Full text of Federal Reserve Notes : February 1978

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Federal Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO

•

FEBRUARY 1978

Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington
BpHArfli o^serv* -^k
FED PROPOSES
AUTOMATIC TRANSFERS

BRADLEY HEADS
ADVISORY COUNCIL

The Federal Reserve Board of Gover

Gilbert F. Bradley was elecj^fl, president ^•^

nors issued a proposal this month, that
would permit member banks to transfer
funds automatically from individuals'
bank savings accounts to their checking

of the Federal Advisory Council for 1978

accounts. The Board asked for com

ecutive Officer of Valley National Bank

ments on this proposed amendment to
Regulation Q by March 20.

of Arizona.

Under these proposed "automatic trans
fer agreements," funds could be trans
ferred automatically from savings to
checking accounts in order to cover
overdrafts or to maintain specified mini
mum balances. In this respect, the pro
posed transfer service would be an
alternative to plans that protect deposi
tors from overdrafts through pre-ar
ranged automatic extensions of credit.
The service would be available only to

by the members of this advisory gr©yD>, 3••-.

to the Federal Reserve Systkwf Sra&feP'^
is Chairman of the Board and Chief Ex

The Federal Advisory Council is com
posed of 12 members, one from each of
the Federal Reserve Districts in the na

tion. Meeting quarterly with the Federal
Reserve System's Board of Governors,
the Council discusses economic and

banking matters and makes recommen
dations regarding System operations
and policies.

Bradley had been reappointed to the
Council late last year by the Board of Di

individual customers, and not to busi

rectors of the Federal Reserve Bank of

nesses or governments.

San Francisco for the 1978 term. He re

presents the nine-state San Francisco
No minimum amount for transfer would

Reserve District, which contains over

be required under the proposal. Howev
er, the customer would have to forfeit
any interest earned on the amount
transferred during the 30 days before
transfer. The proposal is somewhat
more liberal in both respects than a simi
lar proposal made in March 1976.

6,800 commercial-banking offices and a
population of more than 34 million.

Valley National is the largest bank in Ari
zona. Headquartered in Phoenix, the
bank serves Arizona through more than
175 offices in all of the state's 14 coun

ties. Valley Bank is the 26th largest com
The Board said that the proposal is
aimed at "increasing the convenience
and efficiency of savings accounts and

mercial bank in the United States.^

lowering the cost of making payments
by check." Costs to depositors would be
substantial fee for checks that are re

The proposed new service would be
added to two other bank services pre
viously authorized by the Federal Re
serve. These permit customers of Fed

turned for insufficient funds. Also, the

member banks to withdraw or transfer

Fed would avoid the additional costs in

curred when such checks are presented
for clearance, because they involve

funds from savings accounts by tele
phoned instructions, and to pay bills
from their accounts under pre-autho-

hand processing and multiple handling.

rized payment plans. ^

lower because banks usually charge a

G. F. Bradley

CHECK TRUNCATION
PROGRAM BEGUN
The government-check "truncation" pro
gram is now underway in the San Fran
cisco

Federal

Reserve

District.

Truncating means that the San Francis
co Fed—along with the other Reserve
Banks across the nation—will not have

to forward Federal government checks
to the Treasury anymore. Instead these
checks will be sent to a government re
cord center, and the Reserve Banks will

supply the Treasury only with micro
filmed copies and magnetic-tape data.
The system will expedite the check-pro
cessing cycle, and will reduce the cross
country shipping of over 700 million
Treasury checks annually from various
Reserve Banks to Washington, DC.

The new system began at the Reserve
Bank's San Francisco office on Febru

ary 1, and at its Salt Lake City office on
February 15. The Portland and Seattle
offices will truncate government checks
(Continued on page 4)

SUMMARY OF KEY FED DEVELOPMENTS

• CIRCULAR 9 CHANGES. Circular 9

• IMPROPER PAYMENTS. The Federal

* PAYMENTS SERVICES PROPOSAL.

(Currency & Coin) revisions have been

Reserve Board of Governors has issued

Copies of a Board of Governors pro
posal to improve Federal Reserve pay

mailed to all District member and non-

a policy statement concerning improper

member banks. The changes concern
preparation charges for currency and
coin shipments to nonmember banks,
and a larger limit for the risk-of-loss limi
tation. Preparation charges for ship

and illegal payments by banks and bank
holding companies. The statement
deals with questionable practices here
and abroad, including questionable po

ments to nonmember banks have been

tion contact C. Keefe Hurley, Jr., Senior
Attorney, Legal Division, Board of Gov
ernors of the Federal Reserve System,
Washington, D.C. 20551 (202-4523269).

increased from $1.50 to $4 per ship
ment for currency, and from 10 cents to
25 cents per bag for coin. The singleday risk-of-loss limitation by any one
banking office to the Reserve Bank was

litical contributions. For further informa

further information.

