View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

DALLAS
Federal Reserve Bank of Dallas

April 1986

Wallace receives Liberty Bell
William H. Wallace,
first vice president of
the Dallas Fed (left), is
presented the Liberty
Bell award by John J.
Murphy, chairman of
the 1986 U.S. Savings
Bond campaign.
William H. Wallace, first vice presi­
dent of the Federal Reserve Bank in
Dallas, was presented the U.S.
Treasury Department’s Liberty Bell
award for his effort in initiating the
production of the U.S. Savings Bond
booklet. Incidentally, the wood base
of the bell was taken from one of the
oak or cedar beams of the original
structure of Independence Hall in
Philadelphia.
Wallace suggested the booklet be
developed by the Dallas Fed for finan­
cial institutions and payroll savings
accounts throughout the Eleventh
District, as well as across the nation.
In the Dallas area, Wallace has
also been instrumental in providing
voluntary leadership for the U.S. Sav­

ings Bonds promotion among finan­
cial institutions. “ Employees’ payroll
deduction for Savings Bonds at the
Federal Reserve Bank of Dallas has
increased over the past year, from
four percent to 35 percent, due to the
successful campaign drive conducted
by Tyrone Gholson, assistant vice
president of the Securities Depart­
ment and chairman of the Eleventh
District’s Savings Bond drive,” stated
Wallace.
Wallace was presented the award
by John J. Murphy, Dallas County
chairman of the 1986 U.S. Savings
Bonds campaign. Murphy is chair­
man, president and chief executive
officer of Dresser Industries, Inc.,
Dallas.

INSIDE______________
■

REGS D AND Q AMENDED

■ SAVINGS BONDS________
■

ONE MORE HOLIDAY

■

DISCOUNT RATE DROPS

Board amends Regs D and Q
The Federal Reserve Board issued
final amendments to its Regulations
D (Reserve Requirements of Deposi­
tory Institutions) and Q (Interest on
Deposits) that preserve the current
treatment of money market deposit
accounts (MMDAs) and revise
minimum penalties for early with­
drawal of certain deposits.
In 1980, Congress passed the
Depository Institutions Deregulation
and Monetary Control Act which
called for the orderly phase-out and
ultimate elimination of interest rate
ceilings on all deposit accounts, ex­
cept for demand deposits, under the
direction of the Depository Institu­
tions Deregulation Committee (DIDC).
Under present law, the DIDC ter­
minated on March 31, 1986, which ex­
pired all interest rate ceiling authori­
ty, as well as the authority to require
early withdrawal penalties under
Regulation Q and the explicit man­
date to offer MMDAs.
The final amendments to Regula­
tions D and Q adapt to the expiration
of DIDC authority. They continue to
exempt deposits with the existing
withdrawal and transaction features
of savings and MMDAs from transac­
tion account reserve requirements
and from the prohibition of interest
on demand deposits. That is, savings
deposits and MMDAs will continue to
qualify for the zero or three percent
(nonpersonal) time deposit reserve re­
quirement if, for savings deposits, no
more than three preauthorized, auto­
matic, or telephone transfers are
allowed each month. For MMDAs, no
more than six transfers per month are
authorized, of which three can be by
check, draft or debit card. Holders of
both accounts still will be able to

make unlimited withdrawals or inter­
account transfers by mail, messenger,
or in person at the depository institu­
tion or at an ATM.
The amendments also remove the
$150,000 limitation on business sav­
ings accounts, bringing their treat­
ment into line with MMDAs. If either
savings deposits or MMDAs held by
businesses are authorized to exceed
the transfer limitations described
above, they may be considered de­
mand deposits on which interest
could not be paid because busi­
nesses are not eligible to have NOW
or ATS accounts.
Certain early withdrawal penalties
are retained in the revised Regulation
D to help maintain distinctions be­
tween transaction accounts and time
deposits and between nonpersonal
time deposits of different maturities
for reserve requirement purposes. Ear­
ly withdrawal penalties of at least
seven days’ interest are required on
any withdrawal permitted within the
first six days after a time deposit is
made. This requirement applies to
both personal and nonpersonal time
deposits. For nonpersonal time
deposits with original maturities or
notice periods of 18 months or more
that allow withdrawal within the first
18 months of the deposit, a one
month’s interest penalty is required.
The new early withdrawal rules
became effective April 1, 1986, for
most institutions. Credit unions and
other depository institutions not now
subject to regulations on early
withdrawal penalties will have until
January 1, 1987, to begin imposing
such penalties on time depsoits
opened, renewed, or added to on or
after that date.

