filed
June 1980, U .S . Supreme Court.
Mercantile Texas Corporation v. Board o f Governors,
filed May 1980, U .S .C .A . for the Fifth Circuit.
Corbin, Trustee v. United States, filed May 1980,
United States Court of Claims.
Louis J. R oussel v. Board o f Governors, filed April
1980, U .S .D .C . for the District of Columbia.
Ulyssess S. Crockett v. United States, et al., filed
April 1980, U .S .D .C . for the Eastern District of
North Carolina.
Angela Belk v. Governm ent o f Iran, et al., filed April
1980 , U .S .D .C . for the District for South Carolina,
Columbia Division.
Independent Bank Corporation v. Board o f Gover­
nors, filed October 1979, U .S.C .A . for the Sixth Cir­
cuit.
County N ational Bancorporation and TGB Co. v.
Board o f Governors, filed September 1979,
U .S.C .A . for the Eighth Circuit.



Edwin F. Gordon v. Board o f Governors, et al., filed
August 1979, U .S .D .C . for the Northern District of
Georgia.
Gregory v. Board o f Governors, filed July 1979,
U .S.D .C . for the District o f Columbia.
D onald W. Riegel, Jr. v. Federal Open M arket Com­
mittee, filed July 1979, U .S.D .C . for the District of
Columbia.
Connecticut Bankers Association, et al., v. Board o f
Governors, filed May 1979, U .S .C .A . for the Dis­
trict of Columbia.
Independent Insurance Agents o f A m erica, et al., v.
Board o f Governors, filed May 1979, U .S .C .A . for
the District o f Columbia.
Independent Insurance Agents o f Am erica, et al., v.
Board o f Governors, filed April 1979, U .S .C .A . for
the District of Columbia.
Independent Insurance Agents o f Am erica, et al., v.
Board o f Governors, filed March 1979, U .S.C .A . for
the District o f Columbia.
Credit and Com m erce American Investm ent, et al., v.
Board o f Governors, filed March 1979 U .S .C .A . for
the District of Columbia.
Independent Bankers Association o f Texas v. First
National Bank in D allas, et al., filed July 1978,
U .S.D .C . for the Northern District o f Texas.
Security Bancorp and Security N ational Bank v.
Board o f Governors, filed March 1978, U .S.C .A . for
the Ninth Circuit.
Vickars-Henry Corp. v. Board o f Governors, filed D e­
cember 1977, U .S .C .A . for the Ninth Circuit.
Investment Com pany Institute v. Board o f Governors,
filed September 1977, U .S.D .C . for the District of
Columbia.
Roberts Farms, Inc. v. Comptroller o f the Currency,
et al., filed Novem ber 1975, U .S.D .C . for the South­
ern District o f California.
D avid Merrill, et al. v. Federal Open M arket Com­
m ittee, filed May 1975, U .S.D .C . for the District of
Columbia.

Al

Financial and B u sin ess Statistics
Contents

D o m e s tic F in a n c ia l S ta tis tic s

We e k l y R e p o r t in g C om m er cial B a n k s

A3
A4
A5
A6

Assets and liabilities
A20
All reporting banks
A 21 Banks with assets of $ 1 billion or more
A22
Banks in N ew York City
A23 Balance sheet memoranda
A24 Commercial and industrial loans

Monetary aggregates and interest rates
Factors affecting member bank reserves
Reserves and borrowings of member banks
Federal funds and repurchase agreements of
large member banks

P o l ic y In s t r u m e n t s

A7
A8
A9

Federal Reserve Bank interest rates
Member bank reserve requirements
Maximum interest rates payable on time and
savings deposits at federally insured institutions
A 10 Federal Reserve open market transactions

A24 Major nondeposit funds of commercial banks
A25 Gross demand deposits of individuals,
partnerships, and corporations

F in a n c ia l M a r k e t s

A l 1 Condition and Federal Reserve note statements
A 12 Maturity distribution of loan and security
holdings

A25 Commercial paper and bankers dollar
acceptances outstanding
A26 Prime rate charged by banks on short-term
business loans
A26 Terms of lending at commercial banks
A l l Interest rates in money and capital markets
A28 Stock market—Selected statistics

M o n e ta r y a n d C re dit A gg regates

A29 Savings institutions—Selected assets and
liabilities

Federal R eserve B an k s

A 12 Bank debits and deposit turnover
A 13 Money stock measures and components
A14 Aggregate reserves and deposits of member
banks
A 15 Loans and securities of all commercial banks

C o m m e r c i a l B a n k A s s e t s a n d L iab ilitie s

A 16 Last-Wednesday-of-month series
A 17 Call-date series
A 18 Detailed balance sheet, September 30, 1978




Federal Fin an ce

A30
A31
A32
A32

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
A33 U .S. government marketable securities—
Ownership, by maturity
A34 U .S. government securities dealers—
Transactions, positions, and financing
A3 5 Federal and federally sponsored credit
agencies—Debt outstanding

A2

Federal R eserve Bulletin □ Septem ber 1980

S e c u r it ie s M a r k e t s a n d
C orporate Fin an ce

A36 New security issues—State and local
governments and corporations
A37 Open-end investment companies—N et sales and
asset position
A37 Corporate profits and their distribution
A38 Nonfinancial corporations—Assets and liabilities
A38 Business expenditures on new plant and
equipment
A39 Domestic finance companies—A ssets and
liabilities; business credit

R eal E state

A40 Mortgage markets
A41 Mortgage debt outstanding

R e p o r t e d b y B a n k s i n th e U n it e d S tates

A58
A59
A61
A62

Liabilities to and claims on foreigners
Liabilities to foreigners
Banks’ own claims on foreigners
Banks’ own and domestic customers’ claims on
foreigners
A62 Banks’ own claims on unaffiliated foreigners
A63 Claims on foreign countries—Combined
domestic offices and foreign branches

S e c u r i t i e s H o l d i n g s a n d Tr a n s a c t i o n s

A64 Marketable U .S. Treasury bonds and notes—
Foreign holdings and transactions
A64 Foreign official assets held at Federal Reserve
Banks
A65 Foreign transactions in securities

C o n su m e r I n s t a l l m e n t C re d it

R ep o r t e d b y N o n b a n k in g B u sin ess
E n t e r p r ise s i n the U n ite d S tates

A42 Total outstanding and net change
A43 Extensions and liquidations

A66 Liabilities to unaffiliated foreigners
A67 Claims on unaffiliated foreigners

Flow of F unds

Interest a n d Ex c h a n g e R ates

A44 Funds raised in U .S . credit markets
A45 Direct and indirect sources of funds to credit
markets

A68 Discount rates of foreign central banks
A68 Foreign short-term interest rates
A68 Foreign exchange rates

D o m e s tic N o n fin a n c ia l S ta tis tic s

A69 G u id e to T a b u la r P r e s e n ta tio n a n d

A46 Nonfinancial business activity—Selected
measures
A46 Output, capacity, and capacity utilization
A47 Labor force, employment, and unemployment
A48 Industrial production—Indexes and gross value
A50 Housing and construction
A51 Consumer and producer prices
A52 Gross national product and income
A53 Personal income and saving

I n te r n a tio n a l S ta tis tic s
A54
A55
A55
A56

U .S. international transactions—Summary
U .S. foreign trade
U .S. reserve assets
Foreign branches of U .S. banks—Balance sheet
data
A58 Selected U .S. liabilities to foreign official
institutions



S ta tis tic a l R e le a s e s

D om estic Financial Statistics
1.10

A3

M O N E T A R Y A G G R E G A T E S A N D IN T E R E S T R A T E S
1979

1980

1980

Item
Q3

04

Q2

Ql

Mar.

Apr.

May'

June

July

Monetary and credit aggregates
(annual rates of change, seasonally adjusted in percent)1

Member bank reserves

1 Total................................................................
2 Required .........................................................
3 Nonborrowed ..................................................
4 Monetary base2 ...............................................

9.5'

7.6'
5.2'

10.8
12.2

4.5
5.0
7.1
9.1
8.5

4.8
5.9
7.2
7.8
8.3'

-3.9
-2.4
5.5'
5.7
7.7

Commercial banks
10 Total............................................................
11 Savings4 .......................................................
12 Small-denomination time5 ............................
13 Large-denomination time6 ............................
14 Thrift institutions7 ...........................................

9.1
.4
22.5
4.5
7.4

12.4
-16.5
32.1
19.7
6.7

15 Total loans and securities at commercial banks8

13.4

Concepts of money and liquid assets3

M -1A ..............................................................
M-1B ..............................................................
M-2 ................................................................
M-3 ................................................................
L .....................................................................

7.8
9.6
10.7

12.3'

1.0'
1.2'

4.3'
5.3'
3.4'
7.6

5
6
7
8
9

5.3'
5.0'
7.3'
9.5'

11.2'
6.2'

-.1

3.8'
4.1'
-32.6'

1.4'
1.4'
13.4'
.9'

0.3
45.7

- 1 .9
- .3
5.0
4.4
7.8'

-1 7 .7
-14.1
- 2 .5 '

-1.2

5.8'

8.6

6.8'

8.2
.7

9.4
8.7

0.0

-.8 '
-1.8

2.7

18.7'

6.6'

2.3
8.4

11.4
14.6'
18.1'
13.4'
7.5'

17.7
13.4

1.0

7.8

11.1

Time and savings deposits

8.6'

8.4
-19.3
29.1
11.3
2.7
9.5'

9.8

-22.6
33.9

10.1
5.0'
-.5

8.5
-35.6
42.5
7.6
4.0

15.0
-4 3 .3
54.4
16.2
3.0

6.6

-1.6

-7 .5
14.1
8.5
7.3

32.9
-3 .1
-2 4 .8

2.6

-4 .3

-6.2'

10.8'

2.3
38.6
-3 .1
-19.7
9.0

-2.8'

7.6

1979
Q3

Q2

01

Q4

Apr.

May

June

July

Aug.

Interest rates (levels, percent per annum)
Short-term rates
Federal funds9 ................................................................................
Federal Reserve discount10 ..........................................................
Treasury bills (3-month market yield)1 1 ......................................
Commercial paper (3-month)1112................................................

10.94
10.21
9.67
10.64

13.58
11.92
11.84
13.35

15.07
12.51
13.35
14.54

12.67
12.45
9.62
11.18

17.61
13.00
13.20
15.78

10.98
12.94
8.58
9.49

9.47
11.40
7.07
8.27

9.03
10.87
8.06
8.41

9.61
10.00
9.13
9.57

Long-term rates
Bonds
20 U.S. government1 3 ......................................................................
21
State and local government1 4....................................................
22
Aaa utility (new issue)1 5 ............................................................
23 Conventional mortgages16 ............................................................

9.03
6.28
9.64
11.13

10.18
7.20
11.21
12.38

11.78
8.23
13.22
14.32

10.58
7.95
11.78
12.70

11.42
8.63
12.90
15.55

10.44
7.59
11.53
13.20

9.89
7.63
10.97'
12.45

10.32
8.13
11.60
12.45

11.07
8.67
12.32
13.25

16
17
18
19

1. Unless otherwise noted, rates of change are calculated from average amounts
outstanding in preceding month or quarter. Growth rates for member bank reserves
are adjusted for discontinuities in series that result from changes in Regulations
D and M.
2. Includes total reserves (member bank reserve balances in the current week
ius vault cash held two weeks earlier); currency outside the U.S. Treasury, Federal
Leserve Banks, and the vaults of commercial banks; and vault cash of nonmember
banks.
3. M -l A: Averages of daily figures for (1) 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 (2) currency outside the Treasury, Federal Reserve
banks, and the vaults of commercial banks.
M-1B: M -l A plus negotiable order of withdrawal and automated transfer service
accounts at banks and thrift institutions, credit union share draft accounts, and
demand deposits at mutual savings banks.
M-2: M-1B plus savings and small-denomination time deposits at all depository
institutions, overnight repurchase agreements at commercial banks, overnight
Eurodollars held by U.S. residents other than banks at Caribbean branches of
member banks, and money market mutual fund shares.
M-3: M-2 plus large-denomination time deposits at all depository institutions
and term RPs at commercial banks and savings and loan associations.
L: M-3 plus other liquid assets such as term Eurodollars held by U.S. residents
other than banks, bankers acceptances, commercial paper, Treasury bills and other
liquid Treasury securities, and U.S. savings bonds.

E




4. Savings deposits exclude NOW and ATS accounts at commercial banks.
5. Small-denomination time deposits are those issued in amounts of less than

$100,000.

6. Large-denomination time deposits are those issued in amounts of $100,000
or more.
7. Savings and loan associations, m utual savings banks, and credit unions.
8. Changes calculated from figures shown in table 1.23.
9. Averages of daily effective rates (average of the rates on a given date weighted
by the volume of transactions at those rates).
10. Rate for the Federal Reserve Bank of New York.
11. Quoted on a bank-discount basis.
12. Beginning Nov. 1977, unweighted average of offering rates quoted by at
least five dealers. Previously, most representative rate quoted by these dealers.
Before Nov. 1979, data shown are for 90- to 119-day maturity.
13. Market yields adjusted to a 20-year maturity by the U.S. Treasury.
14. Bond Buyer series for 20 issues of mixed quality.
15. Weighted averages of new publicly offered bonds rated Aaa, Aa, and A by
Moody’s Investors Service and adjusted to an Aaa basis. Federal Reserve com­
pilations.
16. Average rates on new commitments for conventional first mortgages on new
homes in primary markets, unweighted and rounded to nearest 5 basis points, from
Dept, of Housing and Urban Development.

A4
1.11

D om estic Financial Statistics □ September 1980
F A C T O R S A F F E C T IN G M E M B E R B A N K R E S E R V E S

Millions of dollars
Monthly averages of
daily figures

Weekly averages of daily figures for week-ending

1980

1980

Factors
June

July

Aug.

July 16

July 23

July 30

Aug. 6

Aug. 13

Aug. 20

Aug. 27

Supplying Reserve Funds
1 Reserve Bank credit outstanding........................

141,246

141,814

139,277

143,315

142,916

138,456

138,047

138,084

140,962

2 U.S. government securities1 ....................................
3 Bought outright ....................................................

122,336
121,623
713
9,020
8,875
145

122,060
121,662
398
8,937
8,874
63

119,092
118,823
269
8,978
8,873
105

123,227
122,766
461
8,925
8,873
52

123,114
122,670

119,884
119,654
230
8,920
8,873
47

117,939
116,951
988
9,206
8,873
333

117.604
117.604

120.654
120.654

119.744
119.744

' 8,873
8,873

’ 8,873
8,873

8.873
8.873

74
390
4,777
5,576

71
687
5,098
5,351

117
332
5,339
5,375

354
4,879
5,548

49
629
3,309
5,667

242
828
4,069
5,762

390
5,387
5,831

■7.AA

11 Other Federal Reserve assets ..............................

171
365
3,997
5,357

6,096
4,995

700
5,469
4,934

12 Gold s to c k ................................................................
13 Special drawing rights certificate accoun t..........
14 Treasury currency outstanding........................

11,172
2,986
13,288

11,172
3,053
13,305

11,172
3,215
13,310

11,172
3,018
13,294

11,172
3,061
13,296

11,172
3,118
13,301

11,172
3,118
13,343

11,172
3,161
13,309

11,172
3,268
13,311

11,171
3,268
13,313

126,334
543

128,182
512

128,969
480

128,655
520

128,125
508

127,660
498

128,354
490

129,186
488

129,103
479

128,928
471

17
18
19

..........................................
..........................................
Deposits, other than member bank reserves, with
Federal Reserve Banks
Treasury................................................................
Foreign..................................................................
Other* ..................................................................

2,923
354
1,378

3,119
324
1,051

3,297
301
475

3,315
302
1,067

2,723
282
1,148

3,206
324
793

2,652
312
586

3,339
300
538

3,630
315
425

3,840
289
408

20
21

Other Federal Reserve liabilities and capital . . .
Reserve accounts3 ..................................................

4,971
32,189

4,702
31,454

4,488
28,965

4,693
32,247

4,629
33,030

4,552
29,014

4,567
28,718

4,404
27,471

4,484
30,277

4,472
29,066

4

Held under repurchase agreements ..................
5 Federal agency securities ........................................
6 Bought outright ....................................................
7 Held under repurchase agreements ................
8 Acceptances

.................. ..........................................

9 Loans .............................. ..........................................
10 Float .................................. ........................................

AAA

8,952
8,873
79

68

Absorbing Reserve Funds
15 Currency in circulation
16 Treasury cash holdings

End-of-month figures

Wednesday figures

1980

1980

July

Aug.

July 16

July 23

July 30

Aug. 6

Aug. 13

Aug. 20

Aug. 27

Supplying Reserve Funds
22 Reserve bank credit outstanding ......................

143,741

138,316

139,791

146,439

144,892

141,019

131,148

136,300

142,696

140,020

23
24
25
26
27

124,515
124,058
457
8,912
8,875

119,563
118,497
1,066
9,404
8,873

119,848
119,014
834
9,355
8,873

123,519
122,797
722
8,977
8,873

124,386
121,275
3,111
9,426
8,873

119.577
119.577

109.332
109.332

114.815
114.815

120.700
120.700

118.690
118.690

’ 8,873
8,873

’ 8,873
8,873

’ 8,873
8,873

8.873
8.873

' 8,873
8,873

U.S. government securities1 ...........................
Bought outright ........................................
Held under repurchase agreements ..........
Federal agency securities .............................
Bought outright ........................................

28

Held under repurchase agreements ..........

37

531

482

104

553

29
30
31
32

Acceptances ................................................
Loans ..........................................................
Float ............................................................
Other Federal Reserve assets ......................

373
215
4,167
5,559

310
562
2,808
5,669

277
1,515
3,468
5,328

173
559
7,690
5,521

478
548
4,417
5,637

2,620
4,025
5,924

464
6,563
5,916

921
5,783
5,908

821
7,417
4,885

2,572
4,720
5,165

33 Gold stock.......................................................
34 Special drawing rights certificate account.........
35 Treasury currency outstanding..........................

11,172
3,018
13,523

11,172
3,118
13,570

11,172
3,268
13,313

11,172
3,018
13,295

11,172
3,118
13,300

11,172
3,118
13,304

11,172
3,118
13,309

11,172
3,268
13,309

11,171
3,268
13,313

11,171
3,268
13,313

127,097
520

128,337
489

129,364
469

128,761
513

128,122
504

128,238
492

129,169
488

129,618
484

129,151
474

129,313
473

3,199
691
1,332
5,003
33,612

3,954
436
500
4,540
27,920

2,742
336
383
4,570
29,680

2,956
294
1,103
4,563
35,734

2,855
246
1,178
4,570
35,007

3,073
301
415
4,448
31,646

2,762
285
588
4,260
21,195

3,473
237
398
4,255
25,584

2,491
225
377
4,623
33,107

3,749
199
382
4,367
29,290

Absorbing Reserve Funds
36 Currency in circulation ....................................
37 Treasury cash holdings ....................................

Deposits, other than member bank reserves, with
Federal Reserve Banks
38 Treasury.................................... ...................
39 Foreign.........................................................
40 Other° .........................................................
41 Other Federal Reserve liabilities and capital ...
42 Reserve accounts3 ...........................................

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. Includes special deposits under the credit restraint program held by money
market mutual funds ana other financial intermediaries, held by nonmember banks




against managed liabilities, and held by any institution in conjunction with the
consumer credit restraint program.
3. Includes reserves of member banks, Edge Act corporations, and U.S. agencies
and branches of foreign banks.
Note: For amounts of currency and coin held as reserves, see table 1.12

Member Banks
1.12

A5

M em ber Banks

R E SE R V E S A N D B O R R O W IN G S
Millions of dollars

Monthly averages of daily figures
Reserve classification

1978

1980

1979
Apr.

May

June/*

July?

Aug.?

All member banks

Reserves
At Federal Reserve Banks .
Currency and co in --------Total held1 ........................
Required ......................
Excess1 ..........................
Borrowings at Reserve Banks2
6 Total .................................
7 Seasonal ............................

31,158
10,330
41,572
41,447
125

32,473
11,344
43,972
43,578
394

32,712
12,283
45,170
44,928
242

31,878
11,063
43,156
42,966
190

32,400
10,729
43,352
42,907
445

33,663
10,895
44,769
44,678
91

32,726
10,998
43,933
43,793
140

32,189
11,137
43,531
43,280
251

31,454
11,285
42,927
42,509
418

28,965
11,262
40,408
40,077
331

874
134

1,473
82

1,241
75

1,655
96

2,828
152

2,443
156

1,028
64

365
12

390
5

687
9

7,120
7,243
-123
99

7,401
7,326
75

7,758
7,760

7,168
7,205
-37
125

7,276
7,194
82
60

7,603
7,655
-52
81

7,596
7,662

-66

31

7,482
7,600
-118
18

7,272
7,278
-6
54

6,462
6,507
-45
99

12 Reserves held ......................
13 Required ..........................
14 Excess...............................
15 Borrowings2 ..........................

1,907
1,900
7

2,051
2,063

-12

60

1,968
1,941
27
97

1,886

10

2,036
2,005
31
90

1,961
-75
137

2,150
2,173
-23
60

1,922
1,906
16
28

1,868
1,868
0
1

1,785
1,866
-81
20

1,528
1,591
-63
26

16 Reserves held ......................
17 Required ..........................
18 Excess...............................
19 Borrowings2 ..........................

16,446
16,342
104
276

17,426
17,390
36
707

18,078
18,065
13
647

17,246
17,265
-19
729

17,029
17,135
-106
1,479

17,644
17,991
-347
1,287

17,379
17,545
-166

17,049
17,199
-150
319

16,642
16,815
-173
296

15,756
15,739
17
479

20 Reserves held ......................
21 Required .....................
22 Excess...............................
23 Borrowings2 ..........................

16,099
15,962
137
489

16,734
16,536
198
610

16,904
16,692

212
508

16,403
16,229
174
704

16,261
16,233
28
1,152

16,314
16,367
-53
1,015

16,271
16,234
37
161

16,248
16,186
62
27

16,285
16,137
148
20

16,031
15,925
106
83

24 Reserves held ......................
25 Required ...
............
26 Excess...............................

n.a.
n.a.
n.a.

336
303
33

339
323
16

328
303
25

317
300
17

339
299
40

335
295
40

374
332
42

379
354
25

339
315
24

27 Reserves held ...................
28 Required ..........................
29 Excess...............................

n.a.
n.a.
n.a.

39
18

40
25
15

43
23

90
84

198
193
5

162
151

106
97
9

64
59
5

1

2
3
4
5

Large banks in New York City

8 Reserves held ......................
Required ..........................
Excess...............................
11 Borrowings2 ..........................

9
10

Large banks in Chicago

Other large banks

All other banks

Edge corporations

U.S. agencies and branches3

-2

66

26

21

20

6

11

Weekly averages of daily figures for week (in 1980) ending
June 25

July 2

July 9

July 16

July 23

July 30p

Aug. 6p

Aug. 13p

Aug. 20p

Aug. 21P

All member banks

Reserves
At Federal Reserve Banks.....................
Currency and coin .................................
Total held1 .............................................
Required ...........................................
Excess1 ...............................................
Borrowings at Reserve Banks2
35 Total ......................................................
36 Seasonal ................................................

32,383
10,692
43,284
43,082
-202

32,633
11,238
44,065
43,794
271

31,339
11,559
43,089
42,583
506

32,247
11,502
43,936
43,596
340

33,030
10,504
43,726
43,742
-16

29,014
11,552
40,748
40,509
239

28,718
11,542
40,442
39,754
688

27,471
11,748
39,400
39,311
89

30,277
11,474
40,932
40,597
335

29,066
11,135
40,382
40,293
89

318
8

348
7

215
5

332
5

354
5

629
7

828
7

390
6

344
6

700
10

37 Reserves held ...........................................
38 Required ...............................................
39 Excess....................................................
40 Borrowings2 ................... ........................

7,362
7,352
10
0

7,525
7,680
-155
0

7,510
7,328
182
0

7,605
7,706
-101
0

7,081
7,334
-253
0

6,734
6,732
2
241

6,599
6,554
45
214

6,127
6,332
-205
63

6,818
6,747
71
0

6,427
6,376
51
161

41 Reserves held ...........................................
42 Required ................. ........ ....................
43 Excess....................................................
44 Borrowings2 ...............................................

1,591
1,825
-234
0

1,927
1,891
36
21

1,972
1,858
114
0

1,849
2,009
-160
64

1,958
2,005
-47
0

1,604
1,629
-25
5

1,606
1,554
52
21

1,514
1,570
-56
0

1,580
1,611
-31
7

1,382
1,597
-215
80

17,211
17,202
9
297

17,381
17,432
-51
299

16,868
16,896
-28
204

17,061
17,237
-176
258

16,874
17,386
-512
342

15,539
15,751
-212
357

15,937
15,523
414
519

15,111
15,468
-357
311

15,827
15,908
-81
315

15,578
15,883
-305
340

16,367
16,351
-16
21

16,501
16,435
66
28

16,267
16,097
170
11

16,293
16,168
125
10

16,516
16,560
-44
12

16,079
16,051
28
26

16,107
15,819
288
74

15,679
15,640
39
16

16,001
15,991
10
22

16,096
16,113
-17
119

346
305
41

344
322
22

364
331
33

389
371
18

421
384
37

361
346
15

324
304
20

319
301
18

355
340
15

360
324
36

57
47
10

39
34
5

79
73
6

114
105
9

81
73
8

30
31
32
33
34

Large banks in New York City

Large banks in Chicago

Other large banks

45 Reserves held ...........................................
46 Required ...............................................
47 Excess....................................................
48 Borrowings2 ...............................................
All other banks

49 Reserves held ...........................................
50 Required ........................ ......................
51 Excess....................................................
52 Borrowings2 ...............................................
Edge corporations

53 Reserves held ...........................................
54 Required ...............................................
55 Excess....................................................
U.S. agencies and branches3
56 Reserves held ...........................................
57 Required ...............................................
58 Excess....................................................

1. Adjusted to include waivers of penalties for reserve deficiencies in accordance
with Board policy, effective Nov. 19, 1975, of permitting transitional relief on a
graduated basis over a 24-month period when a nonmember bank merged into an
existing member bank, or wnen a nonmember bank joins the Federal




Reserve System. For weeks for which figures are preliminary, figures by class of
bank do not add to total because adjusted data by class are not available,
2. Based on closing figures,
3. Data not reported after July 23, 1980.

A6

D om estic Financial Statistics □ September 1980

1.13

FEDERAL FUNDS AND REPURCHASE AGREEMENTS

Large Member Banks i

Averages of daily figures, in millions of dollars
1980, week ending Wednesday

One day and continuing contract

1 Commercial banks in United States...........................
2 Other depository institutions, foreign banks and foreign
official institutions, and U.S. government agencies
3 Nonbank securities dealers.........................................
4 All other ...................................................................
All other maturities
5 Commercial banks in United States............................

July 2

July 9

47,657'

54,210'

52,249'

48,501'

47,297

52,838

53,697

52,070

49,725

17,036'
1,242
15,568

16,159'
1,585
14,992

17,717'
2,128
16,030

17,789'
2,332
16,640

17,198
2,369
16,119

16,867
3,097
16,090

16,808
2,369
15,440

17,404
2,456
16,253

15,687
2,705
16,612

July 16

July 23

July 30

Aug 6

Aug. 13

Aug. 20

Aug. 27

6 Other depository institutions, foreign banks and foreign
official institutions, and U.S. government agencies
7 Nonbank securities dealers.........................................
8 All other ...................................................................

3,962

3,670

3,829

3,755

3,746'

3,951

3,659

3,386

3,634

6,102
2,956
9,164

5,950
2,856
9,444

5,996
2,956
10,067

5,948
3,036
9,637

5,843'
3,319
10,921

5,712
3,486
10,936

5,825
3,669
11,395

5,7%
3,588
10,164

5,553
3,606
10,760

Memo: Federal funds and resale agreement loans in ma­
turities of one day or continuing contract
9 Commercial banks in United States...........................
10 Nonbank securities dealers.........................................

15,642'
2,117

16,440'
2,444

16,022'
2,457

13,073
2,317

13,278
2,507

15,556
2,559

14,374
2,576

14,010
2,852

11,460
2,418

1. Banks with assets of $1 billion or more as of December 31, 1977.




Policy Instruments
1.14

A7

F E D E R A L R E S E R V E B A N K IN T E R E S T R A T E S
Percent per annum
Current and previous levels
Extended credit

Short-term
adjustment credit

Federal Reserve
Bank

Emergency credit
to all others
under section 132

Special circumstances!

Seasonal credit
Rate on
8/31/80

Effective
date

Previous
rate

Rate on
8/31/80

Effective
date

Previous
rate

Rate on
8/31/80

Effective
date

Previous
rate

Rate on
8/31/80

Effective
date

Previous
rate

Boston ...............
New York ..........
Philadelphia .........
Cleveland ............
Richmond............
Atlanta ...............

10
10
10
10
10
10

7/29/80
7/28/80
7/29/80
7/28/80
7/28/80
7/28/80

11
11
11
11
11
11

10
10
10
10
10
10

7/29/80
7/28/80
7/29/80
7/28/80
7/28/80
7/28/80

11
11
11
11
11
11

11
11
11
11
11
11

7/29/80
7/28/80
7/29/80
7/28/80
7/28/80
7/28/80

12
12
12
12
12
12

13
13
13
13
13
13

7/29/80
7/28/80
7/29/80
7/28/80
7/28/80
7/28/80

14
14
14
14
14
14

Chicago...............
St. Louis..............
Minneapolis .........
Kansas City .........
Dallas .................
San Francisco ----

10
10
10
10
10
10

7/28/80
7/28/80
7/28/80
7/28/80
7/28/80
7/28/80

11
11
11
11
11
11

10
10
10
10
10
10

7/28/80
7/28/80
7/28/80
7/28/80
7/28/80
7/28/80

11
11
11
11
11
11

11
11
11
11
11
11

7/28/80
7/28/80
7/28/80
7/28/80
7/28/80
7/28/80

12
12
12
12
12
12

13
13
13
13
13
13

7/28/80
7/28/80
7/28/80
7/28/80
7/28/80
7/28/80

14
14
14
14
14
14

Range of rates in recent years3

Effective date

In effect Dec. 31, 1970 ............
1971— Jan. 8 ......................
15 ......................
19 ......................
22 ......................
29 .......................
Feb. 13 ......................
19 .......................
July 16 ......................
23 ......................
Nov. 11 ......................
19 ......................
Dec. 13 ......................
17 ......................
24 ......................
1973Jan. 15 ......................
Feb. 26 ......................
Mar. 2 ......................
Apr. 23 ......................
May 4 ......................
11 ......................
18 ......................
June 11 ......................
15 ......................
July 2 ......................
Aug. 14 ......................
23 .......................

Range (or
level)—
All F.R.
Banks

F.R.
Bank
of
N.Y.

5Yi

5h

5V^5Yi
5V4
5-51/4
5-5V4
5
43A-5
4^4
43/4-5
5
4^4-5
43/4
4V ^4
4V^-43/4
4Yl
5
5-5 Yi
5 Yi

5&-5^4
5^4
5^6
6
6-6Yi
6 Yi

7
1-lY i

lYi

5V4
5^4
5V4
5
5
5
43/4
5
5
5
43/4
43/4
4Yi
4Yi
5
5Yi
5Yi
5Yi

5^4
6
6
6Yi

Effective date

F.R.
Bank
of
N.Y.

1974— Apr. 25
30
Dec. 9
16

..............
..............
..............
..............

7^-8
8
73/4-8
73/4

8
8
73/4
73/4

1975— Jan.

6
10
24
Feb. 5
7
Mar. 10
14
May 16

..............
..............
..............
..............
..............
..............
..............
..............

7V4

1 Y\

7V4
63A-7V4
63/4
6 ^ 3/4
6V4
6-65/4

1976— Jan. 19
23
Nov. 22
26

..............
..............
..............
..............

5^2-6
5Yi
5^4-5^
5^4

5 Y4
5Y4

1977— Aug. 30
31
Sept. 2
Oct. 26

..............
..............
..............
..............

5V4-53/4
5V4-53/4

53/4

6 Yi
1

lYi
lYi

1. Applicable to advances when exceptional circumstances or practices involve
only a particular depository institution as described in section 201.3(b) (2) of
Regulation A.
2. Applicable to emergency advances to individuals, partnerships, and corpo­
rations as described in section 201.3(c) of Regulation A.




Range (or
level)—
All F.R.
Banks

IV\

5^4
6

IVa
1 Y\

63/4
63/4
6 Yt

6V4

6

5Y2

5Yi

5Va

5^4

6

Effective date

1978— Jan.

9
20
May 11
12
July 3
10
Aug. 21
Sept. 22
Oct. 16
20
Nov. 1
3

..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............

1979— July 20 ..............
Aug. 17 ..............
20 ..............
Sept. 19 ..............
21 ..............
Oct. 8 ..............
10 ..............
1980— Feb. 15
19
May 29
30
June 13
June 16
July 28
July 29

..............
..............
..............
..............
..............
..............
..............
..............

In effect August 31, 1980

Range (or
level)—
All F.R.
Banks
6- 6 V1
6 Y2
6Y2r-7
1
1-lYx

7V4-73/4
73/4
8
8-8Yi
8Yl
8J4-9Yi
9 Yi

F.R.
Bank
of
N.Y.
6Yl
6Yi
1

7
71/4
7 V4
73/4
8
8Yi
8Yi
9 Yi
9 Yi

10
10-10Yi
10Yi
10Vi-11
11
11-12
12

10
10Yi

12-13
13
12-13
12
11-12
11
10-11
10

13
13
13
12
11
11
10
10

10

10

10 Yi

11
11
12
12

3. Rates for short-term adjustment credit (as described above). 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,
1971-1975, 1972-1976, 1973-1977, and 1974-1978.

A8
1.15

D om estic Financial Statistics □ September 1980
M E M B E R B A N K R E S E R V E R E Q U IR E M E N T S 1

Percent of deposits
Requirements in effect
August 31, 1980

Type of deposit, and deposit interval
in millions of dollars

Net demand2
0-2 .......................................................................................................
2-10 .....................................................................................................
10-100 ..................................................................................................
100-400 ................................................................................................
Over 400 ..............................................................................................
Time and savings2>3-4

Time5
0-5, by maturity
30-179 days....................................................................................
180 days to 4 years........................................................................
4 years or m ore.............................................................................
Over 5, by maturity
30-179 days....................................................................................
180 days to 4 years........................................................................
4 years or m ore.............................................................................

Previous requirements

Percent

Effective date

Percent

Effective date

7
9Vi
im
12%
16^4

12/30/76
12/30/76
12/30/76
12/30/76
12/30/76

10
12
13
16Vi

IVi

2/13/75
2/13/75
2/13/75
2/13/75
2/13/75

3

3/16/67

3VS

3/2/67

3

3/16/67
1/8/76
10/30/75

3Vi
3
3

3/2/67
3/16/67
3/16/67

12/12/74
1/8/76
10/30/75

5
3
3

2Yi

1
6
1

10/1/70
12/12/74
12/12/74

Legal limits

Net demand

Reserve city banks ............................................................................
Other banks ......................................................................................

Borrowings from foreign banks..............................................................
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.
2. (a) Requirement schedules are graduated, and each deposit interval applies
to that part of the deposits of each bank. Demand deposits subject to reserve
requirements are gross demand deposits minus cash items in process of collection
ana demand balances due from domestic banks.
(b) The Federal Reserve Act specifies different ranges of requirements for
reserve city banks and for other banks. Reserve cities are designated under a
criterion adopted effective Nov. 9, 1972, by which a bank having net demand
deposits of more than $400 million is considered to have the character of business
of a reserve city bank. The presence of the head office of such a bank constitutes
designation of that place as a reserve city. Cities in which there are Federal Reserve
Banks or branches are also reserve cities. Any banks having net demand deposits
of $400 million or less are considered to have the character of business of banks
outside of reserve cities and are permitted to maintain reserves at ratios set for
banks not in reserve cities. For details, see the Board’s Regulation D.
(c) 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 on borrowings
from unrelated banks abroad was also reduced to zero from 4 percent.
(d) Effective with the reserve computation period beginning Nov. 16, 1978,
domestic deposits of Edge corporations are subject to the same reserve require­
ments as deposits of member banks.
3. Negotiable order of withdrawal (NOW) accounts and time deposits such as
Christmas and vacation club accounts are subject to the same requirements as
savings deposits.




Minimum

Maximum

10
7
3
0

22
14
10
22

4. The average reserve requirement on savings and other time deposits must be
at least 3 percent, the minimum specified by law.
5. 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 mar­
ginal 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
April 3,1980, was decreased to 5 percent beginning June 12,1980, and was reduced
to zero 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 insti­
tutions, and certain other obligations. In general, the base for the marginal reserve
requirement was originally tne 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 statement
weeks 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 IVi 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 tne extent that foreign loans
and balances declined.

Note. Required reserves must be held in the form of deposits with Federal
Reserve banks or vault cash.

Policy Instruments

A9

1.16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions
Percent per annum
Commercial banks

Type and maturity of deposit

In effect Aug. 31, 1980

Previous maximum

Effective
date

1 Savings .....................................................................
2 Negotiable order of withdrawal accounts 2 ...............
Time accounts 4
3
4
5
6
7
8
9
10
11
12

5V4

7/1/79
1/1/74

5

In effect Aug. 31, 1980

Effective
date

Percent

Effective
date

7/1/73

5 Vi
5

7/1/79
1/1/74

(3)
6

1/1/80

Previous maximum
Percent

5V4

(3)

Effective
date

0)

Fixed ceiling rates by maturity

30-89 days............................................................
90 days to 1 y ear..................................................
1 to 2 years 5 .........................................................
2 to 2Vi years 5 .....................................................
2Vi to 4 years 5 .....................................................
4 to 6 years 6 .........................................................
6 to 8 years 6 .........................................................
8 years or more 6 ..................................................
Issued to governmental units (all maturities)8 .......
Individual retirement accounts and Keogh (H.R. 10)
plans (3 years or more)8 9 ...............................

5V4

8/1/79
1/1/80

6Vi
m
IVi

7%

7/1/73
7/1/73
11/1/73
12/23/74
6/1/78
6/1/78

53/4

1V4

11/1/73

73/4

’ 12/23/74

11/1/73
12/23/74
6/1/78
6/1/78

6/1/78

73/4

7/6/77

6/1/78

6-month money market time deposits10.................
2Vz years or m ore..................................................

1. July 1, 1973, for mutual savings banks; July 6, 1973, for savings and loan
associations.
2. For authorized states only, federally insured commercial banks, savings and
loan associations, cooperative banks, and mutual savings banks in Massachusetts
and New Hampshire were first permitted to offer negotiable order of withdrawal
(NOW) accounts on Jan. 1, 1974. Authorization to issue NOW accounts was
extended to similar institutions throughout New England on Feb. 27, 1976, and
in New York State on Nov. 10, 1978, and in New Jersey on Dec. 28, 1979.
3. No separate account category.
4. For exceptions with respect to certain foreign time deposits see the Federal
Reserve Bulletin for October 1962 (p. 1279), August 1965 (p. 1084), and Feb­
ruary 1968 (p. 167).
5. No minimum denomination. Until July 1, 1979, a minimum of $1,000 was
required for savings and loan associations, except in areas where mutual savings
banks permitted lower minimum denominations. This restriction was removed for
deposits maturing in less than 1 year, effective Nov. 1, 1973.
6. No minimum denomination. Until July 1, 1979, minimum denomination was
$1,000 except for deposits representing funds contributed to an Individual Retire­
ment Account (IRA) or a Keogh (H.R. 10) plan established pursuant to the
Internal Revenue Code. The $1,000 minimum requirement was removed for such
accounts in December 1975 and November 1976 respectively.
7. Between July 1, 1973, and Oct. 31, 1973, there was no ceiling for certificates
maturing in 4 years or more with minimum denominations of $1,000; however,
the amount of such certificates that an institution could issue was limited to 5
percent of its total time and savings deposits. Sales in excess of that amount, as
well as certificates of less than $1,000, were limited to the 6 V1 percent ceiling on
time deposits maturing in 2Vi years or more.
Effective Nov. 1, 1973, ceilings were reimposed on certificates maturing in 4
years or more with minimum denomination of $1,000. There is no limitation on
the amount of these certificates that banks can issue.
8. Accounts subject to fixed rate ceilings. See footnote 6 for minimum denom­
ination requirements.
9. Effective January 1, 1980, commercial banks are permitted to pay the same
rate as thrifts on IRA and Keogh accounts and accounts of governmental units
when such deposits are placed in the new 2Vi-year or more variable ceiling cer­
tificates or in 26-week money market certificates regardless of the level of the
Treasury bill rate.
10. Must have a maturity of exactly 26 weeks and a minimum denomination of
$10,000, and must be nonnegotiable.
11. Commercial banks, savings and loan associations, and mutual savings banks
were authorized to offer money market time deposits effective June 1, 1978. The
ceiling rate for commercial banks on money market time deposits entered into
before June 5, 1980, is the discount rate (auction average) on most recently issued
six-month U.S. Treasury bills. Until Mar. 15, 1979, the ceiling rate for savings
and loan associations and mutual savings banks was V4 percentage point higher
than the rate for commercial banks. Beginning March 15,1979, the V4-percentagepoint interest differential is removed when the six-month Treasury bill rate is 9
percent or more. The full differential is in effect when the six-month bill rate is
8^4 percent or less. Thrift institutions may pay a maximum 9 percent when the sixmonth bill rate is between 8% and 9 percent. Also effective March 15, 1979,
interest compounding was prohibited on six-month money market time deposits
at all offering institutions. The maximum allowable rates in August for commercial
banks were as follows: Aug. 7, 9.117; Aug. 14, 9.141; Aug. 21, 10.015; Aug. 28,
10.50. The maximum allowable rates in August for thrift institutions were as




5
5 Vi
5Vi

7/1/73
7/1/73
1/21/70
1/21/70
1/21/70

5%

Special variable ceiling rates by maturity

13
14

Savings and loan associations and
mutual savings banks

5%

nn

6V1

63/4

IVi
7^4

(!)
C1)

(3) .
5^4
5%
6
6
(7) .
7Yi

(3)\

0)

1/21/70
1/21/70
1/21/70

li/i/73

1V4

’ 12/23/74

73/4

7/6/77

$

follows: Aug. 7, 9.117; Aug. 14, 9.141; Aug. 21, 10.015; Aug. 28, 10.50 Effective
for all six-month money market certificates issued beginning June 5, 1980, the
interest rate ceilings will be determined by the discount rate (auction average) of
most recently issued six-month U.S. Treasury bills as follows:
Bill rate
Commercial bank ceiling
Thrift ceiling
8.75 and above
bill rate + V4 percent
bill rate + Y4 percent
8.50 to 8.75
bill rate + V4 percent
9.00
7.50 to 8.50
bill rate + V4 percent
bill rate + Vi percent
7.25 to 7.50
7.75
bill rate + Vi percent
Below 7.25
7.75
7.75
The prohibition against compounding interest in these certificates continues. In
addition, during the period Mfay 29, 1980, through Nov. 1,1980, commercial banks
may renew maturing six-month money market time deposits for the same depositor
at the thrift institution ceiling interest rate.
12. Effective Jan. 1, 1980, commercial banks, savings and loan associations, and
mutual savings banks were authorized to offer variable-ceiling nonnegotiable time
deposits with no required minimum denomination and with maturities of 2Vi years
or more. The maximum rate for commercial banks is 3/4 percentage point below
the yield on 2Vi-year U.S. Treasury securities; the ceiling rate for thrift institutions
is Va percentage point higher than that for commercial banks. Effective Mar. 1,
1980, a temporary ceiling of 11^4 percent was placed on these accounts at com­
mercial banks; the temporary ceiling is 12 percent at savings and loan associations
and mutual savings banks. Effective for all variable ceiling nonnegotiable time
deposits with maturities of 2Vi years or more issued beginning June 2, 1980, the
ceiling rates of interest will be determined as follows:
Treasury yield
Commercial bank ceiling
Thrift ceiling
12.00 and above
11.75
12.00
9.50 to 12.00
Treasury yield - V4 percent
Treasury yield
Below 9.50
9.25
9.50
Interest may be compounded on these time deposits. The ceiling rates of interest
at which these accounts may be offered vary biweekly. The maximum allowable
rates in August for commercial banks were as follows: Aug. 7, 9.450; Aug. 20,
10.00. The maximum allowable rates in August for thrift institutions were as
follows: Aug. 7, 9.70; Aug. 20, 10.250.
13. Between July 1, 1979, and Dec. 31, 1979, commercial banks, savings and
loan associations, and mutual savings banks were authorized to offer variable
ceiling accounts with no required minimum denomination and with maturities of
4 years or more. The maximum rate for commercial banks was IV4 percentage
points below the yield on 4-year U.S. Treasury securities; the ceiling rate for thrift
institutions was V4 percentage point higher than that for commercial banks.
N ote. Before Mar. 31, 1980, the maximum rates that could be paid by federally
insured commercial banks, mutual savings banks, and savings and loan associations
were established by the Board of Governors of the Federal Reserve System, the
Board of Directors of the Federal Deposit Insurance Corporation, and the Federal
Home Loan Bank Board under the provisions of 12 CFR 217, 329, and 526,
respectively. Title II of the Depository Institutions Deregulation and Monetary
Control Act of 1980 (P.L. 96-221) transferred the authority of the agencies to
establish maximum rates of interest payable on deposits to the Depository Insti­
tutions Deregulation Committee. The maximum rates on time deposits in denom­
inations of $100,000 or more with maturities of 30-89 days were suspended in June
1970; such deposits maturing in 90 days or more were suspended in May 1973. For
information regarding previous interest rate ceilings on all types of accounts, see
earlier issues of the F e d e ra l R eserve B u lle tin , the Federal Home Loan Bank
Board Journal, and the Annual Report of the Federal Deposit Insurance Corpo­
ration.

A 10

D om estic Financial Statistics □ September 1980

1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS
Millions of dollars

1980
Type of transaction

1977

1978

1979
Jan.

Feb.

Mar.

Apr.

May

June

July

U.S. G overnment Securities
Outright transactions (excluding matched salepurchase transactions)

1
2
3
4

Treasury bills

13,738
7,241
0
2,136

16,628
13,725
0
2,033

16,623
7,480
0
2,900

0
1,722
0
790

187
1,590
0
400

1,370
0
0
0

2,428
108
0
0

838
232
0
0

322
0
274
0

0
2,264
0
950

3,017
0
4.499
2.500

1,184
0
-5,170
0

3,203
0
17,339
-11,308
2,600

0
0
383
-403
0

0
0
1,822
-2,177
0

292
0
921
-809
0

109
0
179
-459
0

155
0
1,670
-5,276
0

121
0
412
-1,479
0

0
0
311
-788
0

2,833
0
-6,649

4,188
0
-178

2,148
0
-12,693
7,508

0
0
-383
403

0
0
-374
1,377

355
0
-921
809

373
0
-179
459

405
0
-1,302
3,000

465
0
-412
1,479

0
0
-311
788

758
0
584

1,526
0
2,803

523
0
-4,646
2,181

0
0
0
0

0
0
-1,364
450

107
0
0
0

62
0
0
0

133
0
-25
1,300

164
0
0
0

0
0
0
0

Gross purchases .........................................
Gross sales ..........................................................
Maturity shift ......................................................
Exchange ..............................................................

553
0
1,565

1,063
0
2,545

454
0
0
1,619

0
0
0
0

0
0
-84
350

81
0
0
0

64
0
0
0

216
0
-342
976

129
0
0
0

0
0
0
0

22
23
24

All maturities1
Gross purchases .........................................
Gross sales ..........................................................
Redemptions ........................................................

20,898
7,241
4,636

24,591
13,725
2,033

22,950
7,480
5,500

0
1,722
790

187
1,590
400

2,206
0
0

3,036
108
0

1,747
232
0

1,200
0
0

0
2,264
950

25
26

Matched sale-purchase transactions
Gross sales ..........................................................
Gross purchases .........................................

425,214
423,841

511,126
510,854

626,403
623,245

53,025
55,557

54,541
54,584

55,658
54,636

57,316
57,479

49,934
50,965

50,590
52,076

48,370
46,023

27
28

Repurchase agreements
Gross purchases .........................................
Gross sales ...............................................

178,683
180,535

151,618
152,436

107,374
107,291

5,704
6,872

6,682
6,379

3,029
3,952

7,743

6,896

-1,148

1,486

2,168

7,717
4,811
5,452

12,810
15,258
238

10,719
10,110

5,798

5,407
4,787
-1,140

-4,952

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

Gross purchases ..................................................
Gross sales ...........................................................
Exchange ...............................................................
Redemptions ........................................................

Others within 1 year1
Gross purchases ..................................................
Gross sales ...........................................................
Maturity shift .......................................................
Exchange ...............................................................
Redemptions .........................................................

1 to 5 years
Gross purchases ...................................................
Gross sales ...........................................................
Maturity shift ......................................................
Exchange ..................................................

5 to 10 years

Gross purchases .........................................
Gross sales ..........................................................
Maturity shift ......................................................
Exchange ..............................................................

Over 10 years

29 Net change

in U.S. government securities..........

Federal A gency O bligations

30
31
32

Outright transactions
Gross purchases .........................................
Gross sales ..........................................................
Redemptions ........................................................

1,433
0
223

301
173
235

853
399
134

0
0
0

0
0

0
0
5

668
0
2

0
0
0

0
0
2

0
0
2

33
34

Repurchase agreements
Gross purchases ..................................................
Gross sales ..........................................................

13,811
13,638

40,567
40,885

37,321
36,960

3,049
3,543

2,403
2,372

1,883
1,834

483
563

1,611
1,258

3,035
3,351

1,737
1,242

35

Net change in federal agency obligations............

