Full text of Federal Reserve Notes : March 1981

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FEDERAL RESERVEB

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Federal Beserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO

•

March 1981

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

REG C COMMENTS
SOUGHT BY FED

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The Federal Reserve Board of Gov

ernors has issued a proposal to sim

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plify and shorten Regulation C,
which implements the Home Mort
gage Disclosure Act (HMDA). The
Board will accept public comments
on its proposal through April 15.
Regulation C requires public dis
closure of loan locations by deposi
tory institutions that have offices in
Standard Metropolitan Statistical
Areas (SMSAs).

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The proposed regulation is roughly
30 percent shorter than the current
version, in line with the objectives of
the Board's regulatory-improve
ment project. The redraft is design
ed to make Regulation C more con
cise, and to focus disclosure re
quirements in the most useful area
and at the most reasonable compli
ance cost.

Under the simplification proposal,
institutions that lose their exempt
status (on grounds of size, location
or provisions of state law) would be
permitted to compile data for the
year after they lose that status
rather than the year before. Also, no
branch would have to disclose data

for the SMSA in which the home of
fice is located.

Institutions would be allowed to omit

all data relating to loans in SMSAs
other than that in which the branch

office is located, and would not be

required to provide the public with
annual notice of the availability of
mortgage-loan data.
(Continued on page 4)

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STEEL RISING FOR NEW FED BUILDING

Construction is proceeding smooth
ly in downtown San Francisco on
the new 12-story headquarters
building of the Federal Reserve
Bank of San Francisco.

"Barring unforeseen circum
stances, we hope to move into the
new structure during the final quar
ter of 1982," said Rix Maurer Jr.,

vice president of facilities planning
for the Bank. "Steel erection began
in the latter part of January, and we
are somewhat ahead of schedule."

The $84 million structure, located
on lower Market Street near the

famed Ferry Building, will have a
large four-story base containing
mainly operational departments
and an eight-story office tower ris
ing above it. Its design will feature a
reddish-gray granite exterior and
deep bronze ribbon windows.

Groundbreaking for the new build
ing was March 13, 1980. Some
9,508 cubic yards of concrete have
been poured for the foundation mat
in the 115,000 gross square-foot
basement area, which will house the

vaults, cash department, protection
services, supplies and various
mechanical and maintenance func

tions. In addition, 1,368 concrete

piles, up to 142 feet long, were
driven to support the weight of the
building.

There

will

be

approximately

651,000 gross square feet in the
building. Present plans call for the

Federal Reserve to occupy the
basement and 10 floors, with the

remaining two floors being leased to
other concerns. Major needs for the

new building include consolidating
(Continued on page 3)

Interest

Paid on 13-Week T- Bills

FED EXPANDS
T-BILL ACTIVITY

The following article is the second
in a series discussing Federal Re
serve services to depository institu
tions and the general public.
The Federal Reserve System acts
as the fiscal agent of the U.S. Trea
sury, and in that role it handles the
process by which interested inves
tors acquire public-debt issues and
redeem maturing securities. By
far the largest part of Federal debt
financing involves short-term Trea
sury bills (T-bills), although longterm bonds and intermediate-term

notes also play an important part in
Government financing.
The level of activity in T-bills is
acutely sensitive to prevailing mar
ket rates (see chart), and has varied

of Public Debt. Treasury accounts

are designed primarily for small in
vestors who plan to retain their bills
from the date of issue to the maturity
date. Again, there is no physical
transfer of securities involved.

Treasury bills are sold at a discount,
which means that the yield is the
difference between the purchase

price and the face amount of the

widely over the past 12 months. The
volume of Treasury-bill subscrip

securities. The amount of the dis

tions at the Federal Reserve Bank of

bidding for each issue.

San Francisco rose about 40 per
cent between December 1979 and
December 1980.

count is determined by competitive
Offering schedule
The Treasury offers regularly, every
week, two series of bills—one with a

Treasury bills are held in book-entry

13-week and the other with a 26-

accounts, which means that certifi

week maturity period. Normally the
Treasury announces each offering
on a Tuesday, auctions the bills on
the following Monday, and then

cates are not printed and issued.
This book-entry system represents

a significant advance in terms of ef
ficiency. No physical handling of de
finitive

securities

is

involved

in

sends out its discount checks on the

Thursday following the weekly auc

issuing, transferring or redeeming

tion. Since the auction establishes

T-bills. This translates into benefits

the discount rate for the securities,

of many kinds. Counterfeiting and

the buyer does not know when sub
scribing exactly what rate of return

the risks of loss or theft have been

eliminated. This greatly reduces the
overall cost to the government of
funding debt, and in the final analy
sis, means money in the pocket of
the public.
Financial institutions purchasing Tbills through the Federal Reserve

may have the bills held in a bookentry account at the Federal Re
serve Bank. These accounts, which

reflect the total amount purchased
of each issue of bills, may be used to

support securities transfers.

