Full text of Federal Reserve Notes : Number 1, 1980

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Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO

•

NO. 1, 1980

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

S.F. RESERVE BANK WIDENS

SCOPE OF OPERATIONS DURING 1979
During 1979, the Federal Reserve
Bank of San Francisco provided
expanded central-bank services

uniform rating system, somewhat
along the lines of the inspection
program developed earlier by the

— in the areas of checks, coin,

San

currency, fiscal agency, and

This Bank adopted a policy in
1976 of scheduling the inspec
tion of major holding companies
concurrently with the examination

electronic funds transfers — for a

regional economy which con
tinued to grow at a faster pace

Francisco

Reserve

Bank.

than the rest of the nation. The

of their principal subsidiary bank

Twelfth District, which contains
five Reserve Bank offices (San

by this or other regulatory agen
cies. The policy achieves some
efficiencies by pooling the
knowledge of all of the bank
regulatory agencies involved in
the supervision of each holdingcompany family, while even
greater savings are realized by
the holding companies and banks

Francisco, Los Angeles, Portland,

Salt Lake City and Seattle), is the
largest Federal Reserve District in
terms of both population and
geographic size. It includes the
states of Alaska, Arizona, Califor
nia, Hawaii, Idaho, Nevada,
Oregon, Utah and Washington,
plus the territories of Guam and
American Samoa, and it serves
35V2 million people and 625
banks with a total of 7,114 bank
ing offices.

During 1979, the Reserve Bank
received 142 bank holding-com

pany applications for analysis
and processing, along with 58
other applications involving
structure changes as well as 33
applications for foreign activities.
The applications staff maintained
close communication with active

holding companies and other
applicants, and provided
interpretations and advice to
those wishing to expand or
restructure their operations.
In

1979, the Federal Reserve

System as a whole began its first
year of operation with a stan
dardized inspection report and

being examined. The Fed's Board
of Governors has formally
adopted this policy for implemen
tation System-wide during 1980.

Following a recent System policy
change, the Bank established
guidelines and implemented pro
cedures permitting member
banks to pledge residential
mortgage loans and municipal
obligations at the discount win
dow, yet retain physical posses
sion of paper representing this
collateral. The Bank, a long-time
advocate of such "off-premises
custody" arrangements, was
among the first in the System to
institute these procedures. In a
related action, the System for
mally provided for the acceptance
of foreign paper as discount-win
dow collateral, in line with pro
cedures adopted at this Reserve
Bank several years ago. San

(Continued on page 2)

A.C. Furth

FURTH APPOINTED
S.F. FED DIRECTOR
Alan C. Furth, President of the

Southern Pacific Company, has
been appointed a director of the
Federal

Reserve

Bank of San

Francisco by the Fed's Board of
Governors. Furth will replace
Joseph F. Alibrandi, president of
Whittaker Corporation, for the
unexpired portion of a three-year
board term ending December 31,
1981.

Furth, a native of Oakland, has
spent his entire corporate career
with the Southern Pacific Com

pany. He was appointed Vice
President and General Counsel in

1966, Executive Vice President

(Law) in 1976, and President of
the firm in 1979.
The new Fed director received an

undergraduate degree from the

(Continued on page 4)

BANK OPERATIONS

(Continued from page 1)
Francisco held more than three-

fourths of the foreign collateral

pledged at all Reserve Banks dur
ing 1979. These policy changes
helped expand the pool of col
lateral available for discount-win

which provides better messageswitching services between mem
ber banks, monitoring programs

to help manage check-processing
float, and a new system to handle
the increased reporting burden
associated with banks' foreignexchange operations.

dow borrowings, and reduced the

In a major ongoing project, the

administrative burden associated

Bank continued development

with banks' pledging of collateral.

work on a sophisticated system to
handle the processing of financial
reports received from banks and

The consumer-affairs staff con
ducted examinations at all state-

member banks, and also at about
one-third of their branches, in line

with an expanded System-wide

program designed to achieve
broad-based compliance with
consumer-protection laws and

regulations. In addition, the staff
conducted formal advisory pro

other financial

institutions. The

increasing number of reports and
respondents, in addition to the
increasing visibility and sen
sitivity of the monetary aggreg
ates which are drawn from these

data, make completion of this pro
ject our highest priority effort.

grams for member banks, as part

Data processing and fiscal per

of a service in which specially
trained examiners provide on-site
educational and advisory work.

sonnel

The Reserve Bank received 604

individual consumer complaints

against commercial banks, and of
that total, processed 138 com

plaints which were related to
institutions for which the Bank is

the primary supervisor. Also, the
staff received several thousand

requests for information from the
general public, many of them in
response to a series of Bank-pro

continued

work

on

the

automation of a Treasurysecurities inventory and transfer

system (called SHARE). San
Francisco is the lead district on

this project, which will provide a
standardized on-line database

fiscal-computer application ser

vicing 13 offices in the Kansas
City, St. Louis and San Francisco
districts. This is the first largescale joint automation project
undertaken within the Federal

Reserve System.

duced public-service announce
ments on consumer regulations,

In the check-processing activity,

which were shown on a number of
television stations in the District.

paper checks during the year — a
substantial 6-percent increase.
With continued technological and
operational improvements, check
personnel maintained the highest
check-processing productivity in
the Federal Reserve System. At
the same time, the quality of
operations was significantly
improved. As a result, internally
generated errors which require
costly and time-consuming
adjustment were reduced by more
than 35 percent.

