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DALLAS
Federal Reserve Bank of Dallas

August 1983
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Boykin Notes Strong District Recovery
Increased activity in auto and other
retail sales, residential construction,
and manufacturing confirm that the
recovery in the Southwest is underway,
according to Dallas Fed President
Robert H. Boykin. Speaking July 26 on
the economic recovery in this District,
Boykin stated that this area of the
country has seen a lessening of the
energy and agricultural problems that
were evident earlier in the year, and
that while depressed conditions con­
tinue along the Mexico border, condi­
tions at least do not appear to be get­
ting worse at this time.
Boykin also reviewed Federal
Reserve Chairman Paul A. Voicker’s
semi-annual testimony before Con­
gress July 20. In his testimony, Volcker

stated that economic activity is
advancing at a rate significantly faster
than was anticipated earlier in the
year. The expansion of activity in such
areas as residential construction, con­
sumer spending, inventory turnover,
and reduction in both the inflation and
unemployment rates has helped the
economy continue to pull out of the
recently-experienced recession.
Volcker also discussed the perfor­
mance of the economy in the first
quarter of 1983 and its projected
outlook for 1984. He said that the
Federal Open Market Committee will
continue to place greater emphasis on
the broader monetary aggregates M2
and M3 because of continuing uncer­
tainty associated with M1 due to shifts

of funds into new money market
deposit accounts.
As a result of those shifts, the com­
mittee decided to establish the level of
M1 during the second quarter of 1983
as a new base for monitoring future
growth. This decision reflects the judg­
ment that the rapid growth over the
past several quarters should be treated
as a one-time phenomenon. Therefore,
the new monitoring range for M1 was
set between 5 and 9 percent for the rest
of 1983, up from the target range of 4 to
8 percent established in February. The
target ranges for M2 and M3 were un­
changed from 7 to 10 percent and 6V2
to 91/2 percent respectively. For 1984,
the ranges were tentatively set at 4 to 8
percent for M1, 6V2 to 91/2 percent for
M2, and 6 to 9 percent for M3.
Volcker and Boykin share an op­
tim istic outlook for inflation and
employment. Both men, however,
stressed the need to reduce federal
deficits as the recovery continues.
Volcker stated that, if the deficits re­
main extremely large, they are likely to
pose a “threat to both the inflation
outlook and the sustainability of a
balanced expansion.”

INSIDE
• DIDC Actions
• Dollar Details
• Securities Services

DIDC Actions to Continue
Interest Rate Deregulation
The D e p o s ito ry In s titu tio n s
Deregulation Committee (DIDC) voted
June 30 to remove remaining Regula­
tion Q interest rate ceilings on all time
deposit accounts at financial institu­
tions. The ruling, which becomes effec­
tive October 1, 1983, states that in­
terest rate ceilings will be removed on
accounts with maturities greater than
31 days. Accounts with maturities less
than or equal to 31 days will continue
to be regulated unless they have a
minimum deposit of $2,500.
In summary, the DIDC decided:
• To require an early withdrawal
penalty equal to 31 days’ interest
on time deposits with maturities
of one year or less.
• To require an early withdrawal
penalty equal to 90 days’ interest
on time deposits with maturities
of more than one year.
• To recommend to Congress that
the prohibition on paying interest
on demand deposits be repealed.
• To defer action on a proposal to
allow businesses to hold interestbearing accounts with unlimited
checking privileges (super NOW
accounts).
The five-member panel stated that

the new early withdrawal penalties will
apply only to deposits made or re­
newed on or after October 1, 1983. The
committee also stated that time
deposits of less than $2,500 with
maturities of 31 days or less would be
subject to the NOW account ceiling of
5 1/4 percent currently in effect for both
banks and thrift institutions.
Deregulation of all interest rate ceil­
ings is one provision of the Monetary
Control Act of 1980. That act, which
created the DIDC, stated that all ceil­
ings must be eliminated by 1986. The
process began in 1981, when ceilings
for accounts with maturities greater
than four years were eliminated, and
was continued in 1982 and early 1983
with subsequent deregulatory actions
by the DIDC.
The DIDC is composed of the
Secretary of the Treasury, the Comp­
troller of the Currency, and the
chairmen of the Federal Reserve
Board, the Federal Deposit Insurance
Corporation, the Federal Home Loan
Bank Board, and the National Credit
Union Administration Board. Some of
the DIDC’s major decisions are shown
in a table which accompanies this
article.

