Full text of Federal Reserve Notes : December 1976

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Federal Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO • DECEMBER 1976
Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington

F.G. Larkin Jr.

G.F. Bradley

C.L. Peck

NEW FED DIRECTORS APPOINTED FOR 77
The Federal Reserve Bank of San

Francisco will gain two new directors
next month, while one present direc
tor will begin a new term.

and the UCLA Law Alumnus of the

City Bankers and is currently a trustee
of its Banking Research Fund.
Peck is Chairman of the Board of C. L.

Frederick G. Larkin, Jr. and Clair L.

Director of the San Francisco Fed. An

Peck (the present director) have been
elected by San Francisco District
member banks, and Dorothy Wright
Nelson has been appointed by the

alumnus of Stanford University, he

These three will join six other direc
tors who are serving unexpired terms.
Larkin is Chairman of the Board and

Chief Executive Officer of Security
Pacific Corporation and Security Pa
cific National Bank. He has spent his
entire career at Security Pacific fol
lowing graduation from Stanford Uni
versity. He was elected President of

graduated with a B.S. degree (cum
laude) in civil engineering. He is a
director of Farmers Insurance Group,
the Investment Company of America,
AMCAP Fund, Inc., Northrop Corpo
ration, and the Di Giorgio Corporation.

Nelson was appointed by the Board of
Governors as a public member. She is

of

Judaism

Humanitarian

Award of the Women Lawyers Asso
ciation of Los Angeles.
In a separate move, the Reserve
Bank's Board of Directors reappoint
ed Gilbert F. Bradley to the System's
Federal Advisory Council. Bradley is
Chairman of the Board and Chief

Executive Officer of Valley National
Bank of Arizona.

The 12-member Federal Advisory
Council, which consists of one rep

Dean and Professor of Law at the

resentative from each of the Federal

University of Southern California Law

Reserve Districts, meets four times a

Center. She is

year in Washington DC, with the
System's Board of Governors. The

the first woman to

serve in this capacity with the San
Francisco Fed, although two other

the bank in 1961 and Chairman of the

women

Board eight years later.

bank's branches in Los Angeles and
Salt Lake City, and a third will assume
a directorship at Portland in January.

With the formation of the holding com
pany in 1971, Larkin also became

versity

Award, and the Ernestine J. Stalhut

Peck Contractor and is currently a

Federal Reserve Board of Governors.

Year. She also has received the Uni

are

now

directors

at

the

Council discusses current economic

and banking matters, and makes rec
ommendations to the Board regard
ing System operations and policies.
Over the years, Bradley has served a
number of major civic groups in Arizo

Chairman of the Board and Chief

Dean Nelson's achievements include

Executive Officer of Security Pacific
Corporation. Active in banking organ
izations, he is a member and past

such awards as the Los Angeles

na. He was named Tucson's "Man of

Times Woman of the Year in 1968,

the Year" in 1963, and he was elected

director of the Association of Reserve

Award, AWARE International Award

UCLA

Professional

Achievement

president of the Arizona Bankers As

sociation in 1969. %

GARDNER TESTIFIES
ON EFTS ROLE

"You can thus understand why our

FOREIGN BANK

CONTROLS NEEDED

Government and private enterprise
both have an important stake in the
developing world of computerized

Federal controls on foreign banks
operating in the United States are
becoming increasingly necessary,

transfer systems, Governor Stephen

San Francisco Federal Reserve Pres
ident John J. Balles told an audience

Gardner told the National Commis
sion on Electronic Fund Transfers last
month.

of Japanese bankers in Tokyo last
month.

"Federal Reserve provision of auto
mated clearing facilities was not in
tended to preclude private-sector de

Balles made the remarks during a
month-long trip which encompassed
conferences with government offi

velopment and operation of similar
facilities, any more than its operation

throughout the Pacific Basin.

of check-clearing facilities preempts

correspondent or other clearings of
paper checks," Gardner said.
In his testimony, Gardner drew a

parallel between the Fed's role in
EFTS and the services it performs

with paper checks. He said the Fed's
EFTS operations essentially follow
the check-clearing path, except that
the payment information is ex
changed on magnetic tape instead of
paper checks. The System currently
provides clearing and settlement fa
cilities for automated clearinghouse
operations in 25 offices.

Gardner emphasized that throughout

this entire process, the Federal Re
serve interacts only with financial
institutions for purposes of clearing
and settlement. All other organiza

tional, operational, and legal require

cials,

bankers

and

businessmen

The Fed president noted that foreign
banks have built up substantial oper
ations inside this country, increasing
their banking assets from $18 billion
to $45 billion over the past four years.
This growth has occurred largely out
side the control of the Federal govern
ment and its agencies—and in some
cases with the help of privileges (such
as interstate branching) that are not

The Fed official pointed out that legis
lation to this effect was approved by
the House of Representatives in the
session just ended, but that the Sen
ate failed to vote before adjourn
ment. Similar legislation probably will
be reintroduced next year, based
upon the principle of "nondiscrimina
tion." As Balles explained, this princi
ple means that foreign banks in this
country should have the same pow
ers and obligations as equivalent
domestic banks, but not any more
powers.