1,383

-426

681

-494

31

45

586

353

-318

492

-196
159

0
-366

0
116

0
-704

0
205

0
-34

0
-171

0
366

0
7

0
-64

change in bankers acceptances......................

-37

-366

116

-704

205

-34

-171

366

7

-64

39 Total net change in System Open Market
Account .................................................

7,143

6,951

7,693

-2,345

-903

1,497

2,582

6,171

-73

-4,523

Bankers Acceptances
36 Outright transactions, n e t ......................................
37 Repurchase agreements, net ................................
38 Net

1. Both gross purchases and redemptions include special certificates created
when the Treasury borrows directly from the Federal Reserve, as follows (millions
of dollars): September 1977, 2,500; March 1979, 2,600.




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.

Reserve Banks

A ll

1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements
Millions of dollars

Account
July 30

Aug. 6

Wednesday

End of month

1980

1980
Aug. 20

Aug. 13

Aug. 27

June

July

Aug.

Consolidated condition statement
A ssets
11,171
3,118
391

11,172
3,118
400

11,172
3,268
412

11,171
3,268
407

11,171
3,268
402

11,172
3,018
408

11,172
3,118
399

11,172
3,268
405

2,620
0

464
0

921
0

821
0

2,572
0

215
0

562
0

1,515
0

0
0

0
0

0
0

0
0

0
0

0
373

0
310

0
277

8,873
0

8,873
0

8,873
0

8,873
0

8,873
0

8,875
37

8,873
531

8,873
482

45,300
0
58,174
16,103
119.577
0
119.577

35,055
0
58,174
16,103
109.332
0
109.332

40,538
0
58,174
16,103
114.815
0
114.815

45,189
0
58,703
16,808
120.700
0
120.700

43,179
0
58,703
16,808
118.690
0
118.690

49,781
0
58,174
16,103
124,058
457
124,515

44,220
0
58,174
16,103
118,497
1,066
119,563

43,503
0
58,703
16,808
119,014
834
119,848

17 Total loans and securities............................. .............

131,070

118,669

124,609

130,394

130,135

134,015

129,839

130,995

18 Cash items in process of collection..................................
19 Bank premises ....................................................................
Other assets
20 Denominated in foreign currencies2 ............................
21
All other ..........................................................................

9,923
445

13,013
447

11,992
446

13,598
446

10,629
449

9,375
441

8,312
445

9,721
449

2,215
3,264

2,236
3,233

2,134
3,328

2,135
2,304

2,140
2,576

2,339
2,779

2,201
3,022

2,119
2,761

22 Total assets ................................................................

161,597

152,288

157,361

163,723

160,770

163,547

158,508

162,890

115,816

116,748

117,205

116,719

116,874

114,502

115,654

116,925

Reserve accounts
24
Member banks ............................................................
25
Edge Act corporations ..............................................
26
U.S. agencies and branches of foreign b ank s........
27
T o ta l...............................................................................
28
Special Deposits—Credit Restraint Program ............
29
U.S. Treasury—General account ................................
30 Foreign—Official accounts ............................................
31 Other .....................................................................................

31,183
463
0
31,646
0
3,073
301
415

20,882
313
0
21,195
0
2,762
285
588

25,232
352
0
25,584
0
3,473
237
398

32,740
367
0
33,107
0
2,491
225
377

28,782
508
0
29,290
0
3,749
199
382

33,187
397
28
33,612
578
3,199
691
754

27,548
372
0
27,920
0
3,954
436
500

29,338
342
0
29,680
0
2,742
336
383

32 Total deposits ............................................................

35,435

24,830

29,692

36,200

33,620

38,834

32,810

33,141

33 Deferred availability cash items ......................................
34 Other liabilities and accrued dividends3 ..........................

5,898
1,880

6,450
1,682

6,209
1,695

6,181
2,059

5,909
1,803

5,208
2,250

5,504
1,957

6,254
1,879

35 Total liabilities ...........................................................

159,029

149,710

154,801

161,159

158,206

160,794

155,925

158,199

36 Capital paid in ....................................................................
37 Surplus ...................................................................................
38 Other capital accounts ......................................................

1,175
1,145
248

1,176
1,145
257

1,176
1,145
239

1,177
1,145
242

1,180
1,145
239

1,169
1,145
439

1,175
1,145
263

1,180
1,145
366

39 Total liabilities and capital accounts...........................

161,597

152,288

157,361

163,723

160,770

163,547

158,508

160,890

40 Memo: Marketable U.S. government securities held in
custody for foreign and international account........

82,246

84,350

84,949

82,510

84,408

82,226

82,862

84,331

1 Gold certificate account ....................................................
2 Special drawing rights certificate account......................
3 Coin ......................................................................................
Loans
4 Member bank borrowings..............................................
5 Other ................................................................................
Acceptances
6 Bought outright ..............................................................
7 Held under repurchase agreements ............................
Federal agency obligations
8 Bought outright ..............................................................
9 Held under repurchase agreements ............................
U.S. government securities
Bought outright
10
Bills ..............................................................................
11
Certificates—Special ..................................................
12
Notes ............................................................................
13
Bonds ............................................................................
14
Total1 ............................................................................
15 Held under repurchase agreements ............................
16 Total U.S. government securities....................................

L iabilities
23 Federal Reserve n o te s ........................................................
Deposits

Capital A ccounts

Federal Reserve note statement

41 Federal Reserve notes outstanding (issued to Bank) ..

134,469

129,121

132,977

134,415

134,749

132,861

134,545

134,781

Collateral held against notes outstanding
Gold certificate account ................................................
Special drawing rights certificate accoun t..................
Eligible paper ..................................................................
U.S. government and agency securities......................

11,171
3,118
1,056
119,124

11,172
3,118
28
114,803

11,172
3,268
249
118,288

11,171
3,268
152
119,824

11,171
3,268
879
119,431

11,172
3,018
29
118,642

11,172
3,118
86
120,169

11,172
3,268
553
119,788

46 Total collateral ...........................................................

134,469

129,121

132,977

134,415

134,749

132,861

134,545

134,871

42
43
44
45

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. Beginning Dec. 29,1978, such assets are revalued monthly at market exchange
rates.
3. Includes exchange-translation account reflecting, beginning Dec. 29, 1978,
the monthly revaluation at market exchange rates of foreign-exchange commit­
ments.

A12

D om estic Financial Statistics □ September 1980

1.19 FEDERAL RESERVE BANKS
Millions of dollars

Maturity Distribution of Loan and Security Holdings

Type and maturity groupings
July 30

Aug. 6

Wednesday

End of month

1980

1980

Aug. 13

Aug. 20

Aug. 27

June 30

July 31

Aug. 30

1 Loans—Total ............................................................
2 Within 15 days.......................................................
3 16 days to 90 days..................................................
4 91 days to 1 year....................................................

2,620
2,618
2
0

464
461
3
0

921
918
3
0

821
820
1
0

2,572
2,571
1
0

215
211
4
0

562
560
2
0

1,515
1,510
5
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

373
373
0
0

310
310
0
0

277
277
0
0

9 U.S. government securities—T otal.............................
10 Within 15 days1 .....................................................
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.........................................................

119,577
3,312
25,461
29,647
33,418
13,601
14,138

109,332
5,700
12,619
29,379
33,895
13,601
14,138

114,815
6,097
19,022
28,062
33,895
13,601
14,138

120,700
2,746
22,647
31,293
36,037
13,135
14,842

118,690
2,365
21,876
30,435
36,037
13,135
14,842

124,515
3,633
28,039
31,686
33,418
13,601
14,138

119,563
4,693
21,908
31,328
33,895
13,601
14,138

119,848
3,394
20,302
32,139
36,037
13,134
14,842

16 Federal agency obligations—Total .............................
17 Within 15 days1 .....................................................
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.........................................................

8,873
83
761
1,310
4,724
1,251
744

8,873
0
825
1,330
4,770
1,204
744

8,873
111
714
1,330
4,770
1,204
744

8,873
207
617
1,330
4,770
1,205
744

8,873
287
606
1,250
4,802
1,184
744

8,912
223
518
1,499
4,663
1,265
744

9,404
615
761
1,310
4,770
1,204
744

9,355
769
607
1,249
4,802
1,184
744

i. Holdings under repurchase agreements are classified as maturing within 15
days in accordance with maximum maturity of the agreements.

1.20 BANK DEBITS AND DEPOSIT TURNOVER

Debits are shown in billions of dollars, turnover as ratio of debits to deposit. Monthly data are at annual rates.
1980'
Bank group, or type of customer

1977'

1978'

1979'
Mar.

Apr.

May

June

July

61,574.7
24,788.9
36,785.7

63,088.5
25,538.8
37,549.8

158.7
80.2
587.5
826.4

161.6
85.1
633.7
880.4

201.5
817.1
133.7

203.7
844.5
134.4

10.2
8.6
3.4
4.2

9.7
8.5
3.6
4.3

Debits to demand deposits1 (seasonally adjusted)
1 All commercial banks................................................
2 Major New York City banks......................................
3 Other banks ..............................................................

34,322.8
13,860.6
20,462.2

40,297.8
15,008.7
25,289.1

49,750.7
18,512.2
31,238.5

59,257.1
22,936.8
36,320.3

57,876.9
23,792.6
34,084.2

61,354.5
25,508.0
35,846.4

Debits to savings deposits2 (not seasonally adjusted)
4
5
6
7

ATS/NOW3 ...............................................................
Business4 ...................................................................
Others5 .....................................................................
All accounts ..............................................................

5.5
21.7
152.3
179.5

17.1
56.7
359.7
432.9

83.3
77.4
557.6
718.2

125.4
84.8
679.0
889.2

167.7
86.8
720.7
975.2

137.8
79.0
604.8
821.6

Demand deposit turnover1 (seasonally adjusted)
8 All commercial banks................................................
9 Major New York City banks......................................
10 Other banks ..............................................................

129.2
503.0
85.9

139.4
541.9
96.8

163.4
646.2
113.2

190.4
738.0
129.6

196.2
805.9
128.4

202.9
871.8
131.2

Savings deposit turnover2 (not seasonally adjusted)
11
12
13
14

ATS/NOW3 ................................................................
Business4 ...................................................................
Others5 .....................................................................
All accounts ..............................................................

6.5
4.1
1.5
1.7

1. Represents accounts of individuals, partnerships, and corporations, and of
states and political subdivisions.
2. Excludes special club accounts, such as Christmas and vacation clubs.
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. Represents corporations and other profit-seeking organizations (excluding
commercial banks but including savings and loan associations, mutual savings
banks, credit unions, the Export-Import Bank, and federally sponsored lending
agencies).
5. Savings accounts other than NOW; business; and, from December 1978, ATS.




7.0
5.1
1.7
1.9

7.8
7.2
2.9
3.3

9.1
9.4
3.9
4.5

12.1
10.2
4.2
5.1

9.9
8.9
3.6
4.3

Note: Historical data for the period 1970 through June 1977 have been esti­
mated; these estimates are based in part on the debits series for 233 SMSA’S,
which were available through June 197/. Back data are available from Publications
Services, Division of Administrative Services, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551. Debits and turnover data for savings
deposits are not available before July 1977.

Monetary Aggregates

A 13

1.21 MONEY STOCK MEASURES AND COMPONENTS
Billions of dollars, averages of daily figures

Item

1976
Dec.

1977
Dec.

1978
Dec.

1980

1979
Dec.
Feb.

Mar.

Apr.

May

June

July

371.3
390.9
1,585.9'
1,844.7'
2,230.1'

373.7
394.5
1,609.2
1,865.0
n.a.

Seasonally adjusted
Measures1
1
2
3
4
5

M-1A ........................................................
M-1B ........................................................
M-2 ......................................................
M-3 .............................. ..........................
L2 ..............................................................

6
7
8
9
10

Currency ..................................................
Demand deposits .............. ..................
Savings deposits ......................................
Small-denomination time deposits3 ___
Large-denomination time deposits4 ___

305.0
307.7
1,166.7
1,299.7
1,523.5

328.4
332.5
1,294.1
1,460.3
1,715.5

351.6
359.9
1,401.5
1,623.6
1,927.7

369.7
386.4
1,525.5
1,775.5
2,141.1

373.7
391.3
1,546.7
1,804.5
2,175.9

80.7
224.4
447.7
396.6
118.0

88.7
239.7
486.5
454.9
145.2

97.6
253.9
476.1
533.8
194.7

106.3
263.4
416.7
656.5
219.4

108.1
265.6
403.1
671.4
228.6

373.1
391.2
1,553.1
1,811.1
2,190.1'

367.6
386.6
1,549.9'
1,811.1
2,200.7

108.9
264.2
391.9
687.6
230.7

109.0
258.6
377.3
708.3
234.2

367.8
386.2'
1,562.2'
1,824.4'
2,216.5'

Components
110.1
257.7'
372.7
718.0'
235.0

111.0
260.3
381.4
719.6
230.7

112.0
261.6
393.6
717.3
226.6

Not seasonally adjusted
Measures1
11
12
13
14
15

M-1A ........................................................
M-1B ........................................................
M-2 ............................................................
M-3 ............................................................
L2 ..............................................................

16
17
18
19
20
21
22
23

Currency ..................................................
Demand deposits ....................................
Other checkable deposits5 ....................
Overnight RPs and Eurodollars6 ..........
Money market mutual fu n d s ................
Savings deposits ......................................
Small-denomination time deposits3 ___
Large-denomination time deposits4 . . . .

313.5
316.1
1,169.1
1,303.8
1,527.1

337.2
341.3
1,295.9
1,464.5
1,718.5

360.9
369.3
1,403.7
1,629.2
1,931.1

379.2
396.0
1,527.3
1,780.8
2,143.6

365.5
383.1
1,538.6
1,796.6
2,173.3

366.3
384.4
1,550.0
1,808.8
2,190.8

82.1
231.3
2.7
13.6
3.4
444.9
393.5
119.7

90.3
247.0
4.1
18.6
3.8
483.2
451.3
147.7

99.4
261.5
8.3
23.9
10.3
472.9
529.8
198.2

108.2
271.0
16.7
25.3
43.6
413.8
651.5
223.0

106.8
258.7
17.6
27.1
56.7
400.0
674.6
228.8

107.9
258.4
18.0
24.5
60.9
392.2
690.9
231.6

370.9
389.9
1,558.1
1,817.3'
2,208.7'

362.2
380.7'
1,559.3'
1,820.3'
2,210.3'

370.1
389.9'
1,587.7'
1,844.1'
2,228.4

375.6
396.7
1,614.7
1,868.0
n.a.

109.9
252.2
18.6'
21.3
66.8
374.4
719.1'
233.8

111.1
259.0
19.8'
22.5
74.2
383.6
720.4
228.3

112.7
263.0
21.0
26.0
80.6
396.5
717.9
224.2

Components

1. Composition of the money stock measures is as follows:
M-1A: Averages of daily figures for (1) 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 (2) currency outside the Treasury, Federal Reserve Banks, and
the vaults of commercial banks.
M-1B: M-1A plus negotiable order of withdrawal and automatic transfer service
accounts at banks and thrift institutions, credit union share draft accounts, and
demand deposits at mutual savings banks.
M-2: M-1B plus savings and small-denomination time deposits at all depositary
institutions, overnight repurchase agreements at commercial banks, overnight
Eurodollars held by U.S. residents other than banks at Caribbean branches of
member banks, and money market mutual fund shares.
M-3: M-2 plus large-denomination time deposits at all depositary institutions
and term RPs at commercial banks and savings and loan associations.




108.7
262.2
19.0
20.3
60.4
379.7
710.9
232.1

2. L: M-3 plus other liquid assets such as term Eurodollars held by U.S. residents
other than banks, bankers acceptances, commercial paper, Treasury bills and other
liquid Treasury securities, and U.S. savings bonds.
3. Small-denomination time deposits are those issued in amounts of less than

$100,000.

4. Large-denomination time deposits are those issued in amounts of $100,000
or more and are net of the holdings of domestic banks, thrift institutions, the U.S.
government, money market mutual funds, and foreign banks and official institu­
tions.
5. Includes ATS and NOW balances at all institutions, credit union share draft
balances, and demand deposits at mutual savings banks.
6. Overnight (and continuing contract) RPs are those issued by commercial
banks to the nonbank public, and overnight Eurodollars are those issued by Ca­
ribbean branches of member banks to U.S. nonbank customers.
Note. Latest monthly and weekly figures are available from the Board’s
H.6(508) release. Back data are available from the Banking Section, Division of
Research and Statistics.

A 14

D om estic Financial Statistics □ September 1980

1.22 AGGREGATE RESERVES AND DEPOSITS Member Banks
Billions of dollars, averages of daily figures
1980
1977
Dec.

1978
Dec.

1979
Dec.
Feb.

Apr.

May

Juner

July

Seasonally adjusted
1 Reserves1 .........................................................................................

36.00

41.16

43.57

43.44

43.35

43.69'

44.85'

44.46

43.98

42.80

2 Nonborrowed ................................................................................................
3 Required ........................................................................................................
4 Monetary base2 ............................................................................................

35.43
35.81
127.6

40.29
40.93
142.2

42.10
43.13
153.8

42.20
43.19
154.7

41.70
43.14
155.6

40.86'
43.48'
156.7'

42.40'
44.65'
157.9

43.44
44.27'
158.5

43.60
43.76
158.9

42.40
42.51
158.8

5 Deposits subject to reserve requirements3 .........................................

567.6

616.1

644.4

643.7

647.2

649.1

655.4

656.8

658.0

658.5

6 Time and savings..........................................................................................
Demand
7 Private ........................ ................................................................................
8 U.S. government ........ ..............................................................................

385.6

428.8

451.1

451.9

454.4

457.9

464.2

467.7

467.9

467.0

178.5
3.5

185.1
2.2

191.5
1.8

189.5
2.3

190.9
1.9

189.4
1.8

188.7
2.4

187.3
1.8

188.4
1.7

189.1
2.5

Not seasonally adjusted
9 Monetary base2 ............................................................................................

129.8

144.6

156.3

155.9

154.0

154.9

157.5'

157.8

158.6

159.6

10 Deposits subject to reserve requirements3 .........................................

575.3

624.0

652.6

652.1

643.9

648.0

657.7

651.5

656.9

658.2

11 Time and savings..........................................................................................
Demand
12 Private ........................................................................................................
13 U.S. government ......................................................................................

386.4

429.6

452.0

454.6

455.8

460.6

464.7

467.7

467.4

466.0

185.1
3.8

191.9
2.5

198.6
2.0

195.4
2.1

186.2
1.8

185.5
1.9

190.4
2.6

182.1
1.7

187.2
2.3

190.0
2.2

1.
Member bank reserve series reflect actual reserve requirement percentages
with no adjustment to eliminate the effect of changes in Regulations D and M.
Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percentage
points was imposed on time deposits of $100,000 or more. This action increased
required reserves approximately $3.0 billion in the week beginning Nov. 16, 1978.
Effective Oct. 11, 1979, an 8 percentage point marginal reserve requirement was
imposed on “managed liabilities” (liabilities that have been actively used to finance
rapid expansion in bank credit). On Oct. 25, 1979, reserves of Edge Act corpo­
rations were included in member bank reserves. This action raised required re­
serves $318 million. Effective Mar. 12, 1980, the marginal reserve requirement of
8 percentage points was raised to 10 percentage points. In addition the base upon
which the marginal reserve requirement is calculated was reduced. This action
increased required reserves about $1,693 million in the week ending April 2, 1980.




2. Includes total reserves (member bank reserve balances in the current week
plus vault cash held two weeks earlier); currency outside the U.S. Treasury, Federal
Reserve Banks, and the vaults of commercial banks; and vault cash of nonmember
banks.
3. Includes total time and savings deposits and net demand deposits as defined
by Regulation D. Private demand deposits include all demand deposits except
those due to the U.S. government, less cash items in process of collection and
demand balances due from domestic commercial banks.

Note. Latest monthly and weekly figures are available from the Board’s
H.3(502) statistical release. Back data and estimates of the impact on required
reserves and changes in reserve requirements are available from the Banking
Section, Division of Research and Statistics.

Monetary Aggregates

A15

1.23 LOANS AND SECURITIES All Commercial Banks'
Billions of dollars; averages of Wednesday figures
Category

1977

1980

1979

1978
Dec.

Juner

July

1977

1978

1979

Dec.

Dec.

Dec.

Seasonally adjusted
1 Total loans and securities2 ........................

891.1

2 U.S. Treasury securities ..............................

99.5
159.6
632.1
211.2s
175.25
138.2
20.6
25.8 s
25.8
5.8
29.5

3 Other securities ............................................

4 Total loans and leases2 ................................
5

6
7
8
9
10
11
12

Commercial and industrial lo a n s ............
Real estate loans ......................................
Loans to individuals..................................
Security loans ............................................
Loans to nonbank financial institutions .
Agricultural lo a n s ......................................
Lease financing receivables ....................
All other loans ..........................................

Memo:

Juner

July

Not seasonally adjusted

1,014.33

1,132.54

1,152.1

1,159.4

93.4
173.I3
747.83
246.5 6
210.5
164.9
19.4
27.17
28.2
7.4
43.63

93.8
191.5
847.24
290.54
242.44
182.7
18.3
30.34
31.0
9.5
42.6

97.0
201.5
853.6
295.5
250.2
174.5
15.8
27.9
32.4
10.5
46.7

100.8
204.2
854.4
296.0
251.3
172.4
15.0
28.0
32.6
10.6
48.5

899.1
100.7
160.2
638.3
212.6s
175.55
139.0
22.0
26.3 s
25.7
5.8
31.5

1,023.83

1,143.04

1,155.7

1,160.9

94.6
173.93
755.43
248.26
210.9
165.9
20.7
27.67
28.1
7.4
46.63

95.0
192.3
855.74
292.44
242.94
183.8
19.6
30.84
30.8
9.5
45.9

97.4
202.1
856.4
297.1
250.0
174.0
15.9
28.1
32.6
10.5
48.1

99.0
204.0
858.0
297.5
251.6
172.8
14.5
28.4
33.1
10.6
49.4

13 Total loans and securities plus loans sold2*9

895.9

1,018.I3

1,154.9

1,162.2

903.9

1,027.63

1,145.74'8

1,158.5

1,163.7

14 Total loans plus loans sold2-9 ......................
15 Total loans sold to affiliates9 ......................
16 Commercial and industrial loans plus loans
sold9 ........................................................
17 Commercial and industrial loans sold9 ..
18 Acceptances held ......................................
19 Other commercial and industrial loans ..
20
To U.S. addressees11 ............................
21
To non-U.S. addressees ......................
22 Loans to foreign b a n k s................................
23 Loans to commercial banks in the
United S ta tes......................................

636.9
4.8

751.63
3.8

850.004-8
2.8«

856.4
2.8

857.2
2.8

643.0
4.8

759.23
3.8

858.44-8
2.88

859.0
2.8

860.7
2.8

213.9 s
2.7
7.5
203.7 s
193.8 s
9.9 s
13.5

248.5^.10

292.34-8
1.88
8.5
282.0
263.2
18.8
18.7

297.4
1.9
9.0
286.5
266.9
19.6
19.6

297.9
1.9
9.3
286.6
267.5
19.4
20.1

215.3s
2.7
8.6
203.9s
193.7 s
10.3 s
14.6

250.1610
1.910
7.5
240.9
226.5
14.4
23.0

294.2 4-8
1.88
9.4
283.1
263.2
19.8
20.1

299.0
1.9
8.9
288.2
268.6
19.6
20.2

299.3
1.9
9.0
288.4
269.0
19.4
20.9

93.7

96.3

56.9

92.5

91.8

54.1

1.910
6.8
239.7
226.6
13.1
21.2
57.3

1,135.34*8

1980

77.8

1. Includes domestic chartered banks; U.S. branches, agencies, and New York
investment company subsidiaries of foreign banks; and Edge Act corporations.
2. Excludes loans to commercial banks in the United States.
3. As of Dec. 31, 1978, total loans and securities were reduced by $0.1 billion.
“Other securities” were increased by $1.5 billion and total loans were reduced by
$1.6 billion largely as the result of reclassifications of certain tax-exempt obliga­
tions. Most of the loan reduction was in “all other loans.”
4. As of Jan. 3, 1979, as the result of reclassifications, total loans and securities
and total loans were increased by ^$0.6 billion. Business loans were increased by
$0.4 billion and real estate loans by $0.5 billion. Nonbank financial loans were
reduced by $0.3 billion.
5. As of Dec. 31, 1977, as the result of loan reclassifications, business loans
were reduced $0.2 billion and nonbank financial loans $0.1 billion; real estate
loans were increased $0.3 billion.
6. As of Dec. 31, 1978, commercial and industrial loans were reduced $0.1
billion as a result of reclassifications.




60.3

81.9

7. As of Dec. 1, 1978, nonbank financial loans were reduced $0.1 billion as the
result of reclassification.
8. As of Dec. 1, 1979, loans sold to affiliates were reduced $800 million and
commercial and industrial loans sold were reduced $700 million due to corrections
of two banks in New York City.
9. Loans sold are those sold outright to a bank’s own foreign branches, non­
consolidated nonbank affiliates of the bank, the bank's holding company (if not
a bank), and nonconsolidated nonbank subsidiaries of the holding company.
10. As of Dec. 31, 1978, commercial and industrial loans sold outright were
increased $0.7 billion as the result of reclassifications, but $0.1 billion of this
amount was offset by a balance sheet reduction of $0.1 billion as noted above.
11. United States includes the 50 states and the District of Columbia.

Note. Data are prorated averages of Wednesday data for domestic chartered
banks, and averages of current and previous month-end data for foreign-related
institutions.

A 16

D om estic Financial Statistics □ September 1980

1.24 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series
Billions of dollars except for number of banks

1980
Account

Oct.

Nov.

Jan.

Feb.

Mar.

Apr.

May

June

July

Aug.

1 Loans and investments .....................
2 Loans, gross ....................................
3 Interbank ......................................
4 Commercial and industrial .............
5 Other ..........................................
6 U.S. Treasury securities ....................
7 Other securities ...............................

1,118.4
839.0
54.0
249.8
535.3
91.5
187.8

1,118.0
836.7
52.6
248.0
536.1
92.1
189.3

1,143.3
860.1
62.9
253.4
543.7
92.5
190.7

1.133.4
849.7
57.2
252.6
540.0
92.4
191.2

1,143.6
857.0
58.0
256.2
542.9
93.6
192.9

1,142.8
854.6
55.6
258.3
540.7
94.2
193.9

1,151.9
861.2
62.4
259.2
539.6
93.5
197.2

1,150.5
857.1
67.4
256.0
533.7
93.9
199.5

1,153.2
857.0

1.158.3
857.4

256.8
533.6
95.2

201.0

256.4
534.1
97.6
203.3

1.172.5
866.9
67.8
258.7
540.3
100.3
205.3

8 Cash assets, total .............................
9 Currency and coin ........................
10 Reserves with Federal Reserve Banks
11 Balances with depository institutions
12 Cash items in process of collection ..

160.7
16.6
34.1
45.5
64.6

158.1
18.2
34.7
43.7
61.5

146.4
17.9
28.4
37.7
62.4

148.4
17.3
28.3
43.7
59.0

149.9
17.1
30.7
43.4
58.7

153.8
16.8
34.2
43.1
59.8

168.2
16.8
33.2
49.7

172.4
17.8
37.9
47.9
68.9

150.4
17.4
29.5
45.4
58.0

154.1
17.7
32.1
44.7
59.6

148.7
18.4
28.9
45.6
55.8

13 Other assets .....................................

57.8

59.3

61.2

63.1

65.0

66.1

73.3

72.7

77.4

77.0

82.6

14 Total assets/total liabilities and capital .

1,336.9

1,335.4

1,351.0

1,344.9

1,358.4

1,362.7

1,393.5

1,395.7

1,381.0

1.389.4

1,403.8

15 Deposits ..........................................
16 Demand .......................................
17 Savings .........................................
18 Time ............................................

1,023.6
376.6
207.6
439.4

1,017.6
365.1
205.0
447.4

1,030.6
377.6
203.4
449.7

1.022.5
362.4

1,028.9
358.7
199.9
470.3

1,032.1
354.5
196.5
481.1

1,060.0
377.4
189.3
493.4

1,057.3
370.2
192.3
494.8

1,044.7
358.0
197.8
488.9

1,050.1
363.6
205.7
480.8

1.059.5
363.4
208.7
487.4

19 Borrowings .....................................
20 Other liabilities................................
21 Residual (assets less liabilities) ..........

137.4
74.0
101.9

135.6
78.5
103.7

140.5
74.1
105.8

143.1
77.5

101.8

145.1
81.6
102.9

142.1
84.2
104.2

147.0
81.2
105.2

154.1
78.5
105.7

152.5
76.6
107.1

158.6
74.8
106.0

160.1
76.2
108.0

Memo:
22 U.S. Treasury note balances included in
borrowing..................................
23 Number of banks.............................

8.4
14,605

5.0
14,608

12.8
14,610

15.0
14,594

14,609

9.4
14,626

14.3
14,629

5.1
14,639

13.1
14,646

7.6
14,658

8.7
14,666

24 Loans and investments .....................
25 Loans, gross ....................................
26 Interbank .....................................
27 Commercial and industrial .............
28 Other ..........................................
29 U.S. Treasury securities ....................
30 Other securities ...............................

1,200.3
917.6
71.6
288.3
557.7
93.1
189.5

1,200.9
916.2
71.8
287.9
556.6
93.7
190.9

1,229.8
943.1
80.5
295.0
567.6
94.5
192.2

1,217.7
930.7
75.4
295.1
560.1
94.3
192.7

1,230.8
941.0
78.3
298.5
564.2
95.5
194.4

1,231.8
940.2
75.2
301.7
563.4
96.2
195.4

1,240.9
946.8
82.1
302.0
562.7
95.5
198.6

1,239.2
942.4

1,241.9
942.2
84.8
297.8
559.6
97.2
202.4

31 Cash assets, total .............................
32 Currency and coin ........................
33 Reserves with Federal Reserve Banks
34 Balances with depository institutions
35 Cash items in process of collection ..

179.9
16.6
34.9

176.7
18.2
35.6
60.0
62.9

169.5
17.9
29.0
59.0
63.7

166.5
17.3
28.9
59.8
60.4

168.8
17.1
31.3
60.5
60.0

174.0
16.8
35.0
61.1
61.2

187.3
16.8
33.9

190.7
17.8
38.7
63.8
70.4

Domestically Chartered
Commercial Banks1

200.6
459.6

68.6

66.6

66.8

All Commercial Banking
Institutions2

36 Other assets.....................................

62.5
65.9

66.6
69.9

88.0

298.1
556.2
95.9

201.0

172.0
17.4

30.3

64.6
59.7

76.5

78.5

81.0

83.7

91.6

99.0

98.1

105.5

37 Total assets/total liabilities and capital .

1,456.7

1,456.1

1.480.3

1.468.0

1,486.5

1.497.5

1,527.2

1.528.0

1,519.4

38 Deposits ..........................................
39 Demand .......................................
40 Savings .........................................
41 Time ............................................

1,062.6
394.2
208.3
460.1

1,058.5
384.9
205.9
467.7

1.076.3
400.5
204.3
471.5

1.063.1
380.5
201.3
481.3

1,070.0
376.8
200.3
492.9

1.073.5
373.6
196.7
503.2

1,101.1
396.6
189.5
515.0

1.097.1
387.7
192.6
516.9

1,088.7
379.1
198.2
511.4

42 Borrowings .....................................
43 Other liabilities.................................
44 Residual (assets less liabilities) ..........

171.6
118.5
104.0

169.5

180.5
115.4
108.1

179.5

105.8

104.2

182.9
128.4
105.2

186.5
130.9
106.5

190.8
127.8
107.4

196.3
126.6
108.1

197.9
124.1
108.7

Memo:
45 U.S. Treasury note balances included in
borrowing..................................
46 Number of banks.............................

8.4
14,963

5.0
14,969

12.8

15.0
14,962

8.1

14,975

14,978

9.4
14,995

14.3
15,004

5.1
15,016

13.1
15,043

122.2

1. Domestically chartered commercial banks include all commercial banks in the
United States except branches of foreign banks; included are member and non­
member banks, stock savings banks, and nondeposit trust companies.
2. Commercial banking institutions include domestically chartered commercial
banks, branches and agencies of foreign banks, Edge Act and Agreement cor­
porations, and New York state foreign investment corporations.




121.1

Note. Figures are partly estimated. They include all bank-premises subsidiaries
and other significant majority-owned domestic subsidiaries. Data for domestically
chartered commercial banks are for the last Wednesday of the month; data for
other banking institutions are for last Wednesday except at end of quarter, when
they are for the last day of the month.

Commercial Banks

A ll

1.25 COMMERCIAL BANK ASSETS AND LIABILITIES Call-Date Series
Millions of dollars, except for number of banks
1976

1977

1978

1976

June 30

Dec. 31

1977

1978

Account
Dec. 31

June 30

Dec. 31

Total insured

June 30

Dec. 31

June 30

National (all insured)

827,6%

854,733

914,779

956,431

476,610

488,240

523,000

542,218

578,734
560,077

601,122
581,143

657,509
636,318

695,443
672,207

340,691
329,971

351,311
339,955

384,722
372,702

403,812
390,630

U.S. Treasury securities.........................................
Other .....................................................................
Cash assets ............................................................

101,461
147,500
129,562

100,568
153,042
130,726

99,333
157,936
159,264

97,001
163,986
157,393

55,727
80,191
76,072

53,345
80,583
74,641

52,244
86,033
92,050

50,519
87,886
90,728

7 Total assets/total liabilities1 .........................................

1,003,970

1,040,945

1,129,712

1,172,772

583.304

599,743

651,360

671,166

8 Deposits.....................................................................

825,003

847,372

922,657

945,874

469,377

476,381

520,167

526,932

1 Loans and investments, gross ....................................
Loans

2

3

4
5
6

Gross .....................................................................
Net ........................................................................
Investments

9
10
11

U.S. government ....................................................
Interbank................................................................
Other .....................................................................

3,022
44,064
285,200

2,817
44,%5
284,544

7,310
49,843
319,873

7,956
47,203
312,707

1,676
23,149
163,346

1,632
22,876
161,358

4,172
25,646
181,821

4,483
22,416
176,025

12
13

Interbank................................................................
Other .....................................................................

8,248
484,467

7,721
507,324

8,731
536,899

8,987
569,020

4,907
276,2%

4,599
285,915

5,730
302,795

5,791
318,215

14 Borrowings ................................................................
15 Total capital accounts................................................

75,291
75,061

81,137
75,502

89,339
79,082

98,351
83,074

54,421
41,319

57,283
43,142

63,218
44,994

68,948
47,019

16 Memo: Number of banks...........................................

14,397

14,425

14,397

14,381

4,735

4,701

4,654

4,616

Time and savings

State member (all insured)

Insured nonmember

144,000

144,597

152,514

157,464

207,085

221,8%

239,265

256,749

18
19

Gross .....................................................................
Net ........................................................................

102,277
99,474

102,117
99,173

110,243
107,205

115,736
112,470

135,766
130,630

147,694
142,015

162,543
156,411

175,894
169,106

20
21
22

U.S. Treasury securities.........................................
Other .....................................................................
Cash assets ............................................................

18,849
22,874
32,859

19,296
23,183
35,918

18,179
24,091
42,305

16,886
24,841
43,057

26,884
44,434
20,631

27,926
46,275
20,166

28,909
47,812
24,908

29,595
51,259
23,606

23 Total assets/total liabilities1 .........................................

189,579

195,452

210,442

217,384

231,086

245,748

267,910

284,221

24 Deposits.....................................................................

149,491

152,472

163,436

167,403

206,134

218,519

239,053

251,539

17 Loans and investment, gross......................................
Loans

Investments

Demand

25
26
27

U.S. government ....................................................
Interbank................................................................
Other .....................................................................

429
19,295
52,204

371
20,568
52,570

1,241
22,346
57,605

1,158
23,117
55,550

917
1,619
69,648

813
1,520
70,615

1,8%
1,849
80,445

2,315
1,669
81,131

28
29

Interbank................................................................
Other .....................................................................

2,384
75,178

2,134
76,827

2,026
80,216

2,275
85,301

956
132,993

988
144,581

973
153,887

920
165,502

30 Borrowings ................................................................
31 Total capital accounts ................................................

17,310
13,199

19,697
13,441

21,736
14,182

23,167
14,670

3,559
17,542

4,155
18,919

4,384
19,905

6,235
21,384

32 Memo: Number of banks...........................................

1,023

1,019

1,014

1,005

8,639

8,705

8,729

8,760

Time and savings

Noninsured nonmember

Total nonmember

18,819

22,940

24,415

28,699

225,904

244,837

263,681

285,448

Gross .....................................................................
Net ........................................................................

16,336
16,209

20,865
20,679

22,686
22,484

26,747
26,548

152,103
146,840

168,559
162,694

185,230
178,8%

202,641
195,655

U.S. Treasury securities.........................................
Other .....................................................................
Cash assets ............................................................

1,054
1,428
6,4%

993
1,081
8,330

879
849
9,458

869
1,082
9,360

27,938
45,863
27,127

28,919
47,357
28,497

29,788
48,662
34,367

30,465
52,341
32,%7

39 Total assets/total liabilities1 .........................................

26,790

33,390

36,433

42,279

257,877

279,139

304,343

326,501

40 Deposits.....................................................................

13,325

14,658

16,844

19,924

219,460

233,177

255,898

271,463

4
1,277
3,236

8
1,504
3,588

10
1,868
4,073

8
2,067
4,814

921
2,8%
72,884

822
3,025
74,203

1,907
3,718
84,518

2,323
3,736
85,946

33 Loans and investments, gross .......... .........................
34
35
36
37
38

Loans

Investments

Demand

41
42
43

U.S. government ....................................................
Interbank................................................................
Other .....................................................................

44

Interbank................................................................
Other .....................................................................

1,041
7,766

1,164
8,392

1,089
9,802

1,203
11,831

1,997
140,760

2,152
152,974

2,063
163,690

2,123
177,334

46 Borrowings ................................................................
Al Total capital accounts ................................................

4,842
818

7,056
893

6,908
917

8,413
%2

8,401
18,360

11,212
19,812

11,293
20,823

14,649
22,346

48 Memo: Number of banks...........................................

275

293

310

317

8,914

8,998

9,039

9,077

Time and savings

45

1. Includes items not shown separately.




For Note see table 1.24.

A 18

D om estic Financial Statistics □ September 1980

1.26 COMMERCIAL BANK ASSETS AND LIABILITIES

Detailed Balance Sheet, September 30, 1978

Millions of dollars, except for number of banks
Member banks1
Asset account

Insured
commercial
banks

Large banks
Total

All other
New York
City

City of
Chicago

Non­
member
banks1

Other
large

1 Cash bank balances, items in process ................................................
2 Currency and coin ..............................................................................
3 Reserves with Federal Reserve B a n k s............................................
4 Demand balances with banks in United S ta tes..............................
5 Other balances with banks in United S ta tes..................................
6 Balances with banks in foreign countries......................................
7 Cash items in process of collection..................................................

158,380
12,135
28,043
41,104
4,648
3,295
69,156

134,955
8,866
28,041
25,982
2,582
2,832
66,652

43,758
867
3,621
12,821
601
331
25,516

5,298
180
1,152
543
15
288
3,119

47,914
2,918
12,200
3,672
648
1,507
26,969

37,986
4,901
11,067
8,945
1,319
705
11,049

23,482
3,268
3
15,177
2,066
463
2,504

8 Total securities held—Book value ......................................................
9 U.S. Treasury......................................................................................
10 Other U.S. government agencies ....................................................
11 States and political subdivisions ......................................................
12 All other securities ............................................................................

262,199
95,068
40,078
121,260
5,698
94

179,877
65,764
25,457
85,125
3,465
66

20,808
9,524
1,828
9,166
291

7,918
2,690
1,284
3,705
240

58,271
22,051
7,730
27,423
1,048
19

92,881
31,499
14,616
44,831
1,887
47

82,336
29,315
14,622
36,136
2,234
28

14
15
16
17
18

Trading-account securities ................................................................
U.S. Treasury..................................................................................
Other U.S. government agencies ................................................
States and political subdivisions ..................................................
All other trading account securities............................................

6,833
4,125
825
1,395
394
94

6,681
4,103
816
1,381
316
66

3,238
2,407
401
363
67

708
408
82
117
101

2,446
1,210
278
794
145
19

290
78
55
107
3
47

151
23
9
14
78
28

20
21
22
23
24

Bank investment portfolios ..............................................................
U.S. Treasury..................................................................................
Other U.S. government agencies ................................................
States and political subdivisions ..................................................
All other portfolio securities........................................................

255,366
90,943
39,253
119,865
5,305

173,196
61,661
24,641
83,745
3,149

17,570
7,117
1,426
8,803
224

7,210
2,282
1,201
3,588
138

55,825
20,840
7,452
26,629
903

92,591
31,422
14,561
44,724
1,884

82,185
29,293
14,613
36,123
2,156

25 Federal Reserve stock and corporate stock ......................................

1,656

1,403

311

111

507

475

253

26 Federal funds sold and securities resale agreem ent..........................
27
Commercial b a n k s..............................................................................
28 Brokers and dealers ..........................................................................
29
Others ..................................................................................................

41,258
34,256
4,259
* 2,743

31,999
25,272
4,119
2,608

3,290
1,987
821
482

1,784
1,294
396
94

16,498
12,274
2,361
1,863

10,427
9,717
541
169

9,365
9,090
140
135

30 Other loans, gross ..................................................................................
31 Less: Unearned income on lo a n s ........................................................
32
Reserves for loan l o s s ................................................................
33 Other loans, n e t ......................................................................................

675,915
17,019
7,431
651,465

500,802
11,355
5,894
483,553

79,996
675
1,347
77,974

26,172
107
341
25,724

190,565
3,765
2,256
184,544

204,069
6,809
1,949
195,311

175,113
5,664
1,537
167,912

Other loans, gross, by category
34 Real estate loans ....................................................................................
35 Construction and land development................................................
36 Secured by farmland..........................................................................
37 Secured by residential properties ....................................................
38
1- to 4-family residences................................................................
39
FHA-insured or VA-guaranteed..............................................
40
Conventional ..............................................................................
41
Multifamily residences ..................................................................
42
FHA-insured.................................................................... ............
43
Conventional ..............................................................................
44
Secured by other properties..............................................................

203,386
25,621
8,418
117,176
111,674
7,503
104,171
5,502
399
5,103
52,171

138,730
19,100
3,655
81,370
77,422
6,500
70,922
3,948
340
3,609
34,605

10,241
2,598
23
5,362
4,617
508
4,109
746
132
613
2,258

2,938
685
34
1,559
1,460
44
1,417
99
27
72
660

52,687
9,236
453
31,212
29,774
3,446
26,328
1,438
88
1,350
11,786

72,863
6,581
3,146
43,236
41,570
2,502
39,068
1,665
92
1,573
19,901

64,656
6,521
4,763
35,806
34,252
1,003
33,249
1,554
59
1,495
17,566

45
46
47
48
49
50
51
52
53
54

Loans to financial institutions..............................................................
REITs and mortgage companies......................................................
Domestic commercial banks ............................................................
Banks in foreign countries................................................................
Other depository institutions............................................................
Other financial institutions................................................................
Loans to security brokers and d ealers................................................
Other loans to purchase or carry securities........................................
Loans to farmers except real e s ta te ....................................................
Commercial and industrial lo a n s..........................................................

37,072
8,574
3,362
7,359
1,579
16,198
11,042
4,280
28,054
213, 123

34,843
8,162
2,618
7,187
1,411
15,465
10,834
3,532
15,296
171,815

12,434
2,066
966
3,464
290
5,649
6,465
410
168
39,633

4,342
801
165
268
76
3,033
1,324
276
150
13,290

15,137
4,616
1,206
2,820
785
5,710
2,846
1,860
3,781
67,833

2,930
680
281
635
261
1,073
199
985
11,196
51,059

2,228
412
744
171
167
733
207
747
12,758
41,309

55 Loans to individuals ..............................................................................
56
Installment loans ................................................................................
57
Passenger automobiles ..................................................................
58
Residential repair and modernization ........................................
59
Credit cards and related p la n s......................................................
60
Charge-account credit card s......................................................
61
Check and revolving credit plans ............................................
62
Other retail consumer g o o d s........................................................
63
Mobile h o m es..............................................................................
64
Other ............................................................................................
65
Other installment loans ................................................................
66
Single-payment loans to individuals................................................
67 All other lo a n s ........................................................................................

161,599
131,571
58,908
8,526
21,938
17,900
4,038
19,689
9,642
10,047
22,510
30,027
17,360

110,974
90,568
37,494
5,543
19,333
16,037
3,296
13,296
6,667
6,629
14,902
20,406
14,778

7,100
5,405
1,077
331
2,268
1,573
695
427
179
249
1,302
1,694
3,545

2,562
1,711
209
60
1,267
1,219
47
57
19
38
119
851
1,290

40,320
33,640
11,626
2,088
9,736
8,192
1,545
5,242
2,563
2,678
4,948
6,680
6,100

60,993
49,811
24,582
3,064
6,062
5,053
1,009
7,570
3,905
3,664
8,533
11,182
3,844

50,624
41,003
21,414
2,983
2,605
1,863
742
6,393
2,976
3,417
7,608
9,621
2,582

68 Total loans and securities, n e t.....................................................

956,579

696,833

102,383

35,536

259,820

299,094

259,867

Direct lease financing ............................................................................
Fixed assets—Buildings, furniture, real e s ta te ..................................
Investment in unconsolidated subsidiaries..........................................
Customer acceptances outstanding......................................................
Other assets .............................................................................................

6,717
22,448
3,255
16,557
34,559

6,212
16,529
3,209
16,036
30,408

1,145
2,332
1,642
8,315
11,323

96
795
188
1,258
1,000

3,931
6,268
1,282
6,054
12,810

1,041
7,133
96
409
5,275

505
5,926
46
521
4,249

74 Total assets .................................................................................

1,198,495

904,182

170,899

44,170

338,079

351,034

294,595

69
70
71
72
73

For notes see opposite page.



Commercial Banks

A 19

1.26 Continued
Member banks1
Liability or capital account

Insured
commercial
banks

Large banks
All other

Total
New York
City

City of
Chicago

Non­
member
banks1

Other
large

75 Demand deposits........................................................................
76 Mutual savings banks ..............................................................
77 Other individuals, partnerships, and corporations.....................
78 U.S. government .....................................................................
79 States and political subdivisions ..............................................
80 Foreign governments, central banks, e tc ..................................
81 Commercial banks in United States.........................................
82 Banks in foreign countries.......................................................
83 Certified and officers’ checks, e tc .............................................

369,030
1,282
279,651
7,942
17,122
1,805
39,596
7,379
14,253

282,450
1,089
205,591
5,720
11,577
1,728
38,213
7,217
11,315

66,035
527
31,422
569
764
1,436
21,414
5,461
4,443

10,690
1
7,864
188
252
19
1,807
207
352

100,737
256
79,429
1,987
3,446
211
10,803
1,251
3,354

104,988
305
86,876
2,977
7,116
62
4,189
298
3,166

86,591
194
74,061
2,222
5,545
77
1,393
162
2,937

84 Time deposits.............................................................................
85 Accumulated for personal loan payments.................................
86 Mutual savings banks ..............................................................
87 Other individuals, partnerships, and corporations.....................
88 U.S. government .....................................................................
89 States and political subdivisions ..............................................
90 Foreign governments, central banks, e tc ..................................
91 Commercial banks in United States.........................................
92 Banks in foreign countries.......................................................

368,562
79
399
292,120
864
59,087
6,672
7,961
1,381

266,496
66
392
210,439
689
40,010
6,450
7,289
1,161

38,086
0
177
29,209
61
1,952
3,780
2,077
829

15,954
0
40
12,074
40
1,554
1,145
999
103

98,525
1
148
76,333
356
16,483
1,401
3,585
219

113,931
65
27
92,824
232
20,020
124
629
9

102,066
13
7
81,680
175
19,077
222
672
220

93 Savings deposits..........................................................................
94 Individuals and nonprofit organizations....................................
95 Corporations and other profit organizations.............................
% U.S. government .....................................................................
97 States and political subdivisions ..............................................
98 All other .................................................................................

223,326
207,701
11,216
82
4,298
30

152,249
141,803
7,672
65
2,682
27

10,632
9,878
519
2
215
18

2,604
2,448
148
3
4
*

54,825
51,161
3,195
24
437
8

84,188
78,316
3,809
35
2,025
2

71,077
65,897
3,544
17
1,616
3

99 Total deposits ..............................................................................

960,918

701,195

114,753

29,248

254,087

303,107

259,733

100 Federal funds purchased and securities sold under agreements
to repurchase .......................................................................
Commercial banks...................................................................
Brokers and dealers ................................................................
Others .....................................................................................

91,981
42,174
12,787
37,020

85,582
39,607
11,849
34,126

21,149
6,991
2,130
12,028

8,777
5,235
1,616
1,926

41,799
21,609
6,381
13,809

13,857
5,773
1,722
6,362

6,398
2,566
939
2,894

104
105
106
107

Other liabilities for borrowed money...........................................
Mortgage indebtedness ................................................................
Bank acceptances outstanding.....................................................
Other liabilities ..........................................................................

8,738
1,767
16,661
27,124

8,352
1,455
16,140
23,883

3,631
234
8,398
8,600

306
27
1,260
1,525

3,191
701
6,070
9,020

1,225
491
412
4,477

386
316
521
3,494

108 Total liabilities ............................................................................

1,107,188

836,607

157,026

41,144

314,868

323,569

270,849

109 Subordinated notes and debentures.............................................

5,767

4,401

1,001

79

2,033

1,287

1,366

110 Equity capital ..............................................................................
111 Preferred stock........................................................................
112 Common stock ........................................................................
113 Surplus....................................................................................
114 Undivided profits.....................................................................
115 Other capital reserves..............................................................