MAJOR ACTIONS OF THE DIDC
Effective Date

Action

August 1, 1981 • In te re s t ra te c e ilin g s rem oved on d e p o s its o f fo u r y e a rs and over.
May 1, 1982 • In te re s t ra te c e ilin g s rem oved on d e p o s its o f S'/z y e a rs and over.
9 1-d ay v a ria b le ra te c e r tific a te o f d e p o s it a u th o riz e d .

September 1, 1982 • 7- to 3 1-d ay v a ria b le ra te a c c o u n t a u th o riz e d .
December 14, 1982 • M o n e y m a rk e t d e p o s it a c c o u n t a u th o riz e d w ith no in te re s t ra te
c e ilin g and s ix p re a u th o riz e d tra n s fe r s per m o n th a llo w e d .

January 5, 1983 • S u p e r N O W a c c o u n t a u th o riz e d w ith no in te re s t ra te c e ilin g and
u n lim ite d tra n s fe r s a llo w e d .
In te re s t ra te c e ilin g s rem o ved on 7- to 31-day a c c o u n t.

April 1, 1983 • In te re s t ra te c e ilin g s rem o ved on d e p o s its o f 2 Vi y e a rs and over.
October 1, 1983 • In te re s t ra te c e ilin g s rem o ved on a ll d e p o s its o f 31 d a ys and over
o r w ith a $ 2,500 m in im u m d e p o sit.

Software Users
Group Meets
As the electronic banking age
grows in importance and com­
plexity, the personal computer
has become an increasingly
significant tool of the trade. Just
as a computer can perform a
variety of functions, there is a
variety of software packages
designed to deal with those func­
tions. However, new software
packages are introduced regular­
ly, making it difficult to know
what is best for the needs of
financial institutions.
On July 20, the Federal
Reserve Bank of Dallas par­
ticipated in a Software Users In­
formation Conference sponsored
by Texas Independent Bank. The
conference was designed to
bring bankers together so they
could share the experiences they
have had with the changing com­
puter industry. Those who attend­
ed heard representatives from
the Dallas Fed, Texas Indepen­
dent Bank, consulting firms
specializing in computer prob­
lems, and the Bank Administra­
tion Institute.
Dallas Fed Vice President Bill
Dusek explained the RESPONSE
communications network which
is designed to link financial
institutions directly with the Fed
for access to services.
Todd Jenkins of Whittle, Raddon, Motely, and Hanks, a
Chicago-based consulting firm,
told the audience that they need
to seek unbiased opinions on
software and that a users group
is a good starting point. He also
stressed the need to overcome
user fear and to realistically
assess all costs—-such as time
involved in training personnel
and developing programs—
associated with selecting a par­
ticular computer system and
software.

Dollars: Reading the Fine Print
Most persons can easily recognize a
dollar bill. Its use as a medium of ex­
change makes it almost indispensable
in our daily transactions. Few people,
however, know everything about the
design of United States currency. The
follow ing summarizes im portant
details printed on all paper money.
Most of the currency in
circulatio n —over 99
percent—is Federal Re­
serve Notes. The gov­
ernment has authorized
the 12 Federal Reserve Banks to issue
notes in denominations up to $100. Un­
til 1969, denominations up to $10,000
also were issued. The seal to the left of
the portrait indicates which of the 12
Reserve Banks issued the note. This
seal bears the name and code letter of
that bank. For example, the letter
K —the eleventh le tte r of the
alphabet—is associated with the
Federal Reserve Bank of Dallas and
the Eleventh District.
To the right of the por­
trait is the Treasury
Department seal which
is overprinted on the
face of each note. This
seal and the serial numbers are printed
in green. Paper money currently in cir­
culation is printed by the Bureau of
Engraving and Printing, part of the
Treasury Department, in Washington,
D.C. While all new currency put
into circulation is

