Full text of Federal Reserve Notes : November 1979

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Federal Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO •

NOVEMBER 1979

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

Larkin, Jr.

C. L. Peck, Jnr.

C. E. Schmidt

LARKIN, PECK, SCHMIDT RENAMED TO FED POSTS
Federal Reserve member banks in

The Reserve Bank's nine direc

the San

tors provide management advice

Francisco

District this

month re-elected Frederick G.

on the conduct of Reserve Bank

Larkin, Jr., and Clair L. Peck, Jnr.

operations and on supervisory,
personnel and monetary-policy
matters. They also provide first
hand information on key eco
nomic developments in various

to the Board of Directors of the

Federal

Reserve

Bank of San

Francisco. Larkin was chosen as

a Class A director, representing
District member banks, and Peck
was named as a Class B director,
representing nonfinancial
interests in the District. Sepa
rately, the Board reappointed
Chauncey E. Schmidt to the
Federal

Reserve's

Federal

areas of the District, complement
ing the bank's internal research
efforts.

The

directors

have

specific responsibility for initiat
ing changes in the Reserve
Bank's discount rate, subject to
review and approval by the Board

Advisory Council.

of Governors.

Larkin is Chairman of the Execu

The Federal Advisory Council
provides a link between the bank
ing and financial community and

tive Committee of Security Pacific
National Bank. Peck is Chairman
of the Board of C.L. Peck Contrac

the

tor, as well as Partner in Peck/

Governors. It is composed of 12
members representing each of

Federal

Reserve

Board of

the Fed's regulation of memberbank activities, and the effects of
monetary policy on commercial
banking and the money market.
Larkin has spent his entire career
at Security Pacific National Bank,
following graduation from the
University of Washington and
Stanford's Business School. He
was elected President of the Bank
in

1961

Board

and

Chairman

eight years

of

the

later.

He

became Chairman of the bank's

Executive Committee last year.
Larkin serves as a director of
many industrial and financial

institutions. In addition, he is a
Director and Vice President of the

Los Angeles World Affairs Coun
cil, a Director of the Hospital of the
Good Samaritan Medical Center,

Tooley Investment Builders.
Schmidt is Chairman of the Board,

the

Federal

Director (and Former President

President and Chief Executive Of

Reserve System. The Council

and Chairman) of the Los Angeles

ficer of the Bank of California and

advises

wide

Philharmonic Association, and

its holding company — BanCal
Tri-State Corporation.

range of topics, including overall
banking and monetary objectives,

Director and Board Chairman of

districts
the

in

Board

the
on

a

(Continued on page 4)

FED PROPOSES RULES

FOR FOREIGN BANKING
The

Federal

Reserve

Board

AGENCIES PROPOSE
NEW TIL GUIDELINES

PRESIDENT BLOCKS
IRANIAN ASSETS

of

The Federal Reserve and other

President

Governors proposed several rules
late last month to help implement
provisions of the International

member agencies of the Federal

blocked all official Iranian assets

Financial Institutions Examina

in the United States, including de

tion Council last month proposed

Banking Act of 1978 (IBA). The

several amendments to the Truth

posits in U.S. banks and their
foreign branches and subsidi

proposed regulations — to be
incorporated into the Fed's
Regulation K — would limit the
interstate-banking activities of
foreign banks in the United

in Lending Enforcement
Guidelines (Regulation Z). The

aries. The order was

revisions are designed to make

Government of Iran was about to

the guidelines more workable in
light of the agencies' experiences
this year with the original rules.

funds.

States.

In general, the Board's proposals

1) prescribe procedures by which
a foreign bank can choose a home
state for its office or offices in the

United States; 2) establish rules
limiting interstate expansion of
domestic deposit-taking by

foreign banks; and 3) provide
federal standards for distinguish

ing deposits from credit balances,
as a regulatory guide for limiting
deposit-taking by foreign banks
in more than one state.

Under the Board's proposals, a
foreign bank with one or more de
posit-taking offices in the United
States would be required to select
a home state within 90 days after
the Board's regulations are
finalized. For banks with only one
deposit-taking branch or subsidi
ary, the state location of that
branch would constitute the home

state. A bank with no deposit-tak
ing offices would not be required
to make this selection. A foreign

reports

month

issued

that

in

the

withdraw about $8 billion in such
The order did not affect accounts

of persons other than the Govern
ment of Iran, the Central Bank of

sions because of enforcement

The President took the action pur-

problems.

