Full text of Federal Reserve Notes : October 1981

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Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO

•

October 1981

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

CHECK-HANDLING
VOLUME MIXED

Since the advent of check pricing
August 1, the Federal Reserve Bank

S'\

of San Francisco has experienced a

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5.2-percent drop in total checkprocessing volume. At the same

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time, the adoption of pricing has
helped bring about a dramatic surge
in the handling of "fine-sort" items.
John W. Gleason, vice president of
payment services, reports that the
five Federal Reserve offices in the

Eugene A. Thomas

David J. Christerson

THOMAS, CHRISTERSON PROMOTED BY FED

nine western states processed
192,000 fine-sort bundles during
August and September. A fine-sort
bundle contains from one to 450

checks drawn on the same deposi

The Federal Reserve Bank of San

the Fed before returning to San

tory institution.

Francisco has promoted Eugene A.

Francisco as Assistant Vice Presi
dent and Chief Examiner in 1974.

This represented a 44-percent in

Thomas to Senior Vice President of

Supervision, Regulation and Credit,

He was promoted to Director of

and promoted David J. Christerson

Bank Examination in 1975 and to
Vice President of Bank Examination

the comparable two-month period of
1980. In contrast, growth in fine-sort
volume prior to the adoption of pric
ing ranged between 15 and 20 per
cent a year. The new pricing system

to Vice President of Financial
Services.

Thomas continues to be responsi
ble for directing the Reserve Bank's

in 1978. In the following year he was
named Vice President in charge of
Supervision, Regulation and Credit.

work in the areas of international

Christerson worked in various data-

and bank holding-company regula
tion, bank examination, credit oper

processing positions at Portland be

crease over the fine-sort volume for

was adopted in line with the man

date of the Monetary Control Act of
1980.

affairs.

fore transferring to San Francisco in
1973 as Programming Manager. He

Christerson is responsible for cus
tomer relations, product planning

all parts of the 12th Federal Reserve

returned to the Portland Fed as

District—with the exception of the

Computer Services Manager, but

Pacific Northwest, where two Seat

came back to San Francisco in 1978

as Systems Officer with responsibil
ity for the development and mainte

tle banks joined a private clearing
house and stopped fine-sorting city
checks through the Federal Re

nance of computer-operations envi

serve branch. But volume increased

ronmental software. He became

in the Salt Lake City area, where
major banks for the first time began
to establish a fine-sort program with

ations,

and

consumer

and development, and administra
tion of all priced Fed services in the
San Francisco Reserve District.

Both men are longtime employees
of the San Francisco Fed. Thomas

joined the Bank in 1960 as a bank

examiner, while Christerson joined
the Portland branch as a manage
ment trainee in 1966.

Thomas later served at the Portland

and Los Angeles branch offices of

Cash Officer and then Assistant

Fine-sort volume generally rose in

Vice President of Custody Services
before being appointed director of
the MCA Project Team, which later
became part of the Bank's Financial

the local Federal Reserve Bank.

Services Group.lSfp

volume in the District declined 5.2

Meanwhile, total check-processing
(Continued on page 2)

CHECK HANDLING
(Continued from page 1)

percent below the August-Septem
ber 1980 volume, to 220 million
items. This decline was concentrat

ed mainly in city and RCPC items.
(RCPCs are Regional Check Pro
cessing Centers.)
Nationwide, the Federal Reserve

has lost an average of about 12 per
cent of its check-processing volume
to the private sector since the inau
guration of pricing. In the 1978-81
period, prior to pricing, the Federal
Reserve experienced check-pro
cessing growth of six to seven per
cent annually.

DISCOUNT RATE DROPPED
The Federal Reserve reduced the basic discount rate by one point to 13

percent, effective November 2. This was the first change in the rate since May,
when it rose from 13 to 14 percent. The Fed made no change in the 2-percent
surcharge that applies to large depository institutions which borrow frequently
from the discount window.

In approving the reduction October 30, the Federal Reserve Board said it was
acting in concert with recent declines in short-term interest rates and the
reduced level of adjustment borrowing at the discount window. The Board
said the reduction is consistent with a pattern of continued restraint on growth
of money and credit.
REG Z COMMENTARY
AVAILABLE FROM FED

ernors has deferred, through April

ernors has published an official staff

1982, the reserve-maintenance and

commentary covering the new "sim

reporting requirements for nonmember depository institutions that

substance of some 1,500 Board and

factors also contributed, such as an

staff interpretations that have been

increase in overnight availability of
check exchange among some of the
nation's major commercial banks

issued since the Act became effec

tive over a decade ago, and that

via chartered air carrier. The Fed

regulation.

involved.