issued by one of the Reserve Banks,
some older notes — called U.S.
Notes—were issued directly by the
Treasury Department. In this case, the
Treasury seal is printed in red rather
than green.
No two serial numbers
are alike for two bills of
the same denomina­
tion, type, or series of
note. The serial num­
bers appear in the upper-right and
lower-left corners of a bill. A prefix let­
ter, eight numbers, and a suffix letter
make up the serial number. On Federal
Reserve Notes, the prefix letter corre­
sponds to the issuing Federal Reserve
Bank’s code letter. This is the letter in
the Federal Reserve seal. The notes
are numbered in lots of 100 million.
In the lower-right and
upper-left corners of a
bill are the faceplate
numbers which, along
with the serial number,
can be important aids to law enforce­
ment authorities in the detection of
counterfeit bills. In the left corner is
the note position letter and a quadrant
number which indicate the position of
the note on the plate from which it was
printed. In the lower-right corner, the
note position letter is followed by
the plate serial
number

which indicates the plate from which
the note was printed.
The series identifica­
tion shows the year
that the design for the
notes was first used.
Small changes in the
design—such as changes in the
signature of the Treasurer of the
United States or the Secretary of the
Treasury—are designated by a letter
below the series year. For example,
Series 1977 A means the design was
first used in 1977 and was slightly
changed one time.
The front side of each
denomination of paper
currency has a portrait
of an American presi­
dent or statesm an,
while the reverse side depicts famous
buildings, monuments, or ornate
numerals. The portraits used for each
denomination are: $1—George Wash­
ington; $2—Thomas Jefferson; $5—
Abraham Lincoln; $10—Alexander
Hamilton; $20—Andrew Jackson;
$50—Ulysses S. Grant; $100—Ben­
ja m in F ra n k lin ; $500 —W illia m
McKinley; $1,000—Grover Cleveland;
$5,000—James Madison; $10,0 0 0 Salmon Chase.

Securities and Noncash Changes Announced
The Dallas Fed has announced two
changes in its securities and noncash
collection service areas, both effective
in August. The first change involves im­
plementation of a pilot program for the
collection of sight drafts, and the
second involves a procedural change
in jo in t se cu ritie s safekeeping
operations.
Sight draft pilot
On August 10, the Eleventh Federal
Reserve District will implement a pilot
program for the collection of sight
drafts and other noncash items, having
completed a test study with a Dallas
credit union involving the collection of
automobile sight drafts. All financial
institutions will be eligible to deposit
such items with the Dallas Fed for
collection after the program is
implemented.
Automobile sight drafts typically are
the most common type of item eligible

for the new sight draft collection pro­
gram. These drafts, which are prepared
by automobile dealers, instruct pay­
ment for newly-purchased automobiles
from the financial institution arranging
credit. In addition, the drafts have at­
tached the title to the automobile and
other documents to be transferred to
the institution. When dealers deposit
the sight drafts with their financial in­
stitutions, those institutions must ob­
tain collection through the institution
which has arranged for the loan.
Financial institutions may choose to
have sight drafts collected at a fee of
$5 per item by sending them to the
Federal Reserve office with a collec­
tion form attached. The Fed then sorts
the items according to the paying in­
stitution and mails the items for collec­
tion. After a paid notice is received
from the paying institution, the Fed
makes debit and credit entries to the
appropriate accounts. If the Fed

receives payment by check, however,
the check first must be collected
before credit is given.
Joint safekeeping
On August 1, new joint safekeeping
procedures involving financial institu­
tions and State of Texas political sub­
divisions will be implemented. After
that date, the governing body of the
subdivision will adopt an agreement by
resolution and vest approval authority
in one or more representatives of the
subdivision through a new joint
safekeeping application and signature
card. This will eliminate the need for
the governing body to meet each time a
securities transaction is made.
Securities which belong to financial
institutions often are pledged to
political subdivisions as collateral for
public deposits. Joint application may
be made to the Federal Reserve for the
safekeeping of such securities.

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