85,540
88
17,875
32,341
33,517
1,719

63,174
36
12,816
23,127
26,013
1,182

12,871
0
2,645
4,541
5,554
132

2,947
0
570
1,404
921
52

21,177
5
4,007
8,148
8,680
337

26,178
31
5,594
9,034
10,858
661

22,380
52
5,064
9,217
7,509
538

116 Total liabilities and equity capital................................................

1,198,495

904,182

170,899

44,170

338,079

351,034

294,595

252,337

171,864

18,537

5,576

60,978

86,774

80,472

101
102
103

Memo:

117 Demand deposits adjusted2 .........................................................
Average for last 15 or 30 days

118 Cash and due from ban k ............................................................
119 Federal funds sold and securities purchased under agreements to
resell ...................................................................................
120 Total loans ......................................................... ! ......................
121 Time deposits of $100,000 or more .............................................
122 Total deposits..............................................................................
123 Federal funds purchased and securities sold under agreements to
repurchase ............................................................................
124 Other liabilities for borrowed money...........................................

146,283

124,916

36,862

6,030

45,731

36,293

21,379

43,873
651,874
183,614
944,593

33,682
483,316
150,160
687,543

4,272
76,750
32,196
107,028

1,887
25,722
13,216
28,922

16,007
184,790
65,776
250,804

11,517
196,054
38,972
300,789

10,307
168,558
33,454
257,062

92,685
8,716

86,635
8,326

22,896
3,679

9,473
370

3,211

13,725
1,067

6,053
390

125 Standby letters of credit outstanding...........................................
126 Time deposits of $100,000 or more .............................................
127 Certificates of deposit..............................................................
128 Other time deposits.................................................................

18,820
186,837
160,227
26,610

17,658
152,553
129,667
22,886

10,063
32,654
27,950
4,704

1,477
13,486
11,590
1,896

4,820
66,684
56,383
10,301

1,297
39,728
33,743
5,985

1,162
34,284
30,560
3,724

129 Number of banks........................................................................

14,390

5,593

12

9

153

5,419

8,810

1. Member banks exclude and nonmember banks include 13 noninsured trust
companies that are members of the Federal Reserve System.
2. Demand deposits adjusted are demand deposits other than domestic com­
mercial interbank and U.S. government, less cash items reported as in process of
collection.




Note. Data include consolidated reports, including figures for all bank-premises
subsidiaries and other significant majority-owned domestic subsidiaries. Securities
are reported on a gross basis before deductions of valuation reserves. Back data
in lesser detail were shown in previous issues of the Bulletin.

A20

Domestic Financial Statistics □ September 1980

1.27 ALL LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $750 Million or More on
December 31, 1977, Assets and Liabilities
Millions of Dollars, Wednesday figures

Account
July

2

July

9

July

16

July

23

July

30p

Aug. 6P

Aug.

13p

Aug.

20p

Aug.

27p

57,210

521,437

58,997

48,650

49,101

47,917

46,672

51,012

45,703

States ......................................................................
AH other cash and due from depository institutions

18,728
33,843

19,389
33,266

18,093
37,000

17,497
35,298

17,813
33,422

17,363
23,816

15,993
28,250

18,605
35,034

17,242
31,393

4 Total loans and securities......................................

522,621

518,630

516,300

512,736

514,468

527,183

524,138

522,216

521,504

Securities
5 U.S. Treasury securities ..............................................
6 Trading account ........................................................
7 Investment account, by maturity............................
8
One year or l e s s ....................................................
9
Over one through five years ..............................
10
Over five y e a r s ......................................................
11 Other securities ............................................................
12 Trading account ........................................................
13 Investment account ..................................................
14
U.S. government agencies ..................................
15
States and political subdivision, by maturity . . .
16
One year or l e s s ................................................
17
Over one y e a r ....................................................
18
Other bonds, corporate stocks and securities ..

36,958
4,098
32,861
6,190
21,752
4,918
75,590
3,934
71,656
16,501
52,526
6,382
46,145
2,628

37,483
4,466
33,016
6,226
21,882
4,908
75,786
3,957
71,829
16,443
52,734
6,437
46,297
2,652

37,434
4,592
32,842
6,308
21,694
4,840
75,471
3,495
71,977
16,416
52,944
6,534
46,409
2,616

37,863
4,749
33,113
6,554
21,745
4,814
75,411
3,092
72,318
16,400
53,290
6,612
46,678
2,629

38,141
4,909
33,232
6,698
21,719
4,815
75,533
3,051
72,481
16,397
53,445
6,601
46,843
2,640

39,843
6,445
33,397
7,036
21,635
4,725
76,506
4,040
72,466
16,311
53,484
6,691
46,794
2,671

39,000
5,628
33,372
7,047
21,552
4,773
75,688
2,994
72,693
16,207
53,795
6,805
46,989
2,692

40,422
6,363
34,059
7,436
22,580
4,043
75,649
2,904
72,745
16,086
53,968
6,878
47,090
2,691

39,375
5,252
34,123
7,559
22,566
3,998
75,956
3,237
72,719
16,018
54,028
6,915
47,113
2,673

26,923
22,585
3,298
1,040
395,836
159,557
5,337
154,220
148,585
5,635
105,217
70,794

25,556
20,508
3,945
1,103
392,530
158,880
5,068
153,813
148,233
5,580
105,276
70,528

23,854
19,498
3,438
918
392,308
158,310
4,980
153,330
147,742
5,588
105,575
70,444

21,526
16,911
3,494
1,120
390,750
158,213
4,988
153,225
147,598
5,627
105,790
70,435

21,781
17,431
3,333
1,017
391,791
158,130
5,254
152,876
147,234
5,642
105,932
70,500

28,300
20,590
5,349
2,361
395,331
159,449
5,191
154,257
148,343
5,914
105,998
70,471

26,908
19,866
4,514
2,528
395,374
159,800
5,232
154,568
148,663
5,905
106,426
70,545

22,792
17,468
4,030
1,294
396,196
159,803
4,684
155,118
149,151
5,968
106,747
70,624

22,393
16,700
4,258
1,435
396,648
160,316
5,011
155,305
149,266
6,039
107,077
70,684

31
Commercial banks in the United S ta tes............
32
Banks in foreign countries ..................................
33
Sales finance, personal finance companies, etc .
34
Other financial institutions..................................
35 To nonbank brokers and dealers in securities . . . .
36 To others for purchasing and carrying securities2
37 To finance agricultural production ........................
38 All other ....................................................................
39 Less: Unearned income ..............................................
40
Loan loss reserve ..............................................
41 Other loans, n e t ............................................................
42 Lease financing receivables ........................................
43 All other assets..............................................................

3,971
7,546
8,552
14,409
5,794
2,071
5,188
12,736
7,168
5,518
383,149
8,692
80,267

3,552
7,232
8,384
14,474
4,903
2,036
5,188
12,077
7,198
5,528
379,805
8,718
77,578

3,455
7,035
8,668
14,627
4,797
2,027
5,234
12,137
7,222
5,546
379,540
8,737
75,174

3,342
6,695
8,352
14,487
4,431
2,056
5,336
11,613
7,255
5,559
377,937
8,745
77,064

3,559
6,767
8,510
14,633
4,395
2,055
5,389
11,920
7,229
5,549
379,013
8,756
74,777

3,699
6,968
8,197
14,900
5,641
2,047
5,418
12,543
7,175
5,621
382,534
8,784
78,988

3,891
6,712
8,256
15,088
5,065
2,066
5,432
12,092
7,197
5,635
382,542
8,781
79,270

3,446
7,014
8,458
15,136
5,335
2,059
5,426
12,148
7,198
5,644
383,353
8,806
78,534

3,324
7,338
8,273
15,031
5,047
2,055
5,379
12,124
7,225
5,643
383,780
8,810
80,148

44 Total assets ..........................................................

721,362

709,018

714,301

699,989

698,338

704,049

703,105

714,208

704,801

208,631
769
141,960
5,008
1,061
39,637
8,232
1,959
10,005
276,789
73,377
68,835

196,456
819
134,957
4,535
1,243
36,204
8,818
1,506
8,375
275,381
74,167
69,560

203,881
657
139,172
4,923
873
38,591
8,381
1,655
9,629
275,157
74,324
69,759

187,481
601
130,454
4,316
707
33,364
7,873
1,236
8,929
275,503
74,491
69,826

187,725
681
131,371
4,962
817
30,413
8,218
2,042
9,219
273,708
74,574
69,863

190,256
675
133,616
4,595
1,143
32,473
7,501
1,319
8,933
275,665
75,474
70,748

186,196
644
132,867
4,468
858
31,135
7,242
1,591
7,391
278,112
75,350
70,675

94,081
633
132,971
4,545
3,262
33,630
7,628
1,644
9,769
279,380
75,528
70,845

184,864
635
129,169
4,606
1,829
31,547
8,146
1,615
7,317
279,771
75,400
70,641

3,762
764
16
203,412
172,887
18,764
269
5,519

3,862
727
19
201,213
170,946
18,739
243
5,324

3,847
704
14
200,832
170,674
18,733
255
5,236

3,958
690
17
201,012
170,573
18,977
242
5,199

4,030
666
15
199,135
168,630
19,055
275
5,153

4,062
641
24
200,191
169,561
19,078
280
5,198

4,040
622
14
202,761
171,728
19,484
284
5,225

4,053
614
15
203,852
172,710
19,447
335
5,421

4,120
624
15
204,372
173,043
19,495
351
5,535

5,973

5,961

5,934

6,021

6,022

6,073

6,040

5,939

5,948

397
4,678
120,889

270
1,415
126,824

556
3,245
123,887

546
3,839
124,244

2,556
4,370
122,495

437
2,886
127,071

881
2,288
128,444

774
4,667
126,714

2,468
5,513
123,051

1 Cash items in process of collection ............................
2 Demand deposits due from banks in the United
3

Loans

19 Federal funds sold1 ......................................................
20 To commercial banks ..............................................
21 To nonbank brokers and dealers in securities . . . .
22 To o th ers....................................................................
23 Other loans, gross ........................................................
24 Commercial and industrial ......................................
25
Bankers acceptances and commercial paper . . .
26
All other ................................................................
27
U.S. addressees ................................................
28
Non-U.S. addressees ........................................
29 Real estate ....................................................................
30 To individuals for personal expenditures..............
To financial institutions

Deposits
45 Demand deposits ..........................................................
46 Mutual savings banks ..............................................
47 Individuals, partnerships, and corporations..........
48 States and political subdivisions ............................
49 U.S. government ......................................................
50 Commercial banks in the United S ta tes................
51 Banks in foreign countries ......................................
52 Foreign governments and official institutions . . . .
53 Certified and officers' ch eck s..................................
54 Time and savings deposits ..........................................
55 Savings ........................................................................
56
Individuals and nonprofit organizations............
57
Partnerships and corporations operated for
p rofit................................................................
58
Domestic governmental u n its..............................
59
All other ................................................................
60 Time ............................................................................
61
Individuals, partnerships, and corporations----62
States and political subdivisions ........................
63
U.S. government ..................................................
64
Commercial banks in the United S ta tes............
65
Foreign governments, official institutions, and
banks ..............................................................
Liabilities for borrowed money
66 Borrowings from Federal Reserve B a n k s............
67 Treasury tax-and-loan n o te s ....................................
68 All other liabilities for borrowed money3 ............
69 Other liabilities and subordinated note and
debentures ..............................................................

70 Total liabilities .....................................................
71

Residual (total assets minus total liabilities)4 ..........

62,179

60,749

59,758

60,506

59,674

59,236

58,802

60,350

60,841

673,564

661,094

666,484

652,120

650,528

655,551

654,723

665,965

656,508

47,797

47,924

47,817

47,869

47,810

48,498

48,382

48,243

48,293

1. Includes securities purchased under agreements to resell.
2. Other than financial institutions and brokers and dealers.
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.
FRASER

Digitized for


4. This is not a measure of equity capital for use in capital adequacy analysis
or for other analytic uses.

Weekly Reporting Banks

A21

1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $1 Billion or More on
December 31, 1977 Assets and Liabilities
Millions of dollars, Wednesday figures

July

2

July

9

July

16

July

23

July

30p

Aug. 6p

Aug.

13?

Aug.

20?

Aug. 21p

1 Cash items in process of collection......................................
2 Demand deposits due from banks in the United States ..
3 AH other cash and due from depository institutions........

54,496
18,065
32,056

49,020
18,668
31,568

56,429
17,376
34,806

46,341
16,993
33,056

46,879
17,192
31,181

45,454
16,792
22,249

44,282
15,480
26,410

48,485
18,022
32,731

43,376
16,681
29,223

4 Total loans and securities......................................................

487,697

483,549

481,499

478,185

479,728

491,534

488,444

487,164

486,163

34,424
4,045
30,379
5,796
20,074
4,509
69,610
3,805
65,805
15,379
47,967
5,746
42,221
2,459

34,935
4,416
30,520
5,817
20,204
4,498
69,787
3,858
65,929
15,305
48,140
5,789
42,351
2,483

34,882
4,548
30,335
5,886
20,023
4,426
69,419
3,375
66,044
15,271
48,324
5,884
42,440
2,449

35,299
4,700
30,599
6,112
20,088
4,399
69,374
2,996
66,378
15,249
48,666
5,964
42,702
2,462

35,575
4,868
30,707
6,251
20,035
4,420
69,426
2,933
66,493
15,240
48,781
5,943
42,838
2,472

37,260
6,391
30,869
6,582
19,956
4,331
70,346
3,917
66,429
15,145
48,784
6,024
42,759
2,500

36,420
5,578
30,842
6,590
19,873
4,378
69,535
2,886
66,649
15,046
49,084
6,138
42,946
2,519

37,820
6,320
31,500
6,978
20,865
3,656
69,448
2,789
66,659
14,925
49,216
6,183
43,032
2,518

36,765
5,216
31,549
7,098
20,840
3,611
69,736
3,114
66,622
14,856
49,265
6,217
43,049
2,501

Securities
5 U.S. Treasury securities ........................................................
6 Trading account ..................................................................
7 Investment account, by maturity......................................
8
One year or less ...............................................................
9
Over one through five years .......................... ..............
10
Over five y ea r s................................................................
11 Other securities ......................................................................
12 Trading account ..................................................................
13 Investment account ............................................................
14
U.S.government agencies ..............................................
15
States and political subdivision, by maturity..............
16
One year or le s s ..........................................................
17
Over one y e a r ..............................................................
18
Other bonds, corporate stocks and securities............

Loans
19 Federal funds sold1 ................................................................
20 To commercial banks ........................................................
21 To nonbank brokers and dealers in securities..............
22 To o th ers...............................................................................
23 Other loans, g r o s s ..................................................................
24 Commercial and industrial ................................................
25
Bankers’ acceptances and commercial p a p e r............
26
All other ...........................................................................
27
U.S. addressees ..........................................................
28
Non-U.S. addressees..................................................
29
Real estate ...........................................................................
30 To individuals for personal expenditures........................
To financial institutions
31
Commercial banks in the United S ta tes......................
32
Banks in foreign countries............................................
33
Sales finance, personal finance companies, e t c ..........
34
Other financial institutions............................................
35 To nonbank brokers and dealers in securities..............
36 To others for purchasing and carrying securities2 ........
37 To finance agricultural production.......... ..................
38
All other ...............................................................................
39 Less: Unearned income ........................................................
40
Loan loss reserve ........................................................
41 Other loans, n e t ......................................................................
42 Lease financing receivables ..................................................
43 All other assets .......................................................................

24,104
20,017
3,060
1,028
371,303
151,407
5,232
146,174
140,598
5,576
98,957
62,489

22,461
17,828
3,543
1,090
368,145
150,769
4,961
145,808
140,288
5,520
99,043
62,251

21,135
17,114
3,162
860
367,880
150,207
4,882
145,325
139,798
5,527
99,322
62,167

19,035
14,799
3,129
1,106
366,327
150,133
4,893
145,239
139,677
5,562
99,539
62,148

19,218
15,280
2,942
996
367,336
150,050
5,155
144,895
139,324
5,570
99,679
62,208

24,949
17,857
4,804
2,287
370,829
151,316
5,045
146,270
140,427
5,843
99,735
62,174

23,575
16,978
4,097
2,500
370,794
151,630
5,083
146,547
140,701
5,846
100,143
62,239

20,184
15,252
3,669
1,263
371,602
151,613
4,544
147,069
141,162
5,907
100,469
62,310

19,538
14,231
3,904
1,404
372,041
152,129
4,868
147,260
141,283
5,978
100,812
62,359

3,888
7,457
8,384
14,058
5,740
1,840
5,026
12,056
6,552
5,193
359,558
8,448
78,249

3,468
7,140
8,210
14,113
4,832
1,818
5,026
11,474
6,578
5,201
356,366
8,475
75,532

3,368
6,933
8,506
14,263
4,726
1,819
5,070
11,499
6,598
5,219
356,063
8,494
73,157

3,237
6,580
8,187
14,113
4,372
1,837
5,171
11,010
6,616
5,234
354,477
8,501
75,040

3,455
6,641
8,347
14,239
4,342
1,836
5,219
11,321
6,606
5,222
355,508
8,512
72,718

3,598
6,872
8,030
14,514
5,589
1,829
5,249
11,924
6,557
5,292
358,980
8,536
76,895

3,794
6,614
8,093
14,690
5,009
1,845
5,263
11,472
6,575
5,306
358,913
8,534
77,116

3,354
6,902
8,290
14,742
5,281
1,838
5,257
11,548
6,574
5,316
359,711
8,558
76,352

3,235
7,243
8,087
14,626
4,989
1,836
5,211
11,512
6,602
5,315
360,123
8,561
77,912

44 Total assets ...............................................................................

679,012

666,813

671,762

658,116

656,210

661,460

660,265

671,312

661,916

45 Demand deposits ....................................................................
46
Mutual savings banks ........................................................
47
Individuals, partnerships, and corporations ..................
48 States and political subdivisions ......................................
49
U.S. government ................................................................
50 Commercial banks in the United S ta tes..........................
51
Banks in foreign countries................................................
52
Foreign governments and official institutions................
53
Certified and officer’s ch ec k s............................................
54 Time and savings deposits ....................................................
55
Savings ...................................................................................
56
Individuals and nonprofit organizations......................
57
Partnerships and corporations operated for profit . . .
58
Domestic governmental u n its........................................
59
All other ...........................................................................
60 Time .......................................................................................
61
Individuals, partnerships, and corporations ..............
62
States and political subdivisions ..................................
63
U.S. government ............................................................
64
Commercial banks in the United S ta tes......................
65
Foreign governments, official institutions, and banks
Liabilities for borrowed money
66
Borrowings from Federal Reserve Banks ......................
67 Treasury tax-and-loan n o te s ..............................................
68
All other liabilities for borrowed money3 ......................
69 Other liabilities and subordinated note and debentures

196,383
735
132,300
4,404
951
38,220
8,137
1,954
9,683
257,412
67,840
63,658
3,486
680
16
189,571
161,088
16,994
254
5,262
5,973

184,404
788
125,386
4,007
1,085
34,804
8,757
1,503
8,074
256,020
68,589
64,320
3,580
671
18
187,431
159,196
16,977
228
5,068
5,961

191,808
628
129,506
4,348
782
37,247
8,311
1,652
9,334
255,857
68,716
64,510
3,563
628
14
187,141
158,995
16,988
240
4,985
5,934

175,065
575
121,306
3,745
620
32,112
7,805
1,233
8,669
256,224
68,867
64,571
3,671
608
17
187,357
158,982
17,172
227
4,954
6,021

176,215
655
122,205
4,357
746
29,141
8,152
2,033
8,926
254,546
68,938
64,603
3,736
584
15
185,608
157,165
17,245
260
4,915
6,022

178,445
643
124,226
4,072
1,004
31,106
7,435
1,318
8,640
256,384
69,790
65,414
3,764
587
24
186,594
158,042
17,238
265
4,976
6,073

174,420
618
123,392
3,936
758
29,848
7,181
1,585
7,103
258,682
69,656
65,347
3,738
557
14
189,026
160,103
17,609
269
5,005
6,040

182,183
606
123,622
3,995
2,959
32,314
7,558
1,643
9,486
259,802
69,810
65,499
3,751
545
15
189,992
161,004
17,530
319
5,200
5,939

173,125
610
119,945
3,986
1,689
30,199
8,056
1,599
7,043
260,189
69,696
65,319
3,808
554
15
190,494
161,296
17,584
336
5,330
5,948

397
4,352
115,046
60,776

270
1,298
120,666
59,387

552
2,983
117,521
58,365

542
3,538
117,883
59,157

2,552
4,047
115,913
58,316

437
2,667
120,302
57,884

881
2,096
121,538
57,440

743
4,335
120,177
58,993

2,402
5,113
116,541
59,420

70 Total liabilities .........................................................................

634,366

622,046

627,087

613,409

611,589

616,119

615,057

626,233

616,790

71 Residual (total assets minus total liabilities)4 ....................

44,646

44,766

44,676

44,707

44,621

45,341

45,209

45,078

45,126

Deposits

1. Includes securities purchased under agreements to resell.
2. Other than financial institutions and brokers and dealers.
3. Includes federal funds purchased and securities sold under agreement to
repurchase; for information on these liabilities at banks with assets of $1 billion
or more on Dec. 31, 1977, see table 1.13.




4.
This is not a measure of equity capital for use in capital adequacy analysis
or for other analytic uses.

A22

D om estic Financial Statistics □ September 1980

1.29 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities
Millions of dollars, Wednesday figures
Account
July 2

July 9

July 16

July 23

July 30p

Aug. 6p

Aug. 13p

Aug. 20p

Aug. 21p

1 Cash items in process of collection.................................
2 Demand deposits due from banks in the United States ..
3 All other cash and due from depository institutions ...

22,429
13,702
9,606

19,963
14,185
9,689

25,206
12,507
10,868

18,766
12,806
8,465

19,062
12,903
8,794

17,158
12,572
4,961

15,597
11,359
7,541

19,643
13,152
9,389

15,809
12,349
6,848

4 Total loans and securities1 .............................................

115,351

112,765

112,570

111,391

111,634

115,538

114,611

114,820

115,914

7,648
440
6,273
936

7,670
436
6,282
951

7,657
540
6,219
898

7,823
735
6,194
894

7,952
793
6,239
920

8,285
1,051
6,323
911

8,155
1,046
6,178
931

8,662
1,059
7,006
596

8,656
1,053
7,005
598

13,302
2,626
10,074
1,624
8,450
603

13,321
2,587
10,120
1,645
8,475
613

13,324
2,608
10,100
1,616
8,485
615

13,407
2,584
10,216
1,638
8,578
607

13,445
2,584
10,248
1,649
8,599
613

13,415
2,579
10,230
1,634
8,596
605

13,520
2,554
10,361
1,679
8,683
604

13,522
2,495
10,436
1,750
8,685
592

13,503
2,466
10,476
1,758
8,718
562

19 Federal funds sold3 .......................................................
20 To commercial banks ................................................
21 To nonbank brokers and dealers in securities............
22 To others ...................................................................
23 Other loans, gross .........................................................
24 Commercial and industrial.........................................
25
Bankers’ acceptances and commercial paper..........
26
All o th e r...............................................................
27
U.S. addressees ..................................................
28
Non-U.S. addressees ...........................................
29 Real estate ................................................................
30 To individuals for personal expenditures.....................
To financial institutions
31
Commercial banks in the United States...................
32
Banks in foreign countries......................................
33
Sales finance, personal finance companies, etc..........
34
Other financial institutions......................................
35 To nonbank brokers and dealers in securities............
36 To others for purchasing and carrying securities4 .......
37 To finance agricultural production .............................
38 All other ...................................................................
39 L ess: Unearned income ................................................
40
Loan loss reserve................................................
41 Other loans, n e t............................................................
42 Lease financing receivables ...........................................
43 All other assets^............................................................

7,038
5,265
1,464
310
90,092
47,429
2,265
45,164
43,263
1,901
13,291
8,826

6,035
3,862
1,643
530
88,490
47,447
2,065
45,382
43,545
1,837
13,283
8,818

6,146
4,228
1,559
359
88,200
46,889
1,931
44,958
43,137
1,822
13,338
8,806

5,606
3,681
1,444
481
87,352
46,898
1,986
44,912
43,107
1,804
13,378
8,800

4,879
3,083
1,359
436
88,158
47,208
2,079
45,129
43,308
1,821
13,470
8,817

6,994
4,324
1,678
992
89,662
47,634
2,089
45,545
43,627
1,918
13,481
8,855

7,144
4,234
1,715
1,195
88,631
47,413
1,833
45,580
43,666
1,914
13,576
8,870

6,132
3,497
2,000
635
89,347
47,386
1,630
45,756
43,832
1,924
13,695
8,890

6,851
3,988
2,155
708
89,755
47,748
1,660
46,088
44,091
1,996
13,760
8,914

1,426
3,599
3,457
4,462
3,207
352
246
3,797
1,040
1,690
87,362
1,660

1,182
3,216
3,390
4,508
2,651
333
257
3,405
1,055
1,696
85,740
1,686

1,088
3,125
3,508
4,563
2,753
329
273
3,528
1,057
1,701
85,442
1,690

1,059
2,954
3,455
4,411
2,584
345
377
3,092
1,084
1,714
84,555
1,691

1,129
2,968
3,539
4,462
2,565
350
396
3,253
1,092
1,709
85,358
1,673

35,518

33,339

30,202

31,778

29,721

1,244
3,099
3,178
4,450
3,129
350
395
3,847
1,082
1,735
86,844
1,682
34,552

1,286
2,839
3,329
4,490
2,924
349
406
3,149
1,085
1,754
85,792
1,681
34,050

1,200
2,873
3,502
4,492
3,296
351
409
3,253
1,088
1,755
86,504
1,684
32,855

981
3,259
3,367
4,460
3,177
363
391
3,334
1,098
1,753
86,904
1,686
33,014

44 Total assets ...................................................................

198,265

191,627

193,043

184,897

183,786

186,463

184,840

191,542

185,620

45 Demand deposits ...........................................................
46 Mutual savings banks ................................................
47 Individuals, partnerships, and corporations ...............
48 States and political subdivisions .................................
49 U.S. government .......................................................
50 Commercial banks in the United States......................
51 Banks in foreign countries.........................................
52 Foreign governments and official institutions..............
53 Certified and officers’ checks......................................
54 Time and savings deposits .............................................
55 Savings.......................................................................
56
Individuals and nonprofit organizations...................
57
Partnerships and corporations operated for profit ...
58
Domestic governmental units..................................
59
All other ................................................................
60 Time ..........................................................................
61
Individuals, partnerships, and corporations ............
62
States and political subdivisions ...................... ......
63
U.S. government ...................................................
64
Commercial banks in the United States...................
65
Foreign governments, official institutions, and banks
Liabilities for borrowed money
66 Borrowings from Federal Reserve Banks ...................
67 Treasury tax-and-loan notes........................................
68 AH other liabilities for borrowed money6 ...................
69 Other liabilities and subordinated note and debentures ..

75,241
396
35,823
556
136
25,096
6,378
1,624
5,231
48,492
9,641
9,150
327
159
5
38,851
33,193
1,191
45
1,552
2,870

66,588
462
31,627
474
306
21,572
7,092
1,099
3,955
47,875
9,752
9,271
333
143
5
38,123
32,400
1,249
47
1,571
2,856

70,880
288
33,050
722
124
23,922
6,480
1,331
4,963
48,117
9,788
9,313
329
140
5
38,329
32,515
1,318
48
1,606
2,843

63,066
279
30,142
399
119
20,479
5,997
926
4,724
47,590
9,750
9,272
338
133
37,839
31,976
1,361
41
1,580
2,882

61,387
309
30,318
505
123
17,259
6,282
1,645
4,946
46,765
9,752
9,282
341
125
5
37,012
31,143
1,386
41
1,565
2,876

60,909
302
30,778
454
174
17,793
5,642
988
4,778
47,121
9,848
9,382
347
113
6
37,272
31,254
1,391
46
1,681
2,901

57,834
301
29,052
531
142
17,733
5,338
1,169
3,567
47,856
9,839
9,384
347
105
4
38,017
31,936
1,486
38
1,676
2,881

64,812
317
30,361
542
767
20,578
5,725
1,326
5,194
48,282
9,835
9,374
351
106
4
38,447
32,346
1,511
32
1,749
2,809

59,792
283
29,068
436
381
18,684
6,255
1,305
3,380
48,608
9,803
9,344
353
102
4
38,805
32,555
1,580
30
1,849
2,791

1,201
36,449
22,215

268
39,788
22,358

772
36,069
22,476

918
36,215
22,394

1,685
1,063
36,345
21,930

700
39,904
22,734

410
501
41,378
21,912

986
39,118
23,447

1,124
1,322
36,846
23,047

70 Total liabilities ..........................................................

183,598

176,878

178,314

170,183

169,175

171,368

169,891

176,645

170,740

14,667

14,748

14,729

14,714

14,611

15,095

14,949

14,898

14,880

Securities

5 U.S. Treasury securities2 ..............................................
6 Trading account2 .......................................................
7 Investment account, by maturity.................................
8
One year or less.....................................................
9
Over one through five years..................................
10
Over five years.......................................................
11 Other securities2 ............................................................
12 Trading account2 .......................................................
13 Investment account ....................................................
14
U.S. government agencies ......................................
15
States and political subdivision, by maturity............
16
One year or less..................................................
17
Over one y ear.....................................................
18
Other bonds, corporate stocks and securities..........
Loans

Deposits

71 Residual (total assets minus total liabilities)7 .................
1.
2.
3.
4.

Excludes trading account securities.
Not available due to confidentiality.
Includes securities purchased under agreements to resell.
Other than financial institutions and brokers and dealers.




7

5. Includes trading account securities.
6. Includes federal funds purchased and securities sold under agreements to
repurchase.
7. This is not a measure of equity capital for use in capital adequacy analysis
or for other analytic uses.

Weekly Reporting Banks

A23

1.30 LARGE WEEKLY REPORTING COMMERCIAL BANKS Balance Sheet Memoranda
Millions of dollars, Wednesday figures

July 2

July 9

July 16

July 23

July 30p

Aug. 6P

Aug. 13P

Aug. 20p

Aug. 21p

1 Total loans (gross) and securities adjusted1 ..................
2 Total loans (gross) adjusted1 .......................................
3 Demand deposits adjusted2 .........................................

508,750
396,202
110,723

507,295
394,026
107,572

506,115
393,209
105,420

505,296
392,023
104,760

506,255
392,582
107,393

515,691
399,342
108,723

513,212
398,525
107,531

514,145
398,074
106,176

514,348
399,017
105,785

4 Time deposits in accounts of $100,000 or more.............
5 Negotiable CDs ......................................................
6 Other time deposits.................................................

128,468
91,794
36,674

126,638
90,196
36,442

126,328
90,044
36,284

126,714
90,263
36,451

125,220
88,977
36,243

126,232
89,781
36,451

128,744
91,931
36,813

129,827
93,118
36,709

130,360
93,469
36,891

7 Loans sold outright to affiliates3 ..................................
8 Commercial and industrial .......................................
9 Other .....................................................................

2,788
1,843
945

2,817
1,899
919

2,831
1,836
995

2,736
1,826
911

2,809
1,894
915

2,890
1,927
962

2,897
1,901
996

2,902
1,891
1,010

2,933
1,944
989

10 Total loans (gross) and securities adjusted1 ..................
11 Total loans (gross) adjusted1 .......................................
12 Demand deposits adjusted2 .........................................

475,537
371,503
102,715

474,033
369,311
99,494

472,834
368,533
97,349

471,999
367,326
96,993

472,820
367,819
99,449

481,929
374,323
100,881

479,553
373,597
99,532

480,448
373,180
98,426

480,615
374,113
97,860

13 Time deposits in accounts of $100,000 or more.............
14 Negotiable CDs ......................................................
15 Other time deposits.................................................

120,540
86,086
34,454

118,770
84,523
34,246

118,537
84,403
34,134

118,954
84,681
34,273

117,567
83,510
34,057

118,527
84,283
34,244

120,915
86,369
34,546

121,891
87,466
34,425

122,388
87,802
34,586

16 Loans sold outright to affiliates3 ..................................
17 Commercial and industrial.......................................
18 Other ....................................................................

2,755
1,822
933

2,781
1,875
906

2,794
1,812
982

2,698
1,800
898

2,771
1,868
903

2,843
1,900
943

2,852
1,875
977

2,857
1,868
990

2,890
1,923
967

19 Total loans (gross) and securities adjusted1-4 ................
20 Total loans (gross) adjusted1 .......................................
21 Demand dejx>sits adjusted2 .........................................

111,390
90,440
27,580

110,471
89,481
24,746

110,012
89,031
21,628

109,448
88,218
23,702

110,221
88,824
24,943

112,787
91,087
25,784

111,930
90,256
24,362

112,967
90,782
23,823

113,796
91,637
24,918

22 Time deposits in accounts of $100,000 or more.............
23 Negotiable CDs ......................................................
24 Other time deposits.................................................

29,547
21,844
7,702

28,888
21,180
7,709

29,143
21,370
7,773

28,862
21,034
7,829

28,119
20,319
7,800

28,426
20,504
7,921

29,201
21,184
8,016

29,670
21,610
8,060

30,068
22,000
8,068

Banks with Assets of $750 Million or More

Banks with Assets of $1 Billion or More

Banks in New York City

1. Exclusive of loans and federal funds transactions with domestic commercial
banks.
2. All demand deposits except U.S. government and domestic banks less cash
items in process of collection.




3. Loans sold are those sold outright to a bank’s own foreign branches, non­
consolidated nonbank affiliates of the bank, the bank’s holding company (if not
a bank), and nonconsolidated nonbank subsidiaries of the holding company.
4. Excludes trading account securities.

A 24
1.31

D om estic Financial Statistics □ September 1980
LARGE WEEKLY REPORTING COMMERCIAL BANKS

Domestic Classified Commercial and Industrial Loans

Millions of dollars

Industry classification
Apr. 30

May 28

Outstanding

Net change during

1980

1980

June 25

July 30

Aug. 27

Q2

Ql

June

Adjust­
ment
bank
July

Aug.

1 Durable goods manufacturing..............

24,081

22,939

22,729

22,477

22,966

1,422

-2,332

-2 1 0

-2 5 2

488

46

2 Nondurable goods manufacturing........
3 Food, liquor, and tob acco..................
4 Textiles, apparel, and leather ..........
5 Petroleum refining ..............................
6 Chemicals and rubber ........................
7 Other nondurable g o o d s ....................

18,683
4,176
4,614
2,611
3,903
3,379

18,075
3,859
4,668
2,490
3,761
3,299

18,338'
3,701
4,934
2,715
3,704'
3,284

18,552
3,899
5,066
2,616
3,723
3,248

18,821
3,912
5.231
2,694
3,707
3,277

580
-3 0 2
132
461
61
229

-1 ,4 8 6 '
-1,222
454
-4 2 4
-2 0 8 '
-8 6

262'
-1 5 8
267
225
-5 7 '
-1 5

214
198
131
-9 8
20
-3 6

268
13
165
77
-1 6
29

39
6
6
1
14
12

8 Mining (including crude petroleum
and natural gas) ..............................

13,272

13,588

13,758

13,650

13,562

585

170

-1 0 8

-8 8

14

9 Trade ........................................................
10 Commodity dealers ............................
11
Other wholesale ..................................
12 Retail ....................................................

25,406
1,784
12,050
11,572

24,833
1,639
11,645
11,549

24,600'
1,531
11,679'
11,389

24,330
1,670
11,573
11,087

24,796
1,858
11,626
11,313

450
-3 2 3
71
702

-8 5 7 '
-2 8 5
-4 1 8 '
-1 5 4

-2 3 4 '
-1 0 8
34'
-1 6 0

-2 6 9
139
-1 0 6
-3 0 2

466
187
52
226

121
6
34
82

13 Transportation, communication,
and other public u tilities................
14 Transportation ....................................
15 Communication....................................
16 Other public utilities ..........................

18,832
7,692
2,846
8,293

18,507
7,543
2,800
8,164

18,745
7,600
2,839
8,306

18,996
7,753
2,883
8,359

19,215
7,646
2,918
8,651

448
376
224
-1 5 2

453
83
92
278

238
57
39
142

251
154
44
53

219
-1 0 8
35
292

14
7
1
5

17 Construction ............................................
18 Services ....................................................
19 All other1 ..................................................

5,902
20,444
15,640

5,832
19,977
15,125

5,970
20,299
14,999

5,790
20,616
14,912

5,888
20,827
15,208

73
715
550

96
89
-6 5 6

138
323
-1 2 6

-1 8 0
317
-8 7

98
211
296

23
%
288

20 Total domestic loans............................

142,260

138,876

139,438

139,324

141,283

4,823

-3,531

561

-113

1,958

641

76,192

74,862

74,295

74,783

74,978

3,514

-1,702

-5 6 7

488

194

33

21

1,162

Memo: Term loans (original maturity
more than 1 year) included in do­
mestic loans ......................................

1. Includes commercial and industrial loans at a few banks with assets of $1
billion or more that do not classify their loans.

1.311

Note. New series. The 134 large weekly reporting commercial banks with domestic assets of $1 billion or more as of December 31, 1977, are included in this
series. The revised series is on a last-Wednesday-of-the-month basis.

MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1

Monthly averages, billions of dollars
December outstanding

Outstanding in 1979 and 1980

Source
1976

1
2
3
4
5
6

Total nondeposit funds
Seasonally adjusted2 ..................................................................
Not seasonally adjusted ............................................................
Federal funds, RPs, and other borrowings from nonbanks
Seasonally adjusted3 ..................................................................
Not seasonally adjusted ............................................................
Net Eurodollar borrowings, not seasonally adjusted................
Loans sold to affiliates, not seasonally adjusted4 5 ..................

Memo
7 Domestic chartered banks net positions with own foreign
branches, not seasonally adjusted6 ......................................
8 Gross due from balances ..........................................................
9 Gross due to balances................................................................
10 Foreign-related institutions net positions with directly related
institutions, not seasonally adjusted7 ..................................
11 Gross due from balances ..........................................................
12 Gross due to balances................................................................
13 Security RP borrowings, seasonally adjusted8 ..........................
14 Not seasonally adjusted ............................................................
15 U.S. Treasury demand balances, seasonally adjusted9 ............
16 Not seasonally adjusted ............................................................
17 Time deposits, $100,000 or more, seasonally adjusted1 0 ........
18 Not seasonally adjusted ............................................................

1977

Dec.

Jan.

Feb.

Mar.

Apr.

May

June

July

54.7
53.3

61.8
60.4

85.4
84.4

118.8
117.4

122.5
121.2

129.2
125.9

133.4
130.4

124.2
121.1'

120.0'
123.2

113.9
114.1

113.7
117.7

47.1
45.8
3.7
3.8

58.4
57.0
- 1 .3
4.8

74.8
73.8
6.8
3.8

88.0
86.5
28.1
2.8

92.0
90.6
27.9
2.7

97.2
93.9
29.4
2.6

97.9
94.8
32.9
2.6

94.7'
91.7
26.8'
2.6

94.2
97.4
23.2
2.6

96.1
96.2
15.1
2.8

100.1
104.2
10.7
2.8

- 6 .0
12.8
6.8

-12.5
21.1
8.6

-1 0 .2
24.9
14.7

6.4
22.9
29.3

5.9
23.0
28.9

6.6
23.4
29.8

9.3
23.6
32.9

6.0
24.4
30.4

2.7
27.3
30.0

-5 .2
29.7
24.7

-8 .1
32.3
24.2

9.7
8.3
18.1
27.9
27.0
3.9
4.4
137.7
140.0

11.1
10.3
21.4
36.3
35.1
4.4
5.1
162.0
165.4

17.0
14.2
31.2
44.8
43.6
8.7
10.3
213.0
217.9

21.7
28.9
50.5
49.2
47.9
8.1
9.6
227.7
233.0

22.0
29.6
51.6
51.0
48.3
12.7
12.7
229.1
233.0

22.8
30.4
53.2
49.5
48.2
11.3
11.7
235.6
236.8

23.6
31.9
55.6
45.0
44.1
7.5
7.8
237.1
239.2

20.9
28.5
49.4
41.5
40.6
8.6
9.0
240.3
238.4

20.5
28.4'
48.8'
40.1
42.1
9.4
8.4242.0
240.1

19.9
28.5
48.4'
45.0
44.7
8.6
10.0
237.0
234.9

18.8
30.6
49.4
50.4
50.1
10.7
9.2
233.1
229.2

1. Commercial banks are those in the 50 states and the District of Columbia
with national or state charters plus U.S. branches, agencies, and New York in­
vestment company subsidiaries of foreign banks and Edge Act corporations.
2. Includes seasonally adjusted federal funds, RPs, and other borrowings from
nonbanks and not seasonally adjusted net Eurodollars and loans to affiliates.
Includes averages of Wednesday data for domestic chartered banks and averages
of current and previous month-end data for foreign-related institutions.
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 partici­
pations in pooled loans. Includes averages of daily figures for member banks and
FRASER
averages of current and previous month-end data for foreign-related institutions.

Digitized for


1978

4. Loans initially booked by the bank and later sold to affiliates that are still
held by affiliates. Averages of Wednesday data.
5. As of Dec. 1, 1979, loans sold to affiliates were reduced $800 million due to
corrections of two New York City banks.
6. Includes averages of daily figures for member banks and quarterly call report
figures for nonmember banks.
7. Includes averages of current and previous month-end data until August 1979;
beginning September 1979 averages of daily data.
8. Based on daily average data reported by 122 large banks beginning February
1980 and 46 banks before February 1980.
9. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at
commercial banks. Averages of daily data.
10. Averages of Wednesday figures.

Deposits and Commercial Paper

A25

1.32 GROSS DEMAND DEPOSITS of Individuals, Partnerships, and Corporations!

Billions of dollars, estimated daily-average balances
Commercial banks
Type of holder
1975
Dec.

1976
Dec.

19792

1978

1977
Dec.

Dec.

Mar.

June

1980
Sept.

Dec.

Mar.

June

1 All holders—Individuals, partnerships, and
corporations..................................................

236.9

250.1

274.4

294.6

270.4

285.6

292.4

302.2

288.4

288.6

2
3
4
5
6

20.1
125.1
78.0
2.4
11.3

22.3
130.2
82.6
2.7
12.4

25.0
142.9
91.0
2.5
12.9

27.8
152.7
97.4
2.7
14.1

24.4
135.9
93.9
2.7
13.5

25.4
145.1
98.6
2.8
13.7

26.7
148.8
99.2
2.8
14.9

27.1
157.7
99.2
3.1
15.1

28.4
144.9
97.6
3.1
14.4

27.7
145.3
97.9
3.3
14.4

Financial business ...............................................
Nonfinancial business .........................................
Consumer ...........................................................
Foreign................................................................
Other ..................................................................

Weekly reporting banks

1975
Dec.

7 All holders—Individuals, partnerships, and
corporations..................................................
8
9
10
11
12

Financial business ...............................................
Nonfinancial business .........................................
Consumer ...........................................................
Foreign................................................................
Other ..................................................................

1976
Dec.

1978

1977
Dec.

Dec.

19793
Mar.

June

1980
Sept.

Dec.

Mar.

June

124.4

128.5

139.1

147.0

121.9

128.8

132.7

139.3

133.6

133.9

15.6
69.9
29.9
2.3
6.6

17.5
69.7
31.7
2.6
7.1

18.5
76.3
34.6
2.4
7.4

19.8
79.0
38.2
2.5
7.5

16.9
64.6
31.1
2.6
6.7

18.4
68.1
33.0
2.7
6.6

19.7
69.1
33.7
2.8
7.4

20.1
74.1
34.3
3.0
7.8

20.1
69.1
34.2
3.0
7.2

20.2
69.2
33.9
3.1
7.5

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.
2. Beginning with the March 1979 survey, the demand deposit ownership survey
sample was reduced to 232 banks from 349 banks, and the estimation procedure
was modified slightly. To aid in comparing estimates based on the old and new
reporting sample, the following estimates in billions of dollars for December 1978
have been constructed using the new smaller sample; financial business, 27.0;
nonfinancial business, 146.9; consumer, 98.3; foreign, 2.8; and other, 15.1

3. After the end of 1978 the large weekly reporting bank panel was changed to
170 large commercial banks, each of which had total assets in domestic offices
exceeding $750 million as of Dec. 31, 1977. See “Announcements,” p. 408 in the
May 1978 Bulletin. Beginning in March 1979, demand deposit ownership esti­
mates for these large banks are constructed quarterly on the basis of 97 sample
banks and are not comparable with earlier data. The following estimates in billions
of dollars for December 1978 have been constructed for the new large-bank panel;
financial business, 18.2; nonfinancial business, 67.2; consumer, 32.8; foreign, 2.5;
other, 6.8.

1.33 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING

Millions of dollars, end of period
Instrument

1976

Dec.

1977

Dec.

1978

1980

19791

Dec.

Dec.

Feb.

Mar.

Apr.

May

June

July

Commercial paper (seasonally adjusted)

1 All issuers ...........................................................

53,010

65.036

83,420

112,803

116,465'

119,915'

120,887'

121,032'

123,937

122,259

7,263
1,900

8,888
2,132

12,300
3,521

17,579
2,784

17,308
3,010

18,254
3,142

18,881
3,467

18,526
3,591

19,100
3,188

18,207
3,198

32,622
5,959
13,125

40,612
7,102
15,536

51,755
12,314
19,365

64,931
17,598
30,293

65,387'
19,941'
33,770

64,462'
19,360'
37,199

66,110'
19,166'
35,896

63,813'
18,845'
38,693

62,623
19,436
42,214

63,777
19,239
40,275

Financial companies2
3

Dealer-placed paper3
T otal................................................................
Bank-related ....................................................

4

T otal................................................................

2

Directly placed paper4

5 Bank-related ....................................................
6 Nonfinancial companies5 ......................................

Bankers dollar acceptances (not seasonally adjusted)
7 Total ...................................................................
Holder

8 Accepting banks..................................................
9 Own bills .........................................................

10

Bills bought......................................................
Federal Reserve Banks
11 Own account....................................................
12 Foreign correspondents..................................
13 Others ............................................................
Basis

14. Imports into United States...................................
15 Exports from United States.................................
16 All other ............................................................

22,523

25,450

33,700

45,321

50,269

49,317

50,177

52,636

54,356

54,334

10,442
8,769
1,673

10,434
8,915
1,519

8,579
7,653
927

9,865
8,327
1,538

9,343
8,565
778

8,159
7,560
598

8,159
7,488
670

9,262
8,768
493

10,051
9,113
939

9,764
8,603
1,161

991
375
10,715

954
362
13,700

664
24,456

1

704
1,382
33,370'

205
1,417
39,303'

171
1,373
39,614

0
1,555
40,463

366
1,718
41,290

373
1,784
42,147'

310
1,899
42,361

4,992
4,818
12,713

6,378
5,863
13,209

8,574
7,586
17,540

10,270
9,640
25,411

11,393
11,102
27,774

10,926
11,001
27,389

10,946
11,221
28,010

11,651

29,637

11,536
11,339
31,480

12,109
12,401
29,824

1. A change in reporting instructions results in offsetting shifts in the dealerplaced and directly placed financial company paper in October 1979.
2. Institutions engaged primarily in activities such as, but not limited to, com­
mercial, savings, and mortgage banking; sales, personal, and mortgage financing;
factoring, finance leasing, and other business lending; insurance underwriting; and
investment activities.
Digitized for other
FRASER



11,347

3. Includes all financial company paper sold by dealers in the open market.
4. As reported by financial companies that place their paper directly with inves­
tors.
5. Includes public utilities and firms engaged primarily in such activities, as
communications, construction, manufacturing, mining, wholesale and retail trade,
transportation, and reserves.

A 26

D om estic Financial Statistics □ September 1980

1.34 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans

Percent per annum
Effective date

1980—Apr.
May

2 ................
18 ................
1 ..................
7
16
23
30

1.35

..................
..................
..................
..................

Rate

20
19 Vi
lSVi-19
18 Yi
YlVi
16Vt>
14^
14

Rate

Month

Average
rate

Month

Average
rate

13
12-12 Vi
12
11.50
11.00
11.25
11.50

1979—Jan............................
Feb...........................
Mar...........................
Apr...........................
May ........................
J u n e ........................
July ........................
Aug..........................
Sept..........................
Oct............................

11.75
11.75
11.75
11.75
11.75
11.65
11.54
11.91
12.90
14.39

1979—Nov
Dec
1980—Jan
Feb
Mar
Apr
May ........................

15.55
15.30
15.25
15.63
18.31
19.77
16.57
12.63
11.48
11.12

Effective Date

June

6 ..................
1 3 ..................
2 0 ..................
July 7 ..................
25 ..................
Aug 22 ..................
27 ..................

July ........................
Aug..........................

TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-10, 1980
Size of loan (in thousands of dollars)
All
sizes
1-24

25-49

50-99

100-499

50Q-999

1,000
and over

Short-Term Commercial and
Industrial Loans
1 Amount of loans (thousands of dollars)..................
2 Number of loans .................................................
3 Weighted-average maturity (months).....................
4 Weighted-average interest rate (percent per annum)
5 Interquartile range1 ..........................................