Meanwhile, according to Reserve
Bank payment-services officials,
volume growth has been consistent
with projected increases for other
priced Fed services, such as wire
transfers and Automated Clearing
House (ACH) items. Institutional
access to the Fedwire occurred at

the beginning of 1981, while pricing
of ACH services began August 1.

The Fed launched pricing of securi
ties and non-cash items on October

1. Volume comparison figures in this
area will be available at a later date.

PUBLICATION AVAILABLE

Copies are now available of papers
presented at the Fourth West Coast
Academic/Federal

Reserve Eco

nomic Research Seminar. Free

copies of the proceedings of this
seminar may be obtained from the
Public Information Section of the

The Federal Reserve Board of Gov

The Federal Reserve Board of Gov

While Fed pricing was probably the
major reason for the overall decline
in check-handling volume, other

also provides overnight consoli
dated shipments among most of its
48 processing centers, but checkavailability times can stretch to two
days where more remote points are

RESERVES DEFERRAL

plified" Regulation Z (Truth in Lend
ing). The document deals with the

are still relevant under the revised

The commentary also covers recent
developments in consumer-credit
financing. These include several
types of new home-financing tech
niques, such as "buydowns" of
mortgage interest rates and "wrap
around" mortgages.
The commentary is expected to re
place all individual interpretations

had less than $2 million in total de

posits as of December 31, 1979.
The Board made this deferral in

view of legislation being considered
in Congress to provide a permanent
exemption for smaller depository
institutions. This would require
amending the Monetary Control Act
of 1980, which imposes Federal Re
serve reserve requirements on all
depository institutions offering
transaction (check-type) accounts
or nonpersonal time deposits.
Affected are nearly 18,000 institu
tions nationwide, including approx
imately 17,000 credit unions. These

and be the sole vehicle for inter

institutions are estimated to hold

preting Reg Z. Compliance with the
revised regulations is permissible
anytime after publication (April
1981), but compliance becomes
mandatory April 1, 1982.

one-half of one percent of all depos

Financial institutions desiring a full
text of the Reg Z commentary
should contact the Corporate Ser
vices Department of the San Fran
cisco Fed at (415) 544-2262. Also
available is a 59-page slide-show
script summarizing the simplified
requirements. A two-hour presenta
tion of the slide show on three-

quarter inch videotape (Betamax
format) will soon be available at all
five Federal Reserve offices in the

San Francisco District.

itory institutions' deposits. IfP
Reg Z definition of "arranger" of
credit to clarify the coverage of realestate brokers and others who help
arrange consumer credit, especially
in the area of owner-financed home

sales. In addition, the Board is seek

ing comment by December 11 on a
proposed official staff commentary
on Regulation M, Consumer Leas
ing, which contains leasing provi
sions formerly covered in Reg Z.
Additional information on both the

arranger-of-credit and consumerleasing proposals can be obtained
from the Consumer Affairs Unit of

the San Francisco Fed at (415)

Federal Reserve Bank of San Fran

Meanwhile, the Federal Reserve

544-2762. Full texts of the commen

cisco, P.O. Box 7702, San Francis

Board has requested public com
ment on a proposal to amend the

taries can be obtained from Corpor

co, Ca. 94120, (415) 544-2184.

ate Services (415) 544-2262.1jj|(t

FINANCIAL OFFICERS
HAVE BANK EXPERIENCE
The new financial-service officers of

the Federal Reserve Bank of San

Francisco possess a mixture of
strong commercial-banking experi
ence and prior Federal Reserve
service.

Two of them are located at the San

Francisco headquarters office of the
Financial Services Group, which the
Bank created to provide access for
all depository institutions to priced
Fed services, as mandated by
the Monetary Control Act of 1980.
Maureen E. Shields is in charge of

Maureen E. Shields

product management, which is re
sponsible for product planning and
development and price adminis
tration. Martha F. Perry heads cus
tomer relations, which involves the

marketing and servicing of Fed ser
vices, including procedures for es
tablishing and maintaining accounts
with the Fed.

Ms. Shields joined the San Francis
4

co Fed at the start of 1981 as man

ager of price administration, after
spending nearly four years with
Wells Fargo Bank as an assistant
vice president specializing in prod
uct management and customer ser
vices. She earned a master's de

gree in business administration
from Santa Clara and an undergrad

uate degree from the University of
California at Berkeley.