He told the Japanese bankers, "Con
gress' acceptance of the principle of
nondiscrimination in the proposed
International Banking Act provides a

good foundation for your operations in
the United States.

"I know of no other country where

as U.S. commercial banks. Yet be

such a situation exists," said Balles.

cause of the skills and resources you

Gardner argued that automated
clearing and settlement is a natural
outgrowth of the Fed's long-standing
attempts to improve the payments

finance, I am certain that Japanese
banks will continue to grow and con
tribute to the increased efficiency of

exhibit in the field of international

the U.S. financial system."

mechanism.

Balles noted several specific ways in

Regardless of how EFTS develops,
Gardner said member banks proba

customers.

commitment to its EFTS role. In addi

which Japanese banks could be af
fected by the proposed legislation.
The principal change for these banks
would be the extension of reserve

requirements to branches and agen

seems likely because the System

cies. However, most Japanese-bank
offices are agencies, which have a
relatively small deposit base, so that

expects to realize economies of scale

the cost of these reserves should be

from its EFTS operations.

small. As an offset, these banks would

tion,

continued

Fed

participation

tions. "In common with other elec

tronic payments technologies, the
automated clearinghouse operation

Federal control

"Under the Act, you would have the
same powers and face the same rules

pating financial institutions and their

He identified several major factorssuch as cost savings—which led to
the Fed's involvement in EFTS opera

be uniform

over foreign banks."

available to domestic banks.

bly would not wish to duplicate exist
ing settlement facilities. This alone
should bring about a continued Fed

ments are handled between partici

Federal authorities believe that there
should

"The Federal Reserve has not arrived

at specific positions on questions

gain access to Federal Reserve serv
ices.

must afford customers a level of serv

related to its role in the electronic

Under the proposed act, foreign

ice or other reward which they cannot
otherwise obtain, and such benefits

payments mechanism, although it
has been studying this issue for some

banks could continue to open agen
cies in several states with state ap

must be paid for from cost savings
over the paper-based alternative,"

time. In determining its role, the Board
will consider such factors as competi
tive developments in the electronic

Gardner stressed.

payments mechanism, the positive

and cost-effective alternative to the

encouragement of the private sector,
the preservation of consumer options,
and the willingness of the private
sector to innovate and provide serv

paper system," he added.

ice beneficial to consumers."-^

"If these benefits are realized, I be

lieve that the automated clearing

house operation can be a progressive

proval. (The rationale is that agencies
do not accept domestic deposits and
hence are the equivalent of loanproduction offices of domestic
banks.) Thus, since Japanese banks

generally utilize the agency form of
operation, they could continue to op
erate such offices in several different

states. %

FOUR NEW BRANCH
DIRECTORS APPOINTED

The

Los

branches
Bank

of

Angeles
of

the

San

and

Portland

Federal

Francisco

Reserve
will

have

several new directors next month-

Joseph J. Pinola at Los Angeles, and
Jean Mater, Robert A. Young and
Robert F. Wallace at Portland. Mater

was appointed by the Federal Re
serve Board of Governors, and the

other three officials by the Board of
the Federal

Reserve Bank of San

Francisco.
J. Mater

Pinola, who is President of United

California Bank, gained early experi
ence with Bank of America following
Navy service during the Korean War.
After extensive work in corporate and
branch banking, he was named Bank
of

America's

executive

vice-

president in charge of the North A-

R.A. Young

In 1973, Dr. Mater became the first
woman to receive the coveted Gotts-

Young is President of Northwest Na

chalk Award of the Forest Products

tional Bank in Vancouver, Washing
ton. He held several banking positions

Research Society. A past president of
the Corvallis Chamber of Commerce,

she has also served on advisory
councils to several Federal agencies.

merica Division. In 1976 he assumed

the presidency of United California
Bank, the 14th largest bank in the

in Iowa and California after graduat
ing from the University of Iowa, and
eventually became Board Chairman
and President of Everett (Washing
ton) Trust and Savings Bank. In 1974,
he joined the Northwest Bank.

nation.

