Full text of Federal Reserve Notes : September 1978
The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federal FEDERAL RESERVE BANK OF SAN FRANCISCO • SEPTEMBER 1978 O !• Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington mm** AUTOMATIC TRANSFERS DELAY REJECTED The Federal Reserve Board of Gover nors has decided not to delay the effective date of its rule permitting automatic transfer of funds from sav ings to checking accounts. Several organizations had asked the Board not to allow this service to begin as planned on November 1. Kent O. Sims (dark suit, center), Senior Vice President, greets a number of bankers Under the automatic-transfer ar rangement, funds could be shifted automatically from savings to check ing accounts to cover overdrafts or to maintain specified balances. The ser vice would be available only to indi vidual customers—not to businesses representing Pacific Basin countries. To his left are Dr. Kermit Hanson, Dean, School of Business Administration, and Dr. Charles N. Henning, both from the University of Washing ton. To Sims' right is Assistant Vice President and Economist Hang-Sheng Cheng, who also participated in the conference. PACIFIC RIM BANKERS MEET AT SAN FRANCISCO FED or government agencies. Some fifty bankers from twelve Pacif ic Basin countries attended a confer In a letter to the Independent Bankers Association (IBA), the Board said, ence this month at the Federal Re "The benefits that will accrue from the serve Bank of San Francisco, which featured briefings on a number of automatic-transfer service outweigh the possible benefits of further delay in the introduction of this service." The IBA had requested either a delay or the creation of a new bank savingsaccount category providing rate pari ty with similar thrift-institution ac counts. Thrift institutions can pay up to a quarter percent more interest than commercial banks can pay on savings deposits. In rejecting the IBA suggestion, the Board stated, "After careful consider ation of the petition and other similar requests, we have determined it would not be appropriate. . The Board has recently urged Congress to provide rate parity among all insti tutions for savings-type accounts that are tied to third-party transfer ac counts. The Board believes legisla an active part in both the 1977 and 1978 Pacific Rim programs. "We view the program as an extension of the Bank's ongoing involvement in econ omic research on the Pacific Basin, economic and financial issues. Par and as an opportunity to maintain ticipants included bankers from Aus tralia, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, the active contact with banks in that re Philippines, Singapore, Taiwan, Thai sive and growing business and finan land and the United States. cial ties that the United States—and gion," Sims said. "The bank's interest in the Pacific Basin reflects the exten particularly the West Coast—main International economists from the tain with these countries." San Francisco Fed made presenta tions at the conference on such top ics as international lending, the growth of Third World debt, the as sessment of lending risks, Asian fi mist Hang-Sheng Cheng added that the Bank also publishes a quarterly statistical bulletin on the region—the nancial markets and the structure of Pacific Basin Economic Indicators— the Federal Reserve System. The program was held in conjunction with the Pacific Coast Banking School, which sponsors the Pacific Rim pro gram administered by the Graduate as well as a semi-annual Bulletin of School of Business Administration of the University of Washington. tive actions it has recommended con- Assistant Vice President and Econo the Clearinghouse of Pacific Basin Central Bank Economic Research and numerous economic studies of Pacific Basin countries. Copies of these publications are available from the Public Information Section, Feder al Reserve Bank of San Francisco, Senior Vice President Kent Sims not (continued on page 4) ed that the Reserve Bank had taken (continued on page 3) SUMMARY OF KEY FED DEVELOPMENTS TRUTH IN LENDING CHECK COLLECTION CHANGES The Board of Governors announced three actions affecting its Truth in Lending Regulation Z. The Board adopted an amendment that would simplify the computation of the annual percentage rate for graduated-payment mort gages, as well as for other long-term transactions that involve minor irregularities in the repayment schedule. Certain irregular-payment amounts and payment periods would be considered "regular" for the purpose of calculat ing the annual percentage rate. Unlike an earlier proposal issued last May, the final ruling applies to all long-term credit transactions with minor irregularities in the repay ment schedule—not just mortgage credit—and applies to all contracts with maturities of 10 years or more. The San Francisco Reserve Bank recently made several The Board also adopted an amendment to permit creditors to use as many pages as necessary when disclosing schedules of variable payments. In doing so, the Board withdrew a proposed version that would have allowed the use of abbreviated schedules. In a third Reg Z action, the Board asked for comment on an interpretation which would require disclosure of loss of interest when a time deposit is used as security for a loan. Currently, lenders do not have to disclose such information when a loss results because changes in check-collection procedures. The Salt Lake City Branch began offering a Fine Sort Deposit program. Under this program, commercial banks can presort certain checks, which qualifies them for later deadlines. Also, the Portland Branch