11,316,521
164,331
2.8
17.75
15.62-19.82

885,614
123,866
3.2
17.90
15.12-20.23

518,102
15,129
4.0
18.78
17.72-20.28

697,310
10,596
3.4
18.95
17.50-20.99

2,159,297
11,950
2.7
18.49
17.50-19.82

720,502
1,134
3.0
19.13
18.50-20.39

6,335,696
1,656
2.6
17.10
14.09-19.59

43.8
50.3
19.0

23.0
26.0
13.9

33.2
34.7
10.7

44.2
48.5
32.2

33.4
47.9
14.1

64.5
60.6
34.5

48.8
54.9
18.8

Percentage of amount of loans

6 With floating rate.................................................
7 Made under commitment .....................................
8 With no stated maturity.......................................
Long-Term Commercial and
Industrial Loans
9 Amount of loans (thousands of dollars)..................
10 Number of loans .................................................
11 Weighted-average maturity (months) .....................
12 Weighted-average interest rate (percent per annum)
13 Interquartile range1 ..........................................

1,339,749
15,243
42.8
18.37
17.50-20.00

171,216
13,992
33.9
18.26
15.00-21.34

181,145
845
44.6
18.64
17.75-20.50

105,761
152
42.4
18.62
18.00-20.06

881,627
254
44.2
18.30
17.51-19.75

74.0
71.1

30.1
29.4

76.7
68.6

69.4
71.8

82.5
79.7

Percentage of amount of loans

14 With floating r a te .................................................
15 Made under commitment .....................................
Construction and
Land Development Loans
16 Amount of loans (thousands of dollars)..................
17 Number of loans .................................................
18 Weighted-average maturity (months) .....................
19 Weighted-average interest rate (percent per annum)
20 Interquartile range1 ..........................................

1,110,511
16,924
7.4
18.32
17.50-20.40

91,724
8,317
3.7
17.14
14.75-19.56

114,305
3,208
4.3
15.68
13.10-18.00

199,312
2,904
7.3
18.69
18.00-20.48

494,589
2,292
8.0
19.56
20.00-20.32

210,581
203
9.5
16.99
13.00-19.66

71.0
94.4
45.1
11.9

23.2
82.0
74.3
11.0

35.8
96.9
64.4
10.0

48.3
97.9
39.7
7.2

92.4
97.5
25.9
7.8

82.3
87.7
72.2
27.1

35.5
5.5
58.9

77.0
1.9
21.1

86.0
3.3
10.7

70.9
4.4
24.7

8.7
5.5
85.8

19.5
9.5
70.9

Percentage of amount of loans

21 With floating rate.................................................
22 Secured by real estate..........................................
23 Made under commitment.....................................
24 With no stated maturity .......................................
Type of construction

25 1- to 4-family ......................................................
26 Multifamily .........................................................
27 Nonresidential ....................................................
All
sizes
Loans to Farmers
28 Amount of loans (thousands of dollars)..................
29 Number of loans ..................... ...........................
30 Weighted-average maturity (months) .....................
31 Weighted-average interest rate (percent per annum)
32 Interquartile range1 ..........................................
By purpose of loan

33 Feeder livestock ..................... .............................
34 Other livestock.................................. .................
35 Other current operating expenses..........................
36 Farm machinery and equipment ............................
37 Other .................................................................

1-9

25-49

50-99

100-249

250
and over

1,211,479
64,652
6.6
17.38
16.64-18.50

163,850
44,177
6.4
16.46
14.84-17.81

168,002
11,340
6.1
16.98
15.79-18.67

168,990
5,257
7.0
17.10
15.56-18.40

133,979
1,931
5.7
17.38
16.54-18.68

241,236
1,600
5.2
17.40
16.60-18.27

335,423
347
8.7
18.14
17.24-18.64

17.67
16.64
17.49
16.44
17.15

16.35
16.54
16.54
16.23
16.36

17.01
14.89
17.20
16.41
17.28

17.63
16.62
17.45
16.64
15.31

17.74
17.37
18.48
(2)
15.35

17.56
(2)
17.27
(2)
17.36

17.98
(2)
18.61
(2)
18.02

1. Interest rate range that covers the middle 50 percent of the total dollar amount
of loans made.
2. Fewer than 10 sample loans.




10-24

Note. For more detail, see the Board’s E.2(416) statistical release,

Securities Markets

A ll

1.36 INTEREST RATES Money and Capital Markets
Averages, percent per annum
1980
Instrument

1977

1978

1980, week ending

1979
May

June

July

Aug.

Aug. 1

Aug. 8

Aug. 15 Aug. 22

Aug. 29

Money market rates
1 Federal funds1 ............................................
Commercial paper2-3
1-month ....................................................
3-month ....................................................
6-month ....................................................
Finance paper, directly placed2-3
5
1-month ....................................................
6 3-month ....................................................
7 6-month ....................................................
8 Prime bankers acceptances, 90-day3-4 . . .
Certificates of deposit, secondary market5
9
1-month ....................................................
10 3-month ....................................................
11 6-month ....................................................
12 Eurodollar deposits, 3-month6 ................
2
3
4

13
14
15
16
17

U.S. Treasury bills3-7
Secondary market
3-month ................................................
6-month ................................................
1-year ....................................................
Auction average8
3-month ................................................
6-month ................................................

5.42
5.54
5.60

7.76
7.94
7.99

10.86

5.38
5.49
5.50
5.59

9.35

10.03

8.61

8.93
8.92
8.84

9.02
9.14
9.20

9.73
9.87
9.94

10.24
10.40
10.52

8.55
8.25
8.25
8.97

8.69
8.58
8.60
9.14

8.89
8.77
8.77
9.39

9.58
9.19
9.21
10.14

10.12

9.62
9.91
10.29
10.82

8.82'
8.93
9.11
9.30

9.16
9.29
9.43
10.09

9.21
9.46
9.85
10.33

9.82
10.13
10.62
10.64

10.31
10.80
11.34
11.54

3.00

9.13
9.41
9.39

8.44
8.49
8.43

8.58
8.69
8.61

8.60
8.91
8.94

9.41
9.83
9.85

10.36
10.28

3.126
3.101

9.259
9.443

8.221

8.877
8.867

8.723
8.891

9.411
9.765

10.025
10.250

8.56
8.27
8.03

8.53
8.41
8.29

9.48
9.57
9.61

8.75

10.97
10.91

9.60
9.49
9.29

7.73
7.80
7.78

9.30
9.09
9.01
9.60

8.01

8.11

10.78
10.47
10.25
11.04

7.59
7.42
8.31

8.37
8.03
8.03
8.58

9.30
9.08
9.08
9.85

5.48
5.64
5.92
6.05

7.88

11.03

8.61
8.74

11.44
11.96

9.77
9.79
9.78

11.20

8.53
8.49
8.33
9.41

8.59
8.65
8.73
9.33

5.27
5.53
5.71

7.19
7.58
7.74

10.07
10.06
9.75

8.58
8.65

7.07
7.30
7.54

3.06

8.66

5.265
5.510

7.221
7.572

10.041
10.017

9.150
9.149

6.995
7.218

8.22

11.22

3.06

8.68

8.276

9.93
9.89
10.77

10.01

Capital market rates
U.S. Treasury Notes and Bonds
18
19
20
21
22
23
24
25
26

Constant maturities9
1-year .......................................................
2-year......................................................
2Vi-year10 ..............................................
3-year ......................................................
5 -y ea r......................................................
7 -y ea r......................................................
10-year ....................................................
20-year.................................... ................
30-year....................................................

27
28

Composite11
3 to 5 years12 ........................................
Over 10 years (long-term) ..................

6.09
6.45

8.34
8.34

6.69
6.99
7.23
7.42
7.67

8.29
8.32
8.36
8.41
8.48
8.49

9.71 '
9.52
9.48
9.44
9.33
9.29

6.85
7.06

8.30
7.89

9.58
8.74

5.20

5.52
6.27
6.03

5.92
6.73
6.52

6.80

5.68

7.59

7.11
7.98
7.63

8.43

9.07

10.12

12.11

11.64

11.77

8.02

9.63
9.94

10.20

10.99
11.91
12.35
13.17

10.58
11.39
11.89
12.71

11.07
11.43
11.95
12.67

11.53
11.64

10.96

11.00

10.20

9.78
5.39

10.67

10.12

9.39
9.45
9.05
9.44
9.95
10.09
10.18
10.44
10.36

8.16
8.73
8.91 '
9.21
9.45
9.78
9.89
9.81

8.65
9.03
9.27 '
9.53
9.84
10.25
10.32
10.24

10.24
10.53
10.63 '
10.84
10.95

11.10
11.07

11.00

9.13
9.47
9.70
9.72
9.92

10.12

9.71
10.06
10.25
10.18
10.47

10.59
10.64
10.58

10.39
10.75
10.78
10.74

10.93
10.97
10.94

10.20

9.35
9.70
9.90 '

10.66

10.79
11.03
11.06

11.21
11.20
11.20
11.15
11.09

9.82

11.28
11.47
11.50
11.52
11.69
11.65
11.59
11.41
11.28

10.84

State and Local Notes and Bonds
Moody’s series13
29 Aaa ............................................................
30 B a a ..............................................................
31 B ond Buyer series14 ................................

6.12

8.02

8.15
9.30
8.59

8.00

8.00

8.00

8.00

9.25
8.61

9.25
8.53

9.25

8.68

9.20
8.85

12.33

11.94

12.14

12.26

12.43

12.56

11.64
12.09
12.44
13.15

11.33
11.61
12.09
12.70

11.44
11.91
12.25
12.97

11.57
12.03
12.37
13.07

11.70
12.15
12.56
13.28

12.36
12.65
13.37

11.60
11.41

12.32
12.31

11.92

12.03

12.10

12.36
12.27

12.48
12.36

12.62

9.81
5.20

10.04
5.06

10.03
5.12

10.16
5.05

9.94
5.03

10.01

7.35'
8.46'
8.13

8.03
9.25
8.67

Corporate Bonds
32 Seasoned issues, all industries1 5 ............

By rating group
Aaa ........................................................
Aa ..........................................................
A ............................................................
B a a ..........................................................

8.24
8.49
8.97

8.73
8.92
9.12
9.45

Aaa utility bonds16
37 New issue ..............................................
38
Recently offered issu e s........................

8.19
8.19

8.96
8.97

10.03

7.60
4.56

8.25
5.28

9.07
5.46

33
34
35
36

10.69

10.02

Memo: Dividend/price ratio17
39
40

Preferred stocks ....................................
Common stocks ....................................

5.77

1. Weekly figures are seven-day averages of daily effective rates for the week
ending Wednesday; the daily effective rate is an average of the rates on a given
day weighted by the volume of transactions at these rates.
2. Beginning November 1977, 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). Previously, most representative rate quoted by those
dealers and finance companies. Before November 1979, maturities for data shown
are 30-59 days, 90—119 days, and 120-179 days for commercial paper; and 30-59
days, 90-119 days, and 150-179 days for finance paper.
5. Yields are quoted on a bank-discount basis.
4. Average of the midpoint of the range of daily dealer closing rates offered for
domestic issues.
5. Five-day average of rates quoted by five dealers (three-month series was
previously a seven-day average).
6. Averages of daily quotations for the week ending Wednesday.
7. Except for auction averages, yields are computed from daily closing bid prices.
8. Rates are recorded in the week in which bills are issued.
9. Yield on the more actively traded issues adjusted to constant maturities by
the U.S. Treasury, based on daily closing bid prices.
10. Each monthly figure is an average of only five business days near the end
the month. The rate for each month was used to determine the maximum
for of
FRASER
interest rate payable in the following month on small saver certificates, until June

Digitized


12.00
9.70
5.09'

11.88

12.86
5.04

2, 1980. Each weekly figure shown is calculated on a biweekly basis and is the
average of five business days ending on the Monday following the calendar week.
Beginning June 2, the biweekly rate is used to determine the maximum interest
rate payable in the following two-week period on small saver certificates. (See
table 1.16.)
11. Unweighted averages for all outstanding notes and bonds in maturity ranges
shown, based on daily closing bid prices. “Long-term” includes all bonds neither
due nor callable in less than 10 years, including several very low yielding “flower”
bonds.
12. The three- to five-year series has been discontinued.
13. General obligations only, based on figures for Thursday, from Moody’s
Investors Service.
14. Twenty issues of mixed quality.
15. Averages of daily figures from Moody’s Investors Service.
16. Compilation of the Board of Governors of the Federal Reserve System.
Issues included are long-term (20 years or more). New-issue yields are based on
quotations on date of offering; those on recently offered issues (included only for
first 4 weeks after termination of underwriter price restrictions), on Friday closeof-business quotations.
17. Standard and Poor's corporate series. Preferred stock ratio based on a sample
of ten issues: four public utilities, four industrials, one financial, and one trans­
portation. Common stock ratios on the 500 stocks in the price index.

A28

D om estic Financial Statistics □ September 1980

1.37 STOCK MARKET Selected Statistics
1977

1980

1979r

1978

Feb.

Mar.

Apr.

May.

June

July

August

Prices and trading (averages of daily figures)

Common stock prices
1 New York Stock Exchange (Dec. 31, 1965 = 50) .
2 Industrial ...................................................................
3 Transportation ........................................................
4 U tility .........................................................................
5 Finance ....................................................................
6 Standard & Poor’s Corporation (1941-43 = 10)1 .
7 American Stock Exchange (Aug. 31, 1973 = 100)

53.67
57.84
41.07
40.91
55.23
98.18
116.18

53.76
58.30
43.25
39.23
56.74
96.11
144.56

55.67
61.82
45.20
36.46
58.65
98.34
186.56

66.05
76.42
57.92
36.22
61.84
115.34
288.99

59.52
68.71
51.77
33.38
54.71
104.69
259.79

58.47
66.31
48.62
35.29
57.32
102.97
242.60

61.38
69.39
51.07
37.31
61.47
107.69
258.45

65.43
74.47
54.04
38.50
65.16
114.55
286.21

68.56
78.67
59.14
38.77
66.76
119.83
310.29

70.87
82.15
62.48
38.18
67.22
123.50
321.87

20,936
2,514

28,591
3,622

32,233
4,182

47,827
6,903

41,736
5,947

32,102
3,428

36,425
3,799

39,518
5,240

46,444
6,195

45,984
6,452

Volume of trading (thousands of shares)
8 New York Stock Exchange ......................................
9 American Stock Exchange ........................................

Customer financing (end-of-period balances, in millions of dollars)
10 Regulated margin credit at brokers/dealers2

9,993

11,035

11,619'

12,638

11,914

11,309

11 Margin stock3 ..................................................
12 Convertible bonds ..........................................
13 Subscription issues ..........................................

9,740
250
3

10,830
205

11,450'
167r

12,460
175

11,140
167

2

11,270
167
4

11,200

3

11,740
171
3

166
4

11,320
198
4

640
2,060

835
2,510

1,105'
4,060'

1,320
4,755

1,365
5,000

1,290
4,790

1,270
4,750

1,345
4,790

1,664
4,907

2'

1

11,522

Free credit balances at brokers4
14 Margin-account................................................
15 Cash-account....................................................

Margin-account debt at brokers (percentage distribution, end of period)

100.0

16 Total ...............................

100.0

100.0

100.0

100.0

100.0

100.0

16.0
29.0
25.0
14.0
9.0
7.0

45.0

28.0
31.0
18.0

19.0
32.0

17.0
31.0
23.0
13.0

7.0

7.0
7.0

By equity class (in percent)5
17
18
19
20
21
22

Under 40 ............................
40-49 ..................................
50-59 ..................................
60-69 ..................................
70-79 ..................................
80 or m o r e ..........................

18.0
36.0
23.0

33.0
28.0
18.0

16.0
29.0'
27.0'
14.0

5.0

5.0

7.0

11.0
6.0

10.0
6.0

8.0

22.0
13.0
9.0

6.0
5.0

22.0
12.0

10.0
6.0

8.0
7.0

100.0
12.0
27.0
28.0
16.0
9.0

8.0

Special miscellaneous-account balances at brokers (end of period)
23 Total balances (millions of dollars)6 .

9,910

13,092

16,150

16,498

16,687

16,339

Distribution by equity status (percent)
24 Net credit statu s..................................
Debt status, equity of
25 60 percent or more ......................
26 Less than 60 p ercen t....................

43.4

41.3

44.2

44.1

45.7

44.3

44.9
11.7

45.1
13.6

47.0
8.8

47.4
8.4

41.9
12.4

44.0
11.7

16,543

16,920

17,886

45.8

47.6

48.7

43.6
10.6

43.4
9.0

43.8
8.0

Margin requirements (percent of market value and effective date)7
Mar. 11, 1968
27 Margin stocks . . .
28 Convertible bonds
29 Short s a le s ..........

June 8, 1968

70
50
70

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. Margin credit includes all credit extended to purchase or carry stocks or
related equity instruments and secured at least in part by stock. Credit extended
is end-of-month data for member firms of the New York Stock Exchange.
In addition to assigning a current loan value to margin stock generally, Regu­
lations T and U permit special loan values for convertible bonds and stock acquired
through exercise of subscription rights.
3. A distribution of this total by equity class is 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.




May 6, 1970

Dec. 6, 1971

Nov. 24, 1972

65
50
65

55
50
55

65
50
65

Jan. 3, 1974
50
50
50

5. Each customer’s equity in his collateral (market value of collateral less net
debit balance) is expressed as a percentage of current collateral values.
6. 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 pro­
ceeds) occur.
7. Regulations G, T, and U of the Federal Reserve Board of Governors, pre­
scribed 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.

Thrift Institutions

A 29

1.38 SAVINGS INSTITUTIONS Selected Assets and Liabilities
Millions of dollars, end of period
1980

1979
Account

1977

1978
Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

June

Julyp

Savings and loan associations
1 Assets .............. •.....................

459,241 523,542 576,251 578,922 579.307

582.252

585.685

589.498

591.108

593,321 594,792 596,992

2 Mortgages .............................
3 Cash and investment securities1

4 Other ....................................

381,163 432,808 472,198 474,678 475,797
39,150 44,884 49,220 48,180 46,541
38,928 45,850 54,833 56,064 56,969

476,448
48,473
57,331

477,303
50,168
58,214

479,078
50,899
59,521

480,165
50,576
60,367

480,092 481,184 482,985
52,670 52.613 52,352
60,559 60,995 61,655

5 Liabilities and net w orth.........

459,241 523,542 576,251 578,922 579.307

582.252

585.685

589.498

591.108

593,321

6 Savings capital........................
7 Borrowed money ...................
8 FHLBB .............................
9 Other .................................
10 Loans in process.....................
11 Other ....................................

386,800 430,953 464,489 465,646 470,171
27,840 42,907 54,268 54,433 55,375
19,945 31,990 39,223 39,638 40,441
7,895 10,917 15,045 14,795 14,934
9,511
9,911 .10,721 10,766 10,159
9,904 14,673 16,324 11,684
9,506

472,236
55,233
40,364
14,869
8,735
13,315

473,862
55,276
40,337
14,939
8,269
15,385

478,265
57,346
42,413
14,933
8,079
12,683

478,591
57,407
42,724
14,683
7,660
14,260

481,613 486,900 489,133
55,353 54,950 53,600
41,529 40.613 39,884
13,824 14,337 13,716
7,060
6,974
7,126
16,246 13,056 14,423

12 Net worth2 .............................
13 Memo: Mortgage loan com­
mitments outstanding3

594,792 596,992

25,184

29,057

32,055

32,360

32,566

32,733

32,893

33,125

33,190

32,983

32,912

32,776

19,875

18,911

20,930

18,029

16,007

15,559

16,744

15,844

14,193

13,929

15,368

18,039

Mutual savings banks4
14 Assets .........................................

163,405

163,252

164,270

165,107

165,366

98,610
9,449

98,908
9,253

98,940
9,804

99,220
10,044

99,151
10,131

99,045
10,187

99,163
10,543

99,150
11,115

7,754
3,003
37,036
3,010
4,343

7,658
2,930
37,086
3,156
4,412

7,387
2,887
37,114
2,703
4,417

7,436
2,853
37,223
3,012
4,481

7,629
2,824
37,493
3,361
4,518

7,548
2,791
37,801
3,405
4,588

7,527
2,727
38,246
3,588
4,547

7,530
2,701
38,325
3,575
4,606

147,287

158,174 163,133 163,205

163,405

163,252

164,270

165,107

165,366

166,340 167,002

134,017
132,744
78,005
54,739
1,272
3,292
9,978

142,701
141,170
71,816
69,354
1,531
4,565
10,907

146,006
144,070
61,123
82,947
1,936
5,873
11,525

145,044
143,143
59,252
83,891
1,901
6,665
11,544

145,171
143,284
58,234
85,050
1,887
7,485
11,615

146,328
144,214
56,948
87,266
2,115
7,135
11,643

145,821
143,765
54,247
89,517
2,056
7,916
11,629

146,637
144,646
54,669
89,977
1,990
8,161
11,542

148,563
146,394
56,329
90,065
2,169
6,975
11,465

4,066

4,400

3,182

2,919

2,618

2,397

2,097

1,883

1,849

14,287 158,174 163,133 163,205

Loans
Mortgage .................................
Other ......................................
Securities
U.S. government5 .....................
State and local government---Corporate and other6 ................
Cash ...........................................
Other assets.................................

88,195
6,210

95,157
7,195

98,304
9,510

5,895
2,828
37,918
2,401
3,839

4,959
3,333
39,732
3,665
4,131

7,750
3,100
37,210
2,909
4,351

22 Liabilities ....................................
23
24
25
26
27
28
29
30

15
16
17
18
19
20
21

Deposits ......................................
Regular7 ...................................
Ordinary savings...................
Time and o th er.....................
Other ......................................
Other liabilities............................
General reserve accounts............
Memo: Mortgage loan com­
mitments outstanding8 ..........

145,096 144,828
143,263 143,064
62,672 61,156
80,591 81,908
1,834
1,764
6,600
6,872
11,437 11,504
3,749

3,619

166,340 167,002

n.a.

Life insurance companies
31 Assets .........................................

351,722 389,924 423,760 427,496 431,453

436,226

438,638

439,733

442,932

447,020 450,858

Securities
Government ............................
United States9 .......................
State and local .....................
Foreign10 .............................
Business ..................................
Bonds ...................................
Stocks ...................................
Mortgages ...................................
Real estate...................................
Policy loans .................................
Other assets.................................

19,553 20,009 20,429 20,486 20,294
4,984
5,315
4,822
5,075
5,122
6,354
6,392
6,339
6,051
6,402
9,010
8,918
8,187
8,785
9,015
175,654 198,105 216,183 217,856 218,284
141,891 162,587 178,633 179,158 178,828
33,763 35,518 37,550 38,698 39,456
96,848 106,167 115,991 117,253 118,784
11,060 11,764 12,816 12,906 13,047
27,556 30,146 33,574 34,220 34,761
21,051 23,733 24,767 24,775 26,283

20,378
4,878
6,433
9,067
222,332
181,820
40,512
119,885
13,083
35,302
25,246

20,438
4,898
6,488
9,052
223,423
182,521
40,902
120,926
13,201
35,839
24,811

20,545
5,004
6,454
9,087
221,214
182,536
38,678
122,314
13,512
36,901
25,247

20,470
5,059
6,351
9,060
222,175
182,750
39,425
123,587
13,696
38,166
24,838

20,529 20,395
5,107
4,990
6,352
6,349
9,070
9,056
223,556 224,874
183,356 184,329
40,200 40,545
124,563 125,455
13,981 14,085
38,890 39,354
25,501 26,695

32
33
34
35
36
37
38
39
40
41
42

n.a.

Credit unions
43 Total assets/liabilities and
capital ...................................

53,755

62,348

65,063

65,419

65,854

64,506

64,857

65,678

65,190

66,103

68,102

68,429

44
45
46
47
48
49
50
51

29,564
24,191
41,845
22,634
19,211
46,516
25,576
20,940

34,760
27,588
50,269
27,687
22,582
53,517
29,802
23,715

35,537
29,526
53,533
29,020
24,513
55,739
30,366
25,373

35,670
29,749
56,267
30,613
25,654
55,797
30,399
25,398

35,934
29,920
53,125
28,698
24,426
56,232
35,530
25,702

35,228
29,278
52,089
28,053
24,036
55,447
30,040
25,407

35,425
29,432
51,626
27,783
23,843
55,790
32,256
25,534

36,091
29,587
51,337
27,685
23,652
56,743
30,948
25,795

35,834
29,356
50,344
27,119
23,225
56,338
30,851
25,487

36,341
29,762
49,469
26,550
22,919
57,197
31,403
25,794

37,555
30,547
48,172
25,773
22,399
59,310
32,764
26,546

37,573
30,856
47,829
25,435
22,394
60,574
33,472
27,102

Federal ........................................
State ..........................................
Loans outstanding ......................
Federal ....................................
State ........................................
Savings ........................................
Federal (shares) ......................
State (shares and deposits).......

For notes see bottomof page A30.




A 30

D om estic Financial Statistics □ September 1980

1.39 FEDERAL FISCAL AND FINANCING OPERATIONS
Millions of dollars
Calendar year
Type of account or operation

Fiscal
year

1977

Fiscal
year

1978

Fiscal
year

HI
U.S. budget

1 Receipts1 .......................................................
2 Outlays1 .........................................................
3 Surplus, or d eficit(-) ................................
4 Trust funds ...............................................
5 Federal funds2 ...........................................

1980

1979

1979

H2

HI

1980
May

June

July

357,762
402,725
-44,963
9,497
-54,460

401,997
450,836
-48,839
12,693
-61,532

465,940
493,673
-27,733
18,335
-46,069

246,574
245,616
958
4,041
-3,083

233,952
263,044
-29,093
9,679
-38,773

270,864
289,899
-19,035
4,383
-23,418

36,071
50,198
-14,127
6,463
-20,590

59,055
46,702
12,353
1,361
10,992

37,348
52,409
-15,062
-8,224
-6,838

-8,415
-269

-10,661
334

-13,261
832

-7,712
-447

-5,909
805

-7,735
-528

-1,827
-364

-511
121

-1,214
-107

-53,647

-59,166

-40,162

-7,201

-34,197

-27,298

-16,318

11,963

-16,383

53,516

59,106

33,641

6,039

31,320

24,435

5,350

-4,615

9,737

-2,247
2,378

-3,023
3,083

-408
6,929

-8,878
10,040

3,059
-182

-3,482
6,345

9,841
-1,127

-7,135
-213

3,346
3,300

19,104
15,740
3,364

22,444
16,647
5,797

24,176
6,489
17,687

17,485
3,290
14,195

15,924
4,075
11,849

14,092
3,199
10,893

10,662
4,523
6,139

14,092
3,199
10,893

10,432
3,954
6,478

Off-budget entities (surplus, or deficit

6 Federal
7 Other3

Financing Bank outlays ..............
...........................................................

U.S. budget plus off-budget, including
Federal Financing Bank
or deficit ( - ) ..............................
Source or financing
Borrowing from the p u b lic....................
Cash and monetary assets (decrease, or
increase ( - ) ) * ..................................
Other5 ......................................................

8 Surplus,
9
10
11

Memo;

12 Treasury operating balance
13
14

(level, end of
period) ..................................................
Federal Reserve B a n k s ..........................
Tax and loan accounts .......................

1.Effective June 1978, earned income credit payments in excess of an individual’s
tax liability, formerly treated as income tax refunds, are classified as outlays re­
troactive to January 1976.
2.Half-year figures are calculated as a residual (total surplus/deficit less trust
fund surplus/deficit).
3.Includes Pension Benefit Guaranty Corporation; Postal Service Fund; Rural
Electrification and Telephone Revolving Fund; and Rural Telephone Bank.
4.1ncludes U.S. Treasury operating cash accounts; special drawing rights; gold
tranche drawing rights; loans to International Monetary Fund; and other cash and
monetary assets.

5.Includes accrued interest payable to the public; deposit funds; miscellaneous
liability (including checks outstanding) and asset accounts; seignorage; 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,” Treasury Bulletin, and the Budget of the United States Government,
Fiscal Year 1981.

NOTES TO TABLE 1.38
1.Holdings of stock of the Federal Home Loan Banks are included in “other
assets.”
2.Includes net undistributed income, which is accrued by most, but not all,
associations.
3.Excludes figures for loans in process, which are shown as a liability.
4.The NAMSB reports that, effective April 1979, balance sheet data are not
strictly comparable with previous months. Beginning April 1979, data are reported
on a net-of-valuation-reserves basis. Prior to that date, data were reported on a
gross-of-valuation-reserves basis.
5.Beginning April 1979, includes obligations of U.S. government agencies. Be­
fore that date, this item was included in “Corporate and other.”
6.Includes securities of foreign governments and international organizations and,
prior to April 1979, nonguaranteed issues of U.S. government agencies.
7.Excludes checking, club, and school accounts.
8.Commitments outstanding (including loans in process) of banks in New York
State as reported to the Savings Banks Association of the state of New York.
9.Direct and guaranteed obligations. Excludes federal agency issues not guar­
anteed, which are shown in the table under “Business” securities.




10.Issues of foreign governments and their subdivisions and bonds of the Inter­
national Bank for Reconstruction and Development.

Note. Savings and loan associations: Estimates by the FHLBB for all associa­
tions in the United States. Data are based on monthly reports of federally insured
associations and annual reports of other associations. Even when revised, data for
current and preceding year are subject to further revision.
Mutual savings banks: Estimates of National Association of Mutual Savings
Banks for all savings banks in the United States.
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 differ­
ences between market and book values are not made on each item separately but
are included, in total, in “other assets.”
Credit unions: Estimates by the National Credit Union Administration for a
group of federal and state-chartered credit unions that account for about 30 percent
of credit union assets. Figures are preliminary and revised annually to incorporate
recent benchmark data.

Federal Finance
1.40

A31

U.S. BUDGET RECEIPTS AND OUTLAYS
Millions of dollars
Calendar year
Source or type

Fiscal
year
1977

Fiscal
year
1978

Fiscal
year
1979

1979

1980

1980

HI

H2

HI

May

July

June

Receipts
1 All sources1 ...........................................

357,762

401,997

465,940

246,574

233,952

270,864

36,071

59,055

37,348

2 Individual income taxes, net ....................
3 Withheld ..................................................
4 Presidential Election Campaign Fund .
5 Nonwithheld ............................................
6 Refunds1 ..................................................
Corporation income taxes
7 Gross receipts ..........................................
8 Refunds ....................................................
9 Social insurance taxes and contributions,
n e t ..........................................................
10 Payroll employment taxes and
contributions2 ..................................
11 Self-employment taxes and
contributions3 ..................................
12 Unemployment insurance ......................
13 Other net receipts4 ..................................

157,626
144,820
37
42,062
29,293

180,988
165,215
39
47,804
32,070

217,841
195,295
36
56,215
33,705

111,603
98,683
32
44,116
31,228

115,488
105,764
3
12,355
2,634

119,988
110,394
34
49,707
40,147

9,275
18,104
7
2,101
10,937

27,791
19,791
4
9,380
1,385

19,773
19,513
4
1,580
1,324

60,057
5,164

65,380
5,428

71,448
5,771

42,427
2,889

29,169
3,306

43,434
4,064

1,866
635

16,251
447

2,673
537

108,683

123,410

141,591

75,609

71,031

86,597

20,787

10,793

10,253

88,196

99,626

115,041

59,298

60,562

69,077

15,376

9,702

8,697

4,014
11,312
5,162

4,267
13,850
5,668

5,034
15,387
6,130

4,616
8,623
3,072

417
6,899
3,149

5,535
8,690
3,294

376
4,495
540

395
177
519

-231
1,229
558

17,548
5,150
7,327
6,536

18,376
6,573
5,285
7,413

18,745
7,439
5,411
9,237

8,984
3,682
2,657
4,501

9,675
3,741
2,900
5,254

11,383
3,443
3,091
6,993

2,502
557
623
1,098

2,497
611
502
1,057

2,662
663
623
1,240

14
15
16
17

Excise ta x e s..................................................
Customs deposits ........................................
Estate and gift taxes ..................................
Miscellaneous receipts5 ..............................

Outlays
402,725

450,836

493,673

245,616

263,044

289,899

50,198

46,702

52,409

National d efen se..........................................
International affairs ....................................
General science, space, and technology ..
Energy ...........................................................
Natural resources and environment ........
Agriculture ..................................................

97,501
4,813
4,677
4,172
10,000
5,532

105,186
5,922
4,,742
5,861
10,925
7,731

117,681
6,091
5,041
6,856
12,091
6,238

57,643
3,538
2,461
4,417
5,672
3,020

62,002
4,617
3,299
3,281
7,350
1,709

69,132
4,602
3,150
3,126
6,668
3,193

11,543
648
516
624
1,130
478

11,885
325
527
657
1,159
623

11,666
1,445
503
619
1,316
-2 4 7

Commerce and housing c r ed it..................
Transportation ............................................
Community and regional development . . .
Education, training, employment, social
services ..................................................
29 Health ..........................................................
30 Income security1 ..........................................

-4 4
14,636
6,348

3,324
15,445
11,039

2,565
17,459
9,482

60
7,688
4,499

3,002
10,298
4,855

3,878
9,582
5,302

1,133
1,419
836

924
1,846
966

781
1,948
593

20,985
38,785
137,915

26,463
43,676
146,212

29,685
49,614
160,198

14,467
24,860
81,173

14,579
26,492
86,007

16,686
29,299
94,600

2,521
4,970
16,115

2,560
4,948
15,150

2,435
5,043
17,941

18,038
3,600
3,312
9,499
38,009
-15,053

18,974
3,802
3,737
9,601
43,966
-15,772

19,928
4,153
4,153
8,372
52,556
-18,489

10,127
2,096
2,291
3,890
26,934
-8,999

10,113
2,174
2,103
4,286
29,045
-12,164

9,758
2,291
2,422
3,940
32,658
-10,387

632
363
426
53
9,565
-5,905

1,715
400
413
1,830
4,602
-5 9 4

18 All types1 ...............................................
19
20
21
22
23
24
25
26
27
28

31
32
33
34
35
36

Veterans benefits and services..................
Administration of justice ..........................
General government ..................................
General-purpose fiscal assistance ............
Interest6 ........................................................
Undistributed offsetting receipts6-7 ..........

1. Effective June 1978, earned income credit payments in excess of an indi­
vidual’s tax liability, formerly treated as income tax refunds, are classified as
outlays retroactive to January 1976.
2. Old-age, disability, and hospital insurance, and railroad retirement accounts.
3. Old-age, disability, and hospital insurance.
4. Supplementary medical insurance premiums, federal employee retirement
contributions, and Civil Service retirement and disability fund.
5. Deposits of earnings by Federal Reserve Banks and other miscellaneous re­
ceipts.




2,795
397
382
238
5,299
-8 4 5 c

6. Effective September 1976, “Interest” and “Undistributed offsetting receipts”
reflect the accounting conversion for the interest on special issues for U.S. gov­
ernment accounts from an accrual basis to a cash basis.
7. Consists of interest received by trust funds, 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 1981.

A32

Domestic Financial Statistics □ September 1980

1.41 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION
Billions of dollars
1977

1978

1979

1980

Item
Dec. 31

June 30

Sept. 30

Dec. 31

Mar. 31

June 30

Sept. 30

Dec. 31.

Mar. 31

1 Federal debt outstanding.............................................

729.2

758.8

780.4

797.7

804.6

812.2

833.8

852.2

870.4

2 Public debt securities..................................................
3 Held by public .......................................................
4 Held by agencies ....................................................

718.9
564.1
154.8

749.0
587.9
161.1

771.5
603.6
168.0

789.2
619.2
170.0

796.8
630.5
166.3

804.9
626.4
178.5

826.5
638.8
187.7

845.1
658.0
187.1

863.5
677.1
186.3

5 Agency securities .......................................................
6 Held by public.......................................................
7 Held by agencies ....................................................

10.2
8.4
1.8

9.8
8.0
1.8

8.9
7.4
1.5

8.5
7.0
1.5

7.8
6.3
1.5

7.3
5.9
1.5

7.2
5.8
1.5

7.1
5.6
1.5

7.0
5.5
1.5

8 Debt subject to statutory lim it....................................

720.1

750.2

772.7

790.3

797.9

806.0

827.6

846.2

864.5

9 Public debt securities..................................................
10 Other debt1 ................................................................

718.3
1.7

748.4
1.8

770.9
1.8

788.6
1.7

796.2
1.7

804.3
1.7

825.9
1.7

844.5
1.7

862.8
1.7

11 Memo. Statutory debt lim it........................................

752.0

752.0

798.0

798.0

798.0

830.0

830.0

879.0

879.0

1. Includes guaranteed debt of government agencies, specified participation
certificates, notes to international lending organizations, ana District of Columbia
stadium bonds.

1.42 GROSS PUBLIC DEBT OF U.S. TREASURY

Note. Data from Treasury Bulletin (U.S. Treasury Department),

Types and Ownership

Billions of dollars, end of period
1980
Type and holder

1976

1977

1978

1979
Apr.

1 Total gross public d e b t...............................................

May

June

July

Aug.

653.5

718.9

789.2

845.1

870.0

877.9

877.6

881.7

893.4

2 Interest-bearing d e b t..................................................
3 Marketable ................................................................
4 Bills .......................................................................
5 Notes .....................................................................
6 Bonds .....................................................................
7 Nonmarketable1 .........................................................
8 Convertible bonds2 ................................................
9 State and local government series...........................
10 Foreign issues3 .......................................................
11
Government .......................................................
12
Public .................................................................
13 Savings bonds and notes.........................................
14 Government account series4 ....................................

652.5
363.2
164.0
216.7
40.6
231.2
2.3
4.5
22.3
22.3
0
72.3
129.7

715.2
459.9
161.1
251.8
47.0
255.3
2.2
13.9
22.2
22.2
0
77.0
139.8

782.4
487.5
161.7
265.8
60.0
294.8
2.2
24.3
29.6
28.0
1.6
80.9
157.5

844.0
530.7
172.6
283.4
74.7
313.2
2.2
24.6
28.8
23.6
5.3
79.9
177.5

868.9
564.9
195.3
291.8
77.7
304.0
—
23.7
26.3
19.8
6.4
74.2
179.7

873.5
567.6
195.4
291.5
80.6
306.0
—
23.6
25.9
19.5
6.4
73.6
182.6

876.3
566.7
184.7
301.5
80.6
309.5
—
23.6
25.5
19.0
6.4
73.4
186.8

880.4
576.1
191.5
302.6
82.0
304.3
—
23.5
25.8
19.3
6.4
73.3
181.5

888.7
583.4
199.3
300.3
83.9
305.3
—
23.6
25.8
19.4
6.4
73.2
182.4

15 Non-interest-bearing d eb t...........................................

1.1

3.7

6.8

1.2

1.1

4.4

1.3

1.3

4.7

16 U.S. government agencies and trust funds.................
17 Federal Reserve Banks...............................................
18 Private investors.........................................................
19 Commercial banks .....................................................
20 Mutual savings banks ................................................
21 Insurance companies ..................................................
22 Other companies .......................................................
23 State and local governments ......................................

147.1
97.0
409.5
103.8
5.9
12.7
27.7
41.6

154.8
102.5
461.3
101.4
5.9
15.5
22.7
54.8

170.0
109.6
508.6
94.7
5.0
14.9
20.5
70.1

187.1
117.5
540.5
97.0
4.2
14.4
23.9
68.2

188.2
118.8
563.0
99.2
4.1
14.2
25.7
73.9

190.7
124.0
562.9
100.0
4.1
13.7
25.0
74.8

Individuals
24 Savings bonds.........................................................
25 Other securities ......................................................
26 Foreign and international6 .........................................
27 Other miscellaneous investors7 ..................................

72.0
28.8
78.1
38.9

76.7
28.6
109.6
46.0

80.7
30.1
137.8
54.9

79.9
34.2
123.8
94.8

74.2
43.8
116.4
111.5

73.4
43.0
117.2
111.7

By type

By holder5

1. Includes (not shown separately): Securities issued to the Rural Electrification
Administration, depository bonds, retirement plan bonds, and individual retire­
ment bonds.
2. These nonmarketable bonds, also known as Investment Series B Bonds, may
be exchanged (or converted) at the owner’s option for IVi percent, 5-year mar­
ketable Treasury notes. Convertible bonds that have been so exchanged are re­
moved from this category and recorded in the notes category (line 5).
3. Nonmarketable dollar-denominated and foreign currency-denominated series
held by foreigners.
4. Held almost entirely by U.S. government agencies and trust funds.
5. Data for Federal Reserve Banks and U.S. government agencies and trust
funds are actual holdings; data for other groups are Treasury estimates.




n.a.

n.a.

n. a.

6. Consists of the investments of foreign balances and international accounts in
the United States. Beginning with July 1974, the figures exclude non-interestbearing notes issued to the International Monetary Fund.
7. Includes savings and loan associations, nonprofit institutions, corporate pen­
sion trust funds, dealers and brokers, certain government deposit accounts, and
government sponsored agencies.

Note. Gross public debt excludes guaranteed agency securities and, beginning
in July 1974, includes Federal Financing Bank security issues.
Data by type of security from Monthly Statement of the Public Debt of the United
States (U.S. Treasury Department); data by holder from Treasury Bulletin.

Federal Finance

A33

1.43 U.S. GOVERNMENT MARKETABLE SECURITIES Ownership, by maturity
Par value; millions of dollars, end of period
1980
Type of holder

1978

1980

1979

1978
May

1979
May

June

All maturities

June

1 to 5 years

1 AH holders...............................................................................

487,546

530,731

567,560

566,735

162,886

164,198

176,354

184,000

2 U.S. government agencies and trust funds...............................
3 Federal Reserve Banks............................................................

12,695
109,616

11,047
117,458

10,382
124,003

10,327
124,515

3,310
31,283

2,555
28,469

2,558
32,962

2,541
33,703

4 Private investors.......................................................................
5 Commercial banks ................................................................
6 Mutual savings banks ...........................................................
7 Insurance companies ............................................................
8 Nonfinancial corporations ....................................................
9 Savings and loan associations ...............................................
10 State and local governments ................................................
11 All others ............................................................................

365,235
68,890
3,499
11,635
8,272
3,835
18,815
250,288

402,226
69,076
3,204
11,496
8,433
3,209
15,735
291,072

433,175
68,366
3,083
11,029
7,972
3,198
18,088
321,438

431,893
69,535
3,023
11,075
6,948
3,088
17,997
320,226

128,293
38,390
1,918
4,664
3,635
2,255
3,997
73,433

133,173
38,346
1,668
4,518
2,844
1,763
3,487
80,546

140,835
38,490
1,523
4,217
2,795
1,859
4,186
87,765

147,756
42,026
1,474
4,137
2,565
1,812
4,189
91,553

Total, within 1 year

5 to 10 years

12 All holders...............................................................................

228,516

255,252

274,175

262,450

50,400

50,440

51,460

54,736

13 U.S. government agencies and trust funds...............................
14 Federal Reserve Banks............................................................

1,488
52,801

1,629
63,219

1,086
63,190

1,047
63,038

1,989
14,809

871
12,977

1,398
13,745

1,398
13,623

15 Private investors.......................................................................
16 Commercial banks ................................................................
17 Mutual savings banks ...........................................................
18 Insurance companies ............................................................
19 Nonfinancial corporations ....................................................
20 Savings and loan associations ..............................................
21 State and local governments ................................................
22 All others ............................................................................

174,227
20,608
817
1,838
4,048
1,414
8,194
137,309

190,403
20,171
836
2,016
4,933
1,301
5,607
155,539

209,899
20,636
868
1,714
4,032
1,204
6,640
174,806

198,365
17,584
833
1,659
3,205
1,123
6,412
167,550

33,601
7,490
496
2,899
369
89
1,588
20,671

36,592
8,086
459
2,815
308
69
1,540
23,314

36,317
6,745
458
2,956
348
68
1,749
23,993

39,715
7,354
478
3,006
345
96
1,874
26,561

Bills, within 1 year

10 to 20 years

23 All holders...............................................................................

161,747

172,644

195,387

184,684

19,800

27,588

29,454

29,432

24 U.S. government agencies and trust funds...............................
25 Federal Reserve Banks............................................................

2
42,397

0
45,337

1
49,195

1
49,905

3,876
2,088

4,520
3,272

3,608
3,577

3,608
3,596

26 Private investors.......................................................................
27 Commercial banks ................................................................
28 Mutual savings banks ...........................................................
29 Insurance companies ............................................................
30 Nonfinancial corporations ....................................................
31 Savings and loan associations ..............................................
32 State and local governments ................................................
33 All others ............................................................................

119,348
5,707
150
753
12
262
5,524
105,161

127,306
5,938
262
473
2,793
219
3,100
114,522

146,191
7,057
176
386
1,906
273
4,378
132,016

134,778
4,739
144
373
988
203
3,906
124,426

13,836
956
143
1,460
86
60
1,420
9,711

19,796
993
127
1,305
218
58
1,762
15,332

22,270
1,049
161
1,228
306
53
2,259
17,215

22,229
1,054
158
1,352
332
45
2,302
16,988

Other, within 1 year

Over 20 years

34 All holders...............................................................................

66,769

82,608

78,788

77,766

25,944

33,254

36,117

36,117

35 U.S. government agencies and trust funds...............................
36 Federal Reserve Banks............................................................

1,487
10,404

1,629
17,882

1,085
13,996

1,046
13,133

2,031
8,635

1,472
9,520

1,734
10,529

1,734
10,556

37 Private investors.......................................................................
38 Commercial banks ................................................................
39 Mutual savings banks ...........................................................
40 Insurance companies ............................................................
41 Nonfinancial corporations ....................................................
42 Savings and loan associations ..............................................
43 State and local governments ................................................
44 All others ............................................................................

54,879
14,901
667
1,084
2,256
1,152
2,670
32,149

63,097
14,233
574
1,543
2,140
1,081
2,508
41,017

63,707
13,579
692
1,328
2,126
931
2,262
42,790

63,587
12,844
690
1,285
2,217
920
2,506
291,765

15,278
1,446
126
774
135
17
3,616
9,164

22,262
1,470
113
842
130
19
3,339
16,340

23,855
1,445
73
914
492
15
3,254
17,660

23,828
1,518
80
921
500
14
3,220
17,574

Note. Direct public issues only. Based on Treasury Survey of Ownership from
Treasury Bulletin (U.S. Treasury Department).
Data complete for U.S. government agencies and trust funds and Federal Re­
serve Banks, but data for other groups include only holdings of those institutions
that report. The following figures show, for each category, the number and pro­
portion reporting as of June 30, 1980: (1) 5,362 commercial banks,




460 mutual savings banks, and 724 insurance companies, each about 80 percent;
(2) 415 nonfinancial corporations and 481 savings and loan associations, each about
50 percent; and (3) 492 state and local governments, about 40 percent.
“All others,” a residual, includes holdings of all those not reporting in the
Treasury Survey, including investor groups not listed separately.

A 34

D om estic Financial Statistics □ September 1980

1.44 U.S. GOVERNMENT SECURITIES DEALERS Transactions
Par value; averages of daily figures, in millions of dollars

Item

7
8
9
10

1980

1978
Apr.

May'

1980, week ending Wednesday
Apr. 30 May 7

May 14 May 21 May 28

June 4

10,838

10,285

13,183r

19,725

19,370

17,742

19,620

22,669

21,019

17,283

18,262

17,931

By maturity
B ills ..........................
Other within 1 year
1-5 years ................
5-10 years ..............
Over 10 y e a r s........

6,746
237
2,320
1,148
388

6,173
392
1,889
965
867

7,915
454
2,417

11,664
500
3,967
1,394
1,846

9,996
560
3,718
1,770
1,697

12,995
429
3,846
847
1,503

13.487
557
5,563
1,174
1,887

11,524
558
4,499
2,054
2,384

10,183
428
3,551
1,391
1,730

12,370
464
2,748
1,105
1,576

11,221

1,276

12,885
372
3,610
1.138
1,720

By type of customer
U.S. government securities
dealers ........................
U.S. government securities
brokers ........................
Commercial banks ............
All others1 ..........................

1,382

1,562

1,862

1,137

1,228

1,690

3,709
2,294
3,567

3,838
1,804
3,508

5,170
1,904
4,660

8,128
2,875
7,115

8,243
2,825
6,863

7,184
2,312
6,864

8,221
3,044
6,793

10,004
3,763
7,255

8,758
2,904
7,495

7,672
2,249
6,225

7,409
2,532
7,093

6,946
2,390
6,904

1,729

1,894

2,723

4,497

4,352

3,689

4,334

6,360

4,235

3,515

3,037

3,966

1 U.S. government securities
2
3
4
5
6

1977

11 Federal agency securities

1,121

1,438

1,268

1.
Includes, among others, all other dealers and brokers in commodities and
securities, foreign banking agencies, and the Federal Reserve System.

Note. Averages for transactions are based on number of trading days in the
period.

520
3,546
1,325
1,319

Transactions are market purchases and sales of U.S. government securities deal­
ers reporting to the Federal Reserve Bank of New York. The figures exclude
allotments of, and exchanges for, new U.S. government securities, redemptions
of called or matured securities, or purchases or sales of securities under repurchase,
reverse repurchase (resale), or similar contracts.

1.45 U.S. GOVERNMENT SECURITIES DEALERS Positions and Sources of Financing
Par value; averages of daily figures, in millions of dollars
1980
Item

1977

1978

1980 week ending Wednesday

1979
Apr.

May

June

Apr. 9

Apr. 16

Apr. 23

Apr. 30

May 7

May 14

Positions1
1 U.S. government securities .......

5,172

2,656

3,223

8,036

5,398'

5,156

8,002

8,765

7,575

8,504

5,891

5,890

2 B ills ................................................
3 Other within 1 year ....................
4 1-5 years ......................................
5 5-10 years ....................................
6 Over 10 years ..............................