Susan L.B. Robertson

Ms. Robertson joined the Portland
Fed in 1974, and has served there
as assistant manager for automat
ed-clearinghouse services and as

manager of bank and public ser

Following a 10-year career with

vices. She holds an undergraduate

Union Bank in Los Angeles, Ms.

degree from the University of Ore
gon and a master's degree in edu

Perry joined the Fed in August. She
had served there as assistant vice

president, responsible for opera
tions administration for Union
Bank's Financial Institutions Divi

cation from the University of Mary
land. She has taught school at
Bremerton, Washington, and spent

three years with a commercial bank

sion. She attended Central Con

in Bethesda, Maryland.

necticut State College and holds a
bachelor's degree from California
State University at Los Angeles.

Ferensen rejoined the Seattle Fed
in February after spending seven
years with Seattle First National

Other financial-service officers in

Bank in investment operations,
funds management, and commer
cial credit. A graduate of Northern
Illinois University, he served as a

clude Susan L.B. Robertson at Port

land, William C. Ferensen at Seattle
and William W. Hall at Salt Lake

William W.Hall

Hall has 13 years of commercialbanking experience. Prior to joining
the Salt Lake City Fed, he was vice
president of marketing for Zions Na
tional Bank. He graduated from

City. A financial-service officer will

Navy Pilot from 1965 to 1969 and

be named soon for the Los Angeles
branch, which serves the largest

worked at the Seattle Fed in check

Utah State and the School of Mar

keting at the University of Colorado,

number of depository institutions in

processing, planning, cash and ac
counting before going to Seattle

this Federal Reserve District.

First.

and also attended the Colorado

School of Banking at Boulder. 1jj|p

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RATE HIKE DEFERRED

FED MULLS BANK-THRIFT CONSOLIDATION MOVES

The Depository Institutions Deregu
lation Committee has voted to delay
indefinitely its recent decision per
mitting a half percentage-point rise

Paul Volcker has told Congress that
the Fed is prepared to permit bank
holding companies to acquire sav-

According to the study, there are
few, if any, economic or publicpolicy factors precluding bankholding companies from acquiring

Federal Reserve Board Chairman

in the maximum interest paid on
passbook-saving accounts. The in
crease had been scheduled to go

ings-and-loan associations in emer
gency cases. In a letter to Chairman

thrifts. Also, such consolidations
appear not to run contrary to anti

Jake Garn of the Senate Banking

trust laws and existing regulations.

into effect November 1.

Committee, Volcker said the Feder

In September, the Committee had
approved the hike—to 6 percent for
thrifts and 5.75 percent for banks—
by a vote of three to two. However,
Treasury Secretary Donald Regan,

al Reserve may soon need to use its
statutory power to approve such ac

quisition of ailing thrifts if Congress
fails to act.

"In the absence of this legislation,"

chairman of the Committee, later

wrote Volcker, "the Board believes

decided to change his vote to op

that the public interest may dictate
that the Federal Reserve may soon
need to use its existing, broader sta
tutory authority to approve bank
holding company acquisition of
thrifts on a case-by-case basis."
While it has the authority to allow

pose a passbook rate hike at this
time.

The scheduled increase could be

"unnecessary and even counter
productive" in light of the thrift indus
try's continuing financial problems,
said Regan. The ceiling rates will
remain at 5.5 percent for savings
and loan associations and 5.25 for

commercial banks.^p

such acquisitions, the Fed has not
yet done so because it considers

this to be a public-policy issue that
should be decided by Congress.
The Fed chairman's letter to Garn

was accompanied by a 142-page

staff study outlining the legal, com
petitive and supervisory implica
tions of bank-thrift consolidations.

The study had been requested
by the Senate Committee follow
ing hearings on the issue last
November.

Among the public benefits arising
from such consolidations, adds the

study, should be enhanced compe
tition and efficiency, especially for
smaller thrifts. Other benefits would

include the possibility of a lighter tax
burden, potential for geographical
expansion, and increased financial
stability.
In late October, meanwhile, the

House passed a compromise "regu
lators" bill which sets guidelines for
the interindustry and interstate
merger and acquisition of failing fi
nancial institutions. The measure
would broaden the conditions under

which the Federal Deposit Insur
ance Corporation and the Federal
Savings and Loan Insurance Cor
poration could extend financial
assistance to ailing financial institu
tions—as well as the types of as
sistance, including capital infusion.
It also would establish priorities for
possible merger or acquisition by
out-of-state institutions or bank

holding companies. The bill now
goes to the Senate for possible

amendment. Ijflp