$80 billion in bonds means many records
When you sign that payroll savings
card to invest in U.S. Savings Bonds
or to increase your allotment, do you
ever wonder how the records on so
many bonds...more than $80 billion
worth... are ever kept straight?
Behind the bond issuing and
redeeming scene are the people in
your company, issuing and redemp­
tion agents at banks, the Federal
Reserve System, and beyond these,
the Treasury’s Savings Bond Opera­
tions Office in Parkersburg, West
Virginia.
When the Savings Bond Program
first began, all bonds were printed on
currency paper stock and the record
keeping was done entirely by hand.
Many hours were spent recording
transactions into giant ledgers
nicknamed “sea gulls” because their
sprawling pages bore a resemblance
to these birds on the wing.
Several minor design changes were
made to savings bonds over the
years, but it was not until 1957 that
currency paper stock was abandoned
in favor of a punched tabulating card.
This allowed the processing of issue
stubs and paid bonds using a “ new
tangled” invention—the computer.
The latest design change, in 1985,
was made to make use of more ad­
vanced processing methods. The new
look Series EE bonds includes a
background design of Independence
Hall and portraits of early American
patriots. Paper stock is again in use,
but bonds now share many charac­
teristics with checks.
The equipment now used to handle
the tremendous volume of transac­
tions received daily from Federal
Reserve Banks uses optical and
magnetic ink character recognition
technology in conjunction with high­
speed document transport systems.
It handles the old punched card
bonds and the new paper bonds.
Bond serial number, denomination
and series are “captured” from the
prepunching in the old card bonds
and from optical and magnetic scan­
ning of the new paper bonds. In addi­
tion, the front and back of the bonds

are microfilmed...all in one pass
through the system. Aside from
substantial savings to the taxpayer,
the new system has opened the way
for even faster data search and
retrieval functions. Design changes
also pave the way for similar pro­
cessing of issue stubs.
Since the market-based variable
rate system was started for bonds in
1982, the volume of records has

grown. In fiscal year 1985, bond sales
increased 29 percent to a total of
$5.03 billion issued in 74 million
bonds.
The first months of 1986 have seen
the total value of bonds held by
Americans rise to $80 billion.
(Reprinted with permission from
Communicator’s Quarterly, Winter
1986, Volume 4, Issue 1.)

Holiday added to 1987 schedule
Martin Luther King, Jr. Day will be
observed by the Federal Reserve
Bank of Dallas and its branches
beginning in 1987. All Federal Reserve
offices in the Eleventh District will be
closed on the third Monday of Janu­
ary in observance of the birthday of
Martin Luther King, Jr.
Financial institutions should con­
sult with their own counsel and state
regulators to determine whether ap­
plicable local laws will either require
or allow the institution to close as
well.
A complete list of holidays for 1987
will appear in a fall issue of Roundup.

Discount rate reduced
The Federal Reserve Board an­
nounced a reduction in the discount
rate from 7 percent to 6V2 percent on
Monday, April 21, 1986. The discount
rate is the interest rate that is
charged to depository institutions
when they borrow from their district
Federal Reserve Banks.
Similar action by other important
industrial countries and sizable
declines in most market interest rates
in recent weeks triggered the deci­
sion. More broadly, other determining
factors were: (1) growth in the various
monetary aggregates has been more

CD
C
c r
CD

(f)
0)
u

§. >
"O

-•

O

2 0
zt

CD
D>

Z3
O

O

D O ' 57
CD
0

3
03
zr.
0
=3

8
CD

£
B
~
0
3
CD

O
O
"O

03
Z3

CL

"O

cr
c

CD

ro

5
3

=r

0

CD
CD

80 ) ®
CD 03_

B

oT

0

c r -*•
“ *•

O '

CD

g
0

O

CD

3

_

m
T)

_

03
O

I

O
f—f. CD*
=T CD
CD C
CD O
"O CD

W

3
c
c r 0 ) 03
3
—.
O CL CL
=3

^

limited this year; (2) prospects for
sustaining improved price perfor­
mance and continuing restraint on
costs have been further enhanced by
the recent sharp declines in oil
prices; and (3) the economic expan­
sion appears to be proceeding within
the nation’s growth potential.
In making the change, the Board
voted on requests submitted by the
Board of Directors of the Federal
Reserve Banks of Boston, New York,
Philadelphia, Richmond, Atlanta,
Chicago, St. Louis, Minneapolis, Kan­
sas City, Dallas and San Francisco.

Changes over 5-year period
Date

From

To

12-04-81
07-20-82
08-02-82
08-16-82
08-27-82
10-12-82
11-23-82
12-14-82
04-09-84
11-21-84
12-24-84
05-20-85
03-07-86
03-21-86

13%
12%
11.5%
11%
10.5%
10%
9.5%
9%
8.5%
9%
8.5%
8%
7.5%
7%

12%
11.5%
11%
10.5%
10%
9.5%
9%
8.5%
9%
8.5%
8%
7.5%
7%
6.5%