The general public may purchase
bills from banks or other dealers—

or directly from the Treasury,
through the Federal Reserve Bank.
These direct purchases are held in
the form of entries in accounts main

tained on the records of the Bureau

will be realized. In similar fashion,
but on a different time schedule, the

Treasury offers bills with a 52-week
maturity period every four weeks.
The Treasury has established a
$10,000 minimum purchase price
for its T-bills, with $5,000 multiples
for purchases over $10,000. Pur
chasers must submit their tenders

in competition with other bidders or
(more commonly) on a noncompeti
tive basis. By filing a noncompeti
tive bid, a purchaser agrees to pur
chase the bill at the auction issue

price, calculated as the weighted
average of the accepted competi
tive bids.

In the auction process, the Treasury
first accepts all noncompetitive bids
in full. Then it accepts competitive
bids, beginning with the highestpriced down through successively
lower-priced bids, until it achieves
its desired amount of financing.
Competitive bids are priced on a
basis of 100, with the highest-priced
bid yielding the lowest rate of return.

When a purchaser's competitive bid
is accepted in the auction, that ac
cepted price becomes the bill's ac
tual purchase price. Of course, a
purchaser submitting a competitive
bid takes a risk—he pays a higher
price than others if he bids too high,
and he loses the opportunity to in
vest in the issue if he bids too low.

Payment and taxes
T-bill purchasers must make pay
ment in full for the par amount when
submitting bill tenders. They may
make payment in cash, mature
Treasury securities, certified or
cashier's check made payable to
the Federal Reserve Bank receiving

by the deadline established in the
offering announcement, usually

the tender—or, in the case of finan

10:30 a.m. Pacific time. At the Fed
eral Reserve Bank of San Francis

to their account with the Federal

co, the relevant business hours are

9:00 a.m. to 3:00 p.m. each bus
iness day, except for an earlier
opening hour of 8:30 a.m. on
Mondays.

At each T-bill auction, purchasers
bid the price they wish to pay, either

cial institutions, through a charge
Reserve.

On the date of issue, the Federal

Reserve mails the purchaser a dis
count check or refund—or credits
an account on its books for financial

institutions maintaining such an ac
count—representing the difference
between the amount submitted for

the tender and the issue price as
determined by the auction.
The discount represents ordinary
gain—not capital gain, because the
Internal Revenue Service has ruled

that Treasury bills are not capital
assets. Income derived from T-bills

is subject to all Federal taxes, but is
exempt from state and local taxes.
Purchasers must report this income
to the IRS in the year that the bill
matures or is disposed of.
The Treasury pays the face amount
of the maturing bills by Treasury
check or credit through an account
with the Federal Reserve. Purchas

ers maintaining an account directly
with the Bureau of Public Debt may
elect to have the proceeds "rolledover" (reinvested) into new bills. But
roll-overs may be made only on a
noncompetitive basis, and only

James F. Montgomery

CALIFORNIANS ON PANEL
Two California savings-and-loan
executives—James F. Montgomery
and

Herbert

M.

Sandler—have

when the new-bill issue date coin

been selected by the Federal Re

cides with the maturing-bill maturity
date. Purchasers may make a re
quest for a roll-over, on a one-time

serve Board of Governors to serve

basis, on the tender form at the time

of the original purchase, and may
make subsequent requests by filling
out the roll-over form mailed out

shortly after the reinvestment of the
security. When a purchaser rolls
over his bills, the Treasury sends
him a check for the new discount
rate.

Further information on Treasury
bills can be obtained from any of the
five offices of the Federal Reserve

on its new thrift advisory panel.
Montgomery is president of Great
Western Savings & Loan of Beverly
Hills, while Sandler is chairman of
World Savings & Loan of Oakland.
Nationwide, the Board has named
nine thrift-industry representatives
to the panel, which will consider

matters relating to implementation
of the Depository Institutions De
regulation and Monetary Control
Act of 1980. That legislation, among
otherthings, requires all financial in
stitutions
offering
transaction

Bank of San Francisco:

San Francisco
Los Angeles
Portland
Salt Lake City
Seattle

(415) 544-2452
(213) 683-8563
(503)221-5931
(801) 355-3251
(206)442-1650

all departments and some 1,200
employees of the San Francisco
Fed in one building, and replacing
obsolete vaults and operations
space. Currently, the Fed occupies
five separate buildings in the city's
financial district.

Architects for the project are Skidmore, Owings and Merrill. The con
struction manager is the Dinwiddie

Construction Company.

ifi

(check-type) accounts to maintain
reserves with the Fed. The advisory
panel will meet four times a year
with Board members and staff.