4,772
99
60
92
149

2,452
260
-9 2
40
-4

3,813
-325
-455
160
30

7,870
-1,082
683
61
505

4,025'
-8 4 3
726
361
1,128

3,720
-731
916
504
747

7,769
-1,028
614
31
616

8,864
-1,051
318
87
546

7,487
-1,136
623
21
580

7,950
-1,114
1,098
.143
427

4,754
-8 7 6
1,140
65
808

3,948
-8 1 7
747
638
1,374

7 Federal agency securities..........

693

606

1,471

1,207

1,254

1,411

907

1,067

1,506

1,561

1,406

1,314

Financing2
8 All sources ...............................

9,877

10,204

16,003

19,829

19,358

2,676

17,801

21,376

21,149

20,835

18,748

18,452

Commercial banks
New York City ........................
Outside New York C ity ..........
Corporations3 ..............................
All o th ers......................................

1,313
1,987
2,358
4,158

599
2,174
2,379
5,052

1,396
2,868
3,373
4,104

574
4,215
4,387
10,653

851
3,266
4,651
10,590

105
496
628
1,447

588
3,622
3,793
9,798

1,021
4,417
5,112
10,827

515
4,672
4,272
11,690

447
4,368
4,755
11,266

686
3,793
4,635
9,634

1,204
3,017
4,517
9,714

9
10
11
12

1. 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 agree­
ments to repurchase. The maturities of some repurchase agreements are sufficiently
long, however, to suggest that the securities involved are not available for trading
purposes. Securities owned, and hence dealer positions, do not include securities
purchased under agreement to resell.
2. Total amounts outstanding of funds borrowed by nonbank dealer firms and
dealer departments of commercial banks against U.S. government and federal




agency securities (through both collateral loans and sales under agreements to
repurchase), plus internal funds used by bank dealer departments to finance po­
sitions in such securities. Borrowings against securities held under agreeement to
resell are excluded when the borrowing contract and the agreement to resell are
equal in amount and maturity, that is, a matched agreement.
3. All business corporations except commercial banks and insurance companies.

Note. Averages for positions are based on number of trading days in the period;
those for financing, on the number of calendar days in the period.

Federal Finance

A35

1.46 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt outstanding
Millions of dollars, end of period
1979
Agency

1976

1977

1980

1978
Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

1 Federal and federally sponsored agencies1 ......................

103,848

112,472

137,063

161,653

163,290

165,819

167,813

173,216

176,880

2 Federal agen cies..................................................................

22,419
1,113
8,574
575

22,760
983
8,671
581

23,488
968
8,711
588

24,224
748
8,812
545

24,715
738
9,191
537

24,883
729
9,176
539

25,013
719
9,144
546

25,583
709
9,627
550

25,776
688
9,615
537

4,120
2,998
4,935
104

3,743
2,431
6,015
336

3,141
2,364
7,460
356

3,004
1,837
8,825
453

2,979
1,837
8,997
436

2,979
1,837
9,182
441

2,979
1,837
9,347
441

2,979
1,837
9,440
441

2,937
1,837
9,695
467

81,429
16,811
1,690
30,565
17,127
10,494
4,330
410
2

89,712
18,345
1,686
31,890
19,118
11,174
4,434
2,548
515
2

113,575
27,563
2,262
41,080
20,360
11,469
4,843
5,081
915
2

137,429
33,296
2,621
47,278
16,006
2,676
584
33,547
1,420
1

138,575
33,330
2,771
48,486
16,006
2,676
584
33,216
1,505
1

140,936
33,122
2,769
49,031
15,106
2,144
584
36,584
1,595
1

142,800
33,102
2,764
50,139
15,106
2,144
584
37,240
1,720
1

147,633
35,309
2,644
51,614
15,106
2,144
584
38,446
1,785
1

151,104
36,352
2,643
52,456
13,940
2,144
584
41,039
1,945
1

20 Federal Financing Bank debt7-9 ........................................

28,711

38,580

51,298

66,281

67,383

68,294

69,268

71,885

74,009

Lending to federal and federally sponsored agencies
Export-Import Bank4 ........................................................
Postal Service7 ....................................................................
Student Loan Marketing Association8 ............................
Tennessee Valley A uthority..............................................
United States Railway Association7 ................................

5,208
2,748
410
3,110
104

5,834
2,181
515
4,190
336

6,898
2,114
915
5,635
356

7,953
1,587
1,420
7,100
453

8,353
1,587
1,505
7,272
436

8,353
1,587
1,595
7,457
441

8,353
1,587
1,720
7,622
441

8,849
1,587
1,785
7,715
441

8,849
1,587
1,945
7,970
467

Other Lending10
26 Farmers Home Administration ........................................
27 Rural Electrification Administration ..............................
28 Other .....................................................................................

10,750
1,415
4,966

16,095
2,647
6,782

23,825
4,604
6,951

31,950
6,272
9,546

32,050
6,484
9,696

32,145
6,701
10,015

32,565
6,874
10,106

33,410
7,039
11,059

34,755
7,155
11,281

3

4
5
6
7
8
9

Defense Department2 ....................................................
Export-Import Bank3-4 ..................................................
Federal Housing Administration5 ................................
Government National Mortgage Association
participation certificates6 ......................................
Postal Service7 ................................................................
Tennessee Valley Authority..........................................
United States Railway Association7 ............................

10 Federally sponsored agencies1 ..........................................
11 Federal Home Loan Banks ..........................................
12 Federal Home Loan Mortgage Corporation..............
13 Federal National Mortgage A ssociation......................
14 Federal Land Banks ......................................................
15 Federal Intermediate Credit Banks ............................
16 Banks for Cooperatives ................................................
17 Farm Credit Banks1 ....................................................
18 Student Loan Marketing Association8 ........................
19 Other .................................................................................

Memo:

21
22
23
24
25

1. In September 1977 the Farm Credit Banks issued their first consolidated
bonds, and in January 1979 they began issuing these bonds on a regular basis to
replace the financing activities of the Federal Land Banks, the Federal Interme­
diate Credit Banks, and the Banks for Cooperatives. Line 17 represents those
consolidated bonds outstanding, as well as any discount notes that have been
issued. Lines 1 and 10 reflect the addition of this item.
2. Consists of mortgages assumed by the Defense Department between 1957
and 1963 under family housing and homeowners assistance programs.
3. Includes participation certificates reclassified as debt beginning Oct. 1, 1976.
4. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter.
5. Consists of debentures issued in payment of Federal Housing Administration
insurance claims. Once issued, these securities may be sold privately on the se­
curities market.
6. Certificates of participation issued prior to fiscal 1969 by the Government
National Mortgage Association acting as trustee for the Farmers Home Admin­
istration; Department of Health, Education, and Welfare; Department




of Housing and Urban Development; Small Business Administration; and the
Veterans Administration.
7. Off-budget.
8. Unlike other federally sponsored agencies, the Student Loan Marketing As­
sociation may borrow from the Federal Financing Bank (FFB) since its obligations
are guaranteed by the Department of Health, Education, and Welfare.
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 par­
ticular 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.

A 36

D om estic Financial Statistics □ September 1980

1.47 NEW SECURITY ISSUES of State and Local Governments
Millions of dollars

1980

Type of issue or issuer,

1977

1 All issues, new and refunding1 ..............................................

1978

1979
Jan.

Feb.

Mar.

Apr.

May

JuneP

46,769

48,607

43,490

3,049

2,390

2,385

4,833

4,570

5,960

18,042
28,655

17,854
30,658

12,109
31,256

1,166
1,875

935
1,445

731
1,648

1,662
3,170

1,534
3,032

1,886
4,071

72

95

125

8

10

6

1

4

3

6 State ....................................................................................
7 Special district and statutory authority.................................
8 Municipalities, counties, townships, school districts..............

6,354
21,717
18,623

6,632
24,156
17,718

4,314
23,434
15,617

699
1,392
951

327
1,224
830

393
1,200
786

466
2,175
2,192

749
2,276
1,539

897
3,414
1,647

9 Issues for new capital, to tal..................................................

36,189

37,629

41,505

3,022

2,357

2,379

4,704

4,501

5,886

5,076
2,951
8,119
8,274
4,676
7,093

5,003
3,460
9,026
10,494
3,526
6,120

5,130
2,441
8,594
15,968
3,836
5,536

231
172
552
1,290
63
714

356
178
360
1,021
103
339

191
156
440
1,133
211
248

488
299
607
2,062
315
933

297
193
688
1,801
484
1,038

783
329
563
2,986
332
893

Type of issue

2 General obligation................................................................
3 Revenue ..............................................................................
4 Housing Assistance Administration2 ....................................
5 U.S. government loans.........................................................
Type of issuer

Use of proceeds

10 Education ............................................................................
11 Transportation .................................................................
12 Utilities and conservation...................................................
13 Social welfare .......................................................................
14 Industrial aid .......................................................................
15 Other purposes.....................................................................

Source. Public Securities Association.

1. Par amounts of long-term issues based on date of sale.
2. Only bonds sold pursuant to the 1949 Housing Act, which are secured by
contract requiring the Housing Assistance Administration to make annual contri­
butions to the local authority.

1.48 NEW SECURITY ISSUES of Corporations
Millions of dollars
Type of issue or issuer,
or use

1979
1977

1978

1980

1979
Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

1 All issues1 ....................................................................

53,792

47,230

51,464

3,831

3,801

6,210

4,452

4,353

5,646

8,966

2 Bonds ............................................................................

42,015

36,872

40,139

2,612

2,475

4,834

2,856

2,771

4,744

7,234

Type of offering
3 Public ............................................................................
4 Private placement ......................................................

24,072
17,943

19,815
17,057

25,814
14,325

1,583
1,029

1,500
975

2,450
2,384

1,426
1,430

1,985
786

3,828
916

6,810
424

Industry group
Manufacturing ............................................................
Commercial and miscellaneous ................................
Transportation ............................................................
Public utility ................................................................
Communication ..........................................................
Real estate and financial............................................

12,204
6,234
1,996
8,262
3,063
10,258

9,572
5,246
2,007
7,092
3,373
9,586

9,667
3,941
3,102
8,118
4,219
11,095

319
207
289
658
854
287

308
375
194
763
74
762

943
634
431
1,338
483
1,006

960
262
227
635
533
238

693
215
94
1,423
196
152

1,718
429
158
596
590
1,252

2,373
554
338
702
1,155
2,113

11 Stocks ............................................................................

11,777

10,358

11,325

1,219

1,326

1,376

1,596

1,582

902

1,732

Type
12 Preferred ......................................................................
13 Common ......................................................................

3,916
7,861

2,832
7,526

3,574
7,751

443
776

282
1,044

287
1,089

88
1,508

525
1,057

223
679

202
530

Industry group
Manufacturing ............................................................
Commercial and miscellaneous ................................
Transportation ............................................................
Public utility ................................................................
Communication ..........................................................
Real estate and financial............................................

1,189
1,834
456
5,865
1,379
1,049

1,241
1,816
263
5,140
264
1,631

1,679
2,623
255
5,171
303
1,293

158
286
2
607
2
165

224
430

333
313
59
535

380
426
58
627
39
65

598
404
36
408
27
109

81
374
9
319
53
67

215
512
27
615
25
338

5
6
7
8
9
10

14
15
16
17
18
19

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




365
1
306

135

1933, employee stock plans, investment companies other than closed-end, intra­
corporate transactions, and sales to foreigners,

Source. Securities and Exchange Commission.

Corporate Finance
1.49

OPEN-END INVESTMENT COMPANIES

A 37

Net Sales and Asset Position

Millions of dollars
1979
Item

1978

1980

1979
Dec.

Jan.

Feb.

Mar.

Apr.

May

June

July

Investment Companies1
1 Sales of own shares2 ..................................................
2 Redemptions of own shares3 ....................................
3 Net sales ......................................................................

6,645
7,231
-5 8 6

7,495
8,393
-8 9 8

748
743
5

957
776
181

773
882
-1 0 9

723
892
-1 6 9

1,010
762
248

1,175
647
528

1,772
775
997

1,496
863
633

4 Assets4 ...........................................................................

44,980
4,507
40,473

49,493
4,983
44,510

49,277
4,983
44,294

51,278
5,702
45,576

49,512
5,895
43,617

44,581
5,644
38,937

47,270
5,862
41,708

50,539
6,209
44,330

52,946
6,495
46,451

54,269
5,523
48,746

5
6

Cash position5 ..........................................................
Other .........................................................................

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 an­
other in the same group.
4.Market value at end of period, less current liabilities.

5.Also includes all U.S. government securities and other short-term debt se­
curities.

Note. Investment Company Institute data based on reports of members, which
comprise substantially all open-end investment companies registered with the Se­
curities and Exchange Commission. Data reflect newly formed companies after
their initial offering of securities.

1.50 CORPORATE PROFITS AND THEIR DISTRIBUTION

Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1978
Account

1977

1978

1979

1980

1979
Q4

Ql

Q2

03

Q4

Ql

Q7P

1 Profits before t a x ................................................

177.1

206.0

236.6

227.4

233.3

227.9

242.3

243.0

260.4

208.8

2 Profits tax liability......................................................
3 Profits after tax ..........................................................
4
Dividends .................................................................
Undistributed profits ..............................................
5
6 Capital consumption allowances ...............................
7 Net cash flow ...............................................................

72.6
104.5
42.1
62.4
109.3
171.7

84.5
121.5
47.2
74.4
119.8
194.1

92.5
144.1
52.7
91.4
131.0
222.3

95.1
132.3
49.7
82.6
123.0
205.6

91.3
142.0
51.5
90.5
125.4
215.9

88.7
139.3
52.3
86.9
130.4
217.3

94.0
148.3
52.8
95.5
132.8
228.3

96.1
146.9
54.4
92.5
135.2
227.7

102.4
158.0
56.7
101.3
137.4
238.7

79.5
129.3
58.6
70.7
139.3
210.0

Source. Survey of Current Business (U.S. Department of Commerce).




A 38
1.51

D om estic Financial Statistics □ September 1980
NONFINANCIAL CORPORATIONS

Current Assets and Liabilities

Billions of dollars, except for ratio
1978
Account

1975

1976

1979

1980

1977
Q3

Q4

Ql

02

Q3

04

Ql

1 Current assets.....................................................

759.0

826.3

900.9

992.6

1,028.0

1,079.1

1,106.7

1,165.3

1,197.7

1,233.2

2 Cash ..............................................................................
3 U.S. government securities ........................ .............
4 Notes and accounts receivable..................................
5 Inventories ..................................................................
6 Other ............................................................................

82.1
19.0
272.1
315.9
69.9

87.3
23.6
293.3
342.9
79.2

94.3
18.7
325.0
375.6
87.3

91.7
16.1
376.4
415.5
92.9

103.7
17.8
381.9
428.3
96.3

102.1
19.1
405.6
453.0
99.3

99.7
20.7
418.1
466.9
101.3

103.3
17.7
447.8
490.3
106.1

115.8
17.6
451.8
503.0
109.5

110.5
17.2
465.9
521.2
118.4

7 Current liabilities ................................................

451.6

492.7

546.8

626.0

661.9

701.3

720.4

770.0

801.7

831.4

8 Notes and accounts payable......................................
9 Other ............................................................................

264.2
187.4

282.0
210.6

313.7
233.1

356.2
269.7

375.1
286.8

393.4
307.9

409.2
311.2

441.6
328.3

460.5
341.2

473.3
358.1

10 Net working capital .............................................

307.4

333.6

354.1

366.6

366.1

377.8

386.3

395.3

396.0

401.8

11 Memo: Current ratio 1 ..............................................

1.681

1.677

1.648

1.586

1.553

1.539

1.536

1.513

1.494

1.483

1. Ratio of total current assets to total current liabilities.

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
Statistics.

Note: For a description of this series, see “Working Capital of Nonfinancial
Corporations” in the July 1978 Bulletin, pp. 533-37.

Source: Federal Trade Commission.

1.52 BUSINESS EXPENDITURES on New Plant and Equipment

Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1979
Industry

1978

1980

1979
Ql

Q2

Q3

Q4

Ql

Q2

Q32

Q42

1 All industries.......................................................

153.82

177.09

165.94

173.48

179.33

186.95

191.36

193.89

191.24

193.17

Manufacturing
2 Durable goods industries ..........................................
3 Nondurable goods industries ....................................

31.66
35.96

38.23
40.69

34.00
37.56

36.86
39.56

39.72
40.50

41.30
43.88

42.30
45.01

42.80
45.98

40.35
46.90

41.55
47.33

4.78

5.56

5.46

5.31

5.42

6.06

6.02

6.56

6.40

6.75

3.32
2.30
2.43

3.93
3.24
2.95

4.02
3.35
2.71

3.66
3.26
2.79

4.03
3.10
3.16

4.20
3.39
3.15

4.40
2.98
2.94

3.97
4.11
2.73

3.90
3.73
2.93

4.75
3.75
2.72

29.48
4.70
18.16
25.71

32.56
5.07
20.56
29.35

27.70
4.66
18.75
27.73

28.06
5.18
20.29
28.51

28.32
5.01
20.41
29.66

26.02
5.50
22.71
30.72

28.78
5.57
22.48
30.86

Nonmanufacturing
4 Mining ..........................................................................
Transportation
5 Railroad ....................................................................
6 Air ............................................................................
7 Other ........................................................................
Public utilities
8 E lectric......................................................................
9 Gas and o th e r ..........................................................
10 Communication ..........................................................
11 Commercial and other1 ..............................................

1. Includes trade, service, construction, finance, and insurance.
2. Anticipated by business.

Note: Estimates for corporate and noncorporate business, excluding agricul-




27.86
5.43
22.65
31.80 }

26.84
5.32
54.87 }

25.95
5.78
54.60

ture; real estate operators; medical, legal, educational, and cultural service; and
nonprofit organizations.

Source: Survey of Current Business (U.S. Dept, of Commerce).

Corporate Finance

A39

1.53 DOMESTIC FINANCE COMPANIES Assets and Liabilities
Billions of dollars, end of period
1980

1979

Account

1974

1975

1976

1977

1978
Q2

Q3

Q4

Ql

Q2

Assets
Accounts receivable, gross
1 Consumer ........................................................
2 Business ...........................................................
3 Total............................................................
4 Less: Reserves for unearned income and losses ...
5 Accounts receivable, n e t....................................
6 Cash and bank deposits ....................................
7 Securities .........................................................
8 All other .........................................................

36.1
37.2
73.3
9.0
64.2
3.0

9 Total assets .........................................................

62.3
68.1
130.4
18.7
111.7

65.7
70.3
136.0
20.0
116.0

67.7
70.6
138.4
20.4
118.0

70.2
70.3
140.4
21.4
119.0

25.8

24.9

23.7

26.1

135.8

137.4

140.9

141.7

145.1

6.5
34.5

7.3
41.0

7.8
39.2

8.5
43.3

9.7
40.8

10.1
40.7

8.1
43.6
12.6

8.8
46.0
14.4

9.1
47.5
15.4

8.2
46.7
14.2

7.4
48.9
15.7

7.9
50.5
16.0

38.6
44.7
83.4
10.5
72.9
2.6
1.1
12.6

44.0
55.2
99.2
12.7
86.5
2.6
.9
14.3

52.6
63.3
116.0
15.6
100.4
3.5
1.3
17.3

58.7
70.1
128.8
17.7
111.1

12.0

36.0
39.3
75.3
9.4
65.9
2.9
1.0
11.8

79.6

81.6

89.2

104.3

122.4

9.7
20.7

8.0
22.2

6.3
23.7

5.9
29.6

4.9
26.5
5.5

4.5
27.6
6.8

5.4
32.3
8.1

6.2
36.0
11.5

.4

24.61

Liabilities
10 Bank loans ......................................................
11 Commercial paper ............................................

Debt
12 Short-term, n.e.c.............................................
13 Long-term n.e.c..............................................
14 Other ............. ...........................................
15 Capital, surplus, and undivided profits...............

12.4

12.5

13.4

15.1

17.2

18.2

18.4

19.9

19.2

19.9

16 Total liabilities and capital..................................

79.6

81.6

89.2

104.3

122.4

135.8

137.4

140.9

141.7

145.1

1. Beginning Ql 1979, asset items on lines 6, 7, and 8 are combined.
Note. Components may not add to totals due to rounding.

1.54

DOMESTIC FINANCE COMPANIES

Business Credit

Millions of dollars, seasonally adjusted except as noted

Type

Accounts
receivable
outstanding
June 30,
19801

Changes in accounts
receivable

Extensions

Repayments

1980

1980

1980

Apr.

May

June

Apr.

May

June

Apr.

May

June

1 Total ............................................................

70,255

277

-507

-336

14,754

14,422

14,376

14,477

14,929

14,712

2 Retail automotive (commercial vehicles).......
3 Wholesale automotive ...................................
4 Retail paper on business, industrial and
farm equipment ....................................
5 Loans on commercial accounts receivable and
factored commercial accounts receivable .
6 All other business credit...............................

13,831
12,398

-364
39

-491
-136

-389
-10

844
4,502

699
3,846

782
4,316

1,208
4,463

1,190
3,982

1,171
4,326

20,079

403

-13

-105

1,304

1,267

1,201

901

1,280

7,292
16,655

-233
432

88
45

-235
403

6,269
1,835

6,814
1,796

6,083
1,994

6,502
1,403

6,766
1,751

1,306
6,318

1. Not seasonally adjusted.




1,591

A40

Domestic Financial Statistics □ September 1980

1.55 MORTGAGE MARKETS
Millions of dollars; exceptions noted.

1977
Feb.

Mar.

Apr.

May

July

Terms and yields in primary and secondary markets

Primary Markets

Conventional mortgages on new homes
Terms1
1 Purchase price (thousands of dollars)..........
3 Loan/price ratio (percent) ............................
4 Maturity (years) ..............................................
5 Fees and charges (percent of loan amount)2
Contract rate (percent per annum )..............

6

48.4
35.9
74.2
27.2
1.44
8.76

54.3
40.5
76.3
27.9
1.33

Yield (percent per annum)
I FHLBB series^ ................................................
HUD series4 ....................................................

8.99
8.99

9.01
8.95

8.82
8.17

8.68

8.99
9.11

8.73

2 Amount of loan (thousands of dollars)

8

62.6
45.9
75.3
28.0
1.39
9.30
9.54
9.68

79.8
56.6
72.5
28.8
1.79
11.60

88.0

77.7
55.1
72.0
27.4
1.98
12.25

83.1
59.4
73.6
28.3
2.04
12.64

61.3
72.4
28.8
2.17
13.26

11.93
14.10

12.62
16.05

13.03
15.55

n.a.
13.16

14.63
13.79

14.48
14.12

15.64
16.62

81.3
58.0
74.1
28.4

2.21

89.0
63.7
73.5
28.9
2.13

12.24

12.11

13.68
13.20

12.66
12.45

12.51
12.45

13.45
12.55

11.99
11.30

11.85
11.04

12.39
11.53

14.61
16.29

12.87
13.54

12.35
12.93

12.65
12.80

54,843

55,328

55,419

55,362

17,079

17,453

17,858

18,001

18,034

Secondary Markets
9
10

II
12

Yield (percent per annum)
FHA mortgages (HUD series)5 ....................
GNMA securities6 ..........................................
FNMA auctions7
Government-underwritten loans ..............
Conventional loans ....................................

8.04

9.77

10.01

Activity in secondary markets

Federal National Mortgage Association
Mortgage holdings (end of period)
13 Total .....................................................................
14 FHA-insured .....................................................
15 VA-guaranteed ..................................................
16 Conventional .....................................................

32,904
18,916
9,212
4,776

34,370
18,457
9,315
6,597

43,311
21,243
10,544
11,524

Mortgage transactions (during period)
17 Purchases..............................................................
18 Sales .....................................................................

3,606
86

4,780
67

12,303
5

1,087'’
0

1,063
0

1,021
0

589
0

206
0

100
0

Mortgage commitments8
19 Contracted (during period) ..................................
20 Outstanding (end of period) .................................

6,247
3,398

9,729
4,698

18,960
9,201

999
5,504

825
5,078

507
4,371

391
4,064

441
4,215

734
4,230

4,929.8
2,787.2

7.974.1
4,846.2

12,978
6,747.2

1,169.4
563.7

1,267.3
426.1

493.7
199.4

608.7
214.1

602.5
266.5

1,055.6
430.3

2,595.7
1,879.2

5,675.2
3.917.8

9,933.0
5,110.9

412.1
147.8

918.6
239.9

135.2
65.8

279.7
109.1

169.7
76.0

228.7
140.9

25 Total .....................................................................
26
FHA/VA ...........................................................
27
Conventional.....................................................

4,269
1,618
2,651

3,276
1,395
1,881

3,064
1,243
1,822

4,145
1,092
3,052

4,235
1,086
3,149

4,255
1,080
3,175

4,031
1,076
2,955

4,014
1,072
2,942

4,151
1,066
3,085

Mortgage transactions (during period)
28 Purchases ..............................................................
29 Sales .....................................................................

1,175
1,396

3,900
4.131

6,524
6,211

248
207

193
106

231
199

176
391

225
232

440
288

Mortgage commitments11
30 Contracted (during period) ..................................
31 Outstanding (end of period) .................................

1,477
333

5,546
1,063

7,451
1,410

197
726

186
700

189
643

491
932

577
1,246

708
1,386

53,063
25,146
10,885
16,853

53,990

n.a.
n.a.

n.a.
n.a.

n.a.
n.a.

n.a.
n.a.

n.a.
n.a.

Auction of 4-month commitments to buy

Government-underwritten loans
Offered9 ............................................................
Accepted ..........................................................
Conventional loans
23
Offered9 ............................................................
24
Accepted ...........................................................

21
22

Federal Home Loan Mortgage Corporation
Mortgage holdings (end of period)10

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) in order 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,
rounded to the nearest 5 basis points; 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 sec­
ondary market. Any gaps in data are due to periods of adjustment to changes in
maximum permissible contract rates.
6. Average net yields to investors on Government National Mortgage Associ­
ation guaranteed, m ortgage-backed, fully m odified pass-through




securities, assuming prepayment in 12 years on pools of 30-year FHA/VA mort­
gages carrying the prevailing ceiling rate. Monthly figures are unweighted averages
of Monday quotations for the month.
7. Average gross yields (before deduction of 38 basis points for mortgage
servicing) on accepted bids in Federal National Mortgage Association's auctions
of 4-month commitments to purchase home mortgages, assuming prepayment in
12 years for 30-year mortgages. No adjustments are made for FNMA commitment
fees or stock related requirements. Monthly figures are unweighted averages for
auctions conducted within the month.
8. Includes some multifamily and nonprofit hospital loan commitments in ad­
dition to 1- to 4-family loan commitments accepted in FNMA's free market auction
system, and through the FNMA-GNMA tandem plans.
9. Mortgage amounts offered by bidders are total bids received.
10. Includes participation as well as whole loans.
11. Includes conventional and government-underwritten loans.

Real Estate Debt

A41

1.56 MORTGAGE DEBT OUTSTANDING
Millions of dollars, end of period
1979
Type of holder, and type of property

1977

1980

1979

1978

Q2

Q3

Q4

Ql

Q2P

1 All holders.................................................................

1,023,505

1,172,754

1,333,550'

1,252,426

1,295,935

1,333,550

1,363,787'

1,386,249

7 1- to 4-family .......................................................................
3 Multifamily ..........................................................................
4 Commercial ..........................................................................
5

656,566
111,841
189,274
65,824

761,843
121,972
212,746
76,193

872,068'
130,713'
238,412'
92,357'

816,940
125,916
224,499
85,071

846,287
128,270
232,208
89,170

872,068
130,713
238,412
92,357

890,121'
132,795
243,839
97,032'

903,116
134,377
247,225
101,377

6 Major financial institutions ..............................................
7 Commercial banks1 ........................................................
1- to 4-family ..............................................................
8
9
Multifamily ..................................................................
Commercial ..................................................................
10
F arm ...............................................................................
11

745,011
178,979
105,115
9,215
56,898
7,751

848,095
213,963
126,966
10,912
67,056
9,029

939,487'
245,998'
145,975'
12,546'
77,096'
10,381'

894,385
229,564
136,223
11,708
71,945
9,688

920,231
239,627
142,195
12,221
75,099
10,112

939,487
245,998
145,975
12,546
77,096
10,381

951,898
251,198
149,061
12,811
78,725
10,601

958,803
253,098
150,188
12,908
79,321
10,681

12
13
14
15
16

Mutual savings banks ....................................................
1- to 4-family ...............................................................
Multifamily ..................................................................
Commercial ..................................................................
F a rm ...............................................................................

88,104
57,637
15,304
15,110
53

95,157
62,252
16,529
16,319
57

98,908'
64,706'
17,180'
16,963'
59

97,155
63,559
16,876
16,662
58

97,929
64,065
17,010
16,795
59

98,908
64,706
17,180
16,963
59

17
18
19
20

Savings and loan associations........................................
1- to 4-family ...............................................................
Multifamily .'...............................................................
Commercial ...................................................................

381,163
310,686
32,513
37,964

432,808
356,114
36,053
40,641

475,797
394,436
37,588
43,773

456,543
377,516
37,071
41,956

468,307
387,992
37,277
43,038

475,797
394,436
37,588
43,773

479,078
397,156
37,847
44,075

481,149
398,872
38,011
44,266

21
22
23
24
25

Life insurance com panies..............................................
1- to 4-family ..............................................................
Multifamily ...................................................................
Commercial ...................................................................
Farm ................................. ..........................................

96,765
14,727
18,807
54,388
8,843

106,167
14,436
19,000
62,232
10,499

118,784
16,193
19,274
71,137
12,180

111,123
14,489
19,102
66,055
11,477

114,368
14,884
19,107
68,513
11,864

118,784
16,193
19,274
71,137
12,180

122,471
16,850
19,590
73,618
12,413

125,455
17,796
19,284
75,693
12,682

26 Federal and related agencies............................................
Government National Mortgage Association ............
27
1- to 4-family ..............................................................
28
Multifamily ........................................................
29

70,006
3,660
1,548
2,112

81,853
3,509
877
2,632

97,293
3,852
763
3,089

90,095
3,425
800
2,625

93,143
3,382
780
2,602

97,293
3,852
763
3,089

104,133'
3,919
749
3,170

108,742
4,466
736
3,730

30
31
32
33
34

Farmers Home Administration ....................................
1- to 4-family ..............................................................
Multifamily ..................................................................
Commercial ...................................................................
F arm ...............................................................................

1,353
626
275
149
303

926
288
320
101
217

1,274
417
71
174
612

1,200
363
75
278
484

1,383
163
299
262
659

1,274
417
71
174
612

2,845'
1,139
408
409
889'

3,375
1,383
636
402
954

35
36
37

Federal Housing and Veterans Administration ........
1- to 4-family ..............................................................
Multifamily ...................................................................

5,212
1,627
3,585

5,419
1,641
3,778

5,764
1,863
3,901

5,597
1,744
3,853

5,672
1,795
3,877

5,764
1,863
3,901

5,833
1,908
3,925

5,894
1,953
3,941

38
39
40

Federal National Mortgage Association......................
1- to 4-family ..............................................................
Multifamily ..................................................................

34,369
28,504
5,865

43,311
37,579
5,732

51,091
45,488
5,603

48,206
42,543
5,663

49,173
43,534
5,639

51,091
45,488
5,603

53,990
48,394
5,596

55,419
49,837
5,582

41
42
43

Federal Land Banks ......................................................
1- to 4-family ...............................................................
F arm ...............................................................................

22,136
670
21,466

25,624
927
24,697

31,277
1,552
29,725

28,459
1,198
27,261

29,804
1,374
28,430

31,277
1,552
29,725

33,311
1,708
31,603

35,574
1,893
33,681

44

Federal Home Loan Mortgage Corporation..............
1- to 4-family ..............................................................
Multifamily ...................................................................

3,276
2,738
538

3,064
2,407
657

4,035
3,059
976

3,208
2,489
719

3,729
2,850
879

4,035
3,059
976

4,235
3,210
1,025

4,014
3,037
977

47 Mortgage pools or trusts2 ..................................................
Government National Mortgage Association ............
48
1- to 4-family ..............................................................
49
Multifamily ..................................................................
50

70,289
44,896
43,555
1,341

88,633
54,347
52,732
1,615

119,278
76,401
74,546
1,855

102,259
63,000
61,246
1,754

110,648
69,357
67,535
1,822

119,278
76,401
74,546
1,855

124,632'
80,843'
78,872'
1,971

129,647
84,282
82,208
2,074

51
52
53

Federal Home Loan Mortgage Corporation..............
1- to 4-family ..............................................................
Multifamily ...................................................................

6,610
5,621
989

11,892
9,657
2,235

15,180
12,149
3,031

13,708
11,096
2,612

14,421
11,568
2,853

15,180
12,149
3,031

15,454
12,359
3,095

16,120
12,886
3,234

54
55
56
57
58

Farmers Home Administration ....................................
1- to 4-family ..............................................................
Multifamily ..................................................................
Commercial ...................................................................
Farm ...............................................................................

18,783
11,397
759
2,945
3,682

22,394
13,400
1,116
3,560
4,318

27,697
14,884
2,163
4,328
6,322

25,551
14,329
1,764
3,833
5,625

26,870
14,972
1,763
4,054
6,081

27,697
14,884
2,163
4,328
6,322

28,335'
14,926
2,159
4,495
6,755'

29,245
15,224
2,159
4,763
7,099

59 Individual and others3 ........................................................
1- to 4-family ...................................................................
60
Multifamily .......................................................................
61
Commercial .......................................................................
62
63
F arm ...................................................................................

138,199
72,115
20,538
21,820
23,726

154,173
82,567
21,393
22,837
27,376

177,492'
96,037'
23,436'
24,941'
33,078'

165,687
89,345
22,094
23,770
30,478

171,913
92,580
22,921
24,447
31,965

177,492
96,037
23,436
24,941
33,078

183,124'
98,924'
23,975
25,513
34,712'

189,057
102,271
24,627
25,938
36,221

45
46

1.Includes loans held by nondeposit trust companies but not bank trust depart­
ments.
2.Outstanding principal balances of mortgages backing securities insured or
guaranteed by the agency indicated.
3.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 U.S. agencies for which amounts are small or separate
data are not readily available.




99,151
64,865
17,223
17,004
59

99,101
64,832
17,214
16,996
59

Note. Based on data from various institutional and governmental sources, with
some quarters estimated in part by the Federal Reserve in conjunction with the
Federal Home Loan Bank Board and the Department of Commerce. Separation
of nonfarm mortgage debt by type of property, if not reported directly, and in­
terpolations and extrapolations when required, are estimated mainly by the Federal
Reserve. Multifamily debt refers to loans on structures of five or more units.

A 42

D om estic Financial Statistics □ September 1980

1.57 CONSUMER INSTALLMENT CREDIT' Total Outstanding, and Net Change
Millions of dollars

1980

Holder, and type of credit

Apr.

May

July

301,754

Amounts outstanding (end of period)
1 Total ..............................
By major holder
2 Commercial banks
3 Finance com panies----4 Credit unions ..............
5 Retailers2 ......................
6 Savings and lo a n s ........

230,829

311,122

308,984

308,190

307,621

306,131

303,759

112,373
44,868
37,605
23,490
7,354
2,963
2,176

136,189
54,298
45,939
24,876
8,394
3,240
2,693

149,604
68,318
48,186
27,916
10,361
4,316
2,421

148,868
68,724
47,270
26,985
10,320
4,433
2,384

148,249
69,545
46,707
26,309
10,543
4,467
2,370

147,315
70,421
46,521
25,841
10,755
4,421
2,347

145,405
71,545
45,731
25,746
10,887
4,503
2,314

143,174
72,101
44,907
25,792
10,930
4,581
2,274

140,922
73,118
43,740
25,724
10,995
4,664
2,215

140,489
73,909
43,390
25,707
11,204
4,888
2,167

Indirect paper
Direct lo a n s ..........
Credit union s............
Finance companies ..

82,911
49,577
27,379
22,198
18,099
15,235

102,468
60,564
33,850
26,714
21,967
19,937

115,022
65,229
37,209
28,020
23,042
26,751

114,761
64,824
37,020
27,804
22,604
27,333

115,007
64,544
36,949
27,595
22,335
28,128

115,281
64,047
36,821
27,226
22,246
28,988

115,014
62,978
36,325
26,653
30,168

114,318
61,928
35,791
26,137
21,474
30,916

113,174
60,584
34,929
25.655
20,916
31,674

113,604
60,466
34,704
25,762
20,749
32,389

15 Revolving......................
16 Commercial banks ..
17 R etailers....................
18 Gasoline companies .

39,274
18,374
17,937
2,963

47,051
24,434
19,377
3,240

55,330
28,954
22.060
4,316

54,420
28,841
21,146
4,433

53,522
28,575
20,480
4,467

52,662
28,241
4,421

52,217
27,889
19,825
4,503

51,823
27,456
19,786
4,581

51,246
26,926
19.656
4,664

51,330
26,841
19,601
4,888

19 Mobile h o m e ................
20 Commercial banks ..
21 Finance companies ..
22 Savings and loans ...
23 Credit unions............

15,141
9,124
3,077
2,538
402

16,042
9,553
3,152
2,848
489

17,409
9,991
3,390
3,516
512

17,387
9,968
3,415
3,502
502

17,476
9,974
3,428
3,578
496

17,596
9,978
3,475
3,650
494

17,668
9,965
3,523
3,694
486

17,642
9,927
3,529
3,709
477

17,779
10,039
3,544
3,731
465

17,809

24
25
26
27
28
29
30

93,503
35,298
26,556
19,104
5,553
4,816
2,176

110,068
41,638
31,209
23,483
5,499
5,546
2,693

123,361
45,430
38,177
24,632
5,856
6,845
2,421

122,416
45,235
37,976
24,164
5,839
6,818
2,384

122,185
45,156
37,989
23,876
5,829
6,965
2,370

122,082
45,049
37,958
23,781
5,841
7,106
2,347

121,232
44,573
37,854
23,377
5,921
7,193
2,314

119,976
43,863
37,656
22,956
6,006
7,221
2,274

119,179
43,373
37,900
22,359
6,068
7,264
2,215

119,011
43,182
37,974
22,180
6,106
7,402
2,167

7 Gasoline companies ...

8 Mutual savings banks ..
By major type of credit

9 Automobile ..................
10 Commercial banks .
11

12
13
14

Other ............................
Commercial banks ..
Finance companies ..
Credit u nions............
R etailers....................
Savings and loans . . .
Mutual savings banks

20,000

21,868

10,000
3,546
3,802
461

Net change (during period)3
31 Total ..................................................

35,278

44,810

35,491

1,372

2,295

1,437

-1,985

-3,434

-3,463

-609

By major holder
Commercial banks ..................................
Finance com panies..................................
Credit unions ..........................................
Retailers2 ..................................................
Savings and lo a n s....................................
Gasoline companies ................................
Mutual savings b ank s..............................

18,645
5,948
6,436
2,654
1,111
132
352

23,813
9,430
8,334
1,386
1,041
276
530

13,414
14,020
2,247
3,040
1,967
1,076
-273

433
1,096
-3 2 4
120
7
50
-1 0

783
1,376
-3 7 3
53
306
166
-1 6

17
1,174
-215
243
204
48
-34

-2,237
984
-7 4 3
-6 5
83
14
-2 1

-2,495
105
-9 7 7
-5 8
75
-4 2
-4 2

-2,659
625
-1,362
-1 0 8
89
8
-5 6

-9 7 2
418
-3 8 1
140
196
36
-4 6

By major type of credit
39 Automobile ..............................................
40
Commercial banks ..............................
41
Indirect paper ..................................
42
Direct lo a n s......................................
43
Credit u nion s........................................
44 Finance com panies..............................

15,204
9,956
5,307
4,649
2,861
2,387

19,557
10,987
6,471
4,516
3,868
4,702

12,554
4,665
3,359
1,306
1,075
6,814

972
83
72
11
-1 3 4
1,023

881
22
48
-2 6
-177
1,036

395
-4 1 2
-8 6
-3 2 6
-8 2
889

-6 4 5
-1,335
-6 9 8
-6 3 7
-3 7 3
1,063

-1,343
-1,246
-6 2 6
-6 2 0
-4 8 2
385

-1,7 3 8
-1,5 1 9
-9 4 5
-5 7 4
-6 6 0
441

-9 3
-4 1 3
-3 6 5
-48
-1 7 5
495

45 R evolving..................................................
46 Commercial banks ..............................
47
R etailers................................................
48 Gasoline companies ............................

6,248
4,015
2,101
132

7,776
6,060
1,440
276

8,279
4,520
2,683
1,076

289
109
130
50

575
383
26
166

611
395
168
48

-3 8 8
-2 6 0
-1 4 2
14

-4 8 8
-3 0 8
-1 3 8
-4 2

-7 4 8
-5 6 2
-1 9 4
8

14
-131
109
36

49 Mobile home ............................................
50 Commercial banks ..............................
51
Finance companies ..............................
52
Savings and lo a n s ................................
53 Credit union s.................. ......................

565
387
-189
297
70

897
426
74
310
87

1,366
437
238
668
23

120
68
48
10
-6

198
57
32
115
-6

128
17
57
57
-3

36
-30
41
33
-8

-3 3
-5 4
5
23
-7

97
74
13
23
-1 3

26
-43
-6
78
-3

54 Other ........................................................
55
Commercial banks ..............................
56
Finance com panies..............................
57 Credit union s........................................
58
R etailers................................................
59
Savings and lo a n s................................
60
Mutual savings b anks..........................

13,261
4,287
3,750
3,505
553
814
352

16,580
6,340
4,654
4,379
-5 4
731
530

13,292
3,792
6,968
1,149
357
1,299
-2 7 3

-9
173
25
-1 8 4
-1 0
-3
-10

641
321
308
-1 9 0
27
191
-16

303
17
228
- 130
75
147
-34

-9 8 8
-6 1 2
-1 2 0
-3 6 2
77
50
-2 1

-1,570
-8 8 7
-285
-4 8 8
80
52
-4 2

-1,074
-6 5 2
171
-6 8 9
86
66
-5 6

-5 5 6
-3 8 5
-7 1
-2 0 3
31
118
-4 6

32
33
34
35
36
37
38

1. The Board's series cover most short- and intermediate-term credit extended
to individuals through regular business channels, usually to finance the purchase
of consumer goods and services or to refinance debts incurred for such purposes,
and scheduled to be repaid (or with the option of repayment) in two or more
installments.
2. Includes auto dealers and excludes 30-day charge credit held by travel and
entertainment companies.
3. Net change equals extensions minus liquidations (repayments, charge-offs,
and other credit); figures for all months are seasonally adjusted.




Note. Total consumer noninstallment credit outstanding—credit scheduled to
be repaid in a lump sum, including single-payment loans, charge accounts, and
service credit—amounted to $70.9 billion at the end of 1979, $64.7 billion at the
end of 1978, $58.6 billion at the end of 1977, and $55.4 billion at the end of 1976.

Consumer D ebt

A43

1.58 CONSUMER INSTALLMENT CREDIT Extensions and Liquidations
Millions of dollars; monthly data are seasonally adjusted.
1980
Holder, and type of credit

1977

1978

1979
Jan.

Feb.

Mar.

Apr.

May

June

July

Extensions

1 Total ...................................................................

254,071

298,351

322,558

26,702

27,076

26,620

22,548

21,239

20,698

24,497

By major holder
Commercial banks ......................................................
Finance companies......................................................
Credit unions ...............................................................
Retailers1 .......................................................................
Savings and lo a n s........................................................
Gasoline com panies....................................................
Mutual savings banks ................................................

117,896
41,989
34,028
39,133
4,485
14,617
1,923

142,720
50,505
40,023
41,619
5,050
16,125
2,309

149,599
61,518
36,778
46,092
7,333
19,607
1,631

12,126
5,540
2,527
4,010
485
1,889
125

12,004
5,639
2,495
4,042
775
2,004
117

11,315
5,700
2,501
4,358
665
1,987
94

9,338
4,841
1,865
3,870
555
1,978
101

8,812
4,304
1,615
3,880
536
2,011
81

8,574
4,324
1,302
3,881
576
1,971
70

10,548
4,888
2,267
4,032
711
1,971
80

By major type of credit
9 Automobile ...................................................................
10 Commercial banks ..................................................
11
Indirect paper ......................................................
12
Direct lo a n s...........................................................
13 Credit unions ..........................................................
14 Finance companies..................................................

75,641
46,363
25,149
21,214
16,616
12,662

88,987
53,028
29,336
23,692
19,486
16,473

91,847
50,596
28,183
22,413
18,301
22,950

7,780
4,026
2,154
1,872
1,348
2,406

7,659
3,936
2,096
1,840
1,338
2,385

7,240
3,394
1,978
1,416
1,306
2,540

5,725
2,398
1,433
965
962
2,365

5,192
2,354
1,353
1,001
838
2,000

4,770
2,160
1,092
1,068
708
1,902

6,609
3,239
1,645
1,594
1,178
2,192

15 Revolving .....................................................................
16 Commercial banks ..................................................
17 Retailers ...................................................................
18 Gasoline com panies................................................

86,756
38,256
33,883
14,617

104,587
51,531
36,931
16,125

120,728
60,406
40,715
19,607

10,475
5,030
3,556
1,889

10,458
4,920
3,534
2,004

11,038
5,200
3,851
1,987

10,293
4,929
3,386
1,978

10,089
4,745
3,333
2,011

9,635
4,342
3,322
1,971

10,522
4,974
3,577
1,971

19 Mobile h o m e .................................................................
20 Commercial banks ..................................................
21
Finance com panies..................................................
22 Savings and lo a n s....................................................
23 Credit unions ...........................................................

5,425
3,466
643
1,120
196

6,067
3,704
886
1,239
238

6,395
3,720
797
1,687
191

558
351
87
112
8

597
304
80
207
6

506
263
90
143
10

436
220
84
128
4

324
166
52
103
3

464
302
53
110
-1

421
195
49
169
8

24 Other .............................................................................
25 Commercial banks ..................................................
26 Finance companies..................................................
27 Credit unions ...........................................................
28 Retailers ...................................................................
29
Savings and lo a n s....................................................
30 Mutual savings banks ............................................

86,249
29,811
28,684
17,216
5,250
3,365
1,923

98,710
34,457
33,146
20,299
4,688
3,811
2,309

103,588
34,877
37,771
18,286
5,377
5,646
1,631

7,889
2,719
3,047
1,171
454
373
125

8,362
2,844
3,174
1,151
508
568
117

7,836
2,458
3,070
1,185
507
522
94

6,094
1,791
2,392
899
484
427
101

5,634
1,547
2,252
774
547
433
81

5,829
1,770
2,369
595
559
466
70

6,945
2,140
2,647
1,081
455
542
80

2
3
4
5
6
7
8

Liquidations
31 Total ...................................................................

218,793

253,541

287,067

25,330

24,781

25,183

24,533

24,673

24,161

25,106

By major holder
Commercial banks ......................................................
Finance companies......................................................
Credit unions ...............................................................
Retailers1 .......................................................................
Savings and lo a n s........................................................
Gasoline com panies.....................................................
Mutual savings banks ................................................

99,251
36,041
27,592
36,479
3,374
14,485
1,571

118,907
41,075
31,689
40,233
4,009
15,849
1,779

136,185
47,498
34,531
43,052
5,366
18,531
1,904

11,693
4,444
2,851
3,890
478
1,839
135

11,221
4,263
2,868
3,989
469
1,838
133

11,298
4,526
2,716
4,115
461
1,939
128

11,575
3,857
2,608
3,935
472
1,964
122

11,307
4,199
2,592
3,938
461
2,053
123

11,233
3,699
2,664
3,989
487
1,963
126

11,520
4,470
2,648
3,892
515
1,935
126

By major type of credit
39 Automobile ...................................................................
40 Commercial banks ..................................................
41
Indirect p a p e r.......................................................
42
Direct lo a n s ...........................................................
43
Credit unions ...........................................................
44 Finance com panies..................................................

60,437
36,407
19,842
16,565
13,755
10,275

69,430
42,041
22,865
19,176
15,618
11,771

79,293
45,931
24,824
21,107
17,226
16,136

6,808
3,943
2,082
1,861
1,482
1,383

6,778
3,914
2,048
1,866
1,515
1,349

6,845
3,806
2,064
1,742
1,388
1,651

6,370
3,733
2,131
1,602
1,335
1,302

6,535
3,600
1,979
1,621
1,320
1,615

6,508
3,679
2,037
1,642
1,368
1,461

6,702
3,652
2,010
1,642
1,353
1,697

45 Revolving .....................................................................
46 Commercial banks ..................................................
47 Retailers ...................................................................
48 Gasoline com panies................................................

80,508
34,241
31,782
14,485

96,811
45,471
35,491
15,849

112,449
55,886
38,032
18,531

10,186
4,921
3,426
1,839

9,883
4,537
3,508
1,838

10,427
4,805
3,683
1,939

10,681
5,189
3,528
1,964

10,577
5,053
3,471
2,053

10,383
4,904
3,516
1,963

10,508
5,105
3,468
1,935

49 Mobile h o m e .................................................................
50 Commercial banks ..................................................
51
Finance com panies..................................................
52
Savings and lo a n s .....................................................
53 Credit unions ...........................................................

4,860
3,079
832
823
126

5,170
3,278
812
929
151

5,029
3,283
559
1,019
168

438
283
39
102
14

399
247
48
92
12

378
246
33
86
13

400
250
43
95
12

357
220
47
80
10

367
228
40
87
12

395
238
55
91
11

54 Other .............................................................................
55
Commercial banks ..................................................
56 Finance com panies..................................................
57 Credit unions ...........................................................
58 Retailers ...................................................................
59 Savings and lo a n s ....................................................
60 Mutual savings banks ............................................

