Full text of Federal Reserve Notes : July 1981

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PHOERAL

Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO

•

July 1981

Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington

FEDERAL COURT BLOCKS
DIDC CEILING-RATE PLAN

The U.S. District Court in Washing
ton, D.C., has issued an order

against the Depository Institutions
Deregulations Committee to block
the phase-out of interest-rate ceil

ings on new deposits with a maturity
of four years or more.
The Federal court decision was an

nounced on July 31, a day before
the ceiling-rate revision was sched
uled to take effect. At its June 25

meeting, the DIDC set a four-year
phase-out schedule for interest-rate
ceilings that was scheduled to begin
with the removal of limits on depos
its of maturities of four years or
more.

GRIFFITH REJOINS
SAN FRANCISCO FED
Richard T Griffith has rejoined the
Federal Reserve Bank of San Fran

cisco in a new position as senior
vice president in charge of District
operations.
Griffith has assumed senior-officer

responsibility for the Bank's opera
tional services at its San Francisco,
Los Angeles, Portland, Salt Lake

City and Seattle offices. He also is
reponsible for administration of the
Bank's new Financial Services

department, formed in June to de
velop, price and market Federal Re
serve operating services being of
fered to financial institutions under

the Monetary Control Act of 1980. In
addition, Griffith will serve on the

Bringing suit against the DIDC was
the U.S. League of Savings Associ
ations. It argued that the higher

Reserve Bank's Management Com
mittee, the Bank's top policy-mak
ing body.

rates on these certificates would

Griffith has extensive experience in

contribute to greater financial loss
es among thrift institutions.
Pending further action by DIDC, the
ceiling rates on these deposits of
four years or more remain un
changed. They are:

For commercial banks—Deposits
with maturities of 4 to 6 years, 71/4
percent; 6-8 years, IVz percent; 8
years or more, 7% percent. Thrift

institutions are allowed to pay a
higher differential of 25 basis points
in each category.
Unaffected by the Federal court
order was the lifting of the interest
rate for banks and thrifts on maturi

ties of 21/2 years (known as smallsaver certificates) to less than 4
years. On August 1, the rates be
came 14.90 percent for commercial

both commercial and Federal Re

serve bank operations. Before join
ing the Fed, he held several mana
gerial positions in data processing,
computer systems, bank operations
and other phases of corporate bank
ing at Crocker National Bank, and
was executive vice president of the
banking division of Teknekron, Inc.,
headquartered in Berkeley.

After first joining the San Francisco
Fed in 1975, Griffith served as vice

banks and 15.15 percent for thrifts
—being tied (without a cap) to the
rate on Treasury securities of com
parable maturity. And on August 4,
these figures changed to 15.52 per
cent and 15.80 percent, respectively.

R. T. Griffith

president of computer services,
senior vice president of the comput
er services group and senior vice
president of operations. Following
his last tour of duty with the San
Francisco Fed, he joined Burns In
ternational Security in 1979 as
group vice president and chief oper
ating officer of the western region.

He attended Pepperdine College
and California State College (San
Luis Obispo), as well as the Sloan
Graduate School of Business at
Stanford.

FED PROPOSES FEES FOR
CASH TRANSPORTATION
A

revised fee schedule has been

proposed by the Federal Reserve

financial institution in the home-city

zone (Zone 1). Financial institutions
outside of Zone 1 will be charged
separate per-stop and bag charges.

Board of Governors for its cash

transportation services in supplying
currency and coin to the nation's de
pository institutions.
Comment on the fee proposals is

being sought by September 25. The
Monetary Control Act of 1980 re
quires the Federal Reserve to
charge for its services and make
them available to all financial institu
tions that maintain reserves with the
Fed.

The proposed fees, which would be

ARMORED CARRIER
FEE SCHEDULE
Federal Reserve

Per-stop Charge
(in dollars)

Office

11

76*

24

14

9

11

9

23

16

Volcker said that he saw encourag

18

13

16

15

ing signs of a deceleration in various
price indexes. But he added that in
flationary forces are still well en

Zones 6-10

14

17

17

16

14

trenched, and that the Federal Re

Zones 11-15

12

20

12

12

20

Zones 16-20

24

93*

171*

63

29

serve must remain firmly committed
to a policy of monetary restraint.