changed its closing hour to 9 a.m. from 10 a.m. on Monday through Friday for checks payable in the city of Portland. Moreover, the Reserve Bank announced that banks can now deposit postal money orders and government checks commingled with other RCPC items up to a daily average volume of 300 items at all offices. (RCPC's are Regional Check Processing Centers.) But banks can continue to meet the present 4 p.m. deadline by separately sorted postal money orders and government checks. These changes were outlined in an updated Circular I (Collection of Cash Items) distributed to all District banks. The circular also outlines the procedures for processing government checks under the simplified "truncation" pro gram. For further information, contact the Check Officer at your nearest Federal Reserve office. of compliance with state law. For further information, contact the Reserve Bank's Consumer Affairs Unit (415) 544-2224, RESERVES FOR FOREIGN BORROWINGS LOST AND STOLEN SECURITIES The Board of Governors has changed reserve require ments on foreign borrowings to make it more attractive for The Securities and Exchange Commission (SEC) is ana member banks to borrow funds in the Eurodollar market. lyzing public comments regarding the continuation of its Lost and Stolen Securities Program. The SEC established a pilot program early this year for processing reports and inquiries dealing with lost and stolen securities. The com mission will now decide ifthe program should be extended beyond its scheduled December 31 phase-out date. For The amendment to Regulation D (Reserves) and M (For eign Branches) was designed to improve the international position of the dollar. Specifically, the Board reduced from 4 percent to zero the reserve requirement on member banks' foreign borrowings—primarily Eurodollars—from their for further information, contact the Fiscal Department at any of the Reserve Bank's branches. 26-WEEK CERTIFICATES The Board of Governors has published a statement to answer the most frequently-raised questions concerning the new 26-week savings certificate issued by banks and thrift institutions. This new category of time deposit can be issued in denominations of $10,000 or more. The maximum permissible rate of interest is based on the rate established for six-month Treasury bills issued on or immediately prior to the date of deposit. The rate is calculated on the auction average on a discount basis—not the coupon equivalent rate. Savings banks and savings-and-loan associations are allowed a one-quarter point differential. The Board issued the guidelines after consultation with the Comptrol ler of the Currency. The Federal Deposit Insurance Corpor ation issued similar guidelines for nonmember banks, and the Federal Home Loan Bank Board did likewise for thrift institutions. For further information, contact the Reserve Bank's Law Department (415) 544-2254 or 544-2256. eign branches and other foreign banks. It also reduced from 1 percent to zero the reserve ratio on foreign-branch loans to U.S. borrowers. The ruling also affects the U.S. offices of foreign-owned banking institutions, which have voluntarily maintained reserves on increases in net foreign borrowings since mid-1973. The Board said that its reserve reduction was intended to encourage member banks to substitute Eurodollar borrow ings for domestic borrowings as a source of funds. It also reemphasized its previous request for U.S. banks not to solicit or encourage deposits by U.S. residents at their foreign branches unless such deposits serve a definite international purpose. For further information, contact the Reserve Bank's Supervision, Regulation and Credit De partment (415) 544-2266. HOLIDAY NOTICE The Reserve Bank's Salt Lake City Branch will be closed on October 9 in observance of Discovery Day. All other Bank offices will remain open. FED RAISES DISCOUNT RATE JACKSON ADDRESSES SALT LAKE MEETING The Federal Reserve raised its dis count rate on member-bank borrow Federal Reserve Governor Phillip C. Jackson, Jr., in a Salt Lake City ad ings late this month, from 73A to 8 percent, reflecting the continuation of the upward trend of interest rates that began in late 1977. ed effort by all sectors of the economy to combat inflation and strengthen the nation's economic system. Jackson dress this month, called for a concert addressed an audience of Salt Lake Percent 12 10 City community leaders, meeting with Interest Rates _ - -/ \^Fed Funds —J V \ Rate Francisco. 8 6 Federal Reserve ^A Jackson argued that a viable eco y nomic system requires the support of all the individual members of the sys tem. "The Fed is only part of the sys tem," he said. "The real problem with inflation is that we are all too prone to Discount Rate ,-i=iJ V \L— . A, A*~^ 4 ' , 1 , , i 1 , 1 1 1 1' 1 1 1974 head-office and branch directors of the Federal Reserve Bank of San 1976 1 I 1 1978 The Board of Governors, acting on requests from the directors of all twelve Reserve Banks, commented, "Action was taken in recognition of recent increases in other short-term interest rates, to bring the discount rate into closer alignment with shortterm rates generally, and as a further step to strengthen the dollar." The Fed in recent months has acted to curb inflation and to strengthen the dollar by limiting the growth of bank reserves. These actions thus have put upward pressure on the Federalfunds rate, the rate governing banks' overnight borrowings of unused re serves. By late September, the funds rate had risen above 8V2 percent, ifr shirk our responsibilities and shove P. C. Jackson them off onto somebody else. We're more prone to depend