Montgomery, an accounting gradu
ate of UCLA, came to Great West

ern in 1975 as president, chief oper
ating officer and director after serv
ing for nearly six years as president
of Citizens Savings and Loan of Los
Angeles. Sandler, a former New
York City attorney and graduate of
CCNY and Columbia University, be
came chairman of World and Gold

en West Financial Corporation in
1975 when Golden West S&L mer

ged with World. He had served as
president of Golden West since

1963.

1§

VIDEOTAPE PROGRAM
The Federal Reserve Bank of San

Francisco has produced six more
videotapes in its "Economic Issues"
series, and is offering them on a
free-loan basis to depository institu
tions, educational institutions and

NEW BUILDING
(Continued from page 1)

Herbert M. Sandler

other interested groups. Altogether,
the Bank's library of videotapes in
cludes 25 items produced during the
last several years. Each videotape
runs between 15 and 25 minutes,
and features a Bank economist's
discussion of some current issue of

economic activity.
The six new videotapes cover a
wide range of subjects—money in
the U.S. economy, savings and in
vestment, demographic trends,
housing developments, oil prices,

and the Chinese economy. In earlier
taping sessions, the topic of infla
tion received considerable attention

—in such areas as the history of
inflation, international sources of in
flation, money demand and infla
tion, food-price increases, and the
differences among price indexes.

A complete listing of the threequarter-inch tapes in the Economic
Issues series is available from the

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

94120. Phone (415) 544-2184.
Tapes can be borrowed from that
unit, or from the Bank and Public

Services Departments at the Bank's

branch offices.

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REG C COMMENTS

REGULATION HANDBOOKS AVAILABLE FROM BOARD
A new looseleaf service of all Fed

eral Reserve regulations and relat
ed interpretations is now available
to financial institutions, securities

dealers, lawyers, law libraries and
other interested parties.
The publications released under the
"Federal Reserve Regulatory Ser

vice" are designed to help those
who must refer frequently to the
Board of Governors' regulatory ma
terials. The materials will be updat
ed at least once a month, and each
will be cross-indexed.

The new service actually has four
parts—a complete service covering
all Board regulations and related
materials, and three separate
handbooks

on

securities

monetary policy
regulations.

and

credit,

on

tains the rulings of the Depository
Institutions Deregulation Committee.
Scheduled for publication in June is
the Consumer and Community Af
fairs

Handbook,

which

contains

Regulations, B, C, E, Z, AA and BB,
and associated documents. A com

prehensive
publication
encom
passing material in all of the hand
books also is scheduled for June

publication.
The two-volume, full-service hand

book will cost $150 each year, while
the other handbooks will be priced
at $50 apiece annually. They can be
ordered from the Publications Sec

tion of the Federal Reserve Board,
20th and Constitution Avenue NW,

Washington, D.C. 20551.

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consumer

Securities

The Board's proposed revisions re
flect amendments to the HMDA that

were included in the Housing and
Community Development Act of
1980. (That legislation extended the
life of the HMDA for five more

years.) The Fed has already imple
mented one amendment requiring
compilation and disclosure of mort

gage-loan data on a calendar-year
rather than fiscal-year basis.
Other Congressional amendments
included in the Fed's proposed revi

sion cover itemization of data by
census tract and county (rather than
by census tract and ZIP Code), the
use of a standard disclosure format,

a system of central data repositories
in each SMSA, and aggregation of
mortgage-loan data to cover all in
stitutions in each SMSA.

One handbook has already been
published

(Continued from page 1)

Credit

Transactions. It contains Regula
tions G, T, U and X, which deal with

extensions of credit for the pur
chase of securities, along with relat
ed statutes, Board interpretations
and staff opinions.
A similar handbook on Monetary
Policy and Reserve Requirements,
containing Regulations A, D and Q
plus related materials, is expected
off the presses in April. It also con

DEREG COMMITTEE
ALTERS PREMIUM RULE

The Depository Insitutions Deregu
lation Committee has prohibited the
pyramiding of premiums through the
opening of multiple accounts on one
large deposit solicited by a deposi
tory institution. The ruling took the
form of a temporary amendment to
the Committee's set of rules on pre
miums, finders fees and prepay
ment of interest which took effect

December 31.

Ijflfi

Comments regarding the revision
and simplification of Regulation C
should be sent to the Secretary,
Board of Governors of the Federal

Reserve System, Washington, D.C.
20551. Copies of the Board's pro
posal are available from the Supply
Dept., Federal Reserve Bank of San
Francisco, P.O. Box 7702, San

Francisco, 94120. Phone (415)

544-2016.

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