In addition to these three pro
posed amendments, the agencies
requested public comment on
other aspects of the guidelines.
The Council particularly men

tioned problems determining the
actual annual percentage rate on

real-estate loans, and problems
ascertaining the direct and
indirect costs of administering
and implementing the guidelines.

state selection.

foreign bank holding company
that has a subsidiary bank out
side its home state to give 60
days' notification to the Board
before the subsidiary acquires all
or substantially all of another
bank's assets. Fed approval of the
acquisition would be required.
The Board also proposed
minimum criteria for distinguish

ing credit balances from deposits.
This is necessary since the IBA
restricts

Iran and other controlled entities.
suant

One proposal would increase the
tolerance margin for minor errors
in disclosure of the annual per
centage rate to the borrower, from
the present 1/8 to 1/4 of a per
centage rate point. A second pro
posal would modify the time
period to which the guidelines
apply. Lastly, the Council sug
gested that a phrase be added to
the guidelines to permit the
regulatory agencies greater flex
ibility in applying enforcement
policy where a violation presents
a unique or significant problem.

bank would also be allowed to

The regulations would require a

to

this

Several agencies, including the
Fed, had temporarily suspended
the guidelines on several occa

change its home-state designa
tion one time, provided it relin
quished interests or branches
acquired due to its initial homeThe Board proposed the regula
tion to insure that a foreign bank
does not, directly, or indirectly,
establish and operate a deposittaking branch outside its home
state. Under the proposal, two or
more foreign banks operating in
this country, each of which is
majority-owned by a common
parent, would be regarded as one
banking organization entitled to
only one home state.

response

Carter

the

establishment of

branches (offices at which de

to

the

International

Emergency Economic Powers
Act, which grants him authority
"to deal with any unusual and
extraordinary threat to the
national security, foreign policy,
or economy of the United States."

In a report to Congress, the Presi
dent said, "Blocking property and

property interests of the Govern
ment of Iran, its instrumentalities
and

controlled entities and the

Central Bank of Iran will enable

the United States to assure that
these resources will be available

to satisfy lawful claims of citizens
and entities of the United States

against the Government of Iran."
The Treasury Department imple
mented the blocking action by the
issuance of the

Iranian

Assets

Control Regulations, which
appeared in the November 15
issue of the Federal Register. A
number

of

amendments

to

the

regulations have since been

issued.

^

posits are received), but does not
restrict agencies (offices where
credit

balances are

maintained

but which cannot accept deposits
from U.S. citizens or residents).

Under the Fed's proposed defini
tion, "credit balances" must be
funds maintained at all times to

serve a specific purpose, must not
be solicited from the general pub
lic, and must not be used to pay
operating expenses in the United
States (such as rent, salaries, or

taxes).

"^

VOLCKER REPORTS
ON CREDIT POLICY
Federal Reserve Chairman Paul
Volcker assured

member banks

that the System "fully intends that
sufficient credit will continue to

be available to finance orderly
growth in economic activity,"
even though growth in money and
bank credit is expected to moder
ate as a result of the Fed's Octo

ber 6

policy actions. Volcker

voiced these assurances in a let

ter sent to all

Federal Reserve

member banks late last month.

Volcker recognized in his letter
that greater volatility in moneymarket rates may result from the
Board's new operating pro
cedures. However, he cautioned
that banks should take care when

they adjust lending rates. "Sharp
but clearly temporary variations in
the

cost of a

small amount of

marginal funds should not be the
occasion for adjustments in the
basic lending rate," he said.
The Fed Chairman stressed the

need for banks, when adjusting
rates, to consider the special
problems of smaller customers
who have limited financing alter
natives. In his view, banks should
take particular care that small
businesses, consumers, home
buyers, and farmers continue to
receive

a

reasonable

share

of

G.P. Galloway

M. J. Murray

GALLOWAY, MURRAY NAMED BANK VP'S
The Federal Reserve Bank of San
Francisco this month announced

a number of personnel actions in
Bank Operations/Branches and
Corporate Staff, highlighted by
the promotions to Vice President

of George P. Galloway (Director of
District Security) and Michael J.
Murray (Director of Corporate
Personnel).

Galloway has responsibility for
the development and administra
tion of the Reserve Bank's dis-

for

another

—

transactions

that do not clearly promise
improvement in economic perfor
mance.

available funds. "Loans to such

trict-wide security program. He
joined the Reserve Bank in 1970
after a 29-year career with the
Federal Bureau of Investigation.
While with the FBI, his area of
supervision included investiga
tions of internal bank crimes in

most of Northern California.