on government "Competitive private banks cannot make the services available to rural to solve all our problems, and then communities at competitive prices," blame government when the prob he said. He contended that this kind of burden could not be "turned over lems are not solved." The Fed governor said, "In my opin ion, monetary policy must be very delicately and carefully administered today. It must lean against inflationary pressures. But monetary restraint must not brake so severely that it damages the economy and throws it into recession. Monetary policy has an important part to play in our fight against inflation. But it should not be left to do the job alone." entirely to private banks in a noncontrolled free-enterprise system." Jackson said every country needs a currency—a sound one—and it needs a method of distributing that currency. "Who is going to do it?" he asked. "Our system dictates that the Fed will do it. And Ithink itdoes a good job of supplying the currency at rela tively low costs."'f' Jackson argued that the nation must reduce fiscal deficits in prosperous times. Otherwise the burden of debt could reach intolerable levels when an PACIFIC RIM (continued from page 1) P.O. Box 7702, San Francisco, Ca. 94120, whose phone number is (415) 544-2184. He noted also that the Bank maintains a Pacific Basin Reading Room in its Research Library. The Reading Room contains current material on the Pa cific Basin economies. The Research Library, which is located on the 8th Floor of the Insurance Center, 450 Sansome Street, San Francisco, is open to the public during business hours, iff economic downturn arrives. "Unless we restrain the growth of government spending and encourage expansion of our private capacity, we cannot win the fight against inflation. But fiscal policy has the same con straints from overkill as monetary policy. It too must avoid going too far even in the right direction." Jackson defended the Fed's role in providing central banking services, alluding to the distribution of coin and currency as an example. He said the Fed serves as a focal point in the nation's financial system by providing services to banks throughout the country in an efficient manner. BANK OF UTAH MERGER APPROVED The Federal Reserve Bank of San Francisco has approved the merger of Bank of Utah and Bank of Northern Utah. Bank of Utah, headquartered in Ogden, operates 13 branches with deposits of over $92 million. Bank of Northern Utah has its head office and sole banking operation in Clearfield, Utah. It has deposits of just over $6 million. After the merger, the present office of Bank of Northern Utah will become a Bank of Utah branch office. Bank of Utah will continue as a state member bank of the Federal Reserve System. P91Z-W3 (91V) 8Uoqd 0gtfr6 'eiujO)i|B3 'oosiouey ues 'ZOLL x°0 O d 'oosioubjj ues )0 ^ueg aAjasay iB-iapa^ datuaQ uoi(eujjo)U| ipjeasay sq) Aq s>(UBq |Bf3jaiuuj03 0} pajnqujsip si uoi)E3 -yqnd am >jsny uajB» pue zjag PIBuoy 'a>ung lubi||i/\a Aq paonpojd si sajofj a/vjasay lejapaj dHVO 'OOSIONVHd NVS 25/ ON HWddd aivd OZIW5 VO 'oospuejj ues 'IS ewosues OOt> aovisod sn 1IVIAI SSVIO ISdld OOSjOUBJJ UBS J° >|ueg eAjasey jejepej AUTOMATIC TRANSFERS (continued from page 1) tinue to be the most appropriate approach at this time for finding an early solution to any competitive problems that may be occasioned by A new film describing the functions of the automatic transfer service." entitled The Board's analysis of its correspon Bank," goes behind the scenes to show how the Fed helps keep the amount of money and credit in line dence on this matter indicated that of San Francisco. The film, which is "The Fed. . .Our Central with the nation's economic needs. The film also illustrates how the Fed changes to institute the new service by November 1. But it added that it clears checks, puts coin and curren cy into circulation, destroys old cur rency, supervises banks and admin tion should call for them. ifr M. J. Murray promoted Michael J. Murray to Direc tor of Corporate Personnel, where he is responsible for the development and implementation of District-wide personnel policies and programs. These include employment, training, employee relations, compensation, affirmative action, benefits, employee communication and policy adminis tration. Murray previously served as able from the Federal Reserve Bank most financial institutions will be able ic transfers, and make any necessary adjustments if the competitive situa The San Francisco Reserve Bank has the nation's central bank is now avail to make the necessary operational would monitor the effects of automat MURRAY NAMED PERSONNEL DIRECTOR NEW FILM ON FED NOW AVAILABLE The Bank also named Connie Russell isters consumer-credit laws. Recently the film was selected by the International Communications Agen cy (formerly the United States Infor mation Agency) as one of five U.S. government films to be shown in a traveling film festival in major foreign as Personnel Officer at its San Fran cities. It has also been nominated for cisco office. Ms. Russell was Manag an award by the prestigious C.I.N.E. er of Compensation and Benefits in Corporate Personnel, and now as festival. sumes additional officer responsibili ties in the personnel function. ^ Financial institutions, schools and other interested audiences can book the film by contacting the Public Infor mation Unit, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, Ca. 94120, phone (415) Assistant Vice President of Personnel 544-2184—or by calling the Bank and Public Services Department at any of at the Bank's San Francisco office. the Bank's offices.^