72,988
25,524
24,934
13,711
4,697
2,551
1,571

82,130
28,117
28,492
15,920
4,742
3,080
1,779

90,296
31,085
30,803
17,137
5,020
4,347
1,904

7,898
2,546
3,022
1,355
464
376
135

7,721
2,523
2,866
1,341
481
377
133

7,533
2,441
2,842
1,315
432
375
128

7,082
2,403
2,512
1,261
407
377
122

7,204
2,434
2,537
1,262
467
381
123

6,903
2,422
2,198
1,284
473
400
126

7,501
2,525
2,718
1,284
424
424
126

32
33
34
35
36
37
38

1.
Includes auto dealers and excludes 30-day charge credit held by travel and
entertainment companies.




A 44
1.59

D om estic Financial Statistics □ September 1980
FUNDS RAISED IN U.S. CREDIT MARKETS

Billions of dollars; quarterly data are at seasonally adjusted annual rates.
1977
Transaction category, sector

1974

1975

1976

1977

1978

1978

1979

1980

1979
H2

HI

H2

HI

H2

HI

Nonfinancial sectors

191.3

210.8

271.9

338.5

400.3

394.9

378.9

187.4

200.7

261.1

335.4

384.5

416.1

380.5

408.2

398.2

390.6

311.8

373.8

387.1

409.3

377.7

402.3

303.6

3
4
5
6
7
8
9
10
11
12
13
14

By sector and instrument
U.S. government ........................................................
Treasury securities..................................................
Agency issues and m ortgages................................
All other nonfinancial sectors ..................................
Corporate equities ..................................................
Debt instruments ....................................................
Private domestic nonfinancial sectors..................
Corporate equities ..............................................
Debt instruments ................................................
Debt capital instruments................................
State and local obligations ........................
Corporate b o n d s ..........................................

11.8
12.0
-.2
179.5
3.8
175.6
164.1
4.1
160.0
98.0
16.5
19.7

85.4
85.8
-.4
125.4
10.1
115.3
112.1
9.9
102.1
98.4
16.1
27.2

69.0
69.1
- .1
202.9
10.8
192.0
182.0
10.5
171.5
123.5
15.7
22.8

56.8
57.6
-.9
281.8
3.1
278.6
267.9
2.7
265.1
175.6
23.7
21.0

53.7
55.1
- 1 .4
346.6
2.1
344.5
314.4
2.6
311.8
196.6
28.3
20.1

37.4
38.8
- 1 .4
357.6
4.3
353.2
336.4
3.5
333.0
199.9
18.9
21.2

67.4
68.6
-1 .2
311.5
5.1
306.4
294.2
4.9
289.3
192.5
25.0
25.4

61.4
62.3
-.9
323.1
- 2 .6
325.7
302.5
- 1 .8
304.3
188.0
27.8
20.6

46.0
47.9
- 1 .9
370.2
6.8
363.4
326.3
7.0
319.2
205.1
28.7
19.6

28.6
30.9
- 2 .3
351.9
2.8
349.1
338.6
2.8
335.8
198.8
16.0
22.4

46.1
46.6
- .5
362.1
5.9
356.2
333.0
4.1
328.9
201.1
21.8
19.9

63.2
63.8
- .6
248.6
8.2
240.4
223.9
6.1
217.9
167.0
19.0
32.9

15
16
17
18
19
20
21
22
23

Home ........................................................
Multifamily residential ..........................
Commercial ..............................................
Farm ..........................................................
Other debt instruments..................................
Consumer credit ..........................................
Bank loans n.e.c............................................
Open market p a p e r....................................
Other ............................................................

34.8
6.9
15.1
5.0
62.0
9.9
31.7
6.6
13.7

39.5
*
11.0
4.6
3.8
9.7
-1 2 .3
-2 .6
9.0

63.7
1.8
13.4
6.1
48.0
25.6
4.0
4.0
14.4

96.4
7.4
18.4
8.8
89.5
40.6
27.0
2.9
19.0

104.5
10.2
23.3
10.2
115.2
50.6
37.3
5.2
22.2

109.1
8.9
25.7
16.2
133.0
44.2
50.6
10.9
27.3

103.1
8.4
21.9
8.7
96.7
44.5
26.7
2.4
23.2

99.8
9.3
21.2
9.3
116.3
50.1
43.1
5.3
17.8

109.2
11.2
25.4
11.1
114.1
51.0
31.4
5.1
26.5

109.8
8.1
26.0
16.6
137.0
48.3
48.2
12.0
28.4

108.5
9.7
25.4
15.9
127.8
39.0
52.9
9.7
26.2

72.7
7.9
20.5
14.1
50.9
-9 .2
9.8
30.0
20.2

24
25
26
27
28
29

By borrowing sector ..........................................
State and local governments..........................
Households ......................................................
Farm ............................................................ ..
Nonfarm noncorporate ..................................
Corporate ........................................................

164.1
15.5
51.2
8.0
7.7
81.7

112.1
13.7
49.5
8.8
2.0
38.1

182.0
15.2
90.7
10.9
5.4
59.8

267.9
20.4
139.9
14.7
12.5
80.3

314.4
23.6
162.6
18.1
15.4
94.7

336.4
15.5
165.0
25.8
15.8
114.3

294.2
25.0
150.4
13.8
12.5
92.4

302.5
21.0
156.1
15.3
16.3
93.7

326.3
26.1
169.1
20.8
14.5
95.8

338.6
13.0
168.1
23.5
15.3
118.7

333.0
18.0
161.0
28.1
16.0
109.8

223.9
16.6
78.9
21.6
11.8
95.0

30
31
32
33
34
35
36

F oreign......................................................................
Corporate equities ..............................................
Debt instruments ................................................
Bonds ................................................................
Bank loans n.e.c................................................
Open market paper ........................................
U.S. government loans ..................................

15.4
-.2
15.7
2.1
4.7
7.3
1.6

13.3
.2
13.2
6.2
3.9
.3
2.8

20.8
.3
20.5
8.6
6.8
1.9
3.3

13.9
.4
13.5
5.1
3.1
2.4
3.0

32.3
- .5
32.8
4.0
18.3
6.6
3.9

21.1
.9
20.3
3.9
2.3
11.2
3.0

17.3
.2
17.1
5.7
6.5
2.2
2.9

20.6
- .8
21.4
5.0
9.3
3.6
3.6

43.9
-.2
44.1
3.0
27.3
9.6
4.2

13.3
*
13.3
3.0
1.0
6.1
3.1

29.1
1.7
27.3
4.7
3.5
16.3
2.8

24.7
2.2
22.5
2.2
-1 .6
16.2
5.7

1 Total funds raised................................................
2 Excluding equities ......................................................

Financial sectors
37 Total funds raised................................................

39.2

12.7

24.1

54.0

81.4

87.4

60.3

80.7

82.1

87.0

87.8

47.7

By instrument
U.S. government related ..........................................
Sponsored credit agency securities ......................
Mortgage pool securities........................................
Loans worn U.S. government ..............................
Private financial sectors ............................................
Corporate equities ..................................................
Debt instruments ....................................................
Corporate b o n d s..................................................
Mortgages ............................................................
Bank loans n.e.c....................................................
Open market paper and repurchase

23.1
16.6
5.8
.7
16.2
.3
15.9
2.1
- 1 .3
4.6
3.8

13.5
2.3
10.3
.9
- .8
.6
-1 .4
2.9
2.3
- 3 .7
1.1

18.6
3.3
15.7
- .4
5.5
1.0
4.4
5.8
2.1
-3 .7
2.2

26.3
7.0
20.5
- 1 .2
27.7
.9
26.9
10.1
3.1
-.3
9.6

41.4
23.1
18.3
0
40.0
1.7
38.3
7.5
.9
2.8
14.6

52.4
24.3
28.1
0
35.0
1.2
33.8
7.8
-1 .2
- .4
18.4

29.9
6.8
23.1
0
30.4
.8
29.6
10.1
3.0
1.2
9.5

38.5
21.9
16.6
0
42.2
2.2
40.0
8.5
2.1
2.5
13.5

44.3
24.3
20.1
0
37.8
1.1
36.7
6.4
- .3
3.1
15.7

45.8
21.5
24.2
0
41.2
2.8
38.4
8.7
- .5
-.7
23.0

59.0
27.0
32.0
0
28.8
- .4
29.2
7.0
-1 .9
- .2
13.8

41.0
25.2
15.7
0
6.7
2.6
4.1
10.3
- 6 .7
*
- 3 .5

49

Loans from Federal Home Loan B an k s..........

6.7

-4 .0

-2 .0

4.3

12.5

9.2

5.8

13.2

11.8

7.8

10.5

4.1

50
51
52
53
54
55
56
57
58
59

By sector
Sponsored credit agencies..........................................
Mortgage p o o ls ............................................................
Private financial sectors ............................................
Commercial banks ..................................................
Bank affiliates..........................................................
Savings and loan associations................................
Other insurance companies ..................................
Finance com panies..................................................
REITs ......................................................................
Open-end investment com panies..........................

17.3
5.8
16.2
1.2
3.5
4.8
.9
6.0
.6
- .7

3.2
10.3
-.8
1.2
.3
-2 .3
1.0
.5
- 1 .4
- .1

2.6
15.7
5.5
2.3
-.8
.1
.9
6.4
-2 .4
-1 .0

5.8
20.5
27.7
1.1
1.3
9.9
.9
17.6
-2 .2
- .9

23.1
18.3
40.0
1.3
6.7
14.3
1.1
18.6
- 1 .0
- 1 .0

24.3
28.1
35.0
1.6
4.5
11.4
1.0
18.9
-.4
-2 .1

6.8
23.1

21.9
16.6
42.2
1.5
5.8
16.4
1.0
18.9
-1 .0
- .5

24.3
20.1
37.8
1.1
7.6
12.2
1.1
18.2
-1 .0
- 1 .5

21.5
24.2
41.2
1.3
6.2
9.9
1.0
23.5
- .6
- .3

27.0
32.0
28.8
1.8
2.9
12.9
.9
14.3
- .1
- 3 .9

25.2
15.7
6.7
1.9
4.5
- 2 .9
.8
3.3
-.5
-.3

38
39
40
41
42
43
44
45
46
47
48

11.5
18*5
—2.0
—1.3

All sectors
60 Total funds raised, by instrument........................

230.5

223.5

296.0

392.5

481.7

482.3

439.2

465.2

498.3

467.4

496.0

359.5

61 Investment company shares .............................. ..
62 Other corporate eq u ities............................................
63 Debt instruments .........................................................
64
U.S. government securities ..................................
65
State and local obligations....................................
66
Corporate and foreign b o n d s................................
67
Mortgages .................................................................
Consumer cr ed it.......................................................
68
69
Bank loans n.e.c........................................................
70
Open market paper and R P s ................................
71
Other loans ...............................................................

- .7
4.8
226.4
34.3
16.5
23.9
60.5
9.9
41.0
17.7
22.7

- .1
10.8
212.8
98.2
16.1
36.4
57.2
9.7
-1 2 .2
-1 .2
8.7

- 1 .0
12.9
284.1
88.1
15.7
37.2
87.1
25.6
7.0
8.1
15.3

- .9
4.9
388.5
84.3
23.7
36.1
134.0
40.6
29.8
15.0
25.2

- 1 .0
4.7
478.0
95.2
28.3
31.6
149.0
50.6
58.4
26.4
38.6

-2 .1
7.6
476.8
89.9
18.9
32.9
158.6
44.2
52.5
40.5
39.5

-1 .3
7.2
433.3
97.4
25.0
41.1
145.1
44.5
34.4
14.0
31.8

- .5
.1
465.5
100.0
27.8
34.2
141.6
50.1
54.9
22.4
34.6

-1 .5
9.4
490.4
90.4
28.7
29.1
156.4
51.0
61.8
30.4
42.5

- .3
5.8
461.9
74.5
16.0
34.1
159.8
48.3
48.6
41.1
39.4

- 3 .9
9.3
490.5
105.2
21.8
31.5
157.4
39.0
56.2
39.8
39.5

-.3
11.1
348.7
104.3
19.0
45.4
108.3
- 9 .2
8.3
42.6
30.0




1.60

Flow o f Funds

A45

1978

1980

DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS

Billions of dollars, except as noted; quarterly data are at seasonally adjusted annual rates
1977
Transaction category, or sector

1 Total funds advanced in credit markets to nonfinancial

1974

1975

1976

1977

1978

1979

1979
H2

HI

H2

HI

H2

HI

sectors ................................................................

187.4

200.7

261.1

355.4

398.2

390.6

373.8

387.1

409.3

377.7

402.3

303.6

By public agencies and foreign
Total net advances...............................................................
U.S. government securities ..........................................
Residential mortgages ....................................................
FHLB advances to savings and lo a n s ..........................
Other loans and securities ............................................

53.7
11.9
14.7
6.7
20.5

44.6
22.5
16.2
- 4 .0
9.8

54.3
26.8
12.8
- 2 .0
16.6

85.1
40.2
20.4
4.3
20.2

109.7
43.9
26.5
12.5
26.9

80.1
2.0
36.1
9.2
32.8

104.2
53.3
22.0
5.8
23.1

102.8
43.7
22.2
13.2
23.7

116.6
44.0
30.7
11.8
30.1

47.6
-22.1
32.6
7.8
29.2

112.5
26.2
39.6
10.5
36.3

105.1
27.4
34.0
4.1
39.7

Sponsored credit agencies ................................................
Monetary authorities..........................................................
Foreign .................................................................................
Agency borrowing not included in line 1 ........................

9.8
26.5
6.2
11.2
23.1

15.1
14.8
8.5
6.1
13.5

8.9
20.3
9.8
15.2
18.6

11.8
26.8
7.1
39.4
26.3

20.4
44.6
7.0
37.7
41.4

22.5
57.5
7.7
- 7 .7
52.4

17.8
32.0
4.0
50.4
29.9

19.4
39.4
13.4
30.6
38.5

21.4
49.8
.5
44.9
44.3

23.8
49.9
.9
-2 7 .0
45.8

21.3
65.2
14.5
11.7
59.0

34.5
40.5
13.6
16.6
41.0

Private domestic funds advanced
12 Total net advances...............................................................
13 U.S. government securities ..........................................
14 State and local obligations............................................
15 Corporate and foreign b o n d s........................................
16 Residential mortgages ....................................................
17 Other mortgages and loans ..........................................
18 Less: Federal Home Loan Bank advances................

156.8
22.4
16.5
20.9
26.9
76.8
6.7

169.7
75.7
16.1
32.8
23.2
17.9
- 4 .0

225.4
61.3
15.7
30.5
52.7
63.3
- 2 .0

276.5
44.1
23.7
22.5
83.3
107.3
4.3

330.0
51.3
28.3
22.5
88.2
152.2
12.5

362.9
87.9
18.9
25.6
81.8
157.9
9.2

299.6
44.1
25.0
27.0
89.4
119.7
5.8

322.8
56.3
27.8
24.1
86.7
141.1
13.2

337.1
46.4
28.7
20.9
89.6
163.3
11.8

375.9
96.6
16.0
26.9
85.1
159.1
7.8

348.8
79.1
21.8
24.3
78.5
155.6
10.5

239.4
76.9
19.0
30.9
46.4
70.3
4.1

Private financial intermediation
19 Credit market funds advanced by private financial
institutions .....................................................................
20 Commercial banking ......................................................
21
Savings institutions ........................................................
22
Insurance and pension funds ........................................
23
Other finance ...................................................................

125.5
66.6
24.2
29.8
4.8

122.5
29.4
53.5
40.6
-1 .0

190.3
59.6
70.8
49.9
10.0

255.9
87.6
82.0
67.9
18.4

296.9
128.7
75.9
73.5
18.7

291.4
121.1
56.3
70.4
43.6

265.0
90.7
82.6
70.6
21.2

301.7
132.5
75.8
76.9
16.6

292.0
125.0
75.9
70.2
20.8

308.2
124.6
57.7
75.4
50.6

274.5
117.6
54.9
65.5
36.6

213.3
44.5
32.7
78.9
57.2

24 Sources of fu n d s...................................................................
25
Private domestic deposits ..............................................
26 Credit market borrowing ..............................................
27
Other sources ...................................................................
28
Foreign funds ...............................................................
29
Treasury balances .......................................................
30
Insurance and pension reserves................................
31
Other, net .....................................................................

125.5
67.5
15.9
42.1
10.3
-5 .1
26.2
10.6

122.5
92.0
- 1 .4
32.0
- 8 .7
- 1 .7
29.7
12.7

190.3
124.6
4.4
61.3
- 4 .6
-.1
34.5
31.4

255.9
141.2
26.9
87.8
1.2
4.3
49.4
32.9

296.9
142.5
38.3
116.0
6.3
6.8
62.7
40.3

291.4
136.7
33.8
120.9
26.3
.4
49.0
45.2

265.0
143.8
29.6
91.7
.8
8.5
53.4
29.0

301.7
138.3
40.0
123.5
5.7
1.9
66.2
49.6

292.0
146.7
36.7
108.6
6.9
11.6
59.2
31.0

308.2
121.7
38.4
148.1
49.4
5.1
53.9
39.6

274.5
151.6
29.2
93.7
3.2
- 4 .3
44.0
50.8

213.3
132.6
4.1
76.6
-1 0 .7
- 1 .9
53.2
36.0

Private domestic nonfinancial investors
32 Direct lending in credit m arkets......................................
33
U.S. government securities ..........................................
34
State and local obligations............................................
35
Corporate and foreign b o n d s ........................................
36
Commercial paper ..........................................................
37
Other .................................................................................

47.2
18.9
9.3
5.1
5.8
8.0

45.8
24.1
8.4
8.4
- 1 .3
6.2

39.5
16.1
3.8
5.8
1.9
11.8

47.5
23.0
2.6
-3 .3
9.5
15.7

71.4
33.2
4.5
- 1 .4
16.3
18.7

105.4
57.8
- 2 .5
12.2
10.7
27.1

64.1
34.2
5.7
-6 .5
10.8
19.9

61.1
32.1
7.0
- 3 .7
8.2
17.5

81.7
34.4
2.0
1.0
24.4
20.0

106.1
64.1
-2 .3
7.1
12.5
24.7

103.5
51.5
- 2 .7
17.2
9.0
28.5

30.3
12.3
- 3 .0
7.9
- 8 .6
21.7

38 Deposits and currency.........................................................
39
Security RPs .....................................................................
40
Money market fund sh ares............................................
41
Time and savings accounts............................................
42
Large at commercial banks ......................................
43
Other at commercial banks ......................................
44
At savings institutions................................................
45
Money ...............................................................................
46
Demand deposits ........................................................
47
Currency .......................................................................

73.8
-2 .2
2.4
65.4
32.4
11.3
21.8
8.2
1.9
6.3

98.1
.2
1.3
84.0
-1 5 .8
40.3
59.4
12.6
6.4
6.2

131.9
2.3
*
113.5
-1 3 .2
57.6
69.1
16.1
8.8
7.3

149.5
2.2
.2
121.0
23.0
29.0
69.0
26.1
17.8
8.3

151.8
7.5
6.9
115.2
45.9
8.2
61.1
22.2
12.9
9.3

144.7
6.6
34.4
84.7
.4
39.3
45.1
18.9
7.9

154.5
.2
.9
126.7
49.6
11.4
65.7
26.8
16.1
10.8

148.7
9.8
6.1
110.7
33.9
18.4
58.5
22.1
11.6
10.5

154.8
5.1
7.7
119.8
57.9
- 1 .9
63.8
22.3
14.2
8.1

131.1
18.5
30.2
71.4
-2 5 .3
41.3
55.4
10.9
1.6
9.3

158.1
- 5 .3
38.6
97.9
26.0
37.3
34.7
26.8
20.3
6.5

141.3
- 8 .3
61.9
89.7
-5.1
52.9
41.8
-2 .1
- 10.8
8.7

2
3
4
5
6

Total advanced, by sector

7 U.S. government .................................................................
8
9
10
11

48 Total of credit market instruments, deposits and

11.0

currency ..............................................................

121.0

143.9

171.4

197.0

223.2

250.0

218.6

209.8

236.6

237.1

261.6

171.5

Public support rate (in percent) ..................................
Private financial intermediation (in percent) ............
Total foreign funds .........................................................

28.7
80.0
21.5

22.2
72.2
- 2 .6

20.8
84.4
10.6

25.4
92.5
40.5

27.5
90.0
44.0

20.5
80.3
18.6

27.9
88.5
51.2

26.5
93.5
36.3

28.5
86.6
51.8

12.6
82.0
22.4

28.0
78.7
14.9

34.6
89.1
5.9

Memo: Corporate equities not included above
52 Total net issues...........................................................
53
Mutual fund shares ........................................................
54
Other eq u ities...................................................................

4.1

10.7

11.9

4.0

3.7

5.5

5.9

- .7
4.8

- .1
10.8

- 1 .0
12.9

- .4

7.9

5.5

- .9
4.9

- 1 .0
4.7

-2 .1
7.6

5.4

10.8

- 1 .3
7.2

- .5
.1

- 1 .5
9.4

- .3
5.8

- 3 .9
9.3

11.1

55 Acquisitions by financial institutions ..............................
56 Other net purchases ...........................................................

5.8
-1 .7

9.6
1.1

12.3
- .4

7.4
-3 .4

7.6
- 3 .8

15.7
-1 0 .2

8.1
- 2 .2

.4
-.8

14.7
- 6 .8

12.5
- 7 .0

18.9
- 13.5

18.4
- 7 .6

49
50
51

Notes by line number.
1.
2.
6.
11.
12.
17.
25.
26.
28.
29.

Line 2 of p. A-44.
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. Included below in lines
3, 13, 33.
Line 1 less line 2 plus line 11. Also line 19 less line 26 plus line 32. Also sum
of lines 27, 32, 39, 40, 41, and 46.
Includes farm and commercial mortgages.
Sum of lines 39, 40, 41, and 46.
Excludes equity issues and investment company shares. Includes line 18.
Foreign deposits at commercial banks, bank borrowings from foreign branches,
and liabilities of foreign banking agencies to foreign affiliates.
Demand deposits at commercial banks.




- .3

30. Excludes net investment of these reserves in corporate equities.
31. Mainly retained earnings and net miscellaneous liabilities.
32. Line 12 less line 19 plus line 26.
33-37. Lines 13-17 less amounts acquired by private finance. Line 37 includes
mortgages.
47. Mainly an offset to line 9.
48. Lines 32 plus 38, or line 12 less line 27 plus 45.
49. Line 2/line 1.
50. Line 19/line 12.
51. Sum of lines 10 and 28.
52. 54. Includes issues by financial institutions.
Note. Full statements for sectors and transaction types quarterly, and annually
for flows and for 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.

A 46
2.10

D om estic Nonfinancial Statistics □ September 1980
NONFINANCIAL BUSINESS ACTIVITY

Selected Measures

1967 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted.
1980
1977

Measure

1 Industrial production i ...............................................

1979

1978

Jan.

Feb.

Mar.'

Apr.

May

June

July

Aug.'’

138.2

146.1

152.5'

152.7'

152.6'

152.1

148.3'

144.0'

141.4

139.8

140.5

137.9
135.9
145.3
123.0
145.1
138.6

144.8
142.2
149.1
132.8
154.1
148.3

150.0'
147.2'
150.8'
142.2'
160.5'
156.4'

149.9'
147.0
147.9'
145.8'
160.8
157.0'

150.1'
147.7'
148.4'
146.6'
159.2'
156.5'

150.0
147.7
148.6
146.6
158.3
155.3

146.6'
145.4'
145.3'
145.6'
150.8'
151.0'

143.7'
143.1
142.4
144.0'
146.2'
144.3'

142.5
142.1
142.2
142.1
143.6
139.8

141.8
141.7
141.6
141.8
142.4
136.5

142.3
141.7
141.7
141.6
144.4
137.8

8 Manufacturing ............................................................

138.4

146.8

153.6'

153.4

153.0'

152.1

147.9

143.4'

140.3

138.2

138.9

Capacity utilization (percent)1-2
9 Manufacturing .........................................................
10 Industrial materials industries..................................

81.9
82.7

84.4
85.6

85.7
87.4'

83.9'
86.1'

83.5'
85.6'

82.8
84.7

80.3'
82.1'

77.6'
78.3'

75.7
75.7

74.4
73.7

74.5
74.2

Market groupings

2 Products, total ............................................................
3 Final, total ..............................................................

Consumer goods ..................................................
5
Equipment ...........................................................
6 Intermediate ............................................................
7 Materials...................................................................

4

Industry groupings

11 Construction contracts (1972 = 100)3 ........................

155.0

123.0c

125.0

160.5

174.3

183.0

190.0

171.0

145.0

148.0

n.a.

12 Nonagricultural employment, total4 .............................
13 Goods-producing, to tal.............................................
14
Manufacturing, total ..........................................
15
Manufacturing, production-worker.......................
16 Service-producing .................................................
17 Personal income, total5 ............................................
18 Wages and salary disbursements .............................
19
Manufacturing ...................................................
20 Disposable personal income ........................................

125.3
104.5
101.2
98.8
136.7
244.4
230.2
198.3
194.8

131.4
109.8
105.3
102.8
143.2
274.1
258.1
222.4
217.7

136.0
114.0
107.9
104.9
148.1
307.1
287.2
246.8
242.5

138.3
114.6'
107.8
104.2
151.3
326.6
302.5
256.7

138.6
114.2'
107.8
103.9
151.9
328.1
305.1
259.2
259.4

138.5
113.6'
107.7
103.8
152.2'
330.4
307.4
260.8

138.2
112.1
106.1
101.7
152.6
330.6
306.2
257.8

137.5
110.5
104.3
99.1
152.3
331.6
306.2
254.4
262.0'

136.8'
109.1'
102.9'
97.4'
152.1'
331.6
306.4
254.4

136.6'
107.9'
101.9'
96.1'
152.3'
333.4
307.0
252.8

136.9
108.4
102.3
96.8
152.5
338.0
306.6
251.5

21 Retail sales6 ................................................................

229.8

253.8

281.6'

303.6'

298.0

292.4

286.6

285.0

290.4

299.5

303.9

Prices7
Consumer ................................................................
Producer finished goods...........................................

181.5
180.6

195.4
194.6

217.4
216.1

233.2

236.4
235.7

239.8
238.5'

242.5
240.5'

244.9
241.0

247.6
242.6

247.8
246.6

249.0

22
23

n.a.

5. Based on data in Survey o f Current Business (U.S. Department of Commerce).
Series for disposable income is quarterly.
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.

1. The industrial production and capacity utilization series have been revised
back to January 1979.
2. Ratios of indexes of production to indexes of capacity. Based on data from
Federal Reserve, McGraw-Hill Economics Department, and Department of Com­
merce.
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.
Monthly data for lines 12 throuth 16 reflect March 1979 benchmarks; only sea­
sonally adjusted data are presently available.

2.11

232.4

n.a.

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.

OUTPUT, CAPACITY, AND CAPACITY UTILIZATION!

Seasonally adjusted
1979'

1980'

1979'

1980'

1980'

1979'

Series
Q3

Q4

Ql

Q2

Output (167 = 100)

Q3

Q4

Ql

Q2

Capacity (percent of 1967 output)

Q3

Q4

Ql

Q2

Utilization rate (percent)

1 Manufacturing .............................................
2 Primary processing..............................................
3 Advanced processing..........................................

153.7

153.4

152.8

143.9

180.1

181.7

183.3

184.8

85.3

84.4

83.4

77.9

163.9
148.3

162.5
148.5

160.5
148.8

145.0
143.3

185.6
177.3

187.1
178.9

188.5
180.5

190.0
182.0

88.3
83.7

86.9
83.0

85.1
82.5

76.3
78.7

4 Materials .....................................................

156.9

156.5

156.3

145.0

179.8

181.2

182.8

184.3

87.2

86.3

85.5

78.7

5 Durable goods ....................................................
6 Metal m aterials................................................
7 Nondurable goods ..............................................
8 Textile, paper, and chemical ........................
9
Textile ..........................................................
10
Paper ............................................................
11
Chemical ......................................................
12 Energy ..................................................................

158.6
126.3
176.8
185.0
122.7
146.8
227.7
128.2

156.3
119.6
179.2
187.9
123.8
148.9
231.8
129.0

155.0
117.1
179.3
187.5
120.6
146.1
233.6
130.8

140.6
100.6
165.8
171.8
116.4
141.8
208.3
130.2

184.3
140.3
195.6
203.7
137.9
* 151.9
253.6
149.2

185.7
140.6
197.6
205.8
138.4
153.3
256.8
150.3

187.2
140.7
199.8
208.3
138.8
154.7
260.4
151.1

188.6
140.8
202.0
211.0
139.2
156.0
264.6
151.8

86.0
90.0
90.4
90.8
89.0
96.7
89.8
85.9

84.1
85.1
90.6
91.2
89.4
97.1
90.2
85.9

82.8
83.2
89.7
90.0
86.9
94.5
89.7
86.6

74.5
71.4
82.1
81.4
83.7
90.8
78.7
85.7

1. The capacity utilization series has been revised back to January 1979.




Labor Market

A 47

2.12 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
Thousands of persons; monthly data are seasonally adjusted. Exceptions noted.
1980
Category

1977

1978

1979
Feb.

Mar.

Apr.

May

June

July'

Aug.

H ousehold S urvey D ata

1 Noninstitutional population1 ......................

158,559

161,058

163,620

165,298

165,506

165,693

165,886

166,105

166,391

166,578

2 Labor force (including Armed Forces)1 ..
3 Civilian labor force ................................
Employment
4
Nonagricultural industries2 ................
5
Agriculture ..........................................
Unemployment
Number ................................................
7
Rate (percent of civilian labor force)
8 Not in labor fo r c e ........................................

99,534
97,401

102,537
100,420

104,996
102,908

106,346
104,260

106,184
104,094

106,511
104,419

107,230
105,142

106,634
104,542

107,302
105,203

107,139
105,025

87,302
3,244

91,031
3,342

93,648
3,297

94,626
3,326

94,298
3,358

93,912
3,242

93,609
3,379

93,346
3,191

93,739
3,257

93,826
3,180

6,855
7.0
59,025

6,047

5,963
5.8
58,623

6,307

6,438

58,521

58,951

59,322

6.2

7,265
7.0
59,182

8,154
7.8
58,657

8,006
7.7
59,471

8,207
7.8
59,091

8,019
7.6
59,439

82,423

86,446

89,497

91,186

91,144

90,951

90,468

90,047'

89,865

90,066

19,682
813
3,851
4,713
18,516
4,467
15,303
15,079

20.476
851
4,271
4,927
19,499
4,727
16,220
15.476

20,979
958
4,642
5,154
20,140
4,964
17,047
15,613

20,957
1,007
4,659
5,198
20,637
5,101
17,540
16,087

20,938
1,009
4,529
5,202
20,610
5,115
17,580
16,161

20,642

20,286
1,023
4,436
5,167
20,487
5,137
17,659
16,273

20,014'
1,029'
4,379'
5,134
20,459'
5,150
17,652'
16,230'

19,812

19,903
1,017
4,355
5,121
20,555
5,171
17,773
16,171

6

6.0

6.0

E stablishment Survey D ata

9 Nonagricultural payroll employment3 . . . .
10
11
12
13
14
15
16
17

Manufacturing..............................................
Mining ...........................................................
Contract construction ................................
Transportation and public utilities ..........
Trade ............................................................
F inance...........................................................
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 La­
bor).
2. Includes self-employed, unpaid family, and domestic service workers.




1,012

4,467
5,178
20,531
5,119
17,618
16,384

1,011

4,319
5,110
20,487
5,166
17,748
16,212

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 1979
benchmark and only seasonally adjusted data are available at this time. Based on
data from Employment and Earnings (U.S. Department of Labor).

A48

Domestic Nonfinancial Statistics □ September 1980

2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value'
Monthly data are seasonally adjusted.

Grouping

1967
pro­
por­
tion

1979

1979
age

Aug.

Oct.

1980

Nov.

Dec.

Feb.

Jan.

Mar.

Apr.

May

June

JulyP

A ug/

Index (1967 = 100)
M ajor M arket

1 Total in d ex ....................................................

100.00

152.5

152.1

152.7

152.3

152.5

152.7

152.6

152.1

148.3

144.0

141.4 139.8

140.5

2 Products .........................................................
3 Final products ..........................................
4
Consumer g o o d s ..................................
5
Equipment .............................................
6 Intermediate products ............................
7 Materials .......................................................

60.71
47.82
27.68
20.14
12.89
39.29

150.0
147.2
150.8
142.2
160.5
156.4

149.1
145.8
148.7
141.9
161.3
156.6

150.1
147.3
150.0
143.6
160.6
156.6

149.8
147.1
149.1
144.2
160.2
156.2

149.8
147.2
148.6
145.2
159.6
156.6

149.1
147.0
147.9
145.8
160.8
157.0

150.1
147.7
148.4
146.6
159.2
156.5

150.0
147.7
148.6
146.6
158.3
155.3

146.6
145.4
145.3
145.6
150.8
151.0

143.7
143.1
142.4
144.0
146.2
144.3

142.5
142.1
142.2
142.1
143.6
139.8

141.8
141.7
141.6
141.8
142.4
136.5

142.3
141.7
141.7
141.6
144.4
137.8

Consumer goods
8 Durable consumer goods ..........................
9
Automotive products..............................
10
Autos and utility veh icles..................
11
Autos .................................................
12
Auto parts and allied g o o d s ..............

7.89
2.83
2.03
1.90
80

155.8
167.7
154.3
136.7
201.5

148.0
147.0
125.1
118.5
202.7

153.1
159.2
142.4
129.0
202.1

149.6
150.6
131.0
118.3
200.3

146.7
141.8
121.4
110.2
193.6

142.3
131.3
108.7
98.0
188.5

144.5
142.1
124.6
116.8
186.7

144.1
141.0
122.0
114.9
189.1

136.3
126.3
102.3
97.1
187.2

128.8
118.5
92.6
88.4
184.0

128.2
121.6
97.1
95.7
183.7

127.8
128.2
106.1
105.0
184.2

126.6
118.1
92.0
90.1
184.4

13
14
15
16
17

Home goods .............................................
Appliances, A/C, and T V ...............
Appliances and TV .....................
Carpeting and furniture......................
Miscellaneous home g o o d s ................

5.06
1.40
1.33
1.07
2.59

149.2
127.4
129.3
173.0
151.1

148.6
123.3
126.1
173.4
152.1

149.7
128.0
130.2
173.1
151.7

149.0
129.8
132.4
171.6
150.0

149.4
133.1
135.5
170.8
149.4

148.5
128.9
130.0
170.9
149.8

145.8
122.3
124.4
168.2
149.4

145.8
122.1
125.0
169.1
149.0

142.0
114.8
117.5
165.8
146.8

134.6
102.8
106.0
154.2
143.8

132.0
105.6
108.5
146.7
140.2

127.6
103.1
104.3
136.1
137.3

131.3
117.1

18 Nondurable consumer goods ....................
19 Clothing .....................................................
20 Consumer staples ....................................
21
Consumer foods and tob acco ............
22
Nonfood staples ..................................
23
Consumer chemical products........
24
Consumer paper products..............
25
Consumer energy products............
26
Residential u tilities......................

19.79
4.29
15.50
8.33
7.17
2.63
1.92
2.62
1.45

148.8
131.9
153.5
145.0
163.4
205.5
120.8
152.2
163.8

149.0
130.8
154.0
145.4
164.0
208.8
121.2
150.6
161.8

148.8
130.4
153.9
145.9
163.1
206.4
121.7
150.1
162.2

149.0
132.3
153.6
144.8
163.8
207.9
119.3
152.2
166.5

149.3
131.3
154.3
145.8
164.3
207.8
121.0
152.4
165.0

150.1
130.2
155.6
146.9
165.8
210.5
124.1
151.5
161.9

150.0
130.7
155.4
146.5
165.6
211.8
122.5
150.9
162.5

150.3
131.8
155.5
147.3
165.0
208.9
121.6
152.7
169.6

148.8
128.7
154.5
146.2
164.0
206.9
120.4
152.8
172.5

147.7
127.9
153.2
146.1
161.5
203.0
120.2
150.1
169.8

147.7
127.7
153.3
146.0
161.7
201.6
120.1
152.1

147.1

147.8

153.2
145.5
162.1
201.4
120.2
153.5

153.8

Equipment
27 Business ........................................................
28
Industrial ..................................................
29
Building and m ining............................
30
Manufacturing......................................
31
Power ....................................................

12.63
6.77
1.44
3.85
1.47

171.3
152.2
206.3
130.3
156.3

171.6
151.7
210.6
131.1
147.7

172.3
151.8
203.2
130.8
156.3

172.6
153.5
205.1
132.5
157.6

174.1
153.2
205.0
132.1
157.8

174.9
157.2
222.1
132.6
157.9

176.0
159.2
231.6
133.1
156.4

176.1
159.3
235.6
133.1
153.2

174.2
159.3
239.5
131.9
152.3

171.9
157.8
242.2
129.5
149.1

169.0
154.6
240.5
125.6
146.1

168.1
153.6
242.7
123.9
143.9

167.3
153.4
243.5
124.1
141.5

Commercial transit, farm ......................
Commercial ..........................................
Transit ..................................................
Farm ......................................................

5.86
3.26
1.93
67

193.4
228.1
151.6
144.9

194.6
231.4
148.5
148.3

196.0
234.5
154.6
128.0

194.7
232.5
150.1
139.5

198.1
237.2
151.9
141.0

195.2
238.2
142.8
137.1

195.5
238.7
145.4
129.9

195.5
240.4
142.5
129.7

191.5
235.6
143.0
116.4

188.2
232.0
136.3
124.6

185.6
226.8
138.2
121.6

184.8
225.0
139.0
121.0

183.5
224.0
137.2

36 Defense and s p a c e ......................................

7.51

93.4

91.9

95.4

96.4

96.7

97.0

97.2

97.1

97.6

97.2

96.9

97.8

98.4

Intermediate products
37 Construction supplies..................................
38 Business supplies ........................................
39 Commercial energy products................

6.42
6.47
1.14

158.0
163.1
172.0

158.7
163.9
170.9

157.9
163.3
172.4

157.4
163.0
172.7

155.7
163.5
173.8

156.4
165.1
172.4

153.8
164.5
171.7

152.3
164.3
174.1

139.4
162.0
174.8

133.0
159.4
172.0

128.5
158.6
169.9

127.2
157.5

130.3

Materials
40 Durable goods materials............................
41
Durable consumer parts ........................
42 Equipment p a rts......................................
43
Duraole materials n.e.c............................
44
Basic metal materials..........................

20.35
4.58
5.44
10.34
5.57

157.8
137.1
189.9
150.1
124.1

157.7
129.7
191.5
152.3
127.1

157.2
131.5
193.2
149.5
121.3

155.8
126.1
195.1
148.3
119.9

155.8
125.1
196.7
147.8
118.1

156.0
120.8
199.8
148.5
118.8

154.8
119.9
198.9
147.0
116.4

154.2
120.3
199.2
145.5
116.6

148.2
110.6
195.8
139.8
109.3

139.8
100.1
190.8
130.5
100.0

133.8
96.0
182.5
124.9
95.9

129.0
94.1
179.2
118.1
84.9

131.1
99.7
179.0
119.8

45 Nondurable goods m aterials......................
46 Textile, paper, and chemical materials .
47
Textile m aterials..................................
48
Paper m aterials....................................
49
Chemical materials..............................
50 Containers, nondurable..........................
51
Nondurable materials n.e.c.....................

10.47
7.62
1.85
1.62
4.15
1.70
1.14

175.9
183.7
121.0
143.5
227.4
167.4
136.8

177.1
185.4
121.6
146.2
229.2
166.4
137.5

178.8
187.6
124.4
148.1
231.2
169.1
134.6

178.5
187.0
123.2
148.5
230.5
168.1
137.6

180.2
189.2
123.8
150.1
233.6
168.2
138.8

181.0
189.3
120.1
148.2
236.3
172.7
137.5

179.9
188.1
121.1
146.0
234.5
170.6
138.7

177.0
185.2
120.7
144.2
230.1
167.1
137.4

173.2
180.7
117.7
141.2
224.3
166.8
133.0

165.2
171.5
117.6
141.7
207.3
155.8
136.4

159.0
163.2
114.0
142.4
193.3
155.0
136.9

155.6
158.7
110.5
137.5
188.6
155.4
133.5

156.4
159.8

52 Energy materials ........................................
Primary energy ........................................
54 Converted fuei m aterials........................

8.48
4.65
3.82

128.9
113.5
147.7

128.7
114.6
145.9

128.1
113.6
145.7

129.4
114.0
148.2

129.4
113.7
148.5

130.0
114.4
149.0

131.5
113.7
153.1

130.9
115.6
149.6

130.1
116.4
146.9

129.6
116.2
145.8

130.8
117.7
146.6

131.0
117.1
147.9

130.9

Supplementary groups
55 Home goods and clothing..........................
56 Energy, t o t a l................................................
57
Products ....................................................
58 Materials ..................................................

9.35
12.23
3.76
8.48

141.3
137.9
158.2
128.9

140.4
137.3
156.7
128.7

140.8
136.9
156.8
128.1

141.3
138.3
158.4
129.4

141.1
138.4
158.9
129.4

140.1
138.6
157.8
130.0

138.9
139.4
157.2
131.5

139.4
139.6
159.1
130.9

135.9
139.1
159.5
130.1

131.5
137 9
156.7
129.6

130.0
139.0
157.5
130.8

126.4
139.6
158.9
131.0

128.9
139.1

32
33
34
35

53

For notes see opposite page.




137.9

162.7

130.9

Output

A49

2.13 Continued
Grouping

SIC
code

1967
pro­
por­
tion

1980

1979

1979
Avg.
Aug.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

June

JulyP

Aug.*

Index (1967 = 100)
Major Industry
1 Mining and utilities ....................
2 Mining ......................................
3 U tilities......................................
4
Electric ..................................
5 Manufacturing..............................
6 Nondurable ..............................
7 Durable ....................................

12.05
6.36
5.69
3.88
87.95
35.97
51.98

144.7
125.5
166.0
185.8
153.6
164.0
146.4

144.7
126.8
164.6
183.3
152.9
165.2
144.4

145.7
127.8
165.7
184.5
153.7
164.8
146.0

147.5
129.9
167.2
186.6
153.3
165.0
145.2

148.2
131.4
166.9
186.0
153.2
165.3
144.8

148.2
133.5
164.8
183.4
153.4
166.0
144.7

149.0
132.9
167.1
185.7
153.0
165.9
144.1

151.4
133.0
172.0
192.4
152.1
164.7
143.4

150.1
133.1
169.1
187.9
147.9
161.6
138.4

149.6
133.4
167.7
186.0
143.4
158.0
133.3

150.6
133.2
170.0

150.7
131.3
172.4

151.2
131.7
173.0

140.3
155.3
129.9

138.2
153.4
127.6

138.9
154.0
128.4

150.7
135.3

8
9
10
11

Mining
Metal ............................................
Coal ..............................................
Oil and gas extraction................
Stone and earth minerals ..........

10
11,12
13
14

.51
.69
4.40
.75

127.0
135.6
121.7
137.6

127.1
144.1
122.2
138.3

124.2
146.0
123.6
138.2

132.2
143.3
125.7
140.5

136.9
143.4
127.2
141.4

137.6
141.0
129.9
144.6

136.6
136.0
130.4
142.3

132.7
137.2
131.8
136.0

123.5
143.4
132.5
133.1

120.8
145.0
133.9
128.1

119.8
150.0
133.8
123.9

90.5
149.8
134.8
121.7

12
13
14
15
16

Nondurable manufactures
Foods ............................................
Tobacco products ........................
Textile mill products ..................
Apparel products ........................
Paper and products ....................

20
21
22
23
26

8.75
.67
2.68
3.31
3.21

147.5
117.8
145.0
134.4
151.0

147.5
114.8
145.7
132.5
154.0

147.7
115.6
147.7
131.5
154.2

147.9
113.0
148.5
133.5
154.3

148.4
116.6
148.0
131.1
155.7

148.5
118.7
143.4
131.5
157.4

149.0
120.0
144.0
133.8
153.6

149.3
122.2
142.0
136.1
152.7

147.8
121.9
139.9
131.3
148.2

149.5
116.2
137.1
128.6
145.7

149.0
113.9
133.6
128.1
146.2

147.5

17
18
19
20
21

Printing and publishing..............
Chemicals and products..............
Petroleum products ....................
Rubber and plastic products----Leather and products..................

27
28
29
30
31

4.72
7.74
1.79
2.24
.86

136.9
211.8
143.9
272.2
71.7

137.7
214.8
143.1
278.5
69.7

137.2
212.9
142.6
278.0
70.1

136.2
215.3
142.1
271.3
70.4

137.8
216.8
145.4
263.8
71.2

138.9
218.0
147.5
265.5
74.2

139.9
217.4
144.6
266.8
73.3

139.2
213.6
140.7
264.4
72.8

136.5
209.1
137.4
261.8
69.9

135.5
199.2
133.0
248.1
70.1

134.9
191.1
132.0
242.2
68.5

134.5
189.9
131.1
238.6
66.0

134.9

Durable manufactures
22 Ordnance, private and
government ..........................
23 Lumber and products..................
24 Furniture and fixtures ................
25 Clay, glass, stone products........

19,91
24
25
32

3.64
1.64
1.37
2.74

75.2
136.9
161.5
163.9

73.9
138.5
161.7
162.5

77.1
138.7
163.3
163.6

78.0
135.9
162.9
164.1

77.5
132.4
161.0
163.8

77.1
131.6
160.8
165.0

77.2
130.2
159.2
162.4

76.9
125.3
159.5
156.4

77.5
105.2
157.1
148.8

77.9
104.5
149.5
140.8

77.5
108.7
143.1
134.5

77.6
108.9
138.3
133.3

78.0

Primary metals ............................
Iron and steel ..........................
Fabricated metal products..........
Nonelectrical machinery ............
Electrical machinery ..................

33
331.2
34
35
36

6.57
4.21
5.93
9.15
8.05

121.3
113.2
148.5
163.7
175.0

121.1
112.0
147.6
166.3
172.1

118.4
108.8
147.5
162.9
177.3

117.1
108.1
146.9
162.9
179.5

115.3
106.6
146.2
163.0
181.6

116.4
107.2
145.0
167.1
181.7

111.9
103.4
145.7
167.0
179.2

113.7
105.9
145.5
166.5
179.2

106.4
97.4
141.4
163.2
177.0

96.1
84.4
133.2
162.1
171.4

90.4
75.4
125.8
158.4
166.8

80.8
68.9
122.7
156.8
165.5

125.7
156.9
167.2

31 Transportation equipm ent..........
32 Motor vehicles and p arts........
33 Aerospace and miscellaneous
transportation equipment
34 Instruments ..................................
35 Miscellaneous manufactures-----

37
371

9.27
4.50

135.4
159.9

125.2
138.5

133.3
150.1

128.3
139.3

127.3
137.1

122.1
126.2

125.7
133.9

123.8
130.1

115.1
114.7

109.8
105.9

110.2
106.8

110.6
107.9

107.3
100.8

372-9
38
39

4.77
2.11
1.51

112.2
174.9
153.7

112.6
173.9
155.7

117.4
175.0
154.5

117.9
173.4
155.3

118.1
175.0
153.7

118.3
175.9
153.8

118.1
174.8
151.6

117.8
173.5
152.8

115.5
173.8
151.2

113.5
171.0
147.3

113.3
169.2
143.7

113.1
166.5
142.0

113.5
169.0
141.6

26
27
28
29
30

131.8
142.5

127.5

83.9

Gross value (billions of 1972 dollars, annual rates)
Major Market
36 Products, to ta l..............................

507.4

625.3

615.0

623.7

618.8

619.7

615.8

619.8

619.0

599.5

588.6

584.5

579.9

578.3

37 Final ..............................................
38 Consumer g o o d s ......................
39 Equipment ................................
40 Intermediate ................................

390.92
277.52
113.42
116.62

480.8
327.1
153.6
144.6

469.9
320.0
149.9
145.1

479.3
325.3
154.0
144.4

475.1
322.5
152.6
143.7

476.1
322.1
154.0
143.6

471.2
317.6
153.6
144.6

476.4
320.0
156.3
143.4

475.9
321.3
154.6
143.1

464.5
312.5
152.0
135.0

457.3
306.3
151.0
131.3

455.5
306.0
149.4
129.0

452.0
304.3
147.7
128.0

448.6
302.3
146.3
129.7

1. The industrial production series has been revised back to January 1979.
2. 1972 dollars.




N ote . Published groupings include some series and subtotals not shown separately. For description and historical data, see Industrial Production—1976 Revision
(Board of Governors of the Federal Reserve System: Washington, D .C.), Decem­
ber 1977.

A50

Domestic Nonfinancial Statistics □ September 1980

2.14 HOUSING AND CONSTRUCTION
Monthly figures are at seasonally adjusted annual rates except as noted.
1979
Item

1977

1978

1980

1979
Dec.

Jan.

Feb.

Mar.

Apr.

May

June'

July

Private residential real estate activity (thousands of units)
N ew U nits
2

1-family

3

2-or-more-family ..............................

1,677
1,125
551

1,801
1,183
618

1,552
981
570

1,247
776
471

1,271
780
491

1,168
708
460

968
556
412

789
473
316

4 Started ..................................................
5
1-family ............................................
6 2-or-more-family ..............................