Murray has responsibility for the
development and implementation
of District-wide personnel
policies and programs. He joined
the Bank in 1973, after working as
a personnel administrator at the
Hewlett-Packard Company and
as a manager at the Pacific
Telephone Company. He holds an

M.B.A. from the University of
California (Berkeley).

borrowers, as well as to larger
business customers that require
bank credit in support of their nor
mal operations will help to sustain
key sectors of local and national

Volcker underlined the Fed's view

economies."

operating in the marketplace. "No

Volcker reiterated the Board's

regulatory agency can be in a
position to substitute its own

(San Francisco), Sally Hackett,
Check Processing (Los Angeles),

judgment in this area," he said.

and Raymond Kriese, Personnel

earlier request that banks take
care to avoid financing essen
tially speculative transactions in

that, in the last analysis, the effec
tive distribution of credit among
potential borrowers must rest with
individual lending institutions

In the Bank Operations/Branches
area, four officers were promoted
to

Assistant

Vice

President

—

Gale Ansell, Analysis and Control
(Seattle), David Christerson, Cash

(Los Angeles).

He added his conviction that the

commodity, gold, and foreignexchange markets. He also

banking system's adherence to
the principles set forth in his letter

In the Corporate Staff area (San
Francisco), two new Assistant

warned that credits advanced for

will contribute to the success of

Vice Presidents were named —

"extraordinary financial transac
tions" would be viewed as ques

the Fed's efforts to deal with infla

John K. Davis, Accounting and
Connie Russell, Personnel. New

sactions would include loans for

tion during this period of difficult
economic adjustment. Also, the
banks' cooperation will serve the

the purpose of retiring stock or for
corporate takeovers that simply
substitute one source of financing

longer-range objectives of lend
ing institutions as well as the
nation.
*fr

Officer and

tionable by the Board. Such tran

officer appointments were James
Tenge to Administrative Service
Steve Whitmore

Personnel Officer.

to

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The revised rule restricts
insurance-sales activities to bank

INSURANCE SALES
RULE REVISED

RENAMED TO POSTS

(Continued from page 1)

holding companies or their non-

the Automobile Club of Southern

The

California.

Governors this month revised its

He

is

a

Trustee

of

several major educational institu
tions

— California Institute of

Federal

Reserve

Board

of

Regulation Y, to tighten condi
tions under which bank holding

Technology and Occidental Col
lege — as well as a Trustee of the
Haynes Foundation.

sidiaries can

Peck, like Larkin, is an alumnus of
Stanford University, where he

with populations of less than
5,000. The Fed's Reg Y governs
holding-company activities.

graduated with a B.S. degree (cum
laude) in civil engineering. In
addition to holding numerous di
rectorships, he is a Trustee of the
Doheny Eye Foundation, a

Trustee of the Mead Housing
Trust and Development Corpora
tion, and a Trustee and Vice
Chairman

of

the

Ear

Research

companies or their nonbank sub

handle general-

insurance sales in communities

Graduate School of

Busi

ness Administration.

Schmidt is a member of a number

of financial and other organiza
tions, including the Association of
Reserve City Bankers, the Inter
national Monetary Conference,
the

In

ation, the Advisory Council on
Japan-U.S. Economic Relations,

Peck

received

the

Achievement Award of the

Los

Angeles Chamber of Commerce.
In the same year, he received the
Award of Distinction of the Ameri

can Institute of Steel Construc
tion.

principal places of banking busi
ness in communities with popula
tions of 5,000 or less. The Board

determined that existing
regulatory language authorizing
bank holding companies to
engage in insurance-agency
activities was too broad, because
it permitted remote activities not
intended

vard

Institute.

1977,

bank subsidiaries who have their

and

American

the

Bankers

Stanford

Associ

Research

to

be authorized. The

Board also deleted a provision of
the previous rule permitting
insurance sales activity in larger
communities determined to have

inadequate insurance-agency
facilities.

The Board's action was in confor

mity with a court action requiring
the Board to reconsider a

1971

rule which governs this smallcommunity insurance activity.

Institute Council. He is a director

The

of the Bay Area Council, the
California Roundtable, and the

sale of general insurance in such
communities was an activity
closely related to banking. It

San Francisco Chamber of Com

Board

concluded

that

the

merce. He is also a member of the

noted that national

Schmidt, before joining the Bank
of California in 1976, was Presi

Advisory Board of the Pacific Rim
Bankers Program, as well as the

been authorized to sell insurance

dent of the First National Bank of

Board of Governors of the San

in such communities since 1916,
and that many state banks are

Chicago. He is a graduate of the
U.S. Naval Academy and the Har-

Francisco Symphony Association.

also engaged in this type of

w

activity.

banks

have

if