13

47

12

Zone 11

Los Angeles
,«

Zones 1 -5

Salt Lake City
Zones 1 -5

**

20

8

percent as a private-sector adjust

Zones 6-8

33

28

65

costs. They also reflect comment
received by the Reserve Board on a
proposal published last August.

Zones 1-5

Zones 6-8

fers free cash-transportation ser

"

43

28

34

12

51

12

45

Seattle

Zones 6-9

"

10

22

34

13

23

12

35

8

vices to member banks. The Fed

* Current full cost of service to endpoints in
this zone. The proposed maximum 1982

does not own any armored carriers
but, rather, contracts the work to pri

per-stop charge would be $75 instead of the
figure shown

vate firms.

** Specific fees will apply to each institution in
Zone 1

Fees Announced

Under the latest proposal, deposito
ry institutions in most Federal Re
serve Districts, including the
Twelfth, would pay a fee based on a
volume charge of 50 cents per bag
of coin or currency plus a per-stop
charge. The per-stop charge for
each delivery zone reflects such
factors as volume, frequency of
stops en route, method of deposit,
distance traveled, roadway access
and the type of available loading fa
cility (see table).

The Board has proposed a $75 ceil
ing on the per-stop charge for 1982
and possibly 1983. However, this
ceiling charge will be reviewed at
the end of 1982. Meanwhile, any
cash-transportation costs above
that limit would be absorbed by the
Fed system.

In the Twelfth District a single allinclusive fee will be charged each

He pointed out in his report that the
M-1B measure of the money sup

Portland

Zones 1-5

Currently, the Federal Reserve of

it to rates consistent with sustain

**

Zones 6-10

come effective at the beginning of
1982, incorporate a markup of 16
ment to the Fed's administrative

Federal Reserve Chairman Paul

Volcker, in a semi-annual policy re
port, told Congress on July 21 that
the Fed's anti-inflation policy "re
quires gradual reduction over time
in the expansion of money and cred

able growth in output at reasonably
stable prices."

San Francisco
Zones 1 -5

VOLCKER POLICY
REPORT AVAILABLE

Recover Costs

"These (proposed) charges reflect
the current market rates for provid
ing armored-carrier service to these
institutions," said Douglas O. Knudsen, assistant vice president of
Cash at the San Francisco Fed. "It

ply—currency plus transaction
(check-type) accounts—decelerat
ed slightly in each of the past two
years, and that it is now near or even
below the bottom of its target range
for 1981. The range is 31/2 to 6 per

cent, after adjustment for shifts of
savings into check-like NOW ac
counts. But the broader M-2 mea

sure—primarily currency plus all
depository-institution deposits (ex
cept large CDs) and money-market
fund shares—has been running
near the top of its 6-to-9 percent tar

get range this year, although below
last year's actual growth.
For the remainder of 1981, accord

ing to Volcker's testimony, the Fed
eral Reserve believes that it would

is up to the Fed to find the cheapest
means to furnish coin and currency
to all financial institutions. I figure it
will take two years to phase-in this
service equitably to everyone."

be acceptable to hold M-1B growth
near the bottom of its range, and to
hold M-2 growth near the top of its

By the end of the two-year period,

51/2 percent, while maintaining a 6to-9 percent range for M-2.
Copies are now available of the
Volcker report, Monetary Policy Ob
jectives for 1981—Midyear Review.
Free copies can be obtained by call
ing or writing the Public Information

the Federal Reserve intends to re

cover all costs of armored carrier

service, subject to the Federal Re
serve's responsibility to provide a
minimum level of service nation

wide. During the two-year interim, a
variety of methods for reducing
transportation costs to high-cost lo
cations will be explored, such as
(Continued on page 4)

range. For 1982, the Fed tentatively
has reduced its projected growth

range for M-1B, to between 21/2 and

Section, Federal Reserve Bank of
San Francisco, P.O. Box 7702, San

Francisco, 94120. Phone (415)