1,987
1,451
536

2,020

1,745
1,194
551

1,548
1,055
493

1,419

1,433
587

1,002
417

1,330
786
544

1,041
617
424

1,030
628
402

1,310
765
546

1,140
639
501

1,160
662
498

1,163
669
494

1,095
622
473

1,062
589
473

1,868
1,369
499

1,855
1,286
570

1,880
1,328
552

1,787
1,276
511

1,832
1,230
602

1,669
1,093
576

276

277

820
408

818
419

709
402

571
398

584
396

548
384

458
377

345'
364'

462'
350'

536
342

659
334

49.0

55.8

62.7

61.5

63.2

64.8

62.3

62.8'

63.6'

66.9

64.3

54.4

62.7

71.9

72.6

72.5

76.6

71.1

74.1'

73.5'

77.9

76.8

3,572

3,905

3,742

3,350

3,210

2,990

2,750

2,420

2,310

2,480

2,920

42.8
47.1

48.7
55.1

55.5
64.0

56.5
65.2

57.9

59.0
69.4

59.5
69.4

60.4
70.6

61.2
71.2

63.4
75.7

64.1
75.7

1 Permits authorized ..............................
.................................................

7 Under construction, end of period1 .
8
1-family ............................................
9 2-or-more-family ..............................
10 Completed ............................................
11

1-family

12

2-or-more-family ..............................

.................................................

730
478
1,656
1,258
399

13 Mobile homes s h ip p e d ........................

14
15
16
17

Merchant builder activity in 1-family
units
Number sold ........................................
Number for sale, end of period1 ----Price (thousand of dollars)2
Median
Units sold ........................................
Average
Units sold ........................................

825
495
330

1,078
628
450

1,240
792
448

906'
628
278'

1,208
760
448

1,266
865
401

978'
535'
443'

914'
496'
418'

877
477
400

1,897'
1,135'
762'

1,529'
996'
563'

1,481

886

595

n.a.
n.a.
n.a.
n.a.
n.a.

163

E xisting U nits (1-family)

18 Number sold ........................................
Price of units sold (thous. of dollars)2
19 Median ..................................................
20 Average ................................................

68.2

Value of new construction3 (millions of dollars)

Construction
21 Total put in place......................

228.948

244,045

237,132

226,529

220,088r

216,318

214,268

Private ............................................
R esidential..................................
Nonresidential, total ................
Buildings
Industrial ............................
Commercial ........................
Other ..................................
Public utilities and other

135,799
80,957
54,842

159,555
93,423
66,132

179.948
99,029
80,919

191,191
102,127
89,064

198,097
105,814
92,283

191,732

180,616

172,362

101,519
90,213

93,991
86,625

84,495
87,867

166,129'
78,448'
87,681

163,036
75,207
87,829

160,568
75,838
84,730

7,713
14,789

14,953
24,924
7,427
33,615

15,879
29,422
8,274
35,489

15,810
31,614
9,207
35,652

15,690
30,727
8,508
35,288

13,916
29,911
8,515
34,283

13,611
30,878

26,140

10,993
18,568
6,739
29,832

35,158

14,197
30,149
8,571
34,764

15,022
29,609
8,256
34,942

13,052
28,564
8,019
35,095

29 Public ..............................................
30 Military ......................................
31 Highway ......................................
32 Conservation and development
33 Other4 ..........................................

38,172
1,428
9,380
3,862
23,502

45,901
1,501
10,713
4,457
29,230

49,001
1,641
11,915
4,586
30,859

52,855
1,743
12,858
5,121
33,133

61,483
1,773
16,892
5,141
37,677

57,023
1,530
15,693
5,325
34,475

56,516
1,895
13,606
5,686
35,329

54,167
1,931
14,393
5,000
32,843

53,959
1,551
12,470
6,147
33,791

53,282
1,600
n.a.
n.a.
n.a.

53,700
1,680
n.a.
n.a.

22
23
24
25
26
27
28

6,200

1. Not at annual rates.
2. Not seasonally adjusted.
3. Value of new construction data in recent periods may not be strictly com­
parable with data in prior periods due to 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.
4. Beginning January 1977 “Highway” imputations are included in “Other”.




8,220

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. AH back ana
current figures are available from originating agency. Permit authorizations are
those reported to the Census Bureau from 14,000 jurisdictions through 1977, and
16,000 jurisdictions beginning with 1978.

Prices
2.15

A51

CONSUMER AND PRODUCER PRICES
Percentage changes based on seasonally adjusted data, except as noted
12 months to
Item

1980

1979
1979
July

1 month to

3 months (at annual rate) to

1980

1980
July
Sept.

Dec.

Mar.

June

Mar.

Apr.

May

June

July

Index
level
July
1980
(1967
= 100)1

C onsumer P rices2

1 All items................................................

11.3

13.2

13.8

13.7

18.1

11.6

1.4

.9

.9

1.0

0.0

247.8

2 Commodities ................................................
3 Food ..........................................................
4 Commodities less food ..........................
5
Durable ................................................
6
Nondurable ..........................................
7 Services ........................................................
8 Rent ..........................................................
9 Services less rent ....................................

11.6
10.2
12.3
9.9
15.5
10.9
7.1
11.4

11.2
7.6
12.8
8.9
17.7
16.1
9.2
17.1

13.3
6.5
16.4
9.1
25.2
14.3
10.2
14.9

12.5
12.1
12.7
13.2
12.8
15.8
9.0
16.9

16.1
3.8
22.1
7.6
39.8
20.9
8.3
22.8

5.0
5.6
4.7
6.8
3.5
21.6
10.0
23.3

1.2
1.0
1.3
.2
2.4
1.9
.5
2.0

.5
.5
.5
.5
.6
1.5
.2
1.7

.3
.3
.4
.6
.2
1.6
1.0
1.7

.3
.5
.3
.5
.1
1.8
1.2
1.9

.6
1.0
.5
.5
.3
- .8
.5
- .9

234.1
254.8
222.2
209.8
236.6
272.4
192.1
287.6

Other groupings
10 All items less f o o d ......................................
11 All items less food and en ergy..................
12 Homeownership ..........................................

11.6
9.5
15.2

14.4
12.4
19.9

15.4
10.9
19.5

14.2
13.9
25.6

21.7
15.7
24.1

13.0
13.5
26.6

1.5
1.2
2.1

1.1
1.1
1.9

1.0
1.0
1.8

1.1
1.1
2.3

- .2
- .2
- 1 .8

245.1
233.1
315.4

10.3
10.8
6.9
13.0
9.0
13.2

14.1
15.5
6.5
20.3
10.6
15.0

16.1
20.7
15.3
23.4
5.9
19.4

13.3
14.6
8.6
17.9
10.0
17.0

19.3'
21.6'
- 1 .2 '
34.8'
13.4'
24.0'

6.0
4.0
7.8
10.1
10.9
4.4

1.4'
1.6'
1.0
1.8'
.9'
.7'

.6'
.1'
- 2 .8
1.5'
1.8'
.3

0.0'
.2'
.1
.2'
- .1 '
- .1 '

.8
.7
.7
.7
.9
.8

1.7
1.8
3.8
.9
1.3
.7

246.6
249.1
239.5
251.4
240.2
282.3

20.7
14.5

19.3
3.6

25.1
16.4

27.8
5.7

21.9'
-1 6 .7 '

- 3 .9
-1 0 .5

- 1 .4 '
-2 .7

- .5
- 6 .1

0.0'
2.4

- .5
1.1

3.2
9.0

416.8
263.3

P roducer P rices

13 Finished goods ............................................
14 Consumer .................................................
15
Foods ....................................................
16
Excluding foods ..................................
17 Capital equipment ..................................
18 Intermediate materials3 ..............................
Crude Materials
19 N o n fo o d .....................................................
20 Food ..........................................................

1. Not seasonally adjusted.
2. Figures for consumer prices are those for all urban consumers.




3. Excludes intermediate materials for food manufacturing and manufactured
animal feeds.
Source . Bureau of Labor Statistics.

A52

Domestic Nonfinancial Statistics □ September 1980

2.16 GROSS NATIONAL PRODUCT AND INCOME
Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates.
1979
Account

1977

1978

1980

1979
Ql

Q2

Q3

Q4

Ql

Q2 p

G ross N ational P roduct

1,899.5

2,127.6

2,368.8

2,292.1

2,329.8

2,396.5

2,456.9

2,524.6

2,524.6

By source
Personal consumption expenditures ............................
Durable goods ............................................................
Nondurable goods .................................................... ..
Services ...................................................................... ..

1,210.0
178.8
481.3
549.8

1,350.8
200.3
530.6
619.8

1,509.8
213.0
596.9
699.8

1,454.2
213.8
571.1
669.3

1,475.9
208.7
581.2
686.0

1,528.6
213.4
604.7
710.6

1,580.4
216.2
630.7
733.5

1,629.5
220.2
652.0
757.3

. 1,628.6
195.7
654.8
778.0

6 Gross private domestic investment ..............................
7 Fixed investment ........................................................
Nonresidential ........................................................
8
9
Structures ..............................................................
10
Producers’ durable equipment ..........................
Residential structures ............................................
11
12
N o n farm ................................................................

303.3
281.3
189.4
62.6
126.8
91.9
88.8

351.5
329.1
221.1
76.5
144.6
108.0
104.4

387.2
369.0
254.9
92.6
162.2
114.1
110.2

373.8
354.6
243.4
84.9
158.5
111.2
107.8

395.4
361.9
249.1
90.5
158.6
112.9
109.1

392.3
377.8
261.8
95.0
166.7
116.0
112.0

387.2
381.7
265.2
100.2
165.1
116.4
112.1

387.7
383.0
272.6
103.3
169.4
110.4
105.9

370.3
356.7
267.7
103.8
163.9
89.0
85.3

Change in business inventories ................................
Nonfarm ..................................................................

21.9
20.7

22.3
21.3

18.2
16.5

19.1
18.8

33.4
32.6

14.5
12.6

5.6
2.1

4.7
4.4

13.6
14.2

15 Net exports of goods and serv ices................................
16 Exports ........................................................................
17 Imports ........................................................................

-9 .9
175.9
185.8

-1 0 .3
207.2
217.5

-4 .6
257.5
262.1

4.0
238.5
234.4

-8 .1
243.7
251.9

- 2 .3
267.3
269.5

-1 1 .9
280.4
292.4

-1 3 .6
308.1
321.7

- 2 .5
307.1
309.7

18 Government purchases of goods and serv ic es............
19 Federal ..........................................................................
20 State and local ............................................................

396.2
144.4
251.8

435.6
152.6
283.0

476.4
166.6
309.8

460.1
163.6
296.5

466.6
161.7
304.9

477.8
162.9
314.9

501.2
178.4
322.8

517.2
186.2
331.0

528.3
193.3
335.0

By major type of product
21 Final sales, t o t a l ..............................................................
22
G o o d s ............................................................................
23
Durable ....................................................................
24
Nondurable ..............................................................
Services ...................... ..................................................
25
26 Structures ....................................................................

1,877.6
842.2
345.9
496.3
866.4
190.9

2,105.2
930.0
380.4
549.6
969.3
228.2

2,350.6
1,030.5
423.1
607.4
1,085.1
253.2

2,272.9
1,011.8
425.5
586.2
1,041.4
238.9

2,296.4
1,018.1
422.4
595.7
1,064.2
247.5

2.381.9
1,036.0
424.4
611.6
1,100.6
259.8

2,451.4
1,056.3
420.2
636.1
1,134.0
266.6

2,516.1
1,086.2
421.5
664.8
1,169.5
265.1

2,511.0
1,082.1
419.2
662.9
1,200.5
241.9

27 Change in business in ventories....................................
28 Durable goods ............................................................
29
Nondurable goods ......................................................

21.9
11.9
10.0

22.3
13.9
8.4

18.2
13.0
5.2

19.1
18.4
.7

33.4
24.3
9.1

14.5
7.3
7.2

5.6
1.8
3.8

4.7
-9 .3
14.0

13.6
10.3
3.3

30 Memo: Total GNP in 1972 dollars..........................

1,340.5

1,431.6

1,430.6

1,422.3

1,433.3

1,440.3

1,444.7

1,410.9

1
2
3
4
5

13
14

1,399.2

N ational I ncome
31 Total ......................................................................

1,525.8

1,724.3

1,924.8

1,869.0

1,897.9

1,941.9

1,990.4

2,035.4

2,026.9

32 Compensation of employees ........................................
33
Wages and sa la rie s......................................................
Government and government e n te rp rise s..........
34
Other ........................................................................
35
Supplement to wages and sa la rie s............................
36
Employer contributions for social in su ran c e----37
Other labor income ................................................
38

1,156.9
984.0
201.3
782.7
172.9
81.2
91.8

1,304.5
1,103.5
218.0
885.5
201.0
94.6
106.5

1,459.2
1,227.4
233.5
993.9
231.8
109.1
122.7

1,411.2
1,189.4
228.1
961.3
221.8
105.8
116.0

1,439.7
1,211.5
231.2
980.3
228.2
107.9
120.3

1,472.9
1,238.0
234.4
1,003.6
234.8
109.9
124.9

1,513.2
1,270.7
240.2
1,030.5
242.5
113.0
129.6

1,555.2
1,303.6
243.5
1,060.1
251.6
117.2
134.4

1,567.2
1,310.4
247.5
1,062.8
256.8
118.1
138.7

39 Proprietors’ income1 ......................................................
40 Business and professional1 ........................................
Farm1 ............................................................................
41

100.2
80.5
19.6

116.8
89.1
27.7

130.8
98.0
32.8

129.0
94.8
34.2

129.3
95.5
33.7

130.3
99.4
30.9

134.5
102.1
32.5

130.0
102.3
27.7

119.5
97.3
22.2

42 Rental income of persons2 ............................................

24.7

25.9

26.9

27.3

26.8

26.6

27.0

27.0

27.3

43 Corporate profits1 ..........................................................
44
Profits before tax3 ......................................................
Inventory valuation a d ju stm e n t................................
45
Capital consumption adjustment................................
46

150.0
177.1
-1 5 .2
-1 2 .0

167.7
206.0
-2 5 .2
-13.1

178.2
236.6
-4 1 .8
-1 6 .7

178.9
233.3
-3 9 .9
-1 4 .5

176.6
227.9
-3 6 .6
-1 4 .7

180.8
242.3
-4 4 .0
-1 7 .6

176.4
243.0
-4 6 .5
-20.1

175.0
260.4
-6 3 .2
-2 2 .2

156.0
208.8
-2 8 .2
-2 4 .6

47 Net interest ......................................................................

94.0

109.5

129.7

122.6

125.6

131.5

139.2

148.1

157.0

1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustments.




3. For after-tax profits, dividends, and the like, see table 1.50.

Source. Survey of Current Business (Department of Commerce).

National Income Accounts
2.17

A53

PERSONAL INCOME AND SAVING
Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted.
1979
1977

Account

1978

Q2

Ql
Personal I ncome

and

1980

1979
Q3

Q4

Q2

Ql

Saving

1 Total personal in c o m e ....................................................

1,531.6

1,717.4

1,924.2

1,852.6

1,892.5

1,946.6

2,005.0

2,057.4

2,079.5

2 Wage and salary disbursem ents....................................
3 Comipodity-producing in d u stries..............................
4
M anufacturing..........................................................
5 Distributive in d u strie s................................................
6 Service in d u stries.........................................................
7 Government and government e n te rp rise s ..............

984.0
343.1
266.0
239.1
200.5
201.3

1,103.3
387.4
298.3
269.4
228.7
217.8

1,227.6
435.2
330.9
300.8
257.9
233.7

1,189.3
423.0
324.8
291.1
247.2
228.0

1,212.4
431.7
328.5
295.8
252.8
232.1

1,238.1
438.3
331.9
304.0
261.3
234.5

1,270.5
447.8
338.3
312.4
270.2
240.1

1,303.7
460.0
347.2
320.1
280.0
243.6

1,310.4
454.4
342.0
321.0
287.5
247.5

8
9
10
11
12
13
14
15
16

Other labor in c o m e ........................................................
Proprietors’ income1 ......................................................
Business and professional1 ........................................
Farm1 .............................................................................
Rental income of persons2 ............................................
Dividends .........................................................................
Personal interest in c o m e................................................
Transfer payments ...........................................................
Old-age survivors, disability, and health insurance
benefits .................................................................

91.8
100.2
80.5
19.6
24.7
42.1
141.7
208.4

106.5
116.8
89.1
27.7
25.9
47.2
163.3
224.1

122.7
130.8
98.0
32.8
26.9
52.7
192.1
252.0

116.0
129.0
94.8
34.2
27.3
51.5
181.0
237.3

i20.3
129.3
95.5
33.7
26.8
52.3
187.6
243.6

124.9
130.3
99.4
30.9
26.6
52.8
194.4
260.8

129.6
134.5
102.1
32.5
27.0
54.4
205.5
266.5

134.4
130.0
102.3
27.7
27.0
56.7
217.2
274.9

138.7
119.5
97.3
22.2
27.3
58.6
228.9
282.4

105.0

116.3

132.4

123.8

127.1

138.7

140.0

142.0

143.6

17

L ess: Personal contributions for social insurance ..

61.3

69.6

80.7

78.7

79.8

81.2

82.9

86.6

86.3

18 E quals: Personal income ............................................

1,531.6

1,717.4

1,924.2

1,852.6

1,892.5

1,946.6

2,005.0

2,057.4

2,079.5

L ess: Personal tax and nontax p ay m en ts................

226.4

259.0

299.9

280.4

290.7

306.6

321.9

320.0

324.6

20 E quals: Disposable personal income ........................

1,305.1

1,458.4

1,624.3

1,572.2

1,601.7

1,640.0

1,683.1

1,737.4

1,755.0

21

19

L ess: Personal o u tla y s ................................................

1,240.2

1,386.4

1,550.5

1,493.0

1,515.8

1,569.7

1,623.4

1,672.9

1,671.4

22 E quals: Personal saving ..............................................

65.0

72.0

73.8

79.2

85.9

70.3

59.7

64.4

83.6

M emo :
Per capita (1972 dollars)
Gross national p r o d u c t..............................................
Personal consumption expenditures ........................
Disposable personal in c o m e ......................................
Saving rate (piercent)......................................................

6,181
3,974
4,285
5.0

6,402
4,121
4,449
4.9

6,494
4,194
4,512
4.5

6,514
4,197
4,536
5.0

6,459
4,155
4,510
5.4

6,494
4,195
4,501
4.3

6,509
4,227
4,502
3.5

6,514
4,222
4,502
3.7

6,348
4,106
4,425
4.8

23
24
25
26

G ross Saving
276.1

324.6

363.9

362.2

374.3

367.3

351.9

346.6

345.8

Gross private saving ......................................................
Personal sa v in g .................................................................
Undistributed corporate profits1 ..................................
Corporate inventory valuation a d ju stm e n t................

295.6
65.0
35.2
-1 5 .2

324.9
72.0
36.0
-2 5 .2

349.6
73.8
32.9
-4 1 .8

345.2
79.2
36.1
-3 9 .9

360.5
85.9
35.6
-3 6 .6

352.1
70.3
34.0
-4 4 .0

340.7
59.7
25.9
-4 6 .5

343.7
64.4
15.9
-6 3 .2

372.5
83.6
17.9
-2 8 .2

Capital consumption allowances
32 Corporate .........................................................................
33 Noncorporate .............................. ................................
34 Wage accruals less disbursem ents................................

121.3
74.1

132.9
84.0

147.7
95.3

139.9
89.9

145.1
93.9

150.4
97.5

155.3
99.8

159.6
103.7

163.9
107.1

35 Government surplus, or deficit ( - ) , national income
and product a c co u n ts..............................................
36 F e d e ra l...........................................................................
37
State and local .............................................................

-1 9 .5
-4 6 .3
26.8

-.3
-2 7 .7
27.4

13.2
-1 1 .4
24.6

15.8
-1 1 .7
27.6

12.7
- 7 .0
19.7

14.0
-1 1 .3
25.3

10.0
-1 5 .7
25.8

1.7
-2 2 .9
24.6

-2 7 .8
-4 8 .0
20.2

1.1

1.1

1.1

1.1

1.1

1.2

1.2

39 Gross investment .............................................................

283.6

327.9

367.6

362.8

373.1

375.6

359.1

357.5

351.9

40 Gross private d o m e stic ..................................................
41 Net foreign .......................................................................

303.3
-1 9 .6

351.5
-2 3 .5

387.2
-1 9 .5

373.8
-1 1 .0

395.4
-2 2 .3

392.3
-1 6 .7

387.2
-2 8 .1

387.7
-3 0 .2

370.3
-1 8 .3

42 Statistical discrepancy ....................................................

7.5

3.3

2.9

.6

- 1 .3

8.3

7.2

11.0

6.1

27 Gross saving .....................................................................
28
29
30
31

38 Capital grants received by the United States, net . . .

1. With inventory valuation and capital consumption adjustments.
2. With capital consumption adjustment.




Source . Survey o f Current Business (Department of Commerce).

A54
3.10

International Statistics □ September 1980
U.S. INTERNATIONAL TRANSACTIONS Summary
Millions of dollars; quarterly data are seasonally adjusted except as noted.1
1979
Item credits or debits

1977

1978

Ql
1 Balance on current account .............................................
2 Not seasonally adjusted................................................

1980

1979
Q2

Q3

Q4

Ql

-14,068

-14,259

-788

1,408
1,697

-1,493
-61

1,099
-2,909

-1,802
486

-2,567
-2,405

-30,873
120,816
-151,689
1,628
17,988
1,794
-9,464

-33,759
142,054
-175,813
20,899
2,769
-9,204

-29,469
182,055
-211,524
-1,274
32,509
3,112
4,878

-5,114
41,805
-46,919
-29
7,038
837
2,732

-8,070
42,815
-50,885

9

Merchandise trade balance2 .........................................
Merchandise exports ................................................
Merchandise imports ................................................
Military transactions, net .............................................
Investment income, net3 ..............................................
Other service transactions, n e t......................................
M em o: Balance on goods and services3-4 ......................

-110

-7,060
47,198
-54,258
-443
9,319
690
2,506

-9,225
50,237
-59,462
-700
8,883
792
-250

-10,875
54,708
-65,583
-700
10,123
761
-691

10
11

Remittances, pensions, and other transfers...................
U.S. government grants (excluding military).................

-1,830
-2,775

-1,884
-3,171

-2,142
-3,524

-464
-860

-484
-899

-529
-878

-665
-887

-564
-1,312

12 Change in U.S. government assets, other than official re­
serve assets, net (increase, - ) ..................................

3
4
5
6

7
8

886

-102

7,271
791

-3,693

-4,644

-3,783

- 1,102

-991

-766

-925

-1,461

13 Change in U.S. official reserve assets (increase, - ) .........
14 Gold ............................................................................
15 Special drawing rights (SDRs)......................................
16 Reserve position in International Monetary Fund.........
17 Foreign currencies .......................................................

-375
-118

-1,106
-65
-1,136
-189
283

-3,585

343

-644
-65

-3,246

-1,142

0
6

2,779

-294
158

732
-65
1,249
4,231
-4,683

-8 6

-2,357

-78
415

18 Change in U.S. private assets abroad (increase, - ) 3 .......
19 Bank-reported claims....................................................
20 Nonbank-reported claims .............................................
21 U.S. purchase of foreign securities, n e t ........................
22 U.S. direct investments abroad, net3 ...........................

-31,725
-11,427
-1,940
-5,460
-12,898

-57,279
-33,631
-3,853
-3,450
-16,345

-56,858
-25,868
-2,029
-4,643
-24,318

-3,081
6,181
-2,442
- 1,001
-5,819

23 Change in foreign official assets in the United States
(increase, + ) ............................................................
24 U.S. Treasury securities ..............................................
25 Other U.S. government obligations .............................
26 Other U.S. government liabilities5 ...............................
27 Other U.S. liabilities reported by U.S. banks...............
28 Other foreign official assets6 ........................................

36,574
30,230
2,308
1,159
773
2,105

33,292
23,523
5,488
1,395

-14,270
-22,356
465
-714
7,219
1,116

14,167
6,719
473

30,804
16,259
1,640

534
2,713
3,728

29 Change in foreign private assets in the United States
(increase, + ) ...........................................................
30 U.S. bank-reported liabilities........................................
31 U.S. nonbank-reported liabilities..................................
32 Foreign private purchases of U.S. Treasury securities,
net ........................................................................
33 Foreign purchases of other U.S. securities, n e t............
34 Foreign direct investments in the United States, net3 ...
35 Allocation of SDRs .........................................................
36 Discrepancy .....................................................................
37 Owing to seasonal adjustments....................................
38 Statistical discrepancy in recorded data before seasonal
adjustment ............................................................

-121

0

0
0

0

-52
2,831

0

27
-606

-1,152
-34
-2,060

-14,631
-7,839
935
-513
-7,214

-27,228
-16,997
-932
-2,143
-7,156

-11,918
-7,213
410
-986
-4,129

-7,110
-978
n.a.
-787
-5,345

-8,744
-8,752
-5
-128
-72
213

-10,095
-12,859
94
2,354
195

122

5,789
5,024
335
216
56
158

- 1,221
-5,769
41
-924
4,881
550

-7,765
-5,503
801
-43
-3,365
345

51,845
32,668
1,692

10,945
7,001
-543

16,502
12,082
579

19,152
13,185
606

5,246
400
1,050

12,781
5,902
ii.a.

2,197
2,811
7,896

4,830
2,942
9,713

2,564
803

-120

1,120

1,149
2,812

1,466
677
3,217

920
313
2,564

3,279
2,477
1,123

0

666
2,220

-880

11,354

1,139
23,822

1,139
3,020
74

10,364
1,167

-825
-3,641

11,264
2,400

0

1,152
8,215
-115

-880

11,354

23,822

2,946

9,197

2,816

8,864

8,330

0

0

0

M em o:

Changes in official assets
U.S. official reserve assets (increase, - ) ......................
Foreign official assets in the United States
(increase, + ) .........................................................
41 Change in Organization of Petroleum Exporting Countries
official assets in the United States (part of line 23
above) .......................................................................
42 Transfers under military grant programs (excluded from
lines 4, 6 , and 11 above)...........................................
39
40

-375

732

-1,106

-3,585

343

2,779

-644

-3,246

35,416

31,072

-13,556

-8,616

-10,216

5,573

-297

-7,722

6,351

-1,137

5,508

-1,361

238

1,676

4,955

2,721

204

236

305

29

49

88

139

91

1. Seasonal factors are no longer calculated for lines 13 through 42.
2. Data are on an international accounts (IA) basis. Differs from the census
basis primarily because the IA basis includes imports into the U.S. Virgin Islands,
and it excludes military exports, which are part of line 6.
3. Includes reinvested earnings of incorporated affiliates.
4. Differs from the definition of “net exports of goods and services” in the
national income and product (GNP) account. The GNP definition makes various
adjustments to merchandise trade and service transactions.




5. Primarily associated with military sales contracts and other transactions ar­
ranged with or through foreign official agencies.
6. 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 o f Current Business
(U.S. Department of Commerce).

Trade and Reserve Assets
3.11

A55

U.S. FOREIGN TRADE
Millions of dollars; monthly data are seasonally adjusted.

1979
Item

1977

1978

Dec.
1 EXPORTS of domestic and foreign
merchandise excluding grant-aid
shipments ....................................

121,150

143,578

2 GENERAL IMPORTS including mer­
chandise for immediate consump­
tion plus entries into bonded
warehouses .................................

147,685

171,978

....................................

-26,535

-28,400

1980

1979
Feb.

181,637

16,742

17,233

206,326

19,665

Mar.

Apr.

18,534

18,468

21,640

20,607

19,308

-24,6903 Trade
-2,923
balance-4,407

-2,073

-840

Note. Bureau of Census data reported on a free-alongside-ship (f.a.s.) value
basis. Effective January 1978, major changes were made in coverage, reporting,
and compiling procedures. The intemational-accounts-basis data adjust the Census
basis data for reasons of coverage and timing. On the export side, the largest
adjustments are: fa) the addition of exports to Canada not covered in Census
statistics, and (b) tne exclusion of military exports (which are combined with other
military transactions and are reported separately in the “service account”).

May

June

July

18,642

18,075

20,528

19,893

18,995

-2,850

-1,251

-920

17,678

On the import side, the largest single adjustment is the addition of imports into
the Virgin Islands (largely oil for a refinery on St. Croix), which are not included
in Census statistics.

Source. FT 900 “Summary of U.S. Export and Import Merchandise Trade”
(U.S. Department of Commerce, Bureau of the Census).

3.12 U.S. RESERVE ASSETS
Millions of dollars, end of period
1980
Type

1978

1977

1979
Feb.

Mar.

Apr.

May

June

July

Aug .p

1 Total* ................................................

19,312

18,650

18,928

20,840

21,448

21,521

21,794

21,921

21,828

22,581

2 Gold stock, including Exchange Stabili­
zation Fund1 ...............................

11,719

11,671

11,172

11,172

11,172

11,172

11,172

11,172

11,172

11,172

3 Special drawing rights2-3 .....................

2,629

1,558

2,724

3,836

3,681

3,697

3,744

3,782

3,842

4,009

4 Reserve position in International Mone­
tary Fund2 ...................................

4,946

1,047

1,253

1,287

1,222

1,094

1,157

1,385

1,410

1,564

5 Foreign currencies4 ............................

18

4,374

3,779

4,545

5,373

5,558

5,721

5,582

5,404

5,836

1. Gold held under earmark at Federal Reserve Banks for foreign and inter­
national accounts is not included in the gold stock of the United States; see table
3.22.
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 16 member countries.
The U.S. SDR holdings and reserve position in the IMF also are valued on this
basis beginning July 1974.




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; and $1,152 million Jan. 1, 1980; plus net
transactions in SDRs.
4. Beginning November 1978, valued at current market exchange rates.

A56

International Statistics □ September 1980

3.13 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data
Millions of dollars, end of period
1980

1979
Asset account

1976

1977

19781
Dec.

Jan.

Feb.

Mar.

Apr.

May

JuneP

375,885'

378,605

376,630

34,180'
26,290'
7,890

35,598
26,139
9,459

28,996
18,613
10,383

326,109
76,322
130,208
25,412
94,167

330,166
76,084
132,701
25,556
95,825

All foreign countries
1 Total, all currencies............................

219,420

258,897

306,795

364,166

360,373

372,099

2 Claims on United States.....................
3 Parent b ank ....................................
4 Other .............................................

7,889
4,323
3,566

11,623
7,806
3,817

17,340
12,811
4,529

32,302
25,929
6,373

31,603
24,788
6,815

39,736
32,192
7,544

371,483
35,681''
28,249'
7,432

5 Claims on foreigners ..........................
6 Other branches of parent bank.......
7 Banks .............................................
8 Public borrowers2 ............................
9 Jfonbank foreigners ........................

204,486
45,955
83,765
10,613
64,153

238,848
55,772
91,883
14,634
76,560

278,135
70,338
103,111
23,737
80,949

317,109
79,661
123,344
26,060
88,044

313,816
75,419
125,070
25,797
87,530

316,993
78,185
124,417
26,045
88,346

319,748
80,574
125,983
25,473
87,718

7,045

8,425

11,320

14,755

14,954

15,370

11 Total payable in U.S. dollars..............

167,695

193,764

224,940

267,645

265,157

276,017

12 Claims on United States.....................
13 Parent bank....................................
14 Other .............................................

7,595
4,264
3,332

11,049
7,692
3,357

16,382
12,625
3,757

31,171
25,632
5,539

30,518
24,516
6,002

38,519
31,812
6,707

15 Claims on foreigners..........................
16 Other branthes of parent ban k .......
17 Banks .............................................
18 Public borrowers2 ............................
19 Nonbank foreigners ........................

156,896
37,909
66,331
9,022
43,634

178,896
44,256
70,786
12,632
51,222

203,498
55,408
78,686
19,567
49,837

229,053
61,525
96,192
21,618
49,718

226,781
58,084
97,905
21,536
49,256

229,013
60,217
97,188
21,790
49,818

20 Other assets........................................

3,204

3,820

5,060

7,421

7,858

8,485

16,054''

325,367
79,541
130,067
25,202
90,557
16,338

16,898

17,468

277,637r

277,438

275,262

32,896'
25,920'
6,976

34,353
25,819
8,534

27,805
18,302
9,503

235,804
61,787
103,148
20,985
49,884

234,028
58,898
102,631
21,208
51,291

238,294
58,468
105,057
21,345
53,424

8,493'

8,937

9,057

9,163

276,711
34,501r
27,897'
6,604
233,717
63,434
99,318
21,369
49,596

United Kingdom
21 Total, all currencies ...........................

81,466

90,933

106,593

130,873

128,41

133,793

136,654

138,915

138,930

139,066

22 Claims on United States .....................
23 Parent bank ............... ....................
24 Other .............................................

3,354
2,376
978

4,341
3,518
823

5,370
4,448
922

11,117
9,338
1,779

10,147
8,207
1,940

10,697
8,584
2,113

11,990
9,838
2,152

11,533
9,300
2,233

11,399
9,140
2,259

9,157
6,870
2,287

25 Claims on foreigners..........................
26 Other branches of parent bank.......
27 Banks .............................................
28 Public borrowers2 . ........................
29 Nonbank foreigners ........................

75,859
19,753
38,089
1,274
16,743

84.016
22.017
39,899
2,206
19,895

98,137
27,830
45,013
4,522
20,772

115,123
34,291
51,343
4,919
24,570

113,617
31,995
52,177
4,559
24,886

118,212
35,187
53,127
4,499
25,399

119,290
35,536
52,509
5,860
25,385

122,105
36,015
54,020
5,578
26,492

121,851
34,305
54,076
5,591
27,879

124,059
34,824
54,855
5,897
28,483

30 Other assets........................................

2,253

2,576

3,086

4,633

4,653

4,884

5,374

5,277

5,680

5,850

31 Total payable in U.S. dollars..............

61,587

66,635

75,860

94,287

91,760

96,228

99,711

100,628

98,809

98,013

32 Claims on United States.....................
33 Parent bank....................................
34 Other .............................................

3,275
2,374
902

4,100
3,431
669

5,113
4,386
727

10,746
9,297
1,449

9,820
8,161
1,659

10,285
8,467
1,818

11,620
9,778
1,842

11,071
9,179
1,892

10,988
9,059
1,929

8,790
6,810
1,980

35 Claims on foreigners ..........................
36 Other branches of parent bank.......
37 Banks .............................................
38 Public borrowers2 ............................
39 Nonbank foreigners ........................

57,488
17,249
28,983
846
10,410

61,408
18,947
28,530
1,669
12,263

69,416
22,838
31,482
3,317
11,779

81,294
28,928
36,760
3,319
12,287

79,740
26,842
37,487
3,274
12,137

83,603
29,907
38,185
3,253
12,258

85,452
30,204
37,768
4,589
12,891

86,818
29,980
39,159
4,277
13,402

85,013
28,466
38,594
4,277
13,676

86,404
28,692
39,050
4,3%
14,266

40 Other assets........................................

824

1,126

1,331

2,247

2,200

2,340

2,639

2,739

2,808

2,819

114,748

Bahamas aiid Caymans
41 Total, all currencies............................

66,774

79,052

91,735

108,910

110,946

117,839

115,742

116,461

115,347

42 Claims on United States.....................
43 Parent bank....................................
44 Other .............................................

3,508
1,141
2,367

5,782
3,051
2,731

9,635
6,429
3,206

19,124
15,196
3,928

19,680
15,366
4,314

27,154
22,414
4,740

21,831'
17,323'
4,508

20,057
15,269
4,788

21,404
15,334
6,070

17,622
10,705
6,917

45 Claims on foreigners ..........................
46 Other branches of parent bank.......
47 Banks .............................................
48 Public borrowers2 ............................
49 Nonbank foreigners ........................

62,048
8,144
25,354
7,105
21,445

71,671
27,939
9,109
23,503

79,774
12,904
33,677
11,514
21,679

86,652
9,689
43,120
12,893
20,950

87,838
10,242
44,062
12,908
20,626

86,829
10,265
42,435
13,121
21,008

89,279
13,659
44,450
11,324
19,846

91,590
13,438
47,131
11,345
19,676

90,921
12,454
46,720
11,626

93,565
12,977
48,183
11,519

20,121

20,886

50 Other assets........................................

1,217

1,599

2,326

3,134

3,428

3,856

4,095

4,136

4,160

51 Total payable in U.S. dollars..............

62,705

73,987

85,417

102,302

105,013

111,504

109,631

110,837

109,799

For notes see opposite page.




11,120

3,638'
108,550

Overseas Branches
3.13

A57

Continued

1979
Liability account

1976

1977

1980

19781
Dec.

Jan.

Feb.

Mar.

Apr.

May

JuneP

All foreign countries
S2 Total, all currencies............................

219,420

258,897

306,795

53 To United States ...............................
54 Parent b ank ....................................
55 Other banks in United States..........
56 Nonbanks........................................

32,719
19,773
12,946

44,154
24,542
19,613

57,948
28,464
12,338
17,146

57 To foreigners......................................
58 Other branches of parent b ank .......
59 Banks .............................................
60 Official institutions..........................
61 Nonbank foreigners ........................

179,954
44,370
83,880
25,829
25,877

206,579
53,244
94,140
28,110
31,085

238,912
67,496
97,711
31,936
41,769

364,166
66,573
24,275
14,110'
28,188'
283,324
77,601
122,829
35,664
47,230

360,373

372,099

371,483

375,885'

378,605

376,630

70,341
24,763
12,051'
33,527'

71,118

67,624
22,383
12,351
32,890

69,487'
24,265'
12,832
32,390

73,204
26,545
13,091
33,568

76,417
31,110
12,451
32,856

276,189
72,846
122,044
33,073
48,226

286,262
73,602
130,252
34,221
48,187

289,591
72,490
130,804
34,838
51,459

284,307
71,932
127,806
33,934
50,635

22,866

13,821'
34,431'

289,466
76,695'
129,320'
34,806
48,645

290,944
75,041
130,701
35,007
50,195

62 Other liabilities...................................

6,747

8,163

9,935

14,269

13,843

14,719

14,393

15,454

15,810

15,906

63 Total payable in U.S. dollars..............

173,071

198,572

230,810

273,752

270,597

282,200

282,666

283,690'

284,830

282,517

42,881
24,213
18,669

55,811
27,393
12,084
16,334

64,485
23,216
13,913'
27,356'

65,363
21,195
12,004
32,164

67,133'
23,020'
12,583
31,530

70.718
25,222
12,777
32.719

73,774
29,740
12,131
31,903

205,083
56,532
86,939
28,316
33,296

199,745
56,129
84,340
26,927
32,349

9,029

8,998

64 To United States ...............................
65 Parent b ank....................................
66 Other banks in United States..........
67 Nonbanks........................................

31,932
19,559'
12,373

67,957
23,624
11,721'
32,612'

68,599
21,636
13,414'
33,549'

68 To foreigners......................................

Other branches of parent b an k .......
Banks .............................................
Official institutions..........................
Nonbank foreigners ........................

137,612
37,098
60,619
22,878
17,017

151,363
43,268
64,872
23,972
19,251

169,927
53,396
63,000
26,404
27,127

201,456
60,513
80,671
29,048
31,224

195,229
56,779
80,988
26,691
30,771

205,511
57,714
89,238
27,727
30,832

73 Other liabilities...................................

3,527

4,328

5,072

7,811

7,411

8,090

69
70
71
72

209,157
61,240'
88,064'
28,321
31,532
8,146

207,742
59,375
87,622
28,612
32,133
8,815'

United Kingdom
74 Total, all currencies............................

81,466

90,933

106,593

130,873

128,417

133,793

136,654

138,915

138,930

139,066

75 To United States ...............................
76 Parent b ank....................................
77 Other banks in United States..........
78 Nonbanks........................................

5,997
1,198
4,798

7,753
1,451
6,302

9,730
1,887
4,232
3,611

20,986
3,104
7,693'
10,189'

20,378
3,014
6,507'
10,857'

20,808
2,758
6,559'
11,491'

19,921
2,140
6,502
11,279

20,838
2,301
6,382
12,155

19,877
2,118
6,265
11,494

20,194
2,509
6,213
11,472

79 To foreigners......................................
80 Other branches of parent bank .......
81 Banks .............................................
82 Official institutions..........................
83 Nonbank foreigners ........................

73,228
7,092
36,259
17,273
12,605

80,736
9,376
37,893
18,318
15,149

93,202
12,786
39,917
20,963
19,536

106,524
11,099
53,031
22,890
19,504

110,473
14,799
53,204
23,303
19,167

111,375
14,268
53,955
23,453
19,699

111,769
13,824
54,309
23,628
20,008

111,873
13,668
54,844
22,577
20,784

104,032
12,567
47,620
24,202
19,643

102,117
11,458
48,872
21,822
19,965

84 Other liabilities...................................

2,241

2,445

3,661

5,855

5,922

6,461

6,260

7,284

6,999

85 Total payable in U.S. dollars..............

63,174

67,573

77,030

95,449

92,771

97,391

101,293

101,679'

101,170

100,117

86 To United States ...............................

Parent b ank....................................
Other banks in United States..........
Nonbanks........................................

5,849
1,182
4,667

7,480
1,416
6,064

9,328
1,836
4,144
3,348

20,552
3,054
7,651'
9,847'

19,827
2,968
6,445'
10,414'

20,206
2,724
6,399'
11,083'

19,381
2,089
6,351
10,941

20,337
2,252
6,318
11,767

19,284
2,060

19,503
2,414
6,140
10,949

90 To foreigners......................................
91 Other branches of parent ban k .......
92 Banks .............................................
93 Official institutions..........................
94 Nonbank foreigners ........................

56,372
5,874
25,527
15,423
9,547

58,977
7,505
25,608
15,482
10,382

66,216
9,635
25,287
17,091
14,203

72,397
8,446
29,424
20,192
14,335

70,597
7,793
30,988
17,995'
13,821

74,705
7,322
34,694
18,923
13,766

79,251
10,894
35,300
19,255
13,802

78,296
10,468
34,485
19,554
13,789

78,278
34,488
19,558
14,211

77,140
9,659
35,311
18,300
13,870

95 Other liabilities...................................

953

1,116

1,486

2,500

2,347

2,480

2,661

3,046'

3,608

3,474

87
88

89

6,702

6,210

11,014
10,021

Bahamas and Caymans
% Total, all currencies............................

66,774

79,052

91,735

108,910

110,946

117,839

114,748

115,742

116,461

115,347

97 To United States ...............................
98 Parent bank....................................
99 Other banks in United States..........
100 Nonbanks........................................

22,721
16,161
6,560

32,176
20,956
11,220

39,431
20,356
6,199
12,876

37,674
15,080
5,346
17,248

43,092
16,801
4,609
21,682

43,580
15,099
6,351
22,130

40,896
15,341
4,778
20,777

41,841
16,989
5,417
19,435

45,561
19,114
5,720
20,727

48,523
22,840
5,312
20,371

101 To foreigners......................................
102 Other branches of parent b ank.......
103 Banks .............................................
104 Official institutions..........................
105 Nonbank foreigners ........................

42,899
13,801
21,760
3,573
3,765

45,292
12,816
24,717
3,000
4,759

50,447
16,094
23,104
4,208
7,041

68,578
20,875
33,611
4,866
9,226

65,229
20,559
30,504
5,020
9,146

71,132
22,150
34,701
5,016
9,265

70,804
22,387'
33,774'
4,958
9,685

70,583
22,470
33,028
5,435
9,650

67,953
20,009
32,156
5,461
10,327

63,917
20,137
28,864
5,096
9,820

106 Other liabilities...................................

1,154

1,584

1,857

2,658

2,625

3,127

3,048

3,318

2,947

2,907

107 Total payable in U.S. dollars..............

63,417

74,463

87,014

103,393

105,997

112,929

110,074

111,389

112,383

111,520

1. In May 1978 the exemption level for branches required to report was increased, which reduced the number of reporting branches.
2. In May 1978 a broader category of claims on foreign public bor-




rowers, including corporations that are majority owned by foreign governments,
replaced the previous, more narrowly defined claims on foreign official institutions.

A58

International Statistics □ September 1980

3.14 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS
Millions of dollars, end of period

1980
1977

Item

1 Total1 ..............................................................
By type

2 Liabilities reported by banks in the United States2
3 U.S. Treasury bills and certificates3 .....................

U.S. Treasury bonds and notes
4 Marketable .....................................................
5 Nonmarketable4 ..............................................
6 U.S. securities other than U.S. Treasury securities5
By area

7 Western Europe1 ................................................
8 Canada ................................................................
9 Latin America and Caribbean.............................
10 Asia ...................................................................
11 Africa .................................................................
12 Other countries6 ...............................................

1979

1978

Jan.

Feb.

Mar.

Apr.

May

JuneP

JulyP

131,097

162,589

149,466

145,999

145,037

142,069

140,500

143,460

148,852

152,244

18,003
47,820

23,290
67,671

30,411
47,666

24,739
48,864

24,491
48,234

27,226
42,797

27,923
40,527

28,486
42,731

28,786
45,907

28,749
47,785

32,164
20,443
12,667

35,894
20,970
14,764

37,669
17,387
16,333

38,152
17,434
16,810

37,888
17,384
17,040

37,785
16,784
17,477

37,718
16,384
17,948

38,104
16,184
17,955

39,821
15,954
18,384

40,583
15,954
19,173

70,748
2,334
4,649
50,693
1,742
931

93,089
2,486
5,046
58,817
2,408
743

85,602
1,898
6,371
52,697
2,412
486

82,628
1,922
4,780
53,456
2,480

79,852
2,347
4,916
54,602
2,392
928

77,119
1,644
6,099
53,997
2,419
791

74,154
1,903
5,979
54,403
3,316
745

74,159
2,134
6,035
57,317
2,889
926

75,191
2,157
6,023
61,921
2,694
866

77,898
1,907
6,329
62,470
2,930
710

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.

733

5. Debt securities of U.S. government corporations and federally sponsored
agencies, and U.S. corporate stocks and bonds.
6. Includes countries in Oceania and Eastern Europe.

Note:

Based on Treasury Department data and on data reported to the Treasury
Department by banks (including Federal Reserve Banks) and securities dealers
in the United States.

3.15 LIABILITIES TO AND CLAIMS ON FOREIGNERS Reported by Banks in the United States
Payable in Foreign Currencies
Millions of dollars, end of period
1979
Item

1977

June
1 Banks’ own liabilities ................................................................................
2 Banks’ own claims1 ....................................................................................
3
Deposits ..................................................................................................
4
Other cla im s............................................................................................
5 Claims of banks’ domestic customers2 ....................................................

925
2,356
941
1,415

1. Includes claims of banks’ domestic customers through March 1978.
2. Assets owned by customers of the reporting bank located in the United States
that represent claims on foreigners held by reporting banks for the accounts of
their domestic customers.




1980

1978

2,347
3,663
1,798
1,864
367

Note:
thorities.

1,978
2,559
1,371
1,189
573

Sept.
2,393
2,700
1,356
1,344
616

Dec.
1,870
2,438
1,032
1,406
592

Mar.
2,237
2,812
1,212
1,600
1,056

JuneP
2,562
2,994
1,048
1,946
797

Data on claims exclude foreign currencies held by U.S. monetary au-

Bank-Reported Data
3.16

LIABILITIES TO FOREIGNERS
Payable in U.S. dollars

A 59

Reported by Banks in the United States

Millions of dollars, end of period
1980
Holder and type of liability

1977

1978

1979
Jan.

1 AH foreigners .....................................................

May

June

July/7

187,339

184,844

193,998

185,977

180,552

182,847

186,661

187,319

78,699
19,211
12,441
9,693
37,353

117,146
23,308
13,671
16,277
63,890

113,543
20,791
12,504
12,692
67,556

122,689
22,520
12,741
12,471
74,957

119,118
22,678
12,877
14,611
68,951

115,586
22,319
12,627
15,020
65,620

116,323
22,511'
12,668
15,944'
65,200

116,460
25,967
12,748
16,630
61,116

115,598
22,207
12,753
18,512
62,125

88,098
68,202

70,193
48,573

71,301
49,860

71,309
49,360

66,859
44,408

64,966
42,232

66,524
44,088

70,201
48,193

71,722
49,677

17,396
2,499

19,270
2,350

18,931
2,509

19,407
2,542

19,701
2,750

19,944
2,790

19,643
2,793

19,433
2,575

19,291
2,753

2,607

2,351

1,227

1,712

1,758

1,968

1,775'

3,499

2,888

906
330
84
492

709
260
151
298

444
164
89
191

393
153
78
162

383
160
79
144

648
241
93
314

377'
144
88
145'

842
99
92
652

597
214
93
289

1,701
201

1,643
102

783
102

1,319
114

1,376
157

1,320
87

1,398
82

2,657
1,106

2,291
604

1,499
1

1,538
2

681
0

1,206
0

1,218
0

1,233
0

1,317
0

1,551
0

1,687
0

18,996
11,521

8

U.S. Treasury bills and certificates5 ....................
Other negotiable and readily transferable

48,906

organizations7 ...............................................

Apr.

166,796

Demand deposits .....................................................
Time deposits1 ........................................................
Other2 .......................................................................

11 Nonmonetary international and regional

Mar.

126,168

3
4
5

9

Feb.

3,274

13
14

Demand deposits ....................................................
Time deposits1 .........................................................

231
139

17
18

U.S. Treasury bills and certificates......................
Other negotiable and readily transferable
instruments6 ....................................................
Other .........................................................................