The Bank continued to implement

a long-range automation plan,
which calls for District-wide stan

dardization and centralized pro

cessing of most operations, with
all

five

District

offices

tied

together via a modern computer

network operated out of the San
Francisco data center. All offices
now have centralized services
available in certain areas, such as

tax-receipt processing and some
savings-bond processing. Major
automation projects completed in

Bank

staff

handled

1.3

billion

In 1979, as in earlier years, the
fastest-growing means of pay

District-wide

ment was electronic. While

central-adjustments system to

check-processing activity
increased 6 percent, wire funds
transfers increased 23 percent,
and automated clearinghouse

1979 included a

handle account reconciliations

with member banks, a high-speed
telecommunications system

(ACH) and government deposit
activity jumped 44 percent. In dol
lar terms, District member banks
settled

a

massive

$8.9

trillion

through the Federal Reserve's
wire-transfer system during the
year. But the sharpest percentage
gain occurred at automated
clearinghouses, which move
funds by electronically-transmit
ted payment instructions that
take the place of paper checks.
The Bank expanded ACH opera
tions to a 24-hour per day pro
cessing schedule in October, as
part of a System effort to attract
additional volumes by setting
schedules more accommodating
to corporate originators.
In cooperation with the Treasury
Department, the Bank completed
implementation of a governmentcheck truncation program which
had been instituted in 1978. Trun

cation involves shipping magnetic
tapes and microfilm copies of
checks, instead of the original
paper checks in bulk, to the
Treasury computer-operations
center, enhancing speed and
control. This effort was a major
accomplishment, as the San
Francisco District processes the
largest volume of government
checks in the System — 124 mil
lion in 1979.

Despite the increase in check
usage and the rapidly accelerat
ing growth in electronic pay
ments, the Reserve Bank con
tinued

to

handle

substantial

amounts of coin and currency in

1979. Altogether, it received and
counted 1.9 billion coins and pro
cessed 1.4 billion pieces of cur

rency during the year. Currency
verification decreased by 45 per

cent, reflecting several major effi
ciencies which were adopted in
1978. For example, commercial
banks now deposit excess fit cur
rency in sealed plastic bags, so
that the currency can then be
paid out to the same bank without
the

need

for

Reserve

Bank

verification and counting. In
another major advance, the Bank
installed three high-speed cur
rency machines in 1979, and will

(Continued on page 4)

FED APPOINTS LA.

FED ORGANIZES

BOARD MEMBERS

CHECK ROUTING GROUP

PUBLICATION
NOTE

The Federal Reserve Bank of San

Francisco appointed Bram
Goldsmith, Chairman and Chief
Executive Officer of City National

Bank (Beverly Hills) and Fred W.
Andrew, President of Superior

The Federal Reserve System has
organized a "Routing Number Ad
ministrator" Group to improve the
nation's check-processing
capability, with representation

During 1 980, Federal
Reserve Notes will be pub
lished bimonthly instead of
every month.

from each of the twelve Federal

Farming Co. (Bakersfield) to the

Reserve Banks. The group will

Board of Directors of the Bank's

work jointly with the American
Bankers Association (ABA) and
the Rand McNally Company,
which serves as an agent for the
ABA to review routing-number
assignments to depository institu

Los Angeles office. Separately,
the

Federal

Reserve

Board of

Governors appointed Lola M.
McAlpin-Grant, Assistant Dean of

Law at Loyola Law School (Los
Angeles) to the Los Angeles
Board, and also reappointed Togo
Tanaka, President of Gramercy

Enterprises (Los Angeles) to that
Board.

Goldsmith attended the Univer

sity of Illinois, and has been a
Director of City National Bank
since 1964, and Chairman and
CEO since 1975. In the 1952-74

period, he was President of
Buckeye Realty and Management
Corporation, and Executive Vice
President of Buckeye Construc
tion Company.
Goldsmith is a member of the
Board of Directors of Cedars Sinai

Medical Center, and a Director of
Hartfield-Zodys, Inc. He is a mem

ber of many civic organizations,
and during 1970-74, was National
Chairman

of

United

Jewish

Appeal.
Andrew, a magna cum laude grad
uate of the University of Arizona,
has been engaged in a number of
agricultural pursuits for the past
several

decades.

When

he

became president of Superior
Farming Co. in 1970, the firm had
about 3,000 acres

in

various

stages of development. Currently,
Superior Farming has 38,000
acres of diversified production in
California and Arizona, along with
various integrated processing

member of the California Associ

ation of Winegrape Growers. He is
also a past member of the Food
and Agriculture Committee of the
Chamber

of

Commerce

of

the

United States.