Young was elected to the National
Board of Directors of Robert Morris

-* «Zl

Associates in 1970, and has just com
pleted a term as national president of
the organization. He continues his
service to that organization as Chair
man of the Policy Division and as a
member of both the Executive Com

mittee and the Administration Serv

ices Committee.^
TERMS IMPROVED
R.F. Wallace

Wallace is Chairman of the Board and

Chief Executive Officer of First Na
J.J. Pinola

Active in professional and banking
circles, Pinola became a Director of
the California Bankers Association

this year. He also is a Director of
United California Bank and of West

ern Bancorporation Data Processing
Company. He is a member of the
Association of Reserve City Bankers
and Robert Morris Associates.

tional Bank of Oregon. He became a
banker following graduation from Col

gate University. Wallace joined First
National Bank of Oregon in 1968 as
an Assistant Vice President and be

came president just four years later.
He assumed his present position last
year.

Wallace has served as a member of
the Government Relations Council of

FOR KEOGH PLANS

The Federal Reserve has improved
the terms for Keogh plan retirement
accounts to make it easier for self-

employed individuals to earn a good
return on their savings for retirement.
Keogh plans were first authorized
under 1962 legislation to provide tax
benefits as a means of encouraging
self-employed persons to save for
retirement. The provisions permit a
self-employed individual to establish
a retirement savings plan with a de
pository institution, where he can
place up to 15 percent of earned
income or $7,500 a year—whichever

Dr. Mater, the first woman director on

the American Bankers Association,

the Portland Branch Board, is general

and as a member and past-president

manager of Mater Machine Works,
Inc., and a partner or director in sever

of the Port of Portland Board of Com

is smaller—in the account. The sums

missioners. He is an Associate Cam

al associated firms. She is one of the

paign Chairman and Director of the
United Way, and a Trustee of Lewis
and Clark College.

deposited may be deducted from the
amount of income subject to Federal

few women in the country with a Ph.D.
in Forest Products Chemistry.

tax.

(continued on page 4)

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CONSUMER COUNCIL

STUDIES REGULATIONS

source material that creditors need to

(continued from page 3)

consult to ensure compliance with
regulations.

The Board of Governors made two

At its first business meeting last
month, the Federal Reserve's Con

sumer Advisory Council wrestled with
the problem of how consumer regula
tions affecting banks can be simpli
fied and still be complete and work
able.

Council

members

acknowl

edged that simplification was "a very
controversial idea" that was easy to
embrace as an ideal but difficult to

execute in reality.
The

discussion

indicated

that the

major obstacle to simplification is the
conflict between interest groups with
different aims and divergent view
points. For example, some consum
ers are pressing for more and more
information, some Congressmen are
pushing for simplification of regula
tions, some creditors are advocating
reduced liability under the legislation,
and so on.

Council members underscored the

fact that the choice in writing con
sumer legislation and regulations is
often between simplicity and understandability versus completeness.
One member argued that much of the
complexity is due to creditors asking
regulatory agencies for guidance.
The resulting interpretations and staff
responses then become part of a

sometimes unwieldy body of official

The Consumer Advisory Council,
which is scheduled to meetfourtimes

a year, was established by Congress
to advise the Board of Governors

regarding the implementation of leg
islation passed under the Consumer
Credit Protection Act. The act encom

passes Truth in Lending, Fair Credit
Billing, Equal Credit Opportunity, Fair
Credit ReportingandConsumerLeassing. However, the Board can also
place other consumer-related mat
ters before the Council for its consid
eration.

Four Westerners serve on the 26-

member

Council,

including

Vice-

Chairman William D. Warren. Warren

major changes in its Regulation Q
(Interest on Deposits) to facilitate
such savings. The first enables mem
ber banks to pay all, or a part, of a
Keogh plan time deposit before its
maturity without the usual penalty for
early withdrawal. This amendment
applies to depositors who reach the
age of 59!/2 or become disabled.
The

second

amendment makes it

possible for a Keogh plan depositorto
have less than $1,000 on deposit and
still earn the 7!4-percent interest
available for four-year time deposits,
or the 7'/2-percent available for sixyear deposits. This change recog
nizes the fact that some depositors

may not have the $1,000 necessary to
start such accounts.

is Dean of the School of Law of the

Similar actions were taken by the

University of California at Los An
geles. The others are Roland E. Brandel of San Francisco, a partner in the

Federal Deposit Insurance Corpora
tion for banks it supervises, and by the

law firm of Morrison and Foerster;

savings and loan institutions.

Federal Home Loan Bank Board for

Robert R. Dockson of Los Angeles,

president and chief executive officer
of the California Federal Savings and
Loan Association; and Percy Loy of
Portland, president of the Kubla Khan

Food Company, ^r

This latest Reg Q amendment ex
tends to Keogh plans the conditions
established last December for Indi

vidual Retirement Accounts (IRAs).
Under the Employee Retirement In
come Security Act of 1974, individu
als not covered by a retirement plan

can deposit up to $1,500 or 15 per
cent of gross income—whichever is

smaller—in IRAs. if1