706

20 Official institutions8 .............................................

65,822

90,706

78,077

73,603

72,725

70,023

68,450

71,218'

74,693

76,534

3,528
1,797

12,129
3,390
2,550
6,189

18,163
4,704
3,041
10,418

12,347
3,725
2,309
6,313

12,151
3,680
2,367
6,104

14,527
3,928
2,397
8,202

14,547
4,734
2,392
7,421

15,363'
4,484
2,581
8,297'

16,246
5,043
2,640
8,563

16,733
4,298
2,639
9,797

78,577
67,415

59,914
47,666

61,256
48,864

60,575
48,234

55,497
42,797

53,903
40,527

55,854
42,731

58,447
45,907

59,801
47,785

10,992
170

12,196
52

12,357
35

12,303
37

12,668
32

13,341
35

13,084
40

12,494
45

11,965
51

57,464

88,384

91,389

100,450

95,162

92,013

92,106

89,471

89,714

52,674
15,320
11,249
1,453
2,618

83,383
19,493
13,257
1,724
4,512

86,007
18,451
11,820
1,278
5,353

94,974
20,017
13,345
1,304
5,369

89,381
20,430
13,371
1,574
5,485

86,198
20,578
12,681
1,498
6,399

86,279
21,079
13,003'
1,423
6,653'

84,019
22,904
14,986
1,479
6,438

84,162
22,037
12,946
1,476
7,615

Own foreign offices3 ..............................................

37,353

63,890

67,556

74,957

68,951

65,620

65,200

61,116

62,125

36 Banks’ custody liabilities4 ..........................................
37 U.S. Treasury and certificates..............................
38 Other negotiable and readily transferable

4,790
300

5,000
422

5,382
533

5,475
566

5,781
675

5,815
771

5,828
764

5,452
594

5,552
607

2,425
2,065

2,405
2,173

2,573
2,276

2,559
2,350

2,559
2,547

2,462
2,582

2,491
2,574

2,582
2,277

2,406
2,539

14,736

16,020

18,526

18,625

19,110

19,033

18,121

17,748

18,999

18,183

4,304
7,546

12,990
4,242
8,353
394

14,890
5,087
8,755
1,048

14,746
5,082
8,828
835,

15,171
5,343
8,992
836

14,828
5,219
8,827
781

14,193
4,663
8,645
886

14,305
4,880
8,576
849

15,353
5,839
8,537
977

14,105
4,749
8,545
812

240

3,030
285

3,636
382

3,880
361

3,939
446

4,205
777

3,928
847

3,443
511

3,646
586

4,078
682

2,481
264

3,131
123

3,320
199

3,339
154

3,256
172

2,908
173

2,752
180

2,806
254

3,233
164

11,007

10,974

10,906

11,395

11,236

11,670

11,685

11,773

10,500

19

21 Banks’ own liabilities ................................................
22 Demand deposits ....................................................
23 Time deposits1 .........................................................
24 Other2 .......................................................................
25 Banks’ custody liabilities4 ..........................................
26 U.S. Treasury bills and certificates5 ....................
27
Other negotiable and readily transferable
instruments6 ....................................................
28 Other .........................................................................
29 Banks9 ................................................................
30 Banks’ own liabilities ................................................
31 Unaffiliated foreign banks ....................................
32
Demand deposits ................................................
33
Time deposits1 .....................................................
34
Other2 ...................................................................
35

instruments6

39

47,820

42,335

10,933
2,040

141

..........................................................

Other .........................................................................

40 Other foreigners ..................................................
41 Banks’ own liabilities ................................................
42 Demand deposits ....................................................
43 Time deposits ...........................................................
44 Other2 .......................................................................
45 Banks’ custody liabilities4 ..........................................
46 U.S. Treasury bills and certificates......................
47 Other negotiable and readily transferable
instruments6 ....................................................
48 Other .........................................................................
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.” Data for time deposits before
April 1978 represent short-term only.
2. Includes borrowing under repurchase agreements.
3. U.S. banks: includes amounts due to own foreign branches and foreign sub­
sidiaries consolidated in “Consolidated Report of Condition” filed with bank reg­
ulatory 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 cer­
tificates 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.”

A60

International Statistics □ September 1980

3.16 LIABILITIES TO FOREIGNERS Continued
1980
Area and country

1977

1979

1978

Jan.

Feb.

Mar.

Apr.

May

June

Julyp

1 Total ...................................................................

126,168

166,7%

187,339

184,844

193,998

185,977

180,552

182,847'

186,661

187,319

2 Foreign countries ................................................

122,893

164,190

184,987

183,617

192,285

184,218

178,584

181,072'

183,163

184,431

3 Europe ..........................................................................
4 Austria ......................................................................
5 Belgium-Luxembourg ............................................
6 Denmark ..................................................................
7 Finland......................................................................
8 France ......................................................................
9 Germany ..................................................................
10 Greece ......................................................................
11 Italy ..........................................................................
12 Netherlands ..............................................................
13 Norway ....................................................................
14 Portugal ....................................................................
15 Spain ........................................................................
16 Sweden ......................................................................
17 Switzerland ..............................................................
18 Turkey ......................................................................
19 United Kingdom........ ..............................................
20 Yugoslavia.................. ..............................................
21 Other Western Europe1 ........................................
22 U.S.S.R.......................................................................
23 Other Eastern Europe2 ..........................................

60,295
318
2,531
770
323
5,269
7,239
603
6,857
2,869
944
273
619
2,712
12,343
130
14,125
232
1,804
98
236

85,159
513
2,552
1,946
346
9,208
17,286
826
7,739
2,402
1,271
330
870
3,121
18,225
157
14,265
254
3,440
82
325

90,904
413
2,375
1,092
398
10,401
12,935
635
7,782
2,327
1,267
557
1,259
2,005
17,954
120
24,694
266
4,070
52
302

86,731
378
2,109
955
455
10,534
10,345
832
7,825
2,529
1,229
550
1,192
1,845
16,745
232
25,083
157
3,474
46
217

85,753
379
2,407
587
5444
11,247
8,960
627
7,394
2,485
1,156
438
1,146
1,978
16,950
118
25,300
149
3,455
41
390

85,278
335
2,365
613
484
11,004
8,618
618
7,399
2,377
1,500
314
1,242
1,692
15,625
138
26,810
115
3,693
37
300

82,806
444
2,369
615
522
11,303
5,320
617
7,429
2,022
1,391
537
1,418
1,847
14,859
136
27,187
122
4,301
33
334

82,726'
352
2,795
588
435
10,839
5,427
610
6,942
2,128
1,221
339
1,386
1,632
14,517
136
27,247
144
5,591'
40
354

82,937
383
4,097
553
438
11,199
6,951
626
5,778
2,676
1,282
391
1,366
1,999
14,736
153
24,192
254
5,453
49
357

83,550
442
3,827
534
433
12,171
7,620
566
7,137
2,828
1,140
398
1,370
1,795
14,468
164
22,347
190
5,811
36
272

24 Canada ..........................................................................

4,607

6,969

7,379

9,541

9,556

8,507

8,048

8,201

8,902

8,792

25 Latin America and Caribbean..................................
26 Argentina ................................................................
27 Bahamas ..................................................................
28 Bermuda ..................................................................
29 Brazil ........................................................................
30 British West Indies ................................................
Chile ..........................................................................
31
32 Colombia ..................................................................
33 C u b a ..........................................................................
34 Ecuador ....................................................................
35 Guatemala3 ..............................................................
36 Jamaica3 ....................................................................
37 Mexico ......................................................................
38 Netherlands Antilles ..............................................
39 Panama ....................................................................
40 Peru ..........................................................................
41
Uruguay ....................................................................
42 Venezuela ................................................................
43
Other Latin America and Carribbean................

23,670
1,416
3,596
321
1,396
3,998
360
1,221
6
330
2,876
196
2,331
287
243
2,929
2,167

31,606
1,484
6,752
428
1,125
5,991
399
1,756
13
322
416
52
3,417
308
2,968
363
231
3,821
1760

49,633
1,582
15,354
430
1,005
11,074
469
2,617
13
425
414
76
4,096
499
4,483
383
202
4,192
2,318

50,843
1,635
16,629
447
1,405
11,908
396
2,882
10
386
394
96
3,980
344
4,770
376
216
3,083
1,886

57,933
1,632
22,288
560
1,156
12,958
471
2,840
5
412
391
90
3,973
524
4,663
388
210
3,518
1,856

51,583
1,582
16,352
534
1,367
11,812
445
2,825
6
459
426
97
4,001
419
4,418
363
240
4,075
2,161

48,874
1,679
14,454
479
1,645
11,585
444
2,905
23
357
403
132
4,302
411
4,505
392
216
3,104
1,837

48,953
1,903
16,535
512
1,527
9,571
416
2,780
7
337
350
138
4,111
335
4,082
412
208
3,953
1,775

46,938
1,705
12,887
576
1,454
10,332
450
2,854
6
455
360
91
3,918
250
4,176
346
232
4,707
2,139

49,113
1,840
12,988
464
1,473
12,068
456
2,931
6
346
379
137
4,198
332
4,688
350
232
4,350
1,875

44 Asia ..............................................................................
China

30,488

36,492

32,928

32,056

34,510

34,222

33,519

35,984

39,388

37,937

45
46
47
48
49
50
51
52
53
54
55
56

Taiwan ..................................................................
Hong Kong ..............................................................
India ..........................................................................
Indonesia ..................................................................
Israel ........................................................................
Japan ........................................................................
Korea ........................................................................
Philippines ................................................................
Thailand....................................................................
Middle-East oil-exporting countries4 ..................
Other Asia ..............................................................

53
1,013
1,094
961
410
559
14,616
602
687
264
8,979
1,250

67
502
1,256
790
449
688
21,927
795
644
427
7,534
1,414

49
1,393
1,672
527
504
707
8,907
993
800
277
15,217
1,881

46
1,386
1,694
544
743
517
9,434
959
729
408
14,089
1,506

32
1,567
1,776
579
693
507
10,663
1,019
772
284
14,992
1,625

34
1,888
1,897
558
658
759
9,651
1,069
669
414
15,686
1,638

35
1,076
1,857
576
935
560
9,383
1,008
789
407
15,189
1,704

30
1,3%'
1,944'
740
670
570
10,792
988
885
472
15,724
1,771

44
1,534
2,260
633
807
584
12,430
1,087
883
405
16,712
2,010

38
1,440
2,186
494
849
472
12,544
1,493
940
405
15,283
1,794

57 Africa ............................................................................
58 Egypt ........................................................................
59 M orocco....................................................................
60 South Africa ............................................................
61 Z a ir e..........................................................................
62 Oil-exporting countries5 ........................................
63 Other A frica ............................................................

2,535
404
66
174
39
1,155
698

2,886
404
32
168
43
1,525
715

3,239
475
33
184
110
1,635
804

3,332
449
50
270
128
1,503
932

3,170
332
33
195
93
1,665
852

3,325
318
31
313
102
1,660
901

4,203
438
41
294
84
2,462
885

3,810
376
31
316
86
2,231
768

3,708
346
35
325
107
2,100
796

3,800
447
33
360
78
2,100
781

64 Other countries ..........................................................
65 Australia ..................................................................
66 All other ..................................................................

1,297
1,140
158

1076
838
239

904
684
220

1,114
853
261

1,363
1,054
309

1,304
992
312

1,133
881
252

1,397
1,150
247

1,290
1,019
271

1,239
958
281

67 Nonmonetary international and regional
organizations ........................................................
68 International ............................................................
69 Latin American regional........................................
70 Other regional6 ........................................................

3,274
2,752
278
245

2,607
1,485
808
314

2,351
1,238
806
308

1,227
829
84
314

1,712
618
780
315

1,758
652
746
361

1,968
863
813
292

1,775'
696'
790
289

3,499
2,394
802
302

2,888
1,804
775
309

Mainland .....................................................................

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 Dem­
ocratic 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. Asian, African, Middle Eastern, and European regional organizations, except
the Bank for International Settlements, which is included in “Other Western
Europe.”

A 61

Bank-Reported Data
3.17

BANKS’ OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States
Payable in U.S. Dollars
Millions of dollars, end of period
1980

Area and country

1977

1978

1979

Jan.

Feb.

Mar.

Apr.

May

June

JulyP

1 Total ...................................................................

90,206

115,479

133,762

127,614

131,088

130,775

133,331

139,730'

149,020

151,181

2 Foreign countries ................................................

90,163

115,423

133,730

127,579

131,055

130,739

133,298

139,696'

148,987

151,150

3 Europe ................................................................

18,114
65
561
173
172
2,082
644
206
1,334
338
162
175
722
218
564
360
8,964
311
86
413
566

24,232
140

28,389
284
1,339
147

24,906
258
1,416
126
262
3,086
921
136
1,390
472
177
288
948
747
939
128
11,370
569
203
263
1,205

25,592
315
1,524
156
237
3,197
1,209
141
1,407
610
175
213
1,015
702
1,363
131

25,810
331
1,631
207
188
2,984
1,308
191
1,488
535
254
227
914
593
1,356
123
10,950
598
225
253
1,453

24,525
337
1,590
203
223
2,811
1,153
244
1,462
480
170
247

26,206'
292'
1,471
168
273
2,740
1,104
329
1,748
457
172
246
1,106
661
916
151
11,851'
614
266
247
1,394

29,843
305
1,997
167
306
2,685
1,131
346
1,937
589
218
300
1,195
682
1,236
143
14,024
658
208
289
1,426

28,758
321
1,610
149
230
2,576
998
279
2,293
491
270
349
1,016
571
1,319
143
13,460
648
170
529
1,335

4
5
6
7
8
9
10
11
12

13
14
15
16
17
18
19
20
21
22

23

Austria ............................................................
Belgium-Luxembourg ......................................
Denmark .........................................................
Finland............................................................
France ............................................................
Germany .........................................................
Greece ............................................................
Italy ................................................................
Netherlands .....................................................
Norway ...........................................................
Portugal ...........................................................
Spain ..............................................................
Sweden............................................................
Switzerland .....................................................
Turkey ............................................................
United Kingdom...............................................
Yugoslavia.......................................................
Other Western Europe1 ..................................
U.S.S.R.............................................................
Other Eastern Europe2 ....................................

1,200

254
305
3,735
845
164
1,523
677
299
171

1,120

537
1,283
300
10,172
363

122

366
657

202
3,302
1,159
154
1,631
514
276
330
1,051
542
1,166
149
13,789
611
175
290
1,277

24 Canada ................................................................

3,355

5,152

4,143

25 Latin America and Caribbean.............................
26 Argentina .......................................................
27 Bahamas .........................................................
28 Bermuda .........................................................
29 Brazil ..............................................................
30 British West Indies .........................................
31 Chile................................................................
32 Colombia .........................................................
33 C uba................................................................
34 Ecuador ...........................................................
35 Guatemala3 ......................................................
36 Jamaica3 ...........................................................
37 Mexico ............................................................
38 Netherlands Antilles ........................................
39 Panama ...........................................................
40 Peru ................................................................
41 Uruguay ...........................................................
42 Venezuela .......................................................
43 Other Latin America and Caribbean...............

45,850
1,478
19,858
232
4,629
6,481
675
671

57,443
2,281
21,428
184
6,251
9,692
972

10

65,600 '
4,683
20,743 '
434
7,555
7,819
1,376
1,655
4

4,909
224
1,410
962
80
2,318
1,394

0
705
94
40
5,479
273
3,098
918
52
3,474
1,490

67,925
4,417
18,828
496
7,731
9,762
1,442
1,614
4
1,025
134
47
9,095
248
6,031
652
105
4,695
1,598

44

19,236

25,386

10

4
1,499
1,479
54
143

517

4,142

4,186

3,923

4,283

5,024

4,199

65,152
4,969
19,262
313

68,257
4,992
21,045
321

8,584
1,334
1,539
5

73,886
5,190
25,098
181
8,318
8,648
1,323
1,426
4
1,053

114
51
8,957
325
4,432
585
100
4,246
1,518

7,364
1,367
1,526
4
1,023
109
42
9,231
513
4,652
701
90
4,457
1,520

71,653'
5,117
23,297'
296
8,064
9,042'
1,355
1,408
4
1,007
107
43
9,726'
693'
4,538
628
154
4,528
1,646

4,276
1,553

78,922
5,232
28,763
194
8,980
8,917
1,359
1,448
4
1,052
151
31
10,664
760
4,461
647
91
4,467
1,700

30,625

30,173

32,337

32,827

33,912

34,902

37,163

36,156

28
1,700
1,804
136
117
812
17,027
4,080
649
971
1,400
1,448

51
1,691
2,127
90
128
787
18,899
4,356
645
993

49
1,524

48
1,626

12,671
2,282
680
758
3,125
1,804

35
1,821
1,804
92
131
990
16,921
3,796
737
935
1,548
1,813

75
2,104
2,280
83
154
1,023
21,595
5,337
780
921
1,255
1,558

77
2,218
2,162
97
205
949
20,552
5,477
869
938
1,107
1,506

1,012

1,001

1,719
543
53
232
584
9,839
2,336
594
633
1,746
947

57 Africa ..................................................................
58 Egypt ..............................................................
59 Morocco...........................................................
60 South Africa....................................................
61 Zaire................................................................
62 Oil-exporting countries5 ..................................
63 Other ..............................................................

2,518
119
43
1,066
98
510
682

2,221

1,795

107
82
860
164
452
556

103
445
144
391
600

1,899
130
106
412
146
507
599

64 Other countries ..................................................
65 Australia .........................................................
66 All other .........................................................

1,090
905
186

988
877

111

855
673
182

67 Nonmonetary international and regional
organizations6 ...............................................

43

56

32

888

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 Dem­
ocratic 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).




565
227
265
1,254

618
826
132
10,462
593
330
257
1,366

66,251
4,899
19,214
314
7,618
10,136
1,430
1,698
4
1,025
105
44
9,021
397
3,919
634
82
4,196
1,515

4,023

China
Mainland .....................................................
Taiwan .........................................................
Hong K ong......................................................
India ................................................................
Indonesia .........................................................
Israel ..............................................................
Japan ..............................................................
Korea ..............................................................
Philippines .......................................................
Thailand...........................................................
Middle East oil-exporting countries4 ...............
Other Asia ......................................................

45
46
47
48
49
50
51
52
53
54
55
56

10,886

1,020

112

8,010

8,112

1,011
108
43
9,191
663
4,643
654
84
4,231

1,6%

120

36
10,185
728
4,951
696

101

132
734
19,433
4,726
696
877
1,437

1,359

1,211

87
166
829
20,311
4,853
693
857
1,178
1,263

40
1,889
2,362
61
128
828
20,395'
5,057
717
918
978
1,530

1,775
154
109
342
144
451
574

1,729
128
118
337
143
353
649

1,800
135
128
362
143
443
588

1,770
134
107
465
108
325
632

2,015
93

2,164

617
107
364
714

134
689
107
365
757

978
803
175

958
789
170

1,035
803
232

880
713
167

883
695
187

1,056
860
196

950
743
207

35

33

36

33

34

33

31

1,211

1,888
120

2,001

121

112

5. Comprises Algeria, Gabon, Libya, and Nigeria.
6. Excludes the Bank for International Settlements, which is included in “Other
Western Europe.”
Note. Data for period prior to April 1978 include claims of banks’ domestic
customers on foreigners.

A62
3.18

International Statistics □ September 1980
BANKS’ OWN AND DOMESTIC CUSTOMERS’ CLAIMS ON FOREIGNERS Reported by Banks in the
United States
Payable in U.S. Dollars
Millions of dollars, end of period
1980
Type of claim

1 Total ............................................................

1977

1978

1979
Jan.

Feb.

127,614
14,932
46,414
36,281
4,933
31,349
29,986

131,088
15,052
47,003
39,018
5,153
33,864
30,015

Mar.

Apr

May

133,331
15,151
46,163
40,990
6,093
34,897
31,027

139,730'
15,105'
50,108'
42,896'
6,504'
36,392'
31,621'

June

126,698

153,710

2 Banks’ own claims on foreigners......................
3 Foreign public borrowers.................................

4 Own foreign offices1 ........................................
5 Unaffiliated foreign banks ...............................
6 Deposits.......................................................
7 Other ...........................................................
8 All other foreigners.........................................

115,479
10,263
41,502
40,538
5,480
35,058
23,176

133,762
15,434
47,305
41,016
6,253
34,762
30,007

9 Claims of banks’ domestic customers2 ..............
10 Deposits...........................................................
11 Negotiable and readily transferable instruments3
12 Outstanding collections and other claims4 ........

11,219
480
5,385
5,353

19,948
955
12,974
6,019

22,372
1,208
14,559
6,605

25,116
910
17,410
6,796

14,969

18,044

20,095

22,134

12,924

21,259

90,206

6,176

13 M emo: Customer liability on acceptances........
Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United
States5 ..................................................................

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 bak, 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. Principally negotiable time certificates of deposit and bankers acceptances.

153,147

23,874'

130,775
15,428
45,248
39,692
5,479
34,213
30,407

25,483'

24,873'

July?

174,136

24,100'

149,020
15,692
56,040
43,773
6,555
37,218
33,514

24,669'

151,181
16,232
58,668
41,847
6,088
35,759
34,435

22,883

4. Data for March 1978 and for period prior to that are outstanding collections
only.
5. Includes demand and time deposits and negotiable and nonnegotiable certif­
icates of deposit denominated in U.S. dollars issued by banks abroad. For de­
scription 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.

3.19 BANKS’ OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States
Payable in U.S. Dollars
Millions of dollars, end of period
1979

1978

1980

Maturity; by borrower and area
Dec.
1 Total...........................................................................................

Mar.

June

Sept.

Dec.

Mar.

June?

73,773

71,638

77,738

87,571

86,209

85,265

92,145

58,481
4,583
53,898
15,291
5,361
9,930

55,459
4,627
50,832
16,179
5,948
10,231

60,069
4,604
55,465
17,669
6,433
11,236

68,390
6,062
62,329
19,181
7,652
11,529

65,195
7,033
58,162
21,014
8,103
12,911

63,901
6,843
57,058
21,364
8,419
12,945

70,772
6,913
63,859
21,373
8,536
12,838

15,176
2,670
20,990
17,579
1,496
569

12,396
2,514
21,724
16,992
1,290
541

14,028
2,703
23,144
18,191
1,438
565

16,794
2,471
25,687
21,515
1,399
524

15,209
1,777
24,964
21,673
1,078
493

13,850
1,818
23,177
23,386
1,043
627

17,121
2,099
24,241
25,299
1,307
705

3,142
1,426
8,466
1,407
637
214

3,103
1,456
9,325
1,486
629
180

3,488
1,221
10,279
1,884
614
183

3,658
1,364
11,771
1,578
623
188

4,145
1,317
12,821
1,911
652
169

4,253
1,214
13,397
1,728'
620
152

4,058
1,194
13,846
1,562
567
146

By borrower
2 Maturity of 1 year or less1 ....................................................................
3 Foreign public borrowers..................................................................
4 All other foreigners............................................................................
5 Maturity of over 1 year1 ........................................................................
6 Foreign public borrowers..................................................................
7 All other foreigners............................................................................

By area
8
9
10
11
12
13

Maturity of 1 year or less1
E u rop e..................................................................................................
Canada ..................................................................................................
Latin America and Caribbean..........................................................

A frica....................................................................................................
All other2 ............................................................................................
Maturity of over 1 year1
14 E u rop e..................................................................................................
15 Canada ..................................................................................................
16 Latin America and Caribbean..........................................................
17
18 A frica....................................................................................................
19 All other2 ............................................................................................
1. Remaining time to maturity.
2. Includes nonmonetary international and regional organizations.




A 63

Bank-Reported Data
3.20 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1
Billions of dollars, end of period
1979

1978
Area or country

1976

1980

1977
June2

Sept.

Dec.

Mar.

June

Sept.

Dec.

Mar.

June?

1 Total........................................................................................

206.8

240.0

247.1

247.6

266.3'

264.0'

275.6'

294.0'

303.8'

307.5'

326.8

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 .................................................................................................

100.3
6.1
10.0
8.7
5.8
2.8
1.2
3.0
41.7
5.1
15.9

116.4
8.4
9.6
6.5
3.5
1.9
3.6
46.5
6.4
18.8

112.6
8.3
11.4
9.1
6.4
3.4
2.1
4.1
44.9
5.1
17.9

113.5
8.4
11.7
9.7
6.1
3.5
2.2
4.3
44.2
4.9
18.5

124.8
9.0
12.2
11.3
6.7
4.4
2.1
5.4
47.3
6.0
20.6

119.1'
9.4
11.7
10.5
5.7
3.9
2.0
4.5
46.4
5.9
19.0

125.3
9.7
12.7
10.8
6.1
4.0
2.0
4.8
50.3
5.5
19.5'

135.8
10.7
12.0
12.8
6.1
4.7
2.3
5.0
53.7
6.0
22.3'

138.4'
11.1
11.6
12.2
6.4'
4.8
2.4
4.8
56.4'
6.3'
22.4

140.4'
10.8
12.0
11.4
6.2
4.3
2.4
4.4
57.5'
6.8
24.7'

153.7
13.2
14.1
12.7
6.9
4.5
2.7
3.4
64.6
6.9
24.8

13 Other developed countries................................................................
14 A ustria...............................................................................................
15 Denmark ...........................................................................................
16 Finland...............................................................................................
17 Greece ...............................................................................................
18 Norway .............................................................................................
19 Portugal .............................................................................................
20 Spain .................................................................................................
21 Turkey ...............................................................................................
22
Other Western Europe ..................................................................
23
South A frica .....................................................................................
24
Australia ...........................................................................................

15.0
1.2
1.0
1.1
1.7
1.5
.4
2.8
1.3
.7
2.2
1.2

18.6
1.3
1.6
1.2
2.2
1.9
.6
3.6
1.5
.9
2.4
1.4

19.4
1.5
1.7
1.1
2.3
2.1
.6
3.6
1.4
1.2
2.4
1.4

18.7'
1.5
1.9
1.0
2.2
2.1
.5
3.5
1.5
.9
2.2
1.3

19.4
1.7
2.0
1.2
2.3
2.1
.6
3.5'
1.5
1.3
2.0
1.4

18.2
1.7
2.0
1.2
2.3
2.1
.6
3.0
1.4
1.1
1.7
1.3

18.2
1.8
1.9
1.1
2.2
2.1
.5
3.0
1.4
1.0'
1.8
1.4

19.7
2.0
2.0
1.2
2.3
2.3
.7
3.3
1.4
1.5'
1.7
1.3

19.8'
2.0
2.2
1.2
2.4
2.3
.7
3.5
1.4
1.4
1.3
1.3

18.8
1.7
2.1'
1.1
2.4
2.4
.6
3.5
1.4
1.4
1.1
1.2'

20.3
1.8
2.2
1.3
2.5
2.4
.6
3.9
1.4
1.6
1.5
1.2

25 Oil-exporting countries3 ....................................................................
26 Ecuador .............................................................................................
27 Venezuela .........................................................................................
28
Indonesia...........................................................................................
29
Middle East countries....................................................................
30 African countries ............................................................................

12.6
.7
4.1
2.2
4.2
1.4

17.6
1.1
5.5
2.2
6.9
1.9

19.2
1.4
5.6
1.9
8.4
1.9

20.4
1.6
6.2
1.9
8.7
2.0

22.7
1.6
7.2
2.0
9.5
2.5

22.6
1.5
7.2
1.9
9.4
2.6

22.7
1.6
7.6
1.9
9.0
2.6

23.4
1.6
7.9
1.9
9.2
2.8

22.9'
1.7
8.7
1.9
8.0
2.6

21.9
1.8
7.9
1.9
7.8
2.5

20.9
1.8
7.9
1.9
6.9
2.5

31 Non-oil developing countries............................................................

44.2

48.7

49.1

49.6

52.6'

53.9'

55.9'

58.8'

62.8'

63.8'

67.1

Latin America
Argentina .........................................................................................
Brazil .................................................................................................
C h ile ...................................................................................................
Colom bia...........................................................................................
Mexico ...............................................................................................
Peru ...................................................................................................
Other Latin America ....................................................................

1.9
11.1
.8
1.3
11.7
1.8
2.8

2.9
12.7
.9
1.3
11.9
1.9
2.6

3.0
13.3
1.3
1.3

1.8
3.3

2.9
14.0
1.3
1.3
10.7
1.8
3.4

3.0
14.9
1.6
1.4
10.8'
1.7
3.6

3.1
14.9
1.7
1.5
10.9
1.6
3.5

3.5
15.1
1.8
1.5
10.7
1.4
3.3

4.1
15.1
2.2
1.7
11.4'
1.4
3.6

5.1
15.2'
2.5
2.2
12.0'
1.5
3.7

5.6
15.0'
2.5
2.1'
12.2
1.3'
3.6'

5.5
15.4
2.6
2.2
13.4
1.4
3.6

47

Asia
China
Mainland .......................................................................................
Taiwan ...........................................................................................
In d ia ...................................................................................................
Israel .................................................................................................
Korea (South) ................................................................................
Malaysia4 ...........................................................................................
Philippines.........................................................................................
Thailand ...........................................................................................
Other Asia .......................................................................................

.0
2.4
.2
1.0
3.1
.5
2.2
.7
.5

.0
3.1
.3
.9
3.9
.7
2.5
1.1
.4

.0
2.5
.2
.7
3.6
.6
2.7
1.1
.3

.0
2.4
.3
.7
3.5
.6
2.8
1.1
.3

.0
2.9
.2
1.0
3.9
.6
2.8
1.2
.2

.1
3.1
.2
1.0
4.2
.6
3.2
1.2
.3

.1
3.3
.2
.9
5.0
.7
3.7
1.4
.4

.1
3.5
.2
1.0
5.3
.7
3.7
1.6
.3

.1
3.4
.2
1.3
5.5
.9
4.2
1.6
.4

.1
3.6
.2
.9
6.5'
.8
4.4
1.4
.4

.1
3.8
.2
1.2
7.0
.9
4.6
1.5
.5

48
49
50
51

Africa
Egypt .................................................................................................
Morocco ...........................................................................................
Zaire .................................................................................................
Other Africa5 ...................................................................................

.4
.3
.2
1.2

.3
.5
.3
.7

.3
.5
.2
1.2

.4
.5
.2
1.3

.4
.6
.2
1.4

.5
.6
.2
1.4

.7
.5
.2
1.5

.6
.5
.2
1.6

.6
.6
.2
1.7

.7
.5
.2
1.8

.7
.5
.2
1.9

52 Eastern Europe ..................................................................................
53
U.S.S.R...............................................................................................
54
Yugoslavia.........................................................................................
55
Other .................................................................................................

5.2
1.5
.8
2.9

6.3
1.6
1.1
3.7

6.4
1.4
1.3
3.7

6.6
1.4
1.3
3.9

6.9
1.3
1.5
4.1

6.7
1.1
1.6
4.0

6.7
.9
1.7
4.1

7.2
.9
1.8
4.6

7.3'
.7'
1.8
4.8

7.3
.6
1.9
4.9

7.2
.5
2.1
4.6

56 Offshore banking ce n ter s..................................................................
57
Bahamas ...........................................................................................
58
Bermuda ...........................................................................................
59 Cayman Islands and other British West In d ies........................
60 Netherlands Antilles ......................................................................
61
Panama6 ...........................................................................................
62
Lebanon ..........................................................................................
63
Hong K o n g ......................................................................................
64
Singapore ........................................................................................
65
Others7 ............................................................................................

24.7
10.1
.5
3.8
.6
3.0
.1
2.2
4.4
.0

26.1
9.8
.6
3.8
.7
3.1
.2
3.7
3.7
.5

32.4
12.1
.7
7.2
.6
3.3
.1
4.1
3.8
.5

30.2
11.6
.7
6.8
.6
3.1
.1
4.0
2.9
.5

30.9'
10.3
.7
7.4
.8
3.0
.1
4.2'
3.9
.5

33.7
12.1
.6
7.2
.8
3.4
.1
4.8
4.2
.4

37.0'
14.3
.7
7.5
1.0
3.8
.1
4.9
4.2
.4

38.6'
12.9
.7
9.5
1.1
3.4
.2
5.5
4.9
.4

40.4
13.7'
.8
9.4'
1.2
4.3
.2
6.0
4.5
.4

42.4'
13.7'
.6
11.3'
.9
4.9
.2
5.7
4.7
.4

43.4
13.0
.6
9.7
1.2
5.6
.2
6.9
5.9
.4

66 Miscellaneous and unallocated8 ........................................................

5.0

5.3

8.1

8.6

9.1

9.5

9.9

10.6

11.7

13.1

14.4

32
33

34
35
36
37
38

39
40
41
42

43
44
45
46

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 3.13 (the sum of lines 7 through 10) with the claims
of U.S. offices in table 3.17 (excluding those held by agencies and branches of
foreign banks and those constituting claims on own foreign branches). However,
see also footnote 2.
2. For June 1978 and subsequent dates, the claims of the U.S. offices




11.0

11.0

in this table include only banks’ own claims payable in dollars. For earlier dates
the claims of the U.S. offices also include customer claims and foreign currency
claims (amounting in June 1978 to $10 billion).
3. Includes Algeria, Bahrain, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Oman,
Qatar, Saudi Arabia, and United Arab Emirates in addition to countries shown
individually.
4. Foreign branch claims only through December 1976.
5. Excludes Liberia.
6. Includes Canal Zone beginning December 1979.
7. Foreign branch claims only.
8. Includes New Zealand, Liberia, and international and regional organizations.

A64
3.21

International Statistics □ September 1980
MARKETABLE U.S. TREASURY BONDS AND NOTES

Foreign Holdings and Transactions

Millions of dollars
1980
Country or area

1978

1979
JanJulyP

Jan.

Feb.

Mar.

Apr.

May

June

JulyP

Holdings (end of period)1

1 Estimated total2 ....................................

44,938

50,307

52,831

53,202

52,091

51,371

53,131"

53,819

2 Foreign

countries2 ......................................

39,817

44,875

46,780

46,557

46,534

46,430

46,907

48,727

49,523

3 Europe2 ............................................
4 Belgium-Luxembourg ..........................
5 Germany2 ................................................

17,072
19
8,705
1,358
285
977
5,373
354

23,705
60
12,937
1.466
647
1,868
6,236
491

25,353
60
14,081
1,407
640
1,894
6,757
514

24,902
55
13,797
1,414
636
1,564
6,923
512

24,611
27
13,489
1,453
633
1,534
6,995
478

24,008
28
13,207
1,473
642
1,528
6,603
527

24,075
28
13,225
1,412
653
1,574
6,665
519

24,377
28
12,976
1,437
647
1,731
7,001
556

24,157
45
12,578
1,547
650
1,675
7,091
571

6

7
8

9
10
11
12

Netherlands ............................................
Sweden ....................................................
Switzerland2 ..........................................
United Kingdom ....................................
Other Western Europe ........................
Eastern Europe ....................................
Canada ..........................................................

13 Latin America and Caribbean................
14 Venezuela ..............................................
15 Other Latin American and Caribbean
16 Netherlands Antilles ............................
17 Asia ..............................................................
18 Japan ......................................................
19 Africa ..........................................................
20 All other ....................................................

52,997

152

232

231

389

394

381

385

423

481

416
144
110
162
21,488
11,528
691
-3

546
183
200
163
19,804
11,175
591
-3

546
183
200
163
20,061
10,844
591
-3

547
183
201
164
20,130
10,420
591
-3

552
183
206
164
20,390
9,631
591
-3

581
183
199
199
20,872
9,533
593
-6

592
183
209
200
21,269
9,543
593
-7

696
280
215
200
22,751
9,545
492
-1 1

770
328
242
200
23,534
9,614
592
-1 1

21

Nonmonetary international and regional
organizations ......................................

5,121

5,432

6,051

6,645

6,463

5,661

4,464

4,404

4,296

22
23

International ..........................................
Latin American regional......................

5,089
33

5,388
40

6,016
35

6,592
53

6,407
53

5,606
53

4,401
63

4,338
63

4,234
63

1,757

692

1,820
1,718r
102r

795
762
33

Transactions (net purchases, or sales ( - ) , during period)
24 Total2 ............................................................................

6,297

5,368

3,516

2,527

371

-2 0 7

-9 0 6

-7 1 7

25 Foreign countries2 ......................................................
26
Official institutions..................................................
27
Other foreign2 .............. ............................................

5,921
3,729
2,193

5,059
1,776
3,284

4,648
2,915
1,731

1,904
483
1,421

-2 2 3
-2 6 4
41

-22
-1 0 3
79

-1 0 5
-6 7
-3 7

478
386
92

28 Nonmonetary international and regional
organizations ........................................................

375

311

-1,131

624

594

-185

-8 0 2

-1,195

-6 3

-1 0 4

- 1 ,7 8 5

-1 ,0 1 5

5,023

550

500

1,014

471

462

1,427
-1 0 0

598
100

M emo : Oil-exporting countries

29 Middle East3 ................................................................
30 Africa4 ..........................................................................

329

-100

1. Estimated official and private holdings of marketable U.S. Treasury securities
with an original maturity of more than 1 year. Data are based on a benchmark
survey of holdings as of Jan. 31, 1971, and monthly transactions reports. Excludes
nonmarketable U.S. Treasury bonds and notes held by official institutions of for­
eign countries.

2. Beginning December 1978, includes U.S. Treasury notes publicly issued to
private foreign residents denominated in foreign currencies.
3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
4. Comprises Algeria, Gabon, Libya, and Nigeria.

3.22 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS
Millions of dollars, end of period
1980
Assets

1977

1978

1979
Feb.

Mar.

Apr.

May

June

July

Aug .P

1 D ep osits........................................................................

424

367

429

450

468

618

380

691

436

336

Assets held in custody
2 U.S. Treasury securities1 ..........................................
3 Earmarked gold2 ........................................................

91,962
15,988

117,126
15,463

95,075
15,169

96,200
15,109

89,290
15,087

85,717
15,057

88,489
15,037

93,661
15,034

95,525
15,034

96,504
15,025

1. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable U.S.
Treasury securities payable in dollars and in foreign currencies.
2. The value of earmarked gold increased because of the changes in par value
of the U.S. dollar in May 1972 and in October 1973.




N ote . 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,

A 65

Investment Transactions
3.23

FOREIGN TRANSACTIONS IN SECURITIES
Millions of dollars
1980
Transactions, and area or country

1978

1980

1979
Jan.JulyP

Jan.

Feb.

Mar.

Apr.

May

June

JulyP

U.S. corporate securities
Stocks
1 Foreign purchases ......................................................
2 Foreign s a le s .................................................................

20,145
17,723

22,643
21,017

19,887
17,022

3,128
2,439

4,477
3,355

2,724
2,380

1,985
1,719

1,940
1,958

2,550
2,390

3,083
2,781

3 Net purchases, or sales ( - ) ......................................

2,423

1,627

2,865

689

1,121

344

266

-1 7

160

302

4 Foreign countries ........................................................

2,469

1,610

2,858

688

1,124

342

263

-1 9

162

300

Europe ..........................................................................
France ......................................................................
Germany ..................................................................
Netherlands ...............................................................
Switzerland ...............................................................
United Kingdom ......................................................
Canada ..........................................................................
Latin America and Caribbean..................................
Middle East1 ................................................................
Other Asia ..................................................................
Africa .............................................................................
Other countries ..........................................................

1,283
47
620
-2 2
-585
1,230
74
151
781
189
-1 3
3

217
122
-221
-7 1
-5 1 9
964
552
-1 9
656
211
-1 4
7

1,989
262
63
-161
300
1,473
429
82
335
17
-3
8

506
71
35
8
153
215
42
92
15
30
0
2

856
133
52
-4 1
375
333
130
34
50
58
-1
-3

156
-4 9
-2 5
-6
-3 6
277
130
-4 9
97
8
2
-2

129
14
3
-30
-7 5
194
66
6
145
-8 1
0
-2

105
23
14
-4 0
-1 7
106
-4 2
-4
-6 0
-2 1
0
3

118
9
-5
-2 5
-1 9
160
24
27
-4 2
28
-2
8

118
62
-1 0
-2 7
-8 2
188
81
-2 5
130
-5
-1
2

17 Nonmonetary international and regional
organizations ........................................................

-4 6

17

7

18 Foreign purchases ......................................................
19 Foreign s a le s .................................................................

7,975
5,681

8,826
7,575

9,732
6,178

5
6
7
8
9
10
11
12
13
14
15
16

1

-2

2

3

2

-2

2

1,654
1,137

1,329'
1,011'

1,734
1,152

1,695
898

Bonds2
1,149
548

934
594

1,237
838

20 Net purchases, or sales ( —) ......................................

2,294

1,251

3,555

601

340

399

518

318r

582

797

21 Foreign countries ........................................................

1,885

1,351

3,264

469

275

407

568

249'

525

769

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 East1 ................................................................
Other Asia ...................................................................
Africa ............................................................................
Other countries ..........................................................

744
30
6
12
-2 0 2
930
102
98
810
131
-1
1

639
11
72
-2 0 2
-1 1 8
814
89
109
424
88
1
1

1,085
99
157
-8 2
40
838
75
123
1,923
41
4
13

151
8
-5
-3
6
195
25
14
280
-1
0
0

42
1
6
-3 0
8
71
28
10
181
3
2
8

315
15
11
0
3
265
8
9
79
-4
0
0

251
7
104
-1 4
79
36
2
13
295
7
0
0

92'
47
104
-1 4
-2 9 '
-3 4
9
25
104
17
1
0

105
12
-1 4
6
-1 0
110
5
23
383
5
0
4

129
8
-5 0
-2 6
-1 6
196
-2
29
600
13
0
1

34 Nonmonetary international and regional
organizations ........................................................

409

-101

291

132

65

-8

-5 0

68'

57

28

Foreign securities
35 Stocks, net purchases, or sales ( - ) ........................
36 Foreign purchases ..................................................
37 Foreign s a le s ............................................................

527
3,666
3,139

-7 8 6
4,615
5,401

-1,181
4,093
5,274

-2 3 3
625
858

-4 2 5
805
1,230

-2
665
667

-4 0
402
442

-2 4 1
450
691

-1 6 4
491
655

-7 6
654
731

38 Bonds, net purchases, or sales ( - ) ........................
39 Foreign purchases ..................................................
40 Foreign s a le s ............................................................

-4,054
11,043
15,096

-3,970
12,375
16,345

-6 1 0
9,716
10,326

-4 8
1,264
1,313

-7 4
1,379
1,453

17
1,181
1,164

-1 2
1,072
1,084

-2 5 1
1,479
1,730

-6 1 8
1,637
2,255

376
1,703
1,327

41 Net purchases, or sales ( —), of stocks and bonds ..

-3,527

-4,756

-1,791

-2 8 1

-4 9 9

15

-5 2

-4 9 1

-7 8 1

299

42
43
44
45
46
47
48

Foreign countries ........................................................
Europe ...........................................................................
C anada...........................................................................
Latin America and C aribbean..................................
Asia ...............................................................................
Africa ............................................................................
Other countries ..........................................................

-3,340
-6 5
-3,238
201
349
-441
-1 4 6

-4,006
-1,640
-2,609
348
-1 0 8
-2 3
25

-2,293
-6 6 8
-1,471
214
-4 0 9
7
36

-3 5 9
176
-3 3 0
5
-2 0 4
-2
-4

-5 0 0
-1 2 6
-4 1 5
101
-4 6
-1
-1 3

-3 3
54
-161
29
49
0
-3

-7 2
-8 0
3
14
-1 2
3
0

-4 9 8
-2 1 4
-2 5 6
45
-8 2
4
5

-8 0 0
-4 7 4
-2 8 3
-2 5
-6 5
3
44

-3 0
-4
-2 9
44
-4 9
0
7

49 Nonmonetary international and regional
organizations ........................................................

-1 8 7

-7 5 0

502

78

48

20

7

19

330

1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait,
Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States).




1

2. Includes state and local government securities, and securities of U.S. government agencies and corporations. Also includes issues of new debt securities
sold abroad by U.S. corporations organized to finance direct investments abroad.

A66
3.24

International Statistics □ September 1980
LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the
United States1
Millions of dollars, end of period
1978

1979

1980

1978

Type, and area or country

Sept.

Mar.

June

Sept.

Dec.

Mar.

1 Total ...............................................................

10,099

11,085

14,808

12,786

14,418

15,305

15,490

16,905

17,245

2 Payable in dollars.........................................
3 Payable in foreign currencies2 ..................

9,390
709

10,284
801

11,500
3,308

11,955
831

11,497
2,921

12,528
2,777

12,578
2,912

13,911
2,994

14,351
2,894

By type
4 Financial liabilities......................................
5 Payable in d ollars....................................
6 Payable in foreign currencies................

6,253
3,844
2,409

5,995
3,793
2,202

5,890
3,822
2,068

5,951
3,790
2,161

7,281
5,078
2,203

7,739
5,583
2,156

7 Commercial liabilities ................................
8 Trade payables ........................................
9 Advance receipts and other liabilities .

8,555
4,062
4,493

8,423
3,569
4,854

9,415
4,317
5,098

9,539
4,084
5,455

9,624
4,369
5,255

9,506
4,104
5,401

10
11

Payable in d ollars....................................
Payable in foreign currencies................

7,656
899

7,703
719

8,706
709

8,788
750

8,834
790

8,768
738

12
13
14
15
16
17
18

By area or country
Financial liabilities
Europe .......................................................
Belgium-Luxembourg ........................
France ...................................................
Germany ...............................................
Netherlands ..........................................
Switzerland ..........................................
United Kingdom ..................................

3,855
289
167
366
389
248
2,063

3,601
266
139
311
422
244
2,007

3,429
315
134
283
401
235
1,842

3,553
277
126
381
520
190
1,860

4,549
345
168
497
834
168
2,342

4,764
303
188
520
858
172
2,519

19

Canada ......................................................

244

252

290

300

445

368

20
21
22
23
24
25
26

Latin America and C aribbean............
Bahamas ..............................................
Bermuda ..............................................
Brazil ....................................................
British West Indies ............................
Mexico ..................................................
Venezuela ............................................

1,353
426
56
10
190
102
49

1,343
411
41
13
197
101
55

1,389
442
37
19
185
131
68

1,330
345
37
14
194
122
71

1,483
347
109
18
514
121
72

1,770
436
106
22
693
108
70

27
28
29

Asia ..........................................................
Japan ....................................................
Middle East oil-exporting countries3

791
714
32

790
714
23

772
706
25

757
700
19

795
723
31

816
732
26

30
31

Africa ........................................................
Oil-exporting countries4 ....................

5
2

5
1

6
2

5
1

4
1

12
1

32

All other5 ................................................

5

5

5

5

4

10

33
34
35
36
37
38
39

Commercial liabilities
Europe ......................................................
Belgium-Luxembourg ........................
France ..................................................
Germany ..............................................
Netherlands ..........................................
Switzerland ..........................................
United Kingdom..................................

3,033
75
321
529
246
302
824

3,003
70
350
395
224
329
870

3,306
81
353
471
230
439
997

3,395
103
394
539
206
348
1,015

3,625
137
467
534
227
310
1,078

3,683
118
503
532
288
382
995

40

Canada ......................................................

667

614

645

709

852

686

41
42
43
44
45
46
47

Latin America ........................................
Bahamas ..............................................
Bermuda ..............................................
Brazil ....................................................
British West Indies ............................
Mexico ..................................................
Venezuela ............................................

997
25
97
74
53
106
303

1,168
16
42
61
89
236
356

1,322
65
82
165
121
203
323

1,387
89
48
186
21
256
359

1,323
69
32
203
21
257
301

1,257
4
47
228
20
235
211

48
49
50

Asia ..........................................................
Japan ....................................................
Middle East oil-exporting countries3

2,912
429
1,523

2,622
401
1,122

3,007
489
1,225

2,985
506
1,070

2,859
481
1,021

2,875
568
878

51
52

Africa ........................................................
Oil-exporting countries4 ..................

743
312

779
343

891
410

775
370

728
384

742
382

53

All other5 ..............................................

203

237

243

287

237

263

1. For a description of the changes in the International Statistics tables, see July
1979 Bulletin, p. 550.
2. Before December 1978, foreign currency data include only liabilities denom­
inated in foreign currencies with an original maturity of less than one year.




3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and
United Arab Emirates (Trucial States).
4. Comprises Algeria, Gabon, Libya, and Nigeria.
5. Includes nonmonetary international and regional organizations.

Nonbank-Reported Data
3.25

CLAIMS ON UN AFFILIATED FOREIGNERS
United States1

A67

Reported by Nonbanking Business Enterprises in the

Millions of dollars, end of period
1976

1977

1980

1979

1978
Type, and area or country

1978
Sept.

Mar.

June

Sept.

Mar.

Dec.

1 T o ta l.......................................................................................

19,350

21,298

27,655

23,260

30,117

29,522

30,072

30,141

31,617

2 Payable in dollars.................................................................
3 Payable in foreign currencies2 ..........................................

18,300
1,050

19,880
1,418

24,600
2,994

21,292
1,968

27,307
2,811

26,627
2,895

27,407
2,665

27,098
3,044

28,857
2,760

16,323
10,847
9,785
1,062
5,476
3,880
1,597

19,400
13,933
13,013
920
5,467
3,920
1,547

18,534
12,905
11,967
938
5,629
4,042
1,587

18,296
12,886
11,987
899
5,410
4,013
1,397

17,456
11,810
10,927
883
5,646
3,883
1,763

18,928
13,257
12,496
761
5,671
4,108
1,563

11,332
10,744
588

10,718
10,012
706

10,988
10,330
658

11,776
11,016
760

12,685
11,997
688

12,689
12,000
689

10,995
336

10,374
344

10,618
370

11,407
369

12,287
398

12,253
436

5,180
63
171
266
85
96
4,261

5,475
54
183
361
62
81
4,488

6,403
33
191
391
51
85
5,365

6,066
32
177
401
53
73
5,009

5,827
19
290
296
39
89
4,779

By type

By area or country
Financial claims

20
21
22

Netherlands ...................................................................
Switzerland ...................................................................
United Kingdom ...........................................................

5,050
48
178
510
103
98
3,856

23

Canada ...............................................................................

4,521

5,196

5,132

4,736

4,777

4,735

24
25
26
27
28
29
30

Latin America and Carribbean....................................
Bahamas .......................................................................
Bermuda .......................................................................
Brazil .......................................................