McAlpin-Grant, who obtained an

undergraduate degree from Mt. St.
Mary's College and a law degree
from Loyola Law School, has been
the

Assistant

Dean

of

Law

at

Loyola Law School since 1970. In
the period 1966-70, she was Dep
uty Attorney General for the State
of California.

the

Fraud

Governor's
Task

Force

Consumer
and

of

the

Advisory Board to the Bureau of
Automotive Repairs Services. A
member of the State and Federal

Bars, she has been affiliated with

electronic

through which cash items will be
routed for payment.
The jointly designed plan will
require institutions needing a
routing number to contact Rand
McNally, which will then reserve a
number.

The

local

Federal

Reserve Bank will be responsible
for reviewing and approving each
request.

Association, and in 1974-75 was

planning a name change,
reorganization, consolidation or
merger. In addition, institutions
which are absorbed by another
depository must contact Rand
McNally, since the absorbed
institution generally will be
required to use the routing num
ber of the surviving institution and

Regional

President of

Catholic

Social Services.

Tanaka, a graduate of the Univer
sity of California at Los Angeles,
has been affiliated with a number

of real-estate and publishing
enterprises in the past several
decades. He is a Director of the

for new institutions or for those

the merged institution's number

Los Angeles Wholesale Produce
Market Development Corporation.

will be retired.

He is also a

For

director of several

Andrew serves as Chairman of

organizations, including the Boy
Scouts, the American Red Cross,

a member of the Advisory Board
of California State College
(Bakersfield), and as a board

checks and

payments to identify the payor
financial depository institution

The procedure will be the same

facilities.

ciation of Pistachio Producers, as

used on

the Women Lawyers Association
and the Black Women Lawyers

Southern

the Board of the California Asso

The group's objective is to pro
vide one routing number for each
presentment point designated by
a paying institution for delivery of
cash items for payment. A routing
number is the nine-digit number

and the Federal Reserve District

McAlpin-Grant is a director of
United Financial Corporation of
California, and a member of the
Board of Regents of Mount St.
Mary's College. She is a member
of

tions.

California

civic

the Crippled Children's Society,
Goodwill Industries, and the
Methodist Hospital of Southern
California.

additional

information

on

routing-number procedures, con
tact the Check Processing Officer
of

the

Federal

Reserve

serving your bank.

Office

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BANK OPERATIONS

(Continued from page 2)
install three more in 1980. Each

machine has an optimum feed
rate of 1,200 notes a minute, and

is capable both of detecting coun
terfeits and of destroying, on line,
those notes which do not meet fit

ness standards. Over time, the new
equipment will help reduce staff
in this labor-intensive activity,
and will also improve processing
efficiency.
In the coin area, the major activity
centered around the

release of

the Susan B. Anthony dollar coin,
which was made available to the

public on July 2, 1979. This bank

ments in the form of savings
bonds, marketable Treasury
securities and food stamps.
Activity in marketable securities
increased 25 percent in volume,
reflecting investor attraction to
the double-digit interest rates
offered on such

issues. At the

same time, the Bank worked to

improve computer handling of
securities through such means as
the aforementioned joint automa

tion project with the Kansas City
and St. Louis Districts.

The Bank completed implementa
tion of the Treasury-designed taxand-loan investment program.
Under this arrangement, the

representing one-fourth of the

Treasury earns interest by invest
ing its operating cash balances,
while paying fees for certain ser
vices which it formerly received

total

free

distributed about 65 million coins

to District financial

institutions,

volume distributed

nation

wide. Demand for the coin fell off

from

financial

institutions.

of $50 million a year could be
realized by replacing the present
pool of dollar bills with Anthony

Other changes in fiscal process
ing included revisions to the sav
ings-bond program. First, the
Treasury accelerated payments
for savings bonds sold by finan
cial institutions as issuing agents.
Second, it announced two new
series of savings bonds, EE and
HH, to replace the current E and H

dollar coins.

bonds.

In its role as fiscal agent for the
U.S. Government, the Reserve

Overall,

Bank handled substantial

second

amounts of

effectiveness in the System, with

considerably after the initial
release. However, the Treasury
and Federal Reserve System have
continued to promote the coin,
maintaining that overall savings

public-debt

instru

the

San

Francisco

Reserve Bank operated at the

highest level of cost

FURTH APPOINTED

(Continued from page 1)
University of California, Berkeley,
and obtained a law degree from
the university's Boalt Hall. He was
editor of the Daily Californian
while at the university, and was a
member of the Board of Editors of
the California Law Review at
Boalt Hall. He also attended the

Advanced Management Program
of the Harvard Business School.

Furth is a director and member of
the Executive Committee of both

the Southern

Pacific Company

and the Southern Pacific Trans

portation Company. He also holds
directorships with a number of
other major industrial firms. In
civic activities, he is a trustee of
the Pacific Legal Foundation
(Sacramento), Samuel Merritt

Hospital (Oakland), and Pomona
College.

<fr

an aggregate unit cost 9 percent
below the System average. Pro

ductivity (output per worker-hour)
in these operational activities has
increased 65 percent in the past
five years. The Bank achieved this
performance while experiencing
only slight increases over 1974
unit-cost levels, despite sharply
rising costs of salaries, materials

and equipment.

^