• REGISTERED & CERTIFIED MAIL. To

speed up the processing of registered
and certified mail, the San Francisco Re

serve Bank is instituting an identificationcode system. The code quickly identi
fies certain high-priority shipments such
as savings bonds, savings stamps,
Treasury and Agency coupons, securi
ties, letters of credit, currency and coin,
and government deposits. Banks and
savings-and-loan associations should
identify envelopes, boxes or tags with
the proper code. This will help the Re
serve Bank reduce processing time, and
also will expedite the posting of credit to

identification code should be sent by
regular mail. If you have questions or
need the identification code, call your
nearest Fed office.

• CURRENTCIRCULARS. If you're won
dering whether your circulars are up to
date you can check quickly by referring
to Federal Reserve Circular A, which

Banks would make debit and credit en
tries to member-bank reserve accounts
for wire transfers conducted on Bank

wire, a transfer system operated by

been expanded to include Central Intelli

electronic payments through automated
clearinghouses. For a copy of the pro
posal, contact the Supply Department at

gence Agency (CIA) EFT payments, be

your nearest Fed office.

' EFT PAYMENTS. The Federal Govern

ment's recurring-payments program has

ginning with settlements for February 1.
Payments generally will be consolidated
in the same output file with Supplemental
Security Income, Civil Service, Railroad
Retirement, and Veterans Administra

tion payments, and will be delivered to a

financial organization or processing
center by the business day prior to the
payment date. CIA payments are made
on the first day of each month. If the first
of the month is a Saturday, Sunday, or
holiday, the payment will be dated the
following business day. For further de
tails, contact Sally Balingit, District ACH
Coordinator (405-544-2076).

• BANK HOLDING COMPANY INTER

' SECURITIES UNDERWRITING. The
Board of Governors announced this

month that it will resume the processing
of applications from bank holding com
panies to underwrite and deal in Federal

government and municipal securities. In

1974, the Board proposed amending
Regulation Y (Bank Holding Companies)
to add this activity to the list of permissable holding-company activities. Howev
er, the Board has decided against
amending Regulation Y, and instead will
judge individual applications on a caseby-case basis. For further information,
call the Reserve Bank's Supervision,

Regulation and Credit Department (415)
544-2235.

PRETATION. The Board of Governors

has issued an interpretation of a section

of the Bank Holding Company Act deal
ing with shares or other assets that are

transferred to a company or transferee

• HOLIDAY. The Reserve Bank's Los

that is indebted to it, or to a transferee

Angeles and San Francisco offices will

that maintains an officer or director in

close at noon on March 24 for the ob

terlock with the holding company. Under
this interpretation, control of the shares
(or other assets it owns) is presumed

shows the effective date of all current

not to have changed unless the Board

Fed circulars. For copies of Circular A or
any other circular, contact the Supply
Department at any of the Reserve

determines otherwise. For further infor

Bank's offices.

public comment on two possible ap
proaches. Under one plan, Reserve

make use of Fedwire, a nationwide Fed
eral Reserve service, to clear and settle

a financial institution's account. Each

container should hold only one type of
shipment. Items other than those on the

cisco Reserve District. The Board invited

commercial banks. A second plan would

increased from $2 to $10 million. The

changes were made effective February
1, 1978. The Cash Officer at your near
est Federal Reserve office can provide

ments services to financial institutions

and the public have been mailed to inter
ested parties throughout the San Fran

mation contact the Reserve Bank's Su

pervision, Regulation and Credit
Department (415) 544-2235.

servance of Good Friday. The Portland,
Salt Lake City and Seattle Branches will

be open for the full business day.^

FED ANNOUNCES

OFFICER PROMOTIONS

The Federal Reserve Bank of San Fran
cisco promoted four officers to senior

positions on January 1.

Eugene A. Thomas was promoted to
Vice President of Bank Examinations. In

this capacity, he is responsible for di
recting the commercial, international
and trust examinations sections of the

Supervision, Regulation and Credit De
partment. He previously served as Di
rector of Bank Examinations.

Joseph R. Bisignano was named Direc
tor of Economic Analysis. Bisignano di
rects the support group that provides
economic-policy information to the
Bank's President and Board of Direc
tors. He also oversees national eco
nomic research for the Research and

Public Information Department.
H. Peter Franzel was advanced to Direc

tor of Branch Operations. He oversees

such activities as check processing,
coin and currency services, the market(Continued on page 4)

Franzel

Galloway

Welcome to the District
SANDY STATE BANK ...
HERITAGE BANK & TRUST
Two new banks in the Salt Lake City
area—Sandy State Bank and Heritage
Bank and Trust —recently became
members of the Federal Reserve

System.

Sandy State Bank opened for business
late last year as the only state-chartered
bank in the fast-growing area of Sandy,
Utah. Its population of 35,000 has in

creased more than fivefold in just the
last seven years.
President Ron Carnago and Vice Presi
dent Donald Boshard intend to empha
size the bank's "strong local ties to the
people of Sandy and its commitment to
serving the needs of the community."
President Carnago says that the bank's
management considers Federal Re
serve membership essential to providing
a full range of services.

R. Carnago

J. Starley

Heritage Bank and Trust recently
opened for business in Salt Lake City

years of banking experience in metro
politan Salt Lake City.

under the leadership of President John
Starley. Starley had been associated

with Commercial Security Bank of Salt
Lake City for 30 years, and also had
been past-president of the Salt Lake
Bank Officers Association and an active
member in the Bank Administration Insti

tute. Backing up Starley is Vice Presi
dent and Cashier Barry Dunn, with 20

Starley feels that the bank's market area
is only partially developed, and he in
tends to emphasize service to residen
tial, light-industry and retail customers in

the southwest part of the metropolitan
area. In his view, both Salt Lake City and
Heritage have a lot of growing to do in

the next several years, 'ijfp

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OFFICER PROMOTIONS

WALKER BANK

CHECK TRUNCATION

(Continued from page 3)

MERGER APPROVED

(Continued from page 1)

ing of government securities and other
fiscal activities at the Bank's five

The merger of Walker Bank and Trust
Company of Salt Lake City, Utah, and

branches. Franzel had been Assistant

American Bank of Commerce, Cedar

on March 22, while Los Angeles will con
vert to the new system on April 17. At
that time, all government checks in this

Vice President - Branch Operations

City, Utah, has been approved by the

District will be sent to San Francisco for

Support.

Federal Reserve Bank of San Francisco.

processing.

As a result of the merger, the present of
Meanwhile, George P. Galloway was
named Director of District Security. Gal
loway is responsible for the develop
ment and administration of programs
relating to security, safety and emergen
cy operations for the San Francisco Re
serve District. He also administers a

program designed to help District mem
ber banks deal with security problems.

fice of American will become an autho
rized branch office of Walker Bank and
Trust.

Walker Bank and Trust has deposits of

roughly $500 million and operates 25
branches throughout Utah. American
has deposits of $3.3 million and its sole
banking operation is in Cedar City.

The Reserve Bank also made five other

In granting its approval to the merger,

officer appointments. John H. Beebe
was promoted from Senior Economist to

the San Francisco Fed said its action

Check Officer (San Francisco Branch)

would tend to replace a less viable com
petitor with a stronger competitor, and
would serve to improve the range and
quality of banking services to

to Assistant Vice President. William Ott

customers. ^

Assistant Vice President and Economist.
Robert H. Colfelt was advanced from

was named Assistant Vice President in

the Computer Services Group. Richard
L. Rasmussen was promoted from
Check Officer (Los Angeles Branch) to

To accommodate this new mode of pro

cessing, the symbol and serial number
of each check must be pre-encoded,

along with the MICR-encoded routing
number. (MICR stands for Magnetic Ink
Code Recognition.) On some checks an
additional one-digit transaction code will
be MICR-encoded.

While most banks already "amount en
code" Treasury checks for their own
use, this now becomes a requirement
for deposits at Federal Reserve Banks.
The dollar amount must be encoded in

accordance with the ABA Magnetic Ink
Character Recognition Program. Actual

ly, this encoding provision has been in
effect for government-check deposits
since 1975, so that the new program

simply enforces an existing ruling.
District commercial banks will receive in

Assistant Vice President. Ray Kriese

formational material in the near future

was named Employee Relations Officer

concerning implementation of the gov

at the Los Angeles Branch. ^

ernment-check truncation program.

Banks that have specific questions may
contact the Check Officer at the nearest

Federal Reserve office at any time.'if'