544-2184.1f|

SECURITIES SERVICES AVAILABLE OCTOBER 1

NEW PENNY COMING
A new, lighter-weight coin contain

adopted a fee schedule for securi

Off-line transfers are transmitted by
Federal Reserve personnel acting

ties and for noncash collection ser

on authenticated requests from

vices provided by the Federal Re

depository institutions. Transfers

The United States Mint has an

serve banks.

received off-line include intra- and

nounced plans to begin producing
the new cent pieces in December

The Federal Reserve Board has

According to the Congressional
mandate in the Monetary Control
Act of 1980, these services have

been priced and will be available to
all depository institutions October 1.
The fees have been revised from

proposals published last summer to
reflect 1981 costs plus a 16-percent
markup as the adjustment to private-

inter-district security transfers des
tined for institutions that have not
established on-line communica
tions links with the Fed.

The $3 fee now assessed on behalf

of the U.S. Treasury and various
Federal agencies for inter-district
transfers of book-entry securities

ing more zinc will soon replace the
"copper penny."

and distributing them to the nation's
financial institutions through the
Federal Reserve banks during
1982.

A spokesman for the Mint said the
new copper-plated zinc pennies
would save about $25 million a year.

will be discontinued when the new

Estimated cost of the new coin will

sector rates.

fee schedule goes into effect.

be about six-tenths of a cent com

The securities services fall into

The book-entry account mainten

pared to the present cost of roughly
eight-tenths of a cent.

three categories—book-entry and
definitive securities safekeeping;
purchase and sale of government
securities; and noncash collection
services.

The book-entry securities service
involves recording of ownership of
securities by computer rather than
issuance of definitive paper securi
ties to buyers. A depository institu
tion may establish several types of
book-entry accounts (e.g. a general
account, an investment account, a

trust account or a dealer account)
with its local Federal Reserve office.

Standard national fees will be

assessed for processing security
transfers affecting book-entry ac
counts and maintaining these ac
counts (see table). The fees will be
applied to security transfers origin

ance fee reflects the cost associat

ed with establishing accounts,
maintaining account instructions,
maintaining records reflecting bookentry holdings, reconciling ac
counts, notifying account holders of
maturing securities and providing
periodic statements of account
holdings.
Fees will be assessed for the pur
chase and sale of government secu
rities which cover the costs for re

ceiving requests from depository
institutions and placing orders in the
secondary securities market. The
per-transaction fee for this type of
service will be $22 plus broker's
fees, if applicable, in the nine west
ern states (12th District) served by

The penny is now composed of 95percent copper and 5-percent zinc.
The new coin will contain 97.6-per
cent zinc and 2.4-percent copper. It
will be identical in size and appear
ance to present pennies but will
weigh 19 percent less.

The Ball Corporation of Tennessee
has been awarded an $8.7 million

one-year contract to supply 3.76 bil
lion copper-plated zinc blanks for
the new U.S. penny. Ball will pro
duce 20.8 million pounds of blanks.

trict and deposited at any office of
the Federal Reserve Bank of San

ated on-line and off-line, or to those

A fee also will be charged by the

Francisco, this cost will be $6.85 per
envelope or item processed. In ad
dition, a shipping fee based on the
dollar value of the coupons being
collected will be charged. This fee

received off-line. There will be no

collecting Federal Reserve bank for
coupons sent to another District

trict, depending on actual cost. For

Bank for collection. In this case, full

bonds and other noncash items, the

charge for transfers received on
line. On-line security transfers are
wire transfers of book-entry securi
ties originated by a depository insti
tution with direct access to its ac
count at a Federal Reserve office.

the Federal Reserve Bank of San
Francisco.

costs for the collection service will

be recovered by charging the fee of
the collecting Reserve bank. For
coupons payable in the Twelfth Dis-

varies at each Federal Reserve Dis

per item fee of $6.50 will be applied,
plus any out-of-pocket expenses
such as costs which might be incur
red in the collection of the item.

BOOK-ENTRY SECURITIES SERVICES

Regarding definitive securities safe
keeping, the Twelfth Federal Re

(Effective October 1)

serve District limits this service to

FEE SCHEDULE

Security Transfers:
Originated On-Line
Originated Off-Line
Received Off-Line
Account Maintenance

per transaction
per transaction
per transaction

per account per month

$2.00
8.50*
6.50
6.00

* Composed of the on-line origination fee of $2.00 plus the $6.50 off-lirie surcharge.

certain special collateral accounts.
Further information regarding the
securities and noncash collection

services offered by the Fed can be
obtained by contacting the Fiscal
department at the Federal Reserve
Bank of San Francisco.

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FEES PROPOSED

FED SIMPLIFYING

(Continued from page 2)

MARGIN REGULATIONS

encouragement of increased com
petition, establishment of cash de

As another step in simplification of
Federal Reserve regulations, the
Federal Reserve Board is seeking
comment by September 15 on pro
posed revisions of its margin regu

pots and support for currency
exchanges.
Separate fees also will be establish
ed for institutions with specialized
high-volume arrangements, such as
direct shipments from the Bureau of
Engraving and Printing or armoredcarrier service to a large volume
endpoint with circumstances of diffi
cult access. Reduced transporta
tion charges may be available for
depository institutions that deposit
currency sorted by quality or suit
ably packaged for high-speed
processing, or that accept contain
erized shipments where the signifi
cant reduction in Reserve Bank pro
cessing costs justifies a reduction in
transportation charges.
Mail Fee Set

Registered mail also is used to ship
and accept currency and coin from

lations.

Affected are Regulations G, T and
U. Wherever possible, the Board
hopes to reduce the burden of com
pliance by rewriting the regulations.
The following proposals have been
made regarding Regulation G (Mar
gin Credit Extended by Parties
Other than Banks, Brokers and

Dealers), Regulation T (Margin
Credit Extended by Brokers and
Dealers) and Regulation U (Margin
Credit Extended by Banks).
Reg G—Broaden the types of credit
which may be extended by lenders
subject to that regulation, chiefly
insurance companies and credit
unions.

Alaska, Hawaii, America Samoa,

Guam and other outlying mainland
proposed fee for this type of ship
one-way mail service in 1982.

more objective standards. This

would affect principally lending ar
rangements, by banks and insur
ance companies with corporate bor
rowers, that contain restrictions on

disposition of the borrower's assets.

Reg T—Eliminate "equity building"
devices, consolidate bond accounts
with the General Account and re

quire, in certain instances, an off
setting adjustment to any highly lev
eraged General Account by trans
fers from the customer's special
miscellaneous account; relax the

restriction on the arranging of credit
by investment bankers to permit in
vestment banking services that may
otherwise be prohibited; reduce the
number of types of accounts subject
to Reg T from 11 to 7 (four to be used
for public customer transactions
and three for transactions between

industry members); prescribe the
amount of margin required rather
than the maximum loan value of se
curities used as collateral.

areas of the Twelfth District. The

ment would be limited to $37.50 for

Regs G and U—Redefine "indirect
ly secured" margin loans to achieve

and destruction operations which
are not priced. By the end of 1983,
all Federal Reserve offices would

In connection with the revised fee

offer minimum access to:

schedule for cash transportation the
Federal Reserve Board developed
a policy regarding access by depos
itory institutions to the Fed's curren
cy processing, sorting, cancelling

• one office of a depository institu
tion per municipality (subject to
adjustment for special circum
stances) or
• one office per institution. *£

Reg U—Change the collateral test
to exempt from quantitative limita
tion all bank credit not secured by
margin equity securities. (Presently,
a purpose loan that is collateralized
by any stock is subject